It’s another record-high for the U.S. National Debt which today topped the $12-trillion mark. Divided evenly among the U.S. population, it amounts to $38,974.34 for every man, woman and child.

Technically, the debt hit the new high yesterday, but it was posted on the Treasury Department website just after 3:00 p.m. ET today. The exact calculation of the debt is a 16-digit tongue-twister and red-ink tsunami: $12,031,299,186,290.07

This latest milestone in the ever-rising journey of the National Debt comes less than eight months after it hit $11 trillion for the first time. The latest high-point is not unexpected, considering the federal deficit for the just-ended 2009 fiscal year hit an all-time high at $1.42-trillion – more than triple the previous year’s record high.

Much of the increase in the deficit and debt is attributed to government spending outpacing revenue – both exacerbated by the recession and the government response to it – including hundreds of billions in bailouts and stimulus spending and tax cuts along with decreased tax revenues due to rising unemployment.

In recent days, President Obama has spoken of the need to bring the rising deficit and debt under control.

“I intend to take serious steps to reduce America’s long-term deficit – because debt-driven growth cannot fuel America’s long-term prosperity,” he said in remarks prepared for delivery to the leader’s meeting last Sunday at the Asia Pacific Economic Cooperation summit.

The National Debt has increased about $1.6 trillion on Mr. Obama’s watch, though less than $4.9 trillion run up during the presidency of George W. Bush.

Of course, Obama has only been in office ten months, not eight years.

Since Barack Obama took the Oath of Office, the national debt has increased from $ 10,626,877,048,913.08 to $ 12,031,299,186,290.07. That’s an increase of $ 1,404,422,137,376.99 over 302 days, or $ 4,650,404,428.40 per day, $ 193,766,851.18 per hour, $ 3,229,447.52 per minute, and $ 53,824.13 per second.

Anyone want to bet how long it will take to get to $ 13 trillion ?

My guess is August 15, 2010.

For those keeping score, with Brill and Ramirez the FTC will now consist of two law firm partners specializing in antitrust, one former state assistant attorney general for antitrust, a law professor who specialized in antitrust, and a former staff lawyer for the Senate’s antitrust subcommittee. If that’s not diversity, I don’t know what is.

I wonder what the FTC will place their focus on under this administration?

When Ludwig von Mises first arrived in the United States after escaping from Nazi Europe, and pretty much up until the present day, he was essentially ignored by the mainstream economics community in the United States. It was only through the assistance of American businessmen that he was able to get a job teaching at New York University, and, even then, the work he did had nothing to do with official university activities because he was, effectively, shunned for his uncompromising defense of the free-market.

Earlier this week in The Wall Street Journal, though, Mises is given credit for being one of the few economists in the 1920s to foresee the impending Great Depression:

Mises’s ideas on business cycles were spelled out in his 1912 tome “Theorie des Geldes und der Umlaufsmittel” (”The Theory of Money and Credit”). Not surprisingly few people noticed, as it was published only in German and wasn’t exactly a beach read at that.

Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention. Left alone, interest rates would adjust such that only the amount of credit would be used as is voluntarily supplied and demanded. But when credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.

Government-imposed expansion of bank credit distorts our “time preferences,” or our desire for saving versus consumption. Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.

Ordinarily, any random spikes in credit would be quickly absorbed by the system—the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.

The system is dramatically susceptible to errors, both on the policy side and on the entrepreneurial side. Government expansion of credit takes a system otherwise capable of adjustment and resilience and transforms it into one with tremendous cyclical volatility.

(…)

We all know what happened next. Pretty much right out of Mises’s script, overleveraged banks (including Kreditanstalt) collapsed, businesses collapsed, employment collapsed. The brittle tree snapped. Following Mises’s logic, was this a failure of capitalism, or a failure of hubris?

Mises’s solution follows logically from his warnings. You can’t fix what’s broken by breaking it yet again. Stop the credit gavage. Stop inflating. Don’t encourage consumption, but rather encourage saving and the repayment of debt. Let all the lame businesses fail—no bailouts. (You see where I’m going with this.) The distortions must be removed or else the precipice from which the system will inevitably fall will simply grow higher and higher.

