My post on Wednesday, June 10 regarding the coming explosion in the U.S. Government's cost of borrowing now has company in this article from the UK's Daily Telegraph.

From the article:

In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc.
The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a “debt explosion”.

Voters and the Executive Branch

A lot of people were amused by the Obama Administration selecting someone with absolutely no experience in the automobile industry to run General (Government) Motors.

But, it occurred to me that it's not like voters really check the qualifications, knowledge or experience of the people they vote for... not really, anyway. Most of them just pick the person their preferred "club" (political party) has promoted up the chain and put in front of their nose on the ballot. Most of these people can't tell you about the 1953 Iranian Coup, the 1959 Iraq Coup Attempt, the history of the income tax or Federal Reserve, the difference between Keynesian, Chicago and Austrian schools/theories of economics or what the REAL purpose of "The Law" is supposed to be.

So, if the voters can elect people to Congress who know nothing about (a) the rule of law, (b) the Constitution, (c) economics or (d) history then why can't the President's bozos put some schmo in charge of GM that doesn't know a thing about cars? Not saying I agree, but, just a thought.

As Government Debt Increases, Interest Rates Will Rise, Dollar Will Fall

(cross posted to the HFFT blog also)

I've been paying very close attention to the 10 year treasury bond rate since the current economic meltdown started taking hold. As the Federal Reserve began massively printing money, essentially doubling the money supply in the last four months of 2008 alone, it occurred to me (and anyone else with a casual understanding of economics) that a couple of things must happen:

(1) bond yields will need to significantly increase in order to find buyers for the increased supply and risk of U.S. treasury bonds [ie: our government's borrowings].

(2) the value of the U.S. Dollar must fall relative to more stable currencies that are expanding at a slower rate [ie: Euro is bad comparison, I suggest evaluating dollar value against a basket of world currencies]

As with many things in economics, timing is always difficult to guess and even though you know the treasury rate must increase, other actions the government may take or human beings (and the markets) reaction to conditions and such is always difficult to guess ... but the long-term outcome is undeniable.

Instead of immediately rising, treasury rates (10 year) dropped to as low as 2.08%. Of course, this happened as I incredulously told people it was going the wrong way and HAD to go to 4 or 5 percent and then probably, and potentially much, higher.

The challenge here is that as people dumped their stock market investments and moved their holdings into what are historically considered "safe" government bonds, the demand drove up the price of the bonds. Understanding that bonds trade like stocks and can increase and decrease in price which affects the net percentage income you can derive from them, this made the bond's "effective interest rate" lower. So people may have been paying $1080 for a bond that pays 3% on $1,000. Thus, another asset bubble was created by the Federal Reserve intervening in the economy.

Now, the government is having trouble finding enough buyers for the massive amount of borrowing it is doing and that is driving the price of those $1,000 bonds DOWN. So, now anyone who bought those bonds at prices at $1,000 or higher, thinking they were "safe" is sitting on bonds worth $930. What this also means is that the interest rate our government is having to pay on 10 year debt (just to use this example) is now approaching 4% and is continuing to spike. In fact, it should rise past 4% pretty easily and quickly at this point.

At the same time, the government is planning to intentionally devalue our currency so as to "buy down" the value of its debts. Unfortunately, this also "buys down" the value of your savings, essentially creating a different kind of tax, and to the extent that it increases the dollar value of your home and other assets, you ultimately get taxed on the "inflation portion" should you sell assets and derive income from such. (ie: inflation rises over a period of time by 20%, your equity investments go up 40% ... you pay taxes on the 40% increase, not the 20% "REAL" increase - another reason the Income Tax is a terrible way to extract revenue from citizens).

The long and short of this is that our government is going to have to pay increasingly higher interest rates on ever increasing debt. Remember, "...trillion dollar deficits as far as the eye can see..." ? Without looking it up, I believe in 2007 the U.S. Government paid around $420 billion in interest on the debt. Imagine the interest rate on that doubling while the debt increases by ever more trillions of dollars. The personal income tax brought in around $1.1 trillion that year, which means we could very quickly see every penny of income tax revenue going to nothing but the Interest on our government's debt.

And you wonder why libertarians and other fiscal conservatives keep saying government is out of control, spending is out of control and we can't afford the programs we have now, much less new ones like national health care. Even if you raised the tax rate to 100% on EVERYBODY you wouldn't be able to collect enough money in a decade to pay our current and future obligations.

Republican Liberty Caucus Set To Organize In Marion County (Indianapolis)

It looks like the liberty movement is getting some traction in Marion County amongst a good group of libertarian leaning Republicans. While I officially self-identify with the Libertarian Party and worry that the RLC could continue to end up shoved in a closet and ignored except around election time when somebody wants their votes, I applaud the effort and consider several of the leaders organizing the group as amongst some of the best people I know.

