This from Taipan Daily:

Take a look at this long-term gold futures chart.

Stepping out to a longer-term chart is a bit like seeing the world from a higher altitude. As you head further out, the drama begins to recede. (From a far enough distance, the world is little more than a pale blue dot – as Carl Sagan liked to point out.)

So, too, with gold. There has been a lot of yellow…

This from Taipan Daily’s Emerging Markets blog:

Right now, copper spot prices are an anemic $1.65 per pound. That’s an amazing drop from above $4 back in June.

And yet, one Chilean copper mine is actually expanding.

The mine is called Dona Ines de Collahuasi. It’s Chile’s third largest copper mine and is located in an historical copper mining area. Back in 1880, a large, high-grade copper…

This from Taipan Daily:

Damien Hirst creates grotesqueries. Grand statues of pregnant mothers’ intestines… drowned sheep in tanks of blue water… corpses in full wedding regalia lying under a table.

His conflations of birth, love and death have made him the darling of the art world in recent years. As aberrant as it might seem to place a diamond-covered human skull in the lobby of an office building, this sort of…

This from Taipan Daily:

Wayne Gretzky is widely regarded as the greatest ice hockey player of all time.

At first glance this is an odd thing. When you think of hockey players, you normally picture big, burly, broken-nosed guys with hulking frames and lighting-fast reflexes. (Or at least that’s what I picture. But then I’m not Canadian, eh.)

Gretzky, in contrast, was never all that big. At six feet and 185 pounds, he…

This from Taipan Daily:

“Dr. Copper” is known as the metal with a PhD in economics.

This is because the use of copper is so widespread throughout our lives. Most of the appliances in your house use copper: the fridge, the dishwasher, the microwave, and the washing machine just to name a few.

By the time you add up the electrical wiring, pipes and so on, the average home uses 400 pounds of copper. And your…

Dear Friend,

Poor old AIG.

Turns out the government handout it got in September was a bit harsh. But things are looking up. Uncle Sam has now agreed to give it another $40 billion in taxpayers’ money and reduce the rate of interest it has to pay on the loans.

“I think the new package is a quantum improvement over the old one,” said AIG chief Edward Liddy of the new deal.

No doubt, Mr. Liddy is ecstatic.

Mr. Market also had reason to be pleased. News that China had approved a $586 billion economic ‘stimulus’ package sent stocks soaring in the first minutes of trading today.

Never mind that Circuit City has gone belly up…or that Deutsche Bank has declared shares in GM…

This from Taipan Daily:

Last week, I wrote to you as to how our local hausfraus had found a convenient way to raise funds without the trouble of visiting such sordid places as pawnshops. Their solution: gold-selling parties wherein nice men would come to the house and relieve them of their excess jewelry.

Apparently the need to convert baubles to dollars is not limited to the Maryland upper middle class these days. According to Bloomberg, the pawn business is…

This from Taipan Daily:

Mark my words. It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking.

— Vice–President-Elect Joe Biden

Just a few weeks ago, Vice–President-elect Joe Biden (back when he was plain old Senator Joe Biden) promised the world that Barack Obama will be “tested” by America’s…

Dear Friend,

Last night, America voted to put junior Illinois Senator Barack Obama in the White House.

“Change has come to America,” said Obama in last night’s victory speech.

He wants to restore patriotism and rebuild America, “calloused hand by calloused hand.”

According to Bloomberg, “Obama inherits the toughest environment for a new president since Franklin D. Roosevelt.”
We don’t doubt it.

The 47-year-old faces a cracked financial system, an economic recession, a raging bear market in stocks and a trillion dollar budget deficit… for starters.

The economy is bigger than the president, says Andrew Gordon in Investor’s Daily Edge. And it is heading “irresistibly down”.

Nowhere is that more apparent than in the labor market.

The economy shed 157,000 non-farming jobs in October. And economists expect…

More from Justice in Taipan Daily:

The 1920s – widely known as “the roaring twenties” – were a time of great dynamism and change in the United States.

