Taper

The Federal Reserve--the central economic planning committee--announced that it will begin tapering its QE program, which has been in place since the financial crisis, by 10 billion per month. The Fed will do this by reducing its purchases of treasuries by 5 billion per month to 40 billion per month and reducing its purchases of mortgage backed securities by 5 billion per month to 35 billion per month. The Fed also announced that it would keep the federal funds rate, interest rates, at or near zero for longer than they had originally planned. This offsets some of the effect of the 10 per month reduction in asset purchases. Chairman Bernanke was careful to characterize this reduction in asset purchases as not tightening monetary policy and noting that it was still highly accommodative. He said that further reductions or increases in QE was possible: “asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases”. 

The markets did not have the same reaction to the Fed's tapering decision that it had to the Fed's hint earlier this year that tapering might happen: the stock market was up on the news and gold and silver prices were down. The general consensus among the majority of the market participants is that tapering is a positive development. They believe that the Fed's move signals an improving economy and that a return to normal monetary policy is just around the corner: in the words of Bernanke, there is light at the end of the tunnel.

 According to Marc Faber:

'The Fed will never end QE for good,... They will continue because these programs, once they're introduced, usually keep on going.'
'The economic recovery, or so-called recovery, by June of next year, will be in the fifth year of the recovery,' Faber said. 'So at some stage the economy will weaken again, and at that point, the Fed will argue, 'Well, we haven't done enough, we have to do more.''
'The Federal Reserve—all of them—could be sitting on a barrel of dynamite, and then pouring gasoline on top of it, and then light a cigar with matches, throw the match into the gasoline, and then not notice that there is any danger,' Faber said. 'That is the state of mind of the professors at the Fed, who never worked a single [day] in business.'
And while Faber actually believes that a reduction in QE could happen, he wouldn't view it as a true tapering, as he says it will be a largely meaningless, one-time move that will eventually be reversed as the economy worsens.
'They may do some cosmetic adjustments, but in my view, within a few years, the asset purchases will be substantially higher than they are today,' Faber said.

According to Jim Rogers:

At the moment they are buying a trillion dollars a year – that’s a trillion with a “T” – of assets. Eventually we will see that they stop that if they do or slow it down.

What will probably happen is that they will slow it down at first to see what happens, and if things aren’t too bad at first – and they probably won’t be too bad at first – well what is likely to happen is they will slow it down, things will drop, and then they will rally and the Federal Reserve will say “Hey, this is not so bad, we can do it.” And they’ll cut some more. Things will drop again and then rally, because it will take a while for people to really believe how bad it can get, or will get. And so eventually they will try to cut [QE], it will finally cause the collapse...

Peter Schiff said in September:

We also must understand that even if the Fed were to deliver a small reduction in bond purchases, such a move would change nothing. The Fed would still be continuously adding to its enormous balance sheet while presenting no credible plans to actually withdraw the liquidity. As I have pointed out many times, it simply can't do so without pushing the economy back into recession. Although this would be the right thing to do, you can rest assured that it won't happen.

We should also recall where this all began. When QE1 was first launched Bernanke talked about an exit strategy. At the time I maintained the Fed had no exit strategy. But now questions about an exit strategy have been replaced by much more delicate taper talk. But easing up on the accelerator without ever hitting the brakes will not stop the car or turn it around.

Following this playbook, the Fed will likely maintain the pretense that tapering is a near term possibility and that it has a credible plan on the shelf to bring an end to QE.

The mainstream view that the economy is improving is most certainly incorrect. Much of the economic data such as the unemployment numbers, inflation, and GDP are determined by questionable and subjective methodologies and in the case of the unemployment numbers, manipulated. The inflation number that is used to adjust the GDP number is most likely lower than the real inflation leading to an overestimation of economic growth. Additionally, politicians are incapable of slowing the rate of growth of the national debt. This lack of ability to make any meaningful reforms is evident by looking at the latest budget deal where the republicans caved on the budget and actually eliminated parts of the sequester that cut spending with the hopes of future, insignificant cuts that won't materialize, as evident by examining the history of such deals.

The markets now believe that the economy is improving and are expecting the Fed to continue to reduce QE. When the Fed is forced to increase QE the market participants will possibly realize that the Fed can not exit its QE program. Overall, the Fed's decision to start tapering has moved the date up that the economic crisis will happen.

When You Want To Send a Message...

Send a Buff!

