New Rule: neomercantilists, neoconservatives, and statists are no longer allowed to call themselves "free marketers." People who call themselves free marketers such as Bush, Paulson, Greenspan, and Bernanke are the primary threat capitalism faces. These false prophets of capitalism are the greatest friends that proponents of socialism have.and
Under Bush's watch, private businesses have been the recipients of corporate welfare, sometimes leading to nationalization, on a scale never before seen in American history.
Mises scholar interprets Fed chairman and enemy of free markets Bernanke's remarks about stabilizing the financial system to mean further nationalizing banks. I think Ben Bernanke may have surpassed Al Gore as the most dangerous man in the world.
In short, while speaking in London recently, he cautioned that the proposed funds for the economic stimulus plan — supported by the robbing of American citizens— are "unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system." This means he is priming for a request for more government funds in exchange for government equity positions in the banks.
It is unclear whether this type of scare tactic will ever stop working, but if the recent past is any indicator, Mr. Bernanke will get his wish for more funds. Additionally, Bernanke is calling for global central-bank cooperation. This can be construed to mean global inflation in concert, the bank controllers reaping the benefits while the dollar and other centrally planned currencies are inexorably plundered of purchasing power.Anyone who has studied free-market economic principles even briefly will have strong concerns regarding these statements. At a deeper level, one hopes that common sense would make it clear to even those who have not been fortunate enough to learn about sound-money principles that these ideas propose a dangerous path.
Perhaps an even bigger problem, however, is that Mr. Bernanke conveys these ideas while professing to be a strong believer in the free markets! It is unclear how this should be taken: is it an outright lie, or does he expect that the average citizen is not capable of understanding the difference between a free market and what we have instead? Indeed, is it Bernanke's wish that the average citizen not understand? This confusion on the citizens' part is, after all, what gives those in power the ability to stay there.
It is hard to imagine a more blatant push towards nationalization of the banks (already a legalized cartel). Further guarantee of the debt of financial institutions — already overburdened with high-risk debt in exchange for the government taking equity positions — is preposterous. The notion of privatized profits combined with losses guaranteed by the taxpayers is usually not what comes to mind when someone touts their strong beliefs in a free-market economy.
The Fed already has more power to derail the US economy than the government. It sounds like Bernanke is laying the groundwork for a world-wide Fed. This would be a world shadow government.
Unfortunately, the general idea portrayed by the mainstream media is that the free market has failed and, as Mr. Bush remarked recently, must be abandoned in order to be saved.
"Faith in free markets can only be established after showing the world what can be accomplished by having true freedom in the marketplace to begin with."In this light, Mr. Bernanke's conclusion to his recent remarks, reaffirming his strong belief in the free markets, is ludicrous. His actions — supported by the current administration and sure to be supported by the following administration — speak so much louder than his words. But it seems the vast majority do not hear or understand — believing, as they've been told, that our economy is failing because of insufficient regulation. This open attack on capitalism and the corresponding lack of understanding of the truth is a great hindrance to the struggle for liberty.
It is long past time for this to change. As sound economic policies are fundamental to the ideals of freedom, the fallacies inherent in the doctrine preached by Mr. Krugman and Mr. Bernanke, and perpetuated by President Bush, must be brought to light and dispelled. For real change to come to America, this is imperative.
Faith in free markets can only be established after showing the world what can be accomplished by having true freedom in the marketplace to begin with. Mr. Bernanke would do well to keep this in mind as he proposes ever more socialistic measures to correct problems induced by the very organization he is charged to lead.
Showing how the Fed is actually more powerful than the government in affecting our economy, Mises scholar theorizes that the Fed is secretly buying up the toxic assets that TARP originally intended to buy by printing money, freeing the TARP money to nationalize banks. This guy thinks we're not only paying the price for the Fed's irresponsible monetary policy of this decade, but we're about to pay the price for the irresponsible monetary policy of the entire Greenspan era (20 years). He explains how the Fed artificially drove down gold prices with strategically timed gold dumps to reward short sellers and wipe out long investment in gold in order to disguise inflation. Author suggests buying gold along with some other investment advice.
The Fed's risk transfer to the taxpayer is only worsened by its lack of transparency in doing so. The $2 trillion in lending is going to unknown places in exchange for unknown collateral. This leads me to believe the Fed has been busy buying up all of the toxic assets held by banks. This explains why it let the congressional bailout funds be used for equity purchases and not toxic debt. It hides the huge toxic-asset purchases — which it paid for with printed money — in its balance sheet's opacities. Bloomberg recently made a Freedom of Information Act request for details on bailout fund appropriations, but the Fed refused to comply and is being sued. This secrecy by the Fed in its appropriations of taxpayer money and the most-likely worthless collateral it exchanged it for represents inflationary risks the Fed is attempting to conceal.
The Fed's balance sheet suggests it has been cranking the printing presses like mad. Fed liabilities have expanded to $2.26 trillion, up over 140% since September. However, currency in circulation is up only 7% in that same time period. Where is this "trapped" $1.37 trillion? The answer is it's confined in temporary cash pools, whether in the Supplementary Financing Account or excess reserve deposits or in time-sensitive T-bills. The Federal Reserve seems to be sequestering all of this cash to buy time for the Treasury to finish its funding activities.
