But today, I am writing to you about something that affects me on the most personal level (I’ll just bet it affects you the same way too), and I’m really ticked off about it.

Bandits in Academic Robes

I’ve got a statement in front of me right now by Gregory Mankiw and Kenneth Rogoff, baldly stating that they wish to take away a major portion of my hard-earned money (and yours) for years to come – and give it to idiots.

Rogoff and Mankiw are your classic ivory tower types who spend their adult lives hiding out in the nooks and crannies of our shadow government, pontificating on how the little people ought to live.

Mankiw has degrees from Harvard, Princeton and MIT, and did a stint as the Chairman of the Council of Economic Advisors. When he wasn’t busy demonstrating his skills as a chess prodigy, Rogoff managed to collect sheepskins from Harvard, MIT and Yale. Both get their schemes and rants published regularly in the top economic policy journals.

In Too Deep

Some say these are real smart guys. Certainly their word is trusted as cant in the highest circles of the land. They are exactly the kind of clowns who got us into the mess we’re in these days. So when they propose to rob us blind, I get worried – and I get mad.

These wise guys have looked around at all those poor folks who are drowning in debt: garden-variety rubes with insane mortgages no one could service… crooked corporations with loans they can’t pay off… banks that are (STILL!) sitting on toxic bonds – even Washington itself, which is now borrowing a dollar for every two dollars it spends.

The conclusion they have come to? None of these fools can possibly pay off this debt the way things are currently structured. Just can’t be done. The capital alone is mind blowing, and the daily accrual of interest is staggering.

Washington’s Secret Tax

So they have come up with a way to force you, me, and everyone we know to pay it off for them – in essence, by way of a massive secret tax that will never get voted on by Congress or be signed by any president.

Here’s how their scheme will work: They propose that Washington deliberately jack up the inflation rate three-fold. That way, all those folks who borrowed dollars of a certain size – that is to say, dollars that could purchase a certain amount of goods – could pay off those debts in dramatically smaller dollars that could buy a heck of a lot fewer goods.

Let me try and demonstrate in the simplest of terms why this is great for idiots and terrible news for regular, normal, virtuous folks like you and me.

The Wages of Sin

Let’s say you lent your ne’er-do-well nephew a hundred bucks when a strong dollar could buy a dozen eggs. Instead of investing that money in, oh I don’t know, chickens and feed, he spends that money on what he usually spends money on – horses and beer – with the usual results: a hangover and not much else.

Now his current paycheck is $10 a week, and he’s got to cover room and board with most all of it. (Yeah, I know, my wage figures are a century out of date, your nephew would never settle for a loan that small, and nobody buys chickens anymore. But they are nice round figures that are easy to understand, so let’s just go with them for now.)

It would take him a hundred years just to pay back the principal. As for interest? As they say in Jersey, “fergeddaboudit.” But what if he could earn $20 a week, without working any harder (which is good, because we all know that his allergy to working hard is what got him in trouble in the first place).

Now he can pay you back much faster, right?

Robbing Peter to Pay Paul

Yes and no. But mostly no.

That is to say, yes, your nephew could pay you back, but the only way to make double the paycheck without double the work is to halve the purchasing power of each dollar.

So while he suddenly can pay you back, each dollar he pays you can only buy six eggs. Oh and by the way, each dollar you work for at your decent job can only buy six eggs too. Also, all the money you have worked so hard to save? It just got cut in half too.

This is what Rogoff and Mankiw (and Bernanke, Geithner and Obama too, for that matter) are proposing. The only way we can avoid a massive tsunami of defaults that would make the current round of Wall Street failures and house foreclosures look like a frog hiccupping in a small pond, is to deliberately induce inflation rates between 6% and 12% for years to come.

That way, all those folks who are up to their neck in it can pay off in cheap, watered-down dollars. And all those folks like you and me, who work their rears off, save against the future, and pay off debt whenever possible? Our savings and paychecks, even our stock market gains – all denominated in dollars – get watered down too.

This Is Really Happening, and It’s Happening Right Now

Think this is just theoretical? That I am just another one of those cranky ivory tower types too?

I used eggs in my example on purpose. This week, the Labor Department announced that they have climbed 40% in the past month. Nor are eggs isolated in their increase. Also setting new multi-month highs this month are beef, cotton, coffee, vegetables, crude oil and gasoline.

View Larger Image Here

This is no theory. No sour griping. Anyone involved in dollar trading knows it’s happening already. Just take a look at the dollar index chart above and you can see that the wise guys are already bailing out.

