Category Archives: Predator Class Economics

Palast on the Greek elections

One of the more puzzling phenomenon is the enthusiasm for the EU I have witnessed in my highly educated European friends.  Once I carefully explained the damage certain to be caused by the Maastricht monetary agreements to some friends from Finland who looked at me as if I clearly didn't get it.  For them, joining the Euro was a chance to prove to the world that formerly poor, isolated, colonized Finland had arrived in the big time.  I am certain that the same sort of thinking was repeated in many of the other small entrants to the EU from Estonia to Portugal.  This was a point of national pride.  Unfortunately, the neoliberalism of Maastricht was designed to take advantage of the small and weak who were joining a yacht club they could clearly not afford to join.  The fact that income inequality is a global phenomenon pretty much proves how effective these economic policies are in redistributing wealth upward.

Of course, the poster child for all the bad things that can happen to the little fish who joined the EU is Greece.  Now they are about to elect a government that promises to abandon the EU-mandated austerity measures that are crippling their country.  But notice, they still want to stay in the club.  Veblen was right—the desire for status emulation is such a powerful motivation, it is even more powerful at times than the survival instincts.  Example xxxx is Greece's Syriza Party.  Palast mocks this silliness so much better than I could (see below).

Trojan Hearse: Greek Elections and the Euro Leper Colony

Greg Palast, January 20, 2015

Europe is stunned, and bankers aghast, that polls show the new party of the Left, Syriza, will win Greece’s parliamentary elections to be held this coming Sunday, January 25.

Syriza promises that, if elected, it will cure Greece of leprosy.

Oddly, Syriza also promises that it will remain in the leper colony. That is, Syriza wants to rid Greece of the cruelty of austerity imposed by the European Central Bank but insists on staying in the euro zone.

The problem is, austerity run wild is merely a symptom of an illness. The underlying disease is the euro itself.

For the last five years, Greeks have been told that, if you cure your disease—that is, if you dump the euro—the sky will fall. I guess you haven’t noticed, the sky has fallen already. With unemployment at 25%, with Greek doctors and teachers eating out of garbage cans, there is no further to fall.

In 2010, when unemployment was a terrible 10%, a year into the crisis, the “Troika” (the European Central Bank, European Commission and the International Monetary Fund) told the Greeks that brutal austerity measures would restore Greece’s economy by 2012.

Ask yourself, Was the Troika right?

There is a saying in America: Fool me once, shame on you. Fool me twice, shame on me.

Can Greece survive without the euro? Greece is already dead, but the Germans won’t even bother to bury the corpse. Greeks are told that if they leave the euro and renounce its debts, the nation will not be able to access world capital markets. The reality is, Greece can’t access world markets now: no one lends to a corpse.

There’s a way back across the River Styx. But it’s not by paddling on a euro.

There’s Life after Euro

Many nations do quite well without the euro. Sweden, Denmark and India do just fine without the euro—and so does Turkey, which had the luck to be excluded from the euro-zone. As long as Turks stick to the lira, even Turkey’s brain-damaged Islamo-fascist President Tayyip Erdoğan cannot destroy their economy.

Can Greece just dump the euro? They have happy precedents to follow. Argentina was once pegged to the US dollar much as Greece is tied to the euro today. In 2000, Argentines, hungry and angry, revolted. Argentina ultimately overthrew the dollar dictatorship, the IMF diktats and the threats of creditors, and defaulted on its dollar bonds. Free at last! In the decade since, the Argentine economy soared. Yes, today, Argentina is under attack by financial vultures, but that is only because the nation became so temptingly wealthy.

I was in Brazil when its President Luiz Inácio Lula da Silva told the IMF to go to hell—and rejected privatization of the state banks and the state oil company, rejected cutting pensions and thumbed his nose at the rest of the austerity nonsense. Instead, Lula created the bolsa familia, a massive pay-out to the nation’s poor. The result: Brazil not only survived but thrived during the 2008-10 world financial crisis. Despite pressure, Brazil never ceded control of its currency. (It is a sad irony that Brazil is only now faltering. That’s the fault entirely of Lula’s successor, President Dilma Rousseff, who is beginning to dance the austerity samba.)

Austerity: Religion, Not Economics

The euro is simply the deutschmark with little stars on it. Greece cannot adopt Germany’s currency without adopting Germany’s finance minister, Wolfgang Schäuble, as its own.

And Schäuble has determined that Greece must be punished. As my homey Paul Krugman points out, there is no credible economic theory that says that austerity—that is, cutting government spending, cutting wages, cutting consumer demand—can in any way help a nation in recession, in deflation. That’s why, in 2009, Obama ordered up stimulus, not a sleeping pill.

But austerity has nothing to do with economics. It is religion: the belief by the stern Lutheran Germans that Greeks have had too much fun, spent too much money, and spent too much lazy time in the sun—and now Greeks must pay a price for their sins.

Oddly, I hear this self-flagellating nonsense from Greeks themselves: we are lazy. We deserve our punishment. Nonsense. The average Greek works more hours in a year than any other worker in the 34 nations of the OECD; Germans the least.

The Euro’s Father Describes his Little Bastard

Alexis Tsipras, the leader of Syriza, would like to pretend that austerity and the euro are two different things, that you can marry the pretty girl but not invite her ugly sister to the wedding. Apparently, the Syriza chief is blissfully ignorant of the history of the euro. The horror of austerity is not the consequence of Greek profligacy: it was designed into the euro’s plan from the beginning.

This was explained to me by the father of the euro himself, economist Robert Mundell of Columbia University. (I studied economics with Mundell’s buddy, Milton Friedman.) Mundell not only invented the euro, he also fathered the misery-making policies of Thatcher and Reagan, known as “supply-side economics” – or, as George Bush Sr. called it, “voodoo economics.” Supply-side voodoo is the long-discredited belief that if a nation demolishes the power of unions, cuts business taxes, eliminates government regulation and public ownership of utilities, economic prosperity will follow.

The euro is simply the other side of the supply-side coin. As Mundell explained it, the euro is the way in which congresses and parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system. “Without fiscal policy,” Mundell told me, “the only way nations can keep jobs is by the competitive reduction of rules on business.”

Greece, to survive in a euro economy, can only revive employment by reducing wages. Indeed, the recent tiny reduction in unemployment is the sign that Greeks are slowly accepting a permanent future of low wages serving piña coladas to Germans on holiday cruises.

It is argued that Greece owes Germany, the IMF and the European Central Bank for bail-out-billions. Nonsense. None of the billions in bail-out funds went into Greek pockets. It all went to bail out Deutsche Bank and other foreign creditors. The EU treasuries swallowed 90% of its private bankers’ bonds. Germany bailed out Germany, not Greece.

Nevertheless, Greece must pay Germany back, Mr. Tsipras, if you want to continue to use Germany’s currency, that is.

Greece: Goldman Sacked

Greece’s ruin began with secret, fraudulent currency swaps, designed a decade ago by Goldman Sachs, to conceal Greek deficits that exceeded the euro zone’s 3%-of-GDP limit. In 2009, when the truth came out, Greek debt holders realized they had been cheated. These debt buyers then demanded usurious levels of interest (or, if you prefer, a high “spread”) to insure themselves against future fraud. The compounding of this interest premium brought the Greek nation to its knees. In other words, the crimes committed to join and stay in the euro, not Greek profligacy, caused the crisis.

The USA, Brazil and China escaped from depression by controlling their money supply, government spending and currency exchange rates—crucial tools Greece gave up in return for the euro.

Worse, once the Trojan hearse of the euro entered Athens, tourism, Greece’s main industry, drained to Turkey where hotels and souvenirs are priced in cheap lira. This allowed Dr. Mundell’s remorseless wage-lowering machine, the euro, to do its work, to force Greece to strip all its workers of pensions and power.

Greece fell to its knees, with no choice but to beg Germany for mercy.

But there is no mercy. As Germany’s Schäuble insists, democracy, this week’s vote, means nothing. "New elections change nothing in the accords struck with the Greek government,” he says. “[Greeks] have no alternative.”

Ah, but they do, Mr. Schäuble. They can tell you to take your euro and shove it up your Merkel. more

Creating Money Out of Thin Air and Trained Incapacity

Two days ago, I posted on DailyKos a summary of the very important article on money creation that Jon had featured. Jon asked me to also post my DailyKos summary here, which I am happy to do.

But I also want to draw your attention to some of the comments my DailyKos posting attracted, because they are a wonderful example of the "trained incapacity" Veblen analyzed in in his 1914 book, The Instinct of Workmanship and the Industrial Arts. As regular readers of this blog know, Jon and I have had more than one occasion to invoke "trained incapacity" in trying to understand the absurdity and inanity of political and economic positions, ideas, and arguments of people who otherwise appear to be smart. Jon has a number of posts on the subject of trained incapacity here - just scroll down until you see the phrase on the left.

There were at least three commenters to my DailyKos post who simply refused to accept the fact that banks create money out of nothing. They insisted that the banks would later have to meet reserve requirements, or that the borrower was the actual source of the money created because the borrower signs a pledge to pay back the money. One pointed to the Basel requirements regarding banks' T1 capital, a strong sign that that person is professionally involved in banking and finance. Yet another objected that it is the property pledged as security for the loan that is actually the money which I mistakenly believe (according to them) was created out of thin air. Another snidely argued that if banks can create money out of nothing, no bank would ever go bankrupt, so why "not lend to everyone under the sun, without expectation of repayment?" Then added, trying to dismiss the idea that banks create money out of nothing as the fantasy of some wild-eyed radical, "That may be in fact be what the diarist is driving at: what a wonderful world that would be to live in!" This person either did not see or deliberately failed to mention Jon's observation, which I quoted near the beginning of my posting, "don't create money will-nilly—only create money to pay for things that make the society richer."

When I asked a couple commenters, "Then please explain how the amount of money (measured as M2) grew from $1.28 billion in 1867, to $11,654.3 billion now. Where did the $11.653 trillion come from? Which accounts was it withdrawn from? Who created $11.653 trillion in money, and how, over the past 148 years?" one of my interlocutors could only reply, "economic growth." 

Now, I also want to point out that these people objecting to the idea that banks create money out of thin air, are supposedly "on our side." These are not knuckle-dragging conservatives or Republicans; they are liberals and progressives who regularly follow and contribute to one of the leading openly partisan Democratic Party websites on the tubez. With friends like these, who needs enemies?!? Are these people serious about addressing the problem of climate change? If they are, then I feel it is their duty to us, and to humanity in general, to explain what solutions they propose, and how to fund them. If they are not serious, I feel they should be candid and forthright, and express their rejection that climate change is the problem almost all scientists contend it is - a problem that threatens the very survival of our existence as a species.

Alternatively, they can be candid and forthright in informing us they are willing to allow the planet be burnt and rendered uninhabitable, rather than accept economic paradigms that are contrary to their beliefs of what reality is.

The other alternative, of course, is they are just being stupid by clinging to their belief of how money is created. In which case, we come back to Veblen's analysis of trained incapacity. As John Kenneth Galbraith once noted, "The process by which banks create money is so simple that the mind is repelled."

The thing to understand is that the real political fight in the USA, and the rest of the world, is not Democrat versus Republican, or liberal versus conservative, or left versus right. As Jon has pointed out numerous times, the real fight is the Producer Class versus the Predator Class (the Leisure Class as Veblen named it). What makes the prospect of a Hillary Clinton presidency so distasteful to many people who conservatives and Republicans stupidly believe are lefties and therefore Hillary's hardcore base? It is the fact that the Clintons sold out to, and became part of, the Predator Class many, many, many years ago, and the policies they support and espouse will do serious material harm to the members of the Producer Class. So go through the comments, and see for yourself the taint of the Predator Class within our own ranks.

As one of the Predator commenters wrote: "The real issue is that a faction here hates banks and wants to undermine the system somehow." That's exactly what we want to do, and that's what the Predator Class is terrified of.

He or she was exposed by another commenter.

Creating money out of thin air can now be said with confidence for the first time – possibly in the 5000 years' history of banking - that it has been empirically demonstrated that each individual bank creates credit and money out of nothing, when it extends what is called a ‘bank loan’. The bank does not loan any existing money, but instead creates new money. The money supply is created as ‘fairy dust’ produced by the banks out of thin air. The implications are far-reaching.
That's the conclusion of a December 2014 article, by Richard A. Werner, in the scholarly journal International Review of Financial Analysis, entitled Can banks individually create money out of nothing? — The theories and the empirical evidence. I don't know what I can write to convince you how important this article is. The implications for economic and financial policies of government the world over are staggering - and in a good way. A very good way. Because anyone who looks at the simple evidence presented in this scholarly paper can reach no other conclusion than
  • we really don't need banks,
  • we don't need bankers,
  • we don't have to borrow money to fund government programs,
  • we don't have to cut social programs to balance government budgets,
A big tip of the hat is due to Jon Larson, at Real Economics, for highlighting Dr. Werner's article at RE. This is important material, because the cost of stopping climate change has been pegged by experts at $100 trillion, as I wrote a few weeks ago. And, as Larson explains:
...if guys like Tony and I are going to run around telling folks that their only hope for survival lies in spending $100 trillion for infrastructure upgrades, we owe it to them to explain where all that money will come from.
Actually, the source of that money is blindingly obvious—we will get those funds the same way modern society always gets those funds. We will create them out of thin air. But, scream the monetary Puritans, if you just create money willy-nilly out of thin air, what will stop us from becoming Zimbabwe with runaway inflation? Again the answer is obvious—don't create money will-nilly—only create money to pay for things that make the society richer.
There are three basic hypotheses of money creation that professional economists recognize. First, and probably the most widely accepted among professional economists today, is the financial intermediation theory of banking. This idea is that banks are merely intermediaries between savers and borrowers: the banks take in deposits, then when someone needs a loan, the banks lend them some of the money they have collected as deposits. Thus banks do not really create money, they just aggregate it and distribute it. Moreover, since any other institution can do pretty much the same thing - General Motors Acceptance Corp, for example, or General Electric's GE Capital, or even your local chain of grocery stores, then banks are really not that special, and all those fancy models of how the economy works can pretty safely ignore the existence of banks. Uh huh. Well, that's their theory, and they're sticking to it, even though it has, cough, cough, some difficulty in explaining why what happened in 2007-2008, uh, happened.

The second basic hypothesis is the fractional reserve theory of banking. This was the predominant hypothesis in economics from the 1930s to the late 1960s. In this view, banks are financial intermediaries, just like in the first view, but the banks as an aggregate system can create money by lending out some fraction above and beyond what they actually hold in deposits. For example, say a bank has $100 million in deposits. It can lend out $90 million and hold a reserve of $10 million. The borrower of the $90 million then deposits it in another bank, which in turn can now lend out $81 million while holding a reserve of $9 million. The borrower of the $81 million then deposits it in yet another bank, which, in turn, can now lend out $71.9 million while holding $8.1 million in reserve. And so on and so on, to the final iteration. In this way, the banking system as a whole can create new money, while any one individual bank cannot. Bank regulators can adjust the "reserve requirement" to either increase or decrease the amount of new money the banking system as a whole can create and lend out.

The third basic hypothesis of money creation is the credit creation theory of banking, and it holds that banks create money out of nothing when they grant a loan. The key to understanding why all this arcane banking stuff is so important is to realize that if the credit creation theory of banking is correct, then why does it necessarily have to be banks that do the creating? Why can't it be governments also? Interestingly, most professional economists - including Keynes - dismiss the credit creation theory of banking as the work of a lunatic fringe. But the credit creation theory of banking has been gaining adherents since the financial crashes of 2007-2008, as people like you and me have turned our attention to these matters that were previously the lonely province of professional economists. Or as Dr, Werner puts it:
Since the American and European banking crisis of 2007–8, the role of banks in the economy has increasingly attracted interest within and outside the disciplines of banking, finance and economics.
As the credit creation theory of banking has fought for acceptance, the debate has been rather furious at times: recall the controversy a few years ago over the idea of the U.S. national government erasing its budget deficit by minting a special coin with a face value of $1 trillion, and depositing it with the Federal Reserve. The thing is, as Dr. Werner dryly notes in his paper:
Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories.
So what Dr. Werner, a German-born economist at the University of Southampton in Britain, and some colleagues set out to do was to borrow a large sum of money from a bank, and track what actually happens in the bank's internal accounting and management systems.
The simplest possible test design is to examine a bank's internal accounting during the process of granting a bank loan. When all the necessary bank credit procedures have been undertaken (starting from ‘know-your-customer’ and anti-money laundering regulations to credit analysis, risk rating to the negotiation of the details of the loan contract) and signatures are exchanged on the bank loan, the borrower's current account will be credited with the amount of the loan. The key question is whether as a prerequisite of this accounting operation of booking the borrower's loan principal into their bank account the bank actually withdraws this amount from another account, resulting in a reduction of equal value in the balance of another entity — either drawing down reserves (as the fractional reserve theory maintains) or other funds (as the financial intermediation theory maintains). Should it be found that the bank is able to credit the borrower's account with the loan principal without having withdrawn money from any other internal or external account, or without transferring the money from any other source internally or externally, this would constitute prima facie evidence that the bank was able to create the loan principal out of nothing. In that case, the credit creation theory would be supported and the theory that the individual bank acts as an intermediary that needs to obtain savings or funds first, before being able to extend credit (whether in conformity with the fractional reserve theory or the financial intermediation theory), would be rejected.
Dr. Werner and his colleagues approached a number of banks in Europe, but all the big banks they asked declined to be involved in the experiment. All the big banks gave two basic reasons for their refusal: they were unwilling to risk compromising their internal management and IT systems, and the amount of money the team wanted to borrow - 200,000 Euros - was too small. I quote: "... the transactions volumes of the banks were so large that the planned test would be very difficult to conduct..." OK, then.
It was therefore decided to approach smaller banks, of which there are many in Germany (there are approximately 1700 local, mostly small banks in Germany). Each owns a full banking license and engages in universal banking, offering all major banking services, including stock trading and currencies, to the general public. A local bank with a balance sheet of approximately €3 billion was approached, as well as a bank with a balance sheet of about €700 million. Both declined on the same grounds as the larger banks, but one suggested that a much smaller bank might be able to oblige, pointing out the advantage that there would be fewer transactions booked during the day, allowing a clearer identification of the empirical test transaction. At the same time the empirical information value would not diminish with bank size, since all banks in the EU conform to identical European bank regulations.
Thus an introduction to Raiffeisenbank Wildenberg e.G., located in a small town in the district of Lower Bavaria was made....
It was agreed that the researcher would personally borrow €200,000 from the bank. The transaction was undertaken on 7 August 2013 in the offices of the bank in Wildenberg in Bavaria. Apart from the two (sole) directors, also the head (and sole staff) of the credit department, Mr. Ludwig Keil was present. The directors were bystanders not engaging in any action. Mr. Keil was the only bank representative involved in processing the loan from the start of the customer documentation, to the signing of the loan contract and finally paying out the loan into the borrower's account. The entire transaction, including the manual entries made by Mr. Keil, was filmed. The screens of the bank's internal IT terminal were also photographed. Moreover, a team from the BBC was present and filmed the central part of the empirical bank credit experiment (Reporter Alistair Fee and a cameraman).
Dr. Werner presents the full results in his article, including
  • a numbered sequence of the steps the bank took in reviewing and granting the loan, then crediting the loan amount to the researcher's account;
  • the bank's balance sheet the day before the loan was made, and the balance sheet the day after the loan;
  • the key asset positions of the bank the day before the loan, and the key asset positions the day after;
  • the key liability positions for the same periods;
  • the account summary table for the new account of the borrower;
  • a standard T-account of the transaction from the borrower's perspective.
The critical question is: where did Raiffeisenbank Wildenberg e.G. obtain the funds from that the borrower (researcher) was credited with?
Well, you can probably guess the result of this very, very interesting experiment. It turns out that the bank neither took the €200,000 from the funds it already had as deposits, nor did it obtain €200,000 from a regional or national banking authority, or from the European Central Bank. The €200,000 was simply credited to the borrower's account. Period. The €200,000, in other words, was, created out of thin air. I will close by quoting from the U.S. Constitution.
Article I, Section 8, Clause 5: The Congress shall have Power…To coin Money, [and] regulate the Value thereof...
Aargh... if only the Framers had used the word "create" instead of "coin"! Then it would be much more difficult for the oligarchs who now control the creation and allocation of money and credit, to convince the chowderheads on the right that "government has to live within its means" is our big problem, instead of what our big problem really is: the creation and allocation of money and credit is being misused and abused by oligarchs who speculate and arbitrage with that new money and credit, instead of using it for something economically productive.

Better than a new Cold War?

As someone who can vividly remember some of the more gruesome details of the Cold War, (like when UN ambassador Adlai Stevenson demanded his USSR counterpart immediately answer a question about those missiles in Cuba, "Don't wait for the translation," he shouted) I could do without a rerun of that madness.

The other day, Candy Crowley of CNN interviewed Obama.  In the interview, she gave him a chance to respond to critics who had been praising Putin for his leadership qualities, while mocking Obama for his lack thereof. The implication, Crowley said, was that Obama was a sort of foreign policy nitwit, who had been “rolled” by the Russian president.

Obama then had this to say…
“There was a spate of stories about ‘He was the chess master, outmanoeuvring the West and outmanoeuvring Mr. Obama’ and this and that and the other.”

“Right now, he’s presiding over the collapse of his currency, a major financial crisis and a huge economic contraction. That doesn’t sound like somebody who had rolled me, or the United States of America.”
Ah yes!  Trash talk.  BIG improvement over the Cold War.  And fortunately, this doesn't change anything.  While Russia has been busy shaking up the systems of global alliances, Obama has only managed to team up with some currency speculators.  Mr. Orlov below describes how well Russia is doing in spite of being attacked by the big guns of high finance.  Me, I would much rather have Putin's problems than Obama's.

From Iraq to Moscow – The US Just Keeps on Winning!

Dmitry Orlov 10 DEC 2014

This is an abridged version of an article that originally appeared at Club Orlov

On the wall of George Orwell's Ministry of Truth from his novel 1984 there were three slogans:


It occurred to me that these apply just a little bit too well to the way the Washington, DC establishment operates.

War certainly is peace: just look at how peaceful Iraq, Afghanistan, Yemen, Libya, Syria and the Ukraine have become thanks to their peacemaking efforts. The only departures from absolute peacefulness which might be taking place there have to do with the fact that there are some people still alive there.

This should resolve itself on its own, especially in the Ukraine, where the people now face the prospect of surviving a cold winter without heat or electricity.

Freedom is indeed slavery: to enjoy their “freedom,” Americans spend most of their lives working off debt, be it a mortgage, medical debt incurred due to an illness, or student loans.

And what keeps it all happening is the fact that ignorance is indeed strength; if it wasn't for the Americans' overwhelming, willful ignorance of both their own affairs and the world at large, they would have rebelled by now, and the whole house of cards would have come tumbling down.

But there is a fourth slogan they need to add to the wall of Washington's Ministry of Truth. It is this:


The preposterous nature of the first three slogans can be finessed away in various ways. It's awkward to claim that American involvements in Iraq, Afghanistan, Yemen, Libya, Syria or the Ukraine have produced “peace,” exactly, but various lying officials and assorted national teletubbies still find it possible to claim that they somehow averted worse (totally made-up) dangers like Iraqi/Syrian “weapons of mass destruction.” What they have produced is endless war financed by runaway debt which is leading to economic ruin. But ignorance helps a lot here.

Likewise, it is possible, though a bit awkward, to claim that slavery is freedom—because, you see, once you have discharged your duties as a slave, can go home and read whatever crazy nonsense you want on some blog or other.

With ignorance, you don't even have to make the case: ignorant people are some of the most knowledgeable people on earth—according to them.

But it is very hard to claim that defeat is victory, and herein lies a great challenge for the Washington, DC establishment.

When they are victorious, your leaders get to have their way with the world; when they are defeated, the world has its way with them. This is something that is hard to hide: your leaders say what it is they want to do; and then they either succeed at it or fail.

When they fail, they still try to call it a success, but if you look at their original statements of purpose, and then the results, and the two don't match at all, then it looks just a bit like a defeat-ish sort of thingy no matter how they writhe and squirm and twist.

This is a good thing, because with all the propaganda the Ministry of Truth puts out, it is hard for the average person to ascertain the nature of the “facts on the ground.”

But when it comes to victory vs. defeat, you can usually take it straight from the horse's rectum. Yes, the Ministry's public relations consultants can still claim that “we forced the enemy to give us a free deep-tissue massage of our glutei maximi,” but a precocious 8th-grader can still decode that to “We got our asses kicked.”

So, allow me to enumerate some American victories. Or should I say defeats? Your choice; the two are the same.

Thanks to the trillion or so spent on the war effort, the 1.5 million Iraqi casualties, and the 5,000 dead US soldiers, there is no longer any al Qaeda in Iraq now (just like there was under Saddam Hussein) and the country is free and democratic.

Thanks to many years of continuous effort which cost well over half a trillion dollars and the lives of 3500 or so coalition soldiers, the Taleban in Afghanistan have been vanquished and the country is now at peace.

The Syrian regime has been overthrown and Syria is now peaceful and democratic, and not at all a war-torn basket case that has produced over a million refugees, a large part of it ruled by Islamic militants that are too radical even for al Qaeda.

Overall, the problem of Islamic extremism has been dealt with once for all, and George W. Bush's “Islamofascists” (remember that term?) are but a vague memory. ISIS or ISIL or the Islamic State are something else entirely, plus us bombing them sporadically at great expense has “degraded” them a tiny bit... maybe.

Thanks to a perfectly legal and very necessary US-managed coup, Ukraine is on its way to being a stable and prosperous member of the EU and NATO, and the freedom-loving Ukrainians are no longer at all dependent on Russian gas, coal and nuclear fuel for being able to merely survive the winter of 2014-15, or on Russian good will to send in humanitarian relief convoys, house and feed the refugees from their civil war, or broker their peace agreements with each other.

In accordance with our grand geopolitical strategy for eternal world domination, we successfully kicked Russia out of Crimea and are busy building a huge NATO military base there to make sure that Russia never becomes a great world power again but is forced to comply with our every whim.

Thanks to our relentless diplomatic efforts, Russia is now completely isolated, which is why it can't be constantly signing gigantic trade agreements with countries around the world or championing the cause of non-western nations who don't like being pushed around by the west and have no desire to westernize.

Our sanctions have really hurt Russia, and not at all the EU which didn't lose a huge export market and is not at all at risk of losing access to Russia's natural gas which it doesn't need anyway. Nor did they provide any sort of a huge protectionist benefit to Russia's domestic producers, or a big new export market to our economic rivals.

Regime change in Moscow is a white ribbon's throw away, and our expensively nurtured political pets inside Russia are more popular than ever and are feeling all sorts of love from the Russian people. After all, fewer than 90% of Russians respect and support Putin for the great things he has achieved for them, so our stooges like Khodorkovsky or Kasparov should have no problem getting at least 1% in the next presidential elections, sending them straight into the Kremlin.

Thanks to our relentless political pressure, Putin is now a chastised man, ready to be reasonable and bend to our will, and not at all saying things like “This will never happen!” in an internationally televised annual address to his nation's elected leaders. In any case, nobody listens to his speeches because our national media doesn't need cover them because they are so long and boring.

...and, last but not least...

America is the world's indispensable nation, world's (second) greatest economic power (but rising fast), and American leadership is respected throughout the world. When President Obama said so in a recent speech he gave in China, the audience did not at all laugh out loud right in his face, roll their eyes, make faces or move their heads side to side slowly while frowning.

How can you avoid recognizing the importance of such things, and the fact that they spell DEFEAT? Easy! Ignorance to the rescue!

Ignorance is not just strength—it is the most awesome force in the universe. Consider this: knowledge is always limited and specific, but ignorance is infinite and completely general; knowledge is hard to convey, and travels no faster than the speed of light, but ignorance is instantaneous at all points in the known and unknown universe, including alternate universes and dimensions of whose existence we are entirely ignorant.

In short, there is a limit to how much you can know, but there is no limit at all to how much you don't know but think you do!

With a history that fake, the American Ministry of Truth may yet manage to project it into the future as well. They may produce a level of ignorance so astonishingly high that Americans at large won't know that they have been defeated, thinking that the torrential downpour of the world's rancid slops raining down on their heads is God's rain, and being thankful for it.

Unless, that is, enough Americans wake up and start making the word DEFEAT part of the national vocabulary.

This is not a exceptional nation, not an indispensable nation, but a defeated one. Defeated by their own hands, mind you, because nobody particularly went out of their way to defeat them. They showed up to get beaten, over and over again, until they got what they came for.

Now, defeat has proven to be a great learning experience to many countries that then went on to be quite successful: Germany (on second try), Japan, Russia after the Cold War...

Of course, the first step in that learning process is to admit defeat. But if you don't want to do that, that's OK, because there is always ignorance to give you all the strength you need. more

Water quality—controlling the runoff

It would be easy to assume that Minnesota would not be a place for water problems—either quantity or quality.  I grew up in a state where drinking water directly out of a creek or lake was considered a normal thing to do.  And most municipal water systems regularly top expensive bottled water in most measures of quality—including taste.  But these days, I am hanging out with folks making videos about Minnesota's water problems and the takeaway is: those problems are severe.

The biggest single problem is that agricultural runoff is sending so much fertilizers and irreplaceable topsoil down the rivers that our farms are significant contributors to the dead zone in the Gulf of Mexico.  And while its the urbanites who seem most upset about these problems—and are certainly most organized—the farmers aren't any happier about losing their topsoil patrimony and expensive fertilizers to runoff.  So it would appear that everyone is on the same page. NOT!

From the farmer's perspective, this is a practical problem they would have solved long ago if they knew how and could afford new practices.  But the fact is, it is practically impossible to plant row crops and reduce run-off to zero.  So for the farmer, the whole approach is is to manage the farm using the best conservation practices they can afford.  Some of these farms have been in families for six generation so we are not talking about a slumlord mentality here.  And since the farmers must make all the investment and do all the work, what they believe is extremely important.

The environmentalists believe those (filthy, disgusting) farmers aren't trying hard enough.  They need stricter regulation with monitoring done by drones.  Water quality will magically improve if only harsher laws are written and passed.  How runoff will be actually reduced is not their worry.  They have a set of desired changes that cannot be implemented without bankrupting Midwest agriculture but if anyone fails to try their sometimes expensive fixes, it will only confirm their belief that the farmers aren't trying hard enough.

The last I heard, some farmers are researching the best methods for shooting down drones.  I assume matters will be solved before folks resort to gunfire, but there is a lot of anger out there.  And why not?—it is a perfect example of a Producer-Leisure Class dispute and that battle has been raging since the invention of agriculture.

Start Worrying About Your Tap Water 

By James Greiff, Bloomberg View, DEC 8, 2014

Americans take for granted that every time they turn the faucet, clean water will pour out.

Yet, cracks are appearing in the system that ensures the supply of safe, drinkable tap water, and the efforts to repair the damage are increasingly contentious. Exhibit A is a set of rules proposed in April by the Environmental Protection Agency called Waters of the U.S., which would extend protections to the sources of drinking water for more than 100 million Americans.

These common-sense measures to guarantee basic health and safety have been met with a ferocious campaign from opponents who often resort to willful deception and half-truths. When they aren't misleading, the complaints read like boilerplate from the business lobby: the costs are excessive, the rules too complex and government is intruding where it has no business.

The signs of deteriorating water quality are particularly acute in agricultural areas. For example, the Des Moines, Iowa, water works is having trouble controlling the amount of nitrates in local drinking water. This pollutant exceeded permissible levels of 10 milligrams per liter in one of the utility's main water sources, according to a September letter from water works manager William G. Stowe to the Des Moines Register. Nitrates are especially toxic to infants and at that level can cause blue baby syndrome -- a form of oxygen starvation.

Des Moines's water system spent an additional $1 million in 2013 to filter out nitrates, Stowe wrote, and costs will inevitably rise. The reasons for the contamination are clear: Farms in Iowa and elsewhere can skirt regulations to control the runoff of noxious chemicals derived from fertilizers into rivers. As Stowe wrote:
The intensive corn-soybean cropping system that occupies much of our watersheds `requires' massive amounts of fertilizer applications and agricultural tile drainage to maximize yields. Application of unlimited manure from growing animal feeding operations and commercial fertilizer and the ease in transporting these pollutants to our rivers through drainage systems has significantly, and increasingly, degraded water quality.

Until industrial agriculture is no longer exempt from regulations needed to protect water quality, we will continue to see water quality degrade and our consumers will continue to pay.
The new rules seek to address the loophole. They would ensure existing regulations apply to protected bodies of water, limiting how much pollution is allowed and establishing a permitting process so that industry would have clear guidelines to establish waste outflows.

Opponents seem to have forgotten that the EPA's proposed rules were initially sought by agricultural interests, real-estate developers and state and local governments as a way to clarify regulatory ambiguity, caused, in part, by a pair of Supreme Court rulings. Waters of the U.S. would use technical and scientific analysis to say where the Clean Water Act applies and where it doesn't, including rivers and streams where farms now discharge polluted runoff.

The CWA itself was adopted in 1972 to limit using bodies of water such as New York Harbor or the Cuyahoga River in Cleveland, famed for repeatedly catching fire, as industrial dumping grounds. And the law did much of what it was supposed to do. Today, the Cuyahogasupports aquatic life again and New York Harbor is cleaner than it's been in more than a century.

Trouble is the act has proved fairly easy to circumvent: It has been interpreted as applying to "navigable" waters. That reading would mean that polluters only face clear limits on dumping waste into waterways that allow ships, but as soon as a river gets too shallow, those constraints are ill-defined.

Waters of the U.S. would specify that the CWA extends to streams and wetlands that drain into larger bodies of water. It's a logical effort to control so-called externalities -- in this case, when the expense and harm caused by a polluter are borne by the public.

Some of the opposition to the rules is based on claims that the costs would be too burdensome for industries such as ranching, farming, energy and infrastructure construction. This is worth debating, though an EPA cost-benefit analysis suggests that, on balance, the rules would be an economic plus. The costs would involve compliance and pollution mitigation, while the benefits would include greater recreational uses of waterways, reduced contamination and sedimentation, less flooding and erosion and lower costs for enforcing existing rules.

It's a shame that rather than seeking an honest discussion, some opponents are relying on a misinformation campaign that contains gross distortions and outright falsehoods. To cite a few:
  • Every ditch would be subject to EPA oversight, as would puddles on homeowners' driveways and schoolyard playgrounds.
  • The rules give the federal government control of all farming and real-estate development.
  • The enforcement of the rules would amount to the biggest land grab in U.S. history.
If you want to see a corrective to this hyperbole, the EPA has developed a page of rebuttals called "Ditch the Myth."

Regrettably, and perhaps predictably, the House of Representatives heard the plaints of industry. In September it passed the Waters of the U.S. Regulatory Overreach Protection Act -- the title is self-explanatory -- which would block the rules from formal adoption. The bill passed with almost all Republicans in favor and most Democrats opposed.

Maybe the rules are cumbersome and would impose unsustainable costs that the EPA hasn't considered, as the opponents claim. But if a campaign of falsehoods is allowed to prevail, the tradeoff could be far worse: a loss of trust in the water that comes out of Americans' faucets. more