Some politicians have gone “green” in the name of curtailing “dependence on fossil fuels” and “foreign oil.” It’s a sham. Why not promote a certain type of underwear in the name of curtailing dependency on a foreign brand?

The fundamental problem is that most politicians and central planners view the economy as a blob to be manipulated, rather than a complex capital structure involving individuals making choices in exchanges, a process of production, and a price mechanism.

The reason why the United States is so dependent upon foreign oil is due to policies that have already been put in place. The solution, then, is to repeal and correct these policies – not creating new legislation.

Artificially low interest rates, brought on by loose monetary policy at the FOMC, drives capital overseas (by deploying unearned income from a printing press, disconnecting consumption from production, capital is also consumed). Capital naturally gravitates to cheaper, more efficient, higher-yielding economies. Rather than generating revenue and income, the nation spends beyond its means.

If a person, firm, or nation is dependent upon inflationary credit expansion (as opposed to credit expansion from savings), then that person, firm, or nation is insolvent and inefficient. We are spending beyond our means, which – yes – engenders dependence upon cheaper markets to supply us with production.

If you want to reduce dependence upon foreign “anything,” then the Fed has to lift interest rates and Washington has to abandon the spending orgy. Dollars that have been accumulating in foreign reserves will then come flowing back into the system.

I know “clean” energy sounds so nice, so attacking it is very “environmentally-incorrect.” I will put everything I possibly can into layman’s terms. Let’s start with the following axiom: we consume energy in everything we do. If you’re that environmentally-conscious, you shouldn’t be online reading this right now because you’re using electricity which is consuming energy.

Solar energy sounds so nice. After all, it comes from the sun. But let’s not forget that there is a process of production here. Take, for example, the solarization of a house. Solar energy requires panels, charge controllers, batteries, inverters, etc. And then let’s not forget capital asset depreciation. Energy is consumed during the process of production.

If “clean” energy has a positive yield, then it will be profitable and private enterprise will pony up the capital. The government need not encourage this. If “clean” energy has a negative yield, then this means that it is unprofitable and dependent on so-called “dirty” energy for its sustenance. It would be akin to consuming 1,000 blueberries for every 500 you’re growing – nobody in their right mind would pursue that course absent government subsidies. Somewhere, you have to make up the difference.

This leads me to the following axiom: the most profitable and economically-efficient form of energy, within the construct of the unhampered market, is also the cleanest form of energy.

The best ecological hygienist is the unhampered market. Suppose a logging company owns a forest. That logging company can clear-cut the forest, say, tripling immediate income. However, this must be weighed against diminishing future income, or the capital value of the forest as a whole. Suppose, however, this is government property. This calculation no longer needs to be made, and the objective is going to be rapid extraction of resources.

No shocker, then, that government is the biggest abuser of the environment and waster of resources. Look at the atomic weapons tests done in the Nevada desert – and right on top of our own military service members.

The government does not sustain itself by satisfying consumer demands, but through compulsory taxation. Government subsidies to, and control over, industry diminishes the need to set prices pursuant to supply vs. demand. Why? Because sustenance is no longer dependent upon having to satisfy consumer demands. Sustenance is disconnected from the satisfaction of consumer demands.

It’s the price mechanism that ensures resources are allocated and managed efficiently. The price mechanism can only function within the construct of the unhampered market, allowing for producers to set prices pursuant to supply vs. demand (i.e. market-clearing prices). The scarcer the supply, the greater the demand, the higher the price. Consumption runs inversely with prices.

Government subsidies distort prices, interfering with the price mechanism, and cause prices to be set above, or below, market-clearing prices. There is a paradox in government policy in that the government encourages consumption without production (in the name of economic stimulus), tells us that we should conserve resources, while simultaneously punishing “price gouging.” Within the construct of the unhampered market, there can’t be price gouging any more than there can be wage gouging, since vendors can’t short inventories at prices beyond what consumers are both willing and able to pay.

