Archive for the ‘European Union’ Category

The Return of the Wall

Wednesday, December 12th, 2012

Soviet Union Part Deux

After witnessing the fall of the Berlin Wall, and indeed, the collapse of the entire border frontier between East and West firsthand near the end of my military service, I thought those days marked the final death-knell of communism around the world.  In more than two decades since those days of hope, as it seemed the globe might begin to abandon the plots and schemes of the central planners, what I witnessed is that rather than take the hard-learned lessons forward with us from then until now, we’ve forgotten them.  Discredited and defeated, communism should have been dead, but it’s not gone away after all.  In the last several years, it has made a resurgence, as the generational memories of the terror it brought upon the globe fade, and younger generations fall prey to the song of the socialist sirens.  With communism and its more socially acceptable forms, “socialism” and “progressivism” making a comeback, it should be a surprise to read that the French Prime Minister, Jean-Marc Ayrault, announces in spittle-laden bellicosity that the rich fleeing France for Belgium to escape the high taxes should be considered less than patriotic.  Reading the translation of his remarks, one can only wonder how long it will be before France, like the Soviet Union before it, erects walls to prevent its most successful people, or even people seeking simple freedom from leaving.

When one reads of remarks like this, when armed with even a modicum of historical understanding, one must recognize the frightening threat of a return to the darkest days our world has yet known.  How far from Prime Minister Ayrault’s thinking are the gulags and concentration camps?  Certainly, he’s not proposed such a thing…yet.  Still, in the manner of his speaking, one can see the manifestation of the same old demons being raised up, under the same old guise, and with the same ugly motive. Perhaps worst of all, in castigating those wealthy people leaving France, among them notably the famed French actor Gerard Dépardieu, Ayrault’s accusation is that the wealthy who flee are suffering from a lack of generosity.  This is quite obviously a sick attempt at reversing the guilt onto the innocent, but it’s no surprise from a government now headed by President Francois Hollande, who declared infamously that he didn’t “like the rich.”  The reeking pomposity of socialist dictators-in-waiting has never known more hypocrisy.

In our own country, Barack Obama is continuing that same trend, and the long-time leftist slogan “Eat the Rich” seems near to being implemented in full.  At the rate things are progressing toward a complete worker’s paradise here in the United States, it’s only a matter of time before he decides we need a border fence after all, not to keep illegals out, but to make sure that none may leave. As the Europeans continue to build their coming continental concentration camp, from which only the powerful like Hollande and Ayrault will be afforded the chance to flee, Obama is building another right here, and he’s feeding the lap-dog press the same deceptive and hypocritical banter about the rich, as his family enjoys a multi-million dollar holiday in the state of his [alleged] birth. (Like most Marxists, I suspect he was actually hatched.)

How long will it be before we see the return of the barbed wire and fortifications, complete with machine gun nests, not to defend a country, but to keep its enslaved people from leaving?  With the spreading, grotesque mindset of communism once again spreading like black mold on a too-long neglected basement wall, it seems history is poised to once again repeat itself, because while a people may learn a given lesson by living it, they do a poor job of conveying those lessons to their children.  Worse, they pay for their children to be indoctrinated by the very mindset they overcame, and more is the pity and travesty that the education establishment will  have served not as the instrument of our protection, but the weapon by which the communist sappers undermined our cultural and intellectual fortifications.

You might have come to think it is an exaggeration to suggest that those now in power in France could build a wall, but one ought to consider the words of some of their politicians, as quote in the Telegraph:

“Socialist MP Yann Galut called for the actor to be “stripped of his nationality” if he failed to pay his dues in his mother country, saying the law should be changed to enable such a punishment.”

The idea that a politician is seeking to punish people in this way is not a novelty, but it isn’t lost on most conservatives that the underlying meaning is purely tyrannical.  Meanwhile, another government official had this to say:

“Benoît Hamon, the consumption minister, said the move amounted to giving France “the finger” and was “anti-patriotic”.”

Setting aside the fact of this man’s preposterous title, one must wonder at the sheer idiocy of a country that revels in revolution but cannot rise even to defend its own borders.  Being partly of French heritage, I can’t but imagine that my ancestors who came to North America sought the freedoms their countrymen now forsake, and I am mightily grateful that they saw fit to do so, but I am simultaneously disgusted at the fact that so many of their descendants now seem willing to forsake liberty here.  Communism isn’t dead after all, but tempting us to believe it permitted them to make inroads, and I don’t know if they can be stopped.

With darkness and depression enveloping the globe, it is time to remember the wall between East and West, because we may yet see its resurrection on a global scale.  It’s also time to reconsider whether we should have let so much of the wall be destroyed.  Demolishing it meant that the visible scar upon the face of civilization has been removed, and while the wall itself may have gone for a time, the mindset that had built it now thrives around the globe.  If we are to dismantle communism again, it must not be its mere instruments that we remove, but its entire philosophical base. It must be placed and kept on ice like a virus stored as a hedge against the need to redevelop new vaccines in case of a new outbreak.

 

Is It Inevitable?

Sunday, May 13th, 2012

 

or This?

Rightscoop.com picked up on a fascinating call Mark Levin took on his show on Friday evening, and what made the call interesting on its surface was the subject matter, and the identity of the caller, Nicholas from Paris, France, and why he thought the world was in trouble given his country’s swing to the hard left in the recent election.  The caller was concerned for the US, and the notion that we are turning into France.  While that’s very important, and certainly bears examination, there’s something else in this call that I found revealing.  I want you to pay attention to what Mark Levin says in response, and what it portends for our future, here in the US. It’s not that it wasn’t clear, but that the context of the call actually serves to hide the worst, most frightening aspect of what was said in the exchange, and if you’re like me, you heard it too:

Levin responds by re-stating the caller’s root question:

“Your question though is “how do you get out of this?”

He then warns the caller that the answer isn’t pleasant:

“I’m going to tell you and you’re not going to like it.”

“The system will have to collapse before it can be rebuilt.”

Think about the context of this remark.  I don’t believe Levin intended it to be taken this way, but everything he tells the caller about France applies to our domestic political situation, including the way we “get out of this.”

I offer this to you because in my few spare moments lately, I’ve been giving some thought to the apparent futility of many of our efforts.  We hear from this caller that in his country, there is only the socialist answer for everything, and I wonder how familiar that this has become to us.  Whether it’s the leftist front and the Democrat Party, or the Republican establishment with their so-called “compassionate conservatism,” all of the answers are big-government, and all are oriented toward socialistic ideas and ideals.

This may come as a shock to a few, but I have long thought that what Levin here admits is true, and that in logic, this system cannot be sustained indefinitely is clear, but the fact that we will likely go through an excruciating collapse is less clear to many people.  The reason is simple, and Levin makes the argument correctly: There are too many people who depend upon this socialist welfare state.  There are too many interests invested in continuing as-is, and virtually none interested in stepping back from it.  The idea behind “austerity” is to try to get back to a sustainable basis, but as you can see from Europe’s results over the last few weeks, austerity simply won’t hold up over the longer run because people are too consumed with short-run comforts, particularly those obtained without effort through the welfare state.

If you believe that same mindset isn’t prevalent here in the US, you’re mistaken.  We are not immune to this thinking, and there is every evidence that we are on the same course, though perhaps a half-step or so behind.  This causes me dread, because what I am coming to believe is that until this country collapses, we will never rebuild it, and I am terrified that those who rebuild it will not be of the same character and temperament as those who established this nation in the first place.   More, I think we may see horrifying conditions erupt along that path, with violence unlike any we have seen or known since the Civil War, and perhaps much worse. In short, collapse seems inevitable, but what that collapse may bring could be even worse, and there is no guarantee that we will emerge as anything even roughly approximating the nation we had known.

or even This?

