Video: Attack On Libertarianism Using Somalia

Here is a terse video attacking Libertarianism which misleadingly uses Somalia as a "Libertarian's Paradise". (hat tip Bob Wenzel)

Why the video is short?

Because it deliberately applies the “cum hoc ergo propter hoc” or correlation is causation fallacy. The video's implication: Because Somalia has no government therefore she is poor PERIOD. By making it short the video eludes the required proofs. So this easily would dupe the ignorant.

Again, reference point matters.

I would like to say that Somalia IS NO LIBERTARIAN UTOPIA. But we certainly can learn some lessons from her experiences.

Yet it is very important to point out that even before Somalia overthrew her government she has already been poor. So it would be wrong to adduce poverty to statelessness.

And the reason for the impoverished state is that Somalia had been ruled by a nasty communist regime; the Somali Democratic Party (1969-1991). So essentially Somalia has swung from the extremes of total government to statelessness.

So the appropriate question is “has Somalia been better off at her current state or with the communists?”

The obvious answer is that Somalis said NO to communism.

Here is a briefer of Somalia from Wikipedia,

Somalia, from 1991 to 2006, is cited as a real-world example of a stateless society and legal system. Since the fall of Siad Barre's government in January 1991, there had been no permanent national government in Somalia until the current Transitional Federal Government. Large areas of the country such as Puntland, and Galmudug are internationally unrecognized autonomous regions, while Somaliland is a de facto sovereign state. The remaining areas, including the capital Mogadishu, were divided into smaller territories ruled by competing warlords. In many areas there were (and still are) no formal regulations or licensing requirements for businesses and individuals.

One would ask, if Somalis has been better off why the civil wars?

Again the Wikipedia,

With worsening conditions in Somalia, rebels of the United Somali Congress (USC) led by Mohamed Farrah Aidid attacked Mogadishu and on January 26, 1991, Barre's government was taken out of power.

In May 1991, the northernwestern Somaliland region of Somalia declared its independence. This Isaaq-dominated governing zone is not recognized by any major international organization or country, although it has remained more stable and certainly more peaceful than the rest of Somalia, neighboring Puntland notwithstanding.

UN Security Council Resolution 794 was unanimously passed on December 3, 1992, which approved a coalition of United Nations peacekeepers led by the United States to form UNITAF, tasked with ensuring humanitarian aid being distributed and peace being established in Somalia until the humanitarian efforts were transferred to the UN. The UN humanitarian troops landed in 1993 and started a two-year effort (primarily in the south), known as UNOSOM II, to alleviate famine conditions.

Many Somalis opposed the foreign presence. In October, several gun battles in Mogadishu between local gunmen and peacekeepers resulted in the death of 24 Pakistanis and 19 US soldiers (total US deaths were 31). Most of the Americans were killed in the Battle of Mogadishu. The incident later became the basis for the book and movie Black Hawk Down. The UN withdrew on March 3, 1995, having suffered more significant casualties. Order in Somalia still has not been restored.

Yet again another secession from Somalia took place in the northeastern region. The self-proclaimed state took the name Puntland after declaring "temporary" independence in 1998, with the intention that it would participate in any Somali reconciliation to form a new central government.

A third secession occurred in 1998 with the declaration of the state of Jubaland. The territory of Jubaland is now encompassed by the state of Southwestern Somalia and its status is unclear.

A fourth self-proclaimed entity led by the Rahanweyn Resistance Army (RRA) was set up in 1999, along the lines of the Puntland. That "temporary" secession was reasserted in 2002. This led to the autonomy of Southwestern Somalia. The RRA had originally set up an autonomous administration over the Bay and Bakool regions of south and central Somalia in 1999.

So we have a combination of foreign meddling and competing tribes. We might say that foreign meddling to impose a national government may have been a significant factor in creating tribal frictions.

We see such relevance in the repeated foreign incursions on Somalia’s fishing grounds which partly depleted local fisherman’s livelihood that has spawned famously notorious Pirate Industry which I earlier wrote about.

How about today?

Again the Wikipedia, (bold highlights mine)

The various Somali militias had at that point developed into security agencies for hire. Due to that development, security had much improved and an economic rebound occurred. Somalia was then arguably partly in a state of anarcho-capitalism, where all services were provided by private ventures. According to the CIA, Somalia's telecommunication firms provide wireless services in most major cities and offer the lowest international call rates on the continent.

In 2000, Abdiqasim Salad Hassan was selected to lead the Transitional National Government (TNG).

This was followed in 2004 by the establishment of the Transitional Federal Government (TFG) of the Republic of Somalia, the most recent attempt to restore national institutions to the nation after the 1991 collapse of the Barre regime and the ensuing civil war. On October 10, 2004, Somali parliament members elected Abdullahi Yusuf Ahmed, the former President of Puntland, to be the next president and head of the TFG. The other institutions adopted at this time were the Transitional Federal Charter and the selection of a 275-member Transitional Federal Parliament.

