A Race to the Bottom
This week the Fed slashed its key rate from 1% to a 0-0.25% range. Soon after, the Bank of Japan followed suit and lowered its rate from 0.3% to 0.1%, and yesterday, not to be outdone, the ECB once again intervened in the markets to dramatically drop the value of the euro versus the dollar. Japan and the European Union are concerned that a weaker dollar might increase exports for the U.S. and dramatically decrease exports for themselves. As a result, they lowered the interest rate on thier deposits. This discouraged people from trading dollars into euros and yen and caused them both to fall aggressively. What we are seeing here is a series of competitive currency devaluations. The goal is to have the weakest currency. This explains the extreme movements of late in the Forex markets.
The extraordinary volatility in the dollar is mind-boggling. This volatility relates to a number of factors (some mentioned above), but clearly indicates there is significant risk in holding dollars. It is also evidence of the fact that an enormous investment bubble has emerged in the dollar. Interestingly, even though gold was down today, if you look at the performance of gold in terms of foreign currencies it is doing extremely well. It is hitting new all time highs. The same will be the case with the dollar. Everything will get cheaper in terms of gold. Please protect yourself before its too late..
‘Twas the Night Before Bailout
‘Twas The Night Before Bailout
Posted By: Jane Wells
From reader Tim Jagemann, a Christmas story for our time. I bolded the line that made me laugh out loud…
‘Twas the night before Christmas, and all through their home,
Foreclosure was looming, for sure not a loan;
First Bear, then Lehman, then Fannie & Freddie,
TARP, Madoff, GM – enough already.
Their bills were stacked by the chimney with care,
In hopes that a bailout soon would be there;
The children were nestled, all snug in their beds,
But visions of foreclosure tormented their heads;
And I, in my own mind, the bills I did juggle,
I knew we were in for a long winter’s struggle,
When out on the lawn, there arose such a glow,
I sprang from the couch, to seek out the show.
Away to the window, I flew in a hurry,
Tore open the drapes and stared without worry.
The moon on the crest of new-fallen snow,
Gave the glow of sunlight to the scene below.
When, what to my wondering eyes did I see,
But a large golden sleigh, parked under a tree.
With a short, bearded driver, so burly – not lanky ,
I knew in a flash it must be Bernanke.
More rapid than lawyers, his advisers they came,
Then he whistled, and shouted, and called them by name;
“Now, Paulson! Now, Geithner! Now Dimon and Mack!
On, Bair! On Blankfein! No Pandit, get back!
To the top of the roof! Over the wall!
Now fly away! Fly away! Fly away all!”
So up to the roof top his bankers they flew,
With the sleigh full of cash, and Bernanke too.
And then, in a twinkling, I heard on the roof,
The sound of his chuckle I knew was the proof.
As I drew back my head, and was turning around,
Down the chimney he came, with nary a sound.
He was dressed all in white, from his head to his toe,
His clothes were all glistening with fresh-fallen snow;
A bundle of cash, he had flung on his back,
He looked like a hiker just opening his pack.
His eyes — how they twinkled! His hands – so nimble!
His cheeks were like apples, his smile – a symbol!
His droll little mouth was drawn up like a bow,
And the beard on his chin was as white as the snow.
He was chubby and plump, a jolly old elf,
I smiled when I saw him, disbelieving myself;
A wink of his eye and a nod of his head,
Gave me a sign I had nothing to dread;
He spoke not a word, but went straight to his work,
He paid all the bills; then turned with a jerk,
And laying his finger along side of his nose,
And giving a nod, up the chimney he rose;
He sprang to his sleigh, to his team gave a whistle,
And away they all flew like a holiday missile;
But I heard him exclaim, as he drove out of sight,
“Happy Bailout to all, and to all a good-night.”
Madoff x 1000
As you may or may not know, the media and regulators are trying furiously to unravel the $50 billion Ponzi scheme orchestrated by Wall Street insider Bernie Madoff.
