Archive for April, 2010

Does the Federal Reserve REALLY Control Interest Rates?

April 30th, 2010 12:09 am  |  by  |  Published in Banking, Big Government, Commentary, Constitution, Economics, Federal Reserve, Free Market, government spending, inflation, Liberty, Money, price controls, Taxes  |  Comments Off

Originally published April 29, 2010 at

Many believe that the Federal Reserve controls interest rates.  But what if they do not? Here is a case for readers to decide on.

The Federal Reserve, myself, and many others, have made the claim that the FED controls both the interest rates and supply of dollars and credit.  [For those unfamiliar with the FED, you can learn just about everything you need to know from the links at the bottom of my Federal Reserve plank, and this article “Fractional Reserve Banking in Pictures.”]  Several weeks, I had a conversation with Karl Denninger from Market Ticker on the gold market, and we also discussed  his theory that while the FED can jawbone and could theoretically move the federal funds rate wherever it wants, it still follows the marketplace.  In other words, its control of interest rates may be all bluster and a false charade.

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Time to Sheathe the Sword

April 30th, 2010 12:05 am  |  by  |  Published in Activism, Big Government, Commentary, Constitution, Election, Liberty  |  Comments Off

Originally published April 28, 2010 at

“[America] goes not abroad, in search of monsters to destroy.

She is the well-wisher to the freedom and independence of all.

She is the champion and vindicator only of her own.

She will commend the general cause by the countenance of her voice, and the benignant sympathy of her example.

She well knows that by once enlisting under other banners than her own, were they even the banners of foreign independence, she would involve herself beyond the power of extrication, in all the wars of interest and intrigue, of individual avarice, envy, and ambition, which assume the colors and usurp the standard of freedom. The fundamental maxims of her policy would insensibly change from liberty to force….

She might become the dictatress of the world. She would be no longer the ruler of her own spirit….

[America's] glory is not dominion, but liberty. Her march is the march of the mind. She has a spear and a shield: but the motto upon her shield is, Freedom, Independence, Peace. This has been her Declaration: this has been, as far as her necessary intercourse with the rest of mankind would permit, her practice.”

- then-Secretary of State John Quincy Adams, 1821 address to Congress.

About a year ago on May 1st, 2009, I announced I would be running for Congress after returning home from my engineering job abroad in Asia.  The simple message was – and still is – that by preserving individual liberties and defending peace, the end result is prosperity.  When the campaign started there were no other volunteers, just myself, although there are now over 250 today.  While there is no particular gender or age brackets of the volunteers, I’ve noticed that many of the most dedicated volunteers are veterans.  In fact, the first volunteer, Aaron Emery, former Staff Sargeant, US Army, helped me setup and run the campaign’s interim website while he was stationed in Iraq, which was on the Facebook network before created this website.  I still remember our first conversations, which were garbled quite badly.

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Reconnecting Wall Street to Main Street

April 29th, 2010 11:11 pm  |  by  |  Published in Bailouts, Banking, congress, Economics, government spending, Liberty, Politics, Taxes  |  Comments Off

by Hemant Kathuria, Los Angeles Branch Manager, Euro Pacific Capital

Much has been made about how the massive bailouts of Wall Street firms have come at the expense of US taxpayers. And after having posted record profits during the peak of the real estate boom, it is easy to understand Main Street’s anger at picking up the multi-trillion dollar tab – especially as Wall Street’s bonus machine is spinning once again.

But Wall Street also receives a much more insidious benefit which is almost never discussed, much less protested. From our vantage point, this subsidy – greatly expanded by the federal government nearly 40 years ago – ensures that Wall Street is provided with a virtually unlimited supply of the raw material it requires to operate and grow its business.

Perversely, most of the cost of this material is not borne by Wall Street itself; rather, it is borne by every individual and business in the country. Worse, the cost is not billed to the parties that pay it; rather, it is stealthily embedded into every transaction that takes place in US dollars, without notice or approval.

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Act Now: Financial Bill Attacks Your Vitamins

April 29th, 2010 10:47 am  |  by  |  Published in Activism, Big Government, congress,, Liberty, Market Regulation, Politics  |  1

First, John McCain introduced a bill that would severely damage the vitamin industry.

