Ron Paul

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What Are Interest Rates And Can They Be Artificially Low Or High?

Many economic commentators believe that interest rates in America and around the world are “artificially low”. Indeed, I too have used the term in the past to refer to the condition in Europe that saw interest rates across the member states converge to a uniformly low level at the introduction of the Euro, only to diverge and soar in the periphery during the ongoing crisis.

So what is an interest rate? An interest rate is the cost of money now. As Eugen von Böhm-Bawerk noted, interest rates result from people valuing money in the present more highly than money in the future. If a business is starting out, and has insufficient capital to carry out its plans it will seek investment, either through selling equity in the ownership of the business, or through credit from lenders. For a lender, an interest rate is their profit for giving up the spending power of their capital to another who desires it now, attached to the risk that the borrower will default.

In monetary economies, money tends to be distributed relatively scarcely. In a commodity-based monetary system, the level of scarcity is determined by the physical limits of how much of a commodity can be pulled out of the ground. In a fiat-based monetary system, there is no such natural scarcity, but money’s relative scarcity is controlled by the banking system and central bank that lends it into the economy. If money was distributed infinitely widely and freely, there would be no such thing as an interest rate as there would be no cost to obtaining money now, just as there is no cost to obtaining a widely-distributed and freely-available commodity like air (at least on the face of the Earth!). Without scarcity money would lose its usability as a currency, as there is no incentive to trade for a substance which is uniformly and effectively infinitely available to everyone. So an interest rate is not only the cost of money, but also a symptom of its scarcity (and, as Keynes pointed out, a key mechanism through which rentiers profit).

So, where does the idea that interest rates can be made artificially low or artificially high arise from?

The notion of an artificially low or high interest rate implies the existence of a natural interest rate, from which the market rate diverges. It is a widely-held notion, and indeed, Ron Paul made reference to the notion of a natural rate of interest in his debate with Paul Krugman last year. A widely-used definition of the “natural rate of interest” appears in Wicksell (1898):

There is a certain rate of interest on loans which is neutral in respect to commodity prices, and tends neither to raise nor to lower them.

This is easy to define and hard to calculate. It is whatever interest rate yields a zero-percent inflationary level. Because interest rates have a nonlinear relationship with inflation, it is difficult to say precisely what the natural interest rate is at any given time, but Wicksell’s definition specifies that a positive inflation rate means the market rate is above the natural rate, and a negative inflation rate means the market is below the natural rate. (Interestingly, it should be noted that the historical Federal Funds Rate comes pretty close to loosely approximating the historical difference between 0 and the CPI rate, despite questions of whether the CPI really reflects the true price level due to not including housing and equity markets which often record much greater gains or greater losses than consumer prices).

The notion of a natural rate of interest is interesting and helpful — certainly, high levels of inflation can be challenged through decreasing interest rates (or more generally increasing credit-availability), and deflation can be challenged by decreasing interest rates (or more generally increasing credit availability). If the goal of monetary policy is price stability, then the notion of a “natural interest rate” as a guide for monetary policy is useful.

But policies of macrostabilisation have been strongly questioned by the work of Hyman Minsky, which posited the idea that stability is itself destabilising, because it leads to overconfidence which itself results in malinvestment and credit and price bubbles.

Austrian Business Cycle Theory (ABCT) developed by Ludwig von Mises and Friedrich Hayek, most influentially in Mises’ 1912 work The Theory of Money and Credit, theorises that the business cycle is caused by credit expansion (often fuelled by excessively low interest rates) which pours into unsustainable projects. The end of this credit expansion (as a result of a collapse resulting from excessive leverage, or from the failure of unsustainable projects, or from general overproduction, or for some other reason) results in a panic and bust. According to ABCT, the underlying issue is that the banking system made money cheaply available, and the market rate of interest falls beneath the natural rate of interest, manifesting as price inflation.

I do not dispute the idea that bubbles tend to coincide with credit expansion and easy lending. But it is tough to say whether credit expansion is a consequence or a cause of the bubble. What is the necessary precursor of an unsustainable credit expansion? Overconfidence, and the idea that prices will just keep going up when sooner or later the credit expansion will run out steam. This could be the overconfidence of central bankers, who believe that macrostabilisation policies have produced a “Great Moderation”, or the overconfidence of traders who hope to get rich quick, or the overconfidence of homeowners who see rising home prices as an easy opportunity to remortgage and consume more, or the overconfidence of private banks who hope to make bumper gains on loans or loan-related securities (Carl Menger noted that fractional reserve banking and credit-fuelled bubbles originated in economies with no central bank, in contradiction of those ABCT-advocates who go so far as to say that without central banking there would be no business cycle at all).

