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Michael Fitzsimmons
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Michael Fitzsimmons focuses on investments in the oil & gas sector with an eye for dividend income and long-term capital appreciation. Fitzsimmons is an engineer, not a CFA. The information and data presented in his articles are obtained from company documents and/or sources believed to be... More
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  • You Say You Want a Revolution? Glimpses of Nehru
              
                Fareed Zakaria, one of the brightest foreign policy minds of our day, recently wrote a grand book entitled The Post-American World. In this book Zakaria highly recommends reading Glimpses of World History by fellow Indian – Jawaharlal Nehru. I’d heard of Nehru but didn’t know much about the man. Since I see eye-to-eye with Zakaria on so many of the issues facing the world today, I took his advice and am now reading “Glimpses”. It is, by far, one of the best books I have ever read.
                The first thing you discover about “Glimpses” is that it is a collection of letters written to his daughter while doing time in various British prisons. His crime was advocating for India’s complete independence from the British Empire. Under the mentorship of Mahatma Gandhi, Nehru rose to President of the Indian National Congress and eventually was elected India’s first Prime Minister. These letters helped Nehru deal with the guilt he felt from being separated from his daughter during her young and formative years. The young woman on the receiving end of these letters turned out to be Indira Gandhi who also served as Prime Minister of India.
                The book is aptly titled as the author takes a look a man’s evolutionary path. What makes the book different for me (an American) is the very objective and world wide treatment. What I mean is, the history covered includes India, China, and the rest of Asia. Growing up in America, my history education was centered around European and American history and this left some gaping holes – primarily India and China and to a lesser extent Japan. Nehru weaves together the history of all areas of the world in more-or-less chronological time. I find his presentation, logic, observations and viewpoints quite fascinating. Gandhi would no doubt be very proud of his protégé’s work.

     
    Mohandas Karamchand Gandhi

     
    Nehru and I are currently in the 18th century, which is famous for three revolutions. The revolutions were of three distinct types: political, industrial, and social:
     
    ·        Political. This revolution took place in America and was a revolt of the thirteen colonies and the declaration of an independent republic called the United States of America.
    ·        Industrial. The industrial revolution began in England and spread to other western countries and then elsewhere. It was the advent of the steam engine and big machines. It would impact the world like no revolution before or since.
    ·        Social. The social revolution took place in France and was of course the great French Revolution. It put an end to monarchy rule and innumerable privileges.
     
    The political and social revolutions were quite violent. The industrial revolution was peaceful. All three had wide ranging influence. Many times while reading this book I have thought to myself “If only American policymakers would read this!” I had that same thought today while reading about the 18th centuries three great revolutions. The overpowering urge in myself saying, YES!” compelled me to write this article. What I mean is we need these same three revolutions today in America. We need them all to be peaceful, and we need them all to be of a slightly different nature – but we still need them. Let me detail the revolutions needed.
     
    Politically, the United States is simply broken and must be fixed. The 50 States should ban together and exercise their right to call for a Constitutional Convention. In theory, this revolution should be easy as the heavy lifting has already been done. We already have the U.S. Constitution and Bill of Rights. All we need is to get back to these wonderful documents! For instance:
    o       Constitutionally, wars must be declared by Congress (not the President)! One could make an argument that all members of Congress (and the President) voting for action in Iraq without first declaring war should be impeached for not upholding their oath of office.
    o       Money must be backed by gold and silver, not printed out of thin air by an un-Constitution entity (the Federal Reserve). Abolish the un-Constitutional Federal Reserve.
    o       Implement a “flat” tax and rid the system of tax loopholes favoring the wealthy.
    o       Institute term limits.
    o       Impeach any member who does not uphold the U.S. Constitution and/or the oaths of office.
    o       Pass a balanced budget amendment to stop all the funny money, wars, and pet projects.
    o       Campaign finance reform – we must get the industrial lobbyists out of policymaking so that policy and legislation will be made and written for the good of the American middle class instead of a handful of wealthy industrialists.
     
    Industrially, the United States must re-industrialize the country around the single goal of energy independence. America’s 21st century reindustrialization should be centered on its #1 economic advantage over all other countries: it’s abundant natural gas reserves combined with its natural gas pipeline distribution network connecting every major city in the U.S. and homes where 130,000,000 cars and trucks could be refueled every night in their garages with natural gas. This reindustrialization would create good paying jobs in the auto, energy, and industrial sectors and would build an energy infrastructure that would power this economy for decades to come, reduce foreign oil imports, and pay dividends to all American workers and families. All of this can be done by taking advantage of well-known technology that is decades old. The industrial revolution should have, as a blueprint, a strategic long-term comprehensive energy policy:
     
    Socially, the needed revolution is the biggest challenge of all. The United States must awaken its people to demand better of its government - better health care, education, and policymaking. We should demand integrity, morality (in policymaking), and backbone to stand up against special interests from our politicians. Nehru says a country’s strength is not defined by their military might. It is defined by the citizen’s resistance to servitude. Today, I am not convinced the majority of Americans even realize they are being led down the path of indentured servitude by the fiscal debt and deficits our politicians (both Republican and Democrat) have heaped upon our shoulders. If they do realize it, they certainly aren’t doing much about it. We are not even demanding pragmatic energy policy even after the experience of paying for $147/barrel for foreign oil and $4.50/gallon gasoline. We are not demanding our tax-payer money back after seeing billions go to already wealthy executives as “bonus money” for giving us the greatest economic contraction since the great depression. We are not demanding our media report news and facts instead of tabloid sensationalism. We are in fact a crisis waiting to happen.
     
    I suppose I need to tie this all up with some investment advice. It is simple: gold and silver. Throughout history there have been many revolutions resulting in economic dislocations and turmoil. If a body is able to survive the transition, the best storage of wealth has always been gold and silver. If the U.S. doesn’t have the three peaceful revolutions referred to above, I am afraid many Americans will find out the true worth of gold and silver in the coming years ahead. There is much to be learned from history, but it must first be studied, comprehended, and taken to heart. U.S. policymakers would be well advised to do so.


    Disclosure: Long gold
    Tags: Gold Silver
    Mar 16 11:27 PM | Link | Comment!
  • More Power for the Federal Reserve?
    There were two very disturbing articles on page A2 in Friday's Wall Street Journal. The first, titled Fed's Posture Improves in the Senate, explains how the Fed and Treasury Secretary Geitner have successfully lobbied for the Fed to have ever more power, not less. Apparently, formerly outspoken Fed critics such as Senators Dodd. Bayh, and Shelby have now been brought back into the fold and now support legislation giving the Federal Reserve supervision of the largest banks in the country. Senator Dodd had formerly crafted a bill to carve the central bank out of bank supervision and focus the Fed on monetary policy (which they have also failed at).

    In the second article, Bernanke Says Deficit Action is Key, Bernanke is quoted as saying:

    "But it is very important for Congress and the administration to come to some kind of program, some kind of plan that will credibly show how the United States government is going to bring itself back to a sustainable position."

    Where was Bernanke when Bush was doubling the deficit? This statement is actually an admission by Bernanke that the U.S., led by his policies at the Federal Reserve, is in currently in an unsustainable position. Given that he and his predecessor Alan Greenspan have put us in an unsustainable position today, then why on Earth would Congress give the Federal Reserve even more power as stated in the first article? This reminds me of the "bonus money" bailout for the executives at Goldman Sachs, JP Morgan, AIG and others: let's reward the people most responsible for the financial mess we find ourselves in today!

    This is an abomination. It proves without a doubt Congress is bought and paid for by the fascists in charge of monetary policy. And why not? The Fed can simply print money and give it to anybody it wants. After all, the Federal Reserve is an un-Constitutional bureaucracy operating in complete secrecy with no Congressional oversight whatsoever. And now Congress will give them even more power? The framers of the Constitution did not want a central bank. They required money be backed by gold and silver specifically to prevent the type of control of the money supply that we have today (and the associated fraud that goes with it). On the other hand, every major historical figure supporting socialist or communist rule explained how a central bank is a requirement. Well, we've got our central bank too, so we know where the U.S. is headed. Besides, if the U.S. is going to have a central bank to begin with (we should not), the first requirement must be TRUST. Who can trust Bernanke and friends after they shoveled money at their fellow cronies Lloyd Blankfein, Jamie Dimond, and Robert Benmosche among others? This is fascism, plain and simple. To give these people more power is surely heading in the wrong direction.

    Meanwhile, while Congress pats Bernanke on the back for a job "well done" a true American patriot like Ron Paul continues to be vilified in the press for his very common sense legislation to audit the Federal Reserve. All the legislation asks for is to find out:

    1) how much money did the Federal Reserve print?
    2) who got it?
    3) when did they get it?
    4) why did they get it?

    Every American should support such transparency. Every American tax-payer who is sick and tired of working hard to pay taxes only to see their hard earned money be given to already ultra-rich executives should support Paul's legislation. All Americans who want to get back to the U.S. Constitution and move away from fascism should support this legislation. All Americans who understand the U.S. Constitution require our currency be backed by gold and silver should support this legislation. But who am I fooling - since when did American citizens support of any legislation mean anything?

    Investment Advice

    It is simple" buy gold. The U.S. dollar has depreciated by 95% since the Federal Reserve was created out of thin air (just like the money they print). Expect this to continue and accelerate. We have an oil crisis and a total lack of an energy policy. We now have monetary and fiscal crisis and Congresses response is to give the perpetrators even more power. Congress is leaving American citizens with two choices to preserve their wealth: move out of the country, or buy gold and bury it in the backyard.

    Disclosure: Long gold
    Feb 28 8:57 AM | Link | Comment!
  • Book Review: End the Fed by Ron Paul
     
    Gold is trading over $1200/oz. The Federal Reserve is holding Interest rates at 0% in an attempt to re-inflate the economy. President Obama is continuing and expanding the Bush administration’s policies of deficit spending, corporate bailouts, and war. What better time to review a book that explains it all and recommends a solution? Ron Paul’s book End the Fed does just that: abolish the Federal Reserve and go back to hard money based on the gold standard.
     
    Paul’s book begins by explaining why all Americans should care and why abolishing the Federal Reserve is a good idea:
    ·        It would bring an end to dollar depreciation
    ·        It would prevent the funding of continual unnecessary wars
    ·        It would enable real freedom and protect our liberties
    ·        It would stop the skyrocketing growth of debt
    ·        It would force government to live within its means
    ·        It would end the ability of the Fed (and the government) to control the people through a monopoly on money and credit
    ·        It would stop the Fed from serving the interest of the elite (executives of AIG, Goldman Sachs, etc.) while enacting a sinister tax on the middle class by diluting the value of the dollars they save.
     
    Paul explains how Ben Bernanke and the Fed can print trillions of dollars and distribute them to its cronies with absolute no oversight by Congress. It is not only unconstitutional, it’s immoral.
     
              Paul then gives a very interesting historical perspective on the history of the Federal Reserve and its record: a U.S. dollar today that is worth $0.05 compared to its value when the Federal Reserve was created. The Federal Reserve’s policies are a form of financial socialism for the rich and powerful.
              A discussion follows about Paul’s childhood experiences with money, his main influences (Ludwig von Mises and Murray Rothbard among others) and Austrian economics. Paul explains how the Fed’s ability to print money out of thin air has enabled wars and empire building. If the government had to pay for these wars by taxing its citizens and living within its means, Paul doubts the American people would be so willing to support unnecessary, unproductive, and economically corrosive wars.
              Paul points out that after every major crisis, be it America’s many wars, 9-11, the dot-com bubble, or the meltdown in 2008, the response has always been more monetary expansion and more power to the Federal Reserve. He contends that it is impossible to solve the economic and political problems by turning to the unconstitutional institution that is most responsible for creating all the problems in the first place.
              How ironic it is that a supposedly “free market capitalistic” country like the U.S. has a central bank setting interest rates? Paul contends this is a form of price-fixing and central economic planning. Only the Federal Reserve can create new money out of thin air, inflate the currency, in complete secrecy, and totally without oversight or supervision. Indeed, Karl Marx’s Fifth Plank of the Communist Manifesto states:
     
              “Centralization of credit in the banks of the State, by means of a national bank with state capital and an exclusive monopoly.”
     
    In other words, authoritarian rule is enabled by control of money by an institution like the Federal Reserve. Lenin was reported to have said the best way to destroy capitalism is to debauch the currency. Further, the Federal Reserve corrupts politicians by allowing them to substantiate themselves (and their egos) with unbridled spending, bribery, and immorality. Who can forget December 16, 2008 when Bush rationalized his bailout plan for corporations and their executives by proudly announcing “I have abandoned free market principles to save the free market system.” Paul says this is astounding and preposterous! I say we call it what it is: fascism. And the Federal Reserve enables it and supports it, all in complete secrecy and with no Congressional oversight and no transparency.
              The U.S. Constitution is clear on the matter. Article I, Section 10: “No state shall …. make anything but gold and silver coin a tender in payment of debts.” Paper money is therefore unconstitutional. Period. Further, the Constitution is quiet on the matter of a central bank. However, the Tenth Amendment states: if a power is not “delegated to the United States by the Constitution,” it doesn’t exist. Since the Federal Reserve is not mentioned, logically its existence and power is unconstitutional. Even if it was, it still could not legally repeal the legal mandate for gold and silver coins. There is nothing “Federal” about the “Federal Reserve”, and there is surely nothing in “Reserve”. The term “Federal Reserve” is an oxymoron. Paul also notes how the Supreme Court has consistently bowed to political and corporate pressure by misinterpreting the Constitution on this very straightforward and important issue. Power corrupts. Absolute power corrupts absolutely and the Federal Reserve has absolute power. Is it any wonder that Greenspan and Bernanke are men with extraordinary egos? They are more powerful than the elected President.
     
              Paul explains how and why gold was chosen by men (not governments) to be money because it possessed all the qualities desired to enable commerce and trade. Gold was naturally selected by the people and was used in trade exchange for more than 6,000 years. In 4000 B.C. the Egyptians were using gold bars as money. The Byzantine Empire thrived for six centuries on a gold standard. Then, Nicephorous III Botaniates reduced the amount of gold in then the world’s most used coin in order to fight a war with the Turks. The war was lost and so were the Byzantine Empire and its currency. Historically, fiat currencies (like the paper U.S. dollar) have always failed as money. Gold has always prevailed.
              Paul then presents several cases to support a gold money standard:
    ·        the philosophical case (morality and the moral hazard of the Fed)
    ·        the constitutional case
    ·        the economic case
    ·        the libertarian case (why real money protects freedom and liberty)
     
    Each case alone is very compelling. Taken together, how can one not agree that the Federal Reserve is simply a dysfunctional, unconstitutional, and dangerous entity which merely serves a small group of highly powerful, unsupervised, and very secretive select few at the expense of the middle class?
              Unfortunately, the last chapter of the book, “The Way Out” is too short. To abolish the Federal Reserve in today’s world will be challenging. Since the U.S. dollar is the world’s reserve currency (at least for now…), transitioning to a monetary standard backed by gold and silver will be a delicate maneuver, although it must be done to preserve American liberty and freedom and prevent authoritarian rule. Americans wealth must be fairly preserved during the transition and Paul is light on the details.
              Paul may have also pointed how America’s addiction to foreign oil has exacerbated the problems of the Federal Reserve. The two major financial crises (now and in the late 70’s early 80’s) were preceded by high oil prices that strained the trade deficit and therefore required more money being printed, inflation, and U.S. dollar depreciation.
    I’m also surprised Paul didn’t focus more on the major individual players in this fiat money façade. Paul adequately explains how Greenspan and Bernanke are completely over their heads and incompetent. He also correctly identifies how promoting Geitner to Secretary of the Treasury after Geitner was wrong on everything for the previous15 years proves the system is totally corrupt. However, Paul doesn’t touch on an obvious coincidence: it seems a very small group of people are over represented not only in the making U.S. economic and monetary “policy”, but also appear to be over represented in benefitting greatly from these same policies. Greenspan, Bernanke, Milken, Madoff, Shapiro(head of the SEC and “dear friend” of Madoff), Greenberg(AIG), Benmosche (AIG), Lloyd “doing God’s work” Blankfein (CEO, Goldman Sachs), Gensler (CFTC), Feinberg (the so-called “pay czar”), and many others. Is this mere coincidence or is there something more sinister afoot here? How ironic that the fascist policies now dominating the U.S. economic landscape are apparently being developed by people who should be most familiar with Nazi fascism and its dire consequences? It’s very hard to understand.
    In conclusion, Paul makes a clear case that the U.S. must abolish the Federal Reserve and go back to money standards based on gold and silver. For those who agree, you must contact your elected officials and insist they support Paul’s legislation to audit the Federal Reserve. This is a first step toward the transparency so desperately needed: how much money is being created, who gets it, and why? Without this transparency, the great American democratic experience is doomed to failure. The time is ripe for change as the American people are sick and tired of a dysfunctional government, a dysfunctional economy, and seeing their hard earned dollars being devalued and eaten up by inflation. On the other hand, shinning a light on the Federal Reserve’s inner workings will bring about reform and a shift to real hard currency money. Paul and his supporters should work harder on explaining and publishing exactly how this transition should occur in order to insure a smooth transition. It will certainly be a challenge given today’s realities. However, if Paul is going to promote the cause of “Ending the Fed” (which I certainly agree with), he needs to do a better job of outlining and explaining exactly how to go about it without exacerbating the current economic turmoil. Regardless, this is a fascinating and very informative book. I highly suggest any patriotic American read Ron Paul’s End the Fed. He will certainly get my vote the next time he runs for President!

    Update: Audit the Fed – HR 1207 and S 604 has
    317 Co-sponsors in the House
    30 Co-sponsors in the Senate

    This is great news: House and Senate members are (finally) paying attention!


    Disclosure: Long gold.

    Disclosure: Long Gold
    Dec 03 12:13 PM | Link | 2 Comments
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