Friday, December 18, 2009
Sunday, December 13, 2009
Wednesday, December 9, 2009
Friday, November 20, 2009
Tuesday, November 10, 2009
Wednesday, October 14, 2009
October 14th, 2009 Economic Update
Hello everybody and good afternoon. Today is Wednesday October 14th, 2009. Today the Dow Jones hit 10,000 for the first time in a year, just 7 months after hitting its 12-year low of 6,547. The Gold price settles down to 1064 after testing 1070. Silver prices had a volatile day, reaching 18 dollars only to plunge and find support at 17.50 then closing at 17.80 continuing its uptrend. The dollar index continues its downtrend closing today at 75.77. An interesting chart I want to focus on today is the Dow Jones/Gold. This chart measures the Dow Jones in terms of the spot Gold price. This chart shows a downward trend.
This means the difference between one Dow Jones average and one oz of gold is getting smaller. The trend suggests that the gap will continue to close between the Dow and Gold. With the Dow above 10,000 today and Gold making all time new highs, could it still be the time to buy gold? Could this market rally be a result of inflation? And with the dollar losing so much is the Dow even in a market rally?
This means the difference between one Dow Jones average and one oz of gold is getting smaller. The trend suggests that the gap will continue to close between the Dow and Gold. With the Dow above 10,000 today and Gold making all time new highs, could it still be the time to buy gold? Could this market rally be a result of inflation? And with the dollar losing so much is the Dow even in a market rally?
Sunday, October 11, 2009
Gold/Silver: The First Global Bull Market
Acamar Journal
Oct 9, 2009
In September 2009, the price of gold closed at its highest level in history, on a monthly basis. And this month, gold has reached its all-time highs.
Gold is the only asset category I can think of that is higher in value/price at the end of September 2009 ($995) than when the crisis began in July 2007 ($665), except US bonds but that is only due to massive government intervention. Gold today is higher than the stocks markets in North America, Europe and Asia during the same period; higher than real estate virtually anywhere; higher than the US dollar.
Gold has caught investor attention now that it is holding above $1,000. Barrick Gold (one of the largest gold miners in the world) announced that it was raising $3 billion to close its hedge book. Within days it had to increase the offering to $4 billion!
It is believed to be the largest primary common-equity offering in Canadian history!
Why the frenzy? Because Barrick was losing money on its gold hedges as the price of gold rose. It clearly anticipates that the price of gold is going much higher and investors appear to concur.
I believe gold is now entering its parabolic growth phase in the first global bull market in history that any investor in the world can participate in relatively easily.
Throughout history, investment booms have been local affairs. A tulip craze going too far mostly affected just the Dutch in 1637. The South Sea bubble, American railroads, etc., etc., affected the people of the country involved and some rich overseas financiers.
The Internet boom of the late 1990s was the first real global phenomenon (ironically, it was the internet itself allowing information to be transmitted easily worldwide that helped fuel that bubble) but a non-US investor still had to have an account with a US broker (or a major global financial services firm) to participate.
The global stock market and real estate boom in recent years? How many of you bought significant amounts of Brazilian real estate or Taiwanese stocks?
But gold? Gold is potentially the first real global asset bull market. Sure, oil went from $12 in 1998 to $147 in 2008 but what did that mean to a peasant in China as an investment? How do you stockpile barrels of oil under your bed?
Gold did have a major run in the 1970s. But the involvement of retail investors, the wealth creation for the middle classes in the emerging markets, the scale of global investment capital and flow of information is so different that the mobilisation of capital in gold this time will be of a different order of magnitude.
Gold (and silver, as gold drives the price of silver) is different. As a commodity, it is fungible (it is the same anywhere and interchangeable). It is not primarily brand differentiated, it is easy to buy and store, it has universal appeal as jewelry and as a store of value (and as a safe haven). It does not take any sophistication to buy gold and it can be done by anyone who has a little bit of savings.
More importantly, if I own gold, a peasant buying gold in China can directly affect the value of my holdings through the increase in demand when he buys it in his local village since we are both holding the same thing!
Until 2003, it was illegal to buy gold in China under communist party dictat. Since then, China is set to overcome India as the largest consumer of gold in the world in six short years (as well as becoming the largest producer of gold).
Here's another thought from Richard Russell. The government of China has recently been urging its citizens to buy gold and silver.
Here's Russell's take on this (and it's an intriguing one): As workers have been laid off in factories and are returning to their villages (China's trade surplus in August 2009 fell 45% from a year earlier), the government is concerned about the potential for social unrest due to rising unemployment. If the government believes that gold and silver are going higher (knowing that it is itself part of the reason for that to happen), then it makes perfect sense for it to almost plead with its citizens to buy gold to create a bit of wealth that might help ensure stability.
I think he's right.
As Cheng Siwei, a top Chinese Communist party official said at a monetary policy conference in Italy recently, "Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies. Gold is definitely an alternative."
Gold rising over $1,000 brings new investors into the market. It took oil several years to reach $100 but then it climbed to $147 within five months as it caught investor attention.
Gold was $665 at the start of July 2007, when the crisis first began. When markets melted in Sept/Oct 2008, it fell hard because, as the massive leverage in the global financial system began to unwind dramatically, gold was sold to meet margin calls, redemptions, etc.
After bottoming in October, it started to climb as soon as the selling stopped. It continues to rise on the back of US dollar weakness, potential inflation due to unprecedented monetary stimulus, the potential for a double dip recession, and supply-demand imbalances.
The point is it performed well during the crisis and it is doing well with the recovery.
(Click on images to enlarge)
Two primary demand factors driving investor interest in gold are protection against currency debasement and future inflation.
The US Dollar is caught in a vicious cycle. As the US funds its unprecedented intervention in the economy, it has to print dollars and bonds in gargantuan supply. As it does this, it lowers the value of the dollar and risks a potential blow-up of the US debt market through a crisis of confidence that the debt will become too large to repay.
As the dollar falls, US assets become less attractive (especially low yielding US debt).
This is why, despite record low interest rates, the US is not locking in investors by issuing mostly 20 and 30 year bonds. In Feb 2009, the Treasury Advisory Borrowing Committee noted that, "The average maturity of the debt has already fallen from a range of 60 to 70 months which existed from the mid 1980's until 2002 to a level of 48 months more recently."
The red bars in the chart below represent net Treasury bills issued which have a maturity of less than 1 year and represent about 45% of net debt issued in the last year. What this means is that, on top of the enormous issuance of new debt for which the US must find investors, it also has to recycle significant amounts of existing short-term debt that will mature within the next two years.
The Japanese opposition party, the Democratic Party of Japan, just won the elections. Except for a brief 8 months in office in the 1990s, they have not been in power for 55 years!
While I give them credit for sheer tenacity, it is what the chief finance spokesman told the BCC during the campaign that is interesting. Masaharu Nakagawa said he was worried about the value of the US dollar and Japan would only buy US dollars if they were denominated in Yen - the so-called samurai bonds.
Interestingly, the BCC report cited observers as saying that the move would be a remarkable policy shift but unlikely to happen as the DPJ was not likely to win.
They were wrong and a party that is far less friendly to US and corporate interests than Japan's Liberal Democratic Party is now in power.
Japan and China are the two largest holders of US debt (almost half of the US debt that is held by foreign governments). While it is in their interest not to upset the global order precipitously, they are clearly reluctant buyers of new US debt.
But here's the problem. If the two largest US debt buyers are likely to go on strike in the future (China sold a net amount of $26 billion US bonds in June 2009), and the US is issuing record new levels of debt, who's buying it?
I suspect that there are simply not enough buyers to fund multi-trillion dollar new Treasury issues and the Fed's Quantitative Easing program is acknowledgement of this reality. So the Fed is stepping in to buy US debt as needed to keep yields under control.
Gold is responding as a monetary asset to this currency debasement and the previously unimaginable levels of stimulus which should translate into much higher inflation. Warren Buffett predicts that inflation will exceed the levels we saw in the 1970s (which ran over 20% per annum). Alan Greenspan is concerned that inflation may swamp the bond market.
On the other hand, in 2008, despite record gold prices, gold production fell to a 12 year low! The easy stuff has been mined, it is harder to find new discoveries to replace existing deposits that have been mined, and costs have risen. So, supply from production continues to decline.
Another bullish factor for gold is central bank sales. In August 2009, 15 European banks renewed their agreement (CBGA) to limit their gold sales to 400 metric tons a year (which includes the proposed IMF sale). The current 5 year agreement (which expires Sept 26) was for 500 tons a year, but the banks sold far less than permitted (only 343 tons in 2008 and on course for lesser sales in 2009). So while European sales are falling, other Central banks (Russia, China, India, etc.) are increasing gold in their foreign exchange reserves.
While stock markets are rallying and the economy seems to be recovering, the reality is that this is simply due to massive intervention by governments in their local economies, based on running record deficits.
In 1937, the Federal Reserve tried to withdraw its stimulus after the New Deal and the market promptly crashed. This lesson will not be lost on Bernanke. So while the G-20 may talk about ending the easing to prevent high rates of inflation in the future, it is all talk until housing and employment turn positive.
In fact, Bob Janjuah, the RBS credit strategist who predicted (in June 2008) that there would be a global crash in September 2009, has just warned that the economic data needs to turn positive (not just less bad than previous periods), or else the markets could crash again in the fall, with the SP500 dropping to as low as 500, from its current 1,000+ level.
Stocks of gold mining companies will leverage the rise in the price of gold as they come out of an 8 month consolidation. Thus the frenzy for Barrick stock. And, from now through 2011, gold mining stocks will provide excellent returns for investors.
Oct 9, 2009
In September 2009, the price of gold closed at its highest level in history, on a monthly basis. And this month, gold has reached its all-time highs.
Gold is the only asset category I can think of that is higher in value/price at the end of September 2009 ($995) than when the crisis began in July 2007 ($665), except US bonds but that is only due to massive government intervention. Gold today is higher than the stocks markets in North America, Europe and Asia during the same period; higher than real estate virtually anywhere; higher than the US dollar.
Gold has caught investor attention now that it is holding above $1,000. Barrick Gold (one of the largest gold miners in the world) announced that it was raising $3 billion to close its hedge book. Within days it had to increase the offering to $4 billion!
It is believed to be the largest primary common-equity offering in Canadian history!
Why the frenzy? Because Barrick was losing money on its gold hedges as the price of gold rose. It clearly anticipates that the price of gold is going much higher and investors appear to concur.
I believe gold is now entering its parabolic growth phase in the first global bull market in history that any investor in the world can participate in relatively easily.
Throughout history, investment booms have been local affairs. A tulip craze going too far mostly affected just the Dutch in 1637. The South Sea bubble, American railroads, etc., etc., affected the people of the country involved and some rich overseas financiers.
The Internet boom of the late 1990s was the first real global phenomenon (ironically, it was the internet itself allowing information to be transmitted easily worldwide that helped fuel that bubble) but a non-US investor still had to have an account with a US broker (or a major global financial services firm) to participate.
The global stock market and real estate boom in recent years? How many of you bought significant amounts of Brazilian real estate or Taiwanese stocks?
