Most people, including this writer, have no idea what a depression is like. We treat recent financial events like an intellectual exercise or political game. Normality will be restored soon, we think. Life will carry on as always, we hope. But nothing could be further from the truth. A depression is the end of affluence, vanity, upward mobility, mass education, luxury Christmas presents, good teeth, vibrant health and reasonable life expectancy.

Scattered through this issue of MensaMag are photographs from the last time around.

I’m waiting for someone to make an Emperor’s New Clothes statement. Not that it would necessarily help our economic plight; we’re too near the cliff to stop running.

What’s an Emperor’s New Clothes statement? It’s a bromide like "Unregulated markets are a recipe for disaster" or "If America elects McCain, run and sell dollars". Take Lewitt’s excellent piece from the NYTimes (http://www.nytimes.com/2008/09/16/opinion/16lewitt.html?_r=2&th&emc=th&oref=slogin&oref=slogin) as an example. It purports to be a concise explanation of the importance of AIG’s survival in the current turmoil. But the unvoiced topic is more strident. Most paragraphs beg the question whether focused and determined regulation would have prevented or significantly defused the crisis. At a higher level of abstraction, financial markets and global warming run parallel (pace Jim Szpajcher). Activities in the sectors are ideologically buttressed, the ideologies at present are infected with the couch potato’s disease of laisser-aller, and beliefs are held with adamantine firmness. The question whether, at some point, we lose control and undergo ‘extinction events’ is similar to whether, at some point, we become too insane to withdraw from the supporting ideology.

On the other hand, it’s curious that no bankers and fund managers are jumping from windows.

Today, foolishness has no limits and intelligent souls must struggle to learn their surroundings. What does this mean? Well, for a start, published data about house values can be trashed. They equate Vancouver and Peachland, urban cores and suburbia. All these are thrown into a pot and we’re given the average cost of a Canadian home. There’s no advance in this beyond incantation and alchemy. We know the information is nonsense, yet we tolerate it. On the plus side, there’s virtue in politeness. On the negative, the mental rot created by advertising and politicians and the debunking of education has sunk deep roots. As a community, we may have entered a dreamlike state like Snow White without the Prince. Returning to our example, rising fuel costs will make suburban living a costly nightmare. Buy a house in the suburbs? Can I sell you shares in an American bank? Downtown in a small city or town is the only sane living environment. Or, more generally, we’ll soon apply a multiplier to real estate values based on proximity to jobs. Meanwhile the insane dream of single-family home plus two cars in a sweet suburb, weekly shopping trip to the box stores, two incomes and lots of leisure to spend with the adorable kiddies, lives on. Would you believe it? Of course there are exceptions, for example gold-rush towns and the service sectors they support. Calgary is typical. But even here the shoe hasn’t dropped as to the gap between suburb and downtown property values. Watch for it.

General

Feel life is passing you by? Activities with fellow Mensans will turn this around. Think coffees, martinis, movies, dinners, quizzes, anything that ravels up the tired sleeve of care. Suggest it, we’re game. We’re informal, unstructured, and intellectually stimulating. Want a change? Here’s where to come. Mensa Calgary is a community where members interact, network, support each other, and have fun. For further info, contact Patricia at kathleen4057@yahoo.ca ["There's no pleasure on earth that's worth sacrificing for the sake of an extra five years in the geriatric ward of the Sunset Old People's Home." (John Mortimore)]

MensaTest

Watch this page for the October Mensa test date. Or email/phone Vicki Herd at vherd@shaw.ca, (403) 243-6144. Testing should take just over an hour and is user-friendly.

The testing fee is $90. This covers the cost of writing 2 tests, receiving feedback on eligibility for Mensa membership, plus the first year’s membership fee if you qualify. You write 2 tests so you have 2 chances to qualify for Mensa.  Full time students pay only $70.

A pictorial test is available if your mother tongue is not English and you do not want your test scores to be disadvantaged by language.

You need to score in the top 2% of the population in one of the two tests to qualify.

Please contact Vicki Herd if you have questions about Mensa or the testing, and let Vicki know if you want to write the tests so she can plan resources and give detailed directions to the testing site, likely at meeting Room 2, Basement, W R Castell Central Library, 616 Macleod Trail SE, Calgary.

MensaGenerationX

Viva the under-30s! Poker and games night on October 18, y’all. Mellow and easy time. BYOB. Contact Leslie for time and place, RSVP by Oct 16: august_83@hotmail.com

CoffeeFests

Diverting discussion at 7pm, Kaffa Coffee and Salsa House in Marda Loop. Address: 2138 – 33Ave SW. October 1, 8 and 30. No subject too hot, no view too contentious, no humour too sublime. Confirm with Patricia at kathleen4057@yahoo.ca or not, as you like. Look for the Harry Potter book on the table.

DinnerNight

Our October feast of reason and flow of soul is Tuesday, October 21st, at 7:00pm. The place: one of the best locations for affordable fine dining in Calgary – the Highwood Dining Room at SAIT. RSVP to Patricia (almostp@shaw.ca). Reference the link below for a full review of the restaurant.

http://www.opentable.com/rest_profile.aspx?rid=19825&restref=19825

BookClub

Patricia will host the October Book Club on Friday, October 17th, 2008. The time, 7pm.  Address and more particulars at almostp@shaw.ca. The selection is most appropriately The Great Depression, 1929-1939, by Pierre Burton (1990). 

Here is a review.

Nobody could tell exactly when it began and nobody could predict when it would end. At the outset, they didn’t even call it a depression. At worse it was a recession, a brief slump, a "correction" in the market, a glitch in the rising curve of prosperity. Only when the full import of those heartbreaking years sank in did it become the Great Depression – Great because there had been no other remotely like it and (please God!) there would never be anything like it again.

In retrospect, we see it as a whole – as a neat decade tucked in between the Roaring Twenties and the Second World War, perhaps the most significant ten years in our history, a watershed era that scarred and transformed the nation. But it hasn’t been easy for later generations to comprehend its devastating impact. The Depression lies just over the hill of memory: after all, anyone who reached voting age in 1929 is over eighty today. There are not very many left who can remember what it was like to live on water for an entire day, as the Templeton family did in the Parkdale district of Toronto in 1932, or how it felt to own only a single dress – made of flour sacks – as Etha Munro did in the family farmhouse on the drought-ravaged Saskatchewan prairie in 1934.

The statistics of those times are appalling. At the nadir of the Depression, half the wage earners in Canada were on some sort of relief. One Canadian in five was a public dependent. Forty percent of those in the workforce had no skills; the average yearly income was less than five hundred dollars at a time when the poverty line for a family of four was estimated at more than twice that amount. 

This army of the deprived were treated shabbily by a government that used words like "fiscal responsibility" and "a sound dollar" as excuses to ignore human despair. Balancing the budget was more important than feeding the hungry. The bogey of the deficit was enlisted to tighten the purse strings.

R.B. Bennett, who presided over the five worst years of the Depression, said he was determined to preserve the nation’s credit "at whatever sacrifice." But the burden of that sacrifice did not fall on the shoulders of Bennett or his equally parsimonious opponent, Mackenzie King. It fell on those who, in spite of the politicians’ assurances to the contrary, were starving and naked – on the little girl in Montreal who fainted one day in school because, as her teacher discovered, it wasn’t her turn for breakfast that morning; on another little girl in Alberta who could go to school only on those days when it was her turn to wear "the dress"; or the Ottawa landlord who collapsed in the street from hunger because none of his tenants had been able to pay their rent; on the New Brunswick father who awoke one cold winter night in a house without fuel to check on his three-month-old baby, only to find her frozen to death. 

Over 1.5 million Canadians were on relief, one in five was a public dependant, and 70,000 young men travelled like hoboes. Ordinary citizens were rioting in the streets, but their demonstrations met with indifference, and dissidents were jailed. Canada emerged from the Great Depression a different nation.

The most searing decade in Canada’s history began with the stock market crash of 1929 and ended with the Second World War. With formidable story-telling powers, Berton reconstructs its engrossing events vividly: the Regina Riot, the Great Birth Control Trial, the black blizzards of the dust bowl and the rise of Social Credit. The extraordinary cast of characters includes Prime Minister Mackenzie King, who praised Hitler and Mussolini but thought Winston Churchill "one of the most dangerous men I have ever known"; Maurice Duplessis, who padlocked the homes of private citizens for their political opinions; and Tim Buck, the Communist leader who narrowly escaped murder in Kingston Penitentiary.

In this #1 best-selling book, Berton proves that Canada’s political leaders failed to take the bold steps necessary to deal with the mass unemployment, drought and despair. A child of the era, he writes passionately of people starving in the midst of plenty.

http://www.randomhouse.ca/catalog/display.pperl?isbn=9780385658430

http://www.chapters.indigo.ca/books/The-Great-Depression-1929-1939-Pierre-Berton/9780385658430-AllReviews.html

http://www.bookfinder.us/review-0385658435-title-The_Great_Depression-author-Pierre_Berton.html

SecondTuesdays(of the Month)

October 14th is our casual get-together at Vicki Herd’s home, 2469 Sorrel Mews SW (a couple of blocks south of 33 Ave, east of Crowchild Tr), 7:30pm. BYOB if you wish. Contact Vicki (vherd@shaw.ca / 243-6144) or Patricia (almostp@shaw.ca / 212-1461) for additional info.  RSVP isn’t necessary.

