The Amero and The Economist According to Scott

I was simply going to add a comment to Ben's entries, but I decided there was a bit too much for a simple comment. First off, let me say that Ben is really surprising me with the depth of his research into these blog entries and the skill of his argumentation. I'm glad he's on board with us. But I have one pressing question for him: why in the world are you an accountant? Despite this formidable performance, however, I will have to disagree. That's some temerity on my part, isn't it? Would you go up against an article like that? Let me begin by noting that The Economist is a right-leaning British magazine, and a fine publication at that, but that is a far different thing from having a right-leaning perspective here in the States. I think The Economist is about as conservative as Bill Clinton, to put it in better perspective. It is not communist, but it is far from lasseiz-fair. It is consistently greener, anti-gun, and pro-government interventionism than most any American conservative I can think of. As I recall, it called McCain a fine candidate and the best choice among the contestants in the Republican primary only a few months ago. That should serve to strike any American conservative as a blow to The Economists supposedly "right-leaning" credentials, as many on the right consider McCain a RINO at best or an outright traitor to the cause at worst. I know of almost no conservatives here who are happy with their candidate. Like the liberal American media, it doesn't surprise me that The Economist treats McCain as the best Republican around, but given its druthers, it chooses an Obama over him. Concerning the Amero: It is true that the US dollar is doomed. Let's do a few back-of-the-envelope calculations, shall we? First, the US GDP is about $14 trillion, and on budget debt is about $10 trillion. Currently, the fraction of GDP consumed by government (govt spending) is about 20%, putting the federal budget at about $2.8 trillion, give or take. The budget deficit over the last few years has been about $300 billion /yr (and rising), giving tax revenues at about $2.5 trillion. None of the deficit counts, of course, social security and medicare, as it is "off the book" debt, since the money has not yet been spent, even though it is just as much an obligation as true debt. (Note: I'm doing this off the top of my head. I've been searching for solid numbers, but they seem to be scattered about the internet so randomly I'm having a hard time locating what I need. If anybody has good links, please send them to me!) Now, that is the current status of things. The important thing determining bankruptcy is loss of cash flow. Presently, interest rates are low. Extremely low. Downright suppressed. Which is one of the reasons the US govt has taken on new debt the past few years with little reservation. The interest rate on the debt is in the ballpark of 3% or so. 3% of $10 trillion is about $300 billion, or about 10% of federal outlays, which we had at $2.8 trillion. This jibes well with the 8% figure I just saw on the 2006 1040 Tax schedule, so I must be doing this right! This is ok, actually. Not that bad. But we need to remember a few things:

• We just had a massive commitment of new funds towards the Wall Street bailout.
• Tax revenues are going to take it in the crotch over the next few years, as companies take enormous losses. No income, no income tax. It doesn't matter if the Democrats raise rates. 90% of $0 is $0. Ask Ben.
• Interest rates are insanely low and likely to rise with the ballooning deficit and falling dollar.

