JS, "But what you are describing as a "box" is actually removal of a "box"."
No, JS, being broke, powerless and under the thumb of a warlord is being in a box. We have all read 1984 and we realize that to you and lew peace is war, poverty is riches, terror is civil tranquility and all the rest of your trick definitions.
Now I'll go back and read the rest of your screed just for giggles. If anything is worth replying to I'll do so.
Ron

>>>JS, "But what you are describing as a "box" is actually removal of a "box"."
No, JS, being broke, powerless and under the thumb of a warlord is being in a box.<<<<<

And that is the way things are daily with the current system. Removing the box allows opportunity.It is the box, government and their cronies in the private sector, who steal from us, oppress us.Wouldn't your chances of escaping tyranny be much greater with a local bully than the federal or state government?

>>>> We have all read 1984 and we realize that to you and lew peace is war, poverty is riches, terror is civil tranquility and all the rest of your trick definitions.<<<<

That is nonsense. Where has anything like this been posted on LRC? To the contrary, it is our current crop of warlords who are "spreading democracy" by killing innocent people, keeping us "free" through the "patriot act" and ignoring Constitutional safeguards after swearing allegiance to them.

>>>>Now I'll go back and read the rest of your screed just for giggles. If anything is worth replying to I'll do so.<<<<

You are so kind. I keep hoping that by responding to your points objectively you will come to see/admit your mistaken notions and you continue to repay my sincere efforts with insults. There is a reason for that, you know.

JS,
Sincerity is no substitute for anything when you argue for something as retrograde as an anarchy or a failed confederacy.
The basis of our government is participatory. You and loveable louie argue for withdrawing our participation. You consider it darned near treasonous to go vote.
By deduction louie doesn't want to vote, he doesn't want to serve in the military, pay taxes, serve on a jury or exercise any of the other little dirty duties of being a participating citizen. Having done that you and he wish to sit around moaning because the society isn't being run perfectly.
If we have any warlords in our society it is because of citizens like you and louie. Any little boy soon learns that if he stands around on a playground looking timid long enough a bully will come along and pick on him. Similarly a spend thrift will tax and spend your money.
Getting off your duff and joining with others to govern your society is a lot better than living in an anarchy and standing up to a tyrant alone.
Just remember any negative conditions inside this society reflect you -- you are the villainess because you won't go to work to help eliminate the wrong doers. For crying out loud JS, come out from behind the concealment of using just your initials and accept some adult responsibility.
Ron

Ron,

as much as you view JS as a pie-in-the-sky anarchist--BTW, do you apply general sematics to her use of the word, anarchism?--you, likewise, have your own life spun views of history and political reality that force you in to a philosophical corner. One thing I see as a clear divide between the two of you is that JS recoils from force, whereas you seem to embrace it in many of its manifestations: for the perceived good of us all, no doubt.

Given where government/s has led us of late (the past one-hundred years in particular) I'd postulate we could do with a lot less government and a lot more individual liberty: meaning we would do well as a civilization to encourage much more personal responsibility, which would come at the certain expense of the size and scope of the state itself. Your words seem to imply that if only we had more judiciously designed force mechanisims in place all would be well

Forget about painting Js into a corner, please articulate for us how much government is needed to promote the maximum amount of freedom with the minumum amount of force? (if that matters to you at all) Do we, present day, need more or less government to reach YOUR political nirvana or are you more or less satisfied with the progression of political man today? Can you answer while still avioding general semantical traps along the way?

>>>Sincerity is no substitute for anything when you argue for something as retrograde as an anarchy or a failed confederacy.<<<<

So my "retrogradeness" excuses your insults. Whatever.

>>>>The basis of our<<<<

It may be yours, it is not mine. Therefore it is not ours. Unless you are referring to someone else you share your government with.

>>>> government is participatory. <<<

It does require "our" participation to legitimize it, to perpetuate the dialectic. That is why I will not.

>>>>You and loveable louie argue for withdrawing our participation. You consider it darned near treasonous to go vote.<<<<

"loveable louie". Your sophomoric wit underwhelms. Give it a rest, for your own sake. It's embarrassing.

>>>By deduction louie doesn't want to vote, he doesn't want to serve in the military, pay taxes, serve on a jury or exercise any of the other little dirty duties of being a participating citizen.<<<<<

Let's see. You find something wrong in not "participating" in killing, looting, serving as judges in cases of people being railroaded with bad laws or recidivist criminality-always with the caveat in direct opposition to the intent of the constitution to not "judge the law", can't have THAT! No, I see nothing wrong with not participating in your dirty scheme. Remember YOU said "dirty" first. I can't speak for Lew R., however.

>>>>> Having done that you and he wish to sit around moaning because the society isn't being run perfectly.<<<<

I sit around "moaning"?? I should be a "good citizen" and join a political campaign, right? So I can be a part of the "process", join in on the fun of ruling over the other 50% of the people who don't like my guy/gal? Tough noogies for them if we win, right? They can suck it up and buy more votes than us next time if they can. Or connive with some justices to "decide" the winner. Your system reeks to high heaven.But you can have it, I just want no part of it. I am leaving you all my awesome "power" at the polls, Ron.Enjoy ruling and forcing other people who don't want to live the way you do. That is your beloved system.

>>>>>If we have any warlords in our society it is because of citizens like you and louie.<<<<

Yeah, right. Lets see. If I vote for them and they lie and do bad, it's my fault for electing a bad guy. If I don't vote for them and they lie and do bad, it's my fault for not "participating" more. I understand you perfectly. And I will no longer "participate" in your charade. And you can't stand it because of your grandiose notions of our glorious experiment in "democracy" and your participation in it. You hate the idea of having been a fool for the elites, you refuse to accept reality and give up the fairy tale.Sad. At least I wised up finally. It's looking like you never will.

>>>> Any little boy soon learns that if he stands around on a playground looking timid long enough a bully will come along and pick on him.<<<<

Who said anything about looking timid? Do you think the first settlers , the frontiersmen who founded this country were timid?? Why do you equate freedom with timidity? I am willing to take my chances with my neighbors. Do you fear yours? Do you stand around looking "timid" with your finger on "911"??

>>>>Similarly a spend thrift will tax and spend your money.<<<<

You mean like they are doing now and have done for decades? Not only that, they are spending our kids' and our grandkids' money. But that's OK with you, right? Anything not to be "bullied"....whatever THAT means to you.

>>>>Getting off your duff and joining with others to govern your society is a lot better than living in an anarchy and standing up to a tyrant alone.<<<

Yes, that's right...I'm just not participating enough! That's what the matter is with this country. Your participation, your candidates winning means someone else has to live under government not of his choosing. You think that is OK? Have you even read the Declaration?? Stop calling this system mine, this society mine. It is not. It was planned and created, forced by politicians and "participators" like you.

