By Ron Paul
Last week, the Federal Reserve responded to Wall Street’s coronavirus panic with an “emergency” interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month. More rate cuts would drive interest rates to near, or even below, zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost. But, it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government “stimulus” spending. Boston Federal Reserve President Eric Rosengren has suggested that Congress allow the Federal Reserve to add assets of private companies to the Fed’s already large balance sheet. Allowing the central bank to buy assets of, and thus assume a partial ownership interest in, private companies would give the Federal Reserve even greater influence over the economy. It could also allow the Fed to advance a political agenda by, for example, favoring investment in “green energy” companies over other companies or refusing to purchase assets of retailers who sell firearms or tobacco products. Mr. Rosengren’s proposal to allow the central bank to “invest,” in private companies seems like something one would hear from democratic socialists like Senator Bernie Sanders. This is not surprising since the entire Federal Reserve system is a textbook example of socialism. The essence of socialist economics is government allocation of resources either by seizing direct control of the “means of production” or by setting prices business can charge. Federal Reserve manipulation of interest rates is an attempt to set the price of money. Federal Reserve attempts to set interest rates distort the signals sent by the rates to investors and business. This results in a Fed-created boom, which is inevitably followed by a Fed-created bust. Economic elites benefit when the Federal Reserve pumps new money into the economy because they have access to the money created before there are widespread price increases. Artificially low interest rates also facilitate the growth of the welfare-warfare state. The Federal Reserve’s inflationary policies harm the average American by eroding the dollar’s purchasing power. This forces consumers to rely on credit cards and other forms of debt to maintain their standard of living. Many Americans are unable to afford their own homes because they are saddled with student loan debt that can even exceed their income. Since the bailouts of 2008, there has been a growing understanding that the current system is rigged in favor of the elites and against the average American. Unfortunately, popular confusion of our system of Keynesian neoliberalism with a free-market economy, combined with a widespread entitlement mentality, has led many Americans to support increasing government control of our economy. The key to beating back the rising support for socialism on both the left and right is helping more people understand that big government and central banking are the cause of their problems and that free markets in all areas — and especially in money — is the solution. It is important that the liberty movement put pressure on Congress to cut spending and rein in or, better yet, end the Fed.
In yet another example of President Trump continuing the bad policies of President Obama, the Administration announced it would grant $125 million in new anti-artillery radar and military patrol ships to Ukraine. Maybe a military distraction will take minds off of rocky financial waters and a coronavirus that has the world in a panic?
Close observers of the un-constitutional and immoral Federal Reserve realize that there is trouble in the central planners paradise. As happens with all attempts at trying to micromanage the world, the point is finally reached where the micromanagers are completely overwhelmed by problems of their own making. When the final story of The Fed is written, it will be no different than the unnecessary and foolish central planning schemes of the past.
Three provisions of the USA PATRIOT Act are set to expire on March 15th and many in Congress are scrambling to keep government surveillance of innocent Americans alive. Others are pushing for reform. We are pushing for euthanasia. Today we look at what is expiring and what is likely to be done about it.
By David Stockman It doesn’t get any more pathetic than this. The Fed cuts the absurdly low money market rate by another 50 basis points at 10AM and before noon the Donald is banging the podium for more. So if you ever needed a final warning to get out of the casino, today’s back-to-back eruption of financial insanity from the two most powerful economic actors on the planet should be it. Even then, we might be inclined to give the Donald a tad bit of slack. After all, he’s an absolute dunderhead on economics and spent a lifetime as a leveraged real estate speculator, where, in fact, lower rates are always, but always, to be welcomed when you’re rolling the dice with other people’s money. Still, it doesn’t get any more primitive or dangerous than the Donald’s current conviction that the price of money should be graduated lower based on the current year international league tables of GDP growth or the level of presidential braggadocio, as the case may be. Effectively, however, the tiny posse of fools who run the ECB and the BOJ are burning down the financial foundations of their own economies. So the Donald insists we burn down ours, too. Folks, that’s the sum, substance and full extent of his “thinking”: “As usual, Jay Powell and the Federal Reserve are slow to act. Germany and others are pumping money into their economies. Other Central Banks are much more