The Federal Reserve will initiate federal debt default in the United States

There are two ways in which a national government can default on its publicly-held debt obligations. The first – and the one that caught the attention of markets and rating agencies during the debate over the debt ceiling – is that of declining to honor interest rate obligations on Treasury bills, notes and bonds. This approach usually is confined to Third World banana republics.  Sometimes, as in the case of Argentina, the Third World country that pursues such a policy once was a First World country that allowed itself to be seduced into socialism.  And that is what S & P  rightly worried about when downgrading the U.S. debt from its former triple A rating.

Autocrats and Democrats alike tend to shy away from direct debt default because it is so blatant and because it inevitably drives would-be creditors away from future government note issues. Politicians of any mode are far from easily-shamed – the profession attracts the most unscrupulous genes of any generation – but outright debt-default tends to be the preferred choice of only a minority even of  that shameless caste. Fortunately for those who love to run up unsustainable debt, another route to salvation beckons.

Inflation is the second route to debt default. It is the preferred route followed by governments of all kinds – from the  Imperial dynasties of Ancient China, from the Ancient Republics of Greece and Rome, from the Roman Empire,  from the Divine Right monarchs of Europe, from the parliamentary democracies that followed, from the socialist republics that paid lip-service to Karl Marx, and last, but surely not least, from the constitutional republic of the United States.

Treasury notes – with the small exception of those indexed to the inflation rate itself – are note  obligations that commit government to making fixed periodic payments until the note matures.  Inflation erodes the real value of that nominal commitment. Inflation constitutes theft by government inflicted on any naive investor who choses to trust its word. Once inflation is afoot, wary investors price it in, and the government has to increase its nominal commitments accordingly.  By shifting the rate of inflation upwards over time, an unscrupulous government can continue to steal, at least until the fraud collapses into hyper-inflation.

Inflation-theft works better at lower rates of inflation than at higher, because perceptions of theft remain subdued.  Therefore, when observable inflation rates are low – as at the present time – the temptation to steal is greatest.  Members of the Federal Reserve are now showing signs of cashing in on this window of vulnerability:

In an interview with CNBC, Charles Evans of the Chicago Fed said that he would ‘favour more accommodation’ and became the first policymaker on the rate-setting Federal Open Market Committee explicitly to countenance letting inflation rise above the Fed’s target of 2 per cent in the short term. ‘If 1 per cent was not a catastrophe, 3 per cent is not a catastrophe,’ said Mr. Evans.” Robin Harding, ‘Top Fed member in plea for stimulus’, Financial Times, August 31, 2011

You had better watch your back, Mr. Bernanke.  The politicians in Washington will love to hear  Mr. Evans’ message.  Mr. Evans for Fed Chairman, anyone, when Ben Bernanke’s second terms expires?  Unless, of course, Mr. Bernanke astutely concurs with the stealth  debt default proposal now emanating from within the belly of the Fed.

Failed retread: Alan Kreuger returns to Obama economics team

President Obama clearly has closed his mind to any radical change of direction  over the duration of his term of office in the White House.  By replacing Austan Goolsbee with Alan Kreuger as chairman of the Council of Economic Advisers, the President has brought back into his administration a Princeton economist who served an entirely undistinguished term as chief economist at the Treasury Department, advising  Treasury Secretary Timothy Geithner thoughout the first two years of the Obama administration.

Alan Kreuger is a left- of- center mainstream economist much in the same mould as Larry Summers, motivated by progresssive ideology to push economic policy in the direction of state capitalism. He is more focused on the numbers than Summers, but typically – though not always – finds the numbers to be supportive of bigger rather than smaller government. As a left-leaning specialist on labor market economics, Kreuger constitutes a real threat to Obama’s re-election prospects; and for that, those of us who are not already out of work  must be truly thankful.

