The movie is set in 2016 as the United States is on the brink of economic disrepair, eerily paralleling the current U.S. economic crisis. Young executive, Dagny Taggart, runs one of the largest remaining railroads. To save the railroad from financial ruin, Dagny seeks out entrepreneurial industrialist Henry Rearden, whose super-strength metal holds the promise of the future.  As government interference cripples economic growth, the country’s most competent and productive workers systematically disappear, expanding the realm of government influence and control. Dagny fights back against the growing influence of socialism.

Below you will find a short Q&A with Harmon Kaslow, producer of the film:

Q: Can you provide some opening comments about Atlas Shrugged: Part 1?

A: We are extremely proud of Part 1. We put together an amazing team and had an incredible experience adapting the novel. We learned a lot through the process and are very excited about proceeding with Part 2.

Q: Did the production time impose any constraints on the film? Were there any things you wished you could have done but weren’t able to?

A: John Aglialoro’s journey from acquiring the rights in 1992 to financing the production in 2010 is a fascinating story that is consistent with the novel’s themes of individualism. This is one of America’s greatest novels, yet no one but John had the courage to finance its production. So we had to proceed as an independent production and use our limited financial resources wisely. We also had a ticking clock that forced us to start production prior to June 15, 2010 or risk losing the rights. All the while, we had in our hearts a desire to adapt faithfully the book into a movie that would be entertaining and true to Ayn Rand’s message. Given these variables, my focus was on getting all of the moving parts that go into producing a motion picture in place so that the production team had what they needed to remain as faithful to Ayn’s vision as possible under the circumstances. John and the rest of the team were supportive and up to the challenge. We’re never going to be able to please everyone but one thing we know for sure: we did what everyone said was absolutely impossible – MADE ATLAS SHRUGGED INTO A MOVIE. Opinions vary but again, we are extremely proud of Part 1 and have every intention of making a great Part 2.

Q: Was the film tailored at all to tap into recent political events?

A: We wanted to adapt faithfully the book. So when you see things relating to what’s happening today, those are events that we thought could occur. What’s interesting is that many of the events we thought might happen … are happening. You have to go back and remember what the world was like in April/May 2010 when we were writing the screenplay. While there were conflicts in the Middle East, the implosion we’re experiencing now was not happening. The book is prophetic, and if you understand its message and add a bit of creativity and thought, Brian O’Toole and John Aglialoro, the screenwriters, did an excellent job in setting the foundation and context of where and when the events in our adaptation were taking place and gave us an authentic view of what the near future might look like. We dated the film September 2, 2016 and many of the things we projected might happen are happening now. A lot of these things are coming to fruition a lot sooner than any of us expected, which shows that Atlas Shrugged remains an incredibly relevant piece of literature.

Q: Do you think the message is crucial given our current political and policy environment?  

A: When it comes to the politics of Atlas Shrugged, the message really hits a wide group of people who believe that self reliance is the key to happiness and true liberty. This is about a movement back to the role of reason in human life, and the role of government and the citizen. I believe the movie does a great job of illustrating the power of the individual.

Q: Do you believe that Rand was actually prescient or just possessed a preternatural understanding of human behavior?  

A: Ayn Rand was not born in America. Apparently, she had some life-changing experiences in Russia before coming to America which inevitably impacted and shaped her view of this great country and all that it offered. She had experienced, first hand, a different form of government, which most likely affected her view of the role of the government and the individual. She seemed to have a very sound understanding of America’s greatness. It seems like immigrants see the opportunities we tend to take for granted and she saw that opportunity was being quashed by the government and was courageous enough to tell us a story that would inspire us to not stand idle and let it happen.  What’s important to John and me is that the movie inspires people to read the book.

Q: How do you respond to critics of some of the Rand’s more salacious beliefs — her atheism, the extra-marital affairs, the “greed” — all of which appear to have been represented in the film?

A: We feel no way about Ayn Rand being an anything. We are very proud to have the opportunity to bring Ayn Rand’s magnum opus to the silver screen. It’s an incredible honor that we take very seriously, and we hope to do her justice. When John and I embarked on producing Part 1 staying true to book was of primary importance. So, there was never any reason to explore Ayn Rand’s personal position on the issues you mention above. More importantly, I think people of faith will find that the film, like the story, emphasizes cardinal virtues such as self-reliance, integrity, honesty, strength of character, liberty and justice.

Q: What has been your response to the Atlas Shrugged reviews?

A: We believe the successes and failures of Part 1 are entirely on us. We are extremely proud of the work we did on Part 1. We had an amazing team, and it was truly an incredible experience. We’re never going to be able to please everyone but one thing we know for sure… we did what everyone said was absolutely impossible – MADE ATLAS SHRUGGED INTO A MOVIE. Opinions vary but again, we are extremely proud of Part 1 and have every intention of making a great Part 2.

Q: With the upcoming elections in 2012, do you believe the film can provide any guidance for Americans?

