Tax Receipts as the Ultimate Economic Indicator

According to Sprott Asset Management the US Federal tax receipts are down in February 2012 vs 2011.  Tax reciepts are the ultimate co-incident economic indicator.  

This means that few people are working or being paid less in aggregate.  The latest "improvement" in reported job creation last month was primarily part-time workers and low paying workers.   The US employment situation is not really improving. 

It has become fairly evident over the past several months that most new jobs created in the US tend to be low-paying, while the jobs lost are generally higher-paying. This seems to be confirmed by the monthly US Treasury Tax Receipts, which are lower so far this year despite the seeming improvement in unemployment. Take February 2012, for example, where the Treasury reported $103.4 billion in tax receipts, versus $110.6 billion in February 2011. BLS had unemployment running at 9% in February 2011, versus 8.3% in February 2012.¹² Barring some major tax break we've missed, the only way these numbers balance out is if the new jobs created produce less income to tax, because they're lower paying, OR, if the unemployment numbers are wrong. The bulls won't dwell on these details, but they cannot be ignored.

Figures from the Tax Policy Center show the history of receipts and revenues all of the way back to 1940.

The interesting thing is that, for 50 years, government revenues have been about 19% of GDP despite widely varying tax bracket rates.   The 19% figure therefore shows the EFFECTIVE federal tax rate.  This means that government revenue had been fairly constant despite top tax brackets varying from 33% to 70%.

For much of the last 50 years, government spending ranged from 19% to 21% of GDP during the 1990s and 2000s.   In Bush's last term (2008), Federal outlays were 20.7% of GDP.

Fast forward to 2010, only one year after Obama entered office, Government spending was nearly 24% of GDP (and tax receipts down to 14.9%).   The president's latest budget of 25% of GDP spending  ($3.6 Trillion) was sounded rejected by the House of Representatives by a vote of 414 to 0.

Obama pulling a Chavez?

The federal government is now expanding it's reach and intervention at an asymptotic rate as federal spending is spiraling out of control.   Are you aware that the Federal deficit in February 2012 was $200 billion??   That used to be the annual deficit only a few years ago.

Now, I'm hearing that a vaguely-worded law called the "National Defense Resources Prepardness Order" was signed on Friday that would give the government a legal basis for seizing resources in times of  "emergency".  Take a look at this link:  Sean Hyman of Moneynews,

On Friday (23rd March '12), when most people were already thinking about their plans for St. Patrick’s Day, Obama signed a new executive order which expands his power and control over all of the resources in the U.S. in times of war or emergency. 

This was convenient timing on his part, being that Israel just got approval to go to war with Iran when their military feels it’s the right time.

So if Israel strikes Iran, all Obama has to do is join in on it and he can seize any “real assets” in the U.S. he’d like. In fact, it doesn’t even take war. Any “emergency” is good enough too. And what determines an “emergency”? 

Anything that he deems an emergency. 

Sounds like Hugo Chavez to me. This is just another sign of rapidly escalating Federal power grabs with no end in sight.  I don't know about you, but I'm preparing to get out of this country before we become a completely totalitarian state.  Wake up America, it's happening before our very eyes!  If Obama is re-elected than that will be the sign to depart.  He can't be trusted for an unfettered 2nd term.

It is up to you to stop this insane movement toward infinite national government power. Vote against Obama and vote for Mitt Romney.  I prefer Ron Paul as the only candidate who has the radical agenda required for our times.  Ron Paul is the very nemesis of big and expanding government.

Furthermore, don't expect the Supreme Court to halt this trajectory in it's ruling on Obamacare with it's vast  new bureaucracy and the new taxes that are coming to pay for it.

There is No Energy Plan in America

We consume 20 millions barrels of oil per day but we produce only 5.4 million bpd. The rest is imported and amounts to $500 billion in trade deficits each year--year after year.   The US used to produce about 10 million bpd.   

Obama and other Democrats have said repeatedly that you can't drill your way out this problem.   How does he know?    He doesn't know!!   Who could have predicted the burst of shale oil and gas production?  Natural gas production has risen so much that wellhead prices have collapsed to less than $3 per 1000 cubic feet.   (If it were priced the same as oil, it should cost $18 per 1000 cubic feet.)    Oil production in North Dakota is exploding and the Keystone pipeline would have helped to exploit it.  The problem with Democrats is that they are so pessimistic, Malthusian and arrogant!  Republicans are not much better----but still better in understanding energy.

