Rep. Jane Harman exchanged favors for power-aided Israeli lobbyists accused of espionage, top government investigator says that bank bailouts are open to fraud, Obama tells Cabinet to cut spending by 0.02%, U.S. Treasury estimates it has lost $900 million of taxpayer money from holding $301 billion in Citigroup junk assets, Russian tariffs take toll on U.S. companies, and could the U.S. be headed for a Russian-style economic collapse circa 1998?

Alternative Investment Idea: With real estate prices still falling, stocks whipping around like crazy, and even U.S. Treasury bonds becoming increasingly risky, it pays to investigate alternative forms of investing. One method I use regularly is selling market insurance.

Every investment involves risk and everyone has their own objectives. Some people want low risk and are OK with low returns. Iron Condor trading strategies turn these people into your clients.

Learn how to use options to start your own insurance business, having the market pay you to insure its risks. Get paid regular premiums every month! This Iron Condor trading system will teach you how to become your own insurance company, managing the market risks you assume. Don’t go into this blindly! Learn how the experts use options to generate steady income.

Recommended Reading: The Fed Has Surrendered To Inflation.

Congresswoman Exchanged Favors For Power, Aiding Lobbyists. Rep. Jane Harman (D-CA) was overhead by the National Security Agency (NSA) agreeing to seek lenient treatment from the Bush administration for two pro-Israel lobbyists who were under investigation for espionage. Rep. Harman is the ranking Democrat on the House Intelligence Committee. In her ambition to become chairwoman of the committee she agreed to intercede in exchange for help in persuading party leaders to give her the powerful post.

Bank Bailout Programs Open To Fraud, Says Top Government Investigator. In a report issued by Neil Barofsky, the special investigator general assigned to monitor the bailout program, he warned that the $700 billion Troubled Asset Relief Program (TARP) has evolved into a $3 trillion effort of “unprecedented scope, scale and complexity” and comes with too little oversight and too little information about what companies are doing with the money they are receiving. Barofsky was especially critical of the Obama administration’s plan to buy $100 billion of questionable assets from banks. The contentious plan calls for multiplying the total volume of questionable asset purchases to $1 trillion by allowing private investors to borrow money at low rates from the Federal Reserve.

Obama Tells Cabinet To Cut Federal Spending by $100 million. In a Cabinet meeting Monday morning President Obama called on his department chiefs to immediately cut $100 million from their budgets. This cut comes from a federal budget of $3.6 trillion, with a $1.2 trillion 2009 deficit. The Congressional Budget Office estimates Obama’s budget will bring $9.3 trillion in total deficits over the next decade, if adopted. Critics call this exercise a farce since it represents roughly 0.02% of the total budget.

U.S. Treasury Estimates $900 Million In Losses On Citigroup Assets, So Far. The U.S. Treasury estimated $900 million in losses as of the end of last year on $301 billion in Citigroup assets being guaranteed by the government.

Lessons From The Financial Crisis. This site has long praised financial expert and economist Peter Schiff for his ability to foresee the housing bubble, its collapse, and the resulting financial crisis. In Crash Proof: How to Profit From the Coming Economic Collapse, Schiff explains why the economy was thrown so far out of balance and what can be done to protect your portfolio going forward.

Watch this video showing how Schiff’s predictions have come true with astounding accuracy, but he says there is much more to come!

Russian Tariffs Hurt U.S. Companies, Heralds Trade War. Russian Prime Minister Vladimir Putin’s tariffs are taking a toll on U.S. companies. In particular, Deere & Co. and Caterpillar Inc. have experienced a decrease in exports of 25% to Russia, thus far. Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenues hurt the nation’s economy.

Could the U.S. Face A Russia-Style Meltdown?

Simon Johnson, MIT professor, says financial industry is “too big to exist,” and should be dismattled going forward. Banks should not be above the laws of Capitalism, in which bad business models fail.

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You just finished reading Freedom Under Fire, Apr. 21st, 2009 on The Freedom Factory. Please consider leaving a comment!

