Free kibbles

ECONOMY:

Prediction that gold will hit $7,500. Wow. That's the highest I've seen so far.

"“If you go anywhere around the world, most wealthy people have already abandoned the dollar,” he says. “If you look at the commodity complex you can see very clearly that many people around the world have [already] abandoned the dollar as the reserve currency."If something is not done to remedy this country’s tremendous debt load and stop the flood of dollars into the market, the rest of the world will eventually drop the dollar completely for hard assets - such food, he says."

That's why food prices are rising so rapidly.

The last time gas hit $4 per gallon, our economy was good.

"Bottom line – I doubt the country can take $4 gas. It almost dropped the curtain last time – and last time, we had jobs, equity in our homes and 401ks, things to fall back on. Now, we’re facing a repeat with our backs already up against the wall. There’s nowhere to go and no help in sight."

It's going to get very ugly here.

FEDERAL RESERVE:

Gary North says rising food prices have nothing to do with the Fed.

"My point is this: you should pay no attention to anyone who tells you that the rise in food prices has been the result of recent Federal Reserve policies. Commodity prices rose in 2010 despite a policy of monetary deflation by the FED. This is rarely discussed by financial commentators."

But the rise in commodity prices isn't just a matter of dollar inflation, which North also points out.

"It is true that monetary policy affects the business cycle. It is true that QE2 is inflationary. But let us not mistake cause and effect. The increase in commodity prices all over the world ever since early 2009 is the result of simultaneous central bank policies."

And

"There is an ancient error, stretching back to Adam Smith, which says that retail prices rise because of cost-plus inflation. Prices for raw materials rise, forcing up retail prices. This was refuted by Carl Menger, the original Austrian School economist, in 1871. He showed that production costs rise in response to bids by entrepreneurs, who in turn expect rising demand for the output of their enterprises. The prices of economic inputs rise in response to expectations."

Exactly. Investors are fleeing into commodities to protect themselves because they expect future inflation. Why shouldn't we blame that on Bernanke's printing of money including QE2? North is make the technical point that the the money supply hasn't increased because of Bernanke yet, but his policies are still scaring people into commodities.

"If the central bank of some Asian country tries to keep its currency from rising in relation to the U.S. dollar by inflating the domestic currency, this will affect the price of food there. The increased monetary expansion will fuel the boom phase of the boom-bust cycle. This will goose the economy by lowering nominal interest rates. But this effect would not take place if the central bank did not tamper with the money supply or the interest rate on short-term government bonds."

That happens because the US is the world's reserve currency. No foreign central bank wants to see its currency rise compared to the dollar because that means its exports will fall. Sure, the central bank in the foreign country is inflating, but it's doing so in response to Bernanke.

"To blame Bernanke and the FED for the rising cost of food is based on a misunderstanding of the currency markets. It blames a cause which is not in fact the primary cause. The primary cause is rising output – increased bids – in Third World countries that are experiencing economic growth. To the extent that this rising output is based on long-term innovation and capital investment, this is positive. To the extent that it is based on fractional reserve banking and central bank purchases of debt, it is not positive. Rather, it is creating a boom that will turn into a bust, just as it did in the second half of 2008."

A billion people did not get rich in the last six months, but expectations for inflation ballooned in the last six months. I don't buy this as a purely supply and demand issue. North is describing a structural issue that makes food an attractive investment, so the investors who are moving to commodities because they expect inflation are attracted to food. Thus food prices are going up. Just like years ago they were attracted to houses. It is a boom that will turn into a bust.

"Bringing Keynesian policies up to date, the unprecedented increases in the monetary base of the Federal Reserve, the Bank of England, and the European Central Bank, beginning in late 2008, were the cause of the reversal of the collapse of the financial markets. This reversed the recession. This led to a recovery of commodity prices after 2008. These effects had impact on the eating habits of Chinese and Indian consumers. China and India are part of the international economy. But the effect on food prices was indirect. They rose because demand for Asian exports recovered. The people involved in the export trade were able to bid up the price of food."

So it sounds like we found common ground. The central banks are to blame though the effect is indirect. I don't know why North tried to absolve them only to come back there.

"Bernanke is responsible for persuading all of the FOMC members except Hoenig to vote for the expansion of the monetary base. To the extent that this delays the day of reckoning, when capital is finally priced apart from monetary inflation, the FED is responsible for the bubble in food prices. But this increase has been going on for a decade. This is not recent. It has nothing to do with QE2. Yet."

