What’s Wrong with a Free Lunch?

My father was one cranky old sob, but he certainly was no fool.  One thing he taught me was that “life ain’t fair and nothing in it is free.”

Apparently, the Greek government never met my father, or they would not be in the mess they are currently in.    The Greek Government thought that it could borrow to finance its own growth, and then borrow the money to pay that back.   The Greek government thought that it could finance its social welfare programs with borrowed money, and then borrow money to pay it back.   Sound familiar?

In 1920, an enterprising Italian immigrant by the name of Charles Ponzi (that’s him to the right.  Notice the numbers he’s holding up?) came up with an idea to put a few dollars in his pocket.   He would offer a high yielding investment (50% within 40 days, or 100% within 90 days).

I think the people who bought these “investments” never met my Father either, or they would have known that “If it sounds too good to be true… It probably is, but anyway,   people bought the product he offered, and as he brought in new investors, he would pay off the original investors with the new investors money.  Ponzi  took this idea and ran with it, and that’s why he has those numbers across his chest in the photo.  In the end, he bilked people out of over $2,000,000, and using the Coke Index (the price of a coke when I was a kid, versus the price of a coke today) that’s at least $40,000,000 in today’s dollars.   Ponzi is well remembered however…  they named a scheme after him.  Yep, you guessed it, “The Ponzi Scheme”.  He went to jail for it.

Well the Greeks are finding out that pyramid schemes, whether run by a little italian immigrant by the name of Ponzi, or a Government run amok,  are simply just that…  pyramid schemes.  Now,  just as my cranky old man told me, they’re about to find out that “life ain’t fair, and nothing in it is free.”  Just like in Hamelin, they are going to have to pay the piper, and they are angry, just as the burning policeman at the left suggests.

Livid pensioners,  wild haired socialists, students with a communist bent,  and government workers are very upset that the dole-ist policies of their government are going to have to be reined in.

Well, folks, it’s not just Greece that has involved itself in a Ponzi Scheme.   The federal government never spoke to my father either, and here at home, with our paternalistic government being all things to all people,  borrowing from Peter to pay Paul, one has to wonder what will happen here when the piper’s pay is due.

Americans  accustomed to the Free Lunch that is Our Government (FLTIOG) will certainly not behave like those nasty Greeks… right?….. Right.

An Economic “Tipping Point” or Go Long on Gold

The PIIGS (Portugal, Italy, Ireland, Greece, Spain) have sort of dropped out of the news lately, but not because they lack importance as indicators of the current global economic crisis.

Jean Claude Trichet, the European Central Bank President has remarked that:  “The International Monetary Fund or any other body must not assume the responsibility of Eurozone Governments in dealing with economic problems,”  He has also remarked that  “The Greeks are crooks, and they’ve been lying about the numbers.

The Greek government currently has as a debt load equal to 150% of GDP, or so they say.  Others believe that the actual number is much greater.  They are on the verge of financial collapse.  This creates significant problems within the EU.  The French are large holders of this debt, and want to see this crisis resolved in a fashion that does nothing to hurt them financially.  The Germans on the other hand, are ready and willing to cast off the Greeks and send them on another, and perhaps even more fearful and painful odyssey than that of which Homer wrote over two thousand years ago.

According to Philip Manduca, head of  investment at ECU Group, a financial group based in the UK that is primarily a trader in currency, “We are at a tipping point.”  A lack of fiscal unity in the Eurozone may very well implode the currency, unless… “someone else takes the spotlight, and that may be you (meaning the US).”

Right now, we are  funding our wars and our social programs through debt, but when other nations like China start worrying about our ability to repay,  US bond yields must start to climb as  the perception of risk increases.  Manduca argues that when this happens, and if equities start to fall… we have a real big Uh Oh!

Even with all the stimulus dollars applied, the US has seen only a .1% increase in real GDP, and the government, a large part of that picture, is an unproductive sector of the economy.  The job market is flat, and unemployment has not seen significant change.  On top of that we’ve got Obamacare coming and business in the US is already talking writedowns.  We’re talking a continuation of the “perfect storm” here folks.

So for the average guy, what’s the answer?  Metals, I’m thinking.  Gold and Silver.  Right now, I prefer silver, it’s cheaper, you can buy more of it, and there’s more room to run.  While gold might double in the next few years, silver could increase by a factor.

When I say to you that I don’t want to see this happen, I mean it, and I hope that it doesn’t, but I don’t see any other plausible  outcome.  As an individual, I can live beyond my means for only so long.  It is the same for government, and we have reached the “Tipping Point.”

Watch this video, only 8 minutes long.

ECU Group’s Philip Manduca “We Are At A Tipping Point” And The Only Thing That May Save The Euro Is A Collapse Of The US | zero hedge.

The ObamaCare Writedowns

The problem with socialism is that eventually you run out of other people’s money.

Margaret Thatcher

One of the simplest facts of  life is  “You don’t get something for nothing,” yet  the Democratic congress has assured us that with the new health care bill, we can insure 33 million Americans and not only will it not cost us anything, we  can actually save money in doing so.   Apparently the business sector does not believe this.

