FedUpUSA

Archive for June 8th, 2011

One of the conclusions that I try to coax, lead, and/or nudge people towards is acceptance of the fact that the economy can’t be fixed.  By this I mean that the old regime of general economic stability and rising standards of living fueled by excessive credit are a thing of the past.  At least they are for the debt-encrusted developed nations over the short haul — and, over the long haul, across the entire soon-to-be energy-starved globe.

The sooner we can accept that idea and make other plans the better.  To paraphrase a famous saying, Anything that can’t be fixed, won’t. 

The basis for this view stems from understanding that debt-based money systems operate best when they can grow exponentially forever. Of course, nothing can, which means that even without natural limits, such systems are prone to increasingly chaotic behavior, until the money that undergirds them collapses into utter worthlessness, allowing the cycle to begin anew.

All economic depressions share the same root cause. Too much credit that does not lead to enhanced future cash flows is extended.  In other words, this means lending without regard for the ability of the loan to repay both the principal and interest from enhanced production; money is loaned for consumption, and poor investment decisions are made. Eventually gravity takes over, debts are defaulted upon, no more borrowers can be found, and the system is rather painfully scrubbed clean. It’s a very normal and usual process.

When we bring in natural limits, however, (such as is the case for petroleum right now), what emerges is a forcing function that pushes a debt-based, exponential money system over the brink all that much faster and harder. 

But for the moment, let’s ignore the imminent energy crisis.  On a pure debt, deficit, and liability basis, the US, much of Europe, and Japan are all well past the point of no return.  No matter what policy tweaks, tax and benefit adjustments, or spending cuts are made — individually or in combination — nothing really pencils out to anything that remotely resembles a solution that would allow us to return to business as usual.

At the heart of it all, the developed nations blew themselves a gigantic credit bubble, which fed all kinds of grotesque distortions, of which housing is perhaps the most visible poster child.  However, outsized government budgets and promises, overconsumption of nearly everything imaginable, bloated college tuition costs, and rising prices in healthcare utterly disconnected from economics are other symptoms, too. This report will examine the deficits, debts, and liabilities in such a way as to make the case that there’s no possibility of a return of generally rising living standards for most of the developed world.  A new era is upon us.  There’s always a slight chance , should some transformative technology come along, like another Internet, or perhaps the equivalent of another Industrial Revolution, but no such catalysts are on the horizon, let alone at the ready.

At the end, we will tie this understanding of the debt predicament to the energy situation raised in my prior report to fully develop the conclusion that we can — and really should – seriously entertain the premise that there’s just no way for all the debts to be paid back.  There are many implications  to this line of thinking, not the least of which is the risk that the debt-based, fiat money system itself is in danger of failing.

Too Little Debt! (or, Your One Chart That Explains Everything)

[Note: this next section is an excerpt from a recent Martenson Blog entry, so if this seems familiar to any site members, it's because you've seen it before.]

If I were to be given just one chart, by which I had to explain everything about why Bernanke’s printed efforts have so far failed to actually cure anything and why I am pessimistic that further efforts will fall short, it is this one:

There’s a lot going on in this deceptively simple chart so let’s take it one step at a time.  First, “Total Credit Market Debt” is everything – financial sector debt, government debt (federal, state, and local), household debt, and corporate debt – and that is the bold red line (data from the Federal Reserve). 

Next, if we start in January 1970 and ask the question, “How long before that debt doubled and then doubled again?” we find that debt has doubled five times in four decades (blue triangles).  

Then if we perform an exponential curve fit (blue line) and round up, we find a nearly perfect fit with a R² of 0.99.  This means that debt has been growing in a nearly perfect exponential fashion through the 1970′s, the 1980′s, the 1990′s and the 2000′s.  In order for the 2010 decade to mirror, match, or in any way resemble the prior four decades, credit market debt will need to double again, from $52 trillion to $104 trillion. 

Finally, note that the most serious departure between the idealized exponential curve fit and the data occurred beginning in 2008, and it has not yet even remotely begun to return to its former trajectory.

This explains everything.

It explains why Bernanke’s $2 trillion has not created a spectacular party in anything other than a few select areas (banking, corporate profits), which were positioned to directly benefit from the money.  It explains why things don’t feel right, or the same, and why most people are still feeling quite queasy about the state of the economy.  It explains why the massive disconnects between government pensions and promises, all developed and doled out during the prior four decades, cannot be met by current budget realities.

