Liberty Maven

This morning Ron Paul and his son Rand Paul appeared on CNN discussing health care, Rand running for Senate, and other topics. Watch the appearance below.

http://www.youtube.com/watch?v=INtoIkn0k28

Rand Paul, son of Ron Paul, announced his candidacy for the U.S. Senate yesterday on the Neil Cavuto show. There were reports he would announce on the Glenn Beck show but that didn’t work out. He also appeared on Happy Hour on the Fox Business Channel along with Peter Schiff and Judge Napolitano discussing why he’s running as a Republican vs. an Independent as Cody Willard wishes.

He is also scheduled to be on with Glenn Beck this morning on Beck’s radio show.

I’ve said this before, but the more I see and hear Rand Paul the more I like him and think he’d be a wonderful addition to the U.S. Senate. Don’t forget to pledge and donate during the RunRandRun money bomb on August 20th.

Here is his announcement on Fox News Channel with Neil Cavuto:

http://www.youtube.com/watch?v=zGWy-dPATRM

Here is his appearance on Happy Hour:

http://www.youtube.com/watch?v=u9rtlL4nq3c

And if you’d like a more in-depth interview see this interview with Rand’s local ABC affiliate:

http://www.wbko.com/video/?autoStart=true&topVideoCatNo=default&clipId=4018317&flvUri=

by John Browne – Senior Market Strategist, Euro Pacific Capital

In recent weeks, the financial world has been dazzled by strikingly high earnings reported by our leading investment banks… or at least what we used to call investment banks. The numbers are reminiscent of another era – the one that came to a crashing end last September. Today’s euphoria was keyed to the record $3.44 billion 2nd quarter profit announced by that branch office of the Treasury Department also known as Goldman Sachs. Wells Fargo, JP Morgan Chase, and State Street also chipped in with strong numbers.

The seeming health of these institutions, which are often referred to as the “backbone” of the U.S. economy, is currently being cited as strong proof that economic recovery is at hand. This conclusion is based on selective memory and dubious logic.

The more immediate question hinges on whether this rise in bank and corporate earnings can be sustained in the face of increased commercial real estate mortgage defaults, rising unemployment, and increased savings? Would it then be likely that the broad stock market can continue to rally while the financial sector sputters? If not, a serious correction in U.S. equity prices is a foregone conclusion.

In the early years of this century, major money-center banks and shadow banks incurred irrational risks and paid themselves unimaginably large bonuses. They were termed “gambling casinos” and deservedly drew fire when their bets went south. But instead of forcing these irresponsible firms to pay for their bad behavior, the federal government forced the general public to rescue them.

The Treasury and Fed instituted four key measures intended to boost the banks’ earnings, which in turn, would boost their share prices, improve their capital ratios and force their share prices upward.

First, Congress was pressured into giving instant approval to the $750,000,000,000 Troubled Asset Relief Program (TARP). This massive sum of public money was designed to buy toxic assets from the banks. However, the government soon realized that buying some toxic assets would create a real price and thereby threaten the inflated value of other toxic assets held by financial institutions worldwide. The initial TARP plan was dropped in favor of injecting billions of dollars into certain banks, leaving the toxic assets on their books. Meanwhile, the true values of these toxic assets were officially camouflaged by the initiation of “exceptional” accounting changes.

The injection of free TARP funds enabled the recipient banks to enter a charred landscape that was, nevertheless, bristling with easy profits. For example, $10 billion of TARP funds enabled Goldman Sachs to make leveraged trades during the bear market rally of the last four months. Though this is the same activity that caused its downfall, Goldman now assumes a government guarantee on its risk-taking. With no limits on their appetite for risk, record profits are theirs for the taking.

Read More »

Here is Ron Paul’s quickly delivered opening statement during the Federal Reserve hearing today. Chairman Barney Frank told him he had 2 1/2 minutes, but ended up giving him three.

Paul hammers home the idea that if we use non-government statistics for determining unemployment the rate is around 20% not the already high 9.5% the government would have us believe. He also talks about the skyrocketing debt.

“Net U.S. debt is now 372% of GDP. In the crisis of the 1930’s it peaked at 301%.”

http://www.youtube.com/watch?v=pSRvnXtrmtE

by John Browne – Senior Market Strategist, Euro Pacific Capital

Bad for the Goose, Worse for the Gander

Last week, major banks announced they would no longer offer cash for the IOU’s written by the state of California. At the same time, China proposed that the U.S. dollar be replaced as the world’s official reserve currency. Although seemingly unrelated, these two developments have at their root the same issue: uneasy creditors.

