Orwell, Huxley and the Emerging Totalitarianism

Both men foresaw the future as totalitarian rather than democratic and free

by Emmet Scott 

George Orwell and Aldous Huxley, two of England’s foremost literary figures of the last century, each wrote a compelling description of a future dystopia, both of them nightmare visions of society totally under the control of a ruling clique whose only purpose is the enjoyment of power. In Orwell’s 1984 the ruling tyrant is named Big Brother and is clearly modelled on Stalin, whilst in Huxley’s Brave New World the ruler is known as the Director, a character somewhat less sinister and brutal than Orwell’s Big Brother. The two books are of course very different. Brave New World is a black comedy, which does actually make us laugh, whereas there is absolutely nothing funny about 1984. Nonetheless, there are similarities between the two, and both men can be said to have accurately predicted certain specific features of the world we now inhabit.

The most striking parallel of course is that both men foresaw the future as totalitarian rather than democratic and free. Neither presumably believed their vision of the future to be inevitable, though it is equally clear that each saw aspects of mid-twentieth century life which clearly pointed in the totalitarian direction. Thus 1984 and Brave New World may be seen as warnings against what might be if the trends identified by the two authors persisted. What these trends were and why the authors saw them leading towards totalitarianism is an important question and one that will be addressed presently.

The Economic Enemy Is At Home

China is neither destroyer nor saviour of the West’s economies

By PHIL MULLAN

Two recent events illustrated very well the contrasting responses from the West to the rise of China, and to the rise of the East more generally.

Last month, George Osborne, the UK chancellor of the exchequer, and Boris Johnson, London mayor, went to China. And as happens when you go there, they came back with some souvenirs. In this case, not the usual replicas of terracotta warriors, but something rather more substantial, in the form of inward investment deals. Great news, of course, for the people who will as a result get good jobs in Manchester, Ipswich, London, Somerset and beyond.

In contrast, we have the more negative American response, trying to limit inward investment from China, vetoing, for example, the attempted Chinese takeover of an American oil company, or banning the Chinese telecoms-equipment company Huawei from the US market (the same company Osborne announced is expanding its research-and-development centre in Ipswich).

My argument is that these clearly different approaches retain something in common, which I think is the biggest current threat to the prospects for the health of the world economy. The two approaches are both consistent with what I call the West’s Great Evasion: the failure of the elites here, first to recognise the depth of their systemic economic problems, and second to take direct responsibility for trying to fix them.

Focusing, for example, on whether Chinese investment is a good or a bad thing for the West takes the easy route that sees globalisation as something happening ‘over there’, in the East and South, which may either have some positive spin-off effects back here - perhaps becoming an offshore banking centre, like Luxembourg or the Bahamas - or is something we should be frightened about and that we need to protect ourselves from. Both approaches express a common complacency about the scale of the West’s homegrown problems, which, by being allowed to fester, represent the biggest danger to world economic expansion.

Lies Corrupt Democracy

Democracy by persuasion having become impossible, we are left with democracy as war

by Angelo M. Codevilla

Democracy has no cure for a corrupt demos. Politicians’ misdeeds taint them alone, so long as their supporters do not embrace them. But when substantial constituencies continue to support their leaders despite their having broken faith, they turn democracy’s process of mutual persuasion into partisan war.

Consider: In 1974 President Richard Nixon lied publicly and officially to cover up his subordinates’ misdeeds. His own party forced him to resign. In 1998 President Bill Clinton lied under oath in an unsuccessful attempt to cover up his own. But his party rallied around him and accused his accusers. In 2013 President Barack Obama lied publicly and officially to secure passage of his most signature legislation. But when the lies became undeniable, his party joined him in maintaining that they had not been lies at all.

The point is that Nixon’s misdeeds harmed no one but himself because no one excused them. But Clinton’s and Obama’s misdeeds contributed to the corruption of American democracy because a substantial part of the American people chose to be partners in them.

