The Times they are A-Changin'

Democracy Could Destroy the Euro

Upcoming elections in France and elsewhere will likely show massive popular resistance to the austerity policies needed to save the common European currency

By MICHAEL SIVY

The euro has survived a string of disasters, from the banking crisis in Ireland to the real estate collapse in Spain as well as nonstop economic chaos in Greece. But now the common European currency faces an even greater threat, one that it may be unable to overcome: democracy.

Quite simply, in most of the countries that make up the euro zone, there is no longer a substantial majority willing to make the sacrifices needed to keep the euro currency system together. This has always been true to some extent. Commentators have long talked about the euro zone’s “democratic deficit,” meaning Europe’s economic system is largely the creation of powerful political and business interests and lacks transparency, accountability and a broad popular mandate. But up until now, support by the elites has been more than sufficient to keep the system intact.

Blaming Capitalism for Corporatism

Government SA

By Saifedean Ammous, Edmund S. Phelps

The future of capitalism is again a question. Will it survive the ongoing crisis in its current form? If not, will it transform itself or will government take the lead?

The term “capitalism” used to mean an economic system in which capital was privately owned and traded; owners of capital got to judge how best to use it, and could draw on the foresight and creative ideas of entrepreneurs and innovative thinkers. This system of individual freedom and individual responsibility gave little scope for government to influence economic decision-making: success meant profits; failure meant losses. Corporations could exist only as long as free individuals willingly purchased their goods – and would go out of business quickly otherwise.

How the Fed Favors The 1%

The Fed is transferring immense wealth from the middle class to the most affluent

By Mark Spitznagel

The Fed doesn't expand the money supply by dropping cash from helicopters. It does so through capital transfers to the largest banks.

A major issue in this year's presidential campaign is the growing disparity between rich and poor, the 1% versus the 99%. While the president's solutions differ from those of his likely Republican opponent, they both ignore a principal source of this growing disparity.

The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.

Spain could ruin Europe's Economy

The Pain in Spain

By Robert Samuelson

Just when you thought the world economy might be improving, along comes Spain. It's Europe's next economic domino, struggling to cope with big budget deficits, massive unemployment and an angry public. Will it fail -- and, if so, with what consequences?

As it happens, the $80 trillion world economy splits roughly 50-50 between advanced countries (the United States, Europe, Japan and a few others) and developing countries (China, India, most of Asia, Africa and Latin America). Since the financial crisis, the advanced economies have struggled. In 2012, they will grow a meager 1.4 percent, forecasts the International Monetary Fund. Much of Europe is in recession; the United States (up 2.1 percent) and Japan (2 percent) grow slightly.

England Student Debt Unprecedented

Education is not a free good

By Oliver Staley 

When Alex Winning learned that her university tuition in England for the 2012-2013 year would be triple what her friends in college now pay, she says the idea of that much debt upset her.

“It’s a lot of money to pay back compared to people my age who won’t have that debt,” said Winning, 19, the granddaughter of Jamaican immigrants who will shell out as much as 9,000 pounds ($14,450) a year to study Korean language and politics. “It doesn’t seem fair.”

As the U.S. grapples with record-high college costs and outstanding student loans of $1 trillion, England is embarking on a plan this year that shifts much of the government’s burden of paying for higher education to students and saddles graduates with unprecedented debt.

Zwangswirtschaft Becomes Full-Blown Socialism

YPF Repsol Seized

Argentina's president Fernandez-Kirchner: enjoying the applause of her political cronies following the seizure of YPF. It may not be 'good for the country', but it is definitely going to be good for them. 

By Pater Tenebrarum

First make the company unprofitable by price controls, then blackmail it by revoking its concessions, then steal it – that seems to have been the playbook of  Argentina's government regarding YPF Repsol.

