Romney and Obama are like night and day, isn't it Obvious?

Channel4truth2012 has put up a great video on YouTube comparing side by side the words and political stances of Republican and Democratic presidential candidates Mitt Romney and President Barack Obama. Includes topics like universal health care, gun rights, energy, NDAA, the Patriot Act, Iran, sanctions, economic stimulus. bank and auto bailouts, civil rights, TARP, the Federal Reserve, Ben Bernanke, campaign donations, and more. 

Dear American readers, please watch before voting, there is still a choice. Do not WASTE your vote.

Meet Gary Johnson!

Academic Eric Posner's Great Idea to Solve All Future Problems

My friend and reader Kim asked me to comment on the following opinion published on Bloomberg and asked me to comment on opinions expressed. I'm quote it in its entirety, apologies for a long quote, but there are just many idiocies in it, that you need the full picture.

In February, Mary Schapiro, chairman of the Securities and Exchange Commission, said the agency is looking for ways to rein in high-frequency traders. That is, the people who use computer algorithms to buy and sell derivatives at lightning speed to make instantaneous profits.

High-speed trading can waste resources and cause market disruptions. So the commission is right to look into high-speed trading. But it must realize that this is only one issue at the edge of a vaster problem that requires significant government intervention.

I don't understand: Is the author saying that HFT is dangerous? Or that making money using HFT is against his morality? Did HFT cause any financial crash? How does he define HFT anyway? Is it the role of the government to decide how people should spend their money? Is the author making any sense?

The larger challenge is that much of the U.S. financial system is devoted to wasteful activity -- useless trading that advances no important economic interest but, at the same time, creates a dangerous risk of economic crisis.

Who's the author to say that this wasteful activities, and that people shouldn't be doing wasteful activities anyway? Shall we ban casinos, cinemas, drinking places because they are wasteful activities? Shall we also ban him for publishing any opinion because reading his opinions are such a waste of time, and also so dangerous for our freedoms to spend our time and money the way we want?

The way to control this wasteful speculation is to require government approval of all new financial products, subjecting them to the same sort of examination and regulation that the Food and Drug Administration applies to new medicines.

Again, complete nonsensical proposition. HFT are trading highly liquid instruments, such as stocks and futures. Would the author's FDA ban stocks and futures to prevent what he considers to be wasteful activities?

Before there was an FDA, quacks peddled useless, and sometimes dangerous, tonics like radium water. Yet for all the harm such concoctions caused, they may never have matched the risk and waste of some financial derivatives -- what Warren Buffett has called “financial weapons of mass destruction.”

 If the FDA didn't exist, there would be plenty of other companies, not funded by the tax-payer, which would take on that role. They would more efficient and quicker to produce their reports. It would in the pharmaceutical firm's interest to obtain approval from those companies.

Moreover, the FDA is preventing people whose lives might be saved by experimental medicine to make the decision to use them, and hence, they are also contributing to peoples death.

A credit-default swap, a financial product that pays off if a bond defaults, might seem sensible. If you own a Greek sovereign bond and a CDS, when the bond defaults, the CDS pays you back. But if what you are trying to do is make money with low risk, you could buy U.S. Treasuries rather than Greek bonds. Normally, the buyer of a CDS on a Greek bond doesn’t buy the bond itself (making it a “naked” purchase). Such a transaction cannot reduce risk in the financial system as neither party is hedging a risk they already face. Instead, they are seeking to evade capital-adequacy regulations that aim to limit institutions’ risk exposures or to gamble more cheaply than would be possible if they had to take an explicit short position on the bond.
In the years leading up to the 2008 crisis, traders commonly used CDSs to gamble on default by a country, corporation or package of mortgages and to evade financial regulations associated with such bets.

The problem is not the CDS. The problem is that they are unfunded, uncollaterised. This a decision that both the sellers and the buyers have such instruments have knowingly made, and they should bear the risks associated to them.