The difference between the mentalities of Republicans circa 1974 and of Democrats twenty-five and forty years later is the difference between a society before and after democratic corruption. Forty years ago, just as in our time, the President of the United States headed a coalition of groups with material and ideological interest in his Administration. But, back then, the beneficiaries of power were willing enough to subordinate their interests to the greater good of maintaining the bounds of democratic partisanship. In our time, however, the constituents of Democratic Administrations so identify their own status and benefits with “the greater good” that the very notion of bounds to their own partisanship makes no sense.

Are We Free To Reform Ourselves?

In matters of economics, we are all fascists now

by Theodore Dalrymple        

From afar, the defeat of the Republicans in Congress on the matter of the debt ceiling seemed fore-ordained and the inevitable consequence of political ineptitude on an almost heroic scale. Perhaps (and this is the best that might be said) they were staking their future claim to be able to say ‘I told you so’ when the financial catastrophe wrought by the western world’s addiction to spending money it has neither saved nor earns nor strikes not in the comparatively muted fashion that we have experienced hitherto, but in its full and terrible force.

If so, the Republican Party’s moral authority to pose as the party of fiscal prudence and rectitude is distinctly equivocal. Teetotal in opposition, they have been drunk in office. As in most, if not quite all, western countries, the electorate has been offered a choice between profligates, between those who want to overspend on one thing rather than on another, that is to say between those who wish to please one clientele rather than another. The Republicans have been in favor of fiscal rectitude the way weak-willed alcoholics desire complete sobriety.

The American situation is far from unique; in the two countries in which I spend most of my time, Britain and France, the inability of governments of whatever stripe to put public finances on a sound basis is by now plain for all to see. A slowdown in the rate of growth of the national debt is what is now regarded by much of the population as the most ferocious and heartless austerity.

The name of poor old Keynes is regularly invoked, as if he had ever supported deficit spending that (in the case of France) has lasted nearly half a century without interruption. Government deficits are not run any longer, if they ever were, to stimulate demand when demand contracts in the private sector: they are run to create economic dependence on government and as a permanent unearned subsidy (unearned, that is, by the economy as a whole) of the living standards of the entire population. And no population is going to vote, in the name of probity and prudence, for lower living standards, any more than pimps will vote for sexual purity.

The Triangle Connecting the U.S., Israel, and American Jewry May Be Coming Apart

For decades, shared interests kept all three players in a mutually beneficial relationship, but its end might not be such a bad thing

By Adam Garfinkle

American Jewry is in for a real shock: The “special relationship” between the United States and Israel is fast eroding. The strategic, cultural, and demographic alignments that gave rise to and sustained for more than half a century the special relationship between the United States and Israel are all changing. These changes have independent sources, and the relevant dynamics are playing out in different ways and at different rates. But make no mistake: They are connected to and influence one another.

The simple understanding of how the special relationship works is linear: American Jews go to bat in American politics for Israeli interests, as they understand them, because Israeli interests are believed to be inseparable from Jewish interests. This is the “lobby” model, and we recognize its appurtenances: the American-Israel Public Affairs Committee, the Conference of Presidents of Major American Jewish Organizations, and a galaxy of smaller, sometimes explicitly partisan groups, from J Street to the Emergency Committee for Israel.

In truth, however, the relationship consists of a metaphorical triangle linking American Jewry with the governments of Israel and the United States. In the natural course of political events, all three actors intermediate between the other two, for good and ill. For example, even as American Jews lobby for Israel in American politics, Israeli governments sometimes get between American Jews and their own government: Jonathan Pollard is one example, and the loan guaranteefight during the George H.W. Bush Administration is another. So is the more contemporary effort of the Israeli government to put AIPAC and other American Jewish groups much further out on their skis in advocating a hawkish policy toward Iran than either the George W. Bush or Barack Obama Administrations have considered wise.

