I have recently been made aware of a rather peculiar development. As history would eventually demonstrate for the unenlightened readers of related works, Distributism, Catholic Social Teaching and the Austrian school of thought are more than strange bedfellows, they are cuddlers.

The confusion was a mere loss in translation. Simple enough, really. If G.K. Chesterton, Hilaire Belloc, Arthur Penty, Fr. Vincent McNacc and the other encyclical purists couldn’t possibly have understood the claims of classical liberal apologists. Certainly, without any room for doubt, they would have embraced the individualist, autonomous, materialistic, and morbidly Utopian world and life view of the so-called libertarians. Certainly, without any doubt.

Lest the reader be unaware of the controversy, many Catholics advocating classical liberalism are making the claim that their view of the political economy is most in harmony with Catholic Social Teaching, and strikingly similar to the concepts held by those historically referred to as Distributivists. Turns out, everyone was wrong to believe that “ChesterBelloc” was an entity at enmity with the principles and ideal society envisioned by men like Ludwig von Mises, Murray Rothbard, Ayn Rand, and Barry Goldwater.

Well, of course there are those few exceptions. Let’s not mind that  wild-eyed Roman Catholic part that believed the teachings of the Church to be foundational and central to their philosophies regarding God, man, salvation history and the political economy. Let’s ignore those passages (or entire books) coming off as radically and vehemently opposed to the economics of the Reformation and the Enlightenment. Let’s even wink at the fact that their political foes were just as demonstrably absolutist in their condemnation of tenets at the radix of Catholic Social Teaching. as the Distributists were in condemning feminism and capitalism.Yes, we must certainly turn a blind eye to these not-so-nonchalant difficulties.

All of this aside, the Austrian School and Distributism appear virtually identical. Which, come to think of it, isn’t saying much. In fact, it only declared the obvious: If Distributism ceases being Distributism and begins embracing classical liberalism in its entirety, there would be little to no room by which to distinguish between the two schools of thought.

Let me grant that I have no doubt that the Austrian Catholic apologists have their ducks in a row, coming prepared for cynics like me. The Achilles heel  of the matter is the libertarians denial of the competency, authority and jurisdiction over the supposedly secular science of the political economy. Say as much gives the power to invoke the right of line-item-veto. Cherry-pick this… toss that… play a little word revision here… and a little historical revisionism there… and there you have it! You now have the Church advocating the very thing She has, in a manner most strange, attacked and even condemned!

Difficulties become all the more peculiar as those entertaining these novel notions turn out being people otherwise deemed traditionalist in their liturgical orientation. Latin Mass Catholics or those advocating the New Liturgical Movement would seem to dominate this school of wonder. So while infiltrating places the likes of both the Mises Institute and Fisheaters.com may seem a difficult task to overcome, these folks feel right at home in either company. A paradox, that great tool and fascination of the Distributists, but certainly not one that would have have crossed their minds, much less crossed from fingers to the typewriter keys.

When all is said and done, regardless of how much the Catholic libertarian may wish to illustrate how their views are not only in harmony with Catholic Social Teaching but also with their age-old enemy Distributism, they cannot but admit that this may only be accomplished with great revision, contortion and selectivity on their part. Still more, they beg the question as to whether or not the two are compatible on the must basic, fundamental level of presupposition. One presupposing the political economy to be a mere science, the other presupposing a humane economy formed to best facilitate the advancement of the social Kingship of Christ. As a dear friend recently put it, Catholic Social Teaching advocates an “Economy of Salvation,” and I add that praxeology just can’t calculate this into its formulations.

All have gone home, the last word has been spoken, the dust will settle to the ground, and the two schools will remain no closer to a ceasefire than when the nonsense first began. And after all of this…

GLEN BURNIE, MD – A few weeks back I had the pleasure of joining Adam Mueller and Jason Talley in a chat with Stefan Molyneux, host of Freedomian Radio (FDR), which bills itself as “The largest and most popular philosophical conversation in the world.” Since that time I’ve been checking out more of the content on FDR, which is how I stumbled upon this gem: Anarchy 101 – a 40min overview of anarcho-capitalism.

Being a self-described voluntaryist/anarcho-capitalist I was interested to hear Molyneux’s perspective and think he did a great job, evident by the fact that I’ll likely incorporate some of his framing/messaging into my conversations with others on the subject. As I told Molyneux in our conversation below, his name/site, along with Free Talk Live and The Mises Institute/Lew Rockwell, was one of the most-often mentioned by hardcore people (those that reject the violence of the State) that we met while on the road – some pretty literal ’street cred.’

Keep it up!

Ron Paul appeared once again on Larry Kudlow’s The Kudlow Report on CNBC yesterday, in which he debated the secrecy of the Federal Reserve with Keynesian stooge/economist Peter Morici, who goes on the pro-Fed defensive. This statist goes out of his way to make a true statement by saying the following:

In order to create money, you have to buy bonds to issue the dollars. So they are always involved in fiscal policy. And, as for this inflation and…and…and this fiscal cri….this financial crisis, well, I think Congress had a lot to do with it. You know, they’ve had a hand in monetary policy or financial policy. For example, the Community Reinvestment Act, which encouraged banks to make irresponsible loans. The meddling in the activities of Fannie Mae and Freddie Mac, getting them to make irresponsible loans. A $1.5 trillion deficit. That creates bonds that investors hold internationally. It’s as good as dollars. Wait a minute! If anybody’s going to apologize, then it has to be the people who are totally out of control on Capitol Hill.

While Morici is right on the button on those points, what he fails — perhaps neglect — to mention is that it is all the fault of Congress, the banks (including Fannie Mae and Freddie Mac), the mortgage and financial lenders, and the Federal Reserve for having a hand in the wipe out and evisceration of the value of the dollar, producing the fall of the financial markets, and so on. The only point that Morici gets wrong is that the Fed <i>buys</i> the bonds to print those dollars (as he contends religiously). Actually, it <i>prints</i> money out of thin air with no intrinsic value backing those dollars whatsoever.

Ron gets it right completely. Morici is an idiot when he says that we shouldn’t link our monetary system to gold because it “will always be rising over time.” He’s ridiculous when he fearfully opines, “Well, there’s simply not enough gold in the world. If you want to have 1880s, 1890s deflation, that’s a great way to have it happen.” Morici, on the price of gold, further notes, “The price of gold will always be rising over time while it gyrates around the trend. It will be rising, it will be very difficult to manage the currency that way.” Ron Paul talks over him, correctly noting:

The pri…the price of gold does not go up; the value of the dollar goes down. You gotta understand that point, or you will never solve our problems.

Well, said, Ron! Well said indeed!

[H/T to Lew for his blog posting on this.]

[Cross-posted to Let Liberty Ring.]

Suspicious Swine Flu Numbers (But the Statists Are Gearing Up for the Next Big One)

via Suspicious Swine Flu Numbers (But the Statists Are Gearing Up for the Next Big One) « LewRockwell.com Blog.

Economics and Moral Courage

Lew Rockwell at FFF Conference, Part 1 of 6

Lew Rockwell at FFF Conference, Part 2 of 6

Lew Rockwell at FFF Conference, Part 3 of 6

Lew Rockwell at FFF Conference, Part 4 of 6

Lew Rockwell at FFF Conference, Part 5 of 6

Lew Rockwell at FFF Conference, Part 6 of 6

Authors Forum: The Left, The Right, and The State

The Gold Dollar

A Few Captured Moments With Lew Rockwell In San Francisco

Lew Rockwell Interview with Bill Moyers (1 of 3)

Lew Rockwell Interview with Bill Moyers (2 of 3)

Lew Rockwell Interview with Bill Moyers (3 of 3)

Background Articles and Videos

Lew Rockwell

“…Llewellyn Harrison Rockwell, Jr. (born July 1, 1944, Boston), widely known as Lew Rockwell, is an American libertarian political commentator, activist, proponent of the Austrian School of economics, and chairman of the Ludwig von Mises Institute. …”

“…In 1982, Rockwell founded the Mises Institute in Auburn, Alabama and was its president until the summer of 2009, when he transitioned to the position of Chairman of the Board.^[6] He also is Vice President of the Center for Libertarian Studies in Burlingame, California and publisher of the political weblog LewRockwell.com.

