The view from an Argentinian economist by the name of Adrian Salbuchi.

By Greg Hunter

While I was watching the wall to wall Inauguration coverage of Barack Obama there was a “man in the street” segment on one of the networks where people were being asked “What should the new President do about the troubled economy?” One man said “He should give money to all the homeowners who are in trouble and give some money to other homeowners too.” I think the idea of bailing out anyone and everyone is now in the vernacular of American society. How do you suppose people are getting the idea that everyone should get a financial rescue? Could it be story after story in the news everyday about how Citigroup, Bank of America or a variety of other banks are getting hundreds of billions of dollars in cash and government backing to keep them afloat? Maybe it’s the 200 billion given to AIG to keep it from causing systemic failure. It just couldn’t be the nearly 18 billion given to GM and Chrysler to keep them in business. Bailout fever is spreading like kudzu. The list of businesses and industries in need of a lifeline are like snowflakes in Colorado. Home builders, airlines, insurance companies, money market funds, states (41 are in financial trouble) and hundreds of cities around the nation are facing big budget shortfalls. Is that going to turn into some sort of bailout too? I was in North Carolina two weeks ago. While watching local television I heard the new Governor, Bev Perdue, say the state was 2 billion dollars in the red and that without federal bailout money there would have to be drastic cuts to the state budget. She was in Washington trying to get a piece of the TARP money and, why not, every other state governor is doing the exact same thing!!! Governors from around the country are asking the Federal government for a trillion dollars so they’ll not have to make some very hard choices.

With all this bailout talk, another word is starting to make it into the vernacular…Inflation!!! Before the Geithner confirmation hearing, former Fed Chief Paul Volcker, who I like to call “the Real Maestro,” gave a short testimony to vouch for tax dodging “Turbo” Tim Geithner. (He used Turbo Tax to do his returns.) The most newsworthy thing said were the few lines Volcker slipped in about his concern about inflation because of all the bailout money being created for the banks. No news organization I know of reported that little tidbit. Volcker’s fear of inflation should have been the real headline for the hearing because “Turbo” Tim was already a lock for Treasury Secretary. Later that night on Bloomberg Television, former SEC Chairman Harvey Pitt said he saw “no way” that there is not going to be inflation given the massive amount of money that will be spent for bailouts and economic stimulus. You won’t see that sound bite anywhere in the news either. When you talk about inflation you are really talking about consequences to monetary policy. Inflation was so feared by the founding fathers they wrote in the constitution that money shall be of “Gold and Silver.” That meant no fiat currency for economic stimulus packages and of course bailouts. We are a long way from the founding fathers and their kind of thinking. Today the government can print money until it runs out of trees, but what most people do not realize is there is an after effect for that kind of financial engineering. America has swept aside any talk of moral hazard and is embracing the toxic idea of a “bailout nation” for which the consequences risk our very survival as an independent country.