The decade earned its nickname and then some. Car ownership took off… movies and radio captivated the nation… and the stock market went through the roof.

The Dow went from a trough of 63.90 in 1921 to a peak…

In honor of this historic day – not to mention the risks of an unchecked majority in the senate – we’ll start things off with a little humor.

The inspiring message above is brought to you by despair.com, a tongue in cheek purveyor of de-motivational goods. If you’re getting ready to draw up your Christmas list, one of despair.com’s “government” plaques might be just the thing for the cranky libertarian in your life. (Nothing wrong with being cranky I might add.) Or if you work in a “progressive” office environment, one of…

This from Taipan Daily:

As I write to you on Thursday afternoon, the Dow and the S&P are firmly in the green. That doesn’t mean a whole lot by itself, of course. These days you never know what the last hour will bring. (On Wednesday the Dow snuck in a 400-point reversal… in the last fifteen minutes of trading!)

Market wackiness aside, though, I think we could be close to a tradable bottom here. That is to say, a time to start scouting…

More from Taipan Daily:

Pay no attention to the Fed announcement: Durable Goods is where the real news is hiding!

I have a confession to make: As I sit to write to you today, I don’t know what the Fed will do regarding rates. And, quite frankly, I don’t really care.

The reason I don’t know is because the deadline to send…

More from Justice in Taipan Daily:

Hear ye, hear ye, one and all: The supercycle is dead. Long live the supercycle!

Commodities on the whole have declined nearly 50% from their peak as a result of the credit crisis. This has led some to declare that the “commodity supercycle” – the idea that we are merely in mid-innings of a…

Whirlpool said the drop in profit reflects significantly higher material and oil-related costs and lower industry demand. U.S. industry unit shipments of major appliances declined 11 percent in the quarter.

Whirlpool said it now expects a profit of $5.75 to $6 per share for 2008, compared with its previous estimate of $7 to $7.50 per share.

Based upon its revised earnings expectations and the glum industry outlook, the company said it now expects to generate free cash flow of $50 million or less for the full year, well down from…

This from Taipan Daily:

Whither the dollar and gold? To answer that long-awaited inquiry – which will take some time to cover in full – let’s start by getting a handle on “exploding debt dynamics.” Cartoonish as it sounds, it’s a real term that IMF economists use.

If, like me, the phrase gives you visions of Wile E. Coyote blowing himself up with a box of ACME brand…

This from Taipan Daily:

“Widespread property foreclosures have led to bank failures, and further to much unemployment and a disastrous decline in manufacturing and agricultural production.” Sound a tad familiar?

No, it is not another of my dreary “ripped from today’s headlines” quotes. Rather, it is a contemporaneous description of the chain of events that lead to, and resulted from, the Panic of 1819.

And…

This from Taipan Daily:

The petrocrats were richly rewarded as crude oil climbed to new heights. Now a sharp decline in the price of oil threatens to tear their world apart. A time for drastic action could be at hand…

Today I want to talk about a situation that feels like a ticking time bomb - a time bomb that could go off sooner rather than later. It starts with…

This from Taipan Daily:

Let’s start with banks now that Washington is such a major player in this area. Both New York University’s Professor Nouriel Roubini and myself have delivered many early warnings on this topic.

However, where I have been primarily concerned with the possible fates of the 117 on the FDIC’s watch list of dangerously undercapitalized banks, Professor Roubini notes that some 8% of the 8,500 banks the FDIC insures are in just as deep a…

This from Taipan Daily:

Treasury Secretary Hank Paulson didn’t want things to go this way.

As the ex-head of Goldman Sachs and a die-hard free-markets advocate, he didn’t want to become a de facto socialist (buying stakes in the banks) any more than George Bush did.

But he and Bush have no one none to blame but themselves (and maybe Greenspan) in being forced to swallow this bitter pill.

