“Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, men become the tools of men. Blood, whips, and guns – or gold. Take your choice – there is no other – and your time is running out.” – Ayn Rand
by Jake Towne, the Champion of the Constitution
Originally published Saturday, July 25, 2009 at http://www.nolanchart.com/article6666.html
Douglas Gnazzo’s 2008 book, Honest Money: A History of United States Gold and Silver Currency, is an essential add to the reading list of any serious student of monetary systems. Far shorter than the massive tome of Edwin Vieira’s hopefully-soon-to-be-reprinted Pieces of Eight at 226 pages, Gnazzo takes the reader on a pleasurable blitzkrieg through our country’s rich monetary history, from the founders and the Constitution to modern times. Perhaps the most enthralling section of the book is the closing chapters where Gnazzo’s gives his thoughts on a future commodity-based currency and, more importantly, how to transition there from where we are now. Like myself, Gnazzo has called for a national debate on the subject before it is too late.
Gnazzo splashes all the colors of the truth on the wall for his readers. He relates how our money was slowly debased by the politicians’ wars and those pesky central bankers who weeviled their way back into power after America’s first two central banks were destroyed. He relates how the destructive virus of public debt was sown in during the founding of our country chiefly by Alexander Hamilton, the Revolutionary war hero and mercantilistic servant of the aristocracy in America.
No I’m not saying they actually received any money from the Fed because I don’t know if they did or not. After all knowing such things is illegal under current law. I’m merely saying that if we had a full Fed audit we would know. Their efforts to stymie bipartisan no-brainers like HR1207 and S604 reeks of putrid quid pro quo status quo in Washington DC.
by Peter Schiff, president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets
In a Wall Street Journal op-ed on Monday, and in congressional testimony later in the week, Fed Chairman Ben Bernanke reassured all that thanks to his accurate foresight and deft use of the Fed’s policy toolkit, he could maintain near zero percent interest rates for an extended period without creating inflation. With supernatural powers such as these, one wonders if Ben would be better employed by the Justice League rather than the Federal Reserve.
Ben’s game plan is apparently simple: once he determines that the economy is on solid ground, he will use the monetary equivalent of Superman’s laser vision to strategically evaporate all the excess liquidity that he has recently created without endangering the recovery. Don’t try this at home, kids.
In other words, as he did just a few years ago when the subprime fiasco began to emerge, Bernanke is assuring us that inflation is contained. He is just as wrong now as he was then.
The idea that the inflation genie can be painlessly rebottled has no historic precedent. Even mainstream economists, who’ve never met a fiscal stimulus they didn’t like, agree that central banks must act preemptively with regard to inflation. Bernanke is making the case that the new set of liquidity tools, hastily developed in the panic of late 2008, will act just as well in reverse. But liquidity is a lot like liquid, it’s a lot easier to spill than to un-spill. The Chairman believes that his new gadgetry will allow him to perform a feat of monetary magic no other central banker has managed to pull off. But given his history of getting it wrong, why should we assume that this time he will get it right?
The bottom line is that Bernanke has no exit strategy. He can talk about it all he likes, but when it comes time to actually pull the trigger, his nerves will buckle. The current communications campaign is simply an attempt to calm the markets. I doubt few citizens or members of Congress had any hope of understanding the exit strategy mechanisms that Bernanke described. Many likely place their faith in his seeming mastery of financial minutiae. Sadly, as with the mythical “strong dollar policy,” confident talk may be the sum total of the Chairman’s strategy.
He senses that the villagers, in the form of currency traders and bond market vigilantes, are becoming a bit restless. To sooth their concerns, he must pretend that he has the situation under control. Like Jack Nicholson in A Few Good Men, he knows full well that markets simply “can’t handle the truth.”
But make no mistake, in order to mop up all the excess liquidity, the Fed will need to raise interest rates substantially to attract buyers for all the bonds that the Treasury must sell. Fed officials know that our economy is completely dependent on cheap money and limitless government credit, and can’t tolerate the loss of either. Of course, the longer the monetary spigot remains open, the more addicted to low rates we get, and the harder it will be to kick the habit. If the Fed could not remove the punch bowl during the years before the bust, how will they do so while the economy is far weaker? Even if they do start the process, the minute the “recovery” seems in jeopardy, look for the Fed to turn the showers back on.
Perhaps this week’s “quick hits” should be renamed “quick hit” because I’m going to focus on a single issue: health care.
This week I’m pondering (like many) the future of health care and what Obama’s efforts represent on a philosophical level. It’s easy to dismiss it negatively by calling it “socialized medicine”, but what does the effort to morph our health care system mean in the grand scheme? Getting to the nuts of it, it is a fight between individual liberty and collectivism.
Blind worship of the common good is the boot upon individual rights and the roadblock to innovation. Despite best intentions some always end up being “more good” than others.
The health care plan being touted by Obama and his palace guards spits in the faces of our Founders, further shreds our Constitution, and murders small businesses. Small business is the engine of the U.S. economy. Obama wants to pour water in the gas tank.
Yesterday, the Pension Benefit Guaranty Corporation (or PBGC) announced it will take over payments for 70,000 workers and retirees from the bankrupted Delphi, the large auto parts maker per the Wall Street Journal. This “mini-bailout” is to the tune of $6.2 billion. (Oracle of Delphi photo courtesy Patar knightlicense)
The PBGC is an agency of the US government, created by the Employee Retirement Income Security Act of 1974. It is the government’s pension equivalent to the FDIC, which “insures” bank accounts. (For more on the FDIC debacle, please read “Off a Cliff with No Airbags: The FED Banking System Quivers in Fright“.) The PBGC claims to “protect” the pensions of nearly 44 million American workers, but the reality is that the agency is insolvent with a deficit of $33.5 billion per the WSJ. Since there are political implications from the GM bankruptcy, more or less Delphi employees and retirees are just lucky to receive this charity money from the government. These days, even some who ARE able to withdrawal from other retirement plans like 401k’s are having issues obtaining their funds as I reported on here “Wall Street Journal Reports 401k Withdrawals Frozen or Slowed“.
We like to find levers — proposals that can accomplish a lot with a little. Ideas like our “Read the Bills Act” and our “One Subject at a Time Act” are classic examples. Well, Senator Tom Coburn has found a lever of his own . . .
This really put the members of the Senate Health Committee on the spot. If their plan is really so good, shouldn’t members of Congress be subject to it too? Every Republican but one (Judd Gregg) voted for the amendment, but so did the Chair, Democrat Chris Dodd, as well as Democrats Barbara Mikulski and Ted Kennedy. But . . .
It’s notable that Democratic Senators Sherrod Brown, Sheldon Whitehouse, and even self-admitted socialist Bernie Sanders, all voted against the amendment. Socialized health insurance that’s good enough for you, apparently isn’t good enough for them.
We need to do to the entire Congress what Senator Coburn did to the Senate Health Committee — put them on the spot.
This time, please use your personal comments to say the following (you can cut and paste if you want). . .
I approve of the Coburn amendment added to the Senate health care bill. Congress should have to switch their health insurance coverage to any so-called “public plan” they create for the American people. If you aren’t willing to do that then you shouldn’t be voting for this bill.
The amendment I discussed yesterday, S.845, which would allow concealed carry permit holders to legally carry into other states as long as that state’s laws were followed failed today. The vote was 58 for the amendment and 39 against. 60 votes were required for acceptance.
I can’t help but wonder if Norm Coleman had defeated Al Franken and if Arlen Specter didn’t switch parties the required 60 would have been reached. Both Franken and Specter were among the 39 who voted ‘No’.
After some thought I realized there is a valid argument that this amendment could violate states rights. The argument is based on a bit of a “catch-22″ built-in to the amendment. In short, the amendment would allow concealed carry permit holders to “violate” the state laws that apply to obtaining a permit. For instance in some states the law is such that in order to get a permit one has to pass a live firing test. The amendment would nullify that rule for someone who enters the state from a state that does not have such a requirement.
That being said, there’s something to be said for thinking of it like one thinks of a driver’s license. The laws governing obtaining a driver’s license differ in each state, yet we don’t seem to have a problem allowing reciprocity for cars crossing state lines as long as the rules of the state are obeyed.
And what about the 2nd Amendment? The entire debate should be rendered moot if we actually followed the 2nd amendment. Isn’t it true that humans have a natural right to defend him/her self from harm? After all the Bill of Rights does not grant us rights, it merely affirms our natural human rights. We had the right to defend ourselves from harm pre-Constitution.
Below I’m including the remarks from Virginia Senator Jim Webb delivered yesterday during the debate on this amendment. He was one of several Democrats who voted for the amendment. As one of his constituents I thank him for doing so. I’d like to be thanking him for also cosponsoring S.604 to fully audit the Federal Reserve, but he hasn’t done that yet. I hope in time he does so.
In the meantime, enjoy his strong and thoughtful arguments on the amendment today.
By John Browne – Senior Market Strategist, Euro Pacific Capital
As 2009 moves past its midpoint, many market participants are briskly trying to forget the carnage of 2008 and the first quarter of 2009. But, before we get lost in the euphoria of the 36% Dow rally in the Spring/Summer of this year, a little hindsight is in order. In March, the Dow had plunged to 6,547, or some 53 percent down from its nominal 14,164 high in 2007. Despite the recent gains, we are still nearly 40% below the 2007 peak. This is a brutal truth that everyone seems to be ignoring.
Last week, Merrill Lynch, that storehouse of economic sagacity, announced that the recession was over. Even the bearish NYU economist Nouriel Roubini was reported as saying “the worst is behind us.” However, wishing earnestly for something does not make it so.
Admittedly, the financial meltdown that threatened in late 2008 appears to have been contained. In addition, the Fed’s actions in the credit markets have held interest rates down and turned the yield curve positive. The credit markets also have started to ease. In addition, the federal government’s injection of trillions of dollars into the economy has “boosted confidence” for those too short-sighted to know the consequences. This welcome news has provided impetus to equities.
In combination with reassuring remarks by senior administration officials and retail investors’ wish not to be left behind, money has started to move back into American equities. The resultant rally in stocks seems to have validated the preceding optimism.
Today the Senate is debating what has come to be known as the Thune Amendment (S.845), which would allow those with concealed carry permits to carry in other states. Watching the debate is rather interesting. Just about every Senator who rises to oppose the amendment argues that it “tramples states rights”. As an individual who supports states rights this caught my attention.
Does the Thune Amendment actually violate states rights?
It does not. It can be thought of as applying the laws of state driver’s licenses to concealed carry permits. The summary of the amendment makes it clear that it requires that the carrier follow the laws of the state in which he/she is carrying:
A bill to amend chapter 44 of title 18, United States Code, to allow citizens who have concealed carry permits from the State in which they reside to carry concealed firearms in another State that grants concealed carry permits, if the individual complies with the laws of the State.
Yet every Senator opposed to the amendment is falsely arguing that it violates states rights?
Incidentally, I applaud my own Senator, Jim Webb, for supporting the amendment against the wishes of his Democratic colleagues.
The vote is supposed to occur about an hour from the time of this writing. I’ll write more following the vote.