David Stockman Puts Blame Where It Belongs, Buffet Too Proud to Lend, and the Keynesian Cure All Equation

Former Director of the Office of Management and Budget David Stockman has never been one to let his feelings of disappointment go to waste.  It looks like he finally hit the goldmine as he describes how we got in our current economic situation:

I blame it on the Fed. I blame it on the 1971 decision by Nixon to close the gold window and let the dollar float. Because out of that has evolved -- or morphed -- a central banking policy in the world that absorbs unlimited amounts of government debt. And so we went on what I call the "T-bill standard" or the "federal debt standard." And the other central banks of the emerging mercantilist Asian economies -- Japan, Korea, and now, especially, the People’s Printing Press of China -- have absorbed this massive emission of debt that otherwise would’ve created powerful negative consequences that would’ve forced politicians to act long ago. In other words, higher interest rates, pressure for inflationary monetary policy, and the actual appearance of price inflation. But because all the bonds on the margin were being absorbed by the central banks, we got away for twenty or twenty five years with “deficits without tears.”

Well of course there aren't any tears, everyone got fat and happy off the deficits.  Why pay for things when the Fed heads can just add a few digital zeroes to bank balance sheets and let freedom ring?  Check out his nickname for Bernanke:

As far as I’m concerned, Bernanke is the monetary Darth Vader. He has destroyed the bond market. Because fundamentally, in a healthy capitalist system, the interest rate in the money market and in the longer-term capital market is the price of money and the price of capital.

Since Darth Vader ended up saving the day and rescuing his son's over ambitious ass, I don't think relating Bernanke to him is overly accurate.  Vader died a hero, Bernanke will almost certainly go down as a complete and utter failure and join Arthur Burns and Alan Greenspan in central banking hell.  You see, central banking hell is just like normal hell except Greenspan and the rest of the crew run on treadmills of never ending fiat bills while being whipped from behind by former presidents.  Typically Lincoln takes the lead with Nixon at his side.  Lucky for them, it goes on for eternity.  Here is Stockman on Congress, the banks, and gold:

It’s hard enough for politicians to face the music, to dispense bad news, to make hard choices, allocate pain to constituencies whether it’s spending cut or tax increase. But when the Fed destroys the bond market, which is the benchmark for the whole capital market, and tells the Congress that you can borrow money for two years at eighteen basis points, which is -- as far as Washington’s concerned -- that’s a rounding error. It’s the same as free.

When you’re giving that kind of signal, then there is no incentive, there’s no motivation for people to walk the plank and face down this monster of a fiscal deficit and imbalance that we have. Washington thinks you can kick the can down the road, the debt is more or less free, and we’ll get around to solving the problem. But today, let’s not make any tough choices. That’s where we are. 

The banking system has been saved on the back of the savers of the United States. We have totally destroyed any incentive for thrift, for deferred gratification. The Fed has become more Keynesian than Keynes.

Gold is becoming the de facto money. We’re going to be back to a gold standard, one way or another, through the back door in only a matter of time, simply because the central banks are dominated by the ritual incantation of dying Keynesian theory.

Stockman is right on every point, the irony being that he used to be a U.S. Rep. himself.  He has vindicated himself at this point by seeing the writing on the wall however.

Who hasn't come close to being vindicated for anything however is Mr. Oligarch himself Warren Buffet.  After bitching about how he doesn't pay enough in income taxes (no one is stopping you from writing a check to the Treasury Dept. Warren) he now reluctant to bail out other governments, via SF Gate:

Sept. 30 (Bloomberg) -- Berkshire Hathaway Inc.'s Warren Buffett, who has sold most of his company's holdings of European sovereign debt, said his firm isn't interested in helping to bail out lenders on the continent.

"They need capital in their banks, in many of their banks," Buffett, Berkshire's chairman and chief executive officer, told Bloomberg Television's Betty Liu on "In the Loop" today. "We would not be a good prospect," he said in an interview from the New York Stock Exchange. He's received "very, very few" calls about putting capital into European banks. "Not quite none at all," he said, declining to name any institutions.

Now anyone would be a fool to lend to European banks.  It's the equivalent of dousing your money in kerosene and adding a match to the pile.  But it's awfully ironic how wiling he is to pay more in taxes to the U.S. government that spends like a drunken sailor than another western democracy.  The reason being he won't make money off the deal of course, but we don't want that dirty little secret getting out now.

In a bit of end of the week humor, Zerohedge has a report on a wonderful new discovery that will be sure to give Krugman a tingle down his leg:

(Routers) – A remarkable discovery reveals equations that economists say could end the business cycle - forever. Ian Macallum, spokesman for the Royal & Ancient Historical Society of London, told Routers that the equations were contained in an unpublished manuscript which was found in the attic of an 18th century flat in Soho.
"We were skeptical when initially contacted by the current owners” said Macallum. “There is no record of Keynes ever having resided at that address.  But we can confirm that the manuscript is indeed an original work of Lord Keynes."
Although very technical in original form, Moody’s Chief Economist Mark Zandi said the final derivation of the equations can be simplified to the following:

“Unless you’re a PhD economist, I think it’s impossible to appreciate the elegance of the final derivation: by raising every stimulus factor to the power of infinity, you immediately move the probability of future recessions to zero.  It’s brilliant.  The notion that ‘risk’ is a necessary component of free market capitalism will finally be discredited.”
Federal Reserve Chairman Ben Bernanke was equally sanguine.  “I’ve asked some of my fellow academics at CERN to begin modeling the equations with an array of neutrinos, mixed with a small amount of unconventional policy.  Even without the helicopter, it should be theoretically possible to achieve an economic growth rate faster than the speed of light.  Einstein was a monetarist, so I’ve always been skeptical of his Special Theory.  It is now painfully obvious that he should have raised ‘c’ to the power of infinity, not 2.”
“I’m still trying to catch my breath!” exclaimed Nobel Prize winning economist Paul Krugman.  “Literally, when I read the equations, I felt a chill down my spine and a tingle in my balls.  We can finally end the partisan bickering and get the global economy back on track.”

There you have it folks! The end all to all end alls!  Just shove that handy formula into the super computer at the Fed and we should get all the fiat financed growth we need to get this economy back on track.  Even Krugman's wife never brought as much joy to the Princeton Prof. as this formula does!

Also in the humor section, this cartoon has been making its rounds around the econblogosphere:

Hilarious.

James Altucher on Getting Rid of the FDA and Other Unitended Consequences of Public Policy

Though James Altucher is one of my favorite new blogger/writers, he has really outdone himself on this new post on why the Food and Drug Administration needs to be abolished.  It's easily the best thing I have read all day (well, besides Rothbard's wonderful ode to Ludwig von Mises) and perhaps all week.  An excerpt:

Time to end the FDA, traditional medical education and the insurance companies. Just get rid of them.
Let’s start with the worst and most corrupt semi-government institution known to mankind: the Food  and Drug Administration. The administration that lets you smoke as many cigarettes as you need to get lung cancer, drink a ton of alcohol to get liver cancer, but then won’t let you take any of the drugs or treatments for lung cancer or liver cancer.

