Tuesday, April 28, 2009

Secession

Secession has been in the news recently after the Governor of Texas mentioned it during the Tea Party fervor of a couple of weeks ago. Many would be surprised to discover that it has been the subject of much discussion in certain quarters for many years.

The Mises Institute has published an article entitled, Secession Is In Our Future. It is an interesting article discussing how secession could take place, who would secede, and what would happen.

The writer, Clifford Thies, wonders about the states, "Would they want to bail out the corporations, the unionized public-school teachers, municipal workers, and the UAW, and the bankrupt states of California and New Jersey, among others, when the burden falls much more heavily onto them?"

It is easy to believe that things will always stay as they are, that a great nation like the United States will persevere into perpetuity. But the reality is that no nation is able to last long--nations rise and fall, and to believe that the United States is immune to this is sheer arrogance.

The reality is that the United States will face a currency and debt crisis in the magnitude of a third world nation in coming years. The level of debt and the political pressure toward hyperinflation is so great that it is all but inevitable. In this scenario it is not only conceivable, but likely, that some, perhaps many states, will secede from the Union rather than bear the burden hoisted upon them by the federal government.

Sure, secession may seem a bit crazy, but crazy things happen all the time. We're just not accustomed to them happening to us. There are a lot of really bad things going on now, and they're going to get worse before they get better.

Prepare yourself. As economist Robert Murphy says, " transfer your wealth out of assets denominated in fixed streams of U.S. dollars, and switch to something that responds to large price inflation. In short, sell your corporate and government bonds, and start stocking up on precious metals."

UPDATE: 5/1/09 Here is another excellent article on secession.

Friday, April 24, 2009

Up From Conservatism

I remember studying the U.S. Constitution for the first time in eighth grade and being perplexed that things were not the way they were intended by the founding fathers. Since then I have always yearned to see our government work the way it was intended to work. Yet at the same time I was firmly committed to the principles espoused by the conservative wing of the Republican Party.

I had been persuaded that if Republicans were in power in Washington that the government power would be restrained and we would thrive as a nation. I believed that the way things were was basically working. The Federal Reserve System was managing the economy well, we have freedoms many other nations yearn to possess, and our economy was strong and showed no signs of mortality.

Though I still wished things were as the Constitutional framers had intended them to be, things were working, and I thought it wasn't realistic to upset a functioning system. So I supported George W. Bush for president in 2000 and 2004, believing that he would govern fundamentally differently than Al Gore and John Kerry.

After 9/11 I too began to believe that we must take action against radical Islamic terrorists and part of that action must ultimately include dealing with Iraq, which I'd believed that George H. Bush and Bill Clinton had dealt with inadequately. I was enthusiastic about the prospect of overthrowing the tyrannical regime of Saddam Hussein and bringing peace and democracy to Iraq. I fiercely defended the war and had contempt for those that opposed the war and later worked to end it.

I was a strong proponent of the Patriot Act and believed it was a much needed piece of legislation that would protect America from Islamic terrorism. As for the massive budget deficits of the Bush administration I wished that he and the Congress would use restraint, but I still supported the president and much of the other policies he enforced. I kept thinking, if only Bush had restrained spending, what a great president he could have been. I honestly believed that George W. Bush would go down in history as one of our best presidents—going against the conventional wisdom of the day.

But these beliefs have undergone a radical transformation since Barack Obama took office in January. President Obama has continued many of the policies of his predecessor including bank bailouts, continuing in Iraq, and continued trust in the Federal Reserve System. While President Bush pushed the budget deficit into unprecedented heights, President Obama has already spent more than Bush ever did.

The likeness between the two men's policies has given credence to the notion that the two parties have more in common than not. The two political parties have false disagreements—meaning they are arguing over the wrong questions, arguing with the wrong presuppositions.

Enter Ron Paul, Austrian Economic Theory, and Libertarianism. I was introduced to Austrian Economics through Peter Schiff, a financial pundit that is all over cable news shows. He predicted the economic collapse years ago, and was ridiculed for it. I wanted to know why he was so prescient, so after some research I found that he was connected to the Austrian school of thought on economics. The more I read the more convinced I was that the current political and financial structure was inherently immoral, deceptive, destructive, and unconstitutional.

I found that Congressman Ron Paul of Texas had also been predicting economic collapse for years and had been actively opposed to most everything that Congress has done during his tenure in Washington. I'd known of Ron Paul during the 2008 Republican Primaries and I thought he was a naïve third party candidate with no hope of winning, and I didn't even consider supporting him for these reasons.

I finally broke down and read Ron Paul's book entitled The Revolution: A Manifesto. I thought that I might at least appreciate his stance on small government and sound money, but I thought I would be unconvinced about his opposition to the Iraq War and supporting Israel financially and militarily. To my surprise I found myself in complete agreement with everything he wrote in the book.

As Paul argues, our intervention in the affairs of Afghanistan and Iraq are the foreign policy results of an out of control federal government. If the federal government was restrained as the Constitution and our framers intended, wars would be a very rare thing—and only defensive. Our intervention in foreign states would be non-existent and consequently we would be at peace with other nations, rather than the target of animosity, threats, and violence.

This may seem naïve at first, but imagine how other nations would perceive us if we did not have hundreds of military bases on foreign soil all over the world. Imagine if we had no military presence in the Middle East, if we did not supply foreign aid to despotic regimes all over the world. Do you still think it likely that we would have the enemies we do now? Would we be forced to protect our borders with the measures currently in place?

What if we let other nations govern themselves and we didn't meddle in the affairs of foreign governments? What if other nations were not so mistrustful of our intentions, aims, and interests? Think about the interventions the CIA and the intelligence services have taken abroad in the past 100 years. Think about the money being spent, the power being wielded.

Our foreign policy is directly linked to our economic policies. We would be unable to cast our influence so forcefully abroad were it not for the massive deficit spending and high taxation that conservatives have been arguing against for decades. If our government were forced to limit taxation as the Constitution intended, our ability to influence and wage war would be severely restricted. This is a good thing!

Ron Paul's manifesto is an expression of the legacy of our founding fathers. I was delighted to see these issues are not Republican or Democrat issues—these are fundamentally American issues. All freedom loving Americans ought to resonate with Ron Paul's message of peace, prosperity, and freedom.

In The Revolution Paul demonstrates that both major political parties have far more in common than not. The Democratic Party has the reputation (and deservedly so) of being the party of big government. They often say they want it to be "smarter" or "more efficient," but it is always big. Republicans want "smaller" government, but their idea of small is clearly meaningless, as they had been responsible for the largest increase in government and spending until President Obama took office. Our federal government is massive—there can be no doubt about this. It is undeniable that both parties are for big government, they disagreement is merely superficial concerning how much bigger or how much smaller. This is a false disagreement.

The framers sought to devise a system of states allied with one another through a small, central government. They gave limited rights to the central government bestowing all other rights unto the states. This is clearly not the way things currently stand. Over the years Washington has centralized the power given to the states, subordinating state's rights. This power grab has had profound effects on our nation and has led toward what Ron Paul calls the "Imperial Presidency." The "Imperial President" has taken upon himself powers not granted to the executive branch by the Constitution, and this has been accepted by both political parties. Congress has been complicit in this power grab, granting rights to the executive branch that only they can wield.

I am now fully persuaded that our nation will not have positive, meaningful change until either the Democratic or Republican parties embrace the kind of limited government that the framers intended. I do not believe that either party is capable of this right now. What is required is a fundamental change in governance. There must be either a third party to overthrow the tyranny of the American government or a radical change in the makeup of an established political party. The revolution must happen to save America from the certain ruin that both political parties have been, and are driving toward.

I now repudiate my previously held positions regarding the war in Iraq and the Patriot Act. I now believe that history will regard George W. Bush as one of the worst presidents in our nation's history, and properly so. George W. Bush oversaw the largest increase in government spending in history (prior to Obama at least), he took no meaningful action toward restricting the Fed's easy money policy that directly led to the housing bubble which has now decimated our economy, he waged war against another nation that had not attacked us, he expanded the power of the government with the Patriot Act, he further legitimized the role of the federal government in educating children, and on and on. These are not constitutional policies, and should be strongly criticized by those that love liberty and freedom.

Here is in essence is a brief list of some of the most important reforms that must be taken to restore the liberties granted by our founding documents:

  • Dismantle the Federal Reserve
  • Return to the gold standard (a gold backed currency)
  • Repeal the Income Tax and eliminate the IRS
  • Eliminate welfare programs that encourage people to not work and have encouraged the massive illegal immigration problem
  • Close all military bases on foreign soil
  • Terminate all foreign aid
  • Work toward eliminating both Social Security and Medicaid
  • Privatize all government sponsored enterprises such as Fannie Mae and Freddie Mac
  • Revoke most of the legislation of the last thirty years including the Patriot Act, and all gun control legislation
  • Eliminate all extraneous cabinet departments including Education, Health and Human Services, Homeland Security, etc.
  • Privatize all public schools and end the federal influence over schools
  • Terminate college and university subsidies
  • Terminate all agricultural subsidies
  • Terminate all federal restrictions on oil drilling on public lands and offshore
  • Repeal narcotic laws
  • Outlaw federal employee unions
  • Terminate the congressional pension program and lower salaries for congressmen
  • Withdraw from unconstitutional treaties including WTO and NAFTA
  • Terminate early withdrawal penalties for tax sheltered investments including 401k, 403b, and Roth IRAs
  • Terminate Capital Gains tax



Lest Anyone Think The Recovery Has Begun

Mish has some very dismal news regarding home foreclosures at his blog. He quotes Bloomberg, which says:

Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.

The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.

Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.


Read the whole article, as it is clear the recovery is far from over. The delinquency rate for all mortgages is still increasing. How can a recovery happen while an increasing number of homeowners are deliquent on payments?

I fully expect this recession (or depression) to persist for at least another year while foreclosures begin to settle down. And if things go as badly as I think they will, the market's eventual recovery will begin right as President Obama's disastrous policies take hold and inflation begins to spiral out of the Fed's control. Hurray for Obama!

