Tuesday, January 26, 2010

Do we have a Master Class?

Stewart Dougherty argues that we do. Not only that, he has grounds for believing they are putting the rest of us out of business.
Recent American events paint an ominous picture of a Master Class that is now in total control.

When 90% of the American people vehemently rejected the $700,000,000,000.00 ($700 billion) TARP bailout plan, the Master Class put it on a fast track and approved it anyway.

When a clear majority of the American people said no to a government takeover of Chrysler and GM, the Master Class poured billions of taxpayer dollars into those corporate sinkholes and took them over anyway.

When the people said no to multi-trillion dollar crony bailouts for the bankers and insurers whose corruption had caused global financial mayhem, the government pledged to those elite insiders more than $13,000,000,000,000.00 ($13 trillion) of the people’s money anyway.

When the people expressed astonishment and anger that Wall Street planned to pay itself record 2009 bonuses, in the midst of America’s worst-ever fiscal and financial crisis caused by them, Wall Street stuffed its pockets with taxpayer-supported bonus money anyway.

When the people said no to a proposed $40,000,000,000.00 ($40 billion) bailout of AIG and its elite trading partners such as Goldman Sachs (an amount that subsequently exploded to $180,000,000,000.00+ ($180+ billion)), the Master Class went underground, covertly misappropriated taxpayer money and made the payoffs anyway.

When Fannie Mae and Freddie Mac were nationalized at enormous taxpayer expense, the government approved $6,000,000.00 individual pay packages in 2009 (150 times the average American wage) for the CEOs of both failed companies anyway.

When a clear majority of the people said no to nationalized health care, even after being bombarded by a multi-million dollar, lie-drenched propaganda campaign designed to bamboozle them, the House and Senate passed nationalized health care bills anyway.

When more than seven million American workers lost their jobs and were subsisting on unemployment benefits and food stamps, federal government employees, who now earn DOUBLE what private sector workers earn, were given another round of pay and benefits increases anyway.

When private sector workers’ 401Ks and IRA retirement plans plummeted in value due to economic collapse and endemic Wall Street-orchestrated market corruption (including systemic front running, flash trading, naked short selling and other manipulations), government “defined benefit,” lifetime-cost-of-living-adjusted pension plans, despite already being underfunded by $2,000,000,000,000.00 ($2 trillion), were made richer than ever anyway.

The long, shameful litany of events signaling the total divorce between the Master Class and the people of the United States doesn’t stop there. It goes on and on.

Government stimulus failure

If the government was a doctor and you went to it with a broken arm, it would break the arm again then boast about all the good your medical spending will do for the economy.

In the case of the housing bubble, after it broke the government set about doing everything in its power to bring it back. "Rather than allow prices to fall so that the housing market returns to a sustainable level," Ron Paul writes, "the government does everything in its power to try to keep housing prices elevated."

Did underconsumption burst the housing bubble? No. The collapse was caused by "a malinvestment of resources into sectors of the economy that were unsustainable without easy credit. The rise in housing prices was not, in fact, indicative of the new normal but rather an indicator that something was seriously wrong."

Pursuing the same flawed policies in double-time will only hasten the empire's downfall. And when that happens, blame will be laid squarely on the free market, something we've never had and have been getting further away from since the Continental Congress decided to pay for the Revolution with fiat paper money.

As cynics will sometimes say, when a crisis hits, blame the innocent and promote the guilty. This is in fact what is being done.

Monday, January 25, 2010

Ben Bernanke's bubble blindness

Bernanke began denying the existence of a housing bubble at least as early as July, 2005. If he understood what caused bubbles he might have had a better understanding of what was happening. But he thinks an abundance of paper money can cure any economic problem that arises, so he's never too concerned about bubbles.

This YouTube video shows Bernanke and his paper factory in full denial.

Is that gold bar for real?

In a recent article, Doug Hornig, Senior Editor of Casey's Gold and Resource Report, discusses counterfeit gold coins and bars.

Gold is one of the heaviest metals, but also one of the softest. The old Wild West method of biting down on a gold coin to see if it is real is actually a pretty good test. "If you chomp down and shatter a tooth, it ain’t gold."

There's not enough of a profit margin for scam artists to bother counterfeiting bullion coins, Hornig says, but gold bars are a different story.
Fakes do show up in the market from time to time, and they’re hard to identify. Generally speaking, counterfeiters don’t bother with the smaller ones, which are stamped, numbered, and sealed. They concentrate on 1-kilogram or larger sizes. These are poured, rather than stamped, and can be easily adulterated or even hollowed out and filled with some other, cheaper metal.
Hornig offers some guidelines:
For coins, avoid “commemoratives.” Stick with universally recognized government bullion coins (American Eagle, Canadian Maple Leaf, Austrian Philharmonic, Australian Kangaroo, South African Krugerrand).

For small bars, purchase only those that carry the stamp of one of the known, trustworthy refiners, such as PAMP, Credit Suisse, or Johnson Matthey.

