Liberty Maven

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and our wealth are in jeopardy.” – Dr. Ron Paul

Originally published October 16, 2009 at http://towneforcongress.com/economy/liberty-candidates-2010-the-year-of-hope-1

Ever wonder what happened to that sense of hope and change that most of the voters in the United States were swept up by last fall?

America does need “hope.” America does need “change.”

However, the mainstream Republican and Democratic party machines are both repeating like bad records – “more spending, more taxes, more war, more debt.”

If you flip the record, all you hear is “less liberty, fewer jobs, less prosperity.”

Why doesn’t America consider a sound money and slashing federal spending?

Why doesn’t America consider auditing and cutting back the powers of the ruinous FED?

Why doesn’t America consider destroying the IMMORAL and UNNECESSARY federal income tax?

Why doesn’t America consider a different foreign policy – where there is third choice besides bombing or economic sanctions? Why not replace the blowback our foreign policy has resulted in with a little love and peaceful trade?

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It wasn’t that long ago that it was considered unthinkable that our government, with all its confiscatory taxes at various levels (local, state, federal) would also impose a national sales taxes on all goods, but that’s exactly what’s being proposed at the highest levels.  They are desperate.  Get ready to pay more.

NEW YORK (CNNMoney.com) — President Obama has been steadfast in his pledge that he won’t raise taxes on those making less than $250,000. But that doesn’t mean only high-income households will be subject to higher taxes.

An increasing number of influential Democrats and fiscal-policy experts have signaled that lawmakers will have to get a handle on the deficit. And they recommend seriously considering the creation of a value-added tax (VAT) on top of the federal income tax.

That could mean more money out of everyone’s pockets when buying virtually anything — sweaters, school books, furniture, pottery classes, dinners out.

A VAT is tax on consumption similar to a national sales tax. But it’s not just paid at the cash register. It’s levied at every stage of production. So all businesses involved in making a product or performing a service would pay a VAT. And then the end-user — such as the retail customer — ponies up as well.

Continue reading the article at cnn.com.

Slides 4-36 of the below presentation have been presented to several groups around the district for educational purposes.  Although you are missing my critical narrative and explanations, I invite you to take a look.  If you do disagree or find something new, check my sourcing and citations.

While the hour-long presentation is of course only a snapshot, or a look at the critical pieces of puzzle, I emphasize the importance of the gold market, and view the housing crisis as merely a symptom of the causes – excess FED inflation and artificially low interest rates that were held too low for too long.  The irony is not lost that currently the FED interest rates is roughly 0.15%, far lower than previously.   In the interests of time and for simplicity, I omitted the Treasury market almost entirely – just a brief mention in the slide on the national debt.  The Treasury market is definitely also quite critical.

Jake Towne for US Congress PA-15 – The Financial Crisis (WEB) (Sept 2009)

Jake Towne for US Congress PA-15 – The Financial Crisis (WEB) (Sept 2009)

D o w n s i z e r – D i s p a t c h

Share this message with friends: http://www.downsizedc.org/blog/another-success-milestone-for-audit-the-fed

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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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.

by John Browne – Senior Market Strategist, Euro Pacific Capital

Politicians often find scapegoats for America’s economic woes. It is rare – if ever – that they point the finger at themselves. Yet, the basic cause of the current severe economic problem lies in the machinations of government.

It is clear to even a casual observer that Congress has abused its power to tax and spend. It has taxed success to subsidize failure. It has purchased votes by enacting an unending stream of entitlement programs, financed by taxation, foreign debt and a progressive degradation of the U.S. paper dollar.

This cynical boosting of consumption at the expense of production has resulted in the American consumer now accounting for some 70 percent of United States GDP. By consuming three times what it produces, America has become the largest debtor in history. The Administration now forecasts annual deficits of trillions of dollars for the next decade. This is all the direct responsibility of Congress.

The executive branch is also to blame. Under President Bush II, the United States entered a Global War on Terror, with a mission so ambiguous it was almost sure to bankrupt its executor. To this day, and despite campaign pledges to the contrary, President Obama continues to waste massive amounts of blood and treasure on two fatally flawed wars in Iraq and Afghanistan and on maintaining over 1,000 military installations in 135 countries abroad. No one should forget that the assumption of an international military role depleted the wealth of Rome, Great Britain and the former Soviet Union.

But at least the Republican president slashed domestic spending to compensate, right? Actually, Bush II passed cherry-picked tax cuts for special interests and spearheaded a new prescription drug program for Medicare recipients, at a cost of some $40 billion per year. This was a capstone of sorts to a century-long experiment in entitlement and intervention.

This federal spending went from a drag on the economy to a true albatross by the 1970s. After former Fed Chairman Paul Volcker and Ronald Reagan courageously bought our currency a new lease on life, Alan Greenspan was given the helm at the central bank. Colluding with Presidents Clinton and Bush II to simulate economic growth for political gain, Greenspan, and his chosen successor Ben Bernanke, unleashed a torrent of new dollars into the banking system, where they were leveraged to finance the largest asset boom in history.

