The Bulletproof Patriot

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A derivative in the finance world is a contract which derives its value from the performance of some underlying entity.  Derivatives can be used in many ways, but the easiest way to think of them is as an insurance policy against the price of a commodity, stock, currency, etc. changing.  Derivatives can and are frequently used to allow businesses to insulate themselves for a given period of time against wild price swings in whatever business they engage.

One of the more common commodity derivatives that consumers experience is on oil or fuel prices.  The airline industry, for example, routinely buys derivative contracts on fuel costs to ensure that their business doesn't suddenly become bankrupt if oil prices skyrocket.  This is the reason that when oil suddenly jumps from $80 a barrel to $120 a barrel, your plane ticket prices don't suddenly rise by 50% - the airline's derivative contract protects whatever price is agreed to in the contract and the difference between that figure and the current market value is made up by whoever owns the contract (usually one of the big banks).

Shale oil producers (fracking) are another major buyer of this sort of derivative contract, as their business depends upon a high market oil price (most estimates put this somewhere around $70 per barrel) - below this price, shale oil production is not economical.  With the ongoing slide in oil prices, which dropped from about $100 per barrel in January to under $60 just recently, numerous derivative contracts are currently being activated to keep the shale producers in business.

In a sane market, this is not a problem because derivative contracts are only activated intermittently - oil price drops tend to be transient events, lasting for a relatively brief period.  While oil is down, many other things are not, so the insurer is stable.  Similarly, if a neighborhood experiences a heavy hail storm and all of the roofing and vehicles parked outside are damaged, the insurers can handle the expense when all of those homeowners and vehicle owners file their claim for roof and vehicle repair because the damage is limited to one neighborhood.  If an entire state suddenly needs roof and vehicle repair, the insurer is up the creek and may find themselves bankrupt under a mountain of claims, but the risk of this happening is slim.

The problem with financial derivatives is that so many of them are dependent upon a good overall state of the economy.  If the economy experiences a widespread drop, as it did in 2008, derivatives activation suddenly becomes a real problem for the owners, who lack the cash or liquid assets to sell to fulfill the contract when claims are made.

For this reason, in 2008 the big banks were routinely trading in derivatives through entities which are federally insured by the FDIC.  This allowed them to deal in much riskier contracts because even if the bank wasn't able to back the contract up in the event of a widespread economic drop, the counter party (buyer of the derivative) could make a claim upon the federal government to fulfill the contract.  Thus, the American taxpayer found himself on the hook for risky derivative bets made by the big banks.

In 2010, for all of the failure to enact real financial reform (a problem that still widely exists today), the Dodd-Frank reform bill did manage to succeed in banning the banks from dealing in derivatives through federally insured entities.  The purpose of this was to 1) force the banks to determine risk based upon their own assets rather than assuming the federal government would be there if they failed, and 2) to remove the risk of the taxpayer having to "bail out" the banks again in the event of a massive derivatives explosion.

Yesterday, the U.S. House passed a $1.1 trillion omnibus bill that includes a rider inserted by Republicans which repeals the Dodd-Frank ban on derivatives trading through federally insured entities.  If the Senate approves the measure (and they will), the taxpayer will once again be the backstop for potentially any failed contract the banks choose to sign, and since the taxpayer bailed the banks out in 2008, certainly they will do it again in 2015!

Privatize the gains, socialize the losses.  There are few things more immoral.

The Democrats, to their credit, have been railing against this provision in the House bill and Elizabeth Warren looks to be leading the charge.  She's right to do so - this is a TERRIBLE provision inserted by a bunch of corrupt, unprincipled Republican party hacks who are more interested in saving their own asses than securing yours.

Oh, and for the record, Colorado's newly-elected Senator Cory Gardner voted in favor of the bill, including the derivatives rider [1].

In advancing this bill, the Republican party has also removed any leverage the incoming majority has to pressure the White House to moderate its actions, particularly on immigration.  If you've ever needed a clear reason to believe that both the Republicans and Democrats are selling your rear end to the cheapest bidder, look no further than yesterday's vote.

Congress will never, ever limit itself to the constraints placed upon it by Article 1, Section 8.  It's up to the States and the People to do so, and we have fallen down on the job, all the while believing that voting still matters.

As of yesterday, it doesn't.

It's time for an Article V convention so that the States and the People can flex their muscles, amend the Constitution, and re-shackle Congress to a much shorter leash.

Let's start with a balanced budget amendment, term limits on Congress and the Supreme Court, and a clear and unambiguous definition of the meaning and extent of "interstate commerce."  If we're really on a roll, we might even consider a redesign or outright repeal of the income tax (16th Amendment) and implementation of a Taxpayer Bill of Rights, requiring voter approval in the general election before any tax increase takes effect.

Beyond the duties specifically enumerated in Article 1, Section 8, Congress should be silent.

It is our responsibility to make it so.

Liberty or death,

The Bulletproof Patriot

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While a decent portion of this country is entertaining themselves by inciting race riots in Ferguson, MO, to "protest" the Grand Jury's decision to decline to charge Officer Darren Wilson in the death of Michael Brown and condoning and supporting such lawless behavior by the likes of Time Magazine [1], it is once again left to the few to clean up the social mess brought about by this country's perpetual self-victimized class and their benefactors in government and many parts of the media.

During the riots, Natalie Dubose's bakery, Natalie's Cakes and More was damaged and looted [2].  Natalie is a single mother of two and saved up to start her bakery by selling cakes at bake sales.  By all accounts, this young lady is the real deal - making the best of herself as an American, working hard to achieve success, and busting her ass to support her two children.

