No Economic Recovery; Prepare For Inflationary “Meltup”

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

Your government is lying to you. We are not in economic recovery. We are merely experiencing a cash bubble through printing—inflation—and every day that bubble is in greater danger of bursting. When it does, the American people will face national bankruptcy.

The following video comes to me on the recommendation of Gerald Celente, director of the Trends Research Institute, and The Trends Journal. For those of you who have not already subscribed to his journal, he is one of the best economic forecasters in the world.

To my friends in the Tea Party, this is why you are marching. Simply getting Republicans elected will not be enough to save this nation from economic collapse. Any politician, Democrat or Republican, who does not understand what is in this video must go.

In addition to Mr. Celente, this documentary, "Meltup," features some of the best economic experts available including:

• Peter Schiff, Austrian School economist, bestselling author of Crash Proof, owner of Euro Pacific Capital, former economic advisor to Ron Paul, and current candidate for U.S. Senate in Connecticut
• Dr. Ron Paul, Congressman from Texas , former presidential Candidate, bestselling author and voice of the Austrian School economists on Capitol Hill
• Marc Faber, renowned Austrian School economist.
• Jim Rogers, investor, author, and financial commentator
• Tom Woods, historian, bestselling author, and senior fellow at the Ludwig von Mises Institute.
• And several others.

The National Inflation Association has done a fine job in producing "Meltup." Our liquid fuels crisis, the manipulations and fraud in the precious metals markets, the debt problems and the looming threat of dollar collapse through inflation are all covered in detail. As Celente points out, we are on the verge of the second American Revolution. This video will give you a better understanding of what we face, and what the Tea Party and its supporters MUST achieve if it is to be successful.

Chatting with Tom Wiens: Colorado Republican Candidate for U.S. Senate

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

Thanks to profligate spending policies, bailouts, stimulus packages, and unprecedented extensions of Federal power, I have a good deal of confidence that Democrats will suffer many defeats in the upcoming elections. I just wish I felt equally confident that the Republicans who replace them will do much better. Unfortunately, after chatting briefly with various candidates in the last few forums, I often had the impression that I was talking to some sort of annoying animatronic devices which, upon sensing motion, would begin to recite a list of talking points: “Drill, baby drill,” “All of the above,” “No more bailouts,” and “I’m against stimulus.” Any questions seeking more information about these subjects just triggered another recitation. If this is the depth of understanding we can expect from politicians, is it any wonder why even many Republicans in Congress voted for the so called Jobs bill—a stimulus by another name? Our Republican candidates have all figured out that they should oppose bailouts and stimulus packages, but if the only way they can recognize a bailout or stimulus bill is if it says so in the title, then we are all in a great deal of trouble.

In chatting with the various people vying for the Republican nomination to be the next U.S. Senator, I was impressed by the enthusiasm and decency of the candidates, but not by their grasp of the fundamental economic issues this country must face. I was almost ready to despair over the state of Colorado politics . . . until I overheard Tom Wiens answering a question about the gold market and displaying a depth of economic understanding I have almost never seen in a politician. I immediately requested an interview and, last week, he was kind enough to sit down with me for an hour and a half to chat about the state of the nation.

Now, I did not bring the PPC film crew to this interview; I did not even bring a voice recorder. I was not interested in sound bites or talking points. I was only interested to know what made Mr. Wiens any different from any other Republican candidate, and why anyone should trust him at all given the abysmal job Republicans have done so far in their half-hearted attempts to support limited government and a free market. Mr. Wiens exceeded all of my expectations and left me thoroughly impressed.

The difference in experience between Mr. Wiens and his fellow GOP contenders is fairly obvious. While his major competitors have spent virtually their entire careers in the public sector, Mr. Wiens, by contrast, has a strong background in the private sector as a Colorado banker, rancher, and entrepreneur. Thus, he knows the costs increased regulation and taxation place on small businesses – not just in money – but also in time and effort.

Of course, these days a strong business background is not always a great recommendation for politicians. Our federal government is absolutely full of private sector businessmen who seem all too happy to use the power of government to influence various industries. Many commentators have noted the unprecedented influence of former Goldman Sachs executives in the Bush and Obama administrations, and with the Federal Reserve. The American people are rightly angry that Wall Street so often persuades Congress to offer advantages to some businesses and industries over others.

Mr. Wiens certainly understands this. Rather than make the usual hollow attacks on special interests, however, he blames Congress for overreaching to the point they have created a business climate that almost requires government involvement. When Congress holds some industries accountable for their errors while providing bailouts to cover the mistakes of others and can be persuaded to create anticompetitive regulations to ensure the survival of favored businesses, it should surprise no one that lobbying has become a blood sport.

To Mr. Wiens, the solution to this is not to try silencing lobbyists and industry. That would just mean Congress could continue to meddle in the economy unimpeded—but with even less information on which to base their ill-considered policies. Congress, he says, needs to massively scale back spending, taxes, and much of its administration if it truly wants to aid the economy. Unfortunately, because so few members of Congress have any proper understanding of economics, even some Republicans can be convinced that stimulus packages and jobs bills are needed to help economic growth. In truth, all the stimulus bills have done is increase liquidity and inflation, pouring cash into an increasingly unstable financial market, without any increase in productive capacity at all.

Mr. Wiens suffers no such confusion about economics. He is an avid student of Austrian School free market economics and can speak eloquently and easily about the long term devastating effects bailouts and stimulus packages will ultimately have on our economy. According to him, if Congress really wants to help, it needs to stay out of the markets, lower taxes, pull back its administrative agencies, and massively cut spending—and not just the tiny bit of the total budget that goes to earmarks.

That is certainly sound policy, but I have heard other Republicans say something similar, then watched them vote on appropriations bills in lockstep with liberals. To this challenge, Mr. Wiens pointed out that, as a state senator, he was frequently the only ‘no’ vote in hearings despite the urgings of his own party. I checked with a few of his old colleagues at the state legislature and they all confirm that, even when every other Republican and Democrat was in agreement, if a bill violated Mr. Wiens’ principles as to the proper role of government, he would vote ‘no.’ This earned him a reputation as a bit of a curmudgeon, but also as a man of integrity and philosophical consistency. Though a smart politician can always feign devotion to principle, it is quite rare to find one who has a voting record to prove it.

All of this is rather encouraging and speaks well of Mr. Wiens. However, his many admirable traits are not what inspired my trust. It was his faults that impressed me most. You see, Mr. Wiens talks too much—far too much for talking points and sound bites. During the course of our conversation, he excitedly proposed a single subject rule for congressional bills, sunset provisions for virtually all laws and agencies, and an evaluation process to determine when an agency is bankrupt or failed and should be closed. He burbled on about the precious metal markets, the housing market, and the sovereign debt crisis of the states and much of the EU in great detail. Finally, we talked about energy policy and the liquid fuels crisis. I was impressed he could speak so fluently about supply shortages, increased usage, infrastructure problems, environmental issues, and national security concerns that affect the issue, and quickly decided we would have to discuss some of these issues in more detail on camera.

At one point, we were briefly interrupted by a member of his staff asking a question about provisions for a party. Mr. Wiens was somewhat irked by the interruption and apologized profusely. However, had it not occurred, I would have never known that, every year, he invites cadets from the Air Force Academy out to his ranch for a small celebration in appreciation of the service they do for this country. It just happened to be going on during our interview. While Mr. Wiens may not have thought to mention it, I was quite impressed.

This is why I did not want a video camera or voice recorder for this interview. When people know they are not going to be on video or quoted directly, they tend to speak more freely and you get a better picture of their true characters. When you get to know him, Mr. Wiens does not seem like a typical politician. In fact, I think trying to hold back his enthusiasm and speak only in prepared sound bites might actually kill him. Considering his passionate interest in free market economics and policy, and after examining some of the dense books on those subjects he reads for leisure, you might even call him a bit of a nerd. A distinctly private person, Mr. Wiens is more at home with his own family and business interests than with the megalomaniac self promotion required by a statewide campaign. I think he would not be running at all if he did not so clearly see the terrible financial storm building over this country and most of the world. Mr. Wiens certainly has the means to ensure he and his family can weather that storm. However, he is also a patriot, and he is trying to offer his knowledge and experience to the people of this state and nation to help them weather it as well. His knowledge, experience, and philosophical integrity impressed me greatly, and his personality is far too enthusiastic and quirky to be anything but honest. He may be exactly what we need. I strongly encourage all our honorable friends to take a good look at his candidacy as we approach the primary. I think you will be impressed. So far, I have yet to meet anyone better.

