Liberty Maven

by Michael Pento, Senior Economist at Euro Pacific Capital (www.europac.net)

Civil revolt is currently spreading across the Arab world. What began in Tunisia has now metastasized into Bahrain, Egypt and Libya. Though two dictators have been ousted, the chances that these regimes will fundamentally transform from autocracy to a system of free markets and property rights are also up in the air. An important question is whether or not Saudi Arabia will eventually get into the mix; and, if so, whether the current struggle in Libya would morph into a proxy war between Saudi Arabia (Sunni Muslims) and Iran (Shiite Muslims). It remains to be seen whether the new regime in Egypt-whatever form it ends up to be – will allow Iran to use the Suez Canal to parade warships across the Mediterranean Sea and into Syria. If so, what would Israel’s reaction to such a perceived provocation be?

There are many unknowns, but what is known is that the turmoil has had an immediate and significant impact on the price of oil. WTI is now trading just below $100 a barrel and Brent Crude is already well above the century mark. If the unrest does indeed spread to Saudi Arabia – which produces 12 million barrels of oil per day and is the second largest producer in the world – mainstream analysts have made some wild predictions about how high the oil price could reach. Rising energy prices will further cripple the third world, which has already been placed under extreme pressure from skyrocketing food costs.

Read More »

Quote of the Day: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” — Tenth Amendment to the Constitution of the United States of America

The Federal State has no constitutional authority for involvement in education. This alone should be sufficient reason to abolish the Department of Education and all federal education spending. But there are also two other powerful reasons . . .

* Federal education programs don’t work. Instead, they actually cause harm.
* The Federal State is headed toward bankruptcy and needs to cut spending.

Statist schools don’t work because they have no incentive to perform adequately. Unlike businesses in the Voluntary Sector of the economy, Statist schools can’t be fired or replaced by the people they supposedly serve.

This is the nature of Statism. It constantly compels the masters (citizens) to serve the servants (politicians and bureaucrats). As a result . . .

You’re now spending more than twice as much for the Feds to meddle with education as taxpayers did in the 1970′s, but student performance hasn’t improved.

Instead, costs have soared. For instance . . . Read More »

About half-way through Rand Paul’s new book, “The Tea Party Goes to Washington“, makes me realize that he is trying to really put liberty back into the Tea Party as it was meant to be from the beginning. Making the media rounds yesterday and today, he is spreading that sweet message of freedom like his father. He is scheduled to be on Late Night with David Letterman tonight as well as Hannity’s TV show. Yesterday he was on ABC’s Good Morning America, Nightline, and Hannity’s radio show.

Here is his GMA appearance:

Here is his interview with Hannity on the radio:

Go, Rand, go.

Rand Paul appeared on Fox and Friends yesterday to discuss the budget and his patriotic and constitutional position on opposing the extension of the PATRIOT Act.

by Michael Pento, Senior Economist at Euro Pacific Capital (www.europac.net)

To counter the increasing demands that government reduce its micromanagement of the economy, last week the Obama Administration offered a fig leaf in the form of a white paper entitled “Reforming America’s Housing Finance Market.” In addition to marking the official end of the Bush era “ownership society,” where increasing the level of home ownership was a national priority, the document contains a recommended regulatory overhaul of the Federal Housing Authority (FHA) as well as Fannie Mae and Freddie Mac (together known as Government Sponsored Enterprises “GSE’s”), that intends to bring the share of government owned home loans from the current 95% to 40% over the next 5-7 years.

In the report, the Obama Administration makes the important admission that government interference in housing had dangerously distorted the market. And, while the goal of reducing the government’s footprint in the housing market is certainly laudable, the reform plan is not only too little too late, but fails miserably to address the nucleus of the problem. Even if all the recommendations are adopted, the government would actually extend its explicit guarantees to bail out failing lenders. Most importantly, the proposal completely overlooks the most significant government distortion of the housing market: the Federal Reserve’s manipulation of interest rates. Thus, this plan will insure that government’s role in the mortgage market will likely expand in the years ahead.

Read More »

Ron Paul was interviewed yet again earlier today, this time by Larry Kudlow on The Kudlow Report.

Here is an excellent appearance by Ron Paul on MSNBC’s “Morning Joe”. Fiscal responsibility, foreign policy of Obama, and more is discussed. Ron Paul at one point bluntly calls Barack Obama a warmonger.

Here is Ron Paul discussing his CPAC straw poll victory with Fox and Friends this morning. This is a really good interview as he is able to articulate his own positions and is not interrupted when doing so. He even takes a retaliatory shot, although a bit indirect, at Donald Trump.

Here is video of Rand Paul’s excellent speech at CPAC 2011.

by John Browne, Senior Market Strategist at Euro Pacific Capital

This week, the financial media celebrated as the Dow closed above the 12,000 mark for the first time since June 19th, 2008. For many, this milestone is another sign that the financial nightmare of the past three years will soon fade in the rearview mirror.

The euphoria over share prices has been bolstered by recently released data which catalogs rising consumer confidence and spending, and corporate earnings reports that have beaten estimates. In the meantime, the bond markets have remained resilient, despite evidence of massive public debt problems that bubble beneath the surface. But is this optimism based upon enough sound evidence to support long-term investment?

The recovery in the Dow, to within some 15 percent of its all-time high, should not be much of a surprise to our readers at Euro Pacific, nor should it count as a mark of confidence to anyone. We have always held that ultra-low interest rates distort the investment landscape by forcing yield-starved investors from bonds into equities. Driven by this massive government subsidy, along with a high real rate of inflation, the stock market cannot help but rally. Indeed, the only surprise is that our current rally took so long to develop.

The rally even appears to be immune to the uncertainties created by the unrest in Egypt, which is arguably the largest global political crisis we have seen since the invasion of Iraq in 2003. The big question is: can this rally be trusted for the longer-term? Three factors highlight the risks.

Read More »