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Civility is the ability to disagree with others while respecting their sincerity and decency. Civility begins with understanding. We can best understand our political differences by first understanding the moral foundations upon which political views are built. This site features research, resources, and commentary related to the pursuit of Civility through understanding.




There is a “shadow banking” system that has massively and often unknowingly leveraged client assets into possibly the largest credit bubble the world has ever seen.  Because of more favorable rules, much of the leverage has occured in the Euro, meaning a collapse of the Euro will be much more catastrophic than the public is aware.

One of the shadow banking systems favorite tools is re-hypothocation.   This means institutions can use client funds as collateral for the institutions own investments.  The institutions take $1 of client collateral and use it to purchase $1.40 to $2.00 of investments for the institution.   So for $1 of client money, the client may be trading at leverage, and the institution is trading at leverage.

A much more thorough explantion is provided by Reuters, who concludes

The volume and level of re-hypothecation suggests a frightening alternative hypothesis for the current liquidity crisis being experienced by banks and for why regulators around the world decided to step in to prop up the markets recently. To date, reports have been focused on how Eurozone default concerns were provoking fear in the markets and causing liquidity to dry up.

Most have been focused on how a Eurozone default would result in huge losses in Eurozone bonds being felt across the world’s banks. However, re-hypothecation suggests an even greater fear. Considering that re-hypothecation may have increased the financial footprint of Eurozone bonds by at least four fold then a Eurozone sovereign default could be apocalyptic.

For further reading we suggest this dire post from,  who sees truly frightening possiblities

It turns out the next AIG was among us all along, only because it was hidden
deep in the bowels of the unmentionable shadow banking system, out of sight (by
definition) meant out of mind. Only it was not: and at last check there
was $15 trillion in the shadow banking system
in the US alone, where the
daisy chaining of counteparty risk meant that any liquidity risk flare up would
mean the AIG bankruptcy was not even a dress rehearsal for the grand finale.

The real threat is not the collapse of financial institutions, but the threat of governments stepping in to resuce so called “to big to fail” insitutions.   Governments don’t have the money, so they will print it up via the central banks.  This will certainly lead to inflation, and perhaps hyper-inflation.

A more hopeful opinion on the odds of hyper-inflation is provided by

I respect many of the writers who believe that we will experience hyperinflation. A number of them are, like me, students of Austrian theory economics. I think most of them are jumping the gun. At this point none of the economic or political factors required to set off hyperinflation are present. A careful analysis of theory, fact, and history leads me to conclude that inflation/stagflation is our future. It is quite a leap of fancy to say we are certain to have hyperinflation.



CBS’s 60 Minutes documents how wrongful wealth was created in the run up to the mortgage crisis.

Mortgages are ‘originated’ between the borrower and the original lender through the services of it’s brokers.  The originating lender then may keep the loan, or may decide to resell the loan to another lender.  Originating lenders can also bundle loans into a package and then resell the package.   The originating lender makes money from the fees charged to originate the loan, and from selling the loan to others.

When reselling the loans to other lenders, the originating lender represents that the loans meet certain guidelines pertaining to the ability of the borrower to repay the loan and the value of the collateral.  High risk loans (sub prime), with less qualified buyers and less collateral, command higher fees and higher interest rates, and earned higher profits for the originating lender.  Much higher.

If the originating lenders made loans that did not meet the standards, and then knowingly resold these loans to other lenders, they would be profiting from a crime.  Managers and executives who received compensation from the resale of the misrepresented loans would be profiting from a crime.  If the originating companies stock price rises as a result of the profits from reselling these loan packages, executives made millions of dollars in stock options from a crime.   And if the whole thing fell apart, the investors who bought the loans, and the investors who bought the stock of the originating company, would lose billions of dollars from a crime.  And if the losses were so large as to endanger the financial system and cause government to bail out the failing loan originator, the tax payers would be paying for the crime.

In the two pieces below, 60 Minutes documents Countrywide and Citicorp both knowingly engaged in fraudulent loan origination.  This is the kind of wrongful wealth we can all agree should be stopped.



Not sure whether to laugh or cry over this excellent piece by Jon Stewart and The Daily Show.   The original Bloomberg article focuses on $13 billion in profit that banks accrued from $7.7 trillion in near zero rate loans from the Fed.   The US government spends $40 billion a day, to put the $13 billion in context.  The Fed claims the loans have been repaid and that they actually made money for the US government.  Well, that may be so if you choose the ignore the inflationary effect of printing up $7.7 trillion.  The money may have been “paid back”, but it’s still in the money supply.  To put that inflation of the money supply into perspective, it’s about half of our annual GDP.

The Bloomberg article also highlights the fact that decision makers in Congress were kept in the dark.  A Congress that had trouble passing a $700 billion TARP program surely would have been impacted by the news that the Fed was bailing out the banks with $7.7 TRILLION.


