Ben Bernanke Gave Foreign Central Banks $500,000,000,000 on Behalf of You and I...How Generous of Him

Watch this first: http://www.youtube.com/watch?v=n0NYBTkE1yQ

I believe this clip speaks for itself. However, I also believe it is worth highlighting the following:

1) Most importantly, the private bank which oversees our banking system and much of the economy handed out half a trillion dollars to foreign countries, without anyone in Congress ever voting on it or even being apprised of it (until this hearing, and only after Rep Grayson had the wherewithal to ask). If we are interpreting the Constitution even remotely in the spirit of its text, then this is an outright violation of the Constitution.

2) So that might beg the response, "but the provision to do so is in the Federal Reserve Act, which amended the Constitution, so therefore it's ok." This is flawed logic to say the absolute least. If the Fed Reserve Act indeed makes this allowable, then shouldn't we repeal the Act? Why would any American citizen want a law that allows its central bank to give away billions of dollars to foreign banks (thus obligating future generations to the resulting debt burden)? Has any citizen witnessed a resultant economic benefit from this action? Also note that the Act was drafted by six bankers and one senator 99 years ago (in 1910). I have an inkling that the bankers wrote the Act to reflect their interests, not yours or mine. Just a hunch.

3) Rep Grayson probably deserves our support for questioning Bernanke in this fashion. Of course, to be thorough, his entire record on this subject should be scrutinized (which I have not done).

4) Rep Grayson is small proof that, once in a while, Congressmen actually read the relevant documents upon which they are making legislative and oversight decisions.

5) Bernanke does not appear to be confident in his knowledge of the legal authorities and Fed Reserve Act provisions affecting his chairmanship. But who needs to be when you can essentially commit the larceny of 300 million people and not be held accountable for it.

6) The Chairman of the Congressional committee (Barney Frank) sounds eager to end this line of questioning as Grayson's time limit expires.

7) It will be interesting to see how this kind of revelation affects the Audit the Fed bill (HR 1207) that Congressman Ron Paul initiated in February of this year. You can track the bill's progress here: http://www.govtrack.us/congress/bill.xpd?bill=h111-1207

Black Swan Conjecture

I'm currently reading a book called The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb. Taleb was a trader and derivatives expert on Wall Street, before eventually releasing the aforementioned book, as well as Fooled by Randomness in 2001. I encourage people to learn more about Taleb and his black swan conjecture (you can Google/Wikipedia both items), as well as read the book.

In short, the title is derived from the fact that in 1697, Dutch explorers in Australia discovered the first black swans -- negating centuries of assumption that all swans were white. Taleb expounds on this by stating that black swan events fit the following three criteria:

1) the event is completely unexpected
2) it is highly impactful
3) it is retrospectively distorted; that is, afterward it is rationalized as if it was expected

If you're hesitant or wondering what the practical application is, consider the fact that Taleb's Universa Investments fund (he advises them but does not get directly involved in trading) saw gains between 50 and 110% by the end of 2008. Compare that to the standard 40-60% losses sustained by most fund managers and investment gurus during the same time frame.

To underscore the point, check out the following clip:

http://www.youtube.com/watch?v=_Jli7xPOvIA


It's worth watching the following clips as well:

http://www.youtube.com/watch?v=krU1wPb7i6c

http://www.youtube.com/watch?v=uX4P6I-7JTI


Finally, his website: www.fooledbyrandomness.com

I will continue to post on this general subject going forward, including some upcoming thoughts on utilizing the black swan conjecture in conjunction with strategies proffered by Peter Schiff and Jim Rogers.

Ben Bernanke Has Gotten Everything Wrong...So Naturally He's the Best Guy for the Job

http://www.youtube.com/watch?v=HQ79Pt2GNJo

This must be why the administration strongly endorsed Bernanke recently as the best guy for the job, as they prepare to reappoint him as Fed Chairman. At least he's consistent.

I Guess the Greedy Oil Execs Took the Winter Off

So you’re wondering, how are gas prices going up all over again? An average of approximately $2 just this spring has skyrocketed 50% in a matter of months, leaving us with a $3 average 2 weeks shy of the July 4 holiday weekend. A barrel of oil has risen from about $35 to nearly $70 in this same time period.

But what about the greedy oil execs? Did they take the winter off from their rampant greed, decrease gas prices for us, and then decide to jack them up just in time for your summer vacation?

Or maybe global demand went into a slumber during the winter and has awoken just in time for the summer driving season?

Or maybe the Middle East conspirators decided to spring back into action and manipulate oil prices, after conveniently taking the last several months off from their…conspiring?

Or maybe, it’s none of the above. Maybe, just maybe, the flooding of the global marketplace with trillions of dollars has forced up the price of a barrel of oil (which of course is denominated in dollars), thus resulting in higher gas prices being passed along at the pump. Scary thing is, those trillions have just begun to make their way into the economic system, so we’re only experiencing the leading edge of the resultant effects.