But gold? Gold is potentially the first real global asset bull market. Sure, oil went from $12 in 1998 to $147 in 2008 but what did that mean to a peasant in China as an investment? How do you stockpile barrels of oil under your bed?
Gold did have a major run in the 1970s. But the involvement of retail investors, the wealth creation for the middle classes in the emerging markets, the scale of global investment capital and flow of information is so different that the mobilisation of capital in gold this time will be of a different order of magnitude.
Gold (and silver, as gold drives the price of silver) is different. As a commodity, it is fungible (it is the same anywhere and interchangeable). It is not primarily brand differentiated, it is easy to buy and store, it has universal appeal as jewelry and as a store of value (and as a safe haven). It does not take any sophistication to buy gold and it can be done by anyone who has a little bit of savings.
More importantly, if I own gold, a peasant buying gold in China can directly affect the value of my holdings through the increase in demand when he buys it in his local village since we are both holding the same thing!
Until 2003, it was illegal to buy gold in China under communist party dictat. Since then, China is set to overcome India as the largest consumer of gold in the world in six short years (as well as becoming the largest producer of gold).
Here's another thought from Richard Russell. The government of China has recently been urging its citizens to buy gold and silver.
Here's Russell's take on this (and it's an intriguing one): As workers have been laid off in factories and are returning to their villages (China's trade surplus in August 2009 fell 45% from a year earlier), the government is concerned about the potential for social unrest due to rising unemployment. If the government believes that gold and silver are going higher (knowing that it is itself part of the reason for that to happen), then it makes perfect sense for it to almost plead with its citizens to buy gold to create a bit of wealth that might help ensure stability.
I think he's right.
As Cheng Siwei, a top Chinese Communist party official said at a monetary policy conference in Italy recently, "Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies. Gold is definitely an alternative."
Gold rising over $1,000 brings new investors into the market. It took oil several years to reach $100 but then it climbed to $147 within five months as it caught investor attention.
Gold was $665 at the start of July 2007, when the crisis first began. When markets melted in Sept/Oct 2008, it fell hard because, as the massive leverage in the global financial system began to unwind dramatically, gold was sold to meet margin calls, redemptions, etc.
After bottoming in October, it started to climb as soon as the selling stopped. It continues to rise on the back of US dollar weakness, potential inflation due to unprecedented monetary stimulus, the potential for a double dip recession, and supply-demand imbalances.
The point is it performed well during the crisis and it is doing well with the recovery.
(Click on images to enlarge)
Two primary demand factors driving investor interest in gold are protection against currency debasement and future inflation.
The US Dollar is caught in a vicious cycle. As the US funds its unprecedented intervention in the economy, it has to print dollars and bonds in gargantuan supply. As it does this, it lowers the value of the dollar and risks a potential blow-up of the US debt market through a crisis of confidence that the debt will become too large to repay.
As the dollar falls, US assets become less attractive (especially low yielding US debt).
This is why, despite record low interest rates, the US is not locking in investors by issuing mostly 20 and 30 year bonds. In Feb 2009, the Treasury Advisory Borrowing Committee noted that, "The average maturity of the debt has already fallen from a range of 60 to 70 months which existed from the mid 1980's until 2002 to a level of 48 months more recently."
The red bars in the chart below represent net Treasury bills issued which have a maturity of less than 1 year and represent about 45% of net debt issued in the last year. What this means is that, on top of the enormous issuance of new debt for which the US must find investors, it also has to recycle significant amounts of existing short-term debt that will mature within the next two years.
The Japanese opposition party, the Democratic Party of Japan, just won the elections. Except for a brief 8 months in office in the 1990s, they have not been in power for 55 years!
While I give them credit for sheer tenacity, it is what the chief finance spokesman told the BCC during the campaign that is interesting. Masaharu Nakagawa said he was worried about the value of the US dollar and Japan would only buy US dollars if they were denominated in Yen - the so-called samurai bonds.
Interestingly, the BCC report cited observers as saying that the move would be a remarkable policy shift but unlikely to happen as the DPJ was not likely to win.
They were wrong and a party that is far less friendly to US and corporate interests than Japan's Liberal Democratic Party is now in power.
Japan and China are the two largest holders of US debt (almost half of the US debt that is held by foreign governments). While it is in their interest not to upset the global order precipitously, they are clearly reluctant buyers of new US debt.
But here's the problem. If the two largest US debt buyers are likely to go on strike in the future (China sold a net amount of $26 billion US bonds in June 2009), and the US is issuing record new levels of debt, who's buying it?
I suspect that there are simply not enough buyers to fund multi-trillion dollar new Treasury issues and the Fed's Quantitative Easing program is acknowledgement of this reality. So the Fed is stepping in to buy US debt as needed to keep yields under control.
Gold is responding as a monetary asset to this currency debasement and the previously unimaginable levels of stimulus which should translate into much higher inflation. Warren Buffett predicts that inflation will exceed the levels we saw in the 1970s (which ran over 20% per annum). Alan Greenspan is concerned that inflation may swamp the bond market.
On the other hand, in 2008, despite record gold prices, gold production fell to a 12 year low! The easy stuff has been mined, it is harder to find new discoveries to replace existing deposits that have been mined, and costs have risen. So, supply from production continues to decline.
Another bullish factor for gold is central bank sales. In August 2009, 15 European banks renewed their agreement (CBGA) to limit their gold sales to 400 metric tons a year (which includes the proposed IMF sale). The current 5 year agreement (which expires Sept 26) was for 500 tons a year, but the banks sold far less than permitted (only 343 tons in 2008 and on course for lesser sales in 2009). So while European sales are falling, other Central banks (Russia, China, India, etc.) are increasing gold in their foreign exchange reserves.
While stock markets are rallying and the economy seems to be recovering, the reality is that this is simply due to massive intervention by governments in their local economies, based on running record deficits.
In 1937, the Federal Reserve tried to withdraw its stimulus after the New Deal and the market promptly crashed. This lesson will not be lost on Bernanke. So while the G-20 may talk about ending the easing to prevent high rates of inflation in the future, it is all talk until housing and employment turn positive.
In fact, Bob Janjuah, the RBS credit strategist who predicted (in June 2008) that there would be a global crash in September 2009, has just warned that the economic data needs to turn positive (not just less bad than previous periods), or else the markets could crash again in the fall, with the SP500 dropping to as low as 500, from its current 1,000+ level.
Stocks of gold mining companies will leverage the rise in the price of gold as they come out of an 8 month consolidation. Thus the frenzy for Barrick stock. And, from now through 2011, gold mining stocks will provide excellent returns for investors.
Wednesday, October 7, 2009
Sunday, October 4, 2009
Money
What is Money?
by Cameron Nehrer
According to most definitions given, money is a good that acts as a medium of exchange in transactions.
So where as person A buys an item from person B
Person A provides a certain amount of money, or price, in exchange for person B's good.
But in order to understand this definition lets go further back and ask Why do people exchange at all?
Lets define Exchange as an agreement between two subjects to transfer the goods or services of one man for the goods or services of another.
Exchange is the foundation of an economy. Voluntary Exchanges happen only when both parties involved expect positive net benefits. Or Positive Utility. Or simply put... Exchange occurs because both parties expect to be happy as a result of the transaction.
Obviously a rational person would always value or expect to value what he recieves more than what he gives up in a transaction.
So If Person A exchanges 2 ounces of silver for Person B's 35 pounds of wheat; than
It can be said that...
Person A values the 35 lbs of wheat more than his 2 ounces of silver and
Person B values the 2 oz of silver more than the 35lbs of wheat.
The exchange would never take place otherwise.
This does not mean that 2 oz of silver and 35 lbs of wheat have any sort of underlying equality to them.
Remember, the exchange only happened because each party valued the two products in different order.
So you can start to see that this is not a zero-sum game.
Both parties benefit from the transaction.
Murray Rothbard once said that,
"Exchange is the lifeblood, not only of our economy, but of civilization itself."
Because of the great variety in nature and man, and the diversity of location of natural resources exchange has become universal among mankind.
We use it every day and we have become very much dependent on its practice.
Remember that without exchange, everyone would have to become self-sufficient.
So exchange in society enables people to specialize in the production of certain goods and services, because they can rely on exchange for there other necessities.
Take this for example:
A carpenter can exchange his furniture for food, shelter, etc
A fisherman can exchange his fish for food shelter, and furniture.
The carpenter can than focus on building the best furniture without having to go out and spend the time fishing in order to get food, Because he can exchange furniture for food.
And the fisherman can focus on catching as many fish as he can without focusing on building furniture for his house, because he can exchange his fish for furniture.
Now in this case the fisherman and the carpenter are much better off then they would be if they were required to be entirely self-sufficient. That is, it takes less time and effort for both of them to acquire their fish and furniture as a result of exchange.
What I have described in the example was a small barter economy between the fisherman and the carpenter. But it is easy to imagine that , in the real world today, this little barter system is relatively primitive and would probably not work out so well.
The two basic problems with a barter economy are
"indivisibility" and "lack of coincidence of wants".
To illustrate these two problems lets think about this.....
say Person A had a horse,
which he would like to exchange for several different things.
Maybe he wants to get milk, eggs and some clothes.
Well how could he break apart his horse and give part of it to the farmer and part of it to the tailor?
He can't.
Maybe then Person A found a fisherman who offered him 30 fish for his horse. Person A, thinking that he could divide the fish and then sell them seperately , accepts the fisherman's offer.
So Person A goes to the farmer, and it just so happens that the farmer is willing to exchange his milk and eggs for fish. Here there is a coincidence of wants between the farmer and person A. But what happens if person A can't find a tailor who wants fish.
There has to be a coincidence that both parties want what the other offers.
So it is clear that a civilized economy is nearly impossible under direct exchange.
With money, the two problems that faced the barter society completely disappear. Through out most of the history gold and silver has been used most often as money. In the early stages of civilizations money was emergent and unrestrained by any government action. So many other things have served the purpose that money does. In addition to gold and silver; oxen, cowry shells, tobacco, skins, wagon wheels, corn, cacao nuts, tea, etc have been used as money. All of these items fit these certain qualities; some better than others of course. The best being gold and silver.
Qualities Of Money
-Utility and Value-
That is, each item or piece of money can be used or valued in a way independent from the fact that it is used as money.
-Portability-
The material of money must be valuable, and that value must be related to the weight and bulk of the material. It must be a convenient size in order to use. For example nobody would use iron money, because 1 penny worth of iron would weigh a pound. You could imagine how inconvenient it would be to pay somebody 5 tons of iron for a gallon of milk and a dozen eggs.
-Indestructibility-
In order for money to be exchanged in the market and kept in reserve money must not be subject to easy deterioration or loss. So you can see why gold and silver fit this quality better than oxen, corn, and nuts. Oxen, corn, and nuts will overtime breakdown or decay.
-Divisibility-
Money must be easily divisible. And the division of the material must not effect its value. For example, if you divide a wagon wheel in half your left with two pieces of the wheel that are not as valuable now because they are split apart. If you divide an ounce of gold in half, each 1/2 oz piece contains half of the original value of the full 1 oz piece. Nothing is lost in the division of the material of money. The gold could even then be melted back into a 1 oz piece again if desired.
