A Most Dangerous Precedent.

Whatever one’s position, in favor or opposition to the president’s health care law, the SCOTUS decision was what can only be described as the worst of both worlds.  The left will no doubt gloat that this decision is some sort of a victory for “fairness.”   The Right will no doubt be energized and even more determined to achieve victory at the polls in November in order to repeal the law in its entirety. 

Be that as it may for either side.  The truth is we all lost something by this decision; just a bit more of our liberty.  By the way the court framed it decision, they have in fact empowered government to tax non-behavior.  This is not taxing you on your income, not taxing you for a purchase you’ve made.  This is not even punishing you for having committed a criminal act.  This taxation for not doing something that the government has decided is in your “best interest,” taxation for not participating. 

Dangerous indeed.  Were does it stop?  Are we now no longer even be allowed to tell government that our choice to act or more importantly to not act is none of its business?  The court has opened the door to even more intrusion into or private lives.  They have in fact said there are to be no limits just so long as such intrusion is couched in terms of our “best interest” and enforced in the form of a tax.

No one in their right mind thinks that government will suddenly say “we’ve gone far enough.”  There will always be politicians, from both sides of the aisle, who will seek to corral more and more power and control for government simply because they profit from it or some power group wants a law passed in its “best interest.”  The need for which will be reinforced with campaign contributions.

What next?  We have too much obesity so we all must participate in some government approved exercise program and if we don’t government will tax you because you didn’t do the prescribed number of push-ups?  Or maybe they will tell us that we should eat a certain amount of what the government defines as “healthy” foods.  You don’t really have to, but if you don’t, they’re going to monitor your grocery store receipt and tax you for not participating in what they have deemed is our “best interest.”  

Perhaps my concern is overblown because there is no money to pay for Obamacare or any other pernicious program that may grow out of it.  But have no doubt politicians will continue to expand the excesses of government until it collapses of its own weight.  Maybe then we will get something approaching a clean slate and can start again to build anew a system based on individual liberty and personal responsibility rather than the sloth of demanding that government force everyone else to provide for us all those things we have become to lazy to do for ourselves.  One where we tell central government to stick to its proper rolls of national defense and foreign relations and little else.

The Patients Are In Charge of the Asylum.

The announcement coming out of the G20 meeting in Mexico That the EU countries are now going to pony up another €600 billion ($750 billion) to further bail out Spain and Italy clearly shows that the inmates are in charge of the asylum.  Just a month ago we were told that Spain did not need a bail out but now they are to be given €100 billion to re-capitalize their banks. 

So just where is this €600 billion going to come from?  According to the press release the largest part is to come from the ESM (European Stability Mechanism), problem is that the German Bundestag has not yet authorized Germany’s participation in the ESM.  The primary reason it has not done so is that the German voting public has repeatedly (in local elections) demonstrated that they have had enough of bailing out the profligate PIIGS.

If the structure of the so-called agreement is anything like the €100 billion bailout of Spain it will obligate the already bankrupt to loan to  the bankrupt at rate below that which they will in turn have to borrow the funds. 

Lets be honest here the only winners here (and that only short term, very short term) will be the banks facilitating the loans.  So what is the financial reality behind this latest of stopgap measures?  Quite simply it’s the CDS derivatives (Credit Default Swaps) that would come due if the Spanish and Italian banks went belly up (never mind Greece, Ireland and Portugal).  Safe to say there isn’t enough money in the world to cover the loss.  What is known is that large U.S. banks have underwritten these policies and would be bankrupted quite literally overnight if they were called to pay up.

Never mind the danger presented by Greece leaving the Euro zone, once the German voters and taxpayers are presented with this €600 billion bill they may well say enough is enough and leave the Euro themselves.  What the Germans behave like nationalists?   Yeah right, like that has never happened before.

Rest assured the politicians and bankers are scared to death of the Frankenstein’s monster that they have created.  Rest assured as well that none of them will have the courage to address the issue in public. The FED and the ECB are going to have to put the printing presses into over drive whether they want to or not.  They were of course were hoping to put any such action off until after the U.S. elections, but reality is moving too fast for them to keep playing the propaganda game for that long.

Hope for the best but prepare for the worst, things are going to get ugly long before November 6^th. 

Europe’s New Fascism: As the Bureaucrats March Blindfolded Into the Minefield of Unintended Consequences, is Germany Playing a Game of Third Time’s the Charm?

In the wake of the failed elections in Greece the spotlight of economic instability moved to the other end of the Mediterranean and Spain.  After weeks of mergers, consolidations and outright nationalization the pronouncements coming out of Madrid were that there would be no need for any outside support or bailouts for the collapsing Spanish banks. 

Nobody really believed the propaganda, Spanish bond yields and CDS rates soared and its stock market fell like a stone.  Faced with these realities the official story began to change. As the negotiations dragged out the numbers grew exponentially.  First it was the banks might need €10 billion. That soon became €18 billion and then €40 billion and then €80 billion and now it stands at €100 billion ($125 billion).  Never mind that the actual liabilities arising out of both a collapsed housing market and a complete failure of the government’s massive investment in a so-called green energy sector is more likely closer to €400 billion. 

The negotiations between the Spanish government and the European Commission revolved around several factors.  Firstly, were the loans to be made directly to the banks and Spain and it taxpayers only liable for that percentage of the banks that had been nationalized or would they be made entirely to the State and then disbursed to the banks putting the Spanish taxpayers on the hook for the entire amount in any subsequent failure?  In the end what was agreed to was to loan through as quasi-governmental bank stabilization commission so that who exactly is on the hook for this €100 billion remains nebulous at best.  Secondly and more controversially, was Spain’s refusal to agree to any budgetary controls; i.e. austerity.  On this point Spain appears to have won a pyric victory at best.  Even before the agreement was announced rumblings and complaints were heard from Ireland about wanting to renegotiate their bailout deal to do away with the onerous austerity provisions.  In other words “We want the same deal Spain got.”

So how was Spain able to make a deal absent the austerity demands imposed upon Greece, Ireland and Portugal?  Quite simply, blackmail.  Behind closed doors the Spanish no doubt told the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) representatives, “we are just to damn big to fail and if we don’t get the deal we want it will crash not only Europe and the Euro but the entire global ponzi scheme.”  Even a cursory examination of the deal revels its patent insanity.  For example, look at the requirement that Italy loan Spain €20 billion at a 3% interest rate.  The problem for Italy is that Italy doesn’t have €20 billion to lend, so they have to go onto the open market and borrow that €20 billion at a 7% interest rate.  They might as well be draining blood from one arm and pouring a good percentage on the floor before transfusing it into the other arm.

 The EC, ECB and IMF folded and Spain got the deal.  The Spanish deal will very likely move the coming Greek and Irish elections firmly into the camp of the “no austerity” parties.  Just what Europe needs, political chaos piled on top of economic chaos.

Running in parallel to these negotiations has been a constant propaganda operation coming out of the EC, the ECB and IMF calling for so-called “Eurobonds.”  Any such bonds would be issued against the assets of the European Economic Union member states as a whole.  The drumbeat continues in spite of Germany’s stated steadfast opposition.  

In spite of there being a growing discontent among the German population for being used as Europe’s cash cow, as reflected in recent local elections, Chancellor Merkel’s government is playing power games behind the scenes.  While stating opposition out of one side of her mouth out the other side comes possible consideration if any future loans are backed by the sovereign gold holdings of the central banks of the troubled nations coupled with calls for those nations to surrender control of their budgets to the un-elected EC and the ECB.  

So much for democracy, so much for National self-determination.  In other words accept austerity imposed and controlled by Germany.  Germany failed in two wars to impose control over Europe, so now are they seeking to economically colonize the PIIGS and possibly even France through the EC and the banks?

Sadly I don’t see any happy endings for the Euro or Europe or the US given the current trajectory.  But hey maybe they can stir up another war somewhere to take everybody’s attention away from this looming disaster.  Syria anyone?

Derivatives for Dummies And Why The Politicians Refuse To Discuss Them.

Introduction and background.

While attempting to engage in political and/or economic debate I frequently ask what the other person knows of financial derivatives and how they play into the economic picture.  More frequently than not I am met not with an honest admission of an absence of knowledge, but a hyper-sensitive denial that they are in any way relevant to the discussion.  Some so engaged are so sensitive on the issue that they quickly sink to the personal pejorative as a means of distracting from the issue.  I have found those on both the left and the right, to varying degrees, are guilty of this tactic.

