U.s. Treasury Quotes

We have to grasp, as Marx and Adam Smith did, that corporations are not concerned with the common good. They exploit, pollute, impoverish, repress, kill, and lie to make money. They throw poor people out of homes, let the uninsured die, wage useless wars for profit, poison and pollute the ecosystem, slash social assistance programs, gut public education, trash the global economy, plunder the U.S. Treasury and crush all popular movements that seek justice for working men and women. They worship money and power.

Every culture has a myth of decline from some golden age, and almost all peoples throughout history have been pessimists. Even today pessimism still dominates huge parts of the world. An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. This describes Europe since the early 1970s, when the continent succumbed to undirected bureaucratic drift. Today the whole Eurozone is in slow-motion crisis, and nobody is in charge. The European Central Bank doesn’t stand for anything but improvisation: the U.S. Treasury prints “In God We Trust” on the dollar; the ECB might as well print “Kick the Can Down the Road” on the euro. Europeans just react to events as they happen and hope things don’t get worse.

cash a forged U.S. Treasury check for $37.50 in Ralph’s, a Los Angeles supermarket. According to the arresting officers, Manson told them he had stolen the check from a mailbox. Two more

The employment figures released by federal government agencies are fraudulent. Real unemployment in the United States is not under 7 percent; it’s closer to 37 percent, despite what the White House, the Fed, and the U.S. Treasury try to tell you. The Misery Index, a measure of how Americans feel about the economy, is over 14 percent, not at the 8 percent level the government claims.

Sometimes, however, possibly when my Muse was being capricious, I set aside my paints and drew cartoons. One of them I still have. It shows a cavernous view of the mouth of a man being attended by this dentist. The man's tongue is a simple, U.S. Treasury hundred dollar bill, and the dentist is saying, in French, "I think we can save the molar, but I'm afraid that tongue will have to come out.

U.S. officials wanted to pull out but feared the Afghan state would collapse if they did. Bin Laden had hoped for this exact scenario when he planned 9/11: to lure the U.S. superpower into an unwinnable guerrilla conflict that would deplete its national treasury and diminish its global influence.

When other countries run sustained trade deficits, they must finance these by selling off domestic assets or running into debt — debt which they actually are obliged to pay. It seems that only the Americans are so bold as to say “Screw the world. We’re going to do whatever we want.” Other countries simply cannot afford the chaos from which the U.S. economy is positioned to withstand as a result of the fact that foreign trade plays a smaller role in its economy than in those of nearly all other nations in today’s interdependent world. Using debtor leverage to set the terms on which it will refrain from causing monetary chaos, America has turned seeming financial weakness into strength. U.S. Government debt has reached so large a magnitude that any attempt to replace it will entail an interregnum of financial chaos and political instability. American diplomats have learned that they are well positioned to come out on top in such grab-bags.

Alas, my “fiddle playing” will not get me to Carnegie Hall — or even to a high school recital. Berkshire, on your behalf and mine, will send the Treasury $3.3 billion for tax on its 2003 income, a sum equaling 2½% of the total income tax paid by all U.S. corporations in fiscal 2003.

Why, for example, wasn’t AIG required to reserve capital against them? Why, for that matter, were Moody’s and Standard & Poor’s willing to bless 80 percent of a pool of dicey mortgage loans with the same triple-A rating they bestowed on the debts of the U.S. Treasury? Why didn’t someone, anyone, inside Goldman Sachs stand up and say, “This is obscene. The rating agencies, the ultimate pricers of all these subprime mortgage loans, clearly do not understand the risk, and their idiocy is creating a recipe for catastrophe”?

When foreign military spending [bombing Korea and Vietnam] forced the U.S. balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in U.S. Treasury bonds, as if these still were “as good as gold.” Central banks have been holding some $4 trillion of these bonds in their international reserves for the past few years — and these loans have financed most of the U.S. Government’s domestic budget deficits for over three decades. Given the fact that about half of U.S. Government discretionary spending is for military operations — including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries — the international financial system is organized in a way that finances the Pentagon, along with U.S. buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

The United States thus achieved what no earlier imperial system had put in place: a flexible form of global exploitation that controlled debtor countries by imposing the Washington Consensus via the IMF and World Bank, while the Treasury bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the U.S. Government. Against dollar-deficit regions the United States continued to apply the classical economic leverage that Europe and Japan were not able to use against it. Debtor economies were forced to impose economic austerity to block their own industrialization and agricultural modernization. Their designated role was to export raw materials and provide low-priced labor whose wages were denominated in depreciating currencies. Against dollar-surplus nations the United States was learning to apply a new, unprecedented form of coercion. It dared the rest of the world to call its bluff and plunge the international economy into monetary crisis. That is what would have happened if creditor nations had not channeled their surplus savings to the United States by buying its Government securities.

The Republican establishment is haunted by painful memories of what happened to Old Man Bush in 1992. He peaked too early and he had no response to “It’s the economy, stupid.” Which has always been the case. Every GOP administration since 1952 has let the military-industrial complex loot the Treasury and plunge the nation into debt on the excuse of a wartime economic emergency. Richard Nixon comes quickly to mind, along with Ronald Reagan and his ridiculous “trickle-down” theory of U.S. economic policy. If the Rich get Richer, the theory goes, before long their pots will overflow and somehow “trickle down” to the poor, who would rather eat scraps off the Bush family plates than eat nothing at all. Republicans have never approved of democracy, and they never will. It goes back to preindustrial America, when only white male property owners could vote.

I strongly support liquidating the corporation that is the Federal Reserve and returning to a monetary system based on a marketproduced precious metal, like gold, which is represented by a currency printed and managed by the U.S. Treasury Department as stipulated by our Constitution. The assets currently owned by the Fed should be liquidated and parceled out on a pro-rata basis to its creditors. All we need is the will.

This unique ability of the U.S. Government to borrow from foreign central banks rather than from its own citizens is one of the economic miracles of modern times. Without it the war-induced American prosperity of the 1960s and early 1970s would have ended quickly, as was threatened in 1973 when foreign central banks decided to cut their currencies loose from the dollar, letting them float upward rather than accepting a further flood of U.S. Treasury IOUs.

In the tax profession, there are only three total official credentials. One is the enrolled agent credential. The EA is the only authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury.

And so, as the passengers drifted off to sleep to the rhythmic clicking of steel wheels against rail, little did they dream that, riding in the car at the end of their train, were six men who represented an estimated one-fourth of the total wealth of the entire world. This was the roster of the Aldrich car that night: Nelson W. Aldrich, Republican "whip" in the Senate, Chairman of the National Monetary Commission, business associate of J.P. Morgan, father-in-law to John D. Rockefeller, Jr.; Abraham Piatt Andrew, Assistant Secretary of the U.S. Treasury; Frank A. Vanderlip, president of the National City Bank of New York, the most powerful of the banks at that time, representing William Rockefeller and the international investment banking house of Kuhn, Loeb & Company; Henry P. Davison, senior partner of the J.P. Morgan Company; Benjamin Strong, head of J.P. Morgan's Bankers Trust Company;1 6. Paul M. Warburg, a partner in Kuhn, Loeb & Company, a representative of the Rothschild banking dynasty in England and France, and brother to Max Warburg who was head of the Warburg banking consortium in Germany and the Netherlands.2

In terms of statistical categories, it is indeed true that both the amount of income and the proportion of all income received by those in the top 20 percent bracket have risen over the years, widening the gap between the top and bottom quintiles.9 But U.S. Treasury Department data, following specific individuals over time from their tax returns to the Internal Revenue Service, show that in terms of people the incomes of those particular taxpayers who were in the bottom 20 percent in income in 1996 rose 91 percent by 2005, while the incomes of those particular taxpayers who were in the top 20 percent in 1996 rose by only 10 percent by 2005—and the incomes of those in the top 5 percent and top one percent actually declined.

Trump wanted to know what the new individual income tax rates would be. “I like these big round numbers,” he said. “Ten percent, 20 percent, 25 percent.” Good, solid numbers that would be easy to sell. Mnuchin, Cohn and Office of Management and Budget Director Mick Mulvaney said there needed to be analysis, study and discussion on the impact on revenue, the deficit and the relation to expected federal spending. “I want to know what the numbers are going to be,” Trump said, throwing out numbers again. “I think they ought to be 10, 20 and 25.” He dismissed any effort to crunch the numbers. A small change in rates could have a surprising impact on taxes collected by the U.S. Treasury. “I don’t care about any of that,” Trump said. Solid, round numbers were key. “That’s what people can understand,” he said. “That’s how I’m going to sell it.

