Thoughts Aloud

Archive for the ‘Economics’ Category

Many know that I have been advocating the purchase of gold, because of impending inflation for some time, and that I put all of my savings where my mouth is over two years ago. Now that rampant inflation is upon us, many are wondering why gold prices are not going up.

In a must read article for those interested in the subject of our economy, David Vaughn reveals that Citigroup in an internal client note is predicting that gold may punch through the $2000 per oz. range next year:

“Citigroup says gold could rise above $2,000 next year as world unravels. Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world’s monetary system with liquidity, according to an internal client note from the US bank Citigroup.” “Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009.” “Gold has tripled in value over the last seven years, vastly outperforming Wall Street…”

In a related article, there is an excellent analysis with some revealing charts, of what is happening to gold on the commodities market:

While we see signs of “big money” moving into gold through machinations occuring with respect to “deliveries” at COMEX, there are other ‘tell tale’ signs that demand for physical metal is in fact SOARING. This is reflected by the recent decoupling of the price of COMEX gold futures and real costs one must incur to obtain physical ounces in coin or bar form. The premiums being paid for physical ounces have decoupled to the point where leading gold web sites now routinely list current ebay pricing for gold bars and coins to achieve “accurate” real world pricing for physical metal.

I had heard that high premiums must be paid to obtain gold and silver in convenient coin form, but since I have not personally bought or sold any for a couple of years, I was not aware that coin prices are now quoted from e-bay prices, pretty much ignoring the traditional “spot” commodity prices. Investigating that here, I note that a one ounce gold coin is now worth almost $1000, even though the market price for gold is in the mid $700 range.

Finally, for an excellent explanation of what the Fed is up to, read “U.S. Fed Monetizing Debt by Printing Money.” As an example:

How does the Fed get its money? It doesn’t need to borrow it; it merely creates an entry into its balance sheet. All the Fed requires to “print” money is a keyboard connected to a computer. The difference between the Fed and the Treasury issuing money is that the Treasury needs to get permission from Congress before selling bonds. In this context, it shall be mentioned that physical cash (coins, bank notes) are entered as liabilities on the Fed’s balance sheets; they are rather unique liabilities, however, as you can never redeem your cash: if you went to a bank, the best you can hope for in return for your dollar bill is a piece of paper that states that the bank owes you one dollar. While it is possible for central banks to remove cash in circulation, they are not obliged to do so.

As I keep saying, buckle up and be prepared. Even at $1000 per oz. gold is incredibly cheap right now, is unlikely to get any cheaper, and may very well go through the roof as the wheels keep coming off our economy. â—„Daveâ–º

A slow-paced discussion has been going on in a comment section that deserves a wider audience. Tom recently said:

Thank you for your comments. My mind is still swimming. I have thoughtfully read your comments twice–at least–at different sittings, as well as Troy’s Secession piece along with the comments that followed. I am very impressed by the clearly written expressions of passion and conviction and the depth and quantity of thought and detail. I have some thoughts to express aloud.

As an American citizen, I share much anger and frustration. On the other hand, I do not believe there can exist a political utopia, whether the embedded economic system is capitalistic or socialistic, or a blend of both. Because human beings are imperfect creatures, all governments, institutions, and professions will have elements of corruption and incompetence: and if these pockets of corruption and incompetence are unattended, they can erode and\or destroy a government, an institution, or a profession. Along with many others, I also think that human beings are animals capable of reason and that human beings are also social animals who thrive best by forming social contracts, that is, systems of agreements with commitments, rights and responsibilities, although the social contracts (including the Constitution) may be imperfect ones. As time moves and flaws in the social contract become apparent and new problems develop, the parties involved in the social contract must make choices to correct present and potential problems. In such a process, I think that intelligent, honest, sincere, and competent men and women will sometimes make mistakes, though they act with good intentions. And I also think that all complex problems are not immediately solvable and that some problems cannot be solved at all. When “corrections or “perceived corrections” are made, there well may be some negative, unintended consequences. Consequently, adjustments will be needed. So the cycle continues and more imperfect representatatives in a constitutional repubic will attempt to solve complex problems. So it goes.

So, for me, given the imperfections of human nature and American strengths balanced against America’s weaknesses (democracy’s flaws, capitalism’s flaws), I think that living in America and accepting my rights and responsibilities (as I understand them in the context of the Declaration of Independence, the Constitution and its Amendments, and The Gettysburg Address (especially a government of, and by, and for the people) is the best choice for me at this time and place, my here and now. And I am thankful that I can freely discuss and write about this free choice to live in America, while at the same time honoring and respecting those who think and choose differently.