It is true to say that Obama and his acolytes will have a hand in driving us over the precipice, and indeed, they already have, but let us be circumspect in our evaluation of our situation:  The establishment wing of the GOP has been right there, guiding us in that same direction, albeit somewhat more slowly, but no less indefatigably leftward.  Mitt Romney might be our next President, but if so, what of it?  He, who established Romneycare in Massachusetts will be no more likely to lead us away from socialism than, for instance, Nikolas Sarkozy in France.  In fact, it’s fair to say that Sarkozy is probably a fair analog to the sort of “conservative” leadership Mitt Romney offers, which is to say: It’s not conservative, and it will not change our general direction, or the long-range result.  It will serve as merely one more delay or postponement.

It’s not my intention to cause you undue worry, but it is important that we remain somewhat clear-headed in our view of what it is we’re out to accomplish.  We may see a complete collapse of our country, and it may get as ugly as ugly gets, but I also believe, like Levin admits here, that it is probably inevitable.  What it means to the greater body of the American people is that if you ever wish to return to a free society, you had better start agitating and educating on behalf of such a society now.  Historically, few of the societal makeovers through which nations proceed are bloodless, never mind painless.  More importantly, however, only one came out as well as our adopted Constitution, but what it has demonstrated is that statism, given any loophole, either in the law, or in the culture, will multiply, magnify, and overpower all the restraints thought to have been place upon it.

Our founders attempted to give us a Constitution that would withstand such turmoil, but in the main, avoid it.  It was an imperfect document, but it offered the best shot at a nation built on the basis of individual liberty the world has yet known.  It’s  restraints upon the aggregation and growth of power in the Federal government were not strong enough, and while they may have been plain in the language of our founders, still the language was not plain enough to prohibit the power hungry from perverting the meaning, not merely of the text, but of the very words that are used throughout.  The academics have taken “the people” to mean a collective body, rather than “all individual citizens,” and in this way, we are slowly having our liberties stripped away and delivered to collective notions of “rights,” all to the detriment of individuals.

Ladies and gentlemen, Levin may indeed be right about this, whether he intended it or not, and it’s another warning you should take care to heed.   We are in desperate trouble, and much of it arises from the very contradictions that are slowly consuming us.  Many Americans claim to be “constitutional conservatives,” but I wonder what commitment there is to that idea in practice. Are you willing to undo all the statism that this characterization should imply?  I am, but for my part, I recognize that I am of some tiny minority that would be considered “extreme” both in France, and in the United States, in “polite” political circles.  I read the US Constitution plainly,  and I am versed in the context and meaning in which our founders wrote it.  I neither wear the rose-colored spectacles by which one might imagine into existence rights that cannot exist in logic, nor do I wear the dark masks of those who wish to conceal their grasp for more power.

Our nation cannot survive on its current course.  Cannot.  Will not.  Whether the election in November provides us another four years of the aggressive, lurching tyranny that is Obama, or the more careful, plodding nanny-statism of the Sarkozy-like Romney, the direction is the same, with only the speed along our course varied by the result.  The fundamental issue that confronts us in our time is the same as that which confronts the French or the Greeks, and what would be required to see the salvation of our nation is that which people across Europe now seem to refuse: Austerity.   Austerity is merely the willingness to tell oneself “no” in the short-run, at pains on behalf of a better long-run, and to date, I have yet to see any evidence that a majority of voters (never mind legislators)anywhere are inclined to such self-imposed discipline.  Knowing this, the end of the story may indeed rest in the sentence uttered by Mark Levin:

“The system will have to collapse before it can be rebuilt.”

If it’s true of France, and one could suppose that it is, one might ask whether it isn’t also true of the United States.  What will we be, as a nation, and as a people, when we have been reduced to a sort of atavistic tribalism in which volitional production is replaced with legalized looting of one’s neighbors?  What will the context of that culture impose on the sort of law and governance that emerges?  Do we dare to hope it might in any way resemble  the masterpiece of 1792, much less exceed it?  My pessimism on the subject may reflect my own recent experiences, but history’s judgment is no less worrisome.  If we are to become again a free people, we must change our course entirely. We must identify our malady, and cure it.  Instead, what we now seem to do is to pretend it away.  Until we learn to say “no” and to mean it, we are merely bringing a birthday cake ablaze in candles and gaiety to a what is instead a terrible funeral, with a dirge as our melody.  For those who have mistakenly thought “it could never happen here,” however one might define “it,” the simple truth may be that we’re already well on our way.

It may well be inevitable.

 

 

Dereliction or Treason?

Tuesday, February 7th, 2012

What's He Doing?

Ladies and gentlemen, I am going to offer you a number of facts to consider and then I’m going to ask you to consider them as a complete set.  At present, our military is falling into a disgraceful condition under the maladministration of Barack Obama. In fact, the condition of the country at large is one of unsustainable weakness, but every day, Obama undertakes more bad ideas that hamper or harm our nation.  Most assign this to a reckless incompetence, and while I can understand the desire to not think the worse of a US President for his intentions, I am questioning them now as far too many things seem to be aligning disturbing synchronicity.  It seems as though something is wrong with this President, and it may be far worse than misguided intentions. His actions as President have severely undermined our defenses, and may make us essentially naked to aggressors. When one observes such a trend, it must be called to the attention of his fellows, because if this is intentional, then the only name for this is not “dereliction” but instead “treason.”

We are now slashing the defense budget to make room in the Federal budget for entitlements, including Obamacare’s implementation, and all those other programs previously in existence.  We are now grounding our Air Force’s fighters at a phenomenal rate.  We are nearly 20% weaker in this vital area than we had been a short decade ago, and cancellations of projects like the F-35 guarantee this will only become worse.

We have handicapped our naval capacity by insisting they use a certain percentage of bio-fuels in their combat aircraft at an outrageous expense to tax-payers, and an as-yet unknown cost to the defense of the nation.  We are nearing the point where we will effectively scrap two entire aircraft carrier battle groups, further limiting our ability to respond to threats around the globe, or protect our own air-space here at home.

We have given most of our critical missile defense secrets to the Russians, allegedly to ease their worries about them, but in truth, what we’ve done is to give them to a potential adversary that has contractual relationships with Iran and other nations with which conflicts may be inevitable.  At the same time, Iran continues to threaten us and our allies with missiles against which these systems were designed to act.

Iran now flagrantly sails its fleets not merely through the Suez Canal, but also threatens to shut down shipping through the Straits of Hormuz, and between these two passages, nearly 50% of the world’s oil supply is transported.  We do not challenge them there, except to waggle our finger, but it’s worse because their ships now sail openly along the edge of our territorial waters in an intentionally provocative way.

Petroleum and its distillates are soaring in price, even though President Obama has killed off the Keystone XL pipeline that would have brought fuel to our energy-starved nation within a short time.  Our current oil production is dipping, but more than this, the taps at the Strategic Petroleum Reserves remain open, as Obama uses this to hold down the price of oil only slightly.

The Iranians are developing nuclear weapons and they already have mid-range missiles on which to deliver them, but more than this, they are developing long range rocketry that will reach to the North American continent.  Iran continues to fund terrorists who attack us globally, and yet, when there was an uprising in Iran, Obama did not back it until well after it had been quelled, but he did so only half-heartedly.

Soros is raising an army of rabble that you know as the Occupiers.  What these will be are the useful idiots to be led into slaughter when the time comes, and Obama needs an excuse to clamp down. At the same time, Obama’s department of Immigrations and Customs Enforcement(ICE) is being directed to permit illegals to go without arrest whenever possible.

