The economics of American militarism

The Great Deformation

by Justin Raimondo

David Stockman rocketed to fame as Ronald Reagan’s chief of the Office of Management and Budget (OMB), his name loosely associated with the "trickle down economics" of the supply-siders, but his recent book, The Great Deformation: The Corruption of Capitalism in America, will correct the record: Stockman is not only a libertarian critic of the Milton Friedman school of monetarism and supply side economics, he is also a principled opponent of American militarism. His new book is a massive 700 pages-plus, but don’t let that deter you: inside you will find a scintillating analysis of where, why, and how America went wrong, starting with the New Deal and ending with the Great Recession of ’08 and the subsequent Obama-Bernanke attempts to re-inflate the bubble of America’s debt-driven "prosperity."

His basic thesis is that the Federal Reserve, starting with Richard Nixon’s decouplingof the dollar from gold, has acted as the central planner of the American economy, blowing up the bubble of a false prosperity. This mostly served to fatten the wallets of the One Percent, giving Wall Street a blank check while looting the savings and aspirations of Main Street.

His is a complex argument, and it assumes a knowledge of economic theory that I fear many – including myself – do not possess, but his analysis is clear and forthright: the Fed, instead of acting as a neutral arbiter and manager of the money supply, has engaged in "prosperity management," as he terms it, implanting a "borrow, spend, gamble, and get-rich-quick regimen" that poisoned and deformed the economy and the culture. The decoupling of gold from the value of money led to the financialization – and bifurcation – of the American economy, so that the financial manipulations of Wall Street increasingly had little to do with the production of actual things, and the real performance and value of the financial "assets" they were dealing in, but instead were based on the "free" money being printed hand over heels by the all-powerful Federal Reserve. The hedge funds, the wild speculations of Wall Street’s most distended-from-reality "assets" – like those sliced-and-diced toxic mortgages that led to the housing bust – are all products of the Fed’s central planning: "They consume," says Stockman, "vast resources without adding to society’s output or wealth, and flush income and net worth to the very top rungs of the economic ladder." Although the free market is getting the blame for this, the reality, says Stockman, is that these deformations of capitalism were made possible by massive State intervention via the Fed, which enabled politicians to spend without taxing – and the militarism of the alleged "conservatives" was a key factor in all this.

100 Years Old & Still Killing Us

America Was Much Better Off Before The Income Tax

by Michael Snyder

Did you know that the greatest period of economic growth in American history was during a time when there was absolutely no federal income tax?  Between the end of the Civil War and 1913, there was an explosion of economic activity in the United States unlike anything ever seen before or since.  Unfortunately, a federal income tax was instituted in 1913, and this year it turned 100 years old.  But there was no fanfare, was there?  There was no celebration because the federal income tax is universally hated. 

Sadly, most Americans just assume that there is no other option to an income tax.  Most Americans just assume that it has always been with us and that it will always be with us.  This year, the American people will shell out approximately $4.22 trillion in state and federal income taxes.  That amount is equivalent to approximately 29.4 percent of all income that Americans will bring in this year, and that does not even take into account the dozens of other taxes that Americans pay each year. 

At this point, the U.S. tax code is about 13 miles long, and those that are honest and pay their taxes every year are being absolutely shredded by this system.  But wouldn't the federal government go broke if we didn't have a federal income tax?  No, actually the truth is that the federal government did just fine before there was an income tax.  In fact, the U.S. national debt has gotten more than 5000 times larger since the federal income tax and the Federal Reserve were created by Congress back in 1913. 

As I have written about previously, the Federal Reserve system was actually designed to trap the United States in a debt spiral from which it could never possibly escape, and the federal income tax was needed to greatly expand the size of the federal government and to soak the American people of the funds necessary to service that debt.  But it doesn't have to be this way.  America was once much better off before the income tax and the Federal Reserve were created, and we could easily go to such a system again.

What we desperately need to do is to teach the American people a little history lesson.  The truth is that the greatest period of economic growth in U.S. history was between the Civil War and 1913 when there was no federal income tax at all.  The following is from Wikipedia...

 The Gilded Age saw the greatest period of economic growth in American history. After the short-lived panic of 1873, the economy recovered with the advent of hard money policies and industrialization. From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita, despite the panic of 1873.  The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled.

