We Won the Bailout Battle—But the War Continues

By Julian Dunraven, J.D., M.P.A.

Dear friends,

In my last column, "Stop the Bailout!" I said that we all needed to contact our Congress people and demand that they vote against the $700 billion bailout plan. Thanks to all of you, and millions of other people who did just that, we were successful in pushing Congress to kill that ghastly legislation. Congratulations! Nonetheless, we must remain vigilant.

The bailout bill was dreadful. My last column already referred to some of its problems, such as massively increasing our national debt, starting us on the road to hyperinflation, swiftly devaluing the dollar to the point of collapse, and entangling the Federal government in our economy to an extent never before seen. The final version Congress put out, though, also contained no meaningful restrictions on the spending or the price. It contained several arguably unconstitutional provisions, and fretted endlessly about executive compensation packages, which are almost irrelevant given the enormous scope of this bailout. In demanding that the companies involved repay the government in five years, it also failed to remove these bad debts from the market and created unrealistic expectations which serve to discourage outside investment and virtually guarantees that we will be saddled with these ailing companies for many years to come. Everyone agrees that it was a bad bill. Everyone also agrees that it was the only bill Secretary Paulson would approve. Fortunately, the secretary does not run this country. Nonetheless, though we won the battle, the war has only just begun.

Even now, the leadership in Congress is preparing to resubmit the bailout plan. House Speaker Nancy Pelosi seems to think she can get the votes she needs if the new package includes language that would ease bankruptcy laws to allow debtors to keep more of their assets, thus making it much easier to file for bankruptcy. Making it easier for people to default on their debts is not a cure for our economy. This would not make the bill better; it would make it far worse.

Unfortunately, our esteemed presidential candidates are not helping matters either. Those of you who watched the first presidential debate saw the deer-in-the-headlights looks they gave, and heard their obfuscating answers when they were asked about the economic issues we are facing. Neither of them has a good understanding of what is happening in our economy. The fact that they both supported the bailout is proof enough of that. They both have made the mistake of listening to Bernanke and Paulson, and maintain that Congress simply MUST do something or the consequences will be dire.

Not so. Though the market will undoubtedly go through some painful readjustments as it purges itself of these poisoned assets and failed companies, its recovery, if left alone, has the potential to provide good, strong investment opportunities. With low stock prices and increased savings, Money Morning predicts that U.S. domestic capital will actually increase, reducing outsourcing and improving our deficit of payments--a good thing. This will leave us in a much stronger economic position to face the real threats coming quickly at us, such as Peak Oil and the liquid fuels crisis. However, this may not be possible if Congress and our presidential candidates keep trying to drive us into a depression with their hasty and ill conceived plans. Thus, it remains incumbent upon us to show them what they need to be doing. Here is what you can do right now to help:

1. Educate yourself. If you have not done so already, find reliable people who have been predicting these problems for a long time (that rules out Benanke and Paulson). Listen to what they have to say about what caused the problems and what we have to do to solve them. For a start, I strongly recommend Financial Sense. It has many useful articles and the Financial Sense Newshour (3rd Hour with Jim Puplava and John Loeffler) is a wonderful weekly broadcast that will keep you abreast of everything you need to know in terms that are easily understood to laypeople.

2. Keep pressure on Congress. Keep writing and calling your Congress members-and maybe even the leadership. Tell them not to pass this bailout--in any form. If they never get any support from the people, they won't act, and they won't ruin our country. If we slack off, though, they are likely to pass some new horror that will be even worse than the last one. A dismantling of our bankruptcy laws would be just that.

3. If you want to tell Congress what it should be doing, you might suggest that they repeal some of the bad government programs that got us here in the first place such as the Community Reinvestment Act, which actually encouraged giving loans to high risk borrowers as a social engineering project. After that, they should think about reining in the Federal Reserve and its fast and loose monetary policy which has left us with terrible inflation, forced business into high risk investments just to get a decent rate of return given our piteously low interest rates, and left the dollar on the verge of collapse. After that, they need to think about eliminating certain corporate and capital gains taxes to encourage investment.

4. Protect yourself and your family. I am not a financial advisor, so I cannot tell you what would be best for you and your family. I can say, however, that there are plenty of opportunities to be had if you are paying attention. Gold, silver, and other precious metals are very good security again failure of the currency. In an economy where energy is increasingly becoming an issue, oil and other energy investments look good. Do not have too much faith in government, its programs, or its bonds, however. We are all seeing, right now, the dangerous actions our government has been willing to take with regard to our financial systems. We were able to stop the bailout, but there is no guarantee we will stop future idiocy. If the government's foolishness manages to utterly debase the currency, you do not want to be depending on that same government for your financial security.

Stop The Bailout! It Is Time To Demand Inaction

By Julian Dunraven, J.D., M.P.A.

Dear friends,

We are facing economic calamity. We stand upon the very brink of destruction yet, even now, we have the capacity to save ourselves from utter ruin and escape to heal our wounds. We must act quickly though, for the U.S. Congress, in its unerring stupidity, is poised to push us into the gaping maw of doom in a matter of days. It is now incumbent upon every citizen to defend this country by contacting their congress people and begging them NOT to pass this ghastly bailout.

Our choice is simple. We can choose not to pass this bailout, in which case the market will stumble a bit before correcting itself. Some companies will fail, jobs will be lost, and times will be hard. Then the good companies, who have managed to run themselves well, will begin to fill in the gaps left by the failures. Other, dynamic businesses will also grow into the market space, and we will recover.

The other option is to pass this bailout. Thus, we spend more than $700 billion we do not have for a result that is not guaranteed. In doing so, we prop up failed enterprises and create an unending dependence on the government that may require many billions of dollars more to sustain. We have none of this money. To do this, we either need to borrow more money and virtually double our national debt or print more money. Either way, inflation will skyrocket and the value of the dollar will be obliterated. What was a bad economic situation will become full economic ruin. In this case, the whole of the world's economy will face depression and we will not recover for a very long time.

Thus, we can restrain ourselves now, suffer through our hardships and recover as quickly as we can, or congress can pass this bailout and we can suffer terribly for a very long time in full economic ruin.

That is our choice. Congress does not see it because they are too busy looking at elections and think they must be seen to do something--something they do not understand. They are more afraid of losing an election than losing the country. In this case, though, they must do nothing. Only if they refrain from acting will we be saved. We all must write to our congress people immediately, before it is too late, and demand that they do not do this thing--that they do not sacrifice this nation to their ambitions-- and that they do not pass this bailout! Time is running out.

P.S. Ron Paul has issued a similar call you may read here.

Sarah Palin: A Change More Profound than Giving Speeches

By Julian Dunraven

If this election is really all about change, then November will offer voters a choice between candidates who like to talk about change, and candidates who live for change.

On the left, we have Sen. Barak Obama who, in his extremely short tenure in the U.S. Senate, has never once broken with his party's agenda to champion needed reforms. For his running mate, he has chosen Sen. Joe Biden, a bastion of the liberal establishment for the last 35 years.

On the right, we have Sen. John McCain, who has made a career of going against anyone he thought was wrong--even if that occasionally includes members of his own party. As his running mate, he has chosen Gov. Sarah Palin, who has already proven that she is a consummate and principled reformer. She took on some of the most powerful members of her own party--including Sen. Ted Stevens--to fight corruption and bring ethics and accountability back to government. She slashed budgets, cut taxes and even sold the governor's private jet on E-Bay to bring fiscal responsibility back to government. And unlike so many modern politicians who like to talk about values but rarely live by them, Gov. Palin doesn't just say she is pro life and pro-family--she chose to have her youngest baby even though she knew he would have Down Syndrome, and she has been incredibly supportive of her daughter, who is also choosing to have her baby--despite the difficulties of young motherhood.

Gov. Sarah Palin is a remarkable woman who somehow manages to impress both fiscal and social conservatives at the same time. I can't remember the last time Dr. James Dobson and I agreed on anything but the quality of the weather, yet we are both excited about Gov. Palin and I think the reasons for that are clear: she represents what the Republican Party, at its best, used to be, what it should be, and what it will be again.

Change is coming, but not with Obamamania. Long after that fever breaks and passes, the true reformers, John McCain and Sarah Palin, will be hard at work restoring the glory of this country which Congress and Bush have so badly tarnished.