And is price stability really “natural”? Wicksell (and other advocates of a “natural rate of interest” like RBCT and certain Austrians) seem to imply so. But why should it be the norm that prices are stable? In competitive markets — like modern day high-tech markets — the tendency may be toward deflation rather than stability, as improving technology lowers manufacturing costs, and firms lower prices to stay competitive with each other. Or in markets for scarce goods — like commodities of which there exists a limited quantity — the tendency may be toward inflation, as producers may have to spend more to extract difficult-to-extract resources form the ground. Ultimately, human action in market activity is unpredictable and determined by the subjective preferences of all market participants, and this applies as much to the market for money as it does for any market. There is no reason to believe that prices tend toward stability, and the empirical record shows a significant level of variation in price levels under both the gold standard and the modern fiat system.

Ultimately, if interest rates are the cost of money, and in a fiat monetary system the quantity and availability of money is determined by lending institutions and the central bank, how can any interest rate not be artificial (i.e. an expression of the subjective opinions, forecasts and plans of those involved in determining the availability of credit and money including governments and central bankers)? Even under a commodity-money system, the availability of money is still determined by the lending system, as well as the miners who pull the monetary commodity or commodities out of the ground (and any legal tender laws that define money, for example monetising gold and demonetising silver).

And if all interest rates in contemporary markets are to some degree artificial this raises some difficult questions, because it means that the availability of capital, and thus the profitability (or unprofitability) of rentiers are effectively policy choices of the state (or the central bank).

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America Loves Drone Strikes

This graph shows everything we need to know about the geopolitical reality of Predator Drones (coming soon to the skies of America to hunt down fugitives?).

The American public loves drone strikes:

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The American public does not approve of the extrajudicial killing of American citizens. But for everyone else, it’s open season.

But everyone else — most particularly and significantly, the countries in the Muslim world — largely hates and resents drone strikes.

And it is the Muslim world that produces the radicalised extremists who commit acts like 9/11, 7/7, the Madrid bombings, and the Bali bombings.  With this outpouring of contempt for America’s drone strikes, many analysts are coming to believe that Obama’s drone policy is now effectively a recruitment tool for al-Qaeda, the Taliban and similar groups:

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Indeed, evidence is beginning to coalesce to suggest exactly this. PressTV recently noted:

The expanding drone war in Yemen, which often kills civilians, does in fact cause blowback and help al-Qaeda recruitment – as attested to by numerous Yemen experts, investigative reporting on the ground, polling, testimony from Yemen activists, and the actual fact that recent bungled terrorist attacks aimed at the U.S. have cited such drone attacks as motivating factors.

After another September drone strike that killed 13 civilians, a local Yemeni activist told CNN, “I would not be surprised if a hundred tribesmen joined the lines of al-Qaeda as a result of the latest drone mistake. This part of Yemen takes revenge very seriously.”

“Our entire village is angry at the government and the Americans,” a Yemeni villager named Mohammed told the Post. “If the Americans are responsible, I would have no choice but to sympathize with al-Qaeda because al-Qaeda is fighting America.”

Many in the U.S. intelligence community also believe the drone war is contributing to the al-Qaeda presence in Yemen. Robert Grenier, who headed the CIA’s counter-terrorism center and was previously a CIA station chief in Pakistan, told The Guardian in June that he is “very concerned about the creation of a larger terrorist safe haven in Yemen.”

“We have gone a long way down the road of creating a situation where we are creating more enemies than we are removing from the battlefield,” he said regarding drones in Yemen.

Iona Craig reports that civilian casualties from drone strikes “have emboldened al-Qaeda” and cites the reaction to the 2009 U.S. cruise missile attack on the village of al-Majala in Yemen that killed more than 40 civilians (including 21 children):

That one bombing radicalized the entire area,” Abdul Gh ani al-Iryani, a Yemeni political analyst, said. “All the men and boys from those families and tribes will have joined [al-Qaeda] to fight.

And al-Qaeda’s presence and support in Yemen has grown, not shrunk since the start of the targeted killing program:

Meanwhile Yemen Central Security Force commander Brig. Gen. Yahya Saleh, nephew of ousted president Ali Abdullah Saleh, told Abdul-Ahad that al-Qaeda has more followers, money, guns and territory then they did a year and a half ago.

All at a time when Yemen is facing a “catastrophic” food crisis, with at least 267,000 children facing life-threatening levels of malnutrition. Hunger has doubled since 2009, and the number of displaced civilians is about 500,000 and rising.

As U.S. drones drop bombs on south Yemen villages and AQAP provides displaced civilians with “free electricity, food and water,” tribes in the area are becoming increasingly sympathetic to AQAP.

