QE-4 And The Monetizing of Practically All New Debt

The Federal Reserve made the expected announcement of QE-4  today less than three months after QE-3 was announced. QE-4 is an extension of a previous program called Operation Twist:

Under the "Operation Twist" program that will expire at the end of the month, the Fed was buying $45 billion in longer-term Treasuries with proceeds from the sale of short-term debt. The new round of government bond-buying it announced on Wednesday will be funded by essentially creating new money, further expanding the Fed's $2.8 trillion balance sheet.   

This 45 billion dollars a month purchases of treasuries is in addition to the 40 billion a month purchases of mortgage backed securities for a total of 85 billion dollars being printed each month. This figure is not set in stone and could grow or shrink in the coming months according to Bernanke. The stimulative effects of QE are lessening with each new round. The markets went up massively after the announcement of QE-1, less after QE-2, even less after QE-3, and negatively for QE-4.

Zero Hedge points out the startling fact that the Federal Reserve will be monetizing practically all net new debt:

Three months ago, as part of our ongoing explanation of what happens next to the Fed's balance sheet (which is now established as official canon in advance of the December 12th FOMC, when Bernanke will effectively announce QE4 consisting of $40 billion in MBS and $45 billion in unsterilized TSY purchases as we predicted the day QE3 was announced), we said that "the Fed will continue increasing its 10 Yr equivalents by roughly 12% (of the total market) per year, for at least the next 3 years, at which point it will own 60% of the entire Treasury market. It means that the Fed will monetize all gross long-term issuance every year for the next 3 years." Most looked at the bold sentence without it registering just what it means. Perhaps, now that the "serious" media has finally taken on the topic of applying a calculator to the one driver of all marginal risk demand, it will register a little better. 

In a Bloomberg story titled, appropriately enough "Treasury Scarcity to Grow as Fed Buys 90% of New Bonds" we read that "the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co." Actually that's incorrect and it is more like 100%. What is however 100% correct is what the bolded means in plain language: it is now accepted that the Fed will outright monetize all gross US issuance. Let us repeat this sentence for those who just had flashbacks to Adam Fergusson's "When money dies." The Fed is now monetizing practically all net new debt.  

Other central banks of the world have stated their intentions to print money on a massive scale. According Zero Hedge the incoming head of the Bank of England is signaling that he wants to print a lot more money:

Sure enough it was only a matter of time before Carney showed his true colors, and we were not at all surprised to read last night that the central banker, largely misperceived modestly hawkish, has done not only a full U-turn but is already suggesting the BOE not only resume QE but hit the pedal to the medal to an extent not even seen at the Fed, by pushing for NGDP targeting. Which is nothing but a fancy term for infinite monetary easing.

The most-likely-next prime minister of Japan, Abe, has said that he wants the Bank of Japan to implement unlimited monetary easing:

Abe, who heads the largest opposition party, also said he would appoint as the central bank's next governor someone who agrees with his proposed annual inflation target of 2 to 3 percent. BOJ Gov. Masaaki Shirakawa's term of office is set to expire next April.

"We would carry out necessary public investment and have the BOJ purchase construction bonds to forcibly put money in the market," [...] We would take fiscal policy steps as well as monetary policy measures to overcome deflation at an early time." [...]

Forcing the BOJ to buy government bonds has been long considered taboo because the move caused hyperinflation and devastated Japan's economy immediately after the end of World War II.[...]

Prime Minister Yoshihiko Noda has criticized Abe for threatening to undermine the BOJ's independence, telling a news conference after Friday's Lower House dissolution, "If a government sets specific monetary policy measures and goals . . . there could be problems in terms of the central bank's independence."

Last week, Abe said the BOJ should fall in line with an annual inflation goal of 2 to 3 percent that the LDP would set if it wins the Dec. 16 election and forms the next government. The bank's current target rate is 1 percent.

The BOJ should provide unlimited liquidity to achieve a 2 to 3 percent inflation target if the LDP is returned to office next month, and its governor should be held accountable if the bank misses the goal and he is unable to adequately explain the failure, according to Abe.

An LDP government would urge the BOJ to implement "unlimited monetary easing, he said Thursday, stressing the bank's recent expansion of its asset purchase program is not sufficient to boost the economy and end deflation. [bolded is my doing]

According to Kyle Bass Abe is going to detonate a bomb on the economy:

Japan is about to "detonate" a "debt bomb" and will be forced to massively devalue its currency, Kyle Bass says.

During an interview with University of Virginia business school professor: Ken Eades, Kyle Bass argues that Japan is already in a crisis, and that the possible election of Shinzo Abe next month will set off a chain of events that will result in a devaluation of the Yen and treasury yields skyrocketing. "In the next 12 to 18 months, I think you're going to see a move in their rates. Basically Japan is entering its final 'checkmate' phase of the chess game."

 As mentioned in a previous post on QE-3, the European Central Bank which was given the go-ahead by the German High Court to print unlimited amounts of money.

The central banks of the world are coordinating a massive money printing program on a global scale that will almost certainty lead to massive inflation and wealth destruction. A research report that is based on a cyclical view of economic events by Seymour Pierce, a London based investment bank, makes the case that the global economy is headed for a currency crisis and a wave of massive inflation:

Excessive monetary stimulus and low interest rates create financial bubbles. Central banks are creating the ultimate bubble in money itself, as they fight the downward leg in this Long Wave cycle. This is the biggest debt bubble in history. Each time deflationary forces re-assert themselves, offsetting inflationary forces (monetary stimulus in some form) have to be correspondingly more aggressive to keep systemic failure at bay. The avoidance of a typical deflationary resolution of this Long Wave is incubating a coming wave of inflation. This will not be the conventional “demand pull” inflation understood by most economists. The end game is an inflationary/currency crisis, dislocation across credit and derivative markets, and the transition to a new monetary system , with a new reserve currency replacing the dollar. [...]

Unlike earlier cycles, we are in a world of UNLIMITED CREDIT CREATION. Central banks will not permit a debt deflation under any circumstances, which would likely bring on systemic failure at this point in any case. Keeping the bubble inflated is still taking trillion dollar deficits, but has recently been supplemented by open-ended money printing (QE), not just in the US, But by other central banks in the developed world. Apart from brief pauses, this process will continue.

This is creating the ultimate financial bubble, in MONEY itself, as every time deflationary forces re-assert themselves, the offsetting inflationary forces (monetary stimulus) have to be more aggressive. This is not sustainable and is incubating a coming wave of inflation, which will eventually explode in currency crises.

The report is about 75 pages long, but it is worth skimming through. It makes the interesting point that the U.S dollar is in the process of loosing its status as the world's reserve currency. It points out what this new reserve currency will be:

When inflation leads to more serious currency crises, we will see a “reset” and the transition to a new monetary system. High level “insiders”, such as the heads of the People’s Bank of China and the World Bank have signaled likely elements of the new system. The dollar will be replaced as the reserve currency with a currency basket based on an expanded version of the IMF’s Special Drawing Right (SDR). The SDR is a reserve asset held by central banks which currently consists of the US dollar, Euro,Yen and Pound. In the new system, it is likely to be expanded to include the Yuan and possibly other BRICS currencies, and have some indirect backing by gold (at a much higher price).

This would be bad for America. I have read that the U.S dollar status as the world's reserve currency is one of the reason that the government has been able to service its debt at historically low cost. If the dollar looses its place this could increase the cost of servicing the debt to an unsustainable level. Even if the dollar maintains its status, if interest rates go back to their historic levels the cost of servicing the debt will increase dramatically. This fact will greatly reduce the Fed's ability to tighten monetary policy by raising interest rates when the time comes.

