Passively implicit

The following is a cross-post from The Jacksonian Party.

When looking at the US Constitution I take a view of it as a structuralist, that is to say that the form of government is given as a structure that has a number of interlocking parts that are defined, limited and created to serve a purpose.  Structural analysis means that you take the words as they are presented in the context of the English language.  I laid this out in Structural analysis of Amendment II, and that rests on the work that I looked at earlier by Nicholas Rosencranz who laid out how the sentence structure of the English language creates the structure of government in the Subjects and Objects of the Constitution.  The lineage of the US Constitution starts with agreements outlined in the Anglo-Saxon Chronicle and King Alfred all the way through to Bill of Rights put in place with James II, which I went over in Roots of constitutional government.  For this article I'm going to be building off my article on Taxation via sales.

Taxation was part of the trigger for the US Revolution and it is understood that the Founders and Framers both had a view that taxation is a necessary evil to run the organ of society known as government.  As a necessary evil it must be limited so that it does not over stress the body which is society that requires the functioning of government to do the few and necessary things to allow for the individuals to be free.  With that said taxation takes many forms and the US Congress gets some particular types taxation in Art I, Sec 8, in part:

Section. 8.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

If Congress was getting the complete taxation power with this clause then there would be no need to put in Duties, Imposts and Excises, now, would there?  In fact it took an Amendment for Congress to get the income tax, and even that Amendment has been misused as it nowhere indicates that Congress may levy different taxes on different income levels.  The Progressive Income Tax requires not just the Income Tax part, but a specific exemption of the Privileges and Immunities clause and Amendment V and Due Process of Law which is to be applied equally to all citizens.  Be that as it may, later in Sec 8 is a clause that indicates what the scope of the Taxation power actually is:

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

Duties, Imposts and Excises are generally taxes aimed at the National level and at international trade.  Thus the regulatory or regularizing power of Congress writing law in support of Treaties or, in cases where there are no trade treaties, setting the Nation's tax policy towards importation of goods to sustain trade, thus are complementary to the Duties, Imposts and Excises previously mentioned.  That is to say there is an explicit venue given for the Taxation power that is complete for Congress for international trade modified by Treaties.  Thus even where it is a complete power it is one that has limitations via Treaty.

Next is Sec 9 where one tax power is restricted and then modified by Amendment:

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

This is the first outright restriction to the Taxation power and now limiting it.  Do note that this is a passive clause and that it does not mention Congress nor does it mention any other branch or any other government.  Thus this applies to all governments and all branches of all governments in the United States.  Remember in Sec 8 there is the language 'The Congress shall have...' is an explicit grant of power and as all of Sec 8 is a single sentence with many semi-colons, all of that is covered under that.  There is no need to repeat it per line as the separate grants are broken up for clarity's sake, for readability, and to let someone catch their breath if they had to read it as a single sentence.

In Section 9 each clause is a single, stand-alone sentence, complete in and of itself.  These sentences are not started by explicit and active restrictions upon, say, Congress, but are passive and general in nature.  The Framers were more than capable of starting a sentence 'Congress shall make no law...' but these clauses do not start with that beginning.  As the Constitution is about the organization of the United States and what the role of the States shall be, when States require separate coverage they are mentioned, as in Sec 10, and I'm coming back to Sec 9, but here is the language on Taxation in 10:

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

With 'No State shall...' we are given a definitive subject and then a set of Objects with modifiers.  It is this language that is absent in Sec 9 and without an actual Subject that is defined then the generalized Subject is being addressed to all levels of all governments.

Imposts and Duties on Imports or Exports is a linking of topics in Sec 10 and due to that linkage these powers are addressed to those objects.  That explicit language and linkage then gives proper definition to the prior Congressional power on Imposts and Duties: Imports and Exports.  If a State wants a special exemption it must go to Congress and that only for the necessary execution of inspection laws.  By making those funds go to the US Treasury this is seen as a federal power granted to Congress and is for Imports and Exports.

Now back in Sec 9 there is the final clause and one that clearly de-limits powers and it is this:

No Tax or Duty shall be laid on Articles exported from any State.

As with the prior prohibition this one is given a passive voice and does not state 'Congress shall make no law...' nor does it start 'No State shall...' but, instead, addresses Taxation as a whole.  This is a restriction on the Taxation power, itself.  By not having either Congress or the States as the subject, as with the previous passive and standalone clause, this clause then addresses all governments in the United States.

This is an implicit restriction on taxation of goods moved from State to State on goods exported from one State to another State.  No government may do this in the United States.

Now lets flip this around into a different arena and ask: what is the form of this restriction on an international scale?

The States of the United States are seen as Sovereign entities and actually have an escape hatch from the US Constitution embedded within it in Sec 10:

No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.

This language also shows up later in the Constitution in Art IV:

Section. 4.

The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion; and on Application of the Legislature, or of the Executive (when the Legislature cannot be convened), against domestic Violence.

In Art IV, Sec 4 the guarantee of a Republican Form of Government is to the States, which are signatories to the US Constitution after ratification by the people of that State.  The protections against having this subverted are to protect the States against Invasion and domestic Violence.  In Art I, Sec 10 there are a set of powers that a State recovers if the United States does not support this and it is the ones they agree to set aside outside of these specific causes.  When you examine that list you get the conception of the broad headings that the States recover in full upon invasion, imminent threat of Danger or having their government threatened with being overturned via non-Republican means are broad and sweeping.  These powers are what we call the Foreign Policy power and the Military power, not just the defensive Militia power which is due to all men, but the assertive and external Military power.  Also it regains all the taxation powers and the powers to build new military fortifications and equipment to guard itself.

In International Affairs a State with the full Foreign Policy, Military and Taxation power is known as an independent Nation State: a country.

Thus the States must have these powers to set aside in this agreement known as the US Constitution, as you cannot recover what you did not have to start with.  That is simple logic.

Taking the US Constitution as a TREATY DOCUMENT and examining what the form of Taxation is we then come to a conclusion of the limitation on the Taxation power that is startling due to the understanding that is underlying it.  It is the scope and form of Treaty that many who have argued on the necessity of unburdened trade have used at the International scale and has its full form seen with an organizations of States that agree to this view so as to have a coherent Nation amongst them.

What is a trade agreement that unburdens trade amongst equals and limits the power of an oversight group so that it may not burden such trade via direct taxation?

What is a trade agreement that sets up a system whereby sellers in one State that is signatory to the Treaty cannot have its goods or services taxed by a recipient State and its citizens?

What is the form of trade agreement that abolishes duties, imposts and excises save for necessary inspection and then those funds applied only to those inspections to ensure that agreed-upon legal trade is all that is going on between States?

Why this does have a modern term, doesn't it?

This is known as a FREE TRADE AGREEMENT.

Right there, in the US Constitution, powerfully stated by not being explicit, not a direct power grant, but by restricting all the governments involved, including the agreed-upon oversight body.  It is one of the most subtle and yet powerful statements on the positive value of trade between States to knit a Union together and to allow that free men when trading with other free men in States that all fall under the Treaty shall have NO TAXATION applied to that direct sale from individual to individual, State to State.

And that means no 'Value Added Tax', 'Sales Tax' or any other thing not directly related to quantity, amount or hazard of a given good.  Taxation for tonnage is also removed unless it has safety or verification inspections involved.  The federal government can tax per gallon, per carton of cigarettes, or by any other gross weight and measure so long as it involves upkeep of infrastructure due to those particular items in the way of hazard or safety.

What no government can do is tax by VALUE of the trade involved.

Thus a nickel per gallon on tax is there without regard to the actual cost per galloon.  It is there if it is a penny per gallon and it is there if it is ten thousand dollars per gallon: the quantity is what matters, not the value.  And do note that is for interstate sales, only, so that in-State sales remain the realm of the State government.

Governments will always seek new sources of revenue and tax the hell out of anything they can get their hands on and yet still be unable to balance their budgets.

A free people have an 'out' from onerous taxation: our fellow citizens in the other States under this Free Trade Agreement embedded in the US Constitution.  As a remedy to overburdening of taxes this is one of the most sublime resorts that the ordinary citizen has to escape taxes, become closer with his fellow citizens and support the Union between the States.

Because that is the realm of the Preamble of the US Constitution and note who is invoking it and what we promise to do:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

On voting

Yes another piece from my commentary at Hot Air, and it is pretty well self-contained as part of a Quotes of the Day thread, which can meander hither and yon on topics this one post-debate on Biden and Ryan.  I'm good at that hithering and yonning stuff and this time I wandered back to voting.  Again, as with all my commentary, it is in the 'as-is' format:

Just remember all the triumphalism on the Left is because of Joe Biden.

They are happy about Joe Biden, the least serious man in politics, who was sent out to rile them up.

No matter how happy the Left is, remember they are happy about Joe Biden… it is all they have left to show for their support of Obama and ideals that are bankrupting the Nation not just fiscally but morally and spiritually as well.

As Eastwood said – Biden the man who is a smile with a body behind it.

And the best part is that as people begin to see that Obama & Co. are tanking, the economy will improve. Remember what happened in OCT 2008? Gun sales went through the roof and small businesses began to pull back expansion plans, curtail future investments and set down to weather the storm.

The Left will attempt to claim vindication. Yet it is the course of events that the PEOPLE are doing that will change the course of the Nation. Not our freaking government. This the Left will never, ever understand, and they will attack you for the very idea that people should be free, actually CAN be free to lead a better life without the interference of government. Once this course begins to change this time, with the memory of what happened by not backing it fully under Reagan, this time it will start to sweep away all our notions of politics, education, energy, and production like no other time in history. The PEOPLE are about to declare the 20th century over and the 19th century ideas of the Left as done with. The Left wants Americans to be ordinary plebes, yet we hold the eternal truths as self-evident and we will be extra-ordinary citizens creating a better Nation so that all mankind will have a beacon to look up to and a standard to flock to.

That means holding ALL your elected officials to account: from dog catcher to President. We slacked off as a people and let our parties try to run things. That era not only can end but it must end and it is ending NOW. A Romney win is not something to then walk away from, but a reason to hold to your ideals and to keep on pushing at all levels of government to recognize your rights and liberties to be free FROM government and that we, the people, will take care of the rest of the stuff that we specifically do NOT hand over to government: caring for the poor, the sick, the elderly, the young, and our society. That is my job, your job and the job of all our fellow citizens, and we dare not let government even try to do them.

