A Call to Arms

September 28, 2008

America, we have reached the point of no return!  The government of the United States is about to embark on a course that will prove to be ruinous for our country.  This morning, Congress is jubilantly announcing a tentative agreement on the Wall Street bailout plan.  The plan, if approved this week by the full Congress and signed by the President, is a betrayal of the constitutional oath taken by our leaders.  It is a violation of the public trust and an extreme abuse of the fiduciary responsibilities that each member of Congress and the President has to the American people.  In short, any member of Congress who votes for the measure is guilty of treason and should be dealt with accordingly.

Why is voting for the plan a treasonable offense?  One reason is because it gives enormous power to the Treasury Secretary, who is an unelected official.  He will have power to buy deeply distressed mortgage-backed securities and other bad debts held by banks and investment firms with taxpayer money.  This includes bad debts held by foreign banks that do business in the U.S.  So essentially, by approving the plan the Congress will be handing over $700 billion of taxpayer money to an unelected official and an imperial president.

The whole thing reeks of fascism.  In all of the debate over the bailout plan, no one (except Ron Paul) has questioned whether the move is constitutional.  Congressional leaders are ignoring the will of the people where polls indicate that only thirty percent of Americans approve of the legislation.  The Treasury Secretary and the President are being given extraordinary new powers to act as economic dictators.  And the federal government through the plan is again turning to public debt to stimulate the economy to presumably put us back on sound economic footing.  As this government induced crisis worsens, Washington is acting more and more like Italy under Mussolini than America under Jefferson.

Without question, it is a government induced crisis.  For nearly twenty years, Alan Greenspan as chairman of the Fed embarked on a policy of easy money – low interest rates and expanding money supply.  He became the parent who just couldn’t say no to the American people.  His policies as Fed chairman led to the dot com bubble and bust in the late 90s.  To stimulate the economy after 911 he lowered the federal funds rate to an unbelievable one percent!  The rate stayed there for a year and was increased slowly for the next three years after that.  Rates were low enough for a long enough period of time to cause severe misallocations in the economy.  Thus, the housing bubble was born.  Of course, it also took the absolute stupidity of many Americans to get into debts that they could not afford – a concept that seems to be an implied right of American citizenship which is expressed through laws like the Community Redevelopment Act.  Lastly, by sprinkling in some fraud by lenders and borrowers alike you have the recipe for the disaster that looms over us today.

So, what do our esteemed leaders propose to get out of this mess?  They are proposing more of the same things that got us into this mess.  Passing a $700 billion bailout package is easy money to the politicians and says to the stupid and fraudulent that any mistakes or criminal actions you may have committed will be remedied by the deep pockets of the American taxpayer.  Congress will appropriate this money as if there will be no repercussions down the road.  This sounds very familiar to the mindset of Fed governors when they lowered rates to one percent.

Congress is also being as stupid as those Americans who got themselves into debt that they couldn’t afford.  The U.S. government doesn’t have $700 billion dollars to spend.  Hell, it doesn’t have $10.  It has $9 trillion in debt on the books with at least another $50 trillion in future obligations like Social Security.  At some point soon, foreign countries will stop loaning the U.S. money.  Our currency will become worthless and our standard of living will deteriorate.  Yes, debt does matter whether you are a business, a family, or a huge government.

Lastly, fraud is a component part of our leaders’ proposal to get us out of this mess.  We are being told that this “rescue” plan is for Main Street not Wall Street.  We are being told that somehow putting up huge sums of taxpayer money to buy bad assets is the best answer to get out of the mess that deregulation of the financial industry caused.  The lies go on and on.  Make no mistake about it, the politicians will pass this plan to help their benefactors on Wall Street – those that have helped them get elected.  It is a fraudulent use of taxpayer money.

If not the politicians’ plan than what should be done to remedy the crisis?  Immediately, the government should cease intervening in the crisis.  Let the market determine its own equilibrium.  Former private assets like Fannie and Freddie should be liquidated.  Government spending, especially military spending, should be reduced.  The budget should be balanced, taxes cut and regulations on businesses eliminated.  Any protectionist measures enacted by Uncle Sam should immediately be repealed. 

In the area of foreign affairs, the U.S. should bring troops home from bases around the globe and stop riling up hostilities with Pakistan, Iran, North Korea, Russia, and Venezuela.  These moves would free up funds to be used at home where they are needed and not on high-risk, no gain military adventures.

