Warning

I have been resisting making this warning, but I must because there is a real possibility. I have been warning since October of a Treasury bond market collapse getting under way by the end of March. It actually started on February 12 and picked up speed last week in earnest. Suddenly experts are coming out of the woodwork saying it's a possibility. On March 31st the Fed is supposed to stop its agency debt program and quantitative easing program. What those are is not so important as this: No one on the earth thinks it will happen. But the Fed says they will do it.

If they do, it could start a real panic in the bond market, which would ripple through the whole world, and could end up collapsing the whole world economy. Starting on Thursday, if you even think you heard someone say "bond market panic" or bond market collapse" or "sovereign debt collapse" drop everything. Run and get food and water and gas, alternative means of cooking, heating, lighting, as much as you can. It will be the most important thing you've ever done. You will have about two and a half days to get it done, but have no guarantee that you'll get ahead of the other people. I will post more on this.

More on the debt

David Ross from Radiant Asset Management indicates in his research that the total obligations of the U.S. government exceed $90 trillion referring to the estimate of the Financial Management Services of the U.S. Treasury. They include hospital insurance, supplementary medical insurance, and social security. “[T]he collected money (which Treasury has borrowed and Congress spent) falls far short of what is required to fulfill the long-term obligations of those programs, even if it had not already been spent. Almost all of the $90 trillion are promised obligations with no established method of payment.”

I have never seen this $90 trillion number. I come up with $107 trillion.

Ross points out further: “Including unfunded obligations, the U.S. moves to 1st, well above Taiwan and Zimbabwe, for the highest debt to GDP ratio. . . U.S. total debt plus unfunded obligations total 625% of GDP.”

The Peterson-Pew Commission on Budget Reform stated that “the United States would almost certainly experience a debt driven crisis,” that “could unfold gradually or it could happen suddenly, but with great costs either way.” “The excessive debt would. . . affect citizens in their everyday lives by harming the American standard of living through slower economic growth and dampening wages, and shrinking the government’s ability to reduce taxes, invest, or provide a safety net.”

Many experts believe that at some point such system of borrowing is going to collapse. Peter Schiff, the President of Euro Pacific Capital, argues that the way the U.S. government functions is that “we borrow money and then when the interest payments are due we borrow money to pay the interest. . . It is one gigantic Ponzi scheme.”

Peter Schiff is brilliant, but his video blog is of silly quality.

By the way, the deficit for this year so far is $651,000,000,000.

Treasury auction hairball

Here's a story about what I have called "the big show" this year. This is the 900 pound gorilla that will wreck the economy. Everyone poo pooed the idea and the evidence keeps rolling in. This article talks about the bad government debt auctions, which I have been forecasting would happen by March for the last six months. It does say something misleading by saying "earlier auctions this year have been strong." Some have, but the trend has been bad, and we have had several failed auctions, which people said would never happen. They got so bad that apparently the Fed did something else behind the scenes because suddenly for several weeks after that the results were freakishly good...then bad again.

Everyone with a brain and a pencil can do the math and see that the drunken sailer spending spree is literally impossible to pay for. There is literally not enough savings on earth to lend what our administration wants to borrow in our names. There is literally no combination of tax increases and spending cuts that makes these deficits work. I'm sure they will raise taxes to the moon anyway, but it's still impossible. These nitwits in Washington have given up pretending to try to be competent. They are on a tear to make all of their own dreams come true. Why should they care about us?

Regarding the tax increases, reading the list of new taxes for the health monstrosity makes your eyes glaze over before you can even read the whole list of new taxes you'll have to pay. God forbid you're a business owner (the devil, in liberal-speak). It's ok though. The official estimate is that the cost per family of four will only be $15,200! What the?!

Fear your government run amok

I have to admit I'm shocked. I thought the coming economic collapse was flying totally under people's radar. Now I see a poll showing 79% of Americans fear it. At least they understand. they should fear it. It will be an economic atomic bomb. Article about the poll.

Some famous people weigh in about the Obama Care catastrophe, which is obviously the most disastrous law in US history (I stand corrected. There will be 159 new bureaucracies!):

"If there is anything good to say about Democrat control of the White House, Senate and House of Representatives, it's that their extraordinarily brazen, heavy-handed acts have aroused a level of constitutional interest among the American people that has been dormant for far too long." --economist Walter E. Williams

"The fact that we conservatives were able to fend off this health-care monster for so long is amazing. But the reality is, until true constitutional conservatives recapture Congress, the growth of government and the incineration of liberty will only continue apace." --radio talk-show host Laura Ingraham

"Often the politicians who talk about health care the most believe in the Hippocratic Oath the least. Barack Obama falls into this category. He promises that his health care plan will protect the weak and vulnerable. This would be a little bit more credible if his policies weren't already killing and exploiting them." --columnist George Neumayr

"As America's teetering tower of unkeepable promises grows, so does the weight of government, in taxes and mandates that limit investments and discourage job creation. America's dynamism, and hence upward social mobility, will slow, as the economy becomes what the party of government wants it to be -- increasingly dependent on government-created demand." --columnist George Will

"The smallest minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities." --author and philosopher Ayn Rand

My friends and I agree, period! End of discussion!