Yes, RTP&GG should be all over the ObamaCare debacle; it is a lot of fun to watch; but I'm too lazy to work up a story right now.  Instead, I'll do a quick one I was tickled about: the US sending two B-52s over the Senkaku Islands, to let China know that we don't respect their Air Defense zone and to show them we're not to be trifled with.  Countries aren't intimidated by boats and tiny planes.  It takes a noisy, smoke belching, huge Buff to truly intimidate.  So, we are standing strong with one imperialist Asian power against another (a stance I completely agree with):  From USA Today:

"We will take steps against any attempt to change the status quo by use of force as we are determined to defend the country's sea and airspace," Abe said.
For the United States' part, Defense Secretary Chuck Hagel said the Chinese action represents a "destabilizing attempt to alter the status quo" and "will not in any way change how the United States conducts military operations in the region."
To that end, the U.S. Navy arrived in force Tuesday off the coast of Japan for a complex exercise in which Japanese naval ships and U.S. fighter jets, warships and submarines will practice scenarios for a possible attack on Japan.

Lots of papers covered this, but USA Today had a cool picture of a B-52, so I used it.

I hope that there were lots of advanced radar receivers on the planes to see what kind of threat radars the Chinese would paint them with, so that this was an intel run as well as a show of defiance.

OK, for those who actually want to get the context of this, here's a map:

As you can see, our Jarheads in Okinawa are close to the crisis.  Click on the map to get labels for the overlapping Chinese and Japanese Air Defense and Exclusive Economic zones.

The IMF Talks About The Big C

Recent events have made it very clear that America is incapable of making the necessary reforms to avoid its looming debt/currency crisis. Avoiding making the tough reforms now will only make the reforms  more severe when they are forced upon the nation and the world in the not-too-distant future. These severe reforms will involve a lot of pain to the vast majority of Americans and citizens throughout the world who will be forced to partake in them because they are unaware of what is going on and as a result have not prepared for what is coming. Wealth confiscation will be one of the required reforms or tools to deal with this crisis.

The ground is being prepared by various governments and the IMF--the epitome of free markets supporters, said sarcastically -- for wealth confiscation in America and in the rest of the world. In America, wealth was confiscated during the Great Depression and recently there has been talk and preparation for confiscating retirement accounts and laying the foundation for bail-ins; and in the rest of the world you have plenty of recent examples of wealth confiscation in Argentina, Cyprus, and Poland. Additionally, you have a plethora of examples in history where bankrupt governments have confiscated the wealth of their citizens.


The IMF is aware of the economic situation the world finds itself in and the inevitable need for wealth confiscation and massive tax increases. As Forbes magazine points out, the IMF recently:

The International Monetary Fund (IMF) quietly dropped a bomb in its October Fiscal Monitor Report. Titled “Taxing Times,” the report paints a dire picture for advanced economies with high debts that fail to aggressively “mobilize domestic revenue.” It goes on to build a case for drastic measures and recommends a series of escalating income and consumption tax increases culminating in the direct confiscation of assets. 

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). … The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away. … The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth. (page 49)

You can read the report here. At pg. 40 the IMF laments the fact that wealth is mobile and then it talks about the need to tax wealth differently according to how mobile it is: 

The modern history of recurrent wealth taxes, however, is not encouraging. Relief and exemptions—for land, for instance, and family-owned businesses—creep in, creating avoidance opportunities, as do ferociously complex aspects of the legalities (in dealing with trusts, for instance). Financial wealth is mobile, and so, ultimately, are people—generating tax competition that largely explains the erosion of these taxes. There may be a case for taxing different forms of wealth differently according to their mobility—meaning a higher rate on nonfinancial wealth (largely real estate) than financial. In fact, it appears that both forms of wealth are quite large (Figure 23) and, perhaps surprisingly, that nonfinancial assets are very important for the very wealthy (Table 13). Substantial progress likely requires enhanced international cooperation to make it harder for the very well-off to evade taxation by placing funds elsewhere and simply failing to report as their own tax authorities in principle require"  pg. 40

The report is revealing and provides a glimpse of what to expect in the not-too-distant future. What does this mean for you? If you don't educate yourself and plan accordingly, you can expect to loose a significant portion of your savings, retirement, and other assets through direct confiscation and/or indirect confiscation through currency debasement and inflation. History provides a detailed map of what to expect regarding wealth confiscation. The writing in on the wall. 

Hollywood's Myopic Focus

If it seems like all of Hollywood's movies are exactly the same, it's because they are. 

Leftists' second favorite economic theorist's theories are the prime focus of many Hollywood blockbusters or wannabee blockbusters as this article in The Federalist points out:

In Elysium, one of the more notable box office failures in a disastrous summer for Hollywood, Matt Damon plays a down-on-his-luck ex-con in a dystopian future in which overpopulation, natural resource depletion, and environmental degradation have led to a worldwide economic collapse. In response, the world elite have decamped to a life of luxury on an orbital space station.

