An Open Letter To The G-20 Nations: We Apologize For Obama

June 30, 2010

Dear 19 Other Nations of the G-20:

We just want to take this opportunity to apologize to you for the dumb stuff our President Barack Obama said at the Toronto G-20 meeting.

Surely someone running his ever-present teleprompter ran the gag reel…the one that was supposed to be used at http://www.theOnion.com, the nation’s best online political satire website.

According to various newspapers here at home, we are told that you folks agreed to a goal to cut your budget deficits in half within three years. That goal will require slashing public spending beyond what is politically acceptable in any of your countries, including our own. You already are experiencing public strikes, riots and street demonstrations…and you’ve hardly done anything at all sofar.

That’s a pretty lofty goal, since many of you are teetering at the edge of insolvency at this very moment. That includes the United States government. We Americans wonder if you’ll even exist in three years.

But our President said, “To sustain recovery, we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand.”

We are so sorry.

We Americans know that stealing money through taxation, or simply printing up counterfeit money and flooding the world with it, are stimulus plans that cannot work in the long term. So, if stimulus plans funded by counterfeit or borrowed money are not working, we know that you should stop. We know our government should stop too, but we also know they won’t.

We are so sorry.

We Americans also know that the way government creates the conditions for robust private demand is (1) low taxation, (2) a rollback of ever-more-intrusive government regulation, (3) hard money instead of fiat money and (4) responsible and legal government spending. But our President said, “We must recognize that our fiscal health tomorrow will rest in no small measure on our ability to create jobs and growth today. This is my highest economic priority as president.”

We Americans know that private demand comes from innovation and manufacturing, not a blabbermouth President. Jobs are created when people make things. Jobs are the labor cost of making things, not ends in themselves. Unfortunately, because of (1) confiscatory taxation, (2) crushing regulation, (3) fiat money and (4) runaway government spending, manufacturing jobs have vanished from America, and we now are a service and consumer economy. But many of you have followed in the US Government’s footsteps, and nations like China are kicking your asses on manufacturing and the jobs that flow from it.

We are so sorry. President Obama certainly couldn’t have meant what he said.

Then our President said, “After years of taking on too much debt, Americans cannot…and will not…borrow and buy the world’s way to lasting prosperity. No nation should assume its path to prosperity is paved with exports to America. Indeed, I’ve made it clear that the United States will compete aggressively for the jobs and industries and markets of the future. ”

We are so sorry. That guy will say ANYTHING that rolls up on the teleprompter.

But we Americans know that Obama, the Federal Reserve and Congress are totally committed to continued borrowing around the world from you Jackass nations so stupid that you’ll buy our debt instruments…even when you doubt you’ll ever get repaid. And, as we said before, the only way the United States will compete is to cut debt, stop borrowing, cut regulations and use hard money. And that is not EVER going to come out of Washington DC.

We are so sorry. We’re going to ask that the teleprompter guy is fired.

Obama even pledged to end the “undue advantage” some nations have over others in worldwide trade. He was speaking indirectly about China’s monetary policy of linking the Yuan to the dollar, instead of allowing the Yuan to float against the dollar and other currencies. By linking to the dollar, China has maintained a competitive advantage against the USA. American diplomats have been pressuring China to de-peg from the dollar for years. Obama even announced a goal of doubling US exports over the next five years.

But our president knows that China owns more US debt than any other foreign nation. So, our presidential Chihuahua is barking at the Chinese Bull Mastiff. The big dog is not intimidated…and is certainly in no hurry to give away his advantage.

We are so sorry you have to watch this display of presidential hubris on the world stage. We are embarrassed because you are probably laughing your asses off at this clueless President, trying his best to talk tough in the midst of a group of 19 other national leaders whose nations have been screwed by the US government.

There is good news, however. We also know that your G-20 “Summit” was only meant as a publicity stunt, so morons around the world…like the American media…would give you credit for doing SOMETHING other than destroying the world economy. Perception is reality when there is a camera rolling.

We’ll see you at the next G-20 meeting in Seoul, South Korea. Wear your boots…the US BS is going to get deeper and deeper.

DumpDC. Six Letters That Can Change History.

© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Gold reclaims its currency status as the global system unravels

June 29, 2010

by Ambrose Evans-Pritchard

We already know that the Eurozone money markets seized up violently in early May as incipient bank runs spread from Greece to Portugal and Spain, threatening the first big sovereign default of our era.

Jean-Claude Trichet, the president of the European Central Bank (EC), talked days later of “the most difficult situation since the Second World War, and perhaps the First”.

