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Swamponomics: Exposing This Week’s Economic Fallacies – July 14

Satisfying demand for logic with a supply of sound economics.

Welcome to another installment of Swamponomics: Liberty Nation’s dive into the week’s morass of top news stories and the stream of economic fallacies that have been accepted as conventional wisdom by swamp creatures for years.

Chewing the Fat

The United States has an obesity problem, as one-third of Americans are overweight – and it is getting worse. Despite what feminists say to the contrary, being obese is horrific for your health. This is never a trend that should be celebrated or emulated. But the economics of fatness is fascinating.

The American diet faces a lot of criticism by the more refined European cultures, who seem to enjoy six-course gourmet dishes for every meal of the day. They drink a nice hot cup of tea, while Americans drown in black liquid euphemistically referred to as coffee. They munch on freshly baked baguettes while Americans rip open a bag of Wonder White bread. They chew on pheasant stuffed with haggis and jalapenos while Americans have hot dogs for dinner.

Yes, it is a bad diet, but there is a separate conversation that usually gets ignored. The US is such a wealthy nation that even the impecunious are getting fat. Because there is so much food readily available, and at a low price, consumers are packing on the pounds. It might seem unhealthy, but it is superior to the alternative of languishing in despair and starving to death.

If you look at the poorest nations on the planet, you witness a gaunt and miserable population. This is not because they can resist the temptations of hamburgers or their food is superior to what is eaten in the US. It is mainly because they do not have enough food.

In Venezuela, the average person is losing about 20 pounds a year. Why? A food shortage. In Africa, children often go hungry because there isn’t enough food. In rural Asian nations, families depend on rice just to survive. Now, contrast that to your average supermarket. You can purchase a meal – healthy or unhealthy – for a few bucks, preventing you from ever feeling the same way families feel in Ethiopia.

Fed Up Over Retirement Savings

Federal Reserve Chair Jerome Powell recently delivered his semiannual testimony to Congress. His two days’ worth of statements and answering questions could be summarized by this: Interest rates are likely coming down to support economic growth. Well, duh.

While most of his comments could have easily been predicted, there was one statement he made that was truly fascinating because it suggests a lack of self-awareness. Powell grieved that not enough Americans are saving for retirement.

All the studies prove that the central bank head is correct. There is a retirement crisis unfolding. The average person already knows that he or she is not socking away enough change for those days of wine and roses. Now, there are many reasons why Americans’ winter years will not be financed today, ranging from not making enough money to the rising cost of living. But historically low interest rates are another factor that deters adequate savings.

Following the recession, the Eccles Building introduced near-zero rates. Since 2017, the White House has complained that the Fed is raising rates too high and too fast, pressuring the Federal Open Market Committee (FOMC) to impose at least a quarter-point cut. But if the economy were as strong as the administration asserts, then it would be able to withstand rates that remain below historical averages. Prior to the financial crisis, rates were about 5%. In the 1980s, they hovered in the 15% to 20% range!

So, how could Americans save for retirement when they are still getting putrid returns on their savings? Sure, they could park their money into the stock market, bullion, and other investment vehicles, but what about risk-averse consumers? What if they just want to put their cash in a bank and collect a comfortable return on their deposits?

With a rate cut imminent, this could serve as another deterrent to saving for retirement. This is bad news for a country that already maintains a personal savings rate of just 3%.

Political Theater – the Debt Ceiling

Well, it’s that time of the year again, when politicians showboat, beat their chests, and sound the trumpets to warn about the pending arrival of the four horsemen of the apocalypse. The debt ceiling is upon us! Oh, please, Lord, be merciful on the soul of every creature in the Swamp.

In recent years, the debt ceiling debate has given us some of the greatest performances in political theater history, mainly because both parties have switched their allegiances to the issue based on who is residing in the White House. When former President George W. Bush was living at 1600 Pennsylvania Avenue, the Democrats complained about raising the debt ceiling. During the reign of former President Barack Obama, the GOP was kicking and screaming about hiking the debt ceiling.

Where do the parties stand now that Trump holds the keys to the kingdom?

A new study by the Bipartisan Policy Center forecasts that the federal government could run out of dollars to pay its bills by September, should Congress avoid raising the debt ceiling. The think tank had previously said in May that the Treasury would have until November at the latest before Washington hit the debt ceiling.

For the next few months, the American people will get quite a show. There will be an abundance of doom and gloom prognostications, Democrats will resist, the Republicans will say their opponents are putting the country at risk, and President Trump will threaten to shut down the government. But, in the end, the Rs and Ds will hold an 11th-hour meeting and reach a compromise. The left will claim victory because now some progressive cause du jour can be paid for on credit and the right will promise to rein in public spending some time in the future – just not today.

Nothing changes.

How Rich?

Just imagine how much richer the nation would be if it weren’t for the politicians in government squandering every dollar and cent that the taxpayers are forced to hand over every time they earn a paycheck. They would be left to save more for retirement and buy more bags of Cheetos and Doritos. But the country is forced to live without because the government claims it has a right to your fruits of labor. Poppycock!

~

To read more from Andrew Moran, visit our author page. At Liberty Nation, we love to hear from our readers. Comment and join the conversation!

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