Zimbabwe Ben on Steroids

The monetary base (MB) was $1,658,848 million on 17 Deccember 2008 and $843,841 on 10 September 2008, a 96.58% increase in 14 weeks, which compounds to a 1,131% annualized rate. The MB increased $191,119 in the two weeks ended 17 December or 13.02%. Hey Zimbabwe Ben, give it a rest. Deflation? What are the deflationistas talking about?

Galbraith's Dialectic

"Its interesting to read this essay from early 2006 today in the light of what we have seen in the intervening period. A number of people who might have dismissed this out of hand back then might see a little more truth behind the rhetoric today. ... Why are some people so reluctant to believe that sociopaths and narcissists can use the power of the pen to prey on people? Because they are well spoken and organized? We could contend that these are the most dangerous of the emotionally warped with a need to acquire, dominate and control, because they are smarter and more calculating than the impulse murderers, burglars, rapistsm thieves, and pedophiles. ... Some of the scariest people we have ever met were articulate and pathologically driven borderline psychopaths with a need to acquire political and economic power. It is the focus of their illness that makes them powerful. ... The Constitution is a restraint that works both ways, against the predations of the powerful, but also as a shield against would-be Robespierres with their reigns of terror", my emphasis, Jesse, 26 December 2008, http://jessescrossroadscafe.blogspot.com/2008/12/predator-class.html.

Jesse, you ignored your Hegel, thesis, antithesis, synthesis! Now I will excerpt and explain James Galbraith's (JG) 2006 article using Hegel's dialectic.

"The doctrines of the 'law and economics' movement, now ascendent in our courts, hold that if people are rational, if markets can be 'contested,' if memory is good and information adequate, then firms will adhere on their own to norms of honorable conduct. ... It's a strange vision, and if we weren't governed by people like John Roberts and Sam Alito, who pretend to believe it, it would scarcely be worth our attention. ... Dollars command the world's goods, rupees do not; membership in the dollar economy makes every working American, to some degree, complicit in the capitalist class. ... The predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is the defining feature, the leading force. And its agents are in full control of the government under which we live. ... They include the misanthropes who led the campaign to abolish the estate tax. ... For in a predatory regime, nothing is done for public purposes. Indeed, the men in charge do not recognize that 'public purposes' exist. ... The predatory-prey model explains some things that other models cannot: in particular, cycles of prosperity and depression. ... The predatory model can also help us understand why many rich people have come to hate the Bush administration. For predation is the enemy of honest business. In a world in which the winners are all connected, it's not only the prey who lose out. It's everyone who hasn't licked the appropriate boots. Predatory regimes are like protection rackets: powerful and feared, but neither loved nor respected. They do not enjoy a broad political base. ... Predators compete not by following the rules but by breaking them. They take the business-school view of law: Rules are not designed to guide behavior but laid down to define the limits of unpunished conduct. ... Black was the lawyer/whistle-blower in the Savings and Loan and Keating Five scandals; he later took a degree in criminology. His theory of 'control fraud' addresses the situation in which the leader of an organization uses his company as a 'weapon' of fraud and a 'shield' against prosecution--a situation with which law and economics cannot cope. ... For instance, law and economics argues that top accounting firms will protect their own reputations by ferreting out fraud in their clients. ... How can the political system reform itself? ... How can we get modern economic predation back under control, restoring the possibilities not only for progressive social action but also--just as important--for honest private activity? Until we can answer those questions, the predators will run wild", my emphasis.

