Archive for June, 2013

The Jeffersonian

I ran across a post last night that asked why Edward Snowden gets more attention than William Binney, who has warned us about NSA’s domestic spying since he resigned from the agency in 2001, shortly after the 9/11 attacks. The post’s author seemed a little indignant that Snowden’s notoriety so surpasses Binney’s. It’s also interesting that no one has called for Binney to be prosecuted as a spy and a traitor, even though the warning from both individuals amounts to the same thing: the NSA is conducting domestic surveillance on a scale that goes way beyond what our Constitution permits. They both say we should be concerned about that.

So why does Snowden receive more attention than Binney? Civil disobedience is more dramatic and even spectacular than simple warnings. Glenn Greenwald, The Jeffersonian, and many others have all issued similar warnings for a long time, but Snowden’s documents from…

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Here We Go Again

The week before last, Federal Reserve Chairman Ben Bernanke emerged
from a Federal Open Market Committee (FOMC) meeting and proclaimed that the FOMC came to the conclusion that it may be “appropriate to moderate the pace of (bond) purchases later this year” if the economy continues to improve.  Mind you, he didn’t say the Fed would syphon liquidity out of the economy, simply that it might cut back on its buying of bonds if conditions warranted it.

What happened next was remarkable.  The price of gold dropped $100 an ounce, silver was down 8 percent, the yield on 5 year U.S. Treasury bonds surged by its largest percentage ever, and over a two day period the Dow lost more than 500 points.

Arguably, Bernanke and the FOMC are America’s version of the old Soviet Politburo – central economic planners that thwart the will of the market.  By having ultimate and unfettered control of monetary policy this small economic oligarchy has practically complete control of our economy. The question is, why do we tolerate this?

It’s not just what the Fed chairman says that is a problem; it’s what he does that is even more intolerable.

Albert Einstein use to say, insanity is “doing the same thing over and over again and expecting different results”.  Under this definition, Bernanke is insane.

He has made no bones about the fact that his policies since 2008 were meant to make Americans feel more prosperous so they would start spending again and stimulate the economy back to good health.  In essence, his goal was to re-inflate the housing and stock market bubbles.  According to recent statistics he has done just that.

Nationally, the median price for existing single-family homes was $178,900 in the fourth quarter of 2012, up 10 percent over the same period in 2011.  This marked the greatest year-over-year price increase since the fourth quarter of 2005.

Southern California, Silicon Valley, Washington D.C., and New York City are all experiencing huge real estate booms with prices for pre-construction condos in Manhattan increasing on a bimonthly basis.

There is even a farmland bubble taking place in the Midwest and Mountain states with non-irrigated cropland prices increasing on average by about 18 percent.

In terms of the stock market, it’s no secret that the Dow has surpassed its previous high.  Given Bernanke’s remarks and the subsequent crash of the Dow last week, there is clearly causation between Fed pumping and stock market performance.

But, in all of this “good” news there are reasons to believe that Bernanke’s policies are leading us to another crisis.  Unemployment and underemployment are still high and incomes are down, so where is the money coming from to cause real estate prices to rise dramatically?    It is from speculators and Wall Street firms eager to invest the cheap money they’ve gotten from the Fed.  The problem is that all that cheap money will cause over-investment in the housing market – the production of more homes than are needed.  Once that happens and interest rates rise the bust will come leaving mom and pop homeowners once again holding mortgages against falling property values.

And there is a big reason to be concerned about the booming stock market.  Buying stock on margin reached an all-time high in April at $384.3 billion.  Historically, whenever margin debt has exceeded 2.25 percent of GDP the market has crashed.  This happened in 1929, 2000, and 2007.  Does this mean the market will crash soon?  No one knows for sure, but one thing is certain, Bernanke’s easy money has clearly re-inflated the stock market bubble, setting up mom and pop investors for another dramatic crash.

Thus, Bernanke has been successful in attaining his goal of re-inflating both the housing and stock market bubbles.  However, his policies have not produced an economic recovery as he believed.  In fact, they have brought us to the brink of another crisis.  It’s no wonder since he employed the same approach that produced economic crisis in the past.

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Economic Illiterates Pounce on Wal-Mart Again

The Wal-Mart haters are at it again.  The token lefty at Forbes.com, Rick Ungar, has a piece on that site accusing the nation’s largest private employer of amassing huge profits at the expense of American taxpayers.  Citing a report issued by the Wisconsin Medicaid program, Ungar claims that for every 300 employee Wal-Mart Supercenter store in Wisconsin alone the company’s “sub-poverty” level wages costs American taxpayers about $904,000 per year.  The total is the result of government subsidized health care and housing, and food stamp payments needed to keep families afloat financially.

It’s the same tired old story with a new twist – not only does Wal-Mart harm its workers, but it is a financial burden to taxpayers as well.  What’s even more alarming is that California and other states are considering fining employers like Wal-Mart up to $6000 for every employee of theirs that ends up on state subsidized health care plans.

In the first place and at the foundation of the issue is the fact that no one is forced to work for Wal-Mart and accept the company’s so-called “sub-poverty” wage.  The last time I checked the 13th Amendment to the Constitution banned slavery and involuntary servitude.  If workers don’t like the wages they receive or can’t make ends meet working at Wal-Mart, they can look for work with another employer.

But many do not and thus we have the crux of the problem.  Retail jobs require few if any advanced skills and they certainly do not require a college degree.  Thus, they don’t pay very well.  Traditionally, they have been ideal starting positions for young folks to give them work experience and gas money.  I remember applying for my first job with a family pharmacy when I was 16.  The toughest question I encountered during the interview was, what is the final price of an $.89 box of cough drops if the sale price for the day is 10 percent off?  And today, retail clerks have it even easier as all they have to do is pass the item over a scanner to get the final price.  The bottom line is that retail positions are not made for folks who are supporting families or have adult commitments.  Customarily, folks with these responsibilities have turned to manufacturing and professional jobs.

However, the great irony is that the myriad federal and state regulations which were meant to benefit workers have actually hurt them more by chasing jobs overseas to lower cost venues.  Since 1979, when manufacturing jobs in America peaked at 19.5 million, we have lost close to half of them to overseas competition.  Currently, about 11.5 million Americans work in manufacturing jobs which is the lowest amount since 1941. Now, with far fewer manufacturing jobs for workers to turn to, the same folks who gave us this condition are demanding that retailers raise their wages so workers can meet their financial responsibilities.  But, it doesn’t work that way.  In our economic system, Wal-Mart pays wages based on what the market will bear.  Instituting a higher minimum wage or mandating that retail companies provide health care coverage for their employees will cause more unemployment and hurt the very people those directives were meant to help.  We are already seeing Wal-Mart and other companies gearing up for Obamacare by cutting employee hours to circumvent the law.

In the final analysis, hasn’t government intervention in our economy done enough harm already?  Besides obliterating our industrial base through enormously costly regulations, the Federal Reserve has destroyed the purchasing power of the dollar by monetizing huge sums of federal debt and expanding the money supply ad infinitum .  The very commodities that the working class spends so much of their disposable income on – health care, housing, and food are the very things that have increased in price the most.  More federal and state mandates will only make the matter worse.  We need a return to free markets and sound money.  Folks literate in economic theory understand this.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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Teacher was Right to Warn Students About Drug Survey

Back in 1999 when my wife and I taught at a public high school in North Carolina, she came across an opportunity to put into action material she had just taught.  Fresh from teaching a unit on the Bill of Rights, as she wondered through the administrative office area of our school one day, she noticed a meeting between the vice-principal, the school’s resource police officer, and one of her students.  Without hesitation, she took full advantage of what teachers refer to as a teachable moment by ducking her head into the office and reminding her student that he had a constitutional right to remain silent under the 5th Amendment.  For her efforts, my wife received a sneer from the police officer and nothing more was made of the matter.

Let’s fast forward to 2013 and the tale of another public school teacher taking advantage of the same exact teachable moment.  A short while after teaching a unit on the Bill of Rights, John Dryden, a social studies teacher at Batavia High School in Illinois, picked up a stack of surveys from the school office for his students to complete.  Noticing that his students’ names were on the surveys and the surveys had questions asking about drug and alcohol usage, he reminded his students that they had the right to not incriminate themselves guaranteed by the 5th Amendment.

For his admonition, Dryden was docked a day’s pay, charged with “unprofessional conduct”, and had a letter of remedy outlining probationary actions he must complete placed in his file.

What a difference 14 years can make?

The above illustrates just how perverted the public school system in America has become.  Whether you are a teacher or a student, if you deviate from the Establishment order, you will pay a heavy price.  This includes arresting 12 year olds for doodling on desks and suspending 7 year olds for biting PopTarts into the shape of a gun.

In handing down the punishment on Dryden, the school board president Cathy Dremel indicated that he “mischaracterized” the intentions of school administrators with regards to the survey.  According to Dremel, the intention was not to invade the privacy of students but to focus attention on specific student needs.

Unfortunately, that focus was on actions (drug and alcohol usage) that are illegal and whether school officials and resource police officers like to admit it or not, they are a part of the government apparatus charged with making sure the law is adhered to in the public schools.  Thus, there is no guarantee that a student answering in the affirmative to illegal drug usage would not be charged with a crime.

Now, it could be argued that school officials at Batavia High School would have no way to address student needs without the cooperation of teachers and students on the survey.  Many kids could be lost to drug addiction or worst.

But, the current circumstances not the Bill of Rights impede a school’s ability to do that. If school officials want to truly help students with these types of problems they should push for ending the War on Drugs.  Then we can treat drug abuse not as a criminal matter but like the medical issue that it is.  Then, students could answer questions frankly and potentially receive the help they need.
At the end of the day, all Americans enjoy the right to not incriminate themselves guaranteed by the 5th Amendment.  Public school officials should not be allowed to ignore this right or punish those who teach it.

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