Saturday, August 11, 2012

The Apocalyptic Vision of The Road


A chilling glimpse of a society without capital or moral order


by Ben O'Neill
What is the "means of production" and what significance does it have to society? How is it created, expanded, or merely sustained? What is the relationship between the prevailing moral order of a society and its accumulation of capital?
These are questions that economists and political philosophers have considered throughout the history of economic thought. If you have ever enquired into the differences between capitalism and socialism you will have heard of the means of production, and you will be aware that this is very important to the organization of society. You might have heard of this, but you might not have spent much thought on the relationship between capital and moral order. Indeed, why should ordinary people care about such things? Isn't the means of production just something that one reads about between bong hits in the dorm rooms at university? Or is it perhaps something that is the domain of accountants and corporate managers, concerned with the proper techniques of double-entry bookkeeping? What is its great significance?
For those who are not sure, or don't care, The Road by Cormac McCarthy gives us a chilling glimpse of a society without capital or moral order — a world without a "means of production." It is a terrifying vision, and a wake-up call to those who regard questions of capital accumulation as being merely the dry and technical subject matter of economists. The novel is set in a post-apocalyptic world devastated by a catastrophe of some kind that has destroyed the natural environment. It tells the story of a man and his young son trying to survive the dangers of the new world and retain their sense of goodness in the face of its horrors.
“The country was looted, ransacked, ravaged. Rifled of every crumb. The nights were blinding cold and casket black and the long reach of the morning had a terrible silence to it.… He walked out in the gray light and stood and he saw for a brief moment the absolute truth of the world. The cold relentless circling of the intestate earth. Darkness implacable.… Borrowed time and borrowed world and borrowed eyes with which to sorrow it.” (pp. 129–130)
The world of the novel is cold and inhospitable, and hunger is ubiquitous. Its natural capital has been devastated, and other capital goods lie useless in the abandoned homes of the dead. Aside from some surviving humans (and the occasional animal), plant and animal life on the planet has become extinct, and the environment is barren and cold. There is no way to grow crops or create food, and so humans revert to foraging through the stored goods of the old world, and preying on the only remaining source of meat — other people.
“By then all stores of food had given out and murder was everywhere upon the land. The world soon to be largely populated by men who would eat your children in front of your eyes and the cities themselves held by cores of blackened looters.” (p. 181)
1. Civilization, Capital, and Moral Order
Where do our stores of food come from? And where our civilization? Though modern civilization is a complex thing, it is also very simple in its essence, for it is built on three forms of capital that form the pillars of any civilized order. One of these is the natural and man-made physical capital that humans use to live and to sustain their production of goods — the "means of production" (and perhaps also the means of distribution of goods). In addition to this physical capital are two corresponding forms of human capital: the technical knowledge to operate physical capital and sustain production, and the moral order required to sustain organized use of scarce resources. The degree of civilized life that presently exists does so because we have inherited physical capital and technological knowledge, but also because we have some sense of a moral order needed to sustain these things.
The story of civilization is the story of capital accumulation. This has included an accumulation of physical capital, but also a corresponding accumulation of technical and moral knowledge. We are civilized only to the extent that we ask ourselves what kind of moral order is needed to sustain the accumulation of capital. What kind of moral order sustains a means of production?
“There was yet a lingering odor of cows in the barn and he stood there thinking about cows and he realized they were extinct. Was that true? There could be a cow somewhere being fed and cared for. Could there? Fed what? Saved for what?” (p. 120)
In the midst of a prosperous civilization, it is easy for people to become flippant about the moral order needed to sustain the accumulation of capital. Large stores of capital goods are already here, and it is the present concern of many people to worry about how these should be "distributed" to satisfy their managerial lust and quest for "social justice." In a situation of such abundance, moral relativism and nihilism thrive. All is subjective, and the good is whatever "the representatives of the people" determine it to be. Those who pooh-pooh the moral rules that sustain the accumulation of capital often imagine that they are acting on behalf of the weak and downtrodden. But the breakdown of capital is the breakdown of civilization, and this is of great harm to the weak and strong alike. Indeed, if there are any who are most dependent on civilized order, it is those who are the least likely to survive under the predations of the strong.
“Oh papa, he said. He turned and looked again. What the boy had seen was a charred human infant headless and gutted and blackened on a spit. He bent and picked the boy up and started for the road with him, holding him close. I'm sorry, he whispered. I'm sorry.” (p. 198, grammatical omissions in original)
The Road shows us the predatory nature of man in the absence of his means of production, and the degeneration of the moral order this loss entails. Though the man and his son struggle to remain "good guys" during their precarious existence, the world of the novel is mostly inhabited by "bad guys" — armed gangs who enslave unwary travelers and commit terrible atrocities.
“They passed two hundred feet away, the ground shuddering lightly. Trampling. Behind them came wagons drawn by slaves in harness and piled with goods of war and after that the women, perhaps a dozen in number, some of them pregnant, and lastly a supplementary consort of catamites [boys kept as sex slaves] ill clothed against the cold and fitted in dog collars and yoked each to each. All passed on. They lay listening.” (p. 92, grammatical omissions in original)
The man in the novel struggles to protect his little boy from the predations of other men, while at the same time struggling to maintain his sense of morality and bequeath good values to his son. He carries a gun for protection but has only two bullets, one of which he is saving to kill his own son if circumstance should require it. The boy is too young to comprehend the atrocities that will be inflicted on him if he is caught by "the bad guys," but the man is well aware. Though he devotes his life to the protection of his son, he also considers the fact that he will kill the boy as an act of mercy if they fall into enemy hands:
“Can you do it? When the time comes? When the time comes there will be no time. Now is the time. Curse God and die. What if [the gun] doesn’t fire? It has to fire. What if it doesn’t fire? Could you crush that beloved skull with a rock? Is there a being within you of which you know nothing? Can there be?” (p. 114, grammatical omissions in original)
2. Why Aren't We Eating Each Other Right Now?
Reflecting on the likely effects of massive capital destruction is a fascinating thought experiment. It is one that gives valuable insights into the nature of humanity and the fragility of our present civilization. It matters not whether the destruction is brought about by a sudden disaster, as in the book, or a slow feasting on the accumulated capital of the past. If the means of production are destroyed, or simply not sustained, then we are heading down the road to hunger and predation, as illustrated in the novel.
What stops us from eating each other right now? How long would it take people in our civilization to turn to gross acts of predation in the event of a catastrophic disaster? How long before we would see people start farming other humans?
There are essentially two reinforcing reasons that prevent present humans from treating each other in such a patently predatory way. One reason is moral: there is widespread acceptance that it is evil to enslave and eat other people in our present circumstances. The other reason is contextual: the accumulated capital of our civilization is sufficient to ensure that we simply do not need to eat other people — we already have abundant food available to us. (One other alleged reason that might be mentioned is consequential: we fear the punishment that would be imposed on us for eating other people. However, this is a very minor concern in our present society and is not really operative on most people. The vast majority of people would avoid cannibalism under present circumstances regardless of whether or not they would be caught and punished for this behavior, simply because they do not want or need to engage in this kind of depravity. We mention this motivation only to explain that it is inoperative on most people.)
