Philippine Government Applies Keynesian Remedies, Boom Bust Cycle Ahead

The Philippine government will be applying Keynesian measures of “euthanasia of the rentier” and the “socialization of investments” to prop up economic “growth” (permanent quasi-booms)

The euthanasia of the rentier as reported by the Bloomberg

The Philippines cut interest rates for the first time since July 2009, joining emerging markets from Thailand to Indonesia in easing monetary policy as a deteriorating global economy threatens growth.

Bangko Sentral ng Pilipinas lowered the rate it pays lenders for overnight deposits by a quarter of a percentage point to 4.25 percent, according to a statement in Manila today. The decision was predicted by 13 of 17 economists in a Bloomberg News survey, with the rest expecting no change. The central bank maintained the reserve requirement ratio at 21 percent.

“The Philippine economy is likely to face external headwinds in 2012,” Governor Amando Tetangco said in the statement. “The benign inflation outlook allowed some scope for a reduction in policy rates to help boost economic activity and support market confidence.”

Asian policy makers are under mounting pressure to protect growth after the World Bank cut its global economic forecast this week, saying a recession in the euro region could exacerbate a slowdown in countries such as India and China. Lower borrowing costs and slowing price gains may aid Philippine President Benigno Aquino’s efforts to boost expansion as he increases spending and seeks investment for roads and airports.

Socialization of Investments, again from the Bloomberg

President Aquino is increasing spending this year to a record 1.83 trillion pesos ($42 billion) to help bolster growth to as much as 8 percent annually. The government also plans to offer as many as 16 projects to investors this year, compared with one contract awarded in 2011.

Ayala Corp., leading a consortium that won a contract last month to build a four-kilometer, four-lane paved toll road leading to provinces south of the capital, may bid for two road projects and a contract to run an airport, Managing Director Eric Francia said Dec. 15.

Aquino has won sovereign-rating upgrades from Fitch Ratings and Moody’s Investors Service after intensifying efforts to narrow the budget gap from a record 314 billion pesos in 2010.Standard & Poor’s raised its outlook on the country’s debt rating last month.

Chart from Danske Bank

So the Philippine government via the BSP will push real interest rates deeper into negative territory (left window) that will punish the saving public and the average fixed income investors. This represents a policy which redistributes resources from creditors (again savers) to borrowers (I would guess would be mostly cronies), that benefits the politically privileged banking system (as intermediaries), aside from encouraging the public to take on speculative activities (stock market boom as previously predicted) and a misdirection of capital towards long range investments. Such policies also will promote consumption activities which will likely lead to trade deficits.

These are composite ingredients to the business cycle or boom bust cycle.

The BSP’s adapted measure rhetorically represents an appeal to the popular that has been ensconced by the herding or bandwagon effect, as central banks of major economies has embarked on a similar easing cycle. As earlier pointed out, global interest rates are now in 2009 levels. The other way to see the current global easing cycle is that central banks could be in coordination with one another, and or that this represents as the central bankers dogmatic approach in dealing with any perceived threats to statistical growth.

In addition, consumption of capital will only be amplified by the massive fiscal spending of the Aquino administration ($42 billion) which would mostly end up in inefficient use, wastage and in the pockets of politicians and bureaucrats and their cronies.

I would further that the BSP’s easing process could have been synchronized with the prospective fiscal policies, aimed at providing funds to cronies, who will undertake most of the private-public partnerships, and to the government whom will be requiring these funds that will probably be obtained from the local markets, as earmarked for boosting growth.

And I would propound a political spectrum in these actions—these could be meant to shore up the public’s support for the administration who currently has pushed for an impeachment trial of the Supreme Court Chief Justice.

Public support for the administration means pressure for the Senate, whom has been adjudicating the impeachment trial, to deliver a verdict that is favorable to the administration.

Nevertheless, while this would have temporal benefits for the stock market, and for the economy as measured by spending based statistics, the evil effects of high inflation and malinvestments point to an eventual bust sometime ahead (I can’t determine the exact frame, but we can observe this via interest rates).

For now profit from political folly.

Quote of the Day: Inconsistencies of Public Policies

Bureaucracies typically resist working with other bureaucracies for fear that their own power and budget might decline as a result. If high-ranking politicians wanted to, they could insist on coordinated policymaking. But they don’t, because coordinating does not matter to them. The ultimate goal for a politician running for office is to get elected. From that vantage point, politicians tend to consistently push for policies that will bring them votes, funds or both.

That’s from Chidem Kurdas at the ThinkMarkets, giving us a public choice perspective on the reasons why bureaucracies has the tendency to remain obstinately inefficient and inconsistent. The answer, in short, is all about the incentives guiding the actions of bureaucrats and politicians.

Andrew Napolitano on the Diminishing Economic Freedom in the US

As pointed out earlier, the US has swiftly been losing her reputational pedestal as “the land of the free” as evidenced by the fast expanding dependency culture that has been induced by a ballooning welfare state.

Yet the path towards fascism hasn’t been due to happenstance, but has accounted for gradualism or deliberate incremental efforts to achieve such an end.

Judge Andrew P. Napolitano below defines economic freedom

The root of economic freedom is the recognition of the right to own private property. That includes the right to utilize it unmolested, to dispose of it without anyone's permission and to exclude anyone from it, even the government. Suffice it to say, no American president since the advent of the income tax and the Federal Reserve 100 years ago has fully accepted or meaningfully defended that right. The more the government extracts in taxes and the more it inflates the money supply, the more it rejects and assaults property rights.

And further explains the reasons for the deteriorating trend in the US .

The absence of economic freedom today is nothing new and didn't come about overnight. It is the culmination of the Progressive Era, which gave us the Federal Reserve and the income tax; the New Deal, which gave us the beginning of entitlements; the Great Society, which enhanced the numbers of people who received entitlements; Ronald Reagan, who bashed entitlements during the six years he was running for president but did nothing to dismantle them; and every president from Dwight Eisenhower to George W. Bush, all of whom just accepted the welfare and warfare state as if the Constitution didn't exist.

Today, we have President Obama, committed to private ownership but government control of the means of production, who wants to enhance the welfare and warfare state by having socialized medicine and perpetual war at the same time.

The essence of the governmental assaults on freedom is presidentially proposed, congressionally engineered and judicially accepted redistribution of wealth via the central planning of the economy. And the consequence of all this is the present lamentable state of affairs where half the country is financially dependent on the other half. When this state of affairs was reached in Ayn Rand's great novel "Atlas Shrugged," she had the productive half stop working just to see what the government would do. It wasn't pretty.

Obama's beloved Dodd-Frank law is the latest act of government theft of freedom in the name of economic equality. It brings us one step closer to total government control of the means of producing wealth. With its unaccountable bureaucracy, Federal Reserve-generated funding, and standardless and appeal-proof rulemaking, it reposes into the hands of an unconfirmed-by-the-Senate nanny stater the power to monitor and to regulate virtually all economic activity in the U.S.

The path to societal prosperity can only be attained by economic freedom. It’s a cause worth fighting for not only in the US but wherever society exists.

Video: Salma Khan on How SOPA and PIPA May Kill the Internet

Salman Khan of the famed free education based Khan Academy explains the draconian, insidious and totalitarian implications of the SOPA and PIPA.
(hat tip Lew Rockwell Blog)

China’s Urbanization: City Population Surpasses Rural Population

China’s urban population has surpassed the rural population for the first time.

The Economist writes,

FOR a nation whose culture and society have been shaped over millennia by its rice-farming traditions, and whose ruling party rose to power in 1949 by mobilising its put-upon peasantry, China has just passed a remarkable milestone: its city-dwellers now outnumber its rural residents. New data from the National Bureau of Statistics show that of China’s 1.35 billion people, 51.3% lived in urban areas at the end of 2011. In 1980 less than a fifth of China’s population lived in cities, a smaller proportion than in India. Over the next ten years the government remained wary of free movement, even as it made its peace with free enterprise. Touting a policy of “leaving the land but not the villages, entering the factories but not cities”, it sought industrialisation without urbanisation, only to discover it could not have one without the other. Even now, its ratio of city-dwellers is, if anything, low for an economy at its stage of development. America reached the 50% mark before 1920. Britain passed it in the 19th century. Go further back, however, and China’s cities dazzled the world. It is likely that one thousand years ago, the Song Dynasty capital of Kaifeng was the world’s most populous city. Marco Polo, who visited China in the 13th century, claimed that Hangzhou was “the most splendid city in the world” with 13,000 bridges—although later estimates suggest the true number was 347.

Count me as a skeptic of the continuity of urbanization trends, a phenomenon derivative of the industrial age.

Basically urbanization has been driven by economic opportunities, the economies of scale and centralization of facilities all of which may be changing.

The dynamics of urbanization, according to Wikipedia.org (bold emphasis mine)

People move into cities to seek economic opportunities. A major contributing factor is known as "rural flight". In rural areas, often on small family farms, it is difficult to improve one's standard of living beyond basic sustenance. Farm living is dependent on unpredictable environmental conditions, and in times of drought, flood or pestilence, survival becomes extremely problematic. In modern times, industrialization of agriculture has negatively affected the economy of small and middle-sized farms and strongly reduced the size of the rural labor market.

Cities, in contrast, are known to be places where money, services and wealth are centralized. Cities are where fortunes are made and where social mobility is possible. Businesses, which generate jobs and capital, are usually located in urban areas. Whether the source is trade or tourism, it is also through the cities that foreign money flows into a country. It is easy to see why someone living on a farm might wish to take their chance moving to the city and trying to make enough money to send back home to their struggling family.

There are better basic services as well as other specialist services that aren't found in rural areas. There are more job opportunities and a greater variety of jobs. Health is another major factor. People, especially the elderly are often forced to move to cities where there are doctors and hospitals that can cater for their health needs. Other factors include a greater variety of entertainment (restaurants, movie theaters, theme parks, etc.) and a better quality of education, namely universities. Due to their high populations, urban areas can also have much more diverse social communities allowing others to find people like them when they might not be able to in rural areas.

These conditions are heightened during times of change from a pre-industrial society to an industrial one. It is at this time that many new commercial enterprises are made possible, thus creating new jobs in cities.

The transition to the information age extrapolates to more specialization, as commerce will evolve along with improvements in technology. This means reduced cost advantages of centralized organizations which simultaneously has been accelerating and deepening the trends of business outsourcing.

Moreover real time connectivity should enhance this process, which again reduces the motivation for commerce to congregate in specific areas—or cities.

Also business focus will increasingly be directed to specific needs (niche marketing) rather than mass production and also on where the consumers and markets are.

In the Philippines, shopping malls have sprouted not only in major cities but also in capitals of provinces or secondary cities. Take for example the largest shopping mall chain the SM Group which has 43 malls nationwide and growing. This is a noteworthy example of the deepening dispersion trends, where facilities have been mushrooming outside of mega cities.

Also this serves as an example of the evolving location based markets—businesses locating and providing goods and services where the consumers are.

On the supply side, the call center industry, whose firms have been looking for agents to fill up outsourcing jobs, has been spreading outside the metropolis (Metro Manila). According to Wikipedia.org, there are 788 call centers in over 20 locations, where growing number firms are being established again in secondary cities and in the provinces.

All these suggest that the snowballing forces of decentralization should dampen urbanization trends--that depends on the dynamics of centralization--over the long run.

Quote of the Day: The Internet is Not for the Government to Regulate

From Cato’s Jim Harper

The Internet is not the government’s to regulate. It is an agreement on a set of protocols—a language that computers use to talk to one another. That language is the envelope in which our communications—our First-Amendment-protected speech—travels in hundreds of different forms.

