Bill Johnson

Nov 3, 2008

Your Dollars Are Going Farther

“THE BANKING SYSTEM IS HEALTHY” so said Ben Bernanke, the Federal Reserve 
Chairman, on October 15, only a year ago.  At that time, only a few of our 
prestigious financial institutions had fallen.  

Just prior to the collapses, in Washington DC, the G-7 scolded the U.S. to 
get its financial house in order.  The U.S.’s response was one of overbearing 
pride, acting in a superior manner toward its inferiors.

The greatest game of chicken was in play, and the U.S. wouldn’t flinch.  

That didn’t matter because to the little people who work and save or gamble
in the market - all is an illusion.  It is not a matter of perceived reality; 
it is a matter of actuality.  

The media and leaders of the American people are presenting a falsified 
scenario to those who received the bill for the bailout.  Only if you look 
closely can you see what happened.  

Our nation’s financial picture is so stark that to see it for what it is, is 
to gaze upon a surreal scene that we cannot believe is true.  They’ve just 
handed us the bill after a long drunken party and the band is packing up to go.  

The reality is that the little people will now live a life of national 
servitude to other nations and corporations.  The party is over.  It’s time 
to pay the piper.  It is disheartening, but this mighty nation is in hock.  
Not only are the people in debt, but so are the big financial institutions 
that supposedly are worth billions of dollars but can’t make payroll.  

Yes, many little people owe the banks, but the banks and financial houses owe 
other institutions, entities and nations while the U.S. owes the world.

As the sheet is pulled back and we view the corpse of a once vibrant economy 
with prosperity and opportunity for all, we see a toe-tag with special 
instructions.  It says, “Wake this little guy up and send him to work in the 
salt mines.  He now has a corporate and national debt to pay.”

Very few recognize what just happened in the halls of congress before their 
very eyes.  You and I were sold into slavery for the failure and debts of our 
financial houses.  

When such institutions fail, elected officials have choices.  Let them fail, 
passing the losses to the shareholders and risk takers, or bail them out and 
pass the losses to the citizenry.  

A bail out has more than one meaning.  If you are in jail, to be “bailed out” 
probably means that you did a bad thing and will stand before a judge someday 
soon.  So if we bailed out the financial institutions, when will they be 
judged?  Or, did we just hand them a “get out of jail” ticket at our expense.  

What? . . .  No trial?  . . .  No punishment?

Remember that the little people like you and I only owe the banks, while the 
banks and financial houses owe other institutions, entities and nations 
everywhere.  That doesn’t mean you and I should be made responsible for the 
obligations of financial institutions.  That was their mess, not ours.

The fruits of the labor of the American people will now be extracted in careful 
measure to satisfy the actions of financial institutions that were unrestrained 
by convention or morality.  Uncle Sam with his mighty inflation machine along 
with the help of the IRS will see to it.  

As things get a harder, and dollars don’t go as far, do not despair.  Really, 
your dollars are going farther.  Your wealth and labor are on their way to New 
York and nations like China and other creditor nations.

Even if you do not have a mortgage or credit card, you are now paying down 
debts; the debts of smart financial wizards who miscalculated in the first 
place, but were smart enough to hand you the bill, via our elected congress.  

Do we need term limits?  No!  Stupid people should only be allowed to vote 
twice.  Enjoy your shackles. 

Bill Johnson

Sep 30, 2008

All Wealth Comes Out of the Ground

Simple but true.  Gold, oil, food, wood, iron ore and even silk are just a few of 
the basic materials harvested from the good earth.  Add a little sweat and 
creativity and we have products, an economy and real wealth.  This wealth has 
substance and inherent value. 

Then there is the paper-wealth industry, which attempts to make their money by 
outsmarting others in the paper-wealth industry.  They take pride in out-harvesting 
others in their industry, not by creating actual wealth.  The paper-peddlers who 
can create the most complex scheme is the one who captures the most hard-earned 
dollars from unwise investors.

