After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - March 25th, 2014

History 101

(Originally published February 12th, 2013)

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s where the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As did our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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FT185: “When it comes to foreign policy the Republicans do what is best for the country while Democrats do what is best for their party.” —Old Pithy

Posted by PITHOCRATES - August 30th, 2013

Fundamental Truth

Wherever the Soviets pushed the Americans pushed back to Contain the Expansion of Communism

Once upon a time Democrats were practically warmongers.  Woodrow Wilson got us into World War I.  FDR got us into World War II.  Harry Truman got us into the Korean War.  And LBJ got us into the Vietnam War.  While Republicans were nearly pacifists.  Dwight Eisenhower got us out of the Korean War.  And Richard Nixon got us out of the Vietnam War.

Eisenhower was the Supreme Allied Commander in Europe during World War II.  Saw the carnage of war up close.  And was glad when it was over.  Unlike General Patton.  Who wanted to invade the Soviet Union.  Because he knew we would have to fight them sooner or later.  And rather do it then when they had the most awesome military force in the world still in Europe.  General Patton lost command of Third Army because of talk like that.  And later would die from injuries he got in a freak car accident.

It didn’t take long following the end of World War II for the Soviets to become the new big bad in town.  Just like General Patton foresaw.  Truman stood up to them in Berlin.  Greece.  Turkey.  Iran.  And Korea.  Wherever they pushed the Americans tried to hold the line.  To contain the expansion of communism.  It was the Cold War.  And it first got hot in Korea.  But the UN forces held the line in Korea.  After three years of war.  About as long as America spent fighting in Europe during World War II.

JFK’s refusal to commit American Military Power during the Bay of Pigs Invasion led to the Cuban Missile Crisis

Communism was a thorn in the side of democracy.  The democratic West believed in peace through strength.  With the occasional war breaking the peace.  While the communist East believed in a perpetual state of war with the occasional peace breaking that war.  The communists sought to expand through violent revolution.  If you contained it early (like in the Berlin Airlift) you could avoid a shooting war.  And keep it cold.  But if they got a foothold you could find yourself mired in a hot and prolonged war.  Like in Korea.

When Fidel Castro turned Cuba communist it was not a good thing for the United States.  For all their efforts to contain communism throughout the world here they were.  On Cuba.  Within missile range of the United States.  And Castro was cozying up to the Soviets.  Which is why President Eisenhower gave the green light for the CIA to remove Castro from power.  To remove a threat so close to the United States.  The plan was the Bay of Pigs Invasion.  Which proceeded under the following administration.  JFK’s.

The invasion, though, did not go well.  And unlike in the Guatemalan coup d’état, JFK did not commit American military power to help the invaders (unlike Eisenhower did in the Guatemalan coup).  Who were soon pushed back.  And defeated.  Which breathed new life in Cuba’s communist revolution.  Brought them more into the Soviet sphere.  And encouraged the Soviets to test this young president.  Which they did.  By sending nuclear missiles to Cuba.  Leading to the Cuban Missile Crisis.  And near nuclear war (Castro’s right hand man, Che Guevara, was angry with the Soviets because they refused to nuke the United States during the crisis).  While the Cuban people suffered under their communist oppressors.  And still do.

Today Iran—and Radical Islam—is the Thorn in the Side of Democracy that Communism once Was

Truman was the last Democrat warrior president.  LBJ got us into Vietnam.  But he also gave us the Great Society.  Turning the nation towards a welfare state.  A very costly welfare state.  Which the great costs of the Vietnam War threatened.  The government, much like they did during the Revolutionary War, began printing money to pay for all of this spending.  Devaluing a dollar pegged to gold.  With nations concerned with this devaluation they traded their dollars for gold.  Which is what is supposed to happen under a gold standard.  So nations don’t devalue their currencies.  But printing money is easier than cutting spending.  So President Nixon decoupled the dollar from gold.  So they could really print it.  Giving us the inflationary Seventies.

Since then Democrat presidents have done two things.  Expanded the welfare state.  And demonized their political opponents.  Which extended to their foreign policy.  President Carter cut back on defense spending.  And tried to make friends with our archenemy.  The Soviet Union.  A president the Soviets had little respect for.  Even considering a nuclear first-strike policy as they didn’t think Carter would ever launch his nuclear weapons.  And then President Carter criticized American ally, Mohammad Reza Shah Pahlavi, the Shah of Iran, for his human rights violation.  There was revolutionary fervor in the air.  The Shah implored for help from their long-time friend and ally.  The United States.  Who assured the Shah that the Americans would intervene militarily on his behalf.  But didn’t.  The Iranian Revolution followed.  And Iran became America’s new archenemy.

Iranian oil won World War II.  It fed the Red Army.  Iran served as a portal into the Soviet Union.  War material as well as oil flowed through Iran and into the Soviet Union.  After the war the Soviets didn’t want to leave Iran.  Give up that oil.  Or a warm-weather port on the Indian Ocean.  But the British and the Americans helped the Iranians keep the Soviets at bay.  Their actions included a coup.  And some human rights violations.  To keep what happened in Eastern Europe following World War II from happening in Iran.  Iran prospered.  And Westernized.  It was becoming everything the American left loved.  Secular.  It was becoming more like America.  Where men and women enjoyed doing things they could enjoy in New York City.  Which angered the Islamists.

Today Iran—and radical Islam—is the thorn in the side of democracy that communism once was.  And unlike their Cold War warrior forefathers, today’s Democrats choose party over country.  Basing their foreign policy on expanding the welfare state.  Or demonizing their political opponents.  President Clinton treated al Qaeda’s increasing acts of hostility against Western/American interests as a legal issue.  Which grew bolder until they culminated in the 9/11 attacks on the World Trade Center and the Pentagon.  Clinton did this so he wouldn’t waste money on defense by risking war to protect America.  Or anger his liberal base.  After 9/11, George W. Bush fought back.

The Democrats have demonized George W. Bush as a rich oil man who traded blood for oil.  While at the same time they said he was purposely causing oil shortages to raise the price of oil.  When an opportunity came to overthrow America’s new archenemy, Iran, President Obama did nothing to support the Green Revolution in Iran following questionable election results that kept Mahmoud Ahmadinejad in power.  An intervention that would have been in the best interests of both America and the Iranian people.  But when the Arab Spring blew through Egypt he was quick to tell our friend and ally, Hosni Mubarak, that he had to go.  Turning Egypt over to the Islamist Muslim Brotherhood.  But when civil war came to Syria he chose to do nothing.  Until now (to save face from his ‘red line’ comment about chemical weapons?).  When the opposition has most probably been infiltrated by al Qaeda.

What is the constant in these Democrat foreign policy decisions?  They are the opposite of what the Republicans would have done.  So they couldn’t have done them.  For it would have vindicated George W. Bush.  Angered their liberal base.  And made the world a safer place.

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After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - February 12th, 2013

History 101

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s when the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As has our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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American Revolution, Vietnam, Civil War, Guerilla War, Fabian Strategy, Jackson, Arnold, Lafayette, Clinton, Cornwallis and Yorktown

Posted by PITHOCRATES - June 21st, 2012

Politics 101

In a Civil War where the Enemy was Everywhere and Holding Cities meant little the Only Way to Win was to Kill the Opposing Army

The American Revolutionary War was a lot like the Vietnam War.  Both involved a people on one side of the conflict torn apart by civil war.  Both were bloody.  Both involved a military superpower fighting on the far side of an ocean.  Both involved the French (the French role in Vietnam was in the decade which preceded the American’s two decades).  In both conflicts the French suffered politically at home and profited little for the blood and treasure they invested after the war.  In both the underdog used a Fabian strategy where they avoided major battles for their winning strategy was simply not to lose.  So they fought to extend the war to make it more costly (in both treasure and politics) for the other side to keep fighting.  Both involved poor military planning where decisions were based more on politics than military necessity.  In both the Americans and French were on the same side.  During the American Revolution they were both on the winning side.  In Vietnam they were both on the losing side (though the French stopped fighting before the Americans began fighting).  And, of course, both were wars contesting overseas colonies.

