Saturday, September 24, 2011

All necessities [will be] provided, all anxieties tranquilized, all boredom amused


Intellectual Roots of Terror

by James Ostrowski

The Black Book of CommunismAs zebras are fascinated by lions, libertarians are fascinated by communists, their polar opposites and sworn enemies for the last 150 years. If one believes that society should function with an absolute minimum of governmental coercion, one is curious to know the results of a philosophy which places its faith in the maximum possible use of governmental coercion, force, and violence, to achieve its goals. If communism worked, we libertarians would be forced to check our premises and watch our backs.

Can the laboratory of communism also shed light on the viability of a related political philosophy, which also relies on centralized governmental coercion to achieve its goals: modern liberalism? The communists did all at once what stealthy left-liberals apparently intend to do piece by piece while we sleep. We just lived through a century in which liberals enacted several recommendations of the Communist Manifesto and transformed a night-watchman state into a welfare/warfare state with a continual flow of "progressive" legislation and various "Democrat wars" and crusades with the result that no one in my law school class in 1983 could identify, in response to Professor Henry Mark Holzer's query, any aspect of life that was not in some way regulated or controlled by the state. Seventeen years later, are they through?

Has liberalism closed up shop? Will they ever be through? Not until they have established an egalitarian utopia where virtually all responsibility for living has passed from the individual to the state. In the liberal utopia, if I may pilfer Paddy Chayefsky's words, "all necessities [will be] provided, all anxieties tranquilized, all boredom amused."

If you think I exaggerate, consider that liberals and communists share five critical premises: egalitarianism, utopianism (the use of impossible "ideals" as a guide to policy), the efficacy of force in accomplishing positive goals, hostility to civil society (nonstate institutions, e.g., Boy Scouts, private schools), and the individual's inability to govern himself.

In light of the recent attempted coup d'élection, I am tempted to add a sixth similarity — willingness to win political fights at all costs. Further evidence of some basic affinity between communism and modern liberalism is the latter's frequent coverups and apologies for the former. Finally, communists and liberals share a tendency to expressly support "mass democracy" while they in practice concentrate power in secretive elite bodies such as politburos and appellate courts.

The Black Book

In that spirit of fascination with the enemy, I recently read The Black Book of Communism, a clinical and relentless dissection of the crimes of communism in the 20th century — defined by "the natural laws of humanity" — written by several ex–fellow travelers led by Stephane Courtois.

It is not a book to be read before, during, or after a meal. You would not want to spoil a good meal with the image of Bolshevik troops throwing live human beings into a blast furnace. The Black Book is a story of mind-numbing and mindless brutality. Mao Zedong, one of the stars of the book, said, "political power grows out of the barrel of a gun."

One wonders, after reading this book, whether political power actually grows out of the depraved minds of solipsistic, megalomaniacs like Lenin, Stalin, and Mao. It seems that if you hypnotize yourself into discarding all known ethics and morality, and are willing to use any and all ruthless means to achieve power, then you can have it. A Bolshevik newspaper wrote in 1919, "Our morality has no precedent … everything is permitted … Let blood flow like water." And it did.

The Rap Sheet

When Khrushchev said, "We will bury you," he meant it. Communists buried 85 million people in the 20th century, give or take the number of people who live in New York State. What is really interesting, however, is not the sheer number of victims. After all, as Stalin said, "A single death is a tragedy. A million deaths is a statistic." And what a statistician Stalin proved to be.

But even more awesome is the incredible variety of their murderous means. In pursuit of utopia, the communists were forced to outdo themselves in continually discovering ever more ways to separate the bourgeoisie from their souls. They murdered people by hanging them, whipping them, slitting their throats, carving them up with axes, boiling them, crucifying them, beheading them, drawing and quartering them, stoning them, forcing them to fight to the death against other prisoners, massively drowning them, throwing them from helicopters, asphyxiating them, starving them, poisoning them, burying them alive, and making life unbearable leading to mass suicides. When creativity was absent, the communists fell back on their old standby — the banal bullet to the base of the brain.