By Greg Hunter

Back in the late 60’s and early 70’s prime interest rates averaged 6 or 7 percent. Back before 1971 it was possible to save money at a reasonable guaranteed rate of return and easily keep ahead of what little inflation there was in the U.S. economy. That was the beauty of honest money that held its value and paid a real rate of return. In 1971 all that changed when President Richard Nixon took the country off the gold standard and went to a total fiat currency. A few years later the Employee Retirement Income Security Act (ERISA) was sign into law and that made possible the 401K plan. It allowed people to save in a brand new way largely through the stock market. The stock market is an invaluable tool of capitalism. It is how many companies raise capital and create jobs and prosperity. But what most people do not realize is a 401K is not a savings plan but an investing plan. When you save money, you put it away and get a guaranteed return. In an investment plan the money is put away but not guaranteed. Most people I know do not really understand their 401K plan. Folks are repeatedly told “invest for the long term.” They are also told there is really no other way to save for the future because if you simply save your money inflation will eat up your returns. By and large, working people are pushed into 401K’s. In the right business cycle with the right demographics (as in lots of baby boomers investing in stocks at the same time such as the 80’s and 90’s when business and inflation was stable) the 401K is a not a bad deal especially when you consider that companies often match or contribute funds to make the investment plan advantageous to participants. But in the wrong part of the business cycle (aging baby boomer population and big government bail outs of every big bank) the 401K can provide some gut wrenching lessons about “investing.” People are painfully finding out with every statement that these plans have not been such a good “long term” investment deal. The S&P 500 is back at levels not seen since 1998. And that doesn’t really account for companies whose share prices have been wiped out or bankrupted. A few examples spring to mind such as AIG, WaMu, Wachovia, Bear Stearns, GM, Ford, Fannie, Freddie, Lehman, Enron and World Com. Also, factor in a nearly 30 percent drop in the U.S. Dollar Index and how are people in 401K’s making money for retirement? The short answer: They are not!!! If you would have simply invested in money markets (and taken the company match) back in 1998 with your 401K you would have been hit with inflation but at least you would have a positive nominal return. Most people did take that route. Now, to help fund the multi trillion dollar bailout of Wall Street, the Fed has announced a new policy of “Quantitative Easing.” That means “printing money” to us simple folk. So getting any kind of return on cash will be impossible to do because the government will be printing it faster that you or anyone else can save it. Nobel Peace Prize winner Milton Friedman said it best, “inflation is always and everywhere a monetary phenomenon.” Printing lots of fiat currency is going to produce an ugly phenomenon for most people. I see a continuing freak show of bailout and default. If you are an investor then the stock market and all its risks and rewards are for you but if you are a saver then maybe you should have other options. Wouldn’t it be easier for most people to save if we just had honest money? Someday honest money will be necessary for the county and our citizens to survive.

Greg Hunter is the Economics Editor for CNN.

On March 6th, 2008 Alan Greenspan admits we don’t have a free market. He also admits there was a free market under the gold standard!

This is a great article explaining the current condition of the Western monetary system. It was written by Thorsten Polleit who is honorary professor at the Frankfurt (Germany) School of Finance and Management.

By Bob Chapman
The International Forecaster
September 18, 2008

Losses and bankruptcies of the major banks that we predicted, trouble for the taxpayer who now shoulder a trillion in debt from bank failures, Why do we have to bail out Wall Street fraud? Lehman Brothers left to expire, We are watching our Zombie economy implode, Buy-outs are just throwing good money after bad, Toxic waste eats your equity capital, eats your stocks, your bonds, and eats your retirement funds. 1929 all over again.

The business end of Hanky Panky Paulson’s bazooka is glowing red hot as it continues to fire round after round of high explosive moral hazard contains an up to 85 billion dollar, two-year bridge loan from the Fed to the world’s largest insurer, AIG, to be guaranteed by the US taxpayer via the US Treasury.

Warrants convertible to up to 80% of the common stock of AIG will be pledged as collateral to secure the US Treasury’s loan guarantee to the Fed, with proceeds from the sale of AIG’s now virtually worthless assets being supposedly used to pay down the loan. It’s just Bear Stearns mixed with Fannie and Freddie. You have a loan from the Fed guaranteed by the US Treasury being used to bail out AIG directly instead of being used to facilitate the assassination of BS by a predatory lender (i.e. JP Morgan Chase), and you have what will be ultimate taxpayer ownership of AIG’s toxic waste by having common stock pledged as collateral instead of being purchased through equity injections, as with Fannie and Freddie.

The Treasury’s potential 80% ownership greatly dilutes the value of the existing common shareholders, and the Treasury has been given the right to stop dividend payments on both common and preferred stock of AIG shareholders, which means basically that they have both just been vaporized. The Fed’s Fascist Follies continue.

You, the US taxpayer, will now not only end up owning nearly worthless stock in these corporate cesspools, you have assumed all of their liabilities up to the amount of the loans/capital injections. Remember, the bondholders are still ahead of you!!! BS was $29 billion (plus), Fannie and Freddie are $300 billion just for openers, soon to grow into a loss in excess of one trillion, perhaps even as much as two trillion or more, and now we pour another 85 billion into the pot of boiling moral hazard for AIG. As we inhale the radioactive fumes from the detonation of this latest round of DU laced moral hazard, the stock markets and the dollar rally, while gold and silver decline, all thanks to the manipulation of markets that are rigged daily by the same scum who are bailing out the fraudsters. It is nothing short of surreal.
(more…)