The ECB’s latest monthly bulletin gives us some startling details. It reveals that the bank’s “systemic risk indicator” surged suddenly to an all-time high on May 7 as measured by EURIBOR derivatives and stress in the EONIA swaps market, exceeding the strains at the height of the Lehman Brothers crisis in September 2008. “The probability of a simultaneous default of two or more euro-area large and complex banking groups rose sharply,” it said.

This is a unsettling admission. Which two “large and complex banking groups” were on the brink of collapse? We may find out in late July when the stress test results are published, a move described by Deutsche Bank chief Josef Ackermann as “very, very dangerous”.

And are we any safer now that the EU has failed to restore full confidence with its €750bn (£505bn) “shock and awe” shield, that is to say after throwing everything it can credibly muster under the political constraints of monetary union? This is the deep angst that lies behind last week’s surge in gold to an all-time high of $1,258 an ounce.

The World Gold Council said on Friday that the central banks of Russia, the Philippines, Kazakhstan and Venezuela have been buying gold, and Saudi Arabia’s monetary authority has “restated” its reserves upwards from 143m to 323m tonnes. If there is any theme to the bullion rush, it is fear that the global currency system is unraveling. Or, put another way, gold itself is reclaiming its historic role as the ultimate safe haven and benchmark currency.

It is certainly not inflation as such that is worrying big investors, though inflation may be the default response before this is all over. Core CPI in the US has fallen to the lowest level since the mid-1960s. Unlike the blow-off gold spike of the Nixon-Carter era, this rally has echoes of the 1930s. It is a harbinger of deflation stress.

Capital Economics calculates that the M3 money supply in the US has been contracting over the past three months at an annual rate of 7.6pc. The yield on two-year Treasury notes is 0.71pc. This is an economy in the grip of debt destruction.

Albert Edwards from Societe Generale says the Atlantic region is one accident away from outright deflation – that 9th Circle of Hell, “abandon all hope, ye who enter” . Such an accident may be coming. The ECRI leading indicator for the US economy has fallen at the most precipitous rate for half a century, dropping to a 45-week low. The latest reading is -5.70, the level it reached in late-2007 just as Wall Street began to roll over and then crash. Neither the Fed nor the US Treasury were then aware that the US economy was already in recession. The official growth models were wildly wrong.

David Rosenberg from Gluskin Sheff said analysts are once again “asleep at the wheel” as the Baltic Dry Index measuring freight rate for bulk goods breaks down after a classic triple top. The recovery in US railroad car loadings appears to have stalled, with volume still down 10.5pc from June 2008.

The National Association of Home Builders’ index of “future sales” fell in May to the lowest since the depths of slump in early 2009. RealtyTrac said home repossessions have reached a fresh record. A further 323,000 families were hit with foreclosure notices last month. “We’re nowhere near out of the woods,” said the firm.

It is an academic question whether the US slips into a double-dip recession, or merely grinds along for the next 12 months in a “growth slump”. For Europe, nothing short of a sustained global boom can lift the eurozone out of the deflationary quicksand already swallowing up the South.

Spain had to pay a near-record spread of 220 basis points over German Bunds last week to clear away an auction of 10-year bonds, roughly what Greece was paying in March. Leaked transcripts of a closed-door briefing to the Cortes by a central bank official revealed that Spanish companies have been shut out of the capital markets since Easter. Given that the Spanish state, juntas, banks and firms have together built up foreign debts of €1.5 trillion, or 147pc of GDP, and must roll over €600bn of these debts this year, this is a crisis unlikely to cure itself.

By their actions, investors show that they do believe the EU can be relied upon to back its rescue rhetoric with hard money, and for good reason. Germany’s coalition risks breaking up at any moment, fatally damaged by popular fury over the Greek bail-out. Far-Right populist Geert Wilders is suddenly the second force in the Dutch parliament. Flemish separatists have just won the Belgian elections in Flanders. The likelihood that an ever-reduced group of German-bloc creditors facing disorder and budget cuts at home will keep footing the bill for an ever-widening group of Latin-bloc debtors in distress is diminishing by the day.

Fitch Ratings said it will take “hundreds of billions” of bond purchases by the ECB to stop the crisis escalating. Since Bundesbank chief Axel Weber has already deemed the first tranche of purchases to be a “threat to stability”, it is a safe bet that Germany will fight tooth and nail to prevent such a move to full-blown quantitative easing. The blood-letting along the fault-line between Teutonic and Latin Europe will go on, as the crisis festers.

Yet the markets are already moving on, in any case. They doubt whether the EU’s strategy of imposing of wage cuts on half of Europe without offsetting monetary and exchange stimulus can work. Such a policy crushes tax revenues and risks tipping states into a debt-deflation spiral, as if everbody had forgotten the lesson of the 1930s.