A closing note: I believe that Freedom is not an absolute and that Freedom is not free. My freedom–my ability to make important and significant political, economic, and personal choices in a personally secure and comfortable environment–is deeply rooted in the risks and the sacrifices that many Americans have made through the years in order to make and preserve the identity of the United States. I am humbled at the thought.

That was an excellent summation of your reaction to what you are encountering here, Tom. When one first becomes exposed to some of the history of what America once was, and the perversion of it that has taken place, one’s mind and worldview do indeed swim in a sea of confusion and mixed emotions.

For what it is worth, Troy and I experienced this awakening years ago, long before we met online. We spent the last year together elsewhere, almost daily kicking around proactive ideas about how to awaken the American people to what had happened; and what was coming, if we did not return to our founding principles before it was too late. In between, it is probably fair to say that we went through the stage of pragmatic compromise with the modern Robin Hoods, which you find yourself presently in.

We are now, to be sure, inflexible proponents of individual sovereignty, who will never accept the status of serf or the chains of a slave, be they attempted by a tyrant or a committee of the vox populi. We have watched with trepidation the brewing of this perfect storm. Converging forces of corrupted national politics, unsustainable debt, phony environmentalism, expanding corporatism, globalist geopolitics, Islamic jihad, illegal immigration, the monetary malfeasance of the financial world, and the abdication of their adversarial duty by the fourth estate, were there for all to see; but few bothered to connect the dots. Believing in the essential character of the American people, Troy, I, and countless others did all we knew how to warn them.

Alas, as old men from the heartland, we discounted the efficacy of the emoting academics and their sycophant media, feverishly emasculating the minds of metropolitan voters; thereby robbing them of their birthright as free, self-sufficient, and self-reliant Americans. The indomitable character of the typical countryman of our youth, has simply vanished in our lifetimes.  Now, the results of our recent election provide the final ingredient to that perfect cauldron, and with utter dismay we watch helplessly as the maelstrom comes crashing on our shores.

You appear to subscribe to the swinging pendulum theory, which would keep America essentially centered as we tack back and forth in our endeavors to make more perfect our Union. I and others had a brief moment of hope back in early ’94, when a cadre of young libertarian thinking Republicans made a “Contract With America” to win their votes. Sadly, it only took a distressingly short time for them to be utterly corrupted by the environment in DC, and the pendulum has been stuck on the Left ever since.

For all the hateful rhetoric from the Left over the past eight years, the Bush administration has basically been a Progressive one. For all the epithets from Leftists toward “neocons,” people forget that these characters were Wilsonian Progressives who got fed up with the pacifists who had hijacked the Democratic Party; so they deliberately sought to hijack the Republican Party for their New World Order agenda.

With the singular exception of his Jacksonian reaction to 9/11, Bush has allowed these Wilsonian neoconservatives to govern entirely from the Left. “No Child Left Behind,” “Medicare Drugs,” “Amnesty for Illegals,” “Mexamericanada” (SPP) et al, are not conservative ideas. Neither is massive deficit spending or corporate bailouts. He signed all the pork barrel spending bills that allowed Congress to pander to their voters, to maintain the status quo of incumbency. Bush is not a conservative ideologue or even a libertarian, he is a Pragmatist.

Even his personal choice for the Supreme Court was uninspiring, and it took a massive revolt by his own constituency to get him to appoint a couple of strict constructionists. The simple truth is, Kennedy’s administration was well to the Right of Bush’s, and to a lesser extent, so was Clinton’s. Were he a Democrat, all but the twitchy Jeffersonians among them would be singing his praises. As a Republican, almost nobody is, and to call his tenure in office a period of conservatism, is just silly.

You allude to flaws in our original social contract, and I will acknowledge a few; the pragmatic accommodation of the slave trade, chief among them. Our nation eventually paid dearly for that; but the changes enacted in 1913 were not corrections, they were perversions. If I could erase a single year in our history, that would be the year.

From my and countless others’ perspective, the pendulum never even got back to the center, much less to the Right, and it just took another hard swing Leftward. Nothing I see on the horizon is likely to correct that, and this rapidly approaching perfect storm will be unthinkably devastating and not abate anytime soon. The Progressives who are now in total control of the reins, will undoubtedly repeat FDR’s mistakes, which so unnecessarily delayed our recovery from the last depression.

Please forgive us for abandoning all hope of reason alone effecting the necessary political adjustments to weather it comfortably. Reason is in short supply in America these days; feelings, whim, and the crippling “entitlement” mindset are in ascendancy. The powers that be, even if smart enough to know better, are going to have to dance with the the folks who empower them; and to the tune they played as the piper, however discordant to a rational ear.