Rockwell was closely associated with his teacher and colleague Murray Rothbard until Rothbard’s death in 1995. Rockwell’s political ideology, like Rothbard’s in his later years, combines a form of anarcho-capitalism with cultural conservatism and the Austrian School of economics. He also advocates federalist concepts as a means of promoting freedom from central government, and also advocates secession for the same political decentralist reasons. Rockwell has called environmentalism “[a]n ideology as pitiless and Messianic as Marxism.”^[7]

Paleolibertarianism

In 1985, he was named a contributing editor to Conservative Digest.^[8] During the 1990s Rothbard, Rockwell and others described their views as paleolibertarian^[9], but Rockwell no longer uses the term to describe his ideas.^[10] Jean Hardisty, founder of Political Research Associates, wrote in 1999 that Rockwell was one of the most influential proponents of the paleoconservative faction of “right-wing libertarianism.”^[11]

LewRockwell.com

Lew Rockwell’s web site features a selection of articles, including opposition to war and imperialism along with occasional articles criticizing the presidency of Abraham Lincoln.^[12] The site also carries essays which argue against the participation of the United States in the Second World War, speculation about an end of the United States as a cohesive union and assertions the Western world is threatened by an intersection of fascism and socialism alike as politicians and states centralize their power.^[13][14][15] These writings are sometimes controversial and have brought harsh criticism from some on the political right.^[16][17] As of August 21, 2008, his web site also provides a daily podcast on weekdays featuring interviews with scholars, including many affiliated with the Mises Institute. …”

http://en.wikipedia.org/wiki/Lew_Rockwell

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Banking Cartel’s Public Relations Campaign Continues:Federal Reserve Chairman Ben Bernanke On The Record

“How one carries on in the face of unavoidable catastrophe is a matter of temperament. In high school, as was custom, I had chosen a verse by Virgil to be my motto: Tu ne cede malis sed contra audentior ito. Do not give in to evil, but proceed ever more boldly against it. I recalled these words during the darkest hours of the war. Again and again I had met with situations from which rational deliberation found no means of escape; but then the unexpected intervened, and with it came salvation. I would not lose courage even now. I wanted to do everything an economist could do. I would not tire in saying what I knew to be true.”

~Ludwig von Mises

Economics and Moral Courage

Thank you Lew Rockwell.

Related Posts On Pronk Palisades

Economists

The Battle For The World Economy–Videos

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Friedrich Hayek–Videos

Milton Friedman–Videos

Milton Friedman on Education–Videos

Ludwig von Mises–Videos

The Fountainhead, Atlas Shrugged and The Ideas of Ayn Rand

Murray Rothbard–Videos

Peter Schiff–Videos

Schiff, Forbers and Bloomberg Nail The Financial Crisis and Recession–Mistakes Were Made–Greed, Arrogance, Stupidity–Three Chinese Curses!

L. William Seidman on The Economic Crisis: Causes and Cures–Videos

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Thomas E. Woods, Jr.–Videos

Banking Cartel’s Public Relations Campaign Continues:Federal Reserve Chairman Ben Bernanke On The Record

The options on the table before the Obama Administration War Cabinet all involved escalating the occupation by as many as 80,000 troops. The president wants other options as he continues dithering.

President Barack Obama is not satisfied to execute on any of the options his national security team have brought to the table, “pushing instead for revisions to clarify how and when U.S. troops would turn over responsibility to the Afghan government”, the Associated Press (AP) reports tonight from a senior administration official. The Afghan government has shown itself to be nothing more or less than a brutal mafia. The druglords and warlords are now the taxmen—rightfully scrutinized for being immoral, but actually just acting as a government.

The news comes as Karl Eikenberry, U.S. ambassador to Afghanistan, “sent two classified cables to Washington in the past week expressing deep concerns about sending more U.S. troops to Afghanistan until President Hamid Karzai’s government demonstrates that it is willing to tackle the corruption and mismanagement that has fueled the Taliban’s rise”, The Washington Post reported earlier from senior officials.

At today’s meeting with the War Council, Mr. Obama entertained—what was referred to throughout the day as—”the four options”, which WaPo reported would cost around $1bn per thousand troops. Christi Parsons and Julian Barnes reported them at the Los Angeles Times as:

1. At least 40,000 additional troops, the ‘medium-risk’ option from General Stanley McChrystal, the top commander of the U.S.-led occupation—the ‘low-risk’ option being an escalation of 80,000 troops;
2. 34,000 additional troops, including 23,000 for combat and support, 7,000 for the occupiers’ command base and 4,000 trainers, officials confirmed over the weekend;
3. 20,000 additional troops, the ‘high-risk’ option from Gen. McChrystal—”known by military planners as ‘the hybrid’,” WaPo reports, “to shore up security in 10 to 12 major population areas”; and
4. around 12,000 additional troops, supported by Senator John Kerry (D-MA), more geared toward counterterrorism operations, maintaining the same troop level for counterinsurgency.

Mr. Obama was “leaning toward” escalating the occupation by 34,000 and announcing it after his trip to Asia in a week, Jonathan Landay reported at McClatchy over the weekend.

“The sense that he was being rushed and railroaded has stiffened Obama’s resolve to seek information and options beyond military planning, officials said, though a substantial troop increase is still likely,” the AP reports tonight, adding: “The options presented to Obama by his War Council will now be amended.”

Since Mr. Obama began his presidential run in early 2007, he referred to the occupation of Afghanistan as a “war of necessity”. Leading political scientists, notably Council on Foreign Relations President Richard Haass, see no reason for such an assessment.

Counterterrorism operations have been dubbed by human rights groups and military officials as “death from above”, as strikes have killed 49 civilians for every terrorist leader assassinated. It’s uncontroversial such civilian casualties are counter-intuitive to “winning the hearts of minds of the population”, as Gen McChrystal reported to the president was crucial to avoid “mission failure”.

The argument for shifting to a counterterrorism mission is the concern over the safety of Pakistan’s nuclear arsenal, the possibility of Afghanistan or Pakistan becoming a ’safe haven’ or ‘base of operations’ for ‘terrorists to conduct operations against the U.S. and the fulfillment of juvenile revenge fantasies over 9/11.

Seymour Hersh wrote of the politics toward understanding the security of Pakistan’s nuclear arsenal at The New Yorker over the weekend, of which Little Alex partially analyzed. He discussed the battle between the military and the White House over the Afghanistan occupation and his article with Rachel Maddow this evening (7:18):

Here at Wonderland, we’re not giving the president as much credit as Mr. Hersh. (In his defense, Mr. Hersh was probably not aware that the reports actually stated there was no indication Mr. Obama would cease to escalate the occupation, as Ms. Maddow mistook.) Our message to the president remains the same: Stop dithering and bring the troops home, now!

To execute a counterinsurgency strategy in Afghanistan, the U.S. and its allies would need to commit at least another 100,000 troops to begin building an Afghan Security Force of 400,000. This assessment was made by us before military officials confirmed the number, 600,000, as the amount of counterinsurgent forces needed to begin stablizing Afghanistan.

“Nation-building would be impossible even if we knew how, and even if Afghanistan were not the second-worst place to try,” George Will wrote at WaPo over two months ago. “Afghanistan would need hundreds of thousands of coalition troops, perhaps for a decade or more. That is inconceivable.”.

On Veterans Day, we’re reminded of the deaths of U.S. soldiers during war, but the casualties of war remain, recklessly, forgotten.