The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
America’s Next TARP Model
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Everybody (left and right, young and old) agrees fairness is important. Much depends on how fairness is understood.

Fairness is proportionality.  The left tends to view proportionality in terms of outcomes, therefore disproportionate wealth accumulation is seen as unfair.  The right tends to view proportionality in terms of effort, so wealth unevenly distributed yet proportionate to effort is fair.

Where the two find common ground is opposing wealth not accumulated by effort, but by cheating, illegallity, gaming of the system, political manipulation, etc..  Wrongful wealth is universally seen as unfair.

A smart, technically enabled, generation coming of age with a sense that they are/have been screwed can’t be good. For them, it’s the fault of everyone between 45-65.  And they’re right.   It is this age group that wrote the tax code and the federal regulations. We all know, and have known for a long time, that there is a game (many games) going on, and it’s rigged.

Bloomberg knew the game was riggied when they fought all the way to the Supreme Court for a Freedom of Information Act request to release data on just who the Fed bailed out.  What they found won’t surprise you, won’t even shock you.

Members of Congress can legally trade stocks based on information they receive on the job.  Former Washington State Rep. Brian Baird has been fighting to end the practice for years, with almost no support.  60 Minutes did a segment on his efforts, and now the idea is quite popular.

So there is hope.  We are to blame for wrongful wealth, but we can also fix it.

Will we?


Oct 042011

‘Occupy Wall Street’ has one thing right:  The U.S. is in crisis.  Here is a tour de force documentation of exactly where we stand.


Originally posted by Jim Quinn at




Finch: Why are you doing this?
Evey Hammond: Because he was right.
Finch: About what?
Evey Hammond: That the world needs more than just a building right now. It needs hope.


The dialogue above occurred at the end of the dystopian movie V for Vendetta. It is a tale of revenge and restoring hope among citizens who had chosen safety and security over freedom and liberty. Even though this movie was fictional and adapted from a comic strip, its message and warnings should be heeded. Millions of middle class citizens in the U.S. sink deeper into despair every day. Day by day hope is being lost that the future for our children will be better than our past. The political, financial, and corporate leaders of our country are intellectually and morally bankrupt. The major Wall Street banks are bankrupt. Social Security is bankrupt. Medicare is bankrupt. The whole damned world is bankrupt. Anyone with an unbiased view of our planet would conclude that we are in unfathomable danger. The list of impending catastrophic issues that will blow up the world for millions in the U.S. and across the globe is virtually endless:

U.S. Debt

  • The national debt is currently $14.6 trillion, up from $5.7 trillion in 2000. It took over 200 years to accumulate the first $5.7 trillion of debt and only 11 years to tack on another $8.9 trillion.
  • With the new $450 billion jobs package proposed by President Obama, the deficit in FY12 will likely exceed $1.8 trillion, or 12% of GDP. Greece’s 2010 deficit was 10.5% of GDP.
  • Kenneth Rogoff and Carmen Reinhart in their book This Time is Different: Eight Centuries of Financial Folly, using data from 44 countries over 200 years, concluded that once a country’s national debt exceeds 90% of GDP, the economy stagnates and ultimately makes that country vulnerable to a debt crisis. The U.S. national debt as a percentage of GDP is currently 97% and will reach 107% in 2012. This does not count state and local debt, Fannie Mae and Freddie Mac debt, and the unfunded liabilities for Social Security and Medicare. We are at the same place Greece was in 2007. But we’re no Greece, right? This time is different.

  • Total credit market debt of $52.5 trillion is 3.5 times GDP, versus a long-term leverage ratio of 1.6. This is called living well above your means on borrowed money. We have a long way down before we reach the bottom of this mountain of debt.

  • Despite the rhetoric out of Washington D.C. by the thieves and knaves about cutting deficits, the National Debt is on course to increase by $9 trillion in the next 10 years. It will reach $20 trillion by 2015.


  • The commitments made by politicians over decades in order to get elected have resulted in unfunded liabilities for Social Security and Medicare exceeding $100 trillion.


  • In 1980, just 11.7% of all personal income came from government transfer payments.  Today, 18.0% of all personal income comes from government transfer payments. Wages and salaries paid by private industries totals $5.5 trillion per year, while wages paid by government total $1.2 trillion and social welfare payments from the government total $2.3 trillion. Only ten years ago wages and salaries from private industries totaled $4.1 trillion, while government wages were only $800 billion and welfare payments totaled $1.1 trillion. In ten years the percentage increases paint the true picture: 
    • Private wages & salaries increased 34% 
    • Government wages & salaries increased 50% 
    • Government social welfare transfer payments increased 109% 
  • Despite the rhetoric from politicians, there is no lock box and there is no cash in the Social Security fund. John Mauldin summed it up nicely: “Social Security funds are an entry into a government accounting book that don’t really exist except as an IOU. Politicians of all stripes have used the Social Security money to pay for other government expenses. Those funds were even counted to offset the deficit, although now that Social Security is no longer in a surplus that has gone away.”
  • This year, about 3.3 million people are expected to apply for federal Social Security Disability benefits. That’s 700,000 more than in 2008 and 1 million more than a decade ago. Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income. Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.