Why? Look where we are NOW that we HAVE let government even try to do them. This is the result.

An election is not an end goal but a statement from you of re-dedication to the cause of liberty and accountable government. It is the start of the process, not the end of it, which means it re-starts with each and every election.

Remember Joe Biden is all the Left has: the laughing spirit of derision against you, against liberty, against freedom, and meant to belittle our fellow citizens and our Nation to say that we are too stupid to lead our own lives freely. The man is an insult to us all.

You can’t get rid of stupid as it is one of the two infinites of the natural universe that Einstein coupled with space, and he wasn’t too sure about space.

But you can, assuredly, vote stupid out of office.

That task STARTS with an election.

And re-starts with each and every election at each and every level thereafter.

I am happy to vote in every election. It is my way to help safeguard freedom and liberty and it is my duty and job to do so. That doesn’t mean I have a light mood at each election and it is usually just the opposite: I keep my eye on the target through all the maelstrom so the deed that must be done is accomplished. Elections are too serious to get emotionally involved in. A duty, a job, and your means to safeguard freedom and liberty… a happy task but an earnest job not taken lightly.

ajacksonian on October 13, 2012 at 9:47 AM

I can remember the few times that I didn't vote, even in an off-year non-federal election, and those times revolved around a few topics.

First is too sick to vote.  I didn't have 'good health' at any point in my adult life and an upper respiratory tract infection could spiral from swollen glands to the awful green things from inner space in about two days and then leave me laid up for weeks recovering under antibiotics.  Other than that, with the onset of my catalepsy I couldn't really claim to track reality all that well, so that gets a hit.

Second is out looking for work.  When you spend the better part of a couple of years not at home, not in your home voting district and way before the Internet and world wide web, there was no way to keep up with what the local issues actually were.  To vote responsibly one must keep up with at least the basics, and distance killed that for me.  Also in my working life, I was in a major project that had so much time spent outside of town that I also lost track of local events as the project consumed my attention and spent my energy.  I was happy to do that project and it was worthwhile.

Third was still learning the political landscape for a couple of years out of High School.  That also was coupled with the first problem, too, and those were not happy years. 

Thus with 30 opportunities to cast my ballot, I have missed 8 of them and for only 2 of those instances can I say I was actually too unfamiliar with the topics to vote, which perhaps isn't good but there it is.

There have been times when I absolutely had no one to vote for by my own criteria, yet I voted on purely local issues and left a blank ballot for those races where nothing was satisfactory and I knew of no one, even myself, who would fit the job to write-in.  If memory serves I have written names in twice on local elections when the ballot system is set up for those things.

On the flip-side there are races when I had no clear idea of which candidate would serve better, because they would both serve about equally in my opinion and I let inspiration guide my hand.  And in one race, only, did I cast a vote that I could not in conscience give to either candidate, but knew that a third-party candidate would harm one candidate over another, and there is no long-form for explaining votes, so the short ballot must serve as a reminder to both parties to get their act together. 

After that I have generally voted down or against local spending of all sorts, save for sewer and water main upgrades: we need those as a civil society and those deserve backing to keep things running.  I've voted against school Olympic sized swimming pools, firehouses where there is already adequate coverage, parks where they aren't demanded by anyone, light rail, and other bits of crony spending that I don't see as gaining anything for the community.  Roads, bridges, sewers, water mains, electrical distribution stations... all of those get approval due to necessity.  New schools due to passing demographics, do not and I've been in schools run out of trailers that have been on-site for decades and see no suffering in the ability to teach in such places.

I am a member of a one-person party, who encourages each individual to be a one-person party and to reach out to all other parties (one and multi-person) so as to build a better way to run our republic by going across party lines.  If we must have parties, then it is best to have a fickle, non-partisan population willing to infest parties and then leave them when the louses show up, all the time stripping party structures of upper level power and prestige and putting power back down to the local and individual level.  Partisanship based on party will be the death of us yet.  I am devoted to my Nation and the liberty and freedom that we require our government to respect at all levels so that man can be free.  Good government has few things to do, short funding and is required to do the very, very few things it does in an exemplary way while staying within its budget which is what the taxpayers can afford... not what our government demands as tribute.  Government is the Punisher, that is its role, and only when that role is delimited to only that, can we keep government accountable to the people.  Anything else waters that down and is the basis for corruption giving the fertile ground of tyranny when it continues too long.

I am always happy to vote.

Yet, somehow, I never have a smile on my face when doing it.

It is a duty and an honor that my fellow citizens entrust this to me and I treat it with the solemnity it deserves because you have asked it of me via the means of Caesar.  If this is the form of which our Caesar takes, this republic with representative democracy to guide it, then I must render my judgment upon it to comply.  It is right and it is asked of me, and that rendering must take place.

I apologize for the times I didn't vote, I am not the best of all people to be sure.

I work hard to retain the recognition that we must self-govern and that your trust in me is not misplaced, even when I do not agree with you on the issues or candidates.

What happens inside that booth is between you and that which is all around us at all times.  Who and what you cast your vote for is only amenable to your conscience and, when all else fails, to inspiration in that solitude and let that be your guide.  You might be surprised that this does, actually, work if you but take the opportunity to listen to how you are spoken to alone with such a decision.

I urge everyone who is eligible to vote.

I ask it of you as a Citizen of the Republic of the United States of America.

Roots of constitutional government (2)

This is a follow-on to the first post on Roots of constitutional government.

Prior to the reign of Henry I there was a written limit to the sovereign of Engla-land, later called England, which came from Anglo-Saxon roots.  With the Angles and Saxons having come from central Denmark and northern Germany (on our modern map) these people were influenced by their cultural heritage that passed through the Norse and Germanic traditions.  In moving to the Roman province of Britannia in the 5th century AD, the newcomers found a that parts of the old Roman law system had survived, but that much of the local law was done via more traditional means.  The Anglo-Saxons came with a tradition of the Thing, which are the annual or biannual gatherings of local lawgivers that dispensed the King's justice and then heard the complaints of the people to be passed upwards to higher levels to be addressed.  Trials were by jury of locals under the oversight of a lawgiver or deputy, so that justice could be seen as something that was locally held.  This basic understanding is put down in the Anglo-Saxon Chronicle after Ethelred II found himself on the losing end of the onslaughts of Danes and Vikings, to the point where the local nobility insisted that they would get a say in such government as was necessary, particularly in taxation.

Although the actual series of battles ended in defeat for Ethelred II, the final winner was King Canute (picking up where his father, King Sweyn had left off) and became the last true Viking King.  He did so by cementing his place amongst the Anglo-Saxons by agreeing to the limitations placed upon Ethelred II, and marrying his widow.  Although the heir to the throne after Canute would be Ethelred II's son, Edward, the idea of there being a positive assertion of past fealty to become King had started to take hold.  The rivalry between Harold and Tostig (Tosty as I used previously) would finally end in 1066 with the invasion of Vikings in the north near York (Jorvik) which would be beaten back. The second the Norman invasion of William who had been designated by Edward as he was related to his mother, Emma.  Harold had even agreed with this when he was shipwrecked in Normandy and going back on that agreement left William the only option of asserting rule by force of arms.  If Harold's army had not been weary and wounded from the first battles in the north, then things might have turned out differently with the Norman invasion.  Instead it was William the Conqueror who prevailed who offered that those who had not been struck down at Hastings would be seen as continuing to rule if they gave their agreement to have William as their King.  A few of the Earls would take him up on that, while most of the others would not help in securing the throne for William and for those he set about getting rid of much of the resistance to his rule by force.

What followed was the execution, assassination and running down of lesser nobles, their families and, in the case of the Northumberland, pretty much every person in that north central section of England.  The imposed system would invest in castles that were not fortified trade towns but seats of power, which were under the control of the Dukes that William brought in. Then came the rise of the accountant as King William wanted an exact detailing of all the land, all the people, all the property of England for tax purposes.  A Domesday Book is just that and it accounted for everything down to the last person, the last horse, the last cow and the last pig, and the areas that had been under the Harrying of the North had entire towns missing as there was no one to live in them.  The Revolt of the Earls and Danish invasion would mark troubled times during his reign as he had lands on the continent to deal with as well as England, which meant moving around to deal with problems from as far north as Scotland to Maine just to the south of Normandy in France.

The ducal system of Norman nobles to replace the Anglo-Saxon petty nobles and aristocrats, altered the political landscape of England so as to raise the knights and soldiery necessary to secure the country and provide for the William's army.  With this system comes the system of chivalry and moderation in warfare which was part and parcel of the mainland European system of ruling.  William did not attempt to unify his lands under a single law domain, however, so that England had a different law system than the holding in Normandy where fealty was owed to the French King.  What did happen was that forested land was set aside for the King for his pleasure, and violation of the King's forests had penalties that were not previously seen under the Anglo-Saxon system.  All of this was overlaid on the existing shire system, however, with its existing divisions and subdivisions within each shire to help in administration of law for orderly government.  This system was co-opted by William so as to appoint officials known as sheriffs who were dispensers of royal justice and also the tax man.  If you are starting to see the outlines of where the Robin Hood stories would come from, then you now have the context that created it: Norman ducal system overlaid on pre-existing Anglo-Saxon system but with appointees running those offices.

If the seeds for that realm of stories is founded with William, then the overlay of that system is directly seen in the other realm of stories represented by the Arthurian mythos.  That realm where the land and the King are an entity, where the sovereign rules as first amongst equals which is the basis for the Knights of the Round Table, then the actual system of knights and chivalry come not from the Anglo-Saxon line but the French and mainland European strain of government.  It is the excesses and flaws in the ducal system that show up in more egalitarian England during wars as the imposed administration of law by the sheriff is one that is not found in that representative Anglo-Saxon system and is thus an imposition of rule from the top-down.  This meant that a Kingdom required a strong personality at its top to be secure, and a constant struggle to retain control against unrest and uprisings.  Also the tradition in Normandy had no set succession, and that was left to the King's wishes usually stated on his death bed, although written documents could secure such things unless the heir that had been named had died between the writing and the death.