For bigger orders, 1 kilo and up, ask your dealer if he has an assay or is willing to have one done. If you want 100 ounces, insist on an assay or consider buying directly from the Comex, which means you’ll be assured of getting a good-delivery bar that has never left the circuit.
For bullion coins there are a few tests you can conduct at home, as well:
- Simply apply a magnet. Gold is non-magnetic, but if you’re unlucky enough to have gold-plated steel, it’ll stick.
- Size and weight are good measures. Get a scale calibrated to hundredths of a gram. If a bullion coin weighs light (or possibly heavy), it’s bogus.
- Since real gold has a higher specific gravity than other metals, you can test for that. Many Internet reference sites will tell you how.
- You could buy a commercial counterfeit detector. They aren’t cheap, but will quickly and easily perform the basic tests.

Thursday, January 21, 2010

State of the Republic by Ron Paul (video)

The government of free lunches is one-half the problem. The other half is the people who demand it.

State of the Republic, Part I.

State of the Republic, Part II.

State of the Republic, Part III

Ron Paul on government's investigation of the crisis

Dr. Paul writes:
Last week, the Financial Crisis Inquiry Commission kicked off their first round of hearings on the causes of the economic meltdown on Wall Street. The commission is being compared to the the Pecora Commission launched in 1932 to investigate the causes of the Great Depression. The Pecora commission is beloved by those who believe the solution to every problem is more laws because it was used to justify a number of new laws, including Glass-Steagall. Of course, none of those laws addressed the real causes of the Great Depression. . . .

The Pecora Commission was stacked with big government sympathizers who blamed the free market and the gold standard without question, and without any consideration of government interference in the economy. This panel is no different. Never will they contemplate how government steered us into this crisis, and what perverse incentives can be removed or repealed so that the market will function more smoothly. Never will they discuss how investment should come from savings, not debt. Never will it occur to them that fiat money, artificially low interest rates and the whole Federal Reserve System might be unwise and unstable, not to mention unconstitutional. The answer will always be more government regulation and oversight. It is predictable that this government panel will eventually come to the firm conclusion that government needs to be bigger, and that the market is just too free.

Another crash on the way

Doug Casey comments on what governments have done to "save" us and what it means.
Everyone was afraid the world was going to come to an end a year ago, and it almost did. But governments all around the world stepped in and printed up trillions of their various currency units – it's not just the United States. And still, retail price inflation hasn't blossomed. It seems that governments are bent on keeping asset prices up to avert panic. They focus on controlling perception instead of fixing the problem. It stems from an economic version of the theory that all we need to fear is fear itself. As long as we have the right psychology, everything is going to be okay – total nonsense.

It's the Wile E. Coyote theory of economics. As long as you never look down after running off a cliff chasing the roadrunner, you can keep treading air. Unfortunately, although the power of positive thinking may help in many ways, it's of zero use if you continue living above your means and making stupid decisions. . . .

I've been bearish on general equities for years, based on fundamentals. Whether they go up is no longer a reflection of prosperity – it's a reflection of how much money the government creates and where it goes. But I am feeling particularly strongly bearish on Wall Street right now. That's my gut. The social mood of the country is going to turn ugly and gloomy; people won't want to call their brokers and "get into the market." [Emphasis added] . . .

[T]he government has been suppressing interest rates for a long time now, which is exactly the opposite of what they should be doing. These artificially low interest rates discourage people from saving and encourage them to gamble, hoping to outrun inflation. But eventually the market will force interest rates to go higher, and that will kill the stock market . . .

Monday, January 18, 2010

Government debt-holders

On LRC today, Bill Sardi published a chart and explanatory comments taken from CNBC about the ownership of the federal government's debt. Here's the breakdown:
Federal Reserve + intra-governmental holdings $4.785 TRILLION
Mutual funds $769.1 billion
China (additional $99.8 billion from Hong Kong) $776.4 billion
Japan $711.8 billion
Other investors $629.7 billion
State and local governments $516.9–$550.3 billion
Pension funds $456.4 billion
United Kingdom $214 billion
Oil exporters $191 billion
Caribbean banking centers $189.7 billion
Brazil $126–$158 billion
Insurance companies $126.4 billion
Russia $119.9 billion
Depository Institutions $107.3 billion
Luxembourg $104.2 billion
I apologize for the lack of alignment in the table, but blogger won't let me line the numbers up evenly. Should we be shocked that the Fed is the number one debt buyer? And what constitutes "other intra-governmental holdings"?

Wednesday, January 6, 2010

Pens for hire, cheap

Thomas Paine and Frederic Bastiat had an undying love of liberty and therefore a thorough contempt for the state. My article today on Mises.org discusses their similarities and points out a few differences.

The State Unmasked

“So things aren't quite adding up the way they used to, huh? Some of your myths are a little shaky these days.” “My myths ? They're...