The question of course is a rhetorical one.  I have found that putting it forth demonstrates not just their lack of understanding of what derivatives are, how they function and effect markets, but also how this absence of knowledge obviates their political posturing, not to mention any personal attacks they make.

This then leads to a follow up question; How can anyone propose a viable political direction or solution to a problem when they don’t have the first inkling of the realities that created the problem in the first place?  This then leads to several alternative reactions; 1) flatly refusing to further engage, 2) renewed vituperation's, or, 3) the favorite fall back position ,that they were just expressing an opinion, and that of course all opinions are equally valid or worthy of consideration.  It’s at this point I tell them that I have an opinion on that as well; what utter drivel. 

Anyone with any intelligence or intellectual honesty would no more ask grocery store clerk to explain a cancer diagnosis than they would ask a political partisan, particularly a liberal one to explain the implications of derivatives.

The aforementioned repeated experience inspired this piece.


Contrary to what few stories one might find among the orthodoxy of economic talking heads, derivatives aren’t really all that complex.

They can be best explained by constructing an analogy or two that even the partisans among us should be able to understand.

Derivatives are quite simply a form of insurance policy.  Nothing wrong with insurance right?  Well no, unless of course the value of those policies outweigh the assets of the underwriters on a scale of several hundreds to one.

Imagine if you will the U.S. were to experience a disastrous hurricane season.  A dozens cities along the Gulf coast and the eastern seaboard are destroyed.  Think Katrina on steroids.  Most of those homes and businesses are insured of course and the owners will file the requisite claims for financial restitution.  Except that if the sum total of all the claims exceeds the cash reserves and liquid assets of the underwriters, they go bankrupt.  Not only do the claims not get paid and the policyholders are destroyed, but all of the stockholders and bondholders in the insurance companies are also wiped out.  This includes not just individuals, but because of interconnectedness, many banks, credit unions and mutual funds.  Even more insanely insurance companies underwrite policies against each other’s insolvency.  This is a derivative know as a default swap.  The failure of one threatens the solvency of all.

This is exactly what happened to AIG. They had insured the assets and solvency of GM, Chrysler, Lehman Brothers and Merrill Lynch.  When they went belly up AIG did not have the assets to cover the losses, so the good old U.S. taxpayer was called to the rescue.

To make matters worse, the repeal of the Glass-Steagall act has allowed the banks to become insurance companies and to issue some charming little derivatives known as  “naked swaps.”  These are nothing more than insurance policies issued to individuals and corporations who hold no underlying interest or liability in the insured asset (if you want to call debt an asset, but that’s not the point).

Picture if you will, you want to buy a new car.  You have the down payment or the trade-in but you need to go to the bank and borrow $20,000.00 to complete the purchase.  In order for the bank to loan you that money you must show them that you have insurance to recover the value and repay the loan in case of theft, an accident or some other total loss.  Now imagine that 99 of your neighbors also took out insurance policies against the value of your car.  They don’t make the payments, they don’t pay the taxes and they don’t buy you gas, but if you suffer a loss, not only does the insurers have to pay off your creditor for the $20,000 loan, they also have to pay your 99 neighbors $20,000 each on their claims.  So the insurance companies end up shelling out $2,000,000 on an asset that was only worth $20,000. 

Criminal fraud you say?  My point exactly, but that is just what we are faced with.  It’s not just the $140 billion in Greek debt that would get wiped out in a default, but $1.4 TRILLION in derivative insurance policies (Credit Default Swaps) that would come due and could not possible be paid.  Now multiply that number by 4 or 5 for Spain and 6 or 7 for Italy and you might begin to see just how untenable a situation the banks have put the entire world in.  So greedy are they to collect small premiums on hundreds of huge policies that they have placed us all in peril. BofA alone has underwritten $50 Trillion in derivatives, JP Morgan another $70 Trillion (that they admit to).    The total derivative market is estimated at over $1.4 QUADRILLION!  How many people can even grasp the size of that number? I know I have a hard time with it.  I do know it is more money than exists or has ever existed.

If I am afraid of anything it most certainly is not being faced with any sort of caustic hyperbole.  But derivatives do scare me, as they should scare anyone who has even the smallest grasp of economics and the size of the numbers involved.

Unfortunately for the politicians and their media hacks, once the derivatives issue enters into any honest analysis of the current financial crisis, they destroy both the arguments of the right for so-called austerity and the arguments of the left for more stimulus and increased taxation.  Hence the refusals by both sides to consider or even discuss them in any context.  Better for them to pretend they don’t exist or are irrelevant to the situation.

Anyone who knows me understands that I hold the POLITICAL right and left in equal contempt as they are both beholding to the same crony capitalist (i.e. fascist/Fabian socialist) financial interests on Wall Street and at the Eccles Building.  The concepts of formation and implementation of policy have not been subsumed but completely lost in the obfuscations of political arguing.

What I am is an unrepentant classical liberal and capitalist, the very thing that both sides mutually fear and loathe.  Neither side wants the voting public or even their own political hacks and operatives to understand that in the post Eisenhower/Kennedy period we have politically devolved into a one party state that just happens to have a façade of right and left wings. 

We elect Republicans for a term or two and they pillage our economy and rights.  We get tired of them so we elect Democrats for a term or two and they do the same thing until the public grows weary of their pillaging.  Rinse repeat, rinse repeat. Nothing changes except for the worse, and the game goes on with each side concerned with nothing but the maintenance of their own position and power. 

As it now stands we are reaching the limits of this corrupt game.  The cancerous infection of debt and deficits has grown beyond the point of any possible political excising, not that either party would be willing to do that even if it were possible.  Their aforementioned financial owners would never allow it.  Such an action would not only destroy their institutions but would leave individuals exposed to criminal charges both nationally and internationally.

The precedent for such trials was established at Nuremberg where Nazi finance minister Hjalmar Schacht was in the dock along with the other leading Nazis.  That he was acquitted was a great travesty of justice.

(As an aside, I state that not just as a personal opinion. In the early ‘70’s I had the great pleasure of meeting Bernard Metzler, the man who was originally charged with preparing the prosecution’s case against Schacht.  He asked to be removed from that charge after complaining to Chief Prosecutor Roberts that he was coming under pressure from other member of the staff to drop the charges “for political reasons.”  He also stated that in conversations he had with Roberts and some of the judges after the trial, that Schacht was acquitted because “the political pressures were to great.”  He further said that in his mind he interpreted that to mean threats, but he didn’t think it could ever be proven.  Schacht’s personal and financial connections to FDR’s Ambassador to the USSR, Averell Harriman, were to numerous and ugly to withstand scrutiny at the time. He was too powerful and too well placed within the Truman administration.)

So then the financial elites will fight to the very end to protect themselves and their power, to keep the citizens in perpetual debt bondage.  They will use their politicians and media operatives as their front line shock troops to hide their own culpability.  They know full well that the end result of their game will be disastrous, but they think they are well enough insulated by power and money that they will be left as the last man standing so to speak.  They will be laughing all the way to the their vaults as the politicians, media shills, and naïve hacks end up bearing the brunt of the public’s wrath.

We need to wake up, all this talk about raising taxes a few billion here or there or cutting the budget a few billion over 10 years is utterly meaningless.  You might as well try to lower the level of Lake Michigan with a bucket.

Nothing in the worlds of political economy or financial gamesmanship is as simple as any left vs. right argument.  Anyone who tells you it is, is either a fool or trying to play for one.

And that is why I have said taking everything, all sovereign debt back to zero is the one and only debt solution.  Would that be fair to some and unfair to others?  Yes but it would strip the banksters of much of their power and provide a foundation upon which economies might be rebuilt.  Unless of course you like the idea of a deflationary collapse followed by hyper-inflation like no one has ever seen.

On Wisconsin Redux.

 I  first posted this back in February of 2011.  With the recall election coming up this Tuesday I thought it was worth posting again.  The fundamentals have not changed.

It’s fitting if not ironic that Wisconsin, the birthplace of the public employee union may well become its burial ground as well. Maybe we should call what is unfolding there the “Nightshade Revolution,” as they seem to be poisoning themselves by the consumption of the fruits of their own corruption.