William's eldest son, William Rufus, was a strong leader and continued the building projects that his father had started for fortifications, castles and churches, and to fund this William II went beyond the prior taxation system that was an amalgam of the ducal system and English system, and started to tax the Church, itself, and kept the goods of Bishops and Arch-Bishops after their deaths by not appointing successors.  This, along with never having married, never fathered a child and keeping a male companion close to him meant that William II was not endearing himself to the Church on either financial nor moral grounds.  To be a Christian Monarch one must act in the ways of a Christian and it was those lacks, and utilizing secular authority over the Church that becomes the beginning of the negative example to the American Framers of what happens when the State has oversight and appointment control over the Church.  During the reign of William II between 1087 and 1100, the problems of this control were beginning to show through the post-Roman Monarchial system which would begin to plague the mainland of Europe after Luther.  In England the idea of the local Church being controlled by the Crown would come up in a very different manner and lead to different ends.  The problems of having an irreligious sovereign power in control of religious institutions is not recent and the reasons to separate out this control first shows up under William II.

Under William II the expansion of the forests under control of the Crown increased in extent and punishments were raised, as well.  At one point the Crown owned approximately 25% of all the land under Forest Law.  In our modern times we can see the expansion of power under the US government for the National Park Service, National Fish and Wildlife Service and Bureau of Land Management as the exact equal to Forest Law under William II.  Again the Framers of the Constitution had this set of abuses to look at and gave the federal government just 10 square miles of land that was to be the capitol, and put harsh restrictions in expanding this requiring the assent of State Legislatures on a  parcel by parcel basis.  The US Constitution is not just the assertion of well known traditions via the Amendments, but restrictions are built into the very framework of the Constitution itself.  If the separation of National power over religion is stated clearly and directly, the passive voice of what little the government is allowed to have is a far greater restriction than any active voice assertion.  We unwisely bypass these at our peril by putting the sovereign government in virtual control of large portions of the Nation which it is restricted from doing not by a 'thou shall not' but by 'thou art allowed only this'.

With William II death due to a hunting accident, his younger brother Henry quickly moved to bury his brother and take the throne.  As their elder brother, Robert Duke of Normandy, was away on crusade, Henry sought to consolidate his position in England by an approach that Canute would approve of: Henry agreed to the English law and had published, in Anglo-Saxon, his agreement to uphold the rights of the free English folk in 1106.  This coronation charter was widely distributed so that all the people in the land would know that this King, unlike his predecessors, respected them, their system of laws and their rights. The Charter of Liberties of Henry I thus becomes the next in line of statements of support for the rights of the people as expressed via their common government system.  This Charter of Liberties serves as a template for the later Magna Carta and begins putting into place that those who have been relieved of their lands unlawfully are due for lawful relief.  It allows for return or re-purchase of taken land and it guarantees the right of inheritance of property for the nobles and aristocrats, so that the Crown will no longer have say over who gets such lands on the death of the land holder.  The seignorage, the difference between the value of a metal in the coin and the cost to produce it, was reinstated to that of Edward I so that there was no 'stealth tax' for when gold or silver is given over for certificate or coinage, which puts a stable system of weights and measures in for coins and their content.

What The Charter of Liberties does is reset the English legal system back to its prior state, by and large, and shifts the governmental entities back to the ones that had been more widely understood prior to William I.  Laws are moved back to the local level for the nobles and aristocrats as it was under Edward the Confessor, which puts accountability down to the local level for ordinary laws and even the King's laws are administered at that level, as well.  The Forestry Laws are repealed back to the level of William I, which were bad, yes, but as part of the political negotiations going on to get the English nobles and aristocrats to back him, can be seen as getting rid of the excesses of that law system.  Also enclosed within are benefits to the nobles who are sick, enfeebled and to widows and orphans of same, beyond guarantee of inheritance, which are positive carrots and representing a form of Christian morality.  In all this is one of the main roots of the constitutional system and the lessons learned from the monarchy system are also learned in its excesses.  If William had thought to overlay a permanent Normandy ducal system on England then Henry I seeks to repeal major portions of it to allow for freedom at the lowest levels and hold those responsible for maintaining the system at that level.  What is restored, then, is not a republic but a system that had federalist outlines prior to William I and those representative and accountable sub-systems necessary for a federalist form of system are returned.  Without being expressly federalist, Henry I puts back in place the traditional accountability system that had been noted in the Anglo-Saxon Chronicle and reinforces it with some exactitude.

Preparations and moderation

Via Insty, a CNBC report on consumer spending rising as consumer savings go down.

I would speculate that part of that is to pay off debt and another part is the longer term unemployed drawing on savings to make ends meet.  Reducing debt becomes a primary concern during an economic downturn, and Americans have been doing so while the US government has gone on a spending spree like there is no tomorrow.  Making ends meet is also necessary and prudent withdrawals from savings of various sorts helps to extend a family's ability to stay fed, sheltered and clothed.

A third category is one that I fit in, and that is getting the necessary tools so as to build basic skills to make it through a period of bad times.  Additionally there is storing food, purchasing firearms and ammo, plus generally getting prepared for whatever is to come by whatever looks to be necessary.

The first two are done by those still with debt burdens or who lack active, full-time employment, and that is the majority of the population.  That third category are the people who recognize that the skills and tools they have now are not satisfactory to get through a major economic downturn.  We, as a Nation and as part of a global phenomena, are coming to the end of an era of high debt government that has had an ideology that government can provide for the poor and serve as a 'social safety net'.  Government is, by far, the highest overhead, least efficient way to do this and the cost of doing this is one that has long-term insolvency due to demographics. 

In America Alone, Mark Steyn posits that demographics is destiny, and the demographics in the West, Far East (including China), and Russia suck like an Electrolux, save more quietly.  One of the constants of demographic change in America I looked at in Insurance, Assurance and Prosperity, and that even such a simple known demographic change as the rise in life expectancy (not rise in absolute life span of the human body but how long you can be expected to live within a given absolute life span) means that in a system where the retirement age is not raised to keep up with the average age of mortality (so that half the people in a given cohort have already died by that age) there is a growing number of individuals who live past the old 'retirement age' for more than years but decades.  Add to that Medicare, Medicaid and any other program 'designed' to help the elderly, and what you get is a growing proportion of those living past the old average life expectancy and fewer active individuals in the workforce to support them.

The SSA system was changed under the Johnson Administration so that receipts from SSA were given IOUs by the Treasury and the money went into the general funds for government.  There is no 'lock box' for SSA, and what you have are promissory notes by the government that it will really, and for true, have future funds to put back into SSA.  Cross their heart and fingers on that.  That means that at some future point the general fund would need to provide funds for SSA.

That point was last year.

All of the entitlements are unsustainable, which you would think that the Left wanting 'sustainable' everything else would want to get rid of this unsustainable part of government.  Unfortunately this is used as a political football to allow politicians to show how 'nice' they are in running a Ponzi Scheme to help the retired and poor.  Ponzi Schemes are thwarted by demographics when the first layer or two of 'investors' get paid out via incoming cash from new entrants in the system, but as the pyramid grows for pay-outs, the income from new 'investors' hits a flat-line or even diminishes.  This problem actually was pointed out in the 1930's by the opponents of SSA, but was over-ruled by the Progressive nature of American politics that believes that government would be the solution to all of man's ills.

On the plus side for the US is that we currently have a good internal age demographic and replacement rate for our population that allows for marginal growth for the mid- to long-term future so long as we don't screw up the present.  Our Nation basically has more babies born, living longer, and staying fit longer as adults to the point where our population still grows even as the median age rises due to the Baby Boomers.  This is not true in most of the West at this point in time, with many Nations falling below that replacement rate, meaning fewer younger people coming in to replace older people who have retired onto the social safety net.  In the West this includes: Greece, Italy, Spain, Norway, Sweden, Germany, France... basically all of the old Western Europe.

Notice what happens when the bottom falls out of an economy with too many people on the dole and not enough to pay into the system?  Europe's Ponzi Scheme is a few years ahead of ours as we were more moderate in picking them up, didn't expand them as fast as Western Europe did and did not follow the scare-mongering of Ehrlich and his lot that the Earth would be over-run with humans by the 1990's.  The sub-replacement rate for places like Greece means that an American is more likely to have a Big, Fat Greek wedding than someone in Greece is, with large families and all now on the severe decline there.  Also in this boat from the old Eastern Bloc is Russia, which was suffering this sort of problem going into the 1980's, which may account for the sudden decline in popularity of Communism there... although authoritarian rule has been more the rule than the exception in Russia and is making a comeback.

Who else is in this demographic downtrend?  Japan.  With the over utilization of capital for government public spending since the 1990's and with a society now below the replacement rate demographically for nearly 3 decades, Japan now has more public buildings than can be used... most of them newly built!  To a degree this is true of most of the Far East, but the old 'Asian Tiger' economies never got into public works spending as a way to get their economies going like Japan did.  Sort of like what the Left in the US has wet dreams about with sleek bullet trains, mass transit, crowded cities and public works now crowding out normal buildings in some towns.  Japan will be positively geriatric in two decades while most of Western Europe will just be elderly.

The other fun place with a major demographic problem is: China.  Consider the 'One Child Policy' (which wasn't that well enforced but still had an impact) and that it went on from the early 1970's to 2008 or so.  Just a bit over 30 years of one child families in the urban areas and smaller families in the rural areas, and even with the horrific living conditions, pollution and people dying at factories they live at, life expectancy is still up versus where it was in the 1960's.  If you were born, say, in 1973 in China you are now 38, which would be in the prime of having a family in the US.  In China it means that you are now in a situation where men outnumber women, that you have scant savings, and that you make $6/day (on average) of which $4/day is spent on food.  Looking at your parent's generation you see men and women in their mid-50's on up, and slowly becoming less productive in the workforce.  Plus as the older generation dies out, there are fewer replacement workers and fewer families around.

In a previous article I look at the Directivity of China, just on the financial/economics realm and how the crony capitalist system there is causing rapid accumulation of Non-Performing Loans both to the government and outside investors.  China financed its economic boom in the mid-1990's with capital investment from outside of China, mostly in the West, and put that debt into debt vehicles that run through 5 years.  The first major roll-over of that debt was circa 2000, and a second roll-over was circa 2005.  In 2010 China started to get worried as some of its creditors were not accepting a roll-over and wanted their debt vehicles cashed out and China is using some of its assets to pay those off, while trying to get agreements on yet another roll-over. 

Inside China, the banking system has gotten used to handing out loans faster than you can say Fannie and Freddie.  The Chinese looked at the Western system in Europe and the US for doing such things as running home mortgage systems and particularly liked some aspects of how the government can funnel money to preferred customers.  In other words, they liked the corrupt system of banking that was bubbling in the West.  So they repeated that in residential, commercial and industrial real estate.  There is trouble brewing in China on over-built cities and subdivisions with few people living in them.  In this regard China is also doing some post-bubble Japan work to build infrastructure... with a declining population base ...

