Saturday, August 25, 2012

Gold bugs in Tampa & you thought palmetto bugs were bad

One plank of the Republican platform to be presented in Tampa is a demand for a return to the gold standard. This little bit of crazy is apparently intended to placate the Libertarian delegates that support Ron Paul. I've heard that they actually have enough votes to keep Romney from being nominated. This would explain them moving the official nomination from Wednesday to Monday. You know something is up because the habitual liars didn't use the excuse of the Wrath of God bearing down on Tampa for the sudden change, but claim it was always the schedule. (it has always been done this way, and we've always been at war with East Vagina)

Some history on gold. The US has issued paper money since the Revolution. For a time prior to the Civil War paper money was backed either with gold or silver, although private banks issued their own paper money up until the FDIC was created in 1933. Lincoln issued Green Backs (not backed by gold) to bypass the bankers whom he considered a worse enemy than the rebels.

FDR banned the private holding of gold by US citizens without a permit, except for US coins, but the banks were required to turn in any gold coins they acquired. Most of those gold coins still exist, they didn't melt them down (don't fall for the ads that claim they're rare). The US used them to pay foreign claims for gold, so they mostly sit in various government vaults overseas.

The Bretton Woods Treaty of 1944 established a gold standard for the USD in foreign exchange. Nixon took us off that standard in 1972 since he had run up a considerable trade imbalance during the Vietnam War. With peak oil about to hit US production, the fear was that there would be a run on US gold stocks by large USD holders anticipating runaway oil prices. It's my recollection that Nixon signed the order to head off a British demand for gold literally the next day.

The total value of all gold in existence at today's price is about $10 trillion. This is based on a price of about $61 million a ton, and the US has 8133.5 tons or less than $500 billion worth. You can see the basic problem with a gold standard, and why the gold bugs like to keep talking up the idea of going to a gold standard. There is a bit over a trillion paper dollars in circulation currently. That would more than double the price of gold right there. However a tiny fraction of commerce is done in paper money. What do you do when somebody who has $2 trillion in digital money wants to get paid in gold? Gold bugs like to talk about gold being $8000/ounce. I think the real number would simply be too ridiculous for them to say out loud.

Fiat currency is not what you use to buy a Chrysler. It's simply paper money. Anymore it's largely issued by central banks as debt loaned to banks owned by rich guys who in turn loan to us peasants. The Federal Reserve is not Federal and has no reserves. It's just rich bankers making themselves richer. It's the only thing that I agree with Ron Paul about. The Treasury Dept should simply take it over and run it transparently. In fact all banks should be credit unions, state run (like North Dakota) or Federal for the really, really big stuff. Regulating them doesn't work, they still make too much money and eventually concentrate too much power.

The Fed has also been issuing money by buying debt on the market known a Quantitative Easing (QE1 and QE2). According to the recent Fed meeting minutes, it seem likely they will do another round of this soon, probably by buying securitized home mortgage debt in September. This will set the Republicans hair on fire, with them screaming about the Fed fixing the election for Obama. As if they could beat him without massive election fraud and voter suppression. Okay so maybe they can beat Obama, since they are doing those things. Still, it's about as likely as a return to the Gold Standard.

By the way, the reference to "Full Faith and Credit" in the Constitution doesn't refer to money or government debt, but to a requirement that the states to honor each others laws, contracts, marriages, title deeds and such.

Thursday, August 23, 2012

Living with the opposite of reality

The geniuses of the Republican National Convention have installed a huge banner across the front of the Tampa Convention Center proclaiming "We Built That". They unconsciously summarized the Obama speech that they are trying to mis-characterize. Even though the convention center sports a corporate sponsor's name, it really was built by government with union labor. The "branding" of public buildings with corporate names is really a subtle propaganda ploy to make people think that everything good is provided to them by their benevolent corporate overlords. Americans have been conditioned to believe things that come from corporations are free, and that government is expensive. This is the opposite of reality of course.

The Middle Class shrank over the past decade for the first time since the last Republican Great Depression. There are now far fewer in this demographic and they've had a significant drop in income. This doesn't even take into account the massive price increases forced onto the middle class to pay for things they used to take for granted. Healthcare, college, sales taxes, local property taxes and government fees have been piled on to the middle class make up for not taxing the rich or the corporations that they own.

These shifts also brought along expensive inefficiencies that are inherit to operating things this way. As well as a big slice that is skimmed off the top for "privatization" that is a far bigger burden than is apparent at first blush. All designed not just to make more money for the rich, but to take it away from the middle class. If you can't carry off the loot, burn it. These are concepts were put forward in the economic "modernization" papers produced by the right wing think tanks of the 1950s. They've been applied with a meat ax in third world countries under auspices of the IMF and World Bank.

The approach has been more subtle here as the middle class has been known to rebel. They're going all in this time, the choice is stark. Sitting out the election because the Democrats aren't "left" enough to satisfy self-appointed liberal gate keepers is not acceptable. It literally is now or never, but don't kid yourself that that the struggle is over because we win a single election. It's is going to take hard work to re-educate and de-program the majority of Americans, but it can be done. Reality is out there for the grasping.  

Wednesday, August 22, 2012

The Hand of God is the new normal

News from the Weather Bureau: Looks like God is going to smite Tampa for allowing evil to hold its convention there. The Mississippi River is getting so low from the ongoing drought that barge traffic is regularly halted for dredging despite light loading the barges, and may halt completely. I'm not sure what they're hauling in these barges, they shouldn't be exporting grain, but they probably are.

Wind mill manufactures are starting massive layoffs in response to the failure of Congress to renew tax credit for utilities to buy them. Romney has declared it's his policy to end wind power, in the guise of fairness to the coal industry. You see the problem with wind is that all of the money has to be spent up front to build the equipment, whereas a coal plant is marginally cheaper. Of course wind is free and doesn't pollute. So wind power is far cheaper over the long run even though it requires considerably more people to operate windmills. (Job creating, huh.) Never mind the global warming that makes more and bigger hurricanes. The Act of God unfolding in Tampa may demonstrate whether Obama has adequately fixed FEMA in order to respond to the disasters that are going to be the new normal in the Republican century.

Sunday, August 19, 2012

Alas, poor Freddie and Fannie

The Treasury Department has decided to go full steam ahead with the elimination of the government backed home mortgage holding companies. The bankers love the idea since in their absence they can securit-ize all the home loans, and we all know how well that works out. Hopefully this is just election year posturing to counter claims that Obama is a socialist, but it's a very faint hope.

In a rational world the government would hold all the surplus mortgages (ones not held by Credit Unions) at cost instead of letting rich people take a big slice off the top of everything. Rightwingers just have to have their "capitalism", no matter what the cost to them personally. But hey, someday they'll win the lottery and be rich themselves.