Thus, we reckon that nothing short of hitting the reset button, and rebooting an uncorrupted copy of our original Constitution, is going to get the system back to operating smoothly and efficiently in an atmosphere of laissez faire capitalism, with honest currency, for the true benefit of all Americans – whether they are too mind-numbed to understand it or not. If that requires abandoning the metro-academics to pillage and plunder each other in their Marxist inspired ghettos, while the producers in Flyover Country cast off their chains and start afresh, C’est la vie. â—„Daveâ–º

An ethanol drenched IowaHawk classic. Enjoy. 🙂 â—„Daveâ–º

Orrin over at First Principles has a very comprehensive piece on the looming piracy issue. He makes a good point:

The proper role of government can be understood as an umbrella.  In order to maximize individual freedom, the government must protect us from other individuals who might wish to curtail that freedom.  This is how being tough on crime and having a strong national defense are conservative in the tradition of protecting individual liberties.  (While the proper balance is admittedly never easy to strike, liberals and many libertarians tend to ignore completely the freedom-enhancing value of being able to live your life free from fear of crime or death-by-terrorist, as if government were the only entity capable of restricting your freedom.)

No where does this principle apply more than with protecting commerce from direct, physical attack.

Imagine I make a product, and want to sell it across town to my friend who wants to buy it.  He needs my product in his business, I need his money to grow my own business (and get a sweet car).  But if I am attacked and lose my product every time I try to transport it to my friend, my production becomes pointless, and my profit is lost.  In those circumstances, can I truly be said to be free to pursue my rights to life, liberty, property, and the pursuit of happiness?  Not in the least.  I starve, or am reduced to subsistence.  Same with him.

In a global economy, international piracy works to strangle freedom and liberty in exactly the same way.  It is a scourge to our most fundamental rights.

Undermining these economic liberties is far more dangerous than limiting the growth of some CEO’s retirement fund.  It is a direct threat to our civilization.

Agreed. That is why this libertarian accepts the notion of limited government and is not quite an anarchist. I recommend the article and his prescription for a solution. I wouldn’t hold my breath waiting for Obama to act decisively, however. He and his handlers are pretty invested in diplomacy, and it just wouldn’t do for him to come out swinging. We will have to wait to see whether he is an appeaser. I suspect he will be. â—„Daveâ–º

The Cato Institute has published an interesting essay by an obviously Left-leaning libertarian named Roderick Long entitled, “Corporations Versus The Market; Or, Whip Conflation Now.”

While I would take issue with some of his examples of “corporate welfare” (e.g. Walmart’s competitors use the same roads they do to ship their inventory), I got more out of the essay than I initially expected to. As a devout Capitalist, I used to have somewhat of a knee-jerk defense reaction to Leftist bashing of Corporations of any size, even though I am a small businessman. That business of late (past 12 years) has been a private Montessori school, so the condition of the public school system in America has been a particular focus of mine.

Then, I read a mind blowing (and opening) book by John Taylor Gatto entitled, “The Underground History of American Education,” which is available as a free e-book at that link. The scales started dropping from my eyes. It explains in excruciating detail how and why our children are being deliberately dumbed down. Almost more importantly, SO WERE WE! The process has been underway for over a hundred years! It still pisses me off when I think about it.

The history of the Progressive Movement is covered well in Jonah Goldberg’s “Liberal Fascism” and Amity Shlaes’ “The Forgotten Man“; but if I only had time for one of the three, I would recommend Gatto’s. Further to the detailed history of the Progressives, it documents how the early industrialists like Rockefeller, Carnegie, et al, were very much behind the effort to create mindless little cogs for the tedious chores in their corporate machinery.

There is a reason that public schools resemble factories in so many ways. Humans have to be programmed to accept the tedium of spending the day metaphorically chained to a desk or machine in a cubical or factory, and the younger one starts, the easier the chore. Further, the industrialists didn’t want us to be educated any more than absolutely necessary to perform the required tasks and be easily persuaded to desire their products. Thinkers tend to become entrepreneurs and eventually bothersome competitors who can disrupt their well laid plans with innovation and guerrilla tactics unsuited to the behemoths.

This is the reason that the Montessori Method of education is eschewed by the factory schools in America. Children are given freedom of movement and learn how to think – critically and for themselves – not what to think in a Montessori classroom, and these are dangerous notions to the oligarchy. It almost makes me want to cry when I think of what this nation could be like, if the minds of our children were unleashed, and the government got the hell out of our way.

