The G-20 Pig-out And What It Means For Gold

Listening to President Barack Obama at the Group of 20 summit in Toronto, Canada, last week reminded me a bit of myself. As a person who has gained, lost and then gained back 100 pounds over the past decade, I have given much consideration to the very best time to start a diet. Without a doubt the answer is always: tomorrow.
                     
For nearly 18 months Obama has been on a spending orgy that would make the Roman Emperor Caligula blush. Yet Obama says that the United States and other nations need to cut spending; just not yet, damn it!

"Because durable growth must also include fiscal responsibility,” said Obama after the G-20, “we agreed to balance the need for continued growth in the short term and fiscal sustainability in the medium term." Then the President added: “We can’t all rush to the exits at the same time, so countries that have surpluses should think about how we can spur growth."

In other words, “Of course I will have that piece of cheesecake.”

This is especially true if you not only think the cheesecake isn’t bad for you, but if you have in fact convinced yourself that you just might die without it.

After offering up $7 trillion in spending to re-flate the economy following the Crash of ’08 you might think that the industrialized nations had already bitten off more than they could swallow. This is apparently not so. The G-20 summit concluded with Big Governments showing their still insatiable spending appetites.

As a native born son I can tell you that nobody knows how to borrow and spend better than Canadians. Prime Minister Stephen Harper proved it by urging advanced and developing countries set aside their differences and spend until it hurts.

Harper bragged after the summit ended that the world will adopt a “carefully calibrated” plan that rightly puts growth and jobs first and then tackles market-rattling deficits in a big way.

Harper advocated what he called the, “continued role for ongoing stimulus in the short term,” adding: “The G-20 still has a lot to do to fully entrench the global recovery.”

In their final communiqué the G-20 leaders said that “strengthening the recovery is the key.” Nevertheless the G-20 leaders agreed to cut deficits in half by 2013 and to put government debt loads on a stable or downward track by 2016.

It all sounds a bit like Kirstie Alley at Thanksgiving dinner.

World’s Biggest Loser
And in case you were wondering, nobody has a bigger appetite to spend than Obama. The President says that he fears an austerity program will choke off the global recovery, inviting another crisis. But even he concedes that ballooning American and European deficits will be pared back eventually (just one last box of chocolates… I swear it).

“We are moving in the same direction,” the President said as the summit came to a close. Exactly what direction that is remains unclear, but I for one think it might require an economic liposuction also known as deflation.

Of course that is all down the road. The good news for the U.S. is that the G-20’s six-year window leaves Obama the latitude to front-load stimulus and bring in austerity later. No doubt that will come sometime after the President’s bid for re-election.

Meanwhile, Washington is currently running a $1.4 trillion deficit, or a number which almost totals 11 percent of gross domestic product (GDP). Still the President has said he is determined to keep on spending until we see a permanent economic turnaround. When that will be is anyone’s guess, but one thing is clear: it won’t be easy to stabilize the debt load, much less set it on a downward path. For the 31 members of the Organization for Economic Cooperation and Development, unemployment now stands at 46 million, up some 50 percent since 2007.

Trillions have already been spent trying to resurrect the global economy and if the G-20 meeting is any indication, world governments are about to double-down on their bet. One has to wonder if even John Maynard Keynes—the father of deficit spending—would recognize what is going on now in his name. Perhaps Keynes would fear that runaway deficits threaten an even worse financial crisis.

Eventually deficits become counterproductive. They cause concern and eventually fear in the credit markets. This will invariably lead to skyrocketing interest rates and despite government’s best intentions, an economic collapse.

Germany—a country whose people are known for their boorish appetites—is urging caution when it comes to more government spending. At the G-20 summit German Chancellor Angela Merkel warned: “It’s not about growth at any price, it’s about sustainable growth.”

German Finance Minister Wolfgang Schaeuble added: “Nobody can seriously dispute that excessive public debts, not only in Europe, are one of the main causes of the crisis.”

And German Economy Minister Rainer Bruederle threw in his two euro-cents, saying that the U.S. and Europe need to “urgently” slash spending.

Fat chance I say. A doctor at an obese clinic is more likely to stop fat kids tumbling into an abandoned Twinkie truck than the German Bundestag will be at reining in the spending of other G-20 members.

In fact President Obama has staked his reputation and more importantly, his re-election, on more stimulus spending.

The Wall Street Journal writes that the Obama administration is insisting on new stimulus measures—”convincing evidence that they too recognize that the earlier measures failed.

“The administration’s stimulus program has failed. Growth is slow and unemployment remains high. The president, his friends and advisers talk endlessly about the circumstances they inherited as a way of avoiding responsibility for the 18 months for which they are responsible.”

The latest market evidence says that the WSJ is spot on. Consumer confidence is anything but confident. The Dow Industrials are on the edge of a cliff—perched below 10,000 points, while the S&P 500 is at its lowest point since the dark days of October 2009.

And don’t look for any help from our so-called friends at the Federal Reserve. The central bank has already cut the cost of money as close to zero as it can go. In fact, the yield on 10-year Treasury notes has fallen to less than 3 percent, one of the few times in our history.

All in all it’s enough to drive a fella to run out to Wendy’s and buy up Baconators.

But there is something out there that would soothe us a whole lot better than grease. I am talking about gold.

Bullion prices have risen almost 50 percent since I first recommended it to you on this site last summer—even in the wake of last week’s big correction that took place mostly on profit taking and some fears of deflation. Still, I am convinced that Washington’s next flood of money will push the Midas metal higher—much higher—up to $1,800 per ounce within the next year. That makes bullion at $1,200 a bargain.

Most importantly, gold looks to be the only dependable investment out there. Government policies will soon unleash a tidal wave of inflation which will rock the stock and bond markets as well as the banks themselves. The only profitable place, in fact the only sensible place to be fully invested right now is in gold.

I started out by talking about diets. I want to finish up by telling you something my dad said to me about gardening: “The best time to plant a tree was 20 years ago. The second best time is right now.”

Of course it would have been better to have bought more gold sooner. But let’s do the next best thing and buy some today.

Action To Take
Sell all Big Board stocks and all bond instruments this very day and use the funds to buy physical gold. I recommend American Gold Eagles, Canadian Maple Leafs and African Krugerrands. I prefer these because they are stamped in English, have their gold content stamped on them, come in convenient, well-known sizes (1-ounce, half-ounce, quarter-ounce and one-tenth-ounce) and sell at small premiums over the value of their gold content.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold

Paradise Lost: For The Gulf Coast And The United States

“So many and so various laws are giv’n;
So many laws argue so many sins.” –Paradise Lost, John Milton, 1667

In the epic poem Paradise Lost, Adam and Eve have taken the forbidden fruit and God is asking Adam why. As in Genesis, Adam is passing the buck, telling God that this woman whom He made gave him the fruit. Adam asks God how such evil could have ever been expected from one so lovely.

God tells Adam that the mistake is Adam’s not Eve’s; that Adam was to look out for Eve. God points out that just before Eve met the serpent Adam had told her that they should stick together because the Archangel Raphael had warned them of the serpent. Yet Adam let Eve stray away to meet her fate, the consequences of which changed the world.

And in the end God holds Adam accountable for the loss of paradise.

Obama’s Blame Game
Just as Adam did with Eve, President Barack Obama is shifting as much blame as he can onto BP.

According to The Daily Telegraph, BP CEO Tony Hayward’s grilling looked like a kangaroo court. He had to listen to a litany of accusations from United States lawmakers before he was able to say a single word in his own defense: “As far as the members were concerned, he was there to take the blame, whether or not there were mitigating circumstances, or companies other than BP should be sharing culpability. It was as though, in a criminal trial, the victim’s statements were being read out before the verdict had been passed, although that was a foregone conclusion—a resounding ‘guilty.’ A kangaroo court would have offered a fairer hearing.”

What The Daily Telegraph doesn’t understand is that the Congressional inquisition of BP and Big Oil was never intended to be fair. The goal was to keep the elected elites in office and increase their influence.

Just as Adam thought Eve was a perfect foil, so too, does President Obama think that of BP. And he is right. Last week White House spokesman Bill Burton mocked BP’s CEO and all-around English twit Hayward for attending a luxury yacht race on crystal waters while the Gulf of Mexico is turning into the Black Sea.

Burton opined that Hayward should take part in the cleanup operations in the Gulf of Mexico with the $400,000 yacht he co-owns.

"You know, look, if Tony Hayward wants to put a skimmer on that yacht and bring it down to the Gulf, we’d be happy to have his help," Burton said to a chorus of yuck-yucks in the White House briefing room.

It is almost beyond my comprehension that BP could have such bad PR, from Hayward saying he “wants his life back,” to BP Chairman Carl-Henric Svanberg calling the people of the Gulf Coast, “small people.” But it seems the people of the Gulf are small people, not just to BP but to Obama as well.

The same weekend that Hayward was skipping his yacht, Obama was walking the links. Even as tar balls washed up on Destin, Fort Walton and Panama City Beach, Obama was busy hitting golf balls.

Just as Adam was quick to condemn Eve, the Obama White House sees no hypocrisy in pointing out BP’s sins while denying their own.

Caught Between The Devil And The Deep Blue Sea
One estimate reported by CNN says the catastrophe of the Deepwater Horizon platform spill could cost just the Florida Gulf Coast alone 200,000 jobs before it is all over. Yet the cost on all of us is only starting to climb. Seafood is becoming more expensive and oil prices have resumed their climb towards $80 per barrel.

It is important to note that before the explosion of the Deepwater Horizon, the Gulf of Mexico was producing about 1.6 million barrels of oil per day. That is almost a third of domestic production.

If the Obama administration follows through with an overall ban on offshore drilling in the Gulf of Mexico, and further tightens the screws on exploration in Alaska, the consequences of this crisis will have a devastating affect on our oil needs.

Last week a New Orleans Federal judge lifted the six-month moratorium on deepwater drilling imposed by the President, saying: “The court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium.”

However Interior Secretary Kenneth Salazar responded that he will issue a new order on deepwater offshore oil drilling.

“We see clear evidence every day, as oil spills from BP’s well, of the need for a pause on deepwater drilling,” Salazar said. “Based on this ever-growing evidence, I will issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate, and within our authorities.”

Expect the White House to throw its full weight behind suspension of deep water drilling. And that is bad news for the nation which desperately needs oil from the Gulf of Mexico. Without it we will be left begging OPEC.

Does BO Have A Backdoor Deal With BP?
Meanwhile BP has kicked in $20 billion to pay for their mistake. That led Congressman Joe Barton (R-Texas) to apologize to BP saying that the $20 billion escrow fund was a “shakedown” by the White House.

I think Barton was not only ignorant of the political winds but was dead wrong. I believe that BP and the White House made a deal for the Federal government to funnel that money back to BP in the back door. One of just a handful of ways for this to work would be to give BP sweet deals on future leases.

In the end it will cost the taxpayers more than it will cost BP. Still, Obama probably considers the price tag a bargain if it can turn the nation Green.

“The motivation for allowing the well to blow and prolonging the crisis isn’t merely financial, it’s political too,” writes Prison Planet. “The motto for the people who pull the strings inside the Obama administration, people like Rahm Emanuel and Hillary Clinton is to ‘never let a good crisis go to waste’—and Obama himself has certainly taken that to heart over the course of the last two months.”

Prison Planet speculates that Obama and BP are joined at the hip: “The Obama administration has aggressively exploited the BP oil spill in the Gulf of Mexico to manufacture an artificial urgency in an effort to speed the passage of cap and trade in pursuit of a ‘green economy,’ an agenda firmly supported by the transnational oil corporations Obama is claiming to be reigning in. British Petroleum is one of the founding members of the cap and trade lobby, and has consistently lobbied for greenhouse gas restraints… and subsidies for oil pipelines, solar panels, natural gas and bio-fuels.”

Prison Planet concludes that BP stands to profit to the tune of billions.

Unfortunately what is good for BP is not good for the U.S. Some economic studies have indicated that going Green costs 2.2 jobs for every new job created.

In the Gulf, not only are shores being infected with a killer sludge, but now the Federal government is putting a moratorium on drilling. At stake are hundreds of thousands of jobs for people who have neither the time nor the money to go to yacht races or country clubs. It is their, and even our, paradise lost.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

BP: Blame Petroleum

Birds covered in oil make a great advertisement for renewable energy.”
The Financial Times, June 16, 2010.

As I watched President Barack Obama’s Oval Office speech last weekin which he offered up empty buckets of hopeI reflected on the Greens and the crisis their President is muddling through. Like a cop, there never seems to be a Green around when you need one.

Certainly the Save-The-Earth Squadron has been noticeably silent on the Gulf oil spill. In fact there hasn’t been a peep from the animal rights activists, even in the face of CNN’s continuous coverage of oil stricken pelicans.

According to Politico, “As the greatest environmental catastrophe in U.S. history has played out on Obama’s watch, the environmental movement has essentially given him a passall but refusing to unleash any vocal criticism against the president even as the public has grown more frustrated by Obama’s performance.”

In fact, environmental groups sacrificed some seals to run a full page ad in The Washington Post earlier this month. Incredibly, the ad does not fault Obama over the ecological catastrophe. In fact it thanked him for putting on hold an Alaska drilling project. “We deeply appreciate your decision…” the ad tells Obama.

It gets even more surreal.

“President Obama is the best environmental president we’ve had since Teddy Roosevelt,” Sierra Club chairman Carl Pope told the Bangor Daily News earlier this month. “He obviously did not take the crisis in the Minerals Management Service adequately seriously, that’s clear. But his agencies have done a phenomenally good job.”

Good job? Can you imagine if this disaster belonged to John McCain and Sarah Palin? The Greens would be marching on Washington with ropes in hand. So what is going on?

I think the answer is pretty easy: Greens are not outraged by what is happening in the Gulf of Mexico because it is a means to and end. The end being a President that wants to reshape the U.S. economy right down to the last solar panel.

“These guys have bet the farm on this administration,” said Ted Nordhaus, chairman of an environmental think-tank, the Breakthrough Institute. “There has been a real hesitancy to criticize this administration out of a sense that they’re kind of the only game in town. These guys are so beholden to this administration to move their agenda that I think they’re unwilling to criticize them.”

Even as Obama compares the oil spill to 9/11, the silence of the environmentalists is deafening. It is all part of the Green’s strategy to paint petroleum as the enemy. And Obama is marching lockstep with them.

“In the same way that our view of our vulnerabilities and our foreign policy was shaped profoundly by 9/11,” said the President, “I think this disaster is going to shape how we think about the environment and energy for many years to come.”

Obama is using the catastrophe to push forward climate and energy reform. These are not my conclusions. This is what the President has vowed: “(We will) move forward in a bold way in a direction that finally gives us the kind of future-oriented… visionary energy policy that we so vitally need and has been absent for so long.

“One of the biggest leadership challenges for me going forward is going to be to make sure that we draw the right lessons from this disaster,” the President said.

Obama said he did not know if America would shift from an oil-based economy in his lifetime, however he added that now was the time to “start making that transition.”

Obama’s comments and the Federal government’s need to look like it is doing something about the oil spill led the CEOs from Big Oil to Capitol Hill last week with promises to reform while pleading their case for petroleum.

The executives of the five biggest oil companies operating in the U.S. faced accusations that the Deep Horizon oil spill is somehow the fault of all of them. The bosses of BP, Shell, ExxonMobil, Chevron and ConocoPhillips delved into the safety of offshore oil exploration and drilling and even had to muster arguments as to why oil is a necessity to the American economy.

Woulda, Coulda, Shoulda
I can see why BP was grilled by Congress; but I am baffled why the other Big Four were called before the House Energy and Commerce subcommittee.

"This blowout happened at a BP well,” declared Congressman Henry Waxman (D-Calif.), “but, if it occurred at an ExxonMobil or Chevron well, they wouldn’t have been any more prepared to respond.”

Excuse me Mr. Waxman, but it didn’t occur at an ExxonMobil or a Chevron well. It happened at a BP well, and while we are on the subject let’s talk about why it happened. It happened because the available terra firma of the U.S. has been over drilled, over pumped and sucked dry.