Why Stalin "Lost"

Who Is Lying? The Federal Reserve Or... The Federal Reserve?
By Robert L. Hetzel and Ralph F. Leach

When one thinks of the early 1950's, things that often come to mind are fries and milkshake, muscle cars, Little Richard, and greased hair. Things that rarely come to mind are that the US and China were openly at war over a little piece of land called Korea, that the Treasury market did not exist, that short and long end rates were "fixed" by the Fed at 0.125% and 2.5% respectively, even as inflation was at the highest it has ever been in the post war period at over 20%. What absolutely never comes to mind, is that on March 3, 1951, the world as we know it changed forever, after a little noted event known as the Fed-Treasury Accord of March 3, 1951 took place, and mutated the role of the Federal Reserve, which set off on a path that would ultimately lead to the disastrous economic state the world finds itself in today.

Is There No Escape from the Euro?

A European style divorce is both possible and probable 

By Philipp Bagus

As I discussed recently, the costs and risks of maintaining the eurozone system are already immense and rising. So is an exit possible? Intuitively, the exit from the euro should be as easy as the entrance. Joining and leaving the club should be equally simple. Leaving is just undoing what was done before. Indeed, many popular articles discuss the prospects of an exit of countries such as Greece or Germany.[1] However, other voices have rightly argued that there are important exit problems. Some authors even argue that these problems would make an exit from the euro virtually impossible. Thus, Eichengreen (2010) states, "The decision to join the euro area is effectively irreversible." Similarly, Porter (2010) argues that the large costs of an exit would make it highly unlikely. In the following we address the alleged exit problems.

Legal Problems

The Maastricht Treaty does not provide for a mechanism to exit the European Monetary Union (EMU). Thus, several authors maintain that an exit from the euro would constitute a breach of the treaties (Cotterill 2011, Procter and Thieffry 1998, Thieffry 2011, Anthanassiou 2009).[2] In an ECB working paper from 2009 Anthanassiou claims that a country that exits the EMU would have to leave the EU as well. As the Lisbon Treaty allows for secession from the EU, withdrawal from the EU would be the only way to get rid of the euro.

No, not Italy, and certainly not Spain. Egypt.

On The Forgotten Geopolitical Risk

By Art Cashin

From UBS Financial markets:

"Geo-Politics Still Ignored - Veteran traders have wondered for weeks about the markets whistling past a variety of geopolitical challenges. Yes! Yes! I know about Spain and Italy but they are potential financial crises not truly political ones.

A good example is the deteriorating situation in Egypt. The Muslin Brotherhood went back on it initial promise and backed a candidate for president. That raised the likelihood of a religious government and possible rule by Sharia law.

Live From Athens

"You've Got To Pick A Pocket Or Two"

“It's him that pays the piper.  It's us that pipes his tune  So long, fare thee well  Pip! Pip! Cheerio!  We'll be back soon.”                                          -Oliver, Be Back Soon

The focus has shifted. The all seeing orb is now focused on Spain but it may well turn back to Greece soon. The loan money is exhausted again and the Greeks have elections lined up on Sunday, May 6 which is coincidentally the same day of the French run-off elections. To answer the question of at what point Greece might leave the Eurozone and return to the Drachma is relatively simple; it will be the day when the European loan spigot is shut off. Greece will pander, promise and proclaim until that point and then they will say, “have a nice day and thanks for all the fish.”

Christmas Trees and the Logic of Growth

"Black Swan" Fund Creator Explains Why Central Planning Has Doomed Us All

By Tyler Durden

In a must read Op-Ed in the WSJ, Mark Spitznagel, founder of "fat tail" focused hedge fund Universa, where Nassim Taleb has been known to dabble on occasion, explains the fundamental flaw with central planning, and specifically why "moral hazard" or the attempt to avoid the destructive part of natural cycles, is the greatest unnatural abomination ever conceived by man. His visual explanation should be sufficient for even such grizzled academics who have no clue how the real world works, as the Chairsatan, to comprehend why what he is doing is an epic abomination of every law of nature: "Suppressing fire, creating the illusion of fire protection, leads to the wrong kind of growth, which then invites greater destruction. 