These two sources of civilized behavior — moral and contextual — are not independent of one another. Our moral views on slavery and cannibalism are formed within the context of a prosperous society where these activities are not needed to supply us with our needs (i.e., our present context affects our morality). Similarly, our lack of need for this source of food is itself a result of capital accumulation generated by having an ordered system of production built on moral rules (i.e., our moral system affects our activities, which affect our context). Though the first connection is widely appreciated, the second is not so well understood, and many people are prone to treat the fruits of civilization as just being here somehow (or as a result of science and technology, which got here somehow, etc.), without any particular moral principles needed to sustain them.
The fact that people's behavior is built on a moral foundation that is itself highly dependent on their context is a scary thought — even though people think it's abominable to eat each other right now, give them a few months living in a post-apocalyptic moribund world and they might change their minds! Indeed, this is one of the main salutary lessons of The Road — it shows us the fragility of the moral principles that underlie civilized society.
3. Moral Order? What Moral Order?
Readers of The Road are likely to be struck by the strong connection between the lack of capital and the lack of moral order in the dying world. In that respect the book is an excellent instruction in the importance of capital to civilized life. But if all this is accepted, then what is the moral order required to accumulate and sustain capital?
To answer this, we must understand that capital is formed and sustained by productive efforts undertaken for future reward. By its very nature, capital accumulation requires a present refrain from consumption with a view toward expanding one's future productivity. In order for this trade-off to be worthwhile one must have property rights that function as the "boundaries of order" in our interaction with other people. This is what allows us to accumulate capital and avoid predation. It is what allows us to save for the future with the assurance that we will reap some reward, rather than having our efforts taken to feed looters and killers. The proper moral order for civilized life is one that allows cooperative action for mutual gains but eschews coercion. To the extent that this moral order has been practiced, it has allowed man to build capital and develop civilized life. To the extent that it has been violated, it has led to barriers to capital accumulation, or outright capital destruction.
Despite their peril, the man and boy in The Road are very respectful of the moral order of private-property rights.[1] They vow not to eat other people regardless of their hunger, and they show great respect for the abandoned property of others. When they stumble onto a cache of stored food in an abandoned bunker, the boy says a makeshift prayer for the people who left it there:
“Dear people, thank you for all this food and stuff. We know that you saved it for yourself and if you were here we wouldn't eat it no matter how hungry we were and we're sorry that you didn't get to eat it …” (pp. 149–155)
Though the story of The Road is a grim and uncompromising story of societal breakdown, it is also a love story between a man and his son, and a story of the struggles of good people in a bad world. The man in the story tells his son that they are "carrying the fire," meaning that they are carrying the remains of the civilized order of the old world. They are very much like those described as "the Remnant" by Albert Jay Nock in his classic essay: "those who by force of intellect are able to apprehend [the principles of civilization], and by force of character are able, at least measurably, to cleave to them."
4. Capital, Moral Order, and Human Survival
The vision of The Road is a vision of what occurs when man loses the accumulated capital of civilization and the moral order that sustains it. The book is vague on the nature of the disaster that lands its principle characters in the final days of their species, but this is not really important. What is important is that we are presently in the process of discarding the moral order that sustains the process of capital accumulation, and there is reckless disregard by many people for any connection between an objective moral order for cooperative conduct and the capital accumulation and maintenance they take for granted to feed their abundance.
Those who concern themselves with the "distribution" of the accumulated wealth of the world are a reckless force chipping away at the foundations of civilized order. That they do so with pretentions that they are working for the benefit of the weak and disenfranchised only serves to show their naïveté, and their disregard for the nature of man without his civilization. The problem with this decline is not merely a danger of loss of physical capital, but something far deeper and more total: it is a moral rot, gradually undermining people's capacity to produce and sustain production. Every coercive measure interfering with the moral order of private property and cooperative exchange is another chip at the means of production and the civilized life it engenders.
The Road shows us what it means to lose the means of production. It is not pretty, and it is not at all to the benefit of the weak, nor anyone else.
The book has been praised as a salutation to environmentalist philosophy because it shows the consequences that a total environmental breakdown would have for humanity. I cannot comment on whether the author intended the book to convey this view, though it does not seem evident to me that he did. (The disaster in the book is clearly a sudden catastrophe, and certainly not a gradual breakdown caused by the activities of man.) In any case, I take a different lesson from the book than the alleged environmentalist message. To me, the book conveys the strong connection between capital and moral order. By depicting its absence, the book shows us the core of a civilized society, and allows us to see the importance of capital in a far more commanding way than is presented by economists and their treatises.
At root, human beings are animals, and like other animals we have a hierarchy of needs to satisfy. Despite our ability to reason about our own conduct, our mode of behavior will always reflect the necessity of satisfying those needs in some way. In the midst of our present civilization, with all its abundance, the idea of enslaving and cannibalizing other people (including children and babies) is horrific and revolting, but it is a reality of human nature that this can come about under dire circumstances. What protects us from this result is the accumulated capital of the past, and our capacity to protect that capital by formulating an appropriate moral order to guide our actions. If we are reckless about the connection between our moral order and the accumulation of capital, then we are asking for disaster.
When a person glibly tells you that moral rules are just subjective judgments, or that they are something that transcends petty concerns over material goods, ask yourself where that position leads. If man adopts such a view on a wide scale, will he still exist in another thousand years? Or will his fate have been embodied in The Road.
“On their backs were vermiculate patterns that were maps of the world in its becoming. Maps and mazes. Of a thing which could not be put back. Not be made right again. In the deep glens where they lived all things were older than man and they hummed of mystery.” (p. 287)
Notes
[1] This discussion should not be taken to mean that the moral order of private property ought to be operative irrespective of context. The proper moral principles applying to human interaction may legitimately depend on context; see, e.g., Moral Rights and Political Freedoms (1995) by Tara Smith. It is quite possible that a moral order of private property would not be legitimate in a moribund world such as in the novel, and one might even make the case that cannibalism could be morally legitimate when humans are one of the few remaining sources of food possible. I take no position on these questions in this essay, but they are worth noting to avoid misunderstanding of the source of rights. What is important is that, in the context of a world where it is possible to sustain a means of production, a moral order based on private property and nonaggression is proper and desirable.

