Leszek Balcerowicz: The Anti-Bernanke

The man who saved Poland's economy, on America's mistakes and the better way to heal from a financial crisis

By MATTHEW KAMINSKI

As an economic crisis manager, Leszek Balcerowicz has few peers. When communism fell in Europe, he pioneered "shock therapy" to slay hyperinflation and build a free market. In the late 1990s, he jammed a debt ceiling into his country's constitution, handcuffing future free spenders. When he was central-bank governor from 2001 to 2007, his hard-money policies avoided a credit boom and likely bust.

Poland was the only country in the European Union to avoid recession in 2009 and has been the fastest-growing EU economy since. Mr. Balcerowicz dwells little on this achievement. He sounds too busy in "battle"—his word—against bad policy.

"Most problems are the result of bad politics," he says. "In a democracy, you have lots of pressure groups to expand the state for reasons of money, ideology, etc. Even if they are angels in the government, which is not the case, if there is not a counterbalance in the form of proponents of limited government, then there will be a shift toward more statism and ultimately into stagnation and crisis."

Looking around the world, there is no shortage of questionable policies. A series of bailouts for Greece and others has saved the euro, but who knows for how long. EU leaders closed their summit in Brussels on Friday by deferring hard decisions on entrenching fiscal discipline and pro-growth policies. Across the Atlantic, Washington looks no closer to a "fiscal cliff" deal. And the Federal Reserve on Wednesday made a fourth foray into "quantitative easing" to keep real interest rates low by buying bonds and printing money.

As a former central banker, Mr. Balcerowicz struggles to find the appropriate word for Fed Chairman Ben Bernanke's latest invention: "Unprecedented," "a complete anathema," "more uncharted waters." He says such "unconventional" measures trap economies in an unvirtuous cycle. Bankers expect lower interest rates to spur growth. When that fails, as in Japan, they have no choice but to stick with easing.

The Coming Fiscal Tsunami

As a nation, we are about to be drowned by entitlement debt

by David Koitz

The United States will soon confront a major economic problem, perhaps one unparalleled in the nation’s history. It won’t strike tomorrow, next week, or next month, but it is out there, its roots sown by the demographics of the past half-century and a body politic hesitant to tamper with aging institutions of government. When it emerges, like a tsunami, the destructive consequences of amassing unprecedented federal indebtedness will be overwhelming, and though seemingly distant, when it rears its head it will rise suddenly in our consciousness as if coming without warning.

While a searing left-right ideological debate pervades the nation’s economic dialogue, the enormity of our hovering dilemma gets short shrift. The lack of clarity in the policy discourse, the inclination by lawmakers to procrastinate on politically difficult decisions, and the propensity to pass blame and kick the can down the road are stunning. But like the tearing down of the Twin Towers, a hurricane devastating the Louisiana coast, or an earthquake striking San Francisco, our looming fiscal problem has no political division. It is not a Democratic or Republican problem. It has no party signature. It is simply an American problem. And as it draws ever closer, the need for political convergence becomes ever more pressing.

The problem is very transparent. Unlike the miasma of derivative markets or the opaque operations of hedge funds, it’s not clouded by the vagaries of our financial institutions. It’s a pretty straightforward dilemma. As our federal budget deficits have grown, the level of debt taken on by the U.S. Treasury has risen precipitously. Some people take solace by looking at other nations, whose debts represent a considerably larger share of their economic output, making our debt seem manageable. But given the sheer magnitude of our problem, this measure may obscure how significant even a moderate increase in the debt would be and the risk it would pose if we stay on our current course.

The challenges in our path are not modest. Starting today and continuing over the next 20 years, the post–World War II baby-boom generation will nearly double the nation’s aged population, and the baby trough that followed (and has lingered since) will slow the growth of the working population. The baby boomers and the major advances in life expectancy for subsequent generations will cause a swelling number of recipients of Medicare, Medicaid, and Social Security, and the expenditures of those programs will soar, programs whose creation and inherent promises largely preceded the birth of those who now or will soon seek their benefits.

The Doctor Won't See You Now

Look for health care bottlenecks

By mark steyn

A few years ago, my small local hospital asked a Senate staffer if she could assist them in obtaining federal money for a new building. So she did, expediting the process by which that particular corner of northern New Hampshire was deemed to be "underserved" and thus eligible for the fed gravy. At the ribbon-cutting, she was an honored guest, and they were abundant in their praise. Alas, in the fullness of time, the political pendulum swung, her senator departed the scene, and she was obliged to take a job out of state.