Understand the Financial Crisis: The Lie of Recovery Will Devastate the Unprepared

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

At the People’s Press Collective Reeducation camp this past weekend, I was pleased to see so many people gathered to learn how to become more effective advocates for the cause of restraining government, promoting individual liberty, and restoring free markets. Truly, an army of Davids is indeed rising to oppose the Goliath of obscenely bloated government. Those who attended this camp hardly needed to be told that the U.S. government has become the biggest liar in the history of the world; they attended the camp to gain the tools needed to begin correcting that problem. They face an uphill battle, though. I was horrified to hear that at least a few of our government’s lies had penetrated even the PPC camp when one of the attendees claimed that, with the nation now in recovery, it is critical to elect Republicans so as to resist any further bailouts and allow the recovery trend to continue.

Make no mistake: whatever illusion of recovery we have entered into is just that—an illusion. Nothing has been altered in the fundamentals of our economic situation. In fact, we have done substantial damage to the soundness of our currency and the wealth of our people, leaving us in a much weaker position to face the problems quickly rushing toward us. Those who do not prepare themselves and their families now are likely to be ruined in the coming economic storms. The Obama Administration’s assurances that we are in recovery may be one of the most atrocious lies ever told in a long history of deceptions.

I wish I could agree with my honorable friend in thinking that merely electing Republicans will offer a solution to this problem. Yet, many in the Tea Party movement correctly understand that Republicans have been almost indistinguishable from Democrats in their profligate spending practices. Many of them voted in lock step with Democrats as Congress issued one bailout after another, assaulted our civil liberties, dismantled the free market, and shredded the Constitution.

While it is true that no Democrat will ever reform this obscenity, we can no longer afford the Good Old Boy mentality of deal making, back scratching, entitlement, and the politics of pull that has too long infected the GOP. We require men and women of true principle. Merely demanding principled politicians, however, will do nothing unless we understand the nature of the problem ourselves, and can hold our politicians accountable in how they address it. Otherwise, we are simply asking to be lied to once more.

At the PPC Camps, several attendees have asked me where they can obtain concise, reliable, and comprehensive explanations for our economic situations and what each of us can do to prepare ourselves and our families. In answer, I strongly recommend viewing the free "Crash Course" by Mr. Chris Martenson. Even if you have no background in economics, finance, or natural resources, you will find Mr. Martenson’s webinar easy to understand. His advice will leave you in a better position than many who graduate college with Economics majors. After that you may want to move on to "Smoke and Mirrors: The Story of Fiat Currency Abuse," a webinar presented by Richard Karn of Emerging Trends Report and hosted by the Bullion Management Group, Inc. While parts of this may be a bit dense, especially at the beginning, I advise you to stick with it. You will have a good grasp of our financial situation by the end.

These two webinars will give you the basic knowledge you need if you want to have any hope of holding our Republican candidates to anything resembling real principles. We cannot afford to get it wrong anymore. We cannot continue to watch our government pervert capitalism in favor of unequal patronage whereby favored insiders profit while all others struggle. We cannot allow our government to burn the savings of our people and spend away the wealth of this nation to leave our children, for the first time in U.S. history, a standard of living which is less than our own. We cannot let our government continue to weaken what should be the greatest nation on earth.

Pre-ATF Party: Freedom Underground - Nanny State Policy Panel; Liberty On The Rocks BBQ

Freedom Underground - Nanny State Policy Panel

Friday, June 19, 2009

The Warwick Hotel, (The former Playboy Club) 1776 Grant Street, Denver, CO

***Don’t forget to sign up for the ATF Party the next day!***

Listen to Jon Caldara and Amy Oliver talk nannyism, the ATF party, and this great panel event!

Agenda

11:00a.m. — Registration

11:30a.m. — Lunch

Keynote Speaker: David Martosko, Center for Consumer Freedom

1:00p.m. — Morality and Philosophy of Nannyism

Panelists:

Radley Balko, TheAgitator.com and Reason Magazine

David Harsanyi, author of the Nanny State and syndicated columnist

David Kopel, Independence Institute Research Director

2:15p.m. — Economics of Nannyism: Sin Taxes and Litigation

Panelists:

Terry Gallagher, President of Smoker Friendly

Jordan Lipp, attorney Davis Graham & Stubbs and of the Colorado Civil Justice Leage.

Linda Gorman, Independence Institute Health Care Policy Center Director

3:30p.m. — Break

3:45p.m. — Fighting Nannyism:

Panelists:

Andrew Boucher, Boucher Strategies and NoCoPolitics.com

David Martosko, Center for Consumer Freedom

Andrew Breitbart, The DrudgeReport, Breitbart.com and Big Hollywood

5:00p.m. — Break

6:00p.m. – Dinner

Keynote Speaker: Andrew Breitbart, The DrudgeReport, Breitbart.com and Big Hollywood

8:00 p.m. – Cocktails & Cigars

This is a can’t miss event! Give us a call @ 303.279.6536 or RSVP online here to reserve your spot!

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Liberty on the Rocks BBQ!

Date: Sunday, June 14, 2009
Time: 1:00pm - 4:00pm
Location: Washington Park
Street: Corner of Franklin and Virginia
City/Town: Denver, CO

Email: amanda@libertyontherocks.org

Location - Picnic Spot One at Wash Park next to the fire station (corner of Franklin and Virginia). There is plenty of free on-street parking.

Join others who love freedom for a fun in the sun day at the park!

BYOB - NO GLASS!!

There will be hamburgers, hot dogs, chips and other snacks provided. We will have water and soda, but if you'd like to drink, please bring your own alcohol. And be sure it's not glass - park rules!

There will also be a bake sale to raise money for the organization - so come with your sweet tooth!

We will have games to play, lunch and snacks to munch on and as always, great conversations! Come on out to Washington Park on Sunday, June 14th to network, make friends, eat BBQ lunch and have a great time!

Hope to see you there!

Fiery MEP Daniel Hannan In Denver

The Honor of Your Presence is Requested for a Special Evening With
MEP Daniel Hannan
Friday, June 26, 2009
Cocktail reception 6:00 p.m. - 7:30 p.m.
Grant-Humphreys Mansion
770 Pennsylvania Street, Denver, CO 80203

Daniel Hannan is a writer and journalist, and has been Conservative MEP for South East England since 1999. He has written eight books on European policy, speaks French and Spanish and is author of The Plan: Twelve months to renew Britain

Hannan has recently risen to fame in the U.S. after his fiery speech addressing British Prime Minister Gordon Brown at the European Parliament ("The devalued prime minister of a devalued government.")

RSVP REQUIRED!

Hannan skewers Brown:

How to Craft a Stimulus if You Absolutely Must & Why Obama’s Will Fail

By Julian Dunraven, J.D., M.P.A.

Honorable friends:

Last night, sounding quite defensive, President Obama gave a press conference to resentfully explain his stimulus package to the nation and insist that it be passed without further delays or questions—or we risk catastrophe. So much for the change we were promised. I have heard this tune before, from Mr. Bush. Pass the Patriot Act immediately for the safety of all Americans; yet we ended up mutilating the Constitution and the Supreme Court is still performing reconstructive surgery. We must invade Iraq or be destroyed by WMDs; but there were no WMDs. We must pass the TARP bailout now or the economy will collapse; and it is still collapsing with no sign of recovery on the horizon. Now our Dear Leader, singing the same song with a new voice, wants us to pass an even bigger ‘stimulus’ package lest the economy collapse . . . further. Whenever a politician asks to be trusted on faith alone and for action to be taken without delay or question, that is the time to settle comfortably into your chair, pull out your spectacles, and peruse the supposedly vital proposal most closely. So far, I have not found much to be pleased with—starting with the pork.

Mr. Obama’s claim that the stimulus bill does not contain pork is laughable. While it does not contain any earmarks inserted by individual lawmakers, it does fund a host of local projects that look identical to traditional earmarks. This might not be so objectionable if the projects stood a chance of building an economic infrastructure that generated more wealth than we are spending. It does not. According to the Congressional Budget Office, the cost of this bill alone will increase our annual budget deficits by $884 billion over the next ten years. It represents approximately one tenth of our GDP. Add to that the $9 trillion we have spent on prior bailouts and federal backstopping and we have devoted almost our entire GDP to deficit spending on bailouts. Thus, the stimulus will hurt us, not help us.