OtherUpComings

Saturday, October 4th
An exciting Drumheller excursion. Here’s the itinerary. Please rsvp to almostp@shaw.ca or jjpugh@shaw.ca.
Dep. Langevin School (Bridgeland) parking lot at 8am, travel to Torrington.
Arr. Torrington and tour Gopher Hole Museum, not to be missed.
Arr. Royal Tyrrell Museum. Tour the world class exhibits and Midland Provincial Park.
Arr. Drumheller and  visit attractions such as the giant T-Rex, fossil shop, Rosedale Suspension Bridge, Atlas Coal Mine, Hoodoos, Dorothy ghost town.
Arr. Wayne and enjoy the fabulous bbq steak dinner at the Last Chance Saloon, mmmmmm!
Arr. back at Langevin School around 9:30pm

For more detail, also see http://www.roadtripamerica.com/places/gopher.htm
http://photocamel.com/forum/hdr-photography/51134-grain-elevator-dorothy-ab.html

Sunday, October 26th is Mensa Calgary’s AGM.  All members welcome. 2 to 3pm. For the address, call (403) 212-1461. Order of Business: election of officers (Local Secretary, Secretary/Treasurer, Events Coordinator, Directors at Large), Financial Report, Activity Report.

Refreshments will be served at the conclusion of the AGM.

Nominations for Board positions should be emailed to Peter Walker, Elections Officer, at peterwalker@shaw.ca by Wednesday, October 22, 2008.  Nominations will also be accepted from the floor at the AGM. Come one, come all.

For other and general event queries, email Vicki Herd (vherd@shaw.ca).

1) Three bright children are in a Mensa classroom. The teacher says, "You’re all obedient and very intelligent. Here’s a little IQ test that is fair to each of you. Close your eyes. I’m going to place a red or blue hat on each of your heads. When I say ‘open’, you will open your eyes. If either of the other children is wearing a red hat, clap your hands once. When you know the colour of the hat on your own head, clap twice more. The children, being Mensa members, understood the instructions clearly. They closed their eyes, and the teacher put red hats on each of their heads. The teacher said ‘open’. The children opened their eyes. They all clapped once immediately. After a few moments, the third child clapped twice more and said his hat was red. How did the child know?

2) The same classroom situation as before. This time, after the children opened their eyes, the third child clapped three times right away and said all the hats were red. How did the child know??

The answers to September’s puzzles were supplied in the September issue.

Here are the answers to this month’s puzzles:
1). The third child reasoned that since all three clapped, there had to be at least two red hats. If the third child had a blue hat, child #1 or #2, being very intelligent, would know the other two hats were red and his/hers was therefore red. But neither of them clapped. Therefore, #3’s hat was red.

2) While the teacher talked, the third child reasoned: the test is fair. But if the teacher gives us hats that aren’t the same colour, the test won’t be fair. So all the hats will be either red or blue. As soon as the child saw that the other hats were red, the child knew his/hers was red too.

China’s apologists are wide-eyed and clueless.

The Beijing Olympics were quite a show. But then it’s wonderful what you can do with total control over your people.

Poor old Robert Mugabe. Do you know what that guy needs? An Olympics. Harare 2012, he really missed a trick there. A well-run Games and nothing else matters. Put on a show, throw up a couple of impressive buildings and the world is your friend.

The road home from Beijing is lined with wide-eyed converts who’ve seen the light on totalitarianism. "China has set the bar very high," Jacques Rogge, the president of the International Olympic Committee, said. "There are some things that London will not be able to compare to, or equal – such as the ability to bring hundreds of thousands of volunteers to different sites." Yes, Jacques, it is amazing what people can achieve once they appreciate there is no alternative.

And there isn’t in China. About 100 miles south of Beijing, an agricultural community has been destroyed because its water supply was rerouted to deliver a green and blooming Olympics. Roadblocks stop people from that area travelling north, while taxi drivers were told to take any passengers with unusual requests directly to the police.

Official reports state, however, that the 31,000 people that lost homes or land are delighted to be making this sacrifice. "The legacy of these Games is ultimately up to the Chinese people," Rogge added, but that is a lie too. Nothing can be decided by an oppressed people.

What happens next in China is no more determined by its citizens than the destiny of Iraq was in the hands of Iraqis. The West got rid of Saddam Hussein, not the locals. When the eyes of the world turn from Beijing, this regime will go back to its old ways quicker than a Jamaican sprinter out of the blocks.

Not that it made much pretence of reform while under scrutiny. There were 77 requests to protest in official zones agreed with the IOC, but none was granted. A number of applicants were sentenced to re-education through labour, including two women, aged 79 and 77, one of whom is disabled and almost blind.

"You can get big headlines back home by slating the oppressive regime, but there is a risk of going too far," Tessa Jowell, the Minister for the Olympics, said. Quite right, Tessa. Oppressive regimes have feelings, too, don’t they? As a member of Tony Blair’s Government, Tessa clearly did not think that it was going too far to accuse an oppressive regime of possessing weapons of mass destruction, bombing it, invading it, and then finding none; but having got on the totalitarian happy pills in Beijing, she knows the pain that a media barb can bring. Worse than collateral damage, that is.

This is the most worrying legacy of the Beijing Games. It has shown our ministers, civil servants and sports administrators what could be achieved, if we could only suspend personal freedom. Change is afoot. There was a sketch in the infamous Brass Eye television comedy in which the predatory paedophile and child murderer Sidney Cooke was to be fired into space, only for it to be discovered that an eight-year-old boy was sealed in the capsule with him.

The London Games had its Brass Eye moment on Sunday night when a video, made by the tourist authority Visit London and screened at the handover party, was found to contain an image of Myra Hindley, from a portrait by Marcus Harvey, shown at the Royal Academy in 1997.

I admit that I laughed. There we are, trying to look all Cool Britannia and icily efficient, and a picture of a notorious child murderer finds its way into the show. At the very least, we should be thankful to live in a society in which freedom of artistic expression is allowed. Although maybe not for much longer.

"It is disgraceful this night of British pride has been sullied," said a government spokesman. "Those responsible should be found and sacked." Or sent for re-education through labour, maybe. Now there is someone who has been supping too deeply from the cup of governmental control in Beijing.

No surprise that Ken Livingstone was lavishly entertained by the Chinese Government. Having done so much to smooth Anglo-Chinese relations with his astute comparison of the Tiananmen Square massacre (death toll 2,000-3,000, according to the Chinese Red Cross) with the poll tax riots (death toll none, according to everybody), it is clear what appeals to him about the Chinese system.

He said this week: "When I first got interested in politics all the quality papers had an entire page reporting MPs’ speeches. There would be the most salient point reported each morning." The pronouncements of the powerful, dutifully recorded and displayed without comment, Ken? The Chinese people would recognise that.

Of course the Beijing Games went without a hitch. Give anyone total, terrifying control over a population, with force, and they will make them march in unison, drum, smile, dance, mime, jump through hoops if necessary. "They don’t look very oppressed," wrote one observer. No, pal, and neither would you if you knew the consequences of complaint.

The same columnist wrote that the young girls carrying the flags before events were "perfect examples of what a beautiful young Chinese woman looks like". Yes, they were. This is how that was achieved. Those applying for the job, who numbered thousands, had to be above 1.66m tall, pretty of face and stripped naked for the judges, who measured their body proportions. Isn’t that healthy?

Those performing the three-minute umbrella dance at the opening ceremony trained for six months for 14 to15 hours each day, while the 900 soldiers unrolling the scroll that was the centrepiece of the production wore nappies because they had to stay hidden for seven hours, with not even a trip to the toilet allowed. And this is the event that our Olympics Minister called wondrous? That Rogge thinks will be hard to beat?

The Beijing Olympics was China’s Triumph of the Will. Immaculately staged, but there is a bit more to it than just choreography.

(by martin samuel, The Times, 27Aug08)

Were the ancient Olympics any better than the modern?

I am one of those inverted patriots who takes considerable comfort in Team GB doing as usual (ie badly) at the Olympics. For me it’s a badge of honour that our precocious 14 year old and his partner managed to come last in the finals of the synchronised diving.

Diving in principle maybe OK – though it’s dangerous enough even without any illegal substances (our 14-year-old’s partner has apparently had two operations already for retinal problems  brought on by the diving). But what on earth is the point of synchronised diving?

And, of course, I smirk, when we discover that the fire-work foot-prints on the opening day were done by some version of CGI, or that the cute nine-year old was miming to a ‘less pretty’ girl’s voice (so much for communism’s commitment to feminism – if only), or that a good proportion of the eager spectators have been bus-ed in.

But were the ancient games much better? Were the ancient Greeks up-standing and honest sportsmen, honouring the gods rather than their own ambition?

Not really.

Even before the Roman empire and the emperor Nero came along (to win all the prizes), the Olympic Games were a hornet’s nest of corruption.

The range of events at the ancient Olympics was much narrower that our own (running, boxing, chariot racing, all-in wresting and pentathlon), but these ‘amateurs’ over-trained as much as any modern athlete. And they all turned up at Olympia a month in advance for intense work-outs. Some were as much ‘professionals’ as Andy Murray or Paula Radcliffe. The most famous was a man called Milo from the city of Croton – who won six times in wrestling contests at the ancient Olympics. There were whole families of athletes too, such as Diagoras, who won the boxing contest, and launched a dynasty of victors including his sons and his grandsons.

They also cheated, mostly through bribery. In 388 BCE one boxer bribed three rivals to let him win. They all had to pay what became the usual penalty – namely to put up a statue to Zeus, as a mark of their shame (or of their good try). Why cheat? Because celebrity, even if not cash, was a great reward. Win your event – and you would return home to have part of your city wall demolished to welcome you (no mere entry through the gates).

