Check out my new video commentary the Man Cave Report, http://www.youtube.com/watch?v=QKmt3Xv3GH4.   The topics this week are concerning the election, gold and the Federal Reserve.
 
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Bill Gross, PIMCO Managing Director, has written a new investment outlook entitled "RunTurkeyRun",  http://www.pimco.com/Pages/RunTurkeyRun.aspx.  If you care about the value of the US dollar, if you care about the broken US political process, if you care about the future of the US dollar, you should read "RunTurkeyRun".  Democrats and Republicans are all turkeys.

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If you have an interest in the development of the US wireless and mobile satellite industries I suggest you read the most recent blog by Tim Farrar of TMF Associates, http://tmfassociates.com/blog/2010/10/22/.

I believe Tim is right on in his assessment of the market situation regarding spectrum.  Tim has written a number of excellent blogs on this market in recent months.  I ecourage everyone to consider his thoughts.  I share his perspective on the internet bubble of the late 1990s.  The market extremes that developed during that bubble were unreal.

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One of the first articles I wrote in late 2006 when I founded thepurplemuse.com was Rights vs Privileges.  As I added more material to the site I moved Rights vs Privileges to the More Articles section of the site.  Since Rights vs Privileges was not included in the navigation bar at the top of the home page and was not mentioned on the home page you would think it would be hard to find.  Wrong!

During the past four years I have had visitors to thepurplemuse.com from all over the world find my article through a variety of search engines.  It is the most highly viewed page on thepurplemuse.com despite not being visible on the home page for the past couple of years.  I believe that people are trying to define the differences between these two words. 

In the west we have made a huge mistake in failing to differentiate between a Right and a Privilege.  I read an article this morning about the strikers in France that are protesting the increase of the retirement age from 60 to 62.  The strikers don't want to give up their "rights" to their retirement pensions at age 60.  They fail to understand or don't want to understand that they have no rights to any pension.  French society is providing them the privilege of retiring at 60 or 62 and receiving a pension.

Many US citizens have gotten lost in this debate.  They have failed to look at our founding documents to get a full understanding of their rights.  Any government program that is above and beyond our constitutional guarantees is a privilege given to US citizens by the nation as a whole and may be changed as needed.

I have moved Rights vs Privileges back to the home page and navigation bar so it is easier to find.  We face a lot of difficult decisions in the years ahead.  We must fight to retain our Rights.  We must be prepared to give up some of our Privileges as needed to make our society function in a reasonable manner.  Please take a few minutes and read Rights vs Privileges.

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Everywhere I look I see economists urging Western governments in Europe and the US to borrow more money so they can increase expenditures for a variety of government programs.  The same economists are urging central banks to print more fiat money so that the governments can stimulate their economies.  None of these economists wants to admit to the world that their recommendations of the past are failures and were wrong headed.  The free lunch promised to the people by the economists and many government leaders doesn't exist and never existed on a long term basis.  The world is now finding out the truth.

It appears a few European political leaders have the guts to tell their citizens that the old game is over and they must adapt to changing conditions.  The French are rioting in Paris over a change in the retirement age from 60 to 62.  We have seen Greeks protest over changes in their entitlement programs brought on by the corrective actions caused by government gross overspending.

No political leader in the US has been willing to fully discuss the extent of our problems.  Our political leaders criticize each other but aren't willing to truthfully acknowledge the depth of the problem now and the compounding nature of the problems in the next few years.  Where is the call for a full restructuring of government programs?  This failure of leadership will come back to haunt the US population by the time the issues are fully addressed.

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Check out this terrific drum solo that was recorded during a Cloud of Suns concert in Portland, Oregon on Friday night, http://www.facebook.com/video/video.php?v=1317707722833.

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It appears that some of the Democrats on Capitol Hill in Washington are crying for increases in Social Security payments after no inflation for two years.  Since changes in Social Security payments are tied directly to the CPI, if the CPI is effectively unchanged the payments don't change.  I have made the case previously that the CPI doesn't correlate to anyone's cost of living. In the past the Feds have told the US population that there was low inflation because the increases in the CPI were low. At the same time we all knew that many significant costs were rising far more rapidly than the CPI. The Feds were purposely deceiving the US population in an attempt to control the massive cost increases in entitlement programs that a rising CPI would create. Why change the game now when the nation's financial situation is much worse than previously?

Federal spending continues totally out of control due to the ineffective leadership of Congress and the President.  Where is the political leadership needed to control the revenue and cost of Social Security? Why should anyone receive higher Social Security payments when the program is effectively bankrupt (the government itself is effectively bankrupt)? Governments that are financially strong don't need their central banks (Federal Reserve) to create $500B to $1T of fiat dollars through "Quantitative Easing" programs.

Social Security isn't even the big problem. Medicare is a much bigger issue and will create financial headaches beyond comprehension if not completely resutructured.  Current levels of DoD spending are not affordable or required.

We will see how much heat can be placed on correcting these huge issues after the November elections. The Congress will likely become more conservative and more fiscally responsible than it is today. The question is how much stomach will the new Congress have to restructure government spending? We shall find out in 2011!

TPM

 

President Obama recently confessed during an interview that he didn't really understand that there is no such thing as a "shovel ready" project.  I guess the President finally figured what most people already know.  Major construction projects that get funded don't start immediately due to all of the permits, contracting and and other preliminary work that must be done.  They accomplish little when the objective is an immediate stimulus to the economy. 

It appears that President Obama knows little about the process of making the real world run.  He is in no position to make major decisions about our nation.  He has never run anything. One of the reasons he is anti-business is because he has no concept of what it takes to operate a business successfully.  Obama is a left wing ideologue that has no place in national executive leadership.  The voters have gained a better and better understanding over the last year of Obama's failings as President. His recent interviews are a confession of his failings.

President Bush's errors in office were inexcusable on many levels. Obama was elected in response to Bush's failings. The desire for change was legitimate. The selection of the change agent was poor.

Our nation is far worse off now than it was 10 years ago because a negative trend that has been in motion for decades has increased dramatically due to failings of executive leadership by both parties and a Congress that is ineffective. The US is continuing to lose strength because of the long term weakness of its political leadership. The Tea Party movement is a reflection that part of the population has begun to understand that the people must regain control of the direction of the nation and replace ineffective political leaders.

We will see if any political leader has the guts to tell the nation the facts about the restructuring of the US that must take place to reset the course of our nation to future success. I have yet to see any political leader that really understands the depth of the issues and willing to execute the restructuring of government that is required.

TPM

My wife and I just returned from a week long trip to London and surrounding areas in the UK.  While we spent most of our time visiting historic sites, we did get a chance to read a few newspapers while riding on the trains and the London Underground and watched the late evening news programs on the BBC, ITV and SkyNews.  David Cameron, the new Conservative Party Prime Minister, and his team are working extremely hard to restore some semblance of fiscal discipline in the UK.

To give you an example of how wacko the UK social policy has become over the years, the Conservatives are proposing to establish a maximum annual limit of GBP 26,000 (US$41,600) as the maximum state payout per family.  This change is perceived as a big deal in the UK.  Some unemployed folks will lose as much as GBP 16,000 ($25,600) in annual benefits.  Apparently, 50,000 families will lose average benefits of about $150 per week under the new maximum payouts.  How could any government be handing out over 40 grand a year to its unemployed able bodied citizens on a long term basis?  No wonder a lot of UK people prefer being on welfare than working!  Concerns were expressed that the poor will be priced out of affluent areas.  Why should anyone that is receiving government handouts on a long term basis be living in an affluent area?  The UK government readily acknowledges that people on the dole get more money than many that work at a full time job!

The irony of this debate in the UK is that my wife and I met many young people that are not UK citizens working in service jobs throughout the locations we visited.  Hard working youngsters from the European continent have come to UK to work at entry level jobs that give them a better opportunity than they can get in their home countries.  Able bodied UK citizens sit at home collecting welfare benefits that provide them a pretty decent life, when there are available jobs, if they would take them.

We have a similar situation in the US.  We have immigrants from all over the world working in entry level jobs that Americans will not take.  We have made a lot of stupid policy mistakes in the US, but we don't give people welfare payments like our cousins in the UK.  Hopefully, we never will!

Our friends in the UK are also having a big debate over the implementation of tax rates of 40 and 50 percent on their income and the elimination of tax subsidies for families with children above certain levels of income.  Many of the current UK government leaders realize that the UK is in a horrible financial situation and they must cut spending and raise taxes to solve their problems.  Unfortunately, the social welfare state is so much a part of UK culture that it will be a major battle to restructure it to rational levels.  But the Brits are having a national conversation over the issues and all sides are being heard.  I have to give them credit for some straight talk on a very difficult subject.

And there is a call for more quantitative easing by the Bank of England.  Some folks are concerned that the UK will follow the deflation path of Japan.  That want more fiat money printed by the UK central bank to keep deflation from occurring.

While we were in London, gold moved to a new all time high at over $1,300 per ounce.  The US appears to want to print more fiat money.  The UK may print more fiat money.  Everybody wants to export goods and services to create jobs and help save their economy. 

All of the major western nations have gotten fat and lazy during the past 30 years.  The historical lifestyle wasn't and isn't sustainable.  Everyone must readjust their lifestyles.  The UK is having an open conversation on the issues.  Hopefully, US politicians will talk as openly and honestly to Americans on the same issues in the months ahead.

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