 | | The Daily Reckoning | Monday, November 21, 2011 | - Super-committee debt talks break down...shocker!,
- Second passports, offshore bank accounts, gold and more,
- Plus, Bill Bonner on the problem of too much debt...and all that the feds can't do to fix it...
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|  | | | | Through the Looking Glass | | The Mortal Enemy of Truth Strikes Again |  | | Joel Bowman |
Joel Bowman, reporting from Buenos Aires, Argentina...
"If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State."
-- Joseph Goebbels, Chief Nazi Propagandist
Another political fix has gone awry. Shocker.
Here are a few headlines you could have imagined months ago...
"US Stocks Fall As 'Super-committee' Deadlock Spurs Selloff," says the Wall Street Journal.
"'Super-committee' on Brink of US Deficit Failure," chimes the BBC.
And, adds the ABC, trying to sound ominous, "'Super-committee' Failure Prompts Fear of 'Devastating' Pentagon Cuts."
Bread and circuses. Circuses and bread. It's a wonder anybody still has an appetite.
How did anybody, anywhere, ever think that something called a "super committee" was going to be able to do anything other than exacerbate a given problem. Committees of the sort that convene in Washington DC and Brussels are the cause of problems, not the solution. Certainly panels of policy wonks and well-degreed experts must have convened at every stage of the debt build up in the United States and, for that matter, over in Europe. Did that stop the reckless spending? No. Did it stop the various states, not so dissimilar from each other at their rotten cores, from exceeding serviceable debt limits? Of course not.
And why? It's simple. Because they -- the members of these super duper committees -- are part of the problem. They draw a paycheck from the state...they slave for the state...their bosses are just more powerful parts of the state. Underlings who don't tow the line soon get replaced by someone who will.
In a world under state rule, black is white and white is black. It is a world seen through the looking glass, where the "Department of Defense" becomes the "Department of Offence," "Department of Education," the "Department of Indoctrination." It's an Orwellian, Newspeak world in which "quantitative easing," means money printing, where "homeland security" means fear and insecurity and where something called a "Social Security Trust Fund" is neither secure...nor funded...nor to be trusted.
Few men in modern history were more acutely aware of -- and able to exploit -- the state's strengths and weaknesses than Nazi propagandist, Joseph Goebbels. "The truth is the greatest enemy of the state," he said. Goebbels was a horrid little man, no doubt about it. But he was also right.
"Think of the press as a great keyboard on which the government can play," he once remarked.
But for all the wicked lies inflicted on free men and women, there is an especially wicked place reserved for those who would engage in war propaganda. It takes a lot of lying, a lot of indoctrination, a lot of spin and hoodwink to convince a man to kill a perfect stranger...and to feel proud about having done so. Alas, the state is all too frequently up to the task. We addressed this point last week, in Part I of a discussion on freedom that we recently presented to a conference at La Estancia de Cafayate.
"How many people," we wondered, "would feel compelled to battle on foreign lands, the whereabouts of which were heretofore unknown to them, to slay "the enemy," to lay waste to husbands, fathers and brothers they have never before met, to Napalm fields, Agent Orange crops, to litter terrain afar with landmines, if they didn't believe the patriotic claptrap with which their State ceaselessly indoctrinates them?"
But even through the obscured lens of political propaganda and statist indoctrination the truth sometimes shines. Often, it takes immense courage to accept it, which makes it all the more worth hearing and spreading.
Shortly after we published Part I of the freedom discussion, we received the following piece of reader mail. We were so moved we thought we'd share it with you today (name and identifying details have been withheld).
As a 70 year old veteran of the Vietnam war who commanded a tank
platoon [...] near Pleiku in 1966, I want to tell you that your article addressing Statism speaks directly to the ghosts that follow most combat veterans after leaving the service.
As you grow old and watch your nation use its armed force to support
imperialistic-appearing activity...you become less enamored with your past combat activities and move into a state of wondering if you prostituted your values for a less than noble cause. You were involved in group activities that you would have never participated in on an individual basis.
I have often felt -- perhaps naively, but sincerely -- that if I had 5 minutes to talk to a Viet Cong that I was trying to kill we could have become friends...
The truth is not supposed to be comforting, Fellow Reckoner. It is supposed to be real. Without it, Statism, the mortal enemy of truth, is left to flourish...often with dire consequences.
