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2012 – The year of living dangerously

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by Jim Quinn
of The Burning Platform
Posted on 8th January 2012 


“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability –  problem areas where America will have neglected, denied, or delayed needed action.” – Strauss & Howe – The Fourth Turning – 1997

IN DECEMBER 2010 I WROTE AN ARTICLE CALLED Will 2012 Be as Critical as 1860?, THAT PONDERED WHAT MIGHT HAPPEN WITH THE 2012 presidential election and the possible scenarios that might play out based on that election. Well, 2012 has arrived and every blogger and mainstream media pundit is making their predictions for 2012. The benefit of delaying my predictions until the first week of 2012 is that I’ve been able to read the wise ponderings of Mike Shedlock, Jesse, Karl Denninger, and some other brilliant truth seeking analysts regarding what might happen during 2012. The passage above from Strauss & Howe was written fifteen years ago and captured the essence of what has happened since 2007 and what will drive all the events over the next decade. Predicting specific events is a futile human endeavour. The world is so complex and individual human beings so impulsive and driven by emotion, that the possible number of particular outcomes is almost infinite.

But, as Strauss and Howe point out, the core elements that created this Crisis and the reaction of generational cohorts to the implications of debt, civic decay and global disorder will drive all the events that will occur in 2012 and for as far as the eye can see. Linear thinkers in mega-corporations, mainstream media and Washington D.C. focus on retaining the status quo, their power and their wealth. They believe an economic recovery can be manufactured through monetary manipulation and Keynesian borrowing and spending. They are blind to the fact that history is cyclical, not linear. In order to have an understanding of what could happen in the coming year, it is essential to keep the big picture in focus. As we enter the fifth year of this twenty year Crisis period, there is absolutely no chance that 2012 will see an improvement in our economy, political atmosphere or world situation. Fourth Turnings never de-intensify. They exhaust themselves after years of chaos, conflict and turmoil. I can guarantee you that 2012 will see increased mayhem, riots, violent protests, recessions, bear markets, and a presidential election that will confound the establishment. All the episodes which will occur in 2012 will have at their core one of the three elements described by Strauss & Howe in 1997: Debt, Civic Decay, or Global Disorder.

Debt – On the Road to Serfdom

The world is awash in debt. Everyone is focused on the PIIGS with their debt to GDP ratios exceeding the Rogoff & Reinhart’s 90% point of no return. But, the supposedly fiscally responsible countries like Germany, France, U.K., and the U.S. have already breached the 90% level. Japan is off the charts, with debt exceeding 200% of GDP. These figures are just for the official government debt. If countries were required to report their debt like a corporation, their unfunded entitlement promises to future generations are four to six times more than their official government debt.

Any critical thinking person can look at the chart above and realize that creating more debt out of thin air to solve a debt problem is foolish, dangerous, and self serving to only bankers and politicians. The debt crisis took decades of terrible choices and bogus promises to produce. The world is now in the midst of a debt driven catastrophe. At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression. The largest banks in Europe are leveraged 40 to 1, therefore a 3% reduction in their capital will cause bankruptcy. Once you pass 90% debt to GDP, your fate is sealed.

“Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare. Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?”Rogoff & Reinhart

The ECB doubling their balance sheet and funnelling trillions to European banks will not solve anything. The truth that no one wants to acknowledge is the standard of living for every person in Europe, the United States and Japan will decline. The choice is whether the decline happens rapidly by accepting debt default and restructuring or methodically through central bank created inflation that devours the wealth of the middle class. Debt default would result in rich bankers losing vast sums of wealth and politicians accepting the consequences of their false promises. Bankers and politicians will choose inflation. They believe they can control the levers of inflation, but they have proven to be incompetent, hubristic, and myopic. The European Union will not survive 2012 in its current form. Countries are already preparing for the dissolution. Politicians and bankers will lie and print until the day they pull the plug on the doomed Euro experiment.