I always try to be non-partisan in my approach to politics in that so long as people are fighting for the right things we should always find ways to work together. In keeping with this idea, here is information on the Marion County meeting and my thoughts on the leaders stepping up to organize it.

Marion County Republican Liberty Caucus chartering meeting
Thursday, May 28 at 6:00 PM
The Front Page Tavern
310 Massachusetts Avenue
Indianapolis, IN 46204

more information: lizkarlson@yahoo.com or lakelly@iupui.edu

If you are at all a Barry Goldwater, Ronald Reagan or Ron Paul (or Taft or Coolidge) style Republican or conservative and can’t bring yourself to join the Libertarian Party because you haven’t been abused enough yet [reference: Battered Voter Syndrome] then you should definitely show up with $30 (I’m sure they’ll take your check) in hand to be a charter member of the Marion County Republican Liberty Caucus.

I know that local Washington Township GOP Club President Liz Karlson and Andy Horning’s former running mate for Lt. Governor, Lisa Kelly, have been working to organize this group and should either one of them run for Chair or Vice-Chair they definitely deserve the support. Both of them are team players who are willing to reach out to other groups when common cause provides opportunity and they always take time to thank people for their efforts. Not taking your supporters, volunteers and contributors for granted is an important trait of good leadership.

If you have finally gotten tired of getting battered by the Republican Party, then I highly recommend giving the Libertarian Party your support (it’s cheaper too, only $25) by visiting www.lpin.org and getting involved. In fact, even if you haven’t gotten battered enough yet, think about how much work libertarians do arguing against and fighting against high taxes, out-of-control government programs and spending and other causes and drop a few bucks their way anyway. Whether you avail yourself of it or not, having that third option that allows you to not endorse bad candidates from the other two parties is something worth preserving.

more information on the LPIN: cspangle@lpin.org

Something to Consider - Politicians and Why Voting Isn't Working

This is an excerpt from a Facebook comment I posted after someone lamented the whole "RINO" label when it comes to Republicans who aren't either (a) fiscally conservative enough or (b) theocratic enough to meet some kind of non-existence test or threshold.

I do like to remind people that some of the most supposedly fiscal conservative Republicans often still vote for hundreds of billions of dollars in out of control spending omnibus bills and that if you are a hard core religious conservative, the last thing you probably really want is the government regulating your religious practices (marriage being a religious practice) and should really work to get government out of it completely.

Always remember, you never want to grant to government any power you would not grant your worst enemy. The reasons for this should be self-evident.

Here is the excerpt though:

The fallacy in the whole discussion is that people fail to see how very few people get involved in electoral politics over any kind of ideological bent or passion for the rule of law. It is seen as a career choice, a status symbol or an opportunity to be influential and feel important. This is true of both of the major "clubs".

Those who want most badly to reign over us are typically those we should least allow to do so.

This is why I love Libertarian folks. They truly want things fixed within the confines of free market economics, the Constitution and the rule of law ... not to be in charge of others, wield power or have "status".

Overwhelmed, Burned Out And Somewhat Encouraged?

Friends, neighbors and patriots -

I've been feeling a bit overwhelmed lately by so many things not the least of which is all of the bad stuff that is going on with our government and our economy. All of the sudden these past few weeks I've felt a bit burned out and not sure where to focus my thoughts and energies so please excuse as I just ramble for a bit to get some things out of my system.

One thought I've had repeatedly in light of the MIAC and DHS controversies follows. Those controversies of course were where basically anyone of the following characteristics classified as you as a potential enemy of the state to be watched closely for potential extremist tendencies:

(list includes people who are)
Anti-Abortion
Anti-Taxation
Pro-Constitution
Libertarians
Supporters of Third Parties
Supporters or Fans of Ron Paul
Supporters or Fans of Bob Barr
Supporters or Fans of Chuck Baldwin
Ex Military Personnel
[and probably more]

The MIAC situation even suggested law enforcement pay closer attention to people with bumper stickers on their cars in support of the above. Of course, I look at that list and think to myself, "8 out of 9 isn't bad."

But, the point of this is that for all of the people who were so concerned about terrorists, and who mostly still refuse to acknowledge the root causes, that they were not concerned about granting the government all kinds of power via things like the Patriot Act I have the follow questions:

(1) Does it ever occur to you that you should never, ever grant the government power that you would not want your worst enemy to have? Because, at some point (perhaps now?) your enemy will have that power that was so willingly given when the administration seemed less inclined against you.