-Homogeneity-
All portions of specimens of the material money used should be of the same quality, so that equal weights will have exactly the same value. For example, tobacco as money is not very homogenous because some tobacco leaves could be fresher than others making them of more value than dried out tobacco leaves. Same with oxen, some could be healthier and as a result would be worth more. But an ounce of gold is an ounce of gold.
-Stability of Value-
It is desirable that the material money used maintains a stable value. That is, a material money of minute inflation or deflation. Inflation being the increase in money supply, and deflation being a decrease in the money supply. We all know that when something has a limited supply it usually gains value. Think rare baseball card, or collectors coins. Or if something has an abundant supply it possesses less value.
There are other qualities money can take on, but I feel these are the most important.
Unfortunately, we have a cartel running the production of money. In the U.S. today there are legal tender laws which force us to use fiat paper currency issued by the Federal Reserve. The currency we use does not posses much of the qualities listed above. Our dollars are not backed by gold or silver and are merely pieces of paper with numbers on them. A one hundred dollar bill and a one dollar bill have no difference in weight, and they both cost the same to produce. Unfortunately the dollar's value rest upon the amount of money printed into circulation by the Federal Reserve. This is an unsafe and unstable currency that will create problems for the majority of society.
by Cameron Nehrer
According to most definitions given, money is a good that acts as a medium of exchange in transactions.
So where as person A buys an item from person B
Person A provides a certain amount of money, or price, in exchange for person B's good.
But in order to understand this definition lets go further back and ask Why do people exchange at all?
Lets define Exchange as an agreement between two subjects to transfer the goods or services of one man for the goods or services of another.
Exchange is the foundation of an economy. Voluntary Exchanges happen only when both parties involved expect positive net benefits. Or Positive Utility. Or simply put... Exchange occurs because both parties expect to be happy as a result of the transaction.
Obviously a rational person would always value or expect to value what he recieves more than what he gives up in a transaction.
So If Person A exchanges 2 ounces of silver for Person B's 35 pounds of wheat; than
It can be said that...
Person A values the 35 lbs of wheat more than his 2 ounces of silver and
Person B values the 2 oz of silver more than the 35lbs of wheat.
The exchange would never take place otherwise.
This does not mean that 2 oz of silver and 35 lbs of wheat have any sort of underlying equality to them.
Remember, the exchange only happened because each party valued the two products in different order.
So you can start to see that this is not a zero-sum game.
Both parties benefit from the transaction.
Murray Rothbard once said that,
"Exchange is the lifeblood, not only of our economy, but of civilization itself."
Because of the great variety in nature and man, and the diversity of location of natural resources exchange has become universal among mankind.
We use it every day and we have become very much dependent on its practice.
Remember that without exchange, everyone would have to become self-sufficient.
So exchange in society enables people to specialize in the production of certain goods and services, because they can rely on exchange for there other necessities.
Take this for example:
A carpenter can exchange his furniture for food, shelter, etc
A fisherman can exchange his fish for food shelter, and furniture.
The carpenter can than focus on building the best furniture without having to go out and spend the time fishing in order to get food, Because he can exchange furniture for food.
And the fisherman can focus on catching as many fish as he can without focusing on building furniture for his house, because he can exchange his fish for furniture.
Now in this case the fisherman and the carpenter are much better off then they would be if they were required to be entirely self-sufficient. That is, it takes less time and effort for both of them to acquire their fish and furniture as a result of exchange.
What I have described in the example was a small barter economy between the fisherman and the carpenter. But it is easy to imagine that , in the real world today, this little barter system is relatively primitive and would probably not work out so well.
The two basic problems with a barter economy are
"indivisibility" and "lack of coincidence of wants".
To illustrate these two problems lets think about this.....
say Person A had a horse,
which he would like to exchange for several different things.
Maybe he wants to get milk, eggs and some clothes.
Well how could he break apart his horse and give part of it to the farmer and part of it to the tailor?
He can't.
Maybe then Person A found a fisherman who offered him 30 fish for his horse. Person A, thinking that he could divide the fish and then sell them seperately , accepts the fisherman's offer.
So Person A goes to the farmer, and it just so happens that the farmer is willing to exchange his milk and eggs for fish. Here there is a coincidence of wants between the farmer and person A. But what happens if person A can't find a tailor who wants fish.
There has to be a coincidence that both parties want what the other offers.
So it is clear that a civilized economy is nearly impossible under direct exchange.
With money, the two problems that faced the barter society completely disappear. Through out most of the history gold and silver has been used most often as money. In the early stages of civilizations money was emergent and unrestrained by any government action. So many other things have served the purpose that money does. In addition to gold and silver; oxen, cowry shells, tobacco, skins, wagon wheels, corn, cacao nuts, tea, etc have been used as money. All of these items fit these certain qualities; some better than others of course. The best being gold and silver.
Qualities Of Money
-Utility and Value-
That is, each item or piece of money can be used or valued in a way independent from the fact that it is used as money.
-Portability-
The material of money must be valuable, and that value must be related to the weight and bulk of the material. It must be a convenient size in order to use. For example nobody would use iron money, because 1 penny worth of iron would weigh a pound. You could imagine how inconvenient it would be to pay somebody 5 tons of iron for a gallon of milk and a dozen eggs.
-Indestructibility-
In order for money to be exchanged in the market and kept in reserve money must not be subject to easy deterioration or loss. So you can see why gold and silver fit this quality better than oxen, corn, and nuts. Oxen, corn, and nuts will overtime breakdown or decay.
-Divisibility-
Money must be easily divisible. And the division of the material must not effect its value. For example, if you divide a wagon wheel in half your left with two pieces of the wheel that are not as valuable now because they are split apart. If you divide an ounce of gold in half, each 1/2 oz piece contains half of the original value of the full 1 oz piece. Nothing is lost in the division of the material of money. The gold could even then be melted back into a 1 oz piece again if desired.
-Homogeneity-
All portions of specimens of the material money used should be of the same quality, so that equal weights will have exactly the same value. For example, tobacco as money is not very homogenous because some tobacco leaves could be fresher than others making them of more value than dried out tobacco leaves. Same with oxen, some could be healthier and as a result would be worth more. But an ounce of gold is an ounce of gold.
-Stability of Value-
It is desirable that the material money used maintains a stable value. That is, a material money of minute inflation or deflation. Inflation being the increase in money supply, and deflation being a decrease in the money supply. We all know that when something has a limited supply it usually gains value. Think rare baseball card, or collectors coins. Or if something has an abundant supply it possesses less value.
There are other qualities money can take on, but I feel these are the most important.
Unfortunately, we have a cartel running the production of money. In the U.S. today there are legal tender laws which force us to use fiat paper currency issued by the Federal Reserve. The currency we use does not posses much of the qualities listed above. Our dollars are not backed by gold or silver and are merely pieces of paper with numbers on them. A one hundred dollar bill and a one dollar bill have no difference in weight, and they both cost the same to produce. Unfortunately the dollar's value rest upon the amount of money printed into circulation by the Federal Reserve. This is an unsafe and unstable currency that will create problems for the majority of society.
Friday, September 25, 2009
Monday, September 21, 2009
Thursday, September 17, 2009
Wednesday, August 19, 2009
Political Economics
Political Economics and Keynes
Summer 2009
by Cameron Nehrer
The greatest economists of history based all there theories on sound principles. For them it wasn't so much collecting data and allowing the data to speak for itself. Certainly human behavior, or action, is too spontaneous and robust for the data to provide enough support for any kind of theory. Of course, some sort of theoretical apparatus to analyze and evaluate the data is indeed a necessary tool while studying economics. One must be committed to logic and reasoning before ever becoming a great economist.
Today, however, a growing number of mainstream economists have a reckless disregard for the use of both logic and reason in their work. When I hear Obama say,"...economists endorse.." his plan to recover from the downturn by running trillion dollar deficits over the next decade, I think right away of these economists. I question the motives of these so called intellectuals, and would not be too surprised if they were being paid off by politicians to fashion a theory that benefits the state. Either way, for the sake of scientific advancement, sound principles must always provide a strong foundation for economic theory.
John Maynard Keynes, the pioneer of mainstream economics was described as a neo-classical economists. Keynes paved the path for economists who are great at deluding the public. In his 1963 book, General Theory of Employment, Interest and Money, Keynes explains that the government could raise employment, real income and capital wealth merely by burying money under the ground and inviting private enterprise to dig it up. Many economists today see this as some sort of great revelation that Keynes had made. They see government fiscal policy as the best stabilizer to an economy in all cases, without proper examination of the effects it has. Of course, any economist who is dedicated to his work would agree with what Ludwig Von Mises once said in 1848, that "The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen". Keynes of course had a different idea, his famous statement, "In the long run we are all dead", illustrates this clearly.
Its no wonder that Keynesian theory has been the politicians best friend during times of economic turmoil. It is during times of economic turmoil when society demands solutions from the government. Politicians thrive in this environment by making promises that make people feel good. Phony politicians win people over by promising handouts to special interests. But during this whole delusional process no one stops to question whether these solutions will solve anything. Politicians provide temporary fixes like trillion dollar stimulus plans on the basis of little more than citing Keynes. Fortunately, for them, by citing Keynes they are able to talk about economics without really using any.
But is Keynes right? Does the free market have inherent problems that must be tamed by the almighty government?
Classical economists at the time such as Ludwig Von Mises argued that the U.S. economy was not completely a free market because of issues like the FED reserve, and the federal income tax, which were both enacted just over a decade prior to the depression. Furthermore, Mises and others at the Austrian School of Economics stressed that the depression was a result of business cycles that are caused and exacerbated by government intervention. Mises explained that treating economic downturns with government intervention, quickly turns into a never ending downward spiral of unintended consequences.
In any case, all regulation or control will have some type of effect or consequence on the subject. Today more than ever it is important for people to examine the type of consequences regulation will have on our economy. But unfortunately our government is regulating and controlling more than ever. Taking on almost religious proportion the vast majority of the public continues to have a blind faith in the almighty benevolent government. Here are some examples.
CASH FOR CLUNKERS
Here is a government program with the goal of reducing co2 emissions and stimulating the economy. The government has come to the conclusion that offering $3,500, and $4,500 cash vouchers to car buyers who trade in a clunker will not only solve our economic woes, and will stimulate our economy back to normal, but also will be good for our environment. Sounds great! Right?
Well, so far congress has approved $3 billion dollars for the Cash for Clunker program. With car sales picking up and the approved funds drying up, politicians have nothing but praises for how good the program has worked. But what are they actually doing here? What could possibly result from these interferences? What kind of human action will result in this control that the government is putting on our economy? Furthermore, what will the overall impact on the mass of individuals be?
Ok so let's think about this. So if the idea is that the cash voucher will induce people into trading in their car and buying a new car. And the cars that are being traded in are being destroyed. Then the government has essentially made a program that gives people cash vouchers for destroying clunkers and buying new cars. To me, already this sounds crazy! But let's follow the path paved with great intensions.