Still Chairman Waxman and the rest of the committee have Big Oil back-peddling. ConocoPhillips CEO James Mulva looked like a kindergarten kid ready to cry as he explained that the Federal government’s energy policy must "recognize that we have a robust oil and gas industry that generates vital U.S. jobs, as well as substantial state and Federal revenue from tax and royalty payments."

Obama’s Testing The Waters
Common sense suggests that Mulva and the rest of the non-BP executives should have told Congress to shove-off, that they are in fact keeping America’s economy afloat and, oh by the way, providing you with transportation home. Big Oil isn’t doing this. Instead they are allowing themselves to become whipping boys for Must See Congressional TV. That tells me that something bigger is afoot. Exactly what that is is being revealed by Obama.

From the Oval Office Obama said: “The time to embrace a clean energy future is now.”

It just so happens, writes The Financial Times, that wind turbine makers and solar panel companies are ramping up their pressure on Congress and getting a sympathetic ear.

A member of the Clinton White House (Bill’s not Hillary’s) told The Times that renewable companies had to seize the moment quickly. "Most events do not engage people’s heartstrings and neurons together. This one does," he said, adding: "It cries out for the President to push the Senate to act this year."

First come the heartstrings then come the purse strings. By the time this thing finishes up the environmentalists will be tickled silly. For them the catastrophe in the Gulf of Mexico is a perfect storma stupendous way for the Greens to collect a lot of green from ordinary people like you and me.

Action To Take: The rant against Big Oil is mostly for show. However, BP (NYSE: BP, $29.58) is a mess and it is only going to get worse.

Chart

Fortunately we sold BP on May 5 and recommended you do the same in A Crude Coincidence—The Gulf Oil Spill Works Out Well For The Greens. BP traded that day at $52 per share. At this writing it is trading under $30 per share. If for some reason you still haven’t sold your shares, do so now. Obama and the Big Green Machine may bankrupt BP.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold

Between A Rock And A Slippery Place

It’s taken the biggest environmental crisis in American history to drive home a simple point—Washington’s energy policy has been reckless and could yet be the ruination of this once great United States.

The latest polls show that 38 percent of Americans approve of President Obama’s handling of the Gulf oil crisis. Which makes one wonder, what would it take for these people not to support the President?

Of course there is the latest success that appears to be working almost seamlessly above the Deep Horizon oil well 5,000 feet below the Gulf of Mexico. The containment dome is now trapping more than 15,000 barrels per day of spewing oil, up from just 6,000 barrels per day when it was first placed over the ruptured hole. That’s amazing; the Obama administration said that the ruptured well was only leaking 5,000 barrels per day to begin with!

The President has promised that the U.S. will bounce back from this cataclysm. “We will get through this crisis,” said the President, echoing the words of President Carter who declared that he would bring the American hostages home from Iran, even as the daily calendar on that catastrophe clicked forward endlessly. Will this one reach day 100, day 150, perhaps even day 200?

Better Than Ever
Last week Obama said that the people of the Gulf coast "are going to need help from the entire country," but that he is determined to see that the region will be restored to a condition better than it was before the BP well blew up.

Better? That is like saying Vietnam is better after being raked with Agent Orange?

It is estimated that BP is on the hook for $14 billion but that will never make things better. Not for them (The BP brand has been tarnished for decades); not for the wildlife and certainly not for the people along the coast that make their living from those waters. And that is if we don’t get another “incident.”

But wait! The Deepwater Horizon is not the only well spewing oil into the Gulf of Mexico. According to a Federal document a nearby drilling rig, the Ocean Saratoga, has been leaking since at least April 30. While much smaller than the BP spill it has nevertheless produced a 10-mile-long slick that can be seen on satellite images. Diamond Offshore, which owns the drilling rig, said that they could not comment on the ongoing spill but it appears as if a boat is putting dispersants on the slick.

It all adds up to one thing—even after BP antes up billions you can bet the Federal government is going to be on the hook for a substantial part of the tab. The President promises that he is going to squeeze every penny for the cost of this problem out of BP but Obama has a pretty poor record when it comes to holding companies accountable for their mistakes. Just ask bank executives who threw the economy into a tailspin then collected billions in bailouts and then gave themselves millions in bonuses.

Regardless of the cost, the Gulf of Mexico is not the real problem. The 2 million barrels of crude oil that will have spilled into the Gulf of Mexico is a symptom of a much bigger problem; one that is getting progressively worse. I am talking about America’s unrequited addiction to oil which has been drilled dry within our borders.

The U.S. is now pumping less than 5 million barrels of oil per day. We pumped almost twice that much oil 30 years ago during the first Iranian crisis.

That leaves the U.S. dependent on harvesting petroleum wherever it can, including 5,000 feet deep in the Gulf of Mexico. It also leaves the U.S. importing more than two out of every three barrels we burn, much of that from countries that hate us.

Oil discoveries have been declining since 1964

As the graph above shows, the discovery rate for oil in the United States has fallen off a cliff. The U.S. is tapped out and drilled out. You have to go back to the 1920s to find a decade where less oil was discovered in the U.S. than will be discovered this decade. In case you are wondering, in 1920 there were 7.5 million automobiles in the U.S. Today there are about 250 million registered vehicles on the road.

Driven To Disaster
“Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries,” wrote The New York Times.

The Times pointed out that as politicians heatedly debate opening new regions to drilling, corralling energy speculators, or starting an Apollo-like effort to find renewable energy supplies, analysts say the real source of the problem is closer to home. In fact, it’s parked in our driveways.

A whopping 70 percent of the 21 million barrels of oil the U.S. consumes every day goes for transportation, with the bulk of that burned by individual drivers. Americans’ daily use of oil is nearly twice the combined consumption of the Chinese and Indians.

Our nation’s dependence on imported oil has only kept growing in recent years, undermining the trade balance and creating a perfect storm for environmental disasters like the one happening in the Gulf of Mexico.

From Gaza To The Gulf Of Mexico
There has been no summer lull for the Obama administration. Consider:

  • June is turning out to be one of the bloodiest months in the Afghan war.
  • More than seven years after the U.S.-led invasion of the country in March 2003, bombings and shootings still remain common across Iraq.
  • Much of the world is outraged about events in Gaza, which may or may not have been provoked by America’s largest aircraft carrier also known as Israel.

The common denominator between these events and the Gulf spill is oil. If not for oil and America’s strategic need to secure the world’s last rich pools—most of which lay under Arab lands—Washington could pull its armies out of the Middle East, be an honest broker of peace between Israel and her Arab neighbors. That would not only save American lives but also hundreds of billions of dollars that are being spent on a foreign occupation. It would also restore the reputation of the U.S. which would help usher in a new age of prosperity.

But don’t expect peace to break out anytime soon. The President has a lot to say about the need to go Green, but there are two realities:

  • The technologies needed to replace oil are not here nor are they on the horizon.
  • The only Green that this President seems to understand is the kind of green that BP gave him when he was running for office. After all Obama was the largest recipient of BP campaign contributions.

It seems that if you give the President enough mulla, he is willing to let all of us deal with the Mullahs.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

It’s The Greens That Sowed The Seeds Of The Gulf Oil Disaster

To the Greens I have six words regarding the catastrophe in the Gulf of Mexico: Your President, your policies, your fault.

After all Barack Obama was the progressive Green candidate, a thinker who could steer the course in the 21st Century. Oprah anointed then-Senator Obama as "The Chosen One". To Oprah and a great majority of Liberals, Obama was the anti-Dubya; a larger than life leader with savior qualities that would lead us to peace and overcome all obstacles.

So far, so bad. America’s endgame for Iraq is in question because of increasing levels of Shiite-Sunni violence. Afghanistan looks more untenable all the time. The recovery is sluggish and healthcare has been rammed down the throats of the American people. Now we face an enormous crisis in the Gulf of Mexico. It’s been almost two months since an explosion sent crude pumping into the Gulf and the Obama administration has shown an astonishing lack of leadership.

David Gergen, a centrist political commentator and advisor to four Presidents, has pointed out a basic lack of leadership from the Obama administration: “Ultimately it is not the responsibility of BP or any other company to protect American interests but the responsibility of the Federal government.”

While on Anderson Cooper 360° on CNN, Gergen added: “If our government had fought World War II like the way we’re fighting the oil spill, there’s a good chance many of us would be speaking German today.”

Gergen is hardly alone in the criticism. Former Secretary of State Colin Powell, the general who endorsed Obama in 2008, says the President has been far too slow in asserting leadership over the Gulf spill and the time has come for a "comprehensive and total attack" on the problem.

So here it is, a news flash to Oprah and the Liberals: When it comes to leadership, Barack Obama is a lot more Herbert Hoover than he is Harry Truman, regardless of how many “the buck stops here” speeches Obama chooses to give. Little wonder that a recent USA Today/Gallup survey showed that six out of 10 Americans believe the Federal government is doing a “poor” or “very poor” job handling the spill.

The President bristles at criticism that the Gulf crisis is his Katrina. Even in the face of the failure of BP to stem the spill with its top-kill option, Obama was defending the Federal government’s record and promised aggressive action to ensure future drilling is done safely. He has extended a moratorium on new exploration drilling in the Gulf and announced that 33 current projects in the deep water will be suspended along with two permits for exploration wells in the Beaufort Sea off Alaska.

“As we continue our response effort, we’re also moving quickly on steps to ensure that a catastrophe like this never happens again,” he said. “I’ve said before that producing oil here in America is an essential part of our overall energy strategy. But all drilling must be safe.”

Respectfully Mr. President, can we not worry about future leaks until we fix this one? After all, the BP gusher has well surpassed the 1989 Exxon spill in Alaska as the largest ever in the United States. Crude has continued to spew for 52 days after it began with a rig explosion that killed 11 people. Every effort to stop the spill has so far proved unsuccessful.

When I was a boy on the farm we didn’t worry about the horses that might get out; we scurried about to catch the horse that had gotten out. And right now there is a big and nasty animal rolling about the Gulf presenting a clear and present danger to the United States. Meanwhile we are getting the Green lecture—how to stop future oil spills. Which brings me to my second news flash—it is Green policies that got us into this mess in the first place.

The Greens Made Us Drill So Deep
Last January I wrote about the problems and costs of drilling for oil at such extraordinary depths as those being worked off the coast of Louisiana. It was called The Deep Truth About Oil and the Gulf of Mexico.

In that column I said: “Chevron has spent 10 years and a whopping $2.7 billion for this project. This is the cost of running a drill and casing more than 30,000 feet through earth and ocean, the same distance that an airliner flies above the earth. Chevron will spend billions more and in the end, even with all the high-tech in the world, there are no guarantees that its deep-water experiment will hit pay-dirt. In fact there is less than a 50/50 chance that Chevron’s latest deep-sea adventure will yield anything. Still Chevron and their brethren don’t have a choice.

“The Wall Street Journal sums up the situation: ‘Big easily tapped oil fields close to shore have become off-limits.’”

Fast forward a few months and we saw the real danger in not drilling in shallow waters and places like the Arctic National Wildlife Refuge (ANWR). We see what happens when Big Oil is forced to drill in 5,000 feet or more of seawater; depths at which accidents can’t be easily repaired.

I’ve been talking to my friends in the Alberta oil patch about this for weeks. But the problem didn’t see the light of day until the May 29 episode of Meet the Press. There Host David Gregory asked White House Energy Adviser Carol Browner if in response to the Gulf Coast oil spill, America should start drilling in ANWR.

Gregory asked: "Is the problem that we’re drilling in water that’s just too deep?" 

Gregory continued: "Should you (the White House) even rethink your own approach to the environment to say… maybe in the Arctic Wildlife Reserve; we ought to be drilling there… we ought to be going into shallower waters so that this can be done more safely?"

Incredibly Gregory wasn’t given an answer. But even I know this simple truth—that we need to be drilling in shallow water and places like ANWR. Places where accidents can be corrected.

Don’t expect any leadership on this from the President even though his decision to suspend deepwater drilling off the U.S. coast will have consequences.

“An extended moratorium on safely producing our oil and natural gas resources from the Gulf of Mexico would create a moratorium on economic growth and job creation,” said Jack Gerard, chief executive of the American petroleum Institute.

It’s worth noting that the Gulf of Mexico currently produces about 1.6 million barrels of oil per day—an amount larger than the output of Canada’s oil sands. It was expected to grow to 1.9 million barrels by 2025. But the jury is out on this until Obama—"The Chosen One"—chooses leadership over politics and stops this catastrophe.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

North Korea—Brace For Another Phony War

“What difference does it make if it’s true? If it’s a story and it breaks, they’re gonna run with it.”Wag the Dog

Upset by the Energizer Oil Spill, the healthcare bill or our economic ills? Don’t worry; you might not have to fret much longer. Not because anybody is going to fix these problems. Rather because President Barack Obama might be seeding a much bigger problem.

Last week Obama announced United States troops stationed in the Korean Peninsula were going to a war footing. The move came as South Korea announced it was cutting off all trade with the North in retaliation for what it claims is the deliberate sinking of its warship the Cheonan in March. The government in Seoul vowed “immediate” retaliation if North Korea attempted further provocations.

According to White House spokesman Robert Gibbs, “U.S. support for South Korea’s defense is unequivocal, and the President has directed his military commanders to coordinate closely with their [South Korean] counterparts to ensure readiness and to deter future aggression.”

It has even been “leaked” that because of the urgency of the “crisis”, the U.S. has deployed its most advanced air-superiority fighter, the Raptor F-22, to the Korean Peninsula.

Excuse this writer for thinking it all sounds a bit too much like the movie Wag the Dog. In that film a spin doctor sees his President’s polls falling so he employs a Hollywood director to construct a fake war with Albania. It is all an attempt to distract the media and the people.

Of course what is happening in Korea may have nothing to do with growing dissatisfaction over Obama’s handling of the oil spill, the recent 10 percent decline in the Dow Jones Industrial Average or the European debt crisis. North Korea may in fact be a clear and present danger to our national security. But we should consider that the “crisis” with North Korea is a diversion from growing success for the Tea Party and growing criticism of the President. In fact there is precedent.

Gulf Of Tonkin
Pyongyang has denied it torpedoed the Cheonan near the Korean maritime border killing 46 sailors. And it has accused South Korea of trespassing in its waters, saying that the South has sent “dozens of warships” into its waters these past few weeks in "a deliberate provocation aimed to spark off another military conflict."

I am not stupid enough to believe what comes from this reckless government and its midget dictator Kim Jong-il. Then again I am not stupid enough to believe everything the Federal government tells me either. If you are my age or older you might remember President Johnson and the Gulf of Tonkin.

That military crisis was ushered to an unsuspecting public on Aug. 5, 1964, with a headline in The Washington Post that read: “American Planes Hit North Vietnam After Second Attack on Our Destroyers; Move Taken to Halt New Aggression.” That same day The New York Times reported: “President Johnson has ordered retaliatory action against gunboats and ‘certain supporting facilities in North Vietnam’ after renewed attacks against American destroyers in the Gulf of Tonkin.”

According to Fairness and Accuracy in Reporting, There never was a “second attack” by North Vietnam. No “renewed attacks against American destroyers.” Instead these official lies told from the President on down took hold and opened the floodgates for the bloody and useless Vietnam war; a conflict that originally had a huge backing by the American public and swept LBJ into office with the greatest percentage of the total popular vote (61 percent) ever attained by a Presidential candidate.

The same LBJ who just three months before the election had ordered U.S. bombers to "retaliate" for a North Vietnamese torpedo attack; and attack that never happened. In fact a year later LBJ joked: “For all I know, our Navy was shooting at whales out there.” All very funny except for the terrible cost in blood and money that the Vietnam conflict inflicted. You notice I don’t use the word “war” because the U.S.  didn’t declare war, not then and not in the nearly half century since.

Instead Congress passed the Southeast Asia Resolution (the Gulf of Tonkin Resolution) backing the President in taking “all necessary measures to repel any armed attack against the forces of the United States and to prevent further aggression.” On Aug. 10—less than a week after the fabricated fight—Johnson signed the resolution. There were only two dissenting votes in the Senate and not one in the House.