Thanks to Michael Crichton for eloquently stating the obvious:

Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled.
- Michael Crichton

Also, here is a good article ultimately about the failures of central planning by the current administration. Of course, central planning always fails, so that's not a newsflash. It's just sad because central planning is taking over our whole economy. Plenty of poverty and red tape for all!

Social Justice nightmare

Great points from this article:

"...While President Obama has made wide use of his claim to fighting for Social Justice, especially with his zeal towards a government takeover of our healthcare system, he has utterly ignored the natural – fully predictable – unintended consequences of his attempt to reorder the best medical delivery system the world has ever created.

In fact, this reordering of the American medical delivery system to suit the whims of socialist reformers, President Obama is ensuring a genuine Social Justice nightmare for the whole world.

In which Country do the new drugs, medical innovations and most advanced surgical techniques originate? Exactly. In the United States of America.

But the United States is not a selfish Nation. And every one of these medical “miracles,” the products of free enterprise, under the supervision of government oversight, makes its way quite quickly to the rest of the world. Socialist countries, unable to produce the cures themselves because they have choked innovation with their own “centralized planner” philosophies, then buy the new American drugs at highly discounted prices for their own citizens. In effect, the American medical system quite heavily subsidizes all the other medical systems of the world with its own ingenuity and enterprise. Our doctors routinely travel around the globe, sharing and teaching their techniques to other doctors in other countries. Our charities routinely offer free medical aid around the globe.

Of course, once Obamacare makes all these “miracle” cures unprofitable, those new innovations will dry up here just as surely as they have in all the other socialized medical systems in the world.

That, in itself, creates a wholly unnecessary Social Justice nightmare for which not only America, but the entire world will pay a hefty price in untold suffering and death.

In addition to drying up incentives for medical innovations, which aid the entire human population, Obamacare will immediately cut the numbers of practicing doctors by up to 45%. This Investors Business Daily polling data, taken last summer, was widely criticized by liberal advocacy groups, but then was vindicated by a figure of 29.2% doctors quitting in an insert of the New England Journal of Medicine. The fact that a sizeable proportion of medical doctors would quit “if patient loads increase while pay decreases,” should not be at all surprising, since this is precisely what has happened in every other country with socialized medical models. Decreasing the supply of doctors will unarguably strike a blow at Social Justice, which simply cannot be overstated. One can throw all the taxpayer money he wishes at a disease, but that won’t cure what ails real patients. Keeping people unnecessarily sick because of a doctor shortage is unconscionable in the realm of Social Justice doctrine..."

Of course, I don't care about "social justice." It is stealing private property using big brother. It's neat that they came up with an inoffensive term for Marxism, that is just enough to fool the mouth breathers, but it's still stealing. As world history shows extremely clearly, if you can establish capitalism in a country and get the government the heck out of the way, you will have rapidly rising incomes for all, and millions of people zoom up from destitution to middle class. That actually works in real life.

No sleazy politicians need to hoard all the money and eke it out to people they need to buy off. Real people get real benefit every day of their lives under real capitalism without pollution by government. Are the outcomes perfectly equal? Of course not. Nothing is perfectly equal and never will be (especially under Marxist "social justice" which creates a super-rich ruling class and destitute serf class). Even height or attractiveness is not equally distributed. What are you going to do, pound tall people over the head with a sledge hammer, and slash the faces of the beautiful to equal the outcomes? It's insane.

Throwing the law under the bus

Thirty eight states are in the process of passing laws to either protect their citizens from the socialized medicine takeover, or to sue the US government over the illegal and unconstitutional parts of it. Very nice. There are likely to be a number of challenges also if they end up doing the "deem and pass" method. As many lawyers and constitutional scholars have mentioned, it is a direct violation of the constitution. Normally progressive violations of the constitution aren't so blatant.

Ultimately, of course, they are dead set on usurping the will of the people and doing whatever accomplishes what they are trying to do. Read the bill. It has VERY little to do with good healthcare, does zero to control costs, but has a massive, overwhelming number of regulations seizing control of every aspect of people's lives. Of course, every objective reviewer of the plan says costs will go up, choice will disappear, one third of doctors surveyed say they will find another line of work, and the draconian rationing will begin (as it does under every socialized system, let's not be naive about it). At the risk of repeating myself, 400,000 new bureaucrats to start, 112 new bureaucracies, 38 new taxes, 3,500 new mandates for individuals to obey. And that's just to start.