Get rid of the FDA. Simple.  Let the Internet be a virtual FDA. A drug will have a web page, a scientist with verified credentials will document his research, and comments from users will  describe their experiene with a drug. Many people die and get sick from FDA-APPROVED(!) drugs. The same thing will happen here. But will save the billion dollars and will allow drugs to be quickly tested by the audience that needs it most – people dying of terminal diseases. These people will quickly report back if there is success and we’ll know what works and what doesn’t. If there are bad stories then it’s a guarantee we will hear about them. And it won’t require a billion dollars and ten years to hear about them.

Probably the best line in the whole article:

Almost everything I can learn in an expensive medical school I can learn with a combination of Passion + Internet + Apprenticeship.

Altucher's post demonstrates just how much of a wonderful thing the internet has become.  The decentralization of information will only lead to further innovation as more and more people realize that they can learn anything at the click of a mouse instead of an overpriced text book and a tenured university professor.  See this example:

If you came to me with a headache, for instance, I would ask you a bunch of questions. Did you fall? Did someone hit you? Are you vomiting? Then I would take an ophthalmoscope (that little miner’s light where the doctor says, “now open wide” and a bright light shines directly into your eyes”) and I would  look at the back of the eye  (“the fundus”) to see if I can detect any swelling in the brain or any brain tumors. A simple check on the Internet will show many examples of pictures of a swelled brain compared with an unswelled brain. I might do an EEG also to see if there’s anything abnormal. If I see anything abnormal that requires immediate surgery or a neurologist then I would send you off to a specialized hospital. Else, take two aspirin and call me in the morning. That wasn’t so hard, right? But to do that I need about 12 years of education and go about $300,000 in debt and then pay massive malpractice insurance. And not only that, what if your headache was the result of an ear infection or an eye infection (easy to tell by various methods that are easily found via Google)? I would have to prescribe you an antibiotic.

But of course the powers that be will never let this sort of thing occur on a massive scale.  There is too much money involved though occupational licensing, patent granting, and lawsuits to actually allow people to be responsible for their actions.  Of course I can't choose my own doctor, he has to be certified by the AMA (a government granted monopoly) and must be $300,000 in debt to take a quick look down my throat and stare at my genitals (a privilege in itself I might add).  And if there is a darker than normal freckle somewhere, that may require an extra visit followed by a prescription recommendation he is paid (bribed) to make.  Don't get me wrong, I hardly blame doctors for such behavior.  They are in it to make money, why else does anyone work?  For fun? Even if I got paid to write, I would still treat it like work much like I do already.  It's just that sipping hot,bitter coffee and bitching about the government would be a lot more fun than other jobs, but it's still work.  Back to the doctors though, of course they make you jump through hoops and try to deplete your savings, they know how to fill their wallets.  The only protection against this is more competition, not getting bureaucrats involved that will just get paid off by Big Pharm and the AMA to write laws making competition more unobtainable.

Anywway, Altucher's post is highly recommended.

I was emailed an editorial article by an ex-girlfriend of mine (her pic is somewhere on the blog) today in which she reflected back on her experience working in Harrisburg around the state capital.  She laments that politicians don't care about their constituents and hence her desire to enter politics to "change" things.  I guess that's a sign of my complete failure to show her that politicians are sociopaths that use guns and badges to force everyone to act in a way that they deem appropriate.  And here I thought I was changing hearts and minds with my simple and self evident logic.  Silly me.  What she doesn't realize is that when politicians are generally decent minded, their policies end up having unintended consequences, see Elizabeth soak-the-rich Warren for instance:

Bank of America plans to introduce a $5 monthly debit card usage fee for many of its account holders beginning early next year, the company said.

"The economics of offering a debit card have changed," said Bank of America spokeswoman Anne Pace.

The Dodd-Frank Act's Durbin amendment, which takes effect October 1, and inspired by America's great interventionist, Elizabeth Warren, caps fees banks can charge merchants for processing debit cards to 21 cents per transaction, potentially costing banks billions of dollars in fee income. The banks are going to try and get it from cardholders.

Well shit Ms. Warren, you really think BoA would take such measures lying down?  Look for other banks to replicate such policies as Dodd-Frank eliminates many avenues for banks to be profitable (because creating imaginary money through fractional reserve banking is never enough).

In more government intervention news, rumors are flying around as Pippa Malmgren is speculating that Germany is printing the mark in expectations of leaving the Euro:

News to expect in the coming days and weeks...

•The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.

Well we can only hope such a policy occurs, though the mark will probably be printed like crazy to maintain Germany as a prime exporter.  Still, this may prove to be the catalyst needed to put the nail in the coffin of the euro but you wouldn't know it judging by the "we must save the euro" crap coming out of Merkel's mouth.  You can bet she has a pink slip coming her way soon enough.  See this hilarious and utterly candid video on why the current measures to preserve the Eurozone are complete crap:

While Germany, Greece, Portugal and the rest of the PIIGS may eventually leave the Euro zone, it will likely result in massive printing of their respective currencies to stimulate their economies by subsidizing exports.  It's the same race to the bottom most countries are engaging in right now (or will be again very soon) but it looks like Russia might finally be having the right idea:

MOSCOW, Aug 26 (Reuters) - Russia's central bank will offer gold-backed loans for up to 90 days at an interest rate of 7 percent, it said in a statement on Friday, expanding its lending facilities for dealing with any future liquidity crunch in the banking system.

It's not perfect (the loans could easily be issued while Putin yells "gotcha! we aren't redeeming them for gold!") but it's a start.  While hard, commodity based money provides a necessary check on government's ability to dole out welfare checks, George F. Smith brings up an important point in his Mises Daily article today:

The Mises Institute offers an extensive library of literature explaining the economics behind an autonomous commodity-coin system. But you don't need to be an Austrian to appreciate the value of gold. In 1914 Europe went to war. Three years later it was officially a world war. For this to happen the belligerents (with the exception of the late-entry United States) had to go off the gold standard. It wasn't the men doing the fighting who made the decision. It was the politicians who sent them to fight — and die in the millions. And what did they die for? The rest of the bloody century, and now the new century with the world still at war and teetering on financial collapse. The killing had to be funded, and that meant gold had to be abandoned.

An incredibly important point to make, one which needs to be brought up a lot more.  Especially since its seems like Pakistan may be the next place we see boots on the ground.

Update- I thought this was a very apt image for the future of fiat currency:

Update- The impeccable Doug Casey strikes again:

Speculator Series with Doug Casey from Cambridge House International on Vimeo.

Time for Harrisburg Bondholders to Take the Loss, Bachmann Scared of Cuba, and More Green Energy Crony Capitalism

Though I tried to warn everyone back in July, it looks like the wonderful PA legislature is going through with its plans to try and take over the fiscally ailing city known as my hometown of Harrisburg.  From Bloomberg:

Harrisburg may become Pennsylvania’s first municipality to fall under receivership.
The City Council in July and August rejected fiscal rescue blueprints from consultants hired by the state and Mayor Linda Thompson. Today, The state House of Representatives voted 185-9 for a bill that would let Republican Governor Tom Corbett name a receiver. The Senate still must consider the plan.
The capital city of 49,500 faces a debt burden five times its general-fund budget because of an overhaul and expansion of a trash-to-energy incinerator, which doesn’t generate enough revenue to cover the obligations. It avoided defaulting on general-obligation bonds in September and last year by getting advances on state aid.