JG, what "straw man" law and economics (L&E) movement are you talking about? I've read at least ten of Richard Posner's books and think I know at least as much about it as you. "Ascendent in our courts", huh? At best you, JG, are an ignoramus, at worst a fraud. You remind me of your father, John Galbraith, (1908-2006), Harvard economics professor and admitted socialist. You learned something from him. I agree, Roberts and Alito are intellectual frauds. However they don't claim to decide cases using "L&E" or anything other than, "if it's good for big business, it's good". Nothing forces China, India, Russia or any other country to accept dollars. Do you recollect, Charles DeGaulle under the tutalage of Jacques Rueff, led to the 1968 dollar devaluation? A big 1967 discussion topic was "dollar imperialism". Do you remember? In 1967 Jean-Jacques Servan-Schreiber (JJSS) wrote The American Challenge. Do you remember it? I do, reading it in 1967. Did your father discuss JJSS's book in any of his Harvard classes? You are four months my junior. Any country can go to gold at any time. "Complicit in the capitalist class", how interesting. Are all capitalists criminals? I agree, in my experience only a small percentage of the wealthy are predators. Yes, they control Uncle Sam. I have written of the "Bloodless Coup" many times. I oppose the estate tax. I have a vested interest in keeping it, i.e., to sell estate planning services. So? Plank three of the Communist Manifesto advocated an end to inheritance rights. Are you, JG a Communist? If the shoe fits, wear it. I use the Austrian business cycle to explain booms and busts. Yes, "predation is the enemy of honest business". So? "Appropriate boots". Now we are getting somewhere, see my Leon Trotsky quote, my 20 October 2008 post. Criminal conduct. Humm, see my 25 April 2008 post. I articulated the "control fraud" concept in 1984, Black may have done it earlier, I do not know. I too, saw the S&L crisis first-hand. "Cannot cope", is JG nuts? L&E says this is what happens. The answer: raise penalties for, and the likelihood of, being caught. JG creates straw men. JG's "top accounting firm" argument is a sham. What "top" accounting firms do is: discount their expected net client fees at an appropriate rate. They subtract from this the present value of the expected lawsuit payout. If the result is positive, they produce a workpaper rationalizing why white is black. When did I first say this? Drumroll please, approximately Thanksgiving 1976, 32 years ago! Now JG exposes himself, "progressive social action". What does JG want? Honest business or to replace our current predators with others which will use predation for JG approved purposes? JG, you apparently fooled Jesse, not me. JG's Hegelian synthesis is between today's predators and JG's preferred beneficiaries of "progressive social action". JG wants predators to redirect more loot to JG's intended beneficiaries. It's the bourgeoise that was Marx and Lenin's enemy. So too, JG's.

I think of JJSS's book and how I read the same arguments with respect to China today, that I read with respect to France and Germany in 1967. In 1967 I did not know the arguments were fallacious. 1967's world lived under Bretton Woods (BW) and we knew BW would be with us forever. In 1971 Nixon closed the "gold window". So much for what we knew. Similarly, China will pull the plug on the dollar sooner or later.

Towne on Gold

Jake Towne's (JT) 26 December 2008 post on various "gold standards" blasts Zimbabwe Ben for the "Great Lie", i.e., claiming the gold standard caused the depression. I agree with JT. I had not planned to excerpt JT's article. But after a reader request, have. Link: http://seekingalpha.com/article/112309-bernanke-s-great-lie-the-gold-standard-and-the-great-depression.

"The purpose of the following is to argue that the 'gold standard,' as understood by most of the public, did not cause or worsen the Great Depression as current Fed Chairman Ben Bernanke has based many of his papers, speeches, and, to a large extent, his entire career on. I do believe this blame must be firmly rejected and monetary policy should, at the very least, be debated in a national forum. Indeed many other economists, such as the Friedman family, Anna Schwartz, Alan Greenspan, and Jeffrey 'Shock Doctor' Sachs, have all promulgated this lie. ... I charge that these renowned Keynesian and Friedmanite-Monetarist-Chicago-Shock-School economists have consistently used the term 'gold standard' to mislead their audiences and readers". I part company with JT as Uncle Miltie, when asked, said a 100% reserve gold standard would be a "pretty good system", albeit "inflexible". Friedman never thought it politically feasible to have 100% gold money. "For instance, in his 1990 NBER paper Bernanke frequently refers to an 'interwar gold standard' and in his 2002 salute to Milton Friedman he acknowledged that 'the gold standard was not adhered to uniformly as the Depression proceeded'." The various world powers contemplated abandoning gold to finance the impending Great War. "Without more ado, let's dive into 'gold standard' terminology, although if you do not understand the differences between commodity, receipt, fractional, and fiat money to please read this first 'The Money Matrix--What is Honest Money?'."