Last summer, she returned to the old neighborhood and thought she'd look for a doctor. The sweet old guy with the tweed jacket in the neatly painted cape on Main Street had taken down his shingle and retired. Most towns in the North Country now have fewer doctors than they did in the 19th century, and the smaller towns have none. The Yellow Pages list more health insurers than physicians, which would not seem to be an obvious business model. So she wound up going to the health center she'd endowed so lavishly with your tax dollars just a few years earlier.

They gave her the usual form to fill in, full of perceptive inquiries on her medical condition: Do you wear a seat belt? Do you own a gun? How many bisexual men are you now having sex with? These would be interesting questions if one were signing up for eharmony.com and looking to date gun-owning bisexuals who don't wear seat belts, but they were not immediately relevant to her medical needs. Nevertheless, she complied with the diktats of the Bureau of Compliance, and had her medical records transferred, and waited ...and waited. That was August. She has now been informed that she has an appointment with a nurse-practitioner at the end of January. My friend pays $15,000 a year for health insurance. In northern New Hampshire, that and meeting the minimum-entry requirement of bisexual sex partners will get you an appointment with a nurse-practitioner in six months' time.

Why Nazism Was Socialism and Why Socialism Is Totalitarian

Robbers, Pickpockets and other Criminals

by George Reisman

My purpose today is to make just two main points: (1) To show why Nazi Germany was a socialist state, not a capitalist one. And (2) to show why socialism, understood as an economic system based on government ownership of the means of production, positively requires a totalitarian dictatorship.

The identification of Nazi Germany as a socialist state was one of the many great contributions of Ludwig von Mises.

When one remembers that the word "Nazi" was an abbreviation for "der National sozialistische Deutsche Arbeiters Partei — in English translation: the National Socialist German Workers' Party — Mises's identification might not appear all that noteworthy. For what should one expect the economic system of a country ruled by a party with "socialist" in its name to be but socialism?

Nevertheless, apart from Mises and his readers, practically no one thinks of Nazi Germany as a socialist state. It is far more common to believe that it represented a form of capitalism, which is what the Communists and all other Marxists have claimed.

The basis of the claim that Nazi Germany was capitalist was the fact that most industries in Nazi Germany appeared to be left in private hands.

What Mises identified was that private ownership of the means of production existed in name onlyunder the Nazis and that the actual substance of ownership of the means of production resided in the German government. For it was the German government and not the nominal private owners that exercised all of the substantive powers of ownership: it, not the nominal private owners, decided what was to be produced, in what quantity, by what methods, and to whom it was to be distributed, as well as what prices would be charged and what wages would be paid, and what dividends or other income the nominal private owners would be permitted to receive. The position of the alleged private owners, Mises showed, was reduced essentially to that of government pensioners.

The iron fist in the velvet glove of gay marriage

A radical gloss attached to the continuing encroachment of the state upon our private, intimate lives

by Brendan O’Neill 

Following the publication yesterday of the Lib-Con government’s proposals for introducing gay marriage, there has been a frenetic debate about whether religious freedom will be harmed by allowing homosexuals to get hitched. The government has given assurances that religious institutions will not be forced to carry out same-sex weddings (and has actually banned the Church of England from doing so), yet still the eye of this stormy debate has focused on whether religious groups’ rights to uphold and celebrate only traditional marriage will be dented by the government’s fervent promotion of same-sex marriage.

What a massive red herring. What an enormous distraction from the real authoritarian instinct motoring the Conservative Party’s and others’ conversion to the cause of gay marriage. The central problem with the gay marriage agenda is not that at some point in the future an unwilling man of the cloth might be strong-armed into giving his blessing to a gay union, but rather that it allows the state to do something that was traditionally considered beyond its purview: to redefine the meaning of marriage and, by extension, the meaning of the marital home, the family, and our most intimate relationships. Some have sought to depict the drive for gay marriage as a continuation of the struggle for civil rights that exploded in the mid-twentieth century; it’s better understood as a continuation, and intensification, of the modern state’s desire to get a foot in the door of our private lives and to assume sovereignty over our relationships.

Food Fight

California brings the nanny state to the kitchen table

BY TROY SENIK

California’s new state motto might as well be “Does this dress make me look fat?” No other state comes close to California’s aesthetic obsession, which has birthed innumerable diet and fitness fads and made the gym into the equivalent of a state church. Considered on its merits, it’s a largely unobjectionable trend—laudable, even, for its emphasis on self-improvement. But when wed to two of California’s more unfortunate proclivities—a reflexive, nearly primitive worship of all things “natural” (usually evangelized by someone carrying an iPhone) and an insatiable appetite among government officials for meddling in the most minuscule aspects of everyday life—it spells trouble.