In conclusion, with the announcements of new rounds QE being announced closer and closer together, the fact that QE-3 and QE-4 are open-ended, and the lessening stimulative effect each new round is having coupled with the announcements by the central banks of the world of their intentions to print massive amounts of money, it seems as if the end of the tracks for the global economy is not that far  ahead. Economic events are accelerating at a very rapid pace. Whenever individual nations has enacted and carried out economic policies, monetizing debt, that are currently being or soon to be carried out by the central banks of the world, economic depression and massive inflation have followed. I can't predict the future, but from everything I have read it seems as if something big in the global economy is going to happen fairly soon.

A Conservative Farewell Speech

No, I'm not giving a farewell speech.  The fight goes on, even if it's conducted from the marshy wasteland on the fringe of the kingdom.

Here is the farewell speech of the greatest conservative politician of my lifetime.  The speech was given in 1991, at the end of her 12 years as PM of the United Kingdom and one year before the formation of the European Union.

She used her two terms as PM to turn the UK from a socialist basket case (in 1979, the UK's standard of living was on par with East Germany's), to an economic powerhouse, by standing up to the unions and capably advocating the Free Market system.  Though the UK has diverged somewhat leftward since her time, it is still in far better shape than she found it and the British overall are still maintaining their independence from the EU. 

In this speech she shows clearly and simply what liberals want, and in so doing shows the ridiculousness of their desire.  She also delivers a parting warning about the danger of the EU that is remarkably prescient.

We need a Thatcher badly now, as Americans have shown that they prefer the results liberalism provides rather than conservatism.


2012 Election Analysis

Well, I'm too cheap to buy Photoshop and Microsoft Paint sucks, so I'm just not going to post the goofy photo I was trying to make.  But, it woulda been so awesome!

Anyway, Obama wins with 51% (~62 million) of the popular vote to Romney's 48% (~59 million), and that managed to translate into 332 to 206 Electoral Votes.  So many different things to consider and discuss that I don't know how to arrange things, so the post may be a little jumbled.

First some interesting data: the overall popular vote was down from 2008, even though there are more registered voters now.  Obama got 10 million fewer votes than he did in 2008, Romney got 3 million fewer votes than the pathetic 2008 Republican nominee McCain did.  McCain's vote total would have beaten Obama this year.  More data:

Ethnicity/Gender Ratio:
White Men -  Romney 64%  Obama 35%
White Women - Romney 57%  Obama 42%
Hispanic Men - Obama 65%  Romney 34%
Hispanic Women - Obama 76%  Romney 23%
Black Men - Obama 87%  Romney 12%
Black Women - Obama 96%  Romney 3%
Asian Total - Obama 73%  Romney 26%

Generational Ratios:

Marital Ratio:
Married Men - no data
Married Women - Romney 53%  Obama 46%
Unmarried Men - Obama 56%  Romney  43%
Unmarried Women - Obama 67%  Romney 32%

Dem-Rep-Ind Split:

Democrat Ratio: 92% Obama   7% Romney

Republican Ratio:

Independent Ratio: 50% Romney    45% Obama

If anyone knows of a good website that can fill in the missing information above, let me know and I'll update the article.  I thought I would be able to find the age breakdowns, but haven't. 

I figured Romney would win a relatively close election.  I figured the partisan split would be something like halfway between the electorate of 2008 and that of 2010.  Obamamania could not still exist.  The partisan split of 2008 was DEM +7, that of 2010 was I think REP +1, but it might have been DEM +1.  Regardless, I expected DEM +3.  With Independents breaking for Romney, I figured this would give Romney the popular vote closely, though the Electoral Vote was going to be tough.  I figured enough swing states would fall Romney's way to give him the victory. 

In the campaign, Obama campaigned towards his base and Romney, after the Primaries, campaigned towards the middle.  This indicated to me that Romney had the advantage, that Obama was desperate to have to campaign hard for the base.  However, the polls show that that campaign paid off for him.

As The Huffington Post says:

As the exit polls showed, Obama won the popular vote despite losing to Romney handily among independents. Independents preferred Romney to Obama 50 to 45 percent. This was only the second time in the last 10 elections that the winner lost the independent vote, and in the only other time it occurred the margin was much closer, as Bush lost independents to Kerry by just 2 points, 51 to 49 percent.

The reason Obama was able to overcome this deficit was that many more Democrats than Republicans turned out to vote. The Democrats held a 6-point advantage over Republicans among voters in 2012, down only a single point from 2008. Since Democrats supported their nominee by a whopping 92-7 margin, Obama was able to overcome losing independents, even by a significant margin.

Even though we saw no Obamania like we saw in 2008, the Democrats turned out in force while Republicans tended to sit on their hands, even though anyone paying attention knew how important this election was. 

Pollsters and other analysts focused on a gender gap, that Obama had a large advantage with women that Romney wasn't going to be able to overcome, however, the results don't quite bear that out.

As The Atlantic says regarding the gender gap:

In other words, if you want to place a bet on how someone will vote and you have to choose between knowing that person's gender or their race/ethnicity, you're better off learning their race or ethnicity. That marker is more telling.
 

The one critical statistic above is the race of the voter.  If I had the age statistics, that may be another critical factor, but, as with gender, it probably is not as telling as race.  The marital status probably ties more into the fact that Whites have a far higher marriage ratio than other ethnic groups (Asians probably are high too but still too small a percentage of the population to affect the marriage ratio).

I'm not going to take the time to produce the poll results, but on questions of who would best take care of the problems important to voters, Romney was leading on almost every catagory, including the (by far) most important question of the Economy.  But, rather than vote for the person they thought would take care of the problems, minorities voted strongly for the candidate who was Not White.  Though Whites voted strongly for Romney, they weren't as unified a voting bloc as the minority groups were.  Even Asians, who get screwed worse even than Whites on Affirmative Action policies  and would also suffer even worse on Obama's redistributionist policies voted overwhelmingly for the Affirmative Action president. 

A President who took a recession and made it worse and longer with his Socialist policies, who advanced policies that weakened America and its allies around the world (his Administration's feckless handling of Benghazi is a chief example), and who did everything he could to exacerbate racial tensions in America was re-elected. 

It could be argued, probably rightly, that Blacks and Latinos would consider the redistributionist policies of the president to be in their best interest, but this wouldn't hold for Asians who have a higher standard of living than Whites.

But, it is not just the extreme racial vote that did Romney in; as stated above, the vote total for Romney is down from that of McCain.  How can that be, when the energy for Romney seemed to be way higher than it was during the perfect Democrat storm of 2008?  That is the thing that I really do not understand: the Republican or White or whatever voters that sat on their hands this election.  I don't know how someone could have been motivated to vote for McCain in 2008 and not be motivated to vote for Romney in 2012. 

An evenly-matched electorate, in which Independents favored Romney, should have given the election to Romney.  Instead Conservatives stayed home.  Why?

Why did we re-elect this complete failure of a President?

Because what the majority of Americans want now is free stuff from the Government, and we have a government eager to hand it to them.  This to me seems to signal the end of a functioning Democracy.

Time to build a bunker

It's not that the government wasn't already eager to give free stuff to Americans, it's that, faced with the fiscal cliff that we are, and having a choice with Romney/Ryan that at least offered some hope of facing it realistically, Americans chose to keep getting more free stuff and screw everything else.

Uncharted Terrority

QE-3 to infinity, creating money out of thin air, was announced on the thirteenth of this month:

The Federal Reserve announced plans to unleash more stimulus Thursday, in its third attempt at a controversial program to rev up the U.S. economy.

The policy, known as quantitative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month. The end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months.[...]

Meanwhile, the Fed will continue its existing policy known as Operation Twist. Together the two programs will add $85 billion in long-term bonds to the Fed's balance sheet each month.

  QE-3 is "open-ended". It will continue until the unemployment rate drops to an unspecified number. (It is interesting that one of the driving forces of hyperinflation in the Weimar Republic was the desire to prevent massive unemployment.) The Federal Reserve is now buying around 74 percent of all new debt issued by the Treasury Department.