And, yes, it was all about politics. No barbarians were allowed. One fifth-century king of Macedonia turned up – and was at first turned away before he was finally allowed to compete. And on one occasion, as I’ve hinted before, in 364 BC, during the athletic celebrations, there was hand to hand fighting for control of the site of Olympia itself. The so-called Olympic Truce  (meant to declare peace throughout the Greek world) would hardly have managed to stop the Russian conflict with Georgia – or vice versa.

Even without the miming nine-year old  — plus ca change.

(by mary beard, The Times, 14Aug08)

How on earth has it become normal, in one generation, to farm out children to a succession of poorly paid helpers?

This summer I’ve been in that black hole that every working mother falls into at some point: when the childcare fails. The person who was looking after my children decided to leave, and I have been struggling to find a replacement. Some women cope by calling in sick; others hunch over the mobile between meetings, organising extended "playdates" with sympathetic friends and explaining to ageing relatives that Teddy must go in the cold wash, however gooey he is. When you’re in the black hole, the gravitational pull of home can become overwhelming.

I’m lucky. So far I have been able to afford to pay for someone to come to my home to care for my boys, and every childminder I’ve employed has been great. But it’s getting harder. The credit crunch is spooking many professional mothers back to work. I have spoken to two nanny agencies whose books are suddenly full of mothers who had not expected to return so fast, but fear the mounting bills. They would have to make good money though to have much left over from what the agencies say is the going rate for a London nanny: £20,000 to £30,000 a year.

The costs of full-time nursery care are also up, by a third in four years. So for many mothers the financial benefits of working must be getting more and more marginal. But that does not stop the frenzy. I have made two job offers that were trumped by other parents within hours. Gazumping is back: just not in the housing market.

At any one time there must be hordes of us middle-class mothers online, sifting e-mails from Romanian au pairs and Jamaican childminders and newly arrived South Africans who sound terrific on the phone until they mention that they can’t drive. It’s uplifting because of the numbers of would-be carers from all over the world who have reserves of patience and fortitude that I blatantly lack.

It’s also dispiriting to get so many e-mails from people who say quite openly that they would like to work with children simply because they are bored with their job in a shop or café. A nice graphic designer I interviewed admitted that childcare just paid better than her true vocation. There are a host of would-be childcarers who have, it seems, almost no interest in children.

The au pair/nanny/childminder market is surprising in other ways. One is the speed with which we choose the person to whom we will delegate our precious little charges. Companies interview candidates as many as six or seven times when filling an important position; parents make their minds up after two meetings at most. We relinquish our children’s days to strangers easily. Long days they are too: what is a gossipy lunch hour in the canteen to me could be an infinity to my three-year-old if he was unhappy.

An Ofsted report yesterday gave warning that more than half of the childminders and nurseries in some London boroughs are "inadequate". Which is why so many of us prefer to rely on relatives, or trade up to someone who can form the "one-to-one attachment" that the experts say is so important in the early years.

Yet I wonder if we are kidding ourselves there too. What has really struck me in the past few weeks is how few people applying for childcare jobs have ever stayed for more than a year in any previous position. This is partly because of visa restrictions, and youthful aspirations to see the world. One applicant told me yesterday that she had just come out of a "very long-term job" and couldn’t commit to another: it turned out the job had lasted ten months.

But there is also shameless exploitation. I have met one girl who gets calls from her boss at 10 o’clock at night to complain about her ironing. Another is looking after three children almost every weekend because the parents, both professionals, are continually away. Both girls are Eastern Europeans, very sensible but lonely and worn out at 23. There are far too many young women who are desperate to find new positions because the parents never come home on time and go away so often without the children. Some of these girls exhibit more concern about their charges than the parents seem to.

The result is a merry-go-round in which children are bundled on to form an attachment with Eva, only to find her replaced by Kate and then by Norah. The girls are probably much better than the parents deserve. But to the children, they are strangers. The notion that a child might be looked after by a parent and by one other familiar person in their pre-school years, an assumption that I vaguely made when I went back to work after having my first child six years ago, now looks utterly quaint.

Children are famously resilient. But the merry-go-round is so ubiquitous that it is easy to overlook the possible effects. You can’t pay lip service to young children’s need for a stable scene if you’re constantly changing the characters.

This weekend I overheard a woman of about my age in the gym. A friend was asking her about her holiday. "It was great," she said. "But now that our oldest can speak, she can say ‘please don’t go’. That was a bit of a drag, to be honest." What has happened to the notion that we are responsible for our own children? Some people seem to have families without the slightest intention of nurturing them. We recently visited an animal welfare centre that will not let you adopt a dog if you work full-time. The analogy with children was horribly obvious. I breathed a sigh of relief that I am part-time.

What is extraordinary is how, in only one generation, we have come to see looking after our children as a job for other people. I am no better. I don’t quite know how I got here. But I’m still hoping to find that great person who has more patience than me and who might just stick it out for several years, warding off the time when the next black hole sucks me in.

(by camilla cavendish, The Times, 28Aug08)

It takes two to start a cold war and Russia has so far been provoked pointlessly into confrontation.

Russia, according to President Medvedev, is ready for a "new Cold War". If politicians, including our own, want a new Cold War, they will get one. But the fault will lie as much with us as Russia.

Every move in Russia’s foreign policy is greeted by the West with alarm and suspicion. But its policy has been perfectly consistent for years. Russia’s aim has been to rebuild itself as a great power, and use that power to regain a dominant position in the old Soviet space it surrendered in the 1990s. In Russia’s perception, the United States wants to take over the space vacated by Russia as fruit of its victory in the Cold War, using Nato as a dagger, and Britain to supply moralistic veneer.

Russia has made it clear for years how deeply it resents the expansion of Nato to its borders. One of Stalin’s aims was to create "buffers" between the Soviet Union and Germany to stop a repetition of the two invasions that cost millions of Russian lives: the "buffer" reflex explains the militarily useless decision to keep a few Russian troops a few miles beyond the South Ossetian border.

Russia was rightly pushed out of its satellites in 1989-90 by popular uprisings but it created the Commonwealth of Independent States in the expectation that it would provide a buffer against Western expansion. What did the West do? It expanded not just its political but also its military penetration into the CIS area whenever an opportunity presented itself. Most recently, the Anglo-American consortium made it clear that it wanted Georgia and Ukraine inside Nato, though Germany and France succeeded in blocking the move temporarily.

What did Britain and America think they were doing? Pushing Nato deep into the old Soviet Union and setting up a missile defence system in Poland and the Czech Republic on the patently false pretence that it was to counter the (non-existent) threat from Iran was bound to add to Russia’s already considerable paranoia, without achieving anything worth having. Significantly, every shade of Russian opinion, from liberal to xenophobic, regards Western policy as crass. Does the British Government realise with what fire it is playing? Have they no memory of how a "local" quarrel in 1914 escalated into a world war?

About a year ago I was at a lunch with the Georgian Ambassador, a delightful man but full of small-country big talk. I pointed out politely that small countries on the edge of big countries had to be careful not to provoke their larger neighbour; but that it is also perfectly possible for them to coexist peacefully if the smaller nation understands its place in the scheme of things.

The conditions for such peaceful coexistence need not be especially onerous. Finland is a classic postwar example of a state that conducted itself so as to retain its independence and liberty even under Stalin’s baleful eye. It was not a heroic or romantic stance, but a mature one.

President Saakashvili is a hothead. He invaded South Ossetia aiming to translate theoretical sovereignty into practical sovereignty and lost Georgia’s theoretical sovereignty as a result. He ought to be removed by his people, not for war crimes but for gross incompetence.

The West takes its stand on the rule of law. But international law has no enforcement mechanism. So its maintenance depends on the co-operation of the great powers; and this depends not only on the great powers being sensitive to each others’ concerns, but small powers recognising that, whatever the UN charter says about equal sovereignty, some states are more sovereign than others. Russia will no more accept international law as binding if it goes against its interests than the US does, as it has shown in Kosovo, Iraq and elsewhere. Kosovo taught Russia an important post-communist lesson: if the West can invade a sovereign state without Security Council sanction, why not Russia?

The last thing Georgia needs is to join Nato. Membership will do nothing to protect its theoretical sovereignty; trying to get in will intensify its bullying by Russia and, will dangerously sour international relations. Russia and China are not natural allies, but Western moralism and geopolitical ambition will drive them together to resist what they see as encroachments on their space.

If that happens, the world would be divided into democratic and authoritarian blocs – with a new arms race, economics turned into politics and globalisation stalled. Is this what David Miliband wants? If not, can he explain his foreign policy?

The solution to the present crisis is obvious enough, but only the Georgians can bring it about. They should replace their hot-headed President with a cooler head. The new president should set about mending Georgia’s fences with its giant neighbour. A helpful move would be to suspend its application to join Nato. Russia will cool down and we will all be able to breathe more easily. Mr Miliband might even be reduced to talking sense.

(by robert skidelsky, The Times, 28August08)

Those who think that there is such a thing as progress in international affairs – that we are capable of learning the lessons of history – have been brutally disabused by the Georgian crisis. You can have all the rules you like to discipline international behaviour; but they are not worth the paper they are written on if they run against fierce nationalisms and ethnic passion.

Ethnic and nationalist rivalry is as old as sin, and as inextinguishable. As a diplomat in Britain’s Moscow Embassy during the Cold War, I spent time in two of the Caucasian republics, Georgia and Azerbaijan. They were then under Moscow’s heel as part of the Soviet Union. Their loathing of Russians was palpable.

At the time of my visits, Stalin, a Georgian by birth, was still officially a non-person, airbrushed by his successors from the annals of Soviet history. But in defiance of Moscow his portraits could still be seen in Georgian state farms and government offices. I asked a Georgian official why this was so. “Because he killed so many Russians,” came the sardonic reply.

