Wednesday, February 16, 2011

The End of the American Century

It's time to practice Jeffersonian libertarianism at home and abroad

Though its first decade began with a security nightmare in lower Manhattan and ended with an economic collapse blocks away on Wall Street, the 21st century can still bring greater peace, prosperity, and individual liberty if American libertarians seize this moment in history. We must echo President Dwight Eisenhower’s “military industrial complex” warnings in his January 17, 1961 farewell address and we must counter the “American Century” conceit still plaguing us from Henry R. Luce’s Life magazine editorial of February 17, 1941, the 70th anniversary of which is now upon us.

The contrast between Eisenhower’s historically informed wisdom and Luce’s jingoistic missionary zeal offer an opportunity for serious discourse beyond the empty choices presented by bloated government liberals and big government conservatives. Both “sides” pretend they want to downsize the fat federal beast, just as they both sell interventionist foreign policy with flag-waving “support the troops” propaganda.

More alike than not, Democrats and Republicans serve the narrow interests of the “government affairs representatives” who infest Washington’s K Street lobbying firms. They pander to both the procurers of middle- and elderly-class entitlements and to the rent seekers from scare-mongering national security industries, who profiteer from a permanent state of empire-building and elective warfare.

Unfortunately, it has now become mantra for 2012 Republican nominee wannabes to drop a Luce-style reference to “American exceptionalism” into every nascent campaign speech, op-ed, and FOX News cable-babble. They're attempting to create a GOP theme to counter the second-term ambitions of what the populist, nativist right considers a “less-than-American” president, Barack Obama, who made the mistake of saying in an April 2010 press conference outside the U.S. that, "I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism."

Obama qualified that remark to assure his worldwide audience that he, too, worships at the altar of the High Church of American Exceptionalism, but it was too little, too late. The neo-con artists, think tank directors, and weekly journal editors who live for an endless state of war seized on Obama’s words. They went on the attack to please their oil and defense-contractor friends, in service to the interests of the religiously-defined nation-state of Israel, and supported by the Rapturist hallucinations of certain domestic Christian fundamentalists eager to ascend into the clouds to meet Jesus via their self-fulfilling prophecies about Armageddon in the Holy Land.

Those of us blessed with the classical liberal meme stream inherited from the Enlightenment and the Age of Reason can do the human race a favor by using the Eisenhower and Luce anniversaries as a teaching moment. We can illuminate just how much liberty has been lost due to today’s permanent state of warfare, which not only Eisenhower in 1961, but James Madison two centuries earlier, warned against. We can define how Luce’s pre-war jingoistic “American Century” proclamation, in his immodestly named Life magazine, contributed to a post-war sense of New World entitlement. Luce’s conceit encouraged Americans to think of ourselves as God’s policemen to the world, and to obsess about our right not only to whatever our rapidly expanding middle-class incomes could buy, but also to what politicians could hand out via federal, state, and local taxes—and a massive deficit-spending spree.

“American exceptionalism” is a slogan used in many ways. With modesty, it describes an exemplar nation, setting an example for indigenous movements for liberal democracy and free markets (perhaps even in Egypt and Iran right now). But more often, it is employed by warmongers and nation builders to justify the projection of American hard power. This approach has been sorely abused by many presidents, including Theodore Roosevelt, Woodrow Wilson, Lyndon Johnson, Richard Nixon, George W. Bush, and—sorrowfully, for me—Barack Obama, who now echoes President Bill Clinton and Secretary of State Hillary Clinton’s anointment of America as “the indispensable nation.”

As we witness the rise of great middle classes around the globe, empowered by the democratization of information, finance, and technology, America is at a stage of history when we should disenthrall ourselves from the notion we are at the center of human existence. We have become the problem in so many places because of our over-bearing presence. We need to step back and put the individual, not our nation-state, at the center of the universe.

Executive director of the Washington Center for Politics & Journalism, Terry Michael’s writing is collected at his “thoughts from a libertarian Democrat” personal web site,

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What's Next for China?

What's Next for China?

by James A. Dorn

James A. Dorn is vice president for academic affairs and a China specialist at the Cato Institute in Washington, DC.

China has made dramatic economic progress during the last five years, weathering the global financial crisis and becoming the world's largest exporter and second largest economy, surpassing Japan. The next five years, however, will present major challenges to China's development model with its emphasis on state-led capital allocation, mercantilist trade policies, and an undervalued currency as evidenced by massive foreign exchange holdings.

China's authoritarian development model appears robust, generating high real growth year after year. But if true economic development is measured by the alternatives open to people, China's market socialism falls far short of achieving the status of Hong Kong as the world's freest economy.

The flaws in China's development model will become increasingly evident as inflationary pressures build, differences in rural-urban living standards mount, a growing middle class demands an end to censorship, capital controls narrowly limit investment alternatives, land rights are strictly curtailed, and freedom of movement is infringed upon by a draconian internal passport system.

James A. Dorn is vice president for academic affairs and a China specialist at the Cato Institute in Washington, DC.
More by James A. Dorn

Without the freedom to openly criticize the Chinese Communist Party's monopoly on power, people won't be free to choose preferred alternatives, including a genuine rule of law that protects life, liberty, and property. Without capital freedom, people won't be free to choose investment alternatives that make them better off than the negative real returns on holding deposits at state-owned banks. Without transferable land-use rights, farmers will remain at the mercy of local officials and be unable to realize the full value of those rights. And without the freedom to move and to be treated equally under the law, the divide between those holding urban resident permits and non-holders under the hukou system will continue to foster social unrest.

The overriding challenge facing China's goal of sustainable development will be to engage in institutional change that grants individuals more economic and personal freedom. Financial repression needs to give way to liberalization — allowing market forces to determine interest rates and allocate capital, permitting greater exchange-rate flexibility, and giving the People's Bank of China more independence so it can use monetary policy to achieve long-run price stability. More fundamentally, China needs to depoliticize investment decisions by opening capital markets, privatizing state-owned banks, and making the yuan fully convertible.

China also needs to normalize its balance of payments. It doesn't make sense for a capital-poor country to be a net exporter of capital — accumulating nearly $3 trillion of foreign exchange reserves to keep its currency undervalued against the dollar in order to promote exports. China should exploit its comparative cost advantage but not revert to crude mercantilism. By allowing relative prices (including interest rates and the real exchange rate) to adjust, and by respecting intellectual property rights and removing barriers to market access, China would widen the range of choices open to people and increase domestic consumption.

Moving away from state-led development toward market liberalism would strengthen US-China ties and promote peaceful development. China would then more likely be viewed as a constructive partner rather than an emerging threat.

Top Ten Obama Budget Failures

Top Ten Obama Budget Failures

by Michael D. Tanner

Michael D. Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Looking for a good joke? Did you hear the one about how President Obama is making painful spending cuts in order to reduce the budget deficit?

There is so much to dislike in this budget that it's hard to narrow it down to the worst ideas. But here are my top ten:

1. Red ink as far as the eye can see. At no point over the next ten years does the president propose that the government actually balance its budget. In fact, the budget deficit never drops below $600 billion. By 2020, the deficits are over $700 billion again and rising.

2. Greek-style debt. Overall, the president's budget adds roughly $13 trillion to the national debt over the next decade. By 2020, our gross debt reaches $26 trillion.

3. More spending. Unprecedented budget deficits, unsustainable debt — and what does the president propose? Spending $53 billion over ten years on high-speed rail. Nothing better symbolizes the triumph of narrow special interests over the national interest. In total, the president's budget includes $8.7 trillion in new spending over the next ten years on everything from education to "green jobs."