And the best part, you get to start paying next year, but get no benefits at all until 2015. Actually, the best part is that the government must have direct access to your bank account, and if you refuse you can go to prison for up to five years. That is heartwarming care.

Naturally, we couldn't do a simple and cost saving thing like getting government out of the middle of the healthcare business so they they can compete and drive down costs and find efficiencies. We couldn't do tort reform, which actually is desperately needed. We can't allow competition across state lines and common sense solutions like that. Only injecting hundreds of thousands of bureaucrats and miles of red tape will do. Republicans had plans on the table based on the Swiss and Dutch insurance reform models, but of course they couldn't be considered since it is clear from the bill that it nothing whatsoever to do with healthcare.

Good article about the illegality of it.

Despite what they say, they know this plan to cram this down America's throat by any sleazy means necessary is a suicide pact. An overwhelming majority of Americans oppose it. I have to ask the question I always ask. Since representative democracy is a popularity contest, why are they barely afraid to inflict one bill after another after another on voters who don't want them? What has changed that they don't care what voters think? What do they know that we don't know? We know that 92% of Americans want to remove their local congressman, and only 21% believe the government has the consent of the governed. Again, why don't the vast majority of the politicians care? What do they know?

"Wreak havoc around the world..."

Not to beat a dead horse, but I'm sure some people are still not convinced this collapse is coming. Note what he says about regime change. This guy runs the most powerful investment company in the world. He's no slouch.

Pimco: Threat of Sovereign Debt Crisis Underestimated

Thursday, 18 Mar 2010 03:25 PM

Article Font Size

By: Dan Weil

Governments, investors and economists don’t realize the full extent of the havoc that the sovereign debt crisis can wreak around the world, says Pimco CEO Mohamed El-Erian.

“Our sense is that the importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” he says.

“Yet, with time, it will prove to be highly consequential. The sooner this is recognized, the greater the probability of being able to stay ahead of the disruptions rather than be hurt by them,” he recently wrote in the Financial Times.

For now, experts are focusing narrowly on Greece, El-Erian explains.

“Down the road, it will be recognized for what it is: a significant regime shift in advanced economies with consequential and long-lasting effects.”

To help deal with the crisis, everyone must keep in mind several points, he says.

• This is just the latest disruption to balance sheets.

• The crisis blurs the distinction between developed and emerging economies.

• Adjustment will come. The question is how orderly it will be.

• The global dimensions of the crisis complicate each country’s response.

• Expect slow reaction from the public and private sectors.

Former Federal Reserve Chairman Alan Greenspan says the turmoil may soon spread to the United States, thanks to our exploding budget deficit and debt burden.

"History tells us that great powers when they've gotten into very significant fiscal problems have ceased to be great powers," he told NBC.

© Moneynews. All rights reserved.

Fantastic video about heart of the US debt problem

I HAVE to include this video. This is right to the heart of what I keep saying about US debt and the coming collapse. Also, he explains how economist Paul Krugman is a moron, which is always good. It is a little economicsy, but very good.

Fun facts

A little something for the few people who still insist Obama's drunken sailor spending spree is somehow not far from normal:

From the Martin D. Weiss investor letter:

"Back in the 1980s President Reagan was plagued with the worst string of federal deficits ever recorded until that time. But with February’s deficit, Washington has managed to run up just as much red ink as it did in all of 1986, the single worst deficit year under Reagan.

Going back further, to the 1970s under President Nixon, we also had a rash of deficit spending that sent chills up the spines of economists. But last month’s deficit of $221 billion was more than TRIPLE the sum total of ALL deficits during the six years under Nixon.

Ever since America’s Declaration of Independence, deficit spending has been a recurring theme in Washington that invariably returns with a vengeance, especially during wartime. But it took 169 long years and seven major wars — from 1776 to 1945 — to rack up a cumulative deficit that matches the gaping budget hole of just 28 short days in February."

Here's another interesting thing I happened to come across, written in 1940 by a Socialist who claimed he wasn't. From HG Wells' New World Order"

"The New Deal is plainly an attempt to achieve a working socialism and avert a social collapse in America; it is extraordinarily parallel to the successive "policies" and "Plans" of the Russian experiment. Americans shirk the word "socialism", but what else can one call it?"

