Spitzer and Weiner should learn from John Profumo

Elliot Spitzer and Anthony Weiner are just two low-grade amoral politicians who abused their offices during the past few years. Spitzer abused his position as Governor of New York to rack up some $87,000 in payouts to high-end call girls. Weiner used his position as a U.S. Congressman to mail out photographs of his naked genitals to supposed female admirers. Both men were married at the time. Both wives – in Lady Macbeth roles of career advancement – followed the appalling example of Hillary Clinton in standing by their men. Both Spitzer and Weiner initially lied about their behavior. Both ultimately were nailed, and resigned their positions. But not for long. Like Gary Hart, following his Monkey-Business debacle, they are both running again.

Fifty years ago, in the spring and summer of 1963, an English scandal erupted involving John Profumo, Secretary of State for War in the government of Harold Macmillan. Profumo, aged 48, had become involved with a loose set of people who gathered at Clivedon, the country estate of the Astor family. At a pool party, hosted by the society doctor, he met a young woman, 19-year old Christine Keeler, who was either a dancer or prostitute, depending on who one spoke to. They commenced an affair, which was over by 1962. Keeler was romantically involved, during that period, with Yevgeny Ivanov, the Soviet Naval attache assigned to London. All mature adults were aware that such a person must be a Soviet spy.

Profumo was caught out, and lied, just like Spitzer and Weiner. On the advice of his movie-star wife, he then came clean and resigned his position. Profumo – humiliated on every front page as an adulterer, a liar and a war minister who consorted with enemy spies – was finished. What would he now do? Surely he never stood for public office again. Profumo, unlike Spitzer and Weiner, had a conscience. He wanted to repay his moral debt to England.

He removed himself to a poor, run-down settlement house, called Toynbee Hall, in the East End of London.There he engaged in social work of the lowest order, washing dishes and cleaning toilets. He visited prisons for the criminally insane, helped with housing for the poor, and worker education. This was not for show. he worked at Toynbee Hall in that manner for the following 40 years, until he was 88 years of age.

Now there is a real man whose wife should be proud to stand by him. When he died in 2006, at the age of 91, the front pages of all Britain’s newspapers wrote about him with respect, even awe. He had truly redeemed himself, through humility and genuine public service.

When I view photographs of Spitzer and Weiner cavorting before the media with no sign of humility or conscience, it makes me want to vomit. For I know full well what they were, still are, and will be for the remainder of their wretched lives.

“When they caught him makin’ whooppee
And the campaign had to cease
Gary went into seclusion
He just had to find some peace.
He’s been out in Colorado
Since I can’t remember when
But he must be gettin’ horny
Cause he’s runnin’once again.

So he’s running into the Politics Game
Yes, he running into the politics game
Warren Beatty told him ‘lookie’
You can get a lot of nookie
If you get into the politics game.

John Denver, The Ballad of Gary Hart.

Hat Tip: Peggy Noonan, ‘How to Find Grace After Disgrace’, The Wall Street Journal, July 13, 2013

More on Edward Snowden

Today, Edward Snowden has accepted all three offers of political asylum – from Bolivia, Ecuador and Venezuela. He has applied for asylum in Russia until such time as his safe passage to Latin America can be secured. It is difficult to reach any of the three destinations from Russia without flying through United States or European territories

What a sorry situation this has become. A patriot who has alerted all countries including his own of massive surveillance by the United states government, is stranded until some method can be developed to get him out of Obama’s flight interceptions.

One method springs immediately to my mind. Vladimir Putin may decide to make a state visit to one of those countries, flying in his own Air Force One. Because of what happened recently to the President of Bolivia, Putin might let it be known that Russian advanced fighter planes will protect his flight from interference of any kind.

Then see how quickly President Obama and his international cronies will climb down and allow the flight to proceed.

If Obama keeps his promise, he will pardon Edward Snowden

“In his second inaugural address, President Barack Obama called upon ‘We the People’ to preserve America’s ideals of individual freedom and equality.’ When Edward Snowden disclosed the National Security Agency’s secret surveillance programmes, he was rising to this challenge. Like the nation’s ‘founding fathers’, hw was also defying the usurpations of an increasingly intrusive government. Mr. Obama should therefore call off the campaign to apprehend him and offer Mr. Snowden a pardon instead.” Stephen Walt*, ‘Snowden deserves an immediate presidential pardon’, Financial Times, July 9, 2013

“Mr. Snowden’s motives were laudable: he believed fellow citizens should know their government was conducting a secret surveillance programme enormous in scope, poorly supervised and possibly unconstitutional. He was right….Once a secret surveillance system exists, it is only a matter of time before someone abuses it for selfish ends. Richard Nixon kept his own ‘enemies list’ and used the Central Intelligence Agency to spy on american citizens. Former Federal Bureau of Investigation director, J. Edgar Hoover, helped keep himself in office by collecting dirt on officials.” Stephen Walt*,ibid.