It should come as no surprise, then, that the City Council in Los Angeles, the state’s epicenter of vanity, recently made headlines by expanding its portfolio to include citywide dietary management. Last month, the body unanimously voted to approve a resolution exhorting Angelinos to participate in “meatless Mondays,” a weekly exercise in herbivorousness justified on multiple grounds: from combating obesity (which cynics might note is a malady afflicting some of the council members) to reducing carbon footprints to preventing animal cruelty (apparently tolerable the other six days of the week). It was as if council members dared one another to see how many liberal erogenous zones they could stimulate with a single initiative.

French Thief Complains that Victims Are Running Away

Atlas is shrugging

French Prime Minister: “I’m upset that the wildebeest aren’t remaining still for their disembowelment.”

by Daniel J. Mitchell

I predicted back in May that well-to-do French taxpayers weren’t fools who would meekly sit still while the hyenas in the political class confiscated ever-larger shares of their income.

But the new President of France, Francois Hollande, doesn’t seem overly concerned by economic rationality and decided (Obama must be quite envious) that a top tax rate of 75 percent is fair. And patriotic as well!

So I was pleased – but not surprised – when the news leaked out that France’s richest man was saying au revoir and moving to Belgium.

But he’s not the only one. The nation’s top actor also decided that he doesn’t want to be a fatted calf. Indeed, it appears that there are entire communities of French tax exiles living just across the border in Belgium.

Best of all, the greedy politicians are throwing temper tantrums that the geese have found a better place for their golden eggs.

France’s Prime Minister seems particularly agitated about this real-world evidence for the Laffer Curve. Here are some excerpts from a story in the UK-based Telegraph.

France’s prime minister has slammed wealthy citizens fleeing the country’s punitive tax on high incomes as greedy profiteers seeking to “become even richer”. Jean-Marc Ayrault’s outburst came after France’s best-known actor, Gerard Dépardieu, took up legal residence in a small village just over the border in Belgium, alongside hundreds of other wealthy French nationals seeking lower taxes. “Those who are seeking exile abroad are not those who are scared of becoming poor,” the prime minister declared after unveiling sweeping anti-poverty measures to help those hit by the economic crisis. These individuals are leaving “because they want to get even richer,” he said. “We cannot fight poverty if those with the most, and sometimes with a lot, do not show solidarity and a bit of generosity,” he added.

In the interests of accuracy, let’s re-write Monsieur Ayrault’s final quote from the excerpt. What he’s really saying is: “We cannot buy votes and create dependency if those that produce, and sometimes produce a lot, do not act like morons and let us rape and pillage without consequence.”

A Funny Thing Happened On The Way To The Fiscal Cliff

It will be Nottingham and the Sherwood Forest 

 “If I've told you once, I've told you a hundred times; do not fan the girls when they're wet! But you'll never learn; you'll be a eunuch all your life.”   -Lycus

By Mark J. Grant
There are 16 days left before we all shoot over the falls and are plunged into the freezing water. The markets are pretending it will never happen and that some magical incantation will be found to set everything right in the moments before we take the dive. The lethargy is noticeable and the apathy is like someone has thrown the wet towel of complacency over everyone’s shoulders. The crowd meanders. The mob is a headless jumble of people and the clock ticks and ticks and does not stop ticking. The unknown is recognized but like some mindless lemming staring at the cliff I do not think that many understand the gravity of the situation.

Lycus: “Is it contagious?”

Pseudolus: “Have you ever seen a plague that wasn’t?”

In the best case scenario, according to most people, some agreement will be reached. I hate to even agree that this is the best case but this is what almost everyone thinks and so I will go along with it for the moment. This best case scenario however includes an assumption that I do not believe will be correct which is that something formulated by common sense will be the result and it is just there that I hold little hope. To be quite open; I am more frightened of what our political leaders might concoct than what we face at the cliff. The Democrats cry for more stimulus in a time when we cannot afford the stimulus and the social programs we now have but “more money” seems to be the only words in their vocabularies these days. Ok, they can also say “tax the rich” but it is a limited amount of words that they speak now.

It’s against the law of the United States to take one’s own life. The penalty is death.

Obama claims a mandate. Who gave him this mandate one may reasonable ask; the 47.5 million people on food stamps, the people living on the tax benefits of those that work, the people who game the system so that they never have to find a job and enjoy a life paid for by those that are gainfully employed? That is one heck of a mandate isn’t it and yet that is the basis of his claim.

