Richard Russell on the National Debt

I watched a video clip today from Yahoo! Tech Ticker where some youthful idiot was saying that since our Debt to GDP ratio was less worse than many other countries that everything will be Ok. Sure.

Richard Russell thinks differently, and I’m putting my money on Russell.

He had this to say:

“The US national debt is now over $11 trillion dollars. The interest on our national debt is now $340 billion. This is about at 3.04% rate of interest. In ten years the Obama administration admits that they will add $9 trillion to the national debt. That would take it to $20 trillion. Let’s say that by some miracle the interest on the national debt in 10 years will still be 3.09%. That would mean that the interest on the national debt would be $618 billion a year or over one billion a day. No nation can hold up in the face of those kinds of expenses. Either the dollar would collapse or interest rates would go through the roof.”

Obama talks a good line, but other than taxing the snot out of us he really doesn’t have much of a plan for cutting spending, which is what needs to be done.

And for all of the Bush bashing and Cheney bashing about being war mongers, our presence in the no chance in hell war of Afghanistan has INCREASED under Obama, even if our Iraq presence has shrunk somewhat.

These wars are costing LIVES and our budget. We cannot afford either, even if there were something to gain, which I doubt.

Maybe someone in Washington will listen to Richard Russell, but I doubt it. Just make sure you do.

The only way to protect yourself, IMHO, is to get your finances positioned properly.

Click here to learn more.

5 Tips for U.S. Investors For International Investing

The days of the numbered Swiss Bank account are long since gone, but International Investing for the U.S. investor is not dead at all. Quite the contrary, with the witch hunt currently going on in Washington for new and improved ways to soak the rich, moving some investment assets to other jurisdictions makes more sense than ever.

When it comes to international investing, here are  5 tips to consider:

  1. Investing outside of your country is NOT ILLEGAL! Nor is it UNPATRIOTIC. Having a bank account, brokerage account, annuity or life insurance policy outside the United States is sensible, not illegal. And contrary to what you might hear from the scum masquerading as politicians in Washington there is nothing unpatriotic about it. Especially considering the current establishment’s disdain for the Constitution and Bill of Rights.
  2. You MUST, however, invest internationally within the legal constraints of your country. While there are currently reporting requirements that prevent any sort of real privacy, you can invest outside the borders of your own country that gain you jurisdictional diversification and possibly a level of asset protection from frivolous legal pursuits against you. Make sure you use an International Investment Advisor who is very knowledgeable of the laws of YOUR country and how to avoid any trouble with any government, U.S. or otherwise. Stay LEGAL!
  3. Being compliant does NOT mean you cannot benefit from a solid offshore investment strategy. Again, seek out a knowledgeable international investment advisor who can help you plan a LEGAL, cost-efficient, tax deferred, confidential and flexible investment strategy. Planning is key and it does take some time to do properly, but the end result is worth it.
  4. Competent, confidential international investment planning is still available. You just have to know where to look. The recent disgusting behavior by elements of UBS in Switzerland does not mean that no one is helping Americans with offshore investment. It just means you have to be careful and choose your partners wisely. Meet them personally to find out what they really are all about.
  5. The time to act is now! You cannot wait until a Friday rumor of government action on currency controls, limits on international movement of money or other freedom limiting actions are swirling – about to take place on Sunday afternoon – to start thinking about diversifying your assets internationally. Act now while there is still time to do it right. There are other benefits to a diversified international portfolio that have nothing to do with who is in the White House or how badly a country’s currency outlook is. Procrastination kills.

I was fortunate enough to be introduced to some competent, personable, English speaking Swiss Wealth Management people about 15 years ago. I have been able to invest with them, watch them, meet personally with them on multiple occasions and really get to know them. And I certainly do not regret it.

If you have significant assets such that you are interested in international diversification, wealth management without all of the limitations placed on U.S. citizens, asset protection and do not have a personal relationship with a competent international investment advisor then you can Contact Me here.

After a little bit of pre-qualification, I can put you in touch with the people I trust.

National Suicide

I just saw a piece by Cal Thomas recommending a new book due out in a few days titled “National Suicide: How Washington is Destroying the American Dream from A to Z”.

Cal is a conservative writer, but I think very fair and balanced.

I could bash the Democrats and mention how they complained during Republican presidencies that deficits were a severe burden to our grandchildren, yet the deficits being proposed currently are magnitudes higher than ever before. But as Don McAlvany pointed out over a decade ago, there isn’t a dime’s worth of difference between the Democrats and the Republicans.

They are just “Socialist Party A” and “Socialist Party B”.

Martin Gross, the author of “National Suicide”, brings much to light including specific wasteful spending that will easily turn the stomach of any taxpayer – that is, an American who actually PAYS taxes and doesn’t just suck the you-know-what of the Federal Government.

But it’s more than that. One case is illegal immigration. Both sides support it, Democrats to get votes, Republicans to get cheap labor. Yet they spend billions allegedly to stop it.

Been to an airport lately? TSA used to stand for “Thousands Standing Around”; now it’s more like “Thousands SITTING Around”. I didn’t feel any safer due to their overbearing presence. Four TSA reps set up a little table at our boarding gate and picked several individuals to double check their ID and boarding pass – as if the first TSA rep at security didn’t do a good enough job looking at my passport under a magnifying glass.