Indefinite Pessimism Every culture has a myth of decline from some golden age, and almost all peoples throughout history have been pessimists. Even today pessimism still dominates huge parts of the world. An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. This describes Europe since the early 1970s, when the continent succumbed to undirected bureaucratic drift. Today the whole Eurozone is in slow-motion crisis, and nobody is in charge. The European Central Bank doesn’t stand for anything but improvisation: the U.S. Treasury prints “In God We Trust” on the dollar; the ECB might as well print “Kick the Can Down the Road” on the euro. Europeans just react to events as they happen and hope things don’t get worse. The indefinite pessimist can’t know whether the inevitable decline will be fast or slow, catastrophic or gradual. All he can do is wait for it to happen, so he might as well eat, drink, and be merry in the meantime: hence Europe’s famous vacation mania.

Sometimes reparations is used to justify a feeding frenzy in which minority claimants simply raid the U.S. Treasury en masse while government bureaucrats facilitate a large transfer of wealth from the taxpayer to these so-called historical victims. A scandalous example of this is the Pigford case. Some ninety-one black farmers had sued the U.S. government alleging a legacy of bias against African Americans. Rather than settle the suit and pay the farmers a reasonable compensation, the Obama administration used the lawsuit to make an absurdly expensive settlement. It agreed to pay out $1.33 billion to compensate not only the ninety-one plaintiffs but also thousands of Hispanic and female farmers who had never claimed bias in court. Encouraged by this largesse, law firms began to conjure up new claimants. Later reviews showed that some of these claimants were nursery-school-age children and even urban dwellers who had no connection to farming. In some towns, the number of people being paid was many times greater than the total number of farms. According to the New York Times, one family in Little Rock, Arkansas, had ten members each submit a claim for $50,000, netting $500,000 for the family without any proof of discrimination. Then the Native Americans got in on the racket, and the Obama administration settled with them, agreeing to fork over an additional $760 million. The government also reimbursed hundreds of millions of dollars in legal fees, a cornucopia for trial lawyers who also happen to be large contributors to Obama and the Democratic Party. Altogether the Pigford payout is estimated to have cost taxpayers a staggering $4.4 billion.3

The world is in the midst of a war, but it is not the kind of war you may be imagining. It is a currency war in which nations compete to lower the value of their currency in order to help their industries gain greater profits from exports. The currency disputes have arisen from a conflict of interest between the United States and China. The U.S. has been struggling against a massive fiscal deficit and foreign debt in recent years, especially since the global financial crisis. With so much at stake, the era of U.S. dollar hegemony seems to be ending. China has been raking in profits from its biggest export market, the U.S., by keeping its yuan, also known as the renminbi, undervalued. China has also been purchasing U.S. treasury bonds to add to its foreign reserves, worth more than $2 trillion. In September, the U.S. House of Representatives passed the Currency Reform for Fair Trade Act with a vote of 348 to 79. Under the bill, the U.S. is allowed to slap tariffs on goods from China and other countries with currencies that are perceived to be undervalued. Basically, the U.S. is pushing China to allow the yuan to appreciate. “For so many years, we have watched the China-U.S. trade deficit grow and grow and grow,” House Speaker Nancy Pelosi said on the day of the vote, which was on Sept. 29 local time. “Today, we are finally doing something about it by recognizing that China’s manipulation of the currency represents a subsidy for Chinese exports coming to the United States and elsewhere.” But China does not want the value of its currency to increase because a stronger yuan will hurt Chinese exporters who will see a decline in exports to the U.S. once the currency’s value rises.

9:12 P.M.—GROUND ZERO, WASHINGTON, D.C. Without warning, the capital of the United States was obliterated. At precisely 9:12 p.m. Eastern, in a millisecond of time, in a blinding flash of light, the White House simply ceased to exist, as did everything and everyone else for miles in every direction. No sooner had the first missile detonated in Lafayette Park than temperatures soared into the millions of degrees. The firestorm and blast wave that followed consumed everything in its path. Gone was the Treasury building, and with it the headquarters of the United States Secret Service. Gone was the FBI building, and the National Archives, and the Supreme Court, and the U.S. Capitol and all of its surrounding buildings. Wiped away was every monument, every museum, every restaurant, every hotel, every hospital, every library and landmark of any kind, every sign of civilization.

The people in a position to resolve the financial crisis were, of course, the very same people who had failed to foresee it: Treasury Secretary Henry Paulson, future Treasury Secretary Timothy Geithner, Fed Chairman Ben Bernanke, Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO John Mack, Citigroup CEO Vikram Pandit, and so on. A few Wall Street CEOs had been fired for their roles in the subprime mortgage catastrophe, but most remained in their jobs, and they, of all people, became important characters operating behind the closed doors, trying to figure out what to do next. With them were a handful of government officials—the same government officials who should have known a lot more about what Wall Street firms were doing, back when they were doing it. All shared a distinction: They had proven far less capable of grasping basic truths in the heart of the U.S. financial system than a one-eyed money manager with Asperger’s syndrome.

Despite the fact that Uncle Rulon and his followers regard the governments of Arizona, Utah, and the United States as Satanic forces out to destroy the UEP, their polygamous community receives more than $6 million a year in public funds. More than $4 million of government largesse flows each year into the Colorado City public school district—which, according to the Phoenix New Times, “is operated primarily for the financial benefit of the FLDS Church and for the personal enrichment of FLDS school district leaders.” Reporter John Dougherty determined that school administrators have “plundered the district’s treasury by running up thousands of dollars in personal expenses on district credit cards, purchasing expensive vehicles for their personal use and engaging in extensive travel. The spending spree culminated in December [2000], when the district purchased a $220,000 Cessna 210 airplane to facilitate trips by district personnel to cities across Arizona.” Colorado City has received $1.9 million from the U.S. Department of Housing and Urban Development to pave its streets, improve the fire department, and upgrade the water system. Immediately south of the city limits, the federal government built a $2.8 million airport that serves almost no one beyond the fundamentalist community. Thirty-three percent of the town’s residents receive food stamps—compared to the state average of 4.7 percent. Currently the residents of Colorado City receive eight dollars in government services for every dollar they pay in taxes; by comparison, residents in the rest of Mohave County, Arizona, receive just over a dollar in services per tax dollar paid. “Uncle Rulon justifies all that assistance from the wicked government by explaining that really the money is coming from the Lord,” says DeLoy Bateman. “We’re taught that it’s the Lord’s way of manipulating the system to take care of his chosen people.” Fundamentalists call defrauding the government “bleeding the beast” and regard it as a virtuous act.

Little Nicky heads to the Badlands to see the show for himself. The Western Roads are outside his remit as a U.S. Treasury agent, but he knows the men he wants are its denizens. Standing on the corner of the Great Western and Edinburgh Roads, a sideshow, a carnival of the doped, the beaten, and the crazed. He walks round to the Avenue Haig strip and encounters the playground of Shanghai’s crackpots, cranks, gondoos, and lunatics. He’s accosted constantly: casino touts, hustling pimps, dope dealers; monkeys on chains, dancing dogs, kids turning tumbles, Chinese ‘look see’ boys offering to watch your car. Their numbers rise as the Japs turn the screws on Shanghai ever tighter. Half-crazy American missionaries try to sell him Bibles printed on rice paper—saving souls in the Badlands is one tough beat. The Chinese hawkers do no better with their porno cards of naked dyed blondes, Disney characters in lewd poses, and bare-arsed Chinese girls, all underage. Barkers for the strip shows and porno flicks up the alleyways guarantee genuine French celluloid of the filthiest kind. Beggars abound, near the dealers and bootleggers in the shadows, selling fake heroin pills and bootleg samogon Russian vodka, distilled in alleyways, that just might leave you blind. Off the Avenue Haig, Nicky, making sure of his gun in its shoulder holster, ventures up the side streets and narrow laneways that buzz with the purveyors of cure-all tonics, hawkers of appetite suppressants, male pick-me-ups promising endless virility. Everything is for sale—back-street abortions and unwanted baby girls alongside corn and callus removers, street barbers, and earwax pickers. The stalls of the letter writers for the illiterate are next to the sellers of pills to cure opium addiction. He sees desperate refugees offered spurious Nansen passports, dubious visas for neutral Macao, well-forged letters of transit for Brazil. He could have his fortune told twenty times over (gypsy tarot cards or Chinese bone chuckers? Your choice). He could eat his fill—grilled meat and rice stalls—or he could start a whole new life: end-of-the-worlders and Korean propagandists offer cheap land in Mongolia and Manchukuo.

The book received a wider review in the business press than in academic journals. A few weeks after the U.S. publication I was invited to address the annual meeting of Drexel-Burnham to outline how the new Treasury bill standard of world finance had replaced the gold exchange standard. Herman Kahn was the meeting’s other invited speaker. When I had finished, he got up and said, “You’ve shown how the United States has run rings around Britain and every other empire-building nation in history. We’ve pulled off the greatest rip-off ever achieved.” He hired me on the spot to join him as the Hudson Institute’s economist. I was happy enough to leave my professorship in international economics at the New School for Social Research. My professional background had been on Wall Street as balance-of-payments economist for the Chase Manhattan Bank and Arthur Andersen. My research along these lines was too political to fit comfortably into the academic economics curriculum, but at the Hudson Institute I set to work tracing how America was turning its payments deficit into an unprecedented element of strength rather than weakness.