The feeling was mutual. Later in Moscow I related my Caucasian experiences to Leonid Brezhnev’s interpreter, Viktor Sukhodrev. “That’s no place for a white man,” he said with his impeccable North London accent (he had equally good American).

Recent events have shown no weakening in these ancient hatreds. But the Western powers behaved as if caught on the hop. Last year a French diplomat warned me that once Kosovo got its independence (itself the unnatural product of Balkan hatreds), Russia would feel free to make its move in Georgia. And so it has come to pass. As a Times leader put it recently, history has resumed, leaving Francis Fukuyama, the apostle of its end, trailing in its wake. But Professor Fukuyama was adrift from the very start. Once the iron fists of the former Soviet Union and Tito’s Yugoslavia had been removed, nationalist and ethnic tensions broke surface with the murderous velocity of the long suppressed. Contrary to what David Miliband has been telling us, the glacial years of the Cold War were “the period of calm”. The years since have been marked by the constant turmoil of history’s march.

Globalisation and interdependence were supposed to have swept aside these ancient feuds and rivalries. Theories of the postmodern state now abound. Tony Blair preached how national interest would be trumped by the spread of “global values”. This is self-evident rubbish. For here is the paradox of the modern world. Money, people, culture, business and electronic information cross porous frontiers in ever-increasing volume. But as national boundaries dissolve in cyberspace, so everywhere the sense of nationhood and national interest strengthens. Five minutes in Beijing, Washington, Tehran or Moscow will tell you that. What is the European Union if not the 21st-century arena for the intense and competitive prosecution of the national interest by its 27 member states?

It is useless to say that nationalism and ethnic tribalism have no place in the international relations of the 21st century. If anything the spread of Western-style democracy has amplified their appeal and resonance. The supreme fallacy in foreign policy is to take the world as we would wish it to be and not as it actually is. In Britain’s case, the delusion is compounded when we are powerless to effect the outcome we desire. This has been particularly the case with Russia, where we have managed to be both impotent and provocative. If we really want to put a halt to bad Russian behaviour, let us do so where we can make a difference, and where it is justified – starting with the expulsion of the vast nest of Russian intelligence officers in London, as Labour and Conservative governments did not hesitate to do in the 1970s.

We can foolishly downgrade national interest within the armoury of British diplomacy, if we wish. But we had better not underestimate its driving force in the international behaviour of others. That is the road to dangerous miscalculation.

Take Russia, China and Iran. Each seethes at the recollection of what it considers historical humiliations visited on it by Western powers. For all three the beginning of the 21st century has opened opportunities for payback – for getting respect as a nation (just look at recent Russian newspapers). You don’t have to like or approve of these regimes. But not to understand their histories is not to understand the mainspring of their external policies – in Russia’s case its determination to rebuild its greatness, dismantled, as millions of Russians see it, by Mikhail Gorbachev and his Georgian Foreign Minister, Eduard Shevardnadze, aided and abetted by the West. I would bet a sackful of roubles that Russian foreign policy would not be one jot different if it were a fully functioning democracy of the kind that we appear keen to spread around the globe.

What is to be done, as Lenin once put it? The first thing is to sweep away any rose-tinted illusions left from the Blair-Bush era. For the democracies of North America and Europe, relations with Russia are always going to be awkward and bumpy, at best co-operative and adversarial in equal measure.

The fall of the Soviet Union did not wipe the slate clean. The Russia that we are dealing with today, with its fear of encirclement, its suspicion of foreigners and natural appetite for autocracy, is as old as the hills, long pre-dating communism. It is a Russia that will never be reassured by the West’s protestations of pacific intent as it pushes Nato and the EU ever eastwards.

Most important of all, Russia and the West need to draw up rules of the road for the 21st century. Mr Miliband and others have condemned the notion of returning to the geopolitics of the Congress of Vienna which, in 1815 after the Napoleonic Wars, divided Europe into spheres of influence between empires and nations. They perhaps forget that what was agreed at Vienna held at bay for almost a century a general European war.

Something similar is needed today, based again on spheres of influence. Nato must renounce the provocative folly of being open to Georgian or, worse, Ukrainian membership. This strikes at the heart of the Russian national interest and offers no enhanced security to either Tbilisi or Kiev. As for Russia, it must be made unambiguously clear where any revanchist lunge westwards would provoke a military response by Nato.

This may sound shocking and anachronistic to the modern sensibility. But, there is no other way to remove the scope for miscalculation, the mother of far too many wars.

(by christopher meyer, The Times, 2Sept08)

I’m an American, California born. It’s true my mother was English and that I was brought up here from early childhood and think myself exceptionally lucky to belong here; I feel as English as I think anyone possibly can. Yet all the same, America is the land of my forebears on my late father’s side. I would even qualify to be a Daughter of the American Revolution, since one of my ancestors in North Carolina fought in the American war of independence. My grandmother travelled as a little girl in a covered wagon in the Wild West with my great-grandfather, who was an army officer. I have close family living in America still, and I have the right to vote there.

So I have always felt a strong sentimental attachment to the United States. I’ve felt proud of American achievements and generosity, and resented the unthinking antiAmericanism everywhere in Europe, ever since the first child in the playground of my first school shouted at me "Yanks go home". Admittedly the spectacle of electioneering is a painful test of anyone’s respect for the United States. In their ghastly harrumphing electoral extravaganzas the Americans show themselves at their worst – vulgar, venal, naive, dishonest, stupid, wasteful, tasteless and vicious. Priggish though it may sound, I prefer to ignore these periods of national hysteria; after all, politics is nasty everywhere, it’s just that America does everything in extremes.

But last week everything changed. John McCain’s choice of Governor Sarah Palin was the last straw. It makes American politics look like a sick comedy. My faith in my native country had already been shaken by other elections and by other wrongs, such as the Iraq war (which I at first supported, to my shame). But the moose-hunting pitbull with lipstick is too much. I have never used my vote in the past, but if I had, I would usually have voted Republican. Today no rational conservative can vote for the Palin and McCain ticket. It makes America an international laughing stock. The fact that there has been a Palin bounce, after her charismatic speech, fills me with dismay.

This has little to do with Palin’s views. I disagree passionately with some of them, but the Republicans are entitled to present any views they choose to the electorate. Nor do I share the objections to Sarah Barracuda of the liberal sisterhood; unlike them I don’t in the least object to an ambitious woman being right-wing. I am rather right-wing myself, and Margaret Thatcher is one of my heroines.

Unlike the lily-livered liberal intelligentsia, I admire Palin for being a good shot and a good fisherwoman, and capable of butchering large wild animals in her basement, though I do not share her rather unsporting enthusiasm for shooting wolves out of small aircraft. I admire her for her determination, for her energy and her self-possession. I admire the virtues of small-town and frontier America. As for her grooming and her cunningly chosen glasses, if I don’t admire the results, I do admire the self-discipline and self-respect behind them.

All the same, her selection was a shock. What horrified me was not so much the woman herself, though she is clearly entirely unfit to be vice-president or president. It was McCain’s cynical and sudden choice of her. Would you give power of attorney over your entire life to someone you had only met once, or possibly twice? Of course not. You would give the matter and the person very serious consideration. Yet McCain in effect is offering power of attorney over all the affairs of the United States and over all Americans, including me, to a woman he had barely met. I myself wouldn’t hire a house-sitter on such scant acquaintance.

Palin herself may not know what a vice-president is for, but McCain surely must. He must know that a vice-president needs to be someone the president can trust and rely on and work with. Such a person is not easy to find, even when highly qualified in other ways. It takes time. It’s a personal matter, a question of psychological fit and mutual understanding.

Obviously McCain’s public relations people have been scouring the country for libertarian babes. But politics is not painting by numbers. McCain doesn’t know Palin at all, nor it seems did his vetting people; revelations keep emerging about her all the time. But he showed himself willing to hand the free world over to a stranger because his people think she is a psephological paragon.

I had thought that McCain was, for a politician, an honourable man. Certainly honour is one of his top selling points. But who can think so now? In choosing a woman he doesn’t know or understand, purely for electoral advantage, he reveals a dishonourable lust for office, a disrespect for women generally and a dishonourable indifference to the future of his country. After all, if this known unknown woman does become president, it will almost certainly be because he himself is dead – quite possible given his age and health – and past caring.

Though he didn’t know Palin personally, he must have known a few facts about her. He must have known that she compares feebly with previous vice-presidential candidates. Her education is minimal, her real political and managerial experience very slight. The only previous woman candidate for vice-president, the Democrat Geraldine Ferraro, was well qualified, well educated and experienced; Palin can’t hold a candle to her. Palin’s experience is as nothing compared to that of Dick Cheney (congressman, secretary of defence and White House chief of staff), Al Gore (senator and congressman) or George Bush Sr (congressman, ambassador to the United Nations and China, head of the CIA). Being a vice-president is not just a matter of PR and homespun rhetoric, or used not to be.

Even a brief consideration of Palin might suggest that she is not the straightforward redneck hockey mom she claims to be. It’s not possible to be much of a mom to five children, including a baby with Down’s syndrome, if you have a more than full-time job. Like other people with working responsibilities, you have to hand your children over to someone else to bring up. There’s nothing wrong with that, but it denies you the right to exploit your image as a yummy downhome mummy.

In short Palin is an ill-educated, inexperienced hypocrite. The Republicans are trying to sell her to the voters as something she isn’t, and McCain hardly cares what she is. It’s a bad day for my native land.

(by minette marrin, The Sunday Times, 7Sept08)

For the past two weeks serious commentators and columnists have been asked to take the candidacy of Sarah Palin for the vice-presidency of the United States seriously.

Formerly sane people have written of the McCain campaign’s selection of this running mate as if it represents a new face for Republicanism, an emblem of can-do western spirit, a brilliant ploy to win over Clinton voters, a new feminism, a reformist revolution, and a genius appeal to the religious right.

I’m afraid I cannot join in. In fact I cannot say anything about this candidacy that takes it in any way seriously. It is a farce. It is absurd. It is an insult to all intelligent people. It is a sign of a candidate who has lost his mind. There is no way to take the nomination of Palin to be vice-president of the world’s sole superpower – except to treat it as a massive, unforgivable, inexplicable decision by someone who has either gone insane or is managerially unfit to be president of the United States. When, at some point, the hysteria dies down, even her supporters will realise that, by this decision, McCain has rendered himself unfit to run a branch of Starbucks, let alone the White House.

Isn’t she doing well in the polls? Hasn’t she rattled the Obama campaign? Yes, she is. And yes, she has, a little. But review the extraordinary facts on the table about this woman and you will see how ephemeral this will soon turn out to be.

The announcement of Palin was made more than two weeks ago. It took a fortnight for her to agree to sit down for an intimate interview of the kind usually reserved for Hollywood stars instead of the press conference typical of a new vice-presidential candidate. This has never happened in American political history. Even Dan Quayle, the least qualified vice-presidential nominee before Palin, and a man who did not know how to spell "potato", gave a press conference a day after the convention in 1988.

There have been two explanations for this astonishing Putin-style decision to keep a vice-presidential candidate from the press. The first was that the press would be too mean to her and needed to show, in campaign manager Rick Davis’s word, sufficient "deference" before they would be allowed to ask her a question. Deference? Is 21st-century America an 18th-century monarchy? The press owes such a total unknown who could be president next January deference?

The second explanation is that she needed time to cram for the exam. The McCain camp knew she had never expressed any views about foreign policy. And the only time she had on record was to oppose the surge that is the centrepiece of McCain’s campaign. They knew she knew nothing and was utterly unqualified to be president at a moment’s notice. And so she spent the last week furiously prepping. As Maureen Dowd noticed, she is Eliza Doolittle to John McCain’s Henry Higgins.

But at the end of last week we were granted an audience with the Princess of Alaska. It was painful. She had no idea what the Bush Doctrine was – the central and most controversial foreign policy innovation of the past eight years: the doctrine of preemption against states with WMDs. Moreover, in her speech the same day, she described the war in Iraq. She said her eldest son, who has just enlisted, would "defend the innocent from the enemies who planned and carried out and rejoiced in the death of thousands of Americans".

Does Palin believe that the men who planned and carried out the 9/11 attack are in Iraq? The hijackers are all dead, but Bin Laden and Zawahiri and the rest of the gang are, as far as we know, in Pakistan. Nobody believes they are in Iraq.

Then we have the now mountain of lies that follow Palin everywhere she goes, lies she keeps repeating as if they are not subject to factual scrutiny. In her first interview she said it was common for vice-presidential candidates never to have met a single foreign leader. Untrue. Every living vice-presidential candidate has met some foreign leaders before being picked.

She said she did not deny that climate change was man-made. But she has clearly stated that on the record. A year ago she said: "I’m not an Al Gore, doom-and-gloom environmentalist, blaming the changes in our climate on human activity."

She keeps repeating as a defining political motif that she said: "Thanks, but no thanks for the Bridge to Nowhere." But we now know that she originally lobbied for the bridge in Alaska paid for by federal funds. And she never returned the money. And she even wore a "Nowhere, Alaska" sweatshirt to push back against the McCains of this world who derided the bridge as a pointless boondoggle.

She says she’s against pork-barrel spending, and this was partly why McCain picked her. McCain’s signature issue, after all, is his disdain of pork. Here’s one of McCain’s oldest jokes: "We’re not going to spend $3m of your tax dollars to study the DNA of bears in Montana," he said earlier this year, citing Montana’s request for federal money to study the endangered grizzly bear. "I don’t know if it was a paternity issue or criminal, but it was a waste of money."

Here’s what Politico.com revealed about Palin’s time as Alaska governor: "According to a ’summary of requests for federal appropriations’ posted to her budget office’s website earlier this year, Palin requested millions of federal dollars for everything from improving recreational halibut fishing to studying the mating habits of crabs and the DNA of harbour seals."

She boasts that she secured a new oil pipeline for Alaska, but closer inspection finds that nothing has even begun to be built, and that the state may end up owing billions if the pipeline is never constructed.

She says she’s a fiscal conservative, but as mayor she increased her tiny town’s debt service by 69%. When she took office, the town of Wasilla had no long-term debt. By the time her term was over, the debt amounted to $3,000 per citizen.

She is the biggest joke to be put on a ticket in national politics. The most accurate thing said about her in the past two weeks was said on the day she was picked. It was said by Alaska’s Republican state senate president, Lyda Green: "She’s not prepared to be governor. How can she be prepared to be vice-president or president? Look at what she’s done to this state. What would she do to the nation?"

(by andrew sullivan, The Sunday Times, 14Sept08)

With Lehman Brothers set to liquidate, maybe we’ll finally find out if management was inflating the bank’s real estate assets. It should also tell us how much trouble the commercial property market is in.

It’s been a mystery, but if Lehman Brothers starts selling lots of properties, the mystery will be over. That’s not a bad thing.

We know housing is a mess, but commercial property has been the quieter side to the real estate disaster. All across the United States, pension funds invested heavily in office buildings and malls and warehouses, frequently through private-equity "opportunity funds" that employed high levels of leverage. They buy on 70 per cent to 90 per cent borrowed money. So with just a modest drop in values, these investments can crater. Collectively, the opportunity funds have around $200 billion US in equity. How much of that is gone?

Many analysts suspect prices are down about 15 per cent to 25 per cent from last year. REITs, which hold another $300 billion in equity but use just 50 per cent leverage, have already "priced in" a solid drop in values. They’re down 25 per cent from their high last year. So are the pension funds sitting on $100 billion in losses?

The opportunity funds haven’t come clean. The problem with big private funds is that so much depends on what the managers tell you. And managers are notoriously self-serving fellows.

That brings us back to Lehman. Its critics argued that its managers were taking an overly charitable view of their assets. That’s what landed them where they are now. And it’s why we may all benefit from its liquidation, either in part or as a whole.

Lehman bought $12.5 billion of commercial property in 2007, more than doubling its holdings. But it refused to mark down its investments much, even though it purchased them at peak prices on high leverage. That didn’t seem right.

One of its more troubling deals was struck in May 2007, when the bank agreed to put up $2.2 billion in equity plus provide debt for the purchase of a real-estate investment trust, Denver apartment landlord Archstone Communities, for $22.2 billion.

The premium Lehman agreed to, a price 18 per cent over Archstone’s closing price the previous day, ballooned to around 30 per cent over fair market value by the time the deal neared its closing date in October. Even though Lehman had co-investors, the purchase was 75 per cent leveraged.

So didn’t that mean that marked to market, the buyers were facing a total washout? Instead of paying the walk-away fee and dropping the deal, Lehman went ahead with the deal.

Apartment REIT stocks have fallen even further since last October. Yet Lehman only marked its $2.2 billion stake down by 25 per cent this past spring.

Lehman hasn’t explained why it didn’t write off the Archstone stake entirely. Did it sell off a few Archstone assets in the private market and were those prices used to justify its lofty value of its stake in Archstone? Had it received offers to buy the company from other private buyers? What did the bank’s managers know that the rest of Wall Street didn’t?

This is exactly the kind of mystery that doesn’t go over well in the current environment on Wall Street. Now Lehman seems likely to bring the mystery to an end. Painfully, but quickly.

Suppose Lehman’s properties sell for rock-bottom prices, leading to massive write-offs at other investment banks and funds. Would we be better off not knowing? Japanese banks played that game for a long stretch in the 1990s. They refused to write down or unload the foolishly expensive investments they made in U.S. properties. They ended up fighting deflation and watching their stocks fall for well more than a decade.

(by stephane fitch, Forbes, 17September2008)

On Friday morning, Senator Christopher Dodd, the head of the Senate Banking Committee, was interviewed on ABC’s ‘Good Morning America." Dodd revealed that just hours earlier at an emergency meeting convened by Secretary of the Treasury Henry Paulson and Federal Reserve chairman Ben Bernanke, lawmakers were told that  "We’re literally maybe days away from a complete meltdown of our financial system." Dodd added somberly, that in his three decades of serving in public office, he had "never heard language like this."

The system is at the breaking point, and despite Wall Street’s elation from the proposed $1 trillion dollar bailout to remove toxic mortgage-backed debt from banks balance sheets, the market is still correcting in what has become a vicious downward cycle. This cycle will persist until the bad debts are accounted for and written off for or until the exhausted dollar-system collapses altogether. Either way, the volatility and violent dislocations will continue for the foreseeable future.

Most people don’t understand what happened on Thursday, but the build-up of bad news on the Lehman default and the $85 billion government takeover of AIG, triggered a run on the money markets and a freeze in interbank lending. The overnight LIBOR rate (London Interbank Offered Rate) more than doubled to 6.44%! Bank of America reported overnight borrowing rates in excess of 6%. Longer-term LIBOR rates also rose sharply. On Wednesday, jittery investors removed their money from money markets and flooded short-term US Treasurys for the assurance of a government guarantee on their savings even though interest rates had turned negative which means that their balance would actually shrink at the date of maturity. This is unprecedented, but it does help to illustrate how raw fear can drive the market.

