"Is life so dear or peace so sweet as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take, but as for me, give me liberty or give me death!" — Patrick Henry, 23 March 1775

“Be wary of strong drink. It can make you shoot at tax collectors – and miss.” — Robert Heinlein

"Democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury, with the result that a democracy always falls under loose fiscal policy." — Sir Arthur Francis Tyler

Alexander Hamilton started the U.S. Treasury with nothing, and that was the closest the country ever came to breaking even. — Will Rogers

"It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow." --James Madison (likely), Federalist No. 62, 1788

"I think we have more machinery of government than is necessary, too many parasites living on the labor of the industrious." --Thomas Jefferson, letter to Thomas Cooper, 29 November 1802

"I consider the foundation of the Constitution as laid on this ground that 'all powers not delegated to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states or to the people.' To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, not longer susceptible of any definition." — Thomas Jefferson (Opinion on the Constitutionality of a National Bank, 15 February 1791)

The great object is that every man be armed.... Everyone who is able may have a gun.... Are we at last brought to such a humiliating and debasing degradation that we cannot be trusted with arms for our own defense? — Patrick Henry

"First, Do No Harm!" should be the first rule for all government regulators. Are there any of the so-called "experts" in the Bush Administration or the incoming Obama Administration who have thought about that? Do any of them really have any idea what they're doing? Most everything government touches becomes less efficient, less responsive to the public, and more likely to be looted; why would the bail out of Wall Street (or AIG or the "Big Three") be any different? Why would a disease caused by low interest rates and easy credit be cured by even lower interest rates and more easy credit?

THE GOOD WAR by Bill Bonner

The Washington Post reports that the War on Terror is over. No armistice has been announced. No treaty has been signed. The whole thing is just being dropped quietly, like a burnt-out cigarette. Too bad. It was our favorite war.

In the few words that follow, we explain why. First, the background:

“The history of the world is but the biography of great men,” was Thomas Carlyle’s contribution to the genre. But here at The Daily Reckoning we are more of the ‘cometh the hour, cometh the man’ school of history. When something needs doing...there is always finds some clown dim enough to do it. Osama bin Laden was that man.

“Bleeding America to the point of bankruptcy”, was what he was up to, he said in a videotape. He even did the math. “Every dollar spent by al-Qaida in attacking the US has cost Washington $1m (£545,000) in economic fallout and military spending,” said the report.

“We, alongside the mujahideen, bled Russia for 10 years, [in Afghanistan] until it went bankrupt ... So we are continuing this policy in bleeding America to the point of bankruptcy.”

How many generations will still tell of bin Laden’s triumph? He brought down not just one empire, but two. His band of terrorists leeched the Soviets so thoroughly, they fainted. It was no coincidence that the Soviets lost Afghanistan in the same year their empire disintegrated. Then, he delivered a challenge to the America’s ‘amour propre.’

The attack on the World Trade Center incited a death wish. The feds flashed a Red Alert; Americans cowered in their houses and sealed their windows and doors against biological attack. The 9/11 attackers could have been pursued by the usual gendarmes – at negligible cost. Instead, in the general panic, the Bush administration decided to go all out. Thus it was that the greatest stimulus package since WWII began – in haste and in delusion.

The federal budget went from its biggest surpluses to its biggest deficits. Interest rates were cut too – to an emergency rate of 1%. Within 24 months, the bubble in the Nasdaq was replaced by much bigger bubbles – in housing, finance, derivative debt, art, private equity, executive compensation, student loans and other forms of private debt. In effect, bin Laden suckered the fattest man on earth into having another éclair. The thunder coming from the financial markets for the past 18 months is the noise of his midriff exploding.

But we are not writing to complain about Osama bin Laden or the Bush Administration’s reaction. When it comes to war and adultery, make-believe may be better than the real thing. Certainly, it is safer. In the War on Terror, the enemy had no tanks...no aircraft... no ships...no armies...no celebrated strategists...no famous generals...no sophisticated weapons...no military culture...no leather trench coats...no burnished helmets...no battle cries.... The problem was, it was hard to find the enemy at all. The Department of Homeland Security conducted 3 billion airport inspections looking for them. We remember getting patted down so thoroughly we felt we should leave a tip. But how many enemy combatants do you think they nabbed? Not a one.

There are two possibilities. The first is that the security procedures were so fearsome that terrorists dared not try anything funny. The second is that there weren’t really many terrorists at large – at least, not in the United States of America.

But compare it to WWI or WWII...or even a penny ante affair like the Spanish American war. The War on Terror mobilized the whole nation in a Great National Cause...at much expense, much damage to the Constitution, and much inconvenience, but without actually causing much real suffering. Sure, a few hapless Muslims, caught in the wrong place at the wrong time, were put on the rack. And yes, the cops in London gunned down a Brazilian electrician. Back in the United States, young couples did not embrace as they had in WWII – that is, as if there would be no tomorrow. Instead, they spent money as if there would be no tomorrow! No doubt, the desperate spending contributed to the bankruptcy of the whole system of bubble finance. But compared to the pain of a shooting war; the War on Terror was a delight. As far as we know, the Department of Homeland Security suffered not a single casualty. Not even any self-inflicted wounds. No executions for treason. And hardly any reported cases, neither of fleeing in the face of the enemy...nor collaborating...nor sabotage.

What a shame to let such a marvelous war end without even a victory parade. Some of the agents should at least get medals for courage under fire...or exceptional valor.

Perhaps some special award [to] the special agents who arrested Tamera Jo Freeman. A ‘Black Heart’ medal might be appropriate. The woman was on a flight to Denver when her children got into a squabble. She spanked them both...and then Homeland Security agents put the cuffs on her. Charged with committing an “act of terrorism” she spent three months in jail and lost custody of her children.

And there ought to be some medal for the Pentagon flatfoot who put the long arm of American law all the way across the Atlantic and onto the shoulder of Gary McKinnon. Mr. McKinnon, as the mayor of London informed us on Tuesday, believes in UFOs. And to prove that the U.S. army is hiding information on extraterrestrials, he hacked into the Pentagon’s computer...leaving his email address and a message: “Your security is crap.”

Rather than thank him for this useful observation, the Defense Department no doubt put out a billion dollar consulting contract for someone to tell them their security is crap...and put out a warrant for Mr. McKinnon’s arrest on a terrorism charge. That kind of service above and beyond the call of duty should be recognized.

So form up the battalions of veterans! Assemble the legions of luggage inspectors and metal detector operators...and all the thousands of investigators, worn down by five years of following leads to nowhere! Dress them up in bright, clean uniforms...and give them their moment of glory. Pin medals on their chests. Then have a jolly march down Fifth Avenue. Line the streets. Give them a hearty hoorah as they march by. Throw out the ticker tape. Young girls ...fling yourselves at them...and get a kiss! And then, send them home.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis.

1/28/2009: Stimulus for Who?

This week the House is expected to pass an $825 billion economic stimulus package. In reality, this bill is just an escalation of a government-created economic mess. As before, a sense of urgency and impending doom is being used to extract mountains of money from Congress with minimal debate. So much for change. This is déjà vu. We are again being promised that its passage will help employment, help homeowners, help the environment, etc. These promises are worthless. This time around especially, Congress should know better than to pass anything of this magnitude without first reading the fine print. There a many red flags that I have found in this bill.

At least $4 billion is allocated to expanding the police state and the war on drugs through Byrne grants, which even the Bush administration opposed, and the COPS program, both of which are corrupt and largely ineffective programs.

To help Big Brother keep a better eye on us and our children, $20 billion would go towards health information technology, which would create a national system of electronic medical records without adequate privacy protection. These records would instead be subject to the misnamed federal “medical privacy” rule, which allows government and state-favored special interests to see medical records at will. An additional $250 million is allocated for states to nationalize individual student data, expanding Federal control of education and eroding privacy.

$79 billion bails out states that haphazardly expanded their budgets during the bubble years, but refuse to retrench and cut back, as their taxpayers have had to, during recession years.

$200 million expands Americorps. $100 million goes to “faith-and-community” based organizations for social services, which will further insinuate the government into charity and community service. Private charities are much more efficient and effective because they are directly accountable to donors, while public programs tend to get rewarded for failure. With its money, the Federal Government brings its incompetence and its whims, while creating foolish dependence. This is sad to see.

Of course the bill is rife with central planning projects. $4 billion for job training, much of which will be used to direct workers into “green jobs”. $200 million to “encourage” electric cars, $2 billion to support US manufacturers of advanced batteries and battery systems, which is yet another function of government I can’t find in the Constitution. Not to mention $500 million for energy efficient manufacturing demonstration projects, $70 million for a Technology Innovation Program for “research in potentially revolutionary technologies” in which government, not supply and demand, will pick winners and losers. $746 million for afterschool snacks, $6.75 billion for the Department of Commerce, including $1 billion for a census.

This bill delivers an additional debt burden of $6,700 to every American man, woman and child.

There is a lot of stimulus and growth in this bill – that is, of government. Nothing in this bill stimulates the freedom and prosperity of the American people. Politician-directed spending is never as successful as market-driven investment. Instead of passing this bill, Congress should get out of the way by cutting taxes, cutting spending, and reining in the reckless monetary policy of the Federal Reserve.

Posted by Ron Paul (Jan 26, 2009, 12:53:53)

"Taxes are voluntary." [...depends on the meaning of force.
Harry Reid is an idiot.]
http://www.youtube.com/watch?v=R7mRSI8yWwg

1/21/2009: A Minority View by Walter E. Williams

President Obama was sworn into office placing his hand on Abraham Lincoln's Bible. That is the last Bible I would use to be sworn into office. You say, "Why? Didn't Lincoln's Emancipation Proclamation free your ancestors?" It all depends where they were living. Let's examine the document's text to see why.

President Abraham Lincoln issued the Emancipation Proclamation on January 1, 1863, which reads, "That on the first day of January, in the year of our Lord one thousand eight hundred and sixty-three, all persons held as slaves within any State or designated part of a State, the people whereof shall then be in rebellion against the United States, shall be then, thenceforward, and forever free …" The key phrase is "in rebellion against the United States" because slaves remained slaves in states not in rebellion.

The Proclamation is specific about the states where slaves were freed, to wit: "Arkansas, Texas, Louisiana, (except the Parishes of St. Bernard, Plaquemines, Jefferson, St. John, St. Charles, St. James Ascension, Assumption, Terrebonne, Lafourche, St. Mary, St. Martin, and Orleans, including the City of New Orleans) Mississippi, Alabama, Florida, Georgia, South Carolina, North Carolina, and Virginia, (except the forty-eight counties designated as West Virginia, and also the counties of Berkley, Accomac, Northampton, Elizabeth City, York, Princess Ann, and Norfolk, including the cities of Norfolk and Portsmouth), and which excepted parts, are for the present, left precisely as if this proclamation were not issued."