The thing I got most out of Long’s essay was a clearer picture of how the Right slope, away from individual Liberty in my Political Circle Chart, represents not just the trend toward theocracy; but embodies corporatism, which can be as statist as Marxism, and almost as dangerous to our Liberty. Example:

Consider the conservative virtue-term “privatization,” which has two distinct, indeed opposed, meanings. On the one hand, it can mean returning some service or industry from the monopolistic government sector to the competitive private sector—getting government out of it; this would be the libertarian meaning. On the other hand, it can mean “contracting out,” i.e., granting to some private firm a monopoly privilege in the provision some service previously provided by government directly. There is nothing free-market about privatization in this latter sense, since the monopoly power is merely transferred from one set of hands to another; this is corporatism, or pro-business intervention, not laissez-faire. (To be sure, there may be competition in the bidding for such monopoly contracts, but competition to establish a legal monopoly is no more genuine market competition than voting—one last time—to establish a dictator is genuine democracy.)

I must admit he has a point. Further:

This conflation in turn tends to bolster the power of the political establishment by rendering genuine libertarianism invisible: Those who are attracted to free markets are lured into supporting plutocracy, thus helping to prop up statism’s right or corporatist wing; those who are repelled by plutocracy are lured into opposing free markets, thus helping to prop up statism’s left or social-democratic wing. But as these two wings have more in common than not, the political establishment wins either way.

I hadn’t looked at it that way. Statism to the Left of me and statism to the Right of me, which has nothing to do with the religious Right. And:

In the nineteenth century, it was far more common than it is today for libertarians to see themselves as opponents of big business.[20] The long 20th-century alliance of libertarians with conservatives against the common enemy of state-socialism probably had much to do with reorienting libertarian thought toward the right; and the brief rapprochement between libertarians and the left during the 1960s foundered when the New Left imploded.[21] As a result, libertarians have been ill-placed to combat left-wing and right-wing conflation of markets with privilege, because they have not been entirely free of the conflation themselves.

Another piece of the puzzle falls into place in my mind, and I need to now modify my chart to reflect the economic spectrum. Laissez-faire Capitalism would be at the top, with Marxism / Socialism on the Left and corporatism on the Right. â—„Daveâ–º

Over the years, I have periodically encountered the following list of Communist goals from Cleon Skousen’s book, “The Naked Communist” which was inserted into the Congressional Record in 1963. It is always sobering, and now that we have progressed to the point of electing a Marxist to the office of POTUS, it is worth reviewing once again:

Communist Goals (1963) Congressional Record–Appendix, pp. A34-A35 January 10, 1963

Current Communist Goals EXTENSION OF REMARKS OF HON. A. S. HERLONG, JR. OF FLORIDA IN THE HOUSE OF REPRESENTATIVES Thursday, January 10, 1963.

Mr. HERLONG. Mr. Speaker, Mrs. Patricia Nordman of De Land, Fla., is an ardent and articulate opponent of communism, and until recently published the De Land Courier, which she dedicated to the purpose of alerting the public to the dangers of communism in America.

At Mrs. Nordman’s request, I include in the RECORD, under unanimous consent, the following “Current Communist Goals,” which she identifies as an excerpt from “The Naked Communist,” by Cleon Skousen:

[From “The Naked Communist,” by Cleon Skousen]

1. U.S. acceptance of coexistence as the only alternative to atomic war.

2. U.S. willingness to capitulate in preference to engaging in atomic war.

3. Develop the illusion that total disarmament [by] the United States would be a demonstration of moral strength.

4. Permit free trade between all nations regardless of Communist affiliation and regardless of whether or not items could be used for war.

5. Extension of long-term loans to Russia and Soviet satellites.

6. Provide American aid to all nations regardless of Communist domination.

7. Grant recognition of Red China. Admission of Red China to the U.N.

8. Set up East and West Germany as separate states in spite of Khrushchev’s promise in 1955 to settle the German question by free elections under supervision of the U.N.

9. Prolong the conferences to ban atomic tests because the United States has agreed to suspend tests as long as negotiations are in progress.

10. Allow all Soviet satellites individual representation in the U.N.

11. Promote the U.N. as the only hope for mankind. If its charter is rewritten, demand that it be set up as a one-world government with its own independent armed forces. (Some Communist leaders believe the world can be taken over as easily by the U.N. as by Moscow. Sometimes these two centers compete with each other as they are now doing in the Congo.)

12. Resist any attempt to outlaw the Communist Party.

13. Do away with all loyalty oaths.

14. Continue giving Russia access to the U.S. Patent Office.

15. Capture one or both of the political parties in the United States.

16. Use technical decisions of the courts to weaken basic American institutions by claiming their activities violate civil rights.

