We've truly entered a Bizarro World universe, where up is down, right is left – and the Russians, of all people, are now lecturing us about the virtues of free enterprise.

Yes, it happened at the Davos conference of bigwigs, insiders, and their sycophantic hangers-on, where the elite meet to munch canapés and discuss the way the world works, or, in this case, the way it isn't working. The conference was heavy with the sort of pessimism that doesn't usually accompany a gathering of the rich and pompous, yet instead of the usual self-congratulatory vaunting of their own virtue and "concern" for the world's peasants, these aristocrats of the conference table were less than ebullient about the downward spiral of the global economy – which, you'll remember, yesterday was touted as the savior of us all, but these days is portrayed as the instrument of our collective doom.

While the walkout of Turkish Prime Minister Recep Erdogan grabbed the biggest headlines – he didn't like it when David Ignatius of the Washington Post shushed him in favor of letting former Israeli Prime Minister Shimon Peres drone on uninterrupted – the real shocker was Vladimir Putin's peroration, which sounded more like Ron Paul than the leader of a nation that has intruded the state into the economy and polity in a big way.

Putin likened the economic crisis the world is facing to "the perfect storm, which denotes a situation when nature's forces converge in one point of the ocean and increase their destructive potential many times over." This is very similar to the apocalyptic tone not only of Rep. Paul, but of gold bugs and libertarians outside the Beltway: save your candles, the dark ages are coming!

Yet our leaders were unprepared: in spite of strong indications that the crisis was breaking over our heads, only a prescient minority realized that our chickens were coming home to roost, while the "majority strove to get their share of the pie, be it one dollar or a billion, and did not want to notice the rising wave." As the Remnant looked on, Western elites were oblivious to their onrushing doom:

"I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasized the U.S. economy's fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism.

"The time for enlightenment has come. We must calmly, and without gloating, assess the root causes of this situation and try to peek into the future."

Well, perhaps he was gloating just a little, but who can blame him? After all, the high-and-mighties of the West had recently undergone a spasm of unrestrained hubris, from which we have only just begun to recover. This manic mood was given expression not only by the Bush Doctrine and its attendant military campaigns, but also by a mad triumphalism that predated 9/11 and really started with the fall of the Soviet empire. The "unipolar" delusion distorted our thinking and gave rise to all sorts of grandiose projects that wound up costing us dearly.

One of those projects was – and is – the encirclement and economic strangulation of Russia: the ill-fated "color revolutions," the deployment of "soft power" in the service of penetrating the former Soviet republics with "civil society" organizations, funded and directed by Western governments, and the challenge to Russian predominance in the "near abroad" of the Caucasus and central Asia, where the U.S. seeks to build bases ostensibly to fight the "war on terrorism" in Afghanistan and Pakistan. That this dagger pointed at the throat of Kremlin leaders will have to be withdrawn, albeit reluctantly and temporarily, is doubtless where the gloating comes in.

So far, Putin's critique is pointed, yet hardly shocking. Well, hang in there, dear reader, because we're just getting to the good part:

"Add to this colossal disproportions that have accumulated over the last few years. This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral."

This realistic perspective is in sharp contrast to the frantic gyrations of our own political and financial leaders, who are wholly invested in maintaining that disproportion in all its gargantuan perversity. Collateral? Real value? Such bothersome impediments to omnipotence have long since been thrown overboard by the Washington-Wall Street crowd. As a top White House aide once told journalist Ron Suskind, guys like him – disdainfully dubbed "the reality-based community" – who "believe that solutions emerge from [their] judicious study of discernible reality" aren't clued in to the new reality:

"That's not the way the world really works anymore. We're an empire now, and when we act, we create our own reality. And while you're studying that reality – judiciously, as you will – we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors… and you, all of you, will be left to just study what we do."

The same hubris that drove the Iraq war and led us to believe we could "transform" the Middle East, as some of the more perfervid neocons insisted, drove our financial leaders over a similarly steep cliff. The empire is now crumbling, along with the economic assumptions that financed it, as Putin points out:

"The entire economic growth system, where one regional center prints money without respite and consumes material wealth, while another regional center manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback."

Whether the Russian leader has been boning up on the works of the Austrian economists and has absorbed or at least understood their critique of central banking as the flaw in the otherwise beneficial ointment of Western-style capitalism, or has independently come to similar conclusions, is open to speculation. Suffice to say that the parallelism is astonishing. For the long period of American economic and imperial expansion, the dollar was the reserve currency of choice, its markets the freest and most profitable in the world. As we enter a perhaps even lengthier period of decline, the leading indicator of our protracted contraction is the end of the dollar-denominated world economy. Whereas the Chinese premier, in his Davos speech, merely called for closer monetary regulation and restraint on the part of his American trading partner, Putin called on the markets to dump the dollar.

Putin accurately describes the bubble of American supremacism and diagnoses its cause. It was "brought about ," he avers, "by excessive expectations. Corporate appetites with regard to constantly growing demand swelled unjustifiably. The race between stock market indices and capitalization began to overshadow rising labor productivity and real-life corporate effectiveness." The industrial West engaged in an orgy of consumption, without producing any more – indeed, while producing much less. Our entire system was and is based on the generation of "unearned wealth, a loan that will have to be repaid by future generations." It all "would have collapsed sooner or later," and "in fact, this is happening right before our eyes."

As America's political leaders rush to reinflate the bubble, Putin would let it pop:

"This means we must assess the real situation and write off all hopeless debts and 'bad' assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalization, bonuses, or reputation. However, we would 'conserve' and prolong the crisis, unless we clean up our balance sheets."

In short, the malinvestment engaged in during the bubble years must be liquidated. The longer we try to conserve enterprises supposedly "too big to fail," the more painful and prolonged will be the process of economic recovery. This is precisely what libertarians such as Ron Paul and analysts such as Peter Schiff have been saying all along.

Unlike Barack Obama and his advisers, whose faith in government action is near religious, Putin warns against "excessive intervention in economic activity and blind faith in the state's omnipotence." It may be a "natural reaction" to turn to an increased state role in such times as these, yet "instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent. The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation."

Oh, but this is my favorite part:

"In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated."

I lived to see an American president red-baited by the Kremlin! That, in itself, is utterly amazing, and proof positive that we have indeed slipped into an alternate universe, a Bizarro World where history runs backward – and in reverse. Sounding more like Barry Goldwater than any Russian leader I ever heard of, Putin took aim at the Obama-commies:

"Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state."

Those remarks would not be out of place coming out of the mouth of a Republican congressman – and a fairly conservative one – inveighing against the "stimulus" package. Putin goes beyond even this, however, when he warns against the danger of military Keynesianism:

"Unfortunately, we are increasingly hearing the argument that the buildup of military spending could solve today's social and economic problems. The logic is simple enough. Additional military allocations create new jobs.

"At a glance, this sounds like a good way of fighting the crisis and unemployment. This policy might even be quite effective in the short term. But in the longer run, militarization won't solve the problem but will rather quell it temporarily. What it will do is squeeze huge financial and other resources from the economy instead of finding better and wiser uses for them."

Paul Krugman and his media echo chamber happily inform us that it doesn't matter how or where we spend the money, just as long as we "stimulate" the economy with massive injections of monetary steroids. So why not military spending – lots more military spending? After all, this is a point both conservatives and liberal Keynesians can agree on, as Putin surely realizes. I suspect his call for disarmament will be largely ignored, along with his insight that demilitarization will "bring significant economic dividends."

That a Russian leader is now telling Americans that their turn toward statism and militarism is harmful both to themselves and to the world is a turn of events no one of my generation could possibly have imagined, certainly not anyone of libertarian inclinations. It is a sad and telling commentary that no American leader of any stature, aside from the previously mentioned Rep. Paul, has the courage to tell us what we need to hear.

~ Justin Raimondo

http://kingsausage.blogspot.com/

Why Condemn Phelps, When We Ought to Condemn the Laws That Brand Him a Criminal.

by Paul Armentano

Add decorated Olympic swimmer Michael Phelps to the growing list of successful Americans who happens to indulge in marijuana during his down time. The tabloid news story is making international headlines, though it's difficult to understand why.

After all, Mr. Phelps is hardly alone in his herbal inclinations. According to national and federal surveys, nearly one out of two Americans have tried weed, and among those age 18 to 25 – Phelps is 23 – pot smoking is especially popular.

Contrary to the messages promoted by the federal government, marijuana consumers include people from all walks of life, ethnic classes, and socio-economic backgrounds. America’s current President said that he smoked marijuana regularly as a young man. Supreme Court Justice Clarence Thomas, former Vice President Al Gore, former Republican House Speaker Newt Gingrich, California Governor Arnold Schwarzenegger, and legendary astronomer Carl Sagan all have admitted using marijuana at different times during their lives.

According to the U.S. government, most current marijuana users are gainfully employed. Statistically, most marijuana users are successful academically and financially. A National Bureau of Economic Research study even reported that marijuana use is associated with earning higher wages. Some former and current users, like Virgin tycoon Sir Richard Branson, Progressive Auto Insurance founder Peter Lewis, and New York State Mayor Michael Bloomberg are even multi-millionaires.

Perhaps the public's fascination with this story is because Phelps is recognized as one of the most talented and successful athletes in the entire world. (He holds the record for the most gold medals won by any athlete in history.) But Phelps isn't an anomaly in this regard either. Many top athletes use cannabis off the field – noting that it helps them to relax after the excitement of sports competition and alleviate the pain from nagging injuries. It also won't leave them with a hangover or adversely impact their performance the next day.

A 1997 New York Times investigation estimated that up to 70 percent of pro-basketball players occasionally indulge in the use of pot, and many high-profile football players – most notably Miami Dolphins star running-back Ricky Williams, former Dallas Cowboys all-star Mark Stepnoski, and even Super Bowl XLIII MVP Santonio Holmes – have spoken candidly about their off-field marijuana use. In fact, Phelps isn't even the first gold medalist to admit to smoking cannabis. That honor belongs to Canadian snowboarder and 1998 Winter Olympics gold medal winner Ross Rebagliati, who tested positive for having used cannabis in the days prior to his history-making performance.

Sure, there will be some who will say that this latest chapter in Phelp's life is deserving of criticism because the 14-time gold medalist is sending a poor message to young children. And what message would that be? That you can occasionally smoke marijuana and still be successful in life. Well sorry if the truth hurts.

Fact is, most Americans who use pot do so for the same reasons – and in the same manner – as do those who drink alcohol. According to a recent University of Alberta study, the majority of adults who use cannabis do so recreationally to "enhance relaxation." Researchers concluded: "[M]ost adult marijuana users regulate use to their recreational time and do not use compulsively. Rather, their use is purposively intended to enhance their leisure activities and manage the challenges and demands of living in contemporary modern society. Generally, participants reported using marijuana because it enhanced relaxation and concentration, making a broad range of leisure activities more enjoyable and pleasurable."

No doubt Michael Phelps indulged in the use of marijuana for these very same reasons. He ought not to be condemned for it nor branded a criminal for his actions.

For that matter, neither should anyone else.

http://kingsausage.blogspot.com/

Our rulers are destroying the economy. Not little by little, as they usually do, but in huge swaths. Each great assault on the free market, whether it be denominated a bailout, a stimulus, or some other species of purported salvation, brings us visibly closer to the complete ruin of an economic order that required centuries to build. Awestruck, as if we were observing a tsunami sweep across an island, we can only watch the rulers' devastating actions, for which, strange to say, they expect the public to be grateful―and, truth be told, most people are grateful, and clamor for more of the same. We listen to the kingpins' lunatic ravings as they describe their perceptions of the current situation and solemnly declare their determination to "do something" to restore the prosperity that they themselves have demolished by previously "doing something" of the very same kind.

They gaze out at a financial debacle rooted in various government policies that induced lenders to do business with millions of borrowers who had no realistic prospect of repaying the loans. And what do these überguardians propose? They aim to relieve the unfaithful borrowers of their contractual obligations, to purchase the disappointed lenders' "toxic assets," and to "get credit moving again," so that new loans will be made, again at artificially reduced interest rates to borrowers who have no realistic prospect of repaying them. They are pouring credit madness on credit madness because they have no real understanding of how the economic world actually works and, even if they did understand, they are politically beholden to the owners and managers of failing economic behemoths who profited handsomely from the artificial prosperity of the boom and are now staring into the abyss.

Our forebears have stood in a similar position on previous harrowing occasions, and the sense of utter helplessness we feel now resembles the one they felt then. When the world was rushing toward total war in the late 1930s, every intelligent person could imagine the abattoir toward which the great leaders were dragging their nations, yet no one could pull them back from the appalling destruction into which they seemed hell-bent to plunge.

In 1939, in his poem "In Memory of W. B. Yeats," W. H. Auden wrote:

In the nightmare of the dark
All the dogs of Europe bark,
And the living nations wait,
Each sequestered in its hate;
Intellectual disgrace
Stares from every human face
And the seas of pity lie
Locked and frozen in each eye.

Though everyone foresaw the catastrophe, no one could pull the leaders back from its execution.

I experienced this sense of powerlessness in 2002 as I watched the Bush administration rushing headlong toward its murderous attack on the Iraqis. On September 23 of that year, I gave vent to my feelings in an article called "Helplessly, We Await the Catastrophe Our Rulers Are Creating." "Today," I wrote,

the dogs of war are barking not in Europe, but in the District of Columbia, and again people are looking on helplessly as the tragedy unfolds. We see the disaster being designed and touted, we observe the intellectual disgrace staring from the faces of George W. Bush and his advisers, and we note the seas of pity lying locked and frozen in their eyes. Yet we can do nothing to prevent the makers of this coming calamity from carrying out the devastation.

The calamity that Bush and his government wrought in Iraq has now become a chronic, seemingly permanent condition, a pain that never eases, an emergency destined to continue as far as the eye can see, and nearly everybody has given up hope that anything good will ever come out of it, or even that its daily horrors will ever do anything but continue to erupt episodically in spasms of political madness and haphazard violence.

Iraq, however, is thousands of miles away, and few Americans could keep their attention focused on it for long, in any event. Now that the financial mess and the deepening recession are affecting all Americans and raising fears about the whole country's future economic well-being, Iraq has been relegated to brief articles on page A-23 of the newspaper. The economic crisis had become overwhelmingly the foremost concern, and on this front, good news has been a very scarce commodity for the past year.

In the present situation, the formula our rulers employ to guide their actions is simple: borrow and spend―the more, the better. If reminded that the government cannot accumulate ever more debt without grave repercussions, they always answer that the present emergency is so pressing that concern about the future must be set aside until the present exigencies have been met. It is not clear that they sincerely believe the economic drivel they dispense to the news media. Perhaps they are merely cunning enough to appreciate Rahm Emanuel's admonition, "You never want a serious crisis to go to waste." My sense, however, especially when I ponder the way in which they describe the economic situation and justify their proposals for repairing it, is that they have virtually no sound understanding of basic economics, and no interest in acquiring such an understanding, either. If the top dogs of the power elite are already living their lives in a reprehensible manner, it probably does not contribute to their happiness to dwell on the possibility that, in the process, they may also be contributing to public ruin.

Whether they are fools or charlatans, or both, as I suppose them to be, their actions amount to a genuine tragedy, because their leadership, so long as the people tolerate it, portends only devastation. The people, in the main, are afraid, and they are immoral, so they are happy to seize any momentary advantage or enrichment the government will hand them, regardless of the moral breach this coercive transfer of wealth represents. The rulers understand the people's moral weakness and exploit it at every turn. Their own example of thoroughgoing corruption, of course, only coarsens the entire society's moral character―after all, what sort of people tolerates, much less affirmatively supports, such creeps in high places? In the body politic, however, the masses are the tail, not the dog. The rulers, like tigers who lie in wait near a spring, knowing that their prey will eventually come there to drink, tempt the people to indulge their appetites for ill-gotten gain, and, sure enough, the masses need not be invited twice. It does not occur to the diners that this repast consists of tainted meat, and therefore that in due course they must suffer the consequences of having swallowed toxic fare.

Artificially easy credit, rapid monetary growth, subsidized homeownership for people who cannot make the mortgage payments, exclusive privileges granted to dishonest bond-rating agencies, explicit and implicit government guarantees of bank accounts, bonds, and other financial assets―these policies and others that tend in the same direction have created our present economic difficulties. To suppose, and to act on the supposition, that precisely these same kinds of policies will repair the day is supreme folly. To augment these mistakes by expending a trillion borrowed dollars in new government outlays for whatever suits the grasping members of a totally corrupt Congress only compounds the folly on a cosmic scale. Yet, no struggling firm or family wants to fail, and each prefers to survive the day without having to make painful adjustments, even if doing so requires supping disgracefully at the state's filthy trough.

The entire spectacle is painful to behold. The good that the people and their leaders expect to come of these foolish measures can provide, at most, only temporary relief. Not far down the road, the devil is waiting to collect his due.

- Robert Higgs is senior fellow in political economy at the Independent Institute and editor of The Independent Review. He is also a columnist for LewRockwell.com. His most recent book is Neither Liberty Nor Safety: Fear, Ideology, and the Growth of Government. He is also the author of Depression, War, and Cold War: Studies in Political Economy, Resurgence of the Warfare State: The Crisis Since 9/11 and Against Leviathan: Government Power and a Free Society.

Belt-tightening is required by all, including government.


By PETER SCHIFF

As recession fears cause the nation to embrace greater state control of the economy and unimaginable federal deficits, one searches in vain for debate worthy of the moment. Where there should be an historic clash of ideas, there is only blind resignation and an amorphous queasiness that we are simply sweeping the slouching beast under the rug.

With faith in the free markets now taking a back seat to fear and expediency, nearly the entire political spectrum agrees that the federal government must spend whatever amount is necessary to stabilize the housing market, bail out financial firms, liquefy the credit markets, create jobs and make the recession as shallow and brief as possible. The few who maintain free-market views have been largely marginalized.

Taking the theories of economist John Maynard Keynes as gospel, our most highly respected contemporary economists imagine a complex world in which economics at the personal, corporate and municipal levels are governed by laws far different from those in effect at the national level.

Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system. In their view, absent the stimuli of the New Deal and World War II, the Depression would never have ended.

On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated.

It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can't be repaid. However, this is precisely what we are planning on a national level.

I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice.

As a follower of the Austrian School of economics I believe that market forces apply equally to people and nations. The problems we face collectively are no different from those we face individually. Belt tightening is required by all, including government.

Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.

If we look at government market interventions through this pragmatic lens, what can we expect from the coming avalanche of federal activism?

By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.

The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it's called a recession, and it's not fun, easy or quick. But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations.

Mr. Schiff is president of Euro Pacific Capital and author of "The Little Book of Bull Moves in Bear Markets" (Wiley, 2008).

The news media are in the process of creating a great new historical myth. This is the myth that our present financial crisis is the result of economic freedom and laissez-faire capitalism.

The attempt to place the blame on laissez faire is readily confirmed by a Google search under the terms “crisis + laissez faire.” On the first page of the results that come up, or in the web entries to which those results refer, statements of the following kind appear:

“The mortgage crisis is laissez-faire gone wrong.”

“Sarkozy [Nicolas Sarkozy, the President of France] said `laissez-faire’ economics, `self-regulation’ and the view that `the all-powerful market’ always knows best are finished.”

“`America’s laissez-faire ideology, as practiced during the subprime crisis, was as simplistic as it was dangerous,’ chipped in Peer Steinbrück, the German finance minister.”

“Paulson brings laissez-faire approach on financial crisis….”

“It’s au revoir to the days of laissez faire.”[1]

Recent articles in The New York Times provide further confirmation. Thus one article declares, “The United States has a culture that celebrates laissez-faire capitalism as the economic ideal….”[2]Another article tells us, “For 30 years, the nation’s political system has been tilted in favor of business deregulation and against new rules.”[3]In a third article, a pair of reporters assert, “Since 1997, Mr. Brown [the British Prime Minister] has been a powerful voice behind the Labor Party’s embrace of an American-style economic philosophy that was light on regulation. The laissez-faire approach encouraged the country’s banks to expand internationally and chase returns in areas far afield of their core mission of attracting deposits.”[4] Thus even Great Britain is described as having a “laissez-faire approach.”

The mentality displayed in these statements is so completely and utterly at odds with the actual meaning of laissez faire that it would be capable of describing the economic policy of the old Soviet Union as one of laissez faire in its last decades. By its logic, that is how it would have to describe the policy of Brezhnev and his successors of allowing workers on collective farms to cultivate plots of land of up to one acre in size on their own account and sell the produce in farmers’ markets in Soviet cities. According to the logic of the media, that too would be “laissez faire”—at least compared to the time of Stalin.

Laissez-faire capitalism has a definite meaning, which is totally ignored, contradicted, and downright defiled by such statements as those quoted above. Laissez-faire capitalism is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force. This protection applies to the initiation of physical force by other private individuals, by foreign governments, and, most importantly, by the individual’s own government. This last is accomplished by such means as a written constitution, a system of division of powers and checks and balances, an explicit bill of rights, and eternal vigilance on the part of a citizenry with the right to keep and bear arms. Under laissez-faire capitalism, the state consists essentially just of a police force, law courts, and a national defense establishment, which deter and combat those who initiate the use of physical force. And nothing more.

The utter absurdity of statements claiming that the present political-economic environment of the United States in some sense represents laissez-faire capitalism becomes as glaringly obvious as anything can be when one keeps in mind the extremely limited role of government under laissez-faire and then considers the following facts about the present-day United States.

1) Government spending in the United States currently equals more than forty percent of national income, i.e., the sum of all wages and salaries and profits and interest earned in the country. This is without counting any of the massive off-budget spending such as that on account of the government enterprises Fannie Mae and Freddie Mac. Nor does it count any of the recent spending on assorted “bailouts.” What this means is that substantially more than forty dollars of every one hundred dollars of output are appropriated by the government against the will of the individual citizens who produce that output. The money and the goods involved are turned over to the government only because the individual citizens wish to stay out of jail. Their freedom to dispose of their own incomes and output is thus violated on a colossal scale. In contrast, under laissez-faire capitalism, government spending would be on such a modest scale that a mere revenue tariff might be sufficient to support it. The corporate and individual income taxes, inheritance and capital gains taxes, and social security and Medicare taxes would not exist.

2) There are presently fifteen federal cabinet departments, nine of which exist for the very purpose of respectively interfering with housing, transportation, healthcare, education, energy, mining, agriculture, labor, and commerce, and virtually all of which nowadays routinely ride roughshod over one or more important aspects of the economic freedom of the individual. Under laissez faire capitalism, eleven of the fifteen cabinet departments would cease to exist and only the departments of justice, defense, state, and treasury would remain. Within those departments, moreover, further reductions would be made, such as the abolition of the IRS in the Treasury Department and the Antitrust Division in the Department of Justice.

3) The economic interference of today’s cabinet departments is reinforced and amplified by more than one hundred federal agencies and commissions, the most well-known of which include, besides the IRS, the FRB and FDIC, the FBI and CIA, the EPA, FDA, SEC, CFTC, NLRB, FTC, FCC, FERC, FEMA, FAA, CAA, INS, OHSA, CPSC, NHTSA, EEOC, BATF, DEA, NIH, and NASA. Under laissez-faire capitalism, all such agencies and commissions would be done away with, with the exception of the FBI, which would be reduced to the legitimate functions of counterespionage and combating crimes against person or property that take place across state lines.

4) To complete this catalog of government interference and its trampling of any vestige of laissez faire, as of the end of 2007, the last full year for which data are available, the Federal Register contained fully seventy-three thousand pages of detailed government regulations. This is an increase of more than ten thousand pages since 1978, the very years during which our system, according to one of The New York Times articles quoted above, has been “tilted in favor of business deregulation and against new rules.” Under laissez-faire capitalism, there would be no Federal Register. The activities of the remaining government departments and their subdivisions would be controlled exclusively by duly enacted legislation, not the rule-making of unelected government officials.

5) And, of course, to all of this must be added the further massive apparatus of laws, departments, agencies, and regulations at the state and local level. Under laissez-faire capitalism, these too for the most part would be completely abolished and what remained would reflect the same kind of radical reductions in the size and scope of government activity as those carried out on the federal level.

What this brief account has shown is that the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state than to laissez-faire capitalism. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez-faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.

Government Intervention Actually Responsible for the Crisis

Beyond all this is the further fact that the actual responsibility for our financial crisis lies precisely with massive government intervention, above all the intervention of the Federal Reserve System in attempting to create capital out of thin air, in the belief that the mere creation of money and its being made available in the loan market is a substitute for capital created by producing and saving. This is a policy it has pursued since its founding, but with exceptional vigor since 2001, in its efforts to overcome the collapse of the stock market bubble whose creation it had previously inspired.

The Federal Reserve and other portions of the government pursue the policy of money and credit creation in everything they do that encourages and protects private banks in the attempt to cheat reality by making it appear that one can keep one’s money and lend it out too, both at the same time. This duplicity occurs when individuals or business firms deposit cash in banks, which they can continue to use to make purchases and pay bills by means of writing checks rather than using currency. To the extent that the banks are then enabled and encouraged to lend out the funds that have been deposited in this way (usually by the creation of new and additional checking deposits rather than the lending of currency), they are engaged in the creation of new and additional money. The depositors continue to have their money and borrowers now have the bulk of the funds deposited. In recent years, the Federal Reserve has so encouraged this process, that checking deposits have been created equal to fifty times the actual cash reserves of the banks, a situation more than ripe for implosion.

All of this new and additional money entering the loan market is fundamentally fictitious capital, in that it does not represent new and additional capital goods in the economic system, but rather a mere transfer of parts of the existing supply of capital goods into different hands, for use in different, less efficient and often flagrantly wasteful ways. The present housing crisis is perhaps the most glaring example of this in all of history.

Perhaps as much as a trillion and a half dollars or more of new and additional checkbook-money capital was channeled into the housing market as the result of the artificially low interest rates caused by the presence of an even larger overall amount of new and additional money in the loan market. Because of the long-term nature of its financing, housing is especially susceptible to the effect of lower interest rates, which can serve sharply to reduce monthly mortgage payments and in this way correspondingly increase the demand for housing and for the mortgage loans needed to finance it.

Over a period of years, the result was a huge increase in the production and purchase of new homes, rapidly rising home prices, and a further spiraling increase in the production and purchase of new homes in the expectation of a continuing rise in their prices.

To gauge the scale of its responsibility, in the period of time just since 2001, the Federal Reserve caused an increase in the supply of checkbook-money capital of more than 70 percent of the cumulative total amount it had created in the whole of the previous 88 years of its existence—that is, almost 2 trillion dollars.[5]This was the increase in the amount by which the checking deposits of the banks exceeded the banks’ reserves of actual money, that is, the money they have available to pay depositors who want cash. The Federal Reserve caused this increase in illusory capital by means of creating whatever new and additional bank reserves as were necessary to achieve a Federal Funds interest rate—that is, the rate of interest paid by banks on the lending and borrowing of reserves—that was far below the rate of interest dictated by the market. For the three years 2001-2004, the Federal Reserve drove the Federal Funds Rate below 2 percent and from July of 2003 to June of 2004, drove it even further down, to approximately 1 percent.

The Federal Reserve also made it possible for banks to operate with a far lower percentage of reserves than ever before. Whereas in a free market, banks would hold gold reserves equal to their checking deposits, or at the very least to a substantial proportion of their checking deposits,[6]the Federal Reserve in recent years contrived to make it possible for them to operate with irredeemable fiat money reserves of less than 2 percent.

The Federal Reserve drove down the Federal Funds Rate and brought about the vast increase in the supply of illusory capital for the purpose of driving down all market interest rates. The additional illusory capital could find borrowers only at lower interest rates. The Federal Reserve’s goal was to bring about interest rates so low that they could not compensate even for the rise in prices. It deliberately sought to achieve a negative real rate of interest on capital, that is, a rate below the rate at which prices rise. This means that a lender, after receiving the interest due him for a year, has less purchasing power than he had the year before, when he had only his principal.

In doing this, the Federal Reserve’s ultimate purpose was to stimulate both investment and consumer spending. It wanted the cost of obtaining capital to be minimal so that it would be invested on the greatest possible scale and for people to regard the holding of money as a losing proposition, which would stimulate them to spend it faster. More spending, ever more spending was its concern, in the belief that that is what is required to avoid large-scale unemployment.