Ron Paul's stance of QE-3:

To me, it is so astounding that it does not collapse the markets. [Bernanke] said, ‘We are in very big trouble. We are going to do something unprecedented and we believe it will not hurt the dollar.’ [...] It means that we are weakening the dollar. We are trying to liquidate our debt through inflation.[...] I think the country should have panicked over what the Fed is saying that we have lost control and the only thing we have left is massively creating new money out of thin air, which has not worked before, and is not going to work this time.

According the Dallas Fed President:

The Federal Reserve's decision to jolt the economy a third time with monetary stimulus measures won't help the country much but could stoke inflationary pressures down the road, said Dallas Fed President Richard Fisher, a noted inflation hawk.[...]

Such a policy tool — known as quantitative easing but dubbed by many as merely printing money out of thin air — follows two similar rounds in the past that have flooded the economy with trillions of dollars with the hope of encouraging investing and hiring.[...]

It will come as no surprise to those who know me that I did not argue in favor of additional monetary accommodation during our meetings last week. I have repeatedly made it clear, in internal FOMC deliberations and in public speeches, that I believe that with each program we undertake to venture further in that direction, we are sailing deeper into uncharted waters,' Fisher told the Harvard Club recently, according to prepared remarks of his speech.

Despite all the models and resources at the Fed's disposal, uncertainty is a very difficult factor to plug into assumptions when forecasting the economy.

'The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course,' Fisher said.

'And nobody—in fact, no central bank anywhere on the planet—has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank—not, at least, the Federal Reserve—has ever been on this cruise before.'

The Federal Reserve adheres to a dual mandate to keep prices stable and unemployment rates optimal.

The Fed sets monetary policy by targeting inflation rates to 2 percent, but many market experts say the latest stimulus policy reflects the Fed's desire to prioritize the unemployment portion of its mandate way above keeping inflation rates in check.

In other words, the Fed is so willing to keep its foot on the gas pedal and risk seeing inflation rates rise above target levels in order to see unemployment rates fall that the country is steaming ahead deeper into unfamiliar waters.

'Not only will they tolerate higher inflation, not only will they wish for higher inflation, but they actually may target higher inflation,' Mohamed El-Erian, CEO of Pimco, manager of the world’s largest bond fund, told CNBC.

Central banks elsewhere have rolled out similar measures, flooding the world with inflation-fueling liquidity.

'This is true for all central banks — the (European Central Bank), the Fed, the Bank of Japan, the Bank of England. We are so deep into unfamiliar territory, so deep into experimental mode, that we don’t know what the consequences will be,' El-Erian said.

'Whoever comes afterward will have to clean up the mess.'

On the point that  "central banks elsewhere have rolled out similar measures, flooding the world with inflation-fueling liquidity.",  Germany's Constitutional Court opened up the flood gates in Europe that will unleash unlimited money printing:

Germany's Constitutional Court gave a green light on Wednesday [September 12th] for the country to ratify Europe's new bailout fund, boosting hopes that the single currency bloc is finally putting in place the tools to resolve its three-year old debt crisis.

But the strings it attached to its endorsement of the ESM and a separate European pact on budget rules were less onerous than many had feared.

European Central Bank (ECB) President Mario Draghi announced plans last week to buy 'unlimited' amounts of government bonds issued by stricken euro states like Spain and Italy in order to reduce their borrowing costs.

That plan fuelled optimism in the markets, but it was contingent on the ESM coming into force. Following Wednesday's ruling, German Finance Minister Wolfgang Schaeuble said he expected the rescue fund to be operational within weeks.

 Also Japan has decided to act by printing more money, something they have been doing for a very long time, in response to QE-3:

The Bank of Japan announced Wednesday that it would expand its asset purchase program by 10 trillion yen in an effort to stimulate its economy as global demand slows.
The announcement comes less than a week after the U.S. Federal Reserve announced its latest stimulus plan, and two weeks after the European Central Bank revealed its new bond-buying program.

Apparently this is not enough, "The Bank of Japan is ready to expand monetary stimulus again even after this month's action and may ponder new steps if necessary, board member Takehiro Sato said, warning of global uncertainties that could push the economy into recession".

Printing money devalues the currency of the nation that engages in such actions, and that in turn gives it an unfair economic advantage against other nations. This forces other nations to intervene and devalue their currency. It is a global race to the bottom.

What does all of this mean? This is very spooky stuff. The global economy is based on debt. Nations have been spending money that does not exist, and paying for this with creating money out of thin air for some time now. It is very much like a con artist that gets a loan and pays for that loan with another loan and so on. The game is rapidly approaching the end. The very next step for the Federal Reserve and just about every other central bank in the world is 100%, straight-up, Weimar Republic, Zimbabwe type money printing. This means that massive world-wide inflation, or some economic disturbance, is possibly not that far off. As the Dallas Fed President said central banks "are sailing deeper in uncharted waters". Now is the time to educate yourself and to prepare to avoid finding yourself in the situation found below. 

As noted in the book When Money Dies:

In hyperinflation, a kilo of potatoes was worth, to some, more than the family silver; a side of pork more than the grand piano. A prostitute in the family was better than an infant corpse; theft was preferable to starvation; warmth was finder than honor, clothing more essential than democracy, food more needed than freedom.

Paul Ryan The Fiscal Warrior

Looks like Mitt Romney has chosen a conservative that is going to fight to massively reduce the size of government and tackle entitlement reform. The election is now about the big issue of reducing the size of government. This is big news. The coming economic crisis has been avoided thanks to a bold move by Mitt Romney to pick a radical small government politician that is going to make things happen.

Of course there is always more than the shiny facade pimped by party loyalists and for those that have bothered to investigate Ryan's record the picture becomes a bit murkier.
For starters there is the very pressing and disturbing votes of the Bush legacy. Specifically Ryan's support of: TARP, Medicare Part D and No Child Left Behind (NCLB). All three are wonderful examples of how the Republican party only fights for fiscal sanity when they are a minority party, the second they become the majority they expand Government programs at an alarming rate. NCLB is a monstrosity that gave the Department of Education teeth, Medicare Part D tacked on hundreds of billions (half a trillion as of today per year) to the debt and was passed in the House in a manner very reminiscent to ObamaCare and TARP is an egregious disregard of the free market system and should make any citizen sick to their stomach.[...]

In order to understand that Ryan's budget is nothing more than smoke and mirrors we turn to a detailed analysis of the budget. This interactive analysis lets you compare and contrast the Ryan and Obama budgets side by side and examine the projects for spending. [...]

First we got Medicaid. Clearly the difference is notable and appreciable. In fact based on this image alone it would almost invalidate all my criticism of the Ryan budget. [...]

Next we have Medicare. What's this? Apparently Grandma is not going off a cliff, instead it would appear that she is being pushed up a hill! Ryan's plan spends MORE on Medicare than Obama.[...]

Next up is Social Security. No, it is not a graphical glitch. Ryan's plan does absolutely nothing for Social Security. Yet conservative websites and pundits swoon over Ryan like he is the next coming of Barry Goldwater, more on that later.[...]

Lastly, the national debt. This is probably not surprising, but after all the hoopla and all the bravado the end result is that the speed at which our fiscal apocalypse arrives is merely slowed down by a teeny weeny bit. [...]
The answer is quite simple. Romney and Ryan represent exactly the same problem even if one appears to be a moderate and the other appears to be an epic fiscal warrior. The Republican party fights for and pushes through the status-quo. The images you see up above and the Ryan record is the status-quo. No doubt about it.
Yet Romney is counting on the ignorance of Republican base to run with the facade of Ryan's conservatism. If that illusion holds then Ryan's image will invariably boost Romney's own image as many will view Romney's decision as courageous and bold despite Obama's willingness to distort Ryan's budget. In other words, you are witnessing a most fantastic and glamorous circus. A bad Hollywood movie, except that ending will be quite real and not something you can pause or turn off.[...]

However we all know what happens when politicians threaten the sacred cows of entitlement spending. They get destroyed. Barry Goldwater was America's last libertarian-Republican candidate and he was obliterated because he dared to speak up against Social Security. Barry's loss paved the way for the great society and the invention of Medicare and Medicaid. How ironic. Poll after poll shows that Americans refuse to accept changes to entitlement programs, despite their clamoring for someone to fix our debt.

 They had me fooled for a little bit in thinking Paul Ryan was a small government conservative that is going to reduce the debt and reign in big government. 

222,000,000,000,000

 The actual U.S debt is 222 trillion dollars:

Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade.
In the course of that year, the U.S. government’s fiscal gap -- the true measure of the nation’s indebtedness -- rose by $11 trillion. [...]

The U.S. fiscal gap, calculated (by us) using theCongressional Budget Office’s realistic long-term budget forecast -- the Alternative Fiscal Scenario -- is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference -- this year’s true federal deficit -- is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.  

The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.[...] 

Part of the fiscal gap’s growth reflects changes in policy, such as the Bush and Obama tax cuts, the introduction of Medicare Part D, and the expansion of defense spending. Part reflects “natural” growth of existing programs, including growth in Medicare and Medicaid reimbursement rates. And part reflects the demographic time bomb U.S. politicians are blithely ignoring.

When fully retired, 78 million baby boomers will collect, on average, more than 85 percent of per-capita gross domestic product ($40,000 in today’s dollars) in Social Security, Medicare and Medicaid benefits. Each passing year brings these outlays one year closer, which raises their present value.

 According to the CBO:

 Many budget analysts believe that the alternative fiscal scenario presents a more realistic picture of the nation's underlying fiscal policies than the extended-baseline scenario does. The explosive path of federal debt under the alternative fiscal scenario underscores the need for large and rapid policy changes to put the nation on a sustainable fiscal course.

Hotair notes that, "We’ve been talking about the 'fiscal cliff' or 'Taxmageddon' coming at the end of the year, but this is the real fiscal cliff we face. And yet, no one in this general-election cycle has even acknowledged it, let alone proposed a solution to it." 

Here is a more optimistic view of the situation.

The Enemy

Most people think that communism has fallen and is no longer a threat to the free world: the Soviet Union Collapsed and communism has been discredited by its obvious failure as an economic system. What most people don't know is that communism never collapsed, but it has transformed itself. And still yet that America has been defeated by this new communism. (By communism I don't mean the Soviet-Style- Communism, but instead a system which has more in common with fascism that with communism. If I wanted to be cleaver I would not even use the terms communism or fascism as these words tend to turn people away and cause them to dismiss what is said after these words.) After the world conquest of communism failed to take place in the 1900's. Key intellectuals and leaders of communism began to wonder why communist revolutions did not take place in the West. They then realized that it was the foundation of Western Culture that must be attacked if the West was to fall to communism:

Gramsci posited that because Christianity had been dominant in the West for over 2000 years, not only was it fused with Western civilization, but it had corrupted the workers class. The West would have to be de-Christianized, said Gramsci, by means of a "long march through the culture."

The new battleground, reasoned Gramsci, must become the culture, starting with the traditional family and completely engulfing churches, schools, media, entertainment, civic organizations, literature, science, and history. All of these things must be radically transformed and the social and cultural order gradually turned upside-down with the new proletariat placed in power at the top."

In 1919, Georg Lukacs became Deputy Commissar for Culture in the short-lived Bolshevik Bela Kun regime in Hungary. He immediately set plans in motion to de-Christianize Hungary. Reasoning that if Christian sexual ethics could be undermined among children, then both the hated patriarchal family and the Church would be dealt a crippling blow. Lukacs launched a radical sex education program in the schools. Sex lectures were organized and literature handed out which graphically instructed youth in free love (promiscuity) and sexual intercourse while simultaneously encouraging them to deride and reject Christian moral ethics, monogamy, and parental and church authority.

This is one of the reason that pop culture glorifies sexual promiscuity and the left supports gay rights and anything else that will destroy the foundation of our society. To see that America culture has transformed in the way that communist intellectuals knew was required for America to fall to communism all one has to do is  look at T.V shows, movies, pop culture, the crap that is taught in today's universities, and the beliefs held by the common American to see this. (I have heard people spout communist slogans and state that we don't know if communism is so bad. Even one of my favorite sitcoms Seinfeld has helped to chip away, with a smile, at the foundations of our society and has contributed to revolution.)

Communist leaders knew that the West would never outright accept communism:

In 1959 President Eisenhower asked Secretary of Agriculture, Ezra Taft Benson to teach Nikita Khrushchev about American Agriculture.

Sec. Benson recalled the following conversation……

'Your grandchildren will live under communism.' Khrushchev said.

'On the contrary,' Secretary Benson replied, 'My grandchildren will live in freedom as I hope that all people will.' 

Khrushchev then retorted: 'You Americans are so gullible. No, you won’t accept Communism outright; but we’ll keep feeding you small doses of Socialism until you will finally wake up and find that you already have Communism. We won’t have to fight you; we’ll so weaken your economy, until you fall like overripe fruit into our hands.

 Khrushchev was probably referring to the economic rivalry during the Cold Wart, but this weakening has come about through the adoption of economic policies modeled after socialism and central planning: the welfare state. The economic crisis of 2008 has done a lot to move America towards a command and control economy.

The six- time U.S presidential candidate for the socialist party Norman Thomas stated :

The American people will never knowingly adopt Socialism. But under the name of 'liberalism' they will adopt every fragment of the Socialist program, until one day America will be a Socialist nation, without knowing how it happened.

Khrushchev also stated:

We can't expect the American People to jump from Capitalism to Communism,
but we can assist their elected leaders in giving them small doses of Socialism,
until they awaken one day to find that they have Communism.

 It may be hard for us to accept or acknowledge, but the painful truth is that America has already been defeated by the new-communism and today "find that they have Communism".  Not the Soviet-Style Communism, but the softer-milder kind. It has happened so slowly and gradually without a major event to mark the turning point, that most people don't even know it and/or don't care enough to look. For one to see that America has been defeated, all they have to do is look at who the American people have elected to the highest office in our land. A man whose mentor was a communist with ties to Russia.

Imagine an American man so devout in his Communist beliefs, that during the Cold War the FBI placed him on its security index – meaning that if an armed conflict were to have erupted between the U.S. and the Soviet Union, Federal authorities would have looked to him as a prime suspect for treason.

Now imagine that man mentored the leader of the free world.

(Obama has admitted that this was the man that he mentioned in his autobiography. It is also interesting that a lot of what this man advocated we see our president doing today. You need to learn about this Frank Marshall Davis.)
A man whose parents were devoted socialist/communist. A man who has surrounded himself with communist while in office and/or people who profess their love for communist leaders. A man who has chosen for his 2012 campaign slogan Forward. (A classic communist slogan.) A man who has actively worked to "fundamentally transform" our nation. The American people have elected the enemy as our president, and after three years in office about half of them still support the man. Enemy is a strong word so it needs to be defined. I am using the word enemy to mean someone that stands against everything that made our nation great; someone that stands instead for communism; someone who wants to and actively works to "fundamentally transform" this nation. America fought against this ideology and way of life on the battlefield during the Korean War, the Vietnam War, and the Cold War. Many men have died to keep America and the world safe from this system. And now America has bowed down before this system and elected a leader who seeks to bring America under this system. The bottom line is that America has been defeated from within by socialism/communism/collectivism/fascism.

Some might say "that if this is defeat then it isn't so bad". "My life hasn't changed that much." The German of the 1930's would have said the same thing immediately after Hitler took over. (I am not trying to intimate that Obama is Hitler.) Only after their nation was destroyed and two million of their women rapped would they realize what had happened. The change/revolution is not completed. All that is left to complete the revolution is a major transformative event that will be upon us in the not-so-distant future when the economy collapses or some other major event. Of course when this happens it at first will appear much as Nazism appeared to the German people-- as a savior. Only then will people realize that this has happened.

Preimplantation Genetic Diagnosis

Preimplantation Genetic Diagnosis (PGD) is a technique that is used for finding abnormalities or disorders in fertilized or unfertilized eggs (ovum). It is usually done in vitro fertilization for parents who suspect that they have a hereditary disease that is linked to genes. Many eggs are fertilized and the chromosomes are analyzed. Once an ideal egg is singled out, it is implanted in the mother's uterus. The rest of the fertilized eggs are discarded or used for testing. They will not live.There are also ways to analyze an ovum before it is fertilized in cases where maternal mutations are the only concern. (Sharpe)

Benefits:

• Less disabled people could ease the burden on our health system. A study showed that annual health care costs for a someone with down syndrome is over $34000 (Boulet). This study was done in 2004. 
• If someone finds out that they are carrying a child with a sever disability, they are more likely to terminate the pregnancy. PGD can prevent these sort of abortions.

Drawbacks:

• It has been suggested that Bill Gates, Lewis Carroll, and Thomas Jefferson had/have Asperger Syndrome; a high functioning version of autism (Hensley). What if PGD prevents great thinkers from ever being born?
• Are we playing the hand of God? 

PGD can also be a way of picking traits for our offspring: height, IQ, hair color, etc. Although research is still being done on this. I saw a scientist on NOVA talking about the complexity of these issues because there are hundreds of genes that contribute to these traits and environmental issues that we have no control of.

Citations used:

Boulet, Sheree, and Noelle-Angelique Molinari, Scott Grosse, Margaret Honein, Adlolfo Correa-Villasenor. “Health Care Expenditures for Infants and Young Children with Down Syndrome in a Privately Insured Population.” The Journal of Pediatrics. Aug. 2008. Vol. 153, Issue 2, Pages 241-246. Web. 16 July 2012.

Hensley, Samuel. “Fetal Genetic Testing is Unethical.” Biomedical Ethics. Ed. Viqi Wagner. Detroit: Greenhaven, 2008. 208-213. Print

Sharpe, Neil, and Ron Carter. Genetic Testing: Care, Consent, and Liability. New Jersey: Wiley-Liss, 2006. Print.

ObamaCare Survives

The Supreme Court declared ObamaCare constitutional, in virtually its entirety, today in a 5-4 decision.  Conservatives had big hopes for a reversal to this horrible monstrosity, but the newest conservative on the Bench, Chief Justice Roberts, threw in his lot with the liberals on the court to form the majority.  Interestingly, the justice viewed as the perpetual swing vote on the Court, Justice Kennedy, voted with the conservatives on this decision and said the law is "invalid in its entirety".

But how the majority arrived at their decision is very interesting: basically, they rejected the Obama administration's argument that the Individual Mandate (requiring all citizens to purchase health insurance) was constitutional under the Commerce Clause and took it upon themselves to declare it was constitutional if it is considered a tax, which they (the majority on the Supreme Court) decided it was.  From Scotus Blog via Instapundit:

In Plain English: The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters. Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding. . . . Yes, to answer a common question, the whole ACA is constitutional, so the provision requiring insurers to cover young adults until they are 26 survives as well.

And here's the catch: when arguing for ObamaCare, the Obama administration and the Democrats in Congress who pushed this act swore up and down that it was not a tax.  In fact, they knew that if it were called a tax, there was no chance at all that it would be approved in Congress.  So, now we find out more about Nancy Pelosi's famous statement that "we've got to pass this bill to find out what's in it". 

Again via Instapundit and Reason, here is new conservative hero, Representative Darrell Issa (R-CA):

“In selling Obamacare, Congressional Democrats and President Obama assured the American people that it was not a tax. Today, the Supreme Court ruled it was, in fact, a tax. This tax was imposed on the American people amidst an extended recession and is one of the many reasons our economy remains stagnant under President Obama’s leadership."

But, my friends, all is not lost.  As Ace says regarding this case,

...but remember, it was only Plan B, and we had little confidence in it until this past March.

Plan A was always to win the Senate and the White House and flush this piece of shit down the toilet through reconciliation.

Let's do it.

A Revealing Episode

Micahael Burry predicted the 2008 financial crisis and made about 100 million dollars for himself and around 700 million dollars for his clients by shorting the market . He wrote an Op-Ed in the New York Times titled 'I Saw the Crisis Coming. Why Didn't the Fed?'. What happened to him as a result of writing this Op-Ed? See what happened starting from minute 14:00 to 15:40. This should tell you something.  

From Bad to Good to Bad

Washington state recently privatized liquor sales. Before June 1st the state government had a monopoly on liquor sales. The people of the state, evidently COSTCO helped the initiative, voted to give all liquor sales to private vendors.

This could have been a great thing. Privatizing any industry is almost always good. But of course there are a ton of hidden taxes and fees. (oregonlive.com)

Because of the complex nature of the new fees, and additional markups by distributors, it's unclear what the final cost of a fifth or a half-gallon will be until it gets rung up at the cash register. State analysts have predicted prices could go up by as much as 20 percent from what they were before the privatization initiative passed

A liquor store manager in Rainier Oregon said that sales had jumped 20 percent since the new legislation was passed. Many Washington residents are flocking to the government ran liquor stores in Oregon to get better prices.

So, what was supposed to be a great thing, got screwed up by the government. The link above stated that there is a 20.5% sales tax and a $3.77 per liter tax! What is this, New York City?

While we are on the liquor sales subject, I have been thinking about something. Why can't alcohol be delivered the same as pizza? It seems to me that it would be a healthy benefit to society. A lot of Americans drink a few beers, catch a buzz, run out of booze, and drive to the store. The fact that residential alcohol delivery is illegal will not stop me from getting alcohol if I want it. Why didn't we elect Ron Paul?

June 5th - The Tide Continues to Turn

Three state and municipal elections on June 5th show that the sentiment towards facing reality is growing across our nation.  As we all know, the big election, maybe even bigger than the presidency this November, was Scott Walker's (and others') recall election in Wisconsin.  The other two were municipal ballot measures in San Diego and San Jose to adjust compensation for PEUs, making them like everyone else's rather than gold-plated. 

The recall elections in Wisconsin were a continuance of a panic/temper tantrum that the PEUs of Wisconsin have been throwing (with strong support from lefty allies) ever since Scott Walker was elected governor in 2010 with promises to control runaway state spending.  Though Walker did nothing justifying a recall (ie broke no laws), the PEUs knew they had to do whatever it took to throw him out of office.  This is typical of Democrats when they lose to pull every trick they can to overturn the will of the people.  The PEUs rightly worried that if the policies Walker enacted succeeded, the PEU's power over budgets and policitians would be broken.  In other words, that one of the greatest threats to our nation's stability and functionality would be overcome.  From their perspective, they were rightly panicked and tried any and all options to get the man either neutered (through Senate and Court recalls/elections) or thrown out through his own recall.

But the people of this Blue State (still support Obama by a good bit over Romney) were swayed by someone who promised to get their fiscal house in order, by whatever means. Wisconsin went from having a $3.6 billion deficit to a $154 million surplus under Walker, even as property taxes dropped, and teachers' jobs were saved.  As I said in a previous article, results count.  Sound fiscal policies get results and people, even some Democrats, pay attention to these results. 