Let's be conservative and say the rate doubles - to a measly 6%. This extremely low-ball, virtually certain event will raise the interest to 20% of the federal budget. Yes 20%. Now, with falling tax receipts, the government will be forced to take on, yes, more debt to pay its bills. GDP might grow, but not by much in the next year or two as the recession depresses growth. If federal outlays stay the same (they will not, they will grow - remember: bailout) and tax receipts fall by, say 20%, you are looking at $2 trillion in revenues, a $3 trillion budget (remember the increase in interest rates) and a guaranteed $1 trillion deficit. Increasing the total budget deficit by 10% in a single year. And we're looking at several of these years going forward. I used an interest rate of 6%. In 1990 rates on treasuries were at 8%, double today's 4%. In 1982, they were about twice that. That's what we're looking at. Bare minimum, the budget deficit increases at 10% per year for 2-3 years. This is unsustainable. At 6% interest, this looks like 25% of tax revenues in no short order. At best, GDP grows at 4% per year. We are not going to "grow our way out of this." This is a best case scenario. I think it will be much, much worse. As deficits build up and interest rates rise, the effect snowballs on itself quite quickly, as you can see. It doesn't take much when deficits are this large coupled with interest rates this low and a federal budget this large a fraction of GDP. That's really the key here: the relationship between these three numbers. I expect interest rates in the low teens within 5-6 years. I expect the dollar not to last much longer as a respected currency, if at all. But notice that this does not happen "by next February." This schedule is far and away to fast for a dollar collapse. Secondly, do not expect rapid unification of our governments. If anything, I expect the opposite. In his comparison to the EU, Ben fails to call attention to the repeated rejection of a EU constitution in multiple national referendums across the continent. The fact is, people are tribal creatures. They don't like coming together. The great empires of history were consolidated through military conquest, not mutual consent. The EU is an aberration, not the norm, and certainly not a trend. In fact, many trends point to a dissolution of the EU. Note the grumbling over the Euro in Italy and Poland, and the refusal of the Brits to give up their Pound or the Swiss their Franc. If an American Union and the Amero is to be a reality, it is far more likely to be realized through force of arms, not treaty. Furthermore, no unification is likely during recession. With unemployment increasing, wage competition will begin in earnest, and that does not bode well for the perception of foreigners. Bad times tend to touch off rashes of xenophobia. Witness mass deportation of Mexicans in the 1930's. If anything, this is going to create social fissures, not harmony. Any attempt by the Congress to "pull us all together" is likely to be met with a gallows set up on the steps of the capitol building. Americans are increasingly passive towards government, but they are not yet the "sheeple" that populate Europe. They would not tolerate such a move by Washington. My prediction would be quite the opposite. I see a rejection of the wave of "globalization" over the next quarter to half century. I see increasing social fissures and increasing tribalism as the government grows more powerful, more intrusive, and has a larger share in the outcomes of people's lives and endeavors. We are simply too different to tolerate a larger government. We do not want to live the same way. I see violence, civil unrest, and the distinct possibility of the "parting of ways" of certain demographics. I think it might not take much for a state like California to part company with the rest of us, getting a "good riddance" from the rest of the union, if worst came to worst. But that, of course, is an extreme case. What is more certain is this: the Federal Government is likely to go bankrupt, either honestly through outright default, or dishonestly through massive inflation. The economy will be awful, government will grow, and civil unrest is likely. North American unification is out of the question. We will hate one another too much, squabbling amongst ourselves over the ruins of our once great nation to invite anyone else into the family. Not that anyone would want to join us. The next twenty years do not look good for America's standing in the world. We will slip from superpower status, and we will have to answer a lot of very hard questions at a time when expectations are far detached from reality. Better to adjust our expectations early.

The Economist for Obama

Sorry to be monopolizing the blog here, but I had mention this.  The pro-free-market magazine The Economist endorsed Obama today.  It must also be said that the magazine endorsed Kerry in 2004, so Republicans will obviously shrug this off as another endorsement from the "liberal media."  

But, aside from the weighty endorsement, the content of the article is perhaps most telling.  The argument put forth in the article expresses why some who have once called themselves Republicans, such as myself, are so disgusted with the McCain campaign and are willing to give a potentially liberal politician a shot at running our country.  

The Amero Conspiracy

The latest conspiracy theory to begin to bubble up into the mainstream media concerns a North American Union (NAU) that would include the countries of Canada, Mexico, and USA.  Within the NAU these countries would use a single currency, called the Amero.  I am told that this story was mentioned this week in Mexico’s national news (I found no evidence of this week's report.  Here is one from June 2008.)  and that a video with Spanish subtitles is has been floating around the Internet in Mexico.  

 The video in question is an explanation of how the NAU will come to pass, a homemade workup by Hal Turner, who shows what he claims to be an Amero, minted in Colorado by the US government.  Hal further claims that a secret shipment of Ameros was sent to China in preparation for the upcoming conversion to the Amero.  Hal’s account of how this will go down is that the US will take on so much debt that it will default, which will cause a massive devaluation of the dollar.  Then, the US government will swoop in to save the day by converting all dollars to Ameros, instantly shoving us all into the NAU.  He claims this will happen in February 2009. 

 Sounds crazy, right?  And I know what you’re saying: “Why would you believe anything from a crazy racist extremist like Hal Turner?”  Yes, that is true.  Hal Turner is a racist white supremacist.  He is so extreme, in fact, that Sean Hannity had to deny knowing him.  Now that’s extreme. 