The money for this cannot even be financed with debt any longer. U.S. Treasury bonds are becoming increasingly difficult to sell as the world loses confidence in our ability to handle our massive debt. As such, the U.S. must either raise taxes or print the money. Even the Democrats seem to be leery of raising taxes during such hard times, which means the money must be printed. As Dick Army has stated in The Wall Street Journal, “If the government prints the money, it will increase inflation, which will decrease the value of the dollar. That would, in effect, rob Paul to pay Paul back with devalued currency.

“Taking money out of the private economy -- either through taxes or inflation -- and spending it in a way that doesn't offset the loss of money with real economic gains is worse than doing nothing.”

Doing nothing is exactly what some economists argue would be best right now, given the damage the current stimulus could do. Even those economists who want to see some sort of stimulus are not confident in Mr. Obama’s plan and certainly against taking any overly hasty action to pass it. On the right, Martin Feldstein argues that “The problem with the current stimulus plan is not that it is too big but that it delivers too little extra employment and income for such a large fiscal deficit. It is worth taking the time to get it right.” On the left, former CBO Director Alice Rivlin echoes the need to carefully consider the stimulus and its long and short term goals, warning that acting too quickly on one giant bill could ensure that “money will be wasted because the investment elements were not carefully crafted,” and, “that it will be harder to return to fiscal discipline as the economy recovers if the longer run spending is not offset by reductions or new revenues.”

These economists are correct. Too much is at stake to rush into this massive stimulus package just because Mr. Obama wants his first hundred days to be wildly productive. A good stimulus plan should include a large reduction in taxation so as to free up money for investment. Currently, the tax cuts in Mr. Obama’s package are too small and too brief to have any real effect. Second, a good stimulus should focus heavily on infrastructure and production. Currently, the stimulus bill devotes only about 5% of its spending to true infrastructure. The great bulk goes to social service spending such as unemployment, food stamps, et cetera. While such social service spending may be noble, as Jim Puplava has stated on the “Financial Sense Newshour,” it is like giving people fish instead of teaching them how to fish. Once they have eaten the fish, they will be hungry again.

When Japan experienced its terrible recession of the 90’s, its government quadrupled its debt in an attempt to spend its way to recovery through public works. The effort failed. Only when Japan reinvested in infrastructure, boosted productive capacity, and started selling their products to China did they begin to recover. In short, they had to create a “fishing industry,” rather than just distribute fish. America, too, must create a “fishing industry” if it wants to recover. The current stimulus contains nowhere near enough infrastructure spending and virtually nothing that could boost our productive capacity.

Even if these deficiencies were corrected though, the problem of financing any stimulus with our massive debt remains. The people supervising the process are still the same people who failed to see the problem coming, who failed to manage the first bailouts effectively, and who now fail to properly pay their own taxes. No one in Washington is even attempting to reform the banking and securities laws or the Federal Reserve’s meddling which brought us here. Trust has been lost. Moreover, the U.S. cannot possibly afford the trillions of dollars it would take to counter the contraction in consumer spending. We are entering a depression, characterized by massive deleveraging. The stimulus, as written, is doomed to failure and, at this point, can only add to our woes. Truly, it would be better to do nothing and allow the market to purge itself.

None of this, of course, will stop our government from passing the stimulus package. That will require a great deal of anger on the part of the people. Ben DeGrow of Mount Virtus has issued an appeal to speak out against it and I echo that call. We will not be able to stop it entirely, but we might convince Congress to take the advice of Ms. Rivlin and Mr. Feldstein to continue working on it for a while so that it is not a complete shambles.

Global Warming: Policy Change, Not Climate Change, Is the Real Danger

By Julian Dunraven, J. D., M.P.A.

Honorable friends:

Global warming does indeed seem to be a pervasive problem. Yesterday it plagued me in my morning paper, harangued me from radio and television broadcasts, and even managed to insinuate itself into the conversation of irksome social acquaintances. Although I have become accustomed to bad policy masquerading as good science, and even look forward to reading my Global-Warming-Article-of-the-Day in the paper, yesterday’s news was particularly insufferable.

Todd Hartman of The Rocky Mountain News started it off, trumpeting Dr. Susan Solomon’s new pronouncement that CO2 emissions “will irreversibly change the planet,” for centuries to come no matter what we do. I suppose someone should suggest to Dr. Solomon that, if she has noticed human behavior has little to no impact on climate change, it might be because the whole things is part of the earth’s natural and periodic cycles. However, I was rather hoping her pronouncement might end the climate change squawking; after all, she does not seem to have much hope that there is anything more to be done. Alas, fortune is not so kind.

True believers never lose hope, and so NPR did its best to keep the faith alive by broadcasting proposed solutions. It seems a few members of the scientific community were watching “The Simpsons” and drew a bit too much inspiration from Mr. Burn’s attempt to block the sun by raising a giant metal disk over Springfield. Of course, the earth is a lot bigger than the town of Springfield, and thus there would have to be quite a few of these disks launched into orbit before we could block enough sunlight to begin cooling the earth. The disks would also have to be replaced occasionally as they fell out of orbit. The real sticking point is the cost, which is currently several trillion dollars. It is always unfortunate when mere economics gets in the way of good Simpsons . . . or science rather.

Another absurd proposal NPR and others have deigned to promulgate, involves launching sulfur particles into the atmosphere. This, would be far cheaper than the Mr. Burns plan, and would sufficiently darken the sky to promote global cooling. Unfortunately, it may also severely change weather patterns, increase acid rain, and—oh yes—darken the sky. No one quite knows how many species of animal and plant life would be devastated from a decrease in light sufficient to cool the earth. It might eventually leave the world a barren wasteland, but everyone agrees it would be a cooling barren wasteland.

Fortunately, it is only bureaucrats like those running the UN Intergovernmental Panel on Climate Change (IPCC) who seem to use middle school science fair projects as the standard for publishable research. The IPCC’s report, which was authored by a mere 52 scientists, was widely touted as representing the final and absolute conviction among the scientific community that Global Warming is the result of human produced CO2 emissions. Instead, the Republican minority of the U.S. Senate Committee on Environment and Public Works, led by Sen. James Inhofe (R-OK), has soundly refuted this in its Minority Report, which cites over 650 scientists, all contesting the IPCC’s claims.

One of the more interesting dissenters is Dr. Don Easterbrook, whose study of the climate indicates normal and alternating periods of warming and cooling stretching back for millennia. Not only does Dr. Easterbrook contest the idea that Global Warming is caused by humans, after looking at the sun’s recent activity and the Pacific Ocean’s decadal oscillation, he has staked his reputation on his theory that we are now entering a period of Global Cooling, and the Warming advocates will soon see their arguments collapse.

Whether or not he turns out to be correct will be largely irrelevant for the next four years. President Barack Obama’s cabinet selections clearly indicate the he accepts the idea of human caused Global Warming absolutely, and intends to write policy with that in mind. In his January 2009 Monthly Review, Richard Loomis of World Energy gives a thorough analysis of “President. Obama’s Energy Picks.”

As. Mr. Loomis explains, Secretary of State Hillary Clinton sees Global Warming as a national security threat and, during her campaign, advocated for strong carbon cutting measures. Steven Chu, as Secretary of Energy, has expressed great distaste for oil, dislikes nuclear power for the waste it generates, and refers to coal as, “my worst nightmare.” Solar, wind, and natural gas power and natural gas fuel seem to be his preferences. Carol Browner, the “Energy Czar,” comes to us from the EPA, where she argued that California should be granted a waiver from the Clean Air Act to allow it to more strictly regulate carbon emissions. Lisa Jackson, the EPA Administrator, pushed a moratorium on new coal plants as the EPA head for New Jersey. Then there is Ken Salazar as Secretary of the Interior who, while not joining the rest in his hatred of coal, is strongly opposed to expanding oil drilling whether on land or off shore.

From this list, Mr. Loomis is correct to fear some sort of cap and trade mechanism being forced on the U.S. by executive order. And herein lies the real danger of Global Warming. In his January 24th broadcast of “the Big Picture,” Jim Puplava warns that the U.S. will have a difficult time convincing the rest of the world to join in such an initiative during this economic crisis. Europe especially will be disinclined to rely more on natural gas when Putin has consistently demonstrated his willingnes to use the gas supply as political leverage. Thus, the U.S. will be forced to pursue carbon reduction policy alone. The high energy costs of such a policy would put the U.S. at a competitive disadvantage to Europe, China, and our other major trading partners. This is especially worrisome at a time when tax revenues are declining and government spending is increasing, and Mr. Puplava is right to wonder how much more of our debt the world will continue to finance when other nations are beset with their own economic problems.

Then there is peak oil. The recent IEA World Energy Outlook reports a 9.1% annual depletion rate in the world’s oil reserves. All major oil fields are in decline, virtually no new discoveries are being made, and oil demand continues to rise across the world—despite the economic crisis—especially in China, India, and oil producing nations developing their own economies. We are set for an oil supply crisis to hit between 2012-2015. Our own oil reserves are not sufficient to avert this problem, but they can help buy more time for us. However, as developing an oil field takes anywhere from 4-6 years, we would need to start investing today. Instead, low oil prices, and the refusal of the Obama administration to expand drilling while it considers actually raising taxes on oil produces has all but killed capital investment in this vital field.
Natural gas fuel is also a viable stop gap measure while we search for something to more permanently replace oil. However, it is not unlimited, and if we insist on squandering it to supply our electricity, it will not be of much help to us when we face the coming oil supply crisis.

As I have said before, Global Warming is something science is still vigorously debating as it attempts to fully understand the causes of climate change. However, to the Obama administration, the debate is over. In the midst of an economic crisis, it is willing to tax coal and nuclear power into extinction—despite an already overburdened grid. It is willing to put our nation’s entire economy in peril of the worst oil supply crisis ever seen and squander the natural gas resources that could help protect us. And it is willing to do all of this solely on the basis of its faith in human caused Global Warming. Whether climate change is a real problem caused by humans is still up for debate. However, the dangers of policy change based on that premise are very real and imminent.

The Rise of Gold and Fall of The Dollar

By Julian Dunraven, J.D., M.P.A.

Honorable friends:

Last month I wrote that the bailout total, which has now reached more than $8.5 trillion, with another $850 billion stimulus to come this year, will eventually force us into dangerous levels of inflation. I thank the Bangor Daily News and Bridget Johnson at The Rocky Mountain News for picking up on that post. Since then, although the Fed printing presses have been running at a frantic pace, nearly doubling the money base, much of it has not yet reached the money supply. That is about to change.

As the credit crisis hit and companies began to deleverage in earnest, selling anything they could to obtain dollars and pay down debt, U.S. treasury bonds sold very well. Our people, seeing the credit crunch and falling prices, began to fear a deflationary trend and flocked to treasury bonds as well. Truly markets are psychologically driven—and often insane. More rational heads have reminded us that real deflation requires a contraction in the money supply—which the Fed’s printing has made all but impossible. It seems, however, that reason is beginning to reassert itself.

U.S. treasuries are now selling at almost zero percent interest rates. As a result, $1 million invested into a one month treasury bill, rolled over each month, will earn you only a meager $100 annual interest. A one year treasury bill for $1 million will earn you only $4,300. No one can live off such pathetic returns, certainly not our retirees. As for other governments, such returns offer little incentive to continue financing our debt, which increasingly looks to be utterly unmanageable. As a result U.S. Treasury sales are beginning to decline.

As the Ludwig von Mises Institute points out, our biggest creditor nations are unlikely to increase their investment. Japan has been a net seller of U.S. Treasuries and it has its own problems to deal with from demand destruction affecting its exports. OPEC nations are suffering from falling oil prices and their own resulting economic woes render them unable to finance more of our debt. The Caribbean banks are suffering from the credit crunch forcing liquidity and in no position to offer help. That leaves China, which is passing its own $585 billion stimulus, of which the government is providing only $170 billion, leaving the rest to be financed out of its foreign exchange reserves—such as U.S. treasuries.

To further complicate the matter, Chuck Butler’s Daily Pfenning yesterday picked up on news that Chinese officials are now contemplating selling U.S. Treasuries in part out of retaliation that the U.S. government has cast blame on China for the global financial crisis. Yu Yongding, a former member of the People's Bank of China's policy board, also warned that “supply of Treasuries may far exceed demand in the future.”

Thus, as the Fed finds itself unable to sell sufficient treasury bonds to finance all the government spending, it will have no choice but to begin quantitative easing, a polite term for printing money and injecting it directly into the money supply. In other words: massive inflation.

As part of their efforts to accomplish this enormous monetary expansion and devaluation in a vain effort to stimulate the economy, the Ludwig von Mises Institute points out that the central banks have finally abandoned their attempts to artificially suppress the price of gold through naked short selling and dumping. Slapstick Politics discussed this inevitability back in October.

As I predicted last month, the result of all of this has been a drop in the value of the dollar and a precipitous rise in the price of gold as people try to find a way to preserve their wealth. The other major fiat currencies of the world are no better, as James Turk of Gold Money illustrates. The central banks of the world have all embarked on this strategy of bailouts and spending together, and they are all devaluing their currencies together. That trend is likely to continue for some time, and gold remains the best protection against it.

For those of you who still have yet to purchase gold and are cringing at its current price surge to around $900 per ounce, there are some hopeful signs to watch for. Although I do not think the bailouts and stimulus packages will be at all effective at solving the financial crisis in the long run (a topic Slapstick Politics will continue to address), I do expect them to produce a short term boost in confidence in the near future. The strange aura of hope that the Obama administration has coming into office will assist this as well. There may also be another period of deleveraging in the near future. In either scenario, several investment specialists speculate that the price of gold could plummet back down to $650-700 per ounce. If that happens, it would be a wonderful time to purchase. Before the central banks have completed their efforts at quantitative easing, most gold investment experts are estimating the price of gold could rise to anywhere from $1,500-5,000 per ounce. The Ludwig von Mises Institute goes quite a bit further, speculating that gold could climb to almost $10,000 per ounce. While I tend to lean toward the more conservative estimates, gold continues to provide the best possible protection against the inflation and devaluation the central banks of the world are now foisting upon us in what is perhaps the greatest theft of wealth in history.

Sen. Inhofe Asks the People to Help Fight Second TARP Bailout

By Julian Dunraven, J.D., M.P.A.

Honorable friends:

From what I have been reading, I doubt there are many people left in this nation, outside the District of Columbia, who still believe that the TARP bailout was a good idea. Despite this, only a few members of the Senate have shown courage in representing the people against this horrendous and immoral plundering of our country’s wealth. Sen. James Inhofe (R-OK), along with Senators Barasso (R-Wyo.), Wicker (R-Miss.), DeMint (R-S.C.), Lincoln (D-Ark.) and Enzi (R-Wyo.), have cosponsored legislation that would halt the second installment of the $350 billion bailout.

They face tough opposition, however. Obama, backed by House Speaker Nancy Pelosi and Senate Leader Harry Reid, has demanded that Congress release the money to the incoming administration. Obama has threatened to veto any attempt Congress makes to withhold the money.

The U.S. Senate is due to vote on the issue this afternoon. Many people have told me that they feel helpless to prevent what seems to them to be inevitable. It is not. Sen. Inhofe and his allies are committed to fight it, but Inhofe has asked for the help of the people. All it takes is a few moments to find your senator’s web page, type a quick objection to the bailout, and e-mail the message. The Senate needs our help to stand up against this pressure, but it can be done.

Already, CNN reports that Republican senators, anticipating that Obama will get the money, are asking his administration to promise that he will only use it on the financial industry, and not alter the purpose—for the auto industry for instance—as the Bush administration did. There was a time when such a request would have been silly. The Constitution, after all, prevents a president from altering legislation to his whim—he is charged merely with enforcing it. Yet, today, Congress must beg the president to even follow the laws they pass. As Sen. Inhofe has stated before, and I have echoed, our Republic is in dire straits.

If we are unhappy with this state of affairs, then it is up to us, the people, to correct the government which should be answerable to us. It is our responsibility to defend the Constitution and to make our will known to the spineless and feckless fools currently sitting in Congress that we do not want more money to go to these bailouts. It is not hard, and requires only a few moments, and a few clicks of the mouse. I hope you will all join me in answering Sen. Inhofe’s call to contact our senators, and to send them all but one powerful word: “NO!”