"The pure 100% reserve gold and silver standard is commodity money issued in the form of hard gold and silver coins, or receipt ... money issued in lieu of metal held in a money warehouse. The amount of coinage in circulation plus the receipt money always equals the total mass in the monetary system". This is the gold standard. People carry gold and silver coins and use them daily. Banks are just gold and silver warehouses. Like wheat warehouses, banks charge you storage fees! Any wheat, corn or soybean silo owner could run a bank under this standard.

"The 'international' or 'classical' gold standard is actually a form of fractional money. In simple terms, one can redeem paper or electronic currency for a fixed amount of gold coinage. ... The critical concept to understand here is that the monetary supply can be inflated or pyramided upon the total base amount of metal, which of course is conveniently possessed by the government. So under the 'classical' gold standard if everyone decided to exchange their paper receipts at the same time, the country would be bankrupted; not enough gold would exist for everyone to redeem their receipts". Since 1694, when the Bank of England (BofE) was formed, this is was the world's 'gold standard' for most years. A 100% gold standard is incompatible with fractional reserve banking.

JT now describes two other gold standards I ignore.

"A fiat monetary system consists of money that is declared 'legal tender' by a government with no commodity backing. ... As [Murray] Rothbard notes, if one examines both the 'gold exchange' standard and the 'gold bullion' standard closely, both are de facto fiat currencies as the people are in effect banned from possessing the backing commodity gold". This is important. Why? Because a gold coin standard takes power from the banks and gives it to the people who can get coins and force banks into bankruptcy. We are taught "bank runs" are"bad". Why?

"Now what really happened in the early twentieth century? ... Up until 1914, America and most European nations were on the 'classical' gold standard. China operated on a 'classical' silver standard. Then America brought the central bank known as the Fed into existence in 1914 via the Federal Reserve Act of 1913. Next, to finance WWI, France, Holland, Germany, Britain, Belgium, and Italy broke off the 'classical' gold standard and issued paper money to finance their military spending deficits". This explains what happened. The world's governments stole each's respective citizen's savings by inflating each's currency to pay for WWI. The world could not come leave WWI richer instead of poorer. Someone somewhere had to pay for the war in real terms. "Money" confuses the issue. As opposed to say, Germany sending police house-to-house to rob people of gold at gunpoint, it decreased the value of the people's marks by printing more of them. In effect, engaging in fraud as opposed to robbery. In about 1957, we were taught this was common in South American countries that regularly had 20-35% annual inflation rates. They were immoral. Imagine, first graders were expected to understand what Zimbabwe Ben (1590 SATs) cannot. This is very simple: all consumption is paid for.

"However, on the side of the WWI victors ... was America with its gigantic horde of gold. American Fed chairman Benjamin Strong massively inflated the dollar to prop up the [BofE's] 'gold bullion' standard with no benefit to the American people whatsover. This Great Inflation took place between 1921-1929 and the American monetary system was inflated by 62%, or 7.7% annualized". China props up our dollar today, "with no benefit to the [Chinese] people whatsoever". When hundreds of millions of Chinese peasants realize this, we could have a catastrophe an overpaid fool like Henry Paulson cannot contemplate: war with China. I'm deadly serious. That "respectable"economists do not discuss current monetary policy's war making potential show how incompetent they are. Or worse. Historical note: Strong was head of the New York Fed, not Fed Chairman.

"In 1931 all hell broke loose. ... The final descent came on September 21 [1931] when the [BofE]abruptly left its 'gold bullion' standard and depreciated madly, causing massive losses to French banks". What recently happened in Iceland?

"To make a long story fairly brief, President Hoover began the ill-fated government-assisted economy called the 'New Deal', which FDR fanatically continued. FDR ended the 'classical' gold standard with his theft by force of America's remaining coin bullion". FDR was smart enough not to send Secret Service agents house-to-house to seize gold coins. Even FDR figured out that might spark something America's bankers did not want, a revolution.

"Only until the war boom of 1942 would unemployment drop to pre-Depression levels. ... As previously claimed, Great Britain had never returned to the 'classical' gold standard, and instead had been propped up by the FED! The 'speculative attacks' were not speculative at all; they were committed by those who recognized that this Madoff-Ponzi scheme had failed!". I remember 1967's pound devaluation and the Chancellor of the Exchequer's lies about Britain's plans not to devalue the pound. I remember Mexico and dog hill, 1982. The moral of the story: government officials lie all the time. Listen to them at your own risk!

"Maybe when this depression finally ends in the hyperinflationary death of a bunch of more fiat currencies, I will write a paper to correct all the Keynesian and Friedmanite gaffes Bernanke and others continue to make. Hopefully, I can call it 'How the Austrian Standard Cured Inflation and Stopped the Financial Crisis of the Greater Depression.' I will be sure to correctly define the Austrian Standard first".

Our current monetary misadventure need not end in hyperinflation. Why? Because Unc owns 261.5 million ounces of gold. With M3, no longer published, estimated at $15 trillion, M3 can be "ratified" at $57,000 an ounce. Do I expect a gold "remoniztization"? Yes, when the "price" is high enough. When in Las Vegas, who wins, you or the house? Bet with the house, buy gold. Related posts:

http://skepticaltexascpa.blogspot.com/2007/12/kill-all-lenders.html.

http://skepticaltexascpa.blogspot.com/2007/12/fed-and-four-letter-word-gold.html.

http://skepticaltexascpa.blogspot.com/2008/10/dollar-si-krona-no.html.

Time's St. Joan

"We must start with the recognition that, despite decade after decade of reform efforts, our public K-12 schools have not improved. ... It is most crucial for our political leaders to ask why we are at this point--why after millions of pages, in thousands of reports, from hundreds of commissions and task forces, financed by billions of dollars, have we failed to achieve any significant progress? ... Lack of effort is not the cause of our 30-year inability to solve our education problem. ... [W]e have seen many courageous and talented individuals pushing hard to move the system. Leaders such as Joel Klein (New York City), Michelle Rhee (Washington, D.C.) and Paul Vallas (New Orleans) have challenged the system, and elected officials from both sides of the political spectrum have also fought valiantly for change. ... I believe the problem lies with the stucture and corporate governance of our public schools", my emphasis, Louis Gerstner at the WSJ, 1 December 2008.

"Rhee has promised to make Washington the highest-performing urban school district in the nation, a prospect that, if realized, could transform the way schools across the country are run. ... This fall, Rhee was asked to meet with both presidential campaigns to discuss school reform. In the last debate, each candidate tried to claim her as his own, with Barack Obama calling her a 'wonderful new superintendent.' ... Each week, Rhee gets e-mails from superintendents in other cities. They understand that if she succeeds, Rhee could do something no one has done before: she could prove that low-income urban kids can catch up with kids in the suburbs. ... Rhee is convinced that the answer to the U.S.'s education catastrophe is talent, in the form of outstanding teachers and principals. She wants to make the Washington teachers the highest paid in the country, and in exchange she wants to get rid of the weakest teachers. ... Like about half the states, Washington is now tracking whether students' test scores improve over time under a given teacher. Rhee wants to use that data to decide who gets paid more--and, in combination with classroom evaluation, who keeps the job. But many teachers do not trust her to do this fairly, and the union bristles at the dea of giving up tenure, the exceptional job security that teachers enjoy", my emphasis, Amada Ripley/Washington at Time, 8 December 2008.

New principle: assert governance problems when you have no clue what's wrong! Michelle Rhee (MR) is now "Courageous". She's today's St. Joan! We need an education SARBOX! That will fix everything. Right. I say let's give our new St. Joan the same treatment the last one got. See my 10 August 2008 post: http://skepticaltexascpa.blogspot.com/2008/08/is-anyone-surprised.html.

I have an idea for MR: purge Washington's schools of Negroes, leave only white and Asian kids. MR will then run the top performing urban school district. St. Joan, the answer is talent, kids, not teachers! Like many Washington teachers, I don't trust MR as far as I can throw her. Why? Time writes, "The second year, Rhee got better. She and another teacher started out with second-graders who were scoring in the bottom percentile on standardized tests. They held onto those kids for two years, and by the end of third grade, the majority were at or above grade level, she says. ... 'What was most dissappointing was to watch those kids go off into the fourth grade and just lose everything,' Rhee says, 'because they were in classrooms with teachers who weren't engaging them'." Really MR, or who did not fudge the kids' tests? I think sufficient scrutiny of MR's kids tests will show she faked their results.

Citi's $800 Million Man-2

"After 18 tempestuous months with Citigroup Inc., the managers of Old Lane Partners LP are looking for a fresh start. Last year, the financial-services firm shelled out more than $800 million to buy Old Lane, eager for its stable of well-regarded former Morgan Stanley executives, led by Vikram Pandit. Mr. Pandit became Citigroup's chief executive last December. ... The hedge fund's hefty price tag and quick demise angered Citigroup employees and investors, especially as Citigroup's overall financial condition worsened. Mr. Pandit reaped at least $165 million from the deal", my emphasis, David Enrich at the WSJ, 24 December 2008.

Well-regarded "former Morgan Stanley executives", by whom? Where's GSG's CNC guillotine? Are the SEC and SDNY US attorney's office looking into the bona fides of this transaction? If not, why not? What are Citigroup's directors like say, Robert Rubin doing? I think this transaction was a sham. See my 24 June 2008 post: http://skepticaltexascpa.blogspot.com/2008/06/citis-800-million-man.html.

Tick Marks

Dan Meyer, Tennesse accounting professor, writes Tick Mark, link: http://tickmarks.blogspot.com/. His 10 December 2008 post reads in part, "In a closely matched field of eight, (the nominees plus David Albrecht's 'The Summa'), the four accounting blogs chosen for the 'Twelve Blogs of Christmas' are: CPA Firm Leaders Blog (Rita Keller), FEI SOX Blog (Edith Ornstein), re: the Auditors (Francine McKenna) and the Skeptical Accountant (anonymous male from Texas). ... The Skeptical Accountant is a hard-nosed libertarian male with no use for sloppy economic practice--regardless of who is responsible. Two top recent posts include 'Oil Supply' and 'The Bloodless Coup Continues-6'."

Thanks Professor Meyer. I think your description of me as a "hard-nosed libertarian male" is more accurate than as a leftist.

Ben Franklin-4

"I read Justin Fox's article with horror [Dec.,15]. The basic premise: a government-run pension is more secure than my 401(k). Curiously, I saw no mention of a current government program called Social Security--one the government has handled so expertly I probably will never get to collect from it", Charles Ravenswaay (CR) letter to Time, 29 December 2008.

"The government cannot guarantee a 3% return over inflation. And we already have a national pension system called Social Security, which is going bankrupt. ... You would better serve your readers by educating them to these realities rather than indoctrinating them with the obfuscations of self-serving Democratic politicians", my emphasis, Thomas Maskell (TM) letter to Time, 29 December 2008.

That's it CR. Kick Fox for me too!

Attaboy TM, "obfuscation of self-serving Democratic politicians".

Defense Economics

"In his great Civil War history, 'Decision in the West,' Albert Castel describes the last Confederate hope of victory. If in 1864 the Confederate armies continue to extract a steep cost from the North, 'the majority of Northerners will decide that going on with the war is not worth the financial and human cost and so will replace Lincoln and the Republicans with a Democratic president and Congress committed to stopping hostilities and instituting peace negotiations.' ... The administrations of George W. Bush have virtually assured such a catastrophe throwing the country off balance, both politically and financially, while breaking the nation's sword in an inconclusive seven-year struggle against a ragtag enemy in two small bankrupt states. Their one accomplishment--no subsequent attacks on American soil thus far--has been offset by the stunningly incompetent prosecution of the war. ... This confusion has come at the price of transforming the military into a light and hollow semi-gendarmaire focused on irregular warfare and ill-equipped to deter the conventional and strategic forces of China and Russia while begging challenges from rivals or enemies no longer constrained by our former reserves of strength. For seven years we failed to devise effective policy or make intelligent arguments for policies that were worth pursuing. Thus we capriciously forfeited the domestic and international political equilibrium without which alliances break apart and wars are seldon won. The pity is that the war could have been successful and this equilibrium sustained had we struck immediately, preserving the link with September 11th; had we disciplined our objective to forcing upon regimes that nurture terrorism the choice of routing it out with their ruthless secret services or suffering the destruction of the means to power for which they live. ... The counterpart to Republican incompetence has been a Democratic opposition warped by sentiment. The deaths of thousands of Americans ... were not a criminal matter but an act of war made possible by governments and legions of enablers in the Arab world. ... But the costs of not reacting to China's military expansion, which could lead to its hegemony in the Pacific; or of ignoring a Russian resurgence, which could result in a new Cold War and Russian domination of Europe; or of suffering a nuclear detonation in New York, Washington or any other major American city, would be so great as to be, appraently, unimaginable to us now", my emphasis, Mark Helperin (MH) at the WSJ, 19 December 2008.

"Hosni Mubarak is no one's idea of a visionary, but in sensing the Middle East's political winds he has few equals. So when Egypt's president-for-life warned his ruling party last week that 'the Persians are trying to devour the Arab states,' it's worth paying attention. ... Egypt and Saudi Arabia ... calculate that the U.S. lacks the will to prevent a nuclear Iran. As for Barack Obama's promise of 'tough diplomacy,' we suspect the Arab states take him about as seriously as they would a tourist who thinks he knows how to bargain at an oriental bazaar. Little wonder, then, that the Arab states are taking a keen interest in acquiring nuclear capabilities of their own. ... Still, it's difficult to see what use oil giants like the Saudis or Algerians would have for nuclear power except as a hedge against an Iranian bomb. ... All this is a useful reminder that the threat of Iran's nuclear programs lies not only in whether or not it will acquire a bomb. It's also a question of how Iran's neghbors will react. The Israelis have said publicly that a nuclear Iran is an intolerable threat, a view many Arab states share privately. If neither Israel nor the U.S. act, they will be tempted to seek their security by acquiring their own nuclear deterrents", my emphasis, Editorial at the WSJ, 20 December 2008.

"One of the top priorities for the Obama administration must be to establish policy regarding China's military buildup. ... Chinese officials claim that the buildup is 'defensive' and insist that Beijing's intentions are 'peaceful.' ... Investments in updating our weapons systems and bolstering our alliances will pay dividends in keeping China at bay", Editoral at the Washington Times, 22 December 2008.

"The Department of Defense is preparing budget cuts in response to the decline in national income. The DOD budgeteers and their counterparts in the White House Office of Management and Budget apparently reason that a smaller GDP requires belt-tightening by everyone. That logic is exactly backwards. ... A temporary rise in DOD spending on suppplies, equipment and manpower should be a signifcant part of that increase in overall government outlays. ... An important challenge for those who are designing the overall stimulus package is to avoid wasteful spending. One way to achieve that is to do things during the period of the spending surge that must eventually be done anyway. It is better to do them now when there is excess capacity in the economy than to wait and do them later. ... Industry experts and DOD officials confirm that military suppliers have substantial unused capacity with which to produce additional supplies and equipment. Even those production lines that are currently at full capacity can be greatly expanded by going from a single shift to a two-shift production schedule. ... Military planners must also look ahead to the missions that each of the services may be called upon to do in the future. Additional funding would allow the Air Force to increase the production of fighter planes and transport aircraft without any delays. The Army could accelerate its combat modernization program. The Navy could build additonal ships to deal with its increased responsibilities in protecting coastal shipping and in countering terrorism. And all three services have significant infrastructure needs. Although some activities like shipbuilding cannot be completed in the two year stimulus period, the major part of the expenditures can be brought forward in time by acquiring components and materials quickly and holding them in inventory until they are needed in the ship building process. Such a departure for just-in-time inventory management would be wasteful under normal conditions, but make economic sense when there is temporary excess capacity", my emphasis Martin Feldstein (MF) at the WSJ, 24 December 2008.

"China's top military spokesman said it is seriously considering adding a first aircraft carrier to its navy fleet, a fresh indication of the country's growing military profile as it prepares for its first major naval deployment abroad. ... But officials also made clear that China's navy, which has been investing heavily in ships and aircraft, now has the capability to conduct complex operations far from its coastal waters--and that Beijing is continuing to expand its reach and capability, perhaps with a carrier. ... In some of the most direct public statements on current thinking behind Beijing's naval policy, defense spokesman Col. Huang Xueping said Tuesday that, 'China has vast oceans and it is the sovereign responsibility of China's armed forces to ensure the country's maritime security and uphold the sovereignity of its coastal waters as well as its maritime rights and interests.' ... Since Aug. 15, countries have dispatched warships and planes to participate in antipiracy patrols in the Gulf of Aden and Indian Ocean waters of Somalia. But international forces have been stretched too thin to effectively curb the increasingly daring and sophisticated pirates. ... U.S. government and independent analysts say it could be 2015 or 2020 before China could be ready to deploy an operational carrier", my emphasis, Shai Oster at the WSJ, 24 December 2008.

"Hamas is also sustained by the insight that Israel's considerable military capabilities are unlikely to be matched by political will. It believes that whatever attacks come will be tempered by a host of humanitarian and diplomatic considerations. ... It believes that the weight of international sympathy will be on its side. ... This is not a counsel of restraint, of which Israel has shown more than enough through years of provocation. It is merely to point out that no ingenious conceit can disguise the fact that war offers no outcome other than victory or defeat. This is one big thing that Hamas understands, and that Israel must as well", my emphasis, Bret Stephens at the WSJ, 30 December 2008.

"Writing in the [WSJ] on December 24, 2008, Martin Feldstein gives us an article entitled, 'Defense Spending Would Be Great Stimulus.' The title tells you everything you need to know: military Keynesianism is the medicine being prescribed by a leading figure of the politico-economic Establishment--a Harvard professor, former chairman of the Council of Economic Advisers, former president of the American Economic Association, president emeritus of the National Bureau of Economic Research, and member of the President's Foreign Intelligence Advisory Board. That a man so drenched in professional honors and attainments would be peddling such long-discredited claptrap speaks volumes about the state of mainstream economics. When you think it can't sink any lower, it does. ... Feldstein forsees the creation of some 300,000 jobs as a result on flinging money helter-skelter at military personnel increases, training, equipment, and procurement of major items such as fighter planes, transport aircraft, and combat ships. ... Keynesian economics rests on the presumption that government spending, whether for munitions or other goods, creates an addition to the economy's aggregate demand and thereby brings into employment labor and other resources that otherwise would remain idle. ... Such theorizing never faced squarely the underlying reason for the initial idleness of labor and other resources. ... Contrary to the claims of Keynesian economists, government deficit spending will not generate something for nothing; it certainly will have opportunity costs", Robert Higgs, 2 January 2009 at: http://lewrockewell.com/higgs/higgs101.html.

I agree with MH, the Bushites are destroying our military and leading the world to political instability; 1913 anyone? MH says our military is becoming a "semi-gendarmarie", my words! Bush on 12 September 2001 should have dusted off FDR's "Day of Infamy" speech, delivered it and asked for a declaration of war against Saudi Arabia. He should have ordered the Saudi ambassador to the White House and told him on television, "You will end support for all terrorist activities worldwide. You will stop funding madrassas in Pakistan. You will reform your laws now, permit churches, Hindu temples and such to be built in Saudi, recognize Israel and we will tell you what else we want when it strikes us. Here's a picture of Dresden in 1945. Do you want: Mecca, Medina, Riyadh, Jeddah, etc., to look like this? Go. You have 48 hours to start doing what we demanded. If you wish to destroy your oil wells, go ahead. We will then sit and watch at least 15 million of your 23 million citizens starve to death. We're not kidding. How long will the House of Saud last when starvation is widespread in the Kingdom?". Imagine the howls from Foggy Bottom. The American public would have loved it. Bush's public approval rating would have at least equalled Czar Putin's today. And if we had to burn a few Saudi cities to the ground to show we meant business, so be it. Why are Saudis more precious than: Germans and Japanese were in World War II and American GIs today? This didn't happen. Result: we are stuck in Afghanistan and Iraq, have a homeland security apparatus that harasses Americans, have China and Russia, each of which receives Islamic terrorism, think us crazy. What can we expect from Bush who thinks he has a Saudi prince for a friend? Would Russian domination of Europe be so bad? What's the alternative, Islamic domination?

The Middle East is a tough neighborhood. Only force is respected there. We, Russia and Israel should long ago have carved up Iran like a Thanksgiving ham. Libya's Mohammar Khaddafy also warned us of Iran's danger to the Arab states. Is Foggy Bottom listening, or does it think "tough diplomacy" exists?

Who cares what the Chinese say. Only capabilities count. Besides isn't Communist "peace", when all nations in the world are Communist?

Where is belt-tightening by Citigroup, Goldman and AIG? MF thinks the DOD is just one more federal make-work program. MF and I live in different worlds. Just-in-time inventory for the DOD? Is MF crazy? Suppose we got in a major war. Does MF think our enemies will afford us the luxury of building war materials after it starts? MF is a Harvard economics professor.

The world's naval forces are "stretched too thin" to deal with a few pirates. Amazing.

The US would do well to realize that "war offers no outcome other than victory or defeat". If that means killing even hundreds of thousands of enemy aliens, so be it. During WWII about 6.9 million Germans died; 3.6 million were civilians. So?

While agreeing with Higgs as to Keynesianism, I disagree with him as to the need for equipment procurement. Much of our hardware is antiquated. In terms Higgs can understand, I'd rather the US fight more capital intensive as opposed to labor intensive wars. Our F-15s use a 37-year old design. Our last B-52, the "H" was made in 1962. We use planes older than their pilots! Our M-1 tanks were first made 30 years ago. Our nuclear deterrent is stale. We never built our 600-ship navy, etc., etc., etc.. To refurbish our military and modernise it could exceed $700 billion just for hardware. We spent $300 billion to prop up Citigroup and $150 billion on AIG and abandon our "social contract", which requires we protect our citizens. Crazy. My first contact with military Keynesianaims was in 1967 when The Report from Iron Mountain was released, link: http://en.wikipedia.org/wiki/The_Report_From_Iron_Mountain. Real or hoax, you decide?

Feds in Motion-2

"Sean Patrick Casey, a top federal prosecutor in Brooklyn, N.Y., handling investigations of Wall Street amid the credit crisis, is joining law firm Mayer Brown, LLP as a partner in February", Amirt Efrati at the WSJ, 19 December 2008.

The revolving door revolves once more. We know Mayer Brown (MB), don't we? Yes, MB is the law firm that wasn't indicted over the Refco scandal, see my 22 and 27 December 2007 posts.

Toothless SEC-10

"UnitedHealth Group Inc. settled a [SEC] civil lawsuit over alleged stock-options backdating. The company's former General Counsel, David J. Lubben, agreed to a $575,000 penalty in the case. Mr. Lubben also will repay $1.4 million in gains and $347,211 in prejudgment interest. ... Neither UnitedHealth, one of the largest U.S. health insurers, nor Mr. Lubben admitted or denied the allegations", my emphasis, Kathy Shwiff at the WSJ, 23 December 2008.

Another SEC enforcement triumph.