Today the Federal Reserve created $12 billion dollars, giving it to an unknown individual, bank, or country in exchange for mortgage-backed securities. This happens all the time in various amounts.
The real kicker however, is when that money gets deposited into a bank, the bank can then lend $120 billion dollars because of our system of Fractional Reserve Banking, thus increasing the total money supply by $120 billion. Fractional Reserve Banking is an inflation multiplier.
In the State of the Union address, one of the things President Obama touched on was a recent decision by the Supreme Court that expanded Freedom of Speech in the Election Process. He said:
"Last week, the Supreme Court reversed a century of law to open the floodgates for special interests-including foreign corporations-to spend without limit in our elections. Well I don't think American elections should be bankrolled by America's most powerful interests, or worse, by foreign entities. They should be decided by the American people, and that's why I'm urging Democrats and Republicans to pass a bill that helps to right this wrong."
An article in today's Wall Street Journal points out that not only was this a gross overreaction, but he didn't even know what the facts were.
Then there is the substance of the remark itself. It was factually wrong. The Court's ruling in Citizens United concerned the right of labor unions and domestic corporations, including nonprofits, to express their views about candidates in media such as books, films and TV within 60 days of an election. In short, it concerned freedom of speech; in particular, an independent film critical of Hillary Clinton funded by a nonprofit corporation.While the Court reversed a 1990 decision allowing such a ban, it left standing current restrictions on foreign nationals and "entities." Also untouched was a 100-year-old ban on domestic corporate contributions to political campaigns to which the president was presumably referring erroneously.
When Russ Howard and Steve Cicero launched a grassroots recall campaign against an incumbent politician, they received fines for campaign violations that were eight times the amount of money they had actually raised. Last year when I was still at ABC, I reported on six neighbors in Colorado who protested their city council's proposal to merge with a neighboring suburb. Their protest? They handed out lawn signs. Their opponents used campaign finance laws to sue them, because they hadn't registered as an "issue committee" and hadn't filed reports on every single expense.
A Word About Campaign Finance Laws
Wages and benefits rise a weak 1.5 percent in 2009, the lowest in 27 years. The Consumer Price Index (inflation) rose 2.7% in 2009. Collectively, we are all worse off because of inflation. The fact that wages rose at all with unemployment so high suggests to me that inflation, if the economy manages to get to another boom period before the dollar crisis happens, will be extreme.
I just sent this letter to Senator Nelson. I called him too.
There is a vote in the Senate tomorrow to re-confirmed Ben Bernanke as head of the Federal Reserve.Until S. 604, the Audit the Fed Bill, is given an up or down vote on the Senate floor, Senator Nelson should vote against his confirmation.
I called your office, and the person who answered the phone said Nelson already supports a different "audit the fed" bill. Last time I checked, he was the only co-sponsor.
Nebraskans' are not stupid. Supporting this bill (a bill that has no chance) simply allows him to tell people he supports an audit of the Federal Reserve, even though he has no desire for a real audit. Politics as usual - seems to be a trend with Senator Nelson.
The fact is, the Federal Reserve can buy anything from anyone, using money they create to pay for it, and NOBODY - not even Congress - knows who that money is going to or what it is buying. Currency is the foundation of any economy. Destroy its value and you destroy the wealth and prosperity of the country.
For every dollar that the Federal Reserve creates, the purchasing power of MY savings and retirement is reduced. I'm sick if it.
If Nelson cares at all about Nebraskans, he will vote for a REAL audit and vote against Bernenke's confirmation.
Thank You.
Nelson is in real trouble in Nebraska. His policies and politics align more with Washington D.C. then with Nebraska. He could potentially redeem himself somewhat in my mind if he put up a real fight against the Federal Reserve. I highly encourage everyone out there call him (and Sen. Johanns) and tell him to vote against Ben Bernenke's confirmation.
Senator Mike Johanns: 202-224-4224
Senator Ben Nelson: 202-224-6551
No Audit, No Bernenke.