Our entire system of money, and by extension our sense of entitlement and expectations of future growth, were formed during and are utterly dependent on exponential credit growth.   Of course, as you know, money is loaned into existence and is therefore really just the other side of the credit coin.  This is why Bernanke can print a few trillion and not really accomplish all that much, because the main engine of growth expects, requires, and is otherwise dependent on credit doubling over the next decade.

To put this into perspective, a doubling will take us from $52 to $104 trillion, requiring close to $5 trillion in new credit creation each year of that decade.  Nearly three years has passed without any appreciable increase in total credit market debt, which puts us roughly $15 trillion behind the curve.

What will happen when credit cannot grow exponentially?  We already have our answers; it’s been the reality for the past three years.  Debts cannot be serviced, the weaker and more highly leveraged participants get clobbered first (Lehman, Greece, Las Vegas housing, etc.), and the dominoes topple from the outside in towards the center.  Money is dumped in, but traction is weak.  What begins as a temporary program of providing liquidity becomes a permanent program of printing money needed in order for the system to merely function.

Debt and Europe

The debt situation in Europe is fairly typical of the developed world and mirrors the debt chart of the US seen above.  There’s entirely too much debt, and most of the unserviceable amounts are concentrated in certain spots (i.e., PIIGS), while the amounts owed are concentrated in the German, French, and British banks.

This New York Times graphic did an excellent job of summing everything up:

(Source - click to view larger graphic at source) 

Here is a slightly less-complicated image that expresses the same dynamic:

If everybody owes everybody else, then kicking the can down the road only works if there’s more wealth, more growth, and sufficient economic activity down that road to service the past debts. If any one participant drops the baton in the debt relay race, the absurdity of the situation becomes unavoidable and the cause is lost.

When we hold this view, it is abundantly clear that adding more debt along the way only increases the burdens and is therefore ultimately counterproductive, although it does grant the gift of additional time to avoid facing the truth.  

When all of the most indebted countries are stacked up, we see that all but Russia carry a total indebtedness greater than 100% of GDP and that nine are carrying debt levels higher than any that have ever been repaid historically.

(Source) Note: 260% debt-to-GDP is the all time record for repayment, accomplished by England between 1815 and 1900, but required both massive cuts in spending and an industrial revolution. 

Without mincing words, the world does not face a crisis of liquidity, nor a crisis of insufficient debt, but one of entirely too much debt.  That’s the entire predicament in three words:  too much debt. 

More debt is only going to compound the predicament, yet that is what the world’s central banks and political structures are busy manufacturing.  More debt.

Of course, debt is only one component of the story; there are also liabilities to consider.  The above chart merely graphs the legally defined debts involved.  If we bother to add back in the liability components, which are pensions, social security and government medical plans, the predicament is seen to be three to six times larger: 

Whereas the prior chart showed all debts incurred by all sectors of each nation, the above chart only displays government debt and liabilities.  For reference, the red bars, above, are the amounts that you read about in the paper when commentators note that the US, for example, still has a debt-to-GDP ratio that is under 100%. It’s a comforting tale, but not an accurate description of the situation.

Again, there are no historical examples of any country ever digging itself out from so deep a hole, and yet we find that the entire developed world has bravely pushed itself deep into unknown territory, seemingly without any serious discussions about whether or not this made sense.

Where We Are Now

So here we are, just a few weeks away from the end of the second round of quantitative easing (QE II) , with massive public debts and liabilities having only grown larger instead of shrinking during the Great Recession, everybody in nearly the same boat, and no clear plan for how all the sovereign debts will be funded from current productive cash flows (i.e., existing GDP).

This is why so many commentators, myself included, are convinced that more thin-air money printing is on the way. My thesis, laid out back in early March is that the Fed will stop QE II on schedule and that the financial markets will react exceptionally poorly to this loss of support. Commodities will tank first, then stocks, then bonds; from riskiest and most-leveraged to least.

It is time to face the music; the levels of indebtedness now require permanent support from thin-air money in order to avoid a deflationary collapse. Given this reality, we explore key questions in detail in Part II of this report: Understanding the Endgame:

• How will the global debt crisis play out?
• What does a world economy without growth look like?
• What steps should we, as individuals, need to take in preparation?
• How can investors safeguard their purchasing power during the coming rout in the finanical markets?

