Comrade Buchanan

Pat Buchanan has an article in TakiMag today entitled Comrade Barack. Mr. Buchanan opines:

If Barack Obama is not a socialist, he does the best imitation of one I’ve ever seen.
Under his tax plan, the top 5 percent of wage-earners have their income tax rates raised from 35 percent to 40 percent, while the bottom 40 percent of all wage-earners, who pay no income tax, are sent federal checks.
If this is not the socialist redistribution of wealth, what is it?

This is certainly a fair question. There can be no doubt that taking money from some and giving it to others constitutes redistribution of incomes, which many consider to be the essence of socialism. One problem, however, is that the program already exists. It is called the “Earned Income Tax Credit (EITC),” or “Negative Income Tax.” And if it is socialist, it has a rather strange pedigree. It was proposed by Milton Friedman, supported by President Nixon, signed into law by President Ford, and vastly expanded by President Reagan. This is certainly the oddest collection of socialists I have even encountered.

Comrade Pat has been a life-long Republican partisan and a former speech-writer for Ronald Reagan, whom, I suppose, we will now have to refer to as Comrade Ron. But the obvious question is why did Comrade Pat all of a sudden discover the latent socialism in the Democratic candidate, while missing it, for so many years, in his Republican heroes? Okay. Maybe that's not even an interesting question; maybe it is self-evident that a partisan would apply different standards to members of his own party. Nevertheless, Comrade Pat is an intelligent man, and there is a question that an intelligent man, as opposed to a mere partisan, ought to have asked. And the question is this: “Why, in this day of pervasive income taxes, do 40% of all wage-earners earn so little that not only do they pay no tax, but need a supplement from the government?” The answer is a bit more interesting than mere charges of socialism.

The first answer is that they do pay taxes, and at a high rate. They pay the payroll taxes, which amount to more than 15% of their income. Indeed, without the EITC, these workers would pay a larger proportionate share of their income in taxes than does Warren Buffet, as Mr. Buffet himself acknowledges. In truth, we have two systems of income tax, one for the rich and one for everybody else. The rich, whose incomes often derive mainly from capital gains, are taxed at a preferential rates. Long-term capital gains are taxed at 15%, or less than payroll taxes that the poorest workers pay. McCain thinks that even this is too much of a burden for the rich, and wants to cut the rate in half. Of course, both McCain and Buchanan are victims of a flawed economic theory which believes that only capital creates wealth, while labor is, at best, a mere nuisance that should be gotten rid of whenever possible by outsourcing. I won't here go into the flaws in this theory; those who want to examine it more critically can buy my book, The Vocation of Business: Social Justice in the Marketplace. Here we can merely note that if one adds up the costs of tax preferences, the advantage goes to the rich, not the poor.

But there is another reason for the negative income tax, a reason that impressed the Nobel economist and the Republican presidents alike: It helps to stave off economic collapse. The hard, economic truth is that when incomes accumulate at the top to an unreasonable degree, there is a failure of demand. A CEO may make 500 times what the line worker makes, but he cannot eat 500 times the amount of food, wear 500 times the shirts, shoes, and socks, live in a home 500 times larger, etc. This means that purchasing power is lost to the economy, and must be restored. Nor can the rich man find profitable investments for his excess wealth, since the mere excess itself causes the market to be restricted. Instead, he ends up “investing” it in speculative instruments like CDS's, which add nothing to the productive capacity of the economy. They are mere bets, where one man's winnings are measured precisely by another man's losses.

Now, I don't think Reagan was a socialist; we don't have to call him Comrade Ronnie. And one can make a judgment about whether he really cared one way or another about the poor. But he certainly did care about keeping the economy together through the next election. And if that involved running up huge deficits, or transferring a bit of wealth to the poor, then so be it. As Belloc pointed out, capitalism will always result in collectivism and statism, because it has no other way of stabilizing itself.

In truth, the federal budget is mainly about transferring wealth. However, it is largely a transfer of wealth from the bottom and the middle to the top. Farm subsidies penalize the city at the expense of the country, the military budget is less about defense and more about enriching people like Cheney, the road subsidies give an advantage to suburban homeowners over city dwellers, etc. So if in all of these upward redistributions of income, we find a small space for movements in the opposite direction, than people like Comrade Pat should not be scandalized.

Or at least, that's what Reagan thought.


From Murder in Mexico to Solidarity

On January 8, 1990, Ford Motor Company bussed in hired goons to attack lineworkers at its Cuautitlan, Mexico Assembly Plant (just outside Mexico City). Nine autoworkers were shot and one, Clito Nigmo, died from a gunshot in the back.

In historic cross-border Solidarity efforts, Canadian and U. S. Ford Rank & Filers worked to support the Mexican Ford workers. The Solidarity work included organizing meetings of real workers in all three countries to demand support for the Mexican Ford workers from the “International” United Auto Workers. They declined.

Today, UAW President Ron Gettelfinger continues to murder Solidarity for Ford and the rest of the auto corporations. As part of his drive for lower wages, fewer skills and fewer plants, he has attacked strikes by his own members. He has recently refused to answer questions about whether he will re-open auto contracts to make more concessions – something the Union’s Constitution says requires membership approval. Rest assured he will step us all backwards soon. Again.

The problem for real autoworkers is the UAW’s concessionary program is bankrupt but we can do nothing about it within the UAW’s sham democracy. And, I don’t mean to single out the UAW here as anything like a unique problem. All of America’s big unions are hardly worthy of the name. They are not really Trade Unions at all. They are Corporate Unions, playing the lead role for cutting jobs, wages, working conditions and plants. They bear huge responsibility for the growth of the American underclass numbered now buyt eh Catholic Bishops at 37 million!

When our Mexican Brothers were being mass-fired, disappeared, beaten, shot and even murdered, the UAW took the side of the corporations. So did the AFL-CIO. And the Mexicans lost the battles, strikes and the battle against NAFTA and American and Canadian workers lost – and continue to lose – their wages and jobs.

Hardly anyone asks these days why Mexicans come to the States to work? It’s very simple: They need to feed and clothe their children and keep their families together. They cannot do that in their own country because the corporations do not pay a living wage. The corporations do not pay a living wage because the American Corporate Unions want American Corporations to have cheap labor to be more “competitive”. And, the Corps want poor laborers coming to the U.S. to drive down U.S. wages.

Gettelfinger and his partners in crime force round after round of concessions. They battle against the Good Fight, at home, across our borders and abroad. And they just make matters worse. Dog-eat-dog does not work for most of us. Dog-eat-dog gives us murder and mayhem in Mexico and hopelessness at home. Labor bosses like Gettelfinger stop working people from organizing in The Good Fight and press dog-eat-dog competitiveness in our shops, between cities, states and countries. Jobs disappear. Skill disappears. Products disappear. Quality disappears but we get the Big Lies from Madison Avenue.

Nothing works now but we can change that. We need a return to the virtues of the real Trade Unions. "There is only one thing that stands in our midst, attenuated and threatened, but enthroned in some power like a ghost of the Middle Ages: the Trade Unions, “ said G. K. Chesterton.

In every workplace in the world are people who form deeply profound relationships with coworkers. For most of us, the workplace is the friendliest place out side our families. In all these places there are good people standing up for each other every day. They are the Solidarity basis of the Trade Union comeback. They are beginning to make themselves heard.


Our Thanks to National Catholic Reporter

We at The Distributist Review and The ChesterBelloc Mandate wish to thank the National Catholic Reporter for their mention of our respective sites for a recent online edition of their print paper.

Our hope is that readers of both National Catholic Register and National Catholic Reporter will join us. For that matter, we encourage readers of The Wanderer and The Remnant, Counterpunch or Chronicles, to do the same. After all, distributism has an opportunity to be a substantial outreach.

We cannot stress enough how important it is to join the Distributist Yahoo! Group. Whether you wish to chime in, or prefer to kick back and read the fruitful discussions, consider joining now.

Speaking of Chronicles, here's an article by Thomas Fleming everyone ought to read.


New Urbanism

Philip Bess, architect and author of "Till We Have Built Jerusalem: Architecture, Urbanism, and the Sacred," discusses the application of historical design to contemporary urban planning in an interview for The Claremont Institute.


Bring Back Local Farming

If you are looking to help restore local agriculture using eco-friendly and time-valued techniques, look no further than Polyface Farms.

Polyface is renowned for their apprenticeship programs. Offering 12-month or summer-long commitments, Polyface provides room and board as well as a monthly stipend for all their apprentices.

If you are interested in simply touring the facitilies, Polyface offers transparent self-guided and escorted tours as well.

Distributism is both an urban and rural solution. However, the early movement wisely understood the necessity for the town and country to collaborate. We need an agricultural uprising that will feed America locally. Be a hero and learn the craft of farming.