Thanks to you, the bill was killed!

Then, its key provisions were inserted into the Food Safety bill.

But then, again thanks to you, these provisions were pulled.

Now, the Alliance for Natural Health tells us these provisions might become law in the worst possible way. Unless you act, the financial “reform” bill could give new powers to the Federal Trade Commission (FTC), including the power to regulate food supplements — perhaps regulate supplements right out of existence. proposes the Write the Laws Act (WTLA) to prevent outrages like this. Congress must NOT delegate their legislative power to unelected bureaucrats.

These agencies must not be allowed to thwart the will of the people!

Please tell Congress to oppose any amendment to Chris Dodd’s financial “regulation” bill that will empower the FTC. Tell them to introduce the Write the Laws Act instead.

You may borrow from or copy this letter . . .    Read More »

The Left Protects Civil Rights (Except When They Don’t)

April 28th, 2010 10:39 pm  |  by  |  Published in Civil Liberties, Constitution, Court Cases, Individual Responsibility, Liberty, Philosophy  |  Comments Off

In the two-party charade that is American politics, our choices are limited. You’re either for the wars that exist, or you’re for the wars that exist plus a couple that don’t yet. You’re either for an increase in spending domestically, or an increase in spending abroad. You either want the Fed to increase the debt, or you want the Fed to monetize it. However, even in the few instances where the media and the party leadership tilt the fun house mirror to make the two sides look different, the truth is that they differ in execution – in which rights to usurp – rather than fundamental philosophy.

A shining example of a major party with phony principles is the “defense” of civil rights in America by the Democrats. You see, the Democrats want to protect civil rights. Countless party leaders have spoken out in outrage over the discrimination against minority groups. The Democrats of today support the right of marriage for all people, regardless of their sexuality. They want equal pay and equal opportunity for people of all backgrounds when it comes to employment or housing. In fact, according to their website: “Democrats will fight to end discrimination based on race, sex, ethnicity, national origin, language, religion, sexual orientation, gender identity, age, and disability in every corner of our country, because that’s the America we believe in.” Few Americans would argue with the underlying principle: equal opportunity for all, and discrimination against none.

However, the same Democratic Party that wants equality of opportunity in marriage or the workforce would willfully overlook that equality when it comes to other choices that individuals might make. The philosophical principle of equal opportunity must necessarily mean free choice, lest it be inconsistent and hypocritical. Freedom to pursue the job that we want or the familial structure that we are most comfortable with must mean the freedom to choose what foods or drinks that we want to consume, or the freedom to decide manner in which we defend our own property, or the freedom to select the most appropriate form of health insurance for our families (even if it means no health insurance at all). As it turns out, though, the party that champions civil rights actually defends just a small subset of rights – those which will rally its base, scream injustice, and are not uncomfortable to defend.

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Celebrate Earth Day – No Toxic Dollar Bills

April 27th, 2010 11:06 pm  |  by  |  Published in Activism, Bailouts, Banking, Big Government, Commentary, Debt, Economics, government spending, inflation, Liberty, Money  |  Comments Off

Originally published April 26, 2010 at

Earth Day was last week and is an opportune time to reflect on our dependence on the little rock with some water and vapor on top, especially with the recent not-so-gentle reminder from Iceland’s volcanoes. Following peace – defined as the absence of war, regardless who wins the Nobel Peace Prize these days – the environment is the next highest priority for human society as a whole. As Congress works to instigate another preemptive war against yet another third world nation with continued economic blockades, war is not exactly productive as nation-states spend time and resources murdering… ourselves. Mankind’s twentieth century was the bloodiest on record, and saw the deaths of over 170 million human beings by the wars, prisons, and famines created by our own governments.

The continuation of preemptive wars of aggression in Iraq and Afghanistan into the 21st century is ceaselessly flogging the country I love along a path to spiritual death.  Tyrannical rule at the barrel of a gun abroad and domestic despotism are the age-old recipe for eventual poverty and slavery.

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Protect your access to local food

April 27th, 2010 10:32 am  |  by  |  Published in Activism, Big Government, congress, Constitution,, Liberty, Politics  |  Comments Off

Will the dangerous “food safety” bill pass?

