Merry Xmas and Thanks for Reading

I started blogging about three years ago, initially very occasionally just on whatever happened to irk me at the time, but this year I became a bit more focused and dedicated to posting regularly on the themes of individual freedom and rights, government excess, and the dishonesty of those pursuing collectivist causes such as world environmental regulation. I've gone from having a handful of readers to over a thousand for some of my posts. I don't imagine my blogs have much impact except to reinforce the views of those readers who are already pro-freedom, but I hope I have made one or two people think afresh about accepting the current political orthodoxy of big government is always good. Next year I will continue to post, hopefully even more regularly than this year.

Thanks to all of you who have read my blog. Please continue to do so.

The Case for Bitcoin

I have taken an interest in bitcoin for several years now and when I first starting looking into it, pretty much no one else had heard of the digital currency and it was hard to find any useful information about it. So I got myself a bitcoin wallet and started to play with it.

Recently I've seen a great deal of ill-informed commentary on the subject such as this article by Louis Cammarosano that was linked on Peter Creswell’s blog. While Peter posted this response from guest blogger Paul Van Dinther, I don’t think the response goes nearly far enough in addressing the issues that have been raised, so I’ve decided to do my own post on the subject to destroy some of the myths that are surrounding bitcoin.

Bitcoin is a digital currency, not a payment service like PayPal. A currency is an artificial store of value. A currency can be based on a physical commodity, like gold, but even where this is the case the currency itself is artificial. Currencies do not have to be based on physical commodities and, in fact, almost all currencies in the world today are what is known as “fiat” currencies, meaning they are backed by law rather than by any physical commodity.

Bitcoin, you might be surprised to hear, is a commodity-based currency. What is the commodity that it is based on? Well, this is where things get a little complicated. It is based on a digital commodity that is the result of a complex computation. Like any physical commodity such as gold, the digital commodity requires physical effort to extract it. The physical effort in this case is the computing power required to calculate the next unique number in a sequence that is a bitcoin. One of the reasons that bitcoins are increasing in value is that new coins are getting harder to extract. In 2009 a bitcoin could be “mined” using a personal computer in about two weeks. Now it takes about a year and a half. This is because there will only ever be 21 million bitcoins and more than half of them have already been found.

The beauty of bitcoin is in that complex computation or algorithm that reveals the next coin. The algorithm is a cryptographic formula and, like most cryptography, it is extremely difficult to calculate one way but very easy to validate the outcome of the calculation the other way. Think of multiplying two prime numbers together - even two relatively large primes are quite easy to multiply especially if you have a calculator, but it is very difficult to do the reverse – factorising a very large product. Because it uses a cryptographic algorithm, bitcoin satisfies two security requirements - it is very difficult to hack (i.e. forge a valid bitcoin) and very easy for anyone to check whether any one bitcoin is valid. I won’t go into the details of how the algorithm actually works but it is sufficient to say that the worldwide network of bitcoin wallets effectively “votes” on which is the next valid coin in the sequence. You can probably forge a bitcoin if you knew what you were doing but within an hour of spending it (the time taken for a bitcoin to propagate to nearly every wallet in the world), everyone would know it was fraudulent.

But what if you were able to hack the algorithm itself so that your fraudulent coins were always recognised as the valid ones? That is possible, but over the several years that have passed since bitcoin was invented by the pseudonymous Satoshi Nakamoto, the collective minds of the world’s greatest hackers and, more importantly, some of the world’s leading mathematicians have not been able to reverse engineer the problem. 

So let’s examine each of the arguments that Louis Cammarosano makes against the digital currency. He claims that bitcoin has no intrinsic value but, as Paul Van Dinther points out, neither substantially does gold. The latter is worth what it is because of its rarity and the effort of mining it, not because it has some limited industrial uses in electronic circuits and to coat visors.

Cammarosano’s next argument against bitcoin is his contempt for “early adopter smugness”, a fairly hypocritical objection from someone who calls bitcoin a “faith-based/emotion backed currency”. He says you must believe in bitcoin in order to ascribe value to it. He admits the same applies to the US Dollar and all other fiat currencies. But, as I have said above, bitcoin is actually a commodity-based currency and its value is dependent on the rarity of the commodity, and this puts it above the US Dollar and all other major Western currencies.

He says it is “not really anonymous” because you can trace the trades through the physical delivery of goods that are purchased. Yes, of course you can as the founder of the drugs trading site, Silk Road, recently discovered. Bitcoin is certainly more anonymous than US Dollars and other mainstream currency transactions that must now be declared to the US government under its nefarious FATCA law (of which I have recently blogged).

He says bitcoins are “not limited in supply” because the 21 million bitcoins can be subdivided infinitely. This means that bitcoin can endlessly deflate and can still be used to purchase small value items, and actually this is a highly desirable attribute of a currency and one that we haven’t seen in Western currencies since they were gold-based in the early 20th century.

He says there is “no customer service if something goes wrong,” unlike “PayPal, Visa, MasterCard, and AMEX services that will refund their users’ money if a transaction goes wrong.” But of course his examples are not currencies but rather payment services, and good luck to you getting your value back when the US Dollar tanks as it is soon to do. And he is wrong on the point that bitcoin holdings are uninsurable.

Finally, he says bitcoins can be stolen or lost or even manipulated in value. He is correct in that the coins are only as secure as the digital wallet they are kept in and that big players like governments could manipulate the market value of bitcoins. But is he seriously saying that these attributes don’t apply to every other currency in the world?

In conclusion, the only risk I see with bitcoin is that the algorithm might be broken, but this gets less likely the longer it exists unbroken and while I am not totally convinced it will remain forever impregnable (e.g. who knows what quantum computers could do?), I think bitcoin is already a viable alternative to the fiat currencies of thieving governments who continually debase their value. 

Wealth Inequality in America

Recently a friend of mine posted the following video on Facebook. Normally I wouldn't bother too much with watching a video on wealth inequality - I've heard all the arguments ad infinitum from the Occupy Wall Street crowd - but I paid attention to this because my friend who posted it used to be the New Zealand head of a major American IT company and is about as far from an Occupy protestor as you could get. I watched the video and decided that it made a fair point - the United States has a very inequitable distribution of wealth - and I decided to write a blogpost about the subject, but not before I'd looked a bit further into the issues shown on the video.

Like many of the claims made by the Occupy movement, the facts of the matter aren't quite as straightforward as the video makes them out to be, as the following critique video makes clear.

In spite of the validity of the critique, I'm sure the overall point made in the first video is sound - America has become more unequal in the last few decades. The video also implies (but doesn't provide any statistics to support the implication) that economic mobility has been reduced. This is, I suspect, a bigger problem for America than increased inequality per se.

British journalist Jonathan Freedland, who was The Guardian's Washington correspondent for five years, revealed a remarkable statistic about America in his book, Bring Home the Revolution, that reveals the United States really is the land of opportunity: of all the people in the bottom fifth of the US income scale in 1975, only 5 percent were still there in 1991. In other words, within a decade and a half, 95% of America's poor were poor no more. What is more, one third of those bottom-fifth families had moved into the top half of incomes within a generation. Another statistic that supports this picture of economic mobility is that four out of five American millionaires made their wealth from scratch.  The figures in Britain are substantially the reverse.  This is what makes America what it has been - the land of opportunity. But Freeland concedes that by the time he published his book in 1998 the trend was slowing and I suspect that since then it has slowed further.

Personally, I think income inequality does not particularly matter so long as people have the opportunity to improve their lot. The natural state of human beings is abject poverty - subsistent living. The beauty of the free market is that it allows people to improve their situation by using their abilities to produce goods and services that they can trade with others who produce other goods and services, thereby improving the lot of everyone. Even the lowly labourer benefits because he can use his labour to produce higher value goods (e.g. assembling iPhones) and get greater rewards for his labour than he would get in subsistence work. But the system depends on 'churn', i.e. the ability of people to improve their lot - the labourer saves up and sets up a small business or funds himself through night school and uses his qualification to get a better-paying job. Contrary to what Socialists believe, it really does work and the statistics Freeland quotes in his book proves that it worked for the United States.

