ACLU: “Obama will forever be known as the president who signed indefinite detention without charge or trial into law”; Why Obama’s Presidency Has Been a Great Success

January 2, 2012 · Posted in Government, Interventionism · Comment

The ACLU writes President Obama Signs Indefinite Detention Bill Into Law:

“President Obama’s action today is a blight on his legacy because he will forever be known as the president who signed indefinite detention without charge or trial into law,” said Anthony D. Romero, ACLU executive director. “The statute is particularly dangerous because it has no temporal or geographic limitations, and can be used by this and future presidents to militarily detain people captured far from any battlefield. The ACLU will fight worldwide detention authority wherever we can, be it in court, in Congress, or internationally.”

As I’ve argued since the beginning of the Obama presidency, the more disillusioned young people get with who they thought was for sure going to be their savior, the better it’ll be for the ideas of peace and liberty, and the more devastating it’ll be to the dying concepts of governments and nations in the long run.

Thus Obama’s election and tenure have indeed been a great success in helping push our ideas and we could have hardly asked for any more.

Tags: aclu, ndaa

The Mafia vs. The State

December 31, 2011 · Posted in Government · Comment

Imagine your average neighborhood mafia: A scary armed group of people who plan, organize, and undertake regular extortion runs (meaning money raised by means of threat or use of aggression) at local businesses, in exchange for the “protection” they afford them.

Now imagine this mafia allowing the people of its district to submit votes, allowing them to choose who will be the main guy or party in charge of all its extortion runs.

Now imagine this mafia extending their extortion runs to every single working resident within its territory, demanding a percentage of incomes earned.

Now imagine this mafia demanding that the residents pro-actively send in the tribute “owed” and supply every detail about how much they earned and how and where in order to avoid having someone knock on their doors to collect.

Now imagine this mafia borrowing money from local and remote investors, against the collateral of future extortion proceeds which they then use, among other things, to expand their scope of intrusion into the lives of the residents.

Now imagine this mafia setting up learning camps that it funds with money from increased extortion threats. For generations moving forward the mafia would determine the curriculum used to educate the children of residents and shape their beliefs accordingly.

Now imagine this mafia establishing a bank where it prints its own currency the use of which it makes compulsory by demanding it in extortion payments, and by threatening aggression against anyone who doesn’t accept it in the settlement of debts and anyone who dares to compete in the production of currency.

Now imagine this mafia establishing its own permanent standing army, equipped with tanks, grenades, nukes, fighter jets, aircraft carriers, bases, helicopters, etc.

Now imagine this mafia establishing an institution where it approves or denies drug producers the right to sell drugs to its residents. Producers need to pay fees and wait for years before they’re granted this right.

Now imagine this mafia using its arms to attack other mafia gangs of other adjacent and remote territories, year by year killing millions of non-mafia residents in the process, all funded by money from increased tribute demanded in extortion threats and money borrowed against the promise of payment from yet more future extortion threats.

Now imagine this mafia setting up buildings with giant cages where it locks away people who don’t follow its orders, such as the prohibition against owning or selling certain pieces of harmless vegetation, or resistance against extortion payments.

Now imagine this mafia using extorted money or money borrowed against future extorted money to reward connected businessmen who made bad or economically harmful decisions with other people’s money.

Now imagine this mafia setting up thousands upon thousands of regulatory boards, institutions, departments, sub-departments, and agencies, equipped with rules, decrees, and the police force necessary to enforce them by shaking down businesses or individuals who are in violation of any of such rules or decrees.

Now imagine this mafia operating on a nationwide scale.

Imagine people having been brainwashed in those compulsory education camps over the decades, telling you with a straight face that it is this mafia that we need in order to protect us from people who may steal from or aggress against us!

Now imagine some of the residents in its territory supporting a group that proposes an increase in the mafia’s extortion proceeds and regulatory shake downs. This group of people is today commonly referred to as “Democrats”.

Now imagine some other residents supporting a group that proposes an increase in the mafia’s attacks on other mafias and murders of residents in other territories and an increase in the cagings of carriers and sellers of unwanted vegetation. This group of people is today commonly referred to as “Republicans”.

Now imagine a group of residents proposing that there be no extortion runs and wars at all. This group of people is today commonly referred to as “radicals”.

Imagine all these things and you get the largest and most dangerous mafia gang of all – the state.

