Aaron Ford

Time for people to wake up to the harsh truth:

Story here

Peter Schiff’s weekly commentary is again spot-on:

The Fed Unreserved

Throughout history, governments have always used crises to justify blatant power grabs. Often the crisis subsides, but the expanded government powers remain. In America this week, the tendency came into sharp focus. Congress signaled that it is preparing to perpetuate the Bush Administration’s domestic wiretapping program, and has even abandoned the pretense that warrantless surveillance be confined to terrorism. Similarly, even though our financial crisis has yet to reach full flower, Treasury Secretary Paulson announced plans to give the Federal Reserve new and explicit powers to oversee and regulate the financial services industry. However, a sober look at his plan reveals that it is tantamount to giving the fox complete autonomy to guard the henhouse.

What few economic leaders have acknowledged is that the Federal Reserve itself is responsible for the real estate and credit bubbles, which are the source of our current troubles. By keeping interest rates too low for too long, the Fed ignited a speculative fever and engendered a disregard for risk management that pushed asset prices above rational levels. Should we blame the private sector for taking advantage of all the cheap credit, or the Federal Reserve for supplying it? If a kindergarten teacher passes out handfuls of Pixie Sticks, and then leaves her classroom unattended for several hours, should we blame the five year olds for the hysteria that ensues?

The reality is that we should be restricting, rather than expanding, the powers given to the Federal Reserve. Since Greenspan, Bernanke and company have already inflicted so much damage with the weapons already in their arsenal, why provide them with heavier artillery? Only in Washington do those who screw up get rewarded for doing so.

Since the Fed has demonstrated complete incompetence at setting interest rates, why not return that function to the market? Instead of allowing the Fed to inflict unbridled havoc on our economy, why not re-impose some discipline? Instead of looking for new ways to regulate Wall Street, why not find an old way to regulate the Fed? Actually there is a simple answer to all of these questions; it’s called the gold standard.

In his speech outlining these proposals, Paulson stated that during the past fifty years the performance of the U.S. economy has been second to none. I do not know what planet Paulson has been living on these past fifty years, but it is certainly not Earth. If Paulson were referring to the prior fifty year period, from 1908-1958, his statement would have been correct. But from 1958 to 2008, the U.S. economy has blown a lead even greater than the one the Lakers enjoyed over the Celtics in game four of the just concluded NBA Finals. In fact, it may well qualify as the biggest economic choke in history.

In 1958 the U.S. enjoyed a standard of living so unmatched that the rest of the world still lived in the Stone Age by comparison. Our per capita income was so far ahead of our nearest rival that it seemed impossible that any other nation would ever catch up. Today not only is per capita income in the U.S. barely in the top ten, but we are being rapidly overtaken by countries that up until a few years ago were barely discernable in our rear-view mirrors. When it comes to economic performance during the past 150 years, the U.S. is the Big Brown of economies. 1858-1908 was the Kentucky Derby, 1908-1958 was the Preakness, and 1958-2008 was the Belmont Stakes.

Not only did the U.S. surrender a substantial lead, but in many respects our current standard of living is lower than the one our grandparents enjoyed. Sure we have a few more gadgets, larger televisions and more prevalent air conditioning, but the quality of life has actually declined. In the 1950’s, the average man earned enough money to fully support a wife and four kids, all while saving for retirement and paying off his mortgage. Today the average man can barely support himself. It takes two bread winners in most families to make ends meet, and that is assuming only two children. Even with both parents working, the typical mortgage on the family home will never be paid off and retirement is now a pipe dream. Flush with high pay, low debt, and a strong currency, the Ugly American in the 1950’s could vacation in Europe like a king. Now we can now barely afford the gas for a day trip to a Six Flags theme park.

If Paulson can be so completely clueless regarding the Fed’s role in the current debacle and in America’s economic stumbles over the past two generations, why would anyone place any faith in his proposed remedies? In fact, an unaccountable and unelected Federal Reserve, which nonetheless has lately proven to be as politically craven as any two-bit politician, does not hold the keys to our economic revival. However, with its increased willingness to rescue the big financial firms from their own excesses, perhaps Paulson sees an expanded Fed as the best way to ensure the continued prosperity of his former pals on Wall Street.

John Browne of Peter Schiff’s firm Euro Pacific provides a commentary on how the rest of the world is not dealing with the USA and their phony economy responsibly.