Our financial system has been directly tied to the banking systems of the failing Euro currency, and it’s no secret that if they collapse, as seems likely, we will almost surely accompany them over the precipice and into the abyss.  Your purchasing power is being eroded away, and soon you will begin to see a more distinctly inflationary trend that they will not be able to mostly hide from you as has been true over the last few months.  Instead, we’re going like gang-busters to worsen our troubles.  The government rigs the unemployment statistics, and we’re told “things are improving.”

None of these things are likely to have been unknown to you,  because as readers of this site, you’ve seen most of them covered here.  You might look at any of these in isolation, and conclude that they are the results of colossal incompetence or even dereliction, but as yet, you may not have noticed the common thread running through them.  You might be satisfied with that notion, but for the fact that you know nothing exists in a vacuum, and that you cannot separate the out from the whole if you’re to understand them in context.

What all of these things have in common is that each of them substantially harms America’s economic and physical security.  Each and every one of these things also have in common is the fact that they are directed by a single authority, and the person who wields it is none other than Barack Obama.

Barack Obama maintains two separate cabinets, one consisting of his official cabinet secretaries, and the other composed of his shadowy system of czars and advisers.  The latter group wins every argument, and it shows in the decisions this president takes.

If not dereliction, could this really be treason?  If we didn’t suspect otherwise, I’d think he was getting us ready for a take-down on all fronts.  What’s worse is that his chief opponent in November is likely to be the candidate of his preference.  Still, one can hardly miss the fact that what all of these things leave in play is the fact that we are being set up, and it is we Americans who stand to lose everything.  His sympathies for Iran and the Muslim Brotherhood are telling relations, and the fact that his favorite pen-pal is the radical, Islamist President of Turkey, and what you realize that there’s almost no hope.

Is Barack Obama intentionally leading us to the banquet of the enemies at which we are to be the main course?  Consider what might happen if an electromagnetic pulse(EMP)  bomb was detonated by Iran over US territory:  You will not see television again, perhaps for a generation. Your vehicles will not function.  Every electronic device, and indeed the whole electrical grid may be down for years.  You will have no oil with which even to do battle to reopen the Straits of Hormuz or the Suez Canal, because we have been bleeding our Strategic Petroleum Reserves into the ground at their behest.  No oil?  No Navy or Air Force, meaning no response from us.  At that point, fuel-less, and with nothing in which to place it  if we had it, the country would almost immediately grind to a stop.

Spend a little time to think about everything Barack Obama is doing, and ask yourself if these are the actions of an honest man concerned with his country but inept in application, or instead the mere organizing of a man who is committed to its destruction.  The worst-case scenarios are too awful to imagine, but that we must stop him is also clear.  If it isn’t treason, it sure looks like it, and if the net effect is the same, it won’t make a difference either way.  Does it matter?  In this context, is negligence distinguishable from treason?  I don’t think so, but we must begin to assess the threats against our country, and if we should survive through election 2012, we must unseat this president, though I do not know now how we can beat him.

European Downgrades Imminent(Updated)

Friday, January 13th, 2012

The Beginning of the End?

As I have discussed at length over the last few months, the Euro currency is in trouble, and the member nations who make up the Euro are all facing potential credit rating downgradesDrudge is linking the CNBC report that France has been downgraded by S&P, while others are sure to follow in the short run.  At present, Germany and the Netherlands aren’t among those under immediate threat of downgrade, but the effects have been immediate as stocks have slumped throughout the morning on fears over the blow-back in financial markets.  This is going to continue to threaten the global economy, and it’s becoming increasingly difficult to see a way out of this mess.

Meanwhile, there is no deal yet on Greek debt, which is a part of the trouble:  Sovereign debt is destroying Europe, and as this occurs, we’re mimicking the levels of expenditure that got Europe into all of this trouble. It’s now clear that during a single term, Barack Obama will have added $6.2 Trillion to the national debt.  That’s an extraordinarily dangerous growth in public debt that threatens the economic future and the political stability of the nation.

Ladies and gentlemen, this level of borrowing and expenditure cannot be sustained, and I cannot imagine how somebody like Mitt Romney will do anything to change this.  He’s a timid politician in most respects, and he has no record of making cuts in issues where there is substantial political difficulty.  In fact, the truth is that he’s added to the future liabilities of the state of Massachusetts through his health-care program, that is even now bankrupting that state. In this respect, Romney offers nothing substantially different from what another term of Obama promises to provide: American decline.  It’s time to look closely at all of these candidates to see if any have a record of real cuts, because our nation’s future will depend on it.

Update: Before I could even get this posted, the situation is fluid, and it is being reported that five nations have been downgraded, including Italy, Spain, and Portugal by two notches each, while France and Austria were each dropped a single notch.

 

IMF: Global Economy Threatened

Monday, December 26th, 2011

Another Day, Another Euro

This has to be one of the most ridiculous pronouncements made by a governmental body in some time, not because it is inaccurate, but because they’ve apparently just now taken notice.  YahooNews is reporting that the IMF’s worried about the global economy, and it’s new head, Christine Lagarde is pointing out the problem as a “crisis in confidence in public debt.”  No, really, she said this.  (For her next trick, Lagarde will likely tell you the sky is blue and that the sun rises in the East, while she’s giving out revolutionary information.) What Lagarde doesn’t mention is the IMF’s role in all of this, and the fact that the grotesque amounts of public debt have been augmented by loans from the IMF itself, in propping up all of these nations.  This is much in keeping with the failed policies that have threatened the world economy, but rather than re-think the strategy that has only deepened our troubles, Lagarde criticized nations that seek to shore up their own economies and financial markets, and while she didn’t name names, it’s clear that she’s talking primarily about the British.  She offered this:

Part of the problem, she said, has been national calls for protectionism, making it “difficult to put in place international coalition strategies against it.”

Lagarde added: “National parliaments grumble at using public money or the guarantee of their state to support other countries. Protectionism is in the debate, and everyone for themselves is winning ground.”

Let me translated Lagarde’s lament:  Politicians in much of the world (excepting perhaps only the US) are beginning to heed the voices of their people, who are beginning to demand that their politicians begin to look out for their own nations first, before worrying about the sovereign debt crises of others.  So Britain, for instance, that is doing the smart thing and walking back its relations with the European Union and its failing currency is a bad country, while we in the US who continue to shovel dollars into the IMF via the Federal Reserve are “smart” and “thoughtful,” and the rest of that patronizing tripe that only works on liberals and statists.  Meanwhile, those of us who live in Realityville, USA, are beginning to understand that this crisis is largely the result of bad ideas promulgated by statists the likes of Christine Lagarde.

This announcement is an insult to every thinking person on the globe, and it show just how far these people will go in order to prop up a lousy idea, or a whole play-book full of them.  As if this wasn’t bad enough on its face, Lagarde offers still worse advice by way of a warning:

Emerging countries, which had been growth engines for the world economy before the crisis, have also been affected, said Lagarde, citing China, Brazil and Russia.

“These countries, which were the engines, will suffer from instability factors,” she told the newspaper.

In other words, these countries that have all seen burgeoning exports are now beginning to contract because general consumer demand is down in the importing nations, including the US and the EU. In short, Lagarde doesn’t want you to notice that she’s making an admission about the future prospect of the EU, with its currency in turmoil, and the US, where currency in large amounts has been sent to prop up this entire mess.  What she doesn’t say directly, and dares not admit, is that the coming collapse is already beginning in a more serious way, measured in the GDP of what had been the leading growth engines prior to the onset of the financial crisis.

In short, Lagarde is asking, or even chiding countries to continue a policy that is nothing short of suicidal, all on the basis of the proposal that the IMF be provided more money to loan to nations already deeply indebted. This is both the financial and moral equivalent of urging the family with twice their annual income in short term debt to apply for another credit card or two.  What she is pretending is that the situation can be repaired by some notion of restored confidence among investors and consumers who now [rightly] fear that nothing but collapse lays along this road.

