Ron Paul on Vitter Amendment

Mike Marnell forwarded this video, which appears on the Daily Paul site.  As NPR reports, a weaker "audit the Fed" bill put forward by Senator Bernie Sanders had been approved 96-0.  NPR explains the difference between the Vitter amendment and the Sanders bill:

"The Grayson-Paul bill authorizes audits by the Government Accountability Office of every item on the Federal Reserve's balance sheet, including all credit facilities and all securities purchase programs; there would be exemption only for unreleased transcripts, minutes of closed-door meetings and the most recent decisions of the central bank. The Senate measure is narrower in its focus, but it would require the GAO to scrutinize some several trillion dollars in emergency lending that the Fed provided to big banks after the September, 2008, economic meltdown."

The Fed should be open to everyone's scrutiny.  Better yet, it should not exist. The recent "bailouts" of private Wall Street firms and now foreign governments such as Greece highlight the unconstrained power of the Fed to deprive the American public of its wealth at the whim of insiders, international bankers and greedy government officials.

Zeitgeist--the Movie

I noticed this five-part video on Youtube and embedded it below. It is about 65% accurate, which makes it 65 times more useful than anything you will seen on television news this year.  Rather than take facts from the movie, use it to stimulate reading.  Much of what's in the videos won't be supported by more detailed research.

I don't like the conspiracy theory aspects of these films and wish the implication that 9/11 was a Rockefeller conspiracy had been omitted. That's emabarrasingly absurd.  It is untrue that Robert McNamara said that the Golf of Tonkin attacks "never happened" or were a "mistake". He said that one of them occurred and one of them didn't. You can see this in the 2003 movie/interview Fog of War. There are numerous other mistakes. As well, I found the fifth part to be ridiculous.  Love as a political tactic is fine, but if the public cannot figure out that the Fed is destroying their future I'm not sure what deciding "life is a ride" will accomplish. That said, the movie does open your eyes.

Much of the history is useful, such as the discussion of  Prescott Bush's involvement with the Union Bank and the Nazis and the background of the Fed. Some interesting quotes from Woodrow Wilson are included.  The stuff about chip implants is worth watching.  The comments about the education system's serving as a counterpart to inculcated stupidity via mass media are spot on.


At first I liked the Patriot Act.  Now I don't.  Although I reject conspiracy-based theories I am convinced that government uses war to curtail civil liberties and that this has occurred in the past ten years.  I also see both the Democratic and Republican Parties as well as Congress, the President and the US Supreme Court as threats to my well being that exceed the threats that terrorists pose.  Which is not to say that terrorists don't exist or that they are a figment of Nick Rockefeller's imagination.  But Washington must not be permitted to accumulate power by using terrorism as an excuse.

It is unfortunate that opponents of the Fed fail to follow the KISS strategy--keep it simple, stupid. Occam's Razor is a guide.  That is, the simplest explanation is the best:  "plurality should not be posited without necessity."  Conspiracy theories fail the KISS and Occam's Razor standards and should be chucked.  

Obama = Hitler

I found this timeless classic on Youtube.  It captures the Obama administration to a "T".  If you've seen it before, you'll want to see it again.

Stock Market Volatility

As of this writing the Dow Jones Industrial Average is up 389 points today, and it was up 450 points an hour ago.  The graph above, from IStockAnalyst.com is of Thursday's Dow.  The 700 point intra-day dip is widely attributed to a trading error.

The trading error scenario spooks me.  If a trader's error can move the Dow 700 points, then that same trader can manipulate the market 700 points.  Saying that a single, unidentifiable trader can manipulate the entire stock market 700 points changes my world view. 

I do not believe in conspiracy or market manipulation theories because economic incentives and the power of imitation are powerful enough to explain virtually all patterns.  Conspiracies exist at times, but they cannot explain most real world phenomena.  Add to that the psychological bias known as fundamental attribution error, the tendency for people to see situations as due to human causes.  For example, for most of human history people believed that Zeus or similar anthropomorphic gods caused thunder and lightening. Conspiracy theories are Zeus-like explanations.