  • The official unemployment rate in the U.S. is 9.1% with 14 million people unemployed. The true unemployment rate, taking into account discouraged workers, part time workers who want a full time job, and people who have dropped out of the work force, is above 20%, or 31 million people.
  • It now takes the average unemployed worker in America about 40 weeks to find a new job.

  • Even after a supposed recovery, there are approximately 7 million less people employed today than there were in 2007.
  • The employment to population ratio of 58.2% is at the same level as 1969, before women entered the workforce in record numbers. As wages stagnated and inflation drove costs higher, families were forced to send two parents into the workforce, with predictable consequences to their latchkey children. The ratio peaked in 2001 at 64.4% and has declined precipitously since 2008.

civilian population ratio


  • The number of people on food stamps has gone from 27 million people receiving $30 billion of aid in 2007 to 45 million people (14.5% of U.S. population) receiving $72 billion in aid today.

 food stamp participation

  • The number of uninsured Americans totals 49.9 million.
  • Those covered by employer-based insurance continued to decline in 2010, to about 55%, while those with government-provided coverage continued to increase, up slightly to 31%. Employer-based coverage was down from 65% in 2000.
  • One out of every six elderly Americans now lives below the federal poverty line.
  • Another 2.6 million people slipped into poverty in the United States last year and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the Census Bureau has been publishing figures on it.
  • The percentage of Americans living below the poverty line last year, 15.1%, was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314)
  • Blacks experienced the highest poverty rate, at 27%, up from 25% in 2009, and Hispanics rose to 26% from 25%. For whites, 9.9% lived in poverty, up from 9.4% in 2009. Asians were unchanged at 12.1%.


  • Median household income fell 2.3% to $49,445 last year and has dropped 7% from the peak of $53,252 reached in 1999.
  • Median household income for the bottom tenth of the income spectrum fell by 12% from a peak in 1999, while the top 90th percentile dropped by just 1.5%.
  • Between 1969 and 2009, the median wages earned by American men between the ages of 30 and 50 dropped by 27% after you account for inflation.
  • Median income fell across all working-age categories, but the sharpest drop was among young working Americans, ages 15 to 24, which experienced a decline of 9%.
  • When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.

Wealth Inequality

  • The wealthiest 1% of all Americans now controls 43% of all the financial wealth in this c



“This is a contest of values. This is a choice about who we are and what we stand for.”

                   - President Barack Obama, in comments regarding his Jobs Bill.


The New York Times cheered the President’s value based message, calling Republican values “elitist and narrow”.  Commentators on both sides have take up the clarion call of moral authority.  Paul Krugman recently observed “…something I don’t think most political commentators have fully absorbed: at this point, American politics is fundamentally about different moral visions.”   That it’s a moral question is one thing Mr. Krugman and Karl Rove can agree on.  Mr. Rove recently wrote, ”Politicians would be wise to remember that high taxes also are a matter of principle… This makes taxation a moral issue as well as an economic one.”

Are they right?  Can we really equate politics and morals?

Politics is Morals

The New Republic had this to say about Rep. Paul Ryan’s budget plan “His basic moral premises are foreign, even abhorrent, to liberals. He seems like a person you’d like to negotiate with, but there’s nothing to negotiate over.”

Amen to that, according to Dr. Jonathan Haidt of the University of Virginia.

Dr. Haidt’s research has shown that in the presence of moral motivations, thinking and reasoning aren’t worth much.  His groundbreaking Moral Foundations Theory demonstrates that our political beliefs are a reflection of our moral beliefs.  Dr. Haidt found that we start with intuition, and for the most part use moral reasoning  not to determine, but to justify our intuitive perceptions of right and wrong.  We then tend to bind ourselves into social groups with similar values, which reinforce our intuition but tends to blind us to other groups intuition/morals.

Dr. Haidt theorized that the resulting groups bound together by shared morals could explain our political differences.  Building on prior research  and his own international field work, Dr. Haidt articulated 5 dimensions of morality; Harm, Fairness, Loyalty, Respect, and Purity.  When applied to American political ideology, he found that Liberals prioritize Harm and Fairness, while Conservatives value all five more equally (this does not mean Liberals disregard the other 3, only that they give more weight to Harm and Fairness).   The result is our political views are a reflection of our morals, which themselves are explanations for our personal intuitions regarding right and wrong, and simply put there is nothing more to talk about.

If there’s nothing to discuss, what are Mr. Krugman and Mr. Rove to do about their moral disagreements? Shall they keep at it until one of them persuades or panics a majority into adopting their moral viewpoint?   Are moral beliefs subject to majority rule?

