Politicians love to preach about the virtues of an industrial base. They do it for three reasons: Industrial firms are great sources of subsidies and political patronage, such patronage buys support from organized labor union voting blocks, and it actually does make sense for countries to produce real things of value. Since WWII America’s industry has steadily declined as a percentage of GDP, but the winds of change are blowing.

In “U.S. Economy ‘De-Evolving’: An Industrialist’s Plan To Revive American Manufacturing“, Lynn Tilton, CEO of industrial firm Patriarch Partners,  makes the case that reviving America’s industrial base is imperative for the long term health of our country:

The reality is, in recent times, every great empire has been built on a manufacturing economy. The fall of every empire has been the failure to remember that one fundamental fact.

Tilton points out that manufacturing has dropped from 28% to 12% of the US economy since WWII and that “some people are better at building and making things than working on spreadsheets in a cubicle.”

A few things are clear, however, that support Tilton’s believe in a manufacturing revival:

• The US dollar (USD) is in for troubled times in the near future
• Declining USD means increased demand for domestic goods relative to foreign
• Sustained high unemployment reduces labor costs and makes domestic goods less expensive

In a free economy those factors would work to bring our trade and current account balances into equilibrium through increased manufacturing and industrial production; however, there is no telling how badly politicians can mess things up!

—–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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This article is dedicated to the growing segment of American society that is awakening to the ideas that we are increasingly overworked and overtaxed. My goal is to determine an effective tax burden on the average middle-class American. I will leave it to the reader to judge relative severity of the burden as measured against associated “benefits” to which he is “entitled” from the system.

Deriving an average tax burden for an average citizen is a difficult task. There are more taxes than most realize and they are not levied equally. Income taxes are “progressive” meaning they are applied with increasing severity as you earn more income. Sales, excise, and embedded taxes fall heaviest upon those with a higher propensity to spend (the poor). And inflation taxes most harm those living on fixed incomes and who have significant non-inflation indexed savings (the elderly).

This is by no means an exhaustive analysis, but rather, a quick and dirty first cut to garner a rough approximation of where we stand as a society. There are ultimately philosophical implications and value judgments that need to be made when all is said and done.

SCENARIO: Our fictional middle-class American will earn $100,000 per year (for ease of calculations), and live in a major metropolitan area. In this case, we’ll say this individual lives a few miles inland from the sunny Southern California beaches. Average home values are roughly $300,000 in this region.

Income Taxes

Income taxes consist of direct levies from federal, state, and local goverments, as well as various payroll taxes that are assessed as a percentage of income. Payroll taxes are generally split between employers and employees, but the real effect is a an additional burden placed on employees.

Each employee has a discrete value to an employer, which ultimately flows down into a total compensation package. Legislative mandates to force employers to pay for fringe benefits (heath care), Social Security, Medicare, and other payroll levies is tantamount to decrementing employee income. The issue of “who pays for it” is merely window dressing to confuse the public. In this scenario we allocated the employer-paid component to 1/3 lower wages, 1/3 to shareholder profits, and 1/3 to higher consumer prices.

When all deductions, write-offs, and adjustments are made let’s say our beach loving SoCal resident faces a 15% net federal income tax, a 5% state and local equivalent, 8.27% Social Security, 1.93% Medicare, and 0.8% other payroll tax burden. This combines for a total decrement to income of 31%.

Embedded Taxes

One of the more populist political appeals for raising government revenues is to tax corporations. What most people fail to realize is that there is no such thing as a company. Corporate taxes fall upon shareholders with reduced rates of return on invested capital, employees with reduced wages, and consumers with higher prices. It turns out that goods and services throughout the economy are inflated by about 22% because of these embedded corporate taxes, tariffs, and other levies.