The TED spread (the TED Spread measures market stress by revealing the reluctance of banks to lend to each other) widened and the credit markets froze in place. Borrowing three-month dollars on the interbank market and the U.S. Treasury’s three-month borrowing costs widened five full percentage points. That’s huge. The banking system shut down.

What does it mean? It means the Federal Reserve has lost control of the system. The market is driving interest rates now, and the market is terrified. End of story. 

When the Fed announced its emergency program to dump $180 billion into the global banking system, short term Libor retreated slightly but long-term rates have remained stubbornly high. The noose continues to tighten. These rates are pinned to 6 million US mortgages which will be resetting in the next few years. That’s more bad news for the housing industry.

The entire system is deleveraging with the ferocity of a Force-5 gale touching down in the Gulf, and yet, Henry Paulson has decided that the prudent thing to do is build levies around the system with paper dollars. Naturally, many people who understand the power of market-corrections are skeptical. It won’t work. Libor is pushing rates upwards–that’s the "true" cost of money. The Fed Funds rate (2 percent) is supported by infusions of paper dollars into the banking system to keep interest rates artificially low. Now the extreme pace of deleveraging has the Fed on the ropes. Trillions of dollars of credit is being sucked into a black hole which is raising the price of money. It’s out of Bernanke’s control. He needs to step out of the way and let prices fall or the dollar system will vanish in a deflationary vacuum. 

The problems cannot be resolved by shifting the debts of the banks onto the taxpayer. That’s an illusion. By adding another $1 or $2 trillion dollars to the National Debt, Paulson is just ensuring that interest rates will go up, real estate will crash, unemployment will soar, and foreign central banks will abandon the dollar. In truth, there is no fix for a deleveraging market anymore than there is a fix for gravity. The belief that massive debts and insolvency can be erased by increasing liquidity just shows a fundamental misunderstanding of economics. That’s why Henry Paulson is the worst possible person to be orchestrating the so called rescue project. Paulson comes from a business culture which rewards deception, personal acquisitiveness, and extreme risk-taking. Paulson is to finance capitalism what Rumsfeld is to military strategy. His leadership, and the congress’ pathetic abdication of responsibility, assures disaster. Besides, why should the taxpayers be happy that the stocks of Morgan Stanley, Washington Mutual and Goldman Sachs surged on the news that there would be a government bailout yesterday? These banks are essentially bankrupt and their business models are broken. Keeping insolvent banks on life support is not a rescue plan; it’s insanity.

No one has any idea of the magnitude of the deleveraging ahead or the size of the debts that will have to be written down. That’s because 30 years of deregulation has allowed a parallel financial system to arise in which over $500 trillion dollars in derivatives are traded without any government supervision or accounting. These counterparty transactions are interwoven throughout the entire "regulated" system in a way that poses a clear and present danger to the broader economy. It’s a mess. For example, there are an estimated $62 trillion of Credit Default Swaps (CDS) alone, which are basically insurance policies for defaulting bonds. AIG was as heavily involved in CDS as they were in regulated insurance products. So why would AIG sell CDS rather than conventional insurance?

Because, just like the banks, AIG could maximize its profits by minimizing its capital cushion. In other words, it didn’t really have the capital to pay off claims when its CDS contracts began to blow up. If it had been properly regulated, then government regulators would have made sure that it was sufficiently capitalized with adequate reserves to pay off claims in a down-market. Now taxpayers will pay for the lawless system which men like "industry rep" Henry Paulson put in place. That’s deregulation in a nutshell; a system that allows Wall Street banksters to create credit out of thin air and then run weeping to Congress when their swindles backfire. 

Inflating the currency, printing more money, and increasing the deficits won’t help. The bad debts have to be accounted for and liquidated. The Paulson strategy is to create another ocean of red ink while refusing to face the underlying problem head-on. This just further exacerbates the consumer-led recession which economists know is already setting in everywhere across the country. Demand is down and consumer spending is off due to falling home equity, job losses, and tighter lending standards at the banks. The broader economy does not need the added downward pressure from higher taxes, bigger deficits, or inflation. Paulson’s plan is a band-aid approach to a sucking chest wound. The debts are enormous and the pain will be substantial, but the problem cannot be resolved by crushing the middle class or destroying the currency.

The malfunctioning of the markets and the freeze-over in the banking system are the outcome of a massive credit unwind instigated by trillions of dollars of low interest credit from the Federal Reserve which was magnified many times over via complex derivatives contracts and extreme leveraging by speculative investment bankers. This has generated the biggest equity bubble in history. That bubble is now set for a "hard-landing"  which is the predictable result of an unsupervised marketplace where individual players are allowed to create as much credit as they choose.

If Paulson is not removed and his rescue plan scrapped altogether; the dollar will lose its position as the world’s reserve currency and the US government will face a historic funding crisis as foreign sources of capital dry up. That will thrust the country into a hyper-inflationary depression.

(by mike whitney, informationclearinghouse.info, 21Sept08)

"Stocks that had been beaten down soared. Treasuries and gold, where investors had sought safety in recent days, plunged. Junk bonds shot up."  (by vikas bajaj, describing the stock market on 19September08, New York Times, 20Sept08)

If you want to know why American capitalism is on the brink of disaster, but also want to understand what will save it, then log on to the C-Span congressional website and watch the interrogations of Henry Paulson, the US Treasury Secretary, by the Senate and House banking committees.

Until last week, I was in a minority of one in arguing that Mr Paulson was personally responsible for suddenly turning the painful but manageable credit crunch that had been grinding away 18 months in the background of the US economy into a global catastrophe. Mr Paulson’s appearances on Capitol Hill, marked by the characteristic Bush-era combination of arrogance and incompetence, are turning my once-outlandish view into conventional wisdom: Henry Paulson is to finance what Donald Rumsfeld was to military strategy, Dick Cheney to geopolitics and Michael Chertoff to flood defence.

Mr Paulson may be a former chairman of Goldman Sachs, but as US Treasury Secretary he does not know what he is doing. His recent blunders, starting with the "rescue" of Fannie Mae, have triggered unintended consequences around the world, resulting in the death-spiral of financial values. But last Friday Mr Paulson outdid even these Rumsfeldian achievements, when he demanded $700 billion from Congress for a "comprehensive and fundamental" solution to the global financial crisis, without apparently having any idea of what he would actually do.

The good news – before I return to the perils of Mr Paulson – is that his blunders no longer matter very much. There will still be a huge US government bank bailout, which will probably avert a disastrous slump in the US and global economies. But because Mr Paulson has lost the political initiative, this bailout will now be led by the Democratic leadership in Congress and will be structured around its priorities – relief from mortgage foreclosures, restrictions on bankers’ pay and big government shareholdings in US banks. For President Bush it is a disaster, dashing his last faint hope of having a tangible achievement to his name before he leaves office.

How did things come to such a pass? When Mr Paulson announced his $700 billion "plan" last Friday, everybody in the financial world (myself included) heaved a sigh of relief. Finally, it seemed, the US Government was going to do whatever it takes to stabilise the world financial system. The universal assumption was that Mr Paulson would present a detailed plan of action over the weekend, putting a safety net under the value of homes, mortgages and related assets. Yet all that appeared by Saturday evening was a three-page legislative outline, with no hint of the mechanisms to be used. The only substantive clause in the draft was a swaggering demand for untrammelled power: "Decisions by the Secretary pursuant to this Act are non-reviewable and may not be reviewed by any court of law or any administrative agency."

When further details of the Paulson plan failed to appear on Sunday it was assumed that the details were being untangled in late-night political negotiations. When there was still no plan on Monday, the view was that Mr Paulson must be holding back the details for his testimony to the Senate Banking Committee the following day. But then, to everyone’s astonishment, Mr Paulson turned up to the committee on Tuesday morning with only the briefest opening statement, which simply repeated what he had already said the week before: the sky was falling and the only way to stop it was to give him authority over $700 billion in public money, to be spent in unspecified ways.

And suddenly the sky did fall down – not on the world economy, but on Mr Paulson. Consider the reactions from American politicians, including Republicans: "Stunning and unprecedented in its lack of detail"… "a $700 billion blank cheque to Wall Street"… "neither workable nor comprehensive"… "foolish waste of massive taxpayer funds"… "eerily similar to the rush to war in Iraq". Best of all was John McCain’s comment: "When we’re talking about a trillion dollars of taxpayer money, ‘trust me’ just isn’t good enough."

As the cross-examination rolled on, and Mr Paulson just waffled – "we will ask experts to advise us", "we will get the best and brightest financiers to suggest ideas" – the terrible truth dawned. There was no such thing as a Paulson plan. Not only did Mr Paulson not know what he was doing. He did not know what he was talking about. When pressed to offer at least some basic principles for his rescue, Mr Paulson had no answers. When challenged about limits to executive remuneration and taxpayer stakes in future profits of participating banks, he brusquely rejected all such proposals – on the amazing ground that they might discourage some of the stronger banks from taking advantage of government support!

Could he really be so clueless? Surely not. Why, then, has Mr Paulson failed? His inability to think seriously about solutions to the present financial crisis probably has deep ideological roots. Just as Mr Rumsfeld could simply not believe that US foreign policy might be misguided, Mr Paulson simply cannot believe that markets can be fundamentally wrong. He therefore cannot imagine, for example, that government judgments about the value of bank securities may, in some circumstances, reflect economic realities more accurately than market prices. Since some such recognition of market failure is fundamental to any understanding of banking crises, it is not surprising that Mr Paulson finds it difficult to come up with a credible solution.

The ideological pendulum is now swinging but what is needed to avoid future crises is not necessarily more regulation. It is better-quality regulation, managed by people who understand and respect markets but do not worship them. Markets are usually right, but sometimes they are dangerously wrong – and they need to be managed with decisive and competent government intervention.