The fighting was cruel in Vietnam.  Especially against the civilians.  As the opposing sides fought through villages people suffered if they had shown the ‘wrong’ loyalties when the other side had controlled the village.  The North Vietnamese Army and the Viet Cong (the guerilla insurgents in South Vietnam) did some nasty things.  As did the South Vietnamese American allies.  Even some Americans did some nasty things.  There were few innocents.  Though the Americans were probably more innocent than most.  For when they did something nasty it became public.  Eventually.  And the Americans punished those responsible.

Both sides used killing as the primary strategy.  The Americans introduced the body count.  Measuring the success in military operations in the number of enemy dead.  The Viet Cong conscripted anyone who could fight.  Removing most young men from villages in areas they controlled.  Or they killed anyone who could fight against them.  Both sides tried to kill as many of the other as possible because in a civil war where the enemy was everywhere and holding cities and hills meant little the only way to win was to kill the opposing army.  So they couldn’t fight you anymore.

Neither the Patriots nor the Tories could claim the Moral High Ground in the Deep South

General George Washington quickly adopted a Fabian strategy in the American Revolutionary War because he had no choice.  He was fighting the world’s sole superpower.  And when the war broke out the Americans had no army or navy.  So until they did they fought a guerilla war.  Especially in the south.  Where Patriot partisans controlled the country.  And Tories loyal to the British held the cities.  And manned posts in the interior.  Under the command of British General Cornwallis.  Who reported to General Clinton comfortably ensconced in New York City.  Waiting for General Washington to launch an assault on New York.  Which would never come.

The civil war in the south was about as ugly as civil wars get.  And the ugly stuff was American on American ugliness.  Patriot against Tory.  The British charged that the partisans were killing innocents and neutrals.  And the Americans claimed the Tories were doing the same.  Neither side could really claim the moral high ground.  A young Andrew Jackson (hero of the Battle of New Orleans in the War of 1812 and America’s seventh president) even said, “In the long run, I am afraid the Whigs [the Patriots] did not lose many points in the game of hanging, shooting and flogging.” 

It was a merciless guerilla war in the South.  And they did kill wholesale.  Because that’s the only way to win a civil war.  You kill fighting men until there are not enough of them left to fight back.  And the fighting was not always honorable.  The British captured Jackson in a Waxhaw meetinghouse.  When a body of Tories dressed as locals advanced ahead of a body of Redcoats.  The trick worked.  They captured eleven.  And a British officer gave Jackson scars that would leave him a lasting hatred of the British for the rest of his life.  The officer demanded that Jackson clean his boots.  Jackson claimed he was a prisoner of war.  And that the British officer should treat him as such.  The officer saw him as a partisan traitor.  And brought his sword down on Jackson’s head for his insolence.  Jackson tried to shield his head with his left hand, leaving two deep scars.  One on his head.  The other on his hand.

The Grand Battle George Washington longed for was before him at Yorktown 

The changing fortunes of war in the South often changed the fighting spirit of those fighting the war.  On both sides.  British deserters joined the American lines.  And American deserters joined the British lines.  The Americans serving in the Continental Army were still hungry, thirsty and half-naked.  The Battle of Eutaw Springs was the last big battle in the Deep South.  And it almost ended in a route of the British.  Had not the hungry, thirsty and half-naked Americans stop their pursuit when they entered the abandoned British camp.  As they enjoyed the spoils of war the British returned.  And another 3 hours of bloody fighting continued.  In the sweltering heat of the Deep South.  By the time it was over the Americans lost.  The American casualties were just over 500 (about 25% of their force).  The British lost over 800 (about 40% of their force).  A costly victory for the British.  Despite this loss the Americans were in control of the lower south.

Up until this point Virginia had seen little of the ravages of war.  Lucky for them as Virginian governor Thomas Jefferson, though a brilliant thinker, was a pretty poor wartime governor.  Washington urged him to prepare some defenses.  But he didn’t.  General Cornwallis urged General Clinton to abandon New York and conquer Virginia.  An action he believed would win the war.  Clinton refused for awhile.  But finally agreed to send a force under America’s greatest traitor.  Benedict Arnold.  A new brigadier general in the British Army.  Who landed unopposed in Virginia.  And moved at will.  Tarleton’s cavalry came up from the south to join Arnold.  Entered Charlottesville.  Captured members of the Virginia legislature with Jefferson just escaping in the nick of time.  With the addition of British reinforcements in Virginia Washington sent a force under Lafayette to Virginia to help with their defenses.  A perfect storm was gathering for the British in Virginia.

Cornwallis himself entered Virginia.  And futilely gave chase to Lafayette.  Cornwallis wanted Clinton to commit a major force to the conquest of Virginia.  Clinton wanted the few thousand troops he sent to Virginia returned to New York.  Clinton ordered Cornwallis to hold a position on the Chesapeake with his reduced force.  Cornwallis thought that order was stupid and ordered a withdrawal of his own forces.  Clinton countermanded that order.  Insisting that he pick a place and defend it.  Cornwallis picked Yorktown.  With his back to the sea.  And hopefully the British fleet.  While he moved towards Yorktown the hunter became the hunted.  Lafayette harassed him all the way.  Worse, the French were also on their way.  And the French fleet would engage the British fleet and defeat them.  And a French force would join Washington who came down from New York.  Finally able to abandon his Fabian strategy.  The grand battle he longed for was before him at Yorktown.  Cornwallis was trapped.  And would surrender his Army.

With the surrender of a second British army the initiative went to the Americans.  To continue the war would cost far more British blood and treasure.  But that price was too high.  The British wanted out.  Conceding that the Americans were indeed independent of British rule.  The delaying Fabian strategy, though costly, had worked.  As they would again in another American war.  Where the Americans instead would be fighting on foreign land.  In a place called Vietnam.  Only the Americans would suffer the same fate the British did in the American Revolutionary War.  As a Fabian strategy can be a very effective strategy.  As long as time is on your side.

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Keynesians, Gold Standard, Consumer Price Index, Money Stock, Nixon Shock, 1973 Oil Crisis, Gasoline Prices, Hidden Tax and Wealth Transfer

Posted by PITHOCRATES - April 24th, 2012

History 101

With the Increase in the Money Supply came the Permanent Increase in Consumer Prices that Continues to this Date

Keynesians hate the gold standard.  Because it puts a limit on how much money a government can print.  Keynesians believe in the power of government to eliminate recessions.  And their cure for recession?  Inflation.  The government prints money to spend in the private economy.  To make up for the decline in consumer spending.  But it turned out this didn’t work.  As the Seventies showed.  They printed a lot of money.  But it didn’t end the recession.  It just raised consumer prices.  Because there is a direct correlation between the amount of money in circulation and consumer prices.  As you can see in the following graph. 

 Source: M2, CPI

 The consumer price index (CPI) data comes from the U.S. Department of Labor.  The data is at 5 year intervals.  The CPI is a ‘basket’ of prices for a selection of representative goods and services divided by another ‘basket’ of prices from a fixed date.  The resulting number is a price index.  If you plot these for a period of time you can see inflation (a rising graph) or deflation (a falling graph).  M2 is the money stock (seasonally unadjusted).  M2 includes currency, traveler’s checks, demand deposits, other checkable deposits, retail MMMFs, savings and small time deposits.

