Why the Meltdown Should Have Surprised No One | Peter Schiff

Here is the link to the Peter Schiff video mentioned at the end of the previous post.
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Published in: on September 29, 2010 at 11:43 pm  Leave a Comment  

Be Very Afraid: The ‘Experts’ Are Running the Economy

Be Very Afraid: The 'Experts' Are Running the Economy
by Thomas E. Woods, Jr.

Recently by Thomas E. Woods, Jr.: Some Americans Distrust Authority

When Young Americans for Liberty at Indiana University first invited me to speak last year, the group ran into resistance from the university administration. Having consulted the economics department, the relevant university office declared that I was "uncredentialed," and that perhaps a professor from IU’s economics faculty could give a nice lecture instead. I was uncredentialed, presumably, because my education at Harvard and Columbia was in history, not economics.

The student group refused to take this lying down, and made such a stink in the local media, pointing to my bio and the reception of my book Meltdown – including the friendly coverage it received from mainstream outlets like Barron’s, CBS.com, and UPI – that the university not only reversed its stance but even partially funded my appearance, which took place on September 21 of this year.

The Indiana Daily Student (circulation 15,500) offered me a 600-word guest column in the wake of my appearance. Here’s what I wrote, which they published verbatim (complete with a comments section). ~ Tom Woods

The free market did not cause the financial crisis, and the Elmer’s glue and Scotch tape our wise leaders have applied to the economy are only prolonging the agony. That’s the thesis of my 2009 New York Times bestseller, Meltdown.

That’s not a popular thing to say in Bloomington, I learned several months ago.

When Young Americans for Liberty at IU hit a bureaucratic stone wall in trying to invite me to campus – a problem I can’t say I’ve run into at any other university – the local media took notice. But it was the comment sections that were a particular hoot. It was as though I had insulted Stalin in the old Soviet Union. Who does this idiot think he is? How dare he speak of our wise overlords that way! Why, they’re just looking out for the good of the people! And so on, as if I’d stumbled into some kind of cliché competition.

Then, when the university reversed itself and even helped fund my appearance, the comments switched to, "If I had time, I’d go over there and set this guy straight!" Uh-huh. The large crowd that came to hear me a couple weeks ago couldn’t have been friendlier.

What I explained at IU was that asset bubbles, like the housing bubble we’ve just lived through, do not occur spontaneously. If people bought lots of houses on the free market, interest rates would rise as the banks’ loanable funds were depleted. That would put an end to speculation in real estate.

But thanks to the Federal Reserve System (or simply the "Fed"), which is no part of the free market, large infusions of money created out of thin air kept interest rates low, and thus perpetuated the bubble. During an asset bubble, demand for the asset in question rises, as does its price. Where would people get the money to keep buying an increasingly costly asset if the government’s officially approved money machine weren’t there to flood the economy with cash?

It was this interference with interest rates, pushing them well below where the free market would have set them, that set in motion the classic boom-bust cycle we’ve just witnessed. F.A. Hayek won the Nobel Prize for showing how central banks like the Federal Reserve, by interfering with interest rates and not allowing them to tell entrepreneurs the truth about economic conditions, divert the economy into unsustainable configurations that inevitably come undone in a crash. (Hayek belongs to a tradition of free-market thought called the Austrian School of economics.)

None of this has anything to do with the free market.

Adding fuel to the fire was the so-called Greenspan put, the unofficial policy of the Greenspan Fed that promised assistance to private firms in the event of risky investments gone bad. What kind of incentives do you suppose that created?

The point of being in college is to learn how to think beyond clichés. Forget the quacks who told us, cluelessly, that everything was fine with the economy in 2007. Look instead to modern spokesmen of the Austrian School like Peter Schiff, Ron Paul, and Jim Grant. You know, the people who, unlike your professors (who, by the way, tried to keep a dissident voice from speaking on campus), predicted the recent crash to a T.

Want to know what really happened to the economy, and why your job prospects are so bleak? Watch Peter Schiff’s YouTube "Why the Meltdown Should Have Surprised No One." That’s the first step toward becoming the independent thinker that four years at IU are supposed to make of you.

September 30, 2010

Thomas E. Woods, Jr. holds a bachelor's degree in history from Harvard and his master's, M.Phil., and Ph.D. from Columbia University. He is the author of ten books, including the just-released Nullification: How to Resist Federal Tyranny in the 21st Century, and the New York Times bestsellers Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, and The Politically Incorrect Guide to American History. Visit his website and blog, follow him on Twitter and Facebook, and subscribe to his YouTube Channel.

Copyright © 2010 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Published in: on September 29, 2010 at 11:27 pm  Leave a Comment  

AGNC Commences Public Offering of Common Stock

AGNC's stock price dropped 4.61% this afternoon on the news that it is offering 10 million shares of additional common stock.  This shouldn't be a big surprise to anyone who has examined AGNC's quarterly 10-K filings.  They routinely issue stock to attain paid-in capital to buy more "agency securities".  The company had 33.6 million shares as of June 2010.  It will likely have 43.6 million shares after the new shares are sold.

What is interesting is that AGNC paid $1.30 per share dividend last quarter (2Q 2010).  The dividend cost AGNC $47.1 million dollars.  That dividend payment exceeded it quarterly earnings of $36.8 million dollars.  Then just a few weeks ago it declared that it will pay $1.30 for the third quarter of 2010, but now it will have 43.6 million shares at $1.30/share for a total dividend payment of $56.7 million dollars.

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AGNC Commences Public Offering of Common Stock

BETHESDA, Md., Sept 27, 2010 /PRNewswire via COMTEX/ — American Capital Agency Corp.(AGNC 26.70-1.29-4.61%) ("AGNC" or the "Company") announced today that it intends to offer, subject to market and other conditions, 10,000,000 shares of its common stock in an underwritten public offering. In connection with the offering, the Company intends to grant the underwriters an option for 30 days to purchase up to an additional 1,500,000 shares of common stock to cover overallotments, if any.

AGNC expects to use the net proceeds from this offering to acquire additional agency securities as market conditions warrant and for general corporate purposes.

BofA Merrill Lynch, Citi, Deutsche Bank Securities and UBS Investment Bank are joint book-running managers for the offering.

The offering will be made pursuant to AGNC's existing shelf registration statement, previously filed with and declared effective by the Securities and Exchange Commission. The offering of these securities will be made only by means of a prospectus and a related prospectus supplement. When available, copies of the prospectus and prospectus supplement may be obtained from BofA Merrill Lynch, Attn: Prospectus Department, 4 World Financial Center, New York, New York 10080; Citi, Brooklyn Army Terminal, 140 58th Street, 8th Floor, Brooklyn, New York 11220; telephone: (800) 831-9146; Deutsche Bank Securities, Prospectus Department, Harborside Financial Center, 100 Plaza One, Jersey City, New Jersey 07311-3988; telephone: (800) 503-4611 or UBS Investment Bank, Attn: Prospectus Department, 299 Park Avenue, New York, New York 10171; telephone: (888) 827-7275.

This press release does not constitute an offer to sell or the solicitation of an offer to buy shares of common stock, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.


AGNC is a REIT that invests in agency pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity. The Company is externally managed and advised by American Capital Agency Management, LLC, an affiliate of American Capital, Ltd. ("American Capital"). For further information, please refer to www.AGNC.com.

Here is the link to the rest of the legalese: http://www.marketwatch.com/story/agnc-commences-public-offering-of-common-stock-2010-09-27?reflink=MW_news_stmp 

Published in: on September 27, 2010 at 11:31 pm  Leave a Comment  

Obama’s budget cuts visualized

Published in: on September 26, 2010 at 10:39 pm  Leave a Comment  

Elmo isn’t laughing at the American national debt

Like the Mogambo Guru says, "We're freakin' doomed!!"  Read the other pages on this blog for some tips on how to survive the coming financial calamity.

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Published in: on September 26, 2010 at 10:22 pm  Leave a Comment  

Test audio

Published in: on September 23, 2010 at 11:14 pm  Leave a Comment  

AGNC analysis of the income account> balance sheet and income tax check upon the published earnings statements

American Capital Agency Corp. (AGNC) qualifies as a real estate investment trust (REIT).  They elected to be taxed as a REIT under the unconstitutional Internal Revenue Code of 1986.  In order to avoid U.S. federal or state corporate taxes, AGNC is required by the men with guns (government) to distrubute annually 90% of their taxable income.   Therefore, we don’t need to check its income tax filings to double-check the honesty of their earnings statements.
Note: I wish that we could live in a voluntary society where each business could decide on its own how much of its earnings to distribute to its owners.  No businesses should be taxed.  In a truly free market some businesses would choose to distribute 90% and some would decide to distribute 30%.  Some would decide to distrubute none.  No businesses should be taxed.  Taxes take money away from the employees and owners in the form of taxes.  Individuals shouldn't be taxed either.  However, we are not free so I digress.