Why has it stopped working? Well, I think the answer is simple - capitalism has become crony capitalism. America today is a place where if you are big and powerful enough (i.e. "too big to fail"), the government will support you and bail you out when you make bad decisions. The big guys get the subsidies, the tax breaks and the preferential regulatory treatment, whereas smaller businesses and the middle class salary and wage earners get the regulations, the compliance costs and pay the bulk of tax. The system acts as a brake on economic mobility. When the big guys are protected from failure and the little guys prevented from succeeding, it is no surprise that there is little economic churn. The Occupy crowd blames capitalism, as if America still had some form of genuinely free market economy, but it does not. Capitalism is not to blame, it is government that has perverted the free market and created crony capitalism by allowing its favours to be bought and sold. It is only a return to free markets and government 'of the people for the people', rather than of and for the powerful, that will solve the problem of increasing inequality.

FATCA legislation and agreement is a breach of NZ sovereignty and rights

You may have concluded from my postings that I'm somewhat libertarian in my views and you'd be correct - most of my posts are rants about the ever-increasing encroachment by governments on individual rights - however, I recognise that the vast majority of government policies have the intention (however misguided that intention may be) of improving the lives of the citizens and residents the government represents. I part ways with my philosophical opponents in the means, not the ends. But the New Zealand Government is currently in the process of enacting legislation that has no benefit for New Zealanders, that is a breach of our sovereign rights as a nation, and that breaches our Human Rights Act and Privacy Act, solely because it has been demanded by a foreign government. I am talking about New Zealand's acquiescence to the United States Foreign Account Tax Compliance Act, known as FATCA.

The usually staid law firm of Minter Ellison describes this Act as "a striking example of what could be called American fiscal imperialism." In short, it is attempting to turn all foreign financial institutions into tax collectors and snoops for the US Government by forcing them to hand over information about anyone considered to be a "US taxpayer." This is not, as you might think, just people who live and work in the United States.  The US is one of only two countries (the other is that bastion of liberty and human rights, Ivory Coast) that think it is their sovereign right to extract tax not only from those who live and work in the country but anyone who lives outside the country who they might deem to be a US citizen. Let me give you an example of who the US considers to be US citizen.

My friend, a New Zealander born and bred, married a US woman and together they have a newborn baby who was born in New Zealand. Unsurprisingly, the wife, who holds both NZ and US citizenship, is considered by the US Internal Revenue Service to be a valid target for the FATCA regime. She not only has to pay tax in New Zealand, where she now lives, she has to file a US tax return and pay taxes there as well (although she gets to deduct some, but not all, of the taxes she pays on her NZ income). But here's the kicker - the IRS also considers the baby to be a US taxpayer, irrespective of whether the baby ever sets foot in the United States. My friend's child will be subject to intrusive surveillance by the IRS for the rest of her life and her bankers will be forced to hand over information to the IRS about her, against her will and contrary to her rights under other NZ laws, and all this will be abetted by the New Zealand Government that, as the writer of this blog points out, considers her to be a "US taxpayer habitually resident in New Zealand."

This is, frankly, a disgraceful capitulation by the New Zealand Government to bullying by a foreign power. It is the financial equivalent of 'renditions', that euphemistically-named US Government practice of snatching citizens of other countries off the streets of foreign cities in order to have them tortured and imprisoned.

It is high time the rest of the world stood up to these thuggish policies of the US Government. New Zealand has stood up to the United States before over issues such as visits of nuclear-armed warships and, in my view, this is a more fundamental issue of sovereignty than that. We need to stand united with other countries and tell the United States we will not comply with their unilateral policies and we need to take whatever retaliatory measures are necessary to force them to back down.  If enough countries stand against the US on this, they, like all bullies, will back down.

Iranian Nuclear Deal is "Peace in Our Time"

I am currently reading I Shall Bear Witness: The Diaries of Victor Klemperer. These diaries are the extraordinary personal account of the only Jew to have survived The Holocaust and to have recorded his experiences from the date Hitler came to power to the end of the Second World War. The books should be compulsory reading for every high school student as they give a true insight into what Hannah Arendt called 'the banality of evil.' Klemperer records how friends, neighbours and even Jews themselves, stood idly by and watched the evil of Nazism as it encroached on, and then destroyed, the lives of so many millions of European Jews and other minorities. 

Which brings me to Israel. What, I hear you say, isn't that a leap of logic? Well, I don't think so. I don't believe you can consider 'the Israel question' without considering The Holocaust.

I'm not a Zionist - I don't believe the Jews have some God-given right to occupy the land of Israel any more than I believe the Queen of England has a God-given right to occupy her throne. I don't even think they have a particularly strong historical right and, incidentally, Kemplerer didn't either. But I do think humankind owes the targets of its most bloodthirsty tribalism a safe harbour. The historical reality now is that that safe harbour is Israel. It's there, so get used to it.

And that brings me to Iran. The ayatollahs and successive presidents of the Islamic Republic have pledged to destroy Israel and its people and I think it would be a huge mistake not to take them seriously. I think President Obama and Secretary of State Kerry have got this wrong and I believe their deal with the Iranians will turn out to be their version of Neville Chamberlain's "peace in our time". I think there is a very good chance that the consequences of the deal will be an all-out, probably nuclear, war in the Middle East that will make the conflicts in Iraq and Afghanistan look like curtain-raisers. Obama and Kerry are taking an enormous gamble and the worst thing is they is gambling with the lives of Israelis rather than Americans.

Victor Klemperer described in his diary how Germans and the international community did not believe until it was too late that Hitler's intentions were wholly malevolent. Hitler, like successive Iranian leaders, made no secret of his aims, but the more blatant he became, the less people believed what he said. The only difference today is that the Jews in Israel have the means to defend themselves. Every Israeli prime minister since David Ben Gurion has had six million ghosts looking over his shoulder and Benjamin Netanyahu is no different. When faced with a clear and present existential threat to Israel, he will push the button.

Lincoln was truly heroic

Several years ago, during a visit to Washington, DC, I took the time to visit the Lincoln Memorial and, while looking around the magnificent monument with its enormous seated statue of the great man, I did something that few other visitors to the monument do - I took the elevator down to the basement and visited the small museum that is housed there. At first glance the museum is not very impressive - just a few of Lincoln's personal items and papers in several small rooms - but I found myself engrossed in its contents. Amongst the papers was a letter Lincoln had written to a colleague while he was a young lawyer in Illinois. The topic of the letter was slavery. Lincoln had returned from a trip to the South and expressed his disgust at what he had seen - human beings being treated as chattels and subject to the most inhuman indignities. He vowed in that letter that he would enter politics with the express purpose of abolishing the dreadful stain that he saw slavery to be on the principles by which the founding fathers established the United States of America.

Today in America is the 150th anniversary of Lincoln's greatest speech - the simple 272 word paean to the ideals that are in the words of the Declaration of Independence - that men are born equal and that government should be accountable to the people, not the other way around.  Lincoln's speech at Gettysburg on November 19th, 1863, was intended to be nothing more than an afterword to the lengthy oration by retired senator, Edward Everett, but in a little over two minutes the President said far more than Everett had said in two hours.

Abraham Lincoln is portrayed by some historians as pragmatic and even unprincipled - deferring political and military confrontation over slavery until he was forced to act.  But those historians obviously have not read that letter that I saw at the Lincoln Memorial. Lincoln devoted his life to what he knew was right and he stood by his principles to the end of his life.

I see no counterpart amongst politicians today.

Governments are useless at most everything

It has been amusing, if somewhat predictable, watching the unravelling of the 'Obamacare' healthcare legislation in America. The US Government spent $200m on a health insurance website that doesn't work, but that is the least of the problems. The penny has finally dropped for most Americans that their existing health insurance plans will have to be abandoned and a more expensive scheme purchased, giving the lie to the name of the legislation, the Patient Protection and Affordable Care Act.

