Monthly Archives: March 2009

What If You Threw A Borrowing Party And Nobody Lent?

Governments, ready to spend boatloads cruiseliner-loads of money they don’t have, are trying to borrow it — to the extent possible — from the markets. I mentioned yesterday that the US was starting to print our own money to lend to ourselves. Britain is facing a similar problem — they were auctioning off some bonds, and nobody wanted to buy:

There is a limit to what bond investors will put up with. As governments inflate their fiscal deficits to deal with the crisis, they are issuing an awful lot of government bonds. And some of it is going to prove a tough sell.

Today, the UK suffered a failed auction for the first time since 2002. The Debt Management Office received bids for just £1.63 billion of a £1.75 billion offering. As the government has to sell nearly £150 billion of gilts in the coming (2009-10) financial year, this is hardly an encouraging sign.

To the casual observer, it might seem unsurprising that investors turned their nose up. They were being asked to lend money at 4.5% for 40 years to a country that, even in the midst of a recession, has an inflation rate above the government target, has a deficit expected by the IMF to be 11% of GDP next year, and a currency that has fallen by a quarter against the dollar since last summer.

During the Wall Street “flight to quality” seen late last year, yields on short-term Treasuries dropped significantly as 0.1% returns on short-term bonds were better than the worry of losing 30% of your wealth as the stock market tanked nearly uniformly. But the key there is short-term.

Right now, nobody really believes that governments are going to exercise monetary prudence in the face of cratering economies. That’s true in America, and it’s true in Britain. Why would someone lend money for a 4.5% 40-year return if they honestly think inflation over that time period will ensure they lose quite a bit of money?

Governments are going to borrow lots of money, and the market is not enthralled by the lending terms they’re being offered. There are two ways to get around this. You can offer better terms (i.e. higher yield bonds), but that has the downside of letting the world know that you plan to inflate your own currency. Alternatively, you can simply print the money you need to borrow and loan it to yourself at whatever terms you want. It seems that central banks in the US and Britain are already taking that path, and the market sees the writing on the wall.


A Proposed Constitutional Amendment

Believe me, I’m not advocating the following proposed constitutional amendment.  To be sure, I oppose pretty much everything it represents.  However, if we are to follow the rule of law in this country, we should at least go through the effort of ensuring that contemporary political activities and the law are in sync.

“Any political party which clearly dominates the legislative branch of Congress is authorized to tax any political target to the degree it desires and in a retroactive manner.”

Let’s see how this could be applied:

  • It could be used to tax contracted bonus payments to employees of corporations which aren’t politically correct at the moment.
  • It could be used to tax, retroactively even, all income of politicians from the opposing political party.
  • It could next be used to tax, retroactively even, all income of family members of politicians from an opposing political party.
  • It could be used to tax all campaign contributions provided to any member of an opposing political party.
  • It could be used to levy a specific targeted tax aimed at people who are registered members of opposing political parties.

Remember, these taxes can be as high as 100 percent (on second thought, why stop at 100 percent?).  They can be levied on earnings or other resources from anytime in history.

With this amendment in place, the Democrats can tax AIG executives (and executives from any other corporation) as much as they desire.  Why stop there, though?  They can also maintain political power by taxing non-Democrats in Congress at a rate of 150 percent, going back 25 years.  For those congressmen with spouses or children enjoying income, tax them retroactively, too.

Need to pay off the national debt? Levy an emergency 90 percent payroll tax on registered Republicans, Libertarians and Greens.

Need to ensure that you stay in political power?  Tax the donations made to competitive political campaigns.

Of course, the Republicans could take over Congress again.  This proposed amendment would be to their advantage, too.  It’s not to difficult to see folks like Tom DeLay or Karl Rove using such law to their advantage.  I’m sure the first applications would be aimed at trade unions, to be followed by the political targeting of Democrats everywhere.  If people stop registering as Democrats, simply target them based on other demographics, such as gender, race, age and income level.

If politics are to be tyrannical in nature, why not at least have a constitutional amendment to authorize the actions of the folks standing at the top of the trash heap?

Supreme Court Seems Ready To Limit McCain-Feingold

There seemed to be some good news out of yesterday’s oral argument at the Supreme Court in an important campaign finance law case:

The Supreme Court yesterday appeared ready once again to trim the reach of the McCain-Feingold campaign finance reform act, this time at the behest of a conservative group that produced a withering 90-minute political film called “Hillary: The Movie.”

And that was even before the government’s lawyer rattled the justices by asserting that Congress possessed the power — hypothetically — to ban some political books before an election

After a rollicking one-hour argument, it seemed that the question was whether a majority of the court wanted to use an ax or a scalpel to whittle the law, Congress’s embattled attempt to limit the electoral influence of corporations, unions and special interest groups. It is known formally as the Bipartisan Campaign Reform Act of 2002.

While it’s not always easy to predict where the Court will come out based on oral argument, it seems fairly evidence that a majority was skeptical of the government’s application of the law in this case.

That’s a good sign.

Common Goals

I’m watching Barack Obama’s press conference, and he urged people to remember “their commitments to each other” and our “common goals” as a nation. Collectivist economic actions, by not focusing on individuals and their best interest, actually increase economic inefficiency and destroy wealth.