Currency Debasement – The Inflation Tax

One of the nastier secrets in our financial and political system is that Congress and the Federal Reserve have been colluding since 1913 to steal purchasing power from everyone who uses the U.S. dollar (USD). Our monetary system is based on debt, federal debt to be specific. Here’s how it works:

In 2009 it is estimated that with all of the various bailout plans, “stimulus” packages, and budget imbalances Congress will spend more than $2 trillion in deficit. How can our government spend $2 trillion more than it has in income? The Treasury Department issues bonds, about half of which are bought by private domestic and foreign buyers. This means that $1 trillion this year will come from private lenders. The other $1 trillion comes from the Federal Reserve buying the Treasury’s bonds. It does so by creating money out of thin air, which is then spent, circulating the new dollars throughout the economy and diluting the value of all dollars previously in existence. The subsequent rise in consumer prices is called inflation.

It is difficult to measure precisely how much purchasing power has been stolen from consumers since the Federal Reserve’s creation in 1913. One method calculates the price inflation of gold:

It turns out that every year the Fed has been in existence the fiat currency money supply has increased 4.13% relative to gold, holding economic output constant. This is a reasonable proxy for the inflation tax created by the silent partnership between the Federal Reserve and Uncle Sam. In total, the USD has declined in purchasing power by 98% since the birth of the Federal Reserve, the institution charged with protecting its value!

Putting It All Together

To complete our calculations we’ll have to draw a few more ground rules and assumptions:

Americans are notorious for not saving; rather, we are known for spending more than we earn. In this scenario, let’s assume that 45% of income is spent on items for which sales tax and embedded taxes apply. Further, let’s also assume that this individual has $50,000 in non-inflation indexed assets. This can be cash, cash equivalents, or fixed income securities that are vulnerable to inflation.

When all is said and done the outright confiscation to fund various government functions is 57% of income, or about 7 months of labor! There is a growing segment of our population that receives net wealth transfers from Uncle Sam. Many do not own homes, are relatively frugal, and use savings to speculate on inflation-advantaged assets.  Nonetheless, there are costs to everything. Taxes, regulations, and inflation distort labor markets and cause higher unemployment. So even those not paying income taxes, per se, are suffering from a less favorable labor market.

Since there are so many variables and assumptions that must be made you can view my spreadsheet here and make whatever adjustments you feel appropriate.

Long-Term Consequences

Suffering a 50%-75% reduction in income due to taxation and inflation means we must all work longer and harder to attain equivalent lifestyle outcomes. Throughout your working career this often means longer hours, greater resource input into increasing labor market productivity (higher education, certifications, etc.), or even holding second or third jobs. In the end it is perfectly reasonable to assume we all work for one to two decades longer than we’d otherwise have to in order to achieve retirement requirements!

At What Point Do We Call It Slavery?

What is slavery? Is being forced to work for an additional two decades before earning your retirement slavery? How about working between 6 to 9 months of the year just to pay taxes? How much stress in our lives to focus on career, at the detriment of family, friends, or other life interests is acceptable? Government is growing daily. New regulations, new taxes, and newly created dollars are taking more of our freedom every single day.

We walk around relatively freely, we spend our discretionary income generally in the manner in which we choose, and we can speak out against the system in the most insolent fashion. In many respects, America is still a land of freedom. But in many other not-so-evident ways, we have lost much of our individual liberties and a significant output of our life’s work.

There will come a point at which Americans, by and large, recognize they are being exploited and declare that enough is enough. My guess is this point is fast approaching.

One of the only ways to insulate yourself from financial serfdom is to abandon the paper money slowly shackling us: Sell your US dollars and other paper currencies and buy gold and silver:

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After extensive research we’ve concluded that these are the Top 10 Signs you just might be a Socialist:

1. You advocate for equality for all and yet you want to raise taxes on certain social classes.
2. You support the troops but do not support the war and you did not support the war in Iraq but now you support the war in Afghanistan. So… do you want war or not?
3. You believe in bigger Government and yet you advocate for the government not to run your life.
4. You think that we shouldn’t outsource labor and yet you complain about the rising cost of consumer goods.
5. You want the Government to take control and regulate all private businesses and yet you work for or own a privately owned business.
6. You want to get paid the same as everybody else, but the average income in the US is probably less than what you are making.
7. You think that the Government should spend more money to stimulate the economy when the Government has no money.
8. You think that the tax increase will not affect you.
9. You sit around and wait for the Government to “help” you.
10. You blame the economy for putting you in the situation that you are in even though you’ve been in the same situation for years.

