Thursday, November 21, 2013

Nuking Any Challenge to Yellen

I’m sitting at my desk today and watching the Senate vote on “the nuclear option,” or Harry Reid’s attempt to disallow opposing Senators the opportunity to filibuster incoming Obama nominations.  In particular, they seemed to be making a fuss over a few judges Obama had nominated.  And although eliminating a process that has been etched in Congressional procedure for over 200 years seems as though it would always be a horrible idea, the fact that Obama was having difficulty getting a few judges nominated didn’t strike me as something I would likely lose sleep over.

Then I put it together with another headline from today.  “Senate Banking Committee Approves Yellen Nomination.”  After watching the hearings the other day (something I don’t recommend for those looking for an entertaining way to pass an afternoon), this was not really surprising in itself.  The Senate has always been protective of the bankers who line their campaign coffers with cash and then expect a return on their investment.  The nomination now goes up for a vote in front of the entire Senate and Yellen is pretty much a shoe-in, with just one potential hiccup.

Tea party Senators Rand Paul and Ted Cruz have both spent hours on the Senate floor giving long, filibustering speeches (technically, Cruz’s may not have been a true filibuster since he had a time limit, no e-mails please).  And now, for Paul in particular, here was his chance to stand up and speak critically against the Fed, uninterrupted, for days on-end (or at least until he had to pee).  Specifically, Paul wanted to press the Senate into voting on the Audit the Fed bill.  The House had passed this bill in 2012 with a large, bi-partisan majority (374-98).  The bill has sat in the Senate and Majority leader Harry Reid has refused to put it up for a vote.  Please note, when he was a younger Senator, Harry Reid pushed for exactly such a measure, but now that he’s seasoned and corrupt, he simply refuses to do the job he is elected to do.

This was Rand Paul’s chance to put this issue in front of the country, only now he won’t get that chance.  “Why not?” you ask.

Well, because the “nuclear option” also covers Obama’s nomination of Janet Yellen as the Federal Reserve Chair.  So, with a simple majority, she will be quickly ushered in with no debate.  So let's recap:

After 200+ years of existence, a rule was changed just days before the most powerful job in the world will be filled so that the person filling that job will not have to go against any opposition.  And not one financial journalist connected those dots.  I did not see one mainstream article mentioning the Yellen connection.  Not one.

It all reminds me of the RNC when they unseated the Maine delegates who were prepared to vote for Ron Paul.  Then John Boehner did this:

...and Ron Paul was unable to speak at the convention, silencing a voice that was surely ready to speak out against the Federal Reserve.

Nobody in senior positions, be it in politics or in media, seem to want any anti-Federal Reserve rhetoric to hit the mainstream.  Maybe it’s because, as Henry Ford once said, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow.”

And nobody stands up and starts waving their hands, shouting, "Hey!  Wait a minute!"  As George Carlin said, "Nobody seems to notice.  Nobody seems to care."

It all has me wondering... perhaps the only foresight my first book didn't have is that maybe it should have been called, "The Troy Standard - And the Woman Behind the Desk."

And if you haven't been distracted from the issue enough, The Drudge Report will be happy to point you in the direction of the new Kanye West video, featuring a nearly-naked Kim Kardashian humping him on a motorcycle.  I’m sorry for wasting your time.

Wednesday, October 16, 2013

A Devious Can-Kicking

As I type, legislation is being passed through the Senate which is then expected to pass the House that will re-open the government and extend the debt limit until February, 2014.  This comes after some intense bickering the past few weeks with the Republicans trying to de-fund Obamacare and then trying to delay the individual mandate, but in the end they predictably rolled over and played dead.

It makes you wonder why pick a fight if you are going to give up in the end?  It only makes you look weak.

Besides, with the government shutdown and the debt ceiling as bargaining chips, the GOP is giving away half of their bargaining power because in February, the fight will only be over the debt limit and not the shutdown.

I just can't wrap my arms around why this agreement seems like a good idea for anybody.  All that was done was to kick the can down the road for three months.

I asked around and I got two distinct responses, both of which I reject.

1) They are giving themselves some buffer time to solve the problem in the interim between now and February.