Grope and Change

Hookers bring Secret Service to its knees

By mark steyn

Unlike the government of the United States, I can't claim any hands-on experience with Colombian hookers. But I was impressed by the rates charged by Miss Dania Suarez, and even more impressed by the U.S. Secret Service's response to them.

Cartagena's most famous "escort" costs $800. For purposes of comparison, you can book Elliot Spitzer's "escort" for $300. Yet, on the cold, grey fiscally conservative morning after the wild socially liberal night before, Dania's Secret Service agent offered her a mere $28.

Senator Church’s Prophetic Warning

"We are, like, that far from a turnkey totalitarian state"

By George Washington

Senator Frank Church – who chaired the famous “Church Committee” into the unlawful FBI Cointel program, and who chaired the Senate Foreign Relations Committee – said in 1975:

“Th[e National Security Agency's]  capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything: telephone conversations, telegrams, it doesn’t matter. There would be no place to hide.  [If a dictator ever took over, the N.S.A.] could enable it to impose total tyranny, and there would be no way to fight back.“

Now, the NSA is building a $2 billion dollar facility in Utah which will use the world’s most powerful supercomputer to monitor virtually all phone calls, emails, internet usage, purchases and rentals, break all encryption, and then store everyone’s data permanently.

The former head of the program for the NSA recently held his thumb and forefinger close together, and said:

"We are, like, that far from a turnkey totalitarian state"

The American Experiment In Liberty Has Failed

Farmers in human cattle

By Lawrence Hunter

"It is, perhaps, a fact provocative of sour mirth that the Bill of Rights was designed trustfully to prohibit forever two of the favorite crimes of all known governments: the seizure of private property without adequate compensation and the invasion of the citizen’s liberty without justifiable cause…It is a fact provocative of mirth yet more sour that the execution of these prohibitions was put into the hands of courts, which is to say, into the hands of lawyers, which is to say, into the hands of men specifically educated to discover legal excuses for dishonest, dishonorable and anti-social acts."

                           H. L. Mencken, Prejudices: A Selection, pp. 180-82

The American experiment in liberty has failed.  It is only a matter of time before people realize it. Official dogma exulting over the U.S. Constitution, which for so long was propagated through public schools, churches and government mouthpieces, will not forever withstand the exposure of the truth about American democracy now readily available on the Internet.

As France Goes, so Goes Europe?

Europe is coming apart

By Patrick J. Buchanan

When survival is at stake, one may hear from a politician not what he believes — but what he thinks the people deciding his fate wish to hear.

By that standard, what do the people of France, in the final weeks of their presidential election, wish to hear from their candidates?

President Nicolas Sarkozy seems to believe his countrymen are in a deeply nationalistic frame of mind.

Earth Day’s dark side

Guardians of Earth, persecutors of humankind

By Robert Zybrin

Sunday was Earth Day, the annual jamboree of the green movement held worldwide since 1970. Unfortunately, a review of the accomplishments of the advocates of environmentalism and population control since that spectacular debut shows very little reason to celebrate.

The seminal scriptures of modern-day environmentalism were Rachel Carson’s “Silent Spring,” Paul R. Ehrlich’s “Population Bomb” and the publications of the Club of Rome. While stylistically quite different, these books all served to rally the public around a core anti-human philosophy. As the Club of Rome put it, 

“The Earth has cancer, and the cancer is man.” 

Such misanthropic views could only have the most horrific consequences.

Crony Capitalism and the Expansive Central State

Crony Capitalism flourishes in an economy dominated and controlled by a Central State

By Charles Smith

Crony capitalism arises when an expansive Central State dominates the economy. The Central State can then protect crony-capitalist perquisites, cartels, quasi-monopolies and financialization skimming operations of the sort which now dominate the U.S. economy's primary profit centers.

If we step back, the larger context is the purpose and role of establishing a State to protect its citizens from foreign and domestic predation and exploition.

