Ahead of the Herd Blog

Fake Money, Dead Money and Fake Leaders
15 January 2009

Thanks to reading one of the websites (www.aheadoftheherd.com ) on which some of my articles are published; I’ve recently discovered the benefits of water purifiers, for drinking as well as showering water. Since using these purifiers, my skin and hair is not so dry anymore as well as my breathing is much improved. I am hoping to see more improvement in other areas in the future.

Basically these water filters take out chlorine, among other things, which is added to water to “purify” it, or take out other harmful substances.

Chlorine does a good job in killing or taking out these harmful contents in our water, however, it comes with its own problems. I have found these quotes that explain the use of chlorine in water purification as well as some of its associated problems:

“Why we use chlorine is not because it's the safest or even the most effective means of disinfectant, we use it because it is the cheapest. The long-term effects of using chlorinated drinking water have been recognized only recently. According to the U.S. Council of Environmental Quality, "Cancer risk among people drinking chlorinated water is 93% higher than among those who use non chlorinated water. The highly controversial book titled "Coronaries/Cholesterol/Chlorine” by Dr. Joseph Price, written in the late sixties concluded that nothing could negate the incontrovertible fact, the basic cause of arteriosclerosis and resulting entities such as heart attacks and stroke, is chlorine. Dr. Price later headed up a study using chickens as test subjects, where two groups of several hundred birds were observed throughout their span to maturity.

One group was given water with chlorine and the other without. The group given chlorine water, when autopsied, showed some level of heart or circulatory disease in every specimen, the group without had no occurrence of disease. In winter conditions the group with chlorine showed outward signs of poor circulation, shivering, drooped feathers and a reduced level of activity.

The group without chlorine enjoyed rapid growth and displayed vigorous health. This study received well by the poultry industry then, continues to be used as a reference even today. As a result, most large poultry producers use de-chlorinated water. It would be a common sense conclusion to think for that regular chlorinated tap water if not good enough for the chickens, then it probably is not good enough for human consumption either.” [1]

“It (chlorine) has a disagreeable, suffocating odor that is detectable in concentrations as low as 1 ppm, and is choking and poisonous.” [2]

Chlorine gas was also used by the Nazis, among other, as a chemical weapon.

Chlorinated water looks basically just like pure or de-chlorinated water; however it does not have exactly the same effects as water, as explained above. Our world is filled with things that appear like the real thing, but in reality is anything but the real thing. Either they optically look like the real thing or people accept or use them as the real thing. These things, instead of working like the real things, they work in opposite of the real things or they cause other problems (side-effects).

Herburt Moolman

by George F. Smith

First published on www.mises.org

Studying Jörg Guido Hülsmann's latest book, The Ethics of Money Production, is a vastly enriching experience. After building his case for natural money on the inviolability of an individual's right to his own property, he then shows us how the state has spent the last 400 years usurping this right for the benefit of a privileged few through its protection of fractional-reserve banking.

It is the state's insatiable appetite for revenue, he argues, that is the motivation behind the various monetary schemes it imposes on us, which on an international level begins with the classical gold standard and runs through today's paper-money agreements. Although he doesn't discuss the current economic crisis directly, his observations provide a much-needed correction to government's "do something" approach.

In this essay, I will touch on some of Hülsmann's more salient points, beginning with the origin of money.

Natural Money versus "Forced Money"
We know that in a barter economy the division of labor is primitive because trade is limited by the double coincidence of wants. A carpenter who needs shoes finds a shoemaker who needs a chair, and they enter into a mutually acceptable trade. But trade is also limited by the makeup of the goods themselves — how will the carpenter acquire a small amount of flour with the chair he has built?

Over time, market participants devised better ways to trade. Certain consumer goods were found to be highly marketable and possessed physical characteristics conducive to trade, such as homogeneity, divisibility, and portability, and came to be acquired not for consumption but to serve as media of exchange. Such goods are called money; more than that, they are natural monies because they originated through the voluntary cooperation of acting persons.

The production of natural money is ethical because it involves no violations of property rights and is the corollary of a completely free society in which private property is inviolable. The economy of such a society, Hülsmann tells us, may then be called a "free market," which would likely harbor a variety of natural monies. With this understanding, the claim that the culprit of the current crisis is the free market puts its proponents in the awkward position of having to show causality from something that doesn't exist.

Natural monies come and go; they exist because they satisfy human needs better than any other medium of exchange. When this is no longer true, market participants will stop using them and find something better. Natural money thus becomes a product of grass-roots democratic action, where people have the freedom to choose the best available monies.

"Forced money," by contrast, "owes its existence to violations of property rights." It satisfies the requirement of facilitating trade, but superior monies can't be used without exposing the user to some degree of violence.

Gold, silver, and copper have been the natural monies of many societies for thousands of years. Though they possess physical characteristics that make them superior to other commodities for use as money, they are natural monies only because they were selected through voluntary human action.

Paper Money and the Free Market
If commodity money is the best available money, why do virtually all countries today use paper money instead?

First, as Hülsmann notes, in no period of human history has paper money spontaneously emerged on the free market. "Whenever and wherever it came into being, it existed only because the courts and the police suppressed the natural alternatives."

Hülsmann also points out that no Western writer before the 18th century seemed to think paper money was even a possibility, nor did any philosopher of money ever criticize the then-existing commodity money on utilitarian grounds. For example, in The Laws, book 5, Plato wanted to outlaw natural money to make citizens more dependent on government, but he didn't say it was inadequate as a money. Neither did Aristotle, the Church fathers, or the Scholastics. Before the 16th century, furthermore, there was no problem with hoarding or sticky prices, and apparently no need to stabilize the price level, purchasing power, or aggregate demand.

MP3 CDOf course, none of these observations persuades the paper-money crowd. According to them, the capitalist economies that emerged during the Renaissance required a different kind of money, one whose supply could keep pace with the fast action on the market. After 1500, new theories explaining this need "swamped the world," as Hülsmann puts it — but so did the rejoinders. In other words, in the 20th century, when Rothbard observed that the supply of money, like all other goods, is best left to the free market, it was "anything but a novelty in the history of thought."

We must ask then what was the rationale for imposing paper money on the economy? Hülsmann addresses some of the most widespread errors in attempting to justify government intervention in monetary affairs.

Paper-Money Fallacies
By far the biggest fallacy is the belief that a growing economy requires a growing money supply. If an economy grows by five percent, then the money supply must grow by the same amount, the argument goes, otherwise the additional goods cannot be sold. Since a growth rate as high as five percent is exceptional for precious metals, they must be rejected as money for a modern economy. Paper money, on the other hand, can be produced in any quantity cheaply and quickly.

Economics teaches that any quantity of goods and services can be exchanged with virtually any quantity of money. If the economy grows but the money supply remains constant, prices will have a tendency to fall. It's sometimes argued that if prices fall entrepreneurs will not be able to recover their costs and will face bankruptcy. But entrepreneurs have invariably shown the ability to anticipate future price reductions and compensate by lowering their expenditures. This, in fact, is the normal state of affairs in periods of a stable or falling price level, and was the experience of Germany and the United States during the last three decades of the 19th century.

A variation of the above fallacy is the alleged need to fight deflation. Though it can be defined in several ways, deflation most frequently refers to a sustained fall in the price level. In a deflation, bank customers will have difficulty repaying their debts, and this, in turn, will reduce bank liquidity and curtail credit.

Deflation, however, does not threaten the whole of society because, as credit does not create resources, neither does a curtailment of credit destroy resources. Deflation amounts to "a redistribution of productive assets from old owners to new owners," Hülsmann writes, with the net impact on total production likely to be negligible.

"By far the biggest fallacy is the belief that a growing economy requires a growing money supply."If this is true, why does Ben Bernanke regard deflation as the great devil he must fight at any cost? Because deflation emphatically is a threat to those institutions responsible for inflationary increases in the money supply: fractional-reserve banks and their customers, which means "debt-ridden governments, entrepreneurs, and consumers." Deflation tends to liberate "the underlying physical resources for new employment. The destruction entailed by deflation is therefore often 'creative destruction' in the Schumpeterian sense." (William Greider noted that bankers championed "creative destruction" when it was affecting other people, but when it came knocking on their doors, the bankers were "not so accepting of their own fate.")

Stabilization of the purchasing power of money (PPM) has been another excuse for abandoning natural money for paper money. On a free market, the best monies will prevail and will have a relatively stable PPM. If the money should experience violent fluctuations, people will abandon it and switch to a different money — if they're free to do so.

Irving Fisher and others said that's not good enough; government should fine-tune the PPM, and that requires paper money. But this is another instance of putting the fox in charge of the chicken coop; the result has been a complete disaster. In the modern era, managed currencies everywhere have depreciated and fluctuated as never before in the history of monetary institutions.

Adam Smith and David Ricardo popularized the view that paper money could do the job of commodity money, only at much lower production costs. Whatever appeal this might have vanishes when one remembers that money as such is not a consumer or capital good, but a facilitator of exchanges. Increasing its quantity doesn't add to society's wealth. Its utility lies in its exchange value, and increasing its supply tends to lower that value. Thus, the higher production costs of commodity money turn out to be one of its great advantages, because it cannot be multiplied at will. Paraphrasing Hülsmann, commodity monies have built-in insurance against inflation.

Inflation
Most writers today define inflation as a lasting increase in the price level. Hülsmann adopts a different definition, one that was more or less accepted up until World War II: inflation is any expansion of the money supply that violates private-property rights. Unlike natural (voluntary) money production, which is regulated by the market forces of profit and loss, inflation is always an imposed increase of the money supply. With this definition, inflation can be seen as the cause of "unnatural income differentials, business cycles, debt explosion, moderate and exponential increases of the price level, and many other phenomena." Hülsmann sets about to expose the causal connections in some detail.

"The higher production costs of commodity money turn out to be one of its great advantages, because it cannot be multiplied at will."People — mostly governments — inflate the money supply because they profit from it, and the history of monetary institutions is largely the history of inflationary schemes. Early owners of the new money are the winners because they buy goods and services at current prices. Later owners are the losers because they pay the higher prices that the money-supply increase creates.

Inflation began as the debasement of coins, or what Hülsmann refers to as the falsification (counterfeiting) of money certificates physically integrated with the monetary metal. The counterfeiter could either reduce the precious metal content of the coins or imprint a higher nominal figure on the coins.

