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November 15, 2009
Issue 70  -  Constitutional Perfidy

per - fi - dy  –noun, plural - perfidies.

deliberate breach of faith or trust; faithlessness; treachery
The United States is in a state of emergency.  The elected officials do as they please with no constitutional restrictions or basis.  Even those who "carry the constitution at all times" constantly vote for bills that openly flaunt and violate the basic principles of our representative republic.  One of my biggest pet peeves is the constant references to our "democracy", which we aren't.  The constitution is quite clear about the limitations imposed on the congress.  Our congressmen take an oath when sworn in to office and the current version was enacted in 1884:
    I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.
This is quite clear and unambiguous.  They must support the constitution.  Why don't they?  Their biggest area of violation is doing things that are left to the states.  These limitations are laid out in the 9th and 10th amendments:
9th Amendment  -  The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
10th Amendment  -  The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
What do these mean?  Let's listen to a constitutional expert and former Libertarian presidential candidate, Michael Badnarik:

So it is quite clear that the power resides in the people.  Why do you have to ask someone to put up a deck on your house then?  Why does the federal government get to tell you what to do in regards to your activities?  This is completely bogus and it's entirely because congress has passed laws that are unconstitutional.  That, and the fact that the people never say a word about the increasing encroachments into our lives.  Part of the problem is that most people are very selective about what they complain about.  No smoking in restaurants, "I'm for that, I hate the smell!"  Now that may be true, but the main point is that restaurants are private property and nobody is forced to go into them, so why does the government get to tell people what to do inside their property?
We must protest ANY encroachment into our lives or rights.  Selective complaints allows the incrementalism that leads to NO rights.  NO property.  Government control.  And the ELECTED officials are doing it!  And we keep electing the same idiots!  The republicrats are all playing the same game and we are the losers.
How about money?  Article I, section 10 states:
 No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
So the states can't make anything but gold or silver legal tender.  Then how is federal government producing paper money and MANDATING that it be legal tender?  Remember the federal government gets its power from the states.  Would it make sense that the founders didn't allow the states to make paper money and then turn around and allow the federal government to do the opposite?   Of course not.  It's all a giant scam and we are the dupes.  As long as the two major parties are running things, this will continue:

"U.S. ran deficit of $176 billion in October

Government begins fiscal 2010 with 13th straight monthly deficit

By Robert Schroeder, MarketWatch

WASHINGTON (MarketWatch) -- The U.S. government ran a deficit of $176 billion in October, the Treasury Department reported Thursday, beginning fiscal 2010 in the red and marking a record 13th consecutive month of budget shortfalls.

The deficit was nearly $21 billion more than a year ago and was the largest October deficit on record.

In October, the government took in $135.3 billion, down almost $30 billion from the same month a year ago.

Outlays were $311.7 billion in October, down from the $320.4 billion recorded last October.

Receipts from both individual and corporate income taxes fell in October, compared to a year ago.

President Barack Obama's administration is weighing a number of measures to get the deficit under control. The White House is reportedly considering using some of the $700 billion financial rescue package for debt reduction.

But that idea is still a matter of debate within the administration and it is unclear how much impact it would have on mounting U.S. debt levels, The Wall Street Journal reported Thursday.

Obama also argues that congressional health-care reform bills will reduce the long-term deficit. House lawmakers passed a 10-year, $1.055 trillion overhaul bill last weekend, and the Senate may begin debating its bill next week.

In fiscal 2009, the U.S. government ran a deficit of $1.4 trillion, more than triple the shortfall recorded in 2008.

The Treasury's number was a little higher than the Congressional Budget Office's $175 billion estimate for the October deficit. 

States, meanwhile, are also likely to face depressed revenues throughout fiscal 2010 and likely into fiscal years 2011 and 2012, the National Governors Association and the National Association of State Budget Officers said Thursday."

 So in the first month of the fiscal year, we have a deficit that is higher than all of 2001.  If you multiply this out by twelve months we have a deficit over 2 trillion dollars.  What are they doing?  What about the constitution?  Now, they want to add another trillion to do health care?  YOU CAN'T BORROW YOUR WAY TO PROSPERITY!  We need more savings and investment, not debt. 
Speaking of health care did you hear about this?  (I'll bet you didn't):

Health-care reform to exempt Hawaii

Pacific Business News (Honolulu) - by Linda Chiem Pacific Business News

Hawaii is expected to be exempted from whatever national health-care bill emerges from Congress, meaning businesses will continue to bear most of the cost of providing insurance.