Probably. There’s too much bi-partisan support in Congress.

But thanks to the Downsize DC Army, and many others, Congress is feeling the heat. Senators are considering amendments to improve their version of the bill. These changes could help to protect  . . .

* Small farms
* Your access to locally grown food

Let’s encourage these changes! Please send a letter telling Congress to protect small farms and your access to locally grown food.

You may borrow, modify, or copy this letter . . .

I want safe food. There should be stiff civil and criminal penalties for food producers and sellers who engage in fraud, negligence, and reckless endangerment. But that’s where the government’s role ends. This means . . .

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URGENT: Financial “Reform” Vote Could Be Today

April 26th, 2010 10:40 am  |  by  |  Published in Activism, Banking, Big Government, congress, Constitution,, Federal Reserve, inflation, Liberty, Market Regulation, Money, Politics, Ron Paul  |  Comments Off

The Senate may vote on Chris Dodd’s unconstitutional financial “reform” bill TODAY!

We have mentioned some of the dangers of this bill before . . .

* There is no audit of the Federal Reserve
* It creates new armies of unelected lawmakers, in violation of the Constitution
* It creates a bailout fund for the creditors of large, failing firms
* And does nothing to halt the boom-and-bust cycle

There are many more reasons to oppose the bill. A good summary is provided by James Gattuso of the Heritage Foundation.

At its heart, this bill . . .

* puts the government in control of the financial industry, and potentially the entire economy,
* and stacks the deck in favor of the largest corporations against smaller competitors
* but won’t address the root causes of the 2008 collapse – the Fed’s inflationary policies and the housing bubble it created

And so we’re asking you to tell Congress to oppose Chris Dodd’s financial “reform” bill using’s Reduce Regulations campaign.

You may borrow from or copy this letter . . .   Read More »

The Latest on Auditing the Federal Reserve

April 25th, 2010 10:06 pm  |  by  |  Published in Banking, Big Government, Commentary, congress, Economics, Federal Reserve, government spending, Ron Paul  |  2 Responses

The Senate is set to “test” vote on Chris Dodd’s financial reform bill on Monday night. His version of reform is just more of the same. It completely purges from the bill Ron Paul’s effort to have a full audit of the Federal Reserve. Ryan Grimm at the Huffington Post has all the details, including efforts by Alan Grayson and Senator Bernie Sanders to get the full audit into this bill.

The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate.

“The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn’t do anything of the sort. I’m going to run down the details for you, and reprint the legislative language so you can read it yourself,” writes Rep. Alan Grayson (D-Fla.).

It would not allow the GAO to look into the Fed’s massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions.

Grayson and co-author Rep. Ron Paul (R-Texas) passed legislation through the House that would allow the Government Accountability Office (GAO) to audit the Federal Reserve and, after a delay, release the information to Congress. It was a remarkable victory, with a populist coalition beating back the combined lobbying efforts of the Treasury Department, the Fed and Wall Street banks.

The Senate has been more hostile territory for the Fed audit provision. Banking Committee Chairman Chris Dodd (D-Conn.) opposes the Grayson-Paul version, but allowed a much more restrictive audit proposal from Sen. Jeff Merkley (D-Oregon) into his bill.

By now do we need more proof that lawmakers like Dodd are working for the special interests and against the American People?

To Peg or Not to Peg?

April 23rd, 2010 2:32 pm  |  by  |  Published in Banking, Big Government, Debt, Economics, globalism, Investing, Money, Peter Schiff, Politics  |  Comments Off

Peter Schiff, president of Euro Pacific Capital and author of the soon-to-be-released How an Economy Grows and Why it Crashes.

While I attended an economic conference last week in Shanghai, I found it notable – but not surprising – that two former Secretaries of the Treasury, John Snow and Hank Paulson, as well as current Treasury Secretary Tim Geither, and former President George W. Bush were then in the country at the same time. The fact that so many key American power brokers (myself not included) were in China simultaneously is no coincidence. In an overly indebted world, the $2.5 trillion that China holds in foreign reserves is acting as a center of economic gravity, inexorably pulling all market participants into its orbit.