Greece’s public debt will rise from 120pc to 150pc of GDP under the IMF-EU plan. There is a futile cruelty to this. As Russia’s finance minister Alexei Kudrin acknowledges, a Greek “mini-default” has become inevitable.

EU president Herman Van Rompuy confessed that EMU lured countries into a fatal trap. “It was like some kind of sleeping pill, some kind of drug. We weren’t aware of the underlying problems,” he said.

What he has yet to admit is that the North-South imbalances built up since the euro was launched – indeed, because the euro was launched – cannot be corrected by further loans from the North or by pushing the South in depression. The political fuse will run out before this reactionary and self-defeating policy is tested to destruction.

Copyright © 2010 The Telegraph


The Gulf Oil Disaster and Hurricane Season: A Ring Of Fire?

June 28, 2010

The Gulf of Mexico oil spill area is now the size of France, and is just like an iceberg. 10% is on the surface of the water, and 90% is unseen below the sea surface.

Sea surface temperatures from the Gulf to West Africa are nearing or over 90 degrees Fahrenheit and it’s only the end of June.

Tropical storms are already forming in those hot waters, and will continue to form as low pressure cells move westward from the African continent.

So, the chances that there will be a major blow or two (or three) in the Gulf of Mexico this season are quite high. I’ve already written Trigger of American Economic Collapse? stating that any Gulf hurricane could spread this oil to every beach on the Gulf. But there’s another scenario that is like a disaster movie writ large.

A major tropical storm or hurricane will scoop up vast amounts of surface water from the Gulf and rain it down on land as it comes ashore. The storm will also pick up some of the oil at the surface. Evaporation may not cause tar balls to jump up into the sky. But big storms produce tornadic funnels that do vacuum up surface debris. There have been reports of fish falling from the sky during hurricanes for decades.

So tarballs falling like hail is possible. And, if lightning occurred during a tarball hailstorm, isn’t it possible that the lightning could ignite the tarballs? Then, you would have the actual Biblical apocalyptic scenario of hailstorms of fire. Those gooey ignited tarballs would stick to everything they landed on and start fires.

So, a tropical storm or hurricane system could potentially be laden with petroleum as it makes landfall. All that petroleum-polluted rain could fall on cities, making every surface an oily, slippery, toxic mess. Everything it touches will be polluted, no matter where the rain falls. Trees, grass, crops and livestock will die from the toxicity.

Let’s not forget the storm surges from the Gulf will carry that same oil-filled salt water into populated areas.

But here’s the kicker.

What happens when the sweltering summer sun shines after the storm? All that oily pollutant will begin to dry out and some will evaporate. But the evaporating gasses will be highly flammable. Also, the oil coating everything will be flammable.

All it would take is one spark…one match…and entire cities could ignite and burn. And, just like a grease fire on your kitchen stove, you cannot just squirt water on an oil fire. Firefighters will be powerless to extinguish most fires. Further, the fires could likely spread to encompass entire blocks…even an entire city could burn to the ground…and even under the ground. Sewers filled with flammable oil and gas would explode like bombs, destroying water systems, sewer systems, natural gas pipelines, utility lines…even fiber optic lines.

There are lots of population centers at or near the Gulf of Mexico. Let’s start at the tip of Texas and work our way around to the tip of Florida to list them.

Corpus Christi, TX
Houston/Galveston, TX
Beaumont/Port Arthur, TX
Lake Charles, LA
New Orleans, LA
Gulfport/Biloxi, AL
Mobile, AL
Pensacola, FL
Tampa/St. Petersburg, FL
Bradenton/Sarasota, FL
Fort Myers/Naples, FL

Every one of these cities is at risk going forward into the remaining hurricane season. Tens of millions of people could be forced to leave everything behind and evacuate to escape fires and the toxic pollution. Plus, even if the cities did not burn, the toxic rain could kill nearly all plant life and sterilize the ground for years to come. People near the coast are already becoming sick from breathing the air coming in off the Gulf. A big storm will make the dispersion of toxic oil vastly wider geographically.

A fire storm that burned down a city or multiple cities would bankrupt many insurance companies, including the biggies like State Farm and Allstate. That affects the rest of the insurance industry. Insurance companies have vast investment holdings in government securities that would have to be liquidated in bankruptcy. That liquidation could cause the bond market to collapse.

Look at the potential catastrophe that this oil spill/storm could be. What could the Federal Government do for a place like Houston/Galveston if it all burned to the ground? The potential risk is in the trillions of dollars. No government anywhere has the ability to mitigate this kind of disaster.

