Bernanke's Cowardice Has Sealed Our Fate The day after the election, the Federal Reserve launched QE2, the second round of Quantitative Easing. This public relations euphemism attempts to hide the fact that the Fed is "printing money" (the Fed actually does it electronically these days). "Cheating, debasing, and inflating," as in stealing from the public, is a more accurate description. Bernanke indicated that from 600 to 850 billion additional dollars would be created. To put this in perspective, the TARP package was in this range. The total Federal Reserve balance sheet was $829 billion at the end of 2004 and only $869 billion in August 2007. At the end of 2009, it had ballooned to over $2,200 billion. This announcement means it is headed to $3,000 billion (3 trillion). Ben Bernanke weakly defended his action with the following justifications: Further support to the economy is needed. Easier financial conditions will promote economic growth. Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. The first two statements are true as stated, but unlikely to be affected by additional QE. The third is partially true, although it is unclear that Bernanke's action will raise stock prices. Furthermore, empirical data is not supportive of the alleged relationship between stock prices and spending (see the Kass reference below). Many economists and analysts believe that the Fed actions will not help. Several believe they will actually make conditions worse (two examples are Doug Kass and Pimco's El Erian). The Real Reason for QE2 Mr. Bernanke's justification for committing nearly another trillion dollars does not meet the "smell" test. In prior life, Professor Bernanke would flunk an Econ 101 student for such weak justification (of course, we know no one really gets an F at Princeton, no matter how deserved). Mr. Bernanke's performance was a charade meant to hide the fact that the government is now illiquid! Mr. Bernanke instituted QE2 because the Federal Government has reached the point where it cannot pay its bills. If the Fed does not buy government bonds (print money), checks will stop for programs like Social Security, Medicare and Medicaid reimbursements, military pay, etc. The Madoff Model of government just ended. There are no longer enough bond buyers or taxpayers to pay for the profligate spending of the US government. For more than a decade, responsible economists and analysts warned how this situation had to end. That point has apparently just been reached as a result of some of these reasons: We are increasingly viewed overseas as a profligate, fiscally irresponsible country with no willingness to change. Our debt levels have become dangerously high, raising the probability of sovereign default. Our annual deficit is three to four times larger than ever before, and it looks like there is no political will to address it. Interest rates are too low to compensate for the perceived risk. Foreign countries that supported us are now either unwilling or unable to purchase our debt. Solving Insolvency The root cause of the liquidity problem is insolvency. Insolvency is a condition where eventually, obligations cannot be met. Illiquidity then results. QE2 provides liquidity but does nothing to solve the insolvency issue. Unless the insolvency problem is solved, illiquidity will continue. From a mathematical standpoint, it is possible to solve the insolvency problem. From a practical or political standpoint, it is likely impossible. Our funded federal debt is almost 100% of GDP. Our unfunded social obligations are about another $100 trillion. The total net worth of the country is about $55 trillion. Government has promised benefits twice what everything in the country is worth. To understand the math, see "Spiraling to Bankruptcy." Laurence Kotlikoff referred to a recent International Monetary Fund assessment of the U.S. financial condition: ... the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: "The U.S. fiscal gap associated with today's federal fiscal policy is huge for plausible discount rates." It adds that "closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP." The government would have to double every tax it collects (including payroll taxes) to run 5% surpluses for decades in order to bring government obligations into manageable range. Such tax increases would plunge the U.S. and probably the world into an economic Dark Age. Alternatively, current government spending could be cut by about 50%. Managing spending forward so that a 5% surplus is maintained would also work. Bernanke's Morton's Fork Mr. Bernanke was faced with two choices, neither of which were good. He could have refused to initiate another round of QE, which woul

The Early Days of G.B. Britton & Sons The business began with a partnership styled 'Bry­ant & Britton' about which little is known except that the 'Bryant' of the partnership was an uncle of George Bryant Britton—the founder of G. B. Britton & Sons. It was certainly in existence in 1878, and probably not in existence in 1874. The earliest dated document now in the possession of G. B. Britton & Sons Ltd. is an invoice for grindery supplied to Bry­ant & Britton by R. H. &. H. Ashman on November aoth, 1879. It is interesting that the handwriting of this invoice has been identified as that of Herbert Ashman, a well-known figure in the leather trade who became the first Lord Mayor of Bristol and was knighted by Queen Victoria on the steps of the Council House in 1899. In about 1880 G. B. Britton and George Jefferies went into partnership and built a small factory in Waters Road, Kingswood. There exists a Balance Sheet of 1883, drawn up in the copper-plate writing of F. J. Ackland, the firm's accountant of that time, in which the capital of the partners stood at ,?1,100 45. nd. each, and the stock was valued at ?1,603. By 1886 the partnership was well established and its sales in that year amounted to ?24,380. Towards the end of the century, however, George Jefferies retired. There are many stories of his dry and sometimes rather sombre humour, but he was really a genial man and much respected in the Kingswood district where he lived till his death at the age of eighty-three in 1934. He had no children to succeed him, whereas G. B. Britton at that time was the father of three sons. It is probable that his withdrawal from the business was not unconnected with the growing determination of his partner to expand it and build a larger and more modern factory. At any rate, on December 8th, 1899, shortly after his retirement, a contract was signed for the building of a new factory in the north-light style and in the next year G. B. Britton left the original premises in Waters Road and moved to Lodge Road, Kingswood, where the present main factory stands. But neither building, it should be understood, was a factory in the modern sense. In the 1880s the building in Waters Road contained some fifteen or twenty sewing-machines and three crude presses for cutting out soles and insoles. All were treadle-operated, for it was not until the next decade that the first Tangye gas-engine was installed. There were perhaps a dozen clicking-boards and the rest of the space consisted of stores for leather and grindery, a packing and dispatch bay, and the office. Only four or five makers worked indoors; for the rest, uppers and bottoms were issued to out­door workers who lasted the uppers and attached and finished the bottoms in their own homes—and all by hand. With the move to Lodge Road, much the same methods continued, though the number of workpeople grew steadily. True, some shafting was erected in about 1904 and brushing by 'machine' was gradually followed by the mechanization of other finishing operations. In those days anyone walking through the Kingswood streets at a late hour on a winter's night would pass many a lighted workshop at the back of the houses where the bootmakers, with some lost time to catch up perhaps, were finishing off the work which had to be 'shopped' next day. The clink of the file striking the rivets or hob-nails and the thump of the hammer upon the leather are sounds well remem­bered by the older generation, and indeed they still recall to the author memories of his boyhood days. It was not until 1917 that the first record appears of the purchase of a 'Gimson Consol Laster with knife attachment', and in the following year three British United C.H.M. McKay Lasting Machines were in­stalled. This was an ominous development for the outdoor hand makers whose number, by the early years of the 'Kaiser's War,' had grown to nearly 150. Machine production had begun. Meanwhile, in September 1904, G. B. Britton had announced that he was taking into partnership his two sons, G. E. and S. W. Britton, and that the busi­ness would 'henceforth trade under the name and title of G. B. Britton & Sons'. This communication was accompanied with the then customary assurance of the very best attention to customers' commands, and indeed it was no empty promise, for the business continued to make steady progress. In 1908 an extension to the factory became necessary to deal with a steady increase in the demand for its products. At that time these were almost exclusively nailed boots—principally men's—of more than average quality. There is still in our possession a fine specimen of a waxed Kip nailed boot with a whole quarter and punched peak-cap, which was made in about 1900. The square 'fitter' hobs are filed, so that the two out­side rows look almost like solid bands of metal; the hand-driven rivets are neatly arranged in triangles, and the waist is finished in strips of d