They seemed to pick out people traveling alone, because when the guy realized I had 2 kids with me he uttered an “oh”.

But Gross goes into far more than that and I believe the book, priced inexpensively will be a must read.

Check out National Suicide: How Washington Is Destroying the American Dream from A to Z .

Who is the Worst U.S. President in History?

I have my own opinion on just how bad George W. Bush, Jr. was as a President. He was a huge disappointment for conservatives, and liberals too, by the way.

Many of us did benefit from the tax cuts and child credits, but we pay for it every time we fly or try do any kind of banking. We now officially live in a police state.

Doug Casey has his own opinion, and as usual, he states it very eloquently and in great detail.

Here it is.

Baby Bush: The Worst President in History?

By Doug Casey of The Casey Report

I recognize that I’ve antagonized many subscribers over the years with “Bush Bashing.” In January, just after OBAMA!’s election, I said I wouldn’t mention Bush again, his departure having made him irrelevant. I only feel bad that he and his minions will apparently get away scot-free with their crimes; better they had all been brought up before a tribunal and tried for crimes against humanity in general and the U.S. Constitution in particular. But that is objectively true of almost all presidents since at least Lincoln.

Most of our subscribers to The Casey Report appear to be libertarians or classical liberals – i.e., people who believe in a maximum of both social and economic freedom for the individual. The next largest group are “conservatives.” It’s a bit harder to define a conservative. Is it someone who atavistically just wants to conserve the existing order of things (either now, or perhaps as they perceived them 50, or 100, or 200, or however many years ago)? Or is a conservative someone who believes in limiting social freedoms (generally that means suppressing things like sex, drugs, outré clothing and customs, and bad-mouthing the government) while claiming to support economic freedoms (although with considerable caveats and exceptions)? It’s unclear to me what, if any, philosophical foundation conservatism, by whatever definition, rests on.

Which leads me to the question: Why do conservatives seem to have this warm and fuzzy feeling for George W. Bush? I can only speculate it’s because Bush liked to talk a lot about freedom and traditional American values, and did so in such an ungrammatical way that it made him seem sincere. Bush’s tendency to fumble words and concepts contrasted to Clinton’s eloquence, which made him look “slick.”

I’m forced to the conclusion that what “conservatives” like about Bush is his style, such as it was. Because the only good thing I can recall that Bush ever did was to shepherd through some tax cuts. But even these were targeted and piecemeal, tossing bones to favored interests, rather than any principled abolition of any levies or a wholesale cut in rates.

Is it possible that Bush was actually the worst president ever? I’d say he’s a strong contender. He started out with a gigantic lie — that he would cut the size of government, reduce taxes, and stay out of foreign wars — and things got much worse from there. Let’s look at just some of the highpoints in the catalog of disasters the Bush regime created.

  • No Child Left Behind. Forget about abolishing the Department of Education. Bush made the federal government a much more intrusive and costly part of local schools.
  • Project Safe Neighborhoods. A draconian law that further guts the 2nd Amendment, like 20,000 other unconstitutional gun laws before it.
  • Medicare Prescription Drug Benefit. This the largest expansion of the welfare state since LBJ and will cost the already bankrupt Medicare system trillions more.
  • Sarbanes-Oxley Act. Possibly the most expensive and restrictive change to the securities laws since the ‘30s. A major reason why companies will either stay private or go public outside the U.S.
  • Katrina. A total disaster of bureaucratic mismanagement, featuring martial law.
  • Ownership Society. The immediate root of the current financial crisis lies in Bush’s encouragement of easy credit to everybody and inflating the housing market.
  • Nationalizations and Bailouts. In response to the crisis he created, he nationalized Fannie Mae and Freddie Mac and passed by far the largest bailouts in U.S. history (until OBAMA!).
  • Free-Speech Zones. Originally a device for keeping war protesters away when Bush appeared on camera, they’re now used to herd.
  • The Patriot Act. This 132-page bill, presented for passage only 45 days after 9/11 (how is it possible to write something of that size and complexity in only 45 days?) basically allows the government to do whatever it wishes with its subjects. Warrantless searches. All kinds of communications monitoring. Greatly expanded asset forfeiture provisions.
  • The War on Terror. The scope of the War on Drugs (which Bush also expanded) is exceeded only by the war on nobody in particular but on a tactic. It’s become a cause of mass hysteria and an excuse for the government doing anything.
  • Invasions of Afghanistan and Iraq. Bush started two completely pointless, counterproductive, and immensely expensive wars, neither of which has any prospect of ending anytime soon.
  • Dept. of Homeland Security. This is the largest and most dangerous of all agencies, now with its own gigantic campus in Washington, DC. It will never go away and centralizes the functions of a police state.
  • Guantanamo. Hundreds of individuals, most of them (like the Uighurs recently in the news) guilty only of being in the wrong place at the wrong time, are incarcerated  for years. A precedent is set for anyone who is accused of being an “enemy combatant” to be completely deprived of any rights at all.
  • Abu Ghraib and Torture. After imprisoning scores of thousands of foreign nationals, Bush made it a U.S. policy to use torture to extract information, based on a suspicion or nothing but a guard’s whim. This is certainly one of the most damaging things to the reputation of the U.S. ever. It says to the world, “We stand for nothing.”
  • The No-Fly List. His administration has placed the names of over a million people on this list, and it’s still growing at about 20,000 a month. I promise it will be used for other purposes in the future…
  • The TSA. Somehow the Bush cabal found 50,000 middle-aged people who were willing to go through their fellow citizens’ dirty laundry and take themselves quite seriously. God forbid you’re not polite to them…
  • Farm Subsidies. Farm subsidies are the antithesis of the free market. Rather than trying to abolish or cut them back, Bush signed a record $190 billion farm bill.
  • Legislative Free Ride. And he vetoed less of what Congress did than any other president in history.