What is a clunker anyways? Well according to the bill it is pretty much any car that gets under 18 mpg and that has been registered and insured for the past year. So this program is destroying perfectly good cars. Many people will be affected by this alone. Kids or people who are struggling to afford new cars are usually content with clunkers. This bill will severely limit the supply of used cars. By destroying the supply of "clunkers" many people will be left with out a car at all. Another victim of this bill is the local mechanic who would have been working on these clunkers had they not been destroyed.
A big problem with this program is that it encourages all the wrong things. This bill encourages Americans to destroy working cars and to go further into debt to buy cars they simply don't need and can't afford. The last thing this country needs is more debt.
So what should the government do?
NOTHING
Milton Freidman would probably tell the government,
"Don't just do something; stand there!"
Too often politicians are convinced they have some vested power to control and regulate the economy for the good, but I think the study of economics should prove that most often they end up doing the opposite.
Summer 2009
by Cameron Nehrer
The greatest economists of history based all there theories on sound principles. For them it wasn't so much collecting data and allowing the data to speak for itself. Certainly human behavior, or action, is too spontaneous and robust for the data to provide enough support for any kind of theory. Of course, some sort of theoretical apparatus to analyze and evaluate the data is indeed a necessary tool while studying economics. One must be committed to logic and reasoning before ever becoming a great economist.
Today, however, a growing number of mainstream economists have a reckless disregard for the use of both logic and reason in their work. When I hear Obama say,"...economists endorse.." his plan to recover from the downturn by running trillion dollar deficits over the next decade, I think right away of these economists. I question the motives of these so called intellectuals, and would not be too surprised if they were being paid off by politicians to fashion a theory that benefits the state. Either way, for the sake of scientific advancement, sound principles must always provide a strong foundation for economic theory.
John Maynard Keynes, the pioneer of mainstream economics was described as a neo-classical economists. Keynes paved the path for economists who are great at deluding the public. In his 1963 book, General Theory of Employment, Interest and Money, Keynes explains that the government could raise employment, real income and capital wealth merely by burying money under the ground and inviting private enterprise to dig it up. Many economists today see this as some sort of great revelation that Keynes had made. They see government fiscal policy as the best stabilizer to an economy in all cases, without proper examination of the effects it has. Of course, any economist who is dedicated to his work would agree with what Ludwig Von Mises once said in 1848, that "The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen". Keynes of course had a different idea, his famous statement, "In the long run we are all dead", illustrates this clearly.
Its no wonder that Keynesian theory has been the politicians best friend during times of economic turmoil. It is during times of economic turmoil when society demands solutions from the government. Politicians thrive in this environment by making promises that make people feel good. Phony politicians win people over by promising handouts to special interests. But during this whole delusional process no one stops to question whether these solutions will solve anything. Politicians provide temporary fixes like trillion dollar stimulus plans on the basis of little more than citing Keynes. Fortunately, for them, by citing Keynes they are able to talk about economics without really using any.
But is Keynes right? Does the free market have inherent problems that must be tamed by the almighty government?
Classical economists at the time such as Ludwig Von Mises argued that the U.S. economy was not completely a free market because of issues like the FED reserve, and the federal income tax, which were both enacted just over a decade prior to the depression. Furthermore, Mises and others at the Austrian School of Economics stressed that the depression was a result of business cycles that are caused and exacerbated by government intervention. Mises explained that treating economic downturns with government intervention, quickly turns into a never ending downward spiral of unintended consequences.
In any case, all regulation or control will have some type of effect or consequence on the subject. Today more than ever it is important for people to examine the type of consequences regulation will have on our economy. But unfortunately our government is regulating and controlling more than ever. Taking on almost religious proportion the vast majority of the public continues to have a blind faith in the almighty benevolent government. Here are some examples.
CASH FOR CLUNKERS
Here is a government program with the goal of reducing co2 emissions and stimulating the economy. The government has come to the conclusion that offering $3,500, and $4,500 cash vouchers to car buyers who trade in a clunker will not only solve our economic woes, and will stimulate our economy back to normal, but also will be good for our environment. Sounds great! Right?
Well, so far congress has approved $3 billion dollars for the Cash for Clunker program. With car sales picking up and the approved funds drying up, politicians have nothing but praises for how good the program has worked. But what are they actually doing here? What could possibly result from these interferences? What kind of human action will result in this control that the government is putting on our economy? Furthermore, what will the overall impact on the mass of individuals be?
Ok so let's think about this. So if the idea is that the cash voucher will induce people into trading in their car and buying a new car. And the cars that are being traded in are being destroyed. Then the government has essentially made a program that gives people cash vouchers for destroying clunkers and buying new cars. To me, already this sounds crazy! But let's follow the path paved with great intensions.
What is a clunker anyways? Well according to the bill it is pretty much any car that gets under 18 mpg and that has been registered and insured for the past year. So this program is destroying perfectly good cars. Many people will be affected by this alone. Kids or people who are struggling to afford new cars are usually content with clunkers. This bill will severely limit the supply of used cars. By destroying the supply of "clunkers" many people will be left with out a car at all. Another victim of this bill is the local mechanic who would have been working on these clunkers had they not been destroyed.
A big problem with this program is that it encourages all the wrong things. This bill encourages Americans to destroy working cars and to go further into debt to buy cars they simply don't need and can't afford. The last thing this country needs is more debt.
So what should the government do?
NOTHING
Milton Freidman would probably tell the government,
"Don't just do something; stand there!"
Too often politicians are convinced they have some vested power to control and regulate the economy for the good, but I think the study of economics should prove that most often they end up doing the opposite.
Tuesday, August 11, 2009
Tuesday, July 21, 2009
Monetary Policy Hearing
Here are a few clips from the Monetary Policy Hearing that was held this morning with the Financial Services Committee and the Federal Reserve Chairman.
Wow! Bernanke looks really nervous in this one.
Wow! Bernanke looks really nervous in this one.
Wednesday, July 15, 2009
Minimum Wage, Maximum Stupidity
By Peter Schiff
In a free market, demand is always a function of price: the higher the price, the lower the demand. What may surprise most politicians is that these rules apply equally to both prices and wages. When employers evaluate their labor and capital needs, cost is a primary factor. When the cost of hiring low-skilled workers moves higher, jobs are lost. Despite this, minimum wage hikes, like the one set to take effect later this month, are always seen as an act of governmental benevolence. Nothing could be further from the truth.
When confronted with a clogged drain, most of us will call several plumbers and hire the one who quotes us the lowest price. If all the quotes are too high, most of us will grab some Drano and a wrench, and have at it. Labor markets work the same way. Before bringing on another worker, an employer must be convinced that the added productivity will exceed the added cost (this includes not just wages, but all payroll taxes and other benefits.) So if an unskilled worker is capable of delivering only $6 per hour of increased productivity, such an individual is legally unemployable with a minimum wage of $7.25 per hour.
Low-skilled workers must compete for employers’ dollars with both skilled workers and capital. For example, if a skilled worker can do a job for $14 per hour that two unskilled workers can do for $6.50 per hour each, then it makes economic sense for the employer to go with the unskilled labor. Increase the minimum wage to $7.25 per hour and the unskilled workers are priced out of their jobs. This dynamic is precisely why labor unions are such big supporters of minimum wage laws. Even though none of their members earn the minimum wage, the law helps protect their members from having to compete with lower-skilled workers.
Employers also have the choice of whether to employ people or machines. For example, an employer can hire a receptionist or invest in an automated answering system. The next time you are screaming obscenities into the phone as you try to have a conversation with a computer, you know what to blame for your frustration.
There are numerous other examples of employers substituting capital for labor simply because the minimum wage has made low-skilled workers uncompetitive. For example, handcarts have replaced skycaps at airports. The main reason fast-food restaurants use paper plates and plastic utensils is to avoid having to hire dishwashers.
As a result, many low-skilled jobs that used to be the first rung on the employment ladder have been priced out of the market. Can you remember the last time an usher showed you to your seat in a dark movie theater? When was the last time someone other than the cashier not only bagged your groceries, but also loaded them into your car? By the way, it won’t be long before the cashiers themselves are priced out of the market, replaced by automated scanners, leaving you to bag your purchases with no help whatsoever.
The disappearance of these jobs has broader economic and societal consequences. First jobs are a means to improve skills so that low skilled workers can offer greater productivity to current or future employers. As their skills grow, so does their ability to earn higher wages. However, remove the bottom rung from the employment ladder and many never have a chance to climb it.
So the next time you are pumping your own gas in the rain, do not just think about the teenager who could have been pumping it for you, think about the auto mechanic he could have become – had the minimum wage not denied him a job. Many auto mechanics used to learn their trade while working as pump jockeys. Between fill-ups, checking tire pressure, and washing windows, they would spend a lot of time helping – and learning from – the mechanics.
Because the minimum wage prevents so many young people (including a disproportionate number of minorities) from getting entry-level jobs, they never develop the skills necessary to command higher paying jobs. As a result, many turn to crime, while others subsist on government aid. Supporters of the minimum wage argue that it is impossible to support a family on the minimum wage. While that is true, it is completely irrelevant, as minimum wage jobs are not designed to support families. In fact, many people earning the minimum wage are themselves supported by their parents.
The way it is supposed to work is that people do not choose to start families until they can earn enough to support them. Lower wage jobs enable workers to eventually acquire the skills necessary to earn wages high enough to support a family. Does anyone really think a kid with a paper route should earn a wage high enough to support a family?
The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That’s the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.
Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?
In a free market, demand is always a function of price: the higher the price, the lower the demand. What may surprise most politicians is that these rules apply equally to both prices and wages. When employers evaluate their labor and capital needs, cost is a primary factor. When the cost of hiring low-skilled workers moves higher, jobs are lost. Despite this, minimum wage hikes, like the one set to take effect later this month, are always seen as an act of governmental benevolence. Nothing could be further from the truth.
When confronted with a clogged drain, most of us will call several plumbers and hire the one who quotes us the lowest price. If all the quotes are too high, most of us will grab some Drano and a wrench, and have at it. Labor markets work the same way. Before bringing on another worker, an employer must be convinced that the added productivity will exceed the added cost (this includes not just wages, but all payroll taxes and other benefits.) So if an unskilled worker is capable of delivering only $6 per hour of increased productivity, such an individual is legally unemployable with a minimum wage of $7.25 per hour.
Low-skilled workers must compete for employers’ dollars with both skilled workers and capital. For example, if a skilled worker can do a job for $14 per hour that two unskilled workers can do for $6.50 per hour each, then it makes economic sense for the employer to go with the unskilled labor. Increase the minimum wage to $7.25 per hour and the unskilled workers are priced out of their jobs. This dynamic is precisely why labor unions are such big supporters of minimum wage laws. Even though none of their members earn the minimum wage, the law helps protect their members from having to compete with lower-skilled workers.
Employers also have the choice of whether to employ people or machines. For example, an employer can hire a receptionist or invest in an automated answering system. The next time you are screaming obscenities into the phone as you try to have a conversation with a computer, you know what to blame for your frustration.
There are numerous other examples of employers substituting capital for labor simply because the minimum wage has made low-skilled workers uncompetitive. For example, handcarts have replaced skycaps at airports. The main reason fast-food restaurants use paper plates and plastic utensils is to avoid having to hire dishwashers.