Then again…none of this could happen, and I could just be just a doomsday messenger. I hope I’m wrong, but risk management is my area of expertise. At least SOME of this scenario WILL occur. I just don’t know how much.

If you live at the Gulf Coast, you’d better get prepared.

DumpDC. Six Letters That Can Change History.

© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Supreme Court Ruling Criminalizes Speech in Material Support Law Case

June 27, 2010

President Carter Could Be Prosecuted for Monitoring Fair Elections in Lebanon

(Editor’s Note: It is only a matter of time until Washington deems secessionist movements as terrorist groups, since they advocate the dissolution of the United States. The highest Court in the USA has already decided this issue, so there is nowhere to go other than secession itself. Free speech has been deemed potentially a terrorist act. Is this enough? If this is not enough to convince you of the need for secession, what the hell will it take?)

June 21, 2010, Washington and New York – Today, the U.S. Supreme Court ruled 6-3 to criminalize speech in Holder v. Humanitarian Law Project, the first case to challenge the Patriot Act before the highest court in the land, and the first post-9/11 case to pit free speech guarantees against national security claims. Attorneys say that under the Court’s ruling, many groups and individuals providing peaceful advocacy could be prosecuted, including President Carter for training all parties in fair election practices in Lebanon. President Carter submitted an amicus brief in the case.

Chief Justice Roberts wrote for the majority, affirming in part, reversing in part, and remanding the case back to the lower court for review; Justice Breyer dissented, joined by Justices Ginsburg and Sotomayor. The Court held that the statute’s prohibitions on “expert advice,” “training,” “service,” and “personnel” were not vague, and did not violate speech or associational rights as applied to plaintiffs’ intended activities. Plaintiffs sought to provide assistance and education on human rights advocacy and peacemaking to the Kurdistan Workers’ Party in Turkey, a designated terrorist organization. Multiple lower court rulings had found the statute unconstitutionally vague.

Said CCR Cooperating Attorney David Cole, “We are deeply disappointed. The Supreme Court has ruled that human rights advocates, providing training and assistance in the nonviolent resolution of disputes, can be prosecuted as terrorists. In the name of fighting terrorism, the Court has said that the First Amendment permits Congress to make human rights advocacy and peacemaking a crime. That is wrong.”

Originally brought in 1998, the case challenges the constitutionality of laws that make it a crime to provide “material support” to groups the administration has designated as “terrorist.” CCR’s clients sought to engage in speech advocating only nonviolent, lawful ends, but the government took the position that any such speech, including even filing an amicus brief in the U.S. Supreme Court, would be a crime if done in support of a designated “terrorist group.”

Said CCR Senior Attorney Shayana Kadidal, “The Court’s decision confirms the extraordinary scope of the material support statute’s criminalization of speech. But it also notes that the scope of the prohibitions may not be clear in every application, and that remains the case for the many difficult questions raised at argument but dodged by today’s opinion, including whether publishing an op-ed or submitting an amicus brief in court arguing that a group does not belong on the list is a criminal act. The onus is now on Congress and the Obama administration to ensure that humanitarian groups may engage in human rights advocacy, training in non-violent conflict resolution, and humanitarian assistance in crisis zones without fearing criminal prosecution.”

The Court rejected the government’s argument that the statute, when applied to plaintiffs’ proposed speech, regulated not speech but conduct, and therefore needed to meet only a low standard – “intermediate scrutiny” – to survive. Instead, the Court found that the statute did criminalize speech on the basis of its content, but then found that the government’s interest in delegitimizing groups on the designated “terrorist organization” list was sufficiently great to overcome the heightened level of scrutiny. This one of a very few times that the Supreme Court has upheld a criminal prohibition of speech under strict scrutiny, and the first time it has permitted the government to make it a crime to advocate lawful, nonviolent activity.

For more information on the case, including briefs and a detailed explanation of material support, visit CCR’s HLP legal case page.

The Center for Constitutional Rights is dedicated to advancing and protecting the rights guaranteed by the United States Constitution and the Universal Declaration of Human Rights. Founded in 1966 by attorneys who represented civil rights movements in the South, CCR is a non-profit legal and educational organization committed to the creative use of law as a positive force for social change.


Functionally Sovereign? Or, Just Sovereign?

June 26, 2010

by Marilyn Barnewall

(Editor’s note: The author makes some excellent points about banking. But a new banking system that allows fractional reserve banking will not work, any more than a new currency without gold and silver behind it will work.)

Individual states within our Great Nation have been and continue passing legislation making it clear they are independent, sovereign entities apart from the federal government. They say if they choose, they can declare their independence. They can reclaim state sovereignty and protect themselves from federal government oppression. There are many good legal opinions supportive of that strategy. There are many good legal opinions that oppose it. Under the circumstance of a failed federal government, those who say “yea” probably win the argument.

