Let My Free Market Go: Alternate Recession Strategy

"Some Economists Say Best Way to Battle Recession Is a Do-Nothing Stimulus "

The debate on Capitol Hill this week is all about the size of the stimulus: Should it be big? Bigger? A behemoth? But there is another school of thought that's getting less attention.


Call them the do-nothings.

In these free-spending times there's a growing movement among economists who say the best way out of this recession is to do nothing, nothing at all.
"I think there's nothing wrong with doing nothing," David Henderson of the Hoover Institution told "Good Morning America."
Nor do the 250 other economists who signed on this week to an ad in the New York Times and Washington Post.

"Government just doesn't work very well," said Dan Mitchell, a senior fellow at the Cato Institute. "We tried big spending under Bush, it didn't work. We tried big spending under Hoover, it didn't work.

"A lot of bad government policies got us into this mess and we don't have a magic wand to get us out right away," he said.

Laid Off From a Business? Start Your Own

"Would-be Entrepreneurs Are Using Their Severance Pay to Start New Businesses"

America may be in a recession, but that's not stopping thousands of would-be entrepreneurs from using their severance pay or savings to do something they've always hankered to do: be their own boss.


Even as more and more large companies hand out pink slips, budding do-it-yourselfers are starting new businesses – some of them far different from the jobs they used to hold.
A former Wall Street executive now is walking dogs instead of making deals. A laid-off banker is offering soothing massages. Earlier this month, a former marketing executive – and mother – started a business that helps other moms find work.


Small businesses have long been a key part of America's economic makeup, representing the majority of the jobs created in the country.

Foreclosure at the Mall

"The Recession's Latest Victim Might Just Be That Shopping Center Down the Road"



Forget those 50-percent-off signs. This winter you are likely to see a new sign at your local mall: "Going Out of Business." And that means big trouble for mall owners already struggling to survive.


The nation's shopping center owners are facing a recessionary double whammy:consumers who are spending less and real estate investors who are holding back money used to finance their operations.

And some analysts say that, in the next two months, those forces will collide, sending some mall owners into bankruptcy. Don't expect your local mall to necessarily close its doors -- although some of the 3,500 across the country might -- but it could very likely be owned by somebody else by the spring.

"They have significant problems by and large," said George Whalin, president and CEO of Retail Management Consultants.

Who Is Really Printing Money?

A popular mantra among many gold bugs is: “the Fed is printing money.” Any actions by the Fed to support liquidity in the markets are touted as “money creation” and consequently “monetary inflation” which causes gold appreciation. If gold does not rise, they proclaim that there is “manipulation” and “conspiracy”.


It is fair to say that we do not see the picture in such black and white colors.
The main source of new money in the economy is not the Fed but the commercial banks. It is the private banks that increase money supply through debt (new credit) creation.


During a credit crisis which is characterized by a steep slowdown of credit creation, growth of money supply in the financial system slows as well. It is silly to think that the Fed can replace the whole system of commercial banks by creating money itself from thin air. What the Fed can do is influence money supply by adjusting interest rates, creating more or less incentive for the fractional-reserve lending by the commercial banks.


Lately, the Fed has expanded its sphere of influence but these actions still do not directly cause increases in money supply. The Fed began swapping poor performing assets on the banks’ balance sheets for the high quality treasuries on the Fed’s balance sheet in an effort to improve the financial situation of the banking sector and restore liquidity.


Today, the biggest fear that the Fed has is the fear of deflation. The monetary policymakers understand that (a) a sound banking system is a foundation of US economic prosperity and (b) the failure to support the banking system will inevitably cause deflation. We are, therefore, confident that the Fed, headed by Chairman B. Bernanke, will continue to support the banks by creating the best possible environment for the return to a normal cycle of debt/money creation and use everything in its arsenal to prevent deflation.


Going forward, gold will likely resume its up-trend due to one of two reasons:
Another spell of problems in the financial system will cause gold (and the US treasuries) to once again take the place of safe haven investments, as was the case in the second half of 2007.
Fear of deflation and a further slowdown in the US will spread around the world. As a result, a vicious wave of competitive devaluation will cause not only price shocks (oil, food, etc.) but also spiraling monetary inflation, eventually raising long-term bond yields. This will be the beginning of a real gold bull market when gold outperforms all other major classes of assets including most hard assets.