“Gerald Ford pardoned Richard Nixon, George H.W. Bush pardoned the officials who conducted the illegal Iran-Contra affair, and Mr. Obama has already pardoned several convicted embezzlers and drug dealers. Surely Mr Snowden is as deserving of mercy as these miscreants. Pardoning him would also show that Mr. Obama’s rhetorical commitment to ‘We the People’, and to open and transparent government, is not just empty words.” Stephen Walt*, ibid.

* Stephen Walt is Professor of International Affairs at Harvard University

English history offers a parallel for Egyptian political reform (2)

In 1689, an unconstitutional English Parliament (unconstitutional because it was not called by the King) met and wrote a new constitution (the original constitution was unwritten). The Bill of Rights narrowed the discretionary power of the monarch, increased the independence of the judiciary, in all but name eliminated any notion of the divine right of kings, and significantly increased the powers of parliament. Most importantly, the suffrage was strictly limited to some 5 per cent of the male population (women had no suffrage until the early 20th century). A high property requirement was set in place for any person to vote. Members of Parliament served without pay, unless appointed as members of the Cabinet. King William III and Queen Mary II were required to sign this Bill of Rights before they could jointly access the throne.

This new constitution significantly reduced the arbitrary discretion of the monarch. Equally important, it set in place a parliament that would firmly establish and enforce property rights, thus paving the way for the Industrial Revolution. Britain became the richest and most powerful nation on the planet, building an Empire on which the sun would never set. Slowly, over time, the suffrage was allowed to expand, until in 1884, individuals without property were allowed to vote. This opened the gates to socialism and to the decline and fall of the British Empire.

Egypt is not yet ready for such a transition. Poorly educated as much of its population is, and subject to Islamic religious fanaticism as one-third of its population, surely is, there is no immediate prospect of establishing and maintaining an effective secular parliamentary system.

So the military, for the time being will have to govern. Since senior members of the military are at this time the primary holders of property in Egypt, this should ensure that an effective system of property rights will be established. If the military is far-sighted, I recommend that tit follows the example set by General Augusto Pinochet in Chile when he seized power from an incompetent and socialist President Allende. The General called in free-market Chilean economists trained at the University of Chicago by Milton Friedman, George Stigler, Gary Becker and Arnold Harberger to reform the economic institutions of Chile. Remarkable success followed. When the General voluntarily stepped down from power and returned Chile to democracy, the country was the richest in Latin America, and remains so to this day. This time around, it may not be so exclusively the Chicago-boys that are called to service – Chicago unfortunately is no longer an uncontaminated citadel of free-market economics. Other universities – such as UCLA, George Mason University, New York University, and Clemson University – may have to supplement Chicago supply.

While so ruling, the Egyptian military should ensure that all young Egyptians, females as well as males, receive a secular education. They should ensure that the job market is open equally to females as well as to males. They should offer stability of rule for a time-period sufficient for wealth-enhancing institutions to emerge. This may take five to ten years of transition governance.

The military should then write a new constitution for Egypt, modeled closely on the United States Constitution. A strict separation between Mosque, Church and Temple on the one side and the State on the other side, should be imposed. As in 1787, the suffrage should be strictly limited by a property requirement, albeit allowing females equal access with males to the ballot box. The secret ballot should be required. The initial suffrage should be restricted to no more than ten per cent of the adult population. Voters should satisfy both the requisite property requirement and (possibly) should be limited to individuals with university degrees and equivalent professional qualifications.The judiciary should be completely independent from the executive and legislative branches of government.

Then the world would truly marvel at the high rate of economic growth and economic freedom achieved by an Egypt unfettered from the bonds of autocracy and backward-Muslim religious fanaticism.

The courage of Edward Snowden

First they came for the Tea Party
and I didn’t speak out because I was not a member of the Tea Party

Then they came for the rich
and I didn’t speak out because I was not rich

Then they came for private market entrepreneurs
and I didn’t speak out because I was not an entrepreneur

Then they came for the advocates of freedom
and there were insufficient numbers left in America to speak out for me.

Thank you Edward Snowden for speaking out for me and my fellow patriots!

The Fed should taper QE3 immediately

At his June 19 press conference, Fed Chairman Ben Bernanke outlined the Fed’s plan to start reducing the pace of bond-buying later in 2013 and to end purchases by the middle of 2014. He conditioned this plan on a substantial improvement in the U.S. labor market, leading to an unemployment rate of about 7 per cent by mid-2014 with an increased rate of economic growth.

There can be no realistic expectation that the U.S economy will deliver on these projections. Over the past 12 months, unemployment has fallen from 8.2 per cent to 7.6 per cent. However, there has been no increase in the ratio of employment to population, no decline in the teenage unemployment rate, and virtually no increase in the real average weekly wage for those who are employed.

