Obama The Poker Play or Goodbye Mr Chips!

As I have previously written, I believe we are about to be hit by the back side of the hurricane. This article is from John Mauldin's "Outside the Box." (See 1 and 1a below.)
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My friend, Bret Stephens, discusses Obama's show them your hand policy regarding Afghanistan and predicts it will end in a debacle.

Iran must love playing poker with Obama. Reminds me of the great movie: "Goodbye Mr Chips!" (See 2 below.)
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You are a racist or worse if liberals say so - ask Herman Cain, Sarah Palin, Michele Bachmann and Miss USA. Liberals just love to hate and marginalize those they fear, who see through their double standards, challenge their failing ideas and false values. (See 3 and 3a below.)
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Monty Pelerin and I see eye to eye - Obama ain't that bright! (See 4 below.)
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Tom Sowell, The Constitution and The Fourth of July! (See 5 below.)
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Should the dollar lose its vaulted status as The Global Reserve Currency, it will mean a significant increase in inflation, erosion of our buying power and standard of living. The latter is already happening. (See 6 blow.)
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More judge crap! Spare the rod, spoil the child and they could grow to become ill behaved progressives with meaningless values. (See 7 below.)
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Dick
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1)The 3-D Hurricane and the New Normal*
By Jason Hsu
Chief Investment Officer
Research Affiliates

Debt, deficit, and demographics—the 3-D hurricane—is heading to the shores of all developed economies. It threatens to derail the lukewarm economic recovery and to alter forever the heretofore path of robust growth for the developed world. In a sense, debt, deficit, and demographics will reset the world to a “New Normal”—an extended period of lower economic and return expectations for the aging and debt-ridden developed world. In contrast, emerging economies with healthy government and household balance sheets, responsible fiscal policies, and young labor forces will be the drivers for global growth and will compete with their developed counterparts for economic and political leadership. More importantly, the emerging economies will demand their fair share in the consumption of resources and goods. That competition for resources and goods will lead to higher prices at a time when developed countries are less able to further finance their consumption.

Finance plays a critical role in the real economy, though only an intermediation activity. Shocks to financing for the developed economies—whether through high interest rates due to poor sovereign credit risk or through the crowding out effect from government deficit financing—would have long-term effects on economic growth and the unemployment rate. By comparison, emerging countries have low debt-to-GDP ratios. Specifically, the Asian EM countries generally maintain trade surpluses and, therefore, also act as suppliers of global capital to the debt-laden developed economies. These healthier balance sheets, over time, mean that emerging economies would represent lower credit risk than many of their developed counterparts.

The trend of declining credit spread for EM debt has been occurring for many years. In the New Normal, emerging countries will not only converge with the developed countries, but in fact are likely to overtake many of them in short order. From the credit spread for developed sovereign debt versus emerging sovereign debt, capital markets may not have fully comprehended this pending reversal of fortune between the developed and developing economies. Emerging economies currently are assessed higher credit spreads versus developed economies, although they often have significantly better underlying collateral quality and debt capacity. This reflects an irrational bias on the part of investors; it is not unfathomable that a re-pricing of developed market sovereign credit risk is forthcoming for even the most stalwart of the developed economies—Germany and the United States.

When Deficit becomes Odious Debt
The extensive literature exploring the effects of deficit-driven stimulus programs provides strong evidence that short-term growth, financed by deficit spending, rarely translates into sustained long-term growth. The argument is that government-directed investments are often zero or even negative net present value (NPV) projects—that is, they tend to be suboptimal investments. From that perspective, government stimulus programs are more about creating make-work jobs than investing in infrastructure and education that will drive future growth. The short-term increase in economic activity does not translate into future increases in production of valuable goods and services.

In a true Keynesian sense, government recessionary expenditure aims purely to smooth temporary shocks; it cannot substitute for private sector investments which are necessary to drive long-term growth. Insofar that the government stimulus is financed by more debt, it necessarily translates into higher future tax burdens, which then drains future private sector consumption and investments. By backward induction, a higher future tax burden decreases expected (after-tax) return on investments, which then reduces private sector investments today. Crowding out future and current private sector activities by the public sector growth today bodes ominously for future growth.

Indeed, under standard economic theory, the government either borrows to invest for future growth, and therefore drive future tax revenue, or it borrows to shift future consumption to the present in an attempt to ameliorate shocks to the economy. In reality, deficits have a tendency to become ever-increasing debt. We have been all too willing to believe the story that future growth driven by indomitable American ingenuity will deliver us from our debt. Unfortunately, unless another decade-long period of explosive technology innovation is in the cards for us, we may have just now hit a wall: The debt-to-GDP ratios for many developed countries have become untenable; additional borrowing capacity is small.

In hindsight, the policy of persistent deficit spending seems utterly irrational and short-sighted. On the other hand, one might argue that this outcome is exactly rational in the context of baby boom demographics prevalent in the developed countries. Deficit spending gives an instant and immediate boost to GDP, which can feel like prosperity and good government stewardship. The natural conflict between the future non-taxpayers and the future taxpayers means that Boomers, who have controlled the elections and politics, have rationally chosen a path of more consumption today at the expense of the future generations. Whether deficit spending truly has any significant impact on subsequent growth is rather irrelevant to the discussion; voters and politicians alike would simply misinterpret the economic literature and assume more consumption today will drive more growth tomorrow. In other words, and as scientific as one can put it—the Boomers have screwed Generation X.

Democracy is one of the great equalizers for income inequality in the cross-section of population. The poor have a mechanism to instigate wealth transfers by voting for welfare and public goods production and to avoid exploitation by voting for pro-labor regulations. Democracy seems to serve quite the opposite role, however, when it comes to equalizing the inequality between generational cohorts. There is no doubt that our future generations have become extremely poor; they are each responsible for tens of thousands of dollars in national debt—in some countries, Gen Xers are staring at outright national bankruptcy. But today, our political process continues to allow the Boomers to pile on new debt for the next generation in order to fund their current consumption and future retirement. It appears that democracy has facilitated the exploitation of our future poor by the current rich and indeed has been a strong contributor to what will become the Boomer’s legacy of odious debt.

The great deleveraging, which has been proposed as the only responsible course of action for the developed countries after the global financial crisis, never materialized and calls for fiscal austerity have largely fallen on deaf ears. The Boomers around the world have written into law rich benefits for themselves, which have to be financed by tax dollars from future generations. Adding insult to injury, they have also pre-spent future tax revenues through massive deficit spending today. The combined weight of the explicit debt and implicit government-guaranteed obligations (such as state pensions and healthcare benefits) has begun to stress most of the developed economies and is already crushing some.

Does Monetary Policy help?
Mounting debts—whether implicit or explicit—are a long-term issue that Boomers are passing to the next generation. In the shorter term, the recent U.S. government monetary intervention (namely, QE2) has drawn many people’s attention. What, exactly, has QE2 accomplished?

Although many equate quantitative easing with the printing of money, it is not entirely accurate or useful to do so. The Fed bought long-term Treasury securities from banks and issued interest-bearing reserves in return. When reserves pay interest, they are no different than T-bills; both are short-term government securities paying similar interest rates. The appropriate way to think about QE2 is to recognize that the U.S. government simply refinanced its long-term bonds with short-term bills. If not for all the media hoopla, it has been an otherwise rather unspectacular shift in financing arrangement. No money was printed in the sense that the monetary base did not expand. Arguably, liquidity in the marketplace did not improve materially as banks do not appear to have reduced their government debt holdings in favor of other investments.

Perhaps QE2 has had an impact on interest rates. The evidence here is rather mixed. There is some weak evidence that long rates moved higher due to increased inflation expectations, while other evidence suggests that Treasury yields experienced only a brief and temporary shock before recovering back to their old trend.

Some market pundits have observed various indicators of increased speculation in the financial markets (mostly from increases in speculative positions reported by commodities traders). They argue that the large excess reserve balances held by the banks allowed banks and their related investment arms to engage in greater risk taking. The theory is that banks used their low-yielding reserves as collateral to engage in financial speculation (instead of making loans). As a result, these speculative activities seem to have resulted in higher commodity and stock prices. Whether this theory tests out or not, we do nonetheless observe ample evidence of Federal Reserve Chairman Ben S. Bernanke taking credit for the strong stock market performance as a result of the Fed’s easing policy.

The wisdom of the Fed attempting to create prosperity by stimulating the stock market is debatable. Clearly, such effects can only be transient as prices ultimately are related to the underlying fundamentals. We also note that higher prices today benefit current shareholders but result in low forward-looking returns for future shareholders. In that context, one might argue the attempt to influence asset prices is no different than a wealth transfer from the future generation to the current generation. Alarmingly, it appears that our fiscal and monetary policies are both geared toward exploiting our heirs.

The Prospects for Inflation
Certainly such a massive monetary intervention by the Fed has to have some impact on future inflation, right? While it seems convenient to speak in abstract terms and conclude with undue authority that the Fed is printing money and therefore creating inflation down the horizon, the relationship between Fed activities and inflation is perhaps more tenuous than one suspects.

Ultimately, inflation is too much “nominal purchasing power” chasing too few “goods and services.” Imagine that we have a large increase to our nominal disposable wealth, which increases our desire to consume, but yet there has been no increase to actual goods and services produced—this creates inflation. The Fed does not have the lever for increasing nominal purchasing power for the average firm and consumer. A helicopter raining $100 bills is simply not a monetary tool in the modern central banking toolshed. Indeed, upon reflection, it should be clear that raining down $100 bills on a selected zip code is more similar to the proverbial Roosevelt hole digging/filling program. The resulting inflation is fiscal in nature, rather than monetary. Helicopter Ben would have to run the White House, not the Fed, if he wishes to experiment on a policy of paying people with non-interest-bearing government debt in exchange for make-work labor to temporarily boost aggregate consumption. There is no doubt that inflation will ensue, but it also comes with an increase in government debt and distortions in the incentive to provide labor.

Yes, the Fed does have a printing press, but this mythical printing press simply produces non-interest-bearing government debt, which the government would happily exchange for its interest-bearing debt. The problem is that most of us aren’t too interested in that trade. Bernanke can print dollar bills all day and all night (at least until we hit the congressionally imposed debt ceiling), but the Fed open market operation only allows him to trade paper bills for reserves and reserves for Treasury securities. (Occasionally, the Fed buys other securities to enact a temporary bailout; I will ignore this complication here.) At the end of the day, unless the government issues more debt to fund more spending, the Fed is just helping Uncle Sam refinance its long debt with short debt, or vice versa. It isn’t clear how that has an impact on inflation or anything else for that matter, unless interest rates are manipulated so much as a result that they spur or choke off economic activities.

The more substantive driver of inflation is fiscal, not monetary, policy. The forecasted low future real growth and low future government surpluses are synonymous with a prediction of low future production of goods and services. The “New Normal” assumes poor returns to government deficit spending. The stimulus being put to work today (through deficit spending) is predicted to deliver little future output. This phenomenon then leads to high prices (inflation) as nominal prosperity created through increased government outlays cannot be converted, in the future, into increased consumption. The economy, upon recognizing the likelihood of future inflation, will respond with inflation today. This impending fiscal-driven inflation cannot be stopped by the Fed through monetary maneuvers.

Changing Demographics
As the country prepares for retiring Boomers (and the debt and deficits associated with them), it will also need to prepare for changing demographics—specifically, the adverse effects driven by the dramatic decline in the support ratio associated with an aging population. It is projected that the support ratio in developed countries will decline from 3.5 working age adults per retiree to below 2:1 by 2050. In comparison, in 1970, the support ratio was 5.3:1. By 2025, at the height of Boomer retirement cycle in the United States, there will be 10 new retirees for each new entrant into the workforce. Not only does the future appear unenviably poor in aggregate, it also appears predictably unproductive.

People consume goods and services which are produced by workers. A sharp decline in the United States and developed country workforce means that Americans, and their European and Japanese counterparts, must either reduce consumption drastically or increase reliance on imports from emerging countries. Thus, the trade deficit between developed countries and the emerging countries must continue to widen aggressively or the standard of living for developed countries must decline precipitously. However, the only way for most developed countries to maintain (and increase) their trade deficit against the emerging countries is to borrow heavily from the emerging countries. If the PIIGS are any indication of what is to come, the balance sheet, and ultimately the credit rating, of the developed economies simply would not allow further aggressive borrowing.

Historically, demographic shifts have had little impact on markets. However, the analysis could change dramatically at debt-to-GDP ratios above 100%, which is a phenomenon not seen in history. The linkage between demographics and debt cannot be overemphasized. Demographic shifts are generally considered to be non-risk events, in that they can be fully anticipated ahead of time. Economies with rational agents, saving, consumption, and investment decisions would allow individuals to largely manage the (adverse) effects of (unfavorable) demographic shifts. Boomers should have anticipated the untenable support ratios in their retirement. They were supposed to save aggressively during their working years (delaying pre-retirement consumption) and then convert their large and plentiful retirement assets into retirement consumption, particularly paying up for imported goods. Specifically, Boomers should have anticipated the weakening of their home currencies as their economies run greater trade deficits against the younger EM economies. Boomers should also have anticipated a significant rise in the cost of domestic services, which cannot be effectively imported from foreign labor markets.

Instead, what we observe today is inadequate retirement savings. It is long understood that the pay-as-you-go social security scheme cannot work effectively as a credible mechanism for intergenerational risk-sharing in the face of declining support ratios; as the population ages and fewer workers enter the workforce relative to workers exiting into retirement. There are insufficient numbers of young people paying into the system to support the social security payments for those who have retired. Pension schemes, or forced retirement savings, should have protected workers from the problems associated with aging demographics. Unfortunately, low contributions, high costs, and poor governance and institutional design have generally led to poor funding and adequacy ratios. The problem is further compounded by an inability to further borrow against the production of the future generation. This failure is not due to a lack of political will and mechanism to exploit the future, but by the inconvenient reality that the future has already been fully monetized—rating agencies and international lenders are starting to be uncomfortable with the debt capacity of the developed countries. What was a predictable inevitability—the reality of an aging population—that could have been managed will become a shock that surprises economies and markets. Instead of a gradual and smooth change in rates and prices corresponding with the gradual shift in demographics, the likely outcome is a volatile and violent transition from the old equilibrium to the new.

When 3-D is Really 1-D
Deficit spending, by itself, is not particularly worrisome. That is, borrowing today to invest for the future and/or borrowing to smooth temporary consumption shocks is perfectly reasonable. The danger occurs when chronic deficit spending compounds into high debt-to-GDP ratios. Aging demographics, while a headwind against future growth, can also be thoughtfully managed. Serious problems arise when countries have become so indebted that they are unable to raise debt to bail out retirees who have, by and large, under-saved. Even high debt can be paid down if borrowed money were deployed toward investing for the future, which would result in greater innovation and productivity; technological advances can sustain future growth and consumption even in the face of a declining work force. However, if the borrowed money were largely consumed to provide current prosperity rather than invested for future prosperity, then the mounting debt will be our ugly legacy to the future generations.

The 3-D hurricane is coming. With it will come high inflation rates, high costs for credit, low growth rates, and weakening developed country currency value. Ben Bernanke in a helicopter will not stop the hurricane’s devastating path. More stimulus packages will not stop it. Blaming the Chinese for lending us too much money will not stop it. Pretending that the storm isn’t coming will most assuredly not stop it.

I wish I had a better weather forecast for you.



1a)The Deficit Is Worse Than We Think
Normal interest rates would raise debt-service costs by $4.9 trillion over 10 years, dwarfing the savings from any currently contemplated budget deal.
By LAWRENCE B. LINDSEY

Washington is struggling to make a deal that will couple an increase in the debt ceiling with a long-term reduction in spending. There is no reason for the players to make their task seem even more Herculean than it already is. But we should be prepared for upward revisions in official deficit projections in the years ahead—even if a deal is struck. There are at least three major reasons for concern.

First, a normalization of interest rates would upend any budgetary deal if and when one should occur. At present, the average cost of Treasury borrowing is 2.5%. The average over the last two decades was 5.7%. Should we ramp up to the higher number, annual interest expenses would be roughly $420 billion higher in 2014 and $700 billion higher in 2020.

The 10-year rise in interest expense would be $4.9 trillion higher under "normalized" rates than under the current cost of borrowing. Compare that to the $2 trillion estimate of what the current talks about long-term deficit reduction may produce, and it becomes obvious that the gains from the current deficit-reduction efforts could be wiped out by normalization in the bond market.

To some extent this is a controllable risk. The Federal Reserve could act aggressively by purchasing even more bonds, or targeting rates further out on the yield curve, to slow any rise in the cost of Treasury borrowing. Of course, this carries its own set of risks, not the least among them an adverse reaction by our lenders. Suffice it to say, though, that given all that is at stake, Fed interest-rate policy will increasingly have to factor in the effects of any rate hike on the fiscal position of the Treasury.

The second reason for concern is that official growth forecasts are much higher than what the academic consensus believes we should expect after a financial crisis. That consensus holds that economies tend to return to trend growth of about 2.5%, without ever recapturing what was lost in the downturn.

But the president's budget of February 2011 projects economic growth of 4% in 2012, 4.5% in 2013, and 4.2% in 2014. That budget also estimates that the 10-year budget cost of missing the growth estimate by just one point for one year is $750 billion. So, if we just grow at trend those three years, we will miss the president's forecast by a cumulative 5.2 percentage points and—using the numbers provided in his budget—incur additional debt of $4 trillion. That is the equivalent of all of the 10-year savings in Congressman Paul Ryan's budget, passed by the House in April, or in the Bowles-Simpson budget plan.

Third, it is increasingly clear that the long-run cost estimates of ObamaCare were well short of the mark because of the incentive that employers will have under that plan to end private coverage and put employees on the public system. Health and Human Services Secretary Kathleen Sebelius has already issued 1,400 waivers from the act's regulations for employers as large as McDonald's to stop them from dumping their employees' coverage.

But a recent McKinsey survey, for example, found that 30% of employers with plans will likely take advantage of the system, with half of the more knowledgeable ones planning to do so. If this survey proves correct, the extra bill for taxpayers would be roughly $74 billion in 2014 rising to $85 billion in 2019, thanks to the subsidies provided to individuals and families purchasing coverage in the government's insurance exchanges.

Underestimating the long-term budget situation is an old game in Washington. But never have the numbers been this large.

There is no way to raise taxes enough to cover these problems. The tax-the-rich proposals of the Obama administration raise about $700 billion, less than a fifth of the budgetary consequences of the excess economic growth projected in their forecast. The whole $700 billion collected over 10 years would not even cover the difference in interest costs in any one year at the end of the decade between current rates and the average cost of Treasury borrowing over the last 20 years.

Only serious long-term spending reduction in the entitlement area can begin to address the nation's deficit and debt problems. It should no longer be credible for our elected officials to hide the need for entitlement reforms behind rosy economic and budgetary assumptions. And while we should all hope for a deal that cuts spending and raises the debt ceiling to avoid a possible default, bondholders should be under no illusions.

Under current government policies and economic projections, they should be far more concerned about a return of their principal in 10 years than about any short-term delay in a coupon payment in August.

Mr. Lindsey, a former Federal Reserve governor and assistant to President George W. Bush for economic policy, is president and CEO of the Lindsey Group.
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2) The Coming Afghan Debacle The Taliban is jubilant at Obama's strategy. So is Iran.
By BRET STEPHENS

What does it mean that the U.S. will now be withdrawing its forces from Afghanistan on an accelerated and defined timetable in order to focus, as President Obama said last week, on "nation building here at home"?

It emboldens the Taliban, which thanks to Mr. Obama's surge and David Petraeus's generalship had all but been ousted from its traditional strongholds in Kandahar and Helmand provinces. "My soul, and the soul of thousands of Taliban who have been blown up, are happy," Taliban field commander Jamal Khan told the Daily Beast of his reaction to Mr. Obama's speech. "I had more than 50 encounters with U.S. forces and their technology. But the biggest difference in ending this war was not technology but the more powerful Islamic ideology and religion."

It increases the risk to U.S. forces in Afghanistan, where the fatality count was finally starting to come down after peaking in 2010. Fewer troops means that U.S. commanders will have to make an invidious choice between clearing territory of enemies and holding and building it for friends. "Whether it is Nangarhar or Ghazni, Kandahar or Herat, the place where we decide to 'surge' with remaining forces will leave a window open—and the Taliban will crawl in," says a U.S. military official with experience in Afghanistan. "Any commander who has experienced a withdrawal under pressure knows that it is perhaps the most difficult operation you can conduct and certainly the most dangerous; it gives the attacker a feeling of superiority and demoralizes the withdrawing force."

It strengthens already potent anti-American forces in Pakistan and weakens the hand of moderates. Skeptics of the U.S. within Pakistan's government, particularly the army, will mark the U.S. withdrawal as further evidence that Washington is a congenitally unreliable ally. Opponents of the U.S. outside of the government will capitalize politically on the perception of American weakness. Drone strikes, which outgoing CIA director Leon Panetta has called "the only game in town in terms of confronting or trying to disrupt the al Qaeda leadership," will likely come to an end. Islamabad will also find new reasons to patch up its differences with erstwhile allies in the Taliban and other terrorist groups as a way of keeping its options open.

It strengthens the hand of Iran, which, as the Journal's Jay Solomon reported yesterday, "is moving to cement ties with the leaders of three key American allies—Afghanistan, Pakistan and Iraq—highlighting Tehran's efforts to take a greater role in the region as the U.S. military pulls out." As a demonstration of those ties, Iranian Defense Minister Ahmad Vahidi paid a visit to Kabul last week to sign a bilateral security agreement. "We believe that expansion of joint defense and security cooperation with Iran is in favor of our interests," said his Afghan counterpart Abdulrahim Wardak.

It further weakens NATO, whose future is already in doubt given its inability to oust Moammar Gadhafi from Tripoli. In the last decade it became the fashion to say of the alliance that it was either "out of area"—meaning Europe—or "out of business." Leaving and losing Afghanistan spells the latter.

It gives Hamid Karzai opportunity and motive to reinvent himself as an anti-American leader. The Afghan president is already well on his way to forging a close political alliance with insurgent leader Gulbuddin Hekmatyar, who is believed to have given Osama bin Laden safe passage out of Afghanistan in 2001 and is wanted by the U.S. on a $25 million bounty. Mr. Karzai is said to be furious that the Obama administration made no effort to get a strategic forces agreement that would have left a residual U.S. force after 2014. "I think the reality of their complete withdrawal has struck home," Afghan Human Rights Commissioner Nader Nadery tells the Associated Press. "Now he sees they may go and they don't want a [military] presence here . . . and perhaps now he is thinking, 'Who will protect me?'"

It accelerates Afghanistan's barely suppressed, and invariably violent, centrifugal forces. There are already reports that the old Northern Alliance, which held out against the Taliban in the 1990s and took Kabul in 2001, may be reconstituting itself as a fighting force in anticipation of a hostile government in Kabul. This is a formula for civil, and perhaps regional, war; it is not clear what kind of "partnership" the U.S. could hope to build, as Mr. Obama promised to do, with whatever emerges from its ashes.

Finally, it signals that the United States, like Britain before it, is a waning power. In his speech last week, Mr. Obama waxed eloquent on the point that "what sets America apart is not solely our power—it is the principles upon which our union was founded." Very true. But a nation that abandons to the Taliban those it was once committed to protect shows that it lacks power and principle alike.

At the end of "Charlie Wilson's War," the film quotes the late congressman saying: "These things happened. They were glorious and they changed the world. . . . And then we f—ed up the endgame." To watch President Obama's Afghan policy unfold is to understand exactly what Wilson meant.
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3) When It's OK for Liberals to Demonize the 'Other'
By Christopher Chantrill

In its feature piece on presidential candidate and Tea Party darling Rep. Michele Bachmann (R-MN), The Weekly Standard makes the obvious point: there is something about Bachmann and Sarah Palin that sends liberals crazy.

What unites Bachmann and Palin, above all, is the contempt with which they are treated by liberals. "I'm just mocked and marginalized, Sarah Palin is mocked and marginalized," Bachmann told me. "If you are unashamed and vocal about your position as a conservative, that's what happens. That's what happened to Reagan, that's what happened to Newt Gingrich, that's what happens to anyone who's not afraid to be a conservative. It's part of the job."

So that's why Chris Wallace of FoxNews thinks it's OK to ask Bachmann if she's a flake.

It's strange that our liberal friends should be set on mocking and marginalizing conservative woman politicians. After all, every liberal has been taught to a fare-thee-well about the ethical outrage of marginalization. It's at the center of the postmodern turn. The whole point of the liberal value system these days is to celebrate diversity. To stigmatize and to marginalize another group or another culture, to call someone a flake is wrong, because "other" reduces the span of "us." There are no objective standards to determine right and wrong, therefore we should respect and celebrate other cultures and value systems.

So why don't liberals obey their own rules and take immense care in their statements when it comes to pro-life conservative woman politicians who are so easily experienced as "other" by liberals?

American philosopher Saul Alinsky wrote: "The spirit of democracy is the idea of importance and worth of the individual, and faith in the kind of worth where the individual can achieve as much of his potential as possible." Except when that individual is a pro-life conservative woman, say today's liberals.

Or take Time's Richard Stengel who asks, in a 5,000 word article about the US Constitution: "What would the framers say about whether a tax on people who did not buy health insurance is an abuse of Congress's authority under the commerce clause?" Here's what, Mr. Stengel. The whole point of the Constitution is to limit the power of government officials. If the Constitution doesn't limit the government then the Constitution doesn't have a point.

Anyway, what's with this liberal grand narrative about the Living Constitution? I thought we had all agreed, with the postmodernist Lyotard, that Grand Narratives were a thing of the past. In the post-modern era we have "micro-narratives" as each sub-culture conducts its own Wittgensteinian "language game." In this new world the conservative micro-narrative of constitutional originalism is just as valid as the liberal micro-narrative of the living constitutionalism, and all good diversity counselors should work to celebrate both diversities.

Back in the 18th century, the First Postmodernist celebrated micro-narrative and sub-cultures. He wrote: "To be attached to the subdivision, to love the little platoon we belong to in society, is the first principle (the germ as it were) of public affections. It is the first link in the series by which we proceed towards a love to our country, and to mankind." And Edmund Burke also celebrated the diversity of Catholic Emancipation, and anticipated with his Impeachment of Warren Hastings the problem of dictatorial domination that agitated Adorno and Horkheimer of the lefty Frankfurt School.

Of course it is not enough to belong to the little platoon; you must participate. American freedom-lover Saul Alinsky: "The price of democracy is the ongoing pursuit of the common good by all of the people... Tocqueville gravely warned that unless individual citizens were regularly involved in the action of governing themselves, self-government would pass from the scene." But in the big-government welfare state only liberals are credentialed to pursue the common good. Everyone else just gets benefits.

America's own contribution to postmodernism is the philosopher Richard Rorty. He held with Hume that "corrected sympathy... is the fundamental moral capacity." Get people to read Uncle Tom's Cabin if you want them to identify with the sufferings of slaves. So here goes.

Let the word go forth from the mainstream media to the Democratic National Committee, from the groves of Academe to the citadels of philanthropic foundations, that lily-white Netroots and mainstream media alike should get out to Iowa and get their sympathy corrected by watching the Palin biopic The Undefeated. Because we wouldn't want liberals to compound the ethical outrage of their "mock and marginalize" hate speech towards the pro-life, conservative, female "other" for too much longer. Liberals, "when again touched, as surely they will be, by the better angels of [their] nature," believe in civil discourse and national conversations. At least that's what they keep telling us.

Special thanks to American humorist Saul Alinsky for assistance on this article: "Ridicule is man's most potent weapon."

Christopher Chantrill is a frequent contributor to American Thinker. See his usgovernmentspending.com and also usgovernmentdebt.us. At americanmanifesto.org he is blogging and writing An American Manifesto: Life After Liberalism.



3a)Miss USA -- only liberals need apply?
By Bill Bumpas

Another controversy is brewing over the Miss USA Competition and it has to do with political correctness.


Two years ago Miss California Carrie Prejean, the runner-up in the national contest, claimed she did not win the competition because she affirmed traditional marriage when asked by a judge about same-sex "marriage."

This year the question was asked of the women: "Do you think evolution should be taught in schools?" Only two of the 51 contestants said they believed in evolution, with one of the two eventually winning the crown.

Discovery Institute president Bruce Chapman says the Miss USA pageant has become too politicized.

"What's sad about it is that lots and lots of people take part in this, and they spend a great deal of time I suppose -- personal resources -- competing," he observes, "and it means a lot to them and to their families and their communities and so forth. And then at the end to get walloped with a political correctness test, I think is really low."

Chapman is disappointed that a political litmus test was applied.

"There's a right answer and a wrong answer and you'd better get the right answer," says the Institute president. "The right answer is the politically correct answer on the left. So why don't they put up a sign for Miss USA to say 'only liberal, progressive women need compete?'"

It is unfortunate, he adds, that the women who failed to adapt to the judges' prejudices may have been just wasting their time, talent, and beauty.
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4)President Quixote's Legacy: Confused, Ill-Educated and Not Too Bright
By Monty Pelerin

The number of Obama supporters seems inversely related to his time in office. Many wonder what happened to "The One We Are Waiting For."

Obama assumed office in difficult economic times. After a couple of years of excuses -- which included "the problems were worse than we knew" and the generic, all-purpose "it's Bush's fault" -- Obama now owns the original problems and new ones of his own doing. An incomplete report card on his "accomplishments" would include the following:

•the economy worsened
•discretionary military efforts ("kinetic" if you prefer) increased
•an unpopular, flawed health care plan was forced on the public
•inflation increased, especially in critical goods like food and gasoline
•job prospects decreased
•the stimulus failed miserably
•"transparency in government" became a laugh-line for late night TV
•corruption in government accelerated to Chicago-style warp speed
•Housing worsened and shows no sign of bottoming soon
•Government debt and spending spun out of control
•Wall Street was bailed out and continues to enrich themselves
•Main Street was ignored and becomes poorer as bankruptcies and foreclosures mount
•race relations appear to have worsened
There are a plethora of other problems that could be attributed to Obama. In short, it is difficult to ascertain what, if anything, has improved other than the demise of Osama bin Laden.

Two hypotheses are often cited to explain why things have gotten so much worse:

1.Obama is incompetent.
2.Obama knows what he is doing and is deliberately destroying the country.
These hypotheses are not mutually exclusive. Evidence is consistent with either or a combination of both. The remainder of this article deals only with the first. Readers should not assume that the second is unimportant, inoperable, or impossible.

Dr. Thomas Sowell wrote about "seductive beliefs" in a two-part article (second part here). He touched on some of the incorrect beliefs guiding President Obama. In short, Obama is an ideologue, narrowly (and poorly) educated. As a result, he is ignorant in the ways of the world.

Economics versus Morality

Sowell's analysis provides perspective on Obama's behavior. Obama has virtually no understanding of basic economics. Exploitation ideology is the basis for his world- and economic view. This ideology sees the world as a zero-sum game. In essence a fixed pie is divided. If one person gets more, others necessarily get less.

A country becomes successful by taking advantage of other countries. This naive view, based on the long-discredited concept of mercantilism, sees success as exploitation. Freedom, markets, institutions, incentives, and voluntary trade have no place in Obama's world. Success or failure is determined by one variable -- whether you are the exploiter or the exploited.

Exploitation theory does not comport with economic theory, history, or reality. As Sowell points out:

It is hard to reconcile "exploitation" theories with the facts. While there have been conquered peoples made poorer by their conquerors, especially by Spanish conquerors in the Western Hemisphere, in general most poor countries were poor for reasons that existed before the conquerors arrived. Some Third World countries are poorer today than they were when they were ruled by Western countries, generations ago.

Obama's ideology blinds him to relevant variables. Incentives, institutional frameworks, profit and loss, individual initiative, saving and investment, hard work, etc. have no role in his simplistic world. He is a political creation with no experience in relevant matters. He does not understand markets, business, meeting a payroll, or managing an organization. This vacuum in knowledge produces failed economic results because policies do not consider the relevant variables for economic success.

In Obama's world, success and failure are moral rather than economic outcomes. Success is a marker for evil. Failure is due to someone else's success rather than personal shortcomings. Failure represents passivity, the choice to not exploit others. Proper moral behavior produces failure.

For Obama, economics itself is inconsistent with morality. Hence economics itself must be evil. This view of the world is both simple and ignorant. No, it is beyond that. It is a sign of stupidity! Recognition of this stupidity is the key to understanding Obama's behavior and policies.

An Interpretation of Some Obama Policies

The key to understanding much of Obama's behavior is the notion that economics itself is necessarily evil and must be constrained or even remedied.

Successful allies (think Israel and Great Britain among others) are morally inferior to unsuccessful, backward nations who only are so as a result of exploitation. Third-world nations require restitution for the evils imposed by successful nations. That some of these are enemies of the US makes them even more deserving. The US, heretofore the greatest success, therefore represents the greatest evil. Obama's world-apology tours and treatment of allies can be understood in light of such convoluted beliefs.

Moral judgments also drive domestic policy. Individual success is simply a microcosm of national success. It too is achieved by exploiting others. That explains Obama's "Joe the Plumber" moment. If the pie is fixed in size, the rich make others poor. That is the fallacy underlying Obama's belief that people are entitled to only so much income or wealth.

In his mind, he has a right, probably a moral obligation, to confiscate and redistribute wealth. The rich and successful must be punished at some level of success. Their success causes the poor their pain.

Talent, hard work, ingenuity, risk-taking, etc. are not relevant in Obama's third-grade level of economic understanding. As expressed by Tom Sowell, "[w]hether at home or abroad, Obama's ideology is an ideology of envy, resentment and payback."

The Bigger Problem

Obama is doing what he believes right and just. Sophomoric understanding, however, does not explain why the inequities of the world are assumed to be Obama's responsibility. How does one go from President of the US to a modern-day Don Quixote for the entire world?

Some psychologists and psychiatrists have answered this question in terms of Obama's ego and pathological narcissism. The psychological conditions that motivate a person are less clear than the ensuing actions. They also can be much more frightening. To understand a person, it is sometimes necessary to speculate on such motivations.

Obama's narcissistic disorder apparently enables him to see himself as the President of The World, the Great Rectifier and the One We Have Been Waiting For. Some supporters speak of Obama in messianic terms, as he himself has arrogantly done. This behavior pattern could be indicative of severe delusion, even megalomania.

The original Don Quixote's tilting at windmills was charming and harmless. This knight of old was noble and honorable. He possessed character and integrity. While a bit crazed, his motives were pure. It was difficult not to admire him.

None of that holds true for President Quixote. The only thing these two delusional people have in common is a fascination with windmills. The old knight imagined them as dragons to be slain, the modern one as solutions to the world's problems. Which belief is more rational is left to the reader to decide.

Obama's faults are neither charming nor harmless. He is in a position of extreme power, capable of doing massive damage. His quixotic behavior squanders this nation's resources and destroys its economy. Obama, like his predecessor of old, intends to solve all the injustices of the world. His Quest is to compensate for the sins of the successful.

The downtrodden are his protectorate, just as they were the delusional knight of old. The modern Quixote, however, exploits them for political gain rather than true concern. The successful, fewer in number, are targets unless they can assist him in his goals.

Obama's Superior Intellect

How dangerous this delusional man might be is moot. What seems no longer at issue is Obama's "superior intelligence." Obama's belief system is dominated by the dismissed exploitation theories of Karl Marx and the 60's-style radicals he grew up around. The Reverend Wright preached to him for twenty years about exploitation in terms of Black Liberation Theology. An unrepentant terrorist, Bill Ayers, was a close friend and arguably author of one of Obama's autobiographies. His personally selected "Czars" are the sorriest collection of Presidential advisors ever, at least in terms of reflecting American values and beliefs.

Many went on the same intellectual voyage that Obama did. Most of us outgrew this nonsense, usually by our mid-twenties. Obama never did. He is still a child, intellectually undeveloped and locked into the ideas from the 60's -- both the 1960s and the Marxist 1860s. In that sense he is an intellectual dwarf, frozen in the equivalent of a state of intellectual puberty. His "knowledge" is based on nothing but the discredited ideologies of Socialism.

The claim that Obama is the smartest man to ever hold presidential office is absurd and a reflection on the state of our media who insist on propping up this man-child. Obama's obsession with keeping his college records and personal past secret is prima facie evidence that the claim is untrue. His knowledge base and dismal performance on the world stage is even more damning.

Instead of having a superior intellect, we likely have the most ignorant, ideological, brainwashed dupe this country has ever elected to high office. The man's intellectual development never progressed beyond the stage of all-night freshman bull sessions where all the world's problems were solved (with help from adequate amounts of beer of course).

This intellectual pygmy must be removed from office by whatever possible peaceful means. Impeachment is in order, but will not happen. Thus the 2012 election is critical.

The Democratic Party knows what happened in 2010. They also know that they have an albatross at the top of their ticket. It is likely they will turn on this poseur before the election. If so, this act will be their most significant public service in years.

Obama will not be reelected, but that may not be enough. A country filled with enough fools to elect this modern-day version of a snake oil salesman, this American Idol wannabe, this empty suit, is clearly dumb enough to replace him in kind. H. L. Mencken had it correct: "Democracy is a form of worship. It is the worship of jackals by jackasses."

The Democratic Party is and should be worried about 2012. No Democrat, save the hapless Jimmy Carter, can be happy about their current situation. Carter is the exception because his lock on "worst President ever" is about to be broken by the current occupant.
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5)July 4th
By Thomas Sowell

The Fourth of July may be just a holiday for fireworks to some people. But it was a momentous day for the history of this country and the history of the world.

Not only did July 4, 1776 mark American independence from England, it marked a radically different kind of government from the governments that prevailed around the world at the time -- and the kinds of governments that had prevailed for thousands of years before.

The American Revolution was not simply a rebellion against the King of England, it was a rebellion against being ruled by kings in general. That is why the opening salvo of the American Revolution was called "the shot heard round the world."

Autocratic rulers and their subjects heard that shot -- and things that had not been questioned for millennia were now open to challenge. As the generations went by, more and more autocratic governments around the world proved unable to meet that challenge.

Some clever people today ask whether the United States has really been "exceptional." You couldn't be more exceptional in the 18th century than to create your fundamental document -- the Constitution of the United States -- by opening with the momentous words, "We the people..."

Those three words were a slap in the face to those who thought themselves entitled to rule, and who regarded the people as if they were simply human livestock, destined to be herded and shepherded by their betters. Indeed, to this very day, elites who think that way -- and that includes many among the intelligentsia, as well as political messiahs -- find the Constitution of the United States a real pain because it stands in the way of their imposing their will and their presumptions on the rest of us.

More than a hundred years ago, so-called "Progressives" began a campaign to undermine the Constitution's strict limitations on government, which stood in the way of self-anointed political crusaders imposing their grand schemes on all the rest of us. That effort to discredit the Constitution continues to this day, and the arguments haven't really changed much in a hundred years.

The cover story in the July 4th issue of Time magazine is a classic example of this arrogance. It asks of the Constitution: "Does it still matter?"

A long and rambling essay by Time magazine's managing editor, Richard Stengel, manages to create a toxic blend of the irrelevant and the erroneous.

The irrelevant comes first, pointing out in big letters that those who wrote the Constitution "did not know about" all sorts of things in the world today, including airplanes, television, computers and DNA.

This may seem like a clever new gambit but, like many clever new gambits, it is a rehash of arguments made long ago. Back in 1908, Woodrow Wilson said, "When the Constitution was framed there were no railways, there was no telegraph, there was no telephone,"

In Mr. Stengel's rehash of this argument, he declares: "People on the right and left constantly ask what the framers would say about some event that is happening today."

Maybe that kind of talk goes on where he hangs out. But most people have enough common sense to know that a constitution does not exist to micro-manage particular "events" or express opinions about the passing scene.

A constitution exists to create a framework for government -- and the Constitution of the United States tries to keep the government inside that framework.

From the irrelevant to the erroneous is a short step for Mr. Stengel. He says, "If the Constitution was intended to limit the federal government, it certainly doesn't say so."

Apparently Mr. Stengel has not read the Tenth Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Perhaps Richard Stengel should follow the advice of another Stengel -- Casey Stengel, who said on a number of occasions, "You could look it up."

Does the Constitution matter? If it doesn't, then your Freedom doesn't matter
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6)Central Bankers: Dollar Will Lose Global Reserve Currency Status
By Julie Crawshaw

The U.S. dollar is poised to lose its status as the global reserve currency during the next 25 years, according to a UBS survey of central bank reserve managers.

“Right now there is great concern out there around the financial trajectory that the US is on,” said Larry Hatheway, chief economist at UBS, told the Financial Times, because the dollar has dropped 5 percent so far this year, and is trading close to its lowest ever level against a basket of the world’s major currencies.

This survey stands in sharp contrast to those conducted in previous years, in which the central bank reserve managers said the dollar would retain its status as the sole reserve currency.

UBS queried more than 80 central bank reserve managers, sovereign wealth funds and multilateral institutions. The results pf the survey weren't weighted for assets under management.

The poll findings also indicate a growing role for gold bullion, with 6 percent of those surveyed saying the biggest change in their reserves during the next decade would be adding more gold.

This also contrasts with polls done in previous years, in which none of those surveyed indicated making significant sales of gold in the next decade
-------------------------------------------------------------------------------------------------------------------------7)Judge to mom: 'You don't spank children'
By Charlie Butts

A Texas mother has been sentenced to a lengthy period of probation for spanking her child.

Corpus Christi Judge Jose Longoria, during the sentencing phase of Rosalina Gonzales, said: "You don't spank children" -- then ordered the mother to serve five years' probation for a spanking that prosecutors admitted did not involve a belt or leave bruises on the child.

Kelly Shackelford of Liberty Institute explains that the decision is a clear abuse of the law and the Constitution.

"In this country, children are not children of the state. They're children of the parents and the parents do have a right to reasonable discipline including spanking," says the attorney. "So this is a pretty clear abuse of authority and is something that people need to be aware of -- that government officials don't have the right to this kind of bullying of parents and families."

The Liberty Institute representative says the judge was out of line.

"The judge isn't a policy maker and this judge evidently needs to have a reintroduction to his role. He's not the legislature," explains Shackelford. "The legislature has passed a law and whatever the judge thinks should be the law is really irrelevant."

The Liberty Institute concludes that for the judge to make law or change law from the bench is wrong. Shackelford encourages an appeal in the Gonzales case.
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