During his time working for the head of strategy at the bank in the early 1990s, Musk had been asked to take a look at the company’s third-world debt portfolio. This pool of money went by the depressing name of “less-developed country debt,” and Bank of Nova Scotia had billions of dollars of it. Countries throughout South America and elsewhere had defaulted in the years prior, forcing the bank to write down some of its debt value. Musk’s boss wanted him to dig into the bank’s holdings as a learning experiment and try to determine how much the debt was actually worth. While pursuing this project, Musk stumbled upon what seemed like an obvious business opportunity. The United States had tried to help reduce the debt burden of a number of developing countries through so-called Brady bonds, in which the U.S. government basically backstopped the debt of countries like Brazil and Argentina. Musk noticed an arbitrage play. “I calculated the backstop value, and it was something like fifty cents on the dollar, while the actual debt was trading at twenty-five cents,” Musk said. “This was like the biggest opportunity ever, and nobody seemed to realize it.” Musk tried to remain cool and calm as he rang Goldman Sachs, one of the main traders in this market, and probed around about what he had seen. He inquired as to how much Brazilian debt might be available at the 25-cents price. “The guy said, ‘How much do you want?’ and I came up with some ridiculous number like ten billion dollars,” Musk said. When the trader confirmed that was doable, Musk hung up the phone. “I was thinking that they had to be fucking crazy because you could double your money. Everything was backed by Uncle Sam. It was a no-brainer.” Musk had spent the summer earning about fourteen dollars an hour and getting chewed out for using the executive coffee machine, among other status infractions, and figured his moment to shine and make a big bonus had arrived. He sprinted up to his boss’s office and pitched the opportunity of a lifetime. “You can make billions of dollars for free,” he said. His boss told Musk to write up a report, which soon got passed up to the bank’s CEO, who promptly rejected the proposal, saying the bank had been burned on Brazilian and Argentinian debt before and didn’t want to mess with it again. “I tried to tell them that’s not the point,” Musk said. “The point is that it’s fucking backed by Uncle Sam. It doesn’t matter what the South Americans do. You cannot lose unless you think the U.S. Treasury is going to default. But they still didn’t do it, and I was stunned. Later in life, as I competed against the banks, I would think back to this moment, and it gave me confidence. All the bankers did was copy what everyone else did. If everyone else ran off a bloody cliff, they’d run right off a cliff with them. If there was a giant pile of gold sitting in the middle of the room and nobody was picking it up, they wouldn’t pick it up, either.” In

As we explore later in this chapter, virtually no asset, except for long-term U.S. Treasury bonds, served as an effective hedge against the sudden and sharp decline in asset values that took place during the financial crisis.

To understand what that means in commonsense terms, consider a person who plans to live off the income from $1 million invested in T-bills. Suppose he retires in a given year and converts his investments into an inflation-protected annuity with a return of 4% to 5%. He will receive an annual income of $40,000 to $50,000. But now suppose he retires a few years later, when the return on the annuity has dropped to 0.5%. His annual income will now be only $5,000. Yes, the $1 million principal amount was fully insured and protected, but you can see that he cannot possibly live on the amount he will now receive. T-bills preserve principal at all times, but the income received on them can vary enormously as return on the annuity goes up or down. Had the retiree bought instead a long-maturity U.S. Treasury bond with his $1 million, his spendable income would be secure for the life of the bond, even though the price of that bond would fluctuate substantially from day to day. The same holds true for annuities: Although their market value varies from day to day, the income from an annuity is secure throughout the retiree’s life.

NEW YORK Climate change is likely to exact enormous costs on U.S. regional economies in the form of lost property, reduced industrial output and more deaths, according to a report backed by three men with vast business experience. The report, released Tuesday, is designed to persuade businesses to factor in the cost of climate change in their long-term decisions and to push for reductions in emissions blamed for heating the planet. It was commissioned by the Risky Business Project, which describes itself as nonpartisan and is chaired by former New York City Mayor Michael R. Bloomberg, former Treasury Secretary Henry M. Paulson Jr. and Thomas F. Steyer, a former Bay Area hedge fund manager.

the U.S. Treasury prints “In God We Trust” on the dollar; the ECB might as well print “Kick the Can Down the Road” on the euro.

The Westminster system understandably produces governments with more formal powers than in the United States. This greater degree of decisiveness can be seen clearly with respect to the budget process. In Britain, national budgets are not drawn up in Parliament, but in Whitehall, the seat of the bureaucracy, where professional civil servants act under instructions from the cabinet and prime minister. The budget is then presented by the chancellor of the exchequer (equivalent of the U.S. treasury secretary) to the House of Commons, which votes to approve it in a single up-or-down vote. This usually takes place within a week or two of its promulgation by the government. The process in the United States is totally different. The Constitution grants Congress primary authority over the budget. While presidents formulate budgets through the executive branch Office of Management and Budget, this office often becomes more like another lobbying organization supporting the president’s preferences. The budget, put before Congress in February, works its way through a complex set of committees over a period of months, and what finally emerges for ratification (we hope) by the two houses toward the end of the summer is the product of innumerable deals struck with individual members to secure their support. The nonpartisan Congressional Budget Office was established in 1974 to provide Congress with greater technocratic support in drawing up budgets, but in the end the making of an American budget is a highly decentralized and nonstrategic process in comparison to what happens in Britain.

Sometimes reparations is used to justify a feeding frenzy in which minority claimants simply raid the U.S. Treasury en masse while government bureaucrats facilitate a large transfer of wealth from the taxpayer to these so-called historical victims. A scandalous example of this is the Pigford case. Some ninety-one black farmers had sued the U.S. government alleging a legacy of bias against African Americans. Rather than settle the suit and pay the farmers a reasonable compensation, the Obama administration used the lawsuit to make an absurdly expensive settlement. It agreed to pay out $1.33 billion to compensate not only the ninety-one plaintiffs but also thousands of Hispanic and female farmers who had never claimed bias in court. Encouraged

People like Mike McConnell don’t really move from public office to the private sector and back again; that implies more separation than actually exists. Rather, the U.S. government and industry interests essentially form one gigantic, amalgamated, inseparable entity—with a public division and a private one. When someone like McConnell goes from a top private sector position to a top government post in the same field, it’s more like an intracorporate reassignment than it is like changing employers. When McConnell serves as DNI he’s simply in one division of this entity, and when he’s at Booz Allen he is in another. It’s precisely the same way that Goldman Sachs officials endlessly move in and out of the Treasury Department and other government positions with financial authority, or the way that health care and oil executives move in and out of government agencies charged with regulating those fields. In

Mortgage securities. Pooled together from thousands of mortgages around the United States, these bonds are issued by agencies like the Federal National Mortgage Association (“Fannie Mae”) or the Government National Mortgage Association (“Ginnie Mae”). However, they are not backed by the U.S. Treasury, so they sell at higher yields to reflect their greater risk. Mortgage bonds generally underperform when interest rates fall and bomb when rates rise. (Over the long run, those swings tend to even out and the higher average yields pay off.) Good mortgage-bond funds are available from Vanguard, Fidelity, and Pimco. But if a broker ever tries to sell you an individual mortgage bond or “CMO,” tell him you are late for an appointment with your proctologist.

MENS REA”: On January 16, 1944, the U.S. Secretary of the Treasury, Henry Morgenthau, Jr., and one of his deputies, Randolph Paul, personally visited the President Franklin D. Roosevelt in order to coerce him to finally act and do something to help refugees escaping The Holocaust. More diplomatic efforts had failed, so Morgenthau's approach strengthened. The report brought to the President reveals a desperate and necessary act to coerce a response from an administration that was systematically and overtly preventing both private and official help for the victims escaping Hitler. The report documents a pattern of attempts by the State Department to obstruct rescue opportunities and block the flow of Holocaust information to the United States. Morgenthau warned that the refugee issue had become “a boiling pot on [Capitol] Hill,” and Congress was likely to pass the rescue resolution if faced with a White House unwilling to act. Roosevelt understood the deep implications and pre-empted Congress by establishing the War Refugee Board. The result was “Executive Order 9417” creating the War Refugee Board, issued on January 22, 1944.

Unlike common stocks, whose dividends and earnings fluctuate with the ups and downs of the company’s business, bonds pay a fixed dollar amount of interest. If the U.S. Treasury offers a $1,000 20-year, 5 percent bond, that bond will pay $50 per year until it matures, when the principal will be repaid. Corporate bonds are less safe, but widely diversified bond portfolios have provided reasonably stable interest returns over time.

The U.S. 10-year Treasury yield US10YT=RR touched a two-month top at 2.20 percent having climbed from 1.92 percent in little more than a week.