What needs to be in place for a state to function without the federal government? There is a difference in being sovereign and in being functionally sovereign. There are many things that need to be in place, but the most critical thing on which everything hinges for success is a state banking system.

“We already have that,” you say? Unless your name is North Dakota, you do not.

I have written about the attack on our independent banks by a federal regime that seeks global governance. Our savings and loan industry was similarly attacked (and made to fail) in the 1980s to pave the way for Freddie Mac and Fannie Mae – for volume liar and subprime loans and resultant, as Warren Buffet says, “financial weapons of mass destruction” (mortgage-based derivatives).

The capability to control your state’s monetary policy and the distribution of your currency is not only needed. It is required. Are your legislators serious about state sovereignty? If so, these things are in the legislative works. If they are just pandering to an anxious voter base, they are not.

When hearing the words “State Bank,” most people think the term means “state-chartered bank.” A State Bank is quite different from a state-chartered bank. The 90-year old Bank of North Dakota is the only state-owned bank in America. It has a history of success and has kept unemployment in North Dakota lower than 5 percent as of March 2010. North Dakota is at the top of the nation’s state economic health list, too. The North Dakota State Bank is a big part of the reason.

A State Bank is kind of a mini-Federal Reserve – only it’s a State rather than a Federal Reserve Bank and is a legal part of state government. The Federal Reserve System, a privately-owned corporation not part of the federal government, has Member Banks – nationally-chartered banks (they usually have the word “national” in their name). The Bank of North Dakota also has “Member Banks” – state-chartered banks. The Bank of North Dakota, for example, provides its own state deposit insurance coverage – like the Federal Deposit Insurance Corporation (FDIC – in the case of a State Bank, State Deposit Insurance Corporation).

Nationally-chartered banks (those licensed by the federal rather than state government) can do business in states that have a State Bank system, but may not be Member Banks because of their national charters. By which authority a bank is chartered determines whether it will be a Member Bank of the Federal Reserve System or a Member Bank of its State Banking System. The Federal Reserve System clears checks and performs other monetary functions for its members. It establishes monetary policy for the nation. Why? Because the Fed is the only alternative – the only currency distribution system available in America – except in North Dakota. State Banks can replace Federal Reserve System functions and clear checks and perform other monetary functions for Member Banks. At the moment, North Dakota utilizes the Federal Reserve System’s check clearing functions – but it doesn’t have to, if need be.

A State Bank (exemplified by the Bank of North Dakota) is the official depository institution for all state collections and fees. Such a controlled source of funds is called a captive deposit base. Statistics do not lie. The Bank of North Dakota has made that state profitable even during the trying economic times created by the federal government.

The State Bank pays the State Treasurer a competitive rate of deposit interest but, even more important, loan policy is determined by the State owning the bank, not the federal government or the banking cartel known as the Federal Reserve System. An added plus is that the State can determine loan policies supportive of state assets. In North Dakota, loan policy supports agriculture and energy. In Alaska, Texas and Oklahoma, it could support oil, from drilling to making special pipes needed by that industry. In Colorado, it could be uranium mining, natural gas, and skiing while in Utah it could be coal (and skiing). Banks with lenders that have skills to serve specific industries is key to utilizing credit to support a state’s economic growth.

The standard used by Bank of North Dakota to make flexible loans based on the local economy can also be used by states to create a credible, sustainable currency. In Colorado, the currency could be backed by gold, silver, uranium and natural gas — oil shale, too. In Texas, Oklahoma and Alaska, gold, silver and oil (and other available commodities) can be used. Copper can be used. Lithium can be used. Various other commodities in rich abundance per state can be used. The trick is to get away from a fiat currency system dependent upon ever increasing business and consumer debt for its survival. That system – along with an irresponsible and corrupt Congress – has bankrupted our nation.

Think back to the bureaucratic inaction as we watched the devastation of Hurricane Katrina – or look at the current crisis in the Gulf of Mexico. A State Bank can build its own private disaster fund and eliminate dependence on FEMA. The North Dakota Bank expects flooding in a city this year and has already created a disaster fund to handle it. After two months of federal indecision and excuse making in the Gulf of Mexico, Governor Bobby Jindal of Louisiana could have utilized a State Bank to take more direct action to protect his state. A Louisiana State Bank would have broadened his options.