Slaves in the excepted Louisiana parishes were not freed because those parishes were not in rebellion. Neither were slaves in West Virginia. By the way, West Virginia's June 1863 admission as a state, formerly a part of Virginia, was a clear violation of the Constitution's Article IV, Section 3, that reads in part "but no new States shall be formed or erected within the jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or parts of States, without the Consent of the Legislatures of the States concerned as well as of the Congress." But what the heck, Lincoln had much of the Constitution under siege by then.

The hypocrisy of Lincoln's Emancipation Proclamation came in for heavy criticism. His Secretary of State William Seward said, "We show our sympathy with slavery by emancipating slaves where we cannot reach them and holding them in bondage where we can set them free." The New York World wrote, "He has proclaimed emancipation only where he has notoriously no power to execute it. The exemption of the accessible parts of Louisiana, Tennessee, and Virginia renders the proclamation not merely futile, but ridiculous." The London Spectator mocked, "The principle (of the Proclamation) is not that a human being cannot justly own another, but that he cannot own him unless he is loyal to the United States." Lincoln admitted in a letter to his Treasury Secretary Salmon Chase that his proclamation had no legal justification. Lincoln's motivation for proclamation was the war was going badly for the Union and there was the possibility that England and other European powers, who had recently abolished slavery, might give the Confederacy economic and political aid, but would not do so if the war was seen as a war against slavery. An excellent reference for this period is "The Real Lincoln" by Loyola College of Maryland's economics Professor Thomas DiLorenzo.

President Obama can be forgiven for celebrating the hypocrisy of Abraham Lincoln because the victors of wars write their history and glorify the winners. The recognition that slavery is a despicable institution does not require hero worship of a president who made the largest contribution to the unraveling of our Constitution. After all when it is settled by brute force that states cannot secede, as they thought they had the right to in 1787, then the federal government can ride roughshod over states and their people's right -- in a word make meaningless the Ninth and Tenth Amendments.

Copyright © 2008 Salem Web Network. All Rights Reserved.

The Sanctifying of Plunder Posted By Leonard E. Read

The law…has converted plunder into a right, In order to protect plunder. -Bastiat

The commandment, "Thou shalt not steal," would be far better kept today had not theft assumed various disguises under which its practice has been generally sanctified. The gilding of an evil gives it a virtuous face — a Mr. Hyde’s ugliness covered by a comely Dr. Jekyll mask. Why such subterfuge? To be thought of as a thief by others or to so regard oneself is utterly revolting to all but stunted mentalities; so, we try to sanctify our plunder!

...let us begin to call this practice of "robbing selected Peter to pay for collective Paul" by its right name: legalized plunder. Frederic Bastiat gave us the measuring rod more than a century ago in The Law:

See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. (Italics added)

[Read the entire essay]

"There are more fundamental reasons to doubt whether throwing more money at a problem largely if not entirely caused by loose money and government incentives and mandates to overspend and over lend will yield the kind of recovery that President-elect Barack Obama and most Americans would dearly love to see. In his speech on the economy and his stimulus package Thursday -- a speech still notably short on details -- the president-elect declared that 'only government can provide the short-term boost necessary to lift us from a recession this deep and severe.' The unspoken assumption behind such a statement is that government has a virtually inexhaustible supply of money that can be deployed without having deleterious side effects, only beneficial ones. The problem, of course, is that government has no money of its own, only the money it takes by force from the productive sector of society or it borrows and must pay back with taxes extracted from our children and grandchildren. In the private marketplace economic transactions take place only if both (or all) parties believe they benefit. Such private, profit-making activity, as most of American history demonstrates, involves not simply the redistribution of existing wealth but creation of new wealth. Increased government spending, however financed, takes money from the private wealth-generating sector of society and allocates it to projects not on the basis of their capacity to be economically self-sustaining, but on the basis of their political attractiveness. ...[A] government 'stimulus' can only be accomplished by taking money away from genuinely economically productive activity. Pumping dollars that will eventually be worth less than they are today into various projects may provide some short-term relief or appearance of relief. But only the private sector can actually create wealth and thereby stimulate genuine economic growth. This seems pretty elementary, but most people in Washington have powerful incentives to ignore elementary truths." --Orange County Register

"[T]his is no time to throw good (borrowed) money after bad. If all this spending was going to get the economy growing, it would be working. Yet nobody expects things to improve soon. ... In times of uncertainty, it's natural that people will look to government for answers. Yet the long-term solutions to our current economic problems don't lie in more government spending, controls or regulations." --Heritage Foundation president Edwin Feulner

"I didn't expect Obama to know what to do about the economy; Obama's knee-jerk Keynesianism and allegiance to the disproved New Deal mythology ensure that he will try the Big Government solution, even when Big Government is the problem." --columnist Ben Shapiro

"In fairness to Obama, there is a huge consensus around the notion that government must do, well, something -- something big. ... It's the consensus that scares me. ... Obviously, consensus can be good. But it also can lead to dangerous groupthink. ... Everyone knows everything is right, until everything goes wrong. If that's not one of the great lessons of the financial collapse of 2008, I don't know what is." --National Review editor Jonah Goldberg

"President Elect Obama and his congressional henchmen are in the midst of swiping another $1 trillion-plus from American taxpayers. And Republicans -- who once upon a time professed concern for taxpayers -- could apparently care less. Either they believe stealing from our grandkids makes for sound policy, or they're too afraid to second-guess the second coming of Jimmy Carter." --radio talk show host Laura Ingraham

"No phrase represents more of a triumph of hope over experience than the phrase 'Middle East peace process.' A close second might be the once-fashionable notion that Israel should 'trade land for peace.' Since everybody seems to be criticizing Israel for its military response to the rockets being fired into their country from the Gaza strip, let me add my criticisms as well. The Israelis traded land for peace, but they have never gotten the peace, so they should take back the land." --Hoover Institution economist Thomas Sowell

1/24/2008: Bush Was a Big-Government Disaster

He expanded the state, and the sense that the state is incompetent.
By NICK GILLESPIE
Printed in The Wall Street Journal, page A11

Now that George W. Bush has finally left office, here's a challenge to a nation famous for its proud tradition of invention: Can somebody invent a machine capable of fully measuring the disaster that was the Bush presidency?

Yes, yes, I know that attitudes towards presidencies are volatile. Harry Truman was hated when he left office and look at him now; he's so highly regarded that President Bush thought of him as a role model. There are, I'm sure, still a few William Henry Harrison dead-enders around, convinced that the 31 days the broken-down old general spent as president will someday receive the full glory they deserve.

In a way that was inconceivable when he took office, Mr. Bush -- the advance man for the "ownership society," smaller and more trustworthy government, and a humble foreign policy -- increased the size and scope of the federal government to unprecedented levels. At the same time, he constantly flashed signs of secrecy, duplicity, ineffectiveness and outright incompetence.

Think for a moment about the thousands of Transportation Security Administration screeners -- newly minted government employees all -- who continue to confiscate contact-lens solution and nail clippers while, according to nearly every field test, somehow failing to notice simulated bombs in passenger luggage.

Or schoolchildren struggling under No Child Left Behind, which federalized K-12 education to an unprecedented degree with nothing to show for it other than greater spending tabs. Or the bizarrely structured Medicare prescription-drug benefit, the largest entitlement program created since LBJ. Or the simple reality that taxpayers now guarantee some $8 trillion in inscrutable loans to a financial sector that collapsed from inscrutable loans.

Such programs were not in any way foisted on Mr. Bush, the way that welfare reform had been on Bill Clinton; they were signature projects, designed to create a legacy every bit as monumental and inspiring as Laura Bush's global literacy campaign.

The most basic Bush numbers are damning. If increases in government spending matter, then Mr. Bush is worse than any president in recent history. During his first four years in office -- a period during which his party controlled Congress -- he added a whopping $345 billion (in constant dollars) to the federal budget. The only other presidential term that comes close? Mr. Bush's second term. As of November 2008, he had added at least an additional $287 billion on top of that (and the months since then will add significantly to the bill). To put that in perspective, consider that the spendthrift LBJ added a mere $223 billion in total additional outlays in his one full term.

If spending under Mr. Bush was a disaster, regulation was even worse. The number of pages in the Federal Registry is a rough proxy for the swollen expanse of the regulatory state. In 2001, some 64,438 pages of regulations were added to it. In 2007, more than 78,000 new pages were added. Worse still, argues the Mercatus Center economist Veronique de Rugy, Mr. Bush is the unparalleled master of "economically significant regulations" that cost the economy more than $100 million a year. Since 2001, he jacked that number by more than 70%. Since June 2008 alone, he introduced more than 100 economically significant regulations.

At this late date, it may be pointless to argue about the grounds for the invasion of Iraq, which even Mr. Bush has (finally) acknowledged were built on sand rather than bedrock. The Iraq war has lasted longer than any American conflict except for Vietnam and has cost more than any shooting match except for World War II. Leave aside for a moment the more than 4,200 U.S. deaths and 30,000 casualties, and ask a very basic question: Did President Bush's prosecution of the war -- he declared an end to major hostilities in May 2003 -- and his direction of the ongoing occupation make you feel better about the government's ability to execute core functions?

Or, like the bungled federal response to Hurricane Katrina (later made good by shoveling billions of pork-laden tax dollars to the Gulf area) and the rushed, secretive, and ever-changing bailout of the financial sector, did it make you want to simply despair?

Mr. Bush's legacy is thus a bizarro version of Ronald Reagan's. Reagan entered office declaring that government was not the solution to our problems, it was the problem. Ironically, he demonstrated that government could do some important things right -- he helped tame inflation and masterfully drew the Cold War to a nonviolent triumph for the Free World. By contrast, Mr. Bush has massively expanded the government along with the sense that government is incompetent.

That is no small accomplishment -- and its pernicious effects will last long after Mr. Bush has moved back to Texas, and President Obama has announced that his stimulus package, originally tagged at $750 billion and already up to $825 billion, will cost $1 trillion or more. Mr. Bush has cleared the way for President Obama to intervene more and more in the economy and every other aspect of American life.

Last July, the political scientists Philippe Aghion, Yann Algan, Pierre Cahuc and Andrei Shleifer wrote a paper titled "Regulation and Distrust." Using data from the World Values Survey, the authors convincingly argue that "distrust influences not just regulation itself, but the demand for regulation." They found that "distrust fuels support for government control over the economy. What is perhaps most interesting about this finding . . . is that distrust generates demand for regulation even when people realize that the government is corrupt and ineffective."

George W. Bush has certainly taught us that government really can't be trusted to be very effective, or open, or smart. He has also taught us that government can always get bigger on every level and every way. It's a sad lesson that we'll be learning for many years to come.

Mr. Gillespie is editor in chief of Reason.tv and Reason.com.

1/24/2008: When men get in the habit of helping themselves to the property of others, they cannot easily be cured of it.

