Liberty Maven

During the general election Presidential campaign of 2008 I had no love for the decidedly non-libertarian views expressed by Sarah Palin as John McCain’s running mate. Prior to McCain selecting her I kept reading about how she could be considered a great libertarian leaning Republican. Then McCain chose her and the truth came out. Or did it?

Is she now going to try to undo the neo-conservative views she expressed while campaigning as McCain’s running mate? It would certainly be a good political move for her, but can she be successful doing it? I’ll be reserving judgment until she makes another statement on foreign policy and interventionism, but at least she’s joining the chorus of critics against the Federal Reserve.

During her Hong Kong speech today she took aim at the Fed for playing a role in causing the economic crisis. The Wall Street Journal blog reports:

Former Alaska Gov. Sarah Palin fired a shot at the Federal Reserve in her coming-out speech in Hong Kong today, blaming the central bank for the current crisis and disagreeing with the idea that the Fed should have a greater role in preventing the next crisis. It was an echo of fellow Republican and Texas congressman Ron Paul, who has led the charge in Congress to perform an audit of the Federal Reserve with an eye to eventually eliminating it.

“How can we discuss reform without addressing the government policies at the root of the problems? The root of the collapse? And how can we think that setting up the Fed as the monitor of systemic risk in the financial sector will result in meaningful reform?” she said. “The words ‘fox’ and ‘henhouse’ come to mind. The Fed’s decisions helped create the bubble. Look at the root cause of most asset bubbles, and you’ll see the Fed somewhere in the background.”

More generally, Mrs. Palin took the tack that the financial crisis occurred because government got in the way of free enterprise.

So, thanks for jumping on the anti-Fed bandwagon Sarah, now do liberty-loving Americans another solid and start preaching non-interventionism and a strong focus on national defense rather than preemptive national offense. Do that, then continue it and over time some of us may start believing you.

A couple months ago we revealed the lawsuit former VA congressional candidate Vern McKinley brought against the Federal Reserve and FDIC because the organizations were less than forthcoming in responding to FOIA requests.

Last week McKinley appeared on Fox Business News channel after an editorial was published in the Wall Street Journal about his lawsuit.

D o w n s i z e r – D i s p a t c h

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Quote of the Day: “Economists used to worry about government using up the nation’s savings. But now Americans have no more savings to use. Still, the nation that can’t save a dime sets out to save the entire planet.” — Bill Bonner and Addison Wiggin, Empire of Debt, pg 35.

That should have been enough to spark committee hearings, and perhaps even an expedited vote, but Congressional leaders didn’t want either thing to happen, so . . .

In early August we asked DC Downsizers to call the House Finance Committee Chair, Barney Frank (D-MA), and its Ranking Member, Spencer Bachus (R-AL) to ask for hearings on the Audit the Fed bill. Many of you did that, and guess what?

The House Finance Committee will hold hearings on the Audit the Fed bill this Friday at 9AM. You’ll be able to monitor the proceedings here.

Once we know what happens at these hearings we can decide what to do next. Meanwhile . . .

President Obama is seeking expanded regulatory power for the Fed.

This must not be permitted.

It’s bad enough when Congress allows the Executive Branch bureaucracy to write regulations that have the force of law, but at least we can hold both the President and the Congress accountable for what the bureaucracy does. However . . .

The Fed is an independent institution accountable to no one. In fact, without an audit, we’re not even allowed to know what the Fed is doing with many of the powers and resources it already has.

* Let’s use our “Tell Congress to Cut Red Tape” campaign to fight expanded regulatory powers for the Fed.
* Send a letter to Congress using DownsizeDC.org’s Educate the Powerful System.
* Use your personal comments to say you oppose President Obama’s plan to give the Federal Reserve expanded regulatory powers.
* You can send your letter here.

Congratulations. Your pressure keeps working, so keep doing it!

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“I stand for the Restoration of the Republic, a return of Honest Money to We the People, and a swift end to the Global War of Terror. I hope you are standing beside me as this battle is joined with our domestic enemies, our very own government… If those in power actually intend the best for the American people, but their behavior is so contrary, so immoral, and so unconstitutional with my positions, the government ceases to be my government in all but name. In my writings I unceasingly demonstrate that the federal government no longer heeds the Constitution with any type of respect. An unconstitutional government is not my “friend” or “protector” or “mommy;” it is my bitter enemy.”

