Among the myriad missteps and abuses of the Obama Administration, its habit of rogue lawmaking through…
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Congress Making Good On Rescinding Rogue "Privacy" Regulations Rammed Through by Obama's FCC

Among the myriad missteps and abuses of the Obama Administration, its habit of rogue lawmaking through unelected administrative agencies rather than the deliberative democratic process was perhaps the worst.  Even the most liberal Supreme Court justices on several occasions agreed, striking down Obama Administration regulatory impositions by unanimous votes.

And perhaps no federal agency represented that lawlessness and impropriety better than the Federal Communications Commission (FCC).

Last year as the clock began to expire on the Obama era, the FCC moved to impose new "privacy" regulations upon private Internet Service Providers (ISPs), upon which Americans rely to access the internet.  Those regulations actually did nothing on behalf of consumer privacy, or to prevent online data…[more]

March 22, 2017 • 09:56 pm

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Against Bernanke’s Market Manipulations Print
By Quin Hillyer
Wednesday, August 10 2011
Extremely easy money hasn’t cured the economy for three years now; why should it work now?

Try this thought experiment: You are sitting on a pile of cash or cash-equivalents. You are worried about the overall economy, and particularly about your nation’s debt. Inflation is almost nonexistent right now, but you know the most common way for nations to pay off debt is to inflate their currency. Your cash, therefore, may lose value – and it sure as heck won’t grow appreciably, even in the highest-yield CD you can find, because right now interest rates are negligible. In fact, the central bank’s official interest rates are, for all intents and purposes, zero. Big banks can borrow money for almost nothing (and thus lend it at historic-low rates), but they pay almost nothing for you to save your money in those banks’ accounts.

So what do you do with your cash?

Well, if you think the interest rates will stay low for the foreseeable future no matter what you do, then you might just sit tight anyway. After all, you can always borrow money and make capital investments next year, knowing that the same low rates will apply. Meanwhile, your cash is good, and you might as well stash it in your mattress. Moreover, if you think the economy will remain in the doldrums, then there’s almost nothing to be gained by investing, but there could be plenty to lose.

But if you expect interest rates to start a slow, steady rise, not to high levels but at least by a few percentage points – in other words, back to low-normal – then your incentives are different. Suddenly, you have reason not to just sit on your cash, but to invest it and borrow even more money, also to invest, while the cost of borrowing and investment is almost crazily low. If you know the rates will be higher a year from now than they are today, then now is when it makes sense to put your money to use. When money is cheap, that’s when it makes sense to borrow and invest; but that’s only true if you think it won’t be cheap long.

In sum, then, the best time to put your money to work, or for that matter the best time to buy a house, is when interest rates are incredibly low but starting to rise, or expected to rise soon. Suddenly, the rising rates could cause a race to invest, while the investing is still good.

That’s why it made no sense on Tuesday for the Federal Reserve Board under Chairman Ben Bernanke to announce it would keep central-bank interest rates near zero for another two years. This was supposed to reassure investors who like low interest rates. Instead, it freezes them in place. Again, why invest now when there’s no fear that waiting will mean a missed opportunity?

Furthermore, by announcing, in a highly unusual move, that rates will stay “exceptionally low” for two whole years, Bernanke signaled that he fears the economy will remain exceptionally weak for that same two years. Once digested, this signal of low expectations will dampen investor confidence, in effect becoming at least somewhat a self-fulfilling prophecy. Extremely easy money hasn’t cured the economy for three years now; why should it work now?

Bernanke effectively also signaled lack of concern with the strength of the dollar. This will scare away foreign investors, not attract them, and it will also further undermine the case for the dollar to remain the world’s reserve currency. It also risks creation of yet another asset bubble, of a yet-unknown form, thus giving perspicacious investors reason to fear more economic instability in the future.

For whatever reasons, a market rally on Tuesday that had seen the Dow Jones Industrial Average rise by 200 points immediately tanked once Bernanke made his announcement, dropping to a more-than-200 point loss before investors again turned on a dime and sent the Dow soaring to a 429-point gain by session’s end. At this writing on Wednesday morning, it again has lost exactly that same 429 points. Uncertainty, volatility and instability are the fruits of Bernanke’s manipulations.

Bernanke would do far better to stop keeping rates artificially low, and instead express a willingness to let them rise when and if market forces dictate. The key is not to raise rates, but to stop manipulating them artificially. Then, with other tools at his disposal, he should work to strengthen the dollar. A strong dollar is a dollar that ratings agencies are more likely to respect.

In short, the best way to jump-start the economy is to express confidence that the economy can thrive even with interest rates allowed to edge up on their own as the economy improves. A large proportion of a nation’s economic activity is based on an expectations game. Bernanke’s move on Tuesday does not lead to great expectations.

Question of the Week   
Which one of the following do Presidents Jimmy Carter, Andrew Johnson, William Henry Harrison and Zachary Taylor all have in common?
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Quote of the Day   
 
"Intelligence agencies cannot share details about American citizens with no foreign intelligence value. If [House Intelligence Committee Chairman David] Nunes is right, how were these procedures not broken? If a Bush-era intelligence agency had engaged in 'incidental collection' of Barack Obama's phone calls in 2008, and then disseminated that information, the Earth would have stopped in its orbit…[more]
 
 
—David Harsanyi, The Federalist Senior Editor
— David Harsanyi, The Federalist Senior Editor
 
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