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: Paper Money

Financial Stability Oversight Council Runs Amok

Library of Law and Liberty: The Revenge of Richard Nixon: The Consumer Financial Protection Bureau Spreads Its Tentacles

The institutional structure of the CFPB is novel in American history—not merely an independent agency, it is an independent agency tucked inside another independent agency (the Federal Reserve). Its decision-making is not only independent of any review by the President or Congress, but also from the Federal Reserve itself. Its budget is independent from the congressional appropriations process and is instead drawn directly from the operating revenues of the Federal Reserve, a sum that will rise to 12% of the Federal Reserve’s operating expenses by 2013 (an estimated budget of $448 million). The only check on CFPB’s power is the power of the Financial Stability Oversight Council (FSOC) to veto actions by the CFPB but even then the veto can be exercised only by a 2/3 vote of the Council and only if the proposed action would seriously threaten the safety and soundness of the American financial services system.

Constitution

Constitution (Photo credit: The COM Library)

This so-called agency is the latest example of government run amok: totally unaccountable, run by an unvetted bureaucrat appointed illegally by a socialist president. How about that for comfort in the Constitutional process?

Here’s more from Zywicki:

An agency headed by one person, completely insulated from democratic control and budgetary oversight, guarantees an agency that is vulnerable to all of the excesses that strangled the American economy in the 1970s—regulation that chokes innovation and cripples economic growth. And, indeed, even in its short time in existence the CFPB is already manifesting the problems of cost externalization, undue risk aversion, and other regulatory costs.

In its one-year existence, the agency has not failed to disappoint: one rule that it has issued (illegally, as the agency is not authorized by the Constitution) will impose—ready?—7,684,000 man hours to comply with it! Another one—designed to simplify mortgage disclosures—is 1,099 pages long!

As Zywicki laments:

Regrettably this sort of decision-making was entirely predictable for this agency with inadequate checks and balances.

Inadequate? How about non-existent?

Where’s the Hyperinflation?

Jerry Bowyer: Where’s The Hyperinflation?

the Fed has created an enormous pool of “money” since the credit crisis. In fact, they have more than tripled their monetary reserves. Doesn’t that mean that we should have a more than tripling of prices?

International Money Pile in Cash and Coins

International Money Pile in Cash and Coins (Photo credit: epSos.de)

Good question, and one that I’ve asked myself for a long time. Where is the price inflation that inevitably (we are told) follows monetary inflation? There is a little, of course, and some is buried inside the economy: price decreases that we would otherwise enjoy due to more efficient production and creative new technologies aren’t being felt.

But Bowyer makes a number of good points here:

Even allowing for the time delays and the slower circulation of money in a more slowly moving economy, it seems as though monetary shenanigans which started in 2007 should have been felt by the summer of 2012.

And so, why not? He does some good clarifying of what some, including myself, consider difficult mechanics involved in creating money:

Let’s start with the Fed and money. There is a kind of short-hand in which we say the Fed prints money. But that’s not exactly true. Money creation is a joint exercise between the central bank and the banking system. What the fed creates are entries in an accounting system which gives the banks permission to act as if there is extra money on their balance sheets.

The banks, therefore, have permission to lend more. The reserves they lend end up in someone else’s account in a bank, and that bank then has permission to lend more, and on and on the system goes. It’s called ‘fractional reserve banking’…

And then he simplifies the process even further by using an everyday example: syrup:

I like to think of monetary base as money syrup, like the syrup that’s used to make soda. You add the carbonated water to the syrup and you get soda (or pop, or soda pop, depending on where you live.) The ratio of syrup to soda is the soda multiplier. How fast we buy and drink the soda is the velocity.

This makes sense to me. He also explains that many dollars are overseas, waiting to be spent sometime in the future. So the price inflation down at the store is there waiting to happen. Just not yet.

Boston Fed President Calls for More “Stimulus”

printing money

printing money (Photo credit: Paul Nicholson)

After reviewing the weak jobs report from the Bureau of Labor Statistics (BLS) that was released last Friday, the president of the Federal Reserve Bank of Boston, Eric Rosengren, decided it was time to call for more money to be added to the economy. The jobs report showed a gain that slightly exceeded economists’ consensus, but because of people quitting the work force because they couldn’t find jobs, the unemployment rate went up. And a separate report, not heralded by the media, showed households reported losing more than the BLS’s gains.

