Shana Tova! Happy New Year!
praying that God will bring us peace and liberty in this new year.
Thursday, September 29, 2011
An unintended consequence of Dodd-Frank
Obviously there is the seen versus the unseen as put by Frederic Bastiat and rehashed by Henry Hazlitt. And I'm sure the that the Dodd-Frank financial-regulatory overhaul bill passed last summer has already had several unseen unintended negative consequences.
But for the first time, I just heard on the radio today a negative effect that this law will have directly on consumers. Part of the law limits the fees that banks can charge businesses for accepting debit cards. So of course, this will reduce banks profits - unless the banks find other revenue sources - which is what they are trying to do. Bank of America announced that they will be charging BoA debit card users $5 per month, starting in early 2012!
Of course this will hurt poor and middle class people who pay for gasoline, groceries, and every day expenses with their debit cards. As far as I'm concerned, it is a VERY REGRESSIVE TAX (but I thought Democrats were AGAINST regressive taxes!)
It could also drive more people into credit cards (except there are many poorer people now who can't even get credit cards, after either Dodd-Frank or some other law/regulation capped interest credit card companies can charge). This would certainly help encourage excess, and it has the potential to entrap even more people into the misery that is consumer debt.
Now, I'm not a fan of the current banking system or of the banks which take part in it, but I will not blame the banks for charging their customers to use debit cards in order to replace revenue lost by government imposed caps on these banks.
Here's a similar, but more comprehensive article about this from the Heritage Foundation .
And Forbes reports that Sun Trust bank has already started this and that Wells Fargo has been trying it in various markets.
And yeah, this bill was passed under the guise of protecting consumers! There is evidence that it is already hurting consumers!
But for the first time, I just heard on the radio today a negative effect that this law will have directly on consumers. Part of the law limits the fees that banks can charge businesses for accepting debit cards. So of course, this will reduce banks profits - unless the banks find other revenue sources - which is what they are trying to do. Bank of America announced that they will be charging BoA debit card users $5 per month, starting in early 2012!
Of course this will hurt poor and middle class people who pay for gasoline, groceries, and every day expenses with their debit cards. As far as I'm concerned, it is a VERY REGRESSIVE TAX (but I thought Democrats were AGAINST regressive taxes!)
It could also drive more people into credit cards (except there are many poorer people now who can't even get credit cards, after either Dodd-Frank or some other law/regulation capped interest credit card companies can charge). This would certainly help encourage excess, and it has the potential to entrap even more people into the misery that is consumer debt.
Now, I'm not a fan of the current banking system or of the banks which take part in it, but I will not blame the banks for charging their customers to use debit cards in order to replace revenue lost by government imposed caps on these banks.
Here's a similar, but more comprehensive article about this from the Heritage Foundation .
And Forbes reports that Sun Trust bank has already started this and that Wells Fargo has been trying it in various markets.
And yeah, this bill was passed under the guise of protecting consumers! There is evidence that it is already hurting consumers!
Tuesday, September 27, 2011
Congress and Copies of the Constituiton
The visit I had with Congressman Ron Paul in his congressional office in DC was great. He is an absolute gentleman and such a pleasure to talk to.
The first time I visited, I got a Constitution printed by the Campaign for Liberty organization. These Constitutions were paid for by C4L, which gets funding exclusively from NON-TAX-DEDUCTABLE donations.
This time, the Constitutions were different. And Ron Paul told me why. Apparently, there was a Congressional rule that Congresspeople could only give out the Constitution that is provided by Congress. They are prohibited from handing out Constitutions from private organizations. This is so appalling and outrageous.
Immediately, I thought that it was a dangerous rule. Down the road, they might change something, either mistakenly or purposely. But it turns out that there is a quote on the first page which is misleading: "The sacred rights of mankind are not to be rummaged for, among old parchments, or musty records. They are written, as with a sun beam in the whole volume of human nature, by the hand of the divinity itself; and can never be erased or obscured by mortal power." - Alexander Hamilton, 1775. Now, this quote sounds pretty good. I think I agree with it. But the idea that our Big Government associates the ideas in this quote with Alexander Hamilton is scary and dangerous. Hamilton was one of the biggest-government people at the drafting of the Constitution. At the drafting, he lost on some issues, such as the central bank.
Then, one of the quotes on the back from John Marshall UNBELIEVABLY reads "... a constitution, intended to endure for ages to come, and consequently, to be adapted to the various crises of human affairs." Even Alexander Hamilton disagreed with this! Hamilton assumed that only the delegated powers would be used.
I can't figure out what's worse - attributing a quote to Hamilton which didn't reflect Hamilton's actual views or writing a quote which supports unlimited government in the government-sanctioned copy of the government's limiting document.
(upon further investigation, I cannot confirm that Hamilton would have disagreed with Marshall's quote - I had been under the impression, as bad as Hamilton was, that he expressed his belief at the ConCon that only the expressly delegated powers would be used. Anyone know which Federalist paper might clarify this?)
The first time I visited, I got a Constitution printed by the Campaign for Liberty organization. These Constitutions were paid for by C4L, which gets funding exclusively from NON-TAX-DEDUCTABLE donations.
This time, the Constitutions were different. And Ron Paul told me why. Apparently, there was a Congressional rule that Congresspeople could only give out the Constitution that is provided by Congress. They are prohibited from handing out Constitutions from private organizations. This is so appalling and outrageous.
Immediately, I thought that it was a dangerous rule. Down the road, they might change something, either mistakenly or purposely. But it turns out that there is a quote on the first page which is misleading: "The sacred rights of mankind are not to be rummaged for, among old parchments, or musty records. They are written, as with a sun beam in the whole volume of human nature, by the hand of the divinity itself; and can never be erased or obscured by mortal power." - Alexander Hamilton, 1775. Now, this quote sounds pretty good. I think I agree with it. But the idea that our Big Government associates the ideas in this quote with Alexander Hamilton is scary and dangerous. Hamilton was one of the biggest-government people at the drafting of the Constitution. At the drafting, he lost on some issues, such as the central bank.
Then, one of the quotes on the back from John Marshall UNBELIEVABLY reads "... a constitution, intended to endure for ages to come, and consequently, to be adapted to the various crises of human affairs." Even Alexander Hamilton disagreed with this! Hamilton assumed that only the delegated powers would be used.
I can't figure out what's worse - attributing a quote to Hamilton which didn't reflect Hamilton's actual views or writing a quote which supports unlimited government in the government-sanctioned copy of the government's limiting document.
(upon further investigation, I cannot confirm that Hamilton would have disagreed with Marshall's quote - I had been under the impression, as bad as Hamilton was, that he expressed his belief at the ConCon that only the expressly delegated powers would be used. Anyone know which Federalist paper might clarify this?)
Friday, September 23, 2011
Keynesian liquidity trap
or a just broken banking system and an economy that is in dire need of structural readjustment?
There are reasons that the economy don't have sustainable growth, and there are reasons money is stuck in the bank. Until we look at the fundamentals of the economy, such as current house and other asset prices versus prices for those assets if allowed to clear in an unfettered market, we cannot get back to sustainable growth.
Money will be stuck in the bank, and we will be in a "liquidity trap" until prices are more in line with what prices should be and until bad debt is allowed to be liquidated. We've had horrible inflation.
There are reasons that the economy don't have sustainable growth, and there are reasons money is stuck in the bank. Until we look at the fundamentals of the economy, such as current house and other asset prices versus prices for those assets if allowed to clear in an unfettered market, we cannot get back to sustainable growth.
Money will be stuck in the bank, and we will be in a "liquidity trap" until prices are more in line with what prices should be and until bad debt is allowed to be liquidated. We've had horrible inflation.
Thursday, September 22, 2011
Social Security and Privatization
The debates this summer, amongst Congress, the media, and the GOP candidates have included sharp talk on Social Security.
It is key to recognize that Social Security actually IS a Ponzi Scheme, as Rick Perry called it. It might be the only substantive issue about which Rick Perry is right. So the two main questions are what is a better system and how to responsibly transition to that system.
Some Republicans talk about Social Security privatization. This implies that employers and employees are still mandated to pay FICA taxes, but instead of going into the social security trust fund or the general revenue, the income earner can decide how to invest the payment from him and his employer, through an government-approved private account. Some of these suggested plans would allow only a portion of withholding
But there's another option. That is to simply no longer requiring ANY participation in it. Let me keep my own money and save and invest in the way I want. I might choose to save and invest in PHYSICAL gold and silver, commodity contracts, farm land, ammunition - but "privatization" would not allow this. My money would have to go to either the government managers or the government-approved private money managers. Privatization, as opposed to being allowed to opt out, implies that private companies will get to earn trade commissions on these mandated accounts. This sounds very corporatist, or dare I say it, fascist.
It is key to recognize that Social Security actually IS a Ponzi Scheme, as Rick Perry called it. It might be the only substantive issue about which Rick Perry is right. So the two main questions are what is a better system and how to responsibly transition to that system.
Some Republicans talk about Social Security privatization. This implies that employers and employees are still mandated to pay FICA taxes, but instead of going into the social security trust fund or the general revenue, the income earner can decide how to invest the payment from him and his employer, through an government-approved private account. Some of these suggested plans would allow only a portion of withholding
But there's another option. That is to simply no longer requiring ANY participation in it. Let me keep my own money and save and invest in the way I want. I might choose to save and invest in PHYSICAL gold and silver, commodity contracts, farm land, ammunition - but "privatization" would not allow this. My money would have to go to either the government managers or the government-approved private money managers. Privatization, as opposed to being allowed to opt out, implies that private companies will get to earn trade commissions on these mandated accounts. This sounds very corporatist, or dare I say it, fascist.
Ron Paul must be winning
The other candidates are finally coming around to many of his views (at least rhetorically).
Several candidates (much to the dismay of Rick Santorum) took the stance that the American military should not be engaged in perpetual wars with countries that pose no national security threat.
Gingrich, like he has been doing for a few months now, was critical of the Fed's inflationary policies. Even Romney decided it was time to be critical of the Fed's massive monetary stimulus after staying silent on the issue for years. Four years ago, Romney and McCain, among others, actually LAUGHED at Ron Paul on the debate stage when he would discuss the Fed.
At the debate tonight, almost EVERY candidate called for the abolition of the Department of Education. Four years ago, I don't remember any candidate other than Ron Paul calling for this.
Ron Paul's overall goal has been to change minds. The politicians are likely just talking like Paul because that is what their constituents want them to say. But that is the whole thing - Paul and the liberty movement have helped shift the attitudes of the people.
Several candidates (much to the dismay of Rick Santorum) took the stance that the American military should not be engaged in perpetual wars with countries that pose no national security threat.
Gingrich, like he has been doing for a few months now, was critical of the Fed's inflationary policies. Even Romney decided it was time to be critical of the Fed's massive monetary stimulus after staying silent on the issue for years. Four years ago, Romney and McCain, among others, actually LAUGHED at Ron Paul on the debate stage when he would discuss the Fed.
At the debate tonight, almost EVERY candidate called for the abolition of the Department of Education. Four years ago, I don't remember any candidate other than Ron Paul calling for this.
Ron Paul's overall goal has been to change minds. The politicians are likely just talking like Paul because that is what their constituents want them to say. But that is the whole thing - Paul and the liberty movement have helped shift the attitudes of the people.
Herman Cain's DANGEROUS idea
His 9-9-9 plan concedes that there should be both an income tax (9%) and a national sales tax (9%) (and that 3rd 9 is the corporate tax)!!
I don't want any of these taxes, but if we can completely eliminate the income tax, and we want to REPLACE it, I think economically the national sales tax is the least distortionary. The primary question would be to address the regressive nature of a flat sales tax (maybe they can allow for the poorest to not pay, or not tax on food and other essentials).
To support a national sales tax (or a VAT- even worse!) ON TOP of the income tax is to accept complete tyranny. What would stop the government from raising the rates? In that case, the government could raise both the income tax rates and the sales tax rates. Adding taxes without eliminating taxes is a horrible, HORRIBLE idea.
See my former post on Herman Cain and his time at/stance of the Federal Reserve System.
I don't want any of these taxes, but if we can completely eliminate the income tax, and we want to REPLACE it, I think economically the national sales tax is the least distortionary. The primary question would be to address the regressive nature of a flat sales tax (maybe they can allow for the poorest to not pay, or not tax on food and other essentials).
To support a national sales tax (or a VAT- even worse!) ON TOP of the income tax is to accept complete tyranny. What would stop the government from raising the rates? In that case, the government could raise both the income tax rates and the sales tax rates. Adding taxes without eliminating taxes is a horrible, HORRIBLE idea.
See my former post on Herman Cain and his time at/stance of the Federal Reserve System.
Wednesday, September 21, 2011
September 21 FOMC Statement
The Fed just finished it's FOMC meeting and has released it's press release .
In it, the Fed essentially confirms that the economy is in horrible shape and also that those at the Fed have no idea what they're doing. The release explains that growth is slow and unemployment remains high. The FOMC expects there will be some faster growth soon but that the unemployment rate will remain elevated for a long time; but the Fed leaves open the possibility that the economy does even worse, citing "SIGNIFICANT downside risks to the economic outlook" (emphasis added). This is a key phrase. It is the first time during this depression (from what I'm aware) that the Fed uses the word significant in front of downside risks.
The Fed also believes that inflation has subdued since the run-up in energy and commodity prices this summer.
I can tell you, inflation is here. Food prices in the store remain noticeably higher than they were one year ago. In addition, portions have shrunk. Cranberry sauce used to be a 16oz can, now it's a 14 oz can. Candy bars have continued to increase in price. This is not made up, this is economic reality.
So the Fed is choosing to convert $400 billion of their balance sheet from short term treasuries to long term treasuries (this is colloquially known as "Operation Twist," which was apparently tried in the 60s and failed) . They are hoping that this puts downward pressure on the long end of the yield curve which would encourage longer term investment. I think it will have very small effects in making it easier for those on the margins to invest or take out a mortgage. But in principle the whole process is making the underlying economy even worse.
It will further delay liquidation of bad debt and mal-investment - this overhang is probably the single most significant problem preventing this economy from growing sustainably.
In it, the Fed essentially confirms that the economy is in horrible shape and also that those at the Fed have no idea what they're doing. The release explains that growth is slow and unemployment remains high. The FOMC expects there will be some faster growth soon but that the unemployment rate will remain elevated for a long time; but the Fed leaves open the possibility that the economy does even worse, citing "SIGNIFICANT downside risks to the economic outlook" (emphasis added). This is a key phrase. It is the first time during this depression (from what I'm aware) that the Fed uses the word significant in front of downside risks.
The Fed also believes that inflation has subdued since the run-up in energy and commodity prices this summer.
I can tell you, inflation is here. Food prices in the store remain noticeably higher than they were one year ago. In addition, portions have shrunk. Cranberry sauce used to be a 16oz can, now it's a 14 oz can. Candy bars have continued to increase in price. This is not made up, this is economic reality.
So the Fed is choosing to convert $400 billion of their balance sheet from short term treasuries to long term treasuries (this is colloquially known as "Operation Twist," which was apparently tried in the 60s and failed) . They are hoping that this puts downward pressure on the long end of the yield curve which would encourage longer term investment. I think it will have very small effects in making it easier for those on the margins to invest or take out a mortgage. But in principle the whole process is making the underlying economy even worse.
It will further delay liquidation of bad debt and mal-investment - this overhang is probably the single most significant problem preventing this economy from growing sustainably.
Thursday, September 15, 2011
Gold and Silver update
Gold is $120 off of it's high. After the very quick run-up in prices during the summer, culminating in a $250 run up in the first 3 weeks of August. 6 month chart
my recommendation: buy gold now
Gold has come down recently, so if you are generally bullish as I am, it's a buying opportunity. Plus, the next FOMC policy decision will be released Wednesday, Sept. 21 - the announcement will at least maintain the upward trend of gold, but if there is a signal of more easing, gold will shoot up. Bernanke has recently admitted that the recent run up in commodity prices has significantly contributed to inflation; although he has yet to admit that rise in commodity prices and inflation in general is caused by his money printing.
Silver has been stagnant generally between 38-42 USD per OZt. I am still of course long silver. If I needed a really quick gain, I don't think I'd buy silver right now. But I think it's a good time to be accumulating it for long term speculation and for a currency collapse if you believe it's coming (I do!).
my recommendation: buy gold now
Gold has come down recently, so if you are generally bullish as I am, it's a buying opportunity. Plus, the next FOMC policy decision will be released Wednesday, Sept. 21 - the announcement will at least maintain the upward trend of gold, but if there is a signal of more easing, gold will shoot up. Bernanke has recently admitted that the recent run up in commodity prices has significantly contributed to inflation; although he has yet to admit that rise in commodity prices and inflation in general is caused by his money printing.
Silver has been stagnant generally between 38-42 USD per OZt. I am still of course long silver. If I needed a really quick gain, I don't think I'd buy silver right now. But I think it's a good time to be accumulating it for long term speculation and for a currency collapse if you believe it's coming (I do!).
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