Bernie Madoff is well recognized as the perpetrator of the biggest Ponzi scheme in history, at $50 billion. I beg to differ with that assessment. The United States has financed debt with debt since the late 1980s, when its external debt/GDP broke the 0 mark. Since then, it has risen to over 100% of its GDP (which in itself is quite artificially inflated because of manipulated hedonics-adjusted inflation figures), and now stands at $13 trillion. That is what's called a debt bubble. Bernie who?
But the debt bubble appears ready to collapse. The pyramid scheme is finally running out of investors, and many Treasury ETFs (like SHY, TLT, IEF, and IEI) are showing classic parabolic topping patterns and the next few weeks should confirm or deny my suspicions. Interest rates are at an obvious floor at zero, so there is nowhere to go but up. That means bond prices have nowhere to go but down, and the falling prices will cascade into more selling until the debt bubble deflates and all the spending is financed by quantitative easing. Judging by gold backwardation (discussed later) and the bearish charts on the bubbly debt ETFs, I think the debt monetization and dollar devaluation will begin within the next six weeks. The ProShares UltraShort Lehman 20+ Year Treasury Bond ETF (TBT) and ProShares UltraShort Lehman 7–10 Year Treasury Bond ETF (PST) are good ways to play this debt-market collapse.
With an insolvent public and no foreign demand for Treasuries, the Federal Reserve will monetize debt to finance its continued bailouts and economic stimulus. This is purely created capital pumped right into the system. This is not anything new for the Fed — for the past two decades, it has kept interest rates artificially low and created massive artificial wealth in the form of malinvestment and debt financing. In the past, the Fed has been able to funnel the inflationary effects of its expansionary monetary policy into equity values with its low rates, which discourage saving, causing bubble after bubble. The excess liquidity was soaked up by the stock market, which gave the appearance of economic growth. With inflation being funneled into equity and real estate over the last two decades, illusory wealth was created and the public remained oblivious to the inflationary risk and the great disparity between real returns and nominal.
Now that the "artificial-wealth bubble" of the past two decades is finally collapsing, one of two scenarios can occur: capital destruction or purchasing-power destruction. Capital destruction occurs when the monetary supply decreases as individuals and institutions sell assets to pay off debts and defaults and savings starts growing at the expense of consumption, otherwise known as deleveraging. This is deflation and the public immediately sees and feels its effect, as savings accounts, equity funds, and wages start declining. Deflation serves no benefit to the Federal Reserve, as declining prices spur positive-feedback panic selling and bank runs, and debt repayments in nominal terms under deflation cause real losses.
Purchasing-power destruction is much more desirable by the Fed. Its effects are "hidden" to a certain extent, as the public doesn't see any nominal losses and only feels wealth destruction in obscure price inflation. It breeds perceptions of illusionary strength rather than deflation's exaggerated weakness. The typical taxpayer will panic when his or her mutual fund goes down 20% but will probably not react to an expansion of monetary supply unless it reaches 1970s price-inflationary levels. In addition, the government can pay back its public debt with devalued nominal dollars, which transfers wealth from the taxpayers to the government to pay its debt. Inflation is essentially a regressive consumption tax, which the government wants and the Fed attempts to "hide." Not only is the Treasury's debt burden reduced but the government's tax revenues inherently increase.
This gold-price expansion, set off by the massive short squeeze, will continue until gold prices reflect gold supply and Federal Reserve liabilities in circulation. The "intrinsic" value of gold today (called the Shadow Gold Price), calculated dividing total Fed liabilities by official gold holdings, is about $9,600/oz, compared to the actual spot price of around $850/oz today. This gold-price calculation essentially assumes dollar-gold convertibility, as is mandated by the US Constitution and was utilized at various periods of American history.
I leave you with this, a quote from Fed Chairman Ben Bernanke about President Franklin D. Roosevelt's 1934 Gold Reserve Act, which was the greatest theft of wealth I'm aware of in American history:
The finding that leaving the gold standard was the key to recovery from the Great Depression was certainly confirmed by the U.S. experience. One of the first actions of President Roosevelt was to eliminate the constraint on U.S. monetary policy created by the gold standard, first by allowing the dollar to float and then by resetting its value at a significantly lower level … With the gold standard constraint removed and the banking system stabilized, the money supply and the price level began to rise. Between Roosevelt's coming to power in 1933 and the recession of 1937–38, the economy grew strongly.
My predictions: gold at $2,000/oz by the end of the year and $10,000/oz by 2012 and silver at $30/oz by the end of the year and $130/oz by 2012.
These 3 essays together paint a picture of conspiracy between the Treasure and Fed to nationalize banks and create a supra-national central bank. If the people go along with this tremendous socialization of finance at the world level, basically created a world shadow government much like the Fed acts as a shadow government now, don't be surprised if speculators and short sellers are soon classified as terrorists, much like drug dealers have been.
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