Moreover, "gamblers" (term showing the negative opinion of the author) or speculators, provide liquidity to the market, and take risk off the hands of their counterparties. As such, they do bring value to the market.

Finally, how do you decide who's speculating, and who is not? Again, it would require the government to be all judgmental, and we know how this always ends with governments.

From 2000 to 2007, the notional size of the CDS market ballooned from zero to $62 trillion. Little, if any, of this activity served legitimate hedging purposes; almost all of it was tax and regulatory arbitrage or speculation. When the financial crisis hit, we all paid a steep price for the risks that this speculation had concentrated in a few institutions.

We didn't have the pay the price. We were robbed by the politicians. If the author is stupid enough to think there were no other choices, he should read a few articles and speeches by Ron Paul.

Not all financial innovations are this bad. Retail index mutual funds, created in the 1970s, have helped businesses obtain financing and have enabled people to diversify their investments across a range of stocks. And most mutual funds are useless for speculation because they are designed to be less volatile than the underlying stocks or bonds.

How, the author is creating the goose which lays golden eggs! I'm all for it. But they exists only in fairytales, not in the real world. But the real world is so far away from the academics living in their ivory towers, that I can very much understand where these ideas come from.

Creative economists have recently invented other derivatives that enable homeowners to protect themselves from a decline in housing prices.
So the federal government should address the risk posed by derivatives not by taxing or banning them uniformly, but by regulating them selectively, as it does with beneficial, but risky, medical drugs. Before pharmaceutical companies can sell their drugs to the public, they have to prove the products are safe.

Same as a couple of paragraphs above.

Likewise, the SEC, the Commodity Futures Trading Commission or a whole new federal agency could require financial innovators to prove the safety and efficacy of new derivatives. Their analysis could be done far faster and more cheaply than a typical drug review, because they could base it on existing economic data -- the same data companies use to project demand for their product.
The Federal Trade Commission and the Justice Department use similar procedures to project the likely effects of proposed mergers.

We've seen how successful the SEC, the CFTC and the FED have been in the past, so let's build more such successful organizations!

Regulators would distinguish the demand for the derivative’s beneficial uses -- diversification and insurance, supplying information to the market -- from the demand for its harmful uses -- avoidance of taxation and regulation, speculation and high-frequency trading. These assessments would help the agency determine whether the financial instrument should be licensed, restricted or prohibited.
If such a review had existed in the 1970s, the retail index mutual fund would have passed with flying colors.

Yes, because the brightest and most intelligent people always look for jobs as "regulators", and these omniscient people, which we used to only find in USSR and China, are now also available in the economic dreamland of academics leaving in their ivory towers.  

On the other hand, the reviewing agency would have seen that CDSs would be used not so much to reduce risk as to enable speculation and arbitrage. Traders might have been permitted to buy CDSs only if they owned the underlying bond, and naked CDSs would never have existed.

It doesn't make a difference at all. The problem is not the instrument, is the way the trade was collaterized, and the fact that the government decided to rip off people to save their lobbyist banks.

If our proposal seems radical, that is only because the deregulatory fervor of the past 20 years has created an atmosphere of lawlessness. Before Congress lifted restraints on the derivatives market in 2000, many new financial products were subject to review by the CFTC, in the understanding that speculative financial trading produces limited benefits and subjects the economy to great risks. That is a bit of wisdom we must now rediscover.

 The proposal is not radical. It's simply stated, utter nonsense. The problems we face are originating in too much regulation, and too many government entities feeding credit and fiat money into the system.

(Eric Posner, a professor at the University of Chicago Law School, is a co-author of “The Executive Unbound: After the Madison Republic” and “Climate Change Justice.” Glen Weyl is an assistant professor of economics at the University of Chicago. The opinions expressed are their own.)

Eric Posner is an economist illiterate, living in an Ivory Tower at the University of Chicago, and should probably keep on think twice before publishing another opinion of his. 

