How Foreign Interventionism Has Incited West Africa’s Political Woes

Government operation to free hostages ensnared by an al-Qaeda-linked group in a natural gas plant in a remote area in Southeastern Algeria apparently ended up in a fiasco: most hostages were slain along with their captors.(Bloomberg)

Historian Eric Margolis at the LewRockwell.com sheds us  insightful historical compendium of the recent revival of the political turmoil at West Africa.

I categorized his essay into different headings

1. Not an endemic Islam Story

Western governments and media have done the public a major disservice by trumpeting warnings of an "Islamist threat" in Mali. It’s as if Osama bin Laden has popped up on the Niger River. Our newest crisis in Africa is not driven primarily by religion but by a spreading uprising against profoundly corrupt, western-backed oligarchic governments and endemic poverty.

2. The Repercussions of Libya War and the French Client States

Mali’s troubles began last year when it shaky government was overthrown. Meanwhile, heavily-armed nomadic Tuareg tribesmen, who had served Libya’s late Col. Gadaffi as mercenaries until he was overthrown by French and US intervention, poured back into their homeland in Mali’s north. A major unexpected consequence. Fierce Tuareg warriors, who battled French colonial rule for over a century, were fighting for an independent homeland, known as Azawad.

They, a small, violent jihadist group, Ansar Din, and another handful of obscure Islamists drove central government troops out of the north, which they proclaimed independent, and began marching on the fly-blown capital, Bamako.

France, the colonial ruler of most of West Africa until 1960, has overthrown and imposed client regimes there ever since. French political, financial and military advisors and intelligence services ran West Africa from behind a façade of supposedly independent governments. Disobedient regimes were quickly booted out by elite French troops and Foreign Legionnaires based in West Africa that guarded France’s mining and oil interests in what was known as "FrancAfrique."

3. Contagion and Diversion from Domestic Political-Economic Affairs.

Overthrowing African regimes was OK for France, but not for locals. When Mali’s French-backed regime was challenged, France feared its other West African clients might face similar fate, and began sending troops to back the Bamako regime. President Francois Hollande, who had vowed only weeks ago not to intervene in West Africa, said some 2,500 French troops would intervene in Mali. But only on a "temporary basis" claimed Hollande, forgetting de la Rochfoucauld’s dictum "there is nothing as permanent as the temporary!"

Other shaky western-backed West African governments took fright at events in Mali, fearing they too might face overthrow at the hands of angry Islamists calling for stern justice and an end to corruption. Nigeria, the region’s big power, vowed to send troops to Mali. Nigeria has been beset by its own revolutionary jihadist movement, Boko Haram, which claims Muslim Nigerians have been denied a fair share of the nation’s vast oil wealth, most of which has been stolen by corrupt officials.

France’s overheated claim that it faces a dire Islamic threat in obscure Mali could attract the attention of numbers of free-lance jihadists, many who are now busy tearing up Syria. Paris was better off when it claimed its troops were to protect ancient Muslim shrines in Timbuktu. Or it could have quietly sent in the Foreign Legion, as in the past.

Instead, Mali has become a crisis with the US, Britain, West African states and the UN involved in this tempest in an African teapot. A nice diversion from budget crisis.

4. Hostage taking in Algeria and the Expansion of the Theater of War by Interventionists.

Another Algerian jihadist group just attacked an important state gas installation in revenge for France’s assault on Mali. This bloody action has awoken Algeria’s hitherto quiescent Islamic resistance groups. They waged a ten year war against Algeria’s US and French backed military regime, one of the continent’s most repressive regimes, after Algeria’s armed forces crushed Islamists after they won a fair election in 1991.

Over 250,000 Algerians died in a long, bloody civil war. The Algiers government often used gangs of its soldiers disguised as rebel fighters to commit gruesome massacres to blacken the name of the opposition. Algeria may again be headed for a new bloodbath, this time with minority Berber people calling for their independent state.

US air forces and small numbers of Special Forces from its new Africa Command are now entering action in Mali and Algeria. More are sure to follow as West Africa smolders

My comments

As diversionary ploy to distract the public’s attention, wars has usually been the recourse of economically strained nations to drum up political support (via nationalism), as well as, to “suppress dissension among members of the productive class” (Salerno)

Wars has been typically used as justification for further inflationism and for expansionary government or the “opportunity to intensify economic exploitation” (Salerno)

Wars have been used to promote the financial and political interests of vested interested groups represented by military industrial complex “the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex” (President Eisenhower), as well as, the neoconservative cabal through the ideological role of “global policeman” which formerly had been based on “global struggle against communism” (Gordon) and neocon goals of “continuing privileged hierarchical rule, and to continue to worship the nation-state and its war-making machine” (Rothbard).

Most likely today’s imperial foreign policies as evidenced by West Africa’s conflicts signify as cauldron of the factors above.

Quote of the Day: The Ethics of Free Enterprise Capitalism is Value Creation

With few exceptions entrepreneurs who start successful businesses don't do so to maximize profits. Of course they want to make money, but that is not what drives most of them. They are inspired to do something that they believe needs doing. The heroic story of free-enterprise capitalism is one of entrepreneurs using their dreams and passion as fuel to create extraordinary value for customers, team members, suppliers, society, and investors…

This is what we know to be true. Business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it lifts people out of poverty and creates prosperity.