17. Get control of the schools. Use them as transmission belts for socialism and current Communist propaganda. Soften the curriculum. Get control of teachers’ associations. Put the party line in textbooks.

18. Gain control of all student newspapers.

19. Use student riots to foment public protests against programs or organizations which are under Communist attack.

20. Infiltrate the press. Get control of book-review assignments, editorial writing, policy-making positions.

21. Gain control of key positions in radio, TV, and motion pictures.

22. Continue discrediting American culture by degrading all forms of artistic expression. An American Communist cell was told to “eliminate all good sculpture from parks and buildings, substitute shapeless, awkward and meaningless forms.”

23. Control art critics and directors of art museums. “Our plan is to promote ugliness, repulsive, meaningless art.”

24. Eliminate all laws governing obscenity by calling them “censorship” and a violation of free speech and free press.

25. Break down cultural standards of morality by promoting pornography and obscenity in books, magazines, motion pictures, radio, and TV.

26. Present homosexuality, degeneracy and promiscuity as “normal, natural, healthy.”

27. Infiltrate the churches and replace revealed religion with “social” religion. Discredit the Bible and emphasize the need for intellectual maturity, which does not need a “religious crutch.”

28. Eliminate prayer or any phase of religious expression in the schools on the ground that it violates the principle of “separation of church and state.”

29. Discredit the American Constitution by calling it inadequate, old-fashioned, out of step with modern needs, a hindrance to cooperation between nations on a worldwide basis.

30. Discredit the American Founding Fathers. Present them as selfish aristocrats who had no concern for the “common man.”

31. Belittle all forms of American culture and discourage the teaching of American history on the ground that it was only a minor part of the “big picture.” Give more emphasis to Russian history since the Communists took over.

32. Support any socialist movement to give centralized control over any part of the culture–education, social agencies, welfare programs, mental health clinics, etc.

33. Eliminate all laws or procedures which interfere with the operation of the Communist apparatus.

34. Eliminate the House Committee on Un-American Activities.

35. Discredit and eventually dismantle the FBI.

36. Infiltrate and gain control of more unions.

37. Infiltrate and gain control of big business.

38. Transfer some of the powers of arrest from the police to social agencies. Treat all behavioral problems as psychiatric disorders which no one but psychiatrists can understand [or treat].

39. Dominate the psychiatric profession and use mental health laws as a means of gaining coercive control over those who oppose Communist goals.

40. Discredit the family as an institution. Encourage promiscuity and easy divorce.

41. Emphasize the need to raise children away from the negative influence of parents. Attribute prejudices, mental blocks and retarding of children to suppressive influence of parents.

42. Create the impression that violence and insurrection are legitimate aspects of the American tradition; that students and special-interest groups should rise up and use [“]united force[“] to solve economic, political or social problems.

43. Overthrow all colonial governments before native populations are ready for self-government.

44. Internationalize the Panama Canal.

45. Repeal the Connally reservation so the United States cannot prevent the World Court from seizing jurisdiction [over domestic problems. Give the World Court jurisdiction] over nations and individuals alike.

How close are they to achieving their goals? Do Americans have a clue what is happening to our country? Does Obamarx? How many of us still care? â—„Daveâ–º

For a change of pace, I found some good news at Paleo Lithics blog regarding national embarrassment, John Murtha, being in trouble and appealing for more cash from his donors to save his seat. Then he mentions the famous Johnstown flood tax of 1936, another classic example of “temporary” taxes that outlive their original emergency purpose:

Oops. Welcome to the wonderful world of Pennsylvania politics, where earmarked “temporary taxes” never go away and instead are diverted to “discretionary use.” Where a candidate for office calls his constituents (aka voters) “racist” and “redneck” and the same candidate takes credit for the revitalization of an area that the taxpayers pay toward with the purchase of every bottle of wine or liquor in the overpriced and tiny state monopolized “Wine and Spirit” shops. Where, if you have a few dollars left in your wallet after paying federal, state, and local taxes, you might be able to afford a cheap bottle of wine – if you can afford the sales tax calculated  on top of a decades old temporary tax.  It’s long past time for change in Pennsylvania, starting with John Murtha.

Federal Income Tax itself was promised to be only one percent for the duration of WWI. Right. It is this reality that makes me so nervous about the “temporary” bailout of our major banks. Any bets on how soon the government no longer has any “ownership position” in them?