 --So, this is still just a crazy conspiracy theory, propagated by ultra-conservatives to maintain a healthy fear of foreigners, right?

 Evidence of the NAU theory in the mainstream media can be seen from the likes of Fox News, CNN’s Lou Dobbs (who is vociferously against this idea), MSNBC, and the Boston Globe, not exactly fringe organizations.  Bush denies the NAU as “comical,” but former president of Mexico Vicente Fox has openly admitted that a NAU is a “long-term” goal.

 --Ok, but this currency devaluation scenario is just plain ridiculous, right?

The scenario Hal describes is almost exactly what happened to Mexico in its economic crisis and peso devaluation of 1993-1994.  Yes, that’s right, only 14 years ago.  Mexico suffered a severe economic crisis brought on by it’s banks issuing too much debt, largely issued in dollar-indexed instruments, to prop up its economy in order to get NAFTA passed, and to push various government programs instituted by an big-spending out-going president.  Sound familiar?  They were also keeping the currency at around 2-1 dollar until NAFTA was passed, then they decided to let it “float.”  Well, it floated right into the gutter, and the Clinton Administration bailed them out to the tune of $50 billion.  The Mexican government then made the previous currency worthless by re-printing the money.  Yes, they actually called it the “Nuevo Peso.”  If you go to some tourist hot-spots in Mexico, you might find pre-crisis coins on sale as souvenirs.  They are worthless. 

 --Yes, ok, but that was Mexico.  That sort of thing doesn’t happen in the good ‘ol US of A.

 Ahem, let me remind you that we just nationalized our banking system this month.

 Scary stuff, but let’s think about this.  Conservatives and Libertarians love to demonize this idea of the NAU as a loss of sovereignty, unconstitutional, treasonous, etc.  Ron Paul claims it will be an outgrowth of NAFTA.  To summarize him he says, “I’m for free trade, but I don’t like managed trade.”  NAFTA is certainly managed trade, not free trade.  NAFTA gave us a more or less free circulation of certain goods (but not people) peddled by major corporations.  So, it is certainly managed trade.  If the NAU is going to be a lame attempt to extend NAFTA, then I can see Ron Paul’s objection.  But, what if they actually want to make it free.  Why would he object?

 So, I decided to take a look at another famous union across the pond to see what these unions actually entail.  Here are a few random snippets from the Consolidated Treaty on the EU (updated 2008) that I obtained by quickly browsing the document.

  “to facilitate the free movement of persons, while ensuring the safety and security of their peoples, by establishing an area of freedom, security and justice, in accordance with the provisions of this Treaty”

 “Freedom of movement for workers shall be secured within the Community.  Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.”

 “The Council…shall, within a period of five years after the entry into force of the Treaty of Amsterdam, adopt: 1. measures with a view to ensuring...the absence of any controls on persons, be they citizens of the Union or nationals of third countries, when crossing internal borders.”

 “The liberalisation of banking and insurance services connected with movements of capital shall be effected in step with the liberalisation of movement of capital.”

 “…all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. “

 “The following shall be prohibited as incompatible with the common market: all agreements … which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market…”

 “the adoption of an economic policy which is based on the close coordination of Member States' economic policies…conducted in accordance with the principle of an open market economy with free competition.”

 What!?!

 I thought Europe was a bureaucratic, socialist, mommy-state.  This sounds like free market heaven!  Ok, maybe it doesn’t work that way in practice.  I’ve never even been to Europe, and I just pulled this stuff off the Internet, so I can’t say with authority.  Maybe the individual countries have enough socialist, mommy-state laws on the books that render the EU Treaty impotent.  And maybe libertarians know that if we tried to do this in America, our government would totally botch it like everything else.  Granted.  However, in theory at least that sounds like true free market capitalism at work.  Why would conservatives be against something like this in North America?  Corporate pandering?  Xenophobia? 

 Why is it that conservatives and it seems some libertarians are “for free markets” only when it happens within the borders of the US?  Whenever we start dealing with those pesky foreigners, we start to hear words like control, manage, limit, protect, secure, etc.  That is not free market ideology.  That’s isolationism and protectionism. 