Sticking it to Thatcher’s corpse

The political necrophiliacs dancing at ‘death parties’ disrespect the British people as much as Thatcher

by Patrick Hayes 

It is apt that ‘Ding Dong the Witch is Dead’ became the soundtrack to the sad troupe of left-wingers who took to the streets, champagne glasses in hand, to toast the death of Baroness Thatcher last week. They will, doubtless, chant it again during her funeral procession today. It is apt not because there really was something of the wicked witch about Thatcher, but rather because such a characterisation speaks volumes about the frankly medieval attitude now adopted by what remains of the radical left.

Those supposedly ‘braving the rain’ last Saturday to don party hats and do the conga in Trafalgar Square, and, earlier in the week, those bravely holding Thatcher-death parties in Brixton and Glasgow, were actually demonstrating extraordinary cowardice. Here were people incapable of taking on the Wicked Witch and defeating her ideas in life, who were only to happy to cheer her death. It was as if the mere fact that an 89-year-old woman had gone to meet her maker was some kind of political achievement they had helped bring about. One man at the Trafalgar Square party on Saturday even wore a homemade t-shirt bearing a drawing of Thatcher alongside the words ‘Gotcha’ – referring to the famous Sun front page celebrating the sinking of the Belgrano warship during the Falklands War.

Such celebrations amount to political necrophilia, with the protesters sticking it to Maggie’s corpse in a way they never could to the woman at the height her political powers. The fact that the date of the Trafalgar Square party was organised decades ago – the sole legacy of the now-defunct organisation Class War – with chants of ‘Maggie, Maggie, Maggie, Die!, Die!, Die!’ having long since become commonplace on left-wing and even student demonstrations shows the duration and appeal of the left’s Maggie-death fetish.

The weekend parade had a deeply medieval feel. It was as if those present really believed Thatcher had cast a spell over modern Britain which can now finally be broken. The witch is dead, we are free at last! All will have milk! The individualist, consumerist scales will fall from our eyes! Rejoice, rejoice as one, erm, Big Society, and embrace the alternative the left has to offer (whatever that may be). 

The Left is dancing on Margaret Thatcher’s grave… So why am I smiling?

Oh Margaret, you really were the gift that just keeps on giving

By Perry de Havilland

Every time I read of drunken noisy celebrations from assorted people following Margaret Thatcher’s death… every time I read of someone spewing vitriol and spitting on her memory… every time I read “Ding Dong The Witch is Dead“… my smile grows ever so slightly wider.

Why? Well I think I may have given a clue why I was likely to think this way a few days ago when I wrote this:

I would not have described myself as a libertarian back then even though I more or less was (and indeed I was only vaguely aware of the term, preferring ‘Classical Liberal’ in the non-debased non-US sense). And I still do not call myself one really, even though I more or less am. But for more than a decade I did indeed take delight in calling myself a Thatcherite (even though I only ‘kinda’ was), primarily because it was a wonderful shortcut for discovering all I needed to know about whoever I was speaking to at that time, just by watching their reactions.

Maggie Thatcher pissed off all the right people and I swung her name around like a handbag with a brick in it.

Before Margaret Thatcher took power, we had a Tory party lead by Edward Health… a man who was frankly so indistinguishable from the people he purported to oppose that his ‘conservative’ government nationalised several businesses. The broad statist political consensus amongst the Great and the Good (try not to spit when you read those words) was that the only thing to argue about was the rate at which the state took over, well, everything.

The Flat Caps and Beer Party and the Champagne and Barbour Party carried on a wonderful pantomime show of how they disdained each other and how they were like chalk and cheese, much as they do now, but in truth, it disguised just how much they had in common. Free(er) Markets were a talking point amongst some Tories but in truth they loved to intervene “before breakfast, dinner and tea”.

Pro Death Progressives and the Born Alive Act

Killing babies is the ultimate progressive 'right'

By Noemie Emery

Liberals' view of rights is that they are and they ought to be ever-expanding, and so they are proving to be.

First, the Declaration of Independence spoke of the right to "life, liberty, and the pursuit of happiness," for women (and others). Then Roe v. Wade gave them the right to abortion, then the right to late-term abortion, and then, the right to a dead baby afterward.

This last was asserted by then-Illinois state Sen. Barack Obama, who opposed the Born Alive Act, which would have mandated medical treatment for abortion survivors on the grounds it would have negated the intent of Roe. v. Wade.

The idea was when a woman chose an abortion, she signaled her wish to have a dead baby, and so it should be.