That was Mises’ argument in The Theory Of Money And Credit, but he did so much more than that. In Socialism, first published in 1921, Mises laid out in detail the reasons why the centrally planned economy of nations like the USSR could never produce a rational economy and were doomed to failure. He was, of course, proven right in that regard as we learned only twenty years ago. Mises’ magnum opus is Human Action: A Treatise on Economics and while it’s not easy reading it is well worth consuming for even the amateur student of economics.

Here’s hoping people will start taking Mises’ lessons to heart before we make the same mistakes all over again.

WASHINGTON – A House leader says Democrats haven’t yet lined up enough votes to pass their health care overhaul bill.

Majority Leader Steny Hoyer of Maryland says the vote that House Democrats had scheduled for Saturday could slip to Sunday or early next week.

Hoyer acknowledged to reporters Friday that Democratic leaders don’t yet have the 218 votes needed to pass President Barack Obama’s historic health overhaul initiative.

Let’s make sure they never get those votes.

The Denver Post is having guest columnists who are staunchly pro-legalization write persuasive and articulate articles which could be mistaken for something you might read here at The Liberty Papers. Here’s an excerpt from an article written by Robert Cory Jr.

Today, not much about Colorado’s economy moves. The state is broke and releases prisoners because it cannot afford to keep them. The governor slashes the higher education budget 40 percent. People lose jobs, homes and financial security. Our leaders face serious issues.

And what keeps some politicians up at night? That sneaking suspicion that some suffering cancer patient may gain limited pain relief through medical marijuana, coupled with that gnawing certainty that someone, somewhere, actually grew the plant for that patient.

But government cannot repeal the laws of supply and demand, and cannot extinguish the spark of freedom in peoples’ hearts. Now, the marijuana distribution chain becomes legal. Responsible entrepreneurs open shops to supply a skyrocketing demand for medicine. These small businesses serve needy patients. They pay taxes. They hire employees. They lease space. They advertise. And the drug war industrial complex can’t stand it.

The article only gets better from there. I find it very encouraging that Colorado’s newspaper of record would print this and that citizens are pushing back against big government, if only on this issue.

Here’s a thought Mr. Suthers: rather than trying to interpret the law yourself, why not allow the state legislature and/or Colorado voters clarify the law. In the meantime, while the law in your opinion is vague, err on the side of freedom by no longer prosecuting medical marijuana users or dispensary operators.

Greeley (Colorado) City Council member Carrol Martin also expressed concerns with the Obama Administration’s change in federal policy: “The federal government says they’re not going to control it [medical marijuana], so the only other option we have is to control it ourselves” and “If we have no regulations at all, then we can’t control it, and our police officers have their hands tied.”

Councilman, I would argue that this is a very good thing. You are no longer responsible for enforcing federal laws but state and local laws regarding medical marijuana. Your police officers “have their hands tied”? I think it’s quite the opposite councilman. Your police department can now concentrate on violent crime rather than spend valuable resources on going after non-violent, medicinal, marijuana users and their suppliers. If anything, the Greeley police has their hands freed!

In a time when we have an administration which wants to control banking, housing, the auto industry, the healthcare industry, and everything in-between we have one instance of the same administration relinquishing control and giving it back to the states. This is the perfect opportunity for states to act as independent laboratories of government. Some will pass stricter controls on medical marijuana (or outright ban it) while others may go the other direction and outright decriminalize or leagalize marijuana altogether.

Kirk Johnson writing for The New York Times:

Some legal scholars said the federal government, by deciding not to enforce its own laws (possession and the sale of marijuana remain federal crimes), has introduced an unpredictable variable into the drug regulation system.

“The next step would be a particular state deciding to legalize marijuana entirely,” said Peter J. Cohen, a doctor and a lawyer who teaches public health law at Georgetown University. If federal prosecutors kept their distance even then, Dr. Cohen said, legalized marijuana would become a de facto reality.