The notion of mental accounts is absent in traditional economic theory, which holds that wealth in general, and money in particular, should be fungible: That is, $100 in roulette winnings, $100 in salary, and a $100 tax refund should have the same significance and value to you, since each C-note could buy the same number of downloads from iTunes or the same number of burgers at McDonald’s. Likewise, $100 kept under the mattress should invoke the same feelings or sense of wealth as $100 in a bank account or $100 in U.S. Treasury securities (ignoring the fact that money in the bank, or in T-bills, is safer than cash under the bed). If money and wealth are fungible, there should be no difference in the way we spend gambling winnings or salary.

A second and more powerful explanation looks to changes in the institutions of intellectual life. In this reading of late-twentieth-century U.S. history, the key to the age was the conscious efforts of conservative intellectuals and their institutional sponsors to reshape not only the terms of political debate but the mechanics of intellectual production itself. By the late 1970s, Nixon's former secretary of the Treasury, the Wall Street investor William E. Simon, was urging that "the only thing that can save the Republican Party . . . is a counterintelligentsia," created by funneling funds to writers, journalists, and social scientists whose ideas had been frozen out of general circulation by the "dominant socialist-statist-collectivist orthodoxy" prevailing in the universities and the media.12

The broad U.S. market returned 10.9 percent annually from 1950 to 2009. That handily beat the 6.1 percent return on five-year Treasury notes and the 3.8 percent level of inflation. Table 6-1 shows the inflation-adjusted returns over different periods of time. Inflation-adjusted returns are also known as real returns because that is the amount of purchasing power investors gained or lost. The real return does not include taxes. Real returns reinforce the fact that inflation is an invisible tax on all investments. The portion of return that is related to inflation cannot be counted as investment gain. When creating an asset allocation for your portfolio, you should always consider the expected real return of the investments you are considering. TABLE

Put simply, if both a U.S. Treasury note and small company stock appeared likely to return 7 percent per year, everyone would rush to buy the former (driving up its price and reducing its prospective return) and dump the latter (driving down its price and thus increasing its return). This process of adjusting relative prices, which economists call equilibration, is supposed to render prospective returns proportional to risk.

Sporadic cases of plague were discovered throughout the summer and fall of 1900. Most alarming, at least to the native-born American population of San Francisco, was the first white plague victim discovered in August. In January 1901, U.S. Secretary of the Treasury Lyman J. Gage, who oversaw both the Marine Hospital Service and the Immigration Bureau, commissioned three nationally prominent plague experts to investigate the health conditions in San Francisco. Their report, using the best bacteriological methods then available, confirmed that plague did, in fact, visit San Francisco. The experts explained that the wisest precaution to take against plague's potential return was not to isolate people based on race but, instead, to intensify cleansing and fumigation efforts in any area where plague was found. Between March 1, 1900 and February 29, 1904, 121 cases of plague were diagnosed in San Francisco with 113 resulting in death. Of these deaths, 107 were Chinese, 4 were Japanese, and 2 were white.59 Alas, this episode hardly brought an end to the all-too-reflexive impulse Americans often have in establishing quarantine or public health policy based on race, ethnicity, or social disen-franchisement.

Were the United States an emerging market, its exchange rate would have plummeted and its interest rates soared. Access to capital markets would be lost in a classic Dornbusch/Calvo–type sudden stop. During the first year following the crisis (2007), exactly the opposite happened: the dollar appreciated and interest rates fell as world investors viewed other countries as even riskier than the United States and bought Treasury securities copiously.33 But buyer beware! Over the longer run, the U.S. exchange rate and interest rates could well revert to form, especially if policies are not made to re-establish a firm base for long-term fiscal sustainability.

High-yield bonds—which Graham calls “second-grade” or “lower-grade” and today are called “junk bonds”—get a brisk thumbs-down from Graham. In his day, it was too costly and cumbersome for an individual investor to diversify away the risks of default.;1 (To learn how bad a default can be, and how carelessly even “sophisticated” professional bond investors can buy into one, see the sidebar on p. 146.) Today, however, more than 130 mutual funds specialize in junk bonds. These funds buy junk by the cartload; they hold dozens of different bonds. That mitigates Graham’s complaints about the difficulty of diversifying. (However, his bias against high-yield preferred stock remains valid, since there remains no cheap and widely available way to spread their risks.) Since 1978, an annual average of 4.4% of the junk-bond market has gone into default—but, even after those defaults, junk bonds have still produced an annualized return of 10.5%, versus 8.6% for 10-year U.S. Treasury bonds.2 Unfortunately, most junk-bond funds charge high fees and do a poor job of preserving the original principal amount of your investment. A junk fund could be appropriate if you are retired, are looking for extra monthly income to supplement your pension, and can tolerate temporary tumbles in value. If you work at a bank or other financial company, a sharp rise in interest rates could limit your raise or even threaten your job security—so a junk fund, which tends to outper-forms most other bond funds when interest rates rise, might make sense as a counterweight in your 401(k). A junk-bond fund, though, is only a minor option—not an obligation—for the intelligent investor.

Doubtless the founders of our government, the majority of them at least, regarded the confederation of the colonies as an experiment. Each colony considered itself a separate government; that the confederation was for mutual protection against a foreign foe, and the prevention of strife and war among themselves. If there had been a desire on the part of any single State to withdraw from the compact at any time while the number of States was limited to the original thirteen, I do not suppose there would have been any to contest the right, no matter how much the determination might have been regretted. The problem changed on the ratification of the Constitution by all the colonies; it changed still more when amendments were added; and if the right of any one State to withdraw continued to exist at all after the ratification of the Constitution, it certainly ceased on the formation of new States, at least so far as the new States themselves were concerned. It was never possessed at all by Florida or the States west of the Mississippi, all of which were purchased by the treasury of the entire nation. Texas and the territory brought into the Union in consequence of annexation, were purchased with both blood and treasure; and Texas, with a domain greater than that of any European state except Russia, was permitted to retain as state property all the public lands within its borders. It would have been ingratitude and injustice of the most flagrant sort for this State to withdraw from the Union after all that had been spent and done to introduce her; yet, if separation had actually occurred, Texas must necessarily have gone with the South, both on account of her institutions and her geographical position. Secession was illogical as well as impracticable; it was revolution.

On August 24th, 2016, an article by Fox News provided information about the remaining $1.3 billion. State Department spokeswoman Elizabeth Trudeau said the U.S. government sent the wire transfers as 13 separate payments of $99,999,999.99 each, and a final payment of $10 million. (There was no explanation as to why the individual transactions were kept under $100 million each.) The money came from a little-known fund administered by the Treasury Department for settling litigation claims. The so-called “Judgment Fund” is taxpayer money Congress has permanently approved, which allows the President to bypass Congress to make settlements. On June 7th, 2017, then-Attorney General

REITs. Real Estate Investment Trusts, or REITs (pronounced “reets”), are companies that own and collect rent from commercial and residential properties.10 Bundled into real-estate mutual funds, REITs do a decent job of combating inflation. The best choice is Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.11 While a REIT fund is unlikely to be a foolproof inflation-fighter, in the long run it should give you some defense against the erosion of purchasing power without hampering your overall returns. TIPS. Treasury Inflation-Protected Securities, or TIPS, are U.S. government bonds, first issued in 1997, that automatically go up in value when inflation rises. Because the full faith and credit of the United States

U.S. foreign debt, though, takes the form of treasury bonds held by institutional investors in countries (Germany, Japan, South Korea, Taiwan, Thailand, the Gulf States) that are in most cases, effectively, U.S. military protectorates, most covered in U.S. bases full of arms and equipment paid for with that very deficit spending. This has changed a little now that China has gotten in on the game (China is a special case, for reasons that will be explained later), but not very much—even China finds that the fact it holds so many U.S. treasury bonds makes it to some degree beholden to U.S. interests, rather than the other way around. So what is the status of all this money continually being funneled into the U.S. treasury? Are these loans? Or is it tribute? In the past, military powers that maintained hundreds of military bases outside their own home territory were ordinarily referred to as “empires,” and empires regularly demanded tribute from subject peoples. The U.S. government, of course, insists that it is not an empire—but one could easily make a case that the only reason it insists on treating these payments as “loans” and not as “tribute” is precisely to deny the reality of what’s going on.

Article I, Section 9, Clause 7 of the U.S. Constitution: “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

In the Airmada audiences were people who had come from all over the world to chase the good life in the United States of America. They had found a country more to their liking than the ones they had left, but they bridled at the barriers they had found to their advancement: their religions and ethnicities. The U.S. Treasury Department made sure the members of all ethnic groups equated buying bonds with proving their loyalty.

When playing a bear market, the same rules hold: You want to diversify your risks, especially knowing that collapses move even faster than rallies. You need to decide how much safe cash or near cash you want to hold to sleep at night and to handle financial emergencies, like the loss of your job or your house. Then decide how much to put into longer-term high-quality bonds, like those 30-year Treasuries and AAA corporates, but I think it’s still premature to make this move at the time of this writing, in August 2017. Then decide how much you want to put into a dollar bull fund or the ETF UUP, which tracks the U.S. dollar versus its six major trading partners. If you’re willing to risk part of your wealth, you can also bet on financial assets going down—from stocks to gold. Stocks are the one type of financial asset that goes down in either a deflationary crisis, like the 1930s, or an inflationary one, like the 1970s. So shorting stocks is the best way to prosper in the downturn, either way. But don’t leverage this bet. The markets are simply too volatile. You can short the stock market with no leverage by simply buying an ETF (exchange-traded fund) like the ProShares Short S&P 500 (NYSEArca: SH). It’s an inverse fund on the S&P 500, so if the index goes down 50 percent, you make 50 percent. The ProShares Ultrashort (NYSEArca: QID) is double short the NASDAQ 100, which is likely to get hit the worst. If you make this play, just do a half share, to avoid that two-times leverage (hold the other half in cash or short-term bonds). Direxion Daily Small Cap Bear 3X ETF (NYSEArca: TZA) is triple short the Russell 2000, which is also likely to lead on the way down. So buy only a one-third share of this one, to remain without leverage. (That means the money you allocate here should be one-third in TZA and two-thirds in cash, to offset the leverage.) And unlike the gold bugs, I see gold collapsing. It’s an inflation hedge, not a deflation hedge. If gold rallies back as high as $1,425—on my predicted bear-market rally—then it could easily drop to around $700 within a year. Your last decision is whether to risk some of your funds betting on gold’s downside, for the greatest potential returns. You can buy DB Gold Double Short ETN (NYSEArca: DZZ)—double short gold—at a half share, to offset the leverage, or just simply short GLD, the ETF that follows gold. There you have it. How to handle the coming crash.

what is the status of all this money continually being funneled into the U.S. treasury? Are these loans? Or is it tribute?

Ibbotson Associates, founded by Yale scholar Roger Ibbotson, produces a widely used survey of returns covering the past seventy-eight years. Over the nearly eight-decade period from 1926 to 2003, U.S. stocks produced an annual compound return of 10.4 percent, U.S. government bonds returned 5.4 percent, and U.S. Treasury bills generated 3.7 percent. The 5.0 percentage point difference between stock and bond returns represents the historical risk premium, defined as the return to equity holders for accepting risk above the level inherent in bond investments.

In 1982, his biggest investment was Treasury bonds; right after that, he made Chrysler his top holding, even though most experts expected the automaker to go bankrupt; then, in 1986, Lynch put almost 20% of Fidelity Magellan in foreign stocks like Honda, Norsk Hydro, and Volvo. So, before you buy a U.S. stock fund, compare the holdings listed in its latest report against the roster of the S & P 500 index; if they look like Tweedledee and Tweedledum, shop for another fund.7

(One theory had it that Harry Dexter White, the former Treasury Department official who went on to become director of the International Monetary Fund, stole U.S. Mint engraving plates so that Communism could flood the country with excess currency.)

The American’s Creed William Tyler Page In 1917, William Tyler Page of Maryland won a nationwide contest for “the best summary of American political faith.” The U.S. House of Representatives accepted the statement as the American’s Creed on April 3, 1918. Its two paragraphs remind us that responsibilities are the source of rights. It deserves to be read and recited. Today very few people have even heard of it. I believe in the United States of America as a Government of the people, by the people, for the people; whose just powers are derived from the consent of the governed; a democracy in a republic; a sovereign Nation of many sovereign States; a perfect union, one and inseparable; established upon those principles of freedom, equality, justice, and humanity for which American patriots sacrificed their lives and fortunes. I therefore believe it is my duty to my country to love it; to support its Constitution; to obey its laws; to respect its flag, and to defend it against all enemies.

Strange as it may seem — and irrational as it would be in a more logical system of world diplomacy — the dollar glut is what finances America’s global military build-up. It forces foreign central banks to bear the costs of America’s expanding military empire. The result is a new form of taxation without representation. Keeping international reserves in dollars means recycling dollar inflows to buy U.S. Treasury bills — U.S. government debt issued largely to finance the military spending that has been a driving force in the U.S. balance-of-payments deficit since the Korean War broke out in 1950. [...] “China National Offshore Oil Corporation go home” is the motto when foreign governments try to use their sovereign wealth funds (central bank departments trying to figure out what to do with their dollar glut) to make direct investments in American industry, as happened when China’s national oil company sought to buy Unocal in 2005.[...] So Europeans and Asians see U.S. companies pumping more dollars into their economies not only to buy their exports (in excess of providing them with goods and services in return), not only to buy their companies and commanding heights of privatized public enterprises (without giving them reciprocal rights to buy important U.S. companies), and not only to buy foreign stocks, bonds and real estate. The U.S. media neglect to mention that the U.S. Government spends hundreds of billions of dollars abroad — not only in the Near East for direct combat, but to build military bases to encircle the rest of the world, and to install radar systems, guided missile systems and other forms of military coercion, including the “color revolutions” that have been funded all around the former Soviet Union.

If you happen to have a U.S. $100 bill in your wallet right now, take it out and look at it. You are holding what has become the international currency for illegal behavior. Today, nearly three-quarters of all $100 bills circulate outside of the United States. Criminals like to hold their wealth in hundreds. Actually, this works to the benefit of the United States in a rather odd way. When the U.S. Treasury issues new banknotes, including $100 bills, it purchases an equal value of interest-bearing securities to cover the notes. When those banknotes are taken out of circulation, the government must pay off those securities, together with earned interest. So when three-quarters of all $100 bills are being secreted outside the United States, the Treasury Department saves money. How? As long as those bills remain in circulation, the government doesn’t have to pay off the securities issued to cover them. How much does that save us? Try about $32.7 billion in interest in the year 2000 alone.2

Travel to Cuba Generally Tourist travel to Cuba is prohibited under U.S. law for U.S. citizens, permanent residents, and others subject to U.S. jurisdiction. The hard and fast rules have been relaxed some and exceptions are now made for certain travelers who can show an acceptable reason, to visit the Island Nation in which case a “Tourist Visa" is required and available. US Citizens must have a valid passport with two blank pages available, for entry and exit stamps, at the time of entry into Cuba. United States issued credit and debit cards do not work in Cuba so travelers should plan to bring enough cash with them to cover all the expenses they might incur during their trip. Authorized travelers to Cuba are subject to daily spending limits. See the Office of Foreign Assets Control page of the U.S. Department of the Treasury.The export of Cuban convertible pesos (CUC) is strictly prohibited, regardless of the amount. Travelers may only export the equivalent of $5000 in any currency other than the Cuban convertible peso (CUC). Anyone wishing to export more than this amount must demonstrate evidence that the currency was acquired legitimately from a Cuban bank. Cuba has many Hotels and Resort Areas, most of which are foreign owned; I counted 313 of them. Many are Canadian or European owned with Meliá Hotels International in the lead with twenty-eight hotels in Cuba alone. Being a Spanish hotel chain, it was founded in 1956 in Palma de Mallorca, Spain. The photo show the internationally known “Nacional Hotel.” Some Cruise Lines including Carnival now offer cruises to Cuba and advise guests as to the entry requirements. Follow Captain Hank Bracker, author of “The Exciting Story of Cuba” on Facebook, Goodreads and his Web Page as well as Twitter. His daily blogs and weekend commentaries are now being read by hundreds and frequrntly thousands of readers. Send suggestions and comments to PO Box 607 Elfers, FL 34680-0607.

President John F. Kennedy, like Lincoln, attempted to curtail the bankers by diminishing the power of the Federal Reserve. In June 1963, he issued $4.2 billion in United States Notes through the U.S. Treasury rather than the Federal Reserve System and also took steps to shift power away from the wealthy corporate elite. According

on March 28, 2007, Ben Bernanke, the chairman of the Federal Reserve, stated to the Joint Economic Committee of Congress that “the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” This sentiment was echoed the same day by the U.S. Treasury secretary Henry Paulson, assuring a House Appropriations subcommittee that “from the standpoint of the overall economy, my bottom line is we’re watching it closely but it appears to be contained.

The U.S. Treasury Department has issued at least four licenses to companies that want to establish ferry service to Cuba from Key West, Miami, Fort Lauderdale and Tampa. Baleària, a Spanish company, presently owns the Baleària Bahamas Express ferry service from Fort Lauderdale to Freeport, Grand Bahamas, and is now considering a ferry to operate between Florida and Cuba. United Caribbean and Havana Partners have expressed an interest in a service from Tampa to Havana and Mexico. Baja Ferries USA wants to open routes between the Port of Miami and Port Everglades to Cuba. Some of the ferries will offer duty-free shopping, restaurants, bars and even swimming pools. The details regarding feasibility depends on government restrictions and tariffs placed on them by the countries, as well as the ports involved. Tampa would be a straight run 331 miles due south, but some of the other ports would be closer. In the end it will come down to money, availability of cargo and logistics. As of the summer of 2016, perspective ferry operators are awaiting final approval and licensing from the Cuban government. Because of this the ferry companies are on hold and are still waiting to begin operations. Tampa and The Port of Tampa have expressed their enthusiasm to become fully involved in these new ventures. Bob Rohrlack, President of the Greater Tampa Chamber of Commerce, has been to Cuba several times, taking corporate delegates in preparation for improved, open relations with Cuba.

Net wages: “It’s not what you make, but what you net” after paying the FIRE sector, basic utilities and taxes. The usual measure of disposable personal income (DPI) refers to how much employees take home after income-tax withholding (designed in part by Milton Friedman during World War II) and over 15% for FICA (Federal Insurance Contributions Act) to produce a budget surplus for Social Security and health care (half of which are paid by the employer). This forced saving is lent to the U.S. Treasury, enabling it to cut taxes on the higher income brackets. Also deducted from paychecks may be employee withholding for private health insurance and pensions. What is left is by no means freely available for discretionary spending. Wage earners have to pay a monthly financial and real estate “nut” off the top, headed by mortgage debt or rent to the landlord, plus credit card debt, student loans and other bank loans. Electricity, gas and phone bills must be paid, often by automatic bank transfer – and usually cable TV and Internet service as well. If these utility bills are not paid, banks increase the interest rate owed on credit card debt (typically to 29%). Not much is left to spend on goods and services after paying the FIRE sector and basic monopolies, so it is no wonder that markets are shrinking. (See Hudson Bubble Model later in this book.) A similar set of subtrahends occurs with net corporate cash flow (see ebitda). After paying interest and dividends – and using about half their revenue for stock buybacks – not much is left for capital investment in new plant and equipment, research or development to expand production.

Large-cap U.S. Stock S&P 500 Index Midcap U.S. Stock S&P Midcap 400 Index Small-cap U.S. Value stock Russell 2000 Value Index Non-U.S. Developed stock MSCI EAFE Index Non-U.S. Emerging stock MSCI Emerging Markets Index Real Estate Dow Jones U.S. Select REIT Index Natural Resources Goldman Sachs Natural Resources Index Commodities Deutsche Bank Liquid Commodity Index U.S. Bonds Barclays Capital Aggregate Bond Index Inflation Protected Bonds Barclays Capital U.S. Treasury Inflation Note Index Non-U.S. Bonds Citibank WGBI Non-U.S. Dollar Index Cash 3-Month Treasury Bill

But instead of U.S. citizens and companies being taxed or U.S. capital markets being obliged to finance the rising federal deficit, foreign economies were obliged to buy the new Treasury bonds being issued. America’s Cold War spending thus became a tax on foreigners. It was their central banks who financed the costs of the war in Southeast Asia.

An early reviewer of Cantos XXXI–XLI in the New York Nation amused himself with the conceit of Mr Pound taking correspondence courses in such subjects as ‘History of the U.S. Treasury from the Revolution to the Civil War (from the Original Documents)’ and making notes diligently on small pieces of paper which a gust of wind scattered over the hills about Rapallo, and which he then picked up and sent to the printer as he found them.

1791, the U.S. government granted patents for Parkinson’s flax mill, even though he had admitted that they were “improvements upon the mill or machinery . . . in Great Britain.”32 Clearly, the U.S. government condoned something that, in modern phraseology, could be termed industrial espionage. Building upon this precedent, Hamilton put the full authority of the Treasury behind the piracy of British trade secrets.

Morgan Stanley offered two key concessions that persuaded S&P to give the new bonds a AA-rating. First, the company would issue two classes of bonds, and S&P would rate only the much safer of the two. Banamex would keep the riskier unrated class of bonds, to serve as a cushion to protect the safer bonds, providing greater assurance that the rated bonds would be repaid in full. The company would also purchase some U.S. Treasury bonds, as additional protection. The safer, rated bonds were the bonds actually called PLUS Notes. Second, Morgan Stanley also agreed that the company would commit in advance to execute a foreign currency transaction in which Morgan Stanley would convert the peso payments on the Ajustabonos into U.S. dollars. S&P must have been suspicious that Morgan Stanley would try to market these new bonds as denominated in U.S. dollars, not pesos. As a compromise, S&P required that Morgan Stanley advertise the new bonds with a caveat. The Offering Memorandum for the bonds had to include a disclaimer: “This rating does not reflect the risk associated with fluctuations in the currency exchange rate between Dollars and New Pesos.” With this warning, and a huge fee, S&P finally was satisfied and agreed to rate the new bonds AA-.

Following the tour, the guides usher the visitors into a cavernous hall where interactive displays invite them to press buttons to learn about the different parts of the dollar or to hear about its history. Children press the buttons, but the lights do not go on, and so none of the questions are answered. They rush to the next interactive display only to find that it too no longer interacts. The large room also offers souvenirs for sale, such as a souvenir pen filled with shredded money. In a corner, Japanese tourists buy sheets of uncut American currency from women behind security windows of thick glass. They take the money home with them to use as novelty wrapping paper for gifts and flowers. The twentieth century became the era of paper money. Never before had so much of it been manufactured in so many countries and in so many denominations. Behind the perpetually operating machines of the U.S. Treasury lay a long process whereby paper money won the confidence of ordinary people.

In the current system, to manage the laborious process of cross-firm reconciliation, middlemen ledger-keepers have been created—clearinghouses, settlement agencies, and correspondent banks, custodial banks, and others. Those intermediaries solve some of the trust problems but they also add cost, time, and risk. In the United States, the final settlement of a trade takes two days for U.S. Treasury bonds and up to thirty days for instruments such as syndicated loans. Not only do massive errors and omissions still occur, but the time lag paralyzes literally trillions of dollars of potentially useful capital, which must wait in escrow accounts or collateral agreements until all parties have cleared their books and the trade is settled. A more efficient, real-time system would unlock those funds, sending a wall of money into the world’s markets—yes, to make bankers richer, but also to provide more credit to businesses and households. In theory, R3’s distributed ledger could achieve all that. It could unleash a tidal wave of money.

The intermediate objectives for achieving U.S. defeat may be enumerated as follows: Make the Americans stupid – Disorient the people of the United States and other Western countries. Establish a set of myths useful from the standpoint of the long-range strategy. Examples of such myths: Josef Stalin is our “Uncle Joe,” a man we can trust; the Cold War was triggered by paranoid anti-Communists; Senator McCarthy blacklisted innocent people; President Kennedy was killed by Big Business and the CIA; the Vietnam War was fought on account of corporate greed; Russia and China are irreconcilable enemies who will not be able to combine their forces against the United States; the Soviet Union collapsed for economic reasons; Russia is America’s ally in the War on Terror. Infiltrate the U.S. financial system – Financial control through organized crime and drug trafficking. To this end the Eastern Bloc began infiltrating organized crime in the 1950s and, in 1960, began a narcotics offensive against the West which would generate billions of dollars in illicit money which banks could not resist laundering. In this way, a portal was opened into the heart of the capitalist financial structures in order to facilitate future economic and financial sabotage. Promote bankruptcy and economic breakdown – The promotion of a cradle-to-grave welfare state as a means to bankrupt the United States Treasury (i.e., the Cloward-Piven Strategy). Welfare simultaneously demoralizes the workforce as it bankrupts the government. Elect a stealth Communist president – As an organizer for the Communist Party explained during a meeting I attended more than thirty years ago, the stealth Communist president will one day exploit a future financial collapse to effect a transition from “the dictatorship of the bourgeoisie” to the “dictatorship of the proletariat.” Exploit the counter-revolution – Some strategists believe that a counter-revolutionary or right wing reaction is unavoidable. It is therefore necessary, from the standpoint of sound strategy, to send infiltrators into the right wing. Having a finger in every pie and an agent network in every organization, the Communists are not afraid of encouraging counter-revolution, secession, or civil war in the wake of financial collapse. After all, the reactionaries and right wing elements must be drawn out so that they can be purged or, if necessary, turned into puppet allies. Already Putin is posturing as a Christian who opposes feminism and homosexuality. This has fooled many “conservatives” in the West, and is an intentional ploy which further serves to disorient the West. Take away the nuclear button – The strategists in Moscow do not forget that the neutralization of the U.S. nuclear deterrent is the most important of all intermediate objectives. This can be achieved in one of four ways: (1) cutting off nuclear forces funding by Congress; (2) administratively unplugging the weapons through executive orders issued by Obama, (3) it may be accomplished through a general financial collapse, or (4) a first strike.

An inverse relationship exists between efficiency in asset pricing and appropriate degree of active management. Passive management strategies suit highly efficient markets, such as U.S. Treasury bonds, where market returns drive results and active management adds little or nothing. Active management strategies fit inefficient markets, such as private equity, where market returns contribute very little to ultimate results and investment selection provides the fundamental source of return.

Table 4.1 Equities Generate Superior Returns in the Long Run Wealth Multiples for U.S. Asset Classes and Inflation December 1925–December 2005 Asset Class Multiple Inflation 11 times Treasury bills 18 times Treasury bonds 71 times Corporate bonds 100 times Large-capitalization stocks 2,658 times Small-capitalization stocks 13,706 times Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation, 2006 Year Book.