Though much is written about states reserving the right to sovereignty, very little (if anything), has been written about how sovereign states can avoid the economic chaos awaiting if the state has done no planning to prevent it. People and businesses need access to money. Both need to pay bills. The currency must be supported by an asset available to the state. A State Bank provides a currency/credit/deposit distribution system that allows state government and its citizens to function. It provides a check-clearing and a credit system. That system needs to be acceptable to Brazil – if you want bananas in the winter. It needs to be acceptable to various nations that provide pharmaceuticals taken by people whose lives depend on them.

It’s nice to be sovereign – until a dear one languishes in a hospital, unable to get access to drugs for heart disease or diabetes, because your “sovereign state” didn’t plan far enough ahead to ensure financial stability that allows and supports international trade.

It is doubtful Pfizer is going to send a shipment of drugs to be distributed throughout a newly-declared sovereign state and accept as payment a newly-printed currency with nothing backing it and no distribution system in place. Somewhere during the trade process, a settlement bank that deals with foreign currencies and a credit system ensuring payment must be available.

What do you do for people in your state’s hospitals if you don’t have a monetary distribution system set up that has planned for international trade – and thousands of other situations just as serious? Other, states still a part of the federal system and using the Yankee dollar may not want to do business with you either. They have their own economic/financial problems. They can’t afford to take on those of your state, too. Without a reliable financial services system in place, what products – especially agricultural – will you have available?

To be functionally sovereign, states must create their own currency. If your state doesn’t have its own currency, there are justifiable reasons the federal government will not recognize a declaration of sovereignty. Saying you’re sovereign and being sovereign are two different things.

At the top of the planning list must be a currency distribution system. Without it, States are tied to the federal system in place (the Federal Reserve System, the Federal Insurance Deposit Corporation, the Comptroller of the Currency and the regulators who work for all of the above). Why do you need a banking system? Can’t everyone just carry around gold or silver coins like they did before governments began printing fiat currency? Paper currency isn’t fiat when it’s backed by a solid commodity with a price set by the marketplace – and the commodity doesn’t have to be gold. That, then, is second on the planning list. First, distribution; then a currency you can distribute. Education, highways, and state, county and city services like law enforcement are necessary. People need to be paid. They need to buy groceries. A financial distribution system is required.

The concept of a State Banking System began at a historically similar time. East coast banking powers had too much influence over who got credit and how the credit was to be structured. Interestingly, East Coast bankers called the North Dakota experiment “communist” or “socialist.” When the State Bank concept is compared to what is in place at the federal level with the corporate policies of the non-federal Federal Reserve System and the too big to jail bankers on both coasts, State Banks come out smelling like a capitalist rose. No one wants a globally managed financial system that will be used to back the nations of the world into a global government.

Can a State declare itself sovereign if it does not have sufficient power to determine its own currency and monetary policy? Not only is it a good question. It is the key question to the core problem.

Marilyn Barnewall is a career banker who received her graduate degree in Banking from the University of Colorado Graduate School of Business in 1978. She has authored seven non-fiction books about banking; two are listed at Oxford and Cambridge University libraries. Her current book, When the Swan’s Neck Breaks, details the banking problems she foresaw in 2006.


Secession and Legal Tender Laws: Washington and Bankers Win, You Lose

June 25, 2010

We talk a lot here about monetary policy, most specifically the concept of sound money backed by gold and silver. When gold and silver are the only form of money, there is NO inflation…EVER. Inflation cannot occur with a “hard money” system. (For more, go to the Archive section and dig around.)

Dream for one moment what it would be like if there was no inflation. I bought my first house in 1972. One story and 1,000 square feet for $21,500. If there was no inflation, it would still cost $21,500 for that house, now nearly 40 years later. If you saved money for retirement throughout your earning lifetime, you would be certain that the money you saved at age 25 would still have the same buying power when you reached age 65.

But no person alive in America has experienced hard money with no inflation. It almost sounds too good to be true.

Hard money prevents governments from spending more money than they take in by taxation, which controls the size and scope of government. That is why governments throughout history have loved legal tender laws. Legal tender laws facilitate government counterfeiting and wild uncontrolled spending.

Ever heard of Gresham’s Law?

It is an axiom about money attributed to Sir Thomas Gresham, a 16th Century English financier. It is generally stated that “bad money drives out good money.” But a more accurate statement is “Fiat money drives out real money.” I’ll explain the differences.

Why should you care at all about this?

You should care because legal tender laws have been robbing you blind for your entire lifetime.

Legal tender laws state that government-controlled fiat currency MUST be accepted for many kinds of monetary transactions. That means that you are forced by law to accept a certain kind of currency as settlement of a debt, even if you know that the currency has either lost value or is worthless.

Consequently, human nature dictates that people will first use the money that is devaluing, and the real money will be removed from circulation and stuffed under mattresses and placed in safes as a store of value.

Legal tender laws mostly benefit the government (or their central bank, like the Federal Reserve) who issues the currency and the bankers who practice fractional-reserve banking. When governments issue currency backed by nothing, the value of the currency drips away over time. Sometimes, the value evaporates quickly, like it occurred in Weimar Germany, Argentina and Zimbabwe. But when dollars are legal tender, why wouldn’t a government borrow a bunch of money, then pay it off with debased dollars?

Because it’s immoral? Because it’s theft? Because counterfeiting is illegal? Nope…the answer is that morality, theft and illegal acts are perpetrated by government on a daily basis. So there is really nothing restraining them.

One of the greatest mistakes the Founding Fathers made was to allow the new Federal Government…the united States of America…to “coin money and regulate the value thereof.” (Article I, Section 8). That privilege should have stayed with the States. That way, the only way the US could have spent money is to receive payments from the states. This is the Power of the Purse…the first weapon of control for any state or nation.

Gold and silver have value other than money. They are used in industrial applications and jewelry, among other uses. However, paper currency has no other value than the value ascribed to it through government’s legal tender laws.

Onlookers see government perpetuating this fraud, and they try to mimic the behavior. So people borrow money for large-ticket items, knowing that years down the road, the lender will be forced to accept depreciated dollars as payment of the debt. And the lenders also know that the dollars they are receiving are devaluing, so they build in higher interest rates to make up for the devaluation.

(The interest rates happening in the USA right now are a price control bubble controlled by the government and the Federal Reserve. They have no basis in reality.)

Bankers love legal tender laws because they facilitate “fractional reserve” banking. For those not familiar with that term, it simply means that the bank only has to maintain a small cash reserve, and can therefore lend out the other assets at interest. Further, through accounting skullduggery, banks can literally create money out of thin air and lend it out, also.

Compare fractional reserve banking with honest banking under a gold/silver money system. Banks could only issue IOUs…paper deposit tickets to represent the actual amounts of gold and silver in their vaults. Those IOUs can be used as currency to facilitate commercial transactions. Electronic accounts could also be created for electronic transactions in tiny amounts of gold. Further, the IOUs would represent the WEIGHT OF GOLD OR SILVER, not its monetary value, since in a free market, the value of the precious metal would fluctuate. But banks would have to maintain 100% reserves. If a bank wanted to lend money, it would have two ways: (1) lend out some of its own profits, and (2) borrow money from its own depositors and lend it at a higher interest rate.

When legal tender laws do not exist, people have the freedom to accept the medium of exchange of their choice, not the government’s dictates. In those transactions, people will likely choose to be paid with a medium that has actual value.

A state that plans to secede would be best served by resisting the temptation to enact legal tender laws. That should be one of the bellwethers of how honest your new government is. If the new nation enacts legal tender laws, you know up front that they intend to issue counterfeit currencies, inflate the currencies and facilitate fractional reserve banking. Period.

Gold and silver are “Real Money.” Currencies are not. People should be free to conduct commerce in any form they choose and with any medium of exchange they choose…whether gold, silver, cowboy hats, chickens or anything else THEY choose. While media other than gold and silver money may add a layer of additional complexity to commerce through the exchange rate, it adds total freedom to all transactions as it prevents governments and banks from stealing from you. Seems a small price to pay to prevent governmental plunder.

To learn more about legal tender laws, check out the excellent article written by Jorg Guido Hulsmann, a Senior Fellow at the Mises Institute, a free-market think tank in Auburn, Alabama. He wrote Legal Tender Laws and Fractional Reserve Banking. For those of this audience who desire an in-depth analysis of this topic, click on the link in the previous sentence.

Secession is the hope for humanity. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


The EPA Can Go To Hell, and I Will Go To Texas

June 24, 2010

by Brian Roberts

Last week, the feds sent the Environmental Protection Agency out to harass the sovereign state of Texas. Texas needs to reclaim the spirit of Davy Crockett, when he famously proclaimed “you may all go to hell, and I will go to Texas”; and send the federal agency packing. Here’s why and how.

EPA’s Goal is Centralization of Power

By sending the EPA to Texas, the federal government’s goal is not environmental improvements. The goal is centralization of power. The tactic is to use the unelected bureaucrats of the EPA to increase Texas dependence on the federal government through arbitrary and economically crippling regulation.

Refinery permits are just tools that the EPA intends to use to control the Texas oil and gas industry. EPA control can force Texas into dependence in at least two ways. First, though excessive regulation of a major industry, economic growth will be stifled. This will create more state dependence on federal funds. Second, unnecessary EPA regulations will cost Texans jobs. This is will create individual dependence on welfare programs and since these programs include state-mandated funding, Texas will be hit with additional liabilities.