The Uncensored War, a book by Daniel Hallin, indicts the press over Vietnam.* Hallin points out that the media had “a great deal of information available which contradicted the official account of Tonkin Gulf events; it simply wasn’t used.” Just the day before the first incident Hanoi had protested the attacks on its territory by Laotian aircraft and South Vietnamese gunboats.

What’s more, wrote Hallin, “It was generally known that ‘covert’ operations against North Vietnam, carried out by South Vietnamese forces with U.S. support and direction, had been going on for some time.”

Ancient history you say? Not if you count Saddam Hussein and those weapons of mass destruction that never did turn up. That fairy tale gave us $1 trillion conflict with Iraq and a resounding re-election of another incumbent President.

The bottom line is I won’t be surprised if this fearless President stirs the nation into action and gets many of us ready at the ramparts in the face of a foreign horde. It is what General Douglas MacArthur warned us of.

“Talk of imminent threat to our national security through the application of external force is pure nonsense,” said the General in 1951 adding: “Our threat is from the insidious forces working from within which have already so drastically altered the character of our free institutions—those institutions we proudly called the American way of life.”

MacArthur knew what it took to wage and win a real war. He also learned the hard way the politics and economics involved in a modern “conflict”… the kind of conflicts the U.S. invariably falls into when the nation’s economic or political woes grow out of control.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

*Footnote: The Uncensored War: The Media and Vietnam, Daniel C. Hallin, New York, Oxford University Press, 1986.

Obama’s Big Fat Greek Bailout

“It was built against the will of the immortal gods, and so it did not last for long.” Homer, The Iliad

The youngsters that run Wall Street know a lot more about Homer Simpson than they do the Greek poet. But in the wake of riots in Greece and stock market gyrations at home, we may all soon be in for a full fledged tragedy of epic proportions.

The $1 trillion bailout by the International Monetary Fund (IMF) and Europe to stave off a Greek debt default is just the latest attempt by Big Government to defeat deflation. But the soaring price of gold shows that this latest rescue is mired with problems.

Consider the fact that even the strongest of the rescuers are bleeding debt. Germany, once the hero of fiscal policy in Europe, has seen government debt rise to a whopping 80 percent of its gross domestic product (GDP). Germany is far stronger than the other weak sisters that make up the euro—Spain, Portugal and Italy.

It looks as if the $1 trillion bailout to Greece may not have stabilized global stock markets and it certainly has not arrested the decline of the euro. Last week The New York Times reported that, “Fear in the financial markets is building again, this time over worries that the Continent’s biggest banks face strains that will hobble European economies.”

Greece is the latest domino in a continuing debt crisis that began with the implosion of Lehman Brothers in 2008. Greece is just another link in a very weak chain. In fact, the IMF warns that “high levels of public indebtedness could weigh on economic growth for years.”

Borrowing Against All Of Our Tomorrows
The world’s budget deficit as a percentage of GDP now stands at 6 percent, up from less than 1 percent before the financial crisis. If public debt is not lowered back to pre-crisis levels, says the IMF, economic growth could decline by half a percentage point annually. That is bad for the world and bad for the United States which is just barely clinging to an economic recovery; a recovery built on cheap money. But how long money will stay cheap is anyone’s guess.

In the not too distant future the U.S. dollar, once the Zeus of all currencies, may topple from the mountain top. Greece has a budget deficit of 13.6 percent of its GDP. Meanwhile the U.S. has a budget deficit of 9.3 percent, and that’s only for this year. In the coming years America’s deficit could easily exceed Greece’s number.

Furthermore, Greece’s national debt now totals 115 percent of its GDP. U.S. national debt totals “only” 85 percent of GDP, but it is expected to reach 140 percent of GDP in the next two decades.

But what the Mexican debt crisis taught us in the 1980s and what Greece is teaching us now is that the bond markets will never allow the U.S. to reach its debt targets.

According to Dr. Edward Yardeni, president of Yardeni Research, "There’s a tremendous clash between the bond vigilantes on one side and reckless governments on the other. The bond vigilantes are trying to establish some fiscal and monetary law and order."

You might recall Yardeni from the 1980s when he correctly predicted the Latin debt bomb, the explosion which helped trigger the 1987 stock market crash. Three decades ago Yardeni pointed out that, "If the fiscal and monetary authorities won’t regulate the economy, the bond investor will." Like Homer’s Cassandra, Yardeni has a talent for correctly predicting tragedies but is cursed because no one will believe him.

Just how bad is this crisis which was spawned in Greece, the cradle of learning and democracy? According to Citigroup’s top economist, Willem Buiter, with the exception of wartime, “the public finances in the majority of advanced industrial countries are in a worse state today than at any time since the industrial revolution. Restoring fiscal balance will be a drag on growth for years to come.”

Still, the Obama administration and the Federal Reserve continue to believe they can engineer yet another bailout. In fact, the Fed has opened up new lines of credit to the European Central Bank as part of the European rescue package.

“We didn’t do so out of any special love for Europe,” said Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis. “We’re American policy makers, and we make decisions to keep the American economy strong.” Yet the Fed president admits that the liquidity problems abroad could soon haunt U.S. financial markets and the recovery itself.

The Federal Reserve and Federal government have already borrowed trillions of dollars to derail the wave of deflation that began in early 2008. To do that and to spark a recovery the Fed pushed short-term interest rates towards zero, the lowest levels America has seen since the 1930s. In other words the U.S. government has shot its bolt. The U.S. simply can’t hit the “re-flate” button again without a major outcry from the bond market.

Gold On Record Run
The knee-jerk reaction from the euro crisis has been for money to go into U.S. Treasuries. But the chart below shows the monumental increase in 10-year Treasury bond yields since the beginning of 2009. Investors have demanded a higher return from Uncle Sam as the Obama administration and the Federal Reserve have been hell-bent on bailing out the U.S. economy with trillions of new dollars.

10-Year Treasury Yield

U.S. loans to buoy European central banks will only accelerate the bond markets woes, and with rising interest rates on the horizon, we can anticipate a bear market. The computer-glitch stock market meltdown that happened earlier this month portends to an American tragedy.

With the euro at four-year lows one might be expecting the greenback to soar. Instead there has been only modest strength in the dollar and record highs for gold. At this writing London gold is trading just under $1,200 per ounce. In November 2008, London gold was $713.50, so the Midas metal has had quite a run since then. In fact gold was $810 when I first recommended it to you last August. Still I believe gold is headed much higher.

Action To Take
Expect short-term strength in the U.S. Treasury market as we go into summer. If you own bonds, use this rally to liquidate them. Higher interest rates are looming and so is a bond market meltdown. Meanwhile, continue to accumulate physical gold. I think $1,500 gold is a realistic target by the end of this year.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

P.S.—I thought the quote at the top by Homer is applicable to the U.S. dollar. I am interested to see if you agree.
—JM

Supreme Injustice

“Presidents come and go, but the Supreme Court goes on forever.” President William Howard Taft

President Barack Obama is covering all the bases when it comes to forming his Supreme Court, an institution which will leave his stamp on America long after he has left office.

Gay rights activists are quick to laud the President’s latest pick for the high court, Solicitor General Elena Kagan. The nomination of Kagan comes one year after Obama’s first selection for the court, Sonia Maria Sotomayor. Latinos loudly applauded that nomination. Gays are downright giddy over Obama’s decision to replace John Paul Stevens with Kagan.

Kevin Cathcart, Lambda Legal Defense and Education Fund’s executive director, believes Kagan holds “a strong position” in opposing the military’s ban on gays.

During her confirmation as solicitor general last year it was revealed that Kagen had tried to bar military recruiters from the campus of Harvard Law School while she was dean. Even though Kagan was part of the Clinton administration she was never a fan of Clinton’s policy of “Don’t ask, don’t tell.” It seems that this academic nominee (she has never been a judge and she has only practiced law for two years) believes that being openly gay is good, even if it impedes national security as many in the armed forces believe.

Kagan told the Judiciary Committee last year that in her view, “the exclusion of individuals from basic economic, civic, and political opportunities of our society on the basis of race, nationality, sex, religion, and sexual orientation (is injust).”

With control of 59 votes in the Senate, Democrats should be able to win confirmation. However, if all 41 Republicans vote together, they could block a vote with a filibuster.

Joe Solmonese, Human Rights Campaign president, said Kagan’s selection fulfills Obama’s promise to promote “diversity” on the court. There can be little doubt of that. Last week The Washington Post asked in a headline: “Can men still be appointed to the Supreme Court?”

If we assume that the pool of possible nominations includes equal numbers of equally qualified men and women, then the nomination of two women consecutively has a one in four chance of occurring. But the kicker for Kagan getting nominated is her close personal relationship with the President. In fact Obama introduced the former Harvard Law School dean as "my friend."

"Elena is widely regarded as one of the nation’s foremost legal minds,” Obama said. “She’s an acclaimed legal scholar with a rich understanding of Constitutional law. She is a former White House aide, with a life-long commitment to public service and a firm grasp of the nexus and boundaries between our three branches of government."

I don’t know what having a firm grasp on the nexus and boundaries means, but it sounds like something that would be bandied about at a Mensa meeting. And while I will never be invited to that group of geniuses, I am smart enough to understand that when it comes to consolidating power, Obama resembles leaders from Caesar Chavez to Fidel Castro; friends come first.

The never-married 50-year-old Kagan is not only a close friend to the President but also shares many of his ideals. Kagan clerked for one of the Supreme Court’s staunchest liberals, Thurgood Marshall, and was a research assistant for one of the greatest legal defenders of gay civil rights, Laurence Tribe. She was also a staff member on the Dukakis for President Campaign in 1988. The defeat of Dukakis set back gay rights for 20 years, but with Obama and now Kagan, another minority is set to take swift strides.

As MSNBC pointed out, “Kagan has the chance to extend Obama’s legacy for a generation.” And every bit as alarming as that is the likelihood that Kagan is a supporter of even greater executive powers.

The Court’s Lurch To The Left
In 1952 Supreme Court clerk and later Supreme Court Chief Justice William Rehnquist wrote that the Court should not strike down Jim Crow laws. Rehnquist also said that Brown v. Board of Education should not find that minorities do not have a constitutional right to the same treatment as the majority.

Rehnquist wrote: "To the argument made by Thurgood Marshall [in Brown v. Board of Education] that a majority may not deprive a minority of its Constitutional right, the answer must be made that while this is sound in theory, in the long run it is the majority who will determine what the Constitutional rights of the minority are."

I wonder if it was not Rehnquist’s ideas that were sound only in theory. It seems less and less that it is the majority deciding its future. Consider the immigration law passed in Arizona, SB 1070. A CBS poll showed that 60 percent of American’s don’t think the new law—which is bound to include profiling—is too extreme.

Yet our President has announced opposition. Obama held a reception at the White House on May 5—Cinco de Mayo Day—where he denounced Arizona’s new immigration law. Obama announced that he has instructed his administration, "To closely monitor the new law in Arizona, [and] to examine the civil rights and other implications that it may have."

Furthermore, U.S. Attorney General Eric Holder confirmed that the Justice Department is deliberating whether to file suit against the Arizona law, either on the grounds that it violates the Supremacy Clause or Federal civil rights laws. But during a Congressional hearing May 13, Holder admitted he had not even read the law.

It doesn’t look like Arizona will back down and, in the wake of the past 17 months in office, it appears doubtful that Obama will either.

Congressman Ted Poe (R-Texas) accuses the Obama administration of doing more to secure the borders of foreign countries than its own and called for immediate action to reverse that.

“We want the National Guard to be armed and defend themselves if necessary and to assist the border patrol and local law enforcement," said Poe.

Republican Gov. Jan Brewer—who signed the bill—has said Arizona must act because Washington had failed to stop the flow of illegal immigrants and drugs from Mexico. Arizona is home to nearly half a million illegal immigrants and is the nation’s busiest gateway for illegals and drugs.

Yet Congressman Raul Grijalva (D-Ariz.) said that Republicans are using the issue to divide the country. "We’re here to say it’s time to deal with comprehensive reform realistically and begin the process of healing this country.”

For things to work out for Grijalva, the city of Phoenix may have to live up to its name and raise the dead. According to Brian Ross of ABC News, “Phoenix, Arizona has become the kidnapping capital of America, with more incidents than any other city in the world outside Mexico City, and over 370 cases last year alone.”

In the end expect this dispute to land on the steps of the Supreme Court; a once non-partisan institution that Obama is trying to stack with minority rights activists such as Sotomayor and Kagan. While Latinos and gays may rest easy because of Obama’s choices for the Supreme Court, Americans living in Phoenix will not. That is bad news for the majority of Americans whose families built this great country.

Yours in good times and bad,

John Myers
Myers’ Energy and Gold Report

Obama’s New Deal

"Now, what we’re doing, I want to be clear, we’re not trying to push financial reform because we begrudge success that’s fairly earned. I mean, I do think at a certain point you’ve made enough money." President Barack Obama, April 28, 2010, (emphasis added).

President Barack Obama went to Wall Street last month to champion his cause for financial regulation. Fresh from his healthcare victory the President seems itching for another fight.

Meanwhile the Securities and Exchange Commission (SEC) announced fraud charges against Goldman Sachs, arguing that the firm had committed fraud in structuring and selling its debt obligations. This has Congressman Darrell Issa (R-Calif.) raising troubling questions.

Issa has asked the inspector general of the SEC to investigate the timing of the announcement. He believes the Obama Administration is going after Goldman Sachs just as Democrats are pushing for passage of financial reform legislation in the Senate.

According to Issa, “[This has] fueled suspicion that the Commission … may have engaged in unauthorized disclosure or discussion of Commission proceedings in order to affect the debate over financial regulatory legislation currently pending.”

Last week Goldman Sachs leaked a story that it doesn’t want to engage in a legal battle with the SEC. The Wall Street Journal quoted one senior executive at the firm as saying "We can’t be going to war with the SEC." Goldman understands it needs to choose its battles.

I should have done that better when I took up boxing at the Lilac City Boxing Club. One day I was on a roll, landing a combination on my sparring partner, a man who had once fought Frank Bruno for the World Boxing Association (WBA) heavyweight title. After connecting with a final punch I stepped back. The grizzled old fighter shrugged his hulking shoulders and then gave me a million dollar grin.

“My turn,” said Harvey Steichen.

A few years later I started working for what was then Prudential Securities in Spokane, Wash. I quickly learned that everyone associated with Wall Street was interested in two things—making money and keeping regulators at bay.

One day the Men in Black arrived. As two SEC field agents marched into our offices, one of the old timers whispered to me, “Here comes the Gestapo.” A few weeks later, two up-and-coming brokers were summarily dismissed. I never knew their crime but I understood they were fired because of a judgment by the Federal government. The rumor was they were charged with insider trading.

Don’t get me wrong. I hate Wall Street. After six months at the brokerage company I decided I either had to jump out of my eighth story office or quit.

I think many of you probably feel the same kind of disdain for high finance, especially after learning that big banks deceived their clients into buying risky mortgage investments while they themselves ran side bets that the investments would go bust.

When the house of cards collapsed two years ago it was Washington’s argument that major investment houses simply had to be bailed out. In that aftermath, scores of executives tucked away multi-million dollar bonuses, much of it courtesy of Joe and Jill Taxpayer.

But now the Obama administration is demanding its pound of flesh. According to the The Independent, “This [the fight with Goldman Sachs[ has become the greatest battle between the American government and a private firm since President Franklin Roosevelt took on the ‘House of Morgan’ in the 1930s.”

Illustration of Barack Obama taking notes from Franklin D. RooseveltObama has stylized himself as a New Deal President the likes of FDR. A couple of months ago Obama denounced “fat-cat bankers” for rewarding themselves bonuses after being saved by government bailouts. “Shameful,” he said. In fact, this President sounds much like FDR, who in 1936 denounced Wall Street for its “financial monopoly, speculation, reckless banking,” and who fueled his fight by saying: “I welcome their hatred.”