(2) Do people ever stop to think that at some point, all of this surveillance, wire-tapping, invasions of privacy, no fly lists and other things could be used against the most pro-American, pro-Constitution patriots? Power is granted to reign in the threat of "terrorism" but how many stop to consider that someday, THEY could be the terrorist the government is worried about?

As I've stated many times in the past, I am far more afraid of Congress than I am of "terrorists". Granted, I have the benefit of living in Indiana, not in New York or L.A. but, if the migration of people out of those states is any indication, their people are increasingly feeling a need to escape their own governments and move to more tax friendly and less restrictive environs themselves.

I have been encouraged by the recent surge in activists with the "Tea Party" people. Apparently some of their leadership was concerned that "Libertarians" were against them somehow because of the comments of one person. Why do people try to assign group think to libertarians? I mean, if some Republican or Democrat goes around saying "9/11 was an inside job" I don't assume they ALL think that, even if one of their elected officials were to do so. Everyone does realize that with libertarians running things we wouldn't have had terrorist attacks on our soil, massive FED induced market bubbles and collapses (2 in a decade now folks), massive government debt and a near monopoly stranglehold on a failing education system by government? Right? People do understand this I hope.

Some thoughts on the Tea Party groups and their seemingly growing batch of awesome supporters and volunteers, many of whom seem very sharp.

(1) Remember that most libertarians who have been paying attention and active for many years are pretty much past the point of mild protest. Been there, done those, what's next? When 95% of calls to Congress are adamantly opposing things like bailouts or stimulus packages and they vote for them anyway, waving signs with eloquent speech seems to likely be just as ineffective.

(2) A lot of libertarians and even fiscal conservative Democrats are concerned about things becoming a "social conservative" movement because of a lack of a true understanding of liberty or the philosophical underpinnings. Especially when, in Indianapolis, one of the more visible pro-NeoCon voices is one of the speakers at the Tea Party and laments that, as people wave "boot out all incumbents" signs, some good ones (the Republican ones he's friends with) got tossed in the last couple of elections. Yeah, I'm sure NONE of those guys EVER voted for a large omnibus spending bill. So much for non-partisan but I think the organizers are sincere even though they will likely fall into the two-party system trap and have their eyes opened when things like slating, slating fees, campaign war chests and primaries start getting in the way of getting their candidates on the ballot. Again, we'll just have to see how things go.

(3) It was definitely odd, or maybe it was just perception, that with so many libertarians, Ron Paul supporters, Campaign for Liberty folks, the Republican Liberty Caucus, the Democrat Freedom Caucus (anyone in Indiana?), the John Birch Society and others who have well established lists of pro-liberty and pro-Constitution activists, educators and talent that those resources weren't better included in some of the Tea Party recruiting and planning. But, the fact that all of those factions exists maybe speaks more to the "divided we fail" principle and helps explain some of the lack of progress. Certainly, those groups have been warning us for years, if not decades, about the very things that are becoming crisis now. But now, it seems, being one of those issuing the warning is enough to put you on the DHS "watch list".

(4) A lot of folks are starting to realize that voting isn't working when it comes to protecting the rule of law, our country and our economy. That is exactly why we are supposed to be a Republic (rule of law) not a Democracy (rule of men [aka: mob rule]). Always remember that in a room of ten people, no six should be able to violate the rights or lives of the other four just because a majority decided so. This is a concept called "Tyranny of the Masses" or "Tyranny of the Majority".

One last thought on all of the recent "secession" talk. I've heard the word "secession" in the media and even from elected officials more in the past year than in my whole life combined. It is a fair topic for discussion and debate and just because Lincoln had ego and tax collection concerns with the South seceding doesn't mean that the States don't have that option legitimately. (and please remember the rest of the world ended slavery peacefully and not with the deaths of 640,000 people and tearing their countries apart). I mean, seriously, can you imagine the United States Government going to war with Texas or any other state that desires MORE FREEDOM instead of less?

What a mess.

This Car Caught Littering At 79th And New Augusta Road

Around 5:00 PM today I snapped this vehicle speeding away from where they had stopped at the bridge over a small creek on New Augusta Road, less than a block South of 79th Street. They threw out what appeared to be some boxes and assorted trash. I hoped the picture would come out better (Treo Cameraphone - not so great) so I could get the plate number but it didn't. If I hadn't had my kids in the car I would have chased them down while trying to get the police on the line. It was so blatant, lazy and infuriating. Heck, we were right across from a school with outside trash dumpsters and next an apartment complex with the same. Of course, it's probably illegal or something to use the school's dumpster and I know the apartment complex frowns on outsiders using their trash containers, but still.

Note: they had a temporary license plate that appeared to be held on by strips of masking tape.

Could It Be True?