President Obama pushes ratification of gun trafficking treaty, housing market continues to crash-new home starts down 11% and foreclosures jumping 17%, Senate to call panel to investigate illegal NSA domestic spying, Obama unveils plan to spend another $13 billion and build high speed trains (it’s a down payment), Democrats attack Texas Gov. Perry over secession comments at tea party, Freedom Watch sues dictator Hugo Chavez for acts of terrorism and human rights violations, and a bit of good news: mystery donors give $45 million to universities…

Obama Pushes Ratification Of Gun Trafficking Treaty. President Obama is pressing the Senate to ratify an arms treaty intended to curb the flow of guns and ammunition to drug cartels. The treaty seeks to establish a system for import, export, and transfer of firearms, as well as bolstering cooperation between law enforcement agencies investigating illegal trafficking.

Housing Market Continues to Crash. A drop in new home construction and an increase in the foreclosure rate both signal that housing has far to go before stabilizing. New home starts fell 10.8% and the number of foreclosure notices jumped 17% in just the last month.

Alternative Investment Idea: With real estate prices still falling, stocks whipping around like crazy, and even U.S. Treasury bonds becoming increasingly risky, it pays to investigate alternative forms of investing. One method I use regularly is selling market insurance.

Every investment involves risk and everyone has their own objectives. Some people want low risk and are OK with low returns. Iron Condor trading strategies turn these people into your clients.

Learn how to use options to start your own insurance business, having the market pay you to insure its risks. Get paid regular premiums every month! This Iron Condor trading system will teach you how to become your own insurance company, managing the market risks you assume. Don’t go into this blindly! Learn how the experts use options to generate steady income.

Sen. Feinstein Calls For Panel To Investigate Illegal NSA Wiretaps. Sen. Diane Feinstein (D-CA), who heads the Senate intelligence committee, said she will hold a hearing to examine the National Security Agency’s (NSAs) interception of domestic communications. This comes after new Justice Department reports that wiretapping went beyond what Congress had authorized. The NSA has been systemically collecting e-mail and telephone call records on Americans without having first obtained court warrants. Sen. Feinstein says the hearing will take place within a month.

Obama Unveils Plan To Build High-Speed Trains. President Obama unveiled an ambitious new plan for developing high-speed passenger rail lines in at least 10 regions. The American Recovery and Reinvestment Act-the $787 billion stimulus plan-allots $8 billion for this project. An additional $1 billion will be requested in the President’s budget over the next five years. President Obama states that these funds will “jump start” the projects, but it is not clear how much this will all cost when complete.

Obama’s at it again-spending tens of billions on investments he thinks will make America better off in the long run. Whether or not these government “investments” pay off, trillions of dollars of resource are being transferred throughout the economy. Read my book, Obamanomics: How To Invest Over the Next Administration to learn how to make government policy work for you!

Democrats Attack Gov. Perry Over Secession Comments. Democrats are furious over comments made by Texas governor Rick Perry following a Tea Party in Austin on Wednesday. Perry suggested that at some point Texans might get so fed up that they would want to leave the union. Rep. Jim Dunnam (D-TX) said that some people associate talk of secession with racial division and the Civil War. “Talk of secession is an attack on our country. It can be nothing else. It is the ultimate anti-American statement.” House Democrats are proposing a resolution expressing “complete and total disagreement with any fringe element advocating the secession of Texas or any other state from our one and indivisible Union.”

U.S. Group Sues Venezuelan Dicatator Hugo Chavez. Freedom Watch, a nonprofit group is suing Venezuelan President Hugo Chavez over acts of terrorism and human rights violations. This includes conspiring with Columbian guerrillas, Al Qaeda, and the Taliban.

Mystery Donors Give $45 Million to Universities. During the past few weeks at least eight universities have received gifts totaling nearly $45 million. The schools had to promise not to try to find out the giver’s identity. It is not clear whether the gifts came from an individual or organization.

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There are two colossal events occurring in the world right now: Private credit and wealth is being destroyed, and in its place a good deal of money is being created. Much is taking place behind the scenes, driving this epic showdown between natural forces pushing for a return to sustainable equilibrium pitted against the full arsenal of man’s capability to resist.  Just as the fog of war can obscure a battlefield until the end, the outcome of this struggle is far from clear. Nonetheless, there are some telling events to note, signs for which to watch, and consequences to mull.