I hate Wall Street, but I hate big government even more. The last thing America needs is another FDR. The Billings Gazette recently summed up that Presidency: “FDR closed all the banks, removed the gold standard for the dollar, created innumerable government agencies, established the Tennessee Valley Authority, instituted a minimum wage for workers, encouraged unionization of industry, created the Social Security system, initiated public housing programs and allowed the national debt to soar into the billions. In addition, he attempted to pack the Supreme Court.”

Under Obama’s New Deal the United States has reversed the course set by Ronald Reagan, a man who brought a tidal wave of deregulation and with it, unprecedented economic prosperity. Under Obama’s command the U.S. is veering hard to the Left, a destination that will allow less freedom while creating bigger government. And oh yes, he is also packing the Supreme Court.

“The nanny state is smothering us all,” wrote the Ukiah Daily Journal. “The economic financial crisis which is upon us is being deliberately made worse (or at least being deliberately caused to continue) in order to be used as one excuse to turn the U.S. into a socialist state. If you don’t believe this, stay tuned, because you have been overwhelmed by the lies and myths.”

If you’re like me you’re probably feeling staggered by the Obama onslaught. I urge you to hang tough and stay in the fight. In the words of Lou Holtz, the former football coach at Notre Dame, “We have to fight for our freedom.”

Action To Take
There is a tidal wave of regulation coming down the pike and not just for the investment banks. Big oil is also going to get clobbered in the wake of the Gulf Coast disaster. And the Federal government won’t stop there. I expect that Washington will unroll miles of red tape on publicly traded companies. The result will raise the cost of doing business. That’s a profit killer, something that Wall Street hasn’t yet awakened to. Tighter regulations, growing inflation and rising interest rates will unleash a raging bear market. Therefore, I urge you to stay liquid with cash and/or short-term Treasury bills, physical precious metals and a sprinkling of gold and energy stocks.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

A Crude Coincidence—The Gulf Oil Spill Works Out Well For The Greens

"The end justifies the means.”Machiavelli
 
Fact: Deep water oil platforms don’t just blow up. As the centerpieces of projects that cost billions of dollars, they are designed not to.

Fact: Just before 10 a.m. on April 20 a Transocean rig called the Deepwater Horizon 40 miles south of Venice, La., exploded and caught fire as it was working a well for BP.

Fact: Two weeks later as much as 300,000 barrels of crude oil have spread into the Gulf of Mexico, the bulk of it hitting the shores of Louisiana. More than 2 million barrels could spill out before the well is finally capped making this disaster worse than the Exxon Valdez catastrophe which spilled 400,000 barrels of oil into Alaska’s Prince William Sound in 1989.

Fact: This giant gulf oil spill happened less than three weeks after President Barack Obama announced he would allow offshore drilling.

Fact: Few in the mainstream media or in the federal government are putting a spotlight on to what caused the explosion that killed 11 men. Rather, their focus has been on what it will do to the environment.

Fact: The Greens have all the ammunition they need to permanently suspend future offshore oil production as well as drilling in environmentally sensitive areas, such as the oil-rich Arctic National Wildlife Refuge.

On April 30 Obama suspended plans to expand offshore oil drilling. That same day, during the PBS talk show, The McLaughlin Group, Eleanor Clift made this prediction: “The catastrophic oil spill in the gulf will silence Sarah Palin’s, ‘Drill, Baby, Drill.’”

That’s the aim of the Greens. Michael Brune, executive director of the Sierra Club,said on Saturday: “Taking a temporary break from offshore drilling is an important step, but it’s not enough. We need to stop new offshore drilling for good, now. And then we need an aggressive plan to wean America from dirty fossil fuels in the next two decades.”

What My Deep Throat Says About This Deep Disaster
While I have been around plenty of oil rigs in my life I am hardly an expert. But I have friends who are. One of them is Ryan who is an oil field technician for one of the original Seven Sisters here in Calgary. I met with him last Friday to talk about the Transocean accident and what might have triggered the explosion.

“It probably comes down to one of two things,” said Ryan. “The blowout preventer failed to operate and seal the well. With the computers they have on deep ocean wells that shouldn’t happen; there is always the possibility of human error.” He looked around the room and then confided: “And of course it could be sabotage.”

The blowout preventer is a set of valves that connects the pipe from underground to the surface and it is used to control excessive pressure that might go further up the line. Valves can burst from either high-pressure oil, or oil mixed with gas which travels to the surface unexpectedly. That can start a catastrophic fire if sparked by the electrical gear on the platform. It should be noted that oil services contractor Halliburton is denying that its workers might have caused the accident.

It has already been alleged that Halliburton improperly cemented the well. Cementing is a process used to fill the gap between the drilled hole and the casing that brings oil and gas up out of the ground.

There has been speculation on whether the sealing process had been completed before the blast occurred. Yet the company insists that its workers had finished the cementing operation 20 hours before the rig went up in flames.

Perhaps It Was Just A Coincidence
The Wall Street Journal wrote on Friday: “Concerns about the cementing process—and about whether rigs have enough safeguards to prevent blowouts—raise questions about whether the industry can safely drill in deep water and whether regulators are up to the task of monitoring them.” To its credit, the WSJ is one of the few to report on the question of what caused the explosion.

While the Exxon Valdez accident immediately focused on the cause of the spill and the role that ship’s captain Joseph Jeffrey Hazelwood played, there is so far scant information and inquiry into what triggered the explosion on board the Deepwater Horizon.

The Greens were furious with Obama for allowing offshore drilling. It may be a happenstance that the Deepwater Horizon blew up three weeks later. But given the history of the Green movement I think it is worth considering that environmental extremists could have had a hand in this accident.

I had been thinking along these lines this past Friday when I got an email from my editor asking if I thought something was fishy and would I like to write about it.

I said yes, even though I was a bit apprehensive that you folks might consider me a reactionary or even a nut. And while I am not a big listener of Rush Limbaugh, I was encouraged when I read he was thinking along the same lines.

"Obviously the regime (the Obama Administration) is open to the idea that this is not an accident,” said Limbaugh. "The original Earth Day 40 years ago was inspired by the river in Cleveland catching fire. Forty years later, the day before Earth Day this year, the gulf is on fire. Coincidence? The jury is still out."

Love him or loathe him, what Limbaugh says is backed up by the actions of the White House which sent Homeland Security Secretary Janet Napolitano to the site. Napolitano has declared this is “an incident of national significance." Then on Sunday Obama visited the Gulf Coast to bolster efforts to control the spill.

The Dark Side Of The Greens
Of course I don’t know that eco-terrorists sparked this catastrophe. But I do know you don’t call a cop unless you think there might have been a crime. And some extremists in the Green movement are most certainly criminals.

The Federal government considers eco-terrorism a greater threat to America than Osama bin Laden and his organization al Qaida. According to the Federal Bureau of Investigation (FBI): “Eco-terrorism is the use or threatened use of violence of a criminal nature against innocent victims or property by an environmentally oriented, sub-national group for environmental-political reasons, or aimed at an audience beyond the target, often of a symbolic nature."

Guilty or not I have no doubt that the extremists in the environmental movement must be celebrating the Gulf Coast crisis. A recent poll by the WSJ asked: “Have your views on offshore drilling changed after the oil spill off the Louisiana coast?” The response by its conservative readership was a resounding, yes.

We may never know what caused the explosion that sunk the Deepwater Horizon. What we do know is that 11 men lost their lives and there is going to be untold suffering to the wildlife and on the people of America’s Gulf Coast. We can also expect this catastrophe will do to deep water oil exploration what Chernobyl did to nuclear energy. I expect new offshore drilling to cease for years, perhaps even decades. That sets up a future of greater dependence on Arab oil imports and higher energy prices.

Action To Take: Expect plenty of blame to go around and three companies are going to get hammered: BP (NYSE: BP, $52.15), Transocean Ltd. (NYSE: RIG, $72.32) and Halliburton Co. (NYSE: HAL, $30.65). If you own shares in these stocks liquidate them immediately. If you own energy mutual funds make sure that part of your fund does not own these three stocks. If they do, sell the fund. What is ironic is that over the past few years BP has bragged that its name no longer stands for British Petroleum but rather Beyond Petroleum. It looks as if they might turn out to be right.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Bowing To China: What It Means To Our Future

“Let China sleep, for when China awakes she will shake the world.” Napoleon Bonaparte.
                                         
American greed and extravagance has awakened China, and an eastern shadow is being cast on an indebted and divided America. At stake is our economic future.

It seems hard to believe but in just two generations, from Richard Nixon to Barack Obama, America has crumpled from world kingpin to global has-been. In fact this month President Obama bowed before Paramount Leader of China, Hu Jintao, at the nuclear security summit.

Little wonder our President defers to the Chinese leader. The Treasury Department’s monthly Treasury International Capital report was just released and it shows China with $877.5 billion in long-term Treasury debt. Even worse, the Obama administration needs the Chinese government to buy part of the estimated $2.4 trillion in Treasury debt that Washington must sell off this year.

The Obama administration is praying that the Communists will waddle-up and buy hundreds of more billions of dollars in Uncle Sam IOUs. So far things are not panning out. In February China trimmed its holdings of United States Treasury debt by 1.3 percent, the fourth consecutive decline.

Unless China antes up the recovery will crash and burn. Without robust foreign demand for U.S. Treasuries, interest rates that Washington pays to keep the country solvent will soar.

Business Week reported last week that U.S.-China relations are strained on several fronts, including Chinese censorship, the value of the Yuan, the Copenhagen climate conference, even Obama’s meeting with the Dalai Lama. The final point underscores just how little leverage America has—the spiritual leader had to be shown out the back door of the White House, sidestepping trash, for fear that the Chinese might be angered.

Nixon’s Biggest Blunder
Short of sacrificing Taiwan and living in economic servitude, there may be no pleasing China. According to The Daily Caller, “In either public or private, China will not take orders from the U.S. or anyone else. Not only has Obama’s rhetorical magic not worked on China, he has received a public dressing down by Chinese officials. It was simply a reminder of new global realities. Ultimately, no one will tame China.”

It is a far cry from the world we knew 40 years ago. History may yet declare that Richard Nixon’s worst blunder was not Watergate but his awakening of China. When Nixon played his China card in 1972 the U.S. had no diplomatic relations, no embassy; not even an established route of communication with China. But in less than two generations the Soviet Union, America’s then rival, crumbled. Beijing has filled the vacuum. Today it is our largest creditor and it is becoming an unprecedented economic colossus.

This year China’s gross domestic product (GDP) will top $5 trillion, making it the world’s second-largest economy behind only the U.S. In fact, China has eclipsed Japan five years sooner than was forecast. According to The New York Times, China has also surpassed Japan in having the biggest trade surplus and foreign currency reserves, as well as the highest steel production. China has even overtaken Japan as the world’s largest automobile producer.

C.H. Kwan, a senior fellow at the Nomura Institute of Capital Market Research, left China in the late 1970s to capture the magic that was Japan. Today he believes he got it all wrong. Based on current growth and currency trends, Kwan forecasts that the Chinese economy will surpass the United States by 2039. And that date could move up to 2026 if China lets its currency appreciate by a mere 2 percent a year.

“We’re no longer talking about China making lots of shoes,” said Kwan. “China is about to leave everyone behind in a big way.”

In terms of wealth and power China is becoming what America use to be. China’s GDP grew a shade less than 12 percent in the first quarter of this year. Even more impressively, inflation remained low during the quarter, up just over 2 percent. Strip away food prices, which have jumped because of a major drought, and inflation would almost be flat.

What makes China’s accomplishment so remarkable is that 40 years ago the nation was impoverished. An estimated 90 million Chinese died under Chairman Mao’s rule, making him thrice as an effective killer of his people than was Joseph Stalin. China has polished up its image on the world stage with dalliances like hosting the Olympic Games, but Mao’s grand ambitions are very much intact.

According to the April 15, FX Street.com: “China is out for world domination.”

No Tickey No Money
China’s military may not yet challenge the U.S., but Beijing wields the world’s most powerful weapon—credit. China’s foreign reserves, the world’s largest, rose to a new high of $2.45 trillion at the end of March, up a whopping 25 percent from a year earlier.

It wasn’t until 2006, or 30 years after Mao’s death, that China accumulated its first $1 trillion in foreign reserves. Yet by last April that amount had doubled to $2 trillion and by the end of this year Beijing may hold in its hands $3 trillion in foreign reserves. If Obama gets his way, $1 trillion of that sum will be in liquid Treasury instruments. All that money has a lot of strings.

Last month Premier Wen Jiabao, China’s top economic official, lectured Washington to take "concrete steps" to reassure Treasury investors. Keep in mind the irony: Jiabao, a communist, is demanding that the Obama administration rein in big government spending and preserve the greenback’s integrity. While Obama bows publicly to Beijing, he appears oblivious to their demands on curbing spending. The consequences of this will be horrendous.

Our future boils down to Washington’s insatiable demand for more money. Earlier this month Commodity Online reported that seven U.S. states are in worse financial condition than Greece, Ireland, Portugal and Spain. “Shelter may prove hard to find. With a $3.83 trillion budget, a $12.3 trillion federal government debt, a $1.35 trillion 2010 budget deficit and $63 trillion in unfunded liabilities, the fiscal condition of the U.S. has come into question and foreign interest in U.S. Treasuries has declined.”

chart

As the graph above shows, rates on 10-year Treasuries are now touching on 4 percent, twice as high as they were 16 months ago. If China continues to withdraw from weekly multi-billion dollar Treasury auctions—or worse yet starts to sell some of its Treasury holdings—interest rates will soar. Given the vastness of America’s borrowing needs I would not be surprised to see Treasury yields double again over the next 12 months. That will damn the recovery and kill the bull market in Big Board Stocks. So far only Obama has been bowing down to China, but unless he gets a grip on federal spending, we will all have to get in the prone position.

Action To Take: Sell any and all bonds other than three-month Treasury bills. Lock in interest rates wherever possible. Don’t buy into the bull market on Wall Street. It is as hollow as a fortune cookie.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Fear and Loathing: Why It’s Bullish for Gold

“I hate to say this, but this place is getting to me. I think I’m getting the Fear.” Fear and Loathing in Las Vegas.

First it was Saddam Hussein and his weapons of mass destruction. We had to invade Iraq. Never mind that the United States had a no fly zone over the country and had practically destroyed the Republican Guard; that Iraq had no effective way to deliver such weapons or that the Central Intelligence Agency (CIA) and the State Department didn’t think such weapons even existed.

Then in 2008 the Washington fear machine was at work again. The White House, the Federal Reserve and the Treasury Department were screaming that the world was falling into another Great Depression.

The latest End of Days is a prophecy from Hillary Clinton. At the Nuclear Security Summit in Washington last week, the U.S. Secretary of State said that terrorists like al-Qaida pose a nuclear threat. It is all part of the Obama administration’s plan to convince the American people that al-Qaida is going nuclear.

According to journalist Emily Gertz, “Fear of the terrorist has been used for the past several years to induce Americans to accept an increasingly authoritarian government and the dilution of our civil liberties.”

It is not just the fear of terrorists that President Obama and his Liberal elite are using to expand their sphere of influence. It is FEAR of everything: the jobs we might lose, the food we eat; even the water we drink and the air we breathe.

In his essay, The Politics of Fear, Alex Gourevitch writes that fear mongering is part and parcel of the environmental movement. “Environmentalism is a left-wing politics of fear because it rests on the deeply fearful idea that only an overweening threat to our physical and collective health… Threats to the very conditions of life, rather than social controversies over power and distribution, come to motivate political engagement—an engagement that presumes setting to one side inequality and unfreedom (sic) as the central categories of political contestation.”

A Gentler Time
America has vastly changed from when FDR proclaimed: “The only thing we have to fear is fear itself.”

No doubt The Age of Fear began with 9/11. Before, Washington did its best to keep a lid on anxieties. The Crash of ’87 is an example.

I was driving to work and the radio announcer said: “The Dow Industrials are currently down 325 points.”

“That’s ridiculous,” I thought. The Dow couldn’t be down that much. Either the announcer was stupid or he was playing a prank.

