Friday, April 10, 2009

State of the Union

I haven't posted my thoughts lately as a variety of issues have precluded me from taking the time to share, but events are such these days that I feel compelled to speak out. I'm talking about the state of our Union and what it means for the average American citizen.

The simple fact of the matter is that the United States is bankrupt and, interestingly I think, it really doesn't matter who is responsible. After all if, for example, Bernard Madoff spends the rest of his life in jail, will that undo the disaster he wrought on his thousands of victims? So rather than waste time and energy talking about who is responsible for the mess we find ourselves in, consider this a time to reflect as it may be more profitable to ask why and how have we have come to this point in time.

Our founding fathers were keenly aware that the very nature of government was to expand and encroach upon every facet of the lives of its citizens so it limited the powers of the central government in the Constitution. They also knew that sound money, by definition, would protect the people by containing the central government.

Now consider this quote from Ludwig von Mises in his work: The Theory of Money and Credit.

"It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments."

Please read the entire article here.

Perhaps what we find most interesting is the display of outrage by Americans over the proposed $800 billion TARP I bailout during the Bush administration and even more outrage about the $180 million AIG bonuses. To be sure, this money doesn't exist and it will have to be borrowed by the Treasury and the obligation to pay it back with interest will fall on our children. And before this is all over, they will indeed be slaves. We have seen estimates of government spending and guarantees totaling over $13 Trillion dollars and that seems to have taken place somewhat under the radar. Does anyone recall any meetings of Congress to approve it? And let's not forget the $1 Trillion dollar shortfall of government guaranteed pensions. We don't think that's included anywhere.

And please note that this article is bipartisan. The Republicans and the Democrats are equally guilty of squandering the nations wealth and this has been going on for forty years.

It almost seems as though there is someone who decides when and where there will be outrage

But the bigger question is: where is the outrage about the un-funded liabilities of the US for Social Security and Medicare? That figure is $65-$70 Trillion dollars (see http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf)

The current spending pales in comparison when one considers what's coming at us. See the coming generational storm

And has anyone considered why the crisis hasn't been solved with all of the spending of money to which we have committed? Why is it that Henry Paulson, past Secretary of the Treasury and Timothy Geithner present Secretary of the Treasury seem so afraid, impotent, and inept? Perhaps Paulson was concerned about the $500(?) million dollars in options he had on Goldman Sachs that would go worthless and as Secretary of Treasury he had to escrow to avoid conflict of interest as former Goldman Sachs CEO if a bailout didn't happen.

Or, more to the point, perhaps it is simply that the money spent thus far on the banks doesn't even touch the real problem. Further, Paulson and Geithner don't even know for sure how bad the problem is. The reason for this is that the banks have invested heavily in derivatives of all kinds. This happened after the Securities and Exchange Commission under the Bush administration waved the reserve requirements for the big banks on Wall Street, which enabled them to extend their leverage from $10 for every $1 of capital to $40 for every $1 of capital. These derivatives are leveraged investment vehicles, for lack of a better term, gambling bets, "derived" from an underlying asset. If the asset is, say, a $100 Billion mortgage portfolio, that's a value of $4 Trillion dollars. And when that mortgage portfolio is sub-prime loans lent to people who had no chance to maintain them, the investment blows up.

But wait, there's more. Suppose said financial institution also bought CDSs (credit default swaps), which insures against default of a financial product (can you say AIG?). Now you have a total debt of $8 Trillion dollars all predicated on $100 Billion of bogus mortgages that should never have been made in the first place. And that's just one financial institution. And nobody really understands how far this has gone so they don't have any way of knowing the extent of the damage. Some estimates of the total derivatives in existence near $1,500 Trillion dollars. Truly insane. No wonder Geithner looks scared. So, in effect, he's simply buying time hoping that something will happen that prevents a financial Armageddon. And let's not forget, it was the Maestro, Allan Greenspan who sat before Congress advising them not to regulate derivatives, as they were a way to "spread risk"...Absolutely unbelievable.

But we digress. When looking at the how and why of our problems it should be intuitively obvious to even the casual observer that we would not be where we are if ours was a country that had stayed true to its Constitution. If our government had kept a policy of sound money, they would not have been able to commit to spend money they do not have and does not exist.

So this brings us to the question, how will we finance our spending? There are three ways, none of which are particularly attractive.

1. Increase taxes. Not likely as the American citizen is tapped out.

2. Borrow from foreign investors. The Treasury sells Treasury bonds to other nations. While this has been the way we paid for our deficits in the past, it's not likely to continue, primarily because the buyers of our Treasury bonds are starting to question their value and with good reason given that our spending has gone parabolic. In other words, they question our ability to repay with anything of value. Also, the rest of the world cannot, even if they wanted to, "finance" the insatiable debt demands now pouring out of the current Administration.

And 3. we just heard this announcement a couple weeks ago, the Federal Reserve will print the money to purchase the Treasury bonds that the rest of the world doesn't want to buy because they perceive them as worthless. This is called monetizing the debt. It's the beginning of the end as it leads into an inflationary spiral. If we have to "take up the slack" by buying our own Treasuries by printing money, that devalues our currency, the dollar. As a result, fewer buyers will show up for the next Treasury auction so the Federal Reserve will have to print more money to buy a greater share of the unsold bonds. Eventually, you have a Zimbabwe-like scenario where nobody is interested in our Treasury bonds and the US is printing the money to finance its spending entirely. That's called hyperinflation. Welcome to the banana republic of the USA.

In conclusion, we see our government leaders meeting for their G20 and their G8 meetings and, and one thing we can be sure of; they are united in a single resolve. With the loss of control over the issuance of money comes the loss of control over the political power they wield. Maybe that's not such a bad thing.

So you have to ask yourself, what are you going to do about all of this? Realistically, there is nothing any of us can do to change a government that, for the most part, is made up of evil people who care only about power and nothing about its citizens and are throwing us and our children into financial slavery. But there is something we can do to protect ourselves from our government. And I'm not talking about voting as, for the most part, the candidates are all of the same ilk.

From the link above...

"Inflation is the fiscal complement of statism and arbitrary government. It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism."

"The excellence of the gold standard is to be seen in the fact that it renders the determination of the monetary unit's purchasing power independent of the policies of governments and political parties."

"What all the enemies of the gold standard spurn as its main vice is precisely the same thing that in the eyes of the advocates of the gold standard is its main virtue, namely, its incompatibility with a policy of credit expansion."

And this quote is more timely than ever...

Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account, which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: 'Account Overdrawn.'
Ayn Rand

To Allan Greenspan's credit, he must have been intrigued by Ayn Rand's philosophy and most likely, she inspired him to write this.

Dear readers, the "day" has arrived. The bottom line is that while we may not be able to influence our government of "destroyers" that is hell-bent on the destruction of our currency and our nation, you can, in fact, defend yourself against the ravages of a government gone wrong. Buy gold and buy silver as your understanding permits.

Canadian Common Sense

Canadian-American Steven Crowder says it in ways that even a couch potato can understand. If you can get past all the gesticulations there are several important truths to be gleaned from Mr. Crowder's presentation:

RLC

Moral Beliefs and Proper Basicality

One of the arguments we've made here over the years is that if there is no God the notion of moral obligation becomes meaningless. Apart from a transcendent ground for moral right and wrong, there can be no duty to act one way rather than another.

Now atheistic philosophers, no doubt weary of having their theistic colleagues point out to them the nihilistic implications of their atheism, have adopted a strategy to answer this criticism of the attempt to develop an atheistic ethics or morality. A paper in Faith and Philosophy (available by subscription only) authored by Erik Wielenberg, makes the bold claim that moral beliefs are what epistemologists call properly basic.

Properly basic beliefs are beliefs which do not require that they be based on any other beliefs. We are within our epistemic rights to hold them even if we can give no reasons or evidential support for them. Traditionally, many philosophers held that such things as my belief that I'm experiencing pain-like sensations in my tooth (beliefs evident to the senses), that I had cereal for breakfast (memory beliefs), or that I exist (beliefs that are incorrigible or can't be wrong) are all properly basic.

It's self-evident, Wielenberg claims, that cruelty is wrong and kindness is right. There's no need to defend or justify that belief, and no one with properly functioning cognitive faculties would deny it. Thus, there's no need to ground moral beliefs in God or anything else. They're just brute facts and that's all there is to it.

This is a clever move, especially since some Christian philosophers want to assert that belief in God is also properly basic. Wielenberg compares the basicality of belief in God to belief that, say, cruelty is wrong. He then goes on to argue that if belief in God is properly basic then so, too, is a belief that cruelty is wrong.

Now if moral beliefs are indeed, properly basic then it will do no good to ask what the atheist bases his beliefs upon. He'll simply answer that there's no need to justify them or warrant them. Kindness is better than cruelty and that's the end of the matter.

But I'm not so sure. What does it mean to say that something is wrong if there is no God? Presumably it means that you shouldn't do it, but if we ask why we shouldn't, the answer is simply that you just shouldn't. Suppose I can harm someone to my profit and get away with it. Why is that wrong? Wielenberg replies that it just is, that most people agree that it is, and that no further reasons are necessary. This strikes me as inadequate and question begging.

Moreover, setting that aside, the problem is not so much with beliefs about this or that moral act but with the notion of moral obligation. An obligation is something which binds us to act. It must be imposed. If there is no God then what obligates us to behave one way rather than another? If one person is kind and another is cruel what obligates the first to behave the way he does and obligates the second not to behave as he does?

How can we have a moral duty if there is no transcendent moral authority to impose that duty and to enforce it? In lieu of God where does such a duty come from and why should I feel bound by it?

Finally, what can it mean to say that a behavior is wrong if there's no sanction for performing it? If there were no law enforcement or judicial system laws would be meaningless. If there's no God then to whom, or what, are we accountable for our acts? Society? Ourselves? Why should anyone care what society thinks, and if I impose the obligation on myself, surely I can release myself from it if it proves inconvenient.

If Wielenberg is correct, to say that cruelty is wrong is simply to say that a lot of people don't like it, but what people like and don't like can hardly be the ground for what's moral, much less for moral obligation.

The fact remains that moral obligation can only exist in a world in which there is a transcendent moral authority. Atheists can live just the same as theists in terms of their ethics, but if they chose to live otherwise they would be neither wrong nor right to do so. In an atheistic world, there simply is no wrong or right. There are just things that people, like any other animal, do.

RLC

The End of McCain-Feingold?

For those who follow such things there's a chance that the Supreme Court will do the right thing this summer and nullify McCain-Feingold. At least the editors at National Review are hopeful:

From its conception, the McCain-Feingold campaign-finance law was an assault on the First Amendment. Signing that unconstitutional bill into law, knowing it to be unconstitutional, was one of the worst moments of George W. Bush's presidency. Yet this malignancy lurks in the legal code, widely accepted, even celebrated. Now Deputy Solicitor General Malcolm Stewart has gone before the Supreme Court arguing that McCain-Feingold gives the government the right to ban books and films. He's right, it does. And for that reason, McCain-Feingold should be nullified.

At issue is a film called Hillary: The Movie, a documentary produced by the nonprofit group Citizens United, which did not wish to see Senator Clinton elected president. Because McCain-Feingold prohibits so much as mentioning a candidate's name in pre-election communications paid for by certain disfavored groups - unions and "corporations" - the filmmakers were informed by a federal judge that showing their work would constitute a crime. The filmmakers sued, and the case is Citizens United v. Federal Election Commission. Mr. Stewart is defending the government's ban on this film; the same rules that apply to a campaign commercial apply to a documentary film, his reasoning goes.

Justice Alito alertly pressed Mr. Stewart on that issue: If commercials and films are covered, how about books? How about campaign biographies? Yes, Mr. Stewart answered, the U.S. government is prepared to ban books, under certain circumstances, and is legally empowered by McCain-Feingold to do so. Jaws dropped, black robes fluttered.

There is in politics a principle referred to as the law of unintended consequences which states that meddling with things will almost invariably produce completely unforeseen and completely unwanted outcomes. McCain-Feingold was a well-intentioned attempt to limit the impact of big money on elections by banning political ads within 60 days of an election.

President Obama's Federal Election Commission lawyers argue, however, that the law must be interpreted as also covering films and books and that, if so, this interpetation gives the administration the right to censor films and ban books that mention a candidate and are in circulation 60 days prior to elections. National Review Online agrees that logic compels that the law be interpreted as covering films and books but argues that this is sufficient reason to overturn a law whose implications are so clearly at odds with the First Amendment.

NRO is right. The Court is expected to hand down its decision by the end of June.

RLC