H. G. Wells on the Dictatorial Century

The “Master Spirit” Takes Charge

By Thomas F. Bertonneau

In his monumental Experiment in Autobiography (1934), the English novelist and public intellectual Herbert George Wells (1866 – 1946) claims to understand the German dictator Adolf Hitler intuitively. The discussion will shortly come to that – but first some background.

Writing of his “mid schoolboy stage” at Thomas Morley’s school in 1878 and 79, and trying to reconstruct his thirteen-year-old worldview, Wells recalls, along with much else, his adolescent fondness for indulging in compensatory military fantasies rooted in a rebellious but invariably thwartedlibido dominandi. “The flavor of J. R. Green’s recently published (1874) History of the English people had drifted to me either directly or at second hand,” as the autobiographer writes, “and my mind had leapt all too readily to the idea that I was a blond and blue-eyed Nordic, quite the best make of human being known.” Wells remarks that, “England was consciously Teutonic in those days, [and] the monarchy and Thomas Carlyle were strong influences in that direction.” Discussion of Britain as a romantic “Keltic Fringe” hung in the air, as Wells writes; “and the defeat of France in 1870-71 seemed to be the final defeat of the decadent Latin peoples.” The convictions that, “We English, by sheer native superiority, practically without trying, had possessed ourselves of an Empire on which the sun never set” and that, “the errors and infirmities of other races” were compelling Britain towards “world dominion” fastened themselves unquestionably in young Georgie’s mind. The adult Wells would put it this way: “All that was settled in my head,” such that the array of associated notions informed the lad’s “active imagination.”

The smallish and high-voiced Georgie, “an undernourished boy, meanly clad,” as Wells confesses, “liked especially to dream that [he] was a great military dictator like Cromwell, a great republican like George Washington or like Napoleon in his earlier phases”; and he “used to fight battles whenever [he] went for a walk alone” in the vicinity of Bromley, in Kent.

No one suspected that a phantom staff pranced about me and phantom orderlies galloped at my commands, to shift the guns and concentrate fire on those houses below, to launch the final attack upon yonder distant ridge. The citizens of Bromley town go out to take the air on Martin’s Hill and look towards Shortland across the fields where once meandered the now dried-up and vanished Ravensbourne, with never a suspicion of the orgies of bloodshed I once conducted there.

Wells fondly remembers how he “entered, conquered, or rescued, towns riding at the head of [his] troops, with [his] cousins and schoolfellows recognizing [him] with surprise from the windows.” Crowned heads and elected leaders would converge on his triumph to offer congratulations. “With inveterate enemies, monarchists, Roman Catholics, non-Aryans and the like,” Wells adds, “I was grimly just.” It is in recalling the racial theme that Wells likens himself as he was in those days to the Leader of National Socialism: “I had ideas about Aryans extraordinarily like Mr. Hitler’s.” Those ideas would have included the picture of “the Great Aryan People going to and fro in the middle plains of Europe… varying their consonants according to Grimm’s Law… and driving inferior breeds into the mountains,” as well as the thesis that the Aryan accomplishment consummated itself everywhere when it “squared accounts with the Jews.” Yet as Wells says in distinguishing himself, “Unlike Hitler I had no feelings about the contemporary Jew.” So it is in Wells’ attestation, that, “the more I hear of Hitler the more I am convinced that his mind is almost the twin of my thirteen year old mind in 1879; but heard through a megaphone and – implemented.”

The shifting focus of global affairs

Giving Europe What It Needs But Does Not Want

by George Handlery

The current American administration has made an announcement that is beyond partisanship. Accordingly, America considers herself not to be primarily a country of the Atlantic zone but as a member of the Pacific’s community. With this, the USA reacts rationally to her interests and her location. Consequently, Europe’s priority is abandoned and the Pacific Rim becomes a core interest. The measure is justified on several levels.

A reason for the reorientation is the rise of superpowers in the Pacific, such as China. Her modernization –yet without system change- returns to her the ability to play her traditional role. At the level of power politics, we should not only consider size, population and the will to use armaments. Such considerations make India a dark horse that has good chances to assert herself if she wishes. Japan is a major player that innately rejects dominance. Regardless of her past performance and economic might, Nippon compares to Europe’s Great Powers. By 1945 these have lost the muscle mass to cut the cake in the major league. 

This “pre season” ceding of rankings has ignored two powerhouses. First, Russia comes to mind. As in the US’ case, we have here a Euro-zone actor that is also a major player in any Asian league. Moscow’s real estate engages it in Asia. In time, the intensity of this engagement might undergo an upgrading. Russia’s relationship to Beijing might not continue to be defined by today’s issues. Russia is a beneficiary of the “Unequal Treaties” to whose challenge every Chinese political movement is committed. That the “Chinats” and the “Chireds” share here a common denominator underlines the extent of a national consensus. 

