In one, the popular one now, you try to control the bad actors. You create laws to trip them up before hand, or round them up after. You rely on regulations and regulators.

Nothing wrong with that, except that we already have lots of regulators and it didn’t help.

Why?

The reason is so obvious you question the intelligence of anyone who can’t see it. It’s simple. People willing and able to scam the system are going to be willing and able to game the regulations too.

In a fight between regulators and scammers, my money’s on the scammers. They’re usually richer and nastier.

In the second approach, you don’t overlook the bad actors. You hope they get what they have coming to them. But you don’t rely on laws or lawyers because you’re old enough to have figured out that bit about the bad actors being bigger and nastier than the good ones.

So what do you do?

You focus on getting out of the way of the bad guys. You limit the damage they can do to you. And most of all, you figure out how to avoid them in the first place.

Here are five warnings I wish I’d heeded more:

1. Be careful whom you deal with

Don’t lie down with a dog and you won’t get up with fleas. Delousing yourself is much harder than not getting loused up in the first place.

But delousing is what we do a lot of these days. It’s practically the only thing going on in the economy now. Right now there are people all over the country delousing the SEC… and the Congress… and the banks…and the hedge-funds. There’s even a global delousing effort going on. The fumigators are at work. Pest control is in full force and the exterminators are crawling over the baseboards in the cellar. There’s an international delousing effort at the BIS, with headquarters at Switzerland and local shops all over the world.

A Bug Czar has been crowned and fleas have been declared insecta non grata.

There — that should do it, eh? Any bug with a classical education should figure it out.

Which is another way of saying none of this will work. Or if it works, it won’t work the way you want it to.

The fact is, lice and ticks are at home on a dog. It’s R & R for them. Holiday Inn, Bed & Breakfast, and a luxury spa combined. Get them to leave? Good luck. Much better, don’t take your dog to bed in the first place. Much better, if you have a dog, let him drool in the kennel, not on your pillow.

The short version of all that is we do jackass things and then wonder who’s braying.

I say jackass with no disrespect. Some say that those who get conned “deserve what they get.”

That is the New Testament of the confidence man and the Sunday sermon of the predator.

As financial doctrine, it occasionally makes sense. As moral insight, it’s almost always junk. Very often victims are only weak, nave, or ignorant. The kind of people who wouldn’t know malice if they saw it in the dollar-bin with a white tag tied to its toe. They’re people who follow the rules, thinking other people follow them too. They’re honorable, so they believe in the honor of their fellow man.

Now, not only is being honorable not wrong, it’s the way things should be. But doves should learn not to coo at snakes, and beautiful souls have to wise up to what goes on in the rest of the world… or expect an ugly life.

So, rule number one. Research the people you plan to make your associates. And don’t dismiss your research. When you find out your prospective partner filed for bankruptcy six times in the last ten years, don’t tell yourself it will be different this time, because it won’t. One bankruptcy is a financial failure. Three is a losing streak. Six is a career decision. Follow your gut instinct.

If your boss conducts business with a wink and a leer, don’t pass it off as southern charm. He’s not Dagwood Bumstead looking for a lump of emotional candy. He’s a creep, and you’re a pawn in his narcissistic chess game. Ask for a transfer about two minutes after that. If you’re out of a job, so be it. There’s no guarantee you won’t be out of one, if you put up with it.

2. Never stop learning

Ignorance kills, as a lawyer friend of mine likes to say. Don’t be ignorant. Learn as much as you can about as many things as you can. Do your research. Know what you’re dealing with. With the Internet, it’s much easier. You can do a Google search on anything or anyone. You can go into Google news archives and find newspaper articles and information from as far back as the 1980s.

So start reading.

Mises.org has thousands of books online in Austrian economic and libertarianism. Project Gutenberg has thousands of classic books online. PubMed allows you to access medical journals. LexisNexis will allow you to research law. Edgar will show you company filings. You can search houses for sale on Realtor.com and look up where a house is on Google Earth. You can go to WhoIs to find out about domain names and IP address. You can find out how well a website is doing by looking up Technorati or Alexa rankings. The Way Back Machine lets you look up old magazine articles, even when they’ve been pulled off the current site. Some sites like Zabasearch collect people’s information and put it all in one spot. That’s free information. If you pay, you can get much more.

Mind you, I find data sites downright creepy, especially when they’re online, and especially when they’re centralized and can be accessed with a keystroke. If people have paid for their sins, why not let them start fresh? There may be a recording angel, but surely he lives farther north than DC.

On the other hand, just because the technology is already out there, it pays to keep up with what’s being done with it. Because if it’s out there, your business partner… or your employer… or your enemies… or your friends… probably know about it already. They might even have mined it for information to deploy against you. Shouldn’t you be prepared?

3. Limit what people know about you.

Many of us from small towns grew up around trustworthy people. Our friends and our neighbors knew everything about us, and we didn’t mind, because no one was malicious enough to hurt anyone else.

The big world isn’t so nice. People who have things to hide themselves will be only too anxious to find something on you, attack being the best form of defense in their minds. If they can’t find anything wrong, they’ll hit you with whatever else they can, even a silly thing you said casually. They’ll dig out what your crazy cousin did fifteen years ago. Or perhaps you saved your husband’s latest rant about his mother online. Don’t be surprised if you wake up one morning to find it in the New Yorker.

So, keep things to yourself, even among close friends and relatives.

That’s a hard one for me. I’m a verbal person. I write, I talk, even if it’s only to myself. Leave me next to a blank wall and I’ll strike up a conversation. And it will be two-way.

Fortunately, most people are unlikely to hurt you. But occasionally you’ll run into a psychopath who will. And if you work in politics, the media, or in business, psychopathy is practically the norm.

So keep track of what’s being written about you on the net with Google alerts. Write to sites that aggregate information and ask for your name to be removed from their lists. You might have to repeat that every year. Put yourself on the national do-not-call list so that your telephone number’s out of the reach of marketers.

And then limit the information you give out, even to your lawyer.

It’s taken me half a lifetime to figure out that any questionnaire shoved under my nose doesn’t automatically deserve to be filled in. Leave things blank unless you’re told it’s mandatory to fill it in. Or become creative. Develop fictitious personalities, throwaway mail addresses, exotic, nonexistent addresses. Use another name when doing business. Avoid registering products or filling out questionnaires in your own name. Use fake birth-dates and vary them according to a system that you, and only you, know. Change your passwords every few weeks, using a system to keep track. Write them down broken up in alternate pages in a notebook, without anything to signify what the numbers mean. If the book is lost, no one will be able to make use of the information. Neither will you, of course, but losing a little time is better than losing your savings.

Hacking e-mail, spying on private business, blackmailing and outing people, it’s all fair game these days. Attacking the privacy of public figures has become a national pastime — witness the Letterman case. But it’s not just public life. Private business is a circus of outing and shaming too. Corporations spy on and threaten each other, as well as their employees. Employees write tell-all books.

We live in a spy state, where every half-wit believes it’s his divine right to nose into anything, no matter how little it’s his business. So, these days not only is it wise to keep your own secrets, you might be wise to keep other people’s secrets.

But what should you do if in spite of that, you become a target of an attack on your privacy?

Often, nothing, unfortunately.

I’ll give you the example of an aunt of mine who didn’t want anyone to know she was sick, in case it would prejudice employers against hiring her. A colleague not only hacked her e-mail but forwarded sensitive details about her illness to dozens of people. A frail, sensitive woman, her health broke down under the stress.

I’ll give you the advice I gave her. Say your piece once in private, and say it once in public. Then forget about it. Move on. You’re not the first person to have been screwed over and you won’t be the last. Innocent people are constantly being ruined by the powerful and the unscrupulous. That’s the ugly truth of our system. Reputations are often lost, unjustly.

Our salvation is to worry less about our reputations and more about our consciences.

What we do where no one can see and none can retaliate is the test of who we are.

As for what others think, the world is a large place. Move far away, if you need to. As for the system, stop trying to reform it. It’s beyond reform.

4. Learn to say no

Telling someone no doesn’t come naturally. We’re trained to go through life being agreeable. In fact, learning to say no might be the hardest thing you learn. But it might also be the most important, and once you learn it, it can become good sport.

Speaking for myself, I’ve come to relish saying no to pests. And the nay-saying that gives me the greatest pleasure of all is nay-saying to Internet marketers. It’s not that I’m ever rude to one. I never hang up. My malice is much deeper. I let them prattle on, even asking polite questions. Then I stop them courteously and ask them why they think they have the right to call me on a weekend and waste half-an-hour selling me something I didn’t ask for. Occasionally, when they’re especially pushy, my toying becomes cruel. I turn the tables on them. Instead of selling me things, they find themselves signing petitions or supporting causes or accepting market analysis or invitations to baby showers or anything else at hand.

Can I call you, I ask. Tonight? Tomorrow? I press them to reply. Can you buy two? Now? Pretty soon, they’re begging to hang up.

Try it and see. It’s balm in Gilead.

I advise you to use this technique on rude or uncooperative colleagues too. Give them a taste of their own medicine, and do it generously. Let their cup run over. You will get something better than love. You’ll get respect.

5. Learn how to retaliate

Despite all the myths propagated about forgiveness, I’ve learned that submitting meekly to injustice usually breeds weakness, resentment, and ill-health. There’s nothing that drives up your self-respect as much as socking it back to bullies. I’m not advising being unduly aggressive. Try a friendly approach as long as you can. But when that doesn’t work, time to get tough. Throw some metaphoric crockery. Thumb your nose and thumb it publicly. Turn on the spotlight and watch the cockroaches run.

In other cases, all you may need to do is wait. Time has a knack of delivering even the biggest fish to a patient angler…and when that moment comes, don’t flinch. Yank that line and watch your target flop and wriggle on the sand.

Watch with a smile. Defy the received wisdom and develop a healthy conscience about revenge. It’s highly moral. Only our wimpy but violent age derides its feline nobility and grace.

The uncomfortable truth is the New Testament is meant for people on the same moral level of development… for family… and for friends. But in the big, dirty world, the Old Testament works much better.

Gandhi said an eye for an eye and the whole world goes blind. I say an eye for an eye, and after the first blind man, everyone else’s eyesight gets better in a hurry.

Become a moral vigilante. Why waste time going through the system if you can get better results outside of it? Use the law to warn, to shame, to threaten. But don’t labor under the delusion that a court case always helps. Your enemy will pour his time and money into creating mushroom clouds of paper. He’ll drown you in verbiage and “accidentally-on-purposes.” He’ll postpone and prevaricate and petition. He’ll appeal and block and delay… and hide behind a fog of corporate black ink like an injured squid.

Instead, if you’re obliged by professional ethics to speak up, consider other channels of actions besides the court. Try mediation or arbitration. Perhaps you’re better off complaining to the Better Business Bureau. Or posting on a consumer forum.

Monetary compensation is often not the best justice either. It can make you look like an extortionist. Try going public. Give the bully a taste of his own medicine. Post the hacker’s private information on a website. Put him on the run. That might not make you rich, but the moral satisfaction is tremendous.

Of course, it could also be dangerous. You risk violating the law yourself. In that case, you might be best off to leave your job. Maybe even leave town. Leave the thugs to the mercies of the universe. It sometimes does a better job of retribution than it’s given credit for. Villains do not always go to jail. And if the skeptics are right, they might never go to hell. But they often get dragged into divorce court, which is a good deal worse, from all accounts.

And meanwhile, there are all those other ways the wicked verily get their reward.

Envious rivals cut their throats; the tax man cometh, and the SEC with him; and then cometh old age, failing libido, deadbeat in-laws and brain-dead grandchildren. The inheritance gets squandered and the sycophants and courtiers vanish with the money. The trash-mouth gets acid reflux, the glutton gets dyspepsia and the aging lecher ends up alone, romancing his own hairless skull and wrinkled hide.

Then at the end comes the greatest punishment of all for persisting in evil deeds. You stare into the mirror and evil stares back at you, looking not so much devilish as hollow and bewildered, less like a fiend from hell and more like a Goldman CEO at a Congressional hearing.

Hannah Arendt taught us about the banality of evil. It was left to our age to practice the evil of banality. Habit, laziness, gullibility, ignorance, vanity, greed, fear, cowardice, bravado. We are duped not by heroic evil, but by humdrum vice.

The greatest and best defense we have against the charlatans and knaves who brought our society to its knees is not the law.

It is self-knowledge and discipline.

Lila Rajiva [send her mail] is the author of the groundbreaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

Time to put away your pens and papers, boys and girls.

Professor Bernanke says there’s going to be no test. You hear that? Or maybe, there’ll be one little teeny-weeny take-home. Better yet, you just get to write in and ask for whatever grade you want.

Billy Gross, Bobby Rubin, and Jamie Dimon, you boys get A’s, as usual.

(The rest of you clods better learn to suck up if you want A’s.)

Everyone else gets B’s….

No one fails. Ain’t life great?

Whew. That depression stuff was so, well, depressing. Glad it’s over.

There. That wasn’t so bad, after all, was it, seeing as how it was supposed to be the worst one in half-a-century and the sky was falling and we were all going to live in the Ozarks or Patagonia on canned peas and raw mackerel until we got raptured up… and really all that happened was some green paper got printed and we had to listen to a lot of speeches about schools an’ stuff in Barackistani (not as weird a lingo as Bushlish, but just as daft) and then, bingo, everything’s back to normal again.

Yessir. The economy is healthy.

Grade A, certified organic, flu-vaccinated healthy.

A bit weak. But wholesome.

Except for jobs, that is. No jobs.

What kind of recovery is that, you ask?

What kind? It’s the new deadbeat, can’t-get-a job, rocketing-inflation, trashed-currency, can’t-sell-my-house, can’t-make-my-payments, bankrupt-mafia-government, kazillions-in-debt, trade-warring-with-China recovery — that’s what it is. Glad you asked.

It’s kind of a new thing. No one’s really tried it so far, but they’re doing it in Europe, we hear. And maybe a bit of it in Asia. But it’s back here in the US of A that we’ve got the whole thing down. Right here in Washington. And from now until the economy gets really going, we’ll be getting the full Bernanke on it — at least, that’s the buzz.

Yep. Professor Ben’s all but promised us he’s going to be inflating grades all around this time.

No F’s. No D’s. Heck, no C’s. It’s A’s and B’s all the way. That’s the way they do it in Princeton. It’s a self-esteem thing.

Like that pep talk back on March 16, when Ben first spotted those green shoots.

Now it’s September 15 (exactly six months later), and Ben says the recession is over.

He says it’s all in the numbers from the National Bureau of Economic Research.

The numbers say the recession ended this summer or fall.

Man, the things they can predict these days.

Ole Ground Hog Ben. Puts his head out and the sun comes up.

Amazing. Who knew you could even keep score of an economy?

Kind of like a lacrosse game at Princeton. Swat. Swat. Swat. Take that, Harvard.

Of course, being a Princeton professor and religious and a pretty nice guy from all we’ve heard, Ben couldn’t bring himself to tell an outright whopper. He let the truth out dribble-drabble at the end.

Something about “impaired credit”…. and “head winds”…. and “digging out from personal debt”…. and “ongoing adjustments”….. and “unwinding massive stimulus efforts”…. and “risking igniting inflation”…. and “lingering high unemployment”…. and “sluggish outlook”…. and “higher gas prices” and…. “consumer reluctance”…. and “widespread job insecurity”…. and “significantly impaired credit”…. and “less lending”…. and “higher costs”…. and “deep freeze in credit”…. and “fearing defaults.”

But they put that way down in the report, after paragraph 5 (“Bernanke: Recession is Over,” Kansas City Star, Sept. 15, 2009).

Before that, they just had him muttering something about the economy “underperforming.”

Yeah, underperforming. Like the old geezer just needs a shot of Viagra.

But don’t let any of that bad stuff worry your little head, ’cause you know, the numbers say we’re okay. The numbers say the recession…er correction…er depress…oh, whatever…is over.

And numbers don’t lie, you know.

Like August retail sales. That went up by 2.7% over July.

(I know, I know, cash-for-clunkers, high gas prices, blah blah blah. Gimme a break. It was still up wasn’t it?)

And the ISM numbers are good too.

August PMI (Purchasing Manufacturers Index) came in at 52.9, 4 percent points higher than July.

(A number over 50 indicates an expanding economy. Below 50 is a contracting economy. This is the first time since June 2007 that the number’s been over 50.)

Oh you don’t say!

And New Orders came in at the highest reading since December 2004.

You know what that means. Businesses are stocking up. GDP is on its way up.

Woo-hoo. Ride that gravy train. Ka-ching! Bada boom!

Hold just a moment though.

What’s this Non-Manufacturing Index stuff here?

Oh, you mean those bozos in medicine and law and teaching and real estate and construction and finance and retail?

Yeah, consumers.

You know, guys who consume stuff. That stuff the manufacturing guys are producing.

Seems like they still aren’t doing so good.

So who’s going to buy all the stuff?

Not consumers. They’re cutting back.

You don’t know? That’s what comes of being a grade-inflated B student.

I bet Bob Rubin knows. And Jamie Dimon. And Bill Gross. And Warren Buffett.

And all their hedge-fund managing, private-equity-directing, leveraged-buying-out, sovereign-wealthy speculator buddies lining up to start the casino all over again.

They know whose money they’re using to do it too.

Hey, Professor Bernanke. Can we see you outside class? We have some questions….

Lila Rajiva [send her mail] is the author of the groundbreaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

It’s the sap of the economy stirring.

Animal spirits are back on the prowl.

Just this week, a Schwab analyst argued that the recovery would be much stronger than expected.

Down in the federal maternity ward you can hear the squall of new life as Team Obama slaps cold flesh and breathes life into clammy infant lips.

Recovery is abornin’.

How Green Are Our Shoots!

Thus say both Chairman Ben Bernanke and Treasury Secretary Tim Geithner.

And the public believes them. How come?

It all began in March. In the first televised interview by any sitting Fed chairman in 20 years (CBS 60 Minutes), Bernanke used the term, “green shoots” for the first time. He pointed out that the Dow Jones index had recovered from 12 year lows in 2008 and the banking system had stabilized. No more big banks would fail, he predicted (AFP, March 15, 2009).

Two months later, His Timness echoed Big Ben. Geithner cited reduced spreads on corporate and muni bonds, the reduction in costs in credit protection at the big banks, and smaller risk premiums in the interbank market. He too said the economy was recovering. (Tim Geithner, Statement before the Senate Banking Committee, May 20, 2009)

In June, World Bank President Robert Zoellick joined the "shooters."

Zoellick is a former US trade representative notorious for forcing US government subsidies and trade policies inimical to small farmers onto emerging markets. Zoellick noted “signs of global recovery,” but cautioned that they might be killed off if protectionism were adopted (Reuters, June 8, 2009).

Translation: foreigners had better not object to US government-managed trade policies…or the global recovery will fold.

Put out…or look out.

Zoellick added his own revealing metaphor to the shooter lexicon: “Right now there is a low-grade fever; it isn’t full influenza, but we need to keep a close watch….”

[my emphasis]

[Oddly, Zoellick's own employees at the World Bank contradicted their boss's assessment in a report only a couple of weeks later. (See "World Bank Global Economic Outlook" below.)]

By then billionaire hedge-fund manager George Soros was also seeing green.

And in July, chief wonk of the Obama economic team Lawrence Summers detected greenery in remarks to the Peterson Institute for International Economics.

Green shoots were now being sighted by everyone:

• In July the International Monetary Fund published its World economic outlook update. The Fund revised expected global growth in 2010 upward to 2.5%. The main source of the improvement, it claimed, was a brightening outlook for Asia.
• Simon Johnson, IMF economist — turned-Peterson-Institute-spokesman-turned green-shooting-star even went on PBS to announce, “we are turning some sort of corner.” (August 20, 2009)
• Surveys of economists and business leaders in the summer showed that, in contrast to only a few months earlier, slightly more than half thought that the economy had bottomed.

Question:

How can a depression heralded as equal to or worse than the Great Depression, a depression described as a "reckoning" for over a quarter of a century of economic misdeeds, correct itself in less than a year?

Answer:

It can’t.

Yet, by midyear, that’s exactly what pundits were telling the public. And that’s exactly what the public was beginning to believe.

Not surprisingly, by midyear, stock markets the world over had rebounded sharply.

White Hats and White Lies

But the economy hadn’t really turned any corners.

What was unfolding was a giant sleight-of-hand. The “good guys” of the liberal corporate-state were pulling a fast one, doing two contradictory things at the same time.

On one hand, Team Obama had to admit the enormity of the crisis, in order to justify the size of its own rescue efforts.

Thus Tim Geithner in his statement to the banking committee in May took care to note the following:

1. The economy had lost 2.1 million jobs from December to February ’09, the largest three-month decline since 1945. (The second-largest three-month decline in 1975 was only half as big.)
2. GDP fell at an average annual rate of 5.9 percent in Quarter 4 ’08 and Quarter 1 ’09 — the fastest six-month rate of decline since 1958.
3. Even before policy changes, the Congressional Budget Office was projecting a budget deficit for 2009 well in excess of a trillion dollars because of the weak economy.
4. The US faced economic problems of such a “unique character” that Congress had had to adopt the largest fiscal stimulus package in the nation’s history, at 5% of GDP.

On the other hand, Team O also had to pretend that the rescue had improved things dramatically or people would ask what the point of it was.

The Obamites managed to pull this off with a slew of white lies.

Some of the biggest ones:

Fudge One:

Goldman Sachs had a great quarter, making a profit of $3.5 billion and the government made $1.4 billion on its investment in Goldman Sachs. The government also got a 15% return on its investment in the eight biggest banks.

Truth:

Goldman had a great quarter only because it moved its reporting calendar to cut out December 2008, when it had a loss. And the government only made a profit on the TARP money it gave to Goldman because

• It funneled more money via the bailout of insurance giant AIG to AIGs counterparties, including Goldman (which took in $13 billion of the AIG money).
• Warren Buffett made a pre-TARP financial investment in Goldman.
• Goldman got the benefit of exceptionally low interest rates from the government at the expense of savers and to the benefit of borrowers.
• Goldman was issued FDIC-guaranteed bonds.

Without that extra welfare thrown at it, Goldman would actually be broke, not showing a profit. Ditto for the other banks.

Fudge Two:

The labor market is getting better because jobs are growing. The unemployment rate fell from 9.5% in June to 9.4% in July.

Truth:

That number only shows a slowing in the growth of unemployment. And even that small improvement has been offset by other aspects of the labor market that are worsening quite sharply:

• The duration of unemployment is increasing
• Temporary jobs are declining.
• The percentage of the eligible population receiving unemployment insurance has increased (0.1 percentage point to 4.7%. by September).
• The four-week moving average of initial claims has moved to its highest level in a month.

(Thomson Reuters, September 3, 2009)

Even when jobs have been added, they’ve been created by government spending and they’ve been in areas like education, health, and government. In the purely private economy, in manufacturing, construction and retail, job losses have been huge. (“Brown manure not green shoots,” Nouriel Roubini, Forbes, July 9, 2009.)

Note: Recent improvement in the ISM (Institute of Supply Management) Index that signals expansion of production (and thus hiring) also needs to be discounted against the huge price inflation an increasingly pressured dollar will entail. That’s beside the effects of a hike in the Federal Funds rate that’s bound to follow a dollar-crashing scenario.

Note: The ISM is a leading indicator of executive expectations for future productions, orders, inventories, hiring, and deliveries.

Fudge Three:

Increases in real personal income in April and May will increase consumer spending.

Truth:

The increases were caused by tax-rebates and unemployment benefits kicking in, and most of it was saved, not spent (80 cents on the dollars). There was a temporary lift in consumer spending, but it petered out quickly. And as unemployment rises, benefits decline, and credit tightens in the future, consumption will decline even further

Fudge Four:

The bank stress tests came out better than expected.

The bank stress tests led Ben Bernanke to conclude that nearly all of the banks had enough capital to absorb higher losses should the economy worsen, and that the Treasury stood ready to provide more.

(AFP, “Hope is alive for green shoots,” May 11, 2009)

Truth:

The bank stress tests used an unemployment figure of 10.3% (the most adverse case). But unemployment is likely to be 11% and above by next year. If you take into account discouraged and partially employed workers, some economists suggest the figure is more likely to be 16%.

Another point. The stress tests overlooked all the other ways in which the government was paying for the banks, through FDIC guarantees and cheaper loans, for instance.

Fudge Five:

The housing market is improving.

In July, the Pending Home Sales Index was up 3.2%.

Another improvement was in the value of U.S. homes. In the second quarter that number fell year-on-year (the 10th consecutive quarterly decline), but it fell by a smaller amount than in the previous quarter, for the first time since 2007.

Truth:

The improvement in home sales has been mostly in the lower end of the market and it largely reflects foreclosure sales and government credit, not real improvement in the market.

The slowdown in price decline has been offset by negatives in other areas:

• 23% of all homeowners owe more on their mortgages than their houses are worth.
• 22% of all home sales nationwide in June were foreclosure resales.
• 29.2 percent of all homes sold in June were sold for less than the owners originally paid.

(Portfolio.com August 11, 2009)

Loan problems aren’t confined to subprime. Prime mortgages are going underwater too.

Meanwhile, the market also has to deal with the decline in commercial real estate, which is undergoing one of the greatest contractions in retail in decades. Rents, even in the best urban shopping districts, have been declining.

(Colliers International Spring 2009 Retail Report, May 14, 2009).

Beyond commercial real estate, there are also all the other plagues about to visit us, when personal loans, auto loans, and student loans tighten over the coming years.

Bottom line?

There is no real basis for sustained optimism about the economy yet. Simon Johnson’s relatively upbeat assessment reflects only temporary inputs:

• the government’s reflation effort (that created cheaper credit)
• business write-downs (that created better balance-sheets)
• the business cycle (that leads to restocking and inventories rising)

Johnson cites low inflation as another positive factor. However, with all the money pumped into the economy (including the latest cash-for-clunkers scheme, that’s also unlikely to be anything more than temporary.

This harsh reality is reflected in the World Bank Global Outlook Report of June 22, 2009.

It notes the following for 2009:

• Global growth is set to fall by 2.9%.
• World trade is likely to shrink by nearly 10%.
• Industrial production in rich countries will drop by 15% from August 2008.
• Developed economies will contract by 4.5% in 2009 and grow only in 2010 and 2011
• The US economy will decline by 3%.
• Private capital flows to developing countries are likely to be halved, from $US 707 billion (2008) to $US363 billion (2009).
• Industrial production in developing countries, excluding China, is set to fall by 10%.
• GDP growth in developing countries will fall from 5.9% (2008) to 1.2%.

A Verbal Pandemic Infects the Economy

Given this underlying reality, the media’s success in manipulating market sentiment has been nothing short of astounding.

And all it seems to have taken was the viral proliferation of a single meme. Call it a verbal pandemic.

Go back to March, when there was a second rescue of AIG and Citi in the offing, the Madoff investigation was expanding, and the US had a face-off with China.

(“Nightmare on Wall Street,” Lew Rockwell, April 1, 2009).

Fear was widespread and consumer and business confidence were at multidecade lows.

To take one indicator, Google searches for “economic depression” were four times what they were before the crisis broke in 2008.

Then Bernanke came out with the phrase, “green shoots.” After he introduced it, it showed up 3,123 times in news articles that month. Compare that to 436 in February (according to Nomura Holdings Inc. research).

Bulls and bears both used it. It was applied to the Israeli-Palestinian conflict and to the Iranian demonstrations.

In four months, "green shoots" had grown sevenfold.

Today, a Google search for the meme fetches 3.31 million hits.

As the phrase spread across the media, Bloomberg noted that business and consumer confidence spread with it. Sentiment changed. People stopped panicking and started talking about buying opportunities. It was that change in mood that let administration economists build their flimsy case for economic recovery.

Take a look at Summers’ list of improving indicators in his speech at the Peterson Institute on July 17. You’ll see the proof. At least five of the metrics Summers cites relate to sentiment. I’ve highlighted the relevant words.

• Most businesses are now expecting better times, not worse, as they’d expected 6 months earlier.
• Consumer sentiment is improving.
• Options are showing a less than one percent chance of the Dow falling below 5000 in 2009 (they were once showing a better than 15% chance).
• Private forecasters are expecting positive growth at the end of 2009.
• Google searches for economic depression are back to normal. [Yes, that's on Summers' list.]

Let me repeat this.

It took two simple syllables, neither beyond the reading ability of a preschooler, for people to discount the hard evidence of the numbers and the harder evidence on the streets in favor of a sales pitch by the government.

We might even go a bit further. The stimulus by itself can have done no more than buy time for the banks and take the pressure of the interbank market. It’s taken sustained propaganda for banks and businesses to regain enough confidence to operate.

And they’ve regained confidence not in the economy, but in the government.

In brief, a story-line two words long reminds us once more that rational man is nothing more than a fiction and a fraud. Man persistently thinks and acts against logic and the evidence of his senses. Economic man, the maximizer of his self-interest, turns out not to exist.

Of course, outside economic text books, he had never existed. Man, as we find him in the world, adds up numbers as an afterthought to his feelings. When he feels good, he massages his numbers upward. When he feels bad, the numbers are downcast with him.

Economists who have caught on to this know that what they practice is no science of enlightenment. It is a black art. The knowledge keeps them humble. They stick to describing the way things actually work. They look just ahead of their noses and count themselves lucky if they can balance their check books at the end of the day.

But government economists labor under the delusion of omnipotence. To a man, they believe they can make bull frogs sing in tune and bats bathe in the sunshine. It isn’t enough that their theories blew up the market. For that alone, lesser men would have cut open their veins or thrown themselves under a passing tram.

Now the delusion is they can fix it.

And that is where the meme of "green shoots" figures. Its task was not so much to boost confidence in the markets as it was to boost confidence in the ability of government experts to fix markets.

For that, visible success… or even marginal competence…is no longer needed. The old rain-men had to make rain or they were fed to the lions. The rain-men of today can produce drought…or famine…or even plague… and they become lions.

The more they fail, the more they are believed. When they have been completely refuted, they become Nobel laureates.

They may not know what ails the market, but they know for certain it takes a village of economists to fix it.

Or, as Robert Samuelson put it in a sharp criticism of Summers’ speech at the Peterson Institute:

“If the president and his allies claim often enough that their policies have succeeded, most Americans may believe them.” (“Summer’s Spin: We Did It,” Newsweek, July 17, 2009)

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

The title itself is slimy. “Me and Mrs. Palin.” It’s meant to make you think there are cougar-like revelations inside. Take a look at Mark Seliger’s photo of Levi Johnston, Bristol Palin’s boyfriend. He’s lying back in a chair, his hand curled into a kind of fist over his abdomen, his head turned aside dreamily, with Mrs. Palin’s face photoshopped just above. The title reads, “Keeping up with the Johnston.”

Johnson (without the ‘t’) is slang for the male organ. I don’t need to elaborate. Taken together with the insinuations in the text that Mrs. Palin preferred her daughter’s child to her own, the smear is clear enough.

Mind you, the actual dirt dished is weak stuff.

Mrs. Palin pouts when she loses.

(Presumably Vanity Fair editors do tap dances?)

Todd Palin smuggles beer into the house. The couple fight. They threaten divorce.

Yawn. That’s what married people do.

But wait, there’s even more. The kids do a lot of the cooking. The older kids help the younger kids. Oh my. What fiends. What glass-eating, baby-making monsters.

They let their kids do chores? Sheesh. Hang them!

Don’t they know real “family values” means parents should slave for children so that children never learn to take care of themselves? “Family values” means helpless, dependent children, so teachers and counselors can have harder jobs and state social workers can take over their guardianship and create yet another disenfranchised group that’s dependent on the state.

And on another point, who invented the hideous word “kids” for teenagers? There was a time not to long ago when girls of 16 and 17 were mothers and boys of that age were working at adult jobs.

Dear Vanity Unfair, the piece says more about you than about the Palins or the wretched adolescent who’s figured how to make babies out of wed-lock and then trash the grandparents who let him into their home.

What will the baby feel when he grows up and reads what his father said about his grandparents? And how will dad himself feel when he’s more of a man?

So much for the sensibilities of a certain type of liberal.

Of course, it serves the Palins right for being decent enough to have the little mutt in their house in the first place. Personally, I would have horsewhipped him, not fed him.

Still, the real culprit in all this is not a mixed-up eighteen year old. And it’s not even Vanity Fair. The culprit is a culture that foists this sort of thing on the national psyche as if it’s any kind of journalism. There’s toilet paper I know that has higher standards. The culprit is anyone who likes gloating over this kind of humiliation of people in public life.

After all, humiliating someone psychologically isn’t very different from humiliating them physically. In some cases it’s much worse. The CIA has figured that out. Why can’t we? Instead, we’ve fostered a media that’s essentially pornographic — it pries, strips, sexualizes, humiliates, taunts, and intimidates people to feed the public’s voyeurism. And it does it also to display its own power as king (or queen) maker.

Humiliating people from a pleasurable sense of one’s own unbridled power is the definition of sadism. What’s “liberal” about that?

Liberalism demands better advocates and journalism needs better practitioners.

Nor is there anything liberal or journalistic about turning children against the adults in their lives, to score cheap political points. It smacks of the tactics of communist saboteurs and of the Hitler Jugend.

This isn’t just about selling magazines at any cost.

It’s deeply ideological.

Go back and look at Todd Purdum’s earlier Vanity Fair piece on Sarah Palin (August 2009), snidely titled, “It Came from Wasilla.”

Here are some quotes:

• “Sarah Palin is the sexiest and the riskiest brand in the Republican party”
• “dressed all in black; no red Naughty Monkey Double Dare pumps tonight”

There’s no mistaking the sexist and classist tone of the piece.

And then this piece of disingenuity:

“the surprise pregnancies, the two-bit blood feuds, the tawdry in-laws and common-law kin caught selling drugs or poaching game — give her family a singular status in the rogues’ gallery of political relatives. By comparison, Billy Carter, Donald Nixon, and Roger Clinton seem like avatars of circumspection”

Really?

Billy Carter was registered as a foreign agent of the Libyan government and was investigated by a Senate committee. He liked to urinate in public. Donald Nixon was the conduit for routing money and information to Nixon over some seriously questionable deals, including Watergate. Roger Clinton served a year in jail for cocaine distribution.

They’re avatars of circumspection next to the Palins?

So what’s the real reason for so much venom?

The answer to that can be found in the same September issue of Vanity Fair in a piece by Michael Wolff with the incredible title, “Blame America (and Jesus), for Jaycee Dugard kidnapping.”

Starting from that, the piece goes on to imply — none too subtly — that belief in the divinity of Jesus is somehow linked with kinky sexuality.

I kid you not.

As an experiment, I suggest you try substituting a few other religious figures for Jesus and see whether you’d be able to get away with it, as Vanity Fair apparently thinks it can.

How about “Blame India (and Krishna) for sex-trafficking in Mumbai slums”? How does that grab you?

Or “Blame Saudi Arabia (and Muhammed) for pedophilia?

(Oh sorry, looks like we already do a lot of that).

Here’s a good one. What about “Blame Israel (and Moses) for sexual torture”?

[Note: the paragraph above is satire meant to deride Vanity Fair's bigotry — no offense is meant to Jesus, Mohammed, Moses, Krishna, Hinduism, Islam, Christianity, or Judaism. However, offense is meant to Vanity Fair.... for terminal idiocy and obvious bigotry.]

Here’s a part of the Wolff piece (with my highlights):

"It’s an American Gothic thing — or, by any other name, a white trash thing. On the fringe of communities across the country there is a mutant culture: trashy, marginal, uneducated, unhealthy, and nutty. People cluck about it, and are fairly careful to avoid it, but are, too, remarkably laissez-faire towards it. This is partly because white trash means…white. And partly because, in America, a white man’s home is his castle (no matter how much debris is in the yard), and you just don’t ask too many questions (and because so many homes in America look like the homes of sex offenders).

And partly because of Jesus.

If Phillip Garrido ranted about there being no God, if he passed out atheist tracts, instead of bizarre-o Jesus-saves stuff, he would likely have been carted off years ago. But Jesus saves you not just from your sins but from public opprobrium. It may not make you any less weird in people’s eyes, but it makes you part of a protected class of weirdos. Jesus is an acceptable refuge for the sex offender. God knows, Jesus may even incite the sex offender.

No matter. If you believe hotly enough in Jesus, you’re a good American — at least for all the other weird Christians with piles of crap in their backyards, which is a considerable demographic."

There you have it. The real reason why it’s just fine to trash Sarah Palin is because she’s a lower middle-class white Christian from a small town.

So here’s what I want to know.

What sort of liberalism and what kind of democracy despise the race, religion, and culture of the majority of the people in a country?

And if we can’t answer that to our satisfaction, should we stop using words like liberalism and democracy for whatever it is that rules America today?

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

This comes from a planning scenario released by the President’s Council of Advisers on Science and Technology

The Bloomberg story cites some theatrical numbers:

• Half of the US population infected (that is, over 150 million people)
• 300,000 people in hospital intensive care units
• 30—90,000 people dead
• By-pass surgery emergency operations disrupted

But hidden in paragraph 5 of the Bloomberg piece is the most pertinent part:

These numbers are only “scenario projections” that were “developed from models put together for planning purposes only,” says a Centers for Disease Control spokesman.

So.

• Statistical projections.
• Projections from models of past pandemics. (And not the past, as in 1968 or 1957, but way back, as in 1918.)
• Projections developed for planning purposes only.

That’s three stages removed from anything you could call reality.

But perish this tenuous link with facts, PCAST wants Obama to rush through vaccine production so that 40 million people can be infect — er — injected by mid-September.

And who should make that decision?

A doctor? The surgeon-general? A medical team?

Why, the homeland security adviser!

That’s John Brennan, a former CIA station chief in Saudi Arabia, deputy executive director of the CIA under George Tenet, and the director of the National Counterterrorism Center (CTC) from 2004 to 2005 during the exact period when the CIA became most heavily involved in torture practices in Iraq and elsewhere.

(Question: Why not Janet Napolitano, Secretary for Homeland Security?)

Item: The results of the first trials of the vaccines will be available only in mid-October…

Item: According to UK’s Daily Mail, a letter was sent by the UK government to about 600 neurologists on July 29 expressing concern that the vaccine itself could cause serious complications, specifically, the deadly nerve disease Guillain-Barre syndrome. GBS was one of the side-effects when a similar swine-flu vaccine was used in the United States in 1976.

Item: More people died from vaccine-induced GBS than from the 1976 flu.

Item: The current vaccine, which is going to be given to children, hasn’t been specifically tested on infants.

Question: Why the rush?

Also hidden way, way down in the Bloomberg piece is the opinion of the chief medical officer of a New Jersey university hospital. He says the PCAST estimates are “overblown.”

Also hidden is the admission that normal flu season kills about 36,000 people anyway. And that the normal flu shot is taken by 100 million people.

Question: Then why all the hysteria?

The answer seems to boil down to two things:

• H1N1 targets healthier and younger (12—17 years) people.
• H1N1 seems related to the Spanish flu of 1918, which, reportedly, killed 50 million people — a flu that was displaced by other strains some fifty plus years ago.

(Note: What caused the deaths is not undisputed).

On the surface, at least, it looks like we’ve got ourselves a plague not seen around for half a century… and it goes in for kids.

Talk about intelligent design. If someone wanted a Friday-the-13th horror story to stir up panic in the population, they couldn’t have done better.

Children are already the easiest part of the population to target. Mom and dad might not scare on their own behalf, but let junior sneeze and every parental gene jumps into action.

How hard is it for the government to get involved when most of a child’s life is lived on government property anyway, under the eye of government employees — teachers, counselors, nurses, principals, supervisors?

Still, it’s a giant step from finding something suspicious to proving it’s fraudulent. And that goes double when the thing you suspect is a virus. But while we should hesitate to play amateur virologist, there’s no reason at all why we shouldn’t question the bureaucrats behind the viruses.

Who are they and what’s in it for them?

The first part is easily answered.

The President’s Council of Advisers on Science and Technology, the creators of the swine-flu scenario, has three co-chairs:

1. John Holdren (Director, White House Office of Science & Technology)

2. Eric Lander, head of the Broad Institute (MIT)

3. Harold Varmus (CEO of Memorial Sloan-Kettering Center, NY)

A little digging fills in the details.

1. John Holdren:

Holdren isn’t just any old scientist. He’s a climate change expert who holds the Teresa and John Heinz Professor of Environmental Policy at Harvard’s Kennedy School of Government

(The ‘Teresa’ is, of course, John Kerry’s wife when she was spouse of Ketchup king, John Heinz)

The support for climate change policies goes hand in hand with support for nuclear technology, which Holdren believes is needed for those policies. He also believes all nuclear energy should be under the monitoring of the International Atomic Energy.

Note: Climate change and “peaceful nukes” have been the beneficiaries of a huge PR effort over the last twenty odd years, largely stemming from the Pentagon, specifically, from Andrew Marshall, a charismatic theorist of American dominance whose Office of Net Assessments is the most influential outfit you never heard of.

This PR typically derides any dissent from climate orthodoxy and downplays the enormous costs and risks involved in the global move to nuclear energy. It also involves a lot of fear-mongering over states with “ancient rivalries” (read, India-Pakistan, Israel-Palestine) that carries a sub-text of racial anxiety. The underlying horror is masses of starving people (read, brown and black people) threatening the resource-rich (read whites).

That’s also the subtext of much population alarmism, including Holdren’s.

As early as 1969 Holdren teamed up with neo-Malthusian doomsdayer Paul Ehrlich to advocate population control to “fend off the misery to come.” In 1977, he and Ehrlich, as well as Anne H. Ehrlich, co-authored a textbook (“Ecoscience”), in which they discussed “a wide variety of solutions to overpopulation from voluntary family planning to enforced population controls.”

Ehrlich, with whom Holdren associated until as late as 2003, is known to have advocated compulsory birth control and to have been part of FAIR, deemed a hate group by the Southern Poverty Law Center. (To be fair to Ehrlich, some people think the SPLC is something of a hate-monger itself.)

For a run-down of the most alarming comments in “Ecoscience,” check this webpage.

“Ecoscience” approvingly describes a “planetary regime” that would use a “global police force” to actively control people who “contribute to social deterioration.”

An example of Holdren’s eco-alarmism:

In 2006 he claimed that global sea levels could rise by 13 feet by the end of the century, whereas the IPCC (Intergovernmental Panel on Climate Change) 4th Assessment Report (2007) suggested a potential rise in the same period 0.6—1.9 feet.

2. Eric Lander:

Lander’s work is also suggestive. The Broad Institute, which he heads, has for its goal the mapping of the human genome, with an eye to linking specific genetic markers to diseases in the population.

Put that next to the ongoing rush to digitalize medical information, the rapid development of an “electronic police state” in the US, and the increasing dominance of the insurance industry over all markets (recall the global fall-out when insurance giant AIG threatened to collapse), and you have to wonder whether health insurers wouldn’t find genetic markers very, very useful in creating insurance policies…and whether Homeland Security couldn’t find uses for that information too.

3. Harold Varmus:

The third co-chair, Harold Varmus, is a Nobel Prize winner in Physiology who’s also done work in genetics. As director of the National Institute of Health, Varmus is credited with doubling its budget

More worrisome, Varmus is on the advisory board of something called the Campaign to Defend the Constitution, a group that actively opposes the influence of the religious right on science and policy. He’s also on the board of “Scientists and Engineers for America” (SEA), another group which advocates for “sound science.”

But though SEA is a non-profit and calls itself non-partisan, it appears to be no more than a revamp of an outfit created in 2004 to support John Kerry’s election.

["Scientists and Engineers for Change" — please note the word, "change."]

SEA is far from being non-ideological.

As Wesley Smith writing in The Weekly Standard (October 5, 2006) noted:

“It [SEA] further demands that the government “remove inappropriate limits on stem cell research,” meaning dramatic increases in NIH grants for ESCR and public funding of human-cloning research. It urges that public policy “promote new partnerships between government-funded researchers and industry, including the biotechnology and pharmaceutical sectors” — in other words, time to ratchet up the corporate welfare! And it seeks “an aggressive program of research and innovation incentives,” to promote more efficient energy use, which would, not coincidentally, provide substantial financial benefits to an increasingly powerful science-industrial complex.” (“A New Political Action Committee Enters the Fray”)

Most intriguingly, SEA is affiliated with another non-profit, the SEA Action Fund, which is headed up by Michael Stebbins, a bio-weapons expert. Stebbins is also on the Obama team, as a liaison to the science and technology committee.

Bottom line: The Obama “objective science” team has at least two proven ideologues with axes to grind.

It gets more unsettling.

The week before PCAST came up with its H. G. Wells scenario, Varmus was taking part in a Brookings Institution forum on policies to advance science and technology.

The forum was attended by Robert Rubin, Treasury Secretary under Bill Clinton, and Rubin’s protg, Lawrence Summers, chief Obama economic adviser, a former President of Harvard (where PCAST co-chair Holdren teaches) and a former Treasury Secretary, also under Bill Clinton,

Rubin is Mr. Wall Street, ex co-chair of kleptocrat megabank, Goldman Sachs, and ex-chairman of corrupt drug money launderer, Citigroup, a man as responsible as anyone for the deregulation of the financial industry and the consolidation of the banks that snow-balled a crisis of cheap money into a global depression, a man who never met a door he couldn’t revolve through, a man who’s bailed out of enough corporate-state ships to sink an armada.

Summers, for his part, defends the perfect economic logic of dumping the toxic waste of multinational corporations in Africa.

The outfit that put these power players together, the Hamilton Project, also deserves scrutiny.

HP is the brainchild of its co-chairmen, Bob the Bailer, and another revolving banker of high caliber, Roger Altman, CEO of Evercore, a boutique investment bank.

Altman has had stints at Lehman Brothers (before and after its merger with Shearson) as well as at Treasury, first as an assistant secretary and then as deputy secretary (under Clinton). He’s been an adviser of both John Kerry and Hillary Clinton. In fact, he resigned from Treasury after admitting he tipped off the Clintons about criminal referrals arising from an investigation into the Clintons’ Whitewater investments.

In other words, Altman is not only a Wall Street insider, he’s a Clinton confidante.

Also telling is the fact that Altman has headed up Mergers & Acquisitions and international outreach for the secretive and huge private-equity firm, Blackstone.

Blackstone, as Wall Street watchers know, has a strange way of sneaking into just about everything going on of any importance.

[An aside: Blackstone's CEO is Pete Peterson, commerce secretary under Reagan and also the creator of the Peterson Foundation, the Peterson Institute, and the Concord Coalition. All three outfits present themselves as disinterested policy advocates, but all three betray a focus on budgetary issues that just happens to tally wondrously with Peterson's own financial advantage].

Besides Altman’s ties with Blackstone, the Hamilton Project has another link with Peterson. Along with Obama economic adviser and former Federal Reserve chairman, Paul Volcker, Rubin is a vice-chairman of Peterson’s Concord Coalition, which gave him its Economic Patriotism award in 2006.

How are any of these ties relevant to swine flu?

Both Blackstone and Evercore have powerful ties to big pharma.

I. Blackstone:

Blackstone entered the huge Indian drug market in 2006, buying shares in Emcure, which produces antiretroviral drugs, antiviruses and antibiotics. Besides pharmaceuticals, Blackstone is also heavily invested in hospitals, nursing homes, health insurance and health care packaging, among other things. So while drug companies don’t want Americans buying cheaper generic drugs abroad, companies like Blackstone are investing in foreign drug companies and profiting.

II. Evercore:

Evercore, which Altman now heads, is a big player in the drug industry too.

In July (just one month after swine-flu was declared a pandemic) Evercore concluded its second multi-billion dollar health care deal of this year when it advised leading vaccine maker Sanofi-Aventis (SASY. PA) in its acquisition of the other 50% of Merial from joint owner, Merck. Evercore’s previous multi-billion dollar deal was advising Wyeth on its acquisition by Pfizer, the biggest pharma deal of the year when it took place.

Sanofi-Aventis is described as the world’s leading flu vaccine maker and is rushing to create a swine-flu vaccine that it began testing on August 6.

Industry analysts have noted that sales of swine-flu vaccine will add billions of dollars to drug company revenues in 2009 and 2010. (“Sanofi-Aventis Starts Swine Flu Shot Trials,” Reuters, August 7, 2009).

Meanwhile, the Sanofi-Aventis and Pfizer deals have pushed Evercore ahead of Credit Suisse in volume of mergers & acquisitions in US rankings.

Both deals were put through by Altman and a former Credit Suisse banker who joined Evercore two years ago, after concluding some of the decade’s biggest health-care deals for clients like Johnson & Johnson, Schering-Plough, Wyeth, GlaxoSmithKline, Roche Holding and Teva Pharmaceutical.

(“The Pharmaceuticals Banker That Helped Evercore Land a $4 Billion Mandate,” Deal Journal, July 31, 2009)

Note: Roche Holdings and GlaxoSmithKline are producers respectively of Tamiflu and Relenza, two popular vaccines that retard the spread of swine-flu in the body. The two companies have ramped up their production in anticipation of the pandemic. (“The Quest for a Swine Flu Vaccine,” BBC, April 29, 2009)

III. Big pharma has its fingers in the Obama administration in another way.

Billy Tauzin, the former Louisiana congressman, chief of Pharmaceutical Researchers and Manufacturers Association (PhRMA), the biggest pharmaceutical trade group, has recently managed to enlist Obama’s support in protecting drug prices. The White House has agreed to stymie congressional efforts to allow drugs from Canada to be imported or bargain for lower drug prices, among other concessions. In exchange, PhRMA has agreed to cut $80 billion in projected costs to taxpayers over ten years

(“The White House Deal with Big Pharma Undermines Democracy,” Robert Reich, Salon, August 10, 2009)

IV. And where are the insurance companies in all this? The five largest private health insurers and their trade association, lobbied Congress to the tune of over $6 million in Q1 2009 alone.

(“It’s Robbery,” Alternet, August 24, 2009).

It’s not swine-flu Americans should be worried about. It’s swine-at-the-trough flu, a much more lethal condition.

Symptoms

1. Infiltration of the body politic by activists and unknown agents.

2. Extremism about rising temperatures, feverish statements, and predictions bordering on the delusional.

3. Monopolistic conditions requiring constant monitoring.

4. Frequent and massive collapses needing bailing out and mopping up by supervisors.

5. Ongoing influenz(a)-peddling, symptomatic lobbying, and borderline-racketeering disorder.

6. Reliance on questionable and intrusive foreign bodies.

Diagnosis:

Moderate-Severe Pandemonium

Aetiology:

Cases of pandemonium often tend to be stirred up by government hacks, corporate flacks, and welfare kings interacting with the media, causing acute inflammation in the population. This one is no different.

Note: One of Obama’s chief flu-viators, the director of the Center for Disease Control (CDC), Andrew Besser, left to become a correspondent for ABC this past July.

Item:

The team that wants to vaccinate tens of millions of people, with vaccines not yet tested for safety, for a plague that even the government admits is unpredictable consists of the following:

1. An environmental and population alarmist with a forty-year track-record of making apocalyptic predictions that are flat-out wrong. A guy who’s spent his whole life convinced that there are too many people, that people are destroying the universe, and that we should actively reduce the number of people on the planet.

2. Another guy who’s creating genetic ID’s for people prone to disease — a genetic profiler whose work would be invaluable to health insurance companies and to government surveillance.

An aside: What if they come up with a gene for right-wing attitudes?

3. A third guy who doesn’t like religious values in public policy and works with ideological and activist “science” groups, one of which is affiliated with bio-weapons. A lobbyist for the science-industrial complex.

4. One of the top five miscreants of the global economic collapse, a big-time Wall Street player responsible for using the government, first, to consolidate the mega-banks; then, to bail those banks out when they blundered; and finally, to eviscerate less powerful banks. An insider with ties to the insurance industry.

5. Another Wall Street and government player with a track record of consolidating big pharmaceutical companies, several of which will directly profit from the swine-flu scare. Also an insider with ties to the insurance industry.

Prognosis:

In the scheme of things, swine-flu is no more than a one-off bonanza for the drug companies.

Far more lucrative over the long-haul is the continuing and increasing use of vaccines of all kinds, especially vaccines subsidized and pushed by the government.

Example: In January 2009, the Department of Health and Human Services awarded a $487 Million contract to Novartis to make avian flu vaccine. Novartis is one of five companies (along with GlaxoSmithKline and Sanofi) that are making both seasonal and swine-flu vaccines for the government.

Conclusion:

Just as the avian flu scare ended up being a dry-run for the current round of medical hysteria, the current panic will likely be most significant as a dry-run for an expansion of the police state and for greater consolidation of the big banks, big insurance, and big pharma. In fact, that’s just what Homeland Security adviser Brennan said in remarks to the very influential Center for Strategic and International Studies (CSIS) on August 6, 2009.

Quote:

“Our coordinated response to the H1N1 virus — across the federal government, with state and local governments, and with the private sector and the public — and our extensive preparations for the coming flu season will ensure that we are better prepared for any future bio-terrorist attack.”

Health care, anyone?

Prescription:

Turn off the TV, stay out of crowds, wash your hands often, drink plenty of water, and if you do feel sick, check out Dr. Grattan Woodson’s website.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

Never heard of it? Oh dear. It must be the only “hate” speech not yet on the government Index. If you didn’t know it, our ruling class, for our own salvation and for the salvation of all men, has taken on the task of cleansing us of our own thoughts…and indeed, from thinking.

Admittedly, for a large number of people this would probably be a very good thing. But the rest of us would like to reclaim our cogitations, as well as the vocabulary in which we mutter them.

We want our language back.

Take “hate."

In the good old days, hating someone meant you actually felt visceral dislike toward them. Hate expressed itself in clearly recognizable ways. You spewed invective at the people you hated, you dunked spit-balls in their beer, you snickered at their dress-sense, you aspersed their ancestors and compared them unfavorably to lesser primates.

If you were in the press, you advocated deporting them.

If you were in political office, you set up gas ovens and tried exterminating them, along with their uncles, nieces, and third cousins….

At the very least, you cut up their photos and refused to invite them over for tea.

But those were the old days…when Pravda was propaganda and 1984 was still fiction.

Comes the twenty-first century and “hate” today includes some fairly innocuous things:

1. Holding opinions the ruling class doesn’t like (traditional, religious, libertarian, anti-state)
2. Researching subjects the ruling class would rather ignore (9-11, Federal Reserve activities, gold manipulation, banker fraud, media disinformation, torture, the CIA, Wall Street control of the media, Zionism)
3. Treating people with different political opinions from yours like human beings, instead of pond-scum

It’s obvious from this that we’re ruled by brutes who don’t own decent thesauruses or dictionaries. Which means a lot of innocent Anglo-Saxon words are currently blubbering underwater in the necrotic swamps of DC.

Spare a kind thought for them.

And while you’re at it, I’d urge you to adopt some stray palabra yourself, before Washington reaches out and touches them with its clammy paws.

In fact, I just got me some palabra of my very own.

Here goes:

1. Anti-Sinites

Anyone who supports the devaluation of the US dollar and/or treasury debt, now largely held by the Chinese government and by Chinese and other Asian savers is an anti-Sinite.

Since debt devaluation would wipe out the savings of creditors, it’s clearly motivated by anti-Asian (specifically, anti-Chinese) bigotry. Anti-Sinites want Asians to go broke.

Well-known anti-Sinites include Alan Greenspan, Hank Paulson, and Ben Bernanke.

2. Helicopter Revisionists

Anti-Sinites include Helicopter Revisionists in their ranks.

Helicopter Revisionists question the size of Ben Bernanke’s helicopter. That’s the one from which Ben promised to drop all that money into the economy, remember?

The bigger Ben’s copter, the more money he can drop. The more money he drops, the more the currency depreciates…and the more everything costs in dollar terms.

Helicopter Revisionists claim Ben’s helicopter was never that big. Thus they play down inflation.

Copter Denialists go even further than the Revisionists. They don’t believe inflation even exists.

$10 jar of coffee? $4 loaf of bread? That’s demand, baby.

Yep — all them Pakis, Chinks, Russkies, and Latinos swilling java and stuffing their faces — that’s what’s pushed prices up.

[Never mind that Pakis, Chinks, Russkies, and Latinos have been stuffing their faces for decades without the prices budging.]

3. Shooters (See also para-shooter, green man, leprechaun)

Just as birthers show an untoward preoccupation with Barack Obama’s birth certificate, shooters spend an inordinate amount of time looking for "green shoots" in the economy. Where everyone else sees dry brown weeds, shooters see lush tropical foliage with jobs flowering, the stock market surging, a glint in Jim Cramer’s eyes, and a song on every broker’s lips.

Most psychiatrists consider shooters dangerously delusional. They note that shooters often overlap as a group with anti-Sinites. Greenspan, for example, is both an anti-Sinite and a shooter.

A small radical group of psychologists, however, claims that shooters are harmless visionaries, no different from the people who claim to see little green men or leprechauns. Following intense lobbying by these radicals, shooters were reclassified in the DSM-IV as suffering from a personality disorder rather than a psychosis.

[A sub-class of the shooter is the para-shooter. Para-shooters, as their name suggests, are a parasitic group, largely made up of incompetent CEOs and bureaucrats. Para-shooters, while usually not shooters themselves, depend on shooters to hang onto their perks and privileges. This is especially true of one variant of para-shooter, the golden para-shooter. Golden para-shooters are nearly always full-blown psychopaths].

4. Healthers (See also Rahm-page)

You’ve heard of 9-11 truthers — those right-wing theorists of the 9-11 attacks who insist that the guv’mint “dunnit.”

Well, Healthers are left-wing theorists of health-care.

And they wish the guv’mint “dunnit.”

Healthers have a near-superstitious belief in "health-care" — which they strangely confuse with "being healthy." Indeed, healthers have little interest in health at all. They’re obsessed with pushing questionable pills and procedures through an incestuous web of medical licensees, insurers, and litigators to people who mostly don’t want them.

A gang of healthers that occupies public territory, demands immediate government action, and incites cash hatred (see below) is said to be on a Rahm-page

5. Cash Warfare (See also Cash-hatred)

Way too much attention is paid to the notion of class-war, according to which, the rich hate the poor so much they want to wipe them out. Of course, this makes no economic sense at all. A never-ending pool of cheap labor is every CEO’s midnight fantasy.

Nor can one notice much hatred of the rich by the poor either. Most of the poor worship at the feet of the rich.

Kick me, it feels so good, is the motto of the average working joe.

No, no, no.

The real battle is between the people who save and lend and the people who borrow and spend.

Creditors versus debtors.

Cash-rich versus cash-poor.

And the story of the last twenty years is how the borrowing class got its hands on the cash of the saving class, spent it all, and then sent the bill…you guessed it…back to the saving class.

Now that’s warfare…

6. Red-Washing

Green-washing, as you know, is the way some firms put an environmentally-positive spin on business-as-usual.

Well, red-washing is the way the government puts a red state-friendly, conservative spin on policies that are the same old big-government, tax-and-spend liberalism.

“Compassionate conservatism,” for example, was mostly red-washing.

Red-washing is also used to describe the devious public relations tactic of portraying left-anarchists who are really libertarians as “reds” or “commies” to bamboozle people on the right into supporting the police state.

7. Debt-Squads (See also, ARMs race)

Self-explanatory. Mortgage-brokers, credit-card salesmen, loan sharks — these were the debt squads that roamed the empire for the past fifteen years, beating up (economically-speaking) on anyone dumb enough to miss the fine print and sign up for their one-way tickets to financial assassination — adjustable rate mortgages (ARMs).

You’re upside down on your double-wide? Your McMansion’s been foreclosed on? Grandpop’s moved into a trailer? Thank the debt-squads for it.

8. War on Terra Mater

The neo-conservative war-on-anything-that-moves-within-our solar-system has obviously got very little to do with just Islamic terrorism. Apart from the hackneyed point that you can’t make war on a noun, does anyone really think that an empire that faced down a Soviet Union bristling with nukes needs this much muscle power for Osama and his merry band of jihadists?

Nope. War on Terra (Mater) is more like the truth.

9. Global Browning (See also, Gold Thuggery).

Global Browning, in our opinion, is far worse than global warming. It’s the threat posed by an insidious flunky of the British state called Gordon Brown. Herr Brown sold Britain’s gold at the very bottom of a twenty-year bear market in gold over the red flags waved by his brightest and best. Then, as PM, he presided over the bankruptcy of the British banking system. It’s got us wondering. Accidentally or accidentally-on- purpose? We don’t know, but we can take a guess.

Gordon Brown, we figure, is a gold thug. The distant and repulsive cousin of the stodgy gold bug, the gold thug wants nothing more than to sell the yellow metal as fast as he can to hide his own festering monetary sins. Gold thuggery is rampant in central banks world over, who, under the influence of the Brown brigade, depress gold prices to keep the wind in the sales -er- sails of their inflationary schemes, thus robbing the hard-working peons whose savings pay the bloated salaries of these parasites.

Experts believe that it’s the last twenty years of unremitting Global Browning that’s burned the economy to a crisp

10. Swine Floozy (see also, Avian Floozy, Tami-Floozy, Hillary Health, Nurse Ratched).

We hasten to point out that we use the term floozy gender-neutrally. By floozy we simply mean a cheap tart who’ll sell you anything to make a buck.

There are male, female, gay, bi, transgendered, gender-bendered and fender-bendered floozies, but whatever gender they are, their agenda is the same. They sell you government cures. In almost all cases, these cures are worse than the disease.

Swine floozies want you vaccinated yesterday for a flu epidemic that may show up next week.

If there isn’t an epidemic, they’ll make one up. Or borrow last year’s plague.

A Tami-Floozy is a variant of the genus. Tami-Floozies make a direct killing from investing in the drugs sold to cure the diseases hyped by the other floozies. Donald Rumsfeld is the best-known of the type.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

I still think it is. But I also think your journey abroad should be reasoned and carefully planned, or it could leave you worse off, not better. Run smart, not stupid.

To help you do that, here are some things I’ve learned from years of going back and forth across the world. I’ve grouped them under four headings that express fundamental elements of a libertarian stance in the world.

• Connectivity (the free market is all about communicating and persuading)
• Security (libertarians should take the initiative in defending themselves)
• Simplicity (less always makes for more independence)
• Flexibility (don’t resist change; it’s the essence of the free market)

I. Get Connected

You can’t travel freely if you aren’t able to take care of family or business problems quickly from wherever you are. You can forget about phone calls for that. You won’t always be in a time-zone that allows you to call, your bank’s local line isn’t going to be as accessible, and that 800 number you used to call at home won’t work from overseas. Also, endless international phone-calls won’t help your budget.

The solution? Get online.

Before you board your flight, make sure you have online access to your family and friends, your doctor, lawyer, banks and insurance companies. Skype is the simplest way to keep in touch abroad and it doesn’t cost a dime. Get accounts for yourself and for your family and friends before you leave.

Here’s the way to carry around your account information.

• Write down all the user names and passwords to the websites carrying your business and financial accounts. Be sure to disguise them so that no one else will be able to figure out what they mean and which accounts they refer to.
• Keep the email addresses, phone numbers, and physical addresses of your contacts in a separate spot.
• Write down the actual account numbers and financial information in a third place.

Now, make two or three copies of this vital information on tiny cards, and leave one in a locked drawer at home. Put another into the wallet or purse you always carry with you, and leave the third with the person you trust the most.

If you have excellent computer security, you can also save this information in an encrypted and password-protected file on your laptop. But with all the security threats around, I would avoid this.

Make sure you have a reliable laptop computer to travel with. If all you’re doing is emailing and browsing, a net-book — a smaller, more portable laptop — should be enough. You can find good ones on sale for under $200. Make your purchase well before you travel to avoid lugging around a lemon.

Make sure that your cables and plugs are compatible with the outlets in the countries you’re visiting. Get onto an online forum and ask for specific details. Something as simple as an adapter might not be available locally in exactly the shape you need, so buy it before you leave. Electronic items are usually much more expensive abroad than in the US and you’re probably not going to save anything by trying to buy them abroad. Buy adapters, DSL cables, converters, and surge-strips, wrap them carefully, and label and number them so you don’t lose track of them while moving around.

II. Get Secure

If you plan to use hot-spots for your wireless, make sure you have extra strong security. It’s easy for trojans and viruses to attack your computer through unsecured wireless connections, which means thieves could steal your bank information and credit card numbers.

Don’t rely on just one security system. You need different kinds of software to protect you from different threats. Learn which security tool protects you from what, and research and keep up to date with new threats. Spyware, viruses, trojans, rootkits, phishing attacks, malware and adware all need different kinds of protection.

Security programs can also interfere with each other or make your laptop unbearably slow. So practice playing computer-doctor before you go abroad. If you’re not ready to do that, make sure you have an extended warranty and a technical support line you can call from overseas.

Before you leave, install any software you might need, check all your settings, and make note of them, so if your laptop crashes abroad, you’ll know what the default settings are.

Write down your computer’s web address — it’s IP (Internet Protocol) number. If you feel you need it, get some kind of encryption or proxy to hide it. That should give you some online privacy when emailing or surfing. But be warned that most programs won’t give you complete protection against determined enemies. They’re mainly intended to deter casual attacks.

For bigger trouble, keep the phone numbers and email addresses of a couple of tech-savvy friends on hand.

A few safety precautions:

• If you belong to any social networks like Facebook, avoid posting detailed information about where and for how long you’re traveling. Thieves have been known to use this information to break into houses.
• Never leave a laptop in a hotel room, even in a locker, unless you’re absolutely sure of the place and have been there for at least two weeks. If you store the laptop inside a locker, get that in writing from the management
• Always carry your passport, money, and vital information on your person. Never leave them in a hotel, even locked up. I always wear my purse diagonally across the chest with the clasp facing inward and the pouch in front. This way it can’t be snatched or even touched without my noticing.

III. Keep It Simple

I’ve been living abroad for over a month now. My luggage consists of four items:

1. A small purse carrying vital information, passport, credit cards, and money.
2. A small raffia bag that folds up easily. It holds a few toilet articles, an umbrella, a face-cloth, pen and paper, and a disposable camera. It’s what I carry ordinarily on the street. Anything in it can be replaced without great loss.
3. A padded computer bag with my laptop inside. I pack wires, attachments and flash drives separately, since laptops have to be unpacked in security.
4. A duffel bag for clothes. I find duffel bags are easier to stow overhead or under the seat on a plane.

How much do you need in the way of clothing?

The less the better. From many years of packing I’ve learned that you can live anywhere quite easily for a month or two in two pairs of pants, a dress or skirt, a fitted t-shirt, a top, a few pairs of leggings, a couple of sweaters that can be layered or worn separately, and two pairs of shoes. Any umbrella you take should be foldable.

Stick with black and solid colors that can be mixed and matched. Take clothes that can do double duty at night. Leggings, for instance, can be worn under trousers on a cold day, worn by themselves on a hot day, and slept in. Everything worn next to your body should be made of material thin enough to wash and dry by hand, thick enough to avoid chills, and dark enough to hide stains.

Prefer clothes with pockets. Prefer pockets that can zipped or buttoned-up. Prefer front-pockets that you can see to back pockets that you can’t. Especially useful: a light-weight jacket in a dark color, with inside pockets.

Don’t take expensive ear-rings, chains, watches, or glasses, even if you’re going to attend conferences. In fact, avoid even inexpensive jewelry. It takes up valuable space in your bag. Actually, all your clothes should be inexpensive. If you pack old clothes, you won’t care if you lose them and when your trip is over, you can just give them away. That leaves plenty of space to pack anything you bought abroad.

When packing, roll up your clothes into tubes and wrap them in clear plastic. They take up less space and stay clean, and you can see where everything is without trouble. Vacuum bags are also useful for saving space.

Avoid taking too many toiletries because of the new security regulations. You’ll end up arguing with the security personnel. On the other hand, medicines and vitamins are useful things to carry with you.

Wear bulkier items like jackets on the flight, to save packing space. You can shed or add clothing as you travel, depending on the weather.

On the flight, wear your jacket over your purse so it’s even less visible, pack the raffia bag into the duffel bag so it counts as one piece of carry-on luggage, and carry the laptop in your hand, watching it carefully in security so it’s not damaged.

With just these four items, you’ll be able to avoid having to check-in any luggage, which can save you around a hundred dollars on a budget flight.

IV. Stay Flexible

My final tip is the one most people find hardest to follow. Stay flexible. I don’t mean by this that you should be foot-lose and fancy-free. No. Your travel should be as structured and purposeful as you can make it and you should try to accomplish things methodically.

But the biggest mistake people make with big decisions isn’t usually spending too much time on them. It’s rushing them and getting into trouble. And that’s where you need flexibility.

For most people, a house is the biggest investment they’ll ever make and they need to take their time buying. If you go abroad and find after a month or two that you really haven’t found what you’re looking for, feel free to change your plans.

This might mean coming home earlier than you intended. It might mean sheepishly going back home and looking for a farm in Iowa, instead of Patagonia. So what? You eat a bit of humble pie, your friends snicker, “I told you so,” and within a few weeks it’s all over.

Buy a house in a hurry and you could spend half your life regretting it.

On the other hand, you could fall in love with a country…or stumble on something wonderful that you never suspected existed…or find yourself inexplicably at ease in your foreign life. In that case, why stick to a plan developed before this new world opened out to you?

Go with the flow.

Rearrange your affairs at home and stay on.

Contrary to what most people think, opportunity is always knocking.

The problem is with us. We’re not listening for it.

We’re so fixated on what is that we can’t see what might be.

Leave what is to the determinists.

Libertarians need to focus on what might be.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

The complaints against Palin were largely filed after she was named running-mate of Republican presidential candidate, John McCain, and most of them were resolved in her favor.

Even the investigator was sympathetic and suggested that “Alaska lawmakers may need to create a law that reimburses public officials for legal expenses to defend complaints that end up being unfounded.” (Rachel D’Oro, AP, July 21, 2009).

The DC lawyer who set up the Palin fund said the ethics committee’s finding was “crazy." “Anybody can keep filing ethics complaints and drive someone out of office even if you’re a nut.” (D’Oro, July 21, 2009). The premature publicizing of the finding might also have jeopardized the investigation.

As for the substance of the charges — cashing in on your office?

Why it’s a time-honored tradition when it’s done by the sainted William Jefferson (you know, the guy who assaulted a couple of women, bit one on the lip until she bled, sodomized the barely-adult daughter of a loyal Democrat donor and then tried to trash her as a stalker, besides causing unaccountable career-implosions, jail-time, near-death experiences, and gory suicides for anyone foolish enough to tangle with him on his carnival cruise to political glory).

But let an evangelical mother of five from a small-town try to pay for her legal troubles, and the media is on the case.

This is only the tail-end of sustained and malicious media-targeting of private behavior that has little relevance to Palin’s public actions.

First, there was Palin’s baby…then it was her unwed daughter’s baby…then the Palins were rumored to be divorcing….

Where do standards of decency and privacy go when the target is a conservative? Journalists seem to be scrambling to nose around in conservative dirt like pot-bellied slum-kids licking candy-wrappers from the trash, dead sure that deep inside there’s some juicy stuff left over for them.

The Sarah-sanctimony isn’t unique. Earlier in the summer we had all that prurient self-righteousness oozing around the hacked emails of a gringo governor to his favorite Latina, at all other times a favored political species. Maybe Ms. Chapur would have had better luck if she’d gone up for the Supreme Court, and Ms. Palin should have got herself a sugar-daddy on the banks of the Rio dela Plata.

Meanwhile, the last time I looked, hacking was a federal offense punishable with up to twenty years in prison, but when did that ever stand in the way of the Pulitzer of some pen-pushing peeping Tom with a newspaper to sell and idiots to titillate? And lest we forget, the King David of South Carolina only blew a measly eight grand of the state’s purse on his Argentine crumpet. The sages at the Treasury and Federal Reserve have blown twenty TRILLION (and counting) of public dough on schemes far less doable than Ms. Chapur.

But, whine the people’s pundits, didn’t Mark Sanford actually shake his finger at the martyred William Jefferson in his time of trouble? — oh, the hypocrisy!

Hypocrisy? First, there’s the semantic point that failing to fully live up to moral standards you profess isn’t hypocrisy, it’s human weakness. Then there’s also the little matter that a lifetime of assaulting women and harassing female associates is closer to dementia than it is to dalliance. It makes for as open and shut a case of sexual pathology as it’s possible to find outside a psychiatric clinic or a Hannibel Lecter film.

L’affaire Chapur was adult love and a head-ache only for the Sanford family. It was, in out-of-fashion language — none of our business. The public money involved was too petty to require a public scandal, except for people who wanted one out of nastiness. The Clinton burlesque could also have been handled much more discreetly and compassionately by the press, but it was sexual harassment and a national-security problem.

But don’t let that little bit of guano smear the granite profile of Bubba under whose bibulous nose the greatest heist in financial history unfolded with the measured steps of a minuet.

And what were the great illiterati doing then? Why, they snored through it all, sated on warmed-up left-overs from Camelot. High on the hooch of the new economy, how could they tell that the tale of Bill-and-Hill was less Arthurian myth than Arkansan grift, less gilded sin than gelded spin?

Simply put, Mark Sanford’s behavior was not ideal, but it was ordinary.

Bill Clinton’s was pathological.

And Sarah Palin’s offenses in office — real or imagined — are trivial next to what we’ve seen daily for several years…make that decades… from the Treasury Secretary, the Chairman of the Federal Reserve, and the rest of the heavenly bodies eclipsing life on planet America.

[And to all the people who complained that we had a two-party monopoly, how d'you like your new one-eyed despot?]

Some journalists seem to find it easier to beat up on a small-town mayor than to grow the cojones needed to take on the treacherous billionaire bankers chewing up the system.

That says a great deal about the bully culture we live in.

The bullies strain at Republican gnats only to swallow Democrat camels. They cross land and sea to make one convert to freedom…and he ends up twice the child of hell they are.

In an August 3 piece in Salon magazine, even the usually well-modulated voice of Professor Juan Cole, shot up a few octaves. He compared Sarah Palin to President Mahmoud Ahmadinejad of Iran, and came out in Ahmadinejad’s favor. Now, according to some people, Ahmadinejad stands guilty of anti-Semitism. I don’t know if that’s true or not. But that’s what the establishment media seems to think. So, if the same media thinks Palin is worse than Ahmadinejad, then what it’s saying is that to liberals, being a conservative small-town mother is more dangerous than being anti-Semitic.

Palin and the Iranian president are both dangerous populists, writes Cole. They blame their failures not on their own loose lips (Palin’s stutterings on the Katy Couric show and Ahmadinejad’s alleged anti-Semitism), but on media conspiracies against them.

Of course, there’s no real reason why both things couldn’t be true. Palin could have her short-comings, and she could still be the victim of a hatchet-job by the media. But measured logic is not the style of the Sarah-phobics.

Here’s Cole again on the Irani-Alaskan Axis-of-Medieval:

“Both politicians ‘encourage a political style of exhibitionism, disregard for the facts as understood by the mainstream media, and exaltation of the values of people who feel themselves marginalized by the political system….’”‘

Dear me. Tut-tut. Political exhibitionism, eh? And that wouldn’t be something ever committed by Barack Obama now, would it — he with the near-halo on every magazine cover, who dubbed himself a voice for people marginalized by the system — or so I recall — in his celebrated Getty- er- pre-election speech on race?

As for “facts as understood by the mainstream media,” since when are facts determined by how journalists understand them? Isn’t that just what some guy called Donald Rumsfeld said not so long ago and got these very same journalists lathered up at his solipsism?

I’m no fan of Sarah Palin.

Anyone who has five children at home and hankers for high office has her priorities confused. If a real feminist was needed on McCain’s team, Todd was the Palin they should have picked. And no, the photogenic governor doesn’t have the experience needed to take on DC. No more than our genial President himself.

But by trashing Sarah Palin in such a rancid, racial, and bigoted way, the media did itself no good, and turned her into an instant symbol of the double-standards practiced by this country’s political elites toward outsiders.

Whatever you think of the moose-hunting mayor, she isn’t an insider, and it was insiders who dragged America through the mud over the last two decades. That makes her — one way or other — a voice for ordinary people, one of us. The persistent trashing of Sarah Palin is a trashing of ordinary Americans.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

Like most cynicisms, though, this one has some truth in it. The gods do not give out a full hand of trumps even to the best card-sharpers and there is no Eden without a diabolic worm wriggling at the core.

But between paradise and hell there are many steps. Since our choice is made in the mutable terrain between, we can be forgiven if we hold out for a country closer to the first than to the second.

So, to those of you who wrote — anxious, fearful, peevish, demanding, despairing, impetuous, brave — and asked, “Should I go?” here is my answer:

Yes, but…

Yes — Go, and go dreaming.

But — Dream with your eyes wide open.

On the other hand, your second question: “Where should I go?” deserves nothing but gentle scorn.

You call yourself a libertarian and expect prescriptions from the first person who echoes your own thoughts? You want it with guarantees…. and at no cost too!

And then you wonder why you end up in business with charlatans and bandits…

Here’s the truth. Strangers who tell you that here or there is the best place for you are steering you where they want you to go. Or talking nonsense. Or, are as nave as you are. None of that makes for good advice.

If you’re thinking seriously about moving abroad, the first thing you need to do is to study the matter for yourself.

Remember your high-school days?

Did you ask the local columnist how to get through AP calculus or did you open a text-book and plow through it? If you were willing to put hundreds of hours into getting three credits in a subject I’ll bet none of you has touched since then, what makes you think the five minutes it took to write me an email is all you need to transplant your children, uproot your career, and risk your life savings? Does that make sense?

But there are some guidelines that can help you with your preparation. Here they are. I’ve grouped them under three headings, with the first group getting the most weight.

I. Money & Work

Your first concern should be with money.

How much of it you have, how much you need, and how you’re going to make it.

Ask yourself if you’re interested in

• Work or play
• A job or a business
• Short-term or long-term

Some countries are better for starting a business than others. Singapore, for example, makes it very easy to start one. There’s less red tape. Taxes are lower. If you’re an entrepreneur or in the financial industry, you might decide to drop New York for Singapore.

On the other hand, if you’re trying to live on a small fixed income, why would you go to Singapore, which is on the expensive side? You would move to a country with fewer job prospects but a cheaper lifestyle. You might look at Latin America or parts of Eastern Europe.

Maybe you don’t want to relocate at all, but are just looking for a cheaper place for a family holiday. You’ll find that your money goes a longer way on an unexplored coast in Mexico than in Bermuda.

See how you do it?

Those are informed choices, shaped by where you are now and what you need. They’re not stabs in the dark.

If you don’t tackle your move systematically like that, you’ll end up like one reader who chided me for giving out bad advice. I was nave and ignorant, he said. Didn’t I know that the US creates more jobs than anywhere else and has better benefits for workers? He described how some friends of his had run back to the States, horrified by the difficulties of working abroad.

But then he told me where they’d gone. Bolivia.

Poor souls. I can only imagine. You can safely bet that anyone who flees to Bolivia for its employment prospects is not ready to relocate any farther than downtown. If that.

I mean this kindly and with no disdain.

First of all, you need to have the skills your host country wants or you will have to plan on setting up a business. That means learning the language and culture and studying the market. That can take from two to ten years. I bet Little Miss Muffet and her pal who went to Bolivia didn’t do that, did they?

But there’s no shame in failing. Just do more spade work and next time round, you’ll have better luck.

On the other hand, if all you’re looking for is more government benefits, then look no more. I know just the place for you. It’s a foreign haven chock-full of loop-holes for the lazy — Washington, DC.

And here I can give you a rock-solid guarantee — set up office in a single-wide in some rural area nearby, maybe Pennsylvania. Incorporate in Delaware. Then lobby for a bail-out for the folks. Which folks shouldn’t matter. Just rattle the bowl loud enough. I can guarantee you a 1000% return on your time and effort.

But outside DC, in the real world of real effort, there aren’t any guarantees. There’s risk. That’s just the way it is.

And that’s what your “money” research should try to figure out. It should center around things like jobs, exchange-rates, infrastructure, markets, political stability, legal protections, property rights, taxes (don’t just look at income taxes, analyze the whole tax structure), and banking security.

II. People & Culture

Next comes “people” research, which is harder to do from a desk. You really have to visit to find out if you’re going to like living somewhere for a long time.

You can research crime statistics all day long. But unless you live in a place, you can’t really sense how bad things are. Or if they’re not as bad. Petty crime doesn’t sound too dreadful. But come home three times a month to slashed car tires and broken windows and you might change your mind. Drug wars, gangs, and terrorism sound awful. But you might never come across any of them in some parts of the country.

If you’re a young man going alone, you might be interested in how lively the nightlife is. You might not worry much about health care or safety. A single retired woman might think about nothing else.

If you’re a European in the Philippines, you might be unhappy without an expat community in which you don’t stand out. On the other hand, an Asian might not feel as out of place. If you have ultra-traditional religious views, a racy coastal city might not work for you. A farming community in the mountains might. If you grew up in the bright lights, avoid backwaters — your social circle will probably need to run to more than cows and poultry.

So think through some of these things:

• Family or fling
• East or West
• Monoculture or multiculture

III. Location & Geography

Now, for some physical factors about your country:

• Near or far
• Hot or cold/wet or dry
• City or country

These are mostly less important issues, because you can find urban and rural areas everywhere, as well as the kind of climate you want, even if you have to look for it in the mountains.

But there are some things you should worry about. If you plan to live only part-time somewhere, think about how much and how often it rains. Unattended property can be ruined quickly by heavy rains. If you’re looking for farms, volcanic soil is good for crops…just remember it comes attached to a volcano. If you call an inch of snow-flakes a storm, skip Canada as a destination. The sunny sands of the tropics may glitter in ads, but if you plan on doing more than stewing on a beach, the heat can be devastating. Asthmatics should think twice about building a new lifestyle around hiking in the Andes.

Keep an eye out for hurricane zones and earthquake faults.

The other geographical factors are less pressing. Flight costs depend not only on how far something is but how often people go there. Shop around and plan your trip and you shouldn’t have to pay much more than $1200—1300 dollars round-trip to fly anywhere, even to the ends of the earth. You’ll probably save the cost in reduced living expenses within a month.

A trip abroad can actually be done for under a hundred dollars, if you can be flexible. I’m talking about the Caribbean and some Central American countries. The bottom line is don’t make the cost of traveling to and from your destination your main worry, unless all you want is a holiday.

Then there’s the look and feel of a country. This is what most people go by when they pick where they’re going. They fall in love with snowy peaks and sweeping rivers, take a fancy to a fiesta in a colorful postcard, and rush to book a ticket. That’s not necessarily bad. Your emotions and imagination need to be stirred to survive the tedium of moving.

But picking where to relocate with only your eyes is as bad as ordering food only with it. Or marrying only with it.

An artistic lunch of two peas and a sliver of trout is tres chic in a glossy magazine. But you’ll be ravenous before you get up from the table. That twenty-five year old beauty you loved to spoil hardens into a forty-something harpy with the soft charm of an F-22 Raptor and the loyalty of a Colombian hit man. It’s no use at that point to wish you’d married nice little Emily next door.

Change is the one constant in life. Plan for it.

So look all you want. Window-shop till you see windows in your sleep. Let your eyes have their fill.

But after that, just make sure you consult the organ above them.

And then?

And then — go.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

The readers who liked it wanted advice on where to run. That’s a tall order and I’ll come back to them in another piece.

Those who didn’t like it brandished a few arguments that ought to have a stake driven right through them immediately.

Here goes, point by point.

1. Running away doesn’t help

1. Actually, running away is often the best response to a bad situation.

Speaking practically, when a dump truck turns into your drive, mows down your rhododendrons and heads toward you, do you stand your ground yelling Sicilian imprecations at the driver until he rolls over you too? Or do you leap aside nimbly, take a photo, and call a lawyer? You have as much chance getting through to the poisonous shills in DC with constitutional arguments, as you have charming a rabid pit bull with Shakespeare.

Speaking theoretically, your body and brain are hardwired to either put up or shut up, a “fight or flight" response built into the structure of the autonomic nervous system. That is the physiological term for what you think of as your “lizard brain.” Fight or flight is the either/or response that helped your ancestors survive. It’s not the best way to tackle complex problems, but when it gets down to basic survival, it’s a handy guide.

And how do you know when your survival is at stake?

Check your gut response.

[Just make sure you're not mistaking your complexes, fears, prejudices, and impulses for your gut.]

2. Running away is only for the rich

2. Actually, the only people who can afford to stay put are the rich. If they have a problem, they can afford the 400-dollar-an-hour suits needed to sort it out. If they can’t sort it out, they have the means to tie up their opponents in court long enough to do a disappearing act.

As for our dear leaders, fight the government in court, post 9-11, and see what happens if you’re poor or middle-class.

Unemployed? The rich don’t have to worry about jobs. They have money enough that they employ other people or live on their investments.

Dollar collapsing? No problem.

The rich have access to alternative investments and financial instruments you never heard of.

Too busy to watch the market and too confused to know whom to hire to do it? The rich have access to money managers whose kids have more money in their piggy bank than you have in your house.

The rich can afford not to worry about the government. They have enough to buy or bribe their way out of trouble anywhere. They have tangible assets that go up in value during inflation. They have antiques and jewelry they can cash in during a depression. They have income-producing businesses that free them from the whims of the job market. You have a three-month safety net. They have enough to live out the rest of their lives comfortably.

And when they can’t, they have the contacts and friends who can bail them out or set them up in something else.

3. Things are not so bad

3. Not as bad as what? The Great Depression? There are plenty of people who think we’re in for much worse times than the Great Depression.

But what does it matter if things are not as bad, just as bad, or much worse than the 1930s? Leave the measuring and the hand-wringing to tailors with chubby clients. It’s enough to say the times are likely to be as bad as any you’re likely to live through.

Which is to say, bad enough.

4. Things are worse elsewhere

4. This is pure hearsay. Most of the people who are telling you this have never lived anywhere but the US.

And probably not many places in the US.

The airwaves are thick with pundits whose money is not where their mouth is. They’re telling you to stay put and foot the bills at home….

They’re telling you from France…and from Canada… and from Japan…and from Singapore…and from New Zealand…and yes, from DC — and any of a dozen places where the far-sighted and the deep-pocketed fled long ago.

Or, they’re telling you to stay put from inside the belly of the beast. They’re part of the infernal money-machine on Wall Street that depends on yokels like you keeping the casino going. Meanwhile, the money managers have their assets in life-insurance or in a sock.

Don’t be a fool. If you want to know how things are somewhere else, talk to people who’ve lived there. Research the place. Go visit it. Go — or don’t go. But decide for yourself. Don’t let someone else’s idle opinion decide for you.

5. It’s too late to run

5. Too late for what? It’s never too late to visit a foreign country. If nothing else, it’s an education of a kind desperately needed with all the chauvinism and xenophobia in the air. If you’re young, it’s the best possible time for you to try your chances abroad. Why stay home and let the government stick you with the bill for things you never bought? If you’re a small business man, why market to a debt-racked population, when foreigners are sitting on piles of dollars, desperate to get something for their money? Why defend the values of the free market in a country that rejects it? Plenty of smaller, less grandiose countries have respect for hard work, foresight, innovation, and thrift.

It’s easier to follow the old rules in a new language than it is to learn new and ever-newer rules in your old tongue.

Granted, if you’re retired or have children, your situation is a bit more difficult. But that still doesn’t mean you can’t weigh your options. No one is talking about pulling up your roots forever and fleeing to the jungles of the Amazon. But, if you’re portable, why not consider living somewhere else, maybe part-time. It could save you some money and give you a perspective that could change your life. A US passport is welcome in many countries and can be held along with the passport of several other countries. Why not take advantage of it? If nothing else, you’ll see how other people manage on much less than what we have here.

6. Running away is shirking your duty.

6. This is a peculiarly despicable objection, coming from people who’ve done nothing at all in the way of duty to their community. The most sanctimonious about civic duty today were the greediest back then, in that orgy of government-backed gambling that wrecked the economy. It’s akin to the taunts of treachery against antiwar activists, and it’s completely false.

It’s simply not true that you can’t help your country from abroad. The very fact of being an American abroad helps international communication. See for yourself, hear for yourself what others think. Judge for yourself, from how others live. And let them see, hear, and judge you. Know what your money has done unseen by those at home.

See the ravages, the blood spilled. See the good done. Find out what it once meant to be an American and find out what it is today. Join forces with activists abroad and learn that their struggles and yours are not different. There are many countries where electronic surveillance is not as far down the road as it is here. Your voice might grow bolder and more confident, far from home.

The rest of the world has its own problems, true. Some of them are grave. But it’s here in the US that activism is most sidetracked by partisan politics, insularity, grandstanding, and politically correct insanity. Really and truly, there are few countries in the world outside totalitarian regimes that are as conformist, pervasively and fundamentally, as this country.

I’d rather live under a benign despot that left me to my own devices from day to day, than in a democracy where I’m spied on and manipulated constantly. I may have theoretical rights, but much good they’ll do for me if they’re strangled at birth by spies, PR flacks, and thought-police.

Meanwhile, half these so-called rights don’t exist any more, even in theory. A government that monkeys around with habeas corpus, privacy, bankruptcy procedure, eminent domain, and contracts is signalling loud and clear that it has no respect for the rule of law. It’s telling you as plainly as it can that it’s arbitrary. It’s telling you that it’s a mass state and not a constitutional republic. It’s telling you that it’s on the auction block.

Which part of all that hasn’t got through to you yet?

There are times to fight and there are times to sit out the battles for the sake of the war.

On the sidelines, waiting and watching, you who have left, you who will leave, may do more to keep alive the spirit of freedom abroad. There, in soil more fertile than any in your native land today you may discover America once again.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog. All responses to email are posted at my blog in the comment section after the relevant article, with personal information omitted to ensure privacy.

Lila Rajiva Archives

That’s what I’ve been asking myself for three years now.

Before that, I thought it was simply a matter of finding a better place to live. A place that was quieter and cheaper. Where flippers and developers hadn’t taken over the neighborhood. Somewhere safe I could park my car on the street and not worry about it.

But by the time I found it, I also found that the thieves were inside the house, not on the street. There’s really no hiding from them. And no hiding from what they can do.

Our mene, mene, tekel upharsin is on the wall.

It’s time to run, not hide.

I mean that. We’re in the throes of an economic collapse of a kind last seen in the 1930s. The government is intent on grabbing control of whatever it can. American firms are dropping like flies. Unemployment is soaring. Debt is soaring. The money supply is soaring. Our foreign policy is a wreck — we have more enemies than we can count. We have a drug war on the borders, we have gang war in the ghettos, we have culture wars in the academy and media.

We have criminals in government.

The future isn’t any brighter. Subprime is only the first leg down. We still have a second wave of housing trouble in store, centering around commercial real estate and option ARM loans.

Gerald Celente, the CEO of Trend Research, wrote a piece last year predicting that by 2012 there would be food riots, tax rebellion, and revolution across the country. Celente has a good track record in the forecasting business.

Experts predict a 100% rise in prices across the board. In the best-case scenario, it will happen over ten years. In the worst case, it might happen within months.

More “hate crimes” laws are on the table. They’ll not only crimp political speech, they’ll make it criminal. The likely targets will be people who propose tax rebellion and secession or oppose US support for Israel or militant Zionism. Other candidates for thought reform are Christians who oppose abortions and gay marriage and environmental and animal rights activists.

Homeland Security is preparing a network of emergency facilities for civilians. Innocuous? Maybe, but it’s odd that these holding camps should be built on military installations.

Medical information is being centralized in online data banks accessible by the government, and some favored groups.

Bills to snoop, bills to spy, bills to control. Each time one gets struck down, another sprouts in its place.

Is it really the best strategy to fight each bill one at a time, over and over? Why? If this is what the public and the congress want, so be it. So what if they’re unconstitutional? We’ve long ago established that the constitution means just about whatever anyone wants it to mean. When it comes to torture, Republicans rip up the constitution. When it comes to tax and spend, Democrats rip it up. The whole thing is a partisan racket. Whoever shouts the loudest gets what he wants. So be it.

Rather than forcing the country to change, a far simpler and humbler strategy is to let the country go whichever way it wants, and get out of its way. I’m not a cynic. I’m not telling you to stand on the sidelines and egg both sides on. I’m not telling you to forget your native soil or your community. I’m suggesting that it might be easier for you to defend them from abroad. And I’m suggesting that you start making yourself a foothold abroad. Just in case.

If you’re finding it hard to manage, if you’ve reached a dead end, if you’re depressed by the way things are here, go.

How to do it?

First. Get your papers in order. I’m amazed at the number of people who don’t have passports. A passport is the nearest thing you have to a veto on Washington. Get it in order. You’ll also need other valid documents. Now is the time to start getting them together. You should at least have your driving license, passport and birth certificate ready to go. You should also start collecting other documents you might need (marriage, divorce, and adoption papers, incorporation papers, name changes, social security papers, bank statements, recommendations, letters of authorization, educational and work certifications). These can take months to get from the proper source. You might also need to have them validated by the embassy of the country where you want to move.

Second. Figure out where you want to live. This is not as hard as it sounds. Almost all your research can be done on the net, though at some point, you’ll have to buy a ticket and try living where you want to move.

A good place to start your research is the CIA fact book, which lists current geographic and economic statistics. Wiki will give you maps, photos, and general background. For property prices, viviun.com or glo-con.com have a wide selection of all kinds of property in practically every part of the world. Be aware that prices on English language international sites are usually higher than what you will be able to find from local sources. I suggest you pick a dozen countries you think might interest you and start researching them systematically.

How you choose your country will depend on who you are and what you plan to do. Families with children should look at job opportunities, political stability, crime rates, and schools. Cheap prices can’t be their only criterion. For retired people on a fixed income, warm weather and good health care might be much more important. For those working on the net, an important factor will be good DSL and accessibility to a major city for tech help. I remember I saw what looked like the perfect little farm in the remote highlands of a little visited Central American country. The excitement faded quickly when I found that it was on top of a volcano and more than hundred miles from any kind of town. The volcano was extinct, but a little googling told me that “extinct” volcanoes can come to life.

Spanish will take you anywhere in Latin America. French helps in Africa and in some parts of Asia. But language is made out to be a much bigger problem than it really is. Buy a decent phrase book and a dictionary, make good use of online translators like babel fish, and you’ll be fine. I have conducted lengthy email conversations about renovation costs, world politics, alternative medicine, and Dick Cheney, all with babel fish. The translations are crude and sometimes off the wall, but foreigners are forgiving of people who at least try to talk their language.

Purchasing property in a foreign language is a bit trickier. For that, you’re wise to look for local lawyers and notaries. A good place to make contacts is the online forum of an expat community in that country. Get an internet alias and start asking questions before you leave. Make sure you double check everything your hear against the local government’s official information. Ownership, work, and residency rules for foreigners are constantly changing.

Third. Visit your safe-haven. Every fantasy has to hit the ground for it to become real. For many people, this is the hard part. Dreaming is one thing. But only people who are willing to do the hard work, take some risk, and live with something less than perfection get to make their dreams come true.

Each time you try anything, you’ll always have a hundred naysayers at your elbow, most of them, your nearest and dearest. They mean well. They’re doing what they think is best for you. And about half the time, they may even be right. Don’t bite their heads off. Smile sweetly, listen to all the advice, and when it’s over, make your own decision. Weighing pros and cons is a good start. But ultimately, don’t flinch from making a decision based on gut feeling. Two heads may be better than one. But one strong gut reaction is far better than any number of heads. Listen to it.

You need about two months to prepare for a trip properly. Book well in advance to get the best prices. I started using the site bootsnall.com many years ago and it’s still one of the best. Some places need you to take shots, but usually you can skip this if you’ve not been out of the US in a while.

Here are a couple of important tips:

• Book a hotel or a hostel for the first few nights. Then find an apartment from there. You need to meet the owner in person to feel comfortable in a rental apartment.
• Pack light. Security checks are increasingly uncomfortable and time-consuming. The less you carry, the easier your trip will be.

Make it a priority to visit one foreign country within the next six months. You’re going to find that having another option besides staying put is going to change the way you think and feel about everything here. It may be that leaving for good isn’t for you. You may find that you prefer home with all its problems to a strange culture. Well and good. What have you lost? A small amount of rapidly depreciating money.

It’s an insignificant price to pay for something that will renew your spirit no matter what you decide. And one day, it may end up being your only avenue of escape from trouble.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

You’ll see vegetable gardens growing where once there were pools and barbecues. Bahia grass, golden rod, and azaleas have fallen to tomatoes, peppers, lettuce, onions, squash, and carrots. If they don’t have yards, people are growing vegetables indoors in a study or on the window sill. Heard of square-foot gardening? For a few dollars you can try it yourself. A professional square-foot gardener will send you prepared sod, seeds, and a prefab grid of small squares in which you plant your seeds. It doesn’t matter any longer if you don’t have yard space. And you don’t have to deal with bad soil, mulch, or pests. Apparently, you can grow twelve-inch carrots in six inches of soil on your office desk. You can grow luscious strawberries between your coffee-maker and your dish-rack. Last year, seed companies and garden shops saw the strongest uptick in sales since inflation took off in the 1970s. The biggest sellers were survival vegetables — peas, beans, corn, beets, carrots, broccoli, kale, spinach and the lettuces.

I have to laugh. It’s what I’ve been living on all along, even in the boom years. I love making salads with kale — a humble leafy vegetable that costs a dollar and yet has more nutrients than most others. Nature gives us everything we need cheap, but wastrels that we are, we’d rather kill ourselves fighting for what’s bad for us in the first place.

The off-gridders are independent in other ways. They’ve paid off their debts — if they had any — and sold what they don’t need. They’ve turned part of their money into gold and buried it where even their family doesn’t know.

Some of them have second and third passports. Just in case.

These aren’t raccoon country rebels (no slur to raccoons or rebels) who never saw a fight they didn’t like.

They aren’t polo-playing speculators winging off to a weekend in Chile. Or cranks picking at sea-weed and bee-pollen in a New Mexico colony.

They’re “regular folk” who sense trouble ahead and are getting ready for it. They’re acting on instinct.

There’ll be people to tell you those instincts are wrong. Instincts make people rob, rape, and kill. Instincts turn us into mobs, and mobs go crazy with greed and fear.

Well, we know that. We lived through the biggest bubble in history and there were mobs as far as the eye could see — mobs of real estate agents, mortgage lenders, borrowers and consumers, flippers and speculators, bankers and regulators, pundits, pols, and prognosticators. The pigs and the parasites — we saw them all.

It was mobs all the way up and it’ll be mobs all the way down.

But every group is not a mob and all instincts aren’t bad ones. Instinct helps jungle animals escape death. Deer run when they sense a lion lurking in the growth, and monkeys screech and chatter at the smell of fire. The hot stink of a carcass and vultures begin to descend.

The sky is dark with vultures now. And the stench rises not just from Washington and New York but from all over. Huge tracts of cities have fallen into foreclosure, in California, in Michigan, in Pennsylvania, in Florida. Whole neighborhoods have been abandoned. The borders on the south are fracturing from gangs and drugs and murder. State surveillance and violations of civil freedom are becoming graver by the day. Things are unraveling at home. Abroad, the bombing goes on still, manufacturing the chaos it’s meant to control.

But who would expect anything different.

Take a look around you.

What do you see?

Fools parading their ignorance publicly, while those who know stay cynically silent.

Criminals flaunting their crimes like medals of honor.

Sycophants in the government fawning and flattering.

And the rest of us — gagged, not by the government but by our own stupidity, cowardice, and blindness.

That will tell you how we got here.

But what are you going to do about it? Wait around and see what happens next?

It may be too late for that.

In one sense, "what" has already happened.

In another sense, it doesn’t matter what happens if you’re prepared.

Predicting and panicking won’t help you now.

You have to prepare.

Fortunately, it’s easier and there are fewer people doing it.

Your preparation consists essentially of one thing — becoming more independent.

The foundation for that is to become — and stay — healthy.

Earlier, I outlined a simple ten-step program to good health — eating a largely vegetarian diet and drinking a lot of water; exercising and improving your posture; breathing correctly; cutting out smoking and heavy drinking; and cultivating your intellectual, emotional, and spiritual life.

That should be your start.

The next thing you need to do is to remove some of the physical constraints on your life.

Here’s one way. If you need to drive a lot to get to work, think about moving closer, car pooling, or riding a train or bus. The amount of time you spend traveling imposes an invisible but huge burden on your well-being. It’s not just the time and money spent, it’s the wear and tear on your tires and on your body. Sharing the ride will cut your expenses. If you take a train, you can read, have a meal, or work. On a bus, you’ll be able to relax and watch the scenery. You’ll be able to enjoy a good conversation without endangering any one else.

If your commute is really stressful, you could try coming into the office fewer times but working longer hours. Or you could do part of your job from home. You might also think of transferring to another department. Or of telecommuting. I won’t tell you to leave your job, because jobs are hard to come by, but if you have enough money to go into business for yourself, this might be the time to do it. The other face of disaster is always opportunity.

Make yourself portable. You could work almost completely on the net. Internet marketing has become universal and it’s not small-time. Net marketers make big money. If you’re up to the challenge, you could too. Even if you don’t make enough to live on, it will give you a useful second income that will cushion you in case of trouble at work.

Telecommuting is also light on your wallet. You won’t need a car except for household needs. And with more time to plan, you’ll use your car more efficiently.

Becoming free of your car will free you up in other ways. Instead of making several trips to the grocery store in a week, you might go once in two months and buy in bulk at a discount. You could then put the saved money and time to better use.

You could grow your own food at home. Which means you’ll save even more. Suddenly, you’re eating better, having more time, more fun, and less stress. Now you have what developmental economists call food security. You’re feeding your own little population at home. You don’t depend on imports. You may even be able to export a bit. You can’t be threatened or bought by anyone. Whatever else it can do, the government can’t tax your home-grown peppers.

Meanwhile, you’ve also got a fascinating hobby.

Gardening is just a start. Try other ways of getting off the market economy. Exchange services or barter things to meet your needs. Give away that old guitar you never played and get something you need in exchange. You can look up craigslist in any city in America for people offering services or selling things. I recently found a work-out machine that would retail for a $1000 for about $200 that way. Another idea. Instead of booking expensive hotels when you travel, try exchanging houses with someone who wants to come here to visit. For people on tight budgets, try couchsurfing, a network which gets you a room or a couch in someone’s home. Although I’ve never tried it myself, it looks like a great way to meet people. Again, the government can’t tax it.

5. Recycle and reuse. Spending more time at home should make you acutely aware of the dozens of ways your house is draining you of your money and energy. Bad insulation, leaky pipes, and poor telephone connections all end up costing you. For minor problems, get a hammer, a screw-driver, and a how-to guide, and try fixing them. Don’t expect to produce a professional job. And don’t be too proud to give up and call a professional if you think you’re making the problem worse. Research and fit your house with fluorescent bulbs that use 75 percent less energy and last about 10 times longer than incandescent bulbs. Use recycled water for your garden and pay less, but make sure you understand what’s in the recycled water, or you might hurt your plants. Use dual flush toilets that can save you thousands of gallons of water.

Reducing water usage is not only thrifty it’s good ecological practice and has a direct impact on energy consumption. A large chunk of energy is spent pumping and heating water.

Start storing things. Use solar panels to store natural energy from the sun. Store water in tanks so you don’t run short in a drought. Store organic seeds. Store computer parts and electronic goods. Store anything you think you need which might go up drastically in price.

A quick recap now:

• Live healthily
• Grow your own food
• Drive less
• Make your job portable
• Barter
• Exchange services
• Recycle/reuse
• Store

You might have noticed by now that I haven’t mentioned financial independence, which is where most people start.

The reason I didn’t is that people rarely want just money. They say they do, but in practice they usually want something else — security, or admiration, or power, or status, or love. Money is simply a stand-in for those things. Investment gurus have built far-flung empires on this simple observation.

If that’s so, then the way to financial independence isn’t to think about money at all. At least, it’s not where you start.

Instead, think about what it is you’ve always craved — the glamorous neighborhood, the extravagant car, the high-status job, the high-status lifestyle. Learn to take them or leave them.

The way to financial independence?

Don’t worry about how little or how much money you make. First become independent of all those other things you think you can’t live without.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

In any case, when I had it, it was never much use. I was misdiagnosed on a couple of things and ended up having to treat myself. I got to resenting the way some doctors never really listened. I bridled at having my questions treated like the uninformed babble of a simpleton.

And since I had to pay most of the bill for “maintenance” items like vision and dentistry anyway, dropping insurance altogether seemed like the logical thing to do.

That doesn’t mean it will work for you, though. Especially if you have an on-going illness, be sure to do your own due diligence.

Still, if you’re a relatively healthy person, if you’re cash-strapped or need to pay off a debt, or if you want to strike out in a new direction on your own, you might find my tips useful in helping you go insurance-free for a couple of years.

Or even longer.

You’ll worry less about doing without those “bennies” you’ve got used to for so long. And the less worried you are over going it alone, the more you’ll be able to stand up to the big lie of modern life — that people need the government to survive.

They don’t.

Here are ten simple things you can do to prove that to yourself:

1. Inform yourself

Buy yourself a small textbook of anatomy and physiology and learn how your body works. You can find a good one in a second-hand book store or on eBay, but wherever you buy it, try to get an up-to-date edition. If you can, buy a couple.

Make sure your books have good diagrams, pictures, an index, and a glossary. Practice going through the glossary and identifying where major organs are located. Learn the basic chemistry and physics behind vital processes like oxygenation, PH balance, and osmosis.

Buy a hand-book of first-aid and learn how to perform simple first-aid measures, like applying a tourniquet, or dislodging a bone from the throat.

Get a good handbook of nutrition and supplements and familiarize yourself with the vitamins, trace elements, and minerals your body needs to function well. Stock up on them from a reliable supplier. Remember that overdosing can not only be a waste it can be dangerous, so make sure you store your supplements correctly and discard them when they get old.

Cost: Less than $10—15

2. Explore alternative health resources

Buy yourself a handbook of Ayurvedic medicine (ancient Indian medicine), Chinese medicine, or American folk medicine. If you like, buy all three but stick to one when dosing yourself and don’t mix (or confuse) your doses and remedies.

Before treating yourself, make sure to talk to a trained alternative medicine practitioner. Alternative consultations are usually cheaper than a consultation with an allopathic (Western) practitioner, but some of them can be nearly as expensive. Thumb through your local yellow pages, call up different offices, compare costs, ask around, and pay a visit before taking advice. Once you get any advice, research it thoroughly and get at least two other opinions before you make your decision.

Cost: Less than $25 for books, under $40 a consultation

3. Don’t reject allopathic (Western) medicine

There are frauds and quacks in alternative medicine too. Don’t go to the opposite extreme and reject something just because it’s from establishment doctors.

If you need something like an antibiotic, take it. You can buy antibiotics inexpensively from foreign countries that allow you to buy them over the counter. Ask a friend who travels to buy you a couple of courses of an antibiotic you’re familiar with (for example, doxycycline or cipro). Or have a friend send you antibiotics by mail. Make sure they’re packaged well since mail can be tampered with. I like to bring back medicine with me whenever I travel abroad. Indian brands have comparable quality at much better prices, and I don’t have to spend money on getting a prescription.

Keep track of the expiration dates on your pills and discard anything that’s past the date without hesitation. Don’t try to sell, recycle, or give away your supplies. You might be sued or get into trouble with the government, or get framed as a biological terrorist. Don’t buy in bulk. You or your friend could be subject to customs problems.

Remember to take extra vitamins (especially B-complex) when you take antibiotics.

If possible, avoid antibiotics, especially for routine ailments. They damage the body in subtle and not-so-subtle ways and they weaken your body’s natural resistance. Learn how to make yourself a natural antibiotic and use that when you get a bad cold or flu. You can find the recipe for one (and for many other remedies) on alternative health websites, like earthclinic.com.

Note: On the off-chance that you might have a serious problem and need surgery, research and locate a good hospital and a doctor you can trust in a nearby country where medical costs are lower. Mexico and Panama both have excellent medical facilities, at far lower prices than the US. Even with the costs of travel and accommodation, you’re still going to save a lot going abroad for any surgery or expensive treatment you might need.

Also, make sure to increase the personal injury protection coverage on your car insurance to make up for going off medical insurance.

And if you’re really afraid of a one-time emergency ruining you, buy bare-bones coverage just for that.

Cost: Less than $25—35 for medicine and postage

4. Eat fresh nutritious food

Eat less. Eat small, frequent meals. Use half or quarter plates to eat, so your portions look bigger. Drink plenty of plain filtered water (bottled water is an expensive waste and imposes social costs). Eat plenty of fresh fruit and vegetables in season. Eat fish and fish oils. Substantially reduce the amount of red meat and fat you consume, but take into account your genetic and cultural history in figuring out what “substantial is.” If you’re going to go vegetarian, remember you have to be extremely knowledgeable about what to eat to make up for the meat and fish you’ll be missing. If you’re a drinker, keep it moderate (by medical standards, not yours) and try to eat a Mediterranean diet, which seems to work well with alcohol.

Study the benefits of spices like turmeric, chili powder, cinnamon, and cumin, and add them to dishes. Use plenty of onion (raw and cooked), garlic (raw and cooked), and peppers of all kinds. Snack on seeds. Sunflower and pumpkin are especially good and cheap. Eat seed cheeses and sprouts. Take a spoonful of blackstrap molasses daily as an all-purpose supplement. Study the benefits of vegetarian, vegan, and raw food diets and make use of them in your diet, in accordance with your constitution and health. Find out which foods work better cooked and which work better raw. Avoid food combinations that are bad for you. Practice eliminating certain foods from your diet to find out if you’re allergic to something in them. Many serious ailments have nothing more to them than food allergies.

Learn the healthful properties of common household items like hydrogen peroxide, baking soda, apple cider vinegar, and virgin coconut oil, and make them part of your cleansing routine.

Learn simple home remedies for minor emergencies like burns, cuts, and stings. Learn how to make simple home-made casts. Learn how to stop bleeding with herbal tinctures and applications.

Cost: About $35—50, but it will depend on the quantity

5. Exercise as much as you can and include weight-lifting in your exercise program

Your goal is not to become reed thin but to become fit. Keep track of your BMI (Body Mass Index), which tracks the proportion of fat in your body. People with more muscle burn off fat more easily and carry weight better. Putting on muscle and eating nutritiously is a better way to become shapely than cutting calories randomly and running yourself ragged.

Many clubs and gyms offer free one-day passes. Make use of a few to jump-start yourself until working out becomes a habit and you can do it on your own.

For those on tight budgets, try to get yourself free weights or a simple exercise machine. They can be purchased second-hand for as low as $50—100.

If your budget for exercise is zero, try using household items (bean-bags, boxes, jars, heavy bags, bricks, iron bars) as substitutes for weights.

Incorporate more activity into your daily routine. Fidget. Waste energy. Take the stairs two at a time rather than ride the elevator. Go running with friends. Bike to work instead of driving. Turn on music and dance while waiting for food to cook. Take up gardening. (But make sure it’s strenuous and involves digging, carrying stones, squatting and stretching. Pruning roses won’t cut it.)

Walk your dog, or offer to walk your neighbor’s dog. Coach soft-ball or baseball.

For older, less fit people, there are inexpensive clubs that are more easy-going than state-of-the-art clubs and work as well. You can find dozens of good exercise routines on the internet. Get a tape of music with a great beat, spread out a mat, and start making a few moves on your own. Even five minutes a day will make a difference. Then up the frequency.

Avoid buying new clothes when you put on weight. Just suffer the discomfort until you’re forced to shed the extra pounds. Wear form-fitting clothes, so there’s no place to hide.

Go out of your way to make friends with svelte young things (this is advice to women, not men). Nothing like lively twenty-something friends to keep you motivated

Cost: Between $0—200

Buy this book.

6. Keep positive

Surround yourself with healthy, lively, optimistic people, especially young people. It will give you a more youthful attitude and will wipe off the scowls and furrows of middle-age. Young folks also make better friends than competitive peers

Cut back on sensationalism. Keep track of the news on the internet or through reading. Stop watching TV, which is hypnotic and has a much more disturbing effect on your psyche than the print media. Keep informed about the economy, but look for opportunity in the bad news. Don’t just wallow in disaster. It won’t help your finances, and it could hurt them, since we usually get more of what we focus on.

As the good book said, “Whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are pure, whatsoever things are lovely, whatsoever things are of good report; if there be any virtue, and if there be any praise, think on these things.” (Philippians 4:8)

(Admittedly, there’s not much of any of that going on in the news now, so you may have to look elsewhere for comfort).

Cost: Free

7. Handle stress properly

When you feel stress, listen to music, go for a walk outside, exercise, take a warm bath, or go to sleep. These are actual therapies and are a lot safer and more effective than antidepressants like Zoloft, which have dangerous side effects.

Exercise is by far one of the safest and most effective antidotes to depression.

Along with exercise, water is an easy therapy to add to your health routine. Drinking it, bathing in it, soaking in it, and swimming in it are all good for you. Water can rejuvenate your skin and give relief to your muscles. Remember that sodas and caffeine do not hydrate you. On the contrary, they dehydrate. So drink plenty of water.

Sleep is probably the most underrated therapy of all. It’s not just that problems look much smaller after you’ve had a sound night’s sleep. Your body also heals and rejuvenates itself during sleep. Sleep in a peaceful room with fresh air and no smoke. Don’t overeat, fight, or do anything stressful before turning in. Make sure your back is well-supported by your bed and mattress.

Cost: Free

Buy this book.

8. Breathe

Yes. Breathe. You’d think we’d all do it naturally. But work makes people lead unnatural lives. They hunch over counters and computers all day long, squeeze themselves into car seats and cubicles, and squint at indecipherable numbers under artificial light, their chests and calves constricted by uncomfortable clothes and their lungs clogged by pollution and smoke.

Little shallow gasps don’t feed your blood. Deep slow breathing does Take care to align your body correctly, straighten your spine, center yourself firmly in your solar plexus and breathe slowly and deeply, moving your diaphragm in and out. You may want to take yoga classes to help make it a habit. You’ll be surprised at the improvement in your mood and overall well- being. You may even gain height as your spine stretches.

Cost: $5—15/class for beginner yoga

9. Pray, meditate, visualize

Whatever your religious belief, or lack thereof, a strong spiritual life is good for your health. Spend time alone and get to know your own emotions and thoughts. Feeling your emotions rather than running way from them is the sure way to mental health and freedom from addiction. And addiction — whether to food, or to work, or to gambling, or to spending — is the root of most of our dis-ease today. As someone said, it’s not what you’re eating, it’s what’s eating you.

As you become more attuned to being alone with your own thoughts, you’ll also become more receptive to promptings from beyond your thoughts. What you call those promptings is less important than how much you attune yourself to them. As your conscious life starts drawing more from your subconscious and superconscious, you’ll feel stronger and more “in the flow.” You’ll begin to draw on energy you didn’t think you had.

Cost: Free

10. Don’t go it alone

As a profession, psychologists have the highest rate of suicide and social workers the lowest. There’s a reason why. Analyzing your state of mind and your desires endlessly is the fastest way to depression, anxiety, and neurosis. Take a short trip out of yourself everyday — take up an all-absorbing hobby or a cause you believe in.

Throwing yourself whole-heartedly into something you care about releases you from the pettiness and meanness of the greed-heads, careerists, and opportunists who infest any workplace.

You’ll find that other people have gone through just what you have… and worse. And you’ll find comfort and inspiration in their stories. You’ll make friends who can share your burdens and keep you from the isolation and loneliness that breed disease.

Even more important, make sure to cultivate your closest relationships. Having a spouse, partner, best buddy, or a pet literally strengthens your immune system. Medicine tells us that sex is good for your health. But hand-holding, hugs, and pats — physical and verbal — are just as good. Make sure to get a lot and give a lot

Cost: $0—50/month

It will probably cost you around $250—350 altogether for this simple 10-step program to good health. Considering that you’d have to pay that much for just a month of health insurance, isn’t it worth a try?

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

March Madness

March begins with stocks near the lows of last year’s crash and gold above the band of resistance (930—940), from where it can move higher with confidence. The dollar index (DX) is trading at around 88—89, the highest it’s been since 2005.

Gold moving up generally signals fear of political and financial instability or of currency debasement and inflation. Gold moving down signals stock market optimism or deflationary fears.

This isn’t always so, of course. Gold’s relationship to the stock market, as well as to the dollar index, has sometimes been inverse, sometimes parallel, sometimes uncorrelated.

On Friday, February 27, 2009, the Dow is at 7,062.93 (close) and gold is at $952.00 (London PM fix).

Now look at everything that happens in March:

1. Insurance giant AIG, already rescued by the public, comes back for more. The bill now totals almost $200 billion, nearly half of which goes to foreign banks, including the very banks that shaped government policy on the bank bail-out, a criminal conflict of interest.

2. China and the US face off over US surveillance in Chinese waters, as well as over Chinese currency pegging

3. The Bernie Madoff investigation reveals that family and friends of the ex-Nasdaq chief connived in his fraud, which prosecutors charge, has been going on since the 1980s. Money-laundering through an English bank is part of it.

4. After three rescues, Citigroup ends up trading at around $1 and needing another round of government aid. That brings the government’s total commitment to Citi to over $300 billion.

5. Net capital flows to the US turn negative, auto sales fall sharply, and pension-funding shortfalls are destroying company balance sheets.

6. The Fed Reserve commits to buy $300 billion in Treasuries (creating $1 trillion in new money). The bond market reacts positively.

   But, in what seems like a warning from the other side of the Atlantic, when the Bank of England tries to auction British bonds, it fails to find enough buyers for the first time in seven years. The market is signaling its belief that the UK government is effectively bankrupt.

7. Upward pressure on LIBOR, the London interbank offer rate, continues relentlessly. This is a measure of the willingness of banks to lend to each other and it’s showing severe credit market stress.

What’s Bugging Gold?

With all that going on, spot gold prices should be trading well over $1000, the Dow should be under 6000, and the Dollar Index under 80.

Instead, at the end of March, stocks end up 700 points or so higher than at the beginning of the month, gold ends below its band of resistance, and the dollar recovers strongly to above 85.

The reason?

Markets are about the public’s perception, and in March, rightly or wrongly, public perception focused mainly on three things.

1. The AIG bonuses, rather than AIG’s counterparties

2. China’s savings glut and currency-pegging, rather than the Fed’s inflationary policies

3. A debate on what to do in terms that have already been determined (nationalization or private-public partnership) rather than a debate about who’s doing it and what they should do, without predetermined parameters.

Did this happen randomly?

The record suggests otherwise.

Rewind to the beginning of March and notice what stories get played, when they get played, and how. Notice that gold’s remarkably odd behavior reinforces the media “spin” and tones down the effect of massively important events each time they occur.

Episode One: Dead Banks Walking

Paul Krugman’s op-ed “The Revenge of the Glut” appears in the New York Times on Sunday, March 1, blaming Asian savings for the financial crisis rather than Federal Reserve policy.

Monday, March 2, 2009

On Monday, arch zombie bank, American International Group, Inc. (AIG) announces a loss of around $62 billion for Quarter 4, 2008. AIG has gotten more than $150 billion in federal aid since its near-bankruptcy last fall, and it’s due another $30 billion. AIG’s death rattle means that firms in business with it are in trouble too. That means credit and business are going to decline for a long while. And that means, Look out, Dow 5000…

Meanwhile, pension fund shortfalls are exploding the balance-sheets of some of the biggest companies in the Chicago area to the tune of billions of dollars.

Dow 6,763.29
Gold $937.25

The Dow goes down sharply, over 300 points, or 4.15%, presumably on the deflationary implications of the AIG revelations. But gold doesn’t go down nearly as much as the Dow, confirming its value-holding ability in a deflation.

Tuesday, March 3

Investment guru and hero of the kill-the-zombies crowd Jim Rogers frantically warns that propping up AIG instead of letting it fail will drag bad times on for decades and destroy the American economy and dollar.

The economic news still isn’t good. As unemployment goes up and consumer confidence stumbles, monthly auto sales fall to a multi-decade low.

Against this background, the Fed launches the TALF (the term asset-backed loan facility), covering $200 billion of loans ($20 billion of TARP funds, leveraged 10 times), which is intended to support autos, credit cards, student loans and small business lending. Once the TALF is expanded to its full state, it will have access of up to $1 trillion and will support commercial and residential mortgage-backed securities, asset-backed securities, and corporate loans (through the soon-to-be downgraded collateral loan obligations).

The three main benefits to a TALF investor are the following:

• loans will be non-recourse (no risk to investor)
• there will be no mark-to-market accounting
• there will be no compensation limits for executives

Dow 6,726.02
Gold $913.75

The Dow stays the same, probably because it’s already dropped massively. The promise of credit from TALF might be helping it too. Gold goes down a bit more on the bad economic news.

Thursday, March 5

In front of the Senate Committee on Banking, Housing, and Urban Affairs in DC, zombie spokesman, Donald L. Kohn, Vice Chairman of the Federal Reserve, explains the new Don’t Ask Don’t Tell policy of the Fed (working with the Treasury) on AIG.

It goes like this: Don’t ask us which firms did business with AIG and we won’t tell you…

Even though they’ll be getting large chunks of taxpayer bail-out money.

Revealing names would — get this — undermine confidence and cause financial instability, says Kohn, without cracking a smile.

Dow 6,594.44
Gold $913

Gold moves up a bit, while the Dow falls sharply, by almost 300 points, most likely spurred by renewed concerns over the extent of the government’s commitment on AIG.

March 6, Friday

Comes Friday and Reuters reports that Goldman Sachs Group Inc. and Morgan Stanley are among those firms that got tax-payer funds via the AIG rescue. This is confirmed by the weekend edition of the Wall Street Journal which cites confidential documents showing that the insurance monster paid at least two dozen U.S. and foreign financial institutions about $50 billion. Both Goldman and Germany’s Deutsche Bank AG got about $6 billion for 2008, Quarter 4.

The other bums included Merrill Lynch (now part of Bank of America), Societe Generale (France), Calyon/Credit Agricole (France), Barclays (UK), Rabobank (Holland), Danske (Denmark), HSBC (UK), Royal Bank of Scotland (UK), Banco Santander (Spain), Morgan Stanley, Wachovia, Bank of America, Lloyds Banking Group (UK).

$90 billion of this graveyard robbery went to US and foreign counter-parties and it divides up as follows:

• Goldman Sachs — $12.9 billion
• Societe Generale — $11.9 billion
• Deutsche Bank — $11.8 billion
• Britain’s Barclays PLC — $8.5 billion
• Merrill Lynch — $6.8 billion as of Dec. 31

In short, the AIG rescue is a soup kitchen for Europe’s most toney banks, funded by the plebes here.

Meanwhile, Treasury agrees to convert $25 Billion of the TARP preferred stock for 36% of the common stock of Citi. At close of business Friday, 36% of Citi has sunk to $3 billion. That amounts to a $22 billion loss to the public.

The same day, March 6, news comes that the Brits have bailed out their own bastion of stiff-upper-lipped money men, Lloyds, for 260 billion. That makes Lloyds the second British bank to go on the dole (the first being Royal Bank of Scotland). And it adds more pressure on Barclays and other lenders to go the same way. Depending on your perspective Lloyds is being “nationalized”… or the British Treasury is being turned over to the kleptocrats.

As these huge revelations emerge, Paul Krugman publishes another op-ed, “The Big Dither,” cracking the whip at the Obama administration for slow-poking and floating plan after plan only for commentators to shoot down.

Krugman correctly describes the latest incarnation of the Geithner plan, which proposes to make low-interest non-recourse loans to private investors to buy up troubled assets, as a heads-you-win, tails-we-lose proposition.

It would profit investors if asset prices went up but would let them walk away if prices fell a lot. Geithner himself admits: “There’s capital that wants to come into the system but just can’t get financing.”

Translation, just give us the leverage and we”ll do the buying…

(Maybe like that sweet 30:1 leverage that got us into this mess in the first place, eh?)

But having trashed the Bernanke-Geithner plan, Krugman wants to rush through nationalization. His argument for this is astonishingly weak.

If it’s not done right now, he says, the government is going to have to come in later with “trillions of dollars” to restore the financial system to health.

Enough already with the idle chatter, says Comrade Krugman, as the Fed stone-walls on AIG’s counter-parties.

Nationalize… er … socialize… er… power to the people… whatever… just get on with it!

Dow 6,626.94
Gold $936.00

Dow ends a bit higher. And Gold rises too, most likely on the AIG revelations and fear of worse to come.

Note: Gold’s rise is surprisingly muted for a commodity that moves $50—70 in a day.

Episode Two: World War 4 Alert

Weekend, March 7—8

In a piece in the Sidney Morning Herald, former Australian PM Paul Keating is quoted as saying, “By frightening the Chinese into building their vast $US2 trillion foreign reserves, Geithner was responsible for the build-up of tremendous imbalance in the world financial system. This imbalance, in turn, the reports allege, contributed to the global financial crisis which has since devastated the world economy.”

The article adds a new twist to the “Asian savings” meme, pinning the blame not on the Fed but on Tim Geithner.

The reports once again help take the attention off the Fed’s role in the global financial crisis and its unholy bail-out of AIG’s European counter-parties.

As reports about the AIG deal circulate and stir up public anger, the USNS Impeccable, a survey ship (read, spy-ship) faces off with Chinese ships in what the US claims are international waters off Hainan island. But the encounter is also within 200 miles of the Chinese coast, a zone China considers its exclusive economic zone. Hainan is also a key strategic base in the South China Sea and the location of China’s biggest submarine base. This comes just days after US military talks with China resume.

The US claims it’s a Chinese provocation, although it’s hard to believe that a Chinese spy ship snooping around Americans coasts would be greeted with brotherly love. It seems more likely to be a US provocation.

Notice that the incident reinforces Barack Obama’s provocative warnings to the Chinese about currency manipulation during the presidential campaign. Obama was apparently playing to the part of his base that is China-hawkish and protectionist. Notice that this is also a neo-conservative position, as human rights interventionists (let’s call them liberventionists) would like to see a tougher US posture in places like China and Darfur.

In short, the big government wing in both parties likes the “Chinese currency manipulation” motif.

The Fed-centric or “Uncle Alan-did-it” narrative of the financial crisis has become more and more popular as people notice that its advocates (mostly followers of Austrian economics) have been on target predicting the financial crisis. The mainstream financial press, which makes it money promoting the mythology of the managed market, has been caught off-guard.

Bottom-line, the Fed-centric critique has credibility.

Unsurprisingly, the establishment must undermine that credibility to preserve its own….

Monday, March 9

That suspicion becomes stronger on Monday when two announcements redirect attention to China:

National Intelligence Director Dennis Blair says Chinese policies “seem to be in a more military, aggressive stance.”

Simultaneously, Tony Blair calls the incident “the most serious "since a Chinese plane collided with a U.S. electronic surveillance plane, also off Hainan in the early months of George W. Bush’s presidency.

On the economic front, the financial markets continue to buckle:

It looks increasingly as if pain will shift to holders of bonds and other securities, since debt from financial institutions — including some of the biggest banks, like Citi and Bank of America — is widely held by investors, from pension funds to insurance companies.

LIBOR (the London interbank offer rate, roughly equivalent to the US Fed funds rate) has been rising from a low of 1.08 per cent in mid-January to 1.31 per cent. The renewed pressure in LIBOR is pressuring interest-rate swap spreads that reflect the credit quality of banks in the inter-dealer derivatives market. Forward measures of LIBOR show the market expects no let up in stress in 2009.

The end of March threatens a triple whammy for banks:

1. It’s the end of the first quarter, and they have to undergo further write-downs from worsening credit and mortgage exposure.

2. Government "stress tests" under TARP loom in April

3. Banks are under pressure to contribute more money to the Federal Deposit Insurance Corporation.

Dow 6,547.05
Gold $923.75

The Dow falls even further.

Note: Gold edges downward too, not upward, as you would expect from the credit market pressures and international tensions.

Episode Three: The Oracles Speak

Tuesday, March 10

The next day, Federal Reserve Chairman Ben Bernanke chimes in with gingerly expressed regret for not preventing the borrowing binge of the last few years, although, yes, he’d recognized that “massive capital flows from abroad” were behind the binge.

“The global imbalances were the joint responsibility of the United States and our trading partners,” he admits. Then he bravely allows as to how the US and said partners “collectively did not do enough to reduce those imbalances.”

This is to the Council on Foreign Relations (CFR), Tuesday.

Yessir, we were bad. But our trading partners (China) were just as bad, sending us all that dough.

Barely a week after the third rescue of Citigroup Inc., U.S. officials are again examining what new steps to stabilize the bank if its problems should mount.

Citi has over $500 billion of foreign deposits (relative to a balance sheet of a little under $2 trillion). This is easily the biggest structured investment vehicle (SIV) exposure of any bank. Citi shares are now near $1 apiece.

Despite this evidence of deterioration, Federal officials cautiously describe the discussions as “contingency planning.”

Citi’s PR line is that it hasn’t seen corporate clients or trading partners withdrawing their business. It also claims its capital levels are among the highest in the industry. A conveniently leaked internal memo by Citi’s CEO Pandit announces that the bank is on its way to its strongest quarter since 2007.

But while this happy talk is going on for public consumption, note that Federal Reserve Chairman Bernanke is demanding that the Senate budget committee give him even more power:

“I’d like to challenge the Congress to give us a framework, where we can resolve a multinational complicated financial conglomerate like Citigroup, like AIG, or others, if that became necessary,” he says. (My emphasis.)

Dow 6,926.49
Gold $901.50

Immediately, the Dow shoots up 379.44 points to 6,926.49, its biggest one-day gain this year (5.8 percent) and one of the biggest since World War II, apparently just on Citi’s optimistic assessment of its condition. Gold sinks.

Wednesday, March 11

On Wednesday The New York Post reports that, contrary to early reports, the Madoff family and inner circle seem to be deeply involved with money laundered through "an English bank." (my emphasis)

Then, in The Wall Street Journal, the Oracle of Oracles himself pronounces judgment.

The Fed didn’t cause the housing bubble….

It’s all the fault of Asian savers, says Sir Alan, to give him the title the Queen of England bestowed on him in 2002 for his “contribution to global economic stability.”

(This must have been given in the same spirit as Kissinger’s Nobel Prize for peace, because if the Fed Chairman made any contributions to economic stability in twenty years they’re as invisible to the eye as Carla Bruni’s contributions to burka-wear).

Notice that Greenspan’s announcement about Asian savings reinforces the op-ed by Krugman (March 1), the news reports about Geithner (March 7) and Bernanke’s speech to the CFR (March 10).

Dow 6,930.40
Gold $899.50

Stocks and gold stay roughly where they are, gold just below the psychologically important 900 level. But over the next two days, the yellow metal recovers to above $920, in the absence of any news helpful to the economy. The news out of China, especially, isn’t good, with crude imports diving to a 26-month low in February and trade data showing that the world’s third-largest economy is being hurt more than anticipated from the global recession. Chinese PM Wen Jia Bao also expresses his concern about the “safety of our assets,” which could be his response to the “Asian savings” meme. The Chinese are obviously concerned that the Fed Reserve will continue with its inflationary policy to the detriment of China’s vast holdings in US Treasuries.

Weekend, March 14-15

Public outrage at the AIG bonuses mounts over the weekend.

Bernanke’s comments about “our trading partners” are played on the prime-time TV show 60 Minutes in an unprecedented PR offensive from the Fed. Bernanke also repeats his belief that the US will come out of the recession by 2010.

Question: If all we have on our hands is 6 more months of recession, why do we need government intervention at all?

Monday, March 16

President Obama announces that he will "pursue every single legal avenue to block these bonuses and make the American taxpayers whole," playing on public anger.

The Treasury International Capital (TIC) report discloses that in January international sales and purchases of U.S. assets showed a net outflow of $148.9 billion for the month, compared to net inflows of $196 billion during the credit crisis in October 2008. Foreigners no longer feel that America makes a good investment for their money.

Apparently to counter that perception and ease off on his criticism of the Chinese, Obama says publicly, “I think that not just the Chinese Government, but every investor, can have absolute confidence in the soundness of investments in the United States.”

Dow 7,216.97
Gold $919.50

Stocks stay the same, gold sinks a bit, probably on the twin reassurances from Bernanke and Obama. The market is now waiting for the FOMC (Federal Open Market Committee) to move on Wednesday.

Wednesday, March 18

On the day of the FOMC decision, the EU meets in Brussels to assess the effect of the stimulus programs and prepare for the G20 summit on April 2 in London. It also discusses US pressures to pass more stimulus plans.

Dow 7,486.58
Gold $893.25

The day winds down with stocks again up and gold clearly below 900.

The FOMC decision is a bomb shell. The Fed will buy $300 billion in treasuries, as well as agency (GSE) debt and mortgages-backed securities. This is effectively a commitment to print another trillion dollars

After hours, gold shoots up above its resistance band around 930—940. Stocks move down. The dollar which was around 88 tanks across the board by over 5% to under 83. By the close of the next day gold is at $956.50, well over its band of resistance. Gold bulls are certain it will shoot up even further.

Friday, March 20

But on Friday, unexpectedly, the confrontation with China subsides as suddenly as it flamed into existence. The China Daily announces that the “Sino-US sea standoff appears to have ended.”

On the home front, Citigroup’s chief financial officer, Gary Crittenden, leaves his post and becomes chairman of Citi Holdings, the unit created to sell off the bank’s riskier assets.

Dow 7,278.38
Gold $954.00

Note: Bernanke’s announcement essentially guarantees the future debasement of the dollar. So why isn’t gold shooting up in response?

Monday, March 23

Geithner finally announces details of his private-public partnership. The press has been begging for them for the last two months, with no response.

Simultaneously, there’s some good news on the economy: US existing home sales are up at the fastest rate in 6 years (45% of it is in foreclosures).

Dow 7,775.86
Gold $949.25

The Dow takes a huge leap up and Gold moves slightly down as the market accepts the news from Treasury as a good sign.

Tuesday March 24

Then the AIG bonus affair also fizzles out as executives return their bonuses.

There is an encouraging article in Investor’s Business Daily that argues that the stock market really bottomed in 2001—2002. Current market conditions parallel 1938, not 1929. Hurrah, the depression is behind us.

This bit of fluff overshadows a statement by prosecutors that the Madoff fraud in Europe involves criminal issues. (my emphasis)

As the news turns rosy everywhere suddenly, Geithner demands unprecedented powers for the Treasury Secretary to run non-bank financial institutions, citing the fall out of AIG’s collapse on the economy.

Dow 7,660.21
Gold 923.75

Gold Underwhelms

By the end of the week, after a month of relentless international friction and spiraling financial and economic collapse exacerbated by make-shift and venal policies from the Treasury and the Federal Reserve, the Dow is actually at 7776.18, a full 700 points higher than at the beginning of March, Gold — the crisis commodity — is below the band of resistance and looking weak, and the Dollar Index is trading strongly over 85.

Gold’s underwhelming performance did not surprise everyone, of course. The Gold Anti-Trust Action Committee, the leading activist group on gold manipulation has alleged for many years that leading bullion banks (such as, Goldman Sachs and JP Morgan Chase) have been colluding secretively with central banks and world monetary authorities to sell gold whenever necessary, so that rising bullion prices don’t tip off the market to insidious currency debasement.

In fact, GATA is now pressing for an independent audit of US gold reserves at Fort Knox, something that hasn’t been done since President Eisenhower.

GATA’s efforts are commendable. But attention needs to go equally to another kind of manipulation — the manipulation of public perception.

Between the Lines

Take the nationalization debate.

On the face of things, nationalization versus private-public partnership seems to be a debate pitting the good guy, the People’s Pundit (Paul Krugman) against the bad guys, the Bankers’ Bozos (Geithner and Bernanke).

But these terms preempt thinking about more limited and nuanced approaches. And that makes you wonder if the public isn’t being set up to be patsies, no matter which of the two sides it picks.

Take Krugman’s March 1 op-ed, “The Revenge of the Glut,” which blames the crisis on Asian savers. It’s published on the Sunday just before the Fed Reserve begins stone-walling on AIG and before Bernanke and Greenspan also decry the Asian savings glut.

On that, the Pundit and the Bozos are singing from the same page.

Then, look at Krugman’s March 6 op-ed, “The Big Dither,” where he demands nationalization at once. His argument is that government is going to have pour trillions into the crisis anyway, so why not now and why not with government control, so the government gets the upside as well?

If that’s the extent of his reasoning, it’s clearly flawed.

For starters, it’s perfectly possible for the government to do nothing now and also nothing later. It could just stick to prosecuting wrong-doers and ensuring a safety net and redress for victims. Throw a few more jail terms at the problem, and some of the money we think has vanished might reappear. Bottom line: There’s no need for the public to absorb the bad debt of banks at all…with subsidized loans or anything else. Just let the bank’s bond-holders take the losses.

Secondly, with such a crooked set of players, why wouldn’t nationalization just put more power into the hands of the banking cartel?

Thirdly, whatever upside potential remaining bank assets might have, they might not cover the explicit and hidden costs of a full-scale government take-over.

Fourthly, the Swedish solution that Krugman likes to push turns out not to have been nationalization at all. In Sweden in the 1990s, only one bank, Gota Bank, was taken over and that only after it had collapsed. So says William Isaac, the only one in the debate who’s actually nationalized a bank (“Bank Nationalization is Not the Answer,” Wall Street Journal, February 24, 2009).

Isaac points out that Sweden’s largest bank was about a tenth as big as any one of the three largest banks in the US. Unlike Sweden, the ten largest banking companies in the US hold two-thirds of the nation’s banking assets.

If what’s needed is to put some institutions into receivership and to make sure bondholders take losses that the public’s now taking, why not just say that? Why use the term nationalization, which has much broader implications and can set precedents we don’t want in other areas?

Look at how government’s intervention is actually playing out, anyway:

1. The Federal Reserve has launched the TALF.

According to several experts,

• The TALF supports AAA tranches of short-dated asset-backed securities representing relatively recent originations. That’s exactly the part of the market that’s functioning. The Talf doesn’t seem to be set up to clean up long-dated issues, which is where most of the toxic debt is.
• The TALF will support new lending only if originators use the freed up balance sheet capacity to make new loans. That’s very unlikely in the current environment.

That is, the stated purpose of the program and the way it’s set up are at odds. At best, that’s incompetent. At worst, it is fraudulent.

Question: What are TALF and other programs like it really about?

2. Government regulators have taken over major credit unions.

On March 20, the Federal agency that regulates credit unions, the National Credit Union Administration (NCUA), took control of U.S. Central Federal Credit Union, a huge wholesale credit union with about $34 billion in assets based in Lenexa, Kansas, as well as Western Corporate Federal Credit Union, in San Dimas, Calif., and put them into conservatorship. Total assets of both come to $57 billion. Corporate credit unions provide wholesale credit to the much larger group of retail credit unions that keeps consumer credit flowing to their members. The two unions were said to have failed government stress tests and the government now runs these institutions through conservatorship.

Buy this book.

What’s noteworthy is that the immediate costs of the takeover will come out of an industry-maintained insurance fund, but will eventually mean higher premiums on retail credit unions.

Retail unions compete for market share in their communities with banks. We know that Citi, for instance, has had huge losses in its credit card business, as well as in its sub-prime loans, and that it has recently launched a new product, Citi Forward, to regain market share.

It’s quite plausible that the Federal action is related to this.

Question: What’s really behind the take-over of corporate credit unions?

Now, go back and look at how Bernanke, Krugman, and Greenspan have all repeatedly rattled the anti-Chinese sabre, by emphasizing the Asian savings glut. Hammering away at this meme makes perfect sense if you want to steer public attention away from the Fed’s responsibility for the bubble.

Why?

Because if the Fed Reserve (and Treasury) did cause the bubble, then

1. Fed Reserve (and Treasury) policies over the last twenty years are linked to policies that enriched an international banking cabal centered around Goldman Sachs, whose senior managers darken the financial and political horizon in every direction.

2. Nationalizing the banks under the supervision of the Federal Reserve (and Treasury) and in conditions of extreme monopoly and corruption is very unlikely to be about helping American small businesses and home-owners. It’s much more likely to be linguistic cover for allowing selected banks to exercise more control (regulatory and otherwise) over the rest of the financial sector and over non-financial business via Treasury — just like the credit union take-over.

3. It’s highly likely that the Federal Reserve wanted to hide the names of the foreign recipients of AIG bail-out money to deflect public anger away from its own actions in order to cover up the extent of losses in AIG and AIG’s counterparties.

   

   Buy this book.

   AIG could also be hiding crime, ranging from money laundering to involvement with drug dealers to outright theft.

   This isn’t idle speculation. Citi, for example, has been found guilty of stealing from customers’ checking accounts (“Citibank Stole $14 Million from its Customers,” Consumer Affairs, August 26, 2008). Given AIG’s connections with the CIA and with intelligence operations in China and given Goldman Sachs’ investments in China (some in state-owned banks), it’s highly possible that “national security” issues are either involved in the AIG mess, or can be plausibly invoked.

4. It makes sense then why media attention had to be centered on the relatively trivial matter of the AIG bonuses. The heat had to be taken off the Federal Reserve’s bad faith in the AIG bail-out. Notice that the Obama administration initially stoked the bonus outrage, before backing off when it got out of control.

5. It then also makes sense why the Madoff scandal was treated as an isolated crime, rather than what it looks like — a wide-ranging international conspiracy. It’s obvious that regulators, ratings agencies, banks, officials, private investors and managers in the US and abroad must have known something about such a blatant Ponzi scheme. It’s likely that elements of police and intelligence also knew.

   It’s also very plausible that the Madoff fraud is linked in more than one way to the banking crisis and to the losses (real and alleged) of the major banks. Let’s say we eventually find that many of these losses are no more than a cover for theft, money-laundering and worse. A full-scale government take-over would make investigation difficult, because the government could stone-wall demands for disclosure on the grounds of “national security.”

   On the other hand, it could also be that any fraud is incidental to a planned consolidation of the banking system. In that case, what’s happening would be known to insiders and would be part of an Anglo-American (or multilateral) plan of bank consolidation.

6. Notice that almost as soon as "nationalization" as an option was shelved, Geithner turned around and asked for extraordinary powers for the Treasury.

To some of us it looks as if both nationalization and private-public partnership just end up giving more power to the government.

“Nationalization” could actually be no more than “internationalization” — linguistic cover for a power-grab across national lines by a globalist banking cabal, masquerading as economic therapy for your friendly neighborhood business.

That’s why, at this point the important thing is not which proposal is being batted around; whether it’s diddled this way and called “nationalization,” or twiddled that and called “helping the market,” or “preprivatization,” or anything else. None of it is likely to do anything but stick private losses to the public, as long as the government remains trapped in the sticky web of Goldman Sachs, AIG, Citi & Friends.

Before any further government money gets thrown into the black hole of bad banks, we need full transparency for present government actions and complete investigations of past ones. As soon as possible and as thoroughly as possible, the public needs to know what Treasury and Federal Reserve officials, senior regulators, and the managers of our mega-banks have really been up to for at least the last 15 years.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

Mind you, this is not a defense of Krugman. With a Nobel Prize, some thirty odd books, a perch at one of the leading opinion journals in the world and droves of followers, he doesn’t need one.

It’s a defense of honesty.

That’s the commodity most in short supply today, not IQ. Words should be accurate, and they should be even more accurate when they’re being hurled at someone, if only to make sure you hit them in the jugular. Otherwise, they boomerang…. or hit everyone around. And, what hurts everyone usually hurts the target hardly any. We should have learned that from our little skirmish with Osama.

We can do better by Mr. Krugman.

We need more honesty.

But we also need more morons.

Because, the way I see it, if Krugman is an intellectual heavy-weight, being a moron isn’t such a bad thing, after all.

Psychologically, being a moron would just mean you were somewhere between the ages of eight and twelve. Now, what you think of 8—12 year olds depends on whose they are, but the tantrums of the worst middle-school brat never did any damage that a mop and judicious paddling couldn’t take care of. But even Noah couldn’t get us out of the tidal wave of red ink flooding the planet today.

Likewise with IQ. Just 51—70 points would qualify you for “moronity” — one step above “imbecility” (IQ of 26—50) and two above “idiocy” (IQ of 0—25). But the village idiot….or even a village crammed to its gills with idiots…. could never have got us to this point. An idiot wouldn’t have been able to spell "mortgage derivative" let alone create a pile of them, package them, and Fedex them around the globe. That takes honest-to-goodness intelligence quotient of the most high-powered kind, a full 145 points or more.

You see, a moron with all his God-given simplicity picks up an apple and he touches the thing and he knows it in his moronic way for its red-shiny appleness. He has no other use for it but that. He sniffs it, he licks it, he takes a crunch out of it. If he saw a mortgage loan, he would want to do about the same. He might be slow with the numbers, he might want to paw through them first, but in the end he couldn’t have done much more than just take a bite out of your pocket…

(Or, if he were moron enough, out of his own.)

But your 24-carat, Triple A-rated, gilt-edged, blue-chip, too-big-headed-to-fail, Ivy League meddler will not leave a fruit alone without torturing it with much weightier schemes and devices, such as only old Beelzebub could’ve put the human race up to.

"Idle hands are the devil’s workshop," they say. Well, put those idle hands on a PhD-wielding structured-finance-professing expert and you get an industrial revolution of devilishness. Your garden variety apple turns into an orchard of diagrams, quadratic equations, risk models, and algorithms all intended to prove only one thing — that homo bureaucratus in his Garden of Sweden can do better than Mother Nature, the Great Spirit, the hidden hand, common sense, Jahweh, or anyone less.

It used to be that getting a bank loan only needed you and a guy in a pin-stripe suit. You proved to him you were an upstanding citizen with no axe murders on your rsum and some green stuff in your bank account, he shook your hand, and you were in business. That was it, as far as paperwork went.

Then came the great housing bubble and even seven years in graduate school wouldn’t have helped you figure out all the paper products generated by your roof and four walls — a poisonous glut of abs’s, mbs’s, cdo’s, and cmo’s so bad we’re still flopping around in it belly-up, like a tuna in a tub of mercury.

And if quant-ified banking was fun for you, you’re in for a lot more fun. Think what a party it’ll be when they’re telling every company in the country where to invest and how…..and whom to hire….and then securitizing their policies into paper investment products.

Maybe that’s why so many of our leading people of IQ, including Fed Reserve chairmen past and present (Alan Greenspan, Ben Bernanke), Republican senators (John McCain, Lindsey Graham) and Democrat (Chris Dodd, Chuck Schumer), left-wing economists (Paul Krugman, Joseph Stiglitz) and conservative (Adam Posen, Nouriel Rubini), are all in favor of nationalization. Nothing like a supersized government bureaucracy to mop up all the extra number-crunchers who’ll be out of productive work in a depression.

To hear Paul Krugman tell it, though, bogus number-crunching didn’t cause our problems. He thinks we need more of it. In fact, we need the Swedish model, he says. And no, he doesn’t mean some Britt Ekland look-alike. What he has in mind is Sweden’s bank bail-out model in the 90s, which he claims was nationalization.

Only it wasn’t.

Anders Aslund, a Swedish economist at the Peterson Institute recently set the record straight:

“Sweden did not nationalize its banks. ……..

There is no reason to merge bad banks, because asset sales require plenty of management capacity.

A major concentration of assets in an aggregator bank would only aggravate the functioning of asset markets….

In sum, in Sweden bad debts were not taken over by the state or transferred to any aggregator state bank; but each bank, private or state-owned, established its own bad bank. The Swedish model avoided the trading of depressed assets in the midst of the crisis, while they were internally valued at their low market value. If nobody can assess the value of an asset, it is probably not worth much. Only one bankrupt bank was nationalized.”

Buy this book.

(“Lessons for the US from the Swedish Bank Crisis,” Anders Aslund, Peter G. Peterson Institute for International Economics, February 24th, 2009)

Now go back to what Paul Krugman says.

“What we want is a system in which banks own the downs as well as the ups. And the road to that system runs through nationalization.”

(Paul Krugman: Nationalize the Banks, The New York Times, February 24, 2009)

Someone should remind Dr. Krugman that the system in which banks “own the downs as well as the ups” is called private enterprise. It’s what you have when you let failing private banks and firms fail.

And someone should also tell him that Sweden just demonstrated how it works when its government refused to step in and rescue Saab, the Swedish subsidiary of General Motors. After years of masquerading as a socialist haven, Sweden is more free market than America, it turns out.

Buy this book.

“If the company couldn’t produce cars anymore profitably, it should try wind,” said the Minister of Trade sensibly.

(“Sweden to Saab: Merge to Wind Power or Shut Down,” Fredrik Wass, Greentech Media, March 4, 2009).

Too bad that advice won’t work here in the US, where wind is already the only profitable thing being put out.

When the economy is racing toward complete socialism, the way to private enterprise is not to double up on the pace of socialization. (And that’s all that “going through nationalization” amounts to.) It’s to go into reverse. Just let the banks liquidate. There. The government has nothing to do with it.

But tell me this. When even Mandarin-speaking apparatchiks have got the hang of free markets, how is it that Dr. Krugman, who cut his teeth on Anglophone economic theory, gets his vocabulary so mixed up?

Is it a lack of IQ?

Or is it what I think it is?

A lack of honesty.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

The right blames Fanny and Freddy for setting off the financial tsunami. Naomi Klein says it’s the Chicago boys and capitalism.

The left denounces private sector greed. The right, public sector do-gooding.

Overpaid CEOs, overdrawn borrowers, underestimated risk. There’s enough blame to go around.

The only problem is that a half-baked understanding of a problem leads to half-baked remedies. And half-baked remedies are worse than no remedy at all.

Nationalization is the cry now. Nobel winner Paul Krugman at the New York Times says it’s as American as apple pie. I daresay that’s the first time Krugman ever appealed to tradition to sell anything.

Even Fed Chairman Ben Bernanke floated it recently, and then backed off, when the market tanked in response. But by now we know that our rulers speak not just from both sides of their mouth, but out of both mouths of their two-faced tyranny…and from its derrire too. We can confidently predict that in the days ahead Republicans and Democrats, private and public sectors will join the breadline for nationalization

Now, in a different country, in a different context, nationalization might make sense. But trotting out Sweden’s history as a model for the U.S. is disingenuous. Sweden is about one-twentieth the size of the US and it has around one-thirtieth of the population. It’s not an empire with a vast portion of its economy dependent on its defense department. And it’s also one of the least corrupt and peaceable countries in the world, by standard measures.

Knowing exactly how corrupt this system is, how deceptive, and how out of control, we would be fools to place our faith in nationalization in America. Or in any other panacea pushed by the state. None of them stands any chance of being anything more than a change of label, a PR facelift. A jackass in a wig and stilettos can kick all it wants, it won’t turn into a chorus girl.

Only the Austrians so far seem to grasp this and only the Austrians seem to understand the underlying problem — which is money. Money backed by nothing tends toward nothing. But there is more to it. The cheapening of money, its lack of intrinsic worth is only an effect, not a cause. The cause lies deeper — in the unconstrained power of the government to print money. The source of corruption is this absolute power.

It’s because the US mint alone can print legal money that money has lost its link to real value and become rapidly cheapening paper. The monopoly of money, you could say, has given us toy dollars, monopoly money.

That’s the first tier of damage. There’s a second.

What does cheap money do to the economy? Cheap money makes borrowing attractive, because when the borrower pays back, he pays back with less than he borrowed. How? Because inflation has lifted prices in the interim, and because in the interim, the Fed has intervened to keep the price of money (the interest rate) lower than its market worth.

This little extra boost makes saving unattractive to working folk and induces them to spend. It makes it worthwhile for gamblers to gamble more, and for the prudent to turn into gamblers too. Cheap money transforms the economic calculation of genuine investment activity into a conman’s game of scheming and swindling. It encourages beggar-thy-neighbor speculation, with no roots in productive activity.

Cheap money also makes it worthwhile for businesses to borrow massively and expand. The bigger the business, the bigger a payoff it gets from cheap borrowing. The bigger the business, the more it can buy up (or buy off) its competition. Cheap money means monopolies. And monopolies are the opposite of a competitive free market.

Which is why, in the few decades since Nixon delinked paper money from the gold standard, every economic activity in America has become dominated by giant conglomerates. True, the gigantism of modern business has many other roots. But there isn’t a doubt that cheap money — low interest rates — has been a major impetus behind the frenzy of merger and acquisition activity since the 1980s. Lowering interest rates makes money cheap compared to other factors of production. The country becomes increasingly fixated on making money off money (through debt, payments on debt, insurance on debt default, leverage of debt, and arbitrage between debts). Cheap money was behind Michael Milken’s junk bond innovations at Drexel Burnham Lambert in the ’70s and it was behind the derivatives mania that just went bust.

The rot in this economy has nothing to do with free market enterprise. It’s the sour dregs of monopoly finance. It’s corrupt corporatism.

Naturally, the businesses whose business is money — the banks — have become giants. Simultaneously, and predictably, other businesses — like insurance companies — have turned into banks, bloating the financial sector even more and displacing and perverting productive investment.

Monopoly money gave us monopoly banking. And the biggest of the banks used their power to hustle the regulators and scuttle the regulations. They cannibalized other banks that lacked their connections, stirred up mass panic in the markets, and then boldly stepped out from behind the curtain and seized power right in our faces. Now they consolidate power at break-neck pace behind the rhetoric of change.

Under Bush, they used the cover of right-wing sympathy for businessmen to grab the levers of power. Under Obama, they use the cover of left-wing sympathy for workers to create the programs to deploy that power.

Law-abiding socialism is better than crony capitalism and it’s infinitely better than a kleptocracy. But only a political simpleton would believe that a gigantic and corrupt empire of this sort is going to turn into an earnest cooperative of social democrats simply because the New York Times says so.

Ask yourself: With the government firmly in the pockets of giant businesses, whom would we trust to oversee a central bank?

No one.

And what would prevent it from becoming anything more than an instrument of private interest, with the power and the purse of the public added?

Nothing.

Supporting nationalization Robert Teitelman at The Deal writes,

"Finally, the People can get control of the powerful forces of finance that have, in the past, fed only private moneyed interests."

("The Many Strands of the Nationalization Argument," The Deal, February 3, 2009).

This is gobbledygook.

Which "people"?

Every class and group has a different interest and none of them is in any position to take direct control of anything, least of all policies being hatched in half-light and shrouded language behind the scenes.

Lobbyists and activists have appointed themselves spokesmen for some (poor) people, whose approval they’re busy buying, and they’re enacting the policies of some other (rich) people who are financing them. The rest of it is smoke and mirrors meant to confuse anyone who might object to the robbery.

Buy this book.

The rest of the "people" do not count. Listen to the language being used. Have you heard anyone suggesting returning money to savers (American and foreign) who were cheated out of the market return on their money for decades? Or to creditors (American and foreign) who’ve been stiffed by depreciating currencies for decades? None. Is anyone offering quantitative easing to people who pay their bills but have to endure higher rates and tougher requirements because of other people’s sins? Is anyone talking about workers who retrained themselves at their own expense? Is anyone bailing out healthy businesses whose stocks have been hammered mercilessly along with the toxic financial sector? Or supporting the pensioners whose Triple-A bonds turned out to be junk?

The "forces of finance" are going to serve the people instead of "private moneyed interests"?

Then what happened to the trillions created during the bubble years by the "forces of finance"? Even if all of it was froth, who skimmed the froth? What happened to the tax revenues on it? Or were there no taxes because the money was siphoned off? We know that ex-Nasdaq chief and high-society swindler Bernie Madoff took part in Primex, a digital auction platform intended to rival the New York exchange, and we know that he was joined by Goldman Sachs, Citigroup, Morgan Stanley, and Merrill Lynch. Primex was intended to legitimate "internalization" — which is the matching of customers’ buy-and-sell orders in house, rather than on the public exchange. It would have made a perfect cover for any of the participants who wanted to hide profits. Is that why it was conveniently set up in 1998 at the height of the stock market bubble and why it quietly disappeared in 2004, just before the shoes started dropping in advance of the current market crash?

Buy this book.

The "forces of finance" on the side of "the people?

You might as well wait for Obi-Wan Kenobi.

The plain fact is that it’s only private moneyed interests that are getting the biggest helpings of government money. Especially private interests that have friends in high places, like Goldman Sachs and Citigroup.

Treasury Secretary Tim Geithner is the protégé of Robert Rubin, former chief of Citigroup and former US Treasury Secretary. Geithner’s close advisors include Goldman Sachs alum Gerald Corrigan and John Thain (ex-chief of the New York Stock Exchange), as well as Alan Greenspan (the leading architect of the policy of cheap money and derivatives) and Larry Summers (who is the head of Obama’s National Economic Council, as well as a former chief of the World Bank and former Treasury Secretary).

Both Summers and Rubin were deeply involved in the Clinton administration’s bail-out of Mexico and Russia during their currency crises. In practice, those were bail-outs of the bond-holders, among them, Goldman Sachs. In addition, Summers has taken Citigroup perks (including free rides on its corporate jet) and lobbied for the removal of caps on executive pay at firms which received stimulus money (among them, Citi). And he also defends the impeccable economic logic of dumping toxic wastes in low-wage under-populated regions like Africa.

That doesn’t sound like the record of someone likely to hand over power to the powerless. But it’s what you expect from finance capital in the seat of power.

First, it creates debt everywhere until the capital base of the economy is destroyed and production is in tatters. Banks become bankrupt, except for those that have government connections and can consolidate. The monopolies have nothing to restrain their anti-market behavior and push their own agendas in concert with the state. With no limit to cheap credit, the money supply swells. Workers can no longer keep up with inflation. The lopsided development of the state sector crushes savings and production in the remainder of the economy. Jobs dwindle.

To supplement them, the corporate-state creates make-work programs on the domestic front. When bad times and discontent persist, it looks abroad.

Then comes war.

That is where nationalization in a time of monopoly will take us.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

I can smell it. The nation’s preachers are out in full force. First, there was President Obama telling us we needed to have a great race healing. Now, Attorney-General Eric Holder comes out to tell us we’re still segregated. We work together, but then we live and play by ourselves in segregated groups. We’re all cowards when it comes to race, says Holder.

Holder might have had a point and so might Obama had they spoken at any other time…and in any other way. But frankly the only segregation that really matters now is the segregation of the political class and its clients from the rest of us. It doesn’t matter which neighborhood you live in, black, white, brown or parti-colored — they all spell b-r-o-k-e the same way.

Barack Obama is a likeable guy. Not for one minute do I believe that he’s doing anything but the best he can. He’s sincere.

That may just be the trouble. It seems to be the delusion of societies to think they lack precisely what they have too much of. C. S. Lewis said as much. Cultures awash with hedonism believe themselves puritanically repressed; societies long lost to any orthodoxy fear religious dogma; and now with race at the center of talk shows and college seminars, of gym etiquette and prison protocol, we’re told that more race-talk is what we need.

Is it?

Do we really need to spend more time spewing what we think of each other like inbred cousins on a Jerry Springer show? Jerry used to be my vacuum time, so I actually know how those things ended — in a scrum of tattoos and ripped shirts, fake hair and flying cusses.

If that’s togetherness, a bit of segregation might be more civil.

And a bit of proportion might be more sensible.

We can call it segregation today, but I wonder what people segregated a century ago would think about that. Students clustered in groups of their own choosing are not terrified men and women fleeing dogs and police batons.

Actually, you don’t need to go back a century. You can find the same thing today in prisons, at non-violent demonstrations, wherever people are rounded up and snatched out of their houses. The victims are black, brown and white. And they’re not where they are because we don’t talk enough about race in this country. They’re there because we don’t talk enough about the state.

I’m almost afraid to write this way because any criticism of the current shibboleths about race is apt to get you into trouble. Many people, for instance, think we should hear out any African-American voice on race, without dissent. It seems like the decent thing to do after their history of oppression in this country. So African-Americans get race and soul, much as Indians get non-violence and yoga, Native Americans get medicine-men and beads, the Chinese get martial arts and acupuncture…and the Irish get shamrocks, booze and dreadful childhoods.

This we call authentic. Lived experience makes for credibility, we tell ourselves.

Maybe so.

But from another perspective it looks a lot like segregation too. Intellectual segregation. If African Americans get to talk to us about race, and only race, then we don’t really have to listen to them on anything else. Conversation becomes a fairly predictable thing with each party trotting out the lines allowed to them…and the rest of us compelled to sit through it because we’ve learned that to question might taint us as bigots… haters… mean-spirited… bitter…. resentful… and any of the carefully chosen buzz words that police the boundaries of polite discourse.

Mr. Holder worries about college students picking whom they want to sit next to at lunch. He wonders why we should be integrated at our workplaces but set apart in our play-time and in our living.

But that’s no mystery.

It’s precisely when we’re focused on things outside our group identities that those identities recede into the background. When someone’s throwing me a rope to get me out of a burning house, neither of us has much time for thinking about skin colors or nose shapes. We’re more interested in making sure we escape without being scorched to a crisp. Should we survive, we’ll feel kindly to each other. Our differences might even become a plus. If anything goes wrong, we might blame it on those differences. But at least, we’ll still focus on what we accomplished or didn’t accomplish as human beings.

What I mean is this: at work, in school, on a team, race recedes quite naturally into the background. If you doubt it, ask why integration took place first on the battle-field and on the sports-field.

It’s in our off-time, with no task at hand, that race begins to loom as a problem. And not only race. Gender, age, occupation, class, religion — any of these can become trouble. It usually takes some strong belief to paper over the trouble.

Now, in America religious beliefs are — at least, theoretically — banished from the public sphere. The rationale is that they’re too different to live together peaceably. And among political beliefs, the most American of them — the belief in individuals and free markets is — at least, theoretically — at odds with a strong notion of the public sphere. That tends to leave us more fragmented than smaller, more cohesive societies. That’s the way it is with multi-ethnic, multi-cultural empires

With common purpose absent, all that’s left to us is affirmation of process. Which is why constitutionality becomes paramount in America.

Buy this book.

But even constitutionality can’t be unhinged entirely from common purpose or common meaning. Because, if there’s no point to a process, all things become equally point-less…

Or, to put it another way, equally point-ed; they are meant only to score points.

That is to say, a process devoid of an underlying common meaning tends to become purely and entirely political; its only rationale is to produce whatever results we want at the moment.

So, when we get rid of purpose, in sneaks production. Not production driven from the bottom by demand. This production is driven from the top by planning.

And so you get the commissar. And the clients of the commissar.

You get the corporate-state.

Buy this book.

In the corporate-state, getting what you want is all that matters, and the words by which you get what you want, the words by which you score points and keep score, are not conversations among citizens. They’re slogans intended to scatter the herd hither and thither, or drive it from this point to that.

Words in the corporate-state become forms of coercion. We’re fed language whose purpose is less to bind us together in common humanity as it is to drive us where we cannot truthfully be led.

It is a language of fraud. It is propaganda.

It is the language of empire.

An empire that has to keep its white, black and brown citizens, its Christians, Jews and Muslims, its men and women, its poor, middling and rich, constantly focused on the most divisive things about them, in order to keep them from focusing on what might actually bring them together — the task at hand.

We may or may not be cowards about race, Mr. Holder. But we’re far bigger cowards about facing up to the way race is used in politics in this country today:

as a red herring — to distract

as a red rag — to goad

as a red light — commanding us to stop and go no further.

No amount of preacher talk can hide that. No amount of cant about race should stop us from talking about the one thing we do need to talk more about: the nature and goal of the state power under which we live today.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

But if they really did, why is it that the crimes committed by Soviet commissars or by the Nazi Gestapo. . . or by the CIA . . . were all committed with the law books bulging at the seams?

It’s not how many laws you have that matters, but how well those laws are obeyed.

Which is a matter of culture and history, of what people expect…. and what they’re prepared to accept.

And to know that takes the study of history and manners; it needs a knowledge of morals and religion. The usual smoke and mirrors sideshow supplied by the political class won’t do. You need to turn to the accumulated wisdom of case law and precedent, of customary law and conventions.

The free market arose wherever there were laws and systems like that — whether in Europe or Africa or Asia. One way to think about this difference would be to see it as the difference between a fiat money, like paper, and a real store of value, like gold. You can print all the money you want, but if there’s nothing to back it up, then you’re in a bit of trouble. Your creditors are unlikely to put much store in you as a credit risk, just as the world’s wringing its hands today over the dollar. Pretty soon, they come calling for their loans with cudgels and pitchforks.

Gold does not have the same problem, because there’s a limited supply of it. It has to occur in nature. It has to be found somewhere underground and then mined and refined. It’s an expensive business — that takes risk, time, and money. There are costs attached to it that someone has to pay. Paper money, on the other hand, can be printed any time you want. Just ask Ben Bernanke. He’s dropping it by the helicopter load from the clouds.

You can pass all the laws you want on the statute books, you can employ stables full of well-groomed and pedigreed lawyers. But if there’s nothing to back the laws, you’re in trouble. Businesses aren’t going to want to do business with you. Investors are going to want their investments back.

The problem arises because you can pass statutory laws as you like, even if they have little relation to how the masses of people actually think and act. That means you can have a country where theft and looting are the norm that might, nonetheless, have very intricate laws on the books against theft and looting. The statutes wouldn’t do a thing to change it.

Customary law, on the other hand, can’t be manufactured out of nothing. It grows organically from the soil in which it lives. It reflects the way people really think and act. It doesn’t run so far ahead of its times that it provokes either resistance or indifference from people. Customary law, like gold, reflects real value. And because it does, it’s also likely to be accepted by people more often. Ultimately, customary law works because it’s a more sensitive and complex measure of a society.

It contains more information from the past — from the history and traditions of the people. Like the pricing mechanism, it’s a communication system that allows people to signal their desires and expectations faster and better than they could otherwise.

Customary law doesn’t just communicate with living members of the group, as pricing does. It also reflects the desires of generations past, where statutory law reflects only the demands of one generation, the living. In that sense statutory law really isn’t democratic at all. Or, at least, not democratic enough. It only consults living citizens. It forgets the dead ones.

Buy this book.

Pure reason, Cartesian reason, is very good at technical and physical problems, but it’s not nearly as good when it’s turned on itself or on human life. Human brains aren’t made that way. We’re more likely to understand who and what we are by looking at things we’ve done in the past — which is what we call history — or things we’ve made — which is what we call culture, than by logic.

Man is, first of all, Homo faber (man the creator), and we understand him best by looking at his creations.

Customary laws work, in other words, because they come out of the history and culture of a society. They constitute verum factum (truth as an act), as the Italian philosopher Giambattista Vico wrote in 1710:

The criterion and rule of the true is to have made it. Accordingly, our clear and distinct idea of the mind cannot be a criterion of the mind itself, still less of other truths. For while the mind perceives itself, it does not make itself.

Buy this book.

As more and more of our world is no longer made by us, we understand it less and less. We’re forced to fall back on theory and speculation, on isolated reasoning.

But thinking, as Vico pointed out, is hopeless when it remains isolated reason. It has to include practical wisdom and rhetoric. The Cartesian cogito ergo sum (I think therefore I am) is just not enough.

Vico liked to argue that the rise of pure rationality in history was one signal of a declining phase of human culture. He called it the barbarie della reflessione (the barbarism of reflection) and said that it characterized what he called The Age of Man. This was the last phase of his cycle of civilizations.

In the Age of Man, popular democracy would run amok and lead to tyranny and empires, which would end in chaos. Then the whole cycle would begin again, with the age of the gods. And so it goes on from eon to eon, said Vico.

It makes you wonder. Does anyone ever learn?

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

DIGG THIS

Treasury Secretary Paulson’s Financial Disappearing Act of 2008 is a charade. Lawmakers who dug in and blocked this act of economic treason deserve applause.

The Orwellian name of the legislation itself should have frozen every American citizen in his tracks.
The economy is not about to implode and if it were, it’s doubtful if government would do it anything but harm.

The financial markets are in a crisis of confidence because the US government is debasing its currency and stiffing its creditors. Uncle Sam is a deadbeat and the world knows it. The world is worrying what to do about the useless paper it’s holding. That’s what the panic is about.

It’s a strange day when Barry Goldwater and the Chinese Communists are in agreement ….

And they are both right.

Want to really stabilize the market?

Put the government’s financial house in order. Pay down the debt. Let the losers take their losses. Tighten belts. The economy is not in good shape, but it can still be whipped back into it. It will only take financial discipline and some willingness to accept hardship.

Instead, since last summer, Federal Reserve chairman Bernanke has embarked on a series of epic blunders in the opposite direction. Worried about cheap money? Give ‘em cheaper money!

What does it mean that the banks have a liquidity crisis overlaying a solvency crisis? It means they are broke. The loans are defaulting and no one will lend any more. Why should they? They haven’t got back what they lent out before. What did you expect? That is the result of the bankers’ own stupidity, recklessness, and arrogance. The remedy for it is not to hold up the rest of the population like gangsters and demand at gunpoint that they hand over their wallets.

Money is in plentiful supply all over the world — especially in the accounts of the very people who are demanding our money.

And, by the way, what’s in it for Donald Trump that he’s come out to defend all this?

And what’s in it for Warren Buffett who also defends Paulson?

Paulson, Buffett and Hank Greenberg (the former chief of corrupt insurance giant AIG, now a charity child of the Federal Reserve) have all been in business together, one way or other. And some of that business doesn’t smell right. We now know the bailout of AIG was also a bailout of Goldman Sachs, its counterparty on a number of deals.

This spring the government handed down convictions to employees in one of Buffett’s reinsurance outfits, General Re, which did business with AIG. For decades, Greenberg has been at the center of multiple frauds including falsification of documents offshore and bid-rigging back home. His close associate, Mike Murphy, who lobbied successfully for tax treaties with Bermuda and set up many of the alter ego companies that were part of the fraud, has shredded documents to hide evidence. [There is also a behind-the-scenes power struggle at AIG between Greenberg and the post-Greenberg management, which has been cooperating with the FBI. That's relevant to what's happening too.]

What AIG did was hide losses in affiliated businesses that it owned. It did it by phony risk transfer deals. Risk transfers get better accounting treatment than loans. The fake deals also helped to reduce reserve requirements on the books so that AIG could look better to stockholders. That means the fraud worked both to boost prices and to shortchange shareholders of their dividends for years — at least through the ’90s and then again from 2000—2004.

And who do you suppose sold some of those credit default swaps to AIG and its reinsurers? You guessed it — Hank Paulson’s old bank, Goldman Sachs.

This is not just a problem of mortgage securities gone bad, as Buffett said in his public defense of Paulson and AIG. No. This is a matter of decades of white collar criminality, cronyism, and reckless business practices by leading banks and financial businesses, a massive bubble of stupidity, arrogance and greed that the market refuses to swallow any more. Right at the center are the very financiers who set it off.

AIG was phonying its books long before the housing bubble, at least since Alan Greenspan began cranking out liquidity on the cheap at the end of the 1980s. That is, as soon as the junk-bond mania died and the stock market crashed, money was injected into the system by Maestro Greenspan through low interest rates. The tech bubble was inflated. Goldman Sachs was in the thick of it, sending a tidal wave of credit across the globe through new and complex derivatives and through electronic trading. MIPs, SPVs, SIVs. These off-book vehicles and other hedges (for Ghana’s Ashanti Gold, for AIG, for Enron, even for Fannie and Freddie) were developed before the real estate bubble, some to skirt tax rules, others to make the books look better.

What they also did was blind the companies who used them to the risks and losses they had on their books. Accounting rules and business practices that rewarded managers in the short-term exacerbated the problem. They encouraged shortsighted deal-making, quickie trading into hedge-funds, opaque off-book entities, and accounting swindles of all sorts. Now the bar tab has come due and our boon companions are making their excuses and exiting in a hurry. Guess who’s paying?

After turning his own investment bank into a hedge-fund, the Treasury Secretary now wants to turn the government into a super hedge-fund. That is all this business amounts to. The government is insuring the bad assets. Well, as the AIG case shows, accounting tricks can turn insurance into loans or anything else. Bad debt becomes a troubled asset. Then the trouble passes (into our pockets) and out from the other end of the sleeve comes a white rabbit.

Welcome to the age of trompe l’oeil capitalism.

The Bush administration has already vanished a trillion (and counting) into the black hole of the Iraq war. Then there is the infamous trillion (and counting) that seems to have disappeared from the Defense Department under former Comptroller of Defense, Dov Zakheim, between 2001—2004 (Zakheim is now back in the Bush administration as a wartime contracts commissioner).

Why should this trillion be any different? Especially when we know Goldman Sachs is not only a big government contractor, it also defrauded the municipalities it sold bonds to?

Look at the bill closely.

Section 2 (Purposes) states that it "provides authority to the Treasury Secretary to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans."

That this legislation gives unprecedented authority to the Treasure Secretary is blindingly clear to everyone.

As to the next point, liquidity cannot be restored by decree. It is not money alone but confidence that is being withheld.

As to the last part, it is drivel, and offensive drivel from a government that has bankrupted the country and crippled the future of its sons and daughters.

Contra Nancy Pelosi, who detects an inaudible voice of the people whispering in its leaves, this bill is nothing more than a loud crude Ave Caesar to the bankers. There does not seem to be any more obvious point about the whole business than that the former CEO of Goldman Sachs gets more power.

In Section 101 the Treasury Secretary is given authority to establish a Troubled Asset Relief Program (“TARP”) and an Office of Financial Stability (OFS) within the Treasury Department to implement it that will coordinate with the Board of Governors of the Federal Reserve System (the Fed), the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision (OTS) and the Secretary of Housing and Urban Development (HUD).

Is your head spinning?

TARP is simply doublespeak. It could have come straight from the old Soviet politburo. There are no assets involved here. These are liabilities. These liabilities are not troubled; they are junk.

And why do we need the Orwellian Office of Financial Stability? Is this the Minifinanz of the new United Sachs of America?

Minifinanz seems to bypass or parallel departments we already have. It actually looks strangely like a Treasury equivalent of Douglas Feith’s Office of Strategic Influence, which "stove-piped" false information to the President.

Section 102 creates a program to guarantee the bad loans (sorry, troubled assets) by creating risk-based premiums to cover anticipated claims.

Well — the claims are going to come, and they will be even higher, now that the claimants know that Uncle Sam, the Supreme Court, and the military are backing them. Because that is what the full faith and credit of the US ultimately means. The US government has got itself into the insurance business. Officially, this time.

Odd coincidence that earlier this year, Mr. Paulson was pushing a centralized insurance program that would bypass state insurance regulators.

Odder yet, Mr. Paulson’s old firm Goldman Sachs, wrote many of the derivatives on the credit swaps filling the books of AIG, which the Federal Reserve recently rescued to the tune of $85 billion.

Oddest of all, AIG has been fighting NY State’s insurance regulators on civil and criminal charges, as I noted.

Should someone point out that the remedy for state regulators who try to overreach and push federal regulators is not for the federal government to do an end run around state regulation?

This may help Mr. Paulson’s cronies. It will not help federalism.

In the area of oversight also the bill is deficient.

In Sec 103 of the bill we find that it is Mr. Paulson who alone decides which institutions get to be vanished up his sleeve.

And in Sec 104 we find that oversight of Mr. Paulson will be conducted by…well, Mr. Paulson.

Yes, the charmingly named Financial Stability Oversight Board (Drop the "Federal" and you are left with SOBs) will also have Chairman Bernanke, the SEC chair and the Secy. of HUD, and the Director of the FHFA — but we are not inclined to think that these worthies are any more than rubber stamps for the world’s most powerful banker.

Sec 105 requires Paulson to report to Congress within 2 months and for every 50 million spent.

But two months is a long time in the markets and 50 million can go up and out a lot of sleeves. Does Congress know enough about pricing mechanisms to see through any foul play? Shouldn’t Paulson instead report to independent experts with authority and experience in the real market, who are not appointed by Congress but are self-selected by their peers?

As for regulatory modernization, we recall derivatives regulation came up in the late 1990s. It was the former chief of Mr. Paulson’s old bank, then Treasury Secretary Robert Rubin, and Federal Reserve Chairman, Alan Greenspan, who blocked it.

But apart from the bizarre spectacle of bank managers handing stickup guys the keys to the vault, there are other problems.

How do the rights granted to Paulson (106) relate to other government departments? Why can’t the management of assets be done within existing bureaucracies and laws? How extensive are Paulson’s new rights? Can they be revoked? How easily?

How can the Secretary of the Treasury determine the interests of the public on his own (Sec 107)? And how can he waive Federal regulations on his own (107)?

How can the Secretary manage conflicts of interest (108), when the power given him here is in itself a conflict of interest?

Why is the FDIC in the asset-managing business? (107)

Why should foreign banks be told to act in concert with ours? (112)

(They do anyway, but putting it into law makes global government official.)

And if the government’s interests are to be protected, why does the government only get nonvoting warrants, and not shareholder votes, in the institutions participating in the program? (113)

Buy this book.

The media talks as if the bill gives Paulson $350 billion and he has to work for everything else. Actually, it authorizes the full amount. The only brakes are on the speed with which he gets the rest. The President can request anything over $250 billion and the burden of disapproval is placed on a joint resolution of Congress. How easy will that be to obtain?

For all the talk about helping home owners and punishing CEO’s, there is also little about either in the bill. And what there is is set up poorly.

Buy this book.

Mitigating foreclosures (109) and modifying loans terms are both unjust to homeowners who’ve abided by their loan terms or have already suffered foreclosure. It creates a serious moral hazard problem and encourages more and more claims on the government. Skip the lofty rhetoric. Marketing bad loans does not help the feckless and improvident (a number of whom are not poor), any more than selling credit cards helps them. You might as well hand out bottles to alcoholics. And more bad loans certainly don’t help people who are really hurting.

Likewise, the penalties for participating firms hardly amount to a slap of the wrist (111). If we’re serious about punishing the guilty, there should be disgorgement of all bonuses, incentives and golden parachutes, and severe penalties for unprofessional and illegal conduct. Retroactive pay-cuts for senior managers is in order.

This bill was never about helping anyone but the same crowd who got us into this mess. It’s legislative chicanery that does little more than clear the board and shuffle the cards for the next round of government-backed gambling with financiers who hold the trumps (and Buffetts) and make jokers out of all of us.

No more three-card monte and disappearing acts, please.

The stakes are too high now.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

DIGG THIS

[Last Wednesday, Hank Paulson was installed as CEO of US Government Incorporated, replacing the now defunct United States of America].

Charles Krauthammer wrapped up an astounding week in American history with a hosanna to Ben Bernanke and Hank Paulson. The best possible team to have on your side in a financial crisis bigger than any since the 1930s, says he. Bernanke, because he is an economic historian specializing in the Great Depression. And Paulson, because he knows everyone in the banking industry and is the perfect person for arm-twisting and deal-making. Financiers aren’t all bad, sniffs Krauthammer. There were all those greedy realtors and home-owners too.

Yes, Charles, we do see that greed is a many-splendored thing, visiting the poor and rich alike. But on a mundane level, the yearning of the cleaning lady who gets herself in over her head with a home loan she can’t pay is not the same sort of public hazard as the cosmic larceny of financiers who’ve skipped out with hundreds of millions from companies they’ve skinned like pole cats

Fortunately, one honest man, Kevin Phillips, showed up on Charlie Rose to wrap up the week correctly.

No hope was his verdict.

I don’t think he meant this crisis alone. He was talking about public culture.

No hope from this Democratic party or this Republican party. Or from Paulson. Or from Washington.

No hope of remedy or change. Nothing to do but wait for nature to take its course. It may be diverted and distracted, he said, but it will not be deterred.

He’s right. The remedy for the disease of empire is usually the death of empire.

These are the first death throes. The question is what sort of country will remain.

What took almost a decade in the thirties, was resisted by businessmen and statesmen, what was debated and questioned for years before it took place, step by step, happened last week overnight. With no more than a whisper in advance, the state took over the American economy. A vast portion of housing, banking, and insurance was nationalized. The free market died in the USA.

There are some who say it never lived.

Or lived only a shadow of its self. Maybe so. But whatever shadow it was, there was enough of it to defend, to fight for, to hold up. There was enough to define it as the American way.

That will be seen now as a linguistic oddity by historians in time to come as they piece together the steps by which the most enlightened experiment in government in modern times came to an end, not 250 years after it began. It will be no consolation that it did so in the most impeccably post-modern style with both a bang and plentiful whimpering, a digitalized death by program-trading and risk-models, with balance-sheets and portfolios hemorrhaging electronic red in Guangzhou and Gurgaon, in Peoria and Panama City.

The whimpering came mainly from those with the utmost responsibility for the whole business and the ones least likely to suffer from its fall out — the bankers and financiers of Wall Street and their front men in Washington, whose dereliction of professional duty was so monumental that in another age and place it would have entailed not merely a court-martial but ritual supukku.

Yet, you heard not one expression of real remorse or shame from any of them.

Not from Alan Greenspan (who presided over the Fed over two decades), or from Robert Rubin (Clinton’s former Treasury Secretary, a one-time Goldman Sachs CEO and current Citigroup director) or from John Thain (ex-NYSE chief, previously senior manager at Goldman, and the last chief of Merrill Lynch before its take over) or from Maurice Greenberg (former chairman of the NY Federal Reserve and until recently CEO of A.I.G, the insurance giant that was nationalized overnight).

They had nothing to offer except the time-worn counsel of confidence men: trust me.

And you almost want to. In the land of Tom & Jerry, Snoopy, and Mad magazine, there is such an air of cartoonish unreality to the whole disaster that any minute now you expect a new episode to start up, a boom in, say, molybdenum, with another round of shysters and hucksters clutching each other’s forked tails, chasing round and round, with the Hungarian Rhapsody firing off wildly in the background.

But it’s not a cartoon. It’s an economic kamikaze attack. A hit to the financial nerve center of the economy delivered by no other than the capo of the capital markets himself, Hank Paulson, the former chairman of Goldman Sachs, than which there is no more powerful investment bank in the world.

You don’t have to be a conspiracy theorist to see that what Al Qaeda did to the US partially and symbolically, was accomplished literally and completely, in broad daylight, from within. The Paulson Put(sch), we’ll call it, playing off the old joke about Greenspan’s boom. And we got it, almost to the day, a Biblical seven years after the twin towers were hit.

Is it really conspiracy-mongering to wonder about the timing? Public panic drives market crises, and public panics can be manipulated. Subliminal memories and fears can turn quickly into worship or hysteria, anxiety or terror. Or a mixture of all of them that ends with thinking paralyzed and will power exhausted.

Since 9/11, the first two weeks of September have become a time of foreboding. In an election year, voters are waiting for an "October surprise." Add to that, continual threats of war with Iran, ongoing wrangling with Russia, vague fears of another terrorist attack or of a provocation that might let the government seize more power. For traders, September is the tired coda of the seasonal slump in the markets, doubly volatile and brittle in the waning days of a year of unquiet, of economic stress, of war-mongering, of mounting foreclosures and debt and unemployment, with tension from the elections running high.

So, the questions must not wait. We have to ask them.

Here they are, in no particular order, as they occur to me:

Q. 1. Mr. Paulson, were traders at your old firm, Goldman Sachs, involved in the short-selling that brought down Lehman and Bear Stearns, as many people allege?

The SEC’s temporary ban on short-selling of 799 financial stocks comes after two of your old firm’s rivals have first been disposed of by short-sellers. Wouldn’t you call that a selective enforcement of laws?

Q. 2. Wouldn’t you say that you are powerful enough to influence the chairman of the SEC who sets the rules and that SEC rules deeply affect your old bank? By extending this ban to other countries, isn’t the government acting in concert with a handful of bankers to sustain a global financial regime that suppresses the natural functioning of the market? You may doubt it, but short-sellers are God’s creatures too. Is this really what we are peddling at gun-point to Iraqis as freedom?

Q. 3. SEC Chairman Christoper Cox has been very critical recently of "naked" short-selling, which is the practice of selling stocks short without having "borrowed" the shares from the broker. Mr. Paulson, isn’t it the case that naked shorting is already illegal under the Securities and Exchange Act of 1934 and that lax enforcement of the rule is a long-standing problem that the SEC, for a variety of reasons, tends to ignore? Isn’t the recent ban by the SEC intended only to protect the financial sector from market forces? Doesn’t this encourage malinvestment and doesn’t it unnaturally bolster the value of the financial industry at the expense of other industries, something that artificially low interest rates over twenty years have also encouraged?

Q. 4. Isn’t the change of Goldman Sachs and Morgan from investment banks to holding companies, extraordinarily swift and unexamined? By allowing these investment banks to hold customer deposits, haven’t you simply used your public position to shore up the funding of your old company and an associated bank? If not, why didn’t you convert all five investment banks to depository institutions too? And as an aside, since when is it the job of the government to bolster the balance sheets of investment banks?

Q. 5. Why do you expect depositors to trust Goldman Sachs as a retail bank, given the unscrupulousness and recklessness it displayed as an investment bank? What guarantee is there that these deposits won’t be used to fund more reckless trading, pay off Goldman’s bad loans, or profit some crony somewhere else?

Q. 6. Given Goldman Sachs’s unprecedented ties with the US government as well as with the British government, European banks, and leading hedge funds and financial firms, how could a former CEO of Goldman Sachs not be aware of the solvency and liquidity issues at major investment banks and insurance companies?

On March 6, 2007, little more than three months before the first shoe dropped in this escalating crisis, you told the public that all was well, in the Washington Post. You said:

"We have a very strong global economy…with low inflation, high levels of liquidity and I feel very comfortable with the global economy."

In fact, the vice-chairman of the Federal Reserve’s Board of Governors claimed risk containment was improving:

"We are increasingly turning to the market for credit default swaps, or CDS. CDS are more standardized than corporate bonds, and, over time, they have also become more liquid. They therefore provide us with new, and in many cases more precise, measures of credit risk."

But in the same month, Fed chairman Bernanke was more cautious. In an address to the Joint Economic Committee of Congress he said,

"Overall, the economy appears likely to continue to expand at a moderate pace over coming quarters…To the downside, the correction in the housing market could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector."

Despite this risk, you and your associates have acted as if you put together your rescue plans at the last minute. At least, this is the more innocuous explanation….

If, despite your privileged access to board rooms and back offices, you did not know until after the fact how bad the situation was, isn’t this a prima facie case of incompetence? And if you did know but concealed it from the public and from Congress, isn’t that a case of dereliction of duty? And if, as you admitted last Friday on FOX, you let matters reach such a critical state that Congress would be forced to give in to you because it was a national economic emergency, wouldn’t that be malfeasance?

Q. 7. Why were Fannie Mae and Freddie Mac shareholders, including holders of preferred stock, punished? Why were their claims wiped out, while the claims of bond-holders were coddled? Senior debt holders were given back 100% on the dollar. Junior holders also did not suffer proportionately. Instead, losses were borne almost entirely by equity holders. Senior debt holders include investors like Bill Gross, manager of PIMCO funds. What does it say that the government is treating them preferentially and short-changing other shareholders? Isn’t that why no private investors have been willing to step in to infuse cash into other strapped firms? In other words, didn’t your so-called rescue of Lehman and Freddie actually botch the process of recovery, as Anatole Kaletsky argues?

Q. 8. You’ve claimed that the regulatory system needs to be overhauled. Which parts, specifically, do you wish to modernize, how, and why? And why is it that in November 2006, only 6 months before the market began falling apart, you were saying exactly the opposite on NPR?

I quote:

"Excessive regulation slows innovation, imposes needless costs on investors, and stifles competition and job creation."

In your defense, you were referring to Sarbanes-Oxley, over which reasonable people seem to disagree.

What isn’t in dispute, though, is that your old firm was repeatedly in trouble with regulators throughout its history. Given that, do you think it’s credible for you to argue that regulations are the answer? Haven’t we placed the fox in charge of the chickens here?

Q. 9. What does it say about the state of the country that the Treasury Secretary of a Republican president effectively nationalized a major part of economy without any kind of Congressional hearing or review? Isn’t this directly and completely antithetical both to the constitution and to free markets?

Q. 10. Isn’t a blanket demand for more regulation a gross simplification of the issue? Isn’t it true that in some respects this financial crisis was exacerbated by ill-considered regulations, some of which were put in to solve previous financial crises? For instance, some analysts consider mark-to-market accounting (FAS 157) problematic. They claim that forcing banks to value illiquid assets at the last market price is like forcing homeowners to judge their house value by firesale prices at an auction. It leads to rapid and exponential loss of value, ratings downgrades, and an avalanche in write-offs.

At the same time, it is also true that some other rules, like the uptick rule (which limits short-sale orders to a price higher than the current bid), may need reinstating to prevent cascading sales.

So, isn’t a debate centered around more regulation versus no regulation just the usual "black-or-white" phony debate that siphons off analysis into party-line squabbling? Can’t this whole crisis be summed up instead as a case of too big and too muddled? And isn’t the solution smaller banks and more transparency? If so, do we need massive regulatory overhaul? Couldn’t we get what we want through decentralization, market competition, and independent external audits? A few pragmatic, well-considered, clearly spelled-out and consistently applied rules. Not more centralization and more bureaucracy, which is what your proposal demands.

Isn’t it true that that the reason why you and your fellow bankers are obfuscating the real problem is because leaving things too big and too muddled makes it that much easier for you to… excuse the bluntness… skim the cream off?

On March 23, 2007, NY Fed Reserve Chairman Timothy Geithner, who cobbled together both the Bear and the AIG rescues, said the best way to protect banks was to make them better at absorbing shocks. He suggested giving them the safety-net of more liquidity. In other words, more than a year ago, before things began to unravel in July—August 2007, while you were still insisting the system was strong, one of your key bankers pointed out that more liquidity was needed. He would certainly have told you this. Would it be unnatural to wonder if this crisis was allowed to unfold so that a predetermined and desired course of action (the creation of a megabank with access to customer deposits and loans from the Federal Reserve) could be put through without too much public debate?

Q. 11. Wasn’t it one of Goldman Sachs’ CEOs, President Clinton’s Treasury Secretary, Robert Rubin, who pushed for an end to Glass-Steagall, one of the most important pieces of legislation we had on our books? Among other things, it separated commercial and investment banking. Combining banking functions encourages analysts at a bank to push investments which the same bank might be trading for clients and for itself. Isn’t it true that for decades, Goldman Sachs has been involved in conflicts like this, acting against the interests of clients in dozens of cases? In Goldman’s 2006 10K (a filing to the SEC) there is a 10-page section of pending legal claims, including mutual-fund trading abuses, research improprieties, trading floor special abuses, initial public offering irregularities, and an insider-dealing scandal in 2001 involving a tip on Treasury bonds.

It was a Goldman alum, Robert Rubin, who, along with then Federal Reserve chairman, Alan Greenspan, actively blocked the regulation of the over-the-counter derivative trade (OTC), which is at the center of the epic crisis we are in today. That trade is the source of Goldman’s (and other investment banks) extraordinary profits.

I quote:

"We disagree with any plan by the CFTC to regulate the OTC derivatives market through exemption." Rubin also lied about the response of Brooksley Born, chairman of the Commodities Futures Trading Commission on this matter.

Q. 12. Goldman Sachs has been at the forefront in creating many of the exotic securities we see today, just as it was in the forefront of the development of electronic trading. Both developments have increased the complexity of the capital markets extraordinarily. When we haven’t fully absorbed the impact of these financial innovations, do we really need any more? How can we trust that they won’t be misused in the same way? Given that derivatives have been around for over twenty-five years and have not yet been regulated and that the stock-exchange has been around over a hundred and suffers from regulatory excess where it shouldn’t be regulated and inadequate regulation where it should be, what makes you think that we are going to do any better now? Besides, to a layman’s eye, far too many of these derivative deals look like Ponzi schemes, where rising asset prices depend on new buyers entering the system. We smell a sucker’s game, with the tax-payer as sucker-of-last resort. If this isn’t so, enlighten us, sir.

Q. 13. Didn’t the SEC itself change the limits on leverage set for broker-dealers, the direct cause of the excess in leverage that has caused the credit markets to collapse? In 2004, the SEC let all five investment banks volunteer for a regime that set the debt-to-net capital ratio at 40:1, where it had previously been 12:1. The SEC justified this change in exactly the same language that you, Secretary Paulson, use now, only four years later, in justifying another regulatory change:

Quote:

“The Commission’s 2004 rules strengthened oversight of the securities markets, because prior to their adoption there was no formal regulatory oversight, no liquidity requirements, and no capital requirements for investment bank holding companies.”

With this history, why should we think the SEC will be disinterested in creating rules and impartial in enforcing them?

Q. 14. Can you explain how the structures you created for Enron and for Fannie Mae created value for them and for their shareholders? Can you explain why there were fraud charges, convictions and jail time for executives in one or both places?

Q. 15. Can you explain to the American public how Robert Rubin as Treasury Secretary, bailed out Goldman Sachs bondholders in Mexico in the 1990s? Isn’t this much the same as the bail-out of Fannie’s bond holders? Can you explain how this type of globalization promotes global trade when it defrauds US taxpayers, funds third-world crooks and strong men, and incites chauvinism toward ordinary third-world citizens, who get nowhere near the money but suffer the fall out?

Q. 16. Can you tell us if Robert Rubin and Goldman Sachs have also been involved in the suppression of gold prices, as the Gold Antitrust Action Committee Inc. has long claimed? There is evidence that they did this to hide the vast amount of liquidity (that is, paper money) being pumped into the system by central banks all over the world. Gold prices are a reliable indicator of inflationary trends and signal the erosion of real savings to the public. As you should know, erosion of savings is an attack on capital accumulation. It causes malinvestment, siphoning large amounts of investment from productive use in the economy into speculation and serial asset bubbles.

Q. 17. Can you tell us if Goldman Sachs misused federal environmental laws and agencies to purchase land at fire-sale prices that ultimately profited you and your family and associates? While CEO of Goldman Sachs, you were chairman of the Nature Conservancy (TNC), an environmental activist group that has positions on global climate change and has a lengthy record of scandal and tax fraud, as detailed by a series of investigative articles in the Washington Post and in Senate hearings. The National Legal and Policy Center alleged that TNC’s land donations were structured to improperly give wealthy donors tax breaks. Shareholders, as late as 2006, complained that you had a conflict of interest in your dual role, according to the National Legal and Policy Center, an activist group. TNC’s activities call into question your own personal and business ethics and contrast with your public rhetoric about market discipline. Can we anticipate that the global banking junta that you head will soon be joined at the hip with the climate czars and the nuclear industry? Can we take an unhedged bet on that?

Q. 18. Can you explain why the financial press treats your old firm reverentially, when its "white shoes" are splattered with fraud, corruption and insider deals with government?

Goldman Sachs was involved in fraud in the spectacular bankruptcy of Penn Central, a transportation conglomerate, in the 1970s.

It was banker to media moghul, Robert Maxwell, who swindled pensioners.

Along with the Clinton administration’s Rubin and a bevy of academic experts, it was involved in the market collapse in Russia that some call the rape of Russia.

It was even involved in the stock market crash in 1929, which it partly set off with a type of Ponzi scheme.

Q. 19. When the Treasury, key positions in the Federal Reserve system, the import-export bank, the stock exchange, the British cabinet, the BBC, important European banks, and leading hedge-funds are (or have been) filled by alums of Goldman Sachs and other investment banks, can you suggest why the public should still have confidence that the system is not rigged in favor of financial and political elites here and abroad? Why should you be given more power over the public purse? And if our representatives do give it to you, shouldn’t we conclude that they are acting venally and against the public interest?

Q. 20. Can you explain why despite all this, the public is still encouraged to place more and more of its money in the stock market through pension funds? Can we infer that advocates of this and other programs like it intend to give the banks access to funds and not small investors access to wealth?

Q. 21. You went on TV last Friday to say that the system was clogged up with illiquid assets, which, given enough time, would recover and enable the government to recoup its expenses. But every reliable source on real estate, from Robert Shiller to Nouriel Rubini and Nori Prins, has indicated that the deflation in real estate prices is extensive and probably only half over. Any debt related to real estate (the major part of the bad debt) will get even worse and the assets being sold to the tax payer will probably go to zero or near-zero in market value. With the government severely strapped and under pressure from the right (to expand war funding) and from the left (to expand social spending), how likely is it that any of these assets will be held long enough to make them profitable? Isn’t it more likely that they will be dumped somewhere down the line and any profits siphoned off to the newly created Goldman Sachs bank or some other private channel?

Q. 22. With commercial real estate also going south, can you assure us that Goldman (which has investments in it) will not use its special relationship with the government to lock in bids on infrastructure creation (perhaps on the scale of the New Deal, considering the rhetoric that is being tossed around) that will solidify its stranglehold on the market and public sphere?

Q. 23. Aren’t you effectively creating state banks at this point? And aren’t these banks now part of a global banking order?

Isn’t this restructuring part of the effort to create a new, "more effective" international order that parallels and will eventually "kill" the old one, the UN? I am quoting the words of Charles Krauthammer, leading spokesman of said order and a big fan of yours.

Q. 24. You and your associates talk about trillions of dollars in value having been lost from the world economy. But isn’t it more accurate to say that some of that value never existed? The prices were inflated and a swindle…and the rest of the value was not lost but creamed off. Isn’t it fair to say that this was not done in an honest market but in a crooked one, albeit a large number of people besides you turned crooked too. In fact, if we tally the numbers for the value lost and the fortunes found, they match up nicely.

This, Mr. Paulson, won’t stop the Democrats from making blanket statements about excessive CEO compensation that will be used to diffuse public anger so that honest CEOs from productive sectors and honest money managers and banks will also become equal targets with the corrupt ones. (Not that we object to CEO pay cuts either, but we think shareholders should decide that.)

The criminality of certain parts of the financial industry will provoke general denunciations of free market capitalism. By redistributing a trivial part of the spoils, voters will be bribed to go along with the heist and demand that government make good every deficiency they suffer, from receding wages to receding hairlines. The middle class and the poor will supply a generous share of the improvident. People who were happy to flip houses, lie on their loan applications, default on their student loans, their credit cards and their car loans, scam insurance companies and scoff at the thrifty and hardworking will rush to the front of the outrage line. Democrats will call for reform and forget Robert Rubin. Republicans will denounce Fannie Mae and forget Paulson. Structures will be blamed, although structures are only shadows cast by human beings. Laws will multiply, though laws are only a small part of the problem. Public morality will be ignored, though it is most of it.

Buy this book.

Meanwhile, you and your banker friends will stir up this propaganda as you engineer a new regulatory and tax charade calculated to suck even more money from the honest into the pockets of thieves and derelicts.

Q. 25. You claim that allowing the market to collapse would not be in the public interest. But the market is not an elected official and it has no responsibility to act in anyone’s interest. Rather than setting yourselves up as saviors of a market that doesn’t need it, shouldn’t you and your friends, who fattened off a long series of reckless, illegal and criminal actions, settle with your creditors honestly?

Buy this book.

Lynch mobs are not for us. There are far too many other people who enabled this gigantic swindle for us to practice selective outrage. We are happy to concede that an investigation into all this would be a perfect waste of time and tax-payer money, would addle and inflame an already addled population, and would be stretched to kingdom come. We suggest instead that you and your friends do the minimally decent thing. We suggest that you step down, pay back the clients, shareholders, and investors you robbed and put the rest of your dishonorable fortune to better use.

You, Mr. Paulson, are said to love bird-watching. Perhaps you could return to those vast lands in Chile that Goldman donated to your conservation charity. Go there and do something productive for a change. Leave human society and the round of bankers and bureaucrats. Take off that tie. Work with your hands. Create a sanctuary for endangered birds. At least then, those of us who skimped and saved and followed the rules of the free market can swallow our bitterness. Our pitiful savings might have eroded and vanished because you and your camp followers were flipping and dealing on a scale that would blanch the face of a pathological gambler, but at least we will be able to console ourselves that the bald eagle that was struck down last week in Washington and New York will fly free somewhere in this world because of the wealth we foolishly entrusted to you.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

DIGG THIS

Hockey moms aren’t the only ones wearing Maybelline. Pigs — as Barack Obama says — come in cherry gloss too.

Like the porkers at Wall Street lining up with their lips in a pucker behind Washington’s plush behind. Having pigged out at the public trough for years, they now want their sticky little trotters washed down in the righteous waters of the Potomac.

Tarting up comes natural to our Wall Street-walkers. Turns out these great big masters of the universe were really, well, girly men who couldn’t balance their check-books and put out more than they took in… like any working girl.

Lipstick is especially right for Goldman Sachs, which likes to cross-dress as a devout public servant in after-hours and has at least one set of heels working the floor of the Treasury department during any crisis. Yep, I’m pretty sure Hank Paulson would look good in high-gloss plum. You see, lip shtick is just what Hank’s good at. He was out on Monday flapping his lips with the kind of plummy platitudes you’d expect from semantically challenged mental health workers, not from a Treasury Secretary. A Treas. Sec., mind you, who was once a Goldman CEO not above inserting carefully chosen knives into the ribs of colleagues.

"We need to put this behind us," quoth Hank. "We must move forward."

"We need to work through this."

"We need to heal."

We, of course, need to do nothing. There is no we here. This is a Wall Street crisis. And the usual suspects on Wall Street need to line up, bend over and get caned for their misdeeds. Barring that, they need to take the market’s medicine like men.

Instead, they were out in full therapeutic mode, pouting and whining for a change of their soggy diapers by dear Nanny Washington.

And Nanny obliged.

First there was Fannie and Freddie, the terrible twins, who were taken lovingly into the conservatorship of the state. Translation: they went belly up and the funeral expenses were billed to the tax-payer, though the estate had been sold at private auction a long time before.

Oh, those twins.

Inhaling the swampy fumes of government but croaking from the terra firma of the market. Owned by individuals, backed by the state. The formula of the managed economy — privatized profits and socialized losses.

Created by Congress to expand home ownership by making finance available to a bigger part of the population, the two companies own (or guarantee) around 40 percent of the $8.5 trillion U.S. residential mortgage market. They are the biggest single borrowers in the US, after the federal government. In 2006 they were hit with a $350 million dollar fine, one of the biggest ever assessed by the SEC, as a penalty for accounting malpractice. Then Fannie even got caught trying to pull Nanny’s strings to discredit the regulator. Which strings were those? We can only guess.

Quote: "Goldman Sachs was one of several institutions actively involved in the accounting fraud, its contribution being earnings manipulation through the creation of MBS’s — mortgage-backed securities — in Fannie’s portfolio, a strategy remarkably similar to Goldman’s actions on behalf of Enron. Of note also is the fact that in 2005, while the investigation was ongoing, Congress placed Fannie directly under the Federal Reserve, raising the specter of a surreptitious government bail-out outside the public eye, at some point."

[That's from an investment report I did on Goldman Sachs in August 2006. The only thing wrong in it was that the government bail-out took place in full view of the public.]

That is to say, while Hank blubbers on about how we need more regulation, that’s only now, during bust-time. Way back in bubble-time, Hank’s old firm was busy dabbing rouge on the pork in Fannie’s books and playing hopscotch with regulations.

O tempora, O mores.

Why, back in bubble time, even the former Fed chairman, the all-but-sainted Alan Greenspan was more prescient. He noted that failure to smack down the bratty twins could lead to "systemic risk" in the capital markets.

Of course, he said that after first telling Jane Citizen to go forth and borrow. But that’s because, like the monetary philanthropist he was, Greenspan believed in the widespread giving of ARMs.

As public servant Hank today, so public servant Greenspan back then.

Greenspan too liked dabbing rouge on pork. He relished painting market bottoms with the varnish of cheap money. It made them look plumper and rosier than they really were. Eventually the bottoms looked up and turned into booms, he reminded us.

The rouge worked. Books got beautified. Risky turned risqué.

"The image of Fannie Mae as one of the lowest-risk and ‘best in class’ institutions was a faade,” said James B. Lockhart, the acting director of the Office of Federal Housing Enterprise Oversight (OFHEO) when it released its report in May 2006.

In other words Fannie was a pig, even with the lipstick.

Of course, Goldman’s not the only one on Wall Street with a wicked hand for make-up artistry. The ratings agencies haven’t been too bad themselves, with all that triple-A gloss they plastered on gangrenous sub-prime debt. What was that about? A little make-over for the corpse before the public viewing?

Truth be told. Goldman got good at putting lipstick on porkers long before they dabbed it on Fannie and Freddie. They were doing it in 1999 in ole Hank’s CEO days. Goldman helped Enron’s “smart guys” conduct massive energy futures trading and its leverage, like Enron’s, ballooned. [They had their leverage thang going in those days too.]

Then, in 1993 Goldman invented a special accounting scheme to perk up Enron’s books — “Monthly income preferred shares” (or MIPS) they called it. MIPS let Enron sell fifty-year securities through specially created off-shore companies. To the IRS, Enron described the preferred stock as “debt” and claimed tax deductions on the interest payments. To shareholders, Enron called the same stock “equity” and counted it in the company’s capital value. Goldman took home massive underwriting fees from the scheme

In one year, Goldman had helped 17 companies besides Enron sell 2.7 billion MIPS. There was an offering every week, each dodging IRS rules with more and more finesse. Average commission and interest rates on MIPS ran much higher than on normal debt — between 1 and 1.2%. Goldman made tens of millions.

When the IRS, Treasury and the SEC decided to plug the loophole that was costing them hundreds of millions of dollars a year, Goldman and Merrill Lynch, along with the industry trade group, the Bond Market Association, began big-time lobbying. Then Goldman CEO Jon Corzine (later a US senator and NY Jersey governor) made sure the legislation got nipped in the bud and Goldman’s little accounting number actually ended up a chart-busting hit on the financial circuit.

So when Hank Paulson rushes to put together a bail-out for Merrill Lynch but brushes Lehman aside, he’s just remembering who he used to jam with in the old days. (Of course, buying up Merrill shares trading at $17 for $29 might not be most people’s idea of a bail-out. But that’s another story.)

It could be also that when he’s not actually slitting throats, Hank just likes to lend a helping hand to old Goldmanites, like Merrill’s John Thain (a Goldman COO, CFO and President). You see, our Hank is a helping kind of guy. Like the time he helped Thain help himself to Dick Grasso’s seat at the head of the New York Stock Exchange. Oh, those public servants. Never a moment of rest from the helping.

That’s probably why Hank is helping out A.I.G.

Turns out Maurice ("Hank") Greenberg, the former chair of A.I.G., is an old friend of John Whitehead, another former Goldman head.

The pranks of these Hanks get to be almost as complex as those derivative deals that melt hedge-funds like marshmallows on a grill. But the short of it seems to be that Greenberg jumped ship at AIG after Eliot Spitzer, crusading heavy of the SEC, came sniffing around in 2005. Improprieties,…bid rigging… hissed Spitzer, turning on the heat. Hank (G.) denied it stoutly, but AIG had to restate some of its numbers. It got so warm that even Hank (P.) who left his roost at Goldman Sachs in 2006 to perch at Treasury could smell the flames.

The operative word here is Treasury. That is to say, in the normal run of things, hookers and pols having always gone together like dill and pickles, a married man’s boody calls would provoke no more than a yawn. They certainly wouldn’t have come to the attention of the revenue department. But Spitzer’s zeal had aroused the ire of the banking mafia. And thus it was that no sooner did things get really toasty on Wall Street, then along comes an IRS probe that turns up Spitzer’s sins of the flesh. And thus the public was regaled with the seedy drama of the Emperor’s Club and Eliot. And thus also Wall Street dethroned the hated securities czar and sent him scurrying back to his former life as a mere real estate billionaire.

But now, with Hank (G., not P.) defending AIG as a national treasure fully deserving of taxpayer TLC, you begin to wonder about it all. If AIG was such a treasure, why did Greenberg ever leave? Why did he rail against his successor? And why defend AIG now? Was he thinking about the shares he still has at AIG?

[Maybe he was taking a leaf out of the book of yet another Goldman CEO, Robert Rubin, Obama's unofficial economic guru, a man who's made an art out of jumping ship at the right time (read, Citigroup) leaving his successors to hold the sub-prime bag. It's a trick Rubin worked at as Secretary of the Treasury in the 1990s, when he (along with St. Alan) was responsible as much as anyone else for blocking regulation of the over-the-counter derivative trade and for consolidating the banks — misdeeds for which the rest of the financial industry is now paying.]

Buy this book.

And what about the Starr Foundation, the charity that Greenberg headed, and which Spitzer claimed he also misused? Turns out Spitzer wasn’t so wrong. Greenberg seems to have been using public funds to pursue his own agenda. Maybe Starr is another national treasure in the making… Or is national just what comes in after treasure goes out? You wonder some more.

Just this March, before AIG took ill, Hank (P, not G) came up with a proposal for insurance reform that amounted to an end-run by the big insurance players around the state insurance system. Now your wondering becomes positively thunderous.

There is no bigger player than AIG. Yet no private bids were considered. Had they been, AIG would surely have found private buyers. Lehman did.

Buy this book.

Instead the Fed bailed it out. Actually, it was the Federal Reserve Bank of New York, the most important of the 12 Federal Reserve banks and the one responsible for carrying out the Fed’s exchange rate policy, i.e. for buying and selling dollars. It was the NY Fed which cobbled together the rescue of Bear Stearns. On NY Fed chairman Geithner’s board of directors sits another Goldman chief, Stephen Friedman. Geithner also takes unofficial advice from Goldman alums Gerald Corrigan and the aforementioned John Thain. Then, of course, there’s the man whose bidding Geithner is bound officially to do, the Treas. Sec. himself, His Holiness Hank, servant of the people.

However you cut it, that’s a lot of Goldman.

Which means that however you cut it, the bail-out of the giants of finance is not so much a bail-out of the economy…or of the banking system….

It’s not even a bail-out.

It’s an evisceration of some banks by others…a cannibalistic binge billed to the tax-payer.

No matter how much rosy gloss gets slathered on it, it’s a pig-out at the public trough.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

DIGG THIS

We were listening to Alan Greenspan, former Federal Reserve Chairman, holding forth — with a lucidity we had never heard until now — on his new tome, "The Age of Turbulence — And How I Caused Most of It," Having heard the man many, many — far too many — times in the past decade, we could hardly believe it was the same person. Had we simply passed out during the course of the Great Bubble Era and was the Alan etched in our memory so vividly merely a bad dream? An apparition from a parallel universe?

Or was it the Great Moderator himself?

Fortunately our fears that we were losing our mind were set to rest. We received a missive from the real Alan Greenspan, shortly thereafter, telling us that the Greenspeak we had gotten used to all these years was simply camouflage. The real Greenspan, it said, was the man now before us, confessing from his…er…debt-bed that he had never meant to lower interest rates — never ever. Perish the thought.

But, why speak for him? Here is the Maestro in his own words:

"I, Alan Aurifericus Nefarious Greenspan, Chairman of the Federal Reserve Bank, holder of the Medal of Freedom, Knight of the British Empire, member of the French Legion of Honor, known to my peers as the "greatest central banker who ever lived"…

…I will not trouble you with all my titles, I will not mention, for example, that I was the winner of the prestigious Enron Prize for distinguished public service, awarded on November 1, 2001, just days after Enron began to collapse in a heap of corruption charges…. am about to give you the strange history of my later life.

For I will dispense with childhood…even with young adulthood, and those dreary sessions with that very dreary woman, Ayn Rand, who couldn’t write a compelling sentence if her life depended on it….and my own dreary years at the Council of Economic Advisors…and pass directly to the time I spent as the most powerful man in the world. For here are my real titles: Emperor of the world’s most powerful money. Ruler of the world’s largest and most dynamic economy. And Architect of the most audacious financial system this sorry globe has ever seen.

Yes, I Alan Greenspan, ruled the financial world. But who ruled Alan Greenspan? Ah…I will come to that…and tell you how, while presiding over the biggest boom ever I became caught in what I may call the "golden predicament" from which I have never since become disentangled.

This is not by any means the first thing I have written. I have written much over the years. But it was all written for a purpose which only a few were able to discern. Most readers foolishly saw the cluttered mind of a dithering economist, or the clumsy, stuttering pen of a professional bureaucrat. Many listening to my wandering speeches and twisting sentences thought that English was not my first language. They thought they detected a faint accent, like Henry Kissinger or Michael Caine. They mocked me as "incomprehensible" or "indecipherable." They watched what they thought was an obsequious public servant squirm. They had no idea what I was really up to, which only now can I reveal.

But they admired me too. I knew it. Because they thought they saw in me a kind of genius…an Einstein of economics, whose mind worked at such a high pitch his thoughts sound inaudible to most humans. They counted on me to keep the great empire’s economy rolling forward. Little, actually nothing, did they know of my real thoughts and designs.

But now, all has changed. Now I can write clearly and speak the truth. For now I have left my post. There is no further need for me to dissemble. No further need for me to seem to kow-tow before Congressional committees. No further need to hide the real facts from my employers and the American people. Now, I swear by the gods, what I write comes from my own hand, and not from some highly-paid anonymous flack.

Some are born in crisis, some create crisis, and others just make a mess of things.

Let me begin at the beginning. Scarcely had I settled into the big chair at the Fed when a crisis was thrust upon me. And it is true, I responded in the conventional manner. There is no manual for central bankers. But there is a code of behavior. Faced with a financial crisis of any sort, a central banker’s first duty is to run to the monetary valves and open them. This I did in 1987. I was new to the job and probably didn’t open them enough. The U.S. economy lagged its rivals in Europe for several years. My old boss, George Bush, the elder, lost his bid for re-election in 1992 and blamed it on me. I resolved never to make that mistake again. Faced with a slew of challenges, shocks, uncertainties, crises and elections…ever thereafter, I made sure that every valve, throttle, level, switch and sluice gate was wide open.

But it was on December 5, 1996 that I had my first epiphany. That was the year that I made my celebrated remark about stock prices. I wondered if they did not reflect a kind of "irrational exuberance." Whether they did or did not, I do not know. But what I came to realize was two things: 1) People, especially my employers, actually wanted prices that were irrationally exuberant. And 2) they could become far more irrationally exuberant if we put our minds to it.

I was 70 years old at the time. I had weaseled my way (why not be honest about it?) to the top post by knowing the right people and by making myself generally agreeable, and helpful, and by not saying anything anyone could disagree with. That was the original reason for what the press referred to as "Greenspan speak." My private thoughts remained mine alone. All the public and the politicians got was gobbledygook, but for good reason.

They would not have wanted to hear what I really thought. So I did not tell them. For I knew well and good what generally happened when politicians and central bankers got their hands on soft money and a compliant central banker. I was not born yesterday. They use their control of the money to cheat people. It is as simple as that. (I explained this early in my career; fortunately, no one bothered to read it.)

“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions,” wrote I, when I was still expressing myself in the Libertarian rag. The Objectivist, in 1966, continued: “They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.”

“Gold and Economic Freedom” was my topic in ’66.

“In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society,” I went on.

“Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

“If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.”

Then, after a long discussion of how money works, I gave the Objectivists the conclusion they wanted to hear and one in which I believed strongly myself then, and still do:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation…. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

“Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

I do not quote myself at such length to quarrel with me. Au contraire, we have never changed our opinion. But 10 years later, in 1974, I left New York for Washington. That is, I left America’s heart of commerce to take up residence in its gall bladder of politics.

I was no fool. That was where the real power & glory were. Of course, I had to abandon the free-market, gold-standard currents of the East River for the malignant political eddies and festering statist swamps of the Potomac.

I left New York to serve as the chairman of President Ford’s Council of Economic Advisers. Ayn Rand told a reporter that I was "her (?) man in Washington." I had to laugh. She expected me to change Washington, which just goes to show how lost in space she was. I never even tried to change Washington; I only tried to use it…."

Read the rest of Greenspan’s real memoir in Mobs, Messiahs, and Markets, William Bonner and Lila Rajiva (Wiley, 2007).

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis. Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Bill Bonner Archives

DIGG THIS

This past week the buzz has all been about the House testimony of General David Petraeus on the "surge" in Iraq and an inflammatory ad in response that dubbed him General "Betray Us."

The ad, the brainchild of an antiwar group, ripped the general’s assessment that the increase in manpower in Iraq in 2007 (the "surge") has been effective. It pointed out that the Petraeus report is in stark contrast to independent evaluations of the situation by the GAO as well as evaluations by the Republican party itself.

At issue is the timing of troop withdrawal.

The antiwar movement (with a large part of the population) wants the troops out immediately and insists that the US presence in Iraq is itself inciting violence and terrorism. Bush supporters, many Republicans, some Democrats, and the rest of the population support staying on. They say that immediate withdrawal could create a strategic and humanitarian disaster.

Whatever we think of the administration, we can safely assume that most war supporters really do believe that the occupation of Iraq is central to US national security and the war on terrorism. Questioning their good faith isn’t necessary. Asking why they think this way is.

Take the language war-supporters use. It suggests that people like Ron Paul who want immediate withdrawal are dangerously unrealistic, not merely unpatriotic.

These critics should take another look and see if it isn’t their ideas that run counter to reality. They give us "withdrawal" and "staying on" as mutually exclusive opposites. But any kind of withdrawal can’t possibly happen without some staying on. The troops can’t simply come home tomorrow, presto, because we want them out. So, the issue really is not withdrawal but different lengths of staying on. A few months or many years? At this point you’ll notice that the troops have already stayed on for four years.

Is all this hairsplitting?

No.

By constantly talking in binary terms (withdrawal/no withdrawal), we play into our brain’s hard-wired tendency to think along the lines of group rivalry. We play into the “mob mind” that loves nothing more than slogans.

Obviously if there is a yes/no, either/or divide, we can safely perch on one side and shove our rivals (and the divide immediately creates rivals) to the other side. Then we can devote all our energies to reinforcing this fictitious model with every shred of evidence and lung power at our disposal. Anyone with a passing interest in psychology will tell you what the result will be. We will get more and more of what we focus on — an impasse. And our model of the world will increasingly diverge from the reality underneath.

Take away the "withdraw/no withdrawal" slogan and something happens.

What you get turns out to be not one question but at least two, both of which require us to look at history, not just ideology.

The prescriptive question is —

How long should we stay?

(The post-mortem version is more accurate, how long should we have stayed?)

And the descriptive question is —

How long have we already stayed?

The second question is more interesting….and quite clear.

We’ve been in Iraq not for 4 years, but for 16. (If we count all the meddling with different groups, we’ve been there even longer — for decades). A baby born when George pre halted at the gates of Baghdad would be taking her SAT’s by the time George fils first started showing withdrawal symptoms.

To people who think that getting out now will create a national security and humanitarian disaster, the question we really should be posing is this one:

What sort of national security and humanitarian contingency ever needed a 16-year troop presence half way across the globe that took, all told, around 1.5 million civilian and military lives and around 1.5 trillion dollars?

Seen this way, the issue is no longer the timing of the withdrawal. That’s simply the logistical seal on a 16-year bipartisan strategy that’s already about as big a disaster in humanitarian, economic, and national security terms as you could possibly have without entirely wiping out a country.

The real question is the point of such a disastrous strategy in the first place.

Focusing on the past 16 years (rather than the past 4) tells us where we should be looking for explanations: To the end of the Cold War.

The Cold War, of course, was a boon to the mob mentality. There were all those stark slogans of bi-polarity — us/them, good guys/evil empire, capitalist/communist.

At one level there was good sense in them. Nobody can read Solzhenitsyn or Robert Conquest without being overwhelmed by the magnitude of the horrors in Soviet Russia. Or in Mao’s China. Or under the Khmer Rouge in Cambodia.

It would be easy to conclude from that that what the US did from fear that such communist regimes would expand was always and everywhere justified.

But it wasn’t — because the slogans swept a great deal under the carpet. Some of which was more precious than the painted furniture on top. The label of communism, for instance, failed to tell apart communists and nationalists, communists and anti-imperialists, communists and anarchists, communists and socialists. The real facts of history and politics got washed out in the ideological spin-cycle.

Worse yet, instead of standing firmly on its own individualist, libertarian, and rational principles to counter the evils of utopianism, America — or rather the US government — began to adopt the collectivist methods of its enemies. From a modest republic content with commercial pursuits it transformed itself into a grasping empire of ideologues. Some would say that this has always been the case and that the roots of empire reach much deeper into American history. They could be right.

However, it was really during the Cold War that the non-interventionist principles of the old republic were most thoroughly dismantled. And the sloganeers trying to rally the masses were the primary victims of the sloganeering:

Conservatives started discarding rather than conserving traditional principles of state-craft to pursue a world order made in their own image.

Free marketers began to believe that the state ought to subsidize their risk-taking.

Capitalists started adopting socialist language and policies.

Liberal democracy — of the particular kind enjoyed by western states in the twentieth century — was now said to be an unconditional good for all states, at all times.

But, as a mad, wise man said, "everything unconditional belongs in pathology."

So, at the end of several decades wrestling with the unconditional theories of world communism, the US too began to display its own pathology.

This was enough the case that in 1989 when the sloganeers said that the capitalists had defeated the communists, some observers feared that both had lost. They were right. The rivalry between capitalism and communism turned out to have been a race to the bottom. The price of winning the fight against communism was the loss of the principle at stake in the fight.

Liberty holding up the torch of reason to guide the state became liberty torching reason in abject service to the state.

This new liberty was not liberty at all but license. The regulations it effectively dismantled were mainly those that applied to businesses feeding off government contracts that were large enough to rule out the rule-makers. The rest of America was hog-tied with rules. Here, too, employing the slogans of the mob misleads: It turns out you can have too much regulation and too little — simultaneously.

So, while ordinary individuals and businesses are persecuted at every turn by ham-handed bureaucrats, a handful of corporations, especially those connected to the military, banking, finance, and energy, have become a rentier class, deriving their profits not from genuine free enterprise, from value added, innovation, foresight, and risk-taking, but from their special relationship to the government. Entrepreneurs have been displaced by over-paid technocrats, experts, and managers every bit as bureaucratic and wasteful as the state enterprises they claim to be stream-lining.

Even the most sensitive government functions, like intelligence, are handed over to private contractors working hand-in-hand with the state in mercantilist ventures that rely increasingly on war and disaster to achieve their goals. Simultaneously, the life-blood of the economy, its paper money, is subject to continuous manipulation. As more and more of middle-class savings in the bank, in pension funds, and in home equity, are sucked into the financial markets, financiers siphon off the profits for themselves, while government bailouts socialize the costs of their risk-taking.

It is this corrupt "corporatism" that has claimed the mantle of liberty and free enterprise and swindled millions all over the world into believing it is the true face of free enterprise.

Thus, in her new book, “Shock Doctrine: The Rise of Disaster Capitalism,” Naomi Klein, author of the anti-globalization manifesto, “No Logo,” draws a connection between government shock therapy and human rights violations (echoing a fine essay by Peter Linebaugh in Counterpunch in 2004).

For her, as for many on the left, mercantilism and financialization are capitalism.

But why should we argue the point with socialists when so-called capitalists themselves agree? When the right claims that opposition to torture and war are opposition to the American way of life — isn’t it conceding just this? That capitalism and individualism require endless war and torture?

But suppose, just suppose, the case is precisely the opposite. Suppose it is our slogans that are at fault, not capitalism. Suppose — as it really is — that capitalism and free enterprise best go hand in hand with peace and that the welfare-warfare state we’re so comfortable with is properly called collectivist, not capitalist.

Suppose that the war on Iraq is not a defense of the individualist way of life but the final assault on it — then what?

Then we might notice that the sense of duty that General Petraeus shows — the unquestioning loyalty to the organization he works for, the competitive desire to get the job done, is quite a different thing from that displayed, for instance, by the plain-speaking General George C. Marshall, whose name happens to be on an award given to Petraeus.

Today, plain-speaking is out. Part of the duty the military is to undertake public diplomacy so extensive that it is no more than disinformation.

It is disinformation, for instance, to say that a reduction in troop size of around 30,000 by next year (that is, after the elections) is a withdrawal of troops, when all it would do is return troop strength to what it was before the surge in 2007.

That is not a reduction, it is actually an extension of a surge originally expected to produce a result in 6 months — or be declared a failure.

But should we blame this on Petraeus, who, with a PhD from Princeton in Public Administration, is after all as much a technocrat as he is a general? A technocrat who is intimately part of the financialization and mercantilism of US Govt. Inc. In Bosnia, for example, he was Deputy Commander of the U.S. Joint Interagency Counter-Terrorism Task Force (JITF-CT), specially created after September 11 to add a counter-terrorism capability to the U.S. forces under NATO in Bosnia.

That was at the time when Dyncorp, one of the largest private military contractors in the world, was providing police officers as part of a $15 million annual contract for logistical support.

Two of its employees alleged that several colleagues had colluded in the black-market sex trade of women and children — allegations supported by a court finding that the firing of one whistle-blower was retaliatory and by an out-of-court settlement with another.

Nonetheless, Dyncorp was active again in Iraq, sending out ex-cops and security guards to Iraq to help train a new police force. And again, it was none other than Petraeus who was in charge of that training as well as in setting up Shiite militias (death squads) to go after Sunnis.

Recall, too, that conditions for interrogations involving torture were often set by private contractors unaccountable to government through traditional channels.

And that it was General Petraeus who set up the Shia militias in July 2004 as part of a "surge" that immediately followed the exposure of torture at Abu Ghraib but was immediately displaced by it in the media sensation.

Now, with this new surge in Iraq, three years later, what Petraeus is doing is simply switching his enemies. He is now arming and training Sunni militias to fight Shia.

But he’s not switching contractors. In June 2007 Dyncorp was again chosen by the US army to provide logistical support, this time to the tune of $5 billion a year.

This is the backdrop to Prime Minister Nuri Al-Maliki’s falling out with Petraeus this past summer. Al-Maliki, a Shia, demanded that Petraeus stop creating Sunni militia. He wanted an end to the surge and the US out of Iraq immediately.

But why would the administration want to get out when arming Sunni militias provokes Iranian support of the Shia? And when that, in turn, provides a convenient justification for more sabre-rattling against Iran? It perfectly fits a decades old neo-conservative plan to destabilize the Middle East.

Obviously, Petraeus, who did his doctoral dissertation on the impact of Vietnam on the conduct of war, has learned the lesson from it that public perception of a war must be thoroughly managed. Too bad that’s not quite the same lesson learned by one of his best advisors, Col. H. R. McMaster, a soldier celebrated in Tom Clancy’s novels.

McMaster’s book on Vietnam, "Dereliction of Duty," blames not just the arrogance of Johnson and McNamara for the failure in Vietnam but their calculated deception of the American people. The book is now required reading in the army. Yet, oddly, its author was passed over twice for promotion, while Petraeus shot to the top. That should tell us exactly which lesson from Vietnam is in favor with this government. And what sort of patriotism is popular these days.

Just there lies the difference between the Patriot Acts of this administration and the acts of patriots like Ron Paul, who owes nothing to any organization for his views. Who stands entirely apart from the two-faced one-party system currently in power.

Paul’s patriotism comes from an older time, when someone like “George Marshall could tell the truth and be praised for it, not slandered.

“When General Marshall takes the witness stand to testify," it was said, "we forget whether we are Republicans or Democrats. We know we are in the presence of a man who is telling the truth about the problem he is discussing."

The truth-telling of General Marshall and Dr. Paul is what this country desperately needs today. Without it, we face a defeat much greater than anything than we have experienced in Iraq so far. We face a loss whose magnitude dwarfs any loss of security or power that could be feared from withdrawing at once.

We face a defeat of the very values that originally formed and guided this country. The values professed especially by the Republican party — individualism, free enterprise, limited government, and liberty. Ultimately, these values will be discredited simply because they will be seen as part of the discredited policies of this un-republican Republican administration.

For the truth is that to the world the occupation of Iraq is not simply a blunder. It is a neo-colonial adventure of a very savage sort. One that recalls, to many, the carving up of the globe in the nineteenth century by the European empires. And in much of the developing world today, these empires are identified, falsely, with free enterprise and individualism. Colonialism and capitalism are attacked as one.

Which is why severing the ties of enterprise to empire is the crucial task at hand for individualists and free marketers everywhere. A task only a man like Ron Paul can undertake, when all the other enemies of imperialist collectivism are also friends of socialist collectivism.

Buy this book.

As individualists, though, we know better. We know that it is only free markets (and the laws that protect them) that let the poor raise themselves out of poverty. Corrupt governments and crony capitalists can never do it. And if we cannot care for the poor, sheer self-interest should tell us that our commerce too cannot thrive in a world where people are impoverished by war and plunder.

Before defending the blundering of an inept administration this should have been the first duty of Republicans — defending the slandered honor and interests of free enterprise

Instead, today, Republicans have done what a century of communism failed to do. They have let the occupation of Iraq triumphantly resurrect collectivism from the ashes of Cold War defeat. They have given it a credibility its own performance never could.

Buy this book.

Everywhere we look, collectivists celebrates moral victories: the fiery analysis of anti-globalization activists and antiwar activists strips the corporate-state of its last fig-leaf. And rightly so.

What is truly calamitous, however, is that in the popular mind, the free market stands equally stripped as well.

That is why the important question before us now is not who will save Iraq.

For Iraq was lost the day we attacked it without just cause.

The question before us now is who will save individualism and free markets.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

His topic is "A Traditional Non-Intervention Foreign Policy."

If you wanted to quibble, you could. Personally, I would have preferred it to read,

"A Rational Non-Interventionist Foreign Policy."

Or "A Constitutional Non-Interventionist Foreign Policy."

Because there are traditions and traditions. And while those of us who are intellectually of a conservative bent tend to give any tradition the benefit of the doubt, it will not do to consider non-intervention a good by virtue only of its history, when history is composted with the bones of institutions that rotted from the inside. Traditions are prone to developing hardening of the categories — as some wit noted — and if we classify non-intervention as one, then we are surely inviting some clever update of it. We are asking for the Monroe Doctrine to be turned into Manifest Destiny — with gender neutrality and racial sensitivity thrown in to certify it kosher.

But the Constitution of America — whatever its alleged and real flaws (and it isn’t free of them) — has been a guiding light to this nation and countless others not because it is a tradition but because the principles it embodies are rational, in the highest sense of the word, and because they are worthy of emulation. The Constitution is universal in its appeal. But it is universal because it persuades by its reasonableness, not because it imposes itself over the breadth of the globe as the law of an empire.

The distinction is of some importance today.

Because there are those who demand exactly the opposite — an interventionist foreign policy — for exactly the same reason — universality. You could call them "liberventionists." They are the humanitarian bombers, like Mr. Hitchens.

(That is, when he can find the time in between conducting his jihad against what he likes to call god but sounds more like theological literalism.)

The liberventionists were the people who demanded that we go into Iraq in the first place. Also for universal reasons — one of which was to rescue Iraqi women from patriarchal Islamic traditions.

Even though Iraq, under Saddam, was never Islamicist — until the U.S went into it.

The rhetoric of war quickly sidelined such inconvenient facts.

I am afraid it might sideline this one:

Requiring a war to be constitutional is not a quaint tradition waiting to be made obsolete by age and time, like a spinster running out of marriage proposals.

It is an imperative, since constitutionality is the only language possible in a country whose citizens have such divergent backgrounds and hold such contradictory views that they might as well live on the opposite sides of the globe.

The constitution is the only form of reasonableness available to us any more.

The only kind of universal appeal that appeals finally to something more than naked force.

The constitution is a different kind of universality. Of "how" rather than "what."

It points to procedures and ways of "going on" — not to results and places where we ought to arrive.

The insightful English political philosopher Michael Oakeshott described the difference between the two approaches as the difference between the rules of a civil association (such as a nation) and that of an enterprise association (such as a business).

The constitution is the governing law of the civil association called America.

On the other hand, the new laws this administration is replacing the Constitution with are different creatures. They are the regulations of the business called US Govt. Inc. US Govt. Inc. is not a nation at all, but a vast holding company with unlimited liability for its innumerable tiny shareholders and none at all for the handful of directors at the top. And with many of its most valuable assets hidden off-shore through international trade agreements.

The dangers of a change from association to enterprise are self-evident: If we already know before-hand where we want to get to, we may be tempted to hijack the laws — and logic itself — to that end.

But what could be wrong with that, some might ask? Aren’t freedom, democracy, and human rights "social goods" for which our laws should strive? And in countries beyond the reach of our laws, shouldn’t we impose them through our military?

But language, like logic, is slippery unless it is rooted in something deeper than either words or minds. As one commentator on Oakeshott writes:

“Words such as ‘freedom’, ‘democracy’ and ‘rights’ have long histories and their meanings have shifted over time. Further, when unscrupulous operators use them to rally supporters in some great cause, such words become hazy promises of better things to come. The warm glow of anticipation may be as deceptive as the witches’ promises to Macbeth…”

Our words and our minds reach deep into our bodies in a way we don’t fully understand, except that they operate together. It is not just that the way we think affects the way we act, but the converse: The way we act affects the way we think.

If we violate our consciences, we will tend to alter our consciences after the fact. And then alter our language and our logic, as well.

To be truly rational, we need to go beyond disembodied words and logic to a reason that is rooted in our bodies, our intuitions, and our consciences — as they are inviolate in us, as individuals.

Buy this book.

That means that our rules and our institutions must preserve us ultimately as free individuals, while preserving equally the freedom of all other individuals. My liberty cannot infringe on yours. No, not even if I am the President of the United States. Even the President must be bound by the Constitution’s rules.

That is not a very good thing for US Gvt Inc. Because following the rules does not always help an enterprise association (whether it is a business or a state), reach the goal it sets for itself. It might even hinder it.

Buy this book.

But following the rules is a marvelous thing for the civil association called America. Because by following the rules and conventions of the constitution citizens can let themselves be seen as acting in good faith, not only here at home, but everywhere.

It is adherence to the Constitution that makes us a nation of laws and not of men.

Without that, there can be no good faith.

And without good faith, we will no longer be part of a civil association of individuals, but only insignificant units in an enterprise that can only grow more and more barbaric.

Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.

Lila Rajiva Archives

DIGG THIS

What is it
about Ron Paul that attracts as many and as diverse a group of people
as are repelled?

For a number
of people, right and left, it is his consistent opposition to
the Iraq war.

It is a good
reason. Moral courage allied with wisdom is as much in short supply
these days as chastity at a political convention.

For others,
it is Paul's fiscal responsibility.

Dr. No has
been pursing his lips at every form of political candy offered by
the junk food vendors at the Capital. While many of his colleagues
are letting out their belts, the wiry obstetrician is running marathons
at 71.

While they
keep getting caught in what used to be called "indiscretions,"
he has been married for fifty years. We would be foolish to judge
people by the externals of their lives, for saints and sinners,
puritans and bohemians not only cohabit, they frequently snuggle
under the same skin. Nonetheless, it's a relief to have a few people
around in politics to remind us that it's also perfectly all right
to live uneventfully, even stodgily.

I say this
as someone who has spent a large part of her life among musicians,
writers, and now, financial newsletter writers – whose professional
lives depend on their eccentricity and even contrariness.

There is however
one critical difference between selling financial advice and intellectual
nostrums on the one hand and delivering babies on the other — which
is what Dr. Paul has done for most of his professional life. The
success of obstetrics is pretty easy to ascertain. Either the child
breathes and lives — or it doesn't.

One can't be
a good obstetrician on theory alone. The practice is all.

Check the track
record of the average stock tout and you might find nothing but
bankruptcy filings and credit card debt. That, of course, will count
for little with the tout's avid customers who would mortgage their
four walls and roof for his advice. And toss in their wives as a
bonus.

As for the
pedant, you wish he'd trip over one of his obtuse, meandering sentences
and break his scrawny neck before he stuck it into the real world.
But does anyone care? No. His pet theories may have driven the nation
into premature recession if not down-right impotence, but the expert
will be given not only an Institute
of his very own at some Ivy League, but the whole Earth along
with it to run as he wishes.

There, winsome
coeds will no doubt ornament every step of his way to a Nobel Prize.

Theory is easy.
Any biped with a larynx and functioning synapses can come up with
one.

It is practice
that separates the goats from the sheep.

And that is
the principal reason that the pundits are afraid of that revolution
of the people that is the rise of Ron Paul.

Ron Paul wants
to put the practice of citizenry back in the hands of citizens and
take it away from the theorists.

Oh, the critics
will tell you differently. They will tell you that Ron Paul is a
theorist himself — and a crack-pot theorist as well. A patron of
fringe economics. A gentlemanly loon. Or at least, dangerously far
out on the right bank of the mainstream.

Since the mainstream
has just finished wrecking a whole country abroad in a manner that
Genghis Khan would have been proud of and is busy adding yet another
to its sights; and since, in the meantime it's also managed to find
the time to dismantle several centuries worth of legal structure
at home, you wonder why anyone would worry about that anyway.

But there you
have the sad truth about man. He isn't much concerned about anything
besides how other people think of him. That's all he thinks about
all day long. For that he sweats and schleps, roils and toils. Status.
Image. In groups. Out groups. Pariahs. Brahmins. The sum total of
it all is — what does the other fellow think of me?

Right or wrong
counts for far less. His conscience or soul for nothing at all.
If he feels a pang, he swigs gelusil and turns on the hypnotic lights
of his TV set.

And why? Because
with no real, concrete practical knowledge anywhere between his
ears, his skull rings with the lethal chatter of newspaper headlines
and talk shows.

The patter
of Those Who Know Better.

Hedge-fund
managers who promise that all risk can be ironed out of your portfolio
and make you pay for the wrinkles that aren't.

Political scientists
who invade a country from their desktops but don't know how to boot
it up again when it crashes.

Hucksters who
dream up great stories for their products — and make a punch line
out of the patsies who buy them.

We live in
an empire run by experts.

But in the
empire of experts, the man with horse sense is king.

And Ron Paul
has horse sense.

The horse sense
of mustangs, not geldings.

The kind of
horse sense that bucks and sends you for a toss just when you thought
you have everything under control. The horse sense that stops you
from thinking about things so far off you couldn’t possibly have
spotted them – while tripping over things so close by you shouldn’t
ever have missed them.

The experts
would have you believe that they can control your life and the life
of entire nations by thinking long enough and hard enough about
it. This is a theory so full of holes, it puts Swiss cheese to shame.

Studies have
even shown (Philip Tetlock, Expert
Political Judgment — How Good Is It? How Can We Know?) that
canny laymen do as well as experts when it comes to predicting the
future. In fact, many do even better.

But it's the
experts who have broken us in.

The reason
is simple. Experts promise us a simple sharp tool to dissect the
complexity of the real world. But a dissection that thorough can
only be a post-mortem. Cut through the warm body of society that
fiercely and you turn it into a cadaver.

Buy
this book.

Gray is all
theory, says Mephistopheles, in Goethe's
Faust. The golden tree of life is green.

We will improve
on the devil. Between book covers, theory may be gray — but it is
an intricate gossamer of gray — like the tracery in a Gothic cathedral
or the mysterious depths of an engraving by Gustave
Dore.

We have no
quarrel with it. Indeed, we have a weakness for it, as for all rich,
superfluous things.

Buy
this book.

But a map is
not a road, and a silhouette is not a human being. The trouble begins
when experts
begin to take their expertise so seriously that they forfeit their
own road sense and their readers’. When they are so neutered by
their reasoning that they cannot act — or worse yet, cannot desist
from acting. And the trouble grows into disaster when their credulous
followers, junkies of every news and TV show, rush behind them like
rats
behind the Hamelin piper — into every frippery and fad, every financial
folly and military madness.

And that is
what we have today in our empire of experts.

Worse than
any war — which must at some point end — is the ideology that makes
for war.

For
that can go on forever. That tells us that "what is"
is also "what must be." You
see, empires are made for experts as experts are made for empires.
Without their theories to hold it up, the flimsy scaffold of government
would fall of its own feebleness. And without that scaffold, the
little men on top would be cut down to the same size as the rest
of us.

And that, my
friends, is the real reason why the
experts fear Dr. Paul and the people love him.

September
4, 2007

Lila Rajiva
[send her mail] is the
author of the ground-breaking study, The
Language of Empire: Abu Ghraib and the American Media (MR
Press, 2005), and the co-author with Bill Bonner of Mobs,
Messiahs and Markets (Wiley, 2007). Visit her
blog.

DIGG THIS

Most people
today are quite sure of one thing.

A democratic
state is always and everywhere good.

If we didn't
have the tyranny of the majority, they argue, wouldn't we end up
with the tyranny of the minority? If we reject democracy, won’t
we end up with plutocracy?

Without government
to protect us, we are sure to have corporations to plunder us.

Money and business,
they point out, can be just as coercive as states and armies. Aren't
armies often for hire by the money men? Didn’t Carnegie send in
state troops to break up his unions and fire on his workers? Doesn’t
Microsoft bribe governments in Asia, and didn’t United Fruit topple
governments in Latin America?

There's no
doubt that this argument has some merit to it. You can be quite
sure that businessmen, like any other group of people, will get
away with whatever they can get away with…. whenever they can.
But, without being able to jiggle the levers of power on their behalf,
few businesses would ever get to the size needed to do damage. Few
would be able to inflict mayhem on the scale that even a government
of middling incompetence can.

And besides,
while many businesses do use fraud — and force — to swallow up their
competition, a commercial transaction, in essence, remains a voluntary
exchange between individuals. If you choose to buy neither Pepsi
nor Coke, it is unlikely that either company will force you to drink
their product. But refraining from pulling the lever for either
Bush or Kerry does not rid you of the guaranteed presence of one
of the two in your life for at least the next four years. What’s
more, drinking Coke does not entail any other obligation on your
part. You are not now compelled to eat at Burger King, wear Reebok
shoes, or shop at K-Mart. It is an isolated act.

But think of
the convoluted and improbable complications that have arisen just
because enough people chose to vote for George W. Bush. It is no
consolation to say that there would be an equal number of complications
— even if different — if other people had had their way and elected
Mr. Kerry to office. Voting for Bush or Kerry is no longer simply
a matter of voting for Bush or Kerry. It is voting on the nature
of Middle East policy, the proportion of the budget to be spent
on arms, health or education, the character of the Supreme Court,
the future of wildlife refuges, the health of the ozone, the size
of the trade deficit, the status of the dollar — and an almost infinite
host of issues, questions, policies and debates the outcome of which
even experts who have spent a lifetime on them are likely to do
not much more than guess at.

Now, it is
true that businesses can be heavy-handed when they sell their products.
A shepherd always tries to persuade his sheep that their interests
and his coincide. Indeed, for some people, the art and science of
sheep-suasion — advertising — constitutes the original sin of the
modern economy.

And not without
reason. Like Satan himself, the modern advertiser is armed with
devilish knowledge of the human psyche far beyond the ken of the
yokels of the Eden whom he is about to swindle.

HIDDEN PERSUASIONS

Like Satan,
he addresses his blandishments first to the female of the species.
Notice how real estate agents know well to whom they should pitch
their Jacuzzi-armed bathrooms and granite countertop-heavy kitchens?
Just so, the advertiser is certain that the purchase of anything
in the household — even a fig leaf — needs to be approved by the
lady of the house first. He waves the apple — his advertising copy
— under her nose before her husband’s.

In other words,
when it comes to the market, even before the umpire allows it on
to the field, sex is up and batting. Had it not been for his old
lady, our thick-headed Adam might still be idling buck-naked, his
feet up, enjoying the peaches and pears of paradise. As it turns
out, however, Mrs. Adam has an eye on the social ladder. How could
she let her spouse hang around neither toiling nor spinning, content
with his rustic life among the apes, when all heaven beckoned?

But, for an
“in” with the “better” crowd she needed something new, suggested
the wily salesman. She needed to take a bite — of the big apple.
We all know how the world's first ad campaign ended — with the two
consumers locked out of their home, sweating their derrieres off
in the fields to pay for their little binge. Adam got the workday
and his better half got labor pains . . . and their soul was mortgaged
to the devil for eternity

Which might
be better terms than those facing homeowners who've hocked their
houses in interest-only or adjustable-rate mortgages — where they
might not have the luxury of eternity before lenders come calling.

So yes, modern
advertising is the spawn of the devil, we haven't a doubt. Subliminal
sales pitches nestled in TV jingles do their damage regardless of
conscious choice. Yet, the fact still remains that it is the consumer
who buys or does not buy. And should he fail to take the bait, no
goons come knocking at his door or truss him up like a Thanksgiving
bird. Let a soldier fail to show up for duty long enough, however,
he is liable to be chastised, investigated… and court-martialed.

So you don’t
want your minds turned into mush by advertising? There is a simple
remedy — turn off the TV. But try turning a blind eye to the law
and you are likely to find yourself in the pokey in short order.

And here one
must confess a bit of bafflement. Day after day, ordinary folk complain
about the stratospheric salaries of film actors, baseball players
and CEOs. You'd think they would worry about keeping their money
from adding to the outsize salaries. But what do they do? No sooner
do they manage to scrape together a hundred dollars than they blow
it on a movie or a baseball game or some flim-flam stock touted
by Alf down at the garage.

What we are
saying is that if Microsoft’s business ethics is . . . well . .
. bugging you, you can always shuck Explorer and use Firefox.
You can shelve Hotmail and try Gmail. Spurn Windows and woo Mozilla.

If Wal-Mart’s
labor practices worry you, switch to K-Mart. If you think American
workers are in pain, feel it yourself. Pay extra for their products.

But we notice
that the complainers rarely put their mouths where their money is.
They buy Chinese trinkets, but curse Chinese exporters; they bewail
American consumption, and run up their credit cards.

It can't all
be blamed on the wicked rich. It must be blamed in some small part
on the wicked poor as well. If there are greedy advertisers — as
there are, alas — there are also senseless consumers. And if you
ban all advertising, you might as well ban politicians from campaigning
and bishops from preaching.

But wait: You
say that pounding the pulpit is a different matter from making money?
Maybe so, but religion has its money-men as well, and if they can
push their wares in the heart of the temple, surely honest money-
changers in the market place should be given their moment.

Besides, even
if all commerce was as rank as Gorgonzola, it is not the only thing
that holds people together. There are a hundred voluntary associations,
none of which have to do with the state — or with trade. There are
churches, charities, reading groups, stamp clubs, sports leagues,
sewing circles, scouts troops, fire-fighting brigades — none of
which use force, fraud…. or even filthy lucre… to entice their
participants.

Here, people
cooperate, exchange, learn, debate, and act; and all without a gun
being fired, a law being passed, or a single cop being hired. If
men are such beasts to each other that they need Big Brother breathing
down their necks in all weather, as statists argue, how do you account
for ordinary civic life?

But the statists
have been hammering out their arguments for a while now and they
aren’t going to give in soon. The grip that holds people together,
they answer, has to be something stronger than a handshake or things
fall apart. The cords that bind should be stouter than heart strings;
the glue of human society should be thicker than blood. Voluntary
associations depend too much on good will, on feelings that can
turn on a dime. The heart is too fragile to bear the weight of responsibility
for man’s well-being. We had better turn in our handshakes for handcuffs
and our heart strings for leg irons or the jungle will take over,
they claim.

Homo homini
lupus est (man is a wolf to man), as one of the greatest statists
of all, Thomas Hobbes, noted in “De
cive, Epistola dedicatoria.”

It's always
surprising that the very people who claim to love humanity
so much should love human beings so little that they would
lock them up… for their own good.

“This is one
of the paradoxes of the democratic movement,” wrote the journalist
Walter Lippman in A
Preface to Politics in 1914, “that it loves a crowd and
fears the individuals who compose it — that the religion of humanity
should have no faith in human beings.”

Lippman should
talk. He himself had little faith in human beings. A meddler of
the worst sort, during WWI, he became an advisor to President Wilson
and assisted in the drafting of Wilson’s Fourteen Points, which
are four more than even God needed, as some wit observed.

From having
started out as a newsman, Lippman soon despaired of the brain power
of ordinary citizens. He thought they would never be able to have
an informed opinion on important public issues. Most people, he
argued, were blinded by partial truths or stereo-types — a word
he coined himself. The average man was a spectator who strolled
into a play mid-act and left before the end. He was a member of
a herd. And herds required shepherds. The masses needed heroes —
or villains — on whom they could pin praise or blame for anything
they could not control or understand.

In Public
Opinion, Chapter I, Lippman wrote:

“By the same
mechanism through which heroes are incarnated, devils are made.
If everything good was to come from Joffre, Foch, Wilson, or Roosevelt,
everything evil originated in the Kaiser Wilhelm, Lenin and Trotsky.
They were as omnipotent for evil as the heroes were omnipotent
for good.”

Lippman understood
the source of this tendency: The complexity of the real world.

“We are not
equipped to deal with so much subtlety, so much variety, so many
permutations and combinations,” he wrote. So we make a map of it.
The problem however was “to secure maps on which their own need,
or someone else’s need, has not sketched in the coast of Bohemia.”

That's to say,
our pictures of the world are more or less fictions. From the madman’s
hallucinations to the scientist’s models, we are all — to some degree
or other — creating stories and images that correspond only partially
to the changing flux of reality.

But then of
course, when we act, we step out of this pseudo-environment into
the real environment. In wartime, he observed, there existed “the
casual fact, the creative imagination, the will to believe, and
out of these three elements, a counterfeit of reality to which there
was a violent instinctive response.”

From that,
Lippman noted, arose Herbert Spencer’s tragedy of the murder
of a Beautiful Theory by a Gang of Brutal Facts.

Lippman was
also ahead of his time in understanding the nature of the press.
Unlike the liberals, who thought it would remedy the defects of
public opinion, he knew that it actually intensified them.

So far you
can have no quarrel with the man. He could have stopped and decided
then and there to become a haberdasher or grocer and one's respect
for him would have remained intact; indeed risen. But instead, the
virus of power bites into his innards. He looks at the herd and
instead of simply avoiding it, he wants to chivvy it along. He wants
to mold it, and turn it into putty in the hands of “a specialized
class whose interests reach beyond the locality.” These experts
and bureaucrats, whom Lippman called “elites,” one might as well
call hacks.

If Lippman
wanted a technique of government employed by a cadre of experts,
he got what he wanted. Ever since his time, busybodies have been
in charge of the American government. Political scientists and PR
men have been massaging and managing it. We can see how that’s turned
out.

Lippman was
finally no better than the Marxists and materialists he criticized,
and he fell a victim to the same errors they committed. Just as
they condemned religious ideologues for molding the consciousness
of the bourgeoisie with vain hopes of a Christian paradise, and
then turned around and tried to mold the consciousness of the proletariat
with even more preposterous hopes of a communist paradise,
he too thought he could control the masses with propaganda.

At the heart
of all these attempts is nothing more than monumental hubris. What
made Lippman take upon himself a role God was by most accounts unwilling
to assume? Even Christianity leaves our free will alone. Christ
is content to stand at the door of our hearts and knock. But Lippman
would like to pick the lock and make himself at home. In fact, he
has made off with the TV and the computer while we're kept in deep
slumber by his posse of propagandists and professional liars.

What Lippman
discovered was that men can't possibly know all they need to know
to think and act coherently within a large state. They become the
target of demagogues and desperadoes. They are manipulated by editorialists
and experts, politicians, and pundits, until at the end they can
hardly recognize where their own ideas end and other people’s opinions
take over. In short, Lippman has looked at modern man and found
that a large-scale democracy is a contradiction that does not suit
him. But then, rather than drawing the conclusion that such a state
is inherently unworkable and should be thrown out, he does the very
opposite. He decides to keep his imperial democracy…. and throw
out man.

THE UNIMPORTANCE
OF BEING EARNEST (IN INDIA OR SOMALIA)

So we need
to ask: Is man really such a hopeless creature?

Admittedly,
the evidence is all stacked against him. From Jacob onward, a human
being is a liar and a con man. From Cain down, he is a murderer.
But here let's make an observation. Goodness is very rarely newsworthy.
Had President Clinton been spotlessly faithful to his wife, he would
not have graced the front pages so often and entertained us all
so endlessly. We would have yawned and turned off our TV sets instead
of smirking. Goodness is boring, dull, uneventful.

And for that
reason, we have a very biased view of human nature. Accustomed to
reading gripping stories of treachery and mayhem, we usually fail
to notice fidelity and kindness. Our eyes are always scouring the
distant horizons for colorful scoundrels. The farther off they are,
the less we can know of them and the more our imagination can fill
in the gaps. The people we do know, on the other hand, are so close
we can hardly see them. We know them so well we cannot reduce them
to caricatures that entertain us. And so, entranced by reckless
outlaws, we ignore thoughtful in-laws.

The truth is,
ordinary people are neither good nor bad. They are, as we like to
say, subject to influence. That influence tends to the good in the
small circle of what a man knows first-hand, where he is among friends,
family and a small community. It tends to the bad everywhere else,
in the infinite circle of opinions and ideas at large in the big
world with its pomposity and punditry He is ill-equipped to deal
with them and they swirl around him in a miasma through which he
can stumble only dimly. To tell the truth, even in his home, the
best laid plans of men are surprisingly apt to go a-gley.
How much more in the world!

How much less
likely are we to figure out the road map for billions of people,
when we can't figure it out for ourselves?

If there is
a design in our lives, it is hardly one we spot ahead of us. It
is more likely to sneak up on us from behind after we have lived
through it. We look back and then notice a pattern in what we took
to be meaningless chance. Our intellects, perfectly suited to master
the physical world around us, are dangerously bad at understanding
ourselves or others in the same way. In fact, when we try to, we
are always rebuffed. Life seems to be impervious to logic and our
lives turn out to be more the product of contiguous actions piled
one on top of another like bricks in a wall, than the execution
of any preconceived design.

The Scottish
Enlightenment was quick to grasp this:

“Every step
and every movement of the multitude, even in what are termed enlightened
ages, are made with equal blindness to the future; and nations stumble
upon establishments, which are indeed the result of human action,
but not the execution of any human design,” wrote Adam Ferguson.
(An
Essay on the History of Civil Society, Adam Ferguson, 1767:
Part Third. Section II, p. 122 of the Duncan Forbes edition, Edinburgh
University Press, 1966).

The patterns
that arise naturally from our actions rather than from our conscious
design create an order far more complex and sensitive than any artificial
structure designed by a planning committee. “This type of spontaneous
order — unlike the Zug-zwang of central planning — is the
result of “natural processes,” as I write in a new book with Bill
Bonner, Mobs,
Messiahs, and Markets.

In the free
market, for example, theoretically at least, each actor knows what
he wants and he senses what others want. Not through second guessing
…or second sight. Instead, he does it through the mundane everyday
business of watching prices. The price quickly tells him all he
needs to know at that moment to best negotiate his needs. Free markets
make for the type of complex order that isn't ever predictable.
Central planning makes for the type of simple-minded mess that always
is.

Take a recent
case in India.

“They landed
up at my house and made me take this cow,” wailed Kamlabai Gudhe
in Lonsawala, Wardha in the north Indian state of Maharashtra.
(“Till
the cows come home,” P. Sainath, Hindu Opinion, November
23, 2006).

Ms. Gudhe,
a Dalit (lower caste) farmer, lost a husband to suicide in the
summer of 2006. If that wasn’t bad enough, she was then the target
of an act of governmental mercy. She got a cow.

“I said we
don’t want this,” she remembered, when asked.

Other villagers
had similar complaints:

“The buffalo
I got through the government cost me Rs.120–Rs.150 a day,”
said one.

“I feed it
the wheat meant for my son — who was the ‘beneficiary,’” added
another.

That hasn’t
stopped the bureaucratic Mother Theresas who thought up the aid
program for poor farmers in which quality cow relief was the lynch-pin.
The Maharashtra Chief Minister planned to bring in 40,000 new cows
to the area in three years while the Indian Prime Minister guaranteed
18,000. Apparently, everyone had a say in the business, except the
cows.

Or the villagers.

And now, the
scheme turns out to be full of . . . well, bull. The villagers
know nothing about rearing the beasts. And since there had to be
someone to look after them, there was one less person earning a
living in each household. Inflow and outgo became as mismatched
as the US current account.

Or as Mother
Gudhe put it succinctly: “This brute eats more than all us in this
house put together. And we don’t get more than four liters of milk
in a day from it.”

None of this
was unforeseen, mind you. With admirable precision, if not tact,
even the Planning Commission called it “insane.” They would know.

“It was not
clever to give poor farmers costly cows in places where there is
no water or fodder,” say the agricultural experts.

No kidding.

And the state
supply of chow is so bad that even starved cows turn up their noses
at it.

That might
be because they weren’t from anywhere around the place. They were
phoren — to use the Indianism for it. The Animal Husbandry
Department, which started out looking for cheaper breeds, ended
up with Jerseys — and half-breed Jerseys at that — each costing
Rupees. 17,500. That’s a fortune for poor Indian farmers. Especially
in a state where wheat production is in decline from lack of water.
What does a starving farmer do with a ravenous cow?

The Jerseys
might not be full-blood, but they have all of their appetite. They
each need Rs. 50 of oil cake a day, green fodder, and someone to
look after them. Then there’s the Rs. 30 for the bus ride to sell
the milk. That adds up to almost Rs. 150 for maintenance, against
earnings of less than Rs. 70 a day during the milking season. And
nothing at all the rest of the year. Why, it’s almost as bad as
a Neg Am mortgage…..

Nature can
only take away your harvest or starve you.

It takes a
bevy of hacks to make you have a cow over it as well.

To gain more
support for that thesis we turn from the animal husbandry of central
government hacks to the Infotech policy of warlords.

There is proof,
after all, that Hayek's spontaneous order exists. Apparently, you
can see it at work — in Africa.

Somalia is
the only country in the world, they say, where there is almost no
government. It is a pure free market, say some observers.

According to
some others, it is also a Hobbesian jungle where “life is solitary,
poor, nasty, brutish and short.”

You don't have
to make up your mind about it. But is it?

Its true that
since President Siad Barre was overthrown in 1991, the country has
been without much in the way of a central government.

Rival warlords
roam unchecked, pillaging and extorting. Famine has killed more
than a million and sent even greater numbers fleeing abroad. Public
education and literacy are low compared even to other African countries;
there are few roads, and the country is forced to rely on foreign
financial institutions for a number of things. Health care is out
of the reach of most people.

A failed state,
a third world hell-hole, a basket case, some would say.

Look what happens
when you don’t have government, statists cluck. With dismay.

But if Somalia
is a failed state, it's an odd sort of failed state; with Internet
cafes all over the place, the cheapest web surfing in the continent,
and cheap local and international phone calls. (“Telecoms
thriving in lawless Somalia,” Joseph Winter, BBC, November 19,
2004.)

There is no
formal banking system, but the money exchange services handle up
to a billion dollars worth of remittances in a year. The main market
in Mogadishu has everything you could want from food to electronics.
The private sector offers other services efficiently too — such
as, hospitality and security. Since the demise of the central government,
the Somali shilling has become far more stable in world currency
markets, while exports have quintupled. (“Stateless
in Somalia and loving it,” Yumi Kim, February 21, 2006, Von
Mises.org).

Look what happens
when you don’t have government, crow anarchists. With glee.

But here, an
about-face is in order. It's true that the government and the governing
classes are a circus fit to have scorn and ridicule heaped on them.
But that's because government as it is today in most countries is
unwieldy, parasitic, inefficient, and murderous.

There is, however,
another idea of government, with which no one can have a quarrel.
It is the one you find in the Federalist papers and in the writings
of the American Revolution.

“That government
is best which governs least,” wrote Tom Paine.

For the Founding
Fathers of America, government was an evil, but a necessary one.
It worked best when it was limited to protecting life, property,
and the rule of law — the minimum conditions needed for a society
to flourish.

Anarchists
will argue, of course, that you don’t need a government to do that.
Private groups are perfectly able to provide security, defense and
infrastructure. I am not ready to argue with them. I don’t believe
I know enough of the matter one way or other. But one thing I do
know is that both anarchists and statists are confused in their
talk. They say state when they mean government, and they say government
when they mean the rule of law. They confuse anarchy with chaos,
and the absence of the state with the absence of law.

Somalia is
stateless, but it is not entirely without laws; there is anarchy,
but there is not yet complete chaos. Somalia may well be an example
of how spontaneous order can take root even when the state collapses.
The Law
of the Somalis: A Stable Foundation for Economic Development in
the Horn of Africa (2005) written
by Michael van Notten, goes to the heart of the matter. Van Notten
is a Dutch lawyer who married into a Somali clan and lived in the
country for the last decade or so of his life.

Van Notten
points out what western observers do not want to notice. Somalia
might lack a government, but it’s not completely without governance.
The country still relies on traditional Somali customary law, which,
he points out, would not be able to work if a strong central government
and Western-style democracy were imposed on top of it. In other
words, Somalia’s free market doesn't operate in suspended animation,
or in a vacuum. It rests — in a precarious, wobbly way, it's true
— on the traditional law of the Somalis. And it does have a government
— even if it's only the government of the Somali clans.

Somali customary
law and clan government follow natural law closely. And whatever
fragments of a genuine free market operate there do so only because
of the norms of behavior springing from this indigenous system.

Van Notten
makes another interesting point. He suggests that the terrible problems
plaguing Somalia don’t arise from the free market or the lack of
central government at all. Instead they are the result of the constant
attempts to impose government, albeit unsuccessfully.

“A democratic
government has every power to exert dominion over people. To fend
off the possibility of being dominated, each clan tries to capture
the power of that government before it can become a threat.” (Van
Notten, 136, 2005, cited by Yumi Kim).

And the fear
of domination is only kept alive by incessant U.N. efforts to intervene
and impose a Western-style government in the country. Leave the
clans alone, he says. Let foreign governments just deal with them.

The irony is
that a real free market is not free at all. It is, and always has
been, restricted — by laws, customs, traditions, morals, expectations.
In Somalia or the West, you have to choose. It is either natural
law or the law of the jungle.

THE GOLDEN
RULES

We note in
this regard the arguments of Peruvian free market economist Hernando
Soto. De Soto thinks he knows why the ground rules in the West allow
the market to work:

Every increment
in production, every new building, product, or commercially valuable
thing is someone’s formal property. Even if assets belong to a
corporation, real people still own them indirectly, through titles
certifying that they own the corporation as “shareholders.” (The
Mystery of Capital: Why Capitalism Triumphs in the West and Fails
Everywhere Else, Hernando De Soto, New York: Basic Books,
2000, p. 48).

Without these,
says De Soto, you don’t have a free market, no matter how big a
government you have. Otherwise, why is it that entrepreneurship,
natural resources, and abundant labor have not saved developing
countries like Egypt and Peru, or Kosovo and Colombia?

Without adequately
documenting property rights, they cannot “readily be turned into
capital, cannot be traded outside of narrow local circles where
people know and trust each other, cannot be used as collateral for
a loan, and cannot be used as a share against an investment.” De
Soto, p. 6, cited by H. Perritt

While Western
nations have sophisticated legal infrastructures that permit capital
to be created, property laws in developing countries are so unwieldy
that they actually pose a barrier to economic activity. Some of
the statistics De Soto lists would be comical if they were not appalling
(De
Soto, pp. 18–27).

In Peru, opening
a small shop with one worker takes 289 days. Registering it costs
31 times the minimum monthly wage. Getting a permit to build a house
on state land takes 6 years and 11 months, and 207 procedures in
52 governmental offices. Obtaining legal title to the land takes
728 steps.

In the Philippines,
formalizing informal urban property takes 168 steps and 13–25 years.

In Egypt, building
on desert land, needs 77 steps, 31 different governmental offices
and 6 to 14 years.

In Haiti, obtaining
a 5-year lease takes 111 steps and 4,112 days.

The result
of this bureaucratic obstacle course is that people live and work
outside the law. And they pay the price. No one will lend them money
except family members. So they end up specializing and producing
for smaller circles. The result? Lower productivity. Capitalism,
he argues, needs legal protections to work. It needs rules.

But here, I
have a bone to pick with Mr. De Soto. He thinks the only rules that
work for capitalism are western rules. In fact, the title of his
book makes no sense at all in some ways. Capitalism Fails Everywhere
Else? If so, why is Western investment capital flooding China? Not
to finance socialism, we can be sure. No, the Communist Chinese
have proved to be the biggest capitalists of all.

What that means
is that no particular set of laws and institutions — as long as
they protect the ground rules of exchange — can claim to be uniquely
fitted to the growth of the free market. Instead, the laws that
enable spontaneous order must arise — spontaneously — from each
society in which it operates. They have to be the result of the
unique history and customs of the people of that society. “Western”
laws are not necessary to Chinese or Malaysian capitalism. Chinese
and Malaysian laws are enough.

The reason
is that the laws that get passed with pomp and circumstance in legislatures
are not the laws that really govern society. They only look like
they do. But ask yourself this. If they really did, why is it that
the crimes committed by commissars in the Soviet Union, by the Gestapo
in Nazi Germany . . . and by the American CIA . . . were all committed
with the law books bulging at the seams?

It is not how
many laws you have that matters, but how well those laws are obeyed
— which is a matter of culture and history, of what people expect….
and what they are prepared to accept. And to know that takes the
study of history and manners; it needs a knowledge of morals and
religion. The usual smoke and mirrors sideshow supplied by the political
class won’t do. You need to turn to the accumulated wisdom of case
law and precedent, of customary law and conventions.

The free market
arises wherever there have been such laws and systems — whether
in Europe or Africa or Asia.

The spice trade
of the Indies, for instance, operated for 500 years without Western
laws, yet it corresponded roughly to free market capitalism. In
Africa, buyers and sellers met under a tree, not a mall, but what
they had was still a market where prices were arrived at by bargaining
between buyers and sellers. Not set arbitrarily by the chiefs.

Africans might
have used gold-dust salt before the Europeans brought in paper currencies,
but they were still using money.

Today, in fact,
some of us might think that gold dust look like the stronger currency.

How else can
we explain the difference between statutory laws and customary laws
like the Somali clan laws? One way to think about it is to see it
as the difference between fiat money, like paper currencies, and
a real store of value, like gold. You see, if there is nothing to
back up the paper currency churned out by a central bank, then the
country is in a bit of trouble. Pretty soon, people come calling
for their loans with cudgels and pitchforks. It's happening right
now in America.

The problem
arises because statutory laws can be passed endlessly, even if they
have little relation to how the masses of ordinary people actually
think and act. That means you can have a country where theft and
looting are the norm, that might still have very intricate laws
on their books against theft and looting. The statutes won't do
a thing to help.

Customary law,
on the other hand, can’t be plucked like a rabbit out of a top-hat.
It has to live…and breed… in the cozy warrens and nooks of particular,
real communities with particular real values.

And because
it does, people tend to accept it more often. It works more often.

It is a more
sensitive and complex measure of a society that tells the stories,
not of just those who happen to breathe now, but of the unborn…and
the long dead. It reflects the fractal fellowship of generations
and time. Not the unwieldy geometry of states and boundaries. It's
the contrast between a dynamic and a static page on the web.

So, while the
cogito ergo sum might look like a rock from where to tackle
technical and physical problems, it is shifting sand when it comes
to human ones. History and experience are outside the beat of unalloyed
reason.

Which is why,
when it comes to understanding how masses of men think, we are better
off without naked logic. We are better off with the warm, colorful
outfits in which practical wisdom and rhetoric trick themselves
out.

MINDING
THE CROWD

That, ultimately,
is what the hidden persuaders in our democracies have figured out.
They know that the masses of men — and that could mean rich hedge-fund
managers just as often as poor villagers — don't really want to
think for themselves. And, for the most part, can't.

What they want,
as Lippman noted, is to simplify things.

Joseph Goebbels,
the Nazi minister of propaganda knew that… and knew how to use
it.

A lie, simple
enough, big enough, and repeated often enough, without explanation
or reasoning, is all it takes to drive a crowd mad.

And so we get
the pundits and the propagandists of the state. We get the real
rulers of our democracies.

How it happens
is easy enough to understand.

Take a fellow
going about his own business. Ordinarily, he is unlikely to settle
for less than a solid explanation for things that go wrong. If his
car starts skidding, he takes it apart at the mechanic shop to find
out why and he doesn’t get back in until it works. The penalty for
careless thinking on the subject might be his life.

Of course,
on many bigger issues, his life might also be at stake. If he lived
in New York, for instance, any explanation for New York’s crime
rate becomes rather personal. But while his car only affects him,
New York’s crime rate affects millions of others. On the subject
of his car, he confidently relies on his own hunches. On the subject
of New York crime, however, he becomes diffident. It is not his
problem alone. Some one else should think of it, he decides. Best
leave it to the people who know. Experts. Pundits.

He opens the
paper and reads the opinion column of Professor Tedious Pontificator
at Princeton University. He has never been to Princeton University.
But he has heard it’s very good. At any rate, it is very expensive,
which is the same thing, in his mind. It is a reliable brand. He
has also never heard of Professor Ponti. But professors, he has
been told, are egg-heads. They know. So if Professor Ponti says
that New York crime rates have gone down because of gun control,
he figures, it must be true. Besides, the fellow has said so in
the papers. It must be St. John’s Gospel. At any rate, he now has
an opinion on hand rather like a concealed weapon that he can fire
off at the nearest bystander.

Buy
this book.

“Dear,” he
begins, putting down his paper and glancing across at his better
half. “Did you know that New York’s crime rate has gone down because
of gun control?” Here, he gets the first pay-off for his secondhand
wisdom. With a single bleat, the poor sod has established himself
in his wife’s eye as a man of the world, conversant with public
issues. For a fleeting moment — since, in marital life, such moments
are always fleeting — he glitters before her, even if it is only
in Professor Ponti’s borrowed feathers. He too has become an expert.

Buy
this book.

But there is
another payoff. By thinking like everyone else, the poor man trades
in the uncertainty and loneliness of being an individual for the
certainty and camaraderie of belonging to a group. What use would
it be for him to be right if he was right all on his own? What would
it profit him to gain his soul but lose the world? He decides he
would rather have the world. Or rather, an instinct lodged in his
brain drives him to it. Solidarity with his unthinking fellows is
wired deeper in his skull than the fleeting pleasures of reasoning
on his own.

In his heart
and soul, man is a social animal and solidarity with his group —
however wrong — is more important to him than being right alone.

In that moment,
he catches the contagion of the crowd.

In
that moment, democracy becomes demagoguery.

This article
is an adaptation of an article published
in Dissident
Voice
in December, 2006.

August
27, 2007

Lila Rajiva
[send her mail] is the
author of the ground-breaking study, The
Language of Empire: Abu Ghraib and the American Media (MR
Press, 2005), and the co-author with Bill Bonner of Mobs,
Messiahs and Markets (Wiley, 2007). Visit her
blog.

DIGG THIS

Another rainy day! More kvetching about the weather, and other things, below…

But first, there is the financial world…the world of money, moolah, lucre, cash, dead presidents, bread, green, and dough to be reckoned with.

And yes, we are still on vacation…but we spare a little time each morning to reckon anyway.

If we weren’t on vacation we’d be wondering how people could still believe in this boom. The other day, the Dow rose 145 points. The believers bought stock.

What were they thinking?

Our guess is that they are not thinking at all…but reacting to such a long, long run of good news; they can no longer imagine that anything bad could ever happen.

The crowd always wants to believe that everything will work out…but history (and good sense) proves this just isn’t so. This dangerous and destructive way of thinking is the topic of our latest book, Mobs, Messiahs and Markets.

But we digress. This new Theology of Capitalism is based on blind faith…in the dollar…in modern economies…and in the central bankers who manipulate them both.

Fortune magazine recently called this boom the "Greatest Economic Boom Ever."

Robert J. Samuelson describes it more fully in Newsweek:

"From 1990 to 2005, trade rose 133 percent. Supply chains are increasingly global. Since 1985, imported components as a share of worldwide manufacturing output have doubled, to almost 30 percent. Cross-border money flows (for stocks, bonds, loans, real estate, entire companies) are huge: $6 trillion in 2005, says the International Monetary Fund. Finally, the boom has reduced acute poverty. The share of the world’s population living on $1 a day or less has dropped from 40 percent in 1981 to 18 percent in 2004, the World Bank estimates."

Roughly during the same period, the average American homeowner enjoyed a 52% real increase in the price of his house. This increase added substantially to his wealth; too bad he spent the money — all of it — and then some! Yes, take away the net increase in debt, and the poor fellow is actually in the hole for the period.

But it gets worse…because his income fell for the first five years of the present century. (These are the only figures we have…we suspect that his real income/hour worked fell during the entire period…but we have no reliable figures to back it up.)

How did the average citizen of the world’s most dynamic, wealth-producing economy actually lose ground during the "Greatest Economic Boom Ever"?

That is the question no one seems to care to pose…or answer. And how can you have a genuine boom when most people don’t really increase their spending power?

Which is why we have to keep reckoning…even on our vacation…! No one else will do it.

Samuelson recalled what might have been the greatest economic boom ever, until now:

"From 1896 to 1913, trade roughly doubled. Declining steamship and telegraph costs were melding countries together. u2018There was something close to an integrated world market for most goods,’ Harvard political scientist Jeffry Frieden writes in his book Global Capitalism. In 1870, wheat prices in Liverpool were about 60 percent higher than in Chicago; by 1913, the gap was 16 percent. European investors eagerly bought bonds of then-developing societies — Argentina, Australia, the United States."

But that boom was very different. That was the boom that put the United States of America not only on the economic map…but at the center of it. In 1910 — thanks to savings rates and GDP growth rates comparable to present-day China — the United States became the world’s number one economy. Wages rose quickly and average people — not merely Wall Street speculators — became much wealthier. Consumer credit had barely been invented and the dollar was still backed by gold; gains enjoyed by working men and women were substantial…and the boom was real.

Maybe the present boom is real for China. For the U.S.A. it is a fraud.

We are getting depressed. Maybe it is the weather. Maybe it is the end of summer. Maybe it is personal.

"This summer has been the worst I can remember," said a friend at dinner last night. "The only thing good about it is that the rainy weather has produced the biggest crop of plums we’ve ever seen. Everything else is a disaster."

Yesterday, we found an old photo where we were standing with our daughter, Maria, our arms wrapped around each other. Alas, Maria seems to have a new man in her life…we worry that we have lost her forever.

Our new book arrived yesterday. It is a good-looking book; we are pleased with it. Jules picked it up and began reading in front of the fire; we were pleased, too, to see him chuckle.

It is a great book in some ways. In our humble opinion, there are profoundly interesting ideas hidden beneath our usually superficial commentary. How they got there, we’re not sure…accidents, probably. If you write enough, sooner or later, by pure chance, you’ll write something decent.

More depressing news: A dear, old friend has been diagnosed with lung cancer.

"I think it’s over for me," he said on the phone. "There isn’t much the doctors can do. Maybe I have only a month left."

Our friend never smoked a day in his life. He would have been better off as a smoker; at least he would have gotten the pleasure of smoking in compensation for the pain of lung cancer.

"You never know why some things happen," he remarked from his hospital bed.

No you don’t.

Meanwhile, from South America comes happy news. Your editor is going to be a grandfather for the first time. In February, by our rough calculations…

So you see, dear reader, we sit in our octagonal office…here in the French countryside…and the great circle of life goes on all around us.

Through one window…we see love bestirring itself… Through another, we see young love bearing fruit…a whole new life coming into being… Through a third, is the product of our middle-aged labor; glorious this morning…it will be forgotten before lunchtime. Through a fourth, we see the inevitable denouement…we see where our death-going tribe ends up…when we finally droop unto death…and make way for new life…

…it is as if we were looking at all the seasons of man…right out of our office windows.

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.

DIGG THIS

Among other
gag-worthy characteristics, the
new immigration bill announced last week is said to cost
over 2 trillion (yes, it seems we have a couple of trillion
to spare, according to the new, new math).

A country already
mired in debt and credit needs to shell out 2 trillion about as
much as breaking the law should be the prerequisite for citizenship
under the rule of law.

The 380-page
bill, fruit of three months of high-sounding wrangling, gives the
immediate right to work (the Z visa), to some 12–20 million
illegal workers who got into the United States before January 1,
2007. Heads of household would have to return to their home countries
within eight years, and they would be guaranteed the right to return.
Applicants would also have to cough up a $5,000 penalty. That's
thousand, not hundred. Chump change for migrant workers, of
course.

Confirmed.
This administration's math is delusional, its laws are contradictory,
and now we also know its alphabet is backward:

"Z visa"
is followed by "Y," a guest worker program which has some
merit to it, in so far as it emphasizes good education and good
skill sets. Brownie points for that. Never mind that guest workers
families are broken up and they themselves usually end up held hostage
to their employer's whims and ever-changing paper requirements.

But "Y"
follows "Z" in another way too. As in, Y bother.

If you're going
to have a law, then apply it fairly to everyone. Or, don't have
the law.

Ted Kennedy
claims the whole business is about bringing people out of the shadows.

If lurking
in the shadows is the criterion, why not bring in insurgents from
Iraq too…that would at least put an end to the killing of troops;
it would supply cheap labor to businesses. And solve a crisis that,
after all, the government did create.

Of course,
the government created this one too.

Does anyone
think migrant workers paid less than minimum wage are going to be
able to cough up $5000? And if they could or couldn't, would it
matter? Because, we already know where this will end — with some
border patrolmen hand-in-glove with criminals who'll run a racket
built on it; with a whole industry of racketeers built on that,
as there already is on fake documentation; with the innocent
in trouble and the guilty off the hook. And then, finally, when
the abuse stinks to heaven, there will be even more high-sounding
wrangling in government (all at taxpayer expense), and everyone
will decide the simplest thing is to cancel the whole thing and
go home…until they come back with the next way to drive a nail
into the coffin of the US economy.

So, when we
are told that this alphabet of errors is not going to be recited
until the number of border patrol agents has been doubled (adding
6,000 new agents, bringing the total to 18,000), border fencing
strengthened (200 miles of vehicle barriers and new surveillance
towers), and a verifiable, high-tech ID-card system for immigrants
operational, all in the space of 18 months, let's figure that the
Noah Webster Standard American usage of this is that it's a whole
new era of bungling bureaucracy about to be inaugurated.

And the only
new money forthcoming to finance this fiasco-in-waiting will be
collected from employers, who will now be fined for hiring undocumented
workers.

Perfect. The
federal government shunts the costs of its own inability to man
the borders to tax-payers. Then it shoves off the mess of this guacamole
onto its citizens.

If Americanness
is defined by citizenship and citizenship is defined by law, can
the government enforce its own laws while violating the law of the
land?

If Americanness
is not defined by citizenship, then we need a debate about
that.

Nobody wants
to demonize immigrants. Least of all an immigrant like me.

If money can
go anywhere in the world to make a return on investment (and it
should), labor should be free to move where it wants to find work.

But here's
the rub. Not all movement of capital is the genuine, productive
result of investment activity. A lot of it is driven by interference
in the market in the form of state intervention in the money supply.
The result of that is speculation. And speculative flows can flood
a country, jack up the prices of everything and then in a trice
flow out, creating financial disaster. That's not the free market.
That's state-created financialization.

We know that.
And the state affects the labor market like that too.

Letting labor
move as it will is one thing. Subsidizing and incentivizing its
movement through public services is another.

That imposes
unbearable costs on local communities, bankrupts the state, and
causes cultural and economic problems. Add to that another thick
layer of DC bureaucracy and you have a recipe for disaster. Especially
when the registration of these 12–20 million illegals has to be
done in 90 days. In
an article in the Washington Times, Emilio Gonzales,
the director of the US Citizenship and Immigration Services thinks
that time-line needs to be doubled or tripled if the process is
not going to go the way of the fraud-ridden 1986 amnesty of a mere
3 million people: “We’re litigating cases today from 1986,"
he says.

But, Department
of Homeland Security Secretary Michael Chertoff thinks it's all
fine and dandy.

“Chertoff told
CNN that the bill would help him better focus his resources.

“Right now,
I’ve got my Border Patrol agents and my immigration agents chasing
maids and landscapers. I want them to focus on drug dealers and
terrorists. It seems to me, if I can get the maids and landscapers
into a regulated system and focus my law enforcement on the terrorists
and the drug dealers, that’s how I get a safe border.”

("Immigration
Breakthrough Could Pave the Way for Citizenship," CNN, May
22, 2007)

By the way,
Michael Chertoff, chief muck-a-muck of the Department of Homeland
Security, knows all about how to handle terrorists…and immigrants…and
safety.

He's the guy
on whose watch New Orleans was hit, first with Katrina…and then
with FEMA.

It was he who
ran the 9-11 investigation. Chertoff was the senior Justice Department
official on duty at the F.B.I. command center just after the attacks
on the World Trade Center and the Pentagon. With all but impossible
speed, he ID'd the terrorists and made the link to Osama bin Laden.
He pushed to merge domestic surveillance and foreign espionage which,
until then, had been kept strictly apart under US law. ("The
Patriot Act's Impact," Duke Law Journal, Nathan C. Henderson,
November 15, 2002.)

Chertoff also
authorized the unconstitutional detainment of thousands of Middle
Eastern immigrants — including Middle Eastern Jews — without charges.
As head of the DOJ’s criminal division, he told the CIA how far
to go in interrogations. (“Amid
Praise, Doubts About Nominee’s Post-9/11 Role,” Michael Powell
and Michelle Garcia, Washington Post, January 31, 2005).

With Viet Dinh,
he co-authored the unconstitutional USA PATRIOT Act, enacted on
October 26, 2001. (“Bush
nominates new Homeland security chief," January 12, 2005).

He's even done
a stint as defense in a terrorist trial.

Put
in charge of the 9-11 investigation, Chertoff defended Dr. Magdy
el-Amir, a leading New Jersey neurologist at the heart of a terrorist
web based in Jersey City, alleged to have funneled millions to Osama.
Some say Chertoff may have shielded el-Amir from criminal prosecution.
("Trail
of Terror,” Chris Hansen and Ann Curry, NBC’s Dateline, August
2002 and The Record, Bergen County, NJ, December 11, 1998).

Nice rsum.

According
to CNN, Republican Rep. Brian Bilbray of California, chairman
of the Immigration Reform Caucus, had this to say about the new
immigration bill:

“The
‘compromise’ announced today by Sen. Kennedy will reward 12 million
illegal immigrants with a path to citizenship — what part of illegal
does the Senate not understand?”

At least, we
already know what part of the Constitution this government doesn't.

And,
Republican Sen. Lindsey Graham of South Carolina says the bill “wound
up being about what it means to be an American … I think we’ve
got a deal that reflects who we are as Americans.”

Maybe, under
this administration, we have.

May
23, 2007

Lila Rajiva
[send her mail] is the
author of The
Language of Empire: Abu Ghraib and the American Media (MR
Press, 2005) and with Bill Bonner, the forthcoming Mobs,
Messiahs and Markets, (Wiley, 2007). Visit her
blog.

DIGG THIS

“I think we
know enough about the response to know it was very effective and
a very successful response,” said retired state police superintendent
W. Gerald Massengill, the chairman of the review panel appointed
to investigate the Virginia Tech shootings. That was in a May 11
article in the Washington Post called "Va
Tech Panel Outlines Agenda."

"Agenda"
is about right. How does 33 dead over a two-and-half-hour spree
on a campus crawling with cops count as "very effective"
and "very successful"?

About the same
way as V-Tech is now apparently about "breaking down bureaucratic
barriers among the courts, the school and the state as it relates
to mental health information."

More federal
undermining of privacy laws, in fact. Just what we need from an
administration already up to its intrusive eye-balls in domestic
surveillance.

Massengill,
by the way, is the man who led the Virginia State Police in the
9-11 attack on the Pentagon, and his fellow panel members are Tom
Ridge, the first U.S. secretary of homeland security, a top policy
maker in state higher education, an administrator of the FBI's center
for the analysis of violent crime and two medical experts.

According to
Massengill, the police gave him a timeline that "helped convince
him that they responded as quickly as they could after the two people
had been shot in West Ambler Johnston Hall."

Since the timeline
is the lynch-pin of the panel's bizarre conclusion, it warrants
more examination than the media has given it so far.

That timeline
first entered the public debate on April 26, 2007 in this report
from AP: "5-minute
Delay Crucial in Tech Shooting."

The article
reported what is now regarded as the official version of the killings
at Virginia Tech on 4/16:

Cho got to
Ambler Johnston Hall a bit before 7 a.m.; he killed his first 2
victims with a Glock 9 mm (a fairly ordinary handgun) with two rounds;
his second bout of killing (30 people) was at Norris Hall and it
took 9 minutes. Police supposedly took 3 minutes to get to Norris
and 5 minutes to get into the building, where several entrances
had been chained shut from inside.

Witness accounts
are often contradictory or mistaken and a crisis, in recollection,
can seem to have taken much longer than it actually did, but still,
think about what's supposed to have happened in 9 minutes:

Cho walked
up and down the halls (2–3 minutes, at least); he poked his head
into a few classrooms a couple of times and left without doing anything;
he fired steadily but with pauses in between, methodically breaking
through doors that had been barricaded (that should have taken a
minute at least), shot, left and returned to at least two classrooms
(another minute or so each); stood over and shot students and fired
individually at each (a minute?) in at least two classrooms. Although
the students were trapped inside, they were barricading doors, running
away, throwing themselves over each other, or jumping through windows,
so they were moving targets that required him to aim and move too.
And reload.

And then he
shot himself. His last victim, wounded and on the floor, said he
watched the gunman's legs move to the front of the classroom, then
heard a pause, then shots. No one actually saw the suicide, so what
happened must remain somewhat tentative.

Why Nine
Minutes

If Cho fired
170 rounds (or 255, in at least one account) in Norris Hall, as
reported, he fired almost 18 rounds per minute or a round roughly
every 3 seconds. I'm not a marksman, so I don’t know if that's likely
or not. If you also take into account that he was reloading and
pausing, he must have been firing an even higher number of rounds
per minute than that most of the time. And, if we go by the multiple
wounds in
each body (3–4), he must have made about 110–120 hits (out
of 170 rounds). Even more, if we include the wounded. So far as
we know, he was an amateur with, at most, a few weeks of practice.
I am not sure if that scenario is plausible or not. And again, I'm
not trying to refute the timeline so much as evaluating it. But
I do wonder how officials can be so sure of it. And why.

This was a
timeline posted on Wiki (it's since been deleted, but you can find
it, with the original footnotes, on my
blog, which has collected material relevant to the case):

• 9:42 a.m.:
  Students in the engineering building, Norris Hall, make a 9-1-1
  emergency call to alert police that more shots have been fired.
• 9:45 a.m.:
  Police arrived three minutes later and found that Cho had chained
  all three entrances shut.
• Between
  9:30 and 9:50 a.m.: Using the .22 caliber Walther P22 and 9-millimeter
  Glock 19 handgun with 17 magazines of ammunition, Cho shoots 60
  people, killing 30 of them. Cho’s rampage lasts for approximately
  nine minutes. A student in Room 205 noticed the time remaining
  in class shortly before the start of the shootings.
• Around
  9:40 a.m.: Students in Norris 205, while attending Haiyan Cheng’s
  issues in scientific computing class, hear Cho’s gunshots. The
  students, including Zach Petkewicz, barricade the door and prevent
  Cho’s entry.
• 9:50 a.m.:
  After arriving at Norris Hall, police took 5 minutes to assemble
  the proper team, clear the area and then break through the doors.
  They use a shotgun to break through the chained entry doors. Investigators
  believe that the shotgun blast alerted the gunman to the arrival
  of the police. The police hear gunshots as they enter the building.
  They follow the sounds to the second floor.
• 9:51 a.m.:
  As the police reached the second floor, the gunshots stopped.
  Cho’s shooting spree in Norris Hall lasted 9 minutes. Police officers
  discovered that after his second round of shooting the occupants
  of room 211 Norris, the gunman fatally shot himself in the temple.

From this Wiki
account (which is quite conservative and can be verified from other
published timelines), the shooting really could have taken place
any time between at least 9:30 and 9:50 — a space of 20, not 9 minutes.

But even on
its own terms, the official timeline seems a little odd. If students
heard gun shots (which could only have been at the very latest at
9:40), and if police reached the second floor at 9:51, that still
makes 11 minutes, not 9.

Why, you might
ask, am I quibbling about a few minutes? After all, no one could
really have been sure of anything in all the confusion. True. But
that's all the more reason why insisting on those 9 minutes seems
peculiar. Especially since we also have at least one account that
the police got there later
than this account suggests.

Confusion again?
What about the video
footage and reports
of the police hiding around the building? Or coming
out of nowhere (BBC, April 17)? That doesn't
square with the official story saying they rushed straight from
that 9-1-1 call to Norris. More confusion? Possibly. But each additional
contradiction becomes that much less plausible as simple error.

But the insistence
on 9 minutes does make sense if you think about the bigger
picture.

If the gunman
only took 9 minutes, then the onus on the police to explain their
behavior becomes much less. It's then no longer a question of what
they were doing for the half hour or so in which Cho was rampaging
through Norris Hall (not to mention the two hours before) but only
what made them delay after they got to Norris at 9:45 (3
minutes after the call).

And that's
simple — the doors were chained shut. Ergo, they had to wait 5 minutes,
while — by this reckoning — Cho finished off his 9-minute spree.

That this is
the significance of having a 9-minute timeline is pretty clear,
since the police officers quoted in the article direct their criticism
specifically at the 5-minute delay. The critics say it was those
few minutes that most significantly increased the number of victims.
Meanwhile, for some reason, they're silent about what the police
were doing for the two hours before.

Bringing
in the Military

Then, tacked
on to the criticism of the 5-minute delay is a discussion (for the
first time in the media) of what is known as the "active
shooter" paradigm in police operations. The critics say
the 5-minute delay wouldn't have happened if V-Tech had been treated
from the start as an "active shooter" situation.

What is an
"active shooter" situation? It's a sniper or shooter crisis
where swifter and more aggressive police tactics are required, because
the perp is careless about his own life and, therefore, more likely
to take as many down with him as he can. Those aggressive tactics,
called, "Immediate Action Rapid Deployment," were developed
in the nineties, but really came into prominence only after the
Columbine school shootings in 1999. But they still aren't operational
everywhere, supposedly because of lack of funds and training.

But notice
that "active shooter" is being referenced in the 4/26
article only in terms of the 5-minute delay. Why? Maybe because
it's a strategy with several advantages:

1. It lets
   the police take some blame, but not so much that the massacre
   looks like a case of negligence. That's a move that makes it possible
   to take the focus off police failure and put it on policy changes
   requiring more laws, more force, and ultimately more federalization
2. It dampens
   public outrage at the individuals who really are culpable. A 5-minute
   delay simply isn't going to work anyone up the way a 2-hour delay
   would.
3. It lets
   officials introduce the "Immediate Action Rapid Deployment"
   (IARD) paradigm into campus policing without undercutting the
   decisions taken by the administration or the police.

Now, IARD is
a distinct step in militarizing police response and is very much
a part of the trend to systematically erase the boundaries between
wartime military actions and domestic policing. Domestic crises
are more and more described and tackled in military terms, just
as foreign military actions are being palmed off as policing operations.

Which is why
the article goes on, "This is a seminal moment for law enforcement
as far as I’m concerned because it proves that minutes are critical."

Yes, it's seminal.
V-Tech is going to help put military responses squarely on campus.

What I'm suggesting
is that the more officials can take the blame off V-Tech, the more
they can push for additional federal policies and laws.

So, if my thesis
holds good, officials should also be taking that 2-hour gap between
Ambler Johnston and Norris off the table as fast as possible, because
that's where the administration's culpability is most obvious. Are
they?

Indeed they
are. In the AP account, the V-Tech review panel states flatly that
shutting down the campus couldn't possibly have done any good because
the shooter could always have gone back into his dorm and shot the
900 or so people who lived there. I quote,

"On Thursday,
Gov. Timothy M. Kaine said that the massacre may not have been averted
if the Virginia Tech campus had been locked down after the two shooting
deaths at the dorm. u2018Well, if the campus had been locked down —
because the shooter lived on campus — I mean he could have gone
into his dorm with 900 people instead of going into a classroom
(and) he could have shot people there,’ Kaine said in his monthly
listener-question program on WRVA-AM and the Virginia News Network.”

Well, surely
this is a straw-man. Locking down the campus was not the only option.
V-Tech could also have made an announcement on its PA system for
students to lock themselves into their rooms or stay off campus.
A siren could have gone off to alert people, instead of an email
notice. Police could have been rushed in to guard buildings (they
should have been doing that anyway, since there had been a couple
of bomb threats in the weeks preceding). How did they manage to
shut down the campus so efficiently in August 2006, when survivalist
and killer, William Morva, was on the loose?

Kaine's tendentious
announcement also overlooks another bunch of really serious failures
on the part of V-Tech. How was it that on a campus where the student
population had been disarmed by policy, there were no monitoring
cameras nor armed security guards near the dorms, who could have
stopped the shooter in the first place? Even measly little schools
have them; why not this lush, plush campus with its own golf course,
power station and airport and what the BBC calls "meticulously
manicured" lawns?

How could V-Tech
promise its students that the campus was gun-free, if they had no
metal detectors or security checks to ensure it? How did Cho leave
campus to post his video and re-enter loaded with ammo and guns
and not set some detector or alarm off? How could he have even entered
a dorm without a security card in the first place? And why were
students
entering and leaving Ambler Johnston until 10 a.m. (according
to student reports) after the shooting at 7:15?

Is none of
that worth noting? Would a little vigilance in any of those things
not have helped at all? Does it really just boil down to
those 5 minutes?

Or is the media
trying to frame what's at stake? Seems like it, especially if we
look at what else is going on.

Framing
a Story

Quite early
on, Time magazine had an opinion piece, "Va.
Tech's President Should Resign," John Cloud, 4/19, which
— with little serious argument — explicitly directed the public's
attention away from the delay between the two shootings and
toward the danger signals Cho was sending up for two year before
the shootings.

Now, those
two years are problematic, of course. But the useful thing about
focusing on the two years is that the failure to follow up on Cho's
problematic behavior — unlike the two-hour delay — can always be
blamed on policies.

And in fact,
people are doing just that. In time, we'll find they've reached
the conclusion that, mirabile dictu, none of this was V-Tech's
fault at all. It was the fault of laws, policies, programs, etc.
etc…

Notice, for
instance, this 4/25
report from MSNBC describing students standing firmly behind
the V-Tech president and administration. It makes a striking contrast
with earlier reports in which students repeatedly and loudly criticized
the administration.

Looks a bit
as if this show of student confidence developed later. But who's
pushing for the vote of confidence for the people at the top? Let's
see.

“Johnson plans
to present the university Board of Visitors on Thursday with an
online petition with thousands of signatures of support for Steger
and Flinchum. Steger also received an endorsement from the governor.
‘Charlie has been acting as a very, very good president,’ Gov. Tim
Kaine said. u2018This kind of event could happen anywhere on any campus,
and there has been an innocence taken away from the students. But
the positive values, and academic tradition of this university will
help the community stay strong, and keep this university attracting
students.'"

I've written
about this kind of media framing before. First, the media sensationalizes.
This is the pulp drama of personal narratives, human interest stories,
emotion, drama, color, personalities… Then, when we get to the
heart of the matter, the focus quickly shies away to broad questions
of law and policy. No one's ever at fault now. It's always a failure
to communicate, bad laws, not enough funding — anything that lets
the bosses off the hook.

That was the
MO of the media during the torture debate. Questions about what
actually happened were quickly framed out and the debate focused
on creating better policies rather than on punishing the people
who created the bad ones. It was ultimately only the alternative
press which pushed the discussion back to where it belonged.

At V-Tech too,
the mainstream public debate has been relentlessly about more federal
laws of all kinds — more gun control…. or federalizing the mental
health data base… or militarizing security…or imposing speech
codes.

Which fits
in perfectly with where this government wants to go, as a recent
piece by James Bovard, "Working
for the Clampdown," in The American Conservative Magazine
(April 27, 2007) indicates. Bovard describes how the Defense Authorization
Act of September 30, 2006 makes it easy for the president to impose
martial law in the event of what he calls public disorder, which
might just be something like an antiwar protest on campus (not for
nothing was it the Homeland Security and Government Affairs Committee
that held a hearing on college campus security on 4/23 and on 4/26).

Meanwhile,
Congressman Ron Paul's Texas newsletter, "Straight Talk,"
describes the dangers of an impending and unconstitutional "hate
crimes" bill (HR 1592) that has every potential
to create a category of "thought crimes."

With that in
mind, you begin to see that despite the overwhelming focus on them,
V-Tech is fundamentally not about these things:

It's Not
About More Gun Laws:

The gun control
argument runs — Were guns not growing on Virginian trees, this
would never have happened. We need new laws: No guns for nut jobs.

But the trouble
with this line of reasoning is that Virginia Tech is already
a gun-free zone. Theoretically at least. The university beat back
an attempt in just 2006 by the state of Virginia to allow student
to carry concealed weapons on campus. And, Virginia's gun laws already
do prohibit deranged people from purchasing firearms. When Cho bought
his two handguns, he was already committing a felony.

It's Not
About More Mental Health Reporting

OK, you ask,
then how come Cho's record of derangement didn't stop him from buying
two guns?

Well, that's
because he had no record. Forget the Feds. He didn't have
one with the state. No one gave him one.

But doesn't
that make the case for more laws regulating the mentally deranged?
Not really. The real problem was that the laws already in place
weren't followed.

First, let's
be precise here — no psychiatrist ever saw Cho. A licensed
social worker recommended sending him to a treatment facility (and
got a special judge to do it) and then a PhD psychologist reckoned
he was a threat only to himself (and had the same special judge
release him) — all in about 24 hours flat. Some evaluation. It was
not only shoddy on its face but in flat violation of state law,
which requires an MD to do the job. ("Cho
Seung Hui's Commitment Papers," Bonnie Goldstein, Slate,
April 24, 2007). That's strike two just there.

And now, strike
three. Although Cho was ordered to undergo outpatient treatment,
it turns out that no one kept track of whether he did or didn't.
Or kept records of any kind, apparently, all of which is a violation
of existing state law.

More details
have emerged about what happened at the three state institutions
through which Cho passed ("Cho
Didn’t Get Court-Ordered Treatment," Brigid Schulte and
Chris L. Jenkins, Washington Post, May 7, 2007).

These were
V. Tech’s Cook Counseling Center, Blacksburg’s New River Valley
community services board, and nearby Christiansburg’s Carilion St.
Alban’s Clinic, which is where Cho ended up staying overnight. Each
now says it had no reason, jurisdiction, or wherewithal to follow
up. They all saw no evil, heard no evil….. and did nothing at
all.

Says Mike Wade,
the Blacksburg board’s community liaison, “Since we weren’t named
the provider of that outpatient treatment, we weren’t involved in
the case.”

Says Terry
Teel, Cho's court appointed lawyer, of the court's role in overseeing
the treatment, "We have no authority."

Says Christopher
Flynn, director of V-Tech's Cook Counseling center, "I’ve never
seen someone delivered to me with an order that says, ‘This person
has been discharged; he’s now your responsibility.’ That doesn’t
happen.”

Really? What's
on paper contradicts all of them.

Re Virginia
Tech. Here are VA
state guidelines with which state universities have to comply
(Act H 3064 approved by the Governor on March 21, 2007, not even
a month before V Tech):

"The governing
boards of each public institution of higher education shall develop
and implement policies that advise students, faculty, and staff,
including residence hall staff, of the proper procedures for identifying
and addressing the needs of students exhibiting suicidal tendencies
or behavior… Nothing in this section shall preclude any public
institution of higher education from establishing policies and procedures
for appropriately dealing with students who are a danger to themselves,
or to others, and whose behavior is disruptive to the academic community."

Re New River:
Virginia state law says that community service boards "shall
recommend a specific course of treatment and programs” for people
such as Cho who are ordered to receive outpatient treatment. The
law also says these boards “shall monitor the person’s compliance."
[Wade claims that's "news to him."]

Re St. Alban's:
Virginia law says that if a dangerously mentally ill person ordered
into treatment doesn’t go, he can be brought back before the
special judge, and if necessary, in a crisis, be committed to a
psychiatric institution for up to 6 months.

Let's put it
this way: If Virginia state guidelines for universities had been
followed, Cho's history would have been on record and campus police
would have had an eye on him already. And if he had been properly
evaluated and monitored according to state mental health requirements,
he would have been labeled a danger to society and the state police
would have stopped him buying a gun.

So tell me,
why do we need more laws when people aren't following the ones already
on the books?

It's Not
About More Funding:

Was it because
there weren't enough funds, as some argue? Community service boards
apparently handled 115,000 mentally ill people in Virginia in 2005
at a cost of $127 million. That works out — very roughly — to about
a thousand bucks per person. I don't know if that's shabby or not.
But it doesn't really seem relevant here. What could it have possibly
cost in additional time or money to call up and find out if Cho
had gone into treatment? Ten minutes and the cost of a local phone
call.

The whole business
is that amazing. No one seems to have known anything or done much
of anything. No one seems to have followed up or even thought they
had to. For instance, reports say the Cho's family didn't seek treatment
for him because they didn't have enough money, yet the family lives
in an affluent Virginia neighborhood, sent their children to elite
private schools, and gave Cho enough spare change for videos, a
car, a cell phone, an escort service (at least once), firearms,
an ungodly amount of ammo and training at a firing range.

Isn't it much
more likely that if Cho's family didn't get help for him, it was
because of the stigma attached to mental illness, which is much
greater among Asian families? And would more money really have made
that better?

Let states
spend as much as they want on community mental health. But don't
tell me Virginia Tech happened because of lack of money.

It's Not
About More Federal Data Bases:

Some argue
that reporting to the Feds has to be tightened because under federal
law, Cho's voluntary confinement would have automatically prevented
him from buying a gun. (Richard Bonnie, chairman of the Virginia
Supreme Court’s Commission on Mental Health Law Reform.)

Well, in the
first place, as we've seen, if he'd been properly evaluated, state
laws themselves would have stopped Cho. If people don't comply with
state laws, why are they any more likely to comply with federal
laws?

According to
the FBI, Virginia is already the leading state in reporting mental
health dis-qualifications to the Feds. But, the problems is that
Virginia state law is a tad different from the federal law. It lists
only two categories that would warrant notifying the state police
— "involuntary commitment" or a ruling of "mental
incapacitation” — neither of which applied to Cho, who was confined
“voluntarily” and wasn’t ruled incapacitated.

Immediately
after V-Tech, Governor Tim Kaine (a Democrat) eliminated this distinction.
He also said he thought V-Tech would help push through legislation
he supports that would also subject firearms sales at gun shows
to instant background checks (legislation introduced annually in
Virginia that dies before a floor vote in the General Assembly).

[Interestingly,
a
move to expand Virginia's mental health laws was already
in the works in October 2006.

Its goal was
to "modify the criteria for placing people in emergency care
by eliminating a requirement that they pose an ‘imminent’
danger to themselves or others," precisely what's now being
demanded as a result of the V-Tech shootings.]

But will making
every state law automatically comply with federal law on this make
things better or worse? I'm not sure. If people know that their
mental health evaluations automatically go into a federal data base,
will that make them even more reluctant to seek help they might
need? Is it a provision that might be misused by vengeful spouses?
And what if, in the present political climate, expression of certain
beliefs — say, conspiracy theories about the government — were classified
as signs of mental derangement? And suppose you could be forced
into psychiatric evaluation for that? What if the hate crimes bill
on the table now makes even thinking or speaking a certain way a
sign not only of derangement but of criminal intent toward society.
I'm afraid that the unintended bad of more federalization might
come to outweigh the hoped-for good of standardization.

In any case,
to my mind, the real problem lies with the special justice who released
Cho and then decided he had to attend outpatient — not inpatient
— treatment. Whether Cho was sent to V-Tech's Cook Center or not
(Cook's not returning calls), mental health advocates and state
officials call it pretty unusual to order outpatient treatment for
someone labeled a imminent danger to himself. Usually,
it's an inpatient order, says Mary Zdanowicz, executive director
of the Treatment Advocacy Center. And, a 1994 survey of special
justices found that outpatient treatment was ordered in just 8 percent
of the commitment hearings, among other things, because they're
hard to monitor (Joint Legislative Audit and Review Commission).

In short, measured
just by current laws and care standards, Cho's evaluation seems
to have been shoddy and the special justice's remedy poorly conceived.

And I don't
see why more laws would change that.

In fact, part
of the problem looks like too much regulatory apparatus and too
many state bodies with orbits designed to mesh that ended up clashing,
on one hand, and too little common sense and care, on the other.

The three agencies
involved at V-Tech shared responsibility like the three crones in
the myth shared one eye — they fumbled so much as they passed it
around that they dropped it.

In short, what
we have here is a full-throttle display of the Diminishing Utility
of More Bureaucrats and Laws (DUMBEL), whereby what was everyone's
responsibility became no one's job.

Meanwhile,
the policies that should be discussed are not.

We still have
no account of what medication Cho was taking, although his roommates
have told us they saw him taking a pill regularly in the mornings.

And we have
even less discussion about a matter of crucial importance now:

How to hold
the state accountable for laws it expects us to follow but doesn't
follow itself.

An article
in the Chronicle of Higher Education (“Lawyer
Says Virginia Tech's Immunity to Lawsuits Over Shooting Is Not Absolute,”
April 24) describes the potential for litigation at V-Tech and quotes
lawyers who suggest that the university showed "gross negligence."
But of course, the panel's swift and well-publicized exoneration
easily trumps that in the public debate.

Meanwhile,
the media, which rushed to shove microphones and cameras in the
faces of grieving friends and family, hasn't shown much interest
in reporting on what victims are up against if they do try to press
their claims: The doctrine of sovereign immunity.

A
relic of common law, it's designed to protect a state university
like Virginia Tech from litigation by the public. States have relaxed
the doctrine to allow state hospitals, for example, to be sued for
malpractice; still, any plaintiff at V-Tech, I am reliably told,
would have to establish a case of gross negligence and would have
only 6 months to press claims. That means any stalling by the university
helps it avert a lawsuit by reducing the amount of time victims
have to collect information and prepare a case. It’s very likely
that the victims don't even know about the doctrine.

And,
by the way, the doctrine of sovereign immunity holds that a state
can do no wrong because the state creates the law and thus cannot
be subject to it. On that count at least, it looks like the State
of Virginia is already perfectly in synch with the Federal government
these days.

May
15, 2007

Lila Rajiva
[send her mail] is the
author of The
Language of Empire: Abu Ghraib and the American Media (MR
Press, 2005) and with Bill Bonner, the forthcoming Mobs,
Messiahs and Markets, (Wiley, 2007). Visit her
blog.

DIGG THIS

“You are hereby
directed not to enter the College campus or any College owned property
at any time for any reason” reads a one- page letter sent through
courier by administrators no more than a day after an upsetting
classroom incident had come to their attention.

If you thought
that was V-Tech officials getting the perpetrator of reportedly
the biggest campus massacre in the US, Cho Seung Hui, out of the
classroom, you thought wrong.

Probably nothing
says more about the priorities of the political culture nowadays
than the firing last week of Nicholas Winsett, a teacher at Boston’s
Emmanuel College. ("Emmanuel
Prof. Fired For Discussing Virginia Tech Shooting,” Emil Steiner,
Washington Post online, April 24, 2007.)

On Wednesday,
two days after the Virginia massacre, Winsett enacted a little skit
in his classroom.

During the
skit, Winsett used a marker to pretend to shoot at a student who
had previously been prepped to simulate firing back. He was illustrating
his argument that the massacre could have been prevented had university
policy allowed guns on campus. That may be debatable.

But, of course,
debating things is precisely what professors do.

To my mind,
he made some thoughtful points:

He asked students
what the impact of this tragedy on the stock market was (nil) to
show that a sensational tragedy does not equate to something that
has a deep social impact.

He also argued
that the incidence of such killings is miniscule. You are more likely
to be shot in a convenience store or struck by lightning than killed
in a mass shooting.

His interpretation
is open to question, of course. For one thing, I think he overlooks
the importance of the twin issues of psychiatric drug use and the
increase in police-state laws. But I doubt he is much off the mark
on the statistics.

Here is a
video of his argument on YouTube.

Emmanuel College
claims he was making light of the tragedy at Virginia Tech. He is
said to have made derogatory references to “rich, white kids.” The
college is within its rights to maintain its standards, which may
well have been violated by what he said. I don’t claim to know.
But, in this case they seem to have been quick enough to act…even
without much investigation.

Meanwhile,
the President of Virginia Tech has yet to step down for the university’s
role in witlessly enabling Cho Seung Hui. Indeed, if we are to believe
Steger, officials did all that could humanly have been done. But
this Time article calls him on that (“Va.
Tech's President Should Resign,” John Cloud, Time, April
19, 2007).

And this is
what V-Tech's own policy guidelines apparently state:

“The governing
boards of each public institution of higher education shall develop
and implement policies that advise students, faculty, and staff,
including residence hall staff, of the proper procedures for identifying
and addressing the needs of students exhibiting suicidal tendencies
or behavior. The policies shall ensure that no student is penalized
or expelled solely for attempting to commit suicide or seeking mental
health treatment for suicidal thoughts or behaviors. Nothing
in this section shall preclude any public institution of higher
education from establishing policies and procedures for appropriately
dealing with students who are a danger to themselves, or to others,
and whose behavior is disruptive to the academic community.”
(my emphasis).

A glance at
Dr. Steger’s professional record shows it to be an impressive one,
which makes this turn in his career all the more tragic.

But this paragraph
in his CV
struck me not as tragic… but ironic:

“Most
recently, he has been asked by the Swiss Ambassador to the United
States and The World Bank to serve on a committee to establish a
foundation in the United States to conduct research on mitigating
global natural disasters.”

Indeed.

Still, even
if he resigned from V-Tech, Steger’s path is unlikely to be downward.

Right
now, that’s not the case with Nicholas Winsett.

April
25, 2007

Lila Rajiva
[send her mail] is the
author of The
Language of Empire: Abu Ghraib and the American Media (MR
Press, 2005) and with Bill Bonner, the forthcoming Mobs,
Messiahs and Markets, (Wiley, 2007). Visit her
blog.