SWATted: The Militarization of America’s Police

SWATted: The Militarization of America’s Police

By Radley Balko

Over the past forty years, American policing has undergone a gradual but important and troubling evolution. Policing in some ways has become more professionalized, organized and regimented, but it has also become more aggressive, militaristic and belligerent. Put another way, there may be fewer cops going rogue today, but the kind of force now permitted and regularly practiced has changed to the point that it resembles rogue behavior en masse. The key case in point is the astonishing increase in the number and use of Special Weapons and Tactics (SWAT) teams. In America SWAT teams now violently smash into private homes more than a hundred times each day. The vast majority of these raids are to enforce laws against non-violent and consensual crimes, mostly having to do with illicit drug use. 

Austere, Devout Ayatollah Is Secretly As Rich As The Shah

All told, Reuters was able to identify about $95 billion in property and corporate assets controlled by Setad

Ayatollah Khamenei, the Supreme Leader of Iran, secretly runs a financial empire that would give the Shah a run for his money. The business interests of Khamenei’s little-known organization, called Setad, include a dizzying array of properties, oil and gas holdings, telecommunications, even ostrich farming. Reuters estimates that Setad oversees assets worth $95 billion.

The first part of an in-depth Reuters investigation shows that Setad habitually confiscates property from ordinary Iranians, including minorities like Baha’is, auctions it off and pockets the proceeds. It owns or invests in farms, energy businesses, stores, and much else. It intimidates Iranians who resist Setad’s efforts to take over their personal assets. Court orders support these shady dealings.

A “small part” of Setad’s operations are philanthropic.

When Khomeini, the first supreme leader, set in motion the creation of Setad, it was only supposed to manage and sell properties “without owners” and direct much of the proceeds to charity. Setad was to use the funds to assist war veterans, war widows “and the downtrodden.” According to one of its co-founders, Setad was to operate for no more than two years. [...]

A complete picture of Setad’s spending and income isn’t possible. Its books are off limits even to Iran’s legislative branch. In 2008, the Iranian Parliament voted to prohibit itself from monitoring organizations that the supreme leader controls, except with his permission. [...]

All told, Reuters was able to identify about $95 billion in property and corporate assets controlled by Setad. That amount is roughly 40 percent bigger than the country’s total oil exports last year. It also surpasses independent historians’ estimates of the late shah’s wealth.

Definitely read the whole thing and look out for parts two and three of the story. A full picture of how Iran’s top leadership operates is not complete without an understanding of how the Ayatollah maintains his upper hand in the society. Fascinating stuff from Reuters.

America Needs To Stop Eating Its Young

Life After Blue

By WALTER RUSSELL MEAD

The demographic problem facing the industrialized world isn’t just about empty cribs and the empty treasuries when there aren’t enough young workers to pay the retirement and health benefits their parents and grandparents expect. It’s also about quality of life. The consumer society is eating its young; people who live in the most affluent societies humanity has ever known are finding it increasingly difficult to start families and raise children. American houses today are filled with more stuff than ever before, but more and more Americans live in broken or struggling families.

Families are in crisis, with two parent households becoming more rare and many children growing up in poor and unstable circumstances as a result. Older people also face greater isolation; it is a quiet crisis most of the time, but in Europe, the United States and Japan a weakening of family ties is leaving more older people on their own with little or no support or contact from extended but atomized families. Obviously each of these problems takes a different shape in different countries, but in many places around the world we can see the same paradox at work. The industrial revolution was supposed to generate and in fact did generate unprecedented affluence. All over the world people have more and better food, more and better health care, more and better housing than their ancestors dreamed possible. Social safety nets even when incomplete provide levels of personal security that past generations never knew.

Yet with all this affluence and security, it is getting harder and harder for people to do the basic things that historically most people have most wanted to do: build a happy and stable marriage, raise a family, and enjoy rich lives in community with family and friends.