They know the truth: Washington is looking to rob us blind. And this time, I am taking it personally.

Source: You Are Being Robbed!

The nomination of Geithner to succeed current U.S. Treasury Secretary Henry M. Paulson Jr. was leaked over the weekend, and was reported by Money Morning yesterday.

Geithner (pronounced: GITE-ner) obtained a Master of Arts degree in International Economics and East Asian Studies from Johns Hopkins University’s School of Advanced International Studies in 1985. He also has studied Japanese and Chinese and has lived in present-day Zimbabwe, India, Thailand and China.

As the nation’s top financial authority, Geithner will inherit oversight of the Bush administration’s $700 billion bailout for Wall Street and a U.S. economy struggling with recession.

He will be flanked by former Treasury chief Lawrence Summers, who will head Obama’s National Economic Council. Analysts say this appointment puts Summers in line to succeed Ben S. Bernanke as chairman of the U.S. Federal Reserve in 2010.

New Mexico Gov. Bill Richardson, who ran against Obama in the Democratic primary, will take over the Commerce Department, and Congressional Budget Office Director Peter Orszag will head the Office of Management and Budget.

In other key appointments, economist Christina Romer will be the director of his Council of Economic Advisors, which provides economic analysis and advice to the president, and Melody Barnes will be the director of his Domestic Policy Council (DPC). Before being tapped by Obama, Barnes was executive vice president for policy at the Center for American Progress.

“I’ve sought leaders who could offer both sound judgment and fresh thinking, both a depth of experience and a wealth of bold, new ideas, and most of all who share my fundamental belief that we cannot have a thriving Wall Street without a thriving Main Street,” Obama said at a press conference in Chicago.

Obama’s economic team will be faced with the grand task of restoring confidence to Americas stricken financial sector, and may have to wrestle the U.S. economy out of its worst downturn in decades. President-elect Obama made it clear that the first priority for he and his team will be to pass an economic stimulus package.

“The main thing right now is to get this economic recovery package on the road, to get money in the pockets of the middle class, to get these projects going, to get America working again,” David Axelrod, Obama’s chief campaign strategist, said in an interview with Fox News Sunday. “That’s where we’re going to be focused in January.”

Obama’s 2009 Stimulus

Obama and his aides remain vague on exactly what that package will look like. Over the weekend, however, the incoming president outlined a plan to create or save 2.5 million jobs by 2011.

“It will be a two-year, nationwide effort to jump-start job creation,” Obama said of the plan. “We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels.”

Tax cuts will also be a critical fixture in the stimulus. And they’d be preferable to rebates because they would have a more immediate impact on the economy. Of course, the question is who will receive those tax benefits.

Obama has repeatedly sounded calls for middle-class tax relief, but he also hinted that he might refrain from repealing tax cuts initiated by President George W. Bush that favored the wealthy – those who make more than $250,000 a year.

Other measures that Obama has proposed in the past include:

• Suspending penalties and income tax on early withdrawals from IRA and 401(k) accounts.
• Offering a temporary tax credit of $3,000 to companies for each new full-time employee hired in the United States.
• Extending unemployment benefits by a period of 13 weeks and temporarily suspending income taxes on those benefits.
• Requiring a 90-day moratorium on foreclosures for homeowners.

Clinton Stretch, a tax principal at accounting firm Deloitte & Touche LLP, told Bloomberg that two other Obama tax proposals could be good candidates for inclusion in a stimulus package.
The first is Obama’s “Make Work Pay” tax credit, which would provide a partial Social Security payroll tax holiday for most taxpayers, worth up to $500 for individuals and $1,000 for married couples.

The second would be an extension of the Earned Income Tax Credit, which favors low-income workers.

Of course, the pending stimulus package could include any of these measures, or none at all. The only certainty is that the stimulus will be costly. Sen. Charles Schumer, D-NY, said the amount set aside for a new stimulus package could equal or surpass the $700 billion designated for the TARP fund, more than half of which has been used to shore up U.S. banks and insurer American International Group Inc. (AIG).

Martin Baily, who was the White House’s chief economist under President Bill Clinton, told Bloomberg that the stimulus could exceed $1.2 trillion. That would dwarf the $175 billion package Obama proposed just one month ago, and even the $168 billion tax-break stimulus package President Bush issued earlier this year.

“We’re out with the dithering, we’re in with a bang,” Austan Goolsbee, a senior Obama economic adviser, said on CBS’ Meet the Press.

Source: Obama Unveils Economic Team, Plans 2009 Stimulus Package