Category Archives: Monetary Issues

Peter Schiff to OWS: “I Am the 1% Let’s Talk”

Here’s a very fascinating video taken at New York’s Zuccotti Park where Peter Schiff has a dialogue with some of the Occupy Wall Street protesters. Schiff brought a sign that read “I Am the 1% Let’s Talk,” and talk they did.

One of the things that occurred to me watching this was how little true discussion is going on between the OWS movement and their critics. Notice how some of the protesters say things like “you rich people” or “you Republicans” etc. Just as its unfair for these protesters to lump everyone into these groups is a mistake, I think it’s also a mistake to assume that all of these protesters are clueless and don’t have some legitimate grievances.

Kudos to Peter Schiff for going out among the protesters and having this much needed conversation. There seems to be some common ground concerning these grievances; the real differences are what the solutions should be.

Gary Johnson and Ron Paul CPAC Speeches

The 2012 G.O.P. candidates each gave speeches at CPAC following the debates. Below are the speeches from Gary Johnson and Ron Paul. The first video is Johnson’s presentation before perhaps the largest audience he has had in awhile. Johnson spends a good part of his presentation introducing himself before giving an overview of his proposals. In the second video, Dr. Paul who is no stranger to CPAC, gets right into his prescriptions for fixing the economy and restoring lost liberty.

Ron Paul’s First 2012 Political Ad Warns Republicans to Avoid Repeating the Mistake of Trusting Democrats on Taxes and Spending

Can the Republicans trust Democrats and compromise by raising taxes in exchange for spending cuts in this debt ceiling debate? Ron Paul says “no” in his first 2012 political ad.

Why not trust Democrats? Ask former President George H.W. Bush what happened to him when he broke his infamous “Read my lips” promise that he wouldn’t raise taxes.

Hopefully, Republican’s will listen to Dr. No for a change, if only on this critical issue.

A Brief Constitutional Lesson for Congresscritters… Particularly those from Kentucky…

United States Constitution
Article 1, Section 7

All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

The issuance of debt is a revenue raising measure. The “debt ceiling” is, in fact, legislation initiated in the House of Representatives, which authorizes the executive branch to issue debt through the treasury (and by extension the federal reserve), up to a specific limit.

This “debt ceiling” and authorization of debt issuance; allows the executive branch to raise revenue in a constitutionally legitimate way; because the revenue is raised under the auspices of specific authorization by the house or representatives.

Neither the Senate, nor the House, acting separately or together; has the authority or ability to delegate this exclusive power of the house, to any other entity, including the president. In fact, it would be a clear violation of the principle of separation of powers to do so.

That is all.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

The Inflation Won’t Come From The Fed

Everyone knows the Fed is pushing Quantitative Easing. By that, it means that when America is having trouble selling T-bills at advantageous interest rates, the Fed prints up some money to keep demand. It buys the bonds with newly-printed money. The recent run was $600B or so, and the Fed’s current balance sheet holds about $2.7T in assets (that they can choose to hold as long as they find prudent — since they print the money to keep them and/or roll them over).

But what if I told you that there was another $11T of outstanding US dollars* out there in the world, and that everyone except the US has a say in whether they are circulated. In fact, that those dollars are sitting on foreign soil is a very good thing for the US and has been for decades, but it’s not assured it will last forever. As I said WAAAY back in 2007:

As I’ve pointed out in the past, the dollar’s status as a reserve currency has largely allowed America to inflate with very little visible burden on our own citizens. We create worthless money, use it to buy durable goods from other countries, and watch as they hold that money or reinvest it in the sinkhole that are Treasury bonds. It’s a credit card on the world, and we can print whatever we need to pay it off…

…as long as they don’t wise up. If they do, suddenly that money might come back to us, and we’ll feel the results of the inflation we’ve engaged upon.

Inflation benefits those who see the money first — in this case, Americans who used that money to buy durable goods from overseas. It has the least benefit for those who see the money last. To date, that has been forex reserves, sovereign wealth funds, etc. But should those foreign nations decide they no longer want to hold US dollars, they’ll spend them right back into circulation — and they’ll eventually want us to sell them goods in exchange for those dollars.

If that happens, the inflation comes full circle and we feel it right here at home — without the Fed ever releasing the $2.7T they have on their balance sheet.

We’ve spent the last four decades, ever since Nixon “closed the gold window”, sending dollars abroad to other nations who stick them under their mattresses. This has been the persistent trade deficit we’ve held. Sure, some of those dollars came back to be lent to our own government to finance even MORE spending that didn’t come from the American people, but much of them quite literally got shoved under the mattress.

What happens if they want to spend those dollars? Well, dollar-denominated assets and goods produced in the US will rise in price. Oil, gold, silver, food (produced in the US), etc. Look at gold, for example: In the last year, gold has increased in dollar terms by over 32%, but by less than 8% in Swiss francs. USD vs other currencies show similar (but smaller) gaps. What can explain this? Well, if nothing else, that big buyers like China and India are using their dollar surplus, rather than their reserves in other currencies, to buy gold.

Where’s the endgame if this dollar-spending widens? Well, eventually those dollars are sold to people who don’t want to buy goods from China or US T-Bills: they want to buy US exports or US assets. That sounds good, of course; everyone likes exports! But is it good? Restate it this way: a durable good (i.e. product of American workers’ output) needs to be produced to leave our shores, and it increases the circulating money supply in the USA. The good we produce here is enjoyed elsewhere, while the increased money supply makes our own goods at home more expensive.

We change from trading our paper for other nations’ hard work to trading our hard work for our own paper back.

The endgame is the end of trade deficits, where we work harder as a nation to supply the rest of the world with goods in exchange for a lower standard of living here. That doesn’t sound good to me at all.

America has enjoyed a very privileged position in the world, and that position has only been possible from two things: other nations have trusted us and they’ve had no other options. The first is eroding to the point where they’re looking for the second. If we want to continue enjoying our position in the world, we need to convince the rest of the world that holding the US Dollar as a reserve currency benefits them — and neither trillion Dollar deficits as far as the eye can see or quantitative easing accomplish that.

When the inflation comes, it’s not going to be the Fed printing money — it’s going to be other nations sending us the money printed over four decades and expecting to buy something with it.
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