So then I have a few questions for our liberal and union friends that are in need of answers.

1. How is it not corrupt, if not morally incestuous, for public employee unions to use the state to forcefully expropriate dues from its compulsory members and then use those dues to elect the very politicians with whom they negotiate their contracts?

2. Is it simply beyond the intellectual capabilities of the left to see the hypocrisy of chanting for freedom and democracy while attempting to block a vote by duly elected representatives? Or that Democrat State Senators have fled from the democratic process because they know they will lose that vote?

3. Are these same Democrats that so loudly protested Republican efforts to use the established rules of the US Senate to block President Obama’s Agenda now celebrating an abrogation of the rules of the Wisconsin Senate?

4. When President Obama said “Elections have consequences,” and “We won,” did he mean that they only have consequences for his opponents, and his friends in organized labor should be exempt from the consequences of elections or their own corruption?

I for one welcome the public employee unions taking the hard line in Wisconsin. The sooner they self expose their attitude that the State’s purpose is to serve their employees and line the coffers of the unions, over and above the needs and concerns of the public they are supposed to be serving, the sooner this monster can be slain and shoved into the grave of history it so justly deserves. That the union bosses would sooner risk the jobs of their members rather than their corrupt power structure should be telling to anyone who takes the time to do any critical thinking about what is going on here, as to just who they are really looking out for.

And Now We Return To Our Grecian Saga.

While the French voters decided to swap a closet socialist for a hypocritical hard core socialist, not a whole lot of mention was given on this side of the pond on what an absolute disaster the Greek elections were that were held the same day. The results produced such a fractured Parliament that no coalition government can be formed and there will have to be another round of elections. Meanwhile it was announced yesterday that Greece would indeed be making a €345 billion payment on previous bonds that they thought they were going to skate out of with the last refinancing and 70% haircut deal. The pressure applied to force Greece to make these payments must have been tremendous, as had they not done so there would have been no way to prevent the triggering of the related CDS. Where exactly Greece came up with all that money has yet to be revealed. Small wonder that bank runs started in earnest yesterday, with Greek citizens withdrawing upwards of €900 million in a single day.

For right now the Troika of the EC, ECB and the IMF are perfectly happy for there to be no seated government in Athens, It allows them to keep looting Greece’s physical assets at rock bottom prices. But what happens when a government is seated? After a year or so of ignoring the possibility, the reality is beginning to sink in even with the American press that Greece my default on its debt. As of yet little or nothing can be found in so-called mainstream sources about what the options are or the real implications.
Does Greece seek a “organized” default, leaving the Euro and returning to the Drachma, coupled with some sort of a new debt reorganization, thus attempting to avoid a “credit event,” i.e. pump even more money into an already failed system?

Do they simply unilaterally leave the Euro, default and hope that after a couple of years of pain and chaos that growth will return and Europe will return to doing business with them in the financial markets?

Do they go the Icelandic route, default on the debt, and throw the crooked bankers and politicians that got them into the mess in jail?

There can be no doubt that right now the Troika would prefer some sort of orderly withdrawal and re-accommodation on the Greek debt. But even this is fraught with uncertainty as there would be nothing to prevent Portugal, Ireland, Spain and Italy then standing up and demanding the same accommodations. Problem is that there’s not enough cash in any of the various facilities set up by the EC and the ECB to do it, not even close. And after this weeks local elections in Germany where Chancellor Merkel’s CDU party got stomped, it’s pretty clear that the German electorate is not going to put up with their savings being used to bailout the profligacy of the PIIGS any more. End Game in this scenario? CDS get triggered, European and some U.S banks collapse, then the European Central Banks and the US Federal Reserve have no choice but to print up the losses. Commodity prices begin to soar, then retail prices, and then bank runs that will make Greece’s €900 million run look like a child’s game.

Second scenario, Greece simply walks away, tells the Troika to pound sand and they will revert to the Drachma and deal with the pain for a couple of year before growth can begin again. End Game for this scenario? Same as above, only worse, as the failure of the CDS could trigger the collapse of a large portion of the rest of the $1 Quadrillion of worthless derivatives.

Third scenario, same as above plus they throw he crooked bankers and politicians in jail. This would perhaps be the most interesting, as the EC would have little choice but put even more crushing economic sanctions in place and perhaps even threaten military action. This of course is the banking elites ultimate answer to any financial crises of their own making, war. But it also would expose the dirty little realty that their concern all along has not been to rescue Greece but to protect the banks. Question would then be where would the EC get the authority never mind the troops to pull this off? The UK? Not likely, its military is but a shadow of it former self. France? The French don’t want to work never mind go to war. Germany? The last thing they would do is put themselves in the position of being seen as starting a third European war. As the only remaining highly productive economy in Europe they would ditch the Euro themselves, take their losses, and wish the rest of Europe good luck. They have already begun setting up their own capital reserves for just such an event.

In short the end game for the Euro experiment draws neigh. The bankers and politicians my have a few more accounting tricks and delaying tactics up their sleeves but even that well is beginning to run dry. Anybody who tells you that the US or the rest of the can escape this disaster with “minimal” damage is either lying through their teeth or has not the first idea o what they are talking about.

A Perplexing Cluelessness?

One has to wonder just who is in charge over at the Obama campaign, particularly as to the selection of slogans.  Given the media’s and the public’s inclination towards reducing phraseology to acronyms and that “Win The Future” is hardly the first phrase that comes to mind when one sees WTF, forgive me if I might question the intellectual depth that allowed this little gem to get off the drawing board never mind put into play.
Once WTF started to show up on campaign sites and on backdrops for Obama’s speeches it took about two seconds for the Republican opposition to jump all over it referencing of course the more familiar meaning of WTF.  Well it was out there and the campaign had to live with it, at least for a while.

So now here we are a month or so on and the best they can come up with for a replacement is “Forward”? Once again one might question the intellectual capacity that brought this one to the fore.  That the term as a political slogan has a long history of usage by European socialist and communist parties is beyond dispute. I’m not one to often site Wikipedia as a source but even that on line encyclopedia has an article on its use by Marx, Lenin and Trotsky.  That’s not to say that this is its only application but one would think it would have at least given them some cause to pause before using it.  http://en.wikipedia.org/wiki/Forward_(generic_name_of_socialist_publications)
So what’s going on here?  Is this but a confirmation of Peggy Noonan’s recent conclusion that what we are seeing is amateur hour at the White House?  Are they really this clueless?  Is perhaps their slogan guru such a hard core socialist/communist that they just can’t help but revert to their indoctrinated form?  If David Axelrod and the President are approving this stuff are they clueless or similarly indoctrinated? Or maybe there is a saboteur in the campaign who is simply playing them for fools.  If that is the case they sure are earning their salary.
Either way not satisfied to have tossed the Republicans the WTF bone to chew on, somebody decided to wrap it with a nice thick slab of “Forward” bacon.  Hilarity will no doubt ensue.

So What’s The Matter With Just A Little Bit More Police State?

When the framers of our Constitution sat down in Philadelphia the realized they had to put substance and structure to the lofty goals of the Declaration of Independence or all the effort and sacrifice of the Revolution would be lost.
Part of their wisdom and genius was the concept of separation of powers. No one branch of government would be allowed to accumulate enough power to be able to unilaterally deprive the citizens of their rights and liberties.

Having dealt with King George they recognized that one of the hallmarks of tyranny was the restriction of movement. We still recognize it today. Countries like China, Cuba, Iran and North Korea severely restrict the movement of their subjects both internally and externally. You can’t just pack up and leave one of those places just because you feel like it. Even saying you would like to can have harsh repercussions. In fact this freedom of movement is one of the defining distinctions between a citizen of a free nation and the subject of an authoritian state.
That’s not to say that the free movement of a citizen cannot be restricted, but it can only be done under due process of law. The legislative branch passes a law, the executive branch charges a violation of that law and the judicial branch finds guilt. Then and only then (with the exception of other court orders) can a person have their passport revoked or the issuance of one denied. In any case it is the power of the judicial branch having made a legal finding that becomes the basis for the restriction.

