Truth is Treason in the Empire of Lies

Three lessons from history for printing up money…

“WE CAN PAY ANYBODY by running a printing press, frankly,” said Thomas Gale Moore, one of Ronald Reagan’s economic advisors, when the United States became a net debtor to its foreign investors in 1986.

“[So] it’s not clear to me how bad [being a net debtor] is,” he added. And for the next two decades or so, owning fewer assets overseas than foreigners laid claim to inside the United States didn’t seem so bad at all.

The long boom delivered by a steady inflow of foreign credit and cash delivered the greatest stock market gains ever enjoyed by US investors. When they topped out, the party switched straight into real estate – adding more than one-third to America’s household wealth on the Federal Reserve’s metrics.

So what if non-US claims on that surging wealth rose faster still? Now the party’s over, inflating away the value of America’s debt will worked just as beautifully as it always before. Right?

“In my view,” says John H.Makin – a visiting scholar at the American Enterprise Institute writing in the Wall Street Journal – “the least bad option [in fixing the financial crisis] is for the Federal Reserve to print money to help stabilize housing prices and financial markets.”

“America is a country that owes money,” agrees Philippa Malmgren, a former Bush advisor and now head of a risk consultancy in London. “It is natural when you are a debtor that you lean in the direction of inflation, because it makes paying it back so much easier.”

The logic is simple: inflate the number of Dollars in issue, and you’ll shrink the real value of each outstanding Dollar you owe. But if escaping your debts really could prove that easy, how come history is littered with the mischief that inflation causes instead…?

Restoration England, 1668
Charles II – still playing his “divine right” as king some 20 years after Parliament cut off his father’s head – steps up the issue of new bonds. Then called “stocks”, they let the King raise cash for yet another losing war against the Dutch.

Charles side-steps Parliamentary approval for these new debts, and starts selling stocks against the promise of future tax receipts (the same wheeze adopted by governments worldwide today, of course). Come 1671, however, all the new money raised went straight to paying interest on the outstanding loans. So Charles opted to default, wiping out 11 of London’s 14 biggest goldsmiths – those early banks who’d first lent the Crown money – and destroying his credit with England’s loyal subjects.

The upshot? The King strikes a secret deal with France, promising to stay out of its war against the Dutch in return for regular cash pay-offs. But the deal – uncovered amid a rash of anti-Catholic panics in London – undermines all support for the Stuart royal family. Fifteen years later, and with the English crown bankrupt once more, his brother James II is overthrown in a popular and (pretty much) bloodless coup.

He’s replaced by William of Orange…head of the Dutch Republic!

Revolutionary America, 1775
Lacking a mandate to tax its population while fighting a war, the second Continental Congress authorizes the “limited” issue of paper money. The new notes, known as Continentals, are backed by neither Gold nor silver, but by the expectation of future tax receipts.

Effectively acting as tradable bonds – but exchangeable for goods and services amongst the Patriots, rather than hard currency – the Continentals will only be redeemed when the Colonies win their independence from Great Britain. But long before that happy day, they race towards zero, becoming progressively worth less as their supply increases.

During the first six months, the supply of Continentals goes from $2 million to $6m. By 1779, the total supply reaches $242m on one estimate – more than twenty times the volume of gold & silver money in circulation before the war began.

“A wagonload of currency will hardly purchase a wagonload of provisions,” complains George Washington. In March 1780, Congress announces a plan to redeem the Continentals at one-fortieth of their face value, effectively stuffing the American people and taxing the new citizenry more aggressively than George III ever did.

“So much for Congress’s honor,” notes Thomas E.Woods for Mises.org today. But for once, at least, these un-backed and over-inflated notes don’t end with political or military defeat. Other than for the Patriots’ cry for lower taxation, that is.

Weimar Germany, 1920
Besides losing 13% of its territory and 10% of its population under the Versailles Treaty after World War One, Germany also owes “reparations” to the Allied victors worth almost 37,000 tonnes of gold – around one-third of the world’s entire above-ground supplies at the time.

Expected to settle the final payment seven decades later, the German government opts instead to pay early by printing money. The volume of Reichsnotes in issue rises 35 billion times over between 1918 and 1924 – and “the young and quick-witted did well,” as the German journalist Sebastian Haffner will record, fifteen years later.

Equity prices in Berlin rose some 2,772,164% by the time a loaf of bread cost a wheel barrow-full of banknotes. The value of those Reichsnotes, however, went the other way – sinking from 8.0 per US Dollar to 4.2 billion per Dollar.

The resulting chaos, now regularly blamed for the rise of Hitler during the Great Depression of the early 1930s, saw “wages paid twice a day and promptly and completely spent within the hour,” notes Glyn Davis in his History of Money.

“Large sections of society, including the middle classes, became impoverished; food riots were common; there was a complete flight from money, which had clearly become worthless to hold.”