There are some who pooh-pooh all this talk about a crisis in our society’s reproductive system. Women are having fewer children, they say, because with more control over their own bodies and with cheap and reliable contraception, they have more choices than they used to. And if fewer women are ending up in stable marriages, this too reflects more personal freedom, not less. Women can live on their own; gay people no longer have to hide in conventional marriages. The marriage and birth rates are down because it was scarcity and ignorance rather than affinity and choice that kept people together and breeding in the past.

Perhaps, but in the United States those descriptions don’t really cover the facts. It’s the poor who aren’t getting married; in many ways as Charles Murray’s recent book Coming Apart: The State of White America 1960-2010 showed, the higher up you go in the social and economic scale, the more likely you are to be in a stable marriage. The upper middle class is where stable families and two parent households still flourish.

Moreover, the ancient human drive to reproduce still seems to be at work. Never in human history have so many spent so much on advanced methods of conception; affluent couples who have left reproduction too late or have fertility problems drop tens of thousands of dollars on intrusive and difficult techniques in a long quest to have a child. We’re all aware that one of the things the rich do more than the rest of us is to procreate; there are lots of successful men who want what I once heard one to call a “second litter” of kids to go with the trophy wife.

Man Dies In Jail Cell After Misdemeanor Pot Offense

Today's Drug War Outrage

By Radley Balko

Today's story is part drug war, part police indifference and callousness, part police cover-up. It comes by way of a lawsuit filed by the family of Michael Saffioti.

Saffioti failed to make a court date on a misdemeanor charge for pot possession. In July of last year, he surrendered himself to Snohomish County, Washington authorities, who promptly jailed him. (The streets of Snohomish County were a little safer that day.) When it came time for breakfast the following morning, Saffioti is seen on video having a conversation with a guard while holding his tray. Presumably, he was inquiring about any dairy products in the meal. Saffioti had a severe allergy. He's then seen taking a few bites of some oatmeal. (You can watch the video here.)

The awfulness that followed is detailed by KIRO TV.

Within a few minutes, Saffioti was back at the guard desk, using his inhaler.

According to the legal claim, he asked to see a nurse.

Instead, he was sent to his cell.

Over the next half hour, the video shows other inmates looking in Saffioti's cell as he jumped up and down.

The legal claim says he pressed his call button and was ignored.

It also alleges that the guards told him h was "faking."

About 35 minutes after he ate, a guard found Saffioti unconscious in his cell. The guard called for help and Saffioti was dragged out.

Nurses arrived and performed CPR. Everett firefighters took over and rushed Saffioti to the hospital where he was pronounced dead a half hour later.

Then the coverup began. County officials stonewalled Saffioti's mother's attempts to obtain video of the events leading to her son's death, first by denying its existence. After Saffioti's family discovered the police had lied about that, they turned over only non-incriminating portions of the video. The family was eventually able to force them to hand over the entire thing. So far, attorneys for the family have also been barred from interviewing jail staff or responding medical personnel.

What Is The Quantum of Proof Necessary for Police to Rape and Torture you in New Mexico?

A government that would rape, torture a man to find a fistful of drugs is not worthy of our allegiance, obedience or respect

By Ken White.

By now you've probably heard the story of David Eckert. He's the New Mexico man who was stopped by police, detained based on a suspicion he was hiding drugs in his rectum, and subjected to increasingly intrusive anal probing and eventually sedation and a colonoscopy. You might have read about him at Simple Justice or Defending people or BoingBoing or Techdirt or Reason or any of the other places that reported on the ghastly episode.

I waited to write about it until I could get a copy of the search warrant affidavit — helpfully provided by my friend Kevin Underhill of the absolutely essential legal blog Lowering the Bar — so that I could address this question: what quantum of proof is required in New Mexico for the police and compliant doctors to rape and torture a man?

What Police And Doctors Did To David Eckert

I use the terms "rape" and "torture" quite deliberately.