No one knows how much oil and gas lies in offshore water along the ENTIRE US east coast and the ENTIRE US West coast.   We know giant oilfields exist offshore California (several were developed in the early 1990s containing more than a billion barrels each).   We don't know how much oil is in ANWR---no one knows!   We should know what's there:  maybe it's a bonanza, maybe it's not much.

Here's the history of US oil production:

Here's an energy plan for America:

1. Allow exploration in ANWR (a flat mosquito-infested swamp in NE Alaska that no one visits or could visit even if they wanted to) that will definitely boost North Slope production.  How much is there; no one knows.  If it's the same as other parts of the North Slope, then you might expect 2 million barrels per day.  Don't tell me you can't drill your way out of a problem!   Politics, misinformation and Malthusian pessimism are the enemy.  
2. Allow exploration and production offshore Southern California.  It's a known place of giant oil fields.  The last two fields developed there had more than 1 BILLION barrels of oil each. There are many more. Assume an extra 1 million barrels per day from exploration and production in Southern California waters alone.
3. Convert trucks to natural gas (of which we have a long term surplus).  That would save 2 million barrels per day.
4. Convert cars to methanol or compressed natural gas (methanol is made from natural gas). That would save 4 to 6 million barrels per day.   Automobiles consume 9.4 million barrels per day, so the import savings could be 9.4 million barrels per day total if all cars were converted to electric, compressed natural gas, LPG or methanol/ethanol.  The additional electricity could come from nuclear or wind power if you want to reduce carbon dioxide emissions.   Other ideas to reduce petroleum consumption would include expanded natural gas powered buses for mass transit or compressed natural gas fleet vehicles.
5. Shale oil might provide an additional 1 million barrels per day or much more across the vast shale basins.
6. Canadian oil sands are good for 2 million barrels per day.  Let the Canadians send oil to America via the Keystone Pipeline for refining in America!  
7. The entire East Coast and the entire West Coast of the US are off-limits for oil or gas energy exploration.  No one, NO ONE knows what's there (or not).  There's no reason not to!  Only politics, ignorance and a complete failure to understand the consequence of chronic trade deficits and compromised national security by politicians are ruining this country.

There you have it. The above steps, without any credit for most of the offshore east and west coasts, could mean a gain of 4 million barrels of day of oil production, then a saving of 6 to 8 million barrel per day by using domestic natural gas for a reduction of 10 to 12 million bpd in oil imports.

 Let me repeat: the above steps could reduce our imports from 14 million barrels per day to 2 to 4 million barrels per day!   (not counting importing 2 million bpd from Canada).   If all cars were converted away from gasoline to natural gas or it's derivatives, then imports would disappear!   That's 0 million barrels per day of imports!

Now that's an energy policy!  If America can put a man on the moon in 10 years, then we could do this!   The only thing missing is leadership and faith in America like John F. Kennedy.   Obama has neither faith nor leadership.  

Time for a Stock Market Commentary

I think the stock market is reaching a near term top and possibly forming a triple (and declining) top dating back to 2000.  Stock market returns this year may yield a 0 to 5% gain with a risk of -10% to minus 15% decline during the year--probably ending mostly unchanged.

• Oil prices are now the new Fed Funds rate since the Federal Reserve has reneged on it's duty to keep interest rates the same or higher than inflation.  Like Fed Funds rate, if the global economy picks-up, then crude oil prices pick up and that works to slow it  (like the Fed and Fed Funds rate is supposed to do).   
• Be careful, Brent crude, more representative of world oil prices, is now $125 per barrel---only $25 less than a peak level that tipped the world into recession in 2008 and precipitated the last credit crunch.   Many key global economies are already slowing or in recession NOW!  This is the biggest risk now.  Rising oil prices are happening despite a weakening global picture.
• US Corporate earnings are probably peaking out as much of the world is close to recessionary conditions now--in Japan, Australia, & Europe. China is slowing.  It's possible earnings will hold up and not fall much but corporate earnings are HIGHLY variable.  A slow fall of corporate earnings probably means slightly lower stock prices going forward.  This assumes that the US doesn't join the world's recession which would mean significantly lower stock prices.  
• There continues to be a high level of risk from macroeconomic instability.  Investors will continue to want lower PEs to compensate for risk--meaning more pressure on stock prices.  
• Here's the chart to show a possible triple top (and possibly declining peaks) of the S&P  Click for a larger chart.

