Invisible Hand Episode 16: Interview with Michael Shanklin

July 11, 2010
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This episode of The Invisible Hand features my recent interview with Michael Shanklin. Mr. Shanklin is an activist for Libertarianism and Austrian Economics who has a weekly podcast at BlogTalkRadio, and frequently writes for several websites, including PeaceFreedomProsperity.com and shanklinmike.blogspot.com.

Also, here are some of the news stories included in this edition of the podcast:

  • The Washington Post reports that, for the first time ever, the United States has opened itself up to a full-scale review of its financial sector by the International Monetary Fund, something that is routine for other G20 members, but which the US has always refused in the past. The results are what the paper describes as “a bitter pill”, as the IMF strongly criticized the government’s debt-to-income ratio, recommending that the latter be sharply increased while dramatically decreasing the former. Specific steps suggested by the organization included decreasing social security payments, increasing fuel taxes, and eliminating income tax deductions for home buyers.

    The report comes as President Obama has recently promised the G20 group, at their meeting in Toronto, that he was committed to cutting the budget deficit in half by just 2013, something the IMF doubts will be possible, according to their report. Officials from the Obama administration downplayed the accuracy of the report, claiming that it was overly bearish on the future of the US economy. Speaking off the record, one official told the Washington Post that the IMF’s figures were “overly pessimistic” compared with those of independent analysts hired by the administration. One of the reasons for the divergence in opinion stems from the fact that the IMF is assuming for their purposes that the US will have to borrow money at a higher interest rate in the future because of a lowered credit rating, which the President’s projections do not include.

  • Gordon T. Long of Market Oracle is warning of a new credit crisis if BP files for bankruptcy which could be greater than that caused by the collapse of Lehman Brothers in 2008. This is because of BP’s activities as a provider of credit, and their involvement in the global over-the-counter derivatives market. Since BP has historically been a cash-generating giant, it has been able to borrow tremendous amounts of money at low interest and loan it out for higher interest. According to Moody’s, the bankruptcy of BP, or any of the other companies and subsidiaries involved in the oil spill, could affect a full 18% of the total global market of Collateralized Synthetic Obligations.

    BP has already been dropped to BBB by the credit rating agency, while two other companies connected to the Deepwater Horizon disaster, Transocean and Anadarko, were recently downgraded from “stable” to “negative.” The article on Market Oracle noted that BP has recently been “aggressively repositioning trillions of dollars in global currency, swap, derivative, options, debt, and equity portfolios,” and that major banks, like Bank of America, have significantly shifted their BP holdings lately, all of which indicates a potentially seismic “credit event” is about to unfold. The article quotes an analyst named Jim Sinclair as saying “God only knows how many assets around the planet are dependent on credit and finance extended from BP. It is likely to dwarf any banking entity in multiples.”

  • Knight Ridder reports that the Legislative Assembly of Costa Rica has voted 31-8 to allow the US to deploy 7000 marines to “circulate the country in uniform without any restrictions,” along with dozens of warships and submarines that will be sent to the area. The purpose is allegedly for “anti-narcotics operations and humanitarian missions.” The operations are set to take place now through the end of December. The dissenting votes came from opposition parties who complained of a loss of domestic sovereignty, disproportionate force, and the potential of collateral damage from the operations. Some websites, including Survivalist News and WeLoveCostaRica.com, have suggested that this is being done to move troops currently stationed at US Southern Command or SOUTHCOM, based in Miami. Both websites speculated that the US military is trying to quietly evacuate military assets from the Gulf of Mexico due to fears for the health and safety of the personnel.

  • the Daily Mail is reporting that an airport in China was closed on July 9th because of a UFO sighting. Several dozen flights were diverted as a strange lighted vehicle with a bright comet-like plume trailing behind it was spotted in the sky by several residents, many of whom were able to photograph it. According to the paper, “some Chinese experts claimed that the strange sight was actually debris from a US intercontinental ballistic missile.” Officials for the Chinese government later disclosed that the object was known to them, but that they couldn’t discuss further details because of a “military connection.”

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