Why Believe Politicians When They Keep Changing Their Story?
By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
There is an old story that the way to tell if a politician was lying was whether his or her mouth was open. Unfortunately, much of what politicians say is rarely the whole truth. Instead, the best that might be heard is only part of the story, omitting important facts that do not support the politician’s position. Other times, through ignorance or outright deceit, politicians lie.
Let me just remind you of a precise example of what I am talking about. For years and years the US Treasury and Federal Reserve had claimed that gold was unimportant, that it was never even discussed, and therefore there was no need to engage in any gold swaps or other trading activities.
Then the Gold Anti-Trust Action Committee filed Freedom of Information Act requests in 2007 and 2009 with the US Treasury and Federal Reserve seeking documents about gold swaps from 1990 onward. Eventually a judge ordered the Federal Reserve to release the minutes of a 1997 meeting where Federal Reserve officials coordinated their gold swap arrangements with other central banks. But before that document was made public, Federal Reserve Governor Kevin Warsh wrote a letter claiming that the reason that documents should not be made public was because the Fed did have gold swap arrangements with other central banks.
Moving up to today, the level of political deception appears to me to be at record levels.
Spanish Prime Minister Mariano Rajoy is a sad example of what I am talking about. A few months ago he claimed that Spain was able to resolve its economic problems on its own. He refused to consider an offered European Union bailout. But, within two weeks, he said that the $125 billion bailout was necessary. At that time, he said that Spain would not need any more help.
Well, the ink is barely dry on those documents and now Rajoy that a total of $300 billion of bailouts is needed.
I’m sure Rajoy probably knew when he originally stated that no bailouts were needed that they really were and that the amount would be on the scale of $300 billion. So when was Rajoy being honest? A few months ago when he said no bailouts, or two weeks after that when he said $125 billion of bailouts would be enough, or today when he is demanding $300 billion? What will he ask for a month from now?
Here are some examples of current deceptions by US politicians.
All the Democrat, Republican, and even the Libertarian presidential candidates talk about cutting the Federal government’s budget deficit, but insist on using the smaller deficits calculated by cash flow accounting. If calculated on the more accurate accrual basis of accounting as required of publicly-held companies, the 2011 budget deficit projections range from more than $3 trillion (by David Walker, the former Comptroller General of the federal government) to $5 trillion (by USA Today in May 2012). If you aren’t even addressing the true scope of the problem, how can you come up with a genuine solution?
The latest national non-farm civilian U-3 definition of US unemployment rate is 8.2%. But this figure uses methodology much different than used by the Bureau of Labor Statistics at the beginning of President Clinton’s time in office. Using the same methodology from 20 years ago, the current unemployment rate, as calculated by John Williams of www.shadowstats.com, would be about 23%. Further distortions to the underreporting of the unemployment rate are caused by large numbers of Americans joining the rolls of those collecting Social Security for disability, food stamps for poverty, and the like.
The Bureau of Labor Statistics reports that the Consumer Price Index is up less than 2% from year earlier levels. Yet, John Williams, using the BLS methodology from 1990, calculates that the CPI is up about 5% in the past year.
The US Treasury is trying to claim that interest rates on its debt are low because the dollar is perceived as a widely-desired “safe-haven” asset. Yet the latest reports indicate that the Federal Reserve is buying at least 60% of all US Treasury debt issues. It is this demand that is artificially holding down interest rates.
At the conclusion of the Federal Open Market Committee meeting Wednesday, the changing lies were laid bare. In June the Feds had declared that the US economy was “expanding moderately.” Yet, this week, even though there were no changes in the economy that required a change in Fed policy, this same committee now says that the US economy “decelerated somewhat.”
Actually, the entire Federal Open Market Committee was an example of saying everything that anyone might want to hear while still saying nothing at all. The FOMC said that they were not changing any policies which would satisfy those who were afraid of another round of inflation of the money supply which would further hurt the value of the US dollar. The FOMC then immediately added that they were closely monitoring the economy in order to take quick action, if needed, meaning a new program of inflation of the money supply. I would not now be a bit surprised if Federal Reserve Chair Ben Bernanke announced this program of quantitative easing on August 31 at the Fed meeting in Jackson Hole, Wyoming. This part of yesterday’s announcement hinting at a new round of quantitative easing in the near future would please investors in stocks.
Today, European Central Bank President Mario Draghi stated that they will not change their policies or interest rates. What will he tell us next week or the week after?
Personally, I would rather have some unchanging assets in my life. An ounce of gold or silver today will still be an ounce of gold or silver next week, next year, and next century.
Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles). His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.