- My personal vow from my October 3, 2008 article on the passage of the bailout bill

Originally published September 16, 2009 at http://towneforcongress.com/economy/bailout-and-corporatism-plank-1

I opposed all the unconstitutional bailouts and stimulus plans of the Republican-Democratic Establishment. I stand against government-assisted cartelization of our nation’s industries and businesses. The actions taken so far by the government will only serve to worsen the economy. Government’s responsibilities should be limited to establishing a framework of laws to protect individuals from fraud, coercion, and aggression against the rights of individuals — life, liberty, and justly acquired property.

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by Peter Schiff, president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets

As we pass the one year anniversary of the fall of Lehman Brothers, journalists, politicians and market analysts have seized on the occasion to offer seemingly sober assessments of what went wrong and what went right in the lead up and aftermath of the biggest financial event since Black Tuesday.

The most popular storyline offered by these Monday morning quarterbacks is that the mistaken decision to allow Lehman to fail resulted from the Bush Administration’s misplaced faith in the free markets. In this telling, the real crises began in the days following the Lehman bankruptcy, which unleashed a financial panic that would have caused complete economic collapse – if not for the subsequent federal intervention.

In reality, Lehman’s demise was simply the result of an unfolding crisis that began years before. Popular belief aside, allowing the institution to succumb to the overwhelming debts on its balance sheet was perhaps the only correct decision made by government since this crisis began. The propagandists’ complete reversal of cause and effect now threatens to spur the government to compound prior mistakes and bring on the next phase of the financial crisis. Unfortunately, this chapter will likely be much more dangerous than what we saw last fall.

In March of 2008, in the aftermath of the Bear Sterns “bailout” (which itself was a major mistake), equity shareholders walked away with a generous ten dollars per share, all creditors were made whole, and most employees got jobs and bonuses from JP Morgan. As a result of this largess, the Fed created a very serious problem for itself. After Bear, the perception took hold that investment banks were too “interconnected” to fail. The resulting moral hazard decreased the financial stability of the banking system and exposed taxpayers to open-ended risks. The Bush administration rightly determined that a message needed to be sent that Bear was an isolated case, and that capitalism still held sway on Wall Street. The fall of Lehman, which was helped along by the unrealistic recalcitrance of its chairman Richard Fuld, would be that clear signal.

However, politics quickly trumped economics, and the Lehman trial balloon soon turned into the Hindenburg. Washington had no stomach for the ensuing financial carnage, and when other institutions began to topple, Bush, Paulson and Bernanke abandoned their prior convictions and threw all they had into the ensuing bailout bonanza. As a result, the moral hazard that they had sought to avoid now exists on a scale unprecedented in our history. Capitalism has been extinguished on Wall Street, and our financial institutions now exist as public utilities. The presidents of our biggest banks are now the highest paid civil servants in the world!

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The American Conservative has posted an except of Ron Paul’s new book End the Fed in which Paul gives a short history of our nation’s monetary policy and how the Fed came to be. Then of course he goes on to explain why the Fed is the #1 culprit in why our currency has lost 95% of its value in the past 95 years.

But how much do we really know about what goes on inside the Fed? Even with the newest round of bailouts, journalists had difficulty determining where the money was coming from and where it was headed. From its founding in 1913, secrecy and inside deals have been part of the way the Fed works.

It says that its job is to keep inflation in check. But this is like the car industry claiming to control road congestion. The Fed might attempt to stop the effects of inflation, namely rising prices. But under the old definition of inflation—an artificial increase in the supply of money and credit—the reason for its existence is to generate more, not less.

The banking industry has always had trouble with the idea of a free market that provides opportunities for both profits and losses. The first part, the industry likes. The second is another matter. That is the reason for the constant drive in American history toward the centralization of money, a trend that not only benefits the largest banks with the most to lose from a sound-money system, but also the government, which is able to use an elastic system as an alternative form of revenue support.