Just days after passage of Obamacare, some of the largest companies in the US are taking writedowns on their profit and loss statements.  In other words, they expect this bill to cost them lots of money.

Well, heck, you might say, the big companies make millions, even billions of dollars, right?  Who cares?  You should care.  When AT&T takes a writedown of one billion dollars, that’s a billion dollars they don’t have to invest in research and development, upgrading equipment, or expansion of their business.  That means jobs, baby, and because these companies are suddenly less profitable, they are less highly valued by the investing community, the result being a lower stock price.  If you are lucky enough to have a 401k plan, I hope you’re not holding them.

It has been said that “He governs best, who governs least.”  Our  federal government has lost sight of this.  The Republican form of government exemplified at this nation’s founding with a limited central government and strong states rights has been dying, at least since the end of the Civil War, and we need desperately to resuscitate it.  I believe the chance will come as our economic plight over the next ten years continues to worsen.  The failures of our mismanaged, over-bloated central government will become apparent, even to the most die-hard liberal wacko.

Read the article below, see what the business world thinks of Obamacare.

The ObamaCare Writedowns – WSJ.com.

Politics Cannot Be Fixed

1913 was a watershed year for the United States of America.  Since 1813,  we had seen tremendous economic and social gain.  The average worker in the USA was living at a level that was simply inconceivable a mere 100 years before.  America was a beacon of freedom and possibilities for the entire world.  Life was good for most Americans, and there was hope always,  for a better future, but the ills were there, and well meaning folks of all stripes came to believe that government might be the vehicle to cure these ills.

Enter the progressive party.  Formed by Teddy Roosevelt in 1912, the wheels were set in motion for a line of  Presidents and political ideology that championed the use of government as a well meaning vehicle to effect social and economic change.  To do this, however requires money, and in 1913 the income tax was born, and the Federal Reserve Bank was created.  With the income tax, a revenue stream was created, and with the Federal Reserve Bank, and their ability to “provide liquidity” to the masters of a burgeoning economic powerhouse, the wheels were set in motion for a continued growth of government over the next century.

This article suggests that as government has grown, and has become more and more an arbiter in society of which businesses succeed and which businesses fail, so has grown special interest politics.  It also implies that political polarization is a natural outgrowth of  Big Government.

An interesting article from the Mises Institute, and a worthy read.

Politics Cannot Be Fixed – D.W. MacKenzie – Mises Institute.

Federal pay ahead of private industry – USATODAY.com

While Main Street continues to suffer, the government boys are doing OK.  The government is hiring  in order to fill its expansionary needs, and while salaries are stagnant in the private sector, government salaries are on the rise.  And its all on our dime, folks.

Government is by its very nature  parasitic.   It utilizes resources, and creates nothing.   A leech on the body politic, it will enlarge itself on the vitality of the public sector until that vitality is sapped.

Jefferson, Madison, Adams all knew this  and sought to create a government limited in scope, where with natural talent, and  in an environment of personal and economic liberty, a person might prosper.

We’ve come a long way baby.

Federal pay ahead of private industry – USATODAY.com.

Ron Paul for President 2012?

Ron Paul’s recent victory in the recent CPAC straw poll has  many conservative talking heads to gibbering in their dismay.

The problem with the majority of conservative leadership in this country today  is, well… they’re not very conservative, at least with regard to fiscal policy.  They talk about the benefits of limited government, yet grow the government every year.   Beyond this, they seem to have no problem with the idea of perpetual war… a certain prescription for tyranny.

The conservatively libertarian views of Ron Paul scares the hell out of the beltway types.  That’s good enough for me.

Ron Paul never thunders, but he’s a lightning rod anyway | NJ.com.

Ron Paul’s Hour of Power by Patrick J. Buchanan

I see the Federal Reserve Banking system as the greatest threat to our nation’s economic and personal liberty.  It permits overspending by the Congress on socialist causes, enables war, and has brought us to the brink of economic collapse.  Pat Buchanan nails this one.

Ron Paul’s Hour of Power by Patrick J. Buchanan.

The Misesian Vision

Do you believe in FREEDOM?  You won’t find it with the Republicrats in Washington, DC.  You might catch a glimmer of it in this article by Lew Rockwell.

The Misesian Vision by Llewellyn H. Rockwell, Jr..

Treasury Resisting TARP Transparency, Oversight

700 Billion dollars… Real money, folks, and the banks can’t tell us what they did with it?  They seem to understand my mortgage pretty well.  Accountancy on gifted funds from the Fed must not be as important as the loans they make to the small fish like me.

Big business, big government, big problem, I’m thinkin’.

Read this article.  If you can come away without the understanding that BIG GOVERNMENT IS NOT OUR FRIEND, well… good luck comrade.

Treasury Resisting TARP Transparency, Oversight | Mother Jones.

The Tea Party — Republicrats… Ignore them at your peril

America has a long history of populist movements.  Most recently the Tea Parties have come to the forefront near spontaneously as many people have determined that the Federal Government and Big Business have become a binary system to the exclusion of the people.  The right and left both fear and reject them.  They may do this at their peril.

In Defense of Tea Parties – Page 1 – The Daily Beast.