Commitment to principle is worthless without…

More from Justice: 

“Paradigm” is just a fancy word for a mental model or a pattern of ideas. The term is often used in reference to how a system or an order works... like a global financial system, or a cultural and political order.

When I say we need a new paradigm, I don’t mean we need to change the way we think about investing and trading. Market mechanics are the same... human psychology is the same... the iron laws of physics (and the key tenets of Austrian economics) are the same.

What I mean is, we need to change the way we think about the world now. We are witnessing the death and rebirth of a new world order, right before our very eyes.

And that’s why things seem to keep getting wilder and wilder, instead of calming down and going back to what we’re used to. We’ve all been expecting reversion to the mean, but the mean has evaporated. The global/ economic/ cultural/ geopolitical realities that you, me and every other thinking adult grew up with on this planet are passing into history. We are headed into something other.

As You Read This, a Massive Plot to Destroy Your Retirement Has Already Begun...But there's still time to protect what you have and even increase your wealth as much as 2,000% by next year! Send for this FREE report today to learn how you can beat the U.S. government's 98-year-old plan to keep you from your retirement dreams. This offer is time-sensitive, so please read on now for complete details...

Take the current structure of the global financial order. We have a fiat currency system, set in motion by Nixon’s closing of the gold window in 1971. We have a top- dog world reserve currency, the U.S. dollar, with the euro and the yen vying for second place. And we have gold as the perennial shadow currency, cycling in and out of favor depending on how badly the paper authorities are screwing things up.

It feels like things have always been this way. But in reality, the paper currency regime we’re all used to is actually less than 40 years old... and it may well not see its 40th birthday.

Is 40 years a long time? In some senses sure; but in other ways not at all. By the time 2011 rolls in, we could be adjusting to a whole new currency regime... something like a “Bretton Woods 2.0” perhaps. Or an ad hoc version of the old gold standard, with a mix of other hard assets backing various notes. The characteristics of currencies and asset-backed ETFs (exchange traded funds) could begin to merge in some weird symbiosis. We just don’t know.

The point is, we are headed in the direction of something other -- and we can’t be sure what it is. It probably won’t be at all like what we know today. It will draw roots from some of the old ways, but only in bits and pieces. (We could go back to some modified form of gold standard, for example, but those expecting it to look the way it did for 19th- century Britain will be deeply disappointed.)

The same is true on the cultural and political side of things. The reign of the U.S. as a dominant superpower is passing into twilight. Does that mean there will automatically be a new superpower? Does it mean that one country, possibly China, will get to have its turn striding the new century like a colossus?

Not necessarily. To ask the question “Who will be the next superpower?” is to wrongfully assumethe old paradigm continues. We are accustomed to thinking in terms of superpowers... so in pondering the possibility of the U.S. falling back, we naturally wonder who will step up. But that’s just plug-and-play thinking in context of the old model.

If the paradigm is wholly different, there won’t necessarily be one 21st- century superpower at all. Maybe we enter a multi-polar world in which there are a handful of dominant players, but none who rule the roost. Maybe the old political strongholds break up and new ones form. (Goodbye, EU; hello, Asia cooperative?) Maybe we see the rise of city-states at the ultimate expense of nation states.

This reality of accelerated change, I think, is why things seem so strange and frightening. Almost all of us, me included, have been working with the old models up to this point. We’ve all been implicitly wondering, “OK, when are things going to go back to normal (or some semblance of normal ).”

But what if there simply is no normal anymore? When you look back at the sweeping cycles of history, you see stretched- out periods of calm and punctuated periods of turmoil. The long periods of calm were the times when people could settle into entrenched ways of thinking... when conventional wisdom put down deep roots, standard patterns seemed set in stone, and whispers of change were just “crazy talk.”

But those steady periods of calm never lasted forever. They always gave way to clash, upheaval, turmoil... to major paradigm shifts that led to something new, something other, than what came before.

I think that’s where we are now. And that’s why the crazy quotient just seems to be rising and rising rather than falling back in line. An old world order is passing away, and a new one is being born.

It’s our job to get ahead of this tidal wave as rapidly as possible... and figure out how to surf it.

Source: The Death and Rebirth of a New World Order

More from Justice: 

“Paradigm” is just a fancy word for a mental model or a pattern of ideas. The term is often used in reference to how a system or an order works... like a global financial system, or a cultural and political order.

When I say we need a new paradigm, I don’t mean we need to change the way we think about investing and trading. Market mechanics are the same... human psychology is the same... the iron laws of physics (and the key tenets of Austrian economics) are the same.

What I mean is, we need to change the way we think about the world now. We are witnessing the death and rebirth of a new world order, right before our very eyes.

And that’s why things seem to keep getting wilder and wilder, instead of calming down and going back to what we’re used to. We’ve all been expecting reversion to the mean, but the mean has evaporated. The global/ economic/ cultural/ geopolitical realities that you, me and every other thinking adult grew up with on this planet are passing into history. We are headed into something other.

As You Read This, a Massive Plot to Destroy Your Retirement Has Already Begun...But there's still time to protect what you have and even increase your wealth as much as 2,000% by next year! Send for this FREE report today to learn how you can beat the U.S. government's 98-year-old plan to keep you from your retirement dreams. This offer is time-sensitive, so please read on now for complete details...

Take the current structure of the global financial order. We have a fiat currency system, set in motion by Nixon’s closing of the gold window in 1971. We have a top- dog world reserve currency, the U.S. dollar, with the euro and the yen vying for second place. And we have gold as the perennial shadow currency, cycling in and out of favor depending on how badly the paper authorities are screwing things up.

It feels like things have always been this way. But in reality, the paper currency regime we’re all used to is actually less than 40 years old... and it may well not see its 40th birthday.

Is 40 years a long time? In some senses sure; but in other ways not at all. By the time 2011 rolls in, we could be adjusting to a whole new currency regime... something like a “Bretton Woods 2.0” perhaps. Or an ad hoc version of the old gold standard, with a mix of other hard assets backing various notes. The characteristics of currencies and asset-backed ETFs (exchange traded funds) could begin to merge in some weird symbiosis. We just don’t know.

The point is, we are headed in the direction of something other -- and we can’t be sure what it is. It probably won’t be at all like what we know today. It will draw roots from some of the old ways, but only in bits and pieces. (We could go back to some modified form of gold standard, for example, but those expecting it to look the way it did for 19th- century Britain will be deeply disappointed.)

The same is true on the cultural and political side of things. The reign of the U.S. as a dominant superpower is passing into twilight. Does that mean there will automatically be a new superpower? Does it mean that one country, possibly China, will get to have its turn striding the new century like a colossus?

Not necessarily. To ask the question “Who will be the next superpower?” is to wrongfully assumethe old paradigm continues. We are accustomed to thinking in terms of superpowers... so in pondering the possibility of the U.S. falling back, we naturally wonder who will step up. But that’s just plug-and-play thinking in context of the old model.

If the paradigm is wholly different, there won’t necessarily be one 21st- century superpower at all. Maybe we enter a multi-polar world in which there are a handful of dominant players, but none who rule the roost. Maybe the old political strongholds break up and new ones form. (Goodbye, EU; hello, Asia cooperative?) Maybe we see the rise of city-states at the ultimate expense of nation states.

This reality of accelerated change, I think, is why things seem so strange and frightening. Almost all of us, me included, have been working with the old models up to this point. We’ve all been implicitly wondering, “OK, when are things going to go back to normal (or some semblance of normal ).”

But what if there simply is no normal anymore? When you look back at the sweeping cycles of history, you see stretched- out periods of calm and punctuated periods of turmoil. The long periods of calm were the times when people could settle into entrenched ways of thinking... when conventional wisdom put down deep roots, standard patterns seemed set in stone, and whispers of change were just “crazy talk.”

But those steady periods of calm never lasted forever. They always gave way to clash, upheaval, turmoil... to major paradigm shifts that led to something new, something other, than what came before.

I think that’s where we are now. And that’s why the crazy quotient just seems to be rising and rising rather than falling back in line. An old world order is passing away, and a new one is being born.

It’s our job to get ahead of this tidal wave as rapidly as possible... and figure out how to surf it.

Source: The Death and Rebirth of a New World Order

But for investors with "a clear head and a keen eye for opportunity" boldness can pay big dividends.

Taipan Daily editor Justice Litle says there are five proven strategies for building wealth... regardless of whether the bulls or the bears are in charge. 

Strategy #1: Superior Information

One of the oldest and most successful wealth-building strategies hinges on superior information -- learning something important before everyone else.

In today's hyper-connected and heavily regulated markets, it is much harder to come by superior information (without a keen willingness to break the law). But back in the 18th and 19th centuries, no one played the superior information game better than the Rothschilds.

The Rothschilds were known for maintaining an extensive (and secretive) information network, connected by financial hubs in five European cities: London, Paris, Vienna, Naples and Frankfurt. Nathan Rothschild, a bullion dealer on the London Stock Exchange, made legendary use of this information network during the Napoleonic wars. This network laid the foundations of the Rothschild fortune.

Richard Bookstaber recounts the backstory in his book, A Demon of Our Own Design:

By the end of the final hour of the battle of Waterloo on June 17, 1815, just 10 hours after first contact, a quarter of the Duke of Wellington's troops lay dead. The French losses numbered nearly 30,000. Within the space of half a day, Waterloo claimed more casualties than any other battle in history.

Given the communications limitations of the period, Great Britain could not immediately know about the carnage of Waterloo or the swift victory... Wellington's Envoy, Major Henry Percy, was dispatched to send the news of the victory to the War Office in London, but he and his horse were affected by the physical toll of the battle.

Even with his best efforts, he did not arrive until late on the night of June 21. Until that time, all of Britain waited in suspense -- all of Britain but one man, Nathan Rothschild.

Because the Rothschilds were known for having superior information -- and because he had made a show of stopping by the prime minister's house on the way -- all eyes were on Nathan Rothschild as he took up his usual post at the London Exchange.

England's victory was a hugely bullish event. Nathan Rothschild knew this full well. But rather than buy British consols (the main trading vehicle of the day), Nathan began to sell.

The heavy selling was a very loud -- and very false -- signal. Rothschild's bearish actions fairly shouted, “Britain has lost! Napoleon has won! Abandon all hope...”

Of course, it was the exact opposite that had actually happened. So once everyone had panicked out of their positions, and the market hit rock bottom, Nathan Rothschild turned around and began to buy. And the family made a spectacular killing. Nathan Rothschild’s masterstroke was twofold: He knew how to acquire superior information, and he knew precisely how to use it.

Strategy #2: By Hook or by Crook

For a thousand years -- from roughly 800 AD to 1800 AD -- the Rhine River in Europe served as a revenue source for the Holy Roman Emperor and his minions. Cargo ships were required to pay tolls at various points along the Rhine, providing a sort of interstate tax revenue on traded goods.

The Raubritters, or robber barons, were originally renegade feudal lords who levied unjust tolls on these passing ships (to the great annoyance of the emperor and the church). The term “robber baron” was later resurrected in 19th-century United States and applied to the financiers and captains of industry who had amassed huge sums by ruthless means.

Few of the latter-day robber barrons were as successful, or as hated, as Jay Gould.

In the aftermath of a failed gold corner, which in turn led to the Panic of 1869, Gould was dubbed “the Mephistopheles of Wall Street.” In addition to being a railroad titan, Gould was known for being one of the most manipulative, cunning and creative financiers in history. His strategic maneuvering included bribery, bankruptcies, lawsuits, insider trading, stock manipulation and much more.