Think about a world where you have to get a judge's permission to irrigate your crops


Environmentalists Clobber Texas


In April 1993, Murray Rothbard wrote on the Texas water problem, explaining how the government policy was on a disastrous course that could lead to massive drought. That day has finally arrived.
By Murray Rothbard

We all know how the environmentalists, seemingly determined at all costs to save the spotted owl, delivered a crippling blow to the logging industry in the North west. But this slap at the economy may be trivial compared to what might happen to the lovely city of San Antonio, Texas, endangered by the deadly and despotic combination of the environmentalist movement and the federal judiciary.

The sole source of water for the 900,000-resident city, as well as the large surrounding area, is the giant Edwards Aquifer, an underground river or lake (the question is controversial) that spans five counties. Competing for the water, along with San Antonio and the farms and ranches of the area, are two springs, the Comal and the Aquarena on the San Marcos River, which are becoming tourist attractions. In May 1991, the Sierra Club, along with the Guadalupe-Blanco River Authority, which controls the two springs, filed a suit in federal court, invoking the Endangered Species Act. It seems that, in case of a drought, any cessation of water flow to the two springs would endanger four obscure species of vegetables or animals fed by the springs: the Texas blind salamander; Texas wild rice; and two tiny brands of fish: the fountain darter, and the San Marcos gambusia.

On February 1, 1993, federal district judge Lucius Bunton, in Midland, Texas, handed down his ruling in favor of the Sierra Club; in case of drought, no matter the shortage of water hitting San Antonio, there will have to be enough water flowing from the aquifer to the two springs to preserve these four species. Judge Bunton admitted that, in a drought, San Antonio, to obey the ruling, might have to have its water pumped from the aquifer cut by as much as 60 percent. This would clobber both the citizens of San Antonio, and the farmers and ranchers of the area; man would have to suffer, because human beings are always last in line in the environmentalist universe, certainly far below wild rice and the fountain darter.

San Antonio Mayor Nelson Wolff was properly incensed at the judge's ruling. "Think about a world where you are only allowed to take a bath twice a week," exclaimed the mayor. "Think about a world where you have to get a judge's permission to irrigate your crops."

John W. Jones, president of the Texas and Southwestern Cattle Raisers Association, graphically complained that the judge's decision "puts the protection of Texas bugs before Texas babies."

How did the federal courts horn into the act anyway?

Apparently, if the Edwards Aquifer were ruled a "river," then it would come under the jurisdiction of the Texas Water Commission rather than of the federal courts. But last year, a federal judge in Austin ruled that the aquifer is a "lake," bringing it under federal control.

Environmentalists oppose production and use of natural resources. Federal judges seek to expand federal power. And there is another outfit whose interest in the proceedings needs scrutinizing: the governmental Guadalupe-Blanco River Authority. In addition to the tourist income it wishes to sustain, there is another, hidden and more abundant source of revenue that may be animating the Authority.

This point was raised by Cliff Morton, chairman of the San Antonio Water System. Morton said that he believed that the Authority would, during a drought, direct the increased spring flow into a reservoir, and then sell to beleaguered San Antonio at a high price the water the city would have gotten far more cheaply from the aquifer. Is the Authority capable of such Machiavellian maneuvering? Mr. Morton thinks so. "That's what this is all about," he warned bitterly. "It's not about fountain darters."

Wolff, Jones, and other protesters are calling upon Congress to relax the draconian provisions of the Endangered Species Act, but there seems to be little chance of that in a Clinton-Gore administration.

A longer-run solution, of course, is to privatize the entire system of water and water rights in this country. All resources, indeed all goods and services, are scarce, and they are all subject to competition for their use. That's why there is a system of private property and free-market exchange. If all resources are privatized, they will be allocated to the most important uses by means of a free price system, as the bidders able to satisfy the consumer demands in the most efficient ways are able to outcompete less able bidders for these resources.