 But, I admit that these scenarios are crazy.  Our economy may crash, but I do not think that the Amero will be forced upon us in February.  However, this simple thought exercise exposes a serious contradiction in current conservative/ Republican ideology.  If we believe in free market ideology, let’s put it into practice, not limit it or only enforce it when it benefits a select few.  If that can’t happen, then I give up.  Show me to the bosom of the socialitst mommy-state.  

Obama Will Win Big....Probably

electoral-vote.com has it at 375 Obama to 157 McCain, Politico shows 364, 174, and most mainstream maps point to an Obama landslide as well.  Intrade prediction markets stand at 84.3 Obama, 15.8 McCain.  Things don’t seem to be going well for McCain.  This week and last there were reports of rebellion from Palin, finger-pointing in his own camp, and various conservatives and Republicans endorsing Obama.  All this signals a ship that is on it’s way down, and the McCain campaign is grasping for air in this last week.

 

My prediction:  Obama will win big…with one huge caveat. 

 

As long as something does not surface this week that scares voters into voting for McCain.  McCain’s whole campaign has been based on fear; fear that Obama is a (black) Muslim, terrorist, elitist, Anti-American, socialist, Marxist, tax-raiser/distributor, Anti-Christ, etc.  Sadly, I think this strategy is working.  Some polls are already beginning to narrow.  And even sadder, it's all McCain has to run on. 

 

It is reported that the LA Times has a damaging tape of Obama at some sort of Palestinian meeting or rally.  And Palin is now trying to link Obama to the PLO.  Rush Limbaugh pounced on this story faster than you can say ditto.  If the tape or any other surprise go mainstream in time, and more importantly stick in the minds of voters, mix in a little Bradley effect, and McCain could stage a huge upset.  

Otherwise, it will be an Obama landslide.

Election Predictions!

Realclearpolitics has Obama winning in a landslide:

Obama/Biden 306

255 Solid 51 Leaning

McCain/Palin 157

127 Solid 30 Leaning

Toss Up 75

75 Toss Up

Looks like even if McCain gets all the tossup states, he still loses. I'm no McCain fan, but I have several reasons to suspect these polls are inaccurate. To enumerate:

• The polltakers tend to be MSM folks, who are biased towards the left
• The political climate has become so heated that conservatives in large part avoid pollsters altogether, avoid talk of politics, and flat out lie when the question is forced as to their political leanings
• "Operatives" of the left systematically try to skew the results by seeking out pollsters, making the election of their candidate look like a foregone conclusion

Anecdotal evidence supports the first two of my contentions, and for a specific (if unverified) example of the latter, check here (courtesy of Fran at Eternity Road). The poll tinkering has been going on for years, and I can specifically remember a flabbergasted Michael Barone on FoxNews during the last presidential election calling for criminal investigations of horribly skewed exit polling showing Kerry winning Ohio handily. If you'll remember, he actually lost in a vote that was not really all that close. I haven't been following the election much since the end of the Republican primary, mostly becase I simply don't care who wins at this point. National politics has also lost its appeal to me, as it no longer matters much who wins and who loses. We end up with the same policies either way, it seems. At any rate, were I following the election closely, I would not take polling too seriously, as it seems to get less and less accurate with each passing election. Which brings me to my specific prediction: McCain wins in a "surprise" upset, in an election which really isn't all that close, despite rampant voter fraud on the part of ACORN and the poll rigging already discussed. Thanks to the illusion of a sure Obama victory created by their own dishonest tactics, the broader left once again feels disenfranchised and robbed by the electoral process. While a conservative would be shamed by the notion that he couldn't even win by cheating, this will only enfuriate the left and somehow further legitimize their belief that they are shut out by an electoral process which is inherently unfair. (Yes, I am aware that the previous sentence makes absolutely no sense. Nobody ever accused a lefty of being rational.) In short, I predict a McCain victory, followed by "civil unrest" in the predictable locales. Furthermore, I expect subsequent elections to get progressively dirtier as the state expands and the stakes get ever higher for the winners and losers. Once again, yet another argument for libertarianism. Can't we all just agree to leave eachother alone and try to get along? But I could be completely wrong. Thoughts, anyone?