The Mess We’re In

Why Politicians Can’t Fix Financial Crises
By Tim Price
“The genius of our ruling class is that it has kept a majority of the people from ever questioning the inequity of a system where most people drudge along, paying heavy taxes for which they get nothing in return.”
                                           - The late Gore Vidal.
“It’s a mess, ain’t it, Sheriff ?” suggests the deputy in the Coen brothers’ No Country For Old Men as they survey the body-strewn aftermath of a West Texas gunfight. “If it ain’t,” replies Tommy Lee Jones’ laconic lawman, “It’ll do till the mess gets here.” And our mess is already here, albeit with the likelihood of plenty more mess to follow. The latest offering¹ (The Mess We’re In: Why Politicians Can’t Fix Financial Crises) in the increasingly crowded pantheon of financial crisis porn stands apart from its competitors for at least three very specific reasons:
  • It doesn’t focus myopically on the mess in banking, but instead puts our giant international banking mess in the context of a wider analysis of budget deficits; the slow collapse of occupational pension provision; fears for economic recovery; and as its subtitle indicates, whether our political systems are even remotely fit for purpose in attempting to resolve these various crises.
  • It offers a much broader overview of the sad history of politicians in their various dealings with the economy and financial markets. (The word has already been coined: “Omnishambles.”)
  • It dares to offer some practical solutions and a way out of the swamp.
We are now five years into this crisis and there is no tangible sign of improvement. Having thrown everything at banks including the kitchen sink, governments are now starting to appreciate that all they have achieved is the loss of a kitchen sink. Which may be why the Financial Times last week reported that the full nationalisation of RBS was back on the agenda. Barclays’ discredited former CEO, Bob Diamond, was obviously ridiculously premature when he suggested that a period of banking remorse and apology needed to be over. On the contrary, given the scale of the mess, and its cost to the taxpayer and to the economy, that requisite period of remorse and apology may yet outlive us. But bashing the bankers gives only the least satisfying form of relief. As we have frequently suggested, no account of the crisis can be complete without a comparable assessment of the role played by our politicians – not just in the run-up to the events of 2007 and 2008, but in the years and decades that preceded them.

The social and economic reasons for Generation Squeezed


There are real conflicts between the young and old; so far, the young are losing
By Robert J. Samuelson
I worry about the future — not mine but that of my three children, all in their 20s. It is an axiom of American folklore that every generation should live better than its predecessors. But this is not a constitutional right or even an entitlement, and I am skeptical that today’s young will do so. Nor am I alone. A recent USA Today/Gallup poll finds that nearly 60 percent of Americans are also doubters. I meet many parents who fear the future that awaits their children.
The young (and I draw the line at 40 and under) face two threats to their living standards. The first is the adverse effect of the Great Recession on jobs and wages. Even if this fades with time, there’s the second threat: the costs of an aging America. It’s not just Social Security, Medicare and Medicaid — huge transfers from the young to the old — but also deferred maintenance on roads, bridges, water systems and power grids. Newsweek calls the young “generation screwed”; I prefer the milder “generation squeezed.”
Already, batteries of indicators depict the Great Recession’s damage. In a Pew survey last year, a quarter of 18-to-34-year-olds said they’d moved back with parents to save money. Getting a job has been time-consuming and often futile. In July, the unemployment rate among 18-to-29-year-olds was 12.7 percent. Counting people who dropped out of the labor market raises that to 16.7 percent, says Generation Opportunity, an advocacy group for the young. Among recent high-school graduates, unemployment rates are near half for African Americans, a third for Hispanics and a quarter for whites, notes the Economic Policy Institute, a liberal think tank.

