Just Sick of It!

It’s not common knowledge and something I only heard in passing a while ago but it just came up again while doing some research. But it’s believed that the United States of America declared, albeit not publicly, a national bankruptcy. The problems we are having today have been partially seen before and are rooted way back in the history of the country. Mastermind century long plot to rule the world? Mistake after mistake by shortsighted politicians? Or plain old greed. You decide.

We were all taught in school, and a lots of people still believe, that the American dollar is valued against gold, which is housed at Fort Knox, this monetary system is called the gold standard. But the fact is that a long, long time ago this standard was abolished and our monetary systems moved from the gold standard to a monetary system called fiat currency.

Before the gold standard there was just gold and other precious metals minted into coins, this is called commodity money. Due to costs and other issues governments decided that instead of issuing gold or silver as coins issuing representative money works out much better. Governments actually made profit for offering representative currency against gold, this profit called Seigniorage occurs when currency marked against the market value of gold at the time it’s issued and if the value of gold goes up the difference between the currency’s mark to gold and it’s current worth is a net profit for the Government.

Most people still believe that printing more money devalues it. This is true when the currency is using the gold standard. Lets assume that there is 100 dollars in the country and 100 ounces of gold in the governments vaults. In that case 1 dollar equals 1 ounce of gold. If the government then doubles the amount of currency in circulation all of a sudden 1 dollar no longer equals 1 ounce of gold, but 1/2 ounce, this is textbook inflation.

On June 5th 1933 Congress passed House Joint Resolution (HJR 192) which suspended the gold standard as the monetary policy in the United States. Replacing it with the Fiat currency monetary policy. Fiat money has no derived value, for example against gold. Instead it originates it’s value from the fact that it can be used to pay ones tax obligations to the government. This in essence links the currency to the entire economy of the country. The currency in the United States was the United States Note until 1971 and Federal Reserve Notes afterward.

The difference between the Unites States Note (“USN”) and the Federal Reserve Note (“FRN”) is critical. Although the USN and FRN are both Fiat currencies they enter circulation far differently. A USN is considered a “bill of credit” and enters circulation into the economy at face value, without interest. While a FRN is issued via the Federal Reserve to the banks, at interest, and then enters circulation via lending from private banks to the people with interest. This interest levied onto the FRN means it is based on debt, to get one dollar into circulation has interest, debt to be paid’ to a bank, come along with it. USN’s were issued by the United States Treasury Department, or for another words the United States government. But FRN’s are issued by the Federal Reserve Bank, which is not part of the government, but back to that latter.

The foundation of the Bankruptcy of America started in July 9th, 1868 with the ratification of the Fourteenth Amendment to the United States Constitution. Primarily dealing with citizenship of people in the United States and the freeing of slaves, Sections 1 though 3. But section 4 is the point of concern:

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Section 4 of the Fourteenth Amendment of the United States Constitution created the National Debt in 1868. This debt was incurred during the American Civil War from 1861 to 1865. In addition to creating the national debt this section also nullified any debt that was created by the south in the civil war.

Some people believe that the Federal Reserve was the first and only national bank the United States has ever had. This is incorrect, before the Federal Reserve Act of 1913 there were actually two national banks, the First Bank of the United States and the Second Bank of the United States. This also brings into the forefront that these banks were private companies. The United States has never had a central bank that was not a private company. From it’s independence in 1783 till the creation of the First Bank of the United States in 1791 the 13 original states had their own banks and currency.

Both the First and Second Bank of the United States had 20 year charters, when the Second bank’s charter was up it was not renewed and the central bank dissolved. Government deposits then reverted back to state charted banks. From 1833 till 1913 the United States operated without a central bank.

In Part two we will discuss the 1913 Federal Reserve Act and progress forward and backwards following the twisted history of the Bankruptcy of the United States of America.

Same bat time, same bat channel.

Unless you’ve been in a hole, or cave, the last week I’m sure you’ve heard of the bailout of American International Group, Inc. I’ve already heard the talking heads, man on the street and politicians using this as just another example of the government helping evil mega-corporations but refuse to help poor old John and Jane with their mortgage.

Thus far this year the government has helped or rescued four companies: Bear Stearns, Fannie Mae, Freddie Mac and now AIG. The reason each of these actions was taken was to protect the integrity of the financial system and the country as a whole. Do I completely agree or like these bailouts, no. But I understand that the government needs to take action to protect the whole country and keeping the financial system operating is a key piece to keeping the country, and possibly the world, running.