Prices send signals to entrepreneurs, telling them where to deploy capital. Prices tell consumers what to buy and what not to buy. The price mechanism can only function within the construct of an unhampered market. There’s no need for the government to encourage or discourage the use of any kind of energy. And let’s not forget that tax credits are subsidies camouflaged as tax cuts. A tax credit merely allows a person to use a portion of income for a specific purpose (i.e. indirect subsidy). (See: http://www.businesstaxrecovery.com/articleupdates/definition-tax-credit)

I write as a native-Minnesotan. Minnesota is one of the first states that employed the use of ethanol-blend fuels. Let me say that if I see anything with ethanol in it, I avoid it like the plague. It’s “cheap” for a reason; it’s inefficient.

Only can politicians get away with turning efficient food into inefficient fuel. If politicians keep at it, we will soon be filling our automobiles up with corn and drinking motor oil. Maybe after installing those solar panels, the government can begin shooting those pollution particles (See: http://www.telegraph.co.uk/earth/environment/climatechange/5128109/Shoot-pollution-particles-into-atmosphere-to-cool-Earth-says-Obama-adviser.html) – which supposedly ”clean energy” is designed to prevent – into the atmosphere in order to block the sun and “save” us from “global warming.” Sounds like the perfect plan. It’s a plan only a politician in D.C. could dream up.

Soon, we will not only be dependent upon foreign sources of “fossil fuels,” but also so-called “clean energy.” Unless you get out and support Ron Paul for president.

Congressional spending and Federal Reserve policy have teamed up to lock the U.S. economy into a downward cycle that may lead to catastrophic failure if left unchecked. Both Congress and the Federal Reserve have taken reckless abandon in their recent attempts to insert the federal government as a solution to the country´s economic woes. Rapid response and common sense solutions are required to counteract these irresponsible practices.

With the increase in federal spending, and the latest passage of a debt ceiling increase by Congress and subsequent signing into law by the White House, interest in investing in U.S. Government securities, like treasury bills, has begun to decline. The increase in deficit spending has created a growing loss of confidence in the government´s ability to repay its loans and threats from credit rating agencies of a potential downgrading of the US’s credit rating. As interest in the bond market decreases, interest rates on bonds automatically increase creating a higher cost to the U.S. government to sell its debt.

The Federal Reserve’s loose monetary policy to finance deficits and suppress interest rates indirectly contributes to what is known as the “carry trade” against the U.S. dollar. By borrowing dollars on the assumption that the dollar will decline and then using them to buy commodities, investors reap higher profits when paying back the initially borrowed dollars. With the continued decline in value of the dollar, the incentive to use the carry trade is increased which leads to a growth in speculation that the dollar will continue to be devalued.

Separately, the Federal Reserve is essentially subsidizing financial institutions by setting the benchmark interest rate at 0%. This initially spurred an increase in financial institution investment in treasury bills to shore up their balance sheets – a practice that served as probably the most under the radar bailout packages in federal government history. The ability of financial institutions to take Federal Reserve dollars at 0% interest and invest them in federal treasury notes with a set interest rate, essentially meant that the federal government was simply handing the financial institutions an allowance (or bailout). The Federal Reserve paying interest on bank reserves is not a solution. Not only is borrowing nearly free money from the Fed to then loan funds back to the Fed at a higher rate immoral, this will force up interest rates on treasuries which, ironically, present policy is trying to prevent.

In the case of a 30 year bond, this was 4.7% as of 1/6/09. Whether by design or by accident, this will serve as a creative federal subsidy until, due to a climbing deficit and reduced faith in the government´s credit, these institutions find it too risky to invest in treasury bills and look elsewhere, or the Fed is forced to raise interest rates due to concerns about creating an artificial bubble for the financial industry, or in housing.  Either that, or the Federal Reserve will displace the market and become the exclusive buyer of treasuries.

The irresponsible lending practices of the Federal Reserve and the reckless spending levels of Congress will inflict greater damage than the country would have felt had the housing and financial institutions been allowed to find equilibrium on their own in the first place. The involvement of the federal government hasn´t saved the U.S. economy; it has simply prolonged and likely worsened the pain of the eventual economic reset. A structurally sound financial system shouldn’t need bailouts or rescues. Swift and steady action is required to help brace the country for a potentially worse decline.

Federal spending must be checked and reversed, including a plan to permanently eliminate the deficit and restore faith in the U.S. government´s credit, thus re-establishing confidence in the bond market. The Federal Reserve must also seek to raise interest rates to prevent inflation and offset any potential asset bubble bursting created as a result of the recent 0% interest rate. Entitlement spending must be decreased and non-essential programs phased out in order to help lessen the strain on the federal budget. All of these actions are necessary now to help soften, and potentially prevent, a predicted economic decline within the next 10-20 years.

Danny Tarkanian
Republican Candidate for the United States Senate
Tark2010.org

Here is a very good recent article that dovetails with this issue: Watchdog: Bailouts created more risk in system

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Congressional spending and Federal Reserve policy have teamed up to lock the U.S. economy into a downward cycle that may lead to catastrophic failure if left unchecked. Both Congress and the Federal Reserve have taken reckless abandon in their recent attempts to insert the federal government as a solution to the country´s economic woes. Rapid response and common sense solutions are required to counteract these irresponsible practices.

With the increase in federal spending, and the latest passage of a debt ceiling increase by Congress and subsequent signing into law by the White House, interest in investing in U.S. Government securities, like treasury bills, has begun to decline. The increase in deficit spending has created a growing loss of confidence in the government´s ability to repay its loans and threats from credit rating agencies of a potential downgrading of the US’s credit rating. As interest in the bond market decreases, interest rates on bonds automatically increase creating a higher cost to the U.S. government to sell its debt.

The Federal Reserve’s loose monetary policy to finance deficits and suppress interest rates indirectly contributes to what is known as the “carry trade” against the U.S. dollar. By borrowing dollars on the assumption that the dollar will decline and then using them to buy commodities, investors reap higher profits when paying back the initially borrowed dollars. With the continued decline in value of the dollar, the incentive to use the carry trade is increased which leads to a growth in speculation that the dollar will continue to be devalued.

Separately, the Federal Reserve is essentially subsidizing financial institutions by setting the benchmark interest rate at 0%. This initially spurred an increase in financial institution investment in treasury bills to shore up their balance sheets – a practice that served as probably the most under the radar bailout packages in federal government history. The ability of financial institutions to take Federal Reserve dollars at 0% interest and invest them in federal treasury notes with a set interest rate, essentially meant that the federal government was simply handing the financial institutions an allowance (or bailout). The Federal Reserve paying interest on bank reserves is not a solution. Not only is borrowing nearly free money from the Fed to then loan funds back to the Fed at a higher rate immoral, this will force up interest rates on treasuries which, ironically, present policy is trying to prevent.

In the case of a 30 year bond, this was 4.7% as of 1/6/09. Whether by design or by accident, this will serve as a creative federal subsidy until, due to a climbing deficit and reduced faith in the government´s credit, these institutions find it too risky to invest in treasury bills and look elsewhere, or the Fed is forced to raise interest rates due to concerns about creating an artificial bubble for the financial industry, or in housing.  Either that, or the Federal Reserve will displace the market and become the exclusive buyer of treasuries.

The irresponsible lending practices of the Federal Reserve and the reckless spending levels of Congress will inflict greater damage than the country would have felt had the housing and financial institutions been allowed to find equilibrium on their own in the first place. The involvement of the federal government hasn´t saved the U.S. economy; it has simply prolonged and likely worsened the pain of the eventual economic reset. A structurally sound financial system shouldn’t need bailouts or rescues. Swift and steady action is required to help brace the country for a potentially worse decline.

Federal spending must be checked and reversed, including a plan to permanently eliminate the deficit and restore faith in the U.S. government´s credit, thus re-establishing confidence in the bond market. The Federal Reserve must also seek to raise interest rates to prevent inflation and offset any potential asset bubble bursting created as a result of the recent 0% interest rate. Entitlement spending must be decreased and non-essential programs phased out in order to help lessen the strain on the federal budget. All of these actions are necessary now to help soften, and potentially prevent, a predicted economic decline within the next 10-20 years.

Danny Tarkanian
Republican Candidate for the United States Senate
Tark2010.org

Here is a very good recent article that dovetails with this issue: Watchdog: Bailouts created more risk in system