But the above explanation is the hardest to swallow, because what it portends for the country is far worse than the $3/gallon pain you’re feeling right now. What it means is the US government cure for the recession has in fact sealed our fate with the promise of significant inflation, sparked by the money printing orgy that started in 2008 and came to a crescendo in February with the latest stimulus bill and Fed Reserve Treasury bond buybacks that promise to inject trillions of dollars into the economy.

This would also explain why your grocery bill has been rising steadily as well, as commodity prices are linked to dollars as well. In fact, it is generally true that inflation is going to show up most drastically in those goods that an individual or entity cannot do without: things like food, energy, and health care cannot be excised from people’s budgets…you essentially must pay the cost whatever it is. Even higher education, perceived as mandatory in developed countries, suffers at the hand of inflation, as institutions sense unlimited demand for their product and continually raise tuition costs. These costs are then absorbed through greater and greater leverage on the part of the student and/or their family, who are then saddled with crushing debt obligations upon graduation.

Of course the government will continue telling you inflation is under control at the standard issue 3-4% figure they disseminate every few months, but tell that to the family of four living on $45,000 a year, spending $300 a week on groceries now versus $225 a few weeks ago, and $50 a week on gas as opposed to the $40 a week recently as well. It’s no secret that families living anywhere near the median household income cannot well absorb 50+% increases in their standard purchases, like food and energy. But that’s what your “stimulus” bill will now demand of you.

In fact, the pain our country felt during the recent Great Recession was mitigated by the fact that commodity prices fell, leaving us with cheaper gas and food bills to offset rising unemployment and loss of home equity. The coming depression will put us through a period where prices will rise significantly as people lose their jobs and their homes. Then we will know what economic misery feels like, and the 2008 meltdown will appear pleasant by comparison.

You Need to See This Movie

http://www.iousathemovie.com/

Your Presidential Candidate Doesn’t Matter (Subtitle: You’ll Be Worse Off Economically in 2016 No Matter Who Gets Elected)

That’s right – it doesn’t matter who’s elected President of the United States this coming November. At least it doesn’t when it comes to the economy and our present difficulties therein.

I’ve been in various social and professional circles where I hear a great deal of enthusiasm expressed for one candidate or the other. Invariably, I have provided the individuals participating in those discussions with much the same message as you see reflected in the title of this blog entry. As long as a country maintains a central bank that practices inflationary monetary policy, particularly as a tool for resisting recessionary forces, that country will experience growing economic pains, a weakening currency, and a widening gap between its haves and have-nots.

To quickly summarize: when inflationary policies are instituted, and money is created out of nothing, that money flows to entities that can utilize it before its price-raising effects seep into the larger economy. These entities (investment banks, corporations, the wealthy) can invest it or capitalize it in a fashion that is advantageous to them, such as by investing in real estate, stocks, derivative investments (options, collateralized debt obligations), or anything else for that matter. Then when the added money trickles down to the consumer (read: you and I), we are left with one thing: higher prices. Less purchasing power. Smaller paychecks. Whatever you want to call it, it’s not good.

Given the above, here’s a question for you: which candidate is talking about the activities of our central bank in the context of our economic woes? Which candidate has come out denouncing the inflationary policies of the Fed Reserve? Which candidate has advised against resisting the natural, corrective recessionary forces underway in the US market? You guessed it…none of them.

So where does that leave things? Well, it basically means that your economic situation is going to deteriorate over the next few presidential administrations, no matter which one of the candidates is at the helm. The underlying, root cause of our economic distress is not just absent from today’s political discourse -- if it is broached it’s met with mockery, disgust, or apathy (exhibit A: former candidate Ron Paul in any Presidential debate from the last year or so). Worse, our society discourages reading in favor of mind-numbing entertainment, so it is unlikely the masses will independently awaken to the effects of central banking anytime soon. Educating oneself in the area of financial literacy is also difficult, due to the complete lack of outlets for this subject. (Anyone still wondering why our schools don’t teach basic financial literacy?) Efforts in this area are left to the self-directed (see previous comment re: reading vs. entertainment).

Allow me to proclaim with even more emphasis the following: no matter who becomes President – Barack Obama or John McCain – your economic situation will be worse after the presumptive two terms that individual will serve. By worse, I mean some combination of the following conditions: less home equity, devalued investments in stocks and bonds, lower purchasing power, less available savings, more reliance on credit to buy the essentials, you name it. It won’t be pleasant.

David Walker Doing Yeoman's Work

David M. Walker, the former head of the Government Accountability Office, has been conducting a "wake-up tour" across America, attempting to shine a light on the fiscal challenges facing our country. I encourage you to watch his appearance on 60 Minutes, which occurred last year, at the following link:

http://www.youtube.com/watch?v=QxoP_9W6FC8

Also, check out this link:

http://www.petergpetersonfoundation.org/

Walker is currently leading the Foundation's broad efforts in the areas of enhancing "public understanding of the nature and urgency of selected key sustainability challenges that threaten America’s future, to propose sensible and workable solutions to address these challenges and to build public will to do something about them."