A: Absolutely, Ayn Rand’s core message really revolves around respecting the rights of the individual – that’s where I think voters will find a real connection between the book and their political beliefs.

Q: Ayn Rand’s thoughts, as conveyed in Atlas Shrugged, have caused debate and discussion around the world and next to the Bible it’s one of the most widely sold books.  Why do you think it’s so important for the book to become a movie and for people to see it? 

A: These films are our best hope for bringing Ayn’s view to a culture that has never needed it more. Since 1957, Atlas Shrugged has inspired those who are intent on rationally living their lives for their own sake and, in the process, bettering the world around them. Since today’s generation gets most of their messaging from visual and sensory presentation rather than from the written word, this generation is ripe to experience the morality of individual responsibility and achievement through the medium of film.

Q: What would satisfy you most in terms of reception for the DVD/Blu-Ray release of the film?

A: People get their friends to watch the movie and then they buy the book and their lives are changed for the better.

Q: Will there be an Atlas Shrugged Part 2?

A: Without question. We know there’s been a lot of speculation as to whether or not we’d continue – all of it due to our own mixed messages – but I can tell you now, beyond a shadow of a doubt, we are fully committed on every front to getting part 2 done. It’s all systems go, and there’s no turning back.

by John Browne, Senior Market Strategist at Euro Pacific Capital

Earlier this month, J.P. Morgan made an important announcement that received scant coverage in the media: the bank would now accept gold as collateral for loans. The move appears to have been well-timed, for in the ensuing weeks, the price of gold and silver climbed steeply, based largely on political turmoil in the Middle East. But why should Morgan’s decision be of interest to anyone outside the bank?

It can be argued that J.P. Morgan is the world’s premier major bank. As such, its decision to accept gold as collateral offers a rare glimpse into the very private financial decision-making of some of the largest and most sophisticated investors in the world, whether governments, corporations, or wealthy individuals.

By reopening its former gold vaults in New York, as well as new facilities in Far Eastern financial centers – which cater to investors who typically have larger gold reserves than Western counterparts – Morgan is telling the world that gold is gaining greater traction as a medium of exchange.

Given that a bank continually looks to provide services that its clients demand, the move suggests that a strategy has taken hold among the highest echelon of investors based on core holdings of precious metals.

Readers of this column know that Euro Pacific has long advised that defensive, long-term investors allocate a portion of their portfolios to precious metals. The reasons could not be more fundamental. Major central banks are in the midst of a campaign of prolonged currency debasement that transfers wealth from prudent individuals to socialist governments with massive debts. To help avoid this hidden tax is to hold savings in something other than fiat currencies.

Apparently, some important Morgan clients agree, and, as a result, many have assembled huge positions in gold – often counted in tons, not ounces. Given the size of these otherwise idle positions, it was perhaps only a matter of time before some holders looked to employ their gold as collateral for cash loans. It is logical to assume that some of the loan proceeds are being used to purchase attractive assets with good yields and upside potential. There is little evidence that holding gold as collateral causes any anxiety to risk managers at J.P. Morgan. Indeed, given the current monetary drift, a vault full of gold should offer far greater confidence than a vault full of paper.

For years, we have forecast stagflation, or a combination of serious inflation and economic depression, for the US. We have described how massive central bank cash infusions have created the conditions for runaway inflation. While the cash injections may have averted a corrective depression in the short-run, they have left a staggering debt cost for future generations.

In the meantime, the world continues to resist cooperation with the Fed’s best laid plans. Flash revolutions in the Middle East threaten to disrupt world oil supplies and send gasoline prices higher. There is great concern that higher energy prices will sap what little vitality there is in the developed economies. Any renewed erosion of consumer confidence could herald a double-dip into depression, even the hint of which would convince Western governments to flood the world once again with more massive injections of paper.

This cycle can only end in catastrophe. Morgan’s embrace of gold is a solution for survival. The strategy is one that our readers know well.

by John Browne, Senior Market Strategist at Euro Pacific Capital

Following the huge gains made by Republicans in the midterm elections, it was widely expected that President Obama would use the State of the Union address to signal a major policy shift toward the center of the political spectrum. On the surface, at least, he appeared to do just that, hinting that he took budget management very seriously and that Americans should be prepared for shared sacrifice. However, as the final applause still echoed in the House chamber, many astute pundits were left trying to make sense of the many contradictory policy prescriptions the President proffered.

Classical political maneuvering dictates that when clouds are grey, politicians must offer good news, tell jokes, and remind us warmly of our childhood (or in Obama’s version, America’s triumph over Russia in the Space Race). Disclosure of specific measures should be avoided at all costs. President Obama followed these tactics closely.

While he did address plans to cut non-defence, discretionary federal spending – a small fraction of the overall budget – the President also announced his intention to increase spending on several existing and new initiatives. The scope of the new initiatives will surely eclipse the modest cuts pledged.