If you had asked me last week whether a single individual could cause a ten percent fall in the Dow by manipulating price, I would have answered absolutely not.  But everyone else, every major financial news source, says I'd have been wrong.  There are enough players who can do this that (1) a simple mistake caused Thursday's 7% intra-day dip and (2) no one can figure out who it was, which means that there are enough such players to make it hard to figure out.  Short term market fluctuations are even less meaningful than I would have thought.


The VIX, a measure of stock market volatility, had mushroomed in recent days (see Yahoo! chart here)  but it fell sharply today, 30% as of 10 AM, following the announcement of a European rescue plan for Greece. Nevertheless, it is still high.  High volatility is associated with stock market bottoms, at least in the intermediate term.

Let's say the sharp dip on Thursday and the sharp increase today are due to the Greek crisis. It seems to me that the Greek cure will work for several years but not forever.  In order to solve their problems, Europeans will need to curtail spending, which would seem to have a detrimental effect on demand, hence profits, hence the markets.  Sounds like the US as well. Without monetary expansion the world economy is burnt toast. The real quality of life has been falling for decades as Federal Reserve Bank monetary expansion has subsidized government, hedge funds and Wall Street at the expense of productive Americans.

One analyst on Kitco  is predicting hyper-inflation as the US and Europe continue to subsidize real estate and stock markets through monetary expansion.  Bloomberg reports today that Ben Bernanke and the Fed have redefined what they mean by "tightening."  Undergrad economics students learn that the Fed tightens by selling treasury bonds to big money-center banks.  The cash received for the bond sales is taken out of circulation, reducing the money supply. In turn, that pushes interest rates up.  But here is what Bloomberg says the Fed now means by "tightening", according to Mitch Stapley of Fifth Third Asset Management:

"Altering a pledge to keep short-term borrowing costs low or articulating plans to begin selling the $1.1 trillion in mortgage-backed securities it now holds will amount to a tightening of monetary policy because the announcements will send bond yields higher, raising borrowing costs, said Mitch Stapley, chief fixed-income officer at Fifth Third Asset Management in Grand Rapids, Michigan."

In other words, the Fed will tighten by saying it will tighten, not by actually tightening.  That sounds a lot like my diet plan, except saying I'm going to diet doesn't have any real long term effect.

The central banks are painted into a corner.  If they raise rates then the world markets will fall.  If they continue to keep them at extraordinarily low levels (money market funds are essentially paying zero now) then there will be escalating inflation.   When inflation starts, there will be few ways to stop it.  One option might be to let the inflation ride. The Kitco analyst is thus predicting a 50,000 Dow, up five-fold from today.

A 50,000 Dow would mean that a dollar today would be worth a small fraction of its current value.  I don't subscribe to that prediction (who knows?) but it does need to be considered.  The other alternative, responsible tightening, would lead to falls in employment and an economic slow down.  Given that unemployment increased recently to 9.9%, according to the Bureau of Labor Statistics, I suspect that Bernanke, et al. aren't in a hurry to raise rates.*

The response to the rising unemployment will likely be additional infusions of money into an already bloated monetary base (recall that Mr. Bernanke and the Fed tripled the monetary base in 2008, and that money is still ready for banks' use).

I happen to have "A" credit (I'm insane, I should have bought a McMansion and gotten the Fed to pay off the mortgage) and have started to get those invitations for credit card checks like I used to get a few years ago.  Might inflation be right around the corner?

The one factor that has offset the inflationary bias in the economy is China.  But China is likely to be thinking about expanding its home market rather than continuing to work for ever lower wages selling exports bought in a depreciating US dollar.  If China starts pulling out of the dollar, then stock market increases will be over-matched by commodity increases as the dollar dwindles into the dust heap.



*The BlS writes:

"Nonfarm payroll employment rose by 290,000 in April, 

the unemployment rate  edged up to 9.9 percent, and 

the labor force increased sharply, the U.S. 
Bureau of Labor Statistics reported today. 

Job gains occurred in manufacturing, professional 

and business services, health care, and leisure 

and hospitality. Federal government employment 

also rose, reflecting continued hiring 
of temporary workers for Census 2010."