A more honorable legacy, perhaps, was the inflation-fighting Bundesbank of the 1970s and ’80s. Staffed by bankers and academics who’d lived through both the Weimar inflation and its World War Two replay – which saw worthless coupons issued as money to Nazi citizens, Wehrmacht troops and even concentration camp victims – the West German central bank refused to devalue the Deutsche Mark alongside the Dollar, British Pound and French Franc by setting interest rates low.

The Bundesbank kept inflation far below the double-digit rates suffered by UK and US households as Gold Prices rose 20 times over against the Dollar. It finally bit the bullet with the birth of the Euro in 1999.

The new European Central Bank has since let slip its money-supply growth target of 4.5% per year. At last count, the supply of Euros was expanding by 10.3% per year, just below 2007’s three-decade record for Europe monetary inflation.

The Global Banking Crisis, 2008
“US money supply growth is running at a 47-year high,” notes Bedlam Asset Management, “as the authorities seek to inflate away the debt bubble and prop up house prices.

“Clearly printing such huge amounts of money is not great for the exchange rate. A weak Dollar has forced the hand of other central banks as they try and keep their currencies competitive with it.”

But might the scam work? Not if China, Japan and the big Dollar-holders of the Arab oil kingdoms can help it. Will they really let their own currencies rise…just so the United States stuffs them by paying its debts with devalued Dollars?

Inflation, it’s claimed, eases the burden of settling your debts. But for government and private debtors alike, that’s only true if your income rises faster than your on-going cost of expenditure. Otherwise, you end up struggling to make ends meet today, only to leave yesterday’s debts for repayment tomorrow again.

Middle-class families and savers looking to get ahead of the game – both inside and outside the Federal Reserve’s fast-inflating currency zone – might want to consider Buying Gold as defense. Because however this latest attempt to inflate away debt pans out in the long run, it’s sure to make history.

And history says – time and again – that solid Gold Bullion holds its value whenever man-made currencies are forced to lose value.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

The government and its licensed monopoly, the Federal Reserve System, made possible the housing bubble. Now they must face the consequences. So must people who want to sell their homes. Nobody wants to face the consequences. But eventually reality intrudes.

By Gary North

LewRockwell.com

You read that right. You can buy a house in Atlanta for $10,000.

That’s if you’re a high roller. How about one for $5,900?

Whenever you see something like this, you should think to yourself: “This sounds crazy; so, the government has to be involved.” This may be incorrect, but you will save a lot of time barking up wrong trees by starting with this assumption.

In this case, it’s a conclusion, not just an assumption. I will get to this later on. But first. . . .

A PARALYZED SYSTEM

There are a dozen houses listed by local real estate agents that you can buy for $10,000 per home. You can buy ten times as many if you are willing to pay $20,000.

How can this be? It is true that we are somewhere in the unwinding of a housing market that has suffered from mania. But this is more than unwinding.
I’ve got entire neighborhoods where all I’ve got is distressed sales. I don’t have any good sales.”
There are foreclosures. But how can prices fall this far? Aren’t there any bidders at $10,000? The answer is simple: no. Are these houses abandoned? Probably. Well, abandoned by their original owners. They may not be abandoned by local entrepreneurs in the pharmaceutical trade.

When I first read about this, I noticed that the article did not use the code words that immediately pop into the typical reader’s mind – words associated with the now-illegal bank practice of “redlining.” There are some neighborhoods that are high risk. Yet, even here, people rent. They don’t rent for $50 a month. So, why don’t renters see an opportunity? They could go to the seller – a bank – and offer to buy the place for no money down and then fix it up. If they have any repair skills, they could make a good case. That is surely a better deal for the renter and the banker than having the house sit empty.

Please don’t tell me they aren’t smart enough. Those previously mentioned entrepreneurs are very sophisticated in matters financial. Some gangs demonstrate remarkable abilities to handle positive cash flow. People on the street know what things cost and who is profiting.

Yet the houses are not selling. If I worked for a foreclosing bank or lending agency, I would go to local pastors and suggest an arrangement. I would try to sell them houses as investments. They have money. Failing this, I would encourage them to locate church members who would like a place to own. In short, I would make a deal. I would get the houses off the books. These houses are not doing the foreclosing agencies any good standing empty.

If nothing else, I would go to Habitat for Humanity or the Fuller Center for Housing, both headquartered in Georgia. I would find out if they could do something with the properties, such as buy them, scrap them, and build new houses.

The fact that this has not been done indicates that there is a terrible paralysis in the foreclosure process. This paralysis points to government regulation. It also points to corporate centralization. Nobody at the local level is being offered incentives to get these properties off the books.

This problem is not confined to Atlanta. I speak from recent experience.

I plan to buy a house next year in an Atlanta suburb. If prices fall enough, I will buy more than one. So, I sent my wife to the area in early May to see how the foreclosure market is doing. She found out.

She went to the courthouse steps to view the auction for foreclosed properties. The sellers had all posted minimum bids. One by one, the houses were offered for sale. There was not one bid. This meant that the asking price was the high bid. Every house went back to the foreclosing lender.

These houses were not priced to sell. They were priced to subsidize the local pharmaceutical trade. “You want free rent? You’ve got it!”

One house that caught my attention was foreclosed last December. The bank is unwilling to drop the price below $250,000. So, it keeps buying it back.

I subscribe to RealtyTrac. It costs $50 a month, but it saves me time, which is valuable. It lists some 250 bank-owned properties in the town I am looking at. Some of these properties have been on the banks’ books for over a year. There is an occasional SOLD entry: maybe one out of every 30 houses listed.

As the housing slowdown continues, and as prices slowly fall because a few sellers become desperate, the number of foreclosed houses in inventory will serve as a constant source of houses in competition with sellers of owner-occupied houses. At some point, the banks holding these foreclosed homes off the market will decide to price them to sell.

When that happens, property tax assessors will enter the twilight zone.

In Atlanta, they already have.

A TAX ASSESSOR’S NIGHTMARE

On May 12, the Atlanta Journal Constitution ran a story on this in its Metro section: “Tax Assessors Boggled by Housing Dip.”

Boggled, indeed.

The article reported on the $10,000 and $20,000 houses for sale. The reporter asked the right questions. They are the questions confronting tax assessors.

What is the value of a lot if no one can get a loan to buy it? How should you value a home that sits on the market for a year with no offers? When a neighborhood has several foreclosures, short sales and abandoned properties, do they set the market?

The problem is, the assessors do not have agreed-upon answers. Distressed property sales – sales by distressed sellers – are not supposed to count. But when distressed sales are the bulk of sales, what then? The article quotes the chief appraiser for Fulton County.

“We are trying to understand all these things,” said Manning. “What’s the right answer? We don’t know. It’s tough.

In fact, seven of Atlanta’s least-expensive homes are listed on average for $8,800 but taxed at an average value of nearly $93,000.

One of the houses is on the books at $101,700. It is being offered for sale at $5,900.

The problem is getting worse. The foreclosures keep increasing. They are expected to increase through 2009, if we believe the chief economist for Freddie Mac, the government-sponsored mortgage company.

Already, there are Atlanta neighborhoods where banks own 90% of the properties on the market. This is accelerating. One agent explained the problem. The tax authorities have these properties on their books at high prices. The prospective buyers do not want to buy these properties when they know they will be hit by high taxes. He said that he had a buyer for a $95,000 duplex. The buyer backed out when he discovered that the property was on the tax roles at $300,000. I would have backed out, too.

The tax assessor has a major problem. If he keeps these properties on the books at the old prices, they won’t sell. If they won’t sell, the sellers will be forced to lower their prices. If these prices fall, the market for normal, non-foreclosure houses locks up. There is too great a discrepancy between the foreclosed house prices and the owner-occupied house prices.

Some of the sellers will then stop paying their mortgages. They will walk away. This is not a major factor yet, but as the economy slows, some people will be trapped. They cannot sell their homes, due to existing foreclosure offers. They have to move. So, they will walk away. Result: another house moves into the foreclosed homes inventory.

And the beat goes on. And the beat goes on.

What’s a tax assessor to do? Lower the appraised value of the homes, of course. But that creates a problem for the local government. Tax revenues fall. The unit of government finds itself running a deficit.

It’s called the Vallejo problem. The city of Vallejo in northern California is very close to going bankrupt. The city council voted to file for bankruptcy on May 6, but the papers have not been filed with the court. Falling housing prices caused a property tax reassessment downward; the result is a fall in property tax revenues. This is not a small city: 100,000.

City councils across the United States will soon find themselves facing the same problem. Property tax assessments will fall if the assessors are faced with a situation in which the sale of foreclosed properties are greater than the sale of retail properties – the “good sales.” In California, this may be the situation by the middle of summer. If the lenders start offering properties priced to sell, it will be the case. When the lenders are forced by law to write down the value of their REO’s – real estate owned properties: foreclosure – they will finally start unloading them.

That is when I will be do my best to help them out – at a market-clearing price, of course.

The longer they hold out, hoping for an upturn in the housing market, hoping also for Congress to intervene and a President to sign the bill, the worse the fire sale will be. When the bankers at last see that the game of wait and see is over, they will stop putting in minimum bids.

When the auctions for foreclosed houses are more like eBay and less like Neiman Marcus, the dam will break. Pity the sellers of owner-occupied homes.

I will not pity the property tax assessors or the city council of America. They profited greatly while the Greenspan bubble was roaring. Bernanke has popped that bubble. What goes up must come down . . . at least until the Federal Reserve capitulates and starts inflating in earnest. That is not now, and it will take years for anything but mass inflation to bring prices back to their 2005 bubble phase.

In the meantime, reality has not penetrated the insulated world of banks or property tax assessors.

Thomas Stump, interim chief appraiser in DeKalb, said the number of “good sales” dropped from 12,400 last year to 8,500 this year. The lower number makes it even harder for the assessors to come up with values, he said.

“We have people in our office who want to sell but can’t find a buyer,” Stump said. “Still, there are buyers out there. It may take much longer. I don’t think you can say a property has no value because it won’t sell.”

Yes, a property has value. It has value because the bank that foreclosed is run by people who do not want to admit in full public view that they made loans that should never have been made. They don’t want to admit that the collateral for these unwise loans has fallen to fifty cents on the dollar, let alone ten cents. So, they hold these properties off the market at above-market prices. They “buy” the properties.

Someday, they will sell. What property tax assessors call “good sales” will slow to a trickle. This means that “good sellers” will have to grin and bear it. They will have to occupy their homes longer than they had planned.

Some will give up. They will walk.

HOW DID THIS HAPPEN?

The Federal Reserve System inflated in the 1990’s to get out of the 1991 recession. In 1995, the housing bubble began in earnest. Then, beginning in mid-2000 and escalating in 2001, the FED continued to inflate. This made the 2001 recession mild. It was mitigated by the housing boom.

That mitigation has now disappeared. The reverse process is now operating. It has not yet peaked.

For a decade, the two government-sponsored enterprises, Fannie Mae and Freddie Mac, put together packages of loans that diversified risk. That was what the academic economists’ formulas said. Then they sold these loans to investors.

The process was centralized. The old system of local banks and savings & loans issuing local mortgages went into decline. Costs of administration were low. Centralization allowed economies of scale.

Yes, they did: going up. Now they don’t: going down. Local agents of national banks and investment organizations have little authority. The distant decision-makers have no tested formula to handle the popped bubbles. They are flying blind, hoping for relief.

The tooth fairy is out of town. She sold her San Francisco condo and now resides in Baja California. She left no forwarding address.

When the cat’s away, the mice will play. From 1996–2006, the cat was away. The mice played. What did they play? Fast and loose.

I received this note from John Schaub, whose site, www.JohnSchaub.com, is one of the best sources of information on single-family home investing.

There was a lot of mortgage fraud in the intercity areas of many big cities like Atlanta. They would take a house worth $5000 and sell it for $50,000 to a friend who would get a loan based on the $50,000. That did not make the house worth $50,000 but the tax assessor would pick up the new “value” off the recorded deed. Other properties were sold with owner financing at terrifically inflated prices, then the loans (first mortgages on single family houses – how could you go wrong) were sold to investors. I’ve long advised never to buy a loan unless you are willing to go see the property. Many of these houses have negative value. It would cost more to tear the house down than the lot is worth.

CONCLUSION

The government and its licensed monopoly, the Federal Reserve System, made possible the housing bubble. Now they must face the consequences. So must people who want to sell their homes. Nobody wants to face the consequences. But eventually reality intrudes.

As for those of us who want to buy some bargains, the times are good and will get much better.

People who lose their homes in a foreclosure will have to rent. It is a great time for people who have the credit ratings, the management skills, the negotiating skills, and the liquidity to buy houses from distressed sellers, as bankers will be before the year is over, and surely before 2009 is over.

If you are such a person, your ship is about to come in. When it does, don’t be at the bus terminal.

May 17, 2008

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2008 LewRockwell.com

Gary North Archives

A downward spiral in California has begun. There is no stopping it now. Sleight of hand wizardry has run its course. The day of reckoning can no longer be postponed. Years of reckless spending has wrecked California.

By Mike Shedlock

(For more hard hitting current economic analysis, visit Mike’s blog at Global Economic Trend Analysis)

Posted by Michael Shedlock at 11:52 AM California Leads Way To Consumer Bust

To receive a free copy of our monthly letter to clients in your inbox every month, register your email address at the bottom of the Sitka Pacific Commentary Page.

Buy Gold and Silver online at GoldMoney
The Best way to buy gold and silver

Click here for the “safest” way to own gold or silver.
Check out Everbank’s MarketSafe® gold and silver CDs

The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

A stronger currency, commensurate with China’s increased economic strength, will both tamp down inflation and allow Chinese consumers to buy more goods and services.

By Peter Schiff

Euro Pacific Capital

As China grapples with the consequences of its devastating earthquake, it has also begun to finally confront the destabilizing forces bubbling up beneath its economic landscape. This week, several key Chinese officials, typically not known for their candor, conspicuously noted the need to both stimulate domestic consumer spending and bring down roaring inflation. While at first blush these two goals might appear mutually exclusive, China’s leaders do have a magic bullet that can hit both targets at once.

A stronger currency, commensurate with China’s increased economic strength, will both tamp down inflation and allow Chinese consumers to buy more goods and services. However, for reasons not entirely clear to me, or few others for that matter, China’s leaders are resisting this simple and beneficial solution.

The Chinese leadership’s stated goal in prodding their citizens to spend more is to decrease their economy’s dependence on exports. If the Chinese, who currently save 50% of their incomes, saved less, more of their production would be consumed locally. As a result, China would be less vulnerable to economic downturns abroad. Without a vibrant domestic market, over-leveraged Americans will apparently remain China’s most important customers.

A strengthened Yuan would lower the real costs of goods for domestic consumers and allow the Chinese themselves to compete more evenly with consumers in other nations to whom they currently send the fruits of their labor. As goods become more affordable in China, the Chinese will naturally consume more. A rising Yuan would therefore kill two birds with one stone: it would reverse recent consumer price increases and it would induce Chinese consumers to buy their own products.

If the Chinese were to follow such a sensible path, the consequences here in America would be immediate and severe. By allowing their currency to appreciate, Chinese monetary authorities would no longer need to buy and remove as many dollars from the open market, producing an immediate reduction in the demand for U.S. Treasuries, mortgage backed securities and other U.S. dollar denominated debt. The result in America would be a simultaneous increase in both consumer prices and interest rates. Such developments would only compound the problems already rippling through our economy.

To spur domestic spending absent such currency rebalancing, Beijing must instead rely on the nominative, simulative effects of inflation. By further expanding their money supply and allowing those increases to be passed on to workers in the form of higher wages, Chinese consumers will have more Yuan to spend and hence will buy more. However, such a policy will only solve one problem by aggravating the other.

Further, by penalizing savers through the erosive effects of inflation, China would discourage savings and jeopardize one of the true sources of its rising living standards. Contrary to the economic hocus pocus propagated on Wall Street, Washington and at American universities; economies grow not as a result of consumer spending, but as a result of savings. Under consumption is the true source of prosperity as it engenders capital formation, which lies at the root of sustainable economic growth.

Here too the implications for Americans are dire. In effect, by only spending half of their incomes and lending much of the rest to us, Americans have merely been enjoying the current consumption that more frugal Chinese consumers have decided to defer. As the Chinese consume more, Americans will simply be forced to consume less.

Low prices and rich consumers are a potent concoction that is sure to soothe China’s roaring economy while raising the living standards of its hard working citizens. It’s a simple solution that only an economist can miss.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

___________________________________________________________________________

Peter Schiff President & Chief Global Strategist
Mr. Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market in U.S. dollar denominated assets before it began and to have positioned his clients accordingly. As a result of his accurate forecasts on the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, subprime debacle, commodities, gold and the dollar, he is becoming increasingly more renowned. He has been quoted in many of the nation’s leading newspapers, including The Wall Street Journal, Barron’s, Investor’s Business Daily, The Financial Times, The New York Times, The Los Angeles Times, The Washington Post, The Chicago Tribune, The Dallas Morning News, The Miami Herald, The San Francisco Chronicle, The Atlanta Journal-Constitution, The Arizona Republic, The Philadelphia Inquirer, and the Christian Science Monitor, and appears regularly on CNBC, CNN, Fox News, Fox Business Network, and Bloomberg T.V. His best-selling book, “Crash Proof: How to Profit from the Coming Economic Collapse” was published by Wiley & Sons in February of 2007. His second book is scheduled for publication in early 2009.

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for over twenty years he joined Euro Pacific in 1996 and has served as its President since January 2000. An expert on money, economic theory, and international investing, Peter is a highly recommended broker by many leading financial newsletters and investment advisory services. He is also a contributing commentator for Newsweek International and served as an economic advisor to the 2008 Ron Paul presidential campaign. He holds FINRA Series 4,7,24,27,53,55, & 63 licenses.

by Tom Engelhardt

LewRockwell.com
by Tom Engelhardt

Kiss American Security Goodbye: 15 Numbers That Add Up to an Age of Insecurity

Once upon a time, I studied the Chinese martial art of Tai Chi – until, that is, I realized I would never locate my “chi.” At that point, I threw in the towel and took up Western exercise. Still, the principle behind Tai Chi stayed with me – that you could multiply the force of an act by giving way before the force of others; that a smaller person could use the strength of a bigger one against him.

Now, jump to September 11, 2001 and its aftermath – and you know the Tai Chi version of history from there. Think of it as a grim cosmic joke – that the 9/11 attacks, as apocalyptic as they looked, were anything but. The true disasters followed and the wounds were largely self-inflicted, as the most militarily powerful nation on the planet used its own force to disable itself.

Before that fateful day, the Bush administration had considered terrorism, Osama bin Laden, and al-Qaeda subjects for suckers and wusses. What they were intent on was pouring money into developing an elaborate boondoggle of a missile defense system against future nuclear attacks by rogue states. Those Cold War high frontiersmen (and women) couldn’t get enough of the idea of missiling up. That, after all, was where the money and the fun seemed to be. Nuclear was where the big boys – the nation states – played. “Bin Laden determined to strike in U.S.…,” the CIA told the President that August. Yawn.

After 9/11, of course, George W. Bush and his top advisors almost instantly launched their crusade against Islam and then their various wars, all under the rubric of the Global War on Terror. (As Secretary of Defense Donald Rumsfeld pungently put the matter that September, “We have a choice – either to change the way we live, which is unacceptable, or to change the way that they live; and we chose the latter.”) By then, they were already heading out to “drain the swamp” of evildoers, 60 countries worth of them, if necessary. Meanwhile, they moved quickly to fight the last battle at home, the one just over, by squandering vast sums on an American Maginot Line of security. The porous new Department of Homeland Security, the NSA, the FBI, and other acronymic agencies were to lock down, surveill, and listen in on America. All this to prevent “the next 9/11.”

In the process, they would treat bin Laden’s scattered al-Qaeda network as if it were the Nazi or Soviet war machine (even comically dubbing his followers “Islamofascists”). In the blinking of an eye, and in the rubble of two enormous buildings in downtown Manhattan, bin Laden and his cronies had morphed from nobodies into supermen, a veritable Legion of Doom. (There was a curious parallel to this transformation in World War II. Before Pearl Harbor, American experts had considered the Japanese – as historian John Dower so vividly documented in his book War Without Mercy – bucktoothed, near-sighted military incompetents whose war planes were barely capable of flight. On December 8, 1941, they suddenly became a race of invincible supermen without, in the American imagination, ever passing through a human incarnation.)

When, in October 2001, Congress passed the Patriot Act, and an Office of Homeland Security (which, in 2002, became a “department”) was established, it was welcome to the era of homeland insecurity. From then on, every major building, landmark, amusement park, petting zoo, flea market, popcorn stand, and toll booth anywhere in the country would be touted as a potential target for terrorists and in need of protection. Every police department from Arkansas to Ohio would be in desperate need of anti-terror funding. And why not, when the terrorists loomed so monstrously large, were so apocalyptically capable, and wanted so very badly to destroy our way of life. No wonder that, in the 2006 National Asset Database, compiled by the Department of Homeland Security, the state of Indiana, “with 8,591 potential terrorist targets, had 50 percent more listed sites than New York (5,687) and more than twice as many as California (3,212), ranking the state the most target-rich place in the nation.”

In the administration’s imagination (and the American one), they were now capable of anything. From their camps in the backlands of Afghanistan (or was it the suburbs of Hamburg?), as well as in the murky global underworld of the arms black market, al-Qaeda’s minions were toiling feverishly to lay their hands on the most fiendish of plagues and pestilences – smallpox, botulism, anthrax, you name it. They were preparing to fill suitcases with nuclear weapons for deposit in downtown Manhattan. They were gathering nuclear refuse for dirty bombs. Nothing was too mad or destructive for them. Every faint but strange odor – the sweet smell of maple syrup floating across a city – was a potential bio-attack. And everywhere, even in rural areas, politicians were strapping on their armor and preparing to run imminent-danger, anti-terror campaigns, while urging their constituents to run for cover. Meanwhile, that former Sodom of the New World, New York City, had somehow been transformed into an I-heart-NY T-shirt-and-cap combo.

So, thank you, Osama bin Laden for expediting the Department of Homeland Security, glutting an already bloated Pentagon with even more money, ensuring that all those “expeditionary forces” would sally forth to cause havoc and not find victory in two hopeless wars, enabling the establishment of a vast offshore prison network (and the torture techniques to go with it), and creating a whole new global “security” industry to “thwart terrorists” that was, by 2006, generating $60 billion a year in business and whose domestic wing was devoted to locking down America.

When the history of this era is finally written, based on the Tai Chi Principle, Osama bin Laden and his scattering of followers may be credited for goading the fundamentalist leaders of the United States into using the power in their grasp so – not to put a fine point on it – stupidly and profligately as to send the planet’s “sole superpower” into decline. Above all, bin Laden and his crew of fanatics will have ensured one thing: that the real security problems of our age were ignored in Washington until far too late in favor of mad dreams and dark phantoms. In this lies a bleak but epic tale of folly worthy of a great American novelist (wherever she is).

In the meantime, consider the following little list – 15 numbers that offer an indication of just what the Tai Chi Principle meant in action these last years; just where American energies did and did not flow; and, in the end, just how much less safe we are now than we were in January 2001, when George W. Bush entered the Oval Office:

536,000,000,000: the number of dollars the Pentagon is requesting for the 2009 military budget. This represents an increase of almost 70% over the Pentagon’s 2001 budget of $316 billion – and that’s without factoring in “supplementary” requests to fund the wars in Iraq and Afghanistan, as well as the President’s Global War on Terror. Add in those soaring sums and military spending has more than doubled in the Bush era. According to the Center on Budget and Policy Priorities, since 2001, funding for “defense and related programs… has jumped at an annual average rate of 8%… – four times faster than the average rate of growth for Social Security, Medicare, and Medicaid (2%), and 27 times faster than the average rate for growth for domestic discretionary programs (0.3%).”

1,390,000: the number of subprime foreclosures over the next two years, as estimated by Credit Suisse analysts. They also predict that, by the end of 2012, 12.7% of all residential borrowers may be out of their homes as part of a housing crisis that caught the Bush administration totally off-guard.

1,000,000: the number of “missions” or “sorties” the U.S. Air Force proudly claims to have flown in the Global War on Terror since 9/11, more than one-third of them (about 353,000) in what it still likes to call Operation Iraqi Freedom. This is a good measure of where American energies (and oil purchases) have gone these last years.

509,000: the number of names found in 2007 on a “terrorist watch list” compiled by the FBI. No longer, in George Bush’s America, is a 10 Most Wanted list adequate. According to ABC News, “U.S. lawmakers and their spouses have been detained because their names were on the watch list” and Saddam Hussein was on the list even when in U.S. custody. By February 2008, according to the American Civil Liberties Union, the names on the same FBI list had ballooned to 900,000.

300,000: the number of American troops who now suffer from major depression or post-traumatic stress, according to a recent RAND study. This represents almost one out of every five soldiers who served in Iraq or Afghanistan. Even more – approximately 320,000 – “report possible brain injuries from explosions or other head wounds.” This, RAND reports, represents a barely dealt with “major health crisis.” The depression and PTSD alone will, the study reported, “cost the nation as much as $6.2 billion in the two years following deployment.”

51,000: the number of post-surge Iraqi prisoners held in American and Iraqi jails at the end of 2007. In that country, the U.S. now runs “perhaps the world’s largest extrajudicial internment camp,” Camp Bucca, whose holding capacity is, even now, being expanded from 20,000 to 30,000 prisoners. Then there’s Camp Cropper, with at least 4,000 prisoners, including “hundreds of juveniles.” Many of these prisoners were simply swept up in surge raids and have been held without charges or access to lawyers or courts ever since. Add in prisoners (in unknown numbers) in our sizeable network of prisons in Afghanistan, at Guantanamo, and in our various offshore and borrowed prisons; add in, as well, the widespread mistreatment of prisoners at American hands; and you have the machinery for the manufacture of vast numbers of angry potential enemies, some undoubtedly willing to commit almost any act of revenge. Though there is no way to tabulate the numbers, hundreds of thousands of prisoners have certainly cycled through the Bush administration’s various prisons in these last seven years, many emerging embittered. (And don’t forget their embittered families.) Think of all this as an enormous dystopian experiment in “social networking,” the Facebook from Hell without the Internet.

5,700: the number of trailers in New Orleans – issued by the Federal Emergency Management Agency as temporary housing after Hurricane Katrina – still occupied by people who lost their homes in the storm almost three years ago. Such trailers have also been found to contain toxic levels of formaldehyde fumes. Katrina (”Brownie, you’re doing a heck of a job”) was but one of many security disasters for the Bush administration.

658: the number of suicide bombings worldwide last year, including 542 in Afghanistan and Iraq, “more than double the number in any of the past 25 years.” Of all the suicide bombings in the past quarter century, more than 86% have occurred since 2001, according to U.S. government experts. At least one of those bombers – who died in a recent coordinated wave of suicide bombings in the Iraqi city of Mosul – was a Kuwaiti, Abdallah Salih al-Ajmi, who had spent years locked up in Guantanamo.

511: the number of applicants convicted of felony crimes, including burglary, grand larceny, and aggravated assault, who were accepted into the U.S. Army in 2007, more than double the 249 accepted in 2006. According to the New York Times, between 2006 and 2007, those enrolled with convictions for wrongful possession of drugs (not including marijuana) almost doubled, for burglaries almost tripled, for grand larceny/larceny more than doubled, for robbery more than tripled, for aggravated assault went up by 30%, and for “terroristic threats including bomb threats” doubled (from one to two). Feel more secure yet?

126: the number of dollars it took to buy a barrel of crude oil on the international market this week. Meanwhile, the average price of a gallon of regular gas at the pump in the U.S. hit $3.72, while the price of gas jumped almost 20 cents in Michigan in a week, 36 cents in Utah in a month, and busted the $4 ceiling in Westchester, New York, a rise of 65 cents in the last year. Just after the 9/11 attacks, a barrel of crude oil was still in the $20 range; at the time of the invasion of Iraq in March 2003, it was at about $30. In other words, since 9/11, a barrel of crude has risen more than $100 without the Bush administration taking any serious steps to promote energy conservation, cut down on the U.S. oil “addiction,” or develop alternative energy strategies (beyond a dubious program to produce more ethanol).

82: the percentage of Americans who think “things in this country… have gotten pretty seriously off on the wrong track,” according to the most recent Washington Post-ABC News poll. This is the gloomiest Americans have been about the “direction” of the country in the last 15 years of such polling.

40: the percentage loss (”on a trade-weighted basis”) in the value of the dollar since 2001. The dollar’s share of total world foreign exchange reserves has also dropped from 73% to 64% in that same period. According to the Center for American Progress, “By early May 2008, a dollar bought 42.9% fewer euros, 35.7% fewer Canadian dollars, 37.7% fewer British pounds, and 17.3% fewer Japanese yen than in March 2001.”

37: the number of countries that have experienced food protests or riots in recent months due to soaring food prices, a global crisis of insecurity that caught the Bush administration completely unprepared. In the last year, the price of wheat has risen by 130%, of rice by 74%, of soya by 87%, and of corn by 31%.

0: the number of terrorist attacks by al-Qaeda or similar groups inside the United States since September 11, 2001.

So consider “the homeland” secure. Mission accomplished.

And if you doubt that, here’s one last figure, representative of the ultimate insecurity that, by conscious omission as well as commission, the Bush administration has left a harried future to deal with: That number is 387: Scientists at the Mauna Loa observatory in Hawaii just released new information on carbon dioxide – the major greenhouse gas – in the atmosphere, and it’s at a record high of 387 parts per million, “up almost 40% since the industrial revolution and the highest for at least the last 650,000 years.” Its rate of increase is on the rise as well. Behind all these figures lurks a potential world of insecurity with which this country has not yet come to grips.

May 16, 2008

Tom Engelhardt [send him mail] who runs the Nation Institute’s Tomdispatch.com, is the co-founder of the American Empire Project. He is the author of several books, including The Last Days of Publishing: A Novel, The End of Victory Culture, and most recently, Mission Unaccomplished (Nation Books), the first collection of Tomdispatch interviews.His blog is The Notion.

Copyright © 2008 Tom Engelhardt

Like it or not, we live in a fiat world. Therefore we must attempt to have sound definitions that best describe the fiat world we are in.

By Mike Shedlock

Visit Mike’s blog at Global Economic Trend Analysis

Posted by Michael Shedlock at 3:29 PM Inflation: What the heck is it?

To receive a free copy of our monthly letter to clients in your inbox every month, register your email address at the bottom of the Sitka Pacific Commentary Page.

Buy Gold and Silver online at GoldMoney
The Best way to buy gold and silver

Click here for the “safest” way to own gold or silver.
Check out Everbank’s MarketSafe® gold and silver CDs

The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

The wars of the 20th century have been, to be sure, economic wars. But they have not been caused by capitalism, as the socialists would have us believe. They are wars caused by governments aiming at complete political and economic omnipotence, and have been supported by the misguided masses of these countries.

By Ludwig von Mises

Ludwig von Mises Institute

[This is the major part of a lecture delivered in Orange County, California, in October 1944. It was published by the Foundation for Economic Education in 2004.]

War is a primitive human institution. From time immemorial, men were eager to fight, to kill, and to rob one another. However, the acknowledgment of this fact does not lead to the conclusion that war is an indispensable form of interpersonal relations and that the endeavors to abolish war are against nature and therefore doomed to failure.

We may, for the sake of argument, admit the militarist thesis that man is endowed with an innate instinct to fight and to destroy. However, it is not these instincts and primitive impulses that are the characteristic features of man. Man’s eminence lies in his reason and in the power to think, which distinguishes him from all other living creatures. And man’s reason teaches him that peaceful cooperation and collaboration under the division of labor is a more beneficial way to live than violent strife.

I do not want to dwell on the history of warfare. It is enough to mention that in the 18th century, on the eve of modern capitalism, the nature of war was very different from what it had been in the age of barbarism. People no longer fought one another with the aim of exterminating or enslaving the defeated. Wars were a tool of the political rulers and were fought with comparatively small armies of professional soldiers, mostly made up of mercenaries. The objective of warfare was to determine which dynasty should rule a country or a province. The greatest European wars of the 18th century were wars of royal succession, for example, the wars of the Spanish, Polish, Austrian, and finally the Bavarian successions. Ordinary people were more or less indifferent about the outcomes of these conflicts. They were not much concerned about the question of whether their ruling prince was a Habsburg or a Bourbon.

Nevertheless, these continuous struggles placed a heavy burden upon mankind. They were a serious obstacle to the attempts to bring about greater prosperity. As a result, the philosophers and economists of the time turned their attention to the study of the causes of war. The result of their investigation was the following:

Under a system of private ownership of the means of production and free enterprise, with the only function of government being to protect individuals against violent or fraudulent attacks on their lives, health, or property, it is immaterial for the citizens of any nation where the frontiers of their country are drawn. It is of no concern for anyone whether his country is big or small, and whether it conquers a province or not. The individual citizens do not derive any profit from the conquest of a territory.

It is different with the princes or ruling aristocracies. They can increase their power and their tax revenues by expanding the size of their realms. They can profit from conquest. They are bellicose, while the citizenry is peace loving.

Hence, the old liberals concluded, there would be no more wars under a system of economic laissez faire and popular government. Wars would become obsolete because the causes for war would disappear. Since these 18th- and 19th-century classical liberals were fully convinced that nothing