Inspired by Washington’s profligacy, California’s Democratic majority long pursued a policy of populist politics, supercharged by referendums, which called for increasingly massive expenditures. Exploding deficits were the natural result. Now, it has reached the point where holders and potential buyers of California debt have lost confidence in the state’s ability to ever repay.

Ever since President Nixon severed the dollar’s link to gold in August 1971, the U.S. has embarked on a monetary policy that has been both a blessing and a curse. The blessing was found in the dollar’s reserve status, which allowed for monetary flexibility that no other country could attempt. But therein lay the curse, as gross economic imbalances were allowed to grow unaddressed. Our currency’s exportability obscured the fact that our government spending was financed largely by inflation and debt.

It appears that California politicians assumed that they could follow the same model. They began to authorize massive expenditures on freeways, schools, universities, and parks. In their thirst for votes, they introduced a vast array of referendums on entitlement issues. This is quite unlike Switzerland’s successful forays into direct democracy, which restricted referendums to election laws and constitutional matters. Absent limits to their purview, California voters inevitably granted themselves new benefits from the public purse, financed by increased taxation and debt. This led to ever higher voter demands and a dramatic rise in real estate values.

In imitating the example of Congress, California’s politicians made one crucial error. Like the Administration, they could tax and borrow. But unlike Washington, California could not print money.

Recently, California’s politicians have realized that there are limits to taxation, and even debt levels. The real estate recession has hit California particularly hard, while rising unemployment and bankruptcies have reduced the local tax base significantly.

The resulting deficit has scared bond buyers. Creditors were further alarmed when President Obama expressed his unwillingness to divert federal aid to California. Unable to finance its expenditures, California has effectively tried to issue its own currency in the form of IOU’s. But banks are now refusing them.   Read More »

I was perusing the Federal Budget recently, and I had sort of a knee jerk reaction to most of the items I saw.  Keep in mind, what I propose below is only a starting point, and it is in no way meant to be a “final draft”.  I’m extremely interested in your input!

1st draft tax plan:

1. GIVE AWAY AMTRAK.  Privatizing CONRAIL worked, this will too. Savings: $1.4 Billion annually. Privatizing it also has the effect of generating tax revenues, as private ownership will make it profitable.
2. Sell (at a minimum) 1/2 of all land owned by the Federal Gvt.  “We the people” currently own an estimated 999,390,920 acres, about 44% of ALL US landmass.  By the way, the Bureau of Land Management has no idea how much land it (we) own(s) anymore. Sell for $500/acre, generating $499,695,460,000, yep, that’s almost $500Billion.  Besides, why does the Federal Gvt need all that land?  Why are they aquiring more every day?
3. Eliminate the Department of Education.  Savings: $178 Billion annually.
4. Eliminate the Department of Agriculture. Savings: $124 Billion annually.
5. Bring ALL troops home, including closure of all foreign military bases (we don’t need troops in Europe and Japan. . .), estimated annual savings: $325 Billion (half the annual budget).
6. Cut the Deparment of Health and Human Services.  Thanks so much for telling us to wash our hands to avoid the pig flu!  Common sense costs us: $71 Billion annually.  They administer Medicare and Medicaid also, both complete failures that are underfunded (and we want to Nationalize healthcare? – we’ve already proven we can’t manage it!), which constitutes $666 Billion annually.  It, as should social security, be a voluntary, not mandatory, system.
7. Eliminate the Department of Homeland Security (this can be taken care of in our normal military budget).  Savings: $44 BN
8. Cut Department of Housing and Urban Development in half at a minimum.  There’s $300 MN in there for housing for persons with AIDS, enough to buy 1,500 homes for $200,000 each.  Savings $105 BN
9. Cut Department of Labor in half at a minimum, savings: $27 BN
10. Cut Department of State in half at a minimum (we fund foreign military to the tune of $5 BN a year, and disburse loans to foreign governments in the amount of $15 BN – which we’ll never get back).  Savings: $35 BN.
11. Eliminate, at a minimum, the entire IRS, as you’ll see reasoning for below, from the Treasury Dept, saving $11 BN

Total Savings / Earnings: $1.422 Trillion

12.  Eliminate graduated scale federal income tax and replace with fair tax based on purchases – no tax on food, at all!!  Set Federal fair tax rate @ 10% max (we could delve into this more and probably wriggle it to 8% or less).  Total sales taxes (when including local) capped @ 20% (I don’t think any local ST is over 10%, is there?).  Furthermore, you don’t need a complicated system to file returns, etc.  You make your purchase, you’re done.  Businesses file sales tax returns, this would just be one more line.