Instead of urging the people to change how they act and to support ever increasing government authority, Mr. Obama should focus on reestablishing the rule of law and stable money supply upon which our wealth creation engine depends. Every subsidy, every ad hoc regulation and program, and every run to the printing press do more to harm the economy than all the greed on Wall Street.

Many Americans are giving up luxuries to survive this economic crisis. The governing class, led by Mr. Obama, need to give up some luxuries too. They can no longer give themselves the luxury of using the Federal Budget as a social engineering tool. They can no longer give themselves the luxury of spending beyond tax revenue. They can no longer play Enron-like accounting games with the budget spending. Most importantly, they can no longer use laws and regulations as a tool for personal and political gain.

The population, which is the foundation of the economy, is weary of politicians acting as if they still have the luxury of legislating and spending for personal and political benefit in this time of crisis. For every restaurant dinner, necklace, vacation, suit, computer, TV, pair of shoes, or couch given up by an American consumer who has to stick by a budget, a politician should give up an earmark, a line item, or a pet program that does nothing to forward one of the US Government’s constitutional duties. Sadly, we will sacrifice luxuries while they take even more.

Is Dollar Hegemony About To End?

Just over two years ago, I offered a worst-case prediction of where this economic crisis could lead.

Wait, though, it gets worse. America isn’t an empire in the conventional sense of the word, but we are an economic empire. The dollar is the currency of the world, from middle eastern oil to the reserve currencies of countless nations. During the Great Depression, or during the stagflation of the 1970’s, other nations were stuck with the dollar, because nothing else was suitable. But if the dollar starts dropping in a major inflation, they now have options. And if they drop the dollar, it’s all over. All of a sudden, America won’t draw on the world for our own stability. Considering the actions of our politicians, that’s a bad, bad thing.

We may be witnessing the end of America as the world’s superpower. It may be the end of our status as the economic empire of the world. Some across the globe, of course, will cheer. After all, they feel like America is the premier force of evil in the world. For all the bad that we’ve done, though, we’ve been a pretty stable force, and worked to prevent the spread of fascism and communism, across the globe. America’s economic system has been the safe-haven for the world. When a position of power is vacated, what typically fills it is rarely positive. The end of the American empire will likely result in more instability worldwide.

There are two reasons that I’m very, very concerned about this.

First, American dollar hegemony has actually been, for all the stupidity we’ve encountered upon over the last few decades, a pretty stabilizing force. To bastardize an old quote, America’s economic system is the worst, except for all the others. There’s no reasonable guarantee that anything that follows dollar hegemony will actually increase stability. Rather I think it will be worse.

Second, I don’t want to pay for our government. While we’ve been pretty well looting the other nations of the world, printing money and sending it to them in exchange for durable goods, only to have them lend it back to our own government to pay for programs we’re unwilling to tax ourselves for. Essentially we’ve been taxing other nations to pay for our own government, with the unspoken understanding that we’d probably slowly print our way out of debt rather than actually pay our debt. I can understand why they don’t want to continue that, especially since we’re dramatically increasing the size of the government that we’ll be expecting them to pay for.

But that doesn’t mean it won’t happen.

Russia, as reported by QandO, made noises last week about putting an end to the dollar as the reserve currency of the world:

The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.

The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a “superreserve currency accepted by the whole of the international community,” the Kremlin said in a statement issued on its web site.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.

Now, QandO again (along with Doug @ BTB) reports that one of our far bigger creditors, China, is making the same suggestion:

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC

I’d like to believe that this is merely a warning to the Obama administration that destroying our currency won’t be accepted by the international community. It would be a very clear warning that if we proceed down this path, those who are currently tied into our dollar will try to quickly cut our losses and leave us out to dry.

But I really don’t think the Obama administration, the Bernanke Fed, and the Geithner Treasury will heed those warnings. You want a reason to fear Great Depression II? This is it.

In fact, it may already be starting. China is worried about the $1 Trillion they’ve already lent us, but the real key to ending dollar hegemony is to stop lending us more. If other countries stop buying US Treasury Bonds, we must find a way to fund our own deficits internally… And there’s some evidence that’s already happening:

Thanks to Brad Setser for the graph

Thanks to Brad Setser for the graph

Yep, foreigners are getting close to their limit. Will it hold? I don’t know, but in the meantime, the Fed is starting the printing press to make up the shortfall (h/t Calculated Risk):

The first outright Treasury coupon purchase will be conducted on Wednesday, March 25, 2009, and will settle Thursday, March 26, 2009. Results will be posted on the New York Fed’s website following the operation.

Starting on Wednesday, April 1, 2009, and continuing every two weeks, the New York Fed will issue a tentative operation schedule for its purchases of longer-dated Treasury securities, including the maturity sector or sectors to be targeted.

The signs are pointing to a major change in world structure.

  • The world is slowing down their purchases of American debt, fearing it won’t be repaid.
  • The world is threatening to liquidate the US Dollar as the de facto reserve currency, because they fear an impending devaluation.
  • The Obama administration, the Fed, and the Treasury appear to be willing to spend historic sums in the face of these developments in the hopes the world is bluffing.