What about the two years they had prior to this time?  We've known this was coming for a long time now, so what makes anyone think that another three months will actually matter?  It seems to be a ridiculous notion that these clowns can fix anything, lest we remember the fate of "The SuperCommittee."

2) They just want to get this out of the way and push it beyond the holidays and the year-end.

Since when does Congress not like bringing up important issues over the holidays?  That's typically the way they get things done.  That's how the Federal Reserve Act got passed on December 23, 1913.

So, as we approach the 100 year anniversary of the most thieving institute in American History (see graph), it seems appropriate to at least mention a possible third motivation for the small 3-month delay.

There is one other major financial news item that will be occurring over the next three months.  Federal Reserve Chairman Ben Bernanke will be stepping down and, pending confirmation, Janet Yellen will be taking his place.  What's the significance of that you ask?  I'll tell you.

If the debt limit is reached without being raised, there are three things that can be done to keep the United States from defaulting on the debt.  In order to avoid the breach, the Treasury could manage the budget cash flows to a deficit-neutral position so as to not add new debt.  That means either 1) Cutting spending immediately or 2) Raising taxes immediately.  Now, there are various ways this could be done, but let's be honest here... with a split Congress, neither of these are going to be agreed upon.

That leaves the third option, which is that the Federal Reserve can monetize the debt.  Basically speaking, this means the Fed buys Treasuries and then forgives the government from its obligation to pay principal and interest.  Watch Ben Bernanke's response (around 1:10 in the video below) when asked if he was planning to "monetize the debt."

He seems quite adamant that he will not monetize the debt, does he not?  Yet he went ahead with his Quantitative Easing strategies and bought up a few trillion in Treasuries, claiming not to be monetizing because in his grand plan, the Fed would eventually either let them mature off the balance sheet or sell them in the open market.  While you might understand how the people could get duped or even Congressmen and women, Wall Street just giggled and laughed as they watched the stock market climb and the Fed loaded up the truck with Treasuries, keeping interest rates at all-time lows.

At least, right up until now...

After pledging under oath that he would not monetize the debt, Bernanke might surely have been seen as perjuring himself if he did just that this week to solve the debt limit crisis.  (Are you beginning to see where I am going with this?)

On the other hand, Janet Yellen has made no such pledge.

So, fast forward three months.  With the economy still not recovering and the Republicans kicking up a fuss over the debt ceiling yet again, what do you think the Democrats will advise the new Fed Chairwoman?  Chuck Schumer never had a problem giving the autonomous Federal Reserve his advice.

And that's just what Janet Yellen will be facing.  And with a few Trillion dollars worth of U.S. Treasuries already on the Fed's balance sheet, I am willing to bet that this becomes a very serious option come February.  You won't hear the mainstream media, members of Congress, or Wall Street economists talk about this in the following days.  But I'm here to tell you... THIS IS WHY THEY'RE ONLY KICKING THE CAN THREE MONTHS.

Remember... you heard it here first.

Thursday, September 26, 2013

My Blog is Just Terrible

I am so embarrassed by my blog.  I truly hoped I would give it more attention, but I haven't.  I am going through some sort of personal phase - not sure exactly what it is.  I think it's just that there isn't enough hours in a day!

Liberty Gulch (Part One) has been selling so well in its' first 3 months, outselling The Troy Standard 5-to-1 and continuing to get mostly favorable reviews.  This momentum has me so focused on writing Part II that I have practically abandoned my Facebook pages and have completely abandoned this blog.

What it comes down to, I think... is that I have to get myself organized.  I am taking on too much and my focus has been too narrow.  I have a vacation coming up - a much needed week away from the office.  Though I'll be spending that time with my beautiful wife and daughter, it's going to give me an opportunity to reflect - both on what I have done the past year or so releasing Troy and Liberty Gulch, and trying to plan for the future.

I hope this will put me on the right track.  Hoping this blog will survive.  There's just not enough time in a day...

Saturday, April 13, 2013

The Fed Goes Open-Crony... And Nobody Cares

A few weeks after each FOMC meeting, the minutes of the meeting are released and analyzed for more details on the direction the Fed will take when it comes to monetary policy... in other words, to judge the pace the Fed will continue their money printing cycle.

Did I lose you yet?  I hope not... because this is where it gets fun.