Compared to fractional-reserve banking and paper money, debasement was a crude method of counterfeiting. Using debasement, English kings could only inflate the money supply by a factor of 0.3 over a 500-year period (1066–1601). When they had access to the advantages of fractional-reserve banking during the subsequent 200 years, however, that factor jumped to 16. And American monetary maestros pumped up the money supply by a factor of 5 in a mere 30 years (January 1973–January 2003) by feeding the fractional-reserve monster.

There were other differences between inflation then and now. When princes of old debased their coins, their subjects considered it a cheat. When today's leaders debauch their currency, they proclaim it as wise and necessary monetary policy, and until recently most people believed them. It has taken the hocus-pocus of massive "stimulus " solutions to begin to shake their faith, though the new messiah is trying to restore it.

The Rise of Fractional-Reserve Banking
The grip of government on our lives cannot be adequately explained without reference to fractional-reserve banking, paper money, and the laws protecting these institutions. Hülsmann provides a compelling explanation of the relationship between government growth and modern banking.

"The history of monetary institutions is largely the history of inflationary schemes."As he tells us, banks developed as money warehouses in northern Italy beginning in the late 16th and early 17th centuries and soon became fractional-reserve banks, meaning they issued certificates in excess of the actual money they had in reserve. Unlike warehouse banks, fractional-reserve banks cannot meet all their obligations at once and are subject to the perpetual nemesis of all fractional-reserve schemes: the bank run.

The usual explanation for the corruption of warehouse banking into fractional-reserve banking is the simple one of bankers' giving in to temptation. While true, this is not the sole cause. Fractional-reserve banking was in part a defense against government confiscation. When Charles V was robbing the reserves of banks in Seville in the mid-1500s, for example, the bankers decided to evade the plunder by loaning a large portion of their deposits to commerce and earning a profit. The threat of confiscation somewhat diminished the bankers' guilt.

Legalizing False Certificates
In an ethical society, laws would punish counterfeiting as an instance of fraud and theft, and, once the false certificates were discovered, market participants would abandon their use and switch to alternatives.

But governments can legalize certain kinds of counterfeiting. This can be accomplished in several ways. One method is for government to spin language in such a manner that certificate imprints can take on any contractually binding meaning. For example, the courts might see nothing wrong with a gold coin marked "one ounce of gold" that in fact has less gold or no gold at all. Legalization here means that the government refuses to enforce the laws against bank counterfeiting. Legalizing false money certificates is the foundation of all other monetary privileges, such as legal monopolies and legal-tender laws.

But even when it holds a monopoly on the supply of coins and banknotes, the government cannot yet open the inflationary floodgates; market participants are still free to evaluate the coins and banknotes and can switch to other monies if their local monopoly supplier is irresponsible. Legal monopoly reduces the range of options and diminishes the full use of one's property, but it does not eliminate choice per se, and that remaining choice continues to keep the government in check.

From the government's perspective, legal-tender laws solve this problem. They attack choice at the root by overruling any contractual agreement a person might make with respect to money.

"In an ethical society, laws would punish counterfeiting as an instance of fraud and theft."There is another sense in which legal tender corrupts choice. If the unhampered market can be thought of as assigning "votes" to money users — one penny, one market vote, as Frank Fetter wrote in 1905 — then the imposition of fractional-reserve banking through legal-tender laws creates votes out of nothing and assigns those votes to the first users of the new money: bankers and government. A privileged money creates a privileged society.

Historically, legal-tender laws usually established a fiat equivalence between the privileged money and other monies. If gold and silver are legal tender, and gold is decreed to trade with silver at 1/20, but will trade at 1/15 on the market, the undervalued silver will gradually disappear from daily transactions. Legal-tender laws inflate the legally privileged money and deflate the others.

With silver scarce, its purchasing power rises, and it becomes difficult to make small purchases. People will be inclined to rely instead on fractional-reserve banknotes and demand deposits, which can be created quickly. If government then makes its notes legal tender, along with gold, the notes increase in demand because no one wants to pay in real money (gold). Notes are consequently redeemed less often, which increases bank reserves of gold. In the fractional-reserve system, this enables banks to issue more banknotes.

For the government, fractional-reserve banknotes are a godsend. It was fairly easy for laymen to distinguish debased coins from sound coins. Paper certificates, though, circulate without any distinctions.

Privileged banknotes entail a "race to the bottom" of worthlessness, but as long as they're redeemable in gold there is a limit to how much they can be inflated. Removing that limit converts them into pure paper money.

The Emergence of Paper Money
Banknotes become paper money through progressive infringements on private property and through breaches of contract perpetrated by central banks. When government grants a monopoly legal-tender status to the notes of a fractional-reserve bank, then allows the bank to suspend the contractually agreed-upon redemption of its notes, it turns those notes into paper money.

"A privileged money creates a privileged society."Paper money, by its very nature, is a form of fiat inflation: it is always and everywhere in greater supply than it would be on the free market, where it could not sustain itself at all. The banknotes of the world became paper money on August 15, 1971 when the United States declared it would no longer redeem its dollars in gold.

While the threat to gold miners is bankruptcy, the threat to paper-money producers like the Fed is hyperinflation. There's really no limit to how much paper money it can produce. As a privileged central bank, it cannot go bankrupt, and neither can the government that appoints the Fed's leaders go bankrupt.

In December 2002, Alan Greenspan claimed that "a prudent monetary policy maintained over a protracted period can contain the forces of inflation." But even "prudent" central bankers can't avoid economic crises. As Hülsmann argues, "the mere possibility of inflating the money supply creates moral hazard" (emphasis added). Users of commodity money do not speculate on the sudden availability of gold and silver miraculously emerging from the mines. By contrast, people do speculate on the "good will" of the paper-money producers, and they're right most of the time.

Inflation's Legacy
Inflation's standard definition is too narrow to provide an appreciation of the extent of its harm; it is far more than a deterioration of the currency's purchasing power. It's also much more than a "hidden tax." Government's perennial fiat inflation is a subtle WMD. Consider the following:

In funding wars, it allows government to ignore the fiscal resistance of its citizens.

It benefits the central government at the expense of secondary and tertiary governments.

It turns moral hazard and irresponsibility into an institution, and guarantees recurring economic crises.

By making credit cheap, it encourages businesses to finance their ventures through borrowing rather than equity. Because of market competition, few firms can resist the offer of low credit, making them more dependent on banks. As Pius XI noted in 1931, it puts a dictatorship in the hands of lenders who regulate the lifeblood of the entire economic system.

Fiat inflation drives people to invest in capital markets where few will have the expertise, time, and inclination to monitor their investments properly. In former times people could save simply by holding gold and silver coins.

Under a perennially increasing price level, the average citizen finds his best strategy is personal debt, which weakens self-reliance and independence.

Under chronic fiat inflation, people will tend to choose their employment based on monetary returns. Money then becomes the prime or only consideration for personal happiness.

Perennial inflation deteriorates product quality. Industries that cannot compensate for inflation with technological innovation turn to other means, such as producing an inferior product under the same name. Lying, which is bound up with fractional-reserve banking, tends to spread like a cancer over the rest of society.

By fueling the exponential growth of the welfare state, fiat inflation fosters the decline of the family. Families become degraded into "small production units that share utility bills, cars, refrigerators, and especially the tax bill." The welfare state drives the family and private charities out of the "welfare market."

As Hülsmann concludes, "fiat inflation is a juggernaut of social, economic, cultural, and spiritual destruction."

The Classical Gold Standard
The myth that governments are servants of their people is fully exposed in the history of money production. From antiquity to the present day, governments have always sought to steal from their citizens through manipulation of the money supply. In modern times, this has taken on the trappings of a science. To oppose it now means to oppose virtually the entire economics profession, most of whose members happen to be on the government payroll in one way or another.

The classical gold standard was ushered in following Germany's victory over France in 1871. Libertarians and monetary conservatives often hail this period as a halcyon era we need to resurrect. But while that standard had desirable results, such as boosting the international division of labor, it was still an imposed standard. As such, it demonetized silver and thus brought about a strong fiat deflation, which in turn reinforced fractional-reserve banking throughout the banking hierarchies.

As Hülsmann makes clear, the inherent fragility of fractional-reserve banking is well known to bankers and motivates them to devise means of postponing the crisis it inevitably produces. The classical gold standard was one such scheme. It was not imposed as a means of limiting inflation. It served as a pretext for national governments to bring the monetary systems of their countries under their control. Rather than "a bulwark of liberty," it was a "breakthrough for the societal scourge of our age — omnipotent government."

Pooling Gold
The onset of World War I in 1914 killed the classical gold standard before it could collapse on its own. An international arrangement called the gold-exchange standard replaced it in 1925 and lasted until 1931. Under the classical standard, the central banks kept their entire reserves in gold, while the commercial banks kept their reserves mostly in central banknotes. The gold-exchange standard took this pooling arrangement to an international level, with the Fed and the Bank of England remaining true central banks and, as the holders of gold, serving as the central banks of the world. Other central banks kept a large portion of their reserves in US and British notes. The gold-exchange standard collapsed following the 1929 Crash when various governments turned to protectionism or imposed foreign-exchange controls. It died in September 1931, when the Bank of England suspended payments.

"The myth that governments are servants of their people is fully exposed in the history of money production."The world suffered through a period of fluctuating exchange rates until the end of World War II, when the Bretton Woods system was adopted. As Hülsmann explains, it amounted to "a gold-exchange standard writ large." Under the classical system, gold was pooled in each nation's central bank; under the gold-exchange standard, the number of pools was cut to two — and under Bretton Woods, one. All the arrangements were devised to facilitate the "flexibility" of banknotes, and each was far more expansionary than its predecessor.

Under Bretton Woods, the participating nations agreed to pool the world's gold reserves at the Fed, which already had the largest gold supply in world history. The Fed continued to redeem its notes in gold to other governments and central banks, which in turn redeemed their own notes in dollars. To a great extent, participants were dependent on the good will of the Fed, which alone had the power to allocate the world's banknotes — dollars — at its discretion.

"Restraint was not part of its mission," Hülsmann tells us, "and the very anchor of the system — the Fed — was particularly ruthless in its inflation of the dollar supply." When it collapsed in 1971, the gold reserves of the Fed were nearing exhaustion. Bretton Woods thus concluded 100 years in which three "cartels of central banks had flooded the western world with their banknotes without nominally abandoning the gold standard."

