Amidst a continuous multimedia assault on legal civilian gun ownership, one paradox studiously ignored by the gun-banners is the penchant for Domestic Agencies of the State to arm their staff members with firearms deemed (rhetorically) appropriate for warfare.

As obvious as this cognitive dissonance may be, it still betrays conditioned blindness to the staggeringly larger institution of mass destruction in whose shadow we live our daily lives.

People who live in a village at the foot of a volcano undoubtedly become accustomed to the occasional tremor or sign of steam rising from the cone above. The longer they live there without any significant sign of danger from the mountain, the more unconcerned they become regarding the threat it represents. They regard its contribution to fertile soil a blessing, and as time passes give ever less thought to the mere possibility that conditions could rapidly change.

Americans appear particularly vulnerable to this false sense of security. The founding myths of the country are taught as history to children and adults alike, leaving the typical citizen smug in his or her belief that the USA enjoys the best system of governance, and that "we're the biggest kid on the block." "We" have the fastest war planes, the biggest Navy, "our" nuclear submarines ring the globe and "our" troops have boots on the ground in nearly every nation on the planet, all part of a force for "good."

If this is in doubt, imagine what would occur if you loudly opined at work or a family gathering that the USA is the Evil Empire? Given the stridency with which most people identify with the State, you might risk physical violence by making such a bold statement.

This leads to some worrisome observations.

First, few people understand modern technology. How many people do you know who actually could describe the scientific basis for how cell phones or microwave ovens work? Could any of them roughly sketch out the parts of these marvels?

These are but two of many items we use in daily life which for all practical purposes are magic. We may laugh at documentaries that recorded how primitive peoples reacted to modernity when first exposed, but in truth the vast majority of us cannot tell modern mechanisms from magic.

In such an environment, is it difficult to understand why many people seem to regard our modern "expert" rulers as wizards able to repeal laws of nature and deliver on promises that are arithmetically impossible? Most people clearly regard the political state as an Earthly God, a supra-human organization that elevates its human members to the level of infallible and not-to-be-questioned demigods who have divined the General Will and guide the rest of us from their seat of Wisdom.

The second worrisome observation is made by Professor Hoppe, who helps illustrate why in a democracy where elected rulers are but temporary caretakers, and elections have become media-saturated popularity contests driven by $50,000 per plate "fundraisers," we must acknowledge that the people who are elected are the most cunning, facile con artists among us. The "lying" candidate, upon winning the election, becomes someone handed the power to order…almost anything these days.

Another term for our politician-rulers might be "sociopaths," and if one popular author is correct, then the 5% figure she offers for the population at large must be ten times, if not nearly twenty times higher when considering public officeholders.

The third worrisome observation is that the US military is a political organization, at least within its upper ranks.

Sociopaths with WMDs.

Please stop to think about that for a moment.

Nearly every American knows someone who is or was in the military. Mom or Dad, brother or sister, an aunt, an uncle, a neighbor, a coworker, those who currently wear a uniform or did so in the past are present almost everywhere we look.

Such people represent the "military-as-normal" in our lives. They are people just like us (for the most part) and would never hurt us, their family, friends and neighbors.

They are what make living in the shadow of a Krakatau or Iceland's Katla seem so safe and normal. The U.S. military is so…pedestrian…or so it seems. It is made up of people just like us, who would never collectively act to harm anyone in this land of the free and home of the brave, right?

It is this overly-sanguine condition that has led to handing technologies of nearly unlimited destructive power to people who are 1) politician-sociopaths, 2) drunk on power, and 3) operate in near total secrecy, surrounded by absolute obedience to authority inculcated on a 24/7 basis.

Instead of worrying about Bubba's AR15 that he uses to shoot cardboard targets a couple times a summer, why aren't we wet-our-pants terrified of the sociopaths to whom our best and brightest have handed atomic bombs, biological weapons, nerve gasses, and more modern, secrecy-shrouded technologies that could prove even more mass-murderous than those of fiction and horror stories?

The answer is simple: If those hellish technological marvels were unleashed on us, then the sociopaths who rule us would insure their own self-destruction, right? They would destroy their wives and husbands, their children and parents, their brothers, sisters, nieces and nephews. No sane persons would contemplate such things.

The fourth and final worrisome observation ties all this together.

In the ancient fable of The Scorpion and the Frog, the frog was of the same belief, that imminent self-destruction would stay the "hand" of the scorpion and allow the frog to safely convey them both across the river.

The nature of the scorpion, however, was to sting. The frog forgot that the scorpion was not a frog; it was by nature something entirely different and always a deadly threat.

We, as a society, let our optimism, society-level Chauvinism, our confusion over technology and experience with the familiar lull us into creating a titanic threat to our lives and our future, one we seem to understand as little as did the residents of Pompeii prior to the historic eruption of nearby Mount Vesuvius.

As usual, it is not the small and foreign (small arms like an AR15, in this case, to the person who doesn't own one) that threatens our children sitting at their school desks, it is the monstrous and familiar, whose incalculable destructive power rests cradled in the hands of megalomaniacs who have spent their entire adult lives steeping in human blood. They are not like us, despite appearances, and any belief to the contrary is childish, naïve, and self-destructively stupid.

What happens if such scorpions decide that the USA (or world) must be destroyed in order to save it?

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at gone-but-not-forgotten Free-market.net.

The Best of David Calderwood

Americans sure seem jumpy these days. Acquaintances who have never seen websites like LRC have asked me about buying gold or silver, and even those who previously abhorred the thought of owning a gun seem to be warming up to the concept.

There's a very real sense that something is wrong; like people on the shore watching water rush away from the land, the shared notion that it's time to get to higher ground, fast, is palpable.

Higher ground is easy to identify when one discusses topography. It's a lot more difficult when considering the definition of "safety" during a financial, economic, and potentially social cataclysm.

Anyone paying attention for the past twenty years could be forgiven for being shocked at how long this whole sorry excuse for an economy has held up. I thought seriously about selling my house in 1998, secure in the belief that doing so would allow me to bank the "profits" at the top and rent during the ensuing economic contraction, after which my money might buy much more.

Whether you agree with my implied expectation or not, my point is that an error in timing is significant. Five minutes too late in running from a tsunami certainly cost some people their lives in Japan. Being five minutes too late during a bank run could lead to complete loss of savings.

Acting too early, however, also has its risks. When making a massive change in one's finances there's usually a burn rate involved in waiting for the anticipated calamity to ensue. During that waiting period there's food to buy, bills to pay, and the costs of life-goes-on are significant.

This is why I cringe when I read recommendations that are unequivocal and drastic. Maybe the author is right on timing and severity, but my experience is that no one, as yet, has nailed both of those in the past twenty years. I think it pays to weigh major financial or life changes very, very carefully.

Be very cautious when considering putting all of your eggs in the "Prepper" basket.

To me, preparing for a middle-of-the-road crisis seems prudent. This means eliminating debt, trying to shore up a job (or plan for another income source), and accumulating a reasonable supply of water and healthful foods you already like to eat.

Crisis or no, I think it's silly not to own a good fire extinguisher and know how to use it. I mean, in the time it takes for the fire department to show up after you call, your actions could be a matter of life and death. By the way, substitute "gun" and "cops" for "fire extinguisher" and "fire department" and you can infer my view of living the unarmed life.

That said, crisis is not a time of Mad Max and roving gangs, it's a time of self-help and mutual assistance. Invest a lot more time and effort into family, neighbors, and friends. They are much more likely to be keys to success if the going really, really gets tough.

Money-wise, I think it's safe to assume that someday the electronic forms of money to which we're accustomed may have a hiccup or two. While the jury is still out regarding the final Act in the Shakespearian tragedy Fiat Money, it remains quite possible that little green-stained pieces of paper will be accepted as a medium of exchange for a while longer. I have yet to see the early signs of a credible alternative and until they appear there is nothing obvious between our current money and a full barter economy. Barter is a TEOTWAWKI [The End Of The World As We Know It] kind of thing, and I think the only way to "prepare" for that is to fill a secret cavern with trade goods you know will be hot commodities in a few years.

With my luck I'd sink my life's savings into something people turned out to be willing to make for themselves. I simply don't try to prepare for Armageddon. Doing so appears mutually exclusive with regard to handling less catastrophic conditions.

Instead, I work with the world as it is today, with an eye to what my research informs me I should prudently prepare to face when this IOU-saturated, over-consuming paradigm evolves into what comes next.

The good news is that I look forward to my fellow citizens hopefully rediscovering the joys of living honorable lives, and expecting no less from those who seek positions of power. The Crystal Meth Economy was fertile ground for moral relativism and infantile "me first" behaviors, and after going cold turkey from that pernicious hallucination perhaps we can expect a popular resurgence of more socially beneficial views like the values of hard work, modesty, and minding one's own business.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

It sounds so nice and simple, doesn’t it?

Just yesterday a woman running for Illinois Treasurer promised me that if given the power of that office she’ll reverse Illinois’ horrific unemployment problem by forcing banks that were recipients of government bailouts to resume lending to small businesses.

Hers was but one of dozens of promises I heard over the past week on the radio, all of them from earnest-sounding men and women intent on obtaining or keeping positions that give them access to some of the levers of power ruling our society.

Sadly, I cannot vote for her.

She’s a moron.

I hate to be that blunt, but who could be so stupid as to believe that it’s simply a lack of access to borrowing that limits small businesses from expansion and hiring? Is there demand for their products? Are business people desirous of loans competent? From where do the funds for loans come, and what are the unseen costs involved? TANSTAAFL.

Answers to these questions are pertinent. She ignores them.

Why?

It could be that she is dramatically ignorant of economic principles. Given what I’ve read of elected rulers, this is probably a safe assumption. The fix for this might be to expect wise but uninformed rulers to recognize their limits and surround themselves with competent experts.

Nobel Prize-winning economists like Milton Friedman and Paul Krugman are often tapped to advise office-holders. One of the architects of tax withholding (Friedman) somehow does not, in my world, qualify a person as "expert" except in Machiavellianism, and readers of LRC are thoroughly familiar with Dr. Krugman’s "expertise." It seems to me that these examples are 100% typical.

I’m 50 years young.

I used to think 50 was getting pretty close to "old" but of course now that I’m here and I see how little I know, and how much I have to learn, I feel pretty young. I have more in common with a high school student than I do with someone who is really, really knowledgeable and wise.

My favorite analogy is this: The sum of my knowledge is like a flashlight. I’m in a darkened warehouse, the sum of all knowledge, and I can tell from echoes and such that it’s really big, but my flashlight is obviously far short of illuminating to the walls and ceiling.

When I learn more, my flashlight gets brighter.

This creates a problem.

As I illuminate more space around me, my sense of the size of the total warehouse grows exponentially. I still can’t see anywhere near to the walls or ceiling. In other words, the more I know, the more I realize that the sum of what I know is pitifully small compared to the sum of all knowledge. The more I know, the more I realize that the sum of all knowledge is astronomically immense (and this doesn’t even address the likelihood that some of what I think I know just ain’t so).

This humbles me.

There are no experts, only students, some of whom are more advanced than others (all of whom undoubtedly are mistaken in some ways about what they think they know; some error is unavoidable, making the dogmatism of most supposed "experts" cause for considerable caution).

We all spend our lives in the immense dark, trying to increase the light around us a bit at a time.

Those who aspire to political office obviously do not grasp this axiom.

A local TV station recently held a debate between the incumbent state senator and his challenger. He’s not a bad guy for a career politician (being a republican in a democrat statehouse meant he did less harm than most) but his challenger’s platitudes about how "we should create 21st century jobs" was so nauseating and insipid that I had to turn off the video.

Do either of these folks have the wisdom to see political office as it really is, or grasp the "seen and unseen" benefits and costs of every proposal they might utter?

Of course not. Who among us could seek office if we understood and grasped the complexity of the real world and our own profound and unavoidable lack of knowledge, that our dictates would be likely (if not certain) to be categorically wrong and do more harm than good?

I suppose a sociopath could. After all, political office is the Superhighway of Criminal Opportunity.

I guess I just answered my own plea. There are no political solutions to political problems.

I can’t vote.

Every candidate is one of two things, a profoundly ignorant fool, or a knowledgeable sociopath.

YMMV, I suppose, but I surely can’t vote for stupid or evil.

I must have better things to do, like acting to arrange my life so that the stupid, harmful, and just plain mean things political officials inevitably do 365 days a year burden me as little as possible.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

What if the place where we live is seized by a pandemic of political negativity so black and clawed that a Great Leap Forward, a Gulag Archipelago, or a Killing Fields is instituted by a political regime to which our neighbors consent?

Without consent no one would send their sons or daughters to labor in Orwell’s Ministries of Love, Truth, Plenty or Peace. No sons or daughters would phone Mom and Dad in breathless joy, "I got the job! I was issued a uniform and begin training next week!" Little Mary could never attend school where her classmates’ parents held Mary’s DHS-employed mother in utter contempt.

Without widespread consent, every IRS agent, every FBI agent, every FDA inspector, and all their tax-paid brethren would be forced to live together in guarded communities lest their non-consenting neighbors slit their throats. Military personnel would never leave their bases unarmed and in uniform lest the locals attack them on sight.

No, whatever political repression befalls the USA, we will know that it exists with consent even if Predator and Reaper drones take to the skies above the 50 states in search for illegal combatants to exterminate.

So what awaits us?

Among many insights I gleaned from Ralph Raico’s fabulous lecture series "History: The Struggle for Liberty," was how cosmopolitan was Germany in the inter-war years. Who could have foreseen the coming conflagration when, if I recall his words correctly, one of every nine marriages registered in a major German city was between a Jew and a Gentile?

Those who understood real economics had to know that the Weimar Republic was crumbling under treaty-required war reparations. Despite what must have been a surface calm during early stages of the economic cataclysm, anyone with an open mind had to see a disaster in the making.

Where does that leave us today?

Bob Prechter has written extensively on the relation between popular culture and the mass psychology that underlies the investment markets. One aspect of this is the observation that horror movies proliferate and are successful during periods of waxing negativity and declining asset markets while happy, Disney-esque fare dominates in times of social and financial optimism.

In our recent past we have seen life imitate art in the form of John Yoo spearheading a legal rationalization for politically-sanctioned torture, a horrific entry into our world of the bloody viciousness of the "Saw" and "Hostel" horror movie franchises that are so popular. This occurred under a "conservative" president and continues under a "liberal" one.

Where is the outrage?

This is the definition of popular consent.

A recent YouTube series on the bank bailouts titled, To Rob a Country, Own a Bank reviewed in fine detail how the leaders of both political parties and highly-placed political appointees colluded with campaign contributors and their ex-colleagues in the banking industry to systematically rob the American people in by far the greatest theft in human history.

Where is the outrage?

You guessed it; naught but consent.

The USA looks like a Third World resource-rich backwater ruled by inbred cannibals wearing uniforms who are busy stuffing their Swiss bank accounts.

John Q. Public worries about paying the mortgage while the political elite strip-mine the nation they manage. After all, we expect it.

What’s really worrisome?

The President has now arrogated the power to order all the firms serving the Internet to turn it off at his demand. FEMA during the aftermath of Hurricane Katrina already demonstrated a predilection for turning off cell phone towers and we know from experience that AT&T, MCI, and all the other phone companies will accede to any demand emanating from the Oval Office.

What happens if you wake up one day and can’t reach your kid who is away at college? You can’t phone your aging parent in the next state. E-mail, cell phones, and land lines are literally turned off by order of the President.

It’s an emergency, the TV tells you. The National Emergency Broadcast System is playing on every channel that does not have one of those "off air" colored bar screens showing, all 999 of them.

Can you imagine what it would feel like to go from our hyper-connected condition of cell phones, texting, teleconferencing, and Facebook to

Silence.

Silence punctuated by a photogenic face or the President him (or her) self calmly telling you to follow all orders given to you by local federal officials.

Maybe there were riots in response to eruptions of boiling anger about skyrocketing unemployment. Maybe racial tensions burst into violence in response to some real or imagined event.

In an effort to restore "peace," a John Yoo-type decides that breaking up neighborhoods and social groups is the best way to defuse riotous anger so people in some places are ordered to leave their homes and belongings and are "relocated" to safer, better managed surroundings.

Government TV will advise you to leave your guns at home, please, for your own safety.

Searches will be conducted en route at a checkpoint under the muzzle of a DHS-operated rotary-barreled machine gun; just think of it like boarding an airplane where consenting to be searched (for your protection, of course) is already routine.

Those who refuse to leave their homes can always be designated as unlawful residents.

As long as Junior still gets a warm reception from his mother when he comes home on leave from remotely operating an MQ-9 Reaper over the 50 states in Operation Peaceful Resolution, aerial re-education will be a path to a better tomorrow.

