Liberty Maven

by Peter Schiff, president of Euro Pacific Capital and author of Crash Proof 2.0: How to Profit from the Economic Collapse

The GDP numbers out yesterday, which showed economic growth at 3.5% in the third quarter, brought a deafening chorus from public and private economists who all agreed that the recession is officially over. With such a strong report, they are happy to tell us that not only has the Fat Lady finished her aria, but she has left the building and is sipping champagne in the bath. As usual, it falls on me to rain on the parade.

Even the giddiest commentators admit that the upside GDP surprise resulted almost entirely from government interventions. But, by pushing up public and private debt, expanding government, deepening trade deficits, and pushing down savings rates, these interventions have succeeded only in putting our economy back on an unsustainable path of borrowing and spending. Accordingly, they have prevented the rebalancing necessary for long-term health. Could there be a simpler illustration of trading long-term pain for short-term gain?

Rather than asking these pre-K economists to make such a three dimensional leap, it may be easier just to give them a brief history lesson.

During the decade that corresponds to the Great Depression, annual GNP expanded for six years and contracted for four. After nose-diving in the early years of the decade, GNP turned positive in 1934 and then logged three more years of solid growth (the four year average annual growth rate was 8.5%). But does anyone really believe the Great Depression ended in 1934, when the economy first stopped contracting? Unemployment reached 19% in 1938, nearly the peak of the entire Depression, almost a full decade after the stock market crashed! Why will we be so much luckier this time around?

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D o w n s i z e r – D i s p a t c h

“The State is that great fiction by which everyone tries to live at the expense of everyone else.” — Frederic Bastiat, French economist of the 19th Century

“How did I go bankrupt? Two ways. Slowly, and then all of a sudden.” — paraphrased from “The Sun Also Rises” by Ernest Hemingway

“May you live in interesting times.” — a proverbial Chinese curse

• Retained, and in some cases expanded, all the Bush-era policies — the wars, the PATRIOT Act, warrantless spying, REAL ID, imprisonment without due process, extraordinary rendition, etc.
• Begun to extend the already existing foundations for a future socialist state with things like direct government ownership of businesses, the health care bill, cap and trade, and a host of other measures big and small

Put the Bush and Obama policies together, sprinkle in a couple more terrorist attacks, and one or two more state-caused financial calamities, and you have a recipe for . . .

• The destruction of American liberty
• The blossoming of a Leviathan State

Read the signs . . .

We are living through a Statist revolution.

Statism is a mindset that prefers coercion to cooperation. Statists love the State because they are blind to its fundamental nature . . .

• The State is a monopoly that you cannot easily fire, replace, or even control
• Everything the State does relies on coercion

If you decide that . . . Read More »

by John Browne – Senior Market Strategist, Euro Pacific Capital

Over the past two years, the federal government and the Federal Reserve have dispersed trillions of public dollars, run up enormous deficits, and kept interest rates at zero. In just about any economic textbook, this combination of policies would be described as the perfect recipe for inflation. Yet, with the exception of the usual increases in health care and education, prices by and large are not rising. Many have concluded that our economic leadership has simply outsmarted the textbooks.

The benign CPI figures are serving as a rallying point behind which the financial talking-heads are forming a parade of optimism. The low CPI is their ‘proof’ that inflation is not a pressing concern. This view is two dimensional.

Inflation is classically described simply as an increase in the money supply. Although these changes will impact price levels, it doesn’t necessarily follow that prices will rise when inflation is high. Instead, inflation may merely result in stable prices at a time when prices would otherwise be falling.

In the popular mentality, however, inflation is simply defined as prices rising. After decades of steadily rising prices, people seem to have forgotten that prices sometimes fall. In light of the bursting of a number of record-breaking, government-fueled asset bubbles, prices should be declining across the board (as they did in the Great Depression). The fact that prices are stable, or have even rallied in some sectors, indicates that inflation is already spreading across the economy.

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Immediately after Barack Obama won the election last November I published an article revealing my own rather cursory investigation of former New Mexico Governor Gary Johnson. I wanted to know more about him because I thought he had the potential to be a viable liberty-loving Presidential candidate in 2012. While I did discover some potential chinks in his armor, I concluded with the following:

It would be very difficult for me to not support Johnson if he were to run for President in 2012. As of right now, In my view he is the best positioned candidate to carry forward the message of liberty within the Republican Party. He may not be perfect on specific issues here or there, but Ron Paulians would be hard pressed to find another Republican candidate with his record and political viability. He served as a Governor for eight years. He didn’t raise taxes as Governor once. He promoted private business and free markets over government corporatism and regulation. Finally, and perhaps most pertinent, he enthusiastically endorsed Ron Paul for President.

