The Imperial Hubris

Empire as a way to death

By Joseph R. Stromberg

OVERVIEW

Pericles' Funeral Oration is widely seen as a noble statement of core Western values. Noble, doubtless, but the rest is arguable (Western Civilization having had a bad day or two). Pericles – the Athenian FDR? – saw the Athenian Empire as the great defender of freedom – freedom defined, however, by the Athenian Empire and its "defensive alliance," the Hellenic NATO aka Delian League. The analogy goes further. Athens was democratic and imperialistic – thus refuting Wilsonian Fallacy #1 that "democracies" are always peaceful and kindly. Like the American globocrats and their NATO counterparts after 1989, the Athenians asserted – in the famous dialogue with the Melians – their "right to rule" after the overthrow of the Persians. For the Americans and NATO, the Soviets' fall raised the question first posed by Southern comedian Brother Dave Gardner in the early sixties, "What will the preachers do, when the Devil is saved?" We know what George Herbert Walker Bush did: he found a lesser devil on whose country he dropped the full weight of humane police action and peacekeeping to the tune of hundreds of thousands of dead Iraqis who never posed the slightest threat to Kennebunkport.

THE AMERICAN EMPIRE'S FIRST CENTURY

The American Empire lurched into existence a hundred years ago with the Spanish-American War. President William McKinley quickly learned how to sail under Two Doctrines. The Outer Doctrine – for public consumption – was that American intervention was uniquely philanthropic: the freedom of the poor Cubans and good government for the Filipinos were our only goals. (Things didn't work out that way – but never mind.)

The Inner Doctrine was a vision of prosperity through economic empire. The Open Door Notes staked the claim. Government support for the expansion of favored corporations into world markets became the central theme of 20th century US foreign policy. Where foreign empires, states, or revolutions threatened this goal, US policy makers would risk war to sustain it. In the end, whatever his outward fuss over "freedom of the seas" and Teutonic "barbarities," Woodrow Wilson's drive to involve Americans in the First Euro-Bloodbath had as much to do with possible threats to the Open Door program as with his "idealism."

After Americans repudiated Wilson's war, a series of Republican Presidents pursued the Open Door with less fanfare. It was emphatically not a period of "isolationism" despite the moderation of those in charge. It seemed to Herbert Hoover that the Open Door and the "territorial integrity of China" were not worth a war. His New Deal successors fitted their policy, especially from 1937, to threats to the Open Door while grumbling about Italian and German inroads into Latin American markets. Once the European war broke out in September 1939, Roosevelt worked to intervene as rapidly as possible.

US wartime military and civilian planning reveals the grand scale of the American leadership's postwar ambitions. They thought in terms of US dominance of the "Grand Area" – later the "Free World," and now, the "New World Order." This planning rested on a mercantilist conception of hegemony. The self-named "wise men" of the northeastern political and corporate Establishment were supremely confident of their ability and right to manage the globe. After bombing their opponents flat, they looked forward to an American Century, only to find the Soviet Union blocking their path into very desirable markets and resources.

The Open Door does not explain everything about the origins of the Cold War but it was a major (even obsessive) concern of policy makers in the late 1940s. Whether the Cold War made any sense at all, it did allow the worldwide extension of US power. It gave an ideological and practical framework for the growth of what can only be called an American Empire.

It also gave us dear old NATO. Debating the treaty in the aftermath of the Berlin Blockade and the Marshall Plan, only a handful of Senators opposed that entangling alliance. Senator Taft said that the pact "will do far more to bring about a third world war than it will ever maintain the peace of the world." This shows how hard it is to foretell things. Taft could not have dreamed that NATO – having achieved its object and having, therefore, no reason to exist – would expand its membership and attack a state which had not attacked a NATO member any more than he could have imagined the wild ride of the Arkansas traveler.

But much more than NATO was at issue. The Wise Men and their National Security managers wanted colossal mobilization blurring the distinction between peace and war. As some of them admitted in the infamous NSC-68, had there been no Soviet Union, they would still have pursued much the same program. This ambitious program almost ran aground on Congressional opposition to its costs (hard to believe now).

The postconstitutional, Presidential War in Korea saved the planners' bacon. It also continued the military practices and moral theory developed in other conflicts. One General commented, "almost the entire Korean peninsula [is]... a terrible mess. Everything is destroyed.... There were no more targets in Korea." General Curtis LeMay noted, "We burned down just about every city in North and South [!] Korea..... we killed off over a million civilian Koreans and drove several million more from their homes." He was not being critical. I shall pass over the "strategy" and "tactics" of the Viet Nam War.

TOTAL WAR AND POST-COLD WAR ADVENTURISM

An Empire – and by any standard there is an American Empire – which subscribes to a doctrine of Total War ought to make everyone nervous. Somewhere along the line from the Pequod War, Sherman's March to the Sea, the bloody so-called "Philippine Insurrection," and the firebombing of Japan and Germany, US leaders – civilian and military – took up the notion that it is reasonable to make war on an Enemy's entire society. Only a few observers like C. Wright Mills and Richard M. Weaver even questioned the doctrine during the High Cold War.

And, sadly, it all ended. For the planners and managers the Soviet collapse was inconvenient – requiring a new ideological rationale, new enemies, and much retargeting – if they stayed in the Empire business. I leave, unsung, the Gulf War, with that lovely phrase about "making the rubble bounce" as well as the hundreds of thousands of Iraqis who have died since that splendid little war under the "humane" mechanisms of "economic warfare." I only add that this style of warfare fails, in detail, the following useful test: Can we conceive of Robert E. Lee using these weapons or tactics?

EMPIRE AS A WAY OF DEATH: MORAL, INSTITUTIONAL, AND CULTURAL

There are many writers who worry themselves sick about "late capitalism" (whatever that might be). It is more to the point to worry about the pattern of late empire. Here we find an array of interlocking ideological, political, and economic facts paralleling those of comparable periods in other civilizations. One of these facts is irresponsible power centered in bureaucracies that aspire to manage all aspects of human life (here Paul Gottfried's After Liberalism is very useful). At the apex of the would-be Universal State stands the figure of Caesar. Oswald Spengler defined "Caesarism" as "that kind of government which, irrespective of any constitutional formulation that it may have, is in its inward self a return to formlessness.... Real importance centered in the wholly personal power exercised by Caesar" or his representatives.

