Guns Acquisition Spree by US Government: For Whom The Bells Toll

Retired Major General Jerry Curry in an OpEd asks to whom has the massive gun buying spree by the US government directed at? [via Prof Gary North at the LewRockwell.com]

Mr. Curry at the Daily Caller:

The Social Security Administration (SSA) confirms that it is purchasing 174 thousand rounds of hollow point bullets to be delivered to 41 locations in major cities across the U.S.  No one has yet said what the purpose of these purchases is, though we are led to believe that they will be used only in an emergency to counteract and control civil unrest. Those against whom the hollow point bullets are to be used — those causing the civil unrest — must be American citizens; since the SSA has never been used overseas to help foreign countries maintain control of their citizens.

What would be the target of these 174, 000 rounds of hollow point bullets? It can’t simply be to control demonstrators or rioters. Hollow point bullets are so lethal that the Geneva Convention does not allow their use on the battle field in time of war. Hollow point bullets don’t just stop or hurt people, they penetrate the body, spread out, fragment and cause maximum damage to the body’s organs. Death often follows.

Potentially each hollow nose bullet represents a dead American. If so, why would the U.S. government want the SSA to kill 174,000 of our citizens, even during a time of civil unrest? Or is the purpose to kill 174,000 of the nation’s military and replace them with Department of Homeland Security (DHS) special security forces, forces loyal to the Administration, not to the Constitution?

Read the rest here

Could “tea parties” be the object of the US government’s gun buying spree? Or has the US government been anticipating and preparing for a massive civil unrest?

Germany’s Bundesbank Consolidates Gold Holdings

Possibly in response to German’s federal authorities call for the audit the gold holdings of their central bank, the Bundesbank—which has the second largest after the US of nearly 3,400 tonnes (valued at 133 billion euros $174 billion) held at foreign central banks, particularly at the vaults at Federal Reserve Bank of New York, the Banque France and the England—has begun to redeem them, despite their disagreements with the Feds.

Writes Telegraph’s Ambrose Evans Pritchard 

Roughly 66pc is held at the New York Federal Reserve, 21pc at the Bank of England, and 8pc at the Bank of France. The German Court of Auditors told legislators in a redacted report that the gold had "never been verified physically" and ordered the Bundesbank to secure access to the storage sites.

It called for repatriation of 150 tons over the next three years to test the quality and weight of the gold bars. It said Frankfurt has no register of numbered gold bars.

The report also claimed that the Bundesbank had slashed its holdings in London from 1,440 tons to 500 tons in 2000 and 2001, allegedly because storage costs were too high. The metal was flown to Frankfurt by air freight.

Has German’s federal government smelled something fishy? Or have they been influenced by the concerns of US Texas Congressman Ron Paul whom has urged, through a bill, for the audit of the US Federal Reserve’s gold?

What if central bank vaults have indeed over-declared their holdings through accounting wizardry? What if central bankers have used of gold for loans, swaps and repurchase agreement partly to control or manipulate or suppress gold prices?

If the suspicions of gold bugs are exposed as true, will the German “audit” prompt for a wider international or domino effect of gold audits that would force central banks, who could have been naked short on gold, to cover or buy them back which should drive gold prices significantly higher?

Or will this be just another white wash? Thus, perhaps the recent price pressures on gold?

Or by securing their gold holdings, have German federal authorities been dabbling with the prospects of an eventual departure from the euro?

More questions than answers from such interesting turn of events.

Quote of the Day: The Limits of Experience

what we know about our action under given conditions is derived not from experience, but from reason. What we know about the fundamental categories of action—action, economizing, preferring, the relationship of means and ends, and everything else that, together with these, constitutes the system of human action—is not derived from experience. We conceive all this from within, just as we conceive logical and mathematical truths, a priori, without reference to any experience. Nor could experience ever lead anyone to the knowledge of these things if he did not comprehend them from within himself.

This is from the great Austrian school of economics professor Ludwig von Mises

Chart of the Day: More Economic Freedom, Lesser Corruption

This striking chart from the Economist exhibits a tight correlation between economic freedom and corruption perceptions which illustrates a very important message: MORE economic freedom translates to LESSER Corruption.