—–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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Intelligence officials say NSA exceeding legal limits on domestic spying-intercepting private e-mails and phone calls, 43% of Americans pay no taxes or actually receive money from government (i.e. receive your money!), consumer prices mixed, nationwide anti-tax protests blast bailouts and big government, Obama vows to simplify the tax code, America has its first “Border Czar,” White House pushes for new government health insurance, Federal Reserve actually considers telling the public what it’s doing, central bank claims recession may be ending soon, Homeland Security labels returning war vets as “right-wing terrorists,” and Texas governor rallies tea partiers with states’ rights agenda…

NSA Domestic Spying Exceeds Legal Authority. The National Security Agency intercepted private e-mail messages and phone calls of Americans in recent months on a scale that went beyond the legal limits set by Congress last year. Several intelligence officials said the N.S.A. has been engaged in “overcollection” of domestic communications on a significant and systemic basis.

Not All Taxpayers Are Created Equal. The Tax Policy Center estimates that for 2009, 43% of tax units-most of which are low income households that may or may not file a return-will have either zero or a negative income tax liability, meaning the government will actually pay them. And when we say “government” will pay them, we mean government will take other peoples’ money and redistribute.

Learn about the real causes of the financial crisis and how to profit from the storm yet to come! Crash Proof, written by Peter Schiff, is one of the best books on the subject. Peter Schiff is a legend for accurately predicting the real estate collapse, subprime mortgage meltdown, and stock market fallout.

Consumer Prices Mixed: General Prices Down, Core Prices Up. The Labor Department reported Wednesday that its consumer price index fell 0.1% in March, compared to the previous month. Consumer prices are 0.4% lower this month than they were in March 2009. However, core prices-which exclude volatile food and energy-are up 1.8% from last year at this time. The inflation-deflation debate has yet to be concluded.

Boost Your Career, Earn Your CFA. Tough economic times mean we should focus on cutting spending, repairing our balance sheets, and enhancing our careers. Financial professionals should consider earning a CFA charter to boost your earning potential and make you more competitive in your labor market. Check out this CFA study program to help pass the Level I exam.

Nationwide Anti-Tax Protests Blast Bailout And Big Government. More than 300 organized “tea party” protests raged across the country on Wednesday. Protesters complained about the growing size of government, their tax burdens, and recent bailouts. At one protest a sign read, “I read as much of the stimulus bill as my Congresswoman.” Another read, “You can’t put lipstick on Socialism.” Conservatives are proving increasing sophistication in using social media to organize such events.

Obama Vows To Simplify U.S. Tax Code Amidst Protests. President Obama promised to rewrite the “monstrous” U.S. tax code as protesters marked April 15th with anti-tax demonstrations across the nation. Obama said he’s renewing his commitment to a simpler tax code, which he defined as one that rewards work and the pursuit of the American dream. These comments are entirely contrary to the massive redistribution programs his administration is pursuing.

The U.S. Now Has A “Border Czar” To Watch Mexican Border. Former U.S. Attorney Alan Bersin has been appointed the new “border czar.” Bersin will oversee Homeland Security’s efforts to end drug cartel violence along the U.S.-Mexico border and reduce the flow of illegal immigrants.

Obama Administration Pushes Government-Run Health Insurance. President Obama’s top health care adviser, Nancy-Ann DeParle, said on Wednesday that she was optimistic about implementing a new government-run health insurance program. The plan would compete with private insurers to provide affordable coverage to the uninsured. Government involvement would be anything but “competitive” since they are uninterested in profit and could easily set prices below market to drive private insurers out of business.