Support Ron Paul

If you are not familiar with Ron Paul, here are 3 videos that sum up quite a lot about him. They are embedded below and very much worth your time.

1. What If?
2. Support video 1
3. Support video 2

You can donate to Ron Paul's 2012 campaign. If you're among my american readers, please help restore America and make the whole world a saver and better place.

Ron Paul Defends WikiLeaks On House Floor

I am glad to see that Ron Paul has taken WikiLeaks' side and is defending it on the house floor. Ron Paul's talk is available on YouTube:


The HuffingtonPost mentioned this on the following report:

In the wake of the recent WikiLeaks document dump, Representative Ron Paul (R-Texas), the self-styled libertarian crusader who's spent the past half-decade building up a massive grassroots following, has emerged as a principal voice in support of the transparency that WikiLeaks has provided. In a speech on the House floor yesterday, Paul held forth at length on the controversy.

Others may disagree, but I don't read Paul's remarks as a defense of Julian Assange specifically -- Assange is only mentioned three times during the five minute oration. This was perhaps wise, given the fact that Assange is facing charges unrelated to WikiLeaks abroad, and has become a fractious enough figure within the WikiLeaks organization itself that internecine battles have broken out, with one faction preparing to open their own site, "OpenLeaks." But it's certainly a defense of WikiLeaks in principle, and whistleblowers in general -- Paul spends more time discussing Daniel Ellsberg than he does Assange.

On balance, Paul's speech primarily touches on themes that he's advanced throughout his career: his antipathy to neo-conservative empire-building, the lies that precipitated the invasion and occupation of Iraq, the primacy of individual liberty, and the value of dissent. WikiLeaks simply gives Paul's convictions some urgency.

And a transcript is also availble:
WikiLeaks release of classified information has generated a lot of attention in the past few weeks. The hysterical reaction makes one wonder if this is not an example of killing the messenger for the bad news. Despite what is claimed, the information that has been so far released, though classified, has caused no known harm to any individual, but it has caused plenty of embarrassment to our government. Losing our grip on our empire is not welcomed by the neoconservatives in charge.
There is now more information confirming that Saudi Arabia is a principal supporter and financier of al Qaeda, and that this should set off alarm bells since we guarantee its Sharia-run government. This emphasizes even more the fact that no al Qaeda existed in Iraq before 9/11, and yet we went to war against Iraq based on the lie that it did. It has been charged by experts that Julian Assange, the internet publisher of this information, has committed a heinous crime, deserving prosecution for treason and execution, or even assassination.
But should we not at least ask how the U.S. government should prosecute an Australian citizen for treason for publishing U.S. secret information that he did not steal? And if WikiLeaks is to be prosecuted for publishing classified documents, why shouldn't the Washington Post, the New York Times, and others also published these documents be prosecuted? Actually, some in Congress are threatening this as well.
The New York Times, as a results of a Supreme Court ruling, was not found guilty in 1971 for the publication of the Pentagon Papers. Daniel Ellsberg never served a day in prison for his role in obtaining these secret documents. The Pentagon Papers were also inserted into the Congressional record by Senator Mike Gravel, with no charges of any kind being made of breaking any national security laws. Yet the release of this classified information was considered illegal by many, and those who lied us into the Vietnam war, and argued for its prolongation were outraged. But the truth gained from the Pentagon Papers revealed that lies were told about the Gulf of Tonkin attack. which perpetuated a sad and tragic episode in our history.
Just as with the Vietnam War, the Iraq War was based on lies. We were never threatened by weapons of mass destruction or al Qaeda in Iraq, though the attack on Iraq was based on this false information. Any information which challenges the official propaganda for the war in the Middle East is unwelcome by the administration and the supporters of these unnecessary wars. Few are interested in understanding the relationship of our foreign policy and our presence in the Middle East to the threat of terrorism. Revealing the real nature and goal of our presence in so many Muslim countries is a threat to our empire, and any revelation of this truth is highly resented by those in charge.
Questions to consider:
Number 1: Do the America People deserve know the truth regarding the ongoing wars in Iraq, Afghanistan, Pakistan and Yemen?
Number 2: Could a larger question be how can an army private access so much secret information?
Number 3: Why is the hostility mostly directed at Assange, the publisher, and not at our governments failure to protect classified information?
Number 4: Are we getting our moneys worth of the 80 Billion dollars per year spent on intelligence gathering?
Number 5: Which has resulted in the greatest number of deaths: lying us into war or Wikileaks revelations or the release of the Pentagon Papers?
Number 6: If Assange can be convicted of a crime for publishing information that he did not steal, what does this say about the future of the first amendment and the independence of the internet?
Number 7: Could it be that the real reason for the near universal attacks on Wikileaks is more about secretly maintaining a seriously flawed foreign policy of empire than it is about national security?
Number 8: Is there not a huge difference between releasing secret information to help the enemy in a time of declared war, which is treason, and the releasing of information to expose our government lies that promote secret wars, death and corruption?
Number 9: Was it not once considered patriotic to stand up to our government when it is wrong?
Thomas Jefferson had it right when he advised 'Let the eyes of vigilance never be closed.' I yield back the balance of my time.

