The Economy - 2011 - It Doesn't Look Good.

THE NEXT BIG ECONOMIC CRISIS

By DICK MORRIS

Published on TheHill.com on June 22, 2010

Many say that the situation in Greece is a harbinger of what is coming to the United States. They are right. But first it will come to states like New York, California and Michigan that are stretched way beyond their means and deeply in debt.

Until now, the problems in these states have been papered over by federal aid. Essentially, Washington has relieved these states (and the local governments they fund) of their constitutional obligations to balance their budgets by giving them welfare checks in the nick of time. Obama now seeks to pass $50 billion in additional welfare to the states.

But since these federal funds are not necessarily recurring -- and the jobs and obligations they fund are -- they simply enlarge each year's deficit hole and enable the states to go more deeply into the red.

As these deficits mount -- particularly if a newly elected Republican House and/or Senate refuse to fund them -- bondholders will get more and more nervous. Eventually, they will realize that the less solvent states are bankrupt and will refuse to buy their debt. Eyes in Sacramento, Lansing and Albany will turn helplessly to Washington to guarantee their debt, just as Athens turns to Berlin.

Republicans, if they control either or both Houses, should stand firm and insist that these states sink or swim on their own. America's taxpayers will not take kindly to having to bail out other states -- or even their own -- to pay for years of reckless spending. Americans will swarm to the GOP and will hail its stand.

The time is long past when a local newspaper can generate sympathy -- even from its own readers and the state's own citizens -- with a headline like "Ford to New York: Drop Dead." Now people in other states (and even in the affected state) would stand up and cheer should the Republicans take so strong a position.

There is currently no legal procedure for a state government to go bankrupt. Congress, especially if it is Republican in 2011, should pass a mechanism that permits states to discharge in bankruptcy their collective bargaining agreements and contracts with municipal unions. Of course, this procedure would have to let school boards and local governments do likewise.

Obama will veto this bill and a stalemate will ensue.

On the left will stand Obama, the unions and the Democrats demanding bailouts for the states and, truly, an end to our federal system of government. Once Washington guarantees state debt and spending, there will be no more state governance, only national rule.

On the right will stand a Republican Congress refusing to do so unless the states declare bankruptcy and cleanse themselves of the union agreements that got them into trouble in the first place. The GOP will point out that state funding is leaking as surely as the Deepwater Horizon oil well and polluting our nation's balance sheet as badly in the process.

The money will run out. States, school boards and localities will stop sending out checks. Emergency state funding may keep schools open, prisons locked and police and fire services running, but otherwise all hell will break loose.

Something will give in this national game of chicken. If it is the states and Obama that blink first, we will free our local governments of the grip of municipal unions, their rigid work rules and their unaffordable pensions. If the Republicans blink first, they will forfeit their right to represent the American people, having backed down from the challenge of our times.

This Armageddon looms in 2011, presenting us with either an opportunity to reform our government in fundamental ways or to set in stone our path to an Athens-esque meltdown.

It's Time to Get Out the Impeachment Stick!

Obamnesty First, Security Second?

Posted 06/21/2010 06:57 PM ET

Immigration: The president tells a border state U.S. senator that if we beef up border protection Democrats will lose the bargaining chip for comprehensive immigration reform. Forget national sovereignty — sue Arizona!

As the Obama administration prepares to sue the state of Arizona to block its copycat enforcement of federal immigration law, Arizona Republican Sen. Jon Kyl reveals that in a private meeting President Obama put his party's agenda above the nation's sovereignty.

Last Friday, Kyl told the audience at a North Tempe Tea Party town hall meeting:

"I met with the president in the Oval Office (regarding securing the southern border with Mexico)," Kyl said, "just the two of us . .. here's what the president said. 'The problem is,' he said, 'If we secure the border, then you all won't have any reason to support comprehensive immigration reform.'"

If we secure the border? The nation's security is a bargaining chip for politically motivated legislation with political consequences?

Every nation has a right to protect its borders, and our commander in chief has a duty to protect ours. Refusal to do so for political reasons is unconscionable. Our border states should not remain exposed to the escalating violence of a Mexican drug war that has already claimed the life of one Arizona rancher.