The political problem for the EPA is that Texas’ commonsense policies have resulted in cleaner air while maintaining one of the healthiest economies in our nation during the current recession. This Texas independence and success is why the feds will continue to financially attack Texas. A self-sustaining state is very problematic for a federal government that is trying to centralize all the power in Washington. So expect the relationship between the Texas state government and the U.S. government to increasingly deteriorate. Bill Hammond, president of the Texas Association of Business, had this to say about the political dilemma facing the EPA:

“Evidently, Texas’ success in improving both our environment and our economy, while Washington still argues about how to accomplish either, is something that EPA and the administration finds troubling.”

Proponents of centralized government will attempt to argue that Texas’ policies are causing the streets of New Orleans to smell like the morning after a frat party, or that pollution from Texas is causing smog in LA and NYC, or that the earth will be destroyed by the Texas carbon footprint. All of these arguments are ridiculous excuses designed to provide cover for a federal power grab. These straw man arguments do not in any way reflect reality.

Proponents of centralized government will argue that Texas should just roll over and take it because, they falsely proclaim: Texas needs federal subsidies. When in fact, Texas has been a donor state for decades and currently only gets back 94 cents for every dollar that is sent to Washington. Historical data shows that every year since 1981, Texas citizens have donated more to the federal government than what was received. The truth is that if Texas continues to roll over and take it, then at some point in the near future Texas will become dependent on federal money and require more back than what was put in, and that is certainly one of the goals of centralization.

The real battle, often hidden behind the propaganda, is between sovereign states seeking a level of independence guaranteed by the Constitution and a federal government that seeks to undermine the American system of federalism itself. Texas success is a powerful example that local, more decentralized government works best and for centralizers, that kind of example must be destroyed.

Texas’ Duty is Decentralization of Power

Texas should invoke the 10th and legally send the EPA back Washington D.C. where they can look for a lesser target to plunder. The tenth amendment guarantees a limited federal government and grants governing authority to states and to the people. Leaders in the Texas legislature and Governor Perry have responded with strong words against the EPA’s intrusion.

Governor Perry said this about the EPA’s actions:

“The Obama administration has taken yet another step in its campaign to harm our economy and impose federal control over Texas. On behalf of those Texans whose jobs are threatened by this latest overreach, and in defense of, not only our clean air program, but also our rights under the 10th Amendment, I am calling upon President Obama to rein in the EPA and instruct them to study our successful approach for recommended use elsewhere.”

Texas State Representative Wayne Christian had this to say:

“The EPA’s unilateral and unwarranted takeover of air quality permits in Texas further proves that the federal government has a clear disregard for the authority of the Texas Legislature and for the principle of federalism. Washington is seeking to command and control all sectors of economic activity. This action must not stand.”

It is apparent that Texas politicians and leaders understand that this is a federal power grab that should not be allowed to proceed. However, in recent times, leadership in Texas has been more about talking the talk and less about walking the walk. A recent example, still fresh on the minds of many Texans, is the hesitancy of the Governor to call a special session so that Texas might pass nullification legislation to protect its citizens from the unconstitutional mandates of Obamacare.

While this delay in legislation concerning health care may prove to be the proper course strategically, this may not be the case in the battle against the EPA’s permit consolidation. EPA’s regional administrator has indicated that Texas has “weeks, not years” before the EPA begins taking over the entire air-pollution permitting program. The time to act has arrived.

Texas leadership would do well to find inspiration in another Davy Crockett quote:

“I would rather be beaten and be a man than to be elected and be a little puppy dog. I have always supported measures and principles and not men. I have acted fearlessly and independent and I never will regret my course. I would rather be politically buried than to be hypocritically immortalized.”

The solution is straightforward: the state government of Texas should tell the EPA to go to hell. In practical terms this means that nullification legislation should be passed by the Texas legislature and signed by the Governor. This legislation, based on the tenth amendment, should declare federal mandates with regards to the Clean Air Act null and void in the state of Texas and should include penalties for federal agents or local law enforcement agents that attempt to enforce this federal law in the state of Texas.

In an age of rapid centralization of power in Washington DC, nullification legislation denying federal authority is becoming common. Various states have defied federal laws by passing legislation designed to nullify: federal healthcare laws, federal firearm laws, federal marijuana laws, federal identification laws, among others.

Reprinted from the Tenth Amendment Center.

June 22, 2010

Brian Roberts is the State Chapter Coordinator for the Texas Tenth Amendment Center.

Copyright 2010 Tenth Amendment Center.