It was predictable

Euro-Collapse

By CONRAD BLACK

The admirable Seth Lipsky of the New York Sun, formerly of the Wall Street Journal and the (English-language) Jewish Forward, seems to be the first American commentator since Walter Lippmann to recognize the prescience, in post–World War II matters, of Charles de Gaulle. He was referring especially to de Gaulle’s recommendation of a restored gold standard as de Gaulle and his chief economic adviser, Jacques Rueff, feared what would happen to the world’s currencies if they were valued only in relation to one another.

Their fear was not misplaced; the U.S. dollar, euro, and yen are all engaged in wholesale inflation, thinly disguised by phony calculations of domestic inflation and by relatively stable relationships between one another, because they are in almost free fall together, like three mountain climbers all sliding down the face of the peak and toward a hard landing.

As Ron Paul pointed out to Federal Reserve chairman Ben Bernanke a few weeks ago, in eight years the U.S. dollar has lost 85 percent of its value opposite an ounce of gold, and this is not the roseate picture revealed by official inflation figures.

I am not convinced that a return to the gold standard is the answer, as gold is an impractical metal and this would confer undue economic influence on speculators, prospectors, and mining engineers. My suggestion is for a composite standard: one-third gold, one-third oil, and one-third a basic consumer-price, essential-spending, basket. Any such yardstick will reveal the distressing crash of the value of units of currency and anything producing a fixed yield: It is a tale not only of scandalous official profligacy and failed stewardship of the value of savings and many categories of investment, but also of official dissembling, misinformation, and pusillanimity.

It is of a piece with the great drive of Presidents Clinton and George W. Bush to swallow the free lunch of expanded family home ownership (and payoffs to the building trade unions and residential-real-estate speculators), by ordering and legislating pelagic immensities of non-commercial (i.e. worthless) residential mortgages.

Charles de Gaulle was born in Lille in 1890, to the family of a monarchist schoolteacher. De Gaulle was a Flaubertesque haut bourgeois, as well as an officer of the French army when it was rivaled only by the German army as the greatest in the world, and was unrivaled as the most storied army of all. He was imbued with the middle-class concept of the value of savings, frugality, pay-as-you-go. To him, greatness and security could never be bought or sustained on the installment plan. And mere politicians, whom he considered a lesser breed swimming in a sticky fondue of moral weakness and opportunism, could never be trusted to resist the temptation to pander, devalue, or seek short-term gain.

De Gaulle’s farsightedness was not confined to national projections of household economics; he also warned of the dangers of Euro-integration. He was the chief architect of the Franco-German friendship treaty of 1963, and — as a veteran of the terrible hecatomb of the Battle of Verdun and a World War I prisoner of war of the Germans, as well as the founder of the Free French in World War II — he knew as well as anyone the horrors of the centuries-long conflict along the Rhine. He also favored a common market and the end of violent ancient rivalries among the many European nationalities. But he always saw a homogenized, centralized Europe as a dangerous fantasy. He believed that a Continental interest, composed of as many as 20 or 25 languages and cultures, would be only an alphabet gruel, blended and stirred by faceless bureaucrats from the little countries, and not representing any real popular interest at all.

He thought that the original Common Market of France, West Germany, Italy, and Benelux could be used by France, effectively maneuvering between the U.S. and the USSR, and between Germany and the Russians, to project and amplify France’s — and, more particularly, his own — influence. Up to a point, while the U.S. was mired in Vietnam, and before European Communism became too enfeebled to challenge the West (which de Gaulle also foresaw), he was correct. But he believed that an unlimitedly accessible Europe would become an incoherent Tower of Babel, governed by bureaucratic intermeddlers in the name of feckless politicians, and liable to excessive outside influence, including from the U.S.