aggressive,” Trump said, referring to the Fed chairman. By contrast, the empty suite and sniveling coward who announced today’s emergency 50 basis point cut deserves no quarter whatsoever. The man is so petrified of a hissy fit by the boys, girls and robo-machines in the trading pits that he has just plain abandoned any pretense of rational financial thought. In fact, you could dismiss his meandering comments at the post-announcement presser as risible drivel and be done with it. Except, except....Powell and his merry band are so drunk with financial power that they now believe any ragged, threadbare, illogical excuse to display their muscle and placate the crybabies and bullies of Wall Street is all that’s required. That is, there are no trade- offs, no risks—just cut and print, rinse and repeat. Thus, spake Pusillanimous Powell, averring that the central bank’s action would provide-- “....a meaningful boost to the economy” by loosening financial conditions and shoring up business and household confidence. Needless to say, this is group think run amuck. There is apparently no longer a single Fed head who understands that interest rates are not merely one-way control dials, which exist solely to enable the FOMC to fine-tune the path of the nation’s $22 trillion GDP. Somewhere over the last decades of Keynesian central banking, the truth that savers are being harmed every time the Fed pleasures Wall Street speculators with another rate cut has been lost completely. So has the notion that rate signals intended to encourage homeowners to buy a house or businesses to build a plant also foster ever more carry trade speculation on Wall Street and reward C-suites for investing in Wall Street pleasing buybacks and M&A deals, not productive investment in plant, equipment, technology, intellectual capital and human resources. Accordingly, we have now reached the point were the Fed is no longer even in the business of safeguarding sound money and financial system efficiency and stability. Instead, it’s morphed into a grand macroeconomic underwriter, purporting to insure the US economy against any and all bumps in the road, regardless of their origin. We already had them insuring against the Donald’s Trade War madness with 3 rate cuts last summer. Then with their repo facility madness in the fall, they were essentially insuring against the adverse rate and growth impacts of Washington’s borrowing binge. And now they are throwing the untoward impacts of plagues and flood onto their underwriter’s table. So presumably anything could be next—even a mass outbreak of hangnails and toe fungus. In fact, the true nature of central bank intervention in financial markets is just the opposite. To wit, tampering with asset prices is the most dangerous and potentially destructive thing any agency of the state could undertake because it fuels greed, recklessness, speculation, malinvestment and economic errors throughout the length and breadth of the system; and, to paraphrase Keynes’ famous observation about inflation, in ways that not one in a million could possibly comprehend. In other words, what was announced this morning had nothing to do with central banking by any even loose historical definition of the term. It was actually another, even more over-the-top exercise in monetary central planning of the GDP and all that is subsumed under its $22 trillion girth. But why in the world would anyone—even arrogant, self-regarding Fed heads—believe they can comprehend the infinite complexities and feedback loops of the GDP? That is, the $22 trillion here and the $85 trillion worldwide economy in which it is intricately and intimately intermeshed. Yet if you presume to know that a 1.05% money market rate rather than a 1.55% rate will produce optimum economic outcomes under the shadow of Covid-19 uncertainty and disruption, then you positively do need to comprehend all the highways and bi-ways weaving through $22 trillion of input/output tables that only crudely comprehend the blooming, buzzing mass of activity which is actually the US economy. Self-evidently, the Fed heads no longer even try to explain the macroeconomics of rate-cutting when they are cheek-by-jowl with the zero bound. They just assert ex cathedra that it will do some good—and not even from the actual quantitative flow economics that the Fed historically avowed. That is, back in the day, if credit was not flowing to homeowners because high rates made borrowing prohibitive, it turned the rate dials lower in order to reduce bank disintermediation and thereby give S&Ls the means to lend, home-buyers the incentive to borrow and home-builders a boost to their order books. And, by contrast, if rates got so low as to cause building activity to skyrocket, thereby fueling rampant wage, lumber and building lot inflation, they proceeded to dial up rates to cool things down. We think the powers of the free market were always up to the task of credit flow regulation on their own: Freely mobilized interest rates always clear markets and bring forth more savings if needed, and more credit demand where economics require. So central bank regulation of credit flows was never really necessary, but here’s the thing: In the present regime of massively subsidized and mispriced capital which the world’s central banks have fostered, there simply isn’t any credit flow channel to regulate. Debt capital has become virtually unlimited and tantamount to free so there simply are no interest rate or credit supply barriers to spending and investment. Likewise, the world economy has become