Millennial Communism


For Marx mankind, led by a vanguard of secular saints, would establish a secularized kingdom of heaven on earth
by Murray N. Rothbard,
[This article is excerpted from volume 2, chapter 10 of An Austrian Perspective on the History of Economic Thought (1995)
The key to the intricate and massive system of thought created by Karl Marx (1818–83) is at bottom a simple one: Karl Marx was a communist. A seemingly banal or trite statement set alongside Marxism's myriad of jargon-ridden concepts in philosophy, economics, history, culture, etc. Yet Marx's devotion to communism was his crucial point, far more central than the dialectic, the class struggle, the theory of surplus value, and all the rest. Communism was the goal, the great end, the desideratum, the ultimate end that would make the sufferings of mankind throughout history worthwhile. History is the history of suffering, of class struggle, of the exploitation of man by man. In the same way as the return of the Messiah, in Christian theology, would put an end to history and establish a new heaven and a new earth, so the establishment of communism would put an end to human history. And just as for postmillennial Christians, man, led by God's prophets and saints, would establish a Kingdom of God on earth (and, for premillennials, Jesus would have many human assistants in establishing such a Kingdom), so for Marx and other schools of communists, mankind, led by a vanguard of secular saints, would establish a secularized kingdom of heaven on earth.
In messianic religious movements, the millennium is invariably established by a mighty, violent upheaval, an Armageddon, a great apocalyptic war between good and evil. After this titanic conflict, a millennium, a new age, of peace and harmony, a reign of justice, would be established upon the earth.
Marx emphatically rejected those utopians who aimed to arrive at communism through a gradual and evolutionary process, through a steady advancement of the good. No, Marx harked back to the apocalyptics, the postmillennial coercive German and Dutch Anabaptists of the 16th century, to the millennial sects during the English Civil War, and to the various groups of premillennial Christians who foresaw a bloody Armageddon at the Last Days, before the millennium could be established. Indeed, since the immediatist postmils refused to wait for gradual goodness and sainthood to permeate among men, they joined the premils in believing that only a violent apocalyptic final struggle between good and evil, between saints and sinners, could establish the millennium. Violent, worldwide revolution, in Marx's version made by the oppressed proletariat, would be the instrument of the advent of his millennium, communism.
In fact, Marx, like the premils (or "millenarians") went further to hold that the reign of evil on earth would reach a peak just before the apocalypse. For Marx as for the millenarians, writes Ernest Tuveson,
The evil of the world must proceed to its height before, in one great complete root-and-branch upheaval, it would be swept away.…
Millenarian pessimism about the perfectibility of the existing world is crossed by a supreme optimism. History, the millenarian believes, so operates that, when evil has reached its height, the hopeless situation will be reversed. The original, the true harmonious state of society, in some kind of egalitarian order, will be reestablished.[1]

Friday, August 10, 2012

IMF Pushes Europe to Ease Greek Burden


The Long Goodbye
By MATTHEW DALTON And COSTAS PARIS
The International Monetary Fund, facing discontent among its members about the huge sums it has lent to the euro zone, is pushing the currency bloc's governments to take steps to lighten the burden of the bailout loans they made to Athens, officials familiar with continuing discussions said.
The IMF pressure—which officials said has been clear in private discussions among Greece's official lenders—comes in response to mounting evidence that Greece's deep recession has thrown the country's bailout program woefully off track from targets set earlier this year.
IMF officials maintain Greece's debt must be reduced to "sustainable" levels before the fund releases billions more euros to keep Athens from running out of cash, some officials said. The most effective way to do this would be for Greece's bailout lenders to forgive some of the debts Greece owes them.
Such a step would meet fierce resistance from euro-zone governments, such as Germany, which have already lent €127 billion ($157 billion) to Greece and are adamant that it shouldn't expect any more concessions.
The German government has said repeatedly in recent weeks that it expects Greece to uphold the program it agreed to in early 2012 and that no extra German financial aid will be made available. Any move to reduce Greece's debt to the euro zone would need to be approved by Germany's parliament, where lawmakers are increasingly impatient with Greece's desire for more-forgiving bailout terms.
An IMF spokesman declined to comment.
Exactly how to define "sustainable" will be the centerpiece of a debate expected to stretch for months over how to right the bailout program and keep Greece in the euro zone. The IMF now wants to see the government debt ratio close to 100% of gross domestic product in 2020, when Greece is supposed to have finished repaying €33 billion in loans to the IMF, officials said.
That would be considerably lower than a target of 120% of GDP agreed in February, when Greece, the euro zone and the IMF signed a new bailout agreement for the country that imposed sharp losses on the Greek government's private-sector creditors. The shift reflects concerns among fund staff that even the previous target won't leave Greece in a position to repay its debts by 2020.

Europe's Beggars


Bluffing Their Way To Unity And Propserity Via Hijacking And Extortion
by Tyler Durden 
Ten days ago, when predicting what may and likely will be the outcome of the August ECB announcement, we said that it is virtually certain that it will follow in the trailblazing footsteps of what Mario Monti did at the June 29th meeting. To wit: "The bottom line here is that Draghi most likely pulled a Mario Monti (and his hanger on Mariano Rajoy), and spoke up before pre-clearing with Buba's Weidmann. Draghi thinks that, like Monti with Merkel at the June 29 summit, he can bluff the Bundesbank into submission, and Germany will agree to monetization, especially if markets have risen enough where nothing out of the ECB next week leads to a market plunge. The problem is that as we patiently explained, Monti got absolutely no concessions our of Merkel, as was seen in the bond yields of Spain after the June 29 summit." Sure enough, the market soared in the days after June 29 as well, giddy with optimism that Germany would never settle for being bullied publicly and had implicitly agreed with the Monti and Rajoy. Euphoria promptly turned to despair as it became quickly clear that Monti had bluffed without preclearing with Merkel and Buba. Fast forward one month, and what we expected to happen is precisely what did happen.
During an all-night European summit in June, Mario Monti, the Italian Prime Minister, gave German Chancellor Angela Merkel an unexpected ultimatum: He would block all deals until she agreed to take action against Italy's and Spain's rising borrowing costs. 
Ms. Merkel, who has held most of the euro's cards for the past two years, wasn't used to being put on the defensive.
"This is not helpful, Mario," Ms. Merkel warned, according to people present. Europe's leaders were gathered on the fifth-floor of the European Union's boxy glass headquarters in Brussels, about to break for dinner.
"I know," Italy's premier replied.
The nine-hour confrontation between Italy and Germany that night led to a compromise that wasn't the sweeping action Mr. Monti wanted. But it has helped pave the way for a possible intervention by the European Central Bank to stabilize the teetering bond markets of Italy and Spain—a high-risk step that could be Europe's last chance to save the euro.
The Italian-German conflict has also exposed a deep philosophical fissure at the heart of the euro zone: Are painful reforms and austerity in countries such as Italy and Spain enough to restore confidence in the common currency, as Germany has insisted? Or do they need Europe's collective financial support while they fix their economies, as Mr. Monti argues?