The other day, the CBO said it expects deficits for next year to be $1.35 trillion. It expects similar deficits for the next decade, and says it could be higher depending on legislation passed this year. Today Congress will meet to expand the deficit "ceiling" by $1.9 trillion. They are also expected to quash an effort to reduce the deficit by voting against a bi-partisan panel that would make the hard decisions for them. Later, they will start deliberations on Bernanke's reconfirmation - the head of the organization that makes all this debt possible. He is expected to be confirmed for a 2nd term (although I have called my senators and told them not to vote for him).
I see absolutely no way out of a complete collapse of our currency and economy. The vast majority of politicians simply don't care about the deficit, our economy, or us. They are in it for the power, for as long as it lasts.
Obama is planning on helping middle class students by dropping student loan repayment to 10% of disposable income instead of 15%, and forgiving the student loan all together after 20 years, instead of 25.
The main reasons why the cost of tuition is so expensive is a) high demand for college admission, and b) government loan support and grants. We've been told for as long as I can remember that if you don't go to college, you won't be able to succeed. Most high school kids think they need to go to college, but only 50% graduate a 4 year program after 6 years. This high demand naturally raises prices. But that doesn't fully explain why tuition costs are increasing faster the health care costs. Because tuition is so high, responsible bank lenders would be taking huge risks lending money to the majority of students and parents. Left alone, schools would be forced to keep prices low enough for people to attend. Unfortunately, this doesn't happen. To 'help', the government will promise to pay back student loans to banks if the student can't, so banks give students whatever loans they want. Therefore, no matter what tuition prices are, students can get loans, and there is no downward pressure on tuition prices.
Obama's plan is only going to make this worse. If you're a student, you can be responsible, get a good education at the most reasonable price, get as few loans as possible while working through school, and pay those loans off right away. OR, you can choose the most expensive school, get student loans for all of it, and only pay 10% of your disposable income for 20 years before having all your college debt forgiven. Since payments will now be 1/3 less and 5 years shorter, it's something to consider. It will most certainly aggravate the problems with high tuition costs. Colleges currently under pressure know they'll get their money, students don't have to worry as much about repayment, and after 20 years their debt can be forgiven.
But that's what happens whenever the government 'helps'. They make most problems worse. More on government and education costs...
Obama is going to put a freeze on discretionary spending next year. The CBO said it will save almost $300 billion over 10 years. Sounds good right?
Well, since it won't go into affect for another year, next year's deficit is still projected to be a whopping $1.3 trillion. If nothing else changes, the year after (with the freeze) will see a deficit of 'only' be $1.27 trillion. Of course the freeze doesn't really mean a "freeze" freeze, budgets will still rise with inflation. So with 2.7% inflation ("nothing else changes" includes inflation), tack on another $34.29 billion to the deficit. Ok. Now... wait... yep. That's a increase of $4.29 billion.
It does nothing.
An educational rap video on economics, "Fear the Boom and Bust."
Hayek is from the Austrian school of economics who is for free markets, against inflation, and pro-savings. His theory is that low interest rates, over consumption, and inflation create the booms that eventually lead to the busts. The bigger the boom, the bigger the bust.
Keynes on the other hand is for a government managed economy in which inflation and government spending are tools to guide the economy. He blames too much saving for recessions. His theory is that booms and busts are cyclical, and the bust period can be managed and even avoided through said increased government spending, inflation, and consumption.
Turns out Wall Street and the big banks have already found loopholes to get out of the regulations the President is creating to contain them.
"A person familiar with the operations of one big Wall Street bank said it expects that new regulation will affect less than 1% of its overall business." - Big Banks Have Already Figured Out The Loophole In Obama’s New Rules
If we really want to rein in the power and influence of these big banks, we simply need to let them fail. And we can do this by getting rid of their safety net, the Federal Reserve. Obama and Congress may have bailed out Wall Street (Bush probably would have too), but what keeps banks from becoming insolvent every day is the Federal Reserve. If a bank loans out too much money, the Federal Reserve is always there to buy assets from them, creating money (and inflation) and put said money in their account.