Later, brave souls made attempts to expand this still further, with Barbara Boxer saying a baby had rights when it came "home from the hospital," and bioethicist Peter Singer proposing a right to abort one's postnatal children.

In this sense, Kermit Gosnell, now on trial on multiple charges of homicide, was perhaps the ultimate civil rights activist, pushing women's rights up to the ultimate level, beyond even feminists' dreams.

In the spirit of Boxer, Obama and Singer, Gosnell excelled in helping women so that, when inspectors finally arrived at his clinic, they found fetal parts everywhere, clogging the toilets, hands and feet saved as tokens, in boxes, in jars.

Europe’s moment of truth

“Nothing beats the truth.”

By Ann Mettler

These were the passionate words of Enda Kenny, Prime Minister of Ireland, when asked last week about the spring European Council on 14-15 March. He was talking about a moment of reckoning for the continent’s leaders as they confront increasingly hostile electorates – most recently exhibited in Italy, where voters sent a clear signal against austerity.
Now it’s payback time for the years – even decades – of denial, of make-believe that the prosperity that Europe enjoyed was somehow divorced from economic realities, be they ballooning debt, declining competitiveness or dysfunctional insider-outsider labour markets. In the name of social justice – and long before the real crisis hit in 2008 – opportunistic political leaders devised loyal corporatist systems in which a growing set of vested interests divided power and spoils among themselves. Rather than embracing meritocracy, social mobility, creative destruction and innovation, entire countries became slow-moving, inward-looking, defensive and elite-driven juggernauts. Against this backdrop, it is not entirely surprising that a growing number of Italians have said “basta” to the current system – but perhaps without really considering the way forward.

Neither Silvio Berlusconi with his pledge of tax cuts the country cannot afford, nor Beppe Grillo, the political novice who has promised to suspend the national debt, is a solution. The fact that over 50% of the country gave them their vote is a stark reminder of the challenge the country – and Europe – faces. And that is why it is time to speak the truth: to tell Italians – and Europeans – that there is no easy way out of the crisis; that it will take years – even decades – of hard work to repair public finances, build a new foundation for prosperity and embrace the fact that, today, the countries with the highest levels of social cohesion are precisely the ones that implemented far-reaching reforms early on.

Soft Fascism

Fascism kept the appearance of private property, but Communists went and nationalized everything outright

By Stephen Green 

Forget for a moment everything you think you know about fascism.

Forget Mussolini’s silly wars in Africa and Greece. Forget the horrible splendor of the Nuremburg rallies. Forget, if for only a moment, the Holocaust.

Instead, remember how fascism worked as a political system – not just the wartime atrocities we all know so well.

First off, there was only one Party. Whether it went by the name of Italy’s Fascists, or Germany’s National Socialist Worker’s Party, the Party ran the country, and the Duce, or Fuehrer, ran the Party. One man didn’t truly have complete control – there are always different factions to please, or cajole, or threaten, or play off one another – but his word was still the final one.

Businesses were seen as semi-private cogs in the government machine – useful for producing jobs, handing out tax dollars to favored individuals, earning kickbacks to favored politicians, and making the tools of war. Business was at once a means of getting and distributing money, and media businesses were useful and tolerated so long as they spewed propaganda, or at least hewed to the Party line.

Companies that weren’t useful didn’t get the juiciest government contracts, and they might just find they had serious labor issues coming up. Further recalcitrance could lead to more severe means of correction, best left to the imagination.

In other words, fascism was just like Communism (which worked a lot like the mafia). The only difference between the two as systems, was that Fascism kept the appearance of private property, but Communists went and nationalized everything outright. In neither system was business free to go about its business. In both systems, all labor unions (or just the one big union, with everyone required to join) reported to the State.

A Vile Bunch of Hypocrites

Children of the Nanny State

By Johnathan Pearce

I wonder how many of those on what is broadly “the left”, who are crying crocodile tears over the fate of coal miners who lost their jobs from unprofitable, subsidised mines in the 1980s, are the same people who want, in the name of global warming alarmism, to shut down profitable mines today? It would be good to ask the current crop of Labour MPs, LibDems and Cameroonian Tories as to whether they think it right to repeal the UK’s various climate change measures that have, among other things, led to the recent closure of UK coal-fired power stations.

Of course, such a question reminds me, when thinking of the nonsense about that has been spouted since the death of Margaret Thatcher, of how illogical and hypocritical people, both politicians, and voters, are on such matters. Not a comforting thought. But I guess it is hardly something that is confined to the UK.

