To Mr. Obama
Mr. Obama, stand up for us.
Just this once, cease your endless game of "balance," your wearisome two-step of "moderate" positioning, posing the way you constantly do as some sort of progressiveliberal, evenwhile predictably and unfailingly pandering to the siren call of a security state that drags us ever deeper into the inescapable maw that hungers to make a people with too much freedom into a docilized, unfree people.
We are not the terrorists you are looking for. We never were. It was the governmentthe government that you, sir, now headthat failed us on that awful day more than nine years ago. It was not we who destroyed those buildings; it was not we who killed our fellow countrymen; it was not we who conspired to let the blood of this wonder of constitutional democracy.
It was not we who hated this country.
Whatever war was to be waged against the vile maniacs who attacked us, it has now been nine long years, and that war continues unabated. Instead of having defeated that enemy, as we have defeated horrible and powerful foes in the past in far shorter order, this war against terrorism has not been won and has, in fact, become a war not just against hateful men and women who want to harm us, but also, with increasing aggression and disturbing escalation, against us.
That war now engorges itself with the despicable perpetuation that crafts us as the enemy waiting in every line, at every encounter with government, in every communication to strike. We have become the people of an occupied land, a populace that must be thoroughly demeaned, degraded, and diminished.
The war on terror is lost, Mr. Obama. If the goal were to protect our freedom, the war has been lost, sir.
The government "of the people, by the people, and for the people," in President Lincoln's magnificent words, now demands that we stand naked before its employees; it arrogates to itself the "right" to watch us in all our comings and goings in the commons; and it stands immune to retributive vengeance through law for anything it claims its enforcers do as "official duty."
Mr. Obama, cease your rhetoric. Set aside your thought that your policies are mature because you appease authoritarians. Dismiss those around you who tell you that anything is more important than the freedom of your nation's people to be left alone.
For once in your life, Mr. President, lead, and do so fearlessly. You are the only one who can set aside the chains of failed policies into which you have been brokered by those before you.
LEAD, Mr. Obama. Lead us back to freedom. If you cannot, then the consequence could very well be more terrible than you could imagine: we might have to find our own way back.
From Then to Now
In his January 1961 farewell address, outgoing President Dwight Eisenhower famously warned of what he described as an emerging "military-industrial complex." Less well known among many was his long-term, unwavering dedication to balanced federal budgets: subsequent to a tax cut in 1954, Eisenhower ignored the harangue for more tax cuts, even in the face of recessions and average economic growth less than that of the Truman years. Eisenhower understood that the economy was in the doldrums, but he also grasped that the balanced budgets he would realize in the final years of his tenure were the result both of responsible spending and of responsible tax policy. There was little justification to go along with tax cuts just for the sake of tax cuts as a Keynesian substitute for mature, steady control of the federal budget on both the expenditures and revenues sides. The bawl for tax cuts to boost the economy fell on deaf ears in the Oval Office of Dwight D. Eisenhower, even when the call came repeatedly from his own Vice President, Richard Nixon.
President Eisenhower's successor in office, John Kennedy, caved to the call of both Republicans howling for tax cuts and neo-Keynesians among his own Democrat advisers who firmly believed in federal spending and lower taxes as twin weapons in the war against lackluster economic growth. The tax cuts of 1964, largely the result of encouragement by Kennedy before his assassination, were an integral factoralong with spending on war and domestic social programsin a nearly two-decade upward spiral of federal expenditures with inadequate tax revenues. As time went on through this period, the Federal Reserve would deviate from its exclusive duty in monetary policy of maintaining stability of the aggregate price level and instead steer perilously further into the slippery slope of financing excess spending by the government through accommodative monetary policy. Through the Administrations of Johnson and Nixon, followed by the flaccid "Whip Inflation Now" campaign of President Ford as the inevitable inflation became more and more embedded in the economy, few looked back at the leadership Eisenhower had exemplified, choosing instead to look to the urgency of the contemporary situation to justify one more round of this stimulus, that wage-and-price control regime, or some other doomed-to-fail way of replacing measured, mature macroeconomic policy command with slogans, patches, and promises.
It would take one-term President Jimmy Carter to appoint Paul Volker to chair the Federal Reserve Board before the only real remedy would come: a draconian, sustained, contractionary monetary policy regime. With the cure would come serious pain to augment the suffering of the economy. What had been "stagflation" that had settled in during Carter's term became a full-blown crisis of looming, stunningly hard recession as the draining of liquidity from the economy by the Fed sent interest rates to extraordinary heights. Few were those who credited Mr. Carter for doing what had to be done, and he was defeated by Ronald Reagan in the 1980 general election.
What had been nearly balanced budgets during Carter's last years became soaring deficits as President Reagan, with good justification, led the old-time Republican gospel choir in a successful push for deep tax cuts. It would not be until his Vice President, George H.W. Bush, became President that tax rates would be re-aligned to more responsible levels. His successor, President Clinton, would enjoy the longest sustained economic expansion in U.S. history, an economic boom time attended by low unemployment, low inflation, and strong tax revenues, not the least of which came from robust capital gains realized by investors in a surging stock market.
That unrelentingly good stock market embittered Alan Greenspan, Paul Volker's protégé and successor as Chairman of the Federal Reserve Board. Greenspan testified before Congress that the stock market was exhibiting what he called "irrational exuberance," an utterly fallacious claim that incomprehensible numbers of investors making even more incomprehensible numbers of trades over months and years could possibly sustain "irrationality" at the scale of trillions of dollars in investment decisions. (To his credit, Mr. Greenspan kept a dead-pan serious look on his face as he made his absurd declaration to a gullible assembly of congressional committee members.) Although he did not use the word at the time, Mr. Greenspan might legitimately be credited with introducing the idea behind the vapid term "bubble" to describe, especially in retrospect, any price level increase theoreticians and critics find unacceptable and perhaps incomprehensible.
There was method in Greenspan's claim, though, despite the failure of his effortsincluding the most consecutive increases in the discount rate everto stop the economic juggernaut of the Clinton years. With tax revenues continuing to close in on federal spending, largely because of tax revenues from capital gains, the Federal Reserve would eventually lose its most powerful tool for conducting monetary policy and, therefore, for being a major control agent of the macroeconomy. So-called "open market operations" by the Federal Reserve use short-term government debt instruments as the leverage for adding liquidity to or draining liquidity from the banking system. The Fed sells Treasury bills to member banks to drain liquidity, and it buys Treasury bills from banks to add liquidity; but if the government stops running budget deficits, the U.S. Treasury stops issuing T-bills (and pretty much all other Treasury debt securities, for that matter). Hence, without T-bills being issued by the U.S. government, the Federal Reserve has no instrument for executing open market operations, so it is effectively out of business as a driving force in economic policy-making.
It was with that in mind that, when George W. Bush succeeded Bill Clinton, not only did the Republicans call for tax cuts to deal with a recession that never actually happened at the beginning of the 21st Century, but Alan Greenspan was there with them, in late January of 2001 providing the assurance from the supposedly objective Chair of the Federal Reserve Board that the economy was, indeed, in such dire condition that the tax cuts were needed. The Republican-controlled Congress then had all the cover it needed, thin as that excuse was at the empirical level, to institute sweeping tax cuts that would last a decade to the real, underlying purpose of trying, as President Reagan had a generation before, to starve the federal government of the funds to pay for social programs.
The horror of the events of September 11, 2001, would fuel two extraordinarily costly wars and massive security expenditures in the homeland that would only exacerbate the widening federal budget deficits of the presidency of George W. Bush, leaving the U.S. Treasury bereft of any semblance of buffer when a real, powerful recession hit at the end of the Bush Administration.
The current President, Democrat Barack Obama, will cave to the Republican call to extend those massive tax cuts deployed ten years ago and which are about to expire. More likely than not, despite his protestations that he will draw the line short of extending the tax cuts for the wealthiest Americans, he will probably find no new political backbone and certainly no new reserve of political capital to make good on much of that vow.
For Mr. Obama and his team of advisers, extending the tax cuts will be nothing less than good Keynesian fiscal stimulus policy. In that regard, he will be much like his Democrat predecessor of a half-century ago. Unlike Jack Kennedy, though, Barack Obama will probably not be martyred, and he most decidedly will not be lionized in the decades and years after his short time in office.
In the end, President Obama will be no John F. Kennedy. More importantly to the future of this nation, he will never be Dwight Eisenhower.
In meager defense of Mr. Obama, not one Republican in office today could hold a candle to Mr. Eisenhower, either.
In America, every generation gets the leadership it elects. Consequentially, it gets the leadership it deserves.
Gears of the Macroeconomy
The story is a little more complicated than that, and the outlook for the economy, while not bright, is not as badat least not in the short runas some economists and political interests might suggest. The longer-term prospects aren't particularly attractive, but that goes to the old saying that it's always darkest just before it's pitch black outside. (The optimist's version of that old saying is, "It's always darkest just before the dawn," but this article is about economics, so optimists will be shot on sight.)
First, GDP is the sum of consumption, private investment, government spending (public investment), and net exports (exports minus imports). In the 3rd Quarter, all of the components of GDP except net exports showed good growth. Our thirst for those cheap imports is still sapping GDP growth, but that will change. The bad news is that the recovery of net exports over the next several years will present its own problems, and hints of those problems are already beginning to become apparent.
The U.S. dollar has been getting weaker against other currencies for several years, now. That makes our exports cheaper overseas, which means our net exports will get stronger. The downside is that, as our exports get cheaper in other countries, imports get more expensive here.
Businesses that have invested heavily in overseas manufacturing of products for domestic consumption will eventually have to start charging more for the goods they sell here in the United States. Retailers that have, over the past decade-plus, geared their purchasing toward foreign products to sell at their American stores will be forced to mark up those goods on their shelves. Anecdotal evidence seems to indicate that this is already happening.
The good news is that, if foreign products are more expensive on retailers' shelves here in the U.S., domestic producers of the same products will find their offerings more attractive as alternatives for buyers. Not surprisingly, though, that has a downside: as the foreign versions of products rise in price, domestic producers of the substitutes will have incentive to raise their prices, too. This is especially true in competitive markets, where constituent firms tend to be "price-takers," moving toward prevailing prices established beyond their individual control.
That's when a major force of consumer-level inflation begins to beat on the door, but only if the economy has a lot of liquidity that can allow consumers to buy at higher prices; otherwise, the pressure to raise prices has no fuel in consumers' pocketbooks.
That's where our central bank, the Federal Reserve, comes into the picture. In the short run, the Fed can use "easy money" to stimulate the economy, a policy of expansionary monetary policy it has been following aggressively to help the American economy out of the worst recession in decades. Unfortunately, in the long run, all that money pumped into the economy is nothing other than a vast reservoir of fuel for inflation because it will provide the liquidity by which the incentive of producers to raise prices will meet the dollars available in consumers' pockets to pay those higher prices.
The good news is that consumers really do not have those dollars to spend right now so inflation will not show up until they have considerably greater willingness to consume. That will come only when the unemployment rate falls quite a bit from its current level.
It works like the gears in a clock, then: inflation will stay subdued until the jobs picture improves, but once that happens, the power of consumptionaccounting as it does for about 70 percent of GDP growthwill guarantee that the huge pool of excess dollars poured into the economy by the Fed will turn into an inflation conflagration.
Once the rising prices pick up enough speed to cause serious concern among the Federal Reserve's policy makers, the central bank will be forced to clamp down hard on the money supply to drain that ocean of excess dollars. By that time, though, inflation expectations will have become embedded in both the goods and labor markets (the labor markets will be the last to start realizing their share of inflation-driven price increases), so the Fed will have to crush the money supply not only long enough to drain the reservoir of excess liquidity, but also to drain the reservoir of expectations that the excess liquidity is still around.
The result will be a period of both high inflation expectations driving wages and prices higher along with stagnating economic growth as interest rates rise on the already embedded inflation premium coupled to a sharply contracted money supply. At the end of the 1970s, the term "stagflation" was used to describe this situation.
In the here and now, a modestly rising GDP is perhaps better news than one might think from hearing economists, pundits, and politicians talk. As long as the GDP rises anemically, the unemployment rate will not drop too swiftly; and as long as the labor market remains soft, consumer spending will not pick up speed with any vigor. When it does, price inflation at the retail level will start to rear its head seriously, given that the foreign imports upon which retailers have relied for so long will be getting more expensive, pushing the prices of domestic equivalents up, too.
When things will turn rather sour, with inflation getting noticed by the mainstream media, might be difficult to predict down to the month or even the quarter, but an optimistic guess would put the time frame somewhere around 2012 for the inflation to get serious enough for the Federal Reserve to finally react forcefully enough and long enough to tame it. The resulting economic slowdown, then, might start some time in the latter part of 2012 or in the first half of 2013.
A less optimistic forecast would put clear evidence of inflation at the retail level happening in late 2011 or early 2012. In that scenario, the Fed would have to start clamping down on the money supply by the Summer of 2012. As rough as that would be, what might become serious efforts to bring the deficit spending spree of the past decade under control would start to bite hard into the GDP (remember that government spending is one of the four components of gross domestic product). Rising interest rates, inflation at the retail level, and less government spending could all come together like the proverbial perfect storm to claw consumer confidence and business investmentessentially, the whole economic recovery enginedown to a crawl just around the time of the general election, when the current occupant of the White House would be hoping for all kinds of good news to get re-elected.
The Republican nominee would, of course, breathe polemical fire about the end of civilization as we know it, and the Democrat incumbent would find himself having to try a second round of soaring rhetoric about hope and change.
As an alternative, the President could take the even less useful route of trying to teach the American public about macroeconomics. This would be the same American public that just return to control of the U.S. House of Representatives members of the party whose last reign ultimately put the entire financial system of the world at the brink of cataclysmic collapse and drove the American economy into the worst recession in decades. Yes, that's the sort of class every teacher wants to educate without a cattle prod and a crate of detention slips.
Is that less optimistic forecast how it's all actually going to happen? Probably. After all, this is economics.
If you want happy endings, watch reruns of The Love Boat. If you want inspiring stories, watch reruns of Touched by an Angel.
If you want darned good forecastingalbeit with a generous but necessary dose pessimistic, cynical despairlearn economics from your host here at The Dark Wraith Forums, where misery loves company. It is far better to be with others when the future is bleak and there's nothing whatsoever you can do about it.
Remember to keep hope alive; otherwise, you'll have nothing to give up when all is lost.
The graphic below was on the screen of a computer in a Transportation Security Administration office.
No, that's not funny. It's vomit bait. And no, it's not just one "rogue" employee's bad idea of a joke. It is exemplary of a pervasive mentality of a government that has no self-control and no idependent judiciary branch interested in or even capable of smiting its ever-increasing invasiveness in the name of this or that law enforcement demand.
This is what has come of our "war on terror." It is also what has become of our government whose thugs protect "the Homeland." It is also what has become of those who let their children go on airplanes. Sooner than you think, it will be what has become of those whose children go to school. Subjugation works this way. I wrote about it in my article, "Forced Nudity as Subjugation." That piece was not an exercise in hypothetical abstractions.
If we just throw up our hands, saying, "I can't do anything about this," then we have no one to blame but ourselves: the terrorists have won.
As much as it might offend those whose groveling fear would drive them to trade even their own children for a modicum of false security, those terrorists would be both the foreign and the domestic sickos. The government servants in the homeland version really do hate our freedom, at least the part that has anything to do with some fanciful right to privacy.
The Freedom to Be Eaten
Competitive markets are not the same as "free markets." The difference is easy to spot: corporations and their shills will run like Hell from competitive markets; Republicans will never speak of competitive markets; and Democrats will slap any fixno matter how complicated, expensive, and ineffectiveon a problem to avoid modernizing and reforming antitrust law to crush the companies that have constructed non-competitive markets.
Competitive markets are brutal to the participants on the supply side.
Free markets are even more brutal to the participants on the demand side.
The bad news is this: now that the extremists of free markets are ascendant in public policy, you could very well get eaten.
The good news is thus: so could the imbeciles who put those Right-wing hoe-handles in power.
Lie low and avoid the chow line. The herd is about to be culled of its idiots.
Age of Darkness
I tell my students that some historians of the Roman Empire give as the date of its fall the fourth day of September in the year A.D. 476. It was on that day that Odoacer, a "barbarian" German in the military service of Rome, removed from the throne the last emperor of the western empire. Other historians see that date as important, but not the "end" of the Roman Empire or even of its western part. (Neither, most certainly, was it even the beginning of the end, given the spiraling power of the germanic tribes setting forth demands upon the Roman emperors and tearing away, piece by piece, at the collapsing frontiers.) Seth Lerer, Distinguished Professor of Literature at the University of California at San Diego, explains that the empire did not "fall" that late-summer day in the last half of the 5th Century, but instead began a new era of change, a process that had been going on for quite a long time at a slower but accelerating pace as fewer and fewer people, both leaders and commoners, had enough light to see why the empire should be kept.
Lex Romana, the law of the Romans, would still remain the law, more or less and at least for a while, for Roman citizens, and the influence of Rome, which had been in marked decline before A.D. 476, would continue but fade in the decades after Odoacer deposed Romulus Augustus. The versions of Lex Romana for Roman subjects of the 6th Century and beyond were complicated, abridged, and full of interpretatio to explain what the cobbled statutes codified in Lex Romana Visigothorum actually meant in practice. Nevertheless, the essential feature of Roman law, as opposed to germanic law, was there: it was based in statuteswritten rules assigning clarity of action by the state in matters of behavior by the governed. This written law would be the way forever after of many of the places the Romans had held great sway. From Canon Law to the Napoleonic Code, statutory law carried not just the burden of relating action to consequences in everyday life, but also the unwavering, operable duty of all men to their sovereign.
Even in England, where the immigrating tribes from the lowlands of Germania had brought their more tribal, "common law," the subsequent occupation by the French during the Norman Occupation would infuse the law of precedents with a statutory frame of reference for the courts. To this day, both England and those nations that had once been its colonial possessions bear the burden of that dynamic tension between the desire to make laws upon the firmament of scrolls and the unrelenting need to have a system respecting precedents but capable of challenging those very laws in all their solemn solidity. (For some background on the difference between statutory and common law, read my article, "Plain Language.")
Notwithstanding all of the waysfrom law to language, from warfare and statecraft to aesthetics and logicthat the Roman Empire continued to influence the world it had left behind, the powerful light that had been Roman civilization would eventually all but vanish from Europe and the British Isles, and the world that had once been brought to its knees and taught to stand in the shadow of empire would fall into an age of darkness far wider than could be cast by the shadow even of a great and harsh master. An age of darkness descended.
The world after Rome was complicated, decidedly less civilized in many places, and certainly riven by great and small ignorance, need, and avarice. There was no time or place for the speculative hubrissuperficial and false as it might have been for the Romansof ideals like destiny compelling the secular and holy. Unlike the Romans, driven by gods unabashedly the idealized versions of men and women, nobles and commoners alike found solace and excuse in an opposite, albeit powerful god of the Christians and Muslims, whose hordes of violence and merchants of atonement would grip the world from east to west in the centuries leading up to, and then following, the turn of the millennium.
In our hubris, we imagine that it is by our own hand that we tame the ferocity of the midday sun into the temperance of afternoon quiet. We see our technologies as enduring, our values as eternal, and our personal opinions as reflecting both the best and the proper that our empire can bring to the world, often through the influence of peaceful exchange and fierce commerce or, when necessary to protect our interests, through violence too appalling for either its critics or apologists to grasp in scale and horror.
The sunset comes, though. The politicians promise a new day, the merchants sell a new product, and the citizens point to others for a reason the way forward is not as well lit as it once was.
Our defenders will guard the perimeter against what awaits just beyond the lights, and we will all know that those things just beyond know much more than we about an age of darkness far wider than could be cast by the shadow even of a great and harsh master.
Twilight will come, and with it will come a degraded place for us. In our fear, we will impose it upon ourselves long before others from beyond the perimeter of our civilization do so, as they inevitably and someday will when we no longer have enough light to see why our empire should be kept.
Again, then, an age of darkness will have descended.