Having allowed the American President to become an Emperor, who dares now be surprised that an "impeached" Executive can, on his own motion, begin bombing a state with which neither the US or NATO was "at war" in the name of human rights and universal do-gooding? Perhaps Mr. Arthur Schlesinger, Jr. needs to take a deeper look at the imperial presidency. The sheer contempt shown for all law – Geneva Convention, UN ephemera, NATO Treaty, and, what ought to matter, our Constitution – shows an "arrogance of power" that would stun the present incumbent's former employer, Senator J. William Fulbright (not to mention his History Professor Carroll Quigley). That so few notice or complain is itself part of the late imperial pattern. Empire, with its many "abridgments of classical liberty" (to quote Richard Weaver) is, in its American form, not the personalistic rule of a Great Khan, but is mediated through mega-colossal bureaucracies, which at times can block the President. Precisely because Presidential power is most unhampered in foreign affairs, recent Presidents have aspired to strut upon the world stage while Rome – or at least Los Angeles – burns.

OUTER DOCTRINE, INNER DOCTRINE, IMPERIAL DOCTRINE

In late empire, the empire itself becomes an ideological value. The Empire is necessary, benevolent, and good. While spin-masters may still deploy universalist rhetoric – "Doin' right ain't got no end," empire is increasingly its own justification. It comes to seem unreasonable that there should be there more than one power in the world. This is the classical imperial doctrine. Some writers refer to this pattern as "Asiatic" – a formula that leaves out several important cases.

Where two empires exist, each calls the other "evil" and asserts its claim to sole universal rule, as in the "Cold War" propaganda duel between Justinian and Chosroes (as recounted by George of Pisidias). The full imperial claim, which arises with late empire, entails the following, as summarized by BYU Historian Hugh Nibley: "(1) the monarch rules over all men; (2) it is God who has ordered him to do so and.... even the proudest claims to be the humble instrument of heaven; (3) it is thus his sacred duty and mission in the world to extend his dominion over the whole earth, and all his wars are holy wars; and (4) to resist him is a crime and sacrilege deserving no other fate than extermination." Clearly, there is room only for one such Benefactor and all others should get out of Dodge. Except for the references to God, this outlook undergirds "the act you've known for all these years" and the propaganda pronouncements of this latest frontier war. The "lateness" of our imperial period is suggested by how little attention the public pays to these exercises. They are now normal, even if few acknowledge that there is an American Empire. And yet, as Garet Garrett wrote in 1954, "The idea of imposing universal peace on the world by force is a barbarian fantasy" and the mental state of a realized empire is "a complex of fear and vaunting."

The late "war," "police action," whatever, provides many examples of the imperial hubris. Thus we witnessed the usual demonization of the Enemy Leader and, then, the Enemy People. The mindless reflex that demands "Unconditional Surrender" soon kicked in. Towards the end (of this phase, anyway) Sandy Berger drew up Skinner Boxes for the Serbs, who would be rewarded with less bombing as they withdrew from square A into B and so on. Bombing after an "agreement" damned sure isn't traditional diplomacy – and it may not even be good behaviorism. But, then, Empire means never having to say you're sorry. Or wrong. But "mistakes" happen.

DOCTRINES, IDEOLOGY, AND PRACTICE

During the splendid little Serbo-American War, imperial spokesmen fielded the old Outer Doctrine of Doing Right alongside the new Imperial Style of just issuing orders whose justice is implicit. (Perhaps this is the real "End of History.") The warmakers' practices simply improved on their old ones: hence the new focused terror bombing in which civilian deaths are all "accidental," "unintended," "collateral," etc., and the Wise Guys' Lessons of Viet Nam: no real press coverage, no casualties, no answering back from Congress, etc.

The ideological babble was deafening, as the sixties "Civilian Militarists" gave way to the young Social Militarists. (What are armed forces for? mused Secretary Albright.) It is beyond belief that these uninformed, half-educated eternal youths, helped out by a few leftover ghouls from the Cold War, wish to tell the world how to live. (Already in 1946, Felix Morley called the US "the world's greatest moralizer on the subject of the conduct of other governments.") After the high-tech smashing of Serbia, the US elite's little sermons about "weapons of mass destruction" (and ordinary guns owned by those terrible rednecks) ring a bit more hollow.

Just as World War I was the War of Austrian Succession and World War II the War of British Succession, this "war" be seen as the War of Soviet Succession (or part of it). This brings us back – like the Freudian return of the repressed – to our old friend the Inner Doctrine: Open Door Empire. As Jude Wanniski points out, NATO's American-run Drang nach Osten has something to do with grabbing political-economic control of all the former Soviet assets in Western Asia. Oil is sometimes mentioned. The old dream of American mercantilist world-overlordship – now misleadingly discussed as "globalization": a mysterious force rising spontaneously out of equally mysterious "late capitalism" – is back. This is why the sober political-economic elites can tolerate the actions of the hippie-bombers. Uncooperative minor states like Serbia that refuse their assigned role must be swept aside. Their actual deeds are beside the point (and similar deeds by others, who do take their orders, go quite unpunished). One wonders if the overgrown, eternally innocent Boy Scouts who are spreading the NATOnic Plague have any idea how dangerous major historical transitions can get? Do they think about World War III? Probably not. Do they think it's clever to poke the wounded but irritable Russian Bear with a stick? Do they yearn for a rerun of the Crimean War? Do they think at all? Who knows? After all, they don't have to think – and that, too, is part of the syndrome of Late Empire.

A Republic if you can keep it

President Obama Signs Indefinite Detention Bill Into Law

By ACLU

WASHINGTON – President Obama signed the National Defense Authorization Act (NDAA) into law today. The statute contains a sweeping worldwide indefinite detention provision.  While President Obama issued a signing statement saying he had “serious reservations” about the provisions, the statement only applies to how his administration would use the authorities granted by the NDAA, and would not affect how the law is interpreted by subsequent administrations.  The White House had threatened to veto an earlier version of the NDAA, but reversed course shortly before Congress voted on the final bill.