Mr. Eckert released medical records to local reporters, who reviewed them and noted that the following things were done to him by doctors and staff at Gila Regional Medical Center:

1. Eckert's abdominal area was x-rayed; no narcotics were found.

2. Doctors then performed an exam of Eckert's anus with their fingers; no narcotics were found.

3. Doctors performed a second exam of Eckert's anus with their fingers; no narcotics were found.

4. Doctors penetrated Eckert's anus to insert an enema. Eckert was forced to defecate in front of doctors and police officers. Eckert watched as doctors searched his stool. No narcotics were found.

5. Doctors penetrated Eckert's anus to insert an enema a second time. Eckert was forced to defecate in front of doctors and police officers. Eckert watched as doctors searched his stool. No narcotics were found.

6. Doctors penetrated Eckert's anus to insert an enema a third time. Eckert was forced to defecate in front of doctors and police officers. Eckert watched as doctors searched his stool. No narcotics were found.

7. Doctors then x-rayed Eckert again; no narcotics were found.

8. Doctors prepared Eckert for surgery, sedated him, and then performed a colonoscopy where a scope with a camera was inserted into Eckert's anus, rectum, colon, and large intestines. No narcotics were found.

Allow me to repeat: no narcotics were ever found during Mr. Eckert's encounter with police and doctors.

Throughout this ordeal, Eckert protested and never gave doctors at the Gila Regional Medical Center consent to perform any of these medical procedures.

Section 30-9-10 of the statutes of New Mexico provide:

A. Criminal sexual penetration is the unlawful and intentional causing of a person to engage in sexual intercourse, cunnilingus, fellatio or anal intercourse or the causing of penetration, to any extent and with any object, of the genital or anal openings of another, whether or not there is any emission.

B. Criminal sexual penetration does not include medically indicated procedures.

C. Criminal sexual penetration in the first degree consists of all sexual penetration perpetrated:

(1) on a child under thirteen years of age; or

(2) by the use of force or coercion that results in great bodily harm or great mental anguish to the victim.

Whoever commits criminal sexual penetration in the first degree is guilty of a first degree felony.

Police officers successfully encouraged doctors to penetrate David Eckert's anus repeatedly, eventually sedating him so they could do it with a colonoscopy device. The procedure was not medically indicated; it was indicated by our nation's War on Drugs.

So why are the police officers from the City of Deming, New Mexico Police Department and doctors and staff from Gila Regional Medical Center who committed these acts upon David Eckert not charged as rapists?

The United States Of Hypocrisy (In One Cartoon)

...because it's always what's not said that matters...

The Original 'Crisis Architect' Speaks Up

Prodded by Prodi

by Pater Tenebrarum

When the euro was introduced, socialist EU commission president Romano Prodi said the following in an interview he gave to the Financial Times: 

“I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.” 

In short, Prodi was convinced from the outset that the adoption of the common currency would eventually lead to an economic crisis. As we noted in the article  we linked to above, Prodi (who himself is sitting pretty, well-supplied with a fat pension and fat perks courtesy of EU and Italian tax payers), still doesn't care one whit that the crisis he wished for has caused misery for millions of people across the EU who have lost their jobs and savings. He continues to believe it is all 'worth it'. In 2012 he said: 

“Well, the difficult moments were predictable. When we created the euro, my objection, as an economist (and I talked about it with Kohl and with all the heads of government) was: how can we have a common currency without shared financial, economical and political pillars? The wise answer was: for the moment we’ve made this leap forward. The rest will follow. 

(emphasis added)

A friend pointed us to a recent article by Ambrose Evans-Pritchard (AEP), who lately appears to be hell-bent on single-handedly saving the euro from his perch at the Telegraph, mainly by generously dispensing inflationist advice. The article in question informs us that Romano Prodi is once again piping up to give us his two cents. 

“The plot is thickening fast in Italy. Romano Prodi – Mr Euro himself – is calling for a Latin Front to rise up against Germany and force through a reflation policy before the whole experiment of monetary union spins out of control.

