Monday, February 2, 2009

What Protections Do We Have From the Government?

Very busy weekend hacking apart the ice sheet that was my driveway. 4 hours of pick-axe work later, and again the driveway is all hardtop. Now my back is mad at me.

Reader Input
As I have said many times, the real payoff of writing this blog is the readers that stop by again and again. The feedback and discussion in the comments section is my first click when I get on the computer. Loyal reader Kevin often posts well thought out macro comments that always get me thinking. In response to Friday's post Kevin dropped a line in the comments section that had plenty of depth and insight. reproduced here with permission:
The dollar is strong because gold is not a medium exchange for most purposes, and every frigging county is trying to do the same damn thing at the same time which is devalue their currency and run massive fiscal stimulus programs and running up budget deficit in the west, or in the east so they can export to us or to try and create inflation and inflate away the debt. The Yen is about the only exception and that has thrown Japan straight into a depression as the carry trades unwind due to deleveraging. Gold is also benefiting as this happens due to people in other countries buying it because their currencies are collapsing at a faster rate then the dollar which is used to settle international trade or at least what's left of it.
The real danger is a major policy blunder by these asshats in DC if they blow up the bond market it's over lights out end of story and the likely hood of that happening can not be understated. Argentina death dance.
One of the item on Obama's list was to back the unions while this would have been ok in boom time it is not good when the economy is in the toilet headed into a deflationary spiral. Labor is a commodity just like anything else and if there is a sh#t pot full of supply and zero demand prices or in this case wages must fall.
The problem with BARF is that the debt is still there, it doesn't matter if the banks hold it or the taxpayer until this stuff is flushed there will be no recovery and things will only get worse.
I starting to think the only requirement that there must be to be in Congress is to have flunked basic math.
Kevin

Well thought out analysis that puts what you read in the mainstream media to shame.

Loyal reader Lisa writes her own blog, and I encourage her to leave a URL that we can use to check it out. Same goes for any reader that writes. I am always looking for sites to read, and will happily post your URL's for the readers here to take a look. Debate and the trading of ideas is the best way to learn and grow.

What Protections Do We Have From the Government?
Iceland collapses. The UK was near collapse. Russia is looking weak in the currency department. China is seeing unrest as workers are losing jobs. Japan looks to be as bad as any time during her "Lost 20 years and counting". The US had major structural issues well covered here and other places.

There are some worrying items that keep popping up that have made me think about just what kind of protections we as private citizens may or may not have against the government. Consider these two items:

-California Suspends State Tax Rebates
Faced with a busted budget and no free cash flow, California has stated they will issue I.O.U's instead of state tax refunds this spring. What if the Federal government went the same way? What would you do? What could you do?

-401k Seizures
I understand that this item had a ton of circulation among the more right wing type of publications. Let me say for the record I have never heard or read credible evidence that the US Congress have even considered this move. Be that as it may, the country of Argentina went right ahead and took private wealth in 401k's and made it the government's money to hand out, invest, and lose as they please. There are plenty of folks at the DAVOS economic summit floating similar ideas. What if your retirement money was taken in by the US government? What could you do?

The two examples show clearly that when money is involved the average joe is powerless. The FED continues to expand their powers under amorphous language. Terms like "the FED can expand its role in the interest of economic stability" are very troublesome. Who is to say "NO" to outright grabs of private property and money?

Now you may think I am wearing a tin foil hat right now. But what is so different between the government using trillions of taxpayer money to bailout the banks (when such action is running about 70% opposed by the public) and taking over 401k's for cash flow help? Why not suspend all tax rebates in the interest of "economic stability"? Why not limit how much cash you can withdraw from your own account to keep money at the banks? Is any of this out in left field?

I am at a loss to think of a clear course of action. Obviously elections allow for removal of government members, but when do people really vote the same bums out? It seems we will have to assume things will not go too far. You know what happens when you assume though!

Tidbits
The web site "The Big Picture" has a quote of the day posting. Today's was pretty good so i am including it here:
"There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers". —Richard Feynman (1918 - 1988)

Scary!

I came across a picture of what 1 Billion dollars looks like all in physical form. No confirmation that this bundle was located in Ben Bernanke's basement waiting to be loaded into helicopters:


Have a good night.

5 comments:

Anonymous said...

Gysc

The 401K and IRA's for that matter are what keep me up at night. See the government doesn't have to seize them all they have to do is put a 100% tax penalty on them if you try to draw money out at say less the age 72 or what ever age. This would effectively stop any out flows from these programs. This could be done with the flick of a presidential pen. i know a lot of guys that are less the 60 who are retired and this would force them back into the workforce if they haven't already been forced into it now due to the stock market fall.
The ones I really feel sorry for are guys your age who are being forced to pay into SS and Medicare threw payroll deductions which you will never see so basically it's just a non refundable tax on top of the taxes that you pay. You will also end up paying for a good part of the greatest fleecing in the history of the world as sooner or latter taxes will have to go up along with inflation to pay for this mess.

Kevin

EconomicDisconnect said...

Kevin,
Right on as usual. There are decisions being made and actions being put in motion right now with no public consult and no debate. Most are ok as long as they are not inconvenienced, but when the people do wake up it will be too late.

Anonymous said...

New website is up, here's the link. www.capitalistpreservation.com
I'll eventually figure out how to link your blog from my site. You are MY favorite blogger!

Anonymous said...

I know you all are tired of hearing about the ice storm that hit my area but if I could add these last couple of things I won't mention it again.

First off: It is a really good idea to have some 20's, 10's and 5 dollar bills around and not just hundreds, it took the banks a few days to open (because all local gennies were snatched up pronto, and it took awhile for outside help to come).

Average people have hardly any cash on hand and it is hard to break a hundred dollar bill in these cicumstances.

Average people at this point in time have no concept of the value of precious metals, all they understand is cash (I believe this will change in the future though).

The National Guard is here and there have been no "Katrina" incidents that I have heard of i.e. they are not trying to take our guns away, in fact they are delivering food and water and are appreciated.

On that note the local news channel has been reporting that if the Sheriff pulls up they will have their lights on to let anyone know that they are not thieves and not to shoot them : )

Power should be restored fully within 2 more weeks in this area.

Anonymous said...

We've had snow/ice on the ground for over a month, but nothing like what you are describing. I don't know where you are, but it sounds like you all have had it rough. Sorry to hear it.