Click here to access Part II of this report (free executive summary; paid enrollment required)  

Chris Martenson

Tens of millions of American families are about to go through economic hell and most of them don’t even realize it. Most Americans don’t spend a whole lot of time thinking about things like “monetary policy” or “economic cycles”.  The vast majority of people just want to be able to get up in the morning, go to work and provide for their families.  Most Americans realize that things seem “harder” these days, but most of them also have faith that things will eventually get better.  Unfortunately, things aren’t going to get any better.  The number of good jobs continues to decline, the number of Americans losing their homes continues to go up, people are having a much more difficult time paying their bills and our federal government is drowning in debt.  Sadly, this is only just the beginning.

Since the financial collapse of 2008, the Federal Reserve and the U.S. government have taken unprecedented steps to stimulate the economy.  But even with all of those efforts, we are still living in an economic wasteland.

So what is going to happen when the next wave of the economic crisis hits?

During one recent interview, Peter Schiff made the following statement….

If you look at the economic relapse that’s going on right now, look at Friday’s abysmal job numbers, look at the housing numbers, understand that all of this is taking place with record monetary and fiscal stimulus. What happens if we remove those supports?

At the end of June, the Federal Reserve’s quantitative easing program is slated to end.  The U.S. Congress and state legislatures from coast to coast are talking about budget cuts.  The amount of borrowing and spending that has been going on is clearly unsustainable, but will the U.S. economy start shrinking again once the current “financial sugar high” has worn off?

Already, all sorts of bad economic news has been coming out and all kinds of economic indicators are turning south.  The American people are becoming increasingly restless.  One new poll has found that 59 percent of the American people disapprove of Barack Obama’s handling of the economy (which is a new high).  According to another recent poll, 63% of Americans say that they feel “not good” or “bad” about how the U.S. economy is performing.

If most Americans had good jobs, could afford their mortgages and could pay their bills, the economy would not be such a big issue.

Unfortunately, times are really tough for American families right now and they are about to get a lot tougher.

*Jobs*

The official unemployment rate just went up to 9.1 percent, but that figure only tells part of the picture.

There are some areas of the country where it seems nearly impossible to find a decent job.  Millions of Americans have fallen into depression as they find themselves unable to provide for their families.

According to CBS News, 45.1 percent of all unemployed Americans have been out of work for at least six months.  That is a higher percentage than at any point during the Great Depression.

Just two years ago, the number of “long-term unemployed” in the United States was only 2.6 million.  Today, that number is up to 6.2 million.

Can you imagine being out of work for 6 months or more?

How would you survive?

Just look at the chart below.  What we are going through now is really unprecedented.  The average duration of unemployment in this country is now close to 40 weeks….

So will things get any better soon?  Well, there were only about 3 million job openings in the United States during the month of April.  Normally there should be about 4.5 million job openings.  The economy is slowing down once again.  Good jobs are going to become even more rare.

There are millions of other Americans that are “underemployed”.  All over the United States you will find hard working Americans that are flipping burgers or working in retail stores because that is all they can get right now.

Most temp jobs and most part-time jobs don’t pay enough to be able to provide for a family.  But there are not nearly enough full-time jobs for everyone.

Sadly, the number of “middle class jobs” is about 10 percent lower than a decade ago.  There are simply less tickets to the “good life” than there used to be.

*Homes*

But without good jobs, the American people cannot afford to buy homes.

Without good jobs, the American people cannot even afford the homes that they are in now.

U.S. home prices have fallen 33 percent since the peak of the housing bubble.  That is more than they fell during the Great Depression.

This decline in housing prices has caused a lot of problems.

28 percent of all homes with a mortgage in the United States are in negative equity at this point.  There are millions of American families that are now paying on mortgages that are for far more than their homes are worth.

Millions of American families literally feel trapped in their homes.  They can’t afford to sell their homes, and if they simply walk away nobody will approve them for new home loans for many years to come.

Many Americans are sticking it out and are staying in their homes until they simply can’t pay for them anymore.

As the number of good jobs continues to decline, the number of Americans that are losing their homes continues to rise.

For the first time ever, more than a million U.S. families lost their homes to foreclosure in a single year during 2010.

If the economy slows down once again and millions more Americans lose their jobs this problem is going to get a lot worse.

*Bills*

Even if they aren’t losing their homes yet, millions of other Americans families are finding it increasingly difficult to pay the bills.

Wages have been very flat over the past few years and yet the cost of most of the basics just seems to keep going up and up.

According to Brent Meyer, a senior economic analyst at the Federal Reserve Bank of Cleveland, the cost of food and the cost of energy have risen at an annualized rate of 17 percent over the past six months.

Have your wages gone up by 17 percent over the past six months?

As 2009 began, the average price of a gallon of gasoline in the United States was $1.83.  Today it is $3.77.

American families are finding that their paychecks are going a lot less farther than they used to, but Ben Bernanke keeps insisting that we have very little inflation in 2011.

Most Americans don’t care much about economic statistics – they just want to be able to do basic things like take their children to the doctor.

According to one recent survey, 26 percent of Americans have put off doctor visits because of the economy.

Sadly, soon a lot more American families will not be able to afford to go to the doctor.

According to one recent survey, 30 percent of all U.S. employers will “definitely or probably” quit offering employer-sponsored health coverage once Obamacare is fully implemented in 2014.

As the economic situation has unraveled, an increasing number of people are being forced to turn to the federal government for assistance.

One out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government.

Some of the hardest hit members of our society have been our children.  Today, one out of every four American children is on food stamps.

Back in the old days, a large percentage of American families were self-sufficient, but that is no longer the case.

Back in 1850, approximately 50 percent of all Americans worked on farms.

Today, less than 2 percent of Americans do.

So these days when American families can’t feed themselves what do they do?

They turn to the federal government of course.

At the moment, approximately 44 million Americans are on food stamps.

But our federal government cannot afford to spend money like this forever.

According to a recent USA Today analysis, the U.S. federal government took on $5.3 trillion in new financial obligations during 2010.  USA Today says that the U.S. government now has $61.6 trillion in financial obligations that have not been paid for yet.

Wow!

Who is going to end up paying that bill?

So with so much bad news, are our leaders alarmed?

Not really.

According to Federal Reserve Chairman Ben Bernanke, “growth seems likely to pick up somewhat in the second half of the year.”

Yeah, we’ll see how that prediction works out.

Others are not so sure that everything is going to turn out okay.

Recently, James Carville warned that we could literally see rioting in the streets if the economic situation does not turn around soon.  Just check out the last part of the video below….

The truth is that America is in decline.  Just like with all of the great empires of the past, our empire is starting to crumble too.

A recent article in the Guardian touched on some of the reasons for America’s decline….

The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.

The economic news is only part of the puzzle.  This country has rejected the ancient wisdom that was passed down to us and we have rejected the principles of our founding fathers.

We have piled up the biggest mountain of debt in the history of the world and yet somehow we expected that everything would turn out okay.

Well, everything is not going to turn out okay.

All of this debt is going to come down on us like a ton of bricks and the U.S. economy is going to continue to fall apart.  Millions of American families are going to lose their jobs and their homes.

Economic hell is coming.

You better get ready.

The Economic Collapse

Blatant and outrageous:

“If this rule goes through as it stands, the demographic of borrowers who get (favorable rates) will be white and wealthy,” said David Stevens, chief executive officer of the Mortgage Bankers Association and former commissioner of the Federal Housing Administration. “African-American, Latino and first-time home buyers will be charged higher prices.”

Stevens was commenting on 376 pages of proposed rules for “Qualified Residential Mortgages,” which would require a 20 percent down payment and limit a borrower’s debt payments to no more than about one-third of income.

So let’s see if I get this right.  Stevens is saying that if you’re not White then:

• You are consigned by your race to take on debt you cannot pay (exceeding 36% of gross income.)

• You are consigned by your race to not be able to save two hundred and fifty dollars a month (that is, because you’re black you must have that iPhone, you must have that beer, you must have that night out on the town even though you can’t afford it.)  Why $250/month?  Because that, for ten years, results in $30,000 in savings, which is 20% of a median $150,000 house, and if you make a roughly-median $50,000 in household income, you can then afford to buy said house.

If you start at 18 by the time you’re 28 you can buy that house.  By the time you’re 58, prior to your retirement at 65, your house is now paid off and owned free and clear.

What David Stevens, Chief Executive Officer of the Mortgage Bankers Association, has in fact said is that if you’re black, hispanic or a “first-time” homebuyer you’re too stupid to be fiscally responsible with your own money.

That is, by virtue of your race this man thinks you’re incompetent and thus you need to be able to do something even more stupid to be able to live in a home you cannot afford to actually buy.

Why is this sort of outrageous and blatant racism – by people like Stevens – tolerated in today’s world?

The Market-Ticker

• In yet another appellate decision on conditions precedent, the Florida Court of Appeals for the Second District overturned a decision of the Circuit Court for Charlotte County. The decision is:

  Konsulian v. Busey Bank, N.A, No. 2D10-2163 (Fla. App. 2nd Dist. June 1, 2011.)

***

• I would expressly note that litigants in other states might want to take particular note of conditions precedent cases in other jurisdictions where the express language of the mortgage provision is given. [emphasis in the original] In many instances, this language is uniform across jurisdictions. While an out of state case may NOT be authoritative in YOUR jurisdiction, the case is more influential when the facts are IDENTICAL.(1)

For more, see FL Court of Appeals Reverse Another Case on Conditions Precedent: Konsulian v. Busey Bank, N.A.

Representing the homeowner was attorney Gregg Horowitz, Sarasota, Florida.

Editor’s Note: A question remaining unanswered is whether the defect in this case makes the foreclosure judgment absolutely void (ie. void ab initio), or merely voidable??? My guess is that in this case, the property has not yet been sold at a foreclosure sale so that the rights of downstream, innocent 3rd party purchasers are not involved. In such a case, the distinction between void and voidable may not need to be addressed.

However, had the property been sold at a foreclosure sale, with title ending up (either as a result of the foreclosure sale, or a subsequent conveyance by a title-taking lender) in the hands of a 3rd party purchaser, the void-voidable determination becomes crucial in assessing the rights of such a purchaser. See Bay State High Court Hears ‘Ibanez’ Follow-Up Case Involving Unwitting 3rd Party Buyer Who Purchased Void Title On Improperly Foreclosed Home for an example of such a problem currently being considered in Massachusetts by the state Supreme Judicial Court (the state’s highest court).

(Given the nature of the defect in the foreclosure action at the center of the Florida case Konsulian v. Busey Bank, N.A (which is significantly different than the nature of the foreclosure defect in the Massachusetts case), I’ll shoot from the hip, take a wild guess and say the judgment in the Florida case would probably be found to be merely voidable, not void ab initio, in which case a 3rd party purchaser’s rights would be unaffected by the voiding of the judgment – provided, of course, the 3rd party purchaser otherwise qualifies as a bona fide purchaser).

(1) From the appellate court’s ruling, reversing the earlier ruling of Charlotte County Circuit Court Judge George Richards (bold text is my emphasis):

• Here, nothing in Busey’s complaint, motion for summary judgment, or affidavits indicates that Busey gave Konsulian the notice which the mortgage required. The language in the mortgage is clear and unambiguous. The word “shall” in the mortgage created conditions precedent to foreclosure, which were not satisfied. See Frost v. Regions Bank, 15 So. 3d 905, 906 (Fla. 4th DCA 2009).

  Under Florida law, contracts are construed in accordance with their plain language, as bargained for by the parties. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000). Further, Busey did not refute Konsulian’s defenses nor did it establish that Konsulian’s defenses were legally insufficient.

  Because Busey did not prove that it met the conditions precedent to filing for foreclosure, it failed to meet its burden, and it is not entitled to judgment as a matter of law.

  Reversed and remanded.

Home Equity Theft Reporter

 
Looks like at least one person in government is refusing to allow the fraud to continue, from the Washington Independent:

A committee of the Ingham County Board of Commissioners unanimously approved a plan to fund an attorney that will be dedicated to helping homeowners battle the growing number of foreclosures based on faulty documents.

In a meeting Tuesday night, the General Services Committee of the Board approved a contract worth up to $60,000 for Legal Services of South Central Michigan. That money will be used to pay an attorney full time to work with county residents caught up in the burgeoning cases of foreclosures based on bad documents.

Those documents have been identified as robo-signed documents from the now defunct company Docx in Georgia. Curtis Hertel, Jr, the county’s register of deeds, discovered the documents after seeing a 60 Minutes report on the company. Those documents, which Hertel says number more than 100, have been referred to both the Michigan Attorney General’s Office and the FBI. In addition, other questionable documents have been found, and Hertel says investigations into the documents are ongoing.

In related news a judge in Washtenaw County ruled on Tuesday that foreclosures involving any title exchanges controlled by Michigan Electronic Recording Systems, Inc. (MERS) were improper. That ruling could void thousands and thousands of foreclosures in the state because it is likely the bank or mortgage company had no legal right to foreclose on the property.

Michigan law requires each mortgage assignment — which means company A sells the mortgage to company B — to be registered with the country register of deeds office. MERS marketed itself as a company that would keep track of the transfers, without all the fees associated with filing assignments. Many of the mortgages were sold over and over again, but the judge ruled that MERS had failed to keep an accurate accounting of the assignments.

In short, no one knew who exactly owned the mortgage, and thus had the right to foreclose. Hertel said his office was contacting those homeowners who were affected by the fraudulent foreclosures.