Argentina’s Debt Conundrum

Argentine officials will need to present their arguments before the court in February

By Eduardo L. Yeyati

Argentina is in a quandary. Prior to its 2005 sovereign-debt exchange, its legislature enacted a “lock law,” which barred the way to any future offers to holders of bonds on which Argentina defaulted in 2002. While the lock law helped to boost the participation rate in the 2005 exchange, holdout creditors remained, and have pursued litigation to force repayment.

In late November, Thomas Griesa, a United States federal judge in New York, ordered Argentina to deposit the $1.33 billion owed to holdouts into an escrow account by December 15. Griesa lifted the stay on his order from February 2012, following indications from Argentina’s government that it intended to ignore the ruling – including public statements calling the holdouts “vulture funds” and a vow by President Cristina Fernández de Kirchner never to pay. The ruling, pending appeal, leaves Argentina with three options: violate its own law, violate US law, or default again.

In his ruling, which was based on the pari passu (“equal footing”) clause included in the bonds, Griesa included the Bank of New York Mellon (the bondholders’ trustee) among entities that act “in active concert and participation” with Argentina, and cautioned it against transferring funds if Argentina ignores the order. As a result, if Argentina chooses to pay exchange bondholders as usual, BNY Mellon may refuse to transfer the funds, triggering a technical default.

The French Death Rattle

What remains to be seen is how the end will come

By Brigitte Granville

Moody’s announcement in November that it had downgraded France’s sovereign-credit rating by one notch from its AAA rating prompted one blogger to poke fun at rating agencies’ tendency either to get things completely wrong or to recognize suddenly a crisis that had long been staring them in the face. The blogger joked, “If this recognition by a rating agency that France has problems is an example of the first failing, a recovery must have begun; if it is an example of the second failing, the country faces a dire reckoning.”

French President François Hollande’s government claims to have awoken to the threat. In a recent interview, Finance Minister Pierre Moscovici likened the measures being undertaken to reduce the country’s debt burden and restore competitiveness to a “Copernican revolution...because these choices were not clear for a French government or for a center-left government.”

As proof of this new realism, the government has been trumpeting its response to the set of policy recommendations that an expert panel led by the business executive Louis Gallois presented two weeks before the downgrade. The response is centered on a payroll-tax cut, which will be offset by spending cuts and a higher value-added tax.

In the run-up to the downgrade, an analyst at Moody’s said that the decision would be based largely on whether the government heeded the Gallois report’s call for a “competitiveness shock” to France’s economy. The downgrade thus suggests that Moody’s considered the government’s response insufficient.

The Fed's Contradiction

Easier money hasn't led to more growth, so we need still easier money

by WSJ Editorial

Four years ago this month the Federal Reserve began its epic program of monetary easing to rescue an economy in recession. On Wednesday, Chairman Ben Bernanke declared that this has worked so well that the Fed must keep easing money for as long as anyone can predict in order to save a still-sputtering recovery.

That's the contradiction at the heart of the Fed's latest foray into "unconventional policy," which is a euphemism for finding new ways to print money: The economy needs more monetary stimulus because it is still too weak despite four years of previous and historic amounts of monetary stimulus. In the words of the immortal "Saturday Night Live" skit: We need "more cowbell."

In his press conference Wednesday, Mr. Bernanke was at pains to say this week's decisions were nothing new, merely an implementation of the policy direction that the Fed's Open Market Committee had set in September. This is technically true, but the timing and extent of the implementation are more than details.

The Fed committed Wednesday to purchase an additional $45 billion in long-term Treasury securities each month well into 2013, in addition to the $40 billion in mortgage assets it is already buying each month. At $85 billion a month, the Fed's balance sheet will thus keep growing from its current $2.9 trillion, heading toward $4 trillion by the end of the year. Four years ago it was less than $1 trillion.

The Constitution And Paper Money

The power to emit bills of credit or issue paper money was not delegated to the United States

by CLARENCE B. CARSON

The United States Constitution does not mention paper money by that name. Nor does it refer to paper currency or fiat money in those words.^[1] There is only one direct reference to the origins of what we, and they, usually call paper money. It is in the limitations on the power of the states in Article I, Section 10. It reads, “No State shall . . . emit Bills of Credit . . . .” Paper that was intended to circulate as money but was not redeemable in gold and silver was technically described as bills of credit at that time. The description was (and is) apt. Such paper is a device for expanding the credit of the issuer. There is also an indirect reference to the practice in the same section of the Constitution. It reads, “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts . . . .” Legal tender laws, in practice, are an essential expedient for making unredeemable paper circulate as money. Except for the one direct and one indirect reference to the origin and means for circulating paper money, the Constitution is silent on the question.