Please read the excerpt from Securities Analysis below to get an idea how to apply this action step to your own securities holdings.



Balance-sheet and Income-tax Checks upon the Published Earnings Statements. The Park and Tilford case illustrates the necessity of relating an analysis of income accounts to an examination of the appurtenant balance sheets. This is a point that cannot be stressed too strongly, in view of Wall Street’s naïve acceptance of reported income and reported earnings per share. Our example suggests also a further check upon the reliability of the published earnings statements, viz., by the amount of the federal income tax accrued. The taxable profit can be calculated fairly readily from the income-tax accrual, and this profit compared in turn with the earnings reported to stockholders. The two figures should not necessarily be the same, since the intricacies of the tax laws may give rise to a number of divergences.2 We do not suggest that any effort be made to reconcile the amounts absolutely but only that very wide differences be noted and made the subject of further inquiry.

The Park and Tilford figures analyzed from this viewpoint supply the suggestive results as shown in the table on page 436.


The close correspondence of the tax accrual with the reported income during the earlier period makes the later discrepancy appear the more striking. These figures eloquently cast suspicion upon the truthfulness of the reports made to the stockholders during 1927–1929, at which time considerable manipulation was apparently going on in the shares.


This and other examples discussed herein point strongly to the need for independent audits of corporate statements by certified public accountants. It may be suggested also that annual reports should include a detailed reconcilement of the net earnings reported to the shareholders with the 2 See Appendix Note 51, p. 787, for a brief résumé of these divergences. net income upon which the federal tax is paid. In our opinion a good deal of the information relative to minor matters that appears in registration statements and prospectuses might be dispensed with to general advantage; but if, in lieu thereof, the S.E.C. were to require such a reconcilement, the cause of security analysis would be greatly advanced.



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Published in: on September 23, 2010 at 7:27 pm  Leave a Comment  

AGNC analysis of the income account> earnings of subsidiaries

We need to examine American Capital Agency Corp’s (AGNC) earnings statements and balance sheets to make sure there are no misleading artifices in their income account.  Today we will check to make sure they didn’t manipulate their earnings by padding their income account with some subsidiary sleight-of-hand.  This is easy since AGNC has no subsidiaries.  No adjustments are necessary.


Please read this excerpt from Securities Analysis on the topic and apply it to stock you own or are considering to purchase with subsidiaries.



On comparatively rare occasions, managements resort to padding their income account by including items in earnings that have no real existence.  One flagrant corporation did the following during the Great Depression:


“An examination of the balance sheets discloses that during these two years the item of Good-will and Trade-marks was written up successively from $1,000,000 to $1,600,000 and then to $2,000,000, and these increases deducted from the expenses for the period.


These figures show a reduction of $1,600,000 in net current assets in 15 months, or $1,000,000 more than the cash dividends paid. This shrinkage was concealed by a $1,000,000 write-up of Good-will and Trademarks.  No statement relating to these amazing entries was vouchsafed to the stockholders in the annual reports or to the New York Stock Exchange in subsequent listing applications. In answer to an individual inquiry, however, the company stated that these additions to Good-will and Trade-marks represented expenditures for advertising and other sales efforts to develop the business of Tintex Company, Inc., a subsidiary.


The charging of current advertising expense to the good-will account is inadmissible under all canons of sound accounting. To do so without any disclosure to the stockholders is still more discreditable. It is difficult to believe, moreover, that the sum of $600,000 could have been expended for this purpose by Park and Tilford in the three months between September 30 and December 31, 1929. The entry appears therefore to have included a recrediting to current income of expenditures made in a previous period, and to that extent the results for the fourth quarter of 1929 may have been flagrantly distorted. Needless to say, no accountants’ certificate accompanied the annual statements of this enterprise.”


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Published in: on September 22, 2010 at 3:51 pm  Leave a Comment  

A small increase to interest rates will burst the bond bubble

Bonds are definately in a bubble.  This is a good article that explains how a small uptick in several interest rates will pop the bond bubble.  It is going to be so sad to see more people's retirement dreams destroyed by the Federal Reserve's manipulation of interest rates.  The market (people's time preference for money) should determine interest rates.
Published in: on September 21, 2010 at 8:55 pm  Leave a Comment  

Fractional Reserve Banking by Murray N. Rothbard

Murray Rothbard explains the fraud known as fraction-reserve banking.

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Published in: on September 19, 2010 at 10:09 pm  Leave a Comment