The big news out of New York City these days is Mayor Mike Bloomberg’s proposed ban on the sale of soda drinks over 16-ounces (about 1/2 liter) at restaurants, movie theaters, sports stadia, street carts, fast food chains, etc. Bloomberg stressed that we have a responsibility to combat obesity, diabetes, and heart disease, and that the government must consequently regulate what people can/cannot put in their bodies. Michelle Obama even came down to applaud the idea.“Excuse me,” I asked, “but who exactly is ‘we’…? I certainly didn’t come into this world born with a burden prevent obesity. And I’m pretty sure nobody else signed up for it either.” ‘We’ is one of the most dangerous words in the English language, particularly when bandied about in Western representative democracy. It’s a term often used when a politician wants to thrust a burden or obligation onto everyone else’s shoulders, but without being too direct about it... Such policies, however, fall on a very slippery slope. When government begins regulating X, the regulation of Y and Z will follow by extension. This is how frogs are brought to a boil– slowly, deliberately, gradually, and grounded in good intentions. The real question is whether you want to be trapped in the same pot as everyone else.
On our current course, there is no other choice for the average American but to say no, regardless of the law, or the threat of its violent enforcement. Rebellion, in all its forms, is as natural as the cycles of the Earth. It reoccurs time and again, sometimes suppressed, but not for long. The horrors of governments gone rogue are no secret. We have so many examples in history to draw from it is hard to imagine any crime despots have NOT visited upon innocents. Frankly, if control thirsty elites can refine tyranny down to a science by examining the mistakes of the past, there is nothing stopping us from refining defiance down to an art form as well. Again, what other choice do we have, but to take heart in the knowledge that though there is no assurance of victory, there is also no assurance of defeat.
The state purports to represent the people when all it does is leech off their labor in order to commit crimes at home and abroad. Under the auspices of keeping democracy safe around the world, the foreign policy of the U.S. government has been one of bombing, killing, and overall domination. Meanwhile, anti-American sentiment continues to spread by instances such as the C.I.A. targeting civilian responders to drone strikes who attempt to aid those who were attacked. In some cases, the C.I.A. even launches drone attacks at the mourners in funerals held for those in earlier strikes. These are the measures under which the American people are told they are being kept safe. What would be constituted as war by any other nation is not so when carried out by the U.S. government. But it’s all just another facade through which Washington pretends to serve the people when in reality it puts them in even more danger.
At this moment, the news media is constantly clamoring about the "Three Ds" that are buffeting the markets: debt, deleveraging, and deflation. We intuitively sense that they're linked -- but how, exactly? Understanding this linking is critical; as debt has fueled the global expansion, it will also dominate its contraction. To illustrate the forces of debt and deleveraging, let’s consider a home mortgage....
As a guy who is living in a taxpayer-funded villa after his bank-insurance-derivatives-hedge fund-ponzi company blew up, we know Benmosche is a hypocrite. In my view, management should be held personally liable a long time before taxpayers. That’s right, I believe in personal responsibility and that means no hiding behind limited liability and bailouts, no matter how “systemically important” you claim to be. But let’s set aside disgust at government for first setting up this scenario via Gramm-Leach-Bliley, and then in 2008 throwing money at hypocritical grifters like Benmosche.
Is he wrong about social security and medical services?
Stripped of acronyms and pseudo-economics, Central banks have one lever: monetary easing. Whatever the name offered for creating money electronically and suppressing interest rates, it boils down to making money abundant and cheap to borrow, at least for banks and other favored players, such as buyers of homes using 3% down-payment FHA mortgages. The problem is that easy money doesn't fix what's broken. Incentivizing debt and leverage does nothing to reduce leverage or debt, and incentivizing speculation does not reduce household debt loads or increase household incomes. And without improving household incomes, you have a recessionary economy held aloft by unsustainably profligate Federal borrowing and spending.
Is this a "solution"? No. Is this sustainable? No.
A picture says more than a hundred words, so I wanted to present in graphical terms what happened at the Swiss National Bank over the last few quarters. Central banks have tried to “manage” currencies in the past. Sooner or later, market forces win. As all other major central banks keep printing additional Euros, Dollars, Yen etc., the SNB looks prone to lose this game. A run on the Swiss Franc could lead to a further increase in prices of Swiss government bonds. Swiss equities however would decline, at least measured in Swiss Francs.
This past Friday, Barack Obama was at a Minneapolis-area Honeywell plant touting his economic recovery credentials to cheering disciples. One of the excited faithful was a young boy, fifth-grader Tyler Sullivan, who took the day off from school to hear the President speak. The President was full of the usual bombast about how Congress needs to work with him to ‘build a strong economy’, and how he wants to get $3,000 to everyone in the American middle class so that people can go out and buy ‘thingamajigs’. Naturally, the crowd cheered. It was the typical sort of gross misunderstanding of economic prosperity that you see from politicians… and most people at this point. People these days think it’s a great idea when the government sprinkles money around the middle class, and love the idea of politicians ‘coming together’ to build a better economy. In reality, when people hear talk about politicians ‘building an economy’ they should run away like a scalded dog. Throughout history, a lot of other politicians have also tried building an economy– it’s called central planning, and it just doesn’t work.
The problems facing the U.S. economy are daunting especially when it comes the issues of Government spending and the current deficit. We recently wrote about the dependency on Government programs which is currently making up as much as 35% of personal incomes. Social Security, Medicaid and Medicare make up the largest portions of the current spending requirements of the Federal Budget. The current administration has promised that cuts will not be made to government "entitlement" programs but is that a promise that any administration can actually keep? When it comes to Social Security the facts are rather alarming. By 2017 the Social Security Administration will pay out more in benefits than it takes in. This is not surprising given that in the 1950's there were roughly 5 workers for every retiree. Today, it is roughly half of that. With 78 Million "baby boomers" moving into retirement the demands on social security are set to spiral higher in the coming years ahead. Is it really any wonder then that with demographics heading in the wrong direction, not to mention a much slower growth economy, that the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033?
Guest Post: A Central Bank Running Suicide? SNB Prints At Pace Not Seen Since EUR/CHF Parity In August 2011Submitted by Tyler Durden on 06/04/2012 13:41 -0500
The most recent money supply data from the Swiss National Bank (SNB) has shown increases of huge amounts. As compared with its loss of 19 bln. francs in 2010 (3% percent of the Swiss GDP), the central bank printed tremendous 17.3 bln. in the week ending in June 1st and 13 bln. in the one ending in May 25th. These numbers were not seen since August 2011 when the SNB increased money supply by 50 bln and 40 bln per week buying the EUR/CHF at rates between 1.00 and 1.13. Now, however they are buying at 1.20 and are risking extreme losses, especially because many other central banks are dumping euros.
If there was ever an article that should spark every British citizen to immediately shift their savings into physical gold this is it. Basically, proposals are on the table to change the way inflation is calculated for bonds that payout based on the rate of change in prices. Unsurprisingly, they are purposely attempting to use an alternative measure of inflation that allows substitution (so when people can no longer buy a steak and must spend the same amount of money on spam this shows up as no inflation)! If this goes through, it is blatant theft. This is why owning TIPS in the U.S. is a total fool’s game. They will mark inflation to whatever level they want at the end of the day. To whatever is most convenient at the moment. You know, just like the banks mark their balance sheets. But don’t take my word for it…
The reality that the global Status Quo has fixed absolutely nothing in four years is finally coming to roost in the global economy. Though there is an endless array of complexity to snare the unwary, the source of instability is both visible and easily understood: too much debt that will never be paid back. Making matters much worse, much of the money that was borrowed--by sovereign governments, local governments, households and private enterprises--was squandered on consumption or malinvestments, and so there are precious few assets or collateral underlying the debt. Even when there is an asset--for example, a vacant house in a vacant development in Spain, or a Greek bond--the market value is considerably lower than the purchase price. The reality is that trillions of dollars, euros, yen and renminbi in phantom wealth will disappear when the losses that have already taken place are finally recognized. Everyone in the world with exposure to the global economy will become poorer in terms of abundant money floating around buying goods and services as credit dries up and deleveraging wipes out trillions of dollars, euros, yen and renminbi of phantom wealth.
Deflation has effectively been abolished by central banking. But is it sustainable? The endless post-Keynesian outgrowth of debt suggests not. In fact, what is ultimately suggested is that the abolition of small-scale deflationary liquidations has just primed the system for a much, much larger liquidation later on. Central bankers have shirked the historical growth cycle consisting both of periods of growth and expansion, as well as periods of contraction and liquidation. They have certainly had a good run. Those warning of impending hyperinflation following 2008 were proven wrong; deflationary forces offset the inflationary impact of bailouts and monetary expansion, even as food prices hit records, and revolutions spread throughout emerging markets. And Japan — the prototypical unliquidated zombie economy — has been stuck in a depressive rut for most of the last twenty years. These interventions, it seems, have pernicious negative side-effects. Those twin delusions central bankers have sought to cater to — for creditors, that debt is wealth and should never be liquidated, and for debtors that debt is an easy or free lunch — have been smashed by the juggernaut of history many times before. While we cannot know exactly when, or exactly how — and in spite of the best efforts of central bankers — we think they will soon be smashed again.
The precautionary principle is typically defined as “if an action or policy has a suspected risk of causing harm to the public or to the environment, in the absence of scientific evidence that the action or policy is harmful, the burden of proof that it is not harmful falls on those taking the action.” In practice, the principle is utilized by government policy makers to ensure technological advances don’t pose too dire of an effect on the surrounding environment. This may appear a noble goal if one accepts the premise that the prime function of government is the protection of life and property. History proves otherwise as easily corruptible politicians have tended to grant exceptions to wealthy business interests which look to dump their waste in public-owned natural resources such as waterways. It is also clear judging by historical cases that socialization often results in environmental degradation. One look at the pollution in once-communist nations such as China or the former Soviet Union reveals that a lack of private property results in a type of moral hazard en masse as there is little incentive to preserve what you don’t officially own.
The recent elections in Egypt now lead to a showdown between the two top vote getters on June 16/17. The protagonists, Ahmed Shaiq (former PM for Mubarak and candidate of the military) vs. Mohammed Mursi (Muslim Brotherhood), pits two candidates most of the population really doesn’t want in the first place. Kind of like Obama vs. Romney. Where’s Ron Paul on the ballot, right? The problem here is Egypt’s position on the timeline of revolution. Egypt has gone through the 1st Stage of a government loosing its justification to govern, and now the 2nd Stage of a caretaker, or provisional government, is now coming to an end. However, no accommodation has been created to correct the deficiencies that caused Egypt’s Spring Revolution, and that spells trouble.