The second outcome, in our opinion, is inevitable but no one knows when it will come and what path it will take.

Borrowing Money is no Longer in Fashion

The economic slowdown has been characterized as “consumers are de-leveraging”, which is an interesting turn of phrase that means that people are not borrowing money to spend.

The importance is dependent on your perspective. Those people who are not borrowing money to spend are thus suffering the pangs of a lowering of their lifestyle, which depended on borrowing money to spend; and then they come around, whining about stupid things like, “Daddy, things have gone up so much in price that I need more money, which you would give me if you loved me. Don’t you love me? I love you! Won’t you please love me, daddy?”
And so I ask, “Can’t you love me if I don’t give you any money?” and they say, “No. You could borrow the money, and then we would love you”, and I reply, “I have been borrowing money and now I can’t pay them back” and so the kids say, “Then borrow some more!”
And, in a terrifying revelation, I realized that it is not only my children, but all the rest of the economy that is totally dependent on everybody else borrowing money to spend, too.
So now you see how Chaos Theory was right, and that all things are connected to all things? If not, then pay attention to how they will now commence to all drag each other down into the Nightmarish Hell Of Inflationary Insolvency (NHOII).


And it doesn’t take a real genius to see why, but the point is not that the American people were stupid enough to think they could get a perpetual free lunch by borrowing money to pay for it, or even that a smaller subset of those who are suffering the pangs of a lowering of their lifestyle is composed of those who also think that they can call me on the phone and either 1.) Ask to borrow some money from me, or 2.) Ask me to pay them back the money I borrowed from them.


My response is the same, in that I give neither one of them any money because I don’t have any money; so to one I laugh in scorn, and to the other I say that I have just put a check in the mail to them, and that they will get their money soon, and if it hasn’t arrived in a few months, call me back and I’ll write you a new check and get it right into the mail.
The point is that a much larger subset of those who are suffering the pangs of a lowering of their lifestyle is composed of those people who think that they can elect government representatives who legislate all problems out of existence, that will tax me and then give the money to them, or the Federal Reserve will create more money to loan to investors with which to buy government debt so that the government can spend, spend, spend us into blessed Utopia. Either way, it’s Bad, Bad News (BBN).


And, alas, one way or the other, they are right. Unfortunately. And that is one reason that I weep, alone, in the Mogambo Bunker Of Bunkers (MBOB), doors locked, radio blaring, machine guns cocked and loaded, mostly drunk or nearly so, soon to be blissfully comatose.
Another reason that I cry so piteously and drink so abusively is that all this new government borrowing will create so much new money that it will destroy the dollar’s buying power, taking my own country down with it.
The only reason that I stop bawling like a little crybaby is the knowledge that the people who own gold, silver and oil will get rich, rich, rich, and since I own gold, then people will want me to loan them a few bucks out of my huge stacks of money because they are starving, and their children are starving, and I will say “No!”, and it will be thin gruel indeed for them to hear my mocking voice again echoing in their heads, “Buy gold, silver and oil, you morons, because your stupid government is letting a private bank (that misleadingly calls itself the Federal Reserve when it is, in fact, neither) to create so damned much fiat money that it will produce catastrophic inflation in consumer prices that will destroy the country, just like it has done to every other stupid country in the last 4,000 years that let its stupid government increase a fiat money supply at its whim! Hahahaha! Now you see why I always said you were freaking doomed! Hahaha!”


But I feel terrible, as this constant infliction of inflationary pain by heedless expansion of the money supply is so unnecessary, and that is why I was pleasantly surprised to read in the Wall Street Journal the headline “Central Banks Consider Gold” in its Commodities Reports column.
The reason is easy to see if you read the article backwards, in that there was a question about central bank buying “last week, when gold saw a record single-day gain”, especially Chinese central bank buying of gold, which is already the ninth-largest holder of gold in the world but which holds only 1% of its foreign-exchange reserves in gold, although it actually said it would like to hold more. And Mark O’Byrne at Gold & Silver Investments says that he would “be surprised if the Chinese hadn’t been nibbling at the gold market,”, which leads to the news that Asian banks “are seen as keen buyers” of gold, which leads to the news that “other central banks are now far more likely to be holders of gold”, which leads us back to the second paragraph that “Turbulence in the financial markets and recent U.S. dollar weakness are helping the precious metal claw back its reputation as the central monetary anchor within the international monetary framework”, which leads to the op ening paragraph of “Central banks may be starting to turn one of the few assets in which they can invest; gold.”


