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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (10010)	12/5/2002 10:27:57 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

The GDP of the US is about 10 trillion dollars. The Sovereign PUBLICLY TRADED debt of the US Treasury is about 7 trillion dollars. The Sovereign debt of the US in NON-PUBLICLY traded US Treasury bonds in the Social Security Trust fund is about 1 trillion dollars. The Sovereign OBLIGATION of the US in the Social Security Trust fund is about 10 trillion dollars. NOTE: The 10 trillion dollars in obligations that are not classified as debts are carried as off balance sheet obligations of the US. Which means no interest is accruing against them. The Sovereign OBLIGATION of the US in Medicare and Medicade is about 7 trillion dollars. The IMPLIED OBLIGATION of the US through the GSE's; i.e. Fannie Mae and Freddie Mac and the Federal Home Loan Banks and their derivative organizations is about 7 trillion dollars. If you combine all of these Sovereign debts and obligations together you get a number of 32 trillion dollars in debt with a GDP of 10 trillion dollars; about 300% of GDP. The largest debt to GDP ratio ever maintained by a sovereign country without a financial and economic collapse was in the US just after WW2 at 140%. This 300% number is being bantered about by many newsletters today as a signal of impending doom when compared to the 140% maximum level achieved post WW2. The problem is that the 300% can not be compared to the 140% number because most of the OBLIGATIONS and IMPLIED obligations that exist today did not after WW2. In other words it is comparing apples to oranges. That doesn't mean it is not a problem; anecdotally it is. BUT We do not have empirically supported evidence to compare the two events and draw the quantitative conclusion that a financial or economic collapse of the US systems is inevitable. Qualitatively we can say that the US is in a dangerous situation. Sovereign obligations and implied obligations have mushroomed since WW2 and have increased at a much faster rate than GDP growth. Sovereign debt has also grown but at a much slower pace than obligations. In essence the US government has been "co-signing" loans that will cause it problems in the future if those obligations are called upon. BEST OF ROGER ARNOLD > November 26, 2002 investmentrarities.com

To: Jim Willie CB who wrote (10010)	12/5/2002 10:29:32 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

It’s a fact. Gold investors believe in gold under any economic condition, but they aren’t so sure about silver. Gold, they insist, is valuable and in fact undervalued. Their argument is basically that gold did well during the last Depression and silver only sold at twenty-five cents an ounce. This truth and their bias is only partially accurate as we investigate which of these two metals truly is the most undervalued. If you relate silver to gold, the first thing that you note is the value ratio. For thousands of years, the ratio was generally 16:1 or lower. That assumption was the low for silver, not the high. In the year 200, you could buy an ounce of gold with only 10 ounces of silver. In 3500 B.C., three ounces of silver were equal to one ounce of gold. More recently, silver has been moving in the area around 40:1 to over 70:1 with gold. There are some very strong reasons why this ratio is seriously out of whack, and why it will be increasingly out of whack, until the price of silver rises. The facts weigh heavily in favor of the smaller ratio and that's a higher silver price….. The Future for Silver As the uses for silver continue to increase and the shortfall is accentuated, I believe when the right day comes, the correction in silver price will be even more dramatic than it was in gold after the signing of the Washington agreement. I believe the rising curve in silver will be breathtaking. When this will happen exactly we do not know. I do believe it could begin in 2003. Stocks of silver are dwindling and it is beginning to show. Probably the largest supply of silver is in India, but they are selling only tiny amounts relative to their total holdings. Millions of peasants hold silver for a last ditch emergency. This was verified in part by the latest GFMS study, which indicated silver movement within India due to natural disasters within the country. All in all, the future for silver is subject to more influences than probably any other commodity, and certainly to more factors than gold. Whether this happens over the short-term or not, one must not lose sight of three major factors as far as silver is concerned. I like to call it the ABC’s of silver investing. A. The shortfall is about 100 million ounces per year. B. Silver is being consumed and not stored like gold. C. Sooner or later we will run out of silver stockpiles. We're not too far from that day. When that day comes, there could be a panic to buy silver. A ratio of 10:1 is a fairly reasonable expectation. BEST OF DAVID MORGAN > November 26, 2002 investmentrarities.com

