The Democratic Donkey Ride Down to the Bottom

If the fiscal cliff is a ditch, the national debt is the Grand Canyon. We are riding the Democratic Party donkey all the way to the bottom and they have no mandate, or desire, to balance the budget. The economic zombie apocalypse is waiting for us there, and they won’t be passing out granola bars.

The GOP has to come together to decide, overwhelmingly, that we must balance the budget. The problem is that the majority of those in the GOP apparently do not see the debt as the top priority. They will pick-up right where they left off before the election and avoid the elephant in the room. And we will all go down together.

They have actually joined with the Democrats in voicing their “horror” over the prospect of forced budget cuts via sequestration. God forbid both sides cut anything. Even if the “devastating” sequestration cuts go through, it won’t even touch the 16+ trillion-dollar debt.

We have been played; very skillfully I must say, by the ruling Democratic Party elite. They have set us up specifically NOT to balance the budget – or even really debate it in a meaningful way. They did this, not in Karate fashion – it was more Aikido fashion. Instead of punching the GOP, they simply invited the GOP’s punches and directed the elephant to the ground. They used the GOP’s own willingness to expand the scope of federal government and depth of the national debt via the Patriot Act, increased military spending, no child left behind, Medicare Part D and the 2008 bailouts. In that respect, the GOP joined with the Democrats in expanding government spending and reach.

They realized two very important points. First, the GOP would not push for a balanced budget because they would have to offer up military spending cuts and they would be afraid that would anger the voters. Second, the Democrats knew that as long as the Dems continued to increase voter dependency on government programs, they would be assured a majority voting block as that dependency was already approaching 50%, all without having to even address the debt. The Democratic strategists knew there was one additional reality about their long-time foe that would guarantee that everything would come together.

The icing on the cake for them was their knowledge that the GOP was stuck in their own antiquated, failed, inter-party battle between moderates and conservatives. Why was this perfect? Because one thing the moderates and conservatives shared, while they debated over the social platform, was their love for military spending. No matter which candidate rose to the top, they knew the trap was set, and no meaningful balanced budget debate would occur. And why was that so important? Because the only thing that could derail their entire plan would be for the GOP to embrace the KEY ISSUE by merging with the Tea Party and Libertarians with their balanced budget, small government passion. That would capture a much wider base and push them over the top – with a mandate to actually balance the budget once in office.

But that didn’t happen. The Democrats knew the GOP would not open the party to that opportunity. Their prediction was confirmed during the Republican National Convention. They knew the GOP was too entrenched, too full of pride. And they were correct. And now the Dems can lead us to increased collectivism – or worse.

So what is the solution, if we are so fortunate to even have a two-party option in 2014 and 2016? The GOP needs to move away from the moderate-conservative debate and move toward the conservative-libertarian/Tea Party debate, which means having all those extra votes in the room with them. The new debate must squarely focus on balancing the budget, and thus necessarily reducing the scope of government as the critical point of focus. Yes, that will lead to discussing military spending. Fortunately, like all inefficiently run government programs, there is plenty of waste that this new alliance can agree upon and target. Who knows, maybe they can actually find a way to save billions of dollars (e.g., requiring countries like Germany to pay for their own border defense) while at the same time actually shore-up one of the most dangerous international borders in the world – the U.S./Mexico border. Defense spending is different from military spending. That distinction provides lots of room for negotiation.

At least the new alliance will be on the same page about something that actually matters – the greatest threat to our national security and the greatest threat to the survival of Democratic Party dominance – the national debt.

Given that even the magnificent Obama machine still left 40% of Americans at home, not voting on election night, I have hope some of those will join us.

Originally Published on ClashDaily.com

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Smart Economic Planning: An American Oxymoron

I wonder if the Romans knew they were about to fall, before the fall. I wonder how their debates went. “Well Maximus, I disagree, I think we need to pass out more bread and increase the number of lions at the games!” “No, no Commodus, we need to expand our forces even further in order to control more of the world!” “I have it! Perhaps we can do both if we simply trim the amount of gold in the coins.” “Excellent, then we are agreed!”

How do countries/empires fall? Seems like they are either invaded, over-run, and conquered or taken down by their own people. There is another way – their economy collapses first, and then they are invaded or taken down by their own people.