This struggle boils down to whether we will have inflation or deflation. If more credit is destroyed than money is created, prices fall monetarily and we have deflation. If the converse is true, prices rise due to more money chasing either fixed or decreased real economic output. Consider the variables in the general money equation:

“M” is the total money supply, “V” is the velocity of money, “P” is the general price level, and “Q” is total expenditures, or real economic output.

Rearranging, we find that P = (M * V) / Q. Isolating this relationship, we can make some observations, as I’ve already done in Decomposing the Inflation Argument: In the U.S., alone,

1) Money supply (M) has increased by at least $13 trillion in the last 16 months,

2) Economic output (Q), as measured by annualized GDP, is falling at a 6.8% rate,

3) Government is doing everything in its power to boost velocity (V): TARP ($700 billion), mortgage bailouts ($50 billion), $1.1 trillion hedge fund subsidy to buy consumer-backed debt, $787 billion for the American Recovery and Reinvestment Act, and this is only 100 days into the Obama Administration.

The question remains as to whether velocity can be revived sufficiently to prevent deflation? For that we need to have some idea of how much wealth has been lost in the Great Unwinding. The NY Times reported that U.S. household wealth dropped $11.1 trillion in 2008.

An excellent analysis by the Hoisington Investment Management Company, published in their Q4 Review and Outlook, shows that in the world’s three more recent debt deflations (dating back to the 1870′s) “the low in long-term interest rates occurred about 15 years after the end of the debt mania.” Translating this to today’s scenario, Hoisington postulates we could be caught in a period of declining long-term interest rates thru the early 2020′s.

On the other side of the argument, we have two significant observations:

1) The Congressional Budget Office calculates Obama’s budget will take us at least $9.3 trillion further into debt over the next decade,

2) Our largest creditors, China and Japan, are daily losing capability to lend us money as their exports shrink. China’s economic growth is cooling to the lowest point in 10 years, and they have actually become net sellers of U.S. debt in January and February. Japan’s current account is expected to turn negative for the first time since WWII later this year.

What this means is that at a time when America is begging to borrow the most it has ever borrowed, the rest of the world is least capable of providing those funds. There are only two eventualities to solve this problem: The Federal Reserve creates money to “buy” Treasury securities, or interest rates rise sufficiently to attract private capital. The net effect will be inflationary.

The consequences of this epic struggle threaten to change our society regardless of how it unfolds. Private capital is being destroyed and replaced with political capital. Government has long ceased to operate within the constraints of the Constitution and is daily expanding its own power. The Founders never envisioned a central authority with the power to create money, socially engineer inflation or deflation, or bail out auto manufacturers, mortgagees, or banks.

Every dollar borrowed and spent places an implicit tax obligation on future private earnings-this burden is growing seemingly without limit. This represents an unprecedented transfer of wealth from taxpayers to bankers and other political beneficiaries. Unemployment is artificially kept in check by expansion of government bureaucracies. Should the government succeed in sparking inflation, it could end up overshooting targets and robbing prudent savers of their life’s work.

We are playing games with our nation’s future and changing our political structure. All this to alter reality and prevent economic correction to sustainable equilibrium. As Al Pacino said in Devil’s Advocate, “Vanity is my favorite sin.”

—–SPECIAL OFFERS—–

The Federal Reserve is creating tens of trillions of new dollars, debasing our currency, and silently taxing us all through inflation. With tens of trillions in federal budget deficits on the horizon there is nowhere for the US dollar to go, but down.

Refuse to be a victim of this flawed financial system, buy gold and silver NOW!

With hyperinflation and risk of economic disaster increasing with each dollar Congress recklessly spends, it pays to be prepared: Consider stocking up on Emergency Supplies:

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New Zealand Prime Minister John Key speaks a strange language. It’s English, all right, even with an accent, but he is one of the only world leaders who is speaking of relaxing regulations, cutting taxes, spending within budget, and focusing on making his country more productive.

Rather than jumping on the tax, borrow, spend, print, populist bandwagon with nearly every other world leader, John Key’s solution to the tough times is to “use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with.”

Key’s idea is to grow the country out of recession by improving productivity, not simply catering to populist calls for wealth redistribution, stifling regulation, and growth-inhibiting class warfare taxes. He calls attempts to use debt and money printing to “prop up growth” risky, saying that saddling future generations with debt could be counterproductive. He is one of the only politicians who states “There is actually a limit to what governments can do.”