Let’s be intellectually honest. If a country engages in a military program that carries out strikes that kill hundreds of civilians — many of whom having no connection whatever with terrorism or radicalism — that country is going to become increasingly hated. People in the countries targeted — those who may have lost friends, or family members — are going to plot revenge, and take revenge. That’s just how war works. It infuriates. It radicalises. It instils hatred.

The reality of Obama’s drone program is to create new generations of America-hating radicalised individuals, who may well go on to be the next Osama bin Laden, the next Ayman al-Zawahiri, the next Abu Musab al-Zarqawi. The reality for Obama’s drone program is that it is sowing the seeds for the next 9/11 — just as American intervention in the middle east sowed the seeds for the last, as Osama bin Laden readily admitted.

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This is Blowback

The YouTube video depicting Mohammed is nothing more than the straw that broke the camel’s back. This kind of violent uprising against American power and interests in the region has been a long time in the making. It is not just the continuation of drone strikes which often kill civilians in Pakistan, Yemen, Somalia and Afghanistan, either. Nor is it the American invasions and occupations of Iraq and Afghanistan. Nor is it the United States and the West’s support for various deeply unpopular regimes such as the monarchies in Bahrain and Saudi Arabia (and formerly Iran). Nor is it that America has long favoured Israel over the Arab states, condemning, invading and fomenting revolution in Muslim nations for the pursuit of nuclear weapons while turning a blind eye to Israel’s nuclear weapons and its continued expansion into the West Bank.

Mark LeVine, Professor of Middle Eastern history at U.C. Irvine, writes:

Americans and Europeans are no doubt looking at the protests over the “film”, recalling the even more violent protests during the Danish cartoon affair, and shaking their heads one more at the seeming irrationality and backwardness of Muslims, who would let a work of “art”, particularly one as trivial as this, drive them to mass protests and violence.

Yet Muslims in Egypt, Libya and around the world equally look at American actions, from sanctions against and then an invasion of Iraq that killed hundreds of thousands of Iraqis and sent the country back to the Stone Age, to unflinching support for Israel and all the Arab authoritarian regimes (secular and royal alike) and drone strikes that always seem to kill unintended civilians “by mistake”, and wonder with equal bewilderment how “we” can be so barbaric and uncivilised.

All of these things (and many more) have contributed to Muslim and Arab anger toward the United States and the West. Yet the underlying fact of all of these historical threads has been the United States’ oil-driven foreign policy. Very simply, the United States has for over half a century pursued a foreign policy in the region geared toward maintaining the flow of oil out of the region at any cost — even at the cost of inflaming the irrational and psychopathic religious elements that have long existed in the region.

This is not to defend the barbaric elements who resort to violence and aggression as a means of expressing their disappointment with U.S. foreign policy. It is merely to recognise that you do not stir the hornet’s nest and then expect not to get stung. 

And the sad thing is that stirring the hornet’s nest is totally avoidable. There is plenty of oil and energy capacity in the world beyond the middle east. The United States is misallocating capital by spending time, resources, energy and manpower on occupying the middle east and playing world policeman. Every dollar taken out of the economy by the IRS to be spent drone striking the middle east into the stone age is a dollar of lost productivity for the private market. It is a dollar of productivity that the market could have been spent increasing American energy capacity and energy infrastructure in the United States — whether that is in oil, natural gas, solar, wind or hydroelectric.

And this effect can spiral; every dollar spent on arming and training bin Laden and his allies to fight the Soviet Union begot many more thousands of dollars of military spending when bin Laden’s mercenaries turned their firepower onto the United States, and the United States chose to spend over ten years and counting occupying Afghanistan (rightly known as the graveyard of empires). It is likely that the current uprisings will trigger even more U.S. interventionism in the region (indeed it already has as marines have already been dispatched to Yemen) costing billions or even trillions of dollars more money (especially if an invasion of Iran is the ultimate outcome). This in turn is likely to trigger even fiercer resistance to America from the Islamist elements, and so the spiral continues on.

The only way out of this money-sucking, resource-sucking, life-sucking trap that is very literally obliterating the American empire is to swallow pride and get out of the middle east, to stop misallocating American resources and productivity on unwinnable wars.

But neither major Presidential candidate is interested in such a policy. Perhaps it is because war is a great profit source for the military-industrial complex, the force to which both the Democratic and Republican parties are beholden?

