Dear Reader,
While it seems churlish to complain about traveling too much – especially when those travels include so many agreeable places… Paris, Dublin, Portugal, Buenos Aires, Salta City, Cafayate, Asunción… where I have stayed over the past month – it can get pretty grueling.
Especially when there is inevitably a tall pile of work waiting on return… work that has had me at the desk at ridiculous hours this week.
I mention this only as something of a caveat if I seem a bit cranky as I address an issue that has caught my eye this week.
As I begin, and with apologies to those of you with tamer musical tastes, I am listening to Alien Ant Farm's rendition of Smooth Criminal. For reasons you'll soon understand, it seems appropriate.
Like you, I read a lot.
And while I regularly come across commentary that strikes me as little more than mindless drivel, recently I have begun to notice something far more concerning than public displays of ignorance.
I refer to deliberate attempts to pollute the public mindset using specious arguments that appear carefully construed to dupe the dupable. In a rare attempt at brevity, I will get straight to a couple of examples to make my point.
This week's winner of the most ill-conceived and downright aggravating mainstream media article is, hands down, an essay titled "Let's Draft Our Kids" that appeared in the New York Times. This fascist manifesto was penned during what must have been a psychotic break by one Thomas Ricks who fashions himself as something of an authority on martial matters.
To get the full sour flavor of the article, you should read it yourself, but to give you a taste of what Mr. Ricks, if left to his own devices, would subject his children to – that is if he were actually able to find someone to mate with him, about which I am skeptical – here's the CliffsNotes.
"…[they] could perform tasks currently outsourced at great cost to the Pentagon: paperwork, painting barracks, mowing lawns, driving generals around, and generally doing lower-skills tasks so professional soldiers don't have to."
As part of their training, perhaps Mr. Ricks would also require that the recruits be taught to sing such classics as "Swing Low, Sweet Chariot," "The Gospel Train's a-Comin'" and "We Will March Through the Valley" in a harmony the generals find agreeable.
"…the government could use this cheap labor in new ways, doing jobs that governments do in other countries but which have been deemed too expensive in this one, like providing universal free day care or delivering meals to elderly shut-ins."
And it gets better, because…
"The pool of cheap labor available to the federal government would broadly lower its current personnel costs and its pension obligations — especially if the law told federal managers to use the civilian service as much as possible, and wherever plausible. The government could also make this cheap labor available to states and cities."
This is such a good idea, it is shocking to me that no one has tried it before. Oh, wait, they have: The Khmer Rouge.
Lazily quoting Wikipedia (now 67% accurate!): "They [the Khmer Rouge] forced many people out of their homes and ignored many basic human freedoms; they controlled how Cambodians acted, what they wore, who they could talk to, and many other aspects of their lives."
Sounds kind of like being dragged off as a slave to me.
(I should mention that many NATO countries had a similar conscription scheme in the past, but – hopefully seeing the error of their ways – all but eight phased it out in recent years, in favor of all-volunteer armies.)
"And libertarians who object to a draft could opt out. Those who declined to help Uncle Sam would in return pledge to ask nothing from him — no Medicare, no subsidized college loans and no mortgage guarantees. Those who want minimal government can have it."
Let me stop there, because I think Mr. Ricks has handed us enough rope to hoist him up on his own petard.
We don't need to break much of a sweat to do so as the cracks in his critical thinking yawn wide. For instance:
Oh, no, not that! With hardly a flip of a synapse, even a legitimate moron should spot that Mr. Ricks is being completely disingenuous. For proof of that contention, let's ask Mr. Ricks a few questions and try to divine how he might reply.
"Mr. Ricks, glad to have you with us today."
"Nice to be here, I think."
"Your plan would allow 'libertarians' to opt out. Out of curiosity, why did you single out libertarians as those most likely to opt out? As opposed to, say, Quakers? Or, perhaps, anyone who actually felt they had something better to do with their lives than submit to being marched about or having to clean public urinals?"
"Ah, well, you know those libertarians… always complaining about the size of government and encroachments on personal liberties and all that. I guess they just popped to mind as a group that true patriots will understand as being uncooperative in these sorts of things."
"Thanks for clearing that up. So, let's get to the terms of your deal. If anyone wants to opt out of being a slave, they can."
"Well, I don't think I'd go so far as to call them a slave."
"Shut up, I'm asking the questions here."
"Whaaa? Okay, that's it! This interview is over, I'm out of here!"
"Sorry, but I'm in charge, and you're not going anywhere. See, that's how the whole slave thing works. Now, get back to my question before I make you strip down and run laps in the rain! So, if someone opts out of being your slave, then they will be detached from the benefits offered by the state, right?"
"That's right."
"Does that mean that they get to stop paying for benefits they will no longer be getting? For example, taxes related to Social Security and Medicare? I'm betting that if you made that offer to the public at large, millions would stand in line for days to sign up for it."
"Ah, no. They still have to pay. They have an obligation to this great nation of ours, a nation founded on the principles of shared sacrifice and justice for all."
"Just answer the question, or it's out in the rain with you. And for the record, the nation was founded on the principle that citizens have the unalienable right to life, liberty and the pursuit of happiness. Now, being forced to serve in the military seems to carry the potential to step on all three of those rights.
"Regardless, you admit that under your plan, an individual would still be expected to pay all taxes but get minimal benefits in return. So despite your claim that an individual can opt for 'minimal government,' in actual fact, they are still carrying the full burden of the bloated bureaucracy?"
"Ah, I guess. Yes."
"As I suspected. Now drop your clothes and get running, and keep running until I tell you to stop."
There is much else wrong with Mr. Ricks' article, including the reality that there are minimal, if any, savings in a slave economy once you factor in care and feeding, plus the loss of taxes that would have otherwise been paid by productive young people pursuing their dreams, versus being hijacked for the sick fantasies of Mr. Ricks and his ilk. Then there's the reality that slaves don't make the most enthusiastic of workers, which translates to a poor return on the investment.
Of course, it's not all about economics – Ricks tries to frame the argument as a win-win because, in addition to the cost savings to be gained from enslaving the youth, it is his contention that doing so will also make the PMIC (Political-Military-Industrial Complex) think twice about starting wars.
Hey, here's a concept: just stop starting wars. After all, 99% of the other countries of the world seem to manage to do without. Wonder what they know that the US doesn't?
Remarkably, this idea of a draft continues to be trotted out. It's not just sloppy thinking, it is dangerous. It is also, sadly, far from being alone in the spotlight of stupidity. Here's another.
In a true classic of the genre, a certain Mr. Jason Cherkis this week penned an article for the Huffington Post titled, A Thousand Cuts: Austerity Measures Devastate Communities Around The World.
The genre to which I refer is where the author dredges up a heart-wrenching story to wave about in order to elicit an emotional response in support of his position. In this case, it is his position that making any cuts in government programs is not just a bad idea, it is cruelty itself. In the case of his story, the cruelty is inflicted on a laid-off female municipal bus driver.
Apparently, the Huffington Post is so enamored of this theme, and of this particularly mindless form of journalism – propaganda, actually – that it is going to run a series of similar stories. Here's how they advertise the series…
"These stories chronicle austerity's collateral damage: the suicide-inducing fear that impending cuts created in the U.K., how one girl's grades suffered when her class size grew, the loss of personnel that made battling fires more dangerous for one New Jersey town."
While I am all atwitter in anticipation of the next installment, for the time being I will have to live with just the sad tale of the bus driver, a tale which included the following heart-tugger:
On her last day, Miller worked a Sunday route, picking up elderly riders in downtown Pittsburgh and driving them to churches in the Hill District.
"I used to call it driving my Miss Daisies," she explained. The women would board in their Sunday best, with neat dresses and big hats. "Every time I think about it makes me want to cry," she said before beginning to sob.
Now, don't get me wrong, I know that being laid off causes all sorts of problems – how could it not? But one person's sob story has zero relevance to a mature discussion about which policy decisions will best foster a thriving economy. To conflate the two is not just stupid, it is pathologically stupid and a calculated attempt at fooling the masses.
So, let's approach Mr. Cherkis' argument, such as it is, in a more methodical manner. For example, by taking it to its logical conclusion. According to him, and the HuffPo…
Back in reality, the Mr. Cherkises and Huffington Posts of the world who see only positives in elevated government spending, even though it requires adding to the largest sovereign debt load in history, appear to completely fail to accept that actions have consequences.
If I were to play the same disingenuous game, I could quickly find lots of examples of hardship from the tens of millions of elderly retirees who expected to be able to offset their cost of living in their retirement through yields earned on their savings of a lifetime.
A friend reminded me that in 2007, you could get a 4% yield even on a brokerage sweep account. Today those same accounts offer a yield of 1/100th of 1%. Or, as he put it, "for every $10,000 you have in cash that used to pay $400 a year, you now earn $10."
And that's before taxes and the steep erosion of your principal due to inflation. Even if you accept the government's rigged numbers of about 3%, you are losing $300 to inflation… but the real loss is probably closer to $1,000. Think this is causing serious hardship? You bet.
As the anti-austerity crowd wins the day – and they will – governments only have one choice: to crank out the funny money that ensures that the inflation rate will become a much more serious problem down the road.
Why am I so sure that the anti-austerity movement will win the day? Simply because it is in the interest of most people at this point.
The politicians don't want austerity, because it curbs their ability to parcel out economic favors; the masses want the spending to continue (note that the riots in Greece and more recently in Spain were not to get their respective governments to spend less, but rather to spend more); and the big financial houses want it to continue because they are very clever at making sure they get a solid first and second bite at the largess.
Returning to the overarching point, the complete lack of critical thinking or even a basic understanding about these issues among the public ensures that dupes will continue to be duped, and continue to vote in the dopes, until the economy ultimately drops… dead.
If you want to envision a better future for the bus driver, envision the benefits from an economy where the government were dialed back to 20% of where it is today, and the free market – the productive, capital-increasing free market – were allowed to blossom. We'll get there, in time, but not without circumstances forcing the matter.
Okay, a final bad argument by yet another group of smooth criminals.
It is now completely apparent that the Obama administration's campaign strategy is to focus not on real issues (like, for example, an economy stuck in a death spiral), but rather to go after Romney pretty much solely because he's rich.
Once more, for the record, I am not a Republican, and I don't think that there is any material difference in the two main parties – at least in terms of the actual outcome of whether Tweedle-dee or Tweedle-dum is elected. Call me a cynic or a skeptic, but before you send me strongly worded emails to straighten me out, check the historical record. You could easily black out the names and party affiliations of presidents for the last fifty years, and you'd notice no discernible pattern in the economic data that favors one gang over the other.
Regardless, if you take the administration's argument at face value – that being rich makes a person a bad prospect as president – then what you are really saying is that hard work and success is either a character flaw or that it should not be rewarded. By extension, then, wouldn't the ideal candidate be a bankrupt failure?
The fact of the matter is that logic and principles don't matter to the proponents of these specious arguments. Whether proposing to enslave the youth, to continue piling up unpayable debts, or setting the stage for an economically devastating class warfare, what really matters to these people is to convince the masses to support the steady growth of the state at the expense of freedom and free markets.
This is not a formula for success, it is a formula for collapse and ruin.
Toss into the mix the institutionalized chicanery that is becoming more apparent with each passing day – the growing LIBOR scandal being the latest – and the challenges faced by individual investors looking to avoid being plowed under as collateral damage become extreme.
A bit later on, I'll share the best way I know to make sure you can avoid the worst of what's coming as this trend gathers momentum, but for now, in that it is keeping within the general theme, following is an article by our own Vedran Vuk on the Fed, another group of smooth criminals if you ask me.
By Vedran Vuk
Believe it or not, I'm not trying to insult the Federal Reserve with the title of this piece. Unfortunately, every investor has to answer this question, "How stupid is the Federal Reserve?" It doesn't matter whether you're a Keynesian or Austrian economist. If you want to know the Fed's next step, you'll have to start here.
Most Fed analysts have it completely wrong. They weigh whether or not the Fed will act based on economic conditions. Particularly, will the slowing labor market induce further Fed stimulus or not? Unfortunately, this analysis follows standard macroeconomics textbooks rather than the reality of the past four years.
From the textbook viewpoint, the Fed has two options: lower the unemployment rate through additional monetary expansion at the risk of inflation, or stay out of the way for the sake of price stability. In today's environment, this is a false set of choices. In the past few years, the Fed has injected trillions into the economy with little to no effect on the unemployment rate. As a result, the real question for us to answer is, "Considering that the Fed has repeatedly failed, will it again try the same policies in an effort to reduce unemployment?" This isn't a question about numbers and figures. It's a question about the hard-headedness, delusion and stupidity at the Fed.
Unless your head is in the sand, it's obvious that the Fed's policies have been a failure. We already know that economic conditions are bad enough for the Fed to act. In the Fed's last minutes – to the dismay of Obama's election campaign – it plainly says, "…the unemployment rate was expected to still be elevated at the end of 2014."
The gravity of the unemployment situation is obvious. What's not so clear is whether Fed members understand the failure of their previous stimulus efforts. The Fed minutes give us a clue:
Meeting participants again discussed the extent of slack in labor markets. Some participants judged that the unemployment rate was being substantially boosted by structural factors such as mismatches between the skills of unemployed workers and those required for available jobs, a view that would imply less slack in labor markets than suggested by a simple comparison of the current unemployment rate to participants' estimates of its longer-run normal level…. Some other participants acknowledged that structural factors were contributing to unemployment, but said that, in their view, slack remained high and weak aggregate demand was the major reason that the unemployment rate was still elevated.
The idea behind structural unemployment stands on extremely weak footing. There's no need to drag out the statistics here. The economy didn't go from 4.4% unemployment in mid-2007 to 10% unemployment in 2009 because of structural changes. Was there an unexplained explosion of tech companies in this two-year period that required greater skills? Were 90% of college graduates art history majors in this two-year period? Hmmm… no. Maybe… just maybe… the biggest global downturn since the Great Depression has something to do with it.
Thankfully, other members of the Fed presented a different view. But nonetheless, the fact that some actually believe the structural change line is frightening. It tells us that many board members are in a state of denial. They've thrown everything including the kitchen sink at the economy, and it has failed. Now, they're trying to make up excuses for their failure, such as "structural changes in the economy."
So, what does this point have to do with anything? The state of denial among some Fed board members should scare the hell out of you. If they're unwilling to accept reality and the consequences of their actions, then things can only get worse from here. To solve any problem, we must first agree on the facts and reality. The Fed doesn't seem to be there yet. As a result, they will continue to use additional monetary expansion in an attempt to lower unemployment – despite the previous failures.
This is spelled out in the Fed minutes: "A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee's goal." Yes, folks. They actually believe their actions will promote growth in employment. After all of their failures, this is still the official line.
The Fed's next move has little to do with the unemployment situation. We already know that unemployment is bad. The tougher part is weighing how delusional the central bank has become. In the minutes, there were signs of a few participants with their heads straight, but quite a few have their heads so far in the sand that they're reaching water.
Coincidentally, the two jokes that showed up in my email box this week were on the same subject… and not one that you'd usually laugh at.
Voted Best Scottish Short Joke
A bloke walks into a Glasgow library and says to the prim librarian,
"Excuse me, Miss, dey ye hae ony books on suicide?"
To which she stops doing her tasks, looks at him over the top of her glasses and says,
"Buggeroff, ye'll no bring it back!"
The First Ever Blonde GUY Joke...
An Irishman, a Mexican and a Blonde Guy were doing construction work on scaffolding on the 20th floor of a building.
They were eating lunch, and the Irishman said, "Corned beef and cabbage! If I get corned beef and cabbage one more time for lunch, I'm going to jump off this building."
The Mexican opened his lunch box and exclaimed, "Burritos again! If I get burritos one more time, I'm going to jump off, too."
The blonde opened his lunch and said, "Bologna again! If I get a bologna sandwich one more time, I'm jumping too."
The next day, the Irishman opened his lunch box, saw corned beef and cabbage, and jumped to his death.
The Mexican opened his lunch, saw a burrito, and jumped, too.
The blonde guy opened his lunch, saw the bologna and jumped to his death as well.
At the funeral, the Irishman's wife was weeping. She said, "If I'd known how really tired he was of corned beef and cabbage, I never would have given it to him again!"
The Mexican's wife also wept and said, "I could have given him tacos or enchiladas ! I didn't realize he hated burritos so much."
Everyone turned and stared at the blonde's wife. The blonde's wife said, "Don't look at me. He makes his own lunch."
A bit earlier, I mentioned the single best way to ensure you are not a victim of the building momentum for an ever larger and even more destructive government involvement in the economy.
The answer is to dedicate a sufficient amount of time and energy into truly understanding the scale of the problems, and the specific actions you can take to protect yourself (and, hopefully, turn a profit).
In that regard, there is no better place or time to spend three days than at the upcoming Summit Casey Research is co-hosting with the Sprott Group of Companies in Carlsbad, California, September 7 – 9.
These Summits provide an excellent networking opportunity – with members of the Casey and Sprott research teams, the blue-ribbon faculty, other participants and with the senior executives of some of our favorite companies.
The faculty line-up so far is exceptional, featuring among others:
Donald Coxe, global strategy advisor to the $500 billion BMO Financial Group. Don has consistently been named as a top portfolio strategist by Brendan Wood International; in 2011, he was awarded a lifetime achievement award and he was ranked number one in the 2007, 2008 and 2009 surveys. Best of all, he is very in tune with commodities markets, a topic of special importance to many of you.
David Walker, former United States comptroller general from 1998 to 2008; founder and CEO of the Comeback America Initiative; and an outspoken critic of the US government's out-of-control spending and the consequences it will trigger if the trend continues unabated. I have been trying to get Walker to our Summits for years, and was finally able to do so only through the assistance of mutual friend Richard Hanley who has arranged for David Walker to take a break in his busy schedule to appear live by video link, followed by a Q&A session with the audience.
Dr. Lacy Hunt, top-performing bond manager and former Fed economist, back by popular demand with critical new perspectives on what's going on behind the scenes at the Fed and at the highest levels of government. (Lacy and I have had a long discussion, and he is very excited about sharing his latest findings in his presentation, on a special panel and in informal discussions with attendees at social events.)
G. Edward Griffin, author of the best-selling Creature from Jekyll Island. I think of all the books that dear readers have recommended to me, Griffin's book tops the list.
Eric Sprott, the CEO of the Sprott Group of Companies, co-hosts of the Carlsbad Summit. Eric is widely respected in the financial community as an analyst and visionary in the area of asset management.
John Mauldin, best-selling author and president of Mauldin Economics, publishers of the wildly popular Thoughts from the Frontline and a new publication, Yield Shark. John has become a good friend over the years and has a rolodex like no one else I know, making him very well informed as to the thinking of some of the top minds in the financial industry.
Peter Schweizer, the William J. Casey Fellow at the Hoover Institution and best-selling author of Throw Them All Out... a reference to members of our less-than-esteemed Congress. Schweizer has appeared on 60 Minutes and, as is the case with most of the faculty, will be with us for most of the Summit.
Dr. Thomas P.M. Barnett, former senior strategic researcher and professor in the Warfare Analysis & Research Department, Center for Naval Warfare Studies, US Naval War College, Newport, RI, where he taught and served in a senior advisory role with military and civilian leaders in the Office of the Secretary of Defense, the Joint Staff, Central Command, Special Operations Command and Joint Forces Command. Dr. Barnett is the author of several books, including The Pentagon's New Map, which will be the focus of his presentation of the Summit.
Karl Denninger, a full-time trader since 1998, is the author of The Market Ticker, a daily market commentary, and operator of the Market Ticker Forums, an online trading community, both since 2007. Mr. Denninger received the 2008 Reed Irvine Accuracy in Media Award for Grassroots Journalism for his coverage of the 2008 market meltdown.
David Webb is a Sweden-based hedge fund manager and founder of Origin Investments, AB. He was brought to our attention by one of our smartest Casey Research analysts who has followed David's work for years and has been amazed by his uncanny ability to consistently rack up big returns during periods of market meltdowns. David will be flying in from Sweden to discuss the paradigm collapse he sees ahead, and how to invest.
Rick Rule of Global Resource Investments/Sprott, Inc., by reputation one of the world's most successful natural-resource investors and a perennial favorite at the Summit, will again be on deck to update us on the resource markets and when the current downturn is likely to end.
Bob Hoye, chief financial strategist of Institutional Advisors. He is widely recognized for his model-based approach to forecasting that has found that key financial sectors, such as the stock market or the yield curve, each recorded similar behavior patterns through each previous era of great financial booms. At the Carlsbad Summit, Bob will share his findings based on these patterns as a guide to what's next.
And many more… including, of course, the Casey Research team of Doug Casey, Bud Conrad, Louis James, Marin Katusa, Alex Daley, Terry Coxon, Jeff Clark and Dan Steinhart (plus yours truly).
As always, senior executives of some of our favorite companies will be on hand in the Map Room, complete with core samples and detailed project maps, to help educate you on the regions and programs they are working on (this is always a don't-miss opportunity to network and get in on private placements and so forth).
And there will be special panels, including Navigating the Politicized Economy, an Explorers' League panel on the state of the junior exploration sector, a brand-new panel "Casey's Best of the Best" where we'll ask our senior editors to share their very best one or two picks out of the companies they are following (this panel alone should pay for your conference participation many times over); and another special panel on Alternative Investments with a focus on ways to earn exceptional yields and make above-market returns while avoiding traditional – and increasingly manipulated – markets (as an example, you'll learn how to safely capture the excellent yields now available in peer-to-peer lending).
It's all happening between Sept. 7, 8 and 9 in one of the prettiest spots in Southern California, the Park Hyatt Aviara in Carlsbad. The cut-off date to save big with our early-bird pricing is approaching – so mark the dates and reserve your space ASAP.
Whether you like it or not, the global economy has entered into truly uncharted waters, and if you want to succeed in protecting your wealth, you have to get as much solid input as possible. You'll find that input and get to exchange ideas with others of a similar world view, in Carlsbad this September.
Hope to see you there.
And with that, I must get back to the pile on my desk, thanking you as I do for reading and for being a Casey Research subscriber.
Oh, one last thing… watch your email next week for something called the Hard Assets Alliance. I think you'll find it as intriguing and useful as we here at Casey Research have.
Best Regards,
David Galland
Managing Director
Casey Research