And this:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further expansion, or later as a final and total catastrophe of the currency system involved” –Ludwig Von Mises

"This is the choice that has been made in the United States and Euro zone, total catastrophe and collapse. The something-for-nothing personality is in complete control." by Chris Wood, Greed and Fear

Beginning of bond rumblings - it's coming

What have I been warning about for months?

Third straight monthly decline in Chinese holdings of US debt

US risks losing AAA debt rating

The United States will scare off the buyers of its debt to the point that they will just refuse to buy it, or expect a high interest rate because of the risk. I predicted failed auctions and debt buyers getting scared off by the end of March. The first failed auction was on February 12, 2010.

Why am I belaboring this whole idea that the things I predicted last September are now predicted by hundreds of experts, and are coming true day by day? Anyone who reads this, if you don't believe it will happen and don't take action, your life will be wrecked. These idiots in Washington will destroy the economy and you will lose everything if you have US dollars, stocks, and so on. There are things people can do, but you have to really believe it is happening first.

While I'm at it, I defy anyone who show me mathematically how they can possibly pull us out of this without a disaster. I also defy anyone to come up with one thing they have done to actually make things better -- not make a show or pay of their friends, make things better for someone outside their immediate political circle.

Tom Hanks losing it?

Normally I don't post comments about Hollywood buffoons. I will have to make an exception. It is always funny to see progressives do that awkward tap dance when they try to turn their progressive feelings into rational thought on the fly. It's even more entertaining when they almost pull it off then crash and burn.

Article about Tom Hanks' obnoxious comments.

See if you are limber enough to follow these mental gymnastics. Over the course of several days, dear Tom said that World War II was about racism. We were frightened of them because they were different and they were frightened of us and fought us. So that's a racist war. He says the war on terror is racist because we are only fighting because they are different so we want to kill them. I'm with him so far. I almost always kill people who are different. That's why here in town there is no one at all different from me. I killed the rest. It's understandable.

So those two wars are racist. What about Obama's continued prosecution and escalation of the wars in Iraq and Afghanistan? Those are fine, obviously totally different. Some fun video of the suddenly insipid Tom Hanks:

Economy "can't be fixed"

Great discussion of "doomed economy of US" and government "boneheads." Both of these guys are great, though they disagree.

I have to explain, at the end Mish says he's a deflationist but that in terms of credit Marc is right that there is room for prices to go higher. The short version is that he believes we are in deflation right now. (I disagree, because I would separate out sinking asset values, and look at the quickly rising consumer prices.) He means that the risk is that banks will start lending, which will unleash the money that the Fed has been "printing." Then voila, hyperinflation. Easy as that. Look back at my posts in January on what that looks like. Yikes!

Inflation is not a good thing

I am compelled to post another quote from the same article as the last post. It is talking about how things are handled once the government has created high or hyper-inflation. Our brilliant leaders already have, we just don't feel it yet. It is like a bullet that has left the gun but not pierced your skin yet.

"A second lesson is that governments resort to predictable measures after they have debased their currencies and caused rampant price inflation. Price controls and wage controls invariably follow. Currency controls are also imposed. Shortages and rationing follow. The government ALWAYS blames its citizens for problems which the government caused.

Younger Americans do not remember the problems we had because of the inflationary policies which the Johnson and Nixon administrations used in order to finance the Great Society and the Vietnam War. In 1971, President Nixon imposed wage and price controls in order to "control inflation." These policies created shortages. They were a dismal failure. I remember sitting in gas lines in the hope of being able to fill up my gas tank. Nixon finally ended his wage and price controls in 1973. I also remember President Ford exhorting Americans to "whip inflation now," as if we, the sheeple, had anything to do with the problem. Mark my words, if we get hyperinflation, our government will blame the American people.

There is another important lesson to be learned from Rome, France, North Korea, Venezuela, and all other historical episodes involving currency devaluation. The lesson is that gold and silver are the antidotes for inflation. Ancient Rome and revolutionary France did not resolve their hyperinflations until they returned to using gold as the basis for their monetary systems. Using gold as the basis for its currency stabilized the Roman/Byzantine Empire for a thousand years. France and the other western european nations had stable currencies until they decided to abandon the restraint of the gold standard in order to inflate and fight World War One. The gold standard imposes monetary restraint on governments.

The most important lesson to be learned from what has happened in ancient Rome, revolutionary France, North Korea, and Venezuela is that a stable currency promotes a stable society. My belief in this principle is one of the reasons why I began writing this newsletter several years ago. There is a reason why I chose to post the motto "Honest Money For Personal Freedom" at the top of my website's homepage. When a nation has honest money, the nation has more freedom. Jefferson, Madison, and Jackson knew this. They wanted honest money so that future generations of Americans would be able to enjoy the freedom for which they had fought. They would be very upset to see what is happening in America these days.