What Shakespeare's shepherd knew

The Ban On Cruel And Unusual Punishment Gets A Test Case
By GEORGE F. WILL 

James Donneley 16 years old
convicted of stealing some shirts
sentenced to 2 months - 1903

In the summer of 1787, just 94 years after the Salem witch trials, as paragons of the Enlightenment such as James Madison, George Washington and Benjamin Franklin deliberated in the Constitutional Convention in Philadelphia, a mob pelted and otherwise tormented to death a woman accused of being a witch. Prosecution of alleged witches, writes historian Edmund Morgan, had ceased in the colonies long before the English statute criminalizing witchcraft was repealed in 1736. Some popular sentiment, however, lagged.

Today, 221 years after the Bill of Rights was added to the Constitution, the Supreme Court is again pondering the Eighth Amendment's proscription of "cruel and unusual punishments." The case illustrates the complexity of construing some constitutional language in changing contexts of social science and brain science.

Counting the Dead Equally

First and second class victims

by Paul Gottfried

Much to the consternation of Western intellectuals and journalists, Hungary’s government sponsors a House of Terror in Budapest which dares to devote attention to not only Nazi crimes, but also Stalinist ones.

Ever since the ascendance of the “antifascist” (read: neo-Stalinist plus PC) persuasion in our “liberal democracies,” it has become gauche and somehow even anti-Semitic to compare Nazi (or more generally “fascist”) atrocities to the collateral damage of the communist forced march into the globalist future.

But the House of Terror’s director, Gábor Tallai, says it is sometimes hard to distinguish between victims of Nazi and Soviet terror. “Many Hungarian Jews who escaped Auschwitz were then dragged off by the Red Army to perform compulsory labor in Siberia.” Since my cousin was one of these forced laborers, I concede Tallai’s point.

The hunger for a simpler, black-and-white world

The Hunger Games trilogy is the fictional equivalent of Occupy’s adolescent worldview

by Patrick Hayes 

‘I don’t write about adolescence’, said Suzanne Collins, discussing her Hunger Games novels in arecent interview. ‘I write about war. For adolescents.’

Regardless of the intended audience of The Hunger Games, its appeal has been much broader. The first novel has sold an estimated 10million copies worldwide and is now as likely to be read by adults as adolescents. Following the pattern of the Harry Potter novels, respectable-looking covers have been produced so adults don’t look out of place reading the books during the daily commute. Critics gush about The Hunger Games offering ‘attractions that many grown-up novels don’t’. The film adaptation has proven to be one of the most successful films of recent years.

It’s not hard to see why. The books are fast-paced thrillers, riffing with a now extremely familiar conceit – a sci-fi dystopia where a group of people are placed in an arena to do brutal combat, with their every move being filmed for a reality TV show called ‘The Hunger Games’. It’s effectively The Running Man with hot teenagers, a made-for-Hollywood version of the Japanese hit, Battle Royale.

Now For An Arab Economic Revolution

Free Goods Versus Freedom

By Saifedean Ammous

Revolution across the Arab world has forced the region’s peoples and governments to grapple with the need for change. Years of sclerosis have given way to a frantic push for reforms to match the aspirations and discontent of millions.

But reform momentum is tugging in two, quite opposite, directions. One push is for governments to provide for their people; the other calls for governments to stop restricting their people’s freedom, particularly their economic liberty. The first type of reform will likely only exacerbate the Arab world’s grave problems; the second offers hope for positive and sustainable change.

The Trouble with Libertarian Paternalism

Choices and Options

By Raghuram Rajan

There are many arguments against government paternalism: apart from limiting individual choice (for example, the choice to remain uninsured in the current health-care debate in the United States) and preventing individuals from learning, history suggests time and again that the conventional wisdom prevalent in society is wrong. And, since governments typically try to enforce the conventional wisdom, the consequences could be disastrous, because they are magnified by the state’s coordinating – and coercive – power.