As matters have turned out, the Federal Reserve got its wish for a negative real rate of interest, but to an extent far beyond what it wished. It wished for a negative real rate of return of perhaps 1 to 2 percent. What it achieved in the housing market was a negative real rate of return measured by the loss of a major portion of the capital invested. In the words of The New York Times, “In the year since the crisis began, the world’s financial institutions have written down around $500 billion worth of mortgage-backed securities. Unless something is done to stem the rapid decline of housing values, these institutions are likely to write down an additional $1 trillion to $1.5 trillion.”[7]

This vast loss of capital in the housing debacle is what is responsible for the inability of banks to make loans to many businesses to which they normally could and would lend. The reason they cannot now do so is that the funds and the real wealth that have been lost no longer exist and thus cannot be lent to anyone. The Federal Reserve’s policy of credit expansion based on the creation of new and additional checkbook money has thus served to give capital to unworthy borrowers who never should have had it in the first place and to deprive other, far more credit worthy borrowers of the capital they need to stay in businesses. Its policy has been one of redistribution and destruction.

The capital it has caused to be malinvested and lost in housing is capital that is now unavailable for such firms as Wickes Furniture, Linens ‘N Things, Levitz Furniture, Mervyns, and innumerable others, who have had to go bankrupt because they could not obtain the loans they needed to stay in business. And, of course, among the foremost victims have been major banks themselves. The losses they have suffered have wiped out their capital and put them out of business. And the list of casualties will certainly grow.

Any discussion of the housing debacle would be incomplete if it did not include mention of the systematic consumption of home equity encouraged for several years by the media and an ignorant economics profession. Consistent with the teachings of Keynesianism that consumer spending is the foundation of prosperity, they regarded the rise in home prices as a powerful means for stimulating such spending. In increasing homeowners’ equity, they held, it enabled homeowners to borrow money to finance additional consumption and thus keep the economy operating at a high level. As matters have turned out, such consumption has served to saddle many homeowners with mortgages that are now greater than the value of their homes, which would not have been the case had those mortgages not been enlarged to finance additional consumption. This consumption is the cause of a further loss of capital over and above the capital lost in malinvestment.

A discussion of the housing debacle would also not be complete if it did not mention the role of government guarantees of many mortgage loans. If the government guarantees the principal and interest on a loan, there is no reason why a lender should care about the qualifications of a borrower. He will not lose by making the loan, however bad it may turn out to be.

A substantial number of mortgage loans carried such guarantees. For example, a New York Times article describes the Department of Housing and Urban Development as “an agency that greased the mortgage wheel for first-time buyers by insuring billions of dollars in loans.” The article describes how HUD progressively reduced its lending standards: “families no longer had to prove they had five years of stable income; three years sufficed...lenders were allowed to hire their own appraisers rather than rely on a government-selected panel...lenders no longer had to interview most government-insured borrowers face to face or maintain physical branch offices,” because the government’s approval for granting mortgage insurance had become automatic.

The Times’ article goes on to describe how “Lenders,” such as Countrywide Financial, which was among the largest and most prominent, “sprang up to serve those whose poor credit history made them ineligible for lower-interest `prime’ loans.” It notes the fact that “Countrywide signed a government pledge to use `proactive creative efforts’ to extend homeownership to minorities and low-income Americans.”[8]“Proactive creative efforts” is a good description of what lenders did in offering such bizarre types of mortgages as those requiring the payment of “interest only,” and then allowing the avoidance even of the payment of interest by adding it to the amount of outstanding principal. (Such mortgages suited the needs of homebuyers whose reason for buying was to be able to sell as soon as home prices rose sufficiently further.)

Just as vast numbers of houses were purchased based on an unfounded belief in an endless rise in their prices, so too vast numbers of complex financial derivatives were sold based on an unfounded belief that the Federal Reserve System actually had the power it claimed to have of making depressions impossible, a power which the media and most of the economics profession repeatedly affirmed.

Derivatives have received such a bad press that it is necessary to point out that the insurance policy on a home is a derivative. And many of the derivatives that were sold and which are now creating problems of insolvency and bankruptcy, namely, “credit default swaps (CDSs),” were insurance policies in one form or another. Their flaw was that unlike ordinary homeowners’ insurance, they did not have a sufficient list of exclusions.

Homeowners’ policies make exclusions for such things as damage caused by war and, in many cases, depending on the special risks of the local area, earthquakes and hurricanes. In the same way, the more complex derivatives should have made an exclusion for losses resulting from financial collapse brought on by Federal-Reserve-sponsored massive credit expansion. (If it is impossible actually to write such an exclusion, because many of the losses may occur before the nature of the cause becomes evident, then such derivatives should not be written and the market will no longer write them because of the unacceptable risks they entail.) But decades of brainwashing by the government, the media, and the educational system had convinced almost everyone that such collapse was no longer possible.

Belief in the impossibility of depressions played the same role in the creation and sale of “collateralized debt obligations (CDOs).” Here disparate home mortgages were bundled together and securities were issued against them. In many cases, large buyers bundled together collections of such securities and issued further securities against those securities. As more and more homeowners have defaulted on their loans, the result has been that no one is able directly to judge the value of these securities. To do so, it will be necessary to disentangle them down to the level of the underlying individual mortgages. Such tangles of securities could never have been sold in a market not overwhelmed by the propaganda that depressions are impossible under the government’s management of the financial system.

Finally, a discussion of the housing debacle would not be complete if it did not include mention of forms of virtual extortion that served to encourage loans to unworthy borrowers. Thus, the online encyclopedia Wikipedia writes:





The Community Reinvestment Act [CRA]...is a United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods... CRA regulations give community groups the right to comment or protest about banks'on-compliance with CRA. Such comments could help or hinder banks' planned expansions.
The meaning of these words is that the Community Reinvestment Act gives the power to “community groups,” to determine in an important respect the financial success or failure of a bank. Only if they are satisfied that the bank is making sufficient loans to borrowers to whom it would otherwise choose not to lend, will it be permitted to succeed. The most prominent such community group is ACORN.
Part and parcel of the environment that has made an act such as the CRA possible, is threats of slander against banks for being “racist” if they choose not to make loans to people who are poor credit risks and also happen to belong to this or that minority group. The threats of slander go hand in glove with intimidation from various government agencies that exercise discretionary power over the banks and are in a position to harm them if they do not comply with the agencies’ wishes. The same points apply to mortgage lenders other than banks.

What this extensive analysis of the actual causes of our financial crisis has shown is that it is government intervention, not a free market or laissez-faire capitalism, that is responsible in every essential respect.

The Laissez-Faire Myth and the Marxism of the Media

The myth that laissez faire exists in the present-day United States and is responsible for our current economic crisis is promulgated by people who know practically nothing whatever of sound, rational economic theory or the actual nature of laissez-faire capitalism. They espouse it despite, or rather because of, their education at the leading colleges and universities of the country, When it comes to matters of economics, their education has steeped them entirely in the thoroughly wrong and pernicious doctrines of Marx and Keynes. In claiming to see the existence of laissez faire in the midst of such massive government interference as to constitute the very opposite of laissez faire, they are attempting to rewrite reality in order to make it conform with their Marxist preconceptions and view of the world.

They absorb the doctrines of Marx more in history, philosophy, sociology, and literature classes than in economics classes. The economics classes, while usually not Marxist themselves, offer only highly insufficient rebuttal of the Marxist doctrines and devote almost all of their time to espousing Keynesianism and other, less well-known anti-capitalistic doctrines, such as the doctrine of pure and perfect competition.

Very few of the professors and their students have read so much as a single page of the writings of Ludwig von Mises, who is the preeminent theorist of capitalism and knowledge of whose writings is essential to its understanding. Almost all of them are thus essentially ignorant of sound economics.

When I refer to the educational system and the media as Marxist, I do not intend to imply that its members favor any kind of forcible overthrow of the United States government or are necessarily even advocates of socialism. What I mean is that they are Marxists insofar as they accept Marx’s views concerning the nature and operation of laissez-faire capitalism.

They accept the Marxian doctrine that in the absence of government intervention, the self-interest, the profit motive—the “unbridled greed”—of businessmen and capitalists would serve to drive wage rates to minimum subsistence while it extended the hours of work to the maximum humanly endurable, imposed horrifying working conditions, and drove small children to work in factories and mines. They point to the miserably low standard of living and terrible conditions of wage earners in the early years of capitalism, especially in Great Britain, and believe that that proves their case. They go on to argue that only government intervention in the form of pro-union and minimum-wage legislation, maximum-hours laws, the legal prohibition of child labor, and government mandates concerning working conditions, served to improve the wage earner’s lot. They believe that repeal of this legislation would bring about a return to the miserable economic conditions of the early nineteenth century.

They view the profits and interest of businessmen and capitalists as unearned, undeserved gains, wrung from wage earners—the alleged true producers—by the equivalent of physical force, and hence regard the wage earners as being in the position of virtual slaves (“wage slaves”) and the capitalist “exploiters” as being in the position of virtual slave owners. Closely connected with this, they regard taxing the businessmen and capitalists and using the proceeds for the benefit of wage earners, in such forms as social security, socialized medicine, public education, and public housing, as a policy that serves merely to return to the wage earners some portion of the loot allegedly stolen from them in the process of “exploitation.”

In full agreement with Marx and his doctrine that under laissez-faire capitalism the capitalists expropriate all of the wage earner’s production above what is necessary for minimum subsistence, they assume that the government’s intervention harms no one but the immoral businessmen and capitalists, never the wage earners. Thus not only the taxes to pay for social programs but also the higher wages imposed by pro-union and minimum-wage legislation are assumed simply to come out of profits, with no negative effect whatever on wage earners, such as unemployment. Likewise for the effect of government-imposed shorter hours, improved working conditions, and the abolition of child labor: the resulting higher costs are assumed simply to come out of the capitalists’ “surplus value,” never out of the standard of living of wage earners themselves.

This is the mindset of the whole of the left and in particular of the members of the educational system and media. It is a view of the profit motive and the pursuit of material self-interest as inherently lethal if not forcibly countered and rigidly controlled by government intervention. As stated, it is a view that sees the role of businessmen and capitalists as comparable to that of slave owners, despite the fact that businessmen and capitalists do not and cannot employ guns, whips, or chains to find and keep their workers but only the offer of better wages and conditions than those workers can find elsewhere.

Not surprisingly, the educational system and media share the view of Marx that laissez-faire capitalism is an “anarchy of production,” in which the businessmen and capitalists run about like chickens without heads. In their view, rationality, order, and planning emanate from the government, not from the participants in the market.

As I say, this, and more like it, is the intellectual framework of the great majority of today’s professors and of several generations of their predecessors. It is equally the intellectual framework of their students, who have dutifully absorbed their misguided teachings and some of whom have gone on to become the reporters and editors of such publications as The New York Times, The Washington Post, Newsweek, Time, and the overwhelming majority of all other newspapers and news magazines. It is the intellectual framework of their students who are now the commentators and editors of practically all of the major television networks, such as CBS, NBC, ABC, and CNN.[9] And it is this intellectual framework within which the media now attempts to understand and report on our financial crisis.

In their view, laissez-faire capitalism and economic freedom are a formula for injustice and chaos, while government is the voice and agent of justice and rationality in economic affairs. So firmly do they hold this belief, that when they see what they think is evidence of large-scale injustice and chaos in the economic system, such as has existed in the present financial crisis, they automatically presume that it is the result of the pursuit of self-interest and the economic freedom that makes that pursuit possible. Given this fundamental attitude, the principle that guides contemporary journalists so-called is that their job is to find the businessmen and capitalists who are responsible for the evil and the government officials who set them free to commit it, and, finally, to identify and support the policies of government intervention and control that will allegedly eliminate the evil and prevent its recurrence in the future.

Their fear and hatred of economic freedom and laissez-faire capitalism, and their need to be able to denounce it as the cause of all economic evil, is so great that they pretend to themselves and to their audiences that it exists in today’s world, in which it clearly does not exist even remotely. By making the claim that laissez faire exists and is what is responsible for the problem, they are able to turn the full force of their hatred for actual economic freedom and laissez-faire capitalism against each and every sliver of economic freedom that somehow manages to exist and which they decide to target. That sliver, they project, is part and parcel of the starvation of the workers in the inhuman exploitation of labor that, in their ignorance, they take for granted is imposed by capitalists under laissez faire. Their brainwashed audience, as much the product of the contemporary educational system as they themselves, then quickly follows suit and obliges their efforts to arouse hatred.

The result is summed up in words such as these, which appeared in one of the same New York Times articles I quoted earlier: “`We now have a collective anger, disgust, over our whole financial system and it’s obvious we’re going to get a regulatory backlash…’” [with] “a spillover effect to other industries because voters have the perception that ‘big companies are animals and they need to be put in their cages.’”[10]

In this way the enemies of capitalism and economic freedom are able to proceed in their campaign of economic destruction and devastation. They use the accusation of “laissez faire” as a kind of ratchet for increasing the government’s power. For example, in the early 1930s they accused President Hoover of following a policy of laissez faire, even as he intervened in the economic system to prevent the fall in wage rates that was essential to stop a reduced demand for labor from resulting in mass unemployment. On the basis of the mass unemployment that then resulted from Hoover’s intervention, which they succeeded in portraying as “laissez faire,” they deceived the country into supporting the further massive interventions of the New Deal.

Today, they continue to play the same game. Always it is laissez faire that they denounce, and whose alleged failures they claim need to be overcome with yet more government regulations and controls. Today, the massive interventions not only of the New Deal, but also of the Fair Deal, the New Frontier, the Great Society, and of all the administrations since, have been added to the very major interventions that existed even in the 1920s and to which Hoover very substantially added. And yet we still allegedly have laissez faire. It seems that so long as anyone manages to move or even breathe without being under the control of the government, laissez faire allegedly continues to exist, which serves to make necessary yet still more government controls.

The logical stopping point of this process is that one day everyone will end up being shackled to a wall, or at the very least being compelled to do something comparable to living in a zip code that matches his social security number. Then the government will know who everyone is, where he is, and that he can do nothing whatever without its approval and permission. And then the world will be safe from anyone attempting to do anything that benefits him and thereby allegedly harms others. At that point, the world will enjoy all the prosperity that comes from total paralysis.


*Copyright © 2008, by George Reisman. George Reisman, Ph.D. is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics. His web site is http://www.capitalism.net/. A pdf replica of his book can be downloaded to the reader’s hard drive simply by clicking on the book’s title Capitalism: A Treatise on Economics and then saving the file when it appears on the screen.

[1] See http://www.volunteertv.com/international/headlines/29762874.html.

[2] Steve Lohr, “Intervention Is Bold, but Has a Basis in History,” October 14, 2008, p. A14.

[3] Jackie Calmes, “Both Sides of the Aisle See More Regulation,” October 14, 2008, p. A15.

[4] Landon Thomas Jr. and Julia Werdigier, “Britain Takes a Different Route to Rescue Its Banks,” October 9, 2007, p. B7.

[5]I arrive at these figures by calculating total checking deposits in January of 2001 and in August of 2008 as the sum of those contained in M1, the “sweep” accounts compiled by the Federal Reserve Bank of St. Louis, and money market mutual fund deposits, both retail and institutional. From these respective totals I subtract total bank reserves as of the same dates. I then subtract the result for 2001 from that for 2008 and divide the difference by the sum calculated for 2001.

[6]If the creation of checkbook money in excess of currency holdings is in fact an attempt at cheating, as I described it earlier, then it follows that a free market would actually require a 100 percent reserve.

[7] Joe Nocera, “Shouldn’t We Rescue Housing?, October 18, 2008, p. B1.

[8] David Streitfeld and Gretchen Morgenson, “The Reckoning, Building Flawed American Dreams,” October 19, 2008, p. A26.

[9] For a comprehensive refutation of all aspects of this intellectual framework, see George Reisman, Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996), chapters 11, 14, and passim.

[10] Jackie Calmes, loc. cit.

A Dial Marked 'War'

The last resort of our bankrupt elite

The War Party loves generals: John McCain mentions Gen. David Petraeus at the drop of a hat, citing him as the final military and moral authority when it comes to U.S. strategy in the Middle East. The reverent tone is supposed to indicate that no further argument is necessary. Military figures are, for the neoconservatives, an essential adjunct to their favorite narrative, which defers to military leaders in a way the Founding Fathers would have found horrifying – they who wondered aloud whether the young republic ought to have a standing army at all, lest it give rise to a permanent military caste that would wield undue influence.

That never happened. Although generals have laid claim to the presidency often, the military as a separate political subclass never gained either ascendancy or undue influence, except insofar as individual military figures went into politics. The tradition of keeping the military as a body out of politics is long and praiseworthy, and it has happily been largely observed – except, of course, by the neocons, who tread on tradition as a matter of high principle and have made a demigod out of Petraeus, a role he seems to revel in.

Yet Petraeus is the exception that proves the rule. The U.S. officer corps was solidly against our Iraqi adventure, and they are horrified at the prospect of a repeat – on a much larger scale, of course – in Iran. They are, like the exemplar of the species, Colin Powell, reluctant interventionists, at best, and generally considered unreliable and even dangerous by the War Party. Others, like the late Gen. William E. Odom, are more fearless in expressing their anti-interventionist instincts, and if we go back in American history, we come across other unlikely peaceniks in uniform.

The unlikeliest was no doubt Gen. Douglas MacArthur, the hero of the 1950s "isolationists" (i.e., the good guys), who wanted to nominate him for president on a third-party ticket opposing another general by the name of Eisenhower. MacArthur was, however, even more of a reluctant politician and declined to run for public office, in spite of efforts by conservative backers of Sen. Robert A. Taft to put his name on the ballot. This was perhaps due, in part, to such sentiments as the following:

"It is a part of the general pattern of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear. While such an economy may produce a sense of seeming prosperity for the moment, it rests on an illusionary foundation of complete unreliability and renders among our political leaders almost a greater fear of peace than is their fear of war."

These words were uttered at the dawn of the Cold War, when it was nothing less than ideological heresy, on the Left as well as the Right, to question either the threat emanating from the East or the onward-and-upward optimism of the postwar American high. "The propaganda of fear" was doing its work, and, besides, the people were narcotized by a false prosperity. The perpetual motion machine of the arms industry was covering up inherent weaknesses in the American economy, providing a cosmetic solution to the problems unleashed by inflationary policies and the gradual militarization of the productive forces. This policy was the perfect solution for politicians who stood at the helm of the USS Empire as it made its maiden voyage and ventured out beyond the far horizon.

In the early Fifties, America stood at the threshold of its imperial destiny, and one writer, Garet Garrett by name, not only saw it coming [.pdf], but also saw how it would end. His remarkably concise and pungent commentary on the rise of empire, in a pamphlet of the same name, is still the best single statement on how and why we lost our old republic. In it, he remarks,

"The bald interpretation of General MacArthur's words is this. War becomes an instrument of domestic policy. Among the control mechanisms on the government's panel board now is a dial marked War. It may be set to increase or decrease the tempo of military expenditures, as the planners decide that what the economy needs is a little more inflation or a little less – but of course never any deflation. And whereas it was foreseen that when Executive Government is resolved to control the economy it will come to have a vested interest in the power of inflation, so now we may perceive that it will come also to have a kind of proprietary interest in the institution of perpetual war."

Let there be no doubt as to our rulers' response to the stinging repudiation of the bailout, which was supposed to save their necks and those of their cronies and backers. On their panel board is a dial marked War, and it is conveniently within reach.

When the news breaks, will the people once again inundate congressional phone lines and bring down the government's Web site with the full weight of their fury? If so, their protests will be misdirected: they should instead be aimed at the White House, which alone has the power to go to war without congressional consent. The rule of law would indicate otherwise, but ever since they let Truman get away with it in 1950, when he sent U.S. troops to Korea without bothering to consult with the people's elected representatives, that power has remained the exclusive prerogative of the executive branch. Because the precedent went unchallenged and was barely even noticed – except by a few eccentrics, like Garrett, who remembered that archaic old parchment known as the Constitution – today a president can unilaterally decide to "save" mankind, his political career, and jump-start the economy, all in one fell swoop. All he has to do is issue the order, and instantly the country is at war.

War, like its progenitor, inflation, is a narcotic that causes us to forget the real problems and their causes and permits all sorts of actions that would not be considered normal under any other circumstances. It is a perfect holiday from the rule of law and is fully taken advantage of by our lawless politicians, who seize on it as a pretext for anything and everything [.pdf]. It emphasizes the worst excesses and encourages their fullest development, so that human behavior is distorted beyond all recognition. Human reason is not merely violated, but inverted: we enter a Bizarro World, where those who made bad investments are bailed out – rewarded – while ordinary folk who live by the rules and pay their bills are taxed to make up the difference.

As the wheels of commerce screech to a grinding halt and the empire of lies – funny money, phony "weapons of mass destruction," and bogus threats to our national security emanating from every corner of the globe – begins to unravel, get ready for the alarm to go off signifying the start of yet another war scare. It's a great diversion from economic troubles, albeit an expensive one – but, as the proposed banksters' bailout showed, no expense is to be spared in saving their necks.

By Jeffrey A. Miron

CAMBRIDGE, Massachusetts (CNN) -- Congress has balked at the Bush administration's proposed $700 billion bailout of Wall Street. Under this plan, the Treasury would have bought the "troubled assets" of financial institutions in an attempt to avoid economic meltdown.

This bailout was a terrible idea. Here's why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.

The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients.

Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

The opinions expressed in this commentary are solely those of the writer.

While watching the Olympics, we tend to cheer participants along national lines. We root for our country's athletes over those from the rest of the world. While there is nothing wrong with this fun diversion, the concept of the individual must never be lost amid the ideal of the collective — the belief that the members of the collective (the nation in this instance) are faceless automatons dedicated to serving the whole.

Before I continue, let me introduce a mathematical term that will help expose the fallacy of the collective: the fractal. Briefly, a fractal is a shape that can be split into parts that are each as complex as the original shape itself.

Consider a tree: the main branches are as complex as the tree itself. In essence, the branch is "a reduced-sized copy of the whole." A branch planted in the ground would be indistinguishable from a tree. Iteratively, the branches of the branches are themselves reduced-sized copies of the tree, and so on.

Additionally, consider computer-generated images that have fractal qualities. Here, a complex structure is drawn that appears to have ragged, yet well-defined edges. A closer view of an edge reveals a structure that is as complex as the original image. This continues iteratively as each closer view reveals new and equally complex structures, ad infinitum.

The point is that each closer view reveals new complexity and uniqueness. In essence, the more we know, the less we know.

Now we turn our attention toward the structure of society.

The topology of society has fractal qualities. Starting from a global view, we tend to see countries as homogenous aggregates. We assume that each country has certain attributes that replicate to all inhabitants — there are Chinese and there are Americans.

In this view, citizen A of country X is nothing more than an instantiation of the ideal-type of the aggregate characteristics attributed to X. We immediately claim to know everything about A simply from the fact that A is a citizen of X. They act that way because he is French and she is Russian. This is a dangerous oversimplification of acting men and women, as we shall see.

Next, let us apply the concept of fractals and refocus our attention on country X alone. By looking exclusively at X, we recognize variations among its various regions. Instead of a homogenous group, we find complexity that is similar to the complexity found relative to the countries of the world. Taking the United States as our example, we recognize differences between residents of (say) Ohio and California. All of a sudden, our homogenous ideal-type American is now the aggregate of various and unique groupings.

Dare we create the ideal-type Ohioan? Certainly not, since a closer view of Ohio reveals variations within the state that are as complex as those between the states. As we work our way through iterative views, we arrive at the evil aggregate: the community.

I single out the community, as it is this concept that allows all larger views to have meaning.

The call for the collective begins with the community. From the first days of kindergarten, public schools drum the concept of community into the minds of children. The schools instruct children to view themselves as similar and indistinguishable components of their communities, regardless of whether the community is school or school district or some other aggregation.

To that end, public schools define themselves as "communities of learners" — not as individuals, but as community whose faceless members strive toward the collective good.

Issues that affect a community affect each member (or child) equally. Children are to act in a manner that makes their school proud. They are encouraged to propose community projects and are required to volunteer for community service. The inherent message is that dying — figuratively in this instance — for the collective is the desired fate in life.

Universalism and collectivism cannot accept this democratic solution of the problem of government. In their opinion the individual in complying with the ethical code does not directly further his earthly concerns but, on the contrary, foregoes the attainment of his own ends for the benefit of the designs of the Deity or of the collective whole.

Yet community is always ill defined. Is your community your neighborhood or one of the many overlapping political subdivisions? Or, is your community those whose company you enjoy?

Those who want to start the study of human action from the collective units encounter an insurmountable obstacle in the fact that an individual at the same time can belong and — with the exception of the most primitive tribesmen — really belongs to various collective entities. The problems raised by the multiplicity of coexisting social units and their mutual antagonisms can be solved only by methodological individualism.

Once the idea of community takes root, children have a difficult time seeing themselves as anything other than a collective part. Sadly, this follows the child through to adulthood. Tax issues are proposed for the benefit of the community. And good community members must always support the collective ends.

Therefore, starting with the collective community, it is easy to widen the view (to zoom out if you will) in order to incorporate greater horizons, ending with the collective nation and its government. If you must sacrifice to be a member of your local community, you must also sacrifice to be a member of your nation, regardless of its policies and actions.

If society or state is an entity endowed with volition and intention and all the other qualities attributed to it by the collectivist doctrine, then it is simply nonsensical to set the shabby individual's trivial aims against its lofty designs.

However, acting men and women are not drones working for the good of the hive. When humans are controlled by the central authority, they no longer act; they react. And, as Mises proved long ago, humans reacting to the commands of the dictator are not constructing a hive, they are simply consuming the remaining honey — the capital — and awaiting a very cold winter.

Yet even the community itself is the aggregation of various and unique groupings. Closer views reveal the family. And even families are the product of various and unique entities: individual acting men, women, and children. It is this complexity — the essential complexity of the individual — that explains why discussing politics and parenting among family members is so tricky. It also explains why watching the football game is safer than table talk on a long Thanksgiving afternoon. But it is this complexity that allows for the growth of the division of labor, which advances and improves economies.

There are two views of the structure of society. There is the collective view, which falsely creates ideal-type aggregations and assumes all members are instantiations of that ideal-type. And there is the Austrian view, which sees only the individual and does not attempt to create any aggregations.

All varieties of collectivist creeds are united in their implacable hostility to the fundamental political institutions of the liberal system: majority rule, tolerance of dissenting views, freedom of thought, speech, and the press, equality of all men under the law.

The Austrians, on the other hand, see the individual despite the geopolitics of the day, and it is the focus on the individual that leads increasingly toward liberty.

Cheer your home team. And cheer the fractals who are your neighbors, friends, and colleagues. Do not lose them in a collective haze.

