Libera Voce

If you watched the Democratic Presidential Primary debate on 02/19/20 you witnessed a poorly moderated chaotic event, more similar to a prison riot than civil discourse. While there was plenty of name calling, principled debate was for the most part absent. It is difficult to pick a “winner” based on coherent and principled platforms of the candidates as the bloodletting consumed so much time to really allow for that, and differentiation in this regard remains ambiguous.

Appalled as I am by Trump’s actions and behavior, I was looking for a decent Democratic alternative to voting for a Libertarian as I always do; having seen the debate, here are my takeaways:

1. Michael Bloomberg can’t debate.  He was stiff and pedantic, as if presenting at a technical corporate event. He was unable to handle what he should have known was coming his way regarding his wealth, misogynistic history and stop-and-frisk policies as mayor, not to mention his opportunistically flipping party loyalties. He may stumble into the convention as a possible “centrist” or “moderate” alternative hoping for a brokered win, but he failed miserably in this debate and will likely fall in the polls and do poorly in the Nevada primary.
2. Elizabeth Warren is repulsive, like Nurse Ratched from “One Flew Over the Cuckoo’s Nest”. She lent little to the debate as far as policy or ideas are concerned. Probably because she has fallen so dramatically in the polls she felt compelled to viscously attack everyone else, especially Mike Bloomberg, who admittedly was very vulnerable, and ill equipped to respond effectively. It was a desperate scorched earth approach in the hopes of remaining relevant long enough to get to the convention. 
3. Bernie is…well, Bernie, the proud honeymooner in the USSR, Soviet loving and table thumping avowed socialist. He is making huge inroads with the younger electorate to become the current leader of the pack, so if you are a socialist there’s no need to vote for any other party if he wins the Democratic ticket.  The DNC leadership is scarred he will do just that and is desperately looking for an alternative, but based on this debate there may not be one. I did see that some of the other candidates hit Bernie with concerns about the violent approaches by some on his staff and supporters; alarmingly, Bernie’s responses were at best unconvincing.
4. While Sleepy Joe was more awake than usual, he put forth a performance based on platitudes and association with Obama, in effect looking like someone who needed an intellectual walker to get through the debate; no, it will not be Biden, as a candidate he looks like a dead man walking, even though he’s likely to make it to the convention.
5. Pete Buttigieg is an intelligent talker in these kinds of political debates where substance is a low priority.  FDR was also a good political debater who once said that the trick is to never really take a position you can’t change, and never provide any real detail to what you propose. In that regard, Mayor Pete is his heir apparent, spouting grand hyperbole with interpretation wide open.  His shallowness was most apparent when he attacked Amy Klobuchar for forgetting Mexican President Obrador’s name. Making togetherness a presidential platform is more effective for kids watching Mister Rogers’ Neighborhood.
6. Amy Klobuchar came across as the most sincere, decent and intelligent of all the candidates.  She made an honest attempt to actually answer moderator questions and showed poise and humor in responding to attacks. She should be that potential DNC choice for a moderate or centrist candidate, an alternative to Bernie, but unless she continues to rise in the polls and win more delegates, she may not make it to Milwaukee. That would be a real loss for the Democrats from a decency perspective, but I doubt that’s what their looking for.

What I think what was missing or scarcely and/or poorly addressed in the debates, which is significantly due to a really poor performance by the moderators, were issues such as:

1. The budget deficit and national debt were hardly mentioned and only obliquely.
2. Answers as to where the trillions of dollars all the candidates, with the exception of Amy Klobuchar, where throwing at all the various issues raised was going to come from, as if spending from an empty pocket was a rational and responsible approach.
3. Ending the senseless, immoral and endless wars the US has waged, wasting lives, money, assets, not to mention good will.
4. Ending the war on drugs that has done nothing in addressing addiction, but has created the largest proportion of incarceration in the world, especially among poor minorities, squandering trillions of dollars, and enabling rampant corruption.
5. The senseless, polarizing and irrational class war rising in this country due to a lack of economic and civic education, where being rich and/or successful is deemed evil.
6. The lack of respect for individual rights, especially those as guaranteed in our own constitution; the most glaring example is free speech suppression, especially in our universities.
7. The lack of financial accountability, not only in government, but among our banks, businesses and consumers who have created the largest debt burden in US history, clearly unsustainable.

These are just a few of the issues that I think the moderators should have focused on for the candidates to have addressed.  The moderators should also have provided the opportunity to have done so by deflecting the vicious attacks and redirecting the debate to issues of substance as that’s their job.

While there was significant talk about the need to beat Trump, it remains talk as this debate was more blood sport than a show of potential leadership. If this is the best that the Democratic Party has to offer, then they have a long way to go if they want the White House come November.