There has been very minimal evidence for a Johnson 2012 bid until now. Jason Pye at UnitedLiberty.org reports that Johnson has formed a PAC and is set to release a book in December entitled “Seven Principles For Good Government”.

A few web sites have been set up by supporters in an effort to coax Johnson into running for President such as JohnsonForAmerica.com.

With this latest news it appears that Johnson is warming up to jump in the fray. I can see it now at the first GOP primary debate sometime in 2011:

Fox News Debate Moderator: Governor Johnson, you’ve been an outspoken critic of the drug war and support the decriminalization of marijuana. These positions don’t seem like Republican positions. This raises questions about your electability. Do you have any sir?

Gary Johnson: Who am I, Ron Paul?

Let us hope so, but this time, let us hope he wins.

D o w n s i z e r – D i s p a t c h

We’re pleased to welcome BJ Lawson to the pages of the Downsizer-Dispatch as a Commentator.

Here’s BJ’s first call to action . . .

Your success promoting the Audit the Fed bills has scared the banking cartel into offering a fake alternative, the so-called Federal Reserve Accountability Act (S 1803).

Please send Congress a letter opposing S 1803, and favoring the real Audit the Fed bill, S 604.

You can use my letter to Congress as a guide to your own . . .

I want my Senators to oppose S 1803, and support S 604 instead. I also want my House Rep. to reject any attempt to foster a bill similar to S 1803 in that chamber.

S 604 would perform a real audit of the Federal Reserve, but S 1803, the so-called Federal Reserve Accountability Act, would actually help the Fed avoid accountability! It would . . .

* Severely limit the scope of any audit,
* Set unreasonable time-frames that will delay or postpone certain audits indefinitely,
* Permit some audits to be performed only one year after a program has been terminated.

Give me a break!

It should be perfectly obvious to any reasonable person that active Federal Reserve programs need the most accountability. And what about programs that are never terminated? Focusing audits on terminated programs is like closing the proverbial barn door after the cow is gone, while giving on-going programs a permanent pass.

Frankly, it seems to me that S 1803 is a fraud designed to preserve the status quo while fooling some Americans into thinking you’ve enacted a real reform. Where did this idea come from anyway? The banking lobby?

You politicians constantly claim that citizens who aren’t doing anything wrong have nothing to fear from their government. Well, if the Federal Reserve isn’t doing anything wrong then it too has nothing to fear. S 1803 actually enhances my suspicion that the Federal Reserve is probably doing lots of bad things!

The cure for this is transparency.

The self-serving political claim that Federal Reserve transparency would disrupt the financial markets is simply wrong. Financial markets require honesty and transparency for the efficient allocation of capital, and for systemic stability. The lack of transparency for Federal Reserve actions is actually the source of market disruption, and creates constant chaos in our international financial relationships.

Please audit the Fed! And make sure it’s a real audit, not a fake one.

Believe me, I’m paying close attention to how you represent me.

END OF SAMPLE LETTER

You can send your letter to Congress using the DownsizeDC.org Educate the Powerful System.

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“All that is necessary for evil to succeed is for good men to stand by and do nothing.” - Edmund Burke

My rebuke to House Speaker Nancy Pelosi and my comments on the Constitution and federal powers of Congress in regards to health care and the “Commerce Clause.”

Originally published October 26, 2009 at http://towneforcongress.com/economy/to-nancy-pelosi-on-health-care-are-you-serious-1

Last week, the U.S. Speaker of the House, Nancy Pelosi, responding to a reporter’s question of whether the Constitution gave Congress the authority to enact individual health insurance mandate, kept repeating, “Are you serious?”

