Liberty Maven

by John Browne – Senior Market Strategist, Euro Pacific Capital

Bad for the Goose, Worse for the Gander

Last week, major banks announced they would no longer offer cash for the IOU’s written by the state of California. At the same time, China proposed that the U.S. dollar be replaced as the world’s official reserve currency. Although seemingly unrelated, these two developments have at their root the same issue: uneasy creditors.

Inspired by Washington’s profligacy, California’s Democratic majority long pursued a policy of populist politics, supercharged by referendums, which called for increasingly massive expenditures. Exploding deficits were the natural result. Now, it has reached the point where holders and potential buyers of California debt have lost confidence in the state’s ability to ever repay.

Ever since President Nixon severed the dollar’s link to gold in August 1971, the U.S. has embarked on a monetary policy that has been both a blessing and a curse. The blessing was found in the dollar’s reserve status, which allowed for monetary flexibility that no other country could attempt. But therein lay the curse, as gross economic imbalances were allowed to grow unaddressed. Our currency’s exportability obscured the fact that our government spending was financed largely by inflation and debt.

It appears that California politicians assumed that they could follow the same model. They began to authorize massive expenditures on freeways, schools, universities, and parks. In their thirst for votes, they introduced a vast array of referendums on entitlement issues. This is quite unlike Switzerland’s successful forays into direct democracy, which restricted referendums to election laws and constitutional matters. Absent limits to their purview, California voters inevitably granted themselves new benefits from the public purse, financed by increased taxation and debt. This led to ever higher voter demands and a dramatic rise in real estate values.

In imitating the example of Congress, California’s politicians made one crucial error. Like the Administration, they could tax and borrow. But unlike Washington, California could not print money.

Recently, California’s politicians have realized that there are limits to taxation, and even debt levels. The real estate recession has hit California particularly hard, while rising unemployment and bankruptcies have reduced the local tax base significantly.

The resulting deficit has scared bond buyers. Creditors were further alarmed when President Obama expressed his unwillingness to divert federal aid to California. Unable to finance its expenditures, California has effectively tried to issue its own currency in the form of IOU’s. But banks are now refusing them.   Read More »

Robert Higgs is on fire, as usual, in his latest article. He logically compares and contrasts Bernie Madoff’s crimes to that of our own government.

Here is a sampling:

President Barack Obama and the sitting members of Congress have not been charged, much less convicted and sentenced, for crimes that make Bernie Madoff’s look like child’s play. Note well: I am referring here not to the assorted murders, assaults, and batteries for which these men and women are manifestly guilty—I say guilty because they not only admit these crimes, but proudly take public credit for them—but to certain of their strictly financial crimes.

Read the rest, you’ll be glad you did.

D o w n s i z e r – D i s p a t c h

Quote of the Day: “Beware the greedy hand of government, thrusting itself into every corner and crevice of industry.” — Thomas Paine (1737-1809)

It’s happened.

The opposition to increased government meddling in health care has grown faster than the politicians expected. They’ve also had problems crafting a bill that makes any kind of sense, even to them.

So we can count a partial victory as of right now. As far as anyone can tell there will be no health care bill before the recess.

Things are also looking bad for the cap and trade bill in the Senate. Much of this also has to do with public pressure.

Your pressure has been a part of that. Let’s keep pushing.

Send your Congressional employees another message telling them to oppose any further government involvement in health care.

You can use your personal comments to . . .

* Object to the idea currently being floated that employer provided health care benefits should be taxed in order to cover the cost of the new government program
* Tell your reps that the proper way to balance the tax treatment of employer provided health insurance versus self-purchased health insurance, is to improve Health Savings Accounts (HSAs).
* Urge your Congressional employees to increase the amount people can deposit, tax free, in their HSAs, and also allow people to pay their health insurance premiums out of their HSAs. This would put self-purchased insurance on the same tax footing with employer provided insurance.

You can send your message at DownsizeDC.org’s health care campaign.

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Ron Paul has HR1207 and over 267 cosponsors. The Senate has S604 and 8 cosponsors. Demanding Federal Reserve transparency is coming from all sides. Vern McKinley, who ran unsuccessfully against Frank Wolf in the 2008 10th district of Virginia’s GOP primary, has been fighting for transparency over the last several months using the law.

He wrote an excellent policy analysis released by the CATO institute in April called “Bright Lines and Bailouts: To Bail or Not to Bail, That is the Question“. I requested he summarize his actions leading up to the lawsuit, included below.

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Karl Rove was interviewed this morning on Glenn Beck’s radio show. During the interview he was asked by Beck if he supported the bill to “Audit the Fed”. That bill is Ron Paul’s HR1207, which as of right now has 261 cosponsors. What is interesting is how similar Rove’s response is to Barney Frank’s response when asked the same question.

Neither gives unequivocal support of auditing the Fed. Both say they agree with an audit in principle, but both seem to disagree with a complete audit as HR1207 (and it’s companion bill in the Senate S604) would accomplish. The reasoning they give can be summed up with two words that I (and many others) have attributed to Barack Obama in the past year: political subterfuge. Or if you prefer the layman version: bull shit.

Beck first asks Rove about the dollar as the reserve currency, then brings up the Fed audit bill. Listen below as Rove equivocates all over the place. This is further proof that our two party system is not Democrats vs. Republicans. It is the powerful status quo vs. everyone else. Isn’t it way past time for “everyone else” to stand up against this kind of claptrap?

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D o w n s i z e r – D i s p a t c h

Quote of the Day: “If a bill for which there is no copy were to actually pass this body, could the bill without a copy be sent to the Senate for its consideration?” — Rep. Joe Barton

However, compared to Congress, unelected bureaucrats are models of transparency. Consider how the House passed the Cap & Trade bill . . .

• The House started debating the bill before even one copy of it was available, and while clerks were inserting another 300-page, last-minute amendment.
• The final House version is 1,428 pages

Such shenanigans are not new, but they’re increasingly commonplace. The American people are growing disgusted that Congress doesn’t read the bills they pass. They’re tired of Congress’s lack of transparency and failure of representation.

DownsizeDC.org has the solution, the Read the Bills Act (RTBA).

This solution scares the Establishment. That’s why other organizations are stepping in with watered-down proposals.

• One foundation seeks to “foster public trust in government,” not to downsize it. They want bills posted on-line for 72 hours before they’re considered on the House floor. But most people with jobs and families can’t read a 1,400 bill in three days. Think tanks, journalists, and activist groups won’t have enough time to analyze it either. Moreover, this proposed rule can be overturned in case of “emergency,” which means everything would become an emergency.
• Another organization threatens to turn “reading the bills” into a sickening partisan issue. It actually boasts of its efforts on behalf of George W. Bush’s re-election in 2004. It wants members of Congress to sign a pledge that they will not vote for the health care reform bill if they haven’t read it and if it hasn’t been posted on the Internet for, yes, 72 hours.

Why don’t they have this pledge for other bills?

The drawback of such a proposal is that . . .

• Republicans who won’t vote for the bill anyway can easily sign this pledge
• Democratic leaders will view reading the bills as a partisan grandstanding issue rather than a substantive reform
• They could rightfully ask why Republicans weren’t so keen on reading bills when they were in power.

In contrast, DownsizeDC.org first proposed the Read the Bills Act in 2005, when Republicans were in power, in reaction to Bush bills like the Patriot Act, Intelligence Reorganization, and the Medicare Drug Benefit.

The Read the Bills Act is the “real deal” . . .

• It requires bills to be read by a quorum in Congress. They won’t sit for 1,000 page readings, so bills will be much shorter.
• Those who were not present for the reading must sign an affidavit stating that they have read and understand the bill before voting for it.
• Bills in their final, amended form must be posted on the Internet for a full week before the final vote is taken, giving more people more time to read them and give their representatives informed feedback.
• No exceptions can be made.

Tell Congress to introduce and pass DownsizeDC.org’s Read the Bills Act. Also tell them . . .

• this isn’t a partisan issue; the first version of the RTBA was written in 2005 in reaction to the GOP Congress
• while regulatory agencies often allow a month or more for comments, the RTBA requires only a week for finalized bills to be posted on the Internet
• watered-down reforms like the 72-hour rule are cosmetic changes that won’t stop scandalous 1,400 page bills from being passed
  

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“Gold is the sovereign of all sovereigns.” – Democritus, Greek scientist and philosopher, circa 430 BCE.

by Jake Towne, the Champion of the Constitution

Originally published Monday, July 13, 2009 at http://www.nolanchart.com/article6588.html

July 24, 1998, was an epic day for the global financial system. In “The Money Matrix – Bring Light to Dark Derivatives! (PART 11/15),” we reviewed the consequences of FED Chairman Alan Greenspan’s decision to allow negotiation of OTC derivative contracts without the use of an exchange to make transactions transparent and reduce counterparty risk. (emblem)

Greenspan also stated:

“Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.”

Translated, this comment simply means that the international central banks will suppress the gold price by releasing central bank gold reserves. Why is the gold price so important? Isn’t it just a yellow metal mostly used for jewelry? How exactly is this manipulation accomplished? These are the questions this article will answer.

THE LONDON GOLD POOL AND THE “REAL RATE OF INTEREST”

Before proceeding, I recognize that many hearing this for the first time may be incredulous. To that end, please read “R.I.P. – The London Gold Pool, 1961-1968“. This article painstakingly demonstrates – using the FED’s own documentation – that the international central bankers secretly colluded to manipulate the gold price in the 1960s to hide the dollar’s debasement. Note the severe aftermath: the London Gold Pool was utterly destroyed in 1968 and the end result was the national bankruptcy of the United States in 1971 when President Nixon blocked the redemption of dollars for gold by foreigners. The collapse of the London Gold Pool heralded the era of free-floating fiat currency. If additional proof is please read this 1961 FED document and analysis by James Turk from the Gold Anti-Trust Action Committee (GATA) entitled “The FED’s Blueprint for Market Intervention.”

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Here is yet another story about those who are supposed to serve and protect, harassing and abusing instead. One wonders how often these events occur but never rise to “Rodney King” proportions.

At least Ryan McCain’s story (included below) ends well. My Brother-in-law was in a similar situation recently. His pickup truck broke down, he fixed it on the side of the road, and to test it out drove a bit and turned down a gravel road. When he turned around 3 police cars screeched into view, cops jumped out, guns drawn yelling. Apparently they thought he had stolen his own car. Of course, checking the registration didn’t stop them from taking him to the station before releasing him. This story, the Steve Beirfeldt/TSA story, the one included below, and countless others make me believe that these are not just isolated incidents. They are a disturbing trend.

Ryan McCain shared the following “isolated incident”:

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This week I’m thinking about the 2nd Amendment and gun control. By now everyone has heard about the Heller Supreme Court victory last year that struck down DC’s gun ban. There is another “gun fight” brewing. The Heller case dealt with applying the 2nd Amendment to the federal government. The new case explores whether the 2nd Amendment applies to the states. Perhaps most compelling about this new case is that it is an effort to strike down Chicago’s gun ban and we have a President who would love nothing more than to extend that ban to all the states.

Make no mistake that is what Barack Obama wants to do. Whether he actually can accomplish it is another story. For more details on the new case and its history see this excellent article from Reason. Let’s all hope that the Supreme Court takes the case and does the right thing.

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Musing on the famous poem by American poet Henry Wadsworth Longfellow and the world monetary system. A European organization called the United Future World Currency created by former central bankers is exposed.

by Jake Towne, the Champion of the Constitution

Originally published on Thursday, July 9, 2009 at http://www.nolanchart.com/article6610.html

Yesterday I was unpacking my books from China, a chore that took a few hours. I came upon a wonderfully illustrated, hardbound edition of Henry Wadsworth Longfellow’s “The Wreck of the Hesperus.” Unable to resist, I sat down and cracked it open – the copy is about 70 years old.  (photo1 photo2)

For a little background, Longfellow was a New Englander who lived seaside for much of his life from 1807-1882. Many of his poems have a rhythmic cadence, and he is also very well known for the poem “Paul Revere’s Ride.” Here is “The Wreck of the Hesperus:”

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