What to do? Add more money to the economy. And keep on adding more money until the moribund economy finally awakens. Here’s Rosengren’s prescription:

You [add money] until it’s clear that you’re no longer treading water. You continue to do it until you have documented evidence that you’re getting growth in income and the unemployment rate consistent with your economic goals.

The Fed has already added an astounding $2.3 trillion of new—freshly created out of nothing—money since the start of the Great Recession in 2007, with little to show for it. And so “doctor” Rosengren is calling for more of what made the patient sick in the first place:

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Growth in Money Supply: Mainlining Heroin

Ambrose Evans-Pritchard: Global slump risk falls as world money rebounds

The first green shoots have begun to emerge in money supply data from across the world, raising hopes of a tentative global recovery by later this year.

I don’t know why more economists (I am not one, just a wanna-be) don’t use an analogy that I find useful: money created out of nothing and injected into the banking system by buying government bonds is like mainlining heroin.

I have no experience with such activity, but the analogy is useful nevertheless. The addict (and we are addicted to easy money, aren’t we?) is seeking another “high” and shoots himself with heroin. Over time, however, it takes more and more heroin to achieve the same high.

Eventually, of course, the addict either dies from an overdose, or goes through rehab and suffers the painful inevitable withdrawal. The longer the addict puts off the day of withdrawal, the worse it will be.

And so we come to the whole point of Ambrose Evans-Pritchard’s article from the British liberal paper Telegraph: money supply is (and has been since the middle of June) increasing greatly. He provides a useful graph of world money supply and if you look carefully, you’ll see a sharp upturn in that supply taking place starting in June.

I went to the Federal Reserve charts available here and found the same thing: the Adjusted Monetary Base, which had declined sharply since the middle of February, has enjoyed a significant “bounce” upward, again starting at about the middle of June.

And the effects of that additional injection of money and credit is having its expected (temporary) effect. Evans-Pritchard quotes Mr. Simon Ward at Henderson Global Investors who tracks these sorts of things:

Mr. Ward said global industrial output should start to “bottom out” by October. The rebound is a huge relief to monetarists following the sudden collapse of M1 growth from a peak of 5.1pc last November, a rare pace of decline with echoes of early 2008…

Any world recovery is likely to be very fragile as the US and Europe battle the headwinds of debt deleveraging, and China struggles to manage the fall-out from its last credit blitz. There is no margin for policy error anywhere. Yet the bulls have a nice puff of wind in their sails for now. Enjoy it.

At least he’s honest about one thing: the high will be temporary; our stock market just went over 13,000 on the Dow for the first time since April, after hitting a bottom of just over 12,000 in late May/early June. That coincides nicely, doesn’t it, with the increase in the supply of money beginning in early June?

But the heroin addict will enjoy another high, putting off the inevitable crash for another little while.

Are Student Loans Killing Grandma?

The Rhode Show: Senior citizens feel sting of loan debt

A new report from the Federal Reserve Bank of New York shows that the growing burden of student loan debt is creating problems for an unexpected group—senior citizens.

Ann Morgan Guilbert as Grandma Yetta.

Ann Morgan Guilbert as Grandma Yetta. (Photo credit: Wikipedia)

Buried in this article from TVL Broadcasting is some very good advice. The interviewer on the show was distressed to learn that 5 percent of the $870 billion in student loan debt belongs to seniors—60 and up—or some $40 billion. And that is putting some severe crimps into grandma’s plans to retire as the note they co-signed to help their grandchild has gone bad.

Let’s think about this: the young person bought the lie that a college degree will lead to a good job. Not. Notes the article:

That clear connect between getting that degree and then getting a good solid job that leads to a prosperous career just isn’t there anymore…

The value that we’ve all assumed came with a college degree simply isn’t there.

Thank you. Good advice. A little late. But good advice nevertheless.

When my son was trying to figure out how to advise his two sons about getting a college degree, each of them made different, and I think, wise decisions. Will, the oldest, decided to get his degree online. They researched the available resources—there are many—and selected one. Total cost: About $15,000. That’s $15,000 for four years of college—that’s total.

Will is doing his homework on a computer with interactive classes with other live students (and a live professor—imagine that!), and is working at his own pace. There are requirements and time lines and deadlines and papers and…well, the whole college experience. Thanks to the internet, it’s affordable. And his education will likely turn out an excellent American history professor (that’s Will’s goal).

