North Korea is total government, as is Zimbabwe, or any other totalitarian state. Zimbabwe used to be Southern Rhodesia. Southern Rhodesia had thousands of individually owned, prosperous farms. Southern Rhodesia exported food, and was an extremely rich, white ruled, free nation. It became independent from Britain in 1965. It was bordered by Zambia, (Northern Rhodesia, which was never free), Mozambique, (formerly a Portuguese colony), and Botswana. In 1978, after years of incredible pressure from the United Nations, Rhodesian President Ian Smith, signed an agreement with three black African leaders, with the promise of white protection. Fat chance. That sealed the doom of Rhodesia. I can still hear Smith begging for help from the free world, as his nation was being overrun, smothered and ruined, but there was no help. Rhodesia became Zimbabwe, and with it, total government, poverty, deforestation, inflation, murder, and seizing of white farms. Total government, in short, took what used to be prosperous Rhodesia, and turned it into total poverty, no freedom, and actual slavery. Whites are gone, as are their farms, which have been divided up and given to blacks, ‘who needed them.’ Whites are also gone or leaving South Africa after being murdered and their farms and businesses seized.

North Korea, as opposed to South Korea, is the difference between night and day. North Koreans are starving, regimented, murdered, and live in abject poverty. North Korea does not lack natural resources, farm land, rain and sunshine, but it has total government. Total government has enslaved, and is literally starving the populace. South Korea makes things, sells things, and is happy and prosperous. South Korea’s government is miniscule, compared to America’s, and that’s why Korean cars are excellent, and lots of things are made and exported in and from South Korea.

In 1935, Amos Pinchot wrote that, “Today the nations in the world may be divided into two classes. The nations in which the government fears the people, and the nations in which the people fear the government.” And that sentence speaks volumes.

When America was founded, the government was at the will of the citizens and states. Today, central government in Washington D.C., with thousands of branches and bureaucrats everywhere, are ruling us, rather than us ruling them. We are afraid of government, whereas government should be afraid of us. It isn’t, and thus we have the addendum to the health care bill, which was passed without a single Republican vote, part of which says that any sale over $600 must be reported on a 1099 form to the IRS, beginning Jan 1st, 2012.

This is fantasy, as far as I can see. Buy a new refrigerator and get a 1099? Buy a new sofa and get a 1099? Buy lots of groceries at one time and get a 1099? Buy a new or used car and get a 1099? Transmission job and get a 1099? How about a yard sale of a $600 something or other? Buy a row boat or canoe and get a 1099? Buy or sell a single Gold Eagle and get a 1099? Millions of forms flooding the IRS, and thousands of new employees to handle them? In addition to the 17,000 new IRS employees to search out everyone to be sure they have health insurance? That would make the IRS probably the largest bureaucracy in D.C. It’s simply too absurd to contemplate. There’s already a bill in Congress to delete this provision of the health care bill, and why not get rid of the whole thing? When idiotic Congress does a 2,000 page bill, and inserts a provision in it, without even a particle of thinking; obviously it must be deleted, or we will become a slave state almost overnight! This absurdity doesn’t take place till Jan 1st, 2012, and by that time, this provision will no longer exist, I am certain.

Which brings us back to North Korea and Zimbabwe, which have total government. As my son David’s bumper strips say, “Government is not the answer.” This fact is becoming quite obvious to millions of Americans, and we have the Tea Party as proof. The socialistic Democrats are scared to death of November, and I don’t blame them. They’ll do everything in their power to change America’s disgust with them, but hopefully it won’t work, because they’d all be lies.

We’re on the march, via Obama and his henchmen in Congress, towards total government, total poverty and enslavement, a la North Korea and Zimbabwe. We cannot allow this to happen. Why isn’t it so obvious to Democrats, that the more government we have, the less responsibility we have, the less prosperity we have, the less jobs we have, and the less freedom and happiness we have? It is as plain as the nose on their faces. Why should it be necessary to clean out Congress? The Democratic platform of 1924 read in part: “We demand that the states of the Union shall be preserved in all their vigor and power. They constitute a bulwark against the centralizing and destructive tendencies of the Republican party.” Got that? The Democrats were worried about the Republicans, back in 1924, and now just the opposite is true. In 1930, as part of a speech, FDR said, “The individual sovereignty of our states must be destroyed.” A lot changed in six years, and the change has stuck with the Democrats.

As I finish this; last week, an additional 464,000, for the first time filled out applications for relief. An average of 450,000 new un-employed each week! Week after week, people are still getting laid off. Who would hire someone today, with compulsory health care on the immediate horizon, paid by the employer? Who would hire anyone now, with a bureaucrat snooping over your shoulder at every turn, to be sure you obeyed the myriad laws regarding hiring someone? Who would attempt to run a business, in the most hostile government attitude towards business in history? Who would start a business if you had the possibility of filling out hundreds of 1099 forms and having an IRS agent checking everything but your blood pressure? Lame brained Congress just passed billions more in benefits for the unemployed, so why should anyone even look for a job, when they can get $500 a week in some places, for sitting on their duffs and watching inane TV? Writing this drivel, makes me sick. What has happened to America?