Fed Considers Actually Telling Public What It Is Doing With “Emergency Programs.” The Federal Reserve is mulling over whether or not it will provide more information about recent emergency programs to the public. This will probably entail increasing disclosure on the collateral it holds against loans to financial firms. Central bank bureaucrats are also thinking about possible press conferences. These statements come after increasing public and Congressional outcry over secrecy and lack of oversight.

Learn the value investing style that made Warren Buffett the world’s most successful investor. This fully automated way to invest like Warren Buffett is worth a quick look.

Fed Claims Recession Is Slowing, May be Bottoming. The Federal Reserve cited today that although the U.S. economy is continuing to weaken, the pace at which it is declining has slowed. Officials claim this is a sign that the recession may be nearing an end.

Homeland Security Report Calls War Veterans Potential Terrorists. A Homeland Security intelligence assessment characterizes military veterans as right-wing extremists. The assessment was sent to law enforcement officials last week, warning that right-wing extremists could use the bad economy and discontent over President Obama as recruiting tools for veterans returning from war.

Texas Governor Rallies Tea Partiers With States’ Rights Agenda. Texas Governor Rick Perry fired up an anti-tax “tea party” Wednesday with his opposition to the growth of federal power and its incursion into state sovereignty. Gov. Perry says federal officials have abandoned the country’s founding principles of limited government and are strangling Americans with taxation, spending, and debt.

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

Nationwide anti-tax protests staged for April 15th tax day-rumors abound that leftist group ACORN intends to crash events, Obama administration readying to disclose results of bank stress tests, revisions to No Child Left Behind on the Obama agenda-prepare to see pervasive federal mandates in education, FDIC helps banks raise $300 billion through unregulated channels, Congress looks set to let D.C. school voucher program expire next year-Big Brother not prepared to let parents choose how to educate their own children, Spanish study casts skepticism on economic value of government creating green jobs…

Nationwide Protests Mark Tax Day, ACORN Plans Backlash. As anti-tax activists organize tea parties across the country on April 15th, rumors are swirling that leftist groups, including ACORN, intend to stage counter-protests in support of President Obama’s first budget.

Brace Yourselves: U.S. Planning to Reveal Results of Bank Stress Tests. The Obama administration is readying to disclose the conditions of the 19 biggest banks in the country. All banks are expected to pass the tests, but stratification relative to peers could send stocks crashing.

Obama Will Rewrite No Child Left Behind Law, Toughen Standards. President Obama have alternated praise and criticism for President Bush’s No Child Left Behind law, all the while keeping his own plans largely a mystery. However, the administration now appears to be preparing to address some of the laws most serious “defects,” mainly increasing educational standards. Local schools should expect increasingly pervasive federal mandates.

F.D.I.C. Guarantees Helped Banks Raise $300 billion On The Sly. With banker opposition mounting against federal government stipulations that have accompanied bailout funds, there has emerged a secretive assistance program that has so far helped banks raise $300 billion in capital. The Federal Deposit Insurance Corporation has been backing bank bond issues so that financial institutions can borrow cheaply. Banks have to pay a small premium for this backing, but the benefit to them is that they are able to raise vast sums without any federal oversight. The downside is for taxpayers who are ultimately on the line should any of these banks fail.

Learn about the real causes of the financial crisis and how to profit from the storm yet to come! Crash Proof, written by Peter Schiff, is one of the best books on the subject. Peter Schiff is a legend for accurately predicting the real estate collapse, subprime mortgage meltdown, and stock market fallout:

D.C. Families Upset Over Loss Of School Voucher Program. Education Secretary Arne Duncan has decided not to offer vouchers for new students because Congress only extended the program for one more year. The D.C. program, which gives about 1,700 low-income children scholarship worth up to $7,500, covers costs of attending private schools. Without Congressional renewal the program is set to expire within a year.