The trend of  democratization of economic opportunities through lesser interventionism or reduced politicization of the markets has been mostly influenced by the snowballing forces of decentralization through globalization and information and technology driven information-digital age than through an implied dynamic of having more socially and economically “conscientious” autocracies.  

A large number of the “Most improved” in Doing Business rankings according to the World Bank (also from the same Economist article) have also been the most dynamic countries in terms of information and technology  development based on the data from the International Telecommunications Union.

Sanctions Against Iran Spurs Burgeoning Use of Gold as Money in the Middle East

US sanctions against Iraq has been promoting the use of gold as medium of exchange in the Middle East, particularly the Iran-Turkey-Dubai corridor.

From Reuters:

Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from Istanbul to Dubai, where the gold is shipped on to Iran, according to industry sources with knowledge of the business.

The sums involved are enormous. Official Turkish trade data suggests nearly $2 billion worth of gold was sent to Dubai on behalf of Iranian buyers in August. The shipments help Tehran manage its finances in the face of Western financial sanctions.

The sanctions, imposed over Iran's disputed nuclear program, have largely frozen it out of the global banking system, making it hard for it to conduct international money transfers. By using physical gold, Iran can continue to move its wealth across borders.

"Every currency in the world has an identity, but gold means value without identity. The value is absolute wherever you go," said a trader in Dubai with knowledge of the gold trade between Turkey and Iran.

The identity of the ultimate destination of the gold in Iran is not known. But the scale of the operation through Dubai and its sudden growth suggest the Iranian government plays a role.

The Dubai trader and other sources familiar with the business spoke to Reuters on condition of anonymity, because of the political and commercial sensitivity of the matter.

Iran sells oil and gas to Turkey, with payments made to state Iranian institutions. U.S. and European banking sanctions ban payments in U.S. dollars or euros so Iran gets paid in Turkish lira. Lira are of limited value for buying goods on international markets but ideal for a gold buying spree in Turkey.

ROUTING VIA DUBAI

In March this year, as the banking sanctions began to bite, Tehran sharply increased its purchases of gold bullion from Turkey, according to the Turkish government's trade data.

Direct gold exports to Iran from Turkey, long a major consumer and stockpiler of gold, hit $1.8 billion in July - equivalent to over a fifth of Turkey's entire trade deficit in that month.

In August, however, a sudden plunge in Turkey's direct gold exports to Iran coincided with a leap in its sales of the precious metal to the UAE.

Turkey exported a total $2.3 billion worth of gold in August, of which $2.1 billion was gold bullion. Just over $1.9 billion, about 36 metric tons, was sent to the UAE, latest available data from Turkey's Statistics Office shows. In July Turkey exported only $7 million of gold to the UAE.

At the same time Turkey's direct gold exports to Iran, which had been fluctuating between $1.2 billion and about $1.8 billion each month since April, slumped to just $180 million in August.

The Dubai-based trader said that from August, direct shipments to Iran were largely replaced by indirect ones through Dubai, apparently because Tehran wanted to avoid publicity.

Perhaps US imperialist policies will backfire in the context of the degeneration of the US dollar as the world’s foreign currency reserve.

Quote of the Day: Infrastructure is the Effect of Economic Progress

Nor is it true that a substantial infrastructure is a precondition of development….  The suggestion that ready-made infrastructure is necessary for development ignores the fact that the infrastructure develops in the course of economic progress, not ahead of it.  The suggestion is yet another example of an unhistorical and unrealistic attitude to the process of development.

I am sharing Café Hayek’s or Professor Don Boudreaux’s quote of the day which is from the late Peter Bauer’s invaluable 1976 collection (page 111), Dissent on Development (Revised Edition); specifically, it’s from Bauer’s 1969 Scottish Journal of Political Economy essay

The popular notion where “infrastructure drives economic progress” which justifies for government interventions simply accounts for the fallacy of confusing cause and effects. This popular fiction has been peddled by media and politically captured institutions, which accounts for as either utter ignorance, political inculcation or propaganda aimed at brainwashing the gullible public.

In reality as recently pointed out, the industrial age had been largely driven by private sector infrastructure. This serves as evidence that growing economic activities motivates people to build and invest in infrastructure to augment their existing conditions with accumulated capital from earlier transactions.