At a time when governments are growing by leaps and bounds, and everyone seems convinced that Big Brother holds the keys to economic prosperity, it is refreshing to see a world leader (actually an ex-currency trader) embrace sound economic principals.

Key admits that New Zealand will not pull the world out of recession; it’s too bad other leaders lack such humility!

Here’s a link to the Wall Street Journal interview with Key.

—–SPECIAL OFFER—–

The Federal Reserve is creating tens of trillions of new dollars, debasing our currency, and silently taxing us all through inflation. With tens of trillions in federal budget deficits on the horizon there is nowhere for the US dollar to go, but down.

Refuse to be a victim of this flawed financial system, buy gold and silver NOW!

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Government detention camps cover up deaths-does America have a human rights problem? Congress passes unprecedented $3.6 trillion budget with $1.2 trillion deficit, official unemployment rates his 8.5%-some economists claiming they are really upwards of 20%, government mortgage giants Fannie and Freddie to pay $159 billion in new bonuses, Obama calls end to ‘Pax Americana’, world leaders pledge $1.1 trillion to IMF, Russia refuses to remove troops from Georgia, NY protesters call for government to ‘Bail out the People’, Hugo Chavez declares that ‘Capitalism must end,’ and Treasuries drop with announcement of next week’s $59 billion note issue and Goldman Sachs estimate that government will need to borrow another $3.25 trillion this year…

Immigrant Deaths Buried In Bureaucracy In Government Camps. A patchwork of over 500 camps, detention centers, and prisons have sprung up across the U.S. that currently hold more than 500,000 people. The stated purpose of the camps is to detain immigrants in process of deportation, but critics claim that secrecy and lack of legal accountability shield the system from independent oversight. One recent case, the death of a Pakistani New Yorker, highlights the insidious nature of the system. Ahmad Tanveer, 43, died on Sept. 9th, 2005 from untreated chest pains while in custody in New Jersey. Inquiries into the death were rebuffed by jail officials, and complaints to the Department of Homeland Security were forgotten. Even when Congressional and media pressure on Immigration and Customs Enforcement led government to release a list of those who had died in custody, the man’s name was not included. This raises serious concerns about human rights violations within our own borders, and the growing power and lack of accountability of the governing class.

Congress Passes Budget Plans, No Republican Support. In a spirit of anything but bipartisanship, Congressional Democrats approved an ‘Obama-friendly’ budget that calls for $3.6 trillion in spending for 2009, with a $1.2 trillion deficit, the largest in history. Not a single Republican supported in either the House or Senate. The bill points the way forward for major legislation later this year on health care, energy, and education, all priorities outlined by President Obama. Blaming the country’s problems on the Bush administration, Senate majority leader Harry Reid justified the unprecedented spending by saying “It’s going to take a lot of work to clean up the mess we inherited, and passing this budget is a critical step in the right direction.” Ironically, the inherited ‘mess’ of which Sen. Reid speaks involved too much deficit spending by Republicans in the past.

U.S. Unemployment Rate Hits 8.5%. The U.S. economy shed another 663,000 jobs in March, bringing the tally up to 5.1 million jobs lost since the start of the recession. The Bureau of Labor Statistics (BLS) reported that unemployment has risen to 8.5% from 8.1% in February, its highest levels in a quarter-century. There is controversy over the accuracy of government unemployment statistics, particularly with the method in which they are calculated. Alternative economic analysis suggests real unemployment rates may be as high as 20%:

Fannie and Freddie To Pay $159 Million In Bonuses. Just a few weeks after retention bonuses at American International Group (AIG) became a national scandal, Fannie Mae and Freddie Mac, the two government-owned mortgage giants, released plans to pay an additional $159 million in bonuses to retain key employees. This comes on top of nearly $51 million already paid out last year for the same purpose. The bonus plans were disclosed to the Senate by the Office of Federal Housing Enterprise Oversight. This is a slap in the face to private businesses that are being harassed by government for fulfilling contractual employment obligations.

