Obama's Wet Jobs Noodle

According to ABC's Geroge Stephanonpoulos, the president's new economic plan for jobs will include three major components.

1. Tax Relief "for companies that create jobs and hire new workers."
2. Infrastructure Investment in "clean energy and new construction projects to build schools and transportation."
3. Assistance for Long Term Unemployed that will feature a program like Georgia's to give "unemployed Americans eight weeks of training at a local company while allowing them to still collect their unemployment benefits."

Stephanopoulos also adds that the president's will speech will include "a proposal for how the government will pay for these initiatives without adding to our debt."

All this shows how deep in a hole the president is, and yeet he's still digging. The president's problem is that to revive the economy he really needs to undo everything he has done. To get the economy going again, as Tony Blankley writes, he really needs to choose the "nuclear option" and steal all the Republican ideas.

He could decide to embrace all the major Republican, Tea Party free-market ideas - marginal business and personal tax-rate cuts (leading to a net tax cut); big discretionary spending cuts to be implemented before the 2012 election; genuine long-term reductions in Medicare, Medicaid and Social Security costs written into law now; major deregulation, including Environmental Protection Agency rules, Dodd-Frank financial burdens and nanny-state consumer regulations; unlimited oil- and gas-drilling and shale-fracking authorization; permanent extension of the George W. Bush tax cuts; repeal of the double tax on American corporations’ foreign profits; limits on unemployment insurance extensions; and withdrawal of his big union initiatives, such as the National Labor Relations Board’s opposition to the Boeing Co. building a factory in South Carolina.

Imagine that! Then he would have stolen the Republicans' clothes.

Republicans, of course, would vote for all of them, as they are Republican positions. The Republican candidate for president as well as GOP congressional candidates would be left with almost nothing (except opposition to Obamacare) on the economic front to oppose in the president’s policies.

You might ask: well why not? The answer is that if the president did all that stuff he would lose his Democratic base. All those policy ideas are poison to the average New York Times reader and NPR listener. And as for the average MSNBC watcher and "progressive:" To them such a program would be a "sellout." What's the point of being a liberal if you give it all away just to create jobs for the American people and profits for the American entrepreneur?

Race Mob Violence and Obama

Now that it has happened, the wonder is that it didn't happen sooner. I am talking about the race-mob violence in cities like Denver. It started in 2009, according to John T. Bennett.

In 2009, a four month wave of mayhem broke out in Denver. There were at least 26 violent robberies committed by two black gangs. The victims were -- without exception -- whites and Hispanics. When the dust settled from that initial spate of violence, victims were left with injuries ranging from a skull fracture to broken noses and shattered eye sockets.

Of course the Denver police and the media did not alert people to the fact that these incidents were caused by black gangs were operating out of their neighborhoods. They didn't alert the public to the racial nature of the events at all until the local TV news finally broke ranks at the end of 2009.

Of course the rest of the mainstream media are soft-pedaling the race angle of this, as they have soft-pedaled black violence for half a century.

This wave of racist flash mob violence presents our national leadership with an astonishing opportunity to end the race madness of the last 50 years, the post-civil rights era.

Here we are in 2011 with a black president and a black attorney general. They can make history by initiating a national conversation on race and race violence. Race violence is unacceptable when it is white guys in sheets and it is unacceptable when it is black guys in baggy pants and reversed baseball caps.

But I don't think that President Obama and Attorney General Holder will do that. They are race-based politicians and, give them credit, they actually believe the poisonous race doctrines of the race industry and the identity left.

But they are standing in the way of history. America desperately wants to get beyond the corruption and the hate of race cards and race hustlers.

Think of it: here we are with a black president and a black attorney general. It is the ideal moment to close down the evil of liberal race politics. But Obama and Holder won't do it. They wouldn't know where to start.

Unfortunately, the people that will suffer for their ignorance and their bigotry are the African Americans. They desperately need a politician to lead them out of the land of racial Egypt and into the Promised Land of race harmony. But don't look for Obama to be that leader. Because he just doesn't get it.

Warren Buffet, Crony Capitalist?

Remember the letter that President Perry (or was it Romney) sent to the Danbury Tea Party in 2015? Here is an excerpt:

I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should "make no law respecting an establishment of business, or prohibiting the free exercise thereof," thus building a wall of separation between Economy & State.

Yeah. It's a pity that they left that bit out of the Bill of Rights. Because what we have, in Hurricane Obama, where politics and business are all mixed up, is an "establishment" or virtual nationalization of business. And just as you can't trust divines to get mixed up in politics or politicians to get mixed up in religion, surely we can all agree now that it is death to let politicians meddle with business. Just as nobody would think of letting businessmen run the government.

Exhibit A in all this is Warren Buffett, Sage of Omaha. He's just ponied up $5 billion for some preferred shares in Bank of America, currently fingered as the weakest bank. That comes a couple of weeks after Buffett penned an Obama-friendly op-ed in the New York Times and just before Buffett hosts an Obama fundraiser at the end of September.

Perfectly harmless you say? OK, let's put Republicans in all the speaking roles. Remember when old Sam Walton penned a Bush-friendly op-ed in the Wall Street Journal, then invested a few billion to rescue bankrupt Enron, then hosted a Bush fundraiser, all the time getting calls from the president on economic policy? You don't remember that? Of course not. Neither Sam Walton or the Bushies would dare to mount such an obvious staging of crony capitalism.

If I were Warren Buffett in the US in 2011, I would be hedging my political bets. Look here. Berkshire Hathaway is valued today, August 26, 2011, at $172 billion. At any moment some political aide at the White House could sicc the SEC or the Justice Department or the new Consumer Financial Protection Bureau on one of Buffett's businesses, just as the SEC and the EPA are currently hounding the horizontal "fracking" business. Right now the jackals, from New York State Attorney General Eric Schneiderman to Elizabeth Warren of the Consumer Financial Protection Bureau, are hounding Bank of America, trying to get BofA to pull the nation's mortgage chestnuts out of the fire.

How do you get the jackals to go away? Call in Warren Buffett!

Let's go back 100 years, to the aftermath of the great Crash of 1907. Back then J.P. Morgan got the richest men in America, locked them in a room, and wouldn't let them out until they had triaged the US economy. They let the insolvent firms go to the wall, the healthy ones survive on their own, and lent money to the firms they thought would survive with a bit of help. They did all this with their own money.

Fast forward a couple of years and the politicians had their progressive knickers in a twist over the "money trust." Just a few men, you see, seemed to own most of American business. Yeah. No doubt. And those were the men who, with Morgan stiffening their backs, kept their heads in the market meltdown when everyone else was losing theirs.

I'm sure that Warren Buffett is an honorable man, not a crony capitalist. But in times like these, when Hurricane Obama could rip the roof off your business just in order to narrow the odds on a marginal state next year, what businessman in his right mind would not be paying protection money to the politicians? After all, that's a nice business you got there, Mr. Billionaire. It sure would be a pity if something happened to it.

Deconstructing Sam Harris

Sam Harris is the chap who, in The End of Faith, asserts that we need to develop a "rational ethics" instead of the transcendental ethics handed down by prophets from God.

Problem is, "rational ethics" is rubbish. You can't derive ethics from reason; that's why humans invented God. Someone has to be the "decider" as President Bush used to say.

In fact, of course, Sam Harris is a conventional liberal espousing all the liberal pieties, and this week, (per Instapundit), Timothy Sandefur has his fun with Sam Harris and his rational ethics which always turn out to support the existing ruling class and its commandments. In other words, God is a liberal.

Instapundit also links to a law review article about the foundation of law, God, and little godlets. I didn't know that humor was allowed in law review articles.

Leaving aside the question of whether God exists (and my personal view is that, since the death of God, the mystery of the nature and origin of the universe only gets curiouser and curiouser) there has to be, in any society, a declaration of commandments. Someone, or some thing, such as a Constitution, speaks with the voice of God, and everyone scurries around trying to hear the voice of God.

In my view, the point of laws and constitutions and ethics is human flourishing in its widest sense. You can set up a a terrestrial paradise, such as Communism, but if it doesn't work then humans will chuck it out. But every social system is an act of faith. Our current democratic capitalism is an act of faith. We believe that the combination of free market and the circumscribed rule of the majority is the best system yet developed for human flourishing. We know, all of us except the Sam Harrises of the world, that the authoritarian welfare state version of democratic capitalism is seriously flawed; it needs reform. The Obama administration is an effort by the Sam Harrises to give the authoritarian welfare state one more college try.

But we know that the vast administrative state is a mistake. We knew it back when Charles Dickens wrote about the Circumlocution Office and its Barnacles and Stiltstockings in Little Dorrit. We were shown an alternative to the administrative state back in the 1980s when Ronald Reagan led the US out of the stagflation of the 1970s, but liberals insisted it was all a mirage.

Ben Franklin said it all: "Experience keeps a dear school, but fools will learn in no other." Now liberals are going to learn the hard way in the dear school of the 2012 elections; it will be an annus horribilis for them, but they refused to learn from the experience of the 1980s.

We can only hope that the America that emerges from the current mess is a better America.

Democrat-voting Conservatives

For some reason it is considered a bad thing that few minorities vote Republican. It's a failure of Republican outreach, or outright racism in the Republican Party.

Michael Medved tries a variant of this. He quotes the August 1 Gallup Poll that has 41 percent of American adults call themselves "conservative" against 21 percent that call themselves "liberal." How come then that President Obama won the 2008 election 53 percent to 47 percent? The reason is simple:

The voters who support Obama in spite of ideology are to a great extent black, Hispanic, and Asian conservatives who feel drawn to right-wing ideas but remain allergic to the Republican Party.

Even in 2010, "In national balloting for House seats, only 9 percent of black voters backed GOP candidates, along with 38 percent of Latinos and 40 percent of Asians."

(Wow! 38 percent of Hispanics and 40 percent of Asians? That's better than I thought.)

The reason for the low minority share for the GOP is usually attributed to white racism and the idea that the party is a "closed country club welcoming only elderly, white, Christian males." So what's the GOP going to do about it? Huh?

I think this misstates the problem. The reason that minorities vote Democratic is that the Democratic Party is a party that celebrates hyphenation. If you think of yourself more as black, or Hispanic, or gay, or feminist rather than American then the Democratic Party is the party for you. And nothing that Republicans can do will change that.

The Republican Party is the party of unhyphenated Americans, people who believe that if you get an education, get skills, work hard, and pay your taxes, then America will deliver. The Democratic Party is the party for people who believe that without governmental intervention, they are screwed.

The Republican notion is the counter-instinctive idea that grew up in the last half-millennium and is packaged in Adam Smith's idea of the "invisible hand." The natural human instinct is to trust in family and the kindred and the tribe, and to be suspicious of the chaps down the road who might launch a dawn raid on our village any day. Trust a stranger or a chap from a different ethnic group? You gotta be kidding. Yet the fact of the last 200 years is that you can trust strangers, usually. If you do, and if the stranger is indeed trustworthy then everyone benefits. And capitalism, down the decades, has developed pretty good ways of figuring out who is trustworthy and who is not.

The two most Democratic groups are blacks and Jews. They are the folks that are the most scared of Republicans: blacks because Republicans are white and Jews because Republicans are Christian. They are scared because their leaders work constantly at making them scared. Any moment black leaders say, whites will break out the white sheets and turn back the clock on civil rights. Any moment, liberal Jewish leaders insist, Christians will start a new pogrom against the Jews. The current effort to brand the Tea Party as white, Christian, and racist is transparently part of this effort. The only way to make 90 percent of any group to agree on something is to scare them witless.

The way for Republicans to detoxify the brand has to lead through this shameless fear-mongering of black and liberal Jewish leaders. Shame the black and Jewish leaders and short-circuit their fear-mongering and you'll find the numbers moving in the Republican direction.

Let's ask a different question. Why is it that 38 percent of Hispanics and 40 percent of Asians voted GOP in 2010? Could it be that their leaders don't work night and day to frighten them off the Republicans?

The Liberal Story Falls Apart

In BigHollywood.com Lawrence Meyers writes about the way that the liberal "story" dominates our lives. Here's how it grabs our eyeballs every day in movies and TV dramas:

Corporations are evil — using unwitting poor Africans for pharmaceutical testing (Constant Gardener) or dumping toxic chemicals into nature (Erin Brockovich, A Civil Action) or responsible for the end of mankind (Rise of the Planet of the Apes)... Radical Muslim terrorists are never villains. Trial lawyers are crusading do-gooders.

Humans understand everything as a story, and liberals, for the last century, have been the main story-tellers. It is their stories that dominate our culture and their stories that dominate politics.

When a criminal suspect fails to convince a jury of his innocence, we say that his story "fell apart" or "failed to hold up." It reminds us that we keep our stories until they fall apart and fail us.

Right now, the liberal story is falling apart, and just about all a conservative needs to do is point to liberal stories lying around in pieces on the floor.

Roger Kimball points to the liberal story about the recession that is cluttering up the national floor right now. Here's how you create a story that fails to hold up.

1. Make $1.5 trillion of risky loans to people you know are unlikely to repay them;
2. Allow financial instituions to slice, dice, and repackage the loans, leveraging them up to 30-1;
3. Require financial institutions to value their assets according to strict “mark-to-market” rules, thus denying businesses needed flexibiity during a crisis;
4. Impose onerous new regulations not only on financial institutions but on U.S. business across the board;
5. Keep talking about raising taxes so people and businesses pay their “fair share,” even though 43.4 percent of those who file pay no income tax at all;
6. Create an economic leviathan in the form of health care legislation that will simultaneously worsen health care in the U.S. while also making it wildly more expensive;
7. Keep emphasizing “green” jobs and “green” energy production at a time when unemployment is above 9 percent and energy costs are skyrocketing;
8. Invest billions of dollars of the taxpayers’ money into failing private businesses with huge union obligations to keep the business going for a while longer so that the unions can squeeze more money out of the taxpayers.
9. Ignore the warnings of credit-rating agencies when they warn you are spending too much money and do not have a credible plan to address your skyrocketing deficits and then blame them when, months later, they downgrade your credit rating.

I recently had a e-mail exchange with a liberal still desperately hanging on to the narrative. Here are some of his comments:

• How much are the Koch Bros and Rove paying you and other Tea Party supporters to put out this garbage?
• The REASON we paid off the huge WWII debt was the emergence of a middle class, union benefits and wages, and a GI Bill that allowed millions of GI's to go to college and fuel the industry in the 1950's and 60's
• The real beginning date of our demise was 1980. Ronald Reagan was elected, the corporations began their ascent to total power and control and now young man, we live in a corporate oligarchy.
• 34,000 lobbyists in DC. Paying for campaigns and writing bills for their employers.
• 2% of the US owns 63% of the wealth. The top 2500 corporations paid no Fed Income tax in 2010. $2.5 Trillion in corporate cash on the sidelines creating NO jobs.

It's hard to get annoyed with that sort of stuff. It is the story of the wheels coming off the liberal "whig history," the tale of social progress directed by wise legislation and socially conscious intellectual leaders that moves us closer and closer every year to a just and equal society.

It is all falling apart right before their liberal eyes, and they can't believe it.

Corporations are People

It's interesting to read The Nation's reaction to Mitt Romney's "Corporations are People" remark. John Nichols obviously thinks that the activists of Iowa Citizens for Community Involvement scored a real coup by getting Romney to admit the truth of his oligarchic agenda.

When Romney began to ruminate on how he would not “raise taxes on people,” the Iowa activists shouted: “Corporations!”

As the crowd began to cheer on the idea of taxing corporations that enjoy the benefits of government bailouts and subsidies without—in all too many cases—giving anything back, Romney became incensed.

The former corporate CEO shouted: “Corporations are people, my friend.”

The crowd shouted: “No, they’re not!”

“Of course they are,” replied Romney, with a “there, I said it…” statement that he and his staff would later confirm as his true faith.

It is curious to experience just how central to the leftist faith is the idea of corporations as evil. And that a "corporate oligarchy" rules America.

One of the central articles of faith is a conspiratorial interpretation of the mainstreaming of the limited-liability corporation in the notion of immortal "corporate personhood." Lefties think that the development in law of corporations as entities separate from their managers and owners is a deep dark conspiracy to take over the world.

But as Thomas Crump reminds us in The Age of Steam, the truth is more prosaic. Corporate personhood was invented in the usual fudge job of legislators responding to crisis. In the mid 19th century limited liability corporations were needed in the development of railways. The risks and the scale of railway development just could not be met with informal methods of incorporation where all the equity investors were liable for debts of the enterprise without limit. People wouldn't sign up for that kind of risk. The limitation of liability meant that investors could routinely put their money into speculative enterprises like railways without worrying that mistakes or malfeasance by the managers could wipe out not just their investment bu the rest of their assets. And railways dwarfed the manufacturing industry in the mid 19th century.

The curious doctrines of our lefty friends require them to construct a narrative of corporate malfeasance. If there weren't a corporate oligarchy they would have to invent it. Otherwise there is no warrant for big government.

The immense value of the Obama administration is that it seems determined to utterly delegitimize the progressive project and its monument, big, unjust government in its massive effort to tax and regulate everything that moves. The effort bids fair to destroy the free-market economy.

The problem is that until we get there, the American people are going to suffer real hardships as the whole economy gets sucked into a maelstrom of liberal folly and fantasy.

What Can You Say?

Over the last week I've been exchanging emails with a man that identifies himself as an "ex-Goldwater Republican." He rages about the corporate oligarchy and thousands of corporate lobbyists, and generally emits left-wing political memes. In other words, this chap is a Democrat. But he's a disappointed man: at 66 he is earning half what he did ten years ago.

When I asked him what he would do about the "corporate oligarchy" he responded thus:

You either, from the ground roots, elect dedicated people that will over time rewrite laws, enlist oversight and regulations and turn this around OR as a 64 year old female client said yesterday, wonder what the reaction would be to 3 or 4 million armed people , converging on the Capital or Wall Street? There is your answer. 1790 France.

I suppose that makes sense. If you believe that corporations are stiffing the American people, rather than being the cause of raising income from $3 per day to $120 per day since 1800; if you believe that the financial system is a crock, that the wealthy should give up their wealth in redistribution, and if all the left-wing economic ideas of the last 150 years have failed, then political or revolutionary action is the only remaining option.

The problem is that government is force, politics is power, and we humans are social animals not soldier ants. Neither government or politics grow a single corn plant or produce a single stick of lumber to build a house.

I've been wondering over the last year or so about the incessant corporate exposé journalism of the left. Every left-wing magazine, almost every month, will feature an exposé of some corporate malfeasance.

I've decided that the endless attack on corporations is a necessary prop to the left-wing belief system that justifies government force. If there weren't outrageous crimes from the corporate CEOs then you couldn't justify government regulation and supervision of the private sector. You would say: well, there are bad apples, but still...

Alas, our lefty friends have trapped themselves in a closed system in which government force is always the answer. Because everything that goes wrong is an economic crime, and every crime must be met with a new law to stop it. The result is a spiral dive into economic madness, as every detail of economic life becomes dominated by government and politics instead of by the demand of the consumers.

How do you talk to such a person? How can you break the spell of the closed world of ideas? Who knows? I just try to stay polite and return insults with friendly replies.

"Inconsequential" Government

Gov. Rick Perry (R-TX) has certainly hit the campaign trail with a bang, what with his blast at the Fed for printing money, and his promise to make government "inconsequential."

To liberals, writes Jeff Jacoby, the idea of making government inconsequential is outrageous. Chris Matthews took the bait immediately.

The governor is saying "not just that the era of big government is over," Matthews hyperbolically told his "Hardball" viewers on Monday, "he's saying the era of government is over... Let's get rid of the government, basically."

I suppose that is how it plays to liberals.

But beyond outraged liberals, there's a big issue here. It is the issue of prudence. The bigger and more consequential that government becomes, the more it is likely to create real hardship for people when it makes a mistake. And government finds it very difficult to correct mistakes.

Let's say it is time to apply the Precautionary Principle to government.

Here's what I mean.

The federal government made itself real consequential in housing. It legislated mortgage interest deductions, it created government-sponsored enterprises to securitize mortgages, it got really interested in the ways that banks rationed credit to low-income and minority borrowers. But the upshot of all this consequence, at least in part, was a world-wide financial meltdown as the value of mortgage bonds and mortgage derivatives came into question world-wide and the solvency of banks world-wide came into question. And guess what. When the dust settled after the housing crash, minorities and women were hardest hit. Net worth among blacks is down by 90 percent.

Why be surprised? Politicians know about winning elections, but don't know too much about loaning money to sub-prime borrowers.

I could go on. What do politicians know about retirement finance, geriatric health care, education, energy? They know enough to use them to get elected and reelected.

Let's back this out further. Down the ages, governments have pretty well taxed and borrowed to the limit. They taxed until they provoked tax revolts; they borrowed until they went broke. In the old days all this taxing and borrowing was done to finance wars of aggression. In our age, after the megawars of the early 20th century, governments tax and borrow to fund entitlements, principally pensions, health care, and relief of the poor. They have made government very consequential in these areas, and they have taxed and borrowed pretty well to the limit in order to deliver lots of pensions and health care and welfare. Unfortunately they have way over-promised, particularly in regards to geriatric health care. That's Medicare to you and me.

Let's stipulate that there is an argument for modest programs to help old people who are unable to support themselves or get health care, from no fault of their own. And there are poor people of all ages that need help. Wouldn't it be better to have small, inconsequential programs to help those in need rather that gigantic programs for the middle class that threaten the very survival of the state when they go wrong?

That's what I understand when I read about government becoming "inconsequential."

Fixing Our Broken Finance

It's forty years since President Nixon took the US off the gold exchange standard. Since then the dollar has declined from $35 per ounce of gold to the present $1,800 per ounce. Not good. With the dollar as paper, our ruling class has expanded credit, government debt, and near government debt recklessly, and ordinary savers, people who save money in banks and bonds, have been screwed. The question is: what do we do?

Actually, I think there are two questions. What does each of us do individually, and what should we do collectively.

Let's get me, individually, out of the way first. I reckoned, back in the early days of the current recovery, that the government was going to print money big time. So I determined not to hold more than a minimum in dollars. Thus I converted my cash into gold ETFs and resolved not to hold dollar-denominated bonds. The stock market may go up and down, I reckoned, but it represents the wealth-generating power of the US economy. The dollar may go to zero, but the US economy won't. Nor will gold.

But what about the nation as a whole? What should we do to stop the damage? The easy solution is to say: get back to gold; set a new gold price for the dollar and stick to it. The problem is that this doesn't solve the other problems, the moral hazard of the central bank as the lender of last resort, the resort to inflation to gun the economy in a recession, and the dense net of credit subsidies embedded in the economy. It will be difficult to fix any of those things because the current ruling class gets so much of its power from their continuance.

I'm going to go out on a limb. I think that a new credit and monetary system is going to grow up alongside the current government-dominated system. The Dutch finance system of central bank, funded government debt, discounted short-term debt, and money-denominated bonds is going to wither away. Because the government abuses it so badly.

The modern financial system began, they say, with people depositing their gold with goldsmiths, who then started to lend money on the credit of the deposited gold. In our present world we have gold ETFs that are supposedly storing gold in vaults in return for electronic depositary receipts. How long can it be before someone figures out a way to turn the gold ETFs into a kind of bank? Don't ask me how. That is for those financial wizards and their lawyers to figure out. But right now a ton of people are sterilizing their cash by storing it in gold in the vaults of the ETFs. Not good. Nature abhors a vacuum and finance abhors one too. Finance is all about getting money from where it is to where it is wanted. Something has got to give, and sooner or later it will.

What will happen then is anyone's guess.

Fixing the Economy

You could call it the Summer of Reality. Liberal opinion leaders are confronting the reality that their response to the Crash of 2008 has failed. But, of course that doesn't mean that they are ready to ditch their Keynesian-Entitlement-Regulation policy brew. That will come later, and not before the end of the annus horribilis of 2012. Take James K. Galbraith, economist and son of famed liberal-socialist John Kenneth Galbraith. He's ready to admit that the Obamis shot the wrong arrow:

In fact, stimulus alone was never going to bring recovery. This crisis was caused by financial collapse, rooted in massive banking fraud. The financial system is our economic motor and when it fails it cannot be revived simply by pouring money on it, any more than a wrecked reactor can be restarted just by adding fuel. Team Obama faced a situation not seen since the 1930s — a worldwide banking meltdown. The financial system needed to be rebuilt — and it still does. But Team Obama chose to overlook this.

But he's not ready to admit the reason for the "massive banking fraud." It was government sponsored enterprises like Fannie and Freddie fire-hosing dodgy sub-prime assets into the credit system. The role of the bankers was in dressing up as much of the dreck as possible to look like investment-grade debt so that the banks and the insurance companies and the pension plans could buy it. The investment banks are middle men; their business is selling bonds to institutions. One way or another, they will sell it. The government's No. 1 job is to make sure that its own debt is investment grade. That's because, ever since modern finance was invented by the Dutch and adopted by the Brits, the foundation of a healthy credit system has been rock-solid government funded debt. The worst bubbles have occurred when government-sponsored enterprises have floated dreck, as in the Mississippi Bubble, the South Sea Bubble, and the Fannie Freddie Bubble.

Here's an article by Alex J. Pollock on the real story of the 2000s financial meltdown. The problem is "agency debt."

The huge debt of Fannie Mae, Freddie Mac, other government-sponsored enterprises, and other off-budget government agencies (“agency debt”) fully relies on the credit of the United States. This means it by definition exposes the taxpayers to losses, but it is not accounted for as government debt.

How much is it? Well, in 1998 agency debt was $4 trillion, the same as the Treasury debt held by the public. In 2009, it was again the same as the Treasury debt--at $8 trillion. Between those dates, during the credit binge of the 2000s, the agency debt was larger than the Treasury debt. In 2002 agency debt was $6 trillion, 50 percent more than Treasury debt held by the public. So the real debt that the full faith and credit of the United States was committed to honoring was about twice the published amount.

We can holler all we like about "massive banking fraud" and "greedy bankers." But until liberals acknowledge that the central player in the late great 2000s credit bubble was government, we really can't start healing the economy.

And to suggest, as the president and Professor Galbraith do, that an "infrastructure bank" is just the ticket is to demonstrate nothing more than an alcoholic's morning-after craving for a pick-me-up.

When Gold Hits $2,067 an Ounce

In the last couple of days, the gold price breached $1,800 an ounce. Oh well, ho hum. So the gold bugs are making some money.

But let us think about something. One day soon, perhaps this year, perhaps next year, gold will breach the magic number of $2,067 an ounce. Why is that a magic number? Because, 100 years ago, before the modern wonder of the Federal Reserve System, you could buy an ounce of gold with 2,067 pennies.

Yes. The value of today's dollar in gold is getting perilously close to one percent of its value 100 years ago, when the government would exchange an ounce of gold for $20.67.

Now some people don't like to evaluate the value of the dollar in gold terms; for those, I suggest measuringworth.com's GDP deflator. It shows a price index of 6.23 for 1911, with 2005 prices as 100. Today the index is 111, so the value of the dollar is 5.61 percent of the 1911 dollar. On that measure the dollar buys about one twentieth what it could buy a century ago, rather than one hundredth.

Yeah, I know; many things we can buy today you couldn't buy then for love or money.

How did the dollar get to be worth 1 percent, or 5.6 percent of its value a century ago? It happened every time that the government got in a jam. In the Depression, after the Fed had gunned the economy in the 1920s, FDR devalued the dollar to $35 per ounce. Then in the 1970s Richard Nixon got in a jam and they floated the dollar. By 1980 the dollar had declined to less than $600 per ounce, but then Ronald Reagan became president and over the next twenty years gold declined to $270 an ounce in 2001. But since then, to get out of a jam in 2001, the Tech crash, and in 2008, the housing crash, the government has been devaluing the dollar with gusto. Now it's around $1,700 to $1,800 per ounce.

You might wonder why this keeps happening. It's not all that hard. Lots of people want easy money, cheap credit. So the government uses its credit to shovel money at deserving recipients. It might be farmers and farm credit, or it might be exporters and the Ex-Im Bank. Or it might be minorities that need affordable housing. No problem. We'll just shovel Fannie and Freddie at them, and when the whole thing comes tumbling down, why, we can refloat the nation's mortgages by taking the dollar down another 50 percent.

Let's call the 20th century the Century of Inflation. But let's make the 21st century something better. Because devaluing the dollar every generation to get out of a financial panic is no way to run a railroad. For one thing, as with most things, minorities and women and orphans and the poor get hardest hit.

Riots and Progressive Politics

Our liberal friends live in a curious world. On the one hand, they are convinced of the sophistication of their politics, and that the average person really isn't qualified to judge political matters. On the other hand, they often reduce politics to us-versus-them slogans such as Republicans "ending Medicare as we know it" without mentioning the sophisticated concept that Medicare is going to end as we know it with or without Republicans because otherwise it will eat the budget and then the economy.

So it is with public safety. Liberals talk a line to us about poverty causing violence. But they also work to make it a reality by sending community organizers into poverty-stricken areas to remind the people there how the Man is ruining their lives and that police brutality is a form of institutional racism.

Actually, the interesting question is why young underclass males don't riot more. The whole point of modern urban police forces, ever since Robert Peel invented urban policing for the Anglosphere in the 19th century, is to control young underclass urban males. The city is an agent of concentration, for merchants, for workers, for intellectuals, and also for young single males.

Whenever young single males gather together their thoughts, if you want to call them thoughts, turn to mayhem. It is the job of police to look them in the eye and tell them "just you try it." But left-wing politics since the French Revolution has been fueled by the idea of the oppressed rising up against their oppressors. So the left has always worked against the forces of order and encouraged the forces of disorder--young single males--as the potential gunpowder for their hoped-for revolution. Thus the left is always articulating ways in which the police are brutalizing the poor. Of course they are. The police are at war with the natural propensity of young single males to create mayhem.

But there is an additional factor to be considered. And that is the welfare state. In the old days, before the welfare state, the poor had an authentic culture and neighborhood society. They had to, because otherwise they would have perished. But the welfare state has demolished the culture of the poor and substituted middle-class supervision and pensions. The consequence in countries like Britain is that something like 15 percent of the adult population subsists on welfare or "incapacity" benefits. For young adults, the proportion is higher. NEETs, they are called: young people Not in Education, Employment, or Training.

According to figures from the Department for Education, 927,000 people aged 16 to 24 - 15.3 per cent - were classed as Neets between the start of January and end of March [2010].

All in all, you can figure that in cities where the police are restrained from harassing young single males, and the family and the neighborhood culture has been utterly demolished by the welfare state, the wonder is that they don't have riots every night of the year.

If you want to understand the nature of policing the underclass in Britain, the place to start is "Inspector Gadget's" Police Inspector Blog.

The End of an Era

It always ends like this. Whether it's a dynasty, a corporation, or even a marriage, it ends in a collapse of confidence, with the guardians of the old order spitting with rage as their facile shibboleths vaporize into thin air.

The authoritarian welfare state was never going to reform itself into something "sustainable" or organized according to the "precautionary principle" on its own. It was always pure politics, with political raiders plundering the wealth of the nation to hand off to their supporters. It was always going to keep going until it ran out of money.

So now the century-long fantasy of the progressives has come up against the cold hard reality of a credit downgrade. Now the American people are waking up and wondering if its political elite knows what it is doing. They are wondering if all those facile promises of benefits will ever be redeemed. They are wondering if they will even have jobs.

We are not yet to the point where people will start to sneer at politicians offering free lunches. Not yet. But the day will come when people will laugh at the idea that anyone imagined that government could deliver social services effectively and prudently. They will laugh at the idea that government could run a pension scheme. They will sneer at the idea that government could run a health system. They will joke about the bad old days when government ran a system of stunningly ineffective schools. But that day is not yet, for there are before us many years of failure and default that will be necessary to drive the lesson home.

The central fact about these Downgrade Days is the utter cluelessness of the ruling class. President Obama is, in these times, not a disappointment, but the very poster boy of the ruling class that he heads. He is a scion of the progressive dynasty, raised to continue and extend the power of his class. Unfortunately, they never taught him how to deal with retreat and defeat. So now the president is sitting in the White House wondering how to save his presidency.

You can almost see Scarlett O'Hara whining to Rhett Butler after three hours of simpering and manipulation: "Where shall I go, What shall I do?

Frankly, my dear liberals, I don't give a damn.

And Now Black Race Riots

In the aftermath of the civil rights revolution in the 1960s America had a choice. It could abandon race politics forever, or it could reformulate it along new lines. It turned out that our liberal friends couldn't resist the temptation of making race work for them, aping the way that Southern whites had made race work for them in the century of Jim Crow.

But just as Jim Crow politics turned the South into a mean and nasty place, a brutal white hegemony, so liberal race politics has turned liberals into monsters.

And it has created a monster too, the widespread black racism that has now metastasized into flash mobs of black youth, organized on Facebook and Twitter, that are disturbingly preying on peaceful whites.

It's easy for conservatives to say "I told you so." It is obvious that, in a modern, commercial, multiracial society no group can be allowed special license to act out its racist fantasies. But liberals have been condoning, and even whipping up, frank racism in the black community for half a century.

Now here we are, in the middle of a nasty great recession, in which young people, as usual, are hardest hit, and young undereducated, undersocialized, underemployed blacks are rioting. This is not like the urban riots of the 1960s in which blacks mostly burned down their own neighborhoods. This is frank race rioting, with black gangs seeking out whites to brutalize.

So now what do we do? We have a large underclass, harvest of 50 years of government subsidies for idleness; we have a catastrophic decline in black wealth, courtesy of the sub-prime mortgage lending of the last 20 years. We have an undereducated youth, courtesy of a century of government education. And we have a sluggish recovery, courtesy of the exploded Keynesian notion that more government spending and cheap money is the way to jump-start an economy. And don't mention the black cloud of ObamaCare, Dodd-Frank, and the S&P downgrade.

Yeah, Mr. President. Why don't you Do Something about all this?

Government-sponsored Theater

I'm back in Ashland, Oregon, finishing up a week of Shakespeare with my daughter and family.

It's always something of a trial, of course. The Shakespeare, not the family. Because Ashland and the Oregon Shakespeare Festival is liberal-land.

The whole experience is a bit like watching the mainstream media: liberals telling each other how wonderful they are.

This year, all three plays we watched are GSEs: government-sponsored entertainment, as in the program's announcement that

The Oregon Shakespeare Festival's productions of Measure for Measure; Julius Caesar, Henry IV, Part II and Love's Labor's Lost are part of Shakespeare for a New Generation, a national theater initiative sponsored by the National Endowment for the Arts in cooperation with Arts Midwest.

Obviously, when you do a project like that, it turns out to be tuned to political perfect pitch. That means that the cast is exquisitely racially balanced, a lot of the plays are directed by women, Julius Caesar is played by a woman, and the humor is physically exaggerated so that even someone that has never cracked a book can get the jokes. It also means that a lot of the physical gestures of TV-land get imported into the productions. TV is our modern cultural lingua franca, and live theater has to learn to speak TV-speak or lose its audience.

Having said that, I found that under the dross you can still find the timeless question at the center of Love's Labor's Lost, the daunting question for any young woman: How can she trust the man wooing to get between her legs? He's thrown up all his grand plans as soon as he's caught the twinkle in her eyes. Very nice, very flattering. But then what? The answer is the old answer: better make him work for it.

In Henry IV, Part II there is still the question of the rising generation: will it amount to anything? Will it ever get serious? And as for the ruling generation, can we ever get out from under the debt of its quarrels, its enmities, its hypocrisies?

Unfortunately, the Julius Caesar had nothing in particular to recommend it. You'd hardly realize that she, Caesar, was a standout army commander and power politician. You'd hardly realize that the play was about ruthless high politics between the great ruling families of a great empire rather than a bunch of actors doing a workshop production in their street clothes. But maybe you can't expect a new generation, especially a new generation that helped elect Barack Obama as president, to have a clue about politics. Maybe director Amanda Dehnert should have had the courage of her convictions and had the conspirators conversing with iPhones and Facebook.

Never mind, the weather was glorious, the swimming was good, and the visit with my daughter and her family delightful as I played the role of grumpy old grandpa the best I knew how.

But next year, next year we'll be right in the middle of the liberal Annus Horribilis and the meaning of Mistress Quickly's demand that she'll have "no swaggerers here" may apply to the body language of that eternally marginalized Ashland minority. I am talking about conservative Shakespeare lovers.

For What Should Obama Sacrifice Himself?

Yesterday we introduced the concept of Obama as the Dying King. It's an ancient concept that goes back to the dying gods of Egypt and Mesopotamia. Not to mention the Christian God who died on the Cross for the sins of the world.

If you are a king, a real king who represents his country before all eternity then he knows that eventually, he must sacrifice himself for his people. Think Lincoln. Think George W. Bush crucified for eight long years by the "civility" chaps over at the DNC.

But if Obama is to nobly sacrifice himself for his country, then the next question is: for what does he sacrifice himself? ObamaCare? Clean energy? Very fast trains? Er, sorry, chums. But those issues are simple bribe-the-voters progressive chestnuts. And they are part of the basic narrative of the Obama administration: He Made Things Worse.

No. The cause for which Obama can honorably sacrifice himself is the issue by which he entered national politics, his speech at the 2004 Democratic National Convention where he declared that we are all one people.

The pundits, the pundits like to slice-and-dice our country into Red States and Blue States; Red States for Republicans, Blue States for Democrats. But I’ve got news for them... We are one people, all of us pledging allegiance to the stars and stripes, all of us defending the United States of America.

Yeah. Something got lost there in the "leading from behind" presidency of "false choices" and Professor Obama lectures and the "great dissuader."

So here is President Obama's great opportunity for a lasting legacy. He can end his failed policies and return to the great promise of his great 2004 speech. He can be remembered as the president that ended the racial divide. He can be the president who ended the Blue State Red State polarization. What a legacy that would be! How the president would go down in history!

But he won't, of course. Because President Obama isn't thinking much about the bigger things. He is sitting in the White House in a funk and the only thing he is capable of doing is doing what he has knows how to do. And what he knows how to do is to play the Alinsky community organizer, the chap that prods marginalized communities into political action to serve the ideological agenda of the left. Trouble is, of course, that he's been doing his community organizer thing for the last two years and it has got him into the biggest mess that a president ever got into in our lifetimes, Nixon excepted. What can he do about it? Who knows? The problem is that nothing in his life, up to now, is a preparation for this moment. The president is like all the other liberals that thought, in 2009, that that were entering upon a new era in America, a fundamental change that would usher in Hope and Change. Only they weren't. Instead they were flying up a box canyon, and it's now too late to turn around without crashing.

The president won't take my advice. Heck no. But, if you ask me, the best thing he can do with the rest of his presidency is to bring America together and stop playing the left-wing politics of division and hate. Bring Red State and Blue State together Mr. President. Bring black and white together. Bring feminist and conservative Christian mothers together. Bring gays and heteros together. Then you will go down in history as the President for All Seasons. Even if you lose in 2012.

Obama as the Dying King

What is Obama to do now? He and his Democratic are lashed to their ten ton deadweight, ObamaCare. They are sinking fast, and dragging the country down with them.

How does Obama win reelection? How does the nation prosper? What on earth happens next?

Tellingly, Hugh Hewitt's chappie Clark Judge writes that folks inside the Beltway are starting to sneer at the president. He quotes center-left Politico.

“McConnell wanted to negotiate primarily with Biden, concerned that other Democrats, especially Obama, would prove to be less trustworthy bargaining partners... GOP House staffers were burnt out after months of fruitless meetings at the White House that they had taken to calling ‘joke meetings’ or worse still, ‘Professor Obama’s lectures.’”

Oy! So Jonah Goldberg writes that Obama is between a rock and a hard place.

He’s got no place he can go, but he can’t stay where he is.

I have an idea. It is an old idea, perhaps the oldest idea there is. Obama must become the Dying King, and sacrifice himself for the greater good of the nation.

The Dying King myth began as the dying god. The Egyptians had Osiris. The Mesopotamians had Dumuzi. For Christianity there is Jesus Christ, the Son of God who died for the sins of the world.

We have had Abraham Lincoln and John F. Kennedy.

The dying king must sacrifice himself that the country might live. George W. Bush understood this at the very moment of 9/11. He knew that he must wage a long war against Islamic terror, and he knew that he would end up being sacrificed for the greater good of the country. And so he was, as liberals turned against his policy at the earliest tactical opportunity, and demonized him for eight long years. But his policy endured, as we know, with Obama essentially continuing his policy, only without the determination and commitment.

Now we have liberalism in free fall, in moral and financial bankrupty. Now it is time for President Obama to step up, in his turn, and submit to the destiny of all worthy leaders, to accept that he must take the incoming rounds (metaphorically) so that the community, the tribe, the nation may endure.

Does he have it in him? Democrats have never really thought about this dimension of political leadership. They just think abou the one-dimensional glory of government programs that care about people. But now they are committed to a terrible Goetterdaemmerung of liberalism. Will the president suck it in and die a noble political death with dignity? Or will he continue as the divider-in-chief, scoring political points and blaming millionaires and billionaires like some Latin American thug dictator.

Next year, 2012, is going to be an annus horribilis for our Democratic friends. The only question remaining is whether the Democrats deal with this immense challenge with fortitude and honor, or whether they funk it and bring the whole nation down around them in a chaotic rout.

What's Next?

The Rushes and the Shauns weren't too happy yesterday as they discussed the debt deal. And they are right of course. The deal does allow for tax increases and defense cuts, and has very little in the way of spending cuts. We should be outraged!

But think what the dirty compromise means. It means that we will have the same argument in the Fall when it comes time to do the Appropriations bills.

Or does the debt-ceiling deal mean that we don't get any appropriations bills this year?

In any case, whenever the next skirmish occurs it will be the same old thing. Republicans will be calling for solving the debt problem and the Obamis will be arguing for tax increases. What in the world is wrong with that?

Let's not forget what this is all about. This is about changing the political culture of the US from the spend and elect culture to the cut and elect culture. You don't do that overnight. It takes years to make a difference and move the ship of state in a new direction. If Republicans had got what they wanted in the debt deal then we could disband the Tea Party patriots and go home. That would not be a good deal. What we want is for our chaps to be outraged at the other guys and not too happy with our guys and go out there and start organizing to put a lot more Tea Party supporters in Congress and in the state legislatures.

Let's admit, at least, that the president got what he had to have, which is a debt ceiling to get him through the election and the prospect of revenue increases and defense cuts to wave like a wand in front of his supporters.

Strategically, the president is flying up a box canyon. If he wins then he has to implement spending cuts. Period. And his second term will be a nightmare that will chop the Democrats down to a remnant. Much better to lose and let the Republicans make the tough choices. Then Democrats can barrack from the sidelines and complain that Medicare, Social Security, Medicaid "as we know it" have been destroyed.

Politics is all about fear. Used to be that the way to frighten the voters was to accuse Republicans of taking an ax to beloved social programs: Mediscare. But now the fear factor is a two-edged sword. There is the debt fear factor and the entitlement fear factor. Are you more afraid of ending up like Greece or more afraid of throwing grandma into the street?

That's how politics is shaping up for the next decade. Which is more frightening? Uncontrollable debt or cuts in entitlements?