Democrats To America: Read Our Lips - More taxes!

Sent to me by a tennis playing friend and fellow memo reader. who wrote he particularly loved this quote: "The border’s too big. The hole in the Gulf is too deep. The recession is too stubborn. Maybe we should find the president a smaller, easier-to-manage country to govern. You know - send him to the minors for a few years."

My response: I'd rather send him to the moon. He's been mooning us so it is about time we mooned him. Me
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I have posted a lot of bumper stickers and recently did one of my own which confirmed the article I am posting below.

Dumb: Obamamaniacs
and
Dumber: Obama (See 1, 1a and 1b below.)
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I post articles from the Naval War College Quarterly from time to time. The one below is independent and should be of concern to those who fear China's rise as a naval challenge. (See 2 below.)
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Lets get racial. (See 3, 3a and 3b below.)
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Obama is interviewed on Israeli TV. He acknowledges Israelis are suspicious of him but attributes it to his middle name and overtures to the Muslim community.

Obama also pointed out that his Chief of Staff was Rahm Emanuel. Sounds like - 'Some of my best friends are Jewish.'

I would suggest, Israelis distrust Obama because he projects weakness, has conducted a dream like foreign policy suggesting if America apologizes to the world we will be loved and finally because he has demonstrated an antipathy towards Israel that matches Carter's.

Netanyahu makes an important speech as well. (See 4 and 4a below.)
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A book written by an Hamas operative named Arman, who is an Israeli prisoner, provides clues a senior Israeli security official finds very disturbing because it shows deep understanding of Israeli intelligence agencies' modus operandi, as well as Israeli society at large. (See 5 below.)
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The Aspen Ideas Festival has begun and brings a lot of brainpower together. This is one participant's thinking.

The funder, earlier today in an interiew said his greatest concern was the dumbing down of America and the poor trends in education. You cannot be a first rate nation if you maintain second rate public schools. He said we need to toughen course curriculum, extend the school day and cut the summer to a one month vacation period. (See 6 below.)
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Are bonds signalling a depression? (See 7 and 7a below.)
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Democrats are preparing to sock it to the middle class. Democrats never heard the words cut spending . They only now the phrase raise taxes and then raise more taxes. The Democrats message to America: Read our lips - more taxes! (See 8 below.)
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Dick
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1)The Dumbest President...EVER!
By Stuart Schwartz

Barack Obama is the dumbest president...EVER.

That is a reasonable conclusion once you've assessed the first nineteen months of his presidency and compared it to the definition of intelligence put together by researchers in the field. Although the mainstream media have spent the last two years proclaiming Obama "super-smart" or, as Newsweek put it, "sort of God" in stature and brilliance, the 44th president of the United States is poised to surpass our 15th president, James Buchanan. Jr., as the White House occupant who has made the dumbest moves while in office. With two years left, he is on the fast track to last.


That takes some doing, for the leadership of the hapless Buchanan prior to the Civil War "has led to his consistent ranking by historians as one of the worst Presidents." This is the president who vetoed a college funding bill because "there were already too many educated people" in the young nation. Buchanan's judgment was so wretched that he thought anti-slavery forces could be convinced to give up their opposition by his personal assurances that slaves were "treated with kindness and humanity" and that poverty could be ended by simply printing more money. Sound familiar?


Barack Obama is dumb. How dumb? Alfred E. Newman dumb, says columnist David Limbaugh, who labeled him "President Alfred E. Obama" because of his blithe disregard of the basics of fiscal responsibility. Alfred E. Newman is the Mad magazine mascot, whose answer to every problem is his signature statement: "What, me worry?"


How dumb? How-many-Obamas-does-it-take-to-screw-in-a-light-bulb dumb. And in the answer lies the answer, the key to his pole position in the race to last: It takes 242. One to hold the light bulb, four to turn the ladder, eighteen to assess conformity to OSHA workplace requirements, four to assess the environmental impact of the burnt-out bulb disposal, twelve to participate in a task force to evaluate green energy solutions for a replacement bulb, eight to script his actions, four to script instructions and work the teleprompter, 23 to work with the justice department to sue the light bulb manufacturer...you get the picture. And, à la Buchanan, Obama never does get that light bulb changed.


That James Buchanan "fiddled while Rome burned" seems to be the consensus of historians. His approach to the raging controversy over slavery in the decade preceding the Civil War was based on ignoring evidence and acting upon events as he wished them to be, not as they were. Fast-forward to the present: Obama responds to the Gulf crisis by trying to move us toward the collapsed centralized green economy of Spain, ignoring the fact that even Spain acknowledges that "every 'green job' created with government money...came at the cost of 2.2 regular jobs, and only one in 10 of the newly created green jobs became a permanent job."


In all areas of his presidency, Obama has demonstrated a striking disregard of facts, lack of good reasoning, and inability to function at an executive level, all at the core of the textbook definition of intelligence derived from more than a half century of research. Intelligence, the experts tell us, comes down to understanding the meaning of the world around us, and then using that understanding to live skillfully and appropriately (i.e., to get stuff done). One survey of more than fifty researchers in the field of intelligence offers the following definition:


A very special mental capability that, among other things, involves the ability to reason, plan, solve problems, think abstractly, comprehend complex ideas, learn quickly and learn from experience. It is not merely book learning, a narrow academic skill, or test-taking smarts. Rather, it reflects a broader and deeper capability for comprehending our surroundings---"catching on", "making sense" of things, or "figuring out" what to do.



Obama is Buchanan-esque in his inability to function as an executive, a key part of intelligence. Even a cursory analysis of history shows that limited government and free markets have produced prosperity; so Obama expands government and takes over private businesses, causing one observer to throw up his hands at another Buchanan moment from Obama and exclaim, "It isn't rocket science, Mr. President!" Hands-on executives and laser focus are business school basics for solving problems; so Obama parties rather than roll up his sleeves, unleashes federal regulators on hapless Gulf state residents rather than cutting through the red tape, and appoints study panels even as the oil washes ashore (e.g., see video timeline). Radical Islamists are waging war against the United States; Obama does a full Buchanan -- or, if you will, an Alfred E. Newman-style "What, me worry?" -- and, denying the existence of Islamic terrorism, asks whom are you going to believe -- me or your lying eyes?


The ability to draw reasonable conclusions from everyday life and then use those conclusions to adapt is fundamental to high intelligence, says cognitive psychologist Robert J. Steinberg, the award-winning Tufts University dean and University of Cambridge fellow. In other words, the scientific community has established good reasoning, learning from past experience, and acting according to those experiences as integral to high intelligence.


It does not include, as David Brooks, tells us, having an exceptional and "perfectly creased pant [leg]" or -- in what Hot Air's Allahpundit calls "a loathsome expression of elitism" -- being able to "talk like us," Brooks, and others of the "smart set." If that were the case, all we would need to increase intelligence in the U.S. Congress is to provide our elected representatives with dry cleaning services. As for the "talk like us" part, it doesn't take intelligence to talk like a self-styled intellectual, a.k.a. a New York Times columnist. Hawkeye Pearce has already shown us the way in the classic "Love Story" episode of television's "Mash." He teaches Radar, the shy Iowa farm boy who has a crush on a nurse who reads the classics and enjoys Bach, to reply with, eyebrows uplifted, "Ahhh...Bach" when she discusses music and throw in the occasional "That's highly significant."


Want to impress David Brooks and others of the media engaging in what Bernard Goldberg calls "a slobbering love affair" with the president? Simple. Reply, as Obama has done, "Ahhh...Burke" to David Brooks, enthralled by a president who expressed appreciation for the "finer points" of political philosophy; or flash your degree to Christopher Buckley, formerly of National Review, awestruck by Obama's "Harvard intellect"; or simply present Marxism and mainline elegance as typical of the academic life, and media academics like Michael Beschloss will gush on mainstream news, "he's probably the smartest guy ever to become President."


But intelligence is as intelligence does, as Forest Gump might remind us. Harvard has produced more than its share of great men and women, but it has also produced the Unabomber, Barney Frank, and Enron CEO Jeffrey Skilling...and now, the next James Buchanan.


So the next time Brooks or others in the mainstream media firmament tell you that Barack Obama is a towering intellect, the smartest president ever, just nod your head wisely and say, "Ahhh...pant leg."


Stuart Schwartz, a former retail and media executive, is on the faculty at Liberty University in Lynchburg, Virginia.

1a)Non-Believer
Andrew Bacevich

As a candidate for president, George W. Bush famously promised to pursue a “humble” foreign policy. The events of 9/11—for Bush akin to a conversion experience—swept humility by the board. The 43rd president found his true calling: Providence was summoning him to purge the world of evil.

When it came to fulfilling this mission, Bush’s subsequent efforts yielded precious little. Recklessness compounded by profound incompetence became the hallmark of his administration. Yet of this there can be no doubt: Until the day he left office, Bush himself remained certain that his intentions were pure and the nation’s cause righteous. In particular, he believed, and believed deeply, in the Iraq war.

Bush’s Freedom Agenda ended in abject failure—no liberalizing tide has swept the Islamic world. The promised Iraqi weapons of mass destruction and the evidence linking Saddam Hussein to Al Qaeda never materialized. Implementing the heinous Bush Doctrine of preventive war in Iraq yielded an insurgency that sent millions fleeing to squalid refugee camps. As a direct result, thousands of American soldiers were killed and many thousands more maimed or otherwise deeply scarred.

Despite all of this and more, George W. Bush never wavered. He remained resolute, his conscience clear. He knew he was doing God’s work. He was—and no doubt remains today—a true believer. The 43d president was a well-intentioned fool, who inflicted grievous harm on his country. Yet when Bush stands before his Maker (or the bar of History), he will say without fear of contradiction: “I did what I thought was right.”

Barack Obama is anything but a fool. Yet when called upon to account for his presidency, honesty will prevent him from making a comparable claim. “The problems I inherited were difficult ones,” he will say. “None of the choices were good ones. Things were complicated.”

The Afghanistan war forms part of that complicated inheritance where good choices are hard to come by. Much as Iraq was Bush’s war, Afghanistan has become Obama’s war. Yet the president clearly wants nothing more than to rid himself of his war. Obama has prolonged and escalated a conflict in which he himself manifestly does not believe. When after months of deliberation (or delay) he unveiled his Afghan “surge” in December 2009, the presidential trumpet blew charge and recall simultaneously. Even as Obama ordered more troops into combat, he announced their planned withdrawal “because the nation that I'm most interested in building is our own.”

The Americans who elected Obama president share that view. Yet the expectations of change that vaulted him to the presidency went well beyond the issue of priorities. Obama’s supporters were counting on him to bring to the White House an enlightened moral sensibility: He would govern differently not only because he was smarter than his predecessor but because he responded to a different—and truer—inner compass.

Events have demolished such expectations. Today, when they look at Washington, Americans see a cool, dispassionate, calculating president whose administration lacks a moral core. For prosecution exhibit number one, we need look no further than the meandering course of Obama’s war, its casualties and costs mounting without discernible purpose.

Obama doesn’t want to be in Afghanistan any more than Benjamin Netanyahu wants to be in the West Bank. Yet like the Israeli prime minister, the president lacks the guts to get out. It’s all so complicated. There are risks involved. Things might go wrong. There’s an election to think about.

So the war continues. Sustaining some artfully updated version of the status quo becomes the easier (or more expedient) course. Thus does a would-be messiah promising salvation and renewal succumb to the imperatives of “politics”—with young soldiers and their families left to bear the consequences.

The question demands to be asked: Who is more deserving of contempt? The commander-in-chief who sends young Americans to die for a cause, however misguided, in which he sincerely believes? Or the commander-in-chief who sends young Americans to die for a cause in which he manifestly does not believe and yet refuses to forsake?

Andrew J. Bacevich is professor of history and international relations at Boston University. He is the author of Washington Rules: America’s Path to Permanent War (2010), The Limits of Power: The End of American Exceptionalism (2008), and The New American Militarism: How Americans Are Seduced by War (2005), among other books.


1b)NASA: Mission to Mecca? - Charles Lane, Washington Post

The latest flap in the blogosphere is about NASA administrator Charles Bolden Jr.’s observation, in an interview with Al Jazeera, that President Obama wants his agency to conduct more outreach with what Bolden called “dominantly Muslim nations.”

“He wanted me to find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contribution to science, math and engineering,” Bolden said.

“Fatuousness,” Charles Krauthammer grumbled.

“The space program is being transformed into a tool of Obama foreign policy, which views American national greatness as an anachronism,” Elliott Abrams objected.

Others complained that Bolden had said that Muslim outreach was perhaps his “foremost” purpose, ahead even of space exploration itself.

In a written statement, the White House pointed out that Bolden was just talking about engaging “the world's best scientists and engineers as we work together to push the boundaries of exploration. Meeting that mandate requires NASA to partner with countries around the world like Russia and Japan, as well as collaboration with Israel and with many Muslim-majority countries. The space race began as a global competition, but, today, it is a global collaboration."

Fair enough. But I still found Bolden’s comment troubling, for a reason of my own: since when is it U.S. government policy to offer or refuse cooperation with various nations based on the religion their people practice?


Last time I checked, the Constitution expressly forbid the establishment of religion. How can it be consistent with that mandate and the deeply held political and cultural values that it expresses for the U.S. government to “reach out” to another government because the people it rules are mostly of a particular faith?

To be sure, the U.S. government has an interest in good relations with all the people of the world, regardless of their religion. We have, perhaps, a particular interest in combating hostility toward our country and its people among the Muslim faithful, because much terrorism is rooted in extreme Islamist ideology.

But does it follow that the U.S. government should seek cooperation on space projects with the government of a particular country explicitly because its people are mostly Muslim?
Doesn’t this put us in the position of categorizing nations by religion as opposed to other characteristics, such as whether they are democratic? We did not pursue space partnerships with Europe because it was “Christian” or Israel because it was Jewish, did we?

There are two risks here. The first is to encourage Islamic identity politics in states that already consider themselves Islamic -- Pakistan comes to mind. The second is to discourage those prospective space partners that do not accept the label of “Muslim” or “Muslim-majority” that the administration seems so eager to pin on them.

Take Indonesia. Back on Feb. 16, Bolden observed that “we really like Indonesia because the State Department, the Department of Education [and] other agencies in the U.S. are reaching out to Indonesia as the largest Muslim nation in the world. We would love to establish partners there.”

Note that, according to Bolden, it’s not just NASA that’s reaching out to Indonesia because it is a big “Muslim nation.” State and Education are, too. Indonesia does not, however, define itself as a Muslim country. Ninety percent of its people are, indeed, of that faith. Yet the country’s official flag and coat of arms do not include any Muslim symbols (in contrast to Turkey or Saudi Arabia). Its official ideology, Pancasila, is studiously nonsectarian. The national motto is “unity in diversity.”

Article I of the Indonesian Constitution establishes a republican form of government that recognizes the sovereignty of the people.” Article XI of that document declares, ecumenically, “The State shall be based upon the belief in the One and Only God. The State guarantees all persons the freedom of worship, each according to
his/her own religion or belief.”

Compare and contrast with the preamble of Pakistan’s Constitution: Whereas sovereignty over the entire Universe belongs to Almighty Allah alone, and the authority to be exercised by the people of Pakistan within the limits prescribed by Him is a sacred trust; And whereas it is the will of the people of Pakistan to establish an order . . . Wherein the principles of democracy, freedom, equality, tolerance and social justice, as enunciated by Islam, shall be fully observed; Wherein the Muslims shall be enabled to order their lives in the individual and collective spheres in accordance with the teachings and requirements of Islam as set out in the Holy Quran and Sunnah," etc.

To be sure, Islamism enjoyed a bit of a surge in Indonesian politics following the ouster of the Suharto regime in 1998. But Islamic parties have been on the wane more recently. The ones that espouse an Islamic state garnered only 17 percent of the vote in this year’s legislative elections. More pluralistic Muslim-based parties got about 12 percent.

It makes as much sense to define this vast, diverse, rapidly modernizing archipelago as “Muslim” as it would to define Brazil as Roman Catholic.

Better for NASA to say that we seek partnerships with all countries that respect the rights of their people, that share our pluralistic values and that seek, as we do, to understand the mysteries of space -- and leave it at that.
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2)China Winning a Victory at Sea
By William R. Hawkins

China is flexing its muscles at sea in Northeast Asia, taking advantage of perceived US weakness. So far, the US response has reinforced the Chinese view.


Tensions have been rising in the region. The issue is not just North Korea's nuclear weapons program and long-range missile tests. In May, an international investigation found that a North Korean torpedo had sunk a South Korean corvette with the loss of 46 lives in March. The United States and the Republic of Korea have referred the incident to the United Nations, but have done little else. Pyongyang's protectors in Beijing have done more. China has stepped out from behind the curtain as neutral host of the suspended Six Party Talks on nuclear proliferation to bring to bear its military, diplomatic, and propaganda resources to defend North Korea on the ship sinking. And under the Chinese onslaught, Washington it falling back in disarray.


China's People's Liberation Army Navy (PLAN) has been conducting live-fire exercises just north of Taiwan and northwest of Okinawa. Indeed, on July 4, a Chinese destroyer and frigate passed between the southwestern Japanese islands of Okinawa and Miyako on their way into the Pacific Ocean. Though passage through the strait was legal under international law, it still alarmed Tokyo as Beijing had not given any notification of the movement of its warships so close to U.S. and Japanese bases.


The Chinese air and naval maneuvers were announced June 24, and were to run from June 30 to July 5. The area of operations was the East China Sea, the entry point to the Yellow Sea where the United States and South Korea were expected to hold a joint exercise starting June 28. Instead, the Pentagon announced, after the Chinese revealed their plans, that any allied "show of force" in the Yellow Sea against North Korea would not take place until July, if then.




Beijing has been protesting any US-ROK exercises, especially if they involve the task force built around the aircraft carrier George Washington, which is based in Japan. A July 6 editorial in the Chinese Communist Party newspaper Global Times had the headline "US has to pay for provoking China." It claimed, "Anxiety on the Chinese side will be huge if a US aircraft carrier enters the sea connecting the Korean Peninsula and China." The editorial went on,


Just look at the thousands of messages Chinese readers have left on the Global Times Chinese-language website. More than 92 percent of them agree that the joint naval drill will be a huge threat to China. Many voiced their concerns, in lines such as: It's a matter of the dignity of a big country; China has to grow even faster in order to avoid the bully and such shame; Don't trust the United States any more.


The next day, another Global Times editorial called on the increasingly anti-Western sentiments being whipped up by the communist regime to generate economic pressure on Washington to cancel the naval exercise.


The Chinese people should act in a way that compels US government's attention. It is the Chinese consumers and workers who contribute to the hard currency to buy US treasury bonds, and support struggling US companies during the financial crisis. Washington may not have the reason or guts to ignore their demand.


Public anger or protests should not be considered a burden by the Chinese government, but an additional force on the bargaining table. If China does not try to explore various means to press Washington, it will become more difficult to deal with future incidents.


The PLAN units that conducted drills in the East China Sea would be no match for the George Washington Strike Group, which includes two cruisers, seven destroyers, and an undisclosed number of submarines in addition to the nuclear carrier. But Beijing is less concerned with American firepower than with the willpower of the Obama administration. And against this soft target, Beijing seems to be winning. The White House has been downplaying the issue as Chinese rhetoric has ramped up.

A July 6 report in the state-owned People's Daily cited South Korean sources as saying the joint naval exercises would not be conducted until after there is action at the U.N. Security Council on the corvette sinking -- action which Beijing's veto could block. If it is true that the U.S. is waiting on the UNSC before it will sail its Navy into the international waters off Korea, then Washington is truly demonstrating a "show of weakness" that will do nothing to deter future aggressive actions by either North Korea or China.
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3)My Black Dad & Obama
By Lloyd Marcus
I am a black tea party patriot faced with a serious problem concerning my 83-year-old father. Dad is an extraordinary man whose life epitomizes the greatness of America.


In the '50s, married with a wife and three kids and employed as a laborer, Dad was among the first blacks to break the color barrier into the Baltimore Fire Dept. The white firefighters treated Dad like scum and boldly displayed their displeasure with having an "n" in their firehouse.


Dad was the young associate pastor of a storefront church. He treated his "haters" with love and strove to be the best Christian and firefighter he could be. Dad won "Firefighter of the Year" two times and eventually the respect and admiration of his white fellow firefighters. A white firefighter who once threatened to punch Dad in his "black nose" risked his life by going back into a burning building to save Dad. The two firefighters became lifelong friends.


While married with a wife and five kids, working as a firefighter and an associate pastor, Dad attended college part-time until he graduated. Dad later earned his doctorate degree, which led to him pastoring large churches and authoring a book. Dad also became Chaplain of the Baltimore Fire Dept. Dad's success story is the result of his character, faith in Christ, and hard work. Dad earned every achievement; no liberal Democrat demanded lowered standards or entitlement programs for him.


Now, here is my problem I mentioned: Dad loves Barack Obama, a man whose philosophy goes against everything I thought my dad stood for. Despite my attempts to convince Dad otherwise, based on my personal experiences attending over two hundred tea parties across America traveling on Tea Party Express, Dad persists in believing the rallies are racist. Dad believes all criticism of Obama and his agenda is racist. It appears that no amount of truth will penetrate the wall of affection Dad has for the historic figure he never imagined would exist in his lifetime.


Out of respect, I have not confronted Dad, my hero, regarding his irrational support for a president whose agenda so radically goes against his Christian faith -- gay marriage, abortion, the murderous partial birth abortion, etc. I also thought, "Dad still bears emotional scars from the horrible racism he experienced in his youth. So perhaps I should be a good son, give the old man a pass, and let him enjoy his black president."


But witnessing the growing tyranny of the Obama regime and his American death march to socialism, I have come to realize it is my patriotic duty to confront my father with the facts about Obama. The stakes are far too high to simply let the old black man enjoy worshiping his first black president. No! America is at risk.


Though in his eighties, Dad is still sharp and pastors four churches. He is bright, articulate, and most importantly come November, a voter with influence. Whether Dad chooses to accept them or not, I must inform him of the facts about Obama's agenda. Then, when Dad goes behind the curtain of the voting booth, he will have to chose between pulling the lever for Godly principles or skin color.


Most of Dad's idolatry for president Obama is centered around his skin color. Racism and idolatry are wrong, even when committed by my beloved Dad.


I have faith that still surviving deep within dad's "Obama Zombie" brain is the wise, wonderful, righteous, and Christian man I have known all of my life.


Disapproving relatives have expressed fear for my safety, warning, "Lloyd is foolishly putting his head on the chopping block!"


Think about that, folks. My black relatives fear I may suffer physical harm from fellow blacks for daring to disagree with our black president. Meanwhile, whites are afraid to speak out against our black president for fear of being called racist. Dear Lord, what is going on in our country?


Patriot brothers and sisters, the bottom line is that while I am not advocating rudeness or bad behavior, it is time we stand up and be more confrontational for our freedoms, liberty, and culture. Prayerfully ask God for wisdom regarding the proper timing and approach. But we must start confronting Obama-ites with the truth. We cannot allow ourselves to be silenced for fear of being called racist and other threats.


Admittedly, this will be uncomfortable. But many before us have sacrificed all for America. America is worth a little discomfort. My prayers, love, and support are with you. God bless.


- Lloyd Marcus, proud unhyphenated American

3a)Never-Ending Racial Hostility
By Steve McCann

I came to the United States in 1952. At that time, this was a segregated country. Discrimination based on race was something I could not understand nor had ever experienced. I lived, once adopted, in a quiet quasi-Southern town where I saw firsthand the invidious nature of rank bigotry and racism.

My father managed two movie theatres, one in the white part of town and one in the black. One time, he took me to his office at the white theatre and then to the one in the black theatre. I asked my father why the makeups of the audiences were so starkly different, and he replied, "That is just the way it is." Not satisfied with his answer, I asked why the dark-skinned people live on one side of the river and the white on the other. He said, "That's the way it is in this country -- people prefer to live with their own races and not mix, besides it's the law." I replied to him that I thought it was wrong. I had never viewed or perceived the nature of a person by his or her skin color.

While still in Europe after the War and living on the streets of a completely destroyed city, I was often given food and treated more kindly by the black American soldiers than their white counterparts. I did not view them as being different because of their skin color, nor did they view me differently because of mine.

But race relations within the United States were something I could never accept. The issue of civil rights remained at the forefront of my consciousness, and on a mild summer day in August of 1963, while attending college in Washington, D.C., I was one of 200,000 people at the Lincoln Memorial to hear Martin Luther King deliver his "I Have a Dream" speech. For the next five years I participated in voter registration drives, demonstrations, marches, and political campaigns to once and for all put an end to the ultimate stain on the American character.


I have watched with some degree of pride and a sense of accomplishment as doors were opened, barriers torn down, attitudes changed, and equality become reality and not a dream. I have no doubt that if Martin Luther King could see the transformation of our society that has taken place over these past 46 years, there would be many things he would be proud of -- not the least of which is the election of a biracial man as president.


With the successes, as with all human endeavors, have come failures and exploitation. Among the mistakes made was the passage of massive government spending programs, which had the unintended consequence of making a large segment of the black population dependent on the government's largess, consequently destroying the foundation of the family and diminishing the ambition to succeed by one's own effort.


However, the most insidious aspect of all is the exploitation of the racial past by those both black and white who do so only to further their political aims or to amass greater wealth. These purveyors of dissension have deliberately and ceaselessly set out to keep open the wounds of past discrimination and not allow them to heal.


For decades now, unscrupulous black leaders have been able to extort money and political power through the tactic of yelling racism whenever an incident involves white and black citizens. Whether there is racism at play is immaterial. As the charge of "racist" has been the greatest societal pejorative since the 1960s, most people have simply cowered, paid up, and tacitly admitted guilt. Meanwhile, the black population has been repeatedly told by their elected officials that the reason for the poverty and despair in the inner cities is due solely to white racism.


Further, this hopelessness could be mitigated only by reparations, more government spending, and by citizens continuing to vote for these same left-wing Democrats who had helped create these conditions in the first place. This has been a deliberate effort to keep resentment alive instead of solving the real problems of these communities, mainly education, economic development, and job creation.


However, the most egregious and disgusting actions of all have been by the white liberal Democratic politicians who have used the race card to achieve power and advance their political agenda. They do not care if racial strife is perpetuated, nor are they concerned for the well-being of the black population, except to use them as a pawn in their incessant drive to control the levers of government.


With the election of a far-left president and Congress determined to remake the country, these white race-hustlers have now shown their true character by asserting that any criticism of President Obama's radical agenda is racist in nature. In order to stifle criticism, induce guilt, and pass their socialist agenda, they claim this is still a racist country.


President Obama was presented with a unique and historical opportunity to stop this ongoing effort to keep racial tensions alive. Instead, he allowed his Justice Department to decide policy based on racial factors, such as the New Black Panther case in Philadelphia, and to exploit the illegal immigration issue as a racial wedge issue for potential political gain. It appears that the president views much of the world and the history of the United States through racially tinted glasses and has no interest in acknowledging the enormous progress made in this nation.


Are there still racists in the country? Yes. In a country of 307 million, there are a significant number of people who believe in all sort of strange and perverted philosophies. There will always be prejudice and discrimination in the hearts of men; these exist even within ethnic groups. Yet one of the favorite tactics of the left is to find a few examples of individual racism and intolerance and project that on society as a whole, allowing these purveyors of "white guilt" to claim that this is still a racist nation.


However, what we fought so hard to end was institutional racism, knowing that in time, the attitudes of the people would change. This for the most part has been accomplished within less than forty years -- a truly remarkable accomplishment in such a short time as compared to the history of other nations.


In the 1960s, those of us of all races, some of whom gave their lives, were determined to rid this great country of its grievous original sin. It was not to give us today the opportunity to exploit race as a means to their devious ends, either monetary or political. In the famous Army-McCarthy hearings of the 1950s, Joseph N. Walsh once asked Senator McCarthy: "Have you no sense of decency?" I ask all of you, black and white -- and, in particular, Barack Obama, who choose to sow the seeds of racial disharmony -- the same question.


This, as compared to the nation I saw in the 1950s, is not a racist country. The time has come to stop being intimidated by racial rhetoric and guilt for the past. The generations upon whose shoulders the guilt rests have since passed into the mists of history. Those alive today, black and white, are the ones who made the enormous advances in civil rights possible. It is a matter of immense pride and accomplishment. Do not allow others to take it away from you.


Racial relations are no longer an overarching issue for our times. Rather, the challenges facing the United States today affect all, regardless of skin color. The policies put forth by President Obama and his radical cohorts in Congress will have a devastating impact on the ability of this nation to survive as a great economic and military power. The American people cannot be distracted by racial exploitation; the future of this great nations truly does hang in the balance.

3b)Racial, Gender Quotas in the Financial Bill?
By Diana Furchtgott-Roth

WASHINGTON - What one finds when reading congressional legislation is invariably surprising. Take the Dodd-Frank financial regulation bill, for instance, which was created by merging Senate and House bills. When the Senate returns from recess one of its first actions will be to vote on the bill, which passed the House on June 30.

I was searching the bill for a provision about derivatives. What did I find but Section 342, which declares that race and gender employment ratios, if not quotas, must be observed by private financial institutions that do business with the government. In a major power grab, the new law inserts race and gender quotas into America's financial industry.

In addition to this bill's well-publicized plans to establish over a dozen new financial regulatory offices, Section 342 sets up at least 20 Offices of Minority and Women Inclusion. This has had no coverage by the news media and has large implications.

The Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the 12 Federal Reserve regional banks, the Board of Governors of the Fed, the National Credit Union Administration, the Comptroller of the Currency, the Securities and Exchange Commission, the new Consumer Financial Protection Bureau...all would get their own Office of Minority and Women Inclusion.

Each office would have its own director and staff to develop policies promoting equal employment opportunities and racial, ethnic, and gender diversity of not just the agency's workforce, but also the workforces of its contractors and sub-contractors.

What would be the mission of this new corps of Federal monitors? The Dodd-Frank bill sets it forth succinctly and simply - all too simply. The mission, it says, is to assure "to the maximum extent possible the fair inclusion" of women and minorities, individually and through businesses they own, in the activities of the agencies, including contracting.

How to define "fair" has bedeviled government administrators, university admissions officers, private employers, union shop stewards and all other supervisors since time immemorial - or at least since Congress first undertook to prohibit discrimination in employment.

Sometimes, "fair" has been defined in relation to population numbers, for example, by the U.S. Department of Education in its enforcement of Title IX, passed in 1972 as an amendment to the 1964 Civil Rights Act, which pertains to varsity athletic opportunities for male and female undergraduates.

Title IX was intended to protect against sex discrimination, but not to allow the use of quotas. Indeed, it specifically prohibited arbitrary leveling of student numbers by gender.

Yet in 1997 the courts essentially sided with an interpretation of the law promulgated by the Department of Education that left universities with no choice but to adopt a proportionality standard for college sports if they wished to avoid lawsuits. If 55% of the students are female, then 55% of the varsity sports slots have to go to women. Financial institutions might have to meet a similar proportionality standard.

Lest there be any narrow interpretation of Congress's intent, either by agencies or eventually by the courts, the bill specifies that the "fair" employment test shall apply to "financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants and providers of legal services." That last would appear to rope in law firms working for financial entities.

Contracts are defined expansively as "all contracts for business and activities of an agency, at all levels, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of the assets of the agency, the making of equity investments by the agency, and the implementation by the agency of programs to address economic recovery."

This latest attempt by Congress to dictate what "fair" employment means is likely to encourage administrators and managers, in government and in the private sector, to hire women and minorities for the sake of appearances, even if some new hires are less qualified than other applicants. The result is likely to be redundant hiring and a wasteful expansion of payroll overhead.

If the director decides that a contractor has not made a good-faith effort to include women and minorities in its workforce, he is required to contact the agency administrator and recommend that the contractor be terminated.

Section 342's provisions are broad and vague, and are certain to increase inefficiency in federal agencies. To comply, federal agencies are likely to find it easier to employ and contract with less-qualified women and minorities, merely in order to avoid regulatory trouble. This would in turn decrease the agencies' efficiency, productivity and output, while increasing their costs.

Setting up these Offices of Minority and Women Inclusion is a troubling indictment of current law. Women and minorities have an ample range of legal avenues already to ensure that businesses engage in nondiscriminatory practices. By creating these new offices, Congress does not believe that existing law is sufficient.

Cabinet-level departments already have individual Offices of Civil Rights and Diversity. In addition, the Equal Employment Opportunity Commission and the Labor Department's Office of Federal Contract Compliance are charged with enforcing racial and gender discrimination laws.

With the new financial regulation law, the federal government is moving from outlawing discrimination to setting up a system of quotas. Ultimately, the only way that financial firms doing business with the government would be able to comply with the law is by showing that a certain percentage of their workforce is female or minority.

The new Offices of Women and Minorities represent a major change in employment law by imposing gender and racial quotas on the financial industry. The issue deserves careful debate - rather than a few pages slipped into the financial regulation bill.

Diana Furchtgott-Roth is a contributing editor of RealClearMarkets and an adjunct fellow at the Manhattan Institute.
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4)Obama: Israelis suspicious of me because my middle name is Hussein

U.S. president tells Channel 2 Israel is unlikely to attack Iran without coordinating with the U.S.


In an interview aired Thursday evening, Obama was asked whether he was concerned Prime Minister Benjamin Netanyahu would try to attack Iran without clearing the move with the U.S., to which the president replied "I think the relationship between Israel and the U.S. is sufficiently strong that neither of us try to surprise each other, but we try to coordinate on issues of mutual concern."


Obama spoke to Channel 2's Yonit Levy one day after what he described as an "excellent" meeting with Netanyahu at the White House. The two leaders met alone for about 90 minutes Tuesday evening, during which time they discussed the peace process with the Palestinians, the contested Iranian nuclear program, and the strategic understandings between their two countries on Tehran's efforts to achieve nuclear capabilities.

Netanyahu promised Obama during their meeting that Israel would undertake confidence-building measures toward the Palestinian Authority in the coming days and weeks. These steps are likely to include the transfer of responsibility over more parts of the West Bank over to PA security forces.

During the interview Wednesday, when confronted with the anxiety that some Israelis feel toward him, Obama said that "some of it may just be the fact that my middle name is Hussein, and that creates suspicion."

"Ironically, I've got a Chief of Staff named Rahm Israel Emmanuel. My top political advisor is somebody who is a descendent of Holocaust survivors. My closeness to the Jewish American community was probably what propelled me to the U.S. Senate," Obama said.

"I think that sometimes, particularly in the Middle East, there's the feeling of the friend of my enemy must be my enemy, and the truth of the matter is that my outreach to the Muslim community is designed precisely to reduce the antagonism and the dangers posed by a hostile Muslim world to Israel and to the West," Obama went on to say.


Obama added that he believed a peace agreement between Israel and the Palestinians could be achieved within his current term. "I think [Netanyahu] understands we've got a fairly narrow window of opportunity… We probably won’t have a better opportunity than we have right now. And that has to be seized. It’s going to be difficult."

The American President entirely sidestepped the question of whether the U.S. would pressure Israel to extend a current 10-month moratorium on construction in West Bank settlements, failing to give a clear answer. The moratorium is set to expire in September, and Netanyahu has announced that he would not extend the timeframe. The U.S., however, views continued Israeli settlement construction as a serious obstacle to peace efforts.

When asked whether he thought Netanyahu was the right man to strike a peace deal with the Palestinians, the U.S. President said that "I think Prime Minister Netanyahu may be very well positioned to bring this about," adding that Israel will have to overcome many hurdles in order to affect the change required to "secure Israel for another 60 years"

In a separate interview with another Israeli media outlet, Obama proclaimed that he was not "blindly optimistic" regarding the chances of a Middle East peace agreement.
Israel is right to be skeptical about the peace process, he said in another yet-to-be-aired interview that was taped on Wednesday. He noted during the interview that many people thought the founding of Israel was impossible, so its very existence should be "a great source of hope."

Meanwhile on Wednesday, Netanyahu told U.S. Jewish leaders that direct Palestinian-Israeli talks would begin "very soon", but warned that they would be "very, very tough."

Netanyahu told his cabinet earlier this week before flying to Washington that the time had come for Palestinian President Mahmoud Abbas to prepare to meet directly with the Israelis, as it was the only way to advance peace.

Israelis and Palestinians have been holding indirect talks mediated by Obama's special envoy to the Middle East, George Mitchell. Aides to Obama sounded a hopeful tone regarding the negotiations last week, telling reporters that the shuttle diplomacy between the two sides had paid off and the gaps have narrowed.

At a meeting with representatives of Jewish organizations at the Plaza Hotel late Wednesday, Netanyahu discussed the efforts to promote Middle East peace. "This is going to be a very, very tough negotiation," he said, adding "the sooner the better."
"Direct negotiations must begin right away, and we think that they will," he said.

4a)'We've done enough'

In NY speech, Netanyahu said: 'Deal with Palestinians could be reached in next year.'

In a speech to the Council on Foreign Relations in New York as part of his US visit, Prime Minister Binyamin Netanyahu declared Thursday that the settlement freeze, set to expire in September, would not be extended.

Netanyahu also announced that a deal with the Palestinians could be reached in the next year.

The prime minister called for direct talks with the Palestinians and announced that a peace deal which will bring hope and security is attainable, and that he hopes to see Mahmoud Abbas operating in the same manner. "I think we've done enough. Let's get on with the talks," he said.

Netanyahu explained that reaching a peace deal with the Palestinians is part of his responsibility to his children and grandchildren.

"I think we should seize the moment," the prime minister declared. "And it is a challenging moment and an important moment. We have the ability to negotiate a peace. And I'm prepared to take risks but we have to get on with it."

"We should just stop all the delays and start now, next week, in two weeks - get the talks going. Because only if we start them, we can complete them," Netanyahu added.

Meanwhile, the White House has denied that a deal has been made regarding the nuclear issue between Israel and the US, after reports Wednesday that the two countries reached a deal in the civilian nuclear sector.
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5)Preparing for 3rd Intifada

Disturbing book drafted by top Hamas prisoner outlines plan for future war on Israel
By Ronen Bergman


"We must carefully examine the hostage's 'quality' – there is a difference between a married man and single man and between a father to children and a childless man. It's also important whether his parents are alive and there is a difference between Ashkenazim and Sephardim. …we saw that Ehud Goldwasser's wife managed to stir great empathy because of her status under Jewish law: A married woman whose husband is missing and whose fate is unknown….Goldwasser gained more media coverage at Eldad Regev's expensive, even though both of them were captured at the same time, because the media always looks for stories that can stir public emotions…"



The above quote is taken from a book titled "Resistance – A View from the Inside." The secret 200-page document was drafted by Mohammed Arman, a senior Hamas man jailed in Israel. The research work, referred to as "Hamas' war plan," was smuggled out of the Hadarim prison's most guarded wing and distributed among senior Hamas leaders, in order to prepare the ground for the "next phase" of Palestinian resistance.


In his document, Arman combined through analysis of terror activities in the Gaza Strip and West Bank with analysis of Israeli media's nature add Hamas' strengths and weaknesses in the West Bank. He demonstrated his arguments using hundreds of examples and quotes about issues ranging from the technology of tracking cell phones to words uttered by Levi Eshkol, Golda Meir, and Ehud Barak, among others.


Yet Arman is no military theorist. He is very much a "field activist" who was among Hamas' most active West Bank commanders until his 2002 arrest. As such, his book is written as a practical guide for field activists. The document he produced is impressive, detailed, and mostly frightening, showing deep understanding of Israeli society's nature and its leadership.

The key points and innovations in the text include the following:

Rocket fire from the West Bank – Arman calls for existing combat methods to be exported from Gaza to the West Bank, while using collaborators among Arab Israelis. "We must acquire rockets, which will be a vital means for the next stage, in order to change the rules of play in the West Bank and mostly in areas bordering on 1948 land…even one person can acquire the needed materials for a rocket without raising suspicions and at very low cost, if we provide him with information on manufacturing methods. This is the role of resistance organizations," he wrote.

Throughout the book, Arman disparages what he views as the low endurance of Israel's home front.

"As we know, every person is scared of death, yet our enemy fears death more than anyone else…this prompts it to constantly consider abandoning the areas where rockets land," he wrote. "The occupation's political leadership can tolerate the rockets to a greater extent than civilians…many Zionists have alternate homes and passports in the countries of their origin."

Recruiting Arab Israelis – Arman devotes great attention to the role of Arab Israelis in the Palestinian struggle, with an emphasis on Jerusalem Arabs. However, he also says that the connection of Israeli Arabs to terror acts and groups should be blurred.

"The objective of the resistance within the 1948 areas and in Jerusalem is to harass the occupiers, disrupt their daily routine, and undermine their confidence," he wrote, adding that this should be done "in order to encourage migration and discourage immigration by harming the economy, scaring off wealthy individuals and cowards – without prompting international reaction that would support the occupation's acts against residents of these areas (Arab Israelis.)"

"We need those residents in the near feature, and therefore we cannot take this issue lightly and get them in trouble," he wrote. "The most effective means is popular war of road sabotage, arson, disrupting vital communications, and sowing fear among the Zionists without killing or even wounding them, with the exception of unusual cases."

The technological front – The impressive sources of information possessed by Arman include debriefings among prisoners. He notes that many terror cells were detained via the Internet.

"One activist who spoke with Gaza via a messenger program in Internet cafes was surprised when the intelligence services presented him with documentation of all the conversations he held in two months," Arman wrote. "The Internet is being monitored just like the phone, and even more thoroughly, because the intelligence services can easily gain access into any e-mail account and impersonate the other party to the conversation. Many cells were exposed that way."

Arman says that based on his inquiries, Israel's intelligence service are able to listen to any network, read any text message, and break into any computer or instant messaging program.

More abduction operations – Much of the text is dedicated to analyzing abductions as a means for securing the release of Palestinian prisoners. Although Arman does not mention himself and members of his cell – who are candidates for release in the Shalit deal – he notes that resolving the prisoner issue via abductions is at the top of Hamas' agenda.

In these sections Arman harshly criticizes Israeli society, yet it appears he fails to understand its nature.

"Zionist society is a society of immigrants from all over the world who do not know each other, or even themselves," he wrote. "Every Zionist only thinks of himself…the view of the average Zionist in respect to prisoner swaps has nothing to do with morality, nationalistic feelings, or humanity, but rather, is based on fear that he too may be abducted one day. So he worries about himself first. This is the Zionist mentality."

Meanwhile, Arman stresses that Gilad Shalit is an "insufficient" bargaining chip for the Palestinians: "One abduction operation isn't enough. One soldier will not secure the objective."

Another criteria provided for abduction victims is their professional background and the knowledge they possess: "The Zionist entity is characterized by frequent government changes and is full of former generals, army chiefs, scientists, nuclear facility employees…Their value is the vital information in their head; information which the enemy closely safeguards."

In respect to abductions, Arman recommends that operations be carried out in the West Bank.


"We should know that abductions in the West Bank will draw implications and responses that are much milder than those in Gaza, as the entire West Bank is under the occupier's security responsibility… without an excuse to utilize brutal force against West Bank residents."

Arman adds that hostages should be held in "underground hideouts, far away from homes, or at a backyard where there is no security risk whatsoever…where no neighbor is suspected as being a collaborator of the occupation."

Adopting the al-Qaeda model – Throughout the document, Arman stresses the importance of independent activity by terror cells, a modus operandi utilized successfully by al-Qaeda and Global Jihad groups for years now. He calls for access to technical information and operational instructions online for activists interested in training themselves on using improvised, easy-to-acquire weapons.

"Popular, cheap, and widely available combat means must be developed…we should avoid scientific entanglements and refrain from referring to substances by their long and odd scientific names, but rather, use the names common in Palestine," he wrote.

Arman, who refers to himself as "the engineer behind the Hebrew University operation" has been sentenced to 36 life terms over his role in the university terror attack, among others. He is considered one of the five most senior Hamas prisoners whom the group wants released in the Shalit deal.


His first book, Death Engineers, which was also smuggled out of prison, was used by his Hamas successors as a mostly technical guide for carrying out murderous terror attacks. His latest book is dedicated to formulating policy ahead of embarking on a "long-term confrontation that will turn into a war of attrition."

A senior Israeli security official said Arman's book is very disturbing because it shows deep understanding of Israeli intelligence agencies' modus operandi, as well as Israeli society at large.

"Not everything in the book is accurate. In some cases he attributes to us capabilities we do not possess, while in other cases he underestimates us," the official said. "Yet as an action plan and an outline for war, the document can certainly serve as a very dangerous platform for what may happen in the West Bank in the future, should the plan he outlined by executed."
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6) Niall Ferguson On The Future Of America's Economy


I'm a financial historian by training, but I also teach a course at Harvard with the grandiose title, "Western Ascendancy: Mainsprings of Global Power." And one of my great concerns in teaching that course...is to ask why it was that after around 1490, completely against what anybody at the time would have expected, a small group of pretty impoverished and fractious kingdoms on the western end of Eurasia and Europe ended up taking over the world, and the great oriental empires--not least being China--stagnated and were ultimately subordinate. The question I posed to my class last year was: Have we arrived at the endpoint of, say, half a millennium of Western predominance? And is that one of these historical changes so huge that we just can't get our heads around it?

My working assumption is that the financial crisis that began in the summer of 2007...has accelerated a fundamental shift in the economic balance of power. Even before the crisis, Jim O'Neill and his team at Goldman Sachs were forecasting that China's gross domestic product would exceed that of the United States in 2027 at half past four on October the 15th, which is just a little pinch of salt to remind you that all such projections need to be taken with a pinch of salt. Still, whether it's 2027, '28, '29 or '30, the interesting thing is the first time they made that projection, they thought it would be 2040. Every time I see Jim, I say, "Have you moved the date forward yet?" because he made that 2027 call before the financial crisis.

The financial crisis unquestionably has hit the United States much harder than China. Their stimulus worked much better than ours...The first point I just want to put out there is: it's hard to believe, under these circumstances, that the acceleration, the shift, if you'd like, from West to East hasn't been speeded up by this crisis.

The second point is: Of course, power is not just about GDP. It's not just about the economy. Power is also about the ability to project hard power through military means. And some people in Washington like to comfort themselves by saying, "We can still do that way more than they can. Count their aircraft carriers, count ours."

But one point that follows from the financial crisis which is terribly, terribly important is that by combating our crisis of private debt with an extraordinary expansion of public debt, we inevitably are going to reduce the resources available for national security in the years ahead. Because as the debt grows, so the interest payments you have to make on it grow, even if interest rates stay low. And on current projections, the federal debt is going to be absorbing around 20 percent, a fifth of all the taxes you pay, within just a few years. The item of discretionary federal expenditure most likely to be squeezed is, of course, defense. And there are lots of historic precedents for that. So, I fear that the financial crisis doesn't just impact on the economy. It actually impacts on American power in the hardest sense.

Third, and penultimate point: The legitimacy of the American way--of what Francis Fukuyama and others confidently in 1989 called liberal capitalism or capitalist democracy--has been fundamentally called into question by this crisis. I've just come back from China. The thing I heard most often was, "You can't lecture us about the superiority of your system anymore. We don't need to learn anything from you about financial institutions, and forget about democracy. We see where it's got you." We have lost an extraordinarily important component of power in this crisis: the power to pontificate, the power to talk about things like the "Washington Consensus." Who now uses the phrase "Washington Consensus" with a straight face? And, so, China is gaining.

And, of course, it has, in the process, gained a very important kind of leverage through what I've called "Chimerica." As a huge source of capital, financing the U.S. current account deficit, it now holds 10 percent, one-tenth, of the entire federal debt in public hands. That is a lever, it's an important form of power, it's financial power.

Unlike Britain in 1945, which was crushed by debt and slow growth, doomed to imperial decline, I think there is a way out for the United States. I don't think it's over. But it all hinges on whether you can re-energize the real mainsprings of American power. And those two things are: innovation, technological innovation, and entrepreneurship. Those are the things that made the United States the greatest economy in the world, and the critical question is: Are we going to get it right? Can we revive those things in such a way that, in the end, we grow our way out of this hole the way the United States grew its way out of the 1970s and, of course, out of the 1930s?
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7)Mind the gap: why the bond markets are signalling a depression
Something potentially momentous has happened in financial markets in the past two months.
By Jeremy Warner


Virtually unnoticed, the yield on long dated pan-European sovereign debt has slipped below that on equities. So what, you might say; that's what happens when shares go down and bonds go up. But in fact this reversal in the traditional relationship between bonds and equities is an extraordinarily unusual event. It's happened only three times in the past 50 years. Alarmingly, all three of those occasions have been in the past decade. What are markets trying to tell us?

There are two ways of looking at the phenomenon. Either it is an aberration, and therefore a buy signal for stock markets, or much more worrying, it marks the final death knell for Europe's 60-year love affair with equities, and therefore the start of a generalised retreat from risk that will see the economy stagnate or worse for perhaps decades to come.

I am an optimist, so I tend towards the former view, but even I would concede that the situation looks ominous; a double-dip recession in either the US or Europe continues to seem unlikely, yet the odds are shortening fast. If the economy starts to contract again, there are plainly highly negative implications for corporate earnings.

But before exploring these two scenarios in more detail, first some historical context. Rewind in time to 1947 and something equally momentous occurred. That was the year in which the Imperial Tobacco pension fund was advised to switch all its assets out of gilts and into equities. Thus was born, for the UK at least, "the cult of equity".

It took a while for the new religion to take hold, but by the late 1950s, it had become the prevailing investment orthodoxy. Over time, it was figured, equities would always outperform bonds because unlike bonds, both dividends and capital would appreciate with inflation and economic growth. As a consequence, the yield on shares has been lower than on bonds pretty much ever since. Investors have become very comfortable with that relationship and tend to regard anything else as abnormal.

On any longer term perspective, however, it's not abnormal at all. Up until 1959, the reverse had been true. For most of the last century and much of the previous one too, equities had consistently yielded more than gilts to compensate for their supposedly higher risk profile. It was only after 1945 that modern portfolio management turned this idea on its head by postulating that higher risk investments would also deliver higher rates of return over time.

What seems abnormal today was in fact the prevailing normality for more than 100 years. How likely is it that we are returning to that bygone age? To believe that we are you have to think there's a depression coming, or at least a prolonged deflationary period.

The thing that makes equities relatively attractive against bonds is inflation. Inflation destroys the value of government bonds as surely as outright default. Conversely, long bond yields of even as little as 3pc begin to look attractive in an environment where prices are falling. For companies, on the other hand, the real burden of costs and debt would rise, with potentially devastating consequences for earnings. But it is not just fear of deflation which is destroying the cult of equity. There are structural reasons too. The UK stock market used to be largely owned by its UK corporate and institutional constituents through their pension funds and savings products. As these funds mature and diversify into more risk averse investment strategies, that relationship is being progressively broken. UK equities have been dumped and government bonds hoarded.

These structural factors are perhaps as important in explaining why the yield gap has narrowed so markedly in the past 10 years as the economic fundamentals. Nor should we omit the regulators from blame. Having cocked up so spectacularly over the banks, they are now more risk averse than ever. Across the piste they demand safety first investment strategies.

Yet on both the two previous occasions where the relationship between bond and equity yields actually reversed – March 2003 and late 2008 – it proved not to be the end of the world for equities, but actually marked the bottom of the trough and therefore a buying opportunity. We are once more in a similar period of extreme risk aversion. Is this another such buying opportunity, or is it this time really the beginning of the end?

The following answer may sound like a bit of a cop-out, but anyone can stick their finger in the air and pretty uninstructive it is too. What does seem clear is that the old rules of investment no longer apply.

Instead, we've moved into a much more multi-layered world where broad brush generalisations about particular asset classes have ceased to carry much meaning. As we have learned, not all sovereign debt is the same; some sovereign bonds are more equal than others. Investors have learned to calibrate sovereign risk in a way that would have been unthinkable just three years ago.

Similarly with equities, where obvious winners and losers are beginning to emerge from the wreckage of the financial crisis. Companies with high exposure to fast growing emerging markets are viewed in a very different light to those wholly reliant on advanced economy consumption or government spending. A German bund is self evidently not just a safer, but in every respect, a better investment wager than a Greek bank. But there is a good reason why Standard Chartered, with its strong Asian presence, is more highly prized than even the most credit worthy of government debt.

Few economists think either Europe or the US are about to enter a double dip. The market signal sent by the equity/bond crossover suggests otherwise. Are the economists again lagging the reality? Willem Buiter, chief economist at Citi, won't entirely rule out a double dip, but as he points out, markets are driven as much by fear and phobia as economic fundamentals and are therefore as frequently wrong about things as the economists. They are like noisy school children, he says; you should pay attention but not take them too seriously.

One thing we know about children that they are frequently capable of startling original perception, and right now they seem to be telling us that something fundamental has changed. The old dynamic is all mixed up. Whatever world it is they are signalling, we won't be going back to the old, pre-crisis one any time soon.

7a)Depression Fear Mongers Obscure the True Concerns
By Amity Shlaes


This year is supposed to be like 1932. That’s what you would believe after reading commentators who compare current patterns in the Dow Jones Industrial Average to those at the end of Herbert Hoover’s presidency.

To focus on these stock patterns is to be like weather forecasters who talk about the heat index or wind chill. They are gilding the statistical lily. The ungilded reality: today the Dow is down about 30 percent from its 2007 high, nowhere near its decline of 89 percent between September 1929 and July 1932. Today, joblessness in the U.S. is a bit less than 10 percent; in 1932 it was 25 percent.

While these differences set today’s slump apart from the Great Depression, there are other issues that may be holding back a recovery.

Instability in the international currency arrangement is the first one. Today doubt that the euro will survive is affecting the dollar and the stock market. The issue is whether Europe will make the fiscal repairs necessary to preclude an otherwise inevitable collapse of the European currency. It isn’t clear whether or when the euro can be restructured. This, as we’ve seen recently, can hurt U.S. stocks.

In the early 1930s an unsustainable monetary construct likewise jeopardized recovery. In that instance, the teetering house wasn’t the euro but the international gold standard. Depositors concerned that the whole arrangement would break apart were pulling gold out of U.K. banks at a rate the country couldn’t afford. When the U.K. did go off gold in September 1931, the investor panic migrated to the U.S., where depositors also started withdrawing gold. Another wave of bank failures ensued.

Tariff Legacy

The second factor is trade. Today most of us doze off when the topic comes up, whether the issue is a bilateral free-trade agreement with a Latin American country or the lack of progress in the Doha Round of trade talks.

This lack of concern resembles many Americans’ disregard for the effects of the Smoot-Hawley Tariff Act, signed into law by Hoover in June 1930. Republicans told themselves that the tariff couldn’t hurt much since trade was a small part of the U.S. economy at that point.

But that view overlooked the signal that markets were sending. Long ago Jude Wanniski noticed that the progress of the Smoot-Hawley legislation tracked declines in the stock market. More recently Scott Sumner, a professor of economics at Bentley University in Waltham, Massachusetts, has argued that the tariff reduced investment all over the world, and therefore produced deflation.

New Tax Trends

The third factor is taxes, perhaps the most important 1932 parallel. Today, U.S. taxes are set to march higher. From the income tax to the dividend tax, all will rise in the next year or so. Also a challenge, albeit less discussed, are the increases in state and municipal taxes in the name of reducing shortfalls in public coffers. This change represents a reversal from the tax-lowering trend of the first part of the decade.

In 1932, a similar reversal occurred. Then-Treasury Secretary Andrew Mellon presided over an enormous tax increase. The top rate on personal income taxes rose to 63 percent from 25 percent. Add in new levies on telegraph and telephone use and, in an obscenely bad error for a recession, a tax on checks. In addition, corporate taxes moved up, as did levies on tobacco. Mellon, who had earlier personally crafted a series of rate cuts, consoled himself about this switch by calling it a temporary emergency measure. The revenue was a disappointment and the economy didn’t recover.

Rising Wages

Fourth is the subtle issue of employee pay. Today President Barack Obama is applying upward pressure on compensation where he can -- in federal contracts, for example. The president is being egged on by various academics. This week Christopher Edley, dean of the University of California-Berkeley’s Boalt Hall School of Law, published an article in the Los Angeles Times titled “The Economic Power of Obama’s Pen,” urging the president to sign an executive order encouraging federal contractors to pay the so-called living wage, government code for wages higher than it might otherwise have paid.

Hoover likewise advocated keeping wages high during periods of economic decline. Even while still Commerce secretary, Hoover argued that worker spending was key to fostering recovery. Shortly after the 1929 crash, the new president hauled corporate heads to Washington and exhorted them to keep wages as high as they could. Henry Ford served as cheerleader for this policy, telling the press as he exited the White House, “Wages must not come down.” In short, Hoover and Ford were Keynesians before John Maynard Keynes.

Disregarding Precedents

In addition, Hoover signed the Davis-Bacon Act, which was passed in 1931 and requires that federal contractors pay the “prevailing wage,” government-speak for relatively high wages. As labor scholars Lowell Gallaway, Lee Ohanian and Harold Cole have shown, the wage pressure increased unemployment. Rather than disobey Washington, not to mention Ford, companies hired fewer people, or postponed rehiring.

The takeaway from 1932? Resetting the euro’s criteria for existence and member countries’ obligations when it comes to bailing out one another should happen sooner rather than later. Democrats and the president should ignore unions and cut trade deals with Latin America. John F. Kennedy, a Democrat, supported tax cuts. Obama can too, or at least block rate increases. The president might also want to suppress his lawyer- Keynesian reflexes and reconsider policy when it comes to wages. But the 1932crisis talk actually impedes such consideration.

(Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)
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