Well that is up until now. I have often said that I hold both political parties in contempt and Senate Bill 1813 is exemplary of why. Our elected officials in Washington are either venal, stupid or both. Put forth as a Highway repair and financing bill it, as is often the case, has its “and other purposes” clause. In this case the “other purpose” is to enable the IRS (a branch of the Treasury Dept. and hence the executive) the unilateral authority to revoke or deny a passport on the mere accusation that the individual might owe the IRS some taxes.

If this bill passes in the House and is signed by the President the free movement of citizens can and will be restricted not by a judge making a decision on probable cause or actual guilt of a crime, but by a faceless bureaucrat to whom there is no appeal and no redress of grievance. This is an unconstitutional usurpation of the authority of the judicial branch by the executive branch plain and simple, and our elected representatives are allowing it to happen.
It’s long been known and sadly tolerated, that IRS code is Napoleonic law, under which the citizen is not innocent until proven guilty, but guilty until he proves himself innocent. But then only if he’s very lucky and has a very good lawyer.
Are we still free citizens of a republic anymore? Or are we like sheep being led to the slaughter  of  transformation back into the subjects of a tyrannical state? How long until even questioning the IRS’s authority to restrict your freedom of movement is cause to restrict your freedom of movement?

This shouldn’t be a question of left vs. right or Democrat vs. Republican. It’s much more basic than that. It’s a question of liberty vs. tyranny and do we as citizen still have the gumption to stand up and fight to persevere what’s left of our liberties before they are all gone?

So Lets Have Another Little War

In the name of maximizing domestic production, the good little socialist President of Argentina has decided to nationalize a Spanish owned oil company YPF and setting of a diplomatic confrontation with Madrid. Just what the Spanish need in the wake of Iran announcing that it will cut off oil shipments to Spain is serial failure Argentina expropriating another source of oil it desperately needs even if it economy is contracting. The government in Madrid has promised that it have “forceful response.” This is of course open to a variety of interpretations but it’s unlikely that Spain can handle having $5 Billion sucked out of its economy at the point of it already facing imminent collapse.

Never mind that Spain was the first if not the only European nation to come to Argentina’s aid during their latest currency failure. But I guess this is how Argentina’s President Fernández and would be Avita Peron thanks Spain for its help.

If there is any country in South America that has mimmicked Europe’s failed welfare stateism it is Argentina. Just how many times does it’s economy have to collapse before it becomes apparent that this socialism crap just does not work?

Meanwhile back in Spain where unemployment is at 23% and youth unemployment is over 50%, the Cental government is talking about taking over the financies of the provences because their even more out of control than the cental government’s. Now looking down the barrel of another $5 billion hole in its GDP one can only imagine the anger and panic set in motion by this little backstabing from Argentina. So much for Ibero American solidarity.

Neither can the dithering hands of the EU in Brussels be happy at this. One more unpredictable turn of events threatining the EU ponze scheme. If it all was not so economicly dangerous it would be hilarious.

Well it’s not like Spain could actually go to war with Argentina but I’d bet they wish they could. One would have to wonder just how Obama will stick his bumbling fingers into this pie and make things even worse. But then I’m sure his refering to the Malvinas Islands as the Maldives has so endeared him to the hearts of the Argentines.

Do French Elections Matter On This Side Of The Pond?

Just about a month ago in the wake of the latest Greek bailout both French President Sarkozy and former French Finance Minister and now IMF head Christine LaGrande were declaring in lockstep, that “the problem is solved” and “economic spring is in the air.”

Well here we are a month on and the Spanish stock market is all but collapsed, the Italian’s are but a step behind with trading in Italian banking stocks having to be halted on a daily basis lest they fall to zero on any given day.  Credit Default Swaps (CDS) on Spanish debt are spiking dramatically as yields rise to the dreaded 7% level.  Look soon for shorting of European banks to be banned once again.

Both Sarkozy and LaGrande it would seem are betting heavily on successful Spanish and Italian bond auctions this coming Thursday.  If the bid to cover ratio comes in at something resembling Bear Sterns final attempt to stay afloat (30% of bond face value) all bets are off for a peaceful summer in the Euro zone.

While LaGrande’s tenure at the IMF may be resting on the auction’s outcome, for all intents and purposes, successful or not Sarkozy’s goose seems to be already cooked.  All that is left is for the actual ballots to be counted before the fork is stuck in and the declaration of  “its done” to be pronounced.

So why should we care that the French, not know for their political acumen, are about to elect a far left wing Socialist in the person of one Francois Hollande?  Hollande is taking the all to predictable socialist path, while paying lip service to deficit reduction he campaigns on expanding government spending and subsidizing hundreds of thousands of new government jobs, all financed of course by massive increases in taxation.  With his ever-increasing lead in the polls, little wonder that over here, Obama is on the same track.

This brings us of course to the realm of unintended consequences.  Up to this point the technocrats in Brussels have managed to forestall the looming disaster only through the close alliance between France’s Sarkozy and Germany’s Chancellor Merkel.  Sarkozy’s passing from the political stage all but guarantees the end of this Franco-German alliance.  Hollande has made no secret of his contempt for Merkel and Germany’s resistance to the issuance of so called Euro Bonds to finance the ongoing deterioration of the PIIGS.

The EU has already rised dithering until the last moment before reaching so-called solutions to an art form. Any break in Franco-German cooperation may well make any further agreements, particularly in regards to Spain, all but impossible.

The triggering of CDS over the latest Greek bailout and 70% haircuts for the bond holders is a far from settled issue as most of the outstanding bonds are covered under British law not Greek, and as such don’t allow for such losses of principal without triggering the CDS.  The issue is already in the courts.  If a similar credit event occurs in Spain or Italy it will be disastrous not only for European banks but for US banks as well.  Particularly for Bank of America, which has underwritten the vast majority of Europe’s CDS.  They don’t have the capital to pay off on all those insurance policies and quite frankly they never did.  Such an event would of course bring to the fore that most toxic of political questions in the run up to our own elections.  Is Bank of America To Big To Fail?  If it fails the cascade into the rest of the US financial structure may be catastrophic, if it is, and the Administration, the Congress and the FED return to the well one more time with another, even more massive round of bailing out the banks and quantitative easing and its incipient inflation, how will the American voters react?

Obama and company are of course hoping that any such event can be held off until after the election.  If they loose that bet Obama will join Sarkozy in the cooking pot before November gets here.  Even if they win that very risky bet, I doubt that Obama’s or any administration could survive the political backlash of either a deflationary implosion of a massive bank failure or an inflationary explosion brought on by the US taxpayer being put on the hook for Europe’s failure by bailing out the To Big To Fail once again.

But then the creation of new and dreadful wars has always been the political elite's one size fits all solution to financial crisis.

Meanwhile.......

It speaks for itself.

Here We Go Again.......

The latest campaign issue (and source of distraction from the underlying problem) is the ever-increasing price of gasoline. Always eager to find a boogie man to lay blame upon the politicians and talking heads are again leveling their sights on market speculation as the primary cause of the problem, coupled with domestic refiners exporting product to overseas markets where prices are even higher than paid here for gasoline.

Yes speculation and export rates (as a percentage of total production) do have an impact on the price we see at the pump, but looking at these two factors in isolation does a disservice to the consumer and the voter and ignores the underlying problem of inflation and what is causing it.

It doesn’t take a genius to figure out that the pontifications of the Federal Reserve and their wholly owned subsidiaries in Washington and in the MSM that so-called “core” inflation is ”minimal” is nothing more than a propagandistic lie.

Quite simply oil is a global market and it’s not that the price is rising as much as that the value of the US dollar in that market is shrinking. Nations all over are actively seeking ways to escape the “petro dollar” and finding other mediums of exchange in which to conduct the oil trade.

The US Federal Reserve continues with its disastrous Zero Interest Rate Policy (ZIRP), and perpetual buying of Treasury Bonds to finance an ever-expanding national debt. The Europeans just simply crank up the printing press to finance the never ending bailouts of the PIIGS and accompany it by replacing elected democratic governments with unelected and unelectable banking technocrats. Then on both sides of the pond these elitists can’t figure out why their own populations start grumbling about fascism and foreign states are dumping their bonds and seek to find other ways to conduct trade.

I’ve said it before and I’ll say it again, when the likes of Bill O’Reilly and Barac Obama are one the same page blaming speculators and not government collectivist centralization of control of free markets you might as well just bend over and grab your ankles because they are going to stick it to you deep and hard.