"France, Italy, and Spain should together pound their fists on the table, but they are not doing so because they delude themselves that they can go it alone," he told Quotidiano Nazionale

Should Germany persist in imposing its contractionary ruin on Europe – "should the euro break apart, with one exchange rate in the North and one in the South", as he puts it – Germany itself will reap as it has sown. "Their exchange rate will double and they will not sell a single Mercedes in Europe. German industrialists know this but all they manage to secure are slight changes, not enough to end the crisis." 

(emphasis added)

Naturally, AEP, who once viewed Prodi as the devil's representative on earth, sotto voce approves. What could possibly be better than abandoning the 'failed German model' and instead adopting the Southern policy of devaluation, inflation and deficit spending that has been so astonishingly effective and successful over the decades?

Should Germany wave good-bye to this 'Latin Block', it won't sell a single Mercedes anymore! Of course the people buying Mercedes cars won't be able to buy them from Greece either, even if a putative 'Southern Euro' were to predictably collapse into a heap.

At the core of all this are mercantilist fallacies about the miracles of devaluation. What is seemingly never considered is that any gains that may be accruing from currency debasement in the short term are quickly erased again as domestic prices adjust. In today's globalized world with its extremely fast exchange of information, such adjustments tend to occur even quicker than in the past. There also seems to be a considerable degree of confusion about who the 'winners' and 'losers' actually are. If people in France or Italy can no longer afford German cars, have they somehow 'gained'? Will their standard of living be improved once they can no longer buy what they were able to buy in the past?

Europe likely to get worse before it gets better

The European Central Bank's latest interest rate cut won't solve the region's problems. It needs bona fide economic growth.

By Cyrus Sanati

 Slashing interest rates won't be enough to fend off Europe's deflationary demons for very long. The surprising move by the European Central Bank Thursday to decrease refinancing and marginal lending rates in the eurozone is the economic equivalent of giving Tylenol to a patient suffering from the flu -- it might lower the fever, but it's no cure.

What Europe needs is bona fide economic growth, and that won't come until confidence returns to the political and economic institutions of the European Union, as well as to the euro itself. But with European leaders unable to agree on basically anything, things will probably get worse before it gets better.

The markets were taken aback after ECB President Mario Draghi announced a surprising 25 basis point cut to both the refinancing and marginal lending rates in the eurozone. The move brought rates down to 0.25% and 0.5%, both extremely low. Analysts had expected any cut, if at all, would have come in December after the central bank issued its latest economic forecasts.

But Draghi felt that he could no longer sit back and do nothing. His decision to lower rates was predicated on two major economic data points released in the last week. The first is very low inflation -- the eurozone experienced a 0.7% increase in prices last month, well below the central bank's target of 2%. The second is poor growth -- the European Commission lowered its 2014 economic growth forecast for the eurozone from 1.2% to 1.1%. Bear in mind that they were predicting 1.4% growth only a few months ago.

The first issue, low inflation, really scares central bankers, as this could lead to deflation. This means prices for goods and services would fall. You might think that's a good thing, right? After all, since real wage growth in Europe is negative (meaning people are taking home less money), lower prices might be a good thing as it would encourage consumption.

Russia's Collapse Into Fascism

The Deadly Recipe : State-sponsored violence, xenophobic hysteria and an authoritarian regime

By Alexei Sakhnin

As I watched neo-Nazis shouting fascist slogans at the annual Russian March in Moscow on Monday, I was reminded of when I was attacked by nationalist extremists during a recent political protest supporting a leftist political agenda.

I was suddenly surrounded by 15 people in masks who appeared out of nowhere and shouted "Death to the red plague!" and "White power!" before attacking us. An all-out brawl ensued. Some fell to the pavement, while others ran off. I remember pandemonium, fear and confusion. Although we were outnumbered, we managed to nab one assailant. His friends quickly disappeared into the crowd.