The false storyline of debt being paid down in the United States continues to be propagated by the mainstream press and decried by Paul Krugman. The age of austerity storyline gets full play on a daily basis. Total credit market debt in 2000 was $27 trillion. It skyrocket to $42 trillion by 2005 as George Bush and Alan Greenspan encouraged delusional Americans to defeat terrorism by leasing SUVs and live the American dream by putting zero down on a $600,000 McMansion, financing it with a negative amortization no doc loan. Paul Krugman got his wish as a housing bubble replaced the dotcom bubble. Debt accumulation went into hyper-speed in 2006 and 2007 as Wall Street sharks conducted a fraudulent feeding frenzy by peddling their derivatives of mass destruction around the globe. By the end of 2007, total credit market debt reached $51 trillion.

In a world inhabited by sincere sane leaders, willing to level with the citizens and disposed to allow financial institutions that took world crushing risks to fail through an orderly bankruptcy process, debt would have been written off and a sharp short contraction would have occurred. The stockholders, bondholders and executives of the Wall Street banks would have taken the losses they deserved. Instead Wall Street used their undue influence, wealth and power to force their politician puppets to funnel $5 trillion to the bankers that created the crisis while dumping the debt on taxpayers and unborn generations. The Wall Street controlled Federal Reserve provided risk free funding and took toxic mortgage assets off their balance sheets. The result is total credit market debt higher today than it was at the peak of the financial crisis in March 2009.

Our leaders have done the exact opposite of what needed to be done to address this debt crisis. The country is adding $3.7 billion per day to the National Debt. With the debt at $15.2 trillion, we have now surpassed the 100% to GDP mark. The National Debt will be $16.5 trillion when the next president takes office in January 2013. Ben Bernanke has been able to keep short term interest rates near zero and the non-existent U.S. economic growth and European disaster has resulted in keeping long-term rates near record lows. Despite these historic low rates, interest on the National Debt totalled $454 billion in 2011, an all-time high. The effective interest rate was approximately 3%. If rates stay at current levels, interest will be between $400 and $500 billion in 2012. Each 1% increase in rates would cost American taxpayers an additional $150 billion. A rapid increase in rates to the 7% level would ratchet interest expense above $1 trillion and destroy the last remaining vestiges of Bernanke’s credibility. It can’t possibly happen in 2012. Right? The world has total confidence in pieces of paper being produced at a rate of $3.7 billion per day.

Confidence in Ben Bernanke, Barack Obama and the U.S. Congress is all that stands between continued stability and complete chaos. What could go wrong? Debt related issues that will likely rear their head in 2012 are as follows:

  • A debt saturated society cannot grow. As debt servicing grows by the day, the economy losses steam. The excessive and increasing debt levels will lead to a renewed recession in 2012 as clearly detailed by ECRI, John Hussman and Hoisington Investment Management.

“Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.” – ECRI 

At present, we observe agreement across a broad ensemble of models, even restricting data to indicators available since 1950 (broader data since 1970 imply virtual certainty of recession). The uniformity of recessionary evidence we observe today has never been seen except during or just prior to other historical recessions.-  John Hussman 

Negative economic growth will probably be registered in the U.S. during the fourth quarter of 2011, and in subsequent quarters in 2012. Though partially caused by monetary and fiscal actions and excessive indebtedness, this contraction has been further aggravated by three current cyclical developments: a) declining productivity, b) elevated inventory investment, and c) contracting real wage income. In summary, the case for an impending recession rests not only on cyclical precursors evident in productivity, real wages, and inventory investment, but also on the disfunctionality of monetary and fiscal policy. – Van Hoisington 