Fascism With a Human Face

As I have touched on previously the ugly reality is that we are living in a neo-fascist state. Sure we still have the illusions free speech and free elections. But do we really?


Just look at the choices we have for President in the upcoming elections. With the exception of Dr. Paul if one were to do a blind comparison among them all you would be had pressed to say who was who and who belonged to what party.

There is a reason for this of course and that is that as in the classical definition of fascism the corporations and the state have merged into a single amorphous entity. The corporations hire the lobbyists to write the bills that they then send to their bought and paid for politicians who pass them into law and then the corporations just go about their business of pillaging the economy and the citizens and everything is nice and “legal.” Just like in Fascist Italy and Nazi Germany. Don’t ask questions of morality the politicians and the courts and the media will only ask that you consider if it is “legal.”

Anyone who thinks that the MSM functions as anything other than Ministry of Propaganda for the neo-fascist state is either not paying attention, woefully ignorant, sadly deluded or to be quite frank, just plain stupid.

So the point in time is rapidly approaching wherein a lot of people are going to have to ask themselves; can this be changed? Can we stand and fight the machine? Or; Do we just hunker down and try and hide from the eye of Sauron or perhaps even flee the country?

How many of us can become capital “A” Anonymous and fight them and hope for continuing victories as was recently achieved in the take down of the proposed SOPA and PIPA legislation? Knowing full well that the state is actively engaged in hunting them down and will have no mercy when and if they find them. How many of us can really become little ”a” anonymous and have the means to effectively hide from the government with enough land and or resources to sustain ourselves and hopefully stay outside their reach or concern? In either case, probably not to many of us. The only remaining alternatives will be to either become a cog in the machine of the corporate government or simply go along with the corruption and fraud and hope that it doesn’t target us specifically.

We are making the transition into what Fabian socialist H.G. Wells called “fascism with a human face.” How long until it devolves into what as George Orwell so succinctly put it “imagine a jack boot stomping on a human face.” No one can tell but have no doubt it will move in that direction.

The reason that this neo-fascist state gets away with this slow one-by-one usurpation of our rights and property is that they have made issues of economics and government so complex that for the vast majority of people when they come up their eyes just glass over and the subject changes to who will win the Super Bowl or the latest season of Survivor or whatever other mindless distraction, put forth deliberately by the same propaganda outlets, so that we don’t become involved with the outcome of our own fates at the hands of the corporatocracy.

The Department of Homeland Security and their increasingly thuggish TSA have grown into some sort Imperial Praetorian Guard, concerned not with protecting the citizens but only with protecting the power of the state. How soon until like those of ancient Rome they start to “remove” even elected officials who question their authority? Just today a sitting US Senator who has been outspoken in his criticism of the TSA was detained for refusing a “pat down” at an airport in his own state of Tennessee. This is not the politically correct theater of the absurd, this is barefaced tyranny.

How long will people continue to wallow in their normalcy bias, thinking that a choice between an Obama or a Romney or a Gingrich is actually a choice? Or simply closing our eyes to the ugly truth and concerning ourselves with nothing but the flickering images on our new HD TVs until one day we wake up and find that all our rights and liberties and property have been stolen from us in the name of “state security” and we wonder out loud “How did this happen?” or ask “Why didn’t the talking heads on TV tell us this was happening?” Or will we wait until the latest and greatest HDTV comes equipped with a web cam and microphone so the Ministry of Truth can watch us as we watch their propaganda. Why not just line up at the courts and all of us change our names to Winston Smith and be done with it?

Of course by the time that the realization of the truth begins to dawn for most it will be too late to “petition the government for redress of grievances” because that right will be gone as well. And all of us who tried to warn the public, who begged and pleaded and cajoled until we were blue in the face will have all either “gone Galt” (members of Congress talking about setting up a “Reasonable Profits Board” draws not even a stiffeled yawn from any of the candidates or the MSM) or disappeared into some FEMA camp, held under indefinite detention, just as the NDAA now says is “legal.”

It’s all to frightening and all too real. It might be 28 years late but 1984 is here.

Now Would Not Be The Time To Celebrate or Relax.

As last week progressed to its conclusion the pressures on Congress from the public and from actual Internet operators to drop any and all so-called internet piracy legislation became too great for them to withstand. SOPA and PIPA as constructed were too little too late. Even the tempting bribes from Wall Street and Hollywood were not enough to overcome their fear of an enraged public and a new and powerful free press. Any court rulings that bloggers are not “real” journalist were exposed as acts of desperation, empty of any real authority and outside the realities of the Internet world.


The Justice Department’s move at the end of the week to take down a major filesharing operation brought a swift reaction from Anonymous and legions of other hackers that shut down entertainment and government webs sites with denial of service attacks. The word no doubt came down from the corporations and the bureaucracy that they could not withstand the attacks, and the call to retreat was sounded. The Feds and their bureaucrats have clearly underestimated how much people love the Internet and the free flow of information it provides that is outside the ability of government and the major media corporations to control. Sure there are a lot of kooky conspiracy theories out there and there will always be those who fall for them. Just look at government and media propaganda, it flourishes and survives in the exact same way. All the suckers notwithstanding there are a lot more people out there with a lot more healthy skepticism and plain old common sense than they get credit for who can see past the bunkum whatever the source.

And that is the point. The numbers of people are growing who no longer are willing to be spoon fed crap, who have come to the realization that there is a truth, a reality, beyond that of government and media managed propaganda. Concurrent with this growth in numbers is a growing realization that government is not the beneficent father it would have us believe it is. SOPA and PIPA can then in fact be seen for what they were, desperate attempts to stem this rising tide.

The words of Thomas Jefferson have come back to haunt the powers that be; “When government fears the people you have liberty, when the people fear the government you have tyranny.”

This is not to say that the power or determination of the statists has been broken. The power of the Internet may have already grown to large for the cage the government wanted to put it in. Yet have no doubt, like in a bad Hollywood movie, the monster will rise from its grave and government will try to construct a newer and bigger cage and find a more surreptitious way of putting it in place. The corruption of the corporatist state has become absolute. It will not simply give up to the “will of the people,” like a wounded animal it will strike back in some new more vicious totalitarian way. A new or manufactured crisis will come along demonstrating the need to bring “certain elements” under control for reasons of “state security” and if the 1st Amendment and freedom of expression become collateral damage well that’s just too bad. It will all be for our own good and protection of course.

Perhaps than it is true that there are two types of people in the world, the ones who want to be left alone to pursue there own happiness free of interference from others and government and those sociopaths who see controlling others and restricting their freedoms as the path to power and wealth. Hopefully as long as the desire for freedom remains a part of our genetic makeup and as long as there are a lot more of the former (and at least a few of them willing to put up the good fight) than the latter, then there is still hope that the next generation will know the freedoms we and past generations have known and in many cases fought to pass on to them.

The Chance Encounter and the Self-inflicted Wound

A friend of mine (you know who you are) once told me that what he liked about my presentations was that I seemed to have a “good command of the English language.” For a writer there can be no higher complement. I may or may not have told them that one of the beauties of the English language was in its character of adopting words that can distill the more seemingly complex ideas into a couple three syllables. Take one of President Reagan’s favorite admonishments for example; “Government isn’t the solution, government is the problem.” Until just the other day I did not know that there was a single term to cover this situation: iatrogenic. A disease caused by the diagnosis or treatment of a physician.

A more absolutely appropriate term for our systemic economic decline I could not imagine. Kind of like leeches and bleeding are analogous to politicians and bankers. Even a small child can understand that tearing a bandage off quickly is less painful than a long slow peeling away. Our politicians and bankers may be simpletons but that doesn’t mean they understand simple truths, or if they do, they don’t want the voting public to recognize them. Heaven forbid that the public might then come to the realization that politicians and bankers are not simply useless but actually destructive to the welfare of the individual and the nation as a whole. (Well at least the current batch of them anyway.)

Keeping in mind that most politicians (at the national level anyway) are the puppets of the financial elites that fund their campaigns, if there is anything a politician can’t stand it is to be perceived as “doing nothing.” Being seen as “taking action” or “fixing a problem” is their reason for existence, the food upon which their ever-expanding egos feed, that and tax dollars of course.