International Paper-Money Systems
When the United States suspended payment of gold, it converted the world's banknotes to paper money. It also created the horror of fluctuating exchange rates that weakened the international division of labor and brought "misery and death" to millions. Yet paper-money standards have emerged. How is this possible?

We need to consider what government wants — more power and revenue — and the means available to attain it. The easiest way for governments to get additional revenue over and above taxes and debt is to encourage foreigners to make investments in their countries. But to do so they must provide sufficient financial safeguards. A government seeking investors, for example, might float bonds denominated in the paper money of a country whose investments it seeks. The issuing of government bonds denominated in US dollars or euros is today a widespread practice.

The territories with the largest capital markets will be the ones whose paper money will be adopted as international standards, and, in the 30 years following the fall of Bretton Woods, those territories have been Europe, Japan, and the United States. Consequently, the euro, the yen, and the dollar are the three most important monetary standards today.

As Hülsmann notes, the standard money producers cooperate with one another to maintain their positions. In a dollar crisis, for instance, the euro producers will commit to stabilizing the dollar-euro exchange rate so that dollar countries won't switch standards. And since paper-money producers know they can count on their competitors to help them out, they have a strong incentive to collude and expand their production.

Would a single global paper money such as the one Keynes proposed at Bretton Woods avoid the pitfalls of competing paper monies? Absolutely not, Hülsmann answers. All paper monies, whether national or global, are subject to moral hazard. They will either collapse in hyperinflation or invite increasing government control over all economic resources.

Is There Any Hope?

$24 $20

"We need to sweep aside privileged money and let the market work."We need to sweep aside privileged money and let the market work. It might seem an impossible goal, but history provides some encouragement. As the author notes, China used paper money for 500 years and suffered from hyperinflations and other monetary problems. When political leaders stopped suppressing silver and copper coins, monetary sanity returned. In US history, the framers repudiated the inflationism of the country's past in the Constitution's very first article; and Andrew Jackson defeated his inflationist foes during his presidency.

An ideal order of natural money production based on a universal respect for private property could exist today, he says, "technically at a moment's notice." With it so close at hand, it remains only to convince others that it should exist. Students of Hülsmann's book will find it a rich resource for such an undertaking.

George F. Smith
http://www.barbarous-relic.com/Welcome.html
george@libertyasylum.com

George F. Smith is the author of The Flight of the Barbarous Relic, a novel about a renegade Fed chairman.

http://creativecommons.org/licenses/by/3.0/us/

by Paul Craig Roberts

The US Constitution has few friends on the right or the left.

During the first eight years of the 21st century, the Republicans mercilessly assaulted civil liberties. The brownshirt Bush regime ignored the protections provided by habeas corpus. They spied on American citizens without warrants. They violated the First Amendment. They elevated decisions of the president above US statutory law and international law. They claimed the power to withhold information from the people’s representatives in Congress, and they asserted, and behaved as if, they were unaccountable to the people, Congress, and the federal courts. The executive branch claimed the power to ignore congressional subpoenas. Republicans regarded Bush as a Stuart king unaccountable to law.

The Bush brownshirt regime revealed itself as lawless, the worst criminal organization in American history.

Now we have the Democrats, and the assault on civil liberty continues. President Obama doesn’t want to hold Bush accountable for his crimes and violations of the Constitution, because Obama wants to retain the powers that Bush asserted. Even the practice of kidnapping people and transporting them to foreign countries to be tortured has been retained by President Obama.

The civil liberties that Bush stole from us are now in Obama’s pocket.

Will it turn out that we enjoyed more liberty under Bush than we will under Obama? At least the Republicans left us the Second Amendment. The Obama Democrats are not going to return our other purloined civil liberties, and they are already attacking the Second Amendment.

Rep. Bobby L. Rush (D, IL) has introduced the Blair Holt Firearm Licensing and Record of Sale Act of 2009. As the British and Australians learned, once firearms are registered, the government knows where they are. The government’s next step is to confiscate the firearms.

Moreover, the Act would permit the government to negate Second Amendment rights by refusing to issue a license. Any parents who bequeathed family antique or historic firearms to heirs would be in violation of the act, as it bans any transfer of a firearm other than via a licensed dealer.

William Blackstone, the revered 18th century defender of liberty whose Commentaries on the Laws of England was a bestseller in colonial America, wrote that "the last auxiliary right" of free men is "having arms for their defense." Blackstone, England’s greatest jurist, said that the right to bear arms enables the "natural right of resistance and self-preservation, when the sanctions of society and laws are found insufficient to restrain the violence of oppression."

The Bush regime’s reversion to medieval methods of incarceration and torture are an indication that we now live in a time "when the sanctions of society and laws are found insufficient to restrain the violence of oppression." Why do the Democrats desire Americans to be helpless in the face of oppression by the armed state? How can it be that Democrats want Americans to be free from the threat of being thrown into dungeons and locked away without a court ever hearing evidence, but are prepared to deny Americans the ability to resist such horrendous treatment should it come their way?

In response to my question, one progressive acquaintance said that he wanted to reduce "gun violence." As guns are inanimate objects, I assume he meant violence committed by people who use guns instead of knives, fists or some other weapon.

"Gun violence" is not something committed by the vast majority of gun owners. "Gun violence" is the preserve of the criminal elements, such as gangs fighting over drug turf. Criminals are already prohibited from owning guns, but criminals pay no more attention to this law than they do to laws against robbery, rape, and murder. Why do Democrats think that disarming law-abiding citizens will disarm outlaws? For how many decades have drugs been banned? Does any Democrat think that the ban on drugs has succeeded?

All the ban on drugs has done is to make the drug trade profitable. Now people fight over it. How can guns be successfully banned when the war on drugs is a failure? All a gun ban would do is to create a new criminal activity.

England, in violation of its unwritten constitution, banned ownership of pistols and rifles. But now the police have to be heavily armed, because criminals are now armed, but not law-abiding citizens. When I lived in England, the police were not armed with firearms. I remember reading a few years after the passage of England’s gun ban that criminals were selling submachine guns on London street corners. The police discovered a warehouse in London filled to the brim with machine guns that were being sold to all comers.

So much for gun bans. They only disarm the law-abiding and leave them defenseless.

Gun bans also greatly increase the crime rate. When households are armed, robbers prefer houses where no one is home. In England, criminals are no longer deterred from entering an occupied home. The more people at home the better. There might be someone to rape and someone to beat up. There is little to fear from a disarmed household.

When I lived in the metro area of Washington DC, I resided on the Virginia side of the Potomac. There was no problem with owning a gun in Virginia, but in DC, until the recent Supreme Court ruling, the only way a person could have a firearm was to keep it disassembled and unloaded.

The Washington "gun control" ordinance benefitted criminals. The crime rate in DC was much higher than across the river. Despite, or because of, the gun ban, DC was the murder capital of the US.

Police seldom, if ever, prevent a crime. Their job is to appear after a crime is committed and to investigate with a view to identifying the perpetrator. A large number of careful studies show that private gun ownership prevents far more crimes than police ever solve. Criminals are routinely deterred, apprehended, and sometimes killed, by armed private citizens.

In contrast, police, especially the notorious SWAT teams, accidentally kill more law abiding citizens than they do criminals. If anyone should be disarmed, it is the police. When police become militarized, as they increasingly are in the US, their attitude toward the public changes from protective to hostile.

Militarized SWAT teams have established a record of showing up at the wrong address.

In Maryland recently, a SWAT team mistook the mayor and his wife for drug dealers. A large number of armed men in black, and not identified as police, broke into the mayor’s home, killed the family’s Labrador dogs, and held the mayor and his wife spread eagled on the floor with loaded automatic weapons a few inches from their heads. Fortunately for the mayor and his wife, a local policeman happened by and informed the paramilitary unit that it was the mayor and his wife whom the SWAT team was terrorizing.

Many progressives oppose gun ownership because they have sympathy for animals and oppose hunting. However, most gun owners are not hunters. Most members of gun clubs are content to shoot holes in paper targets or at clay pigeons. They enjoy hand-eye coordination, the study of ballistics, and reloading for antique rifles. An outing is really just a chance to get together, to talk about history and the load they are working up for their 1873 Winchester, and to enjoy each other’s company.

There is a vast number of small businesses that exist because of gun ownership. Repairs, customizing, parts, sights, brass, bullets, primers, and powders for reloading, reloading equipment, targets, cleaning, refinishing, engraving, it goes on and on. What would happen to these hundreds of thousands of people, to the family businesses and to the skills accumulated, if Americans are deprived of their Second Amendment rights? We would have another million people deprived of livelihood and on the streets. Would they turn to crime?

The progressive canard is that the Second Amendment, unlike the rest of the amendments to the Constitution, is not a constitutional right for citizens. Rather it is a right for a defunct organization known as the militia. Why in the world would the Founding Fathers, when laying out the rights of individuals, confound the point by sticking in among individual rights a right for a military organization?

But so what if they did. Americans have had squatter’ rights to firearms since 1776.

In 1992 when the Supreme Court revisited Roe v. Wade, the justices acknowledged that the legal argument behind the 1973 decision legitimizing abortion was flawed. However, the justices ruled that women had exercised abortion rights for 19 years, and the passage of time had given women squatters’ rights to abortions.

Americans have exercised Second Amendment rights for 234 years. Regardless of the meaning of the Second Amendment, the right of adverse possession makes gun rights final. To assault such a well-grounded right is an act of tyranny.

Paul Craig Roberts
paulcraigroberts@yahoo.com

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and former associate editor of the Wall Street Journal, has been reporting shocking cases of prosecutorial abuse for two decades. A new edition of his book, The Tyranny of Good Intentions, co-authored with Lawrence Stratton, a documented account of how Americans lost the protection of law, has just been released by Random House.

by Frank Shostak

We live in an age of grave economic ignorance, if central-bank policy is an indication of prevailing economic theory. It is apparent that we've learned nothing from several millennia of monetary destruction. The persistent demonstration that capital, not paper, is the basis for prosperity has fallen on deaf ears. Daily, we face the sad spectacle of government officials, pundits, and even Nobel laureates telling us that printing money is the answer to an economic downturn.

Consider that since the eruption of the financial credit crisis in the second half of 2007, all major central banks have embraced an irresponsibly loose-interest-rate stance.