One of Gould's favorite techniques was the “bear raid,” in which a company's shares would be hammered into the ground with strategic selling. This allowed Gould to then step in at rock-bottom prices (precisely when the selling onslaught stopped), wrest control from the board, and establish himself as chairman or president. Many of the maneuvers Gould pioneered would inspire the formation of the Securities and Exchange Commission (SEC), created some 40-odd years after his death.

In his book Dark Genius of Wall Street, Edward Renahan describes how it was done:

Jay Gould would transact virtually all of his Wall Street business for the balance of his short life through a series of special partnerships with a variety of brokerage firms. This device allowed him the luxury of trading anonymously whenever he cared to, and of trading on both sides of a speculation through different brokers. Eventually, Jay would spread his business over so large a network of Wall Street houses that he became something of a phantom; ever present, but frequently invisible and always inscrutable.

In light of his larger-than-life reputation as a heartless crook (still stoked by books and news articles to this day!), Gould never really received credit for the positive things he achieved. Dirty dealings aside, Gould's business acumen greatly aided the expansion and development of America's railroads, thus aiding the dramatic long-term expansion that followed.

Even Mephistopheles had some good in him it seems...

“Free Money” From the Government? Follow the detailed instructions outlined in this letter and you’ll learn how to add $4,570 to $11,450 to your bank account every month, courtesy of the U.S. government. Sound too good to be true?Read on and learn how you can boost your bank account every month …

Strategy #3: Looking to the Future

Claude Shannon, the brilliant scientist of Bell Labs fame, was perhaps best known as the father of “information theory”... an idea so big it is almost impossible to overstate its influence. Wikipedia captures some of the magnitude:

[Information Theory] is at the crossroads of mathematics, statistics, computer science, physics, neurobiology, and electrical engineering. Its impact has been crucial to success of the Voyager missions to deep space, the invention of the CD, the feasibility of mobile phones, the development of the Internet, the study of linguistics and of human perception, the understanding of black holes, and numerous other fields.

As if being the father of information theory were not enough, Shannon did still more. In the late 1930s -- a decade before revealing his famous theory -- Shannon hit on the idea of the digital computer, using Boolean algebra to prove that any problem could be solved with electrical circuits. This led to the 1s and 0s system of binary computing in use today.

Shannon's discoveries meshed together beautifully. The 0s and 1s made digital computing possible, while information theory enabled the means of sending digital information across great distances without garbling the transmission.

As far as digital technology goes, Claude Shannon basically cracked the philosopher's stone. In terms of brilliance and influence, many rank Shannon above Einstein for this reason (plus the follow-on impact of Shannon's ideas on the everyday world).

Just as a great scientist should be, Shannon was deeply playful. He loved to tinker with Erector Sets and odd materials, and was known to juggle in the halls of Bell Labs while riding around on a unicycle. (He invented one of the first computer chess programs and one of the first artificial intelligence devices, among other things.)

One of his quirkier inventions was a cigar-shaped box with nothing but a switch on one side. On flipping the switch, a mechanical hand would come out, flip the switch off, and retreat back into the box again.

We mention Shannon here, though, because he was a wildly successful investor. In his book Fortune's Formula, William Poundstone recounts Claude Shannon's view of markets. “You know the economists talk about the efficient market where everything is equalized out and nobody can make any money really, it's all luck and so on,” Shannon once said. “I don't believe that's true at all.” (Hear, hear! Neither do we.)

Given his track record, Shannon had good reason to doubt the academics. Poundstone notes that Shannon’s performance even stacked up against the Oracle of Omaha’s:

When Warren Buffett bought Berkshire Hathaway in 1965, it was trading at $18 a share. By 1995 each share was worth $24,000. Over thirty years, that represents a return of 27 percent. From the late 1950s through 1986, Shannon's return on his stock portfolio was about 28 percent.

As of record books in the early ‘80s (just before the great equity bull market took off), Claude Shannon had the majority of his investment account in one stock, Teledyne, that he had purchased for just $1 per share. In 1981, this $1 stock was worth $194.38 per share... a nearly 200-fold return.