Regards,
Don Stott
ColoradoGold.com
for Whiskey & Gunpowder

July 26, 2010

Total Government Leads to Total Misery was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The drafting was done in 1787, and the needed nine States had ratified it by June 21st, 1788, so the Constitution became supreme law on that day. Then on March 3rd 1789 Congress opened its doors and the following month George Washington presided. It’s very interesting to notice what the new Congress did, in its first session, from March through September of that year.

It committed six acts, before going home for the winter in September. See if any of them give you warm, fuzzy feelings; and in a moment I’ll focus on the sixth, because of its huge importance.

First came some administration; deciding on how oaths of office were to be taken. Not too much there to bother us.

Second was the “Hamilton Tariff,” under which revenue was to be raised. So the second-ever Act of the US Congress was to arrange for the confiscation of property. Sure, it was Constitutional — it was a set of tariffs, imposed on certain imports; some must have recalled that it was a tariff on tea that had sparked the Revolution in the first place, so may have wondered whether anything had changed except the geographic location of the thieves. The import duties favored Northern manufacturers by making foreign goods seem more expensive — it was protectionist — and hurt Southerners by making them pay more. From Day One, a division was being fashioned that led after seventy years to open warfare. So the first substantive thing Congress did was to start to set the scene for internal conflict.

Third came an establishment of “Foreign Affairs” — now the Department of State — by which the new government was to execute “policies” towards other nations. If the intention was to have a perfectly uniform policy towards all, that would not have been needed. By establishing one, it was clear there were to be some nations more favored, others less favored. That’s what a “foreign policy” means, and it is ultimately the cause of war and, in our own era, of the unconventional war called “terrorism”; for had there been no foreign policy favoring Israel (recall Biden’s call in March for “no space” between the policies of the US and Israel?) there would have been no 9/11, or if there had been one favoring Palestinians there would have been a “9/11” much sooner and much more devastating, executed by Mossad. So the third Act in the history of the new government was to set the scene for all future external conflict.

Fourth was an Act to set up a Department of War — now euphemized as “Defense” — and that was very logical. You play favorites with other nations, eventually you’ll need to fight some of them. Better get ready.

Fifth came the Department of the Treasury, to take in and account for the collection and spending of the money confiscated by Act Two. It is to this Department that today’s IRS belongs, so I need say no more.

So far, it’s not too hard to detect the beginnings of all the most loathsome attributes of any government: tax, distortion, discord and warfare. This is to what our well-meaning “Constitutionalist” friends want to get us back.

The sixth action of that first session bore fruit on September 24th, 1789 and was the “Judiciary Act” — and it’s notorious and breathtaking. Here’s why.

On its face, its purpose was just to flesh out Article Three, which said there was to be a Judicial Branch in the new government. It had to do with establishing Courts — Supreme, District, Circuit — and government Attorneys, General and less general. But as well as that administrative stuff, the 1789 Judiciary Act declared that the Supreme Court had the power to hear actions for “writs of mandamus” as one of original jurisdiction, and so not to be just a court of appeal. Congress was therefore purporting to grant to its sister Branch a power which Article Three never gave it.

Oops! Right off the bat, in its very first session, Congress therefore tried to do something it was not empowered to do (if you’ll allow for the moment that, contrary to Spooner, the Constitution actually empowered anyone to do anything). In so doing, Congress demonstrated its disdain for the fences placed around it by Articles Two and Five. Very clearly, government today acknowledges no limits on its power; the 1789 Judiciary Act made it plain that Congress never did acknowledge such limits, even in its very first session.

Was this arrogation of power deliberate, or inadvertent?

Either is possible if the Act is considered in isolation, but it wasn’t isolated. While the Constitution was being drafted, Alexander Hamilton and other Federalists had wanted to specify powers for the Judicial Branch, just as the charter did for the other two Branches, and in particular to grant it the power of “Judicial Review,” i.e., to say what is, and is not, valid law. He argued that that is what high courts normally do. However in Article Three no powers were granted to it at all, so as it’s fair to presume that it was not to have zero powers (otherwise, why set it up?) consequently Article Three left them wide open — for unlike the wording of Articles I and II there are no limits or prohibitions named, either. It was a blank check, whose detail could be filled in later.