Finally China has a dustbowl going on in its agricultural sector, with clouds of dust going over major cities (adding to the pollution there) and then seen on satellite images over Korea.  Dust from the central part of China has been scraped off of buildings in the western coast of the US and analyzed... and while it isn't much, given how much likely gets into the Pacific Ocean, the fact that microgram amounts can be found in San Francisco just about anywhere is an indication of the scope of the problem in China.  And if you live on a farm in China you are probably older than average with your children having gone to the cities to get work, thus the agricultural sector of China is ageing out faster than the other sectors of the country and are still under crushing poverty.

So when elites are saying 'China is the future' you can ask them: the future of what?

Remember all of that points to a demographic decline in China, with not enough people to work the farms and with less arable land, plus a nasty pollution problem.  Anyone familiar with the ecological disasters from the old USSR in Russia will be able to clearly identify similar in China.  The frantic pace of spending within China is not normal to any economy, ever, on any sort of 'sustainable' basis.  What happens when the able-bodied older generation ages out is anyone's guess, but it won't be pretty inside China.

The other place with positive demographics?  Parts of the Arab Middle East and Africa.  What do they lack?  Skills, infrastructure, education, good jobs, a reliable financial system.... you know, the basics.  Plus most of the political systems aren't set up for anything but authoritarian or dictatorial regimes.

America has huge problems!

We have a housing sector gamed by politicians for decades.  Ditto that on the financial sector that they now wish to game more from last year's lovely laws passed in the dead of night, over weekends or holidays, or buried under a Friday avalanche of documents.  The problem with more government 'regulation' in financial, industrial, commercial and residential markets is obvious: less efficiency, build up of long-term debt, and the creation of an unsustainable crony capitalist system that erodes trust in the laws.  Not to speak of what it does to the fabric of society.  America, however, has countervailing influences not seen in most of the rest of the world.

First up, we don't go to the streets during tough times, but tighten our belts and vow to get through the tough times.  Politicians, academics and ideologues have been trying to destroy this for decades, and yet the US remains one of the most civil societies on the planet.  Notice how 'gun control' laws stopped rioting in Greece, the UK, France?  Oh, that's right, they didn't.  So sorry, perhaps trusting one's fellow man to look to his own safety is better than letting the government do it for him.  Letting each man control his destiny, for good and ill, is the basis for a strong civil society, while top-down mandates on what society MUST be from government never do seem to work out all that well.

Second, America looks to frontiers.  Why all the Alaska programs?  It is the last of the terrestrial frontiers for the US.  It has all the positive draws of hardship, untamed wilderness, natural resources and people who know how to take care of themselves.  If you screw up in a harsh environment you don't get a ticket, a citation to appear in court, or expect 'help' to arrive soon: you either take care of yourself via preparation or you are dead.  Americans love the harshness and cutting nature of a true frontier that is boundless.  Of all the insane things this Administration has done, the one sane thing was to neuter the NASA manned space program, and leave that up to private enterprise.  Already the first commercial test flights are happening and the paying ones start late this year or early next.  The freedom of a frontier to thumb your nose at government and do as you wish is strong and Americans will flock to that like nothing ever seen before on this planet.  That is two decades off to get into full swing if we survive our current circumstances and get a sane financial system put down.

Third is DIYism.  'If you want something done right, do it yourself' is the cliche.  This is not, exactly, true as not everyone can have all the skills at the highest level to do things.  It more properly comes out as: If you want something done that you can be satisfied with, do it yourself.  In doing something yourself you get to see the level of your own abilities (or lack thereof) first hand and that has a positive feedback like you wouldn't believe.  One of the things I've lacked is having my own workshop, what with my prior active working life and then becoming disabled to a high degree, it just hasn't been in the cards.  Yet now I accumulate the tools, hardware and raw materials to start up with some help from cheap tool places, and picking up the Gingery books on the DIY machine shop at low cost.  Also books on basic woodworking and gunsmithing with hand tools are now in my hands.  In America we expect home owners to take care of their homes, on their own if necessary, and the times look to be heading that way.

Fourth is the cussed streak of liberty that can be traced back to the early settlers of America.  These are the people who will NOT part with what they believe and would PREFER that society left them alone, but when society through government feels it must tell one what to do, think, act and believe, then the answer is to leave the society and government.  This is part and parcel of 'get off my damned lawn'.  Americans expect what they own to be honored by their neighbors and not coveted by government... and we tend to back that up as individuals and our society must respect that.

Fifth is that thing that Jefferson wanted: a revolution every 20 years.  Instead we have the Constitution and notice that the things government must do (organize and pay for a military, keep a post road system, ensure equal enforcement of the  laws of the land, protect the Nation from invaders, regularize immigration and naturalization, keep a Mint going as well as US Patent and Trademarks system, pay off our National debt, support our Embassies overseas as well as a court system) are minimal.  Plus nowhere does it say that any Congress must continue on with the laws, regulations, etc. of past Congresses, so long as the government adheres to the Constitution everything is up for grabs every 2 years.  This is known as 'clean sheet' government when take to its maximal, little carry-over state: all but the basics are wiped off the board and the Congress restarts with what it thinks is necessary.  When we didn't have much government, there wasn't much need for this capability, but now that we have an over-sized, costly, over-burdened, Ponzi Scheme running bureaucracy trying to rule our lives, the 'clean sheet' option starts to look very nice, indeed.  Even 'entitlements' are not debt obligation systems, but systems you pay into, now, with a promise of being paid back later, in smaller amounts.  You don't hold a bond or other negotiable vehicle, but a promise of payment.  This is known as a contract.  Our government can wipe those out without batting an eyelash for that is what sovereign governments are able to do.  Fun, no?

While I do have grave concerns over the current state of our government and society, the countervailing parts of the system have been gathering steam for over a decade and more like two decades, now.  The problems of government trying to decide what a 'minimum wage' is, what you are 'entitled' to and how much you should pay for 'health insurance' has now gotten to the point where the countervailing forces are now applying their pressure.  To right this ship and stop it from taking on water requires getting rid of the overburden (cutting the excess supercargo of goodies off the deck), closing hte hatches and running the pumps to get the water out of the hold.  Americans are leading the way to thrift, preparation and paying down debt and will now expect our government to follow suit and get out of the damned way.

If that isn't started now, then 2012 will start to shape up as a 'clean sheet' revival.

Keeping what we have is not an option.

Getting the ship of state upright and the water pumped out of it is a necessity.

Americans grit their teeth and do the necessary things during a disaster... and this is a disaster, make no mistake about it.

Americans are preparing, now, for the long haul.

Our government?

Either get with the program or get the boot, the era of 'nice' government is coming to an end and the bare essentials era is coming your way.  Prepare now... your fellow Americans already are.  We will pay our debts, as a Nation, but we can stop incurring them in a heartbeat... and the great effects of withdrawal from government addiction is that you get richer and freer, both, and begin to wonder just why you ever thought letting government run your life was a good idea.

Painful?  Yes, but the pain soon stops once you realize you actually can pursue your happiness for good or ill, and care for your fellow man.  That will take a few years to sort itself out.  Painful years.

Far better than the degrading situation we are now in and will get if we don't do what is necessary.

Who else is going to do the necessary things to keep this Nation going?

I'm not counting on the Jihadi's to do it, that's for damned sure.

QE2 or Titanic?

The question of the Quantative Easing Part 2 being done by the Federal Reserve is the Reserve printing money to buy US Treasuries through 3rd party resellers (like Goldman-Sachs) at a mark-up so as to try and get liquidity into the markets.  To this point in time easy credit policy has not 'stimulated' businesses and the business climate remains unsettled due to government policies being unknown on a day-to-day basis.  Such things like the cost of Healthcare Reform, the Financial Reform bill, and tax policy have all put forward an array of new federal agencies that will, perforce, eat up money and increase regulation while showing very little in return for their work.  Each piece of paperwork needing to be filled out in the private sector to meet some new government program or regulation is time spent not doing something productive.  With the threat of taxes going up, actually keeping a business afloat is a major problem as no one can forecast what taxes will look like even one year down the road.  On top of all of that Social Security is operating deeply in the red, cashing in its Treasury obligations, which takes money from both the federal government via direct payments (FICA and general revenues) and needing to pay for those cashed out Treasuries years before anyone expected them to be cashed out.

Thus the federal government is insolvent: it has burdens that it needs to meet that eat up all available cash and then needs to borrow more money at interest.

It is finding the borrowing climate hard as the economy is in the doldrums, and no one sees how the US can pay for all of its 'entitlements' or even just the few mandatory government functions necessary to run the National government.  There is, actually, cash for the latter, but only if you shed all the 'voluntary' parts of government at the federal level.

With no political willpower to do that, the un-elected Federal Reserve (which will get autonomous powers under the financial reform bill as Congress can no longer to its job) has decided to start buying some Treasuries to help keep things going in the name of liquidity: in order to try and pay for today we are devaluing our dollar in hopes that this will jump-start the economy.  There are, unfortunately, no success stories for that worth mentioning.  Thus this is a failed monetary policy with high-end risks and very few tangible rewards unless the idea is to survive until the next election to be thrown out of office to blame the incoming people for your mess.

Still this idea has its backers on the Right like Ramesh Ponnuru, at National Review Online and he points to others who are backing it under the ideas put forward by Milton Friedman and Friedrich Hayek. At one of the sites linked to, at Marco Market Musings is an article by David Beckwith on 08 FEB 2010 that a JMCB article by Larry White discussing this topic (pdf document here).  In that article is an analysis of Brad DeLong's look at Hayek's views on this... following this?  From Ponnuru to Beckwith to White to DeLong, about Hayek!

Right!  Lets take a look at the first summary point of White reviewing DeLong's work (boldface mine unless otherwise noted throughout):

(1) The Hayek-Robbins (“Austrian”) theory of the business cycle did not in fact prescribe a monetary policy of “liquidationism” in the sense of doing nothing to prevent a sharp deflation. Hayek and Robbins did question the wisdom of re-inflating the price level after it had fallen from what they regarded as an unsustainable level (given a fixed gold parity) to a sustainable level. They did denounce, as counterproductive, attempts to bring prosperity through cheap credit. But such warnings against what they regarded as monetary over-expansion did not imply indifference to severe income contraction driven by a shrinking money stock and falling velocity. Hayek’s theory viewed the recession as an unavoidable period of allocative corrections, following an unsustainable boom period driven by credit expansion and characterized by distorted relative prices. General price and income deflation driven by monetary contraction was neither necessary nor desirable for those corrections. Hayek’s monetary policy norm in fact prescribed stabilization of nominal income rather than passivity in the face of its contraction. The germ of truth in Friedman’s and DeLong’s indictments, however, is that Hayek and Robbins themselves failed to push this prescription in the early 1930s when it mattered most.