“President Obama's action today is a blight on his legacy because he will forever be known as the president who signed indefinite detention without charge or trial into law,” said Anthony D. Romero, ACLU executive director. “The statute is particularly dangerous because it has no temporal or geographic limitations, and can be used by this and future presidents to militarily detain people captured far from any battlefield.  The ACLU will fight worldwide detention authority wherever we can, be it in court, in Congress, or internationally.”

Under the Bush administration, similar claims of worldwide detention authority were used to hold even a U.S. citizen detained on U.S. soil in military custody, and many in Congress now assert that the NDAA should be used in the same way again. The ACLU believes that any military detention of American citizens or others within the United States is unconstitutional and illegal, including under the NDAA. In addition, the breadth of the NDAA’s detention authority violates international law because it is not limited to people captured in the context of an actual armed conflict as required by the laws of war. 

“We are incredibly disappointed that President Obama signed this new law even though his administration had already claimed overly broad detention authority in court,” said Romero. “Any hope that the Obama administration would roll back the constitutional excesses of George Bush in the war on terror was extinguished today. Thankfully, we have three branches of government, and the final word belongs to the Supreme Court, which has yet to rule on the scope of detention authority. But Congress and the president also have a role to play in cleaning up the mess they have created because no American citizen or anyone else should live in fear of this or any future president misusing the NDAA’s detention authority.”

 The bill also contains provisions making it difficult to transfer suspects out of military detention, which prompted FBI Director Robert Mueller to testify that it could jeopardize criminal investigations.  It also restricts the transfers of cleared detainees from the detention facility at Guantanamo Bay to foreign countries for resettlement or repatriation, making it more difficult to close Guantanamo, as President Obama pledged to do in one of his first acts in office.

Being There

The year when the word ‘progressive’ lost all its meaning

After the events of 2011, radical humanists will have to fight hard to reclaim the p-word.

by Frank Furedi

After the experiences of the past 12 months, it is difficult to give meaning to the idea of a ‘progressive worldview’. Throughout history, progressives came in many shapes and sizes, but whatever their differences might have been, their convictions were similar - they were driven by a positive view of change, innovation and experimentation and by a belief that the world could be a better place tomorrow than today. Despite clashes of opinion over what progress would look like, they assumed that the future could be influenced by political action.

In 2011, the classical ideal of progressivism died, having been displaced by a zombie version that has little to do with the forward-looking, transformative outlook of progressives of the past. The only practical context in which the term progressive is used today is in relation to taxation. Progressive taxation makes sense, of course, because society is entitled to expect greater material contribution from those who earn more than others. But in recent times, progressive taxation has been transformed from a sensible fiscal policy into a naive instrument of social engineering. Historically, the aim of progressives was to realise a positive transformation, whereas today their objective is merely to rearrange the status quo through redistribution.

In recent years, the zombie version of progressivism has become closely linked with the idea of ‘social justice’. Social justice can be defined in many different ways, but in essence it expresses a worldview committed to avoiding uncertainty and risky change through demanding that the state provides us with economic and existential security. From this standpoint, progress is proportional to the expansion of legal and quasi-legal oversight into everyday life. From the perspective of those who demand social justice, the proliferation of ‘rights’ and redistribution of wealth are the main markers of a progressive society.

Paradoxically, the idea of social justice was historically associated with movements that were suspicious of and uncomfortable with progress. The term was coined by the Jesuit Luigi Taparelli in 1840. His aim was to reconstitute theological ideals on a social foundation. In the century that followed, ‘social justice’ was upheld by movements that were fearful of the future and which sought to contain the dynamic towards progress. Probably one of the best known advocates of social justice was Father Charles Edward Coughlin. This remarkable American demagogue and populist xenophobe set up the National Union of Social Justice in 1934. Through his popular radio broadcasts, which regularly attracted audiences of 30 million, he became one of the most influential political figures in the United States. Coughlin praised Hitler and Mussolini’s crusade against communism and denounced President Roosevelt for being in the pocket of Jewish bankers. Here, ‘social justice’ was about condemning crooked financiers and putting forward a narrow, defensive appeal for the redistribution of resources.

Today’s campaigners for social justice bear little resemblance to their ideological ancestors. They’re far more sophisticated and middle class than the followers of Fr Coughlin. But they remain wedded to the idea that the unsettling effects of progress are best contained through state intervention into society. They also maintain the simplistic notion that financiers and bankers are the personification of evil. The current Occupy movement would be horrified by Coughlin’s racist ramblings, yet they would find that some of the ideas expressed in his weekly newspaper, Social Justice, were not a million miles away from their own.

The confusion of social justice with progressivism is symptomatic of today’s implosion of classical political vocabulary. Although this trend transcends left-right political affiliations, its most striking manifestation is in the disintegration of the language of the progressive. Recently, Francis Fukuyama, in his essay ‘The Future of History’, remarked that ‘something strange is going on in the world today’ - which is that despite the intensification of the global crisis of capitalism, anger and frustration have not led to an ‘upsurge in left-wing alternatives’. This ‘lack of left-wing mobilisation’ is down to a ‘failure in the realm of ideas’, he argued.

What 2011 has confirmed is that the way in which the term progressive is used today has little to do with how it was used in the past. The most striking manifestation of this can be seen in the utter estrangement of the left from the idea of progress. The left, classically a movement that was associated with change and progress, has gradually lost its capacity to believe in the future. For most of its existence, the left looked upon the future as a place that would probably be significantly better than the present day. Social change was perceived to be, on balance, a positive thing, and the left tried to harness it towards the realisation of progressive objectives. The present was seen as something which had to be improved upon, reformed or transformed. Today, by contrast, what remains of the left is just as uncomfortable with the future as are other sections of the political class.

Sadly, the confused state of the political lexicon was turned into a virtue in 2011. Political illiteracy came to be celebrated as ‘the new radicalism’. This was the year when commentators extolled the strength of a movement that ‘defies simple characterisations’ - that is, the Occupy movement. Many claimed that the virtue of these occupations is that they refuse to communicate a distinct political message. Instead of serving as a reminder of contemporary disorientation and confusion, political illiteracy was rebranded as a new and subtle form of communication.