They’re right to doubt, and the people of Britain and every other nation are right to worry as what Lagarde seems to be suggesting to European politicians, but indeed politicians everywhere, is that they should take one for the team, not as politicians, but as sovereign nations.  Britain would be right to reject her words as the ravings of a con artist, selling the same old Ponzi scheme again and again.  We in the US could only improve our position by following the British lead away from the EU, and the Euro, but our current financial and political leadership is instead tying us more closely to it.

It’s time to face reality:  The Euro was a doomed currency from the outset, and inviting in those nations with questionable currency and dishonest fiscal policies was never going to make anything but a disaster, but the people of Europe were suckered into it, and now the US is going along.  Their shrill warnings of dire collapses if we don’t go along are merely a postponement of a greater crisis with each subsequent delay.  It’s time to face the music, and as the old saying goes, we must refuse to put even more good money after bad.  So bad is it now that it would be more accurate to say that we are putting bad money after even worse.

The only way to prevent a global collapse is to cut our losses now. Stern fiscal policies must prevail, and money must grow tighter.  At this very moment, at the US Treasury and the Federal Reserve, they’re concocting plans to export your future wealth to Europe in order to buttress a currency that won’t be saved, and each dollar they pour into the effort only devalues the ones in your pockets.  It’s time to put a stop to all of this, and if we’re to save our country, we must start here, and we must start now, and short-run extensions of payroll tax-cuts won’t get it done.  We need real, drastic spending cuts that sharply curtail our budget deficit, something on the order of what Ron Paul is proposing, in the realm of one trillion dollars or more in spending cuts immediately.  If you want sound currency, it has to start at home, and whatever else you may think of Ron Paul, he’s right about this.

 

Eurozone Downgrades Looming – Markets Brace for Panics

Sunday, December 18th, 2011

This Time, Europe...

Santa Claus may be visiting Paris this Christmas, but it looks as though he’ll be dropping a lump of coal in President Sarkozy’s stocking, as reports are now widely circulating that Standard & Poors may issue a credit downgrade for the government of France in time for Christmas.  In truth, this is no laughing matter, and it certainly portends ill tidings for the season, as the financial markets, already in turmoil over sovereign debt issues, and the imminent collapse of the Euro are on the verge of panic.  Much like the downgrade that was issued for US government credit-worthiness, this seems to be bound to the failure to create a workable solution to the budgetary woes and general unsoundness of the fiscal policy of Eurozone member states.

In a report in the American Thinker on Friday, the details of the failure to attain a workable agreement for consolidation of fiscal policy among member states is outlined.  According to that report, the rating agency Fitch is now considering downgrading Germany and other Eurozone members as they look at the increasing probability that no fiscal order will be brought into this situation.

This sets the stage for a new phase of the Eurozone crisis, where we may see the beginning of one-wide collapse.  As I have reported in recent weeks, the looming catastrophe will have been due to two primary causes, and they are nearly impossible to overcome at this late date:  The nations of Europe that created the single currency overstated the value of some of the previous currencies to an outrageous extent, meaning that the Euro was destined from the outset for failure. At the same time, there was no consolidation or enforcement of a unified fiscal policy for member states, so that those countries with already high debt ratios and generous welfare state benefits as well as remorselessly unconscionable retirement programs for government employees virtually guaranteed that there would be a collapse in some form.  As with all such situations, government officials always seek one more postponement of the inevitable, but such a piper will not go unpaid.

What makes any and all of this relevant to we Americans is that our government and our Federal Reserve have tied us to the Euro to an extent that threatens to take us down with them.  If the Euro goes, we will face some sort of financial calamity, and because some Euro derivatives have now been backed by FDIC, it places the American taxpayer on the hook should this all go belly-up.  Add to this the trillions of dollars already loaned under the auspices of TARP and other bail-out programs administered by the Fed, and what you have is a scenario by which we are dragged down, cannibalized on behalf of our friends in Europe.

Our other increasing similarity to debt-ridden Europe is our debt-to-GDP ratio, all in the furtherance of the growing welfare state.  During Barack Obama’s thirty-five months in office, we have added to our cumulative National Debt by something in the neighborhood of $4.5 trillion.   For the first time in our nation’s history, debt now exceeds GDP.  At this rate, we will soon exceed the likes of Italy, that has now a debt of more than 120% of GDP.  At this point, the Obama administration in concert with the Federal Reserve is fighting the same sort of delaying tactic that the Eurozone is now employing: Prop everything up through just one more election.  This is ever the tactic of politicians, who seek to maintain power in the face of calamities they have created.  None of these heads of state are telling their people the truth, or preparing them for hardships that now loom in a very uncertain future. In part, they will offer that they do not wish to create undue panic, but in truth, they do not want to face their electorates’ anger.

Governments ought to have some responsibility to tell their people the truth, even when that truth is terrible and threatening.  The actions of the Eurozone leaders are despicable to me for precisely this reason, because they are telling their people that it will be worked out, somehow, but by now, I think most people have begun to catch on, both in Europe and here at home. What politicians fear most is having to tell their electorate “no,” or worse, “no more.” Politicians rightly understand that through their relentless building of massive welfare states, they have created monsters that will soon threaten their creators.  There’s a history of reprisals in Europe, and one can only hope it doesn’t come to that.

Britain Isolated From Europe

Monday, December 12th, 2011

Should Britain Feel Left Out?

Reuters is reporting that the EU has effectively isolated Britain, and they way they tell it, it’s a disaster for Britain.  From my point of view, it may lead to that country’s salvation.  Insofar as I can determine, what happened  may look like a British set-back according to Reuters, but for the life of me, I cannot see how.  If British Prime Minister David Cameron were smart, he’d play this up, and seek to withdraw entirely from the Union.  As the Reuters article makes clear, Britain has never been fully accepted by other EU members because they’ve neither joined the common currency nor accepted the Schengen Treaty that provides open borders between signatory nations.   The assessment is that Cameron had been “constrained by domestic politics,” but I view that as a victory for the people of Britain.  Rather than getting drawn even deeper into the quagmire of the EU, Britain may yet find itself able to maintain its sovereignty.

This is part of the problem the US faces with its Euro-entanglements.  Also mentioned in the Reuters piece is the fact that US Treasury Secretary Tim Geithner was making his presence known during the flurry of meetings and negotiations happening across Europe throughout the week:

U.S. Treasury Secretary Timothy Geithner had spent several days in Europe before the summit. The United States, like all of Europe’s trade partners, had been watching the accelerating debt crisis with profound concern, worried for their own economies and banks.

No! This is the thing about which I have been warning you for some time, with the Euro currency teetering on the brink of total collapse: The United States has extended itself to cover Eurozone banks to an extent that is reckless and dangerous.  Geithner was on hand to try to lend his assistance in shepherding the process along.  In the end, what came out of it was what Sarkozy had wanted all along.  There will be a new intergovernmental agreement among nations of the Eurozone as a sidebar to the main EU treaty.  This effectively cuts Britain out, but it also gives Britain every justification in breaking all bonds with Brussels.

What is at stake is the notion of tying the budgets of EU nations to some sort of formal, centralized process, by means of which they hope to get control of the staggering debt.  They have extended and leveraged and borrowed in every conceivable fashion, and yet they still look to do more.  The single currency has been a problem even before its official beginning, since the manner in which it was created was based on some rather generous calculations of the value of the original members’ currencies, and because no budget discipline was installed at the time.  Think of this as an incremental approach to a single central government for the entire zone.

In meetings with the head of the ECB, Mario Draghi, and euro zone finance ministers the conversation was all about the two-year-old debt crisis and how to resolve it. The issues: the role of the ECB, how far should or would it stand behind countries to buy them breathing space, the scale of the euro zone’s rescue fund, the part to be played by the IMF, and should the EU let private bondholders off the hook.