If this all sounds a bit familiar, it might be because the same basic setting is behind the plot of the 2008 Pixar film Wall-E, which is also set in a future in which environmental degradation has led the earth’s population to abandon earth for a luxury-liner style spaceship. In that film, a lovable animated robot teaches us that overconsumption is damaging to our basic humanity.

This ties completely in with the Anthropomorphic Global Warming (AGW) cultists as the culprit for both is/are humans overwhelming/abusing their environment in pursuit of material wealth.  Read the whole thing to see how Hollywood has been on this bandwagon since the '70's.

No matter that Malthus' theory as well as AGW have been debunked by reality.

No Exit

Ben Bernanke surprised the markets and most economist at its September meeting by deciding not to taper back its 85 billion a month bond/mortgage backed security buying program. It was believed by most economist that the Fed would began tapering because at its June meeting Bernanke had hinted that the Fed would begin tapering later this year. This belief had caused stocks to go slightly down, gold and silver prices to drop dramatically, and bond yields to spike. While most economist were fooled into believing the Fed narrative that the economy was getting better and that it was time for the Fed to start ending its QE ( monetizing the debt), Peter Schiff was saying at the time that the Fed could not taper or if it did that it would have to reverse course and expand its QE program. From what I have read it is impossible for the Fed to voluntarily exit its bond/MBS purchases as the markets are addicted to Fed stimulus, and this stimulus is the only thing keeping the economy from collapsing. Eventually the markets will realize that the Fed is trapped and that it is impossible for it slowly end its QE program: “The Fed has checked into a monetary Roach Motel. Getting out will be infinitely harder than getting in. In fact it will be likely impossible to get out without tipping the country back into recession”. When the markets realize this, the real economic crisis will happen. This will be a currency/debt crisis where you will be lucky to have half of your savings left.

Obama just told the world that America is unable to pay its bills unless it is able to borrow more money. He also told the world that America won't even try to pay its creditors by cutting spending or raising taxes: “President Barack Obama challenged the U.S. Congress on Friday to approve an increase in the U.S. debt ceiling or else the United States will be unable to pay its bills and then, 'We're deadbeats.'”. This sends a profound message to the world.

America has had a massive trick played on it as it fails to realize that our free-market economic system has been switched out with centrally-planned economic system. Watch this four minute card trick starting at 4:48 to see this illustrated. The Fed is the card trick that distracts us from the fact that our economic system has been changed.

ObamaWar to visit Syria

An American President is seeking a coalition of the willing to take down a Ba'athist dictator over WMDs.  Hmmm...I've got a strange sense of Deja Vu...But wait, in the first case the American President was the Bushitler.  In this case, the American President is a Nobel Peace Prize winning LightWorker, so therefore the casus belli must be..............Totally Unrelated to US Interests.

So, what do we see in Syria at the moment?  It's almost a reversal of Iraq, with the only common denominator the Ba'athist political affiliation of the dictator. 

• In Iraq, the Ba'athist leader was a Sunni in a majority Shiite nation.  In Syria, the leader is an Alawite (sub-sect of Shia) in a majority Sunni nation. 
• In Iraq, the Iranians supported the majority, in Syria, they support the minority. 
• In Iraq, oil was a big issue, in Syria, not. 
• In both cases, there is documented evidence of the dictator using poison gas against his opponents.
• In Iraq, the dictator had already brutally suppressed armed opposition to his regime, in Syria, there is an ongoing civil war, and the dictator's chance of victory is not as certain.
• In Iraq, the dictator had a long history of provocations against the United States, some minor, some major, and the United States was already militarily involved in Iraq, having maintained a no-fly zone there for over a decade before the invasion and having already fought one war against Iraq to expel Iraq from Kuwait; in Syria, I can think of no provocation aimed at the United States ever in its history, and we have had no military involvement there previously.  Syria has supported the Shiite terrorist group Hizballah, but that is aimed at their arch-enemy Israel, not the United States.