Make banks survive on their own without government welfare, then we would see their true power wane.
On the drive to work today, I heard about George Clooney's "Hope for Haiti," a global telethon to raise money for the people of Haiti. I thought to myself, that is how it should be. Private individuals donating their time and money to help people. I also thought to myself, I wonder how long until the U.S. Government steps in and tries to take over.
Turns out, it wasn't long. There is already a bill in the house, Resolution 1021, that is "expressing condolences to and solidarity with the people of Haiti." That part is fine, but it also commits the US government "to begin the reconstruction of Haiti" and affirms that "the recovery and long-term needs of Haiti will require a sustained commitment by the United States."
While the Government may be well intentioned (and I stress "may be"), rebuilding foreign nations after a national emergency is not it's roll. It gives our country a lever to use against Haiti the next time we want something like a military base or new system of government. We were warned against foreign entanglements by Thomas Jefferson, and we have never listened. Nothing good (in the long run) can come of it. I'd much rather non-governmental agencies and volunteers help then send in our military. If they do go in, I would like to see them out - completely out - as soon as possible.
What is the lesson the Democrats need to learn from the victory of Scott Brown in Massachusetts? I think this article says it best...
Wounded in Massachusetts, frustrated Democrats on Wednesday urged the White House to focus on jobs and the economy - not the health care overhaul that's now at risk. - Democrats see Mass. message: Jobs, jobs, jobs
The reason? For jobs to be created, businesses, especially small businesses, need to be able to reasonably predict the future. It becomes very difficult to hire someone if you don't know how much it will cost to insure them 6 months from now. I heard a story on the news yesterday that states out of money may need to raise taxes on businesses to fund unemployment benefits. Making it more expensive to run a business it simply going to increase the number of unemployed! The government is constantly changing the rules. The more rules, taxes and loopholes there are, the more confusing and difficult it becomes to operate a business. And look out if you own a business that has to do with "green" anything, because the government has it's favorites. If you aren't a favorite, laws passed will be designed to help your competition, most likely at your expense. Scott Brown winning in Massachusetts was probably the best thing to happen for new job creation because it put a giant wrench in the works for the Democrats.
If the government (Democrats or Republicans) really wants to create jobs and end unemployment, no amount of stimulus is going to work. To create jobs, the government must get out of the way. They need to stop legislating, and repeal laws that make owning and operating a business in any way difficult or costly - especially businesses that still manufacture things. If you're a business owner, and you see that owning a business is becoming easier and more profitable, you will expand your business. However, if it's becoming more difficult, confusing and expensive, you will be much more hesitant to expand and may even have to let people go.
The people in power have become so arrogant that they think only with their help, only by adding rules, only by spending more and more money, can things be fixed. So go ahead Democrats, focus on the economy. And watch as you lose more and more seats and eventually the Presidency.
With Scott Brown winning a seat in the Senate from the state of Massachusetts, it breaks the Democratic super majority. This puts much of the President's agenda at risk because the Democrats can no longer push through anything they want.
A lot of pundits on each side are going to try and speculate why this happened. Why voters in a mostly democratic state voted for a Republican. I'm no expert, so I can't say for certain. But if I had to guess, it boils down to the following exchange between the moderator David Gergen, and Scott Brown.
"Mr. Brown, let me ask you this question," said Gergen. "You've said you're for health care reform, just not this bill. We know from the Clinton experience that if this bill fails it could well be another 15 years before we see health care reform efforts again in Washington. Are you willing under those circumstances to say 'I'm gonna be the person, I'm gonna sit in Teddy Kennedy's seat, and I'm gonna be the person that's gonna block it for another 15 years.' "My question is, will the Republicans see the lesson in this? Or will they continue on their own path of self-destruction along with the Democrats to the bitter end."Well, with all due respect," Brown shot back, "it's not the Kennedys' seat and it's not the Democrats' seat, it's the people's seat."