Wow, and the other way for a change. There must be some lucky and/or clever traders making a fortune; but for every happy buyer at the lows, there is an unhappy seller kicking himself.  Have they really found the bottom, or was this a lifeline thrown to McCain?  We will see if it can survive the profit taking in the morning.  I notice gold is holding steady at real bargain basement prices, so the hedge funds are still dumping bullion tonnage on the market to acquire cash for the big boys who are still bailing out.  Of course, the effects of inflation – some say there are now four times the number of dollars in circulation as before the crash – are yet to be felt… â—„Daveâ–º

Here is the transcript of the NPR audio below in 2001:

Barack Obama:

“You know, if you look at the victories and failures of the Civil Rights movement, and its litigation strategy in the court, I think where it succeeded was to vest formal rights in previously dispossessed peoples. So that I would now have the right to vote, I would now be able to sit at a lunch counter and order and as long as I could pay for it, I’d be okay, but the Supreme Court never entered into the issues of re-distribution of wealth, and sort of more basic issues of political and economic justice in this society.

“And uh, to that extent, as radical as I think people tried to characterize the Warren Court, it wasn’t that radical. It didn’t break free from the essential constraints that were placed by the Founding Fathers in the Constitution – at least as it’s been interpreted, and Warren Court interpreted it in the same way, that generally the Constitution is a charter of negative liberties: [it] says what the states can’t do to you, says what the federal government can’t do to you, but it doesn’t say what the federal government or the state government must do on your behalf.

“And that hasn’t shifted, and one of the, I think, the tragedies of the Civil Rights movement was because the Civil Rights movement became so court-focused, uh, I think that there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change. And in some ways we still suffer from that.”

A caller:

“The gentleman made the point that the Warren Court wasn’t terribly radical. My question is (with economic changes)… my question is, is it too late for that kind of reparative work, economically, and is that the appropriate place for reparative economic work to change place?”

Obama:

“You know, I’m not optimistic about bringing about major redistributive change through the courts. The institution just isn’t structured that way… You start getting into all sorts of separation of powers issues, you know, in terms of the court monitoring or engaging in a process that essentially is administrative and takes a lot of time. You know, the court is just not very good at it, and politically, it’s just very hard to legitimize opinions from the court in that regard.

So I think that, although you can craft theoretical justifications for it, legally, you know, I think any three of us sitting here could come up with a rationale for bringing about economic change through the courts.”

Marxist; Socialist; Fascist? Pick one; but proud American Patriot, Capitalist, or Constitutionalist he ain’t. â—„Daveâ–º

Gee, I find this audio blast out of Obama’s past strangely comforting:

Obama Bombshell Redistribution of Wealth Audio Uncovered

I had become so accustomed to his “rope a dope” – “aw shucks, I didn’t know what was going on around me” jive that I was starting to think the man was clueless. While still inarticulate, and unable to speak a complete sentence extemporaneously without stuttering, it is obvious here that he was very familiar with the subject matter. This means he is not clueless; but just a very good liar when he pretends not to be toying with Marxist principles. Perhaps this heretofore hidden intelligence might keep him from making too many serious blunders when confronted with the reality beyond the petty world of Chicago politics after all. One can at least hope so. We have survived lying political opportunists shoveling tax money into their enablers’ coffers before, and can do it again… but if he chooses to kill the golden goose for ideological “redistributive” purposes as punishment for the dastardly achievers, we probably won’t. Time will tell. â—„Daveâ–º

All hell is about to break loose in about ten minutes on the stock market.  Duck and cover… and wish us luck. â—„Daveâ–º

Again… and actually worse than the 777; because down here in the 8’s, 733 represents an almost 8% one-day drop.  They say that the underlying weakness in the economy, more than the liquidity crisis, fueled today’s drop.  In any case, the massive spike in volume at the end is back, with a remarkable 76 million shares traded in the last few minutes.  Short traders or Jihad? Maybe I am looking in the wrong places; but I don’t see any speculation about this. â—„Daveâ–º

Daedalus made a comment over at Troy’s place that I would like to explound upon beyond what might be appropriate in a comment section:

I agree with you in principle that it is counter productive to tax corporations, but it does raise the question of what is the moral way to pay for the limited but essential services of a government.

This begs the question, what are the limited but essential services of a government?  To my mind, the principle purposes of our Federal Government are national defense, a court system to adjudicate interstate and international disputes, customs and immigration, and to coin and regulate the value of real money (this last duty was abdicated by Congress in 1913 and we are currently in the throes of paying dearly for that folly).  90% of all else they spend money on is beyond their legitimate purview and of no value to me whatever.  I thus guiltlessly avoid paying my share of the ridiculous cost of such by any means available to me.

