Why Chile Looks Great, Hitler on Dance Protesting, New Case Shiller Shows Housing Declining, and Ron Paul Financial Services Committee on Fed Manipulation on C-Span Tomorrow

So every time I get into debates (if you can really call them that) with users on the HuffingtonPost, the inevitable question I get asked is: if you don't like a centralized government, where else are you gonna go?  *insert Ayn Rand galaxy, Somalia, another planet*?  My response has always been somewhere in South America such as Chile where the police state is not as large or intrusive.  Thankfully, Sovereign Man had two good articles on the brilliance of Chile today and yesterday.  Some excerpts:

Furthermore, Santiago is just a nice, clean, modern, first world city… something like Madrid meets Chicago. It’s a pedestrian-friendly city with great mass transit and a privatized highway system. There are parks everywhere among the sprawling towers, and you see locals everywhere enjoying a coffee in the city’s numerous cafes and eateries.
(as an aside, Santiago has something you won’t find in too many other places in the world… a concept called ‘cafe con piernas’ or coffee with legs. Think of it as a combination of Starbucks and Hooters…)
Most of all, this place is civilized; Santiago is devoid of the sort of destitute squalor you would expect of a Latin American capital. Obviously some parts of town are nicer than others, but overall I find it every bit as nice as Europe or North America with every amenity you could ever want or need, and all at a pretty nice cost of living discount.

Compared to what I’ve seen elsewhere around the world, real estate in Chile (and Santiago in general) is a relative bargain. Bear in mind, I think about real estate in terms of square meters, which for our metric challenged readers is 10.76 square feet… so a 1,500 square foot 3-bedroom home is about 140 square meters.
My unequivocal, universal standard for ‘cheap’ residential real estate in big cities is $1,000 per square meter. It’s really hard to find this anymore in the world. Ecuador comes to mind– there are a number of good quality properties in Cuenca and Quito for $1,000 per square meter.

Property taxes are a joke; owners might pay $40 to $100 per year in taxes on a reasonably-sized apartment, while rents command a 6% yield at present. I expect the rental yield to increase over the years, along with property values, as supply is constrained and demand is increasing.

-------------------------------------------------------

My host was a particular gung-ho Chilean Army officer; curiously, he told me that many of his fellow officers in Chile petitioned the government to authorize a deployment of soldiers to Iraq and Afghanistan. They want to participate in the action, if for no other reason than for the opportunity to improve training at home.
Chile’s politicians wouldn’t hear of it, their response being something slightly more eloquent than “no way in hell are we sending Chileans to die in that f’ing desert.” My host seemed rather disgruntled.
“Trust me,” I said, “you don’t want to go over there… and you should consider yourself lucky that your civilian leadership has the good sense to boycott the conflict. There is nothing good waiting for you in Iraq or Afghanistan.”

Privatized highways, low property taxes, a reluctance to go to war, and Hooters cafes?  Sign me up!  Well, maybe one day I will get there.

Okay, so I know this clip has been used on countless subjects, but man is this funny:

It is of course in response to Adam Kokesh's dance protest at the Jefferson Memorial and subsequent choke slam.

New Case Shiller Home Index numbers came out today showing that housing prices are still going down everywhere except for the following:

Not surprisingly, as government plays a larger role in the economy ,Washington DC moved against the downward trend and remained the top gainer, with a price increase  of 1.2% versus February 2011 and an 8.1% increase versus March 2010.
 
San Francisco (+0.5%), Miami (+0.3%), Seattle (+0.2%) and Los Angeles (+0.1%) also saw month-over-month gains in prices. On the downside, Charlotte (-2.6%), Minneapolis (-2.5%), Cleveland(1.3%) and Atlanta (-1.2%) prices fell significantly.

I was just watching Special Report with Bret Baier and the guest anchor stated that housing is currently in a double dip recession.  Did it ever get out of the first one?

So tomorrow Ron Paul will lead a Financial Services Committee meeting on Fed manipulation of the stock market.  Here is the info:

"Federal Reserve Lending Disclosure: FOIA, Dodd-Frank, and the Data Dump"
Wednesday, June 1, 2011 2:00 PM in 2128 Rayburn HOB
Domestic Monetary Policy and Technology

WITNESS LIST

• Mr. Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System
• Mr. Thomas C. Baxter, Jr., General Counsel, Federal Reserve Bank of New York

Hopefully we can get another exchange of remarks such as this with Scott Alvarez and Rep. Alan Grayson (God do I miss him)

 If you would like to submit a question, do it here.
Perhaps a good question to ask would be how probable is this occurring:

From The Moscow Times: "Belarus on Tuesday froze prices on a number of foodstuffs as analysts warned that the former Soviet republic could descend into economic chaos and an IMF mission headed to Minsk to assess the situation."

Of course the price controls are in response to this:

Belarus devalued its ruble by 36 percent to 4,977 per dollar last week in an attempt to reduce a current account deficit largely caused by generous public spending in the run-up to Alexander Lukashenko's re-election as president last December.

or maybe this chart:

Hopefully tomorrow's hearing will deliver some early summer fireworks.

Update- Phenomenal interview of Jim Grant by James Turk of GoldMoney:

Apologies for it broken into pieces, I couldn't get the full video off Zerohedge.
It's a bit long, but Jim Grant's wit makes it all worthwhile.  And yeah, they come to the conclusion that the Keynesian party is coming to an end soon and the gold standard will reappear.

Greece Falling Apart, Troops in Libya, and More Protests

Just a quick post for today.  Things keep going downhill for Greece including those who support another bailout.  First up is the universal sign of an impending crisis: a bank run.  Via Mish:

Only a few steps separating from Friday to yesterday's mass panic! From early morning to counter the banks there is serious pressure for withdrawals of deposits, especially small amounts. The pressure on banks began last Wednesday, culminating in yesterday's day.

It is significant that Thursday and Friday, banking sources estimate that rose around 1.5 billion euros in total! According to the same month in May estimated the outflow estimated at least 4 billion from 2 billion in April.

The majority of depositors rushed to withdraw for pensioners and small savers and amounts ranging from 2-3000 lifted until 10 -15 000 euros. Motivation in most cases it was the fear that led the country into bankruptcy, deposits frozen even temporarily left without cash, or even lose their savings.

The amount of small withdraws is really a sign, it's not just the international market that is anticipating a crisis anymore.  With all the mass protests going on, it's only a matter of time before some idiot conspiracy theorist comes out and starts warning about a military coup.  Well, who is more of a conspiracy nut that the CIA?

"According to the CIA report, ongoing street protests in crisis-hit Greece could turn into escalated violence and a rebellion and the Greek government could lose control, said Bild. The newspaper said the CIA report talks of a possible military coup if the situation becomes more serious and uncontrolled."

You gotta love Zerohedge.  Especially for pointing out this report from the Guardian that we all knew was a matter of time:

Armed westerners have been filmed on the front line with rebels near Misrata in the first apparent confirmation that foreign special forces are playing an active role in the Libyan conflict.
A group of six westerners are clearly visible in a report by al-Jazeera from Dafniya, described as the westernmost point of the rebel lines west of the town of Misrata. Five of them were armed and wearing sand-coloured clothes, peaked caps, and cotton Arab scarves.
The sixth, apparently the most senior of the group, was carrying no visible weapon and wore a pink, short-sleeve shirt. He may be an intelligence officer. The group is seen talking to rebels and then quickly leaving on being spotted by the television crew.