The only reason I can imagine why a person who is not “evil” (to use a word he favored), completely uninformed, or thoughtless would favor Bush is because he wasn’t a Democrat. Not that there’s any real difference between the two parties anymore…

As disastrous as he was, I rather hate to put him in competition for “worst president” in the company of Lincoln, McKinley, Wilson, the two Roosevelts, Truman, Johnson, and Nixon. He is simply too small a character – psychologically aberrant, ignorant, unintelligent, shallow, duplicitous, small-minded – to merit inclusion in any list. On second thought, looking over that list of his personal characteristics, he’s probably most like FDR, except he lacked FDR’s polish and rhetorical skills. I suspect he’ll just fade away as a non-entity, recognized as an embarrassment. Not even worth the trouble of hanging by his heels from a lamp post, although Americans aren’t (yet) accustomed to doing that to their leaders. Those who once supported him will, at least if they have any circumspection and intellectual honesty, feel shame at how dim they were to have been duped by a nobody.

The worst shame of Bush – worse than the spending, the new agencies, the torture, or the wars – is that he used so much pro-liberty and pro-free-market rhetoric in the very process of destroying those institutions. That makes his actions ten times worse than if an avowed socialist had done the same thing. People will blame the full suite of disasters Bush caused on the free market simply because Bush constantly said he believed in it.

And he’s left OBAMA! with a fantastic starting point for what I expect to be even greater intrusions into your life and finances. Eventually, the Bush era will look like The Good Old Days. But only in the way that the Romans looked back with nostalgia on Tiberius and Claudius after they got Caligula. And then Nero. And then the first of many imperial coups and civil wars.

Only by looking at the past can we make sure that history won’t repeat itself. But most of the time, Doug and his co-editors of The Casey Report look at the future. They analyze budding trends for potential money-making opportunities and share that research with their subscribers… usually for two- or three-digit gains. One of their favorite investments of 2009 is a play on an economic inevitability that is almost guaranteed to bring early birds big returns. Read more here.

Is Gold Confiscation Possible Under Obama?

Are We Being Conned About Gold Confiscation?

By Doug Hornig, Editor, Casey’s Gold & Resource Report

There’s a lot of Internet chatter these days about the possibility of the U.S. government seizing its citizens’ private gold holdings.

What are the chances?

Well, it’s always good to bear in mind that there is no telling what the government might do. It’s already doing things that were unthinkable just a few years ago. If President Obama believes there is political hay to be made from seizing your gold – or even if he sincerely thinks such a move would be “good for the country” – we’re sure he won’t hesitate to make the grab. After all, his favorite predecessor, Franklin Roosevelt, set the precedent.

Many Americans don’t even realize that private gold ownership was forbidden for forty years, but it was. The relevant edict is Presidential Executive Order 6102 of April 5, 1933, which begins:

Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled

An Act to provide relief in the existing national emergency in banking, and for other purposes,

in which amendatory Act Congress declared that a serious emergency exists,

I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations …

There was, of course, no constitutional peg on which to hang such an outrageous crime against the people, so FDR decided to fall back on the 1917 Trading with the Enemy Act, which he claimed gave him the authority to do this in order to prevent gold from falling into the “wrong” hands. If that seems a flimsy argument, it is.

But it echoes eerily today. How much of our personal freedom have we already been asked to sacrifice to the Forever War on Terrorism? And note also the reference to an “existing national emergency in banking” that requires extreme measures. Sound familiar?

So, no question that Obama could follow in the footsteps of his mentor, if he wanted to. That said, though, the likelihood of a new gold confiscation is remote, for a number of reasons.

2009 is not 1933. Back then, the money supply was constrained by the gold standard. As Roosevelt concocted the New Deal, he ran smack up against that wall. He needed more money than he had, couldn’t raise taxes in a depression, and couldn’t print dollars that weren’t gold-backed.

His solution may have been reprehensible, but it was elegant. First, make the private possession of gold illegal, paying those who surrender their metal the official price, $20.67 per ounce. Then revalue gold to $35 per ounce. Voilà: Instant inflation, lots of new money, problem solved. And the New Deal was off and running.

But we have long since abandoned the gold standard, and Obama doesn’t face FDR’s constraints on monetary inflation.  However much money is needed to finance his New Deal Redux, he can have it. All he has to do is rev up the printing press or turn an unlimited number of bits and bytes into electronic cash.

Given this kind of clout, what does he need gold for?