Though internationally recognized, the TFG's support in Somalia was waning until the United States-backed 2006 intervention by the Ethiopian military, which helped drive out the rival Islamic Courts Union (ICU) in Mogadishu and solidify the TFG's rule. Following this defeat, the ICU splintered into several different factions. Some of the more radical elements, including Al-Shabaab, regrouped to continue their insurgency against the TFG and oppose the Ethiopian military's presence in Somalia. Throughout 2007 and 2008, Al-Shabaab scored military victories, seizing control of key towns and ports in both central and southern Somalia. At the end of 2008, the group had captured Baidoa but not Mogadishu. By January 2009, Al-Shabaab and other militias had managed to force the Ethiopian troops to withdraw from the country, leaving behind an underequipped African Union (AU) peacekeeping force.

Over the next few months, a new President was elected from amongst the more moderate Islamists, and the Transitional Federal Government, with the help of a small team of African Union troops, began a counteroffensive in February 2009 to retake control of the southern half of the country. To solidify its control of southern Somalia, the TFG formed an alliance with the Islamic Courts Union and other members of the Alliance for the Re-liberation of Somalia. Furthermore, Al-Shabaab and Hizbul Islam, the two main Islamist groups in opposition, began to fight amongst themselves in mid 2009.

As a truce, in March 2009, Somalia's newly established coalition government announced that it would implement shari'a as the nation's official judicial system.

As one would note, there has been so many and continuous foreign meddling in Somalia in the attempt to foist a national government, on what seems to be a society averse to government.

As Professor Ben Powell writes, (bold highlights mine)

The Somalis again have united against this attempt by outsiders to force a government on them. Unfortunately, the result has been an increase in the power of the Union of Islamic Courts (UIC), who, since June, has gained control over much of southern Somalia, including the former capital, Mogadishu. An estimated 600 militias have joined the UIC since the TFG moved into Baidoa in February.

Every government of Somalia has exploited the country’s population. International meddling created the TFG and, unintentionally, a more powerful UIC. If either group were to become a true government, the population likely will once again become oppressed. In the meantime, the two groups appear headed back into civil war, which will likely result in the kind of chaos the country has not experienced since 1995.

Prime Minister Gedi of the TFG recently said, “It is totally misguided not to accept the government. The alternative is chaos.” Unfortunately, he’s got it exactly backwards. It is, in fact, the attempts to impose a government on Somalia that create chaos.

Aside from the wireless services which offers the “lowest international call rates on the continent” as cited by above by Wikipedia, the current economy of the 9.1 m population of Somalia, again as tersely described by Wikipedia, (bold emphasis mine)

Although it states that no reliable statistics are available for the period in question, the United Nations claims that Somalia, already one of the poorest countries in the world, has become even poorer as a result of civil war. However, the CIA Factbook maintains that gains were made during the early 2000s; "despite the seeming anarchy, Somalia's service sector has managed to survive and grow. Mogadishu's main market offers a variety of goods from food to the newest electronic gadgets. Hotels continue to operate, and militias provide security."

When extreme poverty (percentage of individuals living on less than PPP$1 a day) was last measured by the World Bank in 1998, Somalia fared better than many other countries in Africa, over some of whom Somalia also had superior infrastructure. The CIA World Factbook counsels that "Statistics on Somalia's GDP, growth, per capita income, and inflation should be viewed skeptically", while estimating Somalia's GDP per capita at $600.

In the absence of a Somali state and its institutions, the private sector grew "impressively" according to the World Bank in 2003, particularly in the areas of trade, commerce, transport, remittance and infrastructure services and in the primary sectors, notably in livestock, agriculture and fisheries. In 2007, the United Nations reported that the country's service industry is also thriving. Economist Peter T. Leeson, in an event study of "the impact of anarchy on Somali development", found that "[t]he data suggest that while the state of this development remains low, on nearly all of 18 key indicators that allow pre- and post-stateless welfare comparisons, Somalis are better off under anarchy than they were under government." Powell et al. concur that in absolute terms, Somalia’s living standards have improved and compare favorably with many existing African states, but also report that living standards have often improved "relative to other African countries since the collapse of the Somali central government."

It would be a nightmare for governments and politicians around the world to see a stateless society succeed. So the intuitive response is to view data from a stateless government “sceptically”.

Just imagine if Somalia should succeed then there could be mass revolutions to overthrow governments around the world. That's something governments won't want to happen.

So obviously there will always be a reason to keep Somalia poor.

And this video is part of such propaganda.

Because We Are Uncertain About The Future, We Speculate

Below is an example of a deceptive article which attempts to pin the blame of surging commodity prices, particularly of onion, on “speculators”.

Wall Street Journal Blog writes,

Shed a tear for the onion. While prices of many agricultural commodities have soared, farmers received just 7.49 cents for a pound of onions in April, down from 29.9 cents a year ago, in part due to a big harvest. Futures trading in onions — unlike other farm goods — is banned, which prevents the pungent bulb from being used as an investment vehicle.

Why is this article misleading?

Because the article tries to demonstrate that falling prices equates to the absence of speculators—a post hoc ergo propter hoc fallacy.

As we always say here, reference point matters.

The chart in that article virtually ignores showing how volatile prices of onions are.

Professor Mark Perry’s charts gives us a much better perspective because his charts deal with the bigger picture.

It is true today that onion prices have been falling whereas oil prices have been moving higher (as shown by above window chart), but prices of onions have been far more volatile than oil over the span of 11 years.

And this can be measured based on the differences of standard deviations of monthly price changes, as shown in the lower window, where price volatility of oil (red line) has been greatly lesser than of onions (blue line) from 2000-2011.