History doesn’t think so.

Moral Belief is a Human Right

It was the Stoics of antiquity (3 BC) that first recognized the independence of man’s mind, as Seneca the Younger wrote ” …but the mind is independent, and indeed is so free and wild, that it cannot be restrained even by this prison of the body, wherein it is confined.”   By 1 BC this idea evolved into recognition of the inherent equality of all men.

The recognition of men’s equality led to the Reformation age (circa 1500′s) concept of the liberty of conscience.  As Martin Luther wrote, “Since, then, belief or unbelief is a matter of every one’s conscience, and since this is no lessening of the secular power, the latter should be content and attend to its own affairs and permit men to believe one thing or another, as they are able and willing, and constrain no one by force.”

By the late 1600′s  John Locke (the intellectual forefather of modern Liberalism) articulated the concept of natural rights, “life, liberty, and estate”, as rights belonging to all without limitation. Even Thomas Hobbes, who developed the concept of the social contract and was the antithesis of Locke regarding natural law, respected the right of man to think for himself;   “For moral philosophy is nothing else but the science of what is good and evil…Good and evil are names that signify our appetites and aversions, which in different…men are different: and diverse men differ not only in their judgment on the senses…but also of what is conformable or disagreeable to reason…”.

In the 1700′s  Francis Hutcheson called these natural rights unalienable, or rights that no law or social contract can separate from an individual.  As Hutcheson wrote, “Thus no man can really change his sentiments, judgments, and inward affections, at the pleasure of another; nor can it tend to any good to make him profess what is contrary to his heart. The right of private judgment is therefore unalienable.”

Hutcheson’s “unalienable” was made famous with the Declaration of Independence, which declared in 1776 that  “all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness”.   Just a few years later The Declaration of the Rights of Man, part of the French Revolution in 1789, includes Article 10, “No-one shall be interfered with for his opinions, even religious ones, provided that their practice doesn’t disturb public order as established by the law.”

John Stuart Mill continued the intellectual heritage in the 1800′s, writing in On Liberty (1859)

This, then, is the appropriate region of human liberty.  It comprises, first, the inward domain of consciousness; demanding liberty of conscience in the most comprehensive sense; liberty of thought and feeling; absolute freedom of opinion and sentiment on all subjects, practical or speculative, scientific, moral, or theological. (emphasis added)

And in the mid 1900′s  The Universal Declaration of Human Rights, passed by the United Nations in 1948 with Eleanor Roosevelt playing a central role, would codify the statement that remains both law and inspiration today.  The Guinness Book of Records  has called it the most translated document in the world.  Article 18 states

Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief, and freedom, either alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship and observance.

In 1971 John Rawls, a liberal widely considered one of the 20th century’s most important political philosophers, considered moral and religious freedom an unalienable right existing in the original position

Now it seems that equal liberty of conscience is the only principle that the persons in the original position can acknowledge. They cannot take chances with their liberty by permitting the dominant religious or moral doctrine to persecute or to suppress others if it wishes…

Moreover, the initial agreement on the principle of equal liberty is final. An individual recognizing religious and moral obligations regards them as binding absolutely in the sense that he cannot qualify his fulfillment of them for the sake of greater means for promoting his other interests.

Importantly, the human right to moral belief is not contingent on the source of those beliefs.  Morals may be thought of as originating from intuition, reason, or environment.  The origin of those beliefs has no effect on the right of the individual to hold them.   Man’s right to moral beliefs based on intuition, reason, or environment are just as inviolate as religious beliefs based on intuition, reason, or environment.

So if Mr. Krugman and Mr. Rove’s opposing political beliefs are reflections of their fundamental human right to moral belief, they might as well be arguing about religion.  But we don’t argue about religion in this day and age, we respect and tolerate differences.  It wasn’t always so.

A (very) Brief History of Religious Toleration

Religious tolerance in the western world got its start in the late 1600′s.  Prior to that, religious persecution was the rule.

Christians were a minority religion in the Roman Empire and were persecuted until Constantine I converted to Christianity in the 300′s AD.  Christianity embarked on a 1400 year quest to rid the western world of heresy.  In 1215 the Catholic Church declared “Secular authorities…shall be admonished and induced and if necessary compelled…to exterminate…all heretics pointed out by the Church”Persecution was supported by intellectuals including Saint Augustine and Saint Thomas Aquinas, who once wrote heretics deserved “not only to be separated from the Church, but also to be eliminated from the world by death”Martin Luther in 1543 described the Jews as “base, whoring people, that is, no people of God, and their boast of lineage, circumcision, and law must be accounted as filth.” He wrote they are “full of the devil’s feces … which they wallow in like swine,” and the synagogue is an “incorrigible whore and an evil slut”.

Though there were always dissenting voices, persecution’s decline began in the mid 1600′s led by John Milton and others.  By the mid 1700′s, the path to religious toleration would be pioneered in the fledgling United States, with the adoption of the Virginia Statute for Religious Freedom and the First Amendment.

The inviolability of religious belief is today enshrined in our culture and our law. Our protection has two dimensions, 1) The Establishment Clause prohibiting the government from establishing a national religion, and 2) The Free Exercise Clause guaranteeing free exercise of religious practices.

We are protected in the holding and practice of religious beliefs, and we are protected from having religious beliefs imposed on us by the government or anyone else.

Moral Tolerance

By recognizing moral belief and religious belief as analogous human rights, we simply substitute moral/morality anywhere we use the terms religious/religion with respect to rights.  Hence we could say we are protected in the holding and practice of moral beliefs, and we are protected from having moral beliefs imposed on us by the government or anyone else.

John Rawls expresses the equivalency of morals and religion and their independence from the government in Theory of Justice

The government has no authority to render associations either legitimate or illegitimate any more than it has this authority in regard to art and science. These matters are simply not within its competence as defined by a just constitution. Rather, given the principles of justice, the state must be understood as the association consisting of equal citizens. It does not concern itself with philosophical and religious doctrine but regulates individuals’ pursuit of their moral and spiritual interests in accordance with principles to which they themselves would agree in an initial situation of equality. By exercising its powers in this way the government acts as the citizens’ agent and satisfies the demands of their public conception of justice. Therefore the notion of the omnicompetent laicist state is also denied, since from the principles of justice it follows that government has neither the right nor the duty to do what it or a majority (or whatever) wants to do in questions of morals and religion. Its duty is limited to underwriting the conditions of equal moral and religious liberty.

And if Dr. Haidt is correct that our morals are our politics, we can also say we are protected in the holding and practice of political beliefs, and we are protected from having political beliefs imposed on us by the government or anyone else.

Aspects of both liberal and conservative ideologies demand obedience.  Mr. Krugman and the liberals demand our money to support their conception of social justice.  Mr. Rove and the conservatives demand our money to support the military-industrial complex.  Both demand our childrens money by funding their visions with debt.  Would Mr. Krugman and Mr. Rove give up obedience in favor of moral/political tolerance?

Thomas Jefferson would; from the Statute of Virginia for Religious Freedom

that to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical


Changing the World

In this article we made the case for moral belief as a fundamental  human right.  Everyone has a right to their own beliefs, and to have all beliefs that don’t cause harm to others respected and tolerated.

Our political leaders encourage us to self identify as Democrats or Republicans, willingly binding ourselves to a collection of beliefs which we may not fully share, and blinding us to understanding of the other party.  We can find ourselves defending positions we don’t fully support against opponents we don’t fully understand.

But we are increasingly rejecting the simplistic two party categorization and instead participating in many networks that support  our many interests.  These networks, often local, sometimes virtual, bring us in closer contact with other people who may share our passion for the subject, but approach it from a different perspective.   Cooperation overcomes our blindness and erects bridges built on toleration and understanding that are helping us find solutions.

In our next article we will take you on a tour of remarkable ideas and experiences in modern toleration. We think you will be amazed at both the research and practical experiences taking place throughout our country and the world.   A recent Rasmussen survey showed about a third of us already refuse to label ourselves as Republican or Democrat.  Contrary to what self serving politicians and the media encourage us to believe, our research suggests that the real conflict today is between an emerging post-partisan culture disgusted with and struggling to free itself from the confines of petty partisan politics.


Sign up here to be notified when Part II is posted.`You will recieve a link via email to confirm, please check your spam folder if you do not receive.




Anwar al-Awlaki, then and now


The Wall Street Journal provides a retrospective look at the extensive positive media coverage received by Anwar al-Awlaki, an American citizen recently killed by drone attack in Yemen.

In the early 2000′s, al-Awlaki was hailed as a moderte Muslim capable of bridging the cultural gap between Islam and the West.  Some excerpts…


New York Times:

…Mr. Al-Awlaki, who at 30 is held up as a new generation of Muslim leader capable of merging East and West: born in New Mexico to parents from Yemen, who studied Islam in Yemen and civil engineering at Colorado State University.


Baltimore Sun:

“Al-Awlaki bridges the two worlds as easily as he shifts from lecturing on the lives of the prophets to tapping phone numbers into his Palm Pilot [a now-antiquated electronic device],” reported the paper on October 28, 2001. “He and other Muslims say they support action against terrorist leader Osama bin Laden in retaliation for the Sept. 11 terrorist attacks[.]”



“Awlaki, whose mosque is one of the largest in the U.S., sees himself as a Muslim leader who could help build bridges between Islam and the West. [B]ut political scientist Telhami says these are difficult days for Muslim moderates”



Interesting background information on (reportedly) the first American citizen to be assassinated abroad.


Class warfare, or fairness?  The Brookings Institute explains.

From a well done article at concisely describing the “Buffett Rule”.   Since it is brief, we quote the entire article below:

On Monday, the administration released its deficit reduction blueprint. One part of the administration’s proposal, which has received enormous attention, was that the Joint Select Committee on Deficit Reduction observe the “Buffett Rule” if it attempts tax reform. The furor over this proposal is surprising and the debate about it seems to have largely missed the point.

For background, the proposed Buffett Rule, so named from Warren Buffett’s op-ed in the New York Times, says, “No household making over $1 million annually should pay a smaller share of its income in taxes than middle-class families.” Setting aside the ambiguous definition of “middle-class,” the intent of the proposed rule is clear: tax reform should follow the principle of vertical equity, a hallmark of the progressive tax system—that as one’s income increases so should one’s tax payments as a share of income.

To see why the furor is surprising, note that the Buffett rule is an extremely mild form of progressivity—it just says that tax payments as a share of income shouldn’t be lower for someone with high income than for someone with low income. Is anyone seriously proposing the opposite? That people with income above $1 million should pay a lower share of their income in taxes than a middle-class family? If not, then what is objectionable about the Buffett Rule?

Opponents to the Buffett Rule frequently make the point that households with the highest-incomes already, on average, pay a higher portion of their income in taxes than middle-income households. Indeed, according to estimates from the Tax Policy Center, those making over $1 million in cash income paid an average federal tax rate (excluding excise taxes) of 29.1 percent while those with cash income between $50,000 and $75,000 paid an average federal tax rate of 15 percent.

This type of analysis, though, is based on averages. The Buffett Rule as proposed by the administration would apply—precisely and only—to those high income households who are paying less than the middle class average tax rate. The fact that the average tax rate among very high income households is higher than among middle class households means that the system, on average, is progressive, but it can still be the case—and is—that some people with very high income pay little or no taxes. That is what the Buffett Rule is addressing.

The Buffett Rule is also a matter of horizontal equity, a concept often used when analyzing the fairness of tax proposals but notably absent from the current debate. In an equitable system, people of similar means should have similar tax burdens. The Buffett Rule could improve both the vertical equity and the horizontal equity of the federal tax system by ensuring that every millionaire pay a minimal rate.

To be clear, the administration did not suggest how the Buffett Rule be implemented nor did it score specific versions. Rather, it proposed that the Joint Select Committee observe the principle of vertical (and horizontal) equity when trying to reform taxes. The Buffett Rule could be a guideline either for tweaks to the tax code that will reduce the deficit or for comprehensive tax reform. In any case, the vehement opposition to the proposed rule seems unfounded.


Well said.  The New York Time cites Treasury Department estimates that there about 60,000 “some people”, and taxing them per the Buffett Rule would raise approximately $1.3 billion per year…about 1/10 of what the government spends every day.



Libertarian beliefs about Liberal beliefs.

In his book The Revolution, Ron Paul cites an essay by William Graham Sumner titled “The Forgotten Man“.   Mr. Sumner began the essay with this:

The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C’s interests, are entirely overlooked. I call C the Forgotten Man.

We thought it would be interesting to list the assumptions underlying this framework as a way for Libertarians to make their case.  From the Libertarian perspective then, Liberals assume that:

A & B know what’s best for D.

A & B are not self-interested

C will not help D unless A & B compel him.

A & B are fine with using force to coerce C into helping D.

A & B are not fine with C using force to resist helping D.

A & B prefer C to be unarmed.

C will not help D unless A & B compel him.

C will not help D unless A & B compel him.

Without the assitance of A & B, D will languish or even perish

D wants the help of A & B, or for that matter C.

D will be grateful for the help.

D will not become dependent on the help.

The help will not discourage D from helping himself.

The use A & B have for C’s resources is superior to what C would do on his own.

A & B have dominion over C and first claim on the fruits of his labor.

C will try to avoid his “responsibility” to help D, so they must confiscate his earnings first by withholding from his paycheck.

There are more D’s than C’s, so A & B will get elected by taking from C and giving to D.

A & B are making the world a better place.









Krugman: More stimulus.  Much more.

The nobel laureate argues we aren’t doing enough and urgently need to reverse course through government spending and expansion of the money supply.

What should be happening? The answer is that we need a major push to get the economy moving, not at some future date, but right now. For the time being we need more, not less, government spending, supported by aggressively expansionary policies from the Federal Reserve and its counterparts abroad. And it’s not just pointy-headed economists saying this; business leaders like Google’s Eric Schmidt are saying the same thing


Be sure to catch Eric Schmidt’s recent comments too…

But the current strategy is ludicrous. You have a situtation where the private sector sees essentially no growth in demand. The classic solution is to have the government step in, and with short-term initiatives help stimulate that demand. If they do it right, they’ll invest in income and growth producing things, like highways and bridges and schools.



Paul Volcker cautions the Fed against playing fast and loose with inflation.



Top strategist: “I believe printing money to be a fundamentally dishonest endeavour”

Dylan Grice takes a strong stand against government money creation.  Mr. Grice is one of the world’s foremost finacial strategists according to the Thomson Extel Survey.

Here’s his view, heavily edited for brevity.  Read the full transcript here.

…I believe printing money to be a fundamentally dishonest endeavour. Think about how it works. When the central bank, at zero cost, increases the monetary base by 1%, where does that money go? Answer: into the market for government bonds.

By issuing bonds to itself the government seems to have miraculously raised
revenue without burdening anyone else. This is probably why the mechanism is
universally adopted throughout the world’s financial system. Yet free money does
not, and cannot, exist… someone, somewhere has to pay.

But who? This is where the subtle dishonesty resides, because the answer is that
no-one knows…The point is we can’t know who will pay, only that
someone will pay. Thus the government has raised revenues
without even knowing upon whom the burden falls, let alone telling them.

The burden of this money printing…seeps silently into the
economy, falling indiscriminately but indubitably on unseen, unknowing victims.


The full article is much more extensive and highly worth reading.  In particular he makes the point that increases in asset valuations, not just goods as measured by the CPI, should be included in the inflation calculation.

Mr. Grice prefers the classical definition of inflation, which is inflation of the money supply.  For those who share this view, here’s a sobering chart…


Esquire argues Jon Stewart needs to take a stand.


High school Valedictorian speaks out against public education


Humorist reveiw the week, from


By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens… The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

John Maynard Keynes, 1919


Government has a bottomless piggy bank, and it’s us.  We just don’t realize it.

Keynes was referring to inflation of the money supply.  In simple terms the money supply is the total of everyone’s physical money plus everyone’s bank accounts.   Government can increase or decrease the total supply of money through actions of the Federal Reserve (Fed).  In fact, one of the Fed’s main functions is to regulate the money supply, this is called monetary policy.

When government increases the supply of money, the money already in circulation is automatically worth less.   It’s much like shares of stock.  If you own 100 shares of a company that has 1000 shares outstanding, you own 10% of the company.  If the company was able to issue 1000 new shares, your 100 shares would now own just 5% of the company.  This kind of action in a company’s stock is called dilution.   When it happens to money it’s called inflation.  Same effect.  Whenever new stock/money is created, the value of existing stock/money is now lower.

Let’s look at it another way.  We all know that when lots of people want something, the price goes up.  For example, you may wish to purchase a new car.  You have the money.  You know the price should be $15,000.  Then, just before you go to buy the car, the government announces they will give everyone who doesn’t have a car $20,000 to buy a car with.  Suddenly lots of people have access to the cash needed to buy a car.  Guess what the dealer does to the price?   At first your $15,000 was valuable enough to by a car, but after the government increased the supply of money available to buy cars, your $15,000 was no longer valuable enough to afford the car.   So (the government program) increasing the  supply of money  made the value of (your) existing money lower.

At any given time you own a certain percentage of the money supply.  When government increases the money supply, the value of your money is lower.  But since your bank account didn’t change, you wouldn’t have any way of knowing.

How would you become aware you now own a smaller percentage of the money supply?   When money is created,  more dollars are chasing the same amount of things to buy, causing prices to rise.  This rise in prices is how we measure the effect of increasing the money supply, so over time the rise in prices has come to be referred to as inflation.  The Consumer Price Index (CPI) is our most common measuring stick for inflation.  Because the economy is so large and complicated, it is impossible to know which prices will rise, when they will rise, or by how much they will rise when the money supply is increased.

So, whenever governement increases the money supply, it is eventually ”paid for” by an increase in the price of something, at some time.

How does government increase the money supply?  For reasons too complex to explain here, the Fed mainly controls the money supply by setting interest rates.  The Fed can also directly create dollars.  It creates new dollars by simply increasing the total in it’s own bank account.  If you’re unfamiliar with this it may sound incredible, but that is actually what happens.  The Fed can create money and use it to buy anything it wants.

One of the Feds favorite things to buy is Treasury Bonds.  The sale of Treasury Bonds is how the U.S. government finances it’s deficit spending.  When the government needs to borrow it announces a sale (the term they use is auction) of T-Bonds.  Guess who buys the T-Bonds?  The Fed.  Where did the Fed get the money?  They created it.  The Fed is by far the largest holder of US government debt, usually holding about 50% of the total.

This is called “monetizing the debt“.  If you’re the government and you’re short of cash, it is much quicker and easier than raising taxes or borrowing from the Chinese.

Monetizing the debt means (since the government inflated the money supply) we will eventually pay for it in inflated prices. And since the Fed is independent, they don’t have to tell anyone what they have done, what they are doing, or what they intend to do.   This is what Keynes is talking about when he says governments can confiscate the wealth of their citizens secretly and unobserved, and why not one man in a million can diagnose it.

Is there any limit to how much money the Fed can create?  Yes, it’s just that no one (including the Fed) knows what that limit is, because it’s just too complicated.  They know if they create too much money, inflation will increase.  If they create way too much money, they will lose control and money will hyper-inflate causing disruptions in society (imagine prices rising 50% or greater every year, which has happened many times in world history, and some voices believe can happen again in the U.S.).  This is why the Fed always says their main job is to fight inflation.  The Fed believes it can manage the money supply any way it wants, as long as it controls inflation.  So in practice, the inflation rate is the main limit on how much money they will create.

An inflation rate of 1-3% is, A) low enough that citizens won’t notice, and B) low enough the Fed doesn’t think it will lose control.  An inflation rate of say 10% is high enough citizens will notice and the Fed will fear losing control.

How did we get into this situation?  At the turn of the century economists developed theories that by managing the money supply they could control the business cycle, meaning they would prevent down cycles and keep the economy in a permanent semi-boom cycle, which would feature near full employment.   Especially after the Great Depression, this sounded mighty good.  And so, the last 100 years has been a living experiment.  All the booms and busts, including the one we are experiencing now, have been the result of the unforseen consequences of various interventions in the economy by government.

Likewise, no one knows what would have happened if the government had not been intervening.  And that is the battle line in the debate between (so called) Keynsian economists and ‘free market’ economists.  Stay tuned.



UPDATE:  A reader posted this article to, generating extensive comments.  See the full thread here.

A more technical (and scarier) description is provided here by






Hillary’s Honduras Obsession By Mary O’Grady


ELITISM once featured an article by Raymond J. Learsy (a successful oil trader turned analyst).   He makes an argument that if we could only be more like France , well, everything would be better.  Why?  Because France is  ruled by elites.

Mr. Learsy seems to follow in the footsteps first laid down by Walter Lippman in Public Opinion.  Published in 1922 (when the author was 33 years old), it is one of the earliest and most explicit calls for elitism.  Lippman  believed the common man lacked sufficient understanding to enable him to participate meaningfully in public decisions.  From Wikipedia

Early on Lippmann said the herd of citizens must be governed by “a specialized class whose interests reach beyond the locality.”  This class is composed of experts, specialists and bureaucrats. The experts, who often are referred to as “elites,” were to be a machinery of knowledge that circumvents the primary defect of democracy, the impossible ideal of the “omnicompetent citizen”.

The clarion call from the 1920′s is taking up by Mr. Learsy, who seems to be channeling Mr. Lippman when he writes

France’s governance emanates from an elite corp of public servants, graduates of the “grands ecoles” who run the sinews of the Ministries of State. It has given France a government whose dedication and commitment to the general weal is keenly suited to a fiercely competitive world…France has a government with vision, having the welfare of the general public foremost in its sights.

Successful rule by elite is not limited to France, he continues

…consider China. Here is a society with an elite corps of public servants. Only the best and the brightest from the very top schools gain access to what is today the almost ludicrously misnamed the “Communist Party.”

Curiously, Mr. Learsy goes on to quote an article by David Brooks, which was plainly intended to poke fun at elitism.  From Brooks…

The top 1 percent will go to the elite universities. Some of the others will go to second-tier schools, at best. These unfortunates will find that, while their career prospects aren’t permanently foreclosed, the odds of great success are diminished. Suicide rates at these schools are high, as students come to feel they have failed their parents…  You are truly a golden child, because you succeed in university as well. You have a number of opportunities… you decide to enter government service, which is less risky and gives you chances to get rich (under the table) and serve the nation.

But Brooks concludes:

Perhaps it’s simply impossible for a top-down memorization-based elite to organize a flexible, innovative information economy, no matter how brilliant its members are.

Mr. Lippman made innumerable contributions to public discourse during his career.  Often cited as the father of American political commentary, he won two Pulitzers during his ensuing 30 year career.  However, elitism is such a charged term that a google search of Mr. Lippman today inevitably references his contributions to elitism, rarely approvingly.

It’s possible that elitism defines an interesting distinction between the proclivities of liberals and non-liberals.  Liberals are comfortable with, even welcome, the idea of an informed elite making decisions for them.   Non-liberals,  probably disinclined to believe the benevolent  and public spirited assumptions, are disinclined to trust such an elite.


Regarding abortion I have alway been pro-choice. While researching liberal thought, quite by accident came across this idea…

“the worth of a human fetus, whether it is allowed to live or to be extinguished, is entirely based on the feelings of the mother. If the mother wants to give birth, the fetus is of incomparable worth; if the mother doesn’t, the fetus has the value of a decayed tooth.”
Doesn’t that just make you think?

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