We are now in the process of deleveraging from this boom. It is painful, but it represents an opportunity. A government genuinely interested in economic restructuring could be focusing on cutting spending, lowering taxes, and reducing corruption, instead of playing ‘pin the blame on the capitalists.’

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“The banking industry… can look forward to better times ahead.” – FDIC Chairwoman Sheila Bair, August 2009.

Originally published August 27, 2009 at http://towneforcongress.com/economy/fdic-we-arent-bankrupt-and-everything-is-a-ok

In my last piece, “The FDIC is Bankrupt”, I reported that the Deposit Insurance Fund (DIF) that the FDIC uses to insure banking deposits was negative following the $2.8 billion August 14th failure of Colonial Bank in Alabama. However, today the FDIC released it’s latest quarterly report and reports the DIF is not yet depleted and I was incorrect. To achieve this feat, the FDIC assessed “special assessment fees” of $9.1 billion and the bailout program, Temporary Liquidity Guarantee Program (TLGP), added $1.1 billion to the DIF. Special assessments in the past have been rarely used since the early 1990s – in 2008 Q2 just $0.6 billion was raised, and in 2006 Q2 the total assessments were just $0.007 billion.  (photo)

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by John Browne – Senior Market Strategist, Euro Pacific Capital

Despite growing concerns about the growth in Federal spending, voiced this week by none other than Warren Buffett, Washington seems determined to keep its foot on the money pumping accelerator for as long as it can. But even though Washington continues to ignore the realities, alarm bells are beginning to ring at town halls across the country.

Last week the Fed left its key short-term rates frozen at 0 to 0.25 percent, enabling banks to borrow at near zero and reap spreads as high as 6 to 24 percent. The Fed also continued its policy of paying interest on banks’ reserves, further boosting Wall Street’s bottom line. The government has decided to save the banks, no matter how much the public has to suffer.

Worse still, the Administration has been largely silent over the obscene bonuses paid by banks to the very executives whose ‘casino’ mentality caused a financial crisis that the IMF now estimates has cost the world some $7 trillion. At financial firms that have received bailout money, it has been estimated that thus far in 2009 bonuses paid to executives have exceeded profits.

However, with the pedal still hitting the metal, the Fed has begun to discuss plans of a so called “exit strategy” that would pave the way toward higher interest rates.

These statements of economic neutrality were based upon the Fed’s impression that the recession is ending. But the Fed has not yet taken any meaningful actions to curb its potentially inflationary policies.

For now mere words are enough to encourage American stock markets, but only briefly. More recently, U.S. equity investors gradually are facing up to the fact that, while stock prices rose recently by some 45 percent, earnings, although “ahead of estimates”, have fallen by almost 30 percent, despite savage cost cutting and deep inventory depletion. The more important top line revenues have fallen by about 15 percent and free cash flows are tumbling in response.

The public, who feel the vicious bite of ‘real’ 20 percent unemployment (rather than the official rate of 9.8 percent), are becoming increasing distrustful of big government and deeply resentful of its increasing grasp of their lives. The cracks are beginning to show.

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Yesterday Treasury Secretary Tim Geithner asked Congress to raise the debt ceiling again. Right now it is at $12.1 trillion which could be exhausted by October, according to Timmy. Not surprisingly his justification is absurd:

“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations”

America overdrew it’s credit card a long time ago yet this lunacy continues. Imagine being maxed out on credit cards to the tune of $12 trillion then calling your credit card company and asking them to raise your credit limit. Effectively this is what Tim Geithner is doing. Congress should laugh in his face and trip him when he walks away.

Of course, Congress will likely listen to him. They adore raising America’s credit limit because it means their lobbyists get more stuff. Congress and Geithner are child abusers. They are breaking piggy banks over the heads of our children and taking their money.

We are teaching a new generation that hard work doesn’t pay… unless the recipient is the government.

We don’t need to free our dependency on foreign oil. We need to free our dependency on domestic government.

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

There is an inexplicable, but somehow widely held, belief that stock market movements are predictive of economic conditions. As such, the current rally in U.S. stock prices has caused many people to conclude that the recession is nearing an end. The widespread optimism is not confined to Wall Street, as even Barack Obama has pointed to the bubbly markets to vindicate his economic policies. However, reality is clearly at odds with these optimistic assumptions.

In the first place, stock markets have been taken by surprise throughout history. In the current cycle, neither the market nor its cheerleaders saw this recession coming, so why should anyone believe that these fonts of wisdom have suddenly become clairvoyant?

According to official government statistics, the current recession began in December of 2007. Two months earlier, in October of that year, the Dow Jones Industrial Average and S&P 500 both hit all-time record highs. Exactly what foresight did this run-up provide? Obviously markets were completely blind-sided by the biggest recession since the Great Depression. In fact, the main reason why the markets sold off so violently in 2008, after the severity of the recession became impossible to ignore, was that it had so completely misread the economy in the preceding years.

Furthermore, throughout most of 2008, even as the economy was contracting, academic economists and stock market strategists were still confident that a recession would be avoided. If they could not even forecast a recession that had already started, how can they possibly predict when it will end? In contrast, on a Fox News appearance on December 31, 2007, I endured the gibes of optimistic co-panelists when I clearly proclaimed that a recession was underway.

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