Anthrax mystery: the FBI/media narrative is laughable – and sinister

by Justin Raimondo

It sounds like a very bad made-for-television movie: a mad scientist – a violent sociopath, a "nerd with a dark side," who had already tried to kill several people, is obsessed with pornography, and is fixated on a particular college sorority – unleashes a strain of deadly anthrax through the U.S. mail, killing five, infecting 17 others, and terrorizing the country. His motive, aside from sheer antisocial vindictiveness: he holds the patent for an anthrax vaccine, and he also wants to direct the nation's attention to the supposedly overlooked and underfunded problem of bio-terrorism. That'll teach 'em! It reads like some pretty execrable fiction, yet the FBI is peddling this farrago of shopworn clichés as the facts surrounding the alleged guilt of Bruce E. Ivins, whose suicide the other day ostensibly closes the 7-year-old anthrax terrorism case that has baffled investigators and shone a cruel light on the Bureau's methods and standards of conduct. The real topper has got to be the "sorority obsession" supposedly nursed by Ivins – a mild-mannered family man universally liked by his co-workers and neighbors. This is the sort of B-movie script beloved by Hollywood, wherein the upstanding bourgeois father of two and devoted husband is really a psychopathic slime-ball just beneath the surface, seething with resentment and even hatred of women who rejected his advances in the past – a male version of Carrie, who rises up in his true garb as the virtual incarnation of misanthropy to wreak vengeance on the female sex, and the world. This passes muster in Hollywood, of course, since it embodies all the social prejudices so beloved by that temple of cultural corruption, yet in the real world one looks at it askance and wonders: are these guys kidding? Because this scenario has very little if anything to do with the known facts. The only connection the anthrax letters have to the Kappa Kappa Gamma sorority is the fact that the New Jersey letters were mailed from a post office box not far from where the Princeton chapter keeps a storage locker. No kidding: that is the connection, in toto. So even if Ivins did indeed have an unusual interest in this sorority – supposedly because one of its members once rejected him back when he was a student at the University of Cincinnati – what this storage locker has to do with anything, including his alleged motives, is known only to those geniuses over at the FBI. Clearly, the whole purpose of bringing this sorority angle up is to smear a dead man as a pervert and cast him in the sinister light suitable for the villain in this crude media narrative. The pornography angle serves the same purpose: Ivins apparently rented a mail box under another name, which he used to receive photos of blindfolded women, presumably in suggestive poses. No, not very pretty – but so what? How does this make him the anthrax murderer? Another element of this grade-B thriller is the "scientific" faux-Sherlock Holmes aspect of Ivins' unmasking as the alleged killer. According to all those anonymous FBI and other government officials, who are leaking faster than they ever moved on this case, new scientific techniques that weren't available during the Steven Hatfill fiasco have definitively traced the particular strain of anthrax used in the attacks back to a single flask in Ivins' lab. We're given all sorts of scientific-sounding gobbledygook to make the "evidence" sound convincing, but the fact remains that at least 12 other people at Ft. Detrick, not to mention other labs around the country, had access to the contents of that flask. For all the "genome tracing" and scientific detective work conducted by the FBI over a period of years, the reality is that they can trace the anthrax to a particular lab – but not, as several experts have pointed out, to a particular person. That would require real detective work of the gumshoe variety, as opposed to farming it out to scientists, many of whom are (or were) on the FBI's suspect list. (Ivins himself was recruited to this task.) Yet the FBI is not that concerned with the facts: what they're after is a good story, one that the media – and therefore, they think, the public – will swallow without thinking about it too much. Oh yeah, that obsessive nut with the fixation on blindfolded sorority babes – obviously the sort to go a on rampage, and, unfortunately, he just happened to have access to the most horrific toxins known to mankind, courtesy of the U.S. government. They aren't trying to convince a jury; after all, the guy is dead. The FBI and those in the administration who used the anthrax attacks to stoke up a war just want to convince the American public, a group they obviously hold in such low regard that they don't bother with such niceties as logic and real evidence. Just tell them a story, and make it a good one – oh, and be sure to spice it up with sex. That'll do the trick. Except it won't. The deceased scientist's colleagues and friends are rising to his defense, and the truth about how the FBI persecuted Ivins – and effectively drove him to suicide, in my view quite deliberately – is now coming out. They gave Ivins the full Hatfill treatment: agents followed him everywhere, abusing him, giving him the finger, and intruding on his private space to an extent that seems almost inconceivable. Yet apparently it's all perfectly legal in this era of the PATRIOT Act, a brazen assault on the constitutional rights of all Americans made possible in large part by the anthrax attacks and the atmosphere of hysterical fear they engendered. Now I want to venture into some territory that is wild, to be sure, but no wilder than the anthrax letters themselves. I want to emphasize that this is just pure speculation on my part, or, more accurately, an interesting angle that could have significance – yet I hope not. A number of the recent articles on the anthrax attacks have remarked on how the various targets seem curiously unrelated: the phrase "little in common" is often employed. And yet – and yet… To begin with, targets Tom Daschle and Patrick Leahy aren't just any old U.S. senators. They're Democrats, and, what's more, they are – or, in Daschle's case, were – leaders of the congressional Democratic caucus. Daschle was leader of the Democratic majority in the Senate, and Leahy was – and is – head of the powerful Senate Judiciary Committee, a post he used to his party's maximum advantage. Both of these men, in addition, were major obstacles to the passage of the PATRIOT Act, with Daschle refusing to grant the administration the unlimited power it sought. Together with Leahy, Daschle led the opposition to the original version of the bill, which had no expiration date. The Democrats, particularly Daschle and Leahy, argued in favor of a two-year expiration date, but after their Senate offices were targeted by the anthrax killer, both thought better of it and compromised on a four-year extension. Far from having "little in common," as the conventional media spinmeisters would have it, these two men shared their staunch opposition to the Bush administration's brazen attempt to trample the Constitution underfoot and seize power for themselves. Yes, but what about the anthrax killers' media targets? NBC one could arguably describe as either centrist, or mildly liberal, but what about the New York Post and the National Enquirer, one a rightist daily owned by Rupert Murdoch and the other an iconic gossip sheet whose name is a synonym for journalism of the yellowest sort? These two targets seem to have nothing in common, aside from a certain tabloid flair. Yet they do, indeed, share a certain focus, at least when it comes to one very particular subject, and I owe this insight to the anonymous "Allie," posting on the Newsgarden.org Web site. The Enquirer has published a lot of photos of celebrities caught-in-the-act, so to speak, and one of these was of Jenna Bush, falling-down drunk and rolling around on the floor with another female for the delectation of the attending fraternity boys. The New York Post was another source for this specialized genre. As "Allie" puts it: "If you go to their search page and do a search for Jenna what you come up with is a plethora of articles on the Boozing Bush Twins. More and worse than anything published in The National Enquirer." "Allie" then goes on to list the Post's prolific output of bad-girl-Jenna pieces, with such lurid titles as "Busted Bush Babes Make Different Booze Pleas," "Double Shot: Bush Twins Both Nailed," "Jenna Comes 'Clean': Beer Bush Babe Faces Garbage Duty," and a little editorial comment to stick the knife in all the way: "Reign in These Bush Leaguers," by Linda Stasi. As "Allie" shows, all of the intended targets of the anthrax attacks did indeed have one thing in common: in some manner or other, they had crossed the Bush family, either in a very personal way (the first victims at the Enquirer and the Post), or else politically, in the cases of Daschle and Leahy. As far as the latter two are concerned, it wasn't just their status as Democratic Party leaders, but their active opposition to the Bush agenda during the PATRIOT Act debate, that mattered. As for Tom Brokaw, "Allie" points out that, prior to receiving the deadly anthrax-laden missive, and as the country was still reeling from the impact of 9/11, Brokaw had been approached by administration insiders not to run an interview with Bill Clinton, but he went ahead and did it anyway, thus incurring the Bushies' wrath. Yes, there were many more victims of the anthrax attacks, with five killed and 17 injured. Leahy and Daschle were unharmed, as was Brokaw, but the Enquirer was hit hard, and – given "Allie's" thesis – right on target. In any case, a certain pattern of the intended targets emerges. I can't paraphrase the passion behind Allie's analysis, so I'll let him speak for himself: "Who had a motive? Who had a grudge against The Enquirer and the New York Post? Who had a grudge against Brokaw? Who wanted to frighten or manipulate Congress? First to get it to adjourn indefinitely, leaving Bush with the power of the purse. Second to get the PATRIOT Act passed in all its fascist glory, without even being read. Who? "It's as plain as the nose on your face. Why is the major media pussyfooting around it? Are they still terrified?" I have to say I don't see any real evidence for any of this, beyond the wildly circumstantial – and, in that respect, the basis of "Allie's" thesis is no different from the "evidence" marshaled by the FBI against Dr. Ivins. Except that, of the two narratives, the FBI's tale of a porn-obsessed sorority-house lurker and mad scientist is a lot less believable. What is all too believable, however, is the abuse endured by Ivins and his family, as related by the New York Times: "They had even intensively questioned his adopted children, Andrew and Amanda, now both 24, with the authorities telling his son that he might be able to collect the $2.5 million reward for solving the case and buy a sports car, and showing his daughter gruesome photographs of victims of the anthrax letters and telling her, 'Your father did this,' according to the account Dr. Ivins gave a close friend. "As the investigation wore on, some colleagues thought the FBI's methods were increasingly coercive, as the agency tried to turn Army scientists against one another and reinterviewed family members. "One former colleague, Dr. W. Russell Byrne, said the agents pressed Dr. Ivins' daughter repeatedly to acknowledge that her father was involved in the attacks. '"It was not an interview,' Dr. Byrne said. 'It was a frank attempt at intimidation.' "Dr. Byrne said he believed Dr. Ivins was singled out partly because of his personal weaknesses. 'They figured he was the weakest link,' Dr. Byrne said. 'If they had real evidence on him, why did they not just arrest him?'" Well, they didn't arrest him because there wasn't enough evidence. So they drove him to suicide, as the only alternative to confessing to a crime he didn't commit. The kind of treatment Ivins had to endure at the hands of the FBI and other government agencies would have broken anyone, and, by all accounts, he was truly broken at the end, crying at his desk, suffering at least two breakdowns, and finally giving up the life that, in his view, had become hardly worth living. Why they wanted him dead, or in jail, is the core of the mystery at the center of this horrific episode in the annals of "law enforcement." It's hard to believe this would be done merely to show that the FBI is on the job, protecting the nation from terrorists and other evildoers: their monumental incompetence, which some have interpreted as having more sinister implications, had practically ruined their reputation. Yet why pick on Ivins? It had to be more than just the "weak link" thesis put forward by his friend Dr. Byrne. As I wrote on Monday, the longevity of Ivins' career at Ft. Detrick – 36 years – gave him a bird's-eye view of that troubled facility's deepest and darkest secrets, including the series of events that took place in the 1990s, when all sorts of pathogens were apparently spirited out of the place and unauthorized experiments were carried out by freelancers employed by USAMRIID. Did they drive Ivins to suicide because he knew too much? I don't rule out some degree of involvement by Ivins, perhaps amounting only to knowledge of whom the perpetrators might be. However, in my view, he's taking the fall for those who planned and executed the first biological attack on American soil. Surely a lone nut could not have carried out this technically difficult and logistically complicated scheme to terrorize an entire nation on the eve of such momentous events. That isn't "conspiracism" – it's common sense. With the exoneration of Steven Hatfill and the posthumous demonization of an apparently innocent man, the country is waking up to the importance of the previously nearly forgotten anthrax story – which, I might add, we've pursued in this space with some regularity year after year. ~ Justin Raimondo

By Wendell Berry

The general reaction to the apparent end of the era of cheap fossil fuel, as to other readily foreseeable curtailments, has been to delay any sort of reckoning. The strategies of delay, so far, have been a sort of willed oblivion, or visions of large profits to the manufacturers of such “biofuels” as ethanol from corn or switchgrass, or the familiar unscientific faith that “science will find an answer.” The dominant response, in short, is a dogged belief that what we call the American Way of Life will prove somehow indestructible. We will keep on consuming, spending, wasting, and driving, as before, at any cost to anything and everybody but ourselves.

This belief was always indefensible—the real names of global warming are Waste and Greed—and by now it is manifestly foolish. But foolishness on this scale looks disturbingly like a sort of national insanity. We seem to have come to a collective delusion of grandeur, insisting that all of us are “free” to be as conspicuously greedy and wasteful as the most corrupt of kings and queens. (Perhaps by devoting more and more of our already abused cropland to fuel production we will at last cure ourselves of obesity and become fashionably skeletal, hungry but—thank God!—still driving.)

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The problem with us is not only prodigal extravagance but also an assumed limitlessness. We have obscured the issue by refusing to see that limitlessness is a godly trait. We have insistently, and with relief, defined ourselves as animals or as “higher animals.” But to define ourselves as animals, given our specifically human powers and desires, is to define ourselves as limitless animals—which of course is a contradiction in terms. Any definition is a limit, which is why the God of Exodus refuses to define Himself: “I am that I am.”

Even so, that we have founded our present society upon delusional assumptions of limitlessness is easy enough to demonstrate. A recent “summit” in Louisville, Kentucky, was entitled “Unbridled Energy: The Industrialization of Kentucky’s Energy Resources.” Its subjects were “clean-coal generation, biofuels, and other cutting-edge applications,” the conversion of coal to “liquid fuels,” and the likelihood that all this will be “environmentally friendly.” These hopes, which “can create jobs and boost the nation’s security,” are to be supported by government “loan guarantees . . . investment tax credits and other tax breaks.” Such talk we recognize as completely conventional. It is, in fact, a tissue of clichés that is now the common tongue of promoters, politicians, and journalists. This language does not allow for any computation or speculation as to the net good of anything proposed. The entire contraption of “Unbridled Energy” is supported only by a rote optimism: “The United States has 250 billion tons of recoverable coal reserves—enough to last 100 years even at double the current rate of consumption.” We humans have inhabited the earth for many thousands of years, and now we can look forward to surviving for another hundred by doubling our consumption of coal? This is national security? The world-ending fire of industrial fundamentalism may already be burning in our furnaces and engines, but if it will burn for a hundred more years, that will be fine. Surely it would be better to intend straightforwardly to contain the fire and eventually put it out! But once greed has been made an honorable motive, then you have an economy without limits. It has no place for temperance or thrift or the ecological law of return. It will do anything. It is monstrous by definition.

In keeping with our unrestrained consumptiveness, the commonly accepted basis of our economy is the supposed possibility of limitless growth, limitless wants, limitless wealth, limitless natural resources, limitless energy, and limitless debt. The idea of a limitless economy implies and requires a doctrine of general human limitlessness: all are entitled to pursue without limit whatever they conceive as desirable—a license that classifies the most exalted Christian capitalist with the lowliest pornographer.

This fantasy of limitlessness perhaps arose from the coincidence of the Industrial Revolution with the suddenly exploitable resources of the New World—though how the supposed limitlessness of resources can be reconciled with their exhaustion is not clear. Or perhaps it comes from the contrary apprehension of the world’s “smallness,” made possible by modern astronomy and high-speed transportation. Fear of the smallness of our world and its life may lead to a kind of claustrophobia and thence, with apparent reasonableness, to a desire for the “freedom” of limitlessness. But this desire, paradoxically, reduces everything. The life of this world is small to those who think it is, and the desire to enlarge it makes it smaller, and can reduce it finally to nothing.

However it came about, this credo of limitlessness clearly implies a principled wish not only for limitless possessions but also for limitless knowledge, limitless science, limitless technology, and limitless progress. And, necessarily, it must lead to limitless violence, waste, war, and destruction. That it should finally produce a crowning cult of political limitlessness is only a matter of mad logic.

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The normalization of the doctrine of limitlessness has produced a sort of moral minimalism: the desire to be efficient at any cost, to be unencumbered by complexity. The minimization of neighborliness, respect, reverence, responsibility, accountability, and self-subordination—this is the culture of which our present leaders and heroes are the spoiled children.

Our national faith so far has been: “There’s always more.” Our true religion is a sort of autistic industrialism. People of intelligence and ability seem now to be genuinely embarrassed by any solution to any problem that does not involve high technology, a great expenditure of energy, or a big machine. Thus an X marked on a paper ballot no longer fulfills our idea of voting. One problem with this state of affairs is that the work now most needing to be done—that of neighborliness and caretaking—cannot be done by remote control with the greatest power on the largest scale. A second problem is that the economic fantasy of limitlessness in a limited world calls fearfully into question the value of our monetary wealth, which does not reliably stand for the real wealth of land, resources, and workmanship but instead wastes and depletes it.

That human limitlessness is a fantasy means, obviously, that its life expectancy is limited. There is now a growing perception, and not just among a few experts, that we are entering a time of inescapable limits. We are not likely to be granted another world to plunder in compensation for our pillage of this one. Nor are we likely to believe much longer in our ability to outsmart, by means of science and technology, our economic stupidity. The hope that we can cure the ills of industrialism by the homeopathy of more technology seems at last to be losing status. We are, in short, coming under pressure to understand ourselves as limited creatures in a limited world.

This constraint, however, is not the condemnation it may seem. On the contrary, it returns us to our real condition and to our human heritage, from which our self-definition as limitless animals has for too long cut us off. Every cultural and religious tradition that I know about, while fully acknowledging our animal nature, defines us specifically as humans—that is, as animals (if the word still applies) capable of living not only within natural limits but also within cultural limits, self-imposed. As earthly creatures, we live, because we must, within natural limits, which we may describe by such names as “earth” or “ecosystem” or “watershed” or “place.” But as humans, we may elect to respond to this necessary placement by the self-restraints implied in neighborliness, stewardship, thrift, temperance, generosity, care, kindness, friendship, loyalty, and love.

In our limitless selfishness, we have tried to define “freedom,” for example, as an escape from all restraint. But, as my friend Bert Hornback has explained in his book The Wisdom in Words, “free” is etymologically related to “friend.” These words come from the same Indo-European root, which carries the sense of “dear” or “beloved.” We set our friends free by our love for them, with the implied restraints of faithfulness or loyalty. And this suggests that our “identity” is located not in the impulse of selfhood but in deliberately maintained connections.

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Thinking of our predicament has sent me back again to Christopher Marlowe’s Tragical History of Doctor Faustus. This is a play of the Renaissance; Faustus, a man of learning, longs to possess “all Nature’s treasury,” to “Ransack the ocean . . ./And search all corners of the new-found world . . .” To assuage his thirst for knowledge and power, he deeds his soul to Lucifer, receiving in compensation for twenty-four years the services of the sub-devil Mephistophilis, nominally Faustus’s slave but in fact his master. Having the subject of limitlessness in mind, I was astonished on this reading to come upon Mephistophilis’s description of hell. When Faustus asks, “How comes it then that thou art out of hell?” Mephistophilis replies, “Why, this is hell, nor am I out of it.” And a few pages later he explains:

Hell hath no limits, nor is circumscribed
In one self place, but where we [the damned] are is hell,
And where hell is must we ever be.

For those who reject heaven, hell is everywhere, and thus is limitless. For them, even the thought of heaven is hell.

It is only appropriate, then, that Mephistophilis rejects any conventional limit: “Tut, Faustus, marriage is but a ceremonial toy. If thou lovest me, think no more of it.” Continuing this theme, for Faustus’s pleasure the devils present a sort of pageant of the seven deadly sins, three of which—Pride, Wrath, and Gluttony—describe themselves as orphans, disdaining the restraints of parental or filial love.

Seventy or so years later, and with the issue of the human definition more than ever in doubt, John Milton in Book VII of Paradise Lost returns again to a consideration of our urge to know. To Adam’s request to be told the story of creation, the “affable Archangel” Raphael agrees “to answer thy desire/Of knowledge within bounds [my emphasis] . . . ,” explaining that

Knowledge is as food, and needs no less
Her temperance over appetite, to know
In measure what the mind may well contain;
Oppresses else with surfeit, and soon turns
Wisdom to folly, as nourishment to wind.

Raphael is saying, with angelic circumlocution, that knowledge without wisdom, limitless knowledge, is not worth a fart; he is not a humorless archangel. But he also is saying that knowledge without measure, knowledge that the human mind cannot appropriately use, is mortally dangerous.

I am well aware of what I risk in bringing this language of religion into what is normally a scientific discussion. I do so because I doubt that we can define our present problems adequately, let alone solve them, without some recourse to our cultural heritage. We are, after all, trying now to deal with the failure of scientists, technicians, and politicians to “think up” a version of human continuance that is economically probable and ecologically responsible, or perhaps even imaginable. If we go back into our tradition, we are going to find a concern with religion, which at a minimum shatters the selfish context of the individual life, and thus forces a consideration of what human beings are and ought to be.

This concern persists at least as late as our Declaration of Independence, which holds as “self-evident, that all men are created equal; that they are endowed by their Creator with certain unalienable rights . . .” Thus among our political roots we have still our old preoccupation with our definition as humans, which in the Declaration is wisely assigned to our Creator; our rights and the rights of all humans are not granted by any human government but are innate, belonging to us by birth. This insistence comes not from the fear of death or even extinction but from the ancient fear that in order to survive we might become inhuman or monstrous.

And so our cultural tradition is in large part the record of our continuing effort to understand ourselves as beings specifically human: to say that, as humans, we must do certain things and we must not do certain things. We must have limits or we will cease to exist as humans; perhaps we will cease to exist, period. At times, for example, some of us humans have thought that human beings, properly so called, did not make war against civilian populations, or hold prisoners without a fair trial, or use torture for any reason.

Some of us would-be humans have thought too that we should not be free at anybody else’s expense. And yet in the phrase “free market,” the word “free” has come to mean unlimited economic power for some, with the necessary consequence of economic powerlessness for others. Several years ago, after I had spoken at a meeting, two earnest and obviously troubled young veterinarians approached me with a question: How could they practice veterinary medicine without serious economic damage to the farmers who were their clients? Underlying their question was the fact that for a long time veterinary help for a sheep or a pig has been likely to cost more than the animal is worth. I had to answer that, in my opinion, so long as their practice relied heavily on selling patented drugs, they had no choice, since the market for medicinal drugs was entirely controlled by the drug companies, whereas most farmers had no control at all over the market for agricultural products. My questioners were asking in effect if a predatory economy can have a beneficent result. The answer too often is No. And that is because there is an absolute discontinuity between the economy of the seller of medicines and the economy of the buyer, as there is in the health industry as a whole. The drug industry is interested in the survival of patients, we have to suppose, because surviving patients will continue to consume drugs.

Now let us consider a contrary example. Recently, at another meeting, I talked for some time with an elderly, and some would say an old-fashioned, farmer from Nebraska. Unable to farm any longer himself, he had rented his land to a younger farmer on the basis of what he called “crop share” instead of a price paid or owed in advance. Thus, as the old farmer said of his renter, “If he has a good year, I have a good year. If he has a bad year, I have a bad one.” This is what I would call community economics. It is a sharing of fate. It assures an economic continuity and a common interest between the two partners to the trade. This is as far as possible from the economy in which the young veterinarians were caught, in which the powerful are limitlessly “free” to trade, to the disadvantage, and ultimately the ruin, of the powerless.

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It is this economy of community destruction that, wittingly or unwittingly, most scientists and technicians have served for the past two hundred years. These scientists and technicians have justified themselves by the proposition that they are the vanguard of progress, enlarging human knowledge and power, and thus they have romanticized both themselves and the predatory enterprises that they have served.

As a consequence, our great need now is for sciences and technologies of limits, of domesticity, of what Wes Jackson of the Land Institute in Salina, Kansas, has called “homecoming.” These would be specifically human sciences and technologies, working, as the best humans always have worked, within self-imposed limits. The limits would be the accepted contexts of places, communities, and neighborhoods, both natural and human.

I know that the idea of such limitations will horrify some people, maybe most people, for we have long encouraged ourselves to feel at home on “the cutting edges” of knowledge and power or on some “frontier” of human experience. But I know too that we are talking now in the presence of much evidence that improvement by outward expansion may no longer be a good idea, if it ever was. It was not a good idea for the farmers who “leveraged” secure acreage to buy more during the 1970s. It has proved tragically to be a bad idea in a number of recent wars. If it is a good idea in the form of corporate gigantism, then we must ask, For whom? Faustus, who wants all knowledge and all the world for himself, is a man supremely lonely and finally doomed. I don’t think Marlowe was kidding. I don’t think Satan is kidding when he says in Paradise Lost, “Myself am Hell.”

If the idea of appropriate limitation seems unacceptable to us, that may be because, like Marlowe’s Faustus and Milton’s Satan, we confuse limits with confinement. But that, as I think Marlowe and Milton and others were trying to tell us, is a great and potentially a fatal mistake. Satan’s fault, as Milton understood it and perhaps with some sympathy, was precisely that he could not tolerate his proper limitation; he could not subordinate himself to anything whatever. Faustus’s error was his unwillingness to remain “Faustus, and a man.” In our age of the world it is not rare to find writers, critics, and teachers of literature, as well as scientists and technicians, who regard Satan’s and Faustus’s defiance as salutary and heroic.

On the contrary, our human and earthly limits, properly understood, are not confinements but rather inducements to formal elaboration and elegance, to fullness of relationship and meaning. Perhaps our most serious cultural loss in recent centuries is the knowledge that some things, though limited, are inexhaustible. For example, an ecosystem, even that of a working forest or farm, so long as it remains ecologically intact, is inexhaustible. A small place, as I know from my own experience, can provide opportunities of work and learning, and a fund of beauty, solace, and pleasure—in addition to its difficulties—that cannot be exhausted in a lifetime or in generations.

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To recover from our disease of limitlessness, we will have to give up the idea that we have a right to be godlike animals, that we are potentially omniscient and omnipotent, ready to discover “the secret of the universe.” We will have to start over, with a different and much older premise: the naturalness and, for creatures of limited intelligence, the necessity, of limits. We must learn again to ask how we can make the most of what we are, what we have, what we have been given. If we always have a theoretically better substitute available from somebody or someplace else, we will never make the most of anything. It is hard to make the most of one life. If we each had two lives, we would not make much of either. Or as one of my best teachers said of people in general: “They’ll never be worth a damn as long as they’ve got two choices.”

To deal with the problems, which after all are inescapable, of living with limited intelligence in a limited world, I suggest that we may have to remove some of the emphasis we have lately placed on science and technology and have a new look at the arts. For an art does not propose to enlarge itself by limitless extension but rather to enrich itself within bounds that are accepted prior to the work.

It is the artists, not the scientists, who have dealt unremittingly with the problem of limits. A painting, however large, must finally be bounded by a frame or a wall. A composer or playwright must reckon, at a minimum, with the capacity of an audience to sit still and pay attention. A story, once begun, must end somewhere within the limits of the writer’s and the reader’s memory. And of course the arts characteristically impose limits that are artificial: the five acts of a play, or the fourteen lines of a sonnet. Within these limits artists achieve elaborations of pattern, of sustaining relationships of parts with one another and with the whole, that may be astonishingly complex. And probably most of us can name a painting, a piece of music, a poem or play or story that still grows in meaning and remains fresh after many years of familiarity.

We know by now that a natural ecosystem survives by the same sort of formal intricacy, ever-changing, inexhaustible, and no doubt finally unknowable. We know further that if we want to make our economic landscapes sustainably and abundantly productive, we must do so by maintaining in them a living formal complexity something like that of natural ecosystems. We can do this only by raising to the highest level our mastery of the arts of agriculture, animal husbandry, forestry, and, ultimately, the art of living.

It is true that insofar as scientific experiments must be conducted within carefully observed limits, scientists also are artists. But in science one experiment, whether it succeeds or fails, is logically followed by another in a theoretically infinite progression. According to the underlying myth of modern science, this progression is always replacing the smaller knowledge of the past with the larger knowledge of the present, which will be replaced by the yet larger knowledge of the future.

In the arts, by contrast, no limitless sequence of works is ever implied or looked for. No work of art is necessarily followed by a second work that is necessarily better. Given the methodologies of science, the law of gravity and the genome were bound to be discovered by somebody; the identity of the discoverer is incidental to the fact. But it appears that in the arts there are no second chances. We must assume that we had one chance each for The Divine Comedy and King Lear. If Dante and Shakespeare had died before they wrote those poems, nobody ever would have written them.

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The same is true of our arts of land use, our economic arts, which are our arts of living. With these it is once-for-all. We will have no chance to redo our experiments with bad agriculture leading to soil loss. The Appalachian mountains and forests we have destroyed for coal are gone forever. It is now and forevermore too late to use thriftily the first half of the world’s supply of petroleum. In the art of living we can only start again with what remains. And so, in confronting the phenomenon of “peak oil,” we are really confronting the end of our customary delusion of “more.” Whichever way we turn, from now on, we are going to find a limit beyond which there will be no more. To hit these limits at top speed is not a rational choice. To start slowing down, with the idea of avoiding catastrophe, is a rational choice, and a viable one if we can recover the necessary political sanity. Of course it makes sense to consider alternative energy sources, provided they make sense. But also we will have to re-examine the economic structures of our lives, and conform them to the tolerances and limits of our earthly places. Where there is no more, our one choice is to make the most and the best of what we have.

Daily Article by William L. Anderson | Posted on 7/30/2008

In a recent column, Paul Krugman tries to explain the "Bush bust." Instead of clear, cogent economic theory, we are fed a mass of contradictory ideas, a bit of political partisanship, and explanations that simply make no sense.

When one attempts to apply economic theory in order to explain certain events, one is reminded of Carl Menger's dictum: "All things are subject to the law of cause and effect. This great principle knows no exception, and we would search in vain in the realm of experience for an example to the contrary."

Austrian economists hold that there are certain principles which can be understood and which are based upon immutable laws of human action. Unfortunately, in Krugman's world, events happen with no real explanation.

For example, he writes,

One of the underemphasized keys to the Clinton boom, I'd argue, was the way the cost disease of health care went into remission between 1993 and 2000. For a while, the spread of managed care put a lid on premiums, encouraging companies to expand their work forces.

But premiums surged again after 2000, imposing huge new burdens on business. It's a good bet that this played an important role in weak job creation.

Why did they surge, and how would lower health-care costs help create a boom? Those are questions that demand answers. First, and most important, the boom of the Clinton years was centered in the stock market, yet health insurance premiums operate across the board. Furthermore, while the increase might have been slower during that time, nonetheless those costs did rise. Second, a slower rise in health-insurance premiums automatically leading to a boom in the stock market is a non sequitur — or at least Krugman does not connect the dots.

Another cause of the present downturn, Krugman notes, has been soaring prices. He writes,

What about raw materials prices? During the Clinton years basic commodities stayed cheap by historical standards. Since then, however, food and energy prices have exploded, directly lopping about 5 percent off the typical American family's real income, and raising business costs throughout the economy.