My conclusion?

Consent begins at home.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

Libertarian philosophy is, in one sense, recognition of natural laws regarding human social behavior. We recognize that the free market/private property system aligns innate behaviors in a way that brings about maximum quantities of peace, higher living standards, and the individual pursuit of happiness.

Our trust in the absence of a "plan" stems from a deep appreciation for laws that no man or men can alter. This is not faith, it is knowledge.

The near-universal misery produced by command economies and poorly-defined rights in property are just as predictable with natural laws as broken bones from falls are predictable with physical laws. The horrors of recent human history thus appear to be a series of attempts to repeal one natural law or another.

This all begins with the individual subjugating his sense of right and wrong to some mythological greater power.

The poster child for this, to me, is revealed in the psychology experiments of the late Stanley Milgram. In short, Milgram demonstrated that a majority of individuals will suppress their own natural empathy and, on the order of someone in "authority," administer electroshock torture to another unseen person until the point that the other person is silent.

I experienced a tiny slice of this while in college.

Expecting instant camaraderie, I made a collectivist blunder and pledged a social fraternity. The college I attended was about 85% "Greek" and relatively few males lived in a dorm and unaffiliated with the frat houses. Too naïve to know my own mind at 18 and one month, I joined the club (and moved in).

My experience was essentially a "Lord of the Flies" sort of adolescent stupidity until winter arrived and with it came the initiation ceremony.

The process of initiation depended upon getting the pledges (initiates) to make a programmed blunder while being individually processed through the event in front of a roomful of active (older) members. Once the "mistake" was made, the pledge was hustled to a room where a couple active members played "good cop" and "bad cop" until the pledge begged to address the entire group of active members, begging, often tearfully, to be given a second chance because the group meant so much to him.

This sounds silly; who could be dumb enough not to see through the charade?

I did see through it, but for only one reason. I recognized how the event began.

It started with at least several hours of sensory deprivation right out of a concentration camp manual. My frat "brothers" were applying a bloodless torture technique to helpless pledges.

It was winter in central Indiana. Starting about 9 PM we were stripped to our underwear with windows open, blindfolded, hands tied behind our backs, and subjected to an extremely loud replay over and over of Ravel’s Bolero. This may not seem that bad, but for those who lacked the presence of mind to loosen their bonds, periodically push up the blindfold, and maintain temporal orientation by counting the number of times the song restarted (I guessed it was 15—20 minutes long), even a few hours of this treatment was very disorienting.

Such disoriented people will believe almost anything.

The pledge class was much larger than normal so while I only got about four hours some of my fellows endured this condition of sensory deprivation for over ten. Two young men were all but catatonic by the time their turn came to be "processed," and they didn’t return to relatively normal behavior for another day or two.

"Lord of the Flies"? Oh yes.

A group of immature mostly 19- and 20-year-olds were screwing with the core mental wellbeing of those who volunteered to be their subordinates, tinkering with processes about which they knew absolutely nothing, for purposes that can be best described as trivial beyond measure.

Did anyone consider whether treating others this way was right or wrong?

A few did, mostly those who, by the time they reached their fourth year could no longer stomach the infantile behavior or the casual exploitation of those younger and more naïve so they moved out of the frat house and into an apartment.

Who were worst, the 22-year-olds who among students appeared to enjoy the process the most or the handful of alumni, some as old as mid-50′s, who came back to the frat during initiation and exhibited a disgusting degree of "second childhood" during the proceedings?

I shudder to think that men (and a few women) largely in this age group are those who man the guard posts at Guantanamo Bay’s concentration camp. I am supremely saddened to read that sensory deprivation is among the "kinder" treatments to which they subject prisoners.

Are their commanders (all the way up to our wonderful POTUS) like the adults who, in a fit of vicarious sadism, returned to the frat and egged on the child-men who were in charge?

What of Milgram’s subjects who refused orders to shock "test subjects" all the way to a potentially killing voltage? None of them suggested the "experiment" be stopped. Not one threatened to take action against the program.

These events reveal something important about the inviolable laws governing human nature, laws we either embrace and accommodate or suffer the consequences.

It takes tremendous mental preparation in order for a human being to avoid the overwhelming urge to rationalize evil acts that appear in one’s immediate self-interest.

Today we’re treated to residents of NW Illinois discussing the "economic benefits" of the state selling the largely empty $120 million prison in Thomson to the Obama Administration so Guantanamo concentration camp inmates can be moved there. Did the neighbors of Dachau or Treblinka debate the merits of locating a German government facility nearby?

No doubt.

Only those who in advance were prepared to decide the right and wrong of such proposals were in a position to immediately reject any internal desire to "do the math." No proposed or real economic benefit could trump the wrongness of extending a fig leaf disguise of the vicious policy of imprisonment without a fair and public trial, a policy nurtured by the sociopaths who rule us.

Those who debate the "merits" of these issues have clearly outsourced the determination of right and wrong to others, just as Milgram’s subjects relied on obedience to authority to trump their humanity.

This is human nature folks. If we don’t want to be guided by our worst impulses, we have to get ahead of them (and help our children do so early).

We do this by thinking hard about what is right and wrong, drawing clear lines in our minds (and teaching our kids) about what we absolutely will not do to another human being no matter the cost and be prepared to live by those decisions.

Only by such simple, black-and-white advance (mental) directives can any of us avoid joining in the cloud of gray, banal evil that surrounds us.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

I attribute the size of the problem to a life-long period of confusion over property ownership caused by fractional reserve banking. No one alive today was old enough to grasp, first-hand, what happened the last time too many claims on individual assets were sorted out. This is exactly what occurred in the 1930s when many bank depositors, home owners and owners of plants and equipment discovered that they didn’t actually control those assets they believed were theirs.

According to my vastly oversimplified version of Austrian Business Cycle Theory, the credit-induced boom phase of the 1920s allowed people to think they could have their cake (bank deposits, for instance) and eat it too (loaning it out for consumption).

Actually, that’s not right.

The "eat it too" would be true only if each dollar of deposits was loaned out. In fact, ten times or more of those deposits were loaned out, so people believed their cake (money) was safe in the kitchen (bank) when in fact they and their neighbors had feasted on (and paid for) what they believed were ten cakes.

How sweet it was. The cake bakers loved it.

The trouble was that this game lasted only as long as people collectively believed in it, and that required a whole lot of blind optimism.

People are moody, however. A sweet social mood, like a tree, does not grow to the sky.

When social mood soured and people wanted to exercise more direct control over their property, they discovered that only a few people, the very first in line, actually owned something. Everyone else discovered that the "eat it too" phase had consumed their "cake."

The illusion was gone.

This was the condition in the 1930s. Nominal value disappeared as claims were sorted out, resulting in price deflation as extra, ephemeral claims on assets evaporated. Many people got poorer.

What about now?

Bank depositors believe they own their money when in fact it has all been loaned out. Who among bank depositors wished, explicitly, to be in the business of loaning their money to people to buy big screen TVs, Harleys and overpriced McMansions? Depositors are deluded, in part by deposit insurance, believing that their money is "there" at the bank, withdraw-able at any time. Of course, this is not remotely true.

Who among those carrying a mortgage honestly believes he or she owns nothing, not one brick or board until the final payment is made? No, even those owing more than their home’s current market value still think of themselves as "home owners."

In simplified form, banks loan out ten times the nominal value of their deposits. Those deposits are not multiplied, that’s impossible. Deposits represent productivity, and productivity can’t be created with a computer keystroke. Consumption cannot precede production.

All that occurs is that multiple claims are created for the same underlying productivity, thereby diluting the real value of the deposited productivity. Some of those claims go into demanding new productivity via price increases for consumer goods or the murderous crap bought by Uncle Sam.

This increased production (some of it produces goods, some of it produces bads like Mk 82 bombs, military occupations, or concentration camps like that in Thomson, IL) comes with jobs, incomes, and new bank deposits.

These new bank deposits are cycled again into multiples of nominal demand, more industrial expansion, more jobs, and more bank deposits, but it’s all built on metastasizing claims on the original productivity.

What happens when the cascade of claims begins to unravel, and each job created by such a claim turns out to be an illusion?

This cycle has spun since the late 1930s, and was turbocharged in 1971 when Nixon broke the last vestigial limit on its operation. The inverted pyramid of artificial economic activity and artificial bank deposits was then limited only by the boundaries of mass human psychology, boundaries now operating without any guideposts whatsoever.

What constitutes original, real productivity on which this inverted pyramid of claims rests? How much real value, not the multiple holograms of it loaned via fractional reserve banking, underlies the entire mountain and who ultimately owns it?

This is one question that will be answered by the chaos accompanying a souring mass social psychology.

The real tragedy coming is that an unknown but vast number of people are engaged in occupations sustained only by these illusions. As all the extra claims on the seeds of the credit system prove unenforceable, demand born of multiplying claims on the same asset will disappear, taking with it the jobs in industries so supported, then the bank deposits of money from those jobs, and so on. Massive feedback loops of contraction must occur across all economic subunits.

We should expect this contraction to be widespread but uneven, with industries most amplified by the credit cycle to be the most affected.

Capitalism properly understood cannot operate in an environment where property ownership is not explicit. A fractional-reserve, debt-based money system guarantees delusional booms born of multiplying claims on the same asset and, if the boom lasts long enough, industry segment collapses when the process of sorting out those claims inevitably occurs. Critics of capitalism thus falsely attribute to it problems that actually arise from crucial anti-capitalistic policies.

Fractional reserve banking and debt-based fiat money are defended on the belief that they raise the rate of economic growth, a conclusion based on "broken window fallacy" logic and the short-term (75 years or so) gains that still, temporarily appear so real.

This is tantamount to juicing an athlete with crystal meth and, for the duration of his amplified performance, claiming great success in achieving his record-breaking prowess. As with democratic rulers (and their economist-soothsayers) everywhere, only the now matters, not the athlete’s future collapse.

Sadly, the policy-makers with whom we are afflicted (like fleas on a dog) will learn nothing from their player’s collapse. They will learn nothing because we learn nothing. When sweet optimism reigns, there is always a large constituency that will accept a saccharine economy juiced with crystal meth credit. When the artificially-enhanced sweetness turns sour, though, even our best-laid plans will require us to endure the ensuing period of bitterness.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

The financial theory I follow is best explained by Robert Prechter in his books and firm’s newsletters. This currently puts me in the "deflationist" camp so mine is also not a popular view. Most people look at the past 75 years and expect Helicopter Ben to try inflating the U.S. out of this economic tar pit, but I think Prechter’s differentiation between credit inflation and currency inflation has merit.

Significant across-the-board deflation hasn’t occurred for over 75 years. In order to witness such a rare event, the prevailing mood must change so that the banking system’s zombie condition is revealed. Even a headless frog can be made to jump and appear lively to the willfully myopic.

The Fed’s managers have two tricks to create fiat money inflation; both require the cooperation of people outside their little cabal. The main one they’ve used since long before Ben Bernanke was born is to create credit out of nothing, but that requires third parties willing and able to lend and borrow. Credit is only potential money. It must be borrowed to become money and make price-sustaining demands in the market, and for a lifetime this is exactly what occurred.

This system worked all too well. There is now at least $50 trillion (add the full value of derivatives and unfunded government liabilities and it might be five times higher) in dollar-denominated credit in existence, all pushing upward to keep prices where they are. The value of all that credit rests on trust that people can and will make good on the resulting debt.

If people can’t or won’t borrow then the Fed’s managers could potentially reflex to the other way to create money, the one they have never widely used: they could order the Bureau of Engraving to crank up the printing of bank notes to directly battle a credit contraction, using cash to backstop the banks via Dr. Bernanke’s rhetorical helicopter drop.

If a football field is 360 feet long and 160 feet wide, $50 trillion in Benjamins (the largest denomination now, thank you Drug War) is a football field of cash stacked almost 35 stories high (assuming there’s no airspace between bills) weighing 550,660 tons (that’s five times the weight of the average cruise ship) if my figures are correct.

How many helicopters does Dr. Ben have?

Better still, our rulers could throw in the towel on tracking our cash and issue larger and larger bank note denominations to reduce the size of the pile, as did Zimbabwe’s equally wise rulers.

Hah!

Long before a fraction of this dead cotton and wood could be inked, prices for the existing debt would crater and interest rates skyrocket as investors, banks, the Chinese, and everyone else desperately tried to trade it for anything but dollars. The illusion of value is sustained only as long as people delude themselves that an asset stands behind the dollar somewhere. Printing bank notes en masse would reveal fiat money’s backed-by-nothing reality in full, something our wizards wish to avoid at all costs.

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How do you spell immediate insolvency via credit collapse?

"15% interest rates on T-bonds."

Today our central bankers have lowered the price of their short-term credit to zero. Borrow a million from us, they say, no…borrow a hundred million and pay us back when you get around to it, no questions asked.

Would you borrow a million bucks and buy four or five houses in suburban Las Vegas?

Carrying the debt may be interest-free but property has costs. The value might still decline. Taxes and insurance premiums must be paid. You probably aren’t optimistic enough to take that million at zero interest and buy some houses now, are you?

Five years ago you might have. Conditions have changed (down payment required, for instance) and all the king’s horses and all the king’s men….

The Fed has no way out, and neither do you and I. Banks now teeter dangerously on their collateral, most of it mortgage paper of questionable value. Meanwhile people whose mortgage balance exceeds their home value are widely advised to walk away.

In desperation those managing the federal government put real estate on life support by assuming nearly all home-lending responsibility (see fig. 3) but it’s no cure; where are they going to dig up qualified borrowers?

After 75 years of ever-faster spinning, revving like a jet turbine in the end, their credit inflation machine finally tore itself apart. The economy (as represented by the stock and real estate markets) tumbled down an elevator shaft last year, landing hard in March at record levels of pessimism.

The rally since then has done its job. Excess pessimism has been replaced by bullish conviction. The economy is still a shambles but pundits and politicians have imaginatively sounded the All Clear.

The problem is that nothing revealed by the economic plunge has changed. The Fed has run out of people willing or able to borrow, and a new condition of distrust infects congressman and constituent alike. The federal government is run by people, not machines, and they too will likely demonstrate their own kind of aversion to reckless debt assumption. The recent frenzy of federal borrowing should wane, either bending to public outrage or the necessity to protect Uncle Sam’s credit rating as long as possible (though it, too, will eventually get sucked down into the vortex, probably after most other existing credit has gone the way of the Dodo).

The markets will reveal when this temporary pill-popping of crystal meth credit has worn off; when they fall, the economy will likely collapse every bit as hard as an addict crashing off a huge meth high after sprinting up 25 flights of stairs with the broken femur and punctured lung he sustained in the previous plunge.

What might that look like? Imagine if three out of four of us lose our nice, well-paid jobs and the lucky ones find re-employment at a third what we earned before. Imagine a 1,500 square foot home selling for the same number of dollars in 2012 as a 1,500 square foot home sold for in 1964. It could happen. After all, the main difference between now and then is accumulated credit inflation, and credit has no physical reality. What is a home’s price if the buyer must pay cash?

I think that the architects of our elastic fiat dollar may discover that the rubber buck they stretched for 75 years can still snap back. Should that occur, wiping out much of a lifetime of accumulated credit inflation in a bomb-like release of energy, it will punish everyone whose occupation and standard of living grew to rest on it: us all.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

The magic of central and fractional reserve banking, fiat money and deposit insurance artificially enables improvident rationalizations about credit and debt, and generates false price signals throughout an economy.

By definition, in a fractional reserve system a small amount of debt is pyramided into vast purchasing power, driving up prices for goods and services and/or assets. When it flows into assets it is not generally recognized as inflation and is initially applauded as people feel wealthier, until optimism peaks, only after which is the bubble recognized.

Some have likened the Fed to supplying the punchbowl at the party, but this is the wrong analogy. The party and hangover would occur with or without the Fed; the Fed’s role is to supply methamphetamines whenever the revelers appear to be running out of energy, staving off the hangover and near-term sobriety. This prevents periodic economic readjustments and creates the illusion of "full employment" and "economic stability" over longer periods of time.

Is it not obvious where this leads?

Without the pyramiding of nominal values, waves of "irrational exuberance" would be limited in scope. Asset values would reach apogee earlier and the establishment of entire industries to serve irrational consumption would be limited. Economic activity would grow organically, visibly connected to prior production, and economic activity would hew closer to a balance between serving immediate consumption and the maintenance and growth of capital for future production.

Instead, after a century of central bank dominance and 70-plus years without a deflationary bleeding of the excess gas in the bubble, we have had more than enough time for entire industries to flourish under false assumptions. Huge industries employing tens of millions now cater to the welfare/warfare state on the "guns" side, and to consumers’ vice of living beyond their means on the "butter" side. Optimism was given free rein to establish an entire hallucination economy, one based on ever-rising asset values pushed higher by ever-rising credit availability, itself a product of pyramiding values on spiraling government debt, laundered through a public treasury that strip-mined the savings of three generations.

If the USA was a single small town and the local bank had pyramided the extension of credit on previous borrowing in collusion with the town’s selectmen, how might things appear after a few decades?

The town would be drowning in municipal debt, with ornate street lamps lining picturesque boulevards in every selectman’s district; masses of municipal police, firefighters, road crews and administrative officials would clog street intersections, and a host of businesses would arise to cater to the one buyer larger than all others combined: the town’s political establishment.

The bank would sit on a big chunk of this municipal debt, exhorting everyone to borrow and spend because 70% of the town’s businesses (and jobs) now depend on consumption.

Retailers would hawk luxuries on every street corner, and each business would offer its own special credit card in partnership with the bank. Every third business would serve the swimming pool industry and every family be encouraged to buy a newly-constructed home and every home, new and old, be offered a new swimming pool, no money down, no interest for two years, no payments for six months. Once everyone had a house, they would be encouraged to buy another!

Think about it. How many jobs in this little town would exist only because of the willingness of most people to indenture themselves to the bank while the few thrifty citizens loaned ever more money to the selectmen? Once the optimism finally peaked and receded, could the bank induce more borrowing to sustain things?

No.

Once the contraction begins in earnest, a fact revealed by asset devaluation, the social psychology that sustained the entire mania is over. Instead of a small, painful economic readjustment from a short-lived boom, the little town’s industries are slaughtered as waves of default, unemployment, and credit contraction drown each neighborhood and industrial park. Half the townspeople are expert at tasks for which there is almost zero demand, with enough extra swimming pools and luxury goods to last years, even decades.

This is exactly where the USA (and much of the world) stands today. Half the white collar middle class is highly skilled in occupations for which there’s about to be almost no demand, because the credit pushers running the U.S. government and the central bank gave the public what it wanted…crystal meth credit. Now the economy it created teeters on the brink of exhaustion and their single ability is to cook up more drugs, lowering the price to zero. It won’t work, though; the addicts know they can’t take another hit.

Withdrawal is going to be ugly. Getting clean will take a generation (or much more, if our society has periodic relapses into credit intoxication as we might expect).

For now, residual optimism still generates flashback hallucinations of hope that we can return to the bubble years. Belief in the twin central planners of government and banking has yet to erode significantly, but cracks are appearing in the faith. The first indication that faith is collapsing will be a resumption of significant declines in the major U.S. stock indexes.

When that time comes, look out. Bank runs can’t be far behind.

The debt pyramid will crumble, as will faith, one brick at a time. Ironically, the last stone to fall is likely to be treasury debt, for its collapse will signal an end to the worship of the myth of American Exceptionalism, at least for a time. Since this is the one religion nearly all Americans share, it will be the last vestige of national identity to succumb.

In the meantime, try listing all of the crystal meth—addicted occupations that depend on central bank—induced "private" credit availability and on government debt—supported spending. Start with jobs in the military-industrial-complex, jobs in "public works," jobs in the sciences supported by research grants, jobs in education supported by government grants, and jobs providing medical services and in industries supported by Medicare and Medicaid spending. Don’t forget jobs sustained by credit-based over-consumption like those in the restaurant and leisure industries, and jobs providing myriad middle-class status symbols such as fancy cars, tony fashions and McMansions.

It’s a long list. I recognized years ago that my job was on it.

Is yours?

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

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When the Treasury Department’s managers and the Federal Reserve System’s managers collude behind closed doors, and the lowliest scam that emerges is a lottery-winner level of financial fraud…one that the SEC miraculously can’t fathom…it is pretty obvious who is getting rich at our expense.

Before everyone gets all "conspiracy theory" on me, let’s recognize the obvious, which is that people with similar aims and who benefit from the same set of conditions need not have each other on speed dial in order to coordinate their actions.

Just as the market spontaneously organizes the efforts of individuals laboring in a voluntary system to generate vast productivity, the political system coordinates the efforts of the exploiting class to inexorably change the rules so their exploitive efforts produce more loot. The clown in the White House need not hold a conference call with the heads of the major banking families and the clowns running Congress in order to get all their plans set.

This raises an interesting conjecture.

Has the centuries-long spontaneously-organized labor of the major banking cartel families been the dominant force that gifted us with this hydra political economy that is stealing us blind?

Here’s my line of thought:

We know from Professor Hoppe and other Mises Institute contributors that monarchies tended to be less war-loving than the modern state. Wars generate stunning levels of financing demand, so from this we can infer that the owners of banking cartels would see a transition from monarchy to modern klepto-democratic states as a means of growing the market for their services.

Shifting education to the public sector where Fabian socialism could be taught as a state religion was also highly constructive to financiers’ profits. Once individual citizens are trained to think about the abstraction we call "government" as something magically distinct from the people who manage it, the state is seen as an extension of society rather than a vehicle for exploitation of producers by parasites.

Unprecedented capital then flows from producers into the hands of the political system’s managers and their financiers (especially once production is so crippled that people begin borrowing to artificially maintain their standard of living).

This process required no more explicit coordination than has the advancement of the computer industry since the invention of the printed circuit. All that was necessary was a relative few people who gravitated to loci of power due to their willingness to exploit others, combined with a great increase in wealth allowing productive individuals to support a vast increase in the burden of individuals exploiting them.

Regardless of the specific desires of individuals in the exploiting class, their paths were largely parallel. Exploiter-class occupations proliferated, with celebrity posts in "news" media, entertainment, and the state apparatus itself. During the latter stage of this two-century development, even some of the banking cartel managers came out of the shadows to gain notoriety and celebrity, to be treated like they have a direct line to Divinity.

State and financial institutions spread like rot in a landfill, attracting exploitation-minded people like roadkill attracts flies.

Across the spectrum of human endeavor, once exploiting-class individuals got a toehold in something, in little time their cancer spread and choked most of the voluntary life from previously healthy market-based activities. The involvement of the state’s coercion in education turned to dominance and with the seeming removal of market discipline from schooling it became a free-for-all for the exploiters.

Is it shocking that grade school kids can identify mass murderers like Lincoln or Sherman but have never heard names like Bastiat, de La Botie, or Say? Is it a surprise that college coeds wear Che Guevara t-shirts but would respond, if you told them about the man who explained in 1922 unequivocally why the USSR would fail, "Ludwig von-what?"

It’s no wonder that exploitation of the productive became the dominant process at universities. The majority of people teaching in many departments "sell" things that have no market value. Of course they attack the pillars of peace, property ownership, and non-coercion that might impede their desire for more power, prestige, or whatever else their exploitation might yield. The tick, the flea, and the mite have different aims and occasionally compete for host resources, but all wish to stop the horse’s tail from swatting at them.

So here we stand at the edge of the abyss, observing what this perverse anti-market’s coordination has wrought. Over a century of systematic crippling of individual liberty and the free market it generates have strip-mined whole societies of capital. In this final act productive people even mortgaged everything they own to the financiers and are being driven from their homes as politicians sell their tax liabilities to…political entrepreneurs.

What should we expect now?

First we should see the exploiters blame their nemesis, liberty, for the very ills they and their forbearers bequeathed us through war, inflation, regulation, and above all, debt.

Second, it seems that the true exploiter-class captains are ideology-free. They’re not Marxists. They believe in only one form of private property: theirs.

We should expect the great financiers and banking cartels to divest themselves of their highly profitable financial cons that are now ready to collapse. Trillions of dollars worth of debt and paper assets will flow from the banksters into the "hands" of the public through Treasury Department guarantees, bailout schemes, pension and 401(K) plan purchases, and the like just in time to see it all collapse in value.

Then, once the collapse is complete and all defaults have occurred, those same captains of finance (perhaps helming firms sporting new faades) will swoop in and buy it all back up at fire-sale prices when there’s blood running in the streets. For instance, look for all those mortgages in default to be bundled up and sold for a fraction of a penny, so the banking cartels will succeed in owning vast swaths of real estate, ready to sell it back to the dispossessed at a healthy markup.

They, their grandparents, and their great-great-grandparents have done it before. How do you think they accumulated most of the world’s wealth, by inventing useful things? The only entrepreneurship they know is the political kind.

This murderous form of exploitation will end or at least shrink considerably someday. This won’t occur, however, until there’s a widespread appreciation of the malignant alliance between finance and the state, and a new period of prosperity is begun by eliminating the exploiting class’ revolving door (starting here) between them.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

Why do my neighbors seem to go along with whatever idiotic dictate comes from these clowns running the political system?

Even grossly unpopular political edicts remain because legislators cleverly enlist private intermediaries on whom nearly all people depend, the main one being your employer. We pay extortionate income and payroll tax rates, for instance, only because the employers on whom we depend are surrogate tax collectors (thank you Milton Friedman et al.) via the withholding system.

Employers and employees alike submit because not doing so would drive them into legal limbo where the huge benefits of openness, visibility, and trust must be abandoned lest the IRS and other alphabet soup agencies use them as a means to find and crucify those agencies’ victims.

If Pelosi and Obama succeed in spreading the disease of Medicare/Medicaid to all medical service provision, how many physicians will quit their jobs at Kaiser or Mayo, stop accepting any third-party payment whatsoever, and take their services private? Chances are that doing so under this new federal edict would place them outside of the law, meaning their state license to practice medicine would be revoked.

Physicians have to live, too. They have families, mortgages, and children to feed.

If Pelosi’s and Obama’s program results in a vast new tax bite, how many people will resign from their jobs in order to avoid such additional extortion? Most people will stay with this system as long as the cost of doing so does not exceed the cost of abandoning it and paying the price for duplicating it in whatever market (black, gray, or otherwise) exists.

Political parasites know that people will not choose to abandon this system until they have nothing left to lose by doing so. Ironically, those parasites’ competing ambitions and greed create a classic "tragedy of the commons" in their own system, a system that benefits them as a group if they preserve it unchanged, but whose demise they individually guarantee.

Each political parasite’s power rests on the wealth extracted from citizens and showered on campaign contributors, with a little bread and circuses tossed to the constituents to secure their belief that they benefit from the system.

The problem is that each election cycle requires new political promises of government loot to the jostling factions of campaign contributors, industry segments, the permanent bureaucracy, and constituents, so every year those political parasites each come up with new needs to extract more wealth from members of society at large.

It really doesn’t matter if these extractions take the form of higher taxes, higher borrowing, or monetary debasement, all extract additional wealth, lose a ton of it through waste, and reward political-favor-seeking and redistribution instead of wealth generation. This teaches a subtle but unmistakable lesson that people who produce wealth are chumps, and that real power goes to those who pick producers’ pockets.

Each parasite maximizes his or her power to control the lives of others by channeling the largest amount of wealth extraction through his or her office to campaign contributors and constituents, but when all the parasites do this together, they strip-mine the capital, the price signals, and the self-improvement motivation on which the entire wealth-generating system rests.

No wonder Western Civilization appears to be intellectually bankrupt.

The state is a coercive monopoly managed by a huge committee (of parasites) and populated by those who consume looted wealth and produce bads (e.g. murder, disorder, war, victimless criminal statutes) instead of goods.

Inevitably this monopoly grows, consuming and blocking available production until no production is left to deliver on the promises its managers make. As we approach that point, first a trickle, then a deluge of people recognize this truth; that they’re better off paying to duplicate those promises privately because the alternative is an even lower standard of living.

This is the insight that animates home-schooling and other voluntarily-funded educational alternatives, private security contracting, the alternative health fields, and all other duplicate costs of doing properly what our political masters promise to provide and already fail to deliver. It is the insight that compels prudent people to gut their current standard of living in order to save for their future again, on top of the extortionate taxes paid to doomed old-age welfare programs like Medicare and Social Security, knowing that their colossal political failure looms just over the horizon.

This duplication costs us dearly. It costs ingenuity, time, effort, all things that in the absence of this burden would contribute to rising standards of living.

This doesn’t even take into account how political manipulations artificially raise the cost of everything they touch from higher education to hospital care. This tragedy of the commons is everywhere we look, yet few will see it until not a shred of value remains visible to steal.

Why is this so? It appears so preventable.

All we have to do is collectively set aside the willingness to be bled by these parasites. This begins by seeing "the government" as an unacceptable customer or employer. Stop selling to Uncle Sam and its many vassals. Stop accepting jobs with them. Stop accepting money from them.

That’s unlikely to happen. Paraphrasing MacKay, men go mad in groups but recover their senses only as individuals. This assures our slide toward a standard of living where even brainwashed believers in political systems will have nothing left to lose by abandoning their faith.

To me, hope lies on the path where individuals accept the cost of duplicating what the state’s managers promise but can’t deliver. By traveling this path, we may preserve a remnant of civil society while the rest of the herd and its elected parasites bleed themselves dry.

My thanks to Robert Klassen for his editorial assistance with this article.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

There are obviously a lot of different opinions about guns.

To me, the main gun in one’s battery is a semi-automatic pistol, preferably with a fairly large magazine, in a common caliber and here’s why:

1. Even if state-inspired order breaks down, the state will remain. Unless I wear a uniform and work for the residual state, being visibly armed will be an invitation to trouble with what "law" lingers. Walking down the street with a rifle will not be an option for "civilians" and will still upset the neighbors. If limited to one gun, only the pistol can serve both at home and away.
2. Whether pursued while driving or accosted by three or more assailants, reloading is a two-handed, manual-dexterity luxury I might not enjoy. Starting out with more ammunition increases the chances that I reach the end of the fray without calling "time out" to reload.

A 9mm pistol like a Glock 19 is simple to use, reliable, launches a projectile that is arguably effective (hence all the argument about it), and can be kept in various states of employability based on safety considerations.

While I believe it is essential to teach young children about gun safety, I would still never leave a gun with a loaded magazine and loaded chamber sitting around in reach of anyone. A semi-auto pistol can be kept several ways:

1. With a loaded chamber and a loaded magazine in place. (I’m not fond of this unless the gun is physically on my person with its trigger covered by a rigid part of a rigid holster). If a revolver is chosen and kept with cartridges in its cylinder, this is the condition that it maintains all the time; press the trigger, the weapon goes "bang." Given the ubiquity of television "instruction," everyone above the age of 12 months is potentially prone to picking up a gun and pulling the trigger without thinking. Thanks, but no thanks.
2. Loaded magazine in the pistol, chamber empty. In this condition the slide must be retracted and released before the gun can go "bang." This seems like a relatively safe way to maintain a gun that is not accessible to anyone else, and is a good way to store a home defense gun since even if I wake up in the middle of the night, I must reach an awake-enough state to chamber a cartridge before I can discern a threat and act appropriately. An added bonus is that very small children generally lack the physical strength to rack the slide to chamber a round, and so it yields another layer of safety in case barriers to access break down.
3. Loaded magazine physically separate from the pistol, chamber empty. This is the safest way to store a firearm, presupposing that the weapon itself is kept in a fast-access lockbox like a Gunvault (something I highly recommend, try Amazon or eBay). This also requires the most coordination to employ the pistol, so I consider it to be less than ideal unless curious children (or irresponsible adults) who resist gun safety training are unavoidably present. The equivalent condition with a revolver would be to separately store a loaded speedloader which holds the cartridges in the same geometry as the revolver’s cylinder, but this requires even more coordination than stuffing a magazine into a semi-auto.

The main trade-off is that irresponsible people who fail to observe basic safety rules are more prone to negligent discharges with semi-autos, mostly because they remove the magazine and forget that the chamber may still be loaded…and press the trigger.

The weapon is not unloaded until the magazine is removed, the slide retracted, the chamber visually inspected to verify no cartridge is present, the slide is locked open (if possible) and even then at no time should the muzzle of the gun ever, like a flashlight beam, "sweep" across any person or part of a person including you. There are no gun accidents, only mistakes. Gun mistakes, like car mistakes, are potentially catastrophic. Just ask Plaxico Burress.

There are over a dozen semi-auto pistol makers today producing both classic designs like the 1911 and products unique to their line, including Beretta, Colt, Glock, Kimber, Para-Ordnance, Sig, Kahr, Kel-Tec, Browning, Smith & Wesson, Ruger, Springfield, Taurus, and CZ, to name but a few. We are truly blessed to have such a cornucopia of genius from which to choose, and no one model is ideal for every person.

Each is a compromise of one sort or another. To me, the ubiquitous Glock 19 9mm Luger pistol is light, durable, reliable, easy to disassemble, can accept high capacity magazines (yielding from 15 to as many as 33 shots without a reload), and its trigger requires a very definite press to make it fire, helpful in avoiding mistaken discharges but harder for me to shoot with accuracy.

A typical 1911-style pistol is chambered in 45 ACP caliber, holds fewer rounds in a magazine and is much heavier, but points much more naturally; if I grab one and point, the sights almost perfectly line up on target. The standard single-action 1911′s light, short trigger greatly aids my accuracy but makes it even more essential to keep my finger outside the trigger guard, away from the trigger until the need to fire is immediate.

The polymer-framed high-capacity pistol typified by the Glock is light but fat, the typical 1911 heavy but skinny and easier to grip. [For more on properly gripping a pistol, an excellent video is here.]

It’s just my opinion, though. I think that any quality semi-auto would serve me well. The rest is just personal preference.

The confusion of conflicting opinions about guns constitutes a jargon-filled obstacle course, but like learning the piano, getting through the scales is unavoidable if you want to play.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

Sorry, had to wipe the tears of laughter out of my eyes. Not that our maniacal rulers’ actions are the least bit funny, just the notion that I would be invited, much less that I would accept such a job.

Liberty-minded people know the core tenet of the free market: Information is subjective, local, and time sensitive. No one can centrally plan because it is impossible to aggregate the necessary information.

This axiom is especially difficult for the modern citizen of the USA to swallow because everyone in the middle class has largely lived in a planned bubble of predictability for a lifetime.

Do well in high school, go to a good college, get good grades, graduate and work for a corporation that offers a pension, get an MBA at night (paid for by said employer), get promoted to middle management, be a team player, blah, blah, blah. Marry the hottie of your dreams, vacation in France this year, Greece the next, live in a 4,000 square foot house with a basketball court in the basement, have 2-1/2 kids and a nanny, a white picket fence, a Lexus SUV and a Mercedes.

It was all so simple, like the comfortable similarity of the homes and properties in a suburban subdivision. Who cared if colleges jacked their prices at twice the rate of monetary devaluation (AKA inflation)? A cottage industry existed to remind us that "college grads make millions of dollars more, during a lifetime, than do high school dropouts." Who cared if every second person was a salesman, an accountant, a journalist, a graphic designer, a "business major" or a "coms major" (whatever the heck that is)?

This lifelong illusion of predictability leaves us woefully unprepared for the abyss of reality. There is no book, blog, or Bozo who can produce a career path roadmap that, if leavened with hard work, will consistently and predictably yield a lifestyle to which we’ve all become accustomed. That’s not how reality works. Reality is complex and somewhat unpredictable.

Complexity is scary. That’s why most people prefer a predictable slavery to a "you’re on your own" freedom. The former offers the illusion of security; the inescapable reality of potential failure is undisguised in the latter. Paradoxically, a lifetime of that illusion of security has turned the market’s occasional, personal, decentralized failures into one vast mountain of inescapable, coordinated, catastrophic failure.

A weather analogy is useful: Normally it’s sunny in some places and rainy in others, with an occasional storm and a rare hurricane or tornado. The mental children ruling us thought they controlled the weather and made it sunny all the time, everywhere, but instead all they did was accumulate the storms, the hurricanes, and the tornadoes for the future. The longer they were held in abeyance, the more destructive energy was accumulated.

Now a massive, Biblical-proportion economic storm is washing over the U.S. (and other places, too). All the predictability of the past no longer applies. U.S. citizens got exactly the weather control (and weather controllers) they asked for. Citizens wanted certainty, and the scum who aspire to power rode that collective desire to their goal. They delivered exactly what "the people" demanded of them, the collective delusion of predictability.

Now that the storm has begun, people still demand predictability.

I don’t have a clue what you should do, occupation-wise. Anyone who claims such knowledge must be multiple times smarter than me; hopefully President Obama will appoint such a person as Labor Czar so they can tell me what to do, too. My fervent dream is to labor on the best of the available plantations under the whip of the most benevolent overseer. [Sorry…I paused to swallow some of the bitterness that backed up into my throat.]

I do expect that the unexpected will occur, that the best-laid plans will sometimes fail, that being five minutes late will really hurt, and that hindsight will rarely come with more "kicking yourself."

Paradoxes will be everywhere, and for a time the impossible may persist. Imagine a period when little pieces of mostly green colored paper, printable at nominal cost, surge in value against stocks, most bonds, commodities, real estate, and even precious metals.

It seems impossible, right?

Not if the ATMs stop working, banks drop like flies, and credit cards are declined when the credit/debt bubble’s deflation accelerates. FedGov managers already have plans to go underground in style and let tens of millions of U.S. citizens incinerate in a nuclear war. Will they hesitate to abandon picayune promises like the FDIC and Medicare when circling their wagons becomes necessary?

These are uncharted waters. If you decide to take a crash course in personal navigation, you’ll find me sitting next to you in class, desperately trying to figure it out as I go.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

Some
of my studies on LRC and in other places are for the pure pleasure
of expanding my understanding of the world. Other times I'm prospecting
for information I think I can use in executing future plans. On
occasion I'm doing both. You probably do that, too.

Ludwig
von Mises' magnum opus is titled Human
Action for a good reason. Because each of us must take up
space and utilize resources, everything we do constitutes an action.
Even standing still is an action, because we're acting to take up
that particular space at that particular time instead of taking
up some other space.

I
figure that if I'm acting, I might as well have a plan. This concept
may not be obvious to others, because often their actions look,
to me, more like reactions. I tell my sons that the neighbors
sometimes look to me like balls in a pinball machine, being acted
upon by forces outside of themselves but making few moves that come
from thoughtful deliberation. Perhaps it's perverse, but even if
I misstep I'd rather it be from my own error than someone else's
impositions on me.

Though
government's growth has usurped many decisions from me, there are
still a lot of choices left open, even if the environment in which
I make them is warped in many places by government action. For instance,
I had the freedom to invest in Lucent Technologies, Inc. in 1999.

Thankfully,
I didn't. Its stock price is still down 93% from its peak, even
though it has more than doubled in the last half-year. I could have
sold my home, moved to the country, and built a bomb shelter. So
far, I'm glad I haven't. But that could change.

The
challenge is to figure out how to rationally plan for the future
at a time when lots of absurd things are occurring. The list of
absurdities is long, but the poster child is a commercial heard
on WBBM radio, the most listened-to AM station in America (or so
I'm told).

In
essence, a mortgage company will offer certain qualified persons
a home loan, a grant (from a front for home builders) to cover the
down payment, and another grant to cover the closing costs. The
ad literally says a prospective homeowner can show up with nothing
and leave with the keys to their new home. The only qualification
implicit in the commercial is that the home buyer be living too
close to the edge of their income to be able to save even a few
thousand dollars for a down payment. If this isn't the proverbial
last marginal buyer, I don't know who is.

This
smells, to me, suspiciously like tech stocks did back in 1999 and
early 2000. Then people were paying ever-increasing sums of money
for the common stock of firms that were producing no profits, even
under the fantasy accounting rules of the time, and (to me again)
showed no prospects for changing that condition. I'd get all set
to short-sell something but hesitate to execute the trade…and watch
the stock's price keep climbing like gravity had been repealed.
The few times I did short an index, usually via a short-selling
mutual fund, I just got
run over. I was left with two possibilities: Either I had lost my
mind, or the rest of the world had.

Most
books being published had titles like Dow 36,000. Well, we
know how that turned out. You can buy a used
copy from $0.37 at Amazon.com.

On
the other hand, sometimes absurdities last a really long time. Nixon
dissolved the last vestiges of gold's connection to U.S. legal tender
back in 1971, but instead of gold finally winning against fiat currencies,
the period 1980 to 2000 saw disinflation. Gold remains to this day
down 50% in nominal terms. In 2004 dollars, gold's price peaked
in 1980 at about $1,952, so $425/oz gold today is actually down
78% after 24 years. This tells me that no matter how unassailable
my logic is, I can't rely on observations like this to dictate my
actions. Smart people who invested in gold during the past quarter
century got crushed while balls in the pinball machine who simply
followed the herd made a killing in stocks.

Ah,
but this too is an illusion. The herd wasn't buying stock in 1982.
The herd didn't discover stocks until after 1995. Many made quite
a bundle in the five years prior to 2000, but a lot of that wealth
disappeared in 2000–2002. The rally from October of 2002 to
this past winter brought forth a sigh of relief from a lot of pinballs.
The few who sold when sentiment was most bearish, most certain the
future was lower, which ironically meant stocks were bottoming,
are deep in regret. Mostly, though, nothing has changed since the
late 1990's. Most people still are buying stock and holding, expecting
time to be their friend. Maybe they'll be right, but does following
the herd constitute a plan?

Our
actions impact our wealth in big ways now, and that matters a lot.
After all, the only alternatives we have open to us are those whose
price we're willing and able to pay. People without money
have few choices open to them. The bumper sticker that proclaims,
"Freedom isn't Free" is most true in a sense probably
not intended by those who sell it.

I
figure that at all times some things are going up in value relation
to others, kind of like a lava
lamp. There are times to own some things, and times to jump
onto the next item that's low but rising (or about to). Sometimes
gold is cheap and rising, sometimes it's stocks, sometimes it's
cash, and other times it's real estate. The $64 question is what
time is it?

Logic
tells us that the dollar will be destroyed, that this is an historical
inevitability. But like "The Big One" in California, it
hasn't happened yet and waiting for it has been very costly.

Real
estate seems like a house of cards right now, but it seemed so even
before the Fed discovered how to partner with Fannie Mae to allow
everyone to use his or her home equity like an ATM and buy a nice
shiny Harley Fat
Boy. It looked like a top in the housing market years ago yet
here we are, still in the ionosphere of mortgage finance availability
and low rates. Given that commercial I mentioned earlier, though,
it seems like the top has to be awfully close so investing in real
estate might be risky if the credit creation machine stops firing
on all cylinders. Imagine if houses had to sell for cash in hand…that's
the limit of how far down real estate could drop if lenders stop
lending and borrowers stop wanting to service endless debts.

There
does seem to be at least a psychological difference between bank
credit and Federal Reserve Notes. Another commercial on the radio
advertises for a company that claims to help people eliminate,
not refinance, their debt. If this is the leading edge of a new
fashion, and it may be, then the Fed can offer all the "credit
out of thin air" that it wants, there will be no expansion
of credit. That engine requires three things: A central bank willing
to create the credit, commercial banks (or their investors or customers)
willing to be responsible for the loans, and borrowers willing to
hang yet another straw on their monthly bill-camel's back. The latter
two of these are not givens, even though they may look permanent
after the last few years' experience.

If
people start to retire their debts, selling everything not nailed
down to accumulate cash to do it, then E-Bay will become a conduit
for amazingly rapid price decreases. Why buy a camera battery
at the store for $50 when someone on E-Bay will sell it for $19
(a real story). What will happen when even people's best assets
start turning up for auction and sell well below their established
prices in standard markets? What does it mean for gold if people
are selling their $25,000 Harley hogs for five grand? The online
auction could be the E-Bay-of-Pigs for the U.S. economy.

The
U.S. economy can't run on cash.

All
this sounds like a Bomb Shelter scenario, but it's not. The good
news is that even if these events occur (and that's not assured),
they'll end. Naturally, politicians would be ready to print
more cash once the troubles appeared permanent (like in the Weimar
Republic) and those wise enough to have held tight to their gold
will be like a boat with a large anchor, dropped before the storm.
Buffeted, yes, but not slammed onto the rocks like the rest of the
fleet by the gale force winds.

It's
all about timing.

There
are ways to assess the likelihood of change. Though it seems like
Voodoo to many, the arcane branch of investing called Technical
Analysis can offer tools for forecasting. What doesn't work, unless
one has the patience of a saint and the lifespan of a tortoise,
is looking at the fundamentals using logic. Passion rules the tides
of these things, and passion does not heed logic, yours or mine.
A simple rule of thumb seems to be, if things look extreme, they
probably are. But only when extremes seem permanent are they likely
nearing a reversal in fortune.

October
18, 2004

David
Calderwood [send him
mail] a businessman, artist, and author of the novel Revolutionary
Language, selected January 2000 Freedom Book of the Month
at Free-market.net.

I
often wonder why no reporter asks the obvious question. "Mr.
Obama, you obviously lucked out and didn't get caught while you
were getting stoned, while other young people who were not so lucky
got a criminal record for doing what you did. Do you support the
notion of law as lottery, or is law absolute and universal?

"If
you commit murder or robbery and don't get caught, shouldn't you
be punished no matter how long it takes to identify you? If politicians
have passed laws against using pot or coke, and those laws are moral,
shouldn't you be jailed now, today, because you weren't punished
back when you committed the crimes?

"If
you should not be jailed now, then why should anyone ever be jailed
simply for doing today (and getting caught) what you did back then?
Would jail time and a criminal record have enhanced your life, helped
you get into Harvard law school, and improved your chances of being
elected to the Senate?"

Which
kids could have gone on to great things (no, I don't include public
office in this category) but for the fact that last night the cop
noticed the bag under the back seat and pulled out the handcuffs?

Most
readers of LRC recognize the obvious: The law is now a complete
lottery where some people have better odds than others, but all
face the same general risk of disobeying the 12th Commandment
by getting caught. [The 11th Commandment is, of course,
Keep a Low Profile, and if observed religiously, usually allows
the observation of the 12th, too.]

Was
it smoking pot? Drinking beer prior to that officially blessed 21st
birthday? Exploring the biological sciences with a willing sweet
young thing who's not quite at that "consenting" age?
Offering legal advice, medical care, shop services, disposal services,
landscaping services, mail service, hair braiding, coloring, cutting,
or styling services, taxi services, commercial trucking services,
or just about anything else without first acquiring an official
license?

Was
it attaching a particular cosmetic part like a flash
hider to a certain kind of rifle? [Sorry, I forgot, that was
an immoral act but now is a moral act...it's all in the date.
Or perhaps I'm confused, as it never seemed immoral to me, and was
only illegal, evidently a MAJOR distinction.] Was it accidentally
spilling the wrong material into a waterway or filling dirt into
the wrong low-lying area?

Was
it selling a legal weed to a minor? Forgetting to eradicate ditch
weed on the back forty? Saying anything other than "I don't
recall" to any government employee? Did you slip a Glock
into your pocket because you were going to the ATM after dark for
some cash?

We
know that if everyone who smoked pot or quaffed a beer before 21
actually did time in the hoosegow, we'd need a whole lot more prisons.
Heck, there'd be more prisons than there are bank branches and there
are more of them now than gas stations. [In fact, the guards would
probably have to be ex-prisoners, since there simply aren't that
many folks who didn't take a hit or a pre-21 shot during their irresponsible
years.] This same principle will clearly apply to downloaders as
well.

Evolving
technology virtually begs Peer-to-Peer network users to innovate,
so content owners like the big movie studios will probably have
the same success as the drug warriors. But how many more young people
will lose the lottery? At the rate we're going, what with Martha
Stewart going to jail for lying to the Feds about something that
wasn't itself criminal, the stigma of being an ex-con is in danger
of fading out completely. How can you shun someone who, in a tiny
twist of fate, could just as easily have been you?

Perhaps
life will be less uncertain when lawmakers (and their gutless, herding-animal
constituents…i.e. our neighbors) have the cojones to face
that question. Someday, perhaps our neighbors will see that the
people they threaten with a life-ruining criminal record is their
own next generation, their kids, doing exactly what mom and dad
did when they were young – playing fast and loose with the
rules. Until then, it seems that as science conquers the arbitrary
dangers of nature, humans will replace nature's horrors like polio
and periodic starvation with man-made alternatives. As we know,
the institution best constituted to breathe life into these lunatic
fantasies is government.

Thanks
guys. Thanks a lot.

In
the meantime, the best our community (the LRC community, that is)
can do is to teach our kids the difference between nature's law
(morality) and statehouse law (the lottery). It's wrong to murder,
or rob, or cheat. It's just hazardous to do any of the literally
millions of other things that are technically now crimes. Just remember,
son, to play the odds.

October
1, 2004

David
Calderwood [send him
mail] a businessman, artist, and author of the novel Revolutionary
Language, selected January 2000 Freedom Book of the Month
at Free-market.net.

For
those not fully up to speed on gun jargon, an AR15 is the semi-automatic
version of the rifle the U.S. military has used for several decades.
Semi-auto means that each time the trigger is pulled, only ONE cartridge
is fired and only ONE bullet heads on its merry way in a linear
path from the barrel, in contrast to a fully-automatic gun which
can shoot multiple cartridges per trigger pull and is found in every
TV show from CSI and West Wing to reruns of the Golden Girls nowadays.

AR15s
are expensive guns ($700 and up) but their modularity makes them
a natural for hobbyists. Despite the so-called Assault Weapon
Ban a virtual cottage industry has sprouted these past few years
offering people the option to buy the rifles with various caliber
conversions, various sights, left-handed models, special triggers
for precision target shooting…all sorts of things to let each owner
personalize his or her firearm. The manufacturers had to take off
the flash hiders and the bayonet lugs to comply with the "ban,"
but otherwise anyone could still get the exact same gun during the
whole ten-year period. Even magazines over ten rounds capacity remained
fully available because only new production was banned.*
All previously produced "high capacity" magazines were
still sellable, and there were literally tens of millions of them.
The only change was that their prices went up a little.

Returning
to my e-mail, my friend responded to the picture with a "What's
up with that?"

I
figured my response was so insightful that I should share it.

Hi
Paul,

What
do you mean, “What’s up with that?” Didn’t you get the memo?

There's
a new strategy because “2/3rds of all Americans favor renewing
(and extending) the ban on Assault Weapons (and all other scary
things, to be defined by cosmetic features, but let’s not go
there again).”

The
key is to make the guns less scary-looking.

It
was on Comedy Central's The Daily Show the other night,
didn’t you see? He had a segment on the ban’s expiration (Jon
Stewart was hardly kind to gun nuts, but hey – they’re nuts
– so who cares about u2018em?) and reported how many of the
"banned" guns stayed on the market because their makers
altered the guns' cosmetics. Sure enough he showed a picture of
a rifle with pink furniture. [Editorial note: Furniture
on a gun refers to the shoulder stock, handguard around the barrel,
the grip, and things like that.]

Paul,
that's the new idea. We have to make the guns less scary-looking
so that our non-gun-owning neighbors will fixate their fears on
things that other people think are important (and not things
WE think are important). That’s modern Democracy in Action and
By Heaven what we need is a lot more Democracy!

To
this end all gun owners are pledging to put colorful bows on their
guns, and dress them up in lace and “Sunday Best” clothes, or
put pictures of Barney the Dinosaur or Powder Puff Girls on them.
So **naturally** they need to take those ugly, scary-looking black
stocks off them and replace them with pink, purple, red, maybe
even puce, chartreuse, emerald, and lavender furniture. I really
like the lavender idea, because maybe some enterprising chemist
can add something to the cartridge propellants and make the burned
gunpowder smell like lilac.

If
you're behind the curve on this I can understand. But you MUST
do your duty and run out to buy something to dress up your old
warhorse of a battle rifle [Paul owns a WWII vintage M1 Garand,
and it still has an evil bayonet lug!] so you can carry
it in the next parade in your spot beside the Girl Scouts and
Brownies. We won't have succeeded until Soccer Moms are pushing
their daughters in your direction, telling them to ask if they
might carry your rifle for a while.

Wow,
I just had another epiphany!

While
you’re at it, help me spread the truth about how people are using
books, yes BOOKS, to learn how to do all sorts of dangerous and
nefarious things. For God's sake, people learn chemistry
and PHYSICS (!!) from books, and these form the very foundation
for creating Weapons of Mass Destruction! Science books might
as well be the terrorist's Bible, and publishers should all go
to jail for aiding and abetting the Enemy.

Maybe
then “2/3rds of Americans” will agree on what this country needs
most – a good spate of book burning. After all, when 2/3rds
of the populace wants something, wasn't it Rousseau who wrote
about the General Will, and how it's always right? Two
heads are better than one, and 2/3rds of whatever sample size
the pollsters used must be far, far smarter than you and me.

In
fact, I like this whole idea so much I think I’ll write it up
and submit it to Lew Rockwell for publication. He can get the
word out, we'll start a mass movement, and then everything will
turn out great. All we need is a majority in the next poll.

Your
Bud,
Dave

*A
couple states also have their own prohibitions on certain sizes
of ammunition magazines, but that's another story.

September
17, 2004

David
Calderwood [send him
mail] a businessman, artist, and author of the novel Revolutionary
Language, selected January 2000 Freedom Book of the Month
at Free-market.net.
[No, that's
not an "assault rifle" on the cover of the book. The picture
originally came from www.springfield-armory.com
(the rifle is their M1A) and the manufacturer ground off the bayonet
lug from under the front sight turning it from a scary "bad"
gun into an All-American "good" gun. You could have purchased
one during any of the past ten years (except in The Peoples' Republic
of California). The 20-round magazine was also available via military
surplus, though the prices for them doubled during the so-called
ban.]

Ah-ha,
I thought. The Chicago Air and Water Show was coming in two days,
and the Blue Angels aerobatic team, an annual favorite of the show,
was practicing.

Wow.
Those amazing technological marvels have always excited me, just
like they do millions of other Americans. My excitement at seeing
them waned quickly, however.

I
remembered the time, over twenty years ago when the massive delivery
of new F/A-18's that the Reagan Administration had ordered was nearing,
I had traveled to Glenview Naval Air Station to take a test. You
see, I had the bug to fly one of those sleek machines of incredible
power. At that time, if you wanted to talk to the Navy about playing
with their toys, you first had to take a written test kind of like
an SAT except it had an extra section filled with diagrams of the
horizon seen out of the windscreen and multiple choices of what
attitude the plane was in.

I
took the test and apparently did quite well on it. As you probably
know, test taking is a skill in its own right. Some are particularly
gifted, and I appear to be one of them. It seemed I had passed the
initial hurdle.

Here
is where good judgment saved me from that aforementioned pitfall.

At
the time I was married with a baby on the way. Upon reflection the
descriptions of training and deployment conjured scenes of emotional
horror in my imagination. Gone for months or even a year at a time
I would return from sea a complete stranger to my child. Getting
reacquainted with a wife who had grown accustomed to my absence,
and who, out of necessity was fully capable of living without me,
was disturbing. I guess I was quite naïve about my dreams of
naval aviation because this wasn't what I had in mind.

Under
the circumstances my response had to be, "Thanks, but no thanks."

I
ended up in a much less exotic occupation, to say the least.

Years
have passed and over that time my views of those sleek planes and
the (mostly) guys that fly them have shifted. I now see something
I didn't see before. It isn't about aerobatics or shiny blue paint,
or traveling a thousand miles per hour or zooming in a vertical
climb to the edge of space.

Those
planes are simply killing machines, and the folks that fly them,
no matter how skilled, dedicated, or bright, are puppets.

Like
the carriers on which they ride, F/A-18's are tools for delivering
bombs and other ordnance onto places where other people live or
work. If those people are working to attack Americans minding their
own business at home, the pilots' work would be honorable, but you
don't need to transport such complex weaponry halfway around the
world to attack aggressors. After all, aggressors need some proximity
to be a threat.

The
other problem with being an operator of one of those sleek jets
is that one is not an owner. Someone else tells you where to go
and who to bomb, and the agreement you entered into says that you
don't get to say no, not if you want to go on playing with the toys.
I think "puppet" is fairly apt.

So
pilots have little option but to rationalize what they do as "good,"
and their military and civilian superiors who tell them who to kill
as, "wise and well-informed." While we know this last
is empirically false, humans have a tremendous capacity to lie to
themselves when that's the only bridge required to get them to what
they want. In this case, pilots get to play with toys that are at
the very top of the grownup-toy food chain. Like politicians and
bureaucrats who love the power they wield, rationalizing any evil
is a natural part of the human condition.

The
Blue Angels perform thrilling feats of synchronized flight at airshows,
but those games are basically just a circus to keep us enthralled.
The purpose of those aircraft is to drop death from the air, no
more and no less, and this power resides in the hands of people
whose own interests create a murderous conflict of interest.

The
pitfall I avoided wasn't just the alienation from my family that
sea duty would entail. I also avoided becoming one of these rationalizers.
I'm no better a person than any of them, and I'm sure I would have
made a pact with the devil himself if that was all that stood between
me and strapping one of those planes on my back and hitting the
afterburners. It's an experience that on a practical level can't
be bought.

I
would have become a different person. Given that I really like who
I am today and am proud of my insights that parallel those of the
many LRC columnists who I so admire, to become that Navy pilot would
have been a great loss to me in some metaphysical sense. I would
have remained, probably forever, among the ranks of the blind.

Of
course, like any good story there's a tiny bit of irony. I didn't
discover until decades later that the Naval officer at NAS Glenview
was, shall we say, less than truthful. If you go to Pensacola and
observe some of the men training to fly high performance jets like
the Hornet, a consistent theme is evident. They are all about eight
inches shorter than I am (I'm a bit over 6’2"). It seems that
being tall is a certain disqualifier for flying those jets because
space is a premium when such a machine is designed. But they're
always looking for a few good men to fly the far less glamorous
fixed-wings and helicopters…

I
take away two morals from this. First, the folks that staff the
state's apparatus always over-promise
and under-deliver. If you see everything they offer through that
lens, you'll never be disappointed. Second, great care must be exercised
when pursuing something of great interest, lest one's principles
end up in the landfill.

August
23, 2004

David
Calderwood [send him
mail] a businessman, artist, and author of the novel Revolutionary
Language, selected January 2000 Freedom Book of the Month
at Free-market.net.

With the Iraqi war expected to flare from a chronic phase into acute, considerable ink has been spilled discussing the possible economic ramifications of this war and war in general.

Could the US President and his advisors believe that a good war is just the tonic needed to end the economic downturn and cement the administration's success in the next election?

One hopes not, but published statements suggest otherwise.

The relationship of war with the end economic downturns has provided difficulties for those who follow a logical line of reasoning. How can destruction on a massive scale be good for the business of society? Adherents of this absurd view often point to World War II as the poster child for their theory, at least in the modern age, and they could note, were they so bold, that the largest rally of the current bear market occurred in the months following last year's September 11th attacks.

As usual, they've got their theory wrong. Hans Herman Hoppe has observed in Democracy, The God That Failed that history can be compatible with mutually contradictory theories. The "war is good for economics" camp has their causality backward and they are about to break a whole lot of Bastiat's windows (not to mention kill a lot of people and turbo-charge anti-American sentiment across the globe) yet reap none of the benefits they expect.

Support for this view comes from an unusual quarter, one that serious students of history and policy should consider. Robert R. Prechter, Jr. is best known as a financial forecaster and foremost living promoter of Elliott Wave Theory through the company he founded, Elliott Wave International. Less known is his 1999 book (now in its second printing) The Wave Principle of Human Social Behavior and the New Science of Socionomics, (New Classics Library, 1999, 2002) a book that among other things credibly turns the "war is good" idea on its post hoc ergo propter hoc ear.

This article focuses on but a tiny fraction of the implications propounded in Prechter's book. That fraction, however, is a supreme challenge to the concept of causality when it comes to war, peace, and economic prosperity. Prechter literally inverts the foundation of causality that has confounded mainstream pundits and historians and has contributed to horrific policy missteps in the past and present.

The thesis of HSB is radical: Instead of exogenous events like assassinations of archdukes, famines, or surprise attacks on naval fleets being the cause of war, it is an underlying endogenous mass social mood that governs such events and drives all social manifestations of euphoria (peace and prosperity) and despair (war and economic malaise). Even more radical, yet exhaustively supported, is Prechter's illustration of how this endogenous alternation between optimism and pessimism demonstrates a repeating pattern, thus allowing for accurate forecasting of the character of social events in useful ways.

The Wave Principle, first discovered by R.N. Elliott in the 1930's through careful observation of the stock market, is described by Prechter as a combination of two kinds of fractals. Fractals, of course, are patterned objects that show similarly complex forms at all degrees of observation. This means that if you examine them from up close or afar, they look the same. Indefinite fractals are typified by seacoasts, jagged at all levels of observation. Self-identical fractals are represented by the beautifully complex form of the Mandelbrodt plot where all components have the same exact form as the whole. The waves produced by the stock market were found to be a combination of these two kinds of fractal. Prechter has termed such combinations "robust" fractals.

Those familiar with the Elliott Wave Principle relate it almost exclusively to the investment markets, where it forms its own branch of the arcane science of technical analysis. HSB touches on the market utility of the Wave Principle, but mostly in the context of validating the principle itself before delving into the social forecasting implications in later chapters.

The Wave Principle rests on a foundation of both modern science and centuries of observation. Commentators too numerous to quote have written of humanity's predilection for bouts of mass insanity, with perhaps the most descriptive being Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds published in 1841. More recently numerous scientific publications have described the brain structures we share with our herding mammal relatives and behavioral experiments that document their operation in humans. Prechter examines this literature and finds it consistent with structures and functions needed to explain why, in the aggregate, human behavior would follow the patterned progression described by Elliott.

Briefly, the pattern has a period of progress followed by a period of regress. Each progress, or impulse, is made up of five waves — first up, second down, third up, fourth down, and fifth up. The regression is typically three waves, denoted with letters for clarity — wave a down, wave b up, wave c down. Each wave has subwaves, depending upon whether it itself is part of an impulse or corrective regression, and each larger wave is part of yet a larger wave structure. This is the fractal nature of the pattern.

The excitement of the book soars when Prechter begins to relate social dynamics to the operation of the Wave Principle. By using the stock market as a direct measure of the state of social mood, he shows example after example of social manifestations of the underlying mass psychology, from the old standby of hemline heights to a more subtle chronicle of successful movie genre. He shows how these cultural phenomena are predictable, well in advance of the fact.

The gravity of the investigation grows, however, when he discusses the cycles of peace and war and relates them directly to the labels placed on the historical stock charts using the Wave Principle.

When it comes to war, HSB graphs show that they usually occur during or after the "c" wave in a larger degree structure. Prechter's book denotes the degree as "cycle," which in practice tends to be a part of the pattern that plays out across a span of years, often decades.

The thesis of HSB is then that, far from ending the economic malaise that preceded it, war is simply a manifestation of the social mood that delivered the decline in the first place. War, then, is incidental to the economic upturn that follows. With war or without, the upturn in social mood was due to occur at that point. Libertarians would note that in this context, the war actually saps some of the vitality of the next upturn by having destroyed capital (human and material) which otherwise could've contributed to a greater prosperity.

What does this have to tell us about war with Iraq?

The value of the Wave Principle and the science of socionomics which Prechter promotes, is that if we know where we are in the progression we can make forecasts about the future path and its social manifestations with sometimes a high level of probability. Prechter is on record as perhaps the only person ever to have accurately forecasted a mania in the investment markets a decade before it occurred, when manias are so rare as to occur perhaps once a century. His forecasts for an historic bust to follow it are still playing at a mutual fund near you.

The war on Iraq, however, is not slated to occur in the "same place," Elliott Wave-wise, as FDR's supposed savior, World War II. In fact, Prechter's forecast attaches the highest probability for a stock market bottom still a year or more off, with profoundly difficult economic times to immediately follow. This is the pattern of market cause and economic effect that can be seen time and again through history. A student of this view would see that war with Iraq will not help George W. Bush's re-election in 2004. His political fate was sealed, according to the socionomic view, when he became president during the greatest bust in modern history. All a war will accomplish now is disruption and destruction.

There are many reasons a cynic could cite for the Bush administration's hell-bent pursuit of a large scale war now with Iraq. Installation of puppet governments across the Middle East to give the US de facto control of its oil and gas reserves, the settling of a family score with Saddam, or hubristic visions of perpetual empire might occur to any reasonable observer. The one that should not be considered is to war for economic benefit. In no case does war help, and in this case war's coincidence with a deepening economic bust could be political suicide — generating intensified anger against the Bush administration among citizens who suffer from an increasingly negative social mood.

David Calderwood [send him mail] a businessman, student, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

Lucas
may be publicly apolitical, and movies often lend themselves to
many interpretations. The newest Star Wars installment, however,
left me with a distinct impression that Lucas "gets" modern
history. Perhaps it was just a case of timing.

You
see, I went to see the latest Star Wars installment at right about
the same time the History Channel was running a documentary about
the largest engines of modern warfare, the aircraft carrier. Star
Wars and a nuclear aircraft carrier – what on Earth could they
have in common, you ask?

In
the interest of not giving away the movie, I will stick to generalities.

In
a nutshell, this installment has the bad guy fomenting war between
two entities, using this as a pretext to justify a power grab. The
movie was jammed full of special effects, costumes, all the stuff
we expect from Lucas and his people, but one scene stuck with me
more than any.

Toward
the end of the show was a scene depicting a valley covered, and
I mean, covered by soldiers. Throngs of troops in gleaming
armor marching row upon row up the entrance ramps to those monstrous
battleships that those of us in the 40-plus range first marveled
to in 1977. Hundreds of thousands, perhaps millions of soldiers
in the process of boarding massive engines of destruction, bound
for who-knows-where.

The
old republic is dying, to be replaced (presumably in the next movie)
by the Empire.

Enter
the History Channel and its ode to modern marvels. The program described
the history of the aircraft carrier from World War II through the
present, offering footage of air operations starting with propellers
and ending with F/A-18's. Experts detailed the dimensions, the capabilities,
and the costs of these floating cities. One discussed how some of
the most modern innovations came from the British, though the United
Kingdom lacked the finances to build the enormous ships capable
of using their inventions. It took the US, with its seemingly bottomless
pit of taxpayer's pockets, to successfully render the most modern
concepts.

Viewers
were given as justification of the expense was that America could
now project its forces around the globe and the thirty-year life
span of these marvelous works of military art would mean money well-spent.

Of
course no one at the History Channel asks why such engines of destruction
are necessary. Presumably we’re already up to speed on the need
for a strong defense.

But
that takes me back to our latest Star Wars film. When our enemies
are created by the very "defense" our leaders so desire,
when an active and interventionist foreign policy is backed by three-quarters
of all the military hardware in the world, it takes but to open
one's eyes…

Lucas
awed the world in the opening sequence of the original Star Wars
movie in 1977 with warships of overwhelming scale whose bulk moved
across the screen…and across and across, and across.

Today's
carriers are truly the emblems of modern America. So too are they
the proverbial elephant in the living room, the uninvited guest
too gross to overlook but too terrifying to see. The republic is
dead, long since replaced by Empire.

I
don't know about you, but I think George Lucas has his eyes open.

May
21,
2002

David
Calderwood [send
him mail] is the author of Revolutionary
Language.

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An insight on this question came from an unexpected quarter.

A gentleman by the name of Fernando Aguirre, who posts on Internet forums and his blog as FerFAL, has written voluminously about his experiences as an Argentine citizen during and after the economic cataclysm that wracked his country in 2001. I first found a long forum post, and then a Google search of "FerFAL" revealed a larger web presence, including a recently published book.

Mr. Aguierre shares his thoughts on all sorts of related subjects, from food storage to guns to politics (he appears to really like Rep. Ron Paul). I personally found a great deal of value among what I’ve seen so far.

One brief passage struck me, however, because it related to the mechanism by which middle-class people become poor during an economic meltdown. The mechanism may be obvious, but it is important to see how theory actually worked in the real world.

Mr. Aguierre shares (in "Part IV") how, while studying architecture following the 2001 crisis, a social studies teacher illustrated Argentina’s middle class’ slide into poverty. Quoting the teacher from memory, Mr. Aguierre writes,

"[Those in the] middle class suddenly discover that they are overqualified for the jobs they can find and have to settle for anything they can obtain, therefore unemployment sky rockets: too much to offer, too little demand. You see they prepare, study for a job they are not going to get. You kids, you are studying Architecture because you simply wish to do so. Only 3 or 4 percent of you will actually find a job related to architecture."

We all sat there, letting it all sink in. After a few months, it all proved to be true. Even the amount of students that dropped out of college increased to at least 50%. They either [saw] no point in studying something that would not make much of a difference in their future salaries, had no money to keep themselves in college, or simply had to drop college to work and support their families.

This reads like a premonition.

The USA’s middle-class includes lots of people whose careers rest on higher education and specialized certification. While plumbers, electricians, factory employees and truck drivers typically are among the middle-class, most of those populating suburbia are accountants, middle managers, sales people, financial consultants, teachers, nurses, writers, etc. In other words, as manufacturing and now building activity contract, more of the middle class is made up of the college-educated in white-collar careers.

Factor in our current economic pickle and it’s easy to see the most likely path ahead.

With the economic expansion built on mass optimism and debt rolling over, conditions are now fertile for questioning the college degree system as jobs for the college-educated evaporate en masse. The ability of technology to replace white-collar jobs is widespread, and an increasing need to cut costs is finally driving its use, just as changing economic (and regulatory) conditions also drive the replacement of manpower with robotics in the factory.

Across the economy, the need to cut employment costs (not just payroll, but payroll taxes and benefits) is resulting in mass layoffs of sales people and white-collar office staff. When one considers how much work can be replaced now by accounting software, electronic sales presentations, flatter organizational structures, and "news persons" filing reports for free on the Internet via blogs, it is obvious that vast numbers of middle-class Americans teeter on the precipice of unemployability, not just unemployment.

When the "unique" skill sets that commanded $50,000 to $100,000 (or more) annual salaries turn out to be in vast oversupply, the only course left is to compete with those with neither a college degree nor technical education for jobs that can’t support a middle-class lifestyle.

Hands-on service occupations like nursing and medicine are also far from safe. At the end of the day, it is productivity that pays for such work to be done, and when vast numbers of people cannot find economically productive work, economic reality will land on these occupations, too.

When the economic tide goes out, all boats sink into the mud.

Too many people were goaded into illusory occupations by tax subsidies for higher education, government (rather than market) demand, and other distortions like the credit-without-prior-production of the central bank. Political pandering and central planning replaced the natural balance of an economy growing organically through the honest signals of the price system.

As long as there was enough optimism and ignorance to sustain the illusion, the distortions only grew larger.

Though the ignorance largely remains, there’s no more blind denial left to sustain the burden of all that wasted effort. If your job disappears, it may not come back.

This time it really is different. The final stages of that blind denial included fiscal imprudence that bordered on insanity. The mirage economy can’t return until after the pendulum has swung its full travel to the other side of the arc. That path leads through the valley of a crushing economic depression, one that will radically and permanently alter the lives of middle-class Americans who are almost universally unaccustomed to hardship.

October 27, 2009

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

Especially with handguns, accuracy is required for effect. Every handgun cartridge has documented instances where a determined attacker absorbed hit after center-of-mass hit and kept right on being a threat. The reality is that even someone with holes in their heart can keep going long enough to kill. Only solid hits on the central nervous system are decisive and instant fight-stoppers.

People who buy someone else’s favorite hand cannon (sorry for the offensive T-shirt in the link), shoot it a couple times and put it in a drawer to gather dust may not be helping themselves. It’s not much better if the shooter develops a flinch from anticipating recoil, muzzle blast or being hit by ejected cases from their gun.

For many, the answer lies in choosing guns that are not so powerful as to discourage practice. Among handguns a great example is the 9mm Luger. When loaded with 124 grain or 147 grain jacketed hollow points this cartridge typically performs well in gelatin testing.

There are many great gun designs (here, here, here, here, here, etc.) that chamber the 9mm. My favorites are the Glock and (cover your ears, Mr. Browning) and model 1911-A1.

The Glock pistol chambered for 9mm is simplicity itself, reliable, relatively easy to master, has magazines of capacities varying from 10 rounds to the 33-round version essential for battling zombie hordes (legality depending on where you live), and is surprisingly customizable.

1911-style pistols often have among the best triggers of all repeating firearms. Most 1911 pistols are chambered for the original 45 ACP cartridge, a wonderful round designed around military specifications set in the last days of the horse cavalry. It was intended to equal the 45 Colt revolver cartridge, useful for among other things shooting horses weighing half a ton from under their riders.

While there’s nothing wrong with a 45 ACP that shoots a 230 grain bullet at about 900 feet/second, the same gun chambered for the 9mm Luger, shooting a 147 grain bullet about 980 feet/second makes for a much more enjoyable experience. That often translates to more range time.

Until recently the 1911/9mm combination suffered from reliability problems; some would feed, fire, and eject without fail, many would choke periodically. One manufacturer, Springfield Armory, redesigned the magazine under the guidance of legendary competitive shooter Rob Leatham and now the 1911 in 9mm is as reliable a combination as can be found.

Finding one is the problem. They remain rare although more companies are making them now than ever before (here or here, for example). Some makers offer downsized versions of the 1911 (here, here, here), reduced to fit the smaller cartridge from the ground up. They’re quite pricey, but get rave reviews.

Regarding shoulder-fired guns, a good defensive carbine (a rifle with a shorter barrel and less powerful cartridge) can be just as good a fight-stopper as a shotgun at short range but contains a whole lot more rounds in the magazine, not to mention the carbine’s usefulness at longer ranges should the unusual need arise.

A breakthrough in this area is currently in process.

The effectiveness of a rifle bullet apparently has much to do with fragmentation. The "old" military load for the M16 was a 55 grain bullet moving about 3240 feet/second when it exited a 20 inch barrel. Within about 125 yards the bullet was still moving fast enough that upon hitting a person the bullet would break into two or more pieces and each fragment would sow a separate path of destruction through tissue and potentially hit an important anatomical target.

Recent changes toward shorter-barreled weapons and a heavier, longer bullet led to concerns about performance. Fragmentation occurred less often and only at shorter ranges due to the slower velocity of the bullet.

A "fix" that started within the Army was to develop a new cartridge that addressed the shortcomings of the 5.56 NATO round and improved upon the 7.62×39 cartridge fired by the AK-47. The result was the 6.8mm Remington SPC cartridge.

This new cartridge has seen its share of controversy and growing pains and its widespread adoption by the military is unlikely, but it is gaining a committed following among civilian shooters and hunters. In properly set up rifles (usually variants of the AR15) it hurls a bullet twice as heavy as the 5.56 NATO at nearly the same velocity when both are shot from handy 16 inch barrels. Depending on the specific bullet used, it offers fragmentation out to 300 yards and retains the ability to penetrate common barriers like car windows and doors.

The 6.8 shoots soft, carries up to 25 rounds in a magazine, is often exquisitely accurate, all in a design that is thoroughly proven and user serviceable. Its major drawbacks are ammunition availability and cost, with factory-loaded cartridges running around a dollar per shot (about the same as 308 Win and twice that of cheap 5.56 NATO FMJ practice ammo). Since I believe it’s folly to plan on fighting the Next American Revolution, I consider these issues negligible.

The 6.8 deserves serious consideration by anyone looking for a long gun. It is effective from zero to 300 yards, easy on the shooter’s shoulder whether being fired or carried, and customizable to most persons’ tastes and budgets, plus it meets one of the most important criteria of all: it is still fun to shoot after a couple of magazines’ worth of rounds are expended.

Examples of the 6.8 SPC AR15 are here, here, here, and here. These last three sell only the expensive part, which is the upper half of the rifle; the lower half of any AR15, regardless of manufacturer, simply snaps on and must be purchased through a licensed firearm dealer, for a total cost around $1,000 to $1,200.

One of the best aspects of the AR platform is how any home hobbyist can buy a quality stripped receiver from a gun shop and mail order all the other parts to assemble one at home. When it comes to the 6.8 SPC, my strong preference would be to assemble the lower myself and buy a quality complete upper receiver from one of the firms with an overall rating of "A" on this chart.

Guns of other calibers have merit; I just wish I hadn’t spent so much money these past 30 years on guns I learned to dislike shooting. Give me a 9mm pistol or the newest 6.8 SPC any day.

July 29, 2009

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

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This has been a disturbing few days.

First there was a slaughter of customers in a Chicago-area clothing store that included a victim my oldest son knew in college. Coincidentally, the young woman he knew was a graduate of Northern Illinois University, as is my oldest son.

NIU.

Yes, that NIU.

It gets even better. My middle son is an engineering student at NIU. Only the fact that he is in a co-op program with an aerospace manufacturer and in the "work phase" this semester saved him from personally participating in the chaos that was NIU on February 14th when the latest school shooter played copycat.

Then there’s my oldest son’s girlfriend, who is a graduate student at NIU and was near Cole Hall when the shooting erupted. Despite the size of the student population, both of my older sons know people who were wounded in the crime.

I’ve been to NIU’s campus many times over the past six years. One notable fact was the ubiquity of armed campus police officers. For a person who attended a small Midwestern university thirty years ago where the three campus policemen didn’t even carry guns during the school year, it took some getting used to, having armed cops hanging around in every dorm and seemingly on half the street corners I drove past.

The head of NIU’s Campus Police stated that officers arrived at the lecture hall within two minutes of the shooting. By then the shooter had killed himself, leaving an obvious tragedy in his wake (six dead victims as of this writing). As Greg Perry noted in an earlier LRC column, "When seconds count, the police are only minutes away."

What is there to make of these events?

The first thought I consider of course, is that a halfway decent shooter (someone like me) with an accurate and easy-to-shoot-accurately-gun like a 1911 (here’s a fine example) would have a good probability of stopping such an event while the body count was significantly lower. If there had been one or two of such people in the room…

Oh, wait.

This is Illinois. There are no approved ways for a citizen to legally carry a gun…period. Further, that’s about as likely to change as pigs growing wings and flying out Chicago mayor Daley’s lower gastro-intestinal tract. While the knowledge that someone in the "intended victim population" might be armed appears to deter suicidal shooters from attempting such acts, the consensus remains that it’s better to accept these occasional spasms of horror and teach us all to run and hide than to let motivated people see to their own and the common defense. We’re told to leave it to the professionals (tax-paid to a man) because we’re too unstable to be entrusted with such power.

This is a form of utilitarianism, where a few random people are sacrificed in order to promote the overall welfare of the herd (presumably by limiting the carrying of guns to people who work for certain government agencies, a dubious, irrational and illogical proposition with which we’re nauseatingly familiar). This view is collectivism at its worst, viewing people not as individuals with unique worth but as interchangeable sheep grazing a pasture. It’s sickening to accept this, and calls to mind la Botie’s view “that all servitude is voluntary and the slave is more despicable than the tyrant is hateful.”

I don’t want to be a despicable slave. What do I do?

When my son goes back to NIU next fall for his next academic semester, I suppose I could hand him that 1911 and encourage him to carry concealed…but the odds of another shooting like this occurring there, much less involving him, are next to nothing while the odds of getting caught with a handgun, expelled, prosecuted, and jailed (thus obviously ruining his life) would be several orders of magnitude greater. If he wishes to continue his studies at NIU (and he does) then he’ll have no choice but to accept the small but very real chance that he’ll be a sitting duck for a nut case or common criminal. I don’t like it, and I truly do blame my fellow citizens for demanding we share their folly.

Like paying taxes (extortion by any honest view), this is yet another time that self-preservation requires us to play by the contemptible rules dictated by the slaves who surround us. It may be an inevitable part of the human condition (la Botie’s observation was made over five centuries ago and nothing’s changed), but I don’t have to like it.

I may have to knuckle under, but I’ll still name this for what it is.

One last thought: The examples of waxing sickness in our society are legion, with the wide popularity and official sanction of torturing people and bombing a nation’s citizens into the freedom of liberal democracy topping the list. I subscribe to a theory that posits a connection between social conditions (fashion, economic activity, crime, etc.) and what is measured by the main stock market averages. Given that this theory forecasts a high probability of major market declines in coming years and the commensurate growth of social ills, I fear that the small probability that violence will touch any of us is likely to rise, regardless of the steps we take to mitigate such a chance.

A heightened state of awareness is clearly in order. Don’t volunteer to be a victim.

February 16, 2008

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

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Occasionally I experience an epiphany from unexpected quarters. This morning was one when my wife and I discussed the standardized test she must soon administer to the 9- and 10-year-olds in her fourth grade public school classroom.

She encounters many differences in her job between when she taught fourth grade over twenty years ago, prior to her resignation to parent our three sons full-time, and her return to teaching a couple years ago. One of the most frustrating is the advent of "school report cards" based on standardized tests.

My wife is not opposed to standards and evaluation of outcomes in educating students. This just isn’t the place for a long discussion delving into how evaluation might be successfully structured in the coercively funded environment of a socialized education model, much less the variety of approaches a true free market in educational services might yield. Let’s face it; if I knew how the latter of these might look, I’d be the ultimate educational entrepreneur (which I’m not).

Readers of LRC know how one-size-fits-all standardized testing is an alphabet soup of all the stupidities of command/control business models. Inevitably the teachers are being bent to teach to the test, classroom initiative is stifled, and the school board is considering district-wide changes (having nothing to do with actual learning) justified by the belief they’ll enhance test scores. It’s Taylorism’s "one best way" without the rationality-inducing discipline of profit/loss. No matter how deluded are the architects of the tests, their subsidiaries can’t go out of business.

It was during a discussion of the specific test questions where I suddenly realized what was really going on here.

While some of the math questions in the teacher’s practice manual were relatively simple, others involved elementary algebra (remember, these are 9- and 10-year-olds). The jaw-droppers were the "extended response" questions, where a child is given a single question with up to 55 minutes to provide a free-form explanation, possibly including drawings and mathematical rationale, for an answer.

Yes, you read that right. Think you might have found that a little overwhelming when you were in fourth grade?

I’ll get to that, but first let me boast for just one moment.

My sons are math whizzes.

Seriously, they are all one step short of extraordinary, having all gone to state math team finals (the math equivalent of the state football quarter- and semi-finals), and the two in college breezed through calculus courses that stumped other high schools’ valedictorians. (Okay, maybe this last is a bit of hyperbole, but I’m their father…what did you expect? They did get straight A’s while screwing up the curve for the rest of their classmates.) (I might add that this is quite a validation of my wife’s teaching qualifications, not to mention those of their superlative math team coach in high school.)

At 9 years of age, I doubt any of them could have answered half the questions in the teacher’s test booklet. My youngest, in fact, would have taken one look at one of the "extended response" questions (NOT the example in the PDF file on the state’s web site, which is easy), yawned, contemplated his finger nails, and spent the other 54 minutes staring out the window at the playground.

Could he have answered it?

Perhaps. That’s a BIG perhaps as it took me a little while to figure it out, and he said half his sophomore-year high school classmates today wouldn’t touch it. But why would he have bothered in fourth grade? What was in it for him?

Nada.

So my wife is understandably anxious when she looks across the 24 kids in her class and figures that only the two or three most motivated and able students will have reached the abstract conceptual skills needed to analyze and answer the questions, and she must cross her fingers that they are encouraged by no more than their respect for her to do their best.

My wife, I might add, was the first and only teacher in the school to volunteer to participate in the elementary school version of the math team competitions that so engaged our own sons. She thus has quite a good idea of what push-the-envelope math skills are found among her students. As I said, maybe two or three kids…10%.

I asked myself, again and again. What does this mean? Why would the education bureaucrats in Springfield construct a test for little kids, many of whom still struggle with the basics, that looks more like a math team competition test intended to produce scores in the 50—75% range even among the very brightest students?

Are they setting the schools up…to fail?

[Here's where the light bulb flickered on above my head. See if it does for you, too, when you ask if there's some potential benefit for school bureaucrats to promote a widespread recognition that the schools in their charge are failing. Maybe I should add that in Illinois there's a very powerful coalition that's trying to get a state income tax increase passed to stuff the budgets of public school administrators & unions and cut out the last vestiges of local restraint via property tax limits.]

You bet.

I think among the many motivations for the tests is that they’re trying to establish a school crisis that demands the state income tax be raised from 3% to 4% or more (at least a massive 33% increase!!).

Call me cynical, but now I’m awaiting the press releases and the newspaper editorials. After all, the county where I live got voters to approve an additional 1% sales tax (which was a whopping 16% increase in the tax rate) to fund a new jail (and all sorts of other boondoggles now surfacing) by telling people it would only cost them a penny ("a penny for safety").

How many public school alumni voted for it because they couldn’t do the math?

Maybe that, too, is the point.

February 21, 2007

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

When someone says, "The government did this," or "The Accounting Department did that," in neither case is it technically true that such lifeless abstractions did anything. Only those men and women in decision-making and administrative roles acted. For good or ill, it is they who bear responsibility, and attributing their individual actions to the organization in which they labor leads to a host of misunderstandings.

The most pervasive of these is the state.

The state is the central abstraction by which a catastrophically wrong idea is placed into practice. It is the organized system for employing violent action (or its threat) on the part of individuals, for as noted before, only individuals act. This rationalization occurs on two levels, first by diffusing responsibility to a fiction and second by inducing a group-think inversion of standards.

Belief in the state provides the means for individuals to avoid their own perception of responsibility. This is how we see the legislator, the cop, and the judge (along with their armies of support staff) able to survey the uniformly awful outcomes of their collective actions without embracing a hint of personal responsibility. They are but cogs in the machine, they’ll say, and they didn’t make the rules. Even the legislator will claim that the final bill he voted for was "not ideal," and that if it was up to him it would be different.

This is the fountainhead of the phrase, "I’m sorry, I’m just enforcing the rules" whereby what little personal and private empathy the enforcer feels toward her victim evaporates under the pressure of the organization in which she labors. Occasionally we are even treated to the spectacle of enforcement bureaucrats weeping for the victims of their actions, like when a judge is "forced" by statute to unjustly imprison an individual because of "mandatory minimums."

This bulwark against personal responsibility extends in almost equal measure to the victims’ perceptions as well. Rarely are specific individuals deemed personally responsible for the harms they inflict on the targets of their work. "He’s just doing his job" is an oft-encountered comment even among those just given a ticket for driving a safe speed that happens to be above the posted limit. Past heads of state, though personally responsible for policies of murder and mayhem beyond description, are generally treated with deference and respect in direct proportion to the size of the armies they commanded and the height of corpse piles left behind.

This elimination of personal responsibility would be meaningless, however, without the inversion of moral standards induced by citizens’ personal self-identification with the state.

Lifelong exposure to media-carried circuses and mythology induces an intense sense of identity with this abstraction by nearly all participants; suddenly acts deemed universally wrong when performed by private individuals are rehabilitated into right when performed by individuals acting on behalf of a social abstraction, the state. This inversion feeds the near-universal appeal of the state because it allows individual citizens the opportunity to systematically act on the violent impulses that reside in each person.

This rationalization is a powerful process. It allows nice people to nod in agreement when Dick Cheney issues an unsubstantiated claim that terrorizing a helpless man by inducing a reflexive sensation of drowning has saved them from some nameless violence. It allows 19-year-old soldiers to "follow orders" with near total disregard of normal standards of humanity, dooming themselves to the living hell of lifelong regret that underlies the tragic condition of many veterans. It generates a vicarious sense of power in many people when CNN shows a video of 500-lb bombs detonating in urban areas. It allows citizens who abhor the thought of holding pistols in their own hands the ability to employ costumed enforcers holding pistols to threaten and even slaughter those whose actions, while not harmful, fall outside those citizens’ personal opinion of "right behavior."

In every case, we see the belief in an abstraction, the state, allows people to act out their darkest fantasies in complete, albeit temporary freedom from natural laws, limits and personal responsibility. No wonder the state, particularly its apotheosis, democracy, is so revered: In the name of any definable Greater Good, any action undertaken by those claiming membership in the state is sanctified. This renders every participant in the political process a co-tyrant; each voter unconsciously enjoys the possibility of seeing everyone compelled to populate his or her own particular Utopia. In the name of stamping out racism or sexism in people’s minds, or eliminating poverty or violence, people ardently demand statism and poverty-inducing taxation/regulation, all enforced by violence. Only the abstraction, the state, allows them the means to rationalize acting upon these dark fantasies by creating a collective morality that is an inversion of the neighbor-to-neighbor kind.

It does not require an obsession with the language to reject the silly notion that christening violence and threats with a word, government, thereby absolves of wrongdoing all the individuals employing violence and threats. Truly peaceful people recoil from giving physical reality to their darkest impulses. We reject any special "collective morality" and the magical thinking about the state which supports it.

This view may explain how an abstract abomination polluting human endeavor has exhibited such a tenacious hold on people. Belief in the efficacy and utility of the state has reached apogee in our lifetimes despite its uninterrupted record of failure.

This means that caution is warranted; as we experience the greatest failure of collectivist policy in centuries, by no means is it the end of statism as we know it. The demon of collective violence is buried deeply and it will probably not be exorcised quickly, meaning far more difficulty ahead for the wise, who trust in and love liberty.

October 9, 2009

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

According to the dominant view, the inflation the U.S. has experienced these past 75-plus years will inevitably continue and very likely accelerate as the managers running the Fed and U.S. Treasury attempt to deal with a monstrous overhanging debt bubble by cheapening the dollars with which repayment is made.

This logic appeals because the only history anyone can recall is one of continuous inflation. When I graduated college in the depth of the 1982 recession I earned a starvation wage of about $16,000/year as a laboratory technologist. I shudder to realize that in 2008 dollars that’s a whopping $35,680.83, a figure many people today would not consider the pittance that it was and remains. Such is the evil of relatively low, creeping inflation; it hides a painful reality of declining living standards.

That gradual inflation was bad enough. Today, however, there’s near unanimity that the smoldering inflation of the recent past will burst into the flaming inflation of the 1970s when mortgage rates and bond yields were well into double digits, or even whip up into the firestorm of a Zimbabwe-style hyperinflation as the U.S. dollar burns down to a charred crisp.

Given such consensus of opinion regarding inflation expectations, it may be useful to examine why the potential for a crushing 1930′s style of deflation is worthy of consideration.

One of the better exponents of the minority (deflation) view has been, so far, left out. As an occasional guest on financial TV and print Robert Prechter does not have the media cache of Peter Schiff or Jimmy Rogers but he has an approach to markets that is consistent and accessible to anyone willing to do their homework. Possibly his lesser notoriety stems from the fact that his analysis rarely appears for free in the public domain and when it does so it is in conjunction with an overt invitation to subscribe to paid services. One hopes that proponents of the free market are not somehow offended by the presence of such profit-seeking behavior.

Prechter’s methods also represent a direct challenge to the way most people understand the world, so despite an interesting track record of forecasting (with stunning accuracy and some acknowledged mistakes), his is not among the names mentioned when the prophets of the recent economic debacle are listed. Those who wish to examine this challenge are encouraged to do so and make up their own minds.

Prechter’s position on deflation shows up in the subtitle to his 2002 book Conquer the Crash. In a nutshell, his position is that there’s a critical difference between currency inflation and credit inflation, and that as long as the monetary authorities, banks, and public are collectively optimistic and trusting, both currency and credit appear to have the same effects on prices, but that if credit builds up to a fantastic level as now, when pessimism and distrust take over then a crucial difference between currency and credit is revealed.

This is why historical comparisons are so challenging. The same action can have very different effects if underlying conditions change. In the past whenever the Fed plowed lots more fuel into the credit creation machine called the fractional reserve banking system, that system enjoyed conditions that turned that fuel into multiples of credit and it was promptly borrowed and spent. After 1995 a manic level of optimism led to a vast extension of credit outside of that tidy little cartel called the banking system, so people became even more convinced that credit is the same as currency.

All that debt rests on trust. Creditors count those loans as assets, trusting that they’ll be repaid. The debtor looks at his Jet Ski or Harley Hog and includes it in his asset ledger, too, and trusts he’ll be able to make the payments until the loan is retired.

The trouble is that trust is getting tougher to come by as rising unemployment and declining asset values work together with declining confidence.

One pillar of the inflation-expectation view is that the managers of the Fed can and will exercise the "Helicopter Option" if they decide it’s inflate or die. We should never forget that politicians (and Fed governors are clearly politicians) are inveterate liars. Just because they talk about helicopters and bags of cash, it may be instructive to note that as central planners they are continually subject to the Law of Unintended Consequences.

People of libertarian persuasion used to know this. We used to know in our bone marrow that human beings are not machines programmed to yield predictable results from known inputs.

If the managers of the Fed actually started to punch the "zero key" one space to the left of the decimal in their own account balances and use that to purchase an endless number of electronic T-bonds from the U.S. Treasury, what would those holding T-bonds do? Better yet, to whom could those holding T-bonds sell their T-bonds in the open market?

If the Fed becomes the buyer of last resort for the assets that form its own reserves, what exactly are those reserves worth?

Nothing.

The Fed is not an island in the economic ocean. Neither it nor its managers are omnipotent. Does anyone honestly believe that today’s central bank managers have discovered what the Alchemists could not? On the contrary, their fraud is on the verge of general recognition.

Depending on one’s figures, there is somewhere between 50 and 100 trillion dollars worth of debt in existence today, even now growing exponentially as the Obama Administration takes over as the consumer falters. In this regard credit growth looks like a graph of home prices did two years ago.

This analogy is critical. Inflation has until today, like home prices rises prior to 2005, not significantly reversed since nearly a lifetime ago. As with the reversal of fortune in real estate, an event’s rarity should not be confused with impossibility. A prudent person might keep the possibility of a credit collapse deflation on the radar screen. Should the conventional wisdom be in error, the consequences of an historic deflation do not invite casual disregard.

June 27, 2009

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

David Calderwood Archives

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So here we are, bouncing off a ten percent decline in the Dow 30 Industrial Average, and the clear-eyed among us are scratching our heads.

Nothing has changed, the real estate market is a submarine with its dive claxon sounding, the dislocations of surging gold and oil have everyone jittery, and just when it seems the bottom is about to drop out, we see Wall Street ignite the booster rockets and head for the sky.

How can it be? Rear-end deep in alligators, the folks who are active in the stock market strap on their party hats and announce a bottom by issuing Buy Orders?

There can only be one explanation: It’s a conspiracy!

Just kidding.

The truth is probably more pedestrian. No market-driven phenomenon moves in one direction forever. Each trend has a lifespan, and when it is reached the trend reverses, usually when continuing the trend seems most sure. As Lew suggested in his recent column, even the trend toward credit creation must someday reverse, otherwise we would be forced to conclude that the alchemists running the Fed, Treasury, and Wall Street had actually invented their long-desired perpetual motion machine.

Our challenge has always been to assess whether it is This Time that the reversal is the Big One. People who spend a lot of time analyzing these things could easily have concluded that any of the market tops of the past 20 years was the zenith of credit creation silliness. Those who acted on those assumptions were mercilessly punished by reality, however. It’s truly painful to arrange ones finances to weather a storm that never arrives, watching the least informed around you reap fantastic rewards as the surreal party of credit expansion gets even more raucous.

Been there, did that, bought the t-shirt (you wouldn’t believe the price).

The stock market decline during 2000 and 2001 panicked the moneyed elite and they responded like so many of Pavlov’s dogs. To a Fed with only one tool, the hammer of credit creation, every problem looks like a nail. To carry the analogy, it doesn’t matter that the problem they faced was the result of using the hammer in the first place.

My unusual view is that the trend toward declining stock prices would have ended about where it did regardless of what the Fed did, but like most things in history that’s an untestable hypothesis.

Either way, what I think was the final, manic creation of credit ran its course until lenders were pushing newly created credit at any body that was still warmer than room temperature. I’m surprised that the recent crop of zombie movies didn’t include a scene where the walking dead qualified for a home loan…everyone else did. Credit was created until the gluttony almost ruptured the stomachs of lender and borrower alike.

Conditions that occurred the past five years were both unprecedented and extremely unlikely to repeat. The ability to repackage weak debt and get it rated AAA is gone, not to return until after those with burned fingers today are retired or dead.

With 13-week T-bill rates hovering around 3.25% this week and an effective Fed Funds rate at about 4.5%, it’s a foregone conclusion that the Fed will continue its recent actions and lower its target interest rates. A chart of T-bill rates vs. Fed Funds rates shows that the Fed follows the market-driven rates of T-bills, not the other way around. A trend toward lower T-bill rates (and lower Fed rates) simply implies a desire for lower risk, hardly a boon for stocks. The pundits’ obsession with the Fed Funds rate is simply another illustration of irrationality.

The world is awash in dollar credits. Either holders of dollar credits can sell them for other currency credits, a process that appears to have already occurred as the price for dollars on world markets collapsed all year long, buy commodities (hence the fantastic rallies in gold and oil in dollar terms) or they can bring all those dollar credits back here to the USA and use them to buy up all the things Americans have pawned in order to maintain their profligate spending. This latter is tantamount to a lender taking possession of depreciating assets of an insolvent borrower. At some point even a few cents on the dollar is better than nothing.

I think this is what we’re seeing with the purchases of US corporate assets by foreign individuals and funds. It seems to me, however, that these Sovereign Wealth Funds that are awash in dollars are the last place to expect salvation.

These funds are government owned and managed. It’s like giving some state bureaucracy a bunch of money and expecting them to wisely manage it. I think there’s a good chance that these funds will be the last suckers to the party. If we have excess credit drowning the world, the solution is for that credit to drain away. Among many ways for this to occur, the use of that credit to purchase assets just in time for those assets to decline hard seems like a great way to retire the Fed’s excesses. Another is default, and we’re seeing that in spades among weak real estate borrowers.

None of us know for sure what exactly the future will bring. We can only make educated guesses, but the stars do seem poised to line up for an end to the long period of credit creation. Lots of nervous people are watching the recent stock market lows. If that floor is broken fear may finally overwhelm greed. Either way I doubt the market process, involving the greed and fear of billions of people, is susceptible to the petty manipulation of a few arrogant men.

In the meantime, don’t bet what you can’t afford to lose. Pull up a chair, pop some corn and get ready to watch the next phase in the Clowns’ Parade that is human history.

December 1, 2007

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

Passing through
Sanford Airport near Orlando, FL, I was selected for the "Full
Monty" by TSA. Late for a connecting flight and rather short
on patience, the extended pat down (which included the Chief Groper
running his fingers along the inside of my front waistband)
seemed to accentuate my hearing. I actually overheard someone say
that they felt safer for all the intrusiveness. Since I love analogies,
I came up with one that I believe captures the delusional nature
of this view.

Consider
if one is looking for a needle in haystacks, and haystacks are
passing through one's presence on an hourly basis. Would anyone
grab a random handful of each haystack that passed by and expect
to find said needle by examining in minute detail each
piece of hay in that handful?

Of course not.
Yet most air travelers think an invasive search of a 45-year-old
man traveling with his wife and kids, or running a rod down the
skin-tight top between the breasts of a pretty 16-year-old blond
girl with a tan and painted nails (all 20 of them – I counted)
makes them safer. I might join the march in the streets protesting
this idiocy, but of course I'd be the only one on parade. My fellow
citizens might even be provoked by my lack of support for our nation's
hardworking security people.

We all hear
and read how we all will somehow benefit as the government takes
over more and more elements of our lives. The notion that the government
is best equipped to control everything from product safety to national
defense and from environmental protection to education seems to
be almost universally accepted. Part of the unanimity of this view
may stem from our major news organs' almost total reliance
on government officials and politicians for their stories, but I
could be wrong. Maybe it's not just that they're lazy sloths.

Well over a
thousand years ago Mayans performed a serious ritual in the Ball
Court at Chichen-Itza in the Yucatan Peninsula. They endeavored
to put a heavy rubber ball through a stone ring without using their
hands, an act associated with protecting the Sun as their astronomer-priests
told of its passage through a dangerous part of the universe. As
I understood our Mayan tour guide, their people took this process
very seriously, probably no less so than the TSA grope-master who
"protected" my flight by the laying on of hands (on me,
that is, while his female counterpart "sanctified" that
pretty teenager). All that was missing from my experience were the
scary mask and magic totems. On second thought, maybe magic
wands were in use after all, and the guy's face was, I suppose,
a little
scary.

At the end
of my Mexican stay (before my undesired, intimate episode with that
strange TSA man) I stood in line at Cancun's airport and waited
for my checked baggage to be laboriously hand-searched (no doubt
an FAA requirement for planes headed to U.S. airports) while those
lucky Canadians on a direct flight to Edmonton walked straight to
their check-in without the lines and the hassles. (The government
in Ottawa apparently spends less time aggravating people in other
lands…gee, how lucky are we in the U.S. to have our officials in
Washington DC create new adventures for us continuously.)

Consider
today's obvious similarities to the rituals and superstitions of
people who lived long ago. From newspaper publishers and Harvard
Ph.D.'s to Mrs. Grundy living next door, people we share this country
with haven't
changed much over the centuries, have they? They're still sacrificing
much of their harvest to the Gods (well, the warrior/priests take
it and we assume pass it along) and performing human sacrifices
(lots and lots of them in Iraq and Afghanistan these days) to insure
our group's continued success. So must it be – our warrior/priests
in Washington DC's big
stone temples tell us so.

August 12, 2005

David
Calderwood [send him
mail] a businessman, artist, and author of the novel Revolutionary
Language, selected January 2000 Freedom Book of the Month
at Free-market.net.

While since last spring the dollar has declined about 15% in value compared to a basket of other major currencies, on the domestic front a dollar today buys about 30% more common stock than it did two years ago at the peak, and the dollar also rose substantially in value vs. real estate during the same period.

This distinction is critical because for most people the value of the dollar in terms of foreign currencies is probably not a day-to-day concern. Any change the dollar’s purchasing power in terms of domestic assets, however, is very important both now and when planning for the future.

Tens of trillions of dollars of credit-from-nowhere now in existence fuel demand for goods and services, bidding up asset prices across the entire world economy. This mountain of credit was built on three pillars.

1. Fractional reserve banking.
2. Government debt issuance.
3. Packaging of collateralized debt obligations (CDOs) into "securities."

The third pillar, CDOs, required a phenomenal collective delusion for sustenance, and that level of delusion is gone. It comes around once every several centuries, so we probably shouldn’t hold our breath awaiting its return.

The banking pillar is full of cracks as the banks’ overreliance on real estate loans is increasingly recognized. With their weakness revealed, banks cannot offset credit destruction due to collapsing mortgages and multiplying loan defaults.

Amazingly, the pillar of government debt issuance remains the strongest. This revolving door of taxes paid, massive borrowing, and government payments (direct and indirect) to nearly every citizen is now the sole whirlwind supporting the greatest faux economy since John Law’s Mississippi Scheme or the South Sea Bubble. Whereas it required all three pillars to leverage the growth of credit to these dizzying heights, only one remains to hold the forces of credit collapse deflation at bay.

As long as collective "suspension of disbelief" provides the music, this vast game of musical chairs continues. The above-cited trends, however, leave us sharing the sense that when the music stops there will be very few chairs left in the game for the multitudes to find a seat. We know that this catastrophe, when it arrives, will make instant losers out of the vast majority of people residing in the USA.

So what is a prudent person to do to preserve capital in our chaotic times? No one knows for sure.

The money supply sustaining prices at current levels is made up of a little currency plus an ocean of credit. The credit supply is teetering on a three-legged stool where one leg is gone, another is on the verge of disaster, and the last is mainlining anabolic steroids in an effort to look like Atlas holding the world on his shoulders.

Obama, Geithner, and Bernanke don’t remind me of Atlas. Neither does their Uncle Sam.

If one believes that the failure of the Federal Debt system is imminent, then one should be preparing for TEOTWAWKI. In this event, prudent preparation includes quitting the job, selling the house, moving the family to a temperate rural area and converting all assets to guns, food, ammo, farmland, livestock, barter goods, and books on how to live an 18th century lifestyle.

The trouble is that preparing for TEOTWAWKI renders one in a very poor position should things not be quite so catastrophic. People are incredibly resourceful and the history of communism shows us that even unsustainable systems don’t necessarily collapse all at once.

If the federal government system survives for a period of time after the Federal Reserve banking cartel crashes (or more likely, is seized by an Act of Congress), instead of an immediate dollar collapse, surviving dollars would soar in value. Ironically, the closer any dollar credit exists to the U.S. Treasury, the longer it may survive. The idea in this case would be to hold the last surviving dollar credits, stepping off that boat to the dry land of hard assets when all vulnerable credits have disappeared and asset values have declined about as far as they’re going to. Then will be the time to flee dollars in fear of the appearance of ever-larger denominations of currency, the hallmark of currency hyperinflation.

Can people lose faith in the banking system but maintain trust in Uncle Sam (and the legal tender illusion) for a time, despite the unsustainable binge of central government borrowing and certain train wreck of entitlement programs? To me the answer is yes, they can.

No one knows the future, but a resumption of the domestic surge in the value of the dollar (attended by price declines for stocks, real estate, and other assets) is among the possibilities, and each person must decide which among those paths to prepare for.

I’m grateful to Robert Klassen for providing editorial assistance for this article.

September 26, 2009

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

The Best of David Calderwood

I’ve enjoyed a very rewarding job. Just check out the typical industry success story here. [As an aside, while this may seem like a completely-over-the-top parody, you'd be shocked to see how successfully it skewers the underlying reality of my bizarre occupation, an artifact created by federal prescription drug laws.]

For twelve years I surfed the wave of this industry bubble with this in mind and was smart enough to avoid filling my personal income bubble with bubble-sized bills.

That foresight is about to pay off.

I wrote previously about the difficulty we all face at the end of the Bubble Era. Certainly, for nearly 30 years, and arguably for much longer debasement of the currency, artificial tax pressures, and myriad other coercive interventions in economic matters have constructed a veritable mirage palace in the capital structure of our world.

How much demand really exists for sail boats or houses or refined sugar or a hundred million other goods and services? With all the subsidies, excise taxes, tax loopholes, regulations, permit requirements, and varying levels of erosion of money’s purchasing power, there’s absolutely no way to know.

The existence of the FDA, of medical licensing laws, and of third-party payment for medical treatments warps demand for and production of diagnostic and therapeutic medical services. Entire industries employing millions of people may well be part of that mirage palace. Some of us rented rooms in that palace, some of them quite nice, but they exist only as long as the shared delusions hold together.

Knowing this, I prepared for the day that the people making decisions at my employing firm realized my job was no longer viable.

That day has arrived.

I’m currently sitting on music hold for the conference call. Of the 971 people from my division on the call, some have one code to hear one message, the others have a different code for another message. One group keeps their jobs (for now), the other group’s members will have to find other employment.

Here we go… it’s the VP of sales and marketing. Blah, blah, blah. Business challenges, industry challenges, patent losses, delayed new products, facing health care reform, …

"I regret to inform you that you are displaced." [I learned later that 479 of us heard those words.]

Funny.

I knew it was coming but it seems that inflection points in life are emotionally stirring events.

I guess Mr. Depression had a key to the front door because he let himself in and is sitting at my kitchen table with a cup of coffee now.

The good news is that I’ve prepared for his arrival. I’ve saved a lot, gotten completely out of debt, and so far haven’t let Mr. Market rip me off too much. My soon-to-be-rolled-over or liquidated 401(k) still starts with a "4" and not the "2" everyone else is griping about. As long as the clowns in Congress don’t change the rules too fast, if I want the money in my hands the company’s past matching contributions will just about pay the taxes and penalties for early withdrawal.

I want as much as I can get in my own control, not in a custodial account. All of us know that those kleptocrats in the District of Criminals are wildly flailing their arms, introducing historic levels of chaos into our money, banking, and manufacturing systems. I need to have the flexibility to move my savings to the safest harbor I can find while this cyclone smashes everything that’s vulnerable into matchsticks.

The challenges of this nascent depression moved from academic and theoretical levels to the practical level for me on April 7, 2009.

PS: I’m open to suggestions for where next to apply my skills, which include reasonably successful economic forecasting, money management & technical market analysis, selling, writing, & backhoe operation, truck driving, firearm marksmanship, child rearing, & 26 years of successful marriage. I also keep my word. [See "Specialization is for insects"]

April 9, 2009

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

David Calderwood Archives

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How long does a condition last before people generally consider it permanent and adjust their behavior to accommodate it?

Credit inflation created by Federal Reserve Bank policy has been uninterrupted since prior to World War II. How permanent is that, and what kinds of perverse behaviors does such an assumption of permanence foster?

For one, people no longer save. Permanent inflation destroys the value of any savings held in dollars so people rapidly adopt actions that avoid this invisible tax. People immediately spend whatever money they have, before the cost of what they want inevitably rises (actually, before the value of their dollars declines in the sea of fresh dollar credits).

What, then, do we all do with the excess productivity our division-of-labor economy yields?

We speculate.

To me, saving is setting aside something with no expectation of gain, simply holding onto what I have. Speculation is involves risking something of value in order to gain more than that risked.

Holding Federal Reserve Notes under the mattress in an environment of inflation is to accept a guaranteed loss, year in and year out. Not such a great deal.

Instead, we have mutual funds. We have hedge funds. People can invest in precious metals, mining stocks, and for those willing to take even more risk of loss, options contracts and futures contracts that allow the control of large blocks of value but require only a small percentage of "down payment." We even have options on futures contracts to satisfy the gambler’s gambler. But what about those who don’t wish to gamble?

I hear people all the time say they are saving in their 401(k) plan at work. They tell me they don’t invest in stocks; they have mutual funds.

What?

They’re speculating…and they don’t even know it.

Do you know any real estate speculators? No, I don’t mean the neighbors who bought five Florida condos planning to flip them. I mean anyone who put 20 percent or less down on a house and is paying off the mortgage over fifteen, twenty, or even thirty years.

I was a real estate speculator. Chances are, you are too. Lots of folks never plan to pay off their homes. The speculator’s rule is that once capital appreciation has raised your equity in your investment enough you use that to leverage up to a higher priced asset. In this case you buy a bigger house, often restarting the term of the loan.

Why not? Homes have experienced almost uninterrupted price inflation, and inflation is the speculator’s friend. You "invest" a small amount but enjoy capital price gain on the value of the entire property, even the part you don’t actually own. A 10% down payment followed by a 10% gain in property value yields a 100% gain on your investment.

Why, it’s magic! The joys of leveraged speculation without feeling the fear of loss that usually comes with speculation. What’s to fear when price inflation is guaranteed by our friends at the Fed?

We’re a nation of speculators. The Fed provides the whip to drive the herd into speculation, and decades of experience lull us all into a sense of comfortably complacency. The process invisibly impoverishes people and keeps them hanging on political promises from Washington DC and the local state legislature, so politicians absolutely love it.

All these behaviors have gone on for a long, long time but there’s no way that our times are in any way normal. Credit cards and home loans have been around for decades, but recently people became so complacent that both were practically thrown at persons with little capacity to manage and no history of servicing the payments on their debts.

This zenith in wild speculation coincided with governments at all levels going on their own spending sprees, paying for global wars and nation-building, promising public employee unions king-sized retirement packages — nothing was too extravagant.

While the length of a trend tells us nothing about its remaining lifespan, it’s been said that things that can’t go on forever, don’t. One day, perhaps soon, we will experience a phase change and what was deemed permanent simply…ends. I know lots of people think this stable inflation will end in hyper acceleration, but what if that’s wrong?

What would it look like if the seemingly permanent trend of inflation reversed? First and foremost we should see a widely owned asset class convincingly reverse from wildly overpriced amid a speculative mania to decline amid evidence of a contraction in credit availability.

The dominant belief is that significant or protracted contraction is impossible, yet how else should events in the real estate market be described? It remains to be seen if the contagion of credit contraction spreads and grows. I suspect it will, but have no proof.

Prices for things are high because of a deluge of credit-based liquidity, but clearly that flood is draining out from under home prices. Switching metaphors, visualize that prices for myriad goods and services are supported on the back of a dirigible of Hindenburg proportion, the hydrogen analogous to a vast balloon of credit & debt. What might an economy so supported look like if the fire spreads?

If no one remembers what the absence of inflation is like, consider how unprepared is a nation of speculators for a conflagration of its opposite.

November 26, 2007

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

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In watching the investment markets quite closely for the past decade or so, I concluded that trends often continue until their trajectory is accepted as inevitable. This is related to the Magazine Cover Indicator (MCI) that shows how a trend often reaches terminus when its acceptance is so great that it appears on mainstream magazine covers. Internet history demonstrates the usefulness of this; the link I used is from June 2005, almost exactly when the housing bubble topped. The columnist was writing at that moment how the boom would continue, ignoring the MCI to which she referred. [Join with me, please, in a collective smirk at the irony.]

It’s hard to go against the consensus.

Imagine a tour boat, loaded to capacity. For whatever reason, everyone on the boat crowds to the port side, leaning on the rail. What happens? The boat rolls over, to port of course, and those in the crowd suddenly find themselves not only in the drink, but ever worse the structure of the boat is rolling down right on top of them.

In today’s America there appear to be several articles of faith on which people will brook no debate: One is that the U.S. military, the most destructive organizational force in human history, is capable of crushing any and all resistance. This faith is, of course, false. U.S. forces in the Middle East are failing not due to a shortage of destructive might, but because of the limits imposed by the moral level of action. The U.S. military could theoretically depopulate the entire region, even turn the desert into glass, but any who ordered such visible barbarity would be a short time from their own fall from grace. As a consequence, the barbarity has to be held below a certain threshold so that a separate faith, the people’s faith in America’s innate goodness, is not tested.

That these two articles of faith are contradictory and mutually incompatible suggests one will fail soon. Either U.S. forces are routed in Iraq and Afghanistan, U.S. government barbarity boils over all thresholds in a hellish nuclear attack on non-nuclear Iran, or both.

What did you expect? False faiths are evil, after all.

If one-sidedness of discussion and the vitriolic criticism of a position are any indication, another article of faith is likely to join in the soon-to-be-marching failure parade.

I Googled the word "inflation" and got about fifty million hits. "Deflation," on the other hand, yielded less than four million, and most of those hardly argued in favor of its eventuality. Anecdotally, there appears to several camps regarding inflation, with some people certain that the U.S. government will inflate its way out from under the main entitlement programs to hide their de facto collapse and others certain that a Central Bank can always maintain a macroeconomic balance in favor of a growing monetary aggregate, and thus a stable inflationary bias, also known as the Goldilocks fantasy.

People who suggest, instead, that a 1930′s style deflation looms are treated to a chorus of catcalls, to say the least.

Is everyone on one side of the boat yet?

Most of Lew’s readership can agree on the ultimate outcome when the monetary system and much of economic activity are centrally "planned." Whether the denouement is a collapse in the value of the dollar (inflation) or collapse of outstanding credit (deflation), hard times are the inevitable result from decades of distortions layered into the U.S. (and world) economy.

Time will tell how all this plays out, but with vast numbers of people embracing debt as never before on the belief that repayment will be with wheelbarrows of shrinking dollars, it seems like they might someday find themselves shivering in the water under the widening shadow of the boat’s superstructure.

December 27, 2006

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.