Remember that Western troops on the ground is a violation of the original U.N. resolution:

The subject is sensitive as the UN security council resolution in March authorising the use of force in Libya specifically excludes "a foreign occupation force of any form on any part of Libyan territory".

It sure gets tired asking where the outrage is all the time, so I will let this one past.

I will end with two more reports of worldwide discontent.  First is in Kuwait where 2,000 protested for the resignation of the prime minister and next is in Morocco who are protesting the overall government.  Here is some disturbing footage of Morocco:

They make our protests look like crap:

Hong Kong May Be Dropping Dollar Peg, Trouble in Yemen, and George Will on Obama Breaking War Powers

Simon Black of Sovereign Man had an interesting post the other day on the possibility of Honk Kong dropping its dollar peg and possibly pegging their dollar to the Chinese yuan:

To guard against this constant loss of purchasing power, many Hong Kong’s residents are converting their savings to Chinese Yuan. While the Chinese Yuan closely shadows the US dollar, it has steadily appreciated and is perceived to have significant future upside should the Chinese ever allow it to appreciate more quickly.
US monetary inflation makes it inevitable that the Hong Kong Monetary Authority will come up with some sort of a scheme to either peg the Hong Kong dollar to the Yuan (rather than the US dollar), or perhaps even replace the Hong Kong dollar with the Yuan altogether.
This would be a HUGELY popular move. Hong Kong is one of the few places on Earth with a net savings rate; the loan to deposit ratio its banking system, for example, stood at 81.7% at the end of March, meaning there are only 81.7 cents on the dollar lent out in Hong Kong for every $1 on deposit in the banks.

This reasoning, though sound to some degree, is along the lines of some who are predicting the world may go to a yuan-type standard.  This is kind of hard to believe though because of the looming property bubble in China that is being financed by money printing.  Sooner or later, the bubble will burst and China will most likely go into a large slowdown.  This is already evident by the number of reserve requirements China's central bank has been imposing on banks in an effort to control inflation.

So the big rumor around the blogosphere is that the U.S. will probably be going into Yemen next.  First the State Department tweeted (I can't believe it actually uses twitter) that U.S. citizens need to get out of Yemen and now the New York Times is reporting that Islamist militants have taken control of a town:

SANA, Yemen — Islamist militants battled Yemeni security forces in the southern province of Abyan on Sunday even as the government struck a deal for a cease-fire in the capital, Sana, with its tribal rivals, bringing relative calm here after days of fierce fighting.

In Sana, Yemeni officials said President Ali Abdullah had agreed to a truce with his historic tribal rivals the Ahmar family. Violence broke out between the two sides last Monday after Mr. Saleh refused to follow through on his promise to sign an agreement leading to his resignation.

We are already launching drone strikes there in order to take out Anwar al-Awlaki, we might as well have troops there already.  If you need any more evidence see this:

WARSAW, Poland — Holding out Poland's transformation to democracy as a model for the world, President Barack Obama on Saturday exhorted Western allies and the American public alike to extend their support, energy and vision to those now reaching for democracy in the Middle East and North Africa.
Obama wound up his six-day trip to Europe with a message aimed squarely at the people of the United States, saying that in a time of tight budgets, "I want the American people to understand we've got to leave room for us to continue our tradition of providing leadership when it comes to freedom, democracy, human rights."
Obama, in a brief news conference with Polish Prime Minister Donald Tusk, assured Americans that he spends the bulk of each day worrying about the U.S. economy and how to strengthen it and create jobs. But he coupled that with the message that it is a U.S. obligation to support democracy around the globe, one that pays dividends in the form of a safer and more prosperous world.

Translation: We need to support dictators that support our interests.  We supported the Yemen regime for decades and now it is coming back to bite us in the ass.  Rather than give it up, look for the defense and intelligence departments, along with a few gung-ho Congressmen, rally for us to intervene again.

George Will's column today highlighted something I have vaguely heard about but should be getting a lot more attention:

The U.S. intervention in Libya’s civil war, intervention that began with a surplus of confusion about capabilities and a shortage of candor about objectives, is now taking a toll on the rule of law. In a bipartisan cascade of hypocrisies, a liberal president, with the collaborative silence of most congressional conservatives, is traducing the War Powers Resolution.
Enacted in 1973 over President Nixon’s veto, the WPR may or may not be wise. It is, however, unquestionably a law, and Barack Obama certainly is violating it. It stipulates that a president must terminate military action 60 days after initiating it (or 90, if the president “certifies” in writing an “unavoidable military necessity” respecting the safety of U.S. forces), unless Congress approves it. Congress has been supine and silent about this war, which began more than 70 days ago.

He even eviscerates Sen. McCain:

“No president,” says Sen. John McCain, “has ever recognized the constitutionality of the War Powers Act, and neither do I. So I don’t feel bound by any deadline.” Oh? No law is actually a law if presidents and senators do not “recognize” it? Now, there is an interesting alternative to judicial review, and an indicator of how executive aggrandizement and legislative dereliction of duty degrade the rule of law.

I love Will but he should know by now that laws are easily overlooked in the name of war by presidents and Congress alike.  Case in point:

LASHKAR GAH, Afghanistan (Reuters) – An air strike called in by NATO-led troops in southern Afghanistan killed 12 children and two women, Afghan officials said on Sunday, one of the worst civilian death tolls by foreign forces in months.

The mistaken killing of civilians by foreign troops, usually during air strikes or night raids, is a major source of friction between Afghan President Hamid Karzai and his Western backers, and complicates efforts to win support from ordinary Afghans for an increasingly unpopular war.

And you wonder why there is so much animosity toward us in the Middle East.

I will end with what should be a lesson for any Congressmen that supports raising taxes on oil companies:

North Sea oil production has slowed to its lowest level since records began 15 years ago following the Chancellor's recent tax raid on the industry.

An update from the Department of Energy yesterday showed the biggest fall in oil production since quarterly records started in 1995.

The slowdown follows the Chancellor's controversial Budget decision to increase the supplementary tax on North Sea Oil production to 32 per cent from 20 per cent to pay for a cut in petrol duty.

The Chancellor's decision drew an industry-wide outcry and claims that mature fields would be closed.

You can only raise taxes so long before people get tired of it.  Looks like the U.K. is learning the hard way.

Update- via Tom Woods, which of these is non-egotistical?

BusinessWeek on Tyler Cowen, Oil Dictatorships, Big Government Keeping Small Business Down, and *Gasp* Greece Missed Fiscal Targets?!

BusinessWeek has an interesting article profile of George Mason University Tyler Cowen who owns the popular blog Marginal Revolution.  I know Marginal Revolution is listed as one of the blogs I follow, but I hardly ever check it out and mainly catch headlines from other blogs.  Perhaps that will change if Cowen keeps pointing out headlines like this:

There’s a measles outbreak in Massachusetts, probably thanks to low vaccination rates.

Now even if Romney tried to brag about the success of RomneyCare, he may hit a catch-22.  The article also includes this chart on the most popular financial/economic blogs:

Krugman at #1?  Really?  And how does Robert Reich even make it on there?  The dude's solution to everything is "raise taxes on the rich, unionize Wal-Mart, and inflate housing prices."  You would think using the class warfare care over and over again would get old.  I am reminded of this fantastic line from the slightly contradictory song Baby I'm An Anarchist:

You call the cops
On the looters and piethrowers.
They call it class war,
I call it co-conspirators

I'm not much for looters but you get the point.  Anyway, it's nice to see EconLog, The Big Picture, and CafeHayek on the list.  Surprisingly, I don't see Mish's Global Economic Trend Analysis which I thought was fairly popular.