But it was true. The stock market was plunging. It was Black Monday and the Dow plummeted 508 points, or 23 percent, to 1,739. Half a trillion dollars in wealth had just been erased. Over the next few days the world witnessed the Dow’s fall from over 2,600 to 1,700.

What I remember most about the Crash of ’87 was the Federal government’s response to it. Federal Reserve Chairman Alan Greenspan not only provided liquidity for the banks but urged calm and told the world that America’s economy was “fundamentally sound”. It was a message reiterated by House Speaker Jim Wright, President Ronald Reagan and U.S. Treasury Secretary James Baker. It was our Federal government doing its damndest to reduce panic; to stabilize a dangerous situation.

The stock market crash of ’08 brought an entirely different response from Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson, as explained by Andrew Ross Sorkin in his bestseller, Too Big To Fail. According to Sorkin, the leadership of the Fed and Treasury opted for a novel strategy to get Congress to ante up half a trillion dollars to bail out Wall Street—fear.

“This is only going to work if you scare the sh** out of them.”

That had been Jim Wilkinson’s advice for Paulson before he and Bernanke left to meet with the congressional leadership at Nancy Pelosi’s office that evening. By Wilkinson’s reckoning, unless they could convince Congress that the world was literally going to come to an end, they would never receive approval for a $500 billion bailout package for Wall Street.

History’s Lessons About Fanning Fears
Washington had struck on something that tyrants have known for centuries—that fanning fear makes a populace compliant to just about anything.

A few years before the Wall Street bailout House Speaker Nancy Pelosi warned of impending danger out of Iraq: “Saddam Hussein has been engaged in the development of weapons of mass destruction technology.”

Then in the autumn of 2008 Pelosi did a flip-flop; first opposing and then embracing what had become a $700 billion bailout of the financial markets. In the end Pelosi and two presidents argued that without the taxpayer bailout our entire financial system faced collapse.

No doubt Pelosi will stand shoulder to shoulder with Secretary Clinton on the latest great fear, nuke toting mullahs. The real question is what is Pelosi and the Obama administration really selling? The answer is submission—the handing over of our liberty—in the name of national defense, the economy and the environment.

Of course pedaling fear is nothing new. Ancients like Alexander did it. So too has the Catholic Church, Joseph Stalin and Adolph Hitler. The difference is that America’s leaders once allayed our fears. Today they incite them. FDR was wrong, what we really need to fear is the fear-makers themselves.

Washington’s New Strategy Will Send Gold Soaring
America’s leaders might not be less moral than those before them (I will let you decide). What has changed is that Washington once had a vested interest in quieting fear. It was how government supported the once mighty U.S. dollar.

What is painfully evident is that over the past decade the Federal government has been intent on getting its way, the dollar be damned. And it certainly has been. The U.S. dollar index, a measurement against a basket of other currencies, has fallen by one third. During the same period the price of gold has risen fourfold.

Action To Take: Expect Washington to fan fears on everything from the environment to the economy, even at the expense of the dollar. That means you should diversify out of most dollar instruments and buy physical precious metals. I urge you to store 1-ounce gold and silver Eagles and 1-ounce platinum rounds for your safekeeping.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Sticker Shock—The Taxing of America

We are being taxed into oblivion. No, income taxes have not risen for most of us, at least not yet. Yet slowly and surely the tax vice is closing in. It is all part and parcel of President Obama’s run and gun break towards socialism.

Of course you won’t find newsmakers in agreement with your humble reporter, at least not within the editorial page of The Wall Street Journal or on the front page of The New York Times. Not because they are corrupt or leftists. Rather because Obama has done too good a job in obscuring the truth about the American economy and his own ambitions.

Take the energy situation. No sooner had the White House won modest acclaim for offshore drilling than they did an about-face and announced their intention to tighten their grip on one of the few remaining bastions of freedom—the open road.

This month the Environmental Protection Agency (EPA) set new regulations covering vehicle efficiency. The new rule requires that United States cars and light trucks meet an average fuel-economy standard of 35.5 miles per gallon by 2016.

Dying To Be Green
Administration officials say manufacturers can meet the targets mostly with existing technology and without drastically altering consumers’ choices of vehicles.

There is just one catch; to meet the EPA’s new standard average, new-vehicle prices will rise by an additional $1,100 between now and 2016. It is just further evidence that going green is neither cheap nor easy. In fact it turns out to be a killer.

A report produced last summer by the Obama administration’s own National Highway Transportation Safety Administration (NHTSA) underscored that while clap-trap cars get better gas mileage, occupants are more likely to die in accidents. The fatality rate in small cars is twice that of larger cars. By NHTSA’s cold calculations an additional 493 Americans will die each year. It seems that the big wigs in Washington can live with this since everything from the presidential limousine to cabinet staff cars are going to remain big and, oh yes, gasoline powered. It’s a policy of: “Save a tree, kill a driver.”

The EPA’s mandate is fraught with other problems. Detroit is hanging on by the skin of its teeth in large part thanks to the billions of dollars in federal bailouts ($50 billion to General Motors alone). Despite all that help, membership in the United Auto Workers Union (UAW) has hit a post-World War II low. Last week it was reported that UAW had 355,191 members at the end of 2009. That was down 18 percent from the year before and leaves the union with less than a quarter of the membership it had in 1979.

You would think with the recession still ongoing America could ill afford to make cars more expensive. Then again, the Federal government probably has contingency plans for another stimulus package, one that will give Washington even a greater say over the economy.

Stall Baby Stall
Another industry not yet out of the woods is petroleum. Obama’s offshore oil drilling proposal has not spurred North American oilmen to roll out the oil rigs. Executives in the industry I have talked to are sceptical of a plan that is rife with challenges and chockfull of regulatory hoops.

Consider the Atlantic Coast. A previously planned lease sale off the Virginia coast will go forward, but not until 2012 and only then if it passes review under the National Environmental Policy Act. Furthermore, public meetings will be held on all affected coastal areas this summer to set up Environmental Impact Studies. They will take at least a year. If that goes well then there will be a three month public comment period. Then more analyses and finally—yes finally—an impact statement sent to the Secretary of the Interior. And if the Greens don’t like what the secretary has to say they can go to court. As you can see, the red tape is certain to stretch further than the wells themselves.

Meanwhile, drilling along the ripe west coast and the plum parts of Alaska—regions that Congress approved in 2008—are now off limits.

If you think that petroleum’s importance will soon be diminished by Obama’s Green Revolution, a story out of Texas should give you pause.

According to the April 5 issue of Texas Watchdog, “If the people of Bedford, Texas, are still borrowing whatever they are calling books in 72 years, they may find themselves in the public library on the very day the energy saved by the library’s planned solar power system finally equals the cost to build it.”

I don’t know about you, but I will only be 124 when solar power like that at the Bedford Library starts paying dividends. Things are even better for Austin Community College. The college, with the help of Federal stimulus dollars, can equip two of its campuses with solar energy. The savings commence in 2062!

So far 32 projects in Texas have been given stimulus dollars by the State Energy Conservation Office. They are 80 percent paid for by taxpayers. Texas alone has locked in $290 million Federal tax dollars for green energy programs via the American Recovery and Reinvestment Act.

So far the Federal government has set aside $17 billion for the Department of Energy to waste money on things like solar power in Texas. Instead of lending money for things that might pay off during the next ice age the government should be selling offshore oil leases.

Rising Interest Rates Will Tax Everyone
Unfortunately we have bigger immediate problems than Washington’s lamebrain economic policies. The yield on 10-year Treasuries has just climbed above 4 percent. That is the highest rate in nearly a year. Rising Treasury yields portend to rising interest rates across the board. Rates will continue to climb as Treasury auctions are met with dwindling bids by investors near and far.

Little wonder the U.S. dollar continues to weaken (the Canadian Loonie is now trading above par) and the flood of new Treasury debt continues to swell. Last week alone the Treasury sold $82 billion (yes billion) in notes and bonds. At that pace the Treasury will add another $4 trillion to America’s already staggering $12.8 trillion debt by next spring.

The Democrats mismanagement of the economy on everything from industry to energy is certain to push interest rates higher—much, much higher.

Action To Take: Sell all debt instruments such as bonds and anything longer than a three-month Treasury bill. Use the funds to buy physical gold in the form of non-numismatic 1-ounce coins. Also, if you have to carry debt, say for a mortgage, lock in your interest rate. It is essential you rid you and your family of any variable interest rate loans.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Obamacare (Obamamania) And The Ghost Of Pierre Trudeau

"This is like deja vu all over again."
Yogi Berra

The dictum hit me like a shockwave: Buy into President Obama’s healthcare plan or be considered a criminal.

I had seen it before; a time when another young legal scholar became a sensation. Once he was in power a nation waited breathlessly for him to deliver a new age. He did so with guile and determination.

That man was Pierre Elliott Trudeau, and decades after he left office Canada is still reeling.

Trudeaumania hit Canada in the mid-60s. Trudeau was then a young self-admitted Marxist and Harvard grad (yes Harvard!). He was as brilliant as he was ruthless, and he used his Red Guard elitists to sweep away the Liberal establishment. His first priority: healthcare and financial reform.

It didn’t hurt Trudeau that he was French Canadian. That allowed his supporters and the mainstream media to claim that political opponents were acting out of centuries old prejudices.

Trudeau’s liberal government called themselves “libertarian socialists” and their near dictatorial rule spanned from 1968 to 1984. During that time the Prime Minister set his sights on building what he called a “Just Society.”

“It seems evident to me that the regime of free enterprise has shown itself incapable of adequately resolving problems posed in education, health, housing, full employment, etc.,” said Trudeau.

He backed up his words by implementing the Canada Health Act. It prohibited user fees and extra billing by doctors. Yes, the Prime Minister wrote into law that doctors could only make what the government decided they should be paid. Many of Canada’s best doctors immigrated to the United States.

But Trudeau had loftier goals than just healthcare. He declared that intervention needed to be administered, "at the first sign of national economic weakness: to stimulate buying by putting more money in the hands of consumers.”

To that end Trudeau dictated that, “The State should distribute, extensively and resolutely, payments of all kinds: direct aid, unemployment insurance, agricultural assistance and various grants.”

Nationalization and the Suspension of Habeas Corpus
The Trudeau government launched a wave of nationalization programs. None were larger or more devastating than the National Energy Program (NEP) enacted in 1980.

The NEP was set up to remedy spiraling oil costs for Canadians by forcing oil companies operating in Western Canada to sell their petroleum at a discount to the Eastern provinces. It was nothing short of larceny. Eastern Canada received Western oil at a vast discount. It is estimated that the NEP cost Alberta $100 billion. It was such a blatant seizure of wealth that many of us in Alberta joined a secessionist political party.

The March 11, 2008, American Thinker sums up the Trudeau years: “(He) nationalized 25 percent of the petroleum industry and ruined the nascent boom economy of conservative Alberta. He ensured minority group representation at every level of government and instituted French language requirements in remote English-speaking corners of the country. He turned away from the United States and toward a "third way", vowing to make Canada more European, including the imposition metric system.”

Trudeau did all of that and much more.

In October 1970, the terrorist group FLQ kidnapped British Trade Commissioner James Cross and Quebec’s Minister of Labour Pierre Laporte.

When CBC reporter Tim Ralfe asked him how far he was willing to go to stop the FLQ, Trudeau replied: "Just watch me."

Three days later, on Oct. 16, 1970, the Cabinet under Trudeau’s chairmanship advised the governor general to invoke the War Measures Act. The result was widespread deployment of Canadian Forces troops throughout Quebec and the suspension of habeas corpus, giving far-reaching powers of arrest to police.

The Trudeau government gave the appearance that martial law had been imposed. With far-reaching powers police arrested and detained, without bail, 497 individuals. All but 62 were later released without charges.

Four decades have passed since Trudeau imposed martial law on Canada and it has been 30 years since he nationalized Canada’s oil industry. But even south of the border the cataclysm still echoes. It gains a growing resonance as an American president unleashes his plans for a just society.

“The Obama election’s implications for us are possibly just as fundamental as was Trudeau’s for Canada,” said Michael Krauss, professor of Law at George Mason University. “What if we became Canada?”

I have bad news for Krauss; America is going down that same ruinous path with President Obama. It is hard to conclude otherwise, especially in light of Cuban dictator Fidel Castro declaring last month that the passage of American healthcare reform was "a miracle" and a major victory for Obama’s presidency.

It seems Obama is the kind of leader that Cuba can embrace. (Castro certainly had a close bond with Trudeau. Before he attended Trudeau’s state funeral in the autumn of 2000 he declared three days of mourning in Cuba.)

Just how far to the left President Obama will steer America remains to be seen, but the fact that America is seriously tilting to port is undeniable. Riding roughshod over the Constitution is just one step. Others include the president’s determination to grow government and redistribute the nation’s wealth.

Furthermore, it is naïve to think that Obama will be gone in less than three years. Many a Canadian, especially us out here in the West, believed Trudeau would be a one-term prime Minister. But Canadians got used to collecting Trudeau dollars. By the time he faced his first re-election in 1972 enough Canadians had bought into the prime Minister’s “Just Society” that he would go on to serve another 12 years.

Look for the Dollar to go Loonie
When Trudeau took office in 1968 the Canadian dollar was selling at par with its U.S. counterpart. By the time Trudeau left office in 1984 the Canadian dollar was selling for just 70 cents U.S. That was the Canadian dollar’s first significant devaluation in a century.

In fact, during the Trudeau years the Canadian dollar lost more than half of its purchasing power. Canadians got healthcare, but not one of them could say it was free.

The same scenario could unfold in the U.S., especially if the midterm elections don’t go the Republicans’ way next fall. It is amazing what the majority will sometimes accept and even encourage. I know because I have seen it happen. Not in Cuba… right here in Canada.

Action to take: Accumulate 1-ounce Canadian Gold Maple Leaf, American Gold Eagle and South African Gold Krugerrand coins.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

The Sellout of America: Why Our Enemies are Thriving

The Russians are coming. No, T-72 tanks are not plowing through Poland headed for Paris. There is no need for that outdated Soviet doctrine. Not when Russia can patrol near our coastal waters and harvest our most strategic resource—petroleum.

While the Obama administration seems bent on banning offshore oil drilling on the outer continental shelf, Russia is filling the vacuum, building its energy wealth and stretching its strategic reach all the way to Cuba and the vast oil pools that lay inside the Gulf of Mexico.

The Kremlin’s aim to be the world’s dominant power hasn’t changed since the Soviets tried to smuggle first-strike nuclear warheads onto the island of Cuba. But unlike First Secretary Nikita Khrushchev, today’s supreme leader Vladimir Putin is not gunning to win the arms race. He is out to win the energy race. So far it has been no contest.

Last year marked a milestone for the United States. For the first time since World War II, we pumped less than 5 million barrels of oil per day. We pumped almost twice that much oil 30 years ago when Jimmy Carter was president.

While Carter handed over the Panama Canal, Obama’s mistakes will be far more devastating to the U.S.

“Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries,” wrote The New York Times.

“What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.”

Yet the Obama administration has blindly ignored the warnings. The president continues to tout clean energy over offshore oil, even though seven out of 10 Americans want to drill for it.

Obama’s position on offshore drilling is as cloudy as the deep warm waters of the Gulf. As a senator he opposed it. As a candidate, Obama seemed to support it. But as president, Obama has stifled efforts to expand it.

This month The Washington Post said it now knows the president’s true intentions: “Hidden deep within the president’s budget proposal released on Feb. 1 are numbers that reveal his true intentions. The budget shows that revenues collected from new offshore leasing will decline over the next five years—from $1.5 billion in 2009, to only $413 million in fiscal 2015. If the president planned on expanding offshore drilling, revenues would be increasing, not decreasing. This budget clearly indicates that he has no intention of opening additional areas to drilling off our nation’s coast.”

Enter Russia—a nuclear mega power with a growing choke-hold on fossil fuel supplies. Last summer Russian Deputy Prime Minister Igor Sechin signed four contracts securing exploration rights in Cuba’s economic zone in the Gulf.

Havana says there may be 20 billion barrels of oil along its coast. That’s the total remaining conventional oil reserves of the U.S.