So that in essence is how we got to where we are today. Liken some small displacement in the economy unto a scrape on the arm, left alone a scab will form, the injury heal itself and in time would be long forgotten. Like how a new invention or technology changes the way we do something and results in some businesses going belly up while other new ones come into existence. (Who uses 5” or 3” floppy discs anymore now that we have thumb drives and re-writeable CDs?)

But that is not how government, politicians and their evil spawn the bureaucrats operate. When confronted with a scab it cannot be left alone to heal by some natural course, it must be portrayed as a “potential crisis.” And of course government must intervene in any “crisis”. So then the scab gets picked at and torn off and some government salve get slathered on at twice or more the cost of leaving it alone in the first place and at the same time tending to make the initial germ of infection immune to the natural process of healing, the market correcting itself. Now with a big government bandage covering the problem it is pronounced as “fixed” or at least “under repair” while it continues to fester under the surface only to reemerge at a later date or spread to someplace else and re-emerge as a “new” crisis in need of even more government intervention.

So with each new out break the problems grow worse than the previous ones, requiring (in the politicians and bureaucrats minds) even greater government “solutions” which are always, always, always, more government bureaucracy, spending, taxation and debt.

That this has gone on for decades now, under both Democrats and Republicans, the simple bumps and scraps of the economic course of life have now grown into a massive infection of government debt and addiction to cheap money. Sadder still this disease has spread to much of the body politic as well as far to many people have stopped being savers for their future and become consumers for today, so much so that they are consuming not just their own income but have so borrowed against future income that the downturn (to use the mildest of possible terms) has put them “underwater” as is the current vernacular.

Are there any solutions? Perhaps there were at some point, but I fear that the infection has spread too far for any quick fix. All this brings me to a chance encounter I had about a week ago. Very often on Friday evenings the wife and I go out for some simple repast and get away from the kitchen, at least for one meal. Sitting down in a local restaurant, nothing fancy mind you, I notice sitting next to us at the next table was Erskine Bowles, President Clinton’s former Chief of Staff and more recently of note as part of the Simpson-Boles Commission tasked by the President to find solutions to the very problem outlined above. Not wanting to be rude I waited until he stood up with his family and was preparing to leave that I introduced myself and remarked how I could not have been more disappointed than he and Senator Simpson over the Administration’s out of hand rejection of the commissions recommendations. He shook my hand and remarked that he was indeed disappointed but that work was still being done at the political level and that some 47 Senators had signed on to the commissions recommendations. Not wanting to further delay his Friday evening with his grandchildren, I thanked him for his work, wished him luck in trying to further the commissions work, expressed my hope that it was not too late to be of any positive effect, and hoped he enjoyed the rest of his evening with his family.

We had an opportunity to do something outside the entrenched political norms, but politicians who saw it as not in their personal or party’s best interest, never mind that it might have been in the nation’s best interest rejected it. So the option to keep kicking the can down the road in vain hope that some miracle might occur to rescue them and the economy was chosen instead.

Sadly I don’t think we are going to get any miracle. I think what we are going to get is another war. Be it limited in nature or a wider conflict I can’t predict. But what I do know from reading history is that when governments become desperate to distract the public from the disasters of their own malfeasance they rattle the war sabers.

Like at the onset of America’s being plunged into an already raging World War II. The predictable consequence of our embargo of scrap metal and oil against Japan, no matter how justified, was that they would lash out militarily, somewhere, somehow. It would appear that we have set a similar course with Iran, only with far more cynical economic and political motives. Our financial and gasoline embargo and Iran’s inability to process more than 50% or so of their own refined petroleum needs has already set Iran on a course of hyper-inflation, with prices, of particularly imported goods rising some 200% to 300% in just the last few weeks.  Such is a risky path of national policy.  Although the Iranian people may be well educated and questioning why their government is pursuing nuclear weapons rather than the greater welfare of its citizens may be the intended goal, the government itself is not rational and hoping they will respond in a rational manner may proove to be a fool’s errand.

But then is this not just another manifestation of the supreme arrogance of politicians and bureaucrats and their puppet masters on Wall Street and in the City of London that they know so much better than the rest of us and that they in their infinite wisdom have everything under control?  Maybe it’s just me but it doesn’t seem to be working out so well thus far.

May God save us all from their hubris.

The Weakness of Modern Repuplicans

I wrote this piece back in 2007 but never published it. It is still as valid today as it was then.


The Weakness of Modern Republicans.

I must say that I have long been dismayed by the Republican Party having falling into a semantic trap laid by the Democrats and the mainstream media. That being the contention that the terms “republic” and “democracy” are somehow indistinguishable in meaning and freely interchangeable.

That such a fallacious claim is not confronted demonstrates that at best, they don’t understand, or at worst, they don’t want the voting public to understand that the American Constitution exists not only to protect us from the tyranny of dictators and kings but to protect us from the dangers presented by the manipulation of democracy by the kind of emotional demagoguery that has become the stock and trade of the Democrat Party. (and all to many Republicans)

By accepting this premise we become trapped into believing that “plurality” is somehow the be all and end all in the formulation and implementation of public policy. Such a notion would have the Founding Fathers spinning in their graves.

The Constitution established our nation as a Republic, not a parliamentary democracy, and for that we should be thankful. This is demonstrated in our “Pledge of Allegiance” and by the fact that our military and elected officials swear loyalty to that Constitution, not to an individual, a political party, or a transitory elected government.

Thomas Jefferson is often held up as the spiritual father of the Democrat party, yet it is this same Jefferson to whom we owe perhaps the greatest debt for the fact that our nation is a Constitutional Republic, not a parliamentary democracy. Jefferson was not present at the Constitutional Convention; he was Minister to France at the time. Upon his return he quickly pointed out that the document as proposed, was deficient in its lack of enumerations as to what the new government would be prohibited from doing, i.e. the need to place strict limitations on the exercise of democracy. Thus we have our Bill of Rights, the first ten amendments to the Constitution. These amendments delineate specific rights that “shall not” be infringed by government regardless of what a democratic majority, elected officials or the public may demand or desire.

Neither did Jefferson raise objections to the manner proscribed for the election of our President, namely the system of the Electoral College. The Founding Fathers clearly recognized that we are not a homogenous nation. Political perspectives, social attitudes and perceptions of what is required of government vary greatly from person to person, State to State and region to region. This is as true today as it was in the 1780’s. Herein lie the foundations of not just the Bill or Rights, the Electoral College system, the Supreme Court and the U.S. Senate, but the Constitution’s philosophical guidance of our nation as a republic rather than a democracy. It is these very institutions that protect us from the tyranny of either the majority of citizens over the minority, of a group of large populous states over the smaller less populous ones or of one region over another.

So it would appear then that the founding “Democrat” better understood the dangers of social democracy than those who would claim to be his inheritors. The wisdom of his insight was quickly borne witness too by the chaos and unbridled bloodletting that came be known as the French Revolution.

It is not a mistake that our Constitution grants greater powers and responsibilities to the Senate than it does to the House of Representatives. No one could rationally argue that the Senate is a wholly democratic institution. Yes its members are elected by voting majorities from each of there respective States and its final decisions are reached by the votes of a majority of its members, but the vote of a Senator from Vermont or Wyoming carries the same weight as the vote of a Senator from California or Texas. So that if examined in terms of representing the populations of those States it is not so democratic after all. It was not intended to be. So it is also with the structure of the Electoral College. Nowhere does the Constitution bind the Electors to the majority of votes cast in their respective States. Nor should they be. They are only bound to vote in accordance to what their conscience tells them is best for the nation as a whole.

Would the Democrats argue that the Senate be done away with because it is “undemocratic?” I think not, for to do so would put their leading spokesman out of a job. It was the Founding Fathers vision the House of Representatives was to be bound to the will of the people, and that the Senate, The Supreme Court and the Electoral College was to be bound to logical discourse and reasoned debate guided only by the need for the preservation of the Constitution.

So then we must ask ourselves what insights and visions led our Founding Fathers to bequeath us such undemocratic institutions? How do they help us preserve our Republic?

For myself, I have no doubts that it was their hope that carefully defined and limited democratic methods would serve us well, and for the most part they have. But they also recognized that in times of crisis or when the nation was closely divided, when inflamed political passions and unreasoned or uninformed opinion and demagoguery might hold sway, there must exist safety valves, vehicles whereby once again a few individuals engaged in logical discourse, reasoned debate, careful examination of law the Constitution and of their own consciences might right the Ship of State and bring the nation back to an even keel. They were right then and they are still right today.