The Red wave of Reality is striking at the State level across the nation.  I think someone on our blog pointed this out, but the biggest and least-reported news about the 2010 Republican tidal-wave (I prefer English terms to Japanese) was at the state level - wholesale conversions at the Governors' and State Legislators' levels from Blue to Red.  This is expected to continue.  The current Governor balance of 29 Republicans to 20 Democrats is expected to change to 33 Republicans to 16 Democrats (not sure what's the deal with the missing state, maybe an Independent somewhere) after 2012.  Why?  Because it is getting through to the people that fiscal discipline is needed at the State level.  States can't print money and devalue debt to get out of their budget problems like the Federal gov't can.  They must work their way out of it, and the people know, regardless of their policital outlook, that Republicans offer their best hope of getting it done.  And in places, here and there, it is getting it done.

This, by the way, is another good reason (besides it not violating the Constitution) for all these responsibilities (Education, Health Care, Welfare, etc) to be transferred back to the states:  They must get it done in a fiscally sound way (ie, there will be greater control than if it is done at the Federal level).

The two referenda in California are interesting: one occurred in San Diego, which is a lonely Republican bastion in California, and the other in San Jose, a typical True Blue Democratic municipality.  Both faced PEU benefit obligations that they simply could not afford.  And guess what?  They couldn't afford it, so the people voted to cut their benefits in both cases.  As someone says "that which cannot go on, won't".  This should give all us fiscal conservatives hope that, when push comes to shove, the problems we worry about will be addressed, rather than bring the whole nation's/world's economy down.

Keeping my fingers crossed for November.

RomneyCare/ObamaCare Issue

Conservatives have been tying themselves in knots over how to resolve backing Romney in spite of the fact that he has not-yet disavowed RomneyCare, the alleged, and most-likely-to-be-true model for ObamaCare.  ObamaCare is the biggest among the many big Obamanations foisted on our country by Obama and fellow Democrats.
ToeJamm posted an article rallying the troops to swallow the problems inherent with backing a candidate responsible for RomneyCare.  jeff00139x opposed, then grudgingly acquiesced to steeling himself to fill in the dot for Romney.  I'm not sure where KP is on this, but feel certain it's not an easy choice for him.   Melkor, I think is happy with Romney.  I could not believe that Republicans would choose to remove the most significant arrow in their quiver in their fight to overthrow Obama, but, understand that Obama must be overthrown regardless, and see numerous other hefty arrows left.
Well, the guys at the Powerline blog, who oppose RomneyCare and are generally very conservative, have posted an article in response to liberal douchebag EJ Dionne, pointing out why there are critical differences between RomneyCare and ObamaCare that make it not impossible for a conservative to not be a hypocrite for supporting Romney while opposing ObamaCare.  This won't make you pleased as punch for Romney, just allow you to explain your apparent hypocrisy.

Read the article for the details, but their main points:

- Constitutionality: Conservatives rightly challenge ObamaCare on Constitutional grounds.  RomneyCare is at the state level where there are no constitutional issues.

- Affordability:  Massachusetts could afford RomneyCare, America can't afford ObamaCare.  Says Powerline,

Taxes were not increased and funds were not “borrowed” to pay for Romneycare. This is not true of Obamacare.

- Regulatory Oppression: ObamaCare is a 2000 page document, RomneyCare comes in at 70 pages.  Says Powerline,

In Massachusetts, insurance companies were not, effectively, placed under government control, nor did Massachusetts become the default health care provider in that state.

This is not to say that Conservatives should applaud RomneyCare.  This is to say that is does not appear to violate the Constitution, it appears to be an affordable act that Massachewtions :) wanted, and it does not overwhelm the private enterprises providing these services in the state with regulations.

What Do You Think?

Europe is dealing with major economic issues that are threatening the survival of the European Economic and Monetary Union (EMU) and the whole European political project.

The historian Niall Ferguson points out that a monetary union requires economic and thus political centralization:

Is to follow through the original logic of monetary union. If you go back to 1989 Delors report it was explicit that one consequence of monetary union would be central control of national budgets, of national policy. And that is ultimately the crucial staging point for a federal system of the sort that you have here in Canada.

So if this logic is correct, then for the EMU to saved it will require further political and economic integration.

Do you think that the current situation in Europe will lead to the break up of the European Monetary Union or do you think that it will try to be saved. My opinion is that there will be further political and economic integration as the cost of not doing this would be too economically costly for Europe and the rest of the world.

Best Argument for Capitalism

The best argument for something is results.  The German magazine Spiegel has a series of photos of places in East Germany taken immediately after the fall of the Berlin wall and then some period later of the same sites.  The changes are astounding.  I think there's no doubt, looking at these photos, that the people's prosperity and happiness have both been greatly improved by the advent of capitalism in East Germany, even if the East Germans have been half-hearted in their embrace of the opportunity to prosper.  Also, keep in mind that East Germany was considered to have the highest standard of living of the countries controlled by the Soviet Union.

Portland Sucks

The May primary elections had a hand full of measures on the ballot for Portlanders. Once again, the People's Republic of Portland decided to keep feeding the libraries and to help rebuild a crumbling school system.


David Douglas School District needs some improvements, but instead of managing a tight budget they just take the easy way out and tax property owners. The politicians in Portland know they can play the sympathy card and claim its "for the children". Oh, yeah, we have to make sure to give the teachers their raises as well. We all know how much they deserve it. http://www.oregonlive.com/portland/index.ssf/2012/05/david_douglas_school_district_2.html

The Multnomah County Libraries will be kept on life support as well. We need to make sure that all the pan handlers have a place to access the internet in order to get the required paperwork for their food stamp cards. I swear, every time I've ever entered the county libraries in the last ten years it has been a surplus of lower income people waiting to use the internet. As we see paper books becoming obsolete and being replaced by blogs and kindles, of course it is the government that takes its time catching up to speed. Just like the outdated post office.http://www.oregonlive.com/portland/index.ssf/2012/05/multnomah_county_library_measu.html

I wonder how many voters who voted to tax property owners actually own property? The economy has some dependence on the housing market. These measures will depress the potential for growth.

Side note: Homeless people in Portland are not hungry. With 39 places in the city that serve 24 hr food to homeless, Portland has become a safe haven for them. We are actually seeing an obesity problem among homeless. This news came to me from a homeless shelter manager.

2022

 Europe is in trouble and America is not far behind:

Senator Tom Coburn (R-OK) believes that unless the U.S. gets its fiscal house in order, the financial and economic repercussions will be severe.
“How long do you think before the United States has a financial meltdown?” the Daily Caller’s Nicholas Ballasy asks.
“Two to five years,” Sen. Coburn responds without hesitating.
“Think about what will happen to us. We have $16 trillion worth of debt right now and we’re paying less than 2 percent on that debt  — that’s 4 percentage points less than our historical average for our debt,” he said, adding that he is confident interest rates will “come back up.”
“In 2022, less than 10 years from now, unless we make major changes that everybody’s saying they know has to be made but none of the politicians have the courage to make, the entire federal budget will be made of only three things: interest, Medicare and Social Security, nothing else,” he added.
[...]

“There has not yet been a republic that did not murder itself. We are in the midst of committing murder to our republic,” he added.

Great Lessons From History

How did the German nation become enraptured with Hitler and end up following him to their destruction: millions of Germans dead, two million German women raped, and the literal destruction of their country? Surely we that are living today could never end up making the same mistake. The German people were completely different from us and they were barbarians. It would be comfortable for us living today to believe this, but Hayek noted in The Road To Serfdom that:

Probably it is true that the very magnitude of the outrages committed by the totalitarian governments, instead of increasing the fear that such a system might one day arise in more enlightened countries, has rather strengthened the assurance that it cannot happen here. When we look to Nazi Germany, the gulf which separates us seems s immense that nothing that happens there can posses relevance for any possible development here. And the fact that the difference has steadily become greater seems to refute any suggestion that we may be moving in a similar direction. But let us not forget that fifteen years ago the possibility of such a thing's happening in Germany would have appeared just as fantastic, not only t nine-tenths of the Germans themselves, but also to the most hostile foreign observers (however wise they may now pretend to have been).

