Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Cartel

“Saudi Texas” is changing the world’s economic and political landscape

The virtual explosion in Texas’ production of natural gas and oil, thanks to fracking, caught even Citigroup off-guard. In February it apologized for so widely missing the mark in its report the previous year entitled “Energy 2020: Independence Day”:

Momentum toward North American energy independence accelerated last year [2012] well beyond the wildest dreams of any analyst and

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Drug Cartel Is Being Pushed Back by Fuerzas Autodefenses – Self-Defense Forces – In Mexico

This article was first published at The McAlvany Intelligence Advisor on Wednesday, November 13th, 2013:

 

For Hipolito Mora, the owner of a lime plantation in Michoacán, one of Mexico’s 32 states, the final straw was the refusal of a packing company to buy his fruit because he wouldn’t pay a 10% kickback to the drug cartel that owned it. For Miguel Patino Velaquez, it was the sight of others in his town taking up arms and joining forces to fight the cartel. For Leticia, a lime picker, her tipping point came when she and her two children witnessed the

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Mexican citizens are forming self-defense groups against drug cartels

Exasperated at failed attempts by the Mexican government to neutralize the drug cartel that virtually owns the Michoacán state and especially its principal city, Apatzingán, farmers and lime growers and other citizens are banding together into fuerzas autodefensas – self-defense forces – to accomplish the task.

Recruiting for those forces has accelerated thanks to

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Treasury Refuses to Sell Its Gold Even in the Event of Default

It took more than six months for the Department of the Treasury to answer Utah Republican Senator Orrin Hatch’s questions about how the Treasury would respond to a government shutdown or the failure of the Congress to raise the debt limit. But its response is revealing:

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The Delicious Irony of Obamacare – The Law of Unintended Consequences Kicks In

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, August 21st, 2013:

 

As Obamacare’s implementation draws ever closer, so does the law of unintended consequences. Promoted as a way to provide healthcare coverage for millions of presently uninsured individuals, the real impact is exactly the opposite:

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Proposal to Allow States to Tax Internet Sales Passes Senate

On Friday, March 22nd, a proposal to allow states to tax internet sales passed the Senate overwhelmingly, 75-24. 26 Republicans joined Democrats in passing the non-binding resolution. The proposal was designed to

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Student Loan Consequences: Real, Costly and Personal

The consequences of making low-interest loans to unqualified buyers created the real estate bubble that popped in 2007, resulting in the Great Recession. According to Gary Jason at the American Thinker, it’s about to happen again only this time over student loans. He wrote: “This bubble has been fueled by the federal government’s lavish subsidization of the student loan program … in a way similar to how the housing bubble was fueled by government agencies pushing subprime mortgages.”

Under the Student Aid and Fiscal Responsibility Act (SAFRA) signed into law as part of Obamacare in March, 2010, students may borrow money directly from the federal government regardless of their credit score or any other financial “issues” they may be facing. They are not priced according to any “individualized measure of risk” nor are the loan limits. They are instead politically determined by Congress with undergraduates receiving lower interest rates than graduate students, but graduate students allowed to borrow more than undergrads.

This forced entry by the government into what was once a private market transaction has numerous consequences, nearly all of them negative, and most of them predictable.

First, private lenders disappeared from the market as they could not compete with taxpayer funds and taxpayer guarantees and the resulting below-market interest rates that became available.

Second, the growth in the education industry expanded far beyond what was normal as college administrations saw their opportunity to dip into the “honey bucket” of federal funds, with the consequent growth in administration overhead and higher tuition fees. According to a study by Bain & Company (yes, Mitt Romney’s Bain), “operating expenses are getting higher [at major colleges and universities like Cornell, Harvard and Princeton] and they’re running out of cash to cover it.” According to that study, the growth in those colleges’ debt and rate of spending on new buildings and equipment rose far faster than did their spending on actual education itself. Said Bain,

Boards of trustees and presidents need to put their collective foot down on the growth of support and maintenance costs.

In no other industry would overhead costs be allowed to grow at this rate – executives would lose their jobs.

Thirdly, this growth in the cost of obtaining what was one a coveted possession, a college degree, makes any mathematical justification or cost-benefit analysis highly questionable. Many students are entering a job market with degrees that over qualify them for what the market is able to provide. According to Jason, “over half of all recent college grads are unemployed (or employed only at jobs not requiring a college education).”

