Gordon Long Video Interview of Mish: Topic - Financial Repression (and How to Defend Yourself From It)

I had the pleasure of being interviewed by Gordon Long last week. Gordon is publisher and editor of Gordon T Long Macro Analytics.

The topic was "Financial Repression".

What is financial repression? I defined it as "a set of fiscal and monetary policies for the expressed benefit of the ruling class: politicians, banks, and the already wealthy, at the expense of everyone else."

In the video, I give numerous examples of repression, noting that central bank sponsored inflation is the epitome of financial repression.

We also discuss what to do about financial repression.

The video is about 30 minutes long.



There is one chart in the video that Gordon used to reflect a point I made on inflation. The chart is from Shadowstats, a methodology to which I disagree.

I do believe inflation statistics are a mess but in different ways than Shadowstats. I talked about this recently in my blog Housing Prices, "Real" Interest Rates, and the "Real" CPI.

Also consider GDP, Real GDP, and Shadowstats "Theater of the Absurd" GDP.

Other than that single chart, Gordon did an excellent job of putting together visuals to accompany our video discussion.

Again, it was a pleasure to be on with Gordon. See the link at the top for additional views on financial repression.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Tensions Mount in Hong Kong as Protest Enters 5th Day

Protests in Hong Kong entered the 5th day with no sign of letup.

The protest movement followed a controversial decision in which candidates for chief executive of Hong Kong in the 2017 elections be made by a committee, rather that a general election. Election by committee is billed as "election reform".

Protests intensified after police used teargas in an attempt to disperse student protesters. Pro-democracy protesters now number in the hundreds of thousands. The protesters demand a free election and the resignation of Hong Kong’s current chief executive CY Leung.

This is the greatest mass protest in China since the Tiananmen Square Protests of 1989.

Beacon of Hope

Bloomberg comments on Hong Kong Autonomy

Hong Kong is an island of free speech and civil liberties in an authoritarian sea. It is not, however, a democracy. Hong Kong citizens have never had the power to choose their top leader, neither as part of China since 1997 nor as an outpost of the British Empire for 156 years before that. Now the prospect of the first direct election of a chief executive in 2017 is increasing the tension between Hong Kong’s yearning for autonomy and China’s for loyalty.

Tensions Mount

The Financial Times reports Tension Mounts in Hong Kong as Police Mass.

The stand-off between the authorities and demonstrators calling for the resignation of Hong Kong’s chief executive CY Leung had continued for a fifth day ahead of the midnight deadline given by demonstrators for Mr Leung to stand down.

The huge protests have been going on since Sunday as crowds flocked to join the democracy movement calling on China to reverse course on a controversial plan for electoral reform in the territory.

On Thursday night students blocked a road to Mr Leung’s office as they prepared to escalate their campaign, while the road to the chief executive’s office in the Central district was cordoned off at both ends by the police.

Hong Kong Leaders Will Open Talks With Protesters

Bloomberg reports Hong Kong Leaders Will Open Talks With Protesters.

Hong Kong’s top official Leung Chun-ying appointed his deputy Carrie Lam to hold talks with leaders of pro-democracy protesters who have crippled parts of the city for the past week.

Chief Secretary Lam will discuss constitutional reform, said Leung, who reiterated he won’t resign. Student leaders also urged thousands camped outside government offices to keep calm after they earlier threatened to besiege more buildings if Leung didn’t quit by midnight.

The messages from both sides were the most conciliatory since tens of thousands of mostly young people began rallying on the city’s streets to demand democracy and Leung’s resignation. Student leaders said earlier last night that they would be prepared to speak to Lam, as tensions grew and police warned protesters they would deal firmly with any escalation.

Police Draw the Line at Occupation, Stockpile Teargas in Government Buildings

Messages may be conciliatory, but Hong Kong Police Draw Line on Occupation of Buildings. Police also stockpile teargas in government buildings.

“Some organizers have threatened to escalate their actions by surrounding government buildings,” Hui Chun-tak, chief superintendent of the police public relations branch, told reporters today. “Police will not tolerate any illegal surrounding of government buildings. The police urges protesters to remain calm and show restraint.”

Around 4 p.m., police were seen carrying boxes and canisters into the government complex, with at least one box labeled as containing tear gas. Student leader Joshua Wong said police appeared to be stockpiling gear, including gas, rubber bullets and pepper spray, in preparation for taking action. 