“On MSNBC, and the other cable hawkers of government propaganda this morning, veterans were absent, despite the constant invocation of Veterans Day,” Lew Rockwell, Jr., president of the Ludwig von Mises Institute, commented. “All the photos and discussion were of active-duty troops in the various U.S. occupations. None of the kids with missing limbs or brain parts were shown, the actual veterans, nor that single-payer Hell, the V.A. medical system and its inmates. It was all lies about the glory of war, by a caw-cawing bunch of chickenhawks.”

In-action U.S. casualties from the wars in Iraq and Afghanistan total over 90,000, on record. “That includes a tire-screeching 75,134 dead, wounded-in-action, and medically evacuated due to illness, disease, or injury in Operation Iraqi Freedom (OIF), and 14,323 and counting in Afghanistan, or Operation Enduring Freedom (OEF),” Kelley B. Vlahos reports at AntiWar.com, adding:

Larry Scott, who runs VAWatchdog.org, an invaluable daily monitor of ongoing issues affecting the 23.4 million living U.S veterans, said the 90,591 figure relating to OIF/OEF casualties is valid—and ultimately overwhelming. “People just forget, they don’t realize there is an ongoing cost of war. Whether you agree with the war or not is not the issue. We have to be ready to pay the price.”

Documents from the government and non-governmental organizations have found that 170,000 veterans of the Vietnam Counterinsurgency have committed suicide, Dahr Jamail reported at AntiWar Radio today. The Veterans Health Administration confirmed in an email dated 15 December 2007: 6,552 veterans commit suicide every year—126 every week, 18 every day. Any suicide survivor can attest to the fact that the casualties of every suicide are exponential to the statistic itself.

The RAND Corportation, according to the Online Journal in April 2008, stated around 300,000 troops sent to Iraq and Afghanistan are suffering major depression or Post-Traumatic Stress Disorder—better known as shell shock—and nearly 370,000 received traumatic brain injuries.

Any native of a nation-state invaded by the U.S. Armed Forces can attest to the fact that for every U.S. casualty is a potential nationwide population of human beings and property and natural resources damaged or destroyed.

Mr. Obama won the 2008 presidential election with 52.9% of the vote. That was a year ago. Today, a CNN poll reports 56% of those polled oppose sending more troops to Afghanistan and 58% oppose the occupation as a whole.

Mr. President, politics has a price. Life does not. Morality exceeds value. Integrity makes you a man. Defying power with integrity makes you a leader.

End the occupation of Afghanistan. Yes, you can.

Trends forecaster Gerald Celente discusses the Newspeak of State officials with Lew Rockwell, Jr.: “The wealth of the nation is going to the ‘too big to fail’s” (13:41):

Download the mp3 here.

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At the 1990 Mises University at Stanford, Professor Murray Rothbard (1926-1995) spoke on the collapse of the Soviet Union and the future for freed markets in a lecture titled, “The Future of Austrian Economics.” Educational and always humorous, he shows the flaws of the U.S.S.R. weren’t practical blunders, but ideological and methodological flaws of “planning the modern industrial State” which made its demise inevitable from the start and why compromising radical philosophy with the irrational “doesn’t work”. (49:39):

More from Prof. Rothbard:

• Murray Rothbard on Political Strategy (Video)
• Rothbard on Keynes: Hero or Villian? (mp3)
• The Founding of the Federal Reserve (Video)
• Rothbard: The State is a Counterfeiter
• Dr. Murray N. Rothbard: “America’s Two Just Wars”

His full archive is at Mises.org.

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Thomas Jefferson and Andrew Jackson understood “The Monster”. But to most Americans today, Federal Reserve is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.

Dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary new film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.

Alan Greenspan is not, we’re told, happy about this 42-minute blockbuster. Watch it, and you’ll understand why. This is economics and history as they are meant to be: fascinating, informative, and motivating. This movie could change America. (Excerpt from mises.org)

RunTime: 42 min

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Watch the Full Documentary Now

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[ Full Screen ]

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Zero Discount Value of Gold in the Total Banking System

by Michael S. Rozeff

Recently by Michael S. Rozeff: The Zero Discount Value of Gold and Dethroning the Dollar

The U.S. banking system has many banks with large amounts of bad loans on their books. How do these bad loans affect the value of the dollar and gold? Specifically, how do they affect the Zero Discount Value (ZDV) of gold?

Zero Discount Value (ZDV) in review

An earlier article introduced the concept of gold’s Zero Discount Value (ZDV). Applied to the central bank whose only asset is gold and whose liabilities are currency and bank reserves, the ZDV is a value for gold such that every outstanding dollar liability in the central bank’s monetary base (currency plus bank reserves) is backed by an equivalent dollar’s worth of gold. It is what the dollar price of gold would be if the central bank’s liabilities were 100 percent backed or covered by gold.

To estimate the ZDV in this simple situation, in which no other assets than gold qualify as valuable assets, divide the monetary base by the number of ounces (oz) of gold that the bank holds. If, for example, 200 oz. of gold are held against 400,000 dollars of monetary base, then the ZDV is $400,000/200 oz. = $2,000 an oz. Only if gold is valued at $2,000 an oz. does every dollar that has been issued by the central bank correspond to one dollar’s worth of gold.

The market price of gold need not be the ZDV we estimate from central bank data. Gold has sold at a discount to ZDV for many years in the U.S., which is the main reason the term “zero discount” is used. However, there are market and arbitrage forces that move gold’s price toward the ZDV, if they are not thwarted. This statement is a special case of a proposition that applies to any enterprise whatsoever: Market forces tend to make the value of the outstanding liabilities equal the value of the outstanding assets, inasmuch as the cash flows or other returns of the assets are what give value to the liabilities and investors can usually find ways to buy either the assets directly or else buy the securities that represent them.

The statement that market value of liabilities equals market value of assets is so widely accepted as true that it is taken for granted. One can invest directly in the real assets of an enterprise (that is, in some replica or close substitute of them) or indirectly by means of the debts and stock that finance them. If the values of these two options are not in line, one invests in the less costly alternative. Possibly one arbitrages by selling or issuing the more costly alternative simultaneously. If the debts and stock have market values that are low compared to the market value of the associated real assets, then the tendency is for the real assets to be avoided or sold and the financial claims on them to be bought. Conversely, if the debts and stock have market values that are high compared to the market value of the real assets, the tendency is to buy the real assets directly and sell the financial claims. These actions align the market values on both sides of the balance sheet.

Gold is the real asset of the FED, and currency and reserves comprise its main liability. If the currency value is its face value and the face value is $400,000, then a 200 oz. holding of gold has a ZDV of $2,000 per oz. If the gold sells for less than this, there is a tendency to buy the gold instead of the currency, and vice versa. We observe that gold has in fact sold at a hefty discount to its ZDV for many years. The tendency to buy gold and sell the dollar has been seriously thwarted in the world’s monetary dealings, but not entirely so. Gold has shown a long-term tendency to rise as its ZDV has risen, even if the discount remains large. That tendency has been very far from being a smooth and continuous one. The market price depends on human recognition and action. It depends on many factors, including the actions of authorities, interventions, and sundry political matters. The result is a market price whose many ups and downs depend at times, sometimes long times, on factors other than convergence to ZDV. But still it is my judgment that ZDV exerts a very long-term pull or an attraction for gold’s price.

Bank Money and Bank Money Inflation

In addition to the central bank, the banking system has as its main component the many ordinary banks that make loans to the public and create bank deposits accordingly. Ordinary banks do not hold gold as an asset. Their loans are their main assets. What is the ZDV when we take these banks into account?

When a bank creates a mortgage loan or a business loan, it simultaneously creates a demand deposit or checking account in the name of the borrower, who then spends out of the account to buy a house or perhaps business inventory. Since checking accounts are used as money, the bank creates money when it creates loans. The accounting for this is a debit to a Loan account and a credit to a Deposit account. When loans are repaid, the borrower writes a check to the bank. The bank then credits the Loan account and debits the Deposit account.

