Ron Paul Speaks

February 4, 2011

Every once in a while, something sticks in my craw and I feel the need to regurgitate upon you, my compliant audience. I'll bet few if any of you know of Gideon Gono. This gentleman is the chief banker of Zimbabwe. Mr Gono and the Bernanke share the belief that the printing of money creates employment and prosperity. Mr Gono has certainly defeated the spectre of deflation in his country. Money supply is soaring, the Zimbabwe equity market is doing fine. Unfortunately, breakfast in this fair nation costs one trillion dollars - no shit.

Fast forward to the US-Zimbawbe West. We are insolvent, have an increasing deficit, zero interest rates and print $'s to buy our bonds. Since the majority of the debt has a maturation of about 4 years, in essance, we print money to buy the bonds that are being redeemed and issue more. You know, a Ponzi scheme. What will happen to our currency? Don't you love these rhetorical questions. Now many currency traders follow the DXY or UUP which are measures of the relative value of the $ against the value of the equally impaired, noncollateralized yen, euro and pound. Kind of a contemporary version of the good old Pig Party. You know, Miss Euro get a bad case of acne and now she's even uglier than Miss $. All these currencies share one thing; they are rapidly depreciating against stuff. Corn, tin, soybeans, copper, oil, uranium, wheat, etc. and of course the precious metals. (They've taken a bit of a hit recently but they'll be back.)

Unfortunately, the Bernanke doesn't care because these only contribute to the headline CPI, not the all important core CDE. Since employment sucks, (don't be mislead by the recent BLS nonsense), factory utilization is lagging and magical Hedonic accounting is in vogue, the core rate is below target and the Bernanke still anguishes about the spectre of deflation. So, your $ may buy more euros or whatnot in the future but it will buy less food, gas, utility bills, etc.

The consequence of this policy is that we all get poorer. We get away with this chicanery, for now because the $ is the reserve currency of the world. Interestingly, China, Russia and Brazil trade in their own currencies and exclude the $. Given the growth rate of their economies, what % of international trade will be conducted in non$ currencies in 5-10 years?. Suppose that OPEC, not our best buddies, wanted a basket of currencies, or heaven forbid, gold for their oil? The British pound was the reserve currency of the world until 1967. At that time, it underwent it's second devaluation in 5 years and the $ took over. More to the point, the world adjusted for this eventuality long before 1967 and most trade was conducted in the $ , not the pound. Kind of like what's happening now.

The energy policy of this country is no energy policy. You don't have to be a rocket scientist to realize what must be done. Since, like it or not, we require alot of oil, clearly we should maximize the production of this invaluable resource with in our domestic boundaries. Drill baby, drill! Secondly, we should utilize the abundant, cleaner natural gas which not only is homegrown, but is very cheap relative to oil. Without alot of fanfare, natural gas can become a very important portion of our transportation system. Finally, we should start building nuclear reactors throughout the country to generate clean, efficient utility power. These solutions are so obvious that one must speculate on why our energy policy is no policy. One could argue, with considerable veracity, that we are a nation of morons, governed by imbeciles. Certainly, electing a President devoid of any qualifications on the slogan," Yes We Can" might qualify as proof of this contention. I would be remiss, however, if I did not give the environmentalists their due. This is a powerful wellfunded lobby and they own the DNC along with the labor unions and trial attorneys. There are two generic types of environmentalists. The first group which we can dismiss readily are the true believers who want to turn us back to the Stone Age, living as Luddites.

The other group, more ominous to the health of this nation and everybit as greedy as the nastiest investment banker, are the lobbyists for GREEN ENERGY. They want to make a buck like everyone else, but since they shill for economically nonviable industies, they must be devious. The first tack is the call for government investment. If their industries were worth a shit, they would have no problem attracting private capital, but in the absence of a rational game plan, they attack the public coffers, robbing from the taxpayers. More sinister, they actively block any attempts to take the necessay steps I enumerated at the beginning of this paragraph. There is a method to their madness. None of the industries they righteously pimp for can stand on their own merits with an oil price of $100 but start to make sense at $200.

Given their success to date at thwarting a national energy plan, this horrifying scenario may well come to pass. You folks may end going GREEN, but man are you going to pay for it. Hopefully, there's enough left over for food.

-Guga