The Fed assumes that real GDP will grow by 2.5 per cent during the four quarters of 2013. With a growth rate of only 1.8 per cent in the first quarter and a likely greowth rate of only 1.7 per cent in the second quarter, the growth rate will have to jump to more than 3 per cent in the last two quarters to meet this expectation. And that is well nigh impossible.

U.S. exports are declining in response to weakening demand internationally and to a rising dollar. The Obama tax hike in January coupled to the spending sequester continues to drag down aggregate demand. These effects significantly outweigh the small positive effect on GDP from increased residential investment.

Yet, the market has reacted as if the taper is already in place. As bond yields continue to rise, the aggregate economy will respond in a similar fashion. So it makes a great deal of sense for the Fed to accept expectations and to begin the taper immediately. Such a policy would counter the tendency of investors to seek higher yields in high-risk securities. It would allow normal market forces to return, lifting long-term bond interest rates to the traditional 2 per cent above the inflation rate; or even more, given the debt crisis that continues to overhang the U.S. economy.

‘Do well while doing good’ should be the mantra of an independent Fed. Of course, much depends on the meaningfulness of the word ‘independent’.

Hat Tip: Martin Feldstein, ‘The Fed Shoud Start To ‘Taper’ Now’, The Wall Street Journal, July 2, 2013

Britain leads the world in bank reform

During the 2008 financial crisis, the governments of Britain and the United States failed the test that confronted them. Many of their largest banks had leveraged themselves excessively in mortgage securities and confronted bankruptcy as the U.S. housing market bubble finally burst.

The rational solution to such mis-behavior was to allow the die to fall where it may, specifically to allow insolvent banks to go under and thereby to cleanse an unhealthy financial sector of its least worthy members. The governments led by Prime Minister Gordon Brown (the Scottish cyclops), and President George W Bush (the compassionate conservative) lacked the moral courage to allow free markets to do their work, and introduced the concept of ‘too big to fail’ into the English language.

Since that policy nadir, Britain has forged ahead of the United States with respect to bank reform, as U.S. politicians, from president down to most lowly congressman, have become corporatists, equating the success of an industry with the interests of large companies.

The British government of Prime Minister David Cameron has not succumbed to this fundamental national socialist error, recognizing that the crucial issues lie in the structure of the banks themselves. The government has led the way by concluding that it is not so much that British banks are too big, but that they are too complex.

“Their combination of activities creates conflicts of values, of interests and of objectives. A culture of investment banking that is dominated by trading is incompatible with the requirements of reliable retail banking Central banks have flooded banks with funds to support domestic lending, but the balance sheets of these bans remain dominated by transactions with other financial institutions.” John Kay, Britain is leading the world when it comes to bank reform’, Financial Times, June 26, 2013

The British government gradually has recognized the need for structural change. The Vickers Commission, which reported in 2011, put forward the crucial reform: the separation of retail and investment banking. The Parliamentary Commission on Banking Standards, which reported in June 2013, has proposed criminal sanctions, including jail-time, for bankers who recklessly pursue their own interests ahead of those of the banks they control. Both bodies demand more competition in banking and the government is moving towards the parking of legacy assets in a bad bank. The Bank of England, under the able leadership of Governor Mervyn King, has been the leading source of skeptical thinking on the future of the British financial sector.

In the meantime, under the left-liberal influence of President Barack Obama and the hydraulic Keynesian influence of Ben Bernanke at the Federal Reserve, the American financial sector is returning to its old bad, bonus-boosting habit of excessive leverage, now secure in the knowledge that ‘too big to fail’ is the post-2008 nirvana.

Xi and Putin flip Obama and Holder the bird

In 1956, the United Kingdom confronted the reality that its days of Empire were finally over. In collaboration with France and Israel, the United Kingdom had asserted its authority over the Suez Canal overwhelming the Egyptian forces of Colonel Abdul Nasser. Britain took this action, as an imperial power, without consulting Washington.

U.S. president, Dwight D Eisenhower, was highly displeased with this autonomous action, that coincided with the USSR invading Hungary to put down a potential uprising, right in the middle of his re-election campaign. The British government was served with a warning that if the Allies failed to withdraw immediately from the Canal Zone, the United States would apply downward pressure on sterling. Sir Anthony Eden, the conservative Prime Minister, a great statesman who had served as Foreign Secretary to Prime Minister Winston Churchill from 1940 to Victory in Europe, and who had developed a close personal relationship with then General Eisenhower, reluctantly ordered withdrawal, thereby signaling the end of his own illustrious career, and, effectively, withdrawal of Britain’s imperial role, at least, East of Suez.