The unnatural increase in the flow of funds into the education industry has predictably driven prices higher. As Jason Bower pointed out at The Freeman,

Since 2000, tuition at public, four-year colleges has risen by an inflation-adjusted 72 percent, and over the past 25 years it has increased at an annual rate 6 percentage points higher than the cost of living. (emphases added)

Fourth, when the deferred payments on these loans start, the newly-minted grads without work cannot make them and they go into default. In a recent Department of Education study, loan default rates have risen in each of the last five years, and at an increasing rate, now touching almost one in every seven students with a loan.

Fifth, those loans cannot be dissolved or forgiven in bankruptcy except in extreme circumstances, leaving students in “debtors’ prison” interminably. As Charles Scaliger wrote at The New American,

Inasmuch as the student borrowers are uniquely required by law to repay under [nearly] any circumstances, the student loan business is the closest thing … to debtor prison in modern society.

With such a debt burden, students are forced to make, or avoid making, life choices, such as getting married or buying a home. Who would want to take on a partner who owes tens of thousands to the federal government on the day of the wedding?

And then there is the issue of bribery and insider-dealing. Lenders found ways to entice school officials to direct students needing money to them in exchange for incentives. In addition administration officials found it profitable to support candidates willing to enhance the loan programs for the benefit of the schools. Peter Wood, executive director of the National Association of Scholars, put the matter succinctly:

 The ‘free market’ in this case was never anything close to lean and efficient. To the contrary, it was (and still is) inefficient and frequently corrupt, dominated by players who found it easy to bribe college officials, wring favors from politicians by means of campaign contributions, bilk the Department of Education, and live off generous    subsidies.

All of these consequences come from first causes: the belief that the government has the right to impose its ideological position onto students and then force taxpayers to pay for those consequences when they inevitably arrive. As Kevin Villani, former chief economist at Freddie Mac, wrote in the American Banker, the progression from ideology to practice is fraught with danger. First, he says, the government must

declare that the opportunity to … go to college, is a basic right. Then [it sets] a goal for … college attendance well above private individual demand. When budgets become tight, have government lenders replace private lenders…

This cements into place the “moral hazard” that provides government loans to students without concern about how they might be paid back, because ultimately all government promises are backed by the taxpayer.

The ultimate consequence is borne by the student himself. Once he realizes his predicament – like a lobster trap – it’s too late.

For 36-year-old Nick Keith, it’s too late.

When he decided to go to culinary school, he was persuaded that he could indulge his interest in food by learning the food service industry. The school provided him with all the answers to his questions (for which the school later was successfully sued for making false statements but far too late to help Keith), and pointed him to the sources to lend him the money. Said Keith, “I should have seen all the signs. [The campus tour guide] had a used car salesman’s answer for everything,” including the lie that 99 percent of all graduates found work after graduation. It turned out later – much later – that the real number was closer to 48 percent, and that counted graduates who had to find work outside of food service. Keith’s first job upon graduation was working on a meal assembly line, making $10 an hour.

But that’s when his student loan payment program kicked in. He had to make a choice: pay the rent, or his student loan, but not both.

It’s now nearly a decade since his graduation. His debt, with interest compounded upon interest, is $142,000, at a 17 percent interest rate. He can’t get out:

I get my groceries at the local food bank. I have sold or lost 99 percent of everything I ever owned.

He can’t get work because his bad credit turns off prospective employers. He lives in an aged minivan, relies on the Salvation Army for meals, and parks his van at highway truck stops. For all intents and purposes, he is homeless.

Solutions abound, at least in theory. The government should get out of the student loan business altogether and let the private market take over. And congress should allow students to declare bankruptcy over their loans when necessary. Even there, however, the consequences are towering. There is more than $1 trillion in student loan debt. Almost 15 percent of loans are already in default. The Department of Education would have to receive special funding from congress – the taxpayer – to be able to write off the bad loans that would result.

The costs of college education would rise to more normal, market-driven levels, no doubt keeping some qualified students away. Colleges and universities would have to make massive, perhaps draconian, cuts in their overhead. It would take years for some semblance of balance between supply and demand to return to the education industry. And changing the laws would have precious little immediate impact on people like Keith.

Restoring freedom through private markets, however, is worth the effort despite the pain. The alternative – a continuing debtors’ prison for students and a continuing of the corrupt educational cartel and its incestuous relationship with politicians – is unthinkable.