Kreuger’s policy contributions at Treasury were simply dreadful:

He was the architect of the $3 billion subsidy designed to permanently boost auto sales by  removing auto clunkers from the road in return for new vehicle sales. Designed to bail-out Government Motors and Chrysler – the two nationalized automobile corporations – the subsidy served beautifully to advance car sales by one quarter, in return for  a next quarter’s equivalent decline!  He was also the architect of  a program of tax credits for employers who took on extra staff during the recession.  This program also had no net impact, as employers laid off workers in order to rehire them at a reduced cost.  In both cases, taxpayer monies were flushed down the Obama administration’s toilet. Rational expectations economists come back, all is forgiven!

Hey! Princeton Department of Economics, have you thought recently about hiring Robert Barro or John P. Taylor to your distinguished faculty? Your intellectually-under-nourished  students would clearly benefit enormously from a rational expectations enlightenment!

Sometimes the numbers have led Alan Kreuger in the right direction, but not when serving in a left-of-center administration. For example, in 2002 and in 2008,  Kreuger determined that paying people more not to work increases the incentive not to work, thus increasing the time that the unemployed spend out of work. Any chance of bringing that result to President Obama?  Not a snowflakes chance in Hell!  Kreuger will rerun the numbers and discover that increasing/extending  unemployment benefit in 2011 will drive the unemployed more quickly back into the workforce. For, times they are a changin’.

On one famous occasion, Alan Kreuger has been accused of  fudging the numbers. In 1992, New Jersey hiked its minimum wage by 18 per cent while its neighbor, Pennsylvania, left its minimum wage untouched. Standard economic theory suggests that unemployment should have advanced in New Jersey relative to Pennsylvania.  Alan Kreuger and David Card gathered information on fast food restaurants in the two states, using an employer questionnaire methodology, and determined that, by hiking the minimum wage, New Jersey had actually increased employment in New Jersey fast food restaurants, both absolutely and  relative to those in Pennsylvania.

The paper garnered quite a response, with a number of eminent economists- -including Gary Becker and James Buchanan –  suggesting that the result was more a reflection of fast fingers than of the hiring practices of  fast food restaurants.  A major issue of concern was that no one could replicate the Card/Kreuger empirical results.  Another was that the results of the  paper ran counter to a large number of other studies on the minimum wage, and, yet, contained no theory to explain why low-skilled New Jersey labor might exhibit a backward-sloping supply curve in 1992.

James Buchanan (Nobel Laureate in Economic Sciences 1986) leveled a devastating charge against the two alleged sharpsters:

“no self-respecting economist would claim that increases in the minimum wage increase employment.  Such a claim, if seriously advanced, becomes equivalent, to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests.  Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.”   James M. Buchanan, ‘Minimum wage addendum’, The Wall Street Journal April 25, 1996.

It may well be that the bevy of camp-following whores has expanded significantly in the 15 years since James Buchanan threw down that scientific gauntlet. In any event, it is likely to do so now, since one of its alleged founding fathers is about to serve right inside President Obama’s White House.

Some important federal budget arithmetic

Readers may be puzzled by seemingly inconsistent statistics that are now flooding the media with respect to the size of the U.S. federal debt problem.  Today, I draw on a useful clarificatory column published in The Wall Street Journal  by John Steele Gordon to focus attention on the nature of the apparent inconsistency.

1.  The total national debt of the United States is the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed. 

2.  The publicly held debt is the sum of the Treasury securities held by individuals, financial institutions, and foreign governments.

3.  The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally by the Social Security Trust Fund.  These liabilities equal the future pensions, health care, Social Security payments, etc. that are promised under current legislation. These are liabilities only as long as current law remains unchanged.  So, if legislation was signed into law eliminating all Social Security, health care and other commitments of the federal government – and there is no constitutional protection against such legislation – intra-governmental debt would disappear immediately.

The question thus arises, should intra-governmental debt be included when counting the size of the national debt?  As long as one believes that the commitments will not be reneged upon, the answer must be positive.  For, as the Social Security surplus disappears, given that the Trust Fund  monies have been expended elsewhere, all that remains are Treasury notes. As these notes mature, Congress will have but three options: cut spending elsewhere, raise taxes, or borrow the money in the bond market, thus converting intra-government debt into publicly-held debt.  The third option is the most likely.  So intra-government debt must be counted in.