The German civilization was advanced as noted in Modern Times:

Wiemar was a 'Western' republic. It stood for civilization rather than culture: civilization was in office, culture in opposition. It is no coincidence, either, that German civilization reached its gaudiest flowering during the 1920s, when Germany, for a brief period, became the word-centre of ideas and art.[...] Germany was by far the best-educated nation in the world--as long ago as the late eighteenth century it had passed the 50 per cent literacy mark.[...]

In the Weltbuhne, the smartest and most telling of the new journals, sexual freedom and pacifism were exalted, the army, the state, the university, the Church and, above all, the comfortable, industrious middle classes, were savaged and ridiculed.

The German people were ravaged by economic depression and were desperate for a savior.

The German people were no different than we were today. So given the same set of circumstance that they found themselves--economic ruin--in what would make one believe that we would react differently? Here two good episodes from the History Channel and the Military Channel about the rise of the Third Reich and Germany's fatal attraction to Hitler. They are about three hours in total, but they are worth watching in bits and pieces when you have time. The rise of Nazis Germany and totalitarianism in general is nothing new throughout human history. The same conditions that gave rise to Nazism will be present in the not-too-distance future here. The same thing will happen again, although in a modified form. So the lessons learned from these videos will be worth learning for all peoples and nations.

Join me brothers! The time is now!

It has been known for a while that Romney will likely be the republican nominee. After winning Connecticut, Delaware, New York, Pennsylvania, and Rhode Island on Tuesday, he is definitely going head to head with Obama.

Friends, we need to rally behind him. Just like this lucky recruit in the picture, we need to get motivated. Romney may not be the answer to our problems but he certainly will be the lesser of two evils.Grass root initiatives could be the decider in this election. We need to do what we can in motivating ourselves and our peers to get the word out that Obama needs to be defeated. It is imperative for the future of America. Get motivated! Speak out! Talk to people and get the word out that Obama is not the answer! If you can change one swing voter then you've done your job.

I think I can get my entire Pizza Hut store to vote for Romney. There might be five out of seventeen that do not vote, but the rest will vote for Romney based on the motivation that I have done in the store.

"We are still masters of our fate. We are still captains of our souls."-Churchill

Cool Video

Here is an awesome four minute video titled "If I wanted America to Fail" that focuses on how the government's environmental policies weakens America. If you despised America and wanted to weaken it so that it could be transformed into another system what would you do differently than what the government--especially the left--is doing in the economy, the education system, foreign policy, and domestic policy? This question makes you think.

A Scary Image on Derivative Exposure Estimates

9 Biggest Banks' Derivative Exposure - $228.72 Trillion

 Website with Story, The "buildings" stacked up next to these large bank headquarters are palettes of stacked $100s. Derivatives are very risky and come with a lot of consequences. On one hand they are great tools to hedge a larger position of non-derivatives. That was the intended purpose, but now days people use these instruments daily with larger positions to leverage up the best way possible. The FED has had to look out for these banks best interests because if they hadn't paper money would have failed along with all these bad banks bets. When/if the house of money crumbles, I would advise to not be in it for the customers will be stuck with the bill (i.e. MF Global). Credit Unions don't have shareholders and reinvest to get get low rates and more customer service. These are how banks are suppose to conduct business. Looking out for customers as opposed to looking to get rich off customers.                                                                            

Americans can be Nasty and Vicious when they need to be

Ace linked to this British Army Museum contest to determine Britain's "most outstanding military opponent".  That would be a fun study to investigate, but the answer was a surprise to me:

George Washington has been named as the greatest foe ever faced by the British.

The rest of the top five were:

In second place was Michael Collins, the Irish leader, ahead of Napoleon Bonaparte, Erwin Rommel and Mustafa Kemal Atatürk.

Very surprising to me was the omission of William the Conqueror, who delivered by far the most devastating defeat ever suffered by the English army.

But that's not why I posted this.  I posted this because of the joke poster Ace put up:

Which shows that even our most sainted Founding Father in this famous painting was really fighting dirty. 

In reading further, it says that the candidates had to be from the 17th century onward.  I think it was more of a popularity contest than any study by the British Army museum, though the justifications given for Washington are good.  Also interesting that Britain's most worthy opponent was, more or less, a fellow Brit.

The Fed Is Helping To Bailout Europe

I came across this article describing how the the Federal Reserve is helping to bailout Europe and what this is resulting in:

On Tuesday, March 26, 2012, I was invited by Ron Paul and his staff to assist a meeting of the Domestic Monetary Policy and Technology Subcommittee of the House Committee on Financial Services.[...]

The hearing dealt mainly with the Fed's currency swap with the ECB, which amounts to a covert bailout of European banks.[...]

During the financial crisis between 2007 and 2009, the Fed had bailed out European banks mainly through direct loans to subsidiaries in the United States. In order to conceal the bailouts, the Fed now uses mainly currency swaps. In the swap, the Fed sells dollars to the ECB and buys them back later at the same price, receiving interests. This construction resembles a dollar loan to the ECB at about 0.6 percent (0.5 percent above the federal-funds rate). The ECB can then use these dollars to lend them to troubled European banks. At the hearing the Fed officials did not deny the obvious: the bailout of European banks by the Fed. Rather, they claimed that the bailout was basically a free lunch for US taxpayers, as they would get an almost-risk-free benefit in the form of the interest on the swap.[...]

Let's have a look at these startling arguments. First, there ain't no such a thing as a free lunch; not even for the Fed, the ultimate money producer.[...] One cost of the swap operation acknowledged by the officials in the hearing is the moral hazard created. Banks and governments worldwide may expect that the Fed will come to save them, too, especially if they are well connected with the US financial system. So why be prudent?

The article then goes on to point out what bailing out bankrupt welfare nations through the IMF and the Federal Reserve is resulting:

The highest cost of the swaps, though, may be something else. Through the swaps, the Fed is helping the ECB to bail out European banks that finance insolvent and irresponsible governments. The Fed is indirectly bailing out countries like Greece, Portugal, and Spain, debasing the dollar. Thanks to the bailouts, the political project of the euro continues. Without the swaps, some European banks might have failed, and with them their sovereigns. Thanks to the swaps, the eurozone stays intact.

The project of the euro leads to an ever-increasing rescue fund, and gradually toward a fiscal union and more centralization. A European financial government and the European super state, which would most likely abolish tax competition in Europe, are on the horizon. The highest cost of the Fed policy, therefore, may be liberty in Europe.[...]

Finally, the Fed claims to be prudent. But how can the Fed know the point at which it is no longer prudent to bail out foreign banks? How can it know when the costs of the bailouts start to exceed the benefits to the US public? How can they know what is best for the United States? Interpersonal-utility comparisons are arbitrary. Thanks to the bailouts, some banks may win, some stock owners may win, but at the cost of liberty in Europe and to the detriment of dollar users. Moreover, bailouts produce moral hazards, crises, and losses for individuals in the future. Yet the Fed claims to know what to do: social engineering at its best — or, as Hayek would put it, a fatal conceit on the part of central (banking) planners.

In sum, the Fed has assumed the task of bailing out the financial industry and governments worldwide by debasing the dollar. Fed officials claim to know that the bailout-swaps are basically a free lunch for US taxpayers and a prudent thing to do. Thank God the world is in such good hands.