Managed Currency

by Hilaire Belloc

The advantages of gold as a medium of exchange have been familiar to all our civilization since it began. Gold is easily divisible, of great value for its weight, almost imperishable, easily divided and minted. It is also easy to test. The disadvantages are that even with gold- as with any other actual thing-the value fluctuates. It would be the same thing if you had platinum or potatoes for your currency. When the value of gold for any reason goes up, general prices (that is the average cost of things as a whole) go down, and vice versa. These inevitable fluctuations in the value of the gold medium have had a great effect on history, especially in highly civilized societies where long-term payments are enforceable, or where custom powerfully regulates payment. But when the fluctuations are slow the inconvenience is not noticed; when they become more rapid they are still tolerated for the sake of the compensating advantages of having a currency which everyone understands and knows all about and which is expressed in a real thing which cannot be falsified without the falsehood being discovered. But when the fluctuations are very large people try to escape them by all sorts of tricks. Of late, for various reasons, the fluctuation in prices- that is, in the value of gold as against goods and services-have been enormous. Gold has become worth a great deal more-40 per cent more-than it was even five years ago. Debtors are therefore paying or liable to pay in real things and services more than they promised to pay in real things and services when they entered into their debt, and creditors are receiving fare more. Also everyone is frightened lest there should be still more violent fluctuations in the future.

The obvious way out is a ‘Managed currency’, and a ‘Managed currency’ means the following:

Instead of the law making people pay and receive in gold, or promises to pay gold, they are to pay or receive in little bits of paper or metal tokens on which the Government shall print some name or other and the counterfeiting of which shall be rigorously prevented. It is clear that if you limit the number of such and such an amount they will have such and such an exchange value in circulation, for the settlement of such and such an amount of transaction.

For instance, supposing on the 1st of June of the year 2000 the number of transactions in goods and services all over the world were the equivalent of one hundred million ounces of gold. People all over the world during that day promised to pay or receive for things or work sums which added together came to one hundred million ounces in gold. Suppose gold to disappear altogether, so that payment in gold (or promises to pay gold) no longer had any meaning, and suppose the world to have one Government. That government need only print one hundred million bits of paper each with the inscription, ‘Worth one ounce of gold’, to keep prices exactly as they were. That is putting it very crudely, because of course you have to estimate not only the amount of the actual medium of currency, but the instruments of credit based on it, and these ‘instruments’ are indefinitely large in number, including verbal agreements; but this statement suffices to show the principle. If the volume of transactions remained the same in amount and value day after day the amount of this artificial currency fabricated by the Government would only have to be kept at exactly the same level (issuing a new note for every note destroyed) to keep prices stable.

But the number of transactions fluctuates. More or less things are made, larger or smaller crops are grown, more or less services are exchanged. So that if you keep the amount of the currency level while the volume and value of the transactions are rising or falling your currency will appreciate or depreciate and prices will fall or rise. Merely to fabricate a certain amount of artificial money therefore and to keep it at the same figure will subject you to the same inconvenience as you would have with any other medium, while getting none of the advantages of a real currency. Hence the use of the term ‘managed’. For the authorities who would stamp the bits of paper would have to be continually estimating what the amount of transactions was and making the amount of the currency follow suit, if they wished to keep prices stable.

In the light of these simple principles we can understand the argument of those who are now working in England for a managed currency and for the getting rid of gold as a medium of exchange. Their motives are various: the motive of the debtor who wants to pay less than he has contracted; the motive of the patriot who want to keep society at peace through stable prices; the motive of the economist who sees that stable prices will tend to regulate production and eliminate the wretched cycle of slump and boom-and so on. All these motives combined form a powerful current of tendency at the present time and especially in a country which, like ours, is under the weather.

If you have a real currency such as gold you cannot inflate without being found out, for the price of gold is the index of inflation. If, for instance, you mix your gold with too much alloy, up goes the price of fine gold and the trick is found out. It is the same thing if you print too much paper, nominally based on gold. If you print more paper than you can redeem in gold, up goes the price of the gold and the fraud is discovered. But if you have a ‘Managed currency’ the fraud cannot be discovered. A ‘Managed currency’ needs, therefore, superhuman virtue in those who manage it as well as superhuman knowledge; and this is true even when your managed currency applies to the great bulk of the world.


The Good Yarn

There exists a circulating proposition which claims the moral scrutiny of the popes is strictly confined to particular epochs and cultural circumstances. It is a peculiar philosophy arguing Church documents or papal encyclicals were written in response to an age. According to this novelty, a pontiff may respond to a situation, and given an amount of time or a perceived statute of limitations, his words become antiquated.

One advocate of the “time-capsule” school of thought is author of The Spirit of Capitalism and former National Review columnist, Michael Novak. In a 1981 article, Novak responded to an address given by Russian dissident writer Aleksandr Solzhenitsyn in 1978 to the Harvard graduating class. He was expected to praise the advent of western democracy and capitalism, and decry the horrors of the East. Yet the author of Gulag Archipelago, in an upset for liberal and conservative alike, fired off a critique at the West. He condemned western materialism and shunned an economy bent on expansion, and permitted to plough over virtue and morality. For Solzhenitsyn, modernity’s moral shoulder-shrugging was symptomatic of a diseased society where self-interest and legalism reigned.

“An oil company is legally blameless when it purchases an invention of a new type of energy in order to prevent its use. A food product manufacturer is legally blameless when he poisons his produce to make it last longer: after all, people are free not to buy it.”1

Michael Novak, in his response, compared the author’s speech with Pius IX’s encyclical, The Syllabus of Errors, which listed condemned propositions; ideas branded as modernist.

For Novak, the Syllabus was outdated and he dismissed it as a relic. Western policies had proven the Church wrong, he argued, and the Church would do well to stay out of its way. But there is a specific reason Novak shies away from this document and it is the Syllabus’ incompatibility with the embrace of rationalism.

“It might even be possible to read Solzhenitsyn’s address at Harvard as an updating of Pope Pius IX’s famous critique of modernity, “The Syllabus of Errors.” Solzhenitsyn, like Pius IX, is adept at pointing out the errors, one-sidedness, and blind spots in many of the things we, in a liberal democratic society, hold most dear.”2

Novak clearly decides what side he is on.

“I am sorry, sometimes, then, that we disappoint the great Solzhenitsyn. But I would have it no other way.”3

Novak believes that when liberal democracy and the Church are confronted, the Catholic Church must give way to the former, as she has been humbled by an authentic progress and enlightenment with a successful track record, proven and tested to work. The Syllabus, as any other document standing in the way of this “advancement,” is to be admired as a museum document, significant perhaps to historians or the like. Solzhenitsyn was an utopian getting in the way of “progress.” He was a crank, a theorist of the old school, dreaming of a world of policies subject to our eternal ends. Novak, on the other hand, wished to wake Solzhenitsyn up as economic mechanisms just did not work the way the author thought.

Now there are several consequences when we substitute authority for fashion; the claim that our encyclicals are to be understood under their historical context and nothing more. The first is the perception that successive encyclicals are simply an homage. Pontiffs, when commenting on the anniversary of Rerum Novarum, are just celebrating a wonderful read, like Chesterton writing of Chaucer or singing the praises of Dickens. They may be curiosities of import reserved to the historian, but carry little weight. So when Leo XIII writes about the Americanist heresy in his encyclical, “Testem Benevolentiae Nostrae,” the great pontiff directs his critique at the United States during a concrete period of time, irrelevant to future generations regardless of time and space.

Of course, this is akin to claiming the Ten Commandments were reserved only for the biblical Israelites, The Epistle of St. Paul the Apostle to the Romans could be of little import for Australians, or the Good Samaritan was an illustration of B.C. ethnic charity. Whether a pope addresses a nation or a convent, the diagnosis and solution of any and all error is prescribed to Catholics in any period, after all papal documents clarify the Church’s position on any given topic as it affects her as a whole.4

That said, the same distorted thinking is spreading like wildfire amongst the Catholic corpus, in the form of ambivalence towards Church documents. The prevalent alternative is an official formation of conscience created by political affiliations and constitutions, unprotected by the Holy Spirit but deemed by advocates as infallible or divinely-inspired creeds. This plague takes the form of rationalism, opposed to any Church policies, doctrine, or dogma divergent of public policy.

Essentially it works like this. For modernity to function it must incorporate a systematic agenda. The first step comes in the guise of tolerance. This front is concerned with weakening the virtues. The second is that truth is a matter of opinion, and this sort of relativism insists on the privatization of belief. You are free to believe anything, so long as what you do will not challenge public institutions and policies. Any claim otherwise is brushed aside as utopian or even dangerous.

Catholic historian Dr. John Rao’s conclusions go even further.