Excessively volatile prices puts farmers or producers at bigger risks because of the uncertainty behind estimates of price trends which guides their production process.

Professor Perry quotes this Fortune article. (bold highlights mine)

Before the U.S. Commodity Futures Trading Commission starts scrutinizing the role that speculators may have played in driving up fuel and food prices, investigators may want to take a look at price swings in a commodity not in today's news: onions.

The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place.

Speculators provide more liquidity by risking money on buying and selling to arbitrage from uncertainty.

Yet what speculators do isn’t risk free. In other words, speculators are subject to the rigorous discipline of the markets. Because as much as they profit, they lose money too!

By providing liquidity they give markets more pricing efficiency. This leads to better allocation of resources with the option of being backed by hedging tools.

Importantly, because producers don’t know the future, they are speculating too.

The issue here is uncertainty. Because we are uncertain of the future, thus we speculate.

The assumption that markets can exist without speculators fails to consider why markets exist at all.

Where markets that are not liquid, they are, as the Fortune magazine points out, subject to fierce price swings and less reliable of price signals that heightens risks of producers.

As Ludwig von Mises wrote, (bold highlights mine)

In the real world acting man is faced with the fact that there are fellow men acting on their own behalf as he himself acts. The necessity to adjust his actions to other people’s actions makes him a speculator for whom success and failure depend on his greater or lesser ability to understand the future. Every action is speculation. There is in the course of human events no stability and consequently no safety.

Anyone who says they are certain about the future should put their money where their mouth is.

Iran’s Minister Claims Osama Bin Laden “Died of Illness Sometime Ago”

Iran Intelligence Minister claims that Osama Bin Laden has long been dead.

From the Russia’s RIANOVOSTI.com (pointer to Tyler Durden)

Iranian Intelligence Minister Heidar Moslehi said Tehran has evidence that al-Qaeda leader Osama bin Laden had died of disease long before the United States' alleged raid on the terrorist, FARS Iranian news agency said.

Bin Laden was killed on May 2 in the Pakistani town of Abbottabad, north of the capital Islamabad, during a raid by U.S. Navy Seals.

"We have accurate information that bin Laden died of illness some time ago," Moslehi said.

Bin Laden's body was buried at sea less than 24 hours after the operation.

"If the US military and intelligence apparatus have really arrested or killed bin Laden, why don't they show him (his dead body) why have they thrown his corpse into the sea?" Moslehi continued.

As I have been saying, Bin Laden’s death will produce more questions than answers.

Harvard’s Greg Mankiw Channels F.A. Hayek

It’s rare to see experts of high stature exhibit meekness.

Harvard Professor and former chairman of President Bush's Council of Economic Advisors Greg Mankiw writing in a New York Times column channels F.A. Hayek. (pointer to Professor Russ Roberts) [bold emphasis mine]

AFTER more than a quarter-century as a professional economist, I have a confession to make: There is a lot I don’t know about the economy. Indeed, the area of economics where I have devoted most of my energy and attention — the ups and downs of the business cycle — is where I find myself most often confronting important questions without obvious answers.

Now, if you follow economic commentary in the newspapers or the blogosphere, you have probably not run into many humble economists. By its nature, punditry craves attention, which is easier to attract with certainties than with equivocation.

But that certitude reflects bravado more often than true knowledge.

This exactly is the knowledge problem as Hayek pointed out long ago, which I keep talking about in this space.

F. A. Hayek in The Use of Knowledge in Society wrote, (bold emphasis mine)

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

My salute to Mr. Mankiw.

Blessed are the meek for they shall inherit the earth.

It’s Now A War On Commodities: Credit Margins On Oil and Gasoline Products Raised!

The war on precious metals has expanded. It’s now a war on commodities.

Considering the ‘Pearl Harbor’ effect or the initial success of interventions with silver, the series of price manipulation will now include hikes in credit margins of oil and gasoline products.

According to the CBS Marketwatch, (bold highlights mine)

U.S. exchange operator CME Group CME +1.17% said Monday it is raising the margin requirements for trade in a wide range of oil products, effective Tuesday. The requirement for a new position in benchmark New York Mercantile Exchange crude contracts rises to $8,438 from $6,750 previously, with margins also higher for contracts in benchmark Brent crude, gasoline and other products. The hike was the first of its kind since March 4, according to TheStreet.com. June crude oil CLM11 -0.62% traded at $101.95 a barrel early in Tuesday's electronic session, down 56 cents, or 0.6%, from the close of floor trading Monday on the New York Mercantile Exchange.

It would be so naive for some to believe that this equates to “mitigating” the effects of loose monetary policies.

Commodity traders suffer undue losses by the rigging the rules of the game by regulators (I know they are private regulators but they appear to be working in behalf of the government).

This is equivalent of robbing commodity traders of their property rights...just to justify current policies.

What if the US government decides to apply the same to the stock market?

Yet this New York Times article says that CME officials, in raising credit margins, have not been aware of the consequences of these interferences on the commodity markets. (bold highlights mine)

On April 25, half a dozen officials from the CME Group, which runs many of the nation’s commodities exchanges, met via videophone to discuss the eye-popping rise in the price of silver, which had doubled in just six months to about $47 a troy ounce.

They didn’t realize it, but they were about to take the first step toward popping a bubble in global commodities prices.