The Breton Woods system established fixed exchange rates for international trade.  It also pegged the U.S. dollar to gold.  The U.S. government promised to exchange U.S. dollars for gold at a rate of $35/ounce.  Making the U.S. dollar as good as gold.  This set the rules for international trade.  Made it fair.  And prevented anyone from cheating by devaluing their currency to make their exports cheaper to gain an economical advantage in international trade.  The system worked well.  Until the Sixties.  Because of the Vietnam War.  And LBJ’s Great Society.  These increased government spending so much that the U.S. government turned to printing money to pay for these.  Which depreciated the dollar.  Making it not as good as gold anymore.  So our trading partners began dumping their devalued dollars.  Exchanging them for gold at $35/ounce.  Which was a problem for the Nixon administration.  For that gold was far more valuable than the U.S. dollar.  They could print more dollars.  But once that gold was gone it was gone.  So Nixon acted to keep that gold in the U.S.

On August 15, 1971 Nixon decoupled the dollar from gold.  Known as the Nixon Shock.  Reneging on the solemn promise to exchange U.S. dollars for gold.  And ramped up the printing presses.  Which you can see in the graph.  After August 15 the money supply began growing.  And continues to this date.  With the increase in the money supply came the permanent increase in consumer prices that, also, continues to this date.  In lockstep with the growth of the money supply.

Prior to the Nixon Shock Gasoline Prices were Falling at a Greater Rate than the Rate Consumer Prices were Rising 

Since August of 1971 the U.S. has maintained a policy of permanent inflation.  Which caused a policy of permanently increasing consumer prices.  Those high prices we complain about, then, are not the fault of greedy businesses.  They’re the fault of government.  And their easy monetary policy.  In fact, if it was not for government’s irresponsible monetary policy the high price we hate most would not be as high as it is today.  In fact, because of the efficiency of the industry bringing us this one product its price has not followed the general upward trend in consumer prices.  And what is this product?  Gasoline.  Which, apart from two spikes in the last 60 years or so has either been falling or holding steady in comparison to consumer prices.

 Source: CPI, Gas $/Gal

 These prices are from DaveManual.com.  And reflect generally the price at the pump over this time period.  Using at first leaded gasoline.  Then unleaded gasoline.  Using inflation adjusted average prices.  Then chained 2005 dollars.  These prices are not exactly apples-to-apples.  But the trending information they provide illustrates two major points.  The two spikes in gas prices were due to demand greatly outpacing supply.  And that even with these two spikes gasoline prices would be far lower today if it wasn’t for the government’s policy of permanent inflation.

Note that prior to the Nixon Shock gasoline prices were falling at a greater rate than the rate consumer prices were rising.  These trends stopped in the Seventies for two reasons.  The Nixon Shock.  And the 1973 oil crisis.  When OPEC punished the U.S. for their support of Israel in the Yom Kippur war by cutting our oil supply.  These two events caused gasoline prices to spike.  But then something interesting happened with these high prices.  It brought a lot of oil producers into the market to cash in on those high prices.  This surge in production coupled with a falling demand due to the U.S. recession in the Seventies caused an oil glut in the Eighties.  Bringing prices back down.  Where they flat-lined for a decade or so while all other consumer prices continued their march upward.  Until two of the most populous countries in the world modernized their economies.  India and China.  Causing a spike in demand.  And a spike in prices.  For it was like adding another United States or two to the world gasoline market.

Inflation is a Hidden Tax that Transfers Wealth from the Private Sector to the Public Sector

Keynesians love to talk about how great the economy was during the Fifties when the high marginal tax rate was 91-92%.  “See?” they say.  “The economy was robust and growing during the Fifties even with these high marginal tax rates.  So high marginal tax rates are good for the economy.”  But they will never comment on how instrumental the gold standard was in keeping government spending within responsible limits.  How that responsible monetary policy kept inflation and consumer prices under control.  No.  They don’t see that part of the Fifties.  Only the high marginal tax rates.  Because they don’t want to return to the gold standard.  Or have any restrictions on their irresponsible ways.

Keynesians believe in the power of government to manage the economy.  And they really like to tax and spend.  A lot.  But taxing too much has consequences.  People don’t like paying taxes.  And don’t tend to vote for people who tax them a lot.  Which is why Keynesians love inflation.  Because it’s a hidden tax.  The higher the inflation rate the higher the tax.  Because government also borrows money.  They sell bonds.  That we buy as a retirement investment.  But if there’s been a good amount of inflation between the selling and redemption of those bonds it makes it a lot easier to redeem those bonds.  Because thanks to inflation those bonds are worth far less than they were when the government issued them.  Even Keynes noted that inflation was a way to transfer a lot of wealth from the private sector to the public sector.  Without many people understanding that it was even happening.

If you ever wondered why it takes two incomes to do what your father did with one income this is why.  Inflation.  This never ending transfer of wealth from the private sector to the public sector.  Leaving us less to retire on.  Making it harder to save for our children’s college education.  Not to mention the higher cost of living that shrinks our real wages.  While they tax our higher nominal wages at ever higher income tax rates (income tax bracket creep is another inflation phenomenon).  Everywhere we turn the government takes more and more of our wealth.  All thanks to LBJ increasing the government spending (for his Vietnam War and his Great Society).  And Richard Nixon decoupling the U.S. dollar from gold.  Instead of doing the responsible thing.  And cutting spending.  But much like high taxes you don’t win any friends at the voting booth by cutting spending.  So thanks to them we’ve had permanent and significant rising inflation and consumer prices ever since.  And as a result a flat to a falling standard of living.  Where soon our children may not have a better life than their parents.  Thank you LBJ and Richard Nixon.  And thank you Keynesian economics.

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LESSONS LEARNED #69: “Democrats bank on the youth vote because they’ve lost the wise vote.” -Old Pithy

Posted by PITHOCRATES - June 9th, 2011

When America Changed

The youth movement during the Vietnam War destroyed LBJ.  And lost the Vietnam War.  The college protests.  The explosion in drug use.  Free love.  Race riots.  American terrorists bombing government buildings.  Timothy Leary.  Rock stars promoting drug use.  Dying from drug use.  And leading the youth movement in their anti-war, anti-establishment protests.  This youth was everything their parents weren’t.  It changed America forever.  And not for the better.

The problem with the youth is that they’re young.  They are inexperienced.  And don’t know much.  But when they learn a few things, look out, they then think they now know everything.  Thanks to some manipulative college professors who fed these kids’ intellectual vanity.  Told them that they could make a difference.  And then these kids set out to change the world.  Often with violent protest.  Mob violence.  Which was new in America.  The youth protested the Vietnam War because they were drafting the youth to fight it.  Or just because protesting was fun.  But their protests only extended the war.  For the Tet Offensive almost ended the war in 1968.  The Americans hammered the NVA and the Viet Cong.  Everywhere.  And yet Walter Cronkite took to television and said the war was lost.  Further inflaming the anti-war youth movement.  Riots at the 1968 Democratic Convention.  Protests at Kent State that ended in the shooting of 4 students by national guardsmen.  Sparking violent protests on college campuses everywhere.  Our enemies in Vietnam saw this and couldn’t believe what they were seeing.  And they learned something.  They didn’t need to win the war.  They just needed not to lose the war.  So they adopted a Fabian strategy.  And sacrificed their people until the Americans grew weary of killing them.  Which they did.  Some 7 years later.

These college students grew up and became teachers.  College professors.  And have been trying to change the world ever since.  By teaching their students to be like them.  Feeding these kids’ intellectual vanity.  Making them feel important.  That they, too, can change the world.  If they do as they did.

