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At this moment,Fed Chair Bernanke is inching closer to “quantitative easing” or monetizing part of the national debt by using his agency's money creation powers to buy US Treasury bonds; this amounts to using an outmoded play-book to avert systemic deflation. He has hesitated for good reasons- the measure may or may not help the economy in the short term, but it certainly risks igniting a dangerous inflationary trend.

This all started, you may recall, when the movers and shakers of our financial system made the mistake of relying on monetized real estate assets as if they were the new gold standard.

We then experienced the comprehensive deflation of a single asset class, an overdue adjustment that could have been contained. Instead, policy makers vainly attempted to reverse the decline – postponing the inevitable adjustment – and worse, they took measures that had the effect of spreading the risk to the rest of the economy. This was like the fatal error of the infamous captain of an ocean-going ship who, when a single water-tight compartment is breached, decided to open all the rest to help the “victim compartment” recover.

This is why our ship is at risk of capsizing.

FOOLS' GOLD

A Cautionary fable for our times

Once upon a time, the kingdoms of the realm were under relentless pressure from their subjects to distribute more and more wealth at lower and lower cost. So the kings and queens all agreed to abandon the gold standard in favor of 'trust currency” issued by their royal banks. At the same time the kings and queens of the realm imposed a suffocating system of taxes, enforced wealth 'sharing', petty regulations and permits on the oppressed commercial and producing classes – these were the only people in the realm who were generating the real wealth. Eventually the system failed because the oppressed commercial and producing classes remained even more oppressed - except for certain under-performing royal favorites. Also, it failed because the realm's 'trust currency' was no longer trusted.

So the kingdoms of the realm secretly conferred: All agreed on a new currency backed by the next 'gold standard'; it was called 'condo-gelt. To be safe, all of the royals agreed to pass edicts in their respective principalities - “The law of supply and demand is hereby repealed”.

A period of tenuous and transient prosperity followed. Then one day, “condo-gelt” was exposed as a dramatically overvalued asset class, worth in the aggregate little more that fools' gold.

Once again the royal currency was no longer trusted and the entire economic system collapsed.

The commercial and productive classes demanded an end to the royal system of punitive taxes, enforced “sharing”, and all of the petty regulations of commerce. Some hotheads even demanded a reversal of the edicts repealing the law of supply and demand. The rebels were disparaged by the royals as “ignorant serfs” and “upstart rabble'.

[][][]

For the royals in this story you can substitute the Keynesian political elites of the West.

For “condo-gelt”, you can substitute the securitized mortgage assets, the bundled real estate instruments and other financial gimmicks that served to conceal the fact that Western governments and the “royalist” financial institutions under their political control were allowed to overextend the world economy on a debt platform held up by fantasy assets.

For those of us who still think that we in the liberal democracies have fully emerged from the royal system of elite privileges and top-down governance, the current crisis is a wakeup-and-smell-the-smoke moment.

For the idealists among us who still think that real wealth can be generated by fiat, or that the equal redistribution of poverty produces better results than the naturally unequal distribution patterns that attend any real wealth creation (not to mention the necessary risks) the current crisis is a brutal teaching moment.

For a longer discussion of our current predicament, download a copy of my article, “The Escape from Delusional Economics”, posted at http://www.jaygaskill.com/DelusionalEconomics.pdf , or read it on-line at http://www.jaygaskill.com/DelusionalEconomics.htm.

....and, yes, there really are positive solutions.

Stay tuned for “Breakout!”, to be posted here soon.

JBG

Jay B Gaskill is a California lawyer who served as the Alameda County Public defender before her left his “life of crime” to devote full time to writing. His profile is posted at www.jaygaskill.com/Profile.pdf .

Books by Jay B Gaskill currently available:

The Lost Souls Coffee Shop

The Stranded Ones

Both books are sold only as e-books by Amazon, Barnes and Noble, ireadiwrite Publishing and 10 other on-line book retailers. To locate a vendor, Google “Jay B Gaskill” and the book’s title.

Watch for the 2011 release of Jay Gaskill's new political thriller, “The Gaia Coup”.

As California goes, so goes the nation.

Even readers who are not particularly concerned about who wins the California governor’s race, the issue is important for one overriding reason. 

Saturday’s (October 8, 2010) New York Times spins the Brown campaign’s ‘Whitman is a “whore” gaffe’ in the context of an almost hagiographic paragraph, reprising Brown’s earlier post-Reagan governorship.

“A serious student and literal son of California government — his father, Edmund G. Brown Sr., was governor from 1959 to 1967 — Jerry Brown, now 72, has worked to throw off a past image as the bad boy who dated Linda Ronstadt and earned the sobriquet ‘Governor Moonbeam’ (for his unorthodox political outlook) during his own two terms as governor, from 1975 to 1983.”

The phrase “unorthodox political outlook” is a masterpiece of post-historical hagio-gobble.  The nickname was well earned when Governor Jerry proposed spending a windfall 1 billion dollar California surplus on a state space program, rather than saving it or returning it to taxpayers.

Another excerpt, just for the flavor...”

[Brown is] “...a politician prone to both dreamy idealism and cold pragmatism, capable of being both poetic and profane in the same sentence and often surrounded with starry-eyed do-gooders and the occasional fringe character.”

During Jerry Brown’s Oakland mayor period, the “occasional fringe character” was the mayor’s closest confidant and advisor, reputedly an ex pat from the French Foreign Legion, Jacques Barzaghi.  I was close to the scene in those days and the stories I heard about Mr. Barzaghi’s odd omnipresence - chanting from the lotus position even at meetings Mayor Brown attended involving the Port Authority.  Yes, Jerry’s mysterious companion, Jacques Barzaghi defined “fringe”, but the word “occasional” is like calling the thirty year accumulation or barnacles on an old boat a sometime thing.

From the San Francisco Chronicle of the day:

“Jacques Barzaghi, the controversial longtime aide to Oakland Mayor Jerry Brown, has left the mayor's staff as of Monday, six days after police were summoned to his Oakland home in connection with a domestic disturbance between him and his wife.

“The aide was known for dressing in black, sporting a shaved head, uttering enigmatic statements in a thick French accent -- and attracting controversy. His duties have reportedly included vetting potential appointees, picking out drapes for Brown's offices, approving his campaign commercials and selecting the mayoral clothes.

“One of his quips from Brown's third run for president in 1992 became a favorite quote of the campaign: "We are not disorganized. Our campaign transcends understanding."

“Barzaghi, a former French soldier, actor and director, met Brown at a party in Los Angeles in 1971 after he had mistaken Brown for someone else.

“His prickly personality made him no shortage of foes at Oakland City Hall.

“In 2001, the city of Oakland agreed to pay $50,000 to settle a sexual harassment claim against Barzaghi, whose alleged comments to a female employee led to a three-week suspension.

Archived, from the San Francisco Chronicle 7-20-2004

As the New York Times “whore spin” piece continued –

[In the whore gaffe incident]....”the recorded conversation also showed another side of Mr. Brown: a political player with an often brusque approach to political adversity. It was apparently taped in early September when Mr. Brown called a Los Angeles-based police union to ask for its support and left a voice-mail message. After the call is completed, Mr. Brown tries to hang up, but the recording continues. Mr. Brown’s voice rises as he worries aloud that he might lose the group’s endorsement to Ms. Whitman, amid the union’s concerns about his position on public employee pensions.

“’Do we want to put an ad out?’ Mr. Brown is heard to say. ‘I’ve been warned if I crack down on pensions, I will be — that they’ll go to Whitman, and that’s where they’ll go because they know Whitman will give ’em, will cut them a deal, but I won’t.’

Then an unidentified person speaks, saying: ‘What about saying she’s a whore?’

There is a jumble of sound, before Mr. Brown is heard again. ‘Well, I’m going to use that’, he says. ‘It proves you’ve cut a secret deal to protect the pensions.’”

http://www.nytimes.com/2010/10/09/us/politics/09brown.html?ref=politics

Jerry not only tolerated Mr. Barzaghi for thirty years, he reveled in his company.  Let no one doubt that the “whore” remark about Ms. Whitman is just the tip of the cultural iceberg within the Brown campaign and the cadre of staffers that would follow him to Sacramento and beyond. 

Mr. Brown has already served two full terms as California Governor.  Why has no one raised Mr. Brown’s term limits issue – not as a legal disqualification, but as a simple, spirit of the times concern?

JBG

In 2004 I posted several articles about the ongoing threat to Western democracy. 

Six years later, under a different and less sure-footed administration, each of the problems that I identified have grown more acute.  Now, in the middle of a potentially crippling economic crisis, we are beginning to hear isolationist sounds from the right, grumblings that eerily echo the opportunistic pacifism of the British conservatives who were seeking to ride that lame horse against Labor’s Tony Blair, sounds that echo the Lafollette-Lindberg isolationists of the pre-WW II GOP.

I began my 2004 essay with a reference to Francis Fukuyama’s “End of History”, an important book that naively made a respectable case that democracy is the next, new thing that will follow the discredited bloody-authoritarian models of governance of the 20^th century. I use the term naïve here because professor Fukuyama was naively confident that democracy would succeed because it was the better system, as secure in its right to succession as the dawn follows the night. 

But professor Fukuyama later reversed his support for the Bush administration’s war to liberate Iraq. He thus demonstrated a sad aspect of recent intellectual history: American liberal academics are all too quick to abandon their principled positions whenever their other liberal colleagues gang up on them in sufficient numbers.

One thing has long been clear to me, as it was to intellectuals like Norman Podhoretz and scores of others (men and women of moral integrity and wisdom were later to be maligned as the dreaded neocons): The enemy that was belatedly recognized as an existential, large scale threat in the fire, dust and death of September 11, 2001 was a new, virulent ideology. 

That threat remains as I described it then,

“...a huge interlinked terrorist network with covert and overt state support whose overriding purpose was to create a pan-Arab Islamist empire, a proto-state governing the entire Middle Eastern region, armed with nuclear weapons, standing triumphantly over the smoking cinders of the hated Israel and in control of most of the world’s petroleum supply. They also saw that the pattern of terrorist attacks was designed and intended to disable all forces that stand in the way of the Islamist proto-state. We know the list: the U.S., Israel, the non-compliant Arab States, and Europe.” 

As I reread my 2004 essay I asked myself:  have we lost the nerve to survive?

Here is part of what I wrote, unedited.

We (this is the large “we” consisting of the US and of all the other targets of the current jihad whether they have awakened to their peril or not) are in two decade struggle. This is nothing less a battle for the survival of Western democratic civilization.  It is a struggle that fully qualifies as a “World War”[1] and one that we, as a civilization, must not even seem to be losing, nor is it one in which we should even think of writing off some of  the jihad’s targets, just because their nations are foolish, intractable, remote, or all three.  We democracies may eventually all stand together.  For now, it appears that the US, Great Britain, and a handful of smaller countries must lead out.

Given our reduced military resources, downsized since the end of the Cold War (cut 2 and ½ divisions following Gulf War, Phase1) and the limitations of domestic politics, this president has moved more boldly, forcefully and effectively to respond to the threat than any plausible alternative in either party.  Only when the next president is elected, (presumably when Mr. Bush is reelected), can we expect further action of the kind the situation calls for.  The furor surrounding Mr. Bush’s first election was just one more of the ongoing challenges to existing democratic systems of governance in the world.  There was, in effect, a second, de facto election for president in the immediate wake of 9-11, during which the questions surrounding W’s legitimacy were effectively forgotten. Mr. Bush moved as forthrightly as any president with a mandate.  But a democratic leader at war needs the particular legitimacy that the democratic process itself confers.  The country needs a much more decisive election outcome this time, more secure presidential authority as a result, and an even stronger response to the challenge we face from radical Islam.

The genesis of the struggle is an awakened pan-nationalist fervor among an atavistic, dysfunctional and largely mentally disturbed population centered in the Middle East. There are other such populations in the world, of course – after all this is a description of normal life of an earlier period.  But local conditions have isolated these other peoples and societies to a degree that has permitted the West to “allow time to do its thing”.  This mindset might be described as evolutionary isolationism, the general notion that primitive civilizations will eventually progress “at their own pace”, and that the wisest policy of the more developed nations is benign non-interference.  Leaving aside the dubious wisdom of this form of isolationism when the world is ever more tightly bound by the technologies of transport and communications, the Middle East is a manifestly different case.

Geography, economic realities and the fungibility of deadly technologies have conspired to force the West out of its isolationism. 

We did not take this growing threat seriously in its earlier stages for several reasons, all of which are founded in our collective complacency, lack of foresight, and stubborn failure to grasp the magnitude of the unique danger posed when a truly atavistic fanaticism is coupled with large scale 21^st century weapons technology.

The West has been complacent on more than the narrowly materialistic level. The creature comforts that are the gift of modernity are less disabling than the modernist notion that we Westerners have arrived at the apex of a natural progression of thought, and that the primitive world, suffused as it is with superstition and outmoded religious beliefs, will simply fall like rotten fruit when exposed to our scientist, materialist “values”.  Ironically, the post-modern reality is spreading the notion that no values are worth risking comfort much less life itself to preserve.  Hence, a profound weakening of value commitment more accurately defines the current Western ethos. Populations seduced by the current level of comfort and complacency are very difficult to rouse to self defense, particularly when the threat is striking elsewhere or can somehow be temporarily contained, or (when all else fails) can simply be denied. The modern jihad architects of the current war were not blind to this weakness.

As long as the restive Middle East population was divided and ruled by tribal leaders whose regimes we in the West could “tame” via mutually beneficial economic relationships, the potential threat was ignored. This space is far too limited to chronicle the last 100 years of Middle Eastern history, but suffice it to say that the emergence of a virulent pan Arab nationalism fueled and ignited by a fascistic ideology based on Islam should not have been surprising.

Even now, the biggest obstacle to a truly pan-Arab force remains the Arab inter-tribal rivalries (recalling the “religious” differences among major Arab groups are tribal at root and that religions function as tribal ideologies).  But the developments of the last few years are troubling. 

It is essential that any American administration continue to act from a core understanding of the true nature and scope of the threat.  The credibility of the isolationist mindset collapsed overnight when the WTC Towers fell, the Pentagon was struck, and the White house (or Congress or FBI Headquarters – we my never know which) were narrowly spared.  Reasonable observers soon grasped that we faced a huge interlinked terrorist network with covert and overt state support whose overriding purpose was to create a pan-Arab Islamist empire, a proto-state governing the entire Middle Eastern region, armed with nuclear weapons, standing triumphantly over the smoking cinders of the hated Israel and in control of most of the world’s petroleum supply.

They also saw that the pattern of terrorist attacks was designed and intended to disable all forces that stand in the way of the Islamist proto-state. We know the list: the U.S., Israel, the non-compliant Arab States, and Europe.

The following course appears to be essential to our survival as the world’s preeminent functioning democratic power:

1.      Hardening our domestic defenses.  This is a work in progress, at best, and is beset with bureaucratic inertia, civil liberties lawsuits, and the seeming political inability to take strong measures to control our borders and to limit immigration. 

2.      Forcing other regimes to deny all aid and comfort to terrorist efforts.  Both Afghanistan and Iraq are fully justified uses of military force on this count alone, even if nation building falters.  The demonstration of American power in support of the “Bush doctrine” has had a salutary effect.

3.      Preventing overtly hostile regimes (Iran & Korea) from acquiring a deliverable nuclear weapons capability.  Another work in progress. 

4.      Establishing a semi-permanent US military base in the region not beholden to the Saudis or any other unreliable regime. This is a stated Pentagon goal and awaits developments in Iraq.

5.      Planting the democratic seeds of the counter-jihad in the region.  This single effort, with all the attendant problems, contains the key to averting the Islamist proto-state.  It may be the single most astute choice this administration has made, provided the resources needed to guide Iraq along the proto-democracy course are not denied.

To imagine that any democratic power could rationally use its raw capacity to “solve” the jihad problem with nuclear weapons is a video game fantasy. The “country sized glass parking lot” solution (only half seriously proposed by a friend) will not be a realistic option, either in moral or practical terms. Only a comparable Cold War threat to our own cities could possibly justify such a massive scale of threat response. In the real world, the infliction of casualties in the millions, risking collateral catastrophic economic damage to the world’s economy, could only come about as a necessary and proportional response to a massive threat of similar scope under profound emergency conditions. In my judgment, that simply isn’t going to happen.

For example, the time will come that we, a peaceful democracy, will consider employing tactical nuclear weapons, including neutron bombs, to neutralize a nuclear threat that can’t reasonably be safely eliminated by other means.  The North Koreans have most of Seoul within artillery and rocket range.  Possible friendly casualties following a North Korean response to a US attack might exceed one million.  Any military action against the North would necessarily have a preemption component for these batteries north of Seoul. This logic might well justify the use of tactical nuclear bombs.

As a democracy, we are probably unable to reinstitute the draft in the absence of another 9-11 scale attack. Fortunately, the modern military has traded technology for soldiers, amplifying the effective destructive power on the ground of 1,000 soldiers a thousand fold.  But the stark truth is that we lack the field strength to simultaneously occupy two countries the size of Iraq and Iran, yet we have the power to utterly destroy the military capability of every nation in the region.  And this is a step we may yet be forced to take.

Under these complex circumstances, we should proceed with care while remaining visibly willing and able to utilize the kinds of serious military action that will probably be needed.

A reading of Bob Woodward’s new book, Obama’s Wars, reveals an untried, unprepared president who is uncomfortable in his role as commander in chief, and unrealistic about the gravity and scope of the threat. 

Yet for now at least, Mr. Obama has reluctantly rejected the “cut and run” option that he and his core leftist supporters would really prefer.  He will probably muddle through until the 2012 elections, avoiding outright defeat, deferring the day of actual victory. 

Absent a repeat of the 911 attacks, the main danger is that the conservative core will “go all wobbly” (to quote PM Margaret Thatcher’s admonition to President Bush I). 

In 2013 we may well find ourselves in the position of an aging, weakened superhero, no longer capable of a prolonged fight, but still capable of calling in an air strike. 

We are in the World War IV that was named and described by Norman Podhoretz in his trenchant 2007 book of the same title.  It is to be a long slog, but one that poses a smaller burden in proportion terms (by any reasonable measurement of casualties and treasure) than the Greatest Generation endured before us.

The weaker and more ambivalent our response to this challenge, the longer the war will last.  Because this adversary wants our total subjugation, we are effectively fighting in a corner until the jihad has been disarmed, discredited and dissolved.   This is the hand that history has dealt us. 

As a great man said,

“We cannot escape history. We of this Congress and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation.”

 [Abe Lincoln 12-1-62, to Congress].

Also posted on the Policy think site at http://www.jaygaskill.com/WhatWillObamaBecome.htm

This article follows, “Who is Obama?” at http://www.jaygaskill.com/WhoIsObama.htm .

A piece in the UK Telegraph, “Does Obama want to win in 2012?” (21 August, 2010, by Toby Harnden) makes the case that our POTUS of the moment is an intractable ideologue, unwilling to bend now in order to get reelected in 2012.

Here is the link:

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/7958031/Does-Barack-Obama-want-to-be-re-elected-in-2012.html

And here are three pull quotes:

Observations and Analysis - by

Jay B Gaskill

Attorney at Law

Acting out of frustration with lax federal border enforcement, the State of Arizona enacted legislation designed to enlist local police in the effort to catch and detain illegal-status persons within its borders whenever they otherwise brought themselves to the attention of the authorities.  This measure, borne of desperation (kidnappings, thefts, robberies and shootings along the Arizona – Mexico border have become a security nightmare), was immensely popular in Arizona and enjoys powerful popular support across the USA.

But not within the current administration.

Here is some key language from the Arizona law:

No official or agency of this state or a county, city, town or other political subdivision of this state may limit or restrict the enforcement of federal immigration laws to less than the full extent permitted by federal law.

 

For any lawful contact stop, detention or arrest made by a law enforcement official or a law enforcement agency of this state or a law enforcement official or a law enforcement agency of a county, city, town or other political subdivision of this state in the enforcement of any other law or ordinance of a county, city or town or this state where reasonable suspicion exists that the person is an alien who and is unlawfully present in the united states, a reasonable attempt shall be made, when practicable, to determine the immigration status of the person, except if the determination may hinder or obstruct an investigation.

Today U.S. District Judge Susan Bolton gutted the new Arizona law (SB 1070) by blocking the enforcement of provisions that makes it a crime not to carry immigration registration papers, for a person of illegal status to seek or perform work.  Bolton’s injunction also means Arizona will not be able to require police officers to determine the immigration status of anyone they stop or arrest.

Judge Bolton’s decision was framed as a temporary measure, but in reality the Arizona law is effectively dead until the US Supreme court gets the case, probably no earlier than 2011.

One argument, advanced by the administration and the ACLU, was that federal resources were inadequate to handle the food of illegals who would be detained.  Judge Bolton agreed, finding – at least temporarily – that the federal law (largely identical with Arizona’s) has presumptively preempted the field.  Thus federal, i.e., administration, policy of inaction trumps Arizona’s action.

This leaves the southern border states at the mercy of the federal government’s inability and  - frankly also – unwillingness to enforce border security, by effectively forbidding any meaningful independent state action to accomplish the same end.

I should not neglect a related story.

AP 7-26-10 / Ivan Moreno 

Here’s the deal. 

We are seeing the last stages of an epic conflict between a naïvely altruistic “we are all brothers and sisters” political-moral ideology, with which our country’s governing intelligentsia has become infatuated, and a ruggedly practical “protect the home-front” ethos, that has constituted the popular majority for as long as these things have been measured. 

In the former view, national boundaries are inhumane constructs; therefore, the illegal status of someone living here is an irrelevant, even “improper” consideration, because – after all - we are all brothers and sisters.  

The irony is palpable:

No other country in the world has allowed such lax immigration policies to persist for so long.  The country to our south is at risk of falling into the failed state category, barely able to contain the depredations of its drug lords, yet Mexico has far more stringent immigration enforcement policies on its southern border than the most restrictive Arizona sheriff has ever contemplated.   

If Mexico actually fails as a state, we will be forced to close the southern border in self defense.