How Bernanke Stole Christmas

By Julian Dunraven, J.D., M.P.A. (With Apologies to Dr. Seuss)
December 2008


Every Who Down in Who-ville Liked Christmas a lot
But Bernanke, who lived just north of Who-ville, thought it might be for naught.

Bernanke feared for Christmas, and the whole shopping season.
Now, please don’t ask why. No one quite knows the reason.
It could be that interest rates weren’t adjusted just right.
It could be, perhaps, that banks were leveraged too tight.
But I think that the most likely reason of all,
May have been that his brain was under Keynesian thrall.

But whichever of these reasons you may choose,
He stood there on Christmas Eve, fretting for Whos,
Staring down from the Fed with a sour, Bernanke frown,
At the warm lighted windows below in their town.
For he knew every Who down in Who-ville beneath,
Was busy now, hanging a mistletoe wreath.

“And they’re hanging their stockings! He snarled with a sneer,
“Tomorrow is Christmas! It’s practically here!”
Then he growled, with his Fed fingers nervously drumming,
“I MUST find some way to keep Christmas cash coming!”

For tomorrow, he knew, all the Who girls and boys,
Would wake bright and early and rush for their toys!
And finding none there—Oh the Noise! Noise! Noise! Noise!
That’s one thing he hated! The Noise! Noise! Noise! Noise!

Then the Whos, young and old, would expect a great feast.
And they’d feast! And they’d feast!
And they’d feast! Feast! Feast! Feast!
But this year there would be no Who-pudding, and no rare Who-roast beast.
Which was a thought poor Bernanke couldn’t stand in the least!

And then they’d do something he liked least of all!
Every Who down in Who-ville, the tall and the small,
Would stand close together, with Christmas bells tinkling
They’d stand hand-in-hand. And the Whos would start thinking.

They’d march and they’d protest!
And they’d chant! Chant! Chant! Chant!
And the more Bernanke thought of this Who Christmas Chanting
The more Bernanke thought, “I must stop this Who ranting!
“Why for 45 years we’ve made fiat work now!
I Must keep Christmas cash flowing!
. . . But how?

Then he got an idea!
An awful idea!
Bernanke
Got a wonderful, awful idea!

“I know just what to do!” Bernanke laughed in his throat.
And he made a quick Santy Claus hat and a coat.
And he chuckled, and clucked, “What a great Fed-ish trick!
“With this coat and this hat, I’ll look just like Saint Nick!”

“All I need is a reindeer . . .”
Bernanke looked around.
But since reindeer are scarce, there was none to be found.
Did that stop old Ben?
No! Bernanke simply said,
“If I can’t find a reindeer, I’ll make one instead!”
So he called his friend Hank. Then he took some red thread
And he tied a big horn on top of his head.

Then he fired up the printing presses.
He had lots of money to make,
Loaded the sleigh with excesses
And he hitched up old Hank.

Then Bernanke said, “Giddyap!”
And the sleigh started down
Toward the homes where the Whos
Lay a-snooze in their town.

All their windows were dark. Quiet snow filled the air.
The Whos were all dreaming sweet dreams without care
When he came to the first failing bank in the square.
“This is stop number one,” The old Bernanke Claus hissed
And he climbed to the roof, bloated bags in his fist.

Then he slid down the chimney. It looked rather grimy.
But if Santa could do it, then so could Bernanke.
He got stuck only once, for a moment or two.
Then he stuck his head out of the fireplace flue
Where bad mortgage backed debt all sat in a row.
“These derivatives,” he grinned, “are the first things to go!”

Then he slithered and slunk, with a smile most like a snake,
Around the whole town, and financed each big bank’s mistakes.
Fannie and Freddie, Bear Sterns, and Citi
TARP, AIG, GE and more Citi.
To bad business he gave billions, oh very nimbly,
But as for good business, they didn’t get any.

To get the money flowing he was bound to inflate,
So he even brought treasuries down to negative interest rates.
Printing money by trillions he nearly doubled the cash.
Just think of Zimbabwe; it wouldn’t be rash.

Then he stuffed all the money down the chimneys with gusto
“And NOW!” grinned Bernanke, “I’ll fix up the Autos.”

And then Bernanke flew to Detroit, with more money to drop
When he heard a small sound say “The Senate said ‘Stop.’”
He turned around fast, and he saw to his gall
Congressman Ron Paul, who was ready to brawl.

Bernanke had been caught by this noble Who master
Who’d got out of bed to see what was the clatter.
He stared at Bernanke and said, “Santy Claus, why,
“Why are you devaluing our dollar and savings? Why?”

But, you know that Bernanke was so smart and so slick
He thought up a lie, and he thought it up quick!
“Inflation’s not bad,” the fake Santy Claus lied,
“It’s just that this level has never been tried.
“So I’ll inflate until we can create a new bubble.
“Then our economy will be back to boom on the double.”

But his fib fooled no one. Then he grabbed Paul by the head
And he trussed him and gagged him and tossed him back in bed.
And when Paul was disposed of, with his Constitution too,
He turned back to Detroit and forced the money through.

But inflation burned through the Whos’ savings like fire.
They were poorer, not richer, as he left, the old liar.
Working longer and harder before they could retire.

And the only speck of money
Left to the average Who house
Were accounts that were even too small to buy food for a mouse.

Then the same thing befell all the Whos’ houses
Leaving accounts much too small to feed the other Whos’ mouses.

It was a quarter past dawn . . .
All the Whos, still a-bed
All the Whos, still a-snooze
When he packed up his sled,
Packed it up with their final stimulus package! The checks! All indebting!
For the poor! And the Middle Class! For Change! What trappings!

80 trillion feet up! Up the side of Mount Debt-it,
He rode to overlook Who-ville, on their heads to dump it.
“Hal-loo to the Whos!” he was Fed-ishly humming.
“They’re finding out now that Christmas cash is coming!
“They’re just waking up! I know just what they’ll do!
“Their mouth will hang open a minute or two
“Then all the Whos down in Who-vill will all cry YOO-HOO!”

“That’s a noise,” grinned Bernanke,
“That I simply must hear!”
So he paused. And Bernanke put a hand to his ear.
And he did hear a sound rising over the snow.
It started in low. Then it started to grow . . .

But the sound wasn’t happy!
Why, this sound sounded angry!
It couldn’t be so!
But it WAS angry, VERY!

He stared down at Who-ville!
Bernanke popped his eyes!
Then he shook!
What he saw was a shocking surprise!

Every Who down in Who-ville, through distortions great and small,
Was chanting! Not one had any presents at all!
He HADN’T kept Christmas cash flowing!
IT FROZE
Somehow or other, it froze, though how, he did not know.

And Bernanke, with his Fed-feet ice-cold in the snow,
Stood puzzling and puzzling: “How could it be so?
“It froze despite nationalizing! It froze despite rate cutting!
“It froze despite bailouts, quantitative easing, and printing!”
And he puzzled for hours, ‘till his puzzler was sore.
Then Bernanke thought of something he hadn’t before!
“Maybe our economy,” he thought, “doesn’t come from just a store.
“Maybe the economy . . . perhaps . . . means a little bit more!”

And what happened then?
Well, in Who-ville they say
That Bernanke read von Misses and Hayek that day!
And the minute he saw true capitalism’s light,
He whizzed back to town to set all to right.
He stopped all the bailouts and ended fiat money!
And he, he himself, Bernanke, restored a land of milk and honey.

Bush Blasted for Usurping Congress on Auto Bailout: Sen. Inhofe Defends the Republic as a Modern Cicero

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

Heeding the overwhelming will of the people-- and perhaps at last developing a bit of good sense-- the U.S. Senate has rejected the idea of a bailout for the Detroit automakers. If we were still following that dusty old parchment called the U.S. Constitution, the matter would have ended there, at least until the next president takes office. As we have been ignoring the Constitution for a while though, the story continues.

President Bush declared that the Senate, far from rejecting the bailout, simply failed to act. On that flimsy pretext, he will use $15 billion of the $700 billion bank bailout to aid Chrysler, GM, and Ford. Although Congress authorized that money only for the financial services industry, there has been no oversight, and the Bush administration has already altered the implementation of the bailout several times without consequence. Thus, despite the fact that such actions completely usurp the Legislative branch and represent a total betrayal of our Constitution, the Bush administration is proceeding without hesitation.