The murderers of Robert Krentz escaped to a protected pronghorn antelope area that the Interior Department of Secretary Ken Salazar had placed off limits to U.S. border patrol agents in order to protect endangered species.

So unserious is the administration about protecting the border that it has placed off limits some 4.3 million acres of wilderness area that has become both a haven and a highway for illegal aliens, drug smugglers, human traffickers and potential terrorists.

Arizona is now the kidnapping capital of the United States, and Phoenix has the second-largest kidnapping problem in the world, just behind Mexico City. Claremont Institute fellows William J. Bennett and Seth Leibsohn, writing in National Review, report that someone is kidnapped every 35 hours in Phoenix.

According to the Maricopa County Attorney's Office, kidnapping in Arizona increased 402% between 2004 and 2008, with almost 70% of the kidnapping cases submitted for prosecution involving illegal immigrants.

This is part of a much bigger crime picture. The Center for Immigration Studies reports that while illegal aliens make up 9% of the Arizona population, they are responsible for 22% of the felonies in the state and they constitute 11% of the state prison population.

Instead of securing the border, the Obama administration is preparing to sue Arizona for doing the feds' job by passing SB 1070, which mimics existing federal law.

The irony here is that the Department of Homeland Security has Memorandums of Agreement (MOAs) with around 70 state and local law enforcement agencies to participate in program 287(g) partnerships to enforce federal law.

Nine of these jurisdictions are in Arizona and all of the agreements were inked while Homeland Security Secretary Janet Napolitano was Arizona governor. Last October, Napolitano said these "agreements promote public safety by prioritizing the identification and removal of dangerous criminal aliens and ensure consistency and stronger federal oversight of state and local immigration law enforcement efforts across the nation."

Under these agreements, local law enforcement is trained and authorized to enforce federal immigration laws by arresting criminal illegal aliens. Nationwide the program has ID'd and processed for removal more than 110,000 criminal aliens since January 2006.

The Obama administration wants to sue Arizona for doing what it authorized Arizona to do. No court should allow that.

In a statement issued Friday after it was confirmed the administration was preparing to sue, Arizona Gov. Jan Brewer called Obama's decision "outrageous" but "not surprising."

"Our federal government should be using its legal resources to fight illegal immigration, not the law-abiding citizens of Arizona," Arizona's governor said. We concur.

President Obama's words to Sen. Kyl seem to indicate a willingness to hold the American people hostage to a political agenda and should be roundly condemned. We need to plug the hole on our southern border first.

Useful Idiots Abound!

Is U.S. Now On Slippery Slope To Tyranny?

By THOMAS SOWELL Posted 06/21/2010 06:13 PM ET

View Enlarged Image

When Adolf Hitler was building up the Nazi movement in the 1920s, leading up to his taking power in the 1930s, he deliberately sought to activate people who did not normally pay much attention to politics.

Such people were a valuable addition to his political base, since they were particularly susceptible to Hitler's rhetoric and had far less basis for questioning his assumptions or his conclusions.

"Useful idiots" was the term supposedly coined by V.I. Lenin to describe similarly unthinking supporters of his dictatorship in the Soviet Union.

Put differently, a democracy needs informed citizens if it is to thrive, or ultimately even survive.

In our times, American democracy is being dismantled, piece by piece, before our very eyes by the current administration in Washington, and few people seem to be concerned about it.

The president's poll numbers are going down because increasing numbers of people disagree with particular policies of his, but the damage being done to the fundamental structure of this nation goes far beyond particular counterproductive policies.

Just where in the Constitution of the United States does it say that a president has the authority to extract vast sums of money from a private enterprise and distribute it as he sees fit to whomever he deems worthy of compensation? Nowhere.

And yet that is precisely what is happening with a $20 billion fund to be provided by BP to compensate people harmed by their oil spill in the Gulf of Mexico.

Many among the public and in the media may think that the issue is simply whether BP's oil spill has damaged many people, who ought to be compensated.