so over-invested and malinvested in physical production capacity that the old-fashioned “demand-pull'” inflation just doesn’t happen. Or at least until now it hasn’t because the subsistence rice paddies and villages of the developing world had not yet been drained of cheap labor. That’s why today’s monetary central planners don’t even talk about credit flows to the main street economy any more. There is no problem there for their ministrations to solve. Instead, they talk about “easing financial conditions” and “supporting financial confidence”. That is to say, monetary policy is no longer even about money or credit; it’s an exercise in state-directed psy-ops. And when you look into the real purpose of Fed psy-ops, which was the explicitly acknowledged purpose of today’s emergency rate cut, you quickly come to understand why Wall Street has morphed into a casino and the Fed its dutiful handmaid. To wit, “easier” financial conditions mean low credit spreads and high stock prices or “risk on”. By contrast,”tighter” financial conditions are defined by widening credit spreads and falling stock prices and PE multiples and “risk off”. Needless to say, in today’s debt-entombed main street economy, the Fed’s psy-ops with respect to “financial conditions” are neither here nor there. No wannabe homebuyer is influenced by the Fed’s psy-ops and no businessman stocks or destocks inventories or adds or subtracts from CapEx budgets based on whether the casino has been coaxed into a temporary risk-on or risk off mood by the Fed heads. Stated differently, Fed policy is now almost exclusively about keeping stock prices high and rising, and nipping any even half-assed effort at correction in the bud, and violently so. Self-evidently, today’s grand exercise in psy-ops failed spectacularly and like never before. The casino shifted by 1200 Dow Points between the post-cut announcement high and the intra-day low. And in the wrong direction! Moreover, that bust comes on top of the 4800 Dow point plunge from the February 19th high to the February 28th intra-day low, which was followed by a 2000 point rise from last Friday’s low to Monday’s insane closing high. In other words, the Fed long ago exited the sound money business. After the great financial crisis and its balance sheet pumping spree thereafter it also existed the credit flow control business. And with today’s monumental error, it has now, apparently, euthanized its psy-ops tool, as well. In the days ahead we will elaborate on the truly dangerous new financial world that now exists in the wake of the Fed’s self-defenestration. But in the meanwhile, Gary Kaltbaum captured the madness now loose in the land in his trenchant commentary issued immediately after the Fed’s announcement: Powell lowered rates in the past few minutes because the market was heading lower today. He wasn’t going to make the move today until he saw the DOW down 300 early. This is not about a virus. This is not about an economy. This is about the markets...AGAIN! This is about the Bernanke, Yellen, Powell, Kuroda, Carney, Draghi, LaGarde markets that have made markets addicted to their easier money moves with an unaccountable and limitless amount of conjured up money. Do you not think he sees what we have reported to you? That like a well-trained dog, markets react to his every whim? So what did Powell just do...or at least try to do: He screwed Aunt Mary and Uncle Bob...AGAIN! Yes...how dare you want risk-less income investments! How dare you want a decent money market rate! Screw you Mr. and Mrs. Saver. The continuation of the asset bubble. (SEE A CHART OF ANY INDEX PAST 11 YEARS) A widening of the wealth gap. Yes...all these politicians complaining about the wealth gap? Look no further. The continuation of the distorting or price and yield in bond markets. BOTTOM LINE: Another in a long line of moves to stanch any bleeding in the markets. Mr. Powell is easily Mr. Obvious. By the way, do you know how pundits and futures markets give percentage chances of rate cuts in the future? Since we have nailed these rate cuts all the way down, here is our latest. WE GIVE IT A 100% CHANCE THAT WE WILL NOT ONLY EVENTUALLY BE BACK AT 0% BUT WE WILL EVENTUALLY DO THE NEGATIVE RATE DANCE. BOOK IT NOW! LASTLY: If we ever get to the day where markets do indeed shoot the middle finger back at these market interlopers...head for the hills. If we ever get to the day where the markets see these moves as desperation...head for the hills. Initial reaction...rally 700 points in minutes...drop 600 points in minutes...rally back 300 points in minutes. Welcome to your central bank markets. He got that last bit right. It may well have happened within minutes after he hit the send button. This article was reprinted with permission from David Stockman's Contra-Corner.
David Stockman began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street. Stockman is an Advisory Board member for the Ron Paul Institute for Peace and Prosperity.
After a brief discussion of yesterday's "Super Tuesday" and what it may mean for the markets, today's Liberty Report will look into yet another round of US interference in the nine year war in Syria. While the Trump Administration has thus far avoided direct engagement with Russian and Syrian troops, yesterday a US official illegally crossed into Syria to announce a hundred million dollars in US aid. Earlier the US announced it would be sending more weapons to the Turks, who are embedded with al-Qaeda in Idlib province. As before, these weapons will end up in the hands of al-Qaeda.
By Chris Rossini
One day, you're walking through the electronics store and you pass by the new MacBook Pro made by Apple. You're drawn to it like a magnet. It's as if it was made specifically for you. After examining every inch of it, and testing out all of its features, you think to yourself: "Boy, would I love to have this thing." Then you look at the price tag -- $2000. Wow. Your stomach sinks a little bit. That's a lot of money that you don't have laying around at the moment. But for some unexplainable reason, that doesn't shake your resolve. You're not just going to walk away and move on. After your stomach returns to its normal state, you commit to yourself to do whatever it takes to afford this beautiful piece of machinery. First, your natural desire for immediate gratification kicks in. "Maybe I can borrow the money? Who will give me a loan? Can I pay in installments?" But then you catch yourself, and decide --- "No, while I want this MacBook Pro as soon as possible, I'm not willing to become a debt slave to anyone in order to get it." You resolve to have patience. You're going to get this computer someday, and when you do, you're going to pay for it in full. After fighting off the natural desire for immediate gratification, the next emotion to test your resolve kicks in immediately -- doubt. "Who am I kidding? I'm never going to have $2000 to get this thing. That's a lot of savings!" But once again, you get your mind right. You may not know how you're going to bring about the conditions for getting the computer, but you resolve to have faith that it'll somehow come to pass. An interesting thing happens. Once you resolve to be patient and have faith, a mental weight lifts off your shoulders. It's as if you've passed through some kind of mental hazing or initiation. Nothing has physically changed. You clearly don't have the computer at the moment, but you know inside that someday you will, even though you have no idea how! Your confidence seems logical and rational. After all, you're not seeking to break the laws of physics here. You're not looking to overturn the Universe and its numerous natural laws. You're definitely not interested in robbing anyone, or using force to get the MacBook. This isn't about anyone else at all. It's about you, the MacBook, and somehow building the bridge between the two. As you walk out of the store, you notice a teenager groaning to his Mom, and complaining that he's not getting what he wants right now. You're also not getting what you want right now, but you're walking out of the electronics store with a smile. You've got something to look forward to. You have something that is now pulling you from the future. As you drive home, you stop into a coffee shop. While walking to the counter to place your order, you pass a bunch of people on their laptops. You notice that a few of them are working on the same exact MacBook Pro that you just saw at the store. "Wow! That's weird, I was just looking at those a few minutes ago." There are plenty of other laptops in the coffee shop, but your eyes somehow noticed and focused on the MacBooks. Interesting....Would you have noticed MacBooks had you not gone to the electronics store a few minutes ago? Probably not. They would have blended in with the others. But since your mind is focused on something, you're noticing the very things that you're focused on. You sit down with your coffee, and get to the hard work of thinking. "How am I going to do this?" The first thing that comes to mind is how you're currently spending your earnings. You immediately start cutting out the unnecessary. You pack a lunch to work. You stay home on Saturday nights. You watch less Netflix, and even cancel your subscription. No unnecessary expense is too small. Yes, there's a sting to this, but you quickly notice that your MacBook savings are no longer $0. After a few months, you have about $200 saved! Only $1,800 to go. It's a lot, but you feel good. You don't just have a pull from the future, you're actually moving in its direction! Next, your birthday is coming up, and normally you and your close friends go out to a nice dinner and a bar afterwards. It's usually a big bill for the night. Hey, it's your birthday. You need to go all out, right? But this year, you tell everyone that you're saving up for a MacBook Pro, and every penny counts. You can't stop telling them how great this computer is, and how much you want it. "Let's stay in and get some pizzas," you tell them. Then something very unexpected happens. Family and friends show up at your place for boring pizza, but they come bearing gifts. They see your resolve in getting that MacBook Pro and want to help you get there! Normally, they may throw a $20 bill into a card for you, but this year you're getting $50's and $100's! Amazing! You never would have factored that into your plans. When you were standing in that electronics store months ago, and the doubts were swirling between your ears, you couldn't predict that, on your birthday, cash would be thrown at you from all angles! Now you're getting so close to getting that MacBook Pro that the Apple logo is appearing in your dreams! You're then woken up to a phone call at 4am. It's your boss. Before answering, you curse him for waking you up at 4am. This better be good. It is. A key, and disgruntled, employee just quit unexpectedly, and your boss is in a bind. He needs you to replace your former colleague, ASAP. If you do it, you're getting a nice raise. It's the best phone call that you've ever received at 4am. That MacBook Pro is as good as yours now. A few months later, with cash in hand, you walk back into that electronics store. You remember vividly standing there before, passing on becoming a debt slave and resolving to be patient and to have faith. You think about all the little things that you did to get to this moment. There were so many little things. You think of all the unexpected events that contributed to it; all the stuff that you never could have put into a blueprint. With the MacBook Pro box in hand, you feel like you're floating to the register to pay. You know your feet are moving, but for some reason you can't feel them. As you're walking to the front of the store to pay, you pass by the the walls of TV screens. They're all displaying the same thing. You can't help but hear a bunch of annoying voices blaring from these screens: "We're going to stick it to the billionaires." "You have a 'right' to have FREE this, and FREE that, and FREE everything." "Vote for me and lollipops and lemon drops will descend from the heavens." You shake your head and walk even faster to the register. You're not going to let noise pollution spoil this special day for you. You can care less about "billionaires," or how much money anyone else has. You know that it's impossible for anything to be FREE from a politician. They have to steal from someone else in order to give to you. No thanks! You know that they're in debt to the tune of $23,000,000,000,000. What position can they be in to give anything away for FREE? You know first hand what genuine charity is. You experienced it on your birthday. People voluntarily helped you to get what you want. And while that was wonderful, the box that you hold in your hand is so special because it wasn't FREE. You earned it. You used your mind to build the bridge in order to get it. You waited, even though it was hard to wait. You had faith that you would get their somehow. No....the sounds of snake oil salesmen mean nothing to you anymore. You know exactly where your power is, and exactly how to use it.
Will the just-signed Afghanistan deal mean a rapid US departure (after 19 years of war)? What about the "secret annexes" that Pompeo has admitted are in the agreement? How long will the US-backed Afghanistan government hold without US troops?
By Ron Paul
The 1978 Humphrey-Hawkins Act requires the Federal Reserve to “promote” stable prices and full employment. Of course, the Fed’s steady erosion of the dollar’s purchasing power has made prices anything but stable, while the boom-and-bust cycle created by the Fed ensures that periods of low unemployment will not last for long. Despite the difficulties the Fed faces fulfilling its “dual mandate,” Federal Reserve Chairman Jerome Powell recently announced a new Fed mandate: to protect the financial system from being destabilized by climate change. Powell appears to have bought into the propaganda that “the science is settled” regarding the existence, causes, and effects of climate change. But the statement “the science is settled” is itself unscientific. Science is rarely settled as today’s new discoveries disprove yesterday’s consensus. In the case of climate change, many scientists dispute the claim that absent massive expansion of government power a climate apocalypse will soon be at hand. So far, the Fed’s actions regarding climate change include holding a conference and Chairman Powell indicating the Fed is likely to join the Network for Greening the Financial System. This network is composed in part of central banks from around the world that are attempting to work together to assess the risks of, and plan possible responses to, climate change. While Powell has not given details regarding other actions the Fed might take to protect the financial system from climate change, there are a number of actions that the Fed could take. For starters, Powell could signal that the Fed would be willing to increase its purchase of government debt if Congress passes Representative Alexandria Ocasio-Cortez’s Green New Deal. The Fed, since its creation, has been monetizing federal debt, and thus enabling the growth of the welfare-warfare state. The Fed could implement “Green Quantitative Easing” by purchasing bonds of green energy and other companies whose products fit the environmentalist agenda. The Fed could also use its monetary and regulatory authority to “encourage” financial institutions to support “environmentally-friendly” businesses. Whatever policies the Fed adopts to protect the financial system from climate change, the result will be further erosion of the dollar’s purchasing power, increased government control over the economy, lower economic growth, increased crony capitalism, and a reduction in liberty and prosperity. Ironically, the Fed’s plans to address climate change will harm the environment. History shows that the most effective way to protect the environment is via a system of private property rights and free markets. Private property owners are better stewards of the environment than are government bureaucrats because private property owners have greater incentives to maintain the value of their property. This is why the greatest pollution in history was in the communist countries of the 20th century. The Fed’s failure to provide any details on how it will carry out its self-imposed climate change mandate is another reason why Congress must rein in the secretive, rogue central bank. A step in restoring a monetary policy that truly promotes prosperity is to pass the Audit the Fed bill so Congress and the people can at last learn the full truth about the Federal Reserve.
When Turkey found itself in a bit of trouble in Idlib, Syria last week - a Syrian army advance had taken back much of the province and a Syrian air force strike had killed Turkish soldiers embedded with jihadist fighters - Ankara signaled to Washington that it needed help, including Patriot Missile batteries on Turk soil. The response was cool from the Pentagon, but Pompeo's State Department is all for it - even if it means war with Russia and Iran.
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