Michael D. Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
More by Michael D. Tanner

4. Locking in past spending increases. After increasing domestic discretionary spending by 21.4 percent over his first two years in office, the president now proposes to freeze spending, thereby locking his previous increases in place. It is important to remember that Obama's increases came on top of huge increases during the Bush administration. Thus, for example, under Obama's budget federal spending on education will have increased by more than 100 percent since 2001. The Department of Energy's budget is up 134 percent. Even the Department of Agriculture will spend 112 percent more than it did before George W. Bush became president.

5. Bigger government. Under the president's proposed budget, the size of government would actually increase from the current 23.8 percent of GDP — the second-highest ratio of government spending to GDP since Word War II — to 24.8 percent.

6. Higher taxes. The president's budget imposes $1.6 trillion in new taxes on families and businesses over the next decade. This includes more than $900 billion in higher income taxes and $435 billion in unspecified transportation taxes.

7. No entitlement reform. Last month, the Congressional Budget Office reported that Social Security had begun running permanent budget deficits. Medicare is facing future budget shortfalls larger than the entire budgets of most countries. In fact, if the unfunded liabilities of entitlement programs were to be included in our national-debt figures, our total future indebtedness could top $127.5 trillion. The president's response to this looming crisis was to do ... nothing.

8. Faux Defense Cuts. The president's budget includes $78 billion in defense cuts recommended by Secretary Gates over the next five years. If implemented, those cuts would amount to barely 2 percent of Pentagon spending over that period. But, as with much of the administration's budgeting, the cuts turn out to be the usual Washington game of calling a reduction in projected increases a "cut." In reality, the military's base budget (excluding the costs of the wars in Iraq and Afghanistan) will increase from $549 billion to $553 billion. Some conservatives may be pleased that Pentagon spending will be at the highest level in history, but it is impossible to make any serious effort at deficit reduction without addressing defense.

9. Phony assumptions. "Rosy scenario" is back. The president's budget numbers are based on the assumption that the economy will grow, in real terms, 3.6 percent in 2012 and 4.4 percent in 2013. That's much faster than CBO or private economists forecast, and nearly a quarter point faster than the economy has grown coming out of the last five recessions. The president also projects a dramatic decline in unemployment, with the jobless rate dropping to 6.3 percent in 2014 and then falling to just 5.3 percent in 2017 and beyond. Maybe, but not likely, especially given the impact of the administration's proposed tax increases and the looming implementation of Obamacare. And speaking of Obamacare, the administration continues to insist that the new health-care law will reduce the deficit by nearly $200 billion, when an accurate accounting suggests that it will actually increase the deficit by as much as $823 billion.

10. More money for Obamacare. The budget includes $465 million next year to implement the Patient Protection and Affordable Care Act. The Centers for Medicare and Medicaid Services (CMS), the agency charged with implementing most of the law's major provisions, such as Medicare changes, Medicaid expansion, insurance reforms, and the exchanges, will hire an additional 650 bureaucrats. Moreover, CMS director Donald Berwick told reporters that additional Obamacare funding is scattered throughout the budget.

Are you laughing yet?

What Should U.S. Do about Egypt?

What Should U.S. Do about Egypt? Very Little

by Ted Galen Carpente

Though the spectacular events in Cairo have ended with Hosni Mubarak stepping down, pundits on both the left and the right increasingly chide the Obama administration for not being more supportive of popular movements challenging authoritarian regimes in the Middle East.

Implicitly, and sometimes explicitly, proponents of a more high-profile U.S. role on behalf of democracy in the Muslim world cite Washington's strong (and ultimately successful) support for Poland's Solidarity movement and other anti-Soviet campaigns in the latter stages of the Cold War.

But with the uprising in Egypt likely to embolden other democratic movements in the region — and with pressure sure to remain on the Obama administration to openly support them — Beltway types would do well to keep in mind the very different perception of the U.S. in Eastern Europe circa 1989 versus the present-day Middle East.

Why less is more
In the face of an intense media appetite for sweeping White House pronouncements about events in the region, the administration's best course is to resist temptation, and embrace a policy of saying and doing less instead of more.

T]he United States needs to adopt a low-profile role during these turbulent days.

To most people residing in the Kremlin's empire, the Soviet Union was a meddling, imperialist oppressor. America's moral support was welcomed because they saw the U.S. as the USSR's principal adversary. Even if America had not been a beacon of freedom and democracy, there would have been positive feelings toward the avowed enemy of their imperial overlord.

The situation in the Middle East is vastly — and depressingly — different. Populations in that part of the world generally view the U.S. with great suspicion. Indeed, all too many Middle Easterners regard Washington as the meddling, imperialist power that is responsible for their unsatisfactory lot in life. A succession of U.S administrations has reinforced that negative image by backing corrupt, authoritarian regimes that looted and brutalized their people.

The result is a deep reservoir of hostility toward Washington. A June 2010 poll conducted by the Pew Research Center found that 82% of respondents in Egypt had an unfavorable view of the United States, and 79% in Jordan did so. That negative assessment is not confined to the Arab portion of the Muslim world. In Pakistan, the unfavorable rating was 68%, and in Turkey 74%.

Such pervasive animosity makes it difficult, perhaps impossible, for Washington to play a major constructive role in the political transition that we're now beginning to witness in the Middle East. Put bluntly, even if U.S. officials profess to support the goals of democracy and liberty, those statements have very little credibility with populations in that part of the world.

Ted Galen Carpenter, vice president for defense and foreign policy studies at the Cato Institute, is the author of eight books on international affairs, including Smart Power: Toward a Prudent Foreign Policy for America.

More by Ted Galen Carpenter

Even if Washington's pro-freedom sentiments are genuine, the U.S. cannot overcome the reputation it has acquired from decades of support for autocratic regimes. It would be as if a reformist Soviet regime had belatedly backed free elections and other features of democracy in Eastern Europe. Such a change in policy would have been seen as much too little, much too late.

The danger of meddling
U.S. policymakers understandably want to see secular, democratic forces emerge victorious from the current turmoil and see the Muslim Brotherhood and other Islamist forces marginalized. But embracing secular factions could easily backfire. Anti-American factions would almost certainly cite such support as evidence that Washington is continuing to meddle in their country's internal affairs, and they would use it to discredit their secular opponents.

Even democracy-promotion efforts by American non-governmental organizations could prove counterproductive. Although officially such organizations are private sector ventures, most overseas populations do not make a distinction. And the often cozy cooperation between some NGOs and the U.S. government contributes to the perception that they are merely extensions of the White House, the State Department, or the CIA.

Ostentatiously endorsing secular democratic factions in revolutionary settings in the Middle East could be the kiss of death for those movements. Like it or not, the United States needs to adopt a low-profile role during these turbulent days.

Stop Public Financing of Campaigns

Stop Public Financing of Campaigns

by Gene Healy

Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency.

Shortly after becoming Speaker, Rep. John Boehner, R-Ohio, got that deer-in-the-headlights look when asked to name a single program he'd eliminate. "Don't think I have one off the top of my head," he said.

Thankfully, the House GOP came up with an answer at the end of January, voting to zero out taxpayer financing of presidential campaigns.

At a time when America's hemorrhaging red ink, you might complain that this reveals an instinct for plugging the capillary. Canceling a program that spent $139 million in 2008 — 0.00005 percent of the federal budget — won't stop the bleeding.

Still, presidential public funding is a particularly obnoxious waste of taxpayer dollars, based on the false hope that handouts to politicians will deliver better politics. It may be chump change, but we're the chumps, and it's past time we got a refund.