Why has this happened? According to Krugman, it is because Congress did not give President Bill Clinton enough power:

Much of this pain could have been avoided.

If Bill Clinton's attempt to reform health care had succeeded, the U.S. economy would be in much better shape today. But the attempt failed — and let's remember why. Yes, the Clinton administration botched the politics. But it was Republicans in Congress who blocked reform, as Newt Gingrich pursued a strategy of "coagulation" designed to "clot everyone away" from Mr. Clinton.

As for high food and fuel prices, they're mainly the result of growing demand from China and other emerging economies. But oil prices wouldn't be as high as they are, and the United States would have been much less vulnerable to the current price spike, if we had taken steps in the past to limit our oil consumption.

Again, we are given the non sequitur. How do we know that Clinton's "reform" would have lowered medical costs? The imposition of Medicare more than 40 years ago was the turning point in driving up medical-care costs. How would this "reform" have resulted in lower real costs to the economy? Krugman does not say how, other than to tell us that those Big Bad Republicans want medical care to cost a lot of money.

In dealing with food prices, one has to wonder if food imports to China and elsewhere have skyrocketed or if caloric intake in Asia is growing. In other words, we are supposed to believe that because the Chinese economy has been growing, the rank-and-file Chinese have been pigging out.

What kind of "steps" would have limited oil consumption? Mandatory rationing? Forcing everyone to purchase high-mileage vehicles? Assume that the government had done these things. It is unclear what opportunity costs would have been imposed by measures that would have made transportation of goods and people more difficult to attain, but one can surmise that such heavy-handed regulations would have made us poorer — and much less free.

Furthermore, I do not know how further restrictions on the oil industry — which I am sure Krugman has in mind — would have lowered oil prices and made Americans less vulnerable to price spikes in petroleum. Again, we are dealing with claims that do not pass Menger's standards of cause and effect.

Oil is bought and sold in markets that span the world. The only way to separate the effects of world prices and US prices is to set up trade barriers and trade the US-produced commodity in separate markets. That is already done with sugar, where US growers are "protected" from lower-priced sugar grown elsewhere; the price of US sugar is, on average, about three times the world price. So, if Krugman believes that a similar program would lower oil prices, perhaps he needs to review the price-theory class he took at MIT.

If there is a cause-and-effect pattern in this article, it is based solely upon who occupies the White House, according to Krugman. Now, one might expect such talk from the heads of the two main political parties, but a Princeton economist is supposed to operate by higher standards than what prevail in pure, partisan politics.

Can we blame Bush for what is happening and still be intellectually honest? Yes, but one must understand cause-and-effect in economic analysis if one wishes to affix blame that has more explanatory power than "Bush is a Republican and Clinton is a Democrat."

To understand the current about-to-bust, however, we must look back eight years at the end of the Clinton term. Despite Krugman's partisan rants, it was clear that the Federal Reserve System had actively pumped up stock values, leading to a dangerous bubble that finally broke toward the end of 2000. By the time Bush took office in January 2001, the NASDAQ was on its way to losing half of its value, and the Dow Jones and S&P 500 indices were in freefall as well.

No doubt, the Bush administration would have loved to try to pump up the markets, but by then it was clear that stock prices had been way out of kilter in relation to fundamentals, and the markets were not going to heed the word of a president or anyone else. Thus, the administration turned toward the moribund housing market.

Following the 9/11 attacks, the Fed lowered interest rates to near one percent and began to push housing. Accompanying the Fed's push was the "ownership society" mantra that came from the White House and the Heritage Foundation and Cato Institute, which put a "free enterprise" cover over what was essentially financial socialism.

Not only did we have the Fed forcing down interest rates to below their "natural" levels, but the government and its quasi-government corporations, Fannie Mae and Freddie Mac aggressively hawked their mortgage securities, with the implicit agreement that the government (read that, "taxpayers") would "guarantee" those securities in case they lost value. They lost value anyway.

While Krugman has recognized the bubble and, indeed, recognized it before most other commentators (except the Austrians, of course), his explanation for it is steeped in partisan politics and just plain faulty analysis. The bubble occurred, he claims, because Ronald Reagan mesmerized the country into "believing in free markets," which led to less regulation, which ultimately led to the financial bubbles. The solution? Re-regulate everything.

One hates to break it to this perennial candidate for the Nobel Prize, but the problem is not "unregulated free markets." For one, financial markets are heavily regulated by government. Second, the real problem has been the belief that government can act as the backstop for every financial failure. In fact, the various guarantees, bailouts, loans, and the other measures taken by the government to prop up failing markets have served not only to lengthen the coming recession, but also to block the recovery. One cannot simultaneously have free and wide-open financial markets and government guarantees to back failures, which economists recognize as a moral hazard.

The government's idea (and too many people are buying into this nonsense) is that if it can prop up the failing markets (like housing) and every brokerage house and fund that was fueled by mortgage securities, then somehow, the crisis will pass and the economy will recover. Those holding to Austrian theory, however, know better.

First, and most important, there is a reason the housing market has tanked; the boom was not sustainable. People with middle-income jobs could not reach into their pockets and continue to make payments for houses that had sold at multimillionaire prices. The malinvestments (a distinctive Austrian term) were too massive and the economic fundamentals (there is that word again) simply did not match the go-go housing market.

Second, to prop up the unhealthy, malinvested markets, governments must cannibalize the healthy markets in order to find the needed cash to transfer the wealth. Thus, over time, not only do sick markets fail to recover, but formerly healthy ones also fall into trouble, which is exactly what happened from 1930–1933.

Thus, we move into that territory where Krugman fails to tread: inflation. The Fed has attempted to perform its so-called "bailout magic" by monetary creation, known to the ancients as inflation, which is defined not by rising commodity prices per se, but rather by the unwarranted creation of new money.

Ultimately, why are oil prices rising madly? Certainly, there are supply fundamentals that play a role, but the quick decline of the dollar is mostly to blame. The tipoff has been the subsequent rise of all other commodities, which generally tends to happen in the last stages of inflation. (The earlier stages tend to be concentrated in specific financial markets before moving to commodities and consumer goods, as we are seeing now.)

Krugman, to his credit, has opposed the Iraq war from the beginning, but he also believes that it has been a boon to the economy. (All true Keynesians believe war is good for the economy, although they believe that "massive public works" are even better.) Austrians, however, recognize that the huge federal budget deficits are largely caused by the war and are financed with government paper that will surely lose large amounts of its value soon enough.

(At least the Clinton administration was able to target the stock market, so the wave of sales also meant a spike in capital-gains-tax revenues, which played a major role in balancing the federal budget. Housing sales, however, do not provide the same high-tax returns, which meant that while there was a huge amount of financial activity, the tax proceeds from this bubble were not as high as they were during the Clinton bubble.)

So, can we blame Bush for what is currently happening and what will surely happen in the next year? Absolutely, and we can do it with great relish and authority.

Nonetheless, if we are going to criticize this president, one hopes that we do not fall to the Big Lie that George W. Bush believed in those free markets that utterly failed him and the country. Krugman seems to have done so, and judging from what we hear from Congress and the media, it seems that the loudest voices in this crisis are also the voices that are just plain wrong.

By Richard C. Cook

Global Research, April 30, 2008

Much has been written about whether a worldwide plan exists to control events and steer them in the direction profitable to an elite of the rich and powerful. Is this a “conspiracy theory”? While it is difficult to be specific about who exactly may be behind such a conspiracy, if it exists, it is at least clear that the privately-managed system of global financial capitalism gives ample opportunity for the world’s richest people to combine for their mutual benefit. Further, global financial capitalism itself is based on the monopolization of money-creation by a world banking system that is largely privately owned, even while working through the central banks of the largest and most prosperous nations. This article postulates the existence of a coordinated and longstanding matrix set up by the controllers of money to dominate the movements of history. The article focuses particularly on what seems to have been an attack that has been going on for over a century against the independence of the nations of Russia and the U.S. The article also suggests a series of monetary reforms whereby the U.S. , or any other nation, can regain its economic identity and preserve its political freedom. The article was written a short distance from the reconstructed colonial capitol building in Williamsburg , VA. On this site on May 15, 1776, the Fifth Virginia Convention voted unanimously to instruct its delegation at the Second Continental Congress in Philadelphia to enter a motion for independence. It may be time to do that again. Russian philosopher P.D. Ouspensky (1878-1947) wrote, “It is a mistake to think the times we are living in are like any other. These are extraordinary times.” Ouspensky, with his mentor, G.I. Gurdjieff, escaped from Russia after the Bolshevik Revolution, during the Russian Civil War. Though academia has failed to acknowledge it, this epochal convulsion was financed in part through the monetary resources of the international financial elite operating out of London, Amsterdam, New York, Paris, Hamburg, and Frankfurt. It was this elite, acting through Western banks, which appears to have surreptitiously provided the wherewithal for Lenin and Trotsky to destroy the Russian nation after the fall of the Tsarist regime at the end of World War I. Support by the Western financiers is discussed by Dr. Matthew Raphael Johnson in his revisionist history, The Third Rome: Holy Russia, Tsarism & Orthodoxy. (The Foundation for Economic Liberty , Washington , D.C., 2003) The present analysis postulates that the takeover of Russia, whose backbone was the alliance among the House of Romanoff, the Orthodox Church, the land-owing nobility, and thousands of self-governing peasant communes, was one of two major projects which the financiers set out to accomplish early in the 20th century in a longer-range plan to dominate the globe. The other was the control and eventual destruction of the United States of America. That project may be reaching fruition through the ongoing and seemingly purposeful financial meltdown of 2008. Why Russia and the U.S. ? Events affecting nations have their roots in history, and people underestimate how what happens today is conditioned by the past. The respective fates of Russia and the U.S. have been linked for a long time. The two countries had a close relationship during the American Civil War, when the Russian fleet anchored in New York and San Francisco harbors. In 1867, Russia sold the huge expanse of Alaska to the U.S. Later, the U.S. provided engineering support for Russian industrial development. The two continental giants were, during the latter part of the 19th century, becoming the greatest land powers in the world. With Germany , Great Britain ’s chief rival for economic might, added to the mix, the hegemony of the financiers’ power base in Britain and northern Europe was threatened in a way not seen since Napoleon. Both Russia and the U.S. were largely Christian nations, with a sizeable portion of the American population, especially recent immigrants, being members of the Roman Catholic faith. For centuries nothing had been a greater obstacle to the financial control of nations through war and finance than the Christian religion and its teachings against usury. Plus neither the U.S. nor Russia had a central privately-owned bank. The U.S. had long since gotten rid of its own central banks, the First (1791-1811) and Second (1816-1836) Banks of the United States . The whole concept of commercial banking having control of a nation’s economy was alien to the Russian and U.S. mindset. Instead, wealth came from work. This was expressed by President Abraham Lincoln in a December 3, 1861, address to Congress when he said, “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Lincoln could make such a statement because the U.S. economy, as was the Russian, was deeply rooted in the soil. The backbone of the two cultures was the Russian peasant and the American yeoman farmer, as Thomas Jefferson called him. The merchant and artisan economies of the towns and cities in both nations were founded upon the wealth of the countryside which was derived from human and animal labor and from working the land. Even when industrialization began to flourish in the latter part of the 19th century, it was fueled in both countries largely through savings and retained earnings, not bank credit created “out of thin air” through fractional reserve lending. Banker Domination By the early 20th century, the bankers of Europe had a mission before them. If Russia and the U.S. could be controlled, nothing would stand in the way of the rule of humanity by the materialistic pseudo-religion of power and wealth by which the financiers were obsessed. As Max Weber (1864-1920) wrote in The Protestant Ethic and the Spirit of Capitalism, the acquisition of wealth was viewed as a sign that a person was one of the “elect.” The financiers’ sphere of influence was centered in northern Europe , where the anti-usury doctrines both of the Roman Catholic Church and Martin Luther (1483-1546) had been undermined through the teachings of John Calvin (1509-1564). As is well known, banking in Europe began in the medieval period with store-front gold merchants who invented fractional reserve banking by lending certificates against a gold reserve held for their customers on deposit. By the time of the Renaissance, banking was centered in Italy and Germany , then spread north and west to the Netherlands , France , and England . By this time the Catholic prohibition against usury was well-developed. Pope Sixtus V (1585-90) said charging of interest was “detestable to God and man, damned by the sacred canons and contrary to Christian charity.” Theological historian John Noonan wrote that “the doctrine [of usury] was enunciated by popes, expressed by three ecumenical councils, proclaimed by bishops, and taught unanimously by theologians.” (“Development of Moral Doctrine,” 54 Theological Studies, 662, 1993) Lending of money at interest was often left to the European Jews, where statements in various scriptures, such as the Talmud, appeared to allow the practice when dealing with non-Jews. Some argue that the Vatican worked behind the scenes by using Jews as fronts for their own lending operations. In England , the Tudor and Stuart monarchs made a stand against the rise of bankers as issuers of currency. As Susan Boskey writes in her book The Quality Life Plan: 7 Steps to Uncommon Financial Security, “the Mixt Moneys Case of 1604 in England determined money as a public measure to be regulated by the state.” According to Alexander Del Mar, head of the U.S. Department of Weights and Measures in the late 19th century and author of the book, History of Money in America From the Earliest Times to the Establishment of the Constitution, the Mixt Moneys Case determined that “the state alone had the right to issue money.” Boskey continues: “For over half a century, this ruling alarmed the merchants of London who attempted to defeat the Mixt Moneys decision. The East India Company was the main instigator in the effort, because they were eager to turn a profit by shipping silver to India in exchange for gold. Success was achieved with the British Free Coinage Act of 1666, which, according to Del Mar, ‘altered the monetary systems of the world.’ He wrote: ‘The specific effects of this law were to destroy the royal prerogative of coinage, nullify the decision in the Mixt Moneys case, and inaugurate a future series of commercial panics and disasters which to that time were totally unknown.’ Moneylenders known as ‘strong room keepers’ began the practice of making interest-bearing loans that were not backed one-hundred percent by the gold reserves remaining in their strong room.” “The British Free Coinage Act of 1666,” continues Boskey, “marked a turning point in the role of currency creation as a public measure to one dominated by moneylenders. No longer was the act of putting money into circulation directly connected to the actual, existing material riches of a nation.” About this time, Samuel Pepys (1633-1703) was writing his now-famous Diary. According to Canadian monetary expert Martin Hattersley, Pepys “was describing in surprised delight the new institution of banking, by which the smart investor, instead of paying the goldsmith for warehousing his valuables, opened an account, and was actually paid interest for having his money looked after!” Pepys was captivated by the familiar but pernicious notion that, instead of working for a living, a person could have his money “work for him.” Aristotle had spoken against this concept 2,000 years earlier: “The most hated sort of wealth getting and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange but not to increase at interest. And this term interest, which means the birth of money from money is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth, this is the most unnatural.” (1258b Politics) Hattersley continues: “Who paid for Samuel Pepys' remarkable new service? Basically, the public did. Pepys, leaving his gold with the banker, enabled the latter to lend it out to a third party. Pepys had his ‘money in the bank,’ and the borrower took the gold. The borrower naturally paid interest on the loan. Pepys received interest on his deposit. The same money being (notionally) in the possession both of Pepys and of the borrower meant an increase in the monetary mass of the nation. All the holders of money in the nation, therefore, had the value of their holdings very slightly diluted. There was a profit to the banker on the ‘spread’ between borrowing and lending rates. There was a profit to Mr. Pepys, who at one and the same moment had both money in the bank and an interest bearing investment. Yet the borrower also profited. His loan would be at a lower interest rate than that on capital that had had to be saved up. ‘Smart’ bank financing put him ahead of conventionally financed competitors. All three parties gained, at the expense of the general public, the value of whose money was diluted through inflation of the monetary mass.” Finally, concludes Hattersley, “Skipping forward three centuries (past events such as the South Sea Bubble, tulip mania, the railway boom and the 1929 market crash) we find that the little spot of inflation that Mr. Pepys indulged in has become a universal way of life. The extensive capital development of Canada [and the U.S. ] in the post-World War II boom has been largely financed, not by personal savings and investment, but by the inflation of the money supply. This has left the thrifty who invested their little savings from the hard times of the Great Depression in mortgages, bonds, and life insurance deprived of most of the rewards of their thrift, and has caused the profits of inflation to benefit all who could borrow, build, and then repay their capital in deflated dollars later on.” Hattersley captures the essence of the modern usury-based economy. No longer is life based on honest human labor and the resources of nature, but on financial manipulation. This is why religious people have always viewed usury as a crime. Aristotle placed the usurer in the same category as others who “ply sordid trades,” such as pimps. Returning to the march of history, in 1688, James II, who had become a Catholic, fled the British throne. Through the “Glorious Revolution,” he was replaced by the Protestants William and Mary of the Dutch House of Orange. The main instrument of power of the financiers who supported them was the Bank of England, founded in 1694. The next two centuries saw the financiers’ control of world commerce spread through the instrumentality of the British Empire . The bedrock of British policy was “free trade,” which allowed British manufacturers who paid their workers a pittance to undersell their competitors elsewhere. This was aided by having the British pound become the world’s trading currency. With the First Zionist Congress of 1897, one of the financiers’ geopolitical goals became to support the creation of the nation of Israel , at least partly to dominate the world’s crossroads in the oil-rich Middle East . The oil was needed to fuel the British navy. The nature and origins of Zionism have been hotly debated in recent years, as the role of Israel on the world stage has grown. One thing seems certain: The Jewish religion is by no means monolithic. But its followers, many of whom opposed the philosophy of Zionism, would now be drawn into the financiers’ power game. From this point on, anyone who even questioned Zionism would be labeled “anti-Semitic.” As the 20th century advanced, the financier elite became heavily involved in getting rich off world war and the manufacture of the new weapons of mass destruction that modern technology made possible. Warfare and weaponry, combined with control of credit manufactured through the leveraging of industrial production, were to be the primary means of putting nations and their populations into debt. A materialistic slave society was being created, which books like 1984 warned against. Humanity was lured into compliance through the fantasy world brought about by the mass media by means of advertising, cinema, and television. Another enticement was the growing availability of mass-produced consumer goods. How It Was Done While World War I and the Russian Revolution still lay a few years in the future, the international financiers quietly took control of the U.S. economic system in 1913 through the Federal Reserve Act and the 16th Amendment to the Constitution which provided for the federal income tax. The purpose of this tax was to use citizens’ earnings to pay the interest on the “funded” national debt. As with the debt owed by the British people to the Bank of England, this would be one so large the principle could never be paid off. Russia was allied with Britain and France during World War I (1914-18). But the war against Germany and Austria-Hungary had reached a stalemate until the tide was turned by entry of the U.S. on the side of the Allies. Fighting on the eastern front between Germany and Russia was savage. By the end of the war the Russian Revolution broke out, and, after a terrible Civil War, the Soviet Union came into being. It was the financier-controlled press which goaded President Woodrow Wilson into taking the nation into World War I on the side of England and France. But it was also part of the financiers’ plan to shift the apparent focal point of their financial power from London to New York . This was done through the financing of the war by loans made to the European combatants by the New York banks. It seemed to be in accord with a plan spelled out decades earlier by Cecil Rhodes, whereby the U.S. would not only be “recovered” for the British Empire, but would appear to become the senior partner in the enterprise. By the start of the 1920s, this objective had been accomplished. German, English, French, and other European taxpayers were all deeply in debt to the U.S. banks for the costs of the war. Also during the war years the financiers had secured the issuance of the Balfour Declaration signaling British support for the establishment of a Zionist state in Palestine. The 1917 Declaration was made in a letter from Arthur James Balfour, British Foreign Secretary, to Walter Rothschild, Second Baron Rothschild, for transmission to the Zionist Federation. During and after World War I, world financial power shifted to the New York banks through which, however, it would be the London-based elite exerting de facto control. It might also be said that starting with U.S. entry into World War I, once you look past the patriotic slogans, the U.S., its vast productivity, and the blood of its population have been used in making this country the worldwide military enforcer of international financier domination. World War II became the means of consolidating financier control. Prior to that, during the years of the Great Depression, both Russia —aka the Soviet Union—and the U.S. were slipping away from the fold. Stalin had shown his “Bonapartist” tendencies by favoring “Socialism in one country,” as well as by his deadly purges of the financier-controlled Trotskyite faction and his shocking rapprochement with Hitler in 1939 that seemed to foil the financiers’ intent to play off Nazi Germany and the Soviets against each other. In the U.S., President Franklin Roosevelt had taken steps during the Great Depression to rebuild the U.S. economy by exerting an unaccustomed degree of control over the Federal Reserve System and providing credit at low rates of interest to homeowners, farmers, and businessmen. This made Roosevelt seem to many wealthy Americans “a traitor to his class.” Roosevelt saw that a healthy and self-sustaining domestic economy is essential for the well-being of a sovereign nation. But instead of looking for ways to create a monetary system based on the productivity of the economy, as Lincoln had done with the Greenbacks during the Civil War, Roosevelt left intact the debt-based system overseen by the Federal Reserve. He added to this system the Keynesian idea of government deficit spending for public works to create employment. This was essentially a system whereby government would try to pay its debts by engendering inflation, a policy that has continued until today. But World War II thwarted even these stirrings of nationalism in both countries. In both the Soviet Union and the U.S. , the financiers worked the levers of debt to build massive war machines. They were also working through the Western banks, including Brown Brothers Harriman in New York, to achieve the same ends in Nazi Germany. Eventually Hitler invaded the Soviet Union, and the U.S. entered the war. Both during and after the war, operatives from the international financial elite centered in London were the linchpins of a worldwide matrix of spying, assassination, terrorism, industrial espionage, psy ops, media manipulation, and monetary control. This included financing the founding of Israel as the Western bridgehead in the Middle East in 1948. Despite the creation of an appearance of conflict between the West and the Soviet Union through the Cold War, the financiers continued to work both sides of the fence through their London-based operatives. In the U.S. they created the modern national security state with both the National Security Agency and the CIA firmly under their control. Then, after President John F. Kennedy moved to forestall the neocolonialist Vietnam conflict and replace the Federal Reserve with a U.S. system of silver-backed Treasury currency, he was shot dead in Dallas ’s Dealey Plaza on November 22, 1963. In charge of convincing the public that the Warren Commission was correct in concluding that Kennedy was killed by Lee Harvey Oswald, supposedly a lone deranged gunman, were figures associated with the financier elite from the New York Times, Washington Post, and Yale Law School . (See The Kennedy Assassination Cover-Up Revisited by Donald Gibson, 2005.) But in 1979, a report of the House Select Committee on Assassinations stated that Kennedy was killed by a “probable conspiracy.” It has been thoroughly documented that since World War II the Western intelligence agencies, all with close ties to the financial world, particularly the New York and London investment banks, have been responsible for engendering wars, revolutions, and mayhem in countries around the world, causing the deaths of millions of people in Asia, Africa, Latin America, and southeastern Europe. Meanwhile, the worldwide arms industry, also under financier control, have produced the greatest arsenal of weapons of mass destruction ever seen. After Kennedy was killed, the U.S. moved to arm Israel as the leading military power of the region. Today nuclear weapons have proliferated, with Israel , Pakistan , and India becoming nuclear powers in addition to the U.S. , Russia , Britain , China , and France . But warfare and weapons cost money, and by the late 1960s the Vietnam War was sinking the U.S. deeper into debt. The U.S. war machine was to be the main tool for financier enforcement of their worldwide plan of domination, but the nation was going broke. The problem was made worse by heavy federal expenditures for the poor and elderly through such programs as Medicare and Medicaid. But President Richard Nixon’s Secretary of State Henry Kissinger had a plan. The government worked out an arrangement whereby Saudi Arabia and the other OPEC nations would gradually increase the price of oil, with the profits to be used by the oil-producing nations to buy U.S. Treasury debt securities. By 1980 the cost of oil would be ratcheted up from about $3.50 a barrel to $39.50. The drastic increase of the price of gasoline at the pump acted as a de facto tax on the U.S. economy. But the plan worked. The “petrodollar” and “dollar hegemony” were born, with the dollar becoming the world’s reserve currency. Dollars could flood the world only because in 1971 the Nixon administration had abandoned the dollar’s gold peg as a basis for international currency exchange. Now currencies floated freely in world markets with speculation and inflation rampant. The economies of the world were no longer based on production, but on financial manipulation. It was also the start of the era of monetarism, where the Federal Reserve thought it could regulate the economy by the raising and lowering of interest rates. The Kissinger plan also made the U.S. dependent on Middle Eastern oil and turned it into the muscle behind the financiers’ ambition for Israel to dominate the region. So now Americans, who had liberated Europe from the Nazis, had to fight and die for the financiers in the Middle East . The final conquest of Iraq , starting in 2003, and the planned war against Iran are the latest phases. Meanwhile, through the financiers’ control of the U.S. Federal Reserve System, the producing economy was shattered through the Fed-induced recession of 1979-83, where interest rates were raised to the highest in history to combat the inflation the financiers had themselves caused by the oil price shocks. By this time, as some allege, the controversial concept of “peak oil”—whether it really existed or not—was being used as a cover for financier manipulation of oil markets by limiting production in order to maintain prices. By 1992, when Bill Clinton was elected president, the U.S. producing economy had been devastated by the shutdown of factories and the export of jobs. The work of wrecking the economy was completed by Clinton ’s embrace of NAFTA, which has largely eliminated family farming in favor of financier-controlled agribusiness in the U.S. , Canada , and Mexico . Deregulation of the financial industry began in earnest during the Reagan years from 1981-89 and accelerated under Clinton . By this time, the U.S. economy was being kept afloat only through financial bubbles that allowed the purchase of consumer goods to take place through more family and household debt. We had the merger-acquisition bubble of the 1980s, followed by the George H.W. Bush recession which led to Clinton ’s election in 1992. During the 1990s we had the dot.com bubble fueled by foreign investment. Capital gains taxes on stock price inflation and counting trust funds like Social Security as budgetary assets allowed Clinton to balance the federal budget the last three years of his presidency. But the dot.com bubble also burst with the loss of $7 trillion of wealth through the crash of 2000-2001. Next came the Bush bubbles—in housing, equity funds, commercial real estate, and hedge funds that have been deflating while threatening to destroy altogether the economic viability of what was once the world’s greatest industrial democracy. After this, the only bubble left for an economy that appears to be entering terminal depression may be the current fuel/food bubble that could result in the starvation of millions worldwide. Now the longstanding ambition of the financier elite for the destruction of the American republic may finally be realized—with a lot of help, of course, from their American friends. “End Times” Can it be that the last stage of the U.S. takedown is “The Project for the New American Century”? Is this ambitious plan for “global leadership” through military might that was seemingly invented by the “neocons”—many with dual U.S.-Israeli citizenship—a Trojan Horse? It certainly appears that with 9/11 as a pretext, the neocons suckered the U.S. into the invasions of Afghanistan and Iraq as a means of military occupation of the Middle East . Certainly 9/11 and the Iraq invasion benefited Israel, as some Israeli politicians have frankly stated. Were the neocons also acting on behalf of the financial controllers in London and elsewhere? And was one reason the neocons were so eager to engage in a “clash of civilizations” against the Islamic world the Koranic prohibition of usury which states, “Those who charge Usury are in the same position as those controlled by the devil's influence. This is because they claim that Usury is the same as commerce. However, God permits commerce, and prohibits Usury.” (Koran, Al-Baqarah 2:275) Prior to 9/11, the Bush administration got Congress to cut taxes for the highest income brackets, reversing Bill Clinton’s budget surpluses. The tax cut remained in effect, even as the massive expenditures on the Middle Eastern wars mounted. The consequence has been to bring the federal government to the brink of bankruptcy. The last official act of this phase could well be the ultimate insanity of a U.S. attack on Iran . If successful, this would complete the Western conquest of the Middle East but may start a larger conflict that could eventually force the U.S. to withdraw its forces once the money runs out. Israel would then be at liberty to sweep in to dominate a region that U.S. military power had devastated. Whatever may happen overseas, the U.S. economy at home is on the verge of collapse. It if does, we will have to retreat to our own shores and face here the edifice of a ruined nation with no manufacturing base, a crumbling infrastructure, an aging population, insufficient food, poorly developed resources, and the collapse of the dollar. Of course the prophets of doom who claim that overpopulation must inevitably lead to Malthusian scarcity will take all this as justification of their prejudices. The rumored North American Union, with its currency the amero, could then follow, both under the control of the financiers. Meanwhile in Russia, things took a surprising turn when the Russian people threw out their communist controllers in 1991 and established a Russian republic. The financiers immediately took over through the government of Boris Yeltsin and began to divide up the nation’s resources through their local allies, the “oligarchs.” But the Russian people refused to comply. Despite desperate poverty, they elected Vladimir Putin, a nationalist leader who moved quickly to establish a self-governing Russian state that the financiers and the Western press clearly intend to take down. Russia is now back on the world scene, and a revival of the Orthodox Church is taking place. The drama in that country has not been entirely played out it seems. As far as the U.S. is concerned, the financiers will have used us for a century, then thrown us in the trash. The U.S. may well be replaced by China, which the financiers seem to be grooming as the world’s next military enforcer. China has the advantage of an absolutist one-party system which has achieved remarkable success in terrorizing its huge population into obedience and passivity. The financiers would not hesitate to sacrifice hordes of Chinese to fight both Russia and what may remain of the U.S. By this time, the European Union will likely have its own unified nuclear deterrent to protect the financial centers. The time may come when there will be Chinese bases in the U.S. as occupiers/military police. The wisest and safest course for U.S. foreign policy could be a new alliance with Russia that would rekindle our affinity with that nation from over a century ago. But how likely is this in a world ruled by the financiers where the destruction of the two nations is a long-term goal? One of the tools of financier domination in the meantime will likely be worldwide famine engineered by artificial shortages. This has already started and may cause hundreds of millions of people to die and their resources to be seized. The smokescreens for this will not only be peak oil but also global warming as a means of dealing with the world’s “surplus eaters.” Numerous non-profits and NGOs are greasing the skids with their insistent lobbying against even responsible economic development. Now in the U.S. we will likely see riots, panic, martial law, plagues, epidemics, and prison camps, much of which has already begun with police crackdowns, anti-terrorist exercises, declining public health, erosion of civil liberties, and the world’s largest prison population. It is likely that the “American Century” is over and that the “New American Century” will really be the “No American Century.” Outside of select pockets of prosperity around financial centers, resorts, and military installations, the U.S. is being destroyed. As an example, the residents of once-prosperous towns in Michigan have turned to the illegal manufacture of meth-amphetamine now that the jobs are gone. We have been used and abused, though often suckered into it by our own stupidity and greed. We have allowed ourselves to serve the will of an alien force—the world’s financial elite. Our payback now appears to be a looming national catastrophe. Economic Restructuring Economically, what is left of America must be rebuilt from the ground up. The flaw is not in the productivity of nature, the availability of resources, our ingenuity, nor our ability to work. The flaw has been in the capitalist financial system. We must now rebuild three things: American family farming, since a nation that cannot feed itself cannot long exist; then infrastructure and manufacturing, which will require energy conservation and redevelopment of our energy resources; then income security tied to productivity but not always to employment—a basic guaranteed income for all. The best available treatment of the history and benefits of a guaranteed income may be found in Steven Shafarman’s new book, Peaceful, Positive Revolution, Tendril Press, 2008. The concept of a guaranteed income as a benefit of a modern industrial economy has been around for a long time. But it is often confused with job-creation. As indicated earlier, during the 1930s, British economist John Maynard Keynes came up with the idea of using government deficits to try to out-run unemployment through government-controlled pump priming. But in the long run his methods were doomed to fail as debt-based economic growth eventually reached its limits due to inflation. This is where we are today, with President George W. Bush now the largest deficit spender in history. The most successful attempt to define a rationale for an honest and democratic monetary system, one based on human labor and not financial chicanery, was the Social Credit movement founded by British engineer C.H. Douglas (1879-1952). He first set forth his ideas in his book Economic Democracy in 1918 and continued to teach his system for the next thirty years, attracting a considerable following in Great Britain , Canada , New Zealand , and Australia . Douglas explained the dynamic whereby the incredible productivity of modern technology can readily be harnessed to provide the material sustenance for all members of society, but fails to do so because there is a chronic shortage of purchasing power from the cumulative societal income realized through wages, salaries, and dividends. The main reasons income cannot keep pace with prices is that the latter include retained earnings for savings and reinvestment, along with depreciation of capital—i.e., the tools and facilities of production. But the “gap” between prices and earnings (what Keynes was to call “aggregate demand”) was viewed by Douglas as a benefit of a modern industrial economy rather than the curse which in the Depression was causing farmers to dump their milk in the fields because consumers lacked the money to purchase it. Douglas saw this gap as the natural appreciation of the potential producing economy to which everyone in society was entitled as monetized shares. He said this appreciation should manifest in regular payments of a National Dividend by government from a calculated credit account not dependent on taxation or government borrowing. The National Dividend could be paid by a combination of regular stipends to citizens and/or through a system of price subsidies. And it would be non-inflationary. Douglas went further by explaining that in real life the price-income gap was in fact filled—nature abhors a vacuum—but by bank lending at usury. This was why the banks got richer, while everyone else struggled just to survive. Banks also use their credit creating ability to acquire securities, such as Treasury bonds, with the government paying interest that is compounded because the debt is constantly being re-financed. Interest on the U.S. national debt is expected to exceed $500 billion in fiscal year 2009. To pay it, many social programs will be cut. The technical explanation is provided by Canadian Social Credit expert Wallace Klinck, “Expanding interest charges being paid on exponentially compounding debt accumulates due to an industrial cost accountancy error related to allocating capital charges in retail prices which do not distribute equal incomes within the same production cycle. The growing disparity between prices and incomes is progressively worsened by the replacement of human labor by capital (technology).” Under the current system, the banks steal the fruits of economic wealth which properly belong to the public as a whole, both workers and non-workers, and while the financiers were well aware of Douglas ’s system, they hated it. Word went out in the 1920s that his name was never to be mentioned in the British press. John Maynard Keyes was said to have developed his own deficit-spending theories as a means to counter Douglas ’s influence. And when Douglas visited the U.S. in the late 1930s, he was told to his face that he would never be allowed to introduce his ideas in this country. Next Steps To accomplish a program of real reform will require a strong president but possibly a political revolution to get one. Congressman Ron Paul has made history as the first major presidential candidate to call for the abolishment of the Federal Reserve. He is right. The first thing a president worthy of the name should do is eliminate the Federal Reserve as a bank-of-issue, get rid of our debt-based monetary system, and depose the bankers and Wall Street financiers from the seats of power. Ron Paul is also right that the U.S. should withdraw its military from overseas and stop trying to control the world. What Ron Paul’s candidacy proves is that in the internet age, with financial crises jumping from the headlines every day, and authorities such as Ben Bernanke, chairman of the Federal Reserve, and Secretary of the Treasury Henry Paulson manifestly having no intention of making real changes, the public is ready to listen to new ideas. But even progressive analysts are so locked into outmoded concepts that they fail to realize an entirely new type of monetary system is needed. The basic concept that must be understood, as expressed repeatedly by this author in past articles, is that credit is a power of nature that is part of the human “commons.” Credit allows society to materialize value by drawing from future potential productivity into present actualized reality. Credit therefore should be treated legally as a public utility, like water or electricity. Credit is not a mathematical abstraction that should be manipulated into building pyramids of debt. Such practices are suicidal for an economy. Rather credit is organic, deriving ultimately from human labor (including mental labor, as in the application of technology), along with the sun, the soil, natural resources, and the rain. Thus we have gone full circle to the beginning of this article, where Russia and the U.S. were cited as the two nations that best understood where real wealth comes from. The management of credit may be licensed to responsible private parties who are accountable to public authority, but it should never be given away or “privatized” to individuals or corporations who manipulate it mainly for their own profit, as banks do today. It is the privatization of credit through the banking systems of the world which has loaded humanity with debt, rendered short-term profits the highest priority of all business endeavor, and made modern industrialization as much a curse as a blessing. Note that credit differs in this discussion from the legitimate investment of capital derived from profits or savings whereby an individual risks a portion of his wealth through a contract with a producing entity. Capital markets that facilitate this type of investment fall under the category of commerce, not usury. A national monetary system should reflect the treatment of credit as a public utility and thereby make possible responsible economic activity and the fair distribution of wealth. Some of the measures which should be implemented are contained in the American Monetary Institute’s draft American Monetary Act. (www.monetary.org/) The resulting currency could be issued, not in the form of debt instruments like Federal Reserve Notes, but silver-backed Treasury certificates as in President Kennedy’s program of 1963. Features of a new monetary system could be as follows: A guaranteed income, followed by a National Dividend, should be paid directly to citizens from a Treasury credit account without recourse to either taxation or government borrowing. (C.H. Douglas’s theory of the National Dividend as the monetization of the net appreciation of the productivity of a modern industrial economy is set forth in this author’s Global Research article entitled, “An Emergency Program of Monetary Reform for the United States ,” April 26, 2007.) The National Dividend, currently estimated at over $12,000 per capita annually, could be distributed in a variety of ways, in addition to a subsistence stipend. This could include price subsidies for consumer purchases, taking over existing Social Security payments, universal health insurance, or payments to women with young children. Another way to issue a National Dividend would be to monetize food production, whereby anyone who delivers food products to wholesalers receives a government payment as a producer’s subsidy, thereby discounting food at the consumer point-of-sale. This would work in a similar fashion to farm parity pricing programs of bygone days. As explained by Wallace Klinck, “Social Credit policy is to compensate retail prices at the point-of-sale. It is not, however, to subsidize production which would be subject to consumer choice and fully supported by consumers having at all times financial income adequate to fully liquidate the costs of production. That is, production policy is to be determined essentially by consumers—this being the Social Credit concept of genuine economic democracy with maximum decentralization, or dispersion, of power over production policy. Price controls under the present financial cost-accountancy system, where continued economic activity is dependent upon an inflationary expansion of credit to meet rising costs arising consequent to flawed accountancy, is demonstrably impossible. Price regulation, however, would appear to be both necessary and realistic under a self-liquidating Social Credit system of finance. Although not generally recognized, prices are ‘controlled,’ (or manipulated) under the present system of finance in a most deleterious manner.” The government should also spend money directly into circulation, as it did with Greenbacks in the 19th century, both for operating expenses and for infrastructure projects at the federal, state, and local levels. A national infrastructure bank could be capitalized by state and local infrastructure bonds without any impact on the federal budget. Such spending would again be without recourse to borrowing or taxation. Infrastructure spending could be either through grants or low-interest loans. As with Congressman Dennis Kucinich’s current proposed infrastructure bank legislation, the program could specify that a requisite proportion of funding be spent on American-made products such as steel. We should reform banking by eliminating the catastrophic privately-controlled fractional reserve system. Instead, the government should lend money at a low rate of interest to banks, then use the proceeds to help pay for legitimate government expenditures in the areas of regulation or services. Use of the proceeds, combined with the new Greenbacks and savings from no longer having to pay interest on an unnecessary national debt, would eliminate the need for the federal income tax, allowing the 16th Amendment to be repealed. In fact, under a monetary system such as the one described herein, probably three-fourths or more of the current societal tax burden could be eliminated. In order to clear the way for these reforms, bankruptcy reorganization of the entire $50 trillion of existing debt in the U.S. should be undertaken, with debt being restructured and paid down over time or simply written off. Bank lending for speculation, such as for mergers and acquisitions, equity and hedge fund speculation, and purchase of securities on margin has been explosively enabled through bankers’ ability to move massive amounts of funds electronically. These leveraging practices should be outlawed, as they are abuses of the public interest. (According to the London Times, one John Paulson made $3.7 billion in hedge fund trading last year. “Mr. Paulson’s firm, Paulson & Co, made a fortune from shorting America ’s sub-prime mortgage markets.”) A national fuel conservation program with real teeth should also be instituted. And at least half of the U.S. military budget should be eliminated, with half of the remainder devoted to energy R&D and domestic public works. Employees of the military-industrial complex will find many new career opportunities as the domestic economy revives. As these measures are taken, the United States will no longer be dancing to the financiers’ tune. We would be helping prepare a future where man’s inhumanity to man as expressed through war and financial exploitation is no longer glorified. Such a future would be a milestone in the eventual enlightenment of the human race. But these are measures that must be implemented now, before it is too late. While we await these epochal changes, more modest steps may be in order. The author is often asked for personal financial advice. His advice is to invest in yourself and in other people. Plant a robust home garden. Learn new skills. Start community food co-ops that buy local products. Establish local currencies and barter networks. Join or form a union. Raise bees. Put kids through school. Get out of debt. Pray and meditate. Become politically active. Demand change. Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites. His book on monetary reform is entitled We Hold These Truths: The Promise of Monetary Reform and will be published this autumn by Tendril Press. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years.” His website is at www.richardccook.com. Questions, comments, or contributions may be directed to economicsanity@gmail.com .