“…the freedom all religions are guaranteed is one that requires abandonment of "divisive" doctrines, their replacement with the unifying principles of the naturalist Enlightenment, and, therefore, peace and harmony for those who have lost their souls and would be totally unrecognizable to their ancestors. Such peace and harmony, which destroys the ability of religions to function as they ought, then allows the naturalist strong man to do whatever it is he pleases, limited only by his own continued and quite quixotic subscription to certain "moral values".5

Modernity has guided Catholics for decades, who often unintentionally repeat the same errors found within this philosophy. A few hours worth of study should clearly correct the issues.

If then, worker-associations, micro-property, the just wage, Catholic action, and the reinsertion of justice in the marketplace were solutions isolated to Leo XIII's time, why have successors to the papacy reiterated the same ever since? St. Pius X, Pius XI, Pius XII, John XXIII, Paul VI, and John Paul II not only denounced the errors of Leo’s time, but claimed they still existed in varying degrees, elaborated on Leo XIII’s solutions, and introduced new answers to global woes in their respective works. Upon inspection, it is clear that Catholic Social Doctrine is nothing new, nor is it basically concerned with the latter half of the nineteenth century, but consistent traditional teaching. From Aristotle to St. John Chrysostom, St. Thomas Aquinas to Pope John Paul II, the preferential treatment for the poor, the apologia for equilibrium in our economic policymaking, and a clear prescription has always been part and parcel of the Church.

If we are to counter rationalism and its effect on economics and social policy, we would do well to encourage Catholics to review Church documents. It is there where distributists will learn that ours is not the pursuit of happiness, but rather the pursuit of goodness.

1.Aleksandr Solzhenitsyn, “A World Split Apart,” 8 June 1978.
2.Michael Novak, “On Solzhenitsyn,” National Review 14 Sep 1981: 99.
3.Ibid. 101.
4.H. Thurston, Encyclical. In The Catholic Encyclopedia 1909 New York: Robert Appleton Company. Retrieved October 25, 2008 from New Advent:
5.Dr. John C. Rao, “The Exotic Liberation Theology of Fr. Neuhaus & Dr. Hitchcock,” The Remnant 15 November 2007.


The RINO Party

When Colin Powell endorsed Barrack Obama, Rush Limbaugh had a convenient explanation, shouted into the microphone: “It was all about race.” Of course, the whole point of a program like Rush's is to provide his listeners with sound bites so that they won't have to think; thinking is hard and it is simply more efficient to farm the task out to people like Limbaugh. It's a division of labor sort of thing. But others proposed another explanation, namely that Powell was a Republican In Name Only (RINO) and so his endorsement was hardly a surprise.

The RINO argument, though more coherent, breaks down in the face of the slew of defections from the entire spectrum of the Republican Party. Christopher Buckley, Ken Adelman, Christopher Hitchens, Scott McClellan, Bill Ruckelshaus, William Weld, Lilibet Hagel (wife of Senator Chuck Hagel), Jeffrey Hart, C.C. Goldwater, and a host of other life-long Republicans have switched sides, calling the RINO argument into question. Even Bruce Bartlett has called for conservatives to “reach out to Obama.”

Only part of the problem can be laid at the feet of the McCain-Palin ticket. True, McCain continues the Cheney-Bush policies of replacing taxes with borrowing, expanding the federal government and especially the powers of the executive (the so-called “unitary executive” theory), foreign adventurism, and a slew of other policies that cannot be reconciled with the traditional Republican stance. Even on social issues, McCain is unreliable. As Tom Piatak points out in Chonicles Magazine:

Even on abortion, McCain is unreliable. On February 3, The Washington Post reported McCain's statement that 'it's not the social issues [that] I care about.' And on August 19, 1999, McCain told The San Francisco Chronicle, '[C]ertainly in the short term, or even the long term, I would not support the repeal of Roe v. Wade which would then force X number of women in America to undergo illegal and dangerous operations.' I the same interview, McCain stated he would not have a 'litmus test' for judicial nominees. McCain's former senate colleague, Rick Santorum, an indefatigable champion of the unborn, has stated that McCain did his best behind the scenes to prevent pro-life legislation from coming to a vote on the floor. Robert Novak has reported that McCain has described Justice Samuel Alito as 'too conservative.' Novak has also reminded his readers that, back when Vermont Republican Jim Jeffords became an independent and began to caucus with the Democrats, McCain was in negotiations with the Senate Democrats to do the same thing. There is also McCain's support for federal funding of embryonic stem-cell research (ESCR), which cannot be squared with principled belief in the pro-life cause. Indeed, McCain has recently launched an ad touting his support for more federal funding of stem-cell research, and his campaign spokesman, Brian Rogers, has stated that the ad, which does not distinguish between ESCR and other types of stem-cell research, is intended to reiterate McCain's support for ESCR.

If the problem is not that the defectors are RINO, nor entirely with ambiguous nature of McCain's policies and campaign, what is the problem? Let me suggest that the Republican Party itself that is Republican in Name Only. The Party long ago abandoned its core principles. The problem began early in the Reagan administration, when the tax cuts did not lead to a smaller government; indeed, Reagan merely substituted borrowing for taxing. But borrowing is taxing; it is merely a tax shifted from the current generation onto the next; it is taxing our children for benefits that we enjoy, a kind of inter-generational theft that is counter to everything a pro-family party ought to do.

The government did not shrink under Reagan, and under Bush “(even excluding post-9/11 “homeland security spending) [domestic spending] has grown faster than during the previous two decades of divided government, and the incidence of pork-barrel projects has reached an all time high,” according to Christopher DeMuth of The American Enterprise Institute.

In abandoning its conservative principles, the Republican Party did not really become more Liberal. What it has become is more Corporate. That is, the Party has become captive of Corporate America, and it is run more and more for their convenience and profit, a profit they do not share with the rest of the nation, and are, indeed, even unwilling to pay for. As James Galbraith points out, the political world has become...

...divided into two groups. There are those who praise the free market because to do so gives cover to themselves and their friends in raiding the public trough. These people call themselves “conservatives,” and one of the truly galling things for real conservatives is that they have both usurped the label and spoiled the reputation of the real thing.

At this point we can ask, “What does the Republican Party need to do to change, to recover its principles?” And the answer is clear: It needs to lose, and to lose big-time. A marginal loss won't be enough to force a self-examination. Only a clear and crushing defeat will allow the Party to begin the process of recovering the Party's principles. Alas, it often happens that only pain leads to self-examination, and only confession leads to healing. If the Republican Party is really to become an alternative to Democratic statism, rather than just a substitute for it, it needs time out of power to re-focus on principles and practical responses to real problems, qualities which have been in short supply for the Party for the last 20 years.

The first thing the Party needs to do is to send the former Trotskyites who call themselves “neocons” back to the liberal darkness from whence they came. The next thing the Party needs is to convert the anti-abortion movement into a true “Pro-life, Pro-Family” movement (See “Pro-Life or Just Anti-Abortion?”).

In the interest of full disclosure, I must say that I am adding my name to the list of defectors. To the chagrin of many of my conservative, Catholic friends, I am voting—have already voted—for Barrack Obama. Since in the current crises, the Republican Party has little to offer the country, voting for Obama can do little harm, and may do much good. At least he seems to recognize a point that has escaped the Republicans, namely that our economic problems require the healing of the “real” economy, the economy of making things. In this, he can do no worse and may do much better. Indeed, conservatism should be more concerned with the real economy than the merely financial one, and currently the Republicans don't seem to know the difference.

But I am also voting Democrat for the good of the Republican Party. Unless it loses—and loses big—it will not change. And if it doesn't change, conservatives will have no real home in American politics.


Money Music

Song Parodies

by Dan Sullivan


To the tune of "Over There" by George M. Cohan. (Click here and then scroll down to "Over There" for Melody)

This parody was written just after Congress passed bankruptcy "reform" at the request of money-lending interests.

We set mortgage rates to inflate real estate.
Making prices fly way up high to the sky;
Prices rising every day. Buy that house now. Don't delay!

We make loans unsound, spreading debt all around.
Prices then rebound, crashing down to the ground.
So much money that you owe,
And there isn't any dough!

Overdue. You're overdue,
And foreclosure is coming to you.
Yes the banks are coming, the banks are coming,
We're taking everything from you.

So prepare. Say a prayer,
Soon you'll be sleeping out in the air.
We'll be over; we’re taking over,
And you'll work for us till
You're over overdue.

If you can't repay right away we will say,
Well, that's just to bad; we're impounding your pad.
We showed Congress, line by line,
How to keep you all in line.

Overdue. You're overdue,
And the bankers are coming for you.
Yes the banks are coming, the banks are coming,
And if you cannot pay you're screwed.

Step outside. You can't hide,
'Cause we now have the law on our side.
Your life is over. We’re taking over,
And you'll be our slaves till
You're over overdue.