Accordingly, Russia’s Far Eastern outposts and the rise of China create a potential for collisions. Due to their size, the ramifications are significant. Time might prove this to have been the understatement of the decade. Whatever the future of the one-and-a-half million square kilometers that Czarist Russia took from decaying Imperial China, even if she wants to hug the sidelines, the US, as a power of the heavy weight class, cannot remain uninvolved. As the case of the islands between Viet Nam, the Philippines, Japan and National China tells, America’s involvement in the Pacific theater is growing. In discussing “significance”, the economy is a decisive element. While Europe declines with the “help” of its Euro, the value of its assets nose-dives. Among the advanced economies there, only non-members such as Switzerland and Norway are holding their own. Compare Europe with East Asia, and you hit on a sustainable decisive discrepancy.

Japan's Ultimate Confusion

Does Japan desire to continue as a tier-one nation, or is she content to drift into tier-two status?

By HIRO AIDA

"All the balls are in our court now," quipped one Japanese pundit. Rightly so. Now that U.S. President Barak Obama has been reelected, he says, all the alliance issues, including the stalled plan to relocate a U.S. Marine Corps base in Okinawa and delayed participation in the Trans-Pacific Partnership trade talks, must be taken off the back burner they were put on throughout the presidential election season. But now the player on the Japanese side responsible for hitting the ball back into America’s court, Prime Minister Yoshihiko Noda, is likely to be benched when Japan holds parliamentary elections on December 16. The problem is, however, even bigger than that: The player on the Japanese side has changed so often, “like every 10 minutes,” that the game has hardly advanced at all.

"We don’t expect any major change of U.S. policy towards Japan," said another former diplomat-cum-pundit, "but the problem is on the Japanese side. We are experiencing ultimate confusion. We need to think about what message we get through to the U.S. and how we act."

These two pundits were voicing widespread concerns in Japan about the relationship with the United States. For Japan, the choice of Obama or Romney mattered far less than Japan’s own imminent choices amid both domestic and regional crises. The country feels itself afflicted with a siege mentality for the first time in many decades—one that could even be compared to the ABCD (American-British-Chinese-Dutch) natural resource encirclement on the eve of the Pearl Harbor attack—although so far that comparison has remained too edgy to be voiced publicly.

This time the feelings of encirclement began with a sudden visit in July by Russian Prime Minister Dmitri Medvedev to one of the islands to the north of Hokkaido that are claimed by both nations. These islands were seized by the Soviet Union illegally, Japan claims, following the surrender of Japan on August 15, 1945. The Japanese saw this visit as an egregious affront, particularly coming as it did in the summer season, the traditional time that Japan pays tribute to the war dead.

The Christmas Truce of World War I

A candle lit in the darkness of Flanders

by John V. Denson

The Christmas Truce, which occurred primarily between the British and German soldiers along the Western Front in December 1914, is an event the official histories of the "Great War" leave out, and the Orwellian historians hide from the public. Stanley Weintraub has broken through this barrier of silence and written a moving account of this significant event by compiling letters sent home from the front, as well as diaries of the soldiers involved. His book is entitled Silent Night: The Story of the World War I Christmas Truce. The book contains many pictures of the actual events showing the opposing forces mixing and celebrating together that first Christmas of the war. This remarkable story begins to unfold, according to Weintraub, on the morning of December 19, 1914:

"Lieutenant Geoffrey Heinekey, new to the 2nd Queen's Westminister Rifles, wrote to his mother, 'A most extraordinary thing happened. . . . Some Germans came out and held up their hands and began to take in some of their wounded and so we ourselves immediately got out of our trenches and began bringing in our wounded also. The Germans then beckoned to us and a lot of us went over and talked to them and they helped us to bury our dead. This lasted the whole morning and I talked to several of them and I must say they seemed extraordinarily fine men. . . . It seemed too ironical for words. There, the night before we had been having a terrific battle and the morning after, there we were smoking their cigarettes and they smoking ours." (p. 5)

Weintraub reports that the French and Belgians reacted differently to the war and with more emotion than the British in the beginning. The war was occurring on their land and "The French had lived in an atmosphere of revanche since 1870, when Alsace and Lorraine were seized by the Prussians" in a war declared by the French (p. 4). The British and German soldiers, however, saw little meaning in the war as to them, and, after all, the British King and the German Kaiser were both grandsons of Queen Victoria. Why should the Germans and British be at war, or hating each other, because a royal couple from Austria were killed by an assassin while they were visiting in Serbia? However, since August when the war started, hundreds of thousands of soldiers had been killed, wounded or missing by December 1914 (p. xvi).