With such scant references, then, it might be supposed that the makers of the Constitution were only incidentally concerned with the dangers of paper money. That was hardly the case. It loomed large in the thinking of at least some of the men who were gathered at Philadelphia in 1787 at the Constitutional Convention. There were two great objects in the making of a new constitution: one was to provide for a more energetic general government; the other was to restrain the state governments. Moreover, the two objects had a common motive at many points, i.e., to provide a stronger general government which could restrain the states.

Measures to Prevent a Flood of Unbacked Paper Money

One of the prime reasons for restraining the state governments was to prevent their flooding the country with unbacked paper money. James Madison, one of the leaders at the convention, declared, in an introduction to his notes on the deliberations there, that one of the defects they were assembled to remedy was that “In the internal administration of the States, a violation of contracts had become familiar, in the form of depreciated paper made a legal tender . . .”^[2] Edmund Randolph, in the introductory remarks preceding the presentation of the Virginia Plan to the convention, declared that when the Articles of Confederation had been drawn “the havoc of paper-money had not been foreseen.”^[3]

Too Big to Jail

Our Banking System's Latest Disgrace

By Neil Barofsky

You can be forgiven if you watched the Department of Justice’s announcement yesterday of a $1.92 billion settlement with HSBC with a sense of disappointment--and déjà vu. The event checked all the boxes in a theatrical routine that has become all too familiar.

Descriptions of breathtaking misconduct involving the facilitation of massive drug trafficking and transactions with rogue terror-sponsoring nations? Check.

Broad boasts about the "historic" nature of the settlement that will certainly end the type of criminal misconduct alleged? Check.

Mea culpas from the offending institution with promises that it has really learned its lesson this time and will never ever engage in dastardly conduct again? Yep, that too. 

Nothing, however, was quite as it appeared. Sure, HSBC paid a record fine, but there was something vitally important missing from yesterday's press conference: actual criminal charges for obvious criminal conduct.

Some perspective: HSBC sent more than $800 million in bulk cash from Mexico to the United States, a good chunk of which apparently represented proceeds from some of the most notorious Colombian drug cartels. As someone who tried the first narcotics money laundering case involving extradition from Colombia, let me assure you that this is a lot of money, the discovery of which usually generates vigorous prosecutions and lengthy prison sentences. And it wasn’t HSBC’s only dirty business: There were also hundreds of millions of more dollars of illegally disguised transactions with rogue nations such as Iran and Sudan.

The Federal Reserve's Zombie Economy

Crony capitalism is remaking American business to be more like government

By Elizabeth MacDonald

Deutsche Bank is out with a new warning that says the Federal Reserve’s latest round of an estimated $1.02 trillion in total annual purchases of U.S. Treasuries and mortgage-backed securities is creating lemon socialism, a U.S. economy filled with the financially undead.

Deutsche notes that stock markets are based on winners and losers, but there are neither right now. That’s because the Fed keeps pumping liquidity into the system, so everyone wins. When everyone wins, no one makes money, a bridge to nowhere Japan has already crossed.

The Fed’s balance sheet could rise from $2.8 trillion currently to $4 trillion by the end of the year, even $6 trillion by the time the U.S. jobless rate gets down to the new 6.5% level the central bank wants, as the Fed stuffs a lot of paper padding at the foot of the fiscal cliff.

“Central banks should be more selective with their intervention,” says Deutsche’s equity research team. “Normally, weak companies fail, leaving the winners to advance and new companies to enter; but at the moment no company can win because the losers never leave the field as they receive support through continuous liquidity injections.”

Deutsche's equity team adds if the Fed were to “let markets decide, then equity markets would probably fall." It also notes: "But, as it is, if real investors can’t predict which way markets will go, then they will stay on the sidelines."

Deutsche also says that all of this government help essentially turns into government resentment, and it turns profits--or your wallets--into sitting ducks, a bulls-eye painted on them.

"Capital is rewarded through profits, but currently high profits can either appear socially unacceptable or as easy targets for taxation," Deutsche says.

How the Fed Rules and Inflates

The American banking system now comprises two sets of inverted pyramids

by Murray N. Rothbard

Pursuant to its essence as a post-Peel Act Central Bank, the Federal Reserve enjoys a monopoly of the issue of all bank notes. The U. S. Treasury, which issued paper money as Greenbacks during the Civil War, continued to issue one-dollar "Silver Certificates" redeemable in silver bullion or coin at the Treasury until August 16, 1968. The Treasury has now abandoned any note issue, leaving all the country's paper notes, or "cash," to be emitted by the Federal Reserve. Not only that; since the U.S. abandonment of the gold standard in 1933, Federal Reserve Notes have been legal tender for all monetary debts, public or private.