Sixteen Grand

To the tune of "Sixteen Tons," by Merle Travis, popularized by Tennessee Ernie Ford, (Music Video) (Melody)

This parody was written for the American Monetary Institute conference of 2005. Note that the federal debt owed to private bondholders (as opposed to debt owed by one branch of government to another) is now about $19,000 for every man woman and child in the country. [editor's note: It's much more than $19,000 today, thanks to all the bailouts.]

I was born an American in '63,
The land of milk and honey; land of the free,
Land of the free and the home of the brave,
But we all have to borrow so the rich can save.

I owe sixteen grand of federal debt,
And more to to the state, county, school board and yet
They call it a free country but I still serve,
I owe my soul to the Federal Reserve.

I got a 40 year mortgage hanging over my head.
The word "mortgage" is French; it means pay till you're dead.
Making ends meet is gettin' so damned hard,
But now they let me buy groceries with a credit card.

I owe seventeen grand of federal debt,
And more to to the state, county, school board and yet
They call it a free country but I still serve,
I owe my soul to the Federal Reserve.

Some say our politicians issue money to spend,
But if that's all they did then all our problems would end.
Instead our money's issued by private banks,
When they lend it out at interest, we're supposed to say "thanks."

I owe eighteen grand of federal debt,
And more to to the state, county, school board and yet
They call it a free country but I still serve,
I owe my soul to the Federal Reserve.

We can build more houses; we can make more stuff,
But whatever we do it won't be enough,
'Cause no one can buy it if no one has cash,
And the banks'll take it all when the system goes crash.

I owe nineteen grand of federal debt,
And more to to the state, county, school board and yet
They call it a free country but I still serve,
I owe my soul to the Federal Reserve.


Capitalist? Socialist? Distributist.

See Bill Powell's recent article at Inside Catholic and support him with your comments.


The Crying Need

by Reginald Jebb

The truth of the crisis upon which England is entering is becoming clear to a growing number of people. In that fact lies the hope of her ultimate regeneration.

Let us summarize the position.

A little more than a century and a half ago, England -or rather her governing classes-plumped for industrialism. That is to say they deliberately set themselves to destroy what was then in the main a land of peasants, owning and cultivating their patches of land and sharing the advantages of the commons, and to convert it into a commercial unit based upon factories and overseas trade. The immediate pecuniary advantages to a limited nunmber of people were striking. We had a start of the world. and our expanding dominions provided us with an abundance of markets. The richness of the land itself in coal and iron ore accelerated the success of the experiment. The English developed a machine-sense and a money-mind, and the gradual disappearance of her agriculture was compensated for by the large profits made (by the controlling minority) from the sale of manufactured goods. Banks and a huge system of credit grew apace; for they were the life-blood of the new enterprise. The directness of local production of food and clothing for local consumption and use gave way to the dazzling indirectness of a network of exchanges, in which each mesh of the net gave opportunity to the manipulator to squeeze out his little bit of usury. We became the carrying and banking centre of the world.

For those in control and their immediate adherents all seemed well, always provided that the growing proletariat who worked their machines could be kept in proper subjection. There were ugly rumblings in the revolts of 1830 and later in the Chartist troubles of '40's. Force, followed by the Reform Bill, quieted the former; the Repeal of the Corn Laws and thc rise of the Trades Unions gave hope after the latter. But the system by then was ingrained, and the principle of it accepted even by those who suffered under it. The strikes of more recent years have been nothing more than an effort to shift, and perhaps loosen, the bonds that galled: the imprisonment has been taken for granted.

But from the beginning there was a canker in the root of this gilded flower. Time, and not the struggles of human misery, was to bring it to light. The whole repulsive plant was foredoomed to decay and perish. And the nature of the canker was this.

As a result of the fact that the energies of an industrialised nation necessarily pass from the production of its own prime needs to the making of money through commercial enterprises overseas, two things are bound to happen: agriculture must diminish and become a subsidiary adjunct to big business, and, secondly, money-always concentrating in fewer and fewer hands-must, as soon as the first flush of undisputed success has faded, be used continuously in de-development abroad and the building up there of new markets for manufactured goods. Food will have to be imported, as well as raw materials for the factories. But these imports will grow to be, more and more, merely the interest on capital invested in the foreign countries, and consequently exchange, in the form of manufactured goods exported from home, will be less and less required. In other words, the markets for such goods will continuously diminish. But the product of factories only feeds a nation indirectly by exchanging it for the necessities of life. Hence, unless new markets can be found, the industrialized country will starve. For the mere interchange of raw materials and manufactured goods does not provide food.

This inevitable result, moreover, is accelerated by the fact that the newly developed countries, when they have passed a certain stage of development, themselves take up manufacture in one form or another (there is irony in the fact that England has largely financed this process), and this tends further to diminish the vanishing markets.

Meanwhile the nature of the industrialised country has become such that a rcturn to self-support is rendered difficult. The great mass of the population has become uneducated in the provision of necessary things; they have been herded into towns where there can be no real production, only a modification or an exchange of commodities; they have come to think of money, and not things, as wealth; and, owing to the constant cutting of prices of manufactured goods in order to find markets, they have become more and more impoverished, and an increasing number of them thrown out of work altogether.

So much for the canker. It has now destroyed the flower of English industrialism, and we must act.

It is of little use to prophesy the form that the collapse will take. The decline is full upon us: let us pray that it bc not a sudden and devastating crash! The action to be taken is the important thing, and in its broad outlines it is clear.

We shall need food. We must therefore set about to produce food without delay. Not next year; not after interminable enquiries by an industrialised government, but here and now. Each and all of us who have the smallest bit of land under our control must produce something. Potatoes, wheat (a mere patch of it perhaps), eggs, pork, and milk (no matter whether from cows or goats). Thousands of us can produce in one or several, of these ways. Let us get away, as far as it is possible in the welter of financiers and townbred ways of thought, from the ruling idea of money. that money feeds us. It will not feed us if food is not there to be bought.

Then, too, in the matter of our clothes, let us, whereever opportunity offers, breed sheep and learn to spin and weave the wool ourselves. So many of us have come to half-believe that clothes are produced by Selfridge’s or Hope Brothers; but Selfridge’s and Hope Brothers-aye and Woolworth himself-will empty as the factories fail; and the factories will fail-are failing to-day-in proportion as the making of goods means loss instead of gain.

But, I shall be told, ‘this is pure panicking: things will re-adjust themselves; there is plenty-indeed a surplus-of food in thc world; our present difficulties are the result of an acute instance of recurrent trade depressions; starvation in England is unthinkable.’ ‘Unthinkable’ only because we have grown into such a habit of not thinking. Things may indeed readjust themselves temporarily, by the adoption of wider units of control, by a step nearer to the complete Servile State, or by the juggling of usurious national liabilities by the usurers. They may. Or they may not. Our financial rulers do not seem over-confident. But supposing they do, and we are allowed another lease of life for vulgar luxury and its concomitant lack of liberty, the crash in the end will be all the more severe. If we do not produce things, and if we cannot pay for things, we can only live on the bounty of other nations; and do they love us so much that they will rush in to keep our forty million people alive in perpetuum?

Again, it will no doubt be argued, ‘granting the necessity for increased agriculture and the production of primary necessities, this spasmodic, hand-to-mouth production by a few individuals is powerless to avert a catastrophe. There must be a national schcmc, a vast reorganisation by the State with modern mechanical appliances and the necessary capital.’ God knows it may come to that, if the crash is sudden and the starvation of millions imminent! But it is a hair of the dog that has bitten us: it is all of a piece with decaying commercialism and the era of the merchant. The only real cure is to begin from the other end, however slow the process may be. To adopt any other course is simply to spread the poison. The smallness of the beginning is the best earnest of sound vitality, provided that the growth comes from the soil itself, which is the only source of wealth, and is tended by the people, for whose benefit and happiness it springs. For in a very real sense the transition from financial credits to food realities is a transition from what is big to what is small; from vast wealth (and correspondingly vast penury) to a small competence; from prolonged processes of exchange to direct consumption of produce; from long-distance transport to local markets: from big business to small properties.

Let each individual and family produce in any practical way open to them some at least of the necessities of life, and co-operate as far as may be with others in their locality. If this will not stem a sudden crash, it will at all events lay open the only way towards the re-creation of a peasantry, without which a country cannot continue to live long. It will be a dependence upon realities instead of illusions, and it will allow men to learn by degrees to think sanely.

The Government of England, at the moment I write these lines, are racking their brains to find a way of raising money to balance the budget. One thing is certain: they must take it from somewhere. Whatever happens, the majority of us are bound to be the poorer. Why not sow our poverty on soil which cannot fail to give increase, not of poverty, but of wealth? For the peasant possesses real wealth, whereas the stock-and-share millionaire often has little and never produces any.

We shall have to be content to forgo many luxuries to which we have become accustomed. Our manner of life, and still more the trappings of it, will have to change. But is it such a disadvantage to be rid of the slavery of the office and the factory, and the aching worry of 'keeping up appearances'?

Happiness has been long absent from England. We bid her depart nearly four hundred years ago when we flung aside the Truth for money. And money since then has built up the toppling tower of industrialism. Let us invite her back under the only conditions in which she can live.

[written by Hilaire Belloc's brother-in-law and co-editor of The Weekly Review.]

Editor's note: How much food can the "little plots" grow? See this:

(Thanks to Allen Carillo for finding this video.)


The Culture of (Cyber) Death

John Paul II in Evangelicum Vitae (The Gospel of Life) warned about a growing culture of death, and that

with the new prospects opened up by scientific and technological progress there arises new forms of attacks on the dignity of the human being. At the same time a new cultural climate is developing and taking hold, which gives crimes against life a new and--if possible--even more sinister character.
The Pope's encyclical was written in 1995, just as the internet revolution was getting started. But he foresaw how this would go down. And it has gone very far down indeed. In recent years, this new culture of death has taken the form of video games (ostensibly for adults, but widely available for children) with the theme of sex, violence, and crime. These games represent the real education that we give our children, for no school can (or should) compete with such advanced pedagogical techniques. As Andrew Tuplin writes in Adbusters:
Although Grand Theft Auto IV allows you to kill anything that walks, you cannot (yet) sex anything that walks. Sex in the game is restricted to prostitutes who willingly engage. This design choice has allowed the game maker, Rockstar Games, to negate some particularly unsettling in-game situations such as virtual rape or virtual pedophilia. Though I believe there would be a public outcry if such morally repellent things were included in the game, explaining exactly why virtual sex and murder are acceptable – while virtual rape is not – is a difficult argument.
Indeed. Though marketing considerations may prevent virtual rape, the logic of the game permits, or even encourages it. Of course, these games have the power to form our minds--and our souls--in ways that real life could not. The virtual replaces the real in the formation of habits. After all, a real murder might sicken us and present us with unpleasant consequences; but we can practice a virtual murder an infinite number of times. One can get into the habit of murder without even exercising the courage that a real murderer might have to exercise. Reality at least imposes some limits, even on the murderer or the rapist. But in virtual (non)reality, our avatars do our killing for us, and can do so infinitely.

The first commentator to recognize the dangers of this virtual reality did so long before anyone had imagined the computer. In fact, he warned us of the problem 2,000 years before the computer. As Andrew Tulpin notes:
When Jesus began teaching and interpreting the moral code of the day, he radically redefined adultery, translocating the sin from the physical realm of actions and words to the virtual world of the mind and imagination. In Matthew’s gospel, Jesus says, “You have heard the commandment that says, ‘You must not commit adultery.’ But I say, anyone who even looks at a woman with lust has already committed adultery with her in his heart.” What Jesus teaches is that God is concerned not only with what plays out in the physical world of actions (reality), but also with what takes place in the virtual world of our minds. A sociological approach to morality judges murder wrong because it harms an innocent person. A theological approach to morality finds murder sinful not only because of the physical act, but also because God is offended by an angry mind as well as violent hands. The humanist or secular view of morality is concerned only with what we do. True religious morality is concerned not only with what we do, but with who we are, with what we desire to do.
More and more, we have abandoned real education for virtual education, an education death, greed, lust, and vice. Yet soon, our civilization will need all the courage and prudence we can must to survive the troubles that lay in store for us. The task, I suspect, will fall to a remnant as it always does. But no remnant in history has faced not only such a depraved population, but such a population so well-schooled in depravity. Had I the foresight and wisdom, I would have loved and encouraged my children more than I did to strengthen them to deal with the world we have left them.


Iraq's Forgotten Christians

We hear a lot about the Sunni, Shia, and Kurds of Iraq, but John Allen reports on the toll the war has taken on Iraq's Christian community, one of the oldest in the Middle East.

And this from Aljazeera:

Even the UN is worried.


If Matter Matters

by G.K. Chesterton

Capitalism is as unsafe as the Bank, as the proverb says. Or rather, that is what the proverb ought to say, and probably would say, if proverbs were still the old popular proverbs; which referred to realities. A bank may be a useful thing to a merchant, just as a ship was always regarded as a useful thing to a merchant. But nobody was such a fool as to think that the merchant’s wealth was actually safer in a ship tossing on a distant sea than in a bag of gold put away in a cupboard; let alone those much more safe and solid forms of wealth, that can also be put in a cupboard, in the form of wine or bread or honey or hams hanging from hooks. Nothing is safe unless it is dead, and a house can catch fire as a ship can sink or a bank go bankrupt; but there are degrees in these things, and the advantage that can really be pleaded for banks and ships is not primarily an advantage of safety. Both the ship and the bank may make it possible to do much more with the wealth, and both, in various ways, can carry it to the ends of the earth. But if we are speaking specially of wealth being safe, then certainly it is most safe when it is most solid, when it is most near and available and tangible. Therefore all the old tales and traditions of the normal life of mankind, always regard the merchant as less safe than the farmer. The farm suffers from bad weather, like the ship, but it is not very likely that the farm will be entirely swallowed by an earthquake, as the ship may be entirely swallowed by the sea. Similarly, it is not very likely that even a bad harvest will make every single ear of corn useless, as a certain sort of financial crisis can make every single cheque or bond valueless. The old common sense of human communities felt this fact, and therefore never allowed, as we have allowed, even the idea of merchandise to entirely outweigh and overwhelm the idea of agriculture. The merchant had his place, but it was not the supreme place, and it was not so near the very heart of the society as the place of the ploughman. The merchant might be congratulated on his courage rather than on his safety, but it was not allowed to usurp the place of the courage of the soldier. So one of the most famous merchants, called The Merchant of Venice, is encouraged to talk hopefully of his happiness when his ships come home; but he knows that ships sometimes do not come home. Since then we have further transferred the wealth of Antonio to things in some ways even less solid than ships; things often under influences more alien, remote and inhuman than the strangest storms on the most uncharted sea. And then, because we have taken the things out of the cupboard and put them in the coffers of foreign financiers, we calmly talk about something being ‘as safe as the bank.’ We are perfectly satisfied now, and have none of the hesitation of Shakespeare; because the wealth in the wandering ships has been transferred from Antonio to Shylock.

This is a primary and preliminary fact of the problem, and has nothing to do with doubting any particular bank or denying that banks are useful; still less with merely destroying banks as useless. It merely gets the order and relation of the things stated right, in a world where they are always stated wildly wrong. And it is a great part of the difficulty of our task that it does deal so much more with axioms than with conclusions. When, in the admirable phrase of Father Vincent McNabb, we have induced people ‘to put first things first,’ we may then consider reasonably enough whether the transference or reform or abolition of things like the banking system should come last. As it is, the world has got the first and last things turned all topsy-turvy, and thinks of debts and promises and ciphers and bits of paper as the real thing, and of land and living and positive possessions as unreal things; a romance of The Merry Peasant invented by Distributist minor poets. Then things begin to happen, as they have lately been happening in Germany and even in America, and men feel as if they were in a nightmare, in which rocks should melt and trees vanish like smoke and all material objects fade into a mist, in which nothing seems to remain except spectres and spirits; the ghosts of all the things they have been taught are dead, and the visions of all the things they have been told are impossible. But these older or simpler things remain for the very opposite reason; that property is not dead and that peasantry is not impossible.

There is a strange similarity between the two forms of Materialism, as they respectively affected physics and economics. I mean that the moral materialism, which was expressed in capitalism and commercialism, has had the same fate as the philosophical materialism which was expressed in monism and atheism. About both there was at the beginning a kind of ugly swagger, which in the one case was more inhuman than any incidental inhumanities, and in the other was much more blasphemous than mere blasphemy. The Manchester Man bragged openly of being hard-headed, but he was really bragging of being hard-hearted. The Prussian Professor took an open pleasure in insulting God, but he took a secret pleasure in insulting Man. The economists professed to care only for hard facts, and the physicists delighted in proving that the atoms of which the world is made are very hard facts indeed. The one hard fact was called hard cash; the second was called the indestructible atom.

Both these forms of pride have been punished in the same way; by being turned into their opposites. In both the professors of the concrete are suddenly overwhelmed by the abstract. The atom has become an algebraical formula; the hard cash has become a financial fiction. On the one hand, Nemesis has said to the capitalist: ‘If you will try to rule the world by gold, you shall find it is paper. If you call a ledger solid, you shall go on adding up noughts and find that they come to Nought.’ And, in the case of the materialistic scientist, who stood on matter, and stamped on matter, proving its solidity till it suddenly gave way under him and let him into an abyss of abstractions, to him a Voice out of those upward abysses that he most denied spoke with that authority that is beyond thunder: ‘If you will hit and prod yourself to find out what you are made of, and prove it dead and solid, you shall find out the truth, and it will not be what you seek. I alone have known what you were made of, but in some measure and for a moment, you shall know. You are made of Nothing, and there is nothing for you to discover, except that making which you have denied.’

(G.K.’s Weekly Vol. XIII No.336 [London, England] 22 August 1931 pgs.375-376)


Bailout Nation, Part II

This is the second part of my interview with the Paleocrat.


Blaming the Poor

You have, no doubt been wondering who to blame for the current market meltdown. Was it the greedy bankers, the venial politician, the Wall Street manipulators? Was it a free market failure? All of the above?

The right-wing blogosphere answers, “It was the poor.” And, of course, their powerful corporate and congressional allies. We all know how powerful the poor are; we just never heard before that they were capable of bringing down the whole financial system. But the right wing has uncovered the nefarious plot. For example, Grant Havers, at, states that the “Democrats insisted on a mass affirmative action program to help the poorest Americans acquire mortgages they could never afford.” Stan Leibowitz of the Independent Institute claims that in the drive to increase homeownership, “particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards.” Neil Cavuto of Fox News laments “Loaning to minorities and risky folks is a disaster.” And National Review Online proclaims “One of the reasons so many bad mortgage loans were made in the first place is that Barack Obama’s celebrated community organizers make their careers out of forcing banks to do so.”

What is the act that has all the right up in arms? It is an obscure law known as the Community Reinvestment Act (CRA) which was passed in 1977. How did this 30 year-old law cause the current crises? According to the mythology, community groups like ACORN used it to strong-arm banks and mortgage companies into the subprime business. Hence, the poor bankers, under threat from community organizers like Barrack Obama (yes, “that one”) were forced into a business they had no intention of entering.

The interesting thing about this claim is that none of the bankers and mortgage bankers are making it. In fact, most of the loans were made by organizations not even covered by the act, as Business Week points out. The CRA was originally passed to combat “red-lining,” the practice by which credit-worthy applicants were denied loans because they lived in certain neighborhoods which the banks had “red-lined.” In fact, loans made under the CRA “loans made under the CRA program were made in a more responsible way than other subprime loans,” according to Business Week.

So why the effort to blame the poor in this matter? The reasons are partly political and partly ideological. For the defenders of the free market, the subprime meltdown has been a big embarrassment. The fact that the market could err as badly as it did contradicts the theory of an all-wise and all-knowing market. “If only the market is unregulated, everything will work out fine.” Well, no, actually. The market is capable of great errors, errors the rest of us are expected to pay for.

The other reason is that the right is desperate. McCain's campaign seems to have stalled, and the economy is the biggest reason. Having someone to blame, and especially “minorities.” absolves the right and the Republicans of any responsibility.

Which is unfortunate. Understanding a problem is the first step towards fixing it, and misunderstanding guarantees that the “fix” will only make it worse. The left is out to blame the greed of the bankers, and the right the venality of the poor. Both answers are wrong. To be sure, there are those who are greedy, or venial, or both. But this is not the root cause of the problem. The real root concerns the way we create money.

Money is created by the banks (not, as the myth has it, by the government), who must keep creating money, even when there is no need for it. Ideally, banks would only lend to solvent borrowers for productive purposes. But suppose there is a shortage of productive investments. Suppose that the productive economy was actually shrinking, that jobs were being shipped overseas and not being replaced. Suppose that wages were stagnant or shrinking, so that demand was actually diminishing. In such circumstances, there would be little need for new money. But the banks must keep creating money in order to stay in business. In such circumstances, they will be forced to lend to weaker consumers to prop up demand and to speculators, whose demand for money is infinite.

This is, in fact, the circumstances in which the American economy finds itself. Median wages have been stagnant for the last 30 years and have actually shrunk since the start of the Cheney-Bush administration. The banks had to find borrowers, and the pool of prime quality borrowers was insufficient. So they went to subprime borrowers.

This actually worked pretty well. One thing must be clearly understood: the subprime market did not fail; it had a higher rate of foreclosures, but that was already priced into the higher interest rates. Most subprime borrowers are paying their notes, and will likely continue to do so until the economy collapses and they lose their jobs. They not the cause of the problem. Rather, the problem is caused by the vast market for “derivatives,” a series of side bets on the mortgage markets (See Economic Truth and the Bailout.)

One can legitimately critique the CRA on a number of grounds. One can certainly critique ACORN, or Obama, or the Democrats, or whatever. But to say that the CRA forced even a single subprime loan simply ignores the facts and keeps us from addressing the real problem. It may soothe our ideology, and may be useful in our politics, but it is sure to prevent us from addressing the very real problems we face. These problems have to do with rebuilding the real economy. Even the banks are victims in the current system; they did what they had to do to stay alive, and it killed them.

But even more importantly, this myth-making breaks the solidarity with the poor, and solidarity should guide all of our policy decisions.


Bailout Nation, Part I

I was interviewed on The Paleocrat's (Jeremiah Bannister) radio program last week on the bailout, and Paleo has turned in the interview into a rather nice video.

Be sure to catch his show next Monday, October 13th, when The Paleocrat will interview Kristen Day, the Executive Director of Democrats for Life. The time is 5pm, EST. You can hear it on streaming video at


Warren Buffet and The Finanacial "Pearl Harbor"

As many readers may have noticed, I am not a big fan of capitalism as it is currently constituted. Nevertheless, I am a big fan of one of capitalism's leading lights, Warren Buffet. The genial Mr. Buffet is, perhaps, the most successful investor Wall Street has ever known. The irony is that he never gets anywhere near Wall Street; he lives in the Omaha home he bought in 1958 for $31,000. Granted, he also has a summer home in Laguna Beach, worth some $4 million, but these are modest accommodations for a man who may be the richest in the world.

Buffet's company, Berkshire Hathaway, is likely the most successful firm in the world, judged by the return to investors. The book value of the firm, from its founding in 1965 to last year, grew by an annual compounded rate of 21%/year, which is 10.8% above the S&P 500. The total increase in value over that period is in excess of 400,000%. Not bad for a country boy.

But aside from avoiding Wall Street and living a relatively modest lifestyle, Buffet is unusual in other ways. He believes that the rich pay far too little in taxes. He also believes capital gains should be taxed at the same rate that wages are. This is significant, since Mr. Buffet's salary for running B-H is only $100,000/year; no golden parachutes here! His fortune is entirely the result of his investment expertise. He decries the fact that, as the world's richest man, he pays a proportionately lower share of his income in taxes than does the lady who cleans the office. He also points out, to those who claim that the rich pay too much, that they are ignoring the effects of the Social Security taxes, which raise almost as much as the income taxes, but are only levied on the first $100k or so of income. This means that the less you make, the higher the proportion you pay in taxes.

Like the E. F. Hutton ad of years ago, When Warren Speaks, the Nation (ought) to listen. And Warren spoke with Charlie Rose last week for an hour. For those of you who didn't hear it, here it is:

Mr. Buffet believes that we are in the midst of a “financial Pearl Harbor.” The meltdown will last at least six months, but more likely several years. He supports the bailout, but he thinks the public should buy the toxic paper the banks are trying to foist off on us at their current market value. This is an important point (see “Market Mysticism”) since the banks want us to buy this stuff at its “mark-to-model” value, which means, in effect, any old price the banks put on it. If we buy this stuff at its market price, the public will get a good return on its investment.

As a matter of full disclosure, I am a stockholder in Berkshire Hathaway. But this old distributist will listen to the old capitalist. Pearl Harbor was a rather severe wake-up call. This melt-down is another. How will we respond? Trouble in life is inevitable; the real test, for a person or a nation, is how we deal with it.


Banksta' Rap

See it here.


Economic Truth and the Bailout

To the surprise of absolutely no one, the Congress passed the bailout bill, now renamed a “rescue” act. Mind you, they did not do this easily. At first, they rejected the idea. Apparently, the original bill was far too stingy to the rich, so the Congress had to sweeten the deal by giving them another $100B in tax breaks, subsidies, and other earmarks. Nevertheless, the $800B package would actually be worth it if, as the candidates claim, it would really cure our financial hangover.

But it won't.

Or not for long. Congress has given $700B in booze to the Wall Street alcoholics; it will make them feel better for a bit, but it will cure neither their disease nor the country's illness. For a while, they will make loans. But the same underlying causes of the crises will quickly overtake the market once again and we will be right back were we started, only $700B further in debt. Or rather, more than a trillion further in debt, because we have already spent $350B+ in previous bailouts, none of which seemed to work very well; AIG, for example, has already burned through $61B of their $85B package and it is no closer to being stabilized. This is how collapses work: everything done to fix the problem makes the problem worse, because the real problem is not understood.

What is the real problem, the real cause of the crises? First, let us talk about the apparent cause, which isn't the real cause but only the symptom of a deeper cause. Nevertheless, any good doctor starts his diagnoses with the symptoms. And the obvious symptom that we see is the so-called subprime mortgage mess. Yes, it truly is a mess, a sizable mess. But is it sizable enough to be causing this problem by itself? There are, perhaps, $1.4T in outstanding subprime loans (out of a total mortgage market of perhaps $11T), of which 20% are likely to go into foreclosure. But let us say that twice that, or 40%, goes into the tank. That would still only amount to $560B in losses, even if every penny is lost, which of course it isn't. This is insufficient to explain the need for a trillion in bailouts.

But on top of the subprime loans, Wall Street built a vast pyramid of speculative bets, called “derivatives.” The loans were packaged into Mortgage Backed Securities and sold to investors; good loans were mixed with bad ones. But the presence of the bad loans undermines the whole package and makes it difficult to price. But the rot doesn't stop there. The mortgage bonds were “hedged” with complex instruments such as Credit Default Swaps, by which speculators are able to place bets on the direction of the markets. How big is this derivatives market? No one really knows, since it is completely unregulated and even unregistered. But there are at least $600T of nominal values in derivatives. By comparison, the GDP of the entire planet only comes to some $50T. Granted, the amounts at risk are far lower than the nominal values, less than 1%, but this is still a very large number. Huge amounts of money was lent to make these bets, and when the underlying security (the subprime loan) went bad, the whole structure collapses.

This gives us a good view of the immediate problem. However, if we stop our analysis there, we will miss the deeper and more pervasive cause. For now we have to ask, “Why did the banks and others make so many speculative loans?” These are, after all, intelligent and well-educated folks. Why make such absurd subprime loans in the first place, and why “double-down” on those loans with such complex speculative instruments? To blame it all on greed would be to miss the real point, to miss the deep predicament in which the bankers find themselves. Why did they make all these bad loans?

The answer is simple: “They have to. They have no other choice.”

Banks must lend money to stay in business. Ideally, they lend money for productive purposes, money to expand production and provide jobs, goods, and services to the economy. Second best is lending money to finance consumption. But suppose there is not enough productive uses for all the money. Suppose people do not have good enough jobs for the banks to finance consumption. The banks must still lend, productive capacity or not. In these circumstances, the banks must turn to speculators to absorb the excess lending capacity. They must lend or die, and if no one has a productive use for the funds, they must turn to non-productive uses.

Speculation is non-productive. True, a person can get very rich by speculation and many do. But in a speculative bet, one man's gains are measured precisely by another's losses; there is no net gain to the economy. You can get rich at the race track only because others got a little poorer; for every winning bet there are dozens of losers. But at least the race track track adds a real value—entertainment—to the economy. The derivatives add nothing.

Here is the Great Economic Truth that bankers and economists have forgotten: A nation grows wealthy only by producing things. Only through its farms, fisheries, forests, factories, and mines can real wealth be produced. Everything else, insurance, banking, education, housing, armies, government, churches, entertainment, etc., must live off the wealth produced in the fields, forests, factories, fisheries and mines of a nation. Without these, there can be no original wealth to support all of the other things.

Lending for speculation creates another problem. When a bank lends money it actually creates the money it lends. If it is lending for productive purposes, this is not a problem; the amount of money in circulation and the productive capacity of the nation will be tied together. But with loans for speculation, money is created with no corresponding increase in productive capacity. That is to say, the whole process is inflationary, and the root cause of the financial bubbles; prices go up in some sector for no apparent reason, and must sooner or later deflate; the bubble must pop. This is what happened in housing. When the economy began to falter in the early years of the Cheney-Bush regime, Alan Greenspan encouraged the banks to lower their lending standards and promised them that the regulators would look the other way. He urged them to provide new and exotic loan products. And the banks complied, because there didn't seem to be a better use for the money. Hundreds of billions were provided to the housing market, but there weren't enough solvent borrowers to absorb all that money. Hence, the banks continued to lend to weaker and weaker customers. The flood of funds drove up housing prices, and the housing sector drove the economy.

But this is economic nonsense. The housing sector should never drive the economy; rather, the economy should drive the housing sector. People should buy homes because they have good jobs and are getting good raises. But throughout this period, the median wage actually declined by $2,000 in real terms. The housing bubble occurred not because the real economy was improving, but because the banks were providing loans to an increasingly weakened consumer. And on top of these shaky loans, they were building a vast speculative pyramid. Now it is coming apart, for reasons which should be obvious to banker, politician and economist. But few of them comprehend the real problem.

The most frightening words one hears about our economy are the words one hears nearly every day: 2/3rds of the economy is consumption. No one seems to notice the frightening absurdity of this statement. If 2/3rds is in consumption, then no more than 1/3rd can be in production. This means that we consume twice (at lest) what we produce. This is, obviously, a recipe for disaster. And that disaster is now overtaking us.

The foolish doctrines of “free trade” and unregulated markets have denuded the country of good jobs and productive capacity. Our factories are shipped overseas, our farms are gathered into or dependent on vast corporate collectives known a “agri-businesses,” our mines and oil fields are played out or insufficient to support our consumption, our forests are not competitive with cheap foreign products, and our fisheries are over-fished and non-productive. These are the underlying problems we must face, and “fixing” the subprime mess will fix nothing, or at least nothing important.

To fix the problem, to restore our prosperity, we must restore our productive capacity. But to do this, we will have to break the power of the corporate collectives and the money-center banks. We have to ensure that no enterprise is “too big to fail,” and can hold the whole nation for ransom. But mostly, we will have to break the power of false economic theories, theories that have brought the country to the edge of disaster. If we do not repair the sources of our wealth, we will soon have no wealth. We will leave our children an economic desert.



The Congress voted 263 to 171 in favor of the so-called "Economic Rescue Act".

President Bush signed it an hour later.

Once again, the voters and taxpayers were crucified by the globalist elitists of both so-called "mainstream parties".

The economy will be in worse shape than before.

The politicians will pat themselves on the back and think they've saved the country.

When in truth, they done the opposite.

All the more reason to redouble our prayers and educational efforts to promote Distributism to our fellow Americans and the rest of the world. And with God's grace, we will see a Distributist Earth. Not in our lifetimes, true, but it will happen.

No surrender to the Servile State!



This Friday, October 3rd, is the crucial third vote on the so-called Bailout Bill, now disguised as the “Economic Rescue Act”.

Already, the globalist elites running the Democrats and Republicans are putting pressure on Congress to betray their voters back home. The House already voted “NO”. But their leaders are doing everything they can to change minds and votes. Big business lobbyists are adding fuel to the fire. Some black Democratic congressmen have switched their votes to a “yes” because of Sen. Barack Obama's vote for this infamous bill. Some Republican Congressmen changed their votes thanks to provisions for small businesses added into the bill.

Julie Hirschfeld Davis of the pro-globalist Associated Press tells of this in a report for Yahoo News. You may read the report HERE.


The bill STILL would allow for the Treasury Secretary to have almost dictator-like powers regarding economic affairs, without oversight or control by any other branch of government.

The bill STILL won't guarantee an end or reduction of the financial crisis we're undergoing right now. Julian Delasantellis, writings for the Asia Times, points this out in a essay you can read HERE.

The bill STILL would cost the taxpayers $700 billion...minimum! Even the infamous globalist investment expert Warren Buffett says even this won't be enough. Chris Isidore, writing for the website, writes about what Buffett says HERE.

And it gets worse!

As my colleague Prof. Medaille pointed out yesterday, this bill would raise the debt ceiling to over $11 trillion. Yes, you read it right, and I'll repeat it in capital letters.


And it centralizes more power into government bureaucracies overseeing many provisions in this bill, which not only violates the Constitution but goes against a core principle of Distributist Thought – subsidiarity. That means taking cares of economic and political affairs at the lowest level possible – which means on the local level, not the Federal level.

The Congress will vote on this Friday. So you voice counts. Remember, they have cut down the amount of e-mails a Congressman can receive ON PURPOSE. And are denying it with a straight face. So when you send your e-mails demanding they vote “NO” on the Bailout bill, send it at off-peak hours. But keep up the pressure on them to resist the President and their party leaders.

If you call your Congressman, demand they vote “NO” to this so-called “Economic Rescue Act”. Be brief, be polite and to the point, for their staffers will probably be overloaded with calls Friday. As Shakespeare wrote in Hamlet, “Brevity is the soul of wit.” So be brief and be polite. Keep to the point.

Don't let the Congress get away with causing a Second Great Depression disguised as a so-called “economic rescue”. Demand the Congress vote “NO” on the so-called “Economic Rescue Act”.

And above all...pray, pray, pray and beg God Almighty for mercy. We don't deserve it but we need it.

And thank you all for your prayers and support of the Review. We appreciate it more than you know.


Your Tax Dollars at Work...

The original 3 page Bailout Bill became the 451 page "Economic Rescue Act." Such a lot of people being rescued here. Some of the provisions:

Sec. 101: Extension of alternative minimum tax relief for nonrefundable personal credits.
Sec. 102: Extension of increased alternative minimum tax exemption amount.
Sec. 201: Deduction for state and local sales taxes.
Sec. 202: Deduction of qualified tuition and related expenses.
Sec. 203: Deduction for certain expenses of elementary and secondary school teachers.
Sec. 204: Additional standard deduction for real property taxes for nonitemizers.
Sec. 205: Tax-free distributions from individual retirement plans for charitable purposes.
Sec. 304: Extension of look-thru rule for related controlled foreign corporations.
Sec. 305: Extension of 15-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements; 15-year straight-line cost recovery for certain improvements to retail space.
Sec. 307: Basis adjustment to stock of S corporations making charitable contributions of property.
Sec. 308: Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.
Sec. 309: Extension of economic development credit for American Samoa.
Sec. 310: Extension of mine rescue team training credit.
Sec. 311: Extension of election to expense advanced mine safety equipment.
Sec. 312: Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
Sec. 314: Indian employment credit.
Sec. 315: Accelerated depreciation for business property on Indian reservations.
Sec. 316: Railroad track maintenance.
Sec. 317: Seven-year cost recovery period for motorsports racing track facility.
Sec. 318: Expensing of environmental remediation costs.
Sec. 319: Extension of work opportunity tax credit for Hurricane Katrina employees.
Sec. 320: Extension of increased rehabilitation credit for structures in the Gulf Opportunity Zone.
Sec. 321: Enhanced deduction for qualified computer contributions.!
Se c. 322: Tax incentives for investment in the District of Columbia.
Sec. 323: Enhanced charitable deductions for contributions of food inventory.
Sec. 324: Extension of enhanced charitable deduction for contributions of book inventory.
Sec. 325: Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
Sec. 401: Permanent authority for undercover operations [as related to tax provisions].
Sec. 402: Permanent authority for disclosure of information relating to terrorist activities [as related to tax provisions].
Sec. 501: $8,500 income threshold used to calculate refundable portion of child tax credit.
Sec. 502: Provisions related to film and television productions.
Sec. 503: Exemption from excise tax for certain wooden arrows designed for use by children.
Sec. 504: Income averaging for amounts received in connection with the Exxon Valdez litigation.
Sec. 505: Certain farming business machinery and equipment treated as five-year property.
Sec. 506: Modification of penalty on understatement of taxpayer’s liability by tax return preparer.
Sec. 601: Secure rural schools and community self-determination program.
Sec. 602: Transfer to abandoned mine reclamation fund.
Sec. 702: Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados and flooding.
Sec. 704: Temporary tax-exempt bond financing and low-income housing tax relief for areas.
Sec. 709: Waiver of certain mortgage revenue bond requirements following federally declared disasters.
Sec. 710: Special depreciation allowance for qualified disaster property.
Sec. 711: Increased expensing for qualified disaster assistance property.

It seems that $700B was too stingy; Congress had to tack on another $100B in tax breaks and subsidies. McCain promised not to vote for it if it contained a lot of earmarks. Apparently, this doesn't meet the threshold. I wonder how many earmarks would be required for him to reject it?

The bill is also curious in that it says that there cannot be more than $700B "outstanding at any one time." Does this mean there could be more than $700B involved in this? If they had wanted to limit it to a mere $700B, they could have said so.

The bill also bumps the debt ceiling to $11.3 Trillion. With a T.

The fun never stops.



As reported on the pro-globalist CNN website, in it's Money section, the Senate voted 74-25 in favor of the so-called Bailout Bill, albeit with revisions of their own included.

As reported by Jeanne Sahadi, both so-called “mainstream” Presidential candidates voted for it. And unlike the House version that was – thank God – rejected, the Senate version will cost more than the $700 billion the elitists claim is needed.

Many of the additions to the original Bailout Bill were intentionally added to weaken House opposition to this economy-killing measure. And many of it's core proposals are left intact, possibly including the one giving the Treasury Secretary unlimited control over the nation's economic workings. This was in Section 8A of the original House bill. There has been no word on whether it has been removed or not, but it is feared it hasn't.

The House is expected to vote on the Senate measure this Friday, October 3rd.

As was said earlier, this isn't over yet. We've one the first battle, lost the second, and the third one is on the horizon. And as was mentioned earlier, the House has put limits on Congressmen receiving e-mails from angry voters. They lied when they said their computers couldn't stand the rush of e-mails coming in. They just don't want to hear from the taxpayers and small business and cooperative owners they're about to fleece.

So as suggested by the group, send your e-mail at “off-peak” hours; that is, at times when e-mail traffic to Washington D.C. is usually light. That was, you avoid the risk of getting an error message when you send it.

But don't forget to also call your Congressman and demand they vote “NO” to the Senate version of the so-called Bailout Bill. If they vote for it, tell them you will back their opposition in the next election. If they vote against it, give them your thanks. Keep your calls brief, polite and to the point.

Remember, the House votes on this on Friday, October 3rd. Make your e-mails and phone calls count. Don't count on the so-called “mainstream media” to give any fair coverage on this issue. They are in bed with the elitists and globalists who favor this taxpayer swindle.

Demand your Congressman vote “NO” on the Senate version of the Bailout Bill. And above all, pray, pray, pray! Thank you.


McCain to Democracy: "Drop Dead"

Can't get the Congress to agree to the bailout? No problem, say John McCain, just have the treasure do it anyway, without congressional approval. Here is a video of him making this statement not once, but three times yesterday:

McCain seems to think that the Presidency is a dictatorship that may dispose of a Trillion dollars of the public's money without any public input or authorization. One wonders why this story hasn't gotten more play in the press.


Market Mysticism

The Republicans have an intriguing solution to the current crises: Let the banks lie about the value of their assets.

Now, it is hardly surprising that a group of politicians would find no problem with lying. Of course, they do not call it “lying”; that would be telling the truth, and liars never do that. Such direct statements would be impolitic, I.e., likely to get you defeated. No, the convoluted language that they use is to replace “mark-to-market” accounting with “mark-to-model” pricing. Some explanation may be in order.
Both sound accounting and common sense tells us that an asset should be carried on the books at its market value (called “mark-to-market.”) However, many of the “assets” that the banks hold are not real assets and hence do not have real value; they are largely derivatives, that is, side bets placed on the movement of some particular market, say interest rates or housing values. Right now, everybody is knows that housing values are in the tank—and are likely to get worse—and both the mortgages and the derivatives are not worth much, and certainly not worth their nominal values.

Since the banks' assets are not worth anything, the banks are insolvent and can't make loans. The Republicans want to allow the banks to use “mark-to-model” to value these assets. What does this mean? The SEC puts it this way:

When significant adjustments are required to available observable inputs [that is, the market price] it may be appropriate to utilize an estimate based primarily on unobservable inputs. The determination of fair value often requires significant judgment.

Wow! Let the banks value their assets on “unobservable inputs” and use “significant judgment.” One might note that the observation of the unobservable requires a certain mystical vision which this writer has never experienced, but which seems to be part and parcel of the Republican Religion. Still, it seems strange that a religion which makes a fetish of the market to determine real value now proclaims the insufficiency to the market for that purpose and hence we must rely on mystical visions of unobservable inputs.

Nevertheless, this ingenious plan will allow the banks to state the value of their assets at anything they like. They will all be instantly solvent and able to make loans again. Hence, no bail-out will be required. But now comes the truly mystical part. This is not being offered as a substitute for the bail-out, but as an addition to it! In other words, the banks will get to price their assets anyway they like, and will still get the $700B. This suits Bernanke's plan just fine, since he wants to buy the assets at their “hold-to-maturity” price, a price sure to hand huge losses to the public purse, and huge profits to the private banks.

Of course, mark-to-model will do nothing to alleviate the bank's current problems. They can state their assets at any value they like, but no one will believe them (the Republican Religion is not shared by investors, at least not while they are investing) and no one will lend them the capital to get their books right and start the flow of funds. The only purpose of the Republican plan is to stick it to the public. In the view of Market Mysticism, the Market Knows All, except when the Market Knows Nothing. In the former case, nothing can be done to interfere with the sacred Markets; in the latter case, only the High Priests can interpret the Market.

That's far too much theology for me, and too much faith-based accounting.


  © Blogger template Werd by 2009

Back to TOP