The President was careful to refer to all his spending plans as “investments.” The word is used in order to illicit a pleasant feeling among voters who instinctively favor capitalism over socialism, not because any thinking person expects these resources to be better allocated than they would have been by the market. Governments don’t make investments because they aren’t subject to profit-and-loss feedback. Governments provide public goods for which no profit can be measured or expected – or else we would just have the private sector take care of it. This disingenuous use of the word investment disguises the fact that the President simply intends to borrow even more money to spend on public-sector jobs.

The essential point is that while jobs in the private sector create wealth, public sector jobs actually consume wealth. When I was a Member of the British Parliament, I represented a county that spent the least amount per pupil on education of anywhere in the entire country. Yet, the achievement level of the students was by far the highest. It was vivid proof that it is not the amount of money that is crucial to success, but the quality of the spending. If the President were to lower taxation, cut the number of government regulations, and replace a political atmosphere of uncertainty with one of certainty, he might stand a chance of reviving wealth creation.

More seriously, the President made no mention of the massive debt problems facing US state governments, such as California and Illinois. The potential eruption of these debt and currency problems could well dominate investment strategies for 2011.

Yesterday, the Congressional Budget Office issued a highly embarrassing assessment that the federal deficit for 2011 would rise from the previously projected $1.1 trillion to $1.48 trillion. At a stroke, this nullified the President’s debt reduction plans. The CBO also pointed out that Social Security posted a $45 billion deficit in 2010 and will bleed more than $600 billion over the next ten years. I assume these estimates to be conservative. It is clear that the President, and the rest of Congress for that matter (with the possible exception of Congressman Paul Ryan whose austere recommendations have been ignored by most of his fellow Republicans), are dancing around the bonfire of our sovereign credit and hoping that their twirls will distract us from the conflagration.

Also yesterday, the Federal Reserve’s policy statement claimed that its massive stimulus plans are working, and that it will maintain both QE II and near-zero rates well into 2011. If the economy were indeed improving, as Messrs. Bernanke and Obama claim, why would the Fed and the Treasury need to keep administering life support? Clearly the White House and the Fed have little confidence in their own assertions; so, how should average investors react to more promises which are highly unlikely to be kept?

Rather than buying into Washington’s scripted recovery propaganda, investors should focus on the bottom line. Low interest rates are distorting the value of money and the key investment relationship between risk and reward. One side effect is that investors are being incentivized to favor equities over fixed income. A lack of viable alternatives has likely played an unsung role in supporting the current stock market rally.

Investors would be well-advised to retain a jaundiced view of all political statements, especially those of central bankers and politicians positioning themselves for the next election. In 2011, investors should focus their eyes not on the sky, but at the brick wall our Union is fast approaching.

But nowhere is this new crusade more evident than in the Mainstream Media’s newly-concocted premise that the Tea Party was responsible for Republican losses in the Senate. Christine O’Donnell, Sharon Angle, and Ken Buck were all puppets of the Tea Party and all losers at the ballot box, so they got theirs. Ha-ha!

Nevertheless, if one swallows the Mainstream Media’s thinking, it must then follow that the Mainstream Media itself was responsible for the Democrat losses in the House. While Tea Party miscalculations might have contributed to Republican defeats, it appears that Keith Olberman’s secret Democrat donations, Chris Matthew’s thrill up his leg, and the open bias seen in the body language of news anchors of the Top Three television networks all worked together to defeat the Democrats pulling Nancy Pelosi’s rickshaw.

But what a spectacle America was treated to in the days before November 2nd and what a comparison between these two competing titans: if the Tea Party was strident, the Mainstream Media was shrill; if the Tea Party was energized, the Mainstream Media was dour; if the Tea Party looked away from the establishment, the Mainstream Media was the establishment; if the Tea Party labored for free, the Mainstream Media feasted off campaign advertising revenue; and if the Tea Party fought for the freedom inherent in capitalism and democracy, the Mainstream Media worked to enforce the enslavement built into big government and socialism.

The Tea Party represented the spirit of independence that wrested this country from wilderness and brutality, the Mainstream Media represented the sloth and oppressiveness of the British Monarchy.

Given the choice, was it really the Tea Party which lost in this election or the Mainstream Media?

He’s so similar to George W. Bush, and in some cases worse (drone bombing fetish?), on foreign policy that I expect to hear him start mis-pronouncing the word “nuclear” any day now.

He, like his fellow progressives, believes government is the solution to all the problems of the world. Will it take someone hurling a shoe at him to wake him up to the fact that the government doesn’t have such a great track record when it comes to solutions? That probably wouldn’t work. He’d just accuse the shoe-thrower of being a Right-wing extremist and/or a Tea Party racist and/or a domestic terrorist and/or a misguided soul who has been brain-washed by “my opponents” to believe that government is the problem.

Then he may calm down a bit and suggest that perhaps he just needs to explain things better so the stupid peasants that live around his DC castle and beyond understand that the proper role of government is to be involved in every aspect of their lives.

For instance, let’s investigate the health welfare individual mandate.

