Saturday, June 28, 2008

They have the oil. We have the paper. What's next?

An insightful post at THE CUNNING REALIST: Revenge Of The System.

A phrase that's become popular is "a clash of cultures" and variations of it. The description's appropriate. The first culture is one in which policymakers believe they've repealed the natural business cycle. This culture of moral hazard and push-button Fed liquidity makes it possible for 30-somethings to sit in front of computer screens in Manhattan and Connecticut and make millions from the flickering green dots, while that same liquidity debases the dollars held by wage earners, retirees, and prudent savers; it allows mediocre corporate executives to exercise stock options and become fabulously wealthy; it tells stock and real estate speculators that if things go south, someone sitting in an office in Washington will press the "print" button and make everything okay; it makes "bridges to nowhere" possible; and it allows a nation to launch a preventive war and decades-long occupation without a thought about how to pay for it. This culture depends on dollar hegemony.

The other culture is composed of a few countries, non-allies, that happen to occupy the ground above the natural resource most sensitive to Washington's print button. Since they have the gall to object to our insistence on exchanging ever-depreciating pieces of paper for their main (and finite) natural resource, they both complicate our attempt at reinflation and profit from it.

If a U.S. attack on Iran happens during this administration, it won't be an act of the White House, neocons, or Republican party. And if it doesn't happen before January '09 and something magically comes along after that to make it "necessary" it won't be an act of the Democrats. It'll be the culture, the establishment. I don't mean "establishment" in the pejorative sense. You don't get to the Oval Office, or even come close, without understanding what that word means. Democratic leaders, including of course Hillary Clinton, understand the underlying exigencies and global market dynamics just as well as the White House. Of course we'll get the obligatory gnashing of teeth about the use of force. But let's see how much real resistance there is. Do you think the Dems want operational responsibility for what they realize must come next? This is deeper than either partisan politics or a weapons program that might produce a nuke three or five or ten years from now.

We know the prewar intelligence on Iraq was, at best, massaged and cherry-picked. We know that in January 2003, President Bush secretly proposed painting a U.S. reconnaissance plane in the colors of the United Nations, hoping that Saddam would then shoot at it and provide a casus belli. We know someone forged the Niger uranium documents. Any clear-thinking person using an ounce of hindsight knows the notes that accompanied the 2001 anthrax attacks (viewable here) were a ludicrous attempt to imitate the way a native Arabic speaker might write rudimentary English.

Anyone willing to do those things is capable of literally anything. There are some truly malevolent actors out there right now, and you don't exactly need a custom-fitted Reynolds Wrap chapeau to understand that. But it's important to realize they are just as likely to have names you've never heard before and probably never will. No one typed the Niger forgeries in the basement of the White House. The anthrax notes weren't painstakingly scrawled out in Karl Rove's office on a Sunday night. It wasn't necessary. The bad actors know that once their "work" sets the stage, public officials -- particularly these public officials -- can be relied upon to run with the ball. But I think it's a mistake to see that dynamic as unique to the current administration, or to believe that it won't apply the moment a Democrat sits in the Oval Office. Some underlying exigencies supersede partisan politics.

They have the oil. We have the paper. By shunning that paper and benefiting from our extraordinary attempts to stem economic weakness, they pose an existential threat to Bailout Nation. How much longer can the system allow that? If there's a time for vigilance and maximum skepticism about any sort of "provocation" that conveniently pops up, I think this is it.

Friday, June 27, 2008

Strict and Loose Construnctionism

When I took history in middle school, I remember being taught that loose constructionism meant interpreting the "spirit of the constitution" while strict constructionism meant a literal reading of the words in the constitution. Only now looking back do I realize that this was left-wing propaganda in our education system. When using such phrases as the "spirit of the constitution," of course one is going to think that it is the correct legal philosophy. It's like naming a bill "The Patriot Act" -- only an enemy of America could disagree with it. It is political spin to associate loose constructionism with the spirit of the constitution and strict constructionism with a fundamentalist adherance to the words.

I am a strict constructionalist, but I would say I believe more in the spirit of the Constitution than people who would call themselves loose constructionists. The spirit of the constitution was to limit the power of the Federal goverment. Article I Section 8 lists the "Powers of Congress" and this pretty much means the power of the Federal government. I noticed while reading it today that the entire list of powers given to Congress easily fits on the screen of my laptop. There are only 18 powers given to Congress and I can read all of them without even scrolling.

Loose constructionists believe that somehow the founders couldn't have anticipated the changest that would take place over 200 years and they just forgot or couldn't have known to give Congress all the other powers they in fact needed. Therefore, we'll just interpret the Constitution to mean that all those other "necessary" powers are implied. But this is really going against the spirit of the document. As Thomas Jefferson, said the founders intended to bind the government "from mischief by the chains of the Constitution." They didn't forget to give the Federal goverment certain powers -- they wanted the government to have as little power as necessary to form a more perfect union. Section 8 lists only 18 powers given to Congress. Section 9 lists limits on these powers. But still, this wasn't enough to get many of the states to ratify the Constitution because they felt it didn't do enough to restrict some future government from asssuming additional powers. So they added 10 amendments. The first 8 listed specific things that Congress couldn't do that might infringe on liberty. The 9th amendment basically said that if they forgot any, Congress can't do those either. And the 10th amendment explicitly said that all other powers are reserved to the states. Open and closed. That's the spirit of the Constitution.

James Madison said, "The people are the only legitimate fountain of power, and it is from them that the constitutional charter, under which the several branches of government hold their power, is derived. " There is only one legal mechanism for the Federal government to assume additional powers that aren't explicitly granted in the Constitution. It is to propose amendments and have three-quarters of the states approve them. The founders made the bar high because they wanted to make sure that this Federal government couldn't assume new powers unless the the people overwhelmingly supported it. The centralized concentration of power in Washington that we have today where the Federal government assumes power with almost no limitation is exactly the opposite of the spirit in which this country was founded.

I am taking back the phrase "spirit of the constitution" to mean the form of government that the founding fathers intended and that the states all agreed to. That is the only legitimate interpretation of the Constitution.

Thursday, June 26, 2008

Ron Paul Discusss Inflation and the Coming War with Iran

Among other things, talks about a bill that will be introduced in July that sets the stage for war against Iran.

"This demands that the President impose stringent inspection requirement on all persons, vehicles, ships, planes, trains, and cargo entering or departing Iran and prohibiting the international movement of all Iranian officials."

Paul says this is effectively closing down Iran and is basically a declaration of war against Iran. This will only pass with the Democrats support. Both parties are war parties -- the choice between Republican and Democrat is an illusion.

Don't trust anyone who can't see into the future

Greg Mankiw's Blog: Don't trust anyone who can't see into the future

What Greg Mankiw fails to mention is that the housing bubble, doc-com meltdown, and the current inflation are outcomes predicted by the principles of Austrian economics. As was plain to von Mises, monetary inflation creates asset bubbles and price inflation.

Thursday, June 19, 2008

The Icahn Report

Great content so far at The Icahn Report. His posts discuss problems in corporate governance and he touches upon similar issues I have brought up in my posts on Capitalism versus Corporatism.

Wednesday, June 11, 2008

Gun Control

I was listening to NPR last night on the drive home and happened to tune into an interview discussing gun violence in Trenton, NJ. The person being interviewed was complaining that gun violence in Trenton was so high because gangsters were able to easily buy guns from neighboring Pennsylvania where there is much looser gun control laws. He was arguing that New Jersey had strong gun control laws and there would be much less gun violence in Trenton if only Pennsylvania adopted tighter gun control. The implication was also that there should be Federal gun control.

This is another example of how bad government policy creates a problem and people on the left argue that the solution is to have more government, more regulation, and less freedom.

The speaker did not think to consider what causes the gun violence in the first place. The gun violence is not caused by lack of gun control. It's caused by our drug policy. By making drugs illegal, the government creates a lucrative black market for criminals. This results in gang warfare over drug territory in our inner cities. Just as Alcohol Prohibition is well known for giving rise to the Mafia in this country, bad drug policy and the War on Drugs gave rise to drug gangs in our inner cities. Government officials rarely understand the unintended consequences of their actions.

I am pretty confident that if currently illegal drugs were legalized and regulated just like alcohol and tobacco are, this would take away most of the incentive for these gangs to kill each other. Now, I am not saying the gangs would instantly disappear. Unfortunately, there is path dependence. The mafia remained after Prohibition was repealed and we can't undo decades of the environmental damage and conditioning that has taken place in these gang-infested parts of our cities. But it's the first step.

But people will still argue on national radio that if we only had strict gun control, we would see reduced gun violence. Let's see -- we probably spend over $100 billion each year fighting the War on Drugs, funding military action in foreign countries to combat illegal drugs, and incarcerating millions of non-violent drug offenders in this country in an effort to rid our streets of illegal drugs. Yet, illegal drugs are easily found. If I desired, I am sure I could buy any number of illegal drugs tonight just by going to the right street corner in San Francisco or Oakland. So if we're spending hundreds of billions of dollars trying to stop illegal drugs from being bought and sold, how can people argue that gun control will stop guns from falling into the hands of the same criminals who so easily are able to possess illegal drugs? It's a ridiculous argument.

Gun control does not take guns away from criminals. It takes guns away from law-abiding citizens who want to own guns to protect themselves and their families. My liberal friends will quote all kinds of stats that guns do not really protect people and are often used against the people who own them. I believe these stats are flawed. For example, the stats often just quote cases where a gun is fired, but in the vast majority of cases, a gun is never fired. It's just shown and the criminal runs away. But still this type of argument completely misses the point...

Gun ownership is a right. Our founding fathers wanted us to have guns as a final check against a tyrannical government. James Madison, the primary author of the Constitution and the Bill of Rights, said "Americans have the right and advantage of being armed - unlike the citizens of other countries whose governments are afraid to trust the people with arms." Federalist Noah Webster wrote, "Tyranny is the exercise of some power over a man, which is not warranted by law, or necessary for the public safety. A people can never be deprived of their liberties, while they retain in their own hands, a power sufficient to any other power in the state" and "Before a standing army can rule, the people must be disarmed; as they are in almost every kingdom in Europe. The supreme power in America cannot enforce unjust laws by the sword; because the whole body of the people are armed." It's annoying when people on the left argue that the Second Amendment does not protect an individual's right to arms. It's crystal clear what the authors of the Second Amendment meant if you only read what they wrote.

I agree with the founders. I wish there was a gun in every household in the country, like in Switzerland. I would feel safer knowing that tyranny could not come to this country no matter how many acts Congress passed to suspend habeas corpus or to spy on our communications.