Liberty Maven

by Michael Pento, Senior Economist of Euro Pacific Capital

Any psychoanalyst looking at the behavior of investors today would see clear strains of schizophrenia in a comparison between the markets for gold and US Treasuries.

Currently, the 10-year Treasury yield is setting new lows on a daily basis. In the financial models all economists were taught at school, this would be an indication of an economy with low inflation expectations and a strong currency. But the dollar has fallen over 12% since June, and the price of gold continues to hit all-time highs. These results are completely antithetical. Bonds are flashing a warning sign of deflation, while gold and the dollar presage hyperinflation.

During the last period in which the US experienced significant economic stress, the late 70′s and early 80′s, the markets in gold and Treasuries showed a much higher degree of harmony. At that time, the Fed’s extreme depression of interest rates led to rapidly rising inflation, a weakening dollar, and a massive spike in the price of gold. More significantly, yields on Treasuries soared as investors demanded higher rates as compensation for the added inflation risk. In other words, everything made sense.

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by Peter Schiff, CEO of Euro Pacific Precious Metals and author of the hit economic fable How an Economy Grows and Why It Crashes

Much of the content of the latest Fed statement, released on September 21, echoes the central bank’s previous post-credit crunch pronouncements: there is still too much slack in the economy, interest rates are still going to be near-zero for an “extended period,” and the Fed will continue to use payments from its Treasury purchases to buy yet more Treasuries.

But this recent statement uses a new turn of phrase that should have Americans very upset. The Fed says that “measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate.” Though the wording treads lightly, it should not be taken lightly. It may signal the final push toward dollar collapse.

The Fed’s dual mandate, since an amendment in 1977, has been to promote “price stability” and “maximum employment.” While often discussed as if both goals are complementary facets of one mandate, they tend to have been at odds during every recession since the Great Depression.

The problem is that central banks tend to keep interest rates too low for too long (usually to create a feeling of prosperity credited to the government), which then causes major asset bubbles. When the bubbles pop, there is a period of high unemployment during which prices are supposed to fall. Then, the central bank must choose between boosting short-term employment through inflation or defending price stability by allowing assets to return to a reasonable market value. Aside from the early 1980s chairmanship of Paul Volcker, the Fed has always chosen more inflation.

But they’ve never admitted it.

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Some naysayers, even libertarian naysayers, firmly believe there is simply no hope of a true libertarian society taking hold in America. Then there are those that are trying to making it actually happen. I learned of the Free State Project shortly after it began. Now, years later, the concept has become reality for many liberty-lovers.

If you’ve not heard of the Free State Project, I strongly encourage you to check it out. Now there’s even a movie about it. Libertopia is an upcoming documentary about the project and its people. From the Libertopia movie web site:

It could be your neighbor. Your boss. Your brother, sister, or perhaps a spouse. Right now thousands of Americans, passionate in the ultimate pursuit of liberty, are planning to converge in a single state…

Permanently.

Hundreds have already moved, and their plan is simple:

First, find a state with limited government, a small population, and a vibrant economy.

Second, find 20,000 freedom activists willing to move there and vow to further reduce the size of its government.

By their accounts, that state is New Hampshire. And if their project works, the “Live Free or Die” state just may become a libertarian-utopia.

Libertopia is a documentary that examines the people of the Free State Project– ordinary citizens attempting to reclaim a voice against a government which they believe shares neither their priorities nor their interests. Primarily libertarian leaning, and often considered radicals in their home towns, these people have begun a modern-day pilgrimage to the Granite State.

Here is the trailer for the documentary, set to be released on DVD in 2011:

There’s also an extended trailer available.

What do you think of the Free State Project?

by Peter Schiff, president of Euro Pacific Capital and author of the new best-selling economic fable, How an Economy Grows and Why It Crashes

Since the US economy has failed to recover as widely predicted, pressure on the Federal Reserve to conjure a solution has increased. In fact, the Fed now faces the hardest choices in its history. It can either redouble its past efforts to re-inflate America’s bubble economy (risking the destruction of the US dollar) or it can stop pumping and let the economy deflate to a self-sustaining level. Unfortunately, both choices guarantee severe economic pain – but only one offers the possibility of ultimate success.

Today’s news that the economy lost 95,000 jobs in September confirms that record doses of stimulus have failed to create a real recovery. The loss of 159,000 government jobs in the month could have been a positive if those lost positions had been replaced by wealth-generating private sector jobs. But the 65,000 jobs generated by businesses didn’t come close. Worse still, most of these jobs came from the goods-consuming service sector rather than the goods-producing manufacturing sector (which lost another 6,000 jobs). The unemployment rate has now been above 9.5% for 14 consecutive months, the longest such streak since monthly records began in 1948. More importantly, the real unemployment rate, which factors in discouraged and under-employed workers, rose from 16.7% to 17.1%.

Armed with this weak jobs report, the Fed seems poised to make good on its plan for other round of quantitative easing (in English: printing money). Recent statement from top Fed governors have made that sentiment clear. Apparently they feel that they must do something, even though Fed inaction would be far better for the economy. At a time when we should be trusting the markets to grind out three yards in a cloud of dust, we have put our faith in the Fed’s ability to fling a Hail Mary pass, even though all previous attempts have failed.

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As high profile White House personalities like chief of staff Rahm Emanuel and chief economic advisor Larry Summers hog the spotlight as they leave the Obama administration at midterm, there are also lesser known, yet just as important, figures departing. They have toiled tirelessly in their positions but now merit nary a glance from the press as they exit through the wide White House doors.