On August 11, 2011, the total public debt was $9,924 trillion, and the intra-government debt was $4,666 trillion, making a grand total of $14,587 trillion.  As such, public debt equalled 66.1 per cent, and intra-government debt equalled 31.1 per cent of gross domestic product.  Thus, total debt is now 97.2 per cent of GDP and rising rapidly.  That is the ratio relevant to the U.S. federal debt debate.

It is important to note that what matters is the rate of growth of the debt relative to GDP. And this is where the United States is currently very vulnerable. The ratio itself has been higher – for example in 1946 it stood at 129.98  per cent. But conservative fiscal policies roughly balanced the federal budget, allowing the ratio to decline as GDP grew.  By 1960, the ratio of total federal debt to GDP had declined to 58 per cent. The debt to GDP ratio can also be reduced by inflation, as occurred infamously through the 1970’s, lowering the ratio to 34.5 per cent by 1980.

The fundamental problem confronting the United States at this time is that no attempt is being made to balance the budget, economic growth is all but non-existent, and  the total debt to GDP ratio will soon pass 100 per cent and well beyond as far as the eye can see.  That is why Treasury notes were downgraded by S & P and why the two other major ratings agencies should be castigated for not following suit.  That is why fundamental budgetary reforms are essential – reforms that target all the entitlement programs while reforming the tax structure to raise revenues while  regenerating GDP -growth.

Wise voters will evaluate all candidates for the 2012 elections – presidential, senatorial and representative alike – in terms of how they propose to resolve the federal budget crisis as defined in terms of the total federal debt to GDP ratio.

Hat Tip: John Steele Gordon, ‘A Short Primer on the National Debt’, The Wall Street Journal, August 29, 2011

Hurricanes, governance, and the people

Across the Eastern section of Virginia, residents are recovering from  Hurricane Irene, a Category 1 hurricane that vented her wrath across the mid-Atlantic states from South Carolina to New York.  Irene struck almost exactly six years after Hurricane Katrina devasted New Orleans and much of the State of Louisiana. Katrina was more powerful – a Category 3 hurricane – but Louisiana is much more accustomed to hurricanes than are the mid-Atlantic states.

Here in Virginia, surely Irene caused a great deal of damage. But there was seemingly only one hurricane-associated death and recovery is now well under way. Most of the power has been restored, roads are largely cleared of debris, and homeowners are rapidly cleaning up their yards. Katrina, by comparison, wrought much more damage – indeed recovery is still a work in process.

To a considerable extent, the quality of  a state’s government, together with the underlying integrity of its residents, can be judged by how effectively such natural disasters are guarded against and dealt with. Virginia must rank highly in these terms. Louisiana, by comparison, would appear to have much to learn. Across Virginia, evacuations were required and largely obeyed. Government officials did not flee the scene. Transit systems dealt with any exodus and then shut down.  Power crews were drafted in in a timely fashion. In Louisiana, by comparison, chaos reigned. Government officials deserted their posts, hospital patients were left to die, and police officers joined in the looting of New Orleans. Walmart was the only institution of integrity that took care of its people.

So my reflection for today is that it really does matter where one chooses to reside. The Commonwealth of Virginia stands high in my estimation. And I am deeply thankful that Virginia is where I set up my home.

Ben Bernanke flunks Economics 101

At the annual Jackson Hole, Wyoming all-expenses paid, extravaganza for the barons of global financial markets, Federal Reserve Chairman Ben Bernanke  displayed complete ignorance of market economics and unadulterated  adulation for socialism.

The American economy is faltering in its economic recovery from the 2008 recession for several reasons. The most important impediments to recovery are (1) a monetary policy that has flooded the system with high-powered money that will convert to serious inflation the moment that significant recovery commences;  (2) fiscal policy that has flushed trillions of U.S. dollars  down the toilet, significantly worsening a federal debt crisis that hangs like an albatross across the private sector of the economy; (3) massive over-regulation of the private sector that deters new business initiatives and curtails hiring incentives among already-established companies; (4) an inefficient tax system designed to create tax exemptions for special interest groups while imposing high marginal income tax rates on hard-working successful firms and individuals.