Congressional Record — US House of Representatives July 9, 2002

It is now commonplace and politically correct to blame what is referred to as the excesses of capitalism for the economic problems we face, and especially for the Wall Street fraud that dominates the business news. Politicians are having a field day with demagoguing the issue while, of course, failing to address the fraud and deceit found in the budgetary shenanigans of the federal government — for which they are directly responsible. Instead, it gives the Keynesian crowd that runs the show a chance to attack free markets and ignore the issue of sound money.

So once again we hear the chant: "Capitalism has failed; we need more government controls over the entire financial market." No one asks why the billions that have been spent and thousands of pages of regulations that have been written since the last major attack on capitalism in the 1930s didn't prevent the fraud and deception of Enron, WorldCom, and Global Crossings. That failure surely couldn't have come from a dearth of regulations.

What is distinctively absent is any mention that all financial bubbles are saturated with excesses in hype, speculation, debt, greed, fraud, gross errors in investment judgment, carelessness on the part of analysts and investors, huge paper profits, conviction that a new era economy has arrived and, above all else, pie-in-the-sky expectations.

When the bubble is inflating, there are no complaints. When it bursts, the blame game begins. This is especially true in the age of victimization, and is done on a grand scale. It quickly becomes a philosophic, partisan, class, generational, and even a racial issue. While avoiding the real cause, all the finger pointing makes it difficult to resolve the crisis and further undermines the principles upon which freedom and prosperity rest.

Nixon was right — once — when he declared "We're all Keynesians now." All of Washington is in sync in declaring that too much capitalism has brought us to where we are today. The only decision now before the central planners in Washington is whose special interests will continue to benefit from the coming pretense at reform. The various special interests will be lobbying heavily like the Wall Street investors, the corporations, the military-industrial complex, the banks, the workers, the unions, the farmers, the politicians, and everybody else.

But what is not discussed is the actual cause and perpetration of the excesses now unraveling at a frantic pace. This same response occurred in the 1930s in the United States as our policy makers responded to the very similar excesses that developed and collapsed in 1929. Because of the failure to understand the problem then, the depression was prolonged. These mistakes allowed our current problems to develop to a much greater degree. Consider the failure to come to grips with the cause of the 1980s bubble, as Japan's economy continues to linger at no-growth and recession level, with their stock market at approximately one-fourth of its peak 13 years ago. If we're not careful — and so far we've not been — we will make the same errors that will prevent the correction needed before economic growth can be resumed.

In the 1930s, it was quite popular to condemn the greed of capitalism, the gold standard, lack of regulation, and a lack government insurance on bank deposits for the disaster. Businessmen became the scapegoat. Changes were made as a result, and the welfare/warfare state was institutionalized. Easy credit became the holy grail of monetary policy, especially under Alan Greenspan, "the ultimate Maestro." Today, despite the presumed protection from these government programs built into the system, we find ourselves in a bigger mess than ever before. The bubble is bigger, the boom lasted longer, and the gold price has been deliberately undermined as an economic signal. Monetary inflation continues at a rate never seen before in a frantic effort to prop up stock prices and continue the housing bubble, while avoiding the consequences that inevitably come from easy credit. This is all done because we are unwilling to acknowledge that current policy is only setting the stage for a huge drop in the value of the dollar. Everyone fears it, but no one wants to deal with it.

Ignorance, as well as disapproval for the natural restraints placed on market excesses that capitalism and sound markets impose, cause our present leaders to reject capitalism and blame it for all the problems we face. If this fallacy is not corrected and capitalism is even further undermined, the prosperity that the free market generates will be destroyed.

Corruption and fraud in the accounting practices of many companies are coming to light. There are those who would have us believe this is an integral part of free-market capitalism. If we did have free-market capitalism, there would be no guarantees that some fraud wouldn't occur. When it did, it would then be dealt with by local law-enforcement authority and not by the politicians in Congress, who had their chance to "prevent" such problems but chose instead to politicize the issue, while using the opportunity to promote more useless Keynesian regulations.

Capitalism should not be condemned, since we haven't had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It's not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military-industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!

To condemn free-market capitalism because of anything going on today makes no sense. There is no evidence that capitalism exists today. We are deeply involved in an interventionist-planned economy that allows major benefits to accrue to the politically connected of both political parties. One may condemn the fraud and the current system, but it must be called by its proper names — Keynesian inflationism, interventionism, and corporatism.

What is not discussed is that the current crop of bankruptcies reveals that the blatant distortions and lies emanating from years of speculative orgy were predictable.

First, Congress should be investigating the federal government's fraud and deception in accounting, especially in reporting future obligations such as Social Security, and how the monetary system destroys wealth. Those problems are bigger than anything in the corporate world and are the responsibility of Congress. Besides, it's the standard set by the government and the monetary system it operates that are major contributing causes to all that's wrong on Wall Street today. Where fraud does exist, it's a state rather than a federal matter, and state authorities can enforce these laws without any help from Congress.

Second, we do know why financial bubbles occur, and we know from history that they are routinely associated with speculation, excessive debt, wild promises, greed, lying, and cheating. These problems were described by quite a few observers as the problems were developing throughout the 1990s, but the warnings were ignored for one reason. Everybody was making a killing and no one cared, and those who were reminded of history were reassured by the Fed chairman that "this time" a new economic era had arrived and not to worry. Productivity increases, it was said, could explain it all.

But now we know that's just not so. Speculative bubbles and all that we've been witnessing are a consequence of huge amounts of easy credit, created out of thin air by the Federal Reserve. We've had essentially no savings, which is one of the most significant driving forces in capitalism. The illusion created by low interest rates perpetuates the bubble and all the bad stuff that goes along with it. And that's not a fault of capitalism. We are dealing with a system of inflationism and interventionism that always produces a bubble economy that must end badly.

So far the assessment made by the administration, Congress, and the Fed bodes badly for our economic future. All they offer is more of the same, which can't possibly help. All it will do is drive us closer to national bankruptcy, a sharply lower dollar, and a lower standard of living for most Americans, as well as less freedom for everyone.

This is a bad scenario that need not happen. But preserving our system is impossible if the critics are allowed to blame capitalism and sound monetary policy is rejected. More spending, more debt, more easy credit, more distortion of interest rates, more regulations on everything, and more foreign meddling will soon force us into the very uncomfortable position of deciding the fate of our entire political system.

If we were to choose freedom and capitalism, we would restore our dollar to a commodity or a gold standard. Federal spending would be reduced, income taxes would be lowered, and no taxes would be levied upon savings, dividends, and capital gains. Regulations would be reduced, special-interest subsidies would be stopped, and no protectionist measures would be permitted. Our foreign policy would change, and we would bring our troops home.

We cannot depend on government to restore trust to the markets; only trustworthy people can do that. Actually, the lack of trust in Wall Street executives is healthy because it is deserved and prompts caution. The same lack of trust in politicians, the budgetary process, and the monetary system would serve as a healthy incentive for the reform in government we need.

Markets regulate better than governments can. Depending on government regulations to protect us significantly contributes to the bubble mentality.

These moves would produce the climate for releasing the creative energy necessary to simply serve consumers, which is what capitalism is all about. The system that inevitably breeds the corporate-government cronyism that created our current ongoing disaster would end.

Capitalism didn't give us this crisis of confidence now existing in the corporate world. The lack of free markets and sound money did. Congress does have a role to play, but it's not proactive. Congress's job is to get out of the way.

-Dr. Ron Paul is a Republican member of Congress from Texas and a 2008 US presidential candidate.

Why I Am a Ron Paul Libertarian

by Stan Warford

I was born and raised a liberal Democrat. My grandmother, who lived through the Depression, thought that Franklin Roosevelt was the savior of the United States. My father, who was a farmer, explained to me why it was a good policy for the government to pay farmers to not grow crops. For years I thought that gun control laws were necessary to curb violent behavior. At one time I believed that minimum wage laws were compassionate. I used to defend our government in its foreign interventions, especially those based on humanitarian grounds.

But, during the past twelve years, I have rejected many political beliefs taught to me by my family and my schools. I now believe that our country is in serious trouble that only libertarian principles can alleviate.

Furthermore, these problems have a direct effect on your future.

When you graduate, you will look for a job. What if you cannot find one because the economy is in a recession or even a depression?

Your salary will be paid in dollars. What will those dollars be worth after the Federal Reserve decreases their value with its policy of inflation and Wall Street bailouts?

You will begin to save for your retirement. What if you pay into Social Security your whole life but receive no benefits at the end because the system is bankrupt?

And, heaven forbid, what if you must terminate your employment because our country reinstates the draft and sends you off to war as it did with my generation in the 60s?

The Non-aggression Principle

Libertarianism is based on this Non-aggression Principle: It should be legal for anyone to do anything he wants, provided that he does not initiate violence or threaten violence against the person or legitimately owned property of another.

The Non-aggression Principle implies all the common prohibitions against theft, murder, rape, torture, and violence against other individuals except in cases of self-defense of one’s person or property.

But government itself is financed by the compulsory payment of taxes by its citizens. Taxes are not voluntary. If you disagree with the policies of your government you may not withhold your taxes because if you do the government will threaten you with the violence of law enforcement.

It therefore follows that the government that governs best is the government that governs least.

The libertarian philosophy advocates a small government in line with the US Constitution as envisioned by our founding fathers. It is growing in popularity but has a huge uphill battle to wage. Our government is in large part controlled by special interest groups and the leaders of an entrenched two-party system. The maintenance of this system is based on a series of myths that are perpetuated to justify an ever-expanding government that assumes more power year by year, the very antithesis of a government that governs least.

Here are some of those myths.

Myth Number One – That which is immoral should be illegal.

It is true that many actions that are immoral should be illegal – actions such as theft and murder. However, no action by any individual in the privacy of his own home that does not initiate violence against another should be illegal even if it is immoral. Nor should any action between two consenting adults that does not initiate violence against others be illegal even if it is immoral.

We are in the midst of a huge, expensive, failed war on drugs. The war itself produces more harm than the abuse of the illegal drugs. A recent study puts our incarceration rate at 1%, the highest per capita rate of any country in the world. It is estimated that about a half million of these are for nonviolent drug offenses. Alcohol prohibition was responsible for gangland violence in the streets, and drug prohibition is no different. Libertarians call for an end to the drug war.

Myth Number Two – Government regulation is necessary to save us from the failures of laissez faire capitalism.

The prime example of this myth is the belief that laissez faire capitalism caused the Great Depression and that government intervention in the economy ended it. The fact is, however, that the Federal Reserve was founded in 1913, a full 16 years before the fateful stock market crash of 1929. The Fed presided over an expansion of the credit market, which produced the roaring 20’s, the largest economic bubble in history before its collapse.

In recent history, we have seen the dot com bubble and now the real estate mortgage bubble. Both of these bubbles are created by government intervention in the credit market through the Federal Reserve central bank. Libertarians call for an economic policy governed by the principles of the Austrian School of Economics, which includes a minimization of government intervention in the free market.

Myth Number Three – Government intervention in the affairs of foreign countries is necessary for the security of its own citizens.

Ever since the tragic events of September 11, our executive branch has justified its intervention in Iraq and the subsequent erosion of our civil liberties in order to secure our safety. It has even established a policy of preemptive war, whereby it claims the authority to invade another country because that country might aggress against us in the future. Imagine the chaos in the world if every country claimed that authority.

Our intervention in Iraq has made us less safe, not more, because of the unintended consequence called "blowback" by the CIA in its recently declassified report on our policy in Iran. The 9/11 Commission report also describes the blowback phenomenon. Our military intervention, apart from its devastating effects on Iraqi civilians, acts as recruiting tool for extremists. As Benjamin Franklin said, "Any society that would give up a little liberty to gain a little security will deserve neither and lose both."

Libertarians call for a foreign policy of nonintervention in general and an immediate withdrawal of our troops from Iraq in particular.

Myth Number Four – Non-interventionism is the same as isolationism.

Isolationists want to isolate the country from interaction with the rest of the world. To that end, they are for national economic self-sufficiency and protectionist tariffs. Isolationists use trade wars and economic sanctions as foreign policy tools to isolate other countries from the world economy.

Libertarian non-interventionists, on the other hand, support international trade, low tariffs, cultural exchange, and diplomatic contact. They view trade as so beneficial that they refuse to withhold it even from despotic states. A positive example is our continuing trade with Communist China, which serves to open that country to the liberal ideals of the west and is beneficial both to us and to them in spite of their tarnished record on human rights. A negative example is our continuing economic boycott of Cuba, a policy that has failed to remove its leader of a half century.

Myth Number Five – If the government does not solve a social problem, the social problem will not be solved.

This myth is used to justify government provision of social services such as health care, education, and retirement. The myth is based on the conflation of negative rights with positive rights.

Negative rights are rights of prohibition against other people from initiating violence against you. Negative rights are enshrined in the phrase from the Declaration of Independence that all people have the right to "life, liberty, and the pursuit of happiness."

Positive rights force other individuals to provide you with a service. Positive rights are claims that you have a right to a job with a living wage, a right to affordable health care, a right to an education, and a right to a comfortable retirement. Government uses the fiction of positive rights to expand its power in the provision of these services.

Libertarians object to the use of government to provide social services on two grounds, one ethical and one practical.

Because tax collection is not voluntary, people who receive social services from the government do so through a forced exchange of tax dollars. The receipt of such services thus violates the Non-aggression Principle and is unethical.

The practical objection is the observation that no government agency exercising monopoly power can provide a service with better quality or lower price than the free market can under the discipline of the profit motive. We would have better schools and better health care without government interference in these markets.

Libertarians call for a government whose sole function is limited to the Constitutional guarantee of the negative rights of life, liberty, and the pursuit of happiness.

Myth Number Six – Libertarianism is idealistic and does not work in practice.

Libertarians are often accused of having a naïve faith in the free market, and having ideas about the way society ought to be governed that are not practical. As with most myths, the truth is precisely the opposite, as can be demonstrated by public choice theory. Public choice scholars analyze the structure of government from an economic and political perspective to explain why certain policies come into being.

Government programs are not effective because the incentive system does not reward bureaucrats for good service or punish them for bad service. The Los Angeles Unified School District is impossible to reform because they do not go out of business when they provide poor service as a private company would. Nor does FEMA.

Politicians cannot be expected to be good stewards of other people’s money obtained through the force of taxation. They are motivated by the same self-interest that motivates all people. Because of the professionalization of the political class, their interest is in winning elections, a process that is only possible by courting special interests.

It is the height of naïveté to place your faith in a governmental system that can only work if its politicians and bureaucrats are saints and angels.

Conclusion

The libertarian philosophy is the ultimate philosophy of tolerance. It is a philosophy of live and let live, of not initiating violence against any other individual, of liberty for all, of peace, and of prosperity.

That is why I am a Ron Paul libertarian.

This is based on a talk delivered at the Forum for Political Understanding, Pepperdine University, on April 7, 2008.

April 10, 2008

Stan Warford [send him mail] is a professor of computer science at Pepperdine University.

by Ron Paul

These past few weeks have provided an unfortunate opportunity to discuss inflation. The dollar index has reached new all-time lows. The total money supply, M3, as calculated by private sources, is growing at a disturbing 17% rate. The Fed is pumping dollars into the economy at an alarming rate. Just recently the Fed announced new loan auctions totaling $100 billion. That is new money created from thin air. If these money auctions, combined with the bailout of Bear Stearns, continue to be the trend, we are in for some economic stormy weather. The explanation lies in understanding the basics of money, and why it is dangerous to give government and big banks control over it.

First, money is not wealth, in and of itself. You cannot create more wealth simply by creating more money. Wall Street bankers cry out for more liquidity, but what is really needed is more value behind the dollar. But the value, unfortunately, isn't there.

You see, the Fed creates new money and uses it to purchase securities from banks. Flush with funds, these banks seek to put this money to use. During the Fed's expansionary period, much of this money went to home loans. Through a combination of federal government inducements to lend to risky borrowers, and the Fed's supply of easy money, the housing bubble took shape. Fannie Mae and Freddie Mac were encouraged to purchase and securitize mortgages, while investors, buoyed by implicit government backing, rushed to provide funding. Money that could have been invested in more productive, less risky sectors of the economy was thereby malinvested in subprime mortgage loans.