I don’t want to be a doomsayer, but the outlook sure as hell ain’t rosy. America has been gorging at the buffet for the last 40 years, ever since the collapse of Bretton Woods system. The bill is about to come due, and we’re sure to be surprised when we realize it’s pay-per-item, and not all-you-can-eat.

Open Thread: Stock Market Edition

Two weeks ago, the Dow hit a major low at 6440, closing slightly higher. This made a lot of sense to me, given the fundamentals of the economy. In fact, I nearly posted a rather snide article on CNBC “calling the bottom” that morning.

But then things changed. The Dow has been on a tear ever since, culminating yesterday in a 500-point rise. This is a 20% rise since its lows of merely two weeks ago. And I just don’t understand why.

I see three potential explanations:

  • We’ve hit the bottom of the recession, and the 6440 low was an undershoot on the downswing, which was bound to be quickly reversed.
  • This is a sucker’s rally, and the Dow will soon drop again.
  • We haven’t hit the end of the recession, but the inflationary policies of our government are going to cause a rise in equity and asset prices.

I don’t believe the first. I can be wrong on that, but I think there are structural monetary and economic issues that are still bound to unwind. The government is trying to reinflate the bubble, but I think there’s too much leverage working against them.

I can easily believe the second. I think there’s quite a lot of downside risk, and after such a phenomenal drop, I actually believe there’s plenty of suckers who thought we’d hit bottom.

What really worries me is the third option. If the inflation is starting, this has significant impact on my personal situation. As a renter, I want to purchase real estate before the inflation really hits, locking in a nice low fixed interest rate on a home that’s going to rise in value with the devaluation of the dollar. If the interest rates spike before I can buy, I may be locked out of ownership in any of the neighborhoods I’d actually want to live in.

So what does everyone think? Where will we be in a month, in 6 months, and in 18 months? Is this a sucker’s rally, is this the start of the great inflation, or is this simply the bottom of the recession and things are looking up?


As I have said here before, I am a senior technical executive at a large bank.

As it happens, a bank that was forced at gunpoint, by the secretary of the treasury and chairman of the federal reserve, to accept TARP funds (as all the top surviving banks in the U.S were).

Let me be clear: We did not want TARP funds, or need them; but we, and all the other major banks, were told in no uncertain terms that we WOULD take them.

As obscene as that is, it is irrelevant to what follows; excepting that we did take TARP funds.

The United States House of Representatives recently passed a blatantly unconstitutional bill, placing confiscatory tax burdens on anyone making more than $250,000 and working for an institution that received more than 5 billion of TARP funds.

The bill was in theory specifically addressed at the false outrage over retention bonuses paid to AIG executives; and is targeted only to their bonuses.

In theory.

Of course, this would be an unconstitutional bill of attainder, which wouldn’t pass even the most cursory constitutional challenge; so it was re-written to be broader.

Broader of course means more people would be affected, and congress would be given more power to steal more money.

In fact, if you read into the implications of the bill; it could be used to levy a 90% tax on any income over $250,000, earned by any family making more than $250,000 per year, where either spouse is employed by an institution that received federal “bailout” funds.

It appears that the Senate, and the Obama administration are cold on the bill and that it will not pass, or be signed into law if it did.

I do not earn that much money; nor do my wife and I earn that much together (though in the next few years it is entirely possible that we will).

However, I have something important to say.

If congress should pass any such bill, and the president sign any such law, I WILL NOT OBEY IT.

I will not allow congress to tell me how much I can earn. I will not allow them to take my income because of the actions of others. If they attempt to make me do so by force, I will resist with force.

I will most likely die in the process, which I regret; but at some point a line must be drawn. The constitution must be respected, or it is meaningless.

Congress can make no law that is unconstitutional on it’s face. If such a law be passed, it is the duty of the president to repudiate it; and it must not be signed. If such a law is signed, it is the duty of the agents of the government to refuse to enforce it. If the agents of the state attempt to enforce it, then they must be resisted with force, at all costs.

Anything less is submission to tyranny, and the diminution of citizens, to subjects; or worse.

I have made clear in the past that I would resist police abuse of the constitution. I will resist congresses abuses no less. I will resist the presidents abuses no less.

Agents of the state cannot exceed the legitimate authority of the state. When they do so, they are criminals, and they must be resisted as criminals.

Normally I do not advertise where my lines are; but congress is now in the midst of a tantrum of self indulgence, overconfidence, and hubris not seen since reconstruction.

Nancy Pelosi, Harry Reid, and Barack Obama, are pushing our nation headlong into tyranny and ruin; and decrying those who resist as racists, or reactionaries; simply for not wanting to be serfs.

I would suggest that we petition for the impeachment and prosecution (for conspiracy to deprive every resident of the United States of their civil rights) of any congressman who voted for such a bill; but I know it would do no good.

Government must be made to understand, WE WILL NOT TOLERATE SUCH ABUSE.

We will resist.

We will revolt.

We will not be made subjects, serfs, or slaves.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Just When I Thought I Was Out… They Pull Me Back In!

