https://www.economicpolicyjournal.com/2021/06/robert-wenzel-1957-to-2021.html
Category Archives: Uncategorized
Inflation: PCE and CPI up big, others are not
The Drug War and the Mexican Brain Drain
From Justin Raimondo:
“The drug cartels have inaugurated a reign of terror in Mexico with little resistance from the government. And they are outfitted with military-grade weaponry, including handheld rocket launchers and even makeshift tanks. The government forces, riddled with corruption, have in effect ceded large areas to the cartels, prompting the rise ofcitizens’ militias to fight the criminal gangs alone. The government’s response has been to attack the militias, while leaving the cartels largely alone.
Rife with violence, and increasingly insecure for the Mexican upper and middle classes, Mexico is experiencing a massive brain drain. In the year 2000, there were 300,000 college-educated Mexican nationals living in the US: ten years later there were 530,000. Over a third of those with doctorate degrees live here. In addition to the escalating chaos, Mexican professionals and academics come to the US because their home country doesn’t have the resources, the infrastructure, or the inclination to make it possible for them stay and work in their chosen fields.
The Mexican government is well aware of this problem, and in response has initiated a “Program for Retention and Return.” However, this is unlikely to attract many expatriates unless conditions at home improve markedly and in very short order – or unless Trump is elected President and gets to implement his plan to deport all 11 million “illegals,” strictly limit legal immigration, and dam the southern border.”
Conservatism in Russia
What is considered traditional usually comes from a particular group or culture, and is therefore being eroded at a fast pace in a liberal country like the U.S. Individualism is paramount in a liberal country, and when the liberalism becomes egalitarianism, some groups must pay for others’ equality.
Russia is not a liberal country. Most people who live there are Russian, not members of a multitude of ethnic groups from around the world with no shared traditions. They share a history, a language, and a religion. Russian conservatism is used against them by some American liberals, and so it is worth studying Russian conservatism. This article is a good starting point:
China’s Rise
A lengthy article is out describing China’s economic and military rise. More detail is here. A summary follows:
In 1904, Halford Mackinder wrote “The Geographical Pivot of History”, where he stated that:
- Europe, Asia, and Africa form a unitary land mass with its strategic pivot area between the Persian Gulf and Yangtze River
- This land mass is 60% of earth’s land area
- Global power depends on control of the Eurasian landmass, not global sea lanes
- Who controls the pivot area controls the world
Historically,
- European sea power allowed for control over Asian and African land powers for four centuries
- Steam shipping and the Suez Canal gave sea power the advantage over land power
- Future railways, however, would give the advantage back to Eurasia
- From 1602 (the founding of the Dutch East India Company) and 1922 (Washington Disarmament Conference) the world’s powers competed to control Eurasia’s surrounding sea lanes
- By 1900, Great Britain had naval bases from the North Atlantic to the Mediterranean to the Suez Canal to India, Singapore, and Hong Kong
- The 19th century saw the “Great Game” between Russia, which controlled the Eurasian heartland, and Great Britain, which controlled India and the sea lanes around Eurasia
- Great Britain had army forces in India’s Northwest Frontier, Arabia, and present day Iraq, which Mackinder called “the passage-land from Europe to the Indies” and the gateway to Eurasia’s hearland
- Pax Britannica, which began with the British defeat of Napoleon’s France in 1815, ended with a naval arms race and competition for empire which led to WW1 in 1914
- Influenced by Mackinder, Germany attempted to take control of the Eurasian heartland in 1942 by sending 1 million men to Stalingrad, losing 850 thousand
- The U.S. achieved its empire after WW2 by becoming the first country to control strategic points on both ends of Eurasia, in Japan and Western Europe
- The U.S. then attempted to encircle Eurasia by building an arc of military bases following Britain’s pattern of naval bases mentioned above
- The U.S. 6th fleet in Naples controls the Atlantic and Mediterranean
- The 7th fleet in the Philippines controls the Western Pacific
- The 5th fleet in Bahrain controls the Persian Gulf
- The North Atlantic Treaty Organization, the Middle East Treaty Organization, the Southeast Asia Treaty Organization, and the US-Japan Security Treaty were added as reinforcements around Eurasia
- By 1955, the US had 450 military bases in 36 countries, and by the end of the Cold War in 1990 the US had 700 overseas bases
- The US’s strategic fulcrum around Eurasia is the Persian Gulf
- Iraq’s occupation of Kuwait in 1990 was a pretext for US reestablishment of Persian Gulf dominance after losing Iran as a client state in 1979
- Post 9-11 US bases throughout Afghanistan and Iraq are renewed bid to control edge of Eurasia
- US now has 60 CIA and USAF drone bases surrounding Eurasia and is able to strike targets almost anywhere in Asia and Africa