Barry Ritholtz has a great post today entitled "Take the Loss" which should be read by every PA politician, Gov. Corbett, Mayor Thompson, and every idiotic bondholder than lent Harrisburg money, an excerpt:

When Bear Stearns first began to wobble in 2007, the initial error in this era of bailouts was in rescuing their bondholders. Instead, in 2008, they should have been forced to take the loss.
Its the same for creditors of Citi, Bank of America et. al. — instead of rescue packages, their creditors should have had to take the loss.
Mortgage delinquencies growing? More and more defaults in the pipeline? We can extend & pretend, or we can take the loss.
Note that via the FDIC, some bank lenders did take the loss. Washington Mutual’s collapse led it to being bought by JPM. Wells Fargo picked up Wachovia. Other examples abound, In each case where losses were forced to be realized, we ended up with a healthier few banks, and no moral hazard.
Zombie banks get created when they do not take the loss.
Now we have the European crisis, wherein all of the parties involved refuse to (say it with me) take the loss.
Greek debt piling up? You can restructure, renegotiate, reneg, or you can take the loss. Portugal’s balance sheet a problem? Well, the ECB can kick the can down the road, or they can force lenders to take the loss.
The model for not taking the loss has to be Japan. Look at their stock market since 1989 and you will see the net result of not taking the loss. The Japanese have suffered through lost decades as a result of their refusal to take any write-downs, propping up their Keiretsu.

Allowing those who made dumb decisions to face the consequences?  What an absurd idea!  There is absolutely nothing that the receiver Corbett will potentially name could do that Mayor Thompson can't.  She is looking to preserve collective bargaining contracts while Corbett is looking for a power grab.  Taxpayers get to take the hit like always.  Here is an apt image via WilliamBanzai:

To continue on with the absurdities of politicians, here we have GOP presidential candidate Michele Bachmann, when not mistakenly labeling a cancer vaccine of causing mental retardation, accusing Cuba of providing cover for Hezbollah:

Republican presidential candidate Michele Bachmann said Monday that it would be “foolish” to normalize trade with Cuba because Hezbollah could soon have “missile sites” there.
“Why would you normalize trade with a country that sponsors terror?” the candidate asked a crowd of supporters in Cedar Rapids, Iowa. “There is reports that have come out that Cuba has been working with another terrorist organization called Hezbollah. And Hezbollah is looking at wanting to be part of missile sites in Iran and, of course, when you are 90 miles offshore from Florida, you don’t want to entertain the prospect of hosting bases or sites where Hezbollah could have training camps or perhaps have missile sites or weapons sites in Cuba. ”
Bachmann was most likely basing her fear on an unsubstantiated report from the Italian publican Corriere della Sera, which was picked up by numerous conservative websites earlier this month (see here, here, here and here.)
Even if that report were true, it makes absolutely no mention of “missile sites.”

As Bastiat says, "when goods don't cross borders, soldiers will." Trade is a policy of peace, barriers create tension and hatred.  Bachmann is a moron, plain and simple.  And of course she isn't alone:

Update: The Energy Department on Wednesday approved federal loan guarantees for two green energy projects totaling more than $1 billion. It approved $337 million for a Mesquite Solar project in Arizona and $737 million for a Solar Reserve project in Nevada. The projects would create a total of 52-55 permanent jobs, according to earlier DOE figures and company statements. That's about $20 million per permanent job.

Despite the massive success known as Solyndra, here we go again.  I wonder how much those companies donated to the Obama campaign.

I will end with mentioning Robert Wenzel's wonderful emails to the NY Federal Bank and the Fed headquarters in D.C. in response to Herman Cain's suggestion that one just dial them up with any questions.  I am 100% positive that Cain was telling the whole truth.....see the emails here and here.

Update- Here is a fantastic video on how fiat money really works and why it screws over the low class and enriches the upper class:

Great Interview with Doug Casey, Simon Black on the Difficulty of Crossing Borders, and a Planned Financial Tax for the EU

Every time you see an interview with Doug Casey posted somewhere, always be sure to read it.  While Casey's message is always the same, it is bound to be chock-full of great quotes.  See his latest interview with The Gold Report:

TGR: Do you see that changing after the next election?

DC: No. I think the chances of Obama being reelected are high, simply because more than half of Americans are big net recipients of state largesse. The U.S. has turned into a larger version of Argentina politically, where the electorate is effectively bribed to vote for the biggest thief.

TGR: Considering what you said a moment ago, that the world doesn't need to stimulate consumption, you must find some irony in the Obama administration's plan to stimulate consumption again in the U.S. as a way to spur some economic growth.
DC: I'm afraid that after being counseled by the fools that surround him, Obama talking about economics is like the blind leading the doubly dismembered. They want to spend $450 billion trying to create new jobs—but these are government jobs, where you have people digging holes during the day and filling them up at night to create the appearance of employment. No government has any idea what the market really wants and needs. There should be zero government involvement in this. The government cannot and should not even try to create jobs. If Obama wants to stimulate the economy, he can decrease the size of the government. I would say a 90% reduction would be a good starting figure.

The most interesting part of the interview is Casey's reply to the notion that the world will hold onto its dollars in order to keep up the mercantilist/Keynesian/export subsidizing industries that have powered their economies at this point:

TGR: Given that the U.S. is the world's biggest consuming nation, wouldn't fleeing the dollar create a big consumer vacuum in the international community? Doesn't the rest of the world want to keep up the high level of exports to these U.S. consumers?
DC: That's exactly why the U.S. is in such trouble; it's idiotically focused on consumption, while only production can create prosperity. The world doesn't need to stimulate consumption. This is another canard, because everybody has an infinite desire for goods and services. I know for myself, I'd like not just a car, but 10 Ferraris, a couple of Gulfstreams and 10 houses around the world. So, by myself, I have an infinite desire for goods and services. Multiply that by 7 billion other people. The only way to gratify those desires is by producing enough to trade with other people to give you what you want. When so-called "economists" think the problem is that we don't have enough consumption, that shows that the profession itself is bankrupt. It's actually quite embarrassing.

The interview is, of course, highly recommended.  Since I am staying on the topic of highly recommended reading for this post, check out Simon Black's newest post at Sovereign Man on his troubles globe trotting:

My current US passport, for example, was issued last February while I was in Thailand. By late summer, there was barely a single square inch of space remaining, so today I had the unfortunate displeasure of heading down to the US consulate in Cape Town to have them insert more pages.
Each time I’m forced to demean myself in this way– sitting around those sterile government waiting rooms and filling out useless paperwork only to justify the salary of some bureaucrat– I have plenty of time to reflect on the nature of this system.
You see, for hundreds, even thousands of years, people moved about the earth without any bureaucracy whatsoever. Just like the African elephants I encountered last week who roam freely between Botswana, Zambia, and DR Congo, people too used to travel freely without worrying too much about invisible lines on a map.
Even up until World War I when boundaries between empires were clearly defined, people could still cross borders without the need of a passport.
After the war, some do-gooders at the League of Nations decided that we couldn’t have all those people traveling freely without government intervention… so they sponsored a series of conferences aimed at designing an international travel document, and worked to establish global border checkpoint protocols that required having one.

As for the cost of new passport pages:

I’ve had fresh pages inserted into my passports so many times, I keep watchful eye on the ever-increasing cost of doing so.  Just over 2-years ago, it cost me nothing at the consulate in Panama. Last year, around $40.  Today in Cape Town? $82. Needless to say, this is pretty significant price inflation from a government that pretends inflation doesn’t exist.

One of the features of truly free society is the ability to move around freely without being hindered.  The exception comes with private property of course.  As we see though, open borders is a tough policy when people vote themselves entitlements and understandably don't want to share.  Rick Perry is obviously having this problem right now.  Open borders could be a viable option if it weren't for two things: warmongering and entitlements.  Wouldn't it make sense that our two political parties support both though claim to only support one?  Our overseas adventurism surely isn't making us any friends while free education, healthcare, and a virtual police state prove too tempting for some to stay away.  That is till it all becomes too expensive and oppressive to live under, but might as well take advantage while you can, right?  In the end, open borders is a policy of peace, cooperation, and beneficial trade.  Welfare and warfare retard such policies by bureaucrats and politicians picking winners and losers

A perfect example of distorting the free interaction of trade are transaction costs, so wouldn't you know it that the EU is attempting to do as such:

The European Commission approved in principle the tax proposal on Tuesday, and the head of the EU executive Jose Manuel Barroso may outline the plan on Wednesday in a "state of the union" address to the European parliament in Strasbourg.
On the commission's drawing-board for more than a year, the idea was given fresh impetus last month when given the nod by Europe's power couple, French President Nicolas Sarkozy and German Chancellor Angela Merkel.
"The idea is to force a contribution from the financial sector, which enjoys fiscal privileges thanks to a sales tax exemption, meaning it saves 18 billion euros a year in Europe," an EU source told AFP on condition of anonymity.
If adopted -- not before 2014 -- the tax could ring in between 30 billion and 50 billion euros a year -- possibly half for the European Union budget, the remainder for national governments.
The rate suggested would be minimal with member states free to hike the tax.
The financial transactions tax is slated to target a wide field, with the latest known proposals aiming to slap 0.1 percent on shares and bonds and 0.01 percent on derivatives.

If someone is gonna keep bashing their head against a wall despite all attempts at reason and logic to stop them, there isn't much you can do but let the pain and idiocy occur.  As Mish points out:

Short term traders add liquidity. Would .1% drive them away? Yes, it might. Think of it this way, 10 quick flips is 1%. 100 trades is 10%. In the short-term trading world 100 trades is not a big number.

It's almost painful to watch such self destruction though it's entertaining to see what kind of idiotic ideas the geniuses across the pond come up with next.

I will end with a very apt image for idiocy:

Funny, I know a politician running for president that would do a bang-up job at counseling.  He made an appearance on The Daily Show last night.

Rethinking the Bubble in Commodities/Precious Metals

I have talked a bit before on why gold isn't in a bubble, just overbought.  Judging by recent precious metals activity, I still hold my original position but am beginning to reexamine the kind of fundamentals that drive the price of gold.  Now after Bernanke defied most expectations and decided to not expand the monetary base to deal with what seems like a slowing economy, the price of gold and silver fell.  Mish attributed this to a few factors:

Four Reasons for Metals Plunge

1. Fed did far less than expected
2. Mutual fund redemptions
3. Margin calls at hedge funds
4. China growth story fading

Some attributed it to a CME margin hike which now looks like it came too late.  And yet this all falls under the paradigm of the Austrian Business Cycle Theory.  It doesn't take a genius watching Gordon Liddy commercials to realize that central bank money printing drives the price of gold.  The recent financial crisis was met with the Fed injecting trillions into domestic and foreign banks alike.  Take a look at what this did for gold prices:

Now following the dot-cum bust in which Alan Greenspan dropped interest rates to record lows, hence inflating a housing bubble, the monetary base grew:

See a pattern?The Fed has been meeting crises with money printing since the time of Paul Volcker.  This isn't anything new and the market seems to have accepted this notion.  Thus with Bernanke announcing that no new money printing will occur, the market appears to be reacting in a way to say that it expected more money printing.  One can look at the boom in commodities that occurred once QE2 was announced to see the kind of affect Bernanke has on the economy even if the newly created money remains as excess reserves stored at the Fed.  As Peter Cohan of Forbes observed back in May:

After keeping interest rates near 0% for years, the amount of free debt flying around is exceptionally high. And rather than funelling the cash into job-creating businesses, traders have been using the money to buy commodities futures contracts while selling short the dollar.

It is clear that the recent climb in commodity prices and subsequent drop can be attributed to the Fed's low interest rate policies, typical Austrian Business Cycle theory.  While gold may have fallen into this trap for the time being, money printing around the world will resume and the price will once again begin rising.  I plan on elaborating more on this in an article, so stay tuned.

To further illustrate my point, see the latest CNBC interview with Marc Faber:

"Gold is quite oversold and I would consider buying some gold in the next two days... We overshot on the upside when we went over $1,900. We're now close to bottoming at $1,500, and if that doesn't hold it could bottom to between $1,100-$1,200. "Both equity markets and gold markets have become very oversold, and I think a rebound is occurring. Following this rebound, which I expect to get underway this week, there will be a longer slowdown."

Also see John Tamny's article in Forbes today on why gold is a good indicator of the dollar's strength:

Over the last ten years the price of an ounce of gold has risen 595%, and over that same time frame the S&P 500 has gone up a paltry 2.9%. That's right: If investors had purchased a scarce metal with very limited industrial uses ten years ago they would have wildly outperformed an index loaded with America's most promising companies.
The last ten years are not unique. In the 1970s gold rose 1,355%, while the S&P essentially went flat over the same decade with a return of 16%. Conversely, in the 1980s gold fell 52% and the S&P zoomed upward by 222%. In the 1990s gold's decline continued by 29% and the S&P roared, up 314% for the decade.
Gold is a great predictor of our economic health because as the most constant, objective measure of value in existence, its price is the single best measure of the value of the most important price in the world: the U.S. dollar. Put simply, a fall in the price of gold signals a strengthening dollar, and a rise in the yellow metal signals a weakening one.

I will end with some comic relief, check out this ballsy trader talking about the Euro crisis:

"The collapse is coming...and Goldman Sachs rules the world."

This guy is never gonna appear on television again, he is spilling too many beans.  For a brief summary of the Euro crisis, see this chart:

Occupy Wall Street Continues, The Fed Being Big Brother, and Rick Perry's Own Solyndra

I have talked about it a bit before, but I am honestly surprised how long "Operation: Occupy Wall Street" has lasted.  All along I figured a total of maybe 25 people would show up for a few days and then go back to their trust funds and Marx worshiping.  Well they definitely proved me wrong:

MYFOXNY.COM - After a day of turmoil and unrest, the Occupy Wall Street protest continued in Manhattan Sunday.

80 protesters were arrested Saturday in Union Square after police said they were arrested for blocking traffic. The charges included disorderly conduct and resisting arrest.

One person was charged for assaulting a police officer.

A few of the protests were caught on camera and a Youtube video showed some protesters getting sprayed with mace.

Here is the video:

While protesting "the man" and peacefully bitching about the banksters is all well and good, it's highly doubtful any of these kids actually understand how the Federal Reserve System or economics in general works.  Do they know how many NY Fed primary dealers there are?  Do they actually understand all the detrimental affects of fiat money printing?  Have they ever read "Human Action'' or even heard of Murray Rothbard?  Since he doesn't have a New York Times column out every Monday and Friday (you know exactly who I am talking about) probably not.  Still, I gotta hand it to these kids for having the spunk to stay out there for so long and the whole affair not escalating into a violent riot.  Here are some apt pics via WilliamBanzai7:

While I may have doubted the affect of "Operation: Occupy Wall Street," it looks like the big boys up top are starting to get worried (I honestly couldn't believe this when I read it):

The Federal Reserve Bank of the United States, which in a Request for Proposals filed to companies that are Fed vendors, is requesting the creation of a "Social Listening Platform" whose function is to "gather data from various social media outlets and news sources." It will "monitor billions of conversations and generate text analytics based on predefined criteria." The Fed's desired product should be able to "determine the sentiment [ED:LOL] of a speaker or writer with respect to some topic or document"... "The solution must be able to gather data from the primary social media platforms – Facebook, Twitter, Blogs, Forums and YouTube. It should also be able to aggregate data from various media outlets such as: CNN, WSJ, Factiva etc." Most importantly, the "Listening Platform" should be able to "Handle crisis situations, Continuously monitor conversations, and Identify and reach out to key bloggers and influencers."

Ha! Now that the status quo is being legitimately challenged on a number of platforms, looks like it's time to start spying on the little people and jump start the propaganda machine ala posters in the 1920's.

What does the Fed seriously expect to accomplish from doing this?  Figuring out more people dislike than they originally thought?  As Charles Hugh Smith puts it, too many people realize that "The witch-doctors at the Federal Reserve have been busy painting radio dials on rocks for the past four years, hoping that their increasingly desperate pleas will magically reach the gods of "animal spirits."  Looks like Bernanke can thank one man for all the new much needed scrutiny:

Since I am on the topic of crony capitalism, I received an email from a fan of my recent Press and Journal article who provides some inside knowledge on Rick Perry:

Many Texans have seen thru Perry and his globalists from the beginning and I suspect the only reason he was elected Governor was because his Demo opponent was a con man from Houston, so it was lesser of 2 evils election.

Sort of  boots on the ground report, but the area Republican Women have even said in quiet whispers that they favor Ron Paul.  

I am waiting for the links between Perry and Centra to hit the news. Centra is a Spanish company that builds toll roads for states - of course the deal is Centra builds the road and then gets the profits for the next decade or two. Toil roads are not a favorite of Texans, but Perry has pushed some thru. 

But the real issue is that Centra built toll roads in Illinois several years ago, and now bond payments are coming due and Centra is short money to pay because the toll roads were not as profitable as projected.

Now this is where it gets twisty - Under the influence of Perry, Texas State retirement/pension fund has invested in Centra - problem is that Centra is due to default and probably throw  BK.  Texas rumors are that this is a chunk of change of the pension fund investments. 

How serious the hit on the pension fund is yet to be determined, but it is a known fact that Perry is 'related to Centra leaders' thru marriage of in-laws or his children s in-laws.

Ironically, Robert Wenzel has a post today further elaborating on the potential scandal:

Madrid-based Cintra is involved in road construction projects across the globe, including the operation of the Indiana Toll Road. Because of lower than expected traffic on the toll road, speculation is mounting that Cintra may default on its $3.8 billion Indiana operation.

Cintra and its partners are also building in Texas the $2.1 billion North Tarrant Express, which involves the reconstruction of Loop 820 and Texas 121/183 in Northeast Tarrant County. Cintra is also the lead partner in the LBJ Express, which includes the expansion of Interstate 635 in Dallas.

The company is also lead partner in two segments of the Texas 130 toll road project between Austin and San Antonio.

 If Cintra defaults in Indiana, focus is going to turn to Texas. Among the things that will be discovered are these details:

Perry's former staffer Dan Shelley worked as a ‘consultant’ for Cintra (in 2004), became Perry’s liaison to the legislature during the time that Cintra was awarded the development rights to the multi-billion dollar Trans Texas Corridor (in 2005), then went back to work as a lobbyist for Cintra (in 2006). Shelly's daughter, Jennifer Shelley-Rodriguez, also has a consulting contract with Cintra.

Looks like Perry's got his own Solyndra scandal coming down the pike.  Look for Bachmann or Huntsman to bring it up soon in order to boost their own poll positions.  Romney will only break it out to finish off Perry once his 15 minutes of fame is up (he most likely has his own crony capitalist skeletons to hide).  Judging by Perry's dismal Thursday night performance, it doesn't look like he has too much time left.

With all the banker bashing in today's post, I will end by mentioning my article on the American Thinker today entitled "Leave the Rich Alone."  An excerpt:

Free-market economy = individuals voluntarily exchanging goods.  Each individual is better off as a result of the trade, or else he would not engage in it.

That is the true definition of a free market.  There is no worker exploration, no consumer profiteering, no Marxist chains to throw off.  Just social cooperation in the aggressive pursuit of a better standard of living.  The alphabet soup of regulatory agencies born out of Franklin D. Roosevelt's fetish for power and control serves no real purpose but to bolster government payrolls and guarantee votes under the charade of "doing something."  In turn, government-sponsored enterprises are mere funnels of taxpayer money to mitigate private risk and preserve the cash flow of campaign contributions.  It's always entertaining to hear progressives wax so eloquent about the merits of government regulation, yet when you press them on unintended consequences, you might as well be talking about quantum physics.

So with an economy still in the doldrums, what does a president who has more experience signing grandma up to vote than running even a Taco Bell propose?  Why, that we give him more money, of course!

The Beatles on Ron Paul, Marc Faber and Jim Rogers Double Team, and Why Gold Plunged

Got my very first LewRockwell.com article today titled "The Beatles Would Support Ron Paul."  An excerpt:

Lennon’s criticism of Chairman Mao and communism in "Revolution," is certainly in line with Ron Paul’s beliefs. Paul has always acted on the side of liberty and decentralizing power, not empowering the state for the sake of achieving his ends. In an interview with Reason magazine:
Paul: "Martin Luther King is one of my heroes because he believed in nonviolence and that's a libertarian principle. Rosa Parks is the same way. Gandhi, I admire. Because they're willing to take on the government, they were willing to take on bad laws."
Ron Paul’s position is one of peace and cooperation. The State, by definition, supersedes voluntary cooperation by establishing itself as a monopoly on coercion and violence. This has grown to include drug prohibition. Just in the federal prison system alone there are approximately 103,000 people locked up for drug offenses, that’s 50% of the whole federal prison population.
The influence of drugs on the composition of the Beatles’ music has been speculated for years. While it is widely known the Beatles used drugs during the recording of their most popular albums, they never endorsed their use. Ron Paul has never endorsed the use of drugs either but has held the strict belief that individuals have an absolute right to their body and therefore the government should abstain from prohibiting the use of narcotics.

With songs like "Revolution" and "All You Need is Love," the Beatles catalog contains many songs promoting peace and non-violence. While "Revolution" is often characterized as the Beatles’ most political song, "Taxman," written by the under rated George Harrison, is a scathing attack on the State’s parasitic need for more revenue:

"If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat,
If you take a walk, I'll tax your feet."

If the Beatles were still together and all with us today, it is not farfetched to assume they would support a presidential candidate such as Ron Paul who embraces the libertarian philosophy of non-aggression that detests coercion and violence. Though John Lennon may have drifted toward anarcho-communism (think "Imagine") later in life, his message of peace and cooperation is completely in line with Ron Paul’s principles.
All America needs is not another slick talking politician ready to throw his grandmother under the bus for the sake of one vote. What the country needs is a principled intellectual who holds a record of not only speaking out against the impoverishing policies of the federal government, but one who consistently advocates for peace. Ron Paul is all we need.

Big thanks to everyone who emailed me and expressed their enjoyment with the article, I really appreciate it.  Someone emailed me some more interesting info on the subject:

"Written by George after he realized he'd been catapulted into Britain's notorious highest tax bracket -- one in which he was expected to give back 95 percent of his earnings -- "Taxman" was the Beatles' strongest rocker to date, and also their first overt political statement. Indeed, Harold Wilson, then Prime Minister of Britain, and conservative opposition leader Edward Heath are mentioned by name, albeit in the background vocals."

"I had discovered I was paying a huge amount of money to the taxman. You are so happy that you've finally started earning money - and then you find out about tax.

In those days we paid 19 shillings and sixpence [96p] out of every pound, and with supertax and surtax and tax-tax it was ridiculous - a heavy penalty to pay for making money. That was a big turn-off for Britain. Anybody who ever made any money moved to America or somewhere else."

I also stumbled upon a mention of my Mises Daily piece on Paul Krugman's "Pop Internationalism" on an archive of RealClearMarkets last night.  So a big day indeed.

Now onto some actually important matters, though Jim Rogers has been singing this type of stuff to the choir for a while now, here is another great interview with CNBC:

Via Wall Street Pit:

• The U.S. dollar is going higher “against major currencies,” well-known investor Jim Rogers told CNBC Thursday. The dollar “is going up against everything right now” for a number of reasons, said Rogers. One may be that everybody is panicking “and for some reason they’re rushing into the U.S. dollar.”  “The U.S. dollar is not a safe haven, if you ask me, but I do own it,” he added.
• Also, Rogers noted he would own the U.S. dollar, or the Swiss Franc, or agriculture. “Agriculture prices [are] getting banged right now. I am kind of planning on buying Swiss francs, more dollars and agriculture.”
• In addition, he weighed in on China’s economy, saying, “They’re doing their best to cool things off … I expect them to continue to do it, and that is causing more slowdown around the world.”
• But “the major problems are coming from the west,” Roger stressed. “They are coming from Europe and the [United States]. We are much worse off than we were in 2008 because the debt has gone through the roof.”  “At least in 2008 there was the possibility that the governments could bail us out. Now, of course, the governments have gotten deep, deep, deep into debt themselves,” he added. “Everybody is in much worse shape.”
• Plus, there are all sorts of trade tensions and currency tension developing, Rogers went on to say. “Brazil  is sort of ignited a trade war [by putting a 30 percent import tariff on China and Korea ]. And right now China is trying to get the Europeans to let them open up the trade with China more. The Europeans are saying no, so China is saying, ‘No, we won’t bail you out.’”
• “I hope the trade war doesn’t break out” because throughout history when it does it has “caused depressions,” Rogers added. “You saw what happened in the 1930s. It led to depression and it also led to war. So I hope it can be contained.”
• Ben Bernanke’s idea that low-interest rates are good, “is killing the people who save and invest, and that’s really hurting a very, very large part of the population,” concluded Rogers. (something we’ve said countless times).

For a slightly better and more entertaining interview, see the impeccable Marc Faber- video after the jumps:

Zerohedge excerpts:

You don't need the Fed to tell you that something is wrong.

...at least this time around, Mr. Bernanke did the right thing [...and...] what they said yesterday is better than what they've said for the last 12 years.

...if the S&P drops to around 900-950, we'll get QE3 for sure...

I'm not selling my gold because I think in the long run, they will print money.

I don't know anyone who owns Greek bonds. But who owns them? The ECB and European banks.

The banks, the problem is that they're not run as banks where they have a fiduciary duty...They take the capital and go and gamble left, right and center.

They should default.

The Greek people in Greece, the only way for them to survive economically, half way decently is to leave the EU.

...countries like Greece and probably Portugal will leave the EU, or the strong countries like Germany will leave the EU and then there'll be dual currencies,

Faber is right on as usual.  I would be surprised to see Bernanke even let the Dow Jones hit 950, but maybe Ron Paul is really having an impact.  Unfortunately his impact is amounting to "well we won't start printing right away, we will let things slosh along for a bit to make people want money printing."  Like Paul, Rogers, and Faber (and any Austrian) always says, all Bernanke has is money printing.  That's how he was educated, that's all he knows.  Previous money printing caused this downturn? Print more!  Newly printed money alleviates downturn for short period and then another crash? Print more!  Beware the evil deflation fairy!

While gold took a fairly large hit yesterday, a few, including myself, placed blame on the CME margin hike.  Barry Ritholtz has a really good post outlining the rational for the margin hike today:

I do not think people understand what this means, and why the CME is doing this.
To begin with, commodities are purchased with futures contracts, which offer enormous leverage to speculators. As of this Monday, the minimum cash deposit for trading gold futures will be $11,475 per 100-ounce contract — at $1700 per ounce, that is a $170,000 position. The leverage is nearly 15 to 1. Stocks and bonds, for comparison, trade at 2 to 1 maximum leverage using firm margin. At 15-1, a less than 7% move against you wipes out your capital entirely.
Put it in other terms, if you have $100,000 to speculate with, you can purchase $200,000 worth of stock, or using the same $100k, you can buy $1,481,481.48 in gold futures.
Back in Q1 2009, when Gold was $1000 per ounce, you only needed $5,807.70 to buy 100 ozs of gold in futures (worth $100,000); That’s a little more than 17 to 1 leverage. At those levels, a less than 6% move against you wipes out your capital.
Hence, as Gold has been purchased by more speculators who are highly leveraged, the exchange is trying to ensure that these gold traders have sufficient posted cash as a margin of safety in case of any significant move against them.
Given the vertical spike in Gold prices the past few months, this is merely prudent risk management. Call it managing margin and counter-party risk — something we haven’t seen in other non exchange traded items like CDS or CDOs. Had they been exchange traded with margin rules, perhaps the 2008 collapse would not have been as significant as it was.

While I was fairly aware of the rational behind margin hikes initially, Ritholtz makes a lot clearer.  Ritholtz says that the margin hike shouldn't be blamed for the price fall, but this is the same kind of illogical thinking that dominates such economic schools of thought that promote central bank intervention to deal with a downturn.  It's not the bust that demands stimulus, it was the boom financed initially by money printing that should have never occurred.  In this situation, the margin call shouldn't have brought down gold prices, gold prices should not have risen so much before another call.  To illustrate this point more, Mish offers his explanation on the fall of the price of gold:

Four Reasons for Metals Plunge

1. Fed did far less than expected
2. Mutual fund redemptions
3. Margin calls at hedge funds
4. China growth story fading

Mish places the blame mainly on the reluctance for the Fed to print more.  Once investors had Bernanke slap them in the face while doing "The Twist," gold suddenly became less attractive.  Again it's because the Fed isn't printing money the price of gold fell; it's not the correct explanation of the Fed shouldn't have been printing money to begin with that drove so many people to gold.  Though I am sure Mish would agree with me on this point.  His take on China slowing down is apt though and it doesn't look good for commodities.  Overall, with the Fed, ECB, and Bank of China not announcing any new printing, gold was bound to fall a bit.  But the money supply is still growing in the U.S. and God only knows what's going to play out in the Euro zone.  At least we might finally have a decent timeline on Greece's last hurrah:

More from Sky News correspondent Ed Conway (via Twitter):

• G20 now preparing itself for Greek default after October - Sky sources. Will be on Sky News imminently with more
• G20 sources: all efforts behind the scenes (by G20 members) are now going into recapitalising banks, preparing economies for default.
• G20 sources: default not expected until after Cannes G20 early November. Emergency funding should still keep Greece afloat thru October
• G20 sources: No suggestion Greek default need imply country leaving the euro
• G20 sources: @ Washington summit marked difference in attitude. Confident euro members edging closer to recapitalising banks, expanding EFSF

An orderly default is what is desired, time will tell if it actually plays out.  As long as the bankers are happy with it though, it will occur.

Why Indentifying a Bubble Isn't So Difficult, Gold Crashes, and the Offer to Uncover Rick Perry's Sexual Exploits

John H. Cochrane had an interesting article out a few days ago in Bloomberg titled "Why Identifying a Bubble Is So Much Trouble." 

We seem to be surrounded by “bubbles” -- tech stocks, real estate, and now maybe sovereign debt.
You might expect that any textbook would have a precise definition of this phenomenon; some set of characteristics that distinguish sensible high prices in good times from prices that are “too high” or in a “bubble.” Alas, “bubbles” seem to be in the eye of the beholder.
Does that mean it’s all just empty talk? No, and there is solid academic research that helps us to think about what “bubbles” might mean, and how both policy makers and investors might think about them.
Here are the central facts: High valuations are, on average, followed by many years of poor returns, and vice versa. High valuations are not, on average, followed by years of good cash-flow growth, or by ever-higher valuations.

Question #1: Where does the cash/credit come for to fuel the new high valuations?  *crickets*

This fact holds across markets:
-- High stock price/dividend, price/earnings, or market/book ratios are on average followed by years of poor returns, not years of higher dividend and earnings growth, or permanently higher prices, and vice versa for low prices.
-- High yield spreads (low prices) on long-term bonds are on average followed by good returns on long-term bonds, not by increases in short-term interest rates, and vice versa.
-- High credit spreads (low prices) on low-grade debt are followed, on average, by good returns on that debt, not a proportionally high bankruptcy rate, and vice versa.
-- High interest rates abroad relative to the U.S. are followed, on average, by good returns to U.S. investors in that debt, not by foreign exchange-rate depreciations, and vice versa.
-- High house prices relative to rents are followed, on average, by flat or declining house prices over many years, not by increases in rents, and vice versa.
No one substantially disputes these facts. The question is: What does all this tell us about why prices are high or low in the first place?

Correct (to my very limited knowledge) so far, no mention of who centrally dictates those interest rates.

The “macroeconomic risk” view holds that the discount rate for a given cash flow can vary over time. Price booms come in good macroeconomic times, when the average investor is “searching for yield” and willing to take on some extra risk. Such investors bid up the price of unchanged cash flows.
Price busts come in horrible macroeconomic times, such as those we are enduring. In these periods, the average investor may rightly say, “I understand returns are better going forward, and there is the buying opportunity of a lifetime in junk bonds. But I’m about to lose my house and my job, the bankers are about to shut down my business, and I can’t take any extra risk right now.” Such investors drive prices down until the same prospective cash flows can deliver returns large enough to overcome their justified fear.

Well there he went and did it, Cochrane put the cart before the horse.  Busts don't come in bad economic times, they are the cause of so said bad economic times.  Still no mention of the gigantic elephant of a central bank in the room.  No mention of credit expansion and fractional reserve banking, those are just realities we must ignore.  But wait, maybe he is starting to get at it:

The “irrational” view is that investors’ required returns don’t change, but they simply get it wrong. Sometimes they get over-optimistic and bid up the price as if cash flows are going to be great. Sometimes they get irrationally depressed. In either case, they don’t learn from the centuries of experience.

You can almost hear him straining to type out "malinvestment" but just can't seem to make the connection.

A new view says market swings are all about financial frictions, not mass risk aversion or psychology. In the financial crisis many assets seemed to fall in value because of the run in the shadow banking system, or temporary illiquidity in markets. The question is whether this view can explain broad movements across many directly held assets like stocks, or whether it’s confined to specific smaller markets.

Hey how bout that new "view" Ron Paul keeps bringing up in the GOP debates?  Something about Austrian economics and the boom bust cycle created by central banks lowering the interest rates and printing money?

Research has, at least, given a lot of structure to the “bubble” question. We know that variation in price ratios corresponds to discount-rate variation, not to changes in expected cash flows or the ability to find a greater fool. The challenge is to understand that discount-rate variation. A focused debate, based on clear facts and explicit theories, is real progress.

Research huh?  How about Murray Rothbard's research on the Great Depression?  How about the multitude of Austrian economics who recognized the housing bubble and its cause?  Think it might be a good idea to perhaps look at what they had to say Cochrane?  Or is Bernanke too much of a sacred cow?

Speaking of bubbles, it would be interesting to see if Cochrane saw this coming:

China's papers are calling it their "own subprime crises."

According to Shanghai Daily, 7 large business owners, mostly manufacturers, fled the city of Wenzhou on September 12th. They left thousands of employees jobless and hundreds of millions in unpaid debt.

This is one of the consequences of China's "black bank," the massive undergound banking system that has been growing at a dizzying pace since the government started tightening credit to curb inflation.

No doubt he will place blame on the underground banking system rather than the institution that made credit addicts out all the small towns, cities, and businesses in China that relied on the continuing infrastructure buildup for property tax revenue and income.  Looks like the crash is in full throttle, not good for the world economy considering Europe is just barely hanging on.

Also in potential bubble news, we have gold taking a beating today:

While this will surely get the anti-barbarous relic crew in a tizzy, here is the explanation:

CME just hiked gold margins by 21%, silver by 16% and copper by 18%. Mystery solved.

Way to be a party pooper CME.  

Last night's GOP debate was a pretty big disappointment but it looks like the race is about to get a lot more interesting:

SAN FRANCISCO (Reuters) - Pornographic magazine publisher Larry Flynt offered $1 million on Thursday to anyone with proof of "an illicit sexual liaison" involving leading Republican presidential candidate and Texas Governor Rick Perry.
The offer by the politically left-leaning Flynt targeting Perry was similar to past efforts by the Hustler magazine founder to embarrass public figures he dislikes.
Los Angeles-based Larry Flynt Productions, which publishes Hustler, said it bought full-page advertisements in the weekly editions of the U.S. satirical tabloid The Onion and the Austin Chronicle, a Texas alternative paper, seeking evidence of any Perry peccadilloes.

Not to discriminate against Perry too much, I would like to see dirt on every candidate, including Obama.  It's funny that Flynt sees Perry as a threat and singles him out.  Certainly some news on the sexual exploits of any candidate would be great.

I will end with this cool chart on the Fraser Institute's Economic Freedom Index:

No surprise here, I am gonna have to look more into the index though.

Update- Easily the funniest thing I have read all day, via Tyler Cowen:

Some people on Twitter were taking about “striking down Old Ben and having him come back stronger,” but a) Obi-Wan plain, flat out died, b) Obi-Wan’s younger prodigy, Luke, was a failure who relied on his dad and wouldn’t at the key moment listen to Old Ben and stay on the Dagobah system to invest in additional human capital (instead he read Caplan on the signaling model), and c) they never even made the final three movies of the planned nine, so we don’t know how it turned out with the unwinding of the fiscal stimulus on the Ewok world.  People, next time get your facts straight!

Gary North on Gold Confiscation, Eventual Capital Controls, and Why Ron Paul is Winning the GOP Primary

Gary North has an interesting article out today on the non-likelihood of a future gold confiscation by the federal government a la Roosevelt and Executive Order 6102.  In response to an article by some dude named Jeff Thomas about the probability that the federal government could once again force the public to forcibly sell their gold, North goes on to demolish the argument.  In short, North agrees with the basic mainstream view on why gold confiscation is highly unlikely:

1. "Confiscation would mean the government acknowledges the reality of the value of gold."

Yes, this is quite so. They would be changing their official view… which, of course, they do all the time. But I submit that all that they need to do is put the proper spin on it.

2. "They would meet greater resistance than they did back in '33."

I expect that this is also true, but that a plan will be put in place to deal with that resistance.

I agree completely, there is no way in hell the public would even think about giving up their gold.  This is due to those such as Ron Paul, Glenn Beck, and even Gordon Liddy who have continually outlined the importance of precious metals in lieu of continual money printing.

North also points out that the government couldn't necessarily offset the purchase of the entire population's gold:

Where will the government get the money to buy the gold? It is running a $1.3 trillion deficit as it is. How will the President and/or Congress justify this added expense? How will this create jobs?
If the Federal Reserve System buys the gold from the government at (say) $1800 an ounce, it will be paying $1800 for an asset kept on its books at $42.22. How will the FED handle the bookkeeping? By listing the newly confiscated gold at $42.22, or by revaluing the existing gold at $1800? Then what? Sell assets equal to the new official value of the gold? Or just add the newly created digital money to the monetary base?
There might be renewed calls for an audit of the government's holdings of gold. Why would the President risk this?
Problems! Problems! For what?

North may not know this, but he presents a nice chart showing precisely why gold isn't in a bubble:

Funny, I am not seeing a bubble judging by this chart.  North touches on another point a little bit but doesn't give it enough attention.  While gold may have been worth confiscating under the gold standard (in order to massively devalue the dollar to finance spending schemes of course) the dollar is no longer linked to gold.  If the government wants massive spending plans, the Fed is more than happy to oblige.

So while North does a decent job showing the absurdity of speculating about future gold confiscation, there should be caution about what might occur: capital controls.  About a month ago, Doug Casey speculated on the possibility of capital controls coming as the government struggles to for more revenue.  In Wendy McElroy's recent Mises Daily, she outlined a lot of recent efforts by the IRS in retrieving tax dollars from U.S. citizens abroad, even if they are unaware of their citizenship status.  The desire for more revenue is only going to grow as the U.S. continues to spend itself to kingdom come.  Capital controls, like interning innocent Japanese citizens or murdering massive amounts of Native Americans, will be seen as necessary for national security.  What it will really be securing is congressional seats for politicians.

I am watching the GOP debate right now and it's pathetic as usual (with the exception of Ron Paul of course).  It's nice seeing Gary Johnson get some limelight though.  Dana Milbank had an interesting article in the Washington Post asserting that Ron Paul is winning the GOP primary right now:

Just 15 seconds into a question-and-answer session with reporters Wednesday morning, Ron Paul found a way to work in a mention of the Austrian School of economics.
From there, he moved inexorably through the Paul oeuvre: the need for the gold standard, the problem with energy-efficient light bulbs, why Greece should declare bankruptcy, why Grover Cleveland was his favorite president, and how our economy is collapsing “just like the Soviet system.”

“I mean, how many people have read ‘Human Action’?” the Republican presidential candidate asked, referring to an economic treatise from the 1940s by one Ludwig von Mises. “How many people have studied Mises and Hayek and Rothbard and Sennholz? … A lot of people just flat out don’t understand what I’m talking about.”
He’s right about that. Rarely does a man go far in public life hawking the sort of oddities that the gadfly from Texas does. And yet, in a sense, Ron Paul is winning the 2012 Republican presidential primary.
Paul won’t be the president, or even the party nominee, but that was never his goal. He aimed to shift the debate toward his exotic economic theories, and by that standard he has prevailed.

Well, I am not sure about Milbank's assumption that Paul won't get the nomination or will be president, but he is correct.  Paul's desire was to change the debate and he has succeeded in spades.  Check out this tweet from Newt Gingrich:

“@David_Kretzmann there is no question ron paul was the first serious national leader to take on federal reserve history will recognize him”

History is going to recognize Paul for a lot more than bringing the Fed into mainstream debate, but Gingrich (or his assistant) is completely right.

I just wanted to end with a big shout out to William Banzai who continually posts some of the most brilliantly hilarious images on Zerohedge.  Check out his newest masterpieces:

I also want to point out this fantastic comment on immigration from Richard W. Fulmer on Cafe Hayek:

When an immigrant crosses the border with nothing but the clothes on his back, populists see him as a threat to American jobs, conservatives see him as another mouth is at the trough, liberals see him as proof that there are “two Americas” – one for the rich and one for the poor, and libertarians celebrate him as another mind and another pair of hands.

Update- Debate is over, Gary Johnson said he wants Ron Paul as his Vice President (Paul won't take it but it was nice) and line of the night definitely went to Johnson when he said his neighbor's dogs have created more shovel ready jobs than Obama.  For something enraging, besides the blatant disregard for Paul during the after-debate analysis, see this:

A retired Chicago labor leader secured a $158,000 public pension — roughly five times greater than what a typical retired public-service worker in the Windy City receives — after being rehired for just one day of active duty on the city payroll, local news reports said.

According to The Chicago Tribune, Dennis Gannon stands to collect approximately $5 million in city pension funds during his lifetime. He now draws the pension while working for a hedge fund, the Tribune reported.

Maybe I should go to Chicago for a job.