Treasury Bills The simplest, safest way to generate future cash from current cash is to buy a short-term, three-month Treasury bill. The purchase price you pay is loaned to the government, which in return promises to pay you a guaranteed rate of interest for three months and then return your principal. Because it is very unlikely that the U.S. Treasury will not be around to repay you three months later, the investment is close to riskless and therefore pays a low rate of interest. Its return serves as a benchmark for riskier securities, which must promise to pay more.

The White House would never publicly back up its statement with evidence. But it had promised consequences, and a month later those consequences arrived: The U.S. Treasury announced new sanctions against nineteen people and five organizations.

Secretary of the Treasury Morgenthau and his allies regarded Murphy as a complacent appeaser of Nazism, a man whose inaction and deceit had contributed significantly to the U.S. government’s failure to rescue innocent people from the Holocaust and a reactionary who was willing to throw away possibilities for a peaceful postwar world to satisfy the ideological demands of anti-communism.

They didn't like what they found. Further examination found an active LIBOR fixing ring,[18] led by two large global banks and their inter-dealer brokers.[19] With no way to replace the survey method without the chance of rigging reoccurring, global regulators agreed to scrap LIBOR altogether. The problem was finding a replacement. It’s important to understand what LIBOR actually represents. Yes, it represents bank funding costs, but what does that mean? Theoretically, there are two interest rate components that make up LIBOR. The general level of risk-free interest rates and a credit spread. The risk-free interest rate is the equivalent of the U.S. Treasury yield with the same maturity date. The credit spread component represents something like the probability that the bank might default before the maturity date.

SOFR is a combination of three Repo rates: deliverable GC, GCF, and Tri-Party. The deliverable GC component is an average of all inter-dealer U.S. Treasury General Collateral trades that settle in FICC (Fixed Income Clearing Corp.). GCF is short for General Collateral Finance, and it’s basically inter-dealer Tri-Party trades that settle within FICC. The last component is the Tri-Party rate, and this rate is very important for understanding SOFR. Tri-Party is the average rate for Tri-Party trades that settle at the Bank of New York (BONY). Whereas GC and GCF are dealer-to-dealer rates, Tri-Party is a dealer-to-customer rate. What does that mean? It’s where the Street borrows money from customers, not from each other. Dealer-to-customer means the rate is on the offered side of the market, or lower if the dealer marks up the rate, which we commonly do. The Tri-Party rate is always lower than the inter-dealer rate. And it means that SOFR should always trade below Repo GC.

Beginning in 2001, there was another shift in the Repo market. The CFTC changed their margin investment rules, allowing for FCMs (Futures Commission Merchants) to invest their cash in federal agencies, municipal bonds, and corporate bonds, instead of just Treasurys. The premium that U.S. Treasury collateral enjoyed narrowed. Before the rule change in 2000, GC was averaging around 7 basis points below fed funds. Beginning in 2001, GC was averaging almost flat to fed funds. When there’s less demand for Treasurys, there’s a smaller premium.

When Henry Kissinger, then the U.S. secretary of state, declared that he was first an American, second secretary of state, and third a Jew, Golda Meir supposedly responded to him by saying, “That’s fine, Henry. But in Hebrew everything is written from right to left.

The book doesn't have to be all about U.S. Treasurys, but that's mostly what it’s about. U.S. Treasuries are the foundation of the Repo market. However, these days there are Repo transactions in just about any financial instrument: federal agencies, municipal bonds, corporate bonds, foreign government bonds, emerging markets bonds, mortgage loans, etc.

Repo is the oil that lubricates the engine of the financial markets. It keeps it running smoothly; it’s the plumbing of the financial system. You might even say it’s the oil that lubricates the engine of the entire economy. Here are some important characteristics of the Repo market: In one respect, Repo is a popular instrument for short-term cash investments for institutional investors, with “short-term” meaning from overnight through one year. It’s an ultra-safe investment. It’s an investment collateralized with a Treasury security at a competitive market rate of interest. In another respect, Repo is a mechanism for market participants to cover short sales of U.S. Treasurys. This is a big part of the Repo market and arguably the most interesting part. In another respect, it provides collateralized funding for large leveraged investors. OK, let’s just get this said up front. Yes, the Repo market is the way hedge funds can highly leverage their trading positions. More on this later.

David Heuwetter was the head trader at Drysdale Government Securities and had a great trading idea. It was really more of a scheme to take advantage of the difference in the market convention between outright Treasury purchases and Repo trades. Still at this time, when someone bought and sold a U.S. Treasury outright, the securities settled with the coupon accrued interest added to the purchase price. That is, when you bought a U.S. Treasury, you had to pay for the amount of interest which had already accrued on the security since the last coupon payment date. When interest rates were low, the accrued interest was small, even negligible. However, in the early 1980s, interest rates shot up above 10%, which meant there was a lot of interest accruing on bonds each day.  Heuwetter realized he could short-sell U.S. Treasurys outright and deliver the securities to the buyer and receive the price plus the accrued interest. Then, when he borrowed the securities in the Repo market, he only had to pay the purchase price. He was getting the full use of the accrued interest on the bonds at no cost.

When someone refers to the 2 Year Note, it means something. It’s the current U.S. Treasury 2 Year Note, the 2 Year Note that was most recently auctioned. There’s a big difference between a 2 Year Treasury and the 2 Year Note. It’s also referred to as the on-the-run 2 Year Note.

China has become not only America’s main supplier, but America’s main banker, the largest holder of U.S. debt, with financial reserves topping $3.2 trillion, giving it enough financial leverage to wreak havoc with the American economy if it ever chose to sell off a large slice of its U.S. Treasury holdings. This is the opposite of what America’s business and political leaders promised. The

Jim Cramer’s Mad Money is one of the most popular shows on CNBC, a cable TV network that specializes in business and financial news. Cramer, who mostly offers investment advice, is known for his sense of showmanship. But few viewers were prepared for his outburst on August 3, 2007, when he began screaming about what he saw as inadequate action from the Federal Reserve: “Bernanke is being an academic! It is no time to be an academic. . . . He has no idea how bad it is out there. He has no idea! He has no idea! . . . and Bill Poole? Has no idea what it’s like out there! . . . They’re nuts! They know nothing! . . . The Fed is asleep! Bill Poole is a shame! He’s shameful!!” Who are Bernanke and Bill Poole? In the previous chapter we described the role of the Federal Reserve System, the U.S. central bank. At the time of Cramer’s tirade, Ben Bernanke, a former Princeton professor of economics, was the chair of the Fed’s Board of Governors, and William Poole, also a former economics professor, was the president of the Federal Reserve Bank of St. Louis. Both men, because of their positions, are members of the Federal Open Market Committee, which meets eight times a year to set monetary policy. In August 2007, Cramerwas crying outforthe Fed to change monetary policy in order to address what he perceived to be a growing financial crisis. Why was Cramer screaming at the Federal Reserve rather than, say, the U.S. Treasury—or, for that matter, the president? The answer is that the Fed’s control of monetary policy makes it the first line of response to macroeconomic difficulties—very much including the financial crisis that had Cramer so upset. Indeed, within a few weeks the Fed swung into action with a dramatic reversal of its previous policies. In Section 4, we developed the aggregate demand and supply model and introduced the use of fiscal policy to stabilize the economy. In Section 5, we introduced money, banking, and the Federal Reserve System, and began to look at how monetary policy is used to stabilize the economy. In this section, we use the models introduced in Sections 4 and 5 to further develop our understanding of stabilization policies (both fiscal and monetary), including their long-run effects on the economy. In addition, we introduce the Phillips curve—a short-run trade-off between unexpected inflation and unemployment—and investigate the role of expectations in the economy. We end the section with a brief summary of the history of macroeconomic thought and how the modern consensus view of stabilization policy has developed.

He didn’t buy U.S. Treasury bonds, or stock in companies outside of Silicon Valley, or for that matter stock in anything outside the outrageously volatile Internet sector.

So I lean over carefully, and there, piled a foot high against the sides of the metal bin, are beat-up U.S. quarters, dimes, nickels, and pennies. Next to the filling bin is another bin, a full bin of coins that fell from the pockets of Americans who had more pressing matters than loose change. According to Jack, an average junked U.S. automobile contains $1.65 in loose change when it’s shredded. If that’s right—and from what I see, I believe that it must be—then the 14 million cars scrapped in good years (good for automobile recyclers, at least) in the United States contain within them more than $20 million in cash just waiting to be recovered. Understandably, Huron Valley isn’t interested in revealing just how much money they recover from U.S. automobiles (they have a deal whereby they return the currency to the U.S. Treasury for a percentage of the original value), but David is willing to note that the coin recovery system has “paid for itself.” It occurs to me that Huron Valley has happened upon the most brilliant of businesses: one whose product is money itself! That is, rather than make something that needs to be marketed for money, Huron Valley just makes money.

In fact, what’s been happening is that there’s been a flow of investor funds to the United States, to Treasury securities, which are regarded as a safe haven now, which has a mixed effect for the United States.3 It tends over time to raise the value of the dollar and harm exports. So it’s not good for a healthy economy.

On August 5, the Standard & Poor’s rating agency—citing, among other factors, the prospect of future budget brinkmanship—downgraded U.S. government debt to one notch below the top AAA rating. The rating agency had made an egregious error that caused it to overstate the estimated ten-year deficit by $2 trillion, which the Treasury quickly pointed out. S&P acknowledged the error but asserted that the mistake did not affect its judgment of the government’s creditworthiness. I had the feeling that S&P wanted to show it was not intimidated. The episode highlighted the odd relationship between governments and rating agencies: Governments regulate the rating agencies, but the rating agencies have the power to downgrade governments’ debt.

Government inflation-protected securities (in the United States, these are Treasury Inflation-Protected Securities, or TIPS) A low-cost total U.S. domestic equity (stock) index fund, either a mutual fund or an exchange-traded fund (ETF—i.e., a sort of mutual fund that can be traded like stocks on an exchange) A low-cost total international equity index fund, either a mutual fund or an ETF Single-premium income annuities Low-cost term life insurance

An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. This describes Europe since the early 1970s, when the continent succumbed to undirected bureaucratic drift. Today the whole Eurozone is in slow-motion crisis, and nobody is in charge. The European Central Bank doesn’t stand for anything but improvisation: the U.S. Treasury prints “In God We Trust” on the dollar; the ECB might as well print “Kick the Can Down the Road” on the euro. Europeans just react to events as they happen and hope things don’t get worse. The indefinite pessimist can’t know whether the inevitable decline will be fast or slow, catastrophic or gradual. All he can do is wait for it to happen, so he might as well eat, drink, and be merry in the meantime: hence Europe’s famous vacation mania.

Kennedy also offended the Military-Intelligence complex. Amongs others for the reason that he decided to pull out of Vietnam.[81] He was against a continuation of Western colonialist domination of Vietnam and criticized the U.S. alliance with the French effort to retain its empire. During his presidency he opposed a massive commitment of U.S. forces to fight a war that he felt the Vietnamese had to fight primarily on their own. He consistently rejected recommendations to introduce U.S. ground forces. Shortly before his assassination he started withdrawing U.S. troops from Vietnam. At the time of his death about 16,000 U.S. troops were in Vietnam. U.S. policy in Vietnam changed within twenty-four hours of Kennedy’s death. Under President Johnson the U.S. involvement escalated and 543,000 soldiers (ground forces) were sent to Vietnam.[82] Kennedy wanted to establish a lasting peace in a world free of nuclear weapons. Amongst others he wanted to stop Israel developing its own nuclear bomb. He also was seeking for a peaceful coexistence with Russia and Cuba. Kennedy came up against the Federal Reserve Bank as well. He was the only president of the United States who tried to put an end to the power of the Federal Reserve. He refused to cooperate with the Federal Reserve Bank any longer. Four months prior to his death John Kennedy dared to challenge the Federal Reserve Bank. Kennedy wanted to have his own state money printed instead of prolonging the outstanding loans of compound interest issued by the Federal Reserve Bank. On June 4, 1963, a little-known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Kennedy’s order gave the Treasury the power “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury”. This meant that for every ounce of silver in the U.S. Treasury’s vault, the government could introduce new money into circulation.

If your 401(k) is lucky enough to have Vanguard funds, look for, respectively, the (U.S.) Total Stock Market Index Fund, Total International Stock Index Fund, and either the Short-Term Bond Index or Total Bond Market Index Fund. As already mentioned, the Fidelity Spartan series is also excellent: the Total Market Index, International Index, and U.S. Bond Index (or Short-Term Treasury Bond Index) funds.

Labor and employment firm Fisher & Phillips LLP opened a Seattle office by poaching partner Davis Bae from labor and employment competitor Jackson Lewis PC. Mr. Bea, an immigration specialist, will lead the office, which also includes new partners Nick Beermann and Catharine Morisset and one other lawyer. Fisher & Phillips has 31 offices around the country. Sara Randazzo LAW Cadwalader Hires New Partner as It Looks to Represent Activist Investors By Liz Hoffman and David Benoit | 698 words One of America’s oldest corporate law firms is diving into the business of representing activist investors, betting that these agitators are going mainstream—and offer a lucrative business opportunity for advisers. Cadwalader, Wickersham & Taft LLP has hired a new partner, Richard Brand, whose biggest clients include William Ackman’s Pershing Square Capital Management LP, among other activist investors. Mr. Brand, 35 years old, advised Pershing Square on its campaign at Allergan Inc. last year and a board coup at Canadian Pacific Railway Ltd. in 2012. He has also defended companies against activists and has worked on mergers-and-acquisitions deals. His hiring, from Kirkland & Ellis LLP, is a notable step by a major law firm to commit to representing activists, and to do so while still aiming to retain corporate clients. Founded in 1792, Cadwalader for decades has catered to big companies and banks, but going forward will also seek out work from hedge funds including Pershing Square and Sachem Head Capital Management LP, a Pershing Square spinout and another client of Mr. Brand’s. To date, few major law firms or Wall Street banks have tried to represent both corporations and activist investors, who generally take positions in companies and push for changes to drive up share prices. Most big law firms instead cater exclusively to companies, worried that lining up with activists will offend or scare off executives or create conflicts that could jeopardize future assignments. Some are dabbling in both camps. Paul, Weiss, Rifkind, Wharton & Garrison LLP, for example, represented Trian Fund Management LP in its recent proxy fight at DuPont Co. and also is steering Time Warner Cable Inc.’s pending sale to Charter Communications Inc. Willkie Farr & Gallagher LLP and Gibson, Dunn & Crutcher LLP have done work for activist firm Third Point LLC. But most firms are more monogamous. Those on one end, most vocally Wachtell, Lipton, Rosen & Katz, defend management, while a small band including Schulte Roth & Zabel LLP and Olshan Frome Wolosky LLP primarily represent activists. In embracing activist work, Cadwalader thinks it can serve both groups better, said Christopher Cox, chairman of the firm’s corporate group. “Traditional M&A and activism are becoming increasingly intertwined,” Mr. Cox said in an interview. “To be able to bring that perspective to the boardroom is a huge advantage. And when a threat does emerge, who’s better to defend a company than someone who’s seen it from the other side?” Mr. Cox said Cadwalader has been thinking about branching out into activism since late last year. The firm is also working with an activist fund launched earlier this year by Cadwalader’s former head of M&A, Jim Woolery, that hopes to take a friendlier stance toward companies. Mr. Cox also said he believes activism can be lucrative, pooh-poohing another reason some big law firms eschew such assignments—namely, that they don’t pay as well as, say, a large merger deal. “There is real money in activism today,” said Robert Jackson, a former lawyer at Wachtell and the U.S. Treasury Department who now teaches at Columbia University and who also notes that advising activists can generate regulatory work. “Law firms are businesses, and taking the stance that you’ll never, ever, ever represent an activist is a financial luxury that only a few firms have.” To be sure, the handful of law firms that work for both sides say they do so

Kennedy’s order gave the Treasury the power “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury”. This meant that for every ounce of silver in the U.S. Treasury’s vault, the government could introduce new money into circulation. In all, Kennedy brought nearly 4.3 billion dollars in U.S. notes with the inscription of “United States Note” instead of the usual “Federal Reserve Note” into circulation.[83] With the stroke of a pen, Kennedy was on his way to putting the Federal Reserve Bank out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.[84] With this decision the printing of the bank notes fell into the hands of the state again. Kennedy Five Dollar Notes

Imagine you're alive at the end of the Civil War. You're living in the South, but you're a Northerner. You plan to move home as soon as the war's over. While in the South you've accumulated lots of Confederate currency. Now, suppose you know for a fact the North's going to win the war, and the end is imminent. What will you do with your Confederate money? If you're smart, there's only one answer. You should immediately cash in your Confederate currency for U. S. currency - the only money that will have value once the war's over. Keep only enough Confederate currency to meet your short-term needs. Kingdom currency, backed by the eternal treasury, is the only medium of exchange recognized by the Son of God, whose government will last forever. The currency of his kingdom is our present faithful service and sacrificial use of our resources for him. The payoff in eternity will be what Paul called 'a firm foundation' consisting of treasures beyond our wildest dreams.

Silber, the real reason the exchange was shut, and the reason the U.S. Treasury was involved, was not stock prices but gold. European sellers were entitled to convert their sales proceeds into gold at the U.S. subtreasury building located on Wall Street across from the exchange.

Clearly, the U.S. government condoned something that, in modern phraseology, could be termed industrial espionage. Building upon this precedent, Hamilton put the full authority of the Treasury behind the piracy of British trade secrets.