A Federal Reserve Chairman who understood the model underpinning this assessment would recommend the following policy reforms as the basis for effective economic recovery: (1) the slow but persistent tightening of the monetary corset designed to eliminate the excess overhang of high-powered money; (2) serious stress-testing for all major U.S. banks designed to remove access to the Federal Reserve for any financial institution that fails to maintain a well-defined, substantial Tier One capital ratio; (3) a systematic tightening of the federal fiscal corset designed to move the  budget into a sustainable balance and to reduce federal spending to 20 per cent of gross domestic product by 2014; (4) significant deregulation of the private sector- major financial institutions excepted – including the elimination of the minimum wage; and (5) tax reforms designed to eliminate all tax exemptions and to lower marginal rates for all households while raising overall tax revenues to 20 per cent of gross domestic product by 2014.

Ben Bernanke’s remit, of course is limited to items (1) and (2) on that list, but his voice might count for something on items (3)-(5). At least he would be making a good Paul Volcker try to rectify policies that are driving the U.S. economy into an economic black hole.

Instead, Ben Bernanke flunked the test completely. The thrust of his remarks favors a continuance of monetary over-expansion, continuance of the monetary coddling of failing banks, a new injection of Stimulus IV, the propping up of property prices across the nation, and the abolition of the Bush tax-cuts, without any consideration of fundamental tax reform.

Repeat the academic year, Mr. Bernanke, and learn some real economics from scholars who understand how free market economies actually operate.

The Barack Obama-Ben Bernanke sting

The President of the United States and the Chairman of the Federal Reserve System are co-conspirators in a sting aimed to relieve the nation’s thrifty creditors of their accumulated wealth, as a means of filling their own greedy political pockets, while sluicing some of the ill-gotten gains into the pockets of underserving dissolute debtors, who will hopefully campaign to keep the President in the White House, and to vault the Fed Chairman into a third term of monetary debauchery.

The sting was set in motion earlier this week when Ben Bernanke announced the intention of the Fed to keep interest rates at zero per cent for at least the next two years.  Such a policy is designed for four principal purposes:

First, a backdoor bailout for failing Wall Street financial institutions who are now freed-up to access zero-priced  money for two years so that they can profiteer worldwide by hedging and arbitraging across financial markets, while protecting their backsides  by buying Treasury bonds.  All such basically insolvent institutions should have been liquidated in September 2008, thereby cleansing the financial system of accumulated grime. Note how, President Obama’s  trusted left-hand friend, Warren Buffet, is now attempting to expand his wealth by buying into Bank of America stock to the tune of $5 billion in order to channel some of those sluiced transfers into his own always-greedy pockets.

Second, to destroy the nation’s community banks, the agents of laissez-faire capitalism, who traditionally make their money the old-fashioned way, by paying their customers interest on their hard-earned savings, and by lending such deposits back to their communities in the form of venture capital to aspiring new businesses. With the Fed now setting depositors ‘ interest rates at zero, and with President Obama inducing an anti-socialist capital strike, how will the community banks make a viable margin in the markets in borrowing and lending?  Will they also increasingly play the big banks’  socialist game, by borrowing from the Fed at zero rates and lending to the U.S. Treasury at 2 per cent per annum. Some statist economy that will be! 

Third, a back-door bailout for U.S. households who cannot, or rather will not, balance their budgets. Low mortgage rates – yet again – for homeowners who have placed themselves under-water, diverting excessive economic resources to the construction industry. Back-door bailouts for those who have run- up excessive credit card debt, and now look to big government for a Wall Street-style big- helping- hand.