The “doctor” will see you now

Dr. Mengele, I Presume

Josef Mengele

by Michael Walsh

As you can read here, I’ve been following the horrific tale of “Dr.” Kermit Gosnell, the alleged Butcher of Philadelphia, ever since the story broke last year. In fact, in the guise of my crazy-lefty character, David Kahane, I wrote a big piece, “The Charnel House of Blackmun,” about it shortly after the grand jury issued its stomach-turning report on this latter-day Mengele‘s crimes. An excerpt:

For us, a day without an abortion somewhere in this great land is like a day without a sermon on climate change: The world is a drab and bitter place, in which the cheery hosannas of the unborn dead cannot be heard, praising the glory of a Gaian world they will never pollute with their presence. Forget that Baudelaire dude and the gimp, Verbal Kint: The Master’s greatest trick was not convincing the world he didn’t exist, but persuading women that it was morally affirmative to murder their own children. Medea, take a bow!

Now, you may quibble that Medea killed children who were, you know, actually ambulatory, but to us and Peter Singer, that is a small matter, a mere detail, a bagatelle of a bump in the road on our way to a more perfect nihilism. Which is why I’m here to celebrate a great American named Kermit B. Gosnell, M.D., a man who was standing up to the forces of bigotry and intolerance and unreasoning pedophobia by providing abortion services at his Women’s Medical Society in Philadelphia — until, unaccountably, the state of Pennsylvania arrested him… 

Well, one man’s “baby charnel house” is another man’s monument to the House that Blackmun Built, and surely reasonable men and women of good conscience can agree to disagree, even if Roe is long-since settled law and if you troglodytes so much as try to touch one hair of its sacred little head, we’re coming after you with scissors, suction, a pair of pliers, and a blowtorch… Once you accept the proposition of abortion pretty much on demand, including post-“birth,” this seems to us a distinction without a difference, but there’s no accounting for the lengths to which you Christianist Javerts will go in order to hunt down innocent women’s-health specialists.

While it’s true that the alleged details of Dr. Gosnell’s practice can make you squeamish right-wingers uncomfortable, our brave women are made of sterner stuff. They know the parasitic clumps of cells in their wombs — punishment-by-“baby” for the simple, innocent, joyous act of sexual intercourse — are being eliminated for a higher, nobler cause than mere Christianity. We progressives don’t believe in the afterlife, unless we’re trying to fake some sort of “faith” on television, but we do believe in, shall we say, an eternally resonating resonance that proclaims to the universe: We were here. We lived. We killed. Mission accomplished.

The Wreck of the Euro

Politicians in Europe thought they were living in a post-historical period in which mistakes didn’t really matter all that much

By WALTER RUSSELL MEAD

What does it mean for the euro that, on paper at least, Spaniards, Italians, and Cypriots are much wealthier on average than Germans? That’s the question Wolfgang Münchau tackled in a must-read column in the Financial Times.

Here are the outlines of his argument. A new survey by the European Central Bank has concluded that median German household wealth ranks among the lowest in the entire Eurozone. The median German family is worth €51,000 whereas the median Cypriot household is worth €267,000. Those are eye-popping figures, and the German press is apoplectic over them. Münchau cautions that the median is not the best measure in this case. But even if one were to look at the mean, Germans are worth €200,000 per household, while Spanish net wealth is somewhere around €300,000. There’s another correction to take on board; Germans haven’t bought into home ownership the way many Europeans (and Americans) do. But put in all the caveats and corrections you want, and the numbers are still striking and, to many Germans, infuriating. Why should German households be paying tax money to bail out rich Cypriots?

But anybody who’s traveled in Europe understands that these numbers have something wrong with them. Germans are significantly richer than Italians and Greeks. The answer, says Münchau, must be that varying price levels across the eurozone are responsible.

On the surface, this is not actually as bizarre as it might seem. Price levels vary. The American experience with the dollar is not totally different. A dollar in New York isn’t the same thing as a dollar in other parts of the country. A salary of $150,000 in Manhattan is worth a lot less than a salary of $150,000 in Omaha or Baton Rouge. And while $500,000 can’t buy you a decent sized apartment in Manhattan, it can buy quite a nice house in much of the country. European countries work like this, too. Milan is a lot more expensive than most of the rest of Italy, for example.

But there is a perverse European twist to this state of affairs. In America, it’s the richer parts of the country that have the highest price levels. But in Europe it’s the other way round. Prosperous Germany has lower prices than the dead broke Club Med countries. In American terms, imagine that real estate in Manhattan was cheaper than in Detroit, or that prices in Buffalo, New York, far outstripped prices in Silicon Valley.

Dutch Delusion

Europe's Core, She Rots Some More

By Raul Ilargi

A report published Thursday by the real estate industry in the Netherlands states that the average home price is now 18% lower than it was at the peak in 2008, while detached homes lost 20%-25% (March 2013 YoY prices fell 6.8%, says Eurostat). A separate, earlier, report estimated that 20% of homes, or over 1 million, are now underwater.

Today's report comes hot on the heels of a study issued Wednesday by a government commission, which took a full year to prepare and 121 pages to explain what went wrong in the Dutch housing bubble, and what should be done now to correct it.

The core problem is simple: from 1995 to 2008 home prices more than tripled (rose 200%+). Hence, if we round off to a 20% drop from peak levels, or 60% from 1995 levels when prices were a third of what they were in 2008, there's still an increase of about 150% from the starting levels that needs to be dealt with. We can discount for, and let's be generous, perhaps 50% for overall price inflation, but that still leaves us with a 100% increase, which is quite a bit more than the 60% absorbed so far.

This means that, seen from the 2008 peak perspective, a 20% price fall has been completed, and another 33% drop is needed to get back to where it came from. Some may cite reasons why prices should remain elevated, but that smacks too much of the "this time is different" argument; one might as well argue the opposite. A main point raised is that demand outstrips supply, but demand is not what people want; it's what they will be able to afford. And the Dutch economy is shrinking.

Well, you see the problem by now, of course: like many other nations, the Dutch today feel quite strongly that they have suffered enough already, and someone somehow needs to revive the housing market. But like everyone else, the Dutch wish to wish away the problem of the not yet corrected part of the pricing model. In their case, they want 200% (1995+100%) to be the new normal (a.k.a. the new black).

Not surprisingly, the government report says that A) all parties are to blame, and B) the government needs to get more involved, i.e. make sure loans become available for people who now can't get them, a.k.a. people who are not the most likely prime candidates to buy a home that's still some 33% overvalued. Though, admittedly, sucking in those last remaining suckers would prop up moribund builders, agents and lenders for a while longer. Whether that's a government's task is at the very least highly questionable (obviously, other countries, including the US, work on similar resuscitation efforts).

The most hilarious I've seen to date coming out of the Netherlands (a good second was:" build more homes"!) is the proposal for the government to artificially raise home rents so people will be more likely and tempted to buy a home. An act which, incidentally, has recently been stripped of its most flagrant artificial incentives.

China's collars are turning white

Economic rebalancing - Industrial eclipse

The Economist

EARLIER this year, we noted that China's output of services was poised to overtake its industrial production, probably as soon as this year. That would represent an interesting milestone for China's economy, which is renowned for the hum of its assembly lines, the belch of its smokestacks and the clang of its construction sites. Today's GDP report brings that crossover even closer. In the past four quarters (running from the second quarter of 2012 to the first quarter of 2013), services and industry accounted for the same amount of China's GDP (see chart)*. Indeed, services trumped industry in each of the past three quarters. That hasn't happened since 1961, as far as I can tell. 

I should point out that China's service sector (which includes transport, wholesaling, retailing, hotels, catering, finance, and real estate among other things) is still unusually small. In other economies at China's stage of development, services typically account for about 55-60% of GDP. Prices for services have also been rising faster than industrial prices, contributing to the shift in their favour.

I should also point out that both sectors are highly seasonal, with services typically peaking in the first quarter and industry peaking in the second. So industry (which includes construction, mining and utilities, as well as manufacturing) may bounce back in April, May and June. Nonetheless, the industrial eclipse is edging a little closer. 

When hunger came to Egypt

The question is how long Egyptians can go hungry before the Morsi regime loses its capacity to govern

By David P Goldman

Egyptians are getting hungry. The fall of the Egyptian pound to just 60% of its 2012 exchange rate against the dollar has priced everything but bread out of the reach of the poorer half of the population, and the bread supply is now at risk.

The news late last week that Libya and Qatar may lend US$5 billion to Egypt was overshadowed by reports that Cairo owes $5 billion to the oil companies that produce oil and gas on its territory. Half of the amount is overdue, and oil companies reportedly expect to wait years for payment. Egypt's arrears on trade credits from suppliers of oil, wheat, and other essential items probably exceed its $8.8 billion cash reserves, leaving the country flat broke. 

With a trade deficit running at $32 billion, the Libyan and Qatari money covers just a couple of months; stiffing the oil companies might have covered the past couple of months. If the Egyptian government finally comes to terms with the International Monetary Fund for a $4.8 billion loan, that will cover another few weeks.

Egypt's Exports, Imports and Trade Balance 

Egypt's finances have been in free fall since the mid-2000s, when prices for food and other essential imports soared while export earnings for cotton and other products stagnated. At $60 billion, the country's trade deficit is a seventh of its gross domestic product. The 40% fall in the exchange rate of the Egyptian pound from 6 to the dollar late last year to 8.25 on the black market last week will raise the cost of imports even further. 

The half of Egyptians that lives on $2 a day no longer eats beans, let alone milk products. 

The price of fava beans, the country's second-most important food staple, has already risen by 40% this year, to 5,000 Egyptian pounds (US$728) per ton from $3,000 Egyptian pounds in January. Imports of proteins have collapsed, according to theEgyptian Gazette:

''As for frozen food imports, namely meat, fish and chicken products, they fell by 25 per cent during the first three months of the year, compared to the same period a year before due to the surge in the dollar," said Alaa Radwan, a member in the Food Stuff Industries at the FECC. Radwan, who is also head of the Association of the Meat, Fish and Chickens Importers, explained that banks had suspended offering importers with letters of credit, demanding them to seek dollars from the parallel market, which caused frozen food prices to increase by 25 per cent to 39 per cent.

The price of imported milk products, which account for 60% to 65% of consumption, has risen by 60% since January, the Gazette reported. 

The only basic foodstuffs still available to poor Egyptians are state-subsidized bread, sugar and oil. That may change drastically during the next several months.

Germans are losing patience with being cast as the euro zone’s scapegoats

The biggest risk for the euro right now is not that Greece leaves, it’s that Germany leaves

The Economist

HITLER moustaches and swastikas defiling pictures of Germany’s chancellor, Angela Merkel, have become a recurring motif in the iconography of the euro crisis, most recently in Cyprus. Scapegoating is inevitable during financial upheavals, says Marcel Fratzscher, president of DIW Berlin, a think-tank. Germany, he suggests, has taken the place of the IMF during the Asian crisis of the late 1990s, with Mrs Merkel playing the role of Michel Camdessus, the then IMF boss who was pictured in 1997 with folded arms, standing over a humbled Indonesian president signing up to harsh austerity measures. But scapegoating can be dangerous if the goat is powerful and it begins to feel victimised.

The Germans are not yet openly angry. That would be out of character in a people who have, since the second world war, been eager to atone for the past and be good European partners. In one recent poll, 34% of Germans even said they empathised with the wrath of the southern Europeans. But the mood is shifting. The southerners may see Germany as forcing excessive austerity on them and showing insufficient solidarity, but Germans have a different view.

First, they feel they have already shown solidarity. Almost a quarter of a century after the fall of the Berlin Wall they still pay a solidarity tax to eastern Germany. Some also transfer taxes to weaker German states such as Bremen. Many conclude that, once in place, solidarity ceases being voluntary and instead becomes a yoke. They also bear much of the risk of euro bail-outs, even though a study released this week by the European Central Bank showed that the average German household has less wealth than the average Spanish, Italian and Cypriot one (though this is partly because German households tend to contain fewer adults and are more likely to be in rented accommodation).

Second, they argue that Germany recognised a decade ago that it was not competitive and undertook painful reforms that are now paying off. The crisis countries should follow suit. And third, Germans think the euro crisis was largely caused by rule-breaking (even by Germany itself), which must not be repeated. As one diplomat puts it, “solidarity is important, but it should follow rules. It is not just ad hoc giving.”

Together, these attitudes often have the sound of a morality tale. Indeed, the English term “moral hazard”, which has no direct German translation, has become a staple of discourse in Berlin. Originating in the economics of insurance, it refers to the incentives to take risks when other people stand to pay for any damage. The fear is that German rescue money could cause the crisis countries to duck their reforms.

The Germans are not alone in these views. The Dutch, Finns and Slovaks broadly share them. What makes Germany different is that it is big and central. To historians such as Brendan Simms of Cambridge University, author of a new book, “Europe: the Struggle for Supremacy”, this sounds eerily familiar. Europe has long grappled with the “German question”. Sometimes Germany was too weak, sometimes too strong. Or, as Henry Kissinger, a former American secretary of state, put it, referring to Germany just after unification in 1871, it was “too big for Europe, but too small for the world”. Today, Mr Simms argues, “it sits uneasily at the heart of an EU that was conceived largely to constrain German power but which has served instead to increase it, and whose design flaws have unintentionally deprived many other Europeans of sovereignty.”

The question is whether Germany can use its power by unapologetically leading. Given Germany’s past, its political culture militates against even trying. As Joschka Fischer, a former foreign minister, jokes, “it’s nice to go to a conference of ‘young leaders’, but you don’t want a conference of ‘junge Führer’.” Most Germans worry that others might again come to hate or fear them. Their neighbours are less concerned. As Poland’s foreign minister, Radek Sikorski, put it in a speech in Berlin in 2011, “I fear German power less than I am beginning to fear German inactivity.”

Family Meltdown

Two can live more cheaply than one

By Robert Samuelson 

The discouraging March employment report, with a job increase of only 88,000, raises questions well beyond the dreary state of today's labor market. Prolonged high unemployment may be silently shredding the social fabric in ways that last for decades. Even before the Great Recession, men with a high-school diploma or less faced lower wages and a harder time finding work. This made them less attractive as husbands, contributing to the growth of single-parent families. Stubbornly high unemployment almost certainly aggravates these destructive trends.

It's hard to overstate the breakdown of marriage and the rise of single-parent families. Consider out-of-wedlock births. In 1980, about 18 percent of births were to unmarried women; by 2009, the proportion was 41 percent. Among whites, the increase was from 11 percent to 36 percent; among African-Americans, from 56 percent to 72 percent; among Hispanics, from 37 percent (1990) to 53 percent. Or look at the share of children living with two parents. Since 1970, that's dropped from 82 percent to 63 percent. Among whites, the decline is from 87 percent to 73 percent; among African-Americans, from 57 percent to 31 percent; among Hispanics, from 78 percent to 57 percent.

Just what caused these changes remains controversial. In his 2012 book "Coming Apart," Charles Murray of the American Enterprise Institute cited shifts in cultural norms. Having a child out of wedlock became more common and acceptable; the sexual revolution enabled men to get sex without marriage. The waning power of religion undermined the importance of family. Feminism and expanding welfare programs made it easier for women to survive -- through jobs or aid -- on their own. Liberalized divorce led to more breakups.

But there's also a more strictly economic case. In a paper for Third Way, a liberal think tank, economists David Autor and Melanie Wasserman of the Massachusetts Institute of Technology attribute the decline of marriage -- which, like Murray, they say is concentrated among the poorly educated -- to the eroding economic heft of men compared with women. Women are more independent economically; men are weaker. Marriage has lost much of its pecuniary pull.

One cheer for Labour’s new welfare policy

Calculating welfare entitlements on an individual's work history is a good idea. 

by Rob Lyons 

It’s an uncomfortable fact for Labour Party supporters and Guardianistas everywhere that, as Guardian columnist Jonathan Freedland noted last week, ‘on welfare, the voters are on the Tories’ side’. Which may be the reason why, last weekend, Labour politicians did something shocking: in a bid to connect with voters, they actually said something sensible about the welfare state.

According to Sunday’s Observer, ‘detailed work is underway in the party’s policy review on how to revolutionise the way the system works and address concerns that it promotes a “something-for-nothing” culture. One central idea under consideration is the creation of a flexible payments system offering higher benefits to those who have been employed for longer and have therefore made more National Insurance contributions.’ It’s ‘about linking what you take out to what you have put in’, according to a ‘senior party source’.

Of course, it is pretty woolly stuff. For example, Labour’s shadow work and pensions secretary, Liam Byrne, wrote elsewhere in the Observer that ‘we must do more to strengthen the old principle of contribution’, but then he could only offer the example of prioritising social housing for those ‘who work and contribute to their community’.

Yet while Labour’s proposals currently lack clarity, the principle of welfare entitlements flowing from a contributions scheme - something that was at the heart of the original vision for welfare - makes a good deal more sense than what the state does at the moment: hand out small amounts of money to people regardless of their work history.

We still worship at the altar of funny money

The Correlation Between The Gold Standard And Stupendous Growth Is Clear

Campaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”.  Between 1870 and 1912, a period of forty-two years, industrial production in the United States rose by 682%.

By Nathan Lewis

For some reason, it is conventional wisdom today that the years 1870-1914, the era of the Most Perfect Monetary System Ever Created, was a time of chronic recession and disaster.

But how could that be? The United States was the world’s greatest economic success story of the last two centuries. When did that happen? It didn’t happen during the Civil War and the Great Depression. It must have happened — logically — during times of peace and prosperity.

That’s why Professor Brian Domitrovic says the usual story you hear about the gold standard years is completely wrong.

The United States actually did not return to a gold standard until 1879. However, by 1870, most of the rubble of the Civil War, including the floating “greenback” dollar, had been cleared up. Between 1870 and 1912, a period of forty-two years, industrial production in the United States rose by 682%.

Freedom can never be ‘granted’ to us

Keeping our eyes peeled for ‘phony freedoms’

by Brendan O’Neill 

I was doing my weekly shopping recently, when I saw there was a brand of toilet paper called ‘Freedom’. I started wondering, what kind of freedom is being offered by this toilet paper? Is it a ‘freedom to’ or is it a ‘freedom from’?

I thought it could possibly be a ‘freedom to’, in the sense that purchasing and using this toilet paper would give a person the freedom to wipe their bottoms, something they would not be at liberty to do if they did not own toilet paper.

But then I thought the toilet paper could also be providing a ‘freedom from’ – most obviously a freedom from stains. A freedom from uncleanliness, and also from the social ostracism that often accompanies that particular form of uncleanliness.

Now, of course, that’s ridiculous. This is really hygiene we’re talking about, not freedom. Cleanliness might be next to godliness, but it is not next to freedom of speech or freedom of association as one of the great liberties of the modern age. The Chartists did not demand freedom from skidmarks.

Only a crazy toilet paper company, desperate to catch people’s attention, would denigrate freedom in this way, right? Actually, you’d be surprised. These days, even in the upper echelons of the political classes, people talk seriously about the ‘freedom’ to have a hygienic bottom.

So the UN has made access to sanitation into a human right. Last year, on something called World Toilet Day, it declared: ‘Eliminating inequality can start in the most unlikely of places: a toilet.’ Apparently, ‘the humble toilet can be a stepping stone to… greater human dignity, freedom and equality’.

Now, I am all in favour of more toilets, of everyone in the world having access to a clean, flushing, preferably Gaddafi-style gold-plated toilet. And making that happen will involve further industrialising vast swathes of the earth. But I doubt very much that having a toilet will set people free – cleaner, yes, but freer?

The Currency of Power

America’s Food-for-Votes Program

by WENDY MCELROY

During his 2012 bid to become the Republican nominee for President, Newt Gingrich repeatedly called Barack Obama “the food-stamp President.” From the time Obama assumed office in January 2009 through October 2012, the number of people on food stamps spiked from 31.9 million to 47.5 million, according to the U.S. government’s own data. That is a rise of nearly 50 percent to a peak of 1 in 7 Americans and 1 in 4 children participating. The program's cost has more than doubled in four years, from $30 billion to $72 billion. So, it seems, there was plenty of bread to go with the electoral circus.

The food stamp program's new name is Supplemental Nutrition Assistance Program (SNAP). Critics claim it is economically unsustainable, widely abused, and the harbinger of a colossal welfare state. Advocates insist SNAP is the result of recession—a humanitarian necessity—and that food is a human right. But it is difficult to square food-stamp humanitarianism with other policies issuing from the White House, which add up to an attempt to make people dependent. 

Ulterior Motives?

The recession—which was largely caused and is continued by the government—itself is an inadequate explanation for the surge in food stamp recipients. The Obama administration has been recruiting people for its food stamps program with a zeal that outstrips simple humanitarian concern. In an article entitled “Obama Encouraging Americans to Get on Welfare,” Michael Tanner of the Cato Institute commented, “The Obama administration clearly doesn’t believe that enough Americans are receiving welfare.” He continued,

Health and Human Services Secretary Kathleen Sebelius last week issued an order giving the Obama administration greater authority to waive work requirements included in the 1998 welfare reform law. This comes on top of a new ad campaign, using Spanish-language soap operas, to encourage more Latinos to sign up for food stamps. The administration even gave a special award to an Agriculture Department worker who found ways to combat the “mountain pride” discouraging Appalachian residents from taking full advantage of food stamps and other welfare programs. One message was loud and clear: More Americans should be getting welfare.

And that’s not all.