For instance, the policy rate of the Bank of England (BOE) was lowered from 5.75% in November 2007 to the current level of 1%. The sharp decline in the BOE policy interest rate is in line with policies of other central banks.

The US central bank (the Fed) has lowered its policy rate (the federal-funds rate target) from 5.25% in August 2007 to around zero at present.

Also, the relatively "conservative" European Central Bank (ECB) has been aggressively lowering its policy interest rate. The rate was lowered from 4.25% in September last year to the present target of 2%.

Similarly, the Bank of Japan (BOJ) has visibly eased its interest rate stance. The policy rate was reduced from 0.5% in September 2008 to the current level of 0.1%.

Given that, so far, already extremely low interest rates have failed to revive economic activity, central bankers are now considering another approach.

Last Wednesday, February 11, the governor of the Bank of England said that the UK central bank is going to embrace a quantitative easing policy to revive the economy. The idea here is to flood the economy with money by buying government bonds. US central-bank policy makers are currently contemplating a simliar idea.

We shouldn't overlook the fact that, since embracing the aggressive lowering of rates, central banks have been aggressively pushing money into the banking system without succeeding in reviving economic activity. So why should aggressive money pumping work now?

The yearly rate of growth of the US central-bank balance sheet (money pumping) jumped from 3.9% in August last year to 152.8% in December 2008 before falling to 127.5% in January. The yearly rate of growth of the balance sheet of the Bank of England jumped from negative 7.2% in May 2007 to positive 179.4% by October 2008 before easing to 157.6% in November last year and 129% in January.

The growth momentum of the European Central Bank balance sheet has accelerated in January. Year on year, the rate of growth jumped from 7% in July 2007 to 45.5% in December and to 56.5% in January.

Also, the yearly rate of growth of the BOJ balance sheet follows a visible uptrend. The rate of growth climbed from negative 0.8% in August last year to 10.3% in December before easing to 5.7% in January.

What permits real economic growth is an improvement in the investment infrastructure of the production process. What makes the improvement possible is real savings. It is real savings that fund the enhancement of infrastructure through various tools and machinery, i.e., capital goods. With better tools and machinery, a better quality and a greater quantity of goods and services can be produced.

In a free, unhampered market economy the established infrastructure is in accordance with the tendency toward harmony between various activities. This means that the flow of real savings is sufficient to fund various lines of production without any disruption.

On this Murray Rothbard, paraphrasing Ludwig Lachmann, wrote,

Capital is an intricate, delicate, interweaving structure of capital goods. All of the delicate strands of this structure have to fit, and fit precisely, or else malinvestment occurs. The free market is almost an automatic mechanism for such fitting; … with its price system and profit-and-loss criteria, [it] adjusts the output and variety of the different strands of production, preventing any one from getting long out of alignment.[1]

As a result of the artificial lowering of interest rates and massive money pumping, an additional demand for various goods and services emerges. This leads to an attempt to expand the infrastructure.

This attempt is bound to fail since the flow of real savings is not large enough to support the expansion of the capital structure. Consequently, the attempt to expand the infrastructure leads to the diversion of real funding from various activities that make the present flow of real savings possible. Thus, the flow of real savings comes under pressure and the rate of real economic growth follows suit.

Neither an artificial lowering of interest rates nor monetary pumping by central banks has direct input in the production of capital goods and the production of goods and services that are required to promote and maintain human life and well-being.

The artificial lowering of interest rates and monetary pumping only give rise to various false activities by diverting a portion of the flow of real savings to these activities. The more false activities that emerge on the back of the artificial lowering of interest rates and monetary pumping, the less real savings will be available for wealth-generating activities.

The fact that economic conditions have continued to deteriorate despite the aggressive lowering of interest rates and massive money pumping by central banks raises the likelihood that the flow of real savings is in trouble.

Note again that monetary pumping and the artificial lowering of interest rates can't replace nonexistent real savings. Without additional real savings, it is not possible to undertake various new projects without weakening the existent structure of production.

$60 $50

Remember that the interest rate is just an indicator of the state of demand and supply for real savings. The falsification of this indicator cannot expand the flow of real savings.

Likewise money is just a medium of exchange. Its function is to permit the exchange of the products of one specialist for the products of another specialist. More money cannot generate more real savings or real economic growth.

On the contrary, a further planned expansion in monetary pumping by central banks can only weaken the flow of real savings and undermine prospects for a sustained economic revival.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. He is chief economist of M.F. Global. Send him mail fshostak@manfinancial.com.au

Article first posted on www.mises.org

http://creativecommons.org/licenses/by/3.0/us/

by William Thomson

Business Times Singapore 13 February 2009

FAR from being at, or even near, the trough of the economic and financial system crisis, are we still staring into the abyss? And if things have to get worse before they get better, how much worse, and for how long? Is a 'relief rally' likely in equity markets before long? The Business Times invited a group of experts (who correctly predicted that the crisis would be far worse than most people expected) to tell us where things are likely to go from here - and what kind of investment portfolio to build against an uncertain future.

Panelists

Ernest Kepper: Former official of the International Finance Corporation and Wall Street investment banker who now heads an Asian financial consultancy
Jesper Koll: President and chief executive officer at Tantallon Research, Japan
William Thomson: Chairman of Private Capital Ltd in Hong Kong; Director Finavestment Ltd., and Advisor to Axiom Alternative Funds London.
Christopher Wood: Managing director and equity strategist at CLSA Asia-Pacific Markets in Hong Kong

Moderator: Anthony Rowley, Tokyo Correspondent, The Business Times

Anthony Rowley: We are very pleased to welcome you back, gentlemen, at this critical junction in global financial and economic affairs. I would like to start by asking each of you how far you think activity is likely to recover this year in the world's major economies, and how effective the various stimulus packages announced so far are likely to be?

William Thomson: The next few years are going to be very difficult with high unemployment, possible stagflation and social unrest - as we are seeing in Iceland and some of the Baltic nations. Already we are hearing protectionist voices and the future continuation of globalisation could be severely tested. This year will almost certainly see negative growth overall in the G-7 countries and, at best, we will see some stabilisation in the second half of the year.

But I look for a more L-shaped recovery, rather than a typical V-shaped recovery. There is a very real danger that we could be going to follow a modified Japanese scenario of the 1990s.

The outlook is extremely opaque as we are in the accelerating point of the downturn. While both monetary and fiscal policies have become very relaxed in the US, the UK and elsewhere, funds have mostly been going to recapitalise the banking systems, where they are hoarded rather than re-lent, awaiting the next set of losses and the next recapitalisation. US President Barack Obama's major fiscal stimulus has still to be passed and whilst any tax cuts will have an immediate effect, the spending on infrastructure, etc, will take a considerable time to filter into the economy.

Jesper Koll: The real problem facing global business managers and investors is not so much what will happen in the next couple of months, but what will happen in the next couple of years. Sure, tax cuts and increased public spending are poised to boost demand so that by April/May the global economy will stop contracting. But the problem of excess capacity will not be fixed. Whether in steel, cement, cars or computers, the world has built capacity to supply for 4 or 5 per cent global growth. Unfortunately that may be at least one or 2 per cent too much. So a fair bit of the global productive capital stock is poised to stay idle for quite a while. Governments' focus on supporting demand is very important, of course. But reducing supply is even more important at this stage. Creative destruction is a necessary condition for the next real recovery.

Christopher Wood: I think economic activity in the major Western economies will not recover this year.

Ernest Kepper: I'm doubtful about prospects for the next two to three years as the authorities have failed to get to grips with the financial crisis, resorting to a series of hasty measures to try and support the banking system. The money has been given ineffectually and hasn't worked. So far, the crisis is worsening and little has been realised in terms of getting the banking system working normally again. The current economic model, driven by deregulation and the financial markets, will require radical changes. The future model will have to look dramatically different.

Perhaps what we are seeing is the downside of globalisation, where a crisis that began in the United States can infect all of the world's major economies. It is this dynamic that is having a global impact because the US consumer alone has been accounting for 20 per cent of global GDP - twice that of the entire Japanese economy. Over the past 15 years, businesses in the US, Europe and Japan relocated their manufacturing capacity to places where operating costs were the lowest, for the most part being in the Asian region, especially China, making Asia the manufacturing heartland of the world. The cheap money and easy credit of the last 10 to 15 years led to a bubble in fixed investment in Asia, especially in China.

Meanwhile, what I call the abstract global financial system goes on for the sole reason that players agree on the rules - but the paper or cyber money value for these real goods has become an abstract or intellectual value, and there is no longer a direct link to real goods. These financial instruments/vehicles are so abstract that their valuation is no longer understood, and is corrupted.

Rather than increased bank regulation we need a regulatory agency to control the creation and issuance of financial instruments. This would prevent the introduction of instruments such as financial derivatives and sub-prime mortgages that do not make any positive economic or financial contribution.

Anthony: How much more trouble do you see on the financial horizon?

William: I would hope that most of the damage has been done. After all, the big institutions in the US and the UK are now mostly on state life support. The only real question is how many will eventually have to be nationalised and the form that takes. The financial sector has to shrink as a proportion of GDP in the developed world and the adjustment is going to be painful, especially in the UK, which became over-dependent on the City and financial services. There are huge uncertainties for the future. Questions such as whether investment banking and commercial banking should co-exist in the same institution need to be revisited and how the regulatory system will and should adapt. It failed miserably in the last cycle and needs to be modified to account for globalisation. One thing we can be sure of: we will not be going back to status quo ante.

Jesper: The global banking crisis is now over in the sense that all governments are committed to save depositors, prop-up money markets and, if necessary, nationalise weak banks. What remains, however, is the almost complete lack of new profit opportunities for banks. So banks will have to break up and sell those businesses that are not part of their core competence. At the same time we'll see much more aggressive consolidation of global banking and finance. How long before a Chinese bank buys a European or American one?

Ernest: No industry or institution will be spared in the downturn and the biggest impact will be felt by companies in banking, construction, entertainment and the automotive business. Government and central bank action will not be enough to save either the financial system or the global economy. If the crisis was brought on by too much borrowing and spending you can't solve it by increased government borrowing or by paying off all the bad loans with taxpayer dollars.

The economy will continue to slow down; more jobs will be lost, businesses will go bankrupt and real estate fall into foreclosure. It is doubtful that the attempts to stop this momentum will show any signs of success over the next 12 months. This is a global depression that will touch everyone.