To: Jim Willie CB who wrote (10010)	12/5/2002 10:31:48 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

From Federal Reserve governor, Ben S. Bernanke: "The U.S. experience of the 1920s illustrates many of the points I have been making. As you know, the ‘Roaring Twenties’ was a prosperous decade, characterized by extensive innovation in technology and in business practices, rapid growth, American economic dominance, and general high spirits. Stock prices rose accordingly. As early as the mid-1920s, however, various policymakers and commentators expressed concern about the rapidly rising stock market and sought so-called corrective action by the Federal Reserve. The corrective action was not forthcoming, however. According to some authors, this was in large part because of the influence of Benjamin Strong, long-time Governor of the Federal Reserve Bank of New York and America’s pre-eminent central banker of that era. Strong resisted attempts to aim monetary policy at the stock market, arguing that raising interest rates sufficiently to slow the market would have highly adverse effects on the rest of the economy. ‘Some of our critics damn us vigorously and constantly for not tackling stock speculations,’ Strong wrote about the debate. ‘I am wondering what will be the consequences of such a policy if it is undertaken and who will assume responsibility for it.’ However, Strong died from tuberculosis early in 1928, and the Fed passed into the control of a coterie of aggressive bubble- poppers…" "The correct interpretation of the 1920s, then, is not the popular one - that the stock market got overvalued, crashed, and caused a Great Depression. The true story is that monetary policy tried overzealously to stop the rise in stock prices. But the main effect of the tight monetary policy, as Benjamin Strong had predicted, was to slow the economy -both domestically and, through the workings of the gold standard, abroad… This interpretation of the events of the late 1920s is shared by the most knowledgeable students of the period, including Keynes, Friedman and Schwartz, and other leading scholars of both the Depression era and today… monetary policy had already turned exceptionally tight by late 1927… A small compensation for the enormous tragedy of the Great Depression is that we learned some valuable lessons about central banking. It would be a shame if those lessons were to be forgotten." This is stunning, misguided commentary. The harsh reality is that we learned absolutely the wrong lessons from the Great Depression, and I would suggest Dr. Bernanke and others go to the Mises.org website and order the recent compilation of Murray Rothbard’s writings, The History of Money and Banking in the US. It is wonderfully written, brilliant and exceedingly pertinent history (although the long introduction misses this critical point!). Diligent true students of this seminal period (and money and Credit generally) will have a very difficult time refuting Rothbard’s cogent and comprehensive analysis that the Depression was the consequence of years of inflationary policies, monetary mismanagement, and the Fed’s accommodation of rampant financial excess on Wall Street. It was a long road to unsound money, a dysfunctional Credit system, and perilous financial and economic Bubbles. "Exceptionally Tight" money no more caused the crash in 1929 than it did the bursting of the NASDAQ Bubble in 2000. Instead, there was a dilemma distressingly similar to today’s, with Bubbles only sustained by looser money and greater Credit and speculative excess. It is only a matter of when, at what cost, and under what circumstance Bubbles meet their inevitable fate. The "printing press," Dr. Bernanke, is the problem and not the solution. Again using Dr. Bernanke’s own words (but from our antithetical analytical framework): "In other words, the best way to get out of trouble is not to get into it in the first place." Precisely! And that is what Dr. Richebacher has been preaching for years. Paraphrasing the good doctor, "There is no cure for a Bubble other than not letting it begin in the first place." If the Wall Street darling Benjamin Strong would have acted responsibly to safeguard sound money and financial stability – thus thwarting financial and economic excess in the mid- twenties as things began running completely out of control - it is likely that financial collapse and depression could have been avoided. And applying Dr. Henry Kaufman’s quote regarding the Greenspan era: "The Fed missed its timing." Well, Benjamin Strong bet the farm and lost. Greenspan has lost the ranch, although the "house" apprehensively consents to his gambling on his neighbors’ homesteads. Blaming the Great Depression on those that were rightly fearful of escalating dangerous financial and economic imbalances – those dreadful "Bubble Poppers" – is such a gross distortion of the facts and an injustice to sound economic analysis. Long live the Bubble Poppers! BEST OF DOUG NOLAND > November 26, 2002 investmentrarities.com