Virginia (my home state) passed a law that went into effect yesterday. The law exempts Virginians from the mandate. Virginia has also sued the federal government claiming the mandate is unconstitutional. Here is the latest on this lawsuit (from Reuters):

RICHMOND, Virginia (Reuters) – The state of Virginia and the government were pitched in a legal battle in a federal courtroom on Thursday that could lead to the undoing of the massive healthcare reform law passed three months ago.

Judge Henry Hudson of the U.S. District Court for the Eastern District of Richmond heard the federal government’s arguments to dismiss a lawsuit filed by Virginia that contends the healthcare law’s requirement that all Americans have health insurance is unconstitutional.

Before President Barack Obama signed the radical overhaul of the multi-billion dollar health insurance industry into law, Virginia’s legislature passed its own law that took effect on Thursday that says no one could be mandated to buy health insurance.

While the judge will only decide if the suit can proceed — a decision Hudson said he would render within 30 days — the court heard the first airing of arguments that could make their way to the Supreme Court as some states resist implementing the law.

States “resisting” federal law is just a modern day more politically-correct version of nullification.  There are several states participating in this effort. Virginia is not alone.

If the case is not dismissed, both sides will return to court on October 18 for a summary judgment. If it is dismissed, Virginia will likely appeal and keep the suit in the courts. Regardless, other lawsuits will proceed, including one filed in Florida by more than a dozen states. In July alone, the federal government will have to argue in court twice, once in California on July 16 and once in Michigan on July 21.

Legal analysts say there is a good possibility one of these cases will reach the highest court in the country, but most say there is only a slim chance that the Supreme Court will rule in the states’ favor.

This version of nullification, successful or not, is the best method available to fight back against federal government overreach. The question is are there enough judges with the stones to uphold these “nullification” lawsuits in the courts? I hope we all get a chance to find out.

Then Lisa Lambert, the article’s author, asserts  something that left me, a normally mild-mannered human, screaming at my computer screen in anger. Here it is:

In its argument, the U.S. government said the requirement to buy health insurance falls under the Commerce Clause, the constitutional provision allowing the federal government to regulate commerce between states. Also, the Constitution says that the federal government’s power is higher than the states’.

What?

Where in the U.S. Constitution does it say that the federal government’s power is “higher” than the states? I’m curious how many people who read that sentence will believe it is true. I’m not sure it is a blatant or malicious lie, but it is simply untrue. Then again if our lawmakers can cite the Commerce Clause to regulate any and everything under the sun maybe she’s right. Maybe the supreme law of the land in 1789 really has morphed into being just a “god-damned piece of paper” in 2010.

The Commerce Clause reads, “[The Congress shall have power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes”. (NOTE: The definition of “regulate” in 1789 was to “keep regular” or to “keep in proper functioning order”. The evidence is overwhelming that the Founders never intended for it to permit government direction and control of commerce.)

Now, “among the several States” defines the scope of the clause. It applies to interstate commerce. Since current law is such that health care is purely intrastate commerce (we can’t purchase health insurance across state lines) how can the Commerce Clause apply?

The judge deciding whether to permit the case stated his own dilemma with applying the Commerce Clause to the health welfare mandate.

[Judge] Hudson seemed skeptical of the idea that everyone in the country participates in the commerce of healthcare, saying that this could establish the paradox that a form of economic inactivity – not buying insurance – would be considered an economic activity.

This seems promising to me that the judge will ultimately permit the case to proceed. We’ll know that within the next 30 days.

The mandate is not set to go into effect until 2014. This gives any presidential candidate opposing Obama in 2012 political ammunition. All one would have to do is sign on to support Ron Paul’s bill (H.R. 4995) to repeal the health welfare mandate and then campaign on repealing it prior to it going into effect in 2014.

Imagine the GOP primary debates in 2011-2012. I envision all the GOP candidates fighting over supporting Ron Paul’s H.R. 4995 all the while Ron Paul sits back as the bill’s sponsor relaxed and ready for the next question.

It’s January of 2011 and a lone man stands on a street corner holding a sign in Ames, Iowa. The sign says, “Yes, You Will!” There is a picture of a man below those words.

It is either…

…a picture of Obama with a crown on his head and a whip in his hand.

Or a photo of a smiling Ron Paul with the phrase “run in 2012″ below the picture.

In either case, I’d be left smiling on the outside and hopeful on the inside.

First up, is the first money bomb for Rand Paul’s General election campaign. Pledge here and donate tomorrow (or beginning at midnight tonight) here. He’s going to need a significant amount of money to defend the attacks that are now coming at him from national progressives and Obamatons.

Next, it is the official release day for Tom Woods’ latest and perhaps greatest book entitled, “Nullification: How to Resist Federal Tyranny in the 21st Century“. I consider his previous book “Meltdown” one of the best economics books I’ve ever read. Given Woods’ track record his new book will be mind-opening to those willing to give it a read. The book and Tom were recently featured on Glenn Beck’s TV show about Hayek’s “The Road to Serfdom” (see the video below).