Bloomberg has compiled this chart of the democracy ratings for oil producing countries in the world.  Wouldn't you know, most of them treat their citizens like crap:

I bet you don't have to get your genitals checked out when getting on a plane in Russia...just saying.

Apparently small brokerage firms are finally realizing that those government regulators that were meant to level the playing field are doing the exact opposite.  From the New York Post:

Small stock brokerage firms say regulators are trying to kill them.

And they think the largest independent regulator of the securities industry -- the Financial Industry Regulatory Authority, or Finra, for short -- is nothing more than the hit man for large brokerage firms.

"I've been fighting with Finra for years. In some ways it's like an organized crime group," said John Busacca, founder of the Securities Industry Professional Association. "It's like paying protection money in Bensonhurst."

Busacca, who aired his grievances to me in a phone interview, complains that Finra won't take legal action against large firms but has become extremely picky when dealing with small broker/dealers.

Big business and big government in bed together?  No way.  Everyone knows that those regulators are just angels in disguise doing the public good.  It's bad to think about all the small firms that "could have been" but on the other hand, how can they seriously not see this coming?

And for the most shocking news of all, it turns out Greece was, get this, unable to meet its fiscal targets!

(Reuters) - Greece has missed all fiscal targets agreed under its bailout plan, a mission from an international inspection team found, putting further funding for Athens at risk, according to a German magazine.

And the "denying the inevitable game of Greece default" shall continue.

Hoppe on Argumentation Ethics, Doug Casey Weighs in On Insider Trading, Price of Barbecue Up 29%, and Police Brutality in Spain

Stephen Kinsella has provided a short guide to Hans Herman-Hoppe's theory of argumentation ethics at the Mises Institute today.  I have always been interested in learning more about the theory, and Kinsella does a terrific job in pointing out the key concepts of the theory and why Rothbard even thought it superior to his own natural rights theory.  Kinsella picks out these few key Hoppe quotes that summarize the principle:

..any truth claim, the claim connected with any proposition that it is true, objective or valid (all terms used synonymously here), is and must be raised and settled in the course of an argumentation. Since it cannot be disputed that this is so (one cannot communicate and argue that one cannot communicate and argue), and since it must be assumed that everyone knows what it means to claim something to be true (one cannot deny this statement without claiming its negation to be true), this very fact has been aptly called "the a priori of communication and argumentation."

The compatibility of this principle with that of nonaggression can be demonstrated by means of an argumentum a contrario. First, it should be noted that if no one had the right to acquire and control anything except his own body … then we would all cease to exist and the problem of the justification of normative statements … simply would not exist. The existence of this problem is only possible because we are alive, and our existence is due to the fact that we do not, indeed cannot, accept a norm outlawing property in other scarce goods next and in addition to that of one's physical body. Hence, the right to acquire such goods must be assumed to exist.

...by engaging in discussions about welfare criteria that may or may not end up in agreement, and instead result in a mere agreement on the fact of continuing disagreements — as in any intellectual enterprise — an actor invariably demonstrates a specific preference for the first-use-first-own rule of property acquisition as his ultimate welfare criterion: without it no one could independently act and say anything at any time, and no one else could act independently at the same time and agree or disagree independently with whatever had been initially said or proposed. It is the recognition of the homesteading principle which makes intellectual pursuits, i.e., the independent evaluation of propositions and truth claims, possible. And by virtue of engaging in such pursuits, i.e., by virtue of being an "intellectual" one demonstrates the validity of the homesteading principle as the ultimate rational welfare criterion.

The theory basically boils down to this: the very act of arguing and intellectually considering a position automatically assumes that one has ownership to their body because they must use their body to form their arguments and to engage in communication.  Rather than assume as Rothbard does that property rights for the body are natural and self-evident, Hoppe uses Misean praxeology and logic to deduce it.  Here is Rothbard on Hoppe's theory:

In a dazzling breakthrough for political philosophy in general and for libertarianism in particular, he has managed to transcend the famous is/ought, fact/value dichotomy that has plagued philosophy since the days of the scholastics, and that had brought modern libertarianism into a tiresome deadlock. Not only that: Hans Hoppe has managed to establish the case for anarcho-capitalist-Lockean rights in an unprecedentedly hard-core manner, one that makes my own natural law/natural rights position seem almost wimpy in comparison.

Kinsella's guide, though lengthy, is fantastic and highly recommended.

Doug Casey is the latest to weigh in on insider trading and why it shouldn't be illegal.  Here are some excerpts in an interview with the International Speculator:

Doug: Yes. There’s nothing wrong with insider trading, per se. For example, there’s nothing wrong with a manager, who knows his company will report a good quarter, buying shares in his company in advance. This causes no one any harm. Let me repeat that: the fact that an insider knows – or thinks he knows – good news is coming and buys shares does not hurt anyone. Actually, it spreads out the buying pressure and may help everyone buy at better prices. Moreover, if someone needs to sell urgently on a given day, maybe for tax reasons, or maybe because their kid needs an operation, then the fact that someone is in there buying with gusto does him a lot of good.
L: But people say it isn’t fair.
Doug: There’s no such thing as fair. “Fair” is necessarily an arbitrary and contentious word, usually employed by busybodies and losers. You think it’s fair to the antelope when the lion eats it? Was it fair to the dinosaurs when Mother Nature wiped them out? Or how about this: is giving everyone an equal share of something fair, if some worked for it harder than others? The guy who knows something and buys has not taken anything from unwilling hands – just uninformed hands – and people have to make decisions with varying amounts of uncertainty all the time. You can’t regulate uncertainty or the uneven spread of information out of existence any more than you can regulate the capacity to intuit the significance of information into every human skull. Not only is it impossible to do, it’s ethically wrong to try. If you’re no good at this game, don’t play it. Life’s not fair. Get over it.

CNBC has a good report on how much more throwing a barbecue this weekend will cost as compared to last year:

Here is the summary from EPJ:

Prices for a barbecue this year vs last year: +29%
Ground beef: +14%
Lettuce +28%
Tomatoes: +86%
Potato Salad: +27%
Corn on the Cob: +150%
Coffee: +20 %

For another dosage of civil unrest and police crackdown due to austerity measures in Europe, see more evidence of police brutality in Spain (pay attention at :30 mark):

Robert P. Murphy has a post today not unlike my reconsideration of where the economy is going and the surprise many are experiencing due to so much Fed stimulus not translating to a higher CPI rating.  Murphy makes a prediction:

What I can say for now is that the specific mistake I made, was in thinking that other people would see the end-game as I perceived it. In other words, I am still quite confident that there is no way Bernanke’s actions “fixed” the economy, or that TARP was a good idea etc. To translate that into a falsifiable prediction (which I’ve made before but will here repeat): If the Fed’s balance sheet goes back to where it was pre-crisis (we can make it % of GDP to make it fair), and unemployment (as currently defined) goes under 6%, and we don’t have CPI (as currently defined) inflation higher than 5% over any 12-month period, there’s not some major event that could totally falsify the measures (like a war and Obama drafts everybody and imposes wage and price controls), and (just to cover myself) that situation lasts for at least a year without any hiccups in the economy (i.e. there’s not a stock market crash two months after the above conditions are met), then sure I don’t just need to tweak things a bit, I would have to question Austrian business cycle theory itself. (I realize those are strong conditions, but I don’t want to say something too flippant on a blog post.)
So because I don’t see the Fed’s huge interventions ending in anything but a combination of a bad economy and high price inflation, I thought others would come to that realization and start shorting the dollar. I thought that once we got over the year/year drop in CPI due to the sharp drop in late 2008, that people would realize inflation was the threat.
Well, that obviously has taken a lot longer than I thought. So that was my specific mistake: I thought other investors would start agreeing with my views by now, whereas I still think most of them are being incredibly optimistic.