The Federal-State Crack-up

Congress itself must start undoing the consequences of its own self-indulgence

By MARIO LOYOLA

For decades, Democrats and Republicans alike have invested heavily in governance schemes that erode the Constitution’s separation of powers and mar its proper functioning. The Federal judiciary has uniformly rubber-stamped these schemes. The consequence has been an unsustainable spree of borrowing, spending and overregulation at the Federal level, cyclical fiscal crises at the state level, and less accountable and less representative government at every level. 

These governance schemes are generally of two kinds: one erodes the separation of powers between Federal and state governments, while the other erodes the separation of powers within the Federal government. In the first category is “cooperative federalism”, whereby the Federal government uses monopoly powers to coerce and subvert the prerogatives of state governments. In the other is Congress’s delegation of vast rule-making authority to administrative agencies. 

These two categories of concern are often treated as being entirely distinct, but they share profound similarities. Both are methods for Congress to escape accountability by hiding its power in other institutions of government. Cooperative federalism allows Congress to hide its power within the decision-making of state governments, while its delegation of rule-making authority allows it to hide its power in the far-flung bureaucracy of the Executive Branch. 

The Federal judiciary has a crucial role to play in maintaining and policing the boundaries of America’s basic institutions of state. It is a role it abdicated when confronted with the popular nationalist programs of the New Deal. The constitutional doctrines the judiciary has invoked to let Congress blur these critical separations of power are deeply flawed as a matter of constitutional law, and they have ultimately become unsustainable as a matter of political economy. Federal courts must begin to enforce a strict separation of powers, both between the Federal and state governments and within the Federal government itself. And Congress itself must start undoing the consequences of its own self-indulgence. 

The Return of Toxic Nationalism

The spread of universal values is being rolled back on many fronts, from Russia to the Middle East

By ROBERT D. KAPLAN

Western elites believe that universal values are trumping the forces of reaction. They wax eloquent about the triumph of human rights, women's liberation, social media, financial markets, international and regional organizations and all the other forces that are breaking down boundaries separating humanity.

Tragically, they are really observing a self-referential world of global cosmopolitans like themselves. In country after country, the Westerners identify like-minded, educated elites and mistake them for the population at large. They prefer not to see the regressive and exclusivist forces—such as nationalism and sectarianism—that are mightily reshaping the future.

Take Cairo's Tahrir Square in early 2011. Western journalists celebrated the gathering of relatively upper-income Arab liberals with whom they felt much in common, only to see these activists quickly retreat as post-autocratic Egypt became for many months a struggle among the military, the Muslim Brotherhood and the Islamist Salafists—with the Coptic Christians fearing for their communal survival.

Though secular liberals have resurfaced to challenge Egypt's Islamist president, Mohammed Morsi, do not be deceived. The military and the Muslim Brotherhood both have organized infrastructures. The liberals have only spontaneous emotion and ad hoc organizations. An Islamist-Nasserite regime-of-sorts is likely to emerge, as the military uses the current vulnerability of the Muslim Brotherhood to drive a harder bargain.

Egypt and the Middle East now offer a panorama of sectarianism and religious and ethnic divides. Freedom, at least in its initial stages, unleashes not only individual identity but, more crucially, the freedom to identify with a blood-based solidarity group. Beyond that group, feelings of love and humanity do not apply. That is a signal lesson of the Arab Spring.

Post-Hyperinflationary Zimbabwe

80% Unemployment, Empty ATMs And Paralyzed Transport

by Tyler Durden

Zimbabwe's hyperinflation, courtesy of one Gideon Gono - the brilliant man behind such grand monetary experiments as QE and its offshoots throughout the developed world - and numerous one hundred trillion dollar Zimbabwe dollar bills, may have come and gone, and the country may no longer have a functioning currency of its own, but it certainly has the aftermath of the most recent episode of modern-era monetary hyperinflation to contend with. And with the holidays here, AP provides a very bleak snapshot of what the country which currently has an 80% unemployment, has to look forward to. Zimbabweans are facing bleak holidays this year amid rising poverty, food and cash shortages and political uncertainty, with some describing it as the worst since the formation of the coalition government in the southern African nation.... 

Banks have closed, ATMs have run out of cash and transport services have been paralyzed." It gets worse: "Zimbabwe's unemployment is pegged at around 80 percent with many people in Harare, the capital, eking out a living by selling vegetables and fruits on street corners." And all of this is after the massive economic imbalances in Zimbabwe's economy should have been "fixed" (or so conventional economic theory would have one believe) courtesy of hyperinflation, which left any savers in tatters, destroyed the value of the old currency, benefited solely debtors  but also allowed a fresh start to a government, which could only remain in power due to a violent power grab by the democratically elected-turned-dictator Robert Mugabe.