Spanish Study Skeptical About Green Jobs. A new report out of Spain suggests Americans should not depend on green jobs to help the economy get out of recession. This comes months after President Obama looks to Europe as a model for implementing a green economic agenda. The Spanish report indicates that attempts to implement such jobs in that country have been counterproductive. “For every green job that’s created with government funding, 2.2 regular jobs are lost and that only 1 in 10 green jobs will end up being permanent.

Boost Your Career, Earn Your CFA. Tough economic times mean we should focus on cutting spending, repairing our balance sheets, and enhancing our careers. Financial professionals should consider earning a CFA charter to boost your earning potential and make you more competitive in your labor market. Check out this CFA study program to help pass the Level I exam.

You just finished reading Freedom Under Fire, Apr. 15th, 2009 on The Freedom Factory. Please consider leaving a comment!

Obama continues Bush policy of surveillance secrecy despite campaign promises, tax protests spark conservative insurgency online, submit video footage of your tax woes to CNN and you might be aired nationally, Fed historian and political economist predicts worse inflation than 1970s, consider real estate as an inflation hedge, municipal bond market shows signs of life, older workers 45 years and older face brunt of recession, and flood of government debt crowds out private economy…

Obama Continues Bush Policy of Surveillance Secrecy. President Obama’s most liberal supporters are both dismayed and disgusted with the administration’s continuation of “state secrets” privilege in covering up domestic surveillance operations. President Obama campaigned on the promise of transparency and accountability with eavesdropping programs, but has since reneged. The government continues to do what it wants without open public oversight.

Tax Protest Tea Parties Spark Conservative Insurgency Online. Tea parties have sparked an online insurgency, with independent media sites driving coverage of the protests. Activist groups across the country are banning together to protest growth of big government and policies of borrow, spend, and print.

The Freedom Factory covered the Feb. 27th Santa Monica Tea Party.

Struggling To Pay Taxes? April 15th in the deadline for filing state and federal taxes. Amidst job losses and other economic hardships, many Americans may be finding it difficult to pay taxes this year. Are you looking for financial help? Have you filed a hardship extension? Pull out your camera and share your thoughts on video…your story could be featured on CNN.

Boost Your Career, Earn Your CFA. Tough economic times mean we should focus on cutting spending, repairing our balance sheets, and enhancing our careers. Financial professionals should consider earning a CFA charter to boost your earning potential and make you more competitive in your labor market. Check out this CFA study program to help pass the Level I exam.

Fed Historian And Economist Predicts Big U.S. Inflation. Federal Reserve Chairman Ben Bernanke is flooding the financial system with money. Fed historian and professor of political economy at Carnegie Mellon University, Allan Meltzer, says that if history is any guide, the effort will end in tears. Inflation “will get higher than it was in the 1970s.” So far, Bernanke has proven right and inflation has remained in check.

Real estate investing is an excellent way to hedge inflation risk. Rents can grow with inflation and fixed rates on mortgages are almost certainly below what inflation will be over the next 15 to 30 years. This is a decent program to learn how to buy your first apartment building. It gives the basics, shows you how to pick a good commercial Realtor, find a ‘diamond in the rough’ property, and structure a deal. Visit SoCal Real Estate Advisors if you want detailed consultation on how to value acquisitions and quantify risk…you know, the important stuff!

Municipal Bond Markets Show Signs Of Life. State and local governments have been able to raise billions this year in bond offerings, despite tight lending markets. Utah and Georgia, for example, just raised $614 million and $270.8 million, respectively, in AAA-rated general obligation bond sales through private negotiations with banks. California, on the other end of the credit spectrum, managed to beat expectations and raise $6.5 billion last month in a competitive public auction. It appears as though there is still life in the economy.

Older Workers Face Brunt of Recession. Workers 45+ years of age are facing the brunt of the recession with unemployment rates 37% higher than their younger counterparts. Even workers that do find new employment end up taking lower paying jobs. Couple this with severe asset devaluations in retirement accounts and older Americans face tough times ahead.