Although the $50 billion loss engineered by Madoff is truly a staggering accomplishment (and was done using old-fashioned fraud rather than the mathematical wizardry that has characterized Wall Street’s recent robbery) the size of his scheme pales in comparison to the $50 trillion dollar Ponzi structures run by the U.S. government.
The Social Security and Medicare administrations run their “trust funds” in precisely the same manor as Madoff. As money is collected from current workers, the funds are then dispersed to those already receiving benefits. None of the funds collected are actually invested, so no investment returns are ever generated. Those currently paying into the system are expected to receive their returns based on the “contribution” made by future workers. This is the classic definition of a Ponzi scheme. The only difference is that Madoff didn’t own a printing press to perpetuate his scam.
Double standard? Madoff is a greedy criminal while the government is providing a secure retirement service?? WHERE’S THE OUTRAGE! It truly is amazing how faith in government is so pervasive that many can believe politicians will succeed where private individuals fail, and that governments are somehow immune to the economic laws that govern the rest of society.
Free Money: It’s a Bad Thing
I’m short on time tonight so just of few words about the Fed’s rate cut yesterday. A more in depth post will come later. As mentioned, they lowered interest rates to a target bound range of 0-0.25%, practically free. Lowering interest rates is precisely the wrong solution to the economic crisis, but when it comes to bad ideas our government has been remarkably consistent.
However, yesterday’s rate cuts are child’s play compared to the shenanigans that are going on behind the scenes, i.e. Quantitative Easing. They don’t tell you that monetary inflation always precedes price inflation, and the amount of money being created right now is biblical. Inflation is certain and hyperinflation is probable.
Money market accounts are going to be put in real jeopardy. Rates are so low that these funds cannot operate profitably. There is a high chance they will be forced to shut down. Some rates have even turned negative, meaning you have to pay the government to loan them money. The dollar is not a safe place to have your savings. Its days are numbered so protect yourself while you still can.
If you want a clue as to where we are headed google Weimar Germany Hyperinflation.
The Mother of all Car Wrecks
The auto bailout bill crashed in the Senate yesterday evening. However, the President has indicated that the Treasury will step in and use TARP funds or other assets to try to buy some time for the automakers until Congress returns next year. The rejection of the auto bailout bill caused all of the markets to fall aggressively overnight, with the Dow at one point down over 500 points in the futures. However, the announcement by the Treasury has caused the markets to rebound.
Knowledgeable analysts estimate that the bailout of the auto industry will ultimately cost $100 to $150 billion over the next 12 to 18 months. That money is currently not available to the market and will consequently have to be created out of thin air. This will not be good for the dollar. If the dollar is falling, logic suggests gold will be rising. Perhaps that’s why Merrill Lynch, Citigroup and others are all forecasting a big up move in gold next year. In fact, Citigroup said in the past two weeks that they think gold has the potential to be above $2,000 an ounce next year.
Wisdom of the Past
Sobering quotes and things to remember:
“A Bill of Rights is what the people are entitled to against every government, and what no just government should refuse, or rest on inference.”
Thomas Jefferson
“A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicity.”
Thomas Jefferson
“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”
Thomas Jefferson
“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”
Thomas Jefferson
“To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.”
Thomas Jefferson
“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.“
Thomas Jefferson
“I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents.”
James Madison
“Property is the fruit of labor…property is desirable…is a positive good in the world. That some should be rich shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built.”
Abraham Lincoln
“When the people find they can vote themselves money, that will herald the end of the republic.”
Benjamin Franklin
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been about 200 years. These nations have progressed through this sequence: ‘From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”
Alexander Fraser Tytler (1747–1813)
“It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is able to collect the money that it wants to spend. Government is in the last resort the employment of armed men… Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.”
Ludwig von Mise
“No matter what anyone may say about making the rich and the corporations pay taxes, in the end they come out of the people who toil.”
Calvin Coolidge
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Sir Winston Churchill
“You cannot bring about prosperity by discouraging thrift. You cannot help small men by tearing down big men. You cannot strengthen the weak by weakening the strong. You cannot lift the wage-earner by pulling down the wage-payer. You cannot help the poor man by destroying the rich. You cannot keep out of trouble by spending more than your income. You cannot further the brotherhood of man by inciting class hatred. You cannot establish security on borrowed money. You cannot build character and courage by taking away men’s initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves.”