Grief, Chaos, and Silence

Be careful with those silences

  

by John Derbyshire 

The shooting at a Connecticut elementary school last Friday was a dreadful business, doubly dreadful for happening a few days before Christmas. Any citizen with any power of imagination can see the presents that will never be opened, the festive tree in the living room on Christmas morning waiting for the eager little figures who never come, and the excited little voices that will never again be heard.

That said, it didn’t take long—around 24 hours—for me to feel that there had been quite enough coverage of, and commentary on, the incident.

Not that there is necessarily any harm in so much coverage, though there may be. There’s the copycat business; and yes, crazy people get ideas from other crazy people. The Herostratus factor is in there somewhere—the desire to attain fame by any method at all. Herostratus was the bloke who burned down the temple of Diana in 356 BC for no other reason than that he wanted to be famous. The yearning to be famous is widespread and normal and has inspired great deeds; but in the mind of a lunatic it curdles, like other normal desires.

Certainly I would not want the authorities to restrain or suppress coverage. There is quite enough bias and outright suppression in crime reporting already, most of it voluntary. Let ’em report the Connecticut massacre as much as they want to. I just don’t want to read that much about it; not because I’m too squeamish or fastidious, but because I don’t think there’s much content there.

News-wise, once it was clear that the killer was a lunatic and would be making no further trouble, the only things conventionally newsworthy were the pronouncements of politicians, which were of course uniformly jejune. The nasal tones of New York City Mayor Michael Bloomberg were prominent. Regarding Obama, Bloomberg honked that “The country needs him to send a bill to Congress to fix this problem.”

To fix it! Once and for all! Just like that! Bloomie’s criminal-justice coordinator, a chap named John Feinblatt, chimed in: “I think the American public wants a plan—is demanding a plan—how the president is going to keep them safe.”

The Rodents of Amsterdam

The rodents of Amsterdam  are mere rats on a ship that’s ready to sink

By Takis

As Pastor Martin Niemöller famously wrote:

First they came for the loud, obnoxious, drunken neighbors who defecated on my front lawn, tossed their beer bottles through my window, harassed my children, raped my sister, shot my dog, set my car on fire, and spit in my face, but I did not speak out, because I was not one of them.

Last year the city of Amsterdam fielded an estimated 13,000 complaints of “antisocial” behavior, much of it perpetrated by people who already leech off the public dole. The city’s mayor, Eberhard van der Laan from the left-leaning Labor Party, recently announced a roughly $1.3-million plan to relocate some of Amsterdam’s chronic troublemakers into shipping-container homes on the outskirts of town. (Apparently, deportation still isn’t an option.) Offenders would be required to stay in such facilities for a minimum of six months and face steady surveillance by social workers and police. Despite the program’s punitive nature, they will still receive free lodging and healthcare.

The mayor claims the program will protect those who behave themselves yet are forced to suffer harassment from those who don’t. Bartho Boer, a spokesman for the mayor, claims the program is designed to “defend the liberal values of Amsterdam”:

We want everyone to be who he and she is—whether they are gay and lesbian or stand up to violence and are then victims of harassment. We as a society want to defend them….The aim of this scheme is not to reward people who behave badly with a brand-new, five-room home with a south-facing garden.

A city spokeswoman named Tahira Limon told the BBC:

Usually people are scared to report problems for fear of intimidation. It’s an upside down world and we want to change it so the people who cause the problems are moved.

The program, which incorporates a team of “harassment directors” who field anonymous complaints made to a hotline, has been compared to a similar suggestion made in 2011 by staunchly anti-Islamic Dutch politician Geert Wilders, who proposed building tuigdorpen, roughly translated as “scum villages,” to house the city’s chronic troublemakers:

Repeat offenders should be forcibly removed from their neighborhood and sent to a village for scum. They will then be put into converted containers as homes. If juveniles are involved, their families should be moved, too. Put all the trash together.

The idea of creating such malefactors’ ghettos on Amsterdam’s geographical fringes has drawn loud analogies to leper colonies, gulags, and, but of course, Nazi concentration camps.

When immortality is not enough

Christianity offered salvation in another world; the Europeans wanted a taste of immortality in this one

By Spengler

Alone among 20th century novelists, J R R Tolkien concerned himself with the mortality not of individuals but of peoples. The young soldier-scholar of World War I viewed the uncertain fate of European nations through the mirror of the Dark Ages, when the life of small peoples hung by a thread. In the midst of today's Great Extinction of cultures, and at the onset of civilizational war, Tolkien evokes an uncanny resonance among today's readers. He did not write a fantasy, but rather a roman-a-clef. 

I spoke too soon when I wrote a year ago that a "reasonably faithful cinematic version" of Tolkien's trilogy, The Lord of the Rings, was the "cultural event of the decade" (The Ring and the remnants of the West, Jan 11, '03). With the third installment in cinemas, it appears that director Peter Jackson has buried Tolkien's mythic tragedy under an avalanche of tricks. One wants to hiss along with Gollum: "Stupid hobbit! It ruins it!" We are left with a crackling good adventure, but have lost something precious. 

Despite his huge readership, Tolkien during his lifetime never published The Silmarillion, the tragedy of immortals that underlies The Lord of the Rings. Instead he hit upon the genial device of leading the reader to the elements of his story through the eyes of the Little People who are entangled in it. It is as if Shakespeare had published something like Tom Stoppard's Rosenkrantz and Guildenstern are Dead rather than Hamlet. 

Why I Am Hopeful

Where there is ruin, there is hope for treasures

by Charles Hugh Smith

Readers often ask me to post something hopeful, and I understand why: doom-and-gloom gets tiresome. Human beings need hope just as they need oxygen, and the destruction of the Status Quo via over-reach and internal contradictions doesn't leave much to be happy about.

The most hopeful thing in my mind is that the Status Quo is devolving from its internal contradictions and excesses. It is a perverse, intensely destructive system with horrific incentives for predation, exploitation, fraud and complicity and few disincentives.

A more human world lies just beyond the edge of the Status Quo.

I know many smart, well-informed people expect the worst once the Status Quo (the Savior State and its corporatocracy partners) devolves, and there is abundant evidence of the ugliness of human nature under duress.

But we should temper this Id ugliness with the stronger impulses of community and compassion. If greed and rapaciousness were the dominant forces within human nature, then the species would have either died out at its own hand or been limited to small savage populations kept in check by the predation of neighboring groups, none of which could expand much because inner conflict would limit their ability to grow.

The remarkable success of humanity as a species is not simply the result of a big brain, opposable thumbs, year-round sex, innovation or even language; it is also the result of social and cultural associations that act as a "network" for storing knowledge and good will--what we call technical and social capital.

Christmas in an Anti-Christian Age

While conservatives believe that culture determines politics, liberals understand politics can change culture

by Patrick J. Buchanan

For two millennia, the birth of Christ has been seen as the greatest event in world history. The moment Jesus was born in a stable in Bethlehem, God became man, and eternal salvation became possible.

This date has been the separation point of mankind’s time on earth, with B.C. designating the era before Christ, and A.D., anno domino, in the Year of the Lord, the years after. And how stands Christianity today?

“Christianity is in danger of being wiped out in its biblical heartlands,” says the British think tank Civitas.

In Iraq, Syria, Egypt, Ethiopia and Nigeria, Christians face persecution and pogroms. In Saudi Arabia and Afghanistan, conversion is a capital offense. In a century, two-thirds of all the Christians have vanished from the Islamic world.

In China, Christianity is seen as a subversive ideology of the West to undermine the regime.

In Europe, a century ago, British and German soldiers came out of the trenches to meet in no-man’s land to sing Christmas carols and exchange gifts. It did not happen in 1915, or ever again.

In the century since, all the Western empires have vanished. All of their armies and navies have melted away. All have lost their Christian faith. All have seen their birthrates plummet. All their nations are aging, shrinking and dying, and all are witnessing invasions from formerly subject peoples and lands.

In America, too, the decline of Christianity proceeds.

While conservatives believe that culture determines politics, liberals understand politics can change culture.

The systematic purging of Christian teachings and symbols from our public schools and public square has produced a growing population—20 percent of the nation, 30 percent of the young—who answer “none” when asked about their religious beliefs and affiliations.

In the lead essay in the Book Review of Sunday’s New York Times, Paul Elie writes of our “post-Christian” fiction, where writers with “Christian convictions” like Walker Percy and Flannery O’Connor are a lost tribe.

“Where has the novel of belief gone?” he asks.

Americans understand why Mao’s atheist heirs who have lost their Marxist-Leninist faith and militants Islamists fear and detest the rival belief system of Christianity. But do they understand the animus that lies behind the assault on their faith here at home?

In a recent issue of New Oxford Review, Andrew Seddon (“The New Atheism: All the Rage”) describes a “Reason Rally” in Washington, D.C., a “coming out” event sponsored by atheist groups. Among the speakers was Oxford biologist Richard Dawkins, author of “The God Delusion,” who claims that “faith is an evil precisely because it requires no justification and brooks no argument.”