Around the world many banks will amalgamate with each other in order to survive. The US dollar will continue to lose its value. The Obama administration's measures would provide artificial life support for the banks at considerable expense to the taxpayer, but would not provide them the margins and yield curves that enable them to resume lending at competitive rates Another ceiling on banks' growth is the danger of excessive regulation due to the large losses suffered by the general public. All this means that financial institutions and banks will be less profitable, and lose their level of importance in the economy.

Anthony: How big a 'debt mountain' are governments creating by their fiscal stimulus plans, and how will it be paid down - by the sweat of the taxpayer's brow or through inflation?

Jesper: Let's be clear about one thing: the size of public debt build-up that we are now experiencing is simply unprecedented. Basically, most major economies will see debt-to-GDP ratios double this year and most G-7 countries will be left with debt ratios well in excess of 140 per cent of GDP. At those levels, a little inflation does basically nothing to fix the problem. Only inflation rates well in excess of, say, 10 per cent or 15 per cent could start to make a dent. In other words, we are not looking at a little inflation but at hyper-inflation as a real risk. Another solution would be debt default. Either way, I expect a sharp divergence between sovereign debt interest rates in the coming years.

Christopher: We are facing a debt mountain reflecting years of above-trend credit growth. This debt mountain is deflationary, although the policy response does create a risk of hyper-inflation.

William: We are definitely in a bond bubble and the interest rates that investors are prepared to accept on long- term sovereign debt are quite irrational. The UK and the US, unlike Japan, are not high-saving economies and it seems likely that the eventual result of the debt mountains and quantitative easing, alongside the run down in commodity inventories, will lead to considerable inflation in the medium term - say, by 2011/12.

Ernest: The basic question here is, how high is the debt mountain and what is it made of? Some estimates indicate that total global debt is in the range of US$750 trillion, and the total financial derivatives outstanding are in the range of US$450 trillion. This brings up two significant underlying issues - the lack of transparency in the markets (the fact that we don't know what's going on or even who the players are), and the lack of the basis to determine the true value of financial instruments. Because of these two issues alone, we can expect a very significant transformation of the financial system as we know it.

The size of the US-dollar derivative market may never be fully revealed. However, it can be expected that the current billion-dollar bailouts of banks will lead to extensive restructuring of the global financial system without ever determining the value of many of these derivative financial instruments.

Anthony: So, are government bond markets safe any longer, given the huge fiscal deficits that are being built in the US and elsewhere?

William: The bond markets are becoming the latest financial casino. Who rationally believes that a 2 per cent yield on 30-year US Treasury debt makes sense when the country faces massive unfunded pension and other liabilities for the baby-boomers now entering retirement? US government indebtedness, including such social security liabilities, amounts to over four times US GDP as opposed to the frequently quoted sovereign debt figure of 60-70 per cent of GDP.

The US, with its miserable savings rate, is dependent on the willingness of foreign central bankers to fund these deficits. The Chinese are already nearing the end of their patience as they face losses on their holdings and enormous domestic needs. If US Treasury Secretary Timothy Geithner makes good his threat to name China a currency manipulator, then the US bond markets will face real trouble sooner rather than later. Of course, that may have been just a ploy (for Mr Geithner) to get confirmed, in which case the Ponzi finance game will continue for a little longer.

Ernest: With the financial system bailouts, US public debt has spiralled. It is expected that at some point in time foreign holders of some US$15 trillion to US$20 trillion of US paper could start asking questions regarding whether the yield is sufficient to allow for the perceived risks.

Moreover, China, the Middle East and other sovereign wealth funds may have greater priorities in funding and bailing out their own economies than investing in US paper. If these holders do lose their appetite for Treasury paper, US authorities could be forced to raise yields to a substantially high level - in the range of 10 per cent or so. China, for instance, may suffer from a severe drop in trade and foreign capital inflows. Because of its structural over-reliance on exports and manufacturing, China may be required to utilise its extensive stock of international assets to boost domestic demand and this could cause reduction in its purchases of US Treasuries. As a result, foreign demand for US government bonds could shrink drastically as the US requires increased funding for its bailout and stimulus programmes. This could lead to extreme downward pressure on the US dollar.

Jesper: Government bonds will continue to be the benchmark against which all other assets are measured. The big opportunity is to play one issuer against the other. Simply put, all governments have responded to the crisis at more or less the same time and in the same manner. This uniformity is poised to end. Cycles and policy will now start to differ from country to country, so I expect interest rate differentials to start to widen - and fluctuate - quite substantially.

Anthony: Do you foresee any signs of a 'relief rally' in equity markets or has investor psychology been so badly bruised as to rule out any forays into equities in the short term?

William: A relief rally seems quite likely before too long. The markets were severely oversold in late 2008 and we have had a tentative bounce since then. A greater bounce may require confidence that the financial crisis has been sustainably contained. However, some sort of bounce seems likely in 2009 given a historical context. After all, the 2008 declines were similar in magnitude to those in 1929 - 47 versus 48 per cent. 1930 saw a better than 50 per cent rally before the markets collapsed again to their ultimate lows in 1932 - not that I am predicting that 2010 will be as bad as 1931/2.

There are great values around at present but at the same time some securities are still overpriced based on likely earnings outcomes. The returns on carefully selected equities should far exceed that in government bonds. The main caveat to all this is the structure of US President Obama's tax changes. An increase in marginal tax rates, especially on capital gains and dividends, would almost certainly be interpreted negatively by the market and at best moderate any rally.

Christopher: Wall Street-correlated world stock markets are still overdue more for a short-term, policy-driven relief rally than that which occurred between November and early January.

Ernest: I would not put much weight on any rally because the recession will be much worse than expected. Even the IMF expects the global economy to come to a virtual halt. Any such rally would likely be the result of short-term trading or speculation. There are too many speculators in the market who buy merely on the chance that they can sell higher, and not enough long-term investors who would like to see a company's profits go up and be paid out of dividends.

If stocks can be considered cheap, that is only relative to their values over the recent past when they were grossly over-valued. Current price earnings ratios can be expected to fall well below their long-term average of 16 before a turnaround kicks in. As corporate earnings start to drop, stocks would have to fall in order to maintain a price earnings average. I would expect stocks to fall another 15 to 20 per cent before bottoming out, and don't expect any sort of serious rebound until the credit markets recover from the greatest creation of liquidity over the last 10 years that the financial system has ever seen. That will take years. Therefore, the next 12 to 24 months or so will likely be a period of a lot of confusion in the equity markets.

A model portfolio

Given the sober outlook that they envisage for the global economy and the international financial system, how would our experts recommend constructing an investment portfolio for the short to medium term?

William: First of all, the insurance position in gold remains a vital cornerstone of any medium-term portfolio. After that, diversification is the key. If fixed income is a necessity for the portfolio, then high-grade corporate and emerging market bonds would be favoured over G-7 sovereigns.

Within a US equity portfolio I believe one should get exposure to sectors that will benefit from any economic restructuring and investment in the coming years - areas such as health, infrastructure and clean energy. But I would emphasis high-quality dividend-paying companies in the US and elsewhere. I do not think the world has gone ex-growth in the medium term and so commodities still warrant exposure, especially after their extreme sell-offs since last summer. Beyond that, I also favour selected emerging market equities.

Emerging markets have been almost indiscriminately hammered as foreign cash has been repatriated and the de-leveraging story has unwound. As a result values exist there, especially in Asia. For instance, the Korean market sells for about the same as it sold for at the time of the Seoul Olympics whilst the economy in won terms is six times as large. The stock markets there, in Taiwan and Thailand sell for low single-digit multiples and around 6 per cent yields. Assuming no great reversal of globalisation, greater growth in Asia will continue and these are compelling values. The only developed market with similar values is Germany. Emerging markets are much better long-term equity investment based on relative valuations and growth potential.

Jesper: This is a great time for a stock picker, a hard time for an asset allocator. I do not think it wise to focus on so-called asset classes, bonds, stocks, or cash. Rather, all focus has to be very company-specific. For example, car companies are offering very interesting opportunities right now. It really is darkest before the dawn. A Japanese car company stock may very well do two or three times as well as a German one. But then even among the Japanese ones, one may go bust and another one move to total world domination. More so than ever, focus on stocks, on companies, on their managers and their real competitive edge.

Another thought is on the US dollar. It is tempting to be a dollar bear, given all the problems in the US. I am the opposite, more a dollar bull. The reason is simple. America's policy and corporate management response to the crisis is poised to be more focused and more decisive than anywhere else in the world. Wall Street will remain the dominant global financial centre and America will offer the most compelling investment opportunities in the world. America has become cheap, with lots of super- cheap assets now for sale. The world will start buying more aggressively into America. That's where the real value is. So the dollar should rise

Ernest: I recommend acquiring gold in whatever form. Gold was, and is, a form of cash, and it probably always will be. Paper currency, on the other hand, is a promise to redeem in terms of something else - and as national debts mount higher, the chances of default mount with it. Further, though the US prints increasing numbers of dollars, the amount of gold backing those dollars up is small - and will probably get smaller. With the dollar's value falling, people will begin to buy gold; its potential upward rise will then be unlimited. I also recommend a strong currency, such as the Japanese yen or Swiss francs, as a good place to hold liquid reserves.

Christopher: My recommended long-term US dollar-denominated global portfolio is to have 5 per cent in German physical property, 5 per cent in Japan physical property, 10 per cent in Asia ex-Japan physical property; 35 per cent in domestic demand-oriented Asia ex-Japan equities, 15 per cent in Japanese equities; 15 per cent in unhedged gold mining stocks and 15 per cent in gold bullion.

William R. Thomson
Chairman of Private Capital Ltd.

William Thomson, Chairman of Private Capital Ltd., an advisory company in Hong Kong. He is also a senior adviser to Franklin Templeton in Hong Kong and Axiom Alternative Funds in London.

Mr. Thomson is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

The Patriotic and Moral Imperative for Owning Gold and Silver

Johnny Silver Bear
www.silverbearcafe.com

(Editors Note: One of the perks of editing "the Bear" allows me to post my own rants. I originally published The Patriotic and Moral Imperative for Owning Gold and Silver in October, 2004.)

I pledge allegiance to the flag...