The whole article is a worth reading. This last main points of the article state some of the main arguments that I have against the IMF/World Bank, the Federal Reserve, and central banking in general: that is is allowing the continuation of failed socialist economic policies and failed welfare states to the effect of helping to set up a global economic system based on central planing/socialism. Whether this is by design or simply the result of hubris on the part of the central banks does not change what is happening. ("The Creature From Jekyll Island" is worth reading to learn more about central banking in general.)

Dien Bien Phu and the Will To Win

The Weekly Standard has a long three-page article that does a great job summarizing the post-WWII battle for Indochina between the French and Ho Chi Minh's Vietminh guerillas, and the lead up to American involvement in Vietnam. 

It's a good review in light of what seems to becoming an aimless American involvement in Afghanistan right now.

The article hits on many themes, a couple that seem important to me are the difference between the performance of highly trained, highly motivated troops, and regulars, and also the effect of feckless governmental leadership on the effort to win a war. 

As we say, read the whole thing.  The French struggle to hold on to their colony was by no means a hopeless cause.  They controlled most of the country and population, and when they could set things up correctly, they could deliver devastating defeats to the Vietminh (precursors to the North Vietnamese regulars and Viet Cong guerrillas encountered by Americans).  Their Foreign Legion and Paratroop divisions could aggressively outfight the Vietminh if employed properly.

The battle of Dien Bien Phu was supposedly that setup, but, due largely to lackadaisical prosecution of the battle by senior French leadership, the battle turned into a loss for the French, even though it was a Pyrrhic victory for the Vietminh, a la the Tet Offensive in the Vietnam War (which really was a Pyrrhic loss for the Viet Cong, not a Pyrrhic victory).  Perception often matters more than facts. 

Besides education and admiration of the heroics on both sides in that war, the point of me bringing this up is that it is the attitude of the country's populations and leadership that prosecutes the war that has as much to do with victory as the efforts of the local commanders and troops.  We went into Afghanistan and Iraq with focussed purposes and succeeded spectacularly in attaining our goals in both cases.  However, we then lost focus to what our purpose was and our efforts in those countries became less effective.  It took George Bush's willpower and General Petraeus' Surge strategy to refocus American efforts and secure the situation we desired in Iraq, and to finally attain all of our goals. 

We now have a feckless leader, supposedly focussed on Afghanistan, but actually having no desire and no clue how to prosecute that war, and a population that is now seriously questioning our involvement.  Our troops perform well regardless, but that alone will not secure victory.

I'll just give one large quote near the end:

So ended the Battle of Dien Bien Phu. History has ruled the French defeat inevitable, which demeans the sacrifices made by the soldiers on each side. The Viets won thanks to the unstinting efforts of their army. And even so, the decision hung in the balance. With better command and support, the base could have held out and possibly set the ground for a sensible peace like that allowed by Britain’s victory in the 1950s Malayan Emergency. The war, moreover, needn’t have ended because Dien Bien Phu was overrun. The severe losses forced upon the Viet-Minh made their victory pyrrhic. The Viet-Minh were in no position during the height of the monsoon to move their shattered units to threaten Hanoi. Just as conditions on the ground had not changed much after de Lattre’s 1951 victories, so they hadn’t in summer 1954. What had changed was France’s willingness to continue the fight—politics, not combat, decided the war. Ho’s strategy had proved far more adept than Giap’s tactics.

The article itself does address Afghanistan and also goes on to discuss the ferocity of the French paratroopers efforts in the Battle of Algiers.  Do read!

It's OK Jarheads, Buffs Gotcher Back

Waging war the Strategic Air Command way.  Real men launch nuclear weapons.  When the nuclear arm of the Air Force has an exercise, the point of the exercise is to launch all the birds as fast as possible, called MITO (minimum interval take off), before the incoming Soviet nuke vaporizes the base.  I think the goal is to get them airborne in ten minutes after the alarm is raised.  Once the birds are launched, the hard-working maintenance men can go back to their shops and play spades for the rest of the exercise.  Grueling.  Anyway, this video shows a launch of 'alert' birds from Minot AFB.  If the flag drops, these planes will fly to their target, nuking a path before them with SRAM (Short Range Attack Missiles), and launch their cruise missiles or nuke bombs on the soon-to-be-dust enemy target.  Listen to the comments.  They call it the 'Elephant Walk' as the lumbering B-52s roll to the runway.  After a little while the video is boring.  But if you stick it out to the end, someone makes the key, awesome comment,

"Now that's American airpower right there ladies and gentlemen.   No other country in the world can do what you just saw".   Tru Dat!

Time to go play some spades.

Welcome New Blogger

After months of secret evaluation, the RTP&GG Star Chamber has deemed commenter KP worthy of Blogger status.  KP, the position is yours if you choose to accept it.  Have ToeJamm send me your e-mail address, and I'll give you posting permission.

Bud-D

Transportation Is Important

I have been a delivery driver for 4 years. I make up to 30 deliveries a day in SE Portland. It is frustrating to be stopped at lights for thirty seconds while there is no traffic crossing. This happens a couple times every delivery (approx.). That would mean that I could possibly spend up to 30 mins (30 secs x 2 times per trip x 30 deliveries) of unnecessary idle time on the road. This is a stress that I just accept because I figure there is no other way around it. It is “the luck of the draw”. Or is it?

Recently, I got a traffic violation on the corner of NE Grand and NE Broadway. I was not working at the time. The citation that I received was for rolling through a right turn at a red light. I am not arguing against my violation and I will pay my fine. What caught my eye was how the “high-speed camera and sensor device” recorded my violation. The citation that was sent to me gave me a long list of information regarding my violation. If our state has the ability to put this sort of sophisticated radar system in to enforcw law, why can’t we put it in to our outdated traffic light system? Is it more important to give petty citations to hard working citizens than to have fluid traffic?

Portland is the heart of this state and traffic is the blood flow of our economy. Every Portlander is frustrated about our congestion. If we invest the money to have a sophisticated traffic system that is not based on “ticking clocks” but rather who is at the light, it would increase traffic flow. For instance, the light could turn green for cars, and when the cars are all through, would immediately turn for other traffic. A sophisticated radar or camera, with sophisticated programming, could easily maximize car flow.

I know the State is near broke, but surely this sort of traffic control would pay for itself, especially if it was applied to major traffic arteries of Portland first. Not only would cars not have to spend unnecessary time at lights, they would save gas, brake pads, and other vehicle maintenance costs that bog down our disposable income. Surely the customers would be happy for a timely delivery!

Obamacare To Cost Twice As Much As Originally Forecasted

Looks like Obamacare is going to cost twice as much as forecasted:

President Obama's national health care law will cost $1.76 trillion over a decade, according to a new projection released today by the Congressional Budget Office, rather than the $940 billion forecast when it was signed into law.

This is not surprising since there were all kinds of budget gimmicks behind the original forecast. The sad thing is that the likely Republican candidate for president implemented and steadfastly stands by the precursor to Obamacare. Romney does say that he will repeal Obamacare, but his actions and past comments make it appear that he might not do what he says. Obamacare will help to compound the looming debt crisis.

Looks like February was the highest monthly increase in the national debt:

The federal government's budget deficit grew by $222.5 billion in February, the largest one-month increase in history. Economists are forecasting the deficit for the year will be the biggest imbalance on record.

Keep this figure in mind when you hear politicians claiming that reducing the deficit by a couple hundred million or billion over ten years or even in a year is some big accomplishment. How will the government repay all of this debt? If you know history then it is not to guess.

Inflation won't be a major concern in the near future according to the Federal Reserve:

A little is all right. That’s the message Federal Reserve Chairman

Ben S. Bernanke has been giving out recently when asked about the evidence of inflation in the U.S. recovery. Sometimes Bernanke doesn’t even go that far. He simply says he doesn’t see inflation. The Fed chairman recently described the prospects for price increases across the board as “subdued.”

The laws of nature and more specifically the laws economics, human nature, and mathematics don't apply to people living today. We are special.