  • The onrushing recession will send housing down for the count. With 2.2 million homes already in the foreclosure process and another 13 million homes with negative or near negative equity, the recession will push more people over the edge. As foreclosures rise a self reinforcing loop will develop. Home prices will fall as banks dump houses at lower prices, pushing millions more into a negative equity position. Home prices will fall another 5% to 10% in 2012, with a couple years to go before bottoming.
  • The recession will result in companies laying off more workers. It won’t be as dramatic as 2008-2009 because companies have already shed 6 million jobs. The working age population will increase by 1.7 million, the number of people employed will go up by 1 million, but the official unemployment rate will drop to 7% as the BLS reveals that 10 million people decided to relax and leave the workforce. Surely I jest. The government manipulated unemployment rate will rise above 9%, while the real rate will surpass 25%.
  • The American people rationally increased their savings rate to 6.2% in the 2nd Quarter of 2009. When you are over-indebted and the country heads into recession, spending less and saving more is a sane option. Consumer expenditures accounted for 69% of GDP in 2007, prior to the economic collapse. The “recovery” of 2010-2011 has been driven by Ben’s zero interest rate policy, the resumption of easy credit peddling by the Wall Street banks, and consumers convinced that going further into hock to attain the American dream is rational. Consumer spending as a percentage of GDP has actually risen to 71% and the savings rate has plunged to 3.6%. The 20% drop in gas prices since April bottomed in December. This decline temporarily boosted consumer spending, but prices are on the rise again. With the State and local governments reducing spending, do the Wall Street Ivy League economists really believe consumers will increase their consumption to 73% of GDP and reduce their savings rate to 1%? If you open your local newspaper you will see the master plan. Car dealers are offering 0% financing with nothing down for 60 months. The GMAC/Ditech/Ally Bank zombie lives as subprime auto loans are back. The “strong” auto sales are a debt financed illusion. Ashley Furniture is offering 0% financing for 50 months with no payments through Wells Fargo Bank. When the Federal Reserve provides the Wall Street banks with 0% funding, banks are willing to take big risks knowing that Uncle Ben and the naive American taxpayer will be there to bail them out when it blows up again.
  • With recession a certainty as fiscal stimulus wears off, home prices fall, employment stagnates, and consumer spending grinds to a halt, what will happen to the stock market? The Wall Street shills paraded on CNBC and interviewed by the multi-millionaire talking head twits assure you that stocks are undervalued and the market will surely be up 10% to 15% by 2013. It’s a mortal lock, just as it has been for the last twelve years, with the S&P 500 at the same level as January 1999. The fact is the stock market drops 30% on average during a recession. The talking heads declare that corporate profits are at record levels and will continue higher. Not bloody likely. Corporate profit margins are at an all-time peak about 50% above their historical norms. Profits always revert to their mean. These profits are not sustainable as they were generated by firing millions of workers, zero interest rates for banks, fraudulent accounting by the banks, and trillions in handouts from the middle class taxpayers to corporate America.

In a true free market excess profits will draw more competitors and profits will fall due to competition. When corporate profits exceed the mean by such a large amount, you can conclude that crony capitalism has replaced the free market. Government bureaucrats have been picking the winners (Wall Street, War Industry, Big Media, Big Healthcare) and the American people are the losers. Corporate oligarchs prefer no competition so they can reap obscene risk free profits and reward themselves with king-like compensation. Mean reversion will eventually be a bitch. Real S&P earnings have reached the 2007 historic peak. To believe they will soar higher as we enter a recession takes the same kind of faith shown by Americans buying a $600,000 McMansion in Stockton with no money down in 2005. The result will be the same. Do you ever wonder how corporations are doing so well while the average American sinks further into debt, despair and poverty?

The brilliant John Hussman captures the gist of an investor’s dilemma in his latest article:

“With 10-year Treasury yields below 2%, 30-year yields below 3%, corporate bond yields below 4%, and S&P 500 projected 10-year total returns below 5%, we presently have one of the worst menus of prospective return that long-term investors have ever faced. The outcome of this situation will not be surprisingly pleasant for any sustained period of time, but promises to be difficult, volatile, and unrewarding. The proper response is to accept risk in proportion to the compensation available for taking that risk. Presently, that compensation is very thin. This will change, and much better opportunities to accept risk will emerge. The key is for investors to avoid the allure of excessive short-term speculation in a market that promises – bends to its knees, stares straight into investors’ eyes, and promises – to treat them terribly over the long-term.”

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Ron Paul appeals to America: “Default now, or suffer a more expensive crisis later”

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by Ron Paul, op-ed first posted in Bloomberg
Posted July 22, 2011

Default now, or suffer a more expensive crisis later

DEBATE OVER THE DEBT CEILING HAS REACHED A FEVER PITCH in recent weeks, with each side trying to outdo the other in a game of political chicken. If you believe some of the things that are being written, the world will come to an end if the U.S. defaults on even the tiniest portion of its debt.