2011 was the year when Hal Ashby’s 1979 comedy-drama movie, Being There, provided the model script for political communication. The film follows Chance, a simpleton played by Peter Sellers, whose banal words are interpreted as wise insights springing from a powerful mind. Suddenly, through a series of accidental events, this former gardener becomes a celebrity whose confused musings are held up as a new brand of prophetic insight. Today, ‘being there’ forms the entire basis of the new radical politics. And it is those who question the incoherent ramblings of the characters of ‘Being There 2011’ who are dismissed as hopeless simpletons. ‘Those who deride [Occupy] for its lack of concrete demands simply don’t understand its strategic function’, lectures Gary Younge of the Guardian. Apparently, its strategic function is to ‘create new possibilities’. One can almost hear Chance wowing his audience with inane talk of ‘creating new possibilities’.

The tendency to dismiss clarity of purpose and objectives as old-fashioned and unnecessary represents an acquiescence to confusion and ignorance. It is one thing to lack the political and intellectual resources necessary to formulate a new visionary politics - it is quite another to depict this deficit as a positive thing. When the American political consultant George Lakoff said ‘I think it is a good thing that the Occupy movement is not making specific policy demands’, he gave expression to a zeitgeist that is pleased just to ‘be there’.

But of course, being there is not enough. Public life needs to be refocused around the future, and the reconstitution of progressive politics and ideals is the precondition for making this happen. In the end, what matters are not the words we use to describe ourselves; no, the differences that really matter today are where one stands in relation to the past and the future. Those who are interested in the reconstitution of progressive politics must help to free humanity from its fixation with the present. They need to reacquaint the younger generations with humanity’s history and the lessons of the past, and also adopt a more robust and active orientation towards the future. In 2012, let’s not just pass time being there…

Haven't we been here before?

The forest feels denser and darker all the time

By Ilargi

It's the sort of question you would expect a child to ask in one of those Grimm Brothers fairy tales, a child that walks so far into the woods that it gets lost, and takes another wrong turn and then another, and the forest feels denser and darker all the time, and it doesn't even run around in circles to return to its trail of breadcrumbs, or it doesn't know, because they've all been eaten by the animals. And then night falls slowly.

That's how I increasingly picture our financial situation. We march forward full of faith and feigned innocence into uncharted territory, telling ourselves we will and must find a way out of this mess, boosted by the high priests of our economic belief systems, the media, economists and politicians.

The children in the fairy tales always escape from the dark in the end, but we're not those children. Getting lost in the woods because you ignore the warnings is in general not an act of bravery, but one of stupidity.

Characters in fairy tales serve to teach their young readers and listeners a lesson about the morals of their societies; these characters don’t perish, they get saved because they timely see the errors of their ways. A morality tale.

But whereas the children in these fairy tales go gently into a good night, we go blindly into a bad one.

Perhaps it's fittingly ironic that this time around the rally came before instead of after the announcement by ECB president Mario Draghi of €489 billion in cheap loans for European banks. It fits right in with all the other things we get totally the wrong way around. About 60% of those loans, by the way, are just regurgitated old stuff.

Looking at what they have come up with in episode 1001 of the bailout drama, and just a brief look will do, there's one conclusion and one only: what they say is not what they think.

The ECB claims that it "hopes" the banks will use the money to purchase peripheral debt, but the ECB knows they won't (and what sort of €489 billion deal depends on "hope" only?). It knows, because the ECB itself, along with other parties, has refused to guarantee that debt.

It may be presented as a good deal, but borrowing at 1% to get a 5% return is not all that attractive when you have a 50% chance of an 80% haircut. Or something along those lines.

The ECB also said they hope banks will use the money to loan out to consumers. Just as big a pile of doo-doo. Banks are shedding assets like they're fleas, because they need reserves. That is a solvency issue. Being able to borrow ever cheaper while handing out ever more doubtful collateral addresses a liquidity issue.

There are a few things that this sort of lending will indeed achieve. It will gobble up bad assets from private banks and transfer them to the risk of the public coffer. Nothing new there. The child just gets deeper into the forest, and the light starts fading. A step by step process perceived as progressing so slowly, it raises no alarm. It's still morally repugnant, but who in charge of this thing has any morals left at all in the first place?

Another effect of those €489 billion is that the divide between the ECB and Germany, in particular its central Bundesbank, will widen, and substantially so. Which endangers the entire Eurozone project.

Whatever plan Europe comes up with, be it the European Financial Stability Facility or the European Stability Mechanism, or this latest one from the ECB, there are only two countries left to carry the vast majority of the risk and the burden. One of those countries, France, will soon be downgraded. So will its banks. This will lead to a downgrade of the EFSF and, if there's still time, the ESM.

There will at that point be one country left to carry the entire rest on its shoulders. Germany's allies and relatively strong partners, Holland, Finland, are way too small to do any heavy lifting. Moreover, Holland is on the verge of a housing collapse.

The EFSF needs to be funded; it can only spend what it has received. Europe has been unable to agree on expanding the Facility. Which is why the ECB now comes with its loan plan. Which did lead to a market rally, but that rally fizzled as soon as the plan was announced, even though it was at least €100 billion larger than expected.

So France soon will no longer be a net contributor to the EFSF. Which is one of the main reasons the expansion didn't materialize. Hence, it's all Germany's responsibility, and Germany is smart enough to understand it's not strong enough to bear that responsibility.

And then out of left field comes Mario Draghi handing out half a trillion euros in loans to 523 different European banks that on average are just about to draw their last breath, selling off profitable assets because they're all buyers are interested in, and keeping the lousy ones, which they now can pledge to the ECB, with a huge chunk of the risk involved landing squarely on the shoulders of the German citizenry.

The chance that Berlin will now look even a lot more serious at cutting its losses while it can has become much bigger with Mr. Draghi's first substantial act as ECB president. It's deceptively simple, really. Germany can't guarantee Greek and Italian and Spanish debt with the risk waiting in the wings of France slumping badly. Not without risking its own wealth, its own coherence as a society, in the process.

Staying in the metaphor of the child lost in the darkening forest (and yes, the Grimm brotheres were German), it's like the child, after taking yet another wrong turn, has stumbled upon a big bad wolf.

And though it's already getting almost too dark to see, the last thing the child does notice is that the wolf looks nothing like its sweet old grandmother.

This Will Even Make The Bears Shudder

S&P 500 Falling Below 600? 