[I]f taxpayers were better informed about the program, they might be less likely to support it.

High-minded editorialists along the North Atlantic media corridor greeted the vote with indignant squeals. The GOP's "real motive," the New York Times suggested, was "to give an even bigger voice to big-money contributors in presidential campaigns."

"A terrible idea" the Washington Post inveighed: the system's "worked well for a long time."

But to decide whether subsidizing presidential campaigns "worked well," we need to know what the taxpayers have received for the $1.5 billion spent on the program since its inception.

The answer, according to my colleague John Samples, who's written the definitive study on the program, is "not much."

In the post-Watergate frenzy for "cleaning up" the inherently dirty business of politics, Congress provided for partial public funding of presidential races. Primary and general election candidates who agree to limit private contributions can receive matching funds financed by a voluntary "checkoff" on Americans' tax returns.

Though checking the box doesn't increase an individual's tax liability, in recent years, fewer than 10 percent of taxpayers have diverted funds to the program. The program's supporters counter that tax-preparation software leads many taxpayers to skip the checkoff, so we should spend still more on consciousness-raising ad campaigns.

But if taxpayers were better informed about the program, they might be less likely to support it. As Samples notes, "average Americans would be enraged to learn that they are subsidizing such efforts" as the Lyndon LaRouche cult's six presidential runs. (It seems $5.5 million in federal funds wasn't enough to wrest control from the people who really run things — a global conspiracy including Bilderbergers, Trilateralists and the drug-running Queen of England.)

The Natural Law Party's John Hagelin has received nearly $2 million from the program. In 1999, Hagelin — who sports the impressive title "Raja of Invincible America" — proposed to send a crack team of "Yogic flyers" to pacify Kosovo by generating a "quantum-mechanical consciousness field."

Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency.
More by Gene Healy

Say what you will about Hagelin's levitation scheme, but if implemented, it would have been more amusing and less harmful than President Jimmy Carter's energy policy, President George H.W. Bush's tax hike and President Bill Clinton's actual solution to the Kosovo crisis: a 78-day bombing campaign that violated the War Powers Act and paved the way for a 12-year nation-building mission.

And Carter, Bush and Clinton all ran on the taxpayer's dime ($9 million, $24 million and $26 million, respectively).

Personally, I'm more offended when my tax dollars go to mainstream candidates who win.

Thomas Jefferson had it right: "To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors, is sinful and tyrannical." Presidential public funding may not be breaking the bank, but it's sinful in just the way Jefferson described.

Every few years, as new contenders ready their campaigns, we have to watch the depressing spectacle. Why should we be forced to pay for it?

Obama's Sea of Red

Obama's Sea of Red

by Michael D. Tanner

In the days and weeks leading up to the release of his budget, President Obama and his spokesmen warned us that it would contain "tough choices" and "painful cuts." Having increased government spending by 21.4 percent during his first two years in office, Obama would now be intent on imposing "fiscal discipline."

Hah! By the administration's own estimates, Obama's $3.7 trillion budget would raise this year's budget deficit to $1.65 trillion, the largest pool of red ink since the end of World War II.

Overall, it'll add nearly $13 trillion to the national debt over the next decade. By 2020, our gross debt would reach $26 trillion — more than 100 percent of GDP. That is, we'd owe more than the value of everything produced in this country in a full year.

Republicans, no less than the president, have refused to get serious about entitlement reform.

That's without counting the unfunded liabilities of such entitlement programs as Medicare and Social Security. Include the benefits that we've promised under those programs in excess of projected revenues, and our total future indebtedness could run as high as $127.5 trillion.

Yes, that's trillion with a "T." We'd owe an almost inconceivable 897 percent of GDP. Greece would look like an object lesson in good government by comparison.

All this red ink comes despite the fact that the president would hike taxes by $1.6 trillion over 10 years, including a nearly $1 trillion income-tax increase. Apparently, Obama still believes that we can tax our way to prosperity by penalizing the people and businesses in this country who invest and create jobs.

Yes, this budget does trim some government programs. Those cuts are long overdue, and the president should be commended for recognizing that at least some government spending is unaffordable, wasteful or counterproductive.

But Obama would also boost spending on other programs, a total spending hike of $8.7 trillion over the next 10 years. In fact, if this budget were to pass, the federal government would consume 24.8 percent of GDP, up from 23.8 percent this year. That would be the second-highest ratio of government spending to GDP in the post-war era.

Worse, once entitlement spending begins to really kick in, we may look back at this as the good old days of small government. The Congressional Budget Office warns that, without drastic action, the federal government will consume 43 percent of GDP by 2050. Toss in state and local spending, and government at all levels will take roughly 60 cents out every dollar produced in this country.

No economy can survive the burden that that size government would put on it.

But Obama makes no attempt to deal with entitlements in this budget. Having, with great fanfare, appointed a bipartisan deficit commission last year, he now completely ignores its recommendations. Nor does he offer any of his own. Leadership? Don't look for it here.

Of course, Republicans have been displaying their own sense of humor about deficit reduction as well. They're now embroiled in a fierce interparty fight about whether to cut $100 billion from nondefense domestic-discretionary spending. The usual suspects are on the table, from the Legal Services Corp. to the Corporation for Public Broadcasting, guaranteeing another round of news stories about how the GOP wants to kill Big Bird.

As with the president's budget, any cuts should be applauded. And at least the Republicans aren't proposing any new spending. But for all the sturm and drang, the GOP proposal would only reduce government spending to 23 percent of GDP, a cut of less than 1 percent of GDP.

That is because the Republicans, no less than the president, have refused to get serious about entitlement reform. In fact, the party's congressional leaders spent most of last weekend disavowing anything responsible that they had ever said about fixing Social Security or Medicare. Of course, they're willing — if the president will go first — to have "an adult conversation with the American people" about what those reforms might look like ... someday, maybe, perhaps, but not now.

Meanwhile, the red ink grows. Unless someone in Washington decides to display a little courage, the real joke will be on us.

Mexico's drug war

The Americas

Americas view

Mexico's drug war

Not-so-safe haven


ONE of the striking features of Mexico’s crackdown on drug gangs is that the resulting violence has kept a wide berth of the capital. Of the 34,612 murders related to organised crime that the government counted between 2007 and 2010, just 1.9% took place in Mexico City. Considering that the metropolis accounts for about 8% of the country’s population, that’s not bad going.

You don’t need to go far to find trouble, however. The state of Mexico, which almost encircles the capital, has seen a big increase in violence, as has Morelos, which shares a border with the south of Mexico City. As you can see in the following chart, the number of killings in these states has increased sharply since the end of 2006, when the government’s assault began.

But how bothered should you be if you live in Mexico City? If violence has broken out at the opposite end of the state next door, it might not affect you in the least. If it’s lapping at the edges of the capital, however, it might be more of a problem.

Thanks to the recent publication of some comprehensive data on the location of homicides, it is now possible to plot the violence more precisely. In the second chart, I have plotted killings in Mexico City, plus those that took place in the municipalities that directly border it (13 from Mexico state and three from Morelos). This useful map should give you a better idea of what I’m getting at.

Two things stand out. Firstly, Mexico City is well insulated from the violence taking place in Morelos. Though some Morelos municipalities, such as Cuernavaca, have seen an alarming rise in killings (now tapering off, it seems), the three municipalities that border Mexico City have seen almost none.

In Mexico state, however, is the opposite is true. In this state of 125 municipalities, the 13 that share a border with Mexico City have accounted for a disproportionately large chunk of the trouble. Indeed, over the past four years they have witnessed 797 murders linked to organised crime—just over half the total for the entire state.

The message from these numbers is that for Mexico City, much of the violence happening in its neighbouring states is closer to home than its residents might like to think. Violence in the capital itself, strictly defined, has remained stable. But when one includes the immediate suburbs, the annual number of killings has more than doubled since 2007.

The Producer Price Index (PPI) increased 0.8% in January

Data Watch
The Producer Price Index (PPI) increased 0.8% in January
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist

The Producer Price Index (PPI) increased 0.8% in January, matching consensus expectations. Producer prices are up 3.6% versus a year ago.
The January rise in the PPI was led by energy prices, but gains in prices were widespread. Energy prices increased 1.8% while food prices rose 0.3%. The “core” PPI, which excludes food and energy, increased 0.5%, easily beating the consensus expected gain of 0.2%.

Consumer goods prices rose 0.9% in January and are up 4.7% versus last year. Capital equipment prices were up 0.3% in January and are up 0.6% in the past year.

Core intermediate goods prices increased 1.0% in January and are up 5.0% versus a year ago. Core crude prices increased 4.0% in January and are up 25.7% in the past twelve months.

Implications: Inflation is accelerating at the producer level. In the past year producer prices are up 3.6% but they’re up at a 7.9% annual rate in the past six months and a 9.6% rate in the past three months. Although the Federal Reserve can still claim “core” inflation is low at the consumer level, they are losing that argument at the producer level. The core PPI, which excludes food and energy, increased 0.5% in January, the biggest gain since October 2008. Meanwhile, further up the production pipeline, core intermediate prices increased 1% in January and are up at an 8.6% annual pace in the past three months; core crude prices increased 4% in January and are up at a 52.3% rate in the past three months. Eventually, some of these increases will filter through to consumers. The Fed’s monetary policy is completely inappropriate for the current state of the economy. They have been too easy for too long. QE2 was a mistake. QE3 would be a bigger mistake. Inflation is already on the rise.

Industrial production fell 0.1% in January

Data Watch
Industrial production fell 0.1% in January
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist

Due to a 0.7% decline in mining and a 1.6% drop in utilities, industrial production fell 0.1% in January. Including upward revisions to prior months, production increased 0.2%. The consensus expected a gain of 0.5%. Production is up at a 5.1% annual rate in the past year.
Manufacturing, which excludes mining/utilities, was up 0.3% in January (+0.8% including upward revisions to previous months). The gain in January was led by auto production, which increased 3.2%. Non-auto manufacturing increased 0.1% and was revised upward for prior months. Auto production is up 5.4% versus a year ago while non-auto manufacturing has risen up 5.5%.
The production of high-tech equipment was up 1.1% in January, was revised up for prior months, and is up 13.7% versus a year ago.

Overall capacity utilization slipped to 76.1% in January. Manufacturing capacity use increased to 73.7%, the highest since August 2008.

Implications: Today’s headline decline of 0.1% for industrial production is not something to worry about. The fall was largely due to a decline in mining (which is normally volatile) and utilities (January was not as unusually cold as December). Including revisions to prior months, industrial production was up 0.2%. Manufacturing is still a bright spot, expanding for the 7th consecutive month at a healthy 0.3% pace in January (+0.8% including upward revisions to prior months). Auto manufacturing surged and should continue to add to production growth in the coming year as autos sales rise. Industrial production is going to continue to move higher and will likely keep being led by business equipment. Corporate profits are approaching a new record high and cash on the balance sheets of non-financial companies – earning nearly zero percent interest – had already reached a record high. Now, finally, Bloomberg is reporting that S&P 500 companies are starting to reduce their cash hordes and increase capital spending more rapidly. It makes sense that these larger companies take the lead given that they have access to the capital markets (through bond sales) and are better able to get a bank loan when they need one. Commercial and industrial lending is now up three straight months, a far cry from the 20% year-over-year declines of early 2010.

Top Ten Tips Reagan Gave Clinton

Part Two Reagan 2012 Address To The American People

Part One Reagan 2012 Address To The American People

Newt: Barack Obama is No Ronald Reagan

Single day's death toll in Ciudad Juarez is 18

Single day's death toll in Ciudad Juarez is 18

The worst incident was at a bar on a low-end commercial strip in a rough neighborhood. Men with assault rifles fired on people inside, killing eight and seriously wounding three.

Killings in Ciudad Juarez

Police stand at a crime scene in Ciudad Juarez this week. An armed group of men shot dead six women and a man and severely injured another two women inside a bar, according to local media. (Gael Gonzalez, Reuters / February 12, 2011)

On an especially deadly day in Mexico's most violent city, gunmen barged into a beer joint and killed eight people, six of them waitresses.

An additional 10 people were killed in other shootings in Ciudad Juarez during a 24-hour period ending early Friday. The city across the border from El Paso has been plagued by killings and kidnappings as rival drug gangs fight for control. But 18 dead in a single day seemed especially grim.

The worst incident was at Las Torres Bar in a low-end commercial strip in a rough Juarez neighborhood. Men with assault rifles opened fire on people in the bar Thursday night, killing the eight and seriously wounding three.

"They fired indiscriminately," said Carlos Gonzalez, spokesman for the Chihuahua state prosecutor's office.

Gonzalez initially said that seven of the victims were women who worked in the bar. Later the prosecutor's office issued a statement clarifying that six were female employees and the seventh was a man dressed as a woman.

Nearly 3,000 people were killed in Juarez last year alone, according to official government statistics, a bloodletting that has driven tens of thousands of people into exile and forced the shuttering of about 70% of the city's stores.

Mexican officials, meanwhile, are taking umbrage at recent comments by U.S. Secretary of Homeland Security Janet Napolitano, who raised the possibility of an alliance between Mexican drug cartels and radical Islamic terrorists.

In testimony before a congressional committee this week, Napolitano said: "We have for some time been thinking ahead about what would happen if, say, Al Qaeda were to unite with the Zetas, one of the drug cartels."

She was responding to a question about the possibility of terrorists using a drug-trafficking network to smuggle bombs or other lethal material into the United States from Mexico.

Mexico's interior minister, Jose Francisco Blake Mora, said there was "no sign or element of a connection" between the groups. "Quite the contrary," he told a radio interviewer, "these are two very different phenomena."

Napolitano's remarks came just one day after U.S. Army Undersecretary Joseph Westphal apologized for referring to Mexican drug-trafficking gangs as a "form of insurgency."

Though the comment echoed a similar characterization voiced last year by Secretary of State Hillary Rodham Clinton, the Obama administration has repeatedly sought to back away from such a description, which angers Mexican officials because it suggests, among other things, that the traffickers, like insurgents, desire to topple the government.

18 killed cartel-plagued northern Mexican town

18 killed cartel-plagued northern Mexican town

A series of shootings left 18 people dead Monday in a town in northern Mexico where a turf war has raged between two brutal drug cartels.

A series of shootings left 18 people dead Monday in a town in northern Mexico where a turf war has raged between two brutal drug cartels.

The violence damaged the city hall, a court and the police headquarters in Padilla, a town just north of the Tamaulipas state capital of Ciudad Victoria, the state government said in a statement.

Seven bodies were dumped in Padilla's main square on Monday, another five people were shot to death inside their car, and another person was killed in an attack on a passenger bus, the statement said. Five other inhabitants of the town were killed, but the statement did not specify how.

Tamaulipas, a state bordering Texas, has seen some of the worst atrocities in Mexico's drug war since fighting broke out last year between the Gulf cartel and a gang of its former enforcers known as the Zetas.

Nearly all inhabitants fled one small, picturesque town in the Rio Grande Valley after months of gang battles. In the worst massacre, 72 Central and South American migrants were found bound and shot to death in Tamaulipas ranch in August. Authorities say the Zetas killed the migrants for refusing to work for the gang.

The Tamaulipas government said innocent bystanders were among the dead in Padilla, but it did not specify how many. The statement expressed "solidarity with the families of the innocent victims."

In neighboring Nuevo Leon state, meanwhile, gunmen killed a top intelligence officer, then torched his car, the state government said in a statement.

Homero Salcido Trevino's body was found in a smoldering car abandoned in downtown Monterrey, Mexico's once-peaceful third-largest city that has also been besieged by the Gulf-Zetas fighting.

Salcido Trevino was the director of the state's intelligence and security center, a job he had taken in August. He was shot at least five times, said the statement, which offered no additional details.

The attack had some of the hallmarks of a drug cartel hit, but Nuevo Leon Gov. Rodrigo Medina said investigators had not confirmed that. "It is still premature to tell you it was organized crime," he said.

Local news media reported that Salcido Trevino, who was the nephew of former state Public Safety Secretary Luis Carlos Trevino Berchelmann, had been kidnapped hours earlier as he left his home. Authorities would not comment on the reports.

Gang members have fiercely attacked police and soldiers trying to restore order across Nuevo Leon and Tamaulipas. Police, mayors - and even the leading gubernatorial candidate in Tamaulipas - have been assassinated in more than a year of violence.

Killings soared in Nuevo Leon state last year to 620, compared to 112 in 2009.

"What is evident is that we have a vicious fight between the cartels of organized crime, which have provoked this violence and has obligated us to redouble our efforts," Medina said.

Medina said security officials know the risks they face. He vowed attacks will not "force us to back down or stand aside in this fight."

The Defense Department, meanwhile, announced the capture of a top Zetas suspect.

Juan Carlos Olivera, allegedly the top Zetas operator in five towns around Monterrey, was arrested with two accomplices and four guns, the department said in a statement.

Nationwide, almost 35,000 people have been killed in drug violence since President Felipe Calderon launched a military crackdown against drug trafficking shortly after taking office in December 2006.

In the Pacific coast resort city of Acapulco, police discovered three dead men from a car left in the parking lot of a state prison Sunday, authorities said Monday. A fourth man was found alive in the car with bullet wounds in the face and neck, Guerrero state police said.

A dozen people were killed in Acapulco over the weekend, including a prison guard, authorities said.

Ariz. Border Activist Guilty of Double Murder

Shawna Forde Update: Ariz. Border Activist Guilty of Double Murder

(CBS/AP/KOLD) Shawna Forde, the border activist and leader of an anti-illegal immigrant group, was found guilty on all charges by a Tucson jury in a home invasion that left a 9-year-old girl and her father dead.

Prosecutors said Forde led a May 2009 home invasion in Aravica, a desert community about 10 miles north of Mexico, that killed 29-year old Raul Flores and his 9-year-old daughter Brisenia, reports CBS affiliate KOLD.

Forde and two accomplices broke into the Flores home, claiming to be police officers who were looking for fugitives. When Flores questioned their story, prosecutors said the men opened fire, killing Flores and his young child.

The girl's mother, Gina Gonzalez, called 911 after witnessing the crime. While she was on the phone, prosecutors said the suspects returned to finish her off.

Several gunshots can be heard in the 911 call as Gonzalez pleads with dispatchers to get her help.

The 42-year-old Forde had pleaded not guilty to two counts of first-degree murder and other charges stemming from the home invasion.

Court supervisor Cheryl Thompson said the jury will return Tuesday to begin the penalty phase.

In closing arguments last week, prosecutor Rick Unklesbay argued that phone calls and text messages sent by Forde clearly show she was responsible, while defense attorney Eric Larsen said they proved she had nothing to hide and should be found not guilty.

Forde is the leader of the Minutemen American Defense, a small border watch group, and prosecutors contend that she planned the attack to help fund her anti-immigrant operations.

Flores was believed to be involved with drug trafficking, police say, but officers don't think the assailants found much cash or drugs in the home.

Forde sat quietly in court Thursday, but smiled and joked with others during a break.

Before coming to Arizona, Forde lived in Everett, Wash., where she ran for the city council in 2007, promising to allow police to check the immigration status of suspects, according to local news accounts.

Chris Simcox, founder of the Minuteman Civil Defense Corps, previously told The Associated Press that his group kicked Forde out in 2007 amid allegations of lying and pretending to be a senior leader, and that Forde began her own group, bragging that it would be going after drug cartels. That claim made him worry about the safety of other Minutemen, he said.

"We knew that Shawna Forde was not just an unsavory character but pretty unbalanced, as well," Simcox said.

ATF Gives Guns to Mexican Drug Cartels to Undermine Second Amendment

ATF Gives Guns to Mexican Drug Cartels to Undermine Second Amendment

Posted by Van Helsing

Oh what a tangled web bureauweenies weave when they attempt to use their power to acquire still more power by supporting statist canards with phony data. This time we're not talking about NASA and the global warming farce, but the ATF's practice of smuggling guns across the border so that it will look like the Second Amendment's fault that Mexican drug cartels are violent:

A brewing scandal at the Department of Justice involving an illegal scheme to pad statistics on U.S. guns in Mexico threatens to erupt as U.S. Senator Charles Grassley of the Senate Judiciary Committee begins an investigation. ATF agents of the Bureau of Alcohol, Tobacco, Firearms, and Explosives — a DOJ agency — allegedly smuggled U.S. guns into Mexico in order to bolster the Department's disputed contention that Mexican drug cartels are armed primarily with U.S. guns. Whistleblowers within the ATF contend that one of these guns was used to kill Border Patrol agent Brian A. Terry in December of 2010.

Readers will remember Terry as the underarmed Border Patrol agent killed while providing free police protection to the illegal aliens colonizing Arizona.

This won't come as a surprise:

Rather than launch an internal investigation into the murder and the illegal scheme, the Department of Justice under Eric Holder, according to ATF whistleblowers, instead attempted a coverup. …
Denials are now part of standard operating procedure at the DOJ as the news media and Senator Grassley close in. Grassley's inquiries have been met with stonewalling. But it appears that Grassley's office so far isn't buying DOJ denials.

As always, our moonbat rulers mean well. They just want to protect us from our own guns:

As violence continues to erupt along the southern border due primarily to the dangerous activity of the Mexican drug cartels, the standard explanation of the Obama Administration has been that the mayhem of the cartels can be laid squarely at the feet of so-called 'lax U.S. gun laws' that supposedly enable armed criminal activity. Were it not for U.S. guns, so the explanation goes, then dangerous Mexican gangs would not be so dire a threat to the safety and security of citizens who live in border states.

Here's a better explanation: Mexican gangs would not be so dire a threat if it not for a federal government more interested in demographically reengineering the country to Democrats' electoral benefit than in fulfilling its fundamental duty to defend the border.

eric holder

U.S. agent killed

A U.S. federal agent was shot dead Tuesday and a second wounded when they were intercepted by gunmen as they drove from Mexico City into a part of central Mexico increasingly under the influence of violent drug traffickers, officials said.

The two special agents were with the U.S. Immigration and Customs Enforcement, or ICE, and were apparently ambushed at the kind of fake roadblock often set up by traffickers and their henchmen.

The agents, whose identities were not immediately released, were attached to the U.S. Embassy in Mexico City. The agent who was killed was usually stationed in Laredo, Texas, a U.S. source said, and was on temporary duty at the embassy in Mexico City. His family has been notified of his death.

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The pair were driving from the capital toward the northern city of Monterrey when they were attacked in the state of San Luis Potosi, U.S. authorities said.

The agents "were shot in the line of duty while driving between Mexico City and Monterrey, Mexico, by unknown assailants," ICE said in a statement.

"ICE is working with the U.S. State Department, Mexican authorities and other U.S. law enforcement partners to investigate the shooting," the agency added.

Although the agents were reported initially to have survived the attack, ICE Director John Morton announced later that one of the men had succumbed to his wounds.

"This is a difficult time for ICE and especially for the families and loved ones of our agents," Morton said in a statement.

U.S. Homeland Security Secretary Janet Napolitano said the second agent was in stable condition with gunshot wounds to an arm and leg.

The Mexican government offered condolences and issued a statement "energetically condemning this grave act of violence." It pledged cooperation in assisting the injured agent, who presumably was to be evacuated from the regional hospital where he was being treated, and in helping to resolve the case.

There were conflicting reports on exactly where in San Luis Potosi state the agents were shot. Several Mexican sources put the shooting on Highway 57 between the cities of Queretaro and San Luis Potosi, roughly a third of the way from Mexico City to Monterrey. The attack occurred about 3 p.m.

Gunmen apparently blocked the road, placing their vehicles across the highway and forcing the agents to a stop. Then they opened fire.

San Luis Potosi had traditionally not been tormented by the same level of drug war violence plaguing other parts of the country. But in the last year, members of the notorious Zetas gang have been moving in from adjoining Tamaulipas state to seize more territory, market and drug routes. They often set up "narco-blockades," or fake checkpoints, to impede the movements of law enforcement or other enemies.

Many of the roadways leading to Monterrey, Mexico's wealthiest city, have become exceedingly dangerous in recent months with narco-blockades, shootouts and other violence. There was no immediate indication that the federal agents attacked Tuesday were driving with any sort of extra security.

Despite a ruthless drug war in Mexico among rival cartels and government security forces that has killed more than 34,000 people in four years, it is rare for U.S. officials to come under attack.

On March 13, an officer at the U.S. Consulate in the border city of Ciudad Juarez was shot to death along with her husband and the husband of another consular officer as they drove in two separate cars from a children's birthday party. They were headed home to El Paso, just across the border. A local drug gang was implicated in the shootings.

The presence in Mexico of U.S. law enforcement, intelligence and military officials has been growing substantially as Washington deepens its involvement in the drug war.

In Mexico, ICE investigates human trafficking, firearms smuggling and intellectual property cases, among other issues. The agency has between 25 and 30 agents in the country. Agents also have worked with the government to train Mexicans in advanced investigative techniques used in customs and smuggling investigations.

Napolitano vowed that Tuesday's attack would not diminish U.S. participation in Mexico's drug war.

"Let me be clear: Any act of violence against our ICE personnel — or any [Department of Homeland Security] personnel — is an attack against all those who serve our nation and put their lives at risk for our safety," she said in a statement. "We remain committed in our broader support for Mexico's efforts to combat violence within its borders."

Setting the Government's Agenda

Setting the Government's Agenda

by Gary North

In this report, I am making a point: the country is headed for a fiscal disaster, and there is no broad-based political movement inside the country to put on the brakes. The train is headed for the collapsed trestle, and it is speeding up. The President as the engineer is talking about slowing the train a little, but he has not yet put on the brakes.

No one will put on the brakes.

This has enormous consequences for your financial future. You cannot easily get off the train. It is speeding up. The faster it goes, the more expensive it is to get off.

The voters are not aware that there is anything really wrong. They are once again running up credit card debt. They figure that happy days will soon be here again. Yet the deficit is $1.5 trillion. "No big problem!" Congress says. "Nothing that a $100 billion spending cut cannot solve."

Let's see if they impose that budget cut.

An indication of the self-conscious surrender to the deficit was an article published by Bloomberg on February 14. "Budget Saves $1.1 Trillion, Cuts Deficit, Lew Says."

Who is Lew? Why should we care?

The Obama administration's 2012 budget would save $1.1 trillion over the next 10 years by cutting programs to rein in a deficit that may reach a record $1.5 trillion this year, White House Budget Director Jacob Lew said.

"We have to start living within our means," Lew said yesterday on CNN's "State of the Union" program. "The notion that we can do this painlessly – it's not possible to do it painlessly. We're going to make tough choices."

See the game? It has been financial journalism's game for at least a decade. The game is to run headlines based on a 10-year savings plan. This is done deliberately to confuse the public, on the assumption that readers – even sophisticated readers – will not read the article or think through the numbers. It is done to calm people. It is a now-universal practice.

A President can serve for only eight years. So, he has no authority to achieve such savings.

A $1.1 trillion savings over 10 years is $110 billion a year. The deficit is $1.5 trillion. This, Mr. Lew assures us, is a "hard choice."

No, this is an admission that there will be no hard choices until a crisis hits. This is one more guarantee that the President and Congress will kick the fiscal can down the road for another 10 years.

We are talking about an increase in the on-budget Federal debt of at least $10 trillion over the next 10 years.

How will the savings be made?

About two-thirds of the savings would come from a five-year spending freeze and cuts in domestic programs. One-third would come from revenue increases, including limiting itemized tax deductions for the wealthy, an administration official said.

Some savings would be diverted to increased spending in education, research and development and technology to compete against global rivals, create jobs and reduce the 9 percent unemployment rate, Lew said.

What's that? Savings are defined as "increased spending in education, research and development and technology." I see. Savings are spending.

This is newspeak, just as George Orwell described it in his novel, Nineteen Eighty Four. Examples: "Love is hate." "Peace is war." "Saving is spending."

The public is buying it personally. "Let's run up our credit card debt. No problem. Spending is thrift."

For the first time since August 2008, Americans in December increased credit card debt to $800 billion, up by $2.5 billion in November. Credit card debt is down by 18% since August 2008. It was not just credit card debt. Consumer debt was up, too: autos, student loans, etc. It rose to $1.6 trillion, up $3.8 billion above November. These are not major increases – nothing on a par with Federal debt increases. But the public is buying the government's line: "No big problem.

The Bloomberg article quoted an unknown minor official under Bush. He says this switch by Obama represents a move to the center, in preparation for 2012. It probably does. The center is commitment to a $1.4 trillion deficit rather than $1.5 trillion.

This is the center of a train rushing for the collapsed trestle.

The article says this will not satisfy Republicans. House Speaker John Boehner said on NBC's "Meet the Press" that "we're broke." A spending freeze is "way too much."

Indeed, it is. What is needed is a $1.5 trillion cut in spending. But Mr. Boehner failed to call for that. Nor did any of the 150 economists he cited. (By the way, there are thousands of economists in the country. Where is a single non-Austrian school economist calling for a balanced budget in fiscal 2012?)

House Republicans disclosed plans on Feb. 11 to kill more than 100 U.S. government programs in an effort to cut spending by $61 billion in the budget for the fiscal year that ends Sept. 30. Lew, on CNN, declined to say whether the White House would support that package.

Wow! A whole $61 billion in cuts! But Mr. Lew failed to join in.

Boehner was asked about prospects of shutting down the government if Republicans can't reach a compromise with Senate Democrats and Obama on this year's budget, for which spending authority expires on March 4.

"Our goal is to reduce spending, it is not to shut down the government," Boehner said.

The article went on and on about billion-dollar cuts. It did not raise the question of the effects of a trillion dollar plus annual deficits. Those deficits are on the table. No one is challenging them, with one exception: Ron Paul.


I would like to see Ron Paul elected President, but not because I see him as a political messiah. I would like to see him elected because, in order to get elected, he would have to represent a majority of Americans. He does not represent a majority of Americans. He will not be elected. The voters want more of the same. They will get it.

The Conservative Political Action Conference, also known as CPAC, is an annual convention. Conservative politicians who are thinking of running for the Republican party's presidential candidate show up to rally the conservative troops. Some of them don't show up, knowing they have no chance at winning the straw poll. Sara Palin is one of these annual no-shows. They can then blame their poor showing on the fact that they did not show up.

In 2010, Congressman Ron Paul won the straw poll. In 2011, he did it again. He did it with this speech – a frontal assault against the agenda of the conservative mainstream.

The mainstream media recognizes Paul for what he is: the nation's major voice for libertarianism. This understanding is shared by the conservative mainstream media. Fox News recognizes this, and therefore steadfastly opposes Paul. It was Fox News in 2008 that kept Ron Paul off the podium during its broadcasting of the Republican Party's debates. He was not invited.

The mainstream conservative media want someone who is in favor of the expansion of American Empire. They want someone who will not rock the boat, which would mean sinking the Establishment's ship of state. They are big government conservatives.

The fact that Ron Paul, for the second year in a row, is the favored candidate of the people at CPAC is an insult to the conservative Establishment. It indicates that large numbers of conservatives are not willing to go along with the basic agenda of the conservative movement, namely, the expansion of Federal power in the realm of foreign policy, and an unwillingness to roll back the New Deal, Fair Deal, New Frontier, Great Society, and all the rest of the bipartisan expansion of the Federal welfare state.

Ron Paul represents an ideological threat to the entire conservative movement. Because of this, it opposes him and does whatever it can to make certain that whatever publicity he receives, and whatever public support he receives, will not be given favorable treatment. The fact is this: there is a large group of people in the conservative movement who are in favor of Ron Paul's agenda. This is regarded, correctly, as a vote of no-confidence against the conservative Establishment.

It goes without saying that the Republican Establishment, which is to the left of the conservative Establishment, is even less happy with any publicity Ron Paul gets. These people do not want to think about the fact that there are millions of voters out there who are sick and tired of the expansion of the Federal government. These Paulites not only want to stop the expansion of the Federal government, they want to roll back the Federal government.

This is an intolerable thought to the Republican Party Establishment. The Republican Party Establishment is completely in favor of the expansion of the American Empire and the expansion of Federal welfare spending. The Republican Establishment understands that money buys votes, and they want to buy votes.

So, when any reporter approaches a major Republican figure in Congress, and asks what major spending programs must be cut back, or even limited, the Congressman begins to waffle. He refuses to be specific about what, exactly, ought to be cut from the Federal budget. He refuses to give any examples of how the Federal budget deficit can be rolled back from a $1.5 trillion deficit to, say, a $200 billion surplus. We need a surplus in order to repurchase all American debt. There is simply no thought given to the idea that the Federal debt ought to be zero. That has not happened since 1836, and it is not going to happen again.

So, when Ron Paul receives 30% of the straw poll, Mitt Romney receives 23%, and all the rest of the would-be Republican party hopefuls receive single digits, this indicates that the conservatives who attend CPAC are sick and tired of the waffling. They are unwilling to go along to get along. When the rest of the conservatives receive single-digits, including 3% for Sarah Palin and 2% for Huckabee, this indicates that the conservative Establishment is out of touch with the conservative party activists at CPAC. This is an affront to big-government conservatives.


Setting the agenda is the most important single power exercised by any establishment. We are told the President of the United States is the most powerful person on earth. But someone sets the agenda every day for the President. Somebody is in charge of the daily schedule of meetings. That person, not the President of the United States, will determine what issues get considered.

While it is possible for the President to set his own daily schedule, this is never done. Always it is some lower-level figure who schedules who will meet with the President, meaning which topics will be discussed by the President. The person who controls the daily agenda really does set the agenda for probably 80% of what the President decides to think about.

I have never seen a discussion and political science textbook of the procedure by which the daily schedule is set. A man I knew in high school, Dwight Chapin, used to set the schedule for Richard Nixon. He later got caught in the Watergate scandal and went to jail. I wish he would sit down and write a memoir, not on his activities regarding Watergate, but with respect to how, exactly, he set that daily schedule of meetings. I am sure he had to satisfy all kinds of political pressure groups represented within the cabinet. No one ever writes this memoir.

Yet this power of setting the agenda is rarely discussed in specialized studies of the Presidency. The simplest kind of question, namely, who gets in to see the President, is never mentioned. Here is one of the most important single powers anywhere on the face of the earth, and nobody knows exactly how it is done who was not part of the actual procedure. We do not hear discussions on this, and therefore we do not have any real conception of how policy is made in the executive branch of government.

The reason why Ron Paul is such a threat to the conservative Establishment is the fact that he has such a clear-cut agenda. This is obvious to the people who want access to controlling his daily schedule. That person would not be anybody connected with the Republican Party Establishment or anybody connected with the conservative movement's Establishment. He would have a completely different set of people in charge of his office. It is imperative, therefore, Ron Paul's candidacy be undermined as much as possible well in advance.

This is why, in the reports on the results of the straw poll, the writers spent almost no time on Ron Paul's agenda. There was no discussion of why Ron Paul got votes, except to say that somehow he was able to get more of his people to manipulate the straw poll. The question then is this: Why did the also-rans not get their people in to manipulate the straw poll? If Ron Paul was able to get out all those people, it indicates that the others failed to get support. This, I guarantee you, is never discussed by the journalistic hacks who spin the results of the straw poll. They spend time on the other candidates, as if the winner of the straw poll were somehow a secondary figure.

The conservative Establishment has always been able to keep libertarians at arm's distance from the troops. The mainstream has praised Austrian School economists as theoreticians, but never before has anyone in politics come before the voters to call for the implementation of the Austrian School economists' agenda. There has only been one other figure in my lifetime who was anywhere near as libertarian Ron Paul. That was Howard Buffett, who served in Congress in the late 1940s and early 1950s. He had no national audience. Nobody outside his district in Omaha, Nebraska had ever heard of him. He was not considered "Presidential timber," or even Senatorial timber.

So, Ron Paul was the first libertarian politician ever to penetrate the consciousness of the conservative movement. The fact that he has so completely penetrated the consciousness of the conservative movement has mainstream conservatives terrified. It was never supposed to be that anybody who favors the roll-back of the welfare state would ever be able to get the ear of conservative voters. This is what Ron Paul has been able to do.

If you look at the other people who are powerful enough to get the Presidential nomination, other than Mitt Romney, you find that they are pretty much silent on the issue of foreign aid, American military bases abroad, the expansion of the war in Afghanistan, and when exactly the troops ought to be called home. In other words, they are basically behind Obama.

This raises the question: When will anybody in Congress vote to cut American military spending? This raises another question: When will the foreign aid programs be completely eliminated?


Ron Paul is also known for his position on ending the Federal Reserve System. Nobody in the also-rans has a platform hostile to the Federal Reserve System. It is considered intolerable for any major American political figure to run for President on the platform of ending the Federal Reserve System. This would be a direct assault on the American Establishment. There is no more treasured institution anywhere in the Establishment than the Federal Reserve System. Yet here is a candidate who is basing his agenda on ending the FED.