Christians have been infected by a “God virus,” says Dawkins. They are no longer rational beings. Atheists should treat them with derisory contempt. “Mock Them!” Dawkins shouted. “Ridicule them! In public!”

In “The End of Faith,” atheist Sam Harris wrote that “some propositions are so dangerous that it may even be ethical to kill people.”

“Since the New Atheists believe that religion is evil,” notes Seddon, “that it ‘poisons everything,’ in (Christopher) Hitchens’ words—it doesn’t take much effort to see that Harris is referring to religions and the people who follow them.”

Now since atheists are still badly outnumbered in America and less well-armed than the God-and-Country boys, and atheists believe this is the only life they have, atheist suggestions to “kill people” of Christian belief is probably a threat Christians need not take too seriously.

With reference to Dawkins’ view that the Christian faith “requires no justification and brooks no argument,” Seddon makes a salient point.

While undeniable that Christianity entails a belief in the supernatural, the miraculous—God became man that first Christmas, Christ raised people from the dead, rose himself on the first Easter Sunday and ascended into heaven 40 days later—consider what atheists believe.

They believe that something came out of nothing, that reason came from irrationality, that a complex universe and natural order came out of randomness and chaos, that consciousness came from non-consciousness and that life emerged from non-life.

This is a bridge too far for the Christian for whom faith and reason tell him that for all of this to have been created from nothing is absurd; it presupposes a Creator.

Atheists believe, Seddon writes, that “a multiverse (for which there is no experimental or observational evidence) containing an inconceivably large number of universes spontaneously created itself.”

Yet, Hitchens insists, “our belief is not a belief.”

Nonsense. Atheism requires a belief in the unbelievable.

Christians believe Christ could raise people from the dead because he is God. That is faith. Atheists believe life came out of non-life. That, too, is faith. They believe in what their god, science, cannot demonstrate, replicate or prove. They believe in miracles but cannot identify, produce or describe the miracle worker.

At Christmas, pray for Hitchens, Harris, Dawkins and the other lost souls at that Reason Rally.

Merry Christmas

Stabilization Won’t Save Us

Since we cannot stop making mistakes and prediction errors, let us make sure their impact is limited and localized

By NASSIM NICHOLAS TALEB

THE fiscal cliff is not really a “cliff”; the entire country won’t fall into the ocean if we hit it. Some automatic tax cuts will expire; the government will be forced to cut some expenditures. The cliff is really just a red herring.

Likewise, any last-minute deal to avoid the spending cuts and tax increases scheduled to go into effect on Jan. 1 isn’t likely to save us from economic turmoil. It would merely let us continue the policy mistakes we’ve been making for years, allowing us only to temporarily stabilize the economy rather than address its deep, systemic failures.

Stabilization, of course, has long been the economic playbook of the United States government; it has kept interest rates low, shored up banks, purchased bad debts and printed money. But the effect is akin to treating metastatic cancer with painkillers. It has not only let deeper problems fester, but also aggravated inequality. Bankers have continued to get rich using taxpayer dollars as both fuel and backstop. And printing money tends to disproportionately benefit a certain class. The rise in asset prices made the superrich even richer, while the median family income has dropped.

Overstabilization also corrects problems that ought not to be corrected and renders the economy more fragile; and in a fragile economy, even small errors can lead to crises and plunge the entire system into chaos. That’s what happened in 2008. More than four years after that financial crisis began, nothing has been done to address its root causes.

Our goal instead should be an antifragile system — one in which mistakes don’t ricochet throughout the economy, but can instead be used to fuel growth. The key elements to such a system are decentralization of decision making and ensuring that all economic and political actors have some “skin in the game.”

Will 2013 Mark the Beginning of American Decline?

Sooner or later, it will be America’s turn to fall out of favor with investors and to see its own interest rates rise

By Simon Johnson 

“A modest man,” Winston Churchill supposedly quipped about Clement Attlee, his successor as prime minister, “but then he has so much to be modest about.” We should say the same about economists, particularly their ability to forecast anything in a useful and timely manner.

Those predicting an imminent American economic decline have usually been no exception. This time, though, they may be on to something.

Prevailing arguments about when the era of U.S. dominance would end, and which country would supplant it, have been wildly and consistently wrong for half a century. In the 1950s, Soviet leader Nikita Khrushchev was taken seriously when he told Western ambassadors “We will bury you.” Today, his country no longer exists. In the 1980s, Japan was supposedly going to be No. 1; now the question is whether the precipitous decline in its working-age population will generate a fiscal crisis.