And who is the United States aiming to help by punishing the Assad regime?  The opposition at this point is largely made up of Sunni Islamic extremists.  Punishing the Assad regime will help Islamic extremists.  Winning?  But, as with the Clinton Administration's meddling in Bosnia in the '90's, Democrat/Liberals' favorite wars are wars in which there is no US interest.  In Bosnia, an ethnic cleansing being carried out by the Serbs turned, with our heavy assistance, into an ethnic cleansing carried out by the Kosovo Muslims.  Neither group had ever done anything to the United States.  This pissed off the Serbs' traditional Slav ally Russia, and didn't help us a whit with international Islam.  A conclusion that anyone with a brain foresaw.  There are many Democrats/Liberals who do have brains, so the only conclusion one can come to regarding justification for this action is that it made Clinton look good somehow.  This brings us to some more back-history which helps explains the looming Obamawar, and that is that the Clinton administration took heavy criticism in the early 90's from liberals (one Samantha Power being foremost in the criticism) for not intervening in the tragic genocide that was taking place in Rwanda.  It was a great tragedy, but this happened in the middle of Africa, no where near any of our bases or interests.  In fact, in France and Belgium's realm of colonial rule, so really something we ought to have stayed out of unless we were to play the role of universal global policeman.  Now, guess who is pressing the case hard for our intervention in Syria?  None other than our new UN Representative, Samantha Power.  Hence, the desire for the Obama administration to at least look like it is making some effort in this crisis.

But, let's not get too worked up about this, because what is Obamawar?  Nothing more than lobbing a few cruise missiles at Assad, that won't do anything except piss everyone off:  the Assad regime, because now we really have made ourselves their enemies, and the Sunni rebels that will rightly say that we didn't do anything that amounted to anything.  This technique is copied from the Clinton (after the African embassy bombings killed hundreds), and depressingly, Reagan (after Khaddafi's agents committed the Lockerbie airline bombing, killing at least 100 Americans),  method of responding to Muslim terrorism:  lob some cruise missiles, or drop some bombs and call it good.

There are no good guys or good answers for Syria.  To me, the best option is to stay out of something that is none of our business.  Islamic fundamentalists will never be on our side, and at least Assad is not working actively against us, murderous tyrant though he is.  Maybe Obama will deign to ask Congress their opinion, but doubtful.  He doesn't need to.  The imperial president, with the press in his pocket, can do whatever he wants and not worry about being called on it.

Slightly off topic, but it's interesting that even the Egyptians believe Obama is a Muslim Brotherhood supporter .  And are not happy about it!

Law And Morality

The left and libertarians are mostly in agreement when it comes to the government's role in social issues. They both take the stance that “I don't care what you do and that it would be wrong for me to impose my values on people” or that “you should be able to do what you want as long as it doesn't hurt anyone else” or that “the government should not get involved in social issues”. This view is illustrated in the same-sex marriage,SSM, debate. A common argument against people that don't want the government to reconginze SSM and who want to uphold the definition of marriage that has been in place for thousands of years --or any other issue that involves “morality”-- is that they want to legislate “morality” and impose their views on society. The left and libertarians believe that it is not the the proper role of government to impose morality on society. But this view fails to reconginze the nature of the law which prevents them from being able to see that they are guilty of “imposing morality” because any law—even the ones they support-- by its very nature is “imposing morality”. The issue is not whether morality should be imposed on society but what morality should be imposed on society and to what extent. The left and libertarians also fail to realize that civilization is itself a system that imposes morality or societal norms and practices on people. 

 Selwyn Duke points the problem with the libertarian view on the law and morality:

In a piece I recently wrote about the dangers inherent in libertarianism, I pointed out that libertarians, by applying their live-and-let-live philosophy to the moral sphere as well as the governmental, do nothing to maintain the societal moral framework that enables people to govern themselves from within and that ensures Big Brother won’t have to do so from without (I recommend you read the piece).[...] 

A law is by definition the imposition of a value (and a valid law is the imposition of a moral principle). This is because a law states that there is something you must or must not do, ostensibly because the action is a moral imperative, is morally wrong, or is a corollary thereof. If this is not the case, with what credibility do you legislate in the given area? After all, why prohibit something if it doesn't prevent some wrong? Why force citizens to do something if it doesn't effect some good? [...]

So here is how you fall into the philosophical trap that has ensnared virtually all libertarians (and many others):
Step 1 — Believe in a mythical separation of morality and state.
Step 2 — Accept the laws you agree with and believe necessary, not realizing they’re an imposition of morality.
Step 3 — Turn around and oppose laws you disagree with, not on the basis that the values they reflect are wrong or are not the government’s domain, but simply because they’re an “imposition of morality.”
In truth, something doesn’t have to be proclaimed by a thunderous voice from the heavens, a bishop or Charlton Heston in a Cecil B. DeMille film to be christened “morality,” nor does something cease being so (or at least a conception thereof) because it has become the stuff of academia or wins a popular vote.  A moral does not cease to be a moral because it becomes a meme.[...]