Since rivers, aquifers, and water in general, have been largely socialized in this country, the result is a tangled and terribly inefficient web of irrational pricing, massive subsidies, overuse in some areas and underuse in others, and widespread controls and rationing. The entire water system is a mess, and only privatization and free markets can cure it.

In the meanwhile, it would be nice to see the Endangered Species Act modified or even — horrors! — repealed. If the Sierra Club or other environmentalists are anxious to preserve critters of various shapes or sizes, vegetable, animal, or mineral, let them use their own funds and those of their bedazzled donors to buy some land or streams and preserve them.

New York City has recently decided to abolish the good old word "zoo" and substitute the politically correct euphemism "wildlife preservation park." Let the Sierra Club and kindred outfits preserve the species in these parks, instead of spending their funds to control the lives of the American people

Friday, September 23, 2011

The beginning of the End


Global Stocks Enter Bear Market
By Stephen Kirkland and Rita Nazareth
Stocks sank, dragging a gauge of global equities into a bear market, Treasury 10-year yields slid to a record low and the Dollar Index rose to a seven-month high amid concern central banks are running out of tools to prevent a recession. Commodities erased gains for the year.
The MSCI All-Country World Index plunged 4.5 percent at 4:39 p.m. New York time and is down 22 percent from its May peak, while emerging-market stocks tumbled the most in almost three years. The Standard & Poor’s 500 Index lost 3.2 percent to 1,129.56 after briefly falling below its 2011 closing low. The Dow Jones Industrial Average slid the most over two days since 2008. Ten-year Treasury yields lost as much as 16 basis points to 1.6961 percent. The Dollar Index rose 1.4 percent.
The Federal Reserve said yesterday it saw “significant downside risks” in the economy and it will replace $400 billion of short-term debt with longer-term Treasuries to spur growth as the recovery falters. China’s manufacturing may shrink for a third month, U.S. jobless claims topped estimates and euro-area services and manufacturing output contracted for the first time in more than two years, reports showed.
“The storyline is that global growth is decelerating,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $774 billion. “Financial stresses are rising and policymakers are finding few viable options to stabilize the real economy.”
Bear Markets
The MSCI global index of developed and emerging-market stocks joined gauges of European and developing-nation equities in entering a so-called bear market, typically defined as a drop of at least 20 percent from a peak. The only developed markets out of 24 that aren’t in bear markets are the U.S., the U.K., Canada, Singapore and New Zealand. The S&P 500 is down 17 percent from a three-year high at the end of April.
The world is on the eve of the next financial crisis, with sovereign debt at its epicenter, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., which runs the biggest bond fund. The European Central Bank hasn’t put in place a “circuit breaker” to contain the region’s debt crisis, El-Erian, who is also Pimco’s co-chief investment officer, said at an event in Washington today.
The Dow average plunged 391.01 points, or 3.5 percent, to 10,733.83 and lost 5.9 percent in two days for its steepest decline since December 2008.
Commodity Shares Lead
Gauges of raw-material and energy producers lost more than 5 percent and industrial companies slid 3.8 percent to lead losses among all 10 industry groups in the S&P 500, with Alcoa Inc., Chevron Corp. and Caterpillar Inc. falling at least 4.4 percent. FedEx Corp. (FDX), operator of the world’s biggest cargo airline and considered a proxy for the global economy, tumbled 8.2 percent in its biggest drop since March 2009 after cutting its full-year profit forecast amid falling demand in the U.S. and Asia.
The S&P 500 extended this week’s slump to 7.1 percent and dipped as low as 1,114.22, below its lowest closing level in more than a year. The index lost 2.9 percent yesterday after the Fed’s statement and as Moody’s Investors Service cut its long- term credit ratings on Bank of America Corp. and Wells Fargo & Co., saying U.S. support has become less likely if lenders get into financial trouble. Citigroup Inc.’s short-term rating also was downgraded by Moody’s.
‘Orderly Selling’
“We’re seeing orderly selling,” Ryan Larson, head of U.S. equity trading at RBC Global Asset Management Inc. in Chicago, wrote in an e-mail. “While the headlines and tone remain very much negative, the panic is not setting in.” Larson said he was watching the 1,101 level on the S&P 500, which marked the 2011 intraday low on Aug. 9. “You might see panic set in if that level fails to hold.”