>>>>Just remember any negative conditions inside this society reflect you -- you are the villainess because you won't go to work to help eliminate the wrong doers.<<<<

Not even a good try. No matter what I do, wrong doers will get into office, because 99% of the time they are wrong doers to begin with. What kind of people think they know best how others should live, want to tell other people how to live, spend their money? Egomaniacal, theiving, power-mad nutballs, that's who.But you join right in. Just don't think you are fooling me for a minute. I can't believe you find anything wrong with government schooling. They teach all this same nonsense you are spouting.

>>>> For crying out loud JS, come out from behind the concealment of using just your initials and accept some adult responsibility.<<<<

If I were a 70 something year old and my children were grown I would be much more inclined to do as you ask. I and my children have already had a taste of happens to the nail that stands up in your political system. Why is this important to you? Have you ever heard of Publius, Ron?

JS, "So you don't consider Bush, Clinton, and all the rest of our illustrious "leaders" to be warlords?? That is only semantics, Ron. As far as the current government box that you defend goes, we were far better off under the British than we are now."

Of all the dumb arguments you have ever advanced this one takes the cake. So, you consider Bush, Clinton and whoever you meant by "all the rest" to be morally equivalent to Stalin, Mao, Hitler, Caligula, and a million lesser known tyrants scattered down the pages of history since the beginning of time.
No doubt you would like to add Washington, Lincoln and the entire galaxy of other heroes that have served us so well to your list of villians?
You should be embarrassed
Ron

>>>JS, "So you don't consider Bush, Clinton, and all the rest of our illustrious "leaders" to be warlords?? That is only semantics, Ron. As far as the current government box that you defend goes, we were far better off under the British than we are now."

Of all the dumb arguments you have ever advanced this one takes the cake. So, you consider Bush, Clinton and whoever you meant by "all the rest" to be morally equivalent to Stalin, Mao, Hitler, Caligula, and a million lesser known tyrants scattered down the pages of history since the beginning of time.<<<<

Yes, they are cut from the same cloth, the differences are matters of degree, the size of the body piles they leave behind. U.S. warlords enabled Stalin and helped create Hitler.

>>>>No doubt you would like to add Washington, Lincoln and the entire galaxy of other heroes that have served us so well to your list of villians?<<<<

Yes, they were warlords. Washington for his endorsement of the constituional coup and attacks on citizens over taxation (the Whiskey Rebellion)and Lincoln for his ignoring constitutional safeguards, killing half a million of his own people, forcing conscription on immigrants, shilling for the railroads, corrupting the money, and many other things. I would exclude Patrick Henry and other patriots who valued liberty and warned against centralized power, though.

>>>You should be embarrassed<<<

For seeing and stating truth?? No, I'm not. I am embarrassed I spent so much of my life wedded to the lies you refuse to acknowledge and worshipping "leaders".

js,

I think you're locked in a false Hegelian dialectic cycle like those you posted on recently. Constitutional government is not the synthesis position between your tyranny-anarchy polarities. I think it is constitutional government that can be restored to integrity in this country, which isn't in a category of totalitarian all government or no government.

You maintain that government is inherently corrupt and that statesmen like George Washington and Lincoln were tyrants, different from Hitler and Stalin only in degree. I think this is a gross distortion, and I don't know how you arrive at such an assessment.

You wrote: "For seeing and stating truth?? No, I'm not. I am embarrassed I spent so much of my life wedded to the lies you refuse to acknowledge and worshipping 'leaders'."

What truth are you stating? If tyranny has been promoted under the guise of liberty or some other "good," how or why is it truth to declare that no government is the only means of overcoming tyranny?

I don't know why I'm tossing in my two cents on this same topic again, except that I would like to say that it sometimes seems to me that you've substituted one set of "entrenched" beliefs for a different one, neither of which is conducive to living in "relative" freedom in society versus living as a recluse in a wilderness or as a denizen in armed camps of gated private-pay communities.

If Ron has read Carroll Quigley, I don't see how he could be quite as impervious to realization of behind-the-scenes political machinations as you seem to think he is. I don't think the issue is lewrockwell or no lewrockwell so much as some kind of realistic recognition of what is humanly possible for human governance in society. How would a society exist at all in an anarcho-capitalist scenario? Wouldn't there be a different oxymoronic society of one governing every person who exists?

Even Chins acknowledged, that Hoppe's book, for example, based on the review, proposed unrealistic and extremist views, although Chins took exception, as did you, to my characterization of Hoppe's ideal as "mean-spirited." What I thought was actually far worse than mean-spirited was the author's contention that those people who did not comply with the libertarian ideals he proposes would have to be removed from society, whether through liberty leper colonies or by other means.

I think I've said my peace on this subject for now and evermore. Thanks for trying to comprehend my hidebound if not immoral (as in "taxation is theft") view that goverment is necessary at this stage of humanity's evolutionary progress.

--- --- --- --- --- --- --- --- ---

Replying to:

>>>JS, "So you don't consider Bush, Clinton, and all the rest of our illustrious "leaders" to be warlords?? That is only semantics, Ron. As far as the current government box that you defend goes, we were far better off under the British than we are now."

Of all the dumb arguments you have ever advanced this one takes the cake. So, you consider Bush, Clinton and whoever you meant by "all the rest" to be morally equivalent to Stalin, Mao, Hitler, Caligula, and a million lesser known tyrants scattered down the pages of history since the beginning of time.<<<<

Yes, they are cut from the same cloth, the differences are matters of degree, the size of the body piles they leave behind. U.S. warlords enabled Stalin and helped create Hitler.

>>>>No doubt you would like to add Washington, Lincoln and the entire galaxy of other heroes that have served us so well to your list of villians?<<<<

Yes, they were warlords. Washington for his endorsement of the constituional coup and attacks on citizens over taxation (the Whiskey Rebellion)and Lincoln for his ignoring constitutional safeguards, killing half a million of his own people, forcing conscription on immigrants, shilling for the railroads, corrupting the money, and many other things. I would exclude Patrick Henry and other patriots who valued liberty and warned against centralized power, though.

>>>You should be embarrassed<<<

For seeing and stating truth?? No, I'm not. I am embarrassed I spent so much of my life wedded to the lies you refuse to acknowledge and worshipping "leaders".

Friendly,
I won't even try to tell you of my family's involvement in national, state and local politics. I am 72 YO and for the first time in my life no one in my family, near or far, is holding office who is close enough for me to know about them.
I do think I have enough exposure to the realities of politics to know just what a dirty rotten game it can be -- believe me I am not deluded in the least.
That said we are members of a participatory system of government and any failures I see are due to our failure to exercise the power we have as citizens.
I've been reading Quigley. Before him I had read Gatto But before either of them I had listened to my father and my own common sense.
Is a person that gives away their power and their duty to look out for themselves under these easy conditions suddenly going to develop an attemtive mind and a back bone under anarchy? They won't and that is why anarchy is just a fancy way of calling for tyranny.
Ron

Ron,

I hope you continue to enjoy your reading projects, including the work that you and your son have been doing on the Federalist Papers.