At least one of our senators, though, is refusing to retreat quietly into irrelevancy. Sen. James Inhofe (R-OK), one of the most staunchly conservative members of the Senate, is fighting back on behalf of our republic and the Constitution. Like a modern day Cicero, he issued a philippic against Treasury Secretary Henry Paulson and the Bush administration declaring:

"As the Bush administration changes course once again, it is becoming clear to me that Washington, D.C. might be completely out of control.

"How have we come to a point that Congress--the institution that represents the will of the American people--has handed over so much money and authority to the Treasury Secretary that, if the democratic process fails to achieve a certain desired outcome, the outcome is simply ignored? The stated purpose of $700 billion bank bailout was to rescue us from a catastrophic breakdown of the financial system. Now we're told that the money might be used to bailout the auto companies because legislating their multi-billion dollar gift from the U.S. taxpayer might come with conditions that were too inconvenient for interested parties. I've been a U.S. Senator for some time, and I have never seen anything like this.”

Sen. Inhofe is correct. Congress has been lax in its duties and handed over far too much authority to the executive branch, which is now running roughshod over our republic and tearing the Constitution to shreds, while claiming that it is all justified because we face an emergency situation. Yet, that sort of justification is precisely what our Constitution and its processes were created to guard against in the first place.

It has gone on too long. When we suffered a terrorist attack and faced two wars, Congress handed the President unprecedented powers, both domestically and militarily, which the Supreme Court is still trying to cut back to constitutional levels. Congress sat by while the President made use of torture, suspended the Writ of Habeas Corpus, spied on our own people without warrants, and otherwise made a mockery of our Bill of Rights—because it was an emergency. When the financial crisis hit, Congress again handed the president such sweeping power over our financial system that the U.S. government overnight gained more control over private industry than is exercised by the socialist government of Hugo Chavez's Venezuela. Our money printing has ballooned to a level not seen in the world since the French Revolution—increasing the money base almost 80%--over 40% in the last month alone. Now, the President even presumes to ignore express will of the first branch of government entirely—because it is an emergency.

Our republic is in grave danger. Though I may disagree with Sen. Inhofe occasionally on social issues, I cannot deny that he has both integrity and honor. Already, he has had my respect through the financial crisis because of his determined and reasoned opposition to the woefully irresponsible and ill planned bailouts. Now, though perhaps already too late, he is trying to defend the Constitutional process that defines this nation. For that he has my utmost admiration. I only hope he has more success than Cicero himself, and that his colleagues, and we the people, have enough courage and conviction to join and support him in his opposition to this madness which, as he states, “will not only be futile, but will also move this country further from those first principles that have made us the great nation we are today."

The Bailout Total: $8.5 trillion-- Inflation To Come

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

In prior posts, I have made my disdain for the economic bailouts abundantly clear. Thus, I have not been at all surprised that the bailouts have failed so miserably to solve the financial crisis over these past several weeks of extreme volatility. What has surprised me a bit is the amount of money the government is willing to gamble in a desperate attempt to force the bailouts to work.

“Helicopter” Ben Bernanke, earned his moniker by once promising to drop helicopter loads of money on to a financial crisis if needed. This was the lesson he gleaned from years spent studying the Great Depression of the 1930s. Mr. Bernanke determined that had we simply thrown enough money at it, we could have ended the Great Depression much earlier. The Austrian School would say that he is exactly wrong, but he is now putting his theory to the test in our current financial crisis. As the helicopters continue to swarm, I think it only prudent that we occasionally glance at how much we are spending to test his theory. Jim Puplava, investment advisor and CEO of Puplava Financial Services, Inc., has provided a quick accounting of the helicopter drops and so far:

· For commercial paper, we have allocated $1.8 trillion;
· The Term Auction Facility, which provides negotiated rate for banks to borrow from the FED, has allocated $900 billion;
· Other assets have $606 billion;
· Finance company debt purchases, like the Fannie and Freddie bailouts, have received $600 billion;
· Money Market Facilities have $540 billion;
· The Citigroup bailout cost $291 billion;
· Term Security Lending has $250 billion;
· Term Asset Backed Loan Facilities (TALF), designed to help credit cards and business loans, has $200 billion;
· The bailout for AIG cost us $123 billion;
· Discount Window Borrowings has been allocated $92 billion;
· Commercial Program Number 2, which helps banks buy commercial paper from mutual funds, received $62 billion;
· Discount Window Number 2 has $50 billion;
· The Bear Stearns bailout cost $29 billion;
· Overnight loans have received $10 billion;
· Secondary credit is at $118 billion;
· Federal Deposit Insurance Commitments (FDIC) which guarantees loans, has received $1.4 trillion;
· Guarantees on GE Capital are at $139 billion;
· Citigroup’s second bailout took another $10 billion infusion;
· The Troubled Assets Relief Program (TARP) we heard so much about has $700 billion;
· The earlier stimulus package this year cost $168 billion;
· Treasury Exchange Stabilization Fund took $50 billion;
· Tax breaks for banks are at $29 billion;
· And Hope for Homeowners devoured $300 billion

Thus, the total amount we are spending on the bailout so far is $8.5 trillion.

Early next year, we can look forward to another $700 billion bailout directly to the people (which will include even those who do not pay taxes) as promised by Obama and Pelosi. There will also be some form of bailout to the Detroit automakers, and the bailout for the various states is still to come as California has already begun to issue IOUs. For more detailed information, check out Mr. Puplava’s Financial Sense Newshour, “The Big Picture” for December 6, 2008.

Currently, our GDP is only $10-13 trillion depending on how generously you want to calculate it. Either way, spending 60-80% of our GDP on bailouts should outrage you. So where is this unimaginably vast amount of money coming from? As I have said before, we are simply printing most of it. As you might imagine, such frantic money printing should massively increase inflation. Just examine the money base chart below.

This massive increase has not yet hit the money supply (See chart of M2 below) as the banks are busy trying to recapitalize and deleverage rather than giving out new loans. We used to call that prudent, but prudence is not what our government wants right now. Many of the above programs have been created to allow the government to bypass the banks, injecting cash directly into the economy in an attempt to spur spending, create new bubbles, and stagger along to the next distortion created crash. If it doesn’t work, we can look forward to a large devaluation of the dollar.

This impending inflation and devaluation should explain why investors like Warren Buffett have gone to equities and totally divested themselves of the dollar. Yet, even faced with this evidence, people are still flocking to treasury bonds despite the abysmally low or even negative returns on them right now. A wiser investor would seek stocks of companies which consistently pay dividends, have increased their dividends, and are likely to continue doing so. The precious metals also continue to look appealing as a hedge against the inflation our inept government is trying to ram down our throats.

With the election behind us, countering the political forces pushing the bailout—and the resulting inflation—has become much more difficult, but remains vitally important. Making our own displeasure with these bailouts known and holding politicians accountable for their actions are the only defenses we have against the continued financial mismanagement coming from our government.

Bailouts Continue to Multiply Using Money From Your Accounts

By Julian Dunraven, J.D., M.P.A.

Honorable Friends:

We are now past the election, but I cannot stop thinking of Disney’s Alice in Wonderland and the Dodo’s jolly caucus race. Do you recall the scene? The Dodo perches atop a pillar of rock on a beach, presiding over a crowd of critters running endlessly around his pillar in an attempt to get dry while the tide continues to crash over their heads. The Dodo instructs them that they must all run with the others if they want to get dry, all the while singing his ridiculous song:

'Round and 'round and 'round we go
Until forevermore
For once we were behind
But now we find we are be-

Forward, backward, inward, outward
Come and join the chase
Nothing could be drier
Than a jolly caucus race!

Certainly, everyone has been running together in our own caucus race. Both parties and both presidential candidates decided to run with the bailouts, and the bailouts continue to multiply and grow.

Yesterday morning the AP announced that AIG’s bailout has grown to more than $150 billion. Of this, $40 billion buys preferred stock for public ownership. The original $85 billion loan has been reduced to $60 billion and another $37.8 billion loan has been transformed into a $52.5 billion aid package.

We also have GM and Ford with their hands out for bailout money according to The Ludwig von Mises Institute. Have no doubt that they will get what they seek. They will get a bailout or two despite the fact that other automobile makers are doing just fine. They will get it despite the fact that, as the Institute points out, Ford has fewer employees than Abercrombie and Fitch and GM has far fewer employees than Target, Wal-Mart, or McDonalds, yet these companies would be laughed at if they demanded a bailout.