William Boetcker
“The more one considers the matter, the clearer it becomes that redistribution is in effect far less a redistribution of free income from the richer to the poorer, as we imagined, than a redistribution of power from the individual to the State.”
Bertrand de Jouvenel
“To tax the community for the advantage of a class is not protection, it is plunder.”
Benjamin Disraeli
“Forced to choose, the poor, like the rich, love money more than political liberty; and the only political freedom capable of enduring is one that is so pruned as to keep the rich from denuding the poor by ability or subtlety and the poor from robbing the rich by violence or votes.”
Will Durant
“The mounting burden of taxation not only undermines individual incentives to increased work and earnings, but in a score of ways discourages capital accumulation and distorts, unbalances, and shrinks production. Total real wealth and income is made smaller than it would otherwise be. On net balance there is more poverty rather than less.”
Henry Hazlitt
“When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare.“
Kershner’s First Law
“To lay with one hand the power of government on the property of the citizen, and with the other to bestow it on favored individuals… is none the less robbery because it is… called taxation.”
United States Supreme Court
“The Constitution is a written instrument. As such its meaning does not alter. That which it meant when adopted, it means now.”
United States Supreme Court
“The question is not what anybody deserves. The question is who is to take on the God-like role of deciding what everybody else deserves. You can talk about ’social justice’ all you want. But what death taxes boil down to is letting politicians take money from widows and orphans to pay for goodies that they will hand out to others, in order to buy votes to get re-elected. That is not social justice or any other kind of justice.”
Thomas Sowell
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
Thomas Sowell
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.“
Ronald Reagan
“The reason this country continues its drift toward socialism and big nanny government is because too many people vote in the expectation of getting something for nothing, not because they have a concern for what is good for the country. A better educated electorate might change the reason many persons vote. If children were forced to learn about the Constitution, about how government works, about how this nation came into being, about taxes and about how government forever threatens the cause of liberty perhaps we wouldn’t see so many foolish ideas coming out of the mouths of silly men.”
Lyn Nofziger
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“From each according to his abilities, to each according to his needs.”
Karl Marx
“Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.”
Franklin D. Roosevelt (Called by some the “Founder” of the modern Democrat party)
“Society’s needs come before the individual’s needs.”
Adolf Hitler
“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”
Karl Marx
“Democracy is a form of government that cannot long survive, for as soon as the people learn that they have a voice in the fiscal policies of the government, they will move to vote for themselves all the money in the treasury, and bankrupt the nation.”
Karl Marx
1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all rights of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.
6. Centralization of the means of communication and transport in the hands of the state.
7. Extension of factories and instruments of production owned by the state; … gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country…
10. Free education for all children in public schools…
Karl Marx- Rules of the Communist Manifesto
“We can’t expect the American People to jump from Capitalism to Communism, but we can assist their elected leaders in giving them small doses of Socialism, until they awaken one day to find that they have Communism.”
Nikita Khrushchev
Originally posted on Oct 25, 2008 at 04:12 PM
http://www.websitetoolbox.com/tool/post/apologia/vpost?id=3063010
The Biggest Loser
There are more and more talks for a devaluation of the dollar and other major currencies around the world. An article appeared in Forbes suggesting precisely that as a “cure” for the deflationary spiral that is now underway. Clearly, dollar devaluation would be a solution to some of the severe problems that the world faces at the moment. However, currencies are going to devalue whether it is done by formal act or informally. The only difference is if it is done formally it can be managed and coordinated. If it occurs simply as a result of free market trading, driving the dollar and other currencies lower, it would move to the same place, only chaotically.
All debtors would gain from devaluation and all savers would lose. All assets would rise dramatically, especially gold. Those who hold their life savings in the form of cash, income-producing assets such as treasuries, bonds, CD’s, Money Market Funds, would be the biggest losers.