Draghi and friends just want your money


Why Europe's Plan Is Doomed
By Bill Gross
The very vocal head of the world's largest bond fund has long been critical of the global ponzi system better known as the "capital markets." Now, finally, he shifts his attention to Europe, where the interests of his parent - Europe's largest insurance company Allianz are near and dear to the heart, and deconstructs not only the biggest challenge facing Europe: getting access to your money, but also the fatal flaws that will make achieving this now impossible. To wit: "Psst! Investors – do you wanna know a secret? Do you wanna know what Angela Merkel, François Hollande, Christine Lagarde and Mario Draghi all share in common? They want your money!" .... but... "private investors are balking – and for what it seems are good reasons – because policy makers’ efforts have been, until now, a day late and a euro short, or more accurately, years late and a trillion euros short." And so they will continue failing ever upward, as permissive monetary policy which allows failed fiscal policy to be perpetuated, will do nothing about fixing the underlying problems facing the insolvent continent. Then one day, the ECB, whose credibility was already massively shaken last week, will be exposed for the naked emperor it is. Only then will Europe's politicians finally sit down and begin doing the right thing. It will be too late.
From the FT:
Draghi and friends just want your money
Psst! Investors – do you wanna know a secret? Do you wanna know what Angela Merkel, François Hollande, Christine Lagarde and Mario Draghi all share in common? They want your money!
They’ve wanted it for years now but you are resisting by holding on to it or investing it at negative interest rates in Switzerland, Germany and a growing number of other countries considered to be European Union havens. They want you to be less frugal and more risk-seeking. They want your money as a substitute for theirs in Spain, Italy and, of course, Greece, but they don’t mention that any more. The example would be too off-putting. “Investors,” they plead, “show us your money!”

The ultimate goal of monetary and fiscal policy in the EU is to re-engage the private sector. The EU needs the private sector as a willing (but not necessarily equal) partner in funding its economy. This often gets lost in the noisy details of all too frequent promises such as the one to defend the euro made by Mr Draghi, European Central Bank president.

Anarchy in the Aachen

The strange and little-known case of the condominum of Moresnet
by Peter C. Earle
Can a community without a central government avoid descending into chaos and rampant criminality? Can its economy grow and thrive without the intervening regulatory hand of the state? Can its disputes be settled without a monopoly on legal judgments? If the strange and little-known case of the condominum of Moresnet — a wedge of disputed territory in northwestern Europe, and arguably Europe's counterpart to America's so-called Wild West — acts as our guide, we must conclude that statelessness is not only possible but beneficial to progress, carrying profound advantages over coercive bureaucracies.
The remarkable experiment that was Moresenet was an indirect consequence of the Napoleonic Wars (1803–1815), which, like all wars, empowered the governments of participating states at the expense of their populations: nationalism grew more fervent; many nations suspended specie payments indefinitely; and a new crop of destitute amputees appeared in streets all across Europe.
In the Congress of Vienna, which concluded the war, borders were redrawn according to the "balance-of-power" theory: no state should be in a position to dominate others militarily. There were some disagreements, one in particular between Prussia and the Netherlands regarding the miniscule, mineral-rich map spot known as the "old mountain" — Altenberg in German, Vieille Montagne in French — which held a large zinc mine that profitably extricated tons of ore from the ground. With a major war recently concluded, and the next nearest zinc source of any significance in England, it behooved the two powers to jointly control the operation.
They settled on an accommodation; the mountain mine would be a region of shared sovereignty. So from its inception in 1816, the zone would fall under the aegis of several states: Prussia and the Netherlands initially, and Belgium taking the place of the Netherlands after gaining its independence in 1830. Designated "Neutral Moresnet," the small land occupied a triangular spot between these three states, its area largely covered by the quarry, some company buildings, a bank, schools, several stores, a hospital, and the roughly 50 cottages housing 256 miners and support personnel.[1]

A Little Perspective On What Lies Ahead


The unpayable debts are only symptoms of a deeply flawed system
Eliminating Elites won't eliminate our structural problems or the reduction in phantom wealth we've all been relying on.
by Charles Hugh Smith
Many finance-oriented critiques start from the position that our problems largely stem from the financial/political dominance of Elitist cartels and cabals. Clearly, the malinvestment, exploitation, predation and disregard for the law that characterizes the rule of political-financial Elites in both developed and developing nations have wreaked havoc on societies and economies around the globe.
Implicit in this critique is a dangerously naive assumption: if all our problems can be traced back to Elitist cabals such as the Federal Reserve and the European Central Bank, then it follows that the subjugation or eradication of these concentrations of self-serving power would remove the cause of our problems.
Alas, that would be a welcome step in the right direction, but that alone would not resolve the structural causes of our devolution. Freeing ourselves of self-serving Elites would certainly create an opening for structural transformation that is currently impossible, but the transformation will require changing much of what the average citizen takes for granted as a "given" or even "right."
For a little perspective on what lies ahead, let's consider the structural problems that remain even if we were fortunate enough to throw off the yoke of the Fed, the corporate cartels, and the entire system of Elitist dominance.
1. We would still have mountains of debt that will never be paid and enormous losses to write off. It would be nice if we could place all the inevitable losses as phantom assets are exposed to price discovery on bankers and Elites, but the reality is that these assets are distributed throughout the economy: as these phantom assets vanish, pension funds, insurance companies and other bulwarks of non-Elite wealth/security will have to write off significant portions of their assets.
Citizens will ultimately find their wealth/financial security has been degraded, perhaps severely. It's tempting to think that a "debt jubiliee" on (for example) student loans would "solve the problem," but this is not a pain-free solution: the $1 trillion in student loans are someone's assets, and the "someone" is not necessarily a banker or billionaire: it might be the pension fund that is paying Mom or Dad's pension.