Tell the Youth what kind of Underwear you Wear and they’ll Vote for You

Walter Cronkite eventually admitted his liberal bias.  He was probably the first that went from reporting news to influencing events.  At least, the first that mattered.  For he was the most trusted man in America.  The transformation of the mainstream media soon followed.  Gone were the days of Brinkley and Huntley.  The days of passive news coverage was over.  And the point of no return was the Watergate scandal.  Never before did the media destroy a presidential administration.  Like they did with the Republican Richard Nixon.  The media bias was set.  And became a part of liberal politics.

It was a perfect match.  The youth movement.  And the media.  Together they would advance policy and influence elections.  The media would control the message.  And advance the liberal bias of public education.  Instilled by those radicals of the Sixties.  And you can see it really come together in the 1992 presidential campaign.  Where Bill Clinton ran against the incumbent George H.W. Bush (Read my lips; no new taxes).  Who had record approval ratings a couple of years earlier with the Gulf War victory.  He was so unbeatable that no ‘first string’ Democrat candidates entered the race.  Then a few things happened.  He made a deal with the House to raise taxes in exchange for future spending cuts.  The boob.  Democrats never follow through on spending-cut promises.  And Ross Perot.

Now, according to the exit polling, Ross Perot took an equal amount of votes from each candidate.    Maybe he did.  Maybe his third-party candidacy didn’t help Clinton by taking votes away from Bush.  But he did do something else.  There was a reason Clinton wasn’t a ‘first string’ candidate.  He was flawed.  There was some dirt in his past.  Some scandal.  But no one heard about.  Because the little guy with the big ears who talked funny and had all those charts and graphs just fascinated everyone.  It took the attention away from Clinton’s past.  With a kind assist from the media.  Who with their liberal bias helped their liberal candidate.  And then Clinton went on MTV and told the kids what kind of underwear he wore.  And played the saxophone on the Arsenio Hall Show.  He was a hit with the kids.  The 18-24 demographic made up 11% of the votes.  And that 11% split 46%-33% in favor of Clinton with 21% going to Perot.  Did the youth vote push Clinton over Bush?  They definitely helped.  But more important is the lesson learned.  There are a lot of youth voters.  Historically it hasn’t been easy getting them to the polls.  Because they’re kids who don’t think about politics or elections.  They’re thinking about having fun.  But if you can get them to the polls, and if you can get them to vote for you, they can make a difference.  And Clinton showed how to do it.

Organizing the Youth Vote to Compensate for a Lack of Qualifications

In 2008, the Democrats ran the most unqualified candidate for president they ever ran.  Barack Hussein Obama.  A man that never had a real job.  Or any executive experience.  He had no foreign policy credentials.  The only thing on his resume was a partial term as a U.S. senator.  And a stint as a state senator.  Oh, and he was a community organizer.  Young, inexperienced and wholly unqualified, he was the man to beat.  It should have been an easy task.  But the Republicans let the media pick their candidate.  During the primaries the media gave John McCain glowing coverage.  Said he was what the Republican Party needed.  Someone who can reach across the aisle.  And govern as a moderate.  Of course, they were just blowing smoke.  Because the last thing they wanted was a conservative running against Obama.  Because they were sure that in a campaign between two moderates, they could get their moderate elected.

What Obama lacked in experience and qualifications he made up in organizing a campaign.  He was an excellent candidate.  And ran an excellent campaign.  He tapped into that youth vote.  Who were fed up.  Never in all of their 18-24 years were they as upset as they were during the 2008 campaign.  The economy.  Affordable housing.  Jobs.  Health care.  The Iraq War.  Things that didn’t touch their lives at all while they were ensconced in their cozy college utopias, living off the generosity of mommy and daddy.  But Obama heard them.  And told them that he heard them.  Finally, someone who cared.  And someone who wasn’t George W. Bush.

The youth would be his foot soldiers.  Coming from Chicago, that’s something you need.  He called for volunteers.  And got volunteers.  Some 4 million.  And being the kids they were they knew how to use the Internet.  They knew how to surf.  How to design websites.  How to ask for donations.  And boy did they.  They left the old man (McCain) in the dust.  The Obama campaign was awash in cash.  Even after beating a very well connected Hillary Clinton in the primary.  It may have been her turn.  But Obama never got that memo.  Besides she was old.  And had baggage (i.e., Bill Clinton).  Obama was young.  And new.  He was everything and a bag of Skittles.  First time voters turned out in droves.  And voted for him 68% of the time.  In a year with a record turnout of youth voters.

Young and Dumb wins Elections

It’s difficult to teach an old dog new tricks.  So it’s important to teach the young what you want them to know.  For once they’re thinking ‘correctly’ it’ll be hard to change their mind.  Oh, sure, it’ll happen.  As they grow up and mature.  But you’ll get a few elections out of them before that happens.  And, if you’re lucky, maybe they’ll become a teacher.  Or a public sector worker.  Or a journalist.  But the sad reality is that a lot of these people will get jobs in the private sector.  Raise families.  And eventually become conservative. 

That’s why in every election there is a ‘get out the vote’ campaign.  To get as many fist time voters as possible.  Kids who are politically unaware.  Who know nothing about history or economics.  Blank slates.  Just waiting to be initiated.  Indoctrinated.  To become good Democrat voters.  Because America is a center-right country.  And the majority of people work in the private sector.  Are politically aware.  They know history and economics.  And vote conservative.  Which is why the Democrats don’t want to campaign against a conservative candidate.  And will use the media to get as many John McCains as possible as their Republican candidate.  Because history has proven that a John McCain and a large youth vote will get a Democrat candidate elected.

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FUNDAMENTAL TRUTH #64: “National security can be a messy business. Especially when your enemies don’t play by the same rules.” -Old Pithy

Posted by PITHOCRATES - May 4th, 2011

Adolescent Boys Lie to get what they Want

“But I do love you,” he said.

“Do you really?” she said.

“Oh, baby, I do.  I really, really love you,” he said.

“That’s good because I really, really love you,” she said.  “Do you have any condoms?”

“No,” he said.  “But what do condoms matter when we’re in love?  Especially when that love will be forever?”

“Oh, baby, I love you so much,” she said.  “My parents just don’t understand.  They’re just so out of it.  They don’t understand love.  True love.  Like what we have.” 

A month later she found herself pregnant.  Had gonorrhea.  And her best friend coincidentally had gonorrhea, too.  And her ‘forever’ love?  Gone.  Not ‘gone’ gone.  But gone as in not there with her.  There’ll be a trickle of child support.  But she will raise her baby with the help of her ‘out of it’ parents.  Proving what liars boys are when it comes to love.

The preceding was a work of fiction.  Any resemblance to anyone past or present is purely coincidental.  The moral of this story?  Boys lie to get what they want.  Often with a total lack of concern for the potential consequences. 

Hitler Lied to get what he Wanted

But it’s just not young men with raging hormones that lie.  Others lie for far more sinister reasons.  Adolf Hitler lied when he said that the Sudetenland in Czechoslovakia was his last territorial claim.  And Neville Chamberlain believed him.  Said he and Adolf Hitler reached an agreement.  He had a piece of paper.  And Hitler’s word.  A solid piece of diplomacy.  Of course, anyone looking at a map could see East Prussia lying on the far side of the Danzig Corridor.  East Prussia was German territory.  But Germans traveling on land to and from there had to cross Polish territory.  And with German-Polish history being what it was, there was no way that this was going to end well for Poland.  Especially after Hitler took the rest of Czechoslovakia.  And signed a nonaggression pact with the Soviet Union.  The Nazis had Poland surrounded.  But the Sudetenland was his last territorial claim.  Honest.

Yeah, well, he lied.  For it was in Poland that Heinz Guderian introduced the world to blitzkrieg.  The original shock and awe.  Airpower cleared the way for armor assaults which cleared the way for mechanized infantry.  It was fast.  Guderian’s columns advanced deep into Polish territory like a hot knife through butter.  All the while the Soviets protected the back door.  Who agreed to split up Poland with the Nazis.  So the Soviet Union was complicit in starting World War II.  Chamberlain was stunned.  As Stalin would be later when Hitler reneged on their agreement, too.  And unleashed blitzkrieg on the Soviet Union.  Proving what a big liar Adolf Hitler was.

The preceding was actual history.  Any resemblance to anyone past or present was purely intentional.  The moral of this story?  People lie to get what they want.  Often with a total lack of concern for the potential consequences. 

Communists Lie to Oppress their own People

The communists are a sneaky bunch.  The ultimate pragmatists.  The ends justify the means.  They’ll lie, steal and cheat to get whatever they want.  Even make a deal with Adolf Hitler.  Even though Nazis and Bolshevists were bitter enemies.  Not so much in a philosophical sense as they were in practice very similar.  But in a political sense.  Before Hitler secured his power there were Bolshevists vying for that power in Germany.  So Hitler checked the spread of the Bolshevist Revolution in Germany by blaming them for some of the crimes he committed.  Like the Reichstag Fire.  So there was little love between Nazi Germany and the Soviet Union.  But Stalin couldn’t pass up all that Polish territory.  Or getting the Baltic States back.  Hitler knew how to sweet-talk Stalin.  Offered him exactly what he wanted.  Just like a boy with raging hormones will sweet-talk a girl to get what he wants.  Blinded for the moment by lust.  The boy blinded by his sexual lust.  Stalin blinded by his power lust.

Like the Nazis, the communists had a closed society.  There was no free press.  Instead, they used propaganda.  They lied to their people.  And their school children.  Rewrote history.  Soviet children grew up believing that the Western life was horrible.  Decadent.  And hungry.  The propaganda machine reported the great success of the latest 5-year plan while talking about abject poverty and famine in the West.  Also, that the West were war mongers.  Trying to spread their brutal imperialism against peaceful communist countries everywhere.  Of course, the Soviet people couldn’t see for themselves.  They couldn’t leave the USSR.  They couldn’t watch Western television.  Or read Western newspapers.  So they had little reason not to believe the lies.

But communism didn’t bring out the best in people.  In a society where everyone was ‘equal’, no one worked harder than the next guy.  So Soviet society lagged Western society.  And the only way they could advance Soviet society was through espionage.  They stole what they could from the West.  With a vast network of spies.  Working outside the Soviet Union.  Which presented a bit of a problem.  These spies saw the truth.  And that everything they learned in the Soviet school system, on Soviet television and in the Soviet newspapers were all lies.  The Soviets lost quite a lot of spies who defected to a better life in the West.  So the Soviets had to fix that problem.  By bribing the spies with a life of luxury far greater than the average Soviet ever could imagine.  Or holding family members hostage.

Cheaters Prosper unless others Cheat, Too

Putting all of this together and you can see how they complicate diplomacy.  And national security.  First of all, people lie.  As do governments.  To their own people.  And to other nations.  Which can make getting the truth a little more difficult.  Or telling the truth to your people.  In the Vietnam War, for example, the Soviets were supporting and supplying the North Vietnamese.  A lot of that war material made it to South Vietnam via the Ho Chi Minh Trail.  Which wound through Laos and Cambodia.  Countries we were not at war with.  They were ‘neutral’.  But our enemies violated their neutrality.  They brought war material through these neutral countries into South Vietnam where they used them to kill both civilian and military personnel in South Vietnam.  And Americans.  So what do you do?  Ignore this?  Let the enemy bring in war material unmolested via the Ho Chi Minh trail?  Or do you try to stop it?

Well, the Soviets used the West’s adherence to international law against them.  The Soviets, on the other hand, violated this law and lied that they were not.  But the Americans just couldn’t do this.  At least, they couldn’t do it officially.  To protect American security interests (our South Vietnamese allies and our troops in South Vietnam), America had to cheat, then.  A little.  We call them black operations (i.e., black ops).  Unofficial missions.  Missions that ‘never happened’.  Where Special Forces, CIA forces or even small units of the regular military (sometimes unknown to them) violate neutral territory to combat our enemies who were themselves violating these neutral territories.  Of course, when these missions became public, the media had a field day.  Protests erupted on college campuses.  Providing great aid and comfort to America’s enemies.  And ultimately to the abandonment of South Vietnam.  And if you’re wondering how all that turned out just look at a map today.  Where there is no South Vietnam.

American football is an exciting game to watch.  Primarily because each team plays by the same rules.  If one team could cheat no one would watch.   Because everyone would know that the cheater would win.  So they enforce the rules.  But you can’t do that in international diplomacy.  Because the international referee (i.e., the UN) is impotent.  They can’t stop cheaters.  So cheaters prosper.  Unless others cheat, too.  As in the world of black ops.  Where only cheating can keep the game fair.

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Obama Looking less George W. Bush and more Jimmy Carter/LBJ

Posted by PITHOCRATES - April 1st, 2011

Construction Spending down despite all those Shovel-Ready Projects

Some days it just sucks to be Obama (see February construction spending down 1.4% by Steve Goldstein posted 1/1/2011 on MarketWatch).

February construction spending fell 1.4% to a seasonally-adjusted annual rate of $760.6 billion, the lowest level in more than 11 years, the Commerce Department said Friday. January spending was revised lower to a decline of 1.8% from a previous estimate of a 0.7% fall. Economists polled by MarketWatch had forecast a 0.1% rise.

Construction is the last to enter recession.  And it’s the last to emerge from recession.  Because it takes a long time to go from design to completion.  But after all those shovel-ready projects bought and paid for by the stimulus bill back in 2009, construction should not be the worse it has been in 11 years.  That means the economy is still a mess.  And it may very well get messier.

First bad Fiscal and Monetary Policy, then Inflation

Yes, we’re still mired in recession.  But recession may soon be joined with something we haven’t seen since the 1970s.  At least, not during a recession (see Fed Is Likely to Raise Rates By End of the Year: Lacker by CNBC.com and Reuters posted 1/1/2011 on CNBC).

Richmond Federal Reserve President Jeffrey Lacker told CNBC Friday that he “wouldn’t be surprised” if the central bank raised interest rates before the end of the year…

He said his greater concern is rising inflation and controlling it in the next nine months “will be critical for us.”

Jimmy Carter must be smiling.  Many say he was the worst president.  Mainly because of the stagflation of the 1970s.  High unemployment and high inflation.  Normally, you don’t get the two together unless you really managed to make a mess of the economy.  And now it looks like Obama may go all Jimmy Carter on us.  We still have record unemployment.  And the Fed, while they’re still planning to go ahead with more quantitative easing in June:

At its last meeting, the Fed voted unanimously to continue as planned with its $600 billion bond purchase program, designed to lower interest rates and stimulate growth, which is scheduled to end in June.

is already talking about battling the inflation their previous actions have given us.  Which they did in a futile attempt to counter Obama’s job-killing fiscal policies.  No doubt Carter is grateful he has lived to see this day.  When another president has ruined the economy greater than he did.

TARP bails out Libyan Owned Bank

But it gets better.  For Carter, that is (see Libya-Owned Arab Banking Corp. Drew at Least $5 Billion From Fed in Crisis by Donal Griffin and Bob Ivry posted 1/1/2011 on Bloomberg).

Arab Banking Corp., the lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the U.S. Federal Reserve in the 18 months after Lehman Brothers Holdings Inc. collapsed.

The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion — while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday. In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion…

Arab Banking reported a loss of $880 million in 2008 as it took a $1.1 billion charge tied to structured investment vehicles and derivative products known as collateralized debt obligations. Arab Banking recovered during the next two years, posting profits totaling $265 million.

So, Arab Banking Corp., part-owned by the Central Bank of Libya, the country we’re currently bombing now to ‘encourage’ regime change, was ‘bailed out’ in our TARP program.  That hurts in so many ways.  Our tax dollars that our Congress authorized to purchase trouble assets (i.e., all those Fannie Mae and Freddie Mac subprime mortgages) not only bailed out Obama’s friends on Wall Street, they bailed out foreign banks.  Even helped a Libyan dictator.  Who we’re now trying to ‘accidentally’ kill.  I mean, you can’t make this stuff up.  Meanwhile, Carter looks like a better president with each day that passes by.  Who’d’ve thunk it?

Liberal Base says Obama is Worse than George W. Bush

And speaking of that Libyan…thing…that’s not a war but has all the bombing and killing of a war…how’s that going?  Not so good with the president’s base (see Liberals outraged by Libya intervention posted 1/1/2011 on UPI).

Liberal Democrats, key to Barack Obama’s election as U.S. president, are some of the loudest critics on his strategy on Libya, a review of reaction indicates…

“In two years we have moved from President [George W.] Bush’s doctrine of preventive war to President Obama’s assertion of the right to go to war without even the pretext of a threat to our nation,” Rep. Dennis Kucinich, D-Ohio, an anti-war liberal, said Thursday during a House floor speech. “This is a clear and arrogant violation of our Constitution. Even a war launched for humanitarian reasons is still a war — and only Congress can declare war.”

Rep. John Conyers, D-Mich., said Congress and the White House have argued for years over the division of power in wartime, but “the Constitution grants sole authority to the Congress to commit the nation to battle in the first instance.”

That sounds like they’re saying that Obama is worse than George W. Bush.  Wow.  At least Bush had the pretext of weapons of mass destruction.  What’s Obama got?  Well, had he not acted, there may have been another civil war in the world.  As bad as that is, it isn’t an imminent risk to American security.  Which means the president did not have the Constitutional authority to do what he did.  Unlike George W. Bush in Iraq.

The Military doesn’t want Obama’s Libyan War

So he’s losing his liberal base.  But he’s still got the military establishment, doesn’t he?  As the Left well knows, they don’t care about right or wrong.  They just like to kill people and blow things up.  Right?  Not exactly.  You see, actually knowing a thing or two about war, they are not all that eager to go to war (see U.S. Military Not Happy Over Libya by Leslie H. Gelb posted 1/31/2011 on The Daily Beast).

Pentagon civilian leaders and the military brass see nothing but trouble looming as the Obama administration takes one step after another into the Libyan morass. The next step appears to be arming the Libyan rebels, a move that would inevitably entail pressures to send U.S. trainers and even more potent arms—and a move that Defense Secretary Robert Gates flat-out rejected in testimony before Congress on Thursday. “What the opposition needs as much as anything right now is some training, some command and control, and some organization,” Gates said. As for providing weapons, that is “not a unique capability for the United States, and as far as I’m concerned, somebody else can do that.”

Libyan morass?  Wow.  That’s some heavy criticism.  That’s the kind of language they used back in the day of the Vietnam War.  Which was an unwinnable morass.  Interesting, too, that liberal presidents with aggressive domestic agendas created both of these morasses.  But can Obama win his war?  Even though LBJ couldn’t win his?  Or will Obama follow LBJ’s example and not seek nor accept his party’s nomination for a second term as president?  Guess time will tell.

U.S. aircraft took the lead in junking a good chunk of the Libyan Air Force and launched devastating attacks against Libyan tanks, artillery, and other ground forces. Despite the severity of these attacks, Libyan forces survived, regained the offensive, and are now moving back toward rebel strongholds in eastern Libya. And the expectation of U.S. intelligence is that without having to face U.S. air power, Gaddafi’s troops will build further momentum. So, U.S. military officials haven’t stopped worrying about being dragged yet again into the air war.

You know, this is a lot like the Vietnam War.  Every time we pulled back the enemy advanced.  Then we’d pound them back with our superior airpower.  Until Congress stopped paying for that superior airpower.  And then you know what happened?  No?  Not familiar with our actions to protect South Vietnam?  Okay.  Look on a current map for South Vietnam to find out how that turned out.  But don’ spend too much time looking for it. Because it’s not there anymore.

The rebels won’t be able to use most arms, even relatively simply ones like anti-tank rockets and rifles, without extensive training…

Remember, underneath everything happening now are the two driving goals that President Obama set: to protect populations and to oust Colonel Gaddafi. In all likelihood, U.S. coalition partners cannot achieve these goals without U.S. jets resuming combat missions. Even with more U.S. air power, it probably won’t be possible to stop Gaddafi without using some coalition ground forces. So, pressures to do more and more will continue to lurk. All the Pentagon can do, then, is to raise tough questions (Who are those rebels we’re determined to help, could they be Muslim extremists?) to diffuse pressures on the U.S. military to do more.

If you ever wondered how Vietnam happened, here’s a good teachable moment.  JFK sent in military advisors to train the Army of the Republic of Vietnam (ARVN).  These were the ‘good guys’ in South Vietnam.  But when the very well trained and well supported North Vietnamese Army (NVA) threw them back we needed more than advisors.  We started supporting the ARVN.  Then the ARVN started supporting us as we took over more and more of the war.  Next thing we knew hundreds of thousands of U.S. ground troops were fighting it out in the jungles of Vietnam.  And the rest is history.

Barack Obama makes Jimmy Carter look Good

The last month or so hasn’t been too good for our president.  The economy is still mired in recession.  Inflation is about to join those high unemployment numbers to give us some good old-fashioned Jimmy Carter misery.  Our taxpayer TARP money found its way to Libya.  Instead of buying our troubled assets.  The Liberal base is abandoning him.  The Libyan war is less Constitutional than Bush’s Iraq War.  And appears about as winnable as the Vietnam War.

Yup.  Sucks to be him.  When he’s not on vacation, that is.

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LESSONS LEARNED #58: “Presidents with aggressive domestic agendas tend to have inept and naïve foreign policy.” -Old Pithy

Posted by PITHOCRATES - March 24th, 2011

Social Security:  A Fiscal Disaster just Waiting to Happen

FDR’s New Deal programs were an abject failure.  Nothing he tried ended the Great Depression.  Proof positive that Keynesian Economics doesn’t work.  But this Britain infatuated the world.  Many still cling to the teachings of Keynes.  Because he empowered Big Government.  And people in government love that.  But government is pretty inefficient.  And not very good at doing things.  Take Social Security, for example. 

It started as a payroll tax of 1%.  They argued it was a paltry price to pay to help the disabled and retired.  Of course, the actuaries never saw birth control and abortion coming.  So as the population aged, the birthrate declined.  With the boomers starting to retire, the great pyramid inverted.  More people are collecting than paying in.  Today the tax rate is 6.2%.  That’s 6.2 times the FDR rate.  Which is an increase of 520%.  The federal government has increased the rate 20 times to save the program from bankruptcy.  And, guess what?  It’s STILL going bankrupt.  It’s one fifth of the federal budget.  And it keeps getting bigger.  And it’s such a political third-rail that no one will touch it.  Taxpayers will have to pay so much in taxes that they will have to live a very austere life to pay for people they don’t even know who are collecting far more than they ever paid in.  Because, according to the actuaries, people were just living too long.  That’s another thing they never saw coming. 

In 1937, the average lifespan was 60 years.  The retirement age was 65.  So, in other words, the average social security beneficiary would be dead for approximately 5 years before they were eligible to collect Social Security.  Now that’s how you keep a program solvent.  Make sure that most of the people paying into it die before they have a chance to receive benefits.  Today the average lifespan is about 78 years.  The retirement age is 67.  So the average retiree will collect benefits for approximately 11 years BEFORE he or she dies.  The actuaries NEVER envisioned this.  Damn the American health care system and their miracle drugs.  We’ve never lived longer.  Or burdened the government more.

FDR was a domestic policy disaster.  He ruined this country.  Any objective analyst would agree.  But we still love him for getting us through the dark years of World War II.  Of course, much of the world doesn’t for his gift of the Cold War to these oppressed people.

FDR loved Joe Stalin, Joe Stalin walked all over FDR

In the 1930s, there was some serious government tinkering going on with economies.  FDR in the USA.  Hitler in Germany.  Mussolini in Italy.  And Joseph Stalin in the Soviet Union.  FDR was on the same page, especially with Mussolini and his beloved Joseph Stalin.  He loved these guys.  Until they went rogue.  FDR had no problem hating Germany.  He was never a fan of the country.  But when Germany and the Soviet Union entered into a nonaggression pact to divide and conquer Poland, thus launching World War II, it broke his heart.  He and all his New Dealers were devastated.  Uncle Joe was the model they wanted to copy.  They loved this man.  And what he was doing in the Soviet Union.  Acting bold without a pesky Congress hindering him.  They loved him so much that they didn’t try all that hard to hunt down the Soviet spies within the FDR administration.  And there were plenty of them to hunt down.

But then God answered FDR’s prayers.  Hitler launched Operation Barbarossa, a massive invasion of the Soviet Union.  This part of the war became hell on earth.  The Eastern Front.  There cruelty knew no bounds.  Scorched earth policies.  And genocide.  Hitler’s SS did most of these acts of barbarism.  And the dreaded Einsatzgruppen took systematic murder to new heights.  The Eastern Front saw the worst cruelty of man.  But there was a bright spot.  For FDR.  He could welcome Uncle Joe back into the fold.  And did. 

Roosevelt was a master diplomat.  He could charm the pants off of anyone.  He had a gift.  And it filled him with great pomposity and reckless arrogance.  People warned him about Stalin.  And Soviet Communism.  But FDR poo pooed them.  He said he could talk to Uncle Joe.  Reason with him.  Give a lot and ask for nothing.  And he did.  FDR thought Stalin would then ask for nothing more and work with him in establishing world peace.  Just like a typical progressive/liberal.  And how did that work out?  Not only did the Red Army NOT pull out of occupied countries, they tried to occupy more.  Soviet Communism took Eastern Europe, tried to take Turkey and Greece and pushed into Iran.  We pushed some of these pushes back.  But the Cold War was on.  FDR had given so much that the Soviets had control over huge populations, condemning them to the misery of life behind the Iron Curtain.  And suffer they would for 44 long years.

Despite the fiscal carnage and world misery FDR left in his wake, he is still loved and adored by those on the Left.  People as pompous, arrogant and naïve as he.  Who still want to do things the Roosevelt way.  Despite the unmitigated disaster the FDR way turned out to be. 

Mismanaging Medicare/Medicaid and the Vietnam War

We can best describe LBJ‘s Great Society as doubling down on FDR’s New Deal.  And it was as big a disaster as the New Deal was.  LBJ was going to end poverty and racial injustice.  And pour federal money into education to make it better.  He failed.  Based on the Left’s attacks on the Right, we’re still beset by poverty and racial injustice.  (Even though we elected a black president.  Go figure.)  And that the teacher unions are constantly going on strike to get more money.  For the kids, of course.  And if we still have these problems it can only mean one thing.  The Great Society failed.

Included in the Great Society were Medicare and Medicaid.  Health insurance for the elderly and the poor, respectfully.  Currently, this is another 1/5 of the total federal budget.  And it has the same problems as Social Security has.  A declining birthrate and a growing elderly population that is living longer.  The actuaries crunched their numbers before the explosion of birth control and abortion.  So their projections are just as bad as FDR’s were.  The tax rate went from 0.35% to 1.45%, and increase of 314%.  Unlike Social Security, the death rate never ran in the black for Medicare/Medicaid.  From the get-go people were living 3 years beyond the average retirement age, consuming health care benefits.  Now the average American is living 11 years into retirement.  And a lot of them aren’t doing that by a healthy diet and exercise.  They’re doing it by consuming vast amounts of health care benefits.   LBJ took the problems of the New Deal and multiplied them by ten.  The cumulative effect of these two programs crashed the economy into stagflation and misery in the 1970s.  And if that wasn’t bad enough, he pushed the nation close to civil war by his mismanagement of the Vietnam War.

JFK got us into Vietnam.  But Johnson expanded our involvement.  And tried to manage it from Washington.  With the Whiz Kids left over from JFK.  A bunch of poindexters who tried to run a war by looking at numbers in columns.  Body counts.  And restrictions on the rules of engagement.  It was a horrible way to run a war.  It just prolonged it.  Created more American casualties.  And empowered our enemy.  Can’t bomb the North.  Can’t bomb their supply routes (i.e., the Ho Chi Minh Trail).  We did everything we could to help the enemy by giving them safe sanctuaries up the ying-yang.  And when we had a chance to deliver a knockout punch after the failed Tet Offensive, we did NOTHING.  Partly because Walter Cronkite said the war was lost.  Partly because of the hippies protesting on our college campuses.  And, of course, the race riots.  LBJ couldn’t understand it.  He had given so much with his Great Society and yet people didn’t love him.  All because of that damn war in Vietnam.  JFK’s war.  How he wished they never went there.  It was a distraction to his beloved Great Society.  And it was a bitch to pay for. 

Bad Domestic Agendas, Bad Foreign Policy

Unlike FDR, LBJ could not win his war.  Of course, FDR didn’t have hippies who hated their country protesting against him.  Just a bunch of communists in his administration who were simpatico with his Big Government view.  Because of Vietnam, though, the Left would never have the same fond feelings for LBJ as they do for FDR. 

Their foreign policy has made the world a less safe place.  FDR gave us 44 years of Cold War.  And LBJ weakened the United States by his failure in Vietnam.  Made us a paper tiger.  Made our enemies not fear us anymore.  They started taking chances.   Doubting our will to respond to their aggression.  Or, if we did, they figured we would just cut and run after a few casualties.  And that has been their strategy since.  Not to win.  But to make us quit.  By making us bleed.

Following World War II we had great prosperity.  Peace.  And happiness.  The 1950s.  Following Vietnam, we had stagflation and misery.  High crime rates.  Drug infestation and abject poverty in our big cities.  Abortion and birth control.  The 1970s.  All this despite the programs of LBJ’s Great Society that were to end all those woes.  And with the declining birthrate, the fiscal problems would only get worse.

Their domestic programs are pushing the nation ever closer to bankruptcy.  There appears to be no solution to the damage they’ve done.  Or will do.  Social Security and Medicare/Medicaid will either bankrupt the country.  Or ignite civil unrest as benefits are slashed.  Neither will be good for the country.  But this is what we get from presidents with aggressive domestic agendas.  Fiscal crises.  Domestic unrest.  And an unsafe world.

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LESSONS LEARNED #37: “The Decriminalization of Drugs. Damned if you do. Damned if you don’t.” -Old Pithy

Posted by PITHOCRATES - October 28th, 2010

Drugs are Killing Some of our Kids’ Cool Celebrity Role Models…and Some of Our Kids

Kids going through adolescence look up to role models.  Celebrity role models who look cool.  So they can aspire to that level of cool.  To have more friends.  Be popular.  To be popular with kids of the opposite sex.  And nothing does that like behaving like a celebrity.  Dressing like them.  Smoking like them (Joe Camel didn’t make kids smoke; movie stars and musicians did).  Having sex like them (in public like Alanis Morissette sings about in You Oughta Know).  And getting high like them.

Black Sabbath fired their front man Ozzy Osborne for his excessive drug use.  Steven Adler was fired from Guns n’ Roses for his excessive drug use.  Adler used the same drug cocktail that killed John Belushi, Chris Farley, River Phoenix and Jean-Michel Basquiat, to name a few.  One of Adler’s speedballs, though, gave him a stroke and left him with a speech impediment.  Osborne?  It’s hard to see or hear him and not think ‘drugs’.  Keith Richards, too.  (Some claim that it’s a miracle that either has lived so long.)  Amy Winehouse’ irregular heart beat resulted from a long use of cocaine.  John Entwistle died from a cocaine-induced heart attack.  Ol’ Dirty Bastard died from a cocaine & prescription drug induced heart attack.  Heath Ledger died from an accidental overdose of a prescription drug cocktail (oxycodone, hydrocodone, diazepam, temazepam, alprazolam and doxylamine).  Bradley Nowell died from a heroin overdose just before Sublime’s major label album debut (which included three hits).  Danella Westbrooke lost the cartilage in her nose (and her profile) due to the massive amounts of cocaine she sniffed.  And there are a host of other celebrities whose past drug use is catching up to them in their old age.  Such as David Crosby’s liver disease.  His liver transplant resulted from his many years of drug abuse.

These are some expensive black market drugs.  But this isn’t a problem if you have a lot of money.  If these drugs were decriminalized, they would be cheaper.  And much more plentiful.  Meaning that they wouldn’t be limited to the rich and famous.  If they were less expensive, kids starting their drug exploration wouldn’t have to limit their exploration to the less expensive stuff (stealing from their parents’ medicine cabinet, sniffing butane, smoking marijuana, etc.).  They could broaden their horizon.  And why not?  They’re going to do it anyway.  And not everyone becomes an addict.  Or dies.

The British East Indian Company Used Indian Opium to Fix Their Balance of Trade with China

In the 19th century, mercantilism ruled.  It was all about balance of trade.  Nations wanted to export their goods.  And import gold and silver that paid for those goods.  Both Great Britain and China pursued these policies.  This became a problem for Great Britain whose people grew very fond of Chinese silk and porcelain and other Chinese exotic goods.  But the Chinese weren’t buying anything British.  Great Britain was importing more than she was exporting to China.  This meant there was a net silver flow from Great Britain to China.  And this wasn’t good mercantilism.  For the British.  It was very good mercantilism for the Chinese.  The British needed something to sell to the Chinese.  Something that only they could sell so the Chinese would have no choice but to buy from Great Britain.  And the British East India Company had just the thing.  Indian opium.

And it worked.  It reversed the balance of trade.  Silver was leaving China at an alarming rate.  But it was also turning the majority of Chinese males near the coastal cities into junkies.  Business suffered.  The civil service suffered.  With less available to buy the standard of living fell.  A dysfunctional civil service compounded that problem.  Rampant opium use was undermining Confucian values.  The Chinese begged the British to destroy the Indian poppy fields.  The British replied that, with the huge Chinese demand for opium, if they didn’t sell it, someone else would.  It would only cost the British their lucrative trade.  It wouldn’t solve the Chinese opium addiction problem.

Well, that led to war.  Two of them.  The Opium Wars.  Neither of which ended well for the Chinese.  They lost a lot.  Chinese coastal cities became virtually British.  Hong Kong became British.  Trade favored the British and other foreign nationals.  It led to much bitterness and resentment.  And to the Boxer Rebellion in 1898 to throw the imperialists out of China.  Which didn’t work all that well either.  But the British did help the Chinese to break their opium addiction.  If the Chinese worked from within to reduce consumption, the British would cut back on their opium importations.  Opium use declined in China.  As did opium imports.  With the decline in consumption, no new sources of opium rushed to fill an unmet demand.

The Americans and the Russians to Collaborate over Afghanistan’s Poppy Fields, The Netherlands Making their Legalized Marijuana less Legal

Well, there are still poppy fields in Southwest Asia.  And a high demand for heroin not too far away.  In Russia.  And it’s killing them.  Literally.   Some tens of thousands die each year from overdoses.  The collateral damage (broken families, lost jobs, the spread of AIDS from shared needles, neglected children, etc.) from drug addiction probably touches 10 times that number.  And the drug trade crime kills who knows how many more.  From the poppy fields in Afghanistan through the Central Asian states into Russia herself, there is an explosion of violence for this lucrative drug trade.  How bad is it?  Russia may return to Afghanistan to help the Americans in eradicating these poppy fields and shutting down the drug laboratories.  (For those who do not know, the Russian/Soviet war in Afghanistan was Russia’s Vietnam War.  And, let us not forget that both of these wars became proxy wars between America and the former Soviet Union.  So America and Russia working together in Afghanistan is a big thing).

Russia is even advising America against the ballot initiative in California to legalize marijuana.  Viktor Ivanov, Russia’s top drug official, went to Los Angeles to campaign against the ballot proposal.  He warned that legalizing marijuana will start a downward spiral into drug addiction.  We can understand heroin.  But marijuana?  A soft drug?  The Netherlands have long had legalized marijuana there.  It works there.  Why not in California?

Well, Netherland has had its problems with its marijuana coffee shops and cafes.  There’s been trouble in their border areas.  Tourists coming in just to get high.  And a lot of people have been going there.  Business is booming.  High demand.  Which have brought in crime as people vie to supply that demand.  There have been problems with school kids so they’ve banned these coffee shops/cafes within certain distances of schools.  And they’ve been selling a more potent cannabis, which is knocking the casual user on their ass.  Or impairing their motor skills.  And, with the rising amount of trouble from the drug tourists, they’re restricting sale to Dutch citizens only.  One other note.  Drug enforcement has been stepped up at Schiphol airport.  Why?  To counter a rising cocaine traffic coming in from the Caribbean. 

Drugs, Drug Wars and the War on Drugs Take their Toll as they Kill and Destroy

Kids are experimenting with drugs.  They’ll start with the softer stuff.  Like in the Netherlands.  But they’ll probably move on to something more potent.  Like in the Netherlands.  There appears to be a progression.  From less dangerous drugs to more dangerous drugs.  You can bet that John Belushi, Chris Farley, River Phoenix and Jean-Michel Basquiat, et al, started their drug use with something less dangerous than cocaine-heroin speedballs.  And look at them now.  Of course you can’t because their dead and buried.  But you get the point.

Epidemic use in China destroyed a millennium-old culture.  Ended a dynasty.  Caused multiple wars.  They finally kicked the habit.  With the help of the British (who helped give them the problem in the first place).  But the poppy fields just found new users.  In Russia.  And elsewhere.  It’s so bad that former enemies are joining forces on a former battleground to fight a new common enemy.  And the Russians are warning Californians not to legalize marijuana.  We’ve certainly come a long way from the days of the Cold War where the Soviets would have helped that initiative pass to help bring down their one-time enemy.

Drugs are a problem.  A big problem.  They kill and destroy.  Drug wars kill and destroy.  As does the war on drugs.  Damned if you do.  Damned if you don’t.  So what to do?  Well, imagine two worlds.  One where drugs are plentiful and cheap.  And one where no one uses drugs.  Which world you’d rather live in?  Which world do you want your children to live in?  I thought so.  And there’s your answer.

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