He would never have subscribed to the romantic fraud that Europe, with its many nationalities standing on each other’s shoulders, could have resumed its place as the political epicenter of the world that it had forfeited when it trooped deliriously off to war in the summer of 1914. But it is the merest speculation to suppose that even de Gaulle would have foreseen that an over-united Europe would so soon degenerate into a dyspeptic, demographically dwindling, Islam-raddled lumpen mass of welfare addicts. From 1965, when he was reelected president of France, to now, the reproductive rate of native Europeans of traditional stock has declined by about 40 percent, to levels that will lead to an extinction as easily plotted as that of the American carrier pigeon (which darkened the skies in its numbers in Audubon’s time, and passed into posterity at the Cincinnati Zoo in 1922). GDP growth in Europe in the first three post-war decades fell by over 50 percent over the last three. As Bret Stephens recently pointed out in the Wall Street Journal: “In 1973, Europeans worked 102 hours for every 100 worked by an American. By 2004 they worked just 82 hours for every 100 American ones.”

All the proud, confident predictions of Europe as a world force have mercifully almost ceased. Britain and France ran out of air-to-ground missiles to fire at Qaddafi after ten days; the turbines in the aircraft carrier Charles de Gaulle don’t work as well as did those in the great liner Normandie, which took the Blue Riband in 1935. Britain is building two aircraft carriers, but is uncertain of having sufficient funds to put aircraft on them. The last European military gasp was Tony Blair’s contribution of 20,000 men to the Iraq War.

Even de Gaulle would not necessarily have foreseen that a united European currency zone would accept insolvent countries (which had not supported a hard currency for 3,000 years) being overpaid on entry based on false prospectuses. No one could see that, in 2011, migrant workers, after twelve weeks of evading police, would enjoy the same benefits as permanent workers; that artists would, for 70 years, receive a share in the resale profits on sales of their work; that, if a small enterprise laid off one of six workers, all six must reapply for work.

The worst nightmares of de Gaulle and other Euroskeptics have been exceeded. The United States carried the luxury-goods industries of France and Italy and the engineered-products industries of Germany on its back for decades, but it will not and cannot do it anymore. Decline is reversible; more complicated is a death wish as thoroughly installed in the attitudes and practices of whole peoples as that of most of Europe.

If Europe cannot spark a demographic renewal, with a work force comprising fully half the people, flexible labor markets, tax rates that encourage savings and investment, an end to stealthily galloping inflation, and a reactivation of the economic and military muscle that alone confer credibility, it will quietly perish.

The leaders of Britain, Germany, France, and Italy, however unlikely they may be, should put the hopeless and dangerously misguided European Commission in trusteeship; put Giscard d’Estaing’s cynical monstrosity of a constitution to the shredder; send the dirigiste apparat that regulates everything down to the supermarket display of bananas and the size of condoms, packing; stop propping up defaulting countries and support the lending banks instead; and let all member states keep the common market and cede only as much jurisdiction as they wish.

Not to be forgotten or forgiven prematurely is the blindness of American policymakers, who, except for Nixon and Reagan, bought into this Euro-fable. The only cause for political optimism Obama’s floundering America now has is a glance at how much farther down the well Europe is.

Pimps and bureaucrooks

Roundup of Europe’s Meltdown

 

by Taki

OK. Things are heating up in the old continent after a boiling summer. October will be the cruelest month, as the poet didn’t exactly say, but it might also be crunch time. Europeans seem more sophisticated than the parochial, law-abiding, taxpaying suckers in the good old US of A, but they’re no better than the pompous, self-proclaimed elite within the Beltway. Multiculturalism (human rights for those who don’t respect others’ human rights), high taxation, and open borders are what the bureaucrooks in Brussels are all about. So what is there to say about the old continent, except that it’s a rotten ship ready to sink unless Carla Bruni-Sarkozy has triplets? (It will ensure Nicolas Sarkozy’s reelection next year). Talk about a gang that can’t shoot straight.

Earlier this year, a failed asylum-seeker in England who claimed to be a lesbian won an injunction against deportation. A Ugandan illegal, she said she would face persecution in her homeland for seeking sexual solace with women. A judge, however, ruled that she wasn’t a lesbian after all and was to be removed from the green and pleasant (just joking) land of England. But the decision was overturned by a higher court that ruled she still “could be suspected of being Sapphic,” a word that the Ugandan did not comprehend. She remains in Britain on benefits, as does a man from Togo who has committed numerous crimes against women and children but claims that in Togo he’s a no-no, hence a possible victim.

“I don’t understand why European governments and courts continue to indulge this scum.”

How do you run a country when well-known criminals with records claim persecution back home and are allowed to stay in Europe thanks to the EU Human Rights Act’s unelected judges? When I was busted at Heathrow Airport 27 years ago for carrying two grams of cocaine in my pocket, I was warned I could be deported after serving my four-month sentence in one of Britain’s toughest prisons. The Home Secretary at the time waived the rule because of my previous exemplary conduct—not even the proverbial parking ticket in either continent—so I was allowed to stay and did not need to appeal. The great Maggie Thatcher told me years later that although she was appalled to hear that I might be deported, she had done nothing about it. Rules were rules. But that was then, this is now.

Which brings me to Kelly Brook, a model whose figure—to borrow Raymond Chandler’s words—a bishop would smash in a priceless church stained-glass window to peek at. Kelly is a naughty girl, and why not? A large poster of the Playboy model posing as a large-breasted angel was recently defaced by two young men because she pouted provocatively while thrusting her heaving chest in their direction. The poster was on the side of a London bus shelter. That is when Mohammed Hasnath and Muhammed Tahir went to work. They painted a burqa over her, telling the fuzz who arrested them that it was a sin for a woman to be uncovered in public. They paid a small fine and were set free. Muslims regularly deface posters in Europe with impunity on decency grounds. Hasnath said to the hacks covering the case that if non-Muslims were to look at their women in a lascivious manner, blood would be spilled. That, of course, does not stop the myriad Saudi and Kuwaiti kleptocrats who have overrun Britain to ogle white women and send their pimps over to try and pick them up. What is good for Mohammed Bouf Kaka does not apply to John Q. Smith.

Hasnah and Tahir remind me of those Victorian women who used to cover up table legs lest they get men horny. Muslims in Europe now feel free to impose Sharia customs and laws into our society. There are areas in all major British cities which boast of “Sharia-Controlled Zones.” Hard to believe, but true. In France, especially in the northern working-class suburbs of Paris, the situation is even worse. I don’t understand why European governments and courts continue to indulge this scum. If I made a homosexual joke in any of the magazines I write for in Europe, I’d be fired quicker than you can say, “Christopher Street.” Yet Muslim preachers are allowed to scream abuse at gays daily and ask the faithful to behead them.

It is the same philosophy that permits Serena Williams to abuse umpires and linesmen in the US Open and call a Greek female umpire “unattractive.” (She then thought it over and added the word “inside.”) If I were any member of the Williams family, I’d keep the “u” word—as in “unattractive”—away from my vocabulary. Any white player would have been heavily fined or suspended; Williams was fined 2,000 devalued greenbacks, a sum she spends on bubble gum for her and her entourage per week.

These were some light anecdotes about the sinking old continent (plus one about the sinking new continent) and how unelected EU officials and judges have turned the old lady into a laughingstock for the…Chinese.

Now we come to money. Europe is totally broke except for the Germans, who finally have the opportunity to take over the continent without a single Wehrmacht grenadier being killed. If the euro is to survive, the Germans will have to bail out the rest of the countries. The price will be for Germany to take sufficient control over the indebted countries. Personally I’d be delighted, but there are others with long memories. Politically, there is no hope that a fiscal union would save the euro. Yet the bureaucrooks that run the EU insist on it. Again, I’d love to see the euro disappear as long as those lunch-bucket pilferers and smiling wallet-lifters who run Brussels disappear with it. But it ain’t gonna happen. The bureaucrooks married a whore—the EU—and dragged her down to their level. It was a good idea back in 1957. A trade agreement. Then the crooks decided the idiotic people were too stupid to see what they were doing—a dictatorship of bureaucrooks—and you know the rest. Have a good autumn.

Interesting Lies

Why Interest Rates Tell Lies About Inflation, Growth And Just About Everything Else

By Jerry Bowyer

The job of an interest rate is to tell us the truth about ourselves.

Interest rates are a kind of statistical mirror of the nation. If we are a nation of savers, interest rates tell us that by falling. If we are a nation that lives for the moment, consuming all we make and then some, interest rates will reveal that uncomfortable fact to us by rising. If we are a nation of promise breakers who borrows with no sense of the moral imperative to repay, our IOUs become worthless. If our word is our bond, bonds rise. If our word is not our bond, then bonds fall. If we prefer to have our central bank do our defaulting on our behalf, then eventually inflation risk premiums will reveal themselves throughout the yield curve.

Yes, interest rates tell us the truth about ourselves, and that’s exactly the problem. You see, we don’t want to hear the truth about ourselves. We can’t handle the truth. And like any dysfunctional system that can’t handle the truth, we need an enabler.

Our chief enabler is our own central bank. When credit is short because capital accumulation is not occuring, our central bank creates credit out of thin air. When savings rates rise, but savers hoard, rather than invest, the central bank pushes its newly created money out of short-run credit markets and out into the whole yield curve. They don’t try to deal with the underlying problem, which is that holding high cash balances are a rational response to anti-wealth creation policies and regime uncertainty. They simply declare the existence of an unexplained  “liquidity preference” because of a lack of Keynesian “animal spirits” and tell us that the only way to get out of a “liquidity trap” is easy money, and then they rev up the printing presses once again, as they are doing now.

But if large businesses are holding on to money, they have a reason to do so. And it’s not “greed.” Greed doesn’t cause you to save money in cash accounts yielding nearly zero percent. Fear does. But for the government to admit that it has caused a climate of fear is to admit an uncomfortable truth, and they can’t handle the truth. So they print money to tell themselves and us a lie, just as easy Fed policy and massive purchases of Treasury securities tell the government the lie that it is creditworthy.

One of the biggest lies that interest rates are telling us at the moment is that there is little danger of inflation in the United States. Two  commentators in particular have been making this case: Carpe Diem blogger Mark Perry of the American Enterprise Institute and New York Times columnist Paul Krugman. One of them is a terrific economist and the other one has a Nobel Prize. Both believe that the fact that the spread between inflation protected treasury bonds (TIPS) and conventional Treasury bonds is very low, indicates that the danger of inflation is quite low.

The reasoning behind this is that the difference between an interest rate which has to compensate you for the risk of inflation and an interest rate that does not have to compensate you for that risk is a measure of the market’s estimate of inflation risk. It is often called “inflation expectations” or sometimes the “break even rate.”

This argument would make perfect sense if Treasury bond rates were set by the market. But they are not. Treasury bond rates are set by government, and in the current situation the government’s policy has been to buy massive tranches of Treasury bonds as part of two rounds of quantitative easing. When the Fed buys almost a trillion dollars worth of bonds, unsurprisingly that sudden influx of money drives bond rates down to incredibly low levels.

The thing that is remarkable is not that the Fed can push rates down, but rather that someone could look at America’s tortuously distorted yield curve and think that the message it sends is the message of the market. Krugman, in fact, has gone so far as to argue that free-market economists are hypocritical because we don’t believe what the Treasury bond market is telling us. What market? The whole point of the QEs is for the Fed to expand its interest rate policy influence to the whole yield curve.