Helping Joe and Jane with the home mortgage doesn’t benefit the country. It makes for wonderful feel good, but doesn’t help the country or anyone else.

Now I’m not that much of an ass, if the lender was predatory, or the loan was crap then maybe some help was warranted, which by the way was already done by the federal government by freezing interest rate resets. But be realistic, if someone forecloses a home the only people hurt are the family and the mortgage company or bank. The family gets another home or apartment, which they can afford, and the home gets sold.

The extreme of this is if way too may homes start foreclosing. Think about what happens here for a second. People loose their home, but they move on and get an apartment or cheaper house. But now the mortgage company and bank now have this house, which they don’t want. So they sell the house at a fire sale price and move on. The more and more houses being sold at these rock bottom prices being to drive property value prices down in the area. The cycle will repeat, as the fire sale price is adjusted to the property value of the area, the lower it is the lower the price goes.

Liquidity is a term used to denote that something can be easily turned into cash. For example a stock of a highly traded public company like IBM is very liquid. But property like a house is not liquid, because selling a house takes time which selling a stock does not. The state of our current finical system is a two headed dragon of liquidity and confidence.

Liquidity became a problem when the interest rates began to rise and all the sub-prime mortgages began to default. This caused the banks and lenders to start selling the houses at a  cheap price, costing the bank and lenders money. This drove down house prices and people began to become “upside down” on their mortgage. Being upside down means that you owe more then your house is worth, and usually a good queue to walk away, i.e. foreclose.

This all trickles up hill as the smaller banks end up having less and less liquidity and can’t pay their obligations to the larger banks, so on and so forth. There have been 11 failed banks this year and the government has not bailed those out. But a saving and loan company is far different then what AIG is. AIG provided insurance for financial products this insurance mitigated risk for those products and thus companies invested in them. Let’s also be clear, AIG wasn’t insolvent, it was illiquid. The loan the government made to AIG will be repaid with interest back to the government and will give AIG operating capital so that it can liquidate those pesky investments and holdings.

Eventually we will see our way through this, we always do. The world is not over and life will go on. We will see more companies and bank fail and those whose failure can pose systematic risk to the financial system will be helped and those that won’t will die.

energy: Should we drill of shore or in Alaska and many other places in order to lower the price of oil? NO! Should we force middle eastern counties to produce more oil? NO!

Its time to think of different alternatives to gas and oil. We have been hearing the argument of energy independence for decades. Jimmy carter, a democrat, faced a similar issue and was saying everything we are saying today. I believe completely that we need to get away from oil but its up to the consumer to make the change happen. Everyone is complaining about high gas prices but more people are walking through their neighborhoods and bicycling because of it. Instead of being isolated in our cars, separated from the out side world, and passing the blame to the oil companies and the government we should get a fuel efficient car and a bike. Such a move will force the oil companies to try to get money somewhere els. Oil is bad for our health, bad for our environment, and a risk to our security. If Iran or any middle eastern country decided to stop selling us oil our whole country would be in chaos and we would be forced to invade. Take a walk out side and listen to the birds. When you run into a friend or have a short conversation with a stranger are you going to regret not being in a car. Tell me, how much road rage will you experience? I think we can force the government and the oil companies to realize the archaic days of oil are over!

abortion: When it comes to moral issues like abortion and gay marriage the government should not be able to support or ban anything. I believe it should be left up to individual communities, cities and or states in order to keep large groups of people from getting angry and creating civil unrest. In the process of determining what I think is right and wrong I tried first to find an accurate source of right and wrong. The government is not an accurate source because it can be wrong. The majority vote isn’t necessarily right either because it can be wrong. I decided to choose nature as my source to determine right from wrong, but it should be left up to individual communities, cities and or states to make sure the number of people insulted stays minimal.

social security: The fact that the government is trying to take care of my retirement is ridiculous! if they weren’t taking the eighty dollars out of my check every payday I would arrange to have one hundred dollars directly deposited into a retirement fund or put into a 401k.

education: We need more alternatives to public school. With less people in public schools there would be less issues with money and space and the class rooms would contain better face to face learning. Alternatives are of course private schools, both in class rooms and online, public schools that offer online opportunity’s where parents can help teach their kids instead of relying wholly on some teacher the parent doesn’t know, and home schooling. A combination of all these options would ease the stress on our school system as well as keeping us from relying wholly on the government to educate our children.