Federal Reserve Notes, the legal monopoly of cash or "standard," money, now serves as the base of two inverted pyramids determining the supply of money in the country. More precisely, the assets of the Federal Reserve Banks consist largely of two central items. One is the gold originally confiscated from the public and later amassed by the Fed. Interestingly enough, while Fed liabilities are no longer redeemable in gold, the Fed safeguards its gold by depositing it in the Treasury, which issues "gold certificates" guaranteed to be backed by no less than 100 percent in gold bullion buried in Fort Knox and other Treasury depositories. It is surely fitting that the only honest warehousing left in the monetary system is between two different agencies of the federal government: the Fed makes sure that its receipts at the Treasury are backed 100 percent in the Treasury vaults, whereas the Fed does not accord any of its creditors that high privilege.

On The Fiscal Cliff And A Constitution In Crisis

Out of a population of 315 million, presently only 115 million Americans have full time, non-government funded jobs

by Gordon T. Long

The Political Foundation of the status quo in America is based on a Grand Bargain of Complicity between the top 25% who pay approximately 90% of the taxes, and the bottom 50% who draw on the benefits that come from government. James Madison in the "Federalist Papers" outlined this complicity in the "Tyranny of the Majority". What is becoming painfully evident is that the political elite in America have falsely over-promised on the entitlements that can be delivered, which is now surfacing in the political turmoil of the Fiscal Cliff negotiations and has the potential to quickly lead towards a constitutional crisis.

Meanwhile the very top 1% of Americans, that pay 25% of the taxes and control most of the productive wealth in the nation, are securing and exercising increasing powers within the government, through what is becoming increasingly identified as 'Crony Capitalism" and "Corporatocracy". Thomas Jefferson also warned us about this potential constitutionally destabilizing influence which could emerge within the structure of the 'separation of powers'.

Out of a population of 315 million, presently only 115 million Americans have full time, non-government funded jobs. This is the same as 12 years ago and before an additional 33 million students, immigrants, single parents of others attempted to enter the workforce. It is now fracturing the social compact and the revealing the delusion of the American dream being available to all who are willing to work for it. There is no work, and certainly insufficient work which pays a wage which will support what is expected as a middle class standard of living.

This Grand Bargain is now rapidly fraying as 75 million baby boomers begin retiring and find the promises made to everyone cannot possibly be met. As the Fiscal Cliff crisis is blatantly bringing to the public's attention, for those who can read between the carefully crafted lines, funding for Social Security, Medicare/Medicaid, National Security and Interest on the debt is consuming more than can be realistically raised through taxation.

To collect enough tax revenue to avoid going deeper into debt would require over $8 trillion in tax collections annually. Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.

"The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion"

               Chris Cox and Bill Archer, Former Congressmen - WSJ 11-26-12

Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. Meanwhile, the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth. Compounding this is the fact that the disillusioned wealthy have slowed dramatically their invested CAPEX (Capital Expenditures) in productive assets in the US.

This above confluence and much more indicates that is leading to a Constitutional Crisis by the end of the decade.

Why it’s wrong to censor Holocaust deniers

History, including the history of the Holocaust, should be determined in open, public debate, not in the courts

by Angus Kennedy 

I want to talk about genocide affirmers rather than genocide deniers – and I’ll try to explain what I mean by that.

Firstly, I think that genocide denial has always been something of a shrill brand rather a real force in the world. It had it’s hey day in 1970s France with Robert Faurisson, a rather lame literary critic in the south of France who denied the Holocaust, and was taken apart by, among other people, the French classicist and structuralist Pierre Vidal-Naquet, who was also a left-winger. Vidal-Naquet did not call for the legal prohibition of denial; instead he argued that contempt is a much more effective weapon. Similarly, Deborah Lipstadt, the author of History on Trial: My Day In Court With David Irving (2005), rails against genocide denial but is still opposed to criminalising it, shuddering at the thought ‘that politicians might be given the power to legislate on history’. I think that is a useful point to bear in mind.

The decision of whether or not to criminalise genocide denial is, in a way, the key free speech issue, the fundamental taboo. In that sense, it’s interesting that there continue to be movements by governments to make genocide denial illegal. France will probably try to push through the genocide denial law, despite it being overturned by its constitutional court, and argue for restrictions on what the French can and cannot say.