The implicit guarantee from the Fed is quickly becoming explicit, as those institutions deemed "too big to fail" are bailed out at taxpayer expense. Wall Street made a killing during the housing bubble, reaping record profits. Now that the bubble has burst, these same firms are trying to dump their losses on the taxpayers. This approach requires more money creation, and therefore debasement of all dollars in circulation.

The Federal Reserve, a quasi-government entity, should not be creating money or determining interest rates, as this causes malinvestment and excessive debt to accumulate. Centrally planned, government-manipulated economies always fail eventually. The collapse of communism and the failure of socialism should have made this apparent. Even the most educated, well-intentioned central planners cannot plan the market better than the market itself. Those that understand economics best, understand this reality.

In free markets, both success and failure are options. If government interventions prevent businesses, like Bear Stearns, from failing, then it is not truly a free market. As painful as it might be for Wall Street, banks, even big ones, must be allowed to fail.

The end game for this policy of monetary inflation is that the money in your bank account loses purchasing power. So, by keeping failing banks afloat, the Fed punishes those who have lived frugally and saved. The power to create money is a power that should never be granted to government. As we can plainly see today, the Fed has abused this power, and taxpayers are paying the price.

by Justin Raimondo

It was shocking, hearing CIA director Michael Hayden tell Tim Russert on Sunday morning that we're wide open to another 9/11-style terrorist attack. Al-Qaeda, he said, is turning to operatives who "look Western" and "wouldn't attract your attention if they were going through the customs line at Dulles with you." These new recruits, he averred, "would be able to come into this country … without attracting the kind of attention that others might." Let's see if I understand this correctly: all one has to do in order to get into the U.S. is to "look Western" and not stand out too much in the line at Dulles. Seven years after 9/11, we're still just as vulnerable as ever to another devastating blow such as the one Osama bin Laden delivered on that fateful September morning. I've often joked that the sheer force of the explosions in New York and Washington tore a hole in the space-time continuum and hurtled us into a Bizarro World alternate universe, where up is down and the laws of reason and logic are similarly inverted. Nothing else explains our present course, our crazed foreign policy, and our utter helplessness in the face of a very real threat to the continental United States. Four years after the 9/11 Commission issued its recommendations of preventive measures to be taken, the report molders on the shelf, its laundry list of urgent action items not even close to being implemented. One key passage from the report: "The U.S. border security system should be integrated into a larger network of screening points that includes our transportation system and access to vital facilities, such as nuclear reactors. The president should direct the Department of Homeland Security to lead the effort to design a comprehensive screening system, addressing common problems and setting common standards with system-wide goals in mind. Extending those standards among other governments could dramatically strengthen America and the world's collective ability to intercept individuals who pose catastrophic threats." Our borders are more porous than ever, and not the slightest effort has been made to repair this rather large chink in America's armor. The commission's recommendation that we institute "a biometric entry-exit screening system, including a single system for speeding qualified travelers," has been completely ignored. As the commissioners pointed out, "No one can hide his or her debt by acquiring a credit card with a slightly different name. Yet today, a terrorist can defeat the link to electronic records by tossing away an old passport and slightly altering the name in the new one." That hasn't changed. Indeed, very little has changed. Instead of building a biometric barrier to terrorism, the Transportation Security Administration is busy strip-searching little old ladies from Kansas and devising new ways to deal with passengers who have body piercings. The Department of Homeland Security is a mess – instead of streamlining the bureaucracy it has merely added on another layer of inefficiency. Homeland Security has never passed a government audit. No, not even once. Pre-Order this Book Homeland Security funding, instead of going to defend the most likely terrorist targets, is sent to states like Wyoming, which, as Michael O'Hanlon, a senior fellow at the Brookings Institution, noted, gets "5 to 10 times as many homeland security dollars per capita as many high-risk states." It's small wonder these funds are distributed according to a predictable political formula instead of addressing the real security needs of a nation at war with a deadly enemy. Yet such vindication of my libertarian views on the nature and purpose of government does nothing to reassure me – or to lessen the very real (and increasing) danger. The United States has chosen to fight an offensive war, but this has boomeranged, and badly. The Iraq war not only diverts us from our task of rooting out al-Qaeda, it also empowers and enables the terrorists in their efforts to wreak havoc on the American mainland. Bin Laden's legions are more numerous and better strategically placed than they were before 9/11: they're not only in Afghanistan, they've also infiltrated "liberated" Iraq and entered Pakistan. In the latter location they've carved out a safe haven, where they continue to plot their war against America – while Gen. Pervez Musharraf, our chosen strongman, and the recipient of billions in U.S. aid, gets weak in the knees in the face of bin Laden's tribal protectors. Furthermore – and more importantly – we're losing the ideological battle against the jihadists, whose view of the U.S. as the main enemy of Islam is seemingly confirmed by U.S. government actions since 9/11. America's standing across the Middle East has plummeted. Our Israeli-centric Middle Eastern policy continues to outrage even our allies in the region, making it harder to gain the cooperation of Arab governments and security services to pursue the task we should have accomplished – or, at least, attempted – in the immediate aftermath of 9/11: rounding up the leadership of this terrorist cabal and eliminating them once and for all. The Bush administration's response to the 9/11 terrorist attacks on New York and Washington was predicated on the principle that the best defense is a good offense – with the result that we are now bogged down in both Afghanistan and Iraq with our soft underbelly exposed to the enemy. They invaded Iraq because it was "doable," as Paul Wolfowitz so memorably put it. Yet, as we spend $12 billion per month in Iraq, the biometric system the 9/11 Commission called for, and Congress agreed was necessary, is apparently not doable, at least by our government. Also not doable: the traditional low-tech approach to border security. Two years ago, the GAO pointed out that investigators had "successfully entered the United States using fictitious driver's licenses and other bogus documentation through nine land ports of entry on the northern and southern borders" between February and May 2005. Counterfeit identification? Our intrepid Customs and Border Patrol officers didn't notice the fakes, and, in too many cases, didn't even bother to check identification documents. I wonder what happened to the border guards who messed up so badly. Ten to one they're still working for the same government agencies, albeit with a stern wrist-slapping note appended to their official records. The TSA makes us take off our shoes at every airport but doesn't bother inspecting cargo in planes for explosives. Our president is telling us that the central theater of the war on terrorism is in Iraq – while, in America, our ports are wide open to a nuclear device masquerading as a shipment of coconuts. We were attacked on 9/11, and the administration, instead of fighting back, essentially surrendered – or, at least, gave up entirely the concept of defending the continental United States from another horrific assault. Instead, they went charging around the world on a wild goose chase that has exhausted our resources and the patience of the American people. What's scary is that these are the folks charged with defending us – a realization that would imbue Pollyanna with a sense of impending doom. Yes, we are at war with the network of groups and individuals who planned and executed the 9/11 terrorist attacks – not with the Mahdi Army, the Iranians, the Syrians, and/or anyone who looks cross-eyed at the Israelis. As we bray and posture, asserting our right to preemptively attack any nation on earth, glorying in our role as the global hegemon, the reality is that we are for all intents and purposes utterly defenseless. What this means is that another terrorist attack on the scale of 9/11 – or worse – is practically inevitable. Which is what our very own government officials, both here and in Britain, have been telling us since 2001. It's called covering your ass – and it's the only job governments everywhere are very good at.

Lifeboat Ethics: the Case Against Helping the Poor

by Garrett Hardin, Psychology Today, September 1974

Environmentalists use the metaphor of the earth as a "spaceship" in trying to persuade countries, industries and people to stop wasting and polluting our natural resources. Since we all share life on this planet, they argue, no single person or institution has the right to destroy, waste, or use more than a fair share of its resources.

But does everyone on earth have an equal right to an equal share of its resources? The spaceship metaphor can be dangerous when used by misguided idealists to justify suicidal policies for sharing our resources through uncontrolled immigration and foreign aid. In their enthusiastic but unrealistic generosity, they confuse the ethics of a spaceship with those of a lifeboat.

A true spaceship would have to be under the control of a captain, since no ship could possibly survive if its course were determined by committee. Spaceship Earth certainly has no captain; the United Nations is merely a toothless tiger, with little power to enforce any policy upon its bickering members.

If we divide the world crudely into rich nations and poor nations, two thirds of them are desperately poor, and only one third comparatively rich, with the United States the wealthiest of all. Metaphorically each rich nation can be seen as a lifeboat full of comparatively rich people. In the ocean outside each lifeboat swim the poor of the world, who would like to get in, or at least to share some of the wealth. What should the lifeboat passengers do?

First, we must recognize the limited capacity of any lifeboat. For example, a nation's land has a limited capacity to support a population and as the current energy crisis has shown us, in some ways we have already exceeded the carrying capacity of our land.

Adrift in a Moral Sea

So here we sit, say 50 people in our lifeboat. To be generous, let us assume it has room for 10 more, making a total capacity of 60. Suppose the 50 of us in the lifeboat see 100 others swimming in the water outside, begging for admission to our boat or for handouts. We have several options: we may be tempted to try to live by the Christian ideal of being "our brother's keeper," or by the Marxist ideal of "to each according to his needs." Since the needs of all in the water are the same, and since they can all be seen as "our brothers," we could take them all into our boat, making a total of 150 in a boat designed for 60. The boat swamps, everyone drowns. Complete justice, complete catastrophe.

Since the boat has an unused excess capacity of 10 more passengers, we could admit just 10 more to it. But which 10 do we let in? How do we choose? Do we pick the best 10, "first come, first served"? And what do we say to the 90 we exclude? If we do let an extra 10 into our lifeboat, we will have lost our "safety factor," an engineering principle of critical importance. For example, if we don't leave room for excess capacity as a safety factor in our country's agriculture, a new plant disease or a bad change in the weather could have disastrous consequences.

Suppose we decide to preserve our small safety factor and admit no more to the lifeboat. Our survival is then possible although we shall have to be constantly on guard against boarding parties.

While this last solution clearly offers the only means of our survival, it is morally abhorrent to many people. Some say they feel guilty about their good luck. My reply is simple: "Get out and yield your place to others." This may solve the problem of the guilt-ridden person's conscience, but it does not change the ethics of the lifeboat. The needy person to whom the guilt-ridden person yields his place will not himself feel guilty about his good luck. If he did, he would not climb aboard. The net result of conscience-stricken people giving up their unjustly held seats is the elimination of that sort of conscience from the lifeboat.

This is the basic metaphor within which we must work out our solutions. Let us now enrich the image, step by step, with substantive additions from the real world, a world that must solve real and pressing problems of overpopulation and hunger.

The harsh ethics of the lifeboat become even harsher when we consider the reproductive differences between the rich nations and the poor nations. The people inside the lifeboats are doubling in numbers every 87 years; those swimming around outside are doubling, on the average, every 35 years, more than twice as fast as the rich. And since the world's resources are dwindling, the difference in prosperity between the rich and the poor can only increase.

As of 1973, the U.S. had a population of 210 million people, who were increasing by 0.8 percent per year. Outside our lifeboat, let us imagine another 210 million people (say the combined populations of Colombia, Ecuador, Venezuela, Morocco, Pakistan, Thailand and the Philippines) who are increasing at a rate of 3.3 percent per year. Put differently, the doubling time for this aggregate population is 21 years, compared to 87 years for the U.S.

The harsh ethics of the lifeboat become harsher when we consider the reproductive differences between rich and poor.

Multiplying the Rich and the Poor

Now suppose the U.S. agreed to pool its resources with those seven countries, with everyone receiving an equal share. Initially the ratio of Americans to non-Americans in this model would be one-to-one. But consider what the ratio would be after 87 years, by which time the Americans would have doubled to a population of 420 million. By then, doubling every 21 years, the other group would have swollen to 3.54 billion. Each American would have to share the available resources with more than eight people.

But, one could argue, this discussion assumes that current population trends will continue, and they may not. Quite so. Most likely the rate of population increase will decline much faster in the U.S. than it will in the other countries, and there does not seem to be much we can do about it. In sharing with "each according to his needs," we must recognize that needs are determined by population size, which is determined by the rate of reproduction, which at present is regarded as a sovereign right of every nation, poor or not. This being so, the philanthropic load created by the sharing ethic of the spaceship can only increase.

The Tragedy of the Commons

The fundamental error of spaceship ethics, and the sharing it requires, is that it leads to what I call "the tragedy of the commons." Under a system of private property, the men who own property recognize their responsibility to care for it, for if they don't they will eventually suffer. A farmer, for instance, will allow no more cattle in a pasture than its carrying capacity justifies. If he overloads it, erosion sets in, weeds take over, and he loses the use of the pasture.

If a pasture becomes a commons open to all, the right of each to use it may not be matched by a corresponding responsibility to protect it. Asking everyone to use it with discretion will hardly do, for the considerate herdsman who refrains from overloading the commons suffers more than a selfish one who says his needs are greater. If everyone would restrain himself, all would be well; but it takes only one less than everyone to ruin a system of voluntary restraint. In a crowded world of less than perfect human beings, mutual ruin is inevitable if there are no controls. This is the tragedy of the commons.

One of the major tasks of education today should be the creation of such an acute awareness of the dangers of the commons that people will recognize its many varieties. For example, the air and water have become polluted because they are treated as commons. Further growth in the population or per-capita conversion of natural resources into pollutants will only make the problem worse. The same holds true for the fish of the oceans. Fishing fleets have nearly disappeared in many parts of the world, technological improvements in the art of fishing are hastening the day of complete ruin. Only the replacement of the system of the commons with a responsible system of control will save the land, air, water and oceanic fisheries.

The World Food Bank

In recent years there has been a push to create a new commons called a World Food Bank, an international depository of food reserves to which nations would contribute according to their abilities and from which they would draw according to their needs. This humanitarian proposal has received support from many liberal international groups, and from such prominent citizens as Margaret Mead, U.N. Secretary General Kurt Waldheim, and Senators Edward Kennedy and George McGovern.

A world food bank appeals powerfully to our humanitarian impulses. But before we rush ahead with such a plan, let us recognize where the greatest political push comes from, lest we be disillusioned later. Our experience with the "Food for Peace program," or Public Law 480, gives us the answer. This program moved billions of dollars worth of U.S. surplus grain to food-short, population-long countries during the past two decades. But when P.L. 480 first became law, a headline in the business magazine Forbes revealed the real power behind it: "Feeding the World's Hungry Millions: How It Will Mean Billions for U.S. Business."

And indeed it did. In the years 1960 to 1970, U.S. taxpayers spent a total of $7.9 billion on the Food for Peace program. Between 1948 and 1970, they also paid an additional $50 billion for other economic-aid programs, some of which went for food and food-producing machinery and technology. Though all U.S. taxpayers were forced to contribute to the cost of P.L. 480 certain special interest groups gained handsomely under the program. Farmers did not have to contribute the grain; the Government or rather the taxpayers, bought it from them at full market prices. The increased demand raised prices of farm products generally. The manufacturers of farm machinery, fertilizers and pesticides benefited by the farmers' extra efforts to grow more food. Grain elevators profited from storing the surplus until it could be shipped. Railroads made money hauling it to ports, and shipping lines profited from carrying it overseas. The implementation of P.L. 480 required the creation of a vast Government bureaucracy, which then acquired its own vested interest in continuing the program regardless of its merits.

Extracting Dollars

Those who proposed and defended the Food for Peace program in public rarely mentioned its importance to any of these special interests. The public emphasis was always on its humanitarian effects. The combination of silent selfish interests and highly vocal humanitarian apologists made a powerful and successful lobby for extracting money from taxpayers. We can expect the same lobby to push now for the creation of a World Food Bank.

However great the potential benefit to selfish interests, it should not be a decisive argument against a truly humanitarian program. We must ask if such a program would actually do more good than harm, not only momentarily but also in the long run. Those who propose the food bank usually refer to a current "emergency" or "crisis" in terms of world food supply. But what is an emergency? Although they may be infrequent and sudden, everyone knows that emergencies will occur from time to time. A well-run family, company, organization or country prepares for the likelihood of accidents and emergencies. It expects them, it budgets for them, it saves for them.

Learning the Hard Way

What happens if some organizations or countries budget for accidents and others do not? If each country is solely responsible for its own well-being, poorly managed ones will suffer. But they can learn from experience. They may mend their ways, and learn to budget for infrequent but certain emergencies. For example, the weather varies from year to year, and periodic crop failures are certain. A wise and competent government saves out of the production of the good years in anticipation of bad years to come. Joseph taught this policy to Pharaoh in Egypt more than 2,000 years ago. Yet the great majority of the governments in the world today do not follow such a policy. They lack either the wisdom or the competence, or both. Should those nations that do manage to put something aside be forced to come to the rescue each time an emergency occurs among the poor nations?

"But it isn't their fault!" Some kind-hearted liberals argue. "How can we blame the poor people who are caught in an emergency? Why must they suffer for the sins of their governments?" The concept of blame is simply not relevant here. The real question is, what are the operational consequences of establishing a world food bank? If it is open to every country every time a need develops, slovenly rulers will not be motivated to take Joseph's advice. Someone will always come to their aid. Some countries will deposit food in the world food bank, and others will withdraw it. There will be almost no overlap. As a result of such solutions to food shortage emergencies, the poor countries will not learn to mend their ways, and will suffer progressively greater emergencies as their populations grow.

Population Control the Crude Way

On the average poor countries undergo a 2.5 percent increase in population each year; rich countries, about 0.8 percent. Only rich countries have anything in the way of food reserves set aside, and even they do not have as much as they should. Poor countries have none. If poor countries received no food from the outside, the rate of their population growth would be periodically checked by crop failures and famines. But if they can always draw on a world food bank in time of need, their population can continue to grow unchecked, and so will their "need" for aid. In the short run, a world food bank may diminish that need, but in the long run it actually increases the need without limit.

Without some system of worldwide food sharing, the proportion of people in the rich and poor nations might eventually stabilize. The overpopulated poor countries would decrease in numbers, while the rich countries that had room for more people would increase. But with a well-meaning system of sharing, such as a world food bank, the growth differential between the rich and the poor countries will not only persist, it will increase. Because of the higher rate of population growth in the poor countries of the world, 88 percent of today's children are born poor, and only 12 percent rich. Year by year the ratio becomes worse, as the fast-reproducing poor outnumber the slow-reproducing rich.

A world food bank is thus a commons in disguise. People will have more motivation to draw from it than to add to any common store. The less provident and less able will multiply at the expense of the abler and more provident, bringing eventual ruin upon all who share in the commons. Besides, any system of "sharing" that amounts to foreign aid from the rich nations to the poor nations will carry the taint of charity, which will contribute little to the world peace so devoutly desired by those who support the idea of a world food bank.

As past U.S. foreign-aid programs have amply and depressingly demonstrated, international charity frequently inspires mistrust and antagonism rather than gratitude on the part of the recipient nation [see "What Other Nations Hear When the Eagle Screams," by Kenneth J. and Mary M. Gergen, PT, June].

Chinese Fish and Miracle Rice

The modern approach to foreign aid stresses the export of technology and advice, rather than money and food. As an ancient Chinese proverb goes: "Give a man a fish and he will eat for a day; teach him how to fish and he will eat for the rest of his days." Acting on this advice, the Rockefeller and Ford Foundations have financed a number of programs for improving agriculture in the hungry nations. Known as the "Green Revolution," these programs have led to the development of "miracle rice" and "miracle wheat," new strains that offer bigger harvests and greater resistance to crop damage. Norman Borlaug, the Nobel Prize winning agronomist who, supported by the Rockefeller Foundation, developed "miracle wheat," is one of the most prominent advocates of a world food bank.

Whether or not the Green Revolution can increase food production as much as its champions claim is a debatable but possibly irrelevant point. Those who support this well-intended humanitarian effort should first consider some of the fundamentals of human ecology. Ironically, one man who did was the late Alan Gregg, a vice president of the Rockefeller Foundation. Two decades ago he expressed strong doubts about the wisdom of such attempts to increase food production. He likened the growth and spread of humanity over the surface of the earth to the spread of cancer in the human body, remarking that "cancerous growths demand food; but, as far as I know, they have never been cured by getting it."

Overloading the Environment

Every human born constitutes a draft on all aspects of the environment: food, air, water, forests, beaches, wildlife, scenery and solitude. Food can, perhaps, be significantly increased to meet a growing demand. But what about clean beaches, unspoiled forests, and solitude? If we satisfy a growing population's need for food, we necessarily decrease its per capita supply of the other resources needed by men.

India, for example, now has a population of 600 million, which increases by 15 million each year. This population already puts a huge load on a relatively impoverished environment. The country's forests are now only a small fraction of what they were three centuries ago and floods and erosion continually destroy the insufficient farmland that remains. Every one of the 15 million new lives added to India's population puts an additional burden on the environment, and increases the economic and social costs of crowding. However humanitarian our intent, every Indian life saved through medical or nutritional assistance from abroad diminishes the quality of life for those who remain, and for subsequent generations. If rich countries make it possible, through foreign aid, for 600 million Indians to swell to 1.2 billion in a mere 28 years, as their current growth rate threatens, will future generations of Indians thank us for hastening the destruction of their environment? Will our good intentions be sufficient excuse for the consequences of our actions?

My final example of a commons in action is one for which the public has the least desire for rational discussion - immigration. Anyone who publicly questions the wisdom of current U.S. immigration policy is promptly charged with bigotry, prejudice, ethnocentrism, chauvinism, isolationism or selfishness. Rather than encounter such accusations, one would rather talk about other matters leaving immigration policy to wallow in the crosscurrents of special interests that take no account of the good of the whole, or the interests of posterity.

Perhaps we still feel guilty about things we said in the past. Two generations ago the popular press frequently referred to Dagos, Wops, Polacks, Chinks and Krauts in articles about how America was being "overrun" by foreigners of supposedly inferior genetic stock [see "The Politics of Genetic Engineering: Who Decides Who's Defective?" PT, June]. But because the implied inferiority of foreigners was used then as justification for keeping them out, people now assume that restrictive policies could only be based on such misguided notions. There are other grounds.

A Nation of Immigrants

Just consider the numbers involved. Our Government acknowledges a net inflow of 400,000 immigrants a year. While we have no hard data on the extent of illegal entries, educated guesses put the figure at about 600,000 a year. Since the natural increase (excess of births over deaths) of the resident population now runs about 1.7 million per year, the yearly gain from immigration amounts to at least 19 percent of the total annual increase, and may be as much as 37 percent if we include the estimate for illegal immigrants. Considering the growing use of birth-control devices, the potential effect of education campaigns by such organizations as Planned Parenthood Federation of America and Zero Population Growth, and the influence of inflation and the housing shortage, the fertility rate of American women may decline so much that immigration could account for all the yearly increase in population. Should we not at least ask if that is what we want?

For the sake of those who worry about whether the "quality" of the average immigrant compares favorably with the quality of the average resident, let us assume that immigrants and native-born citizens are of exactly equal quality, however one defines that term. We will focus here only on quantity; and since our conclusions will depend on nothing else, all charges of bigotry and chauvinism become irrelevant.

Immigration Vs. Food Supply

World food banks move food to the people, hastening the exhaustion of the environment of the poor countries. Unrestricted immigration, on the other hand, moves people to the food, thus speeding up the destruction of the environment of the rich countries. We can easily understand why poor people should want to make this latter transfer, but why should rich hosts encourage it?

As in the case of foreign-aid programs, immigration receives support from selfish interests and humanitarian impulses. The primary selfish interest in unimpeded immigration is the desire of employers for cheap labor, particularly in industries and trades that offer degrading work. In the past, one wave of foreigners after another was brought into the U.S. to work at wretched jobs for wretched wages. In recent years the Cubans, Puerto Ricans and Mexicans have had this dubious honor. The interests of the employers of cheap labor mesh well with the guilty silence of the country's liberal intelligentsia. White Anglo-Saxon Protestants are particularly reluctant to call for a closing of the doors to immigration for fear of being called bigots.

But not all countries have such reluctant leadership. Most education Hawaiians, for example, are keenly aware of the limits of their environment, particularly in terms of population growth. There is only so much room on the islands, and the islanders know it. To Hawaiians, immigrants from the other 49 states present as great a threat as those from other nations. At a recent meeting of Hawaiian government officials in Honolulu, I had the ironic delight of hearing a speaker who like most of his audience was of Japanese ancestry, ask how the country might practically and constitutionally close its doors to further immigration. One member of the audience countered: "How can we shut the doors now? We have many friends and relatives in Japan that we'd like to bring here some day so that they can enjoy Hawaii too." The Japanese-American speaker smiled sympathetically and answered: "Yes, but we have children now, and someday we'll have grandchildren too. We can bring more people here from Japan only by giving away some of the land that we hope to pass on to our grandchildren some day. What right do we have to do that?"

At this point, I can hear U.S. liberals asking: "How can you justify slamming the door once you're inside? You say that immigrants should be kept out. But aren't we all immigrants, or the descendants of immigrants? If we insist on staying, must we not admit all others?" Our craving for intellectual order leads us to seek and prefer symmetrical rules and morals: a single rule for me and everybody else; the same rule yesterday, today and tomorrow. Justice, we fell, should not change with time and place.

We Americans of non-Indian ancestry can look upon ourselves as the descendants of thieves who are guilty morally, if not legally, of stealing this land from its Indian owners. Should we then give back the land to the now living American descendants of those Indians? However morally or logically sound this proposal may be, I, for one, am unwilling to live by it and I know no one else who is. Besides, the logical consequence would be absurd. Suppose that, intoxicated with a sense of pure justice, we should decide to turn our land over to the Indians. Since all our other wealth has also been derived from the land, wouldn't we be morally obliged to give that back to the Indians too?

Pure Justice Vs. Reality

Clearly, the concept of pure justice produces an infinite regression to absurdity. Centuries ago, wise men invented statutes of limitations to justify the rejection of such pure justice, in the interest of preventing continual disorder. The law zealously defends property rights, but only relatively recent property rights. Drawing a line after an arbitrary time has elapsed may be unjust, but the alternatives are worse.

We are all the descendants of thieves, and the world's resources are inequitably distributed. But we must begin the journey to tomorrow from the point where we are today. We cannot remake the past. We cannot safely divide the wealth equitably among all peoples so long as people reproduce at different rates. To do so would guarantee that our grandchildren and everyone else's grandchildren, would have only a ruined world to inhabit.

To be generous with one's own possessions is quite different from being generous with those of posterity. We should call this point to the attention of those who from a commendable love of justice and equality, would institute a system of the commons, either in the form of a world food bank, or of unrestricted immigration. We must convince them if we wish to save at least some parts of the world from environmental ruin.

Without a true world government to control reproduction and the use of available resources, the sharing ethic of the spaceship is impossible. For the foreseeable future, our survival demands that we govern our actions by the ethics of a lifeboat, harsh though they may be. Posterity will be satisfied with nothing less.

By JUDY SHELTON

Every year, the Senate Select Committee on Intelligence is briefed by the chief of U.S. intelligence on potential threats to the nation. The list is sobering, but usually predictable and typically includes global terrorism, nuclear proliferation and regional conflicts.

But this year, there was a surprising potential foe: the falling dollar. In his report to Congress last week, Director of National Intelligence Michael McConnell went beyond the conventional world of spycraft. Mr. McConnell specifically acknowledged "concerns about the financial capabilities of Russia, China, and OPEC countries and the potential use of their market access to exert financial leverage to achieve political ends." He noted, in particular, the impact a weak dollar can have on national security: "As the dollar has weakened this year, some oil producers -- such as Syria, Iran, and Libya -- have asked to be paid in currencies other than the dollar while others -- such as Kuwait -- are delinking their currency pegs to the dollar."

It's not every day a former Navy vice admiral steeped in the culture of the defense intelligence community talks like a central banker, but Mr. McConnell clearly recognizes a threat: "Continued concerns about dollar depreciation could tempt other major producers to follow suit."

The rest of Washington -- and every presidential contender -- needs to start paying attention to the declining dollar before it develops into a full-blown currency crisis with damaging geopolitical consequences. What happens if major oil-producing nations decide to abandon the dollar for measuring the value of their most important export? What if they set up their own monetary union to serve as an alternative to a currency that is no longer a reliable store of value?

At a time when the Pentagon is focusing on the importance of rebuilding war-torn nations -- restoring civil and economic stability -- as a prerequisite for lasting peace, we should be emphasizing the confidence-building aspects of sound money. The dollar's primary role in the world financial system is the most vital nonmilitary instrument of our national power. We cannot afford to neglect the dollar and thereby give up the global influence that comes from providing the world's key reserve currency.