Fourth, and most satisfying of all for the two socialists who run the sting, wealth-destruction for those thrifty savers who have accumulated sufficient savings to break-loose from the socialist  corset of social security and medicare in their autumnal years. With yields on ten-year bonds running at two per cent per annum, the socialist corset tightens, and even  the thriftly oldies are dragged into the net of dependence on D.C.

Hat Tip: Camden R. Fine, ‘A backdoor bailout for Wall Street’, The Washington Post, August 26, 2011

Camden Fine, by the way, is a community bank owner and was president of a bank that served hundreds of community bankers for more than 20 years.

Keynesian fiscal furnace still roars; with predictably negative outcomes

Give President Obama and the two Pelosi Congresses credit for this much: They said they would spend our way out of recession, and they sure gave it the old Beltway try.  The problem is that we got the spending  without the promised economic activity.”  ‘What Austerity?’, The Wall Street Journal, August 25, 2011

Spending by the United States federal government in fiscal 2011 – which ends on September 30, 2011 – will reach a new historical high of $3.6 trillion, an increase of $141 billion from 2010.  This represents an increase of approximately one third in just four years from 2007.  In 2011, spending will come in at 23.8 per cent of gross domestic product, up from 20.7 per cent in 2008.

The spending increases were promised. Eonomic recovery was also promised, together with significant job creation.  Neither is remotely on the horizon. The hydraulic Keynesian economic advisors –  Larry Summers, Christina Romer and Austan Goolsbee –  have long since fled the capital to take up asylum behind fortified ivory towers. Like Colonel Gaddafi in Libya, President Obama is wandering around the tunnels beneath the White House, no doubt contemplating if he can make it to Annapolis, and a naval exit to some island refuge.

The mouthpiece of Washington politics, the Congressional Budget Office is still painting rosy scenarios in an attempt to shore-up the President’s 2012 campaign. Like propagandists for Saddam Hussein who, in 2003, reported the widespread destruction of  retreating  U.S. cavalry, this is pure fantasy. 

The CBO forecasts a decline in the deficit from $1.3 trillion in 2011 to $973 billion in 2012 and to a mere $265 billion in 2014.  This assumes that federal spending will increase by only $12 billion in 2012, a fiscal corset that even President Ronald Reagan never achieved. President Obama is already calling from his bunker for significant additional spending in 2012.  The forecast also assumes that Medicare payments to doctors will decline by 30 per cent beginning in 2012 – a promise that Congress has been making since 1997 and has never delivered, and never will.

The rest of the CBO’s projected fiscal turn-around supposedly will come from increasing federal revenues when the Bush tax cuts disappear in 2013.  President Obama already is ring-fencing those tax cuts for all save the most wealthy households – and wisely so if he is to have any hope of coming out of his bunker. 

So We the People are supposed to believe that federal tax revenues will rise from 15.3 per cent of gross domestic product in 2011 to 19 per cent in 2013 and to 20.2 per cent in 2014 as the U.S, economy rockets to a growth rate of 4.4 per cent in 2014 and to 5 per cent in 2015, despite huge tax increases on capital gains, dividends, small businesses and workers in 2013.

Beam us all up Scotty. But please leave the President in his bunker until November 2012. At that time, We the People can pull him out and clean him up like we did for Saddam Hussein.

Manhattan is not Paris; DSK is not Louis XIV

“French citizens may not mind their leaders acting out their Louis XIV fantasies with impunity, but Manhattan isn’t Paris.  DSK got neither more nor less than he deserved – something for which he can blame, and thank, Cy Vance and America’s justice system.”  ‘The Judgment on DSK’, The Wall Street Journal, August 24, 2011

When a fat, squat,  ugly, 62-year-old, Jewish man claims that, within a maximum period of nine minutes from  first encounter to affair’s end, he charmed and seduced a 32 year-old Muslim  single- mother into stripping him of his clothing and  fellating him to a sexual climax, the mind simply boggles with dis-belief. Anyone, anywhere in any part of the world, who believes that lie is either a simpleton, or is motivated by goals other than a search for the truth.