The British National Health Service is held up by Britons and by all advocates of socialised medicine worldwide as the exemplar for state-run healthcare, even to the extent of it being the centrepiece of the London Olympics opening ceremony (in a disgusting misappropriation of the supposedly politically-neutral Olympics for political ends). God knows why - as this Forbes article reports, you are 88% more likely to die of breast cancer in the UK than in America and less likely to survive all other major forms of cancer. So, why would Americans want to give up private medicine for socialised medicine?

In my consulting business in recent years I've been doing a lot of work for the New Zealand Government, much of it quite important stuff in terms of delivery of the Government's main policy initiatives. I work for government because Wellington, my home town, does not have much of a private sector any longer (and I've blogged on Wellington's economic situation before). In my work I see many public servants who are dedicated to their work and who genuinely strive to serve the public to the best of their ability. But I see a great deal of incompetence too - monumental computer systems failures like the Obamacare website, construction projects that produce buildings that are faulty from the day they are finished and ships that can't serve the purpose for which they are acquired.

The problem is that some of those who work in government believe that there is no limit to their role and moral mandate, that they can poke their noses into any area of citizens' lives that they see fit.  Any problem, be it social, economic, scientific or environmental is not so daunting that our elected representatives and unelected officials don't think they can fix it. Never mind that they have no expertise in the field concerned - there is always some patsy 'expert' (usually an academic with no practical experience of the subject) ready to support their view that the problem can be fixed by more government interference in citizens' lives.

The truth is that government can never compete with the market in terms of providing solutions to human problems. The reason for this is obvious - the market is the collective result of millions of people applying their knowledge to achieve individual goals, whereas even in the largest government agencies there can be only ever a fraction of the effort and wisdom applied to the problem. The market will always beat the bureaucrat and those who work in government should have the humility to accept this.

On this day, lest we forget

Today is Remembrance Day, when we remember the fallen in the Great War and the conflicts that followed it. Such remembrance is proper. We take so much for granted in Western nations today - our freedom, our prosperity, our respect for some basic human rights - that it is easy to forget that such is not the natural state of affairs for humankind. Liberal, democratic society is hard won and there are still plenty of examples of the alternative around the world to show that there is a thin veneer between civilization  and barbarism.

I think all human societal conflict stems from the belief of certain individuals or groups that they are superior to other human beings and therefore have the right to impose their view of how the world should be on everyone else.  It is this arrogance that makes some people think their dealings with their fellow human beings shouldn't be on the basis of a voluntary exchange of value. Every militaristic leader in history has had this arrogance - I am better than you and I know what is best, so I should rule and you should submit. Sometimes this arrogance stems from religious faith (e.g. Christian Crusades and Muslim jihad), sometimes from philosophical dogma (e.g. Marxism), sometimes even from misguided scientific theory (e.g. Nazi eugenics). Political leadership that is based on a voluntary exchange of value - a social compact to use a modern term - does not need force because most individuals in most human societies will gladly exchange a degree of absolute freedom for a political structure that honours and preserves their individual rights.

Unfortunately we live in a world not dissimilar to that which existed immediately prior to World War One. Liberal, democratic institutions are being curtailed and politicians and bureaucrats are taking more and more power to themselves in the name of protecting us from faceless enemies.  The real conflict in the first half of the Twentieth Century was not between the European powers and their far-flung allies, but between the ideas of individual freedom and mob rule.  Imperialism, Communism, Nazism and Fascism have an etymological commonality - they all derive from collective nouns and are all about dictatorial rule in the name of the group. 

It is freedom from mob rule that we won in two World Wars and in the Cold one, and it is this that we should honour and preserve when remembering our fallen soldiers.

Americans Choose Greater Depression

It has been interesting watching and listening to the commentary on the US budget stand-off, which has been resolved, at least for another few months. Democrats and Republicans have blamed each other, naturally enough, and the overwhelmingly left-wing mainstream media have blamed the Republicans, also naturally enough. But an interesting fact arose during the debate, which the media did not play up because it shows perhaps where the weight of blame really lies.  The US Senate has not passed a budget resolution since 2009.  Every budget appropriation bill since then has been what is called a "continuing resolution," in effect an emergency measure to keep the government running for a short period, as indeed is the case with the latest funding bill (which only funds the government until January 2014).  

The real blame for the lack of a proper budget does not lie with Congress, however.  The reason there has not been a proper budget bill since 2009 is that President Obama's Office of Management and Budget has not proposed one.  The United States follows the procedures of its Westminister origins in the executive branch putting up a budget, which the legislative branch votes on. So you can't blame the Republican-controlled House of Representatives or the Democrat-controlled Senate for failing to pass a budget, because there hasn't been one to vote on for the last four years.  The blame lies fairly and squarely with President Obama.  This article, from the (liberal, pro-Obama) Washington Post, tells why.

Irrespective of the blame, there is a lack of political will to address what is actually an expenditure crisis.  The US Government spends around a third more every year than its takes in revenue and without expenditure cuts, massive tax increases, or a significant surge in economic growth, this will continue to grow.  The federal debt stood at a little over $10 trillion when President Obama took office and he has now increased it by two-thirds to over $17 trillion.  It will almost certainly have doubled by the time he leaves office in 2017. Democrats say George W Bush was just as bad but this is not true - the debt rose 38% under Bush (and 34% under Clinton).  

How is the US federal debt funded?  For the most part, new debt is funded by issuing Treasury Bonds. Who buys the Treasuries?  Well, last year 70% of them were bought by the Federal Reserve. And where does the Federal Reserve gets its funds from?  It creates the money out of thin air through entries in its accounting systems. This is the modern-day equivalent of rolling the printing presses to create more money. We all know what happens when you do that - there are plenty of examples such as Germany in the 1920s and Zimbabwe in recent years.

So why is the US not suffering from hyperinflation? The answer is twofold.  Firstly, actual inflation is not as low as the US Government claims it to be.  If we use the same methodology to calculate inflation as in 1980, current US inflation would be nearly 10% rather than the official rate of 1.5%. Secondly, prices are being held down by a combination of consumer behaviour, which is to pay off debt rather than increase spending, plus artificially low interest rates (ordinarily the latter would discourage the former).  Interest rates are being held down by precisely the situation discussed above - the Federal Reserve buying Treasury Bonds at the low interest rates.  The reason the Federal Reserve is buying most of the T-bonds is that no one else will take them at such low rates.  Chinese investors, for example, who were the main purchasers of T-Bonds up until a couple of years ago, are no longer interested in buying them at the current coupon rate of 1.9% because they believe the risk premium is a lot higher than that.  To get some idea of how the market views the risk of US government bonds, one only has to look at the longer term yields, which are up to 4%.

The US Government can get away with this 'borrowing from Peter to pay Paul' scenario just as long as the US Dollar continues to be regarded as the world's primary exchange currency.  In other words, it can continue to 'print' Dollars to lend to itself because other countries still regard the Dollar as sound. But under this scenario the US Dollar must start to fall, as indeed it is has been doing for the last few years against more stable currencies such as the New Zealand Dollar.  Many commentators believe there will come a tipping point at which confidence in the US Dollar will be eroded sufficiently to see it plummet, and when that happens US inflation will rise and US interest rates will soar.  Of course, that will mean the US deficit will increase even further as the interest on Federal debt rises and the whole vicious circle will send the US economy back into significant decline, a scenario that some commentators are calling the 'Greater Depression'.

The US is unlikely to grow its way out of its current economic situation through more of the same policies. Government borrowing to drive consumer spending has not worked. The alternative is encourage greater capital investment to grow production, jobs and incomes, and the way to do this is to lower taxes, reduce disincentives to investment such as government regulations, and to significantly decrease government spending to balance the Federal budget. Unfortunately, we have a socialist in the White House, who would rather see his country suffer further economic decline rather than free up the economy.  A proper budget that showed the true state of the government's finances, would be a good start.