We use demand deposits as money. We use currency as money. Time deposits are not used in everyday exchange, but yet time deposits are easily converted into demand deposits. If a bank certificate of deposit matures, we can instruct the bank to credit a demand deposit account. When it comes to getting gold’s ZDV, these distinctions among the various kinds of deposits are not relevant. What we want to know is what value of gold it takes to back up all deposits in full. I simply call all deposits bank money to distinguish them from the central bank’s money, which is the monetary base consisting of current plus bank reserves.

The backing of deposits is defined as the value of the bank’s assets that can be used to extinguish the deposit liabilities. Good loans are defined as loans that pay off the promised amounts. Good loans back deposits in the sense that when these loans are paid off, they provide their promised amounts of payments by borrowers to the bank. These payments then shrink deposits by the extent of the loans being paid off.

Bad loans are loans that fail to provide the full amount of the promised payments. Any losses in value of bad loans below the promised payments mean that borrowers have not collected enough dollars from their customers or jobs to write checks to the banks and reduce deposits. The dollars remain in the system as deposits. How so? If a borrower has bought a house on a mortgage loan that he cannot repay, he has written a check to the house’s owner. That seller then has those funds on deposit in his account. They will only be offset when the borrower pays off the bank loan. If he is unable to do this, then bank deposits or bank money do not shrink. But since the bad loan has reduced or no market worth, we see that bad loans reduce the loan backing of the still outstanding dollar deposits that were created against them.

Banks are supposed to write the bad loans off. This requires them to credit the Loan account to reduce it and debit an Equity account, which reduces it. When many loans go bad and reduce Equity drastically, the bank owners and/or managers have to get more equity capital somehow if the bank is to survive. If they do not or cannot, the bank fails and its creditors, the depositors, lose some or, in the worst case, all of their deposits.

Deposit insurance is a bank asset and a method to counteract the effect of bad loans. The extent to which it backs deposits is an important element that I discuss below. Until that discussion commences, it is convenient to carry this analysis forward assuming that there is no deposit insurance. Since I conclude later that deposit insurance does not substantially alter the situation, this assumption is warranted.

Suppose a bank has a simple balance sheet with $200 of good loans and $200 of deposits. The ratio of the market value of the deposits to the loan assets is 1. This indicates a viable or sound bank, that is, a bank with enough backing for deposits to reduce them when the loans are paid off. Now suppose that $40 of the $200 in loans are a total loss. The ratio of deposits to loans is $200/$160 = 1.25. This signifies that even if the loans are fully liquidated, the bank does not have enough bank money to pay off on its deposits.

A bank might have certain off-balance sheet assets to remedy such situations. It might also have off-balance sheet obligations that make the situation even worse. It might have a commitment by its owners to supply capital in such circumstances, or it might have lines of credit with other banks. It might have deposit insurance.

I define bank money inflation as an issue of bank money (deposits) not secured by additional assets of equivalent worth. In the preceding instance, there was no inflation when the deposit/asset ratio was 1. There was inflation when the bad loans produced a deposit/asset ratio of 1.25. Sufficient backing to the deposits means the same thing as no bank money inflation. Insufficient backing means inflation. As long as loan values keep pace with deposits, there is no bank money inflation, simply because good loans mean that loans are being repaid and that they are extinguishing the bank deposits and money as they are repaid. If the loan values are overstated, which has certainly happened in the past decade, then there is insufficient backing and there is bank money inflation.

Notice that bank money inflation does not refer to inflation of prices in the economy, whether of wholesale goods, consumer goods, stocks, bonds, labor, commodities, interest rates, or real estate. Analyzing how this vast array of prices relates to bank money inflation and to central bank money inflation is another ball of wax. I steer clear of mixing up that analysis with the one at hand.

Individual banks within the banking system can always inflate by making bad loans. If the bank’s loans are good loans, it is not inflating money. If the loans are bad loans, then it is inflating money. Critical to bank money inflation occurring is the nature of the loans the banks make. Are they good loans or are they bad loans? That is what determines the extent of bank money inflation.

Inflation (of bank money) is not an economy-wide phenomenon unless banks in general are creating loans whose values fail to keep pace with deposit liabilities. This can occur in a central banking and government-influenced system, even when banks compete with one another in making loans. A government might, for example, subsidize or use its powers to encourage the economy-wide expansion of an industry to which banks make loans that ultimately become bad loans due to overbuilding. The FED’s creation of monetary base can influence interest rates and create bank reserves that induce banks to make what turn out to be bad loans. I’ve discussed these issues at length in an earlier article. It seems to me that these kinds of actions are exactly what caused the present credit debacle, and I’ve argued that case in many articles. The government and the FED stimulated bank lending that gave rise to bad loans and the concomitant bank money inflation. Many observers saw this happening while it happened and others predicted it would happen. Warnings filled the air, but the authorities caused the inflation anyway.

Zero Discount Value with Bank Money

There are two layers involved in the banking system. There is the central bank that produces base money and there are the ordinary banks that produce bank money. Gold backs the monetary base, and loans back the bank money or deposits. If the bank money is fully backed by good loans, does this alter the ZDV? The answer we shall find is that it does not. If the bank money loses value because the banks experience bad loans, does that affect the ZDV? We shall find that it does. In this case, if the deposits are not covered by bank loans, they have to be covered by gold.

For purposes of thinking about the price of gold, which is my objective in all of this, I suggest we obtain a ZDV for the total system. I will sketch out how to do this by consolidating the banks and the central bank. I show that the ZDV for the total system cannot be any lower than the ZDV for the central bank alone. A chain is no stronger than its weakest link. Even if the banks make sound loans and produce no bank money inflation, the currency is still subject to the inflation produced by the central bank. This means that sound bank loans cannot lower the ZDV. Second, if the banks make unsound loans and produce bank money inflation, then the total ZDV must be higher than the ZDV of the central bank alone.

Suppose that the banks have Assets of 10, consisting of Reserves of 1 and Loans of 9. If these are in trillions, they are nearly the same as in the U.S. banking system. The Reserves are held as deposits at the central bank. The Liabilities are Deposits of 10. Equity is 0.

The central bank has Assets of gold, or G, which is a certain number of ounces of gold. Its liabilities are Currency of 1 and Reserves of 1. The Reserves are the deposits of the banks. This fifty-fifty split between currency and reserves is roughly the current situation at the FED. The ZDV of the central bank is (R + C )/G = (1 + 1)/G = 2/G. With gold later to be taken as 261.5 million ounces and the bank’s numbers expressed in trillions, the central bank’s ZDV is $2 trillion/261.5 million oz. = $7,648 per oz. This is actually quite close to the FED’s ZDV at present, which I estimate to be $7,456.

We consolidate the two balance sheets in order to obtain a useful picture of the total banking system. The Reserves disappear from the consolidated balance sheet, because they are an asset of the banks and a liability of the central bank. The combination has no net asset or liability arising from bank reserves.

In actuality, the reserves help the central bank control or influence the maximum amount of bank lending and deposit creation. That is their main role. Competition among individual banks by the production of bank notes and money is thereby replaced by a centralizing influence and a single form of bank money throughout the whole system. Consolidating the balance sheets does nothing to change this reality. It simply allows us to gauge values in an otherwise complex system.

The combined entity has two assets: Loans (L) of 9 and Gold of G ounces. Its Liabilities are Deposits (D) of 10 and Currency (C) of 1.

In order to measure a total ZDV in this situation, we need to incorporate Deposits and Loans of the banks. We need to use the idea that good loans back deposits and bad loans do not.

Consider the case first where all loans are good loans. Bank Reserves identically equal Deposits minus Loans, when all loans are good loans. In that case, ZDV = (D – L + C)/G. The numerator of the ZDV when all loans are good has Deposits minus Loans plus Currency. The denominator is G ounces of gold. The term D – L is the net deposit liabilities of the ordinary banks.