Another major victory: Fed to release Recipients Name of $3.3 Trillion in Emergency Aid

Sorry, not much time to write this post. Here's the big news:

Dec. 1 (Bloomberg) -- The Federal Reserve, under orders from Congress, plans today to identify recipients of $3.3 trillion in emergency aid the central bank provided as it fought the worst financial crisis since the Great Depression.

The Fed intends to post the data on its website at midday in Washington to comply with a provision in July’s Dodd-Frank law overhauling financial regulation. The information spans six loan programs as well as currency swaps with other central banks, purchases of mortgage-backed securities and the rescues of Bear Stearns Cos. and American International Group Inc.

The disclosures may heighten political scrutiny of the central bank already at its most intense in three decades. The Fed’s Nov. 3 decision to add $600 billion of monetary stimulus has met with backlash from top Republicans in Congress, who said in a Nov. 17 letter to Chairman Ben S. Bernanke that the action risks inflation and asset-price bubbles.

“It is quite conceivable it is going to stir up the political pot,” said Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York. “But political criticism isn’t going to prevent them from doing what they need to do. An important part of being a Fed official is to understand whatever you do is going to come under scrutiny.”

This is new and would have never happened just 4 years ago.

The data will probably show the magnitude of central bank support to companies including Bank of America Corp. and General Electric Co. after the collapse of Lehman Brothers Holdings Inc. spurred a surge in private borrowing costs. Lawmakers demanded disclosure after the Fed approved aid dwarfing the federal government’s $700 billion Troubled Asset Relief Program.

Congress excluded one Fed program from disclosure, the discount window, which is the subject of a 2008 lawsuit filed by Bloomberg LP, parent of Bloomberg News, against the central bank. A group of banks is appealing to the Supreme Court over lower-court decisions ordering the Fed to identify loan recipients. The program peaked at $110.7 billion in October 2008.

“We see this not as the end of a process but really a significant step forward in opening the veil of secrecy that exists in one of the most powerful agencies in government,” Senator Bernard Sanders, the Vermont Independent who wrote the provision on Fed disclosure, said to reporters Nov. 17.

The Fed is now under attack and they know that they will be under scrutiny every time they act. There are internal conflicts at the board as well. We are getting closer and closer to a standstill and crippling of the Fed. This is the right track, and hopefully, soon, the People will be able to Audit the Fed, then End it.