Obama Calls End to American Empire. Speaking at the G20 Summit in London this week, President Obama called for an end of the ‘Pax Americana’ and heralded a Global New Deal. The chief objectives of the President were come to an agreement on more global financial regulations, and to gain commitments by national governments for concerted stimulus spending.

World Leaders Pledge $1.1 Trillion To IMF. Concluding the Group of 20 (G20) Summit in London this week, world leaders announced a staggering $1.1 trillion funding commitment-$750 billion in funding, and $250 billion in trade credits-to the International Monetary Fund (IMF) to assuage damage of the economic downturn. Speaking without Congressional approval, the President pledged $100 billion from the U.S. It is not yet clear exactly how the IMF will use these funds. NYU economist and author, William Easterly, is an outspoken critic of international aid organizations like the IMF, pointing out that they are costly, bureaucratic, wasteful, and ineffective. Here’s a quick article Easterly wrote called “Why Doesn’t Aid Work?”

Two books Easterly wrote on the subject:

In The White Man’s Burden: Why The West’s Efforts To Aid The Rest Have Done So Much Ill And So Little Good Easterly contends that the West has failed, and continues to fail, to enact its ill-formed, Utopian aid plans because, like the colonialists of old, it assumes it knows what is best for everyone.

Existing aid strategies, Easterly argues, provide neither accountability nor feedback. Without accountability for failures, he says, broken economic systems are never fixed. And without feedback from the poor who need the aid, no one in charge really understands exactly what trouble spots need fixing.

Economists have long tried to figure out how poor countries could attain higher living standards. Attempted remedies have included providing foreign aid, investing in machines, fostering education, controlling population growth, and making aid loans as well as forgiving those loans on condition of reforms. None of these solutions has delivered as promised. The problem is not the failure of economics, William Easterly argues, but the failure to apply economic principles to practical policy work. In The Elusive Quest For Growth: Economists’ Adventures And Misadventures In The Tropics William Easterly shows how these solutions all violate the basic principle of economics, that people–private individuals and businesses, government officials, even aid donors–respond to incentives. Easterly first discusses the importance of growth. He then analyzes the development solutions that have failed. Finally, he suggests alternative approaches to the problem.

Russia Defies Intentional Calls For Troop Withdrawals From Georgia. Nearly eight months after the war between Russia and Georgia, Russian troops continue to hold large swaths of Georgian territory they previously committed to cede. Under conditions of the cease-fire, the militaries of both sides were to return to positions they held before the start of the conflict, which erupted on Aug. 7th, 2008.

New York Protesters Want Government to ‘Bail Out The People.” Protesters asking the government to ‘bail out the People’ are holding a rally on Wall Street today. They say they should get some of the billions of dollars being spent to save big businesses. They plan to repeat the protest on Saturday with chanting and drumming.

Venezuela’s Chavez Says ‘Capitalism Must End.’ Venezeulan President Hugo Chavez on Friday criticized the G20 summit, saying that Capitalism is in crisis and must end. He took aim at pledges of more than $1.1 trillion for lending to struggling countries, calling it “the same medicine that’s killing the patient-a trillion dollars…more money for a bottomless pit.”

Treasuries Drop As Traders Focus On Record Debt Supply. Treasuries fell on Friday as the U.S. Treasury prepared to sell an estimated $59 billion in notes and inflation-indexed securities next week, part of a record amount of debt the government is likely to issue this year. Analysts estimate that the U.S. will need to borrow $3.25 trillion for the 2009 fiscal year ending Sept. 30th.

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In the name of national security, the Obama administration is secretly drafting an international treaty that will give corporations and government sweeping powers to seize and search private computers and personal media.

When asked to disclose the treaty’s details, President Obama declared content of the Anti-Counterfeiting Trade Agreement (ACTA) “classified in the interests of national security pursuant to Executive Order 12958.”

Scared about Big Brother? Worried about the chaos that could ensue if the dollar snaps and we hit a real economic crisis? In Emergency, Neil Strauss comes to the sobering realization that, even in America, anything can happen.

Rather than watch helplessly, he decided to do something about it. And so he spent three years traveling through a country that’s lost its sense of safety, equipping himself with the tools necessary to save himself and his loved ones from an uncertain future.