I’m not really seeing an imminent outright foreign invasion of America. Our politicians have actually planned well ahead for that possible threat. I am more concerned about the thing they can’t seem to plan for past the next election cycle. They seem to have extraordinary difficulty preparing for medium or long-term economic problems. Other countries seem to have figured that out (c.f., Sweden, Chile, Norway, even South Korea). As EcoMonitor notes, “The centerpiece of Chilean fiscal policy is a balanced budget rule of a much more sophisticated variety than the one endorsed last week by the U.S. House of Representatives.”

And I think it is in this vein that the Libertarian passion is often misunderstood. One of the quickest roads to the destruction of individual liberty is via economic crisis. During economic crisis or collapse, countries can become more vulnerable to foreign invasion as well as increasing totalitarian practices and influences.

So the real question becomes, how can one foresee economic crisis and what does a government do about it once it is recognized? The problem is getting that question answered from the very people who have apparently been unable to foresee it/defend against in the first place. I’m not sure I trust their answers. Maybe they don’t see it. Maybe they do see it but are afraid to acknowledge it. Maybe that is why the discussion is often avoided.

For example, if the Fed is engaged in unlimited QE and artificially lowering interest rates – is that good for the economy? Why is QE3 and the FED not a topic for the current candidates? Why is there no discussion about how QE3 and our debt may influence the stability of the dollar in the global market? Why is there no mention of China entering into partnerships with multiple countries (Germany, Russia and Brazil to name a few) to use their own currencies instead of the dollar? Analysts said that Beijing has been trying to push for trade to be settled in yuan, rather than in US dollars, as part of its plans to seek a more global role for its currency. “The motivation is to be less reliant on the US dollar,” Sean Callow, chief currency strategist at Westpac, told the BBC.”

Why is there no mention in the MSM or on the campaign trail about Saudi Aramco partnering with China’s Sinopec Group for a new 400,000 bpd refinery in Yanbu (on the Red Sea coast in Saudi Arabia)? “China’s investment in oil infrastructure and refining capacity is unparalleled. And more importantly, it executes a consistent strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon subordinate U.S. relations with the same countries.”

I thought one of the reasons we’re told not to be worried about the dollar and debt is because the dollar runs the world – they have to have the dollar – right? That is why they are willing to buy our Treasuries even when they’re getting little to no return – because the dollar is “safe.” What if they stop buying them?

Here are a few props I’d love to see at the next debate (you can find these and much more at the Federal Reserve Economic Data (FRED) site).

How safe do these look?

I’m not sure but I think that helps to explain why China and Russia are stockpiling gold (Wall Street Journal Market Watch).

So, yes, yes, we get it. Obama must be defeated. But with Romney in office we are still going to not only need less bread and fewer lions, but also less world military expansion and “control” if we hope to keep any value in our coin.

Originally Published on ClashDaily.com

 

Take Your Pick: Default or Hyperinflation

Here’s a fairy tale for you. Like Dorothy and her friends, the American people have made the long, desperate trip and are counting on the Great and Powerful Oz to fix things for them. And like the Scarecrow, when we got there, we got screwed. If you remember, the Scarecrow wanted brains, and the man behind the curtain couldn’t deliver but instead said, “by virtue of the authority invested in me by the Universitas Committee E Pluribus Unum, I hereby confer upon you”… paper! He gave the poor guy a piece of paper. And just like the Fed, the wizard left them stranded as he flew off in a hot air balloon (think mortgage bubble) and couldn’t come back to save them because, “I can’t, I don’t know how it works.” And like the Great and Powerful Oz, Fed wizard Ben Bernanke is probably “a very good man…just a very bad wizard.” Or perhaps the problem is actually with our current monetary concept, “I’m afraid it’s true, there’s no other wizard except me.”

Luckily and with a little help, Dorothy realized that she didn’t need the balloon ride or a wizard to get things back to normal, “you don’t need to be helped any longer, you’ve always had the power…”

And for us, what is that power? That power is “We the People” as expressed through our Congress.

