The Atlas Question

The fate of the European economy matters because it will affect us.  Europe is teetering on the edge of a cliff over which it is likely to fall, the only question being how deep is the chasm.  To decide how to defend yourself you need to understand what is going on.

For those with a thirst for detail, the following provides a summary of current events and asks the telling questions, including the rhetorical question, "Is Atlas about to shrug and topple the entire oh so heavy house of cards?"   http://www.zerohedge.com/news/germany-cries-europe-coming-our-money-greece-promptly-obliges  For the rest of you, read on.

Realists have already written much about the many trial balloons floated by European "leaders" but their proposals for the most part are ways to avoid the real problems they face, which are more government than they can afford and unsustainable debt.  If there were a solution acceptable to the insolvent countries, they would have implemented it already. But they continue to maintain that they should borrow more money and not restructure their economies to be self-sustaining. It just doesn't compute without massive money-printing.

As a solution (and a way to preserve the Eurozone as is), the "leaders" of Europe propose to have a European superstate which will control absolutely the finances of its member countries and which will be able to force any country to tighten its belt, even severely (envision some outside entity summarily raising the retirement age by 15 years).  They also propose as part of the same package to launch another bailout fund (The European Stability fund -- "ESM") with a blank checkbook/unlimited call for more funding from the member states, the practical effect of which will be to place Germany on the hook for forking over 32 to 56% of its GDP to bail out profligate spenders whenever bureaucrats in Brussels require it.  The same "leaders" propose to effect this scheme without securing approval from their countries' voters, which, fearing rejection, the "leaders" have studiously avoided.

The truth is that the proposed scheme is probably the only economic solution that could work if all of the countries make nice and the German people are all altruistic.  But they are not. Only 4 of 17 countries needed have approved the treaty required for the ESM. Putting it to the voters, especially in Germany, where the people have realized that they are being victimized, is problematic (they might vote it down) and not putting it to the voters is problematic (as in defiance and/or civil unrest).  Moreover, as the past two years demonstrate, as long as the insolvent countries can borrow money, they will postpone the day of reckoning.

This will not end well.  The markets are (slowly) beginning to realize that the frenetic posturing of Europe's "leaders" is just whistling in the dark.  No solution is forthcoming soon.

I have always recommended that you remain alert, nimble and quick but have avoided giving investment advice.  Since 2008 when I began writing this blog, the Dow-Jones index dropped 4,000 points to below 8,000 and rebounded back to over 12,000.  I warned that the drop was coming but I expected a slow recovery as businesses worked through a recession, which is only now beginning to end.  Little did I imagine that the Fed would take the unprecedented step of pumping up the the stock market, which it now freely admits as Fed policy, to influence investor perceptions and restore confidence.  The unintended consequence of implementing its policy was to destroy the market as a useful predictor of stock values and business and economic health.  Consequently, many investment professionals have become Fed watchers, relying less on balance sheets and business prospects of private enterprises and more on the public pronouncements of government bureaucrats and politicians.

And the professionals have become short time traders, gambling on government policy, rather than long term investors who hope to share in the real wealth created by productive businesses. There will come a time when the less sophisticated investing public finally realizes that they have been playing in a casino and that the cards have been stacked against them by the house.  How big a market drop will that realization trigger -- when and how fast?  I do not know but it could be soon -- or not, if they can find another can to kick.

Are We Following the Republics That Failed?

I was reminded lately of the Commentaries on the Constitution of the United States, a treatise  written by Justice Joseph Story and published in 1833.  A quote from this work appeared as the preamble to a commentary (http://www.zerohedge.com/news/guest-post-china-will-blink-and-gold-will-soar) on Zero Hedge: 

Republics are created by the virtue, public spirit, and intelligence of the citizens. They fall, when the wise are banished from the public councils because they dare to be honest and the profligate are rewarded because they flatter the people in order to betray them.

We are heirs to the wisdom of the ages from many quarters -- and who is listening?

Being aware of Justice Story's scholarly tome, which was the seminal work on our Constitution for many decades, I resolved to find it on the Internet and identify more of his words of wisdom.  