Gold still has to cover the issue of Currency. Since all the loans in L are good, they all subtract from Deposits, and that leaves D – L = R to be covered by gold too. The system ZDV equals the central bank ZDV.

In this particular example, total system ZDV = (10 – 9 + 1)/G = 2/G. The system ZDV is identical to the FED’s ZDV. The reason for this is that Deposits minus Loans equal Reserves, and that is because there are no bad loans.

The total system Zero Discount Value has to equal the central bank’s Zero Discount Value when the banking system’s net liabilities of D – L equal its Reserves. This occurs only when the system’s loans are good loans, that is to say, their market values equal their accounting values or values carried on the books of the banks.

The intuition of the unchanged ZDV in the good loans case is this. The central bank base money inflation gives a certain ZDV of gold. If the derivative bank money that banks then produce is backed up by sound loans, the inflation situation is not made worse. That is, there is no further bank money inflation, for loan repayments are capable of shrinking the bank money supply. We get bank money inflation, as shown earlier, if and only if the banks make loans that go bad. In that case we should find that the ZDV rises above the ZDV using only the central bank balance sheet, because more net deposits and thus money are being backed by the same amount of gold.

Bad Loans and the ZDV

Now we are in a position to evaluate the ZDV of gold when the banking system produces bad loans. The intuition in this case is that since bad loans cannot cover the deposit liabilities as fully as when they are good loans, the system’s net deposit liabilities rise relative to the same amount of gold held. Consequently, the money falls in value relative to gold or gold’s price rises in terms of this money.

To model this case, I modify the Loans (L) to be L – hL, where h is a positive number that provides a “haircut” to Loans. The number hL measures the loss in value of the bank loans. These loans may be carried on the books at face value, but their real market values are less. This is what justifies replacing L by L – hL, where h < 1. Then we find

ZDV = (D – (L – hL) + C)/G = (D – L + hL + C)/G = (R + hL + C)/G.

Hence, we obtain an important result: When bank loans are bad, the system’s ZDV has to be above the central bank’s ZDV alone. If loans are bad in amount hL, then G has to cover that amount of deposits in addition to covering R and C. R of these deposits have always to be covered by gold because every dollar of these deposits that total R in amount has been made through a FED loan whose excess earnings revert to the Treasury, so that they lack asset backing other than gold.

With a 10 percent loan loss, h = 0.1. I use the numbers (in trillions) that are close to those of the U.S. system, with D = 10t, L = 9t, and C = 1t. G = 261.5 million oz. Then ZDV = (10 – 9 + hL + 1)/261.5 = (2 + hL)/261.5 = (2 + 0.1(9))/261.5 = $11,090 per oz.

Looking at a range of h values that are less than 1, we get a range of total system ZDV values of gold:

In a previous article, I was critical of an estimate of $30,000 per oz. of gold. This analysis shows that to get such an estimate, one must assume that bank loans have lost 65 percent of their value. If real estate values have fallen by roughly 30 percent and affected total loan values by the same degree, then the estimates of ZDV are still very large. But since there are many good business and other loans, a loss estimate of 10–20 percent may be more realistic. Whatever estimate of loan losses one chooses, the ZDV ratio provides a way of translating it into a gold price estimate.

The large amount of bad bank loans in the U.S. banking system indicates a very serious bank money inflation and points to a much lower value of the dollar and a much higher price of gold. Before this bad loan debacle, the ZDV of gold of the central bank already was substantially above gold’s market value. The FED’s rush to supply Reserves raised it further, sending it above $7,000. When we bring bad loans into the picture, the ZDV is even higher.

I recognize that some loans can be structured and be so good that h > 1. The bank may have arranged its duration in such a way that when interest rates change, the bank becomes even more solid. However, for the system as a whole, this case is not typically relevant and surely not relevant at this time.

The FED once was restricted to issuing currency with a 40 percent backing of gold. If that has any relevance to what our society considered to be a reasonable amount of fractional-reserve lending at the central bank level, then the above ZDV values can be multiplied by 0.4 to obtain more conservative numbers. They are still very high, ranging from $4,436 to $9,943 in the event of a 50 percent haircut.

A feature of this model is that the ZDV is very sensitive to the destruction of loan values. A 10 percent drop in loan value (h = 0.1) caused the ZDV to rise from $7,648 to $11,090. That’s a whopping 45 percent increase. The reason for this is that the banking system is highly leveraged to gold. The coefficient of h is L/G, and the loans are very high compared to the number of gold ounces. Hence, a small decrease in loan values indicates a much larger loss in the value of the dollars whose backing is gold.

When loan values are impaired but the loans remain on the balance sheet, Deposits minus Loans no longer equal Reserves. If D = 10 and L = 0.9(9) = 8.1, then their difference is 1.9; but R = 1. This difference is what causes the system ZDV to go up. Banks have a hole on the asset side of their balance sheets. There is legal and regulatory forbearance, which is a postponement of action to remedy a problem of obligation. The situation is as if the FED were supplying phantom or shadow reserves. The effect of the bad loans on ZDV is somewhat the same as if the FED had actually created Reserves in even larger amount than they have. Deposit money stays in the economy while the real loan values decline.

The problem I raised at the outset was how the Zero Discount Value of gold might be related to the bad loan problems evident in banks. My way of solving this problem is to define a Zero Discount Value for the total banking system that consolidates the central bank and the member banks. We discover that when bad loans occur, the system ZDV has to be higher than the central bank’s ZDV alone.

The fractional-reserve central banking system has great problems. It pays to pin down what these problems are. Bank money inflation does not follow automatically from the fractional-reserve creation of money by free market banks not under the control or influence of a central bank. Free market banks are monitored by those who use their notes as money. The market punishes banks that inflate and rewards those that do not. Bank money inflation results from the fractional-reserve creation of money when bad loans result from the central bank’s fractional-reserve creation of bank reserves followed by deposit and loan creation. A key question is whether banks are necessarily induced to make bad loans when they find that they have excess reserves created by the central bank. In a previous article exploring this question, I argue strongly that the central bank’s provision of reserves does induce the system to make more loans that eventually go bad. In the same article, I point out that frequently government (as distinct from the central bank) gets into the act by encouraging banks to lend into certain industries and activities that eventually do not pay off, such as housing and railroad building.

Capital Infusions

Banks with bad loans have been raising funds by selling new equity and debt to the public and the government. They have raised something like $900 billion dollars in the last two years or so. Nearly all of this has been in the form of debt, not equity. About $200 billion have been used to sustain dividend payments, which reduce equity.

These capital infusions are not a free market phenomenon. A substantial portion of them came under a brand new FDIC program (Temporary Liquidity Guarantee Program) that fully guaranteed newly-issued senior undescured debt of FDIC insured banks, financial holding companies, bank holding companies, and savings and loan holding companies. A substantial amount (over $300 billion) still exists under this program which has recently been renewed for six more months.

The FDIC’s program was for up to $1.4 trillion. The FDIC could never have paid off on such a huge amount. It cannot pay off on the ordinary deposits it has insured, much less new debt of these companies. These guarantees are a fiction.

The financial system was given a reprieve due to a rush of government guarantees, some of which facilitated capital infusions that back deposits. They bought some time.

These desperation moves also revealed that the government-backed, government-run, government-regulated, government-insured, and government- manipulated banking system cannot stand on its own two feet. It is extremely untrustworthy. It remains alive today only because the American people retain confidence in “the government” and government guarantees. The system will collapse the moment that this confidence collapses, which will be when people at large realize that the guarantees mean little. In the meantime, the banking system is being transformed more and more into a government enterprise. The guarantees are a sign of that as are government’s direct infusions of capital. The absorption of the mortgage business is another sign of that. The regulation of executive pay is yet another.

At some point, the U.S. system will cross over into the existing Chinese communist banking system which is a state-run affair. All such systems collapse, although sometimes the news of the collapse is withheld from public attention.

Deposit Insurance

Deposit insurance is a bank asset that backs deposits. It therefore mitigates a rise in the ZPV. This means that the total system ZPV is an upper bound. The lower bound is the central bank’s ZPV.

Deposit insurance encourages the central bank to produce base money and the banks to produce bank money via loans, because they have a backup credit insurance policy that is typically underpriced to banks. Because it is underpriced insurance, deposit insurance encourages bad loans and inflation because the banks act as if taxpayers will bail them out and make all deposits good despite loans going bad.

In the U.S., the Federal Deposit Insurance Corporation (FDIC) assesses banks with insurance fees. The fiction is maintained that the banks co-insure each other. As long as failures are few and loans are good, this fiction can be maintained. This system can survive if bank loan risks are independent of one another and not too large. The banks together build up an insurance fund asset that stands behind deposits, in which case inflation is mitigated when loans go bad in amounts that threaten deposits.

But this system does not work if many kinds of loans go bad at the same time as in a widespread recession, for then the insurance fund is insufficient. That is currently the case.

The FDIC protects about one-half of bank deposits. If one believes that only the other half is subject to lower loan backing, then one can easily modify the ZDV model by reducing the haircut factor accordingly. But where in fact is such backing to come from? Who is going to pay for it? Who is going to pay for the insurance of deposits? Who is going to remedy the hole on bank balance sheets due to trillions of dollars of bad loans?

The FDIC fund is almost broke. The FDIC will assess banks with higher fees. That has to be a trivial amount compared to the amount of bad loans. The FDIC will borrow billions from the Treasury. How long will it be before it collects enough fees from banks to repay such loans? It appears that taxpayers will be making good the bank deposits for a long time to come. However, the taxpayers are in large part the same people who are the depositors! They cannot back up their own deposit accounts. The idea that the Treasury and thus taxpayers save their own deposits is also a fiction.

As long as the FDIC has only to deal with isolated bank failures spread over time, it can go on. In times like the present when failures are widespread and pervasive due to bad loans that are worth much less than deposits, the entire insurance scheme is revealed as a fiction or a fraud. People who believe that their deposits are insured are not seeing that in their role as taxpayers, they are being made to insure their own deposits.

The FDIC often merges bad banks into good banks. The insured depositors do not lose. The bad loans are either absorbed and worked out or written off. In either case, loan values remain below deposit values. Such mergers do not magically create value. The inflation does not disappear. The money is still in the system and supported by lower loan values.

It seems that no matter how one looks at this, the deposits remain alive in the economy while the bad loans mean that the backing has fallen. If there were truly an exogenous deposit insurer, who paid the banks compensation for their bad loans, the bank money inflation would be mitigated. There is no such sugar daddy. The banks have not put enough money into the FDIC piggy bank over the good years to pay for the lean years. The taxpayers can’t bail themselves out.

I conclude that, although the Zero Discount Values for gold seem high, they are accurately reflecting the facts of the case.

October 27, 2009

Copyright © 2009 by LewRockwell.com

The Best of Michael S. Rozeff

Economics and its Effect on Business and on Human Resources and Marketing

In short: Economics is the study of how people choose to use resources.

Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, “management of a household, administration”) from οἶκος (oikos, “house”) + νόμος (nomos, “custom” or “law”), hence “rules of the house(hold)”.[1] Current economic models developed out of the broader field of political economy in the late 19th century, owing to a desire to use an empirical approach more akin to the physical sciences

What is Money?

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science. The expanding domain of economics in the social sciences has been described as economic imperialism

Economics is the study of how society manages its scarce recourses (Mankiw, 2004, p.4). Since all businesses are part of the economy, the way economy works has a major influence on all functional areas of business. This paper shows how changes in economic activity and inflation affect business as a whole and its Human Resources and Marketing functional areas in particular (“Level 2 Business,” n.d.).

Economic activity changes due to different reasons. Rate of growth at which economic activity changes is called economic growth (“Level 2 Business,” n.d.).  At the time of slow economic growth or recession, people loose their jobs, unemployment level goes up, and income level decreases. As a result, demand for goods and services falls and sales slow down.  Businesses have to consider accommodating to such changes in demand. To illustrate, in order to adjust to a falling demand, a company tries to cut prices to increase sales while suffering lower revenue and decreased profit margin .Thus, the firm might decide to cut back on production and/or reduce number of employees (“Level 2 Business,” n.d.). At the time of economic growth demand and sales increase, unemployment falls, and production goes up as businesses try to cope with the increased demand, Businesses try to accommodate these changes. For example, in order to keep up with the growing demand and increase in production level, firms might reconsider changes in the use of production equipment, changes in equipment or production facilities,  amount of  recourses needed (“Economics Basic,” n.d.  Time and Supply section, para. 1).  All of the above might bring production costs up. This, in turn, brings up prices for goods and services (“Level 2 Business,” n.d.). To control growing cost of production, businesses might decide to cut waste, to change the way people work, to use new technology, or to reconsider number of staff they employ.

**************************************************************

Money, Banking and the Federal Reserve

This is economics and history as they are meant to be: fascinating, informative, and motivating.
Thomas Jefferson and Andrew Jackson understood “The Monster”. But to most Americans today, Federal Reserve is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.

Dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.

How an Economy Grows and Why It Doesn’t (by Irwin Schiff)

**************************************************************

Inflation is a rise in a general price level over a period of time (Mankiw, 2004, p.12). For example, prices for goods and services, prices for raw materials, and prices for individual as well as firms insurance go up. It becomes difficult for businesses to plan ahead since inflation affects not only the amount received from for sales but also the prices of input.  Businesses might start paying higher salaries to their employee to keep up with inflation. In addition, prices of raw material go up.

As prices of input increase, a cost of production goes up causing an increase in prices. If wages do not rise by the same level as inflation, spending power is affected, savings level can also fall. This leads to a decrease in income and decrease in demand and sales follow. Again, firms take action in order to accommodate these changes (“Level 2 Business,” n.d.).

Motivators More Powerful than Money?

What Is Economics?

Human Resources (HR) and Marketing areas of business are affected by changes in economic activity and inflation. Because Human Resources functional area is responsible for recruitment, retention, training, conditions of work, health and safety, and worker representation, it has to consider rising or falling unemployment that results from changes in economic activity or inflation. When unemployment rate is rising, the HR department must deal with issues associated with laying off firm’s employees, for example. The department can take necessary actions to make this process less painful and less problematic as possible for both the company and its employees. For example, it assists employees to understand and adjust to a new situation. In addition, Human Resources may provide job training to the remaining employees in order to meet changes in their new or expanded job duties.

During increase in economic growth or inflation,   when the level of unemployment is low and firms are in need of more workers, it becomes difficult to recruit necessary employees. The department has to make additional efforts in recruitment in order to get labor. Human Resources is also responsible for retention of company’s labor. The department usually plans for and takes actions that will help a firm to retain its workers. For example, they can provide develop and foster programs aimed at increasing employee satisfaction. The department often considers a possible pay raise to hire new or retain its existing labor force.
Because Marketing department is responsible for market research, market analysis, market strategy, and sales, it pays particular attention to the economic situation to see how current or future demand, prices and sales are going to be affected. This helps to determine actions a firm should take or plan on taking in order to succeed or, at least, to stay in business. For example, observing slow economic growth or inflation when demand and sales are falling, the department will try to cut production and selling costs (“Level 2 Business,” n.d).

Changes in Economic Activity

Moreover, it may reconsider and adjust projected sales and prices as well as company’s marketing strategy.  In the time of economic growth when demand and sales increase, unemployment falls, and production goes up, Marketing must consider how to accommodate these changes and adjust production and sales strategy as well as prices accordingly.
In addition, knowledge of current or anticipated economic situation is essential when planning for a new product. Based on the discovery and recommendations of the Marketing department, other departments can properly plan or adjust their work.