Whenever instability turns up, we see efforts to socialize the losses, but rarely do people question the source of instability. Economist Jesús Huerta de Soto places the blame on the institution of fractional-reserve banking. This is the notion that depositors’ money in use as cash may also be loaned out for speculative projects, then re-deposited. The system works as long as people do not attempt to withdraw their money all at once. In the face of such a demand, banks turn to other banks to provide liquidity. But when the failure becomes system-wide, they turn to government.

Read the full excerpt here, and then purchase the hardcover version of End the Fed for only $12.09 here.

Here is the video from MSNBC’s “Morning Joe” of Peter Schiff officially announcing his bid for Senate in Connecticut. Everyone seems to be focused on his potential opponent Chris Dodd and overlooks the fact that he must win the GOP primary first. He’s not even the front runner in the primary…. yet.

by John Browne – Senior Market Strategist, Euro Pacific Capital

Readers familiar with my views know that I believe that the current stock market rally is a bullish chapter in an otherwise bearish novel. In the spring of this year, I had said I would not be surprised if the Dow were to hit 10,000 by the end of summer. While I was a little too optimistic on that particular forecast, it now looks as if U.S. stock markets are a bit ‘toppy’ and a reversal may be in the cards. Seven factors, five tactical and two strategic, cause me to see a change in the wind.

Tactically, the employment situation, falling house prices, tight credit, a sliding U.S. dollar and depressed world trade are cause for deep concern. But as these factors could show rapid changes over the short term, I am less inclined to set my investment bearings by these readings. More troubling are the two strategic issues, the continued creation of excessive debt in the United States and the continued growth of consumer spending as the overwhelming driver of U.S. gross domestic product (GDP). In order for a bull market in U.S. stocks to be sustainable, these problems must be brought to heel. However, making a dent in these imbalances would require the sort of political courage that is vanishingly rare in D.C.

***

For the tactical investor, the following portends a coming correction:

Unemployment

Recently, Wall Street cheerleaders seized on the falling rate of unemployment growth as a sign of economic recovery. In July, the official figures showed unemployment increasing by some 216,000. If this were a reflection of reality, it would be a sign of possible improvement. However, the often-ignored figure for employment, as opposed to unemployment, showed some 980,000 less people employed, or 4.5 times more than the unemployment figure!

How could these two vitally important totals differ by some 764,000? The short answer is that the government excludes from the unemployment figures all those who have given up hope of finding a job and all those who have settled for part-time jobs. In other words: if you have stopped looking for a job, congratulations, you are no longer unemployed! So much for government statistics. The true level of unemployment has been estimated at 20 million, or double the official figure.

Home Prices

In recent days, reports have emerged to show that home prices have stabilized. Given the dismal fundamentals of the real estate market, we had projected that national home prices would have needed to fall an additional 20 percent from current levels in order to return to the Case-Schiller 100-year trend line. But given the massive and continued Federal involvement in every facet of the home buying process, there is nothing at all ‘fundamental’ about home prices today. Absent this intervention, prices would continue to fall. Since the federal treasury does have its limits, the outlook for real estate subsidies, and therefore the entire sector, is still negative.

Tight Credit

Despite reckless federal efforts to boost liquidity, credit remains tight. This reality is the market’s own discipline signaling that the fundamentals remain unsound. Meanwhile, the Fed is inhibiting liquidity to shore up the money center banks by, for the first time, paying interest on bank reserves it holds. The banks thus have little incentive to lend to small businesses, the largest job creators, or to individuals. As an aide, this may also be serving to hide the effects of the Fed’s currency expansion by slowing the velocity of new cash.

Collapsing Dollar

Meanwhile, for Americans, the plummeting U.S. dollar is forcing up the price of most commodities, despite decreased demand. This stagflation is a dangerous recipe not only because it neuters any attempt at policy manipulation of the market, but because it hits the underemployed and unemployed with rising prices for everyday goods.

***

While some investors fixate on the symptomatic issues above to determine their strategy, we choose to focus on the underlying malady itself. Keeping your eye on these unfortunately static conditions will provide a solid point of reference by which to navigate:

Conspicuous Consumption

The Obama Administration has shown no appetite for allowing consumers to reign in their spending habits. So, consumption still accounts for some 70 percent of American GDP. Where individuals have tried to reduce spending and increase savings, stimulus programs and quantitative easing have overridden their gains. Indeed, President Obama’s massive expenditure plans for health and educational entitlements will serve to magnify this crucially damaging strategic imbalance.