Read More »

D o w n s i z e r – D i s p a t c h

Quote of the Day: “We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.” — Daniel Webster (1782-1852), US Senator Source: speech in the Senate, 1833

What was the purpose of this $9 trillion? Who got how much, and why did they get it? No one knows. Congress doesn’t know, and neither does the Inspector General charged with monitoring the Fed, as you can hear for yourself in the video embedded in a blog post by David Theroux of the Independent Institute.

Likewise, neither Congress nor the Inspector General knows anything about the profits or losses the Fed may have experienced from the $2 trillion that is reported on its balance sheet.

Add up the numbers — the Fed has done things in your name with $11 trillion. This is only a few trillion shy of the total annual gross domestic product of the United States. It’s also several times the total annual spending of the federal government.

Would it be an exaggeration to say that the Federal Reserve has become a shadow government, several times the size of the entity that’s supposed to be our real government? If we can judge by the resources involved then we would have to answer yes. The Federal Reserve seems to be disposing of more of your wealth than even your cancerous elected government does.

But apparently, neither you nor the people you elected is even allowed to know what the Fed is doing, let alone exert any control over it. This is a strong argument in favor of Congressman Ron Paul’s bill to audit the Fed — the Federal Reserve Transparency Act of 2009 (HR 1207).

There’s good news in this regard. HR 1207 now has 200-cosponsors, which is 46% of the entire House of Representatives.

But there’s also bad news. Read More »

Ron Paul was interviewed on Montel Williams’ radio show this morning. They discuss fascism, Obama’s support of PayGo and a few other topics.

D o w n s i z e r – D i s p a t c h

Quote of the Day: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” — John Maynard Keynes Source: “The Economic Consequences Of The Peace”

* The amount of new money the Fed has created is roughly $107 billion more than all the money that was in circulation just a year ago
* In other words, the U.S. money supply has more than doubled

Think about what this does to the value of your dollars, to your savings, to your paycheck, to your retirement income? A doubling of the money supply means your money is worth half what it was.

Of course, your money’s loss of value won’t manifest itself overnight. It will take time for the Fed’s counterfeiting to drive up prices. But those who get the new money first will be able to spend it while prices are still low, increasing their wealth at your expense.

The Federal Reserve, as you might expect, promises that prices won’t rise. They claim they’ll withdraw their counterfeit money before that happens. Do you feel comforted? Should we really believe that…

* The Fed can really undo so much counterfeiting
* The attempt to withdraw the counterfeit dollars won’t cause economic disruptions of its own

And if they did sop up their funny money, wouldn’t that mean another “contraction?” …more unemployment? …other sectors in trouble and screaming for a taxpayer-funded bailout?

Our position is simple. If it’s wrong for individuals to counterfeit, it’s also wrong for the government to do it. What we need is money that no one can counterfeit, like gold and silver. Some people want to make this happen by abolishing the Fed. We agree. That needs to happen. But it’s a big step. We think there’s an easier way…

Read More »

If you’ve been following the actions of the Federal Reserve, the Treasury Secretary, and big spenders in government, it’s quite clear that our economic woes won’t be over any time soon.  In fact, we’re potentially headed for a cataclysmic disaster (if that’s not repetitively redundant enough for you).

The Fed has lowered interested rates to effectively zero, and is now embarking on massive quantitative easing (a fancy euphemism for printing money) which could ultimately result in the destruction of the U.S. Dollar.

China is buying less and less of our bonds, and foreign governments are holding less and less dollars in favor of the Euro or other currencies, and there are even calls to have the dollar replaced as the world’s reserve currency.

US Treasury Secretary Timothy Geithner has gone to China to calm the fears.  However, even before he arrived, a Chinese central bank spokesman gave Geithner the message that the US should not assume China will continue to finance Washington’s extravagant budgets.  The governor of China’s central bank is calling for the abandonment of the dollar as reserve currency, using the International Monetary Fund’s Special Drawing Rights in its place.

The method by which the Fed “prints money” is by creating money out of thin air and then uses this money to buy our own Treasuries.

Washington’s financial irresponsibility has brought pressure on the dollar and the US bond market.  Federal Reserve Chairman Bernanke thought he could push down interest rates on Treasuries by purchasing $300 billion of them.  However, the result was to cause a sharp drop in Treasury prices and a rise in interest rates.

As monetization of federal debt goes forward, US interest rates will continue to rise, worsening the problems in the real estate sector.  The dollar will continue to lose value, making it harder for the US to finance its budget and trade deficits.  Domestic inflation will raise its ugly head despite high unemployment.

The incompetents who manage US economic policy have created a perfect storm.

…

Life for most Americans will become truly stressful.

No sunshine and lollipops here.

Read As the Dollar Falls off a Cliff… by Paul Craig Roberts in its entirety.