#BLOODSPORT

On February 13 the Senate passed a War Powers Resolution regarding the President’s ability to use military force against Iran. Although it had bipartisan support, it lacks the votes to overcome a veto.  It is not entirely clear why such a measure is required given the Constitution’s clear and unambiguous language of Article 1, Section 8 that only Congress has the power to wage war. 

Further, we already have a War Powers Resolution with the force of law passed by both chambers of Congress in 1973 that requires the President within 48 hours of using military force to advise Congress and explain what has happened.  Without Congressional approval for making war, any military action is limited to 60 days plus time to disengage from the conflict involved.

The recent Congressional resolutions, which apparently are not the same in the House and Senate, were a reaction to the killing of an Iranian general, increasing the threat of war between the US and Iran. The resolution was not a reflection of the Constitution’s requirement for congressional approval, but a specific act regarding a singular confrontation. The 1973 resolution was a reaction to the Viet Nam War, and it became law regarding all military actions.

The recent impeachment proceedings and subsequent trial were a reaction to the use of coercion in withholding military funding for Ukraine against Russian aggression.  What was lost in this tumultuous but ultimately futile process was the incorrect presumption that the US is involved in any way in some alliance or treaty with Ukraine obligating us to throw $391M in military aid into that conflict. That Trump is guilty of an abuse of power is apparent from his own words and actions, but that must be differentiated from the foreign conflict involved.

Ukraine is not a member of NATO or any alliance or treaty with the US.  Also, Congress has not to the best of my knowledge declared war with Russia which would legitimize aiding Russia’s adversaries as we are doing. It is also historically factual that Ukraine has been an integral part of Russia for centuries and that the language of the country is not Ukrainian, as few Ukrainians even know how to speak it, but Russian, and demographically, culturally and in large part politically closely tied to her.  It was not until the collapse of the Soviet Union that this began to change, but this is an issue for Russia and Ukraine to resolve; the US should not to be a party to this conflict any more than those in Syria, Iraq, Libya, etc.

We should not confuse this situation with reference to Russian cyberattacks aimed at the US elections.  Russia has been using propaganda tools to destabilize foreign politics for a very long time; social media is just a modern tool it now has in its arsenal, but it is not the only country to do so as China and the US do the same thing.

I have been given arguments such as Ukraine has been interested in joining NATO, but the fact is they are not a member, therefore it is irrelevant until such time as they are. 

Another argument is that the assistance to Ukraine has been to provide defensive weapons as compared to offensive, and therefore there is no  need for a declaration of war. It is irrelevant what the nature of the military assistance is, i.e. defensive or offensive weapons, as the distinction is one without a difference in regards to armed conflict. That Russia is the aggressor or Ukraine the defender, foreign military aid to either party constitutes a priori an alliance in the conflict, a de facto declaration of war. The question remains, has Congress voted an act of war with Russia?  If not, our aid is illegal.

Yet another argument that has been offered  is that we provided military assistance to England in WWII before a declaration of war against Germany under Lend-Lease, formally titled an “Act to Promote the Defense of the United States”, enacted March 11, 1941.

While that is factually accurate, it is not a justification, but bringing up Lend Lease does raise a larger historical context that must involve WWI and the genesis of Hitler’s rise to power, which was in turn the cause of WWII. 

Lend Lease was FDR’s work-around to the 1934 “Johnson Debt Default Act” that forbade US assistance to any government that reneged on debt to the US, which the UK did regarding its debt to the US during WWI. In fact, it was that very debt that was the basis for Lord Keynes’ insistence on the infamous Article 231 in the Versailles Treaty specifically because the US refused to forgive the UK its war debt. Initially Secretary of State Dulles rejected Keynes article as dangerously punitive as it would contrarily raise Germany’s thirst for revenge to another violent level, and history proved him right.  However, good old war mongering Woodrow Wilson pounced on Dulles and the US eventually supported Keynes. Subsequently, Keynes got the UK to renege on its war debt anyway.

Military assistance to either side in a conflict is in fact a de facto declaration of war on the other.  Germany didn’t respond to Lend Lease as such because strategically it was not in their interest to do so. You may recall that they never did declare war until after Pearl Harbor, and also that Germany was understandably irate with its Axis ally Japan for precipitating America’s entry into the war.

Keep in mind that the US entry into WWI was based on propaganda promulgated by Wilson’s administration, specifically that Germany killed Americans in the sinking of the Lusitania, a British ship.  Disregarded was the fact that the Lusitania’s manifest included war munitions that the UK had purchased from the US, and was also carrying passengers, including Americans.  The British were using passenger ships as cargo ships in getting war supplies; Germany was not afforded that opportunity.