Thursday, April 09, 2009

Unemployment

Mish's Global Economic Trend Analysis Blog is one of the best blogs on the economy that I've encountered. He has written a post concerning unemployment that is very telling. It is worth reading the whole thing.

The publicized unemployment number is currently 8.5%, much higher than the 5-6% rate we've become accustomed to see in the last fifteen years. Yet this is a deceptive number. During the Clinton administration unemployment was divided into two reported numbers. The first is called U-3, but this does not include "marginally attached workers" and those "employed part time for economic reasons."

So in essence there is a segment of the population that is basically unemployed but is not reported as such. This is a deceptive move by the government to under report the unemployment rate. Yet another example of a way the government manipulates the public.

So the "real" unemploment rate is currently 15.6%--an alarming figure that approaches the levels of the great depression which averaged close to 20% unemployment for a decade.

Here is a graph from the post showing the unemployment rate from 1970 to today:


Looks ugly, no?

Believe Barack Obama, Not Your Own Eyes

Watch this short video, and then, like President Obama wants you to, tell yourself he didn't bow to him.



The Politico has quoted an administration official as saying:

"It wasn't a bow. He grasped his hand with two hands, and he's taller than King Abdullah," said an Obama aide, who spoke on the condition of anonymity."

Obama shouldn't have bowed to him, let alone anyone. But now, to deny it, when we can all plainly see he DID bow to him, is incredulous.

WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH

Wednesday, April 08, 2009

Inflation

The Wall Street Journal has a very interesting piece on the economic crash. The article is primarily a postmortem of the recent economic collapse, but here are a few highlights regarding inflation:

"In 1983, the Bureau of Labor Statistics began to use rental equivalence for homeowner-occupied units instead of direct home-ownership costs... Between 1999 and 2006, the price-to-rent ratio shot up from 20.8 to 32.3.

With home price increases out of the CPI and the price-to-rent ratio rapidly increasing, an important component of inflation remained outside the index. In 2004 alone, the price-rent ratio increased 12.3%. Inflation for that year was underestimated by 2.9 percentage points (since "owners' equivalent rent" is about 23% of the CPI). If home-ownership costs were included in the CPI, inflation would have been 6.2% instead of 3.3%.


...As measured by the Case-Shiller 10 city index, the accumulated inflation in home-ownership costs between January 1999 and June 2006 was 151%, but the CPI measured a mere 23% increase. As the Federal Reserve monitored inflation in the early part of this decade, home-price increases were no longer visible in the CPI, so the lax monetary policy continued. Even after the Fed began to slowly raise the fed-funds rate in May 2004, the average rate remained low and the bubble continued to inflate for two more years."

This is an example of what many economists have been saying for years: the government measure of inflation is deceptive. Inflation can be considerably higher than most, especially the government, will tell us.

Tuesday, April 07, 2009

What A Joke

Barack Obama is a joke--what an embarrassment. He somewhat famously said he'd visited all "57 states" during the campaign, and now he believes "Austrian" is a language.



Is this for real? It is as though Barack Obama is a complete ignoramous. Austrian? What a bufoon. Yeah, he's our president. Awesome.

Monday, April 06, 2009

Smart Business

Here is an interesting article about a banker that predicted the mortgage crisis and is now capitalizing on the business opportunities.

Another Statist Power Grab

Senators John Rockefeller and Olympia Snowe have "introduced a bill to establish the Office of the National Cybersecurity Advisor—an arm of the executive branch that would have vast power to monitor and control Internet traffic to protect against threats to critical cyber infrastructure."

Mother Jones reports:

"The Cybersecurity Act of 2009 (PDF) gives the president the ability to "declare a cybersecurity emergency" and shut down or limit Internet traffic in any "critical" information network "in the interest of national security." The bill does not define a critical information network or a cybersecurity emergency. That definition would be left to the president."

This is the sort of legislation that puts far too much power into the central government that could prove fateful in stifling free access to information and ultimately leading to other covert power grabs by the government that would go unreported or uncriticized.

This legislation, rather than being endorsed by both political parties should be opposed by both parties. This legislation serves no purpose beyond extending the government's control over something outside its jurisdiction.

HT: LRC Blog

Thursday, April 02, 2009

Hyperinflation

Hyperinflation is a situation when inflation is so out of control that money essentially becomes worthless. Nations such as Zimbabwe have "one hundred trillion" dollar notes as part of their currency due to hyperinflation.

Mises Institute economist Thorston Polleit expects we will see hyperinflation, though he doesn't make specific predictions about when. He uses post WWI Germany as an example of hyperinflation and describes the forces at work then and demonstrates that those same forces are at work right now in the United States.

He writes, "...the German hyperinflation was the result of a policy that considered the financing of government debt by an accelerating increase in the money stock as the politically least unfavorable method. It seems that the state of opinion hasn't actually changed much. Today, there is great public support when it comes to expanding the base-money stock for financing ailing banks, insurance companies and, most important, rising government debt."

Though hyperinflation is likely in our future, others like Adam at Gold Versus Paper believe "Inflation is highly unlikely to be significant in the next 12-18 months in the U.S." We are in a deflationary period now, and once the economy does finally start to pickup again inflation will begin to get out of control.