In strict terms, the default being discussed will occur if the U.S. fails to meet its debt obligations, through failure to pay either interest or principal due a bondholder. Proponents of raising the debt ceiling claim that a default on Aug. 2 is unprecedented and will result in calamity (never mind that this is simply an arbitrary date, easily changed, marking a congressional recess). My expectations of such a scenario are more sanguine.

The U.S. government defaulted at least three times on its obligations during the 20th century:

• In 1934, the government banned ownership of gold and eliminated the right to exchange gold certificates for gold coins. It then immediately revalued gold from $20.67 per troy ounce to $35, thus devaluing the dollar holdings of all Americans by 40 percent.

• From 1934 to 1968, the federal government continued to issue and redeem silver certificates, notes that circulated as legal tender that could be redeemed for silver coins or silver bars. In 1968, Congress unilaterally reneged on this obligation, too.

• From 1934 to 1971, foreign governments were permitted by the U.S. government to exchange their dollars for gold through the gold window. In 1971, President Richard Nixon severed this final link between the dollar and gold by closing the gold window, thus in effect defaulting once again on a debt obligation of the U.S. government.

Unlimited spending

No longer constrained by any sort of commodity backing, the federal government was now free to engage in almost unlimited fiscal profligacy, the only check on its spending being the market’s appetite for Treasury debt. Despite the defaults in 1934, 1968 and 1971, world markets have been only too willing to purchase Treasury debt and thereby fund the government’s deficit spending. If these major defaults didn’t result in decreased investor appetite for U.S. obligations, I see no reason why defaulting on a small amount of debt this August would cause any major changes.

The national debt now stands at just over $14 trillion, while net total liabilities are estimated at over $200 trillion. The government is insolvent, as there is no way that this massive sum of liabilities can ever be paid off. Successive Congresses and administrations have shown absolutely no restraint when it comes to the budget process, and the idea that either of the two parties is serious about getting our fiscal house in order is laughable.

Boom and bust

The Austrian School’s theory of the business cycle describes how loose central bank monetary policy causes booms and busts: It drives down interest rates below the market rate, lowering the cost of borrowing; encourages malinvestment; and causes economic miscalculation as resources are diverted from the highest value use as reflected in true consumer preferences. Loose monetary policy caused the dot-com bubble and the housing bubble, and now is causing the government debt bubble.

For far too long, the Federal Reserve’s monetary policy and quantitative easing have kept interest rates artificially low, enabling the government to drastically increase its spending by funding its profligacy through new debt whose service costs were lower than they otherwise would have been.

Neither Republicans nor Democrats sought to end this gravy train, with one party prioritizing war spending and the other prioritizing welfare spending, and with both supporting both types of spending. But now, with the end of the second round of quantitative easing, the federal funds rate at the zero bound, and the debt limit maxed out, Congress finds itself in a real quandary.

Hard decisions

It isn’t too late to return to fiscal sanity. We could start by canceling out the debt held by the Federal Reserve, which would clear $1.6 trillion under the debt ceiling. Or we could cut trillions of dollars in spending by bringing our troops home from overseas, making gradual reforms to Social Security and Medicare, and bringing the federal government back within the limits envisioned by the Constitution. Yet no one is willing to step up to the plate and make the hard decisions that are necessary. Everyone wants to kick the can down the road and believe that deficit spending can continue unabated.

Unless major changes are made today, the U.S. will default on its debt sooner or later, and it is certainly preferable that it be sooner rather than later.

If the government defaults on its debt now, the consequences undoubtedly will be painful in the short term. The loss of its AAA rating will raise the cost of issuing new debt, but this is not altogether a bad thing. Higher borrowing costs will ensure that the government cannot continue the same old spending policies. Budgets will have to be brought into balance (as the cost of servicing debt will be so expensive as to preclude future debt financing of government operations), so hopefully, in the long term, the government will return to sound financial footing.

Raising the ceiling

The alternative to defaulting now is to keep increasing the debt ceiling, keep spending like a drunken sailor, and hope that the default comes after we die. A future default won’t take the form of a missed payment, but rather will come through hyperinflation. The already incestuous relationship between the Federal Reserve and the Treasury will grow even closer as the Fed begins to purchase debt directly from the Treasury and monetizes debt on a scale that makes QE2 look like a drop in the bucket. Imagine the societal breakdown of Weimar Germany, but in a country five times as large. That is what we face if we do not come to terms with our debt problem immediately.

Default will be painful, but it is all but inevitable for a country as heavily indebted as the U.S. Just as pumping money into the system to combat a recession only ensures an unsustainable economic boom and a future recession worse than the first, so too does continuously raising the debt ceiling only forestall the day of reckoning and ensure that, when it comes, it will be cataclysmic.

We have a choice: default now and take our medicine, or put it off as long as possible, when the effects will be much worse.

Debt Ceiling Drama

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by Dr. Ron Paul
Posted July 19, 2011

THE DEBT CEILING DEBATE IS PROVIDING PLENTY OF OPPORTUNITY for political theater in Washington. Proponents of raising the debt ceiling are throwing around the usual scare tactics and misinformation in order to intimidate opponents into accepting more debt and taxes. It is important to distinguish the truth from the propaganda.

First of all, politicians need to understand that without real change default is inevitable. In fact, default happens every day through monetary policy tricks. Every time the Federal Reserve engages in more quantitative easing and devalues the dollar, it is defaulting on the American people by eroding their purchasing power and inflating their savings away. The dollar has lost nearly 50% of its value against gold since 2008. The Fed claims inflation is 2% or less over the past few years; however economists who compile alternate data show a 9% inflation rate if calculated more traditionally. Alarmingly, the administration is talking about changing the methodology of the CPI calculation yet again to hide the damage of the government’s policies. Changing the CPI will also enable the government to avoid giving seniors a COLA (cost of living adjustment) on their social security checks, and raise taxes via the hidden means of “bracket creep.” This is a default. Just because it is a default on the people and not the banks and foreign holders of our debt does not mean it doesn’t count.

Politicians also need to acknowledge that our debt is unsustainable. For decades our government has been spending and promising far more than it collects in taxes. But the problem is not that the people are not taxed enough. The government has managed to run up $61.6 trillion in unfunded liabilities, which works out to $528,000 per household. A tax policy that would aim to extract even half that amount of money from American families would be unimaginably draconian, and not unlike attempting to squeeze blood from a turnip. This is, unequivocally, a spending problem brought about by a dramatically inflated view of the proper role of government in a free society.

Perhaps the most abhorrent bit of chicanery has been the threat that if a deal is not reached to increase the debt by August 2nd, social security checks may not go out. In reality, the Chief Actuary of Social Security confirmed last week that current Social Security tax receipts are more than enough to cover current outlays. The only reason those checks would not go out would be if the administration decided to spend those designated funds elsewhere. It is very telling that the administration would rather frighten seniors dependent on social security checks than alarm their big banking friends, who have already received $5.3 trillion in bailouts, stimulus and quantitative easing. This instance of trying to blackmail Congress into tax increases by threatening social security demonstrates how scary it is to be completely dependent on government promises and why many young people today would jump at the chance to opt out of Social Security altogether.

We are headed for rough economic times either way, but the longer we put it off, the greater the pain will be when the system implodes. We need to stop adding more programs and entitlements to the problem. We need to stop expensive bombing campaigns against people on the other side of the globe and bring our troops home. We need to stop allowing secretive banking cartels to endlessly enslave us through monetary policy trickery. And we need to drastically rethink government’s role in our lives so we can get it out of the way and get back to work.

Bernanke: Gold isn’t money

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from The New York Sun
Posted July 13, 2011

The Fed Chairman and Ron Paul clash over the dollar

IF ONE WANTED TO EDIT OUR SUMMER OF QUARRELS DOWN TO ONE EXCHANGE that encapsulates our national misunderstanding, we would commend that which took place today between the chairman of the Federal Reserve governors, Ben Bernanke, and the chairman of the House Monetary Affairs subcommittee, Congressman Ron Paul. The exchange lasted five minutes, and one won’t find it flagged on the front pages of, say, the New York Times. But it was up in lights on the Drudge Report, which has mounted a picture of Mr. Bernanke under the headline “Bernanke: Gold Not Money,” and linked to a piece in Forbes.

Dr. Paul began by expressing skepticism over optimistic reports on the economy, noting our lackluster performance over the past three years despite the Congress and the Fed having injected $5.3 trilllion dollars into the economy. He noted that the national debt has grown by $5.1 trillion, while GDP has grown less than 1% and 7 million people are unemployed. The average term of unemployment, he observed, has soared to nearly 40 weeks from 17 weeks. He also expressed skepticism over claims that inflation is low, citing one definition of inflation that has prices up 34% over the three years despite the weak economy. So, he asked, why pay money to banks and corporations under a policy of too big to fail rather than giving money directly to the people?

Mr. Bernanke responded by saying that the Fed hasn’t spent any money but has, in fact, made profits that it has returned to the government. He noted that the Fed was founded to deal with financial panics. Dr. Paul interrupted, noting that his five minutes were running out, and asked about the collapse in the value of the dollar by almost 50% in the past three years to less than a 1,580th of an ounce of gold. “When you wake up in the morning, do you care about the price of gold?” he asked Mr. Bernanke.

“Well,” the chairman replied. “I pay attention to the price of gold. But I think it reflects a lot of things. It reflects global uncertainties. I think the reason people hold gold is as protection against of what we call tail risks, really, really bad outcomes. And to the extent that the last few years have made people more worried about the potential of a major crisis then they have gold as a protection.”

“Do you think gold is money?”

Here the chairman paused awkwardly, before, finally, replying.

“No, it’s not money. It’s a precious metal.”

“Even if it’s been money for the past 6,000 years, somebody reversed that, eliminated that economic law?”

“Well, it’s an asset. Would you say treasury bills are money? I don’t think they’re money, either. They’re an asset.”

“Why do central banks hold it?”

“Well, it’s a form of reserve.”

Why don’t they hold diamonds?”

“Well, it’s tradition, long term tradition.”

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

The exchange, which Dr. Paul ended by remarking that some people still think gold is money, throws into relief the disconnected nature of our dialog. In the narrow sense, it’s true that the Fed doesn’t spend money. In the broader sense, it’s true that the Fed has become the enabler of the Federal government’s binge of spending — all the while boasting of the profits from such lending. Now we are in a showdown between a House elected to halt the increases in taxes and spending and a president and Senate bent increasing both. Into this midst comes a central bank signaling its preparedness to mount yet another round of quantitative easing, while the definition of inflation undergoes the equivalent of a gerrymander to disguise the significance of the collapse in the value of the dollar, which — on cue — hit a record low even as the chairman was speaking and the Republican leadership in the Senate was maneuvering to grant the president authority to issue debt on his own say-so. In our 40 years on this beat we don’t think we’ve seen a more cynical performance — by a central bank or an administration — than that which has been on display these past few years.

The Fed wages its war on gold on behalf of fraudulent paper money

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by Dave in Denver
Posted June 17, 2011


Question:   If you were advising the Federal Reserve, what would you say are the unsolved economic problems of the day?
Milton Friedman:  One unsolved economic problem of the day is how to get rid of the Federal Reserve. –January 1996 interview on NPR

RON PAUL HAS BEEN AGGRESSIVELY SEEKING AN OFFICIAL, INDEPENDENT audit of the gold that is supposedly being held at Ft. Knox on behalf of all U.S. citizens.  Such an audit has not taken place since Eisenhower was the President? What gives there?  In the face of mounting criticism and citizen requests for this audit, why does the Treasury ignore this issue?  What does it have to hide?

At this point, anyone who looks at the Treasury financial statements is placing their “full faith” in the belief that the Government is honestly reporting its numbers. Does anyone really believe that the economic numbers the Government publishes on a weekly basis? Everyone believe that the Government is telling truth about why we’re spending trillions on wars in Iraq, Afghanistan and now Libya?

The Fed has been spending millions to fight all of the recent Freedom Of Information Act requests, which have been filed so that we can see what the Fed is doing secretly with our money – especially now that most of what Fed does has a guarantee on it by the Treasury. Most notably for me is the GATA request that we get to see what kinds of transactions the Fed has been in engaging in with OUR gold. It is highly likely that the 8100 tonne book entry on the Treasury balance sheet is just another electronic entry on a piece of paper. How about we get to take a look at the actual physical gold that is supposedly represented by that electronic entry? How about we get to see if that gold has any legal encrumbrances attached to it like Federal Reserve gold swaps and leasing transactions?

An audit needs to be done and it needs to be done under the full, transparent scrutiny of all U.S. citizens who would like to watch it happen. And of even more immediate concern, at least to me, is the drain on physical gold and silver occurring at the Comex. It’s kind of spooky the way unencumbered physical silver is being, and has been, “sucked” out of the system (Comex, SLV) over the past couple months. As much as I want to see Ron Paul force an open audit of Ft. Knox, I’d love to see an open audit of the Comex. I believe the Comex problem is the Achilles Heel of this whole mess.

It wouldn’t take much to stage a run on the Comex. And when that occurs, if it turns out that the Comex is unable to make deliveries of actual physical metal and instead changes its rules and defers to cash settlement of contracts, that’s when all hell will break loose. I would then expect that GLD and SLV will head south quickly in price while the global spot price of gold and silver head for the moon. The slight inversion in silver futures will go nearly verticle and the dollar index will go into a serious tail-spin. But how about we just start with a simple audit of Ft. Knox?

Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: ‘Account overdrawn.’  (famous speech by Francisco D’Anconia in “Atlas Shrugged”)

How Global Elites steal resources and technology

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by James Jaeger
Posted originally May 04, 2011

As many of you old-timers know, my colleagues and I have been working to expose the fraud of the Federal Reserve System for many decades, not only in our movie, Fiat Empire featuring Ron Paul, but at places like the MIND-X and The Daily Bell.

When I first invited artificial intelligence enthusiasts at the MIND-X to read The Creature From Jekyll Island by G. Edward Griffin many apologists, who are either naive or who live off the fiat-currency system, fought me and argued for at least ten years. Given that this subject is now in the mainstream every day: I hope these people will now acknowledge that the issue has merit and the Federal Reserve – the FED – is an instrument of unjust enrichment.

As Ron Paul says – and many others now acknowledge – it’s become common knowledge that the Fed “prints money out of thin air” and this activity inflates the money supply, thus causing the hidden tax of “inflation” and a destruction of the dollar’s purchasing power. It is thus the Federal Reserve System that is the CAUSE OF THE CURRENT GREAT RECESSION, THE 2008 FINANCIAL MELTDOWN, THE LINGERING UNEMPLOYMENT and THE MULTI-TRILLION DOLLAR DEFICITS we are now experiencing.

That bit of housekeeping done, allow me to say further: the Federal Reserve’s MONETIZING of debt – now known by the euphemism of QUANTITATIVE EASING – and its practice of FRACTIONAL RESERVE BANKING have allowed an elite class of people to emerge, a class that has exploited the American middle class, if not driven many of them into bankruptcy. This has happened because the major corporations – majority-owned by this class – have sought ever bigger profits provided by exploiting cheap foreign labor and military services. The American Middle Class is justifiably getting REALLY pissed-off.


The banking class – and the corporations that do business with this class  – have reconfigured U.S. laws to enable them to facilitate massive mergers and acquisitions over the past several decades. This consolidation took massive financing, so where did the money come from? It came from the Federal Reserve Member Banks as loans driven by fiat currency and fractional reserve banking. In other words, the major banks created trillions out of thin air and gave it to their cronies in corporate America in exchange for stock in the consolidated multinational corporations.

These multinational corporations, having driven most of their “free market” competition out of business (as a result of their access to fiat money) were now in a position to fund the campaigns of many congressmen. In exchange for campaign finances, many congressmen were behooved to relax anti-trust laws and provide all manner of special privileges. Such resulted in, for instance, the “financial services” industry whereby banks, stockbrokers and insurance companies were able to commingle their business plans to maximize market share and profits. The conflicts of interest that were created as a result caused the global financial meltdown which started in 2008 and proceeds more covertly to this day.

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Political Pygmies and Mad Hatters

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by  Nelson Hultberg
Originally posted April 20, 2011

THE DEBATE IN WASHINGTON OVER THIS YEAR’S BUDGET that threatened another (ho hum) government shutdown is a sterling example of how modern day pundits and politicians have shrunk their vision of political affairs down to the momentary, the picayune, the superficial, and the irrelevant.

Are there any “big picture thinkers” left in the political arena? Any “men of principle?” Sadly, no. Other than Ron Paul and a few maverick colleagues, there are none. Nothing but pygmies pontificating about the crucial business at hand and claiming how courageous their party is behaving in pursuit of justice and a better America.

To say this is an embarrassing charade is understatement indeed. Our government is $14.3 trillion in debt. The 2011 budget is approximately $3.8 trillion. The budget deficit is $1.5 trillion. And our solons in Washington are smugly bragging about their “fiercely negotiated cut of $37.8 billion?” Is it hyperbole to say these minds are obsessed with the momentary, the picayune, the superficial, and the irrelevant? Is it unfair to declare them to be pygmies? I think not.

When all things are considered, the total public and private debt in America is now over $100 trillion. Yet Bernanke and his Fed buddies are injecting credit (i.e., more debt) into the economy like a fire hose injects water into a bathtub. And still our “men of principle” in Congress declare with straight faces that they are stalwartly facing America’s problems head on. Sure they are. Like drug addicts and embezzlers face their life’s problems.

A Spectacle of Self-Delusion

What is horrifying is that this is not new. This charade-like aura of politics in Washington has been going on for 60 years ever since Dwight Eisenhower captured the GOP from the Robert Taft forces in 1952 and made it into a party of “me-tooers” to FDR’s Democrats. What has been taking place in the American political arena for the past six decades is one of the most blatant spectacles of self-delusion in American history.

Everyone is in on the charade – the populace, the politicians, the professors, the pundits – everyone makes believe that we have a legitimate Congress fighting for truth and justice, that we have a competitive two-party system where the Democrats wish to expand government while Republicans wish to reduce government. This charade is taught in the schools, pontificated about in the media, and argued about in the barrooms. Democrats versus Republicans. Big government advocates versus small government advocates.

It is disgusting that we as a people have become so delusional. But this is why our leaders in Washington argue over such meaningless trifles as $38 billion cuts in face of $1,500 billion deficits (which is equivalent to erecting a bamboo wall to stave off a Tsunami). Why do our leaders take part so proudly in such ludicrous debates? Because they have to perpetuate the great “two-party myth” that says the American people are being given a genuine choice about how they are to be governed. And we the people continue to buy into it like gullible rubes at a carnival. We have descended into the rabbit hole to join the Mad Hatter. Mountebanks and humbuggery saturate our politics and economics. Up is down, and down is up. Words are now tricks to twist the baneful into the tolerable. Reality is not what it is; it is what we wish it to be.

Not one in a hundred of our intelligentsia carry the cause and effect process of all this sham and destruction back to root causes. The best our mainstream media pundits can do is talk about how things started getting out of hand in the Greenspan nineties or the Reaganite eighties. Pygmies, all of them! Their sense of history extends only to a few decades, or at best the length of their own lives.

Yet the nefarious destruction descending upon our country had its beginning in 1913. That was the year that brought us the Federal Reserve and the income tax, which brought us the false boom times of the 1920s, which brought us the necessity to extinguish the inflationary fires with the Great Deflation of the 1930s, which brought us FDR’s welfare-state.

This twenty-five year period, 1913-1938, was the fateful turn in American history. Prior to this period, statism was “alien and horrid” to Americans. By the period’s end, statism was “needed and progressive.” From this momentous era, we embarked upon a journey of social, economic, and political insanity that plunges us deeper into desolation with each passing decade.

Cataclysmic collapse looms ahead, and there is no chance whatsoever that the American ship of state can be righted. We crossed the Rubicon in 1971 when Richard Nixon began the great fraud of irredeemable currency creation that John Maynard Keynes had conned our intelligentsia into believing was somehow wealth. The productive booms and easily correctible recessions of a laissez-faire market became the dangerous booms and ever more devastating recessions of the corporate state.

America is now deep into the death spiral of Rome. The only thing left to fight for is the establishment of some means to inform the American people about the coming cataclysm and what we must do to avert a World-Government as a result of its devastation – some means that can circumvent the tyrannical lock that collectivists have established over our schools, churches, media, and political parties.

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