When a 10-ton elephant plods through a village of grass huts, the big question on everyone’s mind is: which way is he going to turn next? With China, that fundamental question translates to guessing when Beijing will make changes to the value of the yuan. These decisions will determine the overall direction of the global economy, and will set the path that everyone must follow. Unfortunately, no Americans, even those who travel hat-in-hand to China, have a seat at the table where these decisions are being made.

At the risk of beating a dead horse, let me reiterate my central thesis with respect to currency valuation: just as it is always better to be rich than to be poor, it is always better to have a strong currency than a weak one. Although this simple maxim puts me into conflict with much of the economic establishment, I hold its truth to be…well…self-evident.

The effect of current Chinese currency policy (which, despite Beijing’s protests to the contrary, is manipulation pure and simple) is to make the U.S. dollar more valuable and the yuan less valuable. As a result, the benefits of manipulation accrue to Americans, not the Chinese. We get pay raises; they get pay cuts. Americans use their stronger dollars to buy products they would otherwise not have been able to afford. On the flip side, the Chinese people do without products that they otherwise would have been able to afford had their government not transferred their purchasing power to us.

The same effect is experienced with interest rates. In order to manipulate the dollar’s value higher, the Chinese government has gobbled up more than $1 trillion of them.The Chinese then loan the dollars back to the U.S. through purchases of government and mortgage-backed debt, which reduces the cost of servicing our massive liabilities.

By the same token, if China were to stop manipulating the dollar higher, it would remove the props currently supporting our dysfunctional economy. American interest rates and consumer prices would soar, and our economy would collapse. Meanwhile, China would experience the opposite effect. Chinese consumer prices would fall, immediately raising living standards for average Chinese workers, whose higher real wages would finally allow them to fully enjoy the fruits of their labor.

What strikes me as particularly dangerous is that no one, not even the Chinese, appear to understand these fundamental dynamics. All of the Shanghainese with whom I spoke last week were unaware that a stronger yuan would be in their own best interest. The way most people see it, a stronger currency is a bullet that China must be prepared to take in order to save the rest of the world from further pain.

And so we watch the strange spectacle of China stubbornly resisting actions from which it will immediately and substantially benefit. In reality, an appreciating yuan is the bitter medicine Americans must swallow if our sick economy is every to regain its health. (An allegorical explanation of this is contained in my new illustrated book, “How an Economy Grows and Why it Crashes.”)

When Beijing finally comes to it senses, the transition will be unavoidably disruptive. For China, the long-term growth would far outweigh the short-term shock. America, however, would face a much less certain outcome. There is no question that, for Americans, the immediate effects would be very painful, with the gains only developing with time and prudent decision-making. Still, that does not mean we should resist the process, for the longer it is delayed, the more severe the pain and the longer the road back to prosperity.

Given this reality, why are our political leaders so adamant that China effectively pull the rug out from under our economy?  Are they really that clueless?  Perhaps they are – or perhaps they are a bit more devious. Perhaps they are using reverse psychology. Maybe they feel that the best way to get the Chinese to maintain the peg is to demand that they remove it. Historically, the Chinese have always resisted outside interference.

However, to paraphrase Abraham Lincoln, you cannot fool all of the Chinese all of the time. Soon they will see the light, and when they do, it’s lights out for American hegemony. If you think China is important today, just wait a few years. For example, while the Chinese automobile market is now the largest in the world, 90% of Chinese car buyers pay cash. In contrast, only 15% of American car buyers do so. In other words, Chinese consumers can actually afford their cars, while most Americans cannot. Without huge car payments, Chinese consumers are in much better shape not only to trade up to newer cars in the future, but to purchase other products as well. This suggests huge future growth, not only in automobiles but also in other consumer products as well.

This eruption of consumer demand, made possible by pent-up savings, is creating historic opportunities for investors. When the Chinese start using their wealth to expand their own economy rather than to subsidize ours, infrastructure may well be a primary beneficiary. (For more information on this, see Euro Pacific’s new special report: Investing in China’s Infrastructure.)

Whenever the Chinese government decides to end the peg, the Chinese economy will benefit as a result. While as citizens we can hope that U.S. leaders respond with the right policies to enable our economy to regain its former glory, as investors we should position ourselves to benefit from the more certain outcome.

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