To answer John’s question, I suggest user fees.  If we are to be the policeman of the world, how about renting out our forces to those allies who chose not to spend their blood and treasure on their own defense.  Didn’t we turn a profit providing the mercenaries for the first Gulf War, when the free world ponied up the cash for us to kick Saddam out of Kuwait?  If the Europeans need our troops stationed in their countries to protect them from Russia, shouldn’t they be paying us for the service, rather than us paying rent for the bases?

Now that Saddam has been eliminated, Saudi Arabia, Kuwait, Jordan, et al are desperate for us to stay in the theater to protect them from Iran.  Instead of sending them $700B a year for their oil, perhaps we could work out a fair trade for our protection racket.  Piracy is on the ascendency again; perhaps the worldwide shipping industry should help fund our Navy.

The court system could easily be funded by user fees.  A “loser pays” (full) court cost system could be arranged.  This would have the secondary benefit of reducing the load of frivolous lawsuits.  Better yet, anyone wishing their contracts to be protected by US courts could be required to purchase such protection in advance in the form of tax stamps that must be affixed to all the documents. This could easily be turned into another profit center, and private enterprise could compete with arbitration services.

Infrastructure such as Interstate Highways (obstensibly built for our military) and National Parks are already funded by user fees (gasoline taxes, entry fees, etc.).  Any that are not, should and could be.

Customs and Immigration should be funded by tarrifs, duties, and port of entry fees.  Even illegal immigrants spend a fortune in bribes and coyote fees to get here, so legitimate immigrants and tourists could pay a fee to cover the cost of these services.  Perhaps they should be high enough to fund our State Department too, since our embassies are much involved in the visa business.

I know nobody who objects to paying for governmental services they actually use, unless the politicians are wasteful with their funds.  On the local level, property taxes are willingly paid to fund police, fire, and legitimate infrastructure that is universally used by the public.  It is the pet projects for special interests that raise taxpayer ire.

Finally, for any legitimate function I may have overlooked that doesn’t lend itself to user fees, and any defense costs not covered by foreign payments, I would recommend a retail sales tax like the “Fair Tax” proposal.  As I illustrate in my taxes essay, the consumer ultimately pays all taxes anyway. Even with all the waste, fraud, and abuse our politicians currently perpetrate on us, enacting the Fair Tax would end our financial crisis overnight, as all the offshore capital came rushing back to our income-tax-free shores.  â—„Daveâ–º

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I watched the Mike Huckabee show on Fox News last night. It is interesting how likable he is now that there is not a daily drumbeat from the press about him being a fire-breathing fundamentalist preacher trying to turn America into a theocracy.  In retrospect, it is too bad that he had to share the conservative votes in the Primary; I would much prefer him to McCain.  Better yet, he would make a great VP for Sarah Palin. 🙂

During a segment with Chuck Norris, he mentioned that he had heard in high places that there is concern that there might be a coordinated terrorist attack component to what is happening to the stock market, and mentioned the spikes in volume in the last half hour of each day.  This resonated with me because last week when I was playing with the interactive chart on the MSN money site I had noticed the daily spike in volume in the last half hour of trading.  Here is a screen capture of this morning’s chart:

Say goodbye to 9000 and another 7 1/3% of the market.  That adds up to over 20% lost in the past ten days.   Not being a trader, I was unaware of some of the cool tools available for watching it.  I recently installed a ticker widget for Windows Vista, but it only updates every 15 min. or so.  While it did get my initial attention, I just spent an interesting hour repeatedly updating my browser to watch the Dow dive.  Clicking on the widget opens a new tab in my browser for “moneycentral.msn.com,”  which has some nifty features that I started playing with.  I was fascinated with the interactive chart that can be scaled from one day all the way back to 1928.

At Max Scale, it is thought provoking.  It took 35 years for the DJIA to grow to $1000 after the crash of ’29.  Then, it more or less stayed there for another 20 years.  I suppose in the mid ’80s Greenspan’s “irrational exuberance” set it.  The trend line at the end is a bit disconcerting, no?

We as a country went from producing goods, to borrowing and playing with monoply money as our chief occupation.  Perot was right, we are just taking in each other’s laundry and trading basically worthless paper with each other.  What is going to happen when those that now produce our goods overseas stop accepting our ubiquitious green IOU’s in trade for real products?  â—„Daveâ–º

According to the Associated Press:

Retirement accounts have lost $2 trillion

WASHINGTON (AP) – Americans’ retirement plans have lost as much as $2
trillion in the past 15 months, Congress’ top budget analyst estimated
Tuesday.