In short, those crafty Chinese, a fifth of the world’s population, may be getting ready to issue a gold-standard money, which will instantly make their currency the strongest in the world, which is just what a country needs if it wants to import a lot of things cheaply so as to respond to demand for internal economic growth without stoking inflation in prices!


And, fortunately for those of us who both love to have large profits handed to us and who also own gold, a Chinese gold-standard may soon make a dream come true as gold would skyrocket when priced in suddenly depreciated dollars.

New Law Governing Currency Changeover - Venezuela

On March 6, 2007, the Presidential Decree with Status of Law governing a Monetary Changeover was published in Official Gazette. This Law changes the Venezuelan official currency to a unit equivalent to Bs. 1,000.00 current Bolivars. According to this regulation, this changeover will be in force as from January 1, 2008. This decree-law states that all Bolivars resulting from this changeover will be represented by the “Bs.” symbol and will be decimalized. However, as from January 1, and as the Venezuelan Central Bank (BCV) states otherwise, payment obligations in national currency must indicate the use of the new currency by including the expression “Bolivares Fuertes”, or the “Bs. F” symbol.

Therefore, charges expressed in national currency before the effective date will be converted into the new currency by dividing it by 1,000 and then rounding the amount off. Payment Obligations In addition, this new regulation provides that, as from January 1, 2007, all payment obligations expressed in national currency must be entered into by using the new Bolivar. Prices, wages, taxes, amounts expressed in national currency and included in financial statements, other accounting documents, credit notes and, in general, any other operation or reference expressed in national currency must be reported in the new currency. Bills and coins issued by the BCV currently in force will be valid even after the effective date of the decree, until the BCV recalls them from circulation.

Checks and other credit notes payable (even issued before January 1, 2007), and those issued after the effective date of the decree will be considered as having a value corresponding to the conversion. Therefore, they will be paid according to the rules of equivalence. New Currency Any amounts expressed in national currency included in regulations, decrees, administrative orders, memos, instructions, or administrative regulations with general and/or particular effects, as well as judicial decrees issued before January 1, 2008 must be converted to the equivalent amount provided by the law. Likewise, official stationery, fiscal stamps, and/or postage stamps must be used until the stock runs out, in the understanding that their value will be converted according to the new regulations. The value of tax units (unidad tributaria) will remain the same until the National Taxation Services (Seniat) decides to order a change regarding this issue.

The new value of tax units will result from the conversion procedures stated above. Likewise, financial statements approved after the effective date of the decree will be expressed by using the new currency.
As from October 1, 2007, and until the BCV orders otherwise, all instruments used to offer goods and services will contain as reference both the amount prior to the conversions, and the amount resulting from the conversion. Obligations by the BCV and Other Relevant AuthoritiesAccording to this decree-law, the BCV will be in charge of taking all the necessary steps to issue and distribute the new bills and coins required further to the conversion.

Likewise, the BCV is authorized to regulate, by means of resolutions, any matters related to the execution of the monetary changeover, as well as to implement all necessary measures intended for the substitution of bills and coins until the new currency can be fully introduced. The BCV is also authorized to implement a spreading campaign regarding the monetary conversion aiming at informing the population in general on the scope of this new system. Based on this decree-law, The People’s Attorney’s Office, the Customer’s Defense Institute (Indecu), the Superintendence of Banks and other Financial Institutions (Sudeban), the Superintendence of Insurance Companies, and the Security National Commission (CNV) are authorized to look after the proper implementation of the conversion. In addition, any other entity with relevant jurisdiction will be also authorized to do so.

Duties and Punishments On the one hand, noncompliance with the monetary conversion contained in the decree-law will be punishable with fines that will range between 10 and 10,000 Tax Units. Fines will be enforced by Indecu pursuant to the Law for the Protection of Customers and Users, except for fines applicable to financial institutions. In those cases, fines will be enforced by a governmental entity with the relevant control and supervision over financial institutions.

On the other hand, people refusing to accept the new currency in force according to the decree-law as from January 1, 2007, will be punished with a fine equivalent to four times the amount involved. Finally, during this conversion, banks and financial institutions must adapt their systems and arrange for any change intended to convert the whole of the balances of their clients’ accounts by the effective date of the conversion.

Google CEO to Congress: Pass Stimulus Now

During our powerhouse economic panel today on "This Week" Google CEO Eric Schmidt argued Congress needs to pass the stimulus package now.


"The business community needs action now," Schmidt said. "There's a sense that things are getting worse, people are saying the March quarter, the June quarter are going to be particularly difficult for business. It's time for government action."
Schmidt argued the stimulus package needs to be a blend of short-term spending and long-term spending.


"There are plenty of cases where directed spending does help things to happen more quickly. The stimulus package -- most of the money actually goes to reasonably short-term things in education, state-relief, and various other things that help people in the short-term. Some combination of all that money's got to get out now to get people going again."

FedEx CEO: 'Buy America' Puts U.S. Jobs At Risk

The so-called 'Buy America' provision in the stimulus package passed by the House this week raised the ire of Canadian and European leaders who say the measure is protectionist.
But with the industrial Midwest running at 45 percent capacity, and 40 percent of the people who are working in steel companies and other manufacturers laid off, the Obama administration appears to be of two minds on the provision.


Vice President Joe Biden said this week: "I think it’s legitimate to have some portions of Buy American in it."

Meanwhile, White House press secretary Robert Gibbs said this week, "The administration is reviewing that provision. It understands all of the concerns that have been heard not only in this room but in newspapers produced both up North and down South."
During our interview on "This Week" FedEx CEO Fred Smith argues the Buy America provision in stimulus will hurt global trade.


"The reason it's not the right thing to do is that the growth of global trade has been enormously beneficial to the United States. The problem with trade is that the benefits are diffuse and the pain is localized. But the benefits of having a global economy have created an export sector in this country that provides our highest-paying jobs," Smith said.


"If the Congress passes this Buy America provision, I can assure you, and we operate in 220 some odd countries around the world and are a huge part of the import and export infrastructure of the United States, we will get retaliation, and it'll be American jobs at risk."
Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, agreed with Smith, but said what is needed is a better social safety net to help people dislocated from their jobs.


"The fact is that the average American feels that, even when there was growth, he and she wasn't getting a piece of it. And I appreciate you saying, Fred, that we need to take care of the people dislocated, but you have to broaden it," Frank said.


"I will tell you, I believe, until you get a better social safety net, actions that you're not going to like are going to continue," he said. " Until you relieve the localized pain better, the average American will block things like trade, like outsourcing that you think we ought to do."

FedEx CEO Discusses Banker Bonuses

Sen. Claire McCaskill, D-Mo., took to the floor of the Senate this week, angry about the over $18-billion in Wall Street bonuses that were given in 2008. She has argued that no banker be paid more than the president of the United States.


"They don't get it. These people are idiots. You can't use taxpayer money to pay out $18 billion in bonuses. Should these people be making more than the president of the United States? Not really, should they?" McCaskill said this week.


During our interview on "This Week," I asked FedEx CEO Fred Smith -- who himself took a 20 percent pay cut because of his company's performance -- what he thought of Sen. McCaskill's idea.
"The compensation structure on Wall Street is basically built on -- on bonuses, much more so than in the industrial sector," Smith said.


"As I understand it, the average bonus in that $18 billion is about $100,000 a year. The bonuses on Wall Street are down about 44 percent. So certainly up at the very top of the pyramid, people may be getting more than the president of the United States. But I think you have to go into the -- to the detail there."


Smith argued that while Congress has a right to put any kind of restriction on government bailout money, many middle-level bankers depend on their annual bonuses.
"It's a little bit, I think, an exaggeration to say that all the money is going to -- you know, the top few people on Wall Street. There are a lot of middle-level folks that -- that live on -- on those bonuses. And the lack of those bonuses, probably the biggest people are getting hit are the state treasuries of the state of New York and the city of New York."