In conclusion, any member of Congress who votes for the bailout package is betraying their constitutional oath, violating the public trust and abusing their fiduciary responsibility to the American people.  On November 4^th they should be thrown out of office and not replaced with a clone from the other major party.  Instead, minor party candidates should be elected to return our government to “We the People”.  I urge all Americans to write letters to the editor, talk to community groups, friends and family, become involved in minor party candidate campaigns and vote your conscience.  The vicious cycle perpetrated on us by the politicians in Washington must end.  But it cannot end without the efforts of all of us.

In Defense of Capitalism

September 20, 2008

The economy of the United States is not a pure capitalist system.  We operate economically under what economists like to call a “mixed system”.   This is a system that combines elements of a market economy with elements of a planned economy.  It is because of this mixed economic approach that Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke determined that it was within their authority to nationalize Freddie, Fannie, and AIG in the name of stabilizing the financial markets.  In a purely capitalist system, these bailouts would have been impossible.  Quite frankly, the crisis that caused those bailouts to happen in the first place would not have happened if we were a pure capitalist country.

That is not to say that capitalism is perfect.  But, in the current environment we must brace ourselves against the endless onslaught against the system which has made our country number one economically for some time now.  You see the politicians are really just poor sports that have never grown up and never like to admit fault for anything.  McCain, Obama, members of Congress, and the Administration will babble on about how the greed and unbridled actions of others are the culprits for the subprime crisis.  They will talk tough about how they are going to go after the bad guys and bring them to justice.  They will propose new regulations to prevent this from ever happening again.  In short, they will attempt to socialize us to believe that only a capitalist system with the ruling elite (themselves) in charge is good for the country.  They are all liars and are hereby permanently banned from the shrine of Free Market Economics.

Throwing out accusations and speaking in vague generalities is easy.  That is what the politicians do all the time.  So instead, let’s look at some examples of where capitalism has been blamed for a crisis that the politicians actually started.  We have all heard about the greed and lack of regulations that caused the savings and loan crisis of the 1980s.  But, it is never mentioned by the politicians how the crisis came to be in the first place.  For that we go back to the year of my birth, 1964.  Lyndon Johnson, the patron saint of the welfare/ warfare state, had just begun to rebuild that institution on our shores.  With the passage of his so called “Great Society” and increased funding for a military conflict in Southeast Asia, the United States government, through the Federal Reserve Bank, printed money over and above the limit mandated by the gold reserves held by the government at the time.  By the late 1960s, foreign holders of U.S. dollars realizing that their asset would soon be worth much less, demanded, as they were entitled to, an exchange of their devalued dollars for American gold.  The hemorrhaging of U.S. gold reserves that ensued was so great that Richard Nixon closed the gold window in 1971 to prevent a default.  He effectively opened the door to future wild spending by Uncle Sam. 

These actions by our leaders: increased spending and lifting the last vestige of the gold standard would set the stage for the savings and loan crisis.  Little did policy makers know at the time, that printing money to monetize debt was addictive and would eventually lead to inflation.  This was probably because most of them had never heard of the Austrian School of Economics and because some years later Richard Nixon declared that “we are all Keynesians now”.  Nonetheless, savings and loan banks through the 1970s played by the rules paying interest on savings accounts and providing mortgages to borrowers.  The problem came in the late 1970s when faced with high inflation from the spending binge the Fed had to increase interest rates to 21 percent in an attempt to control rising prices.  This hurt the savings and loan banks in two ways.  First, a government regulation that placed a ceiling on the interest rates savings and loans could offer to their depositors caused a transfer of funds from low rate savings and loan savings accounts to new higher rate money market accounts in other banks.   Second, savings and loan banks had much of their money tied up in low, fixed rate, long term mortgages.  As the Fed increased interest rates it made these mortgage backed assets virtually worth nothing.  Thus, government spending which forced the Fed to raise interest rates ultimately caused the savings and loan crisis.  By 1980, before deregulation, many savings and loans were already insolvent.  Politicians are disingenuous when they say the savings and loan crisis was caused by the greed of the bankers; it was caused by the misguided policies of the politicians of the time.

Now, flip the calendar forward a decade to the 1990s.  Through the decade, the “Maestro” Fed chairman Alan Greenspan, had kept interest rates artificially low while continuing to pump more dollars into the economy to keep the good times rolling.  By the end of the decade, we had the dot.com bubble.  Of course, we were told by Washington that this was the fault of greedy techies who were corrupt and had unbridled behavior.  At the end of the day, I didn’t expect Washington to come clean and admit culpability, but I did expect them to learn from their mistake so it wouldn’t happen again.

Then, it did happen again.  The “Maestro” lowered interest rates to one percent to stimulate the economy after 911.   In the meantime, Congress revised the Community Reinvestment Act, which cajoled community banks to make loans to bad risk borrowers.  With an implicit guarantee from Uncle Sam, Fannie and Freddie took on more and more mortgage loans.  With more money in the pipeline, laws forcing banks to make at least some bad loans, and moral hazard, the federal government had tied and given the noose to the financial community to hang itself. 

Again, like in the 80s and the 90s, the cause of the crisis according to the ruling elite is with those greedy bankers.  Again they are being disingenuous.  In the 1980s, Congress instituted the Resolution Trust Corporation to liquidate the bad assets of the insolvent savings and loans.  In the end it cost the taxpayers $150 billion.  Today, Congress is considering a similar approach to liquidate the bad assets of the insolvent financial institutions.  This time the costs will be in the trillions. 

The capitalist system is not perfect, but it is eons better than the bastardized economic system Washington has given us.  History has proven that the price of money is better determined by the market than a central bank.  History has also proven that a commodity backed currency not the political whims of politicians and financial bureaucrats is the best way to rein in the size of government, protect purchasing power and asset value, and in the end avoid catastrophes like the one we are about to encounter.

Fascism in America

September 14, 2008

Folks, we have real problems in this country.  You are probably thinking that I am going to talk about the endless wars we are fighting, the high incarceration rate of our citizenry or the economic collapse that is just around the corner.  Instead of discussing these issues directly, I would like to address the underlying cause of these problems – America’s slow but sure movement to fascism.

In 1944, the great journalist, John T. Flynn published the book “As We Go Marching”.  In the book, Flynn sought to nail down exactly what characteristics make up a fascist system.  He dissected Mussolini’s “state capitalism” and Hitler’s “national socialism” and found commonalities between the two systems – commonalities which together he used to form his definition for fascism.  There were many commonalities but in the interest of brevity the seven most important will be mentioned here.  Thus, according to Flynn fascism as it was practiced in Italy and Germany was a system where:  1. the government had powers which were unrestrained; 2. a leader, who was the dictator, had absolute power; 3. the characteristics of capitalism were allowed to operate; 4. it was the government’s responsibility to ensure that the capitalist system functioned at top capacity;  5. government used public debt to stimulate the economy; 6. the economy operated through the principle of syndicalism; 7. militarism and imperialism were imbedded in the system as a necessary means to employ the masses and further the goals of the state.  He concluded that ironically the United States had actually adopted these same practices to fight the scourge of fascism found in Italy and Germany.  An analysis of the modus operandi of the U.S. government today would yield the same conclusion. 

Beginning with the concept that our government has powers which are unrestrained, it is true that we have a Constitution that is supposed to rein in the power of all levels of government in the U.S.  But, when was the last time you heard any politician (besides Ron Paul) in this country mention the Constitution before government action?  Where is the Constitutional authority for the feds to take over Fannie and Freddie, broker the deal which sold Bear Stearns to J.P. Morgan, and wiretap without a court’s approval the phone lines of citizens?  Many times the Constitution takes a back seat to what the politicians believe are good intentions.  Good intentions are the problem; unrestrained power is the consequence.

George Bush more than any other president, except FDR, has built an imperial presidency.  He is in many respects a leader who has absolute power.  This absolute power has been granted not through military dominance but through political acquiescence.  In the name of homeland security through the so-called “Patriot Act” he has been allowed to expand the federal government’s ability to use wiretaps without judicial oversight; has made it far easier for the government to monitor private internet usage; has authorized “sneak and peek” warrants enabling federal authorities to search a person’s home, office, or personal property without that person’s knowledge; and has required libraries and bookstores to turn over records of books read by their patrons.  He has also been allowed to perpetrate an illegal war started under false pretenses.  The Democrats, who took back Congress on the pledge to end the war, are not even talking about it anymore.  More recently, the president exercised unconstitutional unilateral power by giving the Treasury Department the go ahead to nationalize Fannie and Freddie without even a congressional vote.  Does the move set a precedent for future nationalizations of private companies? 

No one can argue that the characteristics of capitalism do not exist in the United States.  Examples include the means of production and property being held in private hands.  It is also true that since FDR’s New Deal, the government has assumed responsibility for ensuring that our capitalist system functions at top capacity.  Of course this author would dispute that the government has been successful at this endeavor, but the point is that through the Federal Reserve Bank’s regulating the money supply, bureaucratic regulation, and the ability to bailout and nationalize private firms to protect the economy the U.S. government has acted in accordance with fascist doctrine to guarantee smooth functioning of our markets.

The fifth tenet of fascism mentioned above is government using public debt to stimulate the economy.  Currently, the national debt of the United States is $9 trillion.  This is a result of military spending, which we will get to in a moment, but also spending on social programs and projects to stimulate the economy.  This spending includes welfare programs, both individual and corporate, old-age pensions, earmarks to congressional districts, and stimulus checks.  Uncle Sam has wrongly adopted the view like the Italian and German fascist of the early Twentieth Century, that spending is the key to economic success.  Instead, like the Italian and German fascist states, it will prove to be the undoing of the economy.  Nevertheless, the fifth tenet of fascism is met.

Syndicalism is trickier to pinpoint in the United States, but it can be done.  Mussolini’s syndicalism involved the owners of business and their workers coming together in guilds to decide the issues of production, distribution, labor, and credit for their industry.  The closest we have come to this in America is probably through FDR’s National Recovery Administration (NRA) of the 1930s.  Businesses, which included both the owners and employees, were rewarded for compliance with NRA benchmarks by receiving a “Blue Eagle” which they could “proudly” display in their establishments.  The system was voluntary, but non-compliance could have resulted in government organized boycotts of firms.

Currently, syndicalism in the U.S. is a bastardized form of the traditional model of Mussolini’s.  Right now, at this very moment, company executives from Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup and Merrill Lynch are meeting with Federal Reserve and Treasury Department officials to decide how best to dispense with the troubled Lehman Brothers firm.  It is all being done behind closed doors and in the absence of employees.  Even though these two important facets of syndicalism are absent, the government appointed financial industry guild will decide this matter.  This is syndicalism nevertheless albeit American style.

Finally, tenet number 7 – militarism and imperialism are being used in the United States to employ the masses and further the ends of the state.  In 2007, U.S. military spending accounted for 45 percent of the world’s total!  Military expenditures have increased by 59 percent in real terms since 2001.  We are currently spending the largest amount of money on defense than at any other time since World War II.  Why has all this happened?  Certainly, the Administration would blame the so called “War on Terrorism”.  But it also believes like most administrations since the end of World War II that healthy military spending means a healthy economy – the more people that are working the more money that will be spent to sustain the economy.  Military spending is another reference to tenets 4 and 5 which say jointly that the government is responsible for sustaining the capitalist system through public debt.

Not unlike the militarism of fascist Italy and Germany, all of this military spending has to find a way to be used.  Imperialism is the natural outlet.  The United States has military bases in at least 60 countries.  She is fighting wars in two (Iraq and Afghanistan), threatening one (Iran), and carrying out extensive military operations in another (Pakistan).  All is done in the name of American security (an end of the state).  Really it is done for other ends of our state like to perpetuate an American Empire, punish states we do not like, and secure the flow of oil.  This imperialism represents the ends of our state because we have leaders who are ethnocentric, self-righteous, and greedy.

Without question, it is difficult to come to the conclusion that your country is perhaps no less fascist than Mussolini’s Italy and Hitler’s Germany.  It is historical fact that Mussolini killed endless opponents of his regime and Hitler sought to exterminate whole races of people.  Is the U.S. any less guilty for the deaths of over 1.5 million Iraqis because they were collateral damage of a war?  To rationalize ignoring the facts, some may even ask, besides genocide what is so bad about fascism?  The answer to that would be:  because it is not the government laid out in our Constitution; because a truly capitalist system rewards good decisions, punishes bad decisions and is for the good of the people not the state; because a small government with a balanced budget is the best way to ensure the rights of citizens and the value of its currency; and because militarism and imperialism are inherently immoral, wasteful, and historically have more often than not been one of the main causes of empire collapse.