The Internet community is growing in power. (Let’s not be triumphal—government authorities will use every wile to maintain control.) Hopefully the people who get engaged to fight SOPA and PIPA will recognize the many ways that the government regulates and limits information flows through technical means. The federal government exercises tight control over electromagnetic spectrum, for example, and it claims authority to impose public-utility-style regulation of Internet service provision in the name of “net neutrality.”

Video: What's Wrong with Internet Censorship

Cato's Julian Sanchez explains what is wrong with internet censorship

From Cato:

Internet censorship is not the answer to problems of piracy online. Cato Institute research fellow Julian Sanchez explains that internet censorship won't effectively address the problem of piracy and will threaten innovation and the liberties of Americans by engaging in unconstitutional prior restraint.

By the way, after a furious backlash, bi partisan legislators are reportedly backing off from supporting the bill.

Bonus Quote of the Day: Internet as Engine for Free Speech and Innovation

The Internet is the greatest engine for free speech and innovation ever known to humankind. Certainly its power can be used for good as well as bad, but censoring content, jeopardizing the security of the Internet, and stifling innovation is not the answer for protecting intellectual property rights.

That’s from Mike Brownfield at the Heritage “Morning Bell” Blog.

I would add that the internet is the greatest medium for democraticizing knowledge.

Video: Art Carden on Government Intervention (The Story of Broke Response)

Professor Art Carden talks about the basics of government interventionism in the splendid educational video below.


From learnliberty

Prof. Art Carden responds to "The Story of Broke" (http://bit.ly/LLStoryOfBroke), a recent video by the creators of "The Story of Stuff." In "The Story of Broke," Annie Leonard claims that the government isn't actually broke. Rather, the government just wastes resources on the wrong things like subsidies to the dinosaur economy and war. She claims that the government should change its ways, and instead, subsidize firms that will bring us the future we really want.

Art Carden agrees with Leonard that war and subsidies are wasteful, but is skeptical of notion that there is one unified vision for the future. To Carden, everyone has a different vision for the future. Our path to the future, he argues, is determined by the interactions of billions of unique individuals pursuing their own objectives.

Additionally, Carden questions Leonard's distinction between bad subsidies and good subsidies. Every subsidy, deemed good or bad, must be allocated through the political process. Lobbyists and special interests exert a large degree of influence on political decisions, and they use this power to direct subsidies in their own favor at everyone else's expense.

Carden concludes that government spending won't buy a brighter future. A brighter future will emerge when people are allowed to spend money on things they care about. Put another way, positive change will come from billions of people cooperating freely and voluntarily with one another, not from pushing trillions of dollars through a broken political process.

War on the Internet: Freedom Wins Round One

Writes Mac Slavo

Amid significant pressure from tens of thousands of internet users and major web behemoths like Google, Facebook, and Reddit, the Stop Online Piracy Act (SOPA) is, in its current form, Dead on Arrival:

“Misguided efforts to combat online privacy have been threatening to stifle innovation, suppress free speech, and even, in some cases, undermine national security. As of yesterday, though, there’s a lot less to worry about.

“The first sign that the bills’ prospects were dwindling came Friday, when SOPA sponsors agreed to drop a key provision that would have required service providers to block access to international sites accused of piracy.

“The legislation ran into an even more significant problem yesterday when the White House announced its opposition to the bills. Though the administration’s chief technology officials officials acknowledged the problem of online privacy, the White House statement presented a fairly detailed critique of the measures and concluded, “We will not support legislation that reduces freedom of expression, increases cybersecurity risk or undermines the dynamic, innovative global Internet.” It added that any proposed legislation “must not tamper with the technical architecture of the Internet.”

…

“Though the administration did issue a formal veto threat, the White House’s opposition signaled the end of these bills, at least in their current form.

“A few hours later, Congress shelved SOPA, putting off action on the bill indefinitely.

“Sourced From Washington Monthly via The Daily Sheeple

Sponsored primarily by purported free speech advocates that include democrats and republicans alike, the SOPA would have fundamentally transformed the internet as we know it today. As Daisy Luther writes at Inalienably Yours, the bill was nothing short of a direct attack against the first Amendment and the right to free speech:

“On closer inspection, the legalese in the bill has the potential to eviscerate free speech….and like NDAA, without proof…only with suspicion of “wrong-doing”. It’s all about copyright infringement. If you tick off the powers that be, and you’ve quoted someone, somewhere, saying something, you may have infringed on their copyright. As a defendant, you are not even present at the legal proceeding allowing “them” to shut you down until you prove yourself innocent.

“How do they shut you down? Search engines are required to remove you from their listings. Internet Service Providers can be ordered to block access to your site. Advertising networks and payment providers can also be forced to cease doing business with you. This continues until you are proven INNOCENT. Wait – I thought it was innocent until proven guilty….oh….that was “before” the NDAA.

Source: The Internet: The Last Bastion of Free Speech

While this bill of goods was being sold to the American public as a way to reduce online piracy originating on foreign shores, in essence the legislation would have made it possible for any organization (with the financial assets and access to attorneys to do so) to target web sites (foreign or domestic) using excerpts, quotes, and videos without express permission of the authors or producers of such content. Furthermore, any web site linking to suspected copyrighted content would be guilty by association for fascilitating the infringement.

Read the rest here

In the growing realization that political power is being frayed by the ongoing information age revolution or the democratization of knowledge, the 20^th century welfare and warfare state will use anything, like Intellectual Property and copyright arguments, as pretext to rein control over the internet. Earlier they argued that the cyberspace can pose a threat to national security.

Today, Wikipedia and other websites has shut down to express their opposition to proposals over censorship masquerading as ‘foreign Internet Piracy’.

The above is just one of the other being actions undertaken such as Spying of Email and the harassment of Wikileaks

As I previously wrote

These actions represent “resistance to change”, whereby politicians will try to enforce information control or censorship in the way the industrial age used to operate.

The horizontal flow of information threatens the institutional centralized frameworks built upon the industrial age economy.

As I earlier wrote,

“Political and economic ideology latched on a vertical top-bottom flow of power will be on a collision course with horizontal real time flow of democratized knowledge.

“This would likely result to less applicability of ideologies based on centralization, which could substantially erode its support base and shift political capital to decentralized structure of political governance that would conform with the horizontal structure of information flows.

“People will know more therefore control from the top will be less an appealing idea.

But again these attempts to regulate the web are likely to fail.

Nevertheless the war on the internet accounts as part of the adjustment process away from the command and control structure of the industrial ages with the knowledge revolution taking place beyond the reach of politicians. Besides, technological advances will work around regulations.

Signifying the foundation of knowledge, the internet will serve as THE battleground between socialism and free markets, and this will be just one of the many series of skirmishes that are destined to occur. And as previously noted, many internet activists have already been preparing for the worst scenario.

Indexed’s Jessica Hagy has a nice graphical depiction of the ongoing war, which she calls: Dark Ages II: in discussion now!

Indeed, the left and vested interest groups wants us to remain in the Dark ages and as their serfs.

America’s Growing Dependency on the Welfare State

Proof that Americans have become less a representative of “the land of the free” has been the deepening trend of dependency on the welfare state.

From the Wall Street Journal Blog

The pool of Americans relying on government benefits rose to record highs last year as an increasing share of families tapped aid in a weak economy.

Some 48.6% of the population lived in a household receiving some type of government benefit in the second quarter of 2010, up a notch from 48.5% in the first quarter, according to Census data…

The largest chunk of benefits flowing to families came from means-tested programs. In the second quarter, 34.4% lived in a household benefiting from food stamps, subsidized housing or Medicaid, among others.

That number is up from 32.8% a year ago (when a total of 46.8% of the population lived in a home receiving benefits). The biggest increases came from an uptick in those turning to food stamps and Medicaid.

Nearly 15% of Americans lived in a household receiving food stamps in mid-2010; Almost 26% had access to Medicaid.

Only a small share of the population accessed cash welfare benefits as the 1990s overhaul made it more onerous in many cases to receive and maintain those payments. Some 1.9% of the population lived in a household that received welfare in the second quarter of 2010.

I previously had Robert Higgs perspicacious and highly relevant insight as my quote of the day. [bold emphasis added]

As the ranks of those dependent on the welfare state continue to grow, the need for the rulers to pay attention to the ruled population diminishes. The masters know full well that the sheep will not bolt the enclosure in which the shepherds are making it possible for them to survive. Every person who becomes dependent on the state simultaneously becomes one less person who might act in some way to oppose the existing regime. Thus have modern governments gone greatly beyond the bread and circuses with which the Roman Caesars purchased the common people’s allegiance. In these circumstances, it is hardly surprising that the only changes that occur in the makeup of the ruling elite resemble a shuffling of the occupants in the first-class cabins of a luxury liner. Never mind that this liner is the economic and moral equivalent of the Titanic and that its ultimate fate is no more propitious than was that of the “unsinkable” ship that went to the bottom a century ago.

Any wonder why US politicians has unflinchingly been pushing for many arbitrary laws?

S&P 500 Sector Performances: Technology Sector Remains the Leader

Another great insight from Bespoke Invest (which includes the charts below),

The Technology sector ended the year with a 19% weight in the S&P 500, and that is where it stands now as well. The Financial sector, which saw its weight bounce significantly from the March 2009 low through the end of 2010, suffered a drop in weight from 16.1% to 13.4% in 2011. It has, however, bounced by 0.7 percentage points over the first two weeks of 2012 as Financial stocks have gotten off to a good start to the year.

Health Care, Consumer Staples and Utilities saw their S&P 500 sector weightings jump the most in 2011 as investors flocked to high dividend paying defensive names. Along with the Financial sector, Industrials and Materials are the only two other sectors that saw their weights in the S&P 500 drop in 2011. Interestingly, both Industrials and Materials have already gained back all of their 2011 weighting losses in the first two weeks of the year.

My view is that the continuing dominance of technology, despite last year’s underperformance, has been a manifestation of the US economy’s transition to the information age.

A Tale of Riches to Rags: The Bankruptcy of Former Irish Billionaire Sean Quinn

From BusinessWeek/Bloomberg:

Sean Quinn, once Ireland’s richest man, was declared bankrupt after losing more than one billion euros ($1.3 billion) investing in Anglo Irish Bank Corp.

Judge Elizabeth Dunne ruled on the bankruptcy in Ireland’s High Court in Dublin today. Quinn didn’t contest the bankruptcy petition brought by Irish Bank Resolution Corp., formerly Anglo Irish Bank.

The IBRC estimates that Quinn, whose fortune was valued at around $6 billion by Forbes magazine in 2008, owes the bank almost 2.9 billion euros. The lender in April appointed a share receiver to take over the Quinn family’s equity interest in Quinn Group, a conglomerate whose businesses included building materials, insurance and real estate.

We would see many bankruptcies by rich bankers when governments stop supporting them. But this isn’t likely to happen anytime soon as the welfare state will continue with its laborious efforts to preserve the current system.

And this can be seen with many "too big to fail" banks in the EU, continuing to receive massive support from their governments via the ECB.

Quote of the Day: Why Intellectuals Promote Statism

Intellectuals have all too often promoted these envy and resentment ideologies. There are both psychic and material rewards for the intelligentsia in doing so, even when the supposed beneficiaries of these ideologies end up worse off. When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.

That’s from Professor and author Thomas Sowell writing about the selective focusing by mainstream intellectuals in dealing with disparities, where their major thrust has been to promote the politics of class warfare.

[Gosh, this resonates much to the Philippine setting]

Is the US Still the “Land of the Free”?

A law professor at the Washington Times enumerates incisively 10 reasons why the US has been losing its freedom. The law professor points out that despite such dynamics, paradoxically Americans still want to be seen as “the land of the free”.

Writes Jonathan Turley, which I quote in the entirety (bold emphasis mine; hat tip Bill Bonner)

Every year, the State Department issues reports on individual rights in other countries, monitoring the passage of restrictive laws and regulations around the world. Iran, for example, has been criticized for denying fair public trials and limiting privacy, while Russia has been taken to task for undermining due process. Other countries have been condemned for the use of secret evidence and torture.

Even as we pass judgment on countries we consider unfree, Americans remain confident that any definition of a free nation must include their own — the land of free. Yet, the laws and practices of the land should shake that confidence. In the decade since Sept. 11, 2001, this country has comprehensively reduced civil liberties in the name of an expanded security state. The most recent example of this was the National Defense Authorization Act, signed Dec. 31, which allows for the indefinite detention of citizens. At what point does the reduction of individual rights in our country change how we define ourselves?

While each new national security power Washington has embraced was controversial when enacted, they are often discussed in isolation. But they don’t operate in isolation. They form a mosaic of powers under which our country could be considered, at least in part, authoritarian. Americans often proclaim our nation as a symbol of freedom to the world while dismissing nations such as Cuba and China as categorically unfree. Yet, objectively, we may be only half right. Those countries do lack basic individual rights such as due process, placing them outside any reasonable definition of “free,” but the United States now has much more in common with such regimes than anyone may like to admit.

These countries also have constitutions that purport to guarantee freedoms and rights. But their governments have broad discretion in denying those rights and few real avenues for challenges by citizens — precisely the problem with the new laws in this country.

The list of powers acquired by the U.S. government since 9/11 puts us in rather troubling company.

1. Assassination of U.S. citizens

President Obama has claimed, as President George W. Bush did before him, the right to order the killing of any citizen considered a terrorist or an abettor of terrorism. Last year, he approved the killing of U.S. citizen Anwar al-Awlaqi and another citizen under this claimed inherent authority. Last month, administration officials affirmed that power, stating that the president can order the assassination of any citizen whom he considers allied with terrorists. (Nations such as Nigeria, Iran and Syria have been routinely criticized for extrajudicial killings of enemies of the state.)

2. Indefinite detention

Under the law signed last month, terrorism suspects are to be held by the military; the president also has the authority to indefinitely detain citizens accused of terrorism. While the administration claims that this provision only codified existing law, experts widely contest this view, and the administration has opposed efforts to challenge such authority in federal courts. The government continues to claim the right to strip citizens of legal protections based on its sole discretion. (China recently codified a more limited detention law for its citizens, while countries such as Cambodia have been singled out by the United States for “prolonged detention.”)

3. Arbitrary justice

The president now decides whether a person will receive a trial in the federal courts or in a military tribunal, a system that has been ridiculed around the world for lacking basic due process protections. Bush claimed this authority in 2001, and Obama has continued the practice. (Egypt and China have been denounced for maintaining separate military justice systems for selected defendants, including civilians.)

4. Warrantless searches

The president may now order warrantless surveillance, including a new capability to force companies and organizations to turn over information on citizens’ finances, communications and associations. Bush acquired this sweeping power under the Patriot Act in 2001, and in 2011, Obama extended the power, including searches of everything from business documents to library records. The government can use “national security letters” to demand, without probable cause, that organizations turn over information on citizens — and order them not to reveal the disclosure to the affected party. (Saudi Arabia and Pakistan operate under laws that allow the government to engage in widespread discretionary surveillance.)

5. Secret evidence

The government now routinely uses secret evidence to detain individuals and employs secret evidence in federal and military courts. It also forces the dismissal of cases against the United States by simply filing declarations that the cases would make the government reveal classified information that would harm national security — a claim made in a variety of privacy lawsuits and largely accepted by federal judges without question. Even legal opinions, cited as the basis for the government’s actions under the Bush and Obama administrations, have been classified. This allows the government to claim secret legal arguments to support secret proceedings using secret evidence. In addition, some cases never make it to court at all. The federal courts routinely deny constitutional challenges to policies and programs under a narrow definition of standing to bring a case.

6. War crimes

The world clamored for prosecutions of those responsible for waterboarding terrorism suspects during the Bush administration, but the Obama administration said in 2009 that it would not allow CIA employees to be investigated or prosecuted for such actions. This gutted not just treaty obligations but the Nuremberg principles of international law. When courts in countries such as Spain moved to investigate Bush officials for war crimes, the Obama administration reportedly urged foreign officials not to allow such cases to proceed, despite the fact that the United States has long claimed the same authority with regard to alleged war criminals in other countries. (Various nations have resisted investigations of officials accused of war crimes and torture. Some, such as Serbia and Chile, eventually relented to comply with international law; countries that have denied independent investigations include Iran, Syria and China.)

7. Secret court

The government has increased its use of the secret Foreign Intelligence Surveillance Court, which has expanded its secret warrants to include individuals deemed to be aiding or abetting hostile foreign governments or organizations. In 2011, Obama renewed these powers, including allowing secret searches of individuals who are not part of an identifiable terrorist group. The administration has asserted the right to ignore congressional limits on such surveillance. (Pakistan places national security surveillance under the unchecked powers of the military or intelligence services.)

8. Immunity from judicial review

Like the Bush administration, the Obama administration has successfully pushed for immunity for companies that assist in warrantless surveillance of citizens, blocking the ability of citizens to challenge the violation of privacy. (Similarly, China has maintained sweeping immunity claims both inside and outside the country and routinely blocks lawsuits against private companies.)

9. Continual monitoring of citizens

The Obama administration has successfully defended its claim that it can use GPS devices to monitor every move of targeted citizens without securing any court order or review. (Saudi Arabia has installed massive public surveillance systems, while Cuba is notorious for active monitoring of selected citizens.)

10. Extraordinary renditions

The government now has the ability to transfer both citizens and noncitizens to another country under a system known as extraordinary rendition, which has been denounced as using other countries, such as Syria, Saudi Arabia, Egypt and Pakistan, to torture suspects. The Obama administration says it is not continuing the abuses of this practice under Bush, but it insists on the unfettered right to order such transfers — including the possible transfer of U.S. citizens.

These new laws have come with an infusion of money into an expanded security system on the state and federal levels, including more public surveillance cameras, tens of thousands of security personnel and a massive expansion of a terrorist-chasing bureaucracy.

Some politicians shrug and say these increased powers are merely a response to the times we live in. Thus, Sen. Lindsey Graham (R-S.C.) could declare in an interview last spring without objection that “free speech is a great idea, but we’re in a war.” Of course, terrorism will never “surrender” and end this particular “war.”

Other politicians rationalize that, while such powers may exist, it really comes down to how they are used. This is a common response by liberals who cannot bring themselves to denounce Obama as they did Bush. Sen. Carl Levin (D-Mich.), for instance, has insisted that Congress is not making any decision on indefinite detention: “That is a decision which we leave where it belongs — in the executive branch.”

And in a signing statement with the defense authorization bill, Obama said he does not intend to use the latest power to indefinitely imprison citizens. Yet, he still accepted the power as a sort of regretful autocrat.

An authoritarian nation is defined not just by the use of authoritarian powers, but by the ability to use them. If a president can take away your freedom or your life on his own authority, all rights become little more than a discretionary grant subject to executive will.

The framers lived under autocratic rule and understood this danger better than we do. James Madison famously warned that we needed a system that did not depend on the good intentions or motivations of our rulers: “If men were angels, no government would be necessary.”

Benjamin Franklin was more direct. In 1787, a Mrs. Powel confronted Franklin after the signing of the Constitution and asked, “Well, Doctor, what have we got — a republic or a monarchy?” His response was a bit chilling: “A republic, Madam, if you can keep it.”

Since 9/11, we have created the very government the framers feared: a government with sweeping and largely unchecked powers resting on the hope that they will be used wisely.

The indefinite-detention provision in the defense authorization bill seemed to many civil libertarians like a betrayal by Obama. While the president had promised to veto the law over that provision, Levin, a sponsor of the bill, disclosed on the Senate floor that it was in fact the White House that approved the removal of any exception for citizens from indefinite detention.

Dishonesty from politicians is nothing new for Americans. The real question is whether we are lying to ourselves when we call this country the land of the free.

I would add that the increasing politicization of the lives of the average Americans and the curtailment of their civil liberties also covers much of commerce and the financial system where political concessions, bailouts, and inflationists policies seems to have become an imperative.

In short, the US has gradually been transitioning into a fascist state where repressive and arbitrary laws have been substituting the rule of law.

As the great Friedrich August von Hayek admonished in the classic "The Road to Serfdom"

It is one of the saddest spectacles of our time to see a great democratic movement support a policy which must lead to the destruction of democracy and which meanwhile can benefit only a minority of the masses who support it. Yet it is this support from the Left of the tendencies toward monopoly which make them so irresistible and the prospects of the future so dark.

AP Opens in North Korea: Signs of Coming Economic Liberalization?

The Associated Press (AP) recently opened in North Korea

Writes The Guardian

The Associated Press has opened its newest bureau here, becoming the first international news organization with a full-time presence to cover news from North Korea in words, pictures and video.

In a ceremony Monday that came less than a month after the death of longtime ruler Kim Jong Il and capped nearly a year of discussions, AP President and CEO Tom Curley and a delegation of top AP editors inaugurated the office, situated inside the headquarters of the state-run Korean Central News Agency in downtown Pyongyang.

The bureau expands the AP's presence in North Korea, building on the breakthrough in 2006 when AP opened a video bureau in Pyongyang for the first time by an international news organization. Exclusive video from AP video staffers in Pyongyang was used by media outlets around the world following Kim's death.

Now, AP writers and photojournalists will also be allowed to work in North Korea on a regular basis.

For North Korea, which for decades has remained largely off-limits to international journalists, the opening marked an important gesture, particularly because North Korea and the United States have never had formal diplomatic relations. The AP, an independent, 165-year-old news cooperative founded in New York and owned by its U.S. newspaper membership, has operations in more than 100 countries and employs nearly 2,500 journalists across the world in 300 locations.

The bureau puts AP in a position to document the people, places and politics of North Korea across all media platforms at a critical moment in its history, with Kim's death and the ascension of his young son as the country's new leader, Curley said in remarks prepared for the opening

This would appear like a watershed breakthrough. There appears to be a seminal trend among the remnants of communism as Burma and Cuba whom has already taken the inaugural route towards economic liberalization.

And I think North Korea could be headed this way too under the new regime. One event does not make a trend though which is why we have to keep vigil.

I am hopeful that structural changes could be underway. Having North Korea open up economically will not only reduce risks of a regional war, but importantly augment Asia’s role as an economic powerhouse.

Quote of the Day: Libertarian Values

Libertarians do hold that the right to individual liberty across the board is the prime political value but by no means the prime value. Politics for libertarians can be thoroughly derivative, meant mainly to secure the possibility for a full moral or ethical life. Why be free? Mainly to be able to choose right from wrong, that’s why…

The only thing libertarianism has to say about one’s moral convictions is that they may not include coercing anyone else to do anything. Coercion is using unprovoked force on people, ones who haven’t violated the rights of others. If you believe it is your moral duty or responsibility to rob Peter so as to help out Paul, that will not fly. It is like holding that one has the moral duty to rape or kidnap someone. Some may--and sadly some do--claim that this is what they ought to do but they are confused or vicious. Only vis-a-vis children or invalids could one have such moral duties or responsibilities, never toward intact adults.

Despite what we could call the thinness of libertarian politics--the opposite end of the thickness of any kind of totalitarian regime--it does not follow that libertarians hold “that only freedom matters.” That’s what matters politically but as far as how human beings should conduct themselves in their lives, a plethora of moral requirements will be on the agenda for everyone. Fathers, mothers, friends, colleagues, sports partners, farmers, engineers, doctors, and all others who occupy some such role in life have a list of virtues they ought to practice. Hence even college courses in medical, business, engineering and legal ethics, for example.

On top of it there is just the ethics for living one’s human life, ethics addressed by numerous philosophies and religions and nearly all libertarians embrace one or another of these in their personal, nonpolitical lives.

[italics mine]

That’s from Professor Tibor R. Machan who defends against stereotyped misrepresentations or on spurious (begging the questions) claims that for Libertarianism “only freedom matters” to the "exclusion of all other values".

CBS News: US Taxpayers Taking a Hit on Green-Renewable Energy Firms

Political supported green renewable energy companies have been sinking US taxpayer funds.


(hat tip: Mark Perry)

From CBS

It's been four months since the FBI raided bankrupt Solyndra. It received a half-billion in tax dollars and became a political lightning rod, with Republicans claiming it was a politically motivated investment.

CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES' subsidiary Eastern Energy and Solyndra.

Others are also struggling with potential problems. Nevada Geothermal -- a home state project personally endorsed by Senate Majority Leader Harry Reid -- warns of multiple potential defaults in new SEC filings reviewed by CBS News. It was already having trouble paying the bills when it received $98.5 million in Energy Department loan guarantees.

SunPower landed a deal linked to a $1.2 billion loan guarantee last fall, after a French oil company took it over. On its last financial statement, SunPower owed more than it was worth. On its last financial statement, SunPower owed more than it was worth. SunPower's role is to design, build and initially operate and maintain the California Valley Solar Ranch Project that's the subject of the loan guarantee.

First Solar was the biggest S&P 500 loser in 2011 and its CEO was cut loose - even as taxpayers were forced to back a whopping $3 billion in company loans.

Nobody from the Energy Department would agree to an interview. Last November at a hearing on Solyndra, Energy Secretary Steven Chu strongly defended the government's attempts to bolster America's clean energy prospects. "In the coming decades, the clean energy sector is expected to grow by hundreds of billions of dollars," Chu said. "We are in a fierce global race to capture this market."

Economist Morici says even somebody as smart as Secretary Chu -- an award-winning scientist -- shouldn't be playing "venture capitalist" with tax dollars. "Tasking a Nobel Prize mathematician to make investments for the U.S. government is like asking the manager of the New York Yankees to be general in charge of America's troops in Afghanistan," Morici said. "It's that absurd."

My comment:

This represents the political economy of anthropomorphic climate change. Argue about the validity of global warming then divert taxpayers money on money losing projects that benefits only politically allied cronies and their political wards.

This is further proof that even with subsidized money, green or renewable energy can hardly take off simply because consumers don't see them as reliable alternatives (in spite of the global warming bugaboo).

This also proves that government picking out of 'winners' is no guarantee of success.

Even more, the issue of moral hazard applies as cronies are hardly motivated to see the success of these companies since they know government will absorb the losses on their behalf and even perhaps knew or anticipated that these companies would eventually fail, hence, became milking cows.

And corruption will signify another aspect here, since public-private partnerships naturally leads to the prioritization of the whims of the political masters rather than of consumers.

Also one can pretend to know about the future (as the energy secretary) when we really don't.

End of the day what is unsustainable won't last. What is a fraud or unnatural will be exposed for what they are. That's how events have been playing out as shown above.

Quote of the Day: Origin of the State

The positive testimony of history is that the State invariably had its origin in conquest and confiscation. No primitive, State known to history originated in any other manner. On the negative side, it has been proved beyond peradventure that no primitive State could possibly have had any other origin.s Moreover, the sole invariable characteristic of the State IS the economic exploitation of one class by another. In this sense, every State known to history is a class-State. Oppenheimer defines the State, in respect of its origin, as an institution "forced on a defeated group by a conquering group, with a view only to systematizing the domination of the conquered by the conquerors, and safeguarding itself against insurrection from within and attack from without. This domination had no other final purpose than the economic exploitation of the conquered group by the victorious group."

Albert J. Nock, Our Enemy the State p.44-45

The genesis of government is from violence and plunder, and definitely not an outcome of attempts at resolving market imperfections.

Italian Government Restricts the Use of Cash

My wretched airport experience last year has a link to what’s going on in Italy.

Basically global governments have used money laundering as an excuse or as a front to compel the public to migrate their transactions into the politically privileged banking system so that these transactions can be monitored and subsequently bankrolled to finance the governments. I think this represents part of the financial repression.

From Bloomberg (hat tip Bob Wenzel) [bold emphasis mine]

Prime Minister Mario Monti, in office just over a month, wants landlords, plumbers, electricians and small businesses to stop conducting large transactions in cash, which critics say helps them evade taxes. The government on Dec. 4 reduced the maximum allowed cash payment to 1,000 euros from 2,500 euros.

“If they force us to use credit cards, prices will go up,” said d’Andrea, noting that many retailers offer discounts to customers who pay in cash and don’t demand a receipt, in effect splitting with them the savings from evading the country’s 21 percent sales tax. She may curtail future purchases if she’s unable to use cash, d’Andrea said.

Italy loses more than 120 billion euros in unpaid taxes every year, according to the Equitalia tax collection agency. The country spends another 10 billion euros annually on security and labor for processing cash transactions, according to banking association ABI.

Debt Crisis

Monti is focusing on curtailing evasion as one way to reduce Italy’s 1.9 trillion-euro debt, which is bigger than Spain, Greece, Ireland and Portugal’s combined. Investor concern that Italy remains at risk of being overwhelmed by the region’s debt crisis pushed the country’s borrowing costs to euro-era records last month.

In Europe, Italy has a large shadow or informal economy (chart from the Economist) which implies that transactions are not being taxed and are usually done on cash basis and outside the banking system, thus the so-called “evasion”.

Yet in reality informal or shadow economies are symptomatic of the markets circumventing burdensome and stifling regulations, tax payments and social welfare contributions as previously discussed.

So essentially debt strapped governments like Italy has launched a war against their informal economy.

Such dynamic can be seen from the succeeding portion of the same article (bold emphasis mine)

The reform pits the government against some Italians who prefer to pay for everything from wedding receptions to home renovations with cash, allowing merchants to underreport or not declare the revenue, and gaining a discount in exchange. Many small companies pay salaries in cash, allowing employees to report less income, the Finance Ministry said last year.

“Businesses make us accomplices, because nobody wants to pay extra on a large transaction,” said Adele Costantini, a professor of medicine in the southern region of Abruzzo, who had to argue to get a receipt from a house painter. “I want them to pay the tax, not unload it on me.”

Italians are the euro region’s least-indebted consumers and among its biggest savers, according to data from the European Union’s statistics office, Eurostat. Their frugality may be at least partly linked to a distrust of paying with anything other than cash. Italian credit-card holders use their cards on average only 26 times per year, or five times less than in the U.K., according to the Bank of Italy.

‘Culture of Cash’

“The culture of cash is strongly ingrained in Italians, even those that don’t evade,” Deputy Finance Minister Vittorio Grilli said at a Dec. 5 press conference in Rome. The government initially wanted to set a 300-euro or 500-euro cash limit but decided against it, Grilli said, reasoning that citizens needed time to adapt to new rules.

These are manifestations of the welfare state-central banking-banking cartel facing continuing tremendous pressures to preserve the current unsustainable system.

Yet impositions like the above which goes against culture will naturally meet stiff resistance. And unintended consequences will likely be the ensuing order—perhaps the informal economy might resort to trading based on foreign cash currencies or local community currencies could emerge (like in some parts of the US) or even trading could be done in metallic coins or that such laws will simply be ignored or not complied with or that corruption will only swell. There are many variations that could arise in response to such repressive law.

Migration Trends: The Coming European Diaspora?

Past performance does not guarantee future results. This is not just about Wall Street, as long term trends do change in many aspects of social activities.

Take migration trends, what used to be popular—where citizens of emerging markets migrate to western nations—could now be in a process of reversal: Western people are leaving for Emerging Markets. 

After all, what usually drives social mobility is the search for greener pasture or about following the money.

We get this clue from this Wall Street Journal article (hat tip Bob Wenzel)

Economic distress is driving tens of thousands of skilled professionals from Europe, and many are being lured to thriving former European colonies in Latin America and Africa, reversing well-worn migration patterns. Asia and Australia, as well as the U.S. and Canada, are absorbing others leaving the troubled euro zone.

At the same time, an influx of Third World immigrants whose labor helped fuel Europe's growth over the past decade is subsiding. Hundreds of thousands of them, including some white-collar professionals, have been returning home.

The exodus is raising concern about a potential long-term cost of the economic crisis—a talent drain that could hinder the euro zone's weakest economies as they struggle to climb out of recession.

Talk about talent drain or brain drain is utter nonsense.

As the WSJ reports, the principal reason for the reversal of migration trends has been because of the lack or absence of economic opportunities. And this has been because of excessive welfare state, interventionism, bailouts of pet industries of politicians and boom bust policies which has been consuming capital and diverting resources to non-productive activities.

In short, brain or talent drain are symptomatic of failed government policies. 

More account of people in Europe voting with their feet, again from the same article.

During a prosperous decade that ended in 2008, Spain welcomed one of the world's biggest waves of immigrants. Foreign workers poured in at a rate of 500,000 per year to boost its construction and service industries, making the country Europe's prime destination for new arrivals.

Last year, with unemployment topping 20%, Spain became a net exporter of people for the first time since 1990, according to Spain's National Statistics Institute. Some 55,626 more people left the country in the first nine months of last year than arrived, the institute said.

Spaniards are scattering to better-off European countries and beyond, particularly to Latin America. Of the estimated 37,000 Spanish citizens who left the country in 2010, nearly 60% emigrated to countries outside the European Union.

At least 100,000 of Portugal's 11 million citizens moved abroad in 2011, after a decade of anemic growth and rising debt in Western Europe's poorest nation. In Africa, Angola's burgeoning economy has absorbed 70,000 Portuguese since 2003, according to the government-backed Emigration Observatory in Lisbon.

The number of Portuguese in Brazil on work-related visas shot up by 52,000 in the 18 months through June 2011.

Brazil is profiting from Europe's decline. It is wooing foreign engineers and other construction-related specialists to help carry out housing, energy and infrastructure projects for which the government has budgeted $500 billion through 2014, more than double Portugal's annual gross domestic product.

As one can observe what seems as a talent drain for Europe is now a talent gain for emerging markets.

People respond to changes in the environment and the political economy without directions from the government. Instead they are reacting to failed policies.

And allowing for social mobility will only force governments to compete for the most productive members of any society, as well as, force governments to become more competitive by embracing economic freedom. But of course this would be bad news for politicians, their cronies and their media cohorts..

Finally, the north south migration trends could just be the beginning

More from the same article…

With Europe's crisis and Brazil's boom, migration patterns are shifting again.

Brazilians are coming home in epic numbers. The government estimates that nearly half the country's émigrés have returned—from more than 3 million Brazilians living abroad in 2007 to fewer than 2 million today.

Again more evidence of the deepening wealth convergence dynamic borne out of globalization and the ballooning forces of decentralization relative to the baneful effects from the decadent welfare state.

Interesting times indeed.