This should cause further concerns for Americans, because the IMF will get much of its funding from the US Federal Reserve, drawing the US even further into the Euro-debacle.

On Monday, Nicolas Sarkozy insisted that Britain is needed as part of the Eurozone trading bloc, but it’s hard to imagine how this remains that case, and Sarkozy admits as much, in stating:

“We did everything, the chancellor and I, to allow the British to take part in the agreement. But there are now clearly two Europes,” Sarkozy said in an interview with the French daily Le Monde.

This is a typically continental view of the issue, but it’s clear to me that Angela Merkel and Germany will bear the brunt of the strain.  Nevertheless, it’s my view that as dire as some would like to make this out to be for Britain’s sake, I’m unmoved by their insistence that Prime Minister Cameron has made a mistake:

“I think that’s a shame because we need our British friends in Europe,” he said, arguing that Cameron’s centre-left predecessors Tony Blair and Gordon Brown would not have made “the same mistake”.

I think it was a terrible mistake for Britain to tie their nation to this mess in the first place, and I think that was true of Germany as well, but while the British have maintained some independence, the Germans have not, and now they will pay.  If this all goes as badly as it seems that it may, Merkel and Sarkozy may be looking for non-extradition countries to which they can flee.

Apparently, I’m not alone in my dim view of the Euro, as one Telegraph writer points out the real reason for the Europeans’ anger toward Britain:

No, they aren’t really angry with us for opposing the new Treaty for Fiscal Union. The reason our brother and sister Europeans are so chronically enraged with the British is that we have been proved completely right about the euro. For more than 20 years, British ministers have been coming out to Brussels and saying that they just love all this single-market stuff, but that they doubt the wisdom of trying to create a monetary union. And for more than 20 years, some of us have been saying that the reason a monetary union won’t work is that you can’t do it without a political union – and that a political union is not democratically possible.

We warned that you would need a kind of central Euro-government to control national budgets and taxation, and that the peoples of Europe wouldn’t wear it. Now look. It wasn’t the Anglo-Saxon bankers who caused the trouble in the eurozone, Sarkozy mon ami. It was the utter failure of the eurozone countries – starting with France, incidentally – to observe the Maastricht rules. It was the refusal of the Greeks to control their spending or to reform their social security systems. In Greece and Italy, the democratic leaders have been effectively deposed in the hope of appeasing the markets and saving the euro; and what makes the leaders of the eurozone countries even more furious is that it doesn’t seem to be working.

Boris Johnson is absolutely right about this.  It’s damned-well time somebody said it.  Britain shouldn’t fear being cut out of Europe at this point.  They should call it “Independence Day” and celebrate.  In my view, the sooner they can dis-entangle themselves from the entire fiasco, the greater their chances of avoiding at least some of the calamity that will ruin the continent.  I only wish our own leaders here in the US would do the same.

Note: In the US, by mid-afternoon Monday, the Dow was off more than 200 points, or roughly 1.7%, on fears about the continuing European crisis.

As Europe Trembles, Federal Reserve Attempts Bail-Out

Tuesday, December 6th, 2011

We’re well past the end of the efficacy of such charades as the one the Federal Reserve is now undertaking.  With Europe’s currency on the verge of collapse, Standard and Poor’s has put 15 European nations on negative credit-watch.  Worst of all, the Federal Reserve sees the threat to financial stability, and rather than moving to protect the American people, our own monetary agent is instead moving to shore up the Euro via the International Monetary Fund (IMF).  Every American should be incensed by this move, because what it really offers is an international version of “too big to fail.”  The US has  become so entrenched in the future prospects of the Euro currency that the Federal Reserve now believes bailing it out may be the only way to save ourselves.  If this sounds vaguely familiar, it should, because this is the same basis by which the American people were suckered into backing up and bailing-out those banks deemed “too big to fail” back in 2008 and 2009, under Presidents Bush and Obama, respectively.

Readers may remember a few weeks ago that I reported the swindle being permitted by Treasury, where Euro-based derivatives were now to be backed by the FDIC.  That risky scheme actually puts American tax-payers on the hook for hundreds of billions of dollars. Our Federal Reserve has already lent more than $7Trillion to foreign banks, and now it seems they’re intent upon providing still more.  It’s an obscenity that at this late date, we’re still pursuing a failed policy that puts bad money after worse money.  Why?  Simply put, we are so thoroughly invested in the Euro experiment that if we simply walk away, it will fall, and likely take us with it.  The problem is, as I’ve previously explained, that one cannot save the Euro by this method.  There is only one way in which the Euro might be saved, but it will require something the European people likely will riot to oppose:  Vastly more effective fiscal control.

To approach this problem will require that which governments virtually never do:  Restrain spending, while giving up some controls over the economies of their respective nations.  It will require that they cut social spending, but also government employment dramatically.  That’s where the real problem begins, because people now long-accustomed to a vast and prolific welfare state do not give them up without a fight.  Of course, give them up they will, one way or another, when their system ultimately collapses.

We’re not much behind Europe in that development, and our own credit-rating downgrade earlier this year was simply the beginning.  We face the same choices, although still less severe.  Unfortunately, by entangling us with the Europeans, what the Federal Reserve and all of those banks deemed “too big to fail” that have been major players in the  Euro-zone, what this means is that it will accelerate our own collapse.  We may even go down, not following behind Europe, but holding hands and walking side-by-side with them over the precipice.

It’s anybody’s guess how long this can be extended.  It’s possible we might not make the end of the year, or the end of two years before this collapses, but with the direction in which we’ve been heading, collapse seems to be inevitable.  The one and only saving grace America may have, as distinct from Europe, is a healthy sense of charity by comparison.  Americans remain, even in our current economic distress, the most giving of people.  If we are finally forced to confront out own welfare state, there may be some hope that the nation will find some way at least to feed its people, but for Europe, I have no such hope.

Warning: Euro May Trigger Global Collapse

Tuesday, November 29th, 2011

What Democracy Really Looks Like

Over the last week, I’ve been watching events unfolding with growing concern, and while I truly hate the idea that I might inadvertently offer myself up as just one more “Chicken Little,” I must in all candor tell you that because the sky is not falling now, do not assume it will not fall tomorrow.  We’ve listened to the media talking heads, the pundits, the analysts, the economists, and even the politicians, and virtually all of them have made rosy predictions and hopeful prognostications for the immediate future, and your federal government feeds this view with its own phony numbers, endlessly amendable and adjustable statistics, and a common lie that consists of telling you: “It’s all going to be just fine.”  As I’ve reported to you within the last few weeks, more downgrades were coming, and banks moved Euro liabilities under cover of FDIC, but now the downgrades are here.  There will be more.  When the Euro falls, it may very well take the United States with it.  The time to prepare has very nearly expired, and there will be no turning back.

Ladies and gentlemen, I am now going to tell you the truth, and I will place no bunting of red, white and blue around it, because you deserve to know it all lest you be left penniless and homeless and starving in the streets, unable to defend yourself from the cold, never mind the brigands that will likely swarm our cities:  If the Euro collapses, the blow-back may not merely damage our economy, but thoroughly destroy it, and there is absolutely nothing we can do but deepen and worsen the results by more delaying tactics.  Businesses are scrambling to come up with options if the Euro collapses, but the truth is that many of them are now in a position from which they will not recover.   The choices you make now may mean the literal life or death of you, but it’s important that you know how we arrived here so that if ever there is a chance to arise anew, you will already know the answer.  Even now, the statists of Europe are seeking ways to loot you. One world government will come riding in on the back of this nightmarish trojan horse.

It is a truism that few wish to acknowledge that one cannot consume more than one produces without eventually becoming subject to the sort of collapse we now face.  It goes for nations as well as people,  and just as people can hide the growing disparity between their financial underpinnings and their lifestyles for a time, nations can do so, and for even longer and to a greater degree because they can pilfer the value of the few still producing among their citizens.  The problem is that just like individuals, even nations and unions of nations run afoul of nature’s basic truism requiring one to produce at least as much as one consumes.  Herein lies the sickening truth of the impending Euro collapse, and the collapse of all those who have tied themselves to the Euro, including the United States.  For far too long, far too many of us have lived without producing while others camouflaged their bankruptcy, willingly or [more often] unwillingly carrying their burdens.  No nation can survive that.  No people can sustain that.

The single currency of the European Union was advertised to make them more competitive as a trading bloc with the United States and Asia.  In truth, that’s not the whole story.  The Euro was also devised as the means by which to buy a little more time before the welfare states of Europe failed.  No rational person ever thought otherwise, and every politician from Rome to Madrid to London to Paris and Berlin has known this for two generations or more.  Your politicians right here in the good ol’ US of A have known it too, and yet when they had a chance to do something to change it, they instead accelerated it.  You might ask: “Why?”

The answer has ever been the same, and it is the endless pursuit of power at the cost of any and every principle.  This ambition has blinded mankind almost from the very start of the first civilizations.  In our modern society, if you think politicians are the greatest bribe-takers, I urge you to think again: Modern politicians are the greatest source of offers in bribery but the greatest recipients are we the people.  You wonder who is guilty?  He who offers a bribe is powerless in the face of rejection, but he who accepts that bribe is guilty for all his days.  In small increments, and in bits and pieces, the people of Europe were convinced to surrender their liberty in exchange for small bribes.  Over time, the bribes became so large that to maintain them demanded more and more from the producers, until the relative few producers began to join the gravy train.  While they bribed your silence and your complicity with the get from your neighbors’ pockets, be assured that they have been busily lining their own.

The Euro was concocted to hide this.  All those nations whose fiscal problems are now manifest have always been unstable, and it’s because successive generations of politicians in those nations have been carrying out this sort of bribery of its citizenry from time immemorial.  The French revolution was a Marxist affair, though not known by that name in those days, and nations such as Greece, Italy, and Spain haven’t been fiscally responsible for centuries.  The disease is not heritable, but it often visits subsequent generations, because it is born of a bad idea that is passed from one to the next.  That idea is statism.  Statism is the ruin of mankind, and always has been, because its fundamental claim is that man exists to serve the state before himself.  Whether statism took the form of Monarchy, Theocracy, Democracy, or some brand of Totalitarianism, it has ever been the bane of human existence, and yet no idea has more staying power among people than this one.  It plays upon one of mankind’s greatest weaknesses:  The temptation of covetousness and envy, born ever of sloth.  It is enabled  by the deadliest sins against nature, or nature’s God.  It offers the false promise of a life without discomfort, effort, or pain, but in the end, it returns only misery.

A little more than a century ago, this idea began to catch on even in  America.  It has slowly grown as a cancer, and it has spread its tendrils through every community, on every level, and in all things.  We’ve been hiding it, too.  This disease has its own fuel, and the Federal Reserve provides it, and not surprisingly, has been providing it for most of the time in question: Easy money.  Low interest rates and plentiful credit has made this possible.  Consider the individual who runs up a pocket-full of credit cards, and struggles to make the monthly minimum payments.  That’s our nation.  Just as a weak-minded, or necessity-driven person can quickly run into debt to a dangerous level, so too can a country, and just as the easy availability of credit can act as an inducement for an individual, so does it work as a great temptation to nations.  Nations fall when they permit politicians to bribe them with credit.  Look around you: How many votes have been bought by a budget that is nearly two-thirds entitlement programs?

As has been reported this week, our own Federal Reserve loaned out over $7 Trillion at impossibly low interest rates.  That’s half the GDP of the United States, in loans.  Yet you may rightly ask:  Where does the Fed get the money?  Answer: It loans it into existence, i.e., it prints it.  Only the promise of the debtor to pay gives it any value, but if that debtor defaults, well, the value of the dollar is diminished accordingly, but even if the debtor makes payments, there is always risk attached, and that risk is shown in inflation.  This is why the Credit rating of the US Government has been such a big deal:  It is the single largest debtor, and substantially so. As our government looks less and less likely to be able to repay its debts, while it continues to borrow money at an increasing pace, what do you suppose will happen to the value of your money?  Why did Thanksgiving dinner cost an average of 13% more this year than last?  Next year’s will cost 20% more, or worse.

This is the real truth of this situation, and unless and until you are ready to confront it, and to reject the myriad bribes from politicians, you are going to see things grow much worse.  Perhaps most frightening, they may have successfully engineered not only the collapse of the Euro, but also the Dollar, and every other major currency on the planet, but what they will offer as a “fix” is a global currency that will make of us all slaves to the same masters.  They will offer you more bribes, or at least threaten to take away the ones you currently enjoy, all so you will go along.

Ladies and gentlemen, make no mistake about it:  With the current crisis ready to explode in Europe, and with the state of our own economy, under the willfully absent leadership of Barack Obama, we are waiting on the edge of collapse.  This may be a most un-Merry Christmas, and it only promises to worsen.  If we somehow survive as a nation, it will be surprising, but it will only have been possible if we reject calls for a global currency even at the expense of the bribes we are now so accustomed to taking that we believe them to be our entitlements.  From now until then, you can spend your time in contemplation: Do you prefer life as a slave?  Many of your neighbors will say “yes” without flinching.  Somehow, somewhere, we must find the strength to say “No.”   Prepare, my friends, and by the strength of your preparations may the republic endure.

Possible Euro Collapse Sparks Civil Unrest Fears

Sunday, November 27th, 2011

Prepare For the Worst

Those who have been paying attention have known the Euro is in deep trouble, and much of it stems from the way in which is was created.  Too many member states were admitted which had currency that was overvalued for the merger, and they’ve done nothing to curb ridiculous fiscal policies in those countries.  This includes nations such as Greece, Italy, Portugal, Spain, but also to a lesser degree, France.  Now, it’s time to pay the piper, and predictably, nobody wants to do so.  Governments in Europe are now forced to consider what will happen if the Euro falls and the member states wind up reverting to their prior forms of currency.  Some estimates suggest that GDP would decline in Europe among member states by as much as half, or more, and that widespread unemployment on a scale that would dwarf any previous depressions in scale and depth.  In short, they’re now planning for a calamity, complete with riots and revolutions, and the reason is simple: It’s now a very real possibility. From a story in the UK Telegraph:

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.

Of course, many Americans are not moved by these tidings, somehow believing that we are insulated from a European crisis, but nothing could be further from the truth.  If such drastic circumstances arise in Europe, the effects will be global, and so will be the civil unrest that accompanies it.  This is the  kind of calamity from which there is virtually no escape, anywhere on Earth.  In such an environment, not only would our own exports to Europe would collapse, but also we would find our own currency in free-fall because we have so thoroughly tied it to the Euro.  The defaults alone would wreck our own currency, and leave the United States in a similar situation.

Reuters is now carrying a story about the French and German effort to establish some fiscal controls to stave off a calamity, but the truth is that this will likely be too little, too late. Some authorities realize that this will be a stalling tactic at best, and are using the time it may buy to prepare for what is increasingly being seen as an inevitable collapse. From the Telegraph:

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.

Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.

As is now obvious, this is all a play for time.  They’re buying time, but they’re not going to save things, and the Europeans seem to know it.  The question thus becomes:  What is our own government doing to prepare?  What are they telling you to do in preparation?  Nothing.  Your own federal government is behaving irresponsibly in the face of this looming crisis.