For anyone who thought Obama was finally sticking it to the banks, think again. The "Financial Crisis Responsibility Fee" which is to be imposed on the top 50 banks whether they took TARP money or not, is tax deductible!
"That means that for every $1.00 in "sock it to the banks" tax that the government collects, it won't collect about $0.35 in taxes it would otherwise have collected." - What Obama Didn't Tell You About That Huge New "Sock It To The Banks" TaxWhen did this information become public? On a conference call between the Treasury department and Wall Street. It's nice to have friends.
Milton Friedman on more liberty, less government.
The problem of our society today is too much government, not too little. Indeed I am persuaded that government is failing to perform the functions which it alone can perform, because we are trying to have it perform functions which it can not perform.
Words of wisdom.
This is a somewhat long article about the Obama administration's Cass Sunstein, the head of the Office of Information and Regulatory Affairs, and his desire to "cognitively infiltrate" online groups and websites to try and discredit their views.
Sunstein advocates that the Government's stealth infiltration should be accomplished by sending covert agents into "chat rooms, online social networks, or even real-space groups." He also proposes that the Government make secret payments to so-called "independent" credible voices to bolster the Government's messaging (on the ground that those who don't believe government sources will be more inclined to listen to those who appear independent while secretly acting on behalf of the Government). This program would target those advocating false "conspiracy theories," which they define to mean: "an attempt to explain an event or practice by reference to the machinations of powerful people, who have also managed to conceal their role."
An example cited...
Consider the recent revelation that the Obama administration has been making very large, undisclosed payments to MIT Professor Jonathan Gruber to provide consultation on the President's health care plan. With this lucrative arrangement in place, Gruber spent the entire year offering public justifications for Obama's health care plan, typically without disclosing these payments, and far worse, was repeatedly held out by the White House -- falsely -- as an "independent" or "objective" authority. Obama allies in the media constantly cited Gruber's analysis to support their defenses of the President's plan, and the White House, in turn, then cited those media reports as proof that their plan would succeed. This created an infinite "feedback loop" in favor of Obama's health care plan which -- unbeknownst to the public -- was all being generated by someone who was receiving hundreds of thousands of dollars in secret from the administration (read this to see exactly how it worked).
Another thought on inflation. Some people may say, "who cares, I'm not able to save money anyway so it doesn't affect me, it only affects rich people."
If you didn't get a 2.7% raise last year, you are essentially making 2.7% less this year. So for every $10,000 you made after taxes (which include sales tax, income tax, property tax, etc), you can now purchase 27 iTunes albums fewer, etc, etc. Wages are the last thing to raise when it comes to inflation, therefore everyone is affected.
Inflation for last year was only 2.7% according to the government, while Americans saw their wages deflate by 1.6%. These numbers came out last week and most people seemed to agree that it was good, considering the economy. In fact, many see it as positive news. Average inflation is 3.75%, so we should be happy it's at this "acceptable" level. Uhg.
A few days ago, the Federal Reserve purchased $14 bln net ($28.9 bln gross) in agency mortgage-backed securities as part of "ongoing quantitative easing operations." They do this all the time. What this means is that the New York Federal Reserve Bank created $14 billion dollars and bought mortgage-backed securities that were probably "toxic" from undisclosed banks, people, or governments. Wouldn't that be nice to create money and use it to buy worthless junk from your friends to make them rich? Unfortunately, while it makes them rich, it makes us poor. When you increase the supply of money, all other money becomes worth less.
Take last year's inflation. For every $10,000 you may have had in savings or retirement at the beginning of 2009, you can now purchase $270 less with that money. That could be a new iPod or 27 albums on iTunes, 17 large pizzas, it could be a semesters worth of text books or a new set of front tires. Now multiply these things by the amount of savings you have.