Too Big to Jail

Crooks Vs Suckers

By Simon Johnson

Among the fundamental principles of any functioning justice system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail. Breaking an oath to tell the truth is perjury, and lying in official documents is both perjury and fraud. These are serious criminal offenses, but apparently not if you are at the heart of America’s financial system. On the contrary, key individuals there appear to be well compensated for their crimes.

Capitalism, Socialism or Fascism?

Whatever we have, it isn’t free market capitalism

by WashingtonsBlog

What is the current American economy: capitalism, socialism or fascism?

Socialism

Many people call the Bush and Obama administration’s approach to the economic crisis “socialism”.

Are they right?

Well, Nouriel Roubini writes in a recent essay:

This is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest…

The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending.

Where does Money Come From?

Money as Debt

By Paul Grignon

The simple answer to the title question is DEBT. Whether paper cash or numbers on a computer screen, all money (except coins) is “evidence of debt”.

What is "cash” and where does it come from? Cash can be the familiar paper stuff, or it can be credit at the national central bank which banks use to settle accounts between banks. “Credit cash” at the central bank is always convertible to “paper cash” upon demand.

So, where does cash come from? Is it just printed by the government as we are shown on TV?

The Celtic Mind

How Adam Smith and Edmund Burke saved civilization
By Bradley J. Birzer

One contemplates the power, depth, and breadth of the finest 18th-century minds only with some trepidation and humility. Or at least, one should.

The favorite study of the great men of that day, famed editor of The Nation E.L. Godkin explained in 1900, was the glorification of the person against political power. In “opposition to the theory of divine right, by kings or demagogues, the doctrine of natural rights was set up. Humanity was exalted above human institutions, man was held superior to the State, and universal brotherhood supplanted the ideas of national power and glory.”

Exodus

White Muslims and Black Jews

By Mark Steyn

As far as the media were concerned, the murder of Jewish schoolchildren in Toulouse and a black teenager in Florida were the same story — literally: Angry white male opens fire on "the other," his deeply ingrained racism inflamed by the tide of toxic right-wing hate infecting our public discourse. Alas, in Florida, the angry white male turned out to be a registered Democrat and half Hispanic — or, as the New York Times put it, a "white Hispanic," a descriptor never applied by its editors to, say, Sonia Sotomayor or Gloria Estefan or indeed any other person living or dead. And in Toulouse the angry white male turned out to be yet another Muhammad.

Oh, well. Better luck next time, although the pickings seem likely to get thinner: Pitch the Western world a decade or two down the road, riven by an ever-more-fractious tribalism between blacks, Hispanics, and Muslims, and the one surviving nonagenarian neo-Nazi white supremacist will be at the retirement home. But it'll still all be his fault.

Happy Birthday Generation Y

Blog Birthday

A child of five starts school, but a blog of the same age has already taken more daring steps. Today I am making an effort to remember that quiet and fearful woman, from before April 9, 2007, who created Generation Y. But I can’t. Her face disappears, dissolving among all the beautiful and difficult moments I’ve experienced since I posted my first text on the web. I can no longer imagine myself without this accidental and personal diary. I have the impression that I have always, in one way or another, been writing a blog. When the indoctrination and the injustice reached intolerable points, my childish head glossed the reality–from the fringes–in ways I could never say out loud. The evasive adolescent I became did the same thing: narrating her daily life, trying to explain it and trying to escape it.

The better solution

Is the EU Too Weak?

By Charles C. W. Cooke

In the wake of the ongoing eurozone crisis, the New York Times reports that the European Union is looking to make “fundamental changes,” mooting the creation of a “central financial authority — with powers in areas like taxation, bond issuance and budget approval.” This, notes the Times, could “eventually turn the Eurozone into something resembling a United States of Europe.”

And so, in the face of arguably the most significant crisis in the history of the European integration project, the conclusion drawn by those who seek further federation is predictable: The problem with Europe, they say, is not that there has been far too much integration of a continent which is inherently unsuited to union, but that there has been too little. Plus ça change, plus c’est la même chose.