One of my coworkers explained the other day that socialist countries like to wall people in — that way they’re able to enjoy the benefits. America is not quite that way, but it’s getting there — if you’ve got the means, and try to leave, they think it’s to avoid American taxes. And by God, they’ll extract their pound of flesh if they have to chase you to the ends of the earth to do it:

The American Jobs Creation act of 2004, passed by the Republican-controlled government, amended section 877 of the Internal Revenue Code. Under the new law, any individual who has a net worth of $2 million or an average income-tax liability of $127,000 who renounces his or her citizenship and leaves the country is automatically assumed to have done so for tax avoidance reasons and is subject to some rather unbelievable tax laws.

Any individual who is declared to have expatriated for tax reasons is forced to pay US income taxes on all US based income for 10 years following expatriation, regardless of the country in which the individual resides. Additionally, in the 10 years following expatriation, if a qualifying individual spends 30 days in the United States during any year, he or she is taxed as a US citizen on all income derived from any place in the world. To make matters worse, if an individual happens to die in a year in which he or she spent at least 30 days in the United States, the entire estate is subject to US income tax law.

I’ve heard of the social contract… But the United States is one of the few countries in the world that will try to charge you alimony for exiting the contract.

IRONY ALERT: Government conference on openness and transparency is CLOSED to members of the public and the press

The following government conference on openness and transparency is CLOSED to members of the public and the press.  The information below comes from this URL:

Upcoming Conference Providing Guidance on President Obama’s and Attorney General Holder’s Memoranda on the Freedom of Information Act

On March 26, 2009, the Office of Information Policy (OIP), Department of Justice, will host a government wide training conference to discuss President Obama’s and Attorney General Holder’s Memoranda which establish a new era of open government.

The details for this event are listed below:

When:     March 26, 2009
Where:     Department of Commerce’s Auditorium
14th and Constitution Avenue NW (main entrance on 14th Street)
Time:     10:00 – 12:00 noon
Who should attend:     Agency Chief FOIA Officers, Agency Principal FOIA Contacts and FOIA Public Liaisons

No pre-registration is required. However, you must present your Government ID to attend the training. Questions regarding the conference may be directed to OIP’s Training Officer, Bertina Adams Cleveland, at (202) 514-1010. (posted 3/20/2009)

H/T to Mark Hinkle

Another Step Down The Road To Serfdom

Today’s New York Times brings news that the Obama Administration is set to unveil a series of unprecedented regulations:

WASHINGTON — The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.


The administration has been considering increased oversight of executive pay for some time, but the issue was heightened in recent days as public fury over bonuses spilled into the regulatory effort.

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could go beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on company boards to tie executive compensation more closely to corporate performance and to take other steps to ensure that compensation was aligned with the financial interest of the company.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission.

The transparency of this move is really quite obvious. This has nothing to do with stimulating the economy, and even less to do with the root causes of the financial crisis. Instead, what we’re looking at here is naked redistributionism timed to tap into the populist rage that has erupted over the phony scandal surrounding the AIG bonuses. It’s an “us vs. them” game that Obama thinks he can win, and he may well be right.

Make no mistake what this is really all about, though:

You are not free to make as much money as you want. You are not free to succeed because government will tax you at the point of a gun to make sure you aren’t making more money than they approve of.

Welcome to Obama’s America.

Any resemblance to previous Americas is purely coincidental.

Abandoning the Rule of Law

The United States is a banana republic. The Jeffersonian ideal of a series of republics built upon enlightenment values of freedom and reason has died. It wasn’t a sudden death, like that which occurs in a car crash; where one can pinpoint to the second where death occurred. Rather it was a slow lingering death, with organ after organ gradually slowing, a long twilight that ended in the dark of a moonless night.

Some would argue that this is a melodramatic claim, made by some bitter conservative in reaction to the evolution of society, the rantings of a “dead-ender” in knee-jerk opposition to the inevitable and gradual improvement of society. We can test whether or not they are right by comparing the principles of a free society to those dominating the U.S. right now.

The Principles of the Rule of Law

First let us examine whether or not we live under a rule of law.

Joseph Raz described the rule of law as possessing the following properties:

  • Laws are prospective rather than retroactive.
  • Laws are stable and not changed too frequently, as lack of awareness of the law prevents one from being guided by it.
  • There are clear rules and procedures for making laws.
  • The independence of the judiciary has to be guaranteed.
  • The principles of natural justice should be observed, particularly those concerning the right to a fair hearing.
  • The courts should have the power to review the way in which the other principles are implemented.
  • The courts should be accessible; no man may be denied justice.
  • The discretion of law enforcement and crime prevention agencies should not be allowed to pervert the law.

Clearly most of these principles are currently violated, blatantly and routinely:

  • The list of retroactive laws are legion.  Two that leap to mind are the new tax on AIG bonuses, and the Lilly Ledbetter Fair Pay act.
  • Anybody who has watched the legislative process in Congress closely would recognize that the laws are not only not stably maintained, but are changing bewilderingly often, with little notice and even less opportunity for people negatively affected by the law to present their case to legislators
  • The rules and procedures for making laws are anything but clear.  Witness this essay on the Master Resource blog concerning how the Federal government is going to establish regulations on CO2.
  • In an era when any prosecutor could indict a ham sandwich and make it stick, the nominal independence of the judiciary is meaningless. Furthermore, many of the judges in the U.S. legal system abrogate their independence routinely, witness the “deference to the executive” given in numerous critical cases concerning the limit of government power
  • The principles of natural justice have been thrown out of the window.  How can people contest the charges against them, if the evidence is kept secret from them and their lawyers?  How can a government that passes laws allowing contracts to be retroactively rewritten and used as the basis of fines claim to respect any natural law? How can a government that denies people the right to publish what they want, to own weapons for their own defense, to enter into contracts with anyone they want lay any claim to respecting natural justice?  How can a person obey the law, when even the legislators and the executive branch are ignorant as to what the law is?  How can asset forfeiture, where people who have not been convicted of any crime have their property seized by the government which then sells it or uses it for its own pleasure, be compatible with any notion of due process?
  • Nor are the courts accessible…  The laws and procedures of the legal system have become so byzantine that only an expert can navigate them.  And, sad to say,  a handful of people have been detained in a manner that was clearly designed to prevent them from reaching any court, and few people in government have protested.
  • There are two ways that law enforcement may abuse their discretion in such a way as to pervert the law.  One is to turn a blind eye to violations of the law, such as that which occurred in the 19th century when a group of white men murdered a black man.  This is out of fashion – with the famous exception of the “blue wall of silence“.  The other is to “charge stack” – to use its powers to detain and investigate to pursue people frivolously and maliciously  despite its foreknowledge that such an investigation would not in fact turn up a serious crime.   This abuse is systemic.  People are over-charged with tens or even hundreds of charges for a single act by prosecutors who hope to coerce a guilty plea out of a defendant facing hundreds of years of jail time. Often the frivolous investigations are directed against the family members or loved ones of the prosecutor’s target. Take the prosecution of Greg Anderson for his refusal to testify against Barry Bonds; prosecutors are investigating family members in an obvious attempt to coerce his testimony.  This is not a new problem, the IRS is notorious for this tactic.

Now that we have established that the rule of law is effectively dead, the next question to ask is whether or not the rule of law is worth defending?  One can even argue that the rule of law is some unrealizable ideal, laws don’t enforce themselves, they are enforced by men.  So why should we bemoan the failure to live up to some unrealizable ideal?  The answer is, of course, that how well the lawmakers, and law enforcers adhere to the principles of the rule of law is a necessary precondition of how wealthy, prosperous, and pleasant a society is.  All of the principles of the rule of law have at their root a governing set of axioms:

  • The law applies to all equally.
  • The law is not capricious – people can know beforehand which actions are lawful and which are not
  • The law is generated in a manner that allows all affected people to have a voice in crafting it, and that it is not produced by a special class of people for their own interests.

You cannot violate Raz’ principles without producing a society that fails to satisfy those axioms.  A society that applies the law differently to different people, or is capricous and unpredictable, where the laws are crafted for the benefit of some at the expense of others is a society that discourages productive activities and encourages predatory activities, one that is on the fast track towards tyranny.

Where to Now?

I am not concerned with pointing the finger of blame at any individuals or classes of people. Nor am I concerned with reestablishing the past. Murray Rothbard famously commented the the rot set in before the Treaty of Paris was signed. L Neil Smith pointed to the convention which wrote the U.S. Constitution as the moment the death began, calling it a coup. It is clear that the death began in the 19th century, and has been accelerating in the 20th. Merely dialing the clock back will not address the root causes of the death.

The root cause of the death is the fact that the vast majority of the U.S. populace is completely ignorant of what the rule of law is, and the dangers that accompany its abandonment.  Too many people are willing to make deals with the devil for their own benefit, or out of a desire to be left alone.  Too many people are interested in short-term gain to recognize how destructive these policies they accept, or even cheer at will be in the coming months.  Convincing them to change their ways is a difficult, and even quite likely an impossible task.

The change that must happen is not simply the election of a different president, or exchanging one political party’s control of Congress for that of another.  It is not a question of impoved ballot access laws.  Nor is it a question of storing a shotgun loaded with deer slugs in one’s closet.

What is required is a divorce.   Seccession.  Emigration.  Passive disobedience.  The construction of alternate institutions that bypass the state.

Such actions come at a price, people lose their income, friends, and even their families’ support.  But, as unprincipled government takes its toll, those losses will become less and less significant for larger numbers of people, and our numbers will grow.  The more the state takes, the more people will resist.  Four hundred years ago, monarchs whose treasuries had been emptied by the religious wars of the Reformation began selling charters to colonies in the New World as a means of raising money.  The flight of people to the New World, and the tax competition it trigerred led to the flowering of liberty and the spread of Enlightenment values.  If we lay the groundwork now, the coming collapse can be turned to our advantage.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Pre-Law Student Suggests State Of California Divorce Marriage Licensing

Language matters. When you call a gigantic pork sandwich a “stimulus”, it becomes a very difficult thing to oppose. When your version of “campaign finance reform” is a big slap in the face of free speech and only increases the ability for moneyed interests to protect their incumbent investments, it is still seen by the majority of Americans as a positive “reform”.

Marriage is a religious concept. Contract is a state concept. To give the name “marriage” to what you get from a church and simultaneously define it as a civil contract, you open the door to very bitter disputes. Few but the extreme bigots in society would suggest that gays not be allowed to enter into civil contracts. But as we saw here in California last year, a majority said they shouldn’t get married. I’ve said that we should do away with civil “marriage” entirely, and use a different term to reduce double meaning.

Two students from SoCal agree, and they’ve decided to do something about it:

Ali Shams, a senior at the University of California-San Diego, was watching a soccer game with a bunch of buddies when his phone started ringing Tuesday, and refused to stop.

Surprising even the 22-year-old pre-law student, his personal project during Christmas break — framing a constitutional amendment initiative to replace the word “marriage” with “domestic partnership” under state law — was cleared by Secretary of State Debra Bowen to gather petition signatures for a potential statewide ballot.

Fox News, NBC, The Associated Press and many of the state’s largest newspapers were on the phone wanting to discuss the unusual initiative launched by Shams and his friend Kaelan Housewright, a 21-year-old senior at the California Institute of the Arts. More to the point was, a gay issues blog which marveled: “Straight Dudes File California Gay Marriage Ballot Initiative.”

The measure would overturn Proposition 8’s ban on same-sex marriage, and have California treat all unions — opposite-sex or same-sex — as domestic partnerships. It would also allow churches, synagogues and mosques to decide whom they want to marry in a social, rather than civil, ceremony.

The domestic partnership initiative might be an extreme long shot to pass — or even make it to the ballot. In what may be a first, the warring sides in the Proposition 8 campaign agree on something — they both hate the idea.

That’s always good. When two bitter rivals are presented with a way to stop fighting, they often hate the idea. Perhaps they’ll come around. It’s difficult to accept the idea that this dispute is largely over a single word rather than a much more important concept, but language matters.

What does this accomplish to truly end this dispute?

“We’re not banning marriage. We’re protecting fundamental rights for minorities and protecting the religious definition of marriage for” religious groups, Shams said.

As I’ve said before, those who are truly concerned about the sanctity of marriage should keep it in church, where it belongs. Let the legal system do what it is designed to do, arbitrate and enforce contracts. Once separated, the issue becomes much easier to argue — and you can see the motives of those for and those against much more clearly.

This, of course, doesn’t mean I think this will pass — but I hope it gets discussed enough to open a few minds.

Hat Tip: Co-contributor Doug @ Below The Beltway

Social commentary, disguised as a video game review

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Leave it to Munro…

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Quote of the Day II: Gov. Bill Richardson on the Death Penalty

(CNN) — New Mexico Gov. Bill Richardson signed a bill Wednesday repealing the death penalty in his state, his office confirmed.

Regardless of my personal opinion about the death penalty, I do not have confidence in the criminal justice system as it currently operates to be the final arbiter when it comes to who lives and who dies for their crime,” Richardson said in a statement Wednesday.

He noted that more than 130 death row inmates have been exonerated in the past 10 years, including four in New Mexico.

“Faced with the reality that our system for imposing the death penalty can never be perfect, my conscience compels me to replace the death penalty with a solution that keeps society safe,” he said.

Quote Of The Day

I was talking to a coworker this morning about the stock market and the Fed’s injection of $1.2T newly-printed money into the economy. I made a point that I think bears repeating:

The stock market can lose value, while going up.

This is the insidious nature of inflation. They’ll inject this money and nominal prices will move up (houses, DJIA, S&P500, etc) — at which point they’ll claim that they’re fixing the economy.

Just like Germany did in the early 1920’s.

The Dastardly Bonuses: AIG, Fannie, and Freddie

Those eeevvviiilll capitalists at AIG have been taking quite a beating. Now it’s time to spread the “wealth”:

Fannie Mae plans to pay retention bonuses of at least $1 million to four key executives as part of a plan to keep hundreds of employees from leaving the government-controlled company.

Rival mortgage finance company Freddie Mac is planning similar awards, but has not yet reported on which executives will benefit.

The two companies, which together own or back more than half of the home mortgages in the country, have been hobbled by skyrocketing loan defaults. Fannie recently requested $15 billion in federal aid, while Freddie has sought a total of almost $45 billion.

Fannie Mae disclosed its “broad-based” retention program in a recent regulatory filing with the Securities and Exchange Commission. The company was only required to disclose the amounts for the top-paid executives, who will pocket at least $470,000 on top of their base salaries.

The bonuses are more than double last year’s, which ranged from $200,000 to $260,000. Another round of bonuses ranging from $330,000 to $429,000 are planned for next February.


What’s the over/under on how soon Barney Frank calls for the heads of the top folks at Fannie and Freddie?

Hat Tip: Cafe Hayek

Does Congress Have The Authority To Take Back The AIG Bonuses ?

The hyperbolic rage against the AIG bonuses has finally transformed itself into legislation:

While American International Group Inc.’s chief executive says the firm could recover millions in bonuses via voluntary means, that’s not slowing a legislative effort to recoup the money and shift the incentive-based pay structure traditionally used by financial institutions.

The House is scheduled to act Thursday on legislation (HR 1586) that would impose a 90 percent tax on bonuses given to highly paid employees not only of AIG, but of all recipients of more than $5 billion in federal bailout funds, a group expected to include about a dozen financial institutions, according to Ways and Means Chairman Charles B. Rangel , D-N.Y. Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. would likely be among the affected companies.

“I expect to see an overwhelming vote,” House Majority Leader Steny H. Hoyer , D-Md., told reporters Wednesday afternoon.

Of course you will. The question is whether Congress even has the authority to do pass legislation of this type. Several pundits — here and here for example — have argued that the move would violated several provisions of the Constitution, but the sad truth of the matter is that this Congressional mugging is, most likely, Constitutional.

Bill of Attainder and Ex Post Facto Arguments

Article I, Section 9 of the Constitution includes the following limitation on Congressional power:

No Bill of Attainder or ex post facto Law shall be passed.

A bill of attainder is generally defined as follows:

“These clauses of the Constitution are not of the broad, general nature of the Due Process Clause, but refer to rather precise legal terms which had a meaning under English law at the time the Constitution was adopted. A bill of attainder was a legislative act that singled out one or more persons and imposed punishment on them, without benefit of trial. Such actions were regarded as odious by the framers of the Constitution because it was the traditional role of a court, judging an individual case, to impose punishment.” William H. Rehnquist, The Supreme Court, page 166.

Since the legislation being considered by Congress would apply to anyone who receives a bonus from any entity that received more than $ 5 billion in TARP funds and isn’t just limited to recipients of bonuses from AIG, it is likely general enough to get past any question that it is an unconstitutional Bill of Attainder.

As for the ex post facto argument, the Supreme Court decided way back in 1798 that this provision only applies to criminal laws, not civil laws such as a tax measure, so there would be no bar to the bonus tax even though it is theoretically retroactive.

Other Constitutional Arguments

As the Wall Street Journal notes, the remaining arguments against the bonus tax plan are even weaker. The Contract Clause of Article I, Section 10 only applies to the states; the Takings Clause of the 5th Amendment has never been interpreted to apply to tax laws; and, the Due Process Clause of the 5th Amendment only applies to procedural due process, which would clearly exist in this case.

Finally, a post at Wizbang has also raised an Equal Protection objection to the planned tax:

[W]e might as well mention the concept of Equal Protection, since a law taxing only AIG employees would clearly violate it.

As I noted above, the proposed legislation does not only apply to AIG employees or bonus recipients. Therefore, it’s unlikely that they could make a successful claim that they were being singled out as a class by the law. Even if they were, it’s unlikely that they would be considered a suspect class for equal protection purposes, meaning that the law would only have to pass the fairly liberal rational basis test. Most importantly, though, it’s fairly clear from the language of the Fourteenth Amendment that the Equal Protection Clause only applies to the states:

1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

So, as far as the Constitution goes at least, Congress is, sadly, within it’s authority to tax away to oblivion the AIG bonuses.

Cross-posted from Below The Beltway

Preliminary government answers about MPs in Alabama not passing sniff test

With respect to the story starting to hit both the mainstream media and “the tubes” about the recent US Army deployment in Alabama, the federal government response I’m seeing so far isn’t quite hitting hitting the common-sense sniff test.

The abbreviated version of this story is that US Army personnel were sent to assist with operations immediately following Michael McLendon’s murderous rampage in southern Alabama.  While this seems to be a clear violation of the 1878 Posse Comitatus Act, my initial response was to defend the military as much as possible.

As a veteran who has been involved in remotely similar operations, I’ve got a strong degree of empathy for the military side of the issue.  However, the Army Times‘ and Jerome Corsi’s World Net Daily explanations ain’t satisfying me, yet…

From the Army Times:

Geneva County Sheriff Greg Ward said Wednesday that he requested the MPs in response to an offer of assistance from a lieutenant colonel at Fort Rucker for generators, lights and other equipment.

“The lieutenant colonel called our [911] dispatch to say ‘we’re here if you need us,’” Ward told Army Times in a phone interview from his office in Geneva.

With seven separate crime scenes spanning a 20-mile area, Ward’s force of 12 deputies and about 10 more police from neighboring towns, were becoming overwhelmed, he said.

“I thought, let me call them back. So I asked for MPs to come in and relieve our personnel long enough so they could get something to eat,” Ward said, explaining that most of his men had been on the job since 7 a.m. and were exhausted.

The soldiers, he said, were assigned to five highway intersections to help keep traffic flowing and stood guard outside the most horrific crime scene in Samson in which six of the victims, including an 18-month old baby, were killed.

What Ward didn’t want, he said, was for anyone to sneak up and get a picture of the bodies and the soldiers watching the crime scene were instructed to inform the police if that was in danger of happening.

Here’s Corsi’s version:

The mystery over who ordered U.S. Army forces to patrol the streets of the south Alabama town where 11 people were killed in a shooting spree last week has been solved. WND confirmed troops from nearby Ft. Rucker provided limited assistance after a request from the police chief of Samson, Ala.

Multiple news agencies reported the Army was launching an investigation into why the troops were sent to the town, a possible violation of the law. The Associated Press reported uncertainty over who requested the assistance, noting it didn’t come from Republican Gov. Bob Riley or the White House.

“Under the authority of a mutual aid agreement which Fort Rutgers has with local law enforcement community in Samson, Alabama, the Samson city police chief requested support from military police after the shooting,” Lt. Col. Almarah Belk, an Air Force officer working for the Department of Defense press office, told WND in a telephone interview.

“Fort Rutgers provided 22 military police personnel, and five vehicles were sent into Samson to provide non-law enforcement support in the town of Samson, Alabama,” Belk said.

To be sure, I’ve had some serious problems in the past with both President Obama and Governor Riley. I strongly doubt either of them were involved in this.  To the conspiracy theorists trying to push this into a more serious issue, I’ll suggest trying to do some Freedom of Information Act requests for DNA testing on moon rocks.

However, it does appear that a law was broken — and one which helps bind the trust of citizens to the federal government.  Merely stating that local law enforcement requested federal help does not excuse whomever sent out the orders. If one is an agent of the U.S. Army, a local request does not trump federal law.

So far, I’ll stand by the points I made to the Associated Press and blogged earlier.  Here’s the AP version:

The chairman of the Libertarian Party of Alabama, Stephen Gordon, said while many are worried about the use of Army troops in civilian police roles, he doubts there was anything nefarious about the soldiers in Samson.

“There is no apparent harm here, but the principle still needs to be upheld,” Gordon said. “The barrier has been lowered for the next time, and we really need to take a look at what happened.”

Here are the points I made earlier:

  • This does seem (based on evidence presented so far) to be a clear-cut violation of federal law.  There may be some local law enforcement arrangements for pooling local law enforcement resources in time of disaster, but they would not override federal law on the matter.
  • There doesn’t seem to be any major harm done, so long as we don’t allow the bar to be lowered for similar future tragedies.  However, as citizens, it is important that we remain vigilant when things like this do occur.
  • This needs to be investigated to determine where the fault lies.  As I told the AP, if some local commander made a mistake, his wrist probably needs to be slapped, as appropriate.  We do need to find where the system broke down in order to prevent something like this from happening again.
  • This doesn’t seem to be part of any nefarious Obama plot to impose martial law across the land.  Some folks seem to be claiming this is President Obama’s first step in some apocalyptic total-takeover scheme.  For the conspiracy-minded out there, if this is such a plot, the Alabama mass murder seems to be a bad case to begin operations.  It was a quick response to a local event with no advance notice.  Anyway, it seems that Obama has a whole lot on his plate right now.  He’s probably too occupied at the moment to be concentrating on how to use a handful of MPs to overturn the Constitution in the deep south.
  • There are times when U.S. military forces do reasonably need to be involved in local issues.  When I was in the Army, I was involved in an operation to remove unexploded military ordinance found on private property in the D.C. area.  In this case, FEMA, local law enforcement and military personal cooperated and communicated about how to handle the issues involved and we (the military) were very mindful about the line between the military and civilians.
  • That someone didn’t quickly answer the question about who ordered the MPs offbase is concerning.  A quick and honest answer probably would have stopped online speculation which may continue for some time.  It also (probably needlessly) undermines public confidence in the military.  Why not simply say “who dunnit” so folks can move back to more important issues in their lives?

I’ve called Fort Rucker’s Public Affairs Office and left a message.  I’m sure I’ll probably get a reasonable response in the morning.  In the meantime, both sides would probably benefit from laying off the spin and simply providing both reasonable answers and rational responses.  I do spin for a living and am glad I didn’t step in this pile of it.  I also deal with conspiracy-minded folks and don’t like stepping in that equally smelly pile of stuff.

Based on what I know (mostly from the press) of the situation, the military response to the initial situation was “common-sense” reasonable and the situation doesn’t seem to have harmed anyone.  But it seems to be illegal.  The initial media responses seem to be disregarding mention of any actual law involved.

As I wrote earlier today, “This needs to be investigated to determine where the fault lies.  As I told the AP, if some local commander made a mistake, his wrist probably needs to be slapped, as appropriate.  We do need to find where the system broke down in order to prevent something like this from happening again.”

If I was writing the Letter of Reprimand, it might begin with: When [insert rank and name] was faced with an important and timely situation, his immediate focus was upon the local crisis, but…

I also wrote: ” Anyway, it seems that Obama has a whole lot on his plate right now.  He’s probably too occupied at the moment to be concentrating on how to use a handful of MPs to overturn the Constitution in the deep south.”

From either a legal or prophetic perspective, this seems to be relevant: “There may be some local law enforcement arrangements for pooling local law enforcement resources in times of disaster, but they would not override federal law on the matter.”

I’ll add that a possible solution is to rewrite the law to state that if military personnel enter into domestic operations such as this, they should not be armed (which includes sidearms).  I’ve done my share of military operations in civilian areas unarmed and still survived.  Don’t tell me it can’t be done.

While everyone seems to be concentrating on an issue which (IMO) shouldn’t be a serious one, I’ve been trying to spend my day ensuring that African Americans have the same access to the law that the rest of us have when it comes to eminent domain issues.  I’m now several hours behind on the project, but I doubt anyone interested in this issue will care.

I used to co-edit a website with the tagline of “Common sense shoved up your …”

Perhaps it’s time for both sides in this debate to apply some common sense before they deservedly take it up their ellipses.

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