To make it clear, I’m completely opposed to criminalisation of speech or, to be more accurate, criminalisation of an idea – because that’s what this is. This is governments saying that a certain idea – genocide denial – should be illegal. I don’t think history is a matter for judges; it’s a matter for historians. I think that the completely unrestricted and absolute right to free speech is simply the best method we’ve got for getting closer to historical truth with a capital ‘T’. We should not be criminalising ideas; we should never be pragmatic about where we extend tolerance – it is a principal to be defended at all costs.

I am, however, concerned about the rapid expansion of the category of what you might call ‘deniers’. We started with Holocaust deniers - now there are genocide deniers, climate-change deniers and rape deniers. I think this is the case because there’s a growing set of people who are affirmers. The deniers are, if you like, the flipside of the intolerance of the affirmers, who are intolerant of those who do not take the orthodox position on rape, climate change, genocide or the Holocaust. When you brand somebody a denier you refuse to discuss the issue. I’m not suggesting that bringing David Irving up here on the panel would be in any way illuminating – trust me, it would not – but I am saying that society should be free to discuss, in this case, the Holocaust in a completely unrestricted way. No idea should not be off the table.

Too Big To Understand

Bigger and more extensive regulation can make a system less well-regulated

By John Aziz

One thing that has undergone hyperinflation in recent years is the length of financial regulations:

The Dodd-Frank regulatory hyperinflation crowds out those who cannot afford teams of legal counsel, compliance officers, and expansive litigation. Dodd-Frank creates new overheads which are no challenge for large hedge funds and megabanks armed with Fed liquidity, but a massive challenge for startups and smaller players with more limited resources.

As BusinessWeek noted in October:

The law requires Hedge Funds to register with the Securities and Exchange Commission, supply reams of sensitive data on trading positions, carefully screen potential investors, and hire compliance officer after compliance officer.

So, is this expansion in volume likely to improve financial stability? No — the big banks are bigger and more interconnected than ever, which was precisely the problem before 2008, and they are still speculating and arbitraging with very fragile strategies that can incur massive losses as MF Global’s breakdown and more recently the London Whale episode proves.

Andy Haldane laid out the problem perfectly in his recent paper The Dog and the Frisbee:

Catching a frisbee is difficult. Doing so successfully requires the catcher to weigh a complex array of physical and atmospheric factors, among them wind speed and frisbee rotation. Were a physicist to write down frisbee-catching as an optimal control problem, they would need to understand and apply Newton’s Law of Gravity.

Yet despite this complexity, catching a frisbee is remarkably common. Casual empiricism reveals that it is not an activity only undertaken by those with a Doctorate in physics. It is a task that an average dog can master. Indeed some, such as border collies, are better at frisbee-catching than humans.

We’re no longer citizens, we’re suspects

The new Communications Data Bill continues the trend away from privacy to giving the state full access to our private lives

by Luke Gittos 

Following complaints in the halls of Westminster over the past week, UK prime minister David Cameron announced yesterday that the Communications Data Bill will have to be redrafted. The bill - which would have granted draconian, almost open-ended snooping powers to the home secretary to monitor our communications - will now have to be rewritten with greater ‘safeguards’ to protect our privacy.

We should be clear that the retreat on this bill has little or nothing to do with a commitment to safeguarding privacy. Undoubtedly, it is an affordable concession by the Tories to the Liberal Democrat leader Nick Clegg, who indicated that his party had ‘serious concerns’ around the scope of the bill. Clegg’s concerns were typical of the governmental furore over the last week, which has been narrowly focused on the scope of the powers granted under clause 1 of the bill, but which has said nothing about its stated purpose: to facilitate greater disclosure of data from private companies to the state.

The anticipated powers under clause 1 were absurdly broad. It would have given the home secretary an almost open-ended power to make orders, outside the scrutiny of parliament, requiring communications companies to retain and provide communications data.  It would have allowed for disclosure of an absurd amount of information regarding our communication, even down to the device upon which a communication was made (assuming this information is available).

But because the criticism of the bill simply targeted the scope of these ludicrously wide powers, it is likely that the redraft will simply reflect the recommendations of the cross-party committee which scrutinised the bill. The committee, in a report published last week, recommended that the power under clause 1 be restricted in order that the home secretary only be granted the power to make orders through the ‘super affirmative’ procedure. This means that the minister will have to go through more parliamentary committees if he or she wants to extend their own powers under any future act.

Drink up while you can

When being green isn’t enough

BY FRACK GORDON

Statism rests on a fairly simple conceit: the free market is ruled by greed and exploitation, so government intervention is necessary to level the playing field. Inherent in that mindset is the assumption that the government is benevolent, and its actors are without their own selfish motivations. A selective naivety is necessary to maintain this wishful worldview against the constant barrage that is reality, and it leads to some fascinating contradictions. For example, the same group that believes George W. Bush started a war in order to drive up Halliburton’s stock price (or something), never stops to think about the potential pitfalls of handing the government other immense powers, such as defining what the term “health care” will mean.

Politicians are happy to exploit this naivety to accumulate power, feigning self-righteous idealism to mask their ulterior motive. Getting away with anything is possible as long as you claim that you’re doing it for the children, or to uplift the disadvantaged worker, or to strengthen the middle class, or to protect… the bottled soda industry?

We’ll get to that in a second. First, recall O’Brien’s dark reveal at the end of George Orwell’s classic1984: 

The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power… We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites…  They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. 

We’ll quickly slide past how Egypt is providing a very depressing recent real world example of that last line, and transition into Mark Steyn’s response to the Chick-fil-A-permitting absurdity in Chicago this past summer:

Pat Finucane wasn’t the only victim of state terror

Observers ‘shocked’ to discover that Britain colluded with loyalist death squads: where have you been for the past 30 years?

by Brendan O’Neill 

There were ‘shocking levels of collusion’ in the murder of the Irish republican lawyer Pat Finucane, said prime minister David Cameron yesterday.

Launching a long-awaited report into the 1989 killing, in which Finucane was shot dead in front of his family in his north Belfast home by loyalist gunmen, Cameron said he was ‘deeply sorry’ over the whole incident. He confirmed that the Pat Finucane Review, set up last year by the secretary of state for Northern Ireland, had found that ‘agents of the state’ were involved in the killing of Finucane; indeed, ‘state employees played key roles’ in the murder, providing assistance and information to the Ulster Defence Association which pulled the trigger in Finucane’s home. After the killing, members of both the British Army and the Royal Ulster Constabulary (RUC) lied to investigators, in a ‘relentless attempt to defeat the ends of justice’, says the review.

Cameron’s use of the word ‘shocking’ has been splashed across the media coverage. Yet while the report of the Pat Finucane Review might make for disturbing reading - highlighting a sordid instance when the British state assisted in the murder of someone it considered a pest - is it really shocking? It is well known, at least among those who looked beyond the headlines during the conflict in Northern Ireland from 1969 to 1994, that Britain’s security services colluded with loyalist paramilitaries. Some of the families of those murdered by loyalists, including Finucane’s, have been demanding inquiries into collusion for ages. In the Eighties and Nineties, radical journalists, mainly in Ireland but also a few in Britain, frequently reported on acts of collusion between the British state and loyalist death squads. Yet back then, nobody in the mainstream wanted to talk about it, much less employ a QC backed by the PM to investigate the claims and write a ‘shocking’ official report about them.

How the ‘peace process’ provokes violence

Recent riots in Belfast confirm that the politics of cultural identity does little more than reinforce sectarian divisions

by Jason Walsh 

A week of riots in Belfast is nothing new. But isn’t the peace process supposed to have put an end to all this? Think again.

The trouble started last Monday when Belfast City Council passed a motion to fly the Union flag on 18 to 20 state occasions annually, rather than on 365 days a year, as it had done previously. The motion, proposed by the liberal unionist Alliance Party, was a compromise measure; the original motion, tabled by the nationalist Social Democratic and Labour Party (SDLP) and supported by Sinn Fein, had sought to stop flying the flag entirely.

Predictably, given mainstream Unionist parties had been leafleting on the matter, an angry mob appeared at Belfast City Hall. Perhaps less predictably, and certainly not predicted by the police, a riot broke out and the building was stormed. This was followed by five further nights of violence, burnt-out cars and death threats, before it all finally tapered out on Saturday.

Press coverage has focused on outrage among the middle classes and the threat that the violence poses to traders and wider investment in the ‘New Northern Ireland’. Neither of these claims is inaccurate, but both are beside the point. The most revealing thing about the riots is that they show the vacuity of identity politics – on both sides of the sectarian divide.

A properly republican response to British sovereignty in Northern Ireland would not be to dispute the fact of its existence by lowering flags, but rather to question it and argue for Irish sovereignty. Alas, the SDLP’s motion, which is hard to read other than as an attempt to out-‘green’ Sinn Féin, focused on the cultural trappings of sovereignty - identity - rather than its reality.