Bob has updated the post again with one more condition to his prediction:

In contrast, if next week Bernanke pegs the dollar back to gold, and Obama gets Congress to agree to abolish the IRS, cut federal spending by $1 trillion immediately, and start selling off all federal assets, then yeah maybe we could get of our current pickle without a crash and without high price inflation. But really what would be happening is that the great pro-growth measures would offset the disaster I think Bernanke et al. have baked into the cake, in our current trajectory. (Also, in practice I still think there would be a major recession, possibly even depression, in the scenario I just described–but it would last about 6 months.)
So to add another condition to the above, I am barring any incredibly radical pro-growth measures. I’m not going to be a jerk and say, “Oh, Boehner shaved $3 billion from Fiscal Year 2013 spending, so I’m off the hook.” I’m talking crazy Austrian heaven stuff.

Like Bob, I would like to consider myself a man and admit when I am wrong.  The next year or so will prove which school of thought is right.  Joseph Fetz has a pretty convincing comment on the topic validating the Austrian theory though:

As for your little spending comment, you are missing just about every component of what prices are all about; you’re are ignoring that not every entity spends in concert. As I said, government accounts for 46% of all spending. And, it does not have the same margin with regard to utility. It spends whatever it wants, because it has a printing press, coerced revenue, and can spend infinitely if it wanted to (or, until domestic/foreign economies loss faith in the currency). The point is that its marginal utility will diminish at a greater rate than an individual, or any number of individuals within the economy due to this very relationship. I should also mention that its current expenditures tend to be in the industries in which we are seeing the highest increases: defense, welfare, education and healthcare. I would mention pensions, but that is an entirely a different ball of wax (requires literally pages of data and research), but is inextricably related to the topic at hand. The demand for capital and commodities that serve the 4 sectors I mention above are seeing great increases, both on the investment and the consumption side, this is no coincidence.
To continue along with the “who is spending” theme, I must direct our attention to the financial sector; they got a golden parachute out of the entire ordeal. They got bailed out, they got liquid-injected beyond their wildest dreams (apparently more than they wanted), and they’ve got a pretty good promise that that they don’t have to worry about their balance sheets now or in the future. So, now they’re trying to recapitalize, and what better way to do that than to move to stocks, securities, and commodities. They have more liquidity than they know what to do with, they aren’t going to loan it out to the economy (esp. when wages are falling and unemployment is high), so it is no wonder that equities had been climbing, that treasuries were being bought, and that commodities are being bought in huge amounts: highly liquid entities tend to bid up prices of goods and contracts to capital. Duh.
Was Murphy wrong? Yes. He was wrong in that he saw the logical implications of the increase in the monetary base, ready bank reserves, and government stimulus, but that he did not take into account the shift in demand (from the economy to the government and financials). So, core inflation has remained at low levels even though prices at the higher orders. But, the prices of goods in the higher orders of production are rising, and they will have further pressure on CPI. This is going to create further problems with regard to input prices and the selling prices of goods meant for the consumer, but it will be met with inadequate consumer demand (standard ABCT theory, different circumstances). However, considering the fact that Murphy is a quite intelligent man and an economist, I can only imagine what mistakes the technicians behind the switches are making.
We have one of three choices: we let the market correct (which is not a fun time, but necessary), we keep playing this game of cat and mouse of long-run malaise (with transitory bouts of stagflation/deflation), or we can enjoy the spenders of hyperinflation. Of course, there is default, but that is an external problem with our creditors, and is an entirely separate issue, as well as one that has implications that our beyond our reckoning due to our not being able to control the actions of foreign nations (esp. with regard to war).

I must admit, I love his argument for the inefficiency of government spending in regard to diminishing marginal utility as compared to individual spending or private sector spending.  I just finished chapter 2 and 3 in Rothbard's Man, Economy, and State which discussed this very concept but didn't relate it to government spending.  Perhaps Rothbard does it later in the book, but I have yet to reach that point.

On a less theoretical note, here is another example of Goldman Sach's ever extending tentacles into D.C.:

Goldman Sachs has announced that Judd Gregg, a former three-term U.S. Senator from New Hampshire has been named an international advisor to the firm.

The number of these types of occurrences is getting sad and yet there are still some who think government regulators are saints and incorruptible.  Perhaps ignorance really is bliss.

Fed Giving Out Secret Loans (Surprise?), The Finanacial Threat to the ECB, and House of Representatives Taking Advantage of Insider Trading?

Whoa, score of financial news today after a relatively uneventful day yesterday.  First up is Bloomberg reporting on the disclosure that the Fed made many low interest loans to banks during the financial crisis:

Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public.
The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.
Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent.

*Yawn*  Is anyone really surprised?  HBO's Too Big To Fail which is based on the popular novel that depicts the events of the financial crisis has just been released and Jesse Eisinger has an interesting review:

The movie is set up in the Hollywood conventional way: A gang of misfits, each with a special expertise, is brought together for an impossible mission. There's Treasury Secretary Henry Paulson, steely eyed at the moment of truth. There's New York Federal Reserve head Timothy Geithner, the athlete (he doesn't just jog, but also plays what appears to be squash). And then there's Federal Reserve chairman Ben Bernanke, the professor with a heart of gold and secret knowledge of the Great Depression.

Ostensibly it's a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times, labeled Hank Paulson [1] the "hero" of the account.
Except that the movie actually depicts something entirely different: failure upon failure. "Too Big To Fail" The Movie isn't the story of how the Three Musketeers saved the global economy. It's a story of how the three didn't see the financial crisis coming; hadn't prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all.
That, it turns out (whether or not "Too Big To Fail" knows it), is the true story of the financial crisis.

Wow, I really gotta see this. I thought for sure it would put Ben-Newsweek Person of the Year 2009-Bernanke and the rest on a pedestal for "saving" the world economy.  Maybe they will make a movie about the Euro Crisis someday.

Another day, another person coming out and saying what the market already knows: Greece defaulting is an inevitability at this point.  This time it's a former ECB economist:

Former ECB Chief Economist Otmar Issing said Greece will probably be unable to meet its obligations as the euro region’s most indebted nation is “insolvent.” While it is “not physically impossible” for Greece to honor its obligations, repayment is unlikely, he said today at a press conference hosted by Nykredit A/S in Copenhagen.
“I’m skeptical about Greece,” said Issing, who joined the ECB a year before the euro’s inception in 1999 and stayed there until 2006. “Greece is not just illiquid, it’s insolvent.”

And of course ECB Prez. Jean-Claude Trichet will continue to deny it, but maybe he should be looking at his own finances.  From Spiegel:

While Europe is preoccupied with a possible restructuring of Greece's debt, huge risks lurk elsewhere -- in the balance sheet of the European Central Bank. The guardian of the single currency has taken on billions of euros worth of risky securities as collateral for loans to shore up the banks of struggling nations.

Looks like the making of another movie to me.

Let's take it back to America now and see what our dear public servants in Congress have been up to:

It’s no secret that members of Congress qualify as political insiders, but a new report strongly suggests that they also may be insiders when it comes to trading stocks.An extensive study released Wednesday in the journal Business and Politics found that the investments of members of the House of Representatives outperformed those of the average investor by 55 basis points per month, or 6 percent annually, suggesting that lawmakers are taking advantage of inside information to fatten their stock portfolios.
“We find strong evidence that members of the House have some type of non-public information which they use for personal gain,” according to four academics who authored the study, “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives.”

Now, I don't think insider trading should be considered a crime (see Murphy and Tamny) but this shouldn't come as a surprise either.  I mean, Congressmen would be complete and utter morons to not use their position to get ahead in the market.  The irony comes in because, while it isn't proven, Congressmen can use insider information while the overall public can't.  It's well past time to legalize insider trading.  At least Congressmen aren't giving out political positions to their spouses though....oh wait:

U.S. Rep. Barney Frank admitted he helped his ex-lover land a lucrative post with Fannie Mae in the early 1990s while the Newton Democrat was on a committee that regulated the lending giant — but he called questions of a potential ethical conflict “nonsense.”

At least Frank isn't arrogant enough to use the "everyone is doing it" excuse....

“If it is (a conflict of interest), then much of Washington is involved (in conflicts),” Frank told the Herald last night. “It is a common thing in Washington for members of Congress to have spouses work for the federal government. There is no rule against it at all.”

You have to be kidding me, after royally screwing up on recognizing the financial crisis and telling the public that Fannie and Freddie were in great condition months before September 2008, this guy waddles out and claims "well just because other Congressmen give positions to their spouses, why shouldn't I?"  He deserved this and much more from Bill O'Reilly:

Dennis Miller's best joke by far went along the lines of:  When Frank's boyfriend was running a prostitution ring out of their apartment (true story) the code words for dominant and submissive were Fannie Mae and Freddie Mac.  And yet this guy keeps getting elected.

In another awesome display of Congressional irresponsibility, the Senate has voted not to approve neither Obama's budget, Paul Ryan's budget, Pat Toomey's budget, or Rand Paul's budget:

The U.S. Senate rejected a House- passed budget plan that would privatize Medicare, a vote aimed at putting Republicans on record on an issue Democrats say could boost them in the 2012 elections.
The Democratic-controlled Senate voted, 57-40, not to advance the plan drafted by House Budget Committee Chairman Paul Ryan, a Wisconsin Republican.

At the insistence of Republican Senate leaders, the chamber also voted on President Barack Obama’s fiscal 2012 proposal announced in February. Senators voted, 97-0, not to advance the president’s plan, which would cut $1 trillion from budget deficits and is silent on broad changes to Medicare and other entitlement programs.
The Senate also rejected, 55-42, a plan offered by Senator Pat Toomey, a Pennsylvania Republican, that included many of Ryan’s ideas while omitting the Medicare proposal. The Senate turned back, 90-7, a proposal by Senator Rand Paul, a Kentucky Republican, to eliminates scores of programs and balance the budget in five years.

Can't be surprised at this either.  Meanwhile, Bill Gross has stopped being so candid about PIMCO's treasury holdings:

“We're not overweight Treasuries. We're certainly underweight Treasuries, but that does not mean we don't own lots of other bonds...It does not mean as well that we're not a little bit shy in terms of duration." 

"We’re having a good year...so don't cry for Pimco."

On the conspiracy theory front, are you still wondering why we got involved with Libya and not Yemen or Syria?  Here is a hint, it rhymes with Holdman Cracks:

May 26 (Reuters) - Goldman Sachs (GS.N) and HSBC (HSBA.L) together held $335 million of the Libyan oil fund's assets, while Societe Generale (SOGN.PA) held $1 billion in structured products for the fund, Global Witness said on Thursday.

Say, didn't those crazy guys over at Zerohedge predict this all along?

Rand Paul Filibustering The Patriot Act , Belarus Seeing Massive Inflation After Devaluation, and Mish on Crazy Hyperinflation

I saw a presentation at Capital Blue Cross today on the debt ceiling by Dr. Martin Regalia, chief economist for the U.S. Chamber of Commerce.  Dude was pretty knowledgeable and was actually worried (though not enough) about Bernanke and his excess reserves.  I ended up asking him how much he thought QE2 was driving the recovery and he didn't really give a definite answer.  He of course made the call to raise the debt ceiling in the end so I wasn't surprised.  He also claimed that the U.S. never defaulted before, which is totally wrong considering Nixon cut the gold standard in 1971 and basically told foreigners hoping to turn in their dollars for gold to go shove it.  Overall, it was a decent presentation of the disease, but the wrong prescription for the cure in the end.

Now to the real news, check out Sen. Rand Paul actually putting up a fight to stop the the passing of a four year extension of the Patriot Act.  From The Hill:

A combination of the Senate’s arcane rules and Sen. Rand Paul’s (R-Ky.) insistence on voting on several controversial amendments might cause the Patriot Act to lapse at the end of the week.

The expiration of the law before the passage of an extension would create an upheaval in the law enforcement community, which relies on its authority to track suspected terrorists.

However, if Paul insists on using all 30 hours of post-cloture debate he is entitled to under Senate rules, he could force the Patriot Act to lapse for a day.

Even if Paul waives the 30 hours of post-cloture debate, lawmakers will have to scramble to get the extension signed into law by Thursday because President Obama is in Europe. Officials will have to fly a copy of the Patriot Act extension overseas if they are to prevent a range of law-enforcement powers from expiring.

And here is Sen. Paul speaking on The Patriot Act on the Senate Floor

Damn, it sure is nice to see someone giving a crap about civil liberties besides his dad Ron Paul and Dennis Kucinich.

So why isn't the media reporting on Belarus?  From Bloomberg:

Belarus is headed for an economic “meltdown” and the ruble will need to depreciate another 51 percent, VTB Capital said, as locals lay siege to shops and protest price increases after the central bank devalued the currency.
The Belarusian central bank let the managed ruble weaken by 36 percent versus the dollar on May 24 as demand for dollars and euros from importers and households threatened to derail an economy already laboring under a current-account deficit equal to 16 percent of gross domestic product. Russia and other former Soviet partners last week agreed to give Belarus a $3 billion loan and urged President Aleksandr Lukashenko’s government to sell $7.5 billion of assets to replenish the state’s coffers.

Lukashenko reintroduced controls on prices and the currency and re-nationalized some companies and infrastructure after coming to power in July, 1994, on a platform of “market socialism.” The nation’s economy returned to growth in 1996, according to World Bank data.
At the Minsk Refrigerator Plant Co. shop in the capital today, about 20 people queued in drizzling rain to use their rubles to buy fridges. While the shop didn’t open on the day of the devaluation, most of the models in the store already had ‘Sold Out’ stickers on their doors.
“I came on Saturday and it was a nightmare, the store was stormed by people who wanted to spend their rubles because of rumors about the devaluation,” said Nikolay, a 74-year-old pensioner who declined to provide his last name. His entire savings of 6 million rubles now buy one fridge compared with three before the devaluation, he said.

The ruble traded at 5,019.75 per dollar at banks and currency kiosks around the country today, according to the median mid-price of six banks compiled by Bloomberg from the lenders’ websites. That’s 1.8 percent weaker than the official rate.
The devaluation lifted the local price of automobile fuels as much as 24 percent, according to Belneftekhim, an industry group for the country’s oil sector. Last night, about 50 people protested the price increase in the car park of a Minsk hypermarket.

Clearly the people of Belarus should shut their traps and accept that the big banks need a bailout first, not them.  Now this is just sad:

The price of children’s diapers has “gone completely insane” in Minsk, said Natalia, a 24-year-old mother also queuing outside the refrigerator store. “I used to buy a pack for 69,000 rubles, now they cost 140,000,” or almost half the 343,260-ruble monthly child benefit paid by the government, she said.

The government giveth, the government can easily print away.  It looks like the citizens of Belarus will have to learn the lesson the hard way.  This chart on the Ruble is all you need to see:

Mish had quite an epic post on the irrationality of hyperinflation coming to the U.S. today.  Here are his main points:

Stack of Things Missed by Hyperinflationists

1. Trade math
2. Reserve currency math
3. Credit dwarfs currency and changes in credit and the value of credit are far more important than the changes we have seen in money supply.
4. Failure to understand pricing currency of oil is meaningless
5. Misconceptions about excess reserves (Please see Fictional Reserve Lending for a discussion).
6. Not understanding limits and restrictions on the Fed
7. Not understanding limits and restrictions on Congress
8. Failure to understand peak oil will not cause hyperinflation. Heck, peak oil will not even cause inflation.
9. Inflation in China, does not constitute inflation in the US.
10. Unfunded liabilities do not constitute debt
11. Myopia - The US is not the only country with massive structural problems. Let's stop pretending otherwise
12. Failure to understand the Fed will not destroy itself and the banks by allowing hyperinflation

Not every hyperinflationist goes wrong on every point above. However, they all go wrong on point 12.

Point 12 alone is sufficient to debunk hyperinflation arguments.

I have to admit, I am new to this predicting inflation/deflation thing (so please don't take my advice really seriously), but considering the unprecedented steps the Fed is taking, many are making predictions that go either way.  There is undoubtedly inflation in energy, food, precious metals, and the stock market.  There is deflationary pressure elsewhere.  There is growing inflation in China as a result of money printing and fixing the Renminbi to the dollar.  We are living in interesting times and I am trying to fully comprehend the whole thing but the more I read, the more contradictory every side seems.  I had a rather long conversation with a guy who goes under the name MaMoth on Robert P. Murphy's blog discussing comparisons between the modern monetary theorists to the Austrians.  MMT has its merits, mainly predicting that we wouldn't see massive inflation from QE2, but I still think it disregards the law of scarcity and operates under the purview that the government dictates private spending and saving.  While that is true to some extent through tax policy, I think it is a rather bleak view to take that the government must dictate how the economy behaves.  It's still nice to get differing views on things, it forces me to "check my premises" as Ayn Rand would like to say.  Whatever happens in the next few years regarding monetary policy, inflation, and overall economic growth will determine which school of thought is best at predicting events.  I still have my doubts about Bernanke and the Fed being able to control the excess reserves, but time will only tell.

Perhaps this graph, which has been a hit on the blogosphere, will explain a few things:

I still see no reason to believe the trend won't continue.  It will just come down to what degree.

Update- Think America is a dictatorship?  Ron Paul does:

Still don't think so?  See this:

BLACKSBURG, S.C. — The Rutherford Institute has come to the defense of a 73-year-old Virginia resident who was allegedly ordered by a park ranger to remove his car from a national military park in South Carolina because of political messages attached to his vehicle. Jack Faw, whose ancestors fought in the historic battle memorialized at Kings Mountain National Military Park, contacted The Rutherford Institute after being told by a park ranger that the decal promoting a political organization associated with Rep. Ron Paul (R-TX), which was displayed on the back window of Faw's car, was not allowed in the park. In a legal letter to Park officials, constitutional attorney John W. Whitehead warned that the ranger's directive, which resulted in Faw being forced to leave the park, violated Faw's First Amendment rights, as well as National Park Service regulations. Whitehead also demanded assurances that Park employees will be properly instructed in how to respect the constitutional rights of visitors to the Park so that Faw and others will not face similar restrictions in the future.

Un-freaking-believable.

Fed Warning on Inflation? David Stockman on Both Parties Advocating Default, and Paul Craig Roberts on Democracy in China

Rather than get some substantial reading done on Man, Economy, and State, I have spent that past hour or so commenting on the HuffPost.  There is seriously no arguing with people on there.
So anyway, not too much news today.  Mark Perry mentioned my article in a blog post on Carpe Diem today.  Kudos to Dr. Perry for the much-needed publicity.

Ironic news today as both the Elizabeth Duke of the Federal Reserve Bank in Boston and St. Louis Fed Prez James Bullard are both warning of inflation today.

Here is Duke in a speech today at what I believe was the Boston University School of Management:

"the recent increase in gasoline prices has affected consumer choices in housing and other purchases, big and small. Family incomes have not kept pace with rising costs and many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage.

Profound insight indeed yet she fails to realize that it is the Fed's policies that are pushing up gas prices and it was the Fed's funding of the housing bubble that caused many people to take out mortgages.

Here is Bullard actually suggesting in a speech sponsored by the Mineral Area College Foundation that perhaps the core inflation number should be dropped:

Bullard said ignoring energy prices in measures of inflation may understate the true inflation rate if rising energy prices represent a relative price shift for energy.  In addition, he discussed headline and core inflation and stressed that the key policy goal with respect to prices is headline inflation rather than core.  He also said that the Federal Open Market Committee (FOMC) “should de-emphasize core inflation in order to reconnect with households and businesses that experience important price changes every day.”

So inflation should be calculated by including food and energy prices?  What a revelation!  Housing prices should be included, though of course it would understate inflation today as prices are still dropping.  If housing prices were calculated in the CPI, perhaps people would have recognized the housing bubble earlier though.

Here is a pretty good video of David Stockman being interview by Bloomberg:

Excerpt:

"The problem is not the debt ceiling. When push comes to shove, at the 11th-hour, they will do it for a couple of weeks or months and we will have a little more borrowing headroom and will be back to the same impasse where we are now."

"The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts.
When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well."

Obviously raising taxes is the wrong solution, but yes, both parties are advocating default.  Drastic cuts need to be made, but they won't be.
Here is a better interview of Paul Craig Roberts with Max Keiser:

Excerpt:

"The west prides itself that it is the standard for the world, that it is a democracy. But nowehere do you see democratic outcomes: not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty. And that's what the Greeks are in the streets, protesting. We see this all over the west. There is no democracy, there are oligarchies, some of these smaller European countries are not even run by their own governments, they are run by Wall Street... There is probably more democracy in China than there is in the west. Revolution is the only answer... We are confronted with a curious situation. Throughout the west we think we have democracy, we hold ourselves up high, we demonize China, we talk about the mafia state of Russia, we talk about the Arabs and so on, but where is the democracy here?"

Couldn't have said it better myself, except for the slightly protectionist bent he goes on in the second video.  Everyone on the HuffPost should watch this.
I will end with a great graph on the Euro Crisis from the Economist

New Mises Daily Praising Paul Krugman and Post Wondering if He is Blind

My second Mises Daily article was published today praising Paul Krugman's book Pop Internationalism for his stance on free trade.  So far 50 people have Facebook liked it, which I am assuming is a good sign.  Though Krugman's book is good (read my article to see why), his op-ed today in the New York Times is really out-there as far as consistency goes.  See this claim:

Greece’s government, finding itself able to borrow at rates only slightly higher than those facing Germany, took on far too much debt.

Slightly higher!? Are you kidding me?  The current yield on a 10 year bond from Germany is about 3%.  The yield for a 10 year bond from Greece just reached a whopping 16.76% today!!  Is Krugman blind or just being disingenuous?  I am gonna go with the latter.  Surely Krugman wouldn't suggest that Greece, Ireland, Portugal all have their debt reduced through transfer payments from the likes of the U.S. and Germany though:

Realistically, then, Europe needs to prepare for some kind of debt reduction, involving a combination of aid from stronger economies and “haircuts” imposed on private creditors, who will have to accept less than full repayment. Realism, however, appears to be in short supply.

On one side, Germany is taking a hard line against anything resembling aid to its troubled neighbors, even though one important motivation for the current rescue program was an attempt to shield German banks from losses.

Krugman has a Nobel Prize in economics yet fails to realize that nobody wants their tax dollars going to bailout countries whose public sector has grown to an unsustainable level.  And he thinks we are the crazy ones.  I love how he pointed out the losses that could occur to German banks though.  He is totally right as everyone with a brain knows that bailing out the PIIGS is really about bailing out banks in Germany, France, and the U.K.   Krugman does mention the real solution to the debt crisis, but of course warns against it:

On the other side, the E.C.B. is acting as if it is determined to provoke a financial crisis. It has started to raise interest rates despite the terrible state of many European economies. And E.C.B. officials have been warning against any form of debt relief — in fact, last week one member of the governing council suggested that even a mild restructuring of Greek bonds would cause the E.C.B. to stop accepting those bonds as collateral for loans to Greek banks. This amounted to a declaration that if Greece seeks debt relief, the E.C.B. will pull the plug on the Greek banking system, which is crucially dependent on those loans.
If Greek banks collapse, that might well force Greece out of the euro area — and it’s all too easy to see how it could start financial dominoes falling across much of Europe.

Krugman is one puzzling guy.  First he decries the excess profits big banks make and then he wants them bailed out to save them from bankruptcy and losses.  At least he does acknowledge the inevitable:

It’s now clear that Greece, Ireland and Portugal can’t and won’t repay their debts in full, although Spain might manage to tough it out.

Except he may be wrong about Spain.  The anti-bailout sentiment has finally come to the ballot box:

Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialist party had its worst electoral setback in more than 30 years, prompting a shift in regional power that risks swelling the public deficit.
Spanish bonds fell after results showed the opposition People’s Party won 38 percent of the vote in municipal elections yesterday, compared with 28 percent for the ruling Socialists. The Socialists lost control of Barcelona for the first time since 1979 and ceded Seville, leaving the party in opposition in the nation’s four biggest cities. The central region of Castilla-La Mancha, held by the Socialists for three decades, fell to the PP, as did the Balearic Islands.
The transfer of power in the regions may spark doubts over Spain’s ability to contain its budget deficit. Spanish bonds declined amid concern newly elected officials may reveal weaker finances than their predecessors reported. The defeat, capping a week of street protests, may further weaken Zapatero as he cuts the euro-region’s third-largest shortfall to avoid following Greece, Portugal and Ireland in needing a bailout.

It's only a matter of time before the market forces Spain's hand and pushes up bond yields.  From my knowledge, both the E.C.B. and the IMF won't be able to bailout Spain without huge Euro printing.  Krugman will love that.  As for more signs of the slowing down of the world economy, see this Bloomberg article:

A Chinese manufacturing index fell to its lowest level in 10 months, adding to signs that economic growth is cooling after the government raised interest rates and curbed lending to rein in inflation.
The preliminary purchasing managers’ index compiled by HSBC Holdings Plc and Markit Economics dropped to 51.1 in May from a final reading of 51.8 in April. A number above 50 indicates expansion.

The Central Bank of China can't keep the printing presses running forever, which means higher prices could be coming to a Wal-Mart near you.  I wonder what Krugman's solution for that will be.

Update- Forgot to add this before, see this hilarious clip of the car (Cadillac I believe) Obama was riding in break down while leaving the Dublin embassy:

It's even more hilarious that he was riding in a GM.

Update again- I was told that Obama's care got stuck on a pole/barrier in the ground type of thing.  It didn't break down.  It's not as funny as a break down but still pretty good.

Update once more- By far the best comment on my Mises Daily comes from poster R.J. Moore II:

Krugman doesn’t write his own articles anymore. His champagne-socialist harpie wife does. He’s admitted as much. The reason he was better before was because he was his own man. Now he’s a sock puppet for an ‘activist’ woman.

American Thinker Blog Post, Don Boudreaux on Judge Napolitano Talking About Public Supermarkets, and AP Interview with Jim Grant

I have a blog post on the American Thinker today discussing the debt ceiling and how it will be raised.  Here are some excerpts:

As the U.S. has just reached its current debt ceiling of $14.3 trillion, it is incredibly sobering to see just how much debt the federal government has rung up in just thirty years.  The irony, of course, lies in the fact that it was a Republican-controlled Senate and the Reagan administration that pushed for the ceiling to be raised back then. 

So much for Reagan being the stalwart of cutting government spending.

Now, the fight is beginning all over again.  Democrats and President Obama (who infamously voted against raising the debt ceiling as a senator back in 2006) are pushing for Congress to raise the debt ceiling in order for the U.S. not to default on the debt.  Treasury Secretary Timothy Geithner has warned that failure to raise the ceiling will be "catastrophic" to the global economy as interest rates would rise for both public and private borrowing.  Judging by Geithner's previous tax troubles, my faith is lacking in TurboTax Tim's ability to manage his own personal finances, let alone the whole country's.

I posted on this before, but now Don Boudreaux has finally been given a national television platform to speak on the complete idiocy of our current public education system.  Though the interview is short and lacking in substance, it is good for a mainstream audience:

Wall Street commentator Jim Grant has a pretty decent interview with the Associated Press on Yahoo! Finance today discussing inflation, the rising stock market, the possibility of QE3, and reminiscing on a time when the government actually allowed deflation.  Some excerpts:

Q: What would you have done in the financial crisis if you had been in Bernanke's position?
A: Resign. I don't know. I have great faith in the price mechanism, in the mechanics of markets. I think there should have been much less intervention and we should have let some chips fall, many chips fall.
Before the Great Depression, there was a great depression (lower case `g') in 1920-21. Within 18 months, the GDP was down double digits and commodity prices collapsed. Harry Truman lost his haberdashery in Kansas City. It was very painful, but it ended. And the Fed, during that depression, actually raised its discount rate and the Treasury ran a surplus. The reason it ended was the so-called real balance effect -- that is, prices came down and people with savings saw things that were cheap and they invested. That's the fast and ugly approach.
The slow and ugly approach is to mitigate, temporize and forestall to give us time to work ourselves out of difficulties. That's the current approach. I think it's intended to be a more humane approach, but I wonder about its humanity. I mean these college kids get out of school and they've got nothing. It's awful -- 9 percent unemployment and going nowhere except sideways.

Q: You've been warning about higher inflation for a while. How imminent is it?
A: I've been all wrong on this. I thought that this massive monetary stuff would generate the conventional kind of inflation that would be expressed in much higher CPI readings. Not so far. But all things are cyclical and the seemingly impossible is just around the corner. On September 30, 1981, the 30-year US Treasury bond traded at 14 7/8 percent and I remember some crank, some visionary, was talking about how interest rates were going to zero, you watch. Oh, yeah right. And so it came to pass.
It does seem improbable that the inflation rate would ever get beyond 3.5 percent, let alone knock on the door of 10 percent. But I'm here to tell you it's going to 10 percent.
Q: Won't policymakers come down hard if we get even 6 percent inflation and try to lower that?
A: Sometimes they can't control things. We had 6 percent inflation before. Washington is full of well-intentioned people. Ben Bernanke keeps saying that what we really need is a little inflation. He says we'll get 2 percent or a little bit more. You shouldn't even think that, let alone say it out loud. That's such bad luck to tempt fate by saying that you can calibrate things like that. You can't do that.

I will end with this surprising report from the Swiss Journal NZZ claiming that that if ECB, IMF, and EU officials don't approve of another round of bailouts, Greece will go insolvent in July:

If experts from the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB) do not give the go ahead for the next installment of the bailout package totaling 12 billion euros by the end of June give, then Greece will become insolvent on July 18, as the conservative Journal "Kathimerini" reported.

Of course going insolvent, declaring bankruptcy, and restructuring the debt would be the logical thing to do so don't expect any EU officials or monetary authorities to let it happen.

Yemen President Steps Down, Iran Arrests U.S. Spies, Ahmadinejad Takes Over as Oil Minister, and Fascinating Doug Casey Interview on the Singularity

After 32 years, Yemen's president is finally resigning amid massive protests:

SANAA, Yemen — Under pressure from protesters and regional allies, Yemen's president said Saturday he will sign a deal to step down after 32 years in power. Still, he condemned the proposal as "a coup" and warned the U.S. and Europe that his departure will open the door for al-Qaida to seize control of the fragile nation on the edge of Arabia.

Iranian intelligence is claiming to have captured 30 U.S. spies:

Iran has arrested 30 people it said were spying for the United States.

“Due to the massive intelligence and counter-intelligence work by Iranian agents, a complex espionage and sabotage network linked to America’s spy organization was uncovered and dismantled,” an intelligence ministry statement read out Saturday on the television said.

“Elite agents of the intelligence ministry in their confrontation with the CIA (Central Intelligence Agency) elements were able to arrest 30 America-linked spies through numerous intelligence and counter-intelligence operations,” it added.

And now Ahmadinejad is taking over position as Iran's "oil minister" even though it has been deemed illegal according to Al Jazeera:

Iran's constitutional watchdog has deemed illegal Mahmoud Ahmadinejad's decision to take over the role of oil minister, after Iran's president removed the previous minister along with two others earlier in the week.
Iran's president was said to have assumed the role earlier this week as part of a government shakeup that reduced the number of ministries from 21 to 17.
The move put him in direct control of the government unit responsible for the extraction and export of the world's fifth largest oil and gas reserves.

Still think our military presence in the Middle East is winding down?  With a new dictator to implant in Yemen, uncertainty about oil flow from Iran, captured spies, and Obama calling out Syria's murder of protesters, the CIA sure is gonna be busy.

Despite all the news in the Middle East, it was a rather boring day.  I caught a link off LewRockwell.com to this awesome, but dated, interview with Doug Casey by the International Speculator on the topic of increasing technology and the Singularity.  Some excerpts:

Doug: And that includes nuclear waste. Greens, who generally have little background in science, are completely unaware that spent reactor fuel is a potentially valuable future resource – in addition to being a trivial storage problem in the interim. Technology – it’s the most bullish thing possible for the standard of living of the average human being. Many people living below the poverty line in the U.S. have televisions, refrigerators, medicines, and luxuries that even kings and queens of only a hundred years ago couldn’t have dreamed of. That trend is going to continue – and accelerate. It’d be hard for me to overstate how favorable this is.

L: So, would you say you’re a techno-optimist as a matter of general principle – because that’s the way you’d bet on the multi-millennia trend – or because there are specific technologies you see developing that lead you to this conclusion?
Doug: Both.
A key fact my mind keeps returning to is that there are more engineers and scientists alive today than there have been in all of the rest of human history combined. And all of these people want to become the next Steve Jobs or Albert Einstein – they all want to become immensely wealthy or make major breakthroughs. The path to the former is by inventing better technologies, and the path to the latter adds to the understanding that allows us to do the same. These people are as motivated as any alive, and I expect a good number of them will succeed.
There is a countertrend, however: government. States all around the world are becoming increasingly virulent, both in terms of seizing capital and in terms of making capital accumulation more and more difficult. Further, they’re constantly creating new regulations on what can and can’t be done. And remember what I said before: technology isn’t enough – you have to have the wealth to implement the new technology. Whether it’s through power-hungry myopia, bureaucratic stupidity, or ideological insanity, governments are actively destroying the capital we need to advance, and slowing its accumulation.
Back on the positive side, I’m a huge believer in nanotechnology. I believe it is likely – even in the span of the next generation – to change the nature of life on this planet totally, unrecognizably, and irrevocably. It’s the single biggest thing on the horizon.

Editor’s Note: Here is a chart on this subject from Doug’s book, Crisis Investing for the Rest of the 90s.

The expected abrupt transition from the paleolithic to nanotechnic eras (a long-term perspective). Stone-age agriculture and Moon landings lie in the transitional zone.
L: Sounds even more like science fiction.
Doug: Well, if you look at a graph of the rate of change in technology, it’s basically flat for a long, long time, then slopes upward gently until about the 1750s. Then the Great Enlightenment and the Industrial Revolution hit, and the curve rises more and more steeply. If you look at it now, it looks poised to basically go vertical. Short of a global catastrophe that knocks us back to the Stone Age, or wipes our species clean off the planet, there’s no stopping it. The rate of change is accelerating. If it’s not stopped, you get to the point at which the lifespan of your body – or a better one you make – has no natural limit, and your control over everything in the universe that can be controlled is complete.

L: There are people who might say that it was government science that put a man on the Moon…
Doug: Government doesn’t create anything. All it does is take resources from those who have discovered or created them, and, sometimes, focus some of them in a given area. I’m of the opinion that private space travel would have happened sooner and at lower cost if the government hadn’t first given itself a monopoly in the field. I can’t prove that, but that’s what I think.
L: I can believe it. And we have seen very blatant efforts by government to stop technological progress, such as the previous U.S. administration’s effort to stop stem-cell research.
Doug: Yes, and government imposes up to a billion dollars in unnecessary costs on developers of every new drug. All that money goes to pay lawyers and compliance experts, not scientists.

The interview is highly recommended.  Casey even goes into the topic of the Singularity:

Doug: It does, but it isn’t. This is hard science. One person I have great respect for is Ray Kurzweil, an inventor and thinker about the future who’s written about a coming “technology singularity” – a point at which technology doesn’t just get better, it all but instantly leaps to its full potential. Everything that is possible to do, we’ll know how to do. After this happens, people will look at this event as the single most important thing to ever happen – to ever happen. As we date things now BC and AD, in the future everything will be pre- and post-singularity. And this could happen within the next 20 or 30 years.

After all that rather deep stuff, I will end with a great chart showing the rise in U.S. debt and which presidents are responsible:

And some people still believe Democrats and Republicans are different...

Update- Both Bob Murphy and Don BouDreaux of CafeHayek have put this video up.  What a great case of police privatization.