This is from Whole Foods co-CEO John Mackey and Raj Sisodia, a marketing professor at Bentley College in their recently launched book Conscious Capitalism: Liberating the Heroic Spirit of Business as excerpted by a Wall Street Journal Book review (hat tip Carpe Diem's Professor Mark Perry)

  

Video: Doug Casey: We are Living in the Middle of the Biggest Bubble in History

In the following video, Goldmoney’s Andy Duncan interviews, one of my favorite investing savant, Doug Casey. 

At the final minutes, Doug Casey predicts that “There will be many bubbles created in the years to come especially bubbles that has been created by trillions of dollars”, which will filter over or permeate to different parts in the economy and to the world.

Importantly Mr. Casey notes (28: 04) "Right now, we are living in the middle of the biggest bubble in history and when this bubble burst it’s going to be a catastrophe for most people"  

[Yes, I agree, all one needs to is to see how bubbles have morphed into a mental pandemic as the public's addiction to artificial booms have seemingly become deeply entrenched. Hardly any thoughts have been given to possible adverse consequences or myriad risks from all the cumulative inflationism and interventionism implemented by global central banks and their respective political authorities, including the BSP and the Philippine government]  

Mr. Casey point outs that bonds are right now at the peak of the bubble cycle (a view which I have been saying) and further predicts a coming bubble on gold stocks, particularly Gold exploration stock. 

Watch the interview.

Quote of the Day: Money is an Invention of the Marketplace

Money is an invention of the marketplace of exchange, brought into being by traders who discovered that a reliable medium could facilitate trades that were more difficult or even impossible by barter alone. It developed from one form to a better one, one evolutionary trade at a time. Parliaments, Congresses and Emperors came along later and stole it, pure and simple if not fair and square… 

Private coinage was banned not because it didn’t work, but because it did. Governments just don’t care much for competition or for sound and honest money. The Civil War ban on private coinage has remained the law of the land since June 1864—a hallmark on the shameful path of monetary debasement.

This is from Lawrence W. Reed President of the FEE or The Freeman

Information Age: Individual Job Outsourcing

Outsourcing has been largely thought as mainly company based commercial operations. However in the real world, given today’s deepening of the digital economy or information age, the application of outsourcing has been broadening to include individual operations.

The oxymoronic account  of where a company caught an employee  outsourcing one’s job, from CNN.com, which led to his termination, seems like a manifestation of such snowballing dynamic

After a U.S.-based "critical infrastructure" company discovered in 2012 its computer systems were being accessed from China, its security personnel caught the culprit ultimately responsible: Not a hacker from the Middle Kingdom but one of the company's own employees sitting right at his desk in the United States.

The software developer is simply referred to as "Bob," according to a case study by the U.S. telecommunications firm Verizon Business.

Bob was an "inoffensive and quiet" programmer in his mid-40's, according to his employee profile, with "a relatively long tenure with the company" and "someone you wouldn't look at twice in an elevator."

Those innocuous traits led investigators to initially believe the computer access from China using Bob's credentials was unauthorized -- and that some form of malware was sidestepping strong two-factor authentication that included a token RSA key fob under Bob's name.

Investigators then discovered Bob had "physically FedExed his RSA token to China so that the third-party contractor could log-in under his credentials during the workday," wrote Andrew Valentine, a senior forensic investigator for Verizon.

Bob had hired a programming firm in the northeastern Chinese city of Shenyang to do his work. His helpers half a world away worked overnight on a schedule imitating an average 9-to-5 workday in the United States. He paid them one-fifth of his six-figure salary, according to Verizon.

Some thoughts

Programmer Bob’s offense has really not been about outsourcing but of the unauthorized disclosure of what has been internal corporate affairs to a third party.

In the digital economy or the information age, non-contiguous work requirements enable outsourcing on an international scale. The non-sensitivity to geographic confines means that work can be delegated to a specialty agent wherever access to connectivity is present. This translates to job  decentralization or semi-autonomous jobs or jobs that allows for “home based” work or telecommutation.  I may add that semi-autonomous work may not really be “home based” or static work location but about mobility.

Deepening decentralization of industries and jobs will translate to decentralization of living areas. Thus, the incompatibility of mainstream concept of industrial age “urbanization” with decentralization.

Outsourcing, which contributes to the informal economy, should continue to grow as the world’s economy gravitates towards technology inspired specialization.

Quote of the Day: The Virtues of Stock Market Speculation

But the speculator’s actions have conferred definite services to the community. He has smoothed out the jumps in Acme’s share price. By buying the undervalued stock, he has put upward pressure on the price. (Likewise, if he short sells an overvalued stock, he puts downward pressure on the price.) Rather than Acme’s stock jumping from $10 to $20 when war breaks out, it jumps only from $13 to $20, because (in our example) the speculator’s heavy buying had already closed 30% of the gap.

By reducing stock price volatility, speculators take some of the risk out of holding stocks. For example, it’s not necessarily true that the person who sold early to the speculator at $11 “lost” $9 to the wily profiteer. It’s entirely possible that the person needed to sell his holdings of Acme because he had lost his job or because his kid’s tuition went up again. Thus, the speculator has actually made this person — who had planned to sell even if Acme remained at $10 — richer.

More generally, by anticipating future changes in the “fundamentals” and translating them into current stock prices, speculators reward even long-term investors, the kind whom most people praise (as opposed to the short-term, quick-buck speculators). For example, if an institutional investor thinks she has found a solid company that will pay high dividends and will be around for at least 20 years, it is speculators who will help keep the day-to-day stock price from straying too far out of line with these long-term facts. If a financial panic sets in and shareholders are dumping stocks across the board, it is speculators who will staunch the bleeding and swoop in to pick up “deals” at fire-sale prices.

This shows that speculators provide liquidity to the stock market and make it more lucrative for other, long-term investors to do their homework and put some of their savings into corporations they believe have a solid future. A major risk of such an investment is illiquidity — that the investor may have to sell under duress and accept a much lower price than she could get if she only had more time — but speculators mitigate this risk. If the price gets well below “what the stock is really worth,” then that’s exactly when a speculator has an incentive to swoop in and buy.

[italics original]

 

This is from Austrian economics Professor Robert Murphy at the Laissez Faire Books.

Video: Ex-French President Charles de Gaulle Predicted a US Monetary Crisis in 1965

In the following video below, ex-French president Charles de Gaulle delivered a speech on the risks of a US monetary crisis in February 1965 (hat tip Prof Bob Murphy) [Transcript from Canada News Libre]

The fact that many countries accept as a principle, dollars as good as gold for the payment of the differences existing to their advantage in the American balance of trade, this very fact, leads Americans, to get into debt and to get into debt for free at the expense of other countries. Because, what the US owes them, it is paid, at least in part, with dollars they are the only ones allowed to emit. 

Considering the serious consequences a crisis would have in such a domain, we think that measures must be taken on time to avoid it. We consider necessary that international trade be established, as it was the case, before the great misfortunes of the World, on an indisputable monetary base, and one that does not bear the mark of any particular country. Which base? In truth, no one sees how one could really have any standard criterion other than GOLD 

[bold mine]

 

War on Plastic Bags: Debunking Three Popular Myths

I previously wrote about the unfounded claims on the supposed environmentally baneful effects from plastic bags.

Canada’s Fraser Institute offers their case by dealing with 3 popular myths: (bold and blue highlights mine)

The three central arguments used against plastic grocery bags are that plastic bags pollute the air and water, and pose a significant litter problem, clogging our lakes, rivers, and oceans.

Claim: Plastic bags pollute the air

According to most plastic bag critics, it takes roughly 12 million barrels of oil to produce the 100 billion plastic bags used in the US each year (Sierra Club, undated). 

Environmental activists note the production and decomposition of plastic bags emits greenhouse gases and other pollutants at every stage of a plastic bag’s life (New York Times, 2007). This, however, tells less than half of the story, as most analyses of bag impacts don’t consider the costs and benefits of plastic bags relative to alternatives. 

A study released in 2011 by the Environmental Agency of England helps put environmental impact claims in perspective. In Evidence: Life Cycle Assessment of Supermarket Carrier Bags, researchers offer a “cradle-to-grave” review of seven different types of grocery store bags: conventional lightweight plastic bags; plastic bags treated with a chemical to speed its degradation; a lightweight bag made from a biodegradable starch-polyester blend; a regular paper bag; a heavy-duty “bag for life” made from low-density polyethylene (LDPE); a heavier duty polypropylene bag; and a cotton bag (Edwards and Meyhoff Fry, 2011).

The researchers compared the environmental damage done by the bags using a number of indicators of environmental impact, including global warming potential, acidification, eutrophication, human toxicity, and others. They found that the conventional plastic bag had the lowest environmental impact of the lightweight bags in eight out of nine impact categories and that biodegradable plastic bags had even larger environmental impacts than the regular kind. Paper bags performed poorly on the environmental impact tests, and the study found that they must also be used four or more times to match the global warming potential of the plastic bags. In sum, cotton bags were found to have a greater environmental impact than the conventional bags in seven of nine categories, even when  used 173 times—the number of times needed for its global warming potential to be on par with that of a plastic bag

Claim: Plastic bags pollute the water

Another frequently recited argument in favour of banning plastic is that we face a crisis of plastic-encrusted waterways. Environmental groups paint horrific pictures of plastic pollution like the Great Pacific Garbage Patch, which purportedly spans twice the size of Texas (Oceanic Defense,  undated). Though it’s certainly true that plastic bags can be harmful to all things aquatic, it’s important, again, to put such claims in perspective. As assistant professor of Oceanography Angelicque White reports, the claims about the size of the Great Pacific Garbage Patch are simply wrong (2011). She explains, “The amount of plastic out there isn’t trivial, but using the highest concentrations ever reported by scientists produces a patch that is a small fraction of the state of Texas, not twice the size.” Moreover, “there is no doubt that the amount of plastics in the world’s oceans is troubling, but this kind of exaggeration undermines the credibility of scientists. We have data that allow us to make reasonable estimates; we don’t need the hyperbole.” And the contribution of plastic grocery bags to ocean plastic pollution is relatively small: environmental group Grow NYC estimates that only “7.5% of our waste stream consists of plastic film such as supermarket bags” (2012).

Dangers of alternatives

Alternatives, such as trendy cloth bags, pose a danger. A closer look proves cloth bags are not only less environmentally safe as described above, but they pose their own risks to human health. In June 2010, Charles Gerba and colleagues at the University of Arizona and Loma Linda University released a study on contamination of reusable bags. As they explain in Assessment of the Potential for Cross Contamination of Food Products by Reusable Shopping Bags:

“Large numbers of bacteria were found in almost all bags and coliform bacteria in half. Escherichia coli were identified in 12% of the bags and a wide range of enteric bacteria, including several opportunistic pathogens. When meat juices were added to bags and stored in the trunks of cars for two hours, the number of bacteria increased 10-fold indicating the potential for bacterial growth in the bags.”

While some critics dismissed the study due to its partial funding by the American Chemistry Council, real world examples corroborate Gerbera’s results (Huffington Post, 2012). In October 2010, for example, a teenaged soccer player in Oregon fell mysteriously ill, kicking off a nasty strain of norovirus that quickly spread to her teammates and left scientists puzzled. Epidemiologists ultimately uncovered the bizarre yet treacherous culprit: a contaminated cloth grocery bag from the soccer player’s hotel room. An NBC report explains, “The girl had been very ill in the hotel bathroom, spreading an aerosol of norovirus that landed everywhere, including on the reusable grocery bag hanging in the room. When scientists checked the bag, it tested positive for the bug, even two weeks later” (Aleccia, 2012)

To avoid such dangers, epidemiologist Kimberly K. Repp (whose report on the mystery above appears in the Journal of Infectious Diseases) rightly advises that, “we wash our clothes when they’re dirty; we should wash our bags too.” Unfortunately, however Gerbera et al found that “reusable bags are seldom if ever washed and often used for multiple purposes” (2012).

Economic Impacts

Finally, many proponents of the plastic bag ban spend the majority of their time on environmental benefits, and offer little substantive analysis as to the economic impacts of a plastic bag ban or tax. As it turns out, the economic case for plastic bag bans and /or taxes is less than airtight. A report released in January 2011 by the Suffolk University’s Beacon Hill Institute conjectures that Washington, DC’s bag tax, by making purchases more inconvenient, will lead consumers to reduce how much they buy in the District, which “will eliminate a net of 101 local jobs. The job losses will cause annual wages to fall by $18 per worker and aggregate real disposable income to fall by $5.64 million. The wage and income losses will combine to lower income tax collections.” A recent study from the National Center for Policy Analysis also found that plastic bags cost jobs:

“The NCPA surveyed store managers in Los Angeles County where a ban of thin-film bags took effect in July 2011, to determine the ban’s impact on revenues and employment. Over a one year period before and after the ban, stores that fell under the bag ban experienced a 10 percent reduction in  employment, while employment in stores outside of the ban slightly increased (2012)."

Conclusion

The panic surrounding plastic grocery bags is largely unfounded. Despite continued demonization of plastic bags, the  evidence shows that they’re less likely to be contaminated, typically save more energy than paper or cloth alternatives, and are less hazardous to marine life than is commonly conjectured 

Populist environmental politics has mostly been about misanthropic and atavistic social controls, backed by specious theories, which yearns to bring back society to the medieval age. 

The unseen factor has been the transfer of resources or the promotion vested interest groups, using the environment as cover, such as taxpayer funded green energy industry which has continued to bleed taxpayers dry in the US and in the Philippines, green lobby and the logging interests.

More Side Effects from UK’s Alcohol Taxes: Quality Deflation

I pointed out earlier of the unintended consequences from UK’s sin taxes on alcohol: damaging effects of bootleg alcohol, growth of the informal economy or of bootleg alcohol consumption and a shift in alcohol consumption patterns from the formal to the informal economy without reducing overall demand.

Here is another side effect: quality deflation from beer producers in the formal economy

From the CNBC.com

Britain's favorite pint of bitter is being watered down as austerity continues to bite and taxes rise.

John Smith's Extra Smooth, billed as "no nonsense beer", is being reduced from 3.8 percent alcohol to 3.6 percent in response to rising costs and reduced beer consumption. The move comes into effect next month and will save Heineken, the Dutch brewer that owns the John Smith's brand, 6.6 million pounds in duty annually. Beers with weaker alcohol content pay a lower rate of duty than their higher strength rivals.

Heineken, which is also raising the cost of the famous bitter by about 2.5 pence a pint, said it was bringing John Smith's "in line with competitor smooth ales that already sit at or below this alcoholic strength", including its biggest rival, Carlsberg's Tetley Smoothflow…

The Campaign for Real Ale, a lobby group, reckons that U.K. beer tax has risen by more than 40 percent since 2008, and now accounts for a third of the cost of a pint. Over the same period, the number of regular pub goers in the U.K. has declined by 3 million and more than 5,800 pubs have shut.

So Sin taxes essentially encourages low standards that not only reduces consumer satisfaction but importantly increases health risks.

Oh, expect the same outcome in the Philippines.

Bundesbank’s Gold Repatriation will Take Seven Years!

This is just a follow up on my earlier post about how Germany’s Bundesbank repatriation of their gold held by the NY FED (and the Banque de France) could trigger a scramble for the premier precious metal.

Apparently, in today’s deepening digital economy and the space age, it would strangely take 7 years for this process, which only accounts for half of Bundesbank’s claims, to get fulfilled.

Here is the Bloomberg:

The Bundesbank will repatriate 674 metric tons of gold from vaults in Paris and New York by 2020 to restore public confidence in the safety of Germany’s reserves.

The phased relocation of the gold, currently worth about 27 billion euros ($36 billion), will begin this year and result in half of Germany’s reserves being stored in Frankfurt by the end of the decade, the Bundesbank said in a statement today. It will bring home all 374 tons of its gold held at the Banque de France and a further 300 tons from the New York Federal Reserve, it said. Holdings at the Bank of England will remain unchanged.

My guess is that these governments will apply manual labor or of physically dragging gold from source central banks to their destination: the Bundesbank. 

Gold from the NY FED may be shipped by ancient maritime ships known as Triremes.

Portrait of modern day replicas of ancient Triremes from the Wikipedia.org

Of course, they might build these ships manually too. 

On the other hand, from the ranks of the unemployed, political appointees will physically carry bullions from the Banque de France to the Bundesbank. But they would to do these via obstacle courses designated by the authorities.

Pun aside, the above developments, seem as dilatory tactics aimed at implicitly squelching the current demand by the German public for a central bank gold audit. Eventually these central banks hope that the public's interest on these will fade.

Yet instead of "restoring confidence", such will likely raise more questions about the gold reserves held by central banks for the Bundesbank and for the FED itself, as well as, postulations of gold manipulation schemes, employed by central banks and by welfare-warfare governments.

Obama’s Push for Gun Prohibition

US President Obama pushes for a radical overhaul of gun laws.

From Bloomberg,

President Barack Obama unveiled the most ambitious gun-control agenda in decades today, announcing a $500 million package of legislative proposals and executive actions aimed at curbing firearms violence, from mass shootings to street crime.

The president, counting on a shift in public opinion since the shooting rampage at a Connecticut elementary school last month, challenged Congress to mandate background checks for all gun buyers, ban high-capacity ammunition clips, and reinstate a ban on sales of assault weapons

Obama signed 23 executive actions aimed at circumventing congressional opposition to new gun restrictions, including several designed to maximize prosecution of gun crimes and improve access to government data for background checks.

Couched in social morality, Obama’s proposal, which has been psychologically anchored on spur of the moment public impulse (availability heuristic), resonates of his predilection for the expansion of government, and importantly, for a spending $500 million blitz.

Again from the same article:

The administration also plans to address legal barriers that may prevent states from sharing relevant medical information, to review standards for gun locks, require federal authorities to trace firearms recovered in criminal investigations and direct the Centers for Disease Control to research the causes of gun violence.

The new spending would go mostly for training and data- collection programs. Obama wants $10 million for the CDC to conduct further research, “including investigating the relationship between video games, media images, and violence.”

Another $20 million would expand a reporting system to gather data when firearms are used in violent deaths, whether homicides or suicides. To encourage states to share criminal and mental health records for the federal background database, Obama proposes spending $20 million this year and $50 million next year.

School districts and police departments would get $150 million to hire school resource officers, psychologists and social workers and another $65 million for teacher training.

Obama again urged lawmakers to approve an existing request for $4 billion to help communities keep 15,000 police officers on duty.

So gun control looks like stimulus camouflaged mostly for the bureaucracy.

Yet like almost all prohibition laws once this gun control comes into effect the likelihood is to bring the assault weapon and sporting rifle ban into the underground (shadow economy).  And along with the other typical consequences: greater fraud, corruption, and higher risks of violence.

This reminds me of a quote attributed to Russian revolutionary and USSR Premier Vladimir I Lenin

A system of licensing and registration is the perfect device to deny gun ownership to the bourgeoisie.

Incidentally, Lenin’s Russian Civil War resulted to a death toll of 8 million people where only 2 million were from combat deaths according to eNotes.com.

Of course, Lenin introduced the infamous concentration camps or the Gulag

So like all aspiring tyrants, gun control has been the traditional recourse for assuming total social control.

Further, Obama’s thrust to use of “mental health” as checks on gun ownership represents the assumption that bureaucrats know better and have better moral standings than the citizenry have been premised on statolatry or the fiction of the puritanical or deifed state.

Additionally, the gun control regulation opens the portals of public censorship via "investigating the relationship between video games, media images, and violence.” 

The psychiatric treatment approach through social policies has been used as a prominent tool to attain total social control—the therapeutic state

Writes Professor Thomas Szasz at the Citizens Commission on Human Rights International: (hat tip Bob Wenzel) [bold and italics original]

“Although we may not know it, we have, in our day, witnessed the birth of the Therapeutic State. This is perhaps the major implication of psychiatry as an institution of social control.”

“When I use the term therapeutic state, I use it ironically, it’s therapeutic for the people who are doing the locking up, who are doing the therapy, it’s not therapeutic for the victims, for the patients.”

“In the therapeutic state, treatment is contingent on, and justified by, the diagnosis of the patient’s illness and the physician’s prescription of the proper remedy for it… Today, the therapeutic state exercises authority and uses force in the name of health.” The Founding Fathers “could not have anticipated…that an alliance between medicine and the state would then threaten personal liberty and responsibility exactly as they had been threatened by an alliance between church and state.”

“Inasmuch as we have words to describe medicine as a healing art, but have none to describe it as a method of social control or political rule, we must first give it a name. I propose that we call it pharmacracy, from the Greek roots pharmakon, for ‘medicine’ or ‘drug,’ and kratein, for ‘to rule’ or ‘to control.’”

“Formerly, people rushed to embrace totalitarian states. Now they rush to embrace the therapeutic state. When they discover that the therapeutic state is about tyranny, not therapy, it will be too late.”

“This phenomenon illustrates what I call the creeping therapeutic state. I see it as insidious, especially given the cooperation between the government and the media. This is allowed on television. But advertising Scotch, a legal drink, is not allowed. This subtly undermines the rule of law, the principle that if something is legal, then it’s legal, and if it’s illegal, then it’s illegal. A prescription drug is illegal; pharmacists cannot sell it to you unless you have a prescription. These are illegal drugs, but nobody calls them illegal drugs. So I see this as pernicious, as an example of what F.A. Hayek and Ludwig von Mises talked about—that the opposite of freedom is not brutal tyranny but capriciousness.”

The US has been in a transition to the land of the UNfree or what I call as the Philippinization of the US, and the consequences that goes along with it.

As I previously noted,

F. A. Hayek once warned that Americans are headed towards the road to serfdom. His admonitions appear as becoming a reality with the deepening of America’s police state aside from snowballing political and economic fascism, signs of which the US could be in a slippery slope towards dictatorship.

Quote of the Day: The Idea of a Strong Man Rule

The IDEA of a STRONG MAN, a czar and a dictator, appeals to many people, and this directly supports the STATE. Those people who become disenchanted with democracy or with Congress or with partisan politics and debates, and of course the potential czars and dictators, like this idea. Add this notion to the other supports, such as the "public good", "nationalism", and the communistic ideas that are in the Communist Manifesto and have already been enacted into law. The strong man concept might be invoked as an independent means of efficient government, or else as a support to the nation, or society, or the people, or the public good, i.e., as a complementary means to these. However the strong man idea is evoked, it too invades susceptible minds. This leads directly into the virus of STATISM and the STATE.

This is from Professor Michael Rozeff at the Lewrockwell.com. 

Populist state worship or what Mises would call Statolatry frequently leads to dictatorship, which eventually backfires.

The Philippines has been no stranger to this.

Example of How the Minimum Wage Hurt Businesses

Below is an example how government interventionism harms businesses and thus the economy. In the case below, the adverse impact of minimum wages (hat tip Division of Labor’s E. Frank Stephenson)

From KRQE.com

In November, Albuquerque voters said yes to raising the city's minimum wage from $7.50 to $8.50 an hour, and just 13 days into the increase, historic city restaurant is already feeling the pinch.

Owners of the historic El Charritos restaurant on Central say the hike is taking a bit out of business…

Romero says the hike came at the worst possible time for the business with an already sluggish economy, as people cut back on eating out and venders upped their prices for food and fuel.

To stay afloat El Charritos is cutting back too. They have slashed hours now closing at 2 p.m. on Mondays and Tuesdays to cut back on operating costs. El Charritos has also chosen not to fill six positions and say things could get worse.

At the end of the day, vested interest groups that root for minimum wages (e.g. labor unions and companies which use such policies to undermine competition) distorts the balance of the economy and results to increases in unemployment

As the great dean of the Austrian school of economics, Murray N. Rothbard warned (italics mine)

In truth, there is only one way to regard a minimum-wage law: it is compulsory unemployment, period. The law says, it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment.

 

Video Jon Stewart on the $1 Trillion Platinum Coin: It's a Stupid F*cking Idea

Hat tip: Mises Blog

The Daily Show with Jon Stewart
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Let me add Cumberland Advisors' Bob Eisenbeis sensible remark on such outrageous proposition:

a tongue-in-cheek proposal that was getting traction in DC was that the Treasury (and thus the Administration) could solve its funding problems by simply exploiting a loophole in the law that would permit the Treasury to mint a trillion-dollar platinum coin, deposit it in the Treasury’s account with the Fed, and write checks on that account to cover operating costs. Shame on us that we are even talking about the possibility, and even Paul Krugman has weighed in on the issue. To mint the coin would be to print money, and we know from history that printing money doesn’t solve a debt problem. The Spanish found that out when they scoured the world for gold. The more of it you have in circulation, the less valuable it becomes. The Germans found it out during the Weimar Republic, and the Argentineans found it out in the latter half of last century. Krugman claims it isn’t printing money because the Fed would offset Treasury spending, which would put new money in the hands of the public, with asset purchases. But he is wrong, since he is assuming behavior by another governmental entity to offset the Treasury’s spending and hasn’t apparently looked recently at the Fed’s exploded balance sheet. As the result of its quantitative easing programs, there are no offsetting transactions and wouldn’t likely be such transactions. [italics added]

When experts resort to surrealistic ideas as space aliens and platinum coins as solutions to economic fragility, you know how debauched, not only the economic spectrum has been, but importantly, the public's moral standings by virtue of its popularity.

As the great Ludwig von Mises warned, (bold mine)

There are still teachers who tell their students that “an economy can lift itself by its own bootstraps” and that “we can spend our way into prosperity.” But the Keynesian miracle fails to materialize; the stones do not turn into bread...

There is no use in arguing with people who are driven by “an almost religious fervor” and believe that their master “had the Revelation.” It is one of the tasks of economics to analyze carefully each of the inflationist plans, those of Keynes and Gesell no less than those of their innumerable predecessors from John Law down to Major Douglas. Yet, no one should expect that any logical argument or any experience could ever shake the almost religious fervor of those who believe in salvation through spending and credit expansion.

A Coming Scramble for Gold? Bundesbank Initiates Repatriation of NY Fed held Gold

Oh this should be interesting. 

If governments have indeed been manipulating gold prices, then Germany’s Bundesbank’s reported commencing of the process of repatriation of their gold bullions held by the NY Fed may have just opened the gauntlet for a potential scramble for physical gold.

Writes the Zero Hedge, (bold, underline and italics original)

In what could be a watershed moment for the price, provenance, and future of physical gold, not to mention the "stability" of the entire monetary regime based on rock solid, undisputed "faith and credit" in paper money, German Handelsblatt reports in an exclusive that the long suffering German gold, all official 3,396 tons of it, is about to be moved. Specifically, it is about to be partially moved out of the New York Fed, where the majority, or 45% of it is currently stored, as well as the entirety of the 11% of German gold held with the Banque de France, and repatriated back home to Buba in Frankfurt, where just 31% of it is held as of this moment. And while it is one thing for a "crazy, lunatic" dictator such as Hugo Chavez to pull his gold out of the Bank of England, it is something entirely different, and far less dismissible, when the bank with the second most official gold reserves in the world proceeds to formally pull some of its gold from the bank with the most. In brief: this is a momentous development, one which may signify that the regime of mutual assured and very much telegraphed - because if the central banks don't have faith in one another, why should anyone else? - trust in central banks by other central banks is ending.

Much more importantly, it is being telegraphed as such, with Buba fully aware of just what the consequences of this (first partial, and then full; and certainly full vis-a-vis the nouveau socialist regime of Francois Hollande which will soon hold zero German gold) repatriation will be in a global monetary arena, which is already scraping by on the last traces of faith in a monetary system that is slowly but surely dying but first diluting itself to oblivion. And in simple game theory terms, the first party to defect from the prisoner's dilemma of all the bulk of global gold being held by the Fed, defects best. Then the second. Then the third. Until, in this particular case, the last central bank to pull its gold from the NY Fed and the other 2 primary depositories of developed world gold, London and Paris, just happens to discover their gold was never there to begin with, and instead served as collateral to paper gold subsequently rehypothecated several hundred times, and whose ultimate ownership deed is long gone.

Two things:

First, if true then this should be reflected on gold prices soon.

Next if the Bundesbank action will impel for a "domino effect" or where other central banks may likely do the same, then this may translate to some volatility in the asset markets, as bullion banks and the banking system, who may be physically short gold, envisage risks of financial strains to cover their positions.

Quote of the Day: The Taxman is My Shepherd

The IRS is my shepherd; I shall live in want. It maketh me to lie down with expensive accountants; it leadeth me to consort with disreputable lawyers. It crusheth my soul; it leadeth me in the paths of avoidance and evasion to preserve my wealth. Yea, as I walk through the valley of the shadow of penalties and interest charges, I will fear its evil; for it is with me; its code and its staff they torment me. It preparest a table before me in the presence of U.S. attorneys: it bruiseth my head with its reporting requirements; my cup of patience runneth out. Surely goodness and mercy shall be strangers to me all the days of my life; and I will dwell in the house that a plundering state has made forever.

This is from Austrian economist Robert Higgs at the Independent Institute.

Blazing Start for 2013: Phisix 6,000!

I have already made my case for 2013 last week. 

To summarize, ultimately the direction of interest rates will likely drive the direction of the Phisix where higher rates may put a lid on the gains of the Phisix while continued low rates may inspire a blowoff phase.

Yet the direction of local interest rates in 2013 will not be limited to domestic events as they will most likely be influenced by the external environment and by the collaborative efforts by central banks

I also believe that low interest rates will persist, at least until the first quarter. This means that the momentum from the yearend rally will likely be carried over the same period, but of course subject to sporadic profit taking.

As I previously noted[1],

This week’s fiery opening has essentially signified a carryover from last year’s final quarter blitzkrieg (right window), a thrust which may last until the first quarter..

Global equity markets have remained buoyant, even if many major emerging markets, such as the BRICs and ASEAN have begun to manifest signs of profit-taking (this week). The chart above, shows of the weekly performance via the blue bars and the year-to-date or two week performance through the red bars.

Obviously given the trailblazing start, the huge two week gains and signs of overextended run, a short profit taking phase should be a natural consequence…unless we have already reached a blowoff phase.

Mining Index: Head Fake or Dominant Theme for 2013?

I also noted that 2013 will be dominated by the mines

Again from last week

for as long as the inflationary boom remains, I also expect a rotation towards last year’s laggards: the mining sector and possibly the service industry.

I’d like to refresh a perspective which I have been pounding on the table since the latter half of 2012.

The idea is that the mining index (blue) has been in alternating leadership with the Phisix (red) for the past 6 years or since 2007. The mines had two successive year of gains in 2006-2007

Of course, this hasn’t just been about patterns. This has been about the relative price effects of money creation and credit expansion or the Cantillon Effects applied to the stock markets.

The narrow breadth of the Philippine stock market, where only 344 companies are listed according to Wikipedia.org[2], amplifies the effects of the inflationary boom via rotational patterns.

Specifically, industries which recently outperformed eventually encounters a year-long reprieve and industries that have underperformed become the next market darlings. The eventual result: the rising tide lifts all boats or that price levels of publicly listed securities generally increase overtime, but again the relative difference lies in the degree of increases and the timing.

For the past 2 weeks the local Mining index bannered the Phisix (blue-weekly gains) to fresh record highs (8.78% gains in 2 weeks).

The holding industry, one of last year’s best performers, remains resilient and has managed to grab the second spot. Nonetheless another 2012 tailender, the service sector, has narrowed the lead of the Holding industry, and placed third.

Remember, the two former laggards were last year’s politically persecuted industries: The mining industry, particularly, for environmental issues (tailing spills, EO 79) and taxes (excise taxes), while the telecoms (as the industry’s heavyweights) had also been pressured for higher taxes (through the proposed SMS Tax). Telecoms account for about 64% of the service industry index.

The markets may have begun to discount the posturing for political uprightness by Philippine authorities through sustained media assault on these industries, perhaps due to the coming national elections in May

The market could be also be saying that a political comprise or accommodation may be in the pipeline for the contending parties, or that the sheer inundation of money in the system, has been enough to negate or benumb the markets to the political risks involving these industries.

Aside from the potential political accommodation, mainstream media’s take on the mining industry will likely be predicated on the return of foreign investments and of a ‘recovery’ of ‘demand’ via global economic statistical growth.

Here, I am predicting how mainstream media and their preferred ‘experts’ will depict on the mining resurgence, if sustained. These are the likely narratives that will be used. 

To validate the assumption of the supposed recovery of global growth, mainly from emerging markets, we need to see a broad based rise in prices of metals and other commodities. Also industrial metals should outperform gold and or the precious metals group.

The recent the global asset boom may have partially created such impression as industrial metals (GYX) have now outclassed gold.

But of course, this has been more about the mirage from the tsunami of money unleashed by global central banks, and likewise, the domestic counterpart.

For me, given the absence of an active and liquid physical metals spot or futures commodity markets in the Philippines, the mines signifies as the best alternative or hedge against the growing risks of price inflation or even stagflation.

Furthermore, despite the seeming underperformance of the price of gold, which I believe has been actively suppressed, this time through the US Federal Reserve communications strategy in portraying the tilting of balance towards the ‘hawks’, the string of record breaking activities as evidenced by record buying of physical gold and silver in the US (first 2 weeks of 2013), record ETF holdings of gold (as of November 2012) and record gold imports of India and China (fourth quarter 2012), aside from milestone third quarter rate of growth in the gold buying of emerging market central banks (third quarter of 2012), suggests of the blatant disconnect between gold prices and real economic activities underpinning the gold markets[3]. Yes some Fed officials have openly been chattering about risks of price inflation!

Gold prices may not immediately rise, or may even fall in the interim—for the simple reason –gold have risen for 12 straight years!!! This simply is regression to the mean or a normal function of the market process.

However if gold’s real economic activities continues with its current record breaking pace, then bullish pressure building underneath today’s politically constrained prices will eventually be vented on the marketplace—once such pressures become powerful enough to force upon a fissure or a valve or an outlet to release them.

And this is what differentiates between value investing marked by “sit and wait” based on fundamentals compared to the ticker tape mentality, which is based on impulse and skewed towards momentum or price chasing punts.

And given the 2013 sturdy recoil from last year’s selloff, like the Phisix, I expect the natural process of profit taking in the mining sector to occur over the interim. And this should serve as an opportunity to enter.

Of course, two weeks may not make a trend. And I could be wrong, where the recent rebound may be all about an oversold bear market bounce or a head fake. But of course, such perspective essentially ignores the real drivers of today’s boom.

---

[1] See What to Expect in 2013 January 7, 2013

[2] Wikipedia.org Philippine Stock Exchange

[3] See Is the US Federal Reserve Indirectly Putting Down Gold Prices? January 12, 2013