But our government is supposed to be "a government of laws and not of men."

If our laws and our institutions determine that BP ought to pay $20 billion — or $50 billion or $100 billion — then so be it.

But the Constitution says that private property is not to be confiscated by the government without "due process of law."

Technically, it has not been confiscated by Barack Obama, but that is a distinction without a difference.

With vastly expanded powers of government available at the discretion of politicians and bureaucrats, private individuals and organizations can be forced into accepting the imposition of powers that were never granted to the government by the Constitution.

If you believe that the end justifies the means, then you don't believe in constitutional government.

And, without constitutional government, freedom cannot endure. There will always be a "crisis" — which, as the president's chief of staff has said, cannot be allowed to "go to waste" as an opportunity to expand the government's power.

That power will of course not be confined to BP or to the particular period of crisis that gave rise to the use of that power, much less to the particular issues.

When Franklin D. Roosevelt arbitrarily took the United States off the gold standard, he cited a law passed during the First World War to prevent trading with the country's wartime enemies. But there was no war when FDR ended the gold standard's restrictions on the printing of money.

At about the same time, during the worldwide Great Depression, the German Reichstag passed a law "for the relief of the German people."

That law gave Hitler dictatorial powers that were used for things going far beyond the relief of the German people — indeed, powers that ultimately brought a rain of destruction down on the German people and on others.

If the agreement with BP was an isolated event, perhaps we might hope that it would not be a precedent. But there is nothing isolated about it.

The man appointed by President Obama to dispense BP's money as the administration sees fit, to whomever it sees fit, is only the latest in a long line of presidentially appointed "czars" controlling different parts of the economy, without even having to be confirmed by the Senate, as Cabinet members are.

Those who cannot see beyond the immediate events to the issues of arbitrary power — vs. the rule of law and the preservation of freedom — are the "useful idiots" of our time. But useful to whom?

Intergalactic Presidential Incompetence Exceeded by Stratospheric Arrogance!

OBAMA: AN INCOMPETENT EXECUTIVE

By DICK MORRIS & EILEEN MCGANN

Published on DickMorris.com on June 14, 2010

Contrary to what the Constitution says, the president does not run the executive branch of the federal government. It runs itself. Following Newton's Laws of Motion, it is "a body in motion that tends to remain in motion in the same direction and at the same speed unless acted upon by an outside force." The bureaucracy keeps doing what it is programmed to do unless someone intervenes.

And that intervention is the proper job of the president. He has to step in, ask the right questions, get inside and outside advice, and decide how to intervene to move the bureaucracy one way or the other. President Clinton had an excellent sense of how to do this and when to get involved. President Obama does not.

When the spill started, he and his campaign staff - now transplanted to the White House - reacted the way a Senator or a candidate would, blaming British Petroleum, framing an issue against the oil company, and holding it accountable. But what he needed to do was to review the plans for coping with the disaster and intervene to move the bureaucracy in untraditional but more appropriate directions. Instead, he let business as usual and inertia move the process.

The president's tardy requests for international assistance and his government's bureaucratic response to their offers demonstrates his lack of command and control. The Washington Post reports that the Obama Administration initially "saw no need to accept offers of state-of-the-art skimmers, miles of boom or technical assistance from nations around the globe with experience fighting oil spills." Arrogantly, State Department spokesman Gordon Duguid told reporters on May 19th "we'll let BP decide what expertise they do need."

Two weeks after the spill started, the State Department and the Coast Guard sought to figure out what aid they could use from abroad. On May 5th, the Department reported that thirteen international offers of aid had been tendered and the government would decide which to accept "in the next two days." Two weeks later, it said that it did not need any of them.

Now, when it is too late, the U.S. has finally accepted Canada's offer of 10,000 feet of boom. In late May it took 14,000 feet from Mexico, two skimmers from Mexico, and skimming systems from Norway and the Netherlands. Too little too late.

Why didn't the Administration act sooner?

Bureaucratic obstacles stopped it and the president was not involved or active enough to sweep them aside.