Another case of Boom and Bust


IMF Getting a Little More Worried About China

By Bob Davis

While the International Monetary Fund forecasts torrid 9.5% GDP growth this year in China, the IMF is clearly getting a little more worried that China’s boom could turn to bust.

In the IMF’s Global Financial Stability Report, released on Wednesday morning, economist André Meier assessed the risk of a banking crisis in China and is less than reassuring.

A huge expansion of credit in China since 2008 helped that country prosper despite the global financial crisis. But that lending spree is may produce “significant write downs” on debts by local governments, the IMF report says, citing private sector analysis. Although Chinese government has since tried to slow the growth of traditional bank loans, “other forms of credit have surged,” the IMF said As a result, the IMF estimates, China’s domestic loans equaled 173% of GDP at the end of June 2011, which the IMF called “well above the levels of credit” for developing countries of similar income level as China.

Add to that a real estate boom, which has boosted property prices by at least 60% since the end of 2006. Measures to cool the market “might induce a sharper-than-expected correction in prices,” which could further undermine the ability of local governments to repay debt, the IMF warns. That’s because the localities rely on property sales for financing.

China has the wherewithal to bail out its banks, including $3.2 trillion in foreign exchange reserves. But the IMF says that may not be sufficient to “preclude significant bouts of uncertainty as to how losses will ultimate be allocated” among private investors and the central government. Already, the IMF notes, Chinese bank stock prices are slumping.

If the government does step in, the IMF report says, “the consequences could be a substantial worsening of China’s public debt metrics and a narrower scope for future fiscal stimulus” if the economy does slump.

Thursday, September 22, 2011

The End of Sound Money


Τhe Triumph of Crony Capitalism
by David Stockman
The triumph of crony capitalism occurred on October 3rd, 2008. The event was the enactment of TARP — the single greatest economic-policy abomination since the 1930s, or perhaps ever.
Like most other quantum leaps in statist intervention, the Wall Street bailout was justified as a last-resort exercise in breaking the rules to save the system. In the immortal words of George W. Bush, our most economically befuddled President since FDR, "I've abandoned free market principles in order to save the free market system."
Based on the panicked advice of Paulson and Bernanke, of course, the president had the misapprehension that without a bailout "this sucker is going down." Yet 30 months after the fact, evidence that the American economy had been on the edge of a nuclear-style meltdown is nowhere to be found.
In fact, the only real difference with Iraq is that in the campaign against Saddam we found no weapons of mass destruction; by contrast, in the campaign to save the economy we actually used them — or at least their economic equivalent.
Still, the urban legend persists that in September 2008 the payments system was on the cusp of crashing, and that absent the bailouts, companies would have missed payrolls, ATMs would have gone dark and general financial disintegration would have ensued.
But the only thing that even faintly hints of this fiction is the commercial-paper market dislocation. Upon examination, however, it is evident that what actually evaporated in this sector was not the cash needed for payrolls, but billions in phony book profits, which banks had previously obtained through yield-curve arbitrages that were now violently unwinding.
At that time, the commercial-paper market was about $2 trillion and was heavily owned by institutional money-market funds — including First Reserve, which was the granddaddy with about $60 billion in footings. Most of this was rock solid, but its portfolio also included a moderate batch of Lehman commercial paper — a performance enhancer designed to garner a few extra "bips" of yield.
As it happened, this foolish exposure to a de facto hedge fund, which had been leveraged 30-to-1, resulted in the humiliating disclosure that First Reserve "broke the buck," and that the somnolent institutional fund managers who were its clients would suffer a loss — — all of 3 percent!
This should have been a "so what" moment — except then all of the other lemming institutions who were actually paying fees to money-market funds for the privilege of getting return-free risk decided to panic and demand redemption of their deposits. This further step in the chain reaction basically meant that some maturing commercial paper could not be rolled over due to these money-market redemptions.
But this outcome, too, was a "so what": nowhere was it written that GE Capital or the Bank One credit-card conduit, to pick two heavy users of the space, had a Federal entitlement to cheap commercial paper — so that they could earn fat spreads on their loan books.
Regardless, the nation's number one crony capitalist — Jeff Immelt of GE — jumped on the phone to Secretary Paulsen and yelled "fire"! Soon the Fed and FDIC stopped the commercial-paper unwind dead in its tracks by essentially nationalizing the entire market. Even a cursory look at the data, however, shows that Immelt's SOS call was a self-serving crock.
First, about $1 trillion of the $2 trillion in outstanding commercial paper was of the so-called ABCP type — paper backed by packages of consumer loans such as credit cards, auto loans, and student loans. The ABCP issuers were off-balance sheet conduits of commercial banks and finance companies; the latter originated the primary loans, and then scalped profits up front by selling these loan packages into their own conduits.
In short, had every single ABCP conduit been liquidated for want of commercial-paper funding — and over the past three years most have been — not a single consumer would have been denied a credit-card authorization or car loan. His or her bank would have merely booked the loan as an on-balance sheet asset — rather than off-balance sheet asset.