But that poses another problem. That assumes the Congress is willing to click their heels and get to work. I am worried that, given their history of avoiding making tough decisions so as to not look bad, we may be in trouble. According to a number of economists (the ones that don’t follow the hot air balloon philosophy) we may be too late. The perfect storm is already here. The economy is at its worst and another “war” looms. If you want to risk looking bad as a politician, just try tackling those issues – especially if it involves cutting anything.

Congress gave us a glimmer of hope after the House voted to audit the Fed, and the Senate increased the co-sponsors (34 at last count) for their version of the bill recently. On the other hand, were the results of a less publicized vote taken late at night on Friday September 21st. Senator Rand Paul presented a bill to make any foreign aid to Libya, Egypt, and Pakistan contingent upon certain criteria (like protecting our embassies, releasing the doctor who gave us Bin Laden…). The idea was to at least show the world there would no longer be unlimited foreign aid to countries that were not clear allies. The original speech is full of detailed arguments, but this video provides a short synopsis.

Senator Paul knew the bill would fail because the Senate wasn’t willing to confront the two most controversial problems we face – unlimited spending and questionable military entanglements.

“I will probably lose this vote, but if you ask your friends. If you go home and ask your friends should we be sending money to countries that disrespect us, that burn our flag, I think you will find 80 percent to 90 percent of the American people wouldn’t send another penny…That may be why Congress has about a 10 percent approval rating.”

After John Kerry and John McCain teamed-up to argue for continued unlimited aid, the vote was taken and only Senators DeMint, Grassley, Shelby, Toomey, Moran, Lee, Roberts, Risch and Crapo joined with Paul. The vote failed 81 to 10.

Do we really believe Congress will tackle the difficult issues when it comes to debt and military spending?

If you listen to economists like Peter Schiff, Congress no longer has the luxury of kicking the can down the road. He recently delivered a chilling speech at the Mises Circle in Manhattan. “The Fiscal Cliff: How to Spot the Edge” is an easy-to-follow wake-up call about the severity of our economic crisis. His conclusion was that the Fed has become trapped and we are now faced with two options – default on our debt or hyperinflation (click here for the video). He also contends that the solution is to default on the debt before it gets worse. That means doing what had been needed all along – making dramatic cuts in everything. Because no politician wants to face that, then we are at the mercy of inevitable hyperinflation and a worse default. When that happens, that opens the door to incorrectly blame capitalism and invites more government control, regulation, and loss of freedom or worse.

So why is it that politicians from both sides have not addressed the devaluing of the dollar by the Central Bank system (Fed) over the years? In “Twin Demons,” Llewellyn H. Rockwell Jr. explains how this works. The answer is that the Central Bank system is government’s best friend and allows governments to spend money they don’t have, particularly for war. War and debt spending go hand in hand. And once the war is over, the spending continues for social programs. The Central Bank system is confusing to the average citizen and thus allows the government to expand.

“Creating money out of thin air… is preferable for governments, since the process by which the political class siphons resources from society via inflation is far less direct and obvious than in the cases of taxation and borrowing.”

He advocates for a “separation of money and state,” not unlike the pre-fed hard-money Jacksonian monetary theorists of the 1830s who coined the phrase “separation of bank and state.”

So if economists like Schiff and Rockwell are correct, what happens when the Congress actually audits the Fed and brings the Central Bank issues to the forefront of the public debate? How will they handle the decision to either dramatically balance the budget, default on the debt, or risk hyper-inflation? And why would they even tackle this problem openly? As it is now, the Fed is the mysterious man behind the curtain and all monetary evils can be blamed on him.

Originally Published on ClashDaily.com

Surest Roads to Sovereign Suicide

Here’s a quick quiz. Which of the following is the biggest threat to our national security, according to Admiral Mike Mullin, (former) Chairman of the Joint Chiefs of Staff?

  1. Iran
  2. al-Qaeda
  3. Taliban
  4. Our national debt

The correct answer is “D.” Admiral Mullin said, “”Our national debt is our biggest national security threat” on June the 24th, 2010 during a speech he made at a “Tribute to the Troops” breakfast. Does that alarm you? Can you ever remember a top military mind saying something like that?