Coast Guard Lt. Cmdr Christopher T. O'Neil said that "all qualifying offers of assistance have been accepted." But this bureaucratic-speak did not mention that the Jones Act - an isolationist law passed in the 1920s that requires vessels working in American waters to be built and crewed by Americans - disqualified many of the offers of assistance. But Obama could have waived the Jones Act whenever he wanted to.

A Norwegian offer of a chemical dispersant was rejected by the EPA - more bureaucracy.

When Louisiana Governor Bobby Jindal sought to create sand berms to keep oil away from the coastline, the Washington Post reported that he reached out to "the marine contractor Van Oord and the research institute Deltares...BP pledged $360 million for the plan, but U.S. dredging companies - which have less than one-fifth the capacity of Dutch dredging firms -- objected to foreign companies' participation."

An activist, involved chief executive would have swept aside these impediments and demanded immediate action. He would have ridden roughshod over bureaucratic and political objections and gotten the cleanup underway.

But this president is no executive. He is a legislator - he is now pushing new environmental legislation. He is a lawyer - his Attorney General is investigating criminal charges against BP. He is a populist - he is quick to blame BP. He is a big spender - he wants a fund to pay the spill's victims. He is all of these things. But he is no chief executive and that, unfortunately, is the job he was elected to do.

And this is the "change" that we elected in 2008!

Obama's Oil Spill

"Make no mistake BP is operating at our direction...The United States government has always been in charge making sure the response has been appropriate." Barack Obama, 2010-05-27.

Here’s the legal reality. At the Natural Resources Defense Council Switchboard blog, a staff attorney, David Pettit, has posted language in the Clean Water Act, which was amended through the Oil Pollution Act of 1990, that appears clearly to vest the president with both the authority and the obligation to take the reins in a major oil spill where private actions have failed:

(A) If a discharge, or a substantial threat of a discharge, of oil or a hazardous substance from a vessel, offshore facility, or onshore facility is of such a size or character as to be a substantial threat to the public health or welfare of the United States (including but not limited to fish, shellfish, wildlife, other natural resources, and the public and private beaches and shorelines of the United States), the President shall direct all Federal, State, and private actions to remove the discharge or to mitigate or prevent the threat of the discharge.

How Will It All End?

Faber: Nations Will Print Money, Go Bust, Go to War…We Are Doomed

Posted By Andrew Mellon On May 23, 2010 @ 5:28 am In Financial Services

Today the leading Austrian economic think tank, the Ludwig von Mises Institute ^[1] held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future.

Below are his main points and entertaining quotes:

• Central banks will never tighten monetary policy again, merely print, print, print
• Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended
• “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”
• “Central banks love to see asset prices go up,” and their policy reflects their desperation to perpetuate this
• US housing bubble that Greenspan could not spot (even though he has recently spotted bubbles in Asia) stands in stark contrast to that of Hong Kong in 1997, where prices fell by 70%, yet none of the major developers went bankrupt; this was a result of a system not built on excessive debt like that of the US
• “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004
• Over the last couple of years, when the gross increase in public debt has exceeded the gross decrease in private debt, markets have risen, whereas when private debt growth has outpaced public debt growth, markets have tanked
• The next 3-5 years will be highly volatile