I disagree with you about many things. For example, I'm not sure that you're convinced that God is a Republican, but if you are, I disagree with that conception of divinity.

However, I agree with you on the need for constitutional government as opposed to anarchy.

>>>>I think you're locked in a false Hegelian dialectic cycle like those you posted on recently. Constitutional government is not the synthesis position between your tyranny-anarchy polarities. <<<<<

Constitutional government is dead and has been for some time, Ron's denial notwithstanding, it is no longer part of the dialectic. The dialectic is (currently and simplified) democrat (socialism) vs republicans (mercantilism), massive state centralization are necessary for both so that issue is not even on the table. The dialectic goes between the two, the resulting synthesis with then proceed into the new dialectic. Those who enjoy politics enjoy the dialectic. That is why Ron can't stand the idea of doing away with political power (legalized aggression) awarded to the few. Power is like a drug.

>>>>I think it is constitutional government that can be restored to integrity in this country, which isn't in a category of totalitarian all government or no government.<<<<

The Constitution was bad enough even at it's inception. It flew in the face of the Declaration of Independence, it set up a centralized state over the local rule of the states. Nowadays our population is so socialized that no one even understands it anymore, try to discuss it and their eyes glaze over. The country is indeed falling to socialism "like an overripe fruit", just as Lenin (?) predicted. There is no going back. Do you honestly think the government is going to ditch all the laws and agencies created in the last 180 or so years and go back? No government does not mean chaos, Mad Max or lawlessness. It means liberty, freedom to earn a living, to defend yourself, to not be forced into slavery for eco-worshippers, egalitarianists, statists, warmongering corporations, etc. We are rapidly heading for a one world government, rule from afar, complete enslavement and egalitarianism-except for the ruling classes, which I'm sure will only be made up of the "best and brightest" because people VOTED for them.

>>>>>You maintain that government is inherently corrupt and that statesmen like George Washington and Lincoln were tyrants, different from Hitler and Stalin only in degree. I think this is a gross distortion, and I don't know how you arrive at such an assessment.<<<<<<

Reading history. Why do you find Stalin so bad? FDR admired him greatly and his administration was full of USSR spies. Surely someone FDR called "Uncle Joe" murdered millions for only the "right" reasons. Killing is killing. Are Churchill and FDR's hands clean because they only set up Europe for Stalin, and the rest of us for a more gradual slavery?

>>>>You wrote: "For seeing and stating truth?? No, I'm not. I am embarrassed I spent so much of my life wedded to the lies you refuse to acknowledge and worshipping 'leaders'."
What truth are you stating? If tyranny has been promoted under the guise of liberty or some other "good," how or why is it truth to declare that no government is the only means of overcoming tyranny?<<

The truth about Lincoln, washington. The truth about "leaders" and Founding "Fathers". Because government has been done to death, all forms, all conditions. The whole world knows socialism is a failure EXCEPT the dumbed down US, whose population is so ignorant they think the government just prints money and makes jobs for people. Allowing some men legalized aggression over other men is a set up for tyranny and devolves into it eventually. But hey. I have no problem with you, Ron, and any other statist creating your own socialist-statist community, pooling all your resources together in an equal community-utopia. I just want left alone. But statists can't allow that, they can't allow anyone to have freedom because they know their system fails without the enslavement of producers. They insist we all go down the tubes with them, and expect us to VOTE for the privilege of being ruled and robbed.

>>>>>I don't know why I'm tossing in my two cents on this same topic again, except that I would like to say that it sometimes seems to me that you've substituted one set of "entrenched" beliefs for a different one, neither of which is conducive to living in "relative" freedom in society versus living as a recluse in a wilderness or as a denizen in armed camps of gated private-pay communities.<<<<

You see the world in terms of all things having equal value, equal worth, morality relative. I do not. I know liberty is better than slavery, I know knowledge is better than ignorance. You see society as created by government, I know it is the opposite. Society exists and then crafty men (as men will always do)in that society invent reasons why they should rule and others should support them. I say people should be wise and learn to recognize these lies. You accept the lies.

>>>>>If Ron has read Carroll Quigley, I don't see how he could be quite as impervious to realization of behind-the-scenes political machinations as you seem to think he is. I don't think the issue is lewrockwell or no lewrockwell so much as some kind of realistic recognition of what is humanly possible for human governance in society.<<<<<

Ron is a politician at heart. What I advocate is anathema to him because he loves the game, the power struggle. What I suggest strikes at the legitimacy of this game he loves.

>>>> How would a society exist at all in an anarcho-capitalist scenario? Wouldn't there be a different oxymoronic society of one governing every person who exists?<<<<

People would form communities of shared interests, family, religion, etc. People would be free to associate with whomever they wished. People would be free to work or drive or trade without paying off hordes of leeching crats. I honestly don't know all the forms of rules that would evolve, there would definitely arise a form of commerce code so people could trade, say an insurance bond that would guarantee a transaction. There are many ideas and books out there about this, I'm no expert.

>>>>>>>Even Chins acknowledged, that Hoppe's book, for example, based on the review, proposed unrealistic and extremist views, although Chins took exception, as did you, to my characterization of Hoppe's ideal as "mean-spirited." What I thought was actually far worse than mean-spirited was the author's contention that those people who did not comply with the libertarian ideals he proposes would have to be removed from society, whether through liberty leper colonies or by other means.<<<<<<

I don't think they would be removed as much as shunned. They would have to find like-minded anti-liberty people and form mini-states where they could plot the overthrow of the nearby libertarian colony and enslave them.

>>>>I think I've said my peace on this subject for now and evermore. Thanks for trying to comprehend my hidebound if not immoral (as in "taxation is theft") view that goverment is necessary at this stage of humanity's evolutionary progress.<<<

It is BECAUSE of the state of man (I doubt he will evolve out of his depravity) that government is such a bad idea, and the huge nation states of today the worst disaster in human history.

js,

I know constitutional government isn't in the dialectic you wanted people to step out of. That's what I meant when I said it does not occupy the synthesis position between polarities of tyranny (tyrannical "socialism-mercantilism," as you put it) and anarchy. If it's dead it can be resurrected. Isn't resurrection in keeping with "natural law"?

You wrote: "Do you honestly think the government is going to ditch all the laws and agencies created in the last 180 or so years and go back?"

I think there's a greater likelihood of that happening, or at least a gradual paring down, than the government spontaneously and peacefully dismantling itself in toto because Rockwell and Rothbard and secessionists convinced people that anarchy is the only answer to problems of governance. But you say we're heading for one world government. Do you think that's inevitable? Do you view the anarcho-capitalist scenarios of Hoppe, et al. as science fiction?

I sometimes think that you've lost some historical perspective, especially when you compare Washington and Lincoln to Stalin. I honestly don't mean to sound nasty, especially when you're trading insults with Ron, but sometimes I hope your anti-government fervor is not going to morph into an avid interest in something like the Turner Diaries and that you can instead continue to enjoy nonviolent films such as V for Vendetta.

I would never try to enslave you.

>>>I know constitutional government isn't in the dialectic you wanted people to step out of. That's what I meant when I said it does not occupy the synthesis position between polarities of tyranny (tyrannical "socialism-mercantilism," as you put it) and anarchy. <<<<<

But anarchy isn't part of the dialectic, it is outside it. Constitutional gov't IS within the dialectic. "Society" might make a step backward toward following constitution, but it would only be a temporary step, the dialectic would proceed because constitutionalism has the dialectic process built in. Anarchy is not ever considered as a possible alternative and is ALWAYS depicted as violent, brutish, chaotic. This is very odd, because that describes statism perfectly.

>>>>If it's dead it can be resurrected. Isn't resurrection in keeping with "natural law"?<<<<

Constitutionalism is tyranny to begin with. SOMEONE is always ruled by someone he would not gve consent to, it provides the means for massive taxation, it allows it's own interpretation by the people it's intended to restrict leading to "re-interpretation" of more state friendly meanings, it centralizes rule to the point that legal priests in California, thousands of miles away decide how folks in the east and in conservative "fly-over" country should live.The Constitution has provided the means by which current rulers are deliberately ruining our economy and social structure to facilitate the weakening of this country and it's subservience to a global socialist government controlled by elites.Even if resurrected it would devolve again as there is nothing to stop it. Natural law is actually the term that atheists and humanists are more comfortable with, as opposed to God's law.The concepts are pretty much the same.

>>>>>You wrote: "Do you honestly think the government is going to ditch all the laws and agencies created in the last 180 or so years and go back?"
I think there's a greater likelihood of that happening, or at least a gradual paring down, than the government spontaneously and peacefully dismantling itself in toto because Rockwell and Rothbard and secessionists convinced people that anarchy is the only answer to problems of governance. But you say we're heading for one world government. Do you think that's inevitable? Do you view the anarcho-capitalist scenarios of Hoppe, et al. as science fiction?

I don't think anarcho-capitalism will ever occur on a large scale because I believe that we will have a one world government and a one world "religion" as foretold in the Bible.We are well on our way there. Liberty will not be attained without some bloodshed. The state can't even maintain it's hold on us without shedding blood though, so the difference is only whose blood is being shed.We are currently seeing a decline in what Butler Shaffer calls vertically structured institutions, including the media, commerce, health care; they are becoming more horizontally structured as folks investigate alternatives. These are steps toward statelessness, at least until the state passes laws and criminalizes certain websites, etc. My concern is that people are so dumbed down they don't see the failures of history and statism.

>>>>I sometimes think that you've lost some historical perspective, especially when you compare Washington and Lincoln to Stalin.<<<<

It's all a matter of degree. Washington and Lincoln killed to advance their state apparatus and control over their own people, that is what I find particularly heinous. Forget about consent of the governed, don't folks have a right not to be murdered and robbed by their own government? Lincoln was particularly awful, he drove the coffin nails into the Constitution, some scholars refer to the war to prevent Southern independence as America's French Revolution. Lincoln ushered in many evils. That is why it is so important that schoolkids be taught to idolize him. They can't ever have an inclination to question "Father Abraham", or any of the other "Founding Fathers", either, because that is a slippery slope. We have to have a knee-jerk ingrained gut feeling of love for these rulers in order to maintain their legacy. Stalin was just more brazen, killed more people, that's all. Are you talking about perspective or relativism?

>>>>I honestly don't mean to sound nasty, especially when you're trading insults with Ron,<<<<

I try very hard to be respectful and objective in my exchanges with Ron. Perhaps it's best I not even attempt it anymore.

>>>>> but sometimes I hope your anti-government fervor is not going to morph into an avid interest in something like the Turner Diaries and that you can instead continue to enjoy nonviolent films such as V for Vendetta.<<<<

Actually, my "fervor" is pretty mild, simply because I believe things will continue on as foretold and there is little I can do about it. But I can continue to point out lies and nonsense when I see it. The problem with stuff like the "Turner Diaries" and Moi's postings is that there is usually a grain of truth in them. Not completely, but enough that people identify with it and don't look at other factors. They are simple, easy to understand answers with clear cut bad guys. We ARE living in a time of oppression, especially toward liberty loving white religious people of European descent. Western civilization is under attack. It can be argued that these Europeans oppressed and did bad things, but the truth is civilization has advanced further in this Christian European culture than any other culture.To abandon the things that enabled such advancement is foolhardy, especially when alternatives like slavery are promoted.V for Vendetta was pretty violent, did you see it?

>>>I would never try to enslave you.<<<

If you were part of a statist society, your society would begin to try to enslave others. It is inevitable, just like our government enlaves others (and us).

>>>>I honestly don't mean to sound nasty, especially when you're trading insults with Ron,<<<<

I try very hard to be respectful and objective in my exchanges with Ron. Perhaps it's best I not even attempt it anymore.


JS,

You are the least rude regular on this forum. Please keep objecting.

Keep fighting the GOOD fight, js. Your efforts inspire more than a few of us at this forum.

April,
Until the Spartans came along the only governments on Earth were ex-anarchies where a tyrant had gained control. Until that time no anarchy had failed to turn into a tyranny. Since the Spartans some governmests have been improvements over anything seen up to their time.
However, at no time no where on Earth has an anarchy either survived or been successful. What is so great about that record that you wish to go back to it? Do you suppose that loveable lew is going to pick you to be the ruling tyrant?
Ron

This wasn't meant as a slight to you, Ron. I enjoy your thoughts also. Are you related to Benjamin?

A good workout this thread is.

Up Up and Away!

April,
I suppose you mean Benjamin Harrison? Yes, I am a distant cousin. There is about two or three generations of our familiy back in the 17th Century where things get confusing because we are credited with cutting off King Charles I's head. As a result it became dangerous for a while to be a member of our family or to have the King's agents able to trace precise blood lines. Today in many cases we know only that we all used the same coat of arms during that time.
That applies to this discussion in that our family never gave up its name or its intense objection to any tyrant.
Besides, (grin), I never objected to your language. I disagreed with your position as anarchy leads invariably to a new central government. All too often that government is a tyranny.
Ron Harrison

>>>Until the Spartans came along the only governments on Earth were ex-anarchies where a tyrant had gained control. Until that time no anarchy had failed to turn into a tyranny. Since the Spartans some governmests have been improvements over anything seen up to their time.<<<<

Are you choosing the Spartans as examples of "good" government/statism??? You are simply looking at the problem from the POV of the state.You say that no anarchy has failed to turn into a tyranny, but the tyranny you describe is always a state. You are saying we must have tyranny or we will have tyranny.
The age old question has always been, "Why/how are the many ruled by so few"? You say it has always been so and so must always be. The conditions now are drastically changing. The knowledge the elites kept for their own at the top of a vertically structured hierarchy is becoming available to the "many". The old ones who can't conceive of a world without rulers are being replaced by young ones who say "Why are we putting up with this?" The massively centralized nation states that you consider to be "improvements" have killed upwards of 200 million in the 20th century alone. That is a disaster unequalled in recorded history and it directly attributable to statism, particularly the most dehumanizing varieties, socialism and communism. Yes, there will always be tyrants. The question is, is it inevitable that the vast majority accept their rule? The tyrants know that if the masses understand the way the world really works their power will evaporate, they will become irrelevant. They are so completely outnumbered their power rests on trickery and shows of aggression. That is why we have government schooling, to train us in the righteousness of being ruled.

>>>>However, at no time no where on Earth has an anarchy either survived or been successful.<<<<

And at no time on earth has there been such availability of information, ideas, or potential. If people understand that statism does not protect them, it is not their friend, it is their slavemaster they will recognize it and not allow it to gain a foothold. We almost had this same situation at the end of the Revolutionary War in this country but the Anti-Federalists were overcome by the Federalists and we see where that has led. It's time to go back and listen to Patrick Henry and the Anti-Federalists, to teach our children to be wise as serpents and recognize the lies and tricks of the state. One thing I have learned since I began reading history and home schooling is that the tricks of the state don't change much.

>>>> What is so great about that record that you wish to go back to it? <<<<

I am asking you the same question about statism. How many murdered will be too many? How many dumbed down by their own state will be too many? How much theft by "our leaders" will be too much? According to you, it all depends on whose ox is being gored..."participate" in the dialectic and gore the other guy first. Lovely.

I did not see V for Vendetta. I assumed that it must be a nonviolent film since you and Chins said you like it, and since Chins says he loathes force and that you recoil from force.

I didn't care for the violence, but did enjoy most of the non violent parts. You?

There needs to be a distinction between force and aggression (credit for this idea to Stephan Kinsella, an LRC-er I don't always agree with but is on target with this). We might use force to protect ourselves or to maintain our property or what we value. Aggression is taking the property of someone else or attempting to deprive someone else of liberty, their pursuit of happiness to suit our own purposes, or "for the good of all". The violence in V was gratuitous and vengeful. He responded to oppression with violence although we always have the choice to not respond with violence. The redeeming thing about the violence in "V" was that he recognized his own vengefulness and violence at the end, it is a morality play. You would like "V" very much, Friendly. You should see it.

JS, "Constitutional government is dead and has been for some time, Ron's denial notwithstanding, it is no longer part of the dialectic. The dialectic is (currently and simplified) democrat (socialism) vs republicans (mercantilism), massive state centralization are necessary for both so that issue is not even on the table. The dialectic goes between the two, the resulting synthesis with then proceed into the new dialectic. Those who enjoy politics enjoy the dialectic. That is why Ron can't stand the idea of doing away with political power (legalized aggression) awarded to the few. Power is like a drug."

Lady you can make more stew with one oyster than anyone I know. Ron, like any good engineer doesn't like to give away a highly efficient system that is theoretically sound in favor of a piece of pie in the sky made with one lone spoiled oyster.
Your retrogressive tyranny prone system has been tried thousands of times but but you can't come up with even one example where it has resulted in anything better than massice human misery. The two best outcomes with your and loveable lewies system is when it either isn't attempted at all or is overthrown almost at birth.
Ron

Well dumb me down. No wonder mom gave gifts of gold saying something like it'll someday be worth more than money.

Didn't know about Roosevelt's gold seizure..

Roosevelt outlawed gold. Was the silver removed from our coins by Johnson or Nixon? I can't remember.
Ron

Humpty Dumpty Was Pushed

Nixon ended the Bretton Woods agreement after an excess money supply in the 1960s caused foregin central banks to request that their dollar holdings be exchanged for gold.

This was called "settling"; when a central bank held too much of another nation's currency, that central bank could go to the central bank of the nation whose currency it held and exchange that currency for gold.
This was a way of making sure that one nation did not flood the world with paper currency which would inflate itself to the point of worthlessness.

Nixon suspended the convertibility of dollars into gold, meaning that foreign governments could no longer settle their debts for gold at the Federal Reserve.

Some of you might remember the very high interest rates of the late 1970s and early 1980s. President Carter is often blamed for this, but Fed Chairman Paul Volcker had to raise rates to that level in order to encourage savings and make the dollar more viable as a paper currency.

His successor, Alan Greenspan, did something unique in the history of American central banking. He lowered the cost of money (fed funds rate) lower than inflation. The surge in borrowing - and the real estate "boom" followed.

Americans followed their government's lead and took on massive debt. The dollar dropped like a stone and will keep doing so.

Devaluation of the dollar is American policy, and it is a good one when you are a huge debtor.

Nice post JS.

Some of you might remember the very high interest rates of the late 1970s and early 1980s. President Carter is often blamed for this, but Fed Chairman Paul Volcker had to raise rates to that level in order to encourage savings and make the dollar more viable as a paper currency.


To be precise, Volcker responded to bond yields rising precipitously in the open market. Petrodollar Warfare vis-a-vis OPEC's strategic maneuverings was the primary mover in the dollar's cascading decline which catalysized bond yields toward their parabolic rise. Carter was literally no more than a sitting duck.

Money manipulation is difficult to understand and I appreciate your insights. I well remember the Carter years and agree that he had little to do with the inflation during his reign.

His successor, Alan Greenspan, did something unique in the history of American central banking. He lowered the cost of money (fed funds rate) lower than inflation. The surge in borrowing - and the real estate "boom" followed.

The BOJ ( Bank of Japan's) fifteen year fight against deflation with 0% interest rates lowered the cost of money for U.S. debtors vis-a-vis the carry trade. This alone accounted for the housing bubble, soon to be the housing bust. Greenspan, who will go down in history as the world's most reckless central banker, was fortunate to have significant Treasury note demand through REPO's, coupon passes, China, Japan, along with nations who benefited from robust petrodollar reinvestments. If and when these entities decouple from their dollar/debt holdings (many suspect the process is well under way), the "maestro", Greenspan, will probably be safely in a bunker behind two million tons of reinforced concrete, cursing globalisation and the porous border to the south that conjoined to keep the jig going much longer than standard boom bust cycles have historically allowed..

That was most interesting. Now it seems to me that many foreign countries are deciding to finance their favorable balance of payments by holding instead of spending American dollars for American trade goods. Would you please comment?
BTW, where do you get your info? It sounds like good reading.
Ron Harrison

I was really interested in the answer to my question. Do you mind enlightening me?
Ron

Ron,

I get my information from many sources. My favorite interactive sources are found at, but not limited to:

http://itulip.com/

http://www.rgemonitor.com/ (setser's blog is excellent. so is nouriel's)

http://www.whiskeyandgunpowder.com/whitelist.html (Mike Shedlock's views on the credit bubble/deflation are very important, and should be paid attention to by every market investor)

http://www.minyanville.com/

http://www.financialsense.com/ (Financilasense's weekly roundtable transcript from the Big Picture is the best free resource on the net)

http://nowandfutures.com/ (excellent charts. bart compiles the best M3 data available on the net)

That was most interesting. Now it seems to me that many foreign countries are deciding to finance their favorable balance of payments by holding instead of spending American dollars for American trade goods. Would you please comment?

Ron,

I'm not exactly sure what you are asking. One of the problems with discussing economics is that there are so many different terms and usages; I get confused.

I'll try and address it - think of China, since China has a huge trade surplus with the USA. We spend American dollars on Chinese-made goods. These dollars go back to Chinese manufacturers and their ecmployees. Chinese people save a high percentage of their wages. These savings mean that the Chinese central bank(s) have a huge amount of dollars. They've recently been using this surplus to buy American Treasury securities.

"Buy American Treasury securities" is another way of saying "lend the US government money".

The USA doesn't really export that much (compared to what we import), so I am not sure what you mean when you ask about "holding instead of spending American dollars for American trade goods".

This leads to a decrease in the value of the dollar. It also gives foreign investors (in our example, China) a lot of ability to control interest rates in the USA, because they can simply sell their Treasury securities.

If they sell them, the market will be flooded with Treasury securities. The US government still needs to borrow (to run the country) so in order to get investors to buy the new securities (with the ones sold by China on the market) they will have to offer higher interest rates.

The effect for you and me will be that mortgage rates would go up. So would the costs for business borrwoing, so capital spending would drop even lower. It would be bad. (Unless you're a teacher)

I don't know if that answers your question.


BTW, where do you get your info? It sounds like good reading

Check out the site www.dailyreckoning.com. There is a discussion board and lots of good links. The book "Empire of Debt" was also quite informative.

Thanks to both of you. I recognise that homeschooling is one of the major subjects on this site. However at the level you two have raised this discussion I believe economics and finance is also a valuable part of what Mr. Gatto was discussing.
The fact is that the self selected elite of Rockefeller,Carnegie & Morgan as well as others have tried to steer us away from any knowledge that would be in our best interest to know.
Now Mattie, lets return to China before the Sun sinks low in the West?
Someone in China made shirts and sold them in the US for dollars. The dollar is backed only by its being legal tender in the US Market. The shirts probably were not sold for cash on the barrel head, certainly not in gold. The shirts were no doubt sold for some sort of what I believe is called commercial paper. In other words the seller received a piece of paper that was as good as paper dollars in the American market.
At that time the receiver of the paper made a decision. He could have bought his wife a plane ticket and sent her to the US on a shopping trip.
She could have purchased furs and diamonds for herself, trade goods to ship home to hubby that he could resell for Chinese currency or any number of other things.
Or, he could have spent those dollars for Chinese tooling, building materials or whatever to expand his business. Actually this does not explain why an imbalance of payments was created. It only complicates the chain of transactions.
Now, as you say he could also spend those dollars for T Bills or something. Again that only complicates the chain of transactions. There should now be a stream of dollars from the T Bills going to China to be returned to the US for trade goods.
I am sure we all recognise that American merchants (producers) are standing ready willing and able to sell goods for American dollars.
Visualize what should have happened to those dollars? According to Econ 101 (or is it 201?) those dollars should have been returned to our country for American trade goods.
The three of us are not fools. We recognise that most of that trade was conducted in accordance with international treaty. I still remember when Bill Clinton went to Vietnam and came back chortling over the great trade agreement he had gotten. The agreement had two features:
1. Vn could sell us all the goods it wanted in the US. Our borders were open to Vn goods.
2. We could invest all we wanted in Vn.
But I didn't hear a word about their buying any of our goods.
As I see it the foreign country is shipping its raw material plus the labor required to convert those raw materials to finished goods to the US in exchange for paper dollars which then mainly get siphoned off to Where?
Todate the US has received, I believe, trillions of dollars in trade goods. The foreign countries have amassed trillions of dollars in paper dollars that someday they can bring back and convert to purchases of our trade goods. If they do attempt that at this late date they will create a run away inflation that will render their paper dollars worthless. In addition the US government will step in to regulate the conversion of dollars to American trade goods so as not to create too big a mess in this country.
We all saw the Christian principles (Irony) followed by the European nations in dealing with China during the Opium Wars so I don't expect too much if they come to settle the trade deficit with us. However, militarily, they don't seem capable of treating us as they did China a little over a century ago.
There used to be a newspaper cartoon called "Things I'll Betcha." Let me try my hand at that.
I'll "betcha" that if you trace the money you will find that the material suppliers and the workers in those foreign countries with big surpluses have been the ones financing the surplus/deficits while the governments of those countries have pointed with pride to the surplus. In other words the surplus came out of the uncompensated work and material of the suppliers.
How am I doing so far??
Ron

Thanks to both of you. I recognise that homeschooling is one of the major subjects on this site. However at the level you two have raised this discussion n I believe economics and finance is also a valuable part of what Mr. Gatto was discussing. The fact is that the self selected elite of Rockefeller,Carnegie & Morgan as well as others have tried to steer us away from any knowledge that would be in our best interest to know.



I think Mr. Gatto does an excellent job discussing the “fourth purpose” of compulsory schooling. I also think that there is so much interplay between education, consumerism, television and other parts of American life that we sometimes use too much energy trying to figure out how much of modern society is/was some sort of elite scheme. I am of the opinion that “things are what they are” and the path they took to get there is much less important than where things will go in the future. As the saying goes, “You can’t change the past”.

I suspect that with some reflection, most people would agree that elites (in any society – royalty in a monarchy, elected leaders in a democracy, and so on) do not want freedom for the masses. It just doesn’t make sense for people in a position of advantage to forego that advantage or to seek to give it away. Expecting a government official (in any nation) to relinquish power or use less power than they can is like expecting the CEO of a company to change roles with an associate. The latter sounds ludicrous; why do we expect the former? What is it about government in America that we expect benevolence and altruism when we’ve not seen that in the past, anywhere? That must be part of the indoctrination of compulsory schooling.

Noam Chomsky does a great job discussing US foreign policy from this standpoint in his book “Understanding Power”. He touches briefly on education and his conclusions accord with Mr. Gatto. Chomsky is a professor of linguistics at MIT, and one of the world’s foremost authorities on mass media and communication. I don’t care too much for his political stance and activism, but he, more than anyone I’ve ever read – understands and analyzes the dynamics of the relationship between elites and others. His work gives additional perspective to Gatto’s work.


Now Mattie, lets return to China before the Sun sinks low in the West? Someone in China made shirts and sold them in the US for dollars. The dollar is backed only by its being legal tender in the US Market. The shirts probably were not sold for cash on the barrel head, certainly not in gold. The shirts were no doubt sold for some sort of what I believe is called commercial paper. In other words the seller received a piece of paper that was as good as paper dollars in the American market. t that time the receiver of the paper made a decision. He could have bought his wife a plane ticket and sent her to the US on a shopping trip. She could have purchased furs and diamonds for herself, trade goods to ship home to hubby that he could resell for Chinese currency or any number of other things. Or, he could have spent those dollars for Chinese tooling, building materials or whatever to expand his business. Actually this does not explain why an imbalance of payments was created. It only complicates the chain of transactions.



The imbalance comes from Americans buying Chinese goods, while the Chinese do not buy nearly as much in the way of American goods. It doesn’t really matter if the payment is in cash or not. As long as “dollars” are exchanged, even if they are electronic dollars wired between banks, backed by a letter of credit, the economic impact is the same. Chinese typically save a high proportion of their money, so their central banks have significant capital to invest; they often choose US Treasuries.


Now, as you say he could also spend those dollars for T Bills or something. Again that only complicates the chain of transactions. There should now be a stream of dollars from the T Bills going to China to be returned to the US for trade goods.



Let’s look closer. A T-Bill (or any Treasury security) is US government debt. In other words, we have to pay interest on it and repay it at some point. In other words, American assets (your dollars, my dollars, Americans’ dollars) are going out of the country and coming back as liabilities - US government debt. This is what happens when Asian central banks use the dollars we spend on Asian goods to buy US Treasury securities.





I am sure we all recognise that American merchants (producers) are standing ready willing and able to sell goods for American dollars. Visualize what should have happened to those dollars? According to Econ 101 (or is it 201?) those dollars should have been returned to our country for American trade goods.



We don’t make very much in this country, and even less for export. 73% of our GDP in consumption. Simply stated, “you can’t spend and get rich”. I believe that our most exported commodity is, ironically, nuclear power plants and related parts. (Not sure on that)


The three of us are not fools. We recognise that most of that trade was conducted in accordance with international treaty. I still remember when Bill Clinton went to Vietnam and came back chortling over the great trade agreement he had gotten. The agreement had two features:
1. Vn could sell us all the goods it wanted in the US. Our borders were open to Vn goods.
2. We could invest all we wanted in Vn.
But I didn't hear a word about their buying any of our goods.




I went to Vietnam last year and spent a week in Hanoi. It was really something. That country is so poor! At least the cities in China are nice; there is a Rolls Royce dealership in Shanghai, and lots of luxury houses, nice restaurants, etc. Hanoi has about three nice blocks; the colonial French influence is still felt to an extent, so a few blocks in the city look like New Orleans Garden District (pre-Katrina) or the French side of St. Martin. There are very few cars in Hanoi; the people get by on scooters, mostly. There was one mall downtown, and it looked like the kind of mall the USA had in the 1960s. There were a few electronic goods: TVs, maybe even an I-Pod or two, but that was for westerners who worked there. No Vietnamese was buying that stuff.

So the trade agreement may in fact be bilateral, but there is no basis for an assumption that an VND (Viet Nam Dong, their currency) is going to find its way into the US in any meaningful way. Vietnam is still a country where people work on the rice paddies and grow other food, and then at night, they bike into the city to sell their crops in the market. They are 100+ years behind us in most of the country. (Ho Chi Minh city, formerly Saigon, is supposed to be more western, and there are some nice coastal resorts. But Hanoi is the Capital, and it is assuredly a dump.) As such, this is a trade agreement whereby our nation will benefit from the plentiful nimble fingered pre-teen seamstresses making clothing for 2 cents a day, but they will have far less benefit. Furthermore, their own government, a top-down Socialist structure, will not be clamoring to give any more freedoms to their citizens. American investors win big time; typical Americans might save a few pennies here and there, and the average Vietnamese gets zilch. Again, people in positions of advantage are not apt to give them up.


As I see it the foreign country is shipping its raw material plus the labor required to convert those raw materials to finished goods to the US in exchange for paper dollars which then mainly get siphoned off to Where?



The foreign country usually ends up with lots of money in its central bank – either through accumulation of savings or through socialist redistribution, whereby the banks seem to do well.


Todate the US has received, I believe, trillions of dollars in trade goods. The foreign countries have amassed trillions of dollars in paper dollars that someday they can bring back and convert to purchases of our trade goods. If they do attempt that at this late date they will create a run away inflation that will render their paper dollars worthless. In addition the US government will step in to regulate the conversion of dollars to American trade goods so as not to create too big a mess in this country.



I am not sure what you mean. The paper dollars are being used to buy Treasury Securities, not trade goods, since there is very little that we export. It would be very GOOD for the dollar if we had lots of goods to sell to foreign investors, but we don’t – this wouldn’t cause inflation because there would be real demand for things we produce. Prices might go up, but this would be accompanies by real wage growth which matches the price increases.

Since we don’t have much in the way of desired trade goods, they buy debt.

Here is where it gets interesting (to me): Interest rates in the bond market, like anything else, are a function of what interest rate the borrower has to pay in order to attract lenders. (Borrower = entity issuing the bond – can be a company or a government) This is why corporate credit ratings are so important. Companies with a good credit rating can borrow money at low interest rates, while companies with poor credit ratings have to pay high interest rates (like people). Companies which have very poor credit have to pay very high rates. These are often called junk bonds, since the rate of default is so high.

Governments work the same way. There is no formal credit rating for governments, but there is still the ability to attract investors. Investors won’t go near a government security or bond that has a high rate of default.

The US government borrows trillions of dollars in order to finance operations and obligations. The rate of interest charged on treasury securities is a function of investors’ desire to buy them. The desire of Asian central banks to invest in low-interest rate US bonds meant that the Federal Reserve was able to keep the fed funds rate low – to most consumers this means that banks were able to issue low rate mortgages and car loans. If Asian investors lose their desire to buy US Treasuries, the US government still needs to borrow money in order to fund operations and obligations. In order to borrow the money, the US government will have to issue bonds at a higher interest rate (to attract more investors). This will have the ancillary effect of raising the interest rates that matter to most Americans, which will drive down house prices dramatically. In response, the US government could simply fire up the printing press and issue more dollars to pay the debts. This will lead to howling inflation. There are a few interesting outcomes. None that I can see are good. Maybe someone else can add more information.




We all saw the Christian principles (Irony) followed by the European nations in dealing with China during the Opium Wars so I don't expect too much if they come to settle the trade deficit with us. However, militarily, they don't seem capable of treating us as they did China a little over a century ago.


I think the conclusion will just be to sell off the Treasury securities, not to initiate military conflict.



There used to be a newspaper cartoon called "Things I'll Betcha." Let me try my hand at that.
I'll "betcha" that if you trace the money you will find that the material suppliers and the workers in those foreign countries with big surpluses have been the ones financing the surplus/deficits while the governments of those countries have pointed with pride to the surplus. In other words the surplus came out of the uncompensated work and material of the suppliers. How am I doing so far??


You might be right, and while this may reveal their hypocrisy, it doesn’t change the dynamics of the economic situation for us.

Matty,
You are doing great so far. How, let's think about your last statement, "You might be right, and while this may reveal their hypocrisy, it doesn’t change the dynamics of the economic situation for us."
That is a very interesting statement. If the US is willing to accept the economic and political status quo there might be nothing more to say.
I think we need to look at the world in light of the writings of Lee Harris and Mark Philips. The possibilities of doing so are enormous.
First, I don't accept that American producers are refusing to sell abroad. Since the 50s our producers have been constantly discouraged from making the attempt by the many hurdles placec in their way.
When I was in manufacturing we constantly heard of the barriers to trade erected by the foreign governments. In those days our government acquiesed due to our desire to win allies against the Soviet. When I studied tax accounting I found that even the US tax code was tilted in favor of the foreign company.
We are leaving two huge social movememts going on in the modern world even after setting aside the expanionist tendencies of the modern Moslem countries.
If you read Mark Philips you will find that the total number of totalitarian government have decreased significantly durning the past 30 years. Their demise is not accidental according to ambassador Philips they are contrived by the governments of the West.
The other movement is much quieter but much more forceful. Since about 1900 AD our industrial world has become high tech enough that employers in both capitalistic and socialistic countries have increasingly preferred the workers on the high end of the IQ curve. As a result those workers have been coming into community. The early reports indicate they prefer the Red States to the Blue. The Blue has nothing to offer them.
IMHO, even this site is indicative of the High IQs coming together.
I further believe that the homeschooling movement is just the point of the spear in re the changes that are coming.
Ron

Inflation seems the inevitable choice, especially in light of the war and planned wars. Money will have to be printed because people won't tolerate paying taxes for wars they don't want.The taxation will be hidden, postponed. Inflation also seems a logical choice due to the retirement accounts soon to be redeemed by the boomers.

Mike Shedlock furthers an excellent argument that supports a deflationary outcome relative to our present debt/credit bubbles. It's worth copying and reading several times over.

Shedlock article

This is even better:


Shedlock Q&A's

That was refreshing. I have bookmarked it.
Ron

Hi, and thanks to whomever posted the Shedlock links. Some time ago I talked of a deflationary outcome (not on here, among friends. I am new here).

I am now convinced of a different outcome, and want to share a few things. First, many posters talked of a Fed bailout for "banks and hedge funds". This is misleading; a hedge fund is an essentially unregulated investment vehicle for investors with large risk appetites. There will be no Fed bailout of hedge funds. A hedge fund called Amaranth recently lost $6BN on bad natural gas investments. Tough luck!

This is relevant for another reason, which I now discuss. Hedge funds do play an interesting role in the mortgage biz, though. Shedlock and others reference the idea that there will be massive mortgage defaults and that this will hurt banks. This seems intuitive, but is only part of the story. Banks issue mortgages to home buyers (the "primary market") and then package them for sale in a "secondary market". They are bought in huge chunks, say $1BN at a time. Secondary market investors include large investment banks (who then re-sell them to investors as if they were corporate debt) and of course hedge funds. The impact of the hedge fund in creating capacity is noteworthy; someone should compare it to the surge in reinsurance capacity created by the markets after 9/11. I digress...

These secondary market entities are sophisticated financial engineers who price away risks, and hedge what they cannot price with swaps and derivatives and other instruments. (I used to do things like this for a living.)

Thus the end investor in these securities ends up holding the bag. (it might be another hedge fund or another sophisticated investor; it's not an individual, unless ultra-high net worth, who is buying a pool of these securities). The primary lender has long since gotten the risk off its books, so the defaults don't hurt the primary lender that much. Nor will they hurt the Fed or any other government agency, as the risk is transferred to the markets by investor appetites for these securities.

OK, my other contention:

Shedlock mentions that he thinks there will be an attitude reversal, meaning that Americans will begin saving more and more. I disagree, and here is why:

Shedlock correctly notes that if people start saving more, it will increase the value of the dollar. However, for a nation whose citizens are in considerable debt, this is not a desirable outcome. Americans will protest the idea of having to pay off their debts in strengthening dollars. In fact, taking on huge debt is GOOD policy if you expect the value of the currency to decline. Americans will howl to their lawmakers if they feel themselves being crucified on a cross of strong paper dollars.

We may see a situation where the Fed raises interest rates to "encourage" savings. I see this as far more likely than Shedlock's assertion that such a "psychological shift" will occur. The psychological shift that caused people to stop entering lotteries for Florida condos was not some nebulous psychological "occurrence" but rather apprehension of increasing interest rates and the impact on the real estate market.

In other words, markets make opinions, not vice versa. And Fed policy makes markets.

Thus if the Fed raises interest rates, people will intuitively save more. (If your bank offered you 12% on your savings account, you'd save too). If this happens, you might see a shift in policy, and you might even see deflation. But Shedlock is, in my opinion, incorrect to assert that it will just "happen".

People react to the central bank, not vice versa. When Greenspan lowered interest rates below the level of inflation, people went crazy on borrowing. (Of course they did). If rates go up up up, people will go crazy on saving. It's really that simple.

The yield curve (for bond investors, mostly) is currently inverted, meaning that investors expect interest rates in the distant future to be lower than those of the present. (Usually the yield curve is the opposite, which is why the current situation is called "inverted".

I disagree. I expect the Fed to raise rates.

>>>Thus the end investor in these securities ends up holding the bag. (it might be another hedge fund or another sophisticated investor; it's not an individual, unless ultra-high net worth, who is buying a pool of these securities). The primary lender has long since gotten the risk off its books, so the defaults don't hurt the primary lender that much. Nor will they hurt the Fed or any other government agency, as the risk is transferred to the markets by investor appetites for these securities.<<<<

What do you think is the likelihood of the end investors being left holding the bag being primarily pension funds? Thanks for your input. I agree competely that people's spending/saving is market driven.

JS, That was a bunch of stew to make of one tainted oyster. "Planned War" now you are reading minds or do you have a pipeline into the Pentagon? Or did you just pull something out of thin air that sounded good to you? You have absolutely no regard for fact or logic.
Ron