This group knows no bounds when it comes to selling a bright future to their marks.
Most investors gamble in two ways; either by trusting paper-wealth-creators to 
create value, or by buying financial products they don't understand.  One wonders 
if the typical financial sales person understood what he was selling.  If he did, 
it might be time for a Gray Bar Hotel experience.

As you see now, Wall Street's big gambling houses bore names that resembled banks, 
but did not create value.

Take a grander view of the landscape.  On one side, you have the real economy with 
producers creating value, and on the other side, you have the financial district 
and their artificial wealth paper sellers, which at best can only offer a claim-
check for a hopefully bright future.  Your claim-check, which is your monthly 
account statement, is just like the one a dry cleaner gives you in exchange for 
your suit. 

The dry cleaner has to protect and deliver your suit.  Not so with the paper 
wealth people who make you sign an acknowledgment, warning that, “Past performance 
is no indicator of future performance”.  This translates; “Invest with me at your 
own risk, Buddy.  I warned you.”

What hard-working value-creators are just beginning to realize is that they handed 
the fruit of their labor through Alice’s Looking Glass to a not-so-real-world of 
paper wealth, expecting to reach back through the mirror in the future and 
magically pull out big gobs of cash.  The problem is that the paper wealth guys 
and gals took the cash, offered hope, but didn’t did do any actual work to produce 
real wealth.  The workers handed their futures to the gamblers and America lost. 

Now that the Paper Wealth Creators are exposed, people are realizing they can’t 
reach back through Alice’s Looking Glass for their retirement funds. 

This has caused the paper wealthers to go to the government for help.  May I 
remind you that, you and I are the government.  You and I are going to ‘make 
good’ their promises.  In other words, working people handed them something of 
value and it was squandered - vaporized.  Then in turn, the money industry comes 
back to the very same working people asking to be bailed out. 

They want us to give them money so that they can give us money back.  Do you see 
the circle?  Our common problem is much larger than a few upside-down homes or 
retirement accounts. 

The problem is one of artificial wealth creation.  Paper wealth is the problem.  
We cannot continue to inflate our money supply without damages. 

Here is the little secret.  Whoever gets to increase the money supply gets to 
enjoy the increase.  Our banking system works in concert with the government to 
increase the money supply.  They will not feel the pain the working people will.  
They reap benefits without producing wealth. 

I make no apology for my view of the paper-wealth-economy and my distrust of the 
ability of the government to do what’s best for the voiceless little guy. 

For years I have predicted this mess, warning that there will be many unhappy 
campers.  The Savings and Loan Crisis, Black Monday, and the Tech Stock meltdown 
of 2000 were for practice. 

It is not a question of how much longer until it gets better.  It is a question 
of how much worse it will get.  Many will have to start over if they don’t 
quickly preserve what they have placed in trust with the Paper-Wealthers.

Bill Johnson

March 29, 2007

The Butler Did It

Just imagine you are standing on the outside of a fence at an insane asylum
engaged in a conversation with an inmate. He can make big plans and articulate
his rights, but he's powerless and unable to check himself out. He is the ward
of a guardian.

The guardian tells him what to do and when to do it. He is not free. Others
manage his affairs and he is not part of any decisions that concern him. We,
like the ward of the asylum, have placed ourselves into a similar relationship
not realizing what we have done.

However, you ask, "What does this have to do with the butler?"

Suppose your name was "We the People" and several generations ago, you were
named the beneficiary of a great estate called "These United States." Let's
also suppose that our ancestors designed a very special trust named "The
Constitution of the United States."

We don't need to imagine such a scenario because this is true.

With exquisite wording the Constitution, which is a trust, declares how the
trustees (the government) would serve the beneficiaries. With a full set of
instructions, duties and limitations, the constitution is just like an
employment contract for the government. These trustees were given only eighteen
specific jobs and duties - no more and no less.

The crafters later added the first ten amendments to make sure that future
servants knew their limitations; shackling them like slaves and making sure they
knew who answered to whom.

It's taken a couple hundred years, but now the servants pretend that they are in
charge of the beneficiaries who feel they are powerless against an almighty
government.

Not only do we feel powerless, but also we are treated like wards since they are
withholding information from us that concerns us.