For three years or more, the hand-writing has been on the wall, and our own government has obfuscated and lied about the direction of things, but has done little to prepare the American people for the possibilities now in the offing.  Let me suggest to you that the recent sporadic reports of spikes in the purchase of survival supplies is an indicator that the American people have begun to figure it out without governmental warnings.  No rational person can examine what’s been happening on the global economic and financial front and not have some sense of the very real dangers now accumulating.  It remains a prudent course of action for Americans to prepare for any sort of emergency, but with the real possibility of complete Euro-zone collapse now seemingly imminent, prudence would dictate an uptick in preparedness planning.  Our own currency has been tied too closely to the Euro currency to avoid the consequences of its collapse.

FLASH: Hot Mic Catches Obama and Sarkozy Bashing Netanyahu

Monday, November 7th, 2011
Wimp and Shrimp Bash Netanyahu

In a shocking story that demonstrates how terribly contemptuous Barack Obama is towards Israeli Prime Minister Netanyahu, Ynet News published the text of the discussion between Obama and Sarkozy at the G20 meeting. H/T Drudge for digging up the story:

The conversation then drifted to Netanyahu, at which time Sarkozy declared: “I cannot stand him. He is a liar.” According to the report, Obama replied: “You’re fed up with him, but I have to deal with him every day!”

This is perfect.  It’s precisely what you’d expect from this president whose policies have demonstrated an enmity toward Israel, but toward Netanyahu particularly.  It’s disgusting.  Sarkozy has been a questionable character all along, and now Obama complains that he has to deal with Netanyahu daily.  Of course, given the way Netanyahu educated Obama at a joint press conference earlier this year, I suppose I can understand why Obama can’t stand him.  Netanyahu schooled Obama, unflinchingly.

The Real Economic Forecast

Sunday, October 30th, 2011

Where is this Going?

It’s possible that I could be wrong, but something about what’s happening in the economy leads me to suspect that despite the rosy prognostications of Government bureaucrats, and the even rosier hopes of some market analysts, I don’t think the improved GDP growth numbers for the third quarter are going to mean much for the long-term health of the economy.  For one thing, the government has had to revise every quarter downward as they adjust their numbers to better fit reality.  These first numbers are raw at best, and propaganda at worst, and may bear little or no resemblance to what is actually going on.  For another thing, I’ve noticed a trend, and I suspect you’re going to notice it too.  Fuel prices fell with the ugly end of summer, and they’ve recently begun to tick up anew.  I suspect this will tell us the direction of the economy in two months or so, if history is a guide.

As I have discussed at length before, our economic prospects are linked to many things, but few are more important to growth than the price of energy.  Through the first half of October, gasoline prices fell at the pump because the economy was doing poorly and producing few new businesses.  By mid October, the price decline suddenly reversed and we watched the cost per gallon begin to tick upward again. As I have explained ad nauseum, once the prices tick back past the $3.50/gallon boundary on gasoline, or the $4.00 threshold on diesel, you can expect the temporary increase in growth we saw in the end of the 3rd quarter begin to be choked off.

There is always a lag to these things, but what should have offered you the tip on the economy’s underlying condition was when fuel prices began to decline well before Labor Day weekend.  That’s a sign of a struggling economy, all else being equal, and it should have been noted with trepidation.  I knew the numbers for August were going to be abysmal long before they eventuated.  The price of fuel continued to slip, but some time in the last part of the third quarter, we saw a turnaround in growth.  The reason is simple:  With the prices of fuel in decline, economic activity increased, consumers had more to spend on other things, and we saw a brief uplift.  I suspect that as this little bubble grows, the prices of fuels will follow.  As they reach higher, they will begin to suck all of the oxygen out of the economic room, once again.  When that happens, well, you know the rest.

At the same time all of this was going on, Texas was seeing record heat and a continuing drought(that persists for most of the state even now.)  In that period, Texas began to experience rolling brown-outs, and threats of them, as our once enviable electrical grid could no longer support the demand.  We’ve had to shut down a number of coal-fired power plants in Texas due to EPA regulations, and with no new plants to replace them, and more plant closures almost certain in the coming year, the prospects are going to worsen.  Barack Obama’s obsession with the elimination of coal-fired plants is going to be the death of Texas, but hey, Texans didn’t elect him anyway, so why should he care?  This political aspect aside, Rick Perry has been somewhat successful in getting some companies to relocate here, but they’ll find it difficult to function when they can’t turn the lights on.

At the end of it all, it was her superior understanding of this particular facet of the economy that had made me most hopeful Sarah Palin would run for president in 2012.  Most politicians are blissfully ignorant of how thoroughly dependent growth is on energy.   They will soon discover it if Obama has his way.

Now comes some very realistic analysis to which you should pay close attention.  Despite all the assurances of impending improvement, and the ostensibly good news of last week’s Euro-deal, you should still prepare for all of that to collapse.  As Liam Halligan reports in the Telegraph,  this deal, this latest round of bail-outs offers not much hope of failure. As he rightly points out, with all of these government bail-outs, the natural signaling in the free-market is short-circuited, which means people take actions based on conditions that are largely ore even entirely artificial.  It’s much like Treasury forcing all banks to take TARP money during the crisis of 2008, because they realized that by giving assistance funds to some banks, but not to others, they would be signaling which banks were in trouble.  Rather than permit depositors to draw their own conclusions, and make rational choices, what they did was to intentionally obscure which banks were healthy and which were not.  This sort of tinkering is part of what got us here from the outset.

Halligan’s basic warning boils down to a suggestion that the prideful Euro-set will not accept, but is nevertheless the best advice he could give them:  Let Greece default, openly, and boot them from the Euro.  Dump Portugal too, says Halligan, because as he points out, it is “absurd” to think of Portugal as having the same monetary stature as Germany.  This is what you get when politicians interfere in the markets: Unbridled chaos and fakery, and this is what we are now experiencing.  When the Euro-deal fails, as it almost certainly must, Wall Street and markets around the globe will lose all the value they’ve gained in recent weeks, and then some.  Mr. Halligan concludes as follows:

“The eurocrats, of course, lack the guts to trim back monetary union to a more manageable size. Too much face would be lost. So “euroquake” fears, once viewed as outlandish, are gaining pace. Despite Thursday’s deal, and all the reassurances of a “durable solution”, the Italian government on Friday paid 6.06pc for 10-year money, up from just 5.86pc a month ago and a euro-era high. Such borrowing costs are disastrous, given that Rome must roll-over €300bn of its €1,900bn debt in 2012 alone. A default by Italy, the eurozone’s third-biggest economy, and the eighth-largest on earth, would make Lehman look like a picnic.”

“The eurozone must be consolidated. World leaders should similarly force European banks to disclose their losses, we all take the hit and then we move on. Instead, we are served-up, in ever more complex variants, the same “extend and pretend” non-solutions. It gives me no pleasure to write this, but I give this deal two weeks.”

Indeed, what Halligan predicts looks bleak, but as he reminds, it needn’t be the case.  Just like in our own domestic policies, this is being done by people who are largely ignorant of the workings of markets and the conditions that drive them.  The problem is, they always do what politicians have done since the first elections on record: They kick the can down the road hoping for one more postponement.  There w ill come a day that such tactics will offer no further hedge, and I suspect it will be sooner rather than later.

Greenspan Gets One Right; Blows Up on Taxes

Wednesday, October 26th, 2011

Once Upon a Time...