Let's help her rebuild her shop, because part of working to preserve individual liberty is the charge of personal charity to those honestly in need.  Freedom and liberty know no party or race - they're simply American values that exist in the very fabric of this nation, because that is what Americans are about.

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For those who believe that "social justice" or "racial justice" are worthy causes and that the appropriate method to secure both is to burn down small businesses, vehicles, and otherwise destroy the livelihoods of your neighbors like pathetic, lawness animals, I give you an enormous one finger salute, a sincere plea that God forgets you were ever my countrymen, and leave you with the thought that apart from equal justice, there is no justice at all.

Liberty or death,

The Bulletproof Patriot

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"But there's a limit to the discretion that I can show because I am obliged to execute the law.  That's what the Executive Branch means.  I can't just make the laws up by myself."

- Barack Obama, 25 October 2010 [1]

The Progressive defense of the President's executive action on immigration seems to rest rather casually upon two questionable justifications, the first being a rather childish "Reagan and Bush did it first, so it's ok," and the second being that Congress's refusal to reform the immigration system itself has left the President with a mess that he cannot realistically or faithfully execute, justifying his own action to publicly ignore the existing law.  However, Congress's failing to act at the demand of the President (or the People for that matter) provides no justification whatsoever for the President to take it upon himself to "repair" the law on his own, and indeed the Constitution provides no lawful justification for unilateral Presidential action such as this in any case, whether related to immigration law or otherwise.

Nowhere in the Presidential duties outlined in Article II exists the authority to openly permit the violation of established law.  The only related charge the President is granted is the duty to "take care that the laws be faithfully executed" in Article II, Section 3 [2].  Surely, even Progressives can agree that a public announcement encouraging active violation of the law, paired with a pronouncement to not prosecute or deport an arbitrary segment of said immigrants (those who have broken the law for at least five years), cannot possibly be construed as a "faithful execution."  This can be the only logical outcome of such an exercise, since the Constitution provides no authority for the President to choose not to enforce the law, something which "Constitutional scholar" Barack Obama himself has confirmed in interviews and speeches on numerous occasions (see quotations to this effect at the end of this article).

Constitutionally, the powers of the President are limited and well defined, largely to require action as the Head of State.  The President is granted no authority to make or change existing law, although his input is frequently sought and in the case of Congressional action on new laws the President has the final right of veto.  Beyond this, he is charged with ensuring the execution of the law, which is the entire purpose of the "Executive Branch" as noted in the quote at the top of the page.

Bush and Reagan

As legal defenders rush to shield the President from a growing criticism and the obvious risk that the average American could read an article such as this and come to the self-evident conclusion that this executive action is in clear violation of the law, leaving the newly minted Emperor naked, the more popular theories proffered by prominent legal minds are surprisingly shallow, even to a rather jaded and cynical observer such as this one.  A legal rationale which is reliant upon the vast majority of the population taking nothing more than a cursory glance at the matter is unfortunately quite typical of today's American society, where few are interested in an intellectual discussion lasting longer than a commercial break, let alone actively engaged in the philosophical preservation (or even understanding) of their own liberties, something which was once the touchstone of American politics.  Once again, the D vs. R game provides the perfect political cover for the bourgeoisie and their aristocratic masters, who need concoct little more than a vapid "Yes we can!" chant to galvanize the voters into selling out their own self interest for literally nothing in return.

To this end, Progressives across the country are today "enlightened" with the brilliant legal defense of the President's executive action to shield five million illegal immigrants by hiding behind the bumper sticker slogan "Bush did it first! [3] [4]"  To the most superficial extent, this is true.  Beyond here, however, the differences and Constitutional justifications for the seemingly related executive orders are considerably different to any intellectually honest observer.

In 1986, Ronald Reagan signed the Immigration Reform and Control Act, an act lawfully passed by the Congress, which legalized persons who had unlawfully entered the country prior to January 1, 1982 [5].  The act, unfortunately, left the children of illegal immigrants uncovered by the amnesty and remaining subject to deportation and separation from their parents.  Using their flexibility to faithfully execute the law passed by Congress, both Presidents Reagan and Bush issued executive orders deferring deportation of those children, who seemed to have been caught in a legal loophole that Congress had legislated around.

An op-ed by none other than Nancy Pelosi describes this relatively accurately [6]:

Presidents have broad authority to defer removal when it is in the national interest, and past presidents have regularly used this authority. In the years immediately following the enactment of the 1986 Immigration Reform and Control Act, Presidents Ronald Reagan and George H.W. Bush took bold action to protect the spouses and children of people who received status under that law. Although Congress explicitly chose not to grant status to these people – an estimated 1.5 million people – Presidents Reagan and Bush recognized that it was not in the national interest to separate families. Using their authority to establish a “Family Fairness” program, they offered spouses and children indefinite protection from deportation and work authorization.

This is more or less historically correct, but Congress failing to mention the children of illegal immigrants covered by the amnesty is vastly different from Pelosi's assertion of Congress "explicitly [choosing] not to grant status to those people."  It's a sleight of hand, but an important one that we'll pick back up in a minute.

Likewise, President Obama could defer action against persons who would be covered by the Senate-passed bill that Republicans blocked. Like Presidents Reagan and Bush, he could use his authority to prevent family separation – this time of undocumented close family members of U.S. citizens, lawful permanent residents, or DACA beneficiaries. Similarly, he could recognize that it is “essential for agriculture” that farmworkers who toil in our fields do so without fear.

Here's the rub - Pelosi equates the Bush/Reagan executive orders seeking to flexibly enforce a law passed by Congress with an Obama executive order issued without seeking to enforce a law passed by Congress.  Acting within a law is Constitutionally separate and apart from acting within a "Senate-passed bill that Republicans blocked" because a "Senate-passed bill" is not a law.  To those paying close attention, Pelosi has actually mananged to slip out a tacit admission within her own defense that President Obama is acting outside his legal authority to "faithfully execute the laws" by acting on something which Congress has not actually passed.

In addition, Obama acting to protect people who Congress explicitly requires to be deported or otherwise prosecuted (if a repeat offender, which is a felony [7]) is in direct violation of written law.  There is no ambiguity as was the case in the Reagan and Bush orders, and had Congress explicitly required the deportation of the children these orders covered, both Bush and Reagan would have been acting illegally, just as Obama is doing.

Reagan and Bush were acting to execute a lawfully enacted Congressional amnesty.  Obama is not, and rather is acting to create his own amnesty in the absence of Congressional action.  These are two very different things, one being Constitutional, the other being lawless.

Parole In Place

Pelosi goes on to alternatively justify Obama's move by claiming that he can simply "parole-in-place" all of the illegal immigrants he desires, using the previous parole-in-place actions of Ford and Carter (who paroled thousands of Vietnamese).  This justification is also questionable as there is no Constitutional or statutory basis for the current scope of these programs and so their previous use by other Presidents may well also have been unconstitutional.  The previous precedents also have focused on persons related to military conflict and refugees, hardly a similar circumstance to those choosing to run across the U.S. border to deliver a child in an American hospital to gain a foothold on citizenship.

Perhaps more importantly, the persons covered by former parole-in-place policies were not actively in violation of U.S. law (specifically 8 USC Sec. 1325 [8]) and were not already illegally present within the United States.  Application of the parole-in-place philosophy to illegal immigrants was carried out by Bill Clinton and carries literally zero statutory justification, so this defense is similarly nonsense.

Emancipation

The other popular argument forwarded by Progressive defenders of Obama's order to defer deportation is to compare the order to Lincoln's Emancipation Proclamation, which Rep. Pelosi has conveniently reminded us [9] was also an "executive order."  As is typical of Pelosi, the two are comparable on only the most superficial level - any investigation beyond her words, no matter how slight, and the analogy instantly collapses.

Abraham Lincoln issued the Emancipation Proclamation not as an executive order in the traditional sense that Pelosi claims, but rather as a military order using his authority as commander-in-chief.  The proclamation contains several carefully worded exclusions and applied only to those states which had left the Union (and were therefore outside Constitutional jurisdiction) and which were not already under control of the Union Army.  The exclusions went down as far as the county level to avoid creating a question of Constitutional authority, an exercise in which Barack Obama clearly did not participate.

Lincoln, to his credit, believed that the Constitution did not permit him to simply end slavery on his own.  He was correct in believing so, and therefore did not seek to act as a dictator in the proclamation.  He instead proclaimed that for states in rebellion, slaves should and ought to be free and that any formerly enslaved person was free to enter paid service with the Union Army.  Contrary to popular knowledge, the Emancipation Proclamation did not apply to all slaves within the United States and did not abolish slavery.  Abolition of slavery was accomplished by ratification of the Thirteenth Amendment [9].

Constitutional Scholar Obama

Lest we forget that self-described "Constitutional scholar" Barack Obama explicitly proclaimed his own lack of authority to defer deportation for an arbitrary group of illegal immigrants as recently as 2013, here's a few of the gems for the record.

[T]here are those in the immigrants’ rights community who have argued passionately that we should simply provide those who are [here] illegally with legal status, or at least ignore the laws on the books and put an end to deportation until we have better laws. ... I believe such an indiscriminate approach would be both unwise and unfair. It would suggest to those thinking about coming here illegally that there will be no repercussions for such a decision. And this could lead to a surge in more illegal immigration. And it would also ignore the millions of people around the world who are waiting in line to come here legally. Ultimately, our nation, like all nations, has the right and obligation to control its borders and set laws for residency and citizenship.  And no matter how decent they are, no matter their reasons, the 11 million who broke these laws should be held accountable.  - Barack Obama, 1 July 2010

 

I do have an obligation to make sure that I am following some of the rules. I can't simply ignore laws that are out there. I've got to work to make sure that they are changed.  - Barack Obama, 14 October 2010

 

If Congress has laws on the books that says that people who are here who are not documented have to be deported, then I can exercise some flexibility in terms of where we deploy our resources, to focus on people who are really causing problems as a opposed to families who are just trying to work and support themselves. But there's a limit to the discretion that I can show because I am obliged to execute the law. That's what the Executive Branch means. I can't just make the laws up by myself. So the most important thing that we can do is focus on changing the underlying laws.  - Barack Obama, 25 October 2010

 

This is something I’ve struggled with throughout my presidency. The problem is that I’m the president of the United States, I’m not the emperor of the United States. My job is to execute laws that are passed. And Congress right now has not changed what I consider to be a broken immigration system. And what that means is that we have certain obligations to enforce the laws that are in place even if we think that in many cases the results may be tragic.  - Barack Obama, 13 February 2013

 

I want everybody to understand I taught Constitutional law for 10 years.  I take the Constitution very seriously.  The biggest problems that we're facing right now have to do with George Bush trying to bring more and more power into the Executive branch and not go through Congress at all, and that's what I intend to reverse when I'm President of the United States of America.  - Barack Obama, 31 March 2008

Intentionally muddying the waters with legal obfuscation and depending on a "well, he did it first" defense is a strong indicator that the action taken is illegal and that such illegality will become patently obvious to any person who engages in even the slightest amount of research themselves.  This is the case with Obama's executive order.  Reasonable people of all parties can and should come together in defense of the rule of law.  We can argue over policy matters, but without agreement on whether the Constitution means what it says and whether our elected representatives must act within their defined powers cannot be up for debate in a functioning republic.

A President who openly fails to faithfully execute and enforce the laws passed by the Peoples' representatives in the Congress, though he may vehemently disagree with them, is no President at all, and the proper recourse provided for a President who fails to fulfill his Constitutional duties is made clear in Article II, Section 4:

The President, Vice President, and all civil officers of the United States, shall be removed from office on impeachment for, and conviction of, treason, bribery, or other high crimes and misdeameanors.

This is the appropriate course of action given the obvious and admitted abdication of Presidential duties, and any objective Congress seeking fidelity to the rule of law has no other Constitutional alternative.

Liberty or death,

The Bulletproof Patriot

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Government has proven incompetent in virtually every area of its involvement; the reasons for this are numerous, but rest primary on the lack of actual interest and involvement by the People.  Rather than taking a serious look at our futures and planning accordingly, expecting government to act in a way commensurate to the financial position of the country, we vote to elect party hacks who, when faced with the threat of an actual epidemic, choose to blame each other rather than find an actual solution.

Case in point:  The recent "Republican Cuts Kill" video [1] released by Progressive group The Agenda Project which, rather than seeking an actual solution to the risk of Ebola outbreak in Texas, instead takes this opportunity to "build a powerful, intelligent, well-connected political movement capable of identifying and advancing rational, effective ideas in the public debate and in so doing ensure our country’s enduring success [2]" by blaming the Republican party for the outbreak.  Yes, this is the childish level of social discourse we have succumbed to as a nation.


 

The president and founder of The Agenda Project, Erica Payne (who evidently was the brains behind this brilliant production and political calculation), described the video [3]:

Like rabid dogs in a butcher shop, Republicans have indiscriminately shredded everything in their path, including critical programs that could have dealt with the Ebola crisis before it reached our country. Yesterday, a health worker tested positive for the virus — now, the effects of the GOP's fanatical hatred for our government may finally be exposed.

To be fair, the Republican dirtbags are equally to blame for this mess.  But, it's still shocking to see exactly how low this country has sunken when at a time of national crisis, we're still playing the "D vs. R" blame game in an attempt to score some sort of political victory.  Is there an adult anywhere in the room?  Not at the Agenda Project.

But, this video is actually quite instructive in the sense that it gives us another insight into the root cause of our problems:  we all seem to believe that government can provide for our every want and desire, if only we would let them have the power to do so.  Second case in point:  the Federal Reserve's balance sheet [4].

Fed assets

Notice how the balance sheet ballooned from $900 billion to $2.2 trillion in 2009?  This was at the height of the housing crisis.  We're all told that the economy is "in recovery" virtually every Fed meeting and Presidential speech, yet the balance sheet has continued to explode well past the $2.2 trillion we had accumulated at the supposed "end" of the last crisis.  If we're recovered, why is the balance sheet now $4.5 trillion?

In a rational, intelligent society involved in its own self-preservation, the risk of Ebola becoming a pandemic is rather muted.  In a society dependent upon a false sense of government-provided security for all things, in which we depend on the Federal Reserve printing the money to keep the economy under the false impression of "recovery," the risk is substantially higher, because once the veil of security falls, incompetence rules the roost.

If you need any further proof of this than observing the disorganized fiasco of the CDC's "handling" of the Ebola risk, a relatively simple task for a first world nation and a center with brand new Obamacare-provided research budget of $3 billion, I sadly have nothing more to offer.  Of that freshly, taxpayer-confiscated $3 billion research budget, CDC spent all of 6% ($180 million) toward "Emerging Infections" since 2010.  Over the same period, CDC spent $517.3 billion on "Community Transformation Grants," a program which the CDC itself describes as helping Americans to "benefit from healthier environments and have access to healthier options [5]."

Most states have used the CDC grants to provide such things as, "expanding efforts in tobacco-free living, active living, and healthy eating [6]."  The program is also described as "increasing access to healthy foods by supporting local farmers and developing neighborhood grocery stores" and "promoting improvements in sidewalks and street lighting to make it safe and easy for people to walk and ride bikes."  In other words, nearly three times as much money was wasted on bike paths, street lighting, tobacco-free programs, and "healthier environments" than was spent on actual infectuous disease research.  Government at work.

As a highlight of their brazen incompetence, CDC has repeatedly reassured the nation that the Ebola virus is not "airborne."  Yet, the CDC itself also describes Ebola virus as present in both saliva and sweat, which are certainly present in the air around an infected person after a cough or sneeze.  Viruses are miniscule - they can be readily carried on water vapor in the air, similar to how influenza is carried.  Based on the contraction of Ebola virus by numerous, well-trained medical personnel following the CDC's exposure guidelines for direct contact, the bare assertion that the virus cannot be transmitted through the usual channels is absurd.  Two competent nurses in Dallas have managed to contract Ebola virus, while presumably following the CDC guidelines.

Something isn't working, and the Center for Infectious Disease Research and Policy agrees, noting the other day, "We believe there is scientific and epidemiologic [sic] evidence that Ebola virus has the potential to be transmitted via infectious aerosol particles both near and at a distance from infected patients, which means that healthcare workers should be wearing respirators, not facemasks [7]."

If the CDC was behaving as a politically correct bastion of self-preservation, rather than as the nation's primary coordinator and administrator of infectious disease research and prevention, we could reasonably expect them to continue tamping down the worries of mass exposure to Ebola virus for bystanders occupying the same public transportation as those later found positive for the disease, and that's exactly what's been happening.  Except today, the Emperor has no clothes:

Second Ebola-Infected Nurse Identified, Was Symptomatic With 99.5 Degree Fever While Flying [8]

So... if she was symptomatic while flying, based upon the previous CDC advice on the matter, she was contagious.  Which is it?  We'll never know, because the Director of the CDC endowed the nation with this bit of wisdom just today [9]:

I think there are two different parts of that equation. The first is, if you’re a member of the traveling public and are healthy, should you be worried that you might have gotten it by sitting next to someone? And the answer is no.

Second, if you are sick and you may have Ebola, should you get on a bus? And the answer to that is also no. You might become ill, you might have a problem that exposes someone around you.

Just to be clear, you can't contract Ebola by sitting next to someone on a bus.  But you shouldn't get on a bus if you have Ebola, because someone else could contract it from you.

This is the competence that $3 billion in Obamacare research funds gets you in 2014 America.

The larger problem with Ebola virus is that it's an enormous unknown.  The CDC and news media perpetually claim that Americans are at much less risk because our healthcare system and facilities are drastically better than the squalor of west Africa.  This is certainly true, but the care that can be provided at even the best hospital in the world for Ebola patients remains primitive - IV fluids and rest.  It's up to your body to develop a sufficient response to the infection and overcome it, unless you're lucky enough to get a blood transfusion from a survivor or one of the already depleted experimental drug treatments (which wouldn't be given in America anyway, since the FDA is concerned the treatment might kill you just in case you don't die from Ebola).  In other words, the only difference in America is that the bed you're resting in is clean, you have a clean bathroom to vomit in, and an IV bag dripping saline into your veins.  That's it.  This isn't like the avian influenza, which we do have a limited number of at least partially-effective drugs on hand to deal with.  With Ebola, it's a flip of a coin with 3:1 odds you'll be dead within three weeks.  In America, you'll just be in an air conditioned room when your eyes start bleeding.

The World Health Organization (WHO) noted yesterday that if Ebola virus is not contained now, the rate of new infections in west Africa could reach 10,000 per week within the next 60 days.  If we allow this to happen, we're absolutely f*****.  It only takes one person with Ebola walking into a coffee shop, thinking they have the seasonal flu, coughing a few times at the counter, paying, and leaving to start a pandemic when the disease at hand is virtually untreatable and has a fatality rate of 70% [10].

And as a side topic - something nobody is talking about.  Ebola virus is an RNA virus, the mutation rates of which are significantly higher than more traditional DNA viruses, because RNA viruses lack the ability to check their own replication and correct errors.  This is why it is much more difficult to develop vaccines for diseases such as Ebola - they mutate so rapidly that conventional vaccines are ineffective [11].  Yet we haven't heard a peep from the CDC about this risk, and nobody seems to be taking it seriously.

We're already beginning to see the early stages of what could become an economic crisis if an outbreak begins - even the Washington Post is (barely) beginning to notice [12].  Yes, it's still fortunately unlikely, but the chance is actually there this time.  If the virus spreads outside of Dallas due to, say, the infected nurse with a fever boarding a plane from Ohio to Dallas and those people heading to various regions of the country, suddenly people will begin to (quite reasonably, I might add) stay at a distance from places with large crowds.  If it continues to build, social contact will become more and more limited until people are concerned enough that they're pulling their children from school and working from home, if they can.  Would you ride public transportation if Ebola was spreading in your city at a rate of a dozen new patients a day?  How about 10,000 a day as the WHO has warned and which, according to mathematics, is actually possible thanks to the glorious nature of exponential growth?  I didn't think so.  Neither would anyone else.

Stupid comparisons and brush-offs given to this risk by claiming that more people will die of influenza this year than Ebola are asinine.  Some 20 - 60 million Americans contract influenza each season, and yet only 30,000 die as a result - a mortality rate of 0.1%.  Ebola, going strictly on the mortality rate figures provided by the CDC itself, is 700 times more mortally dangerous than the flu.  If 20 - 60 million Americans contracted Ebola, because it was allowed to propagate without being absolutely crushed by overwhelming response now, we'd be looking at literal mountains of dead, 25 million or more.

The Spanish Flu killed 5% of the world's population in 1918 [13], and the drugs we have available to treat an Ebola outbreak today are equivalent to what we had to treat the Spanish Flu then.

It's not time to panic.  But, the Ebola virus threat needs to be taken seriously by competent leaders in government today, not be handled by politically-motivated party cronies and ideological hacks interested in political correctness.  It is a real risk, not a pie-in-the-sky "doom and gloom" fantasy - it's actually here.  If we behave as competent adults, it can be stopped now before exponential growth becomes unmanageable and before the risk of mutation increases.  Unfortunately, we live in a nation which is uninterested in holding our leaders accountable (instead, we re-elect them) for their incompetence, because if we do so, we must also be held to account for our own.  We may well be about to discover once again, much more dramatically this time, that placing our faith in the facade of governmental security to handle the serious threats we face is every bit as much a mistake as it has always been.  This time, however, there might not be enough blood-free sheets to keep the facade in place.

Liberty or death,

The Bulletproof Patriot

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Bell Icon - White EdgesUnderstanding how and why the U.S. dollar currently exists as the world's "reserve currency," what significance the "petrodollar" has in global trade and within the American economy, and what happens when the reserve status finally wanes is critical to grasp as the next phase of the great reset looms ever closer.  The following article is a repost written by Chris Hamilton [1] and has been posted in various places as a solid explanation of the ins and outs of the global monetary system for the layman.  Please take the time to read it, as it covers all of the bases and having this knowledge may eventually prove invaluable when the hard decisions will need to be made.  [Hat tip:  B.A. Smith]

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By Chris Hamilton [1]

By any objective measure Reserve Currencies — particularly the US dollar — are dying. The question most analysts get when discussing the reality of the US and world economic/financial situations is, if things are so dire (references 2, 3, and 4 below), why doesn’t it feel like it? If all the facts stated about $6 trillion annual (GAAP basis) US budget deficits or US government total debt and obligations in excess of $90 trillion are true, why does the system still “function”??? Social Security recipients receive checks, the military is still paid, the garbage gets picked up, and stores still have stocked shelves. Life seems hectic but generally “normal”. So, is there a problem at all and if so, when and how will it go from theoretical to reality?  [2] [3] [4]

Commit to about 5 to 10 minutes of reading and maybe we can have a very plausible answer.

A LITTLE BACKGROUND

Following WWII, a new monetary system for international commerce and finance was implemented. This agreement known as Bretton Woods (the location in New Jersey where the conference was held) gave the expected Allied victors the spoils and represented the World as of 1945.

CHIEF FEATURES OF THE BRETTON WOODS SYSTEM

  • An obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar.
  • The ability of the IMF (created by the Bretton Woods agreement along with many other current day acronyms) to bridge temporary imbalances of payments (IMF would loan money to nations in trouble with strings attached to ideally resolve these imbalances and keep the system functioning).
  • Address the lack of cooperation among other countries and to prevent competitive devaluation of the currencies as well (avoid countries printing money to cheapen their exports and gain advantage in trading)
  • To ensure the US did not abuse it’s privilege as the world’s de-facto currency, the US dollar would be freely convertible into gold (if the US printed an excess quantity of $’s, nations accumulating too many dollars from US trade/budget deficits could convert and retire these dollar’s into gold (gold representing a relatively fixed quantity and storage of value).

WHAT ACTUALLY TOOK PLACE

  • 1946-1959 – Growth surged while debt was flat.
  • Total US government obligations grew minimally from $269 billion to $285 billion. As a result the Debt to GDP ratio fell from 113% to 54%. In other words, the US essentially ran a balanced budget adding approximately $1 billion per year to national debt over 13 years, (about a third of a % annually…all while conducting the Marshall plan, the Korean War, and huge US infrastructure projects). The US was the model of global economic stability and fiscal restraint.
  • 1960-1975 – Debt Doubled While GDP Grew by More Than Three Times.
  • US government debt almost doubled from $285 billion to $533 billion while GDP more then tripled, from $525 billion to $1.7 trillion. In 1975 the US hit a Debt/GDP post Great Depression low of 31%. But great forces were already set in motion that would lead us to today’s trouble…including the initiation of the Great Society in ‘65 and LBJ’s four years later theft of these surplus’ meant to cover future tax shortfalls for these programs…all to hide the true cost of the Vietnam war…all under the “Unified Budget”. The US had put in motion the betrayal of Bretton Woods for national political purposes and the unfunded liability monster was borne.
  • 1975-2014 – Debt Spiked 168 times, 16 times GDP Growth, 11 times Household Net Worth.
  • Total US government obligations grew from $533 billion to $89.5 trillion while GDP grew 10x’s $1.7 trillion to 17 trillion and Household net worth grew 15x’s $5.4 trillion to $82 trillion. Median household income grew 3x’s from an estimated $17k to $51k annually while Real median household income barely grew 1.13x’s, from $45k to $51k annually. Bad policy decisions of 4 decades earlier went parabolic.

Below is a chart of GDP, Household Net Worth, and Federal Treasury Debt all indexed to 1973 to visualize the growth and relationship in each over the last four decades [5].

RAMIFICATIONS

  • The US had roughly 19,000 tons of gold as of the end of WWII and peaked in excess of 20,000 tons by 1958…but by 1971, the redemptions by nations concerned over US deficit spending and printing had reduced the US gold holdings to just over 8,000 tons and a run on the remaining gold (the convertibility of the dollar to gold being the dollars foundation of the dollar) looked likely.
  • 1971 President Nixon closed the US dollars convertibility into gold…but to avoid the dollars demise, Nixon struck an agreement with Saudi Arabia (and soon after all of OPEC) that all future purchases of oil will need be conducted in US dollars (regardless the buyer or destination). In exchange, the US promised weapons and protection to these close “allies” of the US. Unfortunately, this policy rewarded some very un-democratic and very despotic leaders in the middle-East whom reaped the rewards with a tiny minority of their cohorts. These trade policies typically left the populace poor and seething with anger at the US for supporting kings and dictators who ruled in complete contradiction to US founding principles and the best interests of the citizens of these nations.
  • Ultimately, this petro-dollar agreement allowed the US to run very large trade and budget deficits and export the excess dollars worldwide (through our trade/budget deficits) that would have otherwise created significant inflation within the United States.
  • This Petro-dollar agreement compelled by force of necessity a gigantic supply of dollars to be accumulated by foreign nations worldwide.
  • In fact, the estimate is that there are more than 4x’s the supply of all money in the US ($2.8 trillion, M1**) held abroad ($12+ trillion). This includes nearly $6 trillion in foreign held US Treasury’s, $6+ trillion in formal Reserves, and the Federal Reserve estimated that 55% to 70% (and potentially in excess of 100% of M1) of all US currency was held abroad and increasing as of 2012 [6]. As an aside, 80% of all US currency is in $100 bills and the vast majority of these reside overseas, but foreigners also hold lesser amounts in $50’s and $20’s. These formal and informal dollar and US Treasury bond reserves held by foreign nations allow trade in oil and other de-facto dollar denominated commodities (legal and illicit).

**M1 = the supply of money measured by all physical money, checking accounts, and liquid cash like money within the US economy

BRETTON WOODS, THE DOLLAR, & THE “BRICS”

But global power has shifted a bit since 1945 and the US has balked on its Bretton Woods pledges, the Middle-East teams with “radicals” and “revolutionaries”, and now the BRICS (Brazil, Russia, India, China, South Africa) are on a path to de-emphasize dollar usage in favor of localized, decentralized currencies in trade. The US leans on the privilege of the dollar (established @ Bretton Woods) to maintain its lifestyle via massive $6 trillion annual (GAAP basis) deficit spending…but the dollars global dominance wanes more every day while America increasingly leans on this rickety crutch.

Today, the BRICS account for about 25 per cent of global GDP, 35 per cent of total international reserves (with China at over $4 trillion), 25 per cent of total land area and around 42 per cent of the world’s population…and BRICS affiliated nations increase these numbers significantly more.

However, despite their economic weight, the BRICS’ representation, voting power, participation in management and staff in the Bretton Woods institutions (International Monetary Fund, World Bank, World Trade Organization, and International Finance Corporation) and others like the Bank of International Settlement, displays a major deficit of ‘voice’ and influence.

As of July, the BRICS nations formally agreed on a BRICS bank funded w/ $100 billion to rival the influence and power of the IMF. This money is to be lent to nations in need, as an alternative to the IMF (typically with US directed strings attached). China, Brazil, Russia, and so many more are moving away from clearing their trade in dollars and instead utilizing the Yuan, the Real, the Ruble, etc. Please note that Russia and Saudi Arabia are now the largest exporters of oil – and at least Russia is moving rapidly to settle in anything but the dollar…and the troubles in Saudi Arabia, Iran, Iraq, Libya, Syria, Ukraine, etc. are all symptomatic of this conflict for which currency(s) will be used to settle trade.

China is organizing itself and its trade partners in at least 24 separate agreements to transact in the Yuan rather than the dollar. As of 2009, less than 1% of China’s global trade was settled in Yuan but by mid-2013, 17% of Chinese trade was being cleared in Yuan…almost entirely at the expense of the dollar. And the trend and structure to allow far more has only accelerated throughout the BRICS.

ENOUGH – WHAT’S THE ANSWER ALREADY?

It should be very clear where this trend is going and the implications to the United States – the perennially optimistic Congressional Budget Office and like prognosticators have acknowledged the US will soon need to run even larger budget deficits in excess of $1 trillion (and that’s assuming all goes well) due to large debt loads, growing social programs, and large unfunded liabilities. Of course the situation will only get worse because:

  • We consistently spend more cash than we take in as revenue but due to Cash-Based accounting the true nature of the deficit spending is concealed.
  • We continue adding new participants to existing entitlement programs increasing present and future unfunded liabilities…while the tax payers per social program recipient is expected to fall from 4 to 2 per recipient within a decade.
  • We add new entitlement programs (i.e. the Prescription Drug Act in 2003 and the Affordable Care Act in 2010) absent funding therefore increasing our future liabilities.
  • We incur interest expense each year on our Federal Obligation; real interest on our debt held by the public (included in item (a) above), virtual interest on our intra-governmental borrowings, and virtual interest on the present value of our unfunded liabilities).

All this will necessitate the world accept and utilize ever more dollars. HOWEVER, the existing dollar-centric system is not in the favor of most of the new powers of the world…and they are rapidly moving to reduce their dependence on the dollar…just as the US will need foreigners to embrace it more than ever. Rock meet hard place.

If $12+ trillion (plus the continuing growth in available dollars) is no longer needed as reserves for international settlement – where does that money go? Well, a relatively small reduction in dollar trade replaced by Yuan, Ruble, Real, etc. (say 5%-10% over a period, say 2014) would free up $600 billion to $1.2 trillion to move where dollars are still readily accepted…the US of A. Typically, these dollars would be levered up (say conservatively 5x’s)…and voila, $3 trillion to $6 trillion of purchasing power is introduced to America in 2014. Things like stocks, bonds, and Real Estate would be very positively pushed higher and higher (rents, insurance, etc. would also be unwelcomingly pushed higher as wages remain flat due to structural unemployment issues…in other words, asset owners are rewarded, wage earners are punished). The Federal Reserve’s Z1 Household Survey for 2014 would be similar to 2013’s 11+% increase in US assets by $9.5 trillion ($84.5 trillion (’12) to $94 trillion (’13))…all while household liabilities (mortgages, all loans, etc.) barely increased ($140 billion) and wages remained flat.

But let’s say in 2015 the pace of BRICS non-dollar trade continues expanding and international settlement in non-dollars grows by 10% to 20%…and 10% to 20% of dollars are no longer needed as reserves to buy oil, wheat, finance trade, etc. etc. This is about $1.2 trillion to $2.4 trillion formerly held reserves cleared to go looking for their home…the US. $1.2 trillion to $2.4 trillion levered again very conservatively @ 5x’s (or 20% cash down) is $6 trillion to $12 trillion in “hot” money looking for assets. With just a fraction of all the inflation the US exported over the ’71-present period coming home…this creates what amounts to a hyper-monetary dollar overdose in America. Foreign holders of US money chasing assets in America where dollars are readily accepted. And of course, once these things start, they create a momentum of their own and eventually a likely counter by the administration to freeze out these dollars and the likely panic this ensues both domestically and internationally.

IMPLICATIONS

The minority of Americans with assets see their value rise but the majority will get much poorer…those dependent on wages and social programs (generally younger, with families, retirees living on SS, etc.) absent assets are made dramatically poorer (wages stagnant while costs rise…rent, food, insurance, school, fuel, etc.). The economy suffers as consumers lose ground and inequality runs rampant. How it plays out from there is impossible to know as supply and demand implications are met with 2nd derivative government reactions and on and on and on. Beyond that, it’s all just plain guesses with little historical precedence to guide us.

Of course there are many steps and actions that could be taken to acknowledge our challenges and collectively address them through shared sacrifice and a long term restructuring of our economy. But the 4+ decade trend of fraudulent accounting, financialization, and, well, like a hundred other trends that need be reversed seem unlikely to be voluntarily addressed. Prepare for the solution to be involuntarily applied in a time and manner not of our choosing.

See more at: http://charlesbiderman.com/2014/08/14/how-a-reserve-currency-such-as-the-us-dollar-diesslowly-at-first-then-all-at-once/#sthash.yvvNPbtO.dpuf

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Take this knowledge to heart and pass it on.

Liberty or death,

The Bulletproof Patriot

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Sons of the revolution smallIt's been a while since I've bothered posting anything on TBP, and while the absence is explainable by any number of perfectly valid reasons, mostly it's because I've been watching Americans confidently blow off the most recent IRS scandal (where the IRS "lost" Lois Lerner's emails despite having both internal archiving and a contract with an external email archiving company [1]), the most recent VA scandal (which may have killed more than a thousand veterans [2]), the most recent immigration scandal at the border (which is looking more and more to have been ginned up to conveniently press the 'immigration reform' issue [3]), and the national party primary elections (in which the Republican party paid to explicitly attack "TEA Party" candidates and recruit registered Democrats to vote in the Republican primary [4]).

I haven't been around nearly as long as some, but I pay attention far more than most, and even I cannot recall a time in history more rife with scandals, cover ups, outright lies, and acceptance of widespread, deplorable behavior from our elected officials in both parties.  And nobody seems to mind.

Throw on top of all this today's story that the EPA office in Denver has apparently circulated a memo asking employees to stop shitting on the floor [5]:

Management for Region 8 in Denver, Colo., wrote an email earlier this year to all staff in the area pleading with them to stop inappropriate bathroom behavior, including defecating in the hallway.

In the email, obtained by Government Executive, Deputy Regional Administrator Howard Cantor mentioned 'several incidents' in the building, including clogging the toilets with paper towels and 'an individual placing feces in the hallway' outside the restroom.

Rather than simply determining who was responsible for this behavior and immediately firing them (as any private company would have done months ago), the EPA instead "consulted" with a "workplace violence national expert" who informed them that yes, shitting on the floor is a health hazard.

If the Environmental Protection Agency cannot determine on their own WHETHER OR NOT SHITTING ON THE F***ING FLOOR IS A HEALTH HAZARD, WHAT EXACTLY IS THEIR PURPOSE?

Confounded by what to make of this occurrence, EPA management 'consulted' with workplace violence 'national expert' John Nicoletti, who said that hallway feces is in fact a health and safety risk. He added the behavior was 'very dangerous' and the individuals responsible would 'probably escalate' their actions.

And yet, there seem to be no heads rolling.  There have been no mass firings of incompetents.  No prosecutions.  Exactly as is the case at the IRS.  And the VA.  And every other scandal-plagued department under the "leadership" of Barack Obama.  Failure is coddled, propped up, and eventually becomes the only option.  When you repeatedly fail to demand excellence (or even the slightest bit of success), this result is inevitable.

Now, we find out that the Bureau of Economic Analysis has released their third and final calculation of Q1 GDP, and wow is it great [6].  The first estimate pegged the U.S. at a decline of -0.1%, officially in recession territory (but it was due to "weather," of course).  The second estimate pegged us at -1.0%, well within recession territory (but it was also due to "weather," obviously).  The third estimate has Q1 GDP contracting at -2.9%, deeply within recession territory.

Nobody has been able to get away with blaming weather for the third estimate, since even extraordinarily bad weather is typically responsible for a slump in GDP - not an outright collapse of it.  In fact, the GDP print is so bad that the Obama Administration is today crediting a supposed decline in healthcare spending due to the success of Obamacare for the -2.9% decline.  Yes, seriously [7].  Unfortunately, the BEA did not mention any "success" of Obamacare in their report [6].  Even Obama's own agencies aren't buying the lies.

All of these things taken collectively into account, I have come to the disheartening conclusion that the American people simply do not give two shits about their future or taking responsibility for their own lives.  We are willingly becoming debt serfs, something F.A. Hayek addressed quite directly seven decades ago [7].  We are handing over liberties left and right, inviting government in to nanny us because we are too stupid and lazy to take care of ourselves.

Therein lies the reason that I have always doubted that the American People would pull themselves out of this dive.  It simply takes too much work to keep up with everything going on around us.  We can't be bothered to elect responsible, intelligent, and hard working people, so we elect Thad Cochran to an 80th term in the Senate and then encourage this sort of power-hungry electioneering for future candidates [8].  We can't be bothered to involve ourselves in the schooling of our children, so we accept Common Core which, as an engineer with a very thorough mathematics background, I can assure you will destroy mathematics for the next generation and take along with it success in science and technology.

Literally all signs are pointing south for this country, with an enormous amount of warning lights on the economy beginning to flash so brightly that even the talking heads are starting to notice.

When the Titanic sank, a third of the passengers were saved by life boats.  They had somewhere to escape.  We don't.

So get ready to go down with the ship, because nowhere near enough Americans are concerned with plugging up the gaping holes in the bow, instead contented to lie drunk on the upper deck, slowly and stupidly succumbing to their own demise to the upbeat sounds of the Titanic's string quartet.

I hope you enjoy the taste of salt water.

Liberty or death,

The Bulletproof Patriot

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