In any case, we should expect to see much more of this:

Source: Reuters

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Currency Competition

The greatest trouble with monopolies is what they take away — competition. Competition is a beautiful mechanism; in exercising their purchasing power and demand preferences, individuals run the economy — it is their spending that allocates, labour, capital, resources and brainpower. It’s their spending that transmits the information that determines what gets made, what doesn’t, which businesses succeed and which don’t. Individuals exercise a far greater political and economic power in a free economy when they spend, and when they work than when they vote. So without competition, the power of choice suffers, and businesses, markets and societies can become economically stagnant and rampantly corrupt; look at North Korea and the myriad other examples of once-prosperous societies impoverished within the context of a lack of competition.

In a free market, monopolies are potentially less problematic because without competition a monopolist can become complacent and inefficient, allowing competitors a foothold to grab market share; consider the near-monopoly of Microsoft Windows and Internet Explorer in the 1990s, which began to melt away via the rise of Apple, Google, Firefox and the poorly-received Windows Vista in the 2000s. While a free market is not a foolproof guarantee of a competitive market — and sometimes regulation is necessary to prevent the formation of cartels — it is the closest thing to such a thing.

Monopolies can become much more problematic when a monopoly develops and the holders of that monopoly utilise the power of the state to protect their dominance. Whether their business is food, or clothes, or computers, or money, a state-protected monopoly limits competition and distorts the process of allocating of resources, capital and labour.

If we are for competition in goods and services, why should we disclude competition in the money industry? Would choice in the money industry not benefit the consumer in the manner that choice in other industries does? Why should the form and nature of the medium of exchange be monopolised? Shouldn’t the people — as individuals — be able to make up their own mind about the kind of money that they want to use to engage in transactions?

Earlier, this year Ben Bernake and Ron Paul had an exchange on this subject:

Bernanke contends that it is possible to transact in a competing currency like Yen, or pesos or bitcoin. This is technically correct. But, as Ron Paul points out, there are still a number of laws which are arguably preventing a level playing field:

The first step [to real currency competition] consists of eliminating legal tender laws. Article I, Section 10 of the Constitution forbids the States from making anything but gold and silver a legal tender in payment of debts. States are not required to enact legal tender laws, but should they choose to, the only acceptable legal tender is gold and silver, the two precious metals that individuals throughout history and across cultures have used as currency. There is nothing in the Constitution that grants Congress the power to enact legal tender laws. Congress has the power to coin money, regulate the value thereof, and of foreign coin, but not to declare a legal tender. Yet, there is a section of US Code, 31 USC 5103, that purports to establish US coins and currency, including Federal Reserve notes, as legal tender.

The second step to legalizing currency competition is to eliminate laws that prohibit the operation of private mints. One private enterprise which attempted to popularize the use of precious metal coins was Liberty Services, the creators of the Liberty Dollar. The government felt threatened by the Liberty Dollar, as Liberty Services had all their precious metal coins seized by the FBI and Secret Service in November of 2007.

The final step to reestablishing competition in currency is to eliminate capital gains and sales taxes on gold and silver coins. Under current federal law, coins are considered collectibles, and are liable for capital gains taxes. Coins held for less than one year are taxed at the short-term capital gains rate, which is the normal income tax rate, while coins held for more than a year are taxed at the collectibles rate of 28 percent.

This is not a radical change. In this age of cashless payment people can simply load their alternative currency onto a debit card and spend it — similar to the gold-denominated debit card currently available to non-Americans from Peter Schiff’s EuroPacific Bank. In this age of Google and ubiquitous computing, exchange rates can be calculated instantaneously.

If people and businesses choose to stick to government-backed fiat money and refuse other currencies, that is their prerogative. It is possible that other media of exchange would not become popular; but at least there would be a more level playing field. Under the status quo, there is no level playing field.

It is often said in interventionist circles that Bernanke is too tame a central banker, and that right now the people need a greater money supply. Well, set the society free to determine their own money supply based on the demand for money; let the people decide.

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We Should All Love Fed Transparency

Ron Paul’s signature Audit the Fed legislation finally passed the House; on July 25, the House bill was passed 327 to 98. But the chances of a comprehensive audit of monetary policy — including the specifics of the 2008 bailouts — remain distant.

Why? Well, the Fed doesn’t seem to want the sunshine. Critics including the current Fed regime claim that monetary policy transparency would politicise the Fed and compromise its independence, and allow public sentiment to interfere with what they believe should be a process left to experts dispassionately interpreting the economic data. Although the St. Louis Fed makes economic data widely available, monetary policy is determined behind closed doors, and transactions are carried out in secret.

Bernanke:

We fully accept the need for transparency and accountability, but it is a well-established fact that an independent central bank will provide better outcomes.

Ron Paul:

When the Fed talks about independence, what they’re really talking about is secrecy. What the GAO cannot audit is monetary policy. It would not be able to look at agreements and operations with foreign central banks, and governments, and other banks, transactions made under the direction of the FOMC [Federal Open Market Committee], and discussions or communications between the board and the Federal Reserve system relating to all those items. And why this is important is because of what happened 4 years ago. It’s estimated that the amount of money that went in and out of the Fed overseas is $15 trillion. How did we get into this situation where Congress has nothing to say about bailing out all these banks?

What I am struggling to understand is why the Fed is so keen to not disclose the inner workings of monetary policy even in retrospect. How can we judge the success of monetary policy operations without the raw facts? How can we have an informed debate about what the Fed does unless we know exactly what the Fed does? Why should only insiders be privy to this information? Surely the more we know, the better debate economists and the wider society will be able to have about Fed policy?

There are plenty of critics of Bernanke and the Fed, including both those who believe the Fed should do more, and those who believe the Fed should do less. But it seems very difficult to appraise the Fed’s monetary policy operations unless we can look at every aspect of its policy. If Bernanke and the FOMC are confident that their decisions have been the right ones, why can they not at least disclose the full extent of monetary policy and explain their decisions? If they are making the right decisions, they should at least have the confidence to try and explain them.

All that the current state of secrecy does is encourage conspiracy theories. What is the FOMC trying to hide? Are they making decisions that they think would prove unpopular or inexplicable? Are they ashamed of their previous decisions or decision-making frameworks? Are they concerned the decision making process will make them look bad? Are they bailing out well-connected insiders at the expense of the wider society?

We can’t have a real debate about policy unless we have access to all the data about decisions. Those who believe the Fed’s monetary policy has worked should welcome transparency just as much as those who believe the Fed’s monetary policy has not worked. If the Fed’s actions have been beneficial, then transparency will shine kindly on it. If not, then transparency will help us have a better debate about the road forward.

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Forget Broccoli

Americans are either celebrating or damning the Supreme Court’s 5-4 ruling that the individual mandate is constitutional.

I find it hard to believe that anyone believed that the Supreme Court would rule any other way. Precedent dictates that the Federal powers of taxation are unimpeachable, and have been so since the New Deal. That’s the state of reality, and I found it puzzling that the individual mandate to purchase healthcare might be deemed unconstitutional when the collective mandate to collect taxes to purchase next-to-everything (including both healthcare and broccoli) has been considered constitutional for the best part of a century.

If America wants to overturn current legal norms America needs to elect different politicians. But with a greater and greater welfare-bound population, it seems inevitable that more and more Americans will vote themselves greater and greater quantities of free stuff.

Yet there is a bigger point to all of this, and it’s nothing to do with broccoli.

If Congress can constitutionally create a mandate for individuals to purchase healthcare, then Congress can create a mandate for individuals to purchase financial securities. Which — given the fiscal cliff that we are about to run off, and the reality that more and more sovereigns are dumping dollars and treasuries — could well be a useful weapon in keeping the Treasury’s borrowing costs low and the bread and circuses flowing.

Here are the GAO’s own figures:

With such a humungous load, it will take a lot of (shall we say) financial engineering to keep borrowing costs low.

The purchase of treasury securities is of course something Japan already mandates of financial institutions. Sure — the Fed and the primary dealers can do a lot of the heavy lifting — but what’s stopping Congress from mandating that patriotic Americans with any spare cash dump it into government securities (or even flagging equities)?

One day, Atlas may shrug. Until that day, Congress just acquired a powerful new funding tool.

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Time to Get Out of the Middle East

It takes a lot of time and effort to try to understand American counter-terrorism policy today.

Personally, I think the status quo is like trying to treat a cocaine overdose with methamphetamine. It’s like trying to cure chlamydia by having sex with multiple random strangers in a park. It’s like trying to cure a broken nose by punching oneself in the face.

Or, as Glenn Greenwald puts it:

I absolutely believe that another 9/11 is possible. And the reason I believe it’s so possible is that people like Andrew Sullivan — and George Packer — have spent the last decade publicly cheering for American violence brought to the Muslim world, and they continue to do so (now more than ever under Obama). Far from believing that another 9/11 can’t happen, I’m amazed that it hasn’t already, and am quite confident that at some point it will. How could any rational person expect their government to spend a full decade (and counting) invading, droning, cluster-bombing, occupying, detaining without charges, and indiscriminately shooting huge numbers of innocent children, women and men in multiple countries and not have its victims and their compatriots be increasingly eager to return the violence?

Isn’t it painfully obvious? The interventionist policies — occupation, drone strikes, cluster-bombing, indefinitely detention, false vaccination programs and so forth — in the middle east advocated by both “liberal” and “conservative” hawks that are supposed to prevent terrorism are creating anger, creating enemies, and creating terrorists. I too am amazed another 9/11 hasn’t happened. I despise jihadism and Islamism. It is contrary to everything I stand for. That’s exactly why I oppose a foreign policy that serves as a hugely effective recruiting tool for the totalitarian jihadists. 

Yemeni lawyer Haykal Bafana explained the rationale last month:

Dear Obama, when a U.S. drone missile kills a child in Yemen, the father will go to war with you, guaranteed. Nothing to do with Al Qaeda.

Or as convicted terrorist Faisal Shahzad put it:

Well, the drone hits in Afghanistan and Iraq, they don’t see children, they don’t see anybody. They kill women, children, they kill everybody. I am part of the answer to the U.S. terrorizing the Muslim nations and the Muslim people.  And, on behalf of that, I’m avenging the attack.  Living in the United States, Americans only care about their own people, but they don’t care about the people elsewhere in the world when they die.

Or as former CIA counter-terrorism expert Michael Scheuer noted:

The idea that has been pushed by President Clinton and President Bush and Mr. Cheney and Barack Obama and Senator McCain, that America is being attacked [for its freedom] is a disservice to the population of the United States. This war is not against Americans because we’re Americans, it’s motivated by the activities of our government and its allies in the Muslim world.

So why do we keep doing this? Two reasons: hubris and greed.

First, the hubris. We know Ron Paul was booed in South Carolina for advocating that we should do to others as we would like done to us:

My point is if another country does to us what we do others, we’re not going to like it very much. So I would say that maybe we ought to consider a golden rule in — in foreign policy. Don’t do to other nation what we don’t want to have them do to us.

But that’s just the propagandistic nature of being a superpower. Years of prosperity, military supremacy and pro-war propaganda have made it normal to believe strongly in the idea that America is intrinsically better, and wherever America goes America brings freedom, and anyone who doesn’t agree with that needs to be waterboarded until they do.

Yet however many times as the phrase “they hate us because we are free” is repeated, mantra-like by a Rick Santorum or a Newt Gingrich, it does not become truer. It is just an illusion, just a fantasy. While the jihadis were always anti-American, anti-democratic and anti-capitalistic, Osama bin Laden, Ayman al-Zawahiri and Sayyid al-Qutb — the fathers and grandfathers of modern Wahhabism, jihadism and al-Qaeda — became anti-American militants because of America’s role in the middle east.

As bin Laden himself said:

Those who kill our women and innocent, we kill their women and innocent, until they refrain.

And even more clearly:

Free men do not forfeit their security, contrary to Bush’s claim that we hate freedom. If so, then let him explain to us why we don’t strike Sweden, for example.

Second, the greed. America is in the middle east because America likes cheap energy. That myth of America as liberators flourished first as a justification for America’s petrodollar foreign policy.

And people get rich from America being at war — so far in the region of $4 trillion has gone to fighting since 9/11. A lot of weapons contractors are happy with the status quo.

So the military-industrial complex — the lobbyists, the weapons makers, the media — may accept it if Obama kills 14 women and 21 children to get one suspected terrorist. More terrorism means more weapons spending. For the lucky few it’s a self-perpetuating stairway to riches. Yet for wider society it means spending time, money and effort on war, instead of on domestic prosperity. It means the constant threat of terrorism. And it means the loss of our liberty, as the security state adopts increasingly paranoid anti-terrorism measures.

We should do to others as we would have done to ourselves. That means — unless we are comfortable with the idea of ourselves living under military occupation and drone strikes — getting out of the middle east, and letting that region solve its own problems — forget another costly and destructive occupation in Syria. Slash the war and occupation spending, and redirect the money to making America independent of middle eastern energy and resources.

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The National Attack Authorization Act?

We all know that the National Defense Authorization Act (NDAA) signed by President Obama on New Year’s Eve contained a now-struck-down provision to authorise the indefinite detention of American citizens on US soil.

But did you know that the NDAA also paves the way for war with Iran?

From Dennis Kucinich:

Section (6) rejects any United States policy that would rely on efforts to contain a nuclear weapons-capable Iran. Section (7) urges the President to reaffirm the unacceptability of an Iran with nuclear-weapons capability and opposition to any policy that would rely on containment as an option in response to Iranian enrichment.

This language represents a significant shift in U.S. policy and would guarantee that talks with Iran, currently scheduled for May 23, would fail. Current U.S. policy is that Iran cannot acquire nuclear weapons. Instead, H. Res. 568 draws the “redline” for military action at Iran achieving a nuclear weapons “capability,” a nebulous and undefined term that could include a civilian nuclear program. Indeed, it is likely that a negotiated deal to prevent a nuclear-armed Iran and to prevent war would provide for Iranian enrichment for peaceful purposes under the framework of the Non-Proliferation of Nuclear Weapons Treaty with strict safeguards and inspections. This language makes such a negotiated solution impossible.

At the same time, the language lowers the threshold for attacking Iran. Countries with nuclear weapons “capability” could include many other countries like Japan or Brazil. It is an unrealistic threshold.

The Former Chief of Staff of Secretary of State Colin Powell has stated that this resolution “reads like the same sheet of music that got us into the Iraq war.”

The notion of a “nuclear weapons capability” seems like a dangerously low standard. Let us not forget that Mossad, the CIA and the IAEA agree that Iran does not have a bomb, is not building one and has no plans to build one.

But the bill clearly spells out its intent:

SEC. 1222. UNITED STATES MILITARY PREPAREDNESS IN THE MIDDLE EAST.

Section 2 (A) pre-positioning sufficient supplies of aircraft, munitions, fuel, and other materials for both air- and sea-based missions at key forward locations in the Middle East and Indian Ocean;

(B) maintaining sufficient naval assets in the region necessary to signal United States resolve and to bolster United States capabilities to launch a sustained sea and air campaign against a range of Iranian nuclear and military targets, to protect seaborne shipping, and to deny Iranian retaliation against United States interests in the region;

(D) conducting naval fleet exercises similar to the United States Fifth Fleet’s major exercise in the region in March 2007 to demonstrate ability to keep the Strait of Hormuz open and to counter the use of anti-ship missiles and swarming high-speed boats.

As Kucinich notes:

This is an authorization for the use of military force against Iran. It ignores the warnings of both current and former U.S. top military brass who have spoken in opposition to the use of military force against Iran, including former Secretary of Defense Robert Gates, and current Secretary of Defense Leon Panetta. A February 2012 poll demonstrated that less than 20% of the Israeli public supports an Israeli strike on Iran if approved by the United States. Congress must avoid the same mistakes it made in the Iraq war and reject any language that can be construed as authorizing war against Iran.

It seems like the framers of the bill are exceptionally keen on striking Iran as quickly as possible. Maybe they are receiving lots of money from defence contractors?

Unsurprisingly, the biggest Congressional recipient of donations from defence contractors was Howard “Buck” McKeon, the chairman of the armed services committee who also happens to be the sponsor of the NDAA:

The fact that Ron Paul is the number two recipient is a sign that not all defence contractors are keen to hit Iran. But some are.

Still, even though the bill hints very strongly toward it, it doesn’t mean that it is going to happen. Congressmen might be hungry for a war but the military — already overstretched — isn’t. Admiral Fallon was reportedly the force that kept Bush from hitting Iran, and it would not be surprising to see the Pentagon put up fierce opposition to a future war with Iran. It would be a long, expensive war, with the potential of massive negative side-effects, like dragging in other regional powers, disrupting global trade, and squeezing the US economy by spiking the oil price.

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Americans Want Smaller Government and Lower Taxes

From Rasmussen:

A new Rasmussen Reports national telephone survey finds that 64% of Likely U.S. Voters prefer a government with fewer services and lower taxes over one with more services and higher taxes. That’s unchanged from last month and consistent with findings in regular surveys since late 2006. 

In fact, a plurality of Americans have called for small government and lower taxes ever since the days of Reagan.

But it has never worked out like that:

So what’s the difference? Is it that voters outwardly claim to be in favour of smaller government, and then when it comes down to it choose the advocates of big government? I don’t think so — I think it is that voters aren’t being given a real choice.

Here’s the increase in national debt by President:

The reality is that — with the exception of Obama — Americans have again and again opted for a candidate who has paid lip-service to small government. Even Bill Clinton paid lip service to the idea that “the era of big government is over” (yeah, right). And then once in office, they have bucked their promises and massively increased the size and scope of government. Reagan’s administration increased the debt by 190% alone, and successive Presidents — especially George W. Bush and Barack Obama — just went bigger and bigger, in total contradiction to voters’ expressed preferences.

The choice between the Republicans and Democrats has been one of rhetoric and not policy. Republicans may consistently talk about reducing the size and scope of government, but they don’t follow through.Today Ron Paul, the only Republican candidate who is putting forth a seriously reduced notion of government, has been marginalised and sidelined by the major media and Republican establishment. The establishment candidate — Mitt Romney — as governor of Massachusetts left that state with the biggest per-capita debt of any state. His track record in government and his choice of advisers strongly suggest that he will follow in the George W. Bush school of promising smaller government and delivering massive government and massive debt.

As Libertarian presidential candidate and former New Mexico governor Gary Johnson put it:

Pick Obama, pick Romney, government’s going to be bigger. Government’s going to be more intrusive.

So will the American people eventually get what they want? To do that, they have to ditch the hierarchies and orthodoxies of the past. Ron Paul and his tireless band of youthful supporters look set to achieve a strong showing at the Republican convention, as well as so far winning party chairs in Iowa, Colorado, Alaska, and Virginia. The Republican party — currently dominated by ageing tax-and-spend boomer Republicans — is being taken over by the libertarian youth who crave small government at home, as well as a smaller foreign policy. Ron Paul has taken the majority of youth votes in a plurality of states in 2012. And even if Ron Paul is not on the presidential ballot, Gary Johnson — a consistent advocate for lower debt, lower taxes, and smaller government — seems set to take a large slice of the vote in November.

As the mainstream parties continue to defy a majority of voters’ will and accrue more debt and make government bigger and bigger (while failing to address problems of unemployment and underemployment)  it seems natural and inevitable that more and more Americans — especially young Americans (who tend more and more to be unemployed and underemployed) — will abandon the sclerotic big-government Republicans and Democrats.

Trouble is, things may go badly wrong before Americans get the chance to put a practitioner of smaller government into power. Already a majority of Eurasian manufacturing and resource-producing nations have ditched the dollar for bilateral trade. Dollars and treasury bonds have long been America’s greatest export — and the greatest pillar of support for growth in spending and welfare. With the dollar’s downfall, smaller government may not be a choice.

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Drone Warfare in America

What would Obama supporters think if they learned that their beloved President was running far-to-the-authoritarian-right of arch-hawk Charles Krauthammer on one particular civil liberties issue?

Sadly, the answer is that most Obama supporters probably wouldn’t feel very much at all, because support for Obama has always been predominantly emotion-driven (he promised change “you can believe in”, not “change that I can logically convince you will be beneficial“).

But I digress. Charles Krauthammer weighed in on FOX yesterday to telegraph his opposition to bringing drone warfare to the skies of America.

Krauthammer said:

I’m going to go hard left on you here, I’m going ACLU. I don’t want regulations, I don’t want restrictions, I want a ban on this. Drones are instruments of war. The Founders had a great aversion to any instruments of war, the use of the military inside even the United States. It didn’t like standing armies, it has all kinds of statutes of using the army in the country.

I would say that you ban it under all circumstances and I would predict, I’m not encouraging, but I am predicting that the first guy who uses a Second Amendment weapon to bring a drone down that’s been hovering over his house is going to be a folk hero in this country.

The Founders were deeply opposed to the militarisation of civil society. There is all kinds of aversions to it and this is importing it because, as you say, it’s cheap, it’s easy, it’s silent. It’s something that you can easily deploy. It’s going to be, I think the bane of our existence. Stop it here, stop it now.

And this is a big deal. A recent report by Micah Zenko noted:

Worried about the militarization of U.S. airspace by unmanned aerial vehicles? As of October, the Federal Aviation Administration (FAA) had reportedly issued 285 active certificates for 85 users, covering 82 drone types. The FAA has refused to say who received the clearances, but it wasestimated over a year ago that 35 percent were held by the Pentagon, 11 percent by NASA, and 5 percent by the Department of Homeland Security (DHS). And it’s growing. U.S. Customs and Border Protection already operates eight Predator drones. Under pressure from the congressional Unmanned Systems Caucus — yes, there’s already a drone lobby, with 50 members — two additional Predators were sent to Texas in the fall, though a DHS official noted: “We didn’t ask for them.” Last June, a Predator drone intended to patrol the U.S.-Canada border helped locate three suspected cattle rustlers in North Dakota in what was the first reported use of a drone to arrest U.S. citizens.

But I’m going to go even further than the threat to civil liberties: I am fairly certain that the militarisation of U.S. airspace by drones is itself a huge national security threat. While Zenko notes that drones “tend to crash”, the downing of a U.S. drone over Iran late last year — supposedly via an Iranian hack — seems to suggest that it is possible for drones to be commandeered by hackers or hostile powers. And if that’s not the case today, then it almost certainly will be tomorrow. Putting drones into the air above the United States is like going to sleep on a bed of dynamite. It’s an invitation to anyone to try and commandeer a plane, possibly one stocked with high-tech weaponry.

The Federal government would do well to quit groping Grandma at the TSA checkpoint, and start worrying about the potential negative side-effects of systems they are putting into place. All the TSA security theater in the world cannot stop a determined hacker from commandeering a drone.

Charles Krauthammer is right (and after the Iraq invasion which he championed I never thought I would say that): it could be the bane of our existence. Stop it here. Stop it now.