Yet, the decision by Manhattan District Attorney, Cyrus Vance, to ask a New York judge to dismiss all charges against Dominique Strauss-Kahn, and the judge’s decision so to do were entirely correct in a country where the rule of law applies.  In the DSK case, Anglo-Saxon law has worked exactly as it should, at every stage from the initial accusation to the ultimate outcome.

Ms. Nafissatou Diallo evidently had sufficient confidence in the integrity of the New York legal system to file a complaint with the NYPD following the alleged sexual assault and use of force upon her helpless body, by a white male, while she was attempting to clean his $3,000 a night hotel suite.

The NYPD, alerted to the fact that DSK was attempting to flee the country for France –  where he would have had the audacity to make a run for the Presidency – immediately following the alleged crime, had every right to drag him from the flight and to take him into Riker’s Island custody in handcuffs.

With DNA evidence that DSK’s semen was splattered all over the suite and all over the maid, the District Attorney had no option but to bring DSK before a Grand Jury.

Given the evidence, the Grand Jury had no option but to indict DSK on seven charges, two of which involved sexual assault.

Given the indictment and the risk of flight, the New York District Attorney acted generously in placing DSK under house arrest until his case could be fully investigated.

Given the lies about her sexual  past, perpetrated under oath, by the hotel maid, and given inconsistencies in her account of the sexual assault in the Sofitel Hotel, the District Attorney had no option but to ask for the charges against DSK  to be dismissed.

In the light of this request, and in the absence of eyewitness evidence of the nature of the sexual encounter between DSK and Ms Diallo, the judge had no option but to dismiss all charges.

This does not at all imply that DSK is anything but guilty as charged. His own past history of abuse of women, of forcing women into sexual encounters, of admitting publicly to three separate sexual encounters with unknown women during a two day private visit to New York City, constitute powerful evidence that DSK is an aging, unattractive Lothario, hunting down vulnerable women wherever he can lay his hands upon them, and relying upon power and the wealth of a politically-ambitious  millionairess wife, to safeguard him from the legal consequences of his deviance.

The rule of law, however, requires that crimes must be proven beyond all reasonable doubt, a high bar, deliberately designed to avoid convicting the innocent, that inevitably allows some guilty to go unpunished. If Type one errors are low, then Type Two errors must be correspondingly high.  DSK is the beneficiary, in this instance, of a Type Two error.

How the citizens of France respond to this situation will signal the character of the people.  Expectations cannot be high. History demonstrates the poor quality of French character and French culture. The French Revolution was allowed to collapse into the Terror and into the injudicious reliance on Madame Guillotine.  World War II, demonstrated the overt anti-Semitism of the Vichy government led by the corrupt  Marshall Petain, who collaborated with a German monster to send many thousands of  French Jews to the gas chambers. The  delight of a French majority in collapsing the Fourth Republic into the dictatorship of Charles de Gaulle demonstrated the fragile nature of their democratic instincts.

If DSK runs for the Presidency of France,  he may well win. For even among female voters there appears to be a high degree of tolerance for male abuse of women, when the males in question are rich and powerful and pay lip-service to  the ideology of progressive socialism.

 If such is the nature of the French majority, then DSK will be a strong contender for the Presidency of France. Americans, for the most part, will respect but not condone a DSK Presidency.

If  Strauss-Kahn is elected into the Elysee Palace, he would be wise to confine himself to his regular visits to his  Swingers’ Club haunts in Paris. District Attorney Cyrus Vance, and the NYPD will be on full alert, should DSK should  ever choose to visit New York again, his presidency nothwithstanding.

That is the nature of the Anglo-Saxon  rule of law properly applied.

Manhattan District Attorney drops DSK rape charges

Prosecutors in New York City have recommended that a judge dismiss sexual assault charges against Dominique Strauss-Kahn, former head of the International Monetary Fund.  DSK was arrested on May 14, 2011, when he was dragged off an Air France flight just before it departed for Paris from John F. Kennedy International Airport. 