So that’s my To-Do list for Monday, June 28th, 2010. I hope it is yours as well.

httpvp://www.youtube.com/view_play_list?p=57C327D079811600

However, it is generally thought by most in society that corruption need not be a direct function of power, but rather an unfortunate coincidence of these systems of power over a period of time. As part of his best-selling Road to Serfdom (which has gained renewed interest in light of its recent feature on television pundit Glenn Beck’s show), Nobel Prize winner F.A. Hayek sought to discredit this notion of coincidence in a chapter he entitled “Why the Worst Get on Top.” In his own words, Hayek initiates the discussion in this way:

“It is the belief that the most repellant features of the totalitarian regimes are due to the historical accident that they were established by groups of blackguards and thugs … Why should it not be possible that the same sort of system, if it be necessary to achieve important ends, be run by decent people for the good of the community as a whole? … [Yet] There are strong reasons for believing that what to us appear the worst features of the existing totalitarian systems are not accidental by-products but phenomena which totalitarianism is certain sooner or later to produce.”

Those “strong reasons” were the substance of a chapter whose message can give pause to even the most well-intentioned of progressives in today’s political climate: perhaps the expansion and concentration of power attracts those who would plunder the population and take advantage of the weak in society, rather than those who would use such power for any perceived benefit. Specifically, Hayek noted three crucial points that lead socialist regimes into the hands of ruthless totalitarian dictators as a predictable consequence.

1. The person/party perceived as “strong” will be desired by the greatest number in society. By “strong,” Hayek means “able to make action quickly”; most opportunities for expansions of government power or regime changes happen due to a discontented, impatient populace. Typically, the largest group in society is the one which is in such a position to affect change in their direction; but (a) the largest group is the one that is least original and independent due to their lack of education and/or intelligence; (b) a potential dictator can most easily convert those who are docile and gullible from outside this group, further weakening the constituents who bring a leader to power; and (c) it is easier to unify people in a negative program (hatred of an enemy or envy of the rich) than any positive course.

2. All collectivist programs serve a limited group by nature. Collectivism (the opposite of individualism) groups people and treats those groups as one coherent entity. Since socialists regard capital as belonging to the nation, rather than belonging to humanity, the totalitarian program will serve the ruling elite as its advantaged “collective.” From the opposite perspective, the individuals in such a collectivist society – which, Hayek is clear, all centrally planned economies are indeed collectivist – feel inferior to those in the groups that are advantaged by the state, and will join the group if they feel that membership will confer superiority over outsiders. Consequently, these individuals are free of the many moral restraints that they feel when acting on their own behalf, because they need only act on behalf of the group (the party in power). These are the people who are naturally in position to receive leadership assignments in the party.

The most important corollary to the distinction between collectivist and individualist society is that in order to achieve the “ends” in central planning, the would-be leaders must create centralized power, which infinitely heightens that power. Hayek explicitly states that the competitive (i.e. free market) system is the only system designed to minimize, by decentralization, the power exercised by man over man.

3. Collectivist morals contrast with individualist morals. Collectivist “morals” view the ends as the only noble goals, whereas individual ethics teaches us that ‘the end justifying the means’ is the denial of all morals. Anyone in a position within the elite/ruling class must be willing to do things which are “bad” on an individual level, but good for the nation as a whole. As such, these positions attract people who are largely immoral in the individual sense to begin with.

Hayek’s three-pronged approach demonstrates why “the worst getting on top” is systematic and inevitable, rather than subject to random chance – in a socialist or communist system. However, Hayek’s analysis ends there: an effective argument against the specific form of government which he was combating in Serfdom (published in 1944 at the height of WWII), but an argument that stayed within that realm. Applying the argument against centralized power in the form of idealistic socialist/communist states ignores the bigger picture, which can be traced throughout the history of government and politics: Centralized power is, in and of itself, an attraction to the worst elements of society, regardless of the political system in which it is contained.

In his influential work Common Sense, Thomas Paine echoes Hayek’s unspoken theme, applying the corrupting influence of concentrated state power to the monarchy of England while appealing for independence:

“Sir William Meredith calls [England] a republic; but in its present state it is unworthy of the name, because the corrupt influence of the crown, by having all the places in its disposal, hath so effectually swallowed up the power, and eaten out the virtue of the house of commons … Of more worth is one honest man to society, and in the sight of God, than all the crowned ruffians that ever lived.”

Here, again, Paine conflates the power with the specific political system and ruling class with which he is familiar. A monarchy, being a system with a highly visible leader entrusted with the power of the state, is similarly affected by the influence of power as Hayek’s examples of Germany and Italy so many years later.