The Germans -- or Europeans more broadly -- were thought to be on the brink of elbowing aside the U.S. several times, including in the run-up to the global financial crisis in 2008, when the euro seemed to threaten the dollar’s role as the pre- eminent reserve currency. Remember when Brazilian model Gisele Bundchen was quoted as saying she preferred to be paid in euros? Now the euro-area economy looks very sick indeed, and Ms. Bundchen is apparently long American icons (she married football player Tom Brady).

“Trench Warfare” And “Civil War” Over Confiscatory Taxes In France

The Great Escape

By Wolf Richter   

“We’re engaging in trench warfare,” proclaimed Alain Afflelou, head honcho and founder of an eyewear company with 1,200 stores in France and other countries. One of the wealthiest men in France. He was talking about the tax fiasco that split France in two. He was done with his country. He’s moving to London. One of France’s so-called fiscal exiles.

He’d set up his international headquarters in Switzerland, rather than France, 15 years ago to minimize his company’s tax burden, but now he’d personally bail out.

The clamor had started in September when it leaked out that Bernard Arnault, richest man in France and CEO of luxury-goods empires LVMH and Groupe Arnault, was applying for Belgian citizenship. In response, Economy Minister Pierre Moscovici threatened to renegotiate the tax treaties with Belgium, Luxembourg, and Switzerland. A few days ago, reports surfaced in the Belgian media that mailbox companies—a dozen at the Brussels apartment of a Groupe Arnault director alone—have allowed Arnault’s empire to escape several hundred million euros in taxes.

Belgium got cold feet. On Saturday before Christmas when nothing was supposed to happen, Anti-Fraud Secretary of State John Crombez requested that Finance Minister Steven Vanackere transfer Arnault’s tax file to the tax authorities in France, an idea the minister did not immediately reject.

Now Arnault got cold feet. LVMH and Groupe Arnault defended themselves the best they could, claiming that these mailbox companies had “economically perfectly real activities in Belgium where some of them have been implanted for decades.” Indeed, they were “surprised” by the allegations.

But no one stirred up the heat in France like iconic actor Gérard Depardieu who, turns out, set up his domicile in Néchin, a village just across the border in Belgium—as the mayor confirmed, “to escape French taxation.”

Final straw for President Hollande. Now he too threatened to renegotiate the tax treaty “to deal with cases of those who settle in some Belgian village.” He lashed out against the “fiscal dumping” that some countries in the EU were practicing. Prime Minister Jean-Marc Ayrault chimed in; Depardieu’s exile was “pretty pathetic.”

Depardieu was not amused. In an open letter, he renounced his French citizenship, broadsided the Prime Minister and the President, and shocked the nation: all taxes combined ate up 85% of his income.

Not true, explained eyewear mega-retailer Alain Afflelou during the interview. “Those who are in the 75% income-tax bracket may go well beyond 90% taxation.” He listed layers of additional taxes, small percentages here and there that added up. “We therefore have in France a confiscatory taxation that can deprive us of all of our income from work.”

The Sleeper Must Awaken

The awful truth is that WE are responsible

 “Above the comforts of Base Camp, the expedition in fact became an almost Calvinistic undertaking. The ratio of misery to pleasure was greater by an order of magnitude than any mountain I'd been on; I quickly came to understand that climbing Everest was primarily about enduring pain. And in subjecting ourselves to week after week of toil, tedium and suffering, it struck me that most of us were probably seeking above all else, something like a state of grace.”     - Jon Krakhauer, Into Thin Air

By Mark J. Grant
I am not sure the country is seeking a state of grace but we are surely seeking something of a much higher order than we are getting. Congress adjourns, the President spends twenty million dollars of our money flying off to vacation in Hawaii and we peer over the edge of a monetary cliff of our own making because we have elected people that have all of the leadership skills of some Grinch that is stealing our Christmas because we let him. Ultimately it is us you know, “We the People,” and perhaps it is our two party system of government that has failed us because we put people in power who know how to run for election and re-election but who somehow have no idea how to govern the nation. It is pathos, absurdity and frankly a tragedy that we face a financial calamity, and it is just that, and our elected leaders head off on vacation.

"Well, thus we play the fools with the time, and the spirits of the wise sit in the clouds and mock us."

                                                  -William Shakespeare, Henry

It may not be fiddling while Rome is burning but it isn’t that far off that course. In the end, I suspect, we will pass the deadlines and find ourselves in trouble. I say this because to date all we are discussing is who to tax and we have not made one serious effort to confront the social programs that have elected people but which the country cannot afford. It is not that complicated at its core; we cannot afford the entitlements that we have legislated and so the nation must, like any household, man up to what we can and cannot afford and get on with it. No use pretending that we are as rich as we once were and so we must first cut-back and then get down to the serious business of how we can increase our revenues. Households, corporations or governments; the fundamental issues apply and while different themes may apply for the fix; America’s economic condition must be fixed.