I don't know how North can claim that QE2 has not fed expectations of inflation and therefore a flight into commodities, specifically food because of the structural aspects he describes.

Inflation is here.

"“Note that the PPI headline number is for ‘finished goods’ – stuff that’s ready to be sold direct to consumers. In the category of ‘crude goods,’ the figures are far worse – up 3.3% in January, and up a staggering 15.8% over the last four months.”"

Big time. It's like the 70s, only worse.

POLICE STATE:

Changes in the role of the military hint at plan for martial law.

Cops protect citizens from girl scouts by shutting down girl scout cookie stand. And we pay them to do that.

FOREIGN POLICY:

Sarah Palin supports the standard Washington insider foreign policy of sanctioning the people of Iran, isolating them from trade that would separate them from their government instead of free trade with the people so they won't be dependent on their government.

"Much more can be done, such as banning insurance for shipments to Iran, banning all military sales to Iran, ending all trade credits, banning all financial dealings with Iranian banks, limiting Iran’s access to international capital markets and banking services, closing air space and waters to Iran’s national air and shipping lines, and, especially, ending Iran’s ability to import refined petroleum. These would be truly “crippling” sanctions. They would work if implemented."

Nobody ever explains how it's in our interest to make ourselves the enemy of the Iranian people or anybody else. They also never mention why the Iranian government might want the bomb in the first place: to deter US government aggression, toppling their government and starting proxy wars against them, which they've suffered under for decades.

"And while Palin insists U.S. policy should support “the brave people of Iran” who have openly opposed the dictatorship there, she somehow overlooks the fact that it is the people, not the government, of Iran that would suffer most from the crippling of that nation’s economy. When children, the sick, and the elderly die because they are unable to obtain the food and medicine they need, the blame will fall on the U.S. sanctions, not the government in Tehran."

I'm glad to see this author point this out.

Here's another great point about the revolutions in the Middle East that is being largely ignored by the mainstream media:

"But it is not hunger for democracy that drives them. Democracy, autocracy, theocracy, monarchy – right, center, left – it is mostly a gut issue…an empty gut issue. When the money stops flowing down to the man in the street, the blood starts flowing in the streets. It’s a simple equation. A few at the top have too much, and too many others have too little."

Mubarak had been in power 29 years. What changed? Rising food prices. These revolutions are driven by economics, not ideology. As these economic problems spread, we can expect protests and revolution to spread with them. And economic collapse is coming here.

POLITICS:

Because people vote and because of bureaucracy, protests against the government like we see in the Middle East are unheard of. Vote creates an illusion of legitimacy to government that enables representative governments to be more oppressive than dictatorships or monarchies. If you think I'm wrong about how oppressive the US government is, take a look at the incarceration rate and how much wealth it loots from us.

Yet another article advocating freedom over democracy.

Lew Rockwell exposes the fraud about the polarized political parties. They agree on everything except how to split the wealth they steal from us.

Rothbard talks about Soviet foreign policy. He points out that at the founding, Soviet communists had an almost peace at any cost foreign policy until WWII.

"During World War II, the United States, Britain, and Russia – the three major Allies – had agreed on joint three-power military occupation of all the conquered territories. The United States was the first to break the agreement during the war by allowing Russia no role whatever in the military occupation of Italy. Despite this serious breach of agreement, Stalin displayed his consistent preference for the conservative interests of the Russian nation-state over cleaving to revolutionary ideology – by repeatedly betraying indigenous Communist movements.In order to preserve peaceful relations between Russia and the West, Stalin consistently tried to hold back the success of various Communist movements. He was successful in France and Italy, where Communist partisan groups might easily have seized power in the wake of the German military retreat; but Stalin ordered them not to do so, and instead persuaded them to join coalition regimes headed by anti-Communist parties. In both countries, the Communists were soon ousted from the coalition. In Greece, where the Communist partisans almost did seize power, Stalin irretrievably weakened them by abandoning them and urging them to turn over power to newly invading British troops."

Given Stalin's infamous paranoia, I wonder if his motivation wasn't so much "the conservative interests of the Russian nation-state" or his personal interest.

"Even in the other Eastern European countries, Russia clung to coalition governments for several years after the war, and only fully Communized them in 1948 – after three years of unrelenting American Cold-War pressure to try to oust Russia from these countries. In other areas, Russia readily pulled its troops out of Austria and out of Azerbaijan."

He seems to be laying the groundwork to claim the US government was the aggressor in the Cold War, not the Soviets, and that the Soviets only took up aggression of their own in response.