The World From Berlin

I don't mean to pick on Berlin, or Germany. This is taken from an article from Spiegel Online, and the article addresses the issue of the debt ceiling debate in Washington. I will use the article to burst many bubbles.

The original article can be found here:

http://www.spiegel.de/international/world/0,1518,774666,00.html


Quoted material is taken from the article.

"The US needs to raise its debt ceiling, currently set at $14.3 trillion (€10.1 trillion), by Aug. 2, otherwise the country will run out of money"

Now, this is not true. The US will NOT run out of money. The US will run out of borrowing capacity. It is quite a different issue. Tax receipts will continue to roll in, only the spending cannot be supplemented via further borrowing. This is an obvious point, and that the author neglects it suggests either financial ignorance or purposeful manipulation. Neither is acceptable.

The US can certainly continue to meet its interest payments and service the debt. The US can then cut expenditures to meet tax revenue. It is not so hard, once one wraps his mind around it. Millions of people do this every day, in both their personal and business lives.

There is no need to talk about default. The best thing that could happen in this issue would be to cut government expenditures to meet revenue (actually, the best thing would be to shrink or eliminate "government" as it is currently understood, but that is another subject).

Frankfurter Allgemeine Zeitung writes: "The politicians in Washington are playing with fire. A swift compromise is needed. Nobody needs a US default."

Certainly, taxpayers and their children and grandchildren, while perhaps not in "need" of "a US default", certainly would be better of for it, assuming that failure to raise the debt ceiling would even result in such an outcome.

Süddeutsche Zeitung writes: ""It's actually unimaginable. On August 2, the US could, for the first time in its history, become insolvent..."

Again, failure to raise the debt ceiling does not necessarily need to result in default. More importantly, it would NOT be the first time for the US to default - not even in the last 100 years.

Walk with me down memory lane:

Roosevelt confiscated gold, just before changing the value from $20 / ounce to $35 / ounce. A default on the promise to redeem currency for a fixed amount of gold.

Nixon defaulted on the promise to foreign governments to exchange gold for dollars in 1971.

Basically, every day since Nixon's default, the US has added to the default - with the dollar now buying only 1 / 1600th ounce of gold.

Die Welt writes: "In the middle of the poker game between the two political parties to prevent a national default on Aug. 2, polls show that 77 percent of Americans believe that they live in the world's greatest system of government."

Yes, it is a farce that so many Americans believe this. On the other hand, if the borrowing was to be stopped permanently, those 77% might just be right!

"The [Tea Party] movement sees traditional politics as corrupt and regards Washington as a den of iniquity."

On this point, the Tea Party (to the extent "members" actually believe this) is correct.

"Compromise, they feel, is a sign of weakness and cowardice."

Actually, compromise on the issue of the debt ceiling is a sign of certain national (in every sense of the word) bankruptcy (in every sense of the word).

Bild writes: ""Irrespective of what the correct fiscal and economic policy should be for the most powerful country on earth, it's simply not possible to stop taking on new debt overnight."

Who said anything about overnight? This problem has been a long time coming, and known to all.

Roger Clemens and Justice

It can certainly be said that justice has been served in the ongoing torment of Roger Clemens. Well, at least I can say it.

Why is an act of voluntarily doing something to one's own body a crime? Why should such a thing be investigated by "authorities"? Yes, don't say that the crime was that he lied to the "authorities", given that the "authorities" had no business in this matter in the first place.

I will not re-state many of my views of this general issue of steroids in baseball. I have written on this previously, as regarding Barry Bonds. The commentary can be found on this site:

http://bionicmosquito.blogspot.com/2011/03/poor-barry-bonds.html


I will only mention that this issue, at most, is one between employee and employer - nothing more. It should have stayed that way.

This is why I say that justice has been served in this case. It was none of the government's business to begin with.

2011 Women's World Cup

I do not intend to write a story about the match against Brazil yesterday. Enough (yet not enough) has been said about the wonderful finish to the game.

I only would like to touch on my view of the events.

Many will take pride in the nationality. "USA, USA, USA" and all that. Because some women happened to be born in or otherwise have some connection to a specific geography, I guess.

I saw eleven women (ten, actually) that never gave up. Stunning to see the tying goal with perhaps one minute to go in over 120 minutes played. When all legs should be lost, even if hope might not be (no, I don't mean the goalkeeper).

One may not be able to take pride in another's accomplishment; so I will take this joy: One might say that there is no hope, it is too late, etc., in any personal or group pursuit. But for this group of women, they did not buy this, not on this day. I am happy for them, as a team and as individuals.

The color of uniform is secondary, the passport used for travel is irrelevant. Whoever they are and wherever they are from, this group of ten did something truly remarkable.

It is enough. No need to turn it into a false form of patriotism.

The Curse of Public Education

Note: This is the first time I have written here on this subject. It is also my 100th post. This seems fitting.

http://thedailybell.com/2628/Hey-Teachers-%E2%80%A6-Leave-Them-Kids-Alone

As I have mentioned before, I am torn as to which is the worse evil foisted on the people of the West: central banking or central education. I remain torn.

It is criminal to think that students nationwide should somehow fit into a single mold. Don’t tell me about charter schools, magnet schools, private schools, etc. Yes there are differences, a few major, almost all minor. But for 98% of the student population, the differences are immaterial. Learn to be obedient, learn by memorizing trivialities, learn to conform. Or face punishment and be ostracized.

And then we wonder (on this site and other alternative-view sites) why most people fawn over what their political “leaders” tell them.

John Taylor Gatto has written several books on this subject. He was an award winning teacher in New York City; often railed against by various administrators for his practices of actually “educating” students as opposed to “schooling” them. I offer some comments from one of his books, wonderfully entitled “Weapons of Mass Instruction.”

In it, he often mentions the names Rockefeller and Carnegie as men behind the significant increase in clamor for public funding and centralization of education in the US. He identifies the early “pioneers” of this movement, often funded with endowment money from (or otherwise connected to) the fortunes of these two industry titans.

The following are all points taken from this book:

He quotes H.L. Mencken: “The aim [of public education] is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality”

Professor Arthur Calhoun wrote that the fondest wish of utopian thinkers was coming true: children were passing from blood families “into the custody of community experts.”

Gatto cites statistics on literacy as measured by US Army tests of potential recruits – literacy defined as a fourth grade reading proficiency. From WWII to the Korean War, literacy dropped from 96% to 81%. By Vietnam, it fell to 73%.

In 1940, national literacy for blacks was measured at 80%; despite ALL the disadvantages to those in this population, four out of five were literate. Six decades later, the number fell to 60%. Twice the number were now illiterate.

All this despite the money spent on schooling in real terms having increased by 350%.

From a student-teacher letter to the editor in 1995: 113 years earlier, fifth graders in Minneapolis were reading Shakespeare, Thoreau, Washington, Twain, Franklin, and many others. Today, this student teacher is told fifth graders are not to be expected to correctly spell: back, big, call, came, can (the list continues with 30 similarly “complicated” words).

According to William Harris, US Commissioner of Education from 1889 to 1906, the tool to build such a society [amicable folk waiting around for someone to tell them what to do] was psychological alienation. Alienate children from themselves so they could no longer turn inward for strength, alienation from families, traditions, religions, cultures – so no outside source of advise could contradict the will of the political state.

Gatto continues much further, obviously. If you weren’t already sickened by the centralization of education before you read one of his books, you most certainly would be afterwards – assuming you had an ounce of individuality left in you after years of regimentation.

I have referred to a statement by R.J. Rushdoony before; I do so again – but this time by quoting Gary North:

R. J. Rushdoony had little patience with conservatives who complained about high taxes. “They have tithed their children to the State, and then they complain against how much the government is costing them.” He thought all such tax protests would come to nothing. Well, not nothing, exactly. Mass inflation.

We suffer under central banking because we suffer under central education. Yet most parents are happy to be relieved of the burden of raising their children. The world is crumbling all around them and many don’t see it. Or if they see it, they are oblivious as to understand the underlying causes.

The state will educate your children. A more damnable concept cannot be invented (well, that and central banking). What should be seen as a curse, something to run from, is instead seen as a relief.

What is Inflation?

http://thedailybell.com/2623/Antal-Fekete-You-Have-Never-Ever-Seen-an-Elephant-Fly


"It is absurd to claim that paper drawn on 100 ounces of gold is sound, while paper drawn on 100 tons of steel is not."

I have been thinking about the idea of "inflation" in a different manner, since ZenB (I think it was) asked me a question in the Salerno thread.

In a fully free banking / free money / free currency environment, would we even think of the term "inflation"?

I don't think so. I think we would think of profit and loss. I think we would utilize forms of money and banking and currency that were the most efficient, effective and stable within the context of the circumstance at the time and place. We would not speak of inflation: if our choice was sound, it will add to our profit. If not, it will add to our loss.

However, this does not eliminate the need to discuss and learn about sound practices. I like the title of Salerno's book "Money: Sound and Unsound." It is worthwhile to discuss and learn about sound money practices. One would not argue against the utility of a book entitled "Business Practices: Sound and Unsound."

People should certainly be free to use unsound practices in business and in money. In business, if they do this often enough they will see bankruptcy. In matters of money, the same would apply. In a free market for money, we would not speak of inflation, I believe. We would speak of losses due to the use of unsound banking and money practices.

History demonstrates that paper backed by gold is quite sound. Paper backed by steel is not quite as much. This doesn't mean a businessman cannot utilize paper backed by steel in his transaction. It only means it is left to him and his trading partners to suffer the consequences (just another form of dealing with bankruptcy) without consequences shifting to the broader public (again, only in the context of a free banking environment).

Real Bills and Flying Elephants

http://thedailybell.com/2623/Antal-Fekete-You-Have-Never-Ever-Seen-an-Elephant-Fly

Comments in response to Dr. Fekete's editorial today at The Daily Bell.

AF: The bill and the cloth appear simultaneously and will disappear simultaneously. The former disappears when it matures, and the latter disappears when it is purchased by the ultimate consumer.

BM: So a real bill is not backed by gold (money), but is backed by merchandise. I know of no true hard money economist that the supports the view of money being backed by cloth (or flour).

AF: An increase in purchasing media that is matched by an increase of merchandise in urgent consumer demand is not inflationary.

BM: This is another theory that the central bankers use as an excuse to increase the money supply: the money supply must increase with the level of activity in the economy. It is a reason for man to substitute easily produced paper for true money.

As to not being “inflationary”, this is another trick of the monetarists. They speak of “inflationary” in terms of prices, but the true inflation (with all of the corresponding distortions and boom / bust cycle) come with changes in the money supply. Dr. Fekete is speaking of inflation measured in price increases, it seems.

Price increases are only one of the negative effects of monetary inflation, and perhaps not the worst. The worst is the transfer of purchasing power from the saver to the person who has first access to the funny money. This is called theft in normal society. It is apparently called real bills when one wants to hide the fact of this theft.

AF: The nature and origin of the discount rate are entirely different from that of the rate of interest.

BM: To the merchant, the economic effect is identical. Trying to make the legal distinction is irrelevant to the merchant’s cash flow.

AF: The two rates [the discount rate and the rate of interest] are completely independent of one another.

BM: No two rates are ever independent of each other in a relatively modern economy. All rates are relative to other rates. If the rate of one is significantly different than the other (adjusted for risk), the market will resolve this through pricing.

AF: Tradesmen processing semi-finished goods hardly ever pay cash for supplies to their suppliers. The prices they are quoted are not cash prices. They are "90 days net". The credit is part of the deal: you need not even ask for it. On the rare occasion when you don't need the credit you pre-pay your bill, having applied the discount to its face value.

BM: I am glad Dr. Fekete, at least, can see that real bills are credit, as he says so himself. He should teach his students accordingly. Some of his students do not learn very well.

Credit, not backed by gold (money). This is inflation.

Strauss-Khan: One Positive Outcome

Today we have the news that the case against DSK may be falling apart. There is a wonderfully positive side to this story - beyond the certainly positive outcome for justice in the case.

On a global scale, I cannot recall a US prosecution go so horribly bad in such a public fashion. There have been only a couple of US based stories of such turnaround - the Duke lacrosse team comes to mind, but not many more.

Consider: A high profile arrest of one of the most well known financial actors on the world stage. Drama on the plane just moments before take-off. Perp walks, passport stripped, resign from the job, no more dreams of French politics.

And now, the case seems to have all fallen apart.

If one wanted to find a story to display the worst abuses of the US judicial system to the world, a better example could not have been created than the real-world story of DSK.

There will be discussion about the implications on French Politics, the conspiracy theories behind the story (anyone who DENIES a conspiracy here should be sized for a tin-foil hat). All of this is important.

But I find the exposition of the US judicial system to the scrutiny of the world to be the most fascinating and potentially most important part of the story.

The US judicial system is broken on many levels. There have been many stories known only by family and friends that demonstrate this. There are a few stories that hit a larger audience.

The story of DSK was the biggest story around the world on the day of his arrest. It has remained high-profile because of the financial drama around the world and the search for DSK's replacement at the IMF.

It is a story that was perfect in its design if one wanted to expose the faults of the US justice system to the ridicule of the world. This to me is the biggest part of the story today.