- 99 Global Hawk drones monitor terrain and communications in the area
China’s Strategy
- China is attempting control of Eurasia from the inside, instead of using sea and air power as Britain did and the US does
- 2 step plan involves building infrastructure (high speed rail, highways, oil and gas pipelines, etc) to economically integrate Eurasia and using military to cut through US containment
- Economic zone 6,500 miles wide from Shanghai to Madrid is possible, shifting power from maritime periphery to Eurasian landmass
- China has built 9,000 miles of high speed rail, more than the rest of the world combined, carrying 2.5 million passengers daily at up to 240 mph
- Germany and Russia have joined with China to connect Eurasia from east to west, sending goods from Germany to China in 20 days, compared with 35 days by ship
- China signed agreement with Pakistan to build economic corridor
- Oil and gas pipelines connecting China with Kazakhstan, Turkmenistan, Myanmar, Pakistan, Iran, Russia and Europe integrate the energy infrastructure from the Atlantic to the South China Sea and bypass US control
- China created the Asian Infrastructure Investment Bank as a competitor to the US-dominated World Bank – close US allies have joined
- China is building long-term trade relations with Africa, Australia, and Southeast Asia
- China has begun construction on a road, rail, and pipeline corridor connecting western China with the port of Gwadar, Pakistan
- Gwadar will allow for Chinese naval deployments in the Arabian Sea
- China is expanding naval operations in the South China Sea
- Arabian and South China Sea naval bases will allow China to break US military containment
- China is building its own global satellite system which will be the only competitor to the US
The Aims of British Appeasement of Germany After World War 1
From Carroll Quigley’s history of the 20th century, Tragedy and Hope:
British motivations for appeasement are divided into four groups, listed from most to least influential:
1. Anti-Soviet (and anti-French/pro-German)
2. Atlantic bloc supporters
3. Appeasers
4. Those wanting “peace at any price”
The first group was led by Lord Curzon after World War 1 and worked to end Germany’s reparations payments and to allow German re-armament. They also worked against French militarism as the strongest obstacle to Germany in Western Europe.
The second group was led by the Round Table Group, which controlled the Rhodes Trust, the Beit Trust, several British newspapers and policy journals, and Chatham House, among others. They differed from the first group in that they sought to contain the Soviet Union between a Europe dominated by Germany in the west, Japan in the east, and an Atlantic bloc consisting of the British Commonwealth and the United States. The first group simply wished to destroy the Soviets.
The anti-Soviet group was determined to tear France down as a potential rival to Germany, and sought secret cooperation, led by Lord d’Abernon, between Britain and German military leaders against the Soviets. As British ambassador to Germany from 1920 to 1926, D’Abernon blocked inspections of German re-armament.
These two groups worked together in the mid-1920s to craft the Dawes Plan, which called for an end to the Allied occupation of the Ruhr Valley and an easier system of reparations, and the Locarno pacts, which sought to normalize relations with Germany. The moderate wing of the Round Table Group, led by Lords Lothian, Brand, and Astor, aimed to weaken the League of Nations as a collective security organization, which would allow Germany more freedom of movement in its re-armament and increased ability to stand against both the Soviets and the French. With Europe turned over to German control, the British would be able to focus on the creation of the Atlantic bloc.
The Atlantic-German-Soviet three bloc world idea was predicated on the belief that Germany would be forced to keep the peace, after taking over much of Europe, as it would be between the Alantic bloc and the Soviets, who would in turn be checked by Japan on one side and Germany on the other. In this way it was hoped that the balance of international power could be maintained to the satisfaction of all parties.
The anti-Soviet group and the Round Table Group cooperated on this goal and dominated the British government from 1937-1939. The two groups split, however, in late 1939/early 1940 when Lords Halifax and Lothian turned against Germany, which they came to view as insatiable. Neville Chamberlain and others remained committed to using Germany for their anti-Soviet plans.
Wielding far less power than the first two groups were the appeasers and the peace at any price group. The appeasers focused on Germany’s poor treatment by the Allies in the Treaty of Versailles, and believed that if Germany were allowed to regain military parity, re-militarization of the Rhineland, and union with Austria, then European stability and peace could be maintained. When Germany remained unsatisfied after achieving these aims, the appeasers realized that Germany could only be controlled by allowing it to move east, at the expense of Czechoslovakia and Poland, thereby coming into contact with the Soviet Union. Many appeasers moved to the anti-Soviet group at this point.
The peace at any price group was easily manipulated by government propaganda exaggerating German military strength and playing down British strength. A sense of panic was instilled by hyping the threat of a German air attack and by fitting all citizens for gas masks. The panic this created pushed the British population to accept the German destruction of Czechoslovakia in 1938, in exchange for which Chamberlain received from Hitler a letter allowing Chamberlain to proclaim the achievement of peace “in our time.”
When this peace proved short-lived, British public opinion turned against Germany in 1939-1940, but Chamberlain could not publicly espouse the anti-Soviet or three bloc rationale for appeasing Germany. Instead, he acted as if Britain was resisting, but still worked to bring Germany up to the Soviet border behind the scenes.
What is a Caliph?
“Basically, one’s status as a caliph is dependent on the acceptance of that status by some group of Muslims. This follows the general pattern of religio/political formation through consensual agreement.in Islamic and Arab culture. This applies in; ideas, law, government, etc.
The declaration of the caliphate of Abu Bakr al-Baghdadi (Caliph Ibrahim) is a declaration of war against each and every existing Arab and Muslim government because in the presence of a supposed caliph all their governments must be viewed as illegitimate usurpations of the caliph’s divinely given religious and political authority.”
Interview of Scott Horton, Part 1
Scott Horton is the host of “The Scott Horton Show”, a foreign policy focused radio show from a libertarian point of view. Scott has done over 2,500 interviews with experts on foreign policy, economics, history and politics since 2003. They are all available in the archives on his website, scotthorton.org, for free. I recently talked with Scott in Austin, Texas about U.S. history, foreign policy and libertarianism.
Q: What is U.S. government foreign policy?
A: Full spectrum dominance. The United States government will be the global hegemon and the final arbiter in all disputes which concern them. They will never allow any nation or group of nations to ever think about challenging their power. To prolong the unipolar moment indefinitely, where there can never be another Soviet Union that could challenge them. Peace through domination.
Q: This doesn’t seem like it has anything to do with the ideas behind the founding of this country. George Washington’s warnings about foreign relations in his farewell address come to mind.
A: There are some foundational myths in this country. The Second World War has in many ways replaced the Revolutionary War as the foundational event of this country. Our enemies were pure evil, and any means were justified in defeating them. We emerged from that war as the new British Empire. We became what we once fought. And it was justified because we were a force for good, unlike all the previous empires. We were different. The rest of the world had been burned to the ground in World War Two, and we were untouched, so we became the world’s factory. We could afford to be an empire.
Q: What about economic foundational myths?
A: The Great Depression. Every schoolchild learns that Herbert Hoover and laissez faire capitalism caused the Depression. They tried total freedom and it just did not work. It doesn’t matter that Hoover really intervened greatly in the economy, and that Roosevelt prolonged the Depression. What matters is the image of starving people standing in a soup line, and Roosevelt and the New Deal saving the country. That is much more powerful than the truth. The message is that without the government, we’d all be in trouble.
Q: Is war good for the economy? World War Two, along with the New Deal, got us out of the Depression.
A: That’s what they say, but it’s not true. They take GDP from before the war, and compare it to GDP during the war, which is pumped up by military spending that is financed by debt and inflation. There were shortages of consumer goods. That GDP increase did not represent an increase in wealth for the citizens of the country. Robert Higgs has documented this and showed that World War Two was a time of great sacrifice for Americans. He then showed that it wasn’t until after the war, when the government slashed spending, that the Depression ended. The destructive experimentation that the New Deal represented was mostly ended, the war ended, the soldiers came home, and the economy was able to grow.
Q: Is there a connection between central banking and war?
A: War is very expensive, and the government needs inflation to pay for it. They can’t raise taxes too much, or the wars would quickly become unpopular. They can borrow some money from other countries, but that also has its limits. To really do what they want to do, they must resort to inflation, and central banking allows them to do this. They just can’t tax and borrow enough. Printing money is easy. It’s an accounting trick. They create debt on one computer screen and create money on another screen and use the money on the second screen to buy the debt on the first. They can then pay for the war. The negative consequences come later. What we saw in the last decade was a false prosperity created by all this new money, especially in the housing market. So during a time of supposedly great sacrifice, where trillions of dollars are being spent, wasted, on totally non-productive wars, Americans actually have their taxes lowered and feel like the economy is strong. We even had rebate checks mailed to us. And then the crash happens and we’re still feeling the effects. This is all due to the central bank and its inflation.
Q: How does foreign policy operate in a democracy?
A: I was taught in school that in a democracy, the policies adopted are more or less what the people want, and there is wisdom in a democratic majority. The fourth grade narrative is almost as simple as that everything that happens is inevitable. Did the North really have to militarily invade the South and did 650,000 people really have to die? Did the U.S. have to have a blind eye turned on Pearl Harbor in 1941 so it could get involved in a European land war? Did they really have to drop atomic bombs on Japan? These things are not questioned. Democracy and majority rule absolves people of questioning what did happen and what may happen next.
Q: What readings would you recommend to people who want to become more familiar with these issues?
A: Anyone who wants to understand what’s going on with the U.S. empire should read Chalmers Johnson’s Blowback Trilogy. Stephen Kinzer has written a lot on Iran policy. On a more philosophical level, Chapter 14 of Murray Rothbard’s book “For a New Liberty” and his essay “War, Peace and the State” are great. Read Justin Raimondo to learn about the neoconservatives and what they have done to U.S. foreign policy and what is going on today.
Q: Are questions of foreign policy, wars, and empire left/right questions?
A: Both sides are for war and empire and have the same foreign policy goals. G. Edward Griffin showed me in his book “The Creature from Jekyll Island” that these questions don’t have to be viewed as left/right issues. You can be a flag waving nationalist, as he is, and see that the world empire is the surest way to bankrupt and bring down America and so be totally anti-war.
Q: You say you are a libertarian. What does that mean and how does it affect your foreign policy views?
A: It means I’m in favor of the non-aggression principle, which says it is never justified to initiate aggression. I’m against all political relationships that involve coercion. In foreign policy, I apply the principles of individual morality to governments, which seem to always be exempt from these rules. The rules shouldn’t change just because the State is doing it. The government wants to define you as part of a group, and to define which groups you should be against. But groups are just collections of individuals, each with their own lives and goals, and the usual moral rules should apply.
Q: Have you always had these views?
A: I heard George Carlin’s “Jammin’ in New York” when I was about 15. It begins with his criticism of the first Gulf War and ends with him pointing out the hypocrisies of Earth Day. School and the media had always told me that I had to be Republican or Democrat, liberal or conservative. George Carlin handed me a permission slip to not have to choose between them. I had never heard of libertarianism at the time, but I knew I didn’t want to be on either of those sides.
Bank Profits, the Fed, and Interest Rates
Ignoring the issue of increased interest on loans and higher interest costs for deposits, we’ll focus on the affect a rise in interest rates will have on a bank’s portfolio.
As rates rise, a bank’s assets will roll over into new, higher interest earning assets at different speeds. The shorter the terms of its assets, the more quickly it will be able to profit from higher rates. Higher rates will also affect its portfolio of marketable securities (stocks, bonds), with longer term securities decreasing in value more as rates rise. A bank with high cash reserves, on the other hand, will benefit as it rolls cash into interest earning assets as rates rise.
Bank liabilities are largely made up of CDs, long term borrowing subordinated to deposits, Fed fund borrowings, and retail deposits. These liabilities become more attractive as rates rise.
Overall, a bank will benefit from a rate increase if it has borrowed long, with locked-in low interest costs, and lent short, allowing it to roll short term, low interest paying loans into higher interest loans as rates rise, funded by its low interest deposits of longer duration. But how many bank portfolios are structured this way? The Fed is worried about this.
But, according to Morgan Stanley and as reported by Bob Murphy, the Fed has its own problems. It could have negative equity if an interest rate rise decreases the value of its bond portfolio. This makes Fed “tapering” very dangerous to its own portfolio and probably unlikely. It needs to keep interest rates low and its portfolio strong with continuing asset purchases (QE), but those asset purchases continue to skew markets and capital structures and make inflation more likely. Dangerous territory.
Loyalty and Free Speech
As always, and especially in law, it is necessary to understand the past in order to analyze the present. We all know about the Alien and Sedition Acts of 1798 and the stain they left on the reputation of John Adams, but fewer people are familiar with the arguments over free speech and loyalty during the First World War. Here is a brief rundown:
The Espionage Act of 1917 allowed the government to prosecute pamphleteers who argued against conscription and who advocated armaments workers to quit. In upholding two convictions under this law, Justice Holmes came up with the “clear and present danger” test of speech (Schenk vs US). Holmes then appears to soften his stance in his dissent to the Court’s affirmation of another conviction under the Espionage Act in “Abrams vs US” when he stresses the desirability of a “fair trade in ideas”.
“Frohwerk vs US” and “Debs vs US” created the “bad tendency” test to limit dangerous speech. This test does not require Holmes’ “clear and present danger”.
The Sedition Act of 1918 made disloyal speech about the government, its symbols, or the members of the armed forces illegal. This was clarified a bit in the Supreme Court’s affirmation of a New York law making advocacy of the government’s overthrow illegal (Gitlow vs New York). The Court here makes a distinction between a call to action and the expression of abstract doctrine.