—–SPECIAL OFFER—–

The Federal Reserve is creating tens of trillions of new dollars, debasing our currency, and silently taxing us all through inflation. With tens of trillions in federal budget deficits on the horizon there is nowhere for the US dollar to go, but down. Refuse to be a victim of this flawed financial system, buy gold and silver NOW!

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Obama rejects Gov. Sanford’s plan to use stimulus money to pay down South Carolina debt, Russia planning ‘large-scale’ rearming, Obama’s health care plans will cost at least $1.5 trillion, companies fight back against Obama’s economic plans saying they are hurtful, Obama tries to overrule Congress and stifle whistle-blowing, Argentina moves to nationalize factory owned by Lockheed Martin, and big changes stirrup up at the U.N…just the latest in your Freedom Under Fire Report!

Obama Rejects Governor Sanford’s Request to Use Stimulus to Pay Down Debt. The Obama administration rejected South Carolina Gov. Mark Sanford’s request to use $700 million in federal stimulus money to pay down state debt. White House budget director Peter Orszag said in a letter to Sanford that the federal stimulus law forbids that use of the money. According to the White House, 82% must be spent on public schools and colleges, and 18% on public safety and other government services. This means federal funds can only go to unions and expansion of government.

Russia Plan ‘Large-Scale Rearming’. Russian President Dmitri Medvedev said on Tuesday that Russia will begin “large-scale rearming” in 2011 in response to NATO encroachment. Part of the rearmament will be in the country’s nuclear forces. The world had a chance for peace after the Cold War, but it appears we have squandered it.

Health Care Reality Check: Obama’s Plan Will Cost At Least $1.5 trillion. President Obama has been touting a $634 billion “down payment” price tag for his health care reform plans. Health care experts put the realistic price in the $1.5 trillion range over the next decade.

Intel, Overstock, and Lockheed-Companies Fighting Back Against White House. Intel Corp. is angry about President Obama’s plans to increase taxes on overseas income. Overstock.com is worried about increased union power. Lockheed Martin is pushing back against plans to scuttle the F-22 fighter program. U.S. companies are stepping up their fight against Obama’s proposals not aimed squarely at reviving the economy. They say he is trying to do too much, taking the focus off fixing credit markets and proposing ideas that may hurt rather than help.

Obama Tries to Stifle Whistle-Blowers. Senator Charles Grassley (R-Iowa) sent a letter to Obama on Friday condemning a signing statement attached to the $410 billion omnibus spending bill that counters a Congressional provision to protect officials who give information to Congress about their jobs or agencies. Obama said the statute could not limit his power to control the flow of certain information to lawmakers. He wrote “I do not interpret this provision to detract from my authority to direct the heads of executive departments to supervise, control and correct employees’ communications with the Congress in cases where such commmunication would be unlawful or would reveal information that is properly privileged or otherwise confidential.” Sen. Grassley says Obama’s statement is “overly broad” and would “undoubtedly chill whistle-blowers who might otherwise come forward to report waste, fraud or abuse to Congress.”

Argentina Moves to Re-Nationalize Lockheed Martin Factory. Argentine President Christina Kirchner announced Tuesday she intends to re-nationalize an aircraft manufacturer operated by Lockheed Martin, a U.S. company. The trade wars are starting to heat up…

United Nations Turmoil: Nations Line up to Slam Big Powers’ Veto Rights. African and other developing nations joined several European powers at the United Nations (UN) to denounce the veto rights of the five official nuclear powers on the UN security council. Dissidents are attacking the blocking powers of the U.S., Britain, France, China, and Russia.

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The trade wars begin-Mexico raises tariffs on U.S. exports in retaliation of truck project cancellation, Obama angry at A.I.G. over bonuses-tries to cut them, small businesses to be next bailout beneficiaries, government tries to track down and confiscate Madoff assets-who will keep them? China uses global downturn to boost competitive advantages, Jon Stewart rips apart Jim Cramer in debate on poor financial reporting…just the latest in your Freedom Under Fire Report!

Mexico Raises Tariffs on U.S. Exports. Mexico announced plans to raise tariffs on almost 90 U.s. exports. The new trade measures are in retaliation for the cancellation earlier this year of a U.S. commercial trucking project and will target industrial and agricultural products. The global trade war continues to heat.

