The New & Improved Deal

“If the people of the nation understood our banking and monetary system, I believe there would be a revolution before tomorrow morning.” (Henry Ford)

First, the US economy is highly based on consumer spending. One way to increase consumer spending is to make easy credit, i.e. credit cards and other vehicles. At some point, consumers must stop buying, and start repaying credit cards (beyond interest). With credit you buy now, and pay later. Most people just imagine that later never comes. When this happens, consumers buy fewer goods causing a small recession.

However, this isn’t allowed to happen. The Federal Reserve is pressured by congress and the stock market to lowers interest rates, which in turn lowers all interest rates. This makes it easier for everyone to get credit and increases demand for goods and services.

As a side effect, it also increases the supply of money in circulation. In this short term, this also increases the demand for consumer goods and homes. However, soon the market realizes the demand is inflationary, and then the price of everything goes up. As consumer prices rise, budgets get tighter and it is harder to pay bills. People begin defaulting on their credit payments, including mortgages.

Further low interest rates are a message that credit is easy to get and both borrowers and lender make riskier decisions than they would have. This creates malinvestment.

The finance industry has been profiting from the credit boom. For example, they profited in the short run by pushing loans on risky people. But as people default on the loans, it takes the very same banks under.

And banks were also taking on lots of debt in the credit-induced mania. Carlyle capital had a $21.7 billion mortgage portfolio that was supported by just $670 million of net assets.

Now these mortgage backed portfolios have some net worth, basically the money you get when people pay on their mortgage. And they were pretty safe; most people don't like to lose their homes. But there are problems. Easy credit was driving up demand for homes, and encouraging real-estate speculation. This inflated the prices of homes. A person who bought a property at market peak may have a 500k loan on a 300k home. This includes people who took out equity lines of credit against the imaginary equity in the appreciation of their homes.

At some point there was a market correction. Once the market had its correction most people weren't willing to be "upside down" on a home loan, especially speculators. They just mail back the keys to the bank, called "jingle mail"

Now as this started happening en mass, the value of the mortgage backed securities plummet. Billions and Billions of dollars in "wealth" were artificial, and vanished leaving banks holding the bag. Increases in wealth to to increased standard of living, now we have decreasing standard of living, like USSR.

Now there are calls to save the banks. I feel bad for the banks that having problems, because the Fed enabled their activities. It was like giving whiskey and car keys to teenagers. But we can’t just ignore the laws of economics, any more than we can ignore the law of gravity. Instead of letting the bubble pop, the Federal Reserve is attempting to keep the value of the mortgage securities high.

They do this by “buying” the securities and giving cash loans to the banks with the worthless securities as collateral. If they don’t do this, the entire market for securities may collapse. But someone is on the hook if the securities collapse, the American taxpayers. We are “eating” the bad debt. Or in other cases, otherwise healthy banks are doing the same thing. BoA bought Countrywide and Bear Sterns was eaten by JP Morgan Chase.

Is the fed “injection of liquity” going to create more inflation, creating more defaults?
Again people say Captialism failed. The Fed created the first Great Depression and it did it again.

And what happens now? Is the Federal Reserve held accountable for creating another bubble? No. Incompetence is rewarded in government. Federal Reserve is granted more power, even though it created the problem. It was only responsible for protecting banks through the use of loans, but now oversees entire financial industry.

It is up to the taxpayer, who by and large wasn't profiting in the financial speculation to catch the falling knife.

Why Constitutions Matter

In the Declaration of Independence, Constitution, and Bill of Rights the word "democracy" does not appear a single time in the text. This is not because such learned men had never heard of the concept, but because they knew all about democracy and wanted to avoid it as much as possible. The biggest shortcoming of democracy is the "tyranny of the majority" where minority viewpoints were oppressed.

Today we live in a country under the tyranny of the slim majority. We all face an uncertain future where what we are free to do today may be illegal tomorrow. If 51% of people are in favor of something, the other 49% of people are screwed.
If Republicans win, Democrats are screwed. If Democrats win, Republicans are screwed. Washington politics have become a high stakes power struggle and special interests battle to the death to "win it all or lose everything."

When the independent states came together to write a constitution, they foresaw this exact situation. The constitutional delegates feared handing the keys of power to another dictator, after suffering a long, bloody war to achieve freedom.

The framers knew that people would never agree on most issues. The constitution itself was barely agreed to. The solution, in essence, was to agree to disagree, and not fight about it. For that reason they created a federal government with strictly limited powers and enumerated duties, leaving a majority of decisions to the states and the people.

A federal government, unrestrained by the constitution can do anything it pleases. The Legislature can write any law. The Judiciary can create laws by ruling on cases. The Executive can ignore or interpret the law in any way through the use of signing statements and executive decree. President Reagan joked when he said, "I have just signed legislation outlawing Russia forever. The bombing begins in five minutes." But, sadly, that is exactly the nation we live in today. If you can get majority support, you can bomb anything.

A constitution that can mean anything means nothing. What we have in the US now is not a constitutional republic but mob rule. Our nation is becoming more and more polarized, antagonistic, and disenfranchised with their representation. This is the result of a "winner takes all" form of politics.

Such a path can only lead to the failure of the union, and the end of the greatest attempt by a people to live free in the history of mankind. No one can know what will rise from the ashes but if 10,000 years of human history is any guide, it won't be a free nation.

Reasonable Regulations

You have no rights...

Land of the free? Who ever tells you that is your enemy! (Zach de la Rocha)

The powerful and corrupt Federal government is a result of the utter perversion of the Constitution. The politicians take the oath to "preserve and protect" the Constitution and violate it with impunity the very same day.

I am considered a radical and an anarchist to say that the Constitution means what it means. I am unreasonable to agree with the founders that, "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights. . ."

• I believe in an absolute freedom of speech.


• I believe in an absolute right to bear arms, including machine guns and other military ordnance.


• I believe that all people have a right to full court protection from government prosecution including; due process, a speedy and public trial by jury and warrants based on probable cause only.


• I believe the federal government has only the powers specifically enumerated, all others belong to the states and the people.

No exceptions, under any circumstances. I will not sacrifice my freedom for promises of security or a handout.

What we have now is an Orwellian dystopia straight out of Animal Farm. Today "no animal shall kill any other animal" becomes, "No animal shall kill any other animal without cause."

In the recent Heller v. D.C. case the Supreme Court ruled that Americans have the right to keep and bear arms, but said the government can enact reasonable regulations. That isn't a right anymore. It is a privilege which can be revoked at any time, at whim. We are no longer equal citizens, but subjects.

The list goes on and on. Our hallowed Bill of Rights is swiss cheese with exception after exception legislated by congress, signed the president, and upheld by the courts.

America is a constitutional republic. Without strict adherence to the Constitution what is left?

Political Pessimism

A couple of quotes I like to get it started.

"Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions - everything, now restrains itself and anxiously hopes for just two things: bread and circuses" (Juvenal)

"In the end they will lay their freedom at our feet and say to us, 'Make us your slaves, but feed us." (Dosteovsky's Grand Inquisitor.)

I can see things. I can get a sense of the "Big Picture" I am bad at little details, but I see the forest for the trees.

Do you know anything about how a Boa Constrictor snake kills its prey? Some people think that the snake squeezes the helpless animal with tremendous strength, but that isn't the case. The snake merely tightens its grasp bit by bit each time the animal exhales. In the end the animal can't take another breath and dies.

I hate to talk about a slippery slope, but in this case it is appropriate... Our political class, at all levels of government, works round the clock adding layers and layers of control.

"The more corrupt the state, the more it legislates." (Tacitus)

At some point, in history, human nature causes people to rebel and throw off the chains and slay their captors. However, I wonder if we have lost the will to live free. When the founders of our nation declared their independence from England they were incensed about a 6% tax burden. Americans now pay 50% of their income in taxes and we are just happy we get a "refund" come April.

When will the tide turn, or will it? All I know is that is will certainly get worse before it gets better.