The people who do not understand the role of government should not be regulating markets any more than they should be fighting wars or managing flood defences. P.J.O’Rourke, the conservative writer, once remarked: "The Republicans are a party that says government doesn’t work – and then get elected and prove it." This should be the epitaph for the Bush Administration – and Mr Paulson. (by anatole kaletsky)

ForYourContemplation1: LestWeForget

Folks -

This post deals with 20th Century history. For some, it will not even seem to be history.

Having had too little time in Britain, we drove south from Birmingham toward London on our next to last morning.

A low, broken overcast allowed patches of blue sky and sunlight to brighten up the morning which had started out dull, grey. A sense of motion to the right prompted me to look to the west, and I saw an aircraft; big, blocky and slow by today’s standard, moving past us, at about 1,000 feet above the ground. Four large engines and a twin tail gave a signature silhouette, and a thrill ran down my spine: an Avro Lancaster.

While these aircraft are not rare in museums, I have never seen one in flight.

There are two in the world, at this time, which are airworthy: Canada has one – the Mynarski Lanc; and Britain has one – with the Battle of Britain Memorial Flight.
http://www.warbirddepot.com/aircraft_bombers_lanc-cwhm.asp
http://www.bbmf.co.uk/bomber.html

The appearance the World War 2 bomber held special significance for me. We were driving towards Brookwood Cemetery, where a large military section is maintained by the Commonwealth War Graves Commission. Two thousand, four hundred Canadian casualties from the Second World War lie in a carefully tended garden of stone. Among them is Annie’s father’s brother: William Gowans. Born in Scotland, he grew to adulthood on the western edge of the Canadian prairie, near Evarts, Alberta. In the darkness over France, two days after the D-Day landings at Normandy in 1944, he was killed. He was 19. Though the aircraft was damaged, Willie was the only casualty. The pilot was able to return to their base in Yorkshire, bringing his body back to England.

We intended to visit his grave again, having first come to Brookwood in September, 2005.

In an age where Western military forces parcel out casualties grudgingly, miserly, the scale of Total War is incomprehensible.

Stand quietly amid the rows of granite markers bearing a maple leaf or the RCAF crest, and you can almost hear the stories. At the base of the grave stones are phrases chosen by family members, which cast each loss in human terms. Reading a dozen of these epitaphs is an emotional experience. Reading two hundred is difficult. Read any more than that at one time, and numbness sets in to barricade the reader from the emotional charge. The youth of the men can be judged by the many notations of Mother and Mum.

 
THOUGH YOU LIE IN ENGLAND
SO FAR AWAY
YOUR MEMORY IS IN OUR HEARTS
FOREVER. MOTHER

THERE IS NO DEATH.
THE SUN GOES DOWN
TO RISE
UPON SOME OTHER SHORE

A PRECIOUS SON,
SO BRAVE AND TRUE.
PLEASE KEEP HIM SAFE
DEAR GOD, WITH YOU

DEARLY LOVED HUSBAND
OF MARGARET
FATHER OF MICHAEL
SON OF DOROTHY & TREVOR MACE.

IN LOVING MEMORY OF
DEAR DOUG.
WITH THE CHEERY SMILE
AND THE HEART OF GOLD. MUM

NOT JUST TODAY
BUT EVERY DAY
IN SILENCE
WE REMEMBER

DEAR ROSS,
AT THE GOING DOWN OF THE SUN
AND IN THE MORNING
WE WILL REMEMBER YOU.

REST AT PEACE, DEAR SON.
IN LIFE WE LOVED YOU DEARLY
IN DEATH WE DO THE SAME

GONE FROM OUR HOME
BUT ALWAYS IN OUR HEARTS.
MUM

WITH A CHEERY SMILE
AND A WAVE OF THE HAND
HE WANDERED
INTO AN UNKNOWN LAND.

Off to one side, moving past the 1942 graves, which include some of the casualties of the ill-fated Dieppe Raid, one comes across the 1943 graves. Farther on, is the large section containing 1944 graves. Finding our way by memory, we came to the one we sought:

PILOT OFFICER
W. GOWANS
AIR GUNNER
ROYAL CANADIAN AIR FORCE
8TH JUNE 1944 AGE 19

And beneath the cross, signifying his religion as Christian:

THINK OF HIM
STILL AS THE SAME.
I SAY, HE IS NOT DEAD,
HE IS JUST AWAY.

Brookwood Cemetery is near a historic British military base, at Aldershot. Within hearing is the major target shooting facility at Bisley, where the world famous competitions are held. In the lowering skies, massed volleys of rifle fire – scores of rifles, each firing one shot on signal – crackled like manic firecrackers, giving atmosphere to the military grave markers. There may be peace at Brookwood, but there appears to be little quiet.

The war of Bomber Command, and the scale of loss is little known among the general public. What started out as a campaign to destroy military targets gradually, as the desperate struggle for victory carried on into years, became more savage and more ruthless. In 1942, two raids over Germany saw 1,000 bombers over a single city in one night. In 1943, Bomber Command tried (and succeeded) for the first time to set an entire city – Hamburg – on fire. By the autumn of 1944, Bomber Command was able to send 1,500 bombers over Germany in one night. In February, 1945, Bomber Command, along with American bomber forces, destroyed Dresden, creating a firestorm that was visible by air from over 500 miles/ 800 kilometers distance.

But there was a price: 55,000 aircrew were killed during the war in Bomber Command, including nearly 10,000 Canadians. Over 10,000 bomber aircraft were lost or crashed. During 1943 and 1944, out of every 100 bomber crews that finished training, only 25 finished their first tour of operations. Out of those 25 crews who finished one tour, only 2 would complete their second tour of operations. Out of every 100 Lancaster bombers built during the war, 75 were lost. This was a staggering rate of loss, and the main reason that it was carried on was that this campaign was seen as the only way to strike directly at the heartland of Germany.

For those on bombing operations, there was little time to worry about the steady, inevitable loss of crews to weather, accidents, night fighters and flak. Philip Gray, writing in the early 1990’s about his wartime operations on Bomber Command, described how crews coped after an operation where multiple crews were lost:

Grief was always a problem. By the time we had returned from one skirmish, the plans for the next were already coming in on the wires. Other crews would man the guns, and push the throttles forward but, as sure as the Lord made small potatoes, the battle would go on. So, too, would more crews get the chop, creating more anguish, more grief.

As one line of names after another had to be erased from our Flight Room blackboard, their owners hammered out of contention, we, the survivors, found ourselves overpowered by the pace of the distress. To cope with this relentless emotional strain, members of the crew were forced to create a ritual of their own. It had to be fast. It had to be effective. They had to be careful that the sheer weight of woe did not overwhelm.

To the casual observer, these grieving rites could have been seen as macabre and insensitive. Most people might take a lifetime to grieve the loss of, say, six to ten close friends. In this iffy pastime of spreading desolation over the German landscape, we could lose dozens of known faces in a single day, several of them being personal friends. How can normality cope with loss on this scale? There had to be cauterisation or it could have led to insanity. Unlike I Pagliacci, we couldn’t go about our business with tears in our eyes…

"Drinks all round, barman," ordered the WingCo. "I’ll sign the tab."

The night was young. We had a long way to go. Debriefing had come and gone. The trauma of the locker room had been brazened out. Shower, shave, shampoo – even dinner – had all passed in semi-silence.

Squadron Leader Bass set up the drinks again. Then Squadron Leader Jason, then Flight Lieutenant Hardy, then… and so it went on.

That specific evening, images of Flight Lieutenant Cameron and Flight Lieutenant Randell, and any or all of their bomber crews, may have flitted in and out of our thoughts but their names were never mentioned. By the time we walked through the Flight Room door tomorrow, any reference to their physical presence would have faded from the blackboard as though they had never been. In truth, their sacrifice would ride on down the highway of glory for all eternity.

The barman set up the drinks once more, this time for me. Earlier on in the evening several WAAF officers had been present in the bar as usual, but they knew exactly where this night was headed, and had melted away some time ago. This night’s operational Lancasters had long since flown off into the gloom. A crescendo of laughter and eerie merriment began to build up around the bar. Fairly soon now there would be no pain.

Someone, I think it was Wing Commander Giles, jumped onto one of the tables, threw off his jacket, and called for another drink. That drink and still other glasses appeared from the smoky shadows as if by magic.

"Off, off, off" someone shouted, and everyone seemed to take up the chant on cue. One by one the WingCo flung off his shoes, socks, trousers, shirt, singlet, until he stood there in nothing but his underpants. Drink in either hand, balancing precariously on the table top, the Squadron boss now had his hands outstretched, making zooming noises and diving motions with his arms. The racket was full pitch, and the flak started to fly around the room. Those of us spread here and there in different parts of the bar bunched newspaper pages into balls, set fire to them, and heaved them at the WingCo. He, in turn, tried to parry and avoid the missiles, still holding the drinks at arm’s length.

Someone got up on another table, then someone else. Soon we were all over the target again, planes rolling on through, flak flying in all directions, only this time there were no losers. No one got shot down. Even at this stage though, anesthetised by Gilby’s Gin and Johnny Walker, some sixth sense told us that we had to hurry.

Another operational flight was underway right now, our crews slicing through the flak, searchlights and nightfighters. Tomorrow there might be other names dropping off the blackboard, other faces to be exorcised, and the charade would start all over again. There was only one part of the story, the Killing Game if you prefer the other title, that was forever misting off into the land of "we’ll-talk-about-that-tomorrow". This was the question no one dared ask, even of himself. Next time, would we be tanking up yet again to forget someone else, or would all the someone elses be tanking up to forget me?

Judy Melville poked her head around the bar door earlier on in the piece, long before the WingCo had eased into his striptease act and the flak started to scythe about the room. The Intelligence Officer was obviously looking for someone specific. We both knew I still owed her the drink I had promised, but this would not have been a good time to honour the obligation. Other faces and other memories were haunting us.

- From: Ghosts of Targets Past: The Lives and Losses of a Lancaster Crew in 1944-45, by Philip Gray.

For your contemplation.

Jim Szpajcher

ForYourContemplation2 ApocalypseNow

Friends -

On the 7th anniversary of the attacks on the World Trade Center and the Pentagon, one pauses to assess how the world has changed since September 11, 2001.

Bill Bonner sees the end of "laissez-faire" capitalism in the United States.

The United States is the most indebted nation in the world. Not only that, but the nation depends more on foreign money than any nation in the world.The United States is more reliant on imported oil than any nation in the world. The United States is fighting two wars which are half a world away, as its economy slides into depression. The outcome of the fighting is still in question.

"Civilizations die from suicide, not murder." — Arnold Toynbee

Rome posted 15,000 men on Hadrian’s Wall, for 300 years, to keep the barbarian Picts at bay. When Rome fell and the Legions marched away into history, a different set of barbarians sailed onto the coastline, far south of the wall, to raid and pillage. One of the tribes was called the Engles, from Denmark. This was also spelled as Angles. It is from their name that a culture arose, which pushed the Celtic tribes to the west, and what we know as England developed into a country.

Future historians will work overtime to see how such a situation as we face today, came to pass.

For your contemplation.

Jim Szpajcher

"America’s giant mortgage companies nationalized," is how Le Monde treated Monday’s [September 8] big story. "The biggest bailout in history…" it went on.

But what does it mean when the world’s most free-market government nationalizes its largest finance industry? It means a couple things:

First, that the days of "laissez-faire ", even ersatz laissez-faire, are over. No more deregulation. No more tax cuts. No more free trade agreements.

Second, that the feds are running scared. They are in retreat. The battle between a natural market correction…and an unnatural, inflationary boom…is going against them.

We were right all along – or almost right; when the dot.com bubble burst it marked the beginning of the end – the end of the bull market on Wall Street…the end of the credit expansion that began in ‘82…and the peak of American power and influence in the world.

The decline since then has been delayed and disguised – by a flood of new liquidity from the feds. But now, there’s no stopping it. And it’s much worse than it would have been eight years ago…since Americans became more and more used to spending money they didn’t have; they have more debt than ever. And because the Chinese and other foreigners became more and more used to selling things to people who couldn’t pay for them; now their new apartment buildings are empty and their new factories are quiet. And now, the downturn is global…and it will be longer, and harder, than practically anyone imagines.

This just in: "Top China developer’s sales fall sharply." Maybe it was the distraction of the Olympics, but China’s biggest listed property developer, Vanke, said sales fell 35% last month.

And this too: Yesterday, gold fell more than $30 – to $757. The euro rose to $1.40. Oil is rising this morning, on fears of Hurricane Ike, but it closed yesterday at $102. Our guess is that it will sink to the $70 range.

*** And here’s Le Monde again:

"Good news, finally…almost everywhere, inflation remains under control and in retreat."

Wrong. Wrong. Wrong. Inflation may be in retreat. But it’s not good news. It means the whole world is sinking into a slump – not just the United States and Britain.

And that’s what the feds are afraid of. Sec. Paulson justified the takeover of Mac and Mae on the grounds that the markets and the taxpayers needed "protection from a systemic risk."

What was the risk? That both Freddie and Fannie would go broke, that houses would fall to what they were really worth, and that – when the federally-chartered agencies stopped paying their debt to foreign lenders – the whole world financial system would melt down. Driven by fear…Paulson took the bold action…

And now…for the next act:

The U.S. economy has grown during these last two decades. But it has grown only because consumers have been willing to go deeper into the debt. This was not good growth. It was not healthy growth. But at least it was growth.

You get growth by spending money. If the consumer spends – it is growth in retail, consumer items, services, and so forth. If business spends – you get more jobs, more capital equipment, more buildings, trucks, computer programs, etc.

But what if neither consumers nor business is willing to spend?

Sunday’s government takeover of the U.S. mortgage finance industry looked like a godsend to many investors – and to Le Monde. The government made it clear – if it weren’t already obvious – that it wasn’t going to abandon its two federally-sired mortgage twins, Fannie and Freddie. More importantly, it signaled that the feds were ready to spend.

Bill Gross’s PIMCO made $1.7 billion by betting on the bonds of Fannie, Freddie and other agencies. You could have made some money too. We explained the "Paulson Doctrine" in these pages – which guaranteed the bonds would eventually be saved – several weeks ago. The Paulson Doctrine maintains that the feds will let the shareholders take losses – but not the bondholders. Why? Because the largest bondholders are foreign countries – notably China. And America desperately needs more credit from these large, overseas financiers. Foreigners hold trillions of U.S. dollars and U.S. dollar-denominated debt. If they begin to fear the government is not behind it, they’ll dump it fast – which would be the end of the current dollar-based monetary system.

So, the move to bring Fannie and Freddie under direct government control was widely seen as a plus for everyone. Foreign lenders know the game is still rigged – so their money is safe. Homeowners think they’ll be able to continue living at someone else’s expense. And investors hallucinate that the government has "done something" to put this mess behind us.

But we have a question: Where do the federales get the money? The slump – though it has barely begun – has already clipped corporate and individual tax receipts. Plus, social welfare programs are becoming more expensive.

As unemployment increases – it was recently tallied at over 6%, the highest level in five years – the safety net catches more and more people. Make sure you never get trapped in that net. Even if you feel like you’re on steady ground now…it never hurts to be prepared. See how you can get the income of a second job – without the actual work – by clicking here .

*** "I’ll tell you how it works," said a taxi driver. "You’re lucky you live overseas, cause this country is a mess…"

We had been taking a snooze in the back seat. Then, we noticed a jerky movement in the car. When we opened our eyes, we found the cab had drifted to the middle of the road. On the long drive from Charlottesville, VA, to Dulles Airport, our driver was falling asleep.

In attempt to revive him before it was too late, we made conversation.

"I’ll give you just one little thing I know from personal experience," the cabbie went on, "I had a call to pick a woman up here in Charlottesville. She’s a Medicare customer. Do you know about that? Well, she had lost her car and she had come up here to the hospital. And then she was ready to go home. But she didn’t have a car. And I guess she didn’t have anyone to pick her up. She called a cab.

"So I drove her home…all the way down to North Carolina! The fare was $1,100 – which is a lot for a taxicab. But then, she didn’t have to pay it. She just signed one of these vouchers. (He showed us a simple white form…) And then I turned it into the government. So you see, you paid $1,100 to drive her down to North Carolina in a cab!"

The feds have dozens, maybe hundreds, of these absurd programs. When the sun shines, they grow like kudzu. Rain falls upon them like Miracle-Gro.

Fannie and Freddie, between them, have assets of $5.4 trillion and debt of $1.7 trillion. No one knows how much it will cost to keep them in business, but it is bound to be a big number. And the federal deficit is already as big as it has ever been – and growing. Where will the feds get the additional money to support U.S. housing?

We all know where – they have to borrow it. And now another question: We saw what happened when individuals borrowed too much; all of a sudden lenders didn’t want to extend them any further credit. Even Wall Street giants – such as Bear Stearns…and now, Lehman Bros. – can go bust if they borrow too much or speculate too wildly.

Can the U.S. government go bust too? Well…there is that printing press… The federal government can’t go broke, technically, because it can pay off its debts with money it prints up, just for the occasion. But in the event, the dollar itself would collapse in value. Foreign lenders would cease to extend credit. And then, the only choices open to the United States would be to cut back…or to print up even more money.

We’re a long way from the end of this show…but this takeover of Mae and Mac is a big step toward the final curtain. There are other land mines along the way…read about them in the free Financial Survival Library.

*** Our old friend, Michel, is writing a history of the United States.

"Does the U.S. Constitution authorize the federal government to finance mortgage loans?" he asks.

He might have asked a broader question: is there anything that the U.S. government cannot do? It can arrest people, put them in jail, and torture them – without even charging them with a crime. It can regulate any business. It can takeover any asset. It can tax and spend – as much as it can get away with.

"At the end of 1817," Michel continues, "Congress passed a law authorizing the federal government to finance several canal routes, to which no one took exception. Monroe, who had just been elected for 1818, supported the law. But President Madison, ‘Father of the Constitution,’ decided that the law was contrary to the Constitution (or that an amendment was needed) so he vetoed it.

"My goal in this book is to show how, contrary to the intentions of the founding fathers, the Constitution has been interpreted, and twisted, in order to permit the federal government to do all it wanted to do, and that the doctrine of limited government, with powers exhaustively enumerated, has been undermined thanks to the use of two unfortunate expressions in the Constitution – ‘necessary and proper,’ and ‘general welfare,’ from which flows the statist doctrine of ‘implied powers.’

"It began with Hamilton (and a few texts of Madison in the ‘Federalist Papers’), who defended the interests of New England merchants, parenthetically, and it was developed by chief justice John Marshall who, although a Virginian, worked for 34 years at the Supreme Court to make it a very effective weapon against constitutional liberties (subject to some nuances).

"I continue my research, but I think it’s all there…that all the arguments for or against ‘implied powers’ were furnished during the period 1790-1800."

Until tomorrow,

Bill Bonner

The Daily Reckoning