Decades later FDR, desperately wanting to be a wartime president, cursed with the same blood lust as Wilson, needed a way to get involved.  He knew that America wanted no more to do with the constant blood feuds of Europe, and he was obstructed with the Johnson Act, so despite domestic opposition he devised the work-around we know as Lend Lease.  It was not FDR’s motive to fight Fascism, or anti-Semitism, it was his statist lust for power.  Not getting Germany to take the bait, he pushed for and got onerous policies regarding trade with Japan which led that fool to attack Pearl Harbor.

Now by no means do I propose that the US should not have defended against the AXIS, but understand that was a monster of our own creation, and we have continued to create such monstrous situations as we sink into the imperialist trap of a Warfare State.

I have little empathy for either the Republican or Democratic view regarding Ukraine as I see little difference between the two.  What they are fighting about is Trump’s use of foreign aid as leverage for domestic political advantage as corruption and abuse of power, but not the constitutional legitimacy of that foreign aid to begin with.

#WARatWHIM

There was a lot of talk after the 2016 presidential election about electoral reform to amend the constitution and do away with the Electoral College as established in Article 2 Section 1. There has been a lot of speculation about why the framers established the Electoral College but there are some reasons that have been identified:

1. Logistical – how to collect and record results given that the only communication methods was essentially for the states to send the results in by hand.  Establishing electors simplified and expedited the process.
2. State Equalization – as it is today, denser populations had an advantage over sparsely populated areas; the Electoral College was seen as creating a more level playing field.
3. Majoritarianism – a similar concern to the population density issue, but essentially a more focused concern about and possible remedy for mob rule. The counter argument to this was the corollary concern of Minoritarianism where a minority could successfully dictate to a majority, such as happens in a 2/3 vote required in the Senate in certain cases.

Given modern technology, the first reason losses some validity, but simplification of the tally still remains. There are other reasons that some framers had, but I think these are the more important ones.

That doesn’t mean the electoral process doesn’t need reform as the current system is so complex, long winded and unfortunately susceptible to corruption.  I looked around at what was going on in other countries and while there are even more problems with many, there are some things that are noteworthy.

I recently read that in Japan those running for office are limited to 12 to 17 days on campaigning depending on the office involved.  In the UK and other British Commonwealth nations elections can be called at any time and last from a few weeks to a few months.  In America we suffer through years of campaigning, numbing our political senses to a myopic state.

Add to this the lack of transparency and veiled corruption and it’s little wonder that many Americans do not even bother voting. We often have little more than half the eligible voters involved in elections.

So just as an exercise, I thought about what could change, as if the political elite would ever allow such heresy, to counter that.  Here are some things I fantasized about:

1. Limit all political campaigning to 3 months, maybe 4 months tops, prior to Election Day, including primaries. America spends too much time on this process, and the incumbent politician’s too little time actually doing their jobs because of the insane duration of current campaigns.
2. Candidates can only campaign for a certain number of hours per week, and they are obligated to still do their job; if you want to run for office, do it on your time, not the tax payer’s dime.
3. Candidates must declare within the first month or just be left out; too bad if you like to make the grand entrance.
4. Candidates may not use their own money on campaigning.
5. Only citizens eligible to vote may contribute to campaigns, but in respect for free speech, no limits.
6. Entities such as governments (including our own), corporations, unions, and the like may not contribute to or be any source of campaign funds, or be the source of support of any kind for any candidate.
7. Delegates in party primaries and in the Electoral College can only vote as mandated by the results.
8. End all term limits as they infringe on voter’s rights; some voters may actually want who they got, but term limits infringe on the right to run for office and the right to choose candidates.

These ideas are likely to never see the light of day, and even if they were to happen can’t address all the problems, but what we have is just plain soap opera politics, i.e. same story, over and over again, telling us nothing, promising everything, for years on end.

#ELECTORALREFORM

The Trump decision to pull troops out of Syria, which is a muddled situation because it’s not exactly clear what that means, is something he had promised for years, so the shock expressed by politicians and the news media is a bit of feigned drama we hardly need given all the other crises surrounding the President. I am all for getting out of this hell in the Middle East we created through our good intentions as it is just another example of America’s dissent into a Warfare State.  However, for now let’s focus on how all this is just more of the same old war games.

Under the US Constitution, only Congress can declare war, making all the US wars in the Middle East, not to mention Bosnia, Africa and Southeast Asia, etc. unconstitutional. The precedent was the Korean War, the first waged without a Congressional declaration, under the absurd description of a “Police Action” with UN sanction, as if the UN now superseded Congress in our constitution.