Goldman Sachs and Fannie and Freddie also are showing losses. Facing a third quarter net loss of over $29 billion, and a total outstanding debt of $880 billion as of October 31^st, Fannie has warned that its $100 billion bailout may not be enough.

So where is all the requested bailout money coming from? Well, $40 billion of AIG’s money is coming from the $850 billion bailout package Congress just passed. The rest is being printed by the Fed. But let us be honest: all the bailout money has been printed. We were running a deficit long before we ever made even the first bailout.

Understand that, by printing money, the government pays for these bailouts by taking value out of the savings accounts of private citizens. As the money supply is increased through inflation, and by printing more than $2 trillion in the last few weeks we have increased the money supply by almost 50%, the money we hold in savings is devalued. Thus, we must all work harder and longer in order to save less. It is a very subtle form of theft, but make no mistake—it is theft. The citizens of this country are all having their accounts raided, through inflation, to pay for the failed policies of these companies.

Now look at who is running things. Michael Alix has been named as senior vice president of the bank supervision group of the New York Fed. Formerly, he was the chief risk officer at Bear Sterns, which went under back in March from its derivative investments. Former officials of Goldman Sachs can be found throughout the Treasury Department and Fed. I suppose if Goldman continues to suffer, its management can always find new employment with government. Don’t you feel safe?

So this is the state of affairs. The whole country is drowning in debt and asking for bailouts. Our government dodos, who happen to be the same fools who got us into such debt in the first place, are now busy pouring even more debt through inflation upon us to facilitate the requested bailouts. But keep running, they say, and eventually you will get dry. Pay no attention to the rising waves.

Honorable friends, we have fallen down the rabbit hole, but isn’t it entertaining?

'Round and 'round and 'round we go
Until forevermore
For once we were behind
But now we find we are . . . still behind

Recovering from the Election and Preparing the Republican Party for the Future

By Julian Dunraven, J.D., M.P.A.

Honorable friends,

This year, as I handed out candy to trick-or-treaters for Samhain/Halloween, I received a terrible cold in exchange. I spent the last few days sniffling and moaning in bed. At some point, I recall watching a somewhat blurry talking head announce that Barack Obama had just won the election. That set off a wave of coughing I thought might kill me. Cursing cold medication induced hallucinations, I promptly poured myself more cough syrup and tried to return to sleep.

The next day, the irritating headlines refused to disappear, even when I refused any medication at all. The morbidly depressed phone calls that began to pour in confirmed that I was not hallucinating, however much I may have wanted to. Stupidity had finally achieved a majority of votes.

I have also heard from the other side, and I am astounded at what they are saying. Consider this email that invaded my inbox this morning:

“As you read the lovely quote below, which speaks volumes, listen to the ‘Yes We Can’ song one more time. Our future is looking brighter everyday and history has been made.
‘It is said that Rosa [Parks] sat so that Martin [Luther King Jr.] could walk. And Martin walked so that Obama could run. And Obama ran so that we could fly. It’s time to take wing.’”

Now, maybe it is because I am ill, but my breakfast was the only thing threatening to take wing after I read that. One had only to see the enraptured expressions of adulation on the faces of the crowd at Obama’s victory speech to know that this woman is not alone in her sentiment, though. They haven’t simply elected a president; a new messiah has risen to save the nation and the world. I, however, will not be among the worshipers of our new god-president.

As a devotee of the Old Religion of Ireland and a student of history, I know of countless examples where a man has claimed power along with semi-divine status. In each case, the new divinity ended up looking just like old-fashioned tyranny. Only once has the title of messiah ever stuck. But in that case, the man who claimed it never seized power or commanded armies. Rather, he presented a simple message of love that rose to preeminence through persuasion—not state power. To my knowledge, many Christians are still pretty happy with him, though it appears that some have found a replacement.

That replacement had best be up to the task. As the storm clouds gather, the silver lining for Republicans is that, with Democrats in control of both houses of Congress and the White House, they will not be able to blame us for anything anymore. Whatever happens from here will be up to them. I have no doubt whatsoever that if they implement even half of the economic plans they have proposed, they will make things much worse. What will happen when their god-president fails?

Republicans need to be taking advantage of this time to regroup. First, though, we must acknowledge that, by abandoning the fiscal responsibility that had been a fundamental principle of the party for decades, the party set itself up for the rise of this false messiah of socialism. The people have every right to doubt Republican commitment to free markets and spending cuts after the hideous displays they have witnessed during the Bush administration.

Expecting the party to reform on its own, however, seems ridiculous. If Republican leaders failed to uphold their principles, we the people also failed to hold them accountable. If we want to take back the Republican Party, reform it, and hope to have any chance of success, we all have to increase our involvement with the party, as well as make our demands very clear. Congress and our Party leaders have shown that they are utterly unprepared for and confused by the massive economic issues that broadsided the campaigns this year. If you find yourself to be just as clueless and confused by these issues as Congress is, though, you cannot hope to help set them on the correct path. So start by educating yourself.

The issues we will be facing are indeed immense. For most people, it has been many years since they last sat in an economics classroom, if they ever did at all. Fortunately, one of my honorable friends managed to find a site that provides a very simple but comprehensive summary of all the issues we face. I invite you to check out Chris Martenson’s free Crash Course in the Economy. His short lessons will leave you in a much better position to understand exactly how we got here and what we are facing. It will also give you a very good idea of what to demand from the Republican candidates we will soon have to send out to clean up the disasters Obama and the Democrats will inevitably wreak in our society.

Deflation Is Not The Problem: We Face Inflation And Currency Collapse

By Julian Dunraven, J.D., M.P.A.

Honorable friends,

The value of the dollar is up, gold is down, and so is oil; stock values have plummeted, and everywhere I hear fretting about deflation. Do not be deceived. It is not deflation, but inflation which has come to plague us. If people fail to understand this point and rely on the dollar, their wealth will be wiped out.

The credit crisis has forced a massive deleveraging process faster than anyone anticipated. As a result, entities are selling anything they can for dollars to pay down debts. This sell off includes gold holdings, which is helping to push the already manipulated prices down further. The deleveraging sales (along with naked short selling) have also crashed stock prices. This has caused speculators to fear deflation rather than inflation and seek dollars rather than assets, and so they have sold off oil, causing a drop in the price. Coupled with the recessionary fears, this has cut demand slightly and OPEC is cutting production. Keep watching. All of this is temporary.

Demand for oil is still growing, even if that growth has slowed somewhat. Even with demand expected down at 86 million barrels per day, that is still more than last year and less than we are expecting for next year. China alone still has an 8% growth rate. We still suffer a supply destruction of 5-8% per year and have no prospects of any major new fields. The value of oil will climb, and it will climb high.

As for our stocks, many are not overleveraged and are quite strong. They should recover nicely from the dumping this liquidation is forcing right now. They will also benefit as Sen. Charles Grassley (R-IA) has ordered the Justice Department to begin an investigation of the SEC. As a result, the SEC is starting to take action against naked short sellers who have been stealing trillions by selling non-existent stock on the markets. One investment advisor has reported to me that up to 50% of the stock of several major companies currently being traded simply does not exist. Congress is finally beginning to notice this and take aim at these criminal traders who have defrauded both the companies they trade and the investing public in what may be the biggest financial crime we have ever seen. Thus, certain sectors of our economy are still very strong, and with prices so low, it is a good opportunity to buy.

Be very clear about this point: inflation or deflation is determined by increasing or decreasing the money supply; they are not determined by rising or falling prices alone. We are not in deflation simply because of a few momentarily low prices. The Fed is the real worry. It has just added over $5 trillion to its balance sheet. Yes: $5 trillion. We have borrowing and inflation when we should have savings and capital. Our money supply is inflating as if there is no tomorrow. Such a thing has never before been seen in this country. We did see it in the Weimar Republic of Germany, in Argentina, and in the French Revolution, though. In each case, the government inflated the currency to the point of collapse. When the people began to starve, the French Queen was foolish enough to say “Let them eat cake.” She lost her head for it.