Ron Paul's Free Competition in Currency Act

Statement of Congressman Ron Paul, United States House of Representatives

Statement Introducing the Free Competition in Currency Act

December 9, 2009

Madame Speaker, I rise to introduce the Free Competition in Currency Act of 2009. Currency, or money, is what allows civilization to flourish. In the absence of money, barter is the name of the game; if the farmer needs shoes, he must trade his eggs and milk to the cobbler and hope that the cobbler needs eggs and milk. Money makes the transaction process far easier. Rather than having to search for someone with reciprocal wants, the farmer can exchange his milk and eggs for an agreed-upon medium of exchange with which he can then purchase shoes.

This medium of exchange should satisfy certain properties: it should be durable, that is to say, it does not wear out easily; it should be portable, that is, easily carried; it should be divisible into units usable for every-day transactions; it should be recognizable and uniform, so that one unit of money has the same properties as every other unit; it should be scarce, in the economic sense, so that the extant supply does not satisfy the wants of everyone demanding it; it should be stable, so that the value of its purchasing power does not fluctuate wildly; and it should be reproducible, so that enough units of money can be created to satisfy the needs of exchange.

Over millennia of human history, gold and silver have been the two metals that have most often satisfied these conditions, survived the market process, and gained the trust of billions of people. Gold and silver are difficult to counterfeit, a property which ensures they will always be accepted in commerce. It is precisely for this reason that gold and silver are anathema to governments. A supply of gold and silver that is limited in supply by nature cannot be inflated, and thus serves as a check on the growth of government. Without the ability to inflate the currency, governments find themselves constrained in their actions, unable to carry on wars of aggression or to appease their overtaxed citizens with bread and circuses.

At this country's founding, there was no government controlled national currency. While the Constitution established the Congressional power of minting coins, it was not until 1792 that the US Mint was formally established. In the meantime, Americans made do with foreign silver and gold coins. Even after the Mint's operations got underway, foreign coins continued to circulate within the United States, and did so for several decades.

On the desk in my office I have a sign that says: “Don't steal – the government hates competition.” Indeed, any power a government arrogates to itself, it is loathe to give back to the people. Just as we have gone from a constitutionally-instituted national defense consisting of a limited army and navy bolstered by militias and letters of marque and reprisal, we have moved from a system of competing currencies to a government-instituted banking cartel that monopolizes the issuance of currency. In order to reintroduce a system of competing currencies, there are three steps that must be taken to produce a legal climate favorable to competition.

The first step consists of eliminating legal tender laws. Article I Section 10 of the Constitution forbids the States from making anything but gold and silver a legal tender in payment of debts. States are not required to enact legal tender laws, but should they choose to, the only acceptable legal tender is gold and silver, the two precious metals that individuals throughout history and across cultures have used as currency. However, there is nothing in the Constitution that grants the Congress the power to enact legal tender laws. We, the Congress, have the power to coin money, regulate the value thereof, and of foreign coin, but not to declare a legal tender. Yet, there is a section of US Code, 31 USC 5103, that purports to establish US coins and currency, including Federal Reserve notes, as legal tender.

Historically, legal tender laws have been used by governments to force their citizens to accept debased and devalued currency. Gresham's Law describes this phenomenon, which can be summed up in one phrase: bad money drives out good money. An emperor, a king, or a dictator might mint coins with half an ounce of gold and force merchants, under pain of death, to accept them as though they contained one ounce of gold. Each ounce of the king's gold could now be minted into two coins instead of one, so the king now had twice as much “money” to spend on building castles and raising armies. As these legally overvalued coins circulated, the coins containing the full ounce of gold would be pulled out of circulation and hoarded. We saw this same phenomenon happen in the mid-1960s when the US government began to mint subsidiary coinage out of copper and nickel rather than silver. The copper and nickel coins were legally overvalued, the silver coins undervalued in relation, and silver coins vanished from circulation.

These actions also give rise to the most pernicious effects of inflation. Most of the merchants and peasants who received this devalued currency felt the full effects of inflation, the rise in prices and the lowered standard of living, before they received any of the new currency. By the time they received the new currency, prices had long since doubled, and the new currency they received would give them no benefit.