June 18, 2008

G-8 Fails To Sound The Charge

With market watchers the world over feeling increasingly alarmed by spreading economic problems, much hope and attention was focused on Japan last weekend as finance ministers and central bankers of the G-8 (Group of Eight) nations gathered to apparently map out a coordinated global response. In particular, all hoped that the delegates would conjure a plan to save the dollar from the dustbin and stop the price of oil and food from pushing the world into crisis.

The G-8 includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. With the exception of Russia, the members represent the “Old West,” that has dominated the free-market world economy for almost half a century. As very little of promise or substance emerged, I can only hope, against all evidence to the contrary, that much was accomplished behind closed doors.

What the ministers and bankers did not explicitly acknowledge, but must have been evident to them all, is that the source of the falling dollar, and global economic instability, is the United States itself.

Starting in the 1970’s, the United States began moving away from its heritage as a “producer” nation to one in which consumers account for 72 percent of GDP. As a result, American wealth has been massively depleted by a combination of inflation, unsustainable debt issuance and long-term depletion of the U.S. dollar. Although Americans have in fact lost their wealth, they have yet to ratchet down their lifestyles accordingly. This disconnect is the source of global economic instability.

The best way to put America’s standard of living back in line with its wealth, and to relieve the world of its economic imbalances, is through an American recession and the continued fall of the dollar. In fact, the downsizing of the American airline industry and the fall of the housing market are symptoms of this trend. But recession carries unpleasant political repercussions. As a result, politicians would always prefer to see one boom replaced by another.

Clearly, America, which would largely bear the costs of recession, prefers serial bubble blowing and dollar devaluation as the best policy going forward. The question is whether she can hoodwink, bully, or otherwise convince the rest of the G-8 to go along. The problem is that that the economic stagnation which is evident in the United States is nowhere to be seen in the rest of the world.

This puts the G-8 delegates into a difficult quandary. If they follow America’s lead to lower interest rates to avoid recession, they risk unleashing inflation, which is already a major problem the world over. If they indicate increased rates, to curb inflation, they risk driving America into a severe recession. Similarly, to engage in a program of currency intervention to support the dollar (which the United States lacks the means or desire to do unilaterally) involves the prospect for even greater accumulation of dollar reserves, which has already proven to be a huge drain on national balance sheets.

So what did the G-8 do? They talked and did little. Admittedly, they discussed some laudable issues like world poverty and green alternative energy (which will most likely be the next government financed asset boom). But there was no indication of likely action.

Instead, the G-8 policy statement that emerged at the meeting’s end included no mention of lax lending in the United States or of irresponsible central bank liquidity injections, or even of America’s freeze of on-shore oil drilling. Instead, the G-8 took sideswipes at non-G-8 members, including unbridled criticism of the oil producing countries. U.S. Secretary of State Hank Paulson had the temerity to maintain that higher oil prices were due not just to changes in supply and demand, but also to a failure by oil-rich nations to build enough wells and refineries. Talk about the pot calling the kettle black!

All-in-all, it was deeply concerning to witness the G-8’s inability to decide upon real initiatives but, instead, to seek to blame others. It pointed to the fact that the severe problems currently faced by holders of U.S. dollars are likely to continue into the future.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read Peter Schiff’s book “Crash Proof: How to Profit from the Coming Economic Collapse.”

John Browne www.europac.net

The best 1 hour of financial commentary on there, Peter takes calls and elaborates on the topics from his book “Crash Proof:How to Profit from the Coming Economic Collapse”

Last weeks version saw myself get on air for the second time, to ask Peter 3 questions. Check it out about 3/4 way through this MP3 recording:

Wall Street Unspun Wednesday, June 11th, 2008

This is real deal stuff, no more maybes, or I’ll think about it later, these are real issues with real consequences. Anyone who is too lazy or ignorant to at the very least read about these situations will have no one to blame but themselves.

Full story here

Well that is one headline to get your attention isn’t it? The author of the report was bang-on when warning of the credit crunch months ago.

RBS it seems is the only one brave enough to come out with a report like this that puts facts into seriously consideration, instead of the blind bullishness that rules the street.

Check out the story here

That’s been my line since about Nov 07.

I could post hundreds of articles relating to this, but I’ll post just this one for now.

Systemic Meltdown Risk Increases

Good read from a real truth seeker.

http://www.financialsense.com/fsu/editorials/schoon/2008/0617.html

My letter to the Georgia Straight was published in the June 12-June 19 edition.

Read it here.

Ya this guy knows some things.