By Tomi Kilgore

United-ICAP senior technical analyst Walter Zimmerman says the S&P 500 could rally a little further into January before beginning a “traumatic decline” for the rest of 2012, dragged down by weakness in Europe.

How traumatic? You might want to sit down for this one.

He thinks the index will reach its 2012 peak in the 1293-1311 zone, then start a “sharp and sustained drop” until December. His downside target is around 579.57.

579.57! The index would have to wipe out the March 2009 lows and fall by more than 50% current levels to reach that target. And the last time the S&P 500 traded below 600 was in the mid 1990s, when the Backstreet Boys burst on the scene and bell-bottom jeans were making a comeback.

Zimmerman’s reasoning is Europe is in an even worse shape now than it was at the beginning of the year.

“If the history of debt tells us anything it is that one cannot solve a debt crisis by lending more money to the bankrupt and the insolvent,” Zimmerman says.

He expects 2012′s price action will mirror what the S&P 500 did from its Oct 2007 peak until it bottomed in March 2009.

“The technical patterns suggest that 2012 will be a terrible year for holding stocks. Even if by some miracle the euro zone hangs together, it is already falling into a deep and enduring recession,” says Zimmerman. “We expect this recession will drag down both the USA and China.”

The S&P 500 was recently up 0.2% at 1268.

About End and Means

Evil Be Thou My Evil

by Theodore Dalrymple 
Often I read more than one book at a time. When I tire of one I fly to another. This is because the world has always seemed to me so various and so interesting in all its aspects that I have not been able to confine my mind to a single subject or object for very long; therefore I am not, never have been, and never will be the scholar of anything. My mind is magpie-like, attracted by what shines for a moment; I try to persuade myself that this quality of superficiality has its compensations, in breadth of interest, for example.

Be that as it may, I recently spent a day reading two books and constantly switching between them; the first Mao’s Secret Famine, by Frank Dikotter, a professor of Chinese at the London School of Oriental and African Studies, and the second Beyond Evil, by Nathan Yates, a journalist on the British tabloid newspaper, the Daily Mirror.

The famine of Dokotter’s title was that brought about by the Great Leap Forward in China between 1959 and 1962; the thing which was beyond evil was the murder of two little girls in the Cambridgeshire village of Soham, whose disappearance for a time captured the attention of the world.

The famine was probably the worst in world history, at least as measured by the absolute number of victims; according to Dikotter, there were 45,000,000 of them. Other famines have been worse relative to the total population: it is sobering to recall, for example, that the population of Ireland is still only 70 per cent of what it was before the great potato famine of the 1840s, when some in Britain regarded it coldheartedly as a Malthusian winnowing of the surplus population ordained by God.

Officially reported and reconstructed mortality in China, 1950-90 (famine period is shaded)

Nevertheless, there seems something peculiarly dreadful about the famine caused by the Great Leap Forward: from its complete predictability from previous human experience of such great leaps to the utter indifference of Mao Tse-tung to the deaths of scores of millions of his compatriots and to the suffering of hundreds of millions of more of them.

Of course, Mao could not have produced the famine single-handedly, but the other authors of the catastrophe acted mainly from cowardice or sycophancy, unattractive but nevertheless human qualities that few of us have never exhibited in the course of our lives.

One finishes Dikotter’s book with a visceral loathing of Mao, whose preparedness to contemplate seriously the deaths of hundreds of millions of people if only his dim and half-baked ideas about the good society might be put into practice places him among the select company of true moral monsters of the Twentieth Century, for example Lenin and Hitler. The only lesson that Mao drew from the Great Leap Forward and its terrible associated famine was that he should revenge himself on Liu Shao-chi, who did much to bring it to an end. Mao duly took his revenge on Liu during the Cultural Revolution, again at the cost of untold suffering and destruction. Mao cared about as much for humanity as most of us do for ants in the kitchen.         

By comparison with the deaths of 45,000,000 people, those of the two little girls in Soham might seem insignificant. What are two to set against so many? The culprit was a man called Ian Huntley, who had a long history of dubious sexual relations, including with 12 year-old girls. But though he had been reported to or investigated by the police several times (many witnesses, including the mother of a 12 year-old girl whom he had sexually assaulted, refused to testify against him), he had no convictions and therefore no criminal record; thus, when he applied for a job as school caretaker there was no official record of anything that he had done that precluded him from taking up the job. What amounts, legally-speaking, to tittle-tattle cannot be allowed to stand in a man’s way.

The two girls whom he murdered went for a walk one evening, and he asked him into his house. They suspected no ill of him because they already knew him from their school. What happened next is known only to him, who has never told anyone the truth of what he did. Probably he assaulted one or both of them sexually and then, realising that each would be a witness to any allegations made by the other, he killed them both, taking their bodies under cover of night to a distant ditch where he later burnt them beyond recognition.

When a hue and cry for the missing girls was raised he played to psychopathic perfection the part of a concerned person and good neighbour. With all the other villagers, he searched high and low for the two girls, though of course he knew all along where they were. He even uttered words of comfort to the distressed parents.

The question I asked myself as I read the two books, switching from one to another, is ‘How and on what scale do you compare the evil of the two men, Mao Tse-tung and Ian Huntley?’ It hardly seems satisfactory to say that Mao was 22.5 million times worse than Huntley because he was responsible for that many more deaths than he. And yet to utter the two names in the same breath seems almost to indulge in bathos.

Huntley probably did not set out to kill the two girls. He had been violent to women and adolescent girls before, but not so as to cause them permanent physical injury. The chances are that in killing them he was only trying to get rid of the evidence. He preferred their deaths to his exposure as a sex criminal.

Likewise, Mao did not set out to kill millions, but he much preferred to do so than have to back-pedal or re-think his ideas, a back-pedalling that would have cost him his power. If the implementation of his ideas led to disaster, therefore, it proved to him only that there were saboteurs, class traitors and capitalist-roaders still at large, enemies to be destroyed. Never could he admit that his ideas were wrong, and moreover wrong for obvious reasons that anyone of average intelligence ought to have been able to see. Let the heavens fall, he said to himself, so long as I preserve my power.