"The majority is never right. Never, I tell you! That's one of these lies in society that no free and intelligent man can help rebelling against. Who are the people that make up the biggest proportion of the population -- the intelligent ones or the fools? I think we can agree it's the fools, no matter where you go in this world, it's the fools that form the overwhelming majority."

                                        -Henrik Ibsen, An Enemy of the People

Bill of Rights, R.I.P?

Where are we today, 221 years after the Bill of Rights was made the law of the land ?

by Karen Kwiatkowski

We are standing here not far from the place where the first ten amendments – the Bill of Rights – were made the law of the land. These amendments were a great victory for the Anti-Federalists – that indispensable group of founding fathers that included Thomas Jefferson, and George Mason, Patrick Henry and Samuel Adams, James Monroe and George Clinton, and many more.

It is fitting that we celebrate here today what they accomplished here 221 years ago – especially given that every prediction of the Anti-Federalists seem to have come true, and not in a good way.

But before we speak of that, let’s take a moment to remind ourselves of what happened back then. In 1776, the former colonies had united in a war of independence from England and the British crown. By 1787, these united States had won that war. It was not a quick or easy war, but it was a war that was just and right. We know it was just and right, because as Americans, we are familiar with the reasons for the war, as recorded by Thomas Jefferson in the Declaration of Independence.

Jefferson described the Declaration as, "an expression of the American mind." And what a rebellious and powerful and inspiring expression it was!

The generations that claimed independence from the King of England and his empire did so because they understood that all men are created equal, and that all men – all human beings – have rights that are inalienable and intrinsic and timeless, rights granted by the Creator. Chief among these rights are life, liberty, and the pursuit of happiness.

The Declaration goes on to explain why we have government at all. It’s a simple reason. Governments are instituted among men, by men, and derive power from the consent of the governed for one reason: To secure these God-given natural rights.

Let me repeat – government exists only to secure our rights to life, liberty, and pursuit of happiness.

There is a debate as to what "pursuit of happiness" means.

Bernanke Loosens Up

If money printing can create prosperity then why are all the poor nations still poor?

by Frank Shostak

On Wednesday December 12, 2012 Fed policy makers announced that they will boost their main stimulus tool by adding $45 billion of monthly Treasury purchases to an existing program to buy $40 billion of mortgage debt a month.

This decision is likely to boost the Fed’s balance sheet from the present $2.86 trillion to $4 trillion by the end of next year. Policy makers also announced that an almost zero interest rate policy will stay intact as long as the unemployment rate is above 6.5% and the rate of inflation doesn’t exceed the 2.5% figure.

Most commentators are of the view that Fed Chairman Ben Bernanke and his colleagues are absolutely committed to averting the mistakes of the Japanese in 1990’s and the US central bank during the Great Depression. On this Bernanke said that,

A return to broad based prosperity will require sustained improvement in the job market, which in turn requires stronger economic growth.

Furthermore he added that,

The Fed plans to maintain accommodation as long as needed to promote a stronger economic recovery in the context of price of stability.

But why should another expansion of the Fed’s balance sheet i.e. more money pumping, revive the economy? What is the logic behind this way of thinking?

Bernanke is of the view that monetary pumping, whilst price inflation remains subdued, is going to strengthen purchasing power in the hands of individuals.

Consequently, this will give a boost to consumer spending and via the famous Keynesian multiplier the rest of the economy will follow suit.

Bernanke, however, confuses here the means of exchange i.e. money, with the means of payments which are goods and services.

In a market economy every individual exchanges what he has produced for money (the medium of exchange) and then exchanges money for other goods. This means that he funds the purchase of other goods by means of goods he has produced.

Paraphrasing Jean Baptiste Say Mises argued that,

Commodities, says Say, are ultimately paid for not by money, but by other commodities. Money is merely the commonly used medium of exchange; it plays only an intermediary role. What the seller wants ultimately to receive in exchange for the commodities sold is other commodities. [1]

Printing more money is not going to bring prosperity i.e. more goods and services. Money as such produces nothing,

According to Rothbard,

Money, per se, cannot be consumed and cannot be used directly as a producers' good in the productive process. Money per se is therefore unproductive; it is dead stock and produces nothing.[2].

Contrary to popular thinking there is no need for more money to keep the economy going. On this Mises argued,

The services which money renders can be neither improved nor repaired by changing the supply of money. … The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do.[3]