Even more impressive from an ROI (Return on Investment) standpoint were Shannon's returns on Hewlett Packard (HPQ) ... a stock he had purchased at just 13 cents per share. The Shannons had a 63,000% return on Hewlett Packard as of 1981. Given Shannon's deep aversion to selling companies he believed in, that return no doubt grew even more impressive in the years that followed.

Claude Shannon not only invented the future, he and Betty (his wife) invested heavily in it.

But rather than take a cerebral, formula-laden approach, as one might expect, the brainy Shannons were the type of common-sense investors who would, say, sample a piece of Kentucky Fried Chicken before buying stock in the company. (They actually did that.) The Shannons looked to the future, bought companies they believed in... and held on tight.

As we’ve talked about in these pages before, Fed Chairman Ben Bernanke is a devoted student of the Great Depression. You could almost say that a study of the Great Depression - its causes, its quirks, and finding the means to ensure it never happens again - makes up the sum total of Bernanke’s lifework.

In 2002, Bernanke gave a speech titled, “Deflation: Making Sure ‘It’ Doesn’t Happen Here.” (You can read the full text here.)

This is where the, uh, taxing part comes in (underscore emphasis mine):

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Do you know what gentle Ben is really saying here? He is saying he can tax the dollars right out of your wallet if he chooses to. And if he has to, he will... and there isn’t a thing you or I can do about it (other than convert those dollars into something else before they get devalued).

Simply put, inflation is a form of hidden tax. Whenever the U.S. government prints dollars from thin air, it lessens the value of the dollars in your bank account.

This is no different than taking money from your bank account... except the process is much more stealthy. When the government practices taxation by inflation, many of us don’t even know we’ve been taxed. The value has been drained from the dollars, even if the dollars are still there.

If you’re still fuzzy on the concept of inflation as a hidden tax, ask yourself this: Why does the government bother with collecting taxes at all? In theory, Uncle Sam could just print up dollars for everything he needs.

If there were, say, $10 trillion in circulation, the government could just print up $10 trillion more for itself.... dropping the value of all existing dollars by 50%, but hey, so what.

If we did it this way, there wouldn’t have to be an IRS. We could abolish April 15th, stop worrying about tax lawyers... When Uncle Sam needs something, he just writes himself a check. So why not do it?

There are at least two reasons why direct “taxation by inflation” - a system where the government prints what it needs - does not happen.

For one, lobbyists and their masters love a complicated tax code. It allows them to exploit loopholes and siphon dough from the system in all kinds of ways.

But, more importantly, taxation via printing press would be too obvious. If we did it that way, most everyone would understand the concept of inflation as a hidden tax. There would be no room left for stealth. A lot more people would pay a lot more attention to those printing presses chugging away in the dead of night.

And that’s really one of the ironies of this whole bailout mess.

Now that the Fed and Treasury have been rebuffed in their efforts to go through the front door, they’re just going to concentrate even harder on saving the system via the back door... and that means big-time taxation without representation (i.e., taxation via the printing press).

No Votes on This One

There won’t be any votes on this. The printing has already begun, as The New York Times spelled out on Monday:

Without the broad bailout plan they invented and lobbied hard for, the two agencies are once again forced to careen from one desperate path to another, and to dig deep into their toolkits to rescue the global financial system. Even before the House stunned the world on Monday by rejecting the Bush administration’s bailout bill, the Fed was already resorting to the oldest action in its book: printing money.

In the past two weeks alone, the Fed has borrowed and lent a whopping $710 billion - more than the cost of the proposed bailout - in an effort to keep the system afloat. Some of that went to an “emergency lending program” for various banks; some of it went to “swap lines” with foreign central banks to help shore up European and Asian money markets; and some of it went to flailing institutions like AIG.

And the ironic thing is, the Fed is just getting started. If a follow-up bailout plan doesn’t pass - and many of those chanting “No! No!” are hoping it won’t - then Bernanke will just gear up the printing presses to an even further degree.

Source: Get Ready for Taxation Without Representation