Remember when you learned those words? It was back when everything was simple. The Pledge of Allegiance was written in 1892 by Francis Bellamy, the circulation manager of the Boston based "The Youth's Companion" magazine. The end of the Nineteenth Century was a much simpler time. The world was a much simpler place. It is not so simple anymore.

When we recite those seemingly patriotic words, what are we really pledging our allegiance to? To the flag? To the United States? To the Republic for which it stands?

If we are to pledge our allegiance, let it be to an ideal. That ideal should be the American way of life as prescribed by the Constitution. The Constitution was designed to provide the essential ingredient in the recipe for the American Dream. It provided the "roadmap" that gave our forefathers the opportunity to make this country great. That greatness was born out of the sweat and blood of a liberated citizenry.

...of the United States of America.

Freedom as a concept and an ideal is under attack in America. Liberty has lost its meaning for many Americans. It often appears far less valuable than it really is. All too often, the unthinking trade liberty for the seductive illusion of security and stability. Just as Benjamin Franklin warned us, in the end they are left with neither.

We have reached a point where, once again, we must rely on the guidance of our forefathers and their patriotic initiative.

Upon reflection, it would seem that the "patriotism" exemplified by the founders of the American Republic consists, in part, of an allegiance, not to persons, not to offices, and not even to institutions, but rather to political and moral ideals. Such ideals as self-determination, the social contract, inalienable human rights, and additional ideals such as those enumerated in the Declaration of Independence and the Bill of Rights.

An attempt at the decimation of the ideals of freedom and liberty is currently being explored by an "Evil Corporation" that now plans to rule the world.

And to the Republic for which it stands,

History tells us that, twenty-six-hundred years ago, in Athens, Greece, the first two candidates ran for office. Athens is credited as being the birthplace of Democracy. Each of those first two candidates spent some of his own money buying votes. In every Democratic election in history, there have been candidates who used their own money to buy votes. Buying votes has always been an intrinsic part of every Democratic System. It may not be right, but it is a result of "the human condition". That is to say there is, and always has been a temptation to "rig the system". It is one of the reasons why Democracies are fundamentally flawed.

Everything evolves. Everything changes. For better or worse, nothing remains the same.

During Franklin D. Roosevelt's terms in office, things changed substantially. F.D.R. figured out a way to, in his mind, improve the system. Instead of using his own money to buy votes, he would use the taxpayer's money. This would change the face of American politics forever. By inventing more and more social welfare programs, he effectively bought more and more votes with the taxpayer's money. You can always find a bunch of folks willing to vote for a handout. He, more than any other person in our Nation's history, instigated a collectivist paradigm that would mislead our country, and place us in the precarious position that we find ourselves today.

Our present day politicians have embraced the collectivist ploy of social welfare, used it over and over again to get themselves elected and re-elected, adopted it as "business as usual", and gone about their ignoble pursuits with a "job security is job one" mentality.

"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else." -- Frederick Bastiat

Our present system is a radical departure from the vision of the Founders. They understood the ultimate folly of Democracy and rejected it as unworkable. They knew that the majority would always vote for a free ride. They knew that the herd mentality is not compatible with anything nobel, and that conformity is the greatest single threat to liberty.

Freedom and individualism, are the only ideological tenets that can lend to our Country's salvation. It is the individual states that make up a Republic. It is the individual persons that make up the state. Mankind's potential is held within the core of every individual person, but that potential becomes diluted exponentially as the collective mind set is imposed and adopted.

Our country is now controlled by Fabian Socialists. The "Neo conservatives" are perhaps the most blatant perpetrators of the Fabian Socialist agenda with their totalitarian legislation and their reckless redistribution of our Nation's wealth through sovereignty degradation with agreements like NAFTA and FTAA. This is the ultimate result of the one world vision of Cecil Rhodes.

Our flag no longer seems to be standing for, or concerned with "the Republic."

one Nation,

The name of the game is collectivism, the basic precepts of which promote an ideology which dismisses nation, sovereignty, and individual liberties. It also suppresses notions of an omnipotent presence which stand in the way of our subservient indoctrination.

The world is crumbling down around us. And not only economically. We have allowed the orchestrated demise of the world as we know it by a group of misguided, irresponsible power mongers.

Why are these guys bad? Why do I often refer to these banksters as "the Dark Side?" Is it simply due to the fact that they are driven solely by a lust for power? While lust, avarice and greed are indeed Basic Biblical Sins, many people lacking moral stamina fall prey to the various turpitudes of modern society. While failure to resist the temptations of the Basic Sins is a mark of diminished character, it is, in itself, not all-damning.

No, it is because of their lack of cohesive vision. They have attempted to install themselves as the sole shot callers, attempting to rule the world, with no other qualifications other than their membership in the various "lucky sperm clubs." The passed down institutional wealth that they have amassed, through generations of corruption and successful financial manipulation, has skewed their sensibilities. The ideals that may have seemed noble to their grandfathers have been set aside. Their sole motive for world domination has digressed to one of the lowest common denominator. Absolute greed, like absolute power, corrupts absolutely. With no benevolent vision for the future, they have systematically decimated the planet's resources. The resulting imbalance is one that can now only be righted by the severe suffering of all of humanity, including themselves. They are maniacs who have painted humanity in to a corner that is, for all intents and purposes, inescapable.

under God,

In June of 1954 an amendment was made to add the words "under God" to the Pledge of Allegiance. Then President Dwight D. Eisenhower said "In this way we are reaffirming the transcendence of religious faith in America's heritage and future; in this way we shall constantly strengthen those spiritual weapons which forever will be our country's most powerful resource in peace and war."

As I stated above, the collectivist paradigm intentionally suppresses notions of an omnipotent presence. How many of our cherished institutions have been challenged, by law, to abandon the notion of an Almighty?

The greatest problems to consider, when attempting to deal with the Evil Corporation, are three fold. First, the people that are calling the shots, the Puppet Masters, stay behind the scenes and are rarely accessible. Secondly, the front line individuals that serve this alliance, (politicians, bureaucrats, academics, union organizers, mainstream media, etc.), have been, for the most part, kept in the dark when it comes to a real understanding of the ultimate agenda which guides their labors and the subsequent dismantling of the U.S. Constitution. And third, a pandemic apathy, which is the product of a ninety year misinformation campaign, has brought about a lack of opposition to this movement and has rendered the country, almost hopelessly, in the grip of the abomination which is the New World Order.

indivisable,

Indivisable! The Declaration of Independence spelled out, in no uncertain terms, our right to division. "When in the course of human events," and so on. So now we must insure that the group prevails? That we do everything in our power to keep the herd together?

But wait. Enough of my ranting and raving. If you need evidence that the afore mentioned facts are true, and that collectivism is our main enemy, please refer to the research of an expert, G. Edward Griffin. His series, The Future is Calling will provide the foundation for most of what I have previously stated.

There are solutions to the problems we face. Most will require commitment, dedication, and sacrifice. But there is one part of the solution that is relatively painless. Although relatively painless, it is incredibly important. It is a simple act and it will only require your passive involvement. No armed insurrection necessary. Once you understand the source of their power, you will understand this part of the solution. So let me pose an analogy.

Suppose you go to a casino. If you are paying attention, you will notice that everyone is playing with chips. Why? Because the owners of the casino know that their customers, (marks), seem to be more willing to play their games with chips, rather than cash. They have, at least temporarily, demonetized Federal Reserve Notes, (FRNs), by substituting chips. Now let's take this situation to the extreme. Suppose you could buy everything you needed in the casino. Food, clothing, shelter, everything. And you could pay for everything with chips. Now lets additionally suppose that you could also work in the casino, and they paid you with chips. Stay with me here. Let's additionally suppose that you lived there all your life, that you raised your family there and that your kids raised their families there. Eventually, no one would have any need of FRNs. The casino would have successfully demonetized cash and would obviously be in control of the manufacture and issuance of chips. With the production of more chips, they could easily dilute the value of the chips you had already amassed. With that control they would have achieved absolute power in the casino. No matter whether you won or lost, they would win. They would rule the microeconomic world of the casino.

Hey, that's exactly what the collectivist owners of the Federal Reserve started doing in 1913. For an update on that debacle please see The Nature of Money by yours truly. Instead of a casino, they used a whole country to get it started. They progressively got everyone to forget about gold and silver, to dismiss them as, in the words of John Maynard Keynes, "barbarous relics". John Maynard Keynes was a puppet pretending to be an economist. Those that prescribe to "Keynesian Economic Theory" are, IMHO, either idiots, or criminal economic predators. Those predators include every member of every Federal Reserve Board this country has had in the last eighty years! They didn't want people to use gold and silver for money because they couldn't manufacture it themselves.

They could, however, manufacture as many FRNs as they wanted. At the Breton Woods conference of 1945, they expanded the size of their "casino" to include most of the world.

The verdict of history must be that the Federal Reserve has failed dismally. Far from making financial crises impossible, as it initially promised, the Fed, in league with the Bank of England, intentionally engineered the first Great Depression, and it is about to present us with a Super Depression, which will ultimately result in worldwide economic disintegration.

As the economic disintegration unfolds, all forms of savings will be decimated. Notional long term obligations like pensions are already failing as the underwriters fail. Institutional debt will be next. Social Security and Medicare are no longer sustainable. In the next two years we will watch as FRNs are so radically diluted that our economy will begin to mirror the Weimar Republic. This is all part of of the Collectivist's ploy for world domination. Tear the whole thing down and rebuild it in the Fabian Socialist's vision.

"The only difference between Communists and Fabians is a question of tactics. They may compete over which of them will dominant the coming New World Order, over who will hold the highest positions in the pyramid of collectivist power; they may even send opposing armies into battle to establish territorial pre-eminence over portions of the globe, but they never quarrel over goals. Through it all, they are blood brothers under the skin, and they will always unite against their common enemy, which is any opposition to collectivism." --Taken from G. Edward Griffin's essay The Grand Deception, a second look at the war on terrorism.

If you are not already familiar with the Fabian Society and its aspirations, please refer to Carroll Quigley's examination, The Anglo-American Establishment. The essence of the Fabian's agenda was incorporated in a stained glass window that hung in the Web House, a location that served as the group's original headquarters, in Surrey, England. It is that famous line from Omar Khayyam: "Dear love, couldst thou and I with fate conspire to grasp this sorry scheme of things entire, would we not shatter it to bits and then remould it nearer to the hearts desire?" Please read that line again. It is the key to modern history, and it is the key to the war on terrorism: "Dear love, couldst thou and I with fate conspire to grasp this sorry scheme of things entire, would we not shatter it to bits and then remould it nearer to the hearts desire?"

A further dissection of the Collectivist's agenda provides us with a glimpse of their vision; "War is the best way to remold society. War! Shatter society to bits. Break it apart. Then we can remold it nearer to the heart’s desire. And what is our heart’s desire? Collectivism."

The ramifications of the their actions are so mind blowing in scope, that confronting them is beyond the capacity of most, including those who mindlessly abetted the implementation of their plan.

The only thing that "We the People" can do is to take on the individual responsibility of recognizing the problem and dealing with it at the source. Admittedly the problem has become almost insurmountable, but it still must be dealt with at the source.

The source of the problem was the initial demonetization of gold and silver which took place between 1913 and 1945. A large part of the solution is the remonetization of gold and silver today. Ownership of gold and silver is what empowers a bold and contrarian few to take control of large amounts of capital. Ownership of gold and silver is what will empower the masses to throw off the tyrannical bonds of fiat, and replace them with our Constitutionally mandated monetary system, thus protecting the tenets of freedom and liberty, and insuring a future for our children and grandchildren.

with Liberty and Justice for all.

The time has come for us to step up to the plate and do our patriotic duty.

Patriotism is a love of and loyalty to one's country. A patriot is someone who loves, supports, and is prepared to serve their country.

The word patriotism comes from a Greek word meaning fatherland. For most of history, love of fatherland or homeland was an attachment to the physical features of the land. But that notion changed in the eighteenth century, when the ideals of personal freedoms and liberty strongly emerged into political thought. Patriotism was still a love of one's country that included connections to the land and people, but then also included its customs and traditions, pride in its history, and devotion to its welfare.

Today most people agree that patriotism also involves service to their country, but many disagree on how to best perform such service. Some believe that the national government speaks for a country; therefore, all its citizens should actively support government policies and actions. Others argue that a true patriot speaks out when convinced that their country is following an unwise or unjust action.

"Throughout history, it has been the inaction of those who could have acted; the indifference of those who should have known better; the silence of the voice of justice when it mattered most; that has made it possible for evil to triumph." -- Haile Selassie

When was the last time that you acted in a manner that would help insure your personal liberties and freedoms? When have you acted in a manner that did not simply depend on the Government to protect and take care of you. The solution will come as a result of our individual actions. There are no groups on our side. The larger the group, the larger the problem.

I will be forever imploring you to own up to your individual patriotic responsibilities. One easy way is for you to do this is to purchase physical gold and silver bullion. In reality, compared to the amount of fiat currency in circulation, there is so little bullion available for purchase, that a concerted effort on your part could send the value of gold, and just as importantly silver, to the moon.

By participating in this simple, passive action, we can be part of the solution and avail ourselves a chance to survive the mind-boggling catastrophe that lies ahead. We are faced with an epic struggle against the tyranny of false money. Gold and silver are assets that are not borne out of someone else’s debt or liability. Debt based money is abusable and will, therefore, always be abused. Like the children in a dysfunctional family, we have been severely abused. Denial is not a river in Africa.

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance. -- James Madison

Besides enriching ourselves through the exercise of buying and owning gold and silver, we can passively bring about some very important changes in one way that will really make a difference. As the price of bullion subsequently rises, more and more people will begin to see Federal Reserve Notes for what they really are; fake money, and recognize and appreciate precious metals for what the really are; real money.

If one half of one percent of Americans each went out and bought ten ounces of silver, that would amount to 14,000,000 ounces of silver. COMEX has much less than 100,000,000 ounces of silver available. That much buying pressure would have an explosive effect on the price. This could force the hand of the cartel and help change the world for the better.

Get the word out. A candle loses nothing by lighting another candle. Consider it your patriotic and moral imperative.

Buy gold and silver.

It's not what you don't know that will screw you up, it's what you know that is wrong. The spin you hear from the mainstream media is intended to mislead you. Open your eyes and face the future. If you leave your head in the sand and ignore it, you are only leaving your butt exposed for the world to kick. This all may sound like gloom and doom, but when you get a handle on what is going to happen, you will have a future filled with opportunity. Fortune favors the Informed.
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Kenneth Parsons, aka Johnny Silver Bear, is an IT professional in Texas and the President of Silver Bear Communications, Inc. Mr. Parsons has been involved in the advertising and promotion industry for over twenty-five years. He is the editor of the Silver Bear Cafe and, as such, is responsible for shaping the content of "The Bear." Mr. Parsons has served as CEO for Fiberscape Communications, Inc., a web site development / hosting and streaming multi-media company in Richardson, Texas since 1997. He is a Jeffersonian and a passionate supporter of the U.S. Constitution. He is also an outspoken advocate of gold money and equal tax rates. You can contact Mr. Parsons with questions or comments via email.

johnny@silverbearcafe.com

Ship of Fools
Paul Craig Roberts

Is there intelligent life in Washington, DC? Not a speck of it.

The US economy is imploding, and Obama is being led by his government of neconservatives and Israeli agents into a quagmire in Afghanistan that will bring the US into confrontation with Russia, and possibly China, American's largest creditor.

The January payroll job figures reveal that last month 20,000 Americans lost their jobs every day.

In addition, December's job losses were revised up by 53,000 jobs from 524,000 to 577,000. The revision brings the two-month job loss to 1,175,000. If this keeps up, Obama's promised three million new jobs will be wiped out by job losses.

Statistician John Williams (shadowstats.com/) reports that this huge number is an understatement. Williams notes that built-in biases in seasonal adjustment factors caused a 118,000 understatement of January job losses, bringing the actual January job loss to 716,000 jobs.

The payroll survey counts the number of jobs, not the number of employed as some people have more than one job. The Household Survey counts the number of people who have jobs. The Household Survey shows that 832,000 people lost their jobs in January and 806,000 in December, for a two month reduction of Americans with jobs of 1,638,000.

The unemployment rate reported in the US media is a fabrication. Williams reports that

"During the Clinton Administration, 'discouraged workers', those who had given up looking for a job because there were no jobs to be had, were redefined so as to be counted only if they had been 'discouraged' for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, [according to the unemployment rate methodology used in 1980] rose to 18% in January, from 17.5% in December."

In other words, without all the manipulations of the data from a government that lies to us every time it opens its mouth, the US unemployment rate is already at depression levels.

How could it be otherwise given the enormous job loss from offshored jobs. It is impossible for a country to create jobs when its corporations are moving production for the American consumer market offshore. When they move the production offshore, they shift US GDP to other countries. The US trade deficit over the past decade has reduced US GDP by $1.5 trillion dollars. That is a lot of jobs.

I have been reporting for years that American university graduates have had to take jobs as waitresses and bartenders. As over-indebted American consumers lose their jobs, they will visit restaurants and bars less frequently. Consequently, Americans with university degrees will not even have jobs waiting on tables and mixing drinks.

US policymakers have ignored the fact that consumer demand in the 21st century has been driven, not by increases in real income, but by increased consumer indebtedness. This fact makes it pointless to try to stimulate the economy by bailing out banks so that they can lend more to consumers. The American consumers have no more capacity to borrow.

With the decline in the values of their principal assets-their homes-with the destruction of half of their pension assets, and with joblessness facing them, Americans cannot and will not spend.

Why bail out GM and Citibank when the firms are moving as many operations offshore as they possibly can?

Much of US infrastructure is in poor shape and needs renewing. However, infrastructure jobs do not produce goods and services that can be sold abroad. The massive commitment to infrastructure does nothing to help the US reduce its massive trade deficit, the financing of which is becoming a major problem. Moreover, when the infrastructure projects are completed, so are the jobs.

At best, assuming Mexicans do not get most of the construction jobs, all Obama's stimulus program can do is to reduce the number of unemployed temporarily.

Unless US corporations can be required to use American labor to produce the goods and services that they sell in American markets, there is no hope for the US economy. No one in the Obama administration has the wits to address this problem. Thus, the economy will continue to implode.

Adding to the brewing disaster, Obama has been deceived by his military and neoconservative advisers into expanding the war in Afghanistan, a large mountainous country. Obama intends to use the draw-down of US soldiers in Iraq to send 30,000 more American troops to Afghanistan. This would bring the US forces to 60,000-600,000 fewer than US Marine Corps and US Army counterinsurgency guidelines define as the minimum number of soldiers necessary to bring success in Afghanistan-and less than half as many as the army that was unable to occupy Iraq.

The Iranians had to bail out the Bush regime by restraining its Shi'ite allies and encouraging them to use the ballot box to attain power and push out the Americans. In Iraq the US troops only had to fight a small Sunni insurgency drawn from a minority of the population. Even so, the US "prevailed" by putting the insurgents on the US payroll and paying them not to fight. The withdrawal agreement was dictated by the Shi'ites. It was not what the Bush regime wanted.

One would think that the experience with the "cakewalk" in Iraq would make the US hesitant to attempt to occupy Afghanistan, an undertaking that would require the US to occupy parts of Pakistan. The US was hard pressed to maintain 150,000 troops in Iraq. Where is Obama going to get another half million soldiers to add to the 150,000 to pacify Afghanistan?

One answer is the rapidly growing massive US unemployment. Americans will sign up to go kill abroad rather than be homeless and hungry at home.

But this solves only half of the problem. Where does the money come from to support an army in the field of 650,000, an army 4.3 times larger than US forces in Iraq, a war that has cost us $3 trillion in out-of-pocket and already incurred future costs. This money would have to be raised in addition to the $3 trillion US budget deficit that is the result of Bush's financial sector bailout, Obama's stimulus package, and the rapidly failing economy. When economies tank, as the American one is doing, tax revenues collapse. The millions of unemployed Americans are not paying Social Security, Medicare, and income taxes. The stores and businesses that are closing are not paying federal and state income taxes. Consumers with no money or credit to spend are not paying sales taxes.

The Washington Morons, and morons they are, have given no thought as to how they are going to finance a fiscal year 2009 budget deficit of some two to three trillion dollars.

The practically nonexistent US saving rate cannot finance it.

The trade surpluses of our trading partners, such as China, Japan, and Saudi Arabia, cannot finance it.

The US government really has only two possibilities for financing its budget deficit. One is a second collapse in the stock market, which would drive the surviving investors with what they have left into "safe" US Treasury bonds. The other is for the Federal Reserve to monetize the Treasury debt.