• Americans must re-think what constitutes a safe asset; in a “traditional” period, one would generally rank from most to least safe assets: cash, Treasuries, corporate bonds, equities, commodities
• However, last year Economist Gregory Mankiw ^[2] articulated the position which according to Faber essentially echoes that of Fed #2 Janet Yellen and pervades much of the Fed generally, that “The problem is that people are saving money instead of spending, and we have to get the bastards spending to keep the economy going,” so the key is to inflate the money supply at something like 6% per annum
• Thus, Faber says “As far as I’m concerned, the Federal Reserve will keep interest rates at 0, precisely 0…in real terms”
• As such, cash and longterm bonds will be a bad place to hold one’s money; equities are an avenue to preserve wealth (but this is a risky proposition, given the effects of rampant currency depreciation); precious metals are a sound place for wealth preservation
• As for the US being the most important economy for the world, there is a sea change going on right now; recently car sales in emerging economies (such as Brazil, China) are outpacing those of the US, Europe and Japan; oil consumption in emerging markets is increasing, while in the developed world it is contracting; the whole world does not depend on American consumption anymore – 60% of total exports are now going to the emerging world when one includes E. Europe; the US is still a large economy but it is not growing, while the growth in the emerging world is and will continue to be strong
• “People still think of emerging market economies as poor cousins, but because 80% of the world’s people are here, in aggregate the consumption is huge.”; these are not saturated markets and they are growing rapidly
• “Everybody should have 50% of their money in the emerging world, outside the West.”; people should also keep the custody of their assets overseas
• Contrary to what the talking heads are saying, markets are not out of control, central banks are out of control printing money
• The drivers of growth in the emerging world will be the urbanization of India and China; stocks won’t necessarily rise in the short term, but there will be significant growth in Asia in the long run
• The shift in economic power from West to East has been remarkable in speed, largely due to the rapid industrialization of the emerging world and the speed at which information travels today
• There will be a massive increase in resource-intensive industries and new export markets, met with increased volatility and tension around the world
• The supply/demand characteristics of oil are great due to the need for oil in China, India, rest of Asia
• Oil is the top priority for China, as they are now a net importer
• US has a huge strategic advantage over China given that we have access to our own oil, and that of Mexico, Canada, the Middle East and off the western Coast of Africa, in addition to the ability to travel on the Atlantic or Pacific Ocean; meanwhile, China sources 95% of their oil from the Middle East, and while they are building pipelines throughout Eastern Europe for example, their oil supply points in terms of ports for example are limited, and the US has defense bases surrounding these areas; Chinese subs could sink our boats however; the Russians are also not happy about our forces being in the region, and tensions will grow as the need for natural resources in these nations grows
• Eventually, there will be war and one will want physical commodities “not paper from UBS or JP Morgan”
• In war, cities will not offer safety because one can get bombed, water may be poisoned, electricity shut off; instead, one should buy a house in the middle of nowhere/on the countryside
• The tremendous economic Sophism of the day is that a nation can print its way into prosperity; “If debt and money printing equaled prosperity then Zimbabwe would be the richest country.”
• “Mugabe is the economic mentor of Ben Bernanke.”
• Our fiscal situation is much more horrendous than it is made out to be; total debt (public and private) as a percentage of GDP counting unfunded liabilities is an astounding 800% of GDP, more than double that during 1929
• Sovereign credits in the Western world are all bankrupt, but before bankruptcy governments will print money; US government leaders will try to postpone the hour of truth, pushing the problems off till succeeding Presidents and Congressmen
• If deficits didn’t matter as many like Economist James Galbraith ^[3] argue today, why should citizens even pay taxes? It would make everyone happier if they didn’t
• Faber is sure that the economists in academia are intelligent and they study the textbooks hard, but they study the wrong textbooks and are totally inconsistent in their philosophy
• In an environment of money-printing and high volatility that exists in the US and that will be created by future policy, physical gold is the best thing to own
• Once currency depreciation does take place, stocks may become very cheap, as happened when the Mexican peso depreciated by 95% in the early 80s, as the fund managers invested in Mexican equities completely undervalued them after currency collapse
• In a nutshell Faber says he is essentially bearish on everything, though he favors commodities (especially physical precious metals and agriculture), owning a house in the countryside, equities in emerging markets tied to resources (especially necessities like water and oil) and healthcare, and most of Asia including especially Japanese stocks
• There is no means of avoiding a total collapse in the West; at the first train station in 2008, the financial system went bust but didn’t die, at the next station nations will go bust (though this could take 5-10 years or less), but first they will print money as this is the most politically tenable option, and ultimately the world will go to war
• All of us will be doomed

Bear in mind that Faber said all of this quite matter-of-factly.

Even if you disagree with his points on the trajectory of the West, it cannot hurt to understand and prepare for the worst case scenario while still hoping for the best.

America in FULL Retreat NOW !