An argument can be made that the yellow metal is still useful. It runs like this: Creating money out of thin air is inflationary, and a large stash of gold, even if it doesn’t officially back anything, serves as a sort of counterweight. People around the world will have greater confidence in your currency knowing that, as a last resort, you can pay your bills in gold. And the more gold you have, the better.

Furthermore, confiscating gold and assigning it a fixed dollar value would also prevent the kind of runaway gold price that the coming massive inflation is bound to trigger. As those who argue that the gold price is already suppressed correctly point out, the government has decided to sacrifice the dollar in order to avert deflation. Thus a lower-than-free-market gold price helps obscure the damage that’s been done to the currency. People feel richer with more, albeit inflated, dollars in their pockets; a rapidly escalating gold price shows them that they’re not.

These two arguments aren’t empty, but they’re not convincing. Most folks in government subscribe to the “barbarous relic” school of thought about gold. Precious metals probably cross the minds of Obama’s economists only when they’re out buying jewelry.

And most American citizens have never even seen a physical gold coin, much less own one. Reeling in all the bullion out there will, in reality, do the government little if any good.

One final point. In the 1930s, when people were asked to turn in their gold, compliance was quite high. Americans believed their government when told that it was for the greater good. Imagine.

Today, that attitude seems laughably naïve. Those who have gold know that it is an unequaled storehouse of value. That they would meekly part with it at the government’s behest requires a belief that naïveté still rules the land.

Far more likely is that gold owners would resist. And since they also tend to be gun owners, there could be serious confrontations. The government doesn’t want mass resistance to one of its orders, nor an escalation of the domestic violence it will probably get anyway, when unemployment rises to Depression-era levels. It’s simply not worth it.

Never say never where government stupidity is involved. But all things considered, a modern-day gold confiscation is not high on our list of financial worries.

Physical gold and silver, as well as select gold-related investments, are the go-to assets in times of uncertainty. One of our favorite gold stock winners – a great low-risk pick for prudent investors – has been generating 54% returns, at the same time the Dow and the S&P 500 fell through the floor in 2008. Learn more by clicking here.

The FDIC is in Trouble

By Bud Conrad, Editor, The Casey Report

As we all know, the Federal Deposit Insurance Corporation (FDIC) guarantees depositors that they’ll get their money back if a bank fails, at least up to a certain amount. To fund its operations, the FDIC collects small fees from the banks that are held in reserve for the purpose of taking over troubled banks and paying off depositors.

Since the Great Depression, a period marked by widespread runs on banks, the FDIC has done a good job of fulfilling its mandate. So how are they doing in this crisis?

In a nutshell, they are in trouble.

The FDIC insures 8,246 institutions, with $13.5 trillion in assets. Not all of them are going bankrupt, of course. Yet as of late July, a disturbing 64 banks had gone belly up this year – the most since 1992 – costing the FDIC $12.5 billion. At the end of Q1, the agency was already asking for emergency funding.

And worse, much worse, is likely yet to come. The following chart shows the total assets on the books of the FDIC’s list of 305 troubled banks. The list doesn’t include the biggest banks that are considered too big to fail, as they are being separately supported with bailouts. By contrast, if the banks on this list fail, the FDIC is on the hook to have to step in and take them over and, of course, make depositors whole.

Assets of FDIC Insured Problem Institutions

Other measures of how serious the losses at banks are becoming can be seen in the chart below, which shows charge-offs and non-current loans at all banks. You can see that the Net Charge-offs remain stubbornly high, with banks charging off almost $40 billion in bad loans in the last two quarters alone. And the number of non-current loans – loans where payments are not being kept up – is soaring.

Together, these measures indicate the potential for more big failures and more big bailouts coming down the pike.

Bank Problem Loans Approaching $100B Are Dangerous

About Those Reserves…

Into the battle against bank insolvency the Fed brings a level of reserves that can best be described as paper-thin. From almost $60 billion last fall, the FDIC’s reserves have been drawn down to only about $13 billion today, a 16-year low. A quick look at the FDIC’s own data shows us how inadequate those reserves are compared to the deposits they are now insuring.

The chart below says it all:

FDIC Deposit Insurance Fund Reserve Coverage Ratio Is Inadequate

As you can see, the Federal Deposit Insurance Corporation currently covers each dollar on deposit with a trivial 2/10ths of a penny.

And even that understates the seriousness of the situation: the $4.8 trillion in deposits the FDIC is providing coverage on doesn’t include the expansion that now extends insurance coverage from $100,000 to $250,000 for normal bank accounts. That likely brings the exposure of the FDIC closer to $6 trillion. But that’s pretty inconsequential at this point: using any reasonable accounting method, the FDIC is already bankrupt and will require hundreds of billions of dollars in government bailouts just to keep the doors open.

So, given the dire shape of its finances, what measures is the FDIC taking, you know, to batten down the hatches and all that?

For starters, they are expanding their mandate by guaranteeing bank loans – $350 billion and counting at this point. And the government has tapped the FDIC to play a pivotal role in guaranteeing the loans issued to buy toxic waste through the government’s highly problematic and fraud-prone new Private Public Investment Partnership (PPIP). The FDIC’s commitment to the PPIP is and may become limited based on its resources.