Today in America, we face a government that utilizes collectivism perhaps to a greater extent than did Hayek’s totalitarian Germany. We face a government which taxes us to a far greater extent than did Paine’s English crown. We face a government which has sold our rights to the highest bidding lobbyist, a government which creates laws and agencies at the whim of its bureaucratic agents regardless of its Constitutional authority to do so. And despite the best efforts of the Founders to diffuse and limit the powers of the state in America, we find ourselves facing a state with one of the most concentrated centers of power in the world: Washington, DC, the Mecca of corporatists, statists, and fascists alike. This, despite the American form of government being a republic.

Perhaps, as Paine once remarked about England, “it is unworthy of the name.” Or perhaps no entity should be trusted with the myriad duties which our government now claims as its responsibility.

But it is the difference between conservatives and those on the Left that we tend not to make horse’s rear ends of ourselves at rallies and protests. I don’t think I’ve ever read of a single conservative riot, no angry mobs of grown-ups running down the street overturning cars, setting fire to buildings, breaking windows, pillaging, and looting. But every time I see rallies on the Left, there they are obstructing traffic, breaking things, making their presence known through obscene gestures and foul language. None of that was in evidence at this day’s Tea Party protest.

We voiced our opinions on Mr. Obama, federal spending, politicians who won’t listen to us, liberty, freedom, the Constitution, you name it, we wrote it on out signs and discussed it with one another as the time passed. A finer group of people I could never find myself around. Thoughtful, opinionated, and, most importantly, intelligent.

We came, we made our point, and if the powers that be still won’t take notice of what we have to say, they’ll hear from us again this November.

by John Browne – Senior Market Strategist, Euro Pacific Capital

The bad news for Greece is that despite some help from abroad, and some attempts at internal reform, investors are still leery of the troubled state. The good news, if you can call it that, is that they will soon have company in the penalty box.

Now that investors have come face-to-face with the reality of sovereign default in the developed world, greater scrutiny will befall those countries with fiscal conditions similar to Greece. The United Kingdom is a cause of great concern, with a debt ratio rapidly approaching Greek levels. The economic challenges facing Britain are aggravated by a Labour government that is pushing the country further toward socialism. As a result, in from mid-2008 to today the pound sterling has lost some 25 percent of its value even against the US dollar. Debt and socialism are a toxic mix for investors.

When I served as a Member of Parliament, under Margaret Thatcher, freedom literally burst upon Britain. We dropped the top rate of income tax from 92 percent to 30 percent (generating far higher tax revenue); abolished foreign exchange controls overnight; and demolished socialist controls by, for example, allowing people the basic freedom to own their own telephones! A wave of enterprises sprung up and Britain once again was referred to as ‘Great,’ without causing wry smiles. Though it may be astounding by today’s standards, we instituted a public debt repayment schedule. Thereafter, sterling soared by almost 100 percent between 1985 and 1995.

Great Britain has, until the present, never experienced more than two successive socialist governments. Today, the Conservatives, who covertly support the surrender of UK sovereignty to the socialist European Union, are seen as offering little alternative to socialist Labour. Despite the appalling economic record of the current Labour government, recent polls show a serious risk of a hung parliament after this summer’s general election. Suddenly, investors face the real prospect of a fourth socialist government. This specter, combined with the massive debt and misspending of the past three administrations, has led to serious out-flows from sterling and UK government ‘gilt-edged’ bonds, or ‘Gilts.’

As in the United States, the economic problems encumbering the UK and most of Western Europe are deep-rooted. They stem from many decades of dependence on monetary expansion to ‘paper over’ fiscal irresponsibility. GDP growth has been obtained by government subsidies of consumer demand, financed by debilitating taxation of productive enterprise, unimaginable public debts and massive currency debasement.

Alas, it is also becoming painfully clear to investors that, unlike the past, the problems are now too big for the same old government remedies.

Whereas the recent first wave of recession caused individual people and companies to face bankruptcy, the looming second wave threatens entire governments. Who can bail out governments if a number of them default simultaneously? The IMF is a sort of ‘central bank of central banks,’ but it is largely backstopped by the United States. Will China, Germany, or other creditor states be willing to assume the role of global guarantor? If so, what will this mean for the sovereignty and competitiveness of the old pillars of the Atlantic?

Greece is a small economy. But its debt problems highlight fault-lines undermining the euro, and with it the socialist dream of a United States of Europe. Today, Greek ten-year bonds sell at yields north of 6 percent, nearly 300 basis points higher than similar German, Danish, or French sovereign bonds.

While Britain’s debt has become a cause for some concern, investors have drawn hope that the Conservatives would carry the coming  election and restore some semblance of fiscal order. However, recent polling has exposed the risk of a hung parliament. Suddenly, the previously unthinkable notion of a British default crossed into the realm of possibility. Ten-year British Gilts sold off to yield above four percent, a significant premium above the country’s Continental rivals.

In other words, the free market has priced in a loss of the UK’s prized ‘triple A’ credit rating, while the perennially laggard and politicized rating agencies merely issued warnings.

