George Sarant

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Archive for September 2012

ACTS OF WAR

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The attacks on our embassies around the world are clearly being orchestrated. How did Al Qaeda flags suddenly appear all over the world at the same time? Contrary to what the administration is saying, this is not just about an obscure, anti-Islamic film. It is a coordinated assault on the United States.  It is now apparent that the Libyans provided advance warning three days before American personnel were murdered, but these warning were ignored. The Libyans themselves are more pro-American than just about anyone in the Muslim world. But there, as elsewhere, there is a Salafist fundamentalist Islamic movement that demands a literal interpretation of the Koran and wants to take things back to the 7th century. Now these guys can scream and demonstrate against presumed offenses, but even they do not bring RPG’s to a demonstration. The goofy “film,” or at least the idea of it, no doubt did enrage many Muslims, but  all of this was just an added bonus for Al Qaeda, which organized these attacks beforehand, specifically for September 11 as part of its continuing war on the United States and the west.

The administration’s apology tour and outreach to Muslims policy is in shambles. The President thought all he had to do was simply make a speech in Cairo and his charisma would move the masses, but the end result is that he is actually less popular in the Islamic world today than George Bush was. But this fumbling has been obscured by the media’s dutiful diversion of attention from the actual substance of things that are happening to focus on an alleged  Romney mistake in  criticizing the administration. They were actually recorded coordinating questions to Romney, which he, unlike the President, actually answered. Any remaining credibility these partisan hacks may have had has now all but vanished.  On top of this we have the left-wing response, which right away is seeking to curtail our rights of free expression in order to accommodate external foes, rather than to defend our way of life. The government has hauled in the creator of the video for questioning, allegedly on other grounds, while at least Google has courageously refused to bow to pressure to take it off of You Tube.  When will they understand that, to paraphrase Pericles, we may not be interested in the rest of the world, but the rest of the world is interested in us?

These brazen assaults are a result of the government’s desire to be loved, which  betrays a fatal weakness. For it has stood Machiavelli on his head by choosing to be loved rather than feared, and has wound up with neither. It will not use any terminology regarding the “War on Terror.” But the security breach at our consulate was an act of war, as are the continuing attacks on our embassies and should be responded to accordingly.  Al Qaeda is targeting American diplomats, and Americans, around the world, and we should be responding to them as we would to an attack on the homeland. But respect for the US has fallen to such an extent that we can’t even get some countries to allow our Marines in  to defend our embassies, and instead are withdrawing personnel. Is it even safe for us to be traveling now? It is time to dispense with the illusion of being loved and instill some real fear in our enemies, for that is the only way to gain any respect.

 

Written by georgesarant

September 16, 2012 at 10:58 PM

NOT-SO-HIDDEN INFLATION

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The Federal Reserve has now compounded the inflationary scenario discussed previously by printing yet more money, in order to buy $40 billion of mortgage securities per month. This was a political decision, not an economically sound one. As a result our credit rating is starting to be downgraded and the price of commodities- everything from gasoline to food, is increasing. But while prices are already rising the increase is nothing compared to what is to come. 

At the same time interest rates are being driven down to nothing by the government printing press, so savers are actually losing money. The illusion of economic improvement in recent stock market gains is misleading in that it just means more money is going into stocks because interest rates have such a low yield, even though there is significantly greater risk. At this point the “medicine” of the “Quantitative Easing” is becoming poison that will produce galloping inflation down the road unless there is a sharp turn in policy, and even then the challenges are daunting. 

The federal government is currently taking in about $2 trillion in taxes, while spending over $3 trillion a year. This deficit gets added to an ever-increasing debt load that presumably is going to be paid by future generations. Numbers like a trillion are beyond comprehension, but anyone can understand the simple math of the consequences of spending three of something when you only have two. The rising  debt is held by the public and foreign countries like China, which goes along because it finances the export of goods to this and other countries, enabling its economy to continue growing.  

But given that the government is now effectively cheating by debasing the value of the currency, sooner or later lenders will stop lending. However, long before that, interest rates will rise to levels not seen since the 1970s, as lenders must protect themselves against the shrinking value of the currency. Worse, these rates are not being factored in to government projections so that future debt will be larger than anticipated. When there is a 300% increase in the money supply there are bound to be consequences. As rates rise the cost of borrowing will also increase, with disastrous results. First, the interest cost to the government to cover all this debt will become unbearable, given that much of it is short-term borrowing that constantly has to be refinanced at the rate prevailing at the time.  Second, the real estate market will crash even further as the cost of mortgage interest becomes impossibly high. Third, foreign investors will pull their money out as the value of the dollar plummets in relation to other currencies. 