Save Your Pennies...and Nickels

The in-laws are in town, and while fiddling with my rapidly growing collection of nickels, they decided to show me some current Chinese currency. It was a very sad sight to see; they looked like they were made of aluminum, and light as a feather. They obviously can't be made of anything substantial. Which reminded me of our own newest wave of American "silver" dollar coins, like the Pocahantas dollar, which looks like an arcade game token. Pathetic. This may seem esoteric and uninteresting, but there's a point in here somewhere, I promise. The sad state of American currency is a sign of the times and a harbinger of bad, bad things to come. Older folks can remember pre-1965 coins really were made of silver. Younger folks may have seen some of these coins in display cases in a collection somewhere. Nowadays, these coins trade at many times face value purely on the basis of their silver content. Obviously, Uncle Sam would bankrupt himself trying to mint these things at current values. Something had to give. In 1965, the sandwich coins came into production, and are worth a small fraction of face value. Then the zinc penny came along in 1983, with only a thin clad of copper on the outer surface so that it appears as it has since the early 1900's. But it's not the same. Now, the newer coins are basically little more than well polished base metals, worth next to nothing in-and-of-themselves. The only coin in production which still has any value purely from its metal content is the nickel, which is mostly nickel with a little copper. It's the last of a dying breed. Which brings me to my point. As the money of the republic goes, so goes the republic. The Roman Empire similarly debased its currency, mixing lead with the gold in its coins as the empire waned. While the empire was expanding, it absorbed the wealth of the conquered, and things were okay. The coinage remained mostly unadulterated as gold poured in in tribute. But towards the end, finances were stretched. The people had become accustomed to a certain standard of living, extracting the wealth of the conquered, but there were fewer and fewer to conquer, and more and more citizens. Taxes rose, incomes waned, and the empire grew shaky. It showed in the coinage. We all know how the story ends. Another telling trend I've observed in American money is the change of the images printed on the faces of the coins. In the old days, there were pictures of lady liberty (the liberty dollar), buffalo (the buffalo nickel) and Indians (the buffalo nickel and Indian head penny). Now, its all decapitated presidents and patriotic symbols. Eagles, Monticello, etc. It's as if to say, "This money has value because the US Government says so, and you'd better believe it buster. We're America, Dammit!" Its as if to say that substance (gold, copper, silver) can be replaced with, well, feelings and authority. It is very nearly a written confession of exactly what is going on. The Constitution of our republic specifically states that the coinage shall be of gold and silver. Once upon a time, it was. Now, it clearly is not, and has not been for some time. The transition has been slow, so few have noticed. It is difficult to take note of changes that occur over the time-span of a lifetime, especially with today's rapidly changing technologies and pace of life. But gold and silver are not the "barbarous relics" of John Maynard Keynes. They mean something. We are seeing it in the financial markets today. The Keynesians thought they were smarter than the Founders. They were not. The currency is in trouble. The Republic is in trouble. On the brighter side, you can still get nickels at face value. In fact, if you look hard, you can still find the old silver (pre-1965) nickels in the circulating money supply. I've been collecting nickels a bit at a time, preparing for the inevitable day that they will be discontinued and replaced with arcade-token Monopoly money. The penny is due for a "facelift" (read "debasing") beginning next year. Not even worth zinc. Pathetic. You can also find real copper pennies in the circulating money supply (pre-1983). I'm collecting those too. When the inflation finally gets bad enough, their value should unhinge from face value and float with the commodity prices, just as old silver quarters and dimes have. That is real savings that can't be eroded by the government printing presses. Hard times are coming. Collecting the last of the "commodity money" (money whose value is based on the value of its actual substance) in circulation is a pretty small thing. It would take an awful lot of nickels to save up much, but every little thing you can do, you probably should. So that's the practical suggestion for today: collect your nickels and pre-1983 pennies. Its free money, and protection from inflation. You never know when you'll need it. For more information on this phenomenon (and where I got this whole idea), go here. And here.

Early Voting

Voted early today, with little enthusiasm. Just for the record, I wrote in Ron Paul, and otherwise voted a straight libertarian ticket. Sad. Very sad. Among the four presidential and VP personalities, I cannot say that I'd even like to be in the same room with any of them. They are all so repulsive. Even Bob Barr makes me cringe. I can't fathom any one of them running the country. Here's an old post from a former site, back when I voted in the primary. Can't say I've changed my opinion much, only grown more hopeless:

Primary day approaches here where I live. At one time I looked forward to elections with anticipation. I would watch online as each district was decided, rooting for my noble Republican party, who would lead the nation into the next era of American greatness by pursuing their policies of liberty, rule of law, lower taxes, and all the other ideals that have made America great. And, I so thought, will certainly make her great again, just as soon as my guys get in office and those policies are pursued. Like that time eight years ago, when it happened...and then... Not anymore. I will vote in the Republican primary, but not with enthusiasm. And truthfully, the only thing bringing me to the polls (or is it only a single poll, in the case of an individual?) is Ron Paul. Otherwise, I would probably just skip the primary and vote a straight Libertarian ticket during the general election. Even so, I can't say that I think Ron Paul is the greatest candidate ever to run for office. I've seen him speak in the debates, and wasn't impressed. Most of his supporters, the "Pauliacs," evidently think he is some kind of god. Their standards for deism are pretty low, I would have to say. Still, despite his lack of charisma and eloquence, from a pure policy standpoint it doesn't get much better. He supports the right ideas, if occasionally for the wrong reasons, and his voting record is superb (99% of his votes are "no" votes I'm told, earning him the nickname "Dr. No," which sounds about right for the legislative ideas produced by the apes running Washington). So what gives? Don't I support those ideas anymore? Okay, okay, so its not big news that Republicans hate their party these days. It's old hat. But with me, I think the dissatisfaction with our Dear Leader(s) runs a bit deeper. I don't think I can vote a red ticket ever again. The Republicans have had almost eight years of control at the national level, and I have to say that the last eight years have convinced me that Republican politicians don't believe a thing they say. The only thing they seem to believe in is re-election by any means necessary, which I can only hope will lead to quite the opposite. If anything, over the last eight years these guys have worked tirelessly to do exactly, precisely the opposite of what their party is supposed to stand for. No amount of professing belief in limited government, free-markets, yada yada, is ever going to convince me again that these liars believe in these things. Actions speak louder than words. I've seen what they've done with my own eyes, I know what they believe, and I'm not voting for that, ever again. Some people criticize Ron Paul for opposing the war. While I'd like to see the war won, I'm not so sure it's going to happen, but not because our enemies are so strong. They're not; they're a bunch of backwards, petty clowns in the desert with AK's, which they can't even produce on their own, considering they have virtually no economies to speak of. They are pathetic, not so much in the purely condescending sense of the word used these days, but in the true, classical sense, empathy included. Why the West is so afraid of the Islamic menace baffles me. I'm afraid we can't win simply because the West has bought so far into non-judgementalism and multiculturalism that it can't make good decisions about warfare and state-building, and furthermore wouldn't have the stomach to enforce such measures if it knew what they were. It's not impossible to reform such populations. It's been done before. Some might argue, perhaps with some legitimacy, that the end is not worth the means. That's a good debate, perhaps for another time. But regardless, I don't think the US will do it because it can't, not anymore, so there's no point in having the debate. It's over before it begins. Still, I have a hard time being outright anti-war. I hold it against Ron Paul, just a bit, because I consider the arguments he makes against it to be illegitimate. If he made others, I could forgive him. But I would submit that despite this shortcoming, he's still far and away the best candidate. Losing the war won't destroy America. Illegal immigration, expanding socialistic tendencies of the US government, and increasing limits on our essential liberties will. He's the only candidate who opposes all three without question or hesitation. So he gets my vote, plain and simple. Too bad he won't get the votes of others. Too bad he won't win. Which gets to a larger question. I'm voting for Ron Paul this election because I'll probably never see the chance to vote for such a caliber of politician ever again, even such as he is. If America doesn't vote for him, preferring such candidates as she does, does she not deserve to lose out in the long run? As much as we might complain, I think we deserve our government and our lying politicians. We're bringing it all on ourselves...

Welcome!

Welcome to the new blog, Three Chemists & A Banker! Hopefully, we'll have something worth reading shortly... Stay tuned!