The Cuban deal will cement the Kremlin as the dominant petroleum power in the world. Russia already has three times more oil reserves than the U.S. Russia also has the largest natural gas reserves in the world—four times more than Canada and eight times more than Saudi Arabia.

“Vladimir Putin’s Russia is assembling an economic machine powerful enough to force Europe, the U.S. and Asia to their knees,” wrote The First Post. “It does not involve uranium, explosives or suicide bombers, but the natural resources that power the global economy. Russia will soon exert such sway over the supply of oil and natural gas that the OPEC crisis of the mid-1970s could seem trivial.”

Half of Russia’s state revenues and more than one-third its exports are derived from petroleum. Clearly Putin isn’t worried about cleaning up the environment (just one reason world carbon reduction agreements are useless and dangerous), but in projecting power. To that end Russia has surpassed Saudi Arabia as the world’s number one oil producer. The Kremlin also has its hands on the kill-switch to critical natural gas supply lines to Europe and Asia.

Meanwhile America’s dependence on oil is growing just as its availability is shrinking. The last time the U.S. produced such little oil Truman was President. And I can’t find one oilman in 100 that thinks the decline in American oil production is going to be arrested. As one Canadian oil company president said to me: “U.S. production in the lower 48 is falling into a black hole.”

What the Kremlin understands and what the White House doesn’t is that there is nothing on the horizon to replace petroleum. In fact, every four years, the U.S. consumes a cubic mile of oil. This has the energy equivalent of:

  • Four of the giant Three Gorges dams, cranking at full capacity for 50 years.
  • More than 30,000 1.65-megawatt wind turbines, cranking for 50 years.
  • A whopping 100,000 1-megawatt coal-fired electric plants, going full-bore for 50 years.
  • Fifty-two giant nuclear electric plants, running at 100 percent capacity for 50 years.

There aren’t in enough windmills or solar panels now or in 20 years from now that will significantly offset this demand.

What It Means
America is headed for an unmitigated disaster. Russia is bent on becoming the dominant petro-power of the world. Putin has gone so far as to say his country is an “energy superpower” and he has repeatedly demonstrated he will use his nation’s growing energy wealth as a blunt instrument of Kremlin foreign policy.

While Obama fetters away opportunities to drill for more oil, Putin is busy outflanking America on all sides. Russia is busy building closer relations with Iran and Pakistan, America’s key enemy and ally on the War on Terror. And in our own hemisphere Putin is about to meet with Venezuelan President and Uncle Sam hater, Hugo Chavez.

As for Cuba and its oil, it is just the latest energy domino to fall. There will be many more as Russia aims to dominate America, not with armies but with oil.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Why Wall Street Hates Gold

Wall Street hates gold. In fact they hate it as much as government does.

The reason is simple: ordinary investors that count on gold don’t need Wall Street. They don’t need the slick stockbrokers, the puffed-up analysts or the aristocratic money managers. In the eyes of Wall Street gold owners didn’t contribute a red cent to the $20-plus billion in bonuses they got last year.

Twenty-billion dollars might seem like a mega-lottery, but Wall Street always wants more. Bonuses were bigger last year than the year before even though Wall Street almost hurtled the world into an economic dark age.

But Wall Street is scared. They understand they are living it up because of the Barack Obama Bonus Brigade.* Most of all they fear sanity just might be contagious; that more and more investors will be reluctant to throw their hard-earned savings into a marketplace that is overpriced and on the verge of collapse.

Little wonder that CNBC, The Wall Street Journal and the rest of the financial media hammer away at gold. They reiterate the Keynesian mantra that it is a barbarous relic and call it a vastly overpriced commodity whose bubble is about to burst.

“Talk of a Gold bubble over the past 6-9 months grows louder and louder,” writes The Market Oracle. “It is comical and a sign of desperation among those losing their grip on the levers of power and influence. I have never seen a bubble so heavily recognized and announced.”

It does seem strange that today Wall Street is clairvoyant about the billions of dollars invested in the gold market, even though a couple of years ago it was oblivious to the trillions of dollars at risk in the sub-prime lending market.

Of course gold-bashing is nothing new. I saw it when I was a kid and watched my dad, C.V., on the TV show Wall Street Week. It was 1976 and gold was trading for a little more than $100 per ounce. That didn’t stop the host, Louis Rukeyser from calling my dad a gold bug and ridiculing him for telling his subscribers to buy bullion.

But Rukeyser and the rest of the Wall Street establishment weren’t laughing near so hard four years later when the Dow Jones Industrial Average was trading at 800 while gold was fetching $800.

Dirt Cheap, But Not for Long
The last time gold was frothy you could swap an ounce of bullion for a single share in the Dow Jones Industrial Average. Today it takes about 10 ounces of gold to buy a single share in the Dow.

But just how expensive is gold these days? It turns out that no matter how you measure it, gold is cheap. The reason is because the dollar buys so little. Back in 1980 when I was graduating from college I sold 10 Krugerrands and bought myself a shiny new Pontiac Trans Am right off the showroom floor. Today I would need 30 Krugerrands to buy a comparable Chevy Camaro.

In fact, if you account for the dollar’s decline in purchasing power, bullion would trade today at nearly $2,500 to have the same value it had in 1980. And even if you think gold only spiked above $800 per ounce, and a much fairer top is $700, it would still have to trade at $2,000 in today’s money just to have the same relative value.

Finally, bubbles usually burst because of inflated supply and falling demand. Not much sign of that in the gold market.

According to a recently released report by The World Gold Council, overall investment in gold was 7 percent higher last year than in 2008. It seems incredible, but gold demand actually climbed despite rampant fears of deflation and a physical shortage of gold. Moreover, in 2009 total funds invested in all forms of gold were a whopping 20 percent higher than in 2008.

Yet even as demand for the Midas metal continues to grow, production isn’t keeping pace. Output of gold from South Africa, the United States, Australia and Canada has dwindled every year over the past decade.

These countries, which produced two-thirds of global gold production through the 1980s, now produce less than half of the gold mined.

Over the past decade big gold companies have grown not through exploration but via the purchase of reserves in the form of corporate buyouts. The truth is it is getting harder and more expensive to find gold.

“In all of history, only 161,000 tons of gold have been mined, barely enough to fill two Olympic-size swimming pools,” wrote National Geographic in January 2009. “Now the world’s richest deposits are fast being depleted, and new discoveries are rare. Gone are the hundred-mile-long gold reefs in South Africa or cherry-size nuggets in California. Most of the gold left to mine exists as traces buried in remote and fragile corners of the globe.”

When I was born some 50 years ago companies could get about 12 grams of gold for every ton of rock you pulled out of a mine. Today they have to mine four tons of rock to harvest that much gold.

So there doesn’t appear to be enough gold to satisfy demand, at least not at these prices. But there certainly has been an avalanche of money. Consider this: in the past half century the above ground levels of gold have doubled. Meanwhile M3, a broad measure of money, has risen from $300 billion to $10 trillion. In other words, there is twice the amount of gold as there was in 1960. But there are 30 times more dollars.

All of which leads me to think that Wall Street has it picture perfect once again; perfectly wrong. The real bubble is with paper assets. The only silver lining in any of it is that it will blow Wall Street to smithereens—right where it belongs.

Action to take: continue to accumulate gold. I’ve been telling subscribers this since October 2000 when I was writing Outstanding Investments. My stockbroker friends thought I was dead wrong then. They think I am dead wrong now. I’ve been getting a lot of last laughs and I expect to get a lot more.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

* Footnote: Last month New York State Comptroller Thomas DiNapoli admitted that Washington was responsible for lining Wall Street’s pockets with billions even as the rest of the country was mired in recession. “A lot of this (bonuses) is fueled by federal money,” DiNapoli said.

The Ides of March: What Obama’s Woes Will Do to Gold

“Sic semper tyrannis” (Thus always to tyrants). —Brutus, during the assassination of Julius Caesar.

In Shakespeare’s Julius Caesar, a soothsayer warns Caesar to “beware the Ides of March.” The warning did nothing to help Caesar, who was stabbed to death on the Senate floor. The principal conspirator against Caesar was Marcus Junius Brutus, Caesar’s most trusted ally.

Fast forward two millennia and we see another great empire is in trouble, and so, too, its leader.

Thankfully, democratic rulers aren’t murdered, they are voted out of office. Yet this President has almost three more years left in office, plenty of time to do more economic damage for a country and to lose every shred of confidence in a man once hailed as a visionary and a redeemer; the exact qualities that were bestowed upon Julius Caesar.

Caesar came to political prominence in 67 B.C. when he was elected to the Roman Senate. Over the next two decades he would become one of the most renowned of all generals. Eighteen years later he established himself as the sole dictator of the Roman Empire.

Caesar declared himself a man of the people and in 46 B.C. drafted a public letter outlining his goals. They included: “tranquility for Italy, peace for the provinces, and security for the Empire.”

History has declared Caesar did not have the time or means to complete his overly ambitious agenda which included resolving foreign conflicts, strengthening the middle class and resolving the debt crisis. It sounds all too familiar, with the exception that I find nothing about Caesar instituting Roman healthcare.

Historians do point out that Caesar’s goals and methods of governing alienated many of the nobles. For a time, that did not stop Caesar’s lackeys in the Senate from constantly voting him new honors. Unfortunately for Caesar, the Nobel Prize was not one of them, as it was created some 2,000 years later.

On March 15, 44 B.C., Caesar attended his last meeting. He ignored a warning and went to the Senate. Sixty conspirators, most of them Senators who had lost faith in his vision for rebuilding Rome, were waiting for him with concealed daggers. He was stabbed 23 times.

March Madness
What exactly the House and Senate will do to Mr. Obama’s grand plans remains to be seen. But one thing is certain: Mr. Obama has faced a winter of discontent.

According to a survey done by Rasmussen in March, only one in four Americans think the country is heading in the right direction. Other surveys this month show expectations for the nation’s short- and long-term economic future are gloomier than they have been at any time since President Obama took office.

Still, Obama supporters continue to harp on some silver linings among the dark economic clouds. Earlier this month, Senate Majority Leader Harry Reid (D-Nev.) called the latest job numbers proof that the economic recovery is underway, even though the unemployment rate is a whopping 9.7 percent and the true jobless number is close to double that.

“Today is a big day in America,” said Reid earlier this month. “Only 36,000 people lost their jobs today; which is really good.”

Reid seems like the kind of cheerleader the Titantic could have used: “Good news passengers! The ship isn’t sinking as fast as we feared!”

I suspect that Reid and other Obama loyalists will find that most Americans think such talk cheap. In the second half of March, 2010, The Fates may have already determined the President’s plight. The big question is: who will deliver the blow and what will be the result?

Bernanke Obama’s Brutus
In March Federal Reserve Chairman Ben Bernanke promised to end Quantitative Easing (a fancy term for stimulating the economy and funding deficits by running the printing presses). Some think that the Fed Chairman only wants to ensure his Senate reconfirmation. Others think it is a real commitment; that Bernanke is more loyal to the dollar than the President.

I don’t blame you if you are skeptical about Bernanke. Still, there is precedent for the Fed to put the country first. It happened in 1979 when President Carter appointed Paul Volcker as chairman of the Federal Reserve.

The economy then was much as it is now. Unemployment was soaring, confidence was disappearing and the dollar was in crisis. Yet Volcker put the nation first and the presidency second. He raised interest rates through the roof purposefully putting America into a terrible recession.

Volcker’s actions eventually saved the American economy and cost Jimmy Carter his bid to be reelected. But it was tough sledding. The Fed funds rate, which had averaged 11.2 percent in 1979, was raised by Volcker to a peak of 20 percent in June 1981. That same year inflation topped out at 13.5 percent, a fundamental which drove the price of gold from $280 per ounce when Volker was appointed to $850 per ounce just 18 months later.

Yet I am dubious that Bernanke will betray Obama. The Fed chairman seems much more like Arthur Burns than Paul Volcker.

Richard Nixon hurt the dollar primarily because he removed any link between the dollar and gold. After 1971 not even countries could exchange greenbacks for bullion. That gave Nixon, and all later presidents, the freedom to spend away. Because the dollar was the world’s international reserve currency, Washington basically believed that other countries had to like it or lump it.

Arthur Burns came along when it was still expected for the Fed to carry out its primary mission—to protect the integrity of the dollar. Instead, Burns acquiesced to Nixon’s war on poverty, the war in Vietnam and bid for reelection in 1972. It was a cavalcade of spending that carried on throughout the decade of the ‘70s.

“After finally winning the presidential election of 1968, Nixon named Burns to the Fed chairmanship in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972,” wrote Mercury Rising.

“Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed’s influence, Burns and other Governors succumbed. Inflation resulted.”

According to American Thinker, it matters not if Bernanke is loyal to the President like Burns, or the dollar like Volcker; either way he “will be Obama’s Brutus.”

That is because like Rome, America is a weakened empire with no easy choices. Two trillion dollars that the Federal government needs this year underscores this truth.

Where such funds will come from remains very much in question. Foreigners are having second thoughts about financing America’s deficit, and China—the largest owner of Treasuries—has become a net seller of Uncle Sam bonds.

Very soon Treasury yields will have to rise to get the world to continue to finance Washington’s spending spree. So whether or not Bernanke wants it, or even likes it, interest rates are heading higher. That is bad news for the economy and for President Obama who will almost certainly not be re-elected.

Rising rates are, however, good news for the nation for bullion investors. Rising rates ensure falling stock and bond prices and a rush to gold. It happened during the Carter administration and it has already begun during Obama’s term.

Action to take: Sell all bond instruments and Big Board stocks and use the funds to buy bullion, either in physical form or blue-chip gold mining stocks.

As Shakespeare’s soothsayer warned, “Beware the ides of March.”

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Obama’s Real Agenda and Why the Stimulus is Money Well Spent

Last month marked the one-year anniversary of the stimulus bill, or the American Reinvestment and Recovery Act, passing into law.

It was to cost a whopping $787 billion. True to form it has actually cost more, some $862 billion.

The question remains: did it work, or at least did it work well enough to seed recovery? The Federal Reserve doesn’t believe it did.

According to the Globe & Mail, “We have an economic recovery that (Fed Chairman) Mr. Bernanke does not believe is self-sustaining.”

Then again, how could Bernanke think otherwise? Consider that:

  • The United States dollar continues to break down against other currencies while gold is near its all-time high. Meanwhile, prices for raw materials jumped 50 percent last year, more than doubling the advance in the S&P 500. That was their best year since 1971.
  • Mortgage applications for new homes are down 13 percent from last year and were down 30 percent the year before. This despite record low interest rates and housing prices that are cheaper than they have been in a generation.
  • Even with Soviet-style financing, many banks’ balance sheets remain weak. More than 140 banks failed last year. The potential exists for hundreds, perhaps even thousands of more banks to fail over the next two years.
  • U.S. unemployment is running at 9.7 percent and the true unemployment rate is more than double if you count those who have given up looking for work and the underemployed. According to The Atlantic that is the highest unemployment rate since the 1930s.

The only good news is that personal spending grew faster than expected in January by 0.5 percent—the fourth consecutive monthly rise. Wait… wasn’t it too much spending that got us in trouble in the first place?

Of course it was, but Americans are not spending frivolously says Keith Hembre, chief economist with First American Funds in Minneapolis. “This is not a credit binge. Bank loans continue to contract.”

According to Hembre, Americans are pulling cash out of their savings accounts just to get by.

But wait, our government has a solution. If you said more spending you are not clairvoyant, just cognizant.

Most of the Democrats simply can’t wait to spend enough to make the nation prosperous once again. Last summer, Nobel prize winner and liberal lapdog Paul Krugman was arguing that the country was in desperate need of another stimulus package.

“Getting another round of stimulus will be difficult. But it’s essential,” wrote Krugman. And if we don’t? Well Krugman and plenty in the Obama administration are ready to slam the Great Depression horn; that blaring siren that screams of soup lines, dust bowls and hobos.

Last year Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the “lessons of 1937.” That was the year that Franklin Delano Roosevelt started deficit spending in earnest.

There is a chorus from the Left that screams we need another stimulus package or we face Hell—an economic condition so severe that old-timers will recall the Great Depression with fondness.

One might argue that the Obama plan really hasn’t been given a chance. Heck, a trillion dollars here or there isn’t really enough to test a theory, is it?

On the other hand one might say that Obama’s plan has worked perfectly. Not because it has improved the economy, but because it accomplished exactly what it set out to do—to make the Federal government even fatter, greasier and more bloated than it was before. If that is the case then call it Mission Accomplished!

If you think I am crazy consider this: last year former labor secretary Robert Reich wrote on his blog that the recovery might have to rise from ashes like the Phoenix. Riech’s argument is that there can be no recovery until we find an entirely new model for the economy. He didn’t spell out what that model will be, but you can bet one thing—Big Government is a big part of it.

Ron Paul probably sums it up best: “The administration also claims that thousands of jobs have been created or saved by this massive spending bill, but these are just more government jobs, and counterproductive in the long run. Funding for the public sector necessarily comes at the expense of an overtaxed private economy… But the more the burden, the closer the government parasite comes to killing its host.” (You can read all of Dr. Paul’s comments in Whiskey and Gunpowder by clicking here.).

You can’t deny that the federal government is not only more indebted, but also bigger than ever. Last month The Washington Times wrote: “The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history.”

According to the Obama administration the government will employ 2,150,000 employees this year, thousands more than when President Clinton declared that “the era of big government is over” in the 1990s. The growth is not coming to our overstressed military, but in the form of thousands of new civilian jobs.

I didn’t graduate from an Ivy League school like many in the Obama administration and I don’t even know who this year’s nominees are for the Nobel Prize, or even if they have nominees. But I do know that it’s named for Alfred Nobel—the guy who invented dynamite—and that is exactly what the Obama administration is playing with in trying to spend us toward prosperity.

Every government that has tried socialism has suffered for it.

I saw all I needed to see of it growing up in Canada. In the late 1960s Pierre Elliott Trudeau became Prime Minister. His Liberal government seeded socialism for 16 years.

Trudeau was convinced of the superiority of a socialist planned economy over free enterprise. He wrote in 1957, “As far as I go, it seems evident to me that the regime of free enterprise has shown itself incapable of adequately resolving problems posed in education, health, housing, full employment, etc.”

He made his vision a reality, instituting huge deficit spending, a massive welfare class and socialized medicine. And he damn near destroyed the Canadian dollar.

When Trudeau took office in 1968 the Canadian dollar was selling at par with its U.S. counterpart. By the time Trudeau left office in 1984 the Canadian dollar was selling for 70 cents U.S. That was the Canadian dollar’s first marked decline in 100 years! During the 16 years that Trudeau was Prime Minister the Canadian dollar lost more than half of its purchasing power.

Consider what would have happened to two Canadians: one who put $10,000 Canadian cash into his mattress and the other who bought gold in April 1968 when Trudeau was first elected. By June 1984, when Trudeau left office, the investor with the cash would have had the equivalent of $2,350 in constant 1968 dollars. Meanwhile our gold bug would have had $36,000—or 15 times more—in constant 1968 dollars.

If Obama’s vision of government is successful I have no doubt that the results will be even worse for the dollar and better for gold investors. It is ironic, but big creditors like China and Russia, who know better than anyone the ills of socialism, are selling off dollars and buying up resources.

They understand what Milton Friedman meant when he said: “If you put the Federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Commander in Chief?

“The United States needs a Commander in Chief not a professor of law.” –Sarah Palin.

I hate to be a stickler for presidential definitions especially after Bill Clinton said: “It depends on what the meaning of the word ‘is’ is.” But given President Obama’s woeful performance as America’s Commander in Chief, I think he needs to be educated on the meaning of war.

After all, it was Mr. Obama that said “We are at war,” earlier this year at a White House state dinner.

Yet it is clear that Mr. Obama may not understand what war really means. He is certainly not cut from the same cloth as Ike, nor does he have the fortitude of Reagan.

How do I know? Well the Obama administration openly talks with our adversaries; has terminated the F-22 air-superiority aircraft and has shown a fierce commitment to cutting America’s nuclear arsenal even as impending super-power—China—rises in the east.

A recent issue of Foreign Affairs warns that the world is becoming a more dangerous place. According to the magazine, America’s enemies see war far differently than the President does. “The United States’ overseas conflicts are limited wars only from the U.S. perspective; to adversaries, they are essential. It should not be surprising if they use every weapon at their disposal to stave off total defeat.”

All the while our President is muddling through the wars in Iraq and Afghanistan. In his State of the Union Address Mr. Obama barely made a mention of the Afghan conflict which will involve 100,000 U.S. troops in a war that has persisted for eight years.

Worst of all, the President is undermining morale in our military by putting the enemy on trial and allowing gays to serve openly in the military.

The President and his advisers have become adamant in trying Khalid Sheikh Mohammed and four fellow Guantanamo Bay detainees in New York.

With resistance building over plans to try the accused Sept. 11 mastermind in a civilian court in New York, White House officials are lobbying lawmakers to secure funding.

Thankfully there is opposition. A bipartisan group in Congress is pushing to cut off funding to prosecute Mohammed and other 9-11 co-conspirators in civilian courts.

It is hard to believe if Mr. Obama understands the nature of war when the enemy is afforded a trial and the rights provided within the Constitution of the very nation they are trying to destroy. Imagine if President Truman had put Tojo on trial in Honolulu for planning the attack on Pearl Harbor.

Andrew C. McCarthy believes it is ridiculous to try an enemy and thus provide them with the comforts and rights therein.

“A war is a war,” declared McCarthy. “A war is not a crime, and you don’t bring your enemies to a courthouse.”

McCarthy knows a thing or two about trying terrorists. Fifteen years ago he was front and center in the nation’s biggest terrorism trial as the chief prosecutor against a group led by a blind Egyptian sheik that plotted to blow-up the United Nations, as well as the Lincoln and Holland Tunnels.

The Trouble With Gays in the Military
Recently, President Obama renewed his commitment to allow gays to openly serve in the U.S. military. As a result, Senator Joe Lieberman (I-Conn.) has emerged as the Senate champion for trying to scrap limits on gay and lesbian service in the military.
 
Last week Lieberman announced that he would introduce a bill to repeal the ‘Don’t-Ask-Don’t-Tell’ policy that became law in 1993.

Lieberman said: “To exclude one group of Americans from serving in the armed forces is contrary to our fundamental principles as outlined in the Declaration of Independence, and weakens our defenses…”

Not so fast Joe. There are good reasons for keeping gays out of the military, the least of which isn’t combat effectiveness.

A decade ago one of my best friends, a Gulf War veteran and now a major in the National Guard explained it to me when I questioned him on the subject.

“Keeping gays out of combat has nothing to do with sex,” said my friend who served as an U.S. Army infantry captain in Operation Desert Storm. “It has to do with love.”

He explained that leading men, whether it be a squad, a platoon or a company, meant making tough decisions; decisions that put the men under one’s command in grave danger. Such orders are not easily given under the best of circumstances but are undertaken with the knowledge that what is tantamount is the success of a mission.

My friend—who by the way is a true-blue Democrat—went on to explain that he thought gays in the military would lead to relationships in the field; the kind of relationships that would endanger a mission and compromise the lives of men undertaking them.

To underscore his point my friend the Major asked: “Would you order the love of your life into a dangerous undertaking, even if you knew they were the best person for the job?”

As the 2008 Republican Party Platform correctly stated: "Military priorities and mission must determine personnel policies. Esprit and cohesion are necessary for military effectiveness and success on the battlefield.”

For Mr. Obama not to understand this combat necessity puts into question whether he has a fundamental understanding of the nature of war; enough to be our Commander in Chief.

I am not saying that one must have combat experience to be President. What I am saying is that a good President puts the nation ahead of what he thinks is good politics or what is politically correct.

John Stuart Mill was a 19th Century philosopher, economist and academic. Yet he understood the nature of war.

“War is an ugly thing, but not the ugliest of things,” said Mill. “The decayed and degraded state of moral and patriotic feeling which thinks that nothing is worth war is much worse. The person who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself.”

Other words about war that Mr. Obama might want to heed come from the former First Lady Barbara Bush: “War is not nice.”

Neither is it nice sitting back and watching the decline of the U.S. through weak leadership. This is especially true when it not only makes America more vulnerable to our enemies, but also accelerates our economic decline.

You may be asking, “What does any of this have to do with my financial future?” I am glad you inquired.

The U.S. dollar has been the reserve currency of the world for more than half a century. It gained this status not only because of the financial vitality of America but because the U.S. was the ultimate protector against tyranny.

But today America’s precarious economic situation, as well as the serious lack of leadership from its highest office, will only serve to weaken an already crumbling currency.

Action to take: Continue to accumulate hard assets, most important of which is physical gold, silver and platinum.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Why Wall Street Can’t See It

Youth is everywhere. The Barack Obama administration is packed with young academics. Big corporations enlist young people the way an army conducts a draft. Yet the greatest danger to your pocketbook and overall prosperity is the youth that invests America’s money.

According to Money Magazine, the average age of a stock fund manager is a tad over 30. Now that I am in my 50s that makes me more than a little alarmed. I remember when I was young; when I was a dumb college kid.          

Years ago disaster stalked me. At the time I was in my 20s, unaware of calamity until it was sprung upon me.

My dad and I motored towards the extreme end of Idaho’s Lake Coeur d’Alene.

After several arm-aching pulls on the starter cord we had the trolling engine sputtering along. We traced the outlines of the pristine bays and points along the southern shores.

It was a lazy afternoon; the calm before the storm. Over the rhythmic cough and choke of the outboard, from a distance of at least half a mile, I heard a squirrel skipping through the turquoise pines. How strange, I thought. I glanced towards shore and noticed an absolute deadness to the lake—a motionless mass of water stretching out like a giant sheet of stainless steel.

Above the tree-line I saw a monster: colossal cumulus black clouds—swirling and spinning—compressed upon the forest hills. Within this charcoal mass was a tiny grey vortex, tipped to its side, spinning downward, as if to reach out and pull us in.

Now my father was the calmest man I’ve ever known. In fact I had never seen him excited by Mother Nature, an amazing accomplishment for a man who spent most of his life on the brutal Canadian prairies. But this day was different.

As I pointed my finger towards the horizon the old man jumped to his feet and shoved a cigarette in his mouth.

I should have been on notice. The old man never swore and he never, ever panicked. But he was cursing like a sailor and tossing gear about as though we had just been called to general quarters. Before I could manage to reel in the second line, our cabin-cruiser was up and running.

“Our best out is to outrun this,” yelled the old man above the roar of the V-8.

Moments later the rain and wind pounced on the cove we had just evacuated.

After another 20 minutes the storm was closing fast. Across the lake stretched a line. It was surreal—on one side tranquility; on the other, chaos.

Dad yelled, “Get the lifejackets!”

Now that concerned me. The old man wasn’t a life jacket kind of guy. He had never so much as worn a seatbelt.

As I jumped below deck I remembered that I had forgotten to transfer the life jackets into the new boat (remember… dumb college kid).

As I stumbled up to tell the old man about the jackets the storm had closed to within a hundred yards of us. I was shocked by its enormity. The waves were huge. Only half home and we were about to be engulfed by a typhoon.

“Where are the jackets?”

I had to say something, so I lied. “I can’t find them.”

I will never forget the look on his face. It was a combination of rage and terror. For a moment, I didn’t know what to fear more—the old man or the storm.

“You idiot,” he screamed. “You can’t find them because you didn’t pack’em!”
 
By this time the storm had closed to within yards of us. For a few seconds it engulfed only our stern, turning the boat into a gigantic surfboard. Then it grabbed us whole.

All hell broke loose. A tremendous wave crashed over our starboard. Inside the cabin, dishes and groceries flew across the galley. We began taking on water.

Dad switched on the sump-pump, but the up-swell was beyond its capacity. The lake opened up into a giant trough.

I couldn’t help but notice that the boat was lower. Inside the cabin there was water.

Then it hit me: we had no life raft, no life jackets, not even a two-way radio. We were trapped in this damn boat. If it sank, so would we! We were 20 minutes from the marina. I didn’t know if we could make it, and there wasn’t a thing I could do about any of it.

Then, through the grace of God, the storm began to dissipate. By the skin of our teeth we reached the marina.

Others weren’t so lucky. We saw a 21-foot ski boat sink just outside the marina. Later an old timer told us that it was the worst storm he had seen in 60 years.

Two things still stick in my mind: The utter calm before the storm, and my idiotic complacency, even after its approach.

My fear is we face another financial storm, this one from a tsunami of dollars that have been created by the Federal Reserve and the Treasury Department.

Yet that has created a perfect storm for rampant inflation.

Over the past year the Obama administration and Wall Street have been urging banks to increase lending. However the banks have not yet lent out much of the new reserves that the Fed has created. Rather they have left these reserves on deposit.

That means that the velocity of all this new money (how fast it changes hands) has been slow. But that will change as soon as the banks begin lending in earnest which will likely happen this year.

It is little wonder, then, that Reuters reported last week that, “the ultra-rich are increasingly buying copper, nickel and other physical commodities to shield themselves from paper-money inflation.”

According to Ronald Wildmann, who manages three Basinvest funds from Zurich: "As a wealthy person, the worst that can happen to you is not that your relationship manager gives you bad advice. What is much more worrisome is when you wake up in the morning and you look out the window and paper money is worthless."

Wildmann is in his late 40s and is one of the few money managers that even sees the potential for an inflationary storm. The majority of fund mangers are a generation younger and so busy fishing for profits that they haven’t even looked towards the horizon.

But a financial squall is approaching just as surely as that lake storm struck my dad and me three decades ago. When it does, Big Board stocks and blue chip bonds will collapse. At the same time fortunes will be made in hard assets, especially gold and silver.

Action to take: I urge you to divest out of paper in all but the most special situations and buy shares in either blue chip gold and energy companies or physical precious metals.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Banker, Butcher, Spy: Who Our Government Bullies And Bribes to Make This Their Cashless Society

It was the girl with the dark hair. For a few seconds Winston was too paralyzed to move. Whether she was really an agent of the Thought Police, or simply an amateur spy actuated by officiousness, hardly mattered. It was enough that she was watching him.”
George Orwell, 1984

With just days to go and a congressional recess looming, lawmakers are scrambling to find a legislative solution to re-up government surveillance and intelligence-gathering powers that are expiring at the end of the month.

With national security shaping up to be a major issue this election cycle, both sides are under intense pressure to reauthorize three expiring provisions of the USA PATRIOT Act.

Already Senate Democratic leaders are moving toward including a one-year extension on the provisions in their jobs bill, which was expected to be introduced this week.

No one doubts that the world changed for the worse since 9/11. One way has been our own government’s suspicion and surveillance of the very people that elected it.

Of course Washington has been telling us for a decade that it has no choice, that it must spy on us for our own good. It is all part of the War on Terror.

It is worth noting that our government began spying on us in earnest a generation earlier. That time it was because of the War on Drugs.

* * * * 

It was a hot July day in 1990 and I needed a cold drink. The offices to the Myers’ newsletter were on the second floor the Old National Bank Building at the North Division Y on Division Street in Spokane, Wash. One of the perks of paying hefty rent in the new building was that the bank let us use their lunch room replete with cola and snack machines.

Moments after my quarters had plunked into the machine I had a cold can of Coca-Cola in my hands. On the way out of the lunch room I noticed a giant poster on the wall from the Department of the Treasury (see chart below).

Click on the image above to expand the view.

As you can see its pretense is to catch criminals involved in “narcotics trafficking.” See the mention on the bottom? It offers “substantial rewards for information leading to the seizure of currency and/or the arrest and conviction of individuals violating United States currency laws.”

In other words, beware of the kindly bank teller if you deal in cash for whatever reason. He or she has openly been bribed to spy for the Treasury Department, the Internal Revenue Department (IRS) and U.S. Customs to boot.