It is hard to draw any other conclusion but that hundreds of billions in new funding will be required to keep the FDIC operating. Given the catastrophic consequences of the FDIC failing, starting with a bank run of biblical proportions, there’s no question it will get whatever funding it needs. By loading the new loan guarantee responsibilities and the PPIP onto the FDIC’s back, the administration will go back to Congress and ask for the next large bailout.

Of course, in the end, all of this falls on the taxpayer, either directly in the form of more taxes or indirectly via the destruction of the dollar’s purchasing power. Another bale of straw on the camel’s back, and another reason to be concerned about holding paper dollars for the long term.

What should you do?

If you still trust the government to take care of you and yours when the feces hits the fan, you’re on the path to financial disaster. But even in times of crisis, there are things you can do to protect yourself – for example, by betting against the insane machinations of the government and Fed. You can’t make them stop, but at least you can profit from them. Read about Bud Conrad’s favorite investment of 2009… by clicking here.

Cap & Trade – Kill the Economy, Kill the Taxpayer

Oh, and I might add, enrich the pockets of Goldman Sachs and all of their former & future employees now in government service. They will make billions on the trading of carbon credits.

Anyway, here is what Doug Hornig of Casey Research has to say about it. Naturally, we will also learn in Doug’s essay how to profit from it.

(Hint: If you want to profit from investment newsletters, it helps to buy the right ones. Casey Research has a lot of the right ones.)

Be sure and take them up on the free special report, link at the end of the essay.

The Carbon Cap: The Newest Form of Taxation

By Doug Hornig, Editor, Casey Research

It’s possible that no concept in history has ever come so far, so fast, and with so little substance behind it, as “global warming.” Or, to be precise, anthropogenic global warming (AGW) – the kind caused by us puny humans rather than by that fireball that keeps the planet habitable.

We’re extraordinarily lucky. If present thinking is correct, the first single-celled living organisms may have appeared as much as 3½ billion years ago, and it would appear that once life arrived, it never went away. That’s a very long time for conditions to have remained favorable enough to keep the chain from breaking.

As the eons unspooled, Earth’s climate varied, sometimes wildly. It has been much hotter than it is today, and much colder. (One current theory holds that the average surface temperature has regularly oscillated between 120° and -50°F.) Nearly all of the changes have been due to variations, some of them cyclical, in the amount of solar radiation reaching the surface of the planet. Through it all, life endured, because of the existence of carbon.

Now, rather suddenly, carbon is the designated boogey man. Individually and collectively, we are told, we must work on reducing our “carbon footprint,” or else something awful is going to happen. The headlines are terrifying: we’ll have hellacious droughts, monster hurricanes, and entire cities disappearing beneath the waves.

Well, perhaps. In a climatic feedback system as complex as Earth’s, anything is possible. More likely, though, is that we’ll see none of the above. Or at least not because of anything humans do or fail to do.

The simple (yes, inconvenient) truth is that scientists don’t even know whether the planet is warming at all, let alone if AGW has any role in causing it. The data are inconclusive at best. Most of those dire predictions you’ve read are based upon computer modeling, and anyone who watches the nightly weather forecast knows how infallible that tends to be.

Yet the truth has not prevented the AGW theory from being presented to the public as fact. Its proponents have so captured the media that Al Gore’s Nobel Prize is a huge story, while the Manhattan Declaration of 2008 gets nary a mention in the press. The latter, endorsed by hundreds of prominent citizens, including two hundred climate scientists, concluded that “current plans to restrict anthropogenic CO2 emissions are a dangerous misallocation of intellectual capital and resources that should be dedicated to solving humanity’s real and serious problems.”

Sadly, that misallocation is about to get a whole lot bigger. If the Obama administration has its way – and it is expected to, since there’s no meaningful opposition – carbon caps will soon be coming to every American town.

If you’re unfamiliar with the concept of a carbon cap, it’s simple. It’s a tax. The president wants to reduce per-capita U.S. carbon emissions to 14% below 2005 levels by 2020, and 83% by 2050. And he’s promoting this as a good idea by suggesting that it will pour $646 billion into federal coffers between 2012 and 2019, through government auctions of the rights to emit greenhouse gases. Those rights would be sold to energy companies, manufacturers, utilities, or anyone else who “pollutes” the air with carbon dioxide. And they could be traded.

Leave aside the question of whether reducing human carbon emissions is truly a valid goal; and whether we need another huge tax; and whether the government will do anything constructive with an infusion of our money, to the tune of nearly two-thirds of a trillion dollars. Instead, just consider the consequences.

The cost of everything will go up, as the affected businesses compensate for their lost revenue. If carbon credits are auctioned at the lower end of the projected range (between $13 and $20 a ton), estimates are that the average price of gasoline will jump by 12 cents a gallon and the average electricity bill by 7%.

Worse, though, is that the pain will be unevenly distributed. As the Detroit News editorialized, the cap-and-trade plan “is a giant dagger aimed at the nation’s heartland — particularly Michigan. It is a multi-billion-dollar tax hike on everything that Michigan does.”

That is, it penalizes states and regions with large manufacturing bases and coal dependence for electricity, and rewards places with larger populations but light industry and cleaner power plants. As Michael Morris, CEO of coal-heavy American Electric Power, put it: “It is a clear transfer of the middle part of the country’s wealth to the two coasts.” Small wonder that politicians from California and New England are such enthusiastic supporters.

For what to expect here, we can look to Europe, where cap-and-trade is firmly established. While it has worked, in the sense of lowering carbon emissions (though not by as much as anticipated), its effects have been stifling. For example, the Washington Post cited “the Dutch silicon carbide maker that calls itself the greenest such plant in the world, but now can’t afford to run full-time; the French cement workers who fear they’re going to lose jobs to Morocco, which doesn’t have to meet the European guidelines; and the German homeowners who pay 25 percent more for electricity than they did before – even as their utility companies earn record profits.”

This is what’s coming to your town, if Congress capitulates to the White House. The bill that will bring us cap-and-trade recently squeaked through the House with just a single vote to spare. It faces an uncertain future in the Senate, where opposition is stiff. Modifications surely will be made. But with Al Franken having cemented the Democratic super-majority, it’s a lock to pass in some form or other.

Ever-savvy, the market isn’t waiting. Although no cap is yet in place, carbon credits have already arrived. There’s even a place to trade them, the Chicago Climate Exchange (CCX), founded in 2003. And companies are busily buying and selling in anticipation.

How does it work? CCX’s website explains: “CCX emitting Members make a voluntary but legally binding commitment to meet annual GHG [greenhouse gas] emission reduction targets. Those who reduce below the targets have surplus allowances to sell or bank; those who emit above the targets comply by purchasing CCX Carbon Financial Instrument® (CFI®) contracts.”

In other words, some outfits are stocking up on purchased credits, against the day when they’ll be required by law. Others are speculating that the value of those credits will go up once the federal cap is in place. And some are making a lot of money simply by selling carbon reductions they’ve already made.

Among the players are expected names from the heavy industry and utilities sectors: DuPont, Ford, Reliant, American Electric Power, Potash Corp., Waste Management, and so on. But it’s a very long list, and on it are tech companies like IBM and Intel; retailers like Safeway; Miami-Dade County, Florida and Sacramento County, California; the University of Idaho and half a dozen other schools; even the Embassy of Denmark.

There’s no secret key to why so many want a piece of this action. It’s going to be a very, very big business. If European standards are applied to the U.S., we’re talking about a quarter-trillion dollars of credit trading a year.

Investors – if they’re well heeled enough and willing to assume a lot of risk — can participate directly in carbon credit trading. Or they can buy stock in the parent of CCX, which is publicly traded in London.

But there are other ways to profit from this unstoppable force.

For example, by investing in select junior exploration companies focused on alternative energies, oil, or uranium. But in these volatile times, it is vital to not only invest in the right companies but to use the right investment strategies. Like the 20-60-20 rule or the Casey Free Ride Formula described in our new, FREE special report Profiting in a New Era. Applying these tactics can make the difference between losing your shirt or winning big — click here to learn more.

Robert S. McNamara and the Echoes of War

In this “Conversation with Casey”, Doug Casey verbalizes my feelings exactly on a guy I always thought should have been shot decades ago. In fact, it was only recently I realized he had found a way to the helm of the World Bank.

It’s all very disgusting, but Doug does get around to how to invest in the war climate we find ourselves in, permanently it seems. And no, Obama is NOT going to be our saviour from it.

Doug Casey on the Echoes of War

Q: Doug, I hear you’ve been reading the obits recently – what’s on your mind?

Doug: Yes, I couldn’t help but note the long and generally favorable obits on Robert “the Strange” McNamara, at age 93. The obituaries ranged from glowingly positive to, at worst that I read, neutral. I was shocked and disgusted by these things. I considered the man to be a classic sociopath and a war criminal, among other things. He was one of the worst human beings ever to have lived.

Q: Don’t pull your punches, Doug…

Doug: Well, I have to say that I take his death a little personally. In life, I find that the  things I regret most are not the things that I’ve done – although there are some of those – but more than that, it’s the things that I haven’t done. And one of the things I regret having not done was back in about 1995, when McNamara gave a speech at the Aspen Institute, promoting his book. I wanted very much to ask him a question. Usually, I’m pretty bold about these things, but this time, I just didn’t do it.

The question I wanted to ask him was this: “Mr. McNamara, how is it that after nearly destroying the Ford Motor Corporation, then destroying Viet Nam and almost destroying the United States, and then going on to be the president of the World Bank, where you made great strides towards destroying the world economy, how is it possible that today you can be held in high regard and stand up in front of this audience without being pelted with rotten fruit and vegetables?”

Q: So what happened? Did he leave before anyone could ask questions?

Doug: One of the few things I can say in McNamara’s favor is that he actually took questions. I believe I could have gotten a chance to ask my question. I honestly don’t remember why I didn’t do it. It was just one of those moments in which I didn’t do what I almost always do, which is to confront these people whenever I have the opportunity.

McNamara was actually an anti-libertarian in many ways. You know, he started his career as a statistical analyst evaluating the success of bombing raids in Germany and especially in Japan. He was a big promoter of raids on civilian population centers, like the carpet-bombing of Tokyo, in which 100,000 people died in one night, and it really served no useful purpose at all.

Q: Do you know why he advocated that?

Doug: It’s a good question, because he later said that he had a conversation with Curtis LeMay, his immediate superior, in which they discussed the fact that if the U.S. had lost the war, it would be Americans who would have been tried as war criminals, not Tojo, Goering, and those guys.

So, apparently, he considered the moral implications of his criminality, but… he didn’t learn a thing. He advocated the same thing in Viet Nam – but the start of his war crimes was in World War II.

He then went to the Ford Motor Company. It’s often said, especially if you read the recent obituaries, that he “saved” Ford, along with eight other wiz-kids that were in the Air Force with him. But I don’t think that was true at all. The fact that McNamara and these other number crunchers were hired by Ford is, to me, indicative of the start of the collapse of the American auto industry. Previously, American cars were generally very good. The founders were car guys. They understood the way engines work and suspensions work, etc. They liked driving them, and liked racing them, and enjoyed them as products. That’s when cars were good. But McNamara was a bean-counter.

Look at it this way: he was directly responsible for the Edsel, which even today, fifty years later, is still known as the biggest disaster in American automotive history. It was his personal baby.

The only reason earnings went up while he was at Ford was that he was the first of these guys to pinch pennies, fire people who weren’t efficient enough, and do accounting tricks. That sort of thing. He was a non-car guy, running a car company.

To me, it’s shameful, the way people credit him with saving Ford.

And then they go on to talk about Viet Nam, for which he was directly responsible for the way we conducted that war. But there were other things before that. He was behind the Bay of Pigs invasion, and he was primarily responsible for the arms race between the U.S. and the Soviet Union. He’s the one who came up with MIRV missiles, which made the Soviets believe that the U.S. was planning a first strike against them.

But his record in Viet Nam, of course, was a total and complete disaster.

Q: Surely the obits aren’t absolving him of that? Almost no one views the Vietnam War positively these days.

Doug: Well, they all seem to point out that he had moral qualms about it. But my guess is that they weren’t moral qualms at all. Here he was, attacking a simple peasant army that was living on dried rice and had basically nothing but hand-carried weapons, mounting B-52 raids, using all kinds of the highest-tech weaponry of the day, and spending gigantic amounts of money, just to kill peasants. So it doesn’t seem to me that he had any moral qualms. I think he wanted to get out of Viet Nam because he could see how hopelessly stupid it was.

Talk about stupid. Here’s a man that was highly intelligent — he was very, very smart – but he was totally lacking in wisdom. He had no common sense at all. He was a complete fool, the type of guy that I would have loved to see confronted by Mr. T, saying, “I pity the fool!”

He was a very intelligent fool.

Q: So of course they made him the head of the World Bank.

Doug: Yes, and when he was there, he quadrupled its size. It was him who was more responsible than anyone else for the fetish they developed for building steel mills in parts of Africa that were on opposite sides of the continent from coal supplies, etc. It was another disaster.

His career is a series of unmitigated disasters, and still, he’s held in some kind of regard today.

To me, this is a sign of how totally dishonest society has become. These obituaries should show that the guy was a sociopath, a criminal, and a loser, but instead they maintain a united front in speaking no ill of the dead.

Q: Do you really think it’s political correctness of sorts about respecting the dead, or is it that the journalists of today, being largely products of the U.S. public education system, are simply too ignorant or too biased to see the man for what he was?

Doug: That’s a very good question. It could be that the average person writing these editorials – and they are the establishment now – basically agrees with his views and methodology. So they can only nit-pick technical issues around the edges, while they should be attacking the very core of what he stood for.

Anyway, I’m sorry he died… before I had a chance to ask him that question.

I blame myself: I consider it one of the great omissions of my life.

Q: Maybe you’ll have a chance if there’s such a thing as reincarnation.

Doug: Yes, perhaps. He’d come back as a cockroach, and I might have a chance to squash him.

Q: Just so.

Doug: So, we’ve lost one warmonger, but there are plenty more. The U.S. is making exactly the same mistakes in Iraq and Afghanistan as it did in Viet Nam. It’s almost a cookie cutter copy. We’re using all this high-tech junk — $200 million fighter planes, $2 billion bombers, etc. – to fight a primitive peasant army on their own ground. It’s exactly the same thing as Viet Nam. I don’t see any significant differences at all.

And just as Viet Nam was a major step closer to bankruptcy for the U.S. back then, what’s happening in Afghanistan and Iraq is the same – but on steroids, because the junk we’re using is much more expensive than it was back then.

Q: So, you don’t believe our savior Obama is going to pull the soldiers out?

Doug: There’s not a chance in hell.

Think about the gigantic bases they’ve built in Iraq. I mean outside the Green Zone. They’re huge and can only signal an intention to stay for good. And the same thing is happening in Afghanistan. This is all going to end badly.

I hesitate to call myself a political handicapper, though I did predict that Obama would win, but I do think he’s going to be a one-term president. Things are going to be so bad by the time the next election comes around.

Q: Can you quantify “end badly” for us?

Doug: The war with Islam is going to heat up for the same reason the Cold War with the Soviet Union escalated under McNamara. The more the U.S. attacks them, the more they feel threatened and feel they have to counterattack. And when they do, the fearmongers in this country feel threatened, and it keeps escalating.

I don’t see any reason for it to de-escalate at this point, though I’ve got to say that in this respect, Obama is at least marginally better than Bush. At least he doesn’t talk in such a hostile and antagonistic way.

Q: And he speaks English – he can even pronounce the word “nuclear.”

Doug: Yes, that’s right. But I don’t see things turning around at all. In other words, all these secretaries of defense and such will be taking lessons from McNamara, not learning from his mistakes.

Q: When do you think this might really heat up?

Doug: Well, for one thing, forget about Obama and his promise to win this war. The threat has metastasized; it’s not just al-Qaida anymore, but now it’s thousands of people all round the world. It only takes two or three guys to get together to hatch a plan. It’s sort of like “open source” warfare. They don’t need a commander in chief in Redmond, Washington, telling them how to design their warware; there are thousands of war entrepreneurs out there now, making their own designs, driven by what the U.S. is doing.

Q: That makes sense, but again, the timing is critical. In our business, being too early is the same as being wrong.

Doug: That’s correct, but at the same time, you have to diagnose the trend correctly, which I think we’re doing. That said, I think people likely to be plotting against the U.S. have a longer time frame than Americans do. Americans want things done now. Instant gratification. Those on the other side are willing to plan and take their time assuring their revenge. And they understand that the longer the U.S. keeps spending, the more it’s going to be bled to death.

At some point, somebody is going to get hold of one or more nuclear devices, or maybe a biological weapon, from one source or another. There are many possible ways that could happen. Then they fly it into the U.S. on a commercial airliner and detonate on landing, or load it in a perfectly harmless-looking commercial boat and set it off as soon as the boat docks. I think that’s the way it’s likely to happen; they don’t need ICBMs nor cruise missiles to mount an effective nuclear attack. But the time, place, and means are impossible to predict. There are millions of people out there now with chips on their shoulders. A lot of them are going to be plotting stuff for all kinds of reasons. So, you can’t realistically say what will happen; all you can say is that it’s inevitable that something will happen.

Q: Sounds like another good reason to move to Argentina. But what other investment implications are there?

Doug: Things haven’t changed much: buy gold, buy silver, and diversify your assets internationally. That’s the basic step. After you have a firm foundation with those things, you can start looking at speculations. Use the chaos to your advantage.

Q: Given how Vietnam-like wars tend to push the states that wage them towards bankruptcy (this happened to the Soviets in Afghanistan, as well), is there a particularly leveraged way to short the government’s solvency of the sort you write about in The Casey Report?

Doug: Shorting the dollar and shorting long-term Treasury bonds are fantastic long-term bets. That’s especially so for shorting long-term Treasury bonds, as interest rates are still very close to their all-time lows, being artificially suppressed by Federal Reserve buying. That’s a one-way street where you can get huge leverage on your money, if you have a time frame of a couple years. That’s the best single bet I can think of.

Q: Makes sense – thanks for your time, Doug.

Doug: Always a pleasure. Till next week.

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National Debt Road Trip

This short video on the National Debt presented as a road trip would be a bit comical if it was not true. Some might say it kind of bashes Obama, but it that’s not a fair statement since he uses Obama’s own numbers.

The President does indeed present a budget, but if I’m not mistaken the Constitution (remember that old thing?) actually puts the power of the purse strings in the hands of Congress. At least that’s why what I was taught in government class back in the dark ages.

Why does Congress seem to get off scott free? This video helps just a little by mentioning who was controlling congress during some of the spending sprees.

I have a feeling that by the time this is over, no one I talk to will admit having voted for Obama. But that doesn’t mean that Bush was a friend to freedom loving Americans.

If you want to Bush bash, no one does a more honest and succinct job than Doug Casey in this months Casey Report.

Get a clue (hint: Bush Sr and Clinton are now best buddies): there is not a dimes worth of difference between the Democrats and Republicans. Each is just designed to be hated a little less by one group of people.

Yes, Currency Debasement DOES Matter

I think currency debasement is much like the frog getting slowly cooked in the kettle, you just don’t seem to notice the effects.

My thanks to Ed Steer over at Casey’s Daily Resource Plus for the following two pictures of a 1929 postcard.

Look what a few dollars would buy in car parts and labor in 1929:


Now look at your latest auto repair bill.

Back when I was wrenching on our own vehicles 30 years ago, (50 years after this postcard), $25 wouldn’t buy one head gasket and it took about $300 to overhaul a transmission that wasn’t seriously broken.

Now, $25 won’t hardly buy you an oil change.

Look at the cost of sending a postcard:


Today it costs 28 times that!

Currency devaluation kills a retirement nest egg or any other savings, such as a child’s college fund. I have never seen any figures showing investment returns coming even close to the annual increases in college tuition costs.

The current government approach to “fixing” the financial crisis, I feel, is going to end badly. The price we avoid paying today will pale in comparison to the price paid by us and our children, grandchildren, etc in future.

The Federal Reserve is supposed to protect our money. They, with the help of Uncle Sam, are destroying it. The only alternative is to invest in real money.