For example, let's pretend the family chef comes to you with a budget of $1,000
for meals. Then next year he submits another $1,000 budget. This would be fine
if the budget needed $1,000.

However, if only $900 was needed for meals, the extra $100 could offset next
year's budget. You'd only need $800 to complete the $900 needed. However if
the chef invested the change without your knowledge and requested another $1,000
you would be upset.

Likewise, investing a tax surplus is prudent, but shouldn't we be given the full
financial picture, not just a budget request? Shouldn't we be informed of any
'invest or offset' stance our hired help intends to take?

Year after year government bodies and even school districts present padded
budgets without informing us of a surplus and their intents for any surplus.

The full financial statements of state or local governments and school districts
can be seen at web sights such as www.cafrman.com. These sights offer keen
insight and tell you how to obtain Comprehensive Accounting Financial Reports
(CAFR) from the government.

Just imagine the fun you could have during a budgetary meeting and asking
questions while holding up a copy of the CAFR. Our public servants would squirm
as they explain to the audience why they need to collect extra taxes.

As beneficiaries, we need to watch our trustees for the preservation of our
estate. Not only would they overtax us and rat-hole the difference; they might
even overspend. Who knows what kind of problems that could lead into?

More Lipstick on a Pig

It was only 95 years ago when the Federal Reserve was born, and many are 
surprised to learn that it's not our first national bank.  Fewer people realize 
that it is a private corporation, just like Federal Express.  

The difference between these two corporations is that the Federal Reserve has 
achieved 'agency status' for the United States Government.  This is very 
similar to the agency status of other solid financial institutions like 
Fannie Mae and Freddy Mac.  These agencies, representing Uncle San are in it 
for profit, much like the Motor Vehicle License Bureau, which is a state 
sponsored business or franchise.

It's reassuring to know that our government has blessed a few corporations 
allowing them to operate under the oversight of Congress.  These entities are 
backed by "The full faith and credit of the United States".  In other words, 
if something goes wrong, keep those tax dollars flowing.  

What is the role of the Federal Reserve?  As the top bank, they are the 
'Lender of Last Resort'.  The Fed is operating in this role now as banks of 
all sizes are scrambling for money from the Fed, which is handed it over to 
their large clients.  

To keep these banks solvent, the Fed has transferred assets from its own 
balance sheet to underling banks with prestigious old names.  Actually, the 
Fed has already transferred half of its assets to avert bank insolvencies 
and we have a long way to go.

They are doing this because large clients want their money back, no 
differently than grandma going to the bank and redeeming her CD early 
because of fear.  

When the average person thinks of a bank run, they envision the movie, "It's 
a Wonderful Life" and George Bailey contemplating suicide because the town's 
people have lost faith in his bank.

What is actually happening behind the curtain is the big money boys are 
conducting a run on the banks by fleeing bad financial paper and sick banks.  
This has put a tremendous strain on the system, and the balance sheets of 
banks.  A bank is only as good as its assets, and with large investors 
redeeming paper and pulling deposits, once strong institutions are now 
fragile, subject to seizure by federal regulators.

This leads to the seventy-five year old FDIC, which is the Federal Deposit 
Insurance Corporation.  It is easy to see the FDIC is just an insurance 
company or corporation acting as an agent of the government.  

Knowing that your account is insured should make you feel warm and fuzzy 
until you realize that their promise is a little open-ended.  Here's a quote 
from the FDIC.  "Even in the rare cases when the FDIC cannot find a buyer for 
a failed institution, payments to insured depositors begin within a few days.  
In fact, the goal of the FDIC is to begin mailing checks representing insured 
deposits within one business day.  As noted above, payments for certain types 
of accounts may take longer."  

Incidentally, the recent collapse of IndyMac drew down a full twenty percent 
of the FDIC's reserves all by itself.

Why should we be concerned if we're in the good hands of Congress, a lender 
of last resort and a seventy-five year old insurance company?  It might be 
because as a nation we have not experienced what we are going through now.  
Not even during the Great Depression.

If you can access the internet, you need to see a chart on the Federal 
Reserve's web site going back to 1919 at 
http://research.stlouisfed.org/fred2/series/BORROW?cid=50

Anyone who has seen it is awestruck.  It shows that since 1919 the sum of 
all bank borrowing from the Fed has been a few billion at most.  It's rather 
calm other than a little bump for Black Monday.  However, recently borrowing 
has gone straight up, as if off the chart and has not turned down yet.

Looks like a big-boys bank-run. 

For the last couple of months I've sent people to their brokers with a copy 
of the chart.  I have them ask, "What does this mean? How does this affect 
me?  For some reason, they can't explain it, but assure their clients they 
need to stay in the market.  Beats me.

Bill Johnson

April 27, 2007

The Comfort of Blissfulness

About twenty-five years ago, my in-laws took a trip to their homelands of
Germany and the area once known as Czechoslovakia.

When they returned they had many stories to tell, but two of the stories will never
be forgotten by me. The stories molded my outlook on life and how I view
government and control from above.

The first was about a Czechoslovakian family member, who praising free social
medicine mockingly pointed at his big toothless smile and said, "Look, free
medicine . . . you get what you pay for."

I think that no comment is necessary on this story, but with the second story I
may not be able to contain myself.

In Germany, my in-laws visited a lot of friends and family. What they noticed was
that every body had so many benefits from their unions and the government that
included shorter workweeks and an untold myriad of niceties. What was especially 
remarkable was that their union jobs paid very well.

They visited one girl at work whose job it was to put plastic flowers in decorative
boxes for sale. My mother-in-law was impressed that in perhaps 1980 the girl
made $14.00 an hour without pressure to perform whereas my mother-in-law
made perhaps $7.00 an hour doing laundry at a local hospital with very few
benefits.

As they explained, Germany had a better education system too. You could be a
full-time student and live off the government, and many that they met were
perpetual students drawing an actual paycheck just as if the had a job. In
addition, if our young flower girl was expecting a child, she did not have to work
for a year or so. She would continue to receive her check from somewhere,
whether it was her employer or the government, I do not know.

They thought that all of this was just grand, yet without examination, they didn't
connect the two stories. In both of the stories, someone had to pay for the
benefits. For the former Czechoslovakian, his government wasn't fooling him or
taking the money from someone else to buy his vote. The government was in full
control.

In the second story, those in control placed heavy burdens on those who
produced to pay for these magically free benefits. Today many in our Country
want something for nothing called National Healthcare and are willing to deceive
themselves into such a mess.

Social Security is built on smoke and mirrors, and I believe Medicare along with 
Medicaid belong in a hospital bed. Yet with the anemic finances and looming
cutbacks of services in these programs, we want to springboard into an ever
larger program with even greater costs and complexity.

Oh yes, I forgot to tell you about an article I read a few years ago.  I haven't 
confirmed the story, but it makes for a good lesson. . . 

Germany with a great need for tax revenues made prostitution legal so that they
could tax it. They needed tax revenues. Then the brothel owners realized a new
benefit as taxpayers; they could use the government's unemployment agency to
find night workers. Since the government legalized the trade there were no
moral issue involved.

Now, when a young girl looses her job as a server in a nightclub and seeks an
unemployment check or job, she may have to decide whether she will turn tricks
or be denied benefits. We all know the government needs those tax dollars and
many people depend on those government checks. Doesn't she realize we are
depending on her?

Just imagine grandma receiving her monthly check, never making the connection
that her granddaughter grudgingly contributed because both the granddaughter
and the government were desperate.

Both of these people have allowed themselves to become dependent on others,
or more specifically, government.

Sadly, I know that many of our readers depend on others and the Social Security
check.

However, if you amassing your nest egg or have a little true wealth, you need to
reduce your taxes to the legal minimum, make your dollars work harder than
anybody else's, eliminate credit card debt and structure your affairs so that you
are in a financial and legal fortress.

Those who seek standard advice receive standard results. The wealthy have a
broader perspective on legal and financial affairs and seek advice without
bashfulness. By the way, most of them will leave a fortune to their
granddaughter.