The 'liquidation' policy was that of putting failing banks to rest via letting them fail in the 1920's.

Things that pop out?

- Re-inflating price levels is questionable: that is trying to get price levels up to a sustainable level after bubble bursts.  In other words don't try to re-inflate the bubble.

- Corrections to money requires some allocative corrections when easy credit has inflated prices.

- The goal is to stabilize nominal income, not prices.

- All of this is done with a fixed gold parity money supply.

The last point is telling, and anyone trying to use Hayek or any other economist from history must review if they are talking about a 'stable' currency (that is gold, precious metal, or other substance backing) or a 'fiat' currency that has no fixed value and has only relative worth over time.  The prescriptions of Hayek for a fixed parity currency do not apply, necessarily, to a non-fixed value currency and any prescriptions for the former cannot be given to the latter as the monetary value of the currency means there is an absolute adjustment level for the fixed value currency and no absolute value to the non-fixed value currency.

With a non-fixed value currency when you attempt to 'stabilize' the currency by pushing bank notes into the system, you get nominal inflation of the currency, meaning it is worth less than it was before the printing of money.  From that inflation and deflation of non-fixed value currency cannot be definitively addressed by monetary policy alone: other adjustments need to be done so as to stabilize the value of the currency so that it has stability.  When more is printed and money is worth less over time, there is increased instability in the markets and pricing adjusts to meet the de-valued currency.

Can government spending on 'work' projects help?  This is point 2 that is examined:

(2) With respect to fiscal policy, the Austrian business cycle theory was silent. Hayek and Robbins did oppose make-work public programs, but they opposed them because they believed that the programs would misdirect scarce resources, not because the programs were financed by public-sector borrowing.

Governments get money via taxation or the printing press.  When money is taken from taxpayers it is not available in the economy to be used in an economic fashion to address the needs of individuals and businesses.  When money is printed the value of it is lessened when it is a non-fixed value currency, which creates additional instability for pricing and valuation of goods, services and income.  Thus government cannot 'stimulate' an economy as it is not utilizing funds in an economically efficient manner.  Non-economically efficient things can be done, yes, but that is a political case not an economic one that needs to be made, especially during times of downturns: they are not a 'cure' for an economic downturn and must meet some other need of the State.

Mr. White then goes on to look at Hayek's theory and monetary policy norm, and its a bit of a long section:

Hayek’s business cycle theory led him to the conclusion that intertemporal price equilibrium is best maintained in a monetary economy by constancy of “the total money stream,” or in Fisherian terms the money stock times its velocity of circulation, MV. Hayek was clear about his policy recommendations: the money stock M should vary to offset changes in the velocity of money V, but should be constant in the absence of changes in V.4 He accordingly lamented the shrinkage of M due to the public’s withdrawing reserve money from banks (as had occurred in 1929-33), referring (Hayek 1937, p. 82) to “that most pernicious feature of our present system: namely that a movement towards more liquid types of money causes an actual decrease in the total supply of money and vice versa.” He declared (1937, p. 84) that the central bank’s duty lay in “offsetting as far as possible the effects of changes in the demand for liquid assets on the total quantity of the circulating medium.”

To stabilize the volume of nominal spending, Hayek (1935, p. 124) urged that “any change in the velocity of circulation would have to be compensated by reciprocal change in the amount of money in circulation if money is to remain neutral toward prices.” Thus Hayek (1933b, pp. 164-65) held that an increased public demand to hold (i.e. to “hoard” or not spend) deposit balances would have undesirable deflationary consequences unless offset by deposit expansion:

Unless the banks create additional credits for investment purposes to the same extent that the holders of deposits have ceased to use them for current expenditure, the effect of such saving is essentially the same as that of hoarding [of base money] and has all the undesirable deflationary consequences attaching to the latter.5

Hayek (1937, p. 93) was as strongly opposed to contraction in nominal income as he was to excessive expansion:

Whether we think that the ideal would be a more or less constant volume of the monetary circulation, or whether we think that this volume should gradually increase at a fairly constant rate as productivity increases, the problem of how to prevent the credit structure in any country from running away in either direction remains the same.

Hayek’s ideal (ibid.) was not a do-nothing monetary policy but “an intelligently regulated international system.”6

Do note that when talking about the 1929-33 banking problems it is with a fixed value currency.  Thus a 'run on the banks' means that the currency is being taken out of circulation.  Thus both M (the amount of money) and V (its movement through the economy) are lowered simultaneously as there is less of it to lend as more of it moves back to the individuals that removed it from the banks.  Shifting some reserves from the vaults and into circulation makes sense with this, so long as it is still a fixed value currency as this is a replenishment of lending stocks.

This is a description of a liquidity problem.

Today there are investors not investing money, and individuals who are paying off debt (a good thing) so as to be more solvent in their daily lives.  There is plenty of money to lend, there are very few people wanting to borrow it.  The borrowing problems are from the instability, and if low cost loans are not an incentive to borrow money at its current value, then how will decreasing the value of it make it attractive to borrow?  In theory, yes because you will pay it off with devalued currency. That devaluation trend will shoot the original investment value to hell in short order: that investment you make in plant, equipment and materials will be worth less tomorrow and you will then have to charge more for what you are doing which causes an inflationary spiral.  Pumping money in to 'prime the pump' makes everything more expensive in the short and long run, and while loans can be 'paid back' your living standard declines unless your wages chase the increases in cost... which also add to the inflationary spiral.

This is the opposite of 'stabilizing' a currency which could only be done with a fixed value currency, and then in relatively small amounts.  With a non-fixed value currency the ability of all that money to have a real world value decreases, thus this is the effect of decreasing the value of M even when increasing the number of notes in circulation.  Worse, still, is if that amount then is not used for borrowing, because borrowers don't see how they can pay it back lacking things like jobs, and if employers don't borrow it because they have no idea what fiscal, monetary, tax, and social policies will do to them in weeks, months and years, then it just sits there without adding to V. 

During a major economic downturn with a non-fixed value currency, that downturn, itself, needs to be corrected for via the simple expedient of letting things continue via the rule of law: that adds stability to the markets as well known processes will continue and assured outcomes are understood.  Doing anything to try and 'prime the pump' with a non-fixed value currency runs the high risk of not encouraging economic growth (due to uncertainty) which means that you do not lower unemployment (via marginal production expansion) and that prices go up because of inflation.  The word coined for this: Stagflation.

And you get that when the government still has some solvency left to it, as was the case in the 1970's.  Today the US government is insolvent, and unable to make its bonds attractive due to the amount of debt and structural costs of government spending on entitlements, the military, and the entire federal bureaucracy that stretches from medication safety to subsidizing sugar producers to paying for entire Departments that can't improve the criteria of what they were made to do one iota, like Education.  That is why the government now has trouble selling bonds: we are overburdened with too much government trying to do too much and it is costing us all dearly.  A non-fixed value currency adds to that by giving an illusion that doing something to loan rates, changing criteria for lending, inflating money supply, indeed a host of things added in since 1911, will actually allow the government to better 'regulate' the economy.  By all of its activity, however, it has done just the opposite.

What will QE2 get us?  Stagflation, at best.

Why? The unsettled economic climate means no one can forecast the economy as those in government try to 'regulate' it from positions unattached to the economy for political reasons.

What is the answer? 

1. Announce a change to a fixed value currency, exchange current notes for gold backed ones on a 10:1 basis so everyone can just move the decimal point one place.  This will require new bills and coins, many struck from gold and silver.  At that point an ounce of gold might be around $100, which sounds about right for fractional quantities.
   
2. Keep 'entitlements' like SSA for those in the system, end it for those not in it, remove the 'retirement age' and admit that 'retiring' is best planned for by individuals not governments.  End FICA and fund the remains directly from tax revenues.  This is a major part of the insolvency problem.
   
3. Remove Medicare/Medicaid by adding them up, dividing by 2 and block granting that to the States and phase it out over 5 years as a payment.  Remove all subsidies for medical care via the tax code.  This is the other major part of the insolvency problem.
   
4. Stop the federal spending by shedding government agencies and functions wholesale and selling off the remains. What the government is actually required to have is short: State, DoD, Commerce, US Coast and Geodetic Survey, a Mint, USPTO for limited duration patents, copyrights and tracking trademarks, and a much downsized IRS.  This gets some liquidity into the system for government to operate and pay off our debts.   This includes the Federal Reserve, Fannie, Freddie, Ginnie, Sallie, SEC and a host of other 'regulatory' agencies that are nothing but political means to meddle in the economy.
   
5. A balanced budget amendment that requires the American People to directly sign off on deficit spending.

Then you can do all the fixed value currency analysis you like.

Yes, this would be wrenching to us, conceptually.  But it would offer firmness of process, an understanding that nothing is 'too big to fail', that the rule of law guides what happens at all points in the economy, that politicians should not try to 'regulate' things they don't understand and then 'fix' their 'regulations' with more ill-founded political beliefs, and that the best people to decide what to do in the economy are those that make it and run it at the lowest level.  Their election to do so was pretty simple: they got a productive job.  Politicians, not so much.

The Presidential race at the cusp

This election year, before the race is decided on the Democratic Party side, is shaping up to be a race continuing historic trends in the US electorate.  Consider the widely viewed CW on each of the candidates, not what the CW says about their chances to win, but their supporters.

Hillary Rodham Clinton (D) - Her base of support has been increasingly white. middle to lower class, and hispanic, thus drawing on the 'Identity Politics' that the Democrats have inflicted on the population.  Currently she is losing on that base and, with help of her husband, is creating more of her historical negatives which, at best, never reached beyond 47% Nationwide.  Her popularity as a campaigner has drifted that downwards towards 43% and, perhaps lower.

Barack Hussein Obama (D) - His base is characterized as black, young affluent whites, and college educated.  By pressing forward no program or policy, he remains a cipher, and each time he utters an idea that does have some basis in reality, like the need to attack Pakistan, his base shudders.  His fragile coalition depends on platitudes and having a greatly disliked opponent and saying *nothing* that will damage his nascent base.