Now, let’s give Speaker Pelosi the benefit of the doubt and attribute her impolite reply to simple disbelief. In fact, from her point of view her authority is unchallenged per a September press release, and many others such as Politico’s Erwin Chemerinsky and even the contemporary Supreme Court agree. From her press release, Pelosi states:

“The Constitution gives Congress broad power to regulate activities that have an effect on interstate commerce. Congress has used this authority to regulate many aspects of American life, from labor relations to education to health care to agricultural production. Since virtually every aspect of the heath care system has an effect on interstate commerce, the power of Congress to regulate health care is essentially unlimited.“

The Speaker is certainly correct that federal Congress has certainly legislated on “many aspects of American life.”  In fact, there is a lot more at stake with the Commerce Clause than “just” our health care – the entire authority for economic central planning rests on this single clause. I strongly disagree with Pelosi that the Constitution allows Congress broad power in this respect. First, the exact language from my job description in Powers of Congress, Article I, Section 8, Clause 3:

“The Congress shall have Power… to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”

Pelosi believes that she has the power to “regulate Commerce… among the several States” and I suggest that in blunt language she instead literally means to “control the economy… of the States.”  Pelosi and her ilk accomplish this by confusing the modern meanings with the legal meaning and contemporary context of the founders.

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D o w n s i z e r – D i s p a t c h

by Peter Schiff, president of Euro Pacific Capital and author of Crash Proof 2.0: How to Profit from the Economic Collapse

For the most part, the value of the dollar is given cursory attention by the financial media. Typically, its movements are assigned an importance on par with much less determinative metrics such as natural gas futures and construction permits. It’s only when major milestones are reached that anyone really takes notice of the dollar. We are living through one of those times.

The great dollar rally of 2008-2009 has come full circle. When the financial crisis exploded in its full ugliness in mid-2008, the dollar, which had steadily declined over the previous four to five years, put in a rally for the record books. By March 2009, as investors across the world sought safety from the financial storm, the index had surged more than 25%. Since then, the dollar has steadily declined to the point where nearly all those gains have vanished. In short, the panic rally has given way to the long term trend.

So, as the dollar index makes fresh 52-week lows on a nearly daily basis, discussion on the greenback is heating up. And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions – both of which are wrong.

The first camp, which is generally supportive of government intervention in the economy, argues that dollar’s decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar’s decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore ‘King Dollar’ to its throne.

First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars.

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D o w n s i z e r – D i s p a t c h

However, the bill also included a provision to cover-up the prisoner abuse crime we told you about last week.

This cover-up provision couldn’t have passed on its own merits. That’s why the Congressional leadership attached it to the completely unrelated DHS funding bill.

We must force Congress to stop combining unrelated legislation into one bill. Protest what they did with the cover-up measure and tell your representatives to introduce and pass DownsizeDC.org’s One Subject At A Time Act (OSTA).

Here’s what I wrote in my personal comments . . .

The Homeland Security Appropriations Act (H.R. 2892) is a perfect example of why we need OSTA. The prisoner abuse cover-up law it contained had absolutely nothing to do with the funding or activities of the DHS (Department of Homeland Security).

Those opposed to the cover-up measure had an ethical responsibility to oppose the bill as a whole. There was no urgency to pass this bill. Congress could have funded the DHS at current levels with a continuing resolution. That’s why I think a vote for H.R. 2892 was really a vote for the prisoner abuse cover-up.

Those who voted for this bill failed in their duty to uphold the law. Those who failed to protest the inclusion of the cover-up bill in unrelated legislation are likewise guilty. But it gets worse . . .

Jameel Jaffer notes that this law also paves the way for my government to hide nearly everything related to military activities during the Bush years.

I also believe this cover-up will put our troops in greater peril than if the photographic evidence of prisoner abuse was revealed. America’s enemies will say that . . .

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D o w n s i z e r – D i s p a t c h

Our own James Wilson has analyzed this issue on our blog.

The good news is that President Obama isn’t going to Copenhagen to sign a treaty, but he may sign a proposal that could lead to a treaty at a later date. The Copenhagen proposal is designed to create an international scheme to control carbon emissions (and the entire world economy in the bargain).

President Obama wants to have the “cap and trade” (cap and tax) bill passed before he goes to Copenhagen.

Our goal should be to send him to Denmark empty-handed.

Cap and trade should be defeated because . . .

• It hasn’t worked in Europe
• It probably isn’t the best way to control carbon emissions, assuming you believe that’s important
• The climate models that supposedly justify cap and trade have been consistently wrong

Cap and trade needs 60 votes to come to the floor in the Senate. If we can stop that from happening now then there’s no way that 67 Senators will come together later to ratify a treaty for the same purpose, especially if that treaty cedes American sovereignty to international organizations.

We must defeat cap and trade. We must send Obama to Denmark empty-handed.

Please send Congress a letter opposing cap and trade.

You can use my letter to Congress as a guide . . .

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