US Government Proposes Law Making It Illegal For Them To Kill You


Does a free society lead the world in prison population?
by Simon Black
Last Friday, US Congressman Dennis Kucinich introduced HR 6357, a bill which aims to ‘prohibit the extrajudicial killing of United States citizens’ by the federal government. In other words, in the Land of the Free, they need to pass a law to prevent the government from indiscriminately murdering its own citizens.
Now if this doesn’t give one reason to pause and consider the distortions of liberty that have taken place in western civilization, I don’t know what will. Think about it:
  • Does a free society send government hit men to eliminate anyone they perceive to be an enemy of the state?
  • Does a free society have hundreds of police agencies, each with the authority to deprive a man of his life, liberty and property in their sole discretion?
  • Does a free society have hundreds of thousands of laws, codes, rules, regulations, and policies which effectively criminalize nearly every aspect of one’s existence?
  • Does a free society lead the world in prison population?
  • Does a free society hunt down criminals and terrorists by treating its citizens like criminals and terrorists?
  • Does a free society tell its citizens what foods they are / are not allowed to consume?
  • Does a free society steal your money at gunpoint to buy bombs that they drop by remote control on brown people in faraway lands?
  • Does a free society debase its currency and plunder the purchasing power of its citizens?
  • Does a free society saddle unborn generations with obligations they never signed up to bear?
  • Does a free society award near total control of the economy, the money supply, and everything tied to it, to a tiny elite few?
  • Does a free society brainwash its citizens into believing that they live in a free society? (at least the Chinese know they’re not free…)
Ask yourself, are you really living in a free society? Are you free? If not, why not? What else could possibly be more important?
It takes courage to answer honestly. But once you realize the truth and begin to see the system for what it is, it can be a liberating and life-changing experience.
You’ll find that there are places where you can live free in this world. There are ways to preserve your dignity, your privacy, your livelihood. You’ll find that you can build great camaraderie and mutual trust with like-minded souls because you share the same values, not the same color passport.
My guess is that you’re reading this because you’ve already started down the road to freedom. But you might feel alone… intellectually isolated in a sea of automatons.
You’re not alone. More and more people are waking up every day and beginning to realize the incredible fraud that has been perpetrated against them. When enough of them figure it out, this system will be finished.
That’s why I fundamentally believe that today is one of the most exciting times to be alive since the French Revolution. And we’re just getting warmed up.
If you have any friends or loved ones who still exemplify that self-deluded, bombastic serf mentality, I encourage you to pass this along to them… and challenge them to answer honestly.

The recovery-by-stimulus model has failed across the board


With Most Of Europe Still On Its Back, Sweden Tries Policies That Actually Work
By Matt Kibbe
The headlines from across the pond read “Europe Rejects Austerity” as the French and Greeks elected socialists and even some neo-national socialists to office. These new officials have promised tax rates as high as 75 percent on millionaires, and have vowed to continue government spending unabashed in the wake of staggering levels of debt and anemic economic growth and persistent double- digit unemployment. However, there is one finance minister in one European nation that is bucking the trend, and, instead of ridicule and failure, he’s been named Europe’s best finance minister by the Financial Times. He’s not from Britain or Germany and certainly isn’t Greek. He isn’t some old fat cat in a suit either. In fact he’s famous for rocking a pretty awesome ponytail and gold earring. His name is Anders Borg and he’s Swedish.
That’s right, the European nation famously stereotyped for having aggressive taxation to fund an omnipresent state has actually decided that in response to the Eurozone crisis and the continued effects of the global economic downturn, or “Great Recession”, that it’s time to ease up on taxes and reduce the size of government. While Sweden is not technically in the Eurozone, as it does not use the Euro as currency, it has been drawn into the financial mess of the Eurozone by sheer proximity. Unemployment in 2011 was north of 7.5 percent and GDP growth was anemic at .4 percent projected for 2012.
While the rest of Europe and the United States have gone on massive spending sprees fueled by government borrowing and tax hikes, Sweden took a different approach. In the Spring 2012 Economic and Budget Policy Guidelines, the Swedish Government and its Finance Minister, Anders Borg, have laid out a plan that is focused on lowering taxes. Their rationale? “When indviduals and families get to keep more their income, their independence and their opportunities to shape their own lives also increase.”

The canary in Merkel’s coalmine


Angela Merkel's Bismarckian Euro Diplomacy
By Matthew Melchiorre
German Chancellor Angela Merkel seems to be channeling her 19th century predecessor, Otto von Bismarck, in a striking way; engineering a diplomatic balancing act wrought with internal contradictions. Even as she seeks to placate anxious Southern European governments with bailouts, she steadfastly rejects the idea of common European debt known as Eurobonds. Her delicate strategy, like Bismarck’s, seems destined to suffer a tragic fate. Moody’s downgrade last week of Germany’s credit rating outlook signals that time is running out.
Bismarck devised an elaborate system of overlapping treaties and pacts to support Germany’s rise to power while he isolated Germany’s principal rival: France. Similarly, Merkel is committed to preserving German power through support of greater European integration, yet she is equally committed to avoiding measures that would place a permanent burden upon Germany’s economy through common European debt.
Eurobonds are a scheme worth fighting against. Their implementation would signal German support of profligate Eurozone governments in perpetuity. Proponents of a common debt argue that there would be new stringent rules, such as sovereign risk-based borrowing limits enforced by the threat of expulsion, preventing countries from running excessive deficits. But this is fantasy.
Europe has already tried making rules to keep debt under control, and failed. The European Union created the Stability and Growth Pact (SGP) in 1997 to keep annual deficits under 3 percent of GDP and debt-to-GDP below 60 percent. The agreement even called for sanctions against rule breakers. Yet when France and Germany became the first violators in the early 2000s, EU officials simply changed the rules.

Wednesday, August 8, 2012

It's A Matter Of Trust


Bubble, Bubble, Toil & Trouble
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” – Lord Acton
by Jim Quinn
Who do you trust? Do you trust the President? Do you trust Congress? Do you trust the Treasury Secretary? Do you trust the Federal Reserve? Do you trust the Supreme Court? Do you trust the Military Industrial Complex? Do you trust Wall Street bankers? Do you trust the SEC? Do you trust any government agency or regulator? Do you trust the corporate mainstream media? Do you trust Washington think tanks? Do you trust Madison Avenue PR maggots? Do you trust PACs? Do you trust lobbyists? Do you trust government unions? Do you trust the National Association of Realtors? Do you trust mega-corporation CEOs? Do you trust economists? Do you trust billionaires? Do you trust some anonymous blogger? You can’t even trust your parish priest or college football coach anymore. A civilized society cannot function without trust. The downward spiral of trust enveloping the world is destroying our global economy and will lead to collapse, chaos and bloodshed. The major blame for this crisis sits squarely on the shoulders of crony capitalists that rule our country, but the willful ignorance and lack of civic accountability from the general population has contributed to this impending calamity. Those in control won’t reveal the truth and the populace don’t want to know the truth – a match made in heaven – or hell.
“Most ignorance is vincible ignorance. We don’t know because we don’t want to know.” – Aldous Huxley
The fact that 86% of American adults have never heard of Jamie Dimon should suffice as proof regarding the all-encompassing level of ignorance in this country. As the world staggers under the unbearable weight of debt built up over decades, to fund a fantasyland dream of McMansions, luxury automobiles, iGadgets, 3D HDTVs, exotic vacations, bling, government provided pensions, free healthcare that makes us sicker, welfare for the needy and the greedy, free education that makes us dumber, and endless wars of choice, the realization that this debt financed Ponzi scheme was nothing but a handful of pixie dust sprinkled by corrupt politicians and criminal bankers across the globe is beginning to set in. A law abiding society that is supposed to be based on principles of free market capitalism must function in a lawful manner, with the participants being able to trust the parties they do business with. When trust in politicians, regulators, corporate leaders and bankers dissipates, anarchy, lawlessness, unscrupulous greed, looting, pillaging and eventually crisis and panic engulf the system.
Our myopic egocentric view of the world keeps most from seeing the truth. Our entire financial system has been corrupted and captured by a small cabal of rich, powerful, and prominent men. It is as it always has been. History is filled with previous episodes of debt fueled manias, initiated by bankers and politicians that led to booms, fraud, panic, and ultimately crashes. The vast swath of Americans has no interest in history, financial matters or anything that requires critical thinking skills. They are focused on the latest tweet from Kim Kardashian about her impending nuptials to Kanye West, the latest rumors about the next American Idol judge or the Twilight cheating scandal.
Economist and historian Charles P. Kindleberger in his brilliant treatise Manias, Panics, and Crashes details the sordid history of unwitting delusional peasants being swindled by bankers and politicians throughout the ages. Human beings have proven time after time they do not act rationally, obliterating the economic teachings of our most prestigious business schools about rational expectations theory and efficient markets. The only thing efficient about our markets is the speed at which the sheep are butchered by the Wall Street slaughterhouse. If humanity was rational there would be no booms, no busts and no opportunity for the Corzines, Madoffs, and Dimons of the world to swindle the trusting multitudes. The collapse of a boom always reveals the frauds and swindlers. As the tide subsides, you find out who was swimming naked.
“The propensity to swindle grows parallel with the propensity to speculate during a boom… the implosion of an asset price bubble always leads to the discovery of frauds and swindles”– Charles P. Kindleberger, economic historian

"Vengeance Will Be Bitter"


The German Press Responds To Draghi
And, as expected, it's not happy. The punchline:
The central bank is to become subordinate to finance ministers in crisis-stricken countries. In Draghi's homeland Italy, such a situation was the norm for decades -- and the result was chronic inflation. Now, he is accepting a repeat of history. On the short term, it will create relief in the debt crisis. On the long term, vengeance will be bitter." 
More from Spiegel:
Germany has long been wary of ECB bond purchases and opposition has only grown since the Frankfurt-based central bank largely ceased buying sovereign bonds last year. Jens Weidmann, head of Germany's central bank, the Bundesbank, has been particularly vociferous in his criticism of bond purchases, saying they rewarded debt-ridden countries without demanding reforms in return. Draghi even mentioned Weidmann's opposition to the program in his Thursday press conference.
Still, the widespread resistance in Germany to ECB action, and to many other euro-crisis proposals that could increase German taxpayer liability, has painted Merkel into a corner. With the opposition in Berlin showing a decreased willingness to rubber stamp her euro-crisis measures and a growing rebellion within the ranks of her own government, her ability to respond to the worsening crisis may become increasingly limited.
German media commentators take a closer look at the ECB's approach to the crisis on Friday.
Center-left Süddeutsche Zeitung writes:
"The greatest challenge for ECB head Mario Draghi is to make it clear to the people of southern Europe that he will only help if they continue to make radical reforms to their economy. On Thursday he chose a clever dual strategy. He spoke of the possibility of bond purchases and other measures, but only if the governments in question fulfill certain conditions. In other words: there is no free money."
"It is not a problem that investors have reacted with disappointment due to their hopes for something more concrete. It is even helpful. Draghi's insistence on conditions shows that he is aware of the risks to taxpayers. It is also helpful that, in Jens Weidmann, he has a man in the ECB's Governing Council who is seen as a representative of the people in donor countries."
"The ECB Governing Council enjoys even less democratic legitimization than the European Council, which is why the ECB really should only offer temporary help. But it must offer help nonetheless as long as the euro zone is unfinished. If the government and the Fed in the US debated for months … following the Lehman Brothers bankruptcy in 2008, the global financial system would have collapsed."