Thus the Democratic side is breaking into distinct factions between race and class with the shares apportioned between them.  Minorities are over-represented in the Democratic Party and, thus, hold a higher sway there than in the electorate at large.  The class breakout has always tended towards poor to middle class with a very small 'intellectual elite', making up less than 1/3 of the entire party.  Hillary Clinton, then gets white middle class-poor (15%), hispanics (~18%) and a smattering of party apparatchiks beholden to the Clintons (~5-10%) for a rough total of 43% of the Democratic Base.  Flipping those numbers Obama gets the black vote (10-15%), upper class whites (25%) and a smattering of the 'new' party machine from Soros and other rich fundees who seek to replace the Clinton apparatchiks (~5-10%) for ~50%.  Thus the break-out and edge go to Obama in the race

John McCain (R) - While being the presumptive nominee, John McCain is facing problems within the Republican Party.  I looked at the Three Factions of the Republican Party and how the McCain nomination is splitting one faction (Social Cons or SoCons) down their amalgamation lines between Christian Right and Traditionalist Conservatives. 

John McCain's problems are coming from the Traditionalist Conservatives with more than a few Fiscal Conservatives (FiCons) joining in that demurral. 

Even among SecCons (Security Conservatives) there is some whispering between the NeoCons and more traditional faction that grew up around Ronald Reagan, seeing limited engagement as key to stressing US power by using it rarely.  While this is the smallest overall faction (say 15% of the whole) the breaking of the NeoCons and Traditionalist Hawks (those that remember a strong defense and use it sparingly) splits it into 10%/5%.  That last 5% remembers the 'peace dividend' and working against it, to keep the Armed Forces up to size and speed as we did not know *what* the post-Cold War world would look like.

FiCons, however, may applaud McCain's 'anti-earmark' views, but have great problem with the 'budget busting' programs he signed on to not only in the last 10 years, but going to his first years in office.  Nor has John McCain carried through with those FiCon views of restricting spending.  Increasing the size of government is seen as a negative when not coupled by methodology to slow government growth: either by direct cuts to government or creating a fiscal atmosphere where the economny outgrows the government.  John McCain's record is breaking the FiCons (perhaps as much as 45%) into a 35% support base that will follow any Liberal views so long as it can get economic growth higher and 10% that have seen only continued growth in the budget and John McCain offering no leadership from the Senate on actually cutting things other than DoD.

Amongst the Christian Right, John McCain is also seeing some problems crop up as his ability to work with Liberals seeking to try and regulate morality is not only not a *plus* but a negative.  Thus out of the remaining 40%, this group has about half of that (20%), which has been represented by the Big Government views of Mike Huckabee.  He has been fighting it out for McCain's FiCons and trying to get any Traditionalist support that he could.  Here that worrying problem of working with Kennedy, Feingold and Lieberman, will damage some chances for McCain.  That could be as bad as 10%/10% on the pro/anti view.

Traditionalist Conservatism is the largest problem for John McCain as the views held there of small and restricted government, low taxation to remove burden from individuals (not necessarily businesses which is a FiCon view) and the expansion of government regulation with John McCain helping that, brings this group into stark relief.  Mitt Romney using a FiCon form of Traditionalism gathered this 20% to him and found his outreach to Traditionalist Hawks gaining some ground which made the FiCons a three-way draw with those that have no SoCon views. 

Thus there is a solid 45-55% backing of McCain from the Rockefeller Conservatives, NeoCons and some Christian SoCons.

The solid party backing that can be expeted, per candidate (looking at either of the Democrats winning their nomination):

Hillary Rodham Clinton (D) - 45%

Barack Obama (D) - 55%

John McCain (R) - 45%

That leaves the Independents - those that are voting, that is, and more on that in a bit.  Here each party has garnered 10-20% support base over the years and the final 10-30% coming in as 'tie breakers'.  This section of the population has enjoyed 'split government' and since the 1980's and tends to vote in a way to break up single party alignment of the Executive and Legislative branches.  If the 2006 Legislative elections are any key, here, they point to a continued division by electing a Republican for President.  If that is not predictive, however, a Democrat, even with so many Republicans retiring this year, faces a social conservative backlash in their own party, as seen by the 2006 Freshman class.  Winning a majority has not only not *helped* the Democratic Party, but has actually hurt it through incompetent leadership in the House and Senate.

The final key to looking at the electorate is throwing away the idea of a '50/50' Nation.  Historical trends, as I have examined, point to another concept entirely - that of a 30/30/30/10 Nation or even a 30/30/40 Nation with the first two 30% being the two parties.

The above taken from US Census datasets.

These trends start with the entry of the 1946 'baby boom' nearing voting age (prior to the Amendment moving it down to 18) and there was already a downward trend in voting participation in the US prior to that.  The post-1968 Democratic Convention is most telling as a political turning point in voter participation in Presidential Election cycles and in their confluence during the Watergate years. Both of these graphs demonstrate the concept of 'regression towards the mean' where a mean, average slope is held across temporary ups and downs in the actual data points.

For that mean slope to be held to, the expected participation rate of the 2008 Presidential year is not one that will outdo either of the past few elections and possibly exceeding the downward trend seen in 1996.  By putting the two parties at 30% each of the population overall (including leaning independents) there is substance and backing to the concept that a minimum of 40% will not show up this year and may, actually get to 50%.

This is an artifact of the two party system which endeavors to have victors turn-off so many of those that do not *win* and make them non-voters.  That did not work well past 1968, however, as the solid Democratic post-War majority fizzled out in the early 1980's as more voters walked from the Democrats than the Republicans.  While one could still 'win elections' it was only amongst those committed to participate and that commitment has been the target for almost 40 years.

For the Democratic candidates, then, there is a serious move to shift emphasis away from white blue collar to middle class voters and hispanic voters to black poor and middle class voters and white elite upper class voters.  Even as much as a 20% drop in the 'losing' side means a 2-5% drop in the turnout of the electorate coupled with some slight drop amongst the hardcore independents that sometimes lean Democratic.  That, alone, will move the next Election to 56-53% turnout.

On the Republican side, the Party that promised so much to its Conservatives is in the hard bind of having had control of Congress for over a decade and simultaneous control of the Executive for 8 of those years and accomplishing *none* of the goals it had set out to do in 1994 and, before that, with Ronald Reagan in the 1980 election.  Welfare reform was only garnered by waging a public campaign to restrict it and demonstrate valid reason for it that appealed to a broad spectrum of Americans... and it was accomplished with a Democratic President.  Since then the Party has broken its agreement to work for those things it set out to do, leaving it, now, with much of its pre-Reagan base of a 45-55% John McCain.

These Traditionalist Republicans, ranging across from the Social through the Fiscal and Security side will see the Democratic Party as an anathema, and John McCain no better than, say, Sam Nunn.  Unfairly to some degree and most will hold their noses and vote for McCain, but many will *not*.  Even a 2% walkout along with similar affiliated hardcore (unleaning) independents will lower the election turnout to 56% and possibly lower if John McCain cannot explain his past work on 'budget busting' appropriations, helping to over-ride Reagan's vetoes, his actual views of the structure of DoD and his work to remove personal liberty via Campaign Finance Reform.  Many Conservatives will be paying attention to this as the 'Straight Talk Express' has not talked in any way 'Straight' about the Moderate to Liberal views of their candidate.

Together the two parties, then, are looking to drop voter participation by a  minimum of 4% and up to 10% depending on the campaign on each side.   This then puts the election within the traditional mean range of 48-54%.  As there is no feeling of a 'landslide' about to happen or an incredibly weak President going to be replaced by anything better (and in incumbency rate in Congress guaranteeing nothing will happen there of major import) that puts a close fought election victory in the 24%-27% range... slowly whittling down to those committed to party, personality and the ideologies the second bring to the first via elections.

How do you choose amongst politicians:  I look at their record, the historical context of that record, what they say about that record and if it jibes with the first parts, and when they have no record, they need to be put in the brine for a bit more seasoning at a lower level or have some demonstrated and absolutely compelling capability beyond that to take on Executive responsibilities.

They must...

Do as they Say.

Say what they Mean.

Mean what they Do.

Then I will look at ideologies... when those first three fail, then I am stuck with ideologies and the worrying view is that they won't carry through, won't mean it or apply themselves to it to get the job done.  And the days of running away *from* your record is over.  And that is what all three of these candidates wish to do... plus none can actually adhere to the basics of Doing, Saying and Meaning.  Of course we run those folks out, first, as they are dubbed 'unelectable' or have no 'fire in their belly' or just aren't 'good candidates'.  Which is why many of your Fellow Americans will not be voting this year.

Look at the numbers.

This is what we have bought with 'two party politics'.

Follow the money... where?

Victor Comras at Counterterrorism Blog has a new post up on Anti-Money Laundering work that is being amalgamated across a few Federal Agencies. And the key paragraph is, thankfully, right at the top, so that we can get an idea of the scope of this:

Crafted by the Department of the Treasury, along with Justice, State, Homeland Security, the Federal Reserve, Comptroller of the Currency, and the Federal Deposit Insurance Corporation, it sets forth a new Administration focus on money laundering as a direct threat to our national and economic security. Previous AML strategies had co-mingled, and encompassed, combating both money laundering and terrorism financing. But, this strategy tackles money laundering independently. As it contains no call for additional resources, it may portend a shift in resources from terrorism financing investigations to new AML priorities. This could have a negative impact on the Administration’s ability to effectively address new and emerging terrorism financing schemes and mechanisms.

You mean they haven't been doing this? I have taken a basic look at some of this before with The Web of the supernote, which looks at how illegal drugs, terrorist funds, third country bank transfers, technology transfers and counterfeit $100 bills all interplay in a pretty nasty web with multiple lines of connection between Rogue Nations, terrorist groups and standard black market work. That was built upon the basic understanding of connections between and amongst terrorist groups in Template of Terror. It is that basic interconnectedness that is the problem, with new institutions rising and falling that they will utilize to do their work. The reason I looked into those is because of the informal money networks that grow up around small communities and their larger scale interlinking globally and with organized crime. It is this sort of network that is specifically mentioned by the 9/11 Commission Report on p. 171:

Al Qaeda frequently moved the money it raised by hawala, an informal and ancient trust-based system for transferring funds. In some ways, al Qaeda had no choice after its move to Afghanistan in 1996: first, the banking system there was antiquated and undependable; and second, formal banking was risky due to the scrutiny that al Qaeda received after the August 1998 East Africa embassy bombings, including UN resolutions against it and the Taliban. Bin Ladin relied on the established hawala networks operating in Pakistan, in Dubai, and throughout the Middle East to transfer funds efficiently.Hawaladars associated with al Qaeda may have used banks to move and store money, as did various al Qaeda fund-raisers and operatives outside of Afghanistan, but there is little evidence that Bin Ladin or core al Qaeda members used banks while in Afghanistan.