If Hamilton had had his way and the Constitution as drafted had said something like “The Supreme Court shall have power to decide what is law and what is not law” the new government would have been plainly seen as a dictatorship, and in my humble opinion it would have not had a snowball’s chance of getting ratified; even as it was, that process was no sure thing. So that’s why they left it blank — while the Federalist majority intended all along that such a power should, indeed, be owned by the Judicial Branch so that the new government could (with a little delay, and with its cooperation) do anything it wanted to do, while operating under the pretense of being strictly limited.

So Congress’ 1789 attempt to endow the Supreme Court with a new power (to hear certain cases with original jurisdiction) was not accidental, but deliberate; that particular power wasn’t very important, but it was to test the waters, establish a precedent. If they could grant it one small power then, they could later grant it bigger ones, and so eventually equip it with absolute, law-determining power. Take an inch at once, so as to take a mile later on.

Regards,
Jim Davies
LewRockwell.com
Whiskey & Gunpowder

May 12, 2010

The Eden Myth and the Ratification Con of 1789 was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Tentative last safe date to get your Bernankes traded for something of intrinsic value is the end of the first quarter, 2010.

Well…you you could just take my word for it and save both of us some valuable time, but you probably want enough details to know how I made this dizzying leap a couple of weeks ago. My landing spot has been confirmed to my satisfaction by what Chris Dodd is up to.

It is the usual combination of what the dogs did not do in the night, how I would solve the problem if it were mine and I were a Statist, and wisdom accumulated from my gracious hosts at Agora Financial and a lot of time reading obscure articles and foreign newspapers. (English papers can be far more informative than ours.)

I am supposing that you are aware of the money-laundering scheme which funds the current regime? Congress raises the debt ceiling, Treasury Timmy burns out bearings on the printing presses and funnels the money over to Benny Big Bucks; the “money” swooshes through the system several times to US and foreign banks and corporations, including that which is smuggled over so that other governments can “buy” treasuries with the newly-created money substitute, sticking to assorted fingers in copious amounts. Fiat currency is rather like depreciation on your house, as interpreted by your insurance company which does not recognize that the value of a thing is what it costs to replace it. Every time fiat money changes hands it is worth less for the reason insurers give: it’s older.

In the meantime, the Fed has been very busy buying up sliced and diced materials to have sausage to hang in the window. (Okay, call them “toxic mortgages,” but while I’m telling you the roof is really going to fall in this time we may as well indulge in a little flippancy.) Ostensibly, the Fed is rescuing Fannie Mae, Freddie Mac, and assorted banks who have no idea who holds title to many properties any more, and being the savior of what Hillary refers to contemptuously as “the little people” and their underwater mortgages. Right.

If you insist drearily on having that in dignified macroeconomic terms, the Fed is buying up GSE’s by the trainload. The Fed has also announced that it will purchase another 1.2 trillion (yes, TRillion) in treasuries in the next quarter (and a mere two or three hundred billion more before the end of the year) and that it will buy no more after that–which was why I gave you the 31 March deadline. It is busy taking on all the debt it can…but has warned it will not continue to do so.

In the meantime we have learned from a censorious Congress that the Fed cannot account for umpty trillions and that it declines to say which banks it “bailed out” because that would jeopardize those banks’ standing and gravitas, as well as making us all as mad as fire.

Congress, outraged on our behalf, gathered 285 sponsors for a bill to Audit The Fed. Gasp, what an idea, particularly since it hasn’t been done honestly in nearly a century. So…how is it that that sort of power and support cannot pass the Bill and send a team of auditors trotting over? Once again, what the dogs did in the night was nothing. In speech they support the idea, but not with deeds.

Still got your eye on the wrong shell, huh? I doubt the pea has been under any of them for over a decade–to be generous. We can’t audit the Fed because it isn’t time. There are those who are connected who haven’t finished closing out their positions in greenbacks, long a derogatory term. Why can’t we audit? Oh, you modern generation. Because as soon as the Bill passes a lot of foofurraw will be kicked up, and the dead cat will drop half as far again, judging from the laws of physics, at least. When the team announces even a preliminary conclusion in Congress assembled, we’re going to see a mass version of Captain Renault in Casablanca: “We are shocked to learn that gambling has been going on in this establishment!”

Hang on, Sweeties, because it gets much better from the perspective of the big boys. What happens to corporations that have no assets and shocking debts? Okay, so some of them are anointed solemnly as “too big to fail,” but in general they declare bankruptcy. Most of the proletariat is unaware that the Fed is and has always been a private corporation, but we Shooters are better informed. WE know that the Feds (note the “S”) can wash their hands of the Fed at any time! By definition the Fed cannot be “too big to fail.” “Look!” the government will cry. “It already has!”

Now, if the Fed is undergoing bankruptcy proceedings while Bernanke heads for some area that never heard of Federal Reserve Notes for his health, how will the government continue to fund junkets, pay off voting blocks, and send out pay checks? Obviously, there has to be some sort of money, and Congress and the Auditors will have established that the Fed’s version is suitable only for the board game, Monopoly, and putting in the Chic Sales. Whatever shall we do?! You there, in the back of the class?

Very good. The king is dead, long live the king. The Fed will be dead, but fortunately Chris Dodd, in his foresighted way, arranged recently for the three functions of the Fed to be transferred to new departments of the FedS. Besides, it says right there in the devalued Constitution that it is the responsibility of Congress to decree what money is. Son of Fed is born…and what happens?

Well, anyone who didn’t know about the scam in time to flee with his stored value is going to take a brutal kick to the codpiece. The stock market crash and housing bubble will be regarded fondly as “the good old days.”

China is obviously in on the plans (see Hillary’s latest negotiations), and probably everyone who “counts” knows. They may not have told the upper levels of Bangladeshi, Icelanders, or the Yemeni…BRIC, OPEC, and the EU will all pretend to be furious, but most countries have been very busy attempting to devalue their currencies without anyone else recognizing that they’re doing it. Trade balances, and that sort of stuff. It may be amusing to watch the scramble to refloat first.

Don’t break out the champagne too early celebrating, because there is just one other little point to this exercise.

I already pointed it out: we have to have something we call “money.” Obviously no one has anything as rash as gold in mind, and I can’t help wonder how many of the golden ingots in Fort Knox–if, indeed, there are still any there, that being another place that doesn’t get audited–may turn out to be genuine gold-plated tungsten. How convenient to have another metal with the same specific gravity as gold.

And this means? Yes, you there? Absolutely. It means that we must have a new currency to differentiate between new and improved genuine United States funny money and the disgraced notes of the Federal Reserve, which was neither holy, Roman, nor empire.

It doesn’t matter whether they call it “the Amero,” “the Globo,” or “the Obama” in honor of a man who deserves precisely that sort of adulation and appreciation for his accomplishments. Snicker; think of it as America’s version of the Nobel Peace Prize. Would that it were that harmless. Anyone who expects to get a 1:1 swap for his greenbacks leave quietly now, please.

My most sanguine guess–and it is only a guess–is that we’ll turn them over for 30% of face value. And that was “sanguine” meaning “hopeful.” It would not surprise me at all if you are offered ten per cent., or even one per cent., at which point I suggest they would make great wallpaper. Those still holding traditional dollars will be exsanguinated. My bet is on the Amero, since I don’t think the coins I have seen were stamped “D” to indicate that they were turned out by the Franklin Mint as collectors’ items. There were plausible reports that China received a shipment of eight billion of them already…and perhaps more, who can say? Oh, I know, I am such a conspiracy theorist. Other fringe benefits include claiming that the new currency will fight the drug war and smacking those whose assets are stored overseas as dollars still. Can’t bring ‘em home without exchanging them and explaining where you got them.

One of the pigeons devalued currency will kick into the fire is a large increase in the price of items with the lowest cost. Do you really suppose anyone is going to round down on a can of soup that costs $1.12 in debunked FRN? No, indeed, my friends; the rounding will be up and–just as tires soared immediately on news that future tariffs will be levied on the Chinese–those items will probably see hasty increases before the fact. That’s where the big money is going to be on the exchange!  Lower case “e.” And, uh…who are the most famous purveyors of low-priced “goods?” Do I have to do all the thinking around here? Aren’t these things pounding you thud, thud, thud? Wal-Mart and thousands of “dollar” stores full of geegaws from China, of course. The one I use has excellent merchandise and an honest policy. It changed from “Everything A Dollar” to “Everything $1.09″ a few months back. Given their choice of reducing quality or accepting that their costs had increased 9% (that being a fine example of “There is zero inflation.”) they chose to raise prices. Sensible folks. Excellent value for the money. Their version of Vick’s Salve is every bit as good as Kroger’s $4.39 generic and Mr. Vick’s original product which was up over seven the last time I looked. They sell a great many everyday objects which are sturdy and well-designed.

Okay, Sugars, you got all that? The debt is all being loaded onto the Fed, those in the know are scurrying to invest in kukui nuts, baht chains, ink cartridges, whatever they can find that is tangible, and in the fullness of time Mary Renault will be shown right again because The King Must Die.

You heard it here first, and if you don’t get your money out of the mutuals, your CD collection, the Market, banks, and treasuries on your bottom line be it. I stopped to muse gently on the fate of T-bills, but concluded they will “merely” be revalued. Which doesn’t mean there is not a way to repudiate them, only that I have not thought of it yet. Wahoo, would the FedS enjoy that even more than confiscating your 401(K) and replacing it with a genuine Government Retirement Account backed by the full faith and credit of the United States government, a project still in the works.

Killing the Fed like Caesar on the floor of the Senate is the perfect solution for everyone except those of us who are in line to become destitute. The government is off the hook for gazillions with a face-saving explanation for why they replaced the currency. “Devalued” it? Never!

Bernanke won’t even murmur, “Et tu, Obama?” If my analysis is correct, he knows what is coming and helped arrange the biggest coup since FDR confiscated private gold.

Regards,
Linda Brady Traynham

December 3, 2009

Q&A Time:

“Mrs. Traynham, what if you are wrong?” You had the fun of reading my prose and getting out of FRN’s is the most sensible course for many reasons.

“Are you never serious?” What’s more serious than telling you the bottom is about to fall out of the basket you put all your eggs in? It doesn’t matter how you have diversified your assets if they are all denominated in dollars. If they are revalued in a new currency you have no choice of rejecting you’ll discover that broken eggs on pavement aren’t good for much, although they may go well with splattered stock brokers of lesser rank.

“Did you come up with this all by yourself?” No, for once I did not. A very bright friend brought me the first few pieces and asked what I thought. I admire his grasp of things political and economic, the floor shifted under my feet, and I went looking for more straws in the wind and found a couple. He prefers to remain anonymous. Thanks again, fellow.

“How do I tell if the gold I have is real?” Pour aqua regia on it and wait until the acid has dissolved a hole a quarter of an inch deep? For centuries people bit gold coins. Don’t do it; dentists are very expensive. Besides, what are you going to do if you whack a bar briskly with a heavy carving knife and discover that beauty is only skin deep? My guess is that the longer you have had it the more likely a bar is to be genuine, and you will lessen the numismatic value (if any) if you cut into coins. Best answer? Assume yours is real because you can’t do anything about it. Don’t buy any new gold from less than impeccable sources and think carefully about further new coin purchases. I’m sure coins can be minted in tungsten and gold-plated.  Kick yourselves for not buying sterling silver table ware; that isn’t likely to turn out to be tungsten. Oh…go ask Byron King!

They’re Going to Kill the Fed was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

From it we draw the historic words, “That these United Colonies are, and of right ought to be free and independent States…” The resolution was tabled for the day and taken up on June 8.  But because some of the colonies, including Maryland, New York, New Jersey, Pennsylvania and Delaware, had not authorized their delegates to vote for independence (imagine that: politicians who are faithful to their constituents) the congress recessed for three weeks for the men to return home to find their colonies’ will.

Before recessing however, the congress appointed the famous Committee of Five, John Adams (MA), Benjamin Franklin (PA), Thomas Jefferson (VA), Robert Livingston (NY), and Roger Sherman (CT), to produce a document that laid out the case for independence.  The committee tasked Jefferson with the writing of the document, and the bulk of the work was his.  After his initial draft, he presented it to the committee, who made only minor revisions.  Then it was off to the Congress, where the debate really commenced.

The Congress re-convened on June 28, 1776.

It had been a hot spell in Philadelphia.  Jefferson records that on his way to what is now known as Independence Hall, he stopped to look at a thermometer.  Even in the early morning, it was already 80 degrees and rising.  Inside the hall, which was all closed up to avoid the heated debate being heard in the streets outside, some have estimated the temperatures at 100 degrees.  In the humid, bug infested convention, (there was a livery stable next door), the temperature was not the only thing rising.

Jefferson’s own design was to create a document that by its plainness and simplicity would be instructive and convincing, with arguments so plain and straightforward that none could contest them as they set forth the case for independence.  Hoping to create a document that would convince those who read it, not the least of which were many fence-sitting colonists, he listed a long section of the crimes of the King against the colonies, many of which were eventually omitted.  He also had written a substantial portion on the illegitimacy of the slave trade in MEN (capitalization was Jefferson’s).  That too was eventually stricken from the finished edit.

There were those who refused to vote.  There was even an abstention from New York in the final tally.  The young nation was being stressed at every seam in that hot, humid hall.

But on July 2, 1776, the cornerstone of the new nation had been formed.

A day later, July 3, future president John Adams wrote to his wife Abigail the following words.

“The second day of July, 1776, will be the most memorable epoch in the history of America.  I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival.  It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty.  It ought to be solemnized with pomp, and parade, with shows, games, sports, guns, bells, bonfires, and illumination, from one end of this continent to the other, from this time forward forever more.”

His spirit was right, even if his timing was off by a couple days.

What was once memorized by grade school children as a world-shaping piece of literature is now known by very few modern students.

However, it’s final lines bear repeating…

“And for the support of this Declaration, with a firm reliance on the protection of the Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.”

Of the 56 men who signed the Declaration, some names are still common among us:  Franklin, Jefferson and Hancock.  But the remaining 53 have been largely forgotten.  What kind of men were they?  What did they stand to gain from this Revolution?

They ranged in age from 23 (Edward Rutledge of South Carolina) to age 80 (Ben Franklin of Pennsylvania).  24 of them were lawyers or judges, 11 of them were merchants of various kinds, nine were farmers, and the remaining members were ministers, doctors, and statesmen.

With just a handful of exceptions, these were all men of substantial education, property and public standing.  As compared with the rest of the populace of the 1700′s, they had blessings, eases, and pleasures in life enjoyed by very few.  All of them had more to lose, than they had to gain.

John Hancock, who already had a bounty of 500 pounds on his head, was one of the wealthiest of the signers.  From a family of considerable wealth, he inherited his mercantile fortune from his Uncle, Thomas Hancock.  He was educated at Harvard, and had all that life could give him at the time.  Yet he signed his signature with such size and flourish, that “it might be read without spectacles.”

He was not alone.  The fever of liberty was running at a high pitch.  Yet each of them knew the risks.  Treason was punished by hanging.  And the consequences did not end with themselves, but extended to their families as well.  And there was already a massive English fleet docked in the harbor at New York.

And Hancock’s actions did not go unnoticed by the British.  Nor did the those of the other suspected signers.  All of them became ferociously hunted.  Delegates from New York, William Floyd, Philips Livingston, Louis Morris, and Francis Lewis, each had their homes destroyed.  Mrs. Lewis was captured and brutalized.  Though later exchanged for two British prisoners, she never recovered.  The Floyds were able to flee from New York into Connecticut, where they lived as refugees for the next seven years.  Upon their return, they found nothing left of their estate.  Livingston, whose large possessions were confiscated, died two years later still working in Congress.  Morris was deprived of his family for the next seven years.

Delegate John Hart of New Jersey, attempted to come home to see his dying wife, but was turned back by soldiers.  As she lay dying, soldiers destroyed his livestock and burned his farm.  He was hunted from pillar to post.  When the manhunt finally relented, he returned to find his wife dead and buried.  His 13 children had been taken away.  He died three years later absolutely broken, never seeing his family again.

Judge Richard Stockton rushed home from Philadelphia to evacuate his wife and children.  Betrayed by a sympathizer to the Crown, he was torn from his bed where they were hiding in the middle of the night and subjected to a brutal beating.  He was jailed, starved, and finally released after becoming an invalid.  He did not see the end of the war or its victory, and his family was required to live off of the charitable help of friends and strangers.

The list goes on and on.  One heartbreaking, gutwrenching story after another.  Each of sacred honor, fortunes sacrificed and lives lost or forever altered.  Yet not one recanted.  Not one relented.  Not one failed to deliver on his pledge to the others.

And most remarkably, there was one man…a man who had the chance to see his family spared.  A man who could have saved his two sons if only he had rejected the colonial revolution and supported the King.  He was Abraham Clark of New Jersey.  Clark had two sons who fought for the new nation.  They were eventually captured and taken to the notorious British prison ship Jersey, where more than 11,000 American soldiers died.  The two suffered most severely for the “crimes” of their father, brutally beaten and starved.

Clark was offered his two son’s lives if he would just come out in support of the King.  To those of us who live so soft and comfortably 200 hundred years in their wake, it must seem astounding that with a broken heart, he said, “No”.

Life.  Fortune.  Sacred Honor.

Regards,
Bill Jenkins

July 14, 2009

The High Cost of Independence was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The Financial Accounting Standards Board’s headquarters quakes down to its foundation as Congress bullies it toward sweeping rule changes. Those changes govern the balance sheet values of those very pesky loans and derivatives that started us on this road to crisis in the first place. And the rule overhaul could strike as early as this week.

Right now, the FASB recommends a mark-to-market practice for a majority of financial assets. But Congress wants to mark to model — because that’s what ailing banks want. To see what marking to model looks like, let me give an example of how that would work for your 401(k) quarterly report.

Each quarter, instead of finding out your current account value, you’d get a figure derived from a series of equations using various probabilities for what the value of your fund might be at your target date for retirement. In my case, something like 2045.

Of course, I don’t think I’ll be living in the same America in 2045 — even if I never move overseas. And that’s the problem. As the mortgage-back securities blowup taught us, these models — especially those developed by and for the banks — didn’t price things correctly in the first place.

Sure, we all have moments when we think the market’s current valuations are crazy. Maybe because we know the industry better than anyone, or we have a friend who’s found some old land on the books, or we’ve seen the heights of a cycle and expect it to return. If stocks are at the mercy of the market — and its potential for misinformation — shouldn’t we hold other assets to the same standard?

This mark-to-market accounting rule change isn’t the Change the president was after. As a step toward further protectionism of Frankenstein financials, it’s more of the same. Switching over to a mark-to-model system is like a college student who must present her dorm room for inspection. What’s to be done? The floor has a throw rug on it, so she lifts up a corner and swishes all the dust bunnies, dried vomit, spare change, and other detritus under the carpet.

Bloomberg offers the take from former Lehman Bros. managing director, Robert Willens:

“By letting banks use internal models, instead of market prices, and allowing them to take into account the cash flow of securities, FASB’s change could boost bank industry earnings by 20%.”

We note that the April 2 changes will apply to first-quarter financial statements. So I’m assuming that means all the recent earnings announcements will head back to the SEC for restatements in the hopes of attracting new suckers…I mean shareholders. Such a ruling would allow Citigroup to cut losses by 50-70%. Of course, this rule change threat has been afoot since late 2007, but the rush is on as our can-do Congress takes control.

It’s all about swinging those net losses into net gain territory come hell or high water. (Fargo, N.D., for one, is drowning under the Red River as I write).

The industry rhetoric always ends in a rousing “just say no to fire-sale prices.” Funny, I thought Wall Street had an awfully large conflagration going upon which Congress and Treasury are eager to throw more cash. (Well, I’d rather they burn through decimal places than burn books, I guess. But I don’t see the FASB quenching these flames.)

How March 12 Changed Everything

On March 12, the House Financial Services subcommittee called FASB chairman Robert Herz to the stand. His statement blames the underlying financial conditions — and not the standards — for the write-downs banks are having to suck up. He also says that capital adequacy “is beyond the purview of the FASB.” He makes it clear that the FASB exists to protect investors’ right to information.

However, House Financial Services berated him, belittled him, and told Herz he couldn’t make the rules anymore. Last I checked, the FASB was actually an independent private sector organization. But that’s not so important anymore. Check out this exchange:

“Chairman Rep. Paul Kanjorski (D-PA): You do understand the message that we’re sending?

“Herz: Yes, I absolutely do, sir.”

So now Herz has to get a new fair-value rule finished by April 2. Technically, it’s the SEC who has the oversight here, not Congress. But that’s not the worst part.

Herz admitted, after his congressional grilling, that the financial industry and their trade groups are doing the heavy lobbying. Not investors.

Who holds political action committee strings? None other than beleaguered Citigroup, and others like the Bank of New York, Mellon, Bank of America and Wells Fargo.

Take a look at what the Federal Election Commission tracked for just one representative’s, Chairman Kanjorski’s, re-election. Citigroup put up $6,500. Bank of America topped that with $7,000, and Wells Fargo offered the most: $13,000. Of course, it was all chump change to them. And we, the chumps, are already down about 50% this year and don’t have the spare change to dump in the House Financial reps’ pockets. Our only influence comes by selling short more bank stock.

Congress Follows Newton’s Sacred Law

Newton’s Third Law: For every action, there is an equal, opposite reaction. Chances are you heard that an awful lot in grade school, and have seen this reality break up many a marriage.

Well, in the case of the FASB, Congress, and the bold new plans coming out of Timothy the Timid (who stood firm as a lion on his recent Meet the Press junket), we are left with a big naught.

You see, the new age of mark to model that Congress asks the FASB to inaugurate runs directly opposite to what Geithner fixes to do for the banks. Geithner wants to allow banks to sweep this trash from their balance sheets (and onto our Treasury’s and those of “private” investors tempted in yenta-like matches — whose prospects may be read in that famous attempted union of Citi and Wachovia. If you’ll recall, Wachovia fled at the altar for Wells Fargo).

But Congress — with the help of the FASB — wants to let these banks keep the stinking assets…every last one. Mark to model will be left up to the bank’s choice of equations plugged into its internal modeling of future market conditions — and not it being made to write these assets down to below “fair market value.” Thus, they won’t be selling these suckers to the Treasury.

Before you think that means we’re home free, that it’ll keep those dollars in the Treasury (or from being printed in the first place), realize that in five years, 10 years…whatever the fixed term…those assets will actually hit the marketplace.

It could send banks swimming with their favorite enemies — the short sharks — all over again. And those sharp-eyed shorts have every right to signal to the market, “Here are the weak fishes — cut the school down to size.”

What the New and Improved “Fair Value” Could Look Like

Right now, fair value is determined by marking these assets to their market price once a quarter. Is that really so much to ask? The sally from the banks is always the same: Some of the banks will hold these assets to maturity, which could be 10 years down the road.

The model, on the other hand, is only the most mathematical guess where the market will be in 10 years. There’s just one flaw. Even holy Goldman doesn’t know the future, and no matter how many ex-execs it puts in public service, we’ve seen it can’t MAKE the future.

When the math guys, fondly called “quants” — short for “quantitative” — modeled these derivatives the first time around, their calculations indicated what would happen 99% of the time, when there would be some measure of profit, and neglected the other 1% of the time, when losses would be catastrophic.

Obviously, Congress would do better by putting a ban on all “black swan” events. But most important of all, some banks could be freed from tapping the government bailout if mark to model rules the day: Wells Fargo, M&T Bank, U.S. Bancorp, and PNC Financial.

For edification, I leave you with a quote from Wells Fargo’s own CEO, John Stumpf:

“If you’re a pessimist, there’s a lot for you to like about 2009.”

He further says that you should look for more bankruptcies; more borrowers in a bind — hence more loan losses — and, icing on this mud pie: higher unemployment… signaling more borrowers underwater and more loan losses.

However, Stumpf sweetly echoes the best politician (or Mr. Pollyanna, Warren Buffett) when he offers:

“We continue to believe in the spirit, ingenuity, work ethic, creativity, and adaptability of American workers. We’re capitalists and proud of it.”

What he really must believe in is the work ethic of folks like Rep. Paul Kanjorski and friends on the House Financial Services Subcommittee. Stumpf should know he’s the one paying for it.

Regards,
Samantha Buker

April 1, 2009

Tomorrow Mark-to-Model Returns with a Vengeance was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The Financial Times article can be found here, U.S. Congress Takes Aim at ‘Speculative’ Crude Oil Trades . Lets play a little game and see if substituting “Google,” “Bear Stearns,” or “stock prices” for oil makes as much sense.

Here is a retake of the above article with some slight modifications:

“‘Right now, it is funds and speculators who invest in oil Google — and financial markets interfere with the oil stock market,’ [Secretary-general of OPEC Adbullah] al-Badri said in Vienna.

“The idea that speculators — often used as shorthand for hedge funds — may be trading in a way that results in unusual price movements has gained traction among some U.S. lawmakers…

“As chairman of the Senate Permanent Subcommittee on Investigations, [Sen. Carl] Levin produced a report this year on ‘excessive speculation” by collapsed Bear Stearns hedge funds Amaranth in natural gas CDO markets on the New York Mercantile Stock Exchange and the Intercontinental Exchange, an "over-the-counter" platform. Mr. Levin, energy consumer groups, and some utilities bagholders say this hit consumer prices want their money back…

“Since the collapse of energy trader Enron, the Commodity Futures Trading Commission has charged 63 companies and individuals for violations in the sector, and obtained more than $300 million in civil settlements…

“In the U.S., lawmakers New York Attorney General Andrew Cuomo, angered by the lack of a legal basis for the CFTC to fully oversee trading in OTC energy markets are to strike out at Washington Mutual directly, is pushing legislation to widen the agency’s powers his power to sue federal banks.

“Last week, Congressman Peter Welch of Vermont introduced a bill to require ‘government oversight of the trading of unregulated energy commodities Google stock trading to prevent price manipulation and excessive speculation.’”

Think about it. Why is it that speculation in Google, Treasuries, CDOs, asset-backed mortgages, etc., is all welcome, but speculative trading in oil is not?

The root of the problem is not speculation, nor is the problem the high price of oil. The root of the problem is economic conditions that foster, and even encourage, speculation in oil, commodities, gold and silver, currencies, and high beta stocks like Google, Apple, and Research In Motion.

Bernanke and the Fed purposely foster inflation. This drives down the value of the dollar and encourages speculation.

Ron Paul vs. Bernanke

Ron Paul blasted Bernanke in Congress last week as seen on this YouTube video . Following is a transcript:

“We [need to] get down to the bottom of this and define what inflation is, and not look at only prices. This was taught by the free market economists all through the 20th century. They said, ‘Beware, [the central banks] will increase money supply, but they will make you concentrate on prices. And they will give you CPIs and PPIs and fudge those figures.’

“We ignore the fundamental flaw, and that is not only have we had a subprime market in housing, the whole economic system is subprime in that we have artificially low interest rates. This has been going on for 10 years or longer, and now we are bearing the fruits of that policy.

“Instead of looking at consumer prices, which nobody in this country really believes, we need to talk about the distortion, the malinvestment, the misdirection, the bad information that is gotten from artificially low interest rates. In many ways, people refer to you as a price fixer. You fix interest rates. When the Fed fixes interest rates at 1%, that is price fixing.

“The real deception is when we distort the value of money, when we create money out of thin air.

“We have to get back to the very fundamentals of where this problem [bubbles] comes from. And the bubbles occur when we have mal-investment and the creation of new money.

“So my question boils down to this: How in the world can we expect to solve the problems of inflation — that is the increase in the supply of money — with more inflation?”

If Congress wants to reduce speculation in oil, houses, the stock market, and everything else, it should abolish the Fed and let the free market, as opposed to the price fixers, set interest rates. Instead, Congress is sponsoring more absurd regulation.

Government oversight of oil trading makes as much sense as government oversight of Google trading. None.

Regards,
Mish

November 13, 2007

Double Standard Time was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.