The New Dark Age

There is no one date that can be identified as to when Rome fell and the Dark Ages began. Alaric and the Visigoths sacked Rome in 410 and Geiseric and the Vandals sacked it in 455, but it wasn't until hundreds of years later that the Gauls, ruled by the conquering Franks, realized that they were no longer speaking Latin but rather a new language derived from Latin. Eastern Rome or Constantinople did not fall to Sultan Mehmed and the Ottomans until 1455. Whatever date you choose to assign, there was a period of several hundred years during late antiquity when literacy rates were lower than previously, population had been decimated because of a series of plagues between the sixth and eighth centuries and few records were kept. I would argue that this decline was necessary for the rebirth of European civilization that occurred in the Renaissance, the Enlightenment and in Europe's most backward quarter at the time, Great Britain, from the 1500s to 1800s.

Compared to the period from 1776 to 1971, we have entered into an incipient dark age. The dark age is not necessarily identifiable through declines in literacy, although recent studies announced in the newspapers indicate that students' achievement has been in the decline. Nor do I predict the outbreak of plagues, although there have been such predictions. Rather, excessive monetary creation and the new money's transfer to Wall Street and real estate interests have slowed wage growth and innovation. We are in a dark age compared to where we would have been without the Federal Reserve Bank , the current monetary system and income taxes.

In other words, the Federal Reserve Bank's control of the money supply has displaced technological and market innovation with financial and real estate speculation and government. Until Richard M. Nixon finally abolished the gold standard in 1971 the real hourly wage grew at 2% per year. Since then, the real hourly wage has not grown at all. The difference between the wage profiles with compounded 2% annual growth and 0% annual growth over 40 years is around 100%. American workers today are earning 1/2 of what they would have been earning had the gold standard been in place and savings and investment resources allocated efficiently.

No one can know what the economy would have looked like in the absence of the Fed and the income tax, but there is no question that there would have been considerably more rapid and more extensive rates of innovation, just as there had been in the late 19th and early 20th centuries before the Fed was established. There would be less opportunity to work in low-paying retail jobs and less stock market appreciation. But there would have been opportunities to work in technologies that are unknown to us and unknowable because the individuals who would have otherwise invented the technologies became stock traders or lawyers instead of inventors. Likely there would be cures to diseases that are today unknown, methods of transportation that are unknown and conveniences that are unknown. Compared to where we would have been without the Fed, we are living in a dark age.

The Dark Ages perpetuated the Roman class system, replacing Roman Emperors, Senators and Equestrians with barbarian tribal chieftains like Clovis as kings and various feudal titles like earl, duke and count. In the American case, the Fed creates a three-class system: those with early access to Fed reserves, to include the banking system, the military-industrial complex, Wall Street and government; a middle class that mostly works in the military-industrial complex with some access to Fed reserves; and a lumpen proletariat without much access, about a third of the population. The three-class system replaces the egalitarian democracy of laissez faire capitalism, which was characterized by fast paced competition and more fluid class structures than today.

The new dark age is perpetuated by the creation of gilds or interest groups that resist change. Public employee unions demand the privileges to which they have become accustomed, as do their "betters" on Wall Street. The lowest extreme of the lumpen proletariat is content with section 8 housing, welfare and Medicaid, and the right not to work.

The new system is not yet so stable as the manorial and feudalist system of the earlier Dark Ages. The trifurcation of society will see stagnant living standards that may eventually decline. Medical innovation and then the standards of health care will be reduced, along with declines in the quality of diet, resulting in stagnant or perhaps increasing rates of mortality.

America's state-controlled media will attribute stagnation and decline to capitalism or to foreigners. They will protect the aristocrats of Wall Street, the military-industrial complex and government at all costs.

It remains unclear whether American wages will continue along the current stagnant path of the past 40 years or will begin to decline as the nation's economy becomes less important on the global scene. In order to regain a growth position (in real wages) there will need to be considerable upheaval in the American economy. It seems most likely that the wealth transfers to Wall Street, the military industrial complex and government will not abate unless there is an overt crisis.

Glenn Beck and Conspiracy Theories

Contrairimairi sent me this link on the Grand Delusion blog concerning Glenn Beck. The writer makes several good points. He should have stopped at his discussion of the Fed. Claiming that 9/11 was a US government conspiracy is a path which angels ought fear to tread. The freedom movement fails to serve itself by advocating conspiracy theories. The writer states that a few people resigned from the 9/11 commission but that is insufficient to claim a conspiracy.

There have been true conspiracies in American history, such as the one involving the assassination of Abraham Lincoln. There is still debate whether the Kennedy assassination involved a conspiracy. Such debates are fine but ought not be the basis of a political platform. Any movement or group that makes such a debate part of its fundamental belief system or platform consigns itself to the margin. So Beck is right.

Which does not change the Grand Delusion writer's key point. By making himself seem a "mainstream" leader of the freedom movement Beck can do considerable damage to it.

