After 2,065 Years, We Ought to Know This

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." ... Cicero - 55 BC

The Dollar Is Falling!

And our leaders are encouraging it because it preserves their power momentarily. Just look at the chart above left. We've already heard about this year's new trillion dollar plus deficit; it's 3.5 times the unconscionable debt we had under Bush in 2008. And which debt Obama strongly attacked when he was just a candidate; however, when he gained power, he suddenly forgot the danger. When added to recent deficits, the sum totals $11.8 trillion.

Because nothing drastic has happened yet, and because the Obama administration has been so terribly busy trying to change our country, most Americans have become numb to the implication of the facts before them.

However, other countries have not been so complacent. They are shifting out of dollar denominated investments and debts because they clearly see the (almost) inevitable decline in the dollar's value.

Perhaps they are paying attention to our unfunded debt such as Social Security, Medicare, Medicaid, Veteran's Benefits, and government pensions. These are not even listed on the balance sheet, but they amount to almost $104,000,000,000,000 in the foreseeable future.

If Obama passes a Health Care Reform bill, inevitably more will be added to the deficit.

And yet our leaders loudly whistle past the graveyard while they busily print more money to pay back our debts with less valuable dollars. No wonder there is a growing demand for a new international currency.

Ancient Rome, the Byzantine Empire, and Post WWI Germany all tried to use the same method when national obligations became too great to ever pay back.* After all inflation is a silent tax and many hardly even notice when politicians do it. But inevitably, it leads to the ruin of the country. In the fourth century AD, the Roman denarius fell to 1/50 of its value in a mere 13 years. The Bezant took longer, but by the 14th century it had virtually ceased to exist despite the fact it had once been the international currency. The Reich mark plunged from 4.2 to the dollar before WWI to 1,000,000 to the dollar by August 1923.

The chart below illustrates the dollar's loss of value in recent years -- 36% when compared to other currencies and a whopping 75% compared to gold. Without a drastic change in Washington, the dollar will decline even more precipitously.

*One economic writer, Larry Edelson, believes that if the US government started paying off its debts at the rate of $100,000,000 every single day, it would take 3,446 years before the debt is paid off. The statistics above came from the Uncommon Wisdom website.

Everybody Is Cheering

After all the Dow topped $10,000 yesterday. But what does it mean? With Treasury printing presses running at top speed, it doesn’t carry the same financial euphoria it used to.

For example, ten years ago the Dow was $11,497 and it would have taken 40.6 ounces of gold to equal that value. But yesterday’s Dow would only require 9.44 ounces of gold to “buy” that amount.

Inflation has plagued the US all through the 20th Century and threatens to become worse in the 21st because our Federal government insists on spending more money than we can reasonably pay back. Like the Banana Republics we recently disdained, we keep printing more fiat money to avoid raising taxes and to hide the growing reluctance of other countries to buy our treasuries.

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose."
- John Maynard Keynes, 1920

American Revolution or American Renaissance?

Gerald Celente from Trends Research Institute explains his views of America's future in this video clip that is well worth watching. He believes that we are near a turning point that could lead to either revolution or renaissance. Pray that it will be a renewal of freedom and American ideals, not a socialist coup.

Please scroll down to stop the video by Robert Kiyosaki manually before watching this video. I've tried to change it to play manually, but the silly things insists on doing it automatically. As a former boss used to say, "Technology teaches you patience."

If you want to follow up with more info, this video came from Wall Street Survivor.

Everyone Understands Except The Politicians

It’s just common sense to understand the danger of continuing unbridled spending by Washington. Last week Ben Bernanke testified to the House about the grave hazard of our burgeoning debt.

His bottom line was our level of borrowing and spending cannot continue at the current rate. When asked about the possibility of the United States losing its AAA credit rating just as England did recently, Bernanke could offer no desirable outcome.

“At -- at some point, you have to have a path of spending and taxes that will give you a stabilization of the debt-to- GDP ratio. If you don't, then fear that the debt will continue to rise will make it very difficult to finance it.

And at some point, you'll hit a point where you'll have to have both very draconian cuts and very large tax increases, which is not something we want. So in order to avoid that outcome down the road, we need to begin now to plan how we're going to get the fiscal situation into a better balance in the medium term. ...”

And he refused to comment on the possibility of rampant inflation, although his questioner brought it up. Read more at Powerline.

Have you told your Congressional Clowns to STOP THE SPENDING? If so, remind them again.

Happy National Debt Day

Yesterday the federal government spent all of the revenues it will receive this year. So from today onward, we are spending borrowed money. That’s 249 days of “credit card” living to go before we have any more money coming in.

While Debt Day has occurred anytime from July to September in the recent past, this year no one is surprised at its early arrival. After all, this is the year Congress passed at least one massive spending bill that not one of the Clowns had read. And we haven’t gotten to bills about socialized medicine or cap and trade yet. You can tell that Obama is really concerned at this point. He and Geithner only asked for $100,000,000,000 to fight global poverty this weekend.

Let’s hope the Chinese don’t make any funny demands about continuing to buy our debts because “the borrower is the slave of the lender.” (Proverbs 22:7)

Hat Tip to John Hinderaker at Power Line Blog.

Masters of The Universe, Or at Least of The US

According to Simon Johnson, former economist at the IMF, our current financial crisis sounds distressingly familiar to problems he handled with smaller countries. Powerful elites from both Washington and Wall Street have over reached during good times and now they need to drastically change their ways. So far both the Bush and Obama administrations have provided cover rather than forcing change because the financial sector has grown too powerful.

Since facing reality does not appear likely any time soon, he fears a depression deeper than The Great Depression looms on the horizon. The Atlantic carries his sober assessment of our problems. Read it if you dare.

Ominous Signs Re: Money

Do not ignore the following signals since the Obama administration evidently strongly believes in central planning. Drudge headlines China’s call for a global currency this morning. Last week Bruce Wiseman warned of coming international monetary regulations. The London Summit will convene April 2 as world leaders meet to discuss ways out of the current financial crisis. Michael Camdessus of the IMF, has already suggested that "the global village" should "urgently and radically" implement international regulations. The US will send Timothy Geithner, who has recently called for a Global Monetary Authority, to this meeting.

There have been many steps, or rather, missteps to put us in this financial crisis, but in my mind, the most egregious is the mark to market accounting rule* imposed on financial institutions in late 2007. It exaggerates bank assets in good times, encouraging market bubbles and exaggerates bank losses when the bubbles begin to burst. Despite numerous calls for the easy rescission of this arbitrary rule, no one in either administration has considered changing it. Instead, both Bush and Obama have demanded money, and lots of it, to throw at the problem. And with government money, comes more government regulation.

*As I explained in frantic emails begging Congress not to pass the TARP bill, mark to market means that a bank’s assets are controlled or marked by the last sale of a similar asset. Thus, one distress sale, for whatever reason, can devalue all similar assets immediately and severely limit the amount of money a bank can lend.

Warning: Danger Ahead

The Federal Reserve quietly slipped $1,200,000,000,000 into the economy this week. The only trouble, it was just printed money, not increased wealth. That move, officially known as Quantitative Easing is sort of like a college student drinking a triple latte to keep going after an all night party. It appears to solve the problem for awhile, but eventually the lack of sleep catches up and there is an inevitable crash, even in strong, healthy 18 year olds.

Printing money seems to help the economy because it does stimulate spending in many quarters at first. However, it will eventually backfire because the currency in devalued and inflation becomes a problem. Within hours of this change in US monetary policy, the price of gold shot up to $960 an ounce, indicating a loss of confidence in the dollar. Let us hope that we can muddle through the current economic problems without trying that again.