Just look at the social turmoil which has arisen in nations which have utilized inflationary monetary policies. In this article, I limited my focus to four examples. However, I could have included may others, including Weimar Germany, Argentina, Zimbabwe, and Yugoslavia. Hitler and Napoleon were, in large part, products of hyperinflationary crises where the social order had broken down. If it can happen in the nations which produced Bach, Goethe, Voltaire, and Pascal, do you honestly think that it can't happen here? There is a reason why Keynes also said that debauching the currency "...engages all the hidden forces of economic law on the side of destruction."

It can happen here if we do not change our monetary policies. Let us hope that we can elect sensible leaders who will return us to a stable monetary system. However, time is growing short. If we continue on our current path, we know where we are headed as a society."

Worker's paradise

I am just plain quoting an article this time because I wanted to write about this today anyway. I saw this great little piece and decided I'll be lazy. Apparently, there are still plenty of people in the world who still need reminding that socialism is idiotic and pointless, and leads to pitiful outcomes.

This guy, Chavez has had free reign for a decade. He has seized tons of private property, including belonging to other countries, he has brought foreign investment to a halt because property isn't safe. They are bathing in natural resources, and have been able to sell their plentiful oil at a high price for years, yet they can't even keep the electricity on in the capital city? There is a murder every couple of minutes in some cities. And food shortages? What the heck? Typical socialist results...pathetic.

Full article

"...In the Bolivarian worker's paradise of Venezuela, Hugo Chavez has now had power for about 10 years. One would think that he has had enough time to demonstrate the wisdom of his socialist ideas. During his time in power, he has seized and nationalized key industries, vastly increased government spending, and imposed currency and price controls. And what has Chavez accomplished?

Inflation has reportedly been raging at 25% and higher in Venezuela. The Wall Street Journal recently reported that "Venezuela has ceased to produce meaningful amounts of food, medicine and other basic goods under Mr. Chavez." Because of Venezuela's currency controls, Venezuelan citizens and companies have needed govenment permission in order to obtain dollars at the official government rate. This led to a black market, where people could buy the U.S. dollar without government permission.

In March, 2009, Mr. Chavez took steps to seize control over food production in his country. He imposed production quotas and price controls for cooking oil, white rice, sugar, coffee, flour, margarine, pasta, cheeses and tomato sauce. Although rice producers insisted that it cost them 4.41 bolivars to produce a kilo of white rice, the government imposed a maximum price limit of 2.15 bolivars per kilo. Other price controls had been in place for several years prior to 2009. Instead of keeping prices stable, the price controls had spurred the growth of the black market. Venezuela became more and more reliant on imported food because Venezuelan farmers would not supply food staples at government-mandated prices.

In early January, 2010, Mr. Chavez announced the devaluation of the bolivar, the national currency. The bolivar was cut in half, from 4.3 per dollar to 2.15 per dollar, for most imports and transactions. The Venezuelan central bank also announced that it will also subsidize a stronger 2.6-per-dollar rate for imports of food, medicine and other essential items. Not long after the devaluation was announced, Venezuelans reportedly flocked to electrical goods stores, fearing that prices on imported goods would double.

A few days after announcing the devaluation, Mr. Chavez ordered the Venezuelan National Guard to seek out businesses that were raising their prices. On his weekly TV show, he said: "Right now, there is absolutely no reason for anybody to be raising prices of absolutely anything...I want the National Guard on the streets with the people to fight against speculation. Publicly denounce the speculator and we will intervene in any business of any size."

The great Bolivarian leader also said: "The bourgeois are already talking about how all prices are going to double and they’re closing their businesses to raise prices. People, don’t let them rob you, denounce it, and I’m capable of taking over that business." Chavez also said that the government is the only authority able to dictate price increases.

Not long after the devaluation was implemented, the Venezuelan government announced that it will ration power in major cities such as Caracas and Maracaibo. The rationing will last until at least May, 2010. Planned blackouts will be used, and even schools and hospitals will be affected. The power rationing comes at a time when Venezuelans are already subject to water rationing.

It is ironic that there should be a power crisis in a nation which is the top oil exporter in South America. However, it is not surprising. What is happening in Venezuela merely confirms that price and currency controls ALWAYS lead to shortages and to rationing. Shortages and rationing lead to social destabilization. Venezuela is currently suffering from a severe crime wave. According to the U.S. State Department, Caracas has the highest per capita homicide rate in the world, and kidnappings, assaults and robberies occur throughout the country.