Updated 7/15/2008 [ED: Fixed YouTube embed's]
Updated 7/25/2008 [ED: Fixed YouTube embed's]

There has been a quite, may semi-quite, storm brewing on the Internet as of late about a tiny, no nothing island out in Alaska, called Gull Island. Gull Island, and by extension the under it and Alaska, could be the solution to lowing the price of Oil within the next few year. This has spread so much as of late that on today’s Sean Hannity show a caller mentioned it to the guest host.

So in case you are having trouble finding out about this little island that could let me give you a little history and information that I have collected. Gull Island is located about five miles off shore from Prudhoe Bay in Alaska’s northern slope.

Gull Island, although close, is not in the Arctic National Wildlife Refuge or ANWR which you can see the border of it does not cover the Prudhoe Bay area and is a few miles north east of the ANWR area boundary, which is also clearly visible on the official ANWR site.

In the 1970’s Lindsay Williams a Chaplain for the Alyeska Pipeline Company witnessed ARCO drill, test, analyze and then cap a huge oil find on Gull Island. It’s been said that Gull Island has enough oil to pump 2 million barrels of oil a day for 200 years. We import about 10 million barrels of crude oil per day in 2007, so using 1970 era figures and technology we have solved 1/5th of our foreign oil dependence on an already drilled and currently capped well.

But that was 1970 and technology has gotten at least a little bit better since then. Keeping that in mind I believe that 2 million is a entry level figure and should at least double with current technology and methods. If we start drilling now we will see our prices start dropping soon, but it won’t be by a lot. By freeing our oil companies to build new we will be sending a message to the futures markets and futures prices will drop.

If we leave our local oil and Gull Island to just sit there we could end up paying a lot more and oil will reach $170 a barrel easy. If you don’t believe me King Abdullah of Saudi Arabia today mentioned in a speech that we should all get used to current prices and prepare for even higher rates.

But there is no problem right? We could all be switching to other cars, and all those people that can’t afford an electric car or a hybrid should just walk or take the bus, because that’s how you move a family with kids around, the bus. But let is not live off of our land here in America who is without a doubt the most resource rich country in the world from oil to natural gas.

So let the debate rage on. Let’s keep pushing our country toward a depression by raising the cost of transportation and goods to a level where the low-middle and lower class of our society cannot eat or get around. Somehow I should be more worried about a few anamials and micro-organisms in Alaska then my next door neighbor, yea that makes sense.

I love my job, I really do. Whenever I spend too much money, like when I buy a new toy, I just go to my boss and demand more money. Guess what, they just give it to me, and want to know what’s even better? I get to keep that forever, it will for now and ever be added to my paycheck, it’s like a raise, but when I want it!

As you might have guess, I’m telling a little bit a lie here. I don’t have a job where I can just ask for more money and get it, just because I cannot manage my personal finances. But it’s a wonderful dream isn’t it? Well that dream can come true for you, all you have to do is run for public office!

When did our governments; local, state and federal, become so inept at managing money? If business were run like that there would be none to speak of. In business there is somthing called a cashflow report, which basically tells you how much money is entering and leaving your business. You can then estimate, with a little bit of wiggle room, what your projected income is. If your going to see a decline in cashflow the business will then stop hiring people, stop new projects, etc.

Well it doesn’t work that way in government, when the negative cash flow occurs they then use that as a reason to raise our taxes. What they should be doing, is scaling back, cutting funding or stopping projects.

Lets think about this, have you ever seen your taxes go down? There have been vow’s to not raise your taxes or give you a tax cut (which is a check mailed to you) but I’ve never seen my taxes go back down after the government gets out of the rut. Instead they just spend it, and raise my taxes again when they get into trouble.

This is why I’m so happy Nevada is trying to not raise taxes. Nevada is dealing with a projected $900 million dollar shortfall this year. How are they dealing with it? By raising taxes? No! They are cutting funding by 5% across the board, at a first pass and may make more attempts latter. At least Nevada’s governor is trying to avoid taking more of the people money, who like everyone else, are dealing with higher gas prices, higher food prices and a despicable money hungry power company that is raising rates again!

I do believe that we should fund art programs, scientific studies, community outreach programs and the like. I think that’s what makes America great is our caring for our fellow citizens and the most unlucky amongst us. But I think we need to be smart about it, when we have the money we should invest it, only after putting some in a rainy day fund that cannot be raided, in our communities and citizens. But when the belt tightents, we need to step up and pull back to the core services governments needs to offer.

Quick turn around, Uncle Sam has his hand in your wallet again!