The 1973 War Powers Act was passed with bipartisan support to curb the war powers of the President, invoking the constitutional requirement that only Congress can declare war, something that the Constitution actually already did.  In large part this was a reaction to the Viet Nam War, and the absurd silence of the Supreme Court in refusing to hear cases brought against the Johnson administrations for waging war without a Congressional declaration.

Then we have the Afghanistan and two Iraq wars, and subsequent wars with insurgents such as ISIS, none of which was based on a Congressional declaration of war, all initiated and carried out by Presidents as if they had the powers expressly limited to Congress.

This is not to say that there have been wars we should not have had that did have Congressional declarations.  Take the Spanish American War, whose declaration was based on the fabrication that Spain sank the Maine with a mine.  After the war, investigations proved that the Maine sank from an explosion from a boiler malfunction.  Then there’s the case of the Great War, or WW I, where the declaration was based on the German sinking of the Lusitania with loss of American lives. Ignored in that incident was that the Lusitania was a British ship known by her manifest to be carrying war munitions, and that in fact Wilson had authorized munition supplies via American merchantmen to Great Britain, and that Germany warned all neutral countries that supplying their enemies with war materials made them enemies of Germany, i.e. the friend of my enemy is my enemy.

But at least these two wars had the legitimacy of the Congressional powers under the Constitution.  Not since the various war declarations of 1941 and 1942 has the US waged war in accordance with its constitution.  In fact, at this time the US has military assets in approximately 150 foreign countries, and permanent bases in 38, at least that we know of.

Granted, Trump’s reasons and methods regarding the Syria withdrawal are suspect, but the reactions by both political parties and the press are little more than partisan politics and recycled examples of failed justifications; for example:

1. If we don’t fight Jihadists in the Middle East, other countries will fall and eventually we will have to fight them at home! Really, the Domino Theory all over again? Have we learned nothing since Viet Nam? It has become painfully apparent that terrorism is not a territorial phenomenon, but one that travels across the world, an idea that can only be fought in the minds of people. The war against terrorism is just as much a war of ideas as it is to secure our safety here at home.
2. We only have limited Special Forces in Syria who are there to train local militias and act as a buffer.  That is exactly how we started in Viet Nam prior to the fabricated Gulf of Tonkin Incident to justify increased military action.
3. Withdrawal in Syria is a betrayal of our Kurdish allies. This actually has some justification but only to the degree as to how we disengage, not a justification for the failed policy of interventionism.
4. It’s America’s responsibility to bring stability and democracy to the region. Here we go again, nation building as a good intention but in reality just paving the road to hell. We have totally destabilized the region, killing thousands of civilians, causing the breakdown of entire societies with the resultant refugee crises and the very chaos out of which despotic regimes like ISIS are created.
5. We need to counter the influence of bad actors like Iran and its terror proxies. This is a corollary to the nation building mentality, and it really has not worked, except to draw us in deeper to a regional power struggle between the Mullahs of Iran and the House of Saud, for which we’ve become a proxy.

I may have missed some other idiotic excuses for our never ending wars, but probably covered the main ones. These are the same myopic chants waged against people like Ron Paul who has courageously campaigned against these never ending wars.  He is not new in this fight as people like Murray Rothbard before him rallied against the war mongering that plagues our society, and before him Garet Garrett (pen name) too with his “Hallmark of Empire” treatise about a republic’s decent into imperialism; it’s worth just mentioning his prerequisite features:

1. Dominance of executive power.
2. Foreign policy’s dominance over domestic policy.
3. Military ascendancy.
4. Evolution of satellite nations.
5. Fear mongering and grandeur posturing.
6. Trapped in historical failure.

I abridged the above and paraphrased to keep it simple; better that you read Rothbard and Garrett for better understanding.

The only moral justification for violence by an individual or a nation is self-defense.  We don’t own or owe anything to the countries we are militarily involved with or against.  The human and financial losses we have suffered and imposed on others are created by our very own government; in the interest of self-preservation if nothing else, we the people need to change that.

Start by not accepting and perhaps speaking out against our government’s and our compliant news media’s propaganda; the moment you hear about outrage against some foreign actor in some country you likely have hardly heard about let alone know anything beware, it’s more than likely the beginning of some foreign adventure that leads to more misery for some innocent people in some already impoverished and oppressed region, more American casualties, more deficits and more hatred of America, all in the name of democracy, a concept totally alien to the cause proposed.

May the New Year bring America peace, something we have not had for a very long time.

#WARGAMES

Could QE be back? Despite the fact that the government insists the economy is doing well, or at least OK, the Fed has now cut interest rates three times this year, depressing the Fed funds rate to 1.5-1.75%.

We are told that we are doing better than other economies like the EU and Japan because they are into negative interest rates and we’re not.  Yes, that should make us feel so much better. What we are not told about are the results of artificially depressed interest rates.  First, they eviscerate fixed income retirement plans, which most senior Americans rely on.  Second, they provide artificially low loan rates, attracting borrowers who are otherwise a bad credit risk.  Third, they devalue the dollar which is inflationary, but not called out as such.  All together what the Fed is doing is monetizing debt, historically a bad idea.

The Fed is caught in a squeeze; if they allow interest rates to reflect market they would rise in accordance with a simple economic basic called the time value of money. The Fed rate is for interbank funds, not commercial paper, so they principally affect short term rates. If the Fed allowed the rate to float per the market the US would be unable to even pay the annual debt service let alone pay down the principal.  The Fed itself has calculated that were that to happen, the debt service alone would rise to $1T/year, more than the current budget deficit. 

The US is now the largest debtor nation in recorded history, with Federal debt at about $22T; that does not include unfunded off-budget liabilities. Then there’s corporate and consumer debt, about another $20T, with defaults in high yield bonds, auto loans, student loans and credit card debt rising. The Fed has gotten us into such a terrible credit bubble that other countries have not just slowed our bond purchases, but have started to unload.  The world is beginning to understand that one of two things will have to happen, i.e. the Fed will go to QE4 buying more debt in conjunction with increasing the M1, or the US will default.

Doing the former will only make the credit bubble even worse, and the end game will make 2008 look like a small blip comparatively; default will have the same results.  In both cases, creditors will be forced to carry a burden that will likely crush them, leading to many bank failures.  In 2008 through 2010 there were more than three hundred bank failures; this time it will be much worse.

The 2008 crisis was precipitated by a massive credit bubble in insolvent mortgages, but the credit bubble we have now is even greater than that.  The Fed tries to sell the world that QE saved the day, but it didn’t; it just kicked the can down the road. If we were in a true recovery, there would have been no need for QE2 and QE3, but like true shysters, the Fed sold everyone on the greatest Ponzi scheme in history.  There’s a current joke going around that Madoff should have succeeded Janet Yellen as the Fed chairman, not Jerome Powell, because Madoff had a proven track record in Ponzi schemes.

The fact that household net worth was greater in 2008 than it is today is the most telling evidence that there was no recovery, and the way the government manipulates data to cover their tracks is laughable.  Take the unemployment rate for example; the government only counts the unemployed based on claims.  If you’re an unemployed accountant looking for a job, but needed to make ends meet because your benefits ran out, you take a temporary and more than likely part time job, but the DOL counts that as a new job created!

Also, why is the Fed so obsessed with inflation?  Why is a 2% inflation rate a good thing or any inflation at all? When I wake up one morning, and find that everything cost me more, I should be so happy because…why? Since the Fed was founded in 1913, monetary inflation has been 2,499.5%, meaning what costs a dollar back then now costs nearly $26 today! Breaking out just the QE period, what costs a dollar then now costs 20% more.

Einstein once said that doing the same thing over and over again, but expecting a different result, is the definition of insanity; applied to the Fed’s policies it becomes economic suicide.

#BUBBLEECONOMY

It’s hard to connect the dots on this one, but it was kind of fun, so here goes:

Little did I realize that one of the world’s so called democracies actually has a state religion, but yes indeed, those zany Brits have yet to change the fact that the Anglican Church is their state religion. Hopefully they don’t still burn or behead heretics, Jews and Catholics!

The other day, that very Church sent to Parliament a request to ban all pointy knives.  I thought that curious until I learned that not too long ago an MP proposed the same thing but was laughed down so bitterly that he actually disclaimed he ever thought of such a stupid idea.  Not so fast dear stupid MP, Parliament has agreed to take the proposal under consideration!

Now thinking that some priest of this state religion had nothing better to do and pulled this stupidity out of his holier-than-thou ass with no reference to anything in particular, I learned that this was in reaction to the homicide rate in the UK continuing to stubbornly rise, and has now exceeded that of the US, which has continued to fall. Well let’s get those grinders out and de-point (likely not a real word – at least yet) all knives before things really get out of hand!

Now considering the fact that even the strictest areas of the US when it comes to gun laws pale in comparison to those of the UK, my question for the UK folks is why do you think that a ban on pointy knives will do anymore in regard to homicide rates than your gun bans have done?

Normally a rational conclusion in such circumstances, as in the case of the US Prohibition, would be that laws don’t prevent people from doing “illegal” things, they just define the penalties when people get caught. Take the War-On-Drugs in the US as a great example, which has done nothing about the drug trade or addiction, but has fed the prison industry the greatest incarceration rate than any other country in the world. I can only imagine the swelling prison rates in the UK for all those found with pointy knives!

Long live the Queen…and of course the Anglican Church.

#STATERELIGION

Are Trump policies just a disjointed array of campaign promises, and is there no way to connect the dots that would show some coherent pattern, like a plan? My initial observation was no way there’s a plan. Upon further consideration, I may have been wrong.

Trump was elected mostly with the support of what some call the forgotten class of God-fearing, conservative, mostly white middle class Americans, most of whom live in what the press and political parties dismissively call “flyover country”. These people feel that their demise, i.e. losing good paying, unionized manufacturing jobs, was due to free trade, the driving force behind globalization and the trade deficit. Trump promised to end this and said if elected tariffs would be the order of the day, and he delivered. The main target is China, although he went after Canada, Mexico and the EU also.

Trump also blasted Fed chairman Jerome Powell, who he appointed, for raising interest rates and continuing QT. Wall Street howled, Trump tweeted, and Powell relented; so much for the theory of an independent central bank. Note that the Fed now is on a program of cutting interest rates.

Trump also revoked the Iran Nuclear Deal, ostensibly because he found it ineffective as a means to curtail that country’s nuclear arms capabilities. Now I am not advocating for or against Trump’s policies here; for the moment I’m just trying to see if these dots can be connected.

For reasons going back long before Trump’s election, the dollar is the world’s reserve currency, which makes it the medium of exchange in international trade, and therefore requires reserves by the world’s central banks. Given that all of the world’s currencies are fiat based there is only one way to obtain this reserve currency, i.e. trade and underselling American products for dollars. The difference between these sales and purchases in America accounts for the trade deficit.

This requires an extraordinary supply of dollars in order to keep this system liquid. Apparently Trump has bought in to the accepted “wisdom” that reducing the trade deficit requires a weaker dollar. To make the dollar weaker, Trump needs low interest rates and/or keeping QE in play. The Iran deal threatened the dollar as the reserve currency because it would have exponentially increased trade between China, Iran, and the EU; it’s all about oil.  So Trump needed those sanctions back. There is a dilemma here for Trump as tariffs will hurt American exports despite depressed interest rates weakening the dollar, so the two may cancel each other out and not help the trade deficit.

So that’s my thinking, which you may find fault with, but at least it’s based on the facts at hand. What we really need to question is not just Trump’s policies, but whether or not the premise that trade deficits are a problem is true. Given the context of the current world monetary system governments are adverse to free markets, especially free trade, rely on fiat currencies and interventionist foreign and domestic policies. This statist mentality has created a dangerous conflict in international trade that has led to wars in the past, so yes, there is a method to this madness, but just don’t blame Trump because we’ve seen this movie before, and it didn’t end well. 

#MADNESS

I was curious about this as I had assumed that because Madoff’s was the largest in terms of size and investor losses, it was the worst in regards to personal greed, but I was wrong.  Allen Stanford stole $2B from his scheme’s fund whereas Madoff stole a paltry $250M. But in terms of size, I also learned that neither was the biggest as that currently comes in at $42.1T in unfunded liabilities!

I once read an article in Forbes about the Madoff scandal wherein they gave a pretty good idea of exactly what a Ponzi Scheme is:

“A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game)[1] is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources.”

I checked my Oxford dictionary and got pretty much the same definition:

“A form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.”

So I got to thinking, why does this sound alarmingly similar in many respects to what Social Security is as we hear all about how the younger generations are actually funding for the older generations, and the Trust will at some point run out of money?

Well I again recalled an article in Forbes in which they were responding to those that took a rather vociferous exception to the notion that Social Security is a Ponzi Scheme:

“We have today the insistence that Social Security isn’t a Ponzi Scheme because it uses the taxes being paid today to cover the benefits earned in the past, when that is in fact the very definition of a Ponzi Scheme.”

I have heard other criticisms about Social Security, such as claims that Congress illegally borrows from the Trust for other purposes or the taxes are diverted to other appropriations.  I don’t know if that happens or not, but according to The Center on Budget and Policy Priorities “Although legally distinct, they are often referred to collectively as the Social Security trust fund. All of Social Security’s payroll taxes and other earmarked income are deposited in the trust funds, and all of Social Security’s benefits and administrative expenses are paid from the trust funds.”

While this does not necessarily address the claims about nefarious Congressional acts, let’s proceed on the basis that it does not happen as no proof is known. What we do know is that all money paid into the Trust is invested in US Treasury instruments, bonds and notes, because they are deemed the safest.  Arguable, but such investments are susceptible to the Federal Reserve’s interest rate manipulations as we recently saw creating very poor yields, and hardly return enough together with principals to cover liabilities.

Now I’ll bet that all of you have some form of insurance for car, home, life, work, whatever, and you pay good money for that.  Insurance policies are contracts, the essential terms of which are premiums now for basically benefits to cover some future, and in many cases, unknown need.

Let’s just focus on that which is known and disregard car, home, business liability and similar catastrophic insurances, which are still contracts but provide benefits for unknown problems in the future like accidents, hurricanes, etc.

Let’s focus on life, income and retirement. There are many variables to all these insurances but they have one thing in common, i.e. premiums and contributions are paid now for greater benefits in the future, with varying degrees of risks depending on the contract, and how the investments of premiums and contributions are managed. 

With a whole life policy that usually means a guaranteed future return based on low-to-no risk, but likely a lower but stable return to cover death benefits and ultimate cash values.  With certain types of retirement insurances, such as IRAs, 401Ks, etc. there can be higher risk as in the 2008 financial crisis that slammed those retirement accounts that invested in the type of high risk derivative stuff that such accounts should never have in their portfolio; with such investment accounts you can also elect fixed income. The point is that the terms and conditions of these various insurances are known and form a contract, paid with funds from the insured for the benefit of the insured.

Now look at Social Security Insurance; while it is an insurance policy, you can’t count on what the benefits will be as whatever benefits there may be for anyone at any time is up to the dictates of Congress, i.e. the terms and conditions of the contract will vary accordingly; please note that the Supreme Court has ruled as such when this was challenged, but I am not writing about that; simply note that there’s no way out on this because knowing that no one in their right mind would voluntarily invest their hard earned money in such a scheme, had they been aware of it, Congress made your enrollment mandatory.  Now think for a minute if let’s say Prudential Insurance would offer a whole life policy in NYS with such a deal, would sane people buy such a product, and wouldn’t the NYSDFS get on their case?

How can we rely on what the future benefits will be with SSI when it’s burdened with $42.1T in unfunded liabilities? Whether you believe this will bankrupt SSI in 10, 20 or 30 years does not change the” if”, only the “when” this will happen.  It was an unsustainable Ponzi scheme in 1935 and will remain so to its bitter end, and all the gimmicks, like changing the law that provided the benefits not be taxed, to now 85% taxed, or extending income limits for FICA taxes, or whatever future tweaking Congress can come up with, are all bandages on a hemorrhage.

All those younger than retirement age are essentially funding the gap for current beneficiaries, but they are likely to see less and less of those benefits themselves, if at all.  We are crushing the future of our children to fund an insurance policy which is not an insurance policy at all as it actually guarantees diminishing returns. So whatever you tell your children, tell them to find some way to save for the future in the private sector and understand that the FICA taxes they are paying are just funding the biggest Ponzi scheme of all time.

One other thing, if there are any honest politicians out there in favor of ending this scheme and allowing Americans to put their money in their own retirement insurance funds versus paying FICA taxes, vote for them and you vote for our children’s future.

#PONZISCHEME

While we suffer through the current pain of the trade war, the Fed interest rate manipulations, ever earlier campaign hysterics, threats of recession, and all other maddening modern phenomenon, there is seemingly an odd confidence that the American economy is still doing just fine because there is no apparent bubble like there was in 2008.

There has been some news regarding the irrational behavior of the world’s central banks with $16T of sovereign debt trading with negative interest rates, and the equally irrational behavior regarding the federal debt and deficit situation; but we hear little about the same issue in the private sector.  Why is that? Let’s look at some simple statistics published by the Federal Reserve:

1. Corporate High Yield Bonds, also known as Junk Bonds for their high risk, have been increasing in defaults, somewhere around $35B this year alone.  That means that there are companies out there that are considered Zombies, i.e. with earnings less than their debt service, who have simply found they are now incapable of continuing to pay their debts.
2. Earlier this year, defaults on auto loans were up nearly 5% year-over-year; this is about the same it was in 2009.
3. Mortgage debt exceeded $9T last quarter, more than the record breaker in 2009.
4. Student loan defaults are skyrocketing.

So why does the Fed and politicians tell us that there are no bubbles to indicate concerns that we would have a crash.  One hypothesis is that governments are not prone to call a debt crisis a bubble, such as the Dot.Com bubble of 2000 or Housing Bubble of 2008, because to do so would make it apparent that it can be directly tracked to artificially depressed interest rates.

We are told that we need to be more accommodating to maintain a healthy economy, as has the ECB done in Europe.  Well if that were so, why then are they in recession given that interest rates are so “accommodating” that they went negative? The fact the Germany could only sell less than half its recent bond offering, and that in the US the Fed’s quarter point reduction caused an inversion and bond panic should be a warning that debt markets are in crisis.

If we have a healthy economy as we are being told, why the need for stimulus, or why do we have a record deficit when historically deficits decline in a healthy economy? Why are these policies focused on getting the consumer to spend when it is known that consumption is not actually growth?   

If the Federal Reserve and the Federal government were interested in true and long term growth, it would do whatever it can to increase savings which creates capital needed for investing.  This is such an obvious concept to grasp that you have to wonder why the Fed does not promote it as a policy.  A society that emphasizes differed consumption in order to secure a more financially secure state for future generations creates long term sustainability.  Clearly, this is no longer the case in America and is not a sustainable economic condition as savings are at a record low. The absence of yield created by a policy to manipulatimg interest rates lower is meant to encourage consumption over savings, and is unsustainable. wObj�V=��*

#WHATBUBBLE

It is a large and bewildering field of candidates for the Democratic Presidential nomination and their respective campaigns seem to meld in to each other, confusing and overwhelming even for our huge media establishment. What does come across in varying degrees of coherency is the dominant theme about social justice and the need for equality, presented in moralistic tones as a progressive approach to solve inequality. I hear little if at all from the Republican side, which indicates either the absence of coverage, or perhaps the absence of anything at all; I suspect a little of both as it’s clear that the Republican Party has chosen to remain silent, in a state of appeasement allowing the President to be their speaker.

This social justice theme is irrational as it lacks a basic understanding of the nature of rights, the essential one being that it is the nature of man that his basic right is to own himself.  Based on the 18^th C liberalism of their time, the Founding Fathers expressed this belief in man’s basic rights with such phrases as  …all men are created equal…” with “…the right of life, liberty and the pursuit of happiness…” Please note that it is not happiness itself that is stated as a right, but the pursuit of it.

Any other concept of equality is delusional, and any action for what is called social justice is some morally twisted concept that is little more than vicious envy.  Are all soccer players equal to Lionel Messi? Are all investors equal to Warren Buffet? Are all mathematicians equal to Fibonacci? What should move all soccer players, investors and mathematicians is not to envy these people, but to admire them.

The point is we are not equal to anyone else because we are all different, possess different attributes and talents, which consequently represent an idiosyncratic value that results in some form of wealth we may derive from these attributes and talents, and which defines who we are, and the ownership of ourselves is for all of us our only equal and basic right.

So as we are bombarded with the new clichés about income inequality, the wealth gap, or the like, with the attenuating claims about the “rights” to free education, equal pay, free health care, etc., what we are not getting is a justification why such desires are “rights”. A claim to such rights would in turn require someone to provide whatever is claimed as a right, but who can do that? 

In that question, and the answer to it, lies the inherent fallacy of social justice. The often given answer in this political context is if elected, whoever supports these desires as rights will see to it that the government provides for such rights.  Once you assert that such a desire is a right, you then have to assert how such a right is to be realized; if it requires compelling someone to provide the means to satisfy such claims in the name of social justice, then the assertion is actually immoral as it deprives someone of their own rights in order to meet these desires that you have claimed as a right.

The more politically astute candidates will not go further than asserting such rights as doing so would expose such assertions as either fantasies or confiscations; the less astute but perhaps more honest candidates such as Warren and Sanders do go further, and consequently may therefore be less likely to be nominated. Ultimately, it may not make a difference which candidate is nominated to run against Trump as regardless of the winner, the basic right to own oneself is in peril.

As I have already written about the absurd cronyism and inherent corruption in the QE by the government to the benefit of their elite circle, I agree that such actions contributed to “income inequality” in that it dislocated capital from growth to financial manipulation, and disproportionately burdened us with even more debt.  So why then would we expect such corruption to be absent from the government’s pursuit of “social justice”? That, coupled with the moral bankruptcy of such concepts, should be compelling enough for Americans to see through such policies as the destruction of our basic right to own ourselves, which includes the fruits of our talents and labors. To put it another way, the pursuit of equality as social justice asserts the moral prerogative to have others supply you with your desires at the expense of their efforts.

Consider two examples of the basic right to own oneself:

1. The immutable (unless the Supreme Court overturns Roe v. Wade) justification for a women to own her right of free choice to choose pregnancy or its termination.
2. The abolitionist position as expressed by Fredrick Douglass based on this basic right to own oneself.

Why so many “Progressives” see women’s right to choose what is best for their own bodies as clearly a basic human right, but appear incapable of extending such a basic right in all things is bewildering.  Among Fredrick Douglass’ detractors were many socialists who felt his position undercut their belief that all men are slaves to the existence of private property and capitalism, a position which Douglas rejected as contrary to the basic right of man. Our shared natural basic right to own ourselves is the only equality there is, and a right for all regardless of race, wealth, or whatever our individual attributes and talents may be that distinguish us as who we are.

#EQUALITYMYTH