The entire work appears at http://www.constitution.org/js/js_005.htm

His Concluding Remarks, the final short chapter of the three-volume treatise, are well worth reading; but the first and last paragraphs, which end with the above-quote, are especially pertinent to our political environment today:

§ 1903. We have now reviewed all the provisions of the original constitution of the United States, and all the amendments, which have been incorporated into it. And, here, the task originally proposed in these Commentaries is brought to a close. Many reflections naturally crowd upon the mind at such a moment; many grateful recollections of the past; and many anxious thoughts of the future. The past is secure. It is unalterable. The seal of eternity is upon it. The wisdom, which it has displayed, and the blessings, which it has bestowed, cannot be obscured; neither can they be debased by human folly, or human infirmity. The future is that which may well awaken the most earnest solicitude, both for the virtue and the permanence of our republic. The fate of other republics, their rise, their progress, their decline, and their fall, are written but too legibly on the pages of history, if indeed they were not continually before us in the startling fragments of their ruins. They have perished; and perished by their own hands. Prosperity has enervated them, corruption has debased them, and a venal populace has consummated their destruction. Alternately the prey of military chieftains at home, and of ambitious invaders from abroad, they have been some cheated out of their liberties by servile demagogues; sometimes betrayed into a surrender of them by false patriots; and sometimes they have willingly sold them for a price to the despot, who has bidden highest for his victims. They have disregarded the warning voice of their best statesmen; and have persecuted, and driven from office their truest friends. They have listened to the fawning sycophant, and the base calumniator of the wise and the good. They have reverenced power more in its high abuses and summary movements, than in its calm and constitutional energy, when it dispensed blessings with an unseen, but liberal hand. They have surrendered to faction, what belonged to the country. Patronage and party, the triumph of a leader, and the discontents of a day, have outweighed all solid principles and institutions of government. Such are the melancholy lessons of the past history of republics down to our own.

****

§ 1907. If these Commentaries shall but inspire in the rising generation a more ardent love of their country, an unquenchable thirst for liberty, and a profound reverence for the constitution and the Union, then they will have accomplished all, that their author ought to desire. Let the American youth never forget, that they possess a noble inheritance, bought by the toils, and sufferings, and blood of their ancestors; and capable, if wisely improved, and faithfully guarded, of transmitting to their latest posterity all the substantial blessings of life, the peaceful enjoyment of liberty, property, religion, and independence. The structure has been erected by architects of consummate skill and fidelity; its foundations are solid; its compartments are beautiful, as well as useful; its arrangements are full of wisdom and order; and its defences are impregnable from without. It has been reared for immortality, if the work of man may justly aspire to such a title. It may, nevertheless, perish in an hour by the folly, or corruption, or negligence of its only keepers, THE PEOPLE. Republics are created by the virtue, public spirit, and intelligence of the citizens. They fall when the wise are banished from the public councils, because they dare to be honest, and the profligate are rewarded because they flatter the people in order to betray them.

How do we measure up after 180 years? Are we living up to the principles bequeathed to us by the Founders or are we following the republics which failed?

A Fence to Keep People Inside

Not so long ago, when someone criticized the USA, I would ask why people were beating down the doors to immigrate here, so much so that we had a massive illegal immigration problem and needed a fence to keep people out. It probably was the case, and still is, that the individual liberty we enjoy is a magnet for those foreigners who cannot succeed economically in their home countries.  So I find it strange that our political leaders would want to pass laws to inhibit people from renouncing their citizenship and moving away. 

The Brazilian-born co-founder of Facebook, who was raised in Miami, has renounced his U.S. citizenship and is moving to a more tax-friendly country.  Senator Schumer is outraged that someone who used the advantage of freedom that the U.S. provides to make billions is now moving away to avoid paying more taxes.  The Senator has introduced a bill designed to punish people who relinquish their U.S. citizenship and inhibit citizens from leaving. See  Why the Ex-Patriot Act is a Creepy Law.   Senator Schumer's bill is not unique or unprecedented.  We have had such laws since the Clinton administration. See U.S. Citizens One Step Closer to Becoming Tax Slaves.

Freedom is not a gift or privilege granted by the government.  There is no foundation for the argument that the freedom you enjoy obligates you stay here and pay the government for the privilege.  And that is not because you have already paid taxes for the time you were here -- although you have.  It is because freedom is an inalienable right that transcends government, a principle that is routinely  ignored, or has been forgotten, or was never learned. Isn't is interesting that the departure of productive people from the United States to such an extent that the government needs to force you to stay has begun relatively recently with the explosion of government and its assumption of omnipotence.

The Invisible Hand vs. The Heavy Hand

The field of political economy interested me at an early age and I have been immersed in for almost 50 years, studying economic regulation (L.L.M.) and practicing law in Washington before a number of the alphabet soup of administrative agencies there.   From the outset I was opposed to the notion of a political economy. --  i.e., a politically controlled economy -- similar to the lawyer who enjoys practicing criminal law but doesn't think crime is good idea.  Law school gave me an enriched opportunity to evaluate the the theory and practice of U.S. economic regulation and compare it to my carefully studied political and economic philosophy.   That evaluation confirmed my worst fears.

Now that the financial crisis has publicly exposed corruption,  crony capitalism and government overreaching, to the greatest extent in history, many people are outraged .  Some are even beginning to understand that giving politicians the power to control and influence the economy, is not a good idea. They are mad and are blaming the politicians and bureaucrats for running the country into the ground.  And they are protesting, loudly.  The mass media brush off the Tea Party movement and Oppose Wall Street as insignificant.  But they are symptomatic of a national disgust with the corrupt deficiencies and ineptitude of the Federal government and politicians' arrogant assumption of powers over people that the Constitution forbids.

Attempts by government to control an economy cannot happen if it is opposed by the people (who are, in fact, the economy).  And control is much easier if the people know of no reason to oppose it.  Even if that control is misguided and destructive, if no one knows about it or its negative effects, there ought to be little opposition -- or at least so the thinking goes.  So part and parcel of running a political economy (be it the USSR or the USA) is maintaining a firm grip on the information received by the people, and suppressing bad news and the people who spread it.  Thus the connection between political and economic freedom. Political freedom and economic freedom are interdependent.  Erosion of one is accompanied by erosion of the other.

For the above reason, while I mostly report about economic matters, I occasionally identify and report threats to our civil liberties,  especially those threats that can apply to people who want to speak out about against the government's actions in the realm of political economy.  Those threats have been around almost since the founding of the Republic (e.g., Google the Alien and Sedition Acts).  While many of them have been neutralized (primarily by the Supreme Court), some laws nevertheless have been placed on the books over the past two centuries that can be used and have been used to suppress and punish mere vocal opposition to government policies and actions.

Congress periodically proposes more such laws when a pretext arises that causes popular support for them.  Typically,  the argument for such laws is that a sufficiently sizable emergency exists that requires that people sacrifice personal liberty for more security.  Domestic crises and all wars provide such a pretext.  Examples of such crises are the recent financial crisis, Cold War, the War on Poverty, the War on Drugs and the War on Terror (Note that the term "war" is now being used as an action against a concept as distinguished from action against another nation.  A war against a concept is less specific and can cover a wider range of government activity. It also gives the President broad executive powers over domestic matters, powers that are more appropriate to a hot war.)  The passage of laws that threaten civil liberties has mushroomed in recent years as the powers that be ("TPTB)") have learned how to create a continuing crisis to frighten people into acquiescing to more government control and intrusion.  We are now experiencing a "forever war" and a continuing "national emergency."

I have been collecting articles about recent laws and government activity that threaten our civil liberties and economic freedom.  But because many of the articles are burdened with speculation, I have refrained from posting links to them, preferring to extract the facts and produce an objective study.  But the continuous stream of relevant articles has slowed the process. Here is the most recent, from USA Today: "Government Smears Journalists Who Investigate Government Corruption" The details in the article are more ominous than the title implies.   The alleged activities fly in the face of the Federal Government's own published information regarding the First Amendment, which makes worthwhile reading.

 

Too Long Without a Post?

The past 15 years have seen a good number of blogs develop from small beginnings into influential media powerhouses that took their creators from their "real jobs" to become professional bloggers. Sites like Breitbart.com, The Drudge Report, Pajamas Media, ZeroHedge and Global Economic Trend Analysis are now established sources of news and opinion visited daily by vast numbers of people.  Mike Shedlock discussed what it takes for commercial blogging success in New Economic Model for Bloggers, where he listed the why some blogs do not generate enough traffic for commercial success:

• Inconsistency in posting quality
• Inconsistency in posting frequency
• Content too similar to what the top few blogs post
• Site too new to attract a large following
• Blog author gives up

You will note that it has been over a year since my last post.  Clearly I have paid no attention to posting frequency and apparently am not interested in building traffic for commercial success.

This blog has limited objectives.  The first is to to provide the reader with a perspective that he might not find elsewhere by synthesizing a number of disparate opinions and news reports and making observations that might educate and enlighten readers, or to point out reports on the internet that the reader might overlook.

The other objective is to serve as a handy launching point for daily reading of the blogs and news sources which provide a useful understanding of economic events and social trends -- events and trends the understanding of which is important to your economic well-being.  If this site is used as a launching point, the reader will occasionally find my own contribution.  Many bloggers, even some of my favorites, post news and opinion that appear elsewhere and contribute little more of substance to their post.  I hope not to do that and remain content to defer to others who can devote their full time and attention to blogging.  As a retiree, I do not have a real job, but I have a real life.

The reports you can find in the links shown here in the right-hand column have, over the past year, quite adequately followed important events, trends and opinions, which include the unraveling of the European Monetary Union, the tragic potential of a global fiat monetary system, the rampant corruption in high places, the folly of unsustainable debt, and the continued slow conversion of the United States from a government that protects and respects liberty and achievement to one controlled by an elite political class and their cronies and which promotes government dependency and a servile population.