As we have said before, the United Kingdom, as one of the two main bulwarks of modern finance, is the figurative ‘canary in the coal mine.’ It is my belief that just as Greece preceded the UK, Britain will precede the United States along the dark and dangerous shaft of excessive debt. Although the United States is nearly five times larger than the UK, our financial difficulties are in nearly the same proportion. In many ways, problems in the U.S. may be more intractable.

Although the Federal Reserve is actively holding down the short end of the yield curve to near zero, 10-year notes are currently yielding more than 3.6 percent. If the Fed were to cease purchasing Treasuries, or the rating agencies were to become realistic, the free market would drive the 10-year into dangerous territory.

History is littered with examples showing that socialism kills enterprise. The UK and EU are largely socialist. The US is becoming increasingly so. This political trend, coinciding (unsurprisingly) with a major recession, invites catastrophe.

It is one thing for prudent, rich states like Germany to bail out small states like Greece. But few states have the ability or the will to bail out financial giants like the US, EU, or UK. If such a maneuver were attempted, it would surely drag the entire world into depression – and I don’t take the Chinese or the Germans to be that foolish. Absent a reasonable avenue for rescue, we are increasingly likely to see these formerly steady giants topple. If you’re stuck in their shadow, look out.

We have long alerted readers to the possibility and even likelihood of sovereign defaults. Once a key domino falls, collapse can be devastatingly sudden. Those heeding our warnings should be wary of socialism wherever it lurks. Be glad that darkness strikes first on the other side of the Atlantic, but be wary that are close behind.

But the more Mr. Obama talks about his plans, the worse it gets for him. The problem is that he hasn’t presented it properly. As an aid to Democrats everywhere, these are the positions they should be pushing to make this dream reality:

1) Socialized Medicine is free. I don’t know how they do it, but, by golly, nobody has to pay for it. Now if they could do something about the rising cost of cigarettes, gas, sodas, and my tanning bed treatments.

2) Socialized Medicine protects medical professionals and hospitals from extraordinary lawsuits. Right now Republicans and many physicians are  pointing out that to control medical costs, tort reform needs to be initiated to rein in the runaway costs of medical malpractice lawsuits. With Socialized Medicine there would be no need for this legislation. As the government would run the health care system how would anyone be able to sue Uncle Sam? Especially if he wasn’t in the mood to be sued. Socialized Medicine means never having to say “Oops!”.

3) Socialized Medicine covers all diseases. Time and again we see insurance companies denying care for unusual diseases or treatments. Now everything will be covered up to and including euphoria, apoplexy, and miner’s squint. And you won’t have to pay for those pills and medical devices you saw advertised on late-night TV.

4) Socialized Medicine means you will be able visiting many foreign countries. Recently Danny Williams, the Newfoundland/Labrador Premier, came to the United States to get immediate treatment for a heart condition rather than wait for treatment in Canada. As we will not be allowed to visit the United States many of us may sample the medical care in India, Mexico, Argentina, and Mongolia for quick treatment of deteriorating ailments. As many of you may say, ole!

5) Socialized Medicine will give you time to think it over. Haven’t you ever done things on the spur of the moment which you ended up regretting when you sobered up? Things like getting a tattoo, buying a Hummer, or signing up for a lifetime subscription to “Boys’ Life”. Since it will take months, perhaps  years, to see a doctor or schedule a treatment, you will have plenty of time to ponder whether you really want that gallbladder surgery, that liver transplant, that hernia operation, or that brain tumor removed. No longer will we see people who rued the day they had their gallstones taken out.

6) Socialized Medicine means more jobs for the unemployed. While real doctors may become disillusioned and leave the medical profession, this only opens the door for medical school dropouts, incompetent phlebotomists, clumsy surgeons, mediocre radiologists, unskilled nurses, alcoholic anesthesiologists, and backyard mechanics to fulfill their dream of a career in medicine. No medical degree, no problem!

7) Socialized Medicine offers incentives to stay healthy. Since the average patient may be called upon to visit a doctor as described in Reason No. 6, there will be a good reason to pay attention to one’s shape. I’d start jogging right now if I were you.

8. Socialized Medicine will improve the gene pool. Death panels, natural selection, bad luck, call it what you will but the waits and overall medical incompetence associated with Socialized Medicine will mean you will die sooner, rather than later, of your genetic ailment, thus the better off mankind will be if you don’t get a chance to procreate. Future Americans will never again see people afflicted with prickly heat, vertigo, or political idiocy.

9) Socialized Medicine will give the government something to do. Rather than raise hell with the public through IRS audits, unending bureaucratic regulation, or random airport strip searches, the government will find its hands full, day and night, creating paperwork, scheduling payments, and coming up with excuses for why no one answers the medical clinic phone at 2:00 in the afternoon.

10) Socialized Medicine will come in color or black and white. No. just yanking your Obama nose ring. Actually, it won’t but I couldn’t come up with any other reason you would want Socialized Medicine.

So to Mr. Obama and the Democrat Party, instead of using the nuclear option of reconciliation or writing up an executive order, the best way to get Americans to go along with Socialized Medicine is to tell them why they need it.

