Earlier today Ron Paul did what he does best: Hammered central government/economic planning during a House committee hearing. He then gets to ask Ben Bernanke a few questions on interest rate manipulation. Unsurprisingly, Bernanke claims the problems were due to not enough regulation rather than admit that regulation was the cause of the problems.
“Central Banking is an art.” -- Bernanke
Near the end of the 2nd clip both men get to the heart of their differences:
Bernanke: “You are a gold standard, er, uh…”
Paul: “I’m for the Constitution.”
by John Browne – Senior Market Strategist, Euro Pacific Capital
The world is currently in the eye of an economic hurricane. The leading edge of the storm, which made landfall in the second quarter of 2008, raged until the first quarter of 2009, and nearly demolished the world’s financial system. By sand-bagging with trillions of freshly-printed paper currencies, fudging accounting rules, subsidizing key financial houses and markets, and calming the masses with half-baked rhetoric, a worldwide collapse was averted.
But the calm is deceptive.
Because of the lull, Western governments have allowed our structural deficits to fester. Now, their spokesmen are predicting sunny skies for the foreseeable future. The Federal Reserve Chairman speaks of “exit strategies” and President Obama asserts that his stimulus package has prevented a second Great Depression. This inability to see past the horizon means our politicians have squandered our final chance to build sturdier shelters in advance of the hurricane’s trailing edge.
Ron Paul appeared on MSNBC’s Morning Joe this morning for nice long segment. The hosts, for the most part, heaped praise on Paul for his CPAC straw poll victory, energizing young people, and his steadfast fidelity to the free market and limited government.
by John Browne, Senior Market Strategist, Euro Pacific Capital
At a time when more and more offices are going paperless, governments in most of the developed world are doing the opposite. Finance ministers from Washington to London, Tokyo, Madrid, and, most pointedly, Athens, are attempting to paper over gaping financial chasms in the global economy by issuing ever greater quantities of currency and debt. But paper can only stretch so far.
The key problem facing the western world is the 80-year decline in central banking discipline. In truth, these banks have become little more than the private piggy banks of their parent governments. Often furtively, central banks have “bought” ever larger amounts of government debt, which has allowed a consequence-deferred spending spree. The result has been decades of apparent economic growth and prosperity.
To close these gaps, it is widely agreed that governments need to curtail spending, but that inclination is nowhere evident. In a television appearance last week, former Fed Chairman Alan Greenspan explained the predicament bluntly: “[Public] spending is untouchable.”
It is increasingly evident to ordinary Americans that big government demands big spending, financed by big taxes and big issues of government debt, ultimately cleared by big printing presses. They want it stopped, but the politicians won’t budge.
by John Browne – Senior Market Strategist, Euro Pacific Capital
As a former army parachutist with a bad head for heights, I recall standing in the doorway of an aircraft while my jumping instructor shouted: “Don’t look down!” He understood that my unease with parachuting combined with the sight of thousands of feet of open air could be enough to elicit panic. Many investors in today’s American stock and bond markets appear to be getting the same advice. While in my predicament, I had a parachute and a rudimentary understanding of how to use it, I fear that American investors have nothing to break their fall.
Looking down from the lofty nominal heights of today’s American stock and bond markets, there is cause for real concern.
Congressman Ron Paul talks about Tim Geithner’s testimony at the January 27, 2010 hearing on AIG. Even though Dr. Paul received unanimous consent to question Geithner during the hearing, time was cut short and he was not able to do so.
Ron Paul appeared on CNBC this morning for a long segment focused on economics and the Federal Reserve. Paul Kanjorski appears with Paul and plays the part of the Fed apologist in the segment. Ron Paul gets pretty feisty during his arguments, in a good way. Thanks to Minnesota Chris for the video.
John Browne – Senior Market Strategist, Euro Pacific Capital.
Having been among the economic engines of Europe for much of the past decade, it appears as if the British economy has run out of steam. Inflation is rising while bankruptcies and unemployment continue to swell. It is a problem that would have left Lord Keynes’ head spinning. In many ways, the responses of the U.S. and U.K. governments to the financial crisis have been very similar. So far, the American advantages in size and reserve currency status have allowed us to avoid the storm-clouds now descending upon Britain. But these advantages only provide a temporary respite. In the meantime, the slow-motion collapse in Britain offers a glimpse of our own future – and a chance to prevent it.
The history of the United States and the United Kingdom are closely linked in almost every essential manner, from culture to defense to economics. This is hardly surprising because the Founding Fathers were basically British subjects who wished to restore the traditional liberties they were guaranteed in the mother country.
After the Revolution, America went its own way with enhanced freedoms that led to unprecedented prosperity. Most interestingly, the American Constitution was quiet on the subject of central banking. Two early efforts to imitate the British central bank were withdrawn. But in 1913, Congress eventually agreed to establish the Federal Reserve, which persists today as America’s central bank.
Many economists trace America’s economic decline to the activities of the Fed, in particular to the printing of massive amounts of fiat currency unsupported by the gold and foreign exchange reserves held by the central bank. It is a systemic fraud previously committed in Great Britain. But why would a country’s leadership pursue such a dangerous course?
Watching the world’s leaders stumble their way through the economic crisis, it often feels as if political success and economic understanding are mutually exclusive. Even the Chinese, who over the past generation have engineered a dramatic turnaround from their Maoist economic nightmare, show a remarkable willingness to pursue a monetary policy (a currency peg to the U.S. dollar) that yields no benefit to their citizens. Amid this morass of economic quackery, it is refreshing to see a clear ray of sanity emanating from one country: Poland.
Last summer, I was invited to speak at the Economic Forum in Krynica, a resort town in Southern Poland. I was amazed at the level of economic activity and civic spirit that was on display throughout the country. I also was fairly surprised that my economic views, which are routinely ridiculed at home, have much wider support among the Polish economic officials who presented at the conference.
This common sense understanding was showcased in an opinion piece published this week in the Financial Times by Polish Finance Minister Jacek Rostowski. Contrary to the public flogging of the free market currently underway in Washington, under the auspices of the Financial Crisis Inquiry Commission, Rostowski explains how governments caused the Crash of 2008 by removing the necessary element of fear from the markets. He states that this was symptomatic of the “deep Keynesian project,” in which governments over the last half century have looked to smooth the economic cycle through periodic floods of monetary expansion and government spending. I couldn’t have said it better myself.
Today, Venezuela’s Hugo Chavez announced it has devalued the bolivar against the dollar by 50%, despite recent highs of $84 in the oil market per Bloomberg. Chavez’s United Socialist Party is struggling to maintain its reckless spending. In 2009, Venezuela reported an inflation rate of 27%. Despite the historical angst between America and Venezuela, the country remains a key exporter of oil to the United States. (Photo courtesy Kevin Hotaling)
Americans should realize that our country is not immune to a massive currency devaluation. In fact, the last one took place during the middle of the Great Depression when FDR stole the people’s gold and devalued the dollar by almost 70% overnight. It is obvious that the central bank and Congress prefer reckless spending if it can be managed with a slow but accelerating depletion in purchasing power from 1980-2009 as I demonstrated in “The Real Interest Rate” so the populace does not notice the extent of the theft.
Liberty Maven
by John Browne – Senior Market Strategist, Euro Pacific Capital
ecent articles from the campaign have included “