It's a matter of global energy security, first and foremost. Russia makes no secret of its ambitions to elevate the ruble to world reserve currency status. President Vladimir Putin, in a major televised speech last Friday outlining his strategic goals for the next 12 years, stated that Russia must become "one of the world's financial centers" -- a logical step, he asserted, given that Russia has accumulated $484 billion in gold and foreign currency reserves. Mr. Putin earlier called for denominating transactions for Russian oil and gas exports in rubles. When his chosen successor, Dmitry Medvedev, is inaugurated in May, we can expect a tightening of the link between Russian energy deliveries and currency requirements imposed on recipient countries.

A perfect storm for dollar desertion may already be brewing. In the months ahead, China is expected to export fewer consumer goods to the U.S. with a forcibly-appreciated yuan. Meanwhile, Chinese spending for Russian oil and gas will likely start to ramp up. Mr. Medvedev, whose duties include serving as chairman of Gazprom, observed this past summer that the U.S. dollar was not immune to crisis of a "comprehensive, global character." He was thinking ahead about potential opportunities. "A situation may arise where we, China, and some other Asian countries will speak of the emergence of a regional reserve currency." The yuan was a possibility, Mr. Medvedev conceded. "But it is in our interest that it be the ruble."

If gold and foreign currency reserves were the only prerequisite for harboring global ambitions in the monetary arena, China could make impressive claims of its own with $1.7 trillion as of December 2007, the world's highest level. Japan comes in second at $973 billion. If you add together the gold and foreign currency reserves of EU member states that have adopted the euro, including those of the European Central Bank, the total amount in the EU is $511 billion.

Russia trails not so far behind. And beyond its considerable official reserves (which increased by 57% last year alone) and its alarming energy clout in European and Asian markets, Russia has a growing military presence. Not that Russia's military capabilities were ever truly contained. But those capabilities have been constrained as Russia struggled to emerge from its Communist past and join the family of democratic nations. Political transformation and economic renewal took precedence, so it seemed, over the large demands on funds that clinging to military superpower status would have required.

Building up a menacing force of strategic bombers, nuclear submarines and new intercontinental ballistic missiles is a financial luxury -- one that Mr. Putin now seems eager to indulge as Russia fills its coffers. It may be that he sees it as the essential appendage to global power needed to carry out his strategic vision.

How else to explain the incursion of a Russian warplane on Saturday into Japanese air space, a violation that caused 22 Japanese fighter jets to scramble and elicited a strong protest to Moscow from the Japanese foreign ministry? The TU-95 "Bear" bomber is equipped to carry cruise missiles that can deliver a nuclear warhead.

Japanese newspapers speculate that the intrusion might have been prompted by an annual rally held two days before in Tokyo demanding the return of four islands seized by Russia in the closing days of World War II. Both Japan and Russia are strongly motivated to settle the long-standing dispute; Japan wants greater access to Russian energy supplies while Russia seeks Japanese financial capital to develop its far eastern regions.

Just last week -- only three days before the Russian warplane sortie -- Japanese Prime Minister Yasuo Fukuda announced he had received a letter from the Russian president offering to hold talks to resolve the dispute over the islands. Mr. Fukuda has made plans to visit Moscow in late April or early May, convinced that working out a settlement with Mr. Putin "is essential to lift Russo-Japanese ties to higher levels." If he waits until May 9, Mr. Fukuda can take in Mr. Medvedev's inaugural ceremonies as well as the planned full-scale, Soviet-style military parade -- the first display of weapons on Red Square since 1990.

Not that the crude maneuvering of carrot-and-stick incentives isn't effective, but it is dangerous. Especially when the dealmaker has shown a high propensity to rely on the stick.

A weakening U.S. currency plays directly into fears about a weakening U.S. economy and gives credence to self-serving pronouncements about America's weakening role in the world arena. The dollar won't be strengthened by further interest-rate cuts or more fiscal stimulation leading to inflationary consumer spending. If the U.S. is to reclaim its position as provider of the world's most trusted currency, we must think more boldly.

It's time to confront currency disorder. Our goal should be to put forward a new proposal for international monetary relations on the scale of the 1944 Bretton Woods agreement, invoking the same sentiments that inspired architects John Maynard Keynes and Harry Dexter White to provide a foundation of hope for a world all too prone to violence. A global system based on a universally-accepted monetary asset -- the U.S. has the world's highest level of official gold reserves, followed by Germany and France -- would not only counter Russia's offensive. It would convert a national security threat into a golden opportunity.

Ms. Shelton, an economist, is author of "The Coming Soviet Crash" (Free Press, 1989).

Stop Fed Intervention

by Ron Paul

A Statement to the House Banking Committee, February 26, 2008

Mr. Chairman,

Price controls are almost universally reviled by economists. The negative economic consequences of price floors or price ceilings are numerous and well-documented. Our current series of hearings have been called to discuss the most important, but least understood, price manipulation in the world today: the manipulation of the interest rate.

By setting the federal funds rate, the rate at which banks in the Federal Reserve System loan funds to each other, the Federal Reserve inhibits the actions of market participants coming together to determine a market interest rate. The Federal Reserve and the federal government do not deign to interfere in setting the price of houses, the interest rate on mortgages, or the prices of wood and steel. The Fed’s actions in setting the federal funds rate however, because it reflects the price of money to a borrower and thus affects demand for money, affects prices throughout the economy in a manner less pervasive but just as damaging as direct price controls.

The example of the Soviet Union should have taught us that no one person, no group of people, no matter how scientifically trained, can arbitrarily set prices and not expect economic havoc. Only the spontaneous interaction of market participants can lead to the development of a functioning price system that allows the needs and wants of all participants to be met. The sense I get from reading much of the punditry is that the federal funds rate is set often by the whims of the Federal Reserve governors. Even mechanistic explanations such as the Taylor Rule rely on inputs that are often left up to the discretion of the Fed policymakers: what is the potential GDP, do we use CPI or PCE, overall CPI versus CPI less energy and food, etc.

The setting of the interest rate strikes me as quite similar to the way FDR used to set gold prices in the 1930’s, at his whim, resulting in economic havoc and uncertainty. When market actors have to devote much of their time to discerning the mindset of government price-setters, to parsing FOMC statements and minutes, they are necessarily diverted from productive economic activity. They cease to become purely economic actors and are forced to become political forecasters. This is not a problem isolated to this particular case, as businesses are forced to reckon with tax increases, expiring tax credits, import tariffs, subsidies to competitors, etc. However, because the interest rate determines the cost of borrowing and therefore determines whether or not marginal long-term business investments are undertaken, this politicized interest rate manipulation has far more impact than other government policies.

This setting of the interest rate introduces the business cycle into the economy. Until we understand the results these Federal Reserve actions have, we will be doomed to repeat these periods of boom and bust. I urge my colleagues to study this matter, and to resist the urge for greater Federal Reserve intervention in the market.

I remember only one event from first grade. It happened on the first day of school, a time of excitement and new challenges for all of us, I’m sure. I was excited to be a "grader" – that is, to be in a grade which ends with "grade." The school had a milk program, where parents could pay each week for their children to receive a pint of milk at snack-time. My parents had paid, and so I was to receive milk at snack.

As the school day began, the teacher settled down the class and taught us the basic rules for the classroom. Some were familiar from previous years – don’t hit each other, don’t put your finger into the pencil sharpener, don’t put your finger into the door – in fact, most rules seemed to revolve around keeping our fingers out of places. However, one was new and unusual – if you have something to say, raise your hand, don’t just shout or jump out of your seat.

In earlier years, shouting and jumping out of our seats had been the normal way to get the floor in order to speak. Now we were introduced to this new idea of "raising the hand." The teacher would then recognize each student in turn, and each would get a chance to talk. I have never been one to respect authority all that well, particularly as a child when I didn’t yet have the discernment to differentiate legitimate and illegitimate authority. Nonetheless, this rule immediately struck me as wise and worth obeying. I was quite clear that any reasonable person would choose to follow this rule, given that the consequence would be that all others would follow it too. Even lacking universal assent, it would work unilaterally too – those who choose to follow it can simply ignore anyone jumping around and screaming to get his point across. I resolved to follow it immediately and flawlessly.

Such was my state of mind when snack time came around, and the teacher asked, "Who has a milk account?" I responded the way I considered proper – by raising my hand. My fellow milk-drinkers, though, immediately began to jump out of their seats and shout. Having just learned of the alternative to such behavior, I considered their actions atrocious and quite unsuited for polite society. I kept my own counsel, and kept my hand raised.

You can probably figure out where this all led – I didn’t get any milk that day. My response to injustice was then, as now, a combination of surprise, resignation, and shame. I don’t know why injustice should make its victims feel shame, but it does always seem to – and this, by the way, is a fundamental principle on which the state feeds. My feelings, though, were that I had been cheated out of milk, yet had remained true to the rules. The others may have had their milk, but had surely lost some portion of their education.

When my mother came to pick me up, I was ashamed to mention the milk incident, but she questioned me about the milk situation persistently, perhaps already sensing, at that young age, that I was more inclined to do what I considered right than to demand that which was mine. Finally, I broke down and admitted that I had not gotten any milk. She had me wait outside while she went into the school to find out the whole story. Returning, she told me that the teacher had said that she had no idea that I had a milk account, since I hadn’t identified myself. As a side note, it immediately struck me what an absurd system that was, to have no independent record available to the teacher, who doubled as milkwoman, of who had paid for milk. Nonetheless, I responded with what seemed to me an obvious answer – "I raised my hand."

Libertarians often find themselves in a similar position. We support principles that we know everyone else has learned, and it seems that most people in polite society believed in them at some point. We were taught as children about not hitting other people, and we still believe it. Sure, we have more developed philosophies now, stronger arguments for why we ought not to hit people, but the basic principle remains. There are basic rules, like not hitting people, without respect for which no human society can function.

Even the rules regarding self-defense find themselves expressed in elementary school terms. The only viable defense, when caught hitting another child, is "he started it." Any just teacher will recognize that, even if the response was not quite proportional, the child who hit the other first deserves at least more blame. So, libertarians grow up understanding, along with everyone else, that the only time it might ever be acceptable to use force is in response to an aggressive attack. Then we find our neighbors advocating all kinds of force – wars of aggression, taxation, imprisonment for non-violent crimes. It seems as unfathomable to us that people would promote such things as it did to me that the only way to get milk was to break the hand-raising rule. No parent allows their children to take toys away from other children, but rather they encourage their children to share their own toys. Yet the children grow up to think that they can take away people’s property to give it to others, and to not share their own wealth.

As a result, we libertarians often find ourselves tongue-tied in debate. We can address all the economic issues, and point out the utilitarian benefits of liberty, but that’s not what we really want to do. We want to point out the morality of freedom, the evil of coercion – but we are unable, precisely because it is so obvious to us. We cannot effectively answer those who say "We must imprison drug users because it’s the government’s job to protect people from themselves," because it is so unbelievable to us that anyone would think it acceptable, nay, obligatory, to hit someone who has not hit someone else himself. I am often reduced to looking at such a person with a mix of horror and incredulity, and wondering how someone can think such a thing.

We make what seem to us completely obvious points – that we ought to follow our basic moral codes, and the necessary rules for civilization. We think that this ought to work, just like I expected raising my hand to work. We are puzzled by those who proudly and arrogantly proclaim that they are above the rules for civilization, just as I was puzzled by the fact that the children who broke the rules got their milk.

Consider the masses who laugh at libertarianism. Ask them just what, exactly, they oppose. Is it the idea of private property? Is it opposition to theft, or to murder? These are the fundamentals of our position, are they not? Or do they challenge the application of the position to specifics? Would they maintain that it is something other than theft to take away money from Peter to give it to Paul? What word is more applicable?

You’ll quickly find that most don’t oppose anything specific at all. They just think libertarians are weird, kooky – and to a certain extent, we are. While the diversity of the movement continues to grow by leaps and bounds, we remain a somewhat eclectic bunch. How could it be otherwise in a world with a public education system, where "normal" folks are taught never to look behind the curtain? Yet, this is no argument against our positions. In an insane world, only those who appear out of step with the rest will be sane. I appeared weird to my classmates, too, when I sat quietly, following the rules, and raising my hand. When breaking important rules is profitable, why not join those who break them? Look around you – success is in the government sector! Why not join in? Why not indeed. How about – because it is wrong to hit people?

Yet, in the end, we will succeed. In the end, a world run by a system based on hitting people cannot function – which is precisely why we have rules against hitting people in the first place. As the violence becomes more obvious, and it must, such a system loses supporters. People come to realize, too late perhaps, that the libertarians had a point after all. No society can exist if its members don’t believe in the basic rules, it will simply crumble. So society has a choice – to cease to exist at all, or to accept these rules. Our society has widely accepted them. Yet the government only has power because people believe that it is good to break these rules. As the contradiction becomes more obvious, the power of government will be diminished.

I am not counseling apathy or inaction. For the contradiction to be fully understood, there must be faithful guardians of the message present. The idea of non-aggression, together with all its beautiful philosophical and economic clothing, must be presented and kept on view at all times. Then, when the contradictions become too much for an individual to bear, that person has somewhere else to turn, knows of an alternative. That’s where we come in. This is the value of this very website, of the Mises Institute, of the Ron Paul rEVOLution, and of anything which exposes more people to the libertarian alternative. Most people will not spontaneously become libertarians when they become aware of the contradictions, but if libertarian ideas are in view when they are made aware of it, then they are likely to be persuaded. This is how our movement will grow. So, our goal must be outreach and education. We must remember, though, never to beat anyone over the head with our message – we need only to put it out there, to present it well, and they will come, just as supporters from all communities have flocked to Ron Paul. That government is violence institutionalized has become more painfully obvious in recent years, with taser incidents, loss of habeas corpus, and wars started on lies and continued despite the opposition of the people. The result has been more interest in libertarianism, and in particular the Ron Paul campaign.

Our message, although dressed up and more cogently argued, really is nothing more than the kindergarten creed. But adults cannot embrace what they learned in kindergarten, they fear they will look foolish. So we must argue for it through economics and through philosophy, but the message is still the same – don’t hit people. Go forth and spread the word.

January 21, 2008

Joshua Katz, NREMT-P , is the Libertarian Party of Connecticut's candidate for State General Assembly in the 23rd district. He is on the mathematics faculty at the Oxford Academy, Westbrook, Connecticut. He has studied philosophy of mind, logic, and epistemology of economics from an Austrian perspective, and is a former graduate student in philosophy at Texas A&M, as well as holding a bachelor's degree in mathematics. He still holds the title of Chief of EMS for the Town of Hempstead Department of Parks and Recreation, and will return to full-time service there in the summer. He enjoys a glass of port and a wedge of Brie, but has discontinued this practice on a regular basis, due to the sugar content of the port.

The liberal attacks on Ron Paul, fueled by a recent hit piece in the New Republic, are so transparently cynical that it almost makes me smile.


Almost.


To quote James Ridgeway, liberals can be and often are the meanest motherfuckers around. Criticize any of their scared beliefs, then watch out. They'll come at you with anything they've got, doesn't matter if it's truthful, accurate, or even sane. American liberals truly feel that they are humanity's Final Word. If you dispute that, you're a bigot, a hater, a piece of slime that deserves only the nastiest treatment. And baby, you'll get it.

At issue is Ron Paul's supposed racism and queer-phobia, reflected in newsletters that bore his name. Paul has distanced himself from the newsletters, saying that others penned the toxic rhetoric, without his direct knowledge or approval. Maybe Paul's telling the truth. Maybe he's not. Maybe he really does despise those of darker hue and same-sexers. Maybe he's like the worst racist you've ever seen. Maybe he eats black children for breakfast.

Whatever Paul actually believes about minorities and queers is not the real concern here. What bothers liberals, TNR's James Kirchik among them, is that Paul is the only presidential candidate who is seriously running against the state. This includes anti-imperialism and calls to end the Drug War. Given that Hillary and Obama are nowhere near this mindset -- quite the opposite -- means that anyone who is must be a bad person. If those newsletters didn't exist, hit men like Kirchik and the libloggers who support him would find something else to smear Paul with. Because, at bottom, they oppose any dismantling of the war state (recall Kos' shitting all over Kucinich). They simply want their preferred candidates to run the machine instead.

For TNR, there's another angle to its anti-Paul attack: Israel. Paul wants to end U.S. military aid to Israel, and is critical of Israeli aggression (he's also critical of Hezbollah and Hamas, but that doesn't count). This simply won't do for Democrats and many liberals, who either support Israeli violence and occupation, or are at best mum on the topic. When Israeli fighter jets were pounding Lebanon in 2006, it took weeks for leading libloggers to type the slightest negative word, which for them was "disproportionate." It was okay to bury Lebanese in rubble, just so long as it wasn't too much rubble. By opposing this and other uses of American tax dollars to kill and maim Arabs, Ron Paul shows that he's probably anti-Semitic as well.

The funny thing about TNR attacking Paul for being racist is that TNR has published plenty of racist musings itself. Martin Peretz alone contributed much of this, his belief that the "primitive" Palestinians are genetically and culturally incapable of achieving peace (for which no one is to blame, added Peretz in a tender moment) merely one of many racist screeds that TNR had no problem pushing. Then there was former editor Andrew Sullivan inviting Charles Murray to explain at length his "Bell Curve" theory in TNR's pages, a decision that Sullivan defended by writing, "The notion that there might be resilient ethnic differences in intelligence is not, we believe, an inherently racist belief." Of course not. Ron Paul, on the other hand . . .

I might be mistaken, but so far as I know, Ron Paul has not left the campaign trail to oversee the killing of a black man. Liberal hero Bill Clinton did in 1992, flying back to Arkansas from New Hampshire to witness Rickey Ray Rector take the lethal needle. (Since Clinton was our first black president, did that constitute black-on-black violence?) Clinton also expanded the police and prison state, in which a large number of African-Americans are trapped, and shredded the safety net for the poor, among whom reside many African-Americans. Does this make Bill Clinton a racist? Hush yo' mouf!

Racism isn't Paul's only sin. According to Kirchik, those newsletters exhibited acute paranoia:

[S]pecifically, the brand of anti-government paranoia that festered among right-wing militia groups during the 1980s and '90s. Indeed, the newsletters seemed to hint that armed revolution against the federal government would be justified. In January 1995, three months before right-wing militants bombed the Murrah Federal Building in Oklahoma City, a newsletter listed 'Ten Militia Commandments,' describing 'the 1,500 local militias now training to defend liberty' as 'one of the most encouraging developments in America.' It warned militia members that they were 'possibly under BATF [Bureau of Alcohol, Tobacco and Firearms] or other totalitarian federal surveillance' and printed bits of advice from the Sons of Liberty, an anti-government militia based in Alabama--among them, 'You can't kill a Hydra by cutting off its head,' 'Keep the group size down,' 'Keep quiet and you're harder to find,' 'Leave no clues,' 'Avoid the phone as much as possible,' and 'Don't fire unless fired upon, but if they mean to have a war, let it begin here.'

Yikes. Scary stuff. Sane people know that there is no American surveillance state -- or there wasn't one during the hallowed Clinton era, when all that crazy militia activity was taking place. According to liberal history, police state measures (torture, too) only occur during Republican presidencies, the past seven years being the most recent example. For Paul's newsletter to say otherwise is simple lunacy.

I'll tell you this: I've studied various strands of American right wing political philosophy and beliefs, and have had many conversations with rightists of different temperaments, and when it comes to seriously defending First and Fourth Amendment rights (what remain, anyway), I'll stand with libertarians like Ron Paul. I may not agree with most of his beliefs, nor that of the anti-statist right overall, but I know that Paul and others like him aren't looking to tap my phone or break down my door in the middle of the night.

Think the Branch Davidians were paranoid?

Then vote Hillary or Obama.

And sleep tight.

"Equal rights for all; special privileges for none."

"Though the will of the majority is in all cases to prevail, that will, to be rightful, must be reasonable . . . the minority possess their equal rights, which equal laws must protect, and to violate which would be oppression."

"[The purpose of representative government is] to curb the excesses of the monied interests."

"The influence over government must be shared among the people. If every individual which composes their mass participates in the ultimate authority, the government will be safe; because the corrupting of the whole mass will exceed any private resources of wealth."

"Peace, then, has been our principle, peace is our interest, and peace has saved to the world this only plant of free and rational government now existing in it."

"Peace, commerce, and honest friendship with all nations, entangling alliances with none."

~ Thomas Jefferson

You asked for a treatise to explain my support for the "lunatic" Ron Paul. Since you asked, I'll send you some thoughts.

Why should Americans left-of-center – with commitments to peace, justice, and democracy – see Congressman Paul as a real option rather than as a right-wing wacko? That's the question. Several years ago, I was hoping that Senator Russ Feingold (D-WI) would run for president in 2008. He's a principled statesman with a consistent record of opposition to war and empire, and support for democracy and civil liberties. He also has the potential to reach beyond his base of liberal Democrats to conservatives and libertarians with his stance on government frugality and bureaucratic waste. So, I was excited about a Feingold candidacy until he bowed out of the race.

Congressman Dennis Kucinich (D-OH) did not appeal to very many voters in 2004 and he is repeating that dismal showing in 2008. Part of his problem was his flip-flop on abortion when he entered the '04 race. A principled pro-choicer like Feingold and a principled pro-lifer like Paul can earn respect from a wide range of people, but it's hard to admire someone who jumped from pro-life to pro-choice seemingly as a matter of political convenience. As if the Democratic power brokers would ever consent to the nomination of Kucinich, regardless of how enthusiastic he becomes for "reproductive freedom"! So, from the get-go, Kucinich hobbled his efforts by undercutting his strongest selling point: his integrity.

My favorite candidate for the '08 Democratic presidential nomination is Mike Gravel, former U.S. Senator from Alaska. But Gravel, like Kucinich, is treated as a joke by the mainstream media, has not raised substantial money, and languishes at the bottom of the polls. Thomas Jefferson was not perfect, but the founder of the Democratic Party had a platform that is not only remarkably good but still applicable and popular in 21st century America. Leavened with the racial egalitarianism of King, Abernathy, and Hamer, the Jeffersonian platform could be used by politicians for electoral success and wise policy.

Senator Feingold and Representative Paul, who have often voted together on major issues of the day despite being tagged as a "liberal Democrat" and "conservative Republican," are examples of modern Jeffersonians. Senator Gravel is the most Jeffersonian candidate running among the Democrats this year, but he has failed to catch on with a wide portion of the citizenry. That's where Ron Paul comes in.

Not only does Ron Paul represent Jeffersonian values usually termed "conservative" or "libertarian" today (fidelity to the Constitution, frugal government, states' rights, Second Amendment, national sovereignty), but he is also a leading example of support for Jeffersonian positions nowadays described as "liberal" or "leftist" (e.g. opposition not only to the Iraq War but to war in general, anti-imperialism, ending the federal war on drugs, hostility to the Patriot Act and other violations of civil liberties). This accounts for the wide appeal of the Paul campaign. It's precisely the sort of trans-ideological, cross-generational populist-libertarian-moralist coalition that I was hoping to see with a Feingold presidential campaign.

If we stipulate that a candidate polling at least 5% in national polls is a "major candidate," there is simply no other major candidate in 2008 who is more Jeffersonian, more committed to peace, justice, and democracy, than Ron Paul. He puts pretenders like Edwards and Obama to shame. I like a lot of what John Edwards is saying on the campaign trail today, but I don't think he means a word of it. He's a limousine liberal phony when it comes to the rich/poor issue. He supported the Iraq War until it became widely unpopular. He voted for the Patriot Act. He claims to be against outsourcing of American jobs but he voted for permanent normalized trade relations (MFN) for China.

I think Barack Obama would be much preferable to Hillary Clinton as president, but his campaign is built on glossy generalities like "hope," "youth," and "unity." It's more about style than substance. If you study what he's had to say about foreign policy when addressing elite audiences, you see that he's not much different from Clinton and the DLC crowd. He's in the mainstream of the U.S. foreign policy establishment and its perpetual commitment to empire and globalization. Even his strongest selling point for the left – his opposition to the Iraq War in 2002–03 – is suspect upon close examination. In his October 2002 speech, he told the anti-war crowd FOUR times that he was not opposed "to all wars." He summed up his philosophy by saying, "I am not opposed to all wars. I'm opposed to dumb wars." There is nothing about war in general that is offensive to Obama. He objected to the Iraq War only on strategic grounds, not ethical grounds.

Referring to the U.S. Senate authorization vote of 2002, in July 2004, Obama told the New York Times, "What would I have done? I don't know." Asked about the pro-war votes of Kerry and Edwards, Obama told NPR, "I don't consider that to have been an easy decision, and certainly, I wasn't in the position to actually cast a vote on it. I think that there is room for disagreement in that initial decision." Not exactly a stunning statement of the peace position! Obama told the Chicago Council on Global Affairs, in November 2006, "We cannot afford to be a country of isolationists right now. 9/11 showed us that try as we might to ignore the rest of the world, our enemies will no longer ignore us. And so we need to maintain a strong foreign policy, relentless in pursuing our enemies and hopeful in promoting our values around the world." So 9/11 occurred during a period in our history when we were minding our own business (practicing "isolationism")? That's a novel explanation of events!

In April 2007, Obama told the CCGA, "I reject the notion that the American moment has passed. I dismiss the cynics who say that this new century cannot be another when, in the words of President Franklin Roosevelt, we lead the world in battling immediate evils and promoting the ultimate good. I still believe that America is the last, best hope of Earth. We just have to show the world why this is so." Spoken like a true neoconservative. This messianic imperialism continues throughout the speech: "In today's globalized world, the security of the American people is inextricably linked to the security of all people. . . . World opinion has turned against us. And after all the lives lost and the billions of dollars spent, many Americans may find it tempting to turn inward, and cede our claim of leadership in world affairs. I insist, however, that such an abandonment of our leadership is a mistake we must not make. . . . We must lead the world, by deed and example."

Obama even endorsed the Persian Gulf War of 1991, a bloodletting that had nothing to do with U.S. national security: "No President should ever hesitate to use force – unilaterally if necessary – to protect ourselves and our vital interests when we are attacked or imminently threatened. But when we use force in situations other than self-defense, we should make every effort to garner the clear support and participation of others – the kind of burden-sharing and support President George H.W. Bush mustered before he launched Operation Desert Storm."

In contrast to Obama's narrow and perhaps opportunistic reasons for opposing the Iraq War, Ron Paul has consistently opposed every U.S. military intervention since the 1970s. He's the only major candidate who openly speaks out against the American empire and imperialism. Can you even imagine Hillary Clinton or John Edwards using the e-word or the i-word? Not in connection with our own government! When it comes to foreign policy, Ron Paul sounds as radical as Noam Chomsky. In fact, Paul is more radical because he refused to vote for Bush in 2004 while Chomsky was willing to vote for Kerry over a real anti-empire candidate like Nader. Paul not only talks the talk; he walks the walk. Yet he's more acceptable to Middle America than someone like Chomsky or Howard Zinn because he volunteered to serve in the U.S. Air Force in the early 1960s and he has an obvious patriotism that makes him less vulnerable to the "hate-America" smear.

Ron Paul is the only major contender who calls for cutting off the billions of dollars of foreign aid we give to the Israeli government each year (and all other foreign aid as well, including the money going to Egypt and Colombia). None of the "progressive" Democrats care about justice for the Palestinians or dare to question the power of the pro-Israeli-government lobby. Congressman Paul does.

None of the leading Democrats voted against the Iraq War or the Patriot Act. Paul voted against both. All of the leading Democrats have voted time and again to fund the war in Iraq, thereby ceding the only power they have to end the war. Paul has always voted against Defense Department appropriations which include funding for the war. Unlike leading Democrats in the Clinton–Gore-Kerry tradition, Ron Paul opposes the death penalty because he believes in the sanctity of life.

Only Ron Paul funds his campaign without the assistance of PACs and the corporate rich. There is simply no other Democrat, including John Edwards, who has an equal record when it comes to relying on grassroots support, opposing plutocratic policies, and earning the enmity of Big Business. This is why the Wall Street Journal and FOX News detest the "Ron Paul Revolution." The revolution includes stripping the overprivileged of many of their political and economic privileges. While the Manhattan-K Street-Hollywood crowd disdain Paul, supporters working on his behalf raise $6 million in a single day from the "common people" (average contribution: $100). If that's not democracy at work, I don't know what it is.

Ron Paul opposes both the warfare state and the welfare state. The welfare state includes much-publicized handouts to poor people (although far fewer than in the past, thanks to the Bill Clinton–Newt Gingrich gutting of AFDC), but even more importantly it includes middle-class entitlements and billions in taxpayer giveaways to the wealthy. Paul's opposition to NAFTA and GATT is motivated not only by his belief in national sovereignty, but also by his suspicion of cozy deals between Big Government and Big Business.

