Crisis and opportunity: Building a better mousetrap

Armageddon looting machine

By Ellen Brown 

Increased regulation and low interest rates are driving lending from the regulated commercial banking system into the unregulated shadow banking system. The shadow banks, although free of government regulation, are propped up by a hidden government guarantee in the form of safe harbor status under the 2005 Bankruptcy Reform Act pushed through by Wall Street. The result is to create perverse incentives for the financial system to self-destruct. 

Five years after the financial collapse precipitated by the Lehman Brothers bankruptcy on September 15, 2008, the risk of another full-blown financial panic is still looming large, despite the Dodd Frank legislation designed to contain it. 

As noted in a recent Reuters article, the risk has just moved into the shadows:

[B]anks are pulling back their balance sheets from the fringes of the credit markets, with more and more risk being driven to unregulated lenders that comprise the $60 trillion "shadow-banking" sector.

Increased regulation and low interest rates have made lending to homeowners and small businesses less attractive than before 2008. The easy subprime scams of yesteryear are no more. The void is being filled by the shadow banking system. 

Shadow banking comes in many forms, but the big money today is in repos and derivatives. The notional (or hypothetical) value of the derivatives market has been estimated to be as high as $1.2 quadrillion, or 20 times the gross domestic product of all the countries of the world combined. 

The Real Clash is Within Civilisations

Twenty years on, Samuel Huntington’s seminal essay remains misunderstood

The NSA Building & Casbah

By FRANK FUREDI

The aim of this slim volume of essays, The Clash of Civilisations? The Debate: Twentieth Anniversary Edition, is to commemorate the twentieth anniversary of Samuel Huntington’s controversial article, ‘The clash of civilisations’. It republishes the original article as well as essays authored by critics of Huntington’s thesis.

When the article was first published in the Summer 1993 issue of the journal Foreign Affairs, it was dismissed by many critics. They argued that Huntington not only failed to capture prevailing global trends but that he was also far too pessimistic about the future prospects for Western civilisation. In the aftermath of 9/11, attitudes towards Huntington’s article changed, especially in the United States. It is not difficult to see why: after the destruction of the World Trade Center, Huntington’s vision of a civilisational conflict suddenly appeared to offer an astute interpretation of the dynamic which was to underpin the ‘war on terror’.

However one views Huntington’s 1993 essay, there’s no doubting that it touched a raw nerve. His main thesis was that after the end of the Cold War, the world had entered a radically different era. He predicted that global conflicts would no longer be motivated by ideological or economic concerns, but by cultural ones. His argument was clear:

‘It is my hypothesis that the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. Nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilisations.’

The main strength of this thesis was to draw attention to the decoupling of ideological factors from global conflict. This was difficult for many to accept after decades of ideologically driven struggles, domestic and international. Yet Huntington’s focus on struggles between cultures did capture an important dynamic at work in the late twentieth century. He was right, for instance, to point out the significance of culture as a medium for the expression of conflict.

But his assertion that such conflicts will assume the form of civilisational clashes was misguided. Aside from the dubious status of civilisational narratives, it is clear that the defining feature of the contemporary world is that these divisions exist within society itself. When Huntington claimed that ‘civilisational identities will replace all other identities’, he appeared to overlook the fact that such identities are constantly contested within a civilisation itself. One possible reason why Huntington focused on civilisational struggles, and particularly on the theme of the ‘West versus the Rest’, was the difficulty he and members of the Western political elites have in openly acknowledging the depth of the cultural divisions within their own society, particularly in the US. There is a perceptible tendency – especially on the part of anti-traditionalist and anti-conservative commentators – to minimise the issues at stake in the so-called Culture Wars. The title of one such sceptic’s tome – ‘Culture War? The myth of a polarised America’ – vividly expresses this orientation.

The black hole of zero

Oscillation, Feedback, and Resonance

By Keith Weiner

I just saw this fascinating video of a bunch of metronomes that begin ticking out of sync with one another, but slowly line up until they all beat in unison. I really love the title slide where it says “NONLINEAR DYNAMICAL SYSTEMS”, how apropos! Watch the video, the outcome is counterintuitive.

The metronomes show some principles of a non-linear, dynamic system including periodic inputs of energy, oscillation, resonance, and positive feedback. These are key concepts in my series on the Theory of Interest and Prices in Paper Currency. In Part I, I discuss the assumption that the monetary system is linear and static. Later in Part III, I discuss periodic input of energy, oscillation, and resonance. In Part IV, I discuss feedback, both negative which damps a system and positive which runs away.

Our monetary system cannot be understood in terms of the quantity of money. It is convenient, tempting, and easy to assume that if the money supply doubles*, then prices should eventually double sooner or later. It was convenient for the Medievals to assume that if you throw a rock then it first flies straight until it sooner or later runs out of force and falls straight down. Both are errors of rationalism, of sitting in an armchair imagining how the world ought to be, how it should fit with preconceived notions.

A Shooting in Nice Exposes France's Crime Problem

A jeweler kills an escaping robber in Nice, and ignites a debate about how to handle crime in France 

By THEODORE DALRYMPLE

"Revenge is a kind of wild justice," said Francis Bacon, "which the more a man's heart runs to, the more ought law to weed it out." But what if that law, far from weeding it out, fertilizes and irrigates it by excessive leniency towards criminals?

In France the current minister of justice, Christiane Taubira, is determined to reduce the number of law-breakers sentenced to imprisonment, despite a recent steep rise in burglaries. By no means does all of the French public approve. Many want severe and unequivocal punishment of criminals, in the absence of which they approve—with varying degrees of reluctance or enthusiasm—of victims taking the law into their own hands.

This was illustrated to perfection recently in the case of Stéphan Turk in Nice. Just over a week ago, the jeweler, of Lebanese extraction, shot dead one of the two armed robbers who had threatened him with what looked like an automatic weapon. Mr. Turk pulled the trigger as they were making their escape, having relieved him of money and jewels. Mr. Turk was subsequently arrested and charged with voluntary homicide.

A page was set up on Facebook in support of the jeweler, and within a week it had accumulated 1.6 million "likes." There has been nothing remotely like this in France before: Evidently the case touched a very raw nerve. Some of the Facebook messages of support of Turk have been startling in their vehemence. "He should be given the Légion d'honneur," writes one supporter. "One parasite less," observes another. "No justice for them, just a bullet in the head. Sick of being bothered by little s—." Also: "It's deplorable that we should have to kill these scum ourselves." "The only thing I reproach the jeweler with is that he didn't get the other," wrote another of Mr. Turk's supporters.

These supporters don't really care whether Mr. Turk killed in self-defense or from sheer vengefulness. The former would be a defense in law but the latter would not be. Mr. Turk told the police that he shot twice at the motor scooter in an attempt to immobilize it, and it was only when one of the robbers turned to him in a threatening way with his automatic weapon that Mr. Turk shot him dead.

Mr. Turk, who has no criminal record, had no license for the gun and therefore was on the wrong side of the law when he used it. And if he really believed that the robbers had an automatic weapon with them, surely it would have been foolish to shoot at all, except to kill. It seems more likely that he acted on an entirely understandable angry impulse, which has now drawn strong support from jewelers and other shopkeepers from all over France, exasperated by such robberies, as well as the general public, who don't really care any longer about the niceties of the law.

For those on the other side of the leniency-versus-severity divide of the debate, Mr. Turk is a worse criminal than the initial robbers, for murder is a worse crime than robbery—even armed robbery. The left-wing newspaper Libération, having just reminded its readers that Mr. Turk's action was against the rule of law, did not hesitate in calling Mr. Turk a criminal and a murderer—though in the eyes of the law whose rule it had just extolled, he is still an innocent man.

Obama-Rouhani: lights, camera, action

Syria is a Russian "red line" - as important to Russia as Israel to the US

By Pepe Escobar 

The stage is set. By now it's established Iran's Supreme Leader Ayatollah Khamenei has given full authority to the new administration of President Hassan Rouhani to talk directly to Washington about Iran's nuclear program.

This happened only a few days after US President Barack Obama leaked that letters had been exchanged between himself and Rouhani. 

Rouhani's empowerment was first confirmed later last week by extremely credible former nuclear negotiator ambassador Seyed Hossein Mousavian in this op-ed published in Japan. Mousavian was Rouhani's deputy in Iran's Supreme National Security Council (SNSC) from 1997 to 2005. Then Rouhani himself expanded on it this Wednesday in an interview with NBC. 

It's crucial to consider the Supreme Leader's exact position. This past Tuesday, he addressed the elite of the Islamic Revolutionary Guards Corps (IRGC) in Tehran. [1] The key quote: "We don't accept nuclear weapons, not for the sake of the US or others, but because of our beliefs, and when we say that no one should have nuclear weapons, certainly we are not after them either." 

Khamenei fully endorsed Rouhani's diplomatic offensive, emphasizing - not cryptically - two concepts: "heroic flexibility", as in a wrestler sometimes giving way for tactical reasons but never losing sight of the rival; and "champion's leniency" - which happens to be the subtitle of a book Khamenei himself translated from Arabic about how the second Shi'ite imam, Hasan ibn Ali, managed to prevent a war in the 7th century by showing flexibility towards his enemy. 

Does that mean that a historic meeting between Obama and Rouhani next Tuesday on the sidelines of the annual UN General Assembly in New York is all but certain? No. Predictably, the White House has already exercised plausible deniability - as in Obama "not expected to meet" Rouhani. 

What the process implies though, is that Washington and Tehran should be talking, sooner or later, at the highest level. 

Watch the spoilers 
Crucially, Khamenei also told the IRGC, "It is not necessary for the guards to have activities in the political field." This implies they are out of the new nuclear negotiations, in a further confirmation of how the nuclear dossier has been transferred to the Foreign Ministry. Iran's Foreign Minister Mohammad Javad Zarif is the man in charge. He will be traveling to New York with Rouhani. Here is an excellent insight into his frame of mind. As for former foreign minister Ali Akbar Salehi, now appointed by Rouhani as the head of Iran's atomic energy agency, he told the International Atomic Energy Agency in Vienna that it was time to "end the so-called nuclear file".

Thomas Paine doesn't live here anymore

Spying and Lying

By Andrew P. Napolitano

When Edward Snowden first revealed the spying the NSA has been conducting on what was then thought to be only customers of Verizon, the government was embarrassed, but it reluctantly acknowledged that Snowden revealed a truth. He had, after all, displayed an accurate and faithful copy of a judicial order signed by a FISA Court judge directing Verizon to give billing information to NSA agents about its 113,000,000 American customers.

Not to worry, the government’s apologists offered, this is only telephone macro-metadata, meaning information about who spoke to whom, when they talked and for how long, and where they were when they talked, but not what they actually said to each other. When Gen. Keith Alexander, the head of the NSA, stated under oath at a House hearing that his spies lack the authority to capture content, he avoided addressing whether they have the ability to do so, because he knows they do. His boss, James Clapper, the director of national intelligence and a less finessed liar than the general, said under oath at a Senate hearing flatly that the feds were not gathering massive amounts of data about hundreds of millions of Americans, when he knew that they were. And President Obama himself has stated on a few occasions that the government “is not reading” your emails or “listening” to your phone conversations, even though he knows they can.

Since the essence of spying is stealing and keeping secrets, we should not be surprised when that essence is supported by deception and lying. But lying to one’s employers (the American people) is a fireable offense, and lying under oath (to Congress) is a criminal offense. And a government that lies over and over again to the people it is lawfully obliged to serve is not believable and leads to lawlessness.

Obama should have known better than to use Clintonesque language by denying that something “is” happening at the moment he is discussing it. In reality, Obama knows his spies have exceeded their authority under even a broad reading of the Patriot Act and the FISA laws and have grossly failed to comply with their oaths to uphold the Fourth Amendment.

Poor deluded fools

Party Politics

By mark steyn

Prowling my hotel room the other night, I discovered a copy of the latest Vogue, kindly provided by the management. So, after bringing myself up to speed on Jennifer Lawrence — a "girl on fire," apparently — I turned to a profile of Susan Rice. She was the girl sent to put out the fire, dispatched by the Obama administration to slog through all the Sunday talk shows the weekend after Benghazi and blame it on some video. In Sir Henry Wotton's famous formulation, an ambassador is a man sent to lie abroad for the good of his country. In the case of Susan Rice, a U.N. ambassador is a broad sent to lie to her country for the good of her man — viz., Barack Obama. Happily, it worked. A year on, the director of the video is still in custody, and Miss Rice is now national-security adviser. So she and Vogue were in party mood:

"It's a warm evening in June, and guests are assembling for a party she's throwing in honor of LGBT Pride Month at the penthouse of the Waldorf Towers, the official residence of the U.N. Ambassador. Actress turned humanitarian activist Mia Farrow, wearing blue tinted glasses, is one of the first to arrive. Within minutes she's joined by The New York Times's executive editor, Jill Abramson . . ." And soon things are swinging: "They mingle and sip sparkling wine in the elegant living room next to a framed portrait of Oprah Winfrey and First Lady Michelle Obama resting their heads on Rice's shoulders . . ."

Presumably Vogue subscribers are impressed by this sort of thing, but it would seem an odd opening paragraph for a profile of even recent U.N. ambassadors. Hey, maybe I'm wrong; maybe Vogue profiled cocktail soirées chez John Bolton attended by Andie MacDowell or Valerie Bertinelli, and with the great man photographed between Phil Donahue and Barbara Bush, or Merv Griffin and Mamie Eisenhower. Who knows? Out there, in a ramshackle outpost somewhere on the fringes of the map, brave Americans abandoned by their government are dying on a rooftop. But here in the metropolis the dazzling klieg-light luster of Mia Farrow and Jill Abramson plunges all else into shadow.

The Financial Zeitgeist

Τhe spirit of the times

BY JR NYQUIST

Ralph Nelson Elliott proposed the theory of the Grand Supercycle, which represents a period of relatively steady growth in the financial markets punctuated by a collapse. But an even larger view is possible, like that of Brooks Adams (the famous brother of Henry Adams and grandson of John Quincy Adams), who saw an even larger cycle of economic rise and decline. Then there was GeorgWilhelm Friedrich Hegel, who interpreted the movement of history as something more than a set of repeating cycles. Hegel described a phenomenology of mind producing successive changes in the “truths” that rule over us; for example, that we might pass from Adam Smith to atomization and then to a reaction against atomization.

But first, let us begin with a larger cycle view. Peter Chardon Brooks Adams (b. June 24, 1848) suggested that commercial civilizations are subject to predictable cycles. In 1900 Adams foresaw that New York would become the main hub of global finance. He also believed this would signal the beginning of the end of American civilization. In 1895 Adams wrote a book titled, The Law of Civilization and Decay, intended to prove that history is cyclical. His focus was on economic history.

Adams showed how certain decadent economic tendencies of ancient civilization (Greco-Roman) were already afflicting modernity by the 1890s. These tendencies included political centralization, devaluation of the currency; the growth of large cities with small farms being turned into large food-producing businesses, growing indebtedness, the rise of money-power and moneyed interests above all others. For Adams the destruction of civilization necessarily coincided with the rise of financial elites. Bankers and financiers inevitably replaced landed aristocrats as power-brokers. This signaled the collapse of old values in favor of naked materialism.

Adams seemed to be saying that the more we focus on material pursuits, the more shallow and wicked we become. Eventually, this shallowness and wickedness must result in an economic collapse. Strangely enough, our economic obsession may indeed be the grounds for our demise; the idea being that as men pay more and more attention to making money the civilization on which money-making depends becomes unhinged. That is to say, the ground of a solid economy is founded on something deeper and more fundamental than economics. Aristotle, perhaps, would have argued that success comes from the pursuit of goodness. With the realization of goodness, money comes of its own accord. But today, we have reversed the proper order. And this reversal is said to happen on a cyclical basis.

Student Indoctrination

“Give me four years to teach the children and the seed I have sown will never be uprooted.”

By Walter E. Williams

The new college academic year has begun, and unfortunately, so has student indoctrination. Let’s look at some of it.

William Penn, Michigan State University professor of creative writing, greeted his first day of class with an anti-Republican rant. Campus Reform, a project of the Arlington, Va.-based Leadership Institute, has a video featuring the professor telling his students that Republicans want to prevent “black people” from voting. He added that “this country still is full of closet racists” and described Republicans as “a bunch of dead white people — or dying white people” (http://tinyurl.com/lve4te7). To a student who had apparently displayed displeasure with those comments, Professor Penn barked, “You can frown if you want.” He gesticulated toward the student and added, “You look like you’re frowning. Are you frowning?” When the professor’s conduct was brought to the attention of campus authorities, MSU spokesman Kent Cassella said, “At MSU it is important the classroom environment is conducive to a free exchange of ideas and is respectful of the opinions of others.”

That mealy-mouthed response is typical of university administrators. Professor Penn was using his classroom to proselytize students. That is academic dishonesty and warrants serious disciplinary or dismissal proceedings. But that’s not likely. Professor Penn’s vision is probably shared by his colleagues, seeing as he was the recipient of MSU’s Distinguished Faculty Award in 2003. University of Southern California professor Darry Sragow shares Penn’s opinion. Last fall, he went on a rant telling his students that Republicans are “stupid and racist” and “the last vestige of angry old white people” (http://tinyurl.com/185khtk).

Wall Street, Banks, and American Foreign Policy

Wall Street, Banks, and American Foreign Policy

Murray Rothbard’s 1984 analysis of modern American history as a great power struggle between economic elites, between the House of Morgan and the Rockefeller interests, culminates in the following conclusion: “the financial power elite can sleep well at night regardless of who wins in 1984.” By the time you get there, the conclusion seems understatedindeed, for what we have here is a sweeping and compressed history of 20th century politics from a power elite point of view. It represents a small and highly specialized sample of Rothbard’s vast historical knowledge coming together with a lifetime devoted to methodological individualism in the social sciences. It appeared first in 1984, in the thick of the Reagan years, in a small financial publication called World Market Perspective. It was printed for a larger audience by the Center for Libertarian Studies in 1995, and appears in 2005 online for the first time.

Theoreticians Left and Right are constantly referring to abstract “forces” when they examine and attempt to explain historical patterns. Applying the principle of methodological individualism – which attributes all human action to individual actors – and the economic principles of the Austrian School, Rothbard formulated a trenchant overview of the Americanelite and the history of the modern era.

Rothbard’s analysis flows, first, from the basic principles of Austrian economics, particularly the Misesian analysis of banking and the origin of the business cycle. This issue is alsodiscussed and elaborated on in one of his last books, The Case Against the Fed (Mises Institute, 1995). Here, the author relates the history of how the Federal Reserve System came to be foisted on the unsuspecting American people by a high-powered alliance of banking interests. Rothbard’s economic analysis is clear, concise, and wide-ranging, covering the nature of money, the genesis of government paper money, the inherent instability (and essential fraudulence) of fractional reserve banking, and the true causes of the business cycle.

As Rothbard explains in his economic writings, the key is in understanding that money is a commodity, like any other, and thus subject to the laws of the market. A government-granted monopoly in this, the very lifeblood of the economic system, is a recipe for inflation, a debased currency – and the creation of a permanent plutocracy whose power is virtuallyunlimited.

In the present essay, as in The Case Against the Fed, it is in the section on the history of the movement to establish the Federal Reserve System that the Rothbardian power elite analysis comes into full and fascinating play. What is striking about this piece is the plethora of details. Rothbard’s argument is so jam-packed with facts detailing the social, economic, and familial connections of the burgeoning Money Power, that we need to step back and look at it in the light of Rothbardian theory, specifically Rothbard’s theory of class analysis.

Rothbard eagerly reclaimed the concept of class analysis from the Marxists, who expropriated it from the French theorists of laissez-faire. Marx authored a plagiarized, distorted, and vulgarized version of the theory based on the Ricardian labor theory of value. Given this premise, he came up with a class analysis pitting workers against owners.

One of Rothbard’s many great contributions to the cause of liberty was to restore the original theory, which pitted the people against the State. In the Rothbardian theory of class struggle,the government, including its clients and enforcers, exploits and enslaves the productive classes through taxation, regulation, and perpetual war. Government is an incubus, a parasite, incapable of producing anything in its own right, and instead feeds off the vital energies and productive ability of the producers.

This is the first step of a fully-developed libertarian class analysis. Unfortunately, this is where the thought processes of all too many alleged libertarians come to a grinding halt. It is enough, for them, to know the State is the Enemy, as if it were an irreducible primary.

As William Pitt put it in 1770, “There is something behind the throne greater than the king himself.” Blind to the real forces at work on account of their methodological error, Left-libertarians are content to live in a world of science fiction and utopian schemes, in which they are no threat to the powers that be, and are thus tolerated and at times even encouraged.

The Middle East and its elemental descent

What lurks beneath the prevailing chemical weapons trope, is the re-ascendant primacy of water

By Norman Ball 

The art of warfare ... will be vastly different than it is today ..."combat" likely will take place in new dimensions ... advanced forms of biological warfare that can "target" specific genotypes may transform biological warfare from the realm of terror to a politically useful tool. - Rebuilding America's Defenses: Strategies, Forces, and Resources For a New Century, Project for the New American Century, September 2000. 

As we will be wading through normative waters, I'll get to the deep end straightaway by suggesting it's hard to imagine a more sinister statement, albeit couched in the hopeful language of political utility, than the one cited above. 

As banality rendezvous with evil, eugenics manifests in militarized form. There is nothing "transformative" about gene-based weaponization unless one's real beef with ethnic cleansing all along was its surgical imprecision. Suddenly we discover ethnic cleansing without collateral damage was the elusive Holy Grail. Now there's a Strangelovian nightmare we can really pour our atavist hearts into. 

I cannot share enthusiasm for this hermetic ideal, the perfect bombing campaign of the future which, with almost Biblical prescience, skips certain houses while leaving others engulfed in flames. Such touted "advances" are not so much transformative as regressive. They champion a retrograde village mentality at the cost of the global village. The world is too small now to absorb parochialized retreat. 

Allow me to contradict myself already, by confessing in true nativist fashion, to a home team bias. I hope, over the intervening 15 years, that the military industrial complex has at least managed to perfect a nationalist "geno" strain that shields America's heterogeneity from incoming bombs with a "Made in USA" label proudly affixed. Not that we deserve such innovations. We certainly don't. Failing that, I'd like to see (hear) some sort of audible alarm system that alerts us when weapons of our own devise lurch suddenly into reverse gear. We should have Raytheon look into that. Even if we're undeserving of such discriminating firepower, Chinese bondholders, at a minimum, deserve the preservation of their investment. 

Wait, I hear something ... 

Beep ... beep ... beep ... 

"Keeping America in a state of tension and anticipation does not cost us anything but [organizing] dispersed strikes here and there. In other words, just as we defeated it in a war of nerves in Somalia, Yemen, Iraq and Afghanistan, we must afflict it with a similar war in its own home."- al-Qaeda leader Ayman al-Zawahiri 

Domestic cancers in government, finance and corporate America

Why Obama Allowed Bailouts Without Indictments

The following article by Janet Tavakoli is an excellent reminder of the extraordinarily destructive coup pulled off by financial oligarchs in fall of 2008, when the rule of law was suspended and total theft institutionalized. I have written many times about my experience on Wall Street when the bailouts happened. How I ranted and raved on the trading desk about how TARP marked the end of any semblance of free markets and that there was no turning back. How I was told to “take a walk around the block” to cool off.

All of the suffering and hardships the majority of Americans are experiencing today are directly related to the coup pulled off by the crony financial oligarchs in the fall of 2008, and all of the media and political minions that helped them do it. People realize we have become a Banana Republic and they have now lost all hope. That said, there should always be hope and we can certainly restore society to better days, but not until we have remove our domestic cancers from their positions in the highest offices of government, finance and corporate America. That is what we must peacefully achieve.  
Now here’s Janet Tavakoli:

In November 2008, President Obama was elected, and he was sworn in January 2009. The country was promised change and reform. Recently two democrats close to the top of President Obama’s administration made excuses to me for the lack of financial reform in the United States. Their separately related versions were remarkably similar, so similar they seemed scripted: 

The administration made a bargain, and I’m not sure it was the right decision. The world was teetering on the edge of collapse. There was a crisis of confidence. There would have been unimaginable consequences. So bad even your imagination can’t handle the truth? 

It was the lesser of two evils to let a lot of people get away scot free than to risk a collapse in confidence.  There were only two choices according to this narrative. 

It was better to let a lot of people get away scot free than to have the first African American president take on the establishment while the country was deeply divided and he needed agreement on big things like ending wars, health care, Supreme Court nominees (and LGBT rights). There were lots of battles without taking on the financial establishment.  It seems to me that reforming our financial system is a big thing. As for at least two of the narrative’s big issues: health care costs are zooming up, and it looks as if we’re rattling our swords for another military conflict. 

The president was elected in part on his promise to effect change on the really tough issues, and there was no better time than when the crisis was fresh, and he had a groundswell of popular support. 

The most amusing thing about all of this is that people wanted President elect Obama to stick it to the financial oligarchs. Instead, he gave them trillions and offered immunity. More from Janet:

Death of Birth, meet Man-Made Global Warming

Low Birthrate Scaremongering: Al Gore-Style Global Warming Hysteria From The Right Wing

By John Tamny

“…the whole of the earth’s surface forms a single economic territory.” – Ludwig von Mises, Liberalism, p. 83

Writing in the New York Times back in 2010, global warming fabulist Al Gore aggressively went after the warming skeptics. The former vice president wrote of the “unimaginable calamity” the earth faced for climate science deniers failing to heed his calls for corrective environmental action.

To support his apocalyptic claims Gore referenced a NASA report revealing the “the hottest decade since modern records have been kept.” Fair enough, but the Cato Institute’s Pat Michaels, one of those skeptical scientists whom Gore presumably decries, has more recently cited statistics showing that “we’re about to finish 17 straight years with no statistically significant warming in any of the annual global surface temperature records.” Whom should we believe?

The answer to the above is that it really doesn’t matter which side is correct. Better it is to simply rely on market signals to tell us whether or not global warming presents a real threat. Even if we assume that all the hysterical talk about warming from Gore et al is true, market indicators are strongly telling us there’s nothing much to worry about.

Indeed, as evidenced by all the demand for New York City apartments, along with Hamptons and Malibu beach houses, the presumed “calamity” that is global warming is nothing of the sort. If what Steve Forbes once referred to as a “massive human delusion” really were the threat that Gore says it is, the latter would show up in falling prices in the locales mentioned, not to mention an inability to insure properties in those same locations.

We're coming up on 1937

The long-term pernicious effects of Ben Bernanke's monetary policies have yet to be felt

By Martin Hutchinson 

Five years after the 1929 Wall Street Crash, the US economy was in deep trouble but beginning to enjoy a vigorous recovery from the depths of a very unpleasant depression. The rest of the world, on the other hand, with the notable exception of Britain, was mired in Depression and in several cases Fascism. 

This time around, five years after the Lehman crash, we have avoided the Fascism, but the world economy is recovering only feebly. In the 1930s, the US was again plunged into deep depression in 1937, an indication that policymakers had got it wrong. This time around, different mistakes have been made but the likely outcome appears to be very similar. 

There is still considerable discussion about the policy mistakes that converted the 1929 stock market crash into the Great Depression, but three failures stand out. First, the 1930 Smoot-Hawley Tariff zapped world trade just as it was in a fragile position, causing its volume to decline by 65% from the 1929 peak. 

Second, while the Fed kept interest rates low, they did not adjust properly for the decline in money supply caused by bank bankruptcies from late 1930 onwards. This caused a sharp decline in prices that made real interest rates very high - the debt deflation about which Ben Bernanke has nightmares. 

Third, in early 1932, when the depression appeared to be bottoming out, president Hoover forced through a massive tax increase, raising the top marginal income tax rate from 25% to 63%. Keynesians and Austrians, otherwise opposed in their policy prescriptions, can agree that this was a bad idea, giving the Depression another leg downwards to its unspeakable bottom, with real GDP 25% below its 1929 high. 

After 1933, there is less agreement. In 1933 the government threw darts at the US economy, removing the gold peg and instituting Fascist-type business regulations through the National Recovery Administration. Whether these worked or not, the economy bounced nicely in 1933-36 and seemed headed back to equilibrium, although real GDP was still well below the 1929 level in spite of a greater US working-age population and rapid productivity growth. 

Then recession unexpectedly hit again in 1937, and proved to be deeper than any post-war recession, with GDP falling more than 5% and unemployment rising sharply. Keynesians claim this was caused by a very modest move towards a balanced budget, which included minor further income tax increases and spending cuts, but from what we know now this policy move was too small to have had such an effect. Monetarists claim the Fed inappropriately tightened, raising reserve requirements and draining liquidity from the banking system. This may have been part of the cause, but again the modest cause appears too feeble to have had the large effect. 

The Boy Who Starved to Death In Public

Daniel Pelka’s death raises troubling questions about the state of social solidarity

By TIM BLACK

In March 2012, four-year-old Daniel Pelka, having been beaten and starved for months by his mother Magdalena Luczak and her boyfriend Mariusz Krezolek, was left, as he always was, in the unheated box room of his Coventry home. And it was there, on his urine-stained mattress, that he spent the final 33 hours of his miserable, short life.

This week, following the life sentences dished out to Luczak and Krezolek in August, a serious case review of Pelka’s death was published. What emerges from that document, and the case in general, is a disturbing conclusion: a young boy died in plain sight. The starvation, the visible bruises, the broken bones - none of this happened behind the mythical ‘closed doors’ of endless child abuse-awareness-raising campaigns. No, it happened in full view of teachers, nurses and other adults. He was starving to death in public. And no one seemed to have the wherewithal even to give him some food.

Taken together, the indications that something was wrong should have prompted someone in his social milieu to do something. This was the boy who came to school with a broken arm one week, black eyes the next. This was the boy who had been caught scavenging for food by teachers. This was the boy who was seen pulling a muddy, grit-peppered pancake out of a school bin, the boy who was seen retrieving the remains of a pear from the playground and desperately gnawing on it, the boy who used to try to steal food from other children’s lunchboxes. This was the boy who had become so thin by February 2012 that, in the words of one teacher, his ‘clothes were hanging off him’. And yet despite the signs that something was seriously wrong with Pelka, the adults with whom he was coming into contact with at school and at home failed to respond spontaneously, intuitively. In the words of Peter Wanless, chief executive of the National Society for the Prevention of Cruelty to Children: ‘No amount of training or form filling or processes in the world can replace the fact that when a grown adult, especially one in a position of trust… sees a skinny child scavenging for food in a bin, alarm bells need to ring and action needs to be taken. It’s simple common sense. But people didn’t trust their instincts…’

Wanless has it right: people did not trust their instincts. What should have been common sense – to see that there was a problem and help Pelka – was confounded. What should have been near enough spontaneous – to check what was wrong with the child eating sand – was stymied. And this indicates something rather profound: a breakdown in social solidarity. The adults here, from teachers to neighbours, were not responding to the sight of an emaciated child starving before their eyes, instinctively; they were not recognising their own humanity in a child who, it seems, was clearly suffering.

Deflation Vs Progress

Defining Deflation

By Jim Grant

A derangement of money or credit, a symptom of which is falling prices. Not to be confused with a benign, i.e., downward shift in the composite supply curve, a symptom of which is also falling prices.

In a genuine deflation, banks stop lending. Prices tumble because overextended businesses and consumers confront the necessity of selling assets in order to raise cash. When prices fall because efficient producers are competing to deliver lower-priced goods and services to the marketplace, that is called “progress.” 

An extreme example of a genuine deflation occurred after World War I. During the war, belligerent governments resorted to money printing to bridge the gap between income and outgo. In the United States, the Federal Reserve quashed interest rates and liberally extended credit to induce the public to buy war bonds. The result was soaring consumer prices—up 18% in 1918—and artificially low borrowing costs.

By late 1919, the inflated structure of wartime prices began to sag. In early 1920, a worldwide depression got under way. In the United States, the governor of the Federal Reserve Bank of New York, Benjamin Strong, confided that “[w]e must deflate.” Up went interest rates and down plunged commodity prices. From May to December 1920, the Federal Reserve’s index of 12 commodity prices fell by 40%. Between July and December 1921, a price index of 10 crops plunged by 57%. Wages and consumer prices registered substantial, though less dramatic, declines. By mid-1921, America’s depression had bottomed and recovery begun. Prices stabilized, and deflation ended.

In 2013, central bankers the world over define deflation as a fall in prices, no matter what the cause. Many central banks, including the Federal Reserve, the Bank of Canada, the Reserve Bank of Australia and - as of January 2013, the Bank of Japan - “target” a rate of rise in prices of around 2%, and they fret that a rate of inflation of less than 2% will somehow lead to deflation. The merits of this approach to monetary policy can be endlessly argued, but the fact is that it’s something new under the sun.