The Daily Reckoning Presents… February 28, 2015 Archives | Unsubscribe 5 Reasons the Fed Should Fear an Audit Big surprise, Yellen opposes a Fed audit… plus, reminiscences of 2012... This week's recommended reading, including: Ukraine on the cusp of "phase transition"... the case against Tesla… the day the ATMs run out… and more... Then, Dave Gonigam outlines this year's potential tax surprises... You have never seen anything like this video... You can find video footage of just about anything on the Internet. High-speed car chases... poorly made home videos... cats acting like dogs... So believe me when I say... I have never seen anything like this video... anywhere... EVER. Click here to view it now. Baltimore, Maryland February 28, 2015 Dear Reader, "I want to be completely clear," Janet Yellen told the Senate Banking Committee on Tuesday, "I strongly oppose Audit the Fed." "Central bank independence in conducting monetary policy" she continued, "is considered a best practice for central banks around the world," she said. "Academic studies, I think, establish beyond the shadow of a doubt that independent central banks perform better." Hah. What else was she going to say? Blogger Michael Snyder, spying sweat droplets on Janet's brow, compiled a list of one hundred reasons why a full Fed audit should have Yellen shakin' in her boots. Here are our five favorites... #1 "The period prior to 1913 (when there was no income tax) was the greatest period of economic growth in U.S. history." #2 "In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5%." #3 "Since the Federal Reserve was created, there have been 18 distinct recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008." #4 "The Federal Reserve has allowed an absolutely gigantic derivatives bubble to inflate, which could destroy our financial system at any moment. Right now, four of the 'too big to fail' banks each has total exposure to derivatives that is well in excess of $40 trillion." #5 "The six largest banks in the United States (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) have collectively gotten 37% larger over the past five years." I remember when Audit the Fed passed the House of Representatives in 2012. It was 327 yeas to 98 nays. At the time, I was at the Mises Institute in Auburn, Alabama. Dr. Joseph Salerno, one of their monetary scholars, stopped his lecture upon getting a phone alert to say, "I just want to let everyone here know, Ron Paul's Audit the Fed just passed the House." Everyone in the room -- staunchly in favor of ending the Fed, let alone auditing it -- started cheering and high-fiving. Months later, on Capitol Hill, there was a very small celebration in Dr. Paul's congressional office. The staff wanted to commemorate his retirement from Congress. There, we presented him with a matted and framed collection of three floor speeches he had made urging Congress to audit the Fed -- one from each of the three stints he served dating back to 1976. The fact so-many everyday investors know about the Fed and its impact on our wealth is a testament to the work of Dr. Paul's 40-year lone crusade in Congress. One of my favorite mementos is a copy of HR 459 -- Federal Reserve Transparency Act of 2012 -- signed by Dr. Paul and the entire staff. To my chagrin, it's in a box right now because my wife thinks it's ugly and refuses to let me hang it up. Heh. After the vote passed in 2012, we sent each member who voted for the bill a thank-you note from Dr. Paul and two chocolate gold coins. On one side, the coins said either "Audit the Fed" or "End the Fed," and on the other side, they were made to look like the reverse of the $20 Coronet Head gold piece. I keep two of them on my desk as a reminder of the havoc central banks and easy money wreak. They rest atop of a piece of gold jasperoid I brought back from an open-pit gold mine I visited with resource specialist Matt Insley in Nevada. Cheers, Peter Coyne for The Daily Reckoning P.S. The staffer who ordered the chocolate coins must've expected a unanimous vote… because there were a lot left over. When the 112th Congress ended, he decided to give me the rest of them. Since I joined Addison soon after, they've been in the same Folgers coffee can in my desk drawer for three years now. Just the other day, I had to tell an interested colleague to eat one only at his own risk... P.P.S. You'll find this week's five recommended essays below... A TOP 3 performer for the past 14 years Has your nest egg more than QUADRUPLED despite the turmoil of the last 14 years? Is every $100,000 you've invested now worth $431,000? Has your stock portfolio trounced the market with an annual average gain of 11% despite one of the harshest investment climates since the Great Depression? This model portfolio has -- and its newest BUY signal has just been revealed. Click here now for all the details. This Week's 5 Must-Reads Featured on Dailyreckoning.com… 1) The trouble with money printing, explained David Stockman on Thursday, is that it helps creates Teslas. Armed with earnings figures, he shredded the carmakers visage to pieces. If you own shares, you might reconsider after hearing him out -- though, one reader called it a "hit piece" in disagreement. See Stockman's argument and form your own opinion, right here. 2) Ukraine's on the cusp of what Jim Rickards calls a "phase transition" -- where confidence in money is lost and is not easily restored. Professor Steve Hanke of the Troubled Currencies Project has the details, right here. 3) Bill Bonner advised increasing your cash position on Tuesday. You're gonna need it after the machinery of the credit economy breaks down. Click here to read why. 4) The Chinese Year of the Ram purportedly ushers in promise and prosperity. Jim Rickards rained on that parade with his warning on Monday. Owning gold as insurance is a must, he says. But buying put options on China's financial sector would be even savvier. Here's the reason. 