These past few days, President Obama must be reflecting on a similarsequence of events that have occurred under his weak and corrupt administration. No nation on earth now respects the political authority of the United States. U.S.influence in the Middle East is negligible, with the governments of Iran, Syria, Afghanistan, Iraq, Egypt and Pakistan openly flexing their independence from the Stars and Stripes. China and the Russian Federation clearly signal that the United States is a paper tiger led by an incompetent President.

And now, Xi Jinping and Vladimir Putin have publicly flipped President Obama and Attorney General Holder the bird, much in the same manner that Eisenhower flipped Eden the bird in 1956. By allowing Edward Snowden safe passage from their countries, as he flees American snoops without a passport and with felony charges hanging over his head, Xi and Putin clearly indicate that the so-called Pax Americana is over. It has collapsed in a web of lies, corruption and deceit, not least of the People who elected it into office.

Unfortunately, the American political system does not provide for the People to force its president prematurely out of elected office. So American will have to wait some 40 months before they can take their revenge on the betrayal from within.

Edward Snowden runs for freedom from Obama’s hounds from Hell

Earlier this week, the Obama administration filed a charge of espionage against Edward Snowden for revealing details of its secret extensive spying on American citizens. The net looked like closing tightly around Snowden’s neck, as Obama’s snoops sought vengeance for the shame that the freedom-lover has heaped upon them.

Fortunately, there are still some islands of freedom left as Obama attempts to blanket the planet with his coercive surveillance. Hong Kong provided a vital two-day window of opportunity by finding clauses in the U.S. indictment that failed to comply with their laws. Given that the indictment had not been properly filed, the Hong Kong government allowed Snowden access to commercial flights out of the still freedom-loving former British colony.

Wikileaks then assumed responsibility for spiriting Snowden to freedom. Using their international network and their legal support staff, Wikileaks arranged for Snowden to board a commercial flight to Russia, where he will be welcomed and assisted by President Putin. From Moscow, Snowden will fly to Havana, where he will be welcomed with open arms by a communist government that openly despises the Obama administration. From Havana he will fly to Caracas, where he will finally settle down, supported by a Venezuelan government that will never extradite him to the hated Yankees.

Well done Wikileaks and the several governments that have conspired with them to prevent a ruthless, coercive government from imprisoning, if not executing, a good man who dared to expose a debauched and corrupt U.S. administration.

Ben Bernanke finds difficulty in dismounting the bull

Ben Bernanke eagerly mounted the market bull in the wake of the 2008 financial crisis. Using monetary expansion as a device for refueling the market economy, Bernanke and his colleagues at the Federal Reserve have massively increased the magnitude of base money. By purchasing long-term Treasuries and mortgage securities, the Fed has driven long-term interest rates well below their underlying market equilibrium, imposing significant costs on seniors relying on fixed interest receipts to fund their golden years.

Mounting that bull was easy, cheered on as Bernanke was by almost everyone who had suffered capital losses during the financial meltdown. There is, however, no such thing as a free lunch. Sooner or later, those who mount and ride the bull must figure a way how to dismount without imposing a significant setback to a sluggish economy.Bernanke now confronts exactly that quandary in determining when and how to taper the current QE4 monetary expansion.

The eternal problems confronting the bull dismount are timing and political will. The timing to some extent is under his control. The political will lies elsewhere at higher levels in the political system. Bernanke is already learning the import of the second factor. Earlier this week, President Obama strongly hinted that 2014 is the end of the line for this would-be rodeo star. Wall Street has it that Janet Yellen will be Obama’s chosen successor. And she will ride the bull into hyper-inflation if that is what it takes to keep all the bubbles from bursting.

If Bernanke wishes to dismount the bull before he is ejected by the Big Man, he has little wiggle-room available. After all, he has all but promised near-zero rates into mid-2015 and he oversees a Fed balance sheet that has all but quadrupled in five and a half years to some $3.4 trillion.

Interest groups in Washington and on Wall Street are already urging him that it is too soon to dismount, and dangerous to signal any reduction in Fed bond buying in the near to less-near term. The housing recovery may be on its way, they say, but it is fragile indeed. The jobless rate may be falling, but at the pace of a snail. Deflation, they say hovers on the immediate horizon, and would make its dangerous presence felt should QE4 taper out.

My advice to Ben Bernanke is simple. Dismount now, while you still have some control over the bull. Recovery has been fragile over four years of monetary expansion. Much harm has been done to the economy by the manipulation of interest rates and the socialization of risk. Move monetary policy back to neutral and allow the real economy to breathe and adjust to market forces. I know that this asks a lot for a hard-bitten Keynesian such as you. But surely, by now, you understand that we do not live in a Keynesian world.

Hat Tip: ‘Bernanke Rides the Bull’, The Wall Street Journal, June 19, 2013