It is clear that the evil of these two men cannot be compared using a linear scale, and the same goes for the suffering of their victims. Who would expect the parents of the murdered girls to be consoled by the thought that at least the murder of their children was not the Great Leap Forward, that at least Huntley killed only two to Mao’s millions, and that, everyone else they knew apart from the girls had survived, which was certainly not the case during the Great Leap Forward, when every survivor knew of scores who had died? And what would one think of a defence lawyer who argued in court that Huntley was not as bad as many others in history that he could name if he wanted?

Huntley and Mao did what evil they could within their own spheres. Mao’s sphere, alas, was the largest population in the world, while Huntley was confined to a small village in England. Only one of them – Mao – got away with it. But both conscientiously did the worst they could.

The urge or temptation to place people in a league table of evil is very strong, as if evil were measureable on a linear scale, like height or weight. Was Stalin as bad as Hitler, and if not, by what percentage was he less bad? Twenty per cent, forty per cent? Serious arguments are held on this question; I have had them myself, as if something depended upon the answer, as if indeed there were an answer; likewise the comparison of communism with Nazism.

Protagonists of the view that communism was at least as bad as Nazism point to the fact that it killed more people. Protagonists of the opposite view say that, while this might be so, communism lasted seventy years, while Nazism lasted only twelve, as if a longer rule implied almost a right, or an excuse, to kill more victims. If one divides the number of victims by the number of years in power, Nazism was probably worse than communism, even if it is not always entirely clear who was the victim of which ideology. Therefore, goes the argument, Nazism was the worse.

Then, of course, there is the argument about intentions. Communism may have been responsible for more deaths than Nazism, but at least it killed in the name of a universal ideal, not in pursuit of the supposed benefit of only a small portion of mankind. This is a distinction that has always seemed to me rather odd. Who would be much consoled by being asked whether he would prefer to be brutally murdered in the name of a universal ideal or merely because he was a member of a hated racial or religious group? Is it better to be killed as a bourgeois, as a kulak or as a Jew?

In opposing evil, of course, we often commit acts that, in other contexts, would themselves be evil. We are tempted to suppose that the end justifies the means – which sometimes it must, of course, but not always, if for no other reason than that the connection between ends and means is inherently an uncertain one.

And there is another trap that awaits us: there is nothing more delightful to the human mind, or at least to many human minds, than to do evil in the name of good. The number of sadists is legion, and the impulse grows with its satisfaction. Even the dullest of understandings is lightning-quick in its capacity to rationalise sadistic urges in the language of morality. We can thereby come easily to resemble, even if in only attenuated form, those whom we so fiercely oppose and claim to abhor.

There was a remarkable instance of this in the book about the Soham murderer, Ian Huntley. When he was brought to court for his trial, a mob had gathered outside to hurl execration at him. Most in the mob were women, and many had their young children with them. These children screamed in terror as their mothers threatened the culprit (still technically innocent) with physical violence. There is little doubt that, had it not been for the presence of the police, the accused would have been torn limb from limb, children or no children.

But it is morally certain that these Mesdames Defarge lived lives that were not beyond reproach as far as their upbringing of their children was concerned. At the very least, the example of public behaviour that they set was appalling, and their disregard of the terror of their own children in itself a form of abuse. Almost certainly some of them were the kind of women who would have refused to cooperate with the police in the days before Huntley turned murderer. If reproached for their behaviour, they would, with that quickness of mind to which I have already referred, have returned the reproach to its sender by saying that he who made it was a sympathiser with Huntley, and therefore some kind of accomplice of his.

The mob that howled at Huntley resembled that which howled at the victims of the Cultural Revolution. It is true that, unlike the victims of the latter, Huntley had committed a real and terrible evil, but it was an evil so self-evident that it required no howling mob to make evident or to condemn it; those who suffered most from it were certainly not among the mob baying for (among other things) his death. 

Delight in evil is very widespread, even if it is not quite universal, and it takes many forms. I do not exclude myself from these strictures, for I have sometimes enjoyed inflicting suffering on others, even if only of a comparatively mild kind. I have even sometimes suspected that I have enjoyed living among, and reading about, evil in order to assure myself that I am a jolly good fellow, at least comparatively-speaking, using a linear measure of evil of course.   

The politics of Denial

New Year Looks No Less Dysfunctional Than The Old

By MARK STEYN

Ring out the new, ring in the old. No, hang on, that should be the other way around, shouldn't it?

Not as far as 2011 was concerned. The year began with a tea-powered Republican caucus taking control of the House of Representatives and pledging to rein in spendaholic government. It ended with President Obama making a pro forma request for a mere $1.2 trillion increase in the debt ceiling. This will raise government debt to $16.4 trillion — a new world record! If only until he demands the next debt-ceiling increase in three months' time.

At the end of 2011, America, like much of the rest of the western world, has dug deeper into a cocoon of denial. Tens of millions of Americans remain unaware that this nation is broke — broker than any nation has ever been.

A few days before Christmas, we sailed across the psychological Rubicon and joined the club of nations whose government debt now exceeds their total GDP. It barely raised a murmur — and those who took the trouble to address the issue noted complacently that our 100% debt-to-GDP ratio is a mere two-thirds of Greece's.

That's true, but at a certain point per capita comparisons are less relevant than the sheer hard dollar sums: Greece owes a few rinky-dink billions; America owes more money than anyone has ever owed anybody ever.

Public debt has increased by 67% over the last three years, and too many Americans refuse even to see it as a problem. For most of us, "$16.4 trillion" has no real meaning, any more than "$17.9 trillion" or "$28.3 trillion" or "$147.8 bazillion." It doesn't even have much meaning for the guys spending the dough.

Look into the eyes of Barack Obama or Harry Reid or Barney Frank, and you realize that, even as they're borrowing all this money, they have no serious intention of paying any of it back. That's to say, there is no politically plausible scenario under which the $16.4 trillion is reduced to $13.7 trillion, and then $7.9 trillion, and eventually 173 dollars and 48 cents.

At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done. Our most enlightened citizens think it's rather vulgar and boorish to obsess about debt. The urbane, educated, Western progressive would rather "save the planet," a cause which offers the grandiose narcissism that, say, reforming Medicare lacks.

