Week in review

Quote(s) of the week

“The framers of the Constitution gave us a de-centralized federal system with little power at the center and much of it spread out to the states. That system can develop its own evils, as we have seen during the days of slavery, but we are now seeing that centralizing and controlling everything from the federal level is not really the answer, and rather magnifies evil on an aggregate level.” – Alex Wallenwein

“Governments are using this financial meltdown in the same way they used the meltdown of the twin towers in 2001 – to grab a little more power.” – Bill Bonner

“Comrade Bush is to the left of me now. I am convinced he has got no idea what’s going on.” – Hugo Chavez (I know Chavez is reprehensible, but this was too funny to pass up.)

Why Gold Is Dropping When It Shouldn’t

by Alex Wallenwein

“The financial elites can twist and squirm all they want, but nothing they are able to do within their own limited powers will work. All they can do is shut down markets, shut down banks, or create more debt. Period. That is the full extent of their economic power, and their power is now running up against one of the oldest laws in economics – the law of diminishing returns.” more…

The Fed is Destroying Your Money RIGHT NOW

from DownSizeDC.org

“How could the government solve the supposed problem of tight credit by borrowing $700 billion to bailout the credit system? Money borrowed by the government cannot be borrowed by others, which must inevitably tighten credit in the private economy. Of course . . .

“The $700 billion will flow back into the credit system as the government buys up distressed assets from banks and mortgage companies, but only after a delay, and what if, as many have predicted, the $700 billion isn’t enough? The Federal Reserve intends to ‘solve’ and ‘forestall’ these potential problems by creating massive amounts of new dollars.” more…

Government’s Last Stand

by Michael S. Rozeff

“Money is a claim on resources. Where there are resources and productive values, claims can be created on them and there is no problem. But printing more claims does not produce more resources. The government and its printer (the Fed) have no resources except what they take from us. Printing claims enables them to take these resources from us, but it does not expand their amount.” more…

In the news…

  • World governments scramble to avoid further financial turmoil.
  • The UK is proposing a new height of surveillance. It’s way past time to start encrypting ALL of our email.

My two cents

So why am I so out for the Federal Reserve and the corrupt central bankers in general? What’s wrong with central banking? The explanation is fairly simple.

When the government has the ability to create money out of thin air it no longer needs to levy direct taxes to support its spending. But remember government can not spend anything that it does not tax away from the citizenry in some form. Thus the creation of money itself, either through debt or just outright, becomes the tax, with every new dollar that is put into circulation devaluing each existing dollar by a proportional amount. This process is slow and typically goes by unnoticed by the public, but the fact that the dollar has lost 95% of its value since the inception of the Federal Reserve in 1913 shows that the process does indeed occur.

The inflation tax does not affect everyone equally however. Those who receive the new money first get to use it before the devaluation has spread through the system, while the last to receive it bear the brunt of the devaluation. So we only have to ask who uses the money first and who last? It is obvious that the politically well-connected receive the new money before all others and have the benefit of spending it first, while the poorly-connected only receive it once it has worked its way through the system. Inflation is an insidious regressive tax that disproportionately harms society’s most vulnerable.

Another consequence of central banking is that it gives the government the ability to finance its spending without imposing any direct taxes. This in turn gives the public the illusion that something can be had for nothing. Unfortunately there is no free lunch and the public pays with a devalued currency and the erosion of personal liberty, and sadly once the cat is out of the bag, once the spending commences, history has shown that it does not stop until disaster befalls the spendthrift governments that embark on that path.

Eventually the out of control spending makes the very notion of small government a farce. However, if the government’s expenditures were directly tied to its ability to collect taxes every spending program would immediately illicit the response, “and how were you planning on paying for that?” The size of government would be automatically put in check by the citizenry’s disdain of paying taxes. However when taxes are not levied directly, but underhandedly through inflation, the public liberty just sits like a frog in a pot of cold water as the fire is slowly applied. And like the frog the public liberty is slowly boiled away.

To control the size of government, we must control its spending, which means we must control the currency, which means we can not have a bunch of political hack central bankers in charge of it. The currency must be a product of the market. It must not be controlled by any single entity, and it must be based upon something that is of inherently limited supply. Only with sound honest money can we  have limited government.

Does that mean I imply this is a utopia. No. Private currencies will fail, and inevitable some individuals will be damaged by those failures. However, even it these failures happened frequently they would happen on a small scale, and the effects on the overall system would be negligible. By admitting to this and taking for granted that no system is or ever will be perfect we can at least keep ourselves away from the types of centralized systems that take down everything around them when they inevitably fail. And without a doubt for all systems that are a product of human creation it is simply a matter of WHEN not IF they will fail.

And now the numbers

DOW Jones Industrials – 8,852.22 (+401.03/1.05%)
Wilshire 5000 – 9,514.37 (+393.59/1.04%)
CSI 300 (China) – 1,833.26 (-73.70/0.96%)
BSE 500 (India) – 3,771.68 (-163.02/0.96%)
MICEX (Russia) – 599.64 (-100.73/0.86%)
BOVESPA (Brazil) – 36,399.09 (+789.55/1.02%)
Gold/oz – 787.70 (-71.30/0.92%)
Silver/oz – 9.335 (-1.265/0.88%)
Copper/lb – 2.1795 (+0.035/1.02%)
Oil/bbl (Brent) – 69.60 (-6.43/0.92%)
Wheat/bu (CBT) – 5.6625 (+0.0275/1.00%)
Corn/bu – 4.03 (-0.0525/0.99%)
Dollar/Euro – 1.3411 (-0.0006/1.00%)
Yuan/Dollar – 6.8293 (-0.0012/1.00%)
Yen/Dollar – 101.675 (+2.65/1.03%)
Dollar/Real – 0.4721 (+0.039/1.09%)
3 Month Treasury – 0.79 (+0.61/4.39%)
2 Year Treasury – 1.61 (-0.02/0.99%)
10 Year Treasury – 3.93 (+0.06/1.02%)
30 Year Treasury – 4.32 (+0.18/1.04%)
Fed Target Rate – 1.50 (UNCHG)
U.S. Public Debt – 10,331,139,000,845.90 (+64,756,354,302.30/1.01%)

So upon checking my calculations on the percentages above, I think I’m wrong. I’ll have to look into that, but not now. Sorry. I’ll confirm the error and fix it for next week. The raw numbers are correct in any case.

My wife has started to work some night shifts at the hospital and so that means I’m home alone on a Friday night. It’s too bad really since it’s usually movie night. I suppose I should get some studying done…

Meanwhile the leaves are turning and fall is in the air. My hoodie has already become practically obsolete for the weather we are having. And to think that was the extent of my winter attire when I lived in Albuquerque. And it’s only friggin October! I guess it’s time to track down a winter coat… Have a good weekend everyone, and stay warm!

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