The story of man is one of spiritual, cultural, political and physical warfare, and each chapter has victory and vanquishment.  Zoroastrianism was extinguished by Islam, the Ainus have largely been subsumed by the Japanese, and the Maldives’ native Giraavaru culture is now only a memory.  Just like animals, countless languages, cultures, beliefs and peoples have become extinct, often the victims of invasive entities that, through superior morality or might, won that inevitable battle. 
And that is the battle for civilization.  It may sound very noble to say, “. . . believe what you want to believe — I'm ok with that.  After all, I am a Libertarian,” but when enough people believe the wrong things, you will not be OK with it.  You will be living under a regime that enshrines those things in law — you’ll be living in tyranny.
Like it or not, imposing values is what arranging civilization is all about.  And like it or not, you’re part of this process.  The only difference among any of us is in what and how much we impose — and in that some of us actually understand this is precisely what we’re doing.
So we can avoid talk about morality if we want, but it will do nothing to ensure that morality won’t be imposed on us.  It only guarantees a descent into error that, ultimately, ensures that immorality will be.

In the same-sex marriage debate, people that want to uphold marriage as defined for thousands of years are attacked on the grounds that they are imposing their morality on society as if those that are pushing for the government to recognize SSM are not imposing their morality on society. Any law by its very nature is imposing morality on society. So whether you are for or against SSM you are imposing values on society. The question is whether you are imposing values that lead to the destruction of that society or whether you are imposing values that have built and sustained that society. The argument that it is wrong to support “traditional” marriage because it would be imposing values is a cleaver way to get those that support “traditional” marriage to become defensive and to become blind to the fact that supporters of SSM are imposing their values on society: it is a way on the part of SSM supporters to disarm and distract their opponents. SSM proponents are not only imposing their morality on society they are attacking and forcing those that disagree with them to accept their morality: here , here, here, here , here, here, here, here , here and other places. “Evil preaches tolerance until it is in power. Then it tries to silence good.” This is no where more evident than in the issues of homosexuality and SSM: they preach tolerance and that society must accept their “lifestyle” and then they attack and silence those that oppose them as evident from the links given above. Saying that the government should not support traditional values is to surrender our civilization to the forces that will destroy it.

The libertarian view on morality and social issues is one of surrender:

Ultimately, the tragic consequence of the libertarian mentality is that it guarantees the left’s victory in the battle for civilization.  This is because, in libertarians’ failure to fight for hearts and minds in the cultural realm, they cede it to leftists, who aren’t shy about advancing their “values.”  And proof of this is in the social pudding.  You see, if talk of establishing social codes and traditions sounds stifling, know that we haven’t dispensed with such things — that is impossible.  Rather, the left has succeeded in replacing our traditional variety with something called “political correctness,” which describes a set of codes powerful enough to control the jokes we make and words we use, get people hired or fired, and catapult a man to the presidency based partially on the color of his skin.
As for elections, political battles need to be fought, but they are the small picture.  For if the culture is lost, of what good is politics?  People will vote in accordance with their world view no matter what you do.  Thus, he who shapes hearts and minds today wins political power tomorrow.  
The libertarian chant, “I don’t care what you do, just lemme alone” sounds very reasonable, indeed.  But as hate-speech laws, forcing people to buy health insurance and a thousand other nanny-state intrusions prove, when people become morally corrupt enough, they don’t leave you alone.  They tyrannize you.  A prerequisite for anything resembling libertarian government is cast-iron morality in the people.  And we should remember that, to echo Thomas Paine, “Virtue is not hereditary.”
For this reason, neither is liberty.  Scream “Live and let live!” loudly enough in the moral sphere, and in the hearts of men the Devil will live — and the republic will die.

James Madison stated:"Religion is the basis and Foundation of government." Whether this religion is Christianity or the new secular religion of the state, government and laws can not refrain from imposing religion or morality on people. This does not mean that the government should become a theocracy but it does mean that the state has an important role to play in defending the norms and practices of an ordered and free society as F. A. Hayek states in “Law, Legislation and Liberty” as opposed to defending norms and practices that will destroy that society. At the very heart of the decline of our nation are “moral” issues. If you want to make a stand for freedom and to perserve our way of life you have to support and defend the norms, practice, and institutions that has enabled our society to become the most prosperous society in history : you don't have the option of retreating to the realm of moral relativism where everything and anything is okay and staying netural in this battle over the future of our civilization. If you do stay netural, the other side will make their stand by imposing their secular values on society and they will force and corece you to support their morality and persecute you if you don't all while making you belive that to impose your morality is wrong and to accept theirs is just.