To summarize, all functional areas of business including Marketing and Human Resources are affected by changes in economic activity, changes in inflation rate, and other possible changes in economics. These departments as well as entire company should recognize the impact of current and possible future economic situation on business, and take actions in order to accommodate these changes.

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References

Economics Basics: Demand and Supply. Investopedia: A Forbes Media Company

Retrieved September 3, 2007 from http://www.imvestopedia.com/university/economics/economics3.asp

Level 2 Business and economics: The Economic context of business. Level 2

Business and Economics Education. Retrieved September 3, 2007 from

http://www.bized.co.uk/educators/level2/external/lesson/context1.htm

Mankiw, G. (2004). Principles of Economics. Mason, OH: Thomson South-Western

]]> http://freethemarketman.wordpress.com/2009/10/20/the-history-of-the-future-trends-2012/ Tue, 20 Oct 2009 19:49:15 +0000 Jake http://freethemarketman.wordpress.com/2009/10/20/the-history-of-the-future-trends-2012/

By Geral Celente

Autumn 2012, the “Greatest Depression” has spread worldwide. Billions are unemployed, homeless and desperate. Countries bankrupt, trade pacts broken, tariffs rise, borders close.

Protectionist, nationalist and anti-globalization movements have moved out of the margins and into the mainstream. Immigrants brought in during boom times – blamed for bringing down wages, stealing jobs and rising crime – are being rounded up and deported.

Despite differences between the 1930’s Great Depression and today’s “Greatest Depression,” unsettling similarities conjure up memories of pre-World War II. From the United Kingdom to Russia, war drums eerily beat.

China, Vietnam, Indonesia, Singapore – all countries that ramped up production to meet insatiable business and consumer demands of the prior decade – fight for survival.

Japan, Taiwan and South Korea, long industrialized and export driven, blame China for their mounting trade imbalances, internal strife and Southeast Asian instability.

Mexico, once the US resort/retirement retreat, is as dangerous as the Congo, and its government – what’s left of it – is equally ruthless.

Across much of South America, depression, coups and wars prevail; few nations have been spared.

In Afghanistan, Iraq and Pakistan it’s the same news, different year, different body count: “Five US troops killed in Afghanistan.” “US drone attack kills 60 civilians in Pakistan.” “Car bomb blast kills 47 in Iraq.”

In the eleven years since President George W. Bush promised to bring Osama bin Laden back “dead or alive,” there have been more Elvis sightings than traces of bin Laden.

The US military asks for more troops, more money and more time. The President and Congress plunder the treasury and sacrifice more lives all under the pretext of keeping America Al Qaeda-free.

The Israeli-Palestinian peace process remains permanently and violently stalemated.

Iran, having forged a business/military alliance with China and Russia, is now a Nuclear Club member, and the world is forced to deal with it.

Oil-rich nations, having sunk trillions and lost trillions in high stakes investments, are trying to cope with internal rebellion and decreased demand for their only cash crop.

India’s miracle economy has run out of miracle, pushing it back into Third World conditions. Incessant flare-ups with Pakistan carry nuclear implications.

Canada, Australia and New Zealand are not in great shape, but compared to most other nations, they seem like paradise.

Africa is Africa. Not much has changed. Corruption, poverty and conflict prevail. Despots and dictators vie for control. Newly emerging colonial powers outmaneuver old colonial powers to commandeer rich lodes of natural resources.

A few countries flourish, some even in the middle of regional hotspots. Smart citizenry, good leadership, a little luck, energy and resource self-sufficient – they saw the trends coming and made proactive decisions.

Read the rest of the article

Some ‘light’ reading recommendations from our good friend Charles Burris for your weekend:

Lew Rockwell, whose work I have followed for years over at the Ludwig von Mises Institute , had an interesting conversation with Judge Andrew Napolitano on the subject of states’ rights and nullification.  The gist of the discussion was about the legitimacy (and history) of the states in effect vetoing unconstitutional laws enacted by the federal government, ignoring them and in some cases preventing the feds from enforcing them.

A good example of this are California’s medical marijuana laws.  Anyone with an intellectual interest in the US Constitution has pondered the fact that back in 1919 the congress was honest enough to admit that they had no power to regulate alcohol and therefore needed to pass the 18th amendment to grant themselves that power.  Given that there has never been a consitutional amendment passed granting the federal government the power to regulate hemp, California is completely correct when it thumbs its nose at the federal government.

This video is seven minutes long but fairly interesting, Judge Napolitano is always fun to watch:

By Karen de Coster

The amazing success story for our times. All hail Keynesian stimulus and the economic “recovery.”

Rockwell scoffs at Obama’s call for stronger financial regulation. “The idea that this industry is under-regulated is just ridiculous,” he says.
“The important thing we should keep in mind when we talk about regulation is it’s not just control by the government. It’s control of private industry for the benefit of the government and big players in the industry.” He specifically named Goldman Sachs, JPMorgan Chase, Bank of America, and Citigroup.
“When the Obama administration talks about more regulation, they mean more benefits for the special interests and more harm against small businesses, certainly more harm for the American consumer and the American investor.”
On the currency front, Rockwell favors a return to the gold standard.

by Karen De Coster

Ronit Ridberg has given the world a marvelous look into the fraudulent, Big Government-Big Pharma complex with his documentary film, Big Bucks, Big Pharma: Marketing Disease and Pushing Drugs. It’s a bit dated, from 2006, but certainly, that is no hindrance to the message of the film. It’s an hour long, but worth every minute of your time. Below, I have compiled a list of some interesting points from the film. I have also included a lot of my own thoughts from my research on issues brought up in the film, so not all of the material I have presented is contained within the documentary.

Big Pharma is a monster that’s long been out of control, and that is due to its chief enabler, big government, whose bureaucrats profit immensely from promoting Big Pharma’s agenda to grow and protect its profits. In spite of what Michael Moore would say, this arrangement is not capitalism, or as he means it, the free market. It is state capitalism, or, as some may call it, socialist corporatism.

• Industry professionals discuss how Big Pharma normalizes obscure health problems, making them appear common in order to create a new market with a demand for prescription drugs. One Doc interviewed calls this “disease mongering.” For example, after the commercials appeared from GlaxoKlineSmith, suddenly everyone seemed to have Restless Leg Syndrome.
• Perhaps a most disturbing trend brought up in the film is the wacky, wild world of “things just ain’t right” disorders. Whether it’s “generalized anxiety disorder,” “major depressive disorder,” “panic disorder,” “acute social phobia,” or finally, the celebrated “social anxiety disorder,” there’s a disorder to fit you and explain away your day-to-day problems. The film brings up the evil Paxil, which not only utilized direct-to-consumer marketing, but also, SmithKline Beecham took it to the print media to sell its virtues. Reporters lined up to give the drug gobs of attention as a solution for …. shyness. In 1999, US News & World Report ran a cover story, “How Shy is Too Shy?” The story referred to “debilitating shyness” and claimed that “roughly 1 out of every 8 people becomes so timid that encounters with others turn into a source of overwhelming dread.” The commercial for Paxil, shown in the film, is akin to something out of an Alfred Hitchcock movie. Also see this marvelously hilarious story by Seth Stevenson, “Extroverted Like Me: How a Month and a Half on Paxil Taught Me to Love Being Shy.” Written in 2001, Seth is an introvert who experimented with Paxil for forty-five days so he could write a splendid story highlighting the ineffectiveness and life-changing aspects of a powerful, mind-altering drug.
  
• Premenstrual Dysphoric Disorder (PMDD) is a fabricated “disorder.” Sarafem, the drug created to treat the non-condition, was nothing more than Prozac repackaged for a new disease. Eli Lilly was losing its exclusive patent to Prozac. Drug patents, as we know, bring drug companies billions in revenues. Sarafem was Prozac, except that it was colored a pretty pink – such a pretty and precious detail for a lady going on her monthly psychotic binge and emotional release. So, an old drug, a new disorder, and a new patent, and Eli Lilly could make a bundle, at least until (or if) the deception caught on with drug consumers. After Warner-Chilcott acquired the U.S. sales and marketing rights to Sarafem, it successfully fought off an attempt from Teva Pharmaceuticals to make a generic version. The film notes that when executives from Eli Lilly met with the FDA to discuss approval of the drug for its made-up disorder, one-third of the members of the FDA committee had ties to Eli Lilly. This is from the website of Warner-Chilcott:

PMDD is a distinct medical condition. Common symptoms include irritability, sadness, sudden mood changes, tension, bloating, and breast tenderness. The many symptoms of PMDD can markedly interfere with your daily activities and relationships and can make you feel out of control. Some women describe PMDD as frustrating, surprising, tiring, or even isolating. It can take away your enjoyment of family, friends, or work. Some think it’s part of being a woman or PMS (Premenstrual Syndrome). But for millions it is PMDD.

Also see Alice Rebensdorf’s 2001 superb article on Prozac-turned-Sarafem: Sarafem: The Pimping of Prozac for PMS.

• Then there’s Prilosec, developed by Astra-Merck (which became AstraZeneca), which was one of the best-selling prescription drugs of all time. In five years, revenues from the drug totaled $26 billion. The company went to court and won extra months of protection to sell Prilosec exclusively while it was working on its successor, Nexium. This drug was Prilosec repackaged in a pretty purple with yellow stripes, and it was marketed as the “purple pill.” The two drugs had a different active ingredient that did the same thing. The price of Nexium was almost seven times that of Prilosec, and it came with a new patent. In one year, almost $500 million was spent on promoting its use. One commercial in the film shows a precious purple pill floating lazily above the earth, as if to hypnotize the sheeple viewer.
  
• Move on to Phizer’s Lipitor, which quickly became the best selling pharmaceutical drug in history. Lipitor is a me-too (copycat) drug which was preceded by Mevacor, Pravachol, and Zocor. The film makes the obvious connection between the statin drug explosion – especially the sales of Lipitor – and the changing of cholesterol guidelines recommending much lower target levels for LDL cholesterol. This, of course, would lead to the huge boost in statin drug use. Out of the nine cholesterol “experts” who worked on the new guidelines, it was reported that six of them had financial ties (speaking fees, research grants, etc.) to drug companies. Changing the guidelines redefines what it means to be sick. More “sick” people will allow for more drugs to be prescribed. Under the new guidelines, millions of people will be on statin drugs for the rest of their lives.
• The facts at the time of the film: at least one million children under the age of eighteen are taking anti-depressants. Normal teenage anxieties became a profitable “illness” for Big Pharma.
• Medical and pharmaceutical professionals talk about the massive and costly effort on the part of pharmaceutical companies to purchase doctor loyalty. They evade the rules by categorizing all activities as “education,” and therefore all the shenanigans are legal, and that includes kickbacks to MDs. Big Pharma tracks these doctors and what they prescribe, so they know what to spend and where to spend it.
• Also brought up in the film is the Big Pharma president, George W. Bush. Appointed Bush cronies in the FDA assisted Bush in the interfering with FDA sanction letters for advertising infractions that were to be sent to pharmaceutical companies. Anything to fill the Republican campaign coffers.
• Congressional legislation – from those who purport to serve your interests in government – promotes and serves the pharmaceutical industry with its laws and agencies. The agents of government benefit financially from protecting Big Pharma and its profits though patents, agency rulemaking, and political pandering.

The day before I put this together, I was at my doctor’s office. He’s a D.O., and highly sympathetic to holistic health and homeopathic remedies, which is why I decided on him as my primary traditional MD. I had heard him appear often on a local AM radio morning show, and I liked his take on natural solutions and preventative health. This was about fifteen years ago when I was first starting to make major changes toward all things natural. While waiting in the room for the Doc, I couldn’t help but notice, more than ever, that every item in the room had a Big Pharma label on it. This includes the box of facial tissues, the wastebaskets, and the pens. The office area was also littered with Big Pharma’s gifts. Do people find this eerie, if not sinister?

• Here is the Media Education Foundation website where information about the film can be found.
• Here is Dr. Mercola’s link to the film, along with some additional info.

October 10, 2009

	At the Tennessee farm, July 2009.

Karen DeCoster [send her mail] is a libertarian accounting/finance professional and writer. She rides a Harley, shoots lots of guns, and buys Boston Legal DVDs. She likes to put in long miles on her hybrid bicycle, lift heavy weights, use the crock-pot, overindulge on Gouda cheese, do primal workouts, play Frisbee, get lost in the woods, and hang out at Bass Pro Shops. She won’t trade in her clunker for cash and it is highly unlikely that she will become a Czar in the Obama administration. She openly advocates resistance to the current regime in power. This is her LewRockwell.com archive and her Mises.org archive. Check out her website.

Copyright © 2009 Karen DeCoster

The Best of Karen De Coster

If it seems unusual that doctors are speaking out against the dangers of these vaccines, remember that these are not your usual doctors. First, an excerpt from a recent post on Dr. Mercola’s blog:

“This year it is more important that you protect your children and loved ones from the flu vaccines than influenza itself. This article on Lew Rockwell discusses how:

1. The swine flu is simply another flu. It is not unusually deadly.
2. This is the first time both seasonal and pandemic flu vaccines will be administered. Both seasonal flu and swine flu vaccines will require two inoculations. This is because single inoculations have failed to produce sufficient antibodies. This is an admission that prior flu vaccines were virtually useless. Can you trust them this time?
3. Adjuvants are added to vaccines to boost production of antibodies but may trigger autoimmune reactions. Some adjuvants are mercury (thimerosal), aluminum and squalene. Why would you sign a consent form for your children to be injected with mercury, which is even more brain-toxic than lead?
4. This is the first year mock vaccines have been used to gain FDA approval. The vaccines that have been tested are not the same vaccines your children will be given.
5. Over-vaccination is a common practice now in America. American children are subjected to 29 vaccines by the age of two. Meanwhile, veterinarians have backed off of repeat vaccination in dogs because of observed side effects.
6. Modern medicine has no explanation for autism, despite its continued rise in prevalence. Yet autism is not reported among Amish children who go unvaccinated.
7. Researchers are warning that over-use of the flu vaccine and anti-flu drugs like Tamiflu and Relenza can apply genetic pressure on flu viruses and then they are more likely to mutate into a more deadly strain.

Read the rest of this post on Dr. Mercola’s site OR go to Lew Rockwell’s site for the full 18 reasons (Dr. Mercola excerpted his 9 reasons from Lew Rockwell).

And now something from Dr. Ron Paul, who is a full medical doctor, in addition to being a rather unusual politician:

And yet another video from a doctor who’s question the conventional “wisdom” on vaccination:

Glenn Greenwald provided a voice of reason on the latest Iran farce on msnbc’s “Morning Metting” hosted by Dylan Ratigan. Also, get a load of Arianna Huffington acting as if she’s capable of anything more than vomiting the cum fed to her by Democratic Party-line scriptwriters (8:37):

Mr. Greenwald commented on his appearance–that he called, “somewhat strange”–with Arianna Huffington and Jonathon Capehart at his Salon blog.

Ludwig von Mises Institute President Lew Rockwell, Jr. hammered msnbc’s Rachel Maddow on her interview with Clinton Administration Secretary of State Madeline Albright.

My posts on Iran’s facility near Qom since Friday:

• ‘Severe Sanctions’ and ‘Threat of Israeli Strike’ Loom Over Iran in Latest Farce
• Iran Uranium Low-Enrichment Plant ‘Not Yet Operational