The minutes were expected to be released this past Wednesday afternoon, but many were surprised when they were released early ... around 9am.

Why were they released early?  Great question.

Apparently a staffer at the Fed had mistakenly leaked the minutes early to an e-mail list of around 150 people.  How early you ask?  The leak occurred around 2pm on TUESDAY!

You'll be shocked to hear that this is not the first time inadvertent leaking of important public announcements has happened, and there's sort-of a protocol for such things.  First on the list is to release the information to the greater public immediately.  Yet, the Fed waited until 9am the next day to do so.  Clearly an extreme dereliction in their duty to the public.

Well, well, well... you say.  Who exactly did the Fed release this information to?  Maybe the people are honorable and trustworthy and would never, ever trade on illegally distributed information.  Well, lucky for us, the e-mail addresses of the leak were released and we get to see exactly who received the information early.  Are you ready?

The list is largely made up of... whaddya know!  Politicians and bankerss!  Not one of whom stood up and screamed, "HEY WAIT A MINUTE!!!  THIS WASN'T SUPPOSED TO COME OUT UNTIL TOMORROW!"

The following Senators all had this report e-mailed to them early and NONE of them said A FREAKIN' WORD!!!!

Johnson (unspecified if Ron or Tim)

Here are the banks I could pull off the list:

Regions Bank
Wells Fargo
US Bank
BNP Paribas
PNC Bank
Goldman Sachs
JP Morgan

And just to round things out, regulators themselves were on the list, including the US Treasury, FINRA,  and the SEC.

The very next day, the SEC and CFTC announced that no improper trading took place - a laughable statement at best.  Apparently the SEC investigators were able to take a break from their porn-watching long enough to perform an entire investigation in just one morning.  Although, in fairness, I prefer my porn-watching later in the day so maybe it's not such a stretch.  And the CFTC, which has an open investigation on silver price manipulation for nearly 4 years running, is able to investigate this instance within hours.

This is cronyism and favoritism at its worst.  Martha Stewart found herself in the clink for this, but when the Fed does it, it's "Oopsy".  I'm not even sure they issued an official apology.  If the Fed leaked this e-mail at 2pm, it should have been public by 2:01pm.  But it took NINETEEN HOURS for them to release it.

And nobody, except Zero Hedge and Bill Gross from PIMCO, seems to care.  Not the press, not the people, not anyone.  Just like nobody cares when Jon Corzine steals hundreds of millions from his clients, yet walks the Earth a free man - and a comfortably wealthy one at that.

Nobody cares.  The people who are in charge of maintaining the dignity of your dollar are aiding and enriching their friends... and you want to know why your gas and food prices are going up, your house price is going down, people are still not working, and you are earning 0% on your savings...

This is why.  The Federal Reserve does not care about you.  It cares about its power and its survival.  Not you.

Buy The Troy Standard.

Thursday, April 4, 2013

My Take on Bitcoins

A lot of people have been asking me about this new cyber currency known as "Bitcoin".  I guess when you write a novel about the need to establish an alternative to the U.S. Dollar, you become a magnet for
questions like these.  So I figured I'd dedicate the rare blog post to it.

Today I told a good friend of mine who I consider to be fairly bright and more financially-savvy than the average person that I was thinking of buying bitcoins.  His response?

"WTF is a bitcoin?"

In fact, I would bet that most of the people out there do not know what a bitcoin is.  But let me give you the jist of it.  Bitcoin is a cyber-currency whereby the owner holds "bitcoins" in a cyber-wallet.  You can exchange the bitcoins for dollars on various bitcoin exchanges, or use them as currency where they are accepted.  The list of these places is growing every day as the popularity of the currency itself grows.

First, let me tell you some of the things I love about bitcoin.

For one, bitcoins are "mined" into existence based on a pre-determined algorithm that caps bitcoin supply at a certain point (around 22 million).  There is no Federal Reserve to print money when a board of "smart guys" deem it necessary.  There is no government debt attached to bitcoin whereby its issuers may be forced to create more out of thin-air to pay it off.  Supply is certain (void of any failure of the algorithm or hack).