However, Google CEO Eric Schmidt argued a much better compensation method is stocks.
"We're in this for the long term. And in the businesses that I'm familiar with, people are primarily compensated with stocks. Stocks are down. Stocks will eventually return. People will make money that way. That's a much better way to compensate people," Schmidt said.

Heaven -- Where Is It? How Do We Get There?

Nearly nine out of 10 people in the United States say they believe in heaven, according to a recent ABC News poll. But what exactly do people think of when they think of an afterlife and what do they believe is required to get there?
Barbara Walters travels to India, Israel and throughout the United States, interviewing religious leaders, scientists, believers and non-believers alike to get a range of perspectives on heaven and the afterlife.


From Valhalla to Nirvana

Every culture has wrestled with the question of an afterlife, and most have come to a similar conclusion: The bad end up in Hell, the good go to Heaven.
If you were a Viking who died in battle, fierce goddess warriors known as the Valkyries would carry you to Viking Heaven, Valhalla, where you would join an eternal feast. The Romans thought they became immortal and were spirited off to Paradise on a fiery four-horse chariot.
The early Christians and Jews believed that man was not pure enough to enter the Kingdom of Heaven as flesh and blood. They believed all people were transformed into spiritual beings, filling Heaven with angels.


That belief has changed over the centuries, but angels still have an important connection with heaven. In cities all over the world, angels can be seen in watchful poses. "We believe that they are the ones who take care of us. They are the messengers of God. They are the ones who are God's very special friends and his servants," said Cardinal Theodore McCarrick, archbishop of Washington, D.C., and chancellor of Catholic University.


"I always think of heaven as being a place where we won't have any troubles anymore. Heaven is a place where there will be peace and tranquility," McCarrick said. As a Catholic, McCarrick believes heaven is more than a spiritual place. Catholics, he explained, believe the body is resurrected. "I'm looking forward to meeting my mom and dad and the rest of my family," he added.


The Rev. Dr. Calvin Butts, pastor of New York's famed Abyssinian Baptist Church, tells Walters he has had many visions of heaven over the years. He describes heaven as "no tears, no mourning, no suffering. It's eternal joy and happiness because you are at one with God."
Butts says he's certain of heaven's existence, but says it's in an indescribable dimension.


"Heaven is in another dimension. So you don't necessarily have to look up but you can look out and see heaven. Heaven is a fourth dimension if you will," he tells Walters.
Imam Feisal Abdul Rauf, founder of the American Society for Muslim Advancement, tells Walters he believes heaven is indeed a physical place, but getting there depends on your behavior in this life. "The real life is the next life … and based upon how we live this life, it determines where we shall be in the next. We are told we will be in comfortable homes, reclining on silk couches … so we're given the delights of sex, the delights of wine, the delights of food with all of their positive things without their negative aspects."


The promise of heaven plays a central role in the life of Pastor Ted Haggard, president of the National Association of Evangelicals, and his congregation. As an evangelical, Haggard believes if you are not a born again Christian, you have no assurance of going to heaven. But if you are "born again" in the belief that Jesus Christ is your personal savior, you are assured a place in Heaven. He also believes that this life is a sort of weigh station on the way to an eternal home. "Jesus Christ guarantees eternal life to anybody that'll follow him. … The purpose of life is to glorify God and go to heaven … 'cause heaven is our home."


Rabbi Neil Gillman, a professor of philosophy at New York's Jewish Theological Seminary, expressed Judaism's perspective on the afterlife. "For the past 2,000 years, most Jews believed that at death the body and the soul separate, the body is interred and disintegrates in the Earth, the soul goes off to be with God," he tells Walters. But that's not the end of the story. "At the end of days, God will resurrect bodies, will reunite body and soul, and the individual will come before God to account for his or her life," Gillman said.


Walters also traveled to India where she met with the Dalai Lama, considered by Buddhists to be the reincarnated Buddha. The Dalai Lama says that the purpose of life is to be happy, and that you can accomplish that by "warm-heartedness." He tells Walters heaven "is [the] best place to further develop the spiritual practice … for Buddhist the final goal is not just to reach there, but to become Buddha. [It's] not the end."