As a result, many low-skilled jobs that used to be the first rung on the employment ladder have been priced out of the market. Can you remember the last time an usher showed you to your seat in a dark movie theater? When was the last time someone other than the cashier not only bagged your groceries, but also loaded them into your car? By the way, it won’t be long before the cashiers themselves are priced out of the market, replaced by automated scanners, leaving you to bag your purchases with no help whatsoever.
The disappearance of these jobs has broader economic and societal consequences. First jobs are a means to improve skills so that low skilled workers can offer greater productivity to current or future employers. As their skills grow, so does their ability to earn higher wages. However, remove the bottom rung from the employment ladder and many never have a chance to climb it.
So the next time you are pumping your own gas in the rain, do not just think about the teenager who could have been pumping it for you, think about the auto mechanic he could have become – had the minimum wage not denied him a job. Many auto mechanics used to learn their trade while working as pump jockeys. Between fill-ups, checking tire pressure, and washing windows, they would spend a lot of time helping – and learning from – the mechanics.
Because the minimum wage prevents so many young people (including a disproportionate number of minorities) from getting entry-level jobs, they never develop the skills necessary to command higher paying jobs. As a result, many turn to crime, while others subsist on government aid. Supporters of the minimum wage argue that it is impossible to support a family on the minimum wage. While that is true, it is completely irrelevant, as minimum wage jobs are not designed to support families. In fact, many people earning the minimum wage are themselves supported by their parents.
The way it is supposed to work is that people do not choose to start families until they can earn enough to support them. Lower wage jobs enable workers to eventually acquire the skills necessary to earn wages high enough to support a family. Does anyone really think a kid with a paper route should earn a wage high enough to support a family?
The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That’s the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.
Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?
Wednesday, July 8, 2009
Tuesday, June 30, 2009
Thursday, June 25, 2009
Monday, June 22, 2009
International Bailout Brings Us Closer to Economic Collapse
by Ron Paul
Last week Congress passed the war supplemental appropriations bill. In an affront to all those who thought they voted for a peace candidate, the current president will be sending another $106 billion we don’t have to continue the bloodshed in Afghanistan and Iraq, without a hint of a plan to bring our troops home.
Many of my colleagues who voted with me as I opposed every war supplemental request under the previous administration seem to have changed their tune. I maintain that a vote to fund the war is a vote in favor of the war. Congress exercises its constitutional prerogatives through the power of the purse, and as long as Congress continues to enable these dangerous interventions abroad, there is no end in sight, that is until we face total economic collapse.
From their spending habits, an economic collapse seems to be the goal of Congress and this administration. Washington spends with impunity domestically, bailing out and nationalizing everything they can get their hands on, and the foreign aid and IMF funding in this bill can rightly be called an international bailout!
As Americans struggle through the worst economic downturn since the Great Depression, this emergency supplemental appropriations bill sends $660 million to Gaza, $555 million to Israel, $310 million to Egypt, $300 million to Jordan, and $420 million to Mexico. Some $889 million will be sent to the United Nations for so-called “peacekeeping” missions. Almost one billion dollars will be sent overseas to address the global financial crisis outside our borders. Nearly $8 billion will be spent to address a “potential pandemic flu” which could result in mandatory vaccinations for no discernable reason other than to enrich the pharmaceutical companies that make the vaccine.
Perhaps most outrageous is the $108 billion loan guarantee to the International Monetary Fund. These new loan guarantees will allow that destructive organization to continue spending taxpayer money to prop up corrupt leaders and promote harmful economic policies overseas.
Not only does sending American taxpayer money to the IMF hurt citizens here, evidence shows that it even hurts those it pretends to help. Along with IMF loans comes IMF required policy changes, called Structural Adjustment Programs, which amount to forced Keynesianism. This is the very fantasy-infused economic model that has brought our own country to its knees, and IMF loans act as the Trojan Horse to inflict it on others. Perhaps most troubling is the fact that leaders in recipient nations tend to become more concerned with the wishes of international elites than the wishes and needs of their own people. Argentina and Kenya are just two examples of countries that followed IMF mandates right off a cliff. The IMF frequently recommends currency devaluation to poorer nations, which has wiped out the already impoverished over and over. There is also a long list of brutal dictators the IMF happily supported and propped up with loans that left their oppressed populace in staggering amounts of debt with no economic progress to show for it.
We are buying nothing but evil and global oppression by sending your taxdollars to the IMF. Not to mention there is no Constitutional authority to do so. Our continued presence in Iraq and Afghanistan does not make us safer at home, but in fact undermines our national security. I vehemently opposed this Supplemental Appropriations Bill and was dismayed to see it pass so easily.
Last week Congress passed the war supplemental appropriations bill. In an affront to all those who thought they voted for a peace candidate, the current president will be sending another $106 billion we don’t have to continue the bloodshed in Afghanistan and Iraq, without a hint of a plan to bring our troops home.
Many of my colleagues who voted with me as I opposed every war supplemental request under the previous administration seem to have changed their tune. I maintain that a vote to fund the war is a vote in favor of the war. Congress exercises its constitutional prerogatives through the power of the purse, and as long as Congress continues to enable these dangerous interventions abroad, there is no end in sight, that is until we face total economic collapse.
From their spending habits, an economic collapse seems to be the goal of Congress and this administration. Washington spends with impunity domestically, bailing out and nationalizing everything they can get their hands on, and the foreign aid and IMF funding in this bill can rightly be called an international bailout!
As Americans struggle through the worst economic downturn since the Great Depression, this emergency supplemental appropriations bill sends $660 million to Gaza, $555 million to Israel, $310 million to Egypt, $300 million to Jordan, and $420 million to Mexico. Some $889 million will be sent to the United Nations for so-called “peacekeeping” missions. Almost one billion dollars will be sent overseas to address the global financial crisis outside our borders. Nearly $8 billion will be spent to address a “potential pandemic flu” which could result in mandatory vaccinations for no discernable reason other than to enrich the pharmaceutical companies that make the vaccine.
Perhaps most outrageous is the $108 billion loan guarantee to the International Monetary Fund. These new loan guarantees will allow that destructive organization to continue spending taxpayer money to prop up corrupt leaders and promote harmful economic policies overseas.
Not only does sending American taxpayer money to the IMF hurt citizens here, evidence shows that it even hurts those it pretends to help. Along with IMF loans comes IMF required policy changes, called Structural Adjustment Programs, which amount to forced Keynesianism. This is the very fantasy-infused economic model that has brought our own country to its knees, and IMF loans act as the Trojan Horse to inflict it on others. Perhaps most troubling is the fact that leaders in recipient nations tend to become more concerned with the wishes of international elites than the wishes and needs of their own people. Argentina and Kenya are just two examples of countries that followed IMF mandates right off a cliff. The IMF frequently recommends currency devaluation to poorer nations, which has wiped out the already impoverished over and over. There is also a long list of brutal dictators the IMF happily supported and propped up with loans that left their oppressed populace in staggering amounts of debt with no economic progress to show for it.
We are buying nothing but evil and global oppression by sending your taxdollars to the IMF. Not to mention there is no Constitutional authority to do so. Our continued presence in Iraq and Afghanistan does not make us safer at home, but in fact undermines our national security. I vehemently opposed this Supplemental Appropriations Bill and was dismayed to see it pass so easily.
Back in the U.S.S.A.
By Peter Schiff
Harry Browne, the former Libertarian Party candidate for president, used to say: “the government is great at breaking your leg, handing you a crutch, and saying ‘You see, without me you couldn’t walk.’” That maxim is clearly illustrated by the financial industry regulatory reforms proposed this week by the Obama Administration.
In seeking to undo the damage inflicted over the past decade by misguided government policies, the new regulatory regime would ensure that the problems underlying our financial system will only get worse. As was the case with the deeply flawed Sarbanes-Oxley legislation of 2002, or the misguided provisions of the Patriot Act of 2001, such as the torturous anti-money laundering requirements, the move will further burden the financial services industry with unnecessary regulation that will drive up costs, lower quality, and shelter the biggest and least innovative companies. Ultimately, the structure will put the entire U.S. financial industry at a global competitive disadvantage.
The underlying problem is that the excessive risk taking which brought about the crisis was not market-driven, but a direct consequence of government interference with risk-inhibiting market forces. Rather than learning from its mistakes and allowing market forces to once again control risks and efficiently allocate resources, the government is merely repeating its mistakes on a grander scale – thereby sowing the seeds for an even greater crisis in the future.
As is typical of government attempts to control economic outcomes, Obama’s plans focuses on the symptoms of the disease and not the cause. The American financial system imploded for two reasons: cheap money and moral hazard – both of which were supplied by the government. Under the proposed new regulatory structures, these toxic ingredients will be combined in ever-increasing quantities.
The proposals most notably involve extra regulatory oversight of financial entities that the government deems “too big to fail.” This implies that it is desirable to have such entities in the first place, and that the government will continue to back those large organizations that fall under its protection. These “too big to fail” firms will enjoy a competitive advantage over smaller firms in attracting capital, as lenders will perceive zero risk in extending them credit. This will cause these firms to grow even larger, producing even greater systemic risks and larger losses when the next round of bailouts arrives. Meanwhile, smaller firms which seek to expand, and which propose no systemic risks, will face greater challenges as higher capital costs render them less competitive.
If the government did not provide these bailouts or guarantees, then the market itself would ensure organizations did not grow beyond their ability to attract capital. It is only when market discipline is overcome by government guarantees that systemic risks arise.
Obama proposes to entrust the critical job of “systemic risk regulator” to the Federal Reserve, the very organization that has proven most adept at creating systemic risk. This is like making Keith Richards the head of the DEA.
Given the Federal Reserve’s disastrous monetary policy over the past decade, any attempt to expand the Fed’s role should be vigorously opposed. Through decades of short-sighted interest rate decisions, the Fed has proven time and again that it is only able to close the barn door after the entire herd has escaped. If setting interest rates had been left to the free market, none of the excesses we have seen in the credit market would have been remotely possible.
The perverse result will be that our government and the Fed gain more power as a direct result of their own incompetence. Such was also the case with Freddie and Fannie, which should have been allowed to fail, but were nationalized instead, leaving them in a position to do even more damage. The new round of regulations ignores them completely. Along those lines, ratings agencies such as Standard and Poor’s and Moody’s that completely missed the mark were also spared. Perhaps this special treatment is a way of ensuring that Treasury debt maintains its bogus AAA rating.
Unfortunately, despite their intent, my guess is that the new regulations will most severely impact smaller firms, like my own, that never engaged in reckless behavior. This will further reward those “too big to fail” firms, whose economies of scale and cozy relationships with regulators leave them better positioned than their smaller rivals to absorb the costs of the added red tape.
With the transition now fully under way, I propose we end the pretense and rename our country: “The United Socialist States of America.” In fact, given all the czars already in Washington, we might as well go with the Russian theme completely: appoint a Politburo, move into dilapidated housing blocks, and parade our missiles in the streets. On the bright side, there’s always the borscht.
Harry Browne, the former Libertarian Party candidate for president, used to say: “the government is great at breaking your leg, handing you a crutch, and saying ‘You see, without me you couldn’t walk.’” That maxim is clearly illustrated by the financial industry regulatory reforms proposed this week by the Obama Administration.
In seeking to undo the damage inflicted over the past decade by misguided government policies, the new regulatory regime would ensure that the problems underlying our financial system will only get worse. As was the case with the deeply flawed Sarbanes-Oxley legislation of 2002, or the misguided provisions of the Patriot Act of 2001, such as the torturous anti-money laundering requirements, the move will further burden the financial services industry with unnecessary regulation that will drive up costs, lower quality, and shelter the biggest and least innovative companies. Ultimately, the structure will put the entire U.S. financial industry at a global competitive disadvantage.
The underlying problem is that the excessive risk taking which brought about the crisis was not market-driven, but a direct consequence of government interference with risk-inhibiting market forces. Rather than learning from its mistakes and allowing market forces to once again control risks and efficiently allocate resources, the government is merely repeating its mistakes on a grander scale – thereby sowing the seeds for an even greater crisis in the future.
As is typical of government attempts to control economic outcomes, Obama’s plans focuses on the symptoms of the disease and not the cause. The American financial system imploded for two reasons: cheap money and moral hazard – both of which were supplied by the government. Under the proposed new regulatory structures, these toxic ingredients will be combined in ever-increasing quantities.
The proposals most notably involve extra regulatory oversight of financial entities that the government deems “too big to fail.” This implies that it is desirable to have such entities in the first place, and that the government will continue to back those large organizations that fall under its protection. These “too big to fail” firms will enjoy a competitive advantage over smaller firms in attracting capital, as lenders will perceive zero risk in extending them credit. This will cause these firms to grow even larger, producing even greater systemic risks and larger losses when the next round of bailouts arrives. Meanwhile, smaller firms which seek to expand, and which propose no systemic risks, will face greater challenges as higher capital costs render them less competitive.
If the government did not provide these bailouts or guarantees, then the market itself would ensure organizations did not grow beyond their ability to attract capital. It is only when market discipline is overcome by government guarantees that systemic risks arise.
Obama proposes to entrust the critical job of “systemic risk regulator” to the Federal Reserve, the very organization that has proven most adept at creating systemic risk. This is like making Keith Richards the head of the DEA.
Given the Federal Reserve’s disastrous monetary policy over the past decade, any attempt to expand the Fed’s role should be vigorously opposed. Through decades of short-sighted interest rate decisions, the Fed has proven time and again that it is only able to close the barn door after the entire herd has escaped. If setting interest rates had been left to the free market, none of the excesses we have seen in the credit market would have been remotely possible.
The perverse result will be that our government and the Fed gain more power as a direct result of their own incompetence. Such was also the case with Freddie and Fannie, which should have been allowed to fail, but were nationalized instead, leaving them in a position to do even more damage. The new round of regulations ignores them completely. Along those lines, ratings agencies such as Standard and Poor’s and Moody’s that completely missed the mark were also spared. Perhaps this special treatment is a way of ensuring that Treasury debt maintains its bogus AAA rating.
Unfortunately, despite their intent, my guess is that the new regulations will most severely impact smaller firms, like my own, that never engaged in reckless behavior. This will further reward those “too big to fail” firms, whose economies of scale and cozy relationships with regulators leave them better positioned than their smaller rivals to absorb the costs of the added red tape.
With the transition now fully under way, I propose we end the pretense and rename our country: “The United Socialist States of America.” In fact, given all the czars already in Washington, we might as well go with the Russian theme completely: appoint a Politburo, move into dilapidated housing blocks, and parade our missiles in the streets. On the bright side, there’s always the borscht.
Friday, June 19, 2009
Monday, June 15, 2009
Wednesday, June 10, 2009
GM, Amtrak and an Increasingly Fascist America
By Ron Paul
Published 06/09/09
Last week, General Motors finally declared bankruptcy. Many in government thought $20 billion in taxpayer dollars would save the company, but as predicted, it only postponed the inevitable. The government will dump another $30 billion into GM and take a 60 percent controlling interest for it. Public officials are now involving themselves in tactical business decisions such as where GM's headquarters should move and what kind of cars it will build.
The promise that this is temporary and will eventually be profitable is supposed to ease the American people into accepting this arrangement, but it is of little comfort to those who remember similar promises when the American taxpayers bought Amtrak. After three years, government was supposed to be out of the passenger rail business. 40 years and billions of dollars later, the government is still operating Amtrak at a loss, despite the fact that they have created a monopoly by making it illegal to compete with Amtrak. Imagine what they can now do to what is left of the great American auto industry!
In a truly free market, GM would get your money one way and one way only -- by selling you a car you want, at a price you are willing to pay. Instead, the government is giving public money to a private company in spite of the market signals it has been sending. Throwing money at GM does not stop it from being an engine of wealth destruction; on the contrary, it simply gives it more wealth to destroy.
Had it been allowed to fail naturally, the profitable pieces of GM would have been bought up and put to good use by now. The laid off employees would likely have found new jobs and all that capital would be in private hands, reinvested in companies that produce products demanded by consumers. Instead, we are all poorer now.
Political pressure, rather than the rule of law, is deciding how to divide up the remains of GM. The bondholders had billions in retirement savings invested in the company, and though they were entitled to nearly three times as much as the United Auto Workers, the bondholders were left with just a 10 percent stake compared to the union's 17.5 percent stake. For their 60 percent stake, taxpayers have a future of constant bailouts to look forward to.
Comingling public control of private business is known as fascism. While today's politicians may feel emboldened with all their new power, history will only repeat itself as all this collapses on itself. It is the height of hubris for bureaucrats and politicians to attempt to control the market and the freewill of the American people. In the end, the market always wins out. Maybe one day future generations will wise up and allow free markets to function and thrive without the albatross of government around its neck. For now, it looks like those in charge have not learned the lessons of the past, and have doomed us to repeat those mistakes once again.
Published 06/09/09
Last week, General Motors finally declared bankruptcy. Many in government thought $20 billion in taxpayer dollars would save the company, but as predicted, it only postponed the inevitable. The government will dump another $30 billion into GM and take a 60 percent controlling interest for it. Public officials are now involving themselves in tactical business decisions such as where GM's headquarters should move and what kind of cars it will build.
The promise that this is temporary and will eventually be profitable is supposed to ease the American people into accepting this arrangement, but it is of little comfort to those who remember similar promises when the American taxpayers bought Amtrak. After three years, government was supposed to be out of the passenger rail business. 40 years and billions of dollars later, the government is still operating Amtrak at a loss, despite the fact that they have created a monopoly by making it illegal to compete with Amtrak. Imagine what they can now do to what is left of the great American auto industry!
In a truly free market, GM would get your money one way and one way only -- by selling you a car you want, at a price you are willing to pay. Instead, the government is giving public money to a private company in spite of the market signals it has been sending. Throwing money at GM does not stop it from being an engine of wealth destruction; on the contrary, it simply gives it more wealth to destroy.
Had it been allowed to fail naturally, the profitable pieces of GM would have been bought up and put to good use by now. The laid off employees would likely have found new jobs and all that capital would be in private hands, reinvested in companies that produce products demanded by consumers. Instead, we are all poorer now.
Political pressure, rather than the rule of law, is deciding how to divide up the remains of GM. The bondholders had billions in retirement savings invested in the company, and though they were entitled to nearly three times as much as the United Auto Workers, the bondholders were left with just a 10 percent stake compared to the union's 17.5 percent stake. For their 60 percent stake, taxpayers have a future of constant bailouts to look forward to.
Comingling public control of private business is known as fascism. While today's politicians may feel emboldened with all their new power, history will only repeat itself as all this collapses on itself. It is the height of hubris for bureaucrats and politicians to attempt to control the market and the freewill of the American people. In the end, the market always wins out. Maybe one day future generations will wise up and allow free markets to function and thrive without the albatross of government around its neck. For now, it looks like those in charge have not learned the lessons of the past, and have doomed us to repeat those mistakes once again.
Tuesday, June 9, 2009
Thursday, June 4, 2009
Tuesday, May 19, 2009
Monday, May 18, 2009
Fannie and Freddie by Ron Paul in 2003
Ron Paul in the House Financial Services Committee, September 10, 2003
Mr. Chairman, thank you for holding this hearing on the Treasury Department's views regarding government sponsored enterprises (GSEs). I would also like to thank Secretaries Snow and Martinez for taking time out of their busy schedules to appear before the committee.
I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.
One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.
I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.
One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.Dr. Ron Paul is a Republican member of Congress from Texas.
Sunday, May 17, 2009
Tuesday, May 12, 2009
Budget Gap Is Revised to Surpass $1.8 Trillion
WASHINGTON —
President Obama has lately begun pointing to optimistic
signs for the economy, but the continuing crisis still bedevilshis budget projections and his domestic agenda.
Skip to next paragraph
Brendan Smialowski/Bloomberg News
Peter Orszag, the budget director, who appeared with President Obama last week, disclosed the latest revisions in his blog.
The administration, in final budget and tax details released Monday, disclosed a double wallop of bad news from government number-crunchers. First, its Office of Management and Budget reported that the economy had added — both for this year and next — $90 billion to the historically high deficit estimates the administration issued just two months ago.
And the Treasury released revised figures showing that Mr. Obama’s proposal for financing fully half of his health care initiative over the next decade — a 28 percent limit on deductions for Americans in the top two income tax brackets — would raise $267 billion, or roughly $50 billion less than he initially projected. That further complicates the president’s struggles, together with Democrats in Congress, to pay for overhauling health care.
To fill the revenue gap, the Treasury outlined several new ideas for raising nearly $60 billion over 10 years, mainly from tightening rules for inheritance taxes but also from changes in taxing some types of life insurance and other products.
Separately, the chairwoman of the Council of Economic Advisers, Christina Romer, released a preliminary report standing by the administration’s claim that the $787 billion, two-year economic stimulus package that became law in February will save or create 3.5 million jobs by the fourth quarter of 2010, compared with what would have happened without the spending and tax cuts.
The budget office’s revised deficit projections bring the expected shortfall this fiscal year, which ends Sept. 30, to $1.84 trillion, from a February projection of $1.75 trillion. For the 2010 fiscal year, the new estimate is $1.26 trillion, up from $1.17 trillion.
Measured against the economy, this year’s shortfall would be 12.9 percent of the gross domestic product. Next year’s deficit would be 8.5 percent of G.D.P. Even before the revisions, the deficit projections were the highest in more than 60 years, since the end of World War II.
Economists generally agree a country’s annual deficits should not exceed 3 percent of economic output. Mr. Obama, in his 10-year budget outline in February, projected the United States would fall just below that level in the last months of his term, in the 2013 fiscal year. Many analysts consider his economic assumptions too rosy, however, which casts doubt on his deficit forecast.
The president’s budget director, Peter R. Orszag, disclosed the deficit revisions Monday in his blog on the budget office’s Web site. He said they were “driven in large part by the economic crisis inherited by this administration.” He cited Treasury estimates that revenue collections would be $30 billion to $50 billion less this year and next compared with February calculations, and higher-than-expected costs for bank bailouts.
Congressional Democrats echoed the reference to the inheritance from President George W. Bush. “It took eight years for the previous administration to dig this hole. It is going to take time to climb our way out,” Senator Kent Conrad of North Dakota, chairman of the Senate Budget Committee, said in a statement.
Congressional Republicans seized on the new deficit projection to tweak the Democratic administration for its boast last week that its “line-by-line scrub” of the federal budget had produced proposals to save $17 billion in the 2010 fiscal year.
The Senate Republican leader, Senator Mitch McConnell of Kentucky, said in a statement that “the administration acknowledged today that since the president took office, their projections for the deficit grew five times faster than the proposed cuts would save, and that’s assuming all the cuts are enacted” — which they will not be, members of both parties in Congress say.
Mr. Obama’s proposal to limit high-income Americans’ deductions had already hit a wall of opposition in Congress, with the Democratic chairmen of the House and Senate tax-writing committees, among others, objecting that it could depress tax-deductible contributions for charities, colleges and other recipients. The proposal was intended to raise $318 billion of a proposed $635 billion, 10-year reserve fund to introduce cost-saving changes into health care and to expand coverage to the uninsured; the other half was to come from Medicare savings.
Of the new Treasury proposals to raise $60 billion through 2019, more than $24 billion would come from estate and gift taxes that would affect less than three-tenths of 1 percent of estates in any year, according to a senior Treasury official, who spoke to reporters on condition of anonymity. The main change would affect how a taxpayer values property transferred to a family member either at death or during the taxpayer’s life.
Endless Wars? Yep. Still Got 'em. Where is the Change Obama
On Af-Pak: Stop "Helping"By Ron Paul
Published 05/12/09
While much of the country's attention is on other issues, a serious situation is developing in Pakistan that threatens to plunge us into another fruitless and bloody war. It is very frustrating to see that many who were so vehemently against the wars of the last administration have suddenly lost interest in foreign policy simply because we were promised change.
Those still paying attention know that nothing could be further from the truth. Very little has changed, except perhaps rhetoric, but what does that matter when the bombing missions are only getting deadlier? Rather than drawing down violent military interventions into the affairs of other countries, the new administration is escalating the foreign policy of the previous administration.
In Pakistan that entails the continuation and even escalation of military interventionism just across the border with Afghanistan. The targets are believed to be enclaves of Taliban militants, however, many innocent civilians have been caught in the deadly crossfire, severely damaging our image in the region. Many ordinary Afghanis and Pakistanis that never had cause to take up arms against us are being provided with motivation as family and friends are killed and maimed by our clumsy and indiscriminate bombs. Is it worth it for us to be involved in this way at such a high cost of blood, treasure and goodwill? Is there anything to be gained by this policy?
We are helping the Taliban and other enemies to actually gain numbers and strength, while driving them down from the mountains in the border regions deeper into Pakistan, where they have been making a menace of themselves. As our bombings follow them, beleaguered villagers have little choice but to leave their homes and join the swelling numbers of refugees or take up arms and join the fight against us.
Nonetheless, instead of recognizing the cascading unintended consequences of trying to deal with Pakistan's problems, all signs in Washington point to further escalation. Both the House and Senate have newly introduced bills to triple foreign aid to Pakistan, from $500 million to $1.5 billion, with every indication that the leadership in Pakistan is taking advantage of the situation with the Taliban to milk more aid from the US taxpayer. We are broke. This is money we don't have, and it is an insult to the American people to run up the national credit card for this type of military adventurism after many Americans thought they were voting for peace.
The bottom line is our involvement in Pakistan's internal problems is not making us safer. In fact, we are adding to the numbers of our enemies and increasing the threats to our security here at home. We are inciting the very terrorism and extremism we are trying to stop. Every dollar we send, even if it is for humanitarian purposes, frees up resources to make war and potentially prop up unpopular leaders. The factions and politics of the Middle East are irrational and dangerous. We play with fire when we meddle in their affairs, and we isolate ourselves diplomatically by making more enemies than friends. We need to bring our troops home, end all foreign aid, and maintain a neutral stance on the world stage. It, in fact, is the only foreign policy we can afford right now, and it would gain us more friends and trading partners than our bombs ever could. Besides, that's what the Constitution permits and our founders strongly advised.
Sunday, May 10, 2009
Friday, May 8, 2009
"If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be." Thomas Jefferson
Here are some good websites for recent articles on the economic collapse.
http://www.mises.org/
http://www.campaignforliberty.com/
http://www.europac.net/
http://www.mises.org/
http://www.campaignforliberty.com/
http://www.europac.net/
Wednesday, May 6, 2009
Monday, May 4, 2009
Good Article on The C4L Site
The War on Drugs Is a War on You
By Michael Boldin
Published 05/02/09
Printer-friendly version
The drug war is based on a repugnant assertion: that you do not have ownership over your own body; that you don't have the right to decide what you'll do with your body, with your property and with your life. The position of the drug warriors is that you should be in jail if you decide to do something with your body that they don't approve of.
This is an abomination of everything that America is supposed to stand for. As long as this country continues the drug war, you are not free. At the root, then, those that force the drug war on you are enemies to your freedom.
If you are concerned at all about liberty, the economy, the Constitution and the power of the Federal Government -- you cannot ignore the US government's longest and most costly "war" -- the War on Drugs.
But no matter how long it lasts, how much is costs, how many lives are disrupted, and how much it fails -- the war rages on.
Why? Well, because Federal "authorities" don't care what your local laws are, they don't care what your personal choices are, and they don't care what reason you have for your choices.
All they care about is their own power. Period.
In this ongoing drug war, you are always treated as a suspect and your neighborhood is much less safe. You are searched at airports and your bank accounts are spied on. While drug users who are no physical threat to anyone but themselves are put in jail, the prisons become more and more overcrowded, resulting in the early release of violent criminals on a regular basis.
If you love your freedom and you want your city to be safer, this psychotic war on drugs must be ended -- now.
Understandably, many Americans are afraid that ending the drug war will result in countless drug addicts, including children. In reality, though, that's just what we have now!
On top of it, we generally don't even consider the people who are addicted to federally-approved drugs to be drug addicts. According to a 2004 CDC report, almost one-half of Americans use at least one prescription drug. It should be obvious, then, that the drug war has done nothing to reduce Americans' use of drugs -- it's simply to control which drugs people use, and who can make a profit from them.
So what's really going to be different -- can our nation's addiction to drug use get any worse? It's doubtful that legalizing all drugs could make things any worse, but even if it does, then so be it.
People will always do plenty of things that are bad for them, and there's no reason to put them in prison for it. Think about all the things that you do which are bad for your own health and well being -- should the government outlaw those too?
People eat too much fast food and they forget to floss every day. They watch too much TV and they don't count their calories. They stay up too late and they spend too much. And, guess what else? People swallow, snort, shoot and smoke drugs that are both legal and illegal -- and it's not going to stop. A free society just wouldn't force you, under the threat of punishment, to be "good" to yourself all the time. That was the job of your parents -- unless, of course, you want the feds to be your new "daddy."
In all seriousness, though, if we are ever going to have a nation that respects the Bill of Rights, of which the Ninth and Tenth Amendments may be the most important, the DEA and the entire drug war must be eliminated.
If not, what's going to be next? Orwellian telescreens in our homes and a state-mandated morning exercise routine? That would most assuredly keep the cost down on the coming national healthcare system.
Won't that be nice?
Every day that the war on drugs continues is another day of injustice; another day of spending countless billions to lock people up that don't behave the way the bureaucrats want them to behave.
It's time to bring this multi-billion dollar attack on your liberty to an end.
By Michael Boldin
Published 05/02/09
Printer-friendly version The drug war is based on a repugnant assertion: that you do not have ownership over your own body; that you don't have the right to decide what you'll do with your body, with your property and with your life. The position of the drug warriors is that you should be in jail if you decide to do something with your body that they don't approve of.
This is an abomination of everything that America is supposed to stand for. As long as this country continues the drug war, you are not free. At the root, then, those that force the drug war on you are enemies to your freedom.
If you are concerned at all about liberty, the economy, the Constitution and the power of the Federal Government -- you cannot ignore the US government's longest and most costly "war" -- the War on Drugs.
But no matter how long it lasts, how much is costs, how many lives are disrupted, and how much it fails -- the war rages on.
Why? Well, because Federal "authorities" don't care what your local laws are, they don't care what your personal choices are, and they don't care what reason you have for your choices.
All they care about is their own power. Period.
In this ongoing drug war, you are always treated as a suspect and your neighborhood is much less safe. You are searched at airports and your bank accounts are spied on. While drug users who are no physical threat to anyone but themselves are put in jail, the prisons become more and more overcrowded, resulting in the early release of violent criminals on a regular basis.
If you love your freedom and you want your city to be safer, this psychotic war on drugs must be ended -- now.
Understandably, many Americans are afraid that ending the drug war will result in countless drug addicts, including children. In reality, though, that's just what we have now!
On top of it, we generally don't even consider the people who are addicted to federally-approved drugs to be drug addicts. According to a 2004 CDC report, almost one-half of Americans use at least one prescription drug. It should be obvious, then, that the drug war has done nothing to reduce Americans' use of drugs -- it's simply to control which drugs people use, and who can make a profit from them.
So what's really going to be different -- can our nation's addiction to drug use get any worse? It's doubtful that legalizing all drugs could make things any worse, but even if it does, then so be it.
People will always do plenty of things that are bad for them, and there's no reason to put them in prison for it. Think about all the things that you do which are bad for your own health and well being -- should the government outlaw those too?
People eat too much fast food and they forget to floss every day. They watch too much TV and they don't count their calories. They stay up too late and they spend too much. And, guess what else? People swallow, snort, shoot and smoke drugs that are both legal and illegal -- and it's not going to stop. A free society just wouldn't force you, under the threat of punishment, to be "good" to yourself all the time. That was the job of your parents -- unless, of course, you want the feds to be your new "daddy."
In all seriousness, though, if we are ever going to have a nation that respects the Bill of Rights, of which the Ninth and Tenth Amendments may be the most important, the DEA and the entire drug war must be eliminated.
If not, what's going to be next? Orwellian telescreens in our homes and a state-mandated morning exercise routine? That would most assuredly keep the cost down on the coming national healthcare system.
Won't that be nice?
Every day that the war on drugs continues is another day of injustice; another day of spending countless billions to lock people up that don't behave the way the bureaucrats want them to behave.
It's time to bring this multi-billion dollar attack on your liberty to an end.
Wednesday, April 29, 2009
Monday, April 27, 2009
The Left, The Right, and the State
Llewellyn H. Rockwell, Jr. just came out with a good book. "The Left, The Right and the State." The book reveals the way our government works today and I found this excerpt from the introduction to explain it perfectly.
Rockwell focuses on pointing out the problem with the economic policies of both the right and the left, while advocating liberty, and the classical liberal perspective. He points out that the root problem is the amount of power our federal government has been given.
The left wants the state to distribute wealth, to bring about equality, to rein in businesses, to give workers a boost, to provide for the poor, to protect the environment. I address many of these rationales in this book, with an eye toward particular topics in the news.
The right, on the other hand, wants the state to punish evildoers, to boost the family, to subsidize upright ways of living, to create security against foreign enemies, to make the culture cohere, and to go to war to give ourselves a sense of national identity. I also address these rationales.
So how are these competing interests resolved? They logroll and call it democracy. The left and right agree to let each other have their way, provided nothing is done to injure the interests of one or the other. The trick is to keep the balance. Who is in power is really about which way the log is rolling. And there you have the modern state in a nutshell. Although it has ancestors in such regimes as Lincoln's and Wilson's, the genesis of the modern state is in the interwar period, when the idea of the laissez-faire society fell into disrepute -- the result of the mistaken view that the free market brought us economic depression. So we had the New Deal, which was a democratic hybrid of socialism and fascism. The old liberals were nearly extinct.
The US then fought a war against the totalitarian state, allied to a totalitarian state, and the winner was leviathan itself. Our leviathan doesn't always have a chief executive who struts around in a military costume, but he enjoys powers that Caesars of old would have envied. The total state today is more soothing and slick than it was in its interwar infancy, but it is no less opposed to the ideals advanced in these pages. How much further would the state have advanced had Mises and Rothbard and many others not dedicated their lives to freedom? We must become the intellectual dissidents of our time, rejecting the demands for statism that come from the left and right. And we must advance a positive program of liberty, which is as radical, fresh, and true as it ever was.
Rockwell focuses on pointing out the problem with the economic policies of both the right and the left, while advocating liberty, and the classical liberal perspective. He points out that the root problem is the amount of power our federal government has been given.
Wednesday, April 15, 2009
Think Before You Vote
MAY 19th BALLOT
The May 19, 2009 California election ballot includes seven propositions. My positions on the Propositions are as follows:
NO: 1A, 1B, 1C, 1D and 1E
YES: 1F and 13
Six of the above measures were voted onto the ballot in a special February legislative session in Sacramento. These measures were a negotiated effort between Arnold Schwarzenegger, the entire Democratic majority in the California State Legislature, and a handful of Republican legislators: Senator Abel Maldonado (R-Santa Maria), Senator Dave Cogdill (R-Modesto), Senator Roy Ashburn (R-Bakersfield), Assemblyman Anthony Adams, Assembly GOP leader Mike Villines and Assemblyman Roger Niello.
The following sections review the content of each proposition, most of which have misleading titles and are nothing more than tax-grabs that will divert money from hard working, economically responsible Californians to special interest groups. I urge all Californians to become familiar with the May 19th Ballot in order to make fully informed decisions.
1A: BUDGET STABILZATION ACT
Proposition 1A will extend for as long as four years the approximately $16 billion tax increase that is part of the budget deal struck in Sacramento. Proposition 1A includes a provision that keeps the $16 billion tax increase package in place for four years instead of two. Included in the proposition would be the state sales tax (up from the current tax of 8% to 9%), a doubling of the state's vehicle license fee, and an increase of 0.25% in the state's personal income tax on every tax bracket.
MY RECOMMENATION: NO!!!!!
This is a serious tax increase masked as a spending cap.
Not only will it keep the recently approved tax increases going for another 2 years, it removes a tax credit of $200/year per child, which will burden California families even more.
For more information: Howard Jarvis Tax Association
1B: 1A-RIDER FOR SCHOOL FUNDING
Proposition 1B appears as a legislatively-referred constitutional amendment and is an attempt to modify some of the terms of California Proposition 98 (1998). This proposition guarantees $8 billion in school payments, but it can only be enacted if it wins at the polls, and if Proposition 1A also wins.
MY RECOMMENATION: NO!!!!!
1B is designed to raid the supposed 1A Rainy Day Fund" to pay the Teachers Union. Proposition 98 already requires a minimum percentage of the state budget to be spent on K-14 education and an annual increase in education in the California budget. Also, the Legislature will have the ability to restore school funding without Prop. 1B.
For more information: California Proposition 98
1C: SENATE CONSTITUTIONAL AMENDMENT 12
Proposition 1C sells $5 billion of future proceeds of the state lottery for a lump sum to make up for various cuts to the state budget.
MY RECOMMENATION: NO!!!!!
This is the same old. We must demand real solutions,the economy is shot and can not be patched up any longer by bigger government and there love for inflation.
1D: CHILDREN and FAMILIES TRUST FUND ACT
Proposition 1D attempts to modify some of the terms of California Proposition 10 (1998). It redirects $608 million in "First 5" money set aside in Prop 10 revenues for early child development to other children's programs for five years.
MY RECOMMENATION: NO!!!!!
This money was originally taken via a tax on millionaires for these programs. Not only is the title misleading, but as already heavily taxed citizens leave the state, the current “extra” monies funding these functional programs will decrease -- which actually threatens their existence.
For more information: California Proposition 10; League of Women Voters
1E: MENTAL HEALTH SERVICES ACT
Proposition 1E is an attempt to modify some of the terms of California Proposition 63 (2004) by shifting $227 million in voter-approved funding from Prop 63 for two years to pay for the Early Periodic Screening, Diagnosis and Treatment Program, a low-income child development program.
MY RECOMMENATION: NO!!!!!
This is the taking of funds from already approved initiatives; this money was originally taken via a special tax on millionaires for these programs. As with 1D, the title and nature of this program is misleading.
For more information: Lawsuit Challenges Prop. 1E Ballot Label; California Proposition 63; League of Women Voters
1F: SCA8
Proposition 1F prohibits the state commission that sets salary levels for members of the California State Legislature from increasing those salaries in any year with a budget deficit.
MY RECOMMENATION: YES!!!!!
Legislators should not get a pay raise when other Californians have to tighten their belt. A common sense proposition, at last!
PROPOSITION 13: SCA4
Proposition 13 prohibits tax assessors from re-evaluating new construction for property tax purposes when the point of the new construction is to seismically retrofit an existing building.
MY RECOMMENATION: YES!!!!!
We need to support businesses that enhance the safety of their workplaces, not tax and punish them.
RECAP,
NO: 1A, 1B, 1C, 1D and 1E
YES: 1F and 13
It is ironic that my two yes votes are on propositions that have no words in the name of the bill. When not thinking with clear reason, it is easy to appeal to the emotional connotation of words used in the title of legislation. It's hard to vote no on bills that hold the name CHILDREN AND FAMILIES TRUST ACT, because it is worded in a way that is completely misleading. So think, use your brains, and make your decision a sound one.
The May 19, 2009 California election ballot includes seven propositions. My positions on the Propositions are as follows:
NO: 1A, 1B, 1C, 1D and 1E
YES: 1F and 13
Six of the above measures were voted onto the ballot in a special February legislative session in Sacramento. These measures were a negotiated effort between Arnold Schwarzenegger, the entire Democratic majority in the California State Legislature, and a handful of Republican legislators: Senator Abel Maldonado (R-Santa Maria), Senator Dave Cogdill (R-Modesto), Senator Roy Ashburn (R-Bakersfield), Assemblyman Anthony Adams, Assembly GOP leader Mike Villines and Assemblyman Roger Niello.
The following sections review the content of each proposition, most of which have misleading titles and are nothing more than tax-grabs that will divert money from hard working, economically responsible Californians to special interest groups. I urge all Californians to become familiar with the May 19th Ballot in order to make fully informed decisions.
1A: BUDGET STABILZATION ACT
Proposition 1A will extend for as long as four years the approximately $16 billion tax increase that is part of the budget deal struck in Sacramento. Proposition 1A includes a provision that keeps the $16 billion tax increase package in place for four years instead of two. Included in the proposition would be the state sales tax (up from the current tax of 8% to 9%), a doubling of the state's vehicle license fee, and an increase of 0.25% in the state's personal income tax on every tax bracket.
MY RECOMMENATION: NO!!!!!
This is a serious tax increase masked as a spending cap.
Not only will it keep the recently approved tax increases going for another 2 years, it removes a tax credit of $200/year per child, which will burden California families even more.
For more information: Howard Jarvis Tax Association
1B: 1A-RIDER FOR SCHOOL FUNDING
Proposition 1B appears as a legislatively-referred constitutional amendment and is an attempt to modify some of the terms of California Proposition 98 (1998). This proposition guarantees $8 billion in school payments, but it can only be enacted if it wins at the polls, and if Proposition 1A also wins.
MY RECOMMENATION: NO!!!!!
1B is designed to raid the supposed 1A Rainy Day Fund" to pay the Teachers Union. Proposition 98 already requires a minimum percentage of the state budget to be spent on K-14 education and an annual increase in education in the California budget. Also, the Legislature will have the ability to restore school funding without Prop. 1B.
For more information: California Proposition 98
1C: SENATE CONSTITUTIONAL AMENDMENT 12
Proposition 1C sells $5 billion of future proceeds of the state lottery for a lump sum to make up for various cuts to the state budget.
MY RECOMMENATION: NO!!!!!
This is the same old. We must demand real solutions,the economy is shot and can not be patched up any longer by bigger government and there love for inflation.
1D: CHILDREN and FAMILIES TRUST FUND ACT
Proposition 1D attempts to modify some of the terms of California Proposition 10 (1998). It redirects $608 million in "First 5" money set aside in Prop 10 revenues for early child development to other children's programs for five years.
MY RECOMMENATION: NO!!!!!
This money was originally taken via a tax on millionaires for these programs. Not only is the title misleading, but as already heavily taxed citizens leave the state, the current “extra” monies funding these functional programs will decrease -- which actually threatens their existence.
For more information: California Proposition 10; League of Women Voters
1E: MENTAL HEALTH SERVICES ACT
Proposition 1E is an attempt to modify some of the terms of California Proposition 63 (2004) by shifting $227 million in voter-approved funding from Prop 63 for two years to pay for the Early Periodic Screening, Diagnosis and Treatment Program, a low-income child development program.
MY RECOMMENATION: NO!!!!!
This is the taking of funds from already approved initiatives; this money was originally taken via a special tax on millionaires for these programs. As with 1D, the title and nature of this program is misleading.
For more information: Lawsuit Challenges Prop. 1E Ballot Label; California Proposition 63; League of Women Voters
1F: SCA8
Proposition 1F prohibits the state commission that sets salary levels for members of the California State Legislature from increasing those salaries in any year with a budget deficit.
MY RECOMMENATION: YES!!!!!
Legislators should not get a pay raise when other Californians have to tighten their belt. A common sense proposition, at last!
PROPOSITION 13: SCA4
Proposition 13 prohibits tax assessors from re-evaluating new construction for property tax purposes when the point of the new construction is to seismically retrofit an existing building.
MY RECOMMENATION: YES!!!!!
We need to support businesses that enhance the safety of their workplaces, not tax and punish them.
RECAP,
NO: 1A, 1B, 1C, 1D and 1E
YES: 1F and 13
It is ironic that my two yes votes are on propositions that have no words in the name of the bill. When not thinking with clear reason, it is easy to appeal to the emotional connotation of words used in the title of legislation. It's hard to vote no on bills that hold the name CHILDREN AND FAMILIES TRUST ACT, because it is worded in a way that is completely misleading. So think, use your brains, and make your decision a sound one.
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