Flood of Government Debt Crowds Out Private Sector. All the government bailout programs are flooding the market with debt, crowding out private borrowers from obtaining scarce capital. The influx of cash that government borrowing will push into the economy is expected to cause inflation, which will send interest rates higher and make it harder for private businesses to obtain needed capital. chief economist at Delta Global Advisors, Michael Pento says:

The prescription of massive debt, of money printing, of releveraging the economy, is exactly what engendered the depression of 2008, and all of the remedies are the same virus that killed us. You’ve exacerbated everything that went wrong in the beginning.

Everyday the news points in a single direction: the growing size of government and its role in the economy. With every new bailout, every new trillion dollar printing press party by the Federal Reserve, and every new regulatory edict by the President or Congress, our society moves closer to a political economy. Free trade, free enterprise, Capitalism…these are words of a forgotten age. Regardless of your political persuasions, we must all face the reality that confronts us. Now is the time to learn how policy drives markets, so that you can protect your portfolio, insulate it from the whims of the Bureaucratic Machine, and maybe even make a profit along the way. To learn how the New Order will affect your portfolio and how you can protect yourself, read Obamanomics: A Guide to Investing Over the Next Administration.

You just finished reading Freedom Under Fire, Apr. 14th, 2009 on The Freedom Factory. Please consider leaving a comment!

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:

You just finished reading Weighing Credit Contraction Against Money Creation on The Freedom Factory. Please consider leaving a comment!

HUD program turns out to benefit contractors and not the poor…go figure! China cranks up its printing presses-expect global inflation, Peter Schiff (“Dr. Doom”) discusses his book “Crash Proof”, Goldman Sachs plans to sell billions in stock to pay off government aid ASAP, gas prices up 5% in 3 weeks…inflation? Top U.S. general says we’ll be out of Iraq by 2011, and 75% of Americans want to lift Cuba embargo…

HUD Program Benefits Contractors, Not Poor. A federal program designed to help poor families buy affordable homes has actually been lining the pockets of investors and contractors.

China Cranks Up Printing Presses: Inflationary Pressures Mount. The People’s Bank of China said it will ensure sufficient liquidity to sustain economic growth, following news that new loans jumped sixfold to a record in March. It pledged “ample liquidity” to “ensure money supply and loan growth meet economic development needs.” In other words, China intends to follow the U.S. path to printing its way out of recession. This will significantly enhance global inflationary pressures.

Real estate is a great way to hedge inflation. Owning investment property gives two big advantages: (1) Rental rates increase with inflation, and (2) fixed rate mortgages lock in low rates now before inflation takes hold. Consider this Apartment Building Cash Flow System in helping you get started.

Worried about inflation? Does the Federal Reserves scare rather than comfort you? Peter Schiff was one of the few who predicted the financial crash last year. He predicted the housing crash of 2007. And now he predicts a Treasury and U.S. dollar collapse as our government tries to borrow, inflate, and spend its way out of our current problems.

For practical ways to shield your portfolio from the coming storm, check out Crash Proof, in which he explains America’s problems and points to how you can protect yourself.

Goldman Sachs Selling Shares To Pay Off Government. Goldman Sachs will sell $10 billion in common stock to repay U.S. Treasury aid received throughout the financial crisis. A 47% gain in the company’s stock price this year and a return to profitability in the first quarter may help the company meet its funding target. Goldman is one of a growing list of banks and financial institutions rushing to repay federal aid amidst growing government involvement in regular business operations.

Gas Prices Up 5% In 3 Weeks. Gasoline prices have surged 5% in the last 3 weeks, rising 9.6 cents to $2.05 per gallon at the pump. Tillby Lundberg, who published the report, says this is likely due to ‘seasonal demand’ in which prices typically rise during spring and summer months. With $13 trillion in new money printed by the Federal Reserve in the last 16 months, this could be a more ominous sign of encroaching inflation. Watch energy and food prices in the coming months for further indication.

Top U.S. General Says We’ll Be Out of Iraq By Late 2011. General Ray Odierno, the top U.S. military commander on the ground in Iraq, said that he believes U.S. troops will be out of the country by the end of 2011.

Seventy-Five Percent of Americans Want To Lift Cuba Embargo. A new pol shows that 75% of Americans think the U.S. should lift its travel ban and trade embargo with Cuba. The Obama administration is taking steps to relax relations with the island nation, signing new rules on travel for family members and money remittances.

Everyday the news points in a single direction: the growing size of government and its role in the economy. With every new bailout, every new trillion dollar printing press party by the Federal Reserve, and every new regulatory edict by the President or Congress, our society moves closer to a political economy. Free trade, free enterprise, Capitalism…these are words of a forgotten age. Regardless of your political persuasions, we must all face the reality that confronts us. Now is the time to learn how policy drives markets, so that you can protect your portfolio, insulate it from the whims of the Bureaucratic Machine, and maybe even make a profit along the way. To learn how the New Order will affect your portfolio and how you can protect yourself, read Obamanomics: A Guide to Investing Over the Next Administration.

You just finished reading Freedom Under Fire, Apr. 12th, 2009 on The Freedom Factory. Please consider leaving a comment!

We are moving closer towards a political economy every day. Every dollar borrowed, taxed, printed, and spent by government really comes from the private sector.  Trillions of dollars of national resources are being allocated by politicians and bureaucrats towards things they claim will benefit our economy. Congress just passed a $3.6 trillion budget ($1.2 trillion in deficit), and combined the Federal Reserve and Treasury have dumped $13 trillion into the economy in the last 16 months. What we must all ask ourselves right now is whether or not we trust government with our money?

The stock market certainly seems to believe in Big Brother:

Since the absolute low in early March, the Nasdaq is up 27.8%, the S&P 500 is up 24.5%, and the Dow Industrial Average is up 22.5%. These are massive gains in an extremely short period of time. Are we finally seeing results from TARP and the American Recovery and Reinvestment Act? Is Congress doing something right, and is the market finally warming up to President Obama?

We trust government for so much these days. We have the military, police forces, regulations, laws, courts, Social Security, Medicare, Medicaid, welfare, and myriad other programs upon which we have come to depend. Soon we’ll need government to run our health care, regulate carbon emissions, tell cows how much they can fart, and give us permission to take sight-seeing trips to Antarctica! But how much do we really need of some adults to tell other adults what to do? That is, after all, what government boils down to.

Being that government officials are drawn from the same population pool as everyone else, we ought to question their omnipotence. Are they fallible just like you and I? Or does winning an election or securing a federal union job suddenly strip one of human vice?

In “Contributing Factors To The Housing Boom” I wrote that multiple layers of government caused the housing troubles currently tearing apart our economy. Without the Federal Reserve pumping up the money supply, without Congress creating Fannie and Freddie and mandating they provide junk loans to people who had no chance of repaying them, and without local and state micro-regulators dictating everything from building sizes to where and how you could build, the housing market may have simply functioned like any other market. We didn’t exactly witness cheese prices behaving “irrationally exuberantly” over the last decade!

So if we accept that the people running government are fallible, and that they even have some blame in the distorted, crashing economy in which we are all forced to eke a living, we ought to question all the assumptions they expect us to take for granted. Maybe Americans should cut back on spending and save? Maybe interest rates should float higher to represent scarcity of capital for real economic activities? Maybe adding another $10 trillion to the national debt over the course of the next decade is not a good thing?

If you think that what government is doing is good-if you trust them with your life’s savings, then go ahead and listen to your regular financial adviser. Roll your savings back into the stock market. Buy government bonds. Oh, and don’t forget to buy another SUV, a bigger house, line your walls with gold the IMF is selling, and buy yourself that marble floor you’ve always wanted! The good times will return!

Or maybe they won’t. Our government and the Federal Reserve are rolling dice with our futures. They are playing games with our currency, and they are betting that their blind spending of confiscated trillions will magically restore our economy to pre-crisis conditions. This is a tall order!

Should you suddenly become suspicious, here are a few things you can do to protect yourself:

1) Avoid non-dividend paying stocks. Seek yield in everything you do. Stocks are decent inflation hedges since companies can increase prices to compensate, but you should avoid stocks that retain 100% of earnings. Retained earnings are essentially bets that the company can earn sufficiently high returns on incremental capital expenditures. In a tough business environment this becomes less realistic.

2) Buy short-term debt instruments. Avoid long-term maturity bonds since increasing inflation will wipe out coupon payments and resale value on the secondary market. The big exception to this is if you require a fixed income for living expenses for which the current risk-adjusted yield provides. If you can lock in rates you know you can live on, by all means do so.

3) Buy real estate. During an inflationary environment you want to be a net debtor holding fixed rate liabilities. Each new dollar printed makes all the others less valuable, so you might as well use this to your advantage-repay fixed rate debt with less valuable dollars in the future. The second benefit of real estate is that rents can grow with inflation, so long as your tenants do not hold long-term leases already locked in at pre-inflation terms.

4) Treasury Inflation Protected Securities (TIP). These are Treasury securities with fixed real returns supplemented by an inflation premium. These are good so long as the government issuing them remains solvent. To diversify this risk consider the international equivalent, WIP.

5) Commodities. When the world can no longer trust our paper money people turn to commodities as a refuge. Commodities are tangible and have real utility, unlike government paper. Gold and silver are traditionally viewed as currency replacements, agricultural goods always have value in that people must eat, and energy holds the world together. Consider DBC, USO, GLD, SLV, GSG, and DBA, to name a few.

If you’re really savvy and feeling bold you could short the market, hedge with VIX, or join a local militia.

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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.

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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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Treasury Secretary Geithner warns that if you accept government money you must accept government control, Obama tries to force limits on tourism to Antarctica, some travel and financial restrictions with Cuba eased, Obama calls on U.N. Security Council to punish North Korea over missile launch…

Take Government Money, Expect Government Control. Treasury Secretary Tim Geithner says that banks that need ‘exceptional assistance’ from government should expect it to come with terms, including possibility of management overhaul. It is this sort of micro-management and government control that is sparking many aid recipients to push for early repayment.

Everyday the news points in a single direction: the growing size of government and its role in the economy. With every new bailout, every new trillion dollar printing press party by the Federal Reserve, and every new regulatory edict by the President or Congress, our society moves closer to a political economy. Free trade, free enterprise, Capitalism…these are words of a forgotten age. Regardless of your political persuasions, we must all face the reality that confronts us. Now is the time to learn how policy drives markets, so that you can protect your portfolio, insulate it from the whims of the Bureaucratic Machine, and maybe even make a profit along the way. To learn how the New Order will affect your portfolio and how you can protect yourself, read Obamanomics: A Guide to Investing Over the Next Administration.

Obama Tries To Force Limits On Tourism To Antarctica. In an effort to protect Antarctica’s environment, the Obama administration is trying to impose mandatory limits on the size of cruise ships sailing there and the number of passengers they bring ashore. The State Department says they want to “ensure that tourism is conducted in a safe and environmentally responsible manner.”

Obama Easing Travel and Financial Restrictions With Cuba. President Obama will announce this month that Americans will be allowed to travel to Cuba to visit relatives, and send money back to their families there.

Obama Calls On U.N. Security Council To Punish North Korea Over Missile Launch. Saying that North Korea violated international rules when it tested a rocket that could be used for long range missiles, President Obama called on the United Nations Security Council to take action. He said that “Rules must be binding. Violations must be punished. Words must mean something.” It is not clear why any nation must conform to the rules of another.

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