While the hawala system is Middle East indigenous, most if not all poor, rural, non-industrialized Nations have similar that grow up within and amongst them. Notice that this is 'networks' as in plural or multiple networks with differing levels of connectivity between and amongst them. In the notes on the footnotes for the report this is looked at a bit more:

A hawala, at least in the “pure” form, transfers value without the use of a negotiable instrument or other commonly recognized method for the exchange of money.For example, a U.S. resident who wanted to send money to a person in another country, such as Pakistan,would give her money, in dollars, to a U.S.-based hawaladar.The U.S. hawaladar would then contact his counterpart in Pakistan, giving the Pakistani hawaladar the particulars of the transaction, such as the amount of money, the code, and perhaps the identity of the recipient.The ultimate recipient in Pakistan would then go to the Pakistani hawaladar and receive his money, in rupees, from whatever money the Pakistani hawaladar has on hand. As far as the sender and ultimate recipient are concerned, the transaction is then complete.The two hawaladars would have a variety of mechanisms to settle their debt, either through offsetting transactions (e.g., someone in Pakistan sending money to the United States using the same two hawaladars), a periodic settling wire transfer from the U.S. hawaladar’s bank to the Pakistani hawaladar’s bank, or a commercial transaction, such as the U.S. hawaladar paying a debt or an invoice, in dollars, that the Pakistani hawaladar owes in the United States. Hawalas typically do not have a large central control office for settling transactions, maintaining instead a loose association with other hawaladars to transfer value, generally without any formal or legally binding agreements. See Treasury report,“A Report to Congress in Accordance with Section 359 of the [USA PATRIOT Act]”Nov. 2002;Treasury report,“Hawala:The Hawala Alternate Remittance System and its Role in Money Laundering,” undated (prepared by the Financial Crimes Enforcement Network in cooperation with INTERPOL,probably in 1996).

Basically a homegrown system with some high level interconnectedness. It is typified by: low overhead, low accountability, low traceability and flies below the large funds transfer systems that banks use. By being a person-to-person system that is arranged on the fly, the ability of National governments to regulate or even track it is limited. Note that commercial transactions, such as purchase of goods can, itself, be done through yet another party with payment in one Nation and delivery of goods in another without the funds originating in the second Nation. This is a distributed funds system that is not highly amenable to investigation as it has multiple links and sources between each point on the network. Further the intermingling of funds between various sources makes it virtually impossible to distinguish low funds transfers that are more or less legitimate between individuals, and distributed funds transfers for terrorist or criminal operations.

A similar operation based on pesos is being looked at from the PBS report Mr. Comras is citing: US drug dealers go to peso brokers, the brokers would work with smugglers to get goods into Columbia without documentation (also known as the 'grey market' goods system), the goods are sold in Columbia for pesos and the broker gets reimbursement and then pays off the recipient in Columbia in pesos after taking the middle-man cut. A bit more complex than the hawala system but it encompasses the same person-to-person knowledgebase and is very difficult to crack and open as it is transnational in basis.

These sorts of systems create 'artifacts' or strange happenings that get noticed, such as individuals of low means getting a continual supply of money or goods and yet not having the income basis for such. Such artifacts could represent such things as: stolen US cars showing up whole (not piecemeal and reconstructed) in Iraq for use by terrorists, the utilization of front companies to mix in smuggling containers with legitimate goods, or the outright sale of goods to those that are prohibited from getting same.

More worrying, however, is things like credit card fraud as seen in this 24 AUG 2006 Jakarta Post article:

Police arrested the other suspect, Agung Setyadi, on Aug. 16 in Semarang, Central Java. Setyadi is accused of smuggling a laptop to Imam Samudera while he was detained in Krobokan prison in Denpasar, Bali, after being sentenced to death for his role in the 2002 Bali bombing

"Setyadi used a delivery service to send the laptop to the address of an official at the Krobokan prison, who then forwarded it to Imam," said Golose

He said Imam used the laptop to communicate with Setyadi and other militants about how to use the Internet to carry out credit card fraud to fund terror attacks, before he was moved to the high-security Nusa Kembangan prison in October following the second Bali bombing on Oct. 1, 2005

Imam also allegedly engaged in intense communication with unidentified people before the second Bali attack, but police have yet to find evidence he was in contact with anyone directly involved in that bombing, added Golose

The police said they seized a laptop along with its warranty card from the suspected terrorists, as well as two cell phones, three Subscriber Identity Module (SIM) cards, one flash disk, one Bluetooth USB, two hard disks, six CDs, one CD box, two bank books, and several documents released by Osama bin Laden, plus his picture and a photograph of Setyadi.

Simple credit card purchases of low cost items used to sustain terrorist networks and make them less traceable *also* work just as well for the informal funds transfer networks. Counterterrorism Blog has this lovely entry for Hezbollah agents working in the US:

* U.S.A. v. Mohamad Youssef Hammoud et al., Charlotte, North Carolina: 25 individuals charged in connection with cigarette smuggling, money laundering, credit card fraud, marriage fraud and immigration violations. Four individuals were charged with providing “material support or resources to a foreign terrorist organization,” Hizballah, specifically providing “currency, financial services, training, false documentation and identification, communications equipment, explosives, and other physical assets to Hizballah, in order to facilitate its violent attacks.” In 2003, Mohamad Hammoud was sentenced to 155 years in prison, while his brother, Chawki, was sentenced to 51 months.

* U.S.A. v. Elias Mohamad Akhdar et al. (pdf), Dearborn, Michigan: 11 co-defendants charged with racketeering related to the Charlotte, North Carolina scheme. In January, 2004, Akhdar was sentenced to 70 months in prison and was fined over $2,000,000 after having pled guilty in July, 2003.

* U.S.A. v. Imam Mohamad-Musbah Hammoud, et al., Michigan, Canada (Ontario, Quebec), Lebanon: In March, 2006, 19 co-defendants charged with a racketeering scheme involving contraband cigarettes, counterfeit Zig Zag rolling papers and counterfeit Viagra, counterfeit cigarette tax stamps, transporting stolen property, and money laundering. A percentage of the profits derived from the illegal enterprise were given to Hizballah. On July 7, two of the defendants, Imad Majed Hamadeh and Theodore Schenk, 73 pled guilty (pdf). Hamadeh and Schenk face a maximum possible penalty of 20 years imprisonment and a $250,000 fine.

While these may be low-level operatives, note that they are *not* working alone and have some sort of contact and support system amongst them. And while the counterfeit Viagra may have been done locally, there is yet *another* source of that which is *better* than what is produced at the pharmaceutical companies. From US News & World Reports, 22 MAY 2005:

As North Korea pushes forward with its increasingly worrisome nuclear program, the Bush administration is moving to squeeze the regime by cracking down on its far-flung criminal trade, which brings it millions in desperately needed hard currency. Pyongyang has responded by diversifying its key rackets--trafficking in drugs and counterfeit greenbacks--to bogus cigarettes and pharmaceutical products, analysts say. Among the sham North Korean products seized recently: cases of Marlboros and a knockoff version of Viagra (aka Neo Viagra Youth Restoration)--said also to work for hepatitis, obesity, and pain. The regime's state-sponsored racketeering generates as much as $700 million in profits annually--equal to nearly two thirds of its legitimate exports, according to the Congressional Research Service. Seizures of counterfeit U.S. dollars alone have totaled $45 million since 1989, notes CRS's Raphael Perl. "The regime has become increasingly criminalized," he says, "and they always seem to be one step ahead of us."

North Korea is noted for limited output, but very high quality production of narcotics, knock-off pharmaceuticals, and counterfeit bank notes. This was noted in Congressional testimony on 20 MAY 2003, which also reported the movement of North Korea from standard small time supplier to wholesaler across a large number of Asian Nations. There is interconnection to criminal operations by terrorists in the US as seen from this further down in the Counterterrorism Hezbollah in the US article:

* U.S.A. v. Mohammad Shabib, Cleveland, Ohio: Federal prosecutors charged Mohammad Shabib with hiding his role in a drug ring which profits were funneled to Hizballah. Shabib, a gas station owner, had $8,000,000 in a Chicago bank account, which authorities say Shabib amassed by shipping roughly 3 tons of pseudoephedrine from Canada to California, which he would sell to Mexican gangs who would use the drugs to produce methamphetamine. (See: Amanda Garrett, “Terrorists’ Money Takes Convoluted Path in U.S.,” The Cleveland Dealer, January 18, 2004).

Actually, that is quite brazen the movement of such large amounts from North to South across the US and points to someone who actually expected to get away with the crime. But the real kicker comes from this, which now links up 'grey market' goods, organized crime and Hezbollah:

* Hizballah-linked Counterfeit Goods Ring in Los Angeles (pdf), Los Angeles, CA: Testimony of Lieutenant John C. Stedman, Los Angeles County Sheriff’s Department, May 25, 2005: “There are also indicators that some associates of terrorist groups may be involved in (Intellectual Property Right/)IPR crime. During the course of our investigations, we have encountered suspects who have shown great affinity for Hezbollah and its leadership. The following are just two examples: during the search of a residence pursuant to an IPR related search warrant, I saw small Hezbollah flags displayed in the suspect’s bedroom. Next to the flags was a photograph of Hassan Nasrallah whom I recognized as the leader of Hezbollah. The suspect’s wife asked me if I knew the subject of the photograph. I identified Nasrallah and the wife said, ‘We love him because he protects us from the Jews’. Also in the home were dozens of audio tapes of Nasrallah’s speeches. During the search, one of my detectives also found a locket which contained a picture of the male suspect on one side and Sheik Nasrallah on the other. In 2004, detectives served an IPR search warrant at a clothing store in Los Angeles County. During the course of the search, thousands of dollars in counterfeit clothing was recovered as were two unregistered firearms. During the booking process, the suspect was found to have a tattoo of the Hezbollah flag on his arm.”

