Friday, July 30, 2010

Will Washington's Failures Lead To Second American Revolution?

The Internet is a large-scale version of the "Committees of Correspondence" that led to the first American Revolution — and with Washington's failings now so obvious and awful, it may lead to another.

People are asking, "Is the government doing us more harm than good? Should we change what it does and the way it does it?"

Pruning the power of government begins with the imperial presidency.

Click here for the story.

Economist David Rosenberg and investor Marc Faber have wagered a bottle of scotch whisky on whether U.S. 10-year Treasury yields can go lower than 2 %

Rosenberg, chief economist at Gluskin Sheff & Associates Inc., predicted yields on the 10-year note will drop to less than 2 percent. Faber, the publisher of the Gloom, Boom & Doom report, said he doesn’t believe they’ll fall to less than December 2008’s low of 2.08 percent. They have put booze on the line.

Click here for the story.

Wednesday, July 28, 2010

America's Ruling Class -- And the Perils of Revolution

From the American Spectator.

Very interesting reading.

"When this majority discovered that virtually no one in a position of power in either party or with a national voice would take their objections seriously, that decisions about their money were being made in bipartisan backroom deals with interested parties, and that the laws on these matters were being voted by people who had not read them, the term "political class" came into use. Then, after those in power changed their plans from buying toxic assets to buying up equity in banks and major industries but refused to explain why, when they reasserted their right to decide ad hoc on these and so many other matters, supposing them to be beyond the general public's understanding, the American people started referring to those in and around government as the "ruling class." And in fact Republican and Democratic office holders and their retinues show a similar presumption to dominate and fewer differences in tastes, habits, opinions, and sources of income among one another than between both and the rest of the country. They think, look, and act as a class."

Click here for the piece.

Tuesday, July 27, 2010

Inflation's hidden cost: forcing families to make riskier investments

Back when the dollar was sound, American families invested in simple – and safe – instruments like savings bonds. Now, thanks to Washington’s inflationary policies, they have to chase higher – and riskier – returns.

Click here for the story.

Sunday, July 25, 2010

50 Statistics About The U.S. Economy That Are Almost Too Crazy To Believe

Some amazing statistics to be sure. What I think is interesting is the supreme disconnect between some people and how bad it really is out there. I say now is the time to begin reducing government worker pensions and pay.

The thing is it probably will take widespread municipal defaults before these workers have their pay cut. A public school teacher has no business making $100,000 a year, sorry. There are cops in some counties in California that on average make $120,000 per year. On average. Some of these guys are making 200K. That is absolutely crazy. This of course does not take into account the pensions many of these people have which are far better than anything in the private sector.

It is robbery plain and simple. And on the pension issue, as these pensions begin to default the recipients likely will now expect the taxpayers to pick up this bill. It is a parasitic economy.

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.

Click here for the story.

Saturday, July 24, 2010

Soft Fascism and Free Speech

By Nick Sorrentino

Why is it so easy for many people on the American “left” to abandon the principles of free speech? For all the nonsense that has come from that direction over the years at least historically there was lip service paid to the idea that speech was to be free, and that a free press was vital to our “democracy.”
This sentiment seems gone.

Of course the anti-speech movement really blossomed in the universities during the 90s, when the concept of political correctness took hold. Nude paintings of women were deemed offensive and removed from walls of art departments. Words became “weapons.” The concept of hate speech was instituted. Christmas trees were taken down from dorm windows.

I could feel the chill in the air back then. But there were at least a few on the “left” who realized (and sometimes privately expressed) that political correctness was anti-intellectual bullshit.

Unfortunately those people are mostly in retirement these days.

There is now a whole cadre of people who actually got degrees in grievance studies who are in the media and government.

These people don’t give a damn for free speech.

Free speech allows for dangerous ideas. Just as the Church of old crushed anyone it could with the charge of blasphemy, so to does the Church of the Modern Left seek to eliminate any debate by charging opponents with the modern Marxist equivilant of blasphemy. The fact that there are those who disagree with the materialist dialectic simply can no longer be tolerated. The stakes are just too high. Some people should not be allowed to speak.

Don’t trust the bloggers say the MSM. Don’t trust the bloggers says the Richmond Federal Reserve. Don’t trust the people who have little to lose and have much more in common with you than anyone at NBC News or at the Fed.

It is they who are the experts. They know what is best. Question the establishment at your peril.

These guys mean business and we must, for the sake of our country push back.

Smart people are against political correctness and censorship by the state. And there are many smart people on the left who know that what is going on right now is wrong, even if such soft fascism seems to further long held goals.

The Free Speech Movement started in Berkley after all. I am sad to say though that I doubt that the student leaders of that rebellion would welcomed at many student rallies these days.

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Monday, July 19, 2010


This is a great article that was sent to us by an LER reader...It is by James Quinn at Quinn Advisors...Enjoy...

"There is a mysterious cycle in human events. To some generations, much is given. Of other generations, much is expected. This Generation has a rendezvous with destiny." Franklin Roosevelt – 1936

President Roosevelt was correct. The generation he was speaking to was already dealing with the worst financial crisis in the history of the United States, the Great Depression. By 1945, over 400,000 of this generation had lost their lives. Another 600,000 men were wounded. Much was expected and much was sacrificed. Every generation has a rendezvous with destiny. The generation that won World War II passed the ultimate test and proceeded to produce the next generation, the Baby Boom Generation. Their rendezvous with destiny is underway. Will it be a rendezvous with history that results in World War III, the collapse of the Great American Republic, dictatorship, or a return to the original Constitutional principles upon which this country was founded? Many of you are probably thinking the idea of WW III, collapse or dictatorship is crazy. I’d respond with the wisdom of Kramer from the classic Seinfeld show.

Jerry: "Oh you're crazy"

Kramer: "Am I? Or am I so sane that you just blew your mind?"

Jerry: "It's impossible"

Kramer: "Is it? Or is it so possible your head is spinning like a top?"

Jerry: "It can't be"

Kramer: "Can't it? Or is your entire world just crashing down all around you?"

Click here for the article.

Sunday, July 18, 2010

The money supply is increasing, that is technically inflation, why then does it feel like deflation?

By Nick Sorrentino

Technically we are not in deflation. The money supply is increasing. The money supply is in fact inflating.

The problem is that there is so much debt, personal, municipal, state, sovereign, etc. that as each new dollar floats out into the universe, the debt black hole pulls that dollar into its depths, gone forever. This is why in the “real” economy I believe we are in deflationary situation.

Many of my friends have been making the case for inflation, hyper and otherwise for a while, and I think that in the long run it is possible that they will be right. In the near and medium term I think they are wrong at least as far as the “real” economy is concerned. Technically they are already right.

What does this mean?

Will gold prices head down for instance? This is an interesting question for a number of reasons, but I question whether the fact that gold is likely to go “down” in dollar terms matters.

An old gold dealer I knew said something to me a long time ago now. “What do we do when the price of gold goes down? Buy more.”

Most people still think of gold as going up or down based on its value in a dollar defined economy. If the price of gold goes up is must be because its value is perceived as higher than before by investors. This is of course an important part of the gold equation. But it is less important than what is happening to the currency that gold is priced in.

Its not that the gold price goes up or down, it is that the currency the gold is priced in is more or less valuable.

Gold has held its value at a very stable level for thousands of years. An ounce of gold in Jesus’ time would buy you a pretty nice tunic and a good pair of sandals. 100 years ago it would buy a nice suit and pair of shoes. Today an ounce of gold will still buy a decent suit and shoes. 100 years ago an ounce of gold was roughly $20. You could get that suit and shoes for $20. Today that $20 would barely buy you a handkerchief at Brooks Brothers. But the $20 gold piece from a century before would get you almost any suit in the place.

The value of gold is fairly stable. It is paper that fluctuates.

So in a “deflationary” situation such as the one I believe we are looking at gold “prices” in dollar terms are headed south perhaps for a bit. But the “value” of this gold will continue to rise because the “deflation” is happening despite all efforts by the central banks, which means that things are even worse than we may have thought. At least with a hyper-inflationary situation you can say that the banks just pushed the accelerator too hard and that the answer is to ease the foot off of the pedal, or to slam on the brakes if need be. At least there is some sense of some kind of control.

But what happens if the central banks press the accelerator, gasoline pours into the combustion chamber, but the engine doesn’t turn over? What then? What if the combustion chamber has a huge debt leak in it and no matter how much fuel comes into the thing it just ain’t gonna ignite?

Well then it’s time to take the economy to a new mechanic. Maybe an Austrian mechanic.

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Thursday, July 15, 2010

LER Links...

Property speculation leaves 64.5 million vacant homes in China

Speculation in the real estate market has generated such a high rate of housing vacancy that it could lead to social disorder and financial problems, an economist with the Chinese Academy of Social Sciences says. The government, meanwhile, crosses its fingers. ...“The problem now is that investment in the domestic property market has completely overturned China's traditional concepts of wealth management,” Yi explained.

China Slowing Faster Than Anticipated, Capital Economics Says (As we've said before, there are real opportunities in shorting China, but pick wisely.)

U.S. companies turn to China, other Asian nations, for growth

Hilaire Belloc saw Obama coming. A review of The Servile State, by Hilaire Belloc (I read this book in an afternoon in college. I stumbled across it in the library and and did not put it down until I was done. It is an obscure book, but anticipated The Road to Serfdom by 30+ years. In years ahead The Servile State is likey to be read much more.)

NSA's Perfect Citizen Program: What You Need to Know

The newspaper quoted a memo from the main contractor on the project that said, "Perfect Citizen is Big Brother." The NSA denies that it is embarking on any illegal or invasive domestic activities

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Saturday, July 10, 2010

We need to take responsibility for the direction of this country.

-By Nick Sorrentino

The reason we continue to be lied to as a nation is because we continue to allow it.

There was a time when there was no Internet, when society needed to rely almost exclusively on "experts" to keep things puttering along. Information was closely guarded by these experts and frankly the information that even they got was often deeply flawed.

Society looked to the shamans for guidance because it had to. Surely these wise men knew the way. Best to fall in line and continue on. It used to be that general ignorance was the way it was.

Now there is no excuse for such ignorance. The average person has access to high quality information and with some effort can understand many of the most important pieces of our admittedly vast society.

Ignorance is a luxury that we can no longer afford.

Many spend their life blindly going from dot to dot to dot until in the end there are no dots left. Few take the time to step back and look at the picture that forms as each dot is connected. We must, especially now.

Each life is part of a mosaic. Your life. My life. The guy down the street. Together we form a picture. The quality of the mosaic is determined by the quality of each interlocking piece. This "big picture" can either embody a spirit of quality, hard work, intelligence, questioning, gratitude, responsibility, etc., or it can embody lower forms of human existence, ignorance, intellectual compromise, hatred, fear, fraud, and manipulation.

The choices we make as individuals determine the beauty or ugliness of the big picture.

Of course this is no great insight. We all basically know this in our hearts.

It is now time for us to lead. Each of us who is tired of seeing things go in the wrong direction have an obligation to make our little part of the mosaic a little more beautiful, a little more true, a little more just, a little more free.

For too long we have taken our cues from people who do not have our best interests at heart. We must now take the reigns. We the people.

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Friday, July 9, 2010

Is deflation the problem that will throw us into a depression?

I think deflation is the real story at this moment, but do not infer from this that I either agree with Paul Krugman (who believes further stimulus is warranted), or that I think gold and silver are not wise investments.

I was fairly solidly in the inflation camp for quite a while. Obviously with the printing of heaps and heaps of fiat money it stands to reason that inflation would turn out to be the major medium term problem for the world economy.

But as of this moment I see not an inflationary trend but a very real deflationary one.

The current deflationary trend is a reversion to the mean. We were stimulated by so much cheap money for so long (basically the entire last decade) the economy has just petered out. There is just too much debt out there, consumer and otherwise, and the amount of money needed to spur an inflationary trend that is sustained is approaching infinite- and even then...

A debt black hole hangs over the globe sucking stimulus and real wealth into it. The only way to begin to tame this monster is to accept that Keynsianism really is dead. Dead, dead, dead. And that sound money, which encourages real work, and real wealth is the only way out of this colossal mess.



The national knowledge is creeping in that the good times of the stimulus may soon be over. The United States is running an 11% deficit and our gross debt is 83% of our GDP and may rise to 100% in as little as three to five years.

So when we saw a recent note about the "Keynesian endgame" from Scott Minerd, the chief investment officer of Guggenheim Partners, we decided to pay attention:

Click here for the story.
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Thursday, July 8, 2010

China rules out ‘nuclear option’ on T-bills

Guess this is good. I say always take the Chinese at their word.

"All warfare is based on deception."
-Sun Tzu

China has delivered a qualified vote of confidence in the dollar and US financial markets, ruling out the “nuclear option” of dumping its huge holdings of US government debt accumulated over the last decade.

Click here for the story.

Monday, July 5, 2010

This is what the beginning of real economic pain feels like.

By Nick Sorrentino

So word is that the big box discount stores are discounting deeply again. As the summer gets hotter, the economy continues to cool, and the cooling trend seems to be accelerating. The big retailers are feeling very pinched, so much so that they are using what one analyst called “desperation tactics” to get people through the doors. In an environment where the American consumer has little left there is a race in consumer retail to get whatever is still to be had. Of course after that…Well it’s probably not good.

This is why Sam’s Club has embarked on a program to market Small Business Administration backed loans to its customers. The loans are for 5K-25K. This is exactly what is needed of course, more debt. This should do much to solve the problem.

Consumer retailers engaged in “desperation tactics” en masse just prior to Christmas 2008. That fall, the world was plunging into the abyss, and retailers had a lot of excess inventory, and so they cut prices deeply. They had to cut loose of their excess inventory. There was a lot of fat to carve off in the fall of 2008.

Now retailers are very lean, yet they still feel they need to cut prices by big margins to motivate purchasers. When you’ve got no fat left, the knife starts to carve into the bone. And that is what retailers are beginning to do. They are doing whatever they can to get people through the doors, but the options are just running out. The middle class is tapped.

It is said that the American consumer constitutes 70% of the American economy. If this consumer can no longer participate in the economy at the level it has historically the economy must contract. Things must deflate.

Deflation is what we have folks. Prices are going down for houses, cars, nearly everything. There are pockets of prices rising here and there but currently the economic draft is strong, and it is downward.

The Fed will probably crank up the printing presses to 11 from 10.5 but the problem is that there is a huge black whole of 65 trillion (formerly) in derivatives (that are now worthless) sucking this printed money into whatever alternative universe exists on the other side of the hole. Bernanke can get in his helicopter and toss hundred dollar bills out the windows all he wants, but even the mighty Fed, may find itself on the other side of the event horizon of this economic singularity.

*An addendum to this piece.

I just went out grocery shopping and was thinking about the above post and it occurred to me that some might consider it to be a very pessimistic view of the future. Let be clear. I am more optimistic about the future now than I have been for a long time. I believe that there are huge opportunities for entrepreneurs as the economy reinvents itself. This is a great time for those who thrive on change. The old, highly buerocratic order is coming down, and for some, including me, this is a good thing.

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Sunday, July 4, 2010

Restore the Constitution, End the Super-state, Happy Independence Day!

By Nick Sorrentino

On this Independence Day I am happy to report that at this moment Thomas Jefferson is the second most talked about political figure in social media, according to, a website that tracks such things minute by minute. TJ is behind Barrack Obama, and solidly ahead of Hillary Clinton who is in the third space. Additionally John Adams is currently number 9 and Ben Franklin 10.

This can only be a good thing.

I often speak with people who argue that such and such is “unconstitutional.” But when I ask them where in The Constitution such and such is enumerated or restricted they are at a loss.

We need to read the Constitution. Everyone should read it. The Constitution contains the rules by which a free society can operate. Some will conclude, as some in the legal establishment have, that the Constitution is an antiquated document written by white slave holding patriarchs etc. and so is to be disregarded often.

Fine, come to this conclusion, but at least have read the rules of the political game. If you think the rules need to be changed, great, but don’t make the case for something else if you have little idea of the rules you are changing.

I believe however that the Constitution, written over 200 years ago needs to be restored.

Some would consider the “restoration” of the Constitution to be a radical concept. In a sense I agree. It has become a radical concept, yet it should not be.

One of the key problems, among many, is that most of this country has become wedded to the welfare state to some degree. There is Social Security, Medicaid, Medicare, Foodstamps (1 in 8 people in this country are on foodstaps, 1 in 4 children, can't very independent if the state fills your belly), The GI Bill, student loans, the military, the Washington bureaucracy, and on and on.

There was a time, not long ago, when the only interaction the average citizen had with the federal government was when he or she visited the post office.

Now, nearly every aspect of our lives is regulated by the Feds in one way or another. A simple reading of the Constitution by an intelligent person without a vested interest in perpetuating the Federal super-state, shows that such all pervasive regulation is actually unconstitutional.

But most of us have been co-opted. Many supposed conservative voters would freak out if Social Security was ever touched. And this is understandable, people have made huge life choices based on the existence of Social Security. It is unfair to pull such programs from those who are now too old to adjust.

But this exhibits the power of the super-state to co-opt. The same could be said for any number of programs. Once one is dependent in some way on the state, once one has committed to a life path based on the redistribution of wealth from one part of the economy to another, the Constitution looks increasingly quaint, and something to be revered but not enforced.

Nearly everyone has a stake in the federal super-state. That’s why the restoration of the Constitution, which was a reaction against the power of an English super-state (and the Bank of England, this is for another post) is so problematic for so many, though in theory we are supposed to be bound by it.
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Friday, July 2, 2010

Depression on your mind? Here's what to do to protect yourself

Some pretty good advice from this guy, especially on the issue of personal debt.

We all have our Anxiety Closets, filled with fears: global nuclear warfare, raging inflation, clowns. Lately, another fear has arisen: depression.

We're not talking about the psychologically crippling condition, but the economically crippling one. Nobel Laureate Paul Krugman has been the most recent economist to sound a warning about the possibility of a depression.

Could we have a depression? Well, sure. What should you do about it? It depends on how worried you are

Click here for the story

About Me

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Nick Sorrentino is the Editor of The Liberty and Economics Review and CEO of a social media management company.