Tags: Government, mafia, state

“Occupy Wall Street” and its Futility

September 29, 2011 · Posted in Government, Politics · Comment

Tags: occupy wall street, socialism

States Are Underestimating Budget Crisis By Trillions

September 19, 2011 · Posted in Government · Comment

From the interview with Jeffrey Miron:

The problem is pension liabilities are not being accounted for in state budgets. The results: states across the country, he estimates, are underestimating their liabilities by $1-2 trillion.

See here for more that I’ve written regarding state pension plans over the past years.

Tags: public pensions, state pensions

US Government Issues Ultimatum to Swiss Banks over Tax Evaders

September 4, 2011 · Posted in Government · Comment

The US government has issued an ultimatum to Swiss banks over tax evaders:

US authorities have given Switzerland time until Tuesday to transmit data from tax evaders in the United States who have stashed assets away in Swiss banks, the SonntagsZeitung reported on Sunday.

The United States has asked for detailed information on US nationals who have hidden their money in Switzerland, the paper said, basing its report on a three-page letter from the US deputy attorney general James Cole, dated August 31, addressed to the Swiss authorities.

The letter concerned Switzerland’s second biggest bank, Credit Suisse, as well as around another 10 banks, notably Julius Baer, Wegelin, and the cantonal banks of Zurich and Basel, the Sunday paper said.

US authorities want all the data concerning private customers and US foundations which have deposited at least $50,000 (around 35,000 euros) in Switzerland between the period of 2002 and July 2010.

This latest request is not the first by US officials. Switzerland’s biggest bank UBS was forced to disclose the names of 4,450 US clients for whom it had offered to conceal funds from the eyes of the US tax inspectors.

The bank paid a fine of 780 million dollars to avoid losing its banking licence in the United States.

According to an anonymous banker quoted by SonntagsZeitung, Swiss banks risk a fine of around two billion Swiss francs (USD 2.5 billion) to settle this latest tax evasion affair.

… when you’re in a cash crunch, you’re going to turn over every rock for money. One could consider this yet another deflation symptom, but that may be a stretch. Just throwing it out there …

Tags: IRS, swiss banks, tax evasion

US Taxes, Spending & Debts – Historical Charts

September 4, 2011 · Posted in Government · Comment

During recent months, a lot of people have been talking about solutions/causes/issues related to government spending, taxation, and the public debt.

In following all such debates there are but a few simple historical stats that one should be aware of in my opinion, so as to make an assessment whether or not the proposed solutions to existing problems are actually new and untried solutions, or if they are just a dull repetition of past patterns:

Taxation in the US

Over the past century, government revenue in the US has increased from 7% in 1902 to just over 30% today:

US Government Revenue 1902 - 2015

In absolute terms, adjusted for inflation in constant 2005 Dollars, US government revenue has grown from $32.91 billion in 1902 to now around $4,481.27 billion, a 13,516% increase:

The share of income taxes paid by the top 1% income earners has increased from 25% in 1986 to 40% in 2007:

Income taxes paid by the top 1 percent income earners

By the way, total income earned by the top 1% was around $1.6 trillion in 2010.

Government Spending in the US

In that same period, the ratio of government spending to GDP has increased from 3% in 1900 of GDP to now just above 42%:

Governmtn spending to GDP from 1900 through 2016

In terms of absolute numbers, adjusted for inflation in constant 2005 dollars, government spending has grown from $12.9 billion in 1900 to now $5848.77 billion.

Total US Government Spending, Constant 2005 Dollars, 1900-2016

US government spending on education, for example, has grown from less than 0.01% of GDP in 1900 to now 6.3% of GDP:

US government spending on education 1900 to 2016

US Government Debt

Total government debt in the US has grown from 10% of GDP in 1900 to now 120% of GDP:

Total US public debt 1900 - 2016

In absolute terms, inflation adjusted in constant 2005 Dollars, the public debt has grown from $43.86 billion to now $16,898 billion:

Total US public debt 1900 - 2016

Conclusions

Here are some theories that I’ve been voicing or working with that seem to be supported by the facts presented above:

In the long run, raising taxes does not seem to be a valid solution to battle deficits and the ensuing debts as can be evidenced by the correlation between a rising ratio of tax collections to GDP on the one hand, and a virtually permanent and accelerated increase in the absolute inflation adjusted level of the public debt.
“Taxing the rich” does not seem to be a valid solution in battling deficits and debts as can be evidenced in the fact that from 1986 through 2007 the share of taxes paid by the rich doubled while the absolute inflation adjusted level of the public debt even more than doubled, and the debt to GDP ratio increased from 60% to 80%
In fact, increasing the tax revenue seems to supply the state with additional collateral to use to borrow against future incomes. This could explain the long term correlation between tax revenue and public debt.
Raising taxes is not a solution to the problems with government budget deficits, but rather the very admission of failure to attack the problems associated with those deficits.

Tags: government spending, public debt, tax revenues, taxation

Tax Warren Buffet??

August 21, 2011 · Posted in Government · Comment

A lively and healthy email debate emerged among my dear friends when one of them shared a message from MoveOn.org regarding Warren Buffet’s recent article about taxing the super rich (I changed the names and locations for anonymity’s sake).

It all started when “Raven” sent this concise email to several friends, myself included:

Go Warren B: http://civ.moveon.org/standwithwarren/?id=29985-2523622-%3DrmoxOx&t=2

To which “EconomicsJunke” (that would be myself) responded:

I had a discussion about this the other day. In my opinion, if Warren is so keen on helping the Feds out then I would suggest he donate money to the Treasury at http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm … in my opinion he’d just be throwing money down a hole and supplying more collateral that they would only borrow more against, as they have been for centuries, but who am I to interfere in his financial dealings … =)

… to which “Sebastiani” from italy chimed in:

If I had even an inkling of faith that our elected officials would put that money to good use (e.g. pay down the deficit or fund education) I’d be all over this. Instead I believe that this type of measure will only enable said leaders to continue to elude the economic realities the rest of subject to on a daily basis – like not spending beyond our means and responsible accounting. It’s almost like they’re saying “let’s rob yet another piggy bank so that we don’t have to face reality”…not a fan.

… to which “Raven” responded:

I hear you brother. But the WB group are not and have never been taxed like everyone else. So I say let them contribute fairly to the piggy bank and then maybe it wouldn’t be so empty!

… to which “Sebastiani”, after stepping off his Vespa, replied:

With very few exceptions the federal government, and most states, has been spending well beyond its means for decades. Administrations, regardless of party affiliation or current GDP, are fully expected to increase the deficit. This has gotten so bad that parties take bragging rights for having incurred a smaller deficit increase than the other guy. What sort of sick, twisted standard is that?

As businessmen we are held accountable by one rule: make money or fail.

This is what keeps us competitive and creative and forces us to never loose touch with reality. This is what keeps us healthy and in business. Why shouldn’t our elected leaders be held to the same standard?

As for the richest of the rich being given tax breaks I’d say this:

Any relevant sports team has its star players. These players can make or break a team. They win titles and draw crowds into stadiums. They benefits are reaped not only by the team owners, but also by surrounding vendors, bars, restaurants, etc. In return for being massive revenue generators these stars are given certain breaks. If the incentives disappear, the stars will find other teams who give them the treatment they “deserve”.

The same rules apply in business. Especially in an ever more globalized business community. CEO’s of many of these companies have put it all on the line to get to where they are. They have hired 10’s of thousands of tax paying citizens and are paying billions in corporate taxes.

In my opinion the reason our piggy bank has a negative balance are not the star players, who are held accountable by market economics and shareholders, but the politicians, who are not.

… at which point Sebastiani’s wife joined the debate:

OMG! Are you comparing yourself (or other heads of enterprise) to the Michael Jordans of the world? I fear for the world (and especially myself) if Sebastiani Inc. sells for a ton o’ cash. With great wealth comes great responsibility…

Regardless, I’m all in favor of EVERYONE paying their fair share and by that, I mean flat tax system whereby we all pay the same percentage of our income and eliminate loop holes for the rich (or as the GOP likes to refer them: “job creators”). That’s the fairest solution in my book.

… at which point I thought I’d throw in a well deserved dose of voluntaryism, not that I expeceted it to change the debate or anyone’s beliefs in any way:

I like the flat tax concept. Really, really flat though. Like zero percent flat …

… at which the wife laughed:

Hahahahahaha!! That is SUPER flat. If that was a wave Sebastiani would give up surfing for good.

And at that point the debate’s back and forth was confined to the typical and oft repeated Clinton’s surpluses vs Bush’s deficits debate, so nothing much interesting there, until DJ Sparklebox, Raven’s girlfriend added:

its awesome businesses can do so well these days, shit i would like to be one of them, my argument though is an ethical one not a economic one, which is that their success doesn’t negate their responsibility to pay taxes to society.

in fact, if i were one of those big corporations i would be happy to pay taxes to my country because it enabled my success in the first place. also something to think about, if all those extremely wealthy corporations and people paid their fair share of taxes like we all do, i would be interested to see the long-term effect that may have on the distribution of wealth in this country, maybe we wouldn’t see such an unbalance and such a huge the gap between the rich and poor in America (a gap that is far larger than those seen in other industrialized countries around the world, surprising considering America still considers itself the world hegemonic power).

agreed Sebastiani’s wife. flat tax. whether you make $10,000 a year or 10 billion – pay your fucking share – nobody likes a freeloader.

death and taxes………. ???? YEAH RIGHT!!!!! NO WAY! GET REAL!!!! I’M RICH BITCH!!!!!!

And then finally “Roommate” summed it all up and supplied the closing arguments:

Executive Summary:

If the goal is a civil society which fosters the emergence of personal rights, property and wealth:

- Taxation under threat of violence is unethical and not a valid solution.
- Hording wealth to a degree which destabilizes civil society is unethical and not a solution.
- Acknowledgement of the individual’s social responsibility and their willful participation, via investments of both money and time, in programs and organizations which fosters civil society and creates the conditions for the accumulation and securing of property and wealth and emergence of rights is both ethical and the logical solution.
- The words and actions of People with unparalleled access to the media and means to contribute to a solution, who fail to understand the true issue or deceptively misrepresent the true issue, can be frustrating and detrimental to clarity.

I’m noting two main themes in this thread:

01) Those that think Warren is correct and would like to see the wealthy pay more taxes as a solution to a tanking economy
02) Those who want to point out Warren is free to pay more taxes if he wants but hasn’t done so which would itself seem to render his proposed solution invalid

It’s worth pointing out for the sake of clarity that Warren’s lack of apparent action isn’t an invalidation of his suggestion. Nor is the lack of ‘apparent’ action a true indication of a lack of action on his part. I doubt the people reflexively decrying him for not taking public action are aware of his private actions and anyone who has experience with human behavior probably has witnessed the phenomenon of the greedy being quick to point out the apparent lack of charity in others as a justification for their own greediness. That is a universal, childish response some humans grow out of.

Here is a more effective way to frame it for those who don’t understand what type of society awaits if those who are exceedingly prosperous place greater importance on amassing wealth and the concept of private property than on the health and security of individuals in their community.

Keep in mind, most of the people in this video probably aren’t starving and the shop owner may be a nice enough person without any real wealth. Imagine what is in store for those who are greedy within a society of recently dispossessed people who can’t even secure their basic needs for survival. Fleeing with their wealth to Europe will soon be eliminated as an option. If they learn a popular Chinese dialect they might have some luck there but that is also growing more improbable.

Returning to Buffet; I would not be surprised if his recent public words are actually the first part in a series of releases and actions designed to ‘reveal’ the pettiness of his critics and set an example for the wealthy people he and many others seem to take issue with. Considering how well orchestrated the progressive movement is, I would not be surprised to see him on Jon Stewart or Colbert in the next phase of the campaign. When it comes to politics, and considering how much money is at stake, there are few events left to chance. So many actions and statements are orchestrated for maximum populist effect. The timelines of these election propaganda campaigns have stretched to years now, instead of months.

I do not think increasing the tax burden on the American population, or any population, is the solution to a dysfunctional government and an uneducated/unsophisticated citizenry. On a personal level, if your bankers and investors are corrupt or incompetent, why give them more money? If the government is ineffectual and wasteful, why give them more money? That doesn’t make any sense. Giving them more of someone else’s money is not only unkind and unintelligent but criminal.

Warren’s suggestion of increased taxation isn’t wrong because he hasn’t turned over all his money… it is an invalid solution, considering the intended goal, for other reasons. At the best, the threat of taking money from the exceedingly wealthy will prompt them to invest in government approved job-creating enterprises to avoid heavy taxation, at worst it will trigger their greed and deceptiveness which will result in the hording and hiding of wealth. Being forced to invest in unwise ventures at the dictates of a government agency can result in waste of wealth and the creation of useless and unsustainable jobs/products. The former Soviet Union comes to mind.

I do not think we need to tax the wealthy more, I think the wealthy need to invest more of their wealth into research & development and manufacturing & production. And I think the incentive for them to do so will come not from their own insight and philanthropy or government coercion but from the increasing number of dispossessed citizens in this nation. Whenever the government continuously fails and a perverted sense of self interest impedes, the pissed off electorate will take its own action.

I suspect the coming era will remind the advocates of property rights and wealth accumulation that rights and wealth are not granted by a divine being thus inalienable, they are consensual and alienable. We, as individuals, have private property and wealth because others consent to it. (On a personal note; James was recently reminded the concept of private property is only valid if others choose to consent to it. I am disturbed by his loss as well because I remember how much enjoyment he derived from his collection. I am a fellow collector so I can empathize with him. It was an egregious but luckily non-fatal violation of trust, unless James Daniels finds the thief)

By offering the video above as an object lesson I’m not advocating the disintegration of civil society and property rights. It can and does happen without my endorsement. I’m simply pointing out the obvious for people who might prefer wealth and property rights to the welfare of people.

Here is an entirely plausible scenario described in broad terms:
01) Many people who are used to a particular level of affluence and conditioned to believe they have a right to it will want to restore it or an acceptable portion of it.
02) They are aware that neither increased taxation nor the government will be effective in achieving that goal because of impracticality and right-wing resistance.
03) They see others enjoying an exceeding degree of affluence and ask themselves; ‘why them and not me. I’m just as capable?’
04) They have witnessed revolutions and protests all over the world and realize there is strength and anonymity in numbers.
05) They will escalate their efforts to take what they want while the rich will reflexively employ violence to try and keep what they have, which enforces the perception the rich are at the least in different to the suffering of others and at the most are actively behaving in a manner to intentionally increase that suffering.
06) We will see a revolt in which the American wealthy class will play the role of the English royalty, at least in the minds of those who need to rationalize their use of violence.

The scope of civil society’s disintegration will be determined by how quickly people wake up to reality and work together instead of against each other. As an interesting example; The Tea Party will claim they tried negotiation but the government wouldn’t cooperate on significant, immediate and major spending reductions. Making those compromises is actually the first practical step towards an agreeable arrangement more conducive to a real solution. Their party may be riddled with fundamentalists, racists and uneducated, belligerent contrarians but their insistence on this point was not unreasonable or illogical. So they can now justify (amongst the believers in their cause) more aggressive, provocative and violent responses to what they perceive to be illegitimate government actions, policies and programs.

What I would like to see is the wealthy tap voluntarily into the entrepreneurs within the pool of unemployed and invest in business ventures which create long-term jobs and useful products/competitive ideas. This requires neither government interference, increased taxation nor a disintegration of civility and loss of the resulting rights which the participants in a civil society enjoy.

It is ultimately an ethical issue, as Sparklebox pointed out, but not one of taxation (which itself is unethical if enforced by violence). Since many of the exceedingly wealthy appear to be devoid of ethics, based on their very vocal public resistance to what others see as a charitable or fair action (as misguided as that perception may be), it seems inevitable that social unrest will arise. I think Warren and others are trying to use populist power, channeled through government coercion, to force the wealthy to share because they want to prevent the coming domestic turmoil which he and many others foresee. Thousands of pissed off wealthy people, many of whom will be afraid of outing themselves as the economy continues to tank, would be less of an immediate political and social threat than millions of pissed off non-wealthy people. See this article.

I think Warren and his supporters should be more frank in their dialog with the American media and public and I think the wealthy and their cheerleaders should spend less time diverting the discussion from the real issue. If they don’t want higher taxes imposed as a “solution” then they have to acknowledge the reality that personal social responsibility is required by all, commensurate to their abilities, if a civil society is the goal (an acknowledgement of this is required of the wealthy and non-wealthy alike). If anyone wants a relative guarantee of property rights and personal wealth, which civil society provides, and they are intelligent, they will seek to contribute to the extent of their abilities to the establishment and maintenance of a civil society. This includes the wealthy. They are not exempt and they even have a greater stake in the game.

Or they can pool their personal fortunes and invent a device which can either erase the individual’s instinctual sense of self-preservation and evolved sense of fairness from the minds of those whose productivity they derive their wealth from or a device which would allow them to create then escape into a virtual world where theories have no errors in application. Working as a QA Engineer I know how unlikely both are at this point in the evolution of our technological capabilities. There is often a startling discrepancy between the result of clicking on a button and our expectation of what will happen when we click on a button.

Having written all of the above, I would like to preempt one probable response, from those who don’t like the concept of social responsibility, which is simply a diversionary version of what the wealth-obsessed are now offering as a counter-argument: What have you done for the poor lately? How socially responsible are you? .as I mentioned before, this is to be expected from those who don’t like the solution because they may not have any sense of social responsibility themselves, outside the scope of trendy activities like charitable cocktail happy-hour events and donating to goodwill. All of which I’ve tried in my journey to define my purpose correctly. However, there can be validity in them if they are rephrased and asked by those honestly looking for ways to contribute.

What I have done, both good and bad, is known to friends and family. What I want to do is find a way to use the coming turmoil as an opportunity to step into or even create a role which has a broader, more positive impact on the society we live in. My will is engaged in a race against age on a course which is undergoing seismic shifts in its topography but will most certainly produce new opportunities to define purpose along its path.

I suspect we are all approaching another branch on the path which will allow us to participate as part of the solution. If we are and we don’t define that role, others will for us. I think that should be a main point in Warren Buffet’s message.

To which I respond: Amen to that. :)

Tags: taxation, taxes, taxing the rich, warren buffet

What’s Behind the London Riots?

August 9, 2011 · Posted in Government · Comment

Tags: london riots, riots

The (Nut-)Case for More Aggression

August 8, 2011 · Posted in Government · Comment

In The Great Depression 2.0 I wrote:

Once existing stimulus programs and credit expansion attempts subside, there won’t be much left to pick up the slack. The consumer won’t be able to go back to business as usual unless he goes through a long period of reduced consumption, deleveraging, and savings, a period during which the majority of production and spending inside the US will have to be focused on capital goods, so as to restore a balanced ratio between the production of consumer goods and the production of capital goods.

At the point when these government stimuli wind down, Keynesian clowns will be jumping out of the bushes left and right, and demand that the government take on more debt and spend more money.

I would like to submit this beautiful specimen as further evidence for my theory above:

I further said in that article:

But at some point their mindless tirades will no longer appeal to an overtaxed and overleveraged populace. Their ivory tower nonsense will be way too far detached from simple realities.

The Yahoo finance contributor commenting on the clown above writes:

And even though we have very little to show for all that spending, this PhD in economics from the University of Michigan thinks we have no choice but to spend even more.

… attitudes are changing. People are beginning recognize insane behavior for what it is: Doing the same thing over and over while expecting different outcomes.

Government is aggression. Whoever asks for more government spending in reality asks for one thing and one thing only: more aggression.

Aggression solves no problems. It only aggravates and prolongs them.

I further said in that article I wrote about 2 years ago:

Any temporary recovery we witness now, is likely to be remembered as just that, a temporary phenomenon. All actions taken so far have set the perfect stage for a double dip recession of enormous proportions, the worst possible prolongation of the necessary correction.

Be my guest to compare that prediction with the events as they unfold in the coming years.

Tags: aggression, government spending, keynesian

S&P Downgrades US National Debt

August 5, 2011 · Posted in Government · Comment

Word came in that Standard & Poor’s just downgraded US Debt:

Credit rating agency Standard & Poor’s on Friday downgraded the United States’ credit rating first time in the history of the ratings.

The credit rating agency said that it is cutting the country’s top AAA rating by one notch to AA-plus. The credit agency said that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country’s debt situation.

A source familiar with the discussions said that the Obama administration feels the S&P’s analysis contained “deep and fundamental flaws.”

The fact that the recent debt deal didn’t accomplish anything other than smoke and mirrors is so obvious that I don’t think S&P’s pointing it out will catch anyone by surprise. However, whether or not the agency would actually take the step to downgrade is certainly an interesting event. There surely is a reason they picked after hours on Friday for this announcement.

It’ll be interesting to see how the Treasury market reacts. So far it’s always been a big yawn and actually no curtailment in Treasury buying whenever any of the big rating agencies warned about the outlook for US debt.

It is pretty apparent that a lot has to go wrong before the US government dares to default on interest payments for its national debt. So fundamentally I still see strength in this investment vehicle.

However, now due to this new rating certain institutional investors will actually have to drop US debt and shift to other assets.

How much this effect will counterbalance the global flight to safety into the Dollar and thus into Treasury bills remains to be seen.

Up to this point I have been consistently bullish on Treasury Notes and Bonds and they have done well over the past 3 years for sure.

It is certainly possible that global flight to safety will counterbalance an institutional selloff in Treasurys. However, it is also possible that this recent move will mark an end to the 30 year long bullish trend. Just intuitively, I see a 60/40 likelihood for both scenarios, respectively.

In the latter case, expect gold to soar even more.

Tags: treasury notes, treasury yields