In the absence of legal tender laws, Gresham's Law no longer holds. If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society. Merchants would have been free to reject the king's coin and accept only coins containing full metal weight.

The second step to reestablishing competing currencies is to eliminate laws that prohibit the operation of private mints. One private enterprise which attempted to popularize the use of precious metal coins was Liberty Services, the creators of the Liberty Dollar. Evidently the government felt threatened, as Liberty Dollars had all their precious metal coins seized by the FBI and Secret Service in November of 2007. Of course, not all of these coins were owned by Liberty Services, as many were held in trust as backing for silver and gold certificates which Liberty Services issued. None of this matters, of course, to the government, which hates competition. The responsibility to protect contracts is of no interest to the government.

The sections of US Code which Liberty Services is accused of violating are erroneously considered to be anti-counterfeiting statutes, when in fact their purpose was to shut down private mints that had been operating in California. California was awash in gold in the aftermath of the 1849 gold rush, yet had no US Mint to mint coinage. There was not enough foreign coinage circulating in California either, so private mints stepped into the breech to provide their own coins. As was to become the case in other industries during the Progressive era, the private mints were eventually accused of circulating debased (substandard) coinage, and with the supposed aim of providing government-sanctioned regulation and a government guarantee of purity, the 1864 Coinage Act was passed, which banned private mints from producing their own coins for circulation as currency.

The final step to ensuring competing currencies is to eliminate capital gains and sales taxes on gold and silver coins. Under current federal law, coins are considered collectibles, and are liable for capital gains taxes. Short-term capital gains rates are at income tax levels, up to 35 percent, while long-term capital gains taxes are assessed at the collectibles rate of 28 percent. Furthermore, these taxes actually tax monetary debasement. As the dollar weakens, the nominal dollar value of gold increases. The purchasing power of gold may remain relatively constant, but as the nominal dollar value increases, the federal government considers this an increase in wealth, and taxes accordingly. Thus, the more the dollar is debased, the more capital gains taxes must be paid on holdings of gold and other precious metals.

Just as pernicious are the sales and use taxes which are assessed on gold and silver at the state level in many states. Imagine having to pay sales tax at the bank every time you change a $10 bill for a roll of quarters to do laundry. Inflation is a pernicious tax on the value of money, but even the official numbers, which are massaged downwards, are only on the order of 4% per year. Sales taxes in many states can take away 8% or more on every single transaction in which consumers wish to convert their Federal Reserve Notes into gold or silver.

In conclusion, Madame Speaker, allowing for competing currencies will allow market participants to choose a currency that suits their needs, rather than the needs of the government. The prospect of American citizens turning away from the dollar towards alternate currencies will provide the necessary impetus to the US government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government's ability and incentive to inflate the currency, and keep us from launching unconstitutional wars that burden our economy to excess. With a sound currency, everyone is better off, not just those who control the monetary system. I urge my colleagues to consider the redevelopment of a system of competing currencies and cosponsor the Free Competition in Currency Act.

Ron Paul and Alan Grayson question whether "Bernanke is fit to serve" and ask Senate to postpone his confirmation

Oddly enough, this news has not been reported by any major channel or media yet. The Huffington Post has published a report.

The letter goes by:

Dear Chairman Dodd and members of the Banking Committee,

We are writing to ask you to postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf. Without such an understanding, it is impossible to know whether Chairman Bernanke is fit to serve another term [...]

Ron Paul and Alan Grayson

The 3-page letter is definitely worth reading (available from the Huffington Post link).

Related posts:
2009-08-25 Judge orders the Fed to disclose reports on emergency loans
2009-08-27 End the Fed
2009-09-16 Audit the Fed bill obtains 2/3 majority and is now guaranteed to pass
2009-09-26 C-SPAN has posted the HR 1207 hearing in its entirety