The only way the government will be able to sustain itself is by printing more money, so that the money it pays back is worth less than the funds it borrowed. But if the dollar is worth less, it can only mean that things will cost more and more and incomes will not keep pace with the surging rate of inflation. I’m not even talking about a hyper-inflationary doomsday scenario or total collapse, for even an increase of interest rates to a moderate level of say, 7% will leave the government in dire straits, in terms of maintaining payments of the debt load it is carrying forward.  Furthermore, none of this includes additional state and local debt. On a personal level, the only way you can stay ahead of this turmoil with your own funds is by putting them in appreciable assets that provide an inflation hedge.

These things will become obvious by next year, and will accelerate in the years ahead, unless there is a drastic change of direction in Washington. It will require an iron political will to correct, as the necessary steps are bound to be painful and highly unpopular, across the board. It will require deep cuts in spending, reform of entitlement programs, and revision of the tax code. There may be a steep political price paid for acting responsibly, at least in the short term. But that is the only way to save this country, and for that matter the world, at this point. Hopefully we will have the leadership and political courage to ameliorate this situation while it is still possible.  Think about this when you vote in November. 

Written by georgesarant

September 16, 2012 at 9:40 PM

HIDDEN INFLATION

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Inflation is inevitable given that the government has been printing huge amounts of money while borrowing more in order to continue spending money it doesn’t have.  The value of the dollar will be further eroded, with the day of reckoning postponed only because things are worse elsewhere at the moment.   Everyone knows this, but what may be less apparent is that the effects of inflation are already here, it just is not immediately obvious.  It is masked by  government-created economic distortions, structurally built-in, which are expanding like a silent bubble on its way to bursting. While evident in high gas prices and food prices that are about to take off, it is deeper and more sinister. It is like a mirror opposite of inflation that has already devalued money, and we are already paying for it. 

When there is inflation money is worth less. That is elementary. But although there is little apparent inflation at the moment somehow money is still worth less. One way to look at it is what you can earn on your dollars. The government is deliberately depressing interest rates to ridiculously low levels by continuing to print money. This enables it to continue borrowing at bargain rates, which depresses interest rates across the board. As a result the thrifty are penalized with miniscule returns on their savings. When a dollar earns a paltry 1% return what is it really worth? Those who save are already paying the price of hidden inflation by losing what they would otherwise earn were it not for government-induced distortions. This leaves savers, senior citizens, and retirement or pension funds in the hole because the anticipated returns are not being realized. That leaves no alternative to taking on riskier investments to try and earn a decent return. The net result is the same as inflation, where phantom higher returns are earned by money that is worth less and less. 

These policies are breathtakingly irresponsible. Yet they are deliberate, resulting in artificially low interest rates to facilitate voracious government borrowing. But sooner or later lenders will stop lending. The President thinks he can reduce the deficit by taxing rich people more. The problem is that there aren’t enough rich people to make a serious dent in the debt, Even if their taxes were completely devoted to it and notwithstanding the more likely scenario that it would simply be spent on more “unmet needs,” there are many ways the very affluent can avoid taxes. They can simply move, like the wealthy are doing in large numbers in France due to the socialist government’s attempt to raise their taxes to a 75% level. The net result of that is that there will be even less money coming in, and the not-so-rich are left to pay for it and the problems only become worse. 

The Republicans, on the other hand, want to reduce the debt by promoting growth instead, i.e. creating new wealth, instead of depleting existing wealth. If the economy were growing at a healthy pace it would increase tax revenues. In order to stimulate growth there has to be enough incentive to invest and take risks. High taxes, such as those in France only result in a capital strike, for no one will invest if their earnings are to be taxed away. Then governments try to adjust by providing tax incentives, rebates, etc. to get business to invest, which then results only in crony capitalism and economic distortions. 

But whoever wins the election will face daunting challenges due to decades of mismanagement. They may also subsequently pay a political price if policies to truly extricate us from this situation are pursued, for there are no easy solutions. Let us hope we get leaders who will finally behave responsibly, for the alternative is an almost certain collapse. 

Written by georgesarant

September 12, 2012 at 1:36 AM

WHITHER THE DEMOCRATS?

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It is disturbing when one of a country’s major parties takes a radical turn, but that is what we are seeing with the Democrats this year, particularly in terms of their platform. It appears that they are bent on self-destruction, as they have committed to positions far outside of the mainstream. The party is now indistinguishable from European socialists, and has truly become a Social Democratic party. Moderate Democrats have been driven away by the “progressives,” so it is unsurprising that Republicans have reached near parity in party identification, an area where Democrats once had a commanding advantage. They produced a platform  in keeping with statements in a film shown at the convention- that “The Government is the Only Thing We All Belong To.” Most of us would answer that with a resounding NO!  The government belongs to US.

This kind of collectivist thinking permeates the party’s platform and the mentality of the activist left, which basically is now in control. Apart from this, the platform endorses gay marriage, late term abortion, and until pressed, left out any mention of God for the first time, as well as the status of Jerusalem as Israel’s capitol. I am not taking a position on these question here, but simply noting that they are out of step with the sentiments of a substantial portion of the population. It may be true that nobody pays attention to the platform, but it had clear consequences for the party’s presentation of itself.

In front of the country there was a voice vote taken three times on restoring God to the platform, and each time the yeas and nays were about the same, only salvaged by a chairman who ignored the lack of a 2/3 vote and declared the affirmative anyway. In a country where upwards of 80% of the population believes in God it only shows how far out of touch they are. You don’t have to be a believer to see the folly in this.

 

Then there was the array of speakers, with the old breathy-voiced standbys Nancy Pelosi and Harry Reid, as well as the blabbermouth Wasserman-Schultz, and the truly nutty Elizabeth Warren. They were joined by various starlets, and incredibly, a woman whose claim to fame is a demand that the rest of us pay for her birth control pills, who was given a prime time speaking slot. The convention came off looking like a conservative caricature of the party, and like the handiwork of someone who wanted to make the Democrats look bad. The Republicans could do worse than simply replay parts of this convention in their advertising. True some of this was offset by the relatively innocuous remarks of Presidents Clinton and Obama, whose speeches reflected very little of the underlying radicalism of the convention.

The real question is how this is going to play in Ohio.  Why Ohio? Because that is where the election will be decided this year. My guess is that little of this sits well with people in there, but the question is whether they will be aware of it or not, since most people weren’t watching.  Whoever carries Ohio will win. Romney could run the board of toss-up states and still lose if he doesn’t carry Ohio. Similarly, Obama’s re-election prospects dim without Ohio. So on election night when you see who carries Ohio you will know who won the election.

Written by georgesarant

September 9, 2012 at 7:36 PM

EGOMANIA AND POWER

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Today’s New York Times, of all places, contains an article about President Obama’s unbridled ego, his hypercompetitiveness, his high opinion of himself, and his need to dominate, even in relatively trivial pursuits. However, “he tends to overestimate his capabilities,” to put it mildly. For a long time I have felt that egomania is one of the most significant negative features of our time, an idea that will be developed in detail subsequently.

 Everything kids are taught and fed today is designed to build and reinforce “self-esteem.”  As a result, we have a population that views itself as the center of the universe, has a sense of entitlement, and often engages in obnoxious behavior as a result. Everything revives around “me,” and “I” is a term you read and hear ad nauseum. The world is viewed entirely through the prism of the self, so that everything is perceived in terms of how it affects or relates to that individual, which determines its place in the hierarchy of values. Everything is perceived in terms of how it relates to “me.” So, for example, in the case of an actor who was informed of the death of a friend, his only reaction was to say that he wasn’t feeling so good either, going on to describe a slight pain he had. But if everyone, or at least many people, go around thinking “I am special,” we wind up with things like aggressive driving and road rage when they are not given their proper due behind the wheel.

But the more severe the pathology, the more one is likely to fall off a cliff at some point, as limitations become unavoidable, and it becomes clear that one is not so special after all. When this recognition is achieved, it essentIally determines how mature a person is, and the best characters learn it sooner rather than later. But a few people go through life never having to deal with a larger reality, as everything they encounter seems to reinforce their special status and confirm their self-perception. It never registers that their situation has come about largely due to luck and they continue to perceive themselves as possessed with some special grace. The result is the kind of megalomania we see with stars and their entourages, or Presidents with their worshipful aides.
However, under such conditions contradictory information tends to get filtered out, reinforcing a sense of invincibility increasingly divorced from reality. That appears to be what is happening in the White House today, with a President who believes he is always right, the best at everything, and inherently great. He was anointed with a Nobel Prize before he even did anything. He was chosen as “the One” by millions around the world. He was validated by a fawning media, which only confirmed the inevitability of his rise. Thus it is unsurprising that he has an overabundance of confidence.
There are, however, “facts on the ground.” He is often described as “eloquent,” which only indicates how far our standards of rhetorical quality have fallen. For he is a mediocre man in a time of mediocrity. His idea of the Presidency is all appearance and ceremony rather than substance, so, for example, he left it to the congress to fashion his unpopular health plan, while he has spent his time almost continuously campaigning with agreeable crowds. When there is such a dynamic in Hollywood it is frivolous, but when coupled with real power in government it is frightening.
Due to the fact that his eminence is constantly reinforced, anything that stands in the way is heretical. Thus, his greatness should not be limited by inconvenient nuisance things like the the Supreme Court and congress, or an obsolete document like the constitution. Given this, we may be headed for catastrophe if he wins the election- not because he would be President again, but because he would feel vindicated to the point where he would feel entitled to rule by decree. He would issue proclamations and presidential orders contravening the other branches of government and possibly precipitate a constitutional crisis, resulting in impeachment proceedings. Then while our government is self-destructing the world would spin out of control; all because we have a man who is not as great as he thinks he is, but there is no one who can convince him of that fact. That is the truth of our situation today, which can only be rectified, perhaps, by the electorate.

 

Written by georgesarant

September 5, 2012 at 12:08 AM