So, for example, a pipeline delivering Canadian energy from Alberta to Texas is blocked by the president on no grounds whatsoever except that the very thought of it is an aesthetic affront to the moneyed Sierra Club types who infest his fundraisers.

The offending energy, of course, does not simply get mothballed in the Canadian attic: The Dominion's prime minister has already pointed out that Canada will sell it to the Chinese, whose politburo lacks our exquisitely refined revulsion at economic dynamism, and indeed seems increasingly amused by it. Pace the ecopalyptics, the planet will be just fine: Would it kill you to try saving your country, or state, or municipality?

Last January, the BBC's Brian Milligan inaugurated the New Year by driving an electric Mini from London to Edinburgh, taking advantage of the many government-subsidized charge posts en route. It took him four days, which works out to an average speed of 6 mph — or longer than it would have taken on a stagecoach in the mid-19th century. This was hailed as a great triumph by the environmentalists. I mean, c'mon, what's the hurry?

What indeed? In September, the 10th anniversary of a murderous strike at the heart of America's most glittering city was commemorated at a building site: The Empire State Building was finished in 18 months during the Depression, but in the 21st century the global superpower cannot put up two replacement skyscrapers within a decade.

The 9/11 memorial museum was supposed to open on the 11th anniversary, this coming September. On Thursday, Mayor Michael Bloomberg announced there is "no chance of it being open on time." No big deal. What's one more endlessly delayed, inefficient, over-bureaucratized construction project in a sclerotic republic?

Barely had the 9/11 observances ended than America's gilded if somewhat long-in-the-tooth youth took to the streets of Lower Manhattan to launch "Occupy Wall Street." The young certainly should be mad about something. After all, it's their future that got looted to bribe the present.

As things stand, they'll end their days in an impoverished, violent, disease-ridden swamp of dysfunction that would be all but unrecognizable to Americans of the mid-20th century — and, if that's not reason to take to the streets, what is?

Alas, our somnolent youth are also laboring under the misapprehension that advanced Western societies still have somebody to stick it to. The total combined wealth of the Forbes 400 richest Americans is $1.5 trillion. So, if you confiscated the lot, it would barely cover one Obama debt-ceiling increase.

Nevertheless, America's student princes' main demand was that someone else should pick up the six-figure tab for their leisurely half-decade varsity of social justice studies. Lest sticking it to the Man by demanding the Man write them a large check sound insufficiently idealistic, they also wanted a trillion dollars for "ecological restoration."

Hey, why not? What difference is another lousy trill gonna make?

Underneath the patchouli and pneumatic drumming, the starry-eyed young share the same cobwebbed parochial assumptions of permanence as their grandparents: We're gayer, greener and groovier, but other than that it's still 1950 and we've got more money than anybody else on the planet, so why get hung up about a few trillion here and a few trillion there?

In a mere half-century, the richest nation on earth became the brokest nation in history, but the attitudes and assumptions of half the population and 90% of the ruling class remain unchanged.

Auld acquaintance can be forgot, for a while. But eventually even the most complacent and myopic societies get re-acquainted with reality. For anyone who cares about the future of America and the broader West, the most important task in 2012 is to puncture the cocoon of denial.

Instead, the governing class obsesses on trivia. Just to pluck at random from recent Californian legislative proposals, a ban on non-fitted sheets in motels, mandatory gay history for first graders, car seats for children up to the age of 8. Why not up to the age of 38? Just to be on the safe side. And all this in an ever more insolvent jurisdiction that every year drives ever more of its productive class to flee its borders.

Tens of millions of Americans have yet to understand that they can no longer be kicked down the road, because we're all out of road. The pavement ends, and there's just a long drop into the abyss. And, even in a state-compliant car seat, you'll land with a bump.

At this stage in a critical election cycle, we ought to be arguing about how many government departments to close, how many government programs to end, how many millions of government regulations to do away with. Instead, one party remains committed to encrusting even more barnacles to America's rusting hulk, while the other is far too wary of harshing the electorate's mellow.

The sooner we recognize the 20th century entitlement state is over, the sooner we can ring in something new. The longer we delay ringing out the old, the worse it will be. Happy New Year?

Starve the Beast

The Laffer Curve And Austrian School Economics

By Keith Weiner

Jude Wanniski, a writer for the Wall Street Journal, coined the term “Laffer Curve” after a concept promoted by economist Art Laffer. Laffer himself says the idea goes back to the 14^th century

 The idea is that if one wants to maximize the government’s tax revenue, there is an optimal tax rate. (Ignore for the moment whether or not you think this makes good economics in the long run, or whether or not you think this is even moral.)

 Laffer noted that if the tax rate is zero, then the government gets no revenue. But likewise, if the rate is set at 100%, the government also gets no tax revenue. Mainstreamers say that there is no incentive to produce income at 100% tax rate, and this is true. But even more importantly, there is no means: a 100% tax rate is pure capital destruction.

 The “Laffer Maxima”, i.e. the tax rate which maximizes the tax take, is somewhere between 0% and 100%. The Wikipedia article shows a picture of a Laffer Maxima at 70%, and implies that although it’s somewhat controversial this may be the right number.

 There are two points about the Laffer Curve that are important to consider.

 First, what in the world makes any economist think that he can gin up some differential equations and compute the right value for this Maxima? In the first place, every market is composed of an integer number of people transacting an integer number of trades, and each of those trades consists of an integer number of goods. People do not behave like particles in an ideal gas—they have reason and volition. The very idea of modeling a large number of people with equations is preposterous. Never mind that degrees are awarded every year to economists who purportedly do just that.

 Second, what makes anyone think that the Laffer Maxima is a constant?

 Let’s do a thought experiment that is in the vein of the Austrian School of economics. Let’s consider the boom-bust cycle, or what Austrians note is really the credit cycle. The central bank first expands credit, which flows into wealth-creating as well as wealth-destroying activities (malinvestment). As the expansion ages, an even greater proportion of credit funds wealth-destroying activities. Sooner or later the boom turns to bust. Malinvestments are liquidated, people are laid off from their jobs, portfolios take big losses, tax revenues decline, etc.

 One clue can be found right there, in my description of the bust: tax revenues decline.

 OK, maybe the Laffer Curve remains static and the only thing that changes is the absolute tax dollars?

 Let’s continue comparing the boom and the bust phases. In the boom phase what’s happening is that economic activity is being stimulated, i.e. beyond what it would naturally have been. This fuels demand for everything: commodities, labor, construction, fuel, professional services, etc. And all of the people hired in the boom are demanding everything too. It feeds on itself synergistically, for a while.

 At this stage, the frictional cost of taxes may be masked by the lubricant and fuel of credit expansion. This is especially so when everyone feels richer and richer on paper. People spend freely and we saw this in spades in the most recent boom that ended in 2007.

 Now let’s look at the bust phase. The net worth of most people is falling sharply. Many are laid off, their careers, and sometimes lives, shattered. A huge component of the marginal bid for everything is withdrawn. People struggle to make ends meet. Budgets are stretched to the max.

 I submit for the consideration of the reader that in the bust phase, any change in the tax rate drives a big change at the margin of economic activity. The tax rate is more significant in the bust phase than it was in the boom phase. The Laffer Maxima is not a hard-wired, intrinsic value of 70 (or 42 for fans of Douglas Adams). Like everything else in the market, it moves around. It is subject to the forces of the markets.

 I will close with an example. Consider the marginal restaurant. Let’s say it is generating $25,000 per month in gross revenues. Net of $24,700 in expenses, it is generating positive cash flow of $300 per month. Why would the owner even keep it open? Well, times may get better…

Now, let’s say the tax rate goes up a little, say 100 basis points. The restaurant, making little money, pays essentially no taxes anyway. So this does not cause a direct impact. But what about the patrons of the restaurant? If their blended tax rate was 25%, then an increase of 100 basis points (i.e., to 26%) is a tax increase of 4%. These people will have to reduce their budget by 4%.

 One logical place to cut is eating out. Suppose that they reduce their spending in the restaurant by $1,000, in aggregate.  Now our restaurant has $24,000 per month in gross revenues. But its fixed costs cannot be reduced. And even the labor can’t be reduced in this case. The only reduction will be food supplies. So let’s say food supplies are reduced 1/3 of $1,000, or $333. So now the restaurant has expenses of $24,367. Whereas it formerly made $300 profit per month, now it makes a loss of $367 per month.

 The owner can’t continue this very long. And so he closes shop. He defaults on the loans on the fixtures and tenant improvements, lays off 8 people, leaves the electric and gas companies with fixed infrastructure which no longer produces revenue for them, etc.

 The impact to the economy (and hence to the total taxes collected) is negative and disproportionate to the tax increase.

It is happening right now

Greek Lender Of Last Resort - Iran?

by Tyler Durden

A fascinating article by Reuters really brings to bear the reality that Greece faces as lenders and trade creditors refuse to help (and why should they realistically) with energy needs. 

The harsh reality that Iran (yes that nuclearized Iran) is the main provider of Greek oil needs surely puts into perspective what seemingly unlikely events can occur when a person, corporation, country, gets desperate. 

Perhaps we should reflect the other way, that while all the world's bankers and money-men refuse to lend Greece money, Iran has truly become the lender of last resort for Greek survival - as it strikes us that energy needs will/should trump a coupon payment any day.

(Reuters) - Greece is relying on Iran for most of its oil as traders pull the plug on supplies and banks refuse to provide financing for fear that Athens will default on its debt.

Traders said Greece has turned to Iran as the supplier of last resort despite rising pressure from Washington and Brussels to stifle trade as part of a campaign against Tehran's nuclear program.

The near paralysis of oil dealings with Greece, which has four refineries, shows how trade in Europe could stall due to a breakdown in trust caused by the euro zone debt crisis, which is threatening to spread to further countries.

"Companies like us cannot deal with them. There is too much risk. Maybe independent traders are more geared up for that," said a trader with a major international oil company.

"Our finance department just refuses to deal with them. Not that they didn't pay. It is just a precaution," said a trader with a major trading house.

"We couldn't find any bank willing to finance us. No bank wants to finance a deal for them. We missed some good opportunities there," said a third trader.

More than two dozen European traders contacted by Reuters at oil majors and trading houses said the lack of bank financing has forced Greece to stop purchasing crude from Russia, Azerbaijan and Kazakhstan in recent months.

Greece, with no domestic production, relies on oil imports and in 2010 imported 46 percent of its crude from Russia and 16 percent from Iran.Saudi Arabia and Kazakhstan provided 10 percent each, Libya 9 percent and Iraq 7 percent, according to data from the European Union.

"They are really making no secret when you speak to them and say they are surviving on Iranian stuff because others will simply not sell to them in the current environment," one trader in the Mediterranean said.

Leading Greek refiner Hellenic Petroleum denied having any difficulty in buying crude and declined to comment on the exact breakdown of oil supplies. Greece's second biggest refiner Motor Oil Hellas declined to comment.

Greece's four refineries, belonging to Hellenic and Motor Oil, together can process around 400,000 barrels per day. That figure has fallen to around 330,000 bpd in recent months due to maintenances and upgrades.

"Our crude slate is broadly unchanged over the last few months and we are always viewing to optimize our refining operations," a Hellenic spokesman said.

"Our supply agreements are based on purely commercial considerations, no other factors interfering," he said.

Shipping data obtained by Reuters showed four cargoes taking crude from the Middle East outlet of Sidi Kerir on the Egyptian Mediterranean to Greece in September. Three sailed in October. Traders said all carried Iranian Heavy crude and more was coming in November.

"Iran is the only one who might be working on an "open credit" basis right now, given its own difficulty in selling crude," one trader said.

Imports of Iranian oil to the United States are subject to sanctions but are still fully legal to Europe and Asia. The European Union said this week it may consider oil sanctions against Iran within weeks, after a U.N. agency said Tehran had worked to design nuclear bombs.

Iran denies trying to build atom bombs and an Iranian official, who declined to be named, said Tehran has no difficulty in selling its oil.

However, shipping sources said that interest in Iranian crude, which is cheaper than competing Russian grades but politically sensitive, has prompted the country to continue storing crude in the Red Sea, to make it available for swift delivery.

The rest of the oil industry drastically cut crude storage last year after forward prices for crude moved to a discount to prompt, making such operation loss-making.

Iran is storing crude in four very large crude carriers (VLCCs) in the Red Sea.