Maybe the problem is that when Greenspan is actually in charge of something, he loses his competence. I don’t know. Back in the 1960s, he got it. Back when I was in diapers, this man exercised a fertile mind.  Then, he was an unabashed advocate of capitalism and liberty.  Somewhere on his way to becoming the chairman of the Federal Reserve, he lost his way.  Now that he’s been out of there a while, it seems like he’s slowly coming back to his senses.  He offered an in-depth analysis of the Euro Crisis, and I find it to be fairly close to the mark in most respects, but it also seems to be a scathing reproach to some of his own policies while he was the Chairman of the Federal Reserve system.  In the end, however, he takes another step towards the failed policies in the US that Barack Obama is pursuing.  Greenspan seems to have adopted statism, and while still occasionally correct, as often as not, he’s been tragically wrong.

His primary critique of the Euro goes back to it fundamental, underlying flaw:  The cultures of Mediterranean Europe are vastly different from those of Central and Northern Europe.  It’s much as I mentioned earlier when I described the debate I overheard among Germans in the late 1980s about the proposed European Union and a single unified currency:  Germans viewed the southern Europeans with suspicion due to a long, long history of fiscal chicanery.   Two decades have proven the point and Greenspan is now recognizing the fatal flaw those guesthouse discussions of two decades ago made plain to me at the time:  Two distinct cultures and traditions cannot share a single currency, because one culture will tend to treat the currency and their fiscal responsibilities under the union with a higher level of diligence and respect than the other. Is there really any doubt but that this lies at the heart of the European crisis?

Of course, Greenspan is not the sort of fellow who will readily admit a mistake, and what he fails to mention in this critique of Europe is the extraordinarily loose monetary policy he himself administered over at the Federal Reserve.  Frankly, between he and the hucksters of easy mortgage qualification, they together created a bubble of another sort that was likewise doomed to failure.  You cannot build or center an economy on continuing growth in a housing market that is sabotaged by bad lending practices encouraged by your monetary policy, and your fiscal and regulatory policies besides.  To see Greenspan make the one criticism without understanding his own role in the second is an irony of the most enlightening form.

In the end, however, Greenspan discusses the looming debt crisis in the US, and he seems now to be a budget hawk, but as ever, he is neutral to hostile on pro-growth fiscal policy.  He believes in manipulating monetary policy to effect economic ends, so he sees no effective problem with massive tax hikes.  This indifference, as much as anything else he said,  demonstrates the coldly calculating view of individuals as a means to statist ends, and it is here that I suspect that Greenspan really hasn’t reformed much since departing the seat of Fed Chairman.  At the end of the day, he still views your money and your life as instruments of the state, and his policy prescriptions fail to note a similar duality in cultures in our country, every bit as distinct and intractable as the differences between Northern and Southern Europe.

In our nation, the distinction isn’t formed along State borders, but at the split between urban and suburban/rural America. This also largely defines the political polarization he laments in Washington DC.  It really is that obvious.  Of course, I don’t expect Mr. Greenspan to notice this any more than he noticed the irony manifest in his criticism of the Eurozone.  I also don’t expect him ever to make a full recovery to the days when he understood the moral root of money, when he wrote many intelligent articles in his youth.  That was a long time ago, and it seems he has forgotten what he once knew.  It’s one of the few areas in which I  firmly agree with Ron Paul, although so many of his policy stances makes him unpalatable as a Presidential candidate.  Still, I’d like to remind you of what Alan Greenspan once wrote, before he began to accept the premises of the statists. First published in Ayn Rand’s “Objectivist” newsletter in 1966, and subsequently reprinted in her book, Capitalism: The Unknown Ideal, in 1967:

Gold and Economic Freedom

by Alan Greenspan

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term “luxury good” implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society’s divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one — so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the “easy money” country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World War I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline — argued economic interventionists — why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely — it was claimed — there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks (“paper reserves”) could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates. The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930′s.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain’s abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed “a mixed gold standard”; yet it is gold that took the blame.) But the opposition to the gold standard in any form — from a growing number of welfare-state advocates — was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which — through a complex series of steps — the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

Yes, once upon a time, Greenspan was a sensible man who found the statists detestable. Somewhere, he lost his way, and I wish he would remember his earlier positions that had been far more logical.

European Union Headed For Collapse?

Monday, October 24th, 2011

Beginning of the End?

In the UK’s Parliament, David Cameron is trying to stave off a revolt of the conservative party, as at least 60 members are aboard with the idea of putting up a referendum on leaving the EU.  As a way to head them off, Cameron is hoping to exact some EU treaty re-writes that will return some autonomy to the UK in the matters of social laws and employment.  At the moment, he doesn’t seem to be making any headway, and a revolt against his proposal seems likely.  At the same time, French President Nicolas Sarkozy has told Cameron that he’s sick of the UK telling the rest of the EU what to do, since the British “hate the Euro.”  If you haven’t figured out what’s at the root of all of this, let me help to explain:  The EU is on the brink of complete and utter destruction, and the Eurozone is likely to fails, since neither Greece(immediately) nor Italy(just over the horizon) seem likely to stave off default on their sovereign debt.  Yesterday, I related to you the story of Angela Merkel of Germany chastising Italy over its debt-to-GDP ratio, as she’s looking over the immediate horizon and can see the trouble brewing in Italy, but now France has joined in the pressuring of Italy.  The EU is in deep trouble just now and it looks like the beginning of the end.

Some see this as empowering the US, but any such bubble will be short-lived, as while power in Europe is likely to become decentralized in the short run, in the US, a collapse of our markets and our banking system may not be too far away as I reported Saturday and Sunday.  Our current state of economic and financial affairs leverages strongly against any lasting leadership role, because we’re in debt very nearly on par with Italy, and if we fold, the rest of the world will follow.  The problem at the moment for the US is that we’ve stuck our necks out on behalf of the Europeans via the Federal Reserve and the International Monetary Fund to an extent that we are now firmly tied to their fate.  If they fall, so will we, but the question remains: How far, and how fast?

If we had wise political leadership, they would demand that we stop sticking our neck out on behalf of the Eurozone.  Yes, if they fail, it will hurt us too, but the more we increase our stake, the greater our eventual losses, and the greater the damage will be here at home.  If the EU winds up dissolving at some future date, it will be a potential boon to American economic might, but in the short run, it will have dire effects on our capital markets.  The point to be understood is that I can’t imagine a way that Europe fetches this one from the fire, as the UK’s reluctance signals.  If the British do not wish to stick their necks out, I can’t imagine a reason on Earth that we should be so-inclined.

Domestically, we have weak leadership in the only House in government that would be able to stop any of our further involvement. John Boehner’s not going to stick his neck out in opposing what’s being done with the European derivatives from the Bank of America and JP Morgan, just as he wouldn’t stick his neck out over the debt ceiling negotiations.  In the end, Boehner will capitulate to the Democrats just as he did in July, and much like David Cameron is having to do with members of Parliament in London, Boehner will be trying to herd his members in Washington DC who can see the elections of 2012 directly in front of them, and know they cannot support these kinds of deals any longer.

What all of this is likely to mean on Wall Street at the open on Monday is anybody’s guess, but one thing’s for certain: The volatility we’ve been seeing these last several months is likely to continue, and one of these days very soon may be the worst day on Wall Street in 80 years.  I’m not trying to instill fear or panic, but I want you to know what’s going on in the world around you.  With Europe on the brink, the Middle East ablaze, and our own nation in a severe downturn, it’s only natural to wonder when the bubble will burst.  Washington has been trying to conceal all of this from you for so long that I think they may have forgotten it’s fake.  You can’t support the markets with direct injections of cash as was done through TARP, the bail-outs, and QE2 without eventually arriving at the day when it all goes belly-up.  Having been linked to Europe so thoroughly, we are more vulnerable than ever. Our political leaders have neither the competence nor the will to extricate our nation from the grip of a global calamity.  In the case of at least one individual, I believe it’s being engineered.  Prepare, ladies and gentlemen, prepare.