How Bernanke Stole Christmas

By Julian Dunraven, J.D., M.P.A. (With Apologies to Dr. Seuss)
December 2008


Every Who Down in Who-ville Liked Christmas a lot
But Bernanke, who lived just north of Who-ville, thought it might be for naught.

Bernanke feared for Christmas, and the whole shopping season.
Now, please don’t ask why. No one quite knows the reason.
It could be that interest rates weren’t adjusted just right.
It could be, perhaps, that banks were leveraged too tight.
But I think that the most likely reason of all,
May have been that his brain was under Keynesian thrall.

But whichever of these reasons you may choose,
He stood there on Christmas Eve, fretting for Whos,
Staring down from the Fed with a sour, Bernanke frown,
At the warm lighted windows below in their town.
For he knew every Who down in Who-ville beneath,
Was busy now, hanging a mistletoe wreath.

“And they’re hanging their stockings! He snarled with a sneer,
“Tomorrow is Christmas! It’s practically here!”
Then he growled, with his Fed fingers nervously drumming,
“I MUST find some way to keep Christmas cash coming!”

For tomorrow, he knew, all the Who girls and boys,
Would wake bright and early and rush for their toys!
And finding none there—Oh the Noise! Noise! Noise! Noise!
That’s one thing he hated! The Noise! Noise! Noise! Noise!

Then the Whos, young and old, would expect a great feast.
And they’d feast! And they’d feast!
And they’d feast! Feast! Feast! Feast!
But this year there would be no Who-pudding, and no rare Who-roast beast.
Which was a thought poor Bernanke couldn’t stand in the least!

And then they’d do something he liked least of all!
Every Who down in Who-ville, the tall and the small,
Would stand close together, with Christmas bells tinkling
They’d stand hand-in-hand. And the Whos would start thinking.

They’d march and they’d protest!
And they’d chant! Chant! Chant! Chant!
And the more Bernanke thought of this Who Christmas Chanting
The more Bernanke thought, “I must stop this Who ranting!
“Why for 45 years we’ve made fiat work now!
I Must keep Christmas cash flowing!
. . . But how?

Then he got an idea!
An awful idea!
Bernanke
Got a wonderful, awful idea!

“I know just what to do!” Bernanke laughed in his throat.
And he made a quick Santy Claus hat and a coat.
And he chuckled, and clucked, “What a great Fed-ish trick!
“With this coat and this hat, I’ll look just like Saint Nick!”

“All I need is a reindeer . . .”
Bernanke looked around.
But since reindeer are scarce, there was none to be found.
Did that stop old Ben?
No! Bernanke simply said,
“If I can’t find a reindeer, I’ll make one instead!”
So he called his friend Hank. Then he took some red thread
And he tied a big horn on top of his head.

Then he fired up the printing presses.
He had lots of money to make,
Loaded the sleigh with excesses
And he hitched up old Hank.

Then Bernanke said, “Giddyap!”
And the sleigh started down
Toward the homes where the Whos
Lay a-snooze in their town.

All their windows were dark. Quiet snow filled the air.
The Whos were all dreaming sweet dreams without care
When he came to the first failing bank in the square.
“This is stop number one,” The old Bernanke Claus hissed
And he climbed to the roof, bloated bags in his fist.

Then he slid down the chimney. It looked rather grimy.
But if Santa could do it, then so could Bernanke.
He got stuck only once, for a moment or two.
Then he stuck his head out of the fireplace flue
Where bad mortgage backed debt all sat in a row.
“These derivatives,” he grinned, “are the first things to go!”

Then he slithered and slunk, with a smile most like a snake,
Around the whole town, and financed each big bank’s mistakes.
Fannie and Freddie, Bear Sterns, and Citi
TARP, AIG, GE and more Citi.
To bad business he gave billions, oh very nimbly,
But as for good business, they didn’t get any.

To get the money flowing he was bound to inflate,
So he even brought treasuries down to negative interest rates.
Printing money by trillions he nearly doubled the cash.
Just think of Zimbabwe; it wouldn’t be rash.

Then he stuffed all the money down the chimneys with gusto
“And NOW!” grinned Bernanke, “I’ll fix up the Autos.”

And then Bernanke flew to Detroit, with more money to drop
When he heard a small sound say “The Senate said ‘Stop.’”
He turned around fast, and he saw to his gall
Congressman Ron Paul, who was ready to brawl.

Bernanke had been caught by this noble Who master
Who’d got out of bed to see what was the clatter.
He stared at Bernanke and said, “Santy Claus, why,
“Why are you devaluing our dollar and savings? Why?”

But, you know that Bernanke was so smart and so slick
He thought up a lie, and he thought it up quick!
“Inflation’s not bad,” the fake Santy Claus lied,
“It’s just that this level has never been tried.
“So I’ll inflate until we can create a new bubble.
“Then our economy will be back to boom on the double.”

But his fib fooled no one. Then he grabbed Paul by the head
And he trussed him and gagged him and tossed him back in bed.
And when Paul was disposed of, with his Constitution too,
He turned back to Detroit and forced the money through.

But inflation burned through the Whos’ savings like fire.
They were poorer, not richer, as he left, the old liar.
Working longer and harder before they could retire.

And the only speck of money
Left to the average Who house
Were accounts that were even too small to buy food for a mouse.

Then the same thing befell all the Whos’ houses
Leaving accounts much too small to feed the other Whos’ mouses.

It was a quarter past dawn . . .
All the Whos, still a-bed
All the Whos, still a-snooze
When he packed up his sled,
Packed it up with their final stimulus package! The checks! All indebting!
For the poor! And the Middle Class! For Change! What trappings!

80 trillion feet up! Up the side of Mount Debt-it,
He rode to overlook Who-ville, on their heads to dump it.
“Hal-loo to the Whos!” he was Fed-ishly humming.
“They’re finding out now that Christmas cash is coming!
“They’re just waking up! I know just what they’ll do!
“Their mouth will hang open a minute or two
“Then all the Whos down in Who-vill will all cry YOO-HOO!”

“That’s a noise,” grinned Bernanke,
“That I simply must hear!”
So he paused. And Bernanke put a hand to his ear.
And he did hear a sound rising over the snow.
It started in low. Then it started to grow . . .

But the sound wasn’t happy!
Why, this sound sounded angry!
It couldn’t be so!
But it WAS angry, VERY!

He stared down at Who-ville!
Bernanke popped his eyes!
Then he shook!
What he saw was a shocking surprise!

Every Who down in Who-ville, through distortions great and small,
Was chanting! Not one had any presents at all!
He HADN’T kept Christmas cash flowing!
IT FROZE
Somehow or other, it froze, though how, he did not know.

And Bernanke, with his Fed-feet ice-cold in the snow,
Stood puzzling and puzzling: “How could it be so?
“It froze despite nationalizing! It froze despite rate cutting!
“It froze despite bailouts, quantitative easing, and printing!”
And he puzzled for hours, ‘till his puzzler was sore.
Then Bernanke thought of something he hadn’t before!
“Maybe our economy,” he thought, “doesn’t come from just a store.
“Maybe the economy . . . perhaps . . . means a little bit more!”

And what happened then?
Well, in Who-ville they say
That Bernanke read von Misses and Hayek that day!
And the minute he saw true capitalism’s light,
He whizzed back to town to set all to right.
He stopped all the bailouts and ended fiat money!
And he, he himself, Bernanke, restored a land of milk and honey.

Bush Blasted for Usurping Congress on Auto Bailout: Sen. Inhofe Defends the Republic as a Modern Cicero

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

Honorable Friends:

Heeding the overwhelming will of the people-- and perhaps at last developing a bit of good sense-- the U.S. Senate has rejected the idea of a bailout for the Detroit automakers. If we were still following that dusty old parchment called the U.S. Constitution, the matter would have ended there, at least until the next president takes office. As we have been ignoring the Constitution for a while though, the story continues.

President Bush declared that the Senate, far from rejecting the bailout, simply failed to act. On that flimsy pretext, he will use $15 billion of the $700 billion bank bailout to aid Chrysler, GM, and Ford. Although Congress authorized that money only for the financial services industry, there has been no oversight, and the Bush administration has already altered the implementation of the bailout several times without consequence. Thus, despite the fact that such actions completely usurp the Legislative branch and represent a total betrayal of our Constitution, the Bush administration is proceeding without hesitation.

At least one of our senators, though, is refusing to retreat quietly into irrelevancy. Sen. James Inhofe (R-OK), one of the most staunchly conservative members of the Senate, is fighting back on behalf of our republic and the Constitution. Like a modern day Cicero, he issued a philippic against Treasury Secretary Henry Paulson and the Bush administration declaring:

"As the Bush administration changes course once again, it is becoming clear to me that Washington, D.C. might be completely out of control.

"How have we come to a point that Congress--the institution that represents the will of the American people--has handed over so much money and authority to the Treasury Secretary that, if the democratic process fails to achieve a certain desired outcome, the outcome is simply ignored? The stated purpose of $700 billion bank bailout was to rescue us from a catastrophic breakdown of the financial system. Now we're told that the money might be used to bailout the auto companies because legislating their multi-billion dollar gift from the U.S. taxpayer might come with conditions that were too inconvenient for interested parties. I've been a U.S. Senator for some time, and I have never seen anything like this.”

Sen. Inhofe is correct. Congress has been lax in its duties and handed over far too much authority to the executive branch, which is now running roughshod over our republic and tearing the Constitution to shreds, while claiming that it is all justified because we face an emergency situation. Yet, that sort of justification is precisely what our Constitution and its processes were created to guard against in the first place.

It has gone on too long. When we suffered a terrorist attack and faced two wars, Congress handed the President unprecedented powers, both domestically and militarily, which the Supreme Court is still trying to cut back to constitutional levels. Congress sat by while the President made use of torture, suspended the Writ of Habeas Corpus, spied on our own people without warrants, and otherwise made a mockery of our Bill of Rights—because it was an emergency. When the financial crisis hit, Congress again handed the president such sweeping power over our financial system that the U.S. government overnight gained more control over private industry than is exercised by the socialist government of Hugo Chavez's Venezuela. Our money printing has ballooned to a level not seen in the world since the French Revolution—increasing the money base almost 80%--over 40% in the last month alone. Now, the President even presumes to ignore express will of the first branch of government entirely—because it is an emergency.

Our republic is in grave danger. Though I may disagree with Sen. Inhofe occasionally on social issues, I cannot deny that he has both integrity and honor. Already, he has had my respect through the financial crisis because of his determined and reasoned opposition to the woefully irresponsible and ill planned bailouts. Now, though perhaps already too late, he is trying to defend the Constitutional process that defines this nation. For that he has my utmost admiration. I only hope he has more success than Cicero himself, and that his colleagues, and we the people, have enough courage and conviction to join and support him in his opposition to this madness which, as he states, “will not only be futile, but will also move this country further from those first principles that have made us the great nation we are today."

S·P·Q·A
Senatus Populusque Americanus
For The Senate and People of America

More Than 650 Scientists Dissent over UN Global Warming Report

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

Honorable Friends,

Whenever any religion seeks to turn dogma into law, society should be wary. Inevitably, when dogma becomes law, liberty, reason, and true scientific inquiry all suffer. It is not hard to find examples. Just look at the disasters which befell the Catholic Church with Copernicus and Galileo. The Catholic Church learned its lesson though. It has since formed the Pontifical Academy of Sciences to ensure that the Church is never again on the wrong side of the facts. The academy is more interested in truth than in dogma, and thus does not require its members to be Catholic. As a result, its membership roster includes some of the greatest minds of our time, such as Nobel laureate Dr. Steven Hawking, a man who believes more in mathematics than in the common conception of a creator being.

Contrast this with the nations under the sway of Islam. There, any scientific finding that does not fit with the Muslim dogma is either discarded or, worse, condemned. It is a common complaint among the expatriates of Islamic nations that, in order to conduct decent scientific research, they must first leave their native countries. To these people, the West has been a safe haven. However, when it comes to the issue of global warming, the West has its own problems.

In 2003, Michael Crichton famously criticized environmentalism as shifting from genuine scientific concern into the religious preference of urban atheists. In 2005, he continued his criticism of the zealous absolute faith our people seem to place in the idea of global warming, despite a great deal of uncertainty in the data. Certainly, the U.N. Intergovernmental Panel on Climate Change (IPCC) displayed a dogmatic commitment to global warming worthy of any Islamic nation when it issued its recent report on climate change in June of 2008. It claimed to represent a consensus of scientific thought and pronounced that the debate over global warming had ended. They should have said that the debate over global warming would no longer be tolerated.

It seems someone forgot to inform the bureaucrats and politicians who assembled the IPCC report that “consensus” and “compromise” are words from the world of politics which have no place in the world of science. While useful for crafting policy, incontrovertible facts do not compromise no matter how much political pressure they may be under or how many people dislike them. Yet, since the publication of the report, we have learned that it was indeed policy—not proofs—which the UN and IPCC were expressing. Any study which did not confirm or support the conclusion that Global Warming was a real problem caused by human action was systematically excluded from the report. It is fiat science.

Fortunately, the Republican minority of the U.S. Senate Committee on Environment and Public Works, led by Sen. James Inhofe (R-OK), has sought to correct this egregious misrepresentation of scientific fact. The Committee’s Minority Report cites over 650 scientists who dispute the claims made in the IPCC report, which was authored by a mere 52 scientists. Among its 231 pages, you will find links to peer reviewed studies which claim that the sun’s increasing activity may be responsible for the warming we have recorded on earth, along with many other theories that did not fit into the agenda of the global warming advocates at the U.N..

The studies cited should make it abundantly clear that the debate over global warming is far from finished. The topic of climate change is still filled with a great deal of uncertainty and deserves far more study before we commit to climate policies which could damage both our liberty and economy without giving any guarantee of helping our environment. In the meantime, we should be wary of what to believe on faith alone. Though waiting on the scientific method may be tedious, history shows us the disastrous consequences of putting our faith in the wrong place. The modern Islamic world gives us a very good picture of what dogmatic science can do to a society. More to the point, though, if we cannot trust our own government to manage even basic fiscal policy responsibly, why should we trust an organization of many governments to issue scientific findings by political decree on something as complex and uncertain as the climate? I should think the current financial crisis would be more than enough reason to keep them away from anything more complex than acknowledging that the sky is, indeed, blue.

The Bailout Total: $8.5 trillion-- Inflation To Come

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

Honorable Friends:

In prior posts, I have made my disdain for the economic bailouts abundantly clear. Thus, I have not been at all surprised that the bailouts have failed so miserably to solve the financial crisis over these past several weeks of extreme volatility. What has surprised me a bit is the amount of money the government is willing to gamble in a desperate attempt to force the bailouts to work.

“Helicopter” Ben Bernanke, earned his moniker by once promising to drop helicopter loads of money on to a financial crisis if needed. This was the lesson he gleaned from years spent studying the Great Depression of the 1930s. Mr. Bernanke determined that had we simply thrown enough money at it, we could have ended the Great Depression much earlier. The Austrian School would say that he is exactly wrong, but he is now putting his theory to the test in our current financial crisis. As the helicopters continue to swarm, I think it only prudent that we occasionally glance at how much we are spending to test his theory. Jim Puplava, investment advisor and CEO of Puplava Financial Services, Inc., has provided a quick accounting of the helicopter drops and so far:

· For commercial paper, we have allocated $1.8 trillion;
· The Term Auction Facility, which provides negotiated rate for banks to borrow from the FED, has allocated $900 billion;
· Other assets have $606 billion;
· Finance company debt purchases, like the Fannie and Freddie bailouts, have received $600 billion;
· Money Market Facilities have $540 billion;
· The Citigroup bailout cost $291 billion;
· Term Security Lending has $250 billion;
· Term Asset Backed Loan Facilities (TALF), designed to help credit cards and business loans, has $200 billion;
· The bailout for AIG cost us $123 billion;
· Discount Window Borrowings has been allocated $92 billion;
· Commercial Program Number 2, which helps banks buy commercial paper from mutual funds, received $62 billion;
· Discount Window Number 2 has $50 billion;
· The Bear Stearns bailout cost $29 billion;
· Overnight loans have received $10 billion;
· Secondary credit is at $118 billion;
· Federal Deposit Insurance Commitments (FDIC) which guarantees loans, has received $1.4 trillion;
· Guarantees on GE Capital are at $139 billion;
· Citigroup’s second bailout took another $10 billion infusion;
· The Troubled Assets Relief Program (TARP) we heard so much about has $700 billion;
· The earlier stimulus package this year cost $168 billion;
· Treasury Exchange Stabilization Fund took $50 billion;
· Tax breaks for banks are at $29 billion;
· And Hope for Homeowners devoured $300 billion

Thus, the total amount we are spending on the bailout so far is $8.5 trillion.

Early next year, we can look forward to another $700 billion bailout directly to the people (which will include even those who do not pay taxes) as promised by Obama and Pelosi. There will also be some form of bailout to the Detroit automakers, and the bailout for the various states is still to come as California has already begun to issue IOUs. For more detailed information, check out Mr. Puplava’s Financial Sense Newshour, “The Big Picture” for December 6, 2008.

Currently, our GDP is only $10-13 trillion depending on how generously you want to calculate it. Either way, spending 60-80% of our GDP on bailouts should outrage you. So where is this unimaginably vast amount of money coming from? As I have said before, we are simply printing most of it. As you might imagine, such frantic money printing should massively increase inflation. Just examine the money base chart below.

This massive increase has not yet hit the money supply (See chart of M2 below) as the banks are busy trying to recapitalize and deleverage rather than giving out new loans. We used to call that prudent, but prudence is not what our government wants right now. Many of the above programs have been created to allow the government to bypass the banks, injecting cash directly into the economy in an attempt to spur spending, create new bubbles, and stagger along to the next distortion created crash. If it doesn’t work, we can look forward to a large devaluation of the dollar.

This impending inflation and devaluation should explain why investors like Warren Buffett have totally divested themselves of the dollar. Yet, even faced with this evidence, people are still flocking to treasury bonds despite the abysmally low or even negative returns on them right now. A wiser investor would seek stocks of companies which consistently pay dividends, have increased their dividends, and are likely to continue doing so. The precious metals also continue to look appealing as a hedge against the inflation our inept government is trying to ram down our throats.

With the election behind us, countering the political forces pushing the bailout—and the resulting inflation—has become much more difficult, but remains vitally important. Making our own displeasure with these bailouts known and holding politicians accountable for their actions are the only defenses we have against the continued financial mismanagement coming from our government.

Interior Permits Guns in the National Parks

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

Honorable Friends:

In its waning days, the Bush administration has at last given us something to celebrate. And no, I am not simply referring to its imminent departure. Today, the Assistant Secretary of the Interior for Fish, Wildlife and Parks, Lyle Laverty, announced new regulations recognizing an individual’s right to bear arms in the national parks and wildlife refuges.

According to the announcement, the new rule, “would allow an individual to carry a concealed weapon in national parks and wildlife refuges if, and only if, the individual is authorized to carry a concealed weapon under state law in the state in which the national park or refuge is located.” Congratulations Coloradans; all you need to do to carry a concealed handgun in the national parks here is to obtain a concealed carry permit recognized in Colorado. Just don’t try it in states which refuse to recognize our permits—such as the entire Left Coast.

This is a rather major development. Previously, possession of a loaded firearm in a national park or wildlife refuge was strictly forbidden by law since 1983. The former regulations demanded that any firearm be kept unloaded, in a locked case, in some inaccessible part of your vehicle, such as the trunk, in order to enter a national park with it at all.

The new changes came about as Interior Secretary Dirk Kempthorne responded to letters from 51 Senators (Letter 1 / Letter 2) of both parties who pointed out that 48 states now have concealed carry laws and our federal regulations should be updated to reflect that change. Occasionally, even Senators do manage to say something sensible, and it seems Secretary Kempthone agreed.

Naturally, this change in the rules did not come without substantial opposition and, in the published rule, the Department of Interior took the opportunity to respond to many of the concerns raised during the lengthy 90 day comment period. For instance, environmentalists will be pleased to know that most studies conclude that the vast majority of concealed weapons permit holders are not, in fact, poachers. Rather, they tend to carry their weapons for purposes of self defense, and are well aware that any improper use of a firearm is still a punishable offense. The Interior goes on to admit that violent crime is on the rise in national parks, especially near the border and in remote areas, with 8 murders, 43 rapes, 57 robberies, and 274 instances of aggravated assault in 2007. The Department also warns that the mere 3000 officers it has patrolling the millions of remote acres in our national parks cannot possibly guarantee safety. Thus, having a weapon of self defense may not be such a bad idea.

The year 2008 has been good for gun rights and the Second Amendment. First, Justice Scalia gave us the highly entertaining opinion in the District of Columbia v. Heller, in which the Supreme Court affirmed an individual right to keep and bear arms, overturning the D.C. handgun ban. Now we have the Interior opening the national parks to concealed carry permit holders. If you are still looking for stocking stuffers, I cannot think of any better way to commemorate this remarkable year than purchasing handgun training courses for you and your loved ones in preparation for the concealed carry permit application. What better way to ensure a ‘safe’ and happy holiday season?