This happens all the time, year after year, since the creation of the Federal Reserve. That's why the Federal Reserve needs to go.
UPDATE: If you don't think it affects you because you don't have $10K in savings...
My letter to the editor was printed in Sunday's Journal Star. If you're interested in reading it, you can find it here.
The most interesting thing is generally the comments people leave. There were six other letters printed, so not all the comments relate to mine.
I ran into a problem after getting Windows 7 installed on my laptop. When I tried to open Photoshop CS3, I'd get an error that said, "Adobe Photoshop CS3 has stopped working." I noticed it was it would die when "building TWAIN menus."
I think this happened when I hooked up a Dell photo printer. I haven't been able to fix the problem yet, but I did manage to find a work around it. On my system, I went to C:\Program Files (x86)\Adobe\Adobe Photoshop CS3\Plug-Ins\Import-Export and found a file named Twain_32.8BA. I simply added a tilde (~) in front of the file name. Now it starts, and everything works, but I can't use the dell scanner - not that I have used it much before. Anyway, hope this helps someone.
People complain that the free market is broken. I hear it all the time. The government is always telling us how it needs to fix it with more regulations. It needs to guide our actions through tax incentives and disincentives because free markets can't make the right decisions on their own. This is a bunch of hooey (btw, hooey is an actual word).
The problem with the free market is government involvement. People in power giving money to their friends, and other people in power. John Stossel gives us a perfect example of this with a company called "Serious Materials." Government support of a private company, making the company rich, and people in the administration rich as well.
But this isn't just a problem with Obama or his administration, not even close. This happens no matter who is in power. The reason it happens is because the president and congress control vast amounts of money and power. The larger the size of government, the more power they accumulate and the worse things get.
The only way to stop this waste, abuse of power, and corruption isn't to vote out the Democrats and replace them with Republicans, it is to reduce the size of government. Period. Fight every law and regulation not specifically granted to the government in the Constitution. Don't be partisan, fight all politicians trying to create new laws. Support those trying to repeal or stop them (no mater their party). People think large corporations are corrupt? What is the government? A huge conglomerate very similar to a business, except that it also has the power to create laws, extract taxes, fudge the books, and create money. It also has the power to destroy itself, which I think it is well on its way toward accomplishing. Unfortunately, they are going to take us with them.
You can clamor all you want about open government, but talking about it doesn't make it so.
- Senator Demands IP Treaty Details
- Obama keeps health reform behind closed doors
- Fed Defies Transparency Aim in Refusal to Disclose
Just saw an article citing Fitch Ratings as saying, "the US will lose its AAA credit rating unless acts to bring the budget deficit under control, citing a spiral in debt service costs and dependence on foreign lenders."
On an unusually positive note, it appears at least two senators are taking the deficit seriously.
"We're literally going to pass on to our children a country they can't afford," Gregg says. "Their standard of living is going to go down dramatically, the tax burden will go up dramatically, the benefits for senior citizens who are retired will be adjusted dramatically if we allow ourselves to go over this cliff."What they are proposing is an 18-member task force made up of 16 members of Congress - eight Democrats and eight Republicans, and two representatives from the administration, including the secretary of the Treasury. The committee would weigh proposals to lower the national deficit, and if 14 of the 18 members agreed on a proposal, it would go to the House and Senate for a vote. The proposal would then need to pass both chambers by a supermajority: 60 votes in the Senate and by 60 percent of the House. The president would also retain his right to veto.
Even if this commission does happen, and they do come up with ways to stop the red ink, I don't think the President or the Democratically controlled congress has the will power to do anything about it. It simply would not pass. Everything they are doing, or trying to do, requires massive amounts of money - money they don't have. Doing what would be required to stop the red ink would cause a big (and necessary) recession. Policies to create jobs would mean reducing the size of government and getting out of the way of the free market. I just don't see it happening.
UPDATE: One thing I forgot to mention, someone is coming on NPR tomorrow morning to try and explain why balancing the budget would be a bad thing. That should be interesting.
