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The Federal Reserve Must Implement QE3

Apr 6

Posted by ImpeachCongress in Economics, Economy, Inflation, Opinion | No Comments

By: Naional Inflation Association

Gold prices surged today to a new all time high of $1,463.70 per ounce, while silver prices soared to a new 31-year high of $39.785 per ounce. Silver is now up 129% since NIA declared silver the best investment for the next decade on December 11th, 2009, at $17.40 per ounce. The gold/silver ratio is now down to 37, compared to a gold/silver ratio of 66 when NIA declared silver the best investment for the next decade. This means that not only is silver up 129% in terms of dollars since December 11th, 2009, but silver has also increased in purchasing power by 1.78X in terms of gold.

Gold is the world’s most stable asset and the best gauge of inflation. This brand new breakout in the price of gold leads us to believe that the Federal Reserve is getting ready to unleash QE3 at the end of June. The Fed will surely not call it QE3, but NIA can pretty much guarantee that the Fed will continue on with their purchases of U.S. treasuries. If the Fed pauses after QE2, it will mean that treasury bond yields will need to surge to a level where they attract enough private sector and foreign central bank buyers in order to not only support the funding of our rapidly rising budget deficits, but to support the redemption of maturing treasury securities.

In the month of March, the U.S. government spent more than eight times its monthly tax receipts, when you include the money spent for maturing U.S. treasuries. The U.S. treasury netted $128.18 billion in tax receipts during the month of March, but paid out a total of $1.05 trillion, which included $49.8 billion in Social Security benefits, $47.4 billion in Medicare benefits, $22.58 billion in Medicaid benefits, and $37.9 billion in defense spending. However, by far, the U.S. paid out the most for maturing U.S. treasuries, which equaled $705.3 billion.

In order for the U.S. government to stay afloat with only $128.18 billion in tax receipts, it had to spend $72.5 billion from its balance of cash, which ended the month at $118.1 billion, and sell $18 billion worth of TARP assets. But most importantly, the U.S. treasury had to sell $786.5 billion in new treasury bonds.

The U.S. government is the largest ponzi scheme in world history. We can only fund our government expenditures and pay off maturing debt plus interest, by issuing larger amounts of new debt. Americans are lucky that we have been blessed with record low interest rates for an unprecedented amount of time, but NIA believes that as we roll over U.S. treasuries in the future, we will have to refinance them at much higher interest rates. Our national debt is now so large that interest payments on our debt will become the government’s largest monthly expenditure.

If the Federal Reserve doesn’t implement QE3, NIA believes it will just about guarantee a bursting of the U.S. bond bubble in the second half of 2011. If the Fed stops buying U.S. treasuries, there is a chance that we won’t find foreign buyers for our bonds no matter how high interest rates rise. The world is waking up to the fact that the U.S. government is insolvent, and the benefits of propping up the U.S. dollar are no longer worth the expense to our foreign creditors. The U.S. government ponzi scheme will soon be exposed for the world to see.

Japan has been the most consistent buyer of U.S. treasuries. With Japan needing to raise $300 billion to rebuild parts of their country that were destroyed by the earthquake, tsunami, and nuclear disaster, we believe they will be forced to dump their U.S. treasuries, at a time when the U.S. desperately needs Japan to roll over their treasuries into larger amounts of new ones. Not only that, but with Arab revolutions taking place across major Saudi states and the U.S. beginning to occupy Libya for no reason at all, we will likely see Gulf states follow in Japan’s footsteps and stop purchasing/dump U.S. treasuries. Plus, China appears to be becoming more reluctant to continue buying U.S. treasuries, and is positioning the yuan to be the world’s new reserve currency. Without Japan, Saudi states, and China, there will be no buyers left for U.S. government bonds.

The fact is, with no QE3, we could literally see the 10-year bond yield double from 3.52% to north of 7%, overnight. Even then, it is unlikely to attract foreign buyers and we will likely be faced with failing bond auctions, which would cause a massive rush out of the U.S. dollar and trigger the currency crisis NIA has been predicting. NIA sees no other option for the Fed, but for it to continue on with its endless money printing and destructive inflationary policies.

Federal Reserve officials discussed last month in closed-door meetings the possibility that rising commodity prices could cause inflation. The fact is, rising commodity prices don’t cause inflation, they are a symptom of inflation. When the Fed leaves interest rates at 0% for over two years and prints $600 billion as part of QE2, that money printing and easy money is the inflation of our money supply, and rising prices are the result.

The Fed is narrow-minded and continues to focus on the CPI, which only grew last month by 2.11% year-over-year. Fed Chairman Ben Bernanke says he expects rising commodity prices to create a “transitory” boost in U.S. inflation. Meaning, when the CPI rises even higher in the upcoming months, Bernanke will likely place the blame on what he considers to be temporarily high oil and soft commodity prices.

The CEO of Wal-Mart is now saying that U.S. inflation is “going to be very serious” and that Wal-Mart is already seeing “cost increases starting to come through at a pretty rapid rate.” He predicts that because of huge increases in raw material costs, along with soaring labor costs in China, and skyrocketing fuel costs around the world, retail prices will start increasing at Wal-Mart and all of their competitors in June, especially for clothing and food.

When asked about the predictions of Wal-Mart’s CEO, Bernanke said that he expects price pressures to remain largely stable, but then added, “Wal-Mart has more data than the government does.” Bernanke was also quoted as saying, “We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability.”

The European Central Bank (ECB) is expected to raise interest rates tomorrow for the first time since 2008. Many people are now speculating that the Federal Reserve will begin raising the Federal Funds Rate at the end of 2011. NIA is receiving many new ‘NIAnswers’ and email questions on a daily basis, asking us what will happen to gold and silver prices if the Federal Reserve were to raise interest rates.

In our opinion, the Federal Reserve raising the Fed Funds Rate would actually be very bullish for gold and silver prices, because it will serve as an admission that even the Fed believes inflation is becoming a major problem and beginning to spiral out of control. Historically, the best performing time period for precious metals has been when the Fed begins to raise artificially low rates. Remember, when the Fed begins to raise rates, they will probably raise rates only 1/4 or possibly 1/2 of a percentage point at a time. Interest rates of 1% or 2%, although higher than 0%, are still artificially low and will do nothing to curtail inflation. NIA believes the real rate of U.S. price inflation is now 6% and we will need to see the Fed Funds Rate rise to a level that is higher than the real rate of price inflation, if the Fed wants to have any hope of preventing hyperinflation.

It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us

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When Government Turns Predator

Apr 5

Posted by ImpeachCongress in Abuse of Power, Legal Actions, Opinion | No Comments

The following article covers an area of gross government tyranny. Offshore banking. The overreach of the government and particularly their nazi force, the IRS, has become so egregious that simply opening a bank account overseas is viewed as a crime. Monty points out precisely that this bankrupt and broken government will stop at nothing to steal the wealth of its productive citizens. It is disgraceful. –impeachcongress

By: Monty Pelerin

Honest US citizens are being turned into prey by the IRS, the victims of a hunt for tax evaders. It is the natural, if lamentable, product of the urge to power our Founders warned us against.

More than two centuries ago, George Washington stated:

Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.

Over the years, General Washington’s prescience has been demonstrated as government usurped and abused power. The myth that government serves the people should be shattered by now. Increasingly, government behaves as the master, not as the intended servant.

Oppression abounds, but nowhere is the raw abuse of power and coercion more possible and evident than in the Internal Revenue Service. They are the most dangerous member of the government gang. Now they have another tool to bully and expropriate wealth from innocents — US citizens living abroad.

Early in his presidency, Barack Obama pledged to add 800 new IRS agents to punish tax evaders with overseas accounts. In an effort, presumably designed to curtail and punish tax evasion on the part of wealthy Americans, legislation aimed at criminals now threatens the income and savings of the law-abiding.

Background

The Bank Secrecy Act became law in 1970 and implemented the Foreign Bank Accounts Report (FBAR) to monitor money laundering. The FBAR law required that US persons owning or having signing authority over foreign bank accounts report this information to the US Treasury Department. It was not much enforced for the obvious reason that a criminal does not willingly divulge incriminating information. During the first three decades of FBAR, there was widespread ignorance and disregard for the law.

In 2003, the Treasury Department handed over enforcement to the IRS. In 2004 non-willful non-compliance increased to a $10,000 fine per account per annum. Willful non-compliance allows criminal charges, a prison sentence, and fines of $100,000 or 50% of bank account’s contents, whichever is more (see Shepherd, p. 10).

The IRS has implemented two Voluntary Disclosure Programs I (2009) and II (2011), in which they waive criminal charges provided that all back taxes and penalties have been paid, along with an FBAR penalty of 20% (in 2009) or 25% (in 2011) of the account’s highest balance over the last six years. The penalty is lower (12.5%) for balances under $75,000. Persons who were unknowingly US citizens face a 5% penalty (see FAQ 52).

In 2010, Congress passed FATCA (Foreign Account Tax Compliance Act) which forces foreign banks to report on American clients, even if doing so would violate the banking and privacy laws of their country. Implementation of FACTA will be coerced by withholding 30% of US income from banks not in compliance.

The arrogance and brutality of the legislation is apparent. The penalties are severe and disproportionate. Economic blackmail of foreign banks is disgraceful. All of these actions will have repercussions, probably not intended.

US Citizens Abroad

US citizens living abroad must open a foreign bank account because commerce is done in the local currency. All who do are potentially in violation of the FBAR law. Most were unaware of the FBAR requirements; but now that the IRS has rattled its FBAR saber, taxpayers abroad are in a quandary.

Wealthier citizens spend thousands of dollars on accountants and tax lawyers to try to put themselves into compliance with the least financial damage. The average citizen not in compliance has limited options. His choices include:

  1. Do Nothing The IRS doesn’t know about you, so continuing to keep a low profile and ignore the law might be the best route. This option may become impossible once FACTA comes into force.
  2. File FBAR Forms IRS FAQ 17 of the 2011 Voluntary Disclosure Program states that filers who have complied with all taxes and filing requirements except FBAR should not enter the program but simply file the delinquent forms by August 31, 2011 with a letter of explanation. They promise that no penalties will apply to such persons. But given the severe threats of punishment issued to anyone failing to comply, many wonder whether the IRS will accept the excuse of ignorance of the FBAR requirement.
  3. Enter 2011 Voluntary Disclosure Program: Some US citizens who entered the 2009 Voluntary Disclosure Program and were otherwise in compliance with US tax laws, found that the IRS intended to apply to them the full 20% penalty (see, e.g., here and here).
  4. Renounce Citizenship Many US citizens living overseas have lives fully integrated into their new country. They comply with the local tax laws and often possess dual citizenship. Compliance with US tax laws and FBAR are a nuisance and liability that they may be able to live without.

Renunciation of citizenship is not riskless. Such a decision will set citizens free from future liability, but may subject them to IRS penalties for prior non-compliance. In addition, for covered expatriates, those having two million in assets or $145,000 in average annual tax liability over the last five years, an exit tax is also required.

To appreciate the uncertainty and duress faced by US citizens living abroad, a couple of hypothetical situations are useful. International tax lawyer Phil Hodgen partly inspired the following hypothetical cases:

Hypothetical Case 1: Jim lives in a foreign country and has dutifully filed a US income tax return each year, but was unaware of FBAR filing retirements. Jim operates eight accounts: four retirement accounts (which he reported on his annual tax returns), two trading accounts, a checking account and a high interest savings account. The highest balance in these accounts is $1,000,000 over the last six years. His current balance is $800,000 after the market dip.

Jim doesn’t know what to do. After great worry, he enters the Voluntary Disclosure Program. The IRS assesses Jim a $250,000 FBAR penalty. In order to pay the penalty, Jim must withdraw funds from his retirement accounts forcing an additional tax liability of $100,000 on the income. Jim is no longer able to retire because his $800,000 has been reduced to $450,000, solely as a result of IRS capriciousness.

Hypothetical case 2: Nancy is a teacher and mother of three, married to a citizen of the foreign country where she has lived for fifteen years. She dutifully filed her taxes in the US, but never knew about FBAR. A friend entered the Voluntary Disclosure Program and was assessed $14,000. She contemplates the renunciation of American citizenship, because her foreign husband owns a successful business and Nancy is a signer on business accounts. She fears exposing her husband’s business to the IRS and also fears that upon her death, the IRS will seek its pound of flesh from her estate. She renounces citizenship, though it breaks her heart.

Abuse Of the Law

FBAR was initially a harmless and little known embarrassment for the United States. It began as an ineffective attempt to stop money laundering. Like so many other laws (RICO, Homeland Security, etc.), it began with what some believed noble purposes, only to morph into a tyranny imposed upon law-abiding citizens. It is now a tool capable of arbitrary and oppressive expropriation the wealth of millions of US citizens living abroad.

An insolvent government is a dangerous government. It is akin to a wounded and cornered animal. When conditions become really difficult, it is likely to do anything to survive. Arbitrariness in the interpretation of any law is dangerous to freedom, but especially so when government’s primary concern is survival rather than justice.

There are many reasons to be critical of FBAR. The following two will illustrate:

Do Republicans Want the White House?

Apr 4

Posted by ImpeachCongress in Conservatism, Opinion | No Comments

By: Lee Cary

We Americans live in a political era when it’s reasonable, perhaps even prudent, to consider the unthinkable.

Before the election of Barack Obama, most Americans were unable, or unwilling, to consider what his campaign promise to “fundamentally transform” the nation might mean. Before his election, those who used the word “socialism” to refer to his intentions were chided for being too extreme. (A longtime friend of mine said I’d “gone over the edge” in using such language.)

Not until Newsweek published a February 2009 article entitled “We Are All Socialists Now” did the word become widely acceptable, if used benignly.

The litany of previously unthinkable events that have unfolded since then, most recently including our role in Libya, don’t need listing here. The hits just keep on comin’, with no let-up in sight.

For example, when Fox Nation recently reported that former Clinton administration official Jamie Gorelick is on the short list to be the next director of the Federal Bureau of Investigation, we weren’t shocked; we’ve grown accustomed to the unthinkable.

The New Socialist Democrat Party is now fully engaged in a relentless pursuit of what was, throughout the 20th Century, an intermittently-enacted, comprehensive, progressive agenda. The Tea Party Movement (TPM) emerged as a wrench, perhaps not unexpectedly but with unanticipated energy, tossed into the progressive machine. Consequently, über-progressive Democrats, like Senators Harry Reid and Chuck Schumer, simply label the TPM based on their experience of it. Anyone, or anything, that gets in their way is, by definition, “extremist” — a label used by tyrants, big and small, throughout history to refer to their opponents.

Jump now to the 2011 budget battle underway in the House and Senate, with a focus on the House where scores of new members of Congress arrived, metaphorically carried on the shoulders of Tea Partiers.

Before the paint was dry on their office doors, speculation began as to whether they would be change agents and fundamentally transform the new Republican majority in the House, or merely conform to the well-entrenched good-ol-boy principle of go-along-to-get-along.

We’ve heard it said that the best tactic of House Republicans with regard to the 2011 budget is to compromise on cuts by backing off their promise to cut $100 billion from the remainder of this year’s federal expenditures, so as to save their powder for the bigger battle over the 2012 budget.

Already it sounds as though the House Republican leadership is justifying the need to avoid a government “shut-down” — which actually isn’t a shut-down — by meeting Democrats part way. “Compromise” is in the D.C. air, while TV pundits speculate over which party would be blamed for any potential “shut-down.” (Talk concerning who could gain the credit for a shut-down is, on the other hand, conspicuous by absence.)

The “narrative arc” — words Senator Obama liked to use during the campaign — suggests that Speaker John Boehner will successfully cobble together a consortium of Republicans, perhaps excluding many of the newly elected members, along with moderate Democrats, meaning those Dems who want to be re-elected to their conservative-leaning districts in the next election.

At the end, the more progressive House Democrats will agree to insignificant 2011 budget cuts they’ll say are necessary to placate the cold-hearted Republicans whom they’ll accuse, with crocodile tears, of caring little for the poor, the elderly, the children, and the puppies. And that hollow metallic sound we’ll hear will be the infamous can being kicked further down the road.

If this happens, conservatives in sympathy with the TPM, whether or not they ever attended a public gathering, will conclude this: The House GOP leadership caved to the Democrat minority because they care more for their careers than for the nation.

Already, the major meme voiced among House Republicans pushing a compromise is that, after all, they only control one-half of one-third of the federal government. (Imagine where we’d be if General George Washington at Valley Forge had said, “We only control a few thousand soldiers, so let’s compromise with the British.)

If this is how the 2011 budget battle plays out, we’ll have at least two ways to interpret it.

Conventional wisdom will say that Boehner and the Boys were careful to avoid blame for shutting down the government a la Newt Gingrich v. Bill Clinton in 1994-95. A shut-down would have weakened their position in the upcoming 2012 budget battle. (It’s hard to see how surrendering in a small battle before a bigger one yields strength to the loser.)

But since this is the era when it’s reasonable, perhaps even prudent, to think the unthinkable, let’s suppose Boehner and the Boys do understand both the message and power of the TPM, and they’d rather not have it so closely aligned with the GOP going forward. Why? Because they fear the “extremist” label being applied to them.

Furthermore, let’s think this unthinkable: that the GOP’s primary goal in 2012 is to win the Senate, not the White House. And, given a choice, they’d choose the Senate. To that end, the House Republicans’ willingness to negotiate an agreement with the Democrat-controlled Senate on the 2011 budget could eventually be cited as evidence of the GOP’s ability to work cooperatively with a Democrat minority in the Senate, and, yet, temper the progressive initiatives likely to emerge out of a second term Obama White House.

The answer to the question — Do Republicans want the White House? — might be this unthinkable: No. Here’s why: If the GOP controls both the legislative and executive branches after 2012, when the inevitable economic axe falls on our debt-ridden nation, they’ll suffer the blame that will automatically befall the party of the incumbent Chief Executive.

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