Tim, on the other hand, decided to forgo the entire college “thing” and instead he decided to take a 22-month-long class at Redstone College in Denver which will lead him to a career as a high-end aerospace engineer who works on keeping aircraft operational. It’s a perfect fit for him.

No student loans. And no co-signing by grandma (or grandpa).

The LIBOR Scandal: Just the Tip of the Iceberg

Barclay!

Barclays: dealing from the bottom of the deck! (Photo credit: J Dueck)

The ripple effects from the announcement by the British Financial Services Authority (FSA) that it was fining Barclays Bank for manipulating in its favor a key interest rate are just beginning to be felt. Explained the authority:

The London Interbank Offered Rate (“LIBOR”) and the Euro Interbank Offered Rate (“EURIBOR”) are benchmark reference rates fundamental to the operation of both UK and international financial markets, including markets in interest rate derivatives contracts.

LIBOR and EURIBOR are by far the most prevalent benchmark reference rates used in euro, US dollar and sterling over the counter (“OTC”) interest rate derivatives contracts and exchange traded interest rate contracts.

The notional amount outstanding of OTC interest rate derivatives contracts in the first half of 2011 has been estimated at 554 trillion US dollars… (emphasis added)

Let’s put that into simple terms: the LIBOR and the EURIBOR rates affect financial instruments with values more than 36 times the gross domestic product of the United States! These are rates that affect nearly every contract that contains or refers to an interest rate. That would include variable-rate mortgages, municipal bond financings, credit card debt, U.S. treasuries—an enormous, almost incomprehensibly large number.

And all of it manipulated by Barclays and 18 other “money center” banks operating out of the exclusive City of London enclave in the center of London, England.

From the FSA:

LIBOR and EURIBOR are used to determine payments made under both OTC interest rate derivatives contracts and exchange traded interest rate contracts by a wide range of counterparties including small businesses, large financial institutions and public authorities. Benchmark reference rates such as LIBOR and EURIBOR also affect payments made under a wide range of other contracts including loans and mortgages.

And just what did the top people at Barclay’s do that brought the wrath, and penalties of nearly half a billion dollars, of the FSA down on their heads? All the traders did at the start of and during the world-wide economic meltdown was declare that

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Halting Steps Towards a Gold-Backed Currency

Chris Poindexter: Slow Week For Gold

The world is crying out for some of type of encrypted token or bearer receipt that can be traded for physical gold.  Where the physical inventory matches the encrypted tokens at a rate of 100 percent and can be redeemed at a fixed margin for physical gold or cash on demand in various cities around the world. Some countries might consider that a competing currency, but as long as receipts are denominated in fixed amounts of gold and not currency values, that should avoid most complications; it’s really just a new way to trade commodities.

English: Currencies exchange logo Français : L...

English: Currencies exchange logo Français : Logo symbolisant le change de devises (Photo credit: Wikipedia)

While Poindexter is writing for his “gold bug” customers about the price of gold and silver and how the ratio between the two—a very high 59—bodes well for silver purchasers, he makes an excellent side comment about how the free market will eventually revert back to real money, a gold-backed currency.

Ben Bernanke doesn’t recognize silver or gold as real money, which is about as good an indicator you can find that it is! If he’s for it, it’s wise to be against it, and vice versa. It saves a lot of thinking because the man has been so consistently wrong for so long. His response to Ron Paul’s question about whether silver and gold is real money is instructive: “No.”

There are barter currencies in existence now and I’ve written about them. There are local and regional currencies backed by, in some places, maple syrup! No, I’m not making this up! I’m not that clever!

But that’s how we moved from a direct exchange economy—goods for goods—to an indirect exchange economy—goods for money for goods—which helped the world’s GDP to grow by an astonishing 2 percent per year ever since about 1800.

And as the dollar continues to lose value, people will find that other options are going to work better—much better—than paper money that doesn’t maintain its value. I’m not afraid of hyperinflation, mind you. The Fed would never allow that to happen because it would threaten its very existence. But what it will allow is “some” inflation—Gary North thinks in the range of 20 to 30 percent annually—which will serve nicely to generate increasing demands for money that retains its value.

I’m encouraged by Poindexter’s comments. He sees further than I do on this issue. And I welcome that.