Furthermore, I love that bitcoin has gotten people interested in evaluating the value of their own money again.  Too many people take the dollar's value for granted, which was the primary reason that I wrote The Troy Standard in the first place.  Even if people don't use it, at least the issue is being put in front of them every time there is a news story on it.  Besides, though I largely support currencies based on the backing of hard assets, I also support the notion of allowing competition among currencies, and this certainly fits that bill.

In fact, many of the same criticisms that are used against bitcoin can be used against the dollar.  "Well, bitcoins are a scam because they aren't backed by anything but the user's faith," they could say.  They'd be right, of course... but so is the dollar.

There are a number of questions I have regarding bitcoins.  First... the obvious:  Is it safe?  To this, you will find countless articles and testimonials of people who seem to be wise on such matters claiming that, of course, the technology is safe.  But there are no guarantees and bitcoins are clearly still in the "experimental" phase.  In my mind, any computer-based system is "hackable" and, in fact, there have already been a number of "hack" attempts on bitcoin itself.  A Google search on the phrase "bitcoin hacked" brought me 405,000 results - enough to scare any new user.

Obviously the technology isn't perfect and there will most likely be more bumps in the road ahead.  How safe do I consider it?  Well... let's say it's somewhere between playing online Hold 'Em without knowing whether three-of-a-kind beats two-pair, and doing general online banking. I just don't know.

My next question revolves around the origination of bitcoin.  There are nearly 11million bitcoins in existence today.  I would like to know exactly who owns these coins - as in, are there initial investors sitting on a stack of 20% of the total supply?  The creator of Bitcoin is a shadowy fellow named Satoshi Nakamoto and the next televised interview he gives will be his first.  So we will never really know.  If someone is sitting on the bulk of the supply then they could theoretically hoard it, allow the market to balloon thereby attracting attention and price gains and then they could sell into it, taking profits for themselves and subjecting every bitcoin holder to losses.  I'm not saying that is the case, but when the originator of the concept is "shadowy", then it concerns me.  There certainly seems to be a very Ponzi-like feel to this whole thing.

The mining process to generate new bitcoins is largely tech-oriented.  You can sign up and "mine" bitcoins yourself, but the pace at which it is done is very slow and without the right computer systems you are likely to spend more on the electricity than you will earn by mining bitcoins.

What I truly see happening in bitcoin's near future is that the US government will try to nip this thing in the bud before it really takes off.  I've already seen articles depicting bitcoin users as drug dealers, gamblers, and tax cheats.  Maybe they'll use that argument to take action.  Also, in a note declaring April, 2013 "National Financial Capability Month," (don't laugh) the President stated that "Financial Capability also means helping people avoid scams."  Maybe this how they will justify action instead.  I just don't know.  But government regulation or outright criminalization of bitcoin could certainly occur.

And yet, despite all of these negatives, I decided to go ahead and participate in the bitcoin phenomenon and bought a couple of bitcoins early this week.  Not enough to make me beg on the streets if it goes belly up, but enough to have some skin in the game.  I decided that even though bitcoin isn't my ideal form of currency, it's something new and exciting and it exists outside the realm of our current system, which seems more and more like a farce every time Bernanke hits the "Print" key.  Bitcoin is a competing system, and I support the idea of competing currencies wholeheartedly.  I don't like the fiat-dollar either, but I deal in it because I have no other choice.  I don't necessary believe that Bitcoin is the perfect solution, but I'm willing to lend it some support to get people interested in learning about why their money has value.

Saturday, March 16, 2013

Cyprus FDIC Not So Iron-Clad

It was a bit of ironic timing that I posted about the "Iron Clad" guarantee that is the FDIC.  Today, a bailout was announced for the island nation of Cyprus.  As part of the arrangement, depositors in banks will pay a 6.5% "levy" on deposits under $100,000, and 9.9% on deposits above that.

The significance of the $100,000 mark is that it is the point where depositors are covered by Cyprus' version of the FDIC.  Granted, this is not the U.S., but Cyprus could be a nice testing ground for larger nations to judge whether or not similar actions could be taken and what public reaction they could expect.  In Cyprus, someone conveniently parked their bulldozer in front of a bank.

So...maybe people aren't going to take very kindly to the thought of having a 6.5% tax placed on their bank deposits after all.  Sorta makes you wonder why we need banks at all, doesn't it?