Obama Tries to Block A.I.G. Bonuses. President Obama ordered the Treasury Department to “pursue every single legal avenue to block these [A.I.G.] bonuses” and make the American taxpayers whole. A.I.G. received $160 billion in federal aid in the last year, and has used about $1 billion to pay “retention bonuses” to key employees.

No rational person would dispute that A.I.G. executives should not receive $165 million bonuses. The current ‘rationale’ for this largess is that the contractual agreements would cost more money to unwind than to pay upfront. These payments are an affront to ‘pay for performance’: A.I.G. lost $61.7 billion last quarter- the largest loss in corporate history. Also, A.I.G. lost $90 billion to counterparties on mortgage investments. The counterparties that won at AIG and the tax payer’s expense were: Goldman Sachs ($12.9 b), Societe Generale ($11.9 b), Deutsche Bank ($11.8 b), Barclay’s ($8.5 b), and Merrill Lynch ($6.8 b). Finally, it appears we agree with Rep. Barney Frank on something!

Small Businesses to Receive The Next Bailout. In an effort to ease freezing credit markets for small businesses, the Obama administration will inject $15 billion, buying up securities that are linked to small-business loans. President Obama says that “This is still just going to be a first step in what is going to be a continuing effort to make sure that people get credit out there.”

Government Tracking Down Madoff Assets to Confiscate. Federal prosecutors filed a notice in federal court on Sunday evening declaring their intent to seek the forfeiture of a wide swatch of property owned by Bernard and Ruth Madoff. The Madoff’s net worth was estimated to be $823 million at the end of 2008. The big question will be who gets to keep the assets once seized? Government or the victims?

Chinese Invest $600 billion to Make Country More Productive. Chinese leaders are turning economic crisis into competitive advantage, investing an aggressive $600 billion stimulus package to make companies better able to compete in markets at home and abroad, to retain migrant workers on an immense scale and to rapidly expand subsidies for research and development. Railways and roads are being improved to decrease transportation costs for commerce. Meanwhile, the U.S. is squandering the last of its remaining borrowing and printing capacity to prop up bad businesses and subsidize consumption, including housing.

Stewart trounces Cramer in debate. Last Thursday, Jon Stewart hosted Jim Cramer on The Daily Show after the pair indirectly insulted one another the previous week. In the interview, Stewart unrelentingly attacks Cramer and CNBC for poor reporting prior to, and during the financial crisis. Is this fair to Cramer? Yes! As Stewart points out, his show sells ‘snake-oil’ to unsophisticated, retail investors, despite the ‘small print’ disclaimer displayed prior to the show. However, it is not fair to CNBC as a whole. The network solicits a wide variety of opinions and interviews from both the bulls and bears. As always, the investor must ultimately choose where to deploy their capital. Caveat Emptor!

You just finished reading Freedom Under Fire, Mar. 16th, 2009 on The Freedom Factory. Please consider leaving a comment!

The age of banking secrecy coming to an end, climate scientist warns that billions will die, U.S. trade deficit contracts along with trade, Russians steal yet another foreign company’s assets, Mexican drug lord makes Forbes’ billionaires list, road to nowhere to take 26 years and $1.5 billion, California considers legalizing marijuana…just the latest in your Freedom Under Fire report!

Switzerland Gives in to Pressure to Reveal Bank Records. The Swiss government bowed to pressure on Friday and agreed to exchange information on suspected cases of tax evasion, but maintained that its principle of banking secrecy was intact. Swiss officials say that they will only release individual data in cases of “specific” and “justified” requests, rather than handing over blanket information on groups of people so that foreign governments can mine the data for evaders. Austria and Luxembourg are also jumping on the disclosure train, as are the small tax havens of Andorra and Liechtenstein.

Climate Scientist says Global Warming Will Kill Billions. Hans Schellnhuber, the director of the Potsdam Institute for Climate Impact Research in Germany, said that if the buildup of greenhouse gases and its consequences pushed global temperatures 7 degree Fahrenheit higher than today Earth’s population would be devastated.

U.S. Trade Deficit Shrinks, But So Does Trade. Trade between the U.S. and the rest of the world slid lower in January as domestic weakness slashed import levels and a spreading global downturn cut the overseas demand for American exports. U.S. exports declined 20% year-over-year, bringing the overall trade gap to $36 billion for the month. Compare this to last year’s average monthly trade deficit of $56.8 billion.