Buy and Hold Long US Treasury Bonds? Is He Nuts?

Hoisington: Quarterly Review and Outlook

Based upon the historical record of effects of excessive and low quality indebtedness, along with the academic research, the 30-year Treasury bond, with a recent yield of less than 3%, still holds value for patient long-term investors. Even when this bond drops to a 2% yield, it may still have value in relation to other assets. (my emphasis)

This comment from Lacy Hunt, an advisor to Hoisington Investment Management Company, has to be tempered with the realization that he has called the market correctly in long bonds for years. So it pays to dig a little deeper into his analysis. And when I did, I came up with some surprising tidbits and some confirmation about where we are and where we are heading.

For example Hunt writes:

In the eleven quarters of this expansion, the growth of real per capita GDP was the lowest for all of the comparable post-WWII business cycle expansions. Real per capita disposable personal income has risen by a scant 0.1% annual rate, remarkably weak when compared with the 2.9% post-war average.

It is often said that economic conditions would have been much worse if the government had not run massive budget deficits and the Fed had not implemented extraordinary policies.

This whole premise is wrong.

In all likelihood the governmental measures made conditions worse, and the poor results reflect the counterproductive nature of fiscal and monetary policies. None of these numerous actions produced anything more than transitory improvement in economic conditions, followed by a quick retreat to a faltering pattern while leaving the economy saddled with even greater indebtedness.

The diminutive gain in this expansion is clearly consistent with the view that government actions have hurt, rather than helped, economic performance. (my emphases)

This has been a basic theme of mine. For years I have used the analogy of a drug addict who needs an increasing quantity of heroin to get high. It’s either get high or go into withdrawal. The Fed is injecting paper money into the economic body. In the past such injections stimulated economic growth (for a while) but then the economy would falter, start to correct and try to rebalance itself, and then be stimulated again by additional quantities of money. The Fed has no interest in a recession, for obvious political reasons.

So Hunt comes out of all of this by concluding that our economy will be more like Japan’s: stagnant growth in GDP for years, with interest rates likely to go lower. Since they are already at zero on short debt securities, the only place for interest rates to fall is at the long end—specifically the 30-year U.S. Treasury bond.

His position is bolstered by the proposition that there is no place else for safety conscious investors to go. By bidding for those securities, investors drive up the price of those bonds which is reflected in lower and lower yields on those bonds.

Notice his warning: “in relation to other assets.”

BTW: this is not investment advice. I’m no longer in the investment business. This is an economic observation by Lacy Hunt whom many consider a great talent in the field of economic and investment forecasting.

Ron Paul Has the Final Say

WASHINGTON, DC - FEBRUARY 29:  Republican pres...

In his last public opportunity to quiz Federal Reserve Chairman Ben Bernanke, who appeared before the House Financial Services Committee on July 18, Texas Congressman and Republican presidential candidate Ron Paul took the time to put things into perspective:

For the past few years the Federal Reserve System has received criticism from all sides of the political spectrum, and rightly so, for its unprecedented intervention into the economy and its bailouts of large Wall Street banks and foreign central banks.

This has been Paul’s theme ever since he entered Congress following a special election in April 1976. In a position paper that his staff prepared in June of 1976, Paul attacked a pending bill in Congress to fund the International Monetary Fund following the breakdown of the Bretton Woods agreement when President Nixon took the dollar off the gold standard in 1971.

The staffer primarily responsible for that paper, Gary North, remembers starting work on Friday, June 11, 1976, and being given the task of preparing the paper in time for the Monday deadline. He worked all weekend on it, and when it was published, it made such an impression on Senator William Proxmire, then chairman of the Senate Banking Committee, that he invited Paul to testify before his committee. Says North: “At the time, I had never heard of a House member testifying to a Senate Committee. I have never heard of it since.”

But that testimony launched a three-decades-long campaign by that lone congressman to question the existing monetary system, especially the centerpiece of that system, the Federal Reserve.

In his July 18 testimony, Paul recalled his primary problem with the IMF—the same problem he has with the Fed—is that it is a central bank that was deliberately designed to

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Sorry, Rising Corn Prices Not Due to Inflation

Jeff Carter: Grain Prices Could Be The Nail in the Economic Coffin

So far, the Federal Reserve has been extremely lucky. They have held interest rates at 0%. They have monkeyed with the market mechanism of the economy via quantitative ease, and Operation Twist. It recently has come out that regulators knew about the LIBOR deception back in 2008. But they can’t control the price of food.

English: Corn

Corn (Photo credit: Wikipedia)

I don’t know Jeff Carter. But he has put his finger on something that I think needs more air time: despite the Fed’s huge expansion of the money supply and the forcing down of short term interest rates, the economy is still in the doldrums. In fact I wrote recently in The New American that we’re already in recession despite all those efforts.

But some people see the price of grains—wheat and corn prices specifically—heading much higher and think: “it must be the Fed.” They expand the money supply, making each piece of money worth less, and that shows up by requiring more pieces to buy corn and wheat. In a general sense that is true. But not here, and not now.

First of all, in order for increases in the supply of money to show up in the market place and grocery stores, people have to spend it. And there’s a measure of that “propensity to spend”—it’s called the velocity of money. It’s how quickly money is exchanged in the economy. There’s even a chart that shows the velocity of money which you can access at GaryNorth.com. It’s part of free information on his site: just look on the left for “Federal Reserve graphs” and you’ll find it.

The velocity of money has dropped to near record lows. So there’s plenty of money, but people are hoarding it, or paying off debts. So there’s no price inflation. At least not yet.

What then is happening to the price of wheat and corn? It is responding to market forces! There’s a drought. It’s causing much lower production of grains. Lower supply, same demand, voila! Prices go up.

And they will come back down. Maybe not in the next week. But in the free market, things happen to make prices go back down. Farmers (around the world) will see high prices and offer their products here for sale. Farmers will expand their fields and commit more of them to growing grains. Voila! Increased supply, same demand, lower prices!

It’s a wonder to behold. Just don’t blame it on the Fed.

Federal Reserve Responsible for Great Recession

Well, he’s got it half right. Robert Weidemer, author of “Aftershock,” thinks we’re going into a recession—check. He also thinks the Fed can do something about it—uncheck.

This is the old story of how, allegedly, the “hair of the dog” that bit you the night before will help cure your hangover the next morning. It doesn’t make it go away, I’m told (I have no personal experience in the matter!) that it doesn’t cure anything, but a shot of booze in the morning makes you not care as much!

Someday, Weidemer will admit this, and place the blame for the recession we’re in squarely at the feet of the Fed where it belongs.

The Economist: Government Fixed America’s Economy

This article reminds me of the “nattering nabobs” phrase used by William Safire to describe those who tell only part of the truth in order to promote a bigger lie. The Economist is good at this. It is helpful to remember that it is the British equivalent of the CFR’s Foreign Affairs, but from an economic point of view.

You can tell almost immediately where this article is going: it’s government…government…government!…that is responsible, not for America’s present economic decline, but for the good things America enjoys: the internet and oil shale fracking!

Nothing is said about the Federal Reserve, or fractional reserve banking that sent the American economy into recession. Nothing is said about entrepreneurship based upon what’s left of the rule of law and contracts to make investments based not on government edict but on private estimate of potential gain.

I could go on, but you get the idea. If you decide to read this article anyway, be sure not to swallow it. It’ll give you intellectual indigestion.

The Pauls Introduce Their New Internet Freedom Manifesto

WASHINGTON - JUNE 22:  U.S. Sen. Rand Paul (R-...

With Ron Paul’s bill H.R. 459, the Federal Reserve Transparency Act, headed for a floor vote in the House in the next two weeks (and likely success at passage with 263 sponsors), he and his son Sen. Rand Paul (R-Ky.) are now focusing on the Internet.

His Campaign for Liberty (C4L), started in 2008 with some four million dollars of campaign funds from his unsuccessful run for the White House that year, has issued its manifesto to continue the fight: “The Technology Revolution: A Campaign for Liberty Manifesto.”

Starting with his first term as a member of the House of Representatives from Texas in 1976, Paul has led the fight to expose the secret machinations of the Federal Reserve, making that his primary theme in the freedom fight. That theme can be traced to the publication of his The Revolution: A Manifesto in 2008 to his End the Fed in 2009, and finally to his latest book, Liberty Defined, published in January this year.

But with his campaign for the presidency likely to fail at the Republican Party’s convention next month and his decision not seek reelection to his House seat, Paul is passing the torch to his son. As explained on the C4L website: 

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Latest ADP Jobs Report Confirms Slowing Economy

Christine Lagarde

On Thursday, accounting firm ADP issued its National Employment Report noting that jobs in the non-farm private business sector increased by 176,000 in June. ADP’s CEO, Carlos Rodriguez, said, “It is encouraging to see companies creating jobs, particularly in the goods-producing sector where we see positive growth following two months of job loss.” Reuters jumped on the alleged positive news, calling it a “hopeful sign.”

Unfortunately, one month does not make a trend. When June’s numbers are compared to January’s, ADP’s total nonfarm private jobs growth has increased from 110 million to 110.9 million, a gain of 77-100ths of one percent, or about 142,000 new jobs each month. A closer look reveals that most of those jobs were in the highly volatile service sector, in small businesses, usually fast-food or similar businesses, known for their high turnover. In fact, the goods-producing sector gained just one half of one percent employment since January, translating into less than 16,000 job gains each month. These numbers are hardly a “hopeful sign,” but more reflective of an economy that has flat-lined.

Another report from the Department of Labor showed that new claims for unemployment insurance dropped by 14,000 last week to 374,000, the lowest level in six weeks. But that was offset by an upward revision from

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Economy Tipping Over Into Recession, Again

English: Yellow hard hat. Studio photography.

When shipping and supply managers were quizzed about their current outlooks by two separate reporting agencies, their answers were the same: Orders are slowing and so is production of manufactured goods. The Purchasing Managers’ Index (PMI), released in late June, and the Report on Business of the Institute of Supply Management (ISM), which was released on Monday, each showed significant slowing. The PMI’s manufacturing index came in at its lowest level since last July, while new orders for durable goods (autos and appliances) fell sharply in June, continuing a trend downward since early spring. It also showed a decline in the backlog of orders, the first since last September.

According to the ISM, its index fell below 50 for the first time since July 2009, indicating continuing contraction in the manufacturing sector of the economy and echoing the PMI’s report. What was startling in the ISM’s report was the decline in new orders: down by an astonishing 12.3 percentage points in the month of June. ISM’s production index also declined severely, by 4.6 percent, and was down by 10 percent since the end of March.

Retailers’ inventories are climbing as well, indicating lack of demand by consumers. More troubling was

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Feisty, Fearless Economist Anna Schwartz Dead at 96

Anna Schwartz by David Shankbone

Best known as the co-author, along with Nobel Prize-winning economist Milton Freidman, of A Monetary History of the United States, 1867-1960, Anna Jacobson Schwartz died on Thursday, June 21, in New York City at age 96.

A brilliant economist in her own right, she provided the background, the research, and so much of the thinking behind the 859-page A Monetary History that Friedman claimed that “Anna did all the work, and I got most of the recognition.” Considered by many classical economists as the magnum opus on monetary policy (the impact of money supply on economic behavior), by itself it shifted the blame for the Great Depression from the statists’ claim that it was due to excessive laissez-faire capitalism in the 1920s to the interventions by the Federal Reserve that caused the Great Depression and that greatly exacerbated both its depth and duration. So powerful were the conclusions that one of the book’s chapters, “The Great Contraction, 1929-33,” was published as a stand-alone paperback in 1965, and the book itself was hailed by the Cato Institute as one of the most influential economics books of the 20th century. Even Federal Reserve Chairman Ben Bernanke admitted that A Monetary History “transformed the debate about the Great Depression.”

Accolades abounded following the announcement of her passing, even from those who parted ways with her on the role of central banking in a modern economy and the Federal Reserve in particular. George Selgin, a senior fellow at Cato, remembers Schwartz as being candid and uncompromising: “Anna never held a punch, and when she threw one, it landed square on target.” Robert Higgs, a scholar at the Independent Institute, noted, 

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Rand Paul Explains His Support for Romney

English: United States Senate candidate , at a...

Following the announcement last Thursday by Senator Rand Paul that he was endorsing former Massachusetts Governor Mitt Romney as the Republican Party’s nominee for President, he took time to respond to critics of that decision in an interview with Peter Schiff. Said Rand: “Supporting the [Republican] nominee has been part of my [effort] to have influence…. If Republicans see that you are not going to support the nominee, then doors close.”

Rand’s strategy is much more political than ideological. He feels that he can do business with and make binding agreements with parties with whom he has major disagreements but those agreements can only be made if he is allowed “inside.”

That may be a very good strategy, according to Bob Akimbo, writing at the DailyPaul.com blog:

Let’s learn a lesson from the Trojan War. We can bang on the walls of the Federal Reserve until our fists bleed, but it will be a…lot easier if someone opens the door for us from the inside…

His endorsement of Romney gives him the political capital to put those issues [he favors] front and center…. Did you see that opportunity three years ago?

There is a strong element of pragmatism in Paul’s endorsement of Romney. In responding to his critics Paul told Schiff, “People say that ‘you’re selling your soul.’ No, I’m

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American Families Lose 40% of Net Worth to Housing Bubble

The Harvey family

The release last week of the Federal Reserve’s much-anticipated three-year study of America’s finances, its Survey of Consumer Finances, confirmed what many families already know: Between 2007 and 2010 the average family’s net worth declined by nearly 40 percent, mostly because of the decline in housing prices. The Fed study also confirmed that their incomes also fell significantly in real terms, by nearly eight percent.

It was during this period that the country’s Gross Domestic Product (GDP) dropped by more than five percent between the third quarter of 2007 and the second quarter of 2009 while unemployment jumped from 5 percent to 9.5 percent. But the seeds of the decline in net worth had been sown decades earlier as politicians, aided by the media, successfully persuaded Americans that home ownership was to be desired greatly.

By reducing interest rates, giving tax breaks on the deductibility of interest paid on home mortgages, and encouraging (some would say forcing) banks to reduce lending standards, the stage was set for

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Bailout of Spain Just a “Credit Line,” Says New Prime Minister

Mariano Rajoy

Following another last-minute late-weekend meeting of European Finance Ministers, Spain’s new Prime Minister Mariano Rajoy happily announced that not only was his country going to get more bailout funds than it needs, it’s coming without any strings attached. This is because, according to Rajoy, the new measures instituted since the victory of his People’s Party last November have been so effective in bringing common sense and prudent behavior back to the country’s financial markets. Those “radical” fiscal, labor-market, and financial-sector reforms that were instituted were the key, he said, adding,

If we hadn’t done this in these past five months, what was put forward [on Sunday] would have been a bailout of the Kingdom of Spain. Because we had been doing our homework for five months, what did happen…what was agreed, was the opening of a line of credit for our financial system.

There is no conditionality of any kind.

According to a report by the International Monetary Fund (IMF), Spain needed at least $50 billion to rescue and recapitalize its banks. But the Finance Ministers decided to up the ante significantly, to $125 billion, just to be safe. Said Olli Rehn, the European Union’s top economist, “This is a very clear signal to the markets, to the public, that the Eurozone is ready to take determined action.” He added, “We deliberately wanted to ensure there is some additional safety margin…. This is preemptive action.”

What Rajoy failed to mention is that there are most certainly strings attached, and when

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Experts Disagree on U.S. Economic Outlook

The Six Million Dollar Man

As soon as Automatic Data Processing, Inc. (ADPannounced that hiring slowed in April compared to March, with 199,000 new jobs being the lowest since last September, the experts began scratching their heads. Joel Parkken, chairman of Macroeconomic Advisors which produces the monthly reports for ADP said that “this deceleration seems consistent with other incoming data” and that it also means that Friday’s employment report from the Bureau of Labor Statistics (BLS) will show that the unemployment rate will stay at 8.2 percent, the same as last month.

ADP also revised downward last month’s jobs numbers from 209,000 to 201,000, and indicated that 123,000 service jobs were added in April while manufacturing lost 4,000 jobs. Paul Ashworth, chief U.S. economist at Capital Economics who estimated that job growth would be 175,000 for the month, is now backtracking:

Obviously, the weak ADP reading means that there are now clear downside risks to our estimate…Indeed, it is possible we could see a repeat of March, when payrolls [reported by the BLS] increased by only 120,000.

Looking back over the last five months of ADP data, however, gives a better picture of the economy and jobs. Since November total payrolls have increased by 1 million, or about 200,000 jobs per month. Two-thirds of those jobs were created in the service industry while one-third was in the goods producing sector, with only about 15,000 jobs being created in the heavy manufacturing sector every month.

But this report from the payroll giant, which tracks job growth closely, differs from the survey of

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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.

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