Worried about the speculative run-up and the increased volatility of the silver market, the officials concluded that it was time to raise the amount of money that buyers and sellers had to put down as collateral to guarantee their trades. The first increase in so-called margin requirements took hold the next day, effectively making it more expensive for speculators and other kinds of traders to play in the market...

This is unalloyed hogwash, if not a sheer self-contradiction in reporting. Yes this smells more and more of the Fed's 'signaling channel' or state engineered propaganda aimed at manipulating inflation expectations.

Raising credit margins for FIVE times (or more than double the existing rate) signifies as deliberate measures to curb the price acceleration of silver.

It’s silliness to say that the effect of this measure had not been known and that officials acted on this out of worries.

Also, the fact that they are now expanding coverage means officials see the initial effects as a policy success, which it hopes to replicate on other markets. In short, path dependency.

Even more nonsensical is to the attribution of a commodity bubble.

What should be underscored as a bubble is the bubblehead policies to justify more intervention.

It is even foolish to believe that price controls or manipulation will continuously work under the current regime which promotes such ‘speculative’ dynamics.

That’s because inflationism induces a flight to real assets. For as long as governments, most especially the US government, continue to debase her currency, people will seek shelter through commodities via the marketplace.

And further is the asinine impression that markets operate in inertia.

The markets function as a discounting mechanism. Since the market has priced in new information or that it is now aware of the rigging of game by political operators, the market has begun to adjust accordingly.

Proof of this is that despite the announcement of increasing oil margins, oil, silver and gold surged yesterday!

What this only means, at this early state, that price manipulation efforts appear to be wearing off! And so goes the ‘mitigation effects’.

As Ayn Rand aptly wrote

When you see that trading is done, not by consent, but by compulsion -- when you see that in order to produce, you need to obtain permission from men who produce nothing -- when you see money flowing to those who deal, not in goods, but in favors -- when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you -- when you see corruption being rewarded and honesty becoming a self-sacrifice -- you may know that your society is doomed.

Attacking the symptoms, engendered, fostered and nurtured by policymakers, won’t solve or cover the problem. Instead, it is a sign of societal degeneration.

Medical Marijuana Cures Cancer, Lost Opportunity Due to War on Drugs

Marijuana is an illegal substance which governments around the world have tried to prohibit and control unsuccessfully. Yet unknown to many, despite the popular harmful effects arising from its recreational overuse, Marijuana is said to have healthy attributes.

Dr. Mercola writes, (bold highlights mine)

No matter what you call it, cannabis and its range of varieties, including marijuana, is said to be among the safest medicinal substances known, and there are nearly 25 million Americans who have health conditions that medical marijuana could reportedly treat (and this figure only includes those living in states where its use is currently legal), according to The State of the Medical Marijuana Markets 2011-- yet fewer than 800,000 are taking part.

Dr. Mercola writes more about Marijuana basics,

Cannabis, or as it's more commonly known marijuana, has been used for its medicinal properties for thousands of years. It's been heralded as a "cure-all," revered for its healing properties that not only help relieve pain but also have been highlighted as a potential cancer cure.

Before I delve into the intriguing controversy surrounding medical marijuana, it's important to note that the plants referred to as hemp and marijuana are not the same. Both are members of the Cannabis sativa plant species, but they are two distinct varieties.

Marijuana typically is high in THC (delta-9 tetrahydrocannabinol) -- the compound responsible for the plant's notorious psychoactive effect -- and low in CBD (cannabidiol) content. Both THC and CBD are known as cannabinoids, which interact with your body in a unique way I'll describe later.

What's interesting, however, is that CBD has been shown to block the effect of THC in the nervous system. So, marijuana plants are typically high in THC and low in CBD, which maximizes their psychoactive effects.

Hemp, on the other hand, is typically high in CBD and low in THC, as it is bred to maximize its fiber, seeds and oil, the items for which it is most commonly used. For more information on the difference between hemp and marijuana, here is a comprehensive article on the topic from the North American Industrial Hemp Council (NAIHC).

Ironically, despite their differences, the U.S. Drug Enforcement Agency (DEA) classifies all C. sativa varieties as "marijuana," according to NAIHC.

This is why the United States is the only industrialized nation where growing industrial hemp is illegal. Well, technically it is not illegal, but growing it requires a permit from the DEA – and it is reportedly almost impossible to get one.

This is a shame for a variety of reasons, including:

Hemp is healthy: Hemp seeds pack a powerful nutritional punch. Two tablespoons of shelled hemp seeds contain about 11 grams of protein and 2 grams of unsaturated omega-3 fatty acids. And, as TreeHugger reported, hemp seeds have a " "perfectly balanced 1:3 ratio of naturally-occurring omega-3 and omega-6 essential fatty acids...unlike other seeds and nutritional oils, such as flax..."

Hemp is good for the economy: The total retail value of North American hemp products was valued at around $400 million in 2009, but U.S. farmers are unable to benefit from this since hemp products are imported.

In the US, a desperate father secretly administered cannabis oil to his 2 year old son who suffered from brain cancer and found his son ‘cured’

Reports the Daily Mail,

A desperate father whose son was suffering from a life-threatening brain tumour has revealed he gave him cannabis oil to ease his pain. And he has now apparently made a full recovery.

Cash Hyde, known as Cashy, was a perfectly healthy baby when he was born in June 2008 but became sick shortly before his second birthday.

At first he was misdiagnosed with glandular fever before his parents Mike and Kalli, from Missoula in Montana, were given the devastating news he had a serious brain tumour.

The little boy had to have arduous chemotherapy treatment to reduce the growth, which had drastic side effects including seizures and a blood infection.

His distraught parents were repeatedly told he was likely to succumb to the illness because the condition was so bad.

After one bout of high-dose chemotherapy, Cash was so weak he could not lift his head and was too sick to eat any solid food for 40 days.

It was at this point that Mr Hyde decided to take action and go down the route of medical marijuana to try to help his young son.

This has been one of the unfortunate unseen side effects of the war on drugs: what could have been used to expand the horizons of medical advancement has been stymied by populist regulations which only have benefited some vested interest groups.

As Dr. Mercola points out anew, (itlalics his)

Even a quick review of the data suggests that cannabis deserves more than a passing glance as a potential treatment for various diseases. But in the United States, these studies are not being done.

According to a report by Americans for Safe Access:

"In the past three decades, there has been an explosion of international studies designed to investigate the therapeutic value of cannabis (marijuana).

However, drastic restrictions on research in the U.S. have meant that few clinical trials are being conducted domestically and none are being conducted as part of a sponsor-funded drug development plan aimed at obtaining Food & Drug Administration (FDA) approval for the prescription use of the botanical plant itself.

Meanwhile, research teams in Great Britain, Spain, Italy, Israel, and elsewhere have confirmed - through case studies, basic research, pre-clinical, and preliminary clinical investigations - the medical value of cannabis ... "

It is easy to see why drug companies would want no part in funding research studies on a plant that can't be patented. If they were to discover that it could cure cancer, patients would be able to grow it themselves right in their own backyard ... this is not something the pharmaceutical companies would want you to know about.

Bottom line: War on Drugs has not only been political failure founded on unsound economics, it also impedes medical progress that would have saved many lives.

Foreign Meddling, Not ‘War in the name of Islam’, Breeds Terror

The Economist produces a table showing the fatalities from Al Qaeda’s “Killing in the name of Islam”

Apparently this has been published to justify the US government’s action on Osama Bin Laden—a reductio ad absurdum fallacy.

It’s foolish to say that these have all been about religion.

Common sense tells us that with an estimated 1.5 billion Islam adherents and growing, then a war on religion would imply that the world would have been embroiled in various types of violence as a result from this ‘false’ war. But where? The war has been limited to but a few.

For instance, Bin Laden’s alleged war with the west has been anchored upon the following key factors, which the legendary investor Doug Casey enumerates:

One thing they should think about is that Osama didn’t actually present – or certainly shouldn’t have presented – a risk to the U.S. You’ll recall that he said he was only up in arms for three reasons: 1) the U.S. had its troops in Muslim lands; 2) the U.S. was supporting the stooges running those countries; and 3) the U.S. was supporting Israel, which he deemed an oppressor of the Palestinians. If the U.S. desisted from those things, he was happy to leave it alone, in the belief it would necessarily self-destruct.

In other words, the so-called religious war only serves as camouflage to advance US imperialist interests.

In the name of War on Terror, more innocent people are being slaughtered every year than the combined activities of the Al Qaeda.

Writes the New York Times,

Last year was the deadliest of more than nine years of war for Afghan civilians, the United Nations reported Wednesday, attributing 75 percent of the deaths to attacks by Taliban and other insurgents rather than coalition forces.

The United Nations said 2,777 civilians were killed in 2010 — a 15 percent increase over the previous year — in its annual civilian casualty report, authored jointly with the Afghanistan Independent Human Rights Commission.

Despite several prominent recent episodes involving civilian deaths that have strained relations with the Afghan government, deaths caused by NATO forces declined by 26 percent, the report found, reflecting new precautionary steps by military commanders, including Gen. Stanley A. McChrystal, the previous top commander in Afghanistan, and Gen. David H. Petraeus, who took over eight months ago.

That’s from Afghanistan alone in 2010.

While most of these are being blamed on Al Qaeda, based on statistics which we can’t rely on, because only nation states have the power to make such declaration. The point is the War on Terror has been causing more needless deaths regardless of who is responsible.

Here is an estimate of the total casualties over the duration of the War on Terror from Wikipedia,

-Iraq: 62,570 to 1,124,000

-Afghanistan: between 10,960 and 49,600

-Pakistan: between 1467 and 2334 killed in U.S. drone attacks as of May 6, 2011

All these goes to show that imperialism, not a war on religion, is what breeds terror. As Sheldon Richman fittingly writes, (bold highlights mine)

Apologists for activist government never tire of telling us that the benevolent state is our protector and that without it we'd be at the mercy of monsters. It is about time that we understood that the U.S. government does more to endanger the American people than any imagined monsters around the world.

How so? By pursuing its Grand Foreign Policy of meddling anywhere and everywhere. It stands to reason that if you stick your nose in other people's quarrels you will acquire enemies. Some of them will be unhappy about the interference and will retaliate. Tragically, they will not be so careful about discriminating between the offenders and innocent civilians. That's wrong, but so is the meddling that brings the retaliation about.

Unfortunately, far more influential are vested interest groups who profits from these wars, whom dictate on foreign policies channeled through political leaders.

All the rest is propaganda.

Philippine Mining Index and the Manipulated Collapse of Commodity Prices

We're living in an amazing world where real assets can be purchased with fantasy money. It won't last because it's illogical and synthetic. But it has already lasted longer than most realists thought possible.-Richard Russell

The Phisix finally took a breather, falling by 2.33% over the week, the first decline over 7 weeks. Such loss substantially reduced the year to date gains to only .43%.

The decline had been broad based, but ironically the mining and oil sector eluded the downturn supposedly on a raft of speculations over prospective deals.

I say ironic because such defiance comes in the face of a manipulated collapse of commodity prices in the world markets.

The Manipulated Collapse

Abruptly changing the rules of the game represents manipulation.

Since trades are essentially anchored upon expectations based on existing information which incorporates rules and other operating parameters (e.g. architecture of trading platform), drastically altering the rules midway dramatically shifts the balance of cost-benefit expectations and the economic distribution of resources, as manipulation benefits the regulators and their allies at the expense of market participants.

While I expected the huge run up in silver prices to be met with sharp price volatility[1], I didn’t expect that this would be prompted for by a series of steep credit margin hikes imposed by the CME[2]. Silver prices fell 25% over the week.

Since commodity markets are interrelated, as many investors or institutions position in different commodities or commodity indices, the assault on the silver markets rippled throughout the commodity sphere and to other markets.

One evidence of such imbalance is that even as silver prices collapsed, the physical inventory of silver shriveled[3], instead of ballooning. This means that instead of a panic from a sharp price downswing, many have taken the price drop as an opportunity to accumulate physical silver! What appears to be happening is that the heavily leveraged positions or those who fail to meet the margin calls, have forcibly been closed regardless of price, but the new entrants have used such opportunity to accumulate substantially.

If this should serve as a clue then the interventions mean that the effect on silver prices is likely to be transitory as players adjust to the new environment.

The other point is that the fundamental drivers of silver and other commodities remain firmly entrenched.

Commodity Prices Underpin the Fate of Mining and Resource Firms

Changing the rules midway was part of the scenario of the silver bubble meltdown in 1980. The Hunt brothers, whom attempted to corner the silver market, suffered from the same credit margin hikes which led to their bankruptcy.

But of course, the major factors that led to the commodity bubble bust had been due to sharp increases in the interest rates, coming from a shift in the monetary policy stance by US Paul Volcker led US Federal Reserve, and that a global commodity glut had accrued as the globalization gradually took hold[4].

Except for the manipulation, the above events hasn’t shaped the de facto climate.

Why is this important? Because share prices of mining or other commodity based companies essentially depend on the prices of the commodity products.

The almost two decade of bear market in commodities led to the hibernation of mining and other resource based companies or a slump in terms of stock market prices.

Remember Atlas Consolidated at php 400 per share in the 70s and was seen as a ‘blue chip’? Today, Atlas trades at a measly php 15 per share following years of dormancy in the company’s operations. To consider, real or inflation adjusted prices in the 70s means a lot more Pesos today.

As one would note, the CRB Reuters futures index (lower window) courtesy of chartrus.com[5] squares with the performance of the Philippine Mining Index (upper window).

When I turned bullish on gold in 2003 I called this the “Rip Van Winkle”[6] moment. The concurrent rise of the CRB Reuters index also reflects on the Philippine Mining Index.

The point is that the buoyancy of domestic mining and oil index (or prices of mining and oil companies) greatly depends on the underlying trends of their commodity products.

Commodities As Hedge

The war against precious metals is being waged most possibly as part of the signaling channel tools which Central Banks employ to manage inflation expectations. This I think is part of the orchestrated conditioning employed by the US Federal Reserve that is being used to justify further interventions particularly the QE 3.0[7].

All talks about tightening and the ending of QE part of another series of poker bluff at work.

Given the weak housing market (which risks endangering the balance sheets of the US banking system which Fed chair Bernanke sees as the heart of the US economy), the declining interests of foreign governments to finance US deficits, insufficient private savings and the wobbly financial conditions of states[8], plus the ideological economic (quasi boom) biases and path dependency of the policymaking by US political authorities, the US is left with little option but to reengage in quantitative easing sometime in the near future after the end of the QE 2.0 in June.

And part of the propaganda, through biased research studies by the Fed and allied institutions, has been to delink the Fed’s policies with that of surging commodity prices. And the other way to create this impression is to manipulate the commodity markets.

At the end of the day commodities still represents as insurance from the adverse unintended consequences of the monetary interventionism—an addiction inspired by grand delusions of power.

To quote Michael Taylor[9],

the state exacerbates the conditions which are supposed to make it necessary. We might say that the state is like an addictive drug: the more of it we have, the more we 'need' it and the more we come to 'depend' on it.

---

[1] See Hi Ho Silver!, April 23, 2011

[2] See War on Precious Metals Continues: Silver Margins Raised 5 times in 2 weeks!, May 5, 2011

[3] See War Against Precious Metals: Silver’s Collapsing Prices in the face of Collapsing Inventories, May 6, 2011

[4] See War on Precious Metals: Silver Prices Plunge On Higher Credit Margins, May 2, 2011

[5] Chartrus.com CRB Reuters Futures

[6] See Philippine Mining Index; We’ve Only Just Begun! April 10, 2006

[7] See War on Precious Metals: The Rationalization Process For QE 3.0, May 7, 2011

[8] See The US Dollar’s Dependence On Quantitative Easing, March 20, 2011

[9] Taylor, Michael The Possibility of Cooperation (Cambridge: Cambridge University Press, 1987), p. 168 Quotes.liberty-tree.ca

The Osama Bin Laden Available Bias

The history of war is the history of powerful individuals willing to sacrifice thousands upon thousands of other people’s lives for personal gains.-Michael Rivero

Correlation isn’t causation. This applies to the implied impact of Osama Bin Laden’s assasination to the financial markets.

People are so used to connecting current events with actions of market prices from which they impute cause and effect linkages. Such available bias leads people to miscalculate on what has truly been driving markets.

Why should Bin Laden’s death lead to falling markets? Because of fears of retaliation? Retaliation by whom?

Alarmism is no more than part of the political propaganda for increased social control.

Osama Bin Laden’s Al Qaeda represents a small faction whose capability is no more than to launch sporadic urban guerilla tactics with limited effect.

As Eric Margolis writes[1],

The specter of al-Qaida provided a handy pretext to invade Afghanistan to secure strategic territory next to Central Asian oil, keep China out of that region, and double spending on arms. The invasion of oil-rich Iraq was also justified by patently false White House claims Saddam Hussein was in cahoots with Osama bin Laden over 9/11.

Al-Qaida "affiliates" in North Africa, Arabia, and south Asia are simply small groups of local militants who have taken the al-Qaida brand name without having any organic or communications links to the remnants of the core al-Qaida in Pakistan. They are more a dangerous nuisance than a deadly threat.

Osama bin Laden may well and truly be dead. He predicted long ago he would die a martyr in a gunfight with US forces. Bin Laden has been more or less retired for the past 8-10 years, spending his time and energies in staying alive with a $25 million price on his head. He had almost become irrelevant.

As I earlier pointed out[2] Bin Laden’s political capital has sharply been eroding as shown in the chart above from the Economist. This underscores Bin Laden’s irrelevance.

I suspect that Bin Laden was disposed of, largely because of political expediency: President Obama’s popularity ratings have plummeted to record lows and whose chances for reelection have been rapidly shrinking. Thus, the need for a massive boost from which Bin Laden’s death provided as the fodder (which it temporarily did!).

While the general public sees Bin Laden as a mortal enemy, behind scenes Bin Laden looks more like a friend of the US military industrial complex, the huge bureaucratic tentacles of homeland defense which emerged post 9/11 and US politicians. The hunt for Bin Laden was estimated at about the $3 trillion (about 15% of national debt) that has sucked up much of resources at the expense of the economy[3].

So Bin Laden looked more like a political stooge donned as a villain for the public to lash at, but covertly have been providing benefits and profits for the political operators, her network of defense contractors and the bureaucracy.

As earlier pointed out if the report is true that Bin Laden lived in the compound, where he was killed, for 5-6 years, then either this represents a massive intelligence failure for the US government or that the US knew all along and tolerated Bin Laden’s presence.

Thus the eroding political capital base of Bin Laden meant that he was expendable and that Bin Laden would represent as the sacrificial lamb to advance the political interests of President Obama. Besides, a new substitute of Bin Laden has emerged: Libya’s Muammar Gaddafi.

So whether Bin Laden was a political stooge or not, the point is that Bin Laden’s assassination will have little impact on the markets.

As one would note in the above charts, the cratering silver prices prompted for subsequent weaknesses in S&P 500, and Emerging Markets benchmarks while the US dollar belatedly rallied. While some may argue that the sharp moves in the US dollar (obversely a dramatic fall in the Euro) may be attributed to chatters about Greece leaving the Eurozone which has been denied[4] and also on the news of the Portugal bailout[5], I see the US dollar rally-Euro decline as a natural response from overextended positions.

So one has to be careful in reading the sequences of events from which to establish causation relationships.

As a final note, it would also be oversimplistic to view the demise of Bin Laden as a ‘victory’ for the US government. After all it had been Bin Laden’s strategy to engage in a “war of attrition” aimed at bankrupting his superpower opponents...a path which the US seems headed for.

As Ezra Klein of Washington Post aptly writes[6],

For one thing, superpowers fall because their economies crumble, not because they’re beaten on the battlefield. For another, superpowers are so allergic to losing that they’ll bankrupt themselves trying to conquer a mass of rocks and sand. This was bin Laden’s plan for the United States, too.

“He has compared the United States to the Soviet Union on numerous occasions — and these comparisons have been explicitly economic,” Gartenstein-Ross argued in a Foreign Policy article. “For example, in October 2004 bin Laden said that just as the Arab fighters and Afghan mujaheddin had destroyed Russia economically, al Qaeda was now doing the same to the United States, ‘continuing this policy in bleeding America to the point of bankruptcy.’ ”

For bin Laden, in other words, success was not to be measured in body counts. It was to be measured in deficits, in borrowing costs, in investments we weren’t able to make in our country’s continued economic strength. And by those measures, bin Laden landed a lot of blows.

---

[1] Margolis Eric Why bin Laden’s Ghost Is Smiling, May 3, 2011 LewRockwell.com

[2] See Osama bin Laden’s Death: Propaganda, Diminishing Political Capital and Re-election, May 04 2011

[3] Fernholz, Tim and Tankersle Jim, The cost of bin Laden: $3 trillion over 15 years, May 5, 2011, National Journal

[4] Bloomberg.com EU Finance Chiefs See More Help for Greece, Reject Euro Exit (1), May 7, 2011

[5] Monstersandcritics.com EU, IMF confirm 78 billion for Portugal aid package, May 5, 2011

[6] Klein Ezra Osama bin Laden didn’t win, but he was ‘enormously successful’, May 3, 2011, Washington Post

Common Sense Education

Another treasure from marketing guru Seth Godin; this time he talks about the basic things we need to learn about: (bold highlights mine)

-How to focus intently on a problem until it's solved.

-The benefit of postponing short-term satisfaction in exchange for long-term success.

-How to read critically.

-The power of being able to lead groups of peers without receiving clear delegated authority.

-An understanding of the extraordinary power of the scientific method, in just about any situation or endeavor.

-How to persuasively present ideas in multiple forms, especially in writing and before a group.

-Project management. Self-management and the management of ideas, projects and people.

-Personal finance. Understanding the truth about money and debt and leverage.

-An insatiable desire (and the ability) to learn more. Forever.

-Most of all, the self-reliance that comes from understanding that relentless hard work can be applied to solve problems worth solving.

In short, common sense education.

We don’t need extended years for these.

US Presidential Election Poll: Barack Obama versus Ron Paul in 2012?

According to the poll, taken before the announcement of Osama bin Laden's death, President Barack Obama has an edge over all the top GOP candidates in hypothetical match-ups.

Who does best against Obama? Paul. The congressman from Texas, who also ran as a libertarian candidate for president in 1988 and who is well liked by many in the tea party movement, trails the president by only seven points (52 to 45 percent) in a hypothetical general election showdown. Huckabee trails by eight points, with Romney down 11 points to Obama.

The poll indicates the president leading Gingrich by 17 points, Palin by 19, and Trump by 22 points.

That’s from the CNN.(Hat tip: Thomas DiLorenzo)

Amazing.

Classical Liberalism-Libertarianism appears to be gradually transitioning from the fringes into the mainstream.

Cartoon of the Day: Osama Bin Laden’s Last Tweet

(Hat tip Dan Mitchell)

War on Precious Metals: The Rationalization Process For QE 3.0

I have been saying here that the US government’s indirect interventions in the commodity markets, particularly in silver, represents a ratchet effect or rationalizing the effects of past policies by the US government with the intention to apply more of the same policies.

Ratchet effect is technically defined as “A tendency for a variable to be influenced by its own largest previous value.”

Here is what I recently wrote,

First is to apply the necessary interventions on the market to create a scenario that would justify further interventions.

Second is to produce papers to help convince the public of the necessity of interventions.

Then lastly, when the 'dire' scenario happens, apply the next intervention tools.

The rationalization process has been happening. The conditioning (brainwashing) of the public is such that Fed policies have not been inflationary and that market prices have been validating their outlook which should justify further actions.

Proof?

The Wall Street Journal blog has this article, “Commodity Rout Lends Credence to Bernanke’s Inflation Outlook”

All in all, it looks as if Bernanke’s oft-repeated view that the commodities surge, driven by supply shocks, political forces and overseas growth, may indeed be “transitory.” Of course, the issue goes beyond inflation, in that lower oil and food prices may help increase consumers’ spending power, which should help the recovery regain its step.

If you think I am talking conspiracy theory here, I’m not.

The manipulation of the public’s mindset (or mind control) is part of the technical tools used by central banks to influence expectations. This is called the signaling channel.

Writes Shogo Ishii of the International Monetary Fund on his book Official foreign exchange intervention (bold highlights mine)

Under the signaling channel, intervention can be effective if it is perceived as a signal of the future stance of monetary policy...

A central bank has an incentive to follow through with policy actions that justify intervention ex-post to safeguard its credibility and avoid financial losses....

The signaling channel depends in part on the institutional and policy credibility of the central bank. The effectiveness of intervention through signaling relies on influencing market expectations by transmitting information on fundamentals or future policy actions. Intervention must be perceived as credible signals (or threats) of future monetary policies to influence expectations.

So far, pieces of the puzzle fits.

War Against Precious Metals: Silver’s Collapsing Prices in the face of Collapsing Inventories

As prices of silver continue to plunge, physical demand for silver has been swelling.

And this has been causing a swift draining of inventories at the COMEX.

As Zero Hedge’s Tyler Durden points out

At this rate, tomorrow, for the first time, we will see a 32 handle in Comex registered silver ounces, where apparently despite the massive drubbing in paper silver, demand for physical inexplicably persists. Speculators to be blamed for this in 5...4...3...

The war against precious metals has been accentuating the price distortions. Yes they could be blamed on speculators. But the series of credit margin hikes is obviously is a form of price control being waged for political ends.

Either we will see a slump in the demand for physical silver and subsequently growing stockpiles or price manipulations will implode.

What is unsustainable won’t last.

Video: Jon Stewart Mocks President Obama's Refusal To Show Osama Bin Laden's Pictures

The Daily Show's Jon Stewart lampoons the Obama administration for not showing Obama's picture (hat tip Lew Rockwell blog)

Nice quote from Mr. Stewart about 4:17 of the video

We make decisions about war if we see what war actually is, and not as a video game where bodies quickly disappear leaving behind a shiny gold coin.

The Daily Show - Face/Off
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook