Send a Message

I’ve veered from my planned offering this afternoon to accommodate a little analysis of the breaking news that Romney is suspending his campaign for the republican nomination.


With McCain over halfway to the total delegates needed to lock up the nomination, it’s hard to blame Mitt for pulling the plug on his self-financed campaign. His ‘true conservative’ mantra has failed to rally the troops, and he wants to preserve his chances to make a run in 2012 after the Democrats have had a whack at complete control of the legislative & executive branches of Government. The idea of dumping another $40 million down a hole might have been a concern as well.

McCain’s support in the GOP is extremely shallow among primary voters, and I suspect that he’ll only pick up a small portion of the Romney supporters. In spite of his daunting lead, I remain convinced that McCain could be knocked out by the right dove-tailing of events.

Johnny Rotten

In spite of the gracious welcome he got at the C-PAC speech this afternoon, Conservatives will not sign on to support McCain en masse. Some will support third party candidates, some will vote Democratic, and most will stay home. That is, unless something (or someone) comes along to offer conservatives an alternative to not voting or pulling the Hillary lever.

If you buckle and vote for McCain while holding your nose, there is clear message sent – that the party elite can call anything breathing ‘conservative’ and the great unwashed will fall in line to support the person.

You might be running the calculus in your mind at this very moment. A vote for McCain, you reason, would be a betrayal of your deep held conservative principles. But if you don’t vote for him, we might get Hillary or Obama. What’s a conservative to do?

I’d like to suggest a protest vote. How about a protest vote for the most anti-establishment Republican candidate in any of our lifetimes?

Take that, establishment

At this point, there is little chance that Ron Paul will overtake the front-runner in the GOP race to win the nomination. If your fear is that a protest vote might actually elect someone with whom you disagree (if you do disagree with Paul’s positions) on many issues, is that likely? I’m among the most optimistic historically for Paul’s chances, and I’m resigned that we’ll be making a third party run once the primaries are over. I don’t think there is a thing to worry about.

If you plan to vote for McCain in the fall, the best way to send a message to the power brokers in the GOP is to send a shot across their bow by voting for Paul in the Primary. There is no candidate more hated among those folks, and it may be the only opportunity you have to send a clear message of your disapproval of the anointed candidate. If all you do is hold your nose and vote for McCain in November, you’ve only confirmed for them that you’re willing to do their bidding without any reservations about your own principles.


And what if Paul starts to actually pull more delegates than he already has? Well, Huckabee is still in there too, and will see a bump from Romney’s exit. With the delegates split three ways, we could actually push this thing into the convention without a winner. We could see a nominee not on the slate now, and with the message sent, we might get an authentic conservative through the back door.

For that to happen, conservatives have to send a message. The establishment thinks they’ve won this war, and I’d love to see them repudiated. A vote for McCain in the primary by a conservative is a complete repudiation of our principles. Do the right thing and stand for your principles in the primary, and if we’re lucky, you’ll be rewarded for your principled stand. If McCain still runs away with the nomination, you can always decide to take a principled stand again in November.

Fed Release: Banks Insolvent

If you’ve listened to the darker ruminations on the cable news channels recently, you’ve probably heard someone say something to the effect that “the current crisis is the biggest systemic risk since the Great Depression”. I’m a high volume viewer of cable news, and I know I’ve heard just such language more than a dozen times in the last week. Given the idiosyncrasy of cable news, you might be wondering if this isn’t just today’s prevailing hyperbole to make sure you wait through the next commercial break to see what it’s all about. In this particular case, you might want to hold off on that grain of salt.

According to the recently released Aggregate Reserves of Depository Institutions and the Monetary Base, there is trouble brewing in the financial system. More specifically, it appears that our banking system, taken in the aggregate, is in fact insolvent. Get the PDF version of the report on our server here.

While I am by no means an expert at reading the Fed’s various releases, I am also not a neophyte. I’m pretty good with all things financial – good enough to know that the information contained within the report belies the conventional wisdom that the ‘nimbleness’ of the Fed has helped us avert the worst case scenario. From my reading, nothing could be further from the truth.


For purposes of this discussion, I’ll be focusing on a very narrow part of the release, specifically the first page of the report, and on that page, the first four data columns. This is the part of the data that details the reserve requirements of the banks and the actual reserves on hand. It is here that the problem becomes apparent, and amazingly, the first indications of a problem (in the data set in question) really only surfaced in December.

We’ll look at January of 2007 as an illustration of how to understand the numbers:

Jan 2007

Total Reserves – 42.171
Required Reserves – 40.665
Non-Borrowed – 41.960

(all totals in $ Billion)

So in the January 2007 period, the aggregate member banks were required to have 40.665 billion in reserve, but actually had 42.171 billion in cash reserves, an excess of 1.506 billion over the requirement. Of the cash reserves on hand, 211 million was borrowed funds, an insignificant total as the reserves were covered without the borrowed funds.

The story is similar throughout most of 2007, with borrowed funds creeping toward 2 billion in a few months; without exception, the non-borrowed funds were enough to cover the reserve requirements. Without exception, that is, until we reach December.

In December the picture changed radically:

Dec 2007

Total Reserves – 42.585
Required Reserves – 40.837
Non-Borrowed – 27.154

(all totals in $ Billion)

For the first time in the period covered by the report (and likely in many, many moons), the non-borrowed funds were insufficient to cover the reserve requirements, falling short by more than 12 billion. Also significantly, the Fed extended term auction credit of more than 11 billion in the period – and banks having to borrow to meet the minimal reserve requirements is anything but a picture of health.

sick dollar

Of course, the December numbers came before the Fed loosened it’s policies in earnest, so the more optimistic among us might expect to see an improvement in bank performance in January, as the Fed’s ‘nimble’ response to the burgeoning economic crisis work their way into the broader credit markets.

Such optimism would not be warranted. In the bi-weekly summary released for the two-week period ending January 2, the amount of non-borrowed funds fell to 8.7 billion, and two weeks later (Jan 16) to just 198 million. In the most recent summary ending January, the non-borrowed portion is a negative number, meaning that all of the reserve requirements are borrowed, with an additional 8.7 billion borrowed to cover continuing operational needs. In other words, they are – in the aggregate – insolvent.


In spite of my profound disdain for the concept of central banking, I’ll hold off on an ideological diatribe for the moment. The situation is incredibly tenuous, and I have every reason to believe that the situation will continue to deteriorate. This is not a philosophical exercise; it is tragically real. And those guys on the cable news shows suggesting that this is the biggest financial crisis since the Great Depression? They just might be wrong – this one has the breadth and depth to dwarf the Great Depression.

pray for ben

If you’re inclined to pray, maybe you’ll want to remember Ben Bernanke in your prayers tonight. In spite of my objections to the fundamental premise for a central bank, they’ll have to navigate us through this crisis in the short run. The only question I’d ask is this – when this thing finally comes to a head, will we just sweep the mess under the rug and repeat the process, or will we start to ask ourselves if a system based on sound money wouldn’t be a better solution? We need a better solution.

Governments are not equipped to rationally control a fiat currency, and bankers will always manipulate it for the purposes of the financial sector of the economy. I don’t suspect we’ll see an end to the Fed or a return to non-fiat currency anytime soon. Sound money is only good for the average working (and saving) man, and we all know how easy it is to get people to vote against their interests. We have a central bank, don’t we?

It Was a Grand Ole Party

Last one to leave – turn out the lights.


I’ve voted Republican most of my life, though in the interest of disclosure, I admit that I’ve always been more of a radical constitutionalist. Having been a vote that the GOP could solidly count on for 15 years, I broke with the GOP in 2004, opting to vote for Michael Peroutka for President in the general election. At that point, my exasperation with the party had grown so great, I voted for the socialist Sherrod Brown over Mike DeWine. I wasn’t a Brown supporter by any stretch, but given the massive lead Brown had, I figured it was a way to telegraph my disapproval with the direction in which the party was oriented.

I am, sad to say, ruling out a vote for any GOP candidate in the 2008 election season, excepting for the outside chance that Ron Paul will be at the top of the ticket. If I have to hold my nose and vote for socialist statism of one stripe or another, I’ll select the pure socialists who make no hedges about their intentions, and at least offer a person not interested in invading more sovereign nations an audience. A vote for the Republicans has become a vote for more war and increasingly entrenched fascism.

I’m under no illusions about my decision. I am not deluded to believe that my idealogical home is in the Democratic Party – I know that it is not. I am also not sending a message. I am done with the Republican Party, and hope to see it die an unceremonious death this election season. To me, it is the electoral equivalent of a mercy killing.

I held out great hope as the campaign season started. For the first time in my voting life, there was a candidate who was embracing the historical positions that had caused me to first self-identify as a Republican. But it appears that the GOP voters have rejected conservatism, opting instead to redefine what I understood it to mean to be a Republican.

I say “bring on McCain“. Regardless of the opponent, I predict a bloodbath at the polls, and not just at the top of the ticket. I predict that this election will go down as the closest corollary to the Little Big Horn on record. Not only will the Democratic nominee win an electoral landslide, the coattails will be long enough to hand the Democrats a daunting governing majority.

I’m not anxious to see the days of democratic domination return, but I am even less anxious to see what currently passes for conservatives to control the apparatus of government. While both parties are controlled by the neocons and their world-dominating agenda, there remains a truly restraining populist bent among the rank and file in the Democratic party.

In all likelihood, Dr. Paul will be on the ballot in one way or another in November, allowing me to stave off the lesser of two evils analytics. But if I had to pull a major party lever in November, I’d go with the lesser of those evils. Go Hillary (ouch!), and good riddance GOP.

The Terrorists are Winning

There are few certainties in this world, but one that I feel pretty safe predicting is that I will be called anti-American, a terrorist supporter or worse for what I intend to write in this entry.

It isn’t that my logic is flawed, or that I am showing a bias in my analytics. If such exists, I invite the reader to make it known. No…. it is because I refuse to suspend reason and subscribe to the orthodox groupthink demanded in political discussion today.

My contention that the terrorists are winning in no way denotes support of their cause, their ideology or methodology on my part. It comes from a dispassionate analysis of the available evidence, and I am in fact decidedly opposed to their cause.


To determine whether my hypothesis is true, we must define ‘winning’ in this context. Terrorists are not standard combatants, and do not try to capture or hold strategic geography. They do not act as normal combatants, and their goals are atypical as well. Terrorism in the middle eastern context might be better defined as clandestine guerrilla warfare. Winning for these ‘terrorists’ is for the invaders to pack up and go home. There are no territorial gains to be realized, outside of regaining sovereignty over lands occupied by the invading force.

Given our commitment to staying in the region for generations, the forces assembled in opposition to us must necessarily take the long view in their war. They face a prohibitive deficit in relative armaments, and cannot drive out the occupying troops with force. That would be a suicide mission, so they employ the only avenue available to an inferior force – guerrilla warfare.


Outside of the World Trade Center bombing in 1993 and the subsequent events on 9-11, there has been very little that can be objectively described as terrorism aimed at America. While the bombing of the military barracks in Lebanon, the USS Cole bombing and similar actions may be tragic, they are valid strikes against a military target. I am not advocating or supporting the strikes in any manner, mind you, but recognize that in a war, there will be deaths. Every wartime death doesn’t equate to terrorism.

If you accept my premise as laid out here, then we are left with two substantial actions that on their face appear to meet the criterion necessary to be ‘terroristic’ in nature. For purposes of discussion, here is the operative definition:

the calculated use of violence (or the threat of violence) against civilians in order to attain goals that are political or religious or ideological in nature; this is done through intimidation or coercion or instilling fear


It is interesting that both instances occurred in the same place, to a location that can objectively be called the center of the American economic system. It is this financial system that affords the United States the capital to wage it’s wars and occupy most of the world. A compelling case can be made that these acts are not in fact terrorist in nature, as they were attacks on legitimate targets for an entity at war with America. That doesn’t address the morality (or lack thereof) of their battle, so please spare me the knee jerk accusations of being a ‘Islamo-fascist sympathizer’. There will be plenty of time for that. ;)

You don’t agree? Was the United States’ bombing of industrial centers in Berlin and Dresden during World War II terrorism? What about the “weapons of mass destruction” used on Hiroshima and Nagasaki? I trust that once you get past any ridiculous notion of American exceptionalism, you’ll agree that the ‘twin towers’ were in fact legitimate military targets. If not, you’re better at rationalizing away logical arguments than I am. When Osama Bin Laden was fighting the Soviets in the late 70’s and early 80’s, he was a freedom-fighter worthy of our support. What has changed that makes him no longer a freedom fighter, except the entity that he now fights?

I’ve veered down this intellectual side road to make the case that the ‘War on Terror’ can be better understood as a guerrilla war being fought by indigenous peoples in the middle east, who thus far have actually killed far fewer civilians world-wide than we have in either Iraq or Afghanistan. Understanding the reality of the situation is critical if we ever hope to end the war that is ongoing. It is this unwillingness to take an unfiltered view of the entire situation that has caused America to lose face in the world. We are seen as hypocritical, supporting the freedom fighters when the occupiers are Soviet, but feigning righteousness when our own occupying forces are targeted.

Now, some bright reader will surely note that there are car bombings in civilian centers in Baghdad and Kabul, and they would be correct. This wouldn’t provide a justification of our military presence there, unless you can explain why American Marines don’t patrol the streets of Jakarta and Manilla as well. But most of what I’ve said to this point is not germane to the conclusion which I am attempting to support: namely, that the ‘terrorists’ are winning.

But – you may take note – I’ve basically said that they aren’t terrorists. They are guerrilla warriors, right?

Here is another variation on the definition of terrorism:

The use of violence and threats to intimidate or coerce, esp. for political purposes; The state of fear and submission produced by terrorism or terrorization.

There is certainly terrorism afoot in the United States, but not the kind that can be measured with a friendly color-coded scale. It is not about bombing civilian targets, and it is not being waged upon us by Osama Bin Laden. The chief ‘terrorist’ occupies the highest elected office in our land, and his ‘lieutenants’ fill the halls of many a big, stately building in Washington DC. (Now would be the time for cat-calls and ad hominems.)


Who can argue that our government doesn’t use intimidation or coercion for political purposes, with violence the ultimate ends for non-compliance? It is not just in our heavy-handed foreign policy, but in domestic policy as well. We are inundated with warnings that there lurks around every corner a bad man who wishes to do us harm; we are encouraged to acquiesce to demands from the government for greater unchecked access to our personal communications and general invasions of our civil liberties, and dissenters face penalties ranging from ridicule to imprisonment. There are few more effective acts of coercion than imprisonment, and the result of these activities is undeniably a state of fear among the general populace.

The people who are presented to us as terrorists can never hope to defeat us militarily. We have the most advanced weapons on the face of the planet, and they are using pipe bombs. If we are of a mind to deny them to ever strike out at us, we have the means at our disposal. But they are critical props in the real terrorism that is ongoing; the terroristic campaign to forever alter the understanding of what rights are fundamental and beyond the scope of government to infringe is raging. At this moment, the terrorists in Washington are winning.

The Oligarch’s Stooge

In tonight’s California debate, McCain again displayed his utter lack of even a rudimentary understanding of economics. His shortcoming is somewhat muted since it is shared with two of the other combatants, all of the moderators and most of the assembled audience.

Hey Moe!

About 31 minutes into the debate, Volcanic Johnny is sure that there is someone to blame criminally for the credit crisis that is currently wreaking havoc in our financial markets. The problem (he says) is that we aren’t regulated enough (I know…. this from the Reagan conservative). He’s just sure that a new oversight agency and more forms to sign when you get a loan is what can prevent future crises. While it is typical of his reactionary outlook and illustrative of the crisis-oriented narrative justifying his candidacy, if he is really interested in understanding the problems, he should look at the Fed policy on interest rate targets during his Senate tenure that made money cheap and caused these problems.

lead crook
Bernanke talks over the head of the legislators who are looking out for us….

When money is cheap, the banks and financial institutions have access to inflated amounts of capital. That translates into a surplus of available capital for loan, and drives the interest rate down. The reduced rates fuel the borrowing activities of businesses and households. Loans are ‘securitized’ and sold off in large bundles, and ratings agencies stamp the stuff ‘AAA’. This allows the proceeds to be returned to the lending institutions, and loaned out again. And securitized again…….

The ‘virtuous circle’ is repeated endlessly. To a person who makes a living in the financial markets, wealth flows in. Every mortgage has a fee for the broker. The securitizing agency gets it’s cut, and the banks make their loan fees. Real estate agents benefit greatly; Stock and commodities brokers have huge windfalls of fees as the surplus money chases the finite assets.

The multiplication of wealth is frenetic, fueled by the cheap credit made available by the central bank, and benefiting the corporate interests, particularly in banking and financial sectors. The lower classes – those who ‘work hard, not smart’ (or lack access to the large pools of cash needed to work smart) – get left behind, as the relative wealth of the financial class balloons to embarrassing proportions.


This is the supreme evil of central banks. It is the engine of corporatism. It allows the financial class to amass an insurmountable control over the nation’s wealth, which facilitates the control of all other substantial assets. It allows the manipulation of our mass media (including the bloggers supported by partisans to spout the party line), functional control of the productive capacity of the nation and the ability to buy every political office of any consequence.

Our minds are pacified through the media as they control the parameters of acceptable debate, and we are goaded into fighting over trivia. And while the great unwashed toil away in fear of the financial calamity they worry is around the corner, the central bank powers the corporatist oligarchs through good times and bad.

John McCain asks if there is anyone criminally to blame. Sure there is, but they are long since dead. Representative Carter Glass, a Democrat from Virginia and Senator Robert Latham Owen, a Democrat from Oklahoma were the lead sponsors on the bill that saw 341 Representatives and Senators vote to hand over this incredible power to the so-called ‘money interests’.
[Federal Reserve Act of 1913]

The folks who pushed low interest, easy money loans at the local broker’s office? They are just doing what the Federal Reserve wanted them to do, implicit in it’s loose monetary policies. The banks who underwrote it; the brokerages that securitized it; the ratings agency that gave it the big thumbs up? Same answer. The problem is the Fed, but the responsible parties are those elected representatives of the people who allow this travesty to continue.

Now I think it’s time for some straight talk.

Senator McCain. The closest thing I can find to criminal culpability is the corrupt political class who performs the bidding of the oligarchs; who feed their wealth from manipulation of monetary policies, and not from their own labors or ingenuity. I can’t blame the oligarchs alone – who wouldn’t take all of the material wealth that they can legally lay hand to? The criminal culpability, if such an animal exists in this situation, lies at the feet of our legislators who have abdicated their responsibility to control our monetary policy by farming the proverbial chicken coop out to the fox – and who haven’t even kept up with the responsibility of keeping an eye on the fox! The problem – my friend – is you, along with your peers who feign to represent the interest of us chickens. Quite frankly, us chickens is tired of you.

How’s that for straight talk, my friend?

And Now, What You’ve All Been Waiting For….

As noted in my post from last night, Guiliani is out as of today. His endorsement of McCain is illustrative of the inevitable coalescing of consensus that always comes when the establishment fears losing their grip over the process. They needed a split field long enough for one of the horses to float to the top of the heap, at which time the also-rans are unceremoniously pushed aside, lending their support to the consensus candidate. For today, that candidate is John McCain. I suspect after Super Tuesday, it will once again be Romney.


Tonight at 8, CNN will televise the California debate, live from the Reagan Library. As the field winnows down, expect to hear more from Dr. Paul. While he may not get more time proportionally, he’ll get more time by virtue of the fact that there are fewer candidates to vie for the time. And as we’ve seen, Dr. Paul does well in the debates. His principled, conservative outlook comes through loud and clear. As the field continues to cast off the casualties, he will get more time and exposure. I want to go on record as predicting a serious upswing in his support from here forward.

The next test for Paul is in Maine, which begins a three-day caucus process on Friday. The punditry is expecting him to make a respectable showing there. We should soon have some sort of clarity to the mess in Louisiana as well. Paul needs to go on the stage tonight, and point out to everyone in attendance and watching on TV that he has finished second or better in 3 of the last 4 states to hold primaries or caucuses. He needs to get across the idea that we are right where we expected to be and wanted to be – still standing and in great financial shape while the field around us packs it in. People like to back a winner, and Paul has to make a clear case that he can win. He needs to point out that we’ve had those three second (1 first?) place showings without the help of the mainstream media – but that they can’t ignore us much longer.

I’d love to see him say something metaphorically powerful. Maybe:

“This train is ready to leave the station. Our strategy is working, and this is where we begin to press forward. I invite the American people to join with me in sending a message to Washington: we are not willing to let things continue as they have been. We will not accept lip-service. We want a government responsive to the will of the people and observant of the rule of law – all of the law. We expect our government to operate within the bounds that we the people set for it. We are not wards of the state, but sovereign individuals with inalienable rights. We are the masters of this government, and we are not happy with your performance. We want our government back from the elites who control the media and try to influence the voters to select candidates who represent the interests of the elite corporatists while devastating the working people who are the backbone of this economy. We are winning over the hearts and minds of the American people who are waking up to find out that we’ve been had. Our campaign has finished first or second in three of the last four states to vote, and yet we are ignored. The will of the American people will not be denied. The party elites and the media will not tell the American people for whom they may vote. This train is leaving the station tonight, and we want all freedom loving people on board.”

Giuliani Out; McCain Frontrunner

After a third place showing in his ‘firewall’ state – Florida – Giuliani’s inauspicious exit from the race was hardly a surprise. What might not have been expected was the announcement that Giuliani would in fact drop out of the race tomorrow, and endorse John McCain for the nomination.


McCain’s victory is actually a boon to Paul supporters. By my calculations, Romney is the stronger competitor, in spite of his baggage. McCain is a caricature, and in spite of the Florida numbers, faces a tall climb once we get out of the open primaries.


Most states won’t be overruling the rules to allow independents to cross over. Am I the only one out here having a hard time imagining any scenario where McCain wins a majority of delegates? His only hope is a compromise at the convention, but that would lead to hell splitting wide open in the GOP.

And what of Huckabee? Is there anyone voting for him who thinks he is angling for anything beside McCain’s co-pilot seat?


For the requisite hedge: I am not saying that Paul is the odds-on favorite. He still faces a tough road.


If Paul is to ride his stealth strategy to a win, it is playing out as it has to. McCain’s win baffles most of the party. His presumable lead in delegates is made possible by the diluted field. He cannot ride 30% finishes to the nomination, but cannot win in any two-man field. McCain is in a tough spot. He doesn’t have a line to the nomination without a convention vote in my book. He needs Huckabee in the race. He is getting his high water mark, and only a continuation of the fracturing of the non-McCain vote keeps him viable as a frontrunner. And since I haven’t mentioned it yet – McCain is broke.

Romney is still the man to beat. The longer that McCain edges Romney the better. Romney is there to stay, but McCain has to keep winning.


With Thompson out in recent days, Giuliani out tomorrow, and Huckabee likely to drop out after Super Tuesday, I suspect we’ll see a new dynamic moving towards the half-way point in the race. Does Paul have the strategic plans in place to make his splash in a three way race? Is suspect that he has something in the works. I pray it is something profound.

The competition is weak. The strongest candidates (on paper) have left the field. McCain is demonstrably not a conservative, with huge negatives among the party base. It should be fun to see how the Huckabee voters warm up to the guy who lashed out at the ‘religious right’ in 2000. Romney’s shortcomings are legion and of the bottom shelf variety that can be easily demagogued for the most ignorant of the populace (read that: a majority of voters). Paul is the only conservative left; the closest thing to Ronald Reagan that the party has seen since ‘88. The economy is his strong suit, and has been central to his message all along – and not just since Michigan!

Paul is in position to make a realistic run at the nomination. And if not, he has a credible shot at being a power broker at a convention fight. Any seat at the table offers us an opportunity to educate more people about the promise of a return to liberty. Does he have the organization and plan in place to make a go of it?

go ron go

We shall see. Personally, I’m on the edge of my seat.