From Venezuela...
"I want the national guard in the streets, with the people, to fight speculation," Chavez said, calling re-pricing a form of robbery.He encouraged people to publicly denounce businesses where prices increase and threatened to expropriate businesses that do.
The government would transfer ownership of such businesses to the workers, Chavez said.
- Chavez says military will monitor Venezuelan prices
and from North Korea...
Strong-armed currency reform in North Korea, which has confiscated the savings of small businesses and forbidden the use of foreign money, is now causing runaway inflation and contributing to food shortages, say several reports from inside the closed state.
These are extreme examples from countries run by absolute dictators, but they should be recognized as examples of what could (and has) happened in the United States to a lesser degree. When inflation begins to become a problem for a government due to a self-inflicted increased money supply or the rapid use (increased demand) of materials during times of war or boom, the government's reaction always seems to be to try and control the price of said goods. It happened in WWI, the Great Depression, WWII, the Korean War, the Vietnam War - often after the events were well underway. These price controls never work. People either stop selling the price controlled goods once they can't make a profit (which results in shortages), or they sell the products in the black market.
The United States has been pumping so much new money into the economy that avoiding inflation (well, a dramatic increase in inflation) will be impossible. The dollar continues to lose value, factories and businesses continue to move overseas, we continue to lose jobs, and our deficit continues to grow out of control. It will be interesting to see what the first price controls will be. My guess is that it will be gas. Oil is already at around $82/barrel, and I don't see it going down in the near future. During our most recent boom period when we were consuming energy like it was an inexhaustible resource, gas was already near the chopping block. Talk about price controls in places like Hawaii - or wherever prices were high - were fairly common. This time however, I don't think it will be limited to gas. Food and other things deemed necessary for survival will also have price controls asserted. Shortages will follow. Anyone who tries to sell items on the black market will be made criminals and punished "under the law."
None of this of course has to happen. If we simply stopped inflating the money supply, that would help tremendously. There would still be mountains to climb in order to get out of debt and return our economy to one that creates things (jobs included), but at least it would be a start.
I read an article this morning about rent in New York City dropping, and rent in Washington D.C. rising. This applies for both office and residential space.
The office market in Washington, D.C., is poised to topple New York as the nation's most expensive, reflecting the declining fortunes of the nation's financial center and the government expansion under way in the U.S. capital.
- Rents Signal Rise of D.C., Fall of N.Y.
This goes hand in hand with other articles, such as "Number of federal workers getting 6-figure salaries explodes during recession; trend boosts average federal worker salary to $71,206"
The United States government is out of control. Even in my wildest dreams, I didn't think the Obama administration could do so much damage to our economy in such a short amount of time. It is stunning. The only way to pay for these massive increases in government is though huge deficit spending (which keeps rising beyond government expectations) and inflation by the Federal Reserve. We are in a recession! When a business is in a downturn, it cuts jobs. It cuts spending. If the government was a business, it would be bankrupt. But it's not a business, it's our country. It is literally going to destroy our currency and in the process, our economy and maybe society itself.
People are calling the last decade the decade from hell, I think 10 years from now we'll see them as the biggest party since the 1920's, and 2010-2020 will be the beginning of America's lost generation - similar to Japan's lost decade.
Ever walk by your microwave and think, "Boy, I wish that thing was safe." Or maybe, "That darn microwave is so difficult to cook with." Or, "Gee, I hope I don't get sick from eating chicken or turkey pot pies like those people two years ago did."
Neither do I. But apparently researchers at the University of Nebraska do, and the U.S. Department of Agriculture agrees that it deserves attention. Three years worth in fact. So they have issued a grant to the University of Nebraska of $600,000 to study this troubling trend of improper microwave use, safety issues, and lack of consumer knowledge on how to use the confounded things!
Thank goodness for the government. Without them, we wouldn't know how to do anything. Just another example of wasting our tax dollars and driving student tuition up at the same time.