Senator Morrisette in Oregon said he thought that exact situation — a state moving toward legalization, perhaps California — could play out much sooner now than might have been imagined even a few weeks ago. And the continuing recession would only help, he said, with advocates for legalization able to promise relief to an overburdened prison system and injection of tax revenues to the state budget.

This seems like a very reasonable step to take for California from a purely economic standpoint. As I reported in my post Reforming America’s Prison System: The Time Has Come, last year California spent almost $10 million on corrections, more than half of the U.S. prison population accounts for drug offenses, 75% of state drug offenders are non-violent offenders, and that nearly half of all drug arrests in the U.S. were for marijuana offenses.

By my math, that would mean that if California* released all non-violent marijuana users and stopped prosecuting new cases involving non-violent marijuana use, the state could cut its prison population by 19% and save California taxpayers about $2 million** per year just on corrections (to say nothing of other costs associated with policing marijuana use).

If California or any other state tried such a bold approach, the American public would most likely learn that legalization does not lead to the sort of mayhem drug warriors have warned us of over the decades***. We would most certainly not see the sort of mayhem that has occurred via the drug war.

Not only does this perfect storm which the Obama Administration created have possible implications for the War on (Some) Drugs, but the very concept of Federalism itself. What might state governments learn about self governing once they have been encouraged to do so? Might the states resist the next attempted power grab from Washington?

There are many exciting possibilities. Those of us who advocate for smaller government should make the most of this opportunity.

*Assuming that California’s prison statistics are in line with the overall national statistics.

** I know $2 million doesn’t seem like a whole lot but in states which are in financial trouble as much as California, every little bit helps.

***Portugal is a real world case study of drug decriminalization; I don’t believe the results would be much different here.

Here’s the video:

And, here’s my review of Leslie’s book, which I highly recommend.

Supreme Court Justice Louis Brandeis famously envisioned the states serving as laboratories, trying “novel social and economic experiments without risk to the rest of the country.” And on health care, that’s just what they’ve done.

[…]

Despite these state-level failures, President Barack Obama and congressional Democrats are pushing forward a slate of similar reforms. Unlike most high-school science fair participants, they seem unaware that the point of doing experiments is to identify what actually works. Instead, they’ve identified what doesn’t—and decided to do it again.

Of course if government did learn lessons of failed government policy…it wouldn’t be government.

Read the whole article to learn what future all Americans have in store should President Obama and the Democrats have their way.

I believe that all citizens should become involved in the legislative process by letting their voices be heard, and I appreciate the time and effort that you took to share your thoughts with me. One of the most important aspects of my job is keeping informed about the views of my constituents, and I welcome your comments so that I may continue to represent California to the best of my ability. Should I have the opportunity to consider legislation on this or similar issues, I will keep your views in mind.

Great… You thank me for sharing my thoughts. I feel empowered!

What you don’t say is anything whatsoever regarding your opinion on the legislation (at least Feinstein gave me *something*). So how do I interpret your letter?

‘I’m gonna put my finger up in the air and see which way the wind blows, because I have a vulnerable seat in 2010 and I don’t want to piss anyone off. If I see any benefit to myself, I might at some point take a position on this legislation.’

So, today, when I was reading United Liberty, I was reminded of S.604, and decided to check to see if there were any surprises. And to my astonishment, there was! Barbara Boxer actually co-sponsored S.604!!

Do I think she’s really all that interested in an audit of the Federal Reserve? Not from the email response I received. But hey, she knows a populist wave when she sees one, and she’s gonna ride this one to Nov 2010.

There are a lot of forces assembling behind the Audit the Fed movement. Those forces are having traction. Enough traction, in fact, to get a California Democratic Senator to fall into line. It may be a political calculation, but if someone like Boxer has to make that calculation, it proves that there’s actually some real mojo here. Congratulations are due to Ron Paul, because without his tireless work in the House, we wouldn’t be this close to a serious review of what goes on at the Fed.

Letter from Boxer:

Dear Mr. Warbiany:

Thank you for contacting my office to express your views on S.604, the Federal Reserve Sunshine Act of 2009, which would require the Comptroller General to conduct an audit of the Board of Governors of the Federal Reserve and its banks before the end of 2010 and to report its detailed findings to Congress.

I believe that all citizens should become involved in the legislative process by letting their voices be heard, and I appreciate the time and effort that you took to share your thoughts with me. One of the most important aspects of my job is keeping informed about the views of my constituents, and I welcome your comments so that I may continue to represent California to the best of my ability. Should I have the opportunity to consider legislation on this or similar issues, I will keep your views in mind.

For additional information about my activities in the U.S. Senate, please visit my website, http://boxer.senate.gov. From this site, you can access statements and press releases that I have issued about current events and pending legislation, request copies of legislation and government reports, and receive detailed information about the many services that I am privileged to provide for my constituents. You may also wish to visit http://thomas.loc.gov to track current and past legislation.

Again, thank you for taking the time to share your thoughts with me. I appreciate hearing from you.

Barbara Boxer
United States Senator

Letter from Feinstein:

Dear Mr. Warbiany:

Thank you for contacting me to express support for legislation to increase transparency at the Federal Reserve. I appreciate your interest in monetary policy and welcome the opportunity to respond.

The Federal Reserve was originally established in response to the country’s need for a sound and independent central bank to manage decisions relating to U.S. monetary policy. I understand your concern with some of the unprecedented steps that the Federal Reserve has taken recently to ease the flow of credit and stabilize financial markets.

On March 16, 2009, Senator Bernard Sanders (I-VT) introduced the “Federal Reserve Sunshine Act of 2009″ (S. 604), which would require the U.S. Comptroller General to audit the Federal Reserve System before the end of 2010. This bill has been referred to the Senate Banking, Housing, and Urban Affairs Committee. Representative Ron Paul (R-TX) has introduced a similar bill (H.R. 1207) in the House of Representatives. Please know that I will keep your support for this legislation in mind should it come before the full Senate.

While I recognize the importance of accountability in the operations of the Federal Reserve, I strongly believe that monetary decisions should be made independent of political influence or motives. You may be interested to learn that I supported an amendment to the Congressional Budget Resolution (S. Con. Res. 13) offered by Senator Sanders requiring the Federal Reserve to disclose how it has disbursed emergency economic assistance to financial institutions during this severe economic crisis. Be assured that I am carefully monitoring the actions taken by the Federal Reserve to help stimulate our economy and unfreeze credit for businesses and homeowners.

Once again, thank you for writing. I hope that you will continue to share your views with me. If I can be of any further assistance, please contact my Washington, D.C. office at (202) 224-3841. Best regards.

Sincerely yours, Dianne Feinstein
United States Senator

The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.

Government taking your money and spending it is less likely to help GDP than government taking LESS of your money and letting you spend the difference yourself.

Not that this is a new idea, of course… But it’s good to see some academic support.

In his new book End the Fed, though, Paul provides a clear, concise explanation for why we all need to be worried about the fiat paper money system that we’ve lived under for decades. As Paul says, the system itself is unsustainable over the long term, and Federal Reserve itself has contributed to economic instability in the 96 years since it’s founding.

This isn’t a detailed economic treatise, it’s a call to political action, and Paul does an excellent job of making his case for the argument that we need to bring an end to the monetary system that is, slowly but surely and inevitably, destroying us and destroying freedom. Instead, he argues that we need to return to the days of the Gold Standard, which doesn’t even need a central bank to function properly. You may disagree with the end scenario that Paul proposes, but it’s hard to disagree with his assertion that liberty in money is as necessary for a free society as liberty in thought or property.

Paul’s most important insight in this book, though, comes in his concise demonstration of how the “magical printing press” monetary system that we have today makes possible the leviathan state that is threatening to bankrupt us. Without a central bank with the ability to create money at will and in secret, it’s highly unlikely that the welfare-warfare state would be able to exist. Without free money, the state would be forced to either raise taxes or borrow money to finance it’s ventures and adventures and it’s unlikely that either taxpayers or bondholders the kind of unlimited spending that fiat money makes possible.

What this means is this — you’ll never have a truly limited government as long as you have a central bank with the power to create “money” at will.