For example, there is Albert Springwater, who is the president’s teleprompter cleaner. “It’s a very important job,” he says. “Without a clean and readable screen, the President might go from talking about oil drilling to reciting the Gettysburg Address. In fact, I let one of my assistants go the other day when, because of careless wiping, the president mistook the word ‘France’ for ‘Venezuela’ and threatened to put a sea blockade on Paris.”

But what really lured him away from his prestigious White House job? “There was an opening at Best Buy that I just could not ignore. Aisle after aisle of TVs waiting to be dusted off and sprayed with glass cleaner. How could I pass up an opportunity like that?”

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“Know ye not, Who would be free, themselves must strike the blow?” – Lord Byron

Last night at a local candidates’ night I gave the below speech, though the bracketed paragraphs were cut out due to time limitations. The event was co-sponsored by the Lehigh Valley Tea Party and Lehighton Tea Party. My Republocrat competition – for the second event in a row – failed to show up.

During the past 6 years, the official national debt has nearly doubled from $7.6 to $13.5 trillion. Per the US Treasury, the unfunded liabilities for Social Security and Medicare is $107 trillion dollars, which is nearly $400,000 for every man, woman, and child. What has the taxpayer gotten in return?

During the past 6 years, the number of service members killed in Afghanistan has risen from 160 to 1,311.

During the past 6 years, unemployment locally has doubled from 5 to 10%. The number of people living on food stamps has increased from 25 to 41 million which is nearly 1 in 8 Americans.

Now over 3 in 4 Americans live paycheck to paycheck, a figure which has about doubled since 2006. What has the taxpayer gotten in return?

We must stop the endless debt. I have pledged to balance the budget each year, and I have called upon my competitors to join me, and they have chosen to not do so.

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It’s pretty obvious that Ron Paul missed the bus to Camp Politics. And thank God for that.

This comes to us from the Institute for Justice.

Once again Jim DeMint and Ron Paul have formed a coalition. They have worked hard on getting a full Federal Reserve audit and share many commonalities on economic issues. Now they come together for a campaign fund raiser for Ron Paul’s son, Rand Paul in Kentucky. Hmmm I wonder if DeMint and Ron Paul discussed any plans of forming another coalition for 2012 as suggested in our recent poll.

The local media focused on the small number of protesters at the event rather than the event itself.

In less than one hour from the time of this writing, Rand Paul and Jack Conway will appear together with Chris Wallace on Fox News Sunday for a nationally televised debate. The debate has no rules and will comprise the first half-hour of the show. It airs at 9am Eastern on most local Fox affiliates. The latest polls still show Rand Paul with a lead in the race.

Just about now you, as an American voter, are reaching critical political mass. Pummeled by incessant TV, radio, and newspaper ads, and deluged by dinnertime taped phone calls you want to kill the next person who brings up the election.

Then, again, you may have crossed over into that Zombieland of voting in which you can’t seem to get enough of the heady stuff. While the former state is normal, here’s how to tell if you’ve really had too much politics for the season and are badly in need of a vacation or at least electroshock therapy:

1) You know Sarah Palin’s dog’s favorite color.
2) You can recite the Hatch Act from memory.
3) You call polling companies and beg to be polled.
4) You can’t wait for TV shows to end so you can start enjoying the campaign commercials.
5) You’ve come to believe that Rand Paul is a type of gold coin.
6) You can spell Ben Bernanke’s name forward AND backwards.
7) Your shirt has color-coded campaign buttons with Republicans on the right side, Democrats on the left, and Libertarians down the middle.
You agree with every political view no matter who holds it yet become irritated when someone refuses to have an opinion.
9) Your Favorites menu on your computer browser is full of campaign websites.
10) You can’t be reached on the Internet because your e-mail account is glutted with campaign spam.
11) You’ve got a space reserved in front of the early voting place so that you can get there before midnight.
12) You’ve got a tattoo of your favorite candidate on your shoulder and you were the tattoo artist.
13) You’ve painted half your car red and the other half blue.
14) You invite campaign flyer distributors into your house for coffee and cookies and to have a heart-to-heart.
15) You’ve removed the heads from your bobblehead collection and replaced them with leading candidates.
16) You straighten up campaign signs at intersections.
17) Your alarm clock has campaign ads to awaken you.
18) You call radio talk shows just to hear them breathe.
19) Instead of Fantasy Football, you play Fantasy Politics.
20) Your friends avoid you because all you want to talk about is the latest polling numbers.
21) When you dream, it’s of filling out your ballot.
22) Your iPod is full of recorded campaign speeches.
23) You’re disappointed when, after the phone rings, it’s only your mother calling and not a pre-recorded message from a local candidate.
24) You burned out your TIVO recording late-night political shows.
25) Your car has so many campaign stickers on it, it makes two miles less per gallon.

by Peter Schiff, president of Euro Pacific Capital and author of the new best-selling economic fable, How an Economy Grows and Why It Crashes

Long ago, before economic models developed their current levels of sophistication, it used to be that the goal of a government’s economic policy was to bring prosperity to its citizens; in other words, to raise the general level of material comfort, while at the same time reducing the amount of toil required to attain that end.

However, due to the blather spouted by modern economists, success is no longer measured in those terms. Instead, governments simply look to pump up nominal levels of gross domestic product (GDP), while simultaneously catering to the needs of entrenched political classes. As exports feed directly into GDP, currency devaluation has been widely used as a means to boost exports and therefore achieve ‘prosperity.’ In this model, selling is an end unto itself. There is no focus whatsoever paid to the obviously negative consequences of currency debasement: diminished purchasing power and lowered living standards.

Way back in the 20th century, a nation’s currency was viewed much as a company’s stock price. The reliability, competitiveness, and growth of a national economy usually translated into a strong currency.  This system made sense.

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