The statistics bear this out: The inflation expectations metric based on the spread between treasuries and TIPS correlates very badly with inflation, in some cases as badly as negative 80%. This is exactly what Hayek told us to expect. Inflation reflects itself first in a lowering of the actual rate of interest beneath the natural rate. The initial phase of inflation is low bond yields, then as the boom reveals itself to be false and price inflation begins to work its way into the system, rates rise to reflect inflation risk.

Probably the worst thing about all of this is that the Fed itself has been using this distorted metric to argue for easy money, claiming in several recent FOMC statements that there is subdued risk of inflation partly because the inflation expectations are low. How could they be so blind? Can’t they see the circularity of their argument? They set the rates! And then they use the rates which they’ve set to claim that the market does not see a risk of inflation. But the market does see it.

Gold prices are not set by government edict and even after the massive recent sell-offs, gold is still screaming “inflation”  to anyone who will listen. And as food prices continue their rise, the inflationary reality will over time become impossible to ignore, even by economists.

Economic Escherism.

Gary Becker: Conservative Intellectual Of The Welfare State

By Lawrence Hunter

In a recent Wall Street Journal op-ed, Nobel laureate and Hoover Institution economics professor Gary Becker made a telling comment that revealed the intellectual poverty of Establishment Conservatism in America today:

It is a commentary on the extent of government failure that despite the improvements during the past few decades in the mental and physical health of older men and women, no political agreement seems possible on delaying access to Medicare beyond age 65. No means testing (as in Rep. Paul Ryan’s budget road map) will be introduced to determine eligibility for full Medicare benefits, and most Social Security benefits will continue to start for individuals at age 65 or younger.

Becker is an intellectual heavyweight whose views are enormously influential inside the Washington conservative establishment.  It is, therefore, distressing that rather than offering a post-welfare-state vision for America based on more freedom and less government, Becker offers Establishment politicians suggestions on how to preserve and protect the welfare state—suggestions that only would exacerbate the government failure he laments.

The government failure Becker observes is sown into the very fabric of the redistributionist, interventionist welfare state that created Social Security and Medicare as gigantic government Ponzi schemes.  The dire fiscal straits confronting Social Security and Medicare are merely the surface manifestations of the deeper, inherent contradictions of the majoritarian welfare state.  The welfare state undermines economic growth by perverting incentives to work, save, invest and produce, and replaces these virtues with incentives to take leisure, consume, borrow and parasitize on the rest of society.  Having encouraged man in the worst of his natural vices, the welfare then must try to control these vices with higher taxes and more onerous laws and regulations.

To avert constant fiscal crisis, welfare-state politicians raid the granaries to redistribute society’s seed corn as feed to the entitled masses.  The welfare state thus undermines future economic crops, which in turn leads to economic malnourishment and eventually economic starvation—that is if the welfare state is not first destroyed by its own enraged recipients whom the welfare state no longer can support in the style to which they have become accustomed.  As a preeminent scholar of public choice economics, Becker should understand these grim realities rather than urging politicians to seek some oxymoronic optimal redistribution through more government coercion.

Rather than going to the heart of the problem with the redistributive welfare-state — coercive government redistribution and all of its instrumentalities are morally wrong and economically self-destructive even for the supposed beneficiaries—Becker would lead us to believe a bit of tinkering and fiddling about the edges of a fatally flawed design can make the welfare state sustainable.  Becker-type “solutions” to fixing up the welfare state, which currently abound among establishment conservatives, are nothing more than disguised efforts to build an economic perpetual motion machine, to hang the superstructure of the welfare state from a sky hook, to thwart the Second Law of Thermodynamics by sneaking Maxwell’s Demon onto the congressional budget committee through the backdoor to sift and sort budget priorities. This isn’t sound economic design; it is Economic Escherism.

Stripped to its essence, Becker’s “solution” for Medicare and Social Security is just another scheme to save the welfare state by expanding the base of the Ponzi pyramid on which it rests—can you hear the words “tax reform” tinkling faintly in the background?

If Social Security and Medicare were structured as real, asset-based retirement-insurance plans in which benefits were an actuarially sound function of workers’ contributions to the plans throughout their working years, there would be no need (no right) for government to determine when workers retire nor would government have any legitimate interest in restricting workers’ payback from the plans on the basis of their means (wealth and income) at retirement.  In other words, Becker’s “solutions” reveal a fundamental commitment to coercive redistribution—the central organizing principle of the welfare state—and to the preeminence of the fiscal interest of the state over the financial interests of individuals—the central normative value of the welfare state.

Since George W. Bush poisoned the well on personal retirement accounts, the GOP has abandoned any effort to transform Social Security and Medicare into an asset-based retirement system based on workers’ real private investment in real assets they own. Paul Ryan made a gesture in that direction with his voucherized Medicare proposal, but he couldn’t see beyond his green eyeshade as Chairman of the House Budget Committee.  So he made the mistake of designing and justifying it as a budget-cutting exercise that actually expanded the reach of the welfare state and increased the government’s control over seniors’ health care choices.

Rather than transforming Medicare and Social Security into post-welfare-state retirement-insurance programs, Becker-style fixer-upper schemes serve only to expand and deepen dependency on government through tax hikes, price controls, rationing, means testing and benefit cuts, what I referred to in an earlier column as “perestroika reforms” to preserve the welfare state as we know it.  It is the GOP’s attempt to transform the New Deal into its own version of The Great Society with a stern Republican face, and it is destined to fail, politically as well as fiscally.

Politicians are addicted to spending and the power it brings them, which in turn has addicted the American people to government. Republican politicians think they can feed their own addiction to power by suddenly forcing dependent Americans, especially American seniors, to go through cold-turkey-austerity rehabilitation and then minding their P’s and Q’s on the dole. It won’t work. It will only cause social backlash.

When people perceive conservatives’ alternative to the welfare state to be a sort of Collectivism-Lite with an authoritarian twist, they will reject the conservative establishment’s thin gruel and demand the real deal from liberals whom they will vote into office by a landslide.

It is time conservatives woke up to the fact that average Americans are not interested in ravishing Social Security and Medicare, turning them into welfare programs, being forced to work into their seventies and receiving a lower rate of return for their efforts than they already are scheduled to receive.  If they don’t wake up, the political blowback will blow the conservative Grand Old Party away. The result will be an even more liberal Democratic Party unleashed to expand the welfare state, deepen dependency on government, launch Blitzkrieg class warfare and take America further down the path to ruination.

In short, intellectuals and politicians can’t save the welfare state by making it a worse deal for people; they will only make America a worse place to live if they try.

Germany is finished.

Götterdämmerung 

by DETLEV SCHLICHTER

What disturbing and nauseating image greeted us this morning from the covers of the morning papers: a smiling and moved Angela Merkel surrounded by a bunch of suited, self-satisfied, sycophantically grinning parliamentarians happily signing their country’s economic future away, burdening their fellow countrymen and women with financial obligations the grotesque size of which have long ago surpassed the average German’s grasp of large numbers – all in the name of Germany’s “responsibility for Europe”, and for personal political ambition, a commitment to party unity, the impulse to follow orders, that sort of thing.

 Glueckwunsch, gut gemacht.

The whole thing is surreal beyond belief.

What lie did I tell yesterday?

The “rule of law” is not an accurate translation for the German phrase “Rechtsstaat”. The difference is more than semantic and reveals very distinct legal traditions. In any case, it doesn’t matter anymore. Neither concept still applies to Germany. The political class is lying and breaking laws and contracts at will. Political expediency rules.

As the German professor Stefan Homburg pointed out in this interview with the German daily Sueddeutsche Zeitung, EVERY rule that was designed to guarantee the financial stability of the eurozone has now been broken: the Maastricht limits to public debt, the ban on government-funding via the ECB, the no-bail-out provision.

Frank Schaeffler, one of the few dissidents, reminded his fellow parliamentarians in his speech in the Bundestag yesterday, that Chancellor Merkel had told them as recently as October 27, 2010, that the bailout facility would definitely be terminated in 2013, and that this would be the end of it. That was obviously not true. And the statement yesterday that the German public will not be asked for more money was equally a blatant lie.

For just as Merkel’s spineless supporters smilingly threw another €250 billion ($330 billion) – or roughly 10 percent of Germany’s GDP – on the country’s ever-growing debt-pile, the international commentariat and the global bureaucratic elite had already moved on, openly suggesting and discussing their desire for a MUCH BIGGER bailout fund. The FT’s resident statist and inflationist Martin Wolf, who I quote here, is the perfect example. “Europe needs a much bigger bazooka.” Probably several trillion Euros.

Surreal. Surreal.

It is, of course, only a matter of time until Germany will lose its AAA-rating. Its obligations to the euro- project will undoubtedly finish it off fiscally. What’s the endgame?

Currency collapse, of course. Logically, in a system in which certain politically favoured entities are never supposed to default, the printing press is the last line of defence against the sustained onslaught of the laws of accounting and arithmetic. The pressure on the ECB – which has broken all of its own rules of good central banking already – will intensify. By leveraging the EFSF it will ultimately accommodate, via the printing press, the bailout of sovereign states – or, more precisely, the bailout of the careless lenders to states, the banks, which are the real beneficiaries of this bailout frenzy. This is Weimar Republic all over.

Professor Homburg is brutally honest. Government finances have never before been this bizarrely stretched at times of peace. So the best guide for what is in store for us is what happened at the height of war efforts. The state simply takes what it thinks it needs. We will see massive market intervention (several countries extended their bans on short-selling of certain stocks last week), capital controls (the financial transaction tax is a splendid starting point), aggressive taxation and outright confiscation.

In the final chapter of my book Paper Money Collapse – The Folly of Elastic Money and the Coming Monetary Breakdown I identify one of the final stages of a fiat money crisis as the nationalization of money and credit. We have entered that phase.

The short of the century?

Maybe there is a bit of (paper) money to be made from Germany’s demise by shorting German government bonds, Bunds, via the futures market, at least for as long as we are allowed to do so. I don’t have the trade on yet but I am getting closer. I think this will soon be the short of the century, combined with shorting U.S. Treasuries. Hedge funds and banks are getting sucked into extreme long positions right now via free money from the central banks and promises of zero rates forever, and the persistence of the cretinous notion that these government bond markets constitute safe havens. When the extent of Germany’s fiscal destruction is fully apparent, the market will turn.

At present prices, I consider gold to be ridiculously cheap.

And one final word to my English friends. No gloating please about the clever decision to stay out of the euro-mess. You have the same thing coning your way without the euro. The coalition’s consolidation course is apparently so ruthless that every month the state has to borrow MORE, not less. Even official inflation is already 5% but pressure is growing on the Bank of England to print more money. See the comical Vince Cable yesterday, or Martin Wolf, the man with the bazooka, in the FT today. Since 1971 the paper money system has been global. Its endgame will be global, too.

Back to Germany’s professor Homburg. Is there a way out for the common man?, the professor was asked by the interviewer. No, he said. Best to adopt a Buddhist attitude and learn how to be happy when poor.

On that note, have a great weekend!

A Quote for every day

"Do something" economists

The fallacy at the heart of this crisis is that every financial problem has a political solution.

             - Jeff Randall

A narrow path to nowhere

Subdividing America—to Win

By P. Buchanan

“Now even as we speak, there are those who are preparing to divide us, the spin masters and negative ad peddlers who embrace the politics of anything goes.

“Well, I say to them tonight, there’s not a liberal America and a conservative America; there’s the United States of America. There’s not a black America and white America and Latino America and Asian America; there’s the United States of America.”

That was state Sen. Barack Obama in his keynote address to the 2004 Democratic convention. His rejection of tribal politics, his stirring call to national unity, vaulted him into the Senate and was the first step on the path that took him to the White House.

Well, that was then, but now is now.

According to The Washington Post, Obama’s 2012 campaign is today busily subdividing the nation into racial, ethnic and religious enclaves for targeted appeals to find a “narrow path to victory.”

Setting one tribe against another, one faction against another, divide and conquer, is among the oldest tactics of politics and war.

The Obama campaign headquarters calls its divide-and-conquer strategy “Operation Vote.” Reporter Peter Wallsten describes it:

“Operation Vote will function as a large, centralized department in the Chicago campaign office for reaching ethnic, religious and other voter groups. It will coordinate recruitment of an ethnic volunteer base and push out targeted messages online and through the media to different groups, such as blacks, Hispanics, Jews, women, seniors, young people, gays and Asian Americans.

“Look for the race card to be played early and often.”

This is tribal politics, pure and simple. Hire blacks, Hispanics, Jews and gays to appeal to and advance the interests of blacks, Hispanics, Jews and gays. And what happens then to the national interest?

Conspicuously absent from this racial-ethnic-religious targeting is America’s majority, white Christians, who are still 60 percent of the nation. Why no outreach to them? Have they been written off?

Obama got 43 percent of the white vote in 2008, a higher share than either John Kerry or Al Gore. But his approval rating among whites has fallen to less than a third; even lower among working-class whites.

If these folks have come to believe Obama has relegated them to the back of the bus, does not Operation Vote confirm it?

And if targeted appeals to race, ethnicity, religion, gender and sexual orientation is the Obama strategy, 2012 will be among the most divisive elections in U.S. history.

Consider. The Jewish vote in 2008 went for Obama 78 to 21—a 57-point margin. But the Democrats’ recent defeat in the heavily Jewish congressional district of Queens, lately represented by Rep. Anthony Weiner, revealed a serious hemorrhaging of support for Obama and his party.

One reason: Ed Koch accused Obama of “throwing Israel under the bus.”

Obama’s full-throated tribute to Israel at the United Nations, which threw the cause of Palestinian statehood and 60 years of Palestinian suffering under the bus, appears a harbinger of what to expect.

With the Jewish vote, critical to victory in Florida, up for grabs, the Palestinians will have few friends in either party. And if they seek a nation-state by going to the U.N. General Assembly, can anyone blame them?

The black vote went 95 to 4 for Obama in 2008. McCain’s share was the same as former Klansman David Duke got running for governor of Louisiana in 1991.

Today, however, black disillusionment with Obama is broad and deep. Unemployment in that community is nearly 17 percent. The head of the Congressional Black Caucus, Rep. Emanuel Cleaver II of Missouri, said that if Bill Clinton were president, he and his colleagues would be marching on the White House.

What kind of “targeted messages” can Operation Vote make to fire up the African-American base against the GOP?

Look for the race card to be played early and often.

Already actor Morgan Freeman has slandered the Tea Party Republicans as representing a “dark underside of America” that is “going to do whatever (they) can to get this black man outta there.”

“It is a racist thing,” said Freeman.

Would this be the same Tea Party that helped elect two black Republicans to Congress from the Deep South in 2010?

At a Black Caucus event, Rep. Andre Carson of Indiana said that the Tea Party Republicans would “love to see you and me ... hanging on a tree.” California Rep. Maxine Waters said the Tea Party “can go straight to hell.”

If, 13 months from Election Day, the debate has deteriorated to this level of invective, 2012 should be quite a year.

What happened to the Obama who gave that moving address in Tucson on civility in politics after “Gabby” Giffords was shot?

Seven years ago, in his keynote cited above, Obama denounced “the spin masters and negative ad peddlers who embrace the politics of anything goes.”

Does not that sound like the evolving Obama campaign, as described in The Washington Post?