That’s why it’s important to End the Fed, and that’s why this book is one that everyone should read.

The above video clip from The Daily Show, while very humorous, illustrates a fundamental problem of government: shortsightedness.

In this example, the State of Arizona is offering to sell the state capitol for $735 million and rent it back from the new owners.

“What happens next year when you have to pay rent?” asks Daily Show correspondent Jason Jones.

Sen. Lopez responds that the state government is more concerned about this year…they will deal with the next year’s budget (and subsequent budget) shortfalls when the time comes.

If this doesn’t illustrate the shortsightedness of government (at all levels), I don’t know what does. Our government officials do not look far beyond the immediate future (i.e. the next election). They don’t worry about the insolvency of Social Security, Medicare, Medicaid, the long term financial difficulties of the bailouts etc, they will worry about those problems (which they created and will also blame on the free market, big business, or lack of regulation) when they can no longer pretend the problem doesn’t exist. If they are lucky, the other party will be in power by that time and the American public will turn its anger against that party by voting them out.

What the American public needs to understand is that whether the blue team or the red team controls the levers of power, this shortsighted mentality is standard operating procedure for both. They are not interested in solving long term problems but trying to appear as though they are.

Politicians will not be accountable for their deceitful actions until we, the people, hold them accountable.

…I won’t hold my breath.

Particularly irksome when we’re talking about an audit is the fact that they’ve just admitted to engaging in gold swaps, influencing the gold price, in opposition to past denials and with the assertion that they should be able to continue hiding the specifics:

The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed’s disclosure came this week in a letter to GATA’s Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA’s administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund’s treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)

Gold has been flirting with the $1000/oz level for several weeks (topping it a few times). Those in the gold market have long believed that central banks are suppressing the price to keep fears of inflation from hitting the roof.

How much longer do we have to allow the fed to lie to us, and then when we catch them red-handed, assert that they know well enough that we have to let them hide details on top of their lies?

I say we audit the fed. Then End The Fed.

And yet, there was budget director Peter Orszag rushing to a lunch with Chinese bureaucrats on a Monday in late July. To his surprise, when Orszag arrived at the site of the annual U.S.-China Strategic and Economic Dialogue (S&ED), the Chinese didn’t dwell on the Wall Street meltdown or the global recession. The bureaucrats at his table mostly wanted to know about health care reform, which Orszag has helped shepherd. “They were intrigued by the most recent legislative developments,” Orszag says. “It was like, ‘You’re fresh from the field, what can you tell us?’?”

As it happens, health care is much on the minds of the Chinese these days. Over the last few years, as China has become the world’s largest purchaser of Treasury bonds, the government has grown increasingly sophisticated in its understanding of U.S. budget deficits. The issue has become all the more pressing in recent months, as the financial crisis and recession pushed the deficit to record levels. With nearly half of their $2 trillion in foreign currency reserves invested in U.S. bonds alone, the Chinese are understandably concerned about our creditworthiness. And this concern has brought them ineluctably to the issue of health care. “At some point, if you refuse to contain health care costs, you’ll go bankrupt,” says Andy Xie, a prominent Shanghai-based economist, formerly of Morgan Stanley. “It’s widely known among [Chinese] policymakers.” Xie himself wrote a much-read piece on the subject in 2007 for Caijing magazine–kind of the Chinese version of Fortune.

The Chinese, unfortunately for them, have worked their way into a suicide pact with America. They are simply too heavily invested here to see any serious problems with our economy, government, or monetary base. Had they not spent the last decade buying up enormous Treasury holdings, they could let us implode our economy and “fix” our debt/spending issues through debasing our currency, and then swoop in to buy assets on the cheap once we hit bottom. But that’s not on the agenda. If we take the low road, we’re towing them along for the ride.

Obama says he won’t accept a bill that adds to the deficit. I don’t believe him, since I’ve already seen him fail to live up to his promises on taxes and legislative transparency. Even worse, though, he’s got the folks who plan to finance that deficit worried. And the last group you want to scare are the ones you’re trying to get to lend you money.

Hat Tip: Ezra Klein