By late January, there were news reports of "waves of protests" which had erupted throughout Venezuela. The Venezuelan National Guard moved into Mérida, Venezuela, and the governor of Mérida State said that the city would be "...militarized ...as long as ... necessary in order to avoid further confrontations in the city of Mérida." Some of the recent protests were triggered by announcements of increased water rationing. Others began after the government ordered the blocking of six television channels, one of which had been critical of the government.Venezuela appears to be heading for chaos.

Help is on the way, however. In order to alleviate the water crisis, President Chavez has advised Venezuelans to shorten their time in the shower to a maximum of three minutes. He has also counselled them not to sing while in the shower. He has said that baths and jacuzzis are anti-communist..."

Why sovereign debt worries matter to the US soon

I keep finding experts who say what I say only better. Here's brilliant Peter Schiff explaining what I'm so concerned about regarding sovereign debt, and in plain language.

Doesn't add up

The federal government took in $107 billion dollars i9n February and spent $328 billion. Does that seem right? It seems a little off to me to spend three times as much as you took in.

Also, a recent poll found that 92% of those surveyed wanted to unseat their current representative or Senator in Washington and only 21% believed that government enjoyed the consent of the governed. Only 3% thought the government was doing a good job. Hmmm.

Below are some basic numbers about our incredibly enjoyable and convincing recovery:

David Rosenberg of Gluskin Sheff notes that there are measures of economic health other than the stock market and GDP. To wit:

· "More than five million homeowners are behind on their mortgages.

· There are over six million Americans who have been unemployed for at least six months, a record 40% of the ranks of the jobless.

· The private capital stock is growing at its slowest rate in nearly two decades.

· Roughly 30% of manufacturing capacity is sitting idle.

· Nearly 19 million residential housing units, or about 15% of the stock, is vacant.

· One in six Americans is either unemployed or underemployed.

· Commercial real estate values are down 30% over the past year.

· The average American worker has seen his/her level of wealth plunge $100,000 over the last two years, even with the recovery in equity markets this past year.

· Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash.

· Unit labor costs are down an unprecedented 4.7% over the past year, and what has replenished household coffers has been the federal government, as transfer payments from Uncle Sam now make up a record 18% of personal income (and the Senate just passed yet another jobless benefit extension bill!)."

FANTASTIC VIDEO

Great debate in 2006 between Art Laffer and Peter Schiff. Laffer thinks Schiffer is an idiot for saying we'll have a crash. Another awesome thing is that he is predicting it for the exact same reasons that I predicted it in 2006. I love it. He's just more eloquent than me. Love it. It does a great job of explaining (in advance) what happened.

Another great quote, "Merrill Lynch is a shockingly well-run company, and it's stock is a bargain." by Ben Stein

Gasp! An amusing economics video

Here's something new for this blog. It is a country music video that is about economics and is actually a little bit instructive.

Zimbabwe or Japan.

The point is that what the Fed has done would normally always cause devastating inflation that would destroy the country. When Zimbabwe did what we are doing now, the ended up with 5 quintillion percent inflation. that means they had people with bullhorns in stores shouting out prices because the prices went up pretty much every minute. A loaf of bread was like 800 billion dollars.

Japan decided to prop up excessively high real estate prices, and bail out their banks, creating walking-dead zombie banks, which we have made sure to do too. What they have ended up with is a zombie economy for 20 years so far, permanent recession. By the way, the bail outs and propping up didn't work. If you bought a house for $100,000 in 1990, it would be worth about $40,000 today.

Here's an article about something I wrote about last week. Remember the article where the woman was claiming social security has plenty of money until 2042? I said they have zero dollars and zero cents and start using IOU's backed with Chinese money this year. Here is an article explaining it more fully.

Social Security starts using shoebox full of IOU's

I know better than you, comrade

Just for fun I'm going to make fun of the socialists again. If they weren't causing so much suffering and damage I would feel like a bully for pointing out how destructive and completely idiotic their beliefs are.

Let's start at the most basic level. Newsflash: they do not believe in a free market. Therefore they believe in an unfree market. So, instead of everyone being able to decide for themselves what they should do when they need toothpaste, need to find a job, or are shopping for a car, they believe there should not be freedom for the individual to make their own choices. Why is that? What do they propose replacing it with?

You aren't going to believe this, but they say that it makes more sense for strangers, bureaucrats, DMV clerks in a faraway city to make those decisions for you. This is one of the insane basic premises of socialism. Humans are incapable of making good decisions for themselves, so humans should make decisions for people they don't know! I'm serious. What do you think the explosion in government workers, and truly shocking amount of control of the individual is about? That's it. Strangers can do a better job with your life than you can. Not only that, you should not be given the opportunity to run your life.