Monetizing the debt means that when no one is willing or able to purchase the Treasury's bonds, the Federal Reserve buys them by creating bank deposits for the Treasury's account.

In other words, the Fed "prints money" with which to buy the Treasury's bonds.

Once this happens, the US dollar will cease to be the reserve currency.

In addition, China, Japan and Saudi Arabia, countries that hold enormous quantities of US Treasury debt in addition to other US dollar assets, will sell, hoping to get out before others.

The US dollar will become worthless, the currency of a banana republic.

The US will not be able to pay for its imports, a serious problem for a country dependent on imports for its energy, manufactured goods, and advanced technology products.

Obama's Keynesian advisers have learned with a vengeance Milton Friedman's lesson that the Great Depression resulted from the Federal Reserve permitting a contraction of the supply of money and credit. In the Great Depression good debts were destroyed by monetary contraction. Today bad debts are being preserved by the expansion of money and credit, and the US Treasury is jeopardizing its credit standing and the dollar's reserve currency status with enormous quarterly bond auctions as far as the eye can see.

Meanwhile, the Russians, overflowing with energy and mineral resources, and not in debt, have learned that the US government is not to be trusted. Russia has watched Reagan's successors attempt to turn former constituent parts of the Soviet Union into US puppet states with US military bases. The US is trying to ring Russia with missiles that neutralize Russia's strategic deterrent.

Putin has caught on to "comrade wolf." He has succeeded in having the president of Kyrgyzstan, a former part of the Soviet Union, evict the US from its military base. This base is essential to America's ability to supply its soldiers in Afghanistan.

To stop America's meddling in Russia's sphere of influence, the Russian government has created a collective security treaty organization comprised of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan. Uzbekistan is a partial participant.

In other words, Russia has organized central Asia against US penetration.

To whose agenda is President Obama being hitched? Writing in the English language version of the Swiss newspaper, Zeit-Fragen, Stephen J. Sniegoski reports that leading figures of the neocon conspiracy-Richard Perle, Max Boot, David Brooks, and Mona Charen-are ecstatic over Obama's appointments. They don't see any difference between Obama and Bush/Cheney.

Not only are Obama's appointments moving him into an expanded war in Afghanistan, but the powerful Israel Lobby is pushing Obama toward a war with Iran.

The unreality in which he US government operates is beyond belief. A bankrupt government that cannot pay its bills without printing money is rushing headlong into wars in Afghanistan, Pakistan, and Iran. According to the Center for Strategic and Budgetary Analysis, the cost to the US taxpayers of sending a single soldier to fight in Afghanistan or Iraq is $775,000 per year!

The world has never seen such total mindlessness. Napoleon's and Hitler's march into Russia were rational acts compared to the mindless idiocy of the United States government.

Obama's war in Afghanistan is the Mad Hatter's Tea Party. After seven years of conflict, there is still no defined mission or endgame scenario for US forces in Afghanistan. When asked about the mission, a US military official told NBC News, "Frankly, we don't have one." NBC reports: "they're working on it."

Speaking to House Democrats on February 5, President Obama admitted that the US government does not know what its mission is in Afghanistan and that to avoid "mission creep without clear parameters," the US "needs a clear mission."

How would you like to be sent to a war, the point of which no one knows, including the commander-in-chief who sent you to kill or be killed? How, fellow taxpayers, do you like paying the enormous cost of sending soldiers on an undefined mission while the economy collapses?

Paul Craig Roberts
paulcraigroberts@yahoo.com
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Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan's first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice. Click here..... http://www.vdare.com/pb/death_of_due_process.htm for Peter Brimelow's Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.

Road Trip

"We will not apologize for our way of life...."

This unfortunate phrase from President Obama's otherwise sturdy inaugural address, echoed through my mind last week as I cruised the suburban outlands of Montgomery, Alabama. All the usual commercial furnishings of consumerist America hugged the flattish ochre and dusty-green landscape of played-out cotton fields where thirty feet of topsoil has washed away in the two hundred years since the mainly English settlers shoved out the native Alabamu, Coosa, and Tallapoosa. Along the low horizon, mall followed strip mall followed "lifestyle center," book-ending the "one house" failed subdivisions of otherwise empty unsold lots in a cavalcade of floundering enterprise. It seemed at times as if the terrain was a kind of sea-like expanse, and all the retail boxes ghost ships drifting to oblivion.

They say that the banks have stopped calling in their loans on the commercial real estate, even though the owners of the malls and strip malls have arrived firmly in default. Calling in the loans would only pin another horrifying liability on the banks' balance sheets. So all parties join in a game of "pretend," that nothing has really happened to the fundamental equations of business life. Something similar goes on at the next level down, where the tenants of the malls and strip malls sink deeper into rent arrears every month, and the eviction process is simply postponed, while the stores themselves put off paying their vendors and suppliers – as the whole system, the whole way of life, enters upon a circle-jerk of mutual denial in a last desperate effort to forestall the mandates of reality .

How long will these games go on? This is the primary question that haunts the republic as we wait for new TARPS, and "bad banks," economic stimulus packages, infrastructure renewal roll-outs, and other policy life-lines thrown out in guarded hopefulness to haul America out of a ditch.

The center of Montgomery was instructive, too. Not unlike any other city in the USA (pop. about 200,000), the former main artery of downtown commerce – Dexter Avenue, rolling out like a red carpet below the state capitol hill, where Martin Luther King's early career kicked off in a modest red brick church, and where Rosa Parks famously refused to move to the back of her bus – this "main street" presented a sad sequence of empty shopfronts interrupted here and there by rather creepy amateur murals depicting the cruelties of slavery, as if a remonstrance to the politicos up the hill. Most of the buildings lining the avenue still stood burdened by the clownish facade re-doos and ghastly claddings of the 1950s, which had replaced the ordered classical-vernacular decorum of the original 19th century frontages. Once the malls had landed in the old cotton fields, and MLK moved on to Atlanta, Dexter Avenue was just left to rot in the memory trunk.

Here and there around the rest of the downtown, other weird experiments in American post-war anti-urbanism presented themselves, most notably a "building" designed to look like a small-scaled Death Star, all black reflective glass, canted concrete and steel walls – which turned out to belong to Morris Dees' renowned Southern Poverty Law Center -- deployed directly across the street from the modest white clapboard-with-green-shutters house once occupied by Jefferson Davis after Richmond fell and the Confederate leadership skeedaddled further south. There were a few recently-built government towers that looked like Nascar trophies. But the rest of the downtown – the parts not dedicated to surface parking – was the ubiquitous array of muffler shops, or restaurants and churches that looked like muffler shops.

With the city center thus nearly dead, and the asteroid belt of malls and strips on their knees financially, this emblematic sunbelt metro area finds itself in a pickle. Cotton being well-past decline, and having wrecked the soil, the "new" economy of recent decades dedicated itself to building car-dependent air-conditioned suburban sprawl – the perceived perfect antidote to a previous economic order based on serfdom, hook-worm, and inescapable heat. That now-not-so-new economy of sprawl, in turn, has come to a screeching halt, as a cruel destiny threw sand in the mechanisms of reliably cheap oil and revolving credit, and the gears seized up. A mood of ominous watching and waiting pervaded the city, but many of the movers-and-shakers had pinned their hopes on the chance that Mr. Obama's stimulus bill would allow them to commence building a new freeway to the ocean on the Florida panhandle.

My journey continued on the Jesus-haunted blue highways, to that selfsame place, Walton County, Florida, where some of the most famous experiments in the New Urbanism were conducted beginning in the 1980s with the new town of Seaside. I had been there many times over the years, and I was called down to get a prize in the service of the movement, but it was a little disconcerting to see how the build-out had progressed.

The Seaside experiment began very modestly as the idea for a bohemian village of architects and artists in what was then an almost empty quarter of piney woods owned by the St Joe timber company. Seaside was designed so beautifully that it attracted the attention of every thoracic surgeon and corporate lawyer between Nashville and New Orleans, and pretty soon Seaside became the Riviera of the sunbelt's economic elite – and came in for gales of criticism for becoming that. The newer houses and commercial structures grew ever grander, as a Boomer generation status competition ramped up into the new millennium. Several more, ever-grander New Urbanist towns sprouted along the adjacent beaches, some of the most recent composed of immense mansions embarrassing in their opulence. The outcome was a little scary, especially now that the fortunes behind many of these mansions may be threatened by the multiplying fiascos of finance and economy overspreading the nation like a vicious plague.

The New Urbanists had not set out to build monuments to Yuppie-Boomer consumerism, but a peculiar destiny shoved them into that role for a while – even while they toiled elsewhere around the nation to reform town planning laws and generally provide an antidote to the fatal cultural cancer of sprawl, that is, of a settlement pattern guaranteed to comprehensively bankrupt our society. Anyway, the collapse of the housing bubble has affected the New Urbanists' business, too, and this may turn out to be a very good thing because they can put aside the distractions of building very grand places to sop up ill-gotten wealth and focus on the issues that Mr. Obama's people should have been paying attention to all along, namely, how are we going to reform the way we live in this country and what will be the physical manifestation of how we live in the decades to come.

The New Urbanists have preached for years that conventional suburbia would fail America in the long run, and that we'd have to prepare for this failure by restoring traditional modes of occupying the landscape. So far, the Obama team has not been willing to identify the suburban system as the heart of our economic problem. They can't recognize it for what it truly is: a living arrangement with no future – and an economic, ecological, and spiritual disaster. It is, of course, the primary reason why we find ourselves in the deadly predicament of importing over two-thirds of the oil we use every day.

But then, more than half the population lives the suburban way of life, with its deadly mortgage traps, its mandatory motoring, and its civic disengagements. Nobody in power dares tell the truth: that we can't live this way anymore.

But there are scores of places like Montgomery, Alabama, and thousands of traditional main street small towns that are sitting out there waiting to be re-activated. We need to do this much more than we need to build new freeways to the beach. Suburbia is not going to be abandoned overnight (even if it fails logistically and economically !) but we have got to arrive at a consensus about rehabilitating our forsaken small cities and small towns. The New Urbanists have gathered, organized, and codified all the principle and methodology needed to carry out this campaign. This should be their moment. Mr. Obama and his team should get with the program.

James Howard Kunstler
www.kunstler.com