Words of Encouragement
A few words of encouragement on our economy from congressman and ex-presidential candidate Fred Thompson…
CNNsorship?
Technical difficulties or deliberate censorship? You tell us. CNN doesn’t usually afford a soapbox to Peter Schiff because he’s one of the rare breed of financial analysts, he can actually identify the root of the problem – the Federal Reserve.
So when Schiff was cut off during the height of his rant against the Fed, many questioned whether it was a deliberate act of sabotage.
Used to doling out a steady diet of bailout propaganda on a daily basis, CNN’s top brass was probably not amused when Schiff started to blame the government’s obsession with rescuing failed companies for the deepening severity of the economic crisis.
“Capitalism is not about propping up failed companies, we need to let them fail,” said Schiff, before adding, “Now of course behind it all is the Federal Reserve, if the Federal Reserve had not intervened….had they not poured all this alcohol then Wall Street wouldn’t have got drunk, but they did.”
“I am convinced that everything the government is doing to fight this off is gonna make….” said Schiff before the feed was cut.
So, conspiracy or technical gremlins? Watch and let us know what you think. Either way, it’s unlikely that CNN will invite Schiff back on should he continue to dare tell the truth about the real culprits behind the grand larceny undertaken by the government and the Federal Reserve, the cost of which now stands at $8.5 trillion dollars.
Unemployment Update
Yesterday the bottom dropped out of the labor market. We lost 533,000 jobs in the month of November, the largest decline since 1974 and the 5th largest loss in history. Once the labor market weakens this much the loss of jobs seems to take on a life of its own and persists for some time. This is a further indication that this economy is extremely weak and the recession will be much worse and longer than most have been forecasting. Naturally, this kind of data is causing near panic in the markets. Moreover, 637,000 workers dropped out of the labor force and are not counted among the unemployed. If you were to really count all of the workers who would like a job, but can’t find one, the unemployment rate would be closer to 12.5%.
Giving Thanks
Fellow prole Matt wrote,
Can you take some time to explain the recent drop in gas prices? Is this a reflection of the economy or are the big oil companies simply throwing us a bone before Christmas?
Matt,
Big oil will never throw you a bone. They might pick yours clean, but they’ll never throw you one.
We’re in the midst of an economic crisis not seen since the Great Depression (the only reason it doesn’t feel like it to you and I as we go about our daily lives is because the government is literally printing money and giving it away). There is a widespread panic that the recession will turn into a global depression, which would drastically reduce the demand for oil. Also, with stock markets plummeting on every continent, people are selling everything they can and buying U.S. dollars. This is resulting in huge dollar strength. Since oil is priced in dollars, if the dollar strengthens oil will weaken. These are the two main reasons oil is falling.
Fellow prole Tymothyson wrote,
Are they trying to keep us from giving up on gas-driven products?
Ty,
I love your cynicism. Well done. The Saudis along with big oil aren’t too concerned, that’s why they haven’t taken drastic measures to stem the decline. If oil were to stay where it was, at $150, then people would start looking for alternatives. However, now that there has been such huge price volatility, if oil does go back to $150 people won’t be as motivated to search for another viable energy source because they’d think the rise in price would only be temporary and would soon return back to $50 or lower. That is when it will not stop at $150 but continue higher. The Saudis won’t mind that.
Northcom Coming at Ya
A precursor to a power sequence?
The power of the elected > the appointed > the hier
Pentagon to Detail Troops to Bolster Domestic Security
The U.S. military expects to have 20,000 uniformed troops inside the United States by 2011 trained to help state and local officials respond to a nuclear terrorist attack or other domestic catastrophe, according to Pentagon officials.
The long-planned shift in the Defense Department’s role in homeland security was recently backed with funding and troop commitments after years of prodding by Congress and outside experts, defense analysts said.
“There are critics of the change, in the military and among civil liberties groups and libertarians who express concern that the new homeland emphasis threatens to strain the military and possibly undermine the Posse Comitatus Act, a 130-year-old federal law restricting the military’s role in domestic law enforcement.” More…
marsupiol
rcondron
tymothyson
dudebailmeout
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