Here’s another quiz. If you were our enemy planning the demise of the U.S., which of the following would be the best strategy:

  1. Institute economic policies that may appear to help in the short-term but actually involve tremendous risk of leading to an economic event even worse than the 2008 housing-bubble collapse.
  2. Engage in expensive foreign policy strategies that lead to fanning-the-flames of hatred for the U.S., do nothing to actually lead to actual democracy but embolden Islamic extremists to further organize and act-out.
  3. Go to war in the Middle East against an enemy that has allies capable of further destabilizing the U.S. economy.
  4. Place the final decision-making authority of the above in the hands of one or two men, rather than the Congress, at a time when the Congress is not in session.
  5. All of the Above.

The correct answer is “E. All of the Above.”

It is important to search for some answers to these complicated issues. Below are a few of the explanations I have found to be particularly enlightening. Please feel free to add some of your own.

QE3 won’t go to decreasing unemployment. Look just about anywhere on the web, there is a tremendous amount of negative response to the Fed’s decision to move to QE3. For example, Peter Schiff, from the Schiff Report, explains how the Fed’s recent plan to print money, decrease interest rates, and purchase mortgage-backed securities is what got us here in the first place and will be “the final nail in the U.S. dollar” and “a day that will live in infamy.”  Another great explanation is from Reason.com’s Anthony Randazzo. He said, “The fact that QE promotes activities that led to the housing bubble should have stopped its progression as an idea a long time ago, especially since these problems are greater than any gain that would come from this now perpetual pace of money creation.”

The move to Audit the Fed is gaining some steam as more co-sponsors in the Senate are adding their names to Senate Bill 202. As of Sunday evening, there are 32 co-sponsors. If you are interested in joining the cause, you can visit Audit the Fed.

Caroline Glick helps to answer the question posed by Secretary of State Hillary Clinton following the Benghazi attack. Clinton pondered, “Today, many Americans are asking – indeed, I asked myself – how could this happen? How could this happen in a country we helped liberate, in a city we helped save from destruction?” Glick explains how our government, “determined – based on nothing – that the masses of the Muslim world from Gaza to Iraq to Afghanistan and beyond were simply Jeffersonian democrats living under the jackboot. If freed from tyranny, they would become liberal democrats nearly indistinguishable from regular Americans.”

 Pat Buchanan provided a cost-benefit analysis of our involvement in the Middle East in his recent article, Is It Time To Come Home? He notes that, “In this brief century alone, we have fought the two longest wars in our history there, put our full moral authority behind an “Arab Spring” that brought down allies in Tunisia, Egypt and Yemen, and provided the air power that saved Benghazi and brought down Moammar Gadhafi… The cost of our two wars is 6,500 dead, 40,000 wounded and $2 trillion piled onto a national debt that is $16 trillion, larger than the entire U.S. economy. And what in heaven’s name do we have to show for it?”

As Julian Pecquet wrote, Defense Secretary Leon Paneta acknowledged plans to position troops in as many as 18 different locations and expressed concern that extremists would strike, “from positions of weakness,” due to the void left by the fall of dictators in the Middle East. He argued that even with damaging the al-Qaeda leadership, “We always knew that we would have to continue to confront elements of extremism elsewhere as well.” My question is, why, for how long, at what cost, and to what end?

Finally, there is a very well made video (see below) explaining the history of making the war decision and how Congress has increasingly bowed-out and left it to the Executive branch. In the intro, Nick Gillespie wrote, “As deadly and violent attacks on American embassies and consulates in Libya, Egypt, and elsewhere multiply in the Middle East, it’s vitally important to remember that foreign policy decisions – especially acts of war – are not supposed to be the province of one man.”

 As for fighting a war with Iran, the thought of the economic war options China and Russia bring to the table is frightening and should give us pause and even more reason to demand that our politicians get our country’s debt problem in order and stop allowing the Fed to devalue our own currency.

Originally Published on ClashDaily.com

If At First You Don’t Succeed, Buy Buy Again

Peter Schiff, from the Schiff Report, explains how the Fed’s recent plan to print money, decrease interest rates,  and purchase mortgage-backed securities is what got us here in the first place and will be “the final nail in the U.S. dollar” and “a day that will live in infamy.”