When we tried to hand him over to the police, the officers turned away and refused to write up a report. A few minutes later, a black Volga pulled up bearing two men in suits and dark glasses in the front seat. They claimed to be journalists and suggested we release the man.

The close relationship that intelligence agencies and the police maintain with the far right has never been a secret in Russia. Those ties have always been considered something unpleasant, even a little embarrassing, but nothing dangerous. That is, until now.

Russian authorities responded to the street protests in 2011-2012 by stepping up repression. They filed criminal charges against several prominent activists and opposition leaders. Officials sent Pussy Riot members off to labor camps and then arrested almost 30 organizers and participants of the May 6. 2012, mass street rally against President Vladimir Putin. The victims of that crackdown included Left Front leader Sergei Udaltsov and well-known anti-fascist Alexei Gaskarov. The authorities imposed a ban on the Left Front organization and brought repressive measures to bear against other groups that oppose nationalism and xenophobia, paralyzing their activities.

How China Can Cause The Death Of The Dollar And The Entire U.S. Financial System

They can bring down the hammer at any moment and they know it

by Michael Snyder 

The death of the dollar is coming, and it will probably be China that pulls the trigger.  What you are about to read is understood by only a very small fraction of all Americans.  Right now, the U.S. dollar is the de facto reserve currency of the planet.  Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars.  More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it.  As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world. 

Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.

As I mentioned above, nations all over the globe use U.S. dollars to trade with one another.  This has created tremendous demand for U.S. dollars and has kept the value of the dollar up.  It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.

The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars...

Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary.  For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this.  This has created tremendous demand for U.S. government debt and has helped keep interest rates super low.  So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates...

Venezuela's short cut to socialism

Government "Occupies" Electronics Retail Chain, Enforces "Fair" Prices

The socialist paradise that is Venezuela has already shown the Federal Reserve just how the world's greatest "wealth effect" can be achieved courtesy of the Caracas stock market returning over a mindblowing 475% in 2013. Of course, while the US inflation is still slightly delayed (if only for non-core items and those that can't be purchased on leverage) Venezuela's own 50%+ annual increase in prices is only part of the tradeoff to this unprecedented "enrichment" of society, or at least 0.001% of it - after all, it's all about the égalité.

More problematic may be the fact that in addition to a pervasive toilet paper shortage, a collapse in the currency, a creeping mothballing of the local energy industry due to nationalization fears, and a virtual halt of international trade as the country's FX reserves evaporate, Venezuela's relatively new government has adopted arguably the best and brightest socialist policy wielded by both Hollande and Obama, namely the "fairness doctrine."

However, in this case it is not about what is a "fair" tax for the wealthy (as taxes in Venezuela's socialist paradise will hardly do much to build up the desperately needed foreign currency reserves), but what is a "fair" price for electronic appliances like flat screen TVs, toasters, and ACs. The result is that Maduro's government now determines what equilibrium pricing should be.

The reason for this latest socialist victory over the tyranny of supply and demand is that overnight Venezuela's President Nicolas Maduro ordered the "occupation" of a chain of electronic goods stores in a crackdown on what the socialist government views as price-gouging hobbling the country's economy. Various managers of the five-store, 500-employee Daka chain have been arrested, and the company will now be forced to sell products at "fair prices," Maduro said late on Friday.

Overcoming the Contradictions of Liberal Democracy

Part I. Sociobiology and Social Engineering

By Pedro Schwartz

Democracy is an unstable system that often does disservice to individual liberty. With this stark assertion I want to pose two problems that have been with the friends of democracy from the very earliest times—going back to the Athenian followers of Pericles when traduced by Plato, to Alexis de Tocqueville and John Stuart Mill when concerned with the enlargement of the franchise, down to Friedrich Hayek and James Buchanan when proposing remedies for the demagoguery of our day. The first is that government of the people, by the people, for the people has more than once been on the point of perishing from the Earth. The second is that democracy, though the political corollary of individualism, has in practice often tyrannized the individual. One explanation for the recurring instability and frequent oppressiveness of democratic politics is that they are due to the natural attrition of human arrangements. A better answer is that they are the consequence of systematic flaws in our political systems. Democracy as practiced is flawed. Democratic life is beset by paradox. These imperfections must be brought into the open and remedied if we want liberal democracy to survive.