…

Orszag indicated the fear is well-founded. Public and private pension
funds and employees’ private retirement savings accounts—like
401(k)’s—have lost some 20 percent overall since mid-2007, he
estimated. Private retirement plans may have suffered slightly more
because those holdings are more heavily skewed toward stocks, Orszag
added.

…and what is left will continue to purchase less and less.  I suppose we deserve it for spending our lives electing politicians who were mortgaging the future.  Welcome to the future.  Inflation is the most insidious tax of all, and cruelest to seniors unable to arrange a pay raise to counter it.  Tighten your belts.  â—„Daveâ–º

This could be it folks.  So much for the vaunted bailout our befuddled politicians were so proud of Friday; it didn’t work, even on Friday.  Now it is (Black?) Monday:

Asian Market Indices

European Market Indices

Expect ours to tank again on opening.

Hot tip:  Go long on wheelbarrows and short on wallets and purses.  The FED has only one tool left: Treasury printing presses.  Expect an emergency cut in Prime to or near 0%… they will be giving the stuff away and begging us to go spend it, so everyone may soon need a wheelbarrow. â—„Daveâ–º

John posted this link to the Ayn Rand Center’s analysis of our current fiscal crisis on the old RR Forum last night. It included a cogent quote from Ayn Rand, circa 1975:

“One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.” –Ayn Rand, 1975

I am still working my way through the many on-point articles there; but I just got a YouTube link from Troy that is a devastating indictment of certain members of the Democratic Party. It has clips from old C-Span broadcasts of hearings of the House banking committee, where regulators and Republicans were calling for reigning in Freddie and Fanny Mac, to the chagrin of Democrats who thought their loaning 100% to their ghetto constituents for housing loans was precisely why they existed. I had no idea there was such a racial component to this mess. No wonder nobody in DC is willing to discuss the truth about how it happened. â—„Daveâ–º

This is a test post to try the “Blog Post” feature in MS Word 2007. This is a really nice feature that allows one to use the word processer to make a post to a blog without even having a browser open, much less the blog. While the internal WordPress editor works fine, I am quite impressed with the utility of ScribeFire for making a quick post in response to something while surfing without having to open the blog; but for essay type posts, this feature of Word is awesome. It even automatically went out and imported the “Category” list so one can categorize the post as it is made. Sweet.

By some estimates, one trillion dollars was lost in the stock market yesterday. Where did it go? The same place the “value” in our homes went in the past year? The same place the new $650 bn of credit came from that the FED made available to the financial markets yesterday, perhaps? This demonstrates how worthless our currency actually is. 34,722 Tons of gold didn’t just disappear at the Wall Street casino yesterday. Nor did 22,569 Tons of the stuff suddenly materialize over at the FED. No wonder it seems like every other commercial one hears on radio and TV these days is for some gold trading company. (I miss my forum emoticons… eyes should be rolling here.)

The thing to notice is that the value of individual savings denominated in U.S. Dollars took yet another enormous hit yesterday. Those invested in the stock market took a double hit. On average, their stocks, mutual funds, and retirement accounts lost 7% of their value in a single day. Then, the buying power of what is left was diluted by the introduction of another $650 bn of brand new funny money, representing nothing but thin air, by the FED. One way to understand the effect of that mindboggling figure is that it is the equivalent of adding another 21,666,667 welfare families to our population overnight. Then giving them each an unearned $30K tax-free income for a year, to compete with us in the marketplace for exactly the same amount of goods and services that existed yesterday, none of which they helped produce. The market is rational, even if the government is not. Supply and Demand are always balanced by Price. In a free marketplace, it could not be otherwise. Is there any question that prices will soon increase accordingly?

That is why, when I could not buy silver with it, I went and bought another $1K worth of coffee, tobacco, and beans. It is interesting to note that back when I was earning that money just a few years ago, a three-pound package of Jose’s Columbia Supremo coffee beans at COSTCO was under $7. I buy some every trip I make there and have watched the price steadily climb the past couple of years. I had to pay almost $11 a bag for the two cases I bought yesterday; but I have no reason to think it will ever be cheaper. As an imported commodity, assuming that COSTCO survives, it will be interesting to see how much it costs a year from now. If they don’t, it may be more valuable than gold.

Today, I am thinking of going to buy some more ammunition. Not that I need it; but since I can’t find any silver, it will undoubtedly conserve the value of my ready cash better than all these worthless green pictures of Franklin. Besides, if we do spiral into unfettered hyperinflation, bullets could come in handy for bartering. â—„Daveâ–º