 

 

 

 

 

Gold Standard Arguments Being Promoted Again

Two years ago Steve Forbes, two-time candidate for nomination for president by the Republican Party and Editor of Forbes magazine, predicted “a return to the gold standard by the United States within five years … [because it would] help the nation solve a variety of economic, fiscal and monetary ills.” It’s now two years into his prediction and articles explaining how such a return would work, and why, are beginning

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Changing Minds on the Sugar Tariff

Sugar

Sugar (Photo credit: Wikipedia)

Economist Donald Boudreaux has a way with words, but sometimes he uses them as grenades rather than cinnamon rolls. He got upset with Florida Rep. Tom Rooney‘s remarks when he tried to justify tariffs and dressing his arguments up to look “conservative.” This is what ticked Boudreaux off:

Like most conservatives, I don’t like subsidies or government intervention in markets. But I do like U.S. sugar policy, which, according to some, runs counter to these core conservative ideals.

America’s sugar policy has my support and the support of so many other conservatives because it’s the best line of defense we have against an OPEC-like market that threatens our food security and 142,000 U.S. jobs…

The policy we have chosen — placing tariffs on imported sugar — guarantees imports into the U.S. market (America is the world’s biggest sugar importer) but keeps subsidized foreign oversupplies from bankrupting U.S. producers. And, it operates without a federal budget outlay, which means it doesn’t cost taxpayers a dime.

True, this policy isn’t perfect. But it’s necessary. Until Brazil and other countries stop distorting the market with excessive subsidies, our no-cost policy is the least intrusive way to keep 142,000 Americans off unemployment rolls and prevent America from becoming dependent on the OPEC of sugar.

First, I checked Rooney’s voting record vis-à-vis the Constitution and it’s a forgettable 73.  What that rating tells me is that this guy needs help. He is muddled in his thinking, but perhaps he is worth saving rather than

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Online College Courses Disrupt the Educational Cartel

Lecture hall at the University of Paris, France

Lecture hall at the University of Paris, France (Photo credit: Wikipedia)

My oldest grandson, Will, is getting his college degree online. He just turned 20 and he’s already in his junior year. He’ll have a full-on accredited undergraduate degree by the time he is 21. He is already looking for work following his graduation. He is officially courting Savanah. He is at least two years ahead of his peers, maybe more.

This article in The New York Times explains the phenomenon and points out some of the ramifications. There are others as well.

These online courses are called MOOCs:

A handful of companies are offering elite college-level instruction — once available to only a select few, on campus, at great cost — free, to anyone with an Internet connection.

Moreover, these massive open online courses, or MOOCs, harness the power of their huge enrollments to teach in new ways, applying crowd-sourcing technology to discussion forums and grading and enabling professors to use online lectures and reserve on-campus class time for interaction with students.

There are so many advantages here. First is

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Presidential Debate Questions from Light from the Right

George Will – Debate questions for the presidential candidates

The spectacles we persist in dignifying as presidential “debates” — two-minute regurgitations of rehearsed responses — often subtract from the nation’s understanding. But beginning Wednesday, these less-than-Lincoln-Douglas episodes might be edifying if the candidates could be inveigled into plowing fresh ground.

George Will

George Will (Photo credit: Keith Allison)

Will has some suggestions for Presidential Debate questions for Obama and Romney. And so do I. Here is one from Will on the Supreme Court:

Do you rejectthe Kelo v. New London decision, in which the Supreme Court deferred to governments’ desire to seize private property and give it to wealthier private interests who would pay higher taxes?

I have a better one:

Do you support the Supreme Court’s decision to uphold Obamacare on the basis that a tax – any tax – is ok as long as Congress intended it to be a tax?

Will has one on foreign policy:

On Oct. 7, we begin the 12th year of the war in Afghanistan, and 51 recent NATO fatalities have been at the hands of our supposed Afghan allies, causing U.S. commanders to indefinitely suspend many joint operations. Why are we staying there 27 more months?

I have a better one (or three):

Why are we there in the first place? What is your take on the War on Terror, which is a war against a strategy and not a war against an aggressor? And why didn’t Congress get involved in declaring war, as the Constitution demands?

Will has one on domestic policy:

Do you agree that a financial institution that is too big to fail is too big to exist? If not, why not? The biggest banks emerged from the Great Recession bigger. At the end of 2011, the five biggest (JPMorgan, Bank of America, Citigroup, Wells Fargo and Goldman Sachs) held more than $8.5 trillion in assets, which is 56 percent of the 2011 gross domestic product. Why should they not be broken up?

I have a better one:

Since the Federal Reserve is essentially a cartel designed from its beginning to protect big banks from the consequences of their own folly, why shouldn’t the Fed be abolished?

I won’t be holding my breath Wednesday night to see if any of mine make it.