What follows is the second half of a lightly edited version of the speech we gave in Cafayate. Please enjoy...
| | | The Mother of All Financial Bubbles is Just Now Starting to Pop...
The wild ups and downs in stocks and gold aren't due to any single factor.
Everything's shooting up and falling down because we're witnessing a bubble start to pop that's been expanding for decades. It's time you learned the truth about what's happening. Click here.
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| | | | | | | The Daily Reckoning Presents | | Freedom: The New and Future Experiment... Part II | | | | Joel Bowman |
What if the "best of the States" is always on its way to becoming "the worst of States"?
It is true, of course, that certain forms of Statism are more overtlyaggressive than others (though all seek to administer the ultimate punishment for political apostasy, one way or another). Some governments exercise control over their citizenry in subtle ways, like granting them the "privilege" of carrying an identifying document when said citizen chooses to exercise his natural right to travel freely.
Other regimes, however, are not so subtle in their use of coercion. They stone women to death for baring an inch of skin, force those of a certain race into internment camps, and/or execute political opponents at will...among many other atrocities.
This type of the State, according to most folks, constitutes the worst of all evils.
But what if the State, itself, is the "worst of all evils?" What if the State is genetically predisposed to malevolent mutations? What if even the "best State" -- the one that begins its life, nobly, as a constitutionally constrained republic, dedicated to protecting and promoting "life, liberty and justice for all" -- is really, at all times, on the road toward the most evil, militaristic expression possible?
What if force can only beget more force, in other words, coercion only more and greater coercion?
And, more importantly, where does that leave us, goose-stepping down the road to perdition?
Today, in the most powerful nation the planet has ever seen -- a mighty behemoth with military arsenal capable of exterminating the entire human population many, many times over -- more than 45 million of its own citizens live on food stamps, barely able to get by. That many again are supported directly by the State, that grand experiment we've devoted six thousand years to testing, but which we still don't quite understand.
And how is that experiment, however noble its genesis, working out? Well, take a look around.
I'd like to cite just a few troublesome data points that appeared as part of a much longer list in a recent Daily Reckoning.
- According to the US Census Bureau, the percentage of "very poor" rose in 300 out of the 360 largest metropolitan areas during 2010.
- Last year, 2.6 million more Americans descended into poverty. That was the largest increase yet seen since the US government began keeping such statistics on back in 1959.
- Today, 15.1% of all Americans are living in poverty.
- The poverty rate for children living in the United States increased to 22% in 2010.
- There are 314 counties in the United States where at least 30% of the children are facing food insecurity.
- In Washington DC, the "child food insecurity rate" is 32.3%.
- It is being projected that approximately 50 percent of all US children will be on food stamps at some point in their lives before they reach the age of 18.
- And the situation is worsening at the other end of the demographic chart, too. One out of every six elderly Americans now lives below the federal poverty line.
- More than 50 million Americans are now on Medicaid. Back in 1965, only one out of every 50 Americans was on Medicaid. Today, approximately one out of every 6 Americans is on Medicaid.
- One out of every six Americans is now enrolled in at least one government anti-poverty program.
- The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.
The Old Experiment is faltering, even as we sit here today, surrounded by the picturesque landscape of "Doug's Gulch." 
I suspect it is for this very reason many of you are here today. You see the writing on the wall.
So, where to from here? Can we discount the State entirely?
There are, of course, those who argue that the solution rests in going back to a gold standard, or back to the constitution.
What these people are really saying is that they want to start the Old Experiment over, an experiment that, demonstrably, has not only failed, but will end in absolute disaster for those who cling to its now baron promise of redemption.
We had a gold standard. Did that stop the government from abandoning it the moment it needed to inflate the currency to pay for its military misadventures abroad?
We had a Constitution. Did that stop the government from abandoning it, from circumventing the restrictions therein? Where is operation "Shock and Awe" in the Constitution? How about the authority to carry out programs like "universal medicine" or "cash for clunkers." Where is the amendment that empowers the Treasury Secretary to send billions of dollars to his former Wall Street employer?
Do presidents consult their worn, dog-eared copy of the Constitution when they decide to march off to war or to effectively nationalize this or that sector of the economy?
Of course not.
Murray Rothbard, the man who coined the phrase "anarcho-capitalist," perhaps summed it up best in his work, For a New Liberty, when he wrote:
"The idea of a strictly limited constitutional State was a noble experiment that failed, even under the most favorable and propitious circumstances." (And remember, this is from a book published back in 1973, almost forty years ago. Even then, the course of events was becoming obvious, if only to a few.)
"If it failed then," he continues, "why should a similar experiment fare any better now? No, it is the conservative laissez-fairist, the man who puts all the guns and all the decision-making power into the hands of the central government and then says, 'Limit yourself'; it is he who is truly the impractical utopian."
Meanwhile, back in impractical utopia...
Protesters are arrested by the hundreds in New York and elsewhere across the country.
Lemonade stands and bake sales across the nation are being shuttered and reams of rules and nosey-by-nature regulations are strangling small and medium businesses (and, along with them, any hope of genuine recovery).
You're subject to indecent searches -- "gate rapes" -- at the airports and even now, I hear, on State highways and train systems.
You are guilty until proven innocent. Due process be damned.
The question, then, is how do we escape or avoid the State, this most vicious and insidious enemy to freedom?
How do we begin the New Experiment?
Well, first we must recognize that, like the monster under our beds when we're children, the State only exists to the extent that we permit it to.
Without our continued support, both financially, through failing to protect our private property from expropriation at the hands of the State, the IRS, and politically, through our validating participation at the ballot box, the State ceases to exist.
It NEEDS us.
And it is up to us, therefore, to starve the monster, to take our own freedom back from the jaws of the beast.
How best to do this?
However tempting it might be to simply "lynch the bastards" (and, for the bloodthirsty among you, that might be coming anyway) we must realize that force and violence is not the answer, or at least not the best answer. You don't fight fire with fire, unless you want an inferno.
In the same way, there's little point in fighting violence with violence. For one thing, it's stupid. It's a no-win game. Violence is the State's specialty. They have the guns, the jails, the cops, the first responders, the TSA goons, the DEA, SEC, FDA, EPA, IRS and all the rest.
They have cornered the sociopath market, in other words.
Fortunately, we can do much better than that. We can do better than to play right into their clenched fists.
Revolution of the kind brewing amid the Occupy Wall Street camp and the Tea Party movement is probably not the answer either.
What kind of freedom are we seeking if it may be only be granted by those who appoint themselves our masters? Are we really going to prostrate ourselves on the steps of Capitol Hill or in the foyer of Goldman Sachs like some servile zombie and beg for freedom? That kind of subservience only serves to strengthen and validate the perverse, master slave notion they want to perpetuate.
Actually, revolution, in any form, is not the answer at all. We've tried that. We try it when any State begins to falter...then we go and erect another State to replace it.
By definition, revolution simply means returning to the beginning, to the point of origin. No wonder they say history repeats itself, or that it at least rhymes...We've been running and re-running the same experiment over and over again, always expecting a different result -- the very definition of insanity.
You'd think that, after 6,000 years -- and a body count in the hundreds of millions -- we'd give up on the State and try something different.
We don't need to revolve, in other words, we need to evolve.
But that takes courage. It's not easy to clap when everyone is booing. It's not easy to stand up when everyone around you seems content to live their lives on their knees.
The good news is that the State is already falling apart. The bad news is that it will likely try to take you with it. That has been, and continues to be, the glaring lesson of history.
In Europe and the United States, the people are beginning to see that their emperors -- and their empires -- have no clothes. The welfare/warfare State is broke, broken and fast running out of options.
But these people, these occupiers and tea partiers, by and large, are not going after the State...they are going after each other! They are demanding more State power, not less.
As such, you ought to expect higher taxes. Expect capital controls. Expect more and greater restrictions on the freedom of your movement.
And expect riots, as we are already seeing, of growing intensity.
It is not an exaggeration to say your window of opportunity is already closing. And one cannot stress that point enough.
But there is a silver lining to this dark, statist cloud. And it comes, in large part, with the power of communication. It comes with the spread of ideas -- ideas of freedom and of ways to achieve it.
In the same way that Gutenberg's printing press of the late 1400s acted as an "agent of change" in Europe, the Internet is today providing opportunities for the dissemination of ideas like we have never before seen.
Love them or hate them, Internet-based, decentralized organizations like WikiLeaks and Anonymous are operating more and more brazenly by the day, exposing the lies and corruption of the State for millions to see.
The idea, again, is not to overwhelm with force and violence, but to undermine with truth and ideas.
It is true that the State has the guns, but we have the information and, with the advent of the Internet, the means to distribute it.
We live in an age where a child in sub-Saharan Africa can access information published on the other side of the world almost instantaneously...where groups of likeminded individuals can coordinate and share ideas in real time across artificial borders erected by warring, small-minded politicians, where young entrepreneurs in South America can do business with start-up companies across the Pacific, trading cyber currencies well beyond the reach of their respective governments, thereby denying these criminal organizations the financial lifeblood they need to exist.
Now, like perhaps no other time in history, we have a chance to spread the word of freedom quicker and further than any time before.
And freedom, you'll notice by looking around the room, is a catchy tune. Once you've got that idea in your head, you can't shake it. And the world begins to look very different indeed.
On a personal level then, what can you do, now...today.
You should begin, immediately, diversifying yourself across borders. You should open a bank account in a foreign country. You should do that immediately. Uruguay, sometimes know as the "Switzerland of South America," is a reasonably good option that requires little paperwork. You can set up an account there in a few hours. Maybe that's not ideal for your own circumstances but, in any case, you should look into moving funds abroad quickly.
You should also consider working towards obtaining a second passport.
And obviously, you should be holding a significant portion of your portfolio in precious metals -- real money, in other words. They should be hard to get at. Not for you, but for anyone else, including, especially, anyone brandishing a government badge of some description.
How much? That depends on your individual circumstances, but I'm inclined to agree with Byron King, who writes Outstanding Investments, when he says between 15-20% of your portfolio in precious metals, more if your individual circumstances warrant it.
I'd also be looking at foreign real estate, mostly because it's difficult, if not impossible, for your government to get its hands on. Plus, it provides you with a "Plan B" if things really go awry...and I think there's a better-than-average chance they will, both in Europe and in the U.S.
Other than that, you want some of what my friend and colleague, Chris Mayer, calls "dry powder." That's cash on the sidelines -- hedged across multiple currencies -- that you can liquidate quickly to take advantage of deep value, crisis investments. And I do believe there will be many such opportunities for geographically nimble investors in the next 3-5 years.
And finally, a kind of quirky idea that I think is worth mentioning.
Get some mates.
I don't mean people you know from work or second cousins...I mean people who are similarly, independently minded, who are curious and who ask questions, who are not prone to imbibe the bread and circus sideshows they see on television.
Get these people together and begin an informal meeting group where you can share ideas. They might be start up businesses ideas, investment opportunities or just good book recommendations. Doesn't matter. Find some kindred spirits. You'll see they are an invaluable resource during times of crisis.
I'm part of such a group in Buenos Aires, founded, in large part, at Doug's suggestion and introductions.
We have doctors, engineers, software technicians, artists, writers, energy consultants, entrepreneurs and a whole host of talented people all sharing ideas and trying to figure ways to live freer, better lives.
You can do this at home, in your local communities, online, here in La Estancia, wherever...but I can't recommend the activity highly enough.
It's sad to have to say that...but...
In a world where violence is the norm, peaceful assembly and voluntarism have become extremist positions. I encourage you, in this respect, to become an extremist.
In a world ruled by guns and brute force, ideas of liberty and freedom are indeed our greatest tools. It's time we started sharing them.
Thank you.
Joel Bowman,
for The Daily Reckoning
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| | | And now over to Bill Bonner with the rest of today's Reckoning
from Baltimore, Maryland... | | The Economy Has Changed | | Expect Hopes, Dreams and Lifestyles to Follow |  | | Bill Bonner |
Not much action in the markets on Friday. It was a helluva week, though. At the beginning it looked like Europe wouldn't make it to the end. Yields were rising to dangerous levels. Greece was clearly bankrupt. Italy would fall too, unless Germany came to the rescue. And investors weren't too sure about France.
But as the week progressed investors calmed down. Or, at least they got used to being frightened. "Maybe they'll muddle through after all," they said to themselves.
And so the week ended. Nothing decided. Nothing resolved. More questions than ever.
Now, almost everyone has come around to our way of seeing things. In report after report, we see economists and analysts conceding that we're in for a long spell of trouble. Official reports and estimates show next year's GDP barely growing. Unemployment forecasts show the number of people without jobs staying high for years.
Most analysts now also recognize that 1) the real cause is too much debt, and 2) the feds can't do much about it.
Here's the New York Times with a typical hard-luck story:
Every year, young adults leave the nest, couples divorce, foreigners immigrate and roommates separate, all helping drive economic growth when they furnish and refurbish their new homes. Under normal circumstances, each time a household is formed it adds about $145,000 to output that year as the spending ripples through the economy, estimates Mark Zandi, chief economist at Moody's Analytics.
But with the poor job market and uncertain recovery, hundreds of thousands of Americans like Ms. Romanelli (and her boyfriend, who also lives with his parents) have tabled their moves. Even before the recession began, young people were leaving home later; now the bad economy has tethered them there indefinitely. Last year, just 950,000 new households were created. By comparison, about 1.3 million new households were formed in 2007, the year the recession began, according to Mr. Zandi. Ms. Romanelli, who lives in the room where she grew up in Branford, Conn., said, "I don't really have much of a choice," adding, "I don't have the means to move out."
Ms. Romanelli, who works as an assistant editor at Cottages & Gardens magazines, is one of the luckier "boomerang" children who have found jobs and at least can start saving for their own place someday. As of last month, just 74 percent of Americans ages 25 to 34 were working. It is perhaps no wonder then that 14.2 percent of young adults are living with their parents, up from 11.8 percent in 2007. Among young men, 19 percent are living with their parents.
But even some young people who can afford to move out have decided to wait until getting on more solid footing. Prudence, not necessity, has kept them at home.
Jay Bouvier, 26, has a full-time job teaching physical education and health and coaching football and baseball at a high school in Hartford, near his parents' house in Bristol. He could rent his own apartment -- after taxes he makes about $45,000 a year, he says -- but has decided not to. He says he will stay with his parents until he has saved enough to buy his own house.
"I have it pretty good at home, since it's so close to my work, and financially I just feel like it's smarter for the long run to buy," he said. He says that living with his parents enables him to set aside about half of each paycheck.
"It's like I pay rent, but to myself."
You see, it's not just the economy that has changed. So have attitudes. Hopes. Dreams. Plans.
"Markets make opinions," say the old timers. This market is turning Americans into a nation of pinch-pennies and stay-at-homes.
And more thoughts...
With the whole world economy in a bit of a funk you wouldn't expect oil to be over $100 and gold to be over $1,700. Or would you?
As to oil, much of the emerging world is still growing strongly. Over the last 4 years, for example, China has grown 70 times faster than the US. That's a lot more income in a lot more pockets in China. And that's a lot of people who want to use from energy. It's only natural that the price goes up...because supplies are sluggish; they can't increase as fast.
There are also growing numbers of people who suspect the US and Israel are about to start another war. The Republican candidates are talking about Big Sticks. They expect to get money from the defense industry...and votes from the lumpen voters... by promising to throw their weight around overseas.
A war with Iran might be hard to contain. At the very least, you'd expect the price of oil to soar...which would almost certainly seal the deal on a worldwide depression.
As to gold, it appears that governments are buying. Here's the Bloomberg report:
LONDON—Total central-bank gold purchases in the third quarter more than doubled from the second quarter and were almost seven times higher than a year earlier as countries continued to diversify reserves, according to a World Gold Council report.
At 148.4 metric tons, gold buying among central banks was at the highest since the sector became a net buyer of the precious metal in the second quarter of 2009, according to the quarterly report.
Central banks and other official institutions, by comparison, had bought 66.5 tons of gold in the second quarter and 22.6 tons in the third quarter of 2010.
*** A man in India was marrying his daughter. His old friend attended the wedding and noticed that the husband came from a different, and inferior, caste.
"Doesn't it bother you that he's from a different caste," he said to the father of the bride.
"What? Different caste? She works for the Morgan Stanley. He works for Goldman Sachs. Same caste."
And now the global financial Brahmins are on the case. Monti, Draghi, Papademos... 'technocrats,' the papers call them.
And US. Treasury Secretary Geithner too. Right schools. Right jobs. Right responses. As head of the New York Fed he was right there when the biggest bubble in history was created. He made no objection. He raised no alarm.
And then, when the bubble burst he was at the scene of the crime again...with the rest of his caste. At the height of the crisis in '08, Lloyd Blankfein visited him 39 times. He spoke to the Goldman chief more often than he spoke to his own chief -- US president Barack Obama.
This elite caste invented derivatives and sub-prime mortgage debt. Now, they pretend to solve the problems they caused.
Regards,
Bill Bonner,
for The Daily Reckoning
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