DSK was indicted by a grand jury on seven charges, including two counts of sexual assault, for offences that allegedly occurred during his stay at New York’s Sofitel Hotel. Allegedly, he had hidden himself naked in a bathroom  until a hotel-maid – Ms. Nafissatou Diallo – entered to clean the suite. The naked DSK then allegedly pursued her across the suite, grabbed her, prevented her from escaping, and violently sodomized her, before fleeing the hotel.

The District Attorney’s case apparently has disintegrated despite the fact that DSK’s semen was recovered from the suite and from the maid’s clothing. DSK eventually admitted to a sexual encounter with her, but claimed that it was consensual, despite the fact that he is an unattractive, overweight, desicated-looking  sexagenarian, while  the maid is a youthful-looking 32 years of age.

The case evidently has fallen apart because of an unfolding history of lies perpetrated  by the maid as part of her successful application for political asylum from Guinea several years earlier. No doubt this prior history would have moved center-stage in a trial, reducing the value of the maid’s testimony before a New York  jury. Understandably, the New york prosecutors now do not place a sufficiently high probability of success should they pursue the indictment through the criminal courts.

It is important to understand that dropping an indictment does not constitute DSK’s innocence in this matter. It simply reflects the limitations of a jury trial, together with the high burden of proof required in a criminal case. Readers will remember how O.J. Simpson evaded conviction in the infamous Los Angeles murder trial.

However O.J. Simpson eventually was brought to a form of justice through the civil courts, where the standard of proof is lower and where much better qualified private attorneys take over from under-performing state bureaucrats. Ms. Nafissatou Diallo must now rely on a civil suit against DSK to redeem her honor. Even if her suit fails she will savor the knowledge that her courageous allegations may have saved France from electing a depraved deviant into the Elysee Palace.

There are many ways in which criminals are penalized for their unlawful behavior. The criminal courts are not the only vehicles available to the victims of  those monsters who exploit  wealth and  power to debase  innocents whom they hold as unworthy even of their contempt.

“Mr. Vance has denied the right of a woman to get justice in a rape case.  He has not only turned his back on an innocent victim but he also turned his back on the forensic, medical and other evidence in this case.” Kenneth Thompson, Attorney-at-Law  representing Ms. Diallo, August 22, 2011

Obama administration now owns future of Libya

President Obama, some six months ago, placed the United States in a state of war with Colonel Gaddafi’s Libya. He did so without the consent of Congress. Therefore, the war was and remains unconstitutional. On July 15, 2011, President Obama recognized the rebel government, a motley consortium of internally dissenting tribal clans

Today, Colonel Gaddafi’s regime has collapsed following a poorly conducted campaign by a weakly- led United States sheltering behind a  NATO-sponsored seriously- defective military intervention.  The NATO-U.S.  campaign was conducted in the midst of  serious internal dissension amongst  the Libyan  rebels supposedly led by a weak  Transitional Council.

President Obama has now taken time out from his Cape Cod vacation to claim victory:

‘Tonight, the momentum against the Qadhaffi regime has reached a tipping point.  Tripoli is slipping from the grasp of a tyrant.’

If President Obama is correct in this assertion, then he should be praying for an outcome favorable to America’s interests. For the President was not sworn into office to meddle in other people’s affairs, unless the direct interests of his own country were involved.  Colonel Gaddafi was an ally of the United States seeking to make his own contribution to the War on Terror. If the situation now reverses, with Muslim fundamentalists using petro-dollars to finance anti-American terrorism, the American people will not easily forgive this President’s  arrogance and lack of constitutionality in interfering with the politics of a sovereign nation.

The Libyan rebels lack any dominant single leader, so a fractious scramble for power is predictable. My own expectation is that the Muslim  fundamentalists are better prepared than the rest for the blood bath that is likely to follow victory, and that a second civil war will break-out across Libya,  followed by the emergence of a Muslim fundamentalist regime hostile to Western capitalism. 

Such an outcome may sit well with  President Obama. It will not sit well with  a large majority of Americans. The President will not be able to shovel blame onto his predecessor if this new threat to Middle Eastern stability does indeed unfold.