When the Fed manages to inject this cash into the market, we will begin to enter hyperinflation. Inflation will far surpass the interest rates for cash and bonds and any savings connected to the dollar will be wiped out. This is why we have seen savvy investors like Warren Buffett move all of their money into the equity of stocks, or into the safety of real money: gold and silver.

This is still a wonderful time for the purchase of gold and silver. The spot prices on COMEX have yet to realize the shortages we are facing. Yet, every dealer I talk to is desperately adding staff to try and keep up with the unprecedented demand. People are now waiting more than twenty minutes just to place an order and then being told they will have to wait anywhere from 3-5 months for delivery. Faced with such shortages, I have seen the price of a 1 oz. gold coin on eBay rise to over $1,500 while the spot price on COMEX lingers at $700 per ounce.

This will not continue. COMEX prices would lead you to believe there is a glut in supply. Yet it is becoming difficult to get gold and silver. It will shortly be even more difficult to get silver as it is a byproduct of lead and zinc mining and those metals are selling below cost, so mines are shutting down. People are beginning to realize that COMEX does not have physical metal to back up its paper contracts and they are demanding delivery. Many investment strategists expect COMEX to default by December. Once that happens, the dollar really does collapse as the price of gold may climb up to $5,000/oz., and silver may shoot to over $100/oz.. At that point, people will either have gold, silver, and stocks, or they will have worthless paper. We are facing inflation, and that is the simple fate awaiting our fiat currency system.

All That Glitters Is Not Gold: Our Government’s Lies and Manipulations in the Gold Market

By Julian Dunraven, J.D., M.P.A.

Honorable friends,

We have all heard the old adage that when the market is down, gold is up. Well, the market is most assuredly down . . . but so are gold prices. Yet, strangely, demand for gold and other precious metals is skyrocketing, while supply is so low that people are being told they may have to wait six months or more for delivery. Even stranger, on eBay, prices for gold and silver coins and bars are well above the price they are being traded at on the commodities exchange in New York. So what is going on? That is the question some of my clients wanted answered as they fretted about their hedge investments. To answer quite simply, our government is actively working to suppress the gold market, and defrauding investors in the process. Now I will tell you why and how.

In the 1930s, we abolished the gold standard. Instead, we now have a fiat currency where money has value only because we say so. This allows the Federal Reserve to adjust the money supply without regard to a set amount of gold. Unfortunately, the Fed abused its power. Thus, every time we faced an economic hurdle, rather than allowing for market corrections, the Fed simply cut interest rates, printed more money, and inflated the problem away. It worked as long as people had faith in the currency.

As this behavior repeated itself over time, the central bank managed to encourage the unrestrained spending and overleveraging that has caused the economic crisis we face today. This time, though, the problem is not going away.

We are facing the accumulation of years of bad policy. People are beginning to see that the nation is so deeply in debt that the only way out is massive inflation and devaluation of the dollar. In an effort to preserve their wealth and hedge against this inflation, they turn to gold. This causes problems for the Fed and the other central banks.

Although our money is no longer backed by gold, the Fed cannot ignore gold entirely. If the value of the dollar drops too fast against gold, people begin to lose faith in the system. They buy gold instead of treasury bonds and the Fed and other central banks would be forced to stop their meddling in the markets and allow the money supply to readjust to the level it should be at. Thus, the Fed and other central banks have coordinated their efforts to prevent this.

First, as gold begins to rise, they release some of their own gold reserves into the market. The flood of new supply pushes down prices and allows them to continue with their operations. Of course, there is a danger. If they do this too often or too openly, people begin to see the manipulation and lose faith in the system. In recent years, as the increasing activity of the central banks has required more extensive manipulation of gold, the central banks have kept their hands clean by turning to private bullion banks. They have actually started paying these banks to lease gold and then sell it short on the market to keep the price down. Naturally, as an attempt to manipulate the currency, this is illegal for private entities — yet it is happening every day at the expense of investors.

Obviously, even the central banks do not have unlimited supplies of gold and cannot keep this up forever. The U.S. government, though, keeps its gold reserves a closely guarded secret and Fort Knox has not been audited since Eisenhower’s time. Yet, given the long waits for delivery and the high price of physical gold on eBay, we know that physical supply is short. So how do they continue to keep the price of gold futures contracts down on COMEX? They use naked short selling.

Few people ever demand delivery while trading on COMEX. Thus, it is remarkably easy to sell off more paper contracts than there is gold to back it. As long as few people demand delivery, the deception works. This, too, is criminal, but the law has not been enforced. We may see that begin to shift soon though. The manipulations have become so extensive that the difference in price between paper trading on COMEX and physical trading on eBay is becoming severe. People are beginning to notice. As early as December, we may see people demanding delivery on their COMEX contracts. When delivery cannot be met, this house of cards the Fed and other central banks have created will crash down.

So the government has fed us gilded lies while poisoning our market and actively undermining our hedge protections against inflation they created. Angry? You should be. But it will continue until we demand that it stop. Do so. First educate yourself. There is no better place to start than with the people at GATA. Then vote with both your money and your ballot. When you buy gold or silver, demand delivery. When you cast your ballot, vote against candidates who have fostered these manipulations and promised more. Vote against candidates who have benefited from the corruption through huge donations from the perpetrators. Vote against Barack Obama.

The Prophecy Of Ayn Rand From The Gods Of Rudyard Kipling

By Julian Dunraven, J.D., M.P.A.

Honorable friends,

My ballot arrived in the mail today and I greeted it as I would a poisonous viper. As I considered which candidates would be least ill-equipped to deal with the situation we are beset with today, my mind continually turns toward a strange encounter I had this morning at the courthouse. Passing through the lobby, I paused to eavesdrop on a political debate between a few young people regarding the relative merits of McCain and Obama. I am always interested to learn how others view the political landscape, but was disappointed upon hearing only echoes of the populist nonsense the campaigns have been spewing about how their own brands of massive government intervention will save the economy—and all of us — from disaster. After a moment, though, my attention was drawn to an elderly lady sitting alone on a bench; she seemed to be silently crying.

Though this is not an entirely unusual event at a courthouse, it concerned me enough that I approached her to inquire whether she was well. She turned her careworn face to me and dabbed at her eyes with a handkerchief before managing an embarrassed smile. She explained that she had also been listening to the youthful debate and had become distraught by what she had heard. It seems that she was born in Germany and is old enough to remember Hitler’s rise as the nation descended into fascism. People spoke in just the same way, she informed me. Times were hard enough that when the government promised it could fix everything if it just had a few less restrictions and a little more control, the people believed them because they wanted to. She said never thought she would see America making those same mistakes: trusting government to solve all our problems and giving it unfettered access to our economy and our liberty to do it. She told me she knows where that road leads and despairing at the idea of getting any closer ever again.

I never did hear why this lady was at the courthouse, but I thought about what she said for quite a while afterward. Lately, as the Fed spins out of control and Congress and the President lurch from one irrational move to another, many of us have been warning about the failed economic controls attempted in the Great Depression and in communist and socialist economies which just serve to cripple markets and make bad situations worse. What we have not focused on, though, and what she is right to point out, is that massive government control of our economy has consequences that reach much further than just economics. Do any of you recall what Ayn Rand said of the doom of rotted civilizations in Atlas Shrugged?

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self sacrifice – you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: ‘Account overdrawn.’ (New York: Signet, 1985. 383-384).

As I listen to the hum of the Fed printing presses, and watch as our government nationalizes our financial system and squanders the wealth of our nation on bailouts that should never have happened, I cannot help but think Ayn Rand may be correct.

The candidates this year all have a decidedly poor understanding of money and economics, and we have heard them make many promises of even more massive government intervention into the economy sweetened with populist rhetoric. Though John McCain, and Republicans in general, are less likely to balloon our government into the fascist, socialist nightmare Rand foretells, they have done little to earn anything close to our full confidence. We should all be putting a great deal of pressure on our Republican candidates in these last few days of the election to commit to solidly free market principles, and the reduction of government spending and power, or risk losing our votes. There has never been a better time to force a promise out of desperate politicians.

Should we fail to educate our politicians, unfortunately they will not be the only ones to suffer for their ignorance. Rudyard Kipling’s Gods of the Copybook Headings are even now descending in wrath to forcibly remind us of the economic realities we have tried so hard to deny for so long. Martin Hutchinson has a few good suggestions for appeasing these particular gods, all of which the candidates should probably study if they want to get us back on track to healthy free markets.