Yet all this said, in speech after speech we here Presidents (past and present) talk of spreading freedom and democracy throughout the world, without any mention of the necessity of defining freedom as structuring individual rights as the supreme tenant of any form of self-government. Fortunately we already have the structures in place, however tenuous they may have become over the years. I can only hope and pray that as the people of Afghanistan and Iraq and the rest of the Middle East build their new structures of government they to understand the meaning of freedom as well.

Sitting on the Edge, Oblivious to What Lay Before Us

“Crisis takes a much longer time coming than you might think, and then it happens much faster than you would have thought.”

Rudiger Dormbusch
Late MIT Economist

So now we have the latest brouhaha over President Ellsworth, I mean Obama, making non-recess recess appointments to the NLRB and some new so-called consumer protection oversight commission. Don’t hold your breath but someone will start bloviating about impeachment before the week is out. No doubt AG Holder, who couldn’t recognize the foul odor of corruption if he was having excrement for breakfast, will pronounce the actions “technically” legal.

This is a joke right? Congress passed the Frank Dodd bill and the CFTC continues to ignore it, i.e. position limits on precious metals and other commodities have still not been put in place even thought the law required that it be done by June of last year. It’s just more meaningless laws and more meaningless bureaucrats, trotted out as distraction, while power continues to be consolidated in the hands of the elite (of both parties) at the top. Meanwhile the blind partisan hacks will be kept busy fighting over a new bone as our liberties are dissolved into a new legislative morass, known as the National Defense Authorization Act.

Congress passes and the President signs this abomination (the NDAA) that more or less scraps half of the Bill of Rights and the media and the politicians yawn. The police state is here and no one seems to care. Hey the Orange Bowl is tonight and the Super Bowl is in a few weeks, what else could possibly matter right?

I’ve never been a Ron Paul fan, he might be right on target on economic and monetary policy but on foreign policy I think he is out of touch with reality, (evil does exist in this world and no matter how hard it gets slapped down, the bitch that bore it is always in heat). But in the longer term if we acquiesce to the slide into a fascist police state here at home, where the police are allowed to write their own warrants and the courts no longer exist as a neutral abettor between the citizen and the power of government, whether or not Iran has the bomb won’t much matter from inside a detention camp.

More than a few of us would be well served by looking up just how the British enforced the hated “Stamp Act” and how it led to not just the Revolution but the demands for the inclusion of a Bill of Right into the Constitution in the first place. We best open our eyes and speak up or even that right will be gone as well if Congress passes the SOPA (so-called internet piracy act).

We sit at the edge of the precipice and far to many refuse to see.

Merry Christmas To All!

I know I have been away during this busy holiday season, but I wanted to return if just briefly to wish you all a politically incorrect MERRY CHRISTMAS to you all!  Ihope you all enjoy a warm and plesent holiday with all those close to you. See you all next year.

Gloating Over a Pyric Victory

Only within the Marxist indoctrinated mind can it be conceived that wealth is created by government taxation and budgeting. This is the sad pathetic result of rote learning, teaching what to think rather than how to conduct critical thinking.

It’s not just that the federal government is $15 Trillion in debt and has unfunded liabilities for Social Security, Medicare and Medicaid of another $106 Trillion, never mind that it borrows another $0.40 for every $1.00 it spends. Even if one were to ignore all that, set it aside and not consider it an issue, the states are in awful shape themselves. As I write California, Illinois, New York, Rhode Island among others are bankrupt and having to slash the pensions and benefits of state workers in order to try and bring their budgets into balance.

Furthermore it’s not those big, bad, callus, mean spirited, people hating Republicans that are installing these austerity measures. How deliciously ironic, that it’s the Democrat controlled (in most cases for decades) state governments that are doing it. Doing it to their own unionized public service employee voting base. They have kept themselves in power in these very states for so long by making promise after promise payable from the taxpayer’s purse. Well now the bill is due, the cupboard is bare, the lie is exposed as the vicious ponzi scheme it has always been and there is nobody left to blame but themselves.

Pathetically the left has become so ideologically short sighted that they can’t see the budget crisis in the states as directly analogous to the Euro zone crisis. It is and worse. If the Europeans can’t bailout Greece without bailing out Italy and without bailout Spain and so on, what makes them think the federal government can bailout the states?

As Einstein said the definition of insanity is doing the same thing over and over again and expecting a different result.

In Europe we have the very same groups (egged on by hard core communists) that have been the beneficiaries of state sponsored largess rioting in the streets because the well has run dry. It would be delusional to think we won’t have the same thing occur here as our own crisis due.

When it does, have no doubt the left will find a way to lay blame it all on business and Republicans rather than look into the mirror at their own avarice and greed and have some second thoughts. After all violence and irrational emotionalism is so much more satisfying than self-examination and critical thinking. Mob action is easy; it has no conscience or morality, or sense of personal responsibility.

So how long before the markets and people start to realize that the math is impossible? Not until it's too late. (If it isn’t too late already.)  They'll continue to look away until the consequences of their own lies and delusions have them living in filth.  Then they will desperately look for someone to blame (Jews being the perennial favorites), then comes the begging for a strongman to come in and steal it all back for them.

Meeting Collusion with Cooperation

One could hope that at some point the more intelligent aspects of the “Tea Party” movement and “Occupy Wall Street” people might get their heads together and recognize their common interests and common enemies. If they do, the results could be a rapid evolution of the American political process.

But unless or until each side frees itself from the constraints of “left vs. right” doctrines it won’t happen, or at least not up to the potentials of such a merger.

Both groups recognize, at least to some extent, that the root of the problem is in the open collusion between government elites and financial elites. They even may say it out loud but none has the courage to openly label it for what it is; fascism.

The “OWS” group is to some extent guilty of wanting to throw the baby out with the bath water. Their most strident voices seem to be little more than planted, would be communist college professors, or union activists, openly calling for the destruction of capitalism itself, preaching to a choir of poorly educated followers who couldn’t properly define communism, fascism or capitalism. That’s not to say that I don’t agree with the slogan; “the banks got bailed out, we go sold out.” Rather than thinking outside the constraints of conventional politics they are being led down the path to the left of more government and more dependency while ignoring the violent and deadly excesses of central planning collectivism. Even more dangerously it has allowed anti-Semitism to creep in from the fringes. Again ignoring not so historically distant dangers on that particular poison.

Some of the more active voices among the “TEA” people on the other had seem to completely reject out of hand any concept of a “social compact” between citizen and government, or at the very least feel it has become so bloated and abused that it no longer functions in any positive manner and has become disassociative rather than cohesive to society in general. In this last respect they too are correct. This has lead some of them down the path to the right, where personal initiative and self-reliance thus becomes the be all and end all justification of their argument while ignoring the oft as deadly consequences of greed and unfettered laize-fair capitalism. This is how we get an almost knee-jerk reaction to the actions of the OWS by the TEA defending what they know to be the excesses of the very few on Wall Street with the mistaken attitude of “well at least they are capitalists.”

Meanwhile the OWS compounds the mistake of categorizing the criminal behavior on Wall Street as definitive capitalism by attempting to tar the entire system and its participants with that same brush.

Both sides need to recognize that it’s not a matter of the 99% vs. 1%. It’s more like 99.9% vs. 0.1%. If both sides could come to an understanding that the excesses of big government, as viewed from the Tea Party “right,” and the excesses of Wall Street, as viewed for the “Occupy Wall Street” left are but two side of the same coin, and that the collusion between them is working to keep them divided and more occupied fighting each other rather than addressing the issue of that fascist collusion that is at the heart of the problem. If such an understanding amongst the rank and file of both political sets could be reached then the more distasteful extremist elements, communist and racists, on both ends could be marginalized if not pushed out of the picture. And then something might be accomplished furthering work on those elements where there is agreement rather than expending and wasting energy fighting over those thing where there is not.

Such a combination would not only marginalize the extremists but put the left and right wings of our one party state on notice that their game has been exposed for the fraud that it is and a new paradigm is in play that will make them obsolete almost overnight. The thesis of one side must meet the antithesis of the other and give birth to a new synthesis of political and economic direction. Without it only chaos and violent conflict lays ahead.

