Americano Moderno Fascismo
In the aftermath of World War I, the allied countries burdened Germany with the blame for the war. To exact punishment for it, heavy fines and restitution payments were placed on a German people who had no way of paying it. Under the weight of this debt, its economy collapsed.
In desperation, the German people turned to a party of thugs. Thugs who supported the "working man." Thugs who supported the downtrodden. Thugs who spoke of a great new Germany, created by the modern ideals of socialist economy, and ready to stand up to those who had imposed this burden. The creative minds of those thugs convinced their people that the Jews were to blame for their circumstances. By every right, it seems, those thugs believed this to be true. They didn't understand the economics of debt any more than people here do today. So to them, it was perfectly reasonable to believe that the blame lay with a peaceful, yet separate population that lived among them.
Today, in this country, a burden of debt is weighing down our economy. An economic philosophy largely ignored by our institutions of higher learning explains how this happens, but our "experts" are not familiar with this philosophy. Those who are have seen this situation coming. They warned of the dotcom boom and bust. They warned of the housing bust. Their warnings came true. And today their warnings are more dire than ever. Prevailing economic thought teaches us that we need to "stimulate" the economy to launch into true recovery. However, those who predicted our current predicament tell us that the root of the problem is debt. Stimulus creates more debt. And you can't solve a debt problem with more debt. Not unless your end goal is to go bust.
And that's exactly where we're headed. But going bust for a nation isn't the same thing as it is for an individual, or even a large corporation. When you or I go bust, we file bankruptcy, our creditors don't get paid, we have difficulty getting credit for a while, and our slate is wiped clean. For corporations it is similar. Most often pieces of the corporation are sold off to those that can make good use of it's components. But when a nation goes bust the whole society is left in limbo. Chaos ensues.
Today, across Europe, where the debt crises is even more advanced than it is here, public labor unions are organizing and executing protests against the austerity measures those governments are instituting to avoid economic collapse. Just as we have seen here recently with teachers unions in Illinois and New Jersey, student groups in California and others. These are the forces that are organizing today. They haven't created a scapegoat like the German thugs of the 20's and 30's yet. But the keyword is, yet. They are putting pressure on our nation and the nations of Europe to not cut back spending. They want the debt load to continue, regardless of whose back it's put upon. This debt can only lead to catastrophe.
And when catastrophe is realized and a nation goes bust, someone always rises from the ashes. History teaches us that it's usually those who are already organized. And of those who are organized, usually the most ruthless prevail.
by Carlton Smith
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Silver and Gold
Here is an interesting piece by Karl Denninger at the Market Ticker from over the weekend about gold and silver and their value as currency. I've heard all the rants telling everyone to buy up as much gold as they could and the hyperinflationists all tout it as the one thing you must have to protect yourself.
My personal take has been that gold is currently bubbled and will soon collapse, leaving those that buy it now with far less than they paid. Since I believe what we are currently in is a deflationary spin, gold will not serve as a hedge. I have, though, advocated buying gold as a hedge against a complete systemic collapse because it will give you something of value to trade that people will trust - but certainly not as an investment or hedge against inflation.
Denninger's piece has me thinking now that silver is probably the better metal to have as a hedge against a systemic collapse, though I still believe that even in such a situation gold would still retain what Denninger calls "credit value" sufficient to be tradeable for hard goods.
This is a very interesting read if you are at all interested in currency valuations in speculative vs intrinsic contexts.
by Carlton SmithEvery man has the ability to create wealth and most can create credit, which is the essence of money. When Wimpy promises to pay for that hamburger next Tuesday he has created, in point of fact, both credit and (by common definition) money. But only government has the authority to use force to extract both from you - that is, to force you not only to turn over current production but to compel you to produce in the future as well. You have your balance of powers exactly backwards sir.
Moreover, even though most people don’t realize it, even today the dollar is only acceptable as money because it is indirectly “backed” by Gold (via the derivatives market) i.e. you can get Gold in exchange for paper dollars on the open market. The proof of this lies in the fact that were, for some reason, the convertibility of Gold into dollars suspended today [on the open market], the dollar would instantly collapse.
Absolute and abject nonsense. The convertibility by law was disposed of by Richard Nixon. The dollar did not "instantly collapse" (although many said it would.) In addition there was no right of exchange during the period after FDR's confiscation through the repeal of those regulations and laws, and again, the dollar did not "instantly collapse." This claim is utter and pure horsecrap as the dollar was maintained through forty years of being non-convertible.
This is also exactly why the founders of America prohibited anything except Gold and Silver to be used as money, and why the governments go to great lengths to suppress their price.
The founders based our monetary system on silver, not gold. The reason for this is quite simple - silver is both consumed and thus has industrial purpose - that is, it has significant intrinsic value.
Indeed the banking cartel in London tried after the Revolutionary War to change this, going so far as to bribe Congress. Why? Because with gold-backed money and the control of said cartel, along with the lack of utility (intrinsic) value, gold supplies and the speculative premium in its value (its "moneyness") could be easily manipulated. With silver being an industrial metal this was dramatically more difficult to accomplish; ergo, silver was seen as undesirable by the banking cartel - and no wonder.
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Daily Reading
These are some items I found interesting today.
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According to Mike Shedlock at Mish's Global Economic Trend Analysis, the most populous state in the nation wants to fund it's budget shortfalls with returnables. Seinfeld jokes aside, when are these jokers going to get it?
Perez calls his plan "unique and creative approach." Governor Schwarzenegger called it "legal gymnastics." I call it "fiscal insanity".
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David Hersanyi at Reason.com writes about the controversy surrounding Rand Paul's statements regarding the Civil Rights Act of 1964.
I wonder if the mainstream media feels like it found a magic bullet to shoot down libertarian-type candidates by raising questions about their beliefs regarding legislation designed to control how citizens behave, when their behavior might not be politically correct. They're smart enough to know that 99% of the public has no idea what the specifics of the Civil Rights Act of 1964 stated, but that most listeners will equate such a statement with thinking that the politician is opposed to civil rights in general. The laughable part of this is that this demagoguery obscures the point that most mainstream politicians couldn't give a rat's rear end about civil rights and the politicians these questions are targeted to discredit would do far more to restore civil rights to this country than any of those crooked hacks currently in office ever would.
Agree or not, shouldn't Americans armed with historical perspective be able to engage in constructive dialogue about the positive consequences—and some of the negative complexities—of legislation from 1964? (I know. Just kidding.)
Some critics eagerly blasted "naive" libertarians, and others, like Washington Post columnist Eugene Robinson, used Paul's "extremist position" to wring their hands over the coming Republican crusade to overturn the Civil Rights Act—which fits neatly into an arching (and largely imagined) narrative that puts America squarely in the mid-1960s.
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Daily Reading
Here are some stories that I came across today that I found interesting. Perhaps you will too...
- Vox Day at World Net Daily writes about republican government, corruption and public unions.
This goes well beyond ideology. Even the liberal media's standard bearer, the New York Times, was appalled to discover that New York is home to several ex-government employees who retired in their 30s whose pensions now pay them more than $100,000 a year. This is legal, contractual and totally unconscionable. No retired policeman can reasonably claim to have ever put his life on the line to the extent that a Marine Corps private making one-quarter as much while stationed in Afghanistan or Iraq does.
- David Harsanyi at Reason.com has an interesting take on net neutrality.
I know it sounds wonderfully fair. But the reality of net neutrality makes as much sense as mandating that tricycle riders have the same rights and privileges as cars and trucks on our roads—highway neutrality.
The FCC promises it doesn't have any intention of controlling Internet content, only of making access fair. But empowered with the ability to regulate the flow of online traffic, it offers a semantic, not substantive, excuse for a power grab.
- Here is an interesting little song by Tim Miller, inspired by a family that fell victim to predatory lending practices.
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Karl Denninger at The Market Ticker talks about debt and the economy in Kuttner Has Been Lobotomized.
We had the inflation. Punishing, cruel, ridiculous inflation. Yeah, I know, you don't think it happened because it was "only" a doubling of gasoline and diesel prices in a five year span (well, actually, it was closer to a tripling, but who's counting, right?)
Of course this very same inflation showed up in other things, like houses and stock prices. This made people "feel rich", but in fact they were not, because their wages did not accelerate at anywhere close to the same rate, nor could they.
- Mike Shedlock at Mish's Global Economic Trend Analysis writes today about commercial real estate foreclosures and rental property woes.
Los Angeles City Councilman Richard Alarcon is a complete fool, unless of course he is pandering to voters, perpetually buying votes to get re-elected.
- Radley Balko at Reason.com points out several lessons police and local governments (and even cable network A&E) might learn from the Detroit raid that resulted in the death of a little girl.
With many of these shows, the police department gets veto power over what footage makes it on the air. So you won't be seeing footage of many mistaken raids. That said, A&E should air the footage of this raid to show that the violent tactics these shows repeatedly glamorize can and do have tragic consequences. If the network has any guts at all, it will make sure the same episode looks at the possibility that the presence of its own cameras contributed to the death of a little girl.
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Police Abuse
Over the past week I have seen several stories regarding the abuse, murder and harassment of citizens by local police forces. Serve and Protect has quickly become an outmoded euphemism, deserving of derision.
Just take a look at those three articles linked above.
In the first story, a SWAT team entered into a home, shooting at dogs with bullets ricocheting about the house while a mother was reading a bed time story to her young son in an upstairs bedroom. Police were looking for marijuana, which is legal to possess in that community - but the "suspect" was believed to have a whole bunch, apparently. What was he charged with? Possession of drug paraphernalia. He paid a $300 fine. That was certainly worth putting innocent people in mortal danger.
In the second story another police SWAT team burst into a home in Detroit, Michigan - this time looking for a suspected murderer and shot a 7 year old girl sleeping on the living room couch. They say it was accidental. Evidence shows otherwise. Of course, a suspected murderer should be arrested, and it would be reasonable to presume such a suspect dangerous. It would also be reasonable to wait until the man tried to leave the home and arrest him on the street where it's less likely that you might kill little girls. This would be reasonable to presume if you believed that the police were on your side.
In the third story, police in New York City are downgrading violent crimes so crooked politicians can look better statistically and harassing peaceable citizens to meet quotas. If you believe that my use of the word harassment is an attempt to steer the perception of my readers, consider this excerpt:
Officers were instructed to arrest people for "blocking the sidewalk," for not possessing ID (even while just feet from their homes), even for no reason at all (cops were told to "articulate" a charge at a later time). The cops were told to make arrests even if they knew they'd be voiding the charge at the end of their shifts. As a sergeant implores in one recording, "Again, it's all about the numbers."
About those numbers: While only about one tenth of 1 percent of the stops yielded a gun (at present it's nearly impossible to legally carry a gun in New York), the practice has helped drive up the city's marijuana arrests from 4,000 in 1997 to 40,000 in 2007. Marijuana for personal use was actually decriminalized in New York during that period. But you still can't display your pot in public. So the police simply stop people, trick them into emptying their pockets, and then arrest them for displaying marijuana in public.
If you can think of a better word than harassment, please let me know. I can think of a few, but they aren't suitable for family reading.
Once upon a time I believed that police officers were friends of the community. They were what stood between you and the bad guys. They put their lives on the line to keep the community safe. Today I no longer view local law enforcement as offering this protection. In fact, a loved one asked me the other day if I thought it was a good idea to teach her young son that police officers are safe in case he gets lost in a public place. I wasn't sure what to tell her. One would like to think that police officer would be more trustworthy than an average citizen, but does putting on a badge and carrying a gun really bestow that upon a personality? I am inclined to think it does not. The stories above prove it.
by Carlton Smith Print This Post
God Bless You, Mr. Harwell
Sitting on the picnic table in the backyard on an August afternoon, I watched my father playing cribbage with my grandfather. Propped up on the table, next to the cribbage board, sat a small radio with an analog dial, tuned in to the ball game. Listening to the game through Ernie's voice I could see the field and the action as well as I could have had I been there. The only thing missing was the smells of popcorn and hot-dogs. I sat and wondered how he knew where all those folks catching foul balls were from. I fancied he had a seating chart in front of him with the home towns of all the fans.
Many a spring and summer afternoon of my childhood was spent just like this. Me, dad, grampa, a cribbage board and Ernie Harwell. All of us enjoying the shade of that old tree, and loving the game of baseball.
You see, to me, the game itself is intertwined with Ernie's voice. Even today, eight full years since Ernie called his last game, when I turn on the radio to listen it always seems an impostor has invaded the broadcast booth. I'm sure that the guys they have on their now are all wonderful people and I'm sure that they are as good, or better than the radio announcers for most teams. It's just not the same. Even though I still enjoy it - even though I still love it - without Ernie's voice, it's no longer sacred. It no longer brings to mind all of those wonderful memories.
But today, thinking upon his passing, I still cherish those memories. I cherish those summer afternoons sitting in the back yard. Those days by my grandma's pool, huddled in the small cabana with my cousins, hanging on every word. Hoping that Lou Whittaker would pull through with a clutch hit. Hoping that Kirk Gibson would knock another one out of the park. Waiting for that strikeout from Jack Morris, that you knew was coming. Jumping up and down in my grandfather's living room while Gibson rounded third after hitting that monumental home run in game 5 of the 1984 World Series. Watching in awe as Larry Herndon caught that last out of the 9th inning, making the Tigers World Champions. And Ernie was there. Every time.
Yesterday, listening to the radio on my afternoon drive home from work, I heard caller after caller talk about their experiences with Ernie. The owner of a small baseball card store that ran into him on a golf course and asked him if he would record an answering machine message for him - and he gladly did. The sound engineer working back stage for a Tigers event that Ernie approached, just to thank him for the job that he was doing. The mother who frequented the same grocery store as Ernie and his wife, who talked about how Ernie always remembered her name, asked how she was doing and always took time to talk to her young children. Caller after caller, letting the world know how knowing Ernie Harwell made the world a better place for all of them.
I did not know Ernie, personally. I never had the pleasure of meeting him. But for me, the reason I had to pause upon hearing of his passing, was because I knew it was time to say goodbye to all of those memories of my own. I miss those days sitting in the back yard with grandpa and Dad. I miss all of it. Hearing Ernie's voice over the transistor was part of it.
So, today it is with a sad heart that I send my love to all who knew and loved him. And to him I say, thank you. Thank you for being a small part of some of my most wonderful childhood memories. God bless you, Mr. Harwell.
by Carlton Smith Print This Post
What Do You Think?
I'm really not sure what to think. My first instinct is to not believe it, and think this was someone's severely misguided attempt at humor. But it appears to actually be from the State of Pennsylvania.
I've often heard people argue that taxation is not really coercion and there is nothing wrong with taking part of what someone produces for the good of everyone. Those of you out there sympathetic with that view, watch this video, and realize that real people are under pressure to pay these taxes for whatever reason. And those people in Pennsylvania are watching this ad on their televisions.
If you don't think that income taxes are coercive, think about what happens when you don't pay them. Who do they send to your house? Men. Men with guns. They know who you are.
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A Glimmer of Hope
This video, from Karl Denninger says it all. There is now legislation before congress that limits the size of banking institutions so that "too big to fail" will no longer be an issue. If this is passed the threats of the banksters no longer have teeth. There is certainly more to do, but if you are interested in keeping this country from completely collapsing, this is the first step.
It will be interesting to see what members of congress support it and what members oppose it.
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I Gotta Wear Shades
Some interesting things have been happening of late that I wanted to share my thoughts on. Recently I've been quite concerned that the amount of deficit spending our congress and president have availed themselves of would lead to a systemic crash, the likes of which would make the Great Depression look like a cake walk. I believed this would happen because the well would eventually run dry.
Look at what is happening in Greece right now. No one wants to lend them money and their treasury bonds are on par with war-torn Pakistan. Junk. But Greece, though important to the European economy and troublesome to the fate of the Euro, is not anywhere near the size player that the U.S. is in the world economy. You know the saying, the bigger they are...
I was concerned because I didn't see any scenario playing out where our beloved politicians would pull back the reigns before it was too late. I didn't see them mustering the political will to just say, "no". But now, I wonder, if it just might be happening. The housing subsidy, granting new home buyers up to $8000 in tax breaks for buying a new home and $6,500 for non-first-time-buyers, is actually coming to an end. The papers are now starting to warn of the impacts of expanding the stimulus. And Wall Street might just give the politicos the scapegoat they need to end the madness.
Even today, Ben Bernake said, “Achieving long-term fiscal sustainability will be difficult, but the costs of failing to do so could be very high,” Bernanke said in remarks prepared for a speech today to a White House commission on the budget deficit. “Increasing levels of government debt relative to the size of the economy can lead to higher interest rates, which inhibit capital formation and productivity growth -- and might even put the current economic recovery at risk."
So now, even members of the old guard are beginning to have their doubts as to the wisdom of the current course of action. I can no longer say that I would be entirely awestruck were I to start hearing the politicos and media cheerleaders start trumpeting the line that they need to get out of the way and let the mess the Wall Street banks made clean itself out of the system. Now, that said, I didn't say it wouldn't surprise me, and I don't think it will happen.
I expect that the stimulus will be pulled back for now. And the economy will screech to a grinding halt. Property prices will fall dramatically again (I'm guessing another 25% or so). The commercial real estate bubble, which has been sitting at it's apex will finally burst. People will stop buying things again (with the money they are saving by not paying their mortgages, having caught on to the fact that banks aren't foreclosing). Unemployment will soar again. Then the politicians will start shaking in their boots and start pumping the stimulus prime once again. If they're lucky, the mess in Europe will still be going on and the renewed acceleration in deficit spending won't detonate the U.S. treasuries market. Yet.
The trouble with all of this is that the current deficit spending and the future re-acceleration of it that I predict do nothing but delay the inevitable. There is a ton of misallocated investment out there that needs to fail so that its pieces can be put to productive use once again and the economy can actually recover. All of this stimulus has made it worse. The future stimulus I project will make it worse still.
What we have here are two options. One option is to stop the madness and take the medicine. The economy will fall dramatically for a little bit of time, I'd say between a year and two years, and then it will finally start to climb out of the gutter on a new and healthy footing. The other option is to continue the stimulus madness until the point where the world calls us on our debt and causes a complete system crash, marking an end of the American Empire and the kind of life we've all grown accustomed to.
Of course, while I present this as a dichotomy, there are shades of options between these two extremes. We could spend the next several decades stopping and starting stimulus programs to forestall the pain, hoping for some new magic internet 2.0 type technology which will employ millions of people in some new industry that doesn't currently exist, and grind away in the doldrums in the interim. It's possible that we could keep halting these borrowing spurts before the treasury markets decide to call bull. I don't think it's likely, but it is certainly possible.
The one thing I can say for certain is this supposed "recovery" our politicians are talking about right now is not happening. And it won't happen for a long way off.
"The future's so bright..."
by Carlton Smith Print This Post
The Times, They Are A’ Changing
On my way into to work this morning I saw an advertisement billboard that struck me.
[Name of Bank] We have money to lend (and the will to lend it)
When a bank can say that it's ability to lend and will to lend separates it from other banks you have to know that things aren't going well.
Even in light of this, though, I have to say that it's probably fool hearty for banks to be lending right now, especially if they are writing mortgages. The housing market has taken quite a hit, to be certain. But one economist that predicted the housing crash in the first place says there is a very good chance that housing will crash again.
By transferring more underwater mortgage balances onto the public books, the plan puts taxpayers on the hook for further losses if housing prices continue to fall. Given the massive support for real estate already afforded by record-low interest rates and massive federal tax and policy incentives, there are very good reasons to believe that home prices will indeed collapse when these crutches are removed. Recent spikes in long-term interest rates warn of this prospect.
If these items aren't enough to make you wonder, perhaps this last item will. Remember all that talk in grade school about this being a free country? Well, it just got a little less free again. Due to a recent law, if you decide you want to put your money in a foreign bank to keep it safe from a falling economy, the IRS wants to know. And if the country you do your banking through has laws that prohibit such disclosures (like Switzerland) they are being ordered to close the accounts.
Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS.
Come, gather 'round people, wherever you roam, and admit that the waters around you have grown...
by Carlton Smith Print This Post
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