Leung has made three public appearances, including a televised address, since police fired tear gas at protesters on Sept. 28. He arrived by boat near the main protest area yesterday to attend a flag-raising ceremony for China’s National Day. He spoke for less than four minutes, urging the community to “work with the government in a peaceful, lawful, rational and pragmatic manner.”

Wong, founder of the student activist group Scholarism, told a crowd yesterday that if Ip wants to talk, she should come down to the protest site and address everyone.

Talks with the protesters are impossible if the pre-condition is the resignation of Leung, Jasper Tsang Yok-sing, president of the the city’s Legislative Council, said in a press conference today.

In Pictures: Hong Kong's Democracy Standoff

Bloomberg has an interesting 16-image slideshow on Hong Kong's Democracy Standoff

Here are a few of the images.



Demonstrators shine lights from their mobile devices as they hold them aloft during a ongoing protest outside the central government office in Hong Kong, on Oct. 1, 2014.



Demonstrators shine lights from their mobile devices outside the central government office in Hong Kong, on Oct. 1.



Demonstrators shelter under umbrellas during heavy rain storm outside the central government complex, on Sept. 30.


 
Lightning strikes as demonstrators gather outside the central government complex in Hong Kong, on Sept. 30.  

All images by Lam Yik Fei/Bloomberg.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Federal Judge Smacks CalPERS on Sanctity of Pensions; CalPERS Liens Null and Void

Exceptionally good news from California today: A federal judge ruled CALpers claim of "Sanctity of Pensions" is invalid. Today's ruling went even further than the bankrupt city of Stockton originally sought in court.

For details, please consider the New York Times article In Ruling on California Town’s Bankruptcy, Judge Challenges Sanctity of Pensions.

A federal bankruptcy judge on Wednesday upended the widely held belief that public workers’ pensions have a special status in California that makes them impossible to cut, further chipping away at the idea that pensions are sacrosanct in a municipal bankruptcy.

The ruling, which came during a hearing on a plan by the City of Stockton to exit bankruptcy, did not order the city to cut its pension plan or take any specific action. The judge said that he needed more time to reflect on Stockton’s situation and that he would decide Oct. 30 whether the city could emerge from its two-year bankruptcy or whether it still had more work to do.

But the decision, by Judge Christopher M. Klein of the Eastern District of California, dealt a blow to California’s giant state-led pension system, known as Calpers, which has been leading efforts to preserve defined-benefit pensions nationwide.

Calpers had argued that if Stockton stopped making payments and dropped out of the state pension system, the lien would let it claim $1.6 billion of its assets. But Judge Klein said those statutory powers were suspended once a California city received federal bankruptcy protection.

“Why should I take that lien seriously?” he asked a lawyer for Calpers, Michael Gearin. “I may avoid it as a black-letter matter of bankruptcy law,” he said, referring to well-established legal principles.

He did not dispute that Stockton would be billed $1.6 billion to leave Calpers and said such a termination fee “can be seen as a golden handcuff.” But in bankruptcy, he said, Stockton could legally refuse to pay the bill because it arose from the city’s contract with Calpers, and contracts are broken routinely in bankruptcy.

“The bankruptcy code provides that the lien can be avoided and be treated as an unsecured claim,” Judge Klein said.

In court proceedings in July, Judge Klein said it was not clear to him that Calpers was even a creditor. He adjourned the hearings until the city and other parties could brief him on Stockton’s relationship with Calpers.

Bizarre Position of Stockton’s lawyer

One has to wonder just what side  Stockton's lawyer is on.

In oral arguments on Wednesday, Stockton’s lawyer, Marc A. Levinson, said that for Stockton to switch to another retirement plan administered by a different entity would probably take two years, and in the meantime all the city’s workers were likely to quit. Their first choice would be to seek similar jobs in cities that were still part of Calpers, he said, adding that he thought Calpers was a more efficient plan administrator than any other entity Stockton might try.

The idea that the entire city force would quit is lunacy. Moreover, it would be a good thing if they did! 

All Stockton need do is submit a bankruptcy plan that stipulates employees lose 100% of their benefits if they quit before some stipulated date. How many would leave? None.

The position of Stockton's lawyer is so bizarre, one wonders if he is attempting to protect his own pension.

Stockton does not need another defined benefit retirement plan. Rather, it needs to eliminate the one it has. And this excellent, common-sense ruling from Judge Klein paves the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Argentine Central Bank Chief Quits in Currency Dispute; Hyperinflation On the Way?

On Tuesday evening, Argentine President Cristina Fernández accused Juan Carlos Fábrega, head of Argentina’s central bank, of "provoking a devaluation of the peso".

In response Head of Argentine Central Bank Quits.

Without naming Mr Fábrega directly, Ms Fernández accused the central bank during a nationwide address on Tuesday night of failing to control “manoeuvres” by banks and brokers to provoke a devaluation of the peso, and suggested that “privileged information” had been leaked.

After continual clashes over economic policy with Argentina’s economy minister Axel Kicillof, there are fears that Mr Fábrega’s departure may clear the way for greater government control over the central bank.

“Kicillof has increased his power, he will have a bigger say on monetary issues and we should expect an acceleration in the pace of the worsening of financial conditions,” said Miguel Kiguel, who runs the EconViews consultancy.

There was a sharp sell-off in the benchmark Merval stock index after Mr Fábrega’s departure was announced. But Luis Secco, an economist, argues that the central bank has been “absolutely subordinated” to the executive’s decisions “for a long time”.

Mr Fábrega leaves the central bank as annual inflation has climbed to around 40 per cent, and presided over huge monetary emission to finance a growing fiscal deficit, with negative real interest rates of about 20 per cent.

Argentine Central Bank “Absolutely Subordinated”

Inquiring minds may be seeking proof the central bank has been "absolutely subordinated for a long time".

Here's a chart that shows just that.

Argentine Peso vs. US Dollar



64% "Official" Decline Since July 2008

On July 31, 2008, the peso had been relatively stable an traded at 3.03 pesos to the US dollar. Today the peso trades at 8.45 to the US dollar. That's a decline of 64%.

Does a 64% decline constitute hyperinflation? No not quite. Hyperinflation is generally defined as a complete collapse in currency.

Nonetheless, such a decline does constitute severe inflation, especially since the decline has gone increasingly hyperbolic in the past two years.

Black Market Rate Shows 78% Decline

The black market exchange rate is about 14 pesos to the dollar. That's a decline of 78%. And that is arguably hyperinflation territory depending on how fast that decline occurred.

Here's a Black Market exchange rate chart form the Wall Street Journal as of the end of August.



Another Devaluation Coming Up

On September 5, the Wall Street Journal reported Argentina Moves to Limit Dollar Purchases.

Argentina limited the number of people who can buy U.S. dollars on Friday, following record demand for greenbacks amid fears that a debt default and hard-currency shortages could lead to a second peso devaluation this year.

Argentine taxpayers seeking to legally buy up to $2,000 a month are now required to have a monthly salary of at least 8,800 pesos ($1,046). The increase from the previous floor of 7,200 pesos comes amid growing concerns about the central bank's declining foreign-currency reserves.

Argentines have bought almost $1.5 billion since the program was launched in January, when the government devalued the peso by about 20% in an ultimately successful bid to halt a run on the currency and reserves. In just the first four days of September, taxpayers bought $147 million, compared with $260 million for all of August.

The dollar purchases speak volumes about where some Argentines think the exchange rate is headed because buyers pay a 20% tax on those transactions, which effectively means they are paying about 10.10 pesos for each greenback. The local Rofex futures market quotes the peso at 9.1650 to the dollar in December.

Argentines have few reasons to hold pesos. Benchmark deposit rates are at 21%, while inflation is widely believed to be nearly 40%. A black-market exchange rate of around 14 pesos to the dollar makes the official exchange rate of 8.41 pesos look overvalued and hurts confidence in the currency.

The government has been selling limited amounts of dollars to taxpayers to keep them from turning to an underground currency market that is feeding inflation and devaluation expectations. But the default has rekindled demand for U.S. currency, causing the black-market dollar rate to surge from 12.30 pesos in late July and leading people to buy more dollars from the government.

Spotlight on Exports

Argentina is generally perceived as a commodity exporter, especially grains. With that in mind, please consider Against the Grain

AGRICULTURE ought to be Argentina’s strength. Instead, incessant intervention has turned it into a source of weakness. The government has meddled in wheat production since 2006 by raising export taxes and setting export quotas. This interference, defended by the government as “protecting the tables” of Argentine consumers, has simply discouraged farmers from planting the crop.

The interventions show no sign of stopping. Last year’s unexpectedly poor wheat harvest caused the price of bread to double, prompting the government to suspend exports of the crop. Last month was the first December in 25 years that Argentina did not export any wheat.

Wheat production in Argentina has plunged—from nearly 16m tonnes in 2005 to 8.2m tonnes in 2013. Not all the intervening years have been terrible, says Santiago del Solar, an Argentine agronomist and farmer. There were decent wheat harvests in 2008, 2011 and 2012, as high international prices incentivised farmers to plant wheat despite the unpredictability of government policy. But with export restrictions becoming tighter and tighter, Mr del Solar has slashed the area he plants with wheat. He expects other farmers will do the same.

The retreat from wheat has devastated exports. According to the US Department of Agriculture, Argentina was the world’s fourth-largest exporter of wheat in 2006. By 2013, it had dropped to tenth place.

Exports Down, Prices Down Too

Not only are exports in tons down, prices are down even more.

Wheat



Things do not look promising for Argentina.

Four Signs Hyperinflation On the Way

1. Black market rates show a 78% increasingly hyperbolic decline 
2. Governments taking over central banks is a strong indication of futher trouble. 
3. That Argentine citizens willingly pay a 20% tax to escape the peso is another sign. 
4. A fourth factor is falling commodity prices.

If Argentina uses up all of its foreign currency reserves, it's lights out for the Argentina peso.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Yank Boomers Needn't Delay Retiring...in SE Asia

Need I say more?

To make an understatement, let's just say Yanks are not known for their long-term planning. As the earliest cohort of Baby Boomers is of retirement age, we are learning that years of debt-fueled overconsumption and secular declines in income have resulted in platoons of sixty- and seventy-somethings who barely have enough to live on. End result: they must continue working well into their so-called retirement years. They didn't save enough, their investments didn't pan out, or their expectations for living costs without real sources of income were on the optimistic side. Guess what's one of the faster-growing segments of the US labor force?

Short of borrowing the TARDIS from Doctor Who, I am afraid there's not much they can do about insufficient savings and poor returning investments (like housing). However, one thing they can actually do to retire before they reach the century mark or so is to go where the costs of living are lower than in the United States of America. For instance, they could retire in Southeast Asia. Given the popularity of sunny retirements destinations--Arizona, Florida, and Nevada come to mind--they can have all that and more in my backyard:

Southeast Asia is a remarkably beautiful and diverse region that is becoming much more welcoming to Western retirees. Southeast Asia's big appeal for foreign retirees is the cost of living. Several countries here are among the world's cheapest places to retire. Your money goes much further in this part of the world than in the United States or any other Western country, but that does not mean that the standard of living is necessarily lower. 

It is possible to stretch your retirement nest egg to enjoy a better lifestyle in Southeast Asia than you could afford anywhere else in the world. For example, in the United States you're probably paying at least $50 per month for reasonably fast Internet. In the Philippines Internet costs $12 per month, likely for faster speeds than you have now. In Thailand and Malaysia fast Internet is $18 per month.

Similar savings can be seen in the prices of everything from rent and phone service to cooking gas, electricity and groceries. A visit to the doctor costs less than $20 throughout most of the region, and the care you receive is likely to exceed your expectations. English-speaking doctors educated in Europe, Australia and North America are the norm. They work in hygienic offices with modern equipment and can be affiliated with modern internationally accredited hospitals. Thailand and Malaysia are among the top five countries in the world for medical tourism.

Speaking of which, just as many Southeast Asian countries are now promoting medical tourism, they are now also promoting themselves as retirement destinations for Westerners. They are aping Latin American countries in this respect:

Living in Southeast Asia full time is increasingly becoming an option for Western retirees. Several countries now offer user-friendly, affordable retirement residency programs, this region's answer to the pensionado programs that have attracted so many foreign retirees to key Latin American destinations. New programs offered by some countries in this part of the world directly appeal to foreigners looking for legal, long-term residency in retirement. Several countries waive any minimum monthly income requirements for long-term or permanent residency if you invest in a fixed-deposit account at a local bank. In countries where a monthly pension is required, the qualifying amount is often surprisingly low. 

The rest of the US News and World Report article goes into the specifics of retiring in Thailand and the Philippines in particular. To be honest, Westerners may find the law and order situation in Thailand and the Philippines wanting in some places, but hey, doesn't the same hold true for any number of locales Stateside? And, of course, retiring in the tropics sound rather more attractive than stocking shelves or flipping burgers at age 65. 

Congressman Rangel Calls for War Tax, Draft; Why Not Bomb the Entire Muslim World? Draft Worse Than Slavery

In a Time Magazine Op-Ed, Congressman Charles Rangel (Democrat from New York), a combat veteran says It’s Time for a War Tax and a Reinstated Draft.

While I am optimistic about our Commander-in-Chief’s strategy to defeat the Islamic State of Iraq and Syria, I voted against the Continuing Appropriations Resolution 2015 that would grant the President the authority to provide funds to train and arm Syrian rebels against the enemy. I opposed the amendment because I strongly believe amassing additional debt to go to war should involve all of America debating the matter. That is why I have called for levying a war tax in addition to bringing back the military draft.

Both the war surcharge and conscription will give everyone in America a real stake in any decision on going to war, and compel the public to think twice before they make a commitment to send their loved ones into harm’s way.

For a decade I have been calling for the reinstatement of the draft because our military personnel and their families bear a tremendous cost each time we send them to fight.

Draft Worse Than Slavery

Slavery is involuntary servitude. Is a draft anything less than slavery?

Actually, it's worse. You take a guy's freedom away, ship him overseas, give him a rifle, and force him to kill other people against whom he has no direct grievance, when the best such a person can ever hope for is to come back in one piece, years later, possibly with huge psychological stress after needless killing.

Rangel points out the "tremendous cost each time we send them [US troops] to fight" then proposes the stupidest solution possible, to force everyone to have the same opportunity.

I propose there can be no debate on a draft just as there can be no debate on whether we should revive slave trade from Africa.

Financing Wars

Rather than admit the stupidity of wasting $6 trillion in Iraq and Afghanistan and vowing to never do it again, Rangel proposes a War Tax.

The United States has borrowed almost $2 trillion to fund our military engagements on foreign soil. It is estimated that the total cost would be close to $6 trillion; we continue to pay a heavy toll for these conflicts. Each dollar spent on war is a dollar not spent on education, energy, housing, or healthcare. We cannot afford to tread this same path when we are slashing domestic programs that are the lifelines for so many Americans. I will soon introduce a bill that will impose war tax to ensure that we do not have to choose between further gutting the social safety net and adding to the $17.7 trillion of national debt.

Rangel was once Chairman of the House Ways and Means Committee.


Let's Bomb the Entire Muslim World

George Monbiot, writer for the Guardian, says "Humanitarian arguments, if consistently applied, could be used to flatten the entire Middle East".

Monbiot sarcastically asks Why stop at Isis when we could bomb the whole Muslim world?

Let’s bomb the Muslim world – all of it – to save the lives of its people. Surely this is the only consistent moral course? Why stop at Islamic State (Isis), when the Syrian government has murdered and tortured so many? This, after all, was last year’s moral imperative. What’s changed?

In Gaza this year, 2,100 Palestinians were massacred: including people taking shelter in schools and hospitals. Surely these atrocities demand an air war against Israel? And what’s the moral basis for refusing to liquidate Iran? Mohsen Amir-Aslani was hanged there last week for making “innovations in the religion” (suggesting that the story of Jonah in the Qur’an was symbolic rather than literal). Surely that should inspire humanitarian action from above? Pakistan is crying out for friendly bombs.

Is there not an urgent duty to blow up Saudi Arabia? It has beheaded 59 people so far this year, for offences that include adultery, sorcery and witchcraft. It has long presented a far greater threat to the west than Isis now poses. In 2009 Hillary Clinton warned in a secret memo that “Saudi Arabia remains a critical financial support base for al-Qaida, the Taliban … and other terrorist groups”.

The humanitarian arguments aired in parliament last week, if consistently applied, could be used to flatten the entire Middle East and west Asia. By this means you could end all human suffering, liberating the people of these regions from the vale of tears in which they live.

Yes, the agenda and practices of Isis are disgusting. It murders and tortures, terrorises and threatens. As Obama says, it is a “network of death”. But it’s one of many networks of death. Worse still, a western crusade appears to be exactly what Isis wants.

And if the bombing succeeds? If – and it’s a big if – it manages to tilt the balance against Isis, what then? Then we’ll start hearing once more about Shia death squads and the moral imperative to destroy them too – and any civilians who happen to get in the way. The targets change; the policy doesn’t. Never mind the question, the answer is bombs. In the name of peace and the preservation of life, our governments wage perpetual war.

While the bombs fall, our states befriend and defend other networks of death. The US government still refuses – despite Obama’s promise – to release the 28 redacted pages from the joint congressional inquiry into 9/11, which document Saudi Arabian complicity in the US attack. In the UK, in 2004 the Serious Fraud Office began investigating allegations of massive bribes paid by the British weapons company BAE to Saudi ministers and middlemen. Just as crucial evidence was about to be released, Tony Blair intervened to stop the investigation.

Last week’s Private Eye, drawing on a dossier of recordings and emails, alleges that a British company has paid £300m in bribes to facilitate weapons sales to the Saudi national guard. When a whistleblower in the company reported these payments to the British Ministry of Defence, instead of taking action it alerted his bosses. He had to flee the country to avoid being thrown into a Saudi jail.

There are no good solutions that military intervention by the UK or the US can engineer. Whenever our armed forces have bombed or invaded Muslim nations, they have made life worse for those who live there. The regions in which our governments have intervened most are those that suffer most from terrorism and war. That is neither coincidental nor surprising.

Yet our politicians affect to learn nothing. Insisting that more killing will magically resolve deep-rooted conflicts, they scatter bombs like fairy dust.

Fraud of Humanitarin Wars

For humanitarian reasons, 2009 Nobel Peace Laureate Barack Obama has bombed seven Muslim nations: Iraq, Syria, Afghanistan, Pakistan, Yemen, Somalia, and Libya.

The utter lack of interest in what possible legal authority Obama has to bomb Syria is telling indeed: Empires bomb who they want, when they want, for whatever reason (indeed, recall that Obama bombed Libya even after Congress explicitly voted against authorization to use force, and very few people seemed to mind that abject act of lawlessness; constitutional constraints are not for warriors and emperors).

It was just over a year ago that Obama officials [Sec of State John Kerry] were insisting that bombing and attacking Assad was a moral and strategic imperative. Instead, Obama is now bombing Assad’s enemies while politely informing his regime of its targets in advance. It seems irrelevant on whom the U.S. wages war; what matters it that it will be at war, always and forever.

Six weeks of bombing hasn’t budged ISIS in Iraq, but it has caused ISIS recruitment to soar. That’s all predictable: the U.S. has known for years that what fuels and strengthens anti-American sentiment (and thus anti-American extremism) is exactly what they keep doing: aggression in that region. If you know that, then they know that.

As the disastrous Libya “intervention” should conclusively and permanently demonstrate, the U.S. does not bomb countries for humanitarian objectives. Humanitarianism is the pretense, not the purpose.

On May 2, Glenn Greenwald wrote about The Fraud of Humanitarian Wars. "All wars, even the most unjustifiably aggressive, are wrapped in the same pretty rhetorical packaging."

Goering at the Nuremberg Trials

Please recall what Reichsmarschall Hermann Wilhelm Göring (in English his name is also spelled as Hermann Goering) Nazi founder of the Gestapo, Head of the Luftwaffe, said at the Nuremberg Trials.

Here is a clip of the interview in Goering's cell in prison, after the war.

Göring: Why, of course, the people don't want war. Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece? Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship.

Gilbert: There is one difference. In a democracy, the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars.

Göring: Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.

We Gotta Do Something!

Please note that all it took was a couple of beheadings for warmongers to get the rest of Congress behind bombing ISIS in Syria. And that's all it took for Obama to break his promise to get out of Afghanistan. Instead, we will be there until 2024 "at least".

For details, please see "Come Hell or High Water" Promise Morphs Into "Infinity and Beyond"

Public sentiment following the beheadings is "We Gotta Do Something!"

Indeed we do.

Instead of a draft coupled with a war tax, I propose we kick the warmongers out of office and stop all war funding except what's explicitly needed to protect US borders here, not half-way around the globe.

Unfortunately that goal is next to impossible. The industrial-military war machine backs every candidate who is in favor of perpetual war.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

The IMF on Infrastructure

The IMF endorses the free-lunch view of infrastructure spending. That is, an IMF study suggests that the expansionary effects are sufficiently large that debt-financed infrastructure spending could reduce the debt-GDP ratio over time. 

Certainly this outcome is theoretically possible (just like self-financing tax cuts), but you can count me as skeptical about how often it will occur in practice (just like self-financing tax cuts).  The human tendency for wishful thinking and the desire to avoid hard tradeoffs are so common that it is dangerous for a prominent institution like the IMF to encourage free-lunch thinking.