The Fruits of Weakness

By Charles Krauthammer

WASHINGTON -- It is perfectly obvious that Iran's latest uranium maneuver, brokered byBrazil and Turkey, is a ruse. Iran retains more than enough enriched uranium to make a bomb. And it continues enriching at an accelerated pace and to a greater purity (20 percent). Which is why the French foreign ministry immediately declared that the trumpeted temporary shipping of some Iranian uranium to Turkey will do nothing to halt Iran's nuclear program.

It will, however, make meaningful sanctions more difficult. America's proposed Security Council resolution is already laughably weak -- no blacklisting of Iran's central bank, no sanctions against Iran's oil and gas industry, no nonconsensual inspections on the high seas. Yet Turkey and Brazil -- both current members of the Security Council -- are so opposed to sanctions that they will not even discuss the resolution. And China will now have a new excuse to weaken it further.

The real news is that already notorious photo: the president of Brazil, our largest ally in Latin America, and the prime minister of Turkey, for more than half a century the Muslim anchor of NATO, raising hands together with Mahmoud Ahmadinejad, the most virulently anti-American leader in the world.But the deeper meaning of the uranium-export stunt is the brazenness with which Brazil and Turkey gave cover to the mullahs' nuclear ambitions and deliberately undermined U.S. efforts to curb Iran's program.

That picture -- a defiant, triumphant take-that-Uncle-Sam -- is a crushing verdict on the Obama foreign policy. It demonstrates how rising powers, traditional American allies, having watched this administration in action, have decided that there's no cost in lining up with America's enemies and no profit in lining up with a U.S. president given to apologies and appeasement.

They've watched President Obama's humiliating attempts to appease Iran, as every rejected overture is met with abjectly renewed U.S. negotiating offers. American acquiescence reached such a point that the president was late, hesitant and flaccid in expressing even rhetorical support for democracy demonstrators who were being brutally suppressed and whose call for regime change offered the potential for the most significant U.S. strategic advance in the region in 30 years.

They've watched America acquiesce to Russia's re-exerting sway over Eastern Europe, overUkraine (pressured by Russia last month into extending for 25 years its lease of the Black Sea naval base at Sevastopol) and over Georgia (Russia's de facto annexation of Abkhazia and South Ossetia is no longer an issue under the Obama "reset" policy).

They've watched our appeasement of Syria, Iran's agent in the Arab Levant -- sending our ambassador back to Syria even as it tightens its grip on Lebanon, supplies Hezbollah with Scuds, and intensifies its role as the pivot of the Iran-Hezbollah-Hamas alliance. The price for this ostentatious flouting of the U.S. and its interests? Ever more eager U.S. "engagement."

They've observed the administration's gratuitous slap at Britain over the Falklands, its contemptuous treatment of Israel, its undercutting of the Czech Republic and Poland, and its indifference to Lebanon and Georgia. And in Latin America, they see not just U.S. passivity asVenezuela's Hugo Chavez organizes his anti-American "Bolivarian" coalition while deepening military and commercial ties with Iran and Russia. They saw active U.S. support in Hondurasfor a pro-Chavez would-be dictator seeking unconstitutional powers in defiance of the democratic institutions of that country.

This is not just an America in decline. This is an America in retreat -- accepting, ratifying and declaring its decline, and inviting rising powers to fill the vacuum.

Nor is this retreat by inadvertence. This is retreat by design and, indeed, on principle. It's the perfect fulfillment of Obama's adopted Third World narrative of American misdeeds, disrespect and domination from which he has come to redeem us and the world. Hence his foundational declaration at the U.N. General Assembly last September that "No one nation can or should try to dominate another nation" (guess who's been the dominant nation for the last two decades?) and his dismissal of any "world order that elevates one nation or group of people over another." (NATO? The West?)

Given Obama's policies and principles, Turkey and Brazil are acting rationally. Why not give cover to Ahmadinejad and his nuclear ambitions? As the U.S. retreats in the face of Iran, China, Russia and Venezuela, why not hedge your bets? There's nothing to fear from Obama, and everything to gain by ingratiating yourself with America's rising adversaries. After all, they actually believe in helping one's friends and punishing one's enemies.