Escalation of the Extortion Racket


Now It’s ‘The Dissolution Of Europe’ Not Just The Eurozone
By Wolf Richter   
It has been an onslaught. Eurozone heads of state, top politicians, unelected kingpins, and bureaucratic honchos threatened everyone in sight with the demise of the euro, or promised to do “everything” or “whatever it takes” to save it even if it violated treaties or the very foundation of European democracy. In between the lines, bit by bit, the mammoth costs of continuing the endless bailouts or of breaking everything to pieces finally oozed to the surface.
Sunday it was Italian Prime Minister Mario Monti, whose country, after years of living beyond its means, is suffocating under a mountain of debt. He needs the European Central Bank to print a trainload of euros and massively buy up Italian sovereign bonds to force their yields down and keep Italy financially viable—which is precisely what the treaties that govern the ECB don’t allow it to do, though the ECB had done it before, despite all-out opposition from Germany, including the resignation of ECB Council Member and Bundesbank President Axel Weber and ECB Chief Economist Jürgen Stark. After buying €211 billion in sovereign bonds, the ECB stopped in March. And since then, all heck has re-broken loose.
So Monti went on attack. The Eurozone bailout chaos and Germany’s resistance to ECB printing operations have created tensions that show “the traits of a psychological dissolution of Europe,” he told the Spiegel, a threat designed for German consumption—the latest in a series of escalating threats issued by politicians of debt sinner countries. And like his predecessors, he took it a step further than anyone before him.
Further even than Alexis Tsipras, the firebrand leader of Greece’s left-wing SYRIZA party, who’d threatened during the chaotic election, “If Greece doesn’t get its next loan installment, the Eurozone will collapse the following day.” But now comes Monti—and it’s no longer just the demise of the 17-member Eurozone but the dissolution of Europe. Europe as a whole. If the ECB doesn’t print whatever it takes to bail out Italy, “the foundations of the project Europe are destroyed,” he said.

As Liberty Fades, Contemplate The Wisdom Of The Olive Tree


Freedom like an olive tree takes many years to bear good fruit
By Bill Frezza
It’s easy to despair watching the flame of liberty flicker and die. To accept the sad fact that our Founders’ vision of limited government could not be sustained despite the constitutional straitjacket they so carefully designed. To lament the failure of the greatest experiment ever undertaken to secure the fruits of individual liberty under rule of law directed by the consent of the governed. To cry as democracy is slowly crushed under burdens of its own making, drowning in a tidal wave of spiraling debt, unfunded liabilities, and currency debauchery washing from the Old World to the New. To watch as redistributive entitlements ostensibly intended to alleviate the burdens of inequality, misfortune, sloth, age, and illness slowly strangle the goose that laid the golden eggs. To understand that Western Civilization’s finest days have passed.
And then, you contemplate the olive tree. One hundred years, they say, is how long it takes the olive tree to bear good fruit. Unimaginably hearty, these long-lived providers of versatile and wholesome sustenance are readily transplantable. Take an old and gnarly trunk shorn of its limbs and branches, bundle it off to someplace new, give it water and peace, and it blossoms again.
But only if the soil and climate suit. Olive trees won’t grow in some places.
Freedom is like an olive tree. It, too, takes many years to bear good fruit. But once it does it can provide versatile and wholesome sustenance for generations. Born with an implacable will, freedom transplants itself nestled in the bosom of every seeker of new soil and climate that suits. Such seekers may wander for years, but once freedom finds a place to root, it grows to welcome all. Take an old and gnarly people, bundle them off to someplace free, give them rule of law and peace, and they blossom again.
But like the olive tree, freedom won’t grow in some places.

There's No Mystery To Slow Economic Growth


Progressives Are The Problem
Saul Alinski
By Peter Ferrara,
The Big Picture Lesson of the 20th century was that capitalism works and socialism and communism don’t.  The rest of the world learned that lesson far better because they and their close neighbors suffered far more with the socialist and communist progeny of Saul Alinsky’s first radical. But America should know better because it has enjoyed most the workers paradise of capitalism.
Yet those who call themselves Progressive, a polite, Americanized word for Marxist, refuse to accept that obvious conclusion.  That is why our politics have become so nasty.  The Progressives know they can’t win a debate based on reason.  So they turn to name calling, demonization, ostracism, anything to distract from and avoid a reasoned debate.  Hence the widespread use of the term “dumbass” by pot smoking hippie Progressives in commenting on the reasoning of careful scholars that they disagree with, or the ubiquitous allegations that anyone who disagrees with them is lying, or bought off.
This reflects the despotic nature of the Progressive personality and philosophy.  Progressives most fundamentally are certain that they are so much smarter than the rest of us, and that they are so much more moral than the rest of us.  Because of that they are certain that they have the right to rule over the rest of us.  It’s a very anti-social attitude that the rest of us should not be expected to have to live with.
That is why they are not interested in reason.  They are interested in power, for themselves, over the rest of us.  In their view, they have the unquestionable right to rule, and the rest of us have the unquestionable duty to obey.  The last time America was authoritatively subject to that attitude was under the reign of King George III.  And, of course, you know what happened then (unless you are in public school).
That is why the Progressives are so fundamentally in rebellion against the U.S. Constitution.  That governing framework was designed to preserve the rights and liberties of the people, and to restrain the powers of government and of self-appointed, supposedly benevolent despots.  But if you are so sure you are so much smarter and more moral than everyone else, then the Constitution is an outdated, 18th century barrier to your imposition of your notion of the perfect society on everyone else.  That is why for over 100 years now, so-called Progressivism has been an open conspiracy against the Constitution, and so at its root treason.