As Professor Ludwig von Mises noted,

saving and the resulting accumulation of capital goods are at the beginning of every attempt to improve the material conditions of man; they are the foundation of human civilization. Without saving and capital accumulation there could not be any striving toward non-material ends

This means capital don't appear from nowhere!

The mystic of government’s supposed magical potency on the economy has not only been based on fallacies but on the poor understanding of capital, opportunity costs and the law of scarcity.

Moreover, such popular misimpression have been backed by the assumption that governments possess omniscience, which in reality they don’t.

Shadows of the 1987 Black Monday Crash?

Bespoke Invest has a spooky chart which tries to paint a parallel of the S&P 500 today with the infamous October 19^th Black Monday crash in 1987, 25 years ago 

To counter or to alleviate the adverse message from such pattern seeking diagram, the Bespoke writes,

While the patterns between 1987 and 2012 are similar, there are two key differences.  First, the S&P 500 was up considerably more at its peak in 1987 (+39%) than it was at the 9/14 peak this year (+16.6%).  Secondly, in terms of valuation, the S&P 500's P/E ratio is considerably lower now than it was in 1987.  In 1987, the S&P 500's P/E ratio at the low after the crash (14.37) was still higher than it is now (14.28).

Well, crashes really don’t happen because of financial ratios or the degree of year-to-date gains. These are symptoms rather than causes.

In the 1987 episode, the equity market crash signified an amalgam of events: inflationism by global governments via the 1985 Plaza Accord and the February 1987 Louvre Accord, Portfolio insurance, the twin deficits, massive speculation brought about by easy money policies in the US…

As Prudent Bear’s Doug Noland narrates

Credit excesses were certainly not limited to government finance.   Total Non-Financial Debt expanded 14.8% in 1984, 15.6% in 1985 and 15.6% in 1986.  The Credit boom was broad-based, with Federal, State & Local, Household, and Corporate debt all expanding at double-digit rates throughout the period.  Financial Sector Credit Market Debt was exploding, with growth of 17.5% in ’84, 19.3% in ’85, and 26.2% in ’86.  Importantly, this growth reflected the commencement of a historic expansion of non-bank Credit, led by (Agency/GSE) MBS and ABS, along with finance company and (“captive finance”) corporate borrowings.

And equally the influence of Japan’s domestic bubble on the US stock market, again Mr. Noland

The market and U.S. economic environments troubled Toyota executives back in 1987.  They were also plenty worried about Japan.  Japanese policymakers were under intense American pressure to stimulate their economy in order to remedy their widening trade surplus with the U.S.  After beginning 1986 at about 13,000, Japan’s Nikkei equities index surpassed 26,000 in the autumn of 1987.  The Japanese real estate balloon was also rapidly inflating, even as consumer prices remained well contained.  Toyota officials were increasingly worried that loose monetary policy and other stimulus measures had fostered a dangerous Bubble in Japan.  The 1987 crash proved but a minor setback for the Japanese Bubble, as “terminal phase” excesses in 1988 and 1989 sealed Japan’s fate.  The Nikkei ended 1989 at 38,916.  The Nikkei closed Friday, some 23 years later, at 9,003.

The point is that crashes (sharp asset deflation) occur because of prior booms (dramatic asset inflation). 

Crash dynamics, therefore, represent unintended consequences from the interventionism from political authorities.

Will the pattern repeat itself this year? I can’t say, though the risks have ALWAYS been present given my definition of crash dynamics.

The conspicuous “parallel universe” or the environment where markets seems to have “detached” or "diverged" from economic reality signifies as evidence of such monetary interventions prompted dislocations that has led to the recent asset inflation (boom). 

The economic activities has simply been out of touch with the markets as shown above.

Yet the key difference between then 1987 and today has been global central bankers aggressive actions to explicitly support asset prices

In short, crash dynamics will be an offshoot to the action-reaction feedback loop of central bankers to the unfolding events or conditions. The balance sheets of central banks continues to balloon. Recent announcements has been made to add up to this (an estimated $2 trillion from the FED-ECB), and more will be coming as central banking inflationism becomes the only remaining tool in support of the political economic status quo. 

Eventually markets will prevail though, (there will massive wave of defaults or super inflation, if not, hyperinflation).

But in the meantime, my bet has been for a non-crash scenario for October or for this year.

China and Pakistan Concludes Bond, Currency Swap Deals

China’s Dr. Jekyll and Mr. Hyde’s relationship with the world continues

While China’s yuan may hardly be reckoned or considered as an international reserve currency yet, they certainly have been moving towards that direction coming from the trade and investment aspect.

From Reuters.com, (bold mine)

Pakistan will join a growing list of central banks that will invest in China's interbank market as the world's second-largest economy opens its capital markets.

The People's Bank of China announced on Monday that it had signed an agreement with the State Bank of Pakistan to help Pakistan invest in its local debt market, without providing details about the size of the investment programme.

China has allowed foreign central banks to invest in its domestic interbank bond market since 2010 as part of efforts to widen investment avenues for foreign yuan asset holders and promote the international use of the Chinese currency.

China and Pakistan signed a three-year currency swap deal worth 10 billion yuan ($1.60 billion) in December 2011 and companies in the two countries are encouraged to accept export and import bills in Chinese yuan.

The central banks of Japan, South Korea, Singapore, Thailand, Hong Kong and Indonesia are among those who invest in China's bonds onshore.

China’s record gold imports could also signify as part of the process aimed at attaining international currency reserve status.

But of course the most important dynamic will be in the trade and investments dimensions; where the yuan/renminbi may be used for trade and financial flows from which may motivate China’s trading partners to hold the yuan/renminbi as reserves for their banking and financial institutions.

This why China’s foreign policy based on gunboat diplomacy over territorial claims has been inconsistent with her currency status goals. 

For me, this implies that her present appearance of militancy could be a smokescreen for what seems as undeclared political interests working behind the scenes.

Steve Forbes: Bring Back the Gold Standard

Steve Forbes, editor in chief of business magazine Forbes calls for the return of the gold standard 

From Forbes.com

A new gold standard is crucial. The disasters that the Federal Reserve and other central banks are inflicting on us with their funny-money policies are enormous and underappreciated. An unstable dollar is wreaking havoc on our capital markets, depriving us of money for productive enterprises and future enterprises while subsidizing government debt on a scale never before seen in U.S. history. The zero-interest-rate policy destroys capital by punishing savers and enabling the central bank to allocate where capital goes. By definition such central planning means subpar or negative returns. No one believes, given the finances of the U.S. government, that a ten-year Treasury bond should yield only 1.8%.

The promiscuous printing of money in the U.S., Europe and elsewhere is enabling governments to put off pro-growth structural reforms and giving them incentive to increase the burdens on the private sector. The poster child here, of course, is France, raising its maximum income tax rate to 75%. Not since the early 1930s have governments of major countries collectively acted so destructively. The only difference between then and today—and it is a gargantuan one—is that we haven’t destroyed the global trading and capital systems. But even they are facing increasing strains and will continue to do so unless policies are changed.

What the Fed is doing through its binge buying of bonds is enabling Washington to consume our national wealth. Instead of creating new wealth we are beginning to destroy that which exists. No wonder tens of millions of people feel—rightly—that their real incomes are declining and their financial situations are coming under more pressure. In real terms the stock market is lower today than it was in the late 1990s, and even in absolute terms it still isn’t where it was in 2007.

Can we move forward on a gold standard before a real catastrophe à la the 1930s results?

A big part of the problem is that economics classes no longer teach the fundamental importance of stable money. The gold standard, if men tioned at all, is derisively dismissed as a relic, like the Egyptian pyramids or the Ford Model T.

Read the rest here 

While I am delighted to see more people acknowledging the importance of the return of sound money, mostly through the efforts of Ron Paul and the Austrian School, I would first prefer the de-politicization of money or empowering free markets to ascertain monetary standard.

Quote of the Day: The Fiction of the Mass of the People

Representative government cannot express the will of the mass of the people, because there is no mass of the people; The People is a fiction, like The State. You cannot get a Will of the Mass, even among a dozen persons who all want to go on a picnic. The only human mass with a common will is a mob, and that will is a temporary insanity. In actual fact, the population of a country is a multitude of diverse human beings with an infinite variety of purposes and desires and fluctuating wills. 

In a republic, a majority of the population from time to time decides what a candidate for public office shall have the use of The State’s police power. From time to time, an action of a majority can alter the methods by which men get power, the extent of that power, or the terms upon which they are allowed to keep it. But a majority does not govern; it cannot govern; it acts as a check on its governors. Any government of multitudes of men, anywhere, at any time, must be a man, or few men, in power. There is no way to escape from that fact. 

This is from American author, journalist and libertarian Rose Wilder Lane in her essay Credo (1936) So goes the local populist media concept of the "madlang people"

Bastiat on the Twin Doctrines of Luddism and Mercantilism

The great French proto-Austro libertarian Frédéric Bastiat exposes the fallacies of the twin doctrines of Luddism (opposed to modern technology) and mercantilism, which the great Dean of the Austrian school of economics, Murray Rothbard, defines as a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state

The following incisive excerpt, published by the Mises Institute, has been culled from an essay entitled “Human Labor and National Labor” which appeared in Economic Sophisms and in the Bastiat Collection (bold mine)

What misleads the adversaries of machinery and foreign importations is that they judge of them by their immediate and transitory effects, instead of following them out to their general and definite consequences.

The immediate effect of the invention and employment of an ingenious machine is to render superfluous, for the attainment of a given result, a certain amount of manual labor. But its action does not stop there. For the very reason that the desired result is obtained with fewer efforts, the product is handed over to the public at a lower price; and the aggregate of savings thus realized by all purchasers enables them to procure other satisfactions; that is to say, to encourage manual labor in general to exactly the extent of the manual labor which has been saved in the special branch of industry which has been recently improved. So that the level of labor has not fallen, while that of enjoyments has risen.

Let us render this evident by an example.

Suppose there are used annually in this country 10 million hats at 15 shillings each; this makes the sum which goes to the support of this branch of industry £7,500,000 sterling. A machine is invented that allows these hats to be manufactured and sold at 10 shillings. The sum now wanted for the support of this industry is reduced to £5,000,000, provided the demand is not augmented by the change. But the remaining sum of £2,500,000 is not by this change withdrawn from the support of human labor. That sum, economized by the purchasers of hats, will enable them to satisfy other wants, and consequently, to that extent will go to remunerate the aggregate industry of the country. With the five shillings saved, John will purchase a pair of shoes, James a book, Jerome a piece of furniture, etc. Human labor, taken in the aggregate, will continue, then, to be supported and encouraged to the extent of £7,500,000; but this sum will yield the same number of hats, plus all the satisfactions and enjoyments corresponding to £2,500,000 that the employment of the machine has enabled the consumers of hats to save. These additional enjoyments constitute the clear profit that the country will have derived from the invention. This is a free gift, a tribute that human genius will have derived from nature. We do not at all dispute that in the course of the transformation a certain amount of labor will have been displaced; but we cannot allow that it has been destroyed or diminished.

The same thing holds of the importation of foreign commodities. Let us revert to our former hypothesis.

The country manufactures 10 million hats, of which the cost price was 15 shillings. The foreigner sends similar hats to our market, and furnishes them at 10 shillings each. I maintain that the national labor will not be thereby diminished.

For it must produce to the extent of £5,000,000 to enable it to pay for 10 million hats at 10 shillings.

And then there remains to each purchaser five shillings saved on each hat, or in all, £2,500,000, which will be spent on other enjoyments — that is to say, which will go to support labor in other departments of industry.

Then the aggregate labor of the country will remain what it was, and the additional enjoyments represented by £2,500,000 saved upon hats will form the clear profit accruing from imports under the system of free trade.

It is of no use to try to frighten us by a picture of the sufferings that, on this hypothesis, the displacement of labor will entail.

For, if the prohibition had never been imposed, the labor would have found its natural place under the ordinary law of exchange, and no displacement would have taken place.

If, on the other hand, prohibition has led to an artificial and unproductive employment of labor, it is prohibition, and not liberty, that is to blame for a displacement that is inevitable in the transition from what is detrimental to what is beneficial.

Asian and Emerging Market Currencies Confronts the US ‘Our Currency, Your Problem’ Dilemma

Former US Treasury Secretary’s John Connally’s famous comment about the US dollar where he said was “our currency, but your problem” seems very pertinent today.

Governments of Asian and emerging economies whose currencies have been linked to the US dollar have been feeling frictions or pressures from the US Fed’s credit easing policies (as well as from the other developed economies).

From Bloomberg,

Hong Kong’s de facto central bank stepped in for the first time since 2009 to prevent the city’s currency from rising against the U.S. dollar after it touched the upper limit of a range that triggers an intervention.

The Hong Kong Monetary Authority said it bought $603 million at HK$7.75 per dollar, which is the so-called strong side of the permitted convertibility range of HK$7.75 to HK$7.85 that obligates intervention. The move, announced in an e-mailed statement yesterday, was confirmed by spokeswoman Rhonda Lam who said the HKMA acted during New York trading hours.

“Funds continue to flow into Hong Kong given the monetary easing in the U.S. and Europe,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “That’s evident by the rising stock market and property prices. I expect HKMA will still have to intervene in the near term as capital inflows continue.”

Policy makers from around the world have bemoaned the economic threat of stronger exchange rates from the U.S. Federal Reserve’s monetary easing. At International Monetary Fund meetings in Tokyo this month, Brazil’s Finance Minister Guido Mantega vowed to shield his country from the “selfish” monetary policies of some developed nations, while Philippine central bank Governor Amando Tetangco said the Fed was causing “challenges to monetary policy in emerging markets.”

Each government have their own idiosyncratic political agenda, where the supposed lumping of threat of a “stronger exchange rate” is in truth signifies a dubious, if not devious, propositions.

The fact is that all central banks have been doing the same thing, except the difference lies on the degree or scale of inflationism and interventions. The above shows Hong Kong as no different.

The world operates in uncharted territory when it comes to government's aggressive use of monetary tools spearheaded by developed economies (chart from Zero Hedge)

Yet for some governments, the apparent passing the blame on others serve as convenient smokescreens to impose domestic social controls and to implement policies which benefits the incumbent political leaders.

As I pointed out in the past 

In a world where central banks compete to destroy their currencies through devaluation, rising currencies may signify as symptoms of relative devaluation and they could also mask the bubble policies that underpins the statistical economic growth.

Maybe emerging market or Asian central bankers would like to try a shock therapy: Link their currencies to gold and simultaneously liberalize their economies.  However, this would go against the interests of those in power or the political class, as well as, those connected to or dependent on them.

Besides, these would vastly reduce the ability for politicians to make political promises that would jeopardize their hold on power.

At the end of the day, currency wars or the dilemma of "our currency, your problem" through the threat of "stronger exchange rates" makes for great soundbites.

How the US Government Spends Money

When government lavishes away the economy’s scarce and valuable resources through the acquisition of unsustainable levels of debt for the benefit or for the interests of the political class and their cronies, then social entropy should be expected based on the predominant trend of unproductive and wealth consuming activities.

Below are excerpts on the “55 facts about the debt and U.S. government finances” from the Economic Collapse Blog 

#1 While Barack Obama has been president, the U.S. government has spent about 11 dollars for every 7 dollars of revenue that it has actually brought in. 

#2 During the fiscal year that just ended, the U.S. government took in 2.449 trillion dollars but it spent 3.538 trillion dollars. 

#3 During fiscal year 2011, over a trillion dollars of government money was spent on 83 different welfare programs, and those numbers do not even include Social Security or Medicare. 

#4 Over the past four years, welfare spending has increased by 32 percent.  In inflation-adjusted dollars, spending on those programs has risen by 378 percent over the past 30 years.  At this point, more than 100 million Americans are enrolled in at least one welfare program run by the federal government.  Once again, these figures do not even include Social Security or Medicare. 

#5 Over the past year, the number of Americans getting a free cell phone from the federal government has grown by 43 percent.  Now more than 16 million Americans are enjoying what has come to be known as an "Obamaphone". 

#6 When Barack Obama first entered the White House, about 32 million Americans were on food stamps.  Now, nearly 47 million Americans are on food stamps.  And this has happened during what Obama refers to as "an economic recovery". 

#7 The U.S. government recently spent 27 million dollars on pottery classes in Morocco. 

#8 The U.S. Department of Agriculture recently spent $300,000 to encourage Americans to eat caviar at a time when more families than ever are having a really hard time just trying to put any food on the table at all…. 

#19 The U.S. government spends more on the military than China, Russia, Japan, India, and the rest of NATO combined.  In fact, the United States accounts for 41.0% of all military spending on the planet.  China is next with only 8.2%. 

#20 In a previous article, I noted that close to 500,000 federal employees now make at least $100,000 a year. 

#21 In 2006, only 12 percent of all federal workers made $100,000 or more per year.  Now, approximately 22 percent of all federal workers do…. 

#32 When you combine all federal government spending, all state government spending and all local government spending, it comes to approximately 41 percent of U.S. GDP.  But don't worry, all of our politicians insist that this is not socialism. 

#33 As I have written about previously, less than 30 percent of all Americans lived in a home where at least one person received financial assistance from the federal government back in 1983.  Today, that number is sitting at an all-time high of 49 percent. 

#34 Back in 1990, the federal government accounted for just 32 percent of all health care spending in America.  This year, it is being projected that the federal government will account for more than 50 percent of all health care spending in the United States. 

#35 The number of Americans on Medicaid soared from 34 million in 2000 to 54 million in 2011, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls… 

#36 In one of my previous articles, I discussed how it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025. 

#37 If you can believe it, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for each and every household in the United States. 

#38 In the United States today, more than 61 million Americans receive some form of Social Security benefits.  By 2035, that number is projected to soar to a whopping91 million. 

#39 Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years. 

#40 When Barack Obama first took office, the U.S. national debt was about 10.6 trillion dollars.  Now it is about 16.2 trillion dollars.  That is an increase of 5.6 trillion dollars in less than 4 years… 

#55 Boston University economist Laurence Kotlikoff is warning that the U.S. government is facing a gigantic tsunami of unfunded liabilities in the coming years that we are counting on our children and our grandchildren to pay.  Kotlikoff speaks of a "fiscal gap" which he defines as "the present value difference between projected future spending and revenue".  His calculations have led him to the conclusion that the federal government is facing a fiscal gap of 222 trillion dollars in the years ahead.

Read the rest here

As the illustrious economist the late Milton Friedman once said, If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand.

China’s Cumulative Gold Imports Surpasses ECB Holdings

China’s total gold imports has surpassed ECB holdings with imports from Australia soaring by 900%

The Zero Hedge notes (italics original)

First it was more than the UK. Then more than Portugal. Then a month ago we said that as of September, "it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings." Sure enough, according to the latest release from the Hong Kong Census and Statistics Department, through the end of August, China had imported a whopping gross 512 tons of gold, 10 tons more than the latest official ECB gold holdings. We can now safely say that as of today, China will have imported more gold than the 11th largest official holder of gold, India, with 558 tons….

one unspinnable aftereffect of China's relentless appetite for gold comes from a different place, namely Australia, where gold just surpassed coal as the second most valuable export to China. From Bullionstreet: 

Australia's gold sales to China hit $4.1 billion in the first eight months of this year as it surged by a whopping 900 percent.

According to Australian Bureau of Statistics, the yellow metal became the second most valuable physical export to China, surpassing coal and only behind iron ore…. 

In other words, take the chart above, showing only Chinese imports through HK, and add tens if not hundreds more tons of gold entering the country from other underreported export channels such as Australia. One thing is certain: China no longer has any interest in buying additional US Treasurys.

I may add that the Philippine’s informal gold sector has been one of the underreported source for China’s soaring gold imports.

China seems to be preparing for a major black swan event.

Free Online Education: 100k Signs Up for Harvard’s Offer; Minnesota’s Aborted Ban

One of the top universities of the world, Harvard University, has joined the bandwagon in offering free online education.

From Boston.com 

About 100,000 students have signed up for Harvard University’s first free online courses — computer science and an adaptation of the Harvard School of Public Health’s classes in epidemiology and biostatics. The online courses, part of a joint venture called edX, begin Monday, according to Harvard.

The university’s provost, Alan Garber, said Friday that the free courses are part of an effort to educate people worldwide and that the effort will help improve education on Harvard’s own campus.

“We really think that the first courses we offer will be great, but long term, the payoff is going to come from a better understanding about how people learn,” Garber said.

Harvard and the Massachusetts Institute of Technology established edX, a nonprofit organization, in the spring, and the University of California Berkeley joined the effort over the summer.

Courses offered through edX are branded MITx, HarvardX, and BerkeleyX. Anant Agarwal, president of edX, said interest has been equally high for the courses offered by all three schools: 155,000 students registered for a course in circuits and electronics that MIT offered through edX in the spring.

Students taking the online courses hail from around the world, but Agarwal said most of those in the spring course were in the United States, India, Britain, and Colombia.

Students can take as many courses as they wish through edX, and when they demonstrate mastery of a course they can receive a certificate of completion.

Graduates of online courses will eventually challenge those of the traditional courses on the job markets. And this will ultimately pop the current education bubble and radically alter current classroom based paradigms—which have been designed from 20^th century—as well as reduce  state indoctrination, diminish the welfare state, promote competition and lay emphasis on individualization/personalization of education (one teacher per student), expand knowledge specialization and democratize knowledge--yes, education for all willing to be educated. 

Free online education, thus, represents the diffusion and acceleration of the great F. A. Hayek’s knowledge revolution.   

The knowledge revolution will undermine justifications for government interference traditionally channeled through the politicization of the "poor" and "uneducated".

Meanwhile on a related field, politicians who pretentiously claim that they are for “education for all”, and the quack “education is a right” has shown their true colors by an attempted ban on free online education for specious reasons: legal technicalities or the enforcement of a state law that requires authorization from the state government

Notes the conservative Heritage Foundation

Lifelong learners, students wanting supplemental courses, professionals, and Americans across the country interested in enrolling in physics, history, music, and a variety of other courses can do so for free from the open-source provider Coursera. But Minnesota has just informed its residents that they are now prohibited by law from furthering their own education for free through courses offered on Coursera by the likes of Stanford, Duke, Princeton, and more than a dozen other universities.

As several reports have noted, the Chronicle of Higher Education first reported the following:

Notice for Minnesota Users:

Coursera has been informed by the Minnesota Office of Higher Education that under Minnesota Statutes (136A.61 to 136A.71), a university cannot offer online courses to Minnesota residents unless the university has received authorization from the State of Minnesota to do so. If you are a resident of Minnesota, you agree that either (1) you will not take courses on Coursera, or (2) for each class that you take, the majority of work you do for the class will be done from outside the State of Minnesota.

While students who enroll in a Coursera class cannot get college credit (although they can request that a professor send an email to a prospective employer, for instance, confirming that they took the course and reporting their success), models like Coursera are beginning to change the way Americans think about higher education and provide a huge opportunity to reduce costs and improve access.

Coursera—and others such as EdX (a Harvard/MIT online collaboration), Udacity, and Udemy—represent a shift in higher education toward credentialing content knowledge. Such a shift lays the groundwork for a revolution in higher education, allowing students to attain various credentials by demonstrating content and knowledge mastery from a variety of course providers. But that (literally) free pursuit of knowledge for their own personal edification or skill attainment is no longer available to Minnesota residents.

Politicians have obviously been feeling the heat from the internet whom threatens their longstanding privileges.

Cato’s Andrew Coulson wry but relevant commentary on the ban,

One of the classes you can take at Coursera is “Principles of Macroeconomics.” Maybe the folks who lobbied for and enacted the state’s education regulations are afraid that free learning and economic literacy would threaten their phony-baloney jobs. 

Fortunately, the snowballing forces of decentralization which has been enabled and substantially facilitated and buttressed by the internet has forced the Minnesota government to backtrack.

More signs of the deepening of the information-digital age

Graphic of the Day: EUSSR

British author, journalist and politician Daniel Hannan at the Telegraph writes,

Take a close look at this promotional poster. Notice anything? Alongside the symbols of Christianity, Judaism, Jainism and so on is one of the wickedest emblems humanity has conceived: the hammer and sickle.

For three generations, the badge of the Soviet revolution meant poverty, slavery, torture and death. It adorned the caps of the chekas who came in the night. It opened and closed the propaganda films which hid the famines. It advertised the people's courts where victims of purges and show-trials were condemned. It fluttered over the re-education camps and the gulags. For hundreds of millions of Europeans, it was a symbol of foreign occupation. Hungary, Lithuania and Moldova have banned its use, and various  former communist countries want it to be treated in the same way as Nazi insignia.

Wonder why the euro, with its current thrust towards centralization (fiscal union, banking union, bank supervision), seems headed for perdition?