Who's Simplicio now?


Did Galileo get in trouble for being right, or for being a jerk about it?
 
BY ESTHER INGLIS-ARKELL

Galileo was facing some stiff odds when he published his Dialogue Concerning the Two Chief Systems of the World. He'd already been officially warned against heliocentrism, and he had enemies. But it's possible, just possible, that he would have squeaked by if he hadn't been a jerk to the Pope.
The feud between Galileo and the Catholic Church - the one that resulted in Galileo spending the last years of his life under house arrest - is perhaps the most well-known part of his history. Galileo was tried, threatened with torture, and forced to recant his perfectly correct position about the solar system being centered around the sun, instead of around the earth. What isn't as well known is the fact that Galileo was greatly supported by the Church up until he published this book, and was a particular friend of the reigning Pope at the time of his trial. What hung Galileo out to dry might very well not have been his intellectual position, but his attitude.

During much of his life Galileo was not particularly interested in Copernicanism, the idea that the earth orbited around the sun instead of the other way around. Born in 1564, and hailed as a genius from an early age, it wasn't until he in his late forties that he got around to advocating the idea. Even then, he did so only in letters, and so when he went to Rome in 1615, he did so to voluntarily defend his unpublished ideas. He was warned privately not to pursue the matter, and the Inquisition sent out a special Injunction telling him not to hold or argue for Copernicanism, which the Inquisition declared contrary to Scripture. Galileo dropped the matter.

But times changed, and Popes changed with them. In 1623, Cardinal Maffeo Barberini became Pope Urban VIII. Barbarini had met Galileo at a dinner in 1611, where he delighted in the sharp arguments Galileo made to completely destroy those who debated his ideas. This was just after Galileo had come by a new telescope, which allowed him to pick out the universe in more detail than anyone had before, and before the Injunction, so he very well might have discussed his heliocentrist ideas with Barberini at the time. The two men maintained a friendship that endured for over ten years. When Barbarini became Pope, Galileo met with him personally to take up the matter of Copernicanism again.

The two discussed the idea, and how it affected scripture. Barbarini, in the position to appear magnanimous and fair-minded, formally granted Galileo to write about the theory. Mindful of the political climate, Galileo did not suggest a polemic. Instead of an argument, the idea would be presented as a dialog in which characters discussed the two ideas and compared their merits.