You can see that more than a decade before 9/11 our government was busying itself in spying on its citizens. And the biggest attack on our liberty isn’t on what kind of gun we can own, where we can smoke, or even what we search out on the Internet. It is the slow and insidious control of our currency. How much money we have, where we have it and how we move it has become a preoccupation of the Federal Government.

There was a time when there were $1,000 bills. That is no longer. A rapidly devaluing hundred dollar bill is the biggest unit of currency today (in 2010 a $100 bill has the purchasing power of a 1975 $20 bill).

Twenty five years ago you could buy and own U.S. Treasury bearer bonds. Unregistered, they avoided scores of red tape—they could be bought and sold literally overnight; or if necessary, kept in safe keeping away from prying eyes. They too are extinct.

There was a time when you could move money in and out of the country, no questions asked. You can’t do that anymore. For years anything over $10,000 going across the border must be reported.

Uncle Sam wants to know any transaction over $10,000. That law doesn’t just apply to banks or border agents. If you go into your Ford dealer tomorrow and plunk down $12,000 cash, it will be reported to the Feds. Not only that, but if you spend more than $10,000 cash at a car dealership within a year (bought two cars on two different occasions for $6,000 each), the dealer is responsible to report the total of both transactions. In effect, private business has been conscripted by the Federal Government to report on its customers. And the Federal Government’s heavy hand reaches beyond U.S. borders.

In the late 1990s I was driving from my home in Spokane to Calgary, Canada. At that time it was illegal to transport more than $10,000 currency out of the United States, but Canada had no such laws (that would come a few years later, no doubt under pressure from Washington). At the Kings Gate border in British Columbia the Canadian Customs Agent asked if I was carrying more than $10,000 cash.

“What do you care?” I asked.

This did not sit well with the young lady charged with protecting Canada.

“Are you going to tell me… or are we going to have to strip your car and your person?”

“The answer is no, but what I want to know is why are you asking me this? It is not against Canadian law for me to bring in any amount of currency, is it?”

“No,” she said, “it is not. But it is against U.S. law!”

To underscore what she was saying she pointed 75 yards to the U.S. Customs office welcoming southbound traffic.

“So what you are telling me is that you are not only a Canadian customs agent, but you are also acting at the behest of the United States government?”

I realized I was walking a razor thin line and in jeopardy of having my car torn apart. Fortunately she handed me my drivers license (the days before you had to have a passport) and without a word she motioned me to continue on my trip.

A couple of weeks ago I wrote to you about the War on Gold. What I have learned in the last few years is that our government is conducting a War on Cash. Washington despises cash because it is an instrument we can use to exercise our liberties without being monitored. Yet for non-criminals like you and me it is a disappearing tool. Fewer and fewer of us do business with currency any longer, leaving whatever commerce we have easily tracked and traced.

Yet just as criminals continue to have ready access to guns, they too have mountains of cash. There is almost $900 billion in circulation, four times the amount there was in 1990. Meanwhile there are only 300 million Americans. If the drug cartels and terrorists weren’t holding buckets of cash, every man, woman and child would have $3,000 stuffed in their pockets or mattresses. Even if you account for what the banks have on hand (which is surprisingly little), that is a ludicrous number.

Law abiding Americans are without the utility of cash and the inherent privacy it allows when conducting commerce. Yet the drug dealers and terrorists have stacks and stacks of currency on hand.

Today our government is able to track almost all of our transactions in this increasingly cashless and restricted society. Never mind the War on Drugs and the War on Terror. It seems to me that the real war is being conducted on the American people.

Obama’s Incompetence Has Left Israel Gunning for War

“(Obama) is too much Chamberlain and not enough Churchill.”–Chris Matthews, MSNBC.

President Obama has been in office more than a year, yet his administration’s lack of accomplish is startling.

Obamacare is DOA. The total budget is tipping towards $4 trillion per year and the federal deficit will hit a record $1.6 trillion this year.

Yet all this and an unemployment rate of almost 10 percent will not prove to be the President’s biggest blunder. That distinction will likely go to his foreign policy failures whose fruition leaves Israel set to wage war, energy prices and the dollar be damned.

It almost happened once before, almost three decades ago when I was just getting started in this business.

The morning traffic that the growing city of Spokane could muster was bottlenecked on Monroe Street as I headed south towards downtown and my dad’s offices at Myers’ Finance & Energy. It was June and the morning sun was pouring into my old Pontiac whose only climate control was rolling down the windows.

I fussed through the push-buttons on the old radio until I hit the news channel. The headline blared out of the single speaker on the dashboard: “Israeli jets have struck and apparently destroyed Iraq’s nuclear reactor.”

It was the coups de grâce in Saddam Hussein’s nuclear ambitions and the world was fortunate that Israel was able to pull it off—even if the markets were spooked. The attack and the near miss on a broader war helped push bullion prices up more than 20 percent that summer.

It is no secret that Israel is looking to launch a similar strike, this time on Iran’s nuclear processing facility.

But Iran is no Iraq. Besides the fact that Iran will not be caught flat-footed there is the fact that Iran has a far more capable military than what Iraq had 29 years ago.

There is also the fact that Israel won’t have a strategic ally if it executes another attack on a Muslim reactor. Iran cooperated with Israel during its attack on Iraq’s Osirak reactor, providing the Israeli air force with maps and other tactical information.

“There is no guarantee that the Iranian nuclear facilities would be eliminated. Iran could be expected to have learned the lessons exposed by the experiences of both Iraq in 1981 and Syria in 2007, when Israel destroyed their suspected nuclear facilities,” writes the Feb. 3, Sydney Morning Herald. “One would expect Iran to have located many of its nuclear facilities either deep underground or within the mountains to reduce their vulnerability to that type of attack.”

Not only can Iran repulse such an attack on its nuclear facilities but it can threaten the entire region in ways that Saddam Hussein could only dream off.

Iran Captures the High Ground

Last year Iran announced that it had successfully launched its first domestically produced satellite into orbit using an Iranian-built rocket. Tehran proclaimed that “the official presence of the Islamic Republic was registered in space.”

That rocket launch shows that Iran is now able to gather its own satellite intelligence and demonstrates the strides the country has made in rocket technology—the kind of rockets that can be used in a first strike on any of its neighbors.

Furthermore, Iran is working on a second nuclear power plant. It is conceivable that Israel might be successful in knocking out one of the reactors. The other would be left intact and able to develop nuclear weapons after a protracted stand-off. That sets up the possibility for the region’s two super-powers to go, as Slim Pickens said in the movie, Dr. Strangelove: “Toe to toe, nuclear combat.”

America’s Lack of Leadership

So what is the Obama administration doing? It is playing peacemaker and appeaser.

Early in his administration Obama had said he would give the Iranians until the end of 2009 to change their policy on nuclear weapons development. But a year later the Iranians continue with plans to develop a nuclear warhead.

As England did with Hitler, so far America has focused on a diplomatic solution to the “Iran problem.” The Obama administration wants to bring together a coalition that will impose what it calls “crippling economic sanctions” on the Iranians. The most decisive would be stopping Iran’s gasoline imports. But such sanctions are now unlikely as China and Russia have made it clear they will not participate.

Last week Vice President Joe Biden launched a blistering attack on Iran’s hard-line leaders, claiming they were “sowing the seeds of their own destruction.”

Biden’s comments came days after the United States sent more warships to the Gulf and pledged to America’s most important allies to increase its missile defense systems in the region. In other words, the administration is desperately trying to use tough talk and an unproven missile shield to protect the world’s strategic oil supplies in Kuwait, the United Arab Emirates and Saudi Arabia.
 
In the face of the greatest threat of nuclear war since the Cuban Missile Crisis, the Obama administration is launching angry words while trying to build walls to protect its allies. If it reminds you of Neville Chamberlain, you are not alone.

“If you want to compare Obama in any way, compare him to Neville Chamberlain. He says we’re going to have peace in our time,” commented Rush Limbaugh.

In part the U.S. is playing peacekeeper because it is in no position to begin another conflict. Problems in Iraq are far from over. In fact, civil war may be looming. Kurdish and Iraqi forces are said to be near the brink of a war.

Last week the Pentagon made an announcement underscoring why President Obama is so quick to look for diplomatic solutions. The Pentagon flatly stated that the U.S. is to abandon its doctrine of always being ready to fight two simultaneous-conventional wars.

This message has not been lost on Israel. If the past 60 years of history have demonstrated anything it is that the Jewish state will use its military as a first option.

When Israel successfully executed its attack on Iraq in 1981 it helped push gold prices from $390 to $463 per ounce. A strike now that is less than a resounding success could push bullion prices dramatically higher, perhaps in the $1,500 to $1,700 per ounce range. I firmly believe this because the summer of 1981 gold price spike happened when bullion was in a withering bear market. Today the Midas metal is in the midst of one of its biggest bull markets ever.

Money market funds are currently paying an average return of less than 1 percent. That is the smallest return that money markets have ever paid. Consider the fact that at this rate, it will take more than 500 years to double your money.

I believe we are at the brink of a Middle East war at a time when Washington is proving to be impotent with the economy and foreign relations. Add to it the crippling downward momentum of the dollar and you have what I believe is every reason to get out of cash and into energy investments and gold.

Action to take: Sell-off all fixed return investments (bonds) other than short-term Treasury bills and add to your holdings of physical gold. I like 1-ounce U.S. American Eagle coins as well as 1-oz. Canadian Maple Leaf and South African Krugerrand coins.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

The War on Gold: A Personal Account

“Open up,” demanded a man.

I rose from the breakfast table. It was Sept. 19, 1974. I caught a glimpse of the flashing lights bouncing off the premature frost that clung to our trees.

Three cruisers from the Royal Canadian Mounted Police (RCMP) had converged on our small farm south of Calgary, Canada.

“What the hell is going on?” my father C.V. bellowed from down the hall.

I was 15 and filled with dread, fear and fascination. “The cops are here!”

My old man whipped-open the door. Five RCMP officers and a plainclothes tax agent burst into our home.

At the same moment in Calgary the Mounties and Revenue Canada raided my dad’s offices, his lawyer’s office and his bank branch.

Was my father a kidnapper or a bank robber? Hardly. Yet in the eyes of the government he was something much worse. He was a Libertarian and a gold-bug! Worst of all, he had been buying gold for his United States subscribers at a time when it was illegal for them to own it (more about this in a moment).

That morning agents were hunting down documents on my dad and his newsletter, Myers’ Finance & Energy (MFE). But they couldn’t touch his company, Interpublishing, a bona fide operation in Switzerland paying taxes in Switzerland.

Interpublishing was a legitimate offshore company set up by my dad’s accountants. Interpublishing was not a shell company. In fact it was organized the same way as the Canadian Pacific Railway Company, one of Canada’s oldest and largest public companies.

The Midas Mess
The Mounties were out to get their man. It had to do with Americans buying and owning gold and my dad acting as their agent. This had some in the U.S. Treasury Department very upset.

You see at that time it was illegal for Americans to own gold although most believed the law was unconstitutional, and indeed, the U.S. Treasury had become aware of purchases by U.S. citizens.

Meanwhile gold ownership was fully legal in Canada. So my father had started buying gold for any subscribers that could put cash on the barrelhead; charging only a small commission and storage fee.

C.V. wrote in MFE: “We don’t care if you are Chinese, Burmese, Russian or American. Gold ownership is legal in Canada; put the money on our desk and we will buy you the gold. Your account will be numbered but your corresponding identity will be kept secret in Switzerland.”

After the tax men had recorded every check which had been paid by the Americans for this gold they still did not have the owner’s names. And Washington wanted names.

It turned out they had just the instrument to get them. It’s called blackmail. You see, if the Americans couldn’t come forward to claim their gold it could be held hostage to any assessment the Tax Department might like to issue against my dad.

The hope was that mounting pressure from the gold owners would force my dad and the Swiss company to pay the assessment—right or wrong. My dad said it was like hijacking; the only difference being hijackers held third party lives while the tax men held third party money.

Americans Demand their Gold

Then good fortune shined. U.S. gold ownership became legal on Dec. 31, 1974. This meant that owners could come forward. But it meant much more. For if the claimants identified themselves, the Tax Department, having all the documents and keys, had automatically become the legal custodian to the gold and fully responsible, just as Interpublishing had been, to turn it over to the rightful owners upon demand.

The safety deposit keys and the identification list were sent via Teletype from Switzerland and turned over to the Tax Department. Now the tax men not only had the gold, they had everything, including the responsibility.

At this point they were holding a hot potato. Rentals on safety deposit boxes began coming due. Revenue Canada had to decide if it was going to bill the clients just as Interpublishing had been doing, or if it was going to pay the rentals itself? And what if an owner sent in an order to sell? Was Revenue Canada legally obligated to sell it and forward the check?

Like it or not the tax man was in the gold business.

My father advised all clients to write Revenue Canada demanding that they execute the delivery of their wholly-owned gold post-haste.

The Gold is Freed, the Gold-Bug Imprisoned
Things got pretty hot. The gold owners had to be answered. A huge counting operation was arranged. It included a representative of Interpublishing in Calgary, the company’s lawyers, the Tax Department, officials of the bank and two security guards. All boxes were opened, counted and recorded. In all there was $4 million worth of bullion!

When the count was finished it was found that every claimant’s gold was separately wrapped. Not a coin was missing. None belonged to C.V. Myers or Interpublishing.

Falling prices spurred American owners to action. Through a Calgary law firm they launched an action against Revenue Canada and the individuals they claimed had acted beyond their authority in withholding from them their rightful property.

The deadlock broke in March 1975, when the Supreme Court of Alberta admonished Revenue Canada and ordered the return of each and every ounce of gold to my dad’s clients. No damages were paid: there was not even an apology.

Norman Stone wrote a book about the case titled: Unbridled Bureaucracy in Canada, The Bizarre Case of C.V. Myers.

Stone concluded that Canada’s tax department had acted on orders, not from Ottawa, but from Washington. Furthermore wrote Stone, “The capitulation forced by the court left the taxmen (sic) red-faced, angry and vengeful. Talk among the personnel in the Department was funneled back: Get Myers!”

It didn’t take long. I was finishing up my junior year in high school. The old man and I pulled up to his parking space outside his office in late spring 1975. As we got out of the car door two plainclothes agents blocked his way.

“C.V. Myers?” asked the cop.

“Yes.”

“You are under arrest.”

“What for?”

“For evasion of taxes. I must warn you that you don’t have to speak and anything you say may be used against you.”

The cops cuffed my old man right then and there. I was dumbfounded. As the back door on the cruiser was being closed he yelled to me, “Call my lawyers, I am under arrest and on my way to jail.”

Tale of Two Trials
The charge was evasion on $1.8 million in income, exactly the same amount which had been assessed Interpublishing eight months before.

Later that day dad got out on $100,000 bail. But the real cost of urging Americans to buy and hold gold was yet to be announced.

Over the next two years my dad would face two trials. In the first one he was fully acquitted. The second case—a trial de nova (double jeopardy, which was later eliminated by the Canadian Constitution) found my dad guilty and sentenced him to two years plus a day. He was given hard time, especially for a man who was in his 70s.

After my mother died my dad stood over her casket. He was weeping softly as he held one of her hands between his handcuffed two. Behind him stood an impatient corrections officer, telling my dad to hurry, that he had to get him back to his prison cell. He led my dad away just as a young girl started singing my mother’s favorite song: Amazing Grace. My 8-year-old nephew began to sob. Our family mourned in quiet devastation.

But all was not lost. Word of the injustice began to spread. For example the late Congressman Larry McDonald and Congressman Ron Paul urged Ottawa to release my father. And there were editorials in the press condemning the sentence and calling my dad a political prisoner. Colleagues like Richard Russell, Harry Schultz and Jim Dines began writing the Prime Minister and Members of Parliament.

After my dad was diagnosed with liver cancer he was released from Bowden Federal Penitentiary. Less than two years later he died in Loma Linda, Calif., a free but broken man.

Gold had given my dad a sterling reputation, a loyal following and a small fortune. But in the end he paid a terrible price.

What was done to just one individual illustrates what lengths government will go to shut-up its opponents and enforce its will. I know, I was there; a witness to the war on gold.

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report