Exploding Debt

Finally, contrary to election promises of “change,” the Administration shows no signs of controlling its expenditure and massive debt. Indeed, the ill-advised wars fostered by President Bush in Iraq and Afghanistan continue to drain blood and treasure. This Administration appears set to continue its predecessor’s mission of unending debt expansion.

***

Due to our failure to restructure, America is finding it harder and harder to compete globally. Instead of taking our lumps, Washington is lashing out with suicidal measures like this week’s Chinese Tire Tariff, an ominous prelude to next week’s Pittsburgh G-20 meetings.

And the markets just don’t get it. Technically, S&P profits are down some 90 percent, but the Index has risen to push P/E ratios to levels not seen since 1929. The financial media’s cloying banter about ‘green shoots’ is reminiscent of “Baghdad Bob,” the comically delusional Iraqi information officer who denied the advances of American forces even as U.S. tanks overran Saddam’s headquarters.

Some talk of a “jobless recovery.” In the past, such an event could only occur when an asset boom (such as a real estate bubble) provided Americans with non-employment income. Today, there is little prospect of such a boom.

Stock markets tend to reflect financial hope. Given today’s situation, investors might be wise to prepare themselves for economic reality by investing selectively in more prudent economies abroad.

For a more in-depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar, read Peter Schiff’s 2007 bestseller “Crash Proof: How to Profit from the Coming Economic Collapse” and his newest release “The Little Book of Bull Moves in Bear Markets.” Click here to learn more.

More importantly, don’t let the great deals pass you by. Get an inside view of Peter’s playbook with his new Special Report, “Peter Schiff’s Five Favorite Investment Choices for the Next Five Years.” Click here to dowload the report for free. You can find more free services for global investors, and learn about the Euro Pacific advantage, at www.europac.net.

Ron Paul appeared on MSNBC’s “Morning Joe” this morning to promote his new book “End The Fed” (although he didn’t really get a chance to do so) and the general state of economic affairs America. Joe points out how right Ron Paul was when he predicted the economic crisis in 2003.

This is another great educational appearance by Ron Paul. As one of the Youtube commenters stated, “This is the one video that needs to be forwarded to your family members.”

Joe asks Ron Paul, “What did you know in 2003″ that no one else knew? Check the video out below for Ron Paul’s answers.

Alan Greenspan has been dubbed “The Maestro”, but of what? He became what he once despised. He “sold out”. He’s the geeky kid who just wanted to have all the cool kids like him. So he did what they wanted rather than what was morally responsible.

It turns out he was not much more than the architect of the housing bubble which contributed greatly to the economic mess we are suffering through right now. He was the maestro of moral hazard.

Greenspan’s successor, along with his partner in the Treasury are traipsing down the same path. Bernanke and Geithner are the Dukes of Moral Hazard. Bernanke is Luke and Geithner is Bo.

While they tinker with the economy (General Lee) they are making life hell for the rest of us. We are a bunch of Rosco P. Coltranes to them.

What is this moral hazard that I speak of?

Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.

So the Dukes continue their bailouts, money printing, and money laundering just to keep the moral hazard government-sponsored Ponzi scheme afloat.

Meanwhile the dollars we are left with purchase less with every passing day. This is how our dearly beloved government can utilize the hidden tax of inflation to raise taxes. And they can do it without major public scorn since most do not understand that inflation is as evil a tax as the income tax.

There are a few things we can do to help people understand. First, make sure you contact your representative and request they cosponsor HR1207 or S604 to audit the Fed. Next, read Ron Paul’s newly released book, “End the Fed“. It will give you a deeper understanding of The Federal Reserve and arm you with persuasive arguments for abolishing it. Paul effectively ties the Fed to the general persistent growth of government and its intrusion in our lives.

With the Fed around there is no such thing as “limited” government. Government is a perpetual growth industry.

Aren’t we tired of this constant heavy hand regulating us into oblivion? It is high time for the people to stand up and regulate the government.

That would be change I could believe in.