As I have previously blogged, I do not watch television or listen to radio news. The clips I have seen of Beck do not seem to indicate that he has taken a forthright stand on the Fed. I would also be interested in knowing his position on the United Nations. The video below opens questions, unlike any other media source, but Beck himself does not take a position. There is no one on any major media outlet who questions US involvement with the UN, so Beck's position is unbalanced. Balanced does not mean balancing 100% with 0%. Taking a 50-50 position where coverage is 100-0 means that you are advocating 99.5 To 0.5.

The importance of the Federal Reserve Bank issue cannot be overstated. It is the chief issue of interest to the "military industrial complex" and to anyone who favors socialism. Without the Fed and its wealth redistribution mechanism neither big government nor Wall Street's current form of organization would be possible. There is no need for a conspiracy theory. Bald economic interest and straightforward, mechanical economic relationships are all that are required to identify why George Soros favors the Fed and opposes the Second Amendment. Any advocate of the closed society and for a privileged elite would find considerable virtue in Soros's positions.

Acid Test for New York State Candidates

A friend will be interviewing Steve Levy, a prospective New York State candidate for governor, as part of a Republican group. Levy is a Democrat who is considering running as a Republican. Although I am skeptical of over-zealous emphasis on partisanship in part because there have been too few differences between the parties for too long, I am also somewhat skeptical of cross-party candidacies, basically for the same reason. If a Democrat is really for reducing government, why on earth is he or she in the party of Woodrow Wilson, Franklin D. Roosevelt and Barack H. Obama?

But I am not dogmatically opposed to Levy and may in fact support him if he can prove himself as a small government or at least a reduced government candidate (the GOP's other best bet, Rudy Giuliani, is hardly a small government man--although there were no large increases in New York City government during Giuliani's incumbency there were no large reductions either and it is hard to know because of accounting shenanigans).

At first I suggested that my friend ask a wide range of questions, but I realized that only one are two are necessary if there is too little time. One very good litmus test is Levy's position on the Wicks Law. Senator Arthur Wicks was a Republican from Kingston, the very city in which I am a member of the County Committee. This is what I wrote to my friend:

All you have to ask him is about whether and how he will repeal the Wicks Law. The Wicks Law has been on the books since 1912. The law is named for Senator Wicks who amended it. Wicks, I believe, was from my own Town of Olive in the Village of Olive Bridge which is a few miles from my home in West Shokan. Ultimately Wicks was forced to resign as Senate Majority Leader and acting Lieutenant Governor because "it became known that he had made frequent visits to convicted labor leader Joseph S. Fay while the latter was incarcerated at Sing-Sing prison."

The Wicks law says that the state or any other public entity (New York City, Town of Olive) may not hire a general contractor (GC). Four separate categories of contractors, (a) heating, ventilating and air conditioning (b) plumbing (c) electrical (d) all other, must be hired and supervised directly by the state or other public entity. The lack of a GC opens the door to abuse, crime, coordination problems and law suits. Government officials lack the knowledge and experience required to supervise mammoth construction projects. That is why private sector developers hire GCs. Studies find that the Wicks Law increases public construction costs in the state by 15-30%. No one except construction unions and public contractors supports the Wicks Law. Even the New York Times has editorialized against it. Mario Cuomo had appointed an anti-crime commission that found that the Wicks Law fosters organized crime. When I served on the State Assembly staff in 1991 I attended a meeting at Alan Greenberg's office in Bear Stearns. The meeting was meant to devise cost cutting strategies. Presidents of the leading construction firms in New York City were the majority of the participants. I asked one privately about this and he told me that public construction in New York is so corrupt that he never bids on any public contracts.

Compounding the Wicks Law, if you have time there is a second issue, the diffusion of responsibility for construction in four or five different state agencies. These include the Dormitory Authority (whose existence in itself is an outrage) and the Office of General Services. There are two or three others. What happens is that the actual costs of construction are back charged to the agencies on whose behalf the construction is done. So if the Dormitory Authority does work for SUNY it gets charged to SUNY. This buries the true construction costs around the state. Openly comparing the construction costs in one agency would prove embarrassing to the state because the costs are so high, much higher than other states. The state avoids this.

See:

http://www.acecny.org/PDF/WicksLawPosition.pdf

http://www.stopthetaxshift.org/procurement/60-the-wicks-law

America in Economic Decline

Erich Deagostino has forwarded a link to a Yahoo! news report that suggests that America is heading down the same road as Greece, which is nearing bankruptcy. The report notes that:

"As with Greece, America's national debt has been growing by leaps and bounds over the past decade, to the point where it threatens to swamp overall economic output. And in the U.S., as in Greece, a large portion of that debt is owed to foreign investors."

The aggressive Democratic health care socialization push will cause us to stumble further down this road.

There is a long history of cries about excessive borrowing's leading to economic crisis that have turned out not to be true. The history goes back to the 18th century. But of course, it sometimes does turn out to be true. American has defaulted on its loans before. The nation issued a currency called the Continental to finance the Revolutionary War and after the War the Continental turned out to be worthless. People who held it were defrauded. America invented modern hyper-inflation along with democracy. In response, the 19th century saw the development of hard money attitudes, which were viewed as benevolent and pro-labor. In the twentieth century labor unions' leaders realized that they could advance themselves by advocating inflationary policies that benefit Wall Street and harm their membership. In no small part as a result, labor union membