Big government isn’t just expanding in the UK, in the Euro zone and the US as well, the reach of government and it’s control over the daily lives its citizens is reaching Orwellian proportions.

Yesterday, the ITEM club and several other prominent economists sent a letter saying that the chancellor should be lowering taxes, not ramping up spending and risking a hyper inflationary holocaust.

When you try to spend your way out of a recession, the results are as predictable as dropping a snooker ball out of a window….it’s a cause and effect thing…you drop the ball…it falls due to gravity. When you attempt to spend your way out of a recession, soaring inflation, a plunging national currency which we are already seeing and the huge ramping up of national debts, follow. Drop the snooker ball….gravity takes over. Spend your way out of a recession and inflation, increased national debt and a declining currency follow…see how that works? Cause and effect. 

Milton Friedman and his wife have demonstrated this connection clearly and without argument. History has shown this over and over…not one attempt to spend our way out of a recession has ever worked. Jim Callaghan said it in 1976 with his famous quote “in all candour that the option of reversing a downturn by deficit-spending simply “doesn’t exist”.

What is Gordon the Gofer saying? “We are spending more to get the economy moving,” said Brown last week. “That’s the right thing to do.”

It’s not right for the man in the street. It’s not right for future generations, it’s not right for people on fixed incomes…but it is right for a desperate prime minister, it is right for the cities investment bankers and people in the public sector who will benefit from the extra work.

If you’ve never seen someone trying to put out a house fire with petrol….sit back and enjoy a lunatic who believes in fundamentally discredited principles of economic management at work. He’s made some mistakes, but this is by far his most damaging to date….most just don’t know it yet.

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Chancellor, Euro Zone, Hyper Inflationary, ITEM Club, National Debts, Recession, UK, US

“While I have warned for years that the United States was headed into the eye of an economic hurricane, nearly every other “expert” from Washington, Wall Street, the press and academia saw nothing ahead but sunny skies. Now, suddenly, there is an overwhelming consensus that absent the Federal mortgage bailout, my dire forecast would have come to pass. While I’m glad that rose coloured glasses have finally been removed from so many eyes, the vast majority of these observers are still blind. In truth, the bailout plan substantially increases the threats to the U.S. economy. 
 
When I wrote my book “Crash Proof”, I not only predicted that our consumer/mortgage credit-based economy would fall apart, but that the government would ineptly try to repair it. The magnitude of those potential policies formed the basis of my worst case scenario. My fears have now been confirmed, and the U.S. Government is now set to destroy all hope of economic recovery. 
 
Make no mistake; had the government resisted the political pressure to interfere with the markets, we would now be experiencing a very deep recession. But by refusing to let the markets work, policy makers are resisting the only medicine capable of curing the economic disease that afflicts us. The same mistakes were made in the early 1930’s, causing a severe financial crisis to morph into the decade-long Great Depression. 
 
The government will now attempt to keep bad loans from failing and real estate prices from falling. Rather than allowing market forces to rein in excess borrowing and replenish savings, it will encourage even more borrowing and drain what is left of our savings pool. Rather than allowing our economy to return to one based on legitimate production, it will continue to encourage reckless consumption. 
 
In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to civil unrest, food and energy shortages, and the possible imposition of martial law. If such a scenario unfolds, what is left of our Constitution will surely be completely shredded. 
 
Although this reality looms as large as anything I have ever seen, investors still do not see the forest for the trees. Convinced that the bailout will actually work, and that foreign governments are derelict for not launching similar plans, global investors are fleeing other currencies in favour of the dollar. Soon investors will discover that foreign politicians and central bankers have acted responsibly. When they do, the current gains seen by the dollar will reverse violently.”

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Tags: Bailout, Peter Schiffs, Real Estate, UK Banks, US

Now that the US government has backed up all the bad and about to go bad mortgages with almost $1tr of tax payers money, what’s going to happen to the people who struggle to pay their mortgages?

The answer is that the mortgages will be sold to the tax payer once they get into trouble by the financial institutions that hold them. The financial institutions will rightly figure out that they will get more money by selling it to the bail-out fund that they will get from foreclosing on it. So they will keep the good, money making loans and sell the bad loans as they turn bad.

Joe Public struggles to pay his mortgage. He speaks to his bank, tells them about his trouble and they immediately sell the loan to the taxpayer. Joe stays in his house without making any payments on the loan for about a year until some government employee comes by and asks what the issue is. Joe tells them. The government employee then says, well, if we re-negotiate your loan so that you owe us half of what you originally owed us, and we fix your mortgage rate at 4% over 30 years, will you consider making payments to us again?   

“I’ll think about it” says Joe…”when I get a job”. Joe basically has a chunk of his debt forgiven in exchange for not handing back the keys. Tax payers, who have saved, borrowed responsibly and work hard end up picking up the tab for Joe’s recklessness. The debt forgiveness is the critical point. That’s what the objective is…to prevent the market price discovery from working. This is meant to be a capitalist economy…let the market decide the value of mortgages, homes and banks. When the government steps in this way, we cease to have capitalism…we have the “S” word and a price fixing economy.

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Economics, Economy, Finance, Mortgages, US