Wellington voters choose economic decline

The New Zealand local body election results are in, and here in Wellington we now have a slew of Green Party councillors on the city and regional councils as well as our Green mayor re-elected.  This is not entirely surprising. Wellington is the capital and many of its workforce are public servants.  They tend to hold left-wing political views and unsurprising support more government in the lives of citizens, not less.  The Green Party is, like most similar political groups worldwide, hard-left on economic matters.

Wellington as an economic centre is dying.  Even our Prime Minister, John Key, a man you would think would be sensitive to making such criticism of his seat of government, recently said so.  Wellington's problems started in the 1980s with the decline of its manufacturing base due to the (much-needed) reforms of the Lange-Douglas Government including the removal of protectionist trade policies.  The trend was exacerbated with a significant migration of corporate head offices and supporting service businesses to Auckland.   

The economic decline of the capital was disguised throughout the term of the Clark Labour Government in the 2000s because of the vast expansion of the public service with core employees increasing by about 40%. The majority of the increase was in Wellington and the spending of these public sector employees in the region drove up economic activity (and most notably property prices) during the nine years Labour was in power.  The Key National Government has stopped the expansion by limiting departmental budget increases and has even required some retrenchment of numbers.  This has meant Wellington's non-public-sector decline cannot be disguised any longer.

The Greens' policies, which are about socialistic redistribution of wealth and increasing compliance costs for development in pursuit of their environment agenda, are not likely to help matters.  Wellington can't afford the profligate, anti-growth economic policies of the Greens.  The city needs new businesses to generate employment and wealth to stem the decline of the past three decades.  The Greens offer only offer more economic blood-letting at a time when the patient needs vitamins.

If you want an example of what can happen at a local level after years of ill-advised policies you only need look at Detroit - a city that, like Wellington, once had the highest per capita income of any in the country, which has now filed for bankruptcy.  If Wellington is to avoid becoming another Detroit, its voters are going to have to choose politicians who value economic growth over fanciful socialist and environmental aims. Unfortunately I hold out little prospect of the capital's large public employee electorate making such a choice.

1984 is coming

I'm going through a George Orwell phase at the moment, rediscovering his books that I first read as a high school student. Perhaps it is the fact that I am re-reading them with an additional 30 years of experience of the world, or perhaps it is that the world has changed considerably since the first reading, but Orwell's books now resonate with a prescience that they did not back then. 1984, in particular, is scary in its parallels to life in the Western world today.

We have all heard of the comparison of Newspeak, the redacted language of the fictitious state of Oceania, with modern politically-correct language and its euphemistic elimination of any words considered to be insensitive or too permissive (e.g. "differently-abled" for disabled, "Afro-American" for Negro, etc.) But this is the least of the similarities.

The constant electronic surveillance by which Big Brother watches his subjects is reality today.  In the book the surveillance is conducted by the somewhat primitive means of two-way television sets, whereas today it is conducted much more surreptitiously by the likes of the US National Security Agency (which surely would be part of the antonymically named Ministry of Love in the book) simply by demanding all the telephone and internet records of every American be handed over for scrutiny. The fact that the NSA does this it in complete disregard of the law (as indeed did New Zealand's own Government Communications Security Bureau did in the Kim Dotcom case) is, again, portended in the book when the protanganist Winston Smith points out, "nothing was illegal, since there were no longer any laws".

The scariest part of the absolute totalitarianism portrayed in the book is Big Brother's ability to not only rewrite history but to recreate the "truth" by erasing any information that is contrary to its view of the world.  In New Zealand we have an obvious example of this in Treaty of Waitangi settlements for historic Maori grievances that include the government's agreement to issue an official version of the historical facts in issue that suit the claimants' version of events.  Government bureaucrats decide what history should be and then attempt to create an accepted version.  Anyone who tries to maintain a contrary version is branded a racist, just as in 1984 anyone who contradicts the official version of events is guilty of thoughtcrime.

Fortunately, we still live in a world that is at worst a very diluted version of 1984, but the trend in most Western countries is very much towards a more concentrated version of Orwell's distopia.

Spending Taxpayer Dollars on America's Cup is Immoral [UPDATE]

I have followed the fortunes of Emirates Team New Zealand in their bid for America's Cup with mild interest.  At the time of writing, the match score is 8-8, so I don't know whether we have won or lost it.  Oracle Team USA has staged a remarkable comeback from being 6-1 down after the first week of racing and whoever wins the next race will take the trophy.

I don't care very much who wins but I do care that $36 million of New Zealand taxpayers' money has gone to fund this sporting equivalent of tilting at windmills.  The argument that it will benefit New Zealand greatly in terms of tourism and other economic activity is dubious at best and, in any event, does not justify the government using money it has extorted from hardworking New Zealanders on such a frivolous cause.  It is hard enough to accept one's taxes going as involuntary contributions to "worthy" causes such as health and welfare, but seeing them go to a bloody yacht race is outrageous.  Who the hell do the Prime Minister and Finance Minister think they are taking money off low income earners who might be struggling to pay their winter heating bills at this time to spend it on what is a billionaires folly?

Even if we win the Cup (perhaps especially if we win it), this disgraceful abuse of taxpayers' goodwill should end.

UPDATE: Having lost the Cup in this morning's final race, Team NZ head Grant Dalton casts doubt on whether New Zealand will mount another campaign.  However, that hasn't stopped our Prime Minister, John Key saying it is likely he will continue to spend taxpayers' money on this folly.  He goes on to say "New Zealanders work hard to pay their taxes and they expect the Government to be serious and careful about the way they spend their money." If only.

UPDATE2: One final comment - I have lambasted the New Zealand media in the past and in particular the worst offender - the Fairfax Group newspapers such as The Dominion Post and its website Stuff. This morning Fairfax Group plumbed the depths with their "Choke on This Team New Zealand" headline.  I would urge anyone reading this who subscribes to Fairfax Group publications to cancel their subscription immediately. They do not deserve your business.

Inside Every Socialist is Napoleon the Pig

I see the New Zealand Labour Party has elected a new leader, David Cunliffe, its third in two years. The reason for the instability at the top of New Zealand's major centre-left party is the traditional animosity between the hard-left and more moderate factions of the party.  Helen Clark, who was leader from 1993 to 2008 (and NZ prime minister from 1999 and 2008) managed to keep the two sides from each other's throats, undoubtedly because those on both sides feared her than they feared each other.

One of the candidates in the recent tussle for the leadership turned up last week to my daughter's school to talk to the senior girls.  This is the second time the school has invited a Labour MP in the last twelve months and it has not extended the invitation to anyone from any other party, so it is pretty obvious where the political inclinations of the teachers lie. The majority of them are raving left-wingers who take every opportunity to ram their facile political beliefs into the impressionable minds of their students and I have blogged about this before.  However, I am grateful for this propagandising visit because it gave me the opportunity to discuss the MP's Socialist philosophy with my daughter and to use it as the theme of this blog.

The MP, according to my daughter's account of his speech, made three main points to the students:

1. You should live your life for the benefit of others
2. Government needs to be bigger to deliver more benefits to those in need
3. He will support you if you have good ideas just so long as they are consistent with his philosophy.

Let us deal with each of these in turn.

In saying that you should live your life for the benefit of others, Socialists not only believe that people should be charitable, but that everyone should be forced to be altruistic. They believe the state should use its legal monopoly on violence to force you to live a proportion of your working life for the benefit of others by taking the product of your work through taxation.  You are forced to pay your taxes under the threat of imprisonment or worse.

Once the Socialist has decided that you should work some of your life in slavery for others, there is no logical or moral limit to how much of your life he should take - thirty percent, fifty percent or ninety-eighty percent - the only limit is a pragmatic one, i.e. how much can he take without undermining your will to work at all?  There is no limit to the demands on behalf of "those in need" and Socialists differ from Communists only in where they draw the line.

Whenever Socialists advocate enforced sacrifice in favour of those in need there is an unspoken question that always has an obvious answer.  The question is, who gets to decide? Who determines who is needy, and who defines what needy really means?  The answer, of course, is the Socialist proposing the sacrifice.  

The Labour MP's last point is telling.  He is making it clear it should be he that determines what is a "good idea" and who deserves to receive the product of work confiscated by the state.  His philosophy is not so much "from each according to his ability, to each according to his need", as "- to each according to what I determine."  It is no surprise that Socialist parties have brutal leadership contests - the lure of being the one who decides is too great for well-mannered successions.

In his novel, Animal Farm, George Orwell showed that enforced equality requires an enforcer.  This is the fatal flaw with all collectivist philosophy, whether it is modern, milk-toast democratic Socialism or hard-line Marxist-Leninism.  You cannot have an Animal Farm without a Napoleon the Pig.  Scratch the surface of any Socialist and you will find a Napoleon trying to get out. 

US Intervention in Syria Will Fail

You would think the US Government would learn. Just when they are finally managing to extract themselves from Iraq and Afghanistan, they are doing their best to involve themselves in another insoluble conflict in the Middle East. You would think that they would have learned from the events in Libya and Egypt, where the best hopes of the Obama regime for peaceful transitions to democratically elected governments have become completely unstuck, resulting in a great deal of bloodshed and misery for the people of those countries.

America's ill-judged foreign policy produces the most deliciously ironic unintended consequences.

It was recently revealed, for example, that the Central Intelligence Agency orchestrated the 1953 military coup that overthrew the government of Iranian Prime Minister Mohammad Mosaddeq.  Of course, that really worked out well for the Americans when, a quarter-century later, Ayatollah Khomeini overthrew the US puppet regime of Mohammad Reza Pahlavi and ensured Iran became America's arch enemy for the next three decades.

One could also look to the earlier example of US support for Ibn Saud's conquest of the Arabian peninsular that resulted in the establishment in 1932 of Saudi Arabia. The Saudis are the proponents of the particularly extremist Wahhabi form of Islam that inspired the brutal Taliban government in Afghanistan, which gave sanctuary to the Al Qaeda leadership that was responsible for the 9/11 attacks.  Long before 9/11, America funded, armed and trained the Afghan Mujahideen during the Soviet occupation of Afghanistan and it was these rebels that eventually seized control and became the Taliban government.

Perhaps the greatest irony is that America's good intentions to promote its founding principles of individual freedom and human rights around the world has led to the abrogation of those principles at home. Anyone who has been to America in recent years will have seen the deterioration of personal freedom in that country. America has become a surveillance state that in many ways would be the envy of Soviet bloc governments, all in the name of protecting its people from attack by the very people it has armed.

Which brings us to Syria. The Obama administration is planning to bomb Syrian government targets in retaliation for President Bashar al-Assad's alleged use of chemical weapons. I say "alleged" because at the time of writing the Americans cannot say with absolute certainty that Assad was responsible. Some commentators have speculated that the Islamist rebels could have used the weapons to provoke exactly the response against Assad that Obama is contemplating. One should not forget that these rebels have admitted committing appalling outrages of their own.  Another scenario, perhaps more likely, is that Assad has lost control of his own military leaders, one of whom chose to use the chemical weapons.

What is clear is that the situation in Syria not clear. If Obama orders cruise missiles launched at Syria, he will be throwing gasoline onto an already incendiary situation. He has admitted that he doesn't have an objective in mind for such a strike against the Assad regime. That being the case, he should not be surprised if the outcome turns out to be very much to the detriment of America's interests in the region and at home. America has done some dumb things around the world but this will surely be one of the dumbest.

New Zealanders to get it good and hard

So, the New Zealand Parliament has passed into law the odious GCSB Amendment Bill that allows the government free reign to spy on its innocent citizens.  In today's political environment, where vague threats of terrorism justify almost any repressive act of government (such as kidnapping people off the streets of friendly nations, summary executions of individuals anywhere in the world with unmanned drones, and torture to obtain confessions), it does not surprise me that the New Zealand Government wants to join in all the fun. What surprised me about the debate leading up to this law passing is the depth of support that Prime Minister John Key has for these dictatorial spying powers.  I guess it just goes to prove what I've always suspected - most New Zealanders are more interested in feeling secure (not matter how much of an illusion that might be) than freedom.  That is, of course, why we have one of the world's most extensive welfare states.

H L Mencken said, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."  Well, New Zealanders are going to get it good and hard.  As the vacuous waiter said, "Enjoy!"

A Sad Day for New Zealand

Today, if Prime Minister John Key gets his way, the GCSB Amendment Bill and Telecommunications (Interception Capability and Security) Bill, will pass their final reading in the New Zealand Parliament and become law.  For those overseas folk who have not been following the progress of these prospective laws, they have been introduced by the Prime Minister (who is also the cabinet minister in charge of the security services) because it was discovered that our Government Communications Security Bureau (NZ's equivalent of America's NSA and Britain GCHQ), had been illegally spying on New Zealand citizens and residents.

GCSB is part of the "Five Eyes" close community of anglophone government security officials that includes USA, Britain, Canada and Australia.  We know from the revelations of Edward Snowden and Bradley Manning that the United States and its intelligence allies have been circumventing their own laws by spying on their citizens without warrants or with unconstitutionally broad warrants from patsy judges.  We know, for example, that these agencies have used each other to spy on each other's citizens, thereby avoiding legal restrictions on domestic surveillance.  In the case of New Zealand, it was revealed that the GCSB was illegally spying on Kim Dotcom, a New Zealand resident, at the behest of the US authorities - as well as many other New Zealanders.  The response of our Prime Minister and Government was not to prosecute those security agency officials involved but rather to change the law to allow GCSB to spy on New Zealanders. The only oversight will be that of the Prime Minister and an official he appoints.

There is something very worrying about a government changing the law to make legal that which is has been caught doing illegally.  It completely subverts the principles of the Rule of Law and makes a mockery of the law itself.  Why would anyone have respect for the law if the government itself does not?

The Prime Minister has justified the change on two main grounds, firstly because of some vague threat from New Zealanders being trained by Al Qaeda, and secondly because he says he will apply it judiciously.  In regards to the first justification, I simply do not believe there is a credible and immediate threat to New Zealand from Al Qaeda. I am sure John Key has been told there is by US intelligence agencies but they would tell him that, wouldn't they?  In regards to the second justification, why would we trust his discretion in a matter where it is clear he knew about the law-breaking in the first place (at least in the case of Kim Dotcom)?  In any event, such grounds do not begin to justify the sort of wholesale invasion of innocent citizens' privacy we have already seen in the US and now increasingly in this country.

We live in a Westminister democracy.  The Prime Minister is accountable to Parliament, not the other way around.  These bills will pass today with a majority of one vote unless someone in the governing National Party or its allied MPs John Banks and Peter Dunne choose to vote against it.  I think it is a forlorn hope that one of them has the principles and gumption to cross the floor on the final vote.  It will be a sad day for New Zealand if none of them does.

Fonterra a Perfect Example of Crony Capitalism

New Zealand faces a number of major economic risks with the world economy continuing to experience slow or no growth, but one of the worst is our dependence on the dairy industry.  This country of just over four million people has the largest dairy export industry in the world, accounting for around one third of global cross-border dairy trade.  It provides one quarter of New Zealand's merchandise export earnings, worth nearly $15 billion last year.  This is all good, I hear you say, and you'd be right except for one thing - the entire trade is controlled by one company - Fonterra.  

Fonterra traces its history to the formation of the New Zealand Dairy Board in 1930.  It is a cooperative structure, owned by its farmer suppliers.  From its beginning, the organisation has had a statutory monopoly on the export of dairy products and ownership is restricted to its farmer suppliers.  In 2001, the Dairy Board was merged with the two dominant cooperative processing companies, NZ Dairy Group and Kiwi Dairy Company to form a monolithic, vertically-integrated organisation that controls every aspect of production and distribution of New Zealand dairy products from the farm gate to the overseas supermarket.

The monopoly has produced two negative effects, both of which were predicted by those who opposed the 2001 merger - it has led to domination of the domestic market with correspondingly high prices for New Zealand consumers, and it has created a systemic risk of market and brand failure. The latter has been demonstrated twice in the last few years, both times in the lucrative Chinese market - firstly with the horrific 2008 scandal involving Fonterra subsidiary Sanlu that led to the deaths of six babies and the hospitalisation of 54,000, and most recently with the Chinese suspension of imports of Fonterra's milk and whey powder due to botulism.  As this article in Bloomberg points out, the impact of this latest incidient is likely to go beyond Fonterra and the dairy industry. It has already led to a decline in the New Zealand Dollar and knock-on bans in other countries such as Sri Lanka.   

The failure of one company ought not to affect an entire economy.  In a competitive market, other companies with equally strong brands would be largely unaffected and would step in and fill the gap in exports caused by the failure of the offending brand.  This cannot happen with New Zealand dairy exports because of Fonterra's statutory monopoly.

Contrary to popular belief, monopoly is not the natural end-state of capitalism.  Monopolies may occur in a totally free market but only where the dominant player has some huge competitive advantage such as control of critical patents, and even then such monopolies are usually short-lived. Perhaps the greatest monopoly of the them all was John D Rockefeller's Standard Oil but even his monopoly wasn't absolute and was relatively short-lived - being confined to lighting oil in the late 19th Century. Contrary to popular belief, the end to Rockefeller's monopoly didn't come from the US antitrust Sherman Act enacted in 1906 (although this was vindictively used to break up his company) - Standard Oil's dominance was already being eroded by the innovation of electric lighting and the development of new oil products for automobile fuel.  In a free market, all monopolies are short-lived because they can never counter all the likely sources of innovation over the long term. We have seen this with Microsoft, which has not been able to extend its dominance in desktop PC software to the new markets for smartphones and tablets.

The one situation where monopolies do thrive, however, is when they are government-mandated.  The only reason Fonterra and its predecessors have monopolised the New Zealand export dairy market for so long is their legislative protection.  A free market might have produced a dozen Fonterras by now.  If you want to see the potential, you need only look at another dairy cooperative in another country that was set up at the same time - Nestle in Switzerland.  Nestle has grown without the legislative protection of Fonterra to be a highly-diversified food manufacturing company and one of the best known brands in the world.  Fonterra by comparison, has remained largely a commodity producer.  A ban on the import of Nestle milk powder products to China would have minimal effect on the whole of Nestle's business and would be virtually unnoticed in Swiss export trade figures.   

We seem to especially like government-mandated and government-owned monopolies in New Zealand. Our energy, transport and accident insurance markets are totally dominated by such structures.  We pretend that these monopolies are the best for New Zealand but we never try to assess the opportunity costs.  It is no surprise that we have no other large, internationally-competitive private sector companies of the scale of Fonterra. So much of our capital stock in tied up in these protected, crony capitalist entities that there is little incentive or appetite to make New Zealand the home of an Apple, Nokia or Ikea. Perhaps that is one of the reasons New Zealand continues to languish at the bottom of OECD income-per-capita tables. 

The Narrowing Gap Between the Forbidden and the Compulsory

I was recently talking with a friend of mine about the inexorable encroachment of the power of the state into every area of our lives and he made a very insightful comment. There have always been things that are forbidden by the government - traditional crimes against person and property such as murder and theft; and there have always been things that are compulsory as well - taking care of your own children, for example. For most of the last few hundred years, in Western nations at least, the gap between these two areas of state proscription has been large and the State did not consider it to be its business to interfere in areas as broad as where and how you work, whether you save for your retirement, whether you make provision for personal medical care, how you are educated, what you eat and drink, and what you sell to your neighbour. We regarded countries that did try to interfere in all these areas of its citizens lives to be feudal and dictatorial.

The West, led by Britain and the United States of America, valued individual liberty and rights as important foundations of their ways of life. Of course, individual liberty and rights were not absolutes and there were significant exceptions to the rule, such as slavery in the United States before Emancipation, but the general principle was that the state left people alone unless there was good reason not to.  It is this principle that has been abandoned in much of the western world today where governments consider it not only their right but their responsibility to interfere in every area of every citizen's life. The gap my friend talked about is now almost non-existent. Sure, there are a few areas of increased personal freedom such as around the removal of state sanctions against homosexual relations, but the generally the trend has been far in the other direction.

Today we face new challenges to the narrowing gap that remains. Governments across the Western world are trying to ensure we do not say or do anything that is contrary to the narrow view of acceptable behaviour as defined by the small, often unelected, elite in the executive branches of our governments.  These people claim the right (often disregarding legal and constitutional restraints on their power) to watch our every move, listen to everything we say and read everything we write. As always, they claim this is for our own good, to protect us against poorly defined threats and enemies. They often claim these powers are temporary but of course they never give them up.

In the past the mainstream media would have carried the flame of the protests against this encroachment of the state but now most in the media are apologists for it. There are a few who are prepared to stand up and act against this existential threat to free, democratic society from within. Edward Snowden is one of the few. He has exposed illegal an unconstitutional activity by the US Government against its own citizens. Americans should stand up for Edward Snowden before it is too late.

Mainstream Music Industry Sells Sex, Not Music

The gym I attend, like most urban fitness centres, considers it necessary to serve up continuous pop music to go with your exercise.  It is piped to screens and speakers all around the gym via a satellite TV music channel at a volume that means it is impossible to escape, even with your own iPod.  The screens are full of young women like Miley Cyrus and Selena Gomez, who make up for what they lack in musical ability by displaying their more abundant physical attributes, and rappers like Jay-Z, who also make up for what they lack in musical ability by displaying the physical attributes of a bunch of young female dancers.

I love music of all genres - everything from Mozart to Macklemore.  I closely follow the new and alternative music scene and I never travel anywhere without checking out what artists are playing in the place I am visiting. So I know that there are some stunningly good artists and music available today. The problem is, those artists and music are largely ignored by the mainstream music industry, which seems to be nothing more than a production line for homogeneous tripe that is sold through soft porn videos.

I'm also no prude and I realise that sex has always been used to sell music - I'm sure the women and some of the men of the Austrian court liked Mozart for more than just his piano playing (after all, it was the era of men in tights). But the place of sex in popular music today has become a bit like the place of ketchup in my youngest daughter's cuisine - she likes a small amount of potato chips with her ketchup.  It seems that in most popular music videos, the music is strictly secondary.

I suppose I do not have to watch and listen to this crap - I have started using a set of noise-cancelling headphones at the gym so I can listen to what I choose - but I see so many great musicians struggling for a living while airheads like Miley Cyrus make millions, that it makes me grateful I never pursued my own passion for music as far as trying to make a living out of it. The only saving grace in all this is the knowledge that on-line music sales (and piracy) are killing the mainstream music companies. Their demise cannot come soon enough in my opinion.

Quote of the Day

Those deep within the security apparatus, within the charmed circle, must therefore make the decision, on America's behalf, about how much democracy—about how much discussion about the limits of democracy, even—it is safe for Americans to have ~ W W Houston

The above quotation is from this article in The Economist, which is not a magazine that I normally go to for good editorial but in this case it goes to the heart of the issues I cover in my last two posts below.

NZ Government Joins the Paranoids

I don’t want to live in a world where everything that I say, everything I do, everyone I talk to, every expression of creativity or love or friendship is recorded” ~ Edward Snowden

In my last post I wrote about the death of free speech and privacy in America.  This post is about the same thing happening in New Zealand.

New Zealand has always been a relatively free country, at least in terms of political and social liberties.  We were one of the first countries to give women the vote, we treated our conscientious objectors reasonably during the world wars, we decriminalised homosexuality before most other Western nations and from time to time we have tolerated a fair amount of political dissent with equanimity.  We have been relatively immune to the paranoia about national security that has infected America and other major Western nations since 9/11, an infection that has led to an unparalleled and unconstitutional expansion of government powers and made every petty bureaucrat and policeman believe he has a mandate to act like a school yard bully. Unfortunately the New Zealand Government finally has been infected with this craziness and is set to expand the powers of its Government Communications Security Bureau (GCSB) to include surveillance of New Zealand citizens.

The GCSB Amendment Bill is being enacted because the Bureau was found to have acted illegally in monitoring the communications of Kim Dotcom, a New Zealand resident.  The Government's response to this crime was not to prosecute those responsible in the GCSB but rather to make what they were doing legal.  The new Bill allows the GCSB to spy on New Zealanders not only for matters of national security but also for the "international relations and well-being of New Zealand" and the "economic well-being of New Zealand." Furthermore, it allows the GCSB to do so on behalf of any other NZ Government agency or any "public authority (whether in New Zealand or overseas)" or "any other entity authorised by the Minister [in charge of the agency]". This is a hugely broad mandate and, given that the GCSB has already proven it will interpret the law to the point of breaking it, I think it is safe to assume it will be following the Americans' practice of monitoring all domestic and international communications that passes through any NZ telecommunications network. The only other person involved in reviewing such warrants (and only in the case of domestic surveillance) is the Commissioner of Security Warrants, a bureaucrat appointed by the Government.

I have heard commentators from both the political left and right say that if you have nothing to fear if you are innocent, but that misses the whole point.   The fact that some people commit crimes is not a reason to assume everyone does and that all of us should be watched and listened upon by the government.  Such is the culture of the former Soviet Union and Communist East Germany and that prevails in North Korea today.  As US historian and political commentator Dan Carlin said in a recent podcast on the subject, the reason we have our toilets in the bathroom rather than the living room is because we expect privacy when we go to the toilet.  It is not just a personal freedom but requisite of self-respect to go to the bathroom in private. Prisoners are often denied this right for the very reasons that it emphasises their loss of freedom and destroys their self-respect.

We shouldn't have to justify our right to privacy, whether it is the privacy of going to the toilet or the privacy of our communications.  The government derives its just powers from the people, not the reverse.  It is not the legitimate role of the state to know our every move, conversation, opinion or whether we are having an affair with our best friend's wife.  Until and unless the state has probable cause that we have committed, or will imminently commit, a serious crime, it has no business invading our privacy.  And to have any meaning, 'probable cause' must be assessed by an independent judicial authority, not the bureaucrat carrying out the invasion of privacy or the prime minister authorising it.  The process of issuing such warrants and ultimately the warrants themselves should be open to public scrutiny.

The GCSB Amendment Bill is an unnecessary and imprudent expansion of the surveillance powers of the state in this country.  Like Edward Snowden, I do not want to live in a world where everything I say or do is recorded by government bureaucrats.  I thought New Zealand was relatively immune to the madness that has infected the rest of the world.  I'm ashamed and a little frightened to discover I was wrong.

America - Land of the Closely Scrutinised

It has been interesting watching the contortions of the mainstream media over the revelations of whistleblower Edward Snowden and Guardian journalist Glenn Greenwald about the illegal activities of the US National Security Agency and Justice Department.  In some ways I don't envy the left-leaning media their dilemma - who is right, the President who is everything they always wanted (left-wing, black and so cool he needs to be kept in a refrigerator) or Greenwald, who has impeccable credentials (gay, Guardian, ex-civil rights litigator) as one of their own?  Who should they defend - the symbol of their left-wing liberalism in the Oval Office or the only journalist upholding the principles they have always professed to defend such as freedom of speech and conscience?  The very fact that they are caught in this dilemma suggest to me that they were never serious about their principles in the first place.

I have read numerous articles and blogs coming from all sides of the political spectrum attempting to justify the illegal spying by the Obama administration on its own citizens.  The gist of the argument in favour of the government breaking the law is that it is necessary for the security of the nation.  Of course, every dictator since Sulla has used the same argument to garner to themselves excessive and unconstitutional powers and it has never ended well for the people.  Let's be clear, President Obama has been the worst offender in this regard and far worse than his predecessor, George W. Bush.  At least Bush sought a legislative mandate in the likes of the Patriot Act for the expansion of his powers.  The Obama administration has simply disregarded the need for any legislative or constitutional mandate for what it is doing, although it has used the law when it suits it, launching more prosecutions for espionage against whistle blowers than all previous administrations (the charges against Snowden are the seventh and there have been only three other such prosecutions in US history).

The US Constitution enshrines the principles of freedom of speech, privacy and due process precisely because its authors believed that future US presidents might do exactly what Obama has done.  Its drafters saw no situation where the abrogation of these principles was justified (except in the specific instances detailed in the Bill of Rights itself).  Take the Fourth Amendment, which says:

    The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

It couldn't be clearer.  The US Government cannot legally search or seize someone's papers (and any reasonable modern interpretation of "papers" must include email) without a warrant that is issued upon probable cause.  That means the government must have evidence against a specific person, place or thing it wants to search or seize.  Even the broadest interpretation of this cannot include the seizing of information about every American's telephone calls.

The framers of the US Constitution got it right.  They knew what was required if the Constitution was to preserve any semblance of liberty.  They enshrined these principles to ensure freedom survived the propensity of governments towards tyranny.  In my view, the assault on the Constitution by the current US Government is a far greater threat that any terrorist or other threat that has been used to justify these illegal and unconstitutional acts. 

Americans can no longer expose the excesses of their government or even express a dissenting opinion for fear of being targeted by agencies such as the IRS, which was recently exposed as having used its powers to illegally harass political groups that oppose the Obama administration such as the Tea Party. 

Unfortunately, the judicial oversight of the Executive Branch become a joke.  The Foreign Intelligence Surveillance ("FISA") Court, which is meant to oversee the issuing of warrants in regards to national security matters, has rejected just 11 of more than 33,000 applications for warrants in its 35 year existence and the US Supreme Court has become so politically loaded it has ceased to be any form of guardian for constitutional rights.

All this has meant that America is no longer the land of the free, but rather a land where people are so closely watched by government agencies whose methods and mandate would make former East German Stasi officers envious. 

The media should not be debating whether unconstitutional acts are justified, they should be arguing how those who have abrogated the Constitution should be brought to justice.

Frailty of Global Economy is Obvious

This week we have seen the signs that the global financial crisis (or "GFC" as it has become known after five years of familiarity) is far from over.  The US stock market lost more than two percent of its value on Thursday, the Australia market suffered similar losses, China is reporting that business purchasing for the year is much lower than expected, and here in New Zealand our own stock market was down 1% (on top of news that GDP growth is an anemic 0.3% for the March quarter instead of the predicted 0.6%).

What caused the market jitters?  Well, US Federal Reserve chairman, Ben Bernanke, made an announcement on Wednesday that set the cat amongst the financial pigeons.  Those of you who follow the US economy will know that the Federal Reserve has been 'printing' money and injecting it into the economy at a rate of $85 billion per month (that's a trillion dollars, or around $3000 for every man, woman and child in America, per year).  Ordinarily, printing money at that rate would produce fairly massive inflation but Bernanke, who is almost too clever by half, has been buying huge amounts of Treasury Bonds and mortgages (to the extent that the Federal Reserve is by far the largest purchaser of both), thereby keeping interest rates down and containing US Dollar inflation. 

Of course, all this money printing and economic sleight of hand can't go on forever.  You can't keep writing yourself cheques and expect everyone you buy stuff off to keep honoring them - well, not unless everyone else is completely stupid.  There have been signs recently that the world is starting to regard the US economy as much too risky and the US Dollar as something less than the iron-clad reserve currency it has been for many decades.  The reason the Federal Reserve has to buy all those Treasury Bonds is that China no longer wants them - not at the low interest rates the US Treasury expects to pay at any rate - and we're seeing the impact in the declining value of the US Dollar.

So what did Bernanke say that spooked the market?  Did he call an end to his trillion-dollar a year printing of money? Well, not exactly.  He signaled that he might start reducing it towards the end of this year with a view to ending it by the middle of 2014.  Hardly what you would call cold turkey, but enough for the markets to suffer their biggest fall this year.

I've been predicting in this blog that the world economy is going to get a lot worse before it gets better.  The economic situation in Europe is not improving and the US is plainly addicted to printing money.  There is no way out of this except for a major correction that restores equilibrium between the money supply and real market demand for capital.  Interest rates must go up signficantly to bring about this correction and that will force a corresponding correction in asset prices, particularly in major capital markets such as real estate and stocks.  This loss of equity will have huge flow-on effects for a while on on business investment.  In other words, before this is all over many more people are going to lose their savings, their houses and their jobs and we're all in for more pain before things get better.

Increasing Desperation from the Climate Change Alarmists

I used to write and debate a lot about climate change but I haven't written about it in the last year or two.  Why?  Well, to borrow a hackneyed phrase from the man who has probably gained more financially from climate change alarmism than anyone else, Al Gore, "the science is settled."  The only problem for Gore is that it is settled on the opposite side of the argument to what Gore has spent his time promoting since his Vice-presidency.

There are very few scientists today who are prepared to state categorically that man is primarily responsible for global warming.  This is a marked change from 10, or even 5, years ago.  The reason for this sea change is pretty obvious - even as the global atmospheric carbon dioxide has continued to rise (passing through 400ppm earlier this year), average global temperature increases have stalled.  Since 1998 there has been no statistically significant increase in global temperatures.  Even the grandfather of AGW*, former Nasa scientist James Hansen, admits “the five-year mean global temperature has been flat for a decade.”

Of course, Hansen and others who have made their reputations (and in the case of Gore and many others, their fortunes) out of this end-of-times global hysteria aren't yet prepared to admit they are wrong, instead trying to explain away the global warming pause with fanciful theories such as China's smog (i.e. atmospheric carbon is apparently both the cause of the warming and the lack of it - as claimed in the Economist article linked above).

Some climate scientists such as the authors of this paper claim that Hansen et al have got the cause and effect wrong  - carbon dioxide levels in the atmosphere follow temperature changes, not cause them.  Others such as Dr Syun-Ichi Akasofu of University of Alaska and Dr Murry Salby of Macquarie University state that global temperature patterns are entirely consistent with the recovery from the Little Ice Age around 1600 and long-term cyclical trends such as the multi-decadal oscillation. 

The politicians and crony capitalists like Gore who have prospered from the global warming business are not easily deterred, however.  President Obama has cynically joined the envangelical, suddenly discovering climate change in his second inauguration address and in Britain, energy secretary Ed Davey continues to push the party line in a vain attempt to justify some of the highest energy prices in the world that cause misery and deaths every winter.

The cause for rational debate is not helped by studies like this recently published by Cook et al, which attempts to bolster the hoary old argument that 97% of scientific papers on the subject endorse AGW.  As prominent sceptical commentator Anthony Watts shows here a straw poll of the scientists whose papers were categorised as pro-AGW say their work has been mis-represented by the study's authors.

The real scientific consensus is as follows:

• Global temperatures have increased modestly (about 1 degree in total) since the mid-19th Century
• Atmospheric carbon dioxide levels are increasing on average around 3% per year, although the rate of change varies considerably by season (more in summer) and geographical location (more in highly vegetated areas and less in populated areas)
• Mankind's carbon emissions roughly equate to the level of increase in atmospheric carbon dioxide but the increases are poorly correlated to seasonal (mankind's emissions are higher in winter) and geographical (more in populated areas) changes
• There is an increasingly poor correlation between average global temperature and atmospheric carbon levels. 

All this means that mankind's carbon emissions are probably not primarily responsible for global warming, such as it is.

It seems to me the climate change lobby don't know when to concede defeat.  In years to come I am sure we will look back on the whole AGW scare as nothing more than a load of hot air. 


* Anthropogenic (i.e. human-caused) Global Warming

They doth protest too much, methinks

The reaction to the cartoons from Al Nisbet (shown on this blog), about the government's newly-announced policy to provide children with breakfast at lower decile schools, is more interesting than the cartoons themselves.  The cartoons have really brought the political correctness brigade out of the woodwork including that old Marxist, John Minto, who laid a complaint with the Race Relations Conciliator, Susan Devoy.

The cartoonist is not saying much more than I said myself in a comment on Not PC's blog.  I pointed out that the policy would give parents the moral mandate not to feed their children breakfast (in fact, Al Nisbet's words in his cartoon were so similar to mine I wondered whether he had read mine).  I didn't identify the issue as being specific to Maori or Pacific Island families and, actually, neither explicitly did Al Nisbet. Some of the characters in his cartoons have Polynesian features and that was enough for the professional offence takers to do what they always do - that is, take offence irrespective of whether offence was intended.

Green Party leader Metiria Turei asks about the cartoons, "Does our country really hate us?"  My response to that, on another blog, is when you treat the rest of us like slaves who exist merely to serve you, are you really surprised?  The productive minority in this country, who pay all the taxes (17% of New Zealand households pay 97% of income taxes), are getting tired of being the milch cows for those who are not prepared to take responsibility for providing for the children that they bring into the world.  We have a right to be resentful and Al Nisbet was insightful and absolutely correct to express that sentiment.

The reaction to the cartoons, just like the satirical Danish Islamic cartoons, is indicative of how their author found his mark.  As Shakespeare's Queen Gertrude said, the likes of Minto and Turei "doth protest too much".  They are shouting that tired cliche "racist!" because they would rather not address the sharp truth in Al Nisbet's satire.  The real question, as I said on Not PC's blog, is how can anyone justify paying these parents welfare benefits (including supplements targeted at the care of the child) while at the same time relieving them of the responsibility of feeding their children?

The R Word

German Finance Minister Wolfgang Schaeuble warned this week that failure to address Europe's soaring youth unemployment rates and dropping the continent's welfare model could lead to revolution. This is the first time we have heard a Western political leader use the "R" word in association with the current global economic crisis but my guess is it won't be the last.

The fact that a sober-minded German finance minister should make a claim that until recently (if you believe the mainstream media) has been the preserve of the gun-toting, Bible-swearing, bolt-hole-building survivalists who are ridiculed for their predictions of a forthcoming economic and societal collapse, is pretty incredible.

I don't regard myself as one of those right-wing nut jobs (believe it or not) but I have been predicting for some time that the current global economic situation is going to get a lot worse before it gets better and that it will lead to widespread violence in some of the worst-affected countries. I think the course of events is obvious and if you want a road map, you only need to look at the 1930s.  The Wall Street Crash in 1929 was followed by a deep and prolonged economic downturn that became the Great Depression.  It took 4 - 5 years for the impact of the initial stock market collapse in October 1929 to be felt in economies all around the world.  The parallels to the banking crisis of 2008 followed by the Global Financial Crisis, which continues until today in much of Europe, is obvious.  Governments tried to spend their way out of recession in the 1930s but that only made things worse, particularly in the United States where FDR's huge spending programme ("The New Deal") led to the longest and deepest economic downturn of all.  We all know how it turned out for the world at the end of the 1930s.

The Prime Minister of Spain, Mariano Rajoy, in the same article referenced above, calls for more state aid and liberal lending policies towards small businesses - in other words, more of the excessive state spending and central bank pump-priming that led to the recession in the first place.  It didn't work in 1935 so why does anyone think it will work in 2013?

There is a myth that Europe is pursuing austerity policies.  If austerity means cutting government spending, Europe is doing anything but (as this article shows).  Almost all European governments have been spending more than ever before.  If that was going to work, it would already be doing so.

I agree with Herr Schaeuble that Europe risks revolution if the dire economic situation there is not addressed but I do not agree that more state spending on welfare and more money-printing to fund it are solutions. It is precisely the entitlement culture of the welfare state and the head-in-the-sand faith that more and more government spending will generate economic growth that is the problem.  It is the cause of societal collapse, not the solution.  We have seen evidence of this already in the riots in Greece and Spain - disaffected youths who understandably can't fathom why jobs don't magically appear and welfare payments won't keep flowing.

The West has forgotten what made it so successful economically in the first place - a combination of individual self-reliance, largely free markets and respect for private property, plus another important factor - a monetary system with integrity.  All of these things have been abandoned by Western governments and all of them must be restored if the West is to prosper again.