Source: U.S. Census Bureau, Foreign Trade Division

Russians Steal Norwegian Stake in Joint Venture. Russian stocks collapsed on news of a Siberian court seizing Norwegian assets and handing them over to a company allied with a Russian oligarch. Telenor, the Norwegian company, accused the Russian plaintiffs of filing groundless lawsuits to gain control of a cell phone company they owned jointly. A similar fate befell British Petroleum last summer.

Drug Cartel Leader Makes Forbes’ Billionaire Report. Mexican drug lord Joaquin “El Chapo” Guzman Loera stunned authorities by making the Forbes magazines’s annual self-made billionaires report. One severe consequence of making drugs illegal is that criminals, alone, tap the multibillion dollar global trade. Men like “El Chapo” are responsible for murdering over 7,200 people in Mexico last year, alone.

Road to Nowhere will Take 26 Years and $1.5 billion. Part of President Obama’s “stimulus” bill will be the continuation of what critics call the “road to nowhere”. Corridor H has been a pet project of Sen. Robert Byrd (D-West Virginia) for decades and has so far cost federal taxpayers hundreds of millions of dollars. Another $9.5 million was earmarked in the $410 billion omnibus spending bill just signed, while $21 million is alloted from the $787 billion American Recovery and Reinvestment Act. Critics point out that the four-lane super highway is ridiculous considering the low population levels in that part of the Appalachian Mountains, especially since the road ends at Virginia, which refuses to fund its extension through its territory. Overall, the road is expected to take another 26 years to complete at a cost of $1.5 billion.

California Considers Legalizing Marijuana. State Assemblyman Tom Ammiano introduced legislation last month that would legalize pot and allow the state to regulate and tax its sale. The goal is to raise billions for the cash-strapped state. Marijuana sales already amount to $14 billion in annual sales, dwarfing the state’s second largest agricultural commodity, milk and cream, which brings in $7.3 billion annually. State tax collectors are salivating at the chance to bring in an estimated $1.3 billion in new revenues from its legal sale.

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Former Federal Reserve Chairman, Alan Greenspan, published an editorial in the Wall Street Journal today that absolves himself of any wrong-doing in the housing bubble and its subsequent destructive aftermath. Latching onto a weak argument that circa 2002 long-term mortgage and short-term federal funds rates had statistically diverged in correlation, he suggests that the overcapitalization of housing resulting from cheap credit was not his fault. Many critics have pointed the finger at Greenspan for setting short-term rates too low for too long. Access to cheap credit, according to critics, sparked “irrational exuberance” in the housing market, flooding the sector with unprecedented capital and driving prices to ridiculous levels.

Rather, Greenspan blames global trade in boosting foreign savings rates and leaving the U.S. with large current account imbalances that were subsidized by our trading partners. The current account cash flows went almost exclusively into housing, driving long-term mortgage rates to unprecedented lows and encouraging speculation.

Hilariously, in his editorial Greenspan cites famous economist Milton Friedman as saying that during Greenspan’s tenure from 1985-2005, “There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind.”

Friedman did not live to see the aftermath of Greenspan’s policies. Short-term federal funds and long-term mortgage rates did diverge in correlation, but they did so precisely because of Fed and other governmental policies. The structural distortions in our economy leading to sustained trade imbalances were caused by irresponsible monetary and fiscal policies. Congress legislated the creation of the secondary mortgage market, mandated that it funnel capital to subprime borrowers, and taxed away America’s industrial base. Couple this with a sustained period of negative real interest rates orchistrated by Greenspan, and the U.S. economy grew ridiculously distorted over time, channeling the world’s savings towards our consumption, leaving the country bereft of productive capacity. Housing is not productive, but consumptive.

Global trade is not the problem. Current account and trade deficits, of themselves, are not the problem. Artificial interest rate manipulation, social engineering legislation that drives consumption over production, and inflationary monetary policy that drives perpetual inflation and currency debasement are the issues.

Mr. Greenspan accuses his detractors of rewriting history, but that is precisely what he is attempting to do.

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