In short, Ron Paul's agenda is far too specific for the conservative mainstream to tolerate. He wants to do what the conservative mainstream says it wants to do: cut the Federal budget, stop the expansion of the money supply, stop price inflation, and return to a free-market economy. The conservative mainstream does not really want to do any of these things, and never has. It has always been in favor of expanding the military budget, expanding Federal power outside the borders of the United States, running the world as the world's policeman, and increasing the money supply on a reasonable basis in order to keep American prosperity rolling. All of this is big government conservatism. All of this has been basic to the conservative movement since 1950.

Who will set the agenda? Will it be people who want to roll back the Federal government? Will it be people who want to constrict the Federal budget? Will it be people who want to end the Federal Reserve System's ability to bail out the Federal government every time it runs massive deficits? Is it somebody who wants to balance the budget, and not merely balance it, but run a budget surplus, so the government can begin to buy back the Federal debt? No conservative candidate runs on this platform other than Ron Paul.

This is why we can be certain that nothing is going to change in American political life. Ron Paul is not going to get the nomination. The American Establishment will see to this. We will see more deficits, a larger Federal budget, and more inflation. That is all the conservative movement has ever offered to the voters, and it is not going to change now.

In order to set the agenda, the conservative movement in the mainstream financial press must join together in order to confuse the voters. They must persuade the voters that things are not too bad, that there is hope for the future, the Federal deficit is really not so bad after all, and the good news is on the way.


There is no way off the train. The train is going to go over the trestle. The Establishment is committed to kicking the fiscal can. There will be no budget cuts. There will be no balanced budgets.

There will be a crisis when the budgets cannot be financed at anything under 20% per annum except by mass inflation by the FED.

Prepare for the crisis. It's coming.

Egypt Welcomes the New Boss

Egypt Welcomes the New Boss

by Gerald Celente

The Egyptian people in Liberation Square celebrated, the world leaders weighed in, and the global media parroted the tale of "history in the making." The big bad Hosni Mubarak has "listened to the voices of the Egyptian people" and has bowed to their demands to finally end his 30-year presidential rule.

On February 11th, the news came in a brief statement made by freshly anointed Vice President Omar "Egypt is not ready for democracy" Suleiman: "In these grave circumstances that the country is passing through, President Hosni Mubarak has decided to leave his position as president of the republic. He has mandated the Armed Forces Supreme Council to run the state."

Following the announcement, Nobel Prize recipient (and the West’s favorite opposition leader) Mohamed ElBaradei said it was the "greatest day" of his life and that "the country has been liberated."

The "greatest day" was summed up in a USA Today headline: "Mubarak resigns; military takes over in Egypt."

Trends Journal subscribers didn’t have to wait until February 11th to know the outcome of this "history in the making." In our February 1st Trend Alert we forecast:

As we will see in Egypt, military coups will be disguised as regime changes. Already the public is being conditioned to view the Egyptian military as beloved liberators. But in fact they are simply another arm of the autocratic government, no more familiar with democratic ideals than the dictator they replace...who had himself been drawn from the ranks of the military

History has not been newly made – it has only been repeated. Since the 1952 Egyptian Revolution, when army officers overthrew King Farouk I, the nation has been run by members of the military…until Friday, by former Air Force General Hosni Mubarak.

And now, Omar Suleiman (Egypt’s spy chief until Mubarak appointed him to Vice President on January 29) will also serve on the Armed Forces Supreme Council that will run the country, according to Al Jazeera.

Suleiman’s ascent to VP had been long in the making. According to a 2007 WikiLeaked US diplomatic cable titled 'Presidential Succession in Egypt' – "Egyptian intelligence chief and Mubarak consigliere, in past years Soliman (sic) was often cited as likely to be named to the long-vacant vice-presidential post. Many of our contacts believe that Soliman, because of his military background, would at least have to figure in any succession scenario."

In addition to Suleiman being accused of viciously stamping out political opposition and killing, jailing and brutalizing public dissenters during his 17 years as intelligence chief, he was also the "CIA’s man in Cairo" for, in part, devising and implementing the US rendition program. Beginning under President Clinton and continuing through the George W. Bush regime, the US, instead of bringing suspected enemies of the state (i.e., "terrorists") to trial, would kidnap them and send them to Egypt, the destination of choice, to be interrogated and tortured.

Heading the Supreme Council of the newly "liberated" Egypt is Defense Minister Field Marshal Mohamed Hussein Tantawi, who, according to a WikiLeaked 2008 diplomatic cable, is referred to by mid-level Egyptian officers as ''Mubarak's poodle'' – incompetent and archaic but intensely loyal to his President. The cable assesses Tantawi as having "opposed both economic and political reforms that he perceives as eroding central government power."

Other Council members include Defense Minister Lt. General Sami Anan, chief of staff of the Egyptian army, and Air Marshal Ahmed Shafiq, the new prime minister – all stalwart Mubarak supporters.

Yet, despite those in charge being the antithesis of democracy, President Obama proclaimed, "Egyptians have made it clear that nothing less than genuine democracy will carry the day. The people of Egypt have spoken – their voices have been heard and Egypt will never be the same."

"It’s an Egyptian version of ‘Change We Can Believe In,’" reported our man on the scene of the insurrection, John Anthony West, Executive Editor of the Trends Journal. "The people cheer and wave flags, and say exactly the same stupid things except in Arabic. Even the idiot exultation of the press whores sounds the same!" commented West, who arrived in Egypt two days before the protests began on January 25th, and has just returned to the States.

Mr. West warns, "Expect something even more dramatic, drastic and long-lasting when the nationwide, inescapable non-change sinks in a few months from now."

As with Egypt, in the "Democratic" USA, politicians, media and the nation-at-large put their trust and better judgment in the hands of their glorious, benevolent, military men and their magnificent war machines. Yet, as history has long proven, military rule, (decried as "juntas" in countries the US does not do business with) is invariably brutal and only infrequently does legislative power return to the people. If elections are held they are usually rigged and the only change is a change of clothes – from a tailored General’s uniform to a tailored Armani suit.

Meet the new boss, same as the old boss.

Trend Forecast: Getting rid of one person does not make a revolution. As aptly noted by such infamous "revolutionaries" as Marx, Lenin, and Pol Pot, no revolution can succeed that doesn't replace all members of the former ruling class.

In Egypt, the military class still rules and the power of the 18-member Supreme Council of the Armed Forces goes uncontested. The Council’s first actions have been a suspension of the Constitution, dissolution of Parliament and imposition of a ban on labor strikes.

In what appears to be a concession to protestors, the Council has promised to stay in power only on a temporary basis, and to hold fair and open elections within six month’s time…which is essentially the same election timetable proposed by Mr. Mubarak.

While no one can predict whether the military rulers will relinquish power and allow free elections, what can be assumed is that they will not willingly forego the estimated $2 billion in annual US aid the Egyptian government receives.

Since Mubarak’s exit, Beltway policy wonks and political front-men have been urging Washington to funnel funds to "pro democracy" groups in Egypt as part of an effort to influence the shape of the next government, to insure "stability" and support US foreign policy interests.

Trends Forecast: The developments in Tunisia, Egypt, and now spreading to Yemen, Algeria and beyond, are the manifestation of a trend long in the making – one we predicted in our "Off With Their Heads 2.0" Autumn Trends Journal. Not confined to North African and Middle Eastern nations, what is now unfolding is a prelude to a series of civil wars that will lead to regional wars, that will lead to the first "Great War" of the 21st century.

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