5) And last, but not least, Dave Gonigam, editor of our sister publication, The 5 Minute Forecast, outlines this year's potential tax surprises... Need a Vacation? Why Not Go for FREE? While you sit there at home... You wouldn't believe how many Americans are going on FREE adventures all around the world. No, I'm not talking about some time share scam. These people don't do a thing they don't want to. And they go wherever they please. Hard to believe? Believe it. But keep it secret. Click here for all the shocking details. How Rich is "Rich" at the IRS? by Dave Gonigam "Will there be a nasty surprise in your tax return?" asked the article from Pinnacle Advisory Group, a private wealth manager. "Tax Day could bring tax surprises for higher-income taxpayers," chimed in H&R Block. This was a year ago. Indeed, many taxpayers were surprised by changes Congress and the White House pushed through even earlier… when they pulled back from the "fiscal cliff" at year-end 2012. (They shouldn't have been surprised if they were reading The 5 Minute Forecast; we documented the changes in real-time…) Worse, some people who thought they were aware overlooked a few critical details. But that's ancient history, right? Except if you had a good year in 2014… you might be sucked in without realizing it. Let's explore… The one thing "everyone knows" about the new tax landscape is that the "Bush tax cuts" remain in effect as long as you and your spouse make under $450,000 a year (single $400,000). Beyond that, you jump from the 35% bracket to the top Clinton-era rate of 39.6%. Actually, that was last year's figure. It's been adjusted for inflation, ever so slightly. This year, the threshold is $457,600 for couples ($406,750 single). Lots of people who thought they were paying attention figured they were home free as long as their income was under this threshold. Not so… In their quest to punish "the rich," Congress and the White House defined "rich" at a much lower figure than $450,000. In their quest to punish "the rich," Congress and the White House defined "rich" at a much lower figure than $450,000. The "fiscal cliff" reforms also include a phaseout of itemized deductions and the personal exemption. That is, your deductions are limited as your income grows. For tax year 2014, the phaseout starts at $309,900 for couples (single $258,250). Bad news if you're paying a lot of mortgage interest or you're subject to high state income taxes. But even if you're below these thresholds, you're not in the clear… Don't forget about the 3.8% Medicare tax on investment income. This one was not part of the "fiscal cliff" legislation but instead came into effect with Obamacare. The tax applies to "unearned" income -- capital gains, dividends, interest, rental income and so on. The "rich" threshold here is lower still: The tax kicks in on couples' taxable incomes above $250,000 (single $200,000). In addition, the same thresholds also mean an extra 0.9% Medicare tax is applied to your wage and/or business income. So there you go: The feds consider you "rich" if you make $250,000 -- not $450,000. It comes back to the point many wags have made in recent years: There just aren't enough really rich people to keep the federal government funded in the style to which it's become accustomed. By one estimate, the feds could seize every penny of income above $250,000 and it would fund the government for less than five months. That means two things: The threshold for "rich" will keep getting defined down until it snares you. It pays to take every step you can -- right now -- to limit the IRS' take. Unless you think tax rates are likely to stay stable or fall from levels that are still near post-WWII lows. It's with No. 2 in mind especially that the Laissez Faire Club has prepared its all-new special report, Vanishing Point: How to Disappear From the IRS This Tax Season and Save a Boatload of Money in the Process. You'll learn more than 97 tips from IRS insiders -- well, former IRS insiders -- like… A valuable way to deduct thousands of dollars without a single receipt. No longer will you let missing receipts keep you from taking deductions you're entitled to The juiciest tax shelter? Hint: It has to do with your family. A $10,000 investment saves you $9,000 in taxes… year after year after year The "Intimate Co-worker" that allows you to potentially double, even triple the amount of money you put toward retirement. The only question is do you qualify for this weird-sounding program? About HALF of Americans do. Don't file your taxes until you've seen this report. Heck, if you have filed, get the report anyway and file an amended return. It could be worth thousands of dollars. We're sure you have better uses for it than Uncle Sam. Learn how to get a free copy at this link. Regards, Dave Gonigam for The Daily Reckoning Ed. Note: The video at this link shows you how just 30 additional minutes per month could save you thousands per year on your taxes. In fact, it promises to help you save at least $2,000 on your taxes this year alone. It's is not some gimmicky "loophole" that may not apply to you. Nor is it a shady deal that could land you in hot water with the government. This video will agree to show you 97 completely legal ways to lessen your tax burden. This year -- and every year -- for the rest of your life. So before the IRS gets wind of it… Click here to watch this video right now. Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer. 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