— The New York Times, in a 1909 editorial opposing the very first income tax

1/20/2009: Headlines On This Date 4 Years Ago:

"Republicans spending $42 million on inauguration while troops Die in unarmored HumVees"

"Bush extravagance exceeds any reason during tough economic times"

"Fat cats get their $42 million inauguration party, Ordinary Americans get the shaft"

Annnnnnnnnd.......Headlines Today:

"Historic Obama Inauguration will cost only...$120 million"

"Obama Spends $120 million on inauguration; America Needs A Big Party"

"To Everyman Obama shows America how to celebrate"

"Citibank executives contribute $8 million to Obama Inauguration" (after their bail out)

1/20/2008: The Growing Foreclosure Crisis

One oft-repeated assertion no longer holds true. Those in trouble are not, primarily, lower-income borrowers. The foreclosure crisis has become a wave, afflicting neighborhoods of every stripe -- but particularly communities created by the boom itself.

Before Robin Bohnen and her husband, Shane, bought a $1.16 million Mediterranean-style house in an upscale Southern California suburb two years ago, they were not cash-strapped, debt-ridden or credit-impaired.

Now they are all of the above. Soon they also may qualify for one more distressing category: home lost to foreclosure.

...Now, she and husband just owe. They cannot afford their $6,400 monthly payment, and in this plummeting market, they wouldn't make enough on a sale to pay off their mortgage or recoup the 20 percent they put down to buy their Riverside County home.

They're "underwater," industry parlance for borrowers who owe more on their mortgage than their houses are worth. They have joined the growing line of homeowners seeking a break from their lenders.

...This trend shows up most acutely in California and other high-growth regions, such as Arizona, Nevada, Florida and pockets of the Washington region, most notably in Prince William and Prince George's counties.

...Of the 20 Zip codes with the highest share of underwater loans, seven are in California and four are in Riverside County, the vast exurb southeast of Los Angeles where the Bohnens live. Riverside's unemployment rate has zoomed to 10 percent, well above the national average of 7.2 percent. About 94,200 people in the county are looking for work, many of them formerly employed in the real estate, banking and construction industries, according to the county's economic development agency.

...Against this backdrop of plunging values, some homeowners are dumping their homes even if they can make the payments, real estate agents and lenders said. A California lawyer even launched an online calculator, www.payorgo.com, to help borrowers decide.

"There's this easy come, easy go mentality," said Mike Novak-Smith, a real estate agent in Moreno Valley, a working-class part of the county. "Some people would rather hold onto their pickup truck or Mercedes than their homes."

In 2006, about 25 percent of Riverside County home buyers took out loans without making a down payment, according to SMR Research, which analyzes mortgage data. For those borrowers, Novak-Smith says, their loan payments are akin to rent: They essentially have no stake in their homes, which makes walking away easier.

"So they get a ding on their credit record. No big deal," he said. "They wait a few years and buy again."

[Read more]

The Daily Mail (UK National Paper)

Obama's Victory

A victory for the hysterical Oprah Winfrey, the mad racist preacher Jeremiah Wright, the mainstream media who abandoned any sense of objectivity long ago, Europeans who despise America largely because they depend on her, comics who claim to be dangerous and fearless but would not dare attack genuinely powerful special interest groups.

A victory for Obama-worshippers everywhere!

A victory for the cult of the cult. A man who has done little with his life but has written about his achievements as if he had found the cure for cancer in between winning a marathon and building a nuclear reactor with his teeth. Victory for style over substance, hyperbole over history, rabble-raising over reality.

A victory for Hollywood, the most dysfunctional community in the world. Victory for Streisand, Spielberg, Soros and Sarandon. Victory for those who prefer welfare to will and interference to independence. For those who settle for group think and herd mentality rather than those who fight for individual initiative and the right to be out of step with meager political fashion.

Victory for a man who is no friend of freedom. He and his people have already stated that media has to be controlled so as to be balanced, without realizing the extraordinary irony within that statement. Like most liberal zealots, the Obama worshippers constantly speak of Fox and Limbaugh, when the vast bulk of television stations and newspapers are drastically liberal and anti-conservative.

Senior Democrat Chuck Schumer said that just as pornography should be censored, so should talk radio. In other words, one of the few free and open means of popular expression may well be cornered and beaten by bullies who even in triumph cannot tolerate any criticism or opposition.

A victory for those who believe the state is better qualified to raise children than the family, for those who prefer teachers' unions to teaching and for those who are naively convinced that if the West is sufficiently weak towards its enemies, war and terror will dissolve as quickly as the tears on the face of a leftist celebrity.

A victory for social democracy even after most of Europe has come to the painful conclusion that social democracy leads to mediocrity, failure, unemployment, inflation, higher taxes and economic stagnation. A victory for intrusive lawyers, banal sentimentalists, social extremists and urban snobs.

Congratulations America!

The 2009 Index of Economic Freedom

The United States has fallen to sixth place (behind Hong Kong, Singapore, Australia, Ireland and New Zealand...perhaps it's time to move to Asia) and, if Obambi has his way, along with his Democratic and Republican Socialist Party pals, we'll no doubt drop even further.

1/15/2009: Club for Growth Applauds RSC’s Alternative Stimulus Plan

Washington – The Club for Growth heralded the Republican Study Committee’s (RSC) alternative stimulus plan as exactly the kind of program the country needs right now.

President-Elect Obama’s stimulus plan and the latest stimulus proposal released by Rep. Charlie Rangel contain very few pro-growth elements, if any at all. Both bills place an overwhelming emphasis on spending programs that will siphon money out of the private sector and will add to the country’s ballooning debt, but are unlikely to stimulate real economic growth.

Instead, Congress should consider the Republican Study Committee’s plan with its emphasis on reducing America’s debt, lowering the tax burden on American families and businesses, and creating an incentive for businesses to grow and invest in the economy. The RSC’s plan does this by offering:

* Across-the-board reduction in marginal tax rates
* Repeal of the Alternative Minimum Tax
* A reduction in the corporate tax rate
* Ending the capital gains tax on inflation
* Full and immediate expensing of business equipment
* A one percent reduction in government spending

“The RSC’s tax cuts are sorely needed in this environment,” said Club for Growth President Pat Toomey. “Currently, businesses are burdened by an above average corporate tax rate and investors have little reason to go near the stock market. Even just cutting the corporate tax rate and eliminating the tax on capital gains due to inflation will be a huge boon for economic growth—far greater than a liberal spending spree.”

“Calling a spending program a ‘stimulus package’ doesn’t mean it will actually stimulate the economy. If you want to encourage economic growth, you need legislation that will change incentives and give people a reason to invest, produce, and hire more workers. Taking money out of one part of the private sector, funneling it through the government with bureaucracy chewing off a piece, and dumping it into another part doesn’t achieve that goal. If President-Elect Obama is serious about stimulating the economy, he should take a look at the RSC’s alternative stimulus plan.”

1/12/2009: A Lady Named Irena Sendler

There recently was the death of a 98-year-old lady named Irena Sendler. During WWII, Irena, got permission to work in the Warsaw Ghetto, as a Plumbing/Sewer specialist. She had an ulterior motive... She KNEW what the Nazi's plans were for the Jews, (being German).

Irena smuggled infants out in the bottom of her tool box she carried, and she also carried in the back of her truck a Burlap sack, (for larger kids). She also had a dog in the back that she trained to bark when the Nazi soldiers let her in and out of the ghetto. The soldiers, of course, wanted nothing to do with the dog, and the barking covered the kids/infants noises.

During her time and course of doing this, she managed to smuggle out and save 2500 kids/infants. She was caught, and the Nazi's broke both her legs and arms and beat her severely.

Irena kept a record of the names of all the kids she smuggled out and kept them in a glass jar, buried under a tree in her back yard. After the war, she tried to locate any parents that may have survived it, and reunited the family. Most, of course, had been gassed. Those kids she helped were placed into foster family homes or adopted.

Last year Irena was nominated for the Nobel Peace Prize.... She LOST.

Al Gore won for doing a slide show on Global Warming.

1/14/2009: Murder Spree by People Who Refuse to Ask For Directions by Ann Coulter

In a front-page article on Jan. 2 of this year, The New York Times took a brief respite from its ongoing canonization of Barack Obama and returned to its series on violent crimes committed by returning GIs, or as I call it: "U.S. Military, Psycho Killers."

The Treason Times' banner series about Iraq and Afghanistan veterans accused of murder began in January last year but was quickly discontinued as readers noticed that the Times doggedly refused to provide any statistics comparing veteran murders with murders in any other group.

So they waited a year, hoping readers wouldn't notice they were still including no relevant comparisons.

What, for example, is the percentage of murderers among veterans compared to the percentage of murderers in the population at large -- or, more germane, in the general population of young males, inasmuch as violent crime is committed almost exclusively by young men?

Any group composed primarily of young men will contain a seemingly mammoth number of murderers.

Consider the harmless fantasy game, Dungeons and Dragons -- which happens to be played almost exclusively by young males. When murders were committed in the '80s by (1) young men, who were (2) Dungeons and Dragons enthusiasts, some people concluded that factor (2), rather than factor (1), led to murderous tendencies.

Similarly, for its series about how America's bravest and finest young men are really a gang of psychopathic cutthroats, the Times triumphantly produced 121 homicides committed by veterans of the Iraq and Afghanistan wars in order to pin the blame for the murders on the U.S. military.

Perhaps the Times' next major expose could be on how a huge percentage of murderers are people who won't ask for directions or share the TV remote.

Let's compare murders by veterans to murders by other 18- to 35-year-olds in the U.S. population at large. From 1976 to 2005, 18- to 24-year-olds -- both male and more gentle females -- committed homicide at a rate of 29.9 per 100,000. Twenty-five- to 35-year-olds committed homicides at a rate of 15.8 per 100,000.

Since 9/11, about 1.6 million troops have served in either Iraq or Afghanistan. That makes the homicide rate among veterans of these wars 7.6 per 100,000 -- or about one-third the homicide rate for their age group (18 to 35) in the general population of both sexes.

But fewer than 200,000 of the 1.6 million troops who served in Iraq and Afghanistan have been women, and the murder rate for the general population includes both males and females. Inasmuch as males commit nearly 90 percent of all murders, the rate for males in those age groups is probably nearly double the male/female combined rates, which translates to about 30 to 55 murderers per 100,000 males aged 18 to 35.

So comparing the veterans' rate of murder to only their male counterparts in the general population, we see that Iraq and Afghanistan veterans are about 10 times less likely to commit a murder than non-veterans of those wars.

But as long as the Times has such a burning interest in the root causes of murder, how about considering the one factor more likely to create a murderer than any other? That is the topic we're not allowed to discuss: single motherhood.

As I describe in my new book, "Guilty: Liberal 'Victims' and Their Assault on America," controlling for socioeconomic status, race and place of residence, the strongest predictor of whether a person will end up in prison is that he was raised by a single parent. (The second strongest factor is owning a Dennis Kucinich bumper sticker.)

By 1996, 70 percent of inmates in state juvenile detention centers serving long-term sentences were raised by single mothers. Seventy percent of teenage births, dropouts, suicides, runaways, juvenile delinquents and child murderers involve children raised by single mothers. Girls raised without fathers are more sexually promiscuous and more likely to end up divorced.

A 1990 study by the left-wing Progressive Policy Institute showed that, after controlling for single motherhood, the difference in black and white crime disappeared.

Various studies come up with slightly different numbers, but all the figures are grim. A study cited in the far left-wing Village Voice found that children brought up in single-mother homes "are five times more likely to commit suicide, nine times more likely to drop out of high school, 10 times more likely to abuse chemical substances, 14 times more likely to commit rape (for the boys), 20 times more likely to end up in prison, and 32 times more likely to run away from home."

With new children being born, running away, dropping out of high school and committing murder every year, it's not a static problem to analyze. But however the numbers are run, single motherhood is a societal nuclear bomb.

Many of these studies, for example, are from the '90s, when the percentage of teenagers raised by single parents was lower than it is today. In 1990, 28 percent of children under 18 were being raised in one-parent homes -- mother or father, divorced or never-married. By 2005, more than one-third of all babies born in the U.S. were illegitimate.

That's a lot of social problems in the pipeline.

Think I'm being cruel? Imagine an America with 60 to 70 percent fewer juvenile delinquents, teenage births, teenage suicides and runaways, and you will appreciate what the sainted "single mothers" have accomplished.

Even in liberals' fevered nightmares, predatory mortgage dealers, oil speculators and Ken Lay could never do as much harm to their fellow human beings as single mothers do to their own children, to say nothing of society at large.

But the Times won't run that series because liberals adore single motherhood and the dissolution of traditional marriage in America. They detest the military, so they cite a few anecdotal examples of veterans who have committed murder and hope that no one asks for details.

1/13/2009: Yale's Investor Keeps Playbook
In Line for First Loss Since '88, Mr. Swensen Still Champions 'Alternatives'

Fund of funds are a cancer on the institutional-investor world. They facilitate the flow of ignorant capital. If an investor can't make an intelligent decision about picking managers, how can he make an intelligent decision about picking a fund-of-funds manager who will be selecting hedge funds? There's [sic] also more fees on top of existing fees. And the best managers don't want fund-of-fund money because it is unreliable. You need to be in the top 10% of hedge funds to succeed. In a fund of funds, you will likely be excluded from the best managers. [Mr.] Madoff also relied enormously on these intermediaries. He wouldn't have had nearly as much resources were it not for fund of funds.

Consultants make money by giving advice to as many people as possible. But you outperform by finding inefficiencies most of the market has not yet uncovered. So consultants ultimately end up doing a disservice to investors.

[Read More]

1/12/2009: Big Uncle Knows Better By Thomas G. Donlan
Bureaucrats and banking don't belong together.

SEARCHING FOR A RAY OF HOPE TO CUT THROUGH the clouds of the Bailout Economy, we noted a sign that the Treasury's Troubled Asset Relief Program might not yet have become a Washington institution: Interim Assistant Treasury Secretary for Financial Stability Neel Kashkari doesn't have a motorcade of black SUVs to carry him around town.

Kashkari spoke at the Brookings Institution in Washington last week. He was accompanied by only two aides, and the trio traveled by taxicab. Such official modesty almost made it possible to believe that the Treasury has not created an immortal monster.

Agencies such as Fannie Mae, Ginnie Mae and FHA, created to relieve and regulate the housing crisis of the Great Depression, are still around 75 years later, bigger and more powerful than they ever were when they allegedly were needed.

Treasury was "reluctant" to have the government owning private companies, Kashkari said, indicating that reluctance by way of the TARP's purchase of banks' preferred stock, rather than common equity. "It keeps government one step further away from having its fingers in thousands of banks across the country," he said.

But it's one step back after many steps forward. Measured in dollars, the TARP is 172 billion steps toward government ownership of banks, to say nothing of a few billion steps closer to government ownership of auto companies.

In the beginning, long months ago, there were bad assets. Indeed, Treasury started making contingency plans to deal with them a year ago, Kashkari said. The TARP was supposed to relieve imprudent banks of their imprudent loans. This would leave the banks free to make better new loans. The program was deemed impractical a few days after enactment.

Conditions in the money markets were deteriorating much faster than the contingency planners had imagined, Kashkari said. A translation: Officials were scared out of their ability to think clearly or consider the legitimate functions of the federal government.

During September, a few people worried about vesting bureaucrats with so much power over the banking system. Then, in October and November, everyone quit worrying about the redistribution of power and started worrying about the continued existence of capital -- from any source.

It's time to start worrying about power again. Here's a sample of comments that indicate where the country may be headed:

Describing big bankers as existing in a state of "catatonic fear," former Federal Reserve Vice Chairman Alan S. Blinder said that banks shouldn't hold onto their new capital. They should start making loans, he demanded. "If you're taking money from the public purse, we should get something in return, and we're really not."

Banks aren't lending? It's an odd complaint, considering that overborrowing and overlending created our problems.

Then House Financial Services Committee Chairman Barney Frank (D-Mass.), proposed a bill Friday that would force the Treasury to bail out homeowners along with the banks. He would also require the banks to pay no bonuses or golden parachutes to top bankers, and to get rid of their private aircraft. Frank's priorities are as political as ever; he has merely changed the beneficiaries.

For an even clearer view of the kind of control banks will face, we can turn to the lobbyists at Consumers Union. "We own them now, and we should use that to make sure they stop ripping us off," said a firebrand named Gail Hillebrand. "We shouldn't allow banks to use the money to support things that hurt consumers and taxpayers."

Who will be surprised when the pipers must play the tune dictated by their owners, and their owners' owners? Not us.

We are more surprised that Treasury and its allies are still talking about taxpayers' turning a profit from their venture in bank capitalization.

The only profit likely to flow from an agonizing reappraisal of all troubled assets is the paper profit that can be made by inflating nominal values.

1/10/2009: California's Gold Rush Has Been Reversed By Devin Nunes
Entrepreneurs are fleeing heavy taxes in the state.

On Jan. 24, 1848, James Wilson Marshall found gold at Sutter's Mill, in Coloma, Calif., sparking a mad rush of some 300,000 people desiring to strike it rich. San Francisco grew from a tiny hamlet to a boomtown in no time, and in 1850 California entered the Union as the 31st state.

With this history at their back, state leaders might have understood that people have a propensity to get up and move when a better life is to be had elsewhere. But no. After more than 150 years of being a destination, California is becoming a place entrepreneurs, investment capital and the hardy workers who made it a global leader in agriculture, technological innovation and scientific research are fleeing. This exodus is the marker of something deeper than a national recession. It's a sign that the attempts by state leaders to spend their way back to prosperity are killing California.

While it has the sixth highest tax burden in the nation, according to the nonpartisan Tax Foundation, California is facing a breathtaking $40 billion budget deficit this year. This comes on the heels of a decade-long spending spree. Last year the state budget was $131 billion, up from $56 billion in 1998.

Citizens are burdened by all manner of state regulations. To mention just one example, this year a new law enacted by ballot initiative bans cages chicken farmers use on the grounds that it is inhuman to put birds in cages that prevent them from spreading their wings. Complying with the new law will cost farmers hundreds of millions of dollars, which will force many to leave the state. And that will force us to buy our eggs from other states and, possibly, others nations, such as Mexico.

And just as a fallen tree can divert the flow of water in a creek, bad economic policies divert the flow of investment. Entrepreneurs and investors, seeking the path of least resistance, leave when it becomes easier to make a living in more business-friendly states. In 2000, according to the state's Department of Finance, about 150,000 people moved into California. But in the years that followed the in-migration slowed, and in 2005 it reversed, when a net 52,000 people moved out. In 2008, the outflow topped 135,000 people.

Consequently, Idaho, Utah and Wyoming all have unemployment rates around 5% at a time when California is suffering an unemployment rate of 9%. Californians are moving east and creating jobs in their new home states.

Over the past few years, we've witnessed the state government's response to the capital and entrepreneur flight out of our state: Taxes remain high, and lawmakers employ all the tricks in the book to produce "balanced" budgets from shifting expenses around to borrowing ever larger sums of money.

It's now time to turn to the ballot initiative and enact needed reforms that elected representatives in Sacramento have been unwilling to tackle on their own. We're on a dangerous fiscal course, and the people themselves will have to fundamentally change state government to correct it.

Two broad reforms are needed. The first is that we must create a part-time, nonpartisan citizen legislature -- a model that has proven effective in states like Texas (part-time) and Nebraska (part-time and nonpartisan). Californians need to be able to elect leaders whose primary interest is public service, not furthering political careers.

The second fundamental reform is on taxes and spending. Other states have passed a Taxpayers' Bill of Rights. We need to do the same, so I and others will soon be launching a campaign to enact the following:

- Two-year budgeting. This would allow a part-time legislature the time it needs to hold hearings, conduct negotiations, and provide oversight to determine the state's spending priorities in the first year, while in the second, write and pass the budget.

- End budget stalemates. This is easier than it sounds if we enact this reform: Automatically adopt the governor's proposed budget, provided it is free of tax hikes, if the legislature fails to pass a budget by its constitutional deadline. This reform would give the legislature a compelling reason to move the budget along briskly, and it would end the continual government shutdowns resulting from partisan bickering and gridlock.

- New spending controls. To prevent overspending, we need mandatory limits on the growth of government. State spending should not grow faster than inflation, and a 3% budget reserve must be established to prevent unanticipated expenditures, such as natural disasters, from creating a deficit.

- Refund budget surpluses. When the state government is flush with funds, taxpayers should get some of their money back. We need a mandate for the state to send tax-rebate checks to all taxpayers when surpluses exceed the rate of inflation. Had this reform been law in 2001, that year's $10 billion budget surplus would have yielded each taxpayer a rebate of about $667.

My family has farmed the San Joaquin Valley for three generations. And my first lesson in capital flows came when I was 14. I had cracked open my piggy bank to buy seven head of young cattle to raise and sell. I had two choices: I could buy feed or I could fix fences in exchange for free grazing. Like water flowing down a furrow, my cattle went to pasture where I could make a higher profit.

These are big reforms, but we need to stop buying feed to eat for today and start mending fences to make the state better off in the long term. California commerce can again be the envy of the world if we fix the problems that created the financial and economic crisis.

The bottom line is that we should let the water of prosperity flow again unobstructed into our state. If it does, investors, businesses and jobs will return to the Golden State.

Mr. Nunes, a Republican, is a congressman from California.

1/9/2009: from the Patriot Post

"Let us note that if supposedly all-powerful Israel is dedicated to exterminating the Palestinian people, it is doing a bad job. The Palestinian population has only grown since 1948. There are more Arab citizens living in Israel proper today than there were in all of Palestine the year Israel was founded. Perhaps one reason Israel fails at genocide is that it isn't interested in genocide? That would explain why Israel warned thousands of Gazans by cell phone to leave homes near Hamas rocket stockpiles. It would clarify why, even amid all-out war, it offers aid to enemy civilians. It would even illuminate the otherwise mysterious clamor from Israelis for a viable 'peace partner.' But no. For millions of Israel haters, the more plausible explanation is that the 'defiant' Palestinians have miraculously survived Israel's determination to wipe them out. Meanwhile, calls for the complete extermination of Israel are routine. ... A sick mixture of Holocaust envy and Holocaust denial is the defining spirit of Hamas. ... It's Palestinian Islamists who have ideological and political ties to Nazism stretching back to the days of 'Hitler's Mufti,' Haj Amin al-Husseini, a happy warrior for the Nazi cause. So why the obsession with casting the Israelis as the new Hitlerites? One answer is surely that critics know such charges are painful to a country largely born of the Holocaust and marked by its scars. It also grabs attention, galvanizes radicals, vents legitimate frustrations and anger, and helps demonize the enemy and, hence, justify the murder of 'Zionists everywhere,' as Hamas often declares in its communiqués. But I think the desire to cast the Israelis as Nazis is fueled, deep down, by the haters' need to see their own hatreds and ambitions mirrored in their enemy's actions. Hamas has an avowedly Hitlerite agenda. The only way to make such an agenda defensible is to convince yourself and others that the Israelis deserve it. ...[W]ith Hamas, Hitlerism comes to the Middle East wearing the mask of anti-Hitlerism." --National Review editor Jonah Goldberg

"[T]he only acceptable outcome of this war, both for Israel and for the civilized world, is ... the disintegration of Hamas rule. It is already underway. ... The one-step-from-madness gangster theocracy in Gaza -- just four days before the fighting, the Hamas parliament passed a sharia criminal code, legalizing, among other niceties, crucifixion -- is teetering on the brink. It can be brought down, but only if Israel is prepared -- and allowed -- to complete the real mission of this war. For the Bush State Department, in its last significant act, to prevent that with the premature imposition of a cease-fire would be not just self-defeating but shameful." --columnist Charles Krauthammer

"[E]very critical decision that will be made regarding the economy will be made by Insulated Americans whose assets are substantial enough to keep them from being unduly affected by whatever folly they foist on the rest of us. No matter what kind of stupidity, short-term thinking, political correctness, or corruption emanates from the Oval Office or halls of Congress, our political ruling class will never want for all the necessities and most of the luxuries life affords -- even if the rest of America is standing on bread lines or living in tent cities. ... The sad reality is that the term 'citizen government' has become an oxymoron. Our political class has never been more removed from the average American and their interests. ... Perhaps we should concentrate on electing Exposed Americans to office: nothing concentrates the mind like having a direct stake in the decisions one makes. We already know how Insulated Americans run things -- right into the ground. Ground their feet will never touch." --columnist Arnold Ahlert

Why 2009 Will be Worse than 2008
We are not out of the woods yet by Jeff Taylor
Reason Online - January 2, 2009

Whew. Now that 2008 is in the history books, $8.5 trillion in federal bailout money is in the pipeline, and bold leadership is set to take command, Americans can all breathe a little easier, right?

Uh, no. The unhappy fact is that 2009 is almost certain to feature more economic hardship than the year that preceded it. President-elect Barack Obama may think he has steeled himself and his administration for this outcome, but three major factors argue against Obama truly being prepared for what's to come.

Insane expectations. It was no mistake that Vice President-elect Joe Biden was dispatched to try to dampen surging overseas expectations that the Obama presidency will quickly reverse American actions around the globe. But a similar threat lurks domestically, where the federal government under Obama will be expected to correct every dislocation from the confused Bush years—all while providing free health care and full employment.

Most telling is the continued misunderstanding of the role that Obama's Treasury chief pick, Tim Geithner, has played in the Bush bailouts from his current perch at the New York Federal Reserve. Geithner has in every way possible functioned as a loyal member of Hank Paulson's Goldman Sachs army, seeking to reverse market judgements on bad investments with billions in federal cash. Why anyone would expect substantially different policy from an Obama administration with Geithner in place escapes me.

The one exception to this is at the Federal Reserve, where Ben Bernanke might end up as the poster-child for economic malaise, giving Obama license to show Bernanke the door. If nothing else, this could buy Obama time and reset the clock on his honeymoon. But otherwise, without some sort of dramatic gesture to placate the public, by late spring the euphoria over Obama's inauguration could give way to a crushing let down.

State and local implosions. The coming spring will also prove crucial as many states and localities write their budgets. These are the same entities that came hunting for roughly $200 billion in federal “stimulus” handouts via thousands of make-work projects.

The real trouble, however, lies in the hundreds of general funds, enterprise funds, pensions, and health care plans which are skirting the edge of bankruptcy right now. The nearly $3 trillion market for state and local debt remains in flux with the certitude that borrowing costs will creep up by about 50 basis points for all but the most well-insulated jurisdictions.

For many others, 2009 will bring a cruel ratcheting effect when reduced revenues from the slowing economy, coupled with increased investor and analyst wariness, combine to reduce debt ratings. This will further push up the cost of borrowing, which will then further strain revenues. Tax hikes might help, but only at the cost of further depressing business activity.

For that reason, the federal government will once again be called on to bail out insolvent operations—but this time it will be cities, counties, and maybe even a state or two.

Incidentally, this process may have a profound impact on winnowing the field of Republican statehouse superstars who might be in a position to challenge Obama in 2012. If Sarah Palin, Bobby Jindal, or Mark Sanford watches their state circle the drain in '09, you can pretty much write them off as a serious candidate in a time of economic strife. Conversely, should a governor truly rise to the occasion by shrinking the cost of their operations while maintaining services, they would jump to the front of the line.

Addled economics. When otherwise smart people start talking about the positive effects of inflation, we've entered desperate times. Let's walk through the root cause of America's housing bubble, which is widely held to be at the epicenter of America's 2008 economic meltdown, to see why inflation can only compound our economic woes.

Why did housing prices embark on a rocket-ride straight up in recent years? Because banks created an unlimited supply of ready buyers at every price point. How did they do that? By lending money to people without the income historically required to pay back a mortgage of a given size or, in many cases, of any size. So the ongoing housing correction, or “collapse” in some quarters, represents a return to a more sane relationship between a borrower's income and their ability to borrow.

Given this reality, income will be at a premium in 2009. Rising unemployment has already started to batter income levels. But real income can also be impacted by rising inflation, which leaves fewer dollars available to pay for things like mortgages.

In effect, those pundits pushing the inflation solution do not advocate jumping off the fake-wealth-via-permissive-lending treadmill, they just want Americans to run faster to get nowhere.

Already we see that when policymakers debase the currency with zero short-term interest rates they provoke a market response. Long-term interest rates, led by the benchmark 30-year fixed mortgage, inched up last week. This is exactly what you would expect as lenders realize that the dollars they will be getting back will have less—perhaps much less—purchasing power than the ones they are lending out.

In basic terms, this is a process that has gone on for thousands of years, since the dawn of human civilization. When kings, pharaohs, or emperors try to tamper with a society's store of value, that value shifts.

Indeed, all the talk of deregulating or reregulating markets misses the simple yet essential point that the serial bailouts of 2008 were designed to avoid market consequences for bad investments. The New Year will demostrate that this was a waste of both time and resources. In 2009, market forces will punish the human hubris that peaked in 2008, setting the stage for a brighter tomorrow.

Jeff Taylor writes from North Carolina.

...The world’s markets have begun a major correction. The world’s governments – led by the United States – are determined to stop it. They want people to spend like there was no tomorrow. But people are acting like every day is tomorrow. Instead of spending, they are beginning to save.

...In the fight against the global financial illness, the feds can’t cure the patient. All they can do is to deliver larger and larger doses of their quack medicine – until the patient dies.

...If we were in an earlier phase of the imperial cycle – such as we were in 1920 – we would ride out the bust...liquidate the mistakes...and bounce back stronger than ever.

But this is 2009...not 1920. The empire is now old and tired. It has been burdened with so many fixes, rules, privileges and safety nets it cannot compete in many key industries. It is also heavily in debt...and running a trade deficit and a public deficit that sink it further into debt each day.

At this stage, Americans do not boldly face the future...they want protection from it. And so the feds flex every flabby muscle trying to hold it back. Of course, no one can stop the future. Birds gotta fly. Fish gotta swim. And the future’s gotta happen.

All the feds can do is to make it happen in a different way. Almost certainly a worse way. More tomorrow...as we keep thinking...

'Atlas Shrugged': From Fiction to Fact in 52 Years
By Stephen Moore

Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read "Atlas Shrugged" a "virgin." Being conversant in Ayn Rand's classic novel about the economic carnage caused by big government run amok was practically a job requirement. If only "Atlas" were required reading for every member of Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial mess a lot faster.

Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as "the looters and their laws." Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the "Anti-Greed Act" to redistribute income (sounds like Charlie Rangel's promises soak-the-rich tax bill) and the "Equalization of Opportunity Act" to prevent people from starting more than one business (to give other people a chance). My personal favorite, the "Anti Dog-Eat-Dog Act," aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies. Why didn't Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We already have been served up the $700 billion "Emergency Economic Stabilization Act" and the "Auto Industry Financing and Restructuring Act." Now that Barack Obama is in town, he will soon sign into law with great urgency the "American Recovery and Reinvestment Plan." This latest Hail Mary pass will increase the federal budget (which has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion -- in roughly his first 100 days in office.

The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls."

When Rand was writing in the 1950s, one of the pillars of American industrial might was the railroads. In her novel the railroad owner, Dagny Taggart, an enterprising industrialist, has a FedEx-like vision for expansion and first-rate service by rail. But she is continuously badgered, cajoled, taxed, ruled and regulated -- always in the public interest -- into bankruptcy. Sound far-fetched? On the day I sat down to write this ode to "Atlas," a Wall Street Journal headline blared: "Rail Shippers Ask Congress to Regulate Freight Prices."

In one chapter of the book, an entrepreneur invents a new miracle metal -- stronger but lighter than steel. The government immediately appropriates the invention in "the public good." The politicians demand that the metal inventor come to Washington and sign over ownership of his invention or lose everything.

The scene is eerily similar to an event late last year when six bank presidents were summoned by Treasury Secretary Hank Paulson to Washington, and then shuttled into a conference room and told, in effect, that they could not leave until they collectively signed a document handing over percentages of their future profits to the government. The Treasury folks insisted that this shakedown, too, was all in "the public interest."

Ultimately, "Atlas Shrugged" is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand's political admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book: When profits and wealth and creativity are denigrated in society, they start to disappear -- leaving everyone the poorer.

One memorable moment in "Atlas" occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track. The discussion sounds much like what would happen today:

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack Obama puts it.

David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand's ideas, explains that "the older the book gets, the more timely its message." He tells me that there are plans to make "Atlas Shrugged" into a major motion picture -- it is the only classic novel of recent decades that was never made into a movie. "We don't need to make a movie out of the book," Mr. Kelley jokes. "We are living it right now."

Mr. Moore is senior economics writer for The Wall Street Journal editorial page.

1/9/2008: from the Daily Reckoning

It is one of the most extraordinary letters ever written, because the SEC so blatantly ignored its author – a prominent man who repeatedly warned the commission that Bernard Madoff was running a Ponzi scheme.

I know you don't want to believe this… because it would mean another huge fiasco that President Bush has to assign blame for rather than accepting the fact the he was the boss – the decider – when so much bad stuff happened.

But, you have to be a crappy – no make that all-time-great crappy – chief executive officer to run an outfit that ignored a virtual smoking gun of evidence that proved a society scion was engaged in a massive multi-billion fraud

But, that's just what the Bush administration and its SEC did. It ignored Harry Markopolos.

No lightweight or gadfly, Markopolos is the former investment officer with Rampart Investment Management here in Boston. He is also a genius at forensic accounting.

For the past nine years, he tried to show the SEC that Bernie Madoff was nothing more than a fraud. That Madoff's investment performance, given his stated strategy, was not merely improbable but mathematically impossible.

Finally, sick of the SEC's brush off, in 2005, Markopolos penned what should have been a devastatingly persuasive 17-page letter to the SEC.

In it, Markopolos detailed why Madoff had to be a scofflaw. In the letter, Markopolos supposed that Madoff was either a minor scumbag… but mostly likely one of the world's greatest thieves.

He presented an “unlikely” scenario in which Madoff, who acted as a broker as well as an investor, was “front-running” his brokerage customers.

In such a situation, a customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.'s shares rose, Madoff kept them; if they fell, he pawned them off onto the poor customer.

But, reading the 29 “red flags” in Markopolos letter, unless you work, or worked, for the SEC, it is impossible not to conclude as Markopolos did, that, “Madoff Securities is the world's largest Ponzi Scheme.”

To read the letter in its entirety, click here.

It is a heck of a read… good with a cup of coffee Saturday morning or something a bit stronger later in the day.

1/8/2008: Setting the Bull Trap by Bennet Sedacca

Bull Trap: A false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

• Shouldn't the consumer, after decades of over-consumption, be allowed to digest the over-indebtedness and save, rather than be encouraged to take risk?
• Shouldn't companies, no matter what of view, if run poorly, be allowed to fail or forced to restructure?
• Should taxpayer money be used to make up for the mishaps at financial institutions or should we allow them to wallow in their own mistakes?

Is the Ultimate Bull Trap Being Set?

...The Fed is punishing savers and the Prudent Man by manipulating interest rates to zero. You can sit in cash and earn zero or you can be forced out on the risk spectrum just so you can keep up with inflation or your benchmark.

Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation. The funneling of assets into risk is masking the deteriorating fundamentals and giving the appearance of a market that has bottomed. But this is sleight of hand, an illusion

The Fed has declared a war on savers, a war on prudence and provided the ultimate Moral Hazard Card-and with our money no less. They are also setting up the ULTIMATE BULL TRAP-a trap so large that when it is sprung, perhaps as early as the end of the first quarter/beginning of second quarter that there will only be sellers left.

...Ever since 1995, the Federal Reserve and other authorities have been assisting in the birth of the largest debt bubble in our nation's history. Money supply has grown exponentially, weak businesses have been formed and failed, the consumer is leveraged up to their eyeballs, regulation is poor, and savings have dried up. Further, the brokerage/investment banking industry has been pummeled beyond recognition; lifelines have been given to everyone from poorly run banks to poorly run auto manufacturers. Esoteric securities have been relocated from the balance sheets of reckless banks and brokers to the U.S. Treasury, FDIC and Federal Reserve. Investors worldwide watched $30 trillion of stock market equity disappear in the past year while home prices have cratered by better than 25%. What other goodies do we have?

• Unemployment on every front is rising. market that has bottomed.
• Tax receipts are down and State Governments are suffering.
• The debt market, except that artificially supported by the Government is closed.
• Earnings estimates for the S&P 500 are down 60% year-over-year.
• Stocks (using the Dow as a proxy) are at the same level they were 10 years ago.
• Industrial Production around the globe is imploding.

[Read it all]

1/7/2008: Rich People Versus Politicians by Walter E. Williams

Sometimes I wish there were a humane way to get rid of the rich. Without the rich for whipping boys, we might be able to concentrate on what's best for the 99 and a half percent of the rest of us.

Warren Buffett and Bill Gates, with about $60 billion in assets each, are America's richest men. With all that money, what can they force us to do? Can they take our house to make room so that another person can build an auto dealership or a casino parking lot? Can they force us to pay money into the government-run retirement Ponzi scheme called Social Security? Can Buffett and Gates force us to bus our children to schools out of our neighborhood in the name of diversity? Unless they are granted power by politicians, rich people have little power to force us to do anything.

A GS-9, or a lowly municipal clerk, has far more life-and-death power over us. It's they to whom we must turn to for permission to build a house, ply a trade, open a restaurant and a myriad of other activities. It's government people, not rich people, who have the power to coerce and make our lives miserable. Coercive power goes a long way toward explaining political corruption.

Gov. Rod Blagojevich's hawking of Barack Obama's vacated U.S. Senate seat; Ways and Means Committee Chairman Charlie Rangel's alleged tax writing favors; former Rep. William Jefferson's business bribes; and the Jack Abramoff scandal are mere pimples on the government corruption landscape. We can think of these and similar acts as jailable illegal corruption. They pale in comparison to what's for all practical purposes the same thing, but simply legal corruption.

For example, according to the Miami Herald, by March 2008, the powerful Florida Fanjul sugar family had given over $300,000 to politicians and political committees. They didn't fork over all that money to help politicians to uphold and defend the U.S. Constitution. Like businessmen who approach Charlie Rangel, Rod Blagojevich and William Jefferson, they give politicians money because they want a favor in return -- namely import restrictions on sugar so they can charge Americans higher prices. In the case of the Fanjuls, and thousands of others buying favors, they are engaged in legal corruption.

Legalized corruption is widespread and that's the job of 35,000 Washington, D.C., lobbyists earning millions upon millions of dollars. They represent America's big and small corporations, big and small labor unions and even foreign corporations and unions. They are not spending billions of dollars in political contributions to encourage and assist the White House and Congress to uphold and defend the U.S. Constitution. They are spending that money in the expectations of favors that will be bestowed upon them at the expense of some other American or group of Americans.

This power helps explain, for example, why a seat on the House Ways and Means Committee, not to mention its chairmanship, is so highly coveted. For the right price, a tax loophole, saving a company tens of millions of dollars, can be inserted into tax law, a la the Charlie Rangel scandal. At state levels, governors can award public works contracts to a generous constituent. At the local levels mayors can confer favors such as providing subsidies for sports stadia and convention centers. When politicians can give favors, they will find buyers.

The McCain-Feingold law was to get "money out of politics" but more money was spent in the 2008 election cycle than ever. The only way to reduce corruption and money in Washington is to reduce the power politicians have over our lives. James Madison was right when he suggested, "All men having power ought to be distrusted to a certain degree." Thomas Jefferson warned, "The greatest calamity which could befall us would be submission to a government of unlimited powers." That's what today's Americans have given Washington -- unlimited powers.

1/7/2008: Madoff Is a Piker by John Stossel

http://townhall.com/columnists/JohnStossel/2009/01/07/madoff_is_a_piker

Bernard Madoff, who stands accused of bilking sophisticated investors out of $50 billion, is reported to have told two of his executives that his business was "a giant Ponzi scheme."

Perpetrators of Ponzi schemes lead clients to believe their money is invested and that their profits are the fruits of the money manager's savvy. But in fact, the "profits" are merely revenue provided by the next group of dupes. Eventually, when no more new dupes can be found, the scheme crashes.

Political leaders say Madoff's alleged crimes show what's wrong with the country. President-elect Obama said the "massive fraud that was made possible in part because the regulators who were assigned to oversee Wall Street dropped the ball." Senator Majority Leader Harry Reid added, "[R]egulators have been asleep at the wheel."

Politicians go on and on about Wall Street "greed" and "irresponsibility."

But Madoff's scam was small compared to Ponzi schemes the government itself runs: Social Security and Medicare.

By now we all know the government does not invest our payroll taxes and pay our benefits with the profits our money earns. In the beginning, writes economic historian Charlotte Twight in "Dependent on D.C.", Americans were told Social Security was an insurance program. But the government was unable to sustain that bald lie.

In reality, our money, rather than being invested and kept in an actual "trust fund," is immediately given to current retirees in Social Security benefits or to their healthcare providers in Medicare benefits. The government's promise to pay for your retirement pension and medical care is just a promise. And a lie.

In theory, the promise could be kept by raising taxes on future workers, but there won't be enough of them. Changing demographics are destroying the programs. A large working class can support a relatively small retired class, especially when life expectancy is 61 years and benefits don't begin until 65. That's how things were in the early years of Social Security. But when life expectancy grows to 80 and a large generational group -- the baby boomers -- retires expecting to be supported by a far smaller working class, that's trouble.

Ten years after Social Security passed in 1935, there were almost 42 workers for each retiree. Five years later, the ratio slipped to about 17 to 1. Now it's about 3.4 to 1. Thirty years from now, the ratio is projected to be 2 to 1.

Think of the burden on those two to three workers who'll have to support one retiree for 15 to 20 years.

The money just won't be there. In the next 75 years Social Security and Medicare have a combined unfunded liability of $40.3 trillion. Social Security's problems get most of the attention, but Medicare will be the killer. At present it accounts for all but $4.3 trillion of the unfunded liability, and as we aging boomers keep demanding new, improved and more expensive medical care, the deficit will only get worse

Soon government will have to say what Madoff said: Sorry! The money's gone.

The government has no legal obligation to make good on its promises. Twice the U.S. Supreme Court ruled that Americans have no contractual rights regarding Social Security benefits. In 1960 (Flemming v. Nestor), the court said, "To engraft upon the Social Security system a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands."

Get that? You have no "accrued property rights" under Social Security. It's a welfare program that exists at the politicians' pleasure.

The government will either stiff us outright or, more likely, cowardly politicians will pretend to honor their promises by printing so much extra money to write the checks that the dollar will be worth pennies.

If Bernie Madoff tried to foist Social Security and Medicare on us, he'd be arrested, prosecuted and thrown in the hoosegow.

There's one thing I can say on behalf of Madoff: He never forced anyone to participate in his scheme. That's more than I can say for the government. Through taxation and inflation, it forces us to pay for all its schemes.

1/6/2008: Tyranny of the Tax-Exempt By Dick Morris & Eileen McGann

Published in the New York Post on January 6, 2009

It now looks like half of President-elect Barack Obama's stimulus package will take the form of "tax cuts" for 95 percent of all Americans. Yet this wouldn't so much boost the economy as trigger a massive, unhealthy shift in American politics.

Under Obama's plan, the majority of American voters would pay no federal income taxes, but would get money from the government instead. That is, these "refundable tax credits" are basically welfare checks - and Obama's plan would leave the most of us collecting, not paying.

A $200 billion giveaway won't do much to get a $14 trillion economy rolling again. But the plan would leave any future taxpayer revolt no hope of majority support.

Today, the bottom 50 percent of US taxpayers pays a total of $30.6 billion in federal income taxes on a combined income of about $1 trillion. So about 3 percent of all federal income-tax payments come from the poorest half of the country. (The top 1 percent pays 40 percent; the top 25 percent pay 85 percent of the federal income tax.)

Obama's plan - he'd give all couples a $1,000 refundable tax credit and all single people $500 - would funnel more than $50 billion to the lowest half of the country, thereby completely wiping out their total federal tax liability. In most cases, it would trigger a "refund" welfare check.

In one stroke, this would transform the majority of voters from taxpayers into tax eaters - and leave an increasingly small minority to pay the bill. Whether or not this is good economics, it is very dangerous politics.

Essentially, it would put those who actually pay the taxes that fund our government into much the same situation as landlords in New York City - hopelessly outvoted by their tenants, who use their political clout to limit rents and landlords' profits.

Since Ronald Reagan, the anti-tax movement has been based on a blue-collar revolt against high taxes; it would lose that constituency under the Obama plan. Taxpayers would be politically helpless and the tax-eating majority would have free reign to impose any levies it wished.

Almost all of the 68 million tax filers in the country's bottom economic half would get a check from Washington at tax time. Some would be among the 22 million who get money from the Earned Income Tax Credit (EITC). Others would get a $500 check through the (Bush-passed) Child Tax Credit - and all would get funds through the new Obama tax credit.

Welfare would no longer be only for the poor - the majority of the voters would depend on government handouts. This very system is what makes European social democracies so resistant to change.

In 1980, the bottom 50 percent of the nation paid 7 percent of the national tax bill, after refund and credits. It now pays 3 percent; under Obama's plan, it would pay less than nothing (that is, it would net a profit from the IRS). In 1980, the top 1 percent paid 19 percent of the income-tax burden; now it's 40 percent. Taxes have become the province only of the rich.

Of course, the shift in tax burden also mirrors the incredible increase in incomes of the wealthy in the last 30 years - the top 1 percent earned only 8 percent of the total national income in 1980; now it earns 22 percent. And the poorest half has seen its share of national income fall from 17 percent in 1980 to only 12.5 percent today.

So it is both fair and sensible to give the poor a tax break and to draw the bulk of federal revenues from the rich. But to exempt the bottom half - a majority of the voters - from paying any taxes and to award them refund checks instead would dangerously alter the fundamental balance of national politics. For the economically well off, it could effectively become taxation without representation - which, as the founders of our nation warned, leads to tyranny.

1/6/2008: A Question for My Friend Alan Dershowitz by Dennis Prager

...As regards Israel (and America and much else), the Western world’s moral idiots, to use the term in the title of the Dershowitz column, are virtually all on the left, including and especially many of his colleagues in academia.

...to acknowledge the moral failure of the left, especially the secular left, on most of the great moral issues of the post-World War II era -- the Cold War, the Middle East, confronting (or even acknowledging the existence of) the Islamist threat -- is very difficult for a person on the left, even one as analytical as Dershowitz. Secular leftism is analogous to Arthur Koestler’s “god that failed.” And few people want to confront the fact that the ideal, the god they bet their lives on, is a false god.

Second, to acknowledge the broken moral compass that guides the left is to implicitly endorse the right, especially the religious right. But that is very difficult for anyone on the left to do because the essence of the secular left is a rejection of the Christian right. That it is conservatives, especially religious conservatives, who are the most stalwart supporters of Israel, must greatly disturb Dershowitz.

And, it is precisely among those who most reject Judeo-Christian values that anti-Israel moral idiocy prevails. How does Dershowitz explain that? That’s my question.

1/6/2008: Are They All Democrats Now? by David Limbaugh

Though liberals, such as Obama and the vast majority of history textbook authors, have a romantic attachment to FDR, the best evidence is that his New Deal did not end the Great Depression, but exacerbated it.

No one has done a better job in refuting liberal history revisionists and FDR apologists than Burton W. Folsom Jr. in "New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America."

Almost at the end of FDR's second term, the economy was getting worse, with unemployment at more than 20 percent. Folsom cites the words of FDR's treasury secretary and one-time confidant, Henry Morgenthau Jr., to make his case. These words should serve as a chilling reminder to all politicians even considering jumping on Obama's FDR big-spending bandwagon:

"We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot."

1/6/2009: The Economic "Stimulus" by Thomas Sowell

Two centuries ago, when there were plans to create a huge fund of money to pay off Britain's national debt, the great classical economist David Ricardo objected on grounds that-- no matter what the money was said to be for-- politicians could spend it for whatever they wanted.

Two centuries later, we have not yet caught up to that plain reality, even though the $700 billion that was supposed to be used to rescue financial institutions has already begun to be spent on other things.

Regardless of what President Bush or Secretary of the Treasury Paulson may have had in mind when they promoted this huge bailout package, with all due respect to these gentlemen what they had in mind will not matter in the slightest after January 20th.

All that money is just a gift to the Democrats to spend in whatever ways will advance the interests of their constituents and of the Democratic Party.

It was not just a gift of money-- huge though that is-- it is also a gift of exemption from Republican criticism, even for the bailout of General Motors, which President Bush began, even when Congress refused to give GM the money without preconditions. It is a political get-out-of-jail-free card that can cover whatever disasters the Democrats create on their own in the years ahead.

The whole idea behind the "stimulus" package begins to look more and more dubious as the outlines of the policy begin to take shape.

Take the idea that much of this money will be spent on "infrastructure." This certainly sounds good-- until you stop and think about it. So do most political notions.

Does spending on infrastructure mean that the money is going to be spent filling potholes and repairing bridges? Or will it be spent creating new things?

One of the key reasons why infrastructure gets neglected, in the first place, is that there is very little political pay-off to filling potholes and repairing bridges, compared to spending that same money creating community centers, bike paths and other things.

These new things create opportunities for ribbon-cutting ceremonies that give politicians favorable free publicity in the media. But nobody holds ribbon-cutting ceremonies for filling in potholes or repairing bridges.

The whole process is biased toward doing new things, even if the repair and maintenance of existing infrastructure would serve the public interest better.

But, even in the unlikely event that the public interest triumphs over special interests, there is another very important difference between repair and maintenance activities, on the one hand, versus building new things on the other.

New things require long delays before they can get started, especially when they have to be done by politicians. Someone once said that Congress would take 30 days to make instant coffee-- and Congress is just the beginning of the delays, as all sorts of competing interests jockey for position at the public trough.

Just putting together an environmental impact report for something new to be built can be a long process, especially if its findings are challenged by environmental extremists, who pay very little price for challenging, even if the delays caused by their challenges cost others millions of dollars.

In short, it can be years before the money that is supposed to stimulate the economy actually gets into the economy. And nobody knows what the economy will be like when that money finally gets into circulation.

A common problem with government economic policies in general is that it is very hard to predict how long it will be before the policy actually affects the economy. An economic stimulus policy created during a contraction in demand can take effect during an inflationary expansion of demand-- and fuel still more inflation.

A trillion dollars or so, created out of thin air by a government that already has a huge deficit, can set off another round of inflation that can take some very painful new policies to bring under control-- or can have even more painful effects, if it is not brought under control. The new administration may need that get-out-of-jail-free card.

1/6/2009: The Year of Madoff By Eugene Robinson
Tuesday, December 30, 2008; Page A15

For anyone taking stock of 2008, Barack Obama is the inevitable choice as Person of the Year. But he's not the only American whose story suggests that this thrilling, dramatic, unforgettable year will be seen as a demarcation of grand historical eras, a bright line between yesterday and tomorrow. My choice for runner-up is Bernard Madoff.

In a sense, we're all Bernie Madoff. We've been running our economy in accordance with his accounting principles for a generation -- and now we face a most unpleasant reckoning.

As everyone knows by now, Madoff -- once one of the most respected financiers on Wall Street -- stands accused of being perhaps the biggest swindler in history. Before his arrest this month, he reportedly told his sons that he had defrauded investors of up to $50 billion. He allegedly followed the playbook written more than eight decades ago by the elegant grifter Charles Ponzi, who used money from new investors to pay juicy returns to old investors. That works fine for a while, but every Ponzi scheme eventually collapses in ruin.

Wall Street veterans recall how investors once begged to be allowed to invest their money with Madoff. Unlike Ponzi, he didn't promise to deliver flashy double-digit returns overnight. He "earned" his investors 1 percent or 2 percent a month, bull market or bear, rain or shine. Because he didn't overpromise, and because he limited his clientele, he was able to keep the scheme going for decades.

Such steady gains, unsullied by the occasional bad year or disastrous quarter, are patently impossible. Some potential investors took one look at Madoff's operation and took a pass. Some of the millionaires, billionaires and professional money managers who unwisely gave their money to Madoff were guilty of allowing greed to overwhelm their powers of observation and reason.

But not all of Madoff's investors could have been in the dark. Some must have realized how unlikely it was that he had found some sort of magical strategy or technique that would always make money, no matter what the financial markets were doing. Some investors, I would wager, must have calculated that they could get in, get their return and get out before the whole thing fell apart.

Which makes me wonder how many of us had our eyes open when housing prices were soaring in Ponzi-like leaps -- by 10 percent or more a year, in some parts of the country -- while middle-class incomes were largely stagnant. How many of us stopped to ask just who was supposed to be able to pay $1 million for a standard suburban split-level, even if it had an upgraded kitchen with a Sub-Zero fridge?

The whole subprime mortgage industry was based on the idea that housing prices would always rise. Given that assumption, it was perfectly rational for first-time homebuyers to sign up for adjustable-rate mortgages that they couldn't really afford. From the moment they signed the loan papers, they would be building equity -- through appreciation -- that soon would make it easy, and lucrative, to refinance or sell.

In other words: Get in, get their return and get out before the whole thing fell apart.

I'm not saying that average Americans were as culpable as Wall Street in creating this financial and economic crisis; our sins were venial, whereas theirs were mortal. Madoff's alleged fraud was at least straightforward. Much worse was the creation of exotic "derivative" investment products -- whose true value turned out to be impossible to ascertain -- that were bought and sold with enormous leverage. As long as real estate values kept rising, it didn't matter what these chimerical investments were worth. What mattered to Wall Street was the ability to collect enormous fees from real people, in real dollars, for trading unicorns and dragons.

After the bursting of the Internet and housing bubbles, I think we're done with bubbles for a while. Obama's first challenge -- and it may take much of his first term -- is to get the economy back into a pattern of tangible, sustainable growth. He will be able to thank Madoff for giving us the simplest possible explanation of what we knew all along but chose to ignore: that there's still no such thing as a free lunch.

1/6/2009: from the Daily Reckoning www.DailyReckoning.com

...Today’s press – the means by which delusions are shared and propagated – tells us that the government of this world’s richest nation, called the United States of America, is planning a “stimulus package” of something on the order of $1 trillion. What’s the package expected to stimulate? The idea is to get more of these pieces of paper into citizens’ hands, so that they will be encouraged to act as though they were wealthier. It doesn’t seem to bother anyone that the source of the misery of which so many now complain was the fact that, in the past, so many acted so much wealthier than they really were. Nor does it seem to disturb the collective fantasy that this stimulus plan is being created, more or less, by the same class of people who neither saw anything wrong with the last fantasy nor mentioned to anyone that it was going to collapse.

“Hopes pinned on rate cuts and fiscal packages,” says the headline in the Financial Times , a leading source of financial hallucination. It explains how the aforementioned U.S. government intends to cut taxes in order to put those aforementioned pieces of green paper into consumers’ hands.

Further in the paper, another headline – “Reports of $300 billion Obama tax cuts lift mood” – tells us that the public is getting in the spirit of the new fantasy even before it is officially launched.

“Optimism about central bank and government efforts to revive the global economy helped improve investor risk appetite yesterday,” continues the article.

“Fed Officials Endorse Big Stimulus to Battle US Recession,” adds another source – Bloomberg .

What a marvelous place! Every day is magic on this planet. Every day is a new day...with no memory of what happened the day before...nor any thought to what will happen tomorrow. People are ready to believe whatever makes their day more enjoyable...no matter how absurd.

Anyone who bothered to think about this ‘bailout’ plan for two seconds could see that it is a hoax and a scam. Those pieces of paper are not really wealth...they merely represent wealth. But since the U.S. government has no wealth in reserve – indeed, it is famously borrowing to make ends meet already – it can only pass out wealth to one person by taking it from someone else. It talks of ‘tax cuts,’ but we have heard nothing of spending cuts. So, what the global consequence must be is an increase in pieces of green paper – or let us say, demand for wealth – with no actual increase in wealth itself. It is just a shared illusion, in other words.

1/4/2008: This is a legitimate letter - the company actually exists!

To All My Valued Employees,

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job.

What does threaten your job however, is the changing political landscape in this country. Of course, as your employer, I am forbidden to tell you whom to vote for - it is against the law to discriminate based on political affiliation, Race, creed, religion, etc.

Please vote who you think will serve your Interests the best. However, let me tell you some little tidbits of fact which might help you decide what is in your best interest. First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story.

This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my big home at last years Christmas party. I'm sure all these flashy icons of luxury conjure up some idealized thoughts about my life. However, what you don't see is the back story.

I started this company 12 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living space was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the Goodwill store extracting any clothing item that didn't look like it was birthed in the 70's.

My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button For me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, ****, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to me like a 1 day old baby.

You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations... You never realize the back story and the sacrifices I've made. Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't.

The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for. Yes, business ownership has is benefits but the price I've paid is steep and not without wounds. Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check?

Obviously, government feels the latter is the economic stimulus of this country. The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy. Here is what many of you don't understand; to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the mud of America are the essential drivers of the American economic engine.

Nothing could be further from the truth and this is the type of change you can keep. So where am I going with all this? It's quite simple. If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more. Then, I will close this company down, move to another country, and retire.

You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

While tax cuts to 95% of America sounds great on paper, don't forget the backstory: If there is no job, there is no income to tax. A tax cut on zero dollars is zero. So, when you make decision to vote, ask yourself, who understands the economics of business ownership and who doesn't? Whose policies will endanger your job? Answer those questions and you should know who might be the one capable of saving your job. While the media wants to tell you "It's the economy Stupid" I'm telling you it isn't.

If you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the Constitution, and will have changed its landscape forever. If that happens, you can find me in South Caribbean sitting on a beach, retired, and with no employees to worry about.

Signed, Your boss,

Michael A. Crowley, PE
Crowley, Crisp & Associates, Inc.
Professional Engineers
Wake Forest, NC 27587

Naomi Ragen: To All the Useful Idiots Protecting Hamas

Our speech at the UN

Members of the United Nations, Democracies, dictatorships, republics, and the honorable secretary-general:

Within a few hours, media outlets in your countries shall present horrific photos of blood, fire, and rubble from the Gaza Strip. The Palestinians will be screaming, in front of the cameras, about the massacre undertaken by the State of Israel. Initially, you may show understanding for our operations in the Strip, yet once the photos of wounded civilians reach you, you shall press us, as is your custom, to stop defending ourselves.

The first signs of this phenomenon can already be seen. Calls to "end the violence" from across the world are being heard loud and clear - yet they are only being heard now, after years of violence, and after Israel finally decided to respond. The European Union already rushed to declare that it condemns Israel's "disproportional use of force." Several news networks have brought together panels whose members are scrutinizing the law books at this very moment in order to ascertain whether the Jewish State violated some international law.

I do not intend to deal with the question of where were these condemners and critics for the past seven years, when Hamas' murderers set the timers of their rockets to coincidence with the end of the school day in Israel, because of a declared aim to kill as many children as possible. The question we should be discussing at this time is as follows: Why do the countries of the world and global media outlets obsessively engage in strict criticism that is only directed at Israel? After all, there is not even one country out there that is required to adhere to the moral criteria which the world demands of us - of us of all people, the ones who as opposed to the rest of the world face threats of extermination.

Our Arab neighbors are well familiar with this double standard vulnerability. On their part, they are not bound by any kind of moral code.

And so, they learned to exploit the international strictness towards Israel. A long time ago, they already understood that they cannot face the State of Israel on the battlefield. Indeed, when it comes to photographs and videos, they boast uniforms and weapons, yet once the fighting gets underway, they are quick to take off their uniforms and assimilate among women and children used as human shields. They also make sure to place their arms depots in hospital basements and to fire rockets at population centers out of schoolyards. Their great hope is to elicit an Israeli response that would unintentionally hurt a few children. Once that happens, they will wave their bodies before the cameras and cry out to the world for help.

This was the case in Lebanon, and this may happen tomorrow in the Gaza Strip. Easing Europe's conscience the states demanding that Israel adhere to certain moral standards do not even dream of asking the same of her enemies. After all, we are dealing with theocracies and dictatorships, where homosexuals are publicly hanged, where women are regularly stoned for undermining their "family's honor," and where children suspected of theft have their arms severed.

What do these states have to do with the value of human life? We should therefore ask representatives of global opinion: Be honest with yourselves - Do the lives of humans being butchered daily in Iraq, Afghanistan and Darfur arouse you into similar action?

Reality indicates this is not the case. My answer to the question regarding the obsessive preoccupation with the actions of the Jews is purely sociological. Many of you, the shapers of public opinion, and mostly the Europeans amongst you, are interested in easing your conscience: If only can only show that the Israelis-Jews are not so moral or innocent, perhaps they deserve everything you did to them before they were able to establish their state? After all, here they are, occupying and butchering the poor Palestinians; they are certainly no better than us!

To that end, you are willing to help out the lowliest terrorists. Therefore, you bought into their slanderous Mohammed al-Dura tale, and therefore you will rush to buy into various blood libels in the coming days.

Those who launch missiles and mortar shells into kindergartens know that they will always enjoy a protective umbrella from you.

They draw their self-confidence from the intolerable ease with which they enlist your public opinion in their favor.

Therefore, you would do well to think twice before you move to stop the punishment they lawfully deserve.

After all, you are the only lifesaver that can spare this radical terror group the measure of justice hovering above it.

1/3/2009: Khat -- is it more coffee or cocaine? By Cynthia Dizikes

[Once again, the government just can't leave people alone. Taxpyer resources are being wasted to deprive people of the benefits of a relatively benign substance just to enhance the power of government bureaucrats and parasites over our lives. Why not leave them alone and devote the resources to protecting life, liberty and property, the ONLY justifiable use of government resources.]

The narcotic leaf is a time-honored tradition in Africa but illegal in the U.S., where demand is growing.

Reporting from Washington -- In the heart of the Ethiopian community here, a group of friends gathered after work in an office to chew on dried khat leaves before going home to their wives and children. Sweet tea and sodas stood on a circular wooden table between green mounds of the plant, a mild narcotic grown in the Horn of Africa.

As the sky grew darker the conversation became increasingly heated, flipping from religion to jobs to local politics. Suddenly, one of the men paused and turned in his chair. "See, it is the green leaf," he said, explaining the unusually animated discussion as he pinched a few more leaves together and tossed them into his mouth.

For centuries the "flower of paradise" has been used legally in East Africa and the Arabian Peninsula as a stimulant and social tonic.

But in the United States khat is illegal, and an increased demand for the plant in cities such as Washington and San Diego is leading to stepped up law enforcement efforts and escalating clashes between narcotics officers and immigrants who defend their use of khat as a time-honored tradition.

In the last few years, San Diego, which has a large Somali population, has seen an almost eight-fold increase in khat seizures. Nationally, the amount of khat seized annually at the country's ports of entry has grown from 14 metric tons to 55 in about the last decade.

Most recently, California joined 27 other states and the federal government in banning the most potent substance in khat, and the District of Columbia is proposing to do the same.

...But some experts are not convinced that its health and social effects are so benign. A World Health Organization report found that consumption can lead to increased blood pressure, insomnia, anorexia, constipation and general malaise. The report also said that khat can be addictive and lead to psychological and social problems.

[Then again, so can addiction to spending other people's money. Let's put the governments, federal, state and local, and their useless bureaucrats on a 12-step program to wean them from the tit of the taxpayer.]

..."It is not coffee. It is definitely not like coffee," said Garrison Courtney, spokesman for the Drug Enforcement Administration. "It is the same drug used by young kids who go out and shoot people in Africa, Iraq and Afghanistan. It is something that gives you a heightened sense of invincibility, and when you look at those effects, you could take out the word 'khat' and put in 'heroin' or 'cocaine'."

[That's what they said about marijuana back in the "Reefer Madness" days. Watch out, Oreo cookies, there's pot smokers on the loose."]

...The United Kingdom determined last year that evidence does not warrant restriction of khat. In the United States, the substance has been illegal under federal law since 1993.

...Not all lawmakers, however, support the increased efforts to prosecute khat sellers and users. California state Sen. Gloria Negrete McLeod (D-Chino) called khat use "a minor problem that may be nonexistent and little understood" and voted against Anderson's bill.

"The Legislature cannot continue to add on penalties and punishments filling up critically overcrowded prison system without weighing the consequences on how this will affect California," she said. [Amazing, a member of the legislature with at least half a brain...truly a rarity]

[Read the rest]

1/2/2009: The rest of the world cannot understand how after bitter election campaigns, American politicians can return to reality.

• For Instance Sarah Palin has invited the men who defeated her, Barack Obama and Joe Biden to Alaska for a moose hunting trip.
  
• She has hired two other prominent men to assist them. Dick Cheney will instruct them in safe gun handling and Ted Kennedy will drive them back to their cabins.

What a gal... that Sarah is such a sport and thinks of everything.

1/1/2009: Thought For The Year

Give me enough tears to keep me human,
Enough humor to keep me wise,
Enough setbacks to keep me Humble,
Enough accomplishments to keep me confident,
Enough patience to teach me waiting,
Enough hope to teach me trusting,
Enough friends to give me love,
Enough memories to give me comfort
And enough faith to keep me going.

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