“In all honesty, this is not just right for the people, it is right for the taxpayers,” Hertel said.

The ultimate goal, Hertel said of the proposal, was to force banks and lenders to the table to work out a new deal on the mortgage to keep the home owner in their home.

Hertel also announced he would be holding public meetings about the foreclosure crisis and the new program through the non-profit legal group in various Ingham county locations.

General Services Committee Chair Debbie DeLeon praised the move by Hertel.

“I am very proud of the fact that we have a register of deeds that is taking such a leading role where no one has led before,” DeLeon said after the meeting. “This is going to save people’s homes. It will be like a miracle.”

The entire County Commission will take up the resolution on Tuesday and is expected to approve it.

Contact Mr. Curtis Hertel, Jr. and tell him thanks for standing up for the rule of law.

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Ingham County Register of Deeds

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Please consider this interesting interview by Bloomberg columnist Al Hunt with Ron Paul on the debt ceiling, big government, and military spending.

Link if inline video does not play: Ron Paul Interview on Debt Ceiling

Select Interview Highlights

Al Hunt: Do you think Congress will pass an Extension.

Ron Paul: I do. This will go up until the last minute, then they will raise the debt ceiling.

Al Hunt: Your speaker John Boehner says he will absolutely insist on a dollar of spending reduction for every dollar the debt ceiling goes up. Do you take that seriously?

Ron Paul: I don’t take that seriously. President Reagan wanted 2 dollars of cuts. The deficit exploded. Do you think the American people will believe that we are going to cut in the future? The only budget that counts is this year. 10-year programs are pie-in-the-sky talking. This year our obligations are 5 trillion dollars.

Al Hunt: The idea of a spending cap that takes place in 10 years does not appeal to you?

Ron Paul: A 10-year spending cap is too little, too late. No one is going to believe it. All governments when they get this far into debt, default. They don’t default by not paying the bills. We will always pay the bills. The default comes from the devaluation of the currency.

Al Hunt: On Libya, Afghanistan, it looks like most are taking the John McCain line.

Ron Paul: Politically they are making a big mistake. I have been arguing to bring the troops home. I did not want them to go in the first place. The people now know we cannot pay for this. A lot of conservatives are coming to that direction. I’ve said over the years that I will win this argument because we will run out of money. That is how all great nations and empires end. They cannot afford it any longer, and that is what is happening right now. I have proposals that are different. As much as I am opposed to all spending, if you want to cut purposely in deliberate fashion, then have priorities. My priorities is cut all all foreign welfare and foreign militarism, and corporate welfare before you go after child healthcare. That sells. You don’t have to just address health-care for poor people, rather than looking at atrocious spending overseas.

Al Hunt: You would bring home troops from Afghanistan, Libya, Pakistan?

Ron Paul: Res, I believe in strong national defense and that hurts our defense. I would bring them all home. We have no reason to be there. The soldiers we have in Korea went there when I was in high school. How long are we going to stay there?

Al Hunt: Do you see any other candidate [for president] who is talking about a full audit of the Federal reserve?

Ron Paul: No way. But they won’t laugh as much as they did last time. They won’t laugh any longer. Just think of the difference no on the attitudes of the people on the Federal reserve.

Al Hunt: Is the Federal Reserve in retreat?

Ron Paul: (laughing) Have you ever anticipated over the years, Bernanke would be holding press conferences defending his position? He can’t defend it because it is a failed policy. You can’t print money to get yourself out of trouble. Grade school kids know this. We will win when the system comes unglued.

Bernanke’s Self-Serving Lies

The Ron Paul interview was recorded June 3. Bernanke poured on the lies yesterday in his US Economic Outlook. Bernanke tried to absolve the Fed of all guilt. Please see Bernanke’s Self-Serving Bold-Faced Lies for details.

In regards to spending in general and military spending in particular, Ron Paul is correct. This is “how all great nations and empires end”.

A similar sounding statement attributed to Margaret Thatcher goes like this: “The problem with socialism is that eventually you run out of other people’s money to spend.” The statement is true whether or not Thatcher ever said so explicitly.

Republicans need to stop US militarism and focus on the US economy.

In regards to the debt ceiling, unfortunately I too think Boehner will cave. Please see my video discussion on Yahoo Finance regarding the debt ceiling and the bond market: Debt Ceiling Discussion on Daily Ticker with Mish, Aaron Task, Henry Blodget: Will the Bond Market Eventually Force Congressional Hands?

Mike “Mish” Shedlock
Global Economic Analysis