Back to Barbarism

Regnery Publishing makes a pretty penny putting out books written by conservatives which are, judging from the paucity of substantive negative reviews, read almost entirely by the choir. Although the appetite for books of this type appears to be significant, their corresponding value tends to be slight; one's progressive uncle is not going to see the light by reading After America. There's enough Obama bashing that an inattentive reader will be able to conclude that this is simply more political pap, meant to fire up the base for another meaningless election.

This is too bad, because Steyn's book is actually much more than that. Sure, it contains an obligatory plan to roll back Big Government, filled with the sorts of empty promises Republicans have reneged on for nearly a century. But Steyn's heart isn't in it: he tells us that this will prove "difficult", which is a little like explaining that Sisyphus has some hours of work to do.

After America highlights the recklessness of the present administration, but it does so by noting that "Barack Obama is a symptom rather than the problem." If the president does not value life, liberty and limited government, this is equally true of the citizenry that elected him. A government that steals from generations unborn to finance its profligacy and views entrepreneurs as annoying hindrances to the business of government is problematic. Yet it is only a manifestation of a much larger flaw: its citizens no longer value those things which—Steyn argues—have made America so great.

The book is less a defense of things American than it is a critique of the soft socialism typified by Great Britain and Greece. Since FDR at least, the US has sought to shed its Jeffersonian trappings for a Big Government patterned on those of Europe. This trend has only accelerated as of late, not simply under Obama, but also under Bush, the "compassionate conservative" who gave the American people Medicare Part D and the TSA, which now gropes granny lest it be found guilty of profiling.

Greece and Great Britain are both doomed, and for essentially the same reasons. Government debt is overwhelming demographic reality. The people have lost the will to thanklessly perpetuate civilization. Both have middling productive sectors, upon which a large parasitic class feeds. And what feasts! In Greece, public sector employees retire at fifty-eight, whereupon they receive fourteen monthly pay checks until death. That was the plan, anyway. With the Greek birthrate at 1.3 children per couple, the math doesn't work. One can only run a Ponzi scheme if there are ever more suckers from whom to appropriate funds—as the soon to default Greeks are about to realize.

Great Britain may actually be in worse straits: "The United Kingdom has the highest drug use in Europe, the highest incidence of sexually transmitted disease, the highest number of single mothers, the highest abortion rate; marriage is all but defunct, except for toffs, upscale gays and Muslims." And this was before the London riots. Technically this makes Steyn something of a prophet, as does his insistence that America will soon see its credit rating downgraded. The remarkable thing is not that Steyn can point out the obvious consequences of liberalism, but that so many remain oblivious even while its fruits are rotting before our eyes.

The paradox of progressivism is that the creation of a social safety net has rendered man ever more fearful of risk. Instead of starting a business or raising a family, corpulent westerners curl into the fetal position in the gentle hands of government. This is not the way of civilization: it is the path to barbarism, shortly coming to the post-American world near you.

UPDATE: As a commenter from Amazon pointed out, Steyn's publisher is Regnery, not Regency.

But he's unelectable!

In the newest poll from Gallup, Ron Paul does very well against Obama:

President Barack Obama is closely matched against each of four possible Republican opponents when registered voters are asked whom they would support if the 2012 presidential election were held today. Mitt Romney leads Obama by two percentage points, 48% to 46%, Rick Perry and Obama are tied at 47%, and Obama edges out Ron Paul and Michele Bachmann by two and four points, respectively.

This poll partially highlights the weakness of the president. It's not inconceivable that Obama declines to run again, allowing the Democrats to appoint someone--such as Hillary--who doesn't reek of failure.

But it also reveals that Paul is a stronger candidate than Republicans are willing to admit. Moreover, he does well among independents. This is not surprising, since despite his radical views, on two very key issues, he is in agreement with the American populace.

He is almost virulently anti-war. Neo-cons insist he is an isolationist, but rolling back the Empire does not an isolationist make. We've spent about one billion dollars on a curious mission to overthrow Gaddafi in Libya; even if it succeeds, we have no assurances that the new government will be any better. We have wantonly destroyed life and become poorer in the process, a reasonable summation of U.S. foreign policy.

Paul is also right about the pernicious influence of the Federal Reserve and the role it plays in monetizing U.S. debt. Comparatively few Americans understand the power wielded by the central bank, but that minority is growing. Moreover, Paul is fully capable of explaining to the American people the dangers of inflation and the wisdom of sound money. It's true that his view of limited government is not in complete accord with the American people, but he offers a way back to solvency, something no other candidate offers. However much the citizenry may pine for a soft socialism, it is economically untenable. I cannot promise that the people accept what Paul offers; nonetheless, he explains what they need--though not necessarily want--to hear.

Still, the good doctor's first and toughest battle will be to obtain the nomination. After that, we will find out if he is truly "electable".

Iowa straw poll

Let me offer a few quick thoughts. I don't think that it's worthwhile to put too much effort into breaking down the results: not only is it still very early in the campaign season, but it's pretty easy to do well in this event so long as one is willing to pony up the cash for tickets for one's supporters. This is actually reasonable shorthand for what Bachmann did.

Still, she has to be considered a winner here. The left has a visceral hatred of her, surpassed only, perhaps, by the same for Sarah Palin. As a libertarian, I don't care much for either lady, though from a foreign policy standpoint, Bachmann's views are less completely neo-conservative. These women are particularly loathed by the feminists. John Derbyshire's take on the matter, which I can't seem to find, is that women are not supposed to leave the reservation. The narrative has it that feminism has brought untold blessings to womankind--or at least those who avoided being put to death by their mothers. To identity oneself as a conservative or a Republican is to turncoat against the Democrats, purveyors of these essential blessings. That Bachmann and Palin are mothers only increases feminist rage. As Roissy put things:

There’s no better way to remind a hip clubgoing single chick in the city who loves to travel and sip pinot noir of her impending infertility and genetic obsolescence than with the image of a woman who’s chosen not to ignore her biological imperative in favor of playing the field indefinitely.

Critics of Palin and Bachmann insist that the women are not very bright. I've been less than impressed with Palin: not that she's necessarily unintelligent, but that she's not informed. She would have done well to spend her time reading books to increase her knowledge rather than waxing vapidly on Fox News. Bachmann appears to be smarter, though this won't stop the left from uttering endless bromides insisting that she, like every non-moderate Republican in history, is an imbecile.

Bachmann has thus emerged as a serious candidate. Hence she will face increasing scrutiny in the months to come. She's a polarizing figure, so her utility in an election depends on whether she can ratchet up more support among the tea partiers than she can convince Obama weary Democrats to punch the lever against her. She strikes me as a far more formidable candidate than others have supposed, though admittedly much can change in the next year or so.

Ron Paul was the other winner yesterday, as he finished just behind Bachmann. Most of the stories and commentary I have read have ignored Paul's accomplishment. I suspect that, just as in 2008, this will help Paul, as the perception that he is feared by the party elites--as indeed he is--reinforces the notion that he is different from the run of the mill politician.

One last point: it looks as if those party elites have drafted Perry, since it is becoming increasingly clear that Romney is not going to take. I have no idea why anyone suspects that the base will be receptive to Perry, but the elites were successful in getting people to vote for the lackluster McCain. It might seem, then, that a Perry-Bachmann ticket could be in the works, but Bachmann is a possible presidential nominee, whereas Palin only became so after she was plucked from obscurity by McCain.

None of the above should be taken as evidence that the republic is in anyway salvageable. The 2012 election is nothing more than political theater, but it succeeds wonderfully in that capacity, and therefore merits a modicum of attention.

Prospects for a U.S. monetary collapse

My understanding of the debt crisis has led me to believe that the United States, and, indeed, much of the world, is on the short track to economic disaster. I base this primarily on the insight of the Austrian school: that since accumulating too much debt caused the problem, attempts to incur more debt will only exacerbate matters. Secondarily, our political class seems incapable of doing anything to address this problem; I expect economic conditions to worsen until either the currency is rendered worthless by too much inflation, or austerity measures are adopted, whereupon we shall find ourselves in the midst of a depression.

Thus I read with interest a piece which claims that things might be less dire. The author attempts to refute some of the myths of the doom and gloom crowd. Alas, I remain unpersuaded. His debunking shall thus be subsequently debunked.

Purported Myth: "Printing Money Does Not Create Wealth"

Explanation: "The example I like to give is that the Sovereign US Government can start this totally useless agency, yet the money will eventually flow to those who create wealth. Therefore, printing can eventually lead to wealth creation...

If the new ear pickers go into their communities and spend it at local businesses, the printed money goes from useless employees, into the accounts of productive businesses..."

Rebuttal: As one of the commenters has pointed out, this is a classic example of what Frederic Bastiat calls the broken window fallacy. It's true that any money which the government prints will go into the economy, but it only adds to wealth creation by simultaneously subtracting from wealth creation. If a government worked spends a dollar, he may pay a producer, but he has taken that dollar from the citizenry who would have spent it on something else. One could similarly argue that thieves participate in wealth creation by robbing from the rich so as to spend on themselves, which is actually reasonable shorthand for most government spending.

Wealth is created through production. Redistributing the currency--which is what inflation does--can alter the productive process by ensuring that different goods are produced, but it cannot increase the amount of goods provided.

Purported Myth: "Businesses and Foreigners Will Stop Accepting US Dollars"

Explanation: For some reason it is just assumed that the marketplace will all of a sudden stop accepting paper US dollars...

The US Government has determined that taxes are to be levied on owners of property and services, and those taxes will only become extinguished in the form of paper dollars. Failure to submit to this monster will require time in prison. So under the motivation to not spend time in jail, citizens work tirelessly, offering labor and goods in exchange for paper dollars so they can feed the tax monster."

Rebuttal: While it is true that the government monopoly on money ensures that people will use the dollar even when they would prefer to use something else, this ignores the potential for a black market to arise when the currency depreciates sufficiently. Excessive taxation and regulation actually make it more likely that a black market will develop, because in addition to dealing with that which cannot be devalued through inflation, one will also be able to avoid paying government for the privilege of engaging in mutually beneficial exchanges.

Purported Myth: "America Will Soon Not Be Able to Afford the Interest on the National Debt"

Explanation: "Burkett prophesied that America, by the turn of the century, would have so much debt that they could not afford the interest on the debt. Since his book made this claim, the debt has doubled. Now the current doom and gloom crowd is saying, yet again, that we will not be able to afford the interest on the debt."

Rebuttal: No one knows how long extend and pretend will last. What is clear, however, is that the more indebted a nation becomes, the higher the interest rate the market will demand. In a matter of months, Greece went from a nation which was seemingly economically sound to one which could only take on more debt at ever increasing rates of interest. The speed at which this occurred was astounding, even to economic pessimists.

Momentarily, the United States is better positioned than Greece, partially because our debt levels are smaller, and partially because we've been able to suppress interest rates thanks to a Federal Reserve which has made a habit of monetizing the debt.

We are probably still a fair ways from Greece, though ultimately no one knows. What is clear, however, is that a nation which refuses to reduce its insatiable appetite for debt will find it harder and harder to find willing borrowers. I think it likely that the current monetary system will collapse before we reach this stage, but the pessimists are correct in their reasoning, and right to be concerned.

Purported Myth: "Paper Dollars Are Worthless and Backed By Nothing"

Explanation: "Dollars are just worthless pieces of paper. It has no value by itself and is today backed by nothing. I agree with this argument. Consider this though: Oil in and of itself is also worthless. It is just sticky goo that could ruin the environment if it ends up in the wrong place...

The event that causes worthless oil to be in demand is when a company turns it into gasoline. The event that causes worthless paper dollars to be in demand is the prosecution process for failing to pay taxes."

Rebuttal: The first paragraph is basically sound. The error shows up in the next paragraph. It's preposterous to pretend that a nation can jail the citizenry for failing to pay taxes without destroying itself in the process. America, like any other nation, functions because of a relatively small group of people who produce goods and provide them for others. These are the same people who are taxed by the government, and maligned for failing to do more for the country. Jailing these citizens is the height of idiocy, for it turns a producer into someone who acts as a drain on the economy.

It is true that the government can force citizens to use their currency, giving superficial support to the dollar. But it can only do so if it is willing to wage war against the productive class. Expect to see an increase in tax evasion in the next few years, in which case it will be very interesting to see what the IRS decides to do to such "criminals." It is difficult to envision a response that would strengthen the regime.

There is another point which our author misses. If the dollar cannot buy as much, it will become less attractive to work as an agent of the IRS. Thus in late Rome, the soldiers refused to tolerate the currency which had been mixed with base metals; so the wise emperor paid them in coins which had not been debased. Without employees willing to accept the government's money, the government has no one with which to force the citizens to accept that same money.

Purported Myth: "Every Fiat Currency System Eventually Fails"

Explanation: "I hear (and used to believe myself), that the fiat currency system is about to collapse because all fiat currency systems in history have collapsed...

The problem is, these proponents are comparing apples with oranges. Never in history has the entire world been on a coordinated, floating exchange-rate, fiat-currency, system. Therefore, do they really have anything with which to compare today's situation?"

Rebuttal: To answer the question, yes, we do: we have the graveyard of fiat currencies. Countless times in the past, governments have debased their currencies until the populace escapes to anything and everything else. Traditionally, this has been gold and silver, but it could be alcohol, or ammunition, or canned food, or diesel fuel. It does not matter. When the government is printing money so quickly that one cannot make money fast enough to spend it, people will no longer use it; at this point, the currency has been destroyed.

Part of the confusion from which our author suffers is that he assumes that because every central bank is inflating its currency, people have nowhere to turn. Now, it's true that historically, when the British, say, inflated, people could fly to the dollar, thereby checking the British bankers. But the absence of this check--that is, any currency backed by gold--actually makes it far likelier that people will abandon the dollar. The confusion comes because he thinks people have to begin to use something that is already a currency; on the contrary, whatever good people begin to acquire will take hold as the new currency.

Now Bernanke has a good deal of inflating to do until we reach this point, but history is very clear about what happens when we do reach it.

Purported Myth: "Printing Money Will Cause the US Dollar to Lose Reserve-Currency Status"

Explanation: "The US economy is still the biggest in the world by a large margin. The military, which we are not afraid to use, is the most powerful. Until another country holds title to either one of these claims, our reserve currency status will likely remain intact."

Rebuttal: At this point, the dollars status as a reserve currency is only tangentially connected to our economic and military power. In fact, it was not long ago that the U.S. dollar was, at least theoretically, backed by gold. Other countries value the dollar because they know they can turn around and get something else for it. As that something else diminishes, countries will begin to look elsewhere to sell their products. Moreover, while the U.S. will probably remain the nation's largest economy, its diminished purchasing power will further incentivize sellers to look elsewhere for customers.

I suspect that in the next several decades, we will see a world without a reserve currency per se. Regional currencies will develop, regions which will not correspond exactly to the present boundaries of maps. This will greatly reduce international trade--though piracy will see a boost--and thus diminish the goods available to the average consumer. This is unfortunate, but if black market activity reduces the scope in which governments may interfere, I see it as an essentially inevitable result. Moreover, while the interim period will be rife with bloody conflict, a world of small, homogeneous regions should prove more stable than have our gargantuan nation states.

Purported Myth: "If Money Printing is Good, Then Just Print Enough To Give Everyone $1 Million"

Explanation: "If printing is not a big deal, then why not just print away? The doom and gloomers jump to the conclusion that if I think printing won't cause the collapse of America, it must be a good thing. So why not seek more of that good thing? The answer is simple...

There is a limit to the productive capacity of the economy."

Rebuttal: The author insists he is not a Keynesian, so I'll take him at his word, but I do note a curious resemblance. I suppose I see all inflationary systems as similar in nature: printing money is good, but only to a certain point; that point cannot be clearly delineated, and any inflation which does not produce the desired effect will be decried as too small, but a theoretical upper limit is recognized.

Of course, if the government did give everyone one million dollars, every one of the myths above would come true virtually overnight, but setting that aside, I want to focus on the last sentence of his explanation. For while this statement is undoubtedly true, it essentially undermines his entire argument.

Earlier, we learned that printing money can create wealth. Here we learn that wealth is not limited by money, but by something else entirely. As I have said, this is correct, but if it is correct, then printing money can do nothing whatsoever to increase wealth. It can only, as I have said, alter the distribution of that wealth.

If inflationists wish to be taken seriously, they need to explain how much inflation is needed to salvage a depressed economy. Typically, the response is to demand more inflation when a jolt of easy money fails to awaken the sleeping patient. But until we can be told with certitude that we are not inflating too much, I am far from certain that it can be safe to inflate at all.

Purported Myth: "The US Dollar Has Lost 96% of its Purchasing Power - Thus Printing Makes Us Poorer"

Explanation: "Instead of looking at how many dollars it takes to buy a candy bar today compared to 30 years ago, I would challenge you to instead value the candy bar in hours of labor to obtain it. While it might take many more dollars to buy that candy bar, you get many more dollars for each 60 minutes of work. So even though the candy bar costs 1000% more, it may take you 30% less work now to buy it. Therefore, you are in fact richer, even though the value of your dollar does not go as far."

Rebuttal: This is a curious way of looking at the debasement of the currency. The issue at hand is not whether we are richer than our ancestors were decades ago, for this is undoubtedly true, but whether or not inflation has made us poorer than we would have been had the Fed left the money supply alone.

It should be obvious that the Fed has stuck it to the American people, or at least some of them. I've covered this before, but inflation is a tax on savers; the beneficiaries of inflation are debtors, as well as anyone who is politically connected, for they receive the newly printed money before its debasement has been discovered by the market.

Savers provide the capital with which producers make the things which we can then buy. Our tax code attacks producers, while our central bank attacks savers; a more idiotic system would be hard to implement. The establishment class in Washington, as well as their friends from the banks and corporations, have benefited tremendously from the wealth redistribution that occurs courtesy of the Fed. Concomitantly, the people have been harmed. While it is true that, in general, and excepting the present, we have been getting richer as a society, this should not distract us from the real wrongs the people have suffered through inflation. It is the height of absurdity to suggest that the people should be happy that they are a little richer than before, while the banks make money hand over fist, courtesy of a central bank which takes wealth from the people.

In short, things look very bad indeed. Much can change, and the pessimists may be wrong about the timeline, but a sober reading of the tea leaves demands concern. It wouldn't hurt to have some precious metals lying around, either.

Debt deal

It is finished--like the American Republic. There is no real surprise here, as anyone who follows politics could have foreseen that pigs would fly before Congress considered cutting spending.

No attention should be paid to anyone who talks about spending cuts. For as we shall find out, they do not exist in any meaningful sense.

The only interesting part of this story is how dreadful the eventual compromise turned out to be. Naturally, Republicans and Democrats will argue over which side won; what is clear is that the American people did not. Karl Denninger has the details:

Lie once again about "cutting spending." It does no such thing. It increases spending - every year. Bogus and outright-fraudulent "baseline budgeting" means that if they intended to boost spending $300 billion but only increase it $200, that's a $100 billion "cut." If you ran your household like this you'd be broke in a week. For the US, it will take a bit longer.

No tax increases. That's nice, but let's not forget that while the Democrats scream about the "Bush Tax Cuts" the FICA tax cut was theirs. Obama signed it. You cannot keep reducing income and increasing spending forever.

The cuts, fraudulent though they are, aren't even real anyway - and not binding either. There's nothing before 2013, which means a downgrade is almost certain. Further, raising the debt ceiling now for the whole among but allegedly finding the "cuts" over 10 years is an outright fraud by a ratio of 10:1.

A 2013 timeline for actual changes means nothing, since the next Congress is not bound by what this one does. Period.

What a flaming pile of excrement. The Republicans rejoinder will be that they could only do so much with so little power. This is an insult to the intelligence of anyone who understands how representative government works. Since the Republicans controlled the House they could have prevented the debt ceiling from being raised. It's possible Obama could have ignored the debt ceiling, thereby instigating a Constitutional crisis; but this doesn't negate the fact that the Republicans had power; they merely lacked the courage to use it.

Now it's true that the banks would have ensured that the market tanked and that the ratings agencies followed through on threats to downgrade the credit rating--itself a ridiculous farce--of the United States. In other words, refusing to raise the debt ceiling would have been politically painful. But that doesn't mean it would have been the wrong thing to do.

Republicans could have explained that a painful recession was the cost of our profligacy; going deeper and deeper into debt hasn't helped our economy, and it cannot, for sooner or later the piper must be paid. We can do the manly and honorable thing and endure a recession, or we can keep debasing the currency until the financial system collapses. Those are our two options.

The Democrats are insistent on pursuing plan number two. Bernanke will keep printing money until he collapses in tears, having realized that the logical end of Keynesianism is hyperinflation. At which point we'll have ourselves a nice recession anyway, albeit without a functioning currency.

The Republicans had a chance to explain the shortcomings of this plan; predictably, they punted. It's certainly possible, indeed, probable, that Americans would reject honesty from their elected officials. Alas, we may never know, because with one exception, Republicans continue to insist that the problem has gotten better because of this dreadful compromise. The party has sacrificed a chance, perhaps its last one, to be forthright, instead hoping that the electorate will continue to pull the lever for the lesser evil.

The Obama presidency has been little more than an embarrassing joke. He has done nothing to address the debt problem which, admittedly, he inherited from our previous charlatan in chief. But by exacerbating the crisis, he has made it his own. There is no Democrat in Washington who is concerned in the slightest about our debt woes. The party is far more concerned that somewhere, some bureaucrat may have to forgo a raise, or that the bankrupt entitlement system is meddled with in the slightest. So the American people will get no help from them.

But the Republicans have sold them out, too. They insist that once Obama is defeated, all will be well. Yet there is no evidence whatsoever that the Republicans will reduce spending even if they control Congress completely. As recently as the Bush administration, they did possess such control, whereupon they racked up record deficits.

It could be argued that the Republicans have learned their lessons from the Bush years. If so, I fail to see any evidence for this supposition. In fact, all the data points the other way. The Republican house dutifully kicked the can for Obama so that no one in Congress has to deal with the debt ceiling until after the next election. In exchange for this exercise in irresponsibility, the Republicans were bought off by non-existent cuts and slightly more meaningful ones at a much later date.

It will be well into 2013 until Congress will consider addressing our debt woes. They will have worsened by then, making it likely that Congress will simply kick the can again, as it always does.

At least the Republicans are being recognized for magnanimously giving Obama a nice deal, right? Oh, wait, Vice President Biden is castigating the tea partiers as terrorists. So in addition to gaining nothing for the American people, it's unclear what political capital was gained by Boehner's Faustian bargain.

During the next year and a half, I recommend stocking up on whiskey. For one, it makes a useful commodity in the case of a collapse in the nation's currency. For another, it is the only thing I have found that makes it possible to stomach the pusillanimity of our supposed representatives.

Government for the government

Presently, the national soap opera, which is to say, the debate over the debt ceiling, is providing much amusement. In order to hike the debt ceiling, the Republicans are holding out for meager "cuts" and--where have we heard this before?--no new taxes. The Democrats would like the debt ceiling to be raised more; they would also like even less significant reductions in future spending, coupled with increases in taxes, but only on the infernal rich--except, apparently, for the bankers who have been given billions of dollars in bailouts. This is to over-simplify the narrative somewhat; there appear to be at least a handful of Republicans who are seemingly serious about making actual reductions to the deficit, which hampers speaker Boehner's hope for a united front.

Missing entirely from the dog and pony show is any genuine concern for the fate of the American people. The Democrats would like to avoid having to raise the debt ceiling again before Obama attempts to win reelection. The Republicans would prefer that the American people are reminded often of Washingtonian profligacy so that blame is pinned on the president and his party. These stances make a certain amount of political sense, but they are indefensible from any other perspective.

If we consider the situation without pondering any political implications, a few things become clear. First, the United States is deeply indebted. Our ratio of debt to GDP is roughly one. It's good to be suspicious of GDP insofar as it takes into consideration government spending--government programs devoted to digging holes and refilling them would boost GDP--but the ratio between debt and GDP is a reasonable indicator of a nation's solvency. There is no magical ratio, up to which debt is tolerable, or beyond which debt is assured, but given ours at present, it is exceedingly likely that we will never be able to pay back our debt.

While it is certainly possible that I am wrong in thinking thus, it would be exceedingly imprudent to assume that U.S. solvency is assured. If default is not inevitable, it nonetheless must be considered a real possibility. Our debt problem is not new. It came into being with the creation of the Federal Reserve, the subsequent abandonment of the gold standard, and the slew of social programs which were enacted from FDR onward. The actions taken by the last several Congresses--such as the wars in Afghanistan and Iraq, legislation related to Medicare, TARP, stimuli, and so forth--have exacerbated the problem. This current Congress, then, can continue in the ignoble tradition of that venerable institution, or it can take actions which lessen the debt burden. This step would not be unprecedented, but it would be the first such action pursued in many decades.

What would such a step entail? We are told that a failure to raise the debt ceiling will ensure that the U.S. defaults. This is not true. Tax receipts are sufficient to cover interest payments on the debt with money leftover. Should the Congress fail to authorize an increase in the debt ceiling, only foolish and pernicious action by the President would lead to default.

Contrary to the nonsense emanating from Washington then, an increase in the debt ceiling makes default more likely. It is not in the interest of the American people to be burdened with more debt. Instead, the United States Congress must pass a budget which ensures that they are not dependent on debt to make ends meet. The Federal Government is projected to take in 2.1 trillion dollars in fiscal year 2011. This should be sufficient to cover our expenditures. To ensure that this is so, Congress need only do its job: make the cuts necessary to restore solvency. Instead, both parties are taking purely political positions which will do nothing to alleviate the debt crisis.

It is true that making these cuts will be difficult. Present revenues are insufficient to cover Social Security, Medicare and Defense. Hence, even if we scrap every other Federal program, we will need to trim one of the big three to eliminate the deficit. Yet, far from getting better, the problem will become more acute each and every year. Boomers will retire--senselessly I might add, given the nation's impending bankruptcy--putting more stress on Social Security and Medicare. Nor is Defense likely to be willing to take a haircut. Judging from right-wing talk radio, cuts to defense are as intolerable as tax hikes; the Democrats, meanwhile, under our Nobel Peace Prize winning president, have wars going with six countries--Afghanistan, Iraq, Pakistan, Libya, Yemen and Somalia. So the cuts will be difficult to make. Yet this, precisely the task to which our representative are supposed to be devoted, is furthest from Washington's mind.

I cannot say that I see a way out of this mess. We will certainly not grow out of it. Even supposing generous--read: dubious--rates of growth, our entitlement programs and our Empire are too expensive for an aging populace, dependent on Mexican migrants to replace aging boomers. The recession has technically ended, but it continues a world impervious to Keynesian economists.

In all probability, Washington will continue to try to avoid making any hard decisions; we will take on ever more debt, and the parties will try to blame the respective other; the Federal Reserve will purchase any treasuries the Chinese prove unwilling to take; the government will still be able to pay its bills; the people are compelled to make ends meet with depreciated dollars. So it works out for everyone, unless one happens to be a member of the American populace.

It is not the decline and fall that saddens me; as we well know, all good things come to end. No, the tragedy of the American experiment is that we have given no resistance to this great evil. Indeed, we have given it our sanction by continuing to vote for and elect people who care not a whit for us. If this indifference is not painfully obvious now, I cannot say when reality will impinge upon our splendid little fantasies. This grand experiment cannot continue if we are to be governed by those who concern themselves only with the attainment and retention of power. When one puts aside the minute political difference, this, more than anything, unites the two parties. The people are without a voice in Washington.

When lies end

"It will accumulate: moreover, it will reach a head; for the first of all Gospels is this, that a Lie cannot endure for ever." - Thomas Carlyle, The French Revolution

"As indicated in today’s policy statement, the economic recovery appears to be proceeding at a moderate pace, though somewhat more slowly than the Committee had expected, and some recent labor market indicators have also been weaker than expected." - Ben Bernanke, 7/22/11 Press Conference

If one simply points out that there has been no recovery, one is liable to be taken for a biased observer. Those who believe that things are bad--as indeed they are--fail to note--or so we are told--how much worse things would have been had the Federal Reserve and the U.S. Government not acted as they did. This is intended as a serious rebuttal. Yet the very impetus for doubling the monetary base, coupled with the largest stimulus program in the history of civilization, was the fear that without such drastic measures the world as we know it would have descended into violence and chaos. It follows then, that so long as the world stands, the stimulus worked. Only when the apocalypse is upon us will we be able to second guess the wisdom of recent monetary and fiscal policy.

This is convenient for the architects and advocates for said policies, but it's hardly a persuasive argument, especially since there is no proof that the collapse of the housing market would have resulted in Armageddon. Iceland did not pursue the same policies as the Americans, but--as yet--its citizens have not resorted to cannibalism or virgin sacrifice. Whether or not economic stimulus is helpful, then, we know that civilization may continue without it. We will never know how America would have fared had our politicians not proceeded to give billions to bankers and spend borrowed money on dubious political products. All we can say is that we did those things and that the economy is still doing very poorly. We cannot empirically verify that the policies of our government caused the economy to worsen--though we could demonstrate theoretically why it may have done so--but we can emphatically insist that the recovery has not been delivered as promised.

Ben Bernanke is an academic. Recently, he has learned that the neat theoretical world of Keynesian macroeconomics is quite different from the messy world in which he finds himself head of the central bank of the United States. Yet being an academic, it is unlikely that he will alter his beliefs in the theories on which he has expounded for many years. He knows that what he did was right and that the economy should be recovering. He also knows that the economy is not performing as expected. This disparity between reality and his theoretical models can be explained by temporary factors, such as "the aftermath of the tragic earthquake and tsunami in Japan." In fact, it has to be explained in this manner, for his theories cannot be wrong.

Bernanke also points out that: "consumers’ purchasing power has been damped by higher food and energy prices." He offers no word on what may have caused the prices of food and energy to rise, which is to say, he's not about to finger the Federal Reserve as the sole vehicle of inflation. His charts show that inflation is under control, so increases in food and energy prices must be... temporary.

Bernanke's problem is that temporary is becoming more permanent. The sycophantic media believes that he saved the global economy, so they will continue to give him the benefit of the doubt. But we are still something of a Republic, so the people believe their opinion about these sort of things matters. Most Americans have not heard of Bernanke; fewer still have heard of John Maynard Keynes, the defunct economist to whom the Federal Reserve Chairman is a slave. Yet they know when prices go up. They know when jobs go away--and when they don't come back.

Since both parties are enthrall to the corporations and banks at whose behest the stimulus was passed in the first place, prospects for a drastic alteration of fiscal and monetary policy are not good. Some of the tea party candidates show indications of an independent streak, but with the Republicans set to capitulate and raise the debt ceiling in short order, it's save to say that the moneyed interests who caused the housing bubble and also benefited from its bursting, still very much rule the United States.

Which brings us, at long last, back to Carlyle. There are very real limits to how long a lie can be told. In a sit-com, the truth is propounded by the end of the half-hour episode. In the real world, a lie can masquerade as truth for much longer, yet it will eventually break under the weight of its own contradictions.

The Government cannot forever print money for billionaire bankers, thereby impoverishing the rest of Americans, all while insisting that we are on the road to a recovery. I do not say this because I think Americans as a people are extremely intelligent and thus difficult to dupe. On the contrary, in our present state of torpidity, the flicking of television sets has caused us to be duped for a considerable period of time. Yet, as Louis XVI discovered, it is an unwise policy to expect that which is dormant to remain thus forever. Poke him enough, and even the laziest of dogs will awake and attack. And, although he often gives cause to make us forget, man is nobler than any beast.

One cannot mention Carlyle and the Revolution in France without clarifying one's position regarding the prospects of another. At present, the American people, or those that pay attention to these sorts of things, are distracted by the political circus in Washington. The conservatives labor under the illusion that ousting Obama will somehow right the ship of state while the left, with equal lack of sense, believes that handing over the Executive to a Republican would render significant harm to the nation. Comparatively few realize that electoral politics are a mere diversion at this late stage of the Republic. Once the people realize that they are powerlessness to affect reform through official channels, we move one step closer to revolution.

So, for awhile at least, we will remain as we are. But the lies are mounting, moving us closer and closer to a precipice. In a subsequent post, I'll try to flesh out this idea more fully, but for the moment it pays to watch the narrative as constructed by the media to defend government policies and the reality, insofar as we can grasp it, as documented by various marginalized media outlets. The tension between the narrative and reality will become more strained as the former is exaggerated to compensate for the inability of stubborn reality to conform. The days of these particular lies are numbered.

Newt so good with money

The loathsome Newt Gingrich has some bad news. His campaign is evidently over one million in debt. Were this an Onion article, we would get a quote from one of his campaign staff noting that this is good preparation for becoming president of a nation which is many trillions in debt. Alas, this is not satire, this is merely an establishment Republican candidate who is so inept that Fred Thompson is embarrassed.

With the notable exception of Ron Paul, none of the Republican presidential candidates have shown that they understand two very important things. First, the country cannot return to solvency by closing loopholes in the tax code and defunding Obamacare. Social Security and Medicare are both bankrupt; in the short term they can be financed through the general fund--so long as everything else is cut--but in the longer term, even this is unsustainable. Second, in addition to being extremely costly, the Empire foments hatred of the U.S., which is to say that endless wars are counter to the ends at which our country is aiming. Any candidate who professes to tackle out debt problem while leaving military cuts off the table cannot be taken seriously.

One last note. Since Ron Paul is no longer running for Congress, he could run as a third party candidate. I do not expect him to do this, as the primary intention of his campaign is to spread the message of liberty, but it is interesting nonetheless. When the idiot Republicans nominate someone else, Dr. Paul will be able to return to his home to be with his family in retirement--one that is well deserved for the only public servant for whom the appellation is not disappropos.

Unsound Roman money

The difficult task of explaining with exactness the utter demoralization of the currency at the moment when Diocletian ascended the throne cannot be here attempted. Only a few outstanding features can be delineated. The political importance of sound currency has never been more conspicuously, shown than in the century which followed on the death of Commodus (180 AD)...

Although the imperial coins underwent a certain amount of depreciation between the time of Augustus and that of the Severi, it was not such as to throw out of gear the taxation and the commerce of the Empire. But with Caracalla a rapid decline set in, and by the time of Aurelian the disorganization had gone so far that practically gold and silver were demonetized, and copper became the standard medium of exchange. The principal coin that professed to be silver had come to contain no more than five per cent of that metal, and this proportion sank afterwards to two per cent. What a government gains by making its payments in corrupted coin is always far more than lost in the revenue which it receives. The debasement of the coinage means a lightening of taxation, and it is never possible to enhance the nominal amount receivable by the exchequer so as to keep pace with the depreciation. - The Cambridge Medieval History Series, Volume I, pp. 39-40

Plus ca change... The series has been rewritten and reissued periodically, but my highly used copy is about one hundred years old, which is to say that it was written before the ascendancy of Keynesianism. Hence the historian recognizes, very clearly, that debasement does not work. This holds true whether the coins are being reforged with higher percentages of cheaper metal, or if the central bank issues more fiat currency: inflation is ruinous to economies.

No doubt Krugman would have had Diocletian debase his currency even more in order to stimulate the Roman economy and avoid a liquidity trap.

The lesson repeats through history. At some point, the government incurs various expenditures which cannot be funded through taxation, so it debases the currency to makes ends meet. Rather than impose austerity measures upon itself, it debases the currency further; if it persists, the currency becomes effectively worthless. Hence Diocletian began to accept taxes in the form of agricultural products, thereby unintentionally instituting the serf system.

There is no way of knowing if the Federal Reserve will proceed until hyperinflation sets in. I have very little faith in Bernanke's restraint, but the banksters who run our country will be reluctant to allow him to destroy the currency completely, so while inflation is a good bet in the near and medium term, unlike the decline of empires who follow late Roman monetary policy, hyperinflation is by no means inevitable.

The debt ceiling

Whatever one may think of our form of government, it is by all accounts amusing. The house Republicans, fresh off an electoral shellacking of the other faction of the ruling party, is holding the line on tax increases. This is unusual insofar as the right never holds a hardline on anything, but it is charming, albeit transient. On the other side, President Obama and the Democrats lament that the mean old Republicans refuse to consider tax cuts. The narrative, as always, is that the Democrats are concerned with the poor and the middle class while Republicans only care about millionaires and billionaires. This might pass muster if the President's party hadn't spent the last two years giving trillions of dollars to the likes of Goldman Sachs and J.P. Morgan.

There is some concern that the debt ceiling will not be raised. Coincidentally, this is in accordance with the wishes of the American people. Dutifully, then, the two wings of our ruling party shall come together yet again to raise a symbolic middle finger to the citizenry, whereupon both conservatives and liberals shall blame the mysterious other for the capitulation of their own champions. They will raise the debt ceiling because they always raise the debt ceiling. Kicking the can is the one task the legislative branch seems capable of performing.

Perhaps one should not ignore the chance that the President's egomania and the incompetence of the Congress prevent the ruling class from conspiring against the people. Yet this chance is remote, a point which should not be forgotten as the commentary--and the markets--shall become much more skittish as we approach the twelfth hour, whereupon--miracle of miracles!--a deal will be reached.

It is imperative, we are told, that the government raise the debt ceiling, as to do otherwise would force the U.S. to default--this being deemed irresponsible. The real lack of responsibility is better demonstrated by a government that wages endless wars and runs pyramid schemes, but at this late stage of our republic, rank hypocrisy is scarcely worthy of commentary.

The argument in favor of raising the debt ceiling is patently absurd for at least two reasons. First, since the government has enough money to continue to pay the interest on its debt, default would not occur. Certainly this would require the Congress to re-prioritize so as to avoid stiffing our creditors. Given the character of the Congress, this is a near impossibility; but it could be done, and would be done easily were we not governed by those who possess the restraint of children.

Second, a default becomes more likely, not less, as the U.S. takes on more debt. Given the extent of our unfunded liabilities, $114 trillion at last count, default is inevitable. In that sense, the debate over the debt ceiling is utterly irrelevant, but insofar as the American republic is salvageable, the argument is totally opposed to that made by our representatives in Washington. This only seems strange if, drunk on Keynesian macro-economic theory, we forget that the laws of economics also apply to nations. To put the matter differently, if running up ever higher levels of debt is propitious for a nation, it ought to work similarly for an individual. Here the absurdity becomes manifest: if I have six maxed out credit cards, my situation is not improved by applying for another card. When Congress raises the debt ceiling, they bestow upon themselves another credit card, and make it more likely, not less, that the U.S. will default.

Once they have been given an extended line of credit, Congress will begin to spend more money. To some extent, this will be obligatory, since federal pension funds have already been raided as an accounting trick to allow the government to stumble along until August. The problem, for the Congress--and for us--is that as the U.S. heads towards default, foreigners are becoming disinclined to purchase U.S. treasuries. This will require the Federal Reserve to step in and purchase government debt, though it remains to be seen whether they will do this as part of another round of quantitative easing or whether the Fed will simply debase the currency on the sly. Since Bernanke and his magical printing press are increasingly in the spotlight, it will be difficult for him to hide, but it is nonetheless bad news for anyone who holds U.S. dollars, which is to say, the lot of us.

Since there was no economic recovery, there was no double-dip recession, but I suspect that we will hear the latter term bandied about more frequently as it becomes clear, even to the clueless commentariat, that if the unemployment numbers are ever increasing, we are not in the midst of a recovery.