The Sorrow and Rage of a Schoolhouse Rocker

When I was a boy of five or six, I would wake up bright and early every Saturday morning, and slink downstairs to watch TV in the family room—just dive into the stream of morning cartoon shows that played at that magic hour, and let my little brain cells dissolve in the stew of sugary ‘toons, even as I restlessly twisted the channel selector from side to side—clickety-clack! cli-cli-clickety-clack!—looking for something good.

But in between all that visual junkfood—all of which I’ve long since forgotten—there were these little animated films that played during the commercial breaks, called “Schoolhouse Rock!”.

The “Schoolhouse Rock” cartoons were two-minute masterpieces, with bold drawings and incredibly catchy songs, each explaining a different academic subject or topic. Famous ones were “Conjunction Junction”, “Three Is A Magic Number”, “The Great American Melting Pot”, “I’m Just a Bill”, “The Preamble”.

Consider how good, how wonderfully entertaining these little educational cartoons must have been: I am now 44 years old, but I can sing—off the top of my head—maybe a dozen of the “Schoolhouse Rock” songs.

For instance, the chorus to one of my favorites—“Interjection!”:Read more »

Fighting The Terrorists By Terrorizing The Innocent

Something I read:

In the United States, the dominant narrative about the use of drones in Pakistan is of a surgically precise and effective tool that makes the US safer by enabling “targeted killing” of terrorists, with minimal downsides or collateral impacts.

This narrative is false.

These are the first words of a devastating report I’ve just read, “Living Under Drones: Death, Injury, and Trauma to Civilians from US Drone Practices in Pakistan”.

This thing is required reading.

This isn’t some half-assed, crazed droolings of some hippy-dippy Lefty twerp who ought to get a bath and a haircut: This was written by Stanford and New York University lawyers—and it shows. It’s clearly and devastatingly written, with the facts, testimony and evidence so scrupulously laid out that it’s almost like the brief for the prosecution of the war crimes trial that we can only pray will one day take place.

Consider this:

Drones hover twenty-four hours a day over communities in northwest Pakistan, striking homes, vehicles, and public spaces without warning. Their presence terrorizes men, women, and children, giving rise to anxiety and psychological trauma among civilian communities. Those living under drones have to face the constant worry that a deadly strike may be fired at any moment, and the knowledge that they are powerless to protect themselves. These fears have affected behavior. The US practice of striking one area multiple times, and evidence that it has killed rescuers, makes both community members and humanitarian workers afraid or unwilling to assist injured victims.

The bold emphasis is mine. I highlighted it because it reminded me of a tactic that terrorists are famous for using: Plant a bomb and kill some people, and when the ambulance, police and rescuers arrive, set off a second bomb so as to kill even more people.

I’m still processing this report, but the questions that immediately come to mind—jumbled, confused, unsystematic, irrational, yet crucial just the same—are myriad:

• How much courage does it take to kill innocent people by remote control?

• What can be gained by murdering women and children who have never done anyone any harm?

• What happens to a cause or country that achieves “victory” by terrorizing innocent human beings?

• How can the people who carry out such evil possibly live with themselves?

• How can anyone with any sense of decency follow the leadership of men and women who would knowingly commit such atrocious and despicable acts?

Notice those questions: They are the questions people ask of terrorists who commit murder for the sake of their cause—

—but they are also now the questions any humane, decent person must ask of the United States.

Because the United States is now the greatest terrorist agent in the world.

How do I know that the U.S. is now a terrorist state? Do I know because it has killed more innocent people in the last twelve months than all other “terrorists” in the world combined?

No. Terrorism isn’t a matter of numbers—it’s a matter of fear: Putting terror—blinding, relentless fear—into the hearts and souls of people who have done nothing wrong. As in the words of this Pakistani boy:

“We cannot figure out when a drone will strike—they may strike in two days, three days, ten days, or a month—but they are always there.”

That is how I know that America has become a terrorist state.

The question for any and every American citizen is: Will you stand up and fight a government which—in your name—is terrorizing innocent people?

Or will you acquiesce to this evil.

How A Country Rationally Exits The Eurozone

Hi all. Sorry for being away—it couldn’t be helped. Enjoy the new post. More will be forthcoming on a steady basis. GL

We are about to experience the Euro Exit Crisis.

Mish Shedlock and I have a private bet as to whether Italy or Spain will exit first—he says Italy, I say Spain. But either way, it’s gonna pretty much suck.

The whole point of exiting the eurozone is because a country no longer has the money to finance its continuing operations. Insofar as Spain, Greece and possibly Italy, that moment will arrive shortly—possibly within days in the case of Spain. So if a sovereign government reaches this moment, it will have no choice but to exit the EMU and revert to a local currency which the government can then devalue.

By doing this, the government simultaneously has all the cash it needs to continue operations, and also inflates away its debts. The private sector gets a shot of adrenaline insofar as foreign trade is concerned, because its goods and services become that much cheaper on the foreign markets. And the employment situation gets a boost, as those producers selling their cheap goods and services overseas begin to hire more workers to fulfill demand.

The downside is that the government gets shut out of foreign bond markets, its financial sector takes a huge hit, and prices for essential goods and services rise dramatically, hurting the poor, the lower middle-class, the elderly, and the unprepared.

Even with these negatives, though, a forced conversion and devaluation is a boon to bankrupt nations. It is, basically, a reset of the economy: And historical experience shows that though it hurts a lot in the short term, it helps to reignite an economy, and get the people moving once again. This has been true of the United States in 1933, Germany in 1948, Latin America in the 1980’s, Argentina and Uruguay in 2001.

But it’s crucial to understand both the sequence and the mechanics of the process, in order to be able to anticipate what will happen, and thus make sound investment choices.
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Structural Pliancy

Don't be fooled—it's flexible at the top.

A lot of people—and I am one of them—claim that personal and business freedoms are being eroded as never before. They show as evidence the roll-back of civil liberties, the over-regulation of business, the insistence on “compliance” by the various security agencies of every little rule, no matter how trivial—in short, the over-regulation of American life.

They are right: The U.S. government is guilty of over-regulating individuals and businesses—egregiously so.

On the other hand, a lot of other people—and I am one of them too—claim that certain persons and corporations act lawlessly as never before. They show as evidence the abuses of power of those in leadership—be it business, government, the military, or the intelligence/security aparatus—and they insist that something has to be done about it, some regulations have to be imposed.

They are right too: The U.S. government is just as guilty of under-regulating certain individuals and businesses as it is of over-regulating other people and businesses.

Obvious question: How can they both be right? How can it be that a few people, a few businesses, a few institutions are getting away with murder—in some cases literally—while most of us are under a crippling yoke of excessive, dishonest, petty and trivial rules and regulations that either serve no purpose, or actively pervert the welfare of our society?

Simple answer: Structural Pliancy.

Let me explain. Read more »

You Are Free To Travel—If The IRS Lets You

A bill that nobody is paying any attention to is sailing through Congress: Senate Bill 1813. It passed the Senate by 74 to 22, and is expected to sail through the House as well. It’s an act “[t]o reauthorize Federal-aid highway and highway safety construction programs, and for other purposes.”

It’s the “and for other purposes” part of the title that has me worried—specifically Section 40304: “Revocation or denial of passport in case of certain unpaid taxes.”

This section would give the IRS the power to keep a U.S. citizen from traveling—

—and it’s another example of Executive Power run amok. It’s another example of how the United States is turning into a police-state.

The right to travel freely is sacrosanct—it’s not some privilege that the government bestows on us: It’s one of our basic freedoms as citizens. In point of fact, the countries that have limited their citizens’ ability to travel—the Soviet Union, the People’s Republic of China, North Korea, Cuba—were all rightfully called “police-states”: It’s one of their defining characteristics—the fact that they were keeping their citizens hostage.

In the United States, there are several, clearly defined reasons why you would have your passport either denied or revoked—and all of them pass the smell test.

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Will There Be A “Corralito” In Spain?

Yes, it’s a metaphor. Of what, I dunno.

How Spain could exit the eurozone—a practical guide.

In late 2001, while everyone was in shock over 9/11, the Argentines were going through a little shock of their own: The “Corralito”.

Argentina was bankrupt, a product of a stagnant economy, rampant crony-corruption, and—most important of all—of having its currency fixed to the dollar. This currency peg had created a huge credit bubble, and of course massive capital outflows as a result, eventually leading to the depletion of foreign reserves by the government and an inability to raise more funds on the open markets.

In other words, sovereign bankruptcy.

Coupled to these problems, in the months leading up to the December 2001 crash, people were aware that the country was going bankrupt—so they were quickly converting all their Argentine pesos into dollars, and then sending this money to safe havens overseas.

To solve these problems of sovereign insolvency and massive capital flight, and at the same time to stabilize the situation, on December 1, 2001, the Argentine government imposed the infamous corralito—literally, the “little bullpen”: A series of measures designed to hold in capital and prevent it from fleeing the country, while devaluing the currency to a more realistic, sustainable rate of exchange.

As part of the corralito measures, the Argentine government froze all dollar-denominated bank accounts; converted those dollars into Argentine pesos on a one-to-one basis—that is, confiscated people’s dollars; limited all withdrawals in Argentine pesos to a weekly maximum of AR$250 (you read right: per week); and of course—the cherry on the sundae—it devalued the Argentine peso against the dollar.

The devaluation was at first a “mere” 40%—but shortly thereafter the Argentine peso was allowed to float: And it dropped to a rate of four to one against the dollar.

Literally millions of people lost their life-savings in one fell swoop. The local equity market tanked catastrophically, as did the local bond markets. People on a fixed income also got clobbered, as their pensions lost their purchasing power by 40% overnight—and then eventually by 75%.

Chaos ensued.

Now, the situation in Europe today is virtually identical to that of Argentina in 2001: Overleveraged, with an insolvent banking sector, a flatlining economy and growing unemployment.

But of all the countries, Spain in particular is the biggest trouble.

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Spain Will Exit The Eurozone First—This Year

This post is adapted from a piece that originally appeared at my Strategic Planning Group. I've been doing a lot of work over there—hence the scarce postings over here. Sorry! GL

In the LiraSPG Scenario “When The Euro Breaks”, I discussed what would happen to the euro and the eurozone when those countries—unable to continue under their massive debt burdens—began exiting the European monetary union.

One of the assumptions I made was that one of the smaller nations of the eurozone would leave the monetary union first, thereby encouraging one of the bigger nations to follow their example and leave as well. I postulated that the small country would likely be Greece, and that the large country would probably be Spain.

From this exodus, I analyzed what would happen to the euro vis-à-vis gold and the rest of the world’s currencies—namely, that the euro would suffer a staggered loss of value against commodities and other currencies: An initial drop-and-recovery when the smaller nation exited the eurozone, followed by a sustained drop when the big nation exited the monetary union.

The Scenario was written and published on the LiraSPG site in May 2011.

Since then, I have changed my mind: I no longer think that a small country will exit the eurozone first, followed by one of the bigger countries.

I now think that Spain will exit the eurozone first—precipitously and without warning—and that the impact on the euro will be much more sudden and dramatic than I had earlier thought.

In this SPG Supplement, I will explain my thinking. First I will discuss the general European situation; then the Greek debacle, and how the European leadership has lost sight of what salvaging Greece was supposed to be about; then the current Spanish situation, how it is unsustainable, and how the new Rajoy government’s only escape—politically and economically—is to default and then exit the eurozone.

Read more »