Another Uninformed Attack on the Gold Standard

Charles Lane: The Failing Case for Gold

As history abundantly demonstrates, the gold standard would not immunize the economy from financial crises. Imposing it would, however, render the central bank powerless to respond to them, as it could not readily expand credit or act as lender of last resort to solvent institutions.

Gold Key, weighing one kilogram is used to acc...

(Photo credit: Wikipedia)

Here is another perfect example of an uninformed individual given a bully pulpit to promote his ignorance courtesy of the Washington Post.

He refers to a part of the Republican Party’s platform (which means nothing anyway) which calls for a commission to study “possible ways to set a fixed value for the dollar.” This is an allusion to the study done back in 1980 by the Gold Commission which recommended against the concept, but was dissented to by one of its members, Ron Paul, in his “The Case for Gold.”

And this frightens author Lane:

We can only hope that this iteration of Republican pandering to the gold bugs bears no more fruit than the last one. Touted as a cure for the chronic financial instability that central banking purportedly breeds, tying the nation’s money supply to the supply of gold would be worse than the disease.

We know where he stands: “pandering to the gold bugs” is a giveaway to a polemic, not a rational discussion.

A more rational discussion of the gold standard starts with what it would do: rein in the uncontrollable urge by the Fed to bail out the big banks. The Fed, remember, is a cartel whose mission is to protect the big banks from the consequences of their bad behaviors, using taxpayer monies (or digital money created out of nothing which derives its value from depreciating the value of taxpayer monies).

As Steven Horwitz, an Austrian school economist from St. Lawrence University, notes accurately:

If we had a commodity-based free banking system, we would not have had the boom and bust of the 2000s in the first place. The powers that enable the Fed to create liquidity ex nihilo in a crisis are the very same powers that enabled it to drive the real Federal Funds rate below zero for two years and fuel the housing bubble, which gave us the financial crisis and recession.

Just because the Washington Post has a louder voice doesn’t make it any more credible. A wrong-headed opinion about the gold standard is still wrong, no matter who promotes it, don’t you think?

MIT’s Online Threat to the Higher Education Cartel

MIT Kresge Auditorium

Just before Christmas the Massachusetts Institute of Technology (MIT) announced a small improvement to its 2,100 free online courses: The free online service will now grant, for a modest affordable fee, credentials for those online students who gain mastery of the subject. Instead of calling it MIT 2.0, they named it MITx, and it is likely to challenge and change the higher education paradigm and the cartel that runs it.

Tamar Lewin, writing in the New York Times, said that MIT will allow “anyone anywhere to take MIT courses online free of charge—and for the first time earn official certificates for demonstrating mastery of the subjects taught.” This augments MIT’s decision 10 years ago to offer all of its 2,100 courses online for free, courses that have been accessed by more than 100 million students worldwide since then. The upgrade will now allow those students to participate in online laboratories, self-assessments, and interaction not only with students taking the same class on campus at Cambridge, Massachusetts, but those enrolled online as well.

There is no charge to take the courses online, but to obtain a credential that proves mastery will cost something. Harvard provost Rafael Reif said: 

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Not All Economic News is Bad News

English: There's a light at the end of the tun...

Republican presidential candidate Ron Paul noted on Tuesday that efforts to rein in government spending appeared to be in vain, due to an agreement reached with the White House during the recent debt ceiling negotiations. Congress would have to pass a joint resolution to oppose any extension of the debt ceiling, which President Obama is free to veto. Said Paul: “A default is becoming more mathematically unavoidable with…every debt ceiling increase.”

Not only is the word “default” becoming commonplace but also the words “economic collapse.” A study conducted by Leflein Associates and published by EcoHealth Alliance showed that of the 1003 individuals interviewed for the survey, 63 percent—or more than six out of ten of them—feared an “economic collapse” more than a natural disaster, a terrorist attack or a global outbreak of disease. This study was picked up by Michael, the author of his Economic Collapse Blog, who piled on by adding a long list of reasons why concerned citizens should be afraid of such an event: 

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Central Bank Easing Misses the Point

International Money Pile in Cash and Coins

Economist and TV personality Larry Kudlow explained that the decision on Wednesday by many of the world’s central banks made it easier for European banks to borrow dollars from the Federal Reserve.

He made it clear that “nothing has been solved in Europe. The Europeans are not yet helping themselves. Why should the ECB (the European Central Bank) write a trillion-dollar check to near-bankrupt governments?” The real problem isn’t liquidity. There’s plenty of money sloshing around in the banks of the world. The instant problem is the type of money. The banks want to hold dollars, not euros, and the costs of holding dollars was rising to levels not seen since the collapse of Lehman Brothers in 2008.

And the reason dollars were getting increasingly expensive? One main reason was that American money market funds were 

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Forbes: Rich Nations Go Broke by Overpromising and Overspending

Russian coins in ice castle

Cato Institute senior fellow Jim Powell wrote in Forbes magazine about the inevitable and predictable decline of rich nations that debauched their currencies in order to pay their bills. Powell said that politicians’ urge to promise and then to spend is almost overwhelming, calling it “a visceral urge to spend money they don’t have. They can’t control themselves. They’ll weasel their way around any efforts to put the lid on the cookie jar.”

The Roman Empire was on a gold standard, minting and using the aureus from the 3rd century B.C. until the 4th century A.D. The aureus initially contained 10.9 grams of gold, which was worth about 25 denarii, or about a month’s wages. As the empire devolved into promising more and more services (grain subsidies, public entertainment, and a huge bureaucracy and military establishment) it soon exceeded revenues generated through taxation. To make up for the difference, the aureus was steadily debased so that by 50 B.C. it contained 9.09 grams of gold, 8.18 grams by 46 B.C., 7.27 grams by 60 A.D., 6.55 grams by 214 A.D., 5.45 grams by the year 292, 4.54 grams in 312, and 3.29 grams by 367.

Paper money was more easily debased, as the Chinese discovered. Powell noted that seven different Chinese dynasties issued paper money to pay their bills and all of them eventually collapsed or were

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Bernanke Defensive as the Fed Loses its Luster

Protest against the Federal Reserve during eve...

Fed Chairman Ben Bernanke’s news conference on November 2 included the admission that the Fed is depending on hope and patience to see if its continuing strategies of Operation Twist and zero interest rates will grow the economy out of recession. In his session with reporters, Bernanke defended Fed actions in the face of increasing criticism from both the left and the right.

Three years after the Federal Reserve’s massive and continuing interventions in the financial markets, Bernanke was forced to admit that “recent indicators point to continuing weakness in overall labor market conditions and the unemployment rate remains elevated…and consequently [the Fed] anticipates that the unemployment rate will decline only gradually…. Moreover, there are significant downside risks to the economic outlook.” He added that “we did underestimate the pace of recovery for some fundamental reasons,” including the continuing declines in the real estate markets and “a certain amount of bad luck.”

Bernanke was forced to reduce further his estimates about the rate of

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American Oil Development Undermines Green Movement, OPEC

Oil Derrick

The September 15 report from the National Petroleum Council expressed surprise at how much has changed just since their “Hard Truths” report of 2007 that domestic energy development was falling behind escalating demand.

The “Hard Truths” report stated that although “the world is not running out of energy resources…there are accumulating risks to continuing expansion of oil and natural gas production…[which] create significant challenges to meeting projected total energy demand.” As a result, the concept of “Energy Independence” is “not realistic in the foreseeable future” and therefore “the United States must moderate the growing demand for energy.”

In NPC’s letter to Secretary of Energy Steven Chu introducing the latest study, chairman James Hackett said

Extraordinary events have affected energy markets in the years since the NPC reported on the “Hard Truths” about energy in 2007. That study concluded that the world would need increased energy efficiency and all economic forms of energy supply.

This is still true today, but since then,

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Yglesias, Brown: Free Money Will Solve Everything!

Day 3 Occupy Wall Street 2011 Shankbone 8

Image by david_shankbone via Flickr

Writing for the left-wing blog ThinkProgressMatthew Yglesias noted his difficulty in coming up with a suitable slogan representing what the “Occupy Wall Street” demonstrators really wanted. He explained:

My view is that the best demand of all…is “free money for the rest of us.” There are a lot of different specific ways this can be implemented, but the…Powers That Be…have been willing to provide all manner of free money to players in the banking system. Debt cancellation is a form of free money for the indebted. But why give free money only to banks? And why give free money only to the indebted? Why not free money for everyone? “Everyone,” of course, includes the indebted. But it also includes ordinary people who didn’t happen to avail themselves of the credit binge. It’s an idea so good that it sounds almost silly.

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County in Alabama is Bankrupt, Just Like the U.S.

Bribe

Image via Wikipedia

At the very last minute, county commissioners in Jefferson County, home to the metropolis of Birmingham, Alabama, decided to postpone a final decision on whether or not to declare bankruptcy over their excessive indebtedness. The bonded indebtedness incurred to build a state-of-the-art sewage treatment plant exceeds $3 billion, far beyond what the county can afford to service. And raising sewer fees for a fourth time in ten years

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.