D4L UPDATE for 12/7/2011

by Chuck Donovan

Butler On Business Format

12/7/2011

ANNOUNCMENTS
–    The Georgia Libertarian Party has been offered a $5000 direct contribution.  The catch?  The Party has to raise $5000 in matching funds in the month of December, 2011.  There isn’t much time left.  If you like the kind of message you hear from Libertarians such as myself and Jason Riddle, you can help to keep that light of liberty alive.  Time is limited, so go to http://www.LpGeorgia.com and click on the big red CONTRIBUTE button.  Remember your donation, however small, will go towards that $5000 matching offer.

RECOMMENDED INFORMATION OF THE WEEK

–    ARTICLE – The Solution For The Eurozone Debt Crisis Is Actually Quite Simple, by Scott Grannis

  • Published in “Seeking Alpha”, http://www.seekingalpha.com
  • “The best, and probably the only way, to impose real sanctions on governments who spend and borrow too much is to let the market do it. When the yield on your bonds starts to skyrocket, you quickly realize that you can’t continue to borrow. You either mend your ways and borrow less, and/or figure out how to grow more, or you default on your debt obligations. And even if you default, you will find it very difficult—if not impossible—to continue to be profligate. That’s the way it has always worked in the bond market. It’s quite simple: if lenders don’t think you can repay your debts, they won’t lend you any more money.
  • A market-based solution doesn’t need any agreements or rewritten treaties. It also has the virtue of essentially eliminating moral hazard, since lenders would have a powerful incentive to do their due diligence every time they buy a bond, instead of simply relying on what ratings agencies are saying, or betting that they will be bailed out by taxpayers or other countries if things turn sour. A true market-based solution would even make the ratings agencies obsolete.
  • No serious investor would ever base his decisions on what a ratings agency says anyway; the only purpose that ratings serve in today’s world is to facilitate the ability of bureaucrats and technocrats to decide, for example, which assets qualify as Tier 1 capital for banks, effectively overriding the investment decisions of the private sector and thus providing fertile ground for moral hazard.
  • The only reason that no one is talking about a simple, proven, market-based approach to solving the Eurozone sovereign debt problem is that politicians (urged on no doubt by their investment banking constituents) fear that highly indebted Eurozone countries are more likely to default (i.e., to act irresponsibly) than they are to cut spending, and that this, in turn, puts Eurozone banks (who hold tons of Eurozone sovereign debt) at risk, and that this, in turn, puts the very viability of the Euro and the Eurozone economies at risk. Politicians love to think this way, because it makes them indispensable. The truth, however, is that when politicians step into the fray to fix things, they almost always make the situation worse.

 

–    AUDIO – The so-called “War on Drugs”

 

–    VIDEO
o    Afterburner with Bill Whittle: Live Free or Die, (10:22)

  • In the wake of the terrible airplane crash at the Reno Air Races, there were the usual cries for more government intervention by all of the usual MSM suspects.  Aviation is a subject near and dear to my heart, so when Bill Whittle recorded this articulate refutation of the I just wanted to share it with all of you.

o    Greatest Wealth Transfer in History, (2:11)

  • What will be the effect of an entire world economy using fiat currency?  We have never seen this before in history.  History shows a change in accepted currency about every 30 to 40 years.  When that next change takes place, what will the new accepted currency be?

 

QUOTES OF THE WEEK
–    Jim Rogers, on November 29th:
o    ” Governments around the world continue to print money.  Paper money everywhere is being debased.  If the US dollar turns into confetti, there is no high for the price of gold, because the dollar will become worthless”
o    Concerning the European debt crisis he said:  “The solution to too much spending and too much debt is not more spending and more debt. Nobody shows debt going down.  …This situation in Europe is getting out of control.  It already is out of control in the US.  You’re going to have to take your pain sometime.  If you did it now,  …the system would survive.  Right now governments have some credibility left . . . if you wait a year or two or five, when the market forces you to deal with reality, then the markets and the banks <may>have no credibility. …I’d rather take the pain now, rather than the markets force us to take the pain.  And that could be the end of the system,’ he said.”

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