As a Buddhist he believes in reincarnation and tells Walters that people can have second lives as animals. "If someone do[es] very bad, badly … kill or steal … [he] could be born in an animal body." Walters also talks to actor Richard Gere, a longtime follower of Buddhism. Gere tells Walters, "I don't think necessarily heaven and hell happen in some other life. I think it's right now."


The Skeptics and Non-Believers

Walters also speaks with scientists, who say they're beginning to understand why so many people believe in heaven. Still, they have yet to come up with the proof that it exists.
For most people, proof of Heaven's existence is not necessary. Faith is all they need. Dr. Dean Hamer, a geneticist at the National Institutes of Health, thinks he has figured out why this faith comes easily to some, but eludes others. "Whether a person is spiritual or not is not necessarily a matter of their will. It may be something innate about their personality," Hamer tells Walters.
Hamer suspects spirituality might be a personality trait encoded in our genes. He began his research by asking more than 1,000 people to answer a series of questions about faith and spirituality. He then tested DNA from the study participants and found that those who scored highest on his survey had a mutation of at least one gene that seemed to affect their level of spirituality. He named it "the God gene."
"It's a gene that's called VMAT2 and we can isolate it, and we can study it in detail. … This particular gene controls certain chemicals in the brain. And those chemicals affect how consciousness works. They affect the way that our feelings react to the events around us," he tells Walters.


Hamer also notes that researchers have been able to detect changes in the brain when people are in the midst of intense prayer or meditation.
Dr. Andrew Newberg, a neuroradiologist at the University of Pennsylvania, is one of those researchers. Newberg says his research shows a marked increase in brain activity in the frontal regions of the brain. "At the same time," he adds, "the parts of the brain that monitor our sense of time and space became less active."
Newberg says this contributes to an individual's feeling of "losing that sense of self." The feeling, he said, is "attributed to God, for example. And then they feel that God is providing them that energy, that feeling."
But for Ellen Johnson, president of the American Atheists, science or no science, heaven is a myth.

"Heaven doesn't exist, hell doesn't exist. We weren't alive before we were born and we're not going to exist after we die. I'm not happy about the fact that that's the end of life, but I can accept that and make my life more fulfilling now, because this is the only chance I have," she tells Walters.


'Death Trips' to Heaven

Walters also talks with people who feel certain of heaven's existence, apart from their faith, because they believe they've had a glimpse of it in near-death experiences.
A U.S. News & World Report from the late 1990s says as many as 18 million Americans believe they have had near-death experiences that gave them a glimpse of the afterlife.
Dianne Morrissey tells Walters she felt the "white light of God" when she was electrocuted. "My near-death experience changed everything about me. … There is not a single experience on Earth that could ever be as good as being dead," she said.


British psychologist Susan Blackmore has spent decades searching for a scientific explanation: "When the oxygen levels fall in the brain … you get massive over-activity in the brain. … I think there is a true transformation, but not because you've been to heaven."
Family, Children and Heaven


Walters talks with California's first lady, Maria Shriver, whose early experiences with loss as a member of the Kennedy family prompted her to write a book about heaven for children. "I had, growing up, a lot of questions about these deaths that occurred in my family with no person to really talk to them about it," she tells Walters.


"My daughter, who was about 6 or 7 at the time, started asking me a lot of the same questions that I had had as a child, really basic questions: 'Why do you put somebody in a coffin? Where does she go now? Is she scared in the box? Can she breathe in the box?' And what was interesting, Barbara, was that she started answering the questions for herself. So I started writing down her answers," she said.


Walters also talks with Mitch Albom, author of "The Five People You Meet in Heaven," to get his personal take on the afterlife.
Albom tells Walters, "There's one thing I would say about heaven. If you believe that there's a heaven, your life here on Earth here is different. You may believe that you're gonna see your loved ones again. So the grief that you had after they're gone isn't as strong. You may believe that you'll have to answer for your actions. So the way you behave here on Earth is changed. So in a certain way, just believing in the idea of heaven is heavenly in and of itself," he said.