Dialogue Concerning the Two Chief Systems of the World came out a decade later, and became a huge success in intellectual circles. It was exactly what it was promised to be, a dialog about the two ideas. Then someone noticed something. The advocate for Copernicanism was smart and well-spoken, while the one that espoused the Aristotelian geocentric view of the solar system came off as stupid and pigheaded. Well, authors always find a way to show their intentions, and it might have ended there if people hadn't noticed that the feeble-minded geocentrist used some of the same arguments that the Pope had made during his discussions with Galileo. In some cases, he even used direct quotes of what the Pope had said. And just to underline his authorial intentions, Galileo named the geocentrist 'Simplicio' - the Simpleton.

The friendship that Galileo had enjoyed was broken, with a vengeance. He was hauled into Rome and brought before Inquisition, this time not of his own accord. The private warning, and the official Injunction that had been given to him in 1616, were brought forward, and things were looking bleak. Galileo defended himself with technicalities. Although the Injunction had been issued, it had not been signed or properly processed (even in the 1600s, all court systems had bureaucracy). While it was true, he said, that he did discuss Copernicanism, his book was an examination of both sides and so he was technically not 'arguing in favor of it.' While these arguments were technically true, the Church would have been more inclined to come down in favor of technicalities in the case of someone who had refrained from publicly calling the Pope a dummy.

It was not technicalities that saved Galileo, but whatever powerful friends he had left and his own celebrity status. Galileo clung to technicalities, and insisted that he did not remember the earlier informal warnings not to 'hold or argue' heliocentrism. The counsel before which he appeared debated the possible punishments, before deciding that he should be "condemned to imprisonment at the pleasure of the Holy Congregation." The Pope, still smarting, resisted all efforts to end Galileo's house arrest, even towards the end of the man's life. He also demanded a public renunciation, during which he probably smiled and muttered, "Who's Simplicio now?"

Don't let America go down the drain


A Debt I Can't Repay
by Judge Alex Ferrer
I am Cuban. I feel I have to say that right off the bat because so many people, when they first learn that I was born in Havana, are stunned. I guess a lot of people expect that Cubans all speak and act like Ricky Ricardo. But I came to America as a very young child, so assimilation has never been a problem. My family moved to the U.S. in the 60's when Americans, once again, generously opened their arms to yet another wave of immigrants, as they had done so many times before in our country's history. My parents, who were well off in Cuba, had to start over like so many other immigrants, working two jobs each for minimum wage. But through hard work and perseverance, they were able to claw their way up so that we once again had a comfortable lifestyle. Not rich. But comfortable.
Sure, it was difficult, and I remember signs in some of Miami's downtown restaurants that stated "No Cubans Allowed," but the opportunity was there. And so I learned early on from my parents that, through hard work, in America anything was possible. That's how a Cuban born child who fled communism and came here with his immigrant parents became an American citizen, a cop, a lawyer, a judge and now the host of a successful, nationally syndicated television court show--"Judge Alex."
I started working at 15 and became a police officer when I was just 19 years old, working as a cop to support myself and pay my way through college and law school. Full time student by day, full time cop by night. Easy? No. But it was do-able and I didn't have any other options so I did what I had to do. Along the way, I become the youngest cop and the youngest judge in Miami, the first Cuban born attorney elected to Miami's Circuit Court, and now a member of a very small fraternity of TV judges. I would say that no one handed me anything; that I had to work hard for everything I obtained--but that would not be true.
The reality is I was given the most critical key to my success: the opportunity that America provides. This truly is the Land of Opportunity. I sometimes wonder what would have become of my life if Americans had not welcomed us into their country. I would have lived under communist rule in Cuba, barely getting by, no freedom to express my opinions in private, let alone in public, without being beaten and arrested. The government would have made me work at the career they chose for me and, even if I was lucky enough to be selected to be a doctor rather than a ditch-digger, the pay in Cuban pesos would be so inadequate that some doctors in Cuba drive taxis on the side in order to have enough money to feed their families. No. I was given the invaluable opportunity to become successful and live a great life through the unparalleled generosity of the American people.
And, try as I might, that is a debt I can't repay.