* In 2003, Hizballah’s website carried a page on Hajj with Hizbollah, complete with contact information for regions around the world. The page listed a Canadian phone number soliciting Muslims interested in going on the annual pilgrimage to Mecca. Other phone numbers included Beirut; Conakry, Guinea; Sweden; Switzerland; Ivory Coast; Denmark; Sierra Leone; Togo; Ghana and Gambia for people interested living in those places.

From this is gathered a highly distributed system of contacts, money and goods interchange and flow back of funds to Hezbollah via this system. But that isn't all of it, either. When looking into Iranian influence in Bosnia, and the general intermingling of terrorists in the Balkans, this popped up from written testimony presented to the Judiciary Subcommittee on Crime, 13 DEC 2000 from Ralf Mutschke, Interpol's Assistant Director, Criminal Intelligence Directorate:

Structural links between political terrorism and traditional criminal activity, such as drugs trafficking, armed robbery or extortion have come increasingly to the attention of law enforcement authorities, security agencies and political decision makers. There is a fairly accepted view in the international community that in recent years, direct state sponsorship has declined, therefore terrorists increasingly have to resort to other means of financing, including criminal activities, in order to raise funds. These activities have traditionally been drug trafficking, extortion/collection of "revolutionary taxes", armed robbery, and kidnappings. The involvement of such groups as the PKK, LTTE, and GIA in these activities has been established.

I would like to draw the particular attention of the Committee to the Groupe Islamique Armé (GIA), considering the events of December last year. On 14 December 1999, Ahmed Ressam, was arrested near Port Angeles, Washington State, while trying to enter the United States from Canada. He was in possession of a timing device, explosive materials and false identification documents. Ahmed Ressam is known to have shared a Montreal (Canada) apartment with Said Atmani, a known document forger for the GIA. It has been established that before Ressam attempted to enter the US, he was in the company of Abdelmajid Dahoumane in Vancouver (Canada) for a 3 to 4 week period. An Interpol Red Notice was issued regarding the latter. The investigation has revealed links between terrorists of Algerian origin and a criminal network established in Montreal and specializing in the theft of portable computers and mobile telephones. The group in Montreal was in contact with individuals involved in terrorist support activity in France, and with several Moudjahidin groups who are active in Bosnia.

Subsequent to the arrest of Ressam, the Montreal police arrested twelve persons who were committing theft of valuable goods in cars in the Montreal downtown area. The proceeds of these criminal activities were sent to an international network with links to France, Belgium, Italy, Turkey, Australia and Bosnia.

The events in Canada and the United States should be seen in a wider perspective. Indeed, intelligence shows that several Algerian terrorist leaders were present at a meeting in Albania, which could also have been attended by Usama bin Laden, who was believed to be in Albania at that time. It was during this meeting that many structures and networks were established for propaganda and fund raising activities, and for providing Algerian armed groups with logistical support. The arrest at the Canada-US border in December 1999 may indicate that the Algerian terrorists are prepared to take their terrorism campaign to North America.

The GIA is a very active and deadly terrorist organization operating mainly in Algeria but which has also mounted several terrorist attacks in France, including the hijacking of an Air France jetliner in 1994 and a bombing campaign in 1995. Their aim is the overthrow of the Algerian Secular Government and its replacement with an Islamic state. They have developed large scale support and financing activities in Europe and other parts of the world. An analysis recently conducted at the Interpol General Secretariat has revealed GIA involvement in a number of criminal activities in several European countries. Although the information received is fragmented, it has been established that GIA support networks are involved in extortion, currency counterfeiting, fraud, and money laundering.

The above examples concern traditional terrorist groups with a well-defined political ideology who are only involved in organized crime on a secondary level. However, two of the main emerging threats today seem to emanate, on the one hand, from more hybrid groups who operate in highly unstable, often war-torn countries or regions, and, on the other hand, loose alliances and cooperation among different, already existing transnational criminal organizations. Albanian crime groups are highly representative of this trend.

[..]

Finally, Albanian criminal groups frequently engage in burglaries, armed robberies and car theft in Europe and the United States.

There might still be links between political/military Kosovar Albanian groups (especially the KLA) and Albanian organized crime. Of the almost 900 million DM which reached Kosovo between 1996 and 1999, half was thought to be illegal drug money. Legitimate fundraising activities for the Kosovo and the KLA could have been be used to launder drug money. In 1998, the U.S. State Department listed the KLA as a terrorist organization, indicating that it was financing its operations with money from the international heroin trade and loans from Islamic countries and individuals, among them allegedly Usama bin Laden. Another link to bin Laden is the fact that the brother of a leader in an Egyptian Djihad organization and also a military commander of Usama bin Laden, was leading an elite KLA unit during the Kosovo conflict. In 1998, the KLA was described as a key player in the drugs for arms business in 1998, "helping to transport 2 billion USD worth of drugs annually into Western Europe". The KLA and other Albanian groups seem to utilize a sophisticated network of accounts and companies to process funds. In 1998, Germany froze two bank accounts belonging to the "United Kosova" organization after it had been discovered that several hundred thousand dollars had been deposited into those accounts by a convicted Kosovar Albanian drug trafficker.

[..]

In order to smuggle their illicit products into the U.S., Colombian drug cartels began forming alliances with Mexican groups, who have a well-developed smuggling infrastructure for transporting drugs across the vast border with the United States. As Mexicans began to charge more for their services, Colombians established relationships with various Dominican, Jamaican, Puerto Rican, and African-American groups which act as smugglers and retailers for Colombian wholesale cocaine. Colombians have also formed an alliance with some of the Nigerian drug trafficking groups based on product exchange. In the early 1990s, Nigerian groups supplied heroin to Colombian drug traffickers in exchange for cocaine. Colombians were able to develop their own heroin market, while Nigerians started selling cocaine in Western Europe. During the late 1980s and early 1990s, an important alliance was formed between Colombian drug cartels and the Sicilian Mafia. Since the cocaine market in the U.S. was saturated, and because cocaine could be sold with higher profit margins in Europe, Colombians wanted to enter the European drug market. The Cosa Nostra’s well established heroin network was easily applicable to cocaine. In addition, the Sicilians had an excellent knowledge of European conditions and were able to neutralize law enforcement officials through bribery and corruption more effectively than the Colombians. From the Sicilian perspective, the alliance with Colombians was an opportunity to regain part of the market that had been lost to Chinese heroin traffickers. In recent years, South American drug cartels have been forming alliances with East European/Russian Organized Crime Groups in order to support and diversify their operations. East European groups have offered drug cartels access to sophisticated weapons that were previously not available. Helicopters, surface-to-air missiles, rocket-propelled grenades, and even submarines are on the drug cartels’ "shopping list." The East European groups provided new drug markets in Russia, the former Soviet Republics, and Eastern Europe, while consumption was decreasing in the U.S. In 1993, Russian police intercepted a ton of South American cocaine which had been shipped to St. Petersburg by one Russian crime syndicate working with a Colombian drug cartel. In another example, a Russian crime leader was arrested in January 1997 in Miami by U.S. agents for the exportation of cocaine from Ecuador to St. Petersburg (Russia) and then to the United States. In exchange for these services, drug cartels pay for transactions with high quality cocaine. East European/Russian crime syndicates and corrupt military officers are supplying sophisticated weapons to Colombian rebels in exchange for huge shipments of cocaine. Although the Revolutionary Armed Forces of Colombia (FARC) receives most of the arms, some of them are distributed to Hezbollah factions.

That is an extremely complicated set of individuals and organizations to move money from illicit drug sales and other transactions via informal and illegal networks to Eastern European and Russian mafia groups for delivery of weapons to terrorist groups in S. America. By melding criminal activities with DIY banking and informal banking, supplementing that with organized crime trafficking, including human trafficking across the US border of Hezbollah and al Qaeda agents, the entire admixture is quite deep and distributed. And almost all of this is done person-to-person with only the surfacing of money 'laundering' when needed for legitimate goods trafficking.

So here is the question: if the Federal Agencies listed at the start of this, along with DoD cannot figure out how stolen cars are shipped WHOLE to Iraq for terrorist use, then what sort of job will they do in tracking money through illegal, quasi-legal and informal funds and goods systems? Remember that the contacts now go very deep on this and the network is highly informal and distributed reaching into Russia, Syria, North Korea, Venezuela and then onwards in multiple directions to more Nations in S. America, Europe and Africa. Exactly *how* will the US Government track this stuff or even come to some basis for handling it? While the major narcotics busts of the 1960's and '70's made great headlines, they did not stop the trafficking or major mafia groups from operating. Indeed, new groups sprung up on a global basis from S. America to Central Asia to Africa.

To attack this sort of thing a basic set of Goals on Transnational Terrorism have to be developed as a Foreign Policy for the United States. That means getting *serious* on banking and goods transport within a network of verified and legitimate sources. That sort of system holds accountability for goods and money flows within the system and harshly restricting outside flows into it, if not ending them completely. To enforce this is beyond the capability of one or even a sub-set of governments and requires a distributed and effective system of individuals and companies to monitor and stop trade with terrorists and other non-Nation State enemies.

Basically, that is 21st century privateers that are accountable and *live* within this distributed system and have warrant and letters to carry out activities of a military form against those using illegitimate warfare to attack the US and its friends and allies. All of the Federal Agencies and capabilities *combined* fail at this and giving more power to the Federal government or even inter-governmental Agencies like InterPol have failed over decades to stop just organized crime. Not to speak of terrorism. This is far too complicated for bureaucrats to do, who can only point out 'problem areas and groups' but *not* how best to go after them. To combat this without heading into authoritarianism or totalitarianism requires a change in commercial and personal outlook on the part of Citizens and Governments. No Government could get this sort of deep oversight and intervention power and BE trusted with it. Because this is understanding things on a personal scale and Governmental Agencies have proven ill-equipped to do this beyond basic crime fighting. As soon as it goes Transnational, the organs fail because they are not given scope to work so as to protect Liberty and Freedom at home.

The only People we trust is Ourselves as Citizens and those that join *with* us to confront and combat this.

If we dare to.

Otherwise the Nation State will prove the end of Freedom and Liberty in either not addressing this or in taking these things *from* Individuals as abilities. And when Governments can infiltrate down to the extreme personal level, the power to do that is then unlimited and uncheckable by any institution ever designed. To confront this takes something that Government inside the US is not given to do and so must call upon those that can do it.

We the People.