Against the Fed

April 27, 2009

Americans Rally Nationwide to End the Fed | Print | Written by Thomas R. Eddlem Sunday, 26 April 2009 08:00 End the Fed rally“End the Fed” rallies were staged across the nation in more than two dozen cities April 25. Attendees protested in front of every one of the dozen Federal Reserve Bank branches and expressed support of Ron Paul’s H.R. 833, which would abolish the Fed, and H.R. 1207, which would provide an independent audit of the quasi-private central bank. Peter Schiff keynoted the rally in New York City, noting of the current economic bust: “The Federal Reserve was behind all of it and we’re not going to get to the root of our economic problems unless we get to the root cause, which is the Federal Reserve and the phony monetary system we now have.” (See his speech here, and advance publicity for his address here.) Indeed, Statistical Abstract of the United States demonstrates that average inflation-adjusted GNP/GDP annual growth rates for the United States have shrunk from 4.6 percent for the 46 years before the Federal Reserve was adopted to just 3.3 percent afterward. Growth has slowed to less than 2.2 percent in the past 20 years, roughly the rate of population increase. The United States has gone from a nation where the every generation could expect to be materially better off than the past generation, to a nation where it’s difficult for young Americans just to reach the heights their parents once had. “Good afternoon would-be terrorists of America,” Harold Shurtleff of the John Birch Society opened remarks in the shadow of Boston’s Federal Reserve Bank building, referring to a Department of Homeland Security memo that painted liberty lovers as potential terrorists. “The real terrorists are behind us.” The Federal Reserve bankers destroy the economy, explained Shurtleff, the New England Coordinator for the John Birch Society. “Today, there are rallies like this all over the country. Millions of people are waking up.” The Boston rally had been sponsored by EndTheFed.us, RestoreTheRepublic.com and Ron Paul’s Campaign for Liberty. Footage from some of the April 25 rallies is available on YouTube, including Los Angeles, Chicago, Boston, San Antonio, New York City, Detroit, and Indianapolis. “The Federal Reserve is the biggest problem facing America.” Free Talk Live radio host Mark Edge told the Boston audience. “If the Federal Reserve doesn’t go away, America is going to be destroyed.” But the Boston “End the Fed” rally, attended by this correspondent, was not negative. “Even if we don’t end it,” radio talk show host Dave Kopacz quipped in Boston, “they’re doing a pretty good job of self-destruction.” The Federal Reserve’s artificial lowering of interest rates created a false prosperity bubble that led to the current housing and financial crash. And that’s becoming more and more obvious, Kopacz pointed out. Sean Ryan, Boston Coordinator for Campaign for Liberty, explained that “our task is not as hard as it must have been for our ancestors” who fought the war for independence from Britain. The April 25 rallies are a follow-up on earlier rallies on November 22 of last year.

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A Contrarian Perspective

April 26, 2009

April 20, 2009

The Alternative to Spending More
By Daniel Hannan MEP

Is there anything – anything at all – that might convince world leaders that they shouldn’t respond to the credit crunch by spending more? It may seem common sense that you can’t borrow your way out of debt: we all apply that principle to our household budgets. But, since the financial crisis began, states increased their spending despite the plain evidence that stimulus packages have done nothing to ward off the recession.

On most measures, it hasn’t worked: the downturn has happened anyway, but we are now drifting into it with an additional debt burden. The trouble is that, politically, stimulus packages take on their own momentum. Leaders cannot go back to their voters and sheepishly admit that the money has been wasted. They have to pretend that they are almost there, that another billion dollars will do the trick. And so, like rogue traders, they end up doubling and doubling in an attempt to move the market.

What’s the alternative to spending more? How about this: not spending more. The phrase “doing nothing is not an option” is one of the most pernicious in the political lexicon, and is almost never true. By way of illustration, ponder the way in which New Zealand dealt with an earlier banking crisis two decades ago.

New Zealand was the first major country to withdraw all subsidies from its agricultural sector – a reform that was hugely controversial at the time, but that almost no one now wants to reverse. When the grants were terminated, land values fell, and many Kiwi farmers found themselves in negative equity. The bankers approached the government to demand a bail-out. The government declined to involve itself. The bankers tried again, insisting that, if the state didn’t step in, there would be a financial collapse. Ministers politely told them that this was their problem.

Result? The bankers realised that it was their problem. Well aware that the last thing they needed was a series of repossessions and auctions, they allowed farmers to reschedule their mortgage payments. The crisis was averted and, sooner than expected, land prices recovered. It’s what economists call “spontaneous order”.

The point is that, had the government given in to pressure, it would almost certainly have triggered the collapse that it hoped to avert.

Sadly, it’s a brave politician who argues, in a crisis, against state activity. The natural advantage will always lie with the Something Must Be Done crowd. But there are few crises so severe that they cannot be exacerbated by government intervention. I leave you with the words of that most conservative of Conservatives, the third Marquess of Salisbury, spoken about the Bulgarian Crisis of the 1880s, but capable of much wider application: “If anything happens, it will be for the worse, and it is therefore in our interest that as little should happen as possible.”

Daniel Hannan’s daily blog is hosted by the London Daily Telegraph: www.hannan.co.uk


Interesting possible predictions for the economy

April 26, 2009

April 24, 2009

Bad, Worse, or Worst?
An assessment of how serious the current crisis is likely to become

By Bud Conrad

It’s time to call the global crisis what it is: the worst financial collapse since 1929. Even government officials, after trying to ignore the facts on the ground for the last couple of years, are admitting the truth of the matter.

Now that it’s here, we turn our attention to trying to discern, “How bad can it get?” and “How long can it last?”

While such questions can never be answered with anything approaching absolute certainty, there are methods that can be used to assess what may lurk over the horizon. With that goal in mind, this article focuses on – and then expands upon – the recent work of two economists who painstakingly analyzed a substantial number of previous banking and currency crises in an attempt to derive potentially useful lessons. I have then taken their data and applied them to the current circumstances to see where we are, relative to those other experiences.

The Data

The data are from a study called “The Aftermath of Financial Crises” by Carmen M. Reinhart of University of Maryland and Kenneth S. Rogoff of Harvard University. In their study, the authors summarize the results of a broad sampling of banking crises, with between 13 to 22 crises analyzed for each of the variables.

The Reinhart/Rogoff study is based, in turn, on data extracted from an even more comprehensive study of events in 66 countries, titled “This Time Is Different: A Panoramic View of Eight Centuries of Financial Crises,” by the same authors.

I’ve summarized the findings from the latest study in the table below:

The economic measures in the left column show how far the U.S. situation has deteriorated so far. The next columns show the average historical deterioration and the worst case of the crisis analyzed.

I then applied these data to calculate the levels that the U.S. could reach if it followed the path of the historical examples. The projected level is based on the measure analyzed, either from the peak prior to the downturn (e.g., the S&P 500) or from the bottom prior to the downturn (e.g., the lows in unemployment). Thus, as you can see in the table here, the S&P 500 has already dropped from its October 2007 peak of 1565 down to 766. If this crisis were to end up being only “average,” then it would drop to 690.

If, however, the worst case of a 90% drop were to occur, as it did in Iceland last year, then the S&P 500 would trade down to the shocking level of 157. For further reference, if the current crisis were to cause the stock market to fall as sharply as in the Great Depression, the S&P would touch 469.

Duration of Crisis

As you can see in the summary table below, it took 3.4 years, on average, for the stock market to fall from the peak to the bottom. In the worst case, it took five years. With the recent peak in the S&P 500 occurring in October 2007 – just one and a half years ago – the crisis is likely to have some time to go before reaching even an average duration. More specifically, if this crisis turns out to be just “average,” we would not expect to see the low before the first quarter of 2011.

Crisis Horizon: Some Conclusions

The global economic situation continues to deteriorate on all fronts (see charts below).

Housing prices are down 28% from their bubble peak in 2006 but still have a ways down to go to get back to their pre-bubble levels. Even an average downturn will mean that housing remains a problem for several more years. Unless, of course, the government steps in to stave off those resets… a “solution” that carries with it a separate set of problems, making things worse. We continue to expect very serious problems in the commercial real estate sector.

The stock market is approaching a 50% decline, the average of what has been observed in past crises. Further slowing in U.S. corporate activities and profits means additional increases in unemployment, establishing a negative feedback loop that pushes corporate profits – and stock prices – even lower.

The only growth trend at this point is in government bailouts, which are in high gear, indicating we’ll experience the staggering growth of outstanding debt seen in other crises. The elevated levels of government borrowing required to fund that spending are absorbing all available credit from foreigners, directly competing with business in need of the new financing to survive the downturn and continue to grow. Declining business activity coupled with declining levels of household income will result in declining tax revenues, increasing the budget deficit beyond the size of the new bailout programs. State and municipal governments across the country are already being confronted with large shortfalls in their budgets, shortfalls that will only widen as the crisis worsens.

Business slowing, and the resulting jobs contraction, assures that the GDP will decline. Components of GDP having to do with necessities like food and shelter will continue to bump along regardless of the economic conditions, but the lack of growth in GDP could extend for years as it did in Japan and as it did after the 1929 U.S. stock crash.

Inflation/Deflation

Given that we are currently in a deflationary phase, it is easy to dismiss the threat of inflation – and many do. We think that is a mistake. Even a summary tabulation of the unprecedented increases in government debt at this relatively early stage in the crisis make a compelling case for higher inflation, if for no other reason than that it shows clear intent on the part of the government to spend “whatever it takes” to offset the deflationary forces now stalking the land.

The historical examples paint a dismal story of years of economic stagnation. In our view, the trend is now firmly established for dollar debasement, which will eventually overwhelm the deflationary pressures from collapsing asset values. Therefore, don’t listen to the happy faces on CNBC spouting off, for the umpteenth time since this crisis began, that now is the time to jump back in and buy stocks. It isn’t.

Be extremely skeptical when you hear some pundit pronouncing that this piece of short-term good news or another is an “all clear” signal. Until we start seeing a systematic improvement in the economic fundamentals – for example, an upward movement in consumer confidence – the only signal the economy will be hearing is that of a runaway train coming straight at it.

The numbers paint a dark picture… but it is in crises like today’s where unusually good opportunities arise for investors.

Bud Conrad is the Chief Economist at The Casey Report. Try it risk-free for 3 full months: click here to learn more.


How we got into this mess

April 26, 2009

Great video below describing the blatant systemic corruption in our elite institutions (the press, the political class, the financial industry).  The only thing not fully confronted is the fact that this goes on so openly because our leaders and institutions have been bought off or have conflicts of interests which prevent correct action.

It also shows how Obama, far from being the miraculous reformer who was supposed to sweep in and reform the way politics is done in Washington, has simply followed the corrupt polities of the Bush Administration.


Credit

April 26, 2009

More nice comments by Don Harrold.


Nutrition by Natalie

April 26, 2009

Another great source for nutrition advice is the series “Nutrition by Natalie” on youtube.com.  Here are some interesting videos.


The Disappearing Male

April 26, 2009

This documentary about chemical pollutants on people and especially males is very interesting.  Definitely worth a look.

Go to this link to watch it.

http://video.google.com/videoplay?docid=7530701744597358451

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