Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts


Podcast for 01 Nov 09

In this podcast, Bruce, Michael and Dale discuss the state of the economy, and the health care bill that came to the house floor this week.

The direct link to the podcast can be found at BlogtalkRadio.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.


Podcast for 25 Oct 09

In this podcast, Bruce, Michael and Dale discuss Obama;s’war on FOXNews, and the state of the economy.

The direct link to the podcast can be found at BlogtalkRadio.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.


Comments Upgraded

There’s been an upgrade to the TinyMCE Comments plugin that allows commenters to use the WYSIWYG interface for creating comments, instead of a plain old text box.  Works fine for me, but some of you are using off-brand, suck browsers like Opera or whatnot on your home-built Linux systems, so try it out and see if it works.  If it doesn’t, let me know, so I can either unplug the plug-in, or tell you you to use a decent browser like Firefox.


Podcast for 18 Oct 09

In this podcast, Bruce, Michael and Dale discuss the Libaugh NFL story, Obama;s war on FOXNews, and the state of the press in general.

The direct link to the podcast can be found at BlogtalkRadio, since my old computer is becoming an increasingly unreliable recording resource.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.


CA Bans Mail Order Ammo Sales

California Gov. Arnold Schwartzenegger did not sign, but did not veto, AB962, the Mail Order Ammo Ban.  Since California has no pocket veto, that means the bill becomes law without his signature.

This means that, as of 1 Feb 2011, all handgun ammunition sales in California will require a face-to-face transaction between buyer and seller, and sellers will have to obtain a thumbprint and other data from the buyer.


Cracks in the Edifice

For the most part, both the Fed and the Obama Administration have been publicly confident of a number of things. They’ve assured us that the bailouts and stimulus spending, along with the great monetary expansion we’ve had since last October, were necessary to stave off economic collapse.  They’ve also assured us that they have an end game for unwinding these policies when necessary.

But, Federal Reserve Bank of St. Louis President James Bullard is now warning that the negative results of the monetary expansion imposes more risk of inflation than generally believed.

I am concerned about a popular narrative in use today … that the output gap must be large since the recession is so severe … [and] any medium-term inflation threat is negligible, even in the face of extraordinarily accommodative monetary policy. I think this narrative overplays the output-gap story.

Take away Pres. Bullard’s Fed-speak, and what you have is a Federal Reserve bank president warning that the Fed’s accomodative policy runs a very real risk inflation when the economy picks up.  Naturally, to fight this ionflation, the Fed will need to raise interest rates.  With a doubling of the monetary base in the past year, that implies the possibility for raising rates quite substantially, which could strangle any nascent economic recovery in the cradle.

So, while Pres. Bullard also says that moderate economic growth for the end of the year is possible, we probably shouldn’t get our hopes up for a while.

Meanwhile, all of the extra dollars floating out there, combined with extremely large federal budget deficits for the next several years, is having an effect on the dollar.  Not only has the number of dollars vastly expanded, the deficits require greatly increased bond sales, which encumber the federal government with a long-term debt obligation that will be harder and harder to meet.  This is making the dollar…unattractive to heathen foreigners.  Not only in terms of dollar-denominated investments, but also in making the dollar fundamentally unattractive as  the world’s reserve currency. The rumblings about dumping dollar continue.

[T]he United Nations itself last week called for a new global reserve currency to end dollar supremacy, which had allowed the United States the “privilege” of building up a huge trade deficit.

UN undersecretary-general for economic and social affairs, Sha Zukang, said “important progress in managing imbalances can be made by reducing the (dollar) reserve currency country’s ‘privilege’ to run external deficits in order to provide international liquidity.”

Zukang was speaking at the annual meetings of the International Monetary Fund and World Bank, whose President Robert Zoellick recently warned that the United States should not “take for granted” the dollar’s role as preeminent global reserve currency.

You cannot simultaneously have your currency act as the global reserve currency while deflating the currency to uselessness by using foreign investment in dollars to maintain huge current account deficits.  The foreigners may talk funny, and have quaint ways, but they’re not big enough hayseeds to recognize who ultimately gets the short end of that deal if it continues.

Still, our government’s response has been heartening.

Following the summit, US Treasury Secretary Timothy Geithner repeated Washington’s commitment to a strong dollar.

At this point, I suspect that the international financial community takes this commitment as seriously as the attendees of the local junior college take my commitment to have sex with barely legal teen girls.  Actually, my commitment probably has a better chance of coming to fruition, since the international financial community doesn’t have “daddy issues”.

Meanwhile,  all of the teachers, cops, firemen, DMV workers, etc., who thought taking a relatively low-paying government job now in return for really good retirement benefits, may need to rethink that strategy.

The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.

Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.

After losing about $1 trillion in the markets, state and local governments are facing a devil’s choice: Either slash retirement benefits or pursue high-return investments that come with high risk.

In other words, start stocking up on Alpo for those hearty retirement meals, or hope that the pension fund’s investment in fur-bearing trout farms come through big-time.

But it’s not just government workers who may be looking at a bleak future.  The government’s actions since last October are also having unintended consequences on the domestic economy that affects all of us–although I should point out that these unintended consequences were entirely predictable.

The Fed’s policy of essentially free money means that household savers get no return at all on CD’s, T-bills, Money Markets, etc., while speculators can borrow money at no cost, and toss them at any speculative investment that promises any return at all.  So traditional savings are being gutted.

Excessive government borrowing is sucking the air out of the private credit markets.  While goverment borrowing is proceeding at a $1.9 trillion annual rate, private credit is collapsing.

Last year, banks provided new credit at the annual pace of $472.4 billion in the first quarter and $86.7 billion in the second. This year, on a net basis, they’re not providing any credit whatsoever. In fact, they’re actually liquidating loans at the rate of $857.2 billion in the first quarter and $931.3 billion in the second.

Ditto for mortgages. Last year, mortgages were being created at the annual clip of $522.5 billion and $124 billion in the first and second quarters, respectively. This year, they’ve been liquidated at an annual pace of $39.3 billion in the first quarter and $239.5 billion in the second.

This lack of credit means that businesses have been unable to expand or hire–or even maintain their workforce.  As a result, 7.2 million jobs have been lost in the last 21 months, compared to the 2.7 million jobs lost in the 30 months of the last recession.  The official unemployment rate of 9.8% hides the effect of discouraged job seekers, or the under-employed, which means the actual unemployment rate, as it was calculated prior to 1973 is 17%.  Shadow Government Statistics places the actual unemployment rate at an even worse 21%.

And now, after all the unintended consequences of our past actions, some in Congress are now calling for Stimulus II.  Apparently, Stimulus I did such a bang-up job, that they want to double down on two sixes.

Hop.  Hop.  Hop.

the United Nations itself last week called for a new global reserve currency to end dollar supremacy, which had allowed the United States the “privilege” of building up a huge trade deficit.

UN undersecretary-general for economic and social affairs, Sha Zukang, said “important progress in managing imbalances can be made by reducing the (dollar) reserve currency country’s ‘privilege’ to run external deficits in order to provide international liquidity.”

Zukang was speaking at the annual meetings of the International Monetary Fund and World Bank, whose President Robert Zoellick recently warned that the United States should not “take for granted” the dollar’s role as preeminent global reserve currency.


Podcast for 11 Oct 09

In this podcast, Michael and Dale discuss Obama’s Nobel Peace Prize and health care reform.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.


Auto-Ordnance M1 Carbine Review

For Chris’ last birthday, I purchased her a brand new Auto-Ordnance M1 Carbine.  And, for good measure, bought one for myself.  Auto-Ordnance is a brand of Kahr Firearms, and their M1 Carbine is an exact reproduction of the first-gen M1 Carbines produced in World War II.

Auto-Ordnance M1 Carbine

Auto-Ordnance M1 Carbine

Well, almost an exact replica.  The only difference between the Auto-Ordnance product and the original GI M1 Carbines is that the original rifles worked.

I ordered the rifles brand new through Turner’s Outdoorsman.  On my initial look at the rifles when I picked them up, they looked fine.  When I got them home, however, I noticed that one of the rifles had been improperly stained, with the cutout in the stock for the sling completely unstained, except for a big drip line of stain that had bled down.

This was a disappointment in terms of quality control, but not as big as the disappointment that followed.

When I ordered the rifles, I also ordered 1,000 rounds of .30 carbine FMJ milspec ammo from Georgia Arms.  When I had both ammo and rifle in hand, Chris and I took them to the local shooting club where we are members.  Along with the ammo, we also had both the factory 10-round magazines from Auto-Ordnance, as well as several surplus GI magazines.

The first problem we noticed that on one of the rifles, none of the magazines would seat properly, without slamming the bottom of the magazine with a lot of effort.  The magazine release catch was slightly improperly placed, another quality control glitch, and one that was more serious than improperly staining the stock.

Once we began shooting, we quickly learned that neither rifle could be depended upon to shoot a single 10-round magazine without jamming, stovepiping, or other feeding problems.  The GI magazines were hopeless, and the factory Auto-Ordnance were only slightly less so.  The main difference seemed to be that both rifles would jam every two or three rounds with the GI magazines, while the factory mags jammed every 4 or 5 rounds.

In short, from the example of both brand-new rifles and factory mags, I concluded that the Auto-Ordance M1 Carbine is the most shoddily produced, unreliable rip-off of a firearm that it has ever been my misfortune to shoot.

I called Auto-Ordance to complain about the rifles, which were still under warranty, and telling them that I thought their products were completely useless.  They offered to ship me two new factory magazines to see if that would fix the feed problems.  And they told me not to use any GI magazines in them.  I didn’t want the new magazines, I wanted to get rid of the rifles, which is not something they were interested in helping me with.

In view of my experience, the Auto-Ordnance M1 Carbine is a complete waste of money, and I strongly urge anyone interested to avoid them like the plague.  They are utterly worthless for any purpose I can imagine.  Kahr should be ashamed to produce these useless hunks of crap, and I will never, ever buy any product from Kahr again.

Now, I’m out 1400 bucks, and I’m stuck with two rifles that I despise utterly, and 750 remaining rounds that I don’t want to shoot through these non-feeding excretions from Auto-Ordnance.

UPDATE:

By the way, apparently I’m not alone in complaining about the disgustingly poor quality and hideous feed problems of the Auto-Ordnance M1 Carbine.  I ran across this thread at the Firearms Blog, where nearly every commenter has similarly bad opinions of the rifle’s quality, and Kahr’s poor customer service.

This really reinforces my opinion to steer clear of any Kahr product in the future.


For Informational Purposes Only

I am not an investment advisor.  I’m not a guru.  I’m not qualified to give you any investment advice at all.  I’m just looking around and seeing things, and telling you what I see.  And, in this case, I’ll even tell you what I’m doing.

I do so, however, with the strong warning that you should not, under any circumstances, use me for an example, or follow my example.  What I do may not be suitable for you at all.  I just want to make that clear.

First let me recap some data points I’ve made in several previous posts:

The Fed has more than doubled the monetary base over the past year. The amount of money that is just sitting there in the economy is incomprehensible.  But, it’s not making any trouble for us in inflationary terms, because it is just sitting there.  It’s what will happen when it does stop just sitting there that is worrisome.

The Federal Budget has spiraled out of control, with the TARP, stimulus, and recession bringing additional massive amounts of debt to bear, and future deficits signifigantly larger than any in recent memory–on top of which, there is now talk of “Stimulus II”.

Despite the happy talk about the economy’s recovery, the fact is that it is still in decline–just a slower rate of decline.  If a recovery doesn’t occur soon, we will run into another leg down in the economy, as households and businesses draw down their cash reserves, hit their credit limits, and slash their spending.  The longer the recession continues, the more people and business that will be forced into bankruptcies, the more foreclosures will rise, etc.  We call things like this “black swan” events.

On the other hand, even if there is a recovery, the Fed will be faced with the task of trying to wring the extra money back out of the economy.  If they are unsuccessful, inflation will rise.  If they are successful, they may spark another recession through tightening, much as they did to cause the second leg of the back-to-back recessions in 1981-1982. A second leg of a recession will undoubtedly result in greater debt and more money funneled into the economy as the government re-imposes monetary and fiscal stimulus again to re-inflate economic activity.  This will both deepen the debt and increase the money supply, making the next round of interest rate tightenings more difficult, unless the economy comes back strongly.

Social Security is now estimated to begin having a negative cash flow in 2019.  In other words, Social Security expenditures will exceed the payroll tax receipts.  We have, until now, been running surpluses in Social Security receipts, but, of course, the government spent that money in the general fund.  There is, therefore, no pot of money saved to make up for the deficit in receipts in 2016.  Benefits will be cut.  Taxes will be increased.  Economic growth will be affected.

I discount the Robert Fisk story that Bruce linked to earlier today as implausible.  As Fabius Maximus points out:

1. Some of these nations have no reason to risk destabilizing the USA.  Esp the Saudi Princes.

2. Some of these nations have no reason to risk destabilizing the global financial system. Esp.  Japan.

3. Many of these nation have leaders who are some combination of cautious, slow, reactive, and incrementalists.

4. Something of this scale would be almost impossible to keep secret 2 days after the first discussions.

5. If multiple Hong Kong banking sources knew it, their fingerprints would be all over the US dollar – as they shorted it to the max.

Having said that, while I believe this particular story is implausible,  it is obvious that a number of countries, China and Russia chief among them, are urging that the dollar be replaced as the world’s reserve currency, or, at the very least, allow some other currency or basket of currencies to be used in addition to the dollar.  If this happens, billions of dollars will be repatriated to the US, drastically lowering the dollar’s foriegn exchange value.  China is already denominating regional trade deals in yuan, and the use of gold has been on the rise as an instrument for international settlements in Asia and Europe.

There are many more data points, but it would be both tedious and depressing to continue.

The bottom line is that the trends outlined above will, in all probability, necessitate dealing with our foreign creditors.  Such dealings may require us to reschedule our debt payments, which will devastate the bond market, make future borrowing far more difficult, and end the notion that treasury notes are “risk-free” investments. If so, we will have become a financial banana republic in which future investment will be given the gimlet eye.  We may also be required to those foreign debts off in some currency or basket of currencies other than dollars, in order to prevent the government from inflating the debt away.

These trends will also probably require devaluing the US dollar by a substantial amount, so that our imports become expensive, while our exports become cheap.  This will allow us to earn the money to pay off our foreign debts, although it will, of course, result in a lower standard of living in the USA.

This the inevitable result of allowing the government–and the voters–to loot the system for 70 years.

So here is what I have done–and this is purely for informational purposes.  I do not recommend it for you, and I urge you to consider that I may be entirely wrong.

Several months ago, I completely pulled all of my investments out of equities, and into some select bond funds with a mix of government and private bonds.  As of today, I have ceased placing any more money in to either equities or bonds.

For the forseeable future, I will be buying gold bullion.  Not gold stocks.  Not Krugerrands.  Not gold depository accounts.  I mean direct bullion purchases of gold bars or rounds.  My personal preference is for APMEX or Pamp Suisse 10g bars, or Scotia Bank 1/4 oz. rounds, since they have the lowest premiums over the spot price, and are small enough to conveniently convert at local jewelry stores, pawn shops, or gold dealers at need.

Trying to convert a 1kg bar on short notice would be…inconvenient.  Even 1oz. Krugerrands might be hard to convert as the value of each single coin is now over $1000.

I have no interest in paying a premium for “collectible” coins.  I have no interest in purchasing a depository account, where my gold holdings have to be reported to the government. In fact, prior to this month, I had no real interest in gold either.  Indeed, if you bought gold at any time from 1979 to 2001, by march of 2001, you would have lost money–perhaps quite a lot of money, depending on when you bought it.   However, in the current circumstances, let’s just say that my interest is now…heightened substantially.

Whether your interest should be heightened…well, I couldn’t say.


Podcast for 04 Oct 09

In this podcast, Bruce, Michael, and Dale discuss the Obama Enigma, the current state of politics, and Iran’s progress towards nuclear weapons.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.