How is it that those strangers, who are humans, have a gift for running your life, but presumably can't run their own. How could that make sense? And frankly, how could they possibly have enough information to do an adequate job??? Really. How? And more important is the next question. Since they always want us to change from a system where people can make their own decisions to one where strangers take that ability away from them, why should we go to the trouble to do that? Whether they could figure out a way to do an adequate job or not, how could it possibly be better and justify the effort to change to a different system with much higher taxes and much bigger government, etc?

Since that's a tough sell, maybe that's why they recognize the need to "eliminate" 20% of the population in order to "persuade" people they are right. That would also explain the machine guns at the borders to keep people in too.

What's almost funnier is Marx's idea that socialism was a rest stop on the way to communism. So, you have power-mad ruthless dictators murdering 20% of the population in order to "persuade" them. The ruling class takes away all rights and controls all the money. Then they are going to give it all back to the terrified, powerless masses equally so they can all be happy? It's not even nice to point out how stupid and utterly impossible that is. If the ruthless ruling class wanted the people to be free and happy, they would not have butchered them and taken everything from them!

What amazes me the most, considering the bloodthirsty, oppressive, suffocating, and idiotic nature of socialism, and its record of 100% miserable failure, is that it is not banned in every country on earth. The world would be a much happier place, though it would have 275,000,000 more people in it...

Let's never forget these guys...

Marines in Afghanistan enjoying some relaxation. Despite what people may say, the guys they are fighting there could be "fighting" soccer moms in Cleveland or St. Louis. Maybe I'm wrong, but I think if we have to choose, this is better. Pray for them.

What IS government good at?

Here's an excerpt from an article, which talks about the insistence of governments on creating economic crises through abject stupidity:

"After the economic dip of 2000, the US central bank's loose monetary policy laid the groundwork of the housing bubble. When the bubble burst, government implemented a series of stimulus packages, and monetary authorities set the interest rate down close at the zero bound. As of now, new packages are on their way and the Federal Reserve's reluctance to initiate its exit strategy is all too obvious.

In other words, they created one bubble, which burst, so immediately started creating another one with stupid policies, and now are afraid to abandon this newest disaster.

As the collapse of the real-estate markets in the United States demonstrated, the credit boom has produced misallocations on a massive scale. The costs of many houses that were built when loans appeared easy to finance turned out to be unbearable. Projects that seemed to be financially manageable during the time of easy money had to be abandoned when the reality of scarcity was revealed. Investors and consumers were forced to retrench. Capital was lost, yet the debt burdens remain, and the fallout is felt throughout the entire economy.

Misallocations are when governments do stupid things and flood the economy with cheap money which makes it feel like you can do anything and it will come out ok. There'e no reason to use your brain. Then there is a crash and some moron with a teleprompter will complain that it is the fault of the evil "market" or "speculators." In other words, they will lie.

As if economic history is to repeat itself, with each cycle getting worse, policy makers around the world repeat the old mistakes again and again. They have embraced, almost in unison, the rather crude belief that low interest rates and government spending will create wealth.

In the 1970s, in the face of the first oil-price shock, many governments and economists had great expectations of the stimulus policies in Europe and the United States. But the result was global stagflation. Japan practiced fiscal and monetary expansion on a grand scale since its economy entered a recession in the early 1990s, and the result has been stagnation ever since.

Despite the colossal efforts to sustain the boom in Japan, Europe, and the United States, the systemic fragilities of the global financial markets have not vanished, and business bankruptcies and unemployment are on the rise. What has been accomplished, however, is the formation of unsustainable levels of debt and of excess reserves in the banking sector, which could explode at any moment into a surge of inflation.

Fabricating bogus economic growth is highly appealing to policy makers because they can easily produce such "growth" by wasteful consumption for war, welfare, and all kinds of popular government programs. Each stimulus package at first incites irrational jubilation but leaves behind a wasteland of failed projects and frustrated expectations. This mental discouragement of investors and consumers will linger on for years after the boom has ended.

While monetary spending is limitless, and there is no scarcity of zeros to add to the price tag, production remains limited by the scarcity of the factors of production."

In other words, instead of helping the private sector actually become more productive, which has been proven over and over again to be best done by staying out of people's way, government does quick and expensive things it thinks are fun. Of course, these things are disasters, but it's ok, because taxpayers have unlimited money.

Governments create bubble after bubble, problem after problem, find someone to blame, then waste no time in making it worse. The current gargantuan problem they are deliberately creating will no doubt be the fault of "the market," "capitalism," "speculators," and maybe even Christians. Christians seem to be the bogey man of this administration, though they are 80% of the poplutaion.

Antony Mueller, Mises Institute, 3/12/2010

"In the US and Euro zone, POLITICS holds preeminence in ALL its affairs, thus political solutions are always substituted for PRACTICAL solutions. Capitalism, competition and creative destruction of entrenched crony capitalists is BANNED through tax and regulatory corruption. Capitalism is alive and well in the emerging world, and it is dead and buried in the developed world. This is not a failure of capitalism in the developed world; it is a failure of socialism. We live in the land and times of George Orwell, where black is white, up is down and socialism is called capitalism.

Don’t forget, true capitalism is DISINFLATIONARY – its creative destruction provides more goods and services for less money because entrepreneurs compete for customers. Socialism is INFLATIONARY – it is always less goods and services for more money because elites short circuit the creative destruction and substitute crony capitalists who, through regulatory and tax manipulation courtesy of corrupt public serpents, mandate the winners in the competition for CUSTOMERS."

Ty Andros, 3/12/2010

I guess it's too obvious to be worth mentioning that all of this choosing who is too big to fail, who gets to survive and who die, propping up certain companies or industries and so on is blatantly socialist. Socialism causes higher prices, lower wages, inflation, and general stagnation. Hey, but at least you don't have to be bothered with having rights! Again, it is the government interfering in and screwing up the economy.

Get your Jeffrey Dahmer t-shirt!

This is a very good little movie clip about one of the American left's beloved heroes. You can see t-shirts with his face anywhere in this part of the country. Che was a monster who, with some serious rehabilitation could have clawed his way up to being a Jeffrey Dahmer (serial killer, rapist, cannibal). As it was, he never rose to that level. His face makes a mighty fine t-shirt though.

Just the facts, ma'am

You don't think that plan has anything to do with you do you? If so, why? It is massive payoffs, massive taxes, massive growth of government, makes a whole sector of the economy their slush fund, and controls every minute of your life in ways you can hardly imagine. What was it supposed to accomplish again? If you think it provides better care, or care that is not rationed, or reduces cost or anything, the joke's on you. and it's not funny.

If it was supposed to be our version of the failed, bankrupt systems of mediocre to appalling care that other countries have, that would be one thing. This is much, much worse. Pretending it has anything to do with providing a decent outcome for you will only make it worse when you have the truth inflicted on you.

Insane spending spree

Excerpt from this article:

“Michael Pomerleano, visiting scholar at the Asian Development Bank Institute, makes the case for letting markets correct themselves, when he says that the "nationalisation of private debt injects considerable inefficiency into the economic system, inhibiting Schumpeter's process of Creative Destruction that is essential in a market economy and needed to maintain the private sector."

We have seen this all before. In the 1990s, the Japanese government socialized private losses through a massive transfer of private debt to the national balance sheet. This happened in the wake of the Japanese asset bubble — another boom fuelled by a tidal wave of easy money from the central bank — and led to a decade of slow growth and a lack of restructuring of the economy. Whether or not the US economy is "turning Japanese" is still an open question, but is becoming ever more likely as fake fixes are delaying painful economic adjustments. Christopher Wood made the following observation in the Wall Street Journal:

With the U.S. government stepping in to keep markets from clearing, today's U.S. economy in many ways resembles the post-bubble Japanese economy of the 1990s. Ultra-loose monetary policy and low demand for credit, combined with high unemployment and consumer deleveraging, could lead to a prolonged slump.

As the ominous example of Japan shows us, soaring debt levels (resulting from fiscal stimulus and low growth) and financial forbearance (socializing private losses) is not a recipe for economic success.”

Debt manageable? Like a pit viper in your pocket.

I just did a quick calculation. I'm sick of hearing how our national debt is manageable (which is obviously false) and that we really need more of it right now (false). A normal rate for the government to pay to borrow money is 6.5%. This is back of the napkin stuff, but kind of compelling. By the end of the year the national debt will be over $14 trillion. Multiply that by the interest rate and you get $910 billion in interest payments per year, or 59% of the entire revenue of the federal government just for interest. How is that manageable again?

That is assuming that people will pretty much still want the debt. If they really are concerned about getting paid back with dollars that are still worth something, it gets out of control fast. Let's just pretend the interest rate was 10%. The interest alone would eat up 90.3% of the entire revenue of the United States government, leaving 9.7% for, say, everything else -- defense, social security, medicare, roads, education, pork, waste and nonsense, etc.

By the way, in case I haven't mentioned it, Keynesian stimulus in a balance sheet recession is idiotic because the money is bound to fall into a deleveraging sinkhole and disappear, yet the problem is still there, only slightly smaller, and consumer confidence doesn’t budge. In other words, people and companies take money they get and stick it in the bank or pay off debt, so it more or less disappears from the economy instead of stimulating the economy!

Good article about lessons from history for the left.

(My thinking is if they had any intention of learning from history, it would be physically impossible to be on the left.)