U.S. Sens. Daniel Inouye and Daniel Akaka, both Democrats, will request that an exemption for Hawaii be included in the final draft of the health reform bill, according to Peter Boylan, a spokesman for Inouye’s office.

Because of Inouye’s seniority and position as chairman of the Senate Committee on Appropriations, as well as the unlikelihood that any serious political opposition would rise to block his amendment, an exemption appears all but certain.

The Hawaii Prepaid Health Care Act of 1974, which requires businesses to provide health insurance to employees who work more than 20 hours a week, has long been viewed by national health-care experts as progressive legislation that has kept the number of uninsured well below the national average.

But many Hawaii businesspeople see mandatory coverage as an impediment to growth and a cost that puts them at a competitive disadvantage to Mainland businesses. Some are hoping that a new national health-care law will replace Hawaii’s and require individuals to shoulder more of the cost.

Because of its comprehensive nature, Hawaii lawmakers and many health-care advocates don’t want the state law disturbed or diluted by the plan that may emerge from the current debate over reform.

Unlike Hawaii law, the proposals currently before Congress do not have any mandates for employer coverage and instead make individuals responsible for buying their own health insurance, though the majority would still get it through their employers.

Health care is such a volatile political issue, and the legislation is still so unsettled, that few businesspeople and health-care experts interviewed by PBN were willing to say publicly whether they believe Hawaii stands to benefit from an exemption to a federal health-care law. (Hawaii already has an exemption from the federal Employee Retirement Income Security Act, which lays out the standards for all employee benefit plans in the private sector.)

George Greene, president and CEO of the Healthcare Association of Hawaii, the nonprofit that represents Hawaii’s major hospitals and health-care providers, declined to say whether the association has a position on whether the state should pursue an exemption.

The Chamber of Commerce of Hawaii, which has yet to take a position on the exemption, will poll its 1,000 members on the issue next week, said President and CEO Jim Tollefson.

“It’s a moving target so we are now preparing a survey of our members to ask them whether they’d prefer to participate in the national plan, whatever the legislation will be, or stick with what they’ve got,” he said.

Several local attorneys who specialize in health-care and employment issues say they believe a Hawaii exemption is needed to maintain the level of coverage that residents have grown accustomed to since 1974.

“We don’t need the feds to go in and mess up our system,” said Michael Nauyokas, a Honolulu arbitrator and labor lawyer. “I doubt that the proposed federal law is going to be as good as the Prepaid Health Care Act, which is working, or as comprehensive. So why fix something that’s not broken?”

John D’Amato, a partner with the Honolulu law firm of D’Amato and Maloney, which specializes in employee benefits, also supports the exemption.

“It has been such a good thing and businesses treat it just as a cost of doing business that’s factored into our local economy,” he said. “I think the federal government could do us all a great service by giving all of the states the freedom to do what Hawaii has done … we’ve been able to innovate and come up with a plan that works for us. If it becomes a federal issue, we’re back to the beginning.”

But even with a relatively healthy population and only about 10 percent without insurance, access to primary and specialty care still is a problem, especially on the Neighbor Islands. With costs outpacing reimbursements, despite double-digit premium increases, businesspeople, insurers, doctors and hospitals say the Hawaii health-care system is broken and cannot limp on the way it has been.

In a recent interview with PBN, Art Ushijima, president and CEO of The Queen’s Health Systems, which includes the state’s largest acute-care and trauma hospital, described the Hawaii health insurance law as “reasonably successful.”

“It’s clearly been helpful but it hasn’t resolved our access to care issues and it hasn’t been a panacea,” he said. “Hawaii law has been reasonably successful as a platform.

“We’ve got the hurdles and all of us recognize that we cannot continue as we have with the demand issues in the current status quo. It’s going to have to evolve over time and I’d say I’m optimistic about it.”
So Hawaii isn't part of the U.S. anymore?  I'm just kidding, but how can this be "universal" health care if a whole state is not included?  Without scrapping the whole system, there is no way this will save money.   The economic intelligence of those running things is questionable to say the least.  Either that, or they think we're stupid, or not paying we're on the right track.  Just read this:

Obama administration looks to use TARP for deficit reduction

By Michael O'Brien - 11/12/09 05:25 PM ET

The Obama administration may begin using leftover bailout funds to pay off the deficit, the president's budget director said Thursday.

Office of Management and Budget Director Peter Orszag told a summit this afternoon sponsored by Bloomberg News that the $210 billion in unspent funds from the Troubled Asset Relief Program (TARP) may be used in part to pay off the deficit.

"We're reorienting TARP towards assistance for responsible families and lending for small businesses," Orszag said. "And the question that arises as part of that is whether, while maintaining flexibility to deal with future financial crises, one can also free up some resources for debt reduction."
Federal law mandates that leftover funds and profits from the program be used to pay off the deficit, but Orszag's remarks may mark one of the first signs that the administration may be finished using TARP funds toward assisting the ailing U.S. financial system.

Lawmakers have pushed the administration to use the remaining funds in a variety of ways, including a second, jobs-oriented stimulus, more support for small and local banking, or paying off the deficit.

Treasury Secretary Tim Geithner told CNBC Thursday morning that the administration would begin to examine how to bridge the deficit more aggressively once the U.S. recession had begun to subside.

"As growth recovers and as the temporary support for the economy we had to put in place to solve the crisis, as that winds down then we'll be able to start to put our fiscal position on a path to a more sustainable position," Geithner said. "That's important for the United States, important for global financial stability."

The administration is seen as likely to want to keep some parts of the TARP program intact as a backstop against future shocks to the financial system.
So let me get this straight.  I'm going to use borrowed money to pay off a debt and THEN I'm better off??????!???!??  This is absolute nonsense and I pray that the administration isn't that stupid because we are in more trouble then I thought.  No, I don't think they are that stupid, they just think most people aren't looking or don't care, and that's the big problem we have in this country. 
If I was wrong then this type of thing would never be allowed to happen because there would be a pitch fork party the next day:

"Wall Street Record Bonuses Return as Big 3 May Pay $30 Billion

Nov. 9 (Bloomberg) -- Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank, survivors of the worst financial crisis since the Great Depression, are set to pay record bonuses this year.

The firms -- the three biggest banks to exit the Troubled Asset Relief Program -- will hand out $29.7 billion in bonuses, according to analysts’ estimates. That’s up 60 percent from last year and more than the previous high of $26.8 billion in 2007. The money, split among 119,000 employees, equals $250,400 each, almost five times the $50,303 median household income in the U.S. last year, data compiled by Bloomberg show."
Do you get it?  The guys we BAILED out with tax payer dollars are now paying bonuses of a quarter million dollars on AVERAGE!!!!  How are those bailouts going anyway?

Fannie and Freddie Lose Total of $3.1 Billion in Quarter

August 8, 2008

Mortgage giants Fannie Mae and Freddie Mac both post massive losses in the second quarter under the weight of mortgage crisis.


This is just great, the banks are making profits but the other things we bought are getting crushed.  Notice we didn't get a slice of the banks in the bailout?  We got big slices of the things that were going to lose their butts.  Noticing a pattern?  Taxpayer gets the bag and the bankers get the money from the bag.  Of course the reality is that the banks are going to go under too.  They will just wait awhile until they have extracted their loot.  The next shoe to drop is the commercial real estate market.  The banks are hiding all kinds of things on their books:  (from GATA)

Is Our Whole Banking System Catastrophically Insolvent?

A good friend on mine works for a real estate consulting firm in NYC. One of his deals is evaluating a client's investment in an insolvent commercial property. The deal has $110 million bank loan funded by Bank of America. My friend said the property is worth $30-40 million. What I found interesting, and which confirms that banks are not even close to marking their assets properly, is that my buddy said that B of A is carrying the loan on its books at the full $110 million.

I just did a "drive-by" on B of A's latest 10-Q. It has $2.1 trillion in assets, not including cash. It is reporting $257 billion of shareholder equity. Now, BAC is over-marking the above-referenced asset by 70%. Assume across all of its assets, BAC is being generous in its marks by only 10%. This exercise implies that a true mark-to-market of BAC's balance sheet would wipe out BAC's shareholder equity.

Is this unrealistic? I think, if anything, my analysis errs in the favor of BAC. Why? BAC has $159 billion of home equity loans on its books. We know that, in general, most home equity loans are probably worth nothing. Let's say BAC's are worth 50 cents on the dollar (this is generous). That adjustment alone would reduce BAC's book value by nearly $80 billion.

The bank has a loan loss reserve of 3.8% of its $914 billion in loans. But the charge-off ratios for residential mortgages and credit cards (not including commercial r/e) was 4.73% in the latest quarter for mortgages and 12.9% for credit cards. Clearly, BAC is unequivocally under-reserving for the purposes of managing earnings and mainting its vital capital ratios. And we know that the banks are undeniably stretching out their declarations of delinquencies, defaults and charge-offs.

My point here is that between the home equity loans and the anorexic loan loss reserve, I can demonstrate that BAC's shareholder equity is overstated by at least 50%. I haven't bothered addressing the larger balance sheet items of residential mortgages (a large portion of which come from its acquisition of Countrywide, which we know was the goliath of toxic mortgage lending) and commercial loans. Imagine what a realistic assesment of those items would do to BAC's book value.

Then there's the off-balance-sheet toxic waste (like SIV's, CDO's, VIE's and derivatives). I said I did a "drive-by" on BAC's latest 10-Q, meaning I spent a couple hours digging through the footnotes looking for the obvious accounting exploitations the bank used to pervert its accounting presentation. I wanted to show that Bank of America is technically insolvent. If someone wanted to spend the time dissecting the derivatives disclosures and special purpose financing vehicles, I'm sure it could be shown that Bank of America would collapse tomorrow without the Federal Reserve and taxpayer support tossed its way (please note, most of the Fed support has taxpayer guarantees - you can thank Paulson, Geithner and Bernanke for that goody tossed at the banks).

This whole exercise was started after my "catch up time" phone call with one of my best friends from NYC. After I got off the phone I realized that I had just received an inside look at how distorted the book value of just one of BAC's non-menial commercial loan assets was. Based on this simple analysis, I truly believe that if we could do an accurate forensic accounting at all the big banks, especially Goldman, JPM and Citi, it could be shown that they are all fraudulently overvaluing their assets and thus catastrophically insolvent.
Now of course the banks are insolvent as is the country and there is no quick fix.  Don't be fooled by the stock market, the gains there, are being made due to "productivity" gains.  Productivity gains come from doing more work with less people.  This chart from shows the unemployment rate:   
What you see here is the unemployment rate using three measures.  The first one in red, is the official number which just ticked over 10%.  The second measure in gray is using discouraged workers and other people that should count, but don't so they can announce a better number.  This is actually released in the data from the government if you dig deep enough.  This measure is approaching 18%.  The third measure is no longer used, but once was.  The government often changes the way they measure things to make them look better.  This figure is now over 22%!  The depression had unemployment of 25%.  So the profits from wall street are almost entirely from having to pay less people and they aren't giving raises either.  The expenses paid by companies for personnel is at a record low.  This means that eventually the economy will be negatively affected by lower pay and lower employment.  This will then affect profits.  When will this happen?  Probably not until next year.  After the next correction in the market I will probably be looking to get back in for a short term (1-3 months) trade.  I will keep you informed.
Of course the majority of my net worth is still in precious metals and precious metals stocks and gold hit another all time high this week.  It is still VASTLY underpriced as the world's nations print more and more paper money with no limits.  So again, and I know this is a broken record, but you need to get some gold.  Don't believe me yet?  How about the "super wealthy", what are they doing?
Super-rich seen buying gold, selling hedge funds

Submitted by cpowell on 05:52AM ET Friday, November 13, 2009. Section: Daily Dispatches
By Steve Lodge
Financial Times, London
Friday, November 13, 2009

The investment preferences of the world's wealthiest families have shifted significantly in favour of gold and other commodities and away from hedge funds in the wake of the financial crisis, according to a survey of family offices and advisers of the super-rich.

Two-thirds of the 100 respondents to a survey by the Family Office Channel, a new website, said that super-rich families are now more likely to invest in gold and other commodities. They are also more interested in bond investments and in holding higher amounts of cash as part of an "instinctive retreat to ultra-safe asset classes."

By contrast, two-thirds of respondents said the wealthiest families are less likely to invest in hedge funds and structured products -- investments offering capital protection -- with one in three reporting "greatly reduced" interest in these holdings.


These stories have been sprouting up with more regularity.  The super wealthy are finding out that the only true insurance in an inflationary environment is commodities, and the safest hard asset is the one that has been money for 6000  Emulate these guys as they have access to the smartest advisors around. 
This week I close with a prank from a show called "Scare Tactics".  This is an elaborate candid camera type show with professional special effects and actors.  Hope you think this one with "Big Foot" is as funny as I did.  Have a great week!