Ron Paul does not play favorites. He wants to end corporate welfare across the board. His monetary policy of using sound, constitutional money would help the poor by curtailing the hidden "inflation tax." A Paul effort to eliminate the U.S. Department of Education and other manifestations of federal big government would make special interest lobbies unhappy but they would not hurt poor or average citizens. On the contrary, it would free up money and power to deal with problems at the state and local levels. Lower levels of government have been far more "progressive" than the feds in most policy areas over the years, in things ranging from corporate regulation to health policy to medicinal use of marijuana.

Ron Paul is not perfect as either a candidate or a policy maker. I don't agree with him on everything. He has a few personal flaws and weaknesses. He has some disreputable supporters (e.g., racists and anti-Semites who like his opposition to globalization and plutocracy). As I write in my book, in contrasting the mainstream media's depiction of politicians like John Kerry to more genuine liberals like Cynthia McKinney, "The disingenuous nature of their careers and campaigns is politely ignored while the flaws, real and imagined, of party mavericks are trumpeted by the smug talking heads and the frothy news magazines." (p. 256) As with possible Green Party candidate McKinney, Paul's real and imagined flaws are in the process of being magnified by the mainstream media as his popularity rises.

Journalists with the corporate press are enthusiasts of war, empire, global capitalism, political correctness, Leviathan statism, and other respectable projects of the Power Elite. Such things are the antithesis of Ron Paul. If you're forming your opinion of Paul on the basis of coverage by the New York Times, The New Yorker, and NPR, it's not surprising that you think he's a "lunatic." If you listen carefully, you'll "learn" that he's not only a lunatic, but a dangerous "racist lunatic." It's not true, but the truth is irrelevant when the special interests of the wealthy and powerful are threatened.

Meanwhile, a perceptive leftist like Alexander Cockburn recently wrote, "Huckabee's single rival as a genuinely interesting candidate is another Republican, Ron Paul, who set a record a few days ago, by raising $6 million in a single day. Unlike Huckabee, Paul's core issues are opposition to the war and to George Bush's abuse of civil liberties inscribed in the U.S. Constitution. His appeal, far more than Huckabee, is to the redneck rebel strain in American political life – the populist beast that the US two-party system is designed to suppress. On Monday night Paul was asked on Fox News about Huckabee's Christmas ad, which shows the governor backed by a shining cross. Actually it's the mullions of the window behind him, but the illusion is perfect. Paul said the ad reminded him of Sinclair Lewis's line, that 'when fascism comes to this country it will be wrapped in a flag and bearing a cross.' In the unlikely event they had read Lewis, no other candidate would dare quote that line." (CounterPunch, December 22/23)

Even though they disagree on some policies, Cockburn can respect a Republican who publicly warns against imperialism and fascism, and who views the Constitution as a still-binding set of rules . . . instead of "just a G**-d***** piece of paper," as George W. Bush was quoted as saying to members of Congress in 2005.

I know it's hard for many to see the possibility of any good Republican, but it's worth remembering that the GOP heritage includes not only the plutocracy of Calvin Coolidge but also the democracy of Robert La Follette, not only the Wall Street of Thomas Dewey but also the Main Street of Robert Taft. Paul is in that La Follette-Taft tradition of anti-monopoly at home and non-intervention abroad. If the Gravel or Kucinich campaigns had caught fire during the past year, we would see some anti-war Republicans crossing party lines to support one of their candidacies as the vehicle of choice in 2008. Instead, we're seeing some Democrats backing Paul.

While the stray neo-Confederate may like Ron Paul, he is also the recipient of more African American support than any other Republican. Paul is backed by both realistic veterans and idealistic pacifists, Christians and atheists, John Birchers and NORML members. It's a kaleidoscope campaign – not of pandering or double-talking but of an honest commitment to an array of deeply held American values. Liberty and peace are popular. It's not a cult of personality like Obama.

Who's the real kook: the middle-class woman in Peoria concerned about the unconstitutional monetary system or the neoconservative in Washington who wants to remake the world in our image through the barrel of a gun? Who's the real threat: the yahoo in Mississippi who thinks multiculturalism is destroying our traditional culture or the corporate lobbyist who buys and sells elected officials? Who's the real xenophobe: the young person who doesn't want to tell people in other countries how to live their lives or the intellectual who turns our nation into the pariah of the world by sending Americans off to kill foreigners?

I don't expect that you'll support Ron Paul during the primary season, but I wanted you to at least understand why he could have some appeal for a three-time Nader voter such as myself. Many anti-war, pro-limited-government, grassroots democracy advocates will support Edwards, Obama, or some other mainstream candidate in the coming months, but I think we're selling ourselves short when we do so. We may well end up with crumbs from the table in the end because that's how the system is set up. But if we start the process by making it clear that we'll settle for crumbs, we ensure that we'll never get anything more. Radical change will never happen because the Establishment understands that progressive voters can be taken for granted. In the end, most will fall into line behind the candidate with the (D) behind her/his name, no matter how unprogressive s/he is.

To me, voting for Kucinich, Gravel, McKinney, or Paul makes some sense even though they're unlikely to win. At least we're asking for something honest and principled during the first round of voting. Ron Paul isn't the perfect candidate and his Jeffersonianism is not as full-bodied as I would prefer (e.g., he's too weak on the ecological dimension), but at least he's a step in the right direction and his ability to attract a wide range of grassroots support is commendable. He's not the only good choice, but he's no lunatic and there is some logic behind his campaign. It's not everything, but it is something. In a rigged system with a populace divided by secondary issues and exploited by a bipartisan elite, it may be the best we can do in 2008.

The Ron Paul campaign does not represent a madness brought on by the moon. It's closer to the truth to say it's a hopeful manifestation of the sun shining on the political realm. It brings some clarity and accountability to government.

January 4, 2008

Jeff Taylor [send him mail] is a political scientist. His book Where Did the Party Go?: William Jennings Bryan, Hubert Humphrey, and the Jeffersonian Legacy was published last year by University of Missouri Press. He contributed a chapter to the book A Dime's Worth of Difference (Cockburn and St. Clair, eds.). Visit his website.

A new contrarian spirit rules American politics

by Justin Raimondo

What characterizes the political season so far is what we might call frontrunner collapse. The candidates we were all told were the nearly inevitable winners – Hillary Clinton and Rudolph Giuliani – are now hanging on for dear life. Obama is currently pulling ahead of Clinton in Iowa, and the two are neck-and-neck in New Hampshire. John Edwards is also making gains, and before long it may become apparent that the dynastic succession of Queen Hillary to the throne has been upended by those nettlesome noisome peasants-with-pitchforks who insist on defying the conventional wisdom and going their own way. On the Republican side, the same pattern applies, and in spades: all the Major Candidates have slid down into the abyss, with Former Frontrunner Fred "Not Ready for Prime Time" Thompson relegated to the realm of single digits. Each "frontrunner," in succession, has been dethroned and cast aside, only to be replaced by a preacher whose brand of backwoods populism is more appealing to what Andrew Sullivan calls the party's "Christianist" base. Yet it isn't "Christianism," whatever that is, that explains Mike Huckabee's primary appeal. He has broken through to frontrunner status, in spite of the pundits' disdain, and in large part precisely because of it. The Huckabee "surge" is part of a growing populist backlash against the alleged "wisdom" of our failed elites in politics and the media. These are the same elites who have now, according to Paul Krugman, decreed that: "Even now, it's better for your reputation not to have noticed until, say, 2005 that we had some dangerous people running the country. If you noticed earlier — or, worse yet, you caught on to the administration's essential mendacity right from the beginning — it's not a sign that maybe you had good judgment. It shows that you were an irrational Bush hater." Obama, of course, was one of those "premature" anti-war types, and so was another fast-rising political figure – Ron Paul, whose warnings of the disaster that would ensue if we invaded Iraq our longtime readers have been enjoying almost since this site's inception. Now that public opinion has caught up to their prescience, these two outsiders are gaining ground – and Huckabee gains from this pro-outsider phenomenon, which is fueling his rising poll numbers, although he may fade as voters focus on his actual views. The paradigm that best describes what is happening on the ground in Iowa, New Hampshire, and beyond, isn't "right" versus "left," "Christianism" versus secularism, or red-versus-blue state mindsets, but populist demands for change against our hidebound, insular, arrogant elites in the media as well as in government. And no issue has underscored the growing chasm between the people, on the one hand, and the Washington-New York axis of power, on the other, than the war in Iraq. The intersection of the war, as an issue, with the growing populist rebellion against the status quo portends a revolution. The elites – who sold us the disastrous Iraq war, in the first place, and still believe in the necessity of "victory" – realize this perfectly well, and have done everything in their power to neutralize the war issue, at least insofar as it impacts the presidential horserace: "Dems no longer fight the battle of Iraq," one news story informs us: "The successes of President Bush's troop surge in Iraq are quieting things down in another, unexpected place: the Democratic campaign trail in Iowa and New Hampshire." Yeah, sure – the great "success" that will cost us as much as two trillion dollars and keep us in Iraq for the next fifty years or so. A few more "successes" like that, and we are done for! The media is now telling us that the Iraq war is no big deal, and isn't really an issue anymore, and yet the consequences of that war are defining the political landscape even as they speak. You'll remember that opponents of the invasion predicted that war with Iraq would destabilize the entire region and ripple outward from Baghdad – and we are seeing that now in the turmoil ripping apart Pakistan, as the assassination of Benazir Bhutto underscores the fragility of an ostensibly pro-US regime that has access to nuclear weapons. At any moment, a war-weary American public could be confronted with a chorus of calls for the US to intervene militarily in Pakistan – as Obama has previously suggested. With the prospect of a regional war in the Middle East looming larger, the foreign policy issue – which many wrongly believe has been taken off the table this election season – is still front and center. Yet none of the candidates is really taking a truly populist, i.e. antiwar position on this question. Polls show that the majority of Iowa Republicans want us out of Iraq inside of a year – and yet how much of the Republican presidential field would agree with that proposition? On the Democratic side, the antiwar/anti-interventionist sentiment is even stronger – and yet, again, none of the "major" candidates seem to be reflecting that, opting, instead, to echo elite (i.e. interventionist) opinion. William Schneider of the neocon-controlled American Enterprise Institute intones from his perch at CNN that "experience" is what matters most, now that Pakistan is about to explode, and the League of Former Frontrunners chimes in, with McCain, Giuliani, and Hillary all rushing to tell us that they know Musharraf, and Rudy opining that he can identify with what happened in Pakistan, because, after all, in case you haven't heard, he was right there when the terrorists attacked us on 9/11 …. Again, however, the American people are in no mood to listen to these alleged Voices of Experience: they are in what might fairly be called a contrarian mood, and just aren't heeding all the sage advice coming from the many mouths of the Establishment. Which is why Ron Paul, in his interview with Wolf Blitzer, hit a home run when he said that he would certainly not send US troops, in "response" to the alleged "crisis" caused by the death of Bhutto. Blitzer looked incredulous, as if he could hardly believe his ears, and yet the ordinary American – who is by now extremely cynical when it comes to "crisis"-mongering – is apt to see the whole thing as overblown. Which, in reality, it is: "extremists" of the al-Qaeda variety are not about to get their hands on Pakistan's nukes, either by taking over the government – pro-Islamist parties are a tiny minority in Pakistan – or by any other means. The demand to "do something" was explicit in Blitzer's question to Paul: "What would you do, as President," in response to this alleged crisis. Paul's answer, which essentially boils down to "what ‘crisis?'", is not only true but also has political resonance. The irony is that the very people who are ringing the alarm over this oversold "threat" are also trying to destabilize the government of President Pervez Musharraf – the only real bulwark against Islamism. The "dump Musharraf" movement extends from liberal Democrats like Bill Richardson, to extreme neocons outside the administration who accuse Musharraf of collaborating with terrorism – this in spite of the fact that the Pakistanis have captured more top Al Qaeda operatives than all the Western countries combined. Paul rightly dissented from this view, while putting the blame for the rise of extremism right where it belongs – on US government support for Pakistan's dictatorship, and our interventionist policy in the region. As a force in American politics, the new contrarianism is manifesting itself in a number of ways: the rise of Huckabee, the enthusiasm for Obama, the Ron Paul "Revolution," and the corresponding failure of the "mainstream" Establishment-approved candidates to catch on. All these aspects of the emerging American zeitgeist are indications that the American people are fed up. They have had it up to here with the "experts" – all experts. It was the rising class of know-it-alls – ensconced in thinktanks and government offices inside the Washington Beltway – who told us we were on our way to a "cakewalk" in Iraq. They're also done with pundits like Bill Kristol and Charles Krauthammer who were dead wrong about the war, and whom they regard as discredited and no longer worth listening to: both have recently been dropped by Time magazine because, after all, as we libertarians like to point out, the market rules. The lessons of the past few years have been deeply imprinted on the American psyche and are not about to be erased by a new round of media scare-mongering, or any number of paid political advertisements. The elites are in deep trouble, and they know it. Yet they aren't going to just give up and go quietly …. While ideologues of the "left" and the "right" desperately try to shore up the crumbling remnants of the old political paradigm – including the two-party system, as well as the archaic "liberal/conservative" dichotomy – by denouncing heretical "outsiders," nothing can prevent a veritable stampede of defections from the ranks of the "approved" candidates and causes. What we are seeing is a massive loss of faith in American institutions, and not just politically but also culturally: after all, wasn't it the "mainstream" media that sold us the Bush administration's lies in the run-up to war with Iraq? Didn't the New York Times, the newspaper of record, act as a transmission belt for interventionist propaganda, which later turned out to have been a massive hoax? The question is: can the American political system, as rigged as it is, accommodate this upsurge of the contrarian spirit? Or will the two party system – encoded in law as well as custom – effectively strangle growing grassroots discontent? If the latter, then the system – and democracy in America – will face some major challenges in the not-too-distant future.

But is it too little, too late?

by Justin Raimondo

The Democratic presidential primary has been a real yawner, and I say that with a high degree of disappointment. After all, one never expected that the most vocal, visible, and credible antiwar voice to be raised this election season would come from the mouth of a Republican – a nine-term congressman from Texas, no less – who has ignited what appears to be a GOP version of the Eugene McCarthy movement during the Vietnam War era. Obama appears to be drowning in the sweet sauce of his own bromides, and none of the others has really ignited the supposedly antiwar Democratic base. Until this point, John Edwards has been a disappointment, with his flat-out refusal to say that he'd get us out of Iraq by the end of his term in office. However, if only to jazz up this snoozer of a race – and perhaps even revive interest in his faltering campaign – Edwards has decided to take on the War Party. In a recent speech at the University of Iowa, he used the "n"-word. No, not that word, silly, this one: "George Bush, Dick Cheney, and the neocon warmongers used 9/11 to start a war with Iraq and now they're trying to use Iraq to start a war with Iran. And we have to stop them." Wow! Where do I sign up? Edwards seems to understand what Obama doesn't want to know: that politics is all about Good Guys versus Bad Guys, and you can't have one without the other. Who started this war? Wholied us into it? Whowants to escalate it and extend it to Iran? People know, by now, the answers to these questions, and they are up for hearing some real, down-home outrage directed at the Bad Guys, otherwise known as the neoconservatives. After all, it's no secret who was plumbing for war for a solid decade and beating the drums ever louder after9/11. This war didn't come about spontaneously; it wasn't an act of God or nature, like Hurricane Katrina. It was planned, hoped for, wished for, and carried out by a very definite – and relatively small – group of men and women who had (and have) the ear not only of the president but of the major Washington power players, with the nexus of their network centered in the vice president's office. Naming the enemy is the first act of a war, and politics, as we all know, is merely war without the bloodshed (though not always). Edwards has not only named them, but he gives us a capsule history of the great evil they have wrought: "To understand exactly what the administration is trying to do with Iran, we need to go back to the beginning of the Bush administration and look at how they took us to war with Iraq. "In the spring of 2002, the nation was struggling to recover from the devastating terrorist attacks of 9/11. At the same time, a group of Bush administration neoconservatives, like Dick Cheney and Paul Wolfowitz, were strategizing for ways to start a war with Iraq. And suddenly, instead of reacting to 9/11 by working to protect America from terrorists, they saw a political opportunity to promote their right-wing ideological agenda and demonize anyone who disagreed with them." Okay, so Edwards doesn't really understand what a neocon is: he's a politician, after all, not a political scientist. Of course Cheney isn't a "neocon" – in the same way a dog is not a flea. Cheney has neocons, however, just like man's best friend is often beset by similar pests. The relationship is parasitic – or maybe symbiotic. However, you get the general idea: Edwards has correctly diagnosed the problem – the neocons – and charted their path of destruction as they diverted us away from our legitimate goal of fighting the perpetrators of 9/11, then used that tragedy to fuel their own crusade to turn Iraq into either a Jeffersonian republic or a parking lot – with the latter clearly winning out. And Edwards has certainly got the ideology of neoconservatism down: "Here's what you have to know about these neocons – they think might makes right, every time. They believe in domination, not debate. They think America should use our military power to impose our will wherever and whenever we want. They use a sledgehammer when we should use a scalpel. "And here's what you need to know about George Bush's foreign policy – it's written by these neocons, lock, stock, and barrel." He uses the "n"-word a total of seven times in this short speech, inevitably coupling it with another important descriptive term – "radical," as in: "So after 9/11, instead of focusing on the terrorist threat, George Bush started promoting a radical new neoconservative doctrine he called, quote, 'preventive war' – which would soon become part of his argument for war in Iraq." Edwards clearly understands the urgency of his antiwar appeal: his clarion call to stop the war in Iraq before it spreads to Iran demonstrates that he knows what are the implications of the status quo – which he correctly identifies with Hillary Clinton. Unlike Obama, he calls Clinton out not only on Iraq but on the question of war with Iran: "Senator Clinton wants to keep combat troops in Iraq to perform combat missions in Iraq. She will extend the war. I will end the war. Only in Washington would anybody believe that you can end the war and continue combat. On a matter as serious as Iraq, we need honesty and real answers – not more double-talk." Finally, someone in the Democratic dog fight is saying what needs to be said: very clever of him to tie Hillary in with the neocons. It remains for me to point out rave reviews for her coming from Charles Krauthammer, David Brooks, Fred Barnes, and Rich Lowry, not to mention the largesse coming her way from the military-industrial complex. And of course the core of her support among the Democratic Party establishment is the "centrist" Democratic Leadership Council, which served as the launching pad for Bill's White House bid. The DLC is home to the last of the Scoop Jackson Democrats – i.e., neocons who never made the transition to GOP politics, but instead stayed in the party long after it had been supposedly McGovernized, emerging, like moles blinking in the sunlight, after 9/11. I have nothing in common with Edwards' domestic politics, which seem like more of the same old "progressive" laundry list of big government projects that we can neither afford nor would desire even if we weren't bankrupt, but that is neither here nor there. What matters in this election is the foreign policy stance of a candidate, and Edwards is saying all the right things: he has pledged to "completely withdraw all combat troops within 9 to 10 months" of taking office. You can't ask for much more than that. If you're a Democrat, and you consider yourself antiwar, it's clear who your candidate has got to be. However, Edwards is staking out a principled position quite late in the game, and I have to say that it's not just a matter of high principle with him, although he clearly does believe what he's saying. In naming the neocons as the source of the problem – as the Bad Guys in the narrative he's selling – Edwards seems to be imitating another come-from-behind candidate whose success in terms of "buzz" (and fundraising) he would do well to replicate. Of course, I'm talking about Ron Paul – the first candidate to pin the blame for this disastrous war where it rightly belongs, and go after the neocons by name. Oh well, it's the sincerest form of flattery, and libertarians can take it as a compliment. Now if only some of the other Democrats would learn from Ron, take off the kid gloves, and start throwing some real punches…

House Passes Thought Crime Prevention Bill

The U.S. House of Representatives recently passed HR 1955 titled the Violent Radicalization and Homegrown Terrorism Prevention Act of 2007. This bill is one of the most blatant attacks against the Constitution yet and actually defines thought crimes as homegrown terrorism. If passed into law, it will also establish a commission and a Center of Excellence to study and defeat so called thought criminals. Unlike previous anti-terror legislation, this bill specifically targets the civilian population of the United States and uses vague language to define homegrown terrorism. Amazingly, 404 of our elected representatives from both the Democrat and Republican parties voted in favor of this bill. There is little doubt that this bill is specifically targeting the growing patriot community that is demanding the restoration of the Constitution.

First let’s take a look at the definitions of violent radicalization and homegrown terrorism as defined in Section 899A of the bill.

The definition of violent radicalization uses vague language to define this term of promoting any belief system that the government considers to be an extremist agenda. Since the bill doesn’t specifically define what an extremist belief system is, it is entirely up to the interpretation of the government. Considering how much the government has done to destroy the Constitution they could even define Ron Paul supporters as promoting an extremist belief system. Literally, the government according to this definition can define whatever they want as an extremist belief system. Essentially they have defined violent radicalization as thought crime. The definition as defined in the bill is shown below.

`(2) VIOLENT RADICALIZATION- The term `violent radicalization' means the process of adopting or promoting an extremist belief system for the purpose of facilitating ideologically based violence to advance political, religious, or social change.

The definition of homegrown terrorism uses equally vague language to further define thought crime. The bill includes the planned use of force or violence as homegrown terrorism which could be interpreted as thinking about using force or violence. Not only that but the definition is so vaguely defined, that petty crimes could even fall into the category of homegrown terrorism. The definition as defined in the bill is shown below.

`(3) HOMEGROWN TERRORISM- The term `homegrown terrorism' means the use, planned use, or threatened use, of force or violence by a group or individual born, raised, or based and operating primarily within the United States or any possession of the United States to intimidate or coerce the United States government, the civilian population of the United States, or any segment thereof, in furtherance of political or social objectives.

Section 899B of the bill goes over the findings of Congress as it pertains to homegrown terrorism. Particularly alarming is that the bill mentions the Internet as a main source for terrorist propaganda. The bill even mentions streams in obvious reference to many of the patriot and pro-constitution Internet radio networks that have been formed. It also mentions that homegrown terrorists span all ages and races indicating that the Congress is stating that everyone is a potential terrorist. Even worse is that Congress states in their findings that they should look at draconian police states like Canada, Australia and the United Kingdom as models to defeat homegrown terrorists. Literally, these findings of Congress fall right in line with the growing patriot community.

The biggest joke of all is that this section also says that any measure to prevent violent radicalization and homegrown terrorism should not violate the constitutional rights of citizens. However, the definition of violent radicalization and homegrown terrorism as they are defined in section 899A are themselves unconstitutional. The Constitution does not allow the government to arrest people for thought crimes, so any promises not to violate the constitutional rights of citizens are already broken by their own definitions.

`SEC. 899B. FINDINGS.

`The Congress finds the following:

`(1) The development and implementation of methods and processes that can be utilized to prevent violent radicalization, homegrown terrorism, and ideologically based violence in the United States is critical to combating domestic terrorism.

`(2) The promotion of violent radicalization, homegrown terrorism, and ideologically based violence exists in the United States and poses a threat to homeland security.

`(3) The Internet has aided in facilitating violent radicalization, ideologically based violence, and the homegrown terrorism process in the United States by providing access to broad and constant streams of terrorist-related propaganda to United States citizens.

`(4) While the United States must continue its vigilant efforts to combat international terrorism, it must also strengthen efforts to combat the threat posed by homegrown terrorists based and operating within the United States.

`(5) Understanding the motivational factors that lead to violent radicalization, homegrown terrorism, and ideologically based violence is a vital step toward eradicating these threats in the United States.

`(6) The potential rise of self radicalized, unaffiliated terrorists domestically cannot be easily prevented through traditional Federal intelligence or law enforcement efforts, and requires the incorporation of State and local solutions.

`(7) Individuals prone to violent radicalization, homegrown terrorism, and ideologically based violence span all races, ethnicities, and religious beliefs, and individuals should not be targeted based solely on race, ethnicity, or religion.

`(8) Any measure taken to prevent violent radicalization, homegrown terrorism, and ideologically based violence and homegrown terrorism in the United States should not violate the constitutional rights, civil rights and civil liberties of United States citizens and lawful permanent residents.

`(9) Certain governments, including the United Kingdom, Canada, and Australia have significant experience with homegrown terrorism and the United States can benefit from lessons learned by those nations.

Section 899C calls for a commission on the prevention of violent radicalization and ideologically based violence. The commission will consist of ten members appointed by various individuals that hold different positions in government. Essentially, this is a commission that will examine and report on how they are going to deal with violent radicalization and homegrown terrorism. So basically, the commission is being formed specifically on how to deal with thought criminals in the United States. The bill requires that the commission submit their final report 18 months following the commission’s first meeting as well as submit interim reports every 6 months leading up to the final report. Below is the bill’s defined purpose of the commission. Amazingly they even define one of the purposes of the commission to determine the causes of lone wolf violent radicalization.

(b) Purpose- The purposes of the Commission are the following:

`(1) Examine and report upon the facts and causes of violent radicalization, homegrown terrorism, and ideologically based violence in the United States, including United States connections to non-United States persons and networks, violent radicalization, homegrown terrorism, and ideologically based violence in prison, individual or `lone wolf' violent radicalization, homegrown terrorism, and ideologically based violence, and other faces of the phenomena of violent radicalization, homegrown terrorism, and ideologically based violence that the Commission considers important.

`(2) Build upon and bring together the work of other entities and avoid unnecessary duplication, by reviewing the findings, conclusions, and recommendations of--

`(A) the Center of Excellence established or designated under section 899D, and other academic work, as appropriate;

`(B) Federal, State, local, or tribal studies of, reviews of, and experiences with violent radicalization, homegrown terrorism, and ideologically based violence; and

`(C) foreign government studies of, reviews of, and experiences with violent radicalization, homegrown terrorism, and ideologically based violence.

Section 899D of the bill establishes a Center of Excellence for the Study of Violent Radicalization and Homegrown Terrorism in the United States. Essentially, this will be a Department of Homeland Security affiliated institution that will study and determine how to defeat thought criminals.

Section 899E of the bill discusses how the government is going to defeat violent radicalization and homegrown terrorism through international cooperation. As stated in the findings section earlier in the legislation, they will unquestionably seek the advice of countries with draconian police states like the United Kingdom to determine how to deal with this growing threat of thought crime.

Possibly the most ridiculous section of the bill is Section 899F which states how they plan on protecting civil rights and civil liberties while preventing ideologically based violence and homegrown terrorism. Here is what the section says.

`SEC. 899F. PROTECTING CIVIL RIGHTS AND CIVIL LIBERTIES WHILE PREVENTING IDEOLOGICALLY-BASED VIOLENCE AND HOMEGROWN TERRORISM.

`(a) In General- The Department of Homeland Security's efforts to prevent ideologically-based violence and homegrown terrorism as described herein shall not violate the constitutional rights, civil rights, and civil liberties of United States citizens and lawful permanent residents.

`(b) Commitment to Racial Neutrality- The Secretary shall ensure that the activities and operations of the entities created by this subtitle are in compliance with the Department of Homeland Security's commitment to racial neutrality.

`(c) Auditing Mechanism- The Civil Rights and Civil Liberties Officer of the Department of Homeland Security will develop and implement an auditing mechanism to ensure that compliance with this subtitle does not result in a disproportionate impact, without a rational basis, on any particular race, ethnicity, or religion and include the results of its audit in its annual report to Congress required under section 705.'.

(b) Clerical Amendment- The table of contents in section 1(b) of such Act is amended by inserting at the end of the items relating to title VIII the following:

It states in the first subsection that in general the efforts to defeat thought crime shall not violate the constitutional rights, civil rights and civil liberties of the United States citizens and lawful permanent residents. How does this protect constitutional rights if they use vague language such as in general that prefaces the statement? This means that the Department of Homeland Security does not have to abide by the Constitution in their attempts to prevent so called homegrown terrorism.

This bill is completely insane. It literally allows the government to define any and all crimes including thought crime as violent radicalization and homegrown terrorism. Obviously, this legislation is unconstitutional on a number of levels and it is clear that all 404 representatives who voted in favor of this bill are traitors and should be removed from office immediately. The treason spans both political parties and it shows us all that there is no difference between them. The bill will go on to the Senate and will likely be passed and signed into the law by George W. Bush. Considering that draconian legislation like the Patriot Act and the Military Commissions Act have already been passed, there seems little question that this one will get passed as well. This is more proof that our country has been completely sold out by a group of traitors at all levels of government.