Sailing Into Dark and Dangerous Waters or Tonkin Gulf Redux.

If ever there was any question that the super elites of Wall Street and their wholly owned subsidiary know as Congress is a “Ship of Fools,” the recent moves to “punish” China for undervaluing its currency and the CME’s (Chicago Mercantile Exchange) decision to raise margin requirements on copper should remove all doubt.

As has often been stated the last resort of the elites to fend off the repercussions of failed monetary policy is to rattle the war saber. So act one, scene one becomes possibly initiating a trade war with China. The currency bill is clearly a warning to China not to dump US Treasuries. But what does margin requirement on copper futures have to do with a trade war? Quite simply China has liquidity problems of its own. Local industries, finding themselves cut off from domestic credit markets in the face of growing inflation, have been using raw materials stockpiles, particularly copper, as collateral for loans from the international market. So then act one, scene two is the margin increase on copper futures which has the immediate effect of depressing spot market prices and (down by a third in the last few weeks) and simultaneously knocking down the value of the Chinese loans, essentially putting them “under water” as with the US housing bubble. Act one closes with scene three as the Financial Times of London reported today that China’s actual stockpile of copper may me as much as 100% higher than was being officially reported, unleashing even greater volatility in the copper price.

Act Two shifts to the precarious Middle Eastern front and opens with allegations of Iranian involvement in an alleged plot to blow up the Saudi and Israeli Embassies in Washington DC and assassinate the Saudi Ambassador. Most curiously, those cast members from off stage left that were quick to claim the Bush administration trumped up the accusations against Saddam Hussein in order to go to war in Iraq are deafeningly silent about the same possibility being in play here.

While there can be no question that part of the Chinese action in stockpiling raw materials has been to build up their military capacity, there are also growing doubts about the actual strength of the Chinese economy as the central government had to recently do a bank bailout of their own.

It is yet to be scene if Act Three will reveal these actions perhaps driving the two most dangerous regimes in the world right into each other’s arms. Couple China’s growing thirst for energy and need to keep it economy expanding to keep its restive populations appeased with Iran being increasing isolated from open participation in Western markets (along with their own healthy dose of internal discontent) and we have a potential recipe for a situation that can spin out of control on a moments notice, set in motion by a foolish act or increasing instability in financial markets.

Raising Taxes One Page At A Time.

On the one hand the President is fond of saying that he won’t raise taxes on the middle class, on the other hand the Republicans would have you believe that they are adamant about not raising income taxes under the current economic situation. With both the President’s and Congress’s approval ratings abysmally low it would be fair to say that the public has caught on to the game and they’re not buying the story from either side.

While looking through a list of taxes that have been raised a few days ago I came across one at the bottom of the list that made my blood boil. It was a $26 Billion tax on what is know as “Black Liquor.”

So what is Black Liquor and how does putting a $26 Billion tax on it affect the economy, the country and you? No it’s not a tax on Thunderbird or Ripple. The simplistic definition given is that it is a tax on particular type of bio-fuel. Well, yes and no. If the administration is so gung ho on so-called “Green Jobs” why are they leveling a huge tax on a bio-fuel?

Having worked for years for various companies that manufactured and supplied boiler cleaning equipment to the paper industry, black liquor is something I know a little bit about. I can say this in that I have patents for innovations in the design of this equipment.

Anyone who has driven by a large paper mill knows it’s a large, complex if somewhat malodorous operation. Turning wood pulp and rag stock into paper requires chemicals, lots of chemicals, and produces a considerably sized waste stream containing some very nasty and highly toxic by-products. Not the kind of stuff you can bury in a landfill or hold in a waste pond. If they were to leak into the water table the results would be disastrous.

With disposal not an option, the paper companies process these chemicals into a substance called red liquor and then further process it into the black liquor “bio-fuel” that is now subject to being taxed. This is then burned in specially designed units called Recovery boilers, so named because the burning allows the paper makers to “recover” the energy the chemicals contain and use it to generate electricity that is then used in the paper making process or sold into the electrical grid.

I won’t go into the details of the complexities and dangers involved in burning black liquor or red liquor, which is even more complicated, here. But as usual as with any ill-conceived tax policy, the problem is in the unintended consequences.

As a result of this foolishness every kilowatt of electricity sold into the grid by the paper makers just got more expensive. Every piece of paper you use just got more expensive. And every consumer product you buy, from cereal to light bulbs to laundry detergent, if it is packaged in paper or cardboard, it just go more expensive. Your children’s school supplies just got more expensive. Every administrative function in government and in business that requires a piece of paper just – got – more – expensive.

So when you go to the store and buy those things you need and you get angry because it cost more this week than it did last week or last month, now you know why. As you look at that receipt and your blood pressure rises, remember it cost more too and it’s reflected in the total at the bottom. So you might want to take a piece of that now more expensive paper and write a note to the President and your Congressman and let them know how this little known, unadvertised and ill-conceived tax just made your life more difficult and expensive. Let them know that its just this kind foolishness is how we get saddled with ever increasing inflation, and that that is the most pernicious, destructive tax of all.

They Said What? .... Again

Well it looks like the Euro zone gurus are trying to stay ahead of the curve. In last night’s post I speculated that the latest MOPE of the Chinese buying Italian bonds would be shown to be bogus before markets opened on Wednesday. Even with the European market up today, feeding off of yesterdays delusion, the ECB may be preparing for the collapse of yesterday’s MOPE by spreading today’s MOPE. Namely that it’s not the Chinese but the Russians who are going to come to the rescue of the European bond market.

Apparently even this rumor was not deemed enough to inspire the necessary MOPE as within a few hours it was revised to throw possible Brazilian involvement in the mix in hopes of trying to create some perception of a trend.  The half-life on this was pack of lies was made even shorter than expected when the Brazil's Central Bank policy head Mendes met with the press saying that the "Euro is less important in Brazil international reserves", and "Brazil seeks reserve currencies with solid fiscal positions." Oops! Looks like at least one of the prospective victims aren't in the mood to be associated with the Euro debacle even if only in an unsubstantiated rumor.

Seriously “they said what?” After China, then Russia, who’s next, India, Papua New Guinea, or maybe Easter Island? Lord knows they are trying to raise the dead.

They Said What?

With the ever accelerating disaster scenario that is the Euro zone, trying to keep up with rumor/crisis/solution du jure is enough to leave a strong mind with a serious case of confusion (what I call the “they said what?” syndrome) and a weaker one in a state of psychotic dislocation.

Just last Friday the rumor of the day was that Greece could default or withdraw from the Euro over the weekend and that German banks were scrambling to put actions in place to cover the losses the German banks would incur. Oh what I would have given to be a fly on the wall hearing the behind the scene conversations at the G7 meeting in Marseille this weekend. Not so remarkably the public statements were long on hyperbole and short on substance.

By late Sunday the futures on all the major markets were in the red. By the end of trading in Europe all the markets closed down with the French CAC getting hammered down by over 4%, based on concerns of their exposure to Italian Bonds.

It looks like the decision coming out of the G7 meeting was to tell the Greeks with “great firmness” to shut the hell up about possibly defaulting as the bankers had a bigger problem on their hands with the disastrous, nearly bidless Italian Bond auction. With the DJIA continuing to decline the Italians then released a story that they had had discussions with the Chinese requesting they intervene and buy the undesired and undesirable bonds.

Whether the almost immediate reversal in the DJIA, with surprise, surprise financials like BofA and Citi leading the way, was actual investor interest or intervention by the FED is yet to be determined, if at all. If I had to bet on that one I know where I would be putting my money.

Never mind that the Chinese have not even said if they were going to buy any Italian Bonds, the rumor that they might was just the excuse needed for another manipulative intervention. Never mind that they are presently looking at getting burned on the Portuguese and Greek bonds they have already purchased. More MOPE (management of perception economics) was needed and that’s what we got.

With each new rumor/crisis/solution having a half-life shorter than the one before, the Chinese intervention story will probably be shown up as bogus by the time markets open Wednesday if not before. At this point only a fool would speculate what the next round of rumor/crisis/solution/MOPE will be, never mind how absurd it will sound. I can however be pretty sure my first reaction will be “they said what?”