Let me give two samples of the confusion and contradiction that beset present day political life: the crisis of Welfare and the denial of capitalist growth.

The failure of the Welfare State

The financial crisis that started in 2007 is perceived in Europe as the writing on the wall for the original idea of the Welfare State. Financing pensions, health, and education on egalitarian lines is now seen as a system of social service with all the wrong incentives: demand runs wild, quality of service deteriorates and taxpayers groan under their weight.

The trouble is that a majority of voters seem to want a Welfare State that they now know is unsustainable. For many years they were content to sell their birthright for a mess of potage but suddenly now they fear they will go hungry: their pensions are being cut, the queues before the hospitals grow longer, and an increasing number of their young go uneducated.

Nothing could go wrong. Right?

How will it end?

by Keith McCullough

I’m sick and tired of half-baked econ PhDs trying to centrally plan our lives. 

The European Central Bank cutting rates and devaluing The People’s currency as European growth is accelerating (not a typo) took my level of disgust up another notch yesterday. I didn’t think that was possible. I guess I thought wrong. 

Like the Fed, the European central planners thought that cutting rates was going to “stimulate growth”, or something like that. Meanwhile, the market’s reaction to yesterday’s European rate cut “news” was global  Growth Slowing. 

Huh? 

Yes. Much like the “growth” style factor being for sale in US Equities ever since the Fed’s unaccountable decision not to taper (Financials down, Staples/Telcos straight up), that’s precisely how Mr. Market voted, worldwide, after the ECB rate cut:

1.      US Growth Stocks got killed yesterday (Nasdaq -1.9%); Russell2000 now -3.7% from its YTD high

2.    European Growth Stocks stopped going up (yes, we sold everything on the ECB “news”)

3.    Asian Stocks continued lower overnight – China and Japan down another -1.1% and -1.0%, respectively

Actually, since the Fed’s slow-growth-no-taper decision and ECB rate cut, from their recent highs:

1.      China’s Shanghai Composite Index is -6.7%

2.    Japan’s Nikkei is -4.7%

3.    US Growth Stocks like Facebook (FB) and Tesla (TSLA) are -12% and -27%, respectively

These academic wonks of the Keynesian empire fundamentally believe that Deflating The Inflation (from the world record inflation they perpetuated via currency devaluation in 2011-2012) is now the world’s greatest threat.

Deflating the Inflation Myth

The Absurdist Myth That Inflation Drives Growth

By GENE EPSTEIN

Contrary to recent assertions, rising prices don't help profits or encourage people to spend quickly.

Desperate times can breed ideas born of desperation. The sluggish rate of economic growth is getting blamed on a new scapegoat, the tame rate of price inflation. The consumer price index ran just 1.2% higher in September than the same month a year ago, the Bureau of Labor Statistics reported last week, a rate of increase that falls noticeably short of the 2% target set by the Federal Reserve. And according to simplistic logic, economic growth would get a shot of adrenaline if only prices would rise a lot faster.

"Rising prices help companies increase profits; rising wages help borrowers repay debts," opined the New York Times last week ("In Fed and Out, Many Now Think Inflation Helps," Oct. 26). "Inflation also encourages people and business to borrow money and spend it more quickly."

Somehow that prescription didn't work out so well in recession year 1974, when the CPI jumped 12.3%, while the economy shrank. And as the chart on this page shows, despite the claim that profits benefit from rising prices, actual profit rates were much lower in 1974 than they have been over the recent expansion.