And you could also tell them it’s available, for a limited time, in tan.

Look at the facts, these days government dictates how to make a product, the government dictates what to put in a product, the government dictates shipping methodology if the U.S. Postal Service is used, the government dictates working conditions with OSHA, the government dictates minimum pay for employees and who to hire with EEOC laws, the government dictates salaries and bonuses for management in some industries, and, at the end of the day, for its efforts, the government will be on hand to collect its fair share of the company’s profit through taxation if a company is fortunate enough to make a profit on its transactions.

Now the government wants to dictate to companies what they will charge for their products. 

What decision making is left for a company under this administration? Helping pick the color of tablecloths in the company mess hall?

This proposal will be the final nail in the de facto take-over of American business. And it neatly avoids the messiness and expense of actually having to buy or run companies ala General Motors or AIG. Free companies! What socialist politician wouldn’t be giddy with excitement over the prospect?

You just gotta admire that crazy Capitalist Socialism.

by John Browne – Senior Market Strategist, Euro Pacific Capital

President Obama’s State of the Union message only serves to reinforce my forecast that investors will continue to find better returns in markets outside America and in currencies other than the U.S. dollar. Indeed, the reward gap may well increase.

Nothing in the President’s speech indicated willingness to do the hard work of cutting spending. Rather, he reiterated his commitment to a costly new healthcare entitlement and more spending on make-work programs. Only days later, his budget acknowledged that, even before factoring in the cost of his proposals, the federal government is unlikely to be in surplus for the foreseeable future. In response, Moody’s has issued a warning that the United States’ triple-A credit rating is not unassailable. In short, the trend set some ten years ago will continue.

Since 1999, those who invested in U.S. stocks, as measured by the S&P Index, have lost about half of their wealth, in real terms.[i] On the other hand, those who invested abroad, measured by the Morgan Stanley Emerging Market Index,[ii] [iii] have doubled their investments in real terms. This is because capitalism is flourishing abroad, while being curtailed progressively in so-called advanced economies, where the projected aggregate growth rate for 2010 is now only some 2.5 percent. Somewhat optimistically, this assumes no double dip recession. [iv]

Most of the emerging economies are far less leveraged than those of the advanced countries and are relatively well insulated from the massive dollar deleveraging that began in 2007. Crucially, their government spending is geared largely to infrastructure and far less to expensive government bureaucracy and wealth-depleting entitlements. Most importantly, even formerly communist governments, like that of China, have embraced free-market capitalism, while many in the advanced governments are flirting with socialism.

As the most leveraged of the major economies, America in particular faces great problems with regard to regenerating consumer demand. Looking at the future of U.S. stock markets, the following five bearish observations stand out.

First, it appears that the ruling Democratic Party is out of touch with the realities of economics. Paying little apparent heed to their sensational defeat in Massachusetts, President Obama and his Democrat Congress are making no realistic attempt to rein in, let alone cut, runaway government spending. Yet, the current path leads to spiking debt costs, huge tax increases, and unprecedented U.S. dollar debasement. In addition, because many Congressional Democrats were elected by disaffected conservatives during the Bush years, the party cannot agree to terms on reform legislation. This leaves businesses fraught with uncertainty as to how they will be impacted.

Because of the focus on new spending, we have only seen empty gestures with regard to tax-cutting. This is the ultimate form of “stimulus,” but one that must be earned through reduced spending. While President Obama has talked tax cuts, his actions indicate only a redistributionist impulse to set up federal programs for which business and the productive classes must pay. Whether or not that satisfies his ideological goals, it is a recipe for economic disaster.

Second, while the Fed has signaled that it will hold interest rates down for the foreseeable future, it is likely that in the medium and long end of the yield curve the market will soon force rates higher. This will lead U.S. bond and equity markets to better reflect their real values, and end the nominal recovery we have seen thus far.

Third, despite increased government hiring in wealth-consuming jobs, total employment, and especially private, wealth-creating employment, continues to fall. [v] Those jobs are moving abroad. Last year, the U.S. witnessed the steepest drop in demand for H1B visas in recent history. [vi] This indicates that America is losing its appeal as the place for the world’s enterprising young minds to strike it rich.

Fourth, the Dow has risen at a historically fast rate over the past nine months, while volume has thinned. [vii] In other words, the rally is being pushed by speculative traders, not long-term investors. It is, therefore, highly vulnerable to collapse.

Finally, political uncertainty, rising unemployment, and an outlook for increased taxes are destroying any looming consumer confidence. Fourth-quarter GDP grew an annualized 5.7 percent on inventory restocking, but no one is in the mood to spend. [viii] Consequently, those stockpiles will drag on GDP growth for several quarters.

With this somber picture at home, it was not naïve to have hoped the President would shift to a common sense agenda in the State of the Union. Unfortunately, this Administration may not have the fortitude to implement an austerity program. One way or another, the U.S. is going to have to face the economic reality; the longer we wait, the bigger head-start we give to our competitors in the developing world.