• Central bank balance sheets are exploding all over the world which shows an attempt at competitive devaluation of all currencies by all countries.  There is no backing of currencies by anything and therefore they are being manipulated by politicians. Click on the chart of central bank balance sheets as quantitative easing continue to buy outstanding debt.   (See my blog on What is Quantitative Easing? )  The problem is that stock markets are hooked on their opium fix and any sign that QE will end will hurt stock prices temporarily.

• Politicians are not fixing the real problems, global imbalances continue, debt is piling up and credit quality is collapsing everywhere.  It's literally raining credit downgrades in Europe. The West is going to hell in a hand-basket!     
• Governments are killing economies everywhere with statist, interventionist policies
• Charles Biderman at TrimTabs, who focuses on money flows in and out of markets, has indicated that it's only corporate stock buybacks fueled by low interest rate corporate bond issuance that has largely driven the market higher since the market low in March 2009 as the retail investors have been selling stocks/mutual funds for years now.
• Retail investors have been piling into bond funds and not stock funds. Negative real interest rates into the foreseeable future are hurting savers, retirees, pension plans, distorting markets and hurting the economy due to the extreme uncertainty that it's causing.  The Fed should raise interest rates right away to a more normal 2%.
• The political leadership and administration of the US is at a new low.  Administration matters.
• Inflation is 3% and short term interest rates are 0% meaning real interest rates are -3%.     Three percent inflation must not be enough for the brilliant PhDs at the Fed--they want higher inflation! They've said so! 3% inflation used to be crisis level of inflation in the late 1960s. So you can see how far we've devolved.

A Look at Ron Paul's Thoughts

Like many, I've never taken Ron Paul seriously enough.  He seems so radical.  But when you listen to him explain himself, he's not nearly as radical as he sounds.   Take his stance on removing federal law making drugs illegal.   It wasn't that long ago that there were no federal laws prohibiting cocaine or many other drugs. Cocaine was in Coca Cola!  Now we have this vast government bureaucracy both here, abroad and on the border, intruding on people's rights, trying to regulate the same drug with debatable effect.    Al Capone's rise was itself the result of the Federal Government's banning of alcohol which opened up the black market in the same.  This latter point is exactly Ron Paul's point about drug laws!  The Feds imprisoned Al Capone based on tax evasion.  And mail fraud was the only other basis for many other Federal government interventions in the early 20th century: there were no racketeering laws, no expansive and intrusive FBI and CIA.  Now these agencies are spying on everyone, everywhere and costing $100s of billions and debatable results.  The Federal government's mandate at one time was quite minimal and the size of the Fed Govt was minimal for the majority of US history.

He sees the growth of government to be the biggest threat to your liberty.  This in particular I believe and wish to warn about.  Ron Paul basically wants to return the country to the way it was for most of our history from 1787 to 1929.

Here's some of his views from a recent speech and some other libertarian tenants:

• a moratorium on “illegal” airport searches (from a recent campaign speech)
• the dissolution of the Department of Education, the Department of Energy, the Department of Commerce, the Department of Housing and Urban Development, and the Department of the Interior
• repeal of the Patriot Act
• repatriation of American troops stationed overseas;
• an immediate end to bailouts
• eventual end to the federal income tax;
• he called for a trillion-dollar cut to the federal budget.
• he calls for the eradication of the Federal Reserve, the rejection of paper money, and a return to the gold standard 
• He advocated pulling the United States out of the United Nations, NATO and the International Monetary Fund 

Other libertarian tenants that Ron Paul may or may not exactly agree (my comments in italics):

• They believe in non-interventionalist foreign policy. Do we need troops stationed in 140 countries? Of course not!
• Libertarians do not believe in borders. They want to tear down the fences and the walls and allow immigrants to enter our country in order to pursue a better life for themselves and their families. Despite all border control, the US Mexico border is essentially open and those that want to come here are already here. Why pretend that we're in control? We're not!
• Libertarians believe that all people have the right to be married, including gay people. At a minimum, the issue should be a state-by-state decision but equal rights/equal treatment should be supported in The Constitution. Why persecute fellow US citizens who want deeper commitments and accept deeper responsibility?
• Libertarians believe that there should be no laws governing a woman’s body, and there should be no laws infringing upon a woman’s right to choose.
• Libertarians don’t want Medicare or Social Security. Libertarians don’t believe that there should be fire departments, police departments (I find this a bit hard to believe since they are local entities??), public transportation, grants for education, unemployment, disability, food stamps, and every other type of government system and assistance that you can think of.
• Libertarians wish to eliminate taxes in order to eliminate the expansive government programs. The US didn't have a Federal Income tax or a Federal Reserve until 1913. Libertarians believe that without these taxes, individuals will have more money in their pockets and will be able to afford all of these things. If someone is unable to provide themselves or their family with school, healthcare, or food, people need to rely on family members, church, or a private charity.
• Libertarians believe that government’s role in the market should be to protect property owner’s rights. There should be no FDA, equal employment opportunities, public unions, minimum wage, payroll taxes, safe food handling requirements, consumer protections, regulations that protect against financial conflicts of interest and fraud, and business licenses.
• Libertarians believe that business owners should have the right to deny entry to minorities and/or women and/or people with disabilities, if that is how business owners wish to run their businesses.
• Libertarians believe that all drugs should be legalized at the Federal level and legality left to the states. It is felt that legalization would drastically reduce crime and solve overcrowding in prisons. Libertarians view drugs the same way as alcohol prohibition. Libertarians believe that alcohol prohibition created the Mafia and, likewise, drug prohibition created the Crips, Bloods, and drive-by shootings.

Adoption of these principles would certainly put many functions of government back to the states and return the country back to a not-too-distant past when there was a minimal federal beaurocracy. Federal taxes didn't exist until 1913 with the adoption of the 16th amendment to the Constitution!! I bet you didn't know that! I didn't.

A Real Cancer in the World

Iran's theocrats have called Israel a "cancer on the face of the earth".   I have another idea as to what the real cancer is.

Islamists are killing Christians and others all over the world.  This is under-reported in the media.   A good example of the under-reporting  is the outrageous Muslim killings of 4,000 innocent Buddhist civilians in the south of Thailand over the past 10 years.  The victim's did nothing to deserve this!  The killings stem from extreme ignorance and personal misery that only comes from failures within their sub-culture--not unlike the Northern Sumatra Aceh community--also prone to violence and criminality.  There is a mild political grievance but nothing to justify large scale murder:  the 3 southern Thai states near Malaysia want to be returned to Malaysia.  Malaysia doesn't want them!  Thailand and ordinary Thai people are peaceful and tolerant, so there's no excuse to explain a death toll 5 times worse than our 9-11 murders (in proportion to Thailand's population).  It's simply senseless murder.   This passes for religion?

From Ayaan Hirsi Ali from Newsweek Magazine

For years, Muslims and Christians in Nigeria have lived on the edge of civil war. Islamist radicals provoke much if not most of the tension. The newest such organization is an outfit that calls itself Boko Haram, which means “Western education is sacrilege.” Its aim is to establish Sharia in Nigeria. To this end it has stated that it will kill all Christians in the country.

In the month of January 2012 alone, Boko Haram was responsible for 54 deaths. In 2011 its members killed at least 510 people and burned down or destroyed more than 350 churches in 10 northern states. They use guns, gasoline bombs, and even machetes, shouting “Allahu akbar” (“God is great”) while launching attacks on unsuspecting citizens. They have attacked churches, a Christmas Day gathering (killing 42 Catholics), beer parlors, a town hall, beauty salons, and banks. They have so far focused on killing Christian clerics, politicians, students, policemen, and soldiers, as well as Muslim clerics who condemn their mayhem. While they started out by using crude methods like hit-and-run assassinations from the back of motorbikes in 2009, the latest AP reports indicate that the group’s recent attacks show a new level of potency and sophistication.

The Christophobia that has plagued Sudan for years takes a very different form. The authoritarian government of the Sunni Muslim north of the country has for decades tormented Christian and animist minorities in the south. What has often been described as a civil war is in practice the Sudanese government’s sustained persecution of religious minorities. This persecution culminated in the infamous genocide in Darfur that began in 2003. Even though Sudan’s Muslim president, Omar al-Bashir, has been indicted by the International Criminal Court in The Hague, which charged him with three counts of genocide, and despite the euphoria that greeted the semi-independence he grant-ed to South Sudan in July of last year, the violence has not ended. In South Kordofan, Christians are still subject-ed to aerial bombardment, targeted killings, the kidnap-ping of children, and other atrocities. Reports from the United Nations indicate that between 53,000 and 75,000 innocent civilians have been displaced from their residences and that houses and buildings have been looted and destroyed.

On Oct. 9 of last year in the Maspero area of Cairo, Coptic Christians (who make up roughly 11 percent of Egypt’s population of 81 million) marched in protest against a wave of attacks by Islamists—including church burnings, rapes, mutilations, and murders—that followed the overthrow of Hosni Mubarak’s dictatorship. During the protest, Egyptian security forces drove their trucks into the crowd and fired on protesters, crushing and killing at least 24 and wounding more than 300 people. By the end of the year more than 200,000 Copts had fled their homes in anticipation of more attacks. With Islamists poised to gain much greater power in the wake of recent elections, their fears appear to be justified.

Egypt is not the only Arab country that seems bent on wiping out its Christian minority. Since 2003 more than 900 Iraqi Christians (most of them Assyrians) have been killed by terrorist violence in Baghdad alone, and 70 churches have been burned, according to the Assyrian International News Agency (AINA). Thousands of Iraqi Christians have fled as a result of violence directed specifically at them, reducing the number of Christians in the country to fewer than half a million from just over a million before 2003. AINA understandably describes this as an “incipient genocide or ethnic cleansing of Assyrians in Iraq.”

The 2.8 million Christians who live in Pakistan make up only about 1.6 percent of the population of more than 170 million. As members of such a tiny minority, they live in perpetual fear not only of Islamist terrorists but also of Pakistan’s draconian blasphemy laws. There is, for example, the notorious case of a Christian woman who was sentenced to death for allegedly insulting the Prophet Muhammad. When international pressure persuaded Punjab Gov. Salman Taseer to explore ways of freeing her, he was killed by his bodyguard. The bodyguard was then celebrated by prominent Muslim clerics as a hero—and though he was sentenced to death late last year, the judge who imposed the sentence now lives in hiding, fearing for his life.
Such cases are not unusual in Pakistan. The nation’s blasphemy laws are routinely used by criminals and intolerant Pakistani Muslims to bully religious minorities. Simply to declare belief in the Christian Trinity is considered blasphemous, since it contradicts mainstream Muslim theological doctrines. 

I can go on.  How about Iranian sponsorship of terrorism against Jews?  How about Christian intolerance in Saudi Arabia?  How about increasing Muslim-on-Christian violence in Indonesia?

I think I can correctly identify the real cancer on the face of the earth.  I'm not calling for any violence.  I am calling for Islamic reform to eliminate this culture of violence.  The first step is a call for reform from within the religion---calls that never happen.  Don't hold your breath.

What is Quantitative Easing?

What is Quantitative Easing and why would you care?

The short answer:  It's ultimately very inflationary and shields Congress from the discipline of balancing their budget.  One part of the government is essentially subsidizes another part of the government and the public ultimately gets ruined.   Prices could eventually rise 50% based on the QE done to date and there are promises of even more QE.  The Fed pretends that it knows how to avoid such a general price rise, but they will be in a severe political conflict when it comes time to reverse what they've done.  I'll explain below.


Definition of QE
Quantitative easing is where the Federal Reserve creates money out of nothing and buys government bonds to fund some or all of the Federal Government deficits.  Yes, that's right, from nothing.   They buy outstanding government bonds and make an accounting entry on their balance sheet with the agreement of the US Treasury.  Congressmen can just spend and spend and spend.  Why not eliminate all taxes??  No need for taxes!

When the Fed buy bonds, the seller of the bonds receives money in their checking account.  In a fractional reserve banking system, banks can then lend money against those new deposits as long as they keep, say, 10% of their outstanding loans in cash or near-cash.  Thus, if a bank sees a $1 million in new deposits, they could lend another $9 million.

Money Multiplier and Credit Expansion due to New Reserves
Because of this "multiplier effect", when the Fed (Federal Reserve) buys bonds and adds deposits to the banking system (does Quantitative Easing), these new reserves are called "high powered money" because it can support up to 10 times the amount of money in the system.

Quantitative easing so far has added 50% to bank reserves that COULD be lent out and lead to a 50% surge in outstanding credit.   Have a look below (all blog images can be enlarged if you click on them).   See the jump from about $1300 to over $2100 or about a 50% jump in M1 (defined as cash and checking deposits) in 2008?   At a 10 to 1 multiplier, lending and money outstanding could jump $8000 billion on a $800 million increase in banking system deposits.  (The real multiplier is somewhat less than 10:1,  something more like 4:1)

A 50% surge in money in the banking system COULD mean a 50% increase in general prices if there is not a corresponding increase in goods and services ( ie., too much money chasing too few goods).   In reality it's not happening YET.

I could happen.

Reversal of Quantitative Easing
The problem is that the Fed Reserve should sell those bonds, ie.,take that money out of the banking system (reverse the QE) when excess reserves (become lent out) cause prices and business activity to rise.  Some of this is what is intended.  But if you have too much "tinder" in the fire, there's a risk of loss of control.   The Fed should be removing excess reserves now not later--but they're not.  They are considering more QE not less despite that the country is no longer in crisis!   Even today, there's no reason to have a $1 Trillion in excess reserves sitting in the banking system causing people to worry about it's ultimate effect (and I'm not the only one).   Sadly the Fed Reserve is now in the business of subsidizing runaway government spending and keeping interest rates near zero. Also sadly, they are making sure that risk-averse savers are punished with losses of up to 3% per annum.  Thanks alot Ben.  Who elected you?

To make a long story short, the Fed may be forced to reverse the Quantitative Easing just when it's the most inconvenient time to do so.   They could easily be forcing interest rates upward just when inflation and market is forcing market interest rates up.  Higher interest rates will cause government deficits will explode (see The Case For Gold)!   If they can't do it, they won't and price inflation will be inevitable.  They're already in a box and the public and savers will be scr*wed.  What a horrible state of affairs!  

Another question is:  who's going to limit the banks from doing other things with the available credit (money)?  Banks have shown that they can cause mischief and the government has proven itself to be a clueless regulator.  Ben Bernanke is known to approve of some of this new money inflating assets such as the stock market!  So, we'll have new asset bubbles.  The whole thing stinks!    There is a whole range of unexpected outcomes and un-intended consequences. 

This is another powerful reason to hold gold instead of US dollar currency.  The 50% rise (or more) of prices due to rapid money creation (out of nothing) will probably happen at some point.   Watch for more QE in the near future (it's happening all over the world in the past few weeks) which will raise the danger even further.  

The Case for Gold

This is going to be brief.  There is an important case for owning gold long term instead of the US dollar.

Take a look at the following chart (click on the image for a larger view):

Nixon eliminated the gold standard back in August 1971 and it lead to serious inflation and higher gold prices thereafter.  Also visible in the chart is the effect of Fed Reserve chief Paul Volcker's action to kill rising inflation in 1981.  Inflation has remained "subdued" at about 3 to 4% through the 2000s and present.  (3 to 4% inflation used to be consider crisis levels!  Now our Fed Reserve chairman calls for higher inflation!  What insanity!)

The rise of gold prices in the mid-2000s is co-incident with rapid credit expansion and ballooning Federal Budget deficits.  But it's interesting that this occurred with relatively low general price inflation but serious asset price inflation such as housing.   Gold itself is subject to such asset price inflation, in part due to fear of future inflation.

The case for owning gold long term is that, with outstanding government debt rising from $15 trillion today to $25 trillion in 10 years, there is little chance that the Federal reserve will be able to restore normal interest rates--now locked at zero percent and seriously below current inflation rates (ie., negative real interest rates).

You see, due to abnormally low (negative real interest) rates and runaway gov't spending, inflation will likely tend to rise in the coming years from it's current level of about 3%.  (If you don't believe it can happen, just look at  the UK with 5% inflation in the middle of a prolonged economic slump)

Today, at $250 billion per year, current interest payments by the government imply an average interest rate of 1.6% on $15 trillion of outstanding debt (much of it is short term and at less than 1%).   Consider the following scenario.   In 3 years, with $18 trillion of debt outstanding and  interest rates up 3 percentage points to 4.5% (average for the past 40 years) we'd have an explosion in the budget deficit of $540 billion per year.  That's on top of $1+ trillion deficits!  

The Fed Reserve won't be able to raise rates.   If they can't they won't.

This means that there will be no inflation fighting in the future. You can see how we're riding a runaway financial bus on a dangerous mountain road.   Inflation will eventually be a problem---thus the long term case for owning some gold.

One warning:  If our country follows the economic path of Japan after 1990, it IS possible that inflation will not rise in the next decade due to a poor economy.   Gold may fall back in the years ahead, but should be bought on pullbacks as it looks like there will never be any financial discipline given to markets going forward.  Eventually the economy will recover and eventually it will be time to raise interest rates.  It will be extremely difficult to do so.

More Mal-administration

Have you been out and about demanding cleaner air?? Have you been writing the New York Times complaining about air quality in your city?   I doubt it.  I'll bet it's not even in the top 100 concerns in your life.  From the Wheeling WV newspaper (The Intellegencer-Wheeling News-Register)

Time may already have run out for Americans to defeat President Barack Obama in his war against the coal industry. Many utility companies already have run up the white flag.  Before millions of people even knew about the war on coal, decisions were made that will send their utility bills skyrocketing. Some of those choices are irreversible.

A few weeks ago it was revealed at least 32 coal-fired power plants in 12 states, including West Virginia and Ohio, would be closed so utility companies could comply with the Obama administration's air pollution regulations. On the list was the Kammer Plant near Moundsville.

Last week FirstEnergy announced it would close three West Virginia power plants later this year, along with six in Ohio, Pennsylvania and Maryland, for the same reason.

Environmental Protection Agency officials are pressing utilities to replace 25 percent of their coal-fired generating capacity by 2014. That may not be possible, but it is an indication Obama's EPA is attempting to wreck the coal industry before anyone can stop it.

A few days ago, American Electric Power President and Chief Executive Officer Nick Akins said complying with EPA mandates will drive power costs up by at least 10-25 percent. AEP serves 5.3 million customers in 11 states.

On the heels of all that came a disturbing report from the North American Electric Reliability Corp., which works to ensure the nation's power grid is fed by enough generating plants to avoid interruptions in service. EPA regulations "are shown to be the number one risk to reliability over the next one to five years," the NAERC reported.

It may already be too late to save some coal-fired power plants. Clearly, time is short to prevent a crisis - and that is not too strong a word. Members of Congress, led by courageous West Virginians such as Sen. Joe Manchin, D-W.Va. and U.S. Rep. David McKinley, R-W.Va., have fought the good fight on the issue for many months. It's time for other lawmakers to stand up for their constituents and join in the fight.

Expect brownouts and rolling blackouts in the future.  

The key question is "if you shut down power plants and refuse permits for new coal power plants, then you must be permitting other types of plants, right??"  Wrong!  Have a look below at planned construction of all other power plants (other than coal).  Click the image for a larger one.  The additions will not match facility retirements and forced closures proving that environmaniacs really want you to live in a cave, they don't care what you think and don't understand that lower carbon emissions will require a decline of GDP economic activity.    All because the earth has warmed 1 degree Farenheit in the last 50 years and liberals have a Malthusian bent.

Compare that with what China is doing.   Why is America committing suicide? 

Sean Penn: Leftist Lackey

What is Sean Penn thinking?  How can someone be so off base?  He's entitled to his (serial incorrect) opinions, but artists should stick with their day jobs.

Now Sean is chidding the UK to give back the Falklands to Argentina. He did so while visiting Kirchner in Buenos Aires. What does he know about the issue? What an idiot!   Never mind that fellow leftist politicians in Argentina use the issue (again) to deflect attention from their failed leadership and policies.  Argentina was going to be a world power at the turn of the 20th century-proving that maladministration has it's price.

Isn't Sean the one backslapping Hugo Chavez in a recent publicity stunt?  Maybe he thinks that any publicity is good publicity.  At least when Madonna pulled stunts, there was artistic integrity or an 'amusement value" about it.  Oh wait, those two were married!

Sean was sympathetic to Saddam Hussein too--as I recall.  Wonderful.

EPA Carbon Regulation Power Grab

The USA should be proud of our accomplishments in cleaning air and water since the 1960s.  I would think most of us are satisfied about the cleanliness of our air and water.   But, like do-gooders and those-who-must -be-seen-to-be-doing-something, the EPA continues to churn out regulations to will hurt economic activity--just when we need more economic activity not less.  I don't hear any public demand for additional regulations, do you? 

The most egregious power grab is where the EPA has decided to regulate carbon dioxide.  They do so under the guise that carbon dioxide is "harmful or threatening to human health".  

Unlike other gases such as sulfur dioxide, carbon dioxide is naturally occuring at about 0.030%, plants require it for their photosynthesis and the level has only risen only to an less-than-astounding 0.038%!  (that's 380 ppm) 

To call such levels harmful to human or public health is a vast overstretch that must be reversed.  To put things in perspective, my exhaled breath has 4.00% or 100 times the naturally occuring carbon dioxide levels.   Even at that, there is no threat to anyone around me!   It's absurd!   Regulators are really jumping on the global warming bandwagon here.   Only if you're a Polar Bear or on a low-lying Pacific island is there any future "threat".   I don't want to be dismissive here as I have empathy for both polar bears and low-lying Pacific Islanders.

The problem is that there is no limit to what the EPA may try to do under such a guise--including regulating my exhaled breath (to be ridiculous)!

You can see why sulfur dioxide is appropriately regulated.  Other than volcanic eruptions, is not a naturally occuring atmospheric pollutant.  Mostly through burning of coal, man emits sulfur dioxide and, if not regulated and reduced, has shown to cause acid rain, deforestation and harm to human respiration.  It is an irritant to human respiration.  Carbon dioxide is not an irritant to human respiration.  To this day, sulfur dioxide emissions are reduced and that's largely a good and desireable thing for the public.

The EPA will continue it's self-aggrandisement unless this regulatory mandate is overturned.  They will inject themselves further into the business community and hurt the economy.  Already this administration is cancelling coal burning power plants and removing permits for existing plants under this regulation.   You think that this won't eventually hurt the economy?   I guarantee that we need more energy, not less.

The administration is generally hostile to conventional hydrocarbon energy---which will remain our predominant source of energy for the next century.   So, to curtail conventional energy supplies means higher costs now and in the future. Obama is actually of in favor of raising conventional energy costs so that it makes his favored alternatives more attractive. And it's working!  What he doesn't understand is that he hurts moms, pops, poor people, and retirees with such policies and hurts economic activity and wealth creation. It's an extremely untimely philosophy.  

The truth is that the economy has to be prosperous to be able to afford environmental remediation.  If the economy is declining and we're attempting more remediation (cost), it will accelerate the decline.

Do yourself a favor, vote him and his absurd followers out of office!

Energy Demand Will Rise--and Carbon Emissions Will Rise Too

Demand for energy will increase because energy use rises with real economic growth.

For decades, Americans have been made to feel guilty because America's oil consumption is roughly 25% of the world's total.   The media has implied that you've somehow been energy "pigs".   Yes, there is a high level of affluence here, but the simpler reality is that the US economy has been about 25% of the world's economy.   Energy use is in proportion to GDP.   Now the US economy is only 19% of the world's economy.

If there's growth, there will be increasing energy demand.  But the West is getting more energy efficient, so energy use is barely rising despite slow but growing economies.  It is the emerging markets whose energy demand is growing rapidly. China's energy consumption (and carbon emissions) is rocketing upward at a much higher rate than suggested by their GDP growth.  Perhaps it's because China is taking on the energy intensive industries such as steel production and aluminum smelting from the West.

ALL of this talk about reducing global carbon emissions is just that: talk.  Carbon emissions will be rising for decades to come.  Kyoto and any other climate change accords are absurd--there will be NO reduction of CO2 for as far as the eye can see.   After decades of talk and small pilot facilities, there is not a single power plant in the world whose CO2 is being captured and sequestered.   The USA has 10,000 power plants alone, so you can see how daunting the task is!

The world's temperatures have risen about 1.6 degrees F in 50 years, so it's hardly a crisis.  But I explain in my blog Global Warming Extremism that the global warming "alarmist" predictions are overdone.  For example, there are new studies that show that the extreme scenarios are not as likely as the fear mongers believe.  Scientists don't know much and their models are not yet accurate in predicting reality.

• If there are no recovery of carbon dioxide and sequestration at power plants , then electric cars will not reduce carbon dioxide emissions.   It still might still be economical to use an electric car in the USA if your power costs are low in your area.  50% of electrical power in the USA is from more inexpensive coal, another 20% from both natural gas, 20% from nuclear, 7% from hydroelectric.  Notice that wind, solar is less than 1% of power generation.

• Hydrogen cars will not reduce carbon dioxide emissions.  Hydrogen is  too expensive, it uses methane as a feedstock and the manufacturing process for hydrogen emits CO2!!  You will be more energy efficient and less costly to operate a car on natural gas.  Hydrogen is a complete bust in every sense.

• Ethanol is not cost effective as it has much lower energy per gallon than petrol but is more costly than petrol.  Using corn for producing ethanol is hurting food prices too.  It has only been used because of a subsidy from the Federal Government.