This is the Moment

Anyone following the gradual transformation of the United States from an open society into a police-state has probably been mainlining the Greenwald-Snowden-NSA leaks case like a junkie shooting up China White.

For those who missed it, Edward Snowden, a private contractor working for the NSA, leaked several key documents which conclusively proved that the National Security Agency not only spies on all Americans’ electronic communications, but that they have the full-fledged support of the major tech companies, such as Yahoo!, Apple, Microsoft, Facebook and Google, among others.

This has been potent stuff, stuff that pretty much confirms what a lot of hard-core civil libertarians such as myself have suspected about the United States over the last few years: America has been drifting towards turnkey totalitarianism, using the War on Terror as the excuse to roll back civil liberties, and taking advantage of technology¹ to create (in Snowden’s wonderful phrase) “the architecture of oppression”.

Something Edward Snowden said, in the Glenn Greenwald interview where he revealed himself as the source of the NSA leaks, struck me hard: “The greatest fear that I have regarding the outcome for America of these disclosures is that nothing will change.” (Video here, quote at 10:49. Also embedded below.)



He’s right, and it’s my fear too. In fact, it ought to be the fear of anyone who cares about the future of the United States as a representative democracy that stands for basic human rights and against oppression. If the people of the United States do not stand up to their government now, right now, in the face of this blatant violation of all the core principles of the American Constitution, then we’re screwed. If nothing is done now, then the next stop—inevitably, irrevocably—is police-state fascism American-style.

How’s this so? Here’s my argument:

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Mo’ Debt, Mo’ Problems (Mo’ Keynesian Cynicism)

Christ, is Matt Yglesias stupid. Stupid or high, or maybe he’s just a cynical bastard—I really can’t make up my mind.

The U.S. Debt: Notice a trend?
[click to enlarge]

He just wrote a piece in Slate proposing that the U.S. government go into even more debt, ballooning the Federal debt to even higher levels than the “mere” 120% of GDP it currently is.

His “reasoning”? To take advantage of the lower interest rates currently prevalent in the bond markets.

Prima facie, Yglesias sounds reasonable. As he rightly points out,

[T]he inflation-adjusted yield on 10-year Treasury bonds was negative 0.56 percent. Savers, in other words, want to pay the American government for the privilege of safeguarding their money. For the longest-dated bonds we sell, the 30-year Treasury bond, rates were 0.51 percent. That’s higher than zero, but far below the long-term average economic growth level. [emphasis in the original]

All good up to this point.

But then in the very next breath—I mean, literally the very next line—he writes something of startling imbecility:
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Why Isn’t Gold Higher?

Hint: Because it’s the Credit Default Swap of the Next Financial Crisis

Why isn’t gold higher? Two of the three reserve currencies of the world—the dollar and the yen—are on a relentless race to the bottom, and only recently have the Europeans figured out that they’d better start kicking the euro down, before they price themselves out of the global markets.

With this general fiat currency devaluation, you would think that gold would be much-much higher than it is now.

But gold isn’t higher—it’s drifting. Consider this chart of gold, over the last decade:

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Mr. Abe’s Trigger

Prime Minister Shinzō Abe

The newly elected Japanese Prime Minister, Shinzō Abe, has caused quite a stir. The leader of the Liberal Democratic Party, which scored a landslide victory in 2012’s election, he’s promised to restart the Japanese economy, whatever it takes.

How will he do this? He “will implement bold monetary policy, flexible fiscal policy and a growth strategy that encourages private investment, and with these three policy pillars, achieve results”—according to his statement following the LDP election victory.

By “bold monetary policy”, what he means—and what he has said—is to end the independence of the Bank of Japan, and have the government dictate monetary policy directly. (You could argue whether any central bank in any of the developed economies is truly “independent”—or indeed, has ever been so. But for the sake of this discussion, let’s assume that they have been.)

The perception is, the Bank of Japan will not only print yens and buy government bonds à la Quantitative Easing of old—it is also generally thought that Mr. Abe and the incoming Japanese government fully intend to target the yen against foreign currencies, like Switzerland has been doing with the euro.

This perception is what has been driving the Nikkei 225 index higher, and driven the yen lower. Prime Minister Abe’s policies have yet to be fully implemented—so far, it’s all been just talk. But the markets are taking Mr. Abe at his word, convinced that he is going to set a policy very similar to what the United States and the Federal Reserve have been doing: Targetting the equities markets, and printing in order to bring the yen down, and thus make Japanese products competitive in foreign markets.

But why was this decision triggered? For going on twenty-three years, Japan’s GDP growth has been sluggish at best, it’s government amassing huge debts, all the while the yen slowly strengthening and the Nikkei index meandering—yet all of a sudden, now the Japanese government is ready to do whatever it takes to turn the Japanese economy around, which begs the question: Why now?

Simple: Japan’s balance of trade has turned decisively negative for the first time since the Oil Shock of 1980—and this has put the fear of God into the Japanese leadership. Look at the following chart:

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Post Mortem On The Trillion Dollar Coin (or, Krugman Jumps The Shark)

So the idiotic idea of the Trillion Dollar Coin—floated so as to get around the debt ceiling—is dead as Dillinger. The official White House announcement stated:

Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit.

Since we won’t know how this decision was made until a few years hence, when Obama officials start publishing their memoirs, the current best speculation of what probably happened comes from Bruce Krasting:

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The Trillion Dollar Coin: The Zimbabwe Dream of the Obama-heads

Why do banks spend money making sure that their branches look good and solid? Why do banks spend even more money making sure their main offices look as solid and stately and settled as ancient temples?

Is this what Yglesias
and the Obama-heads
have in mind?

Why, to give the illusion of solidity. Because in finance, the illusion of solidity begets solidity—just as the appearance of banana republic-dom begets a banana republic.

The trillion dollar coin idea floating around out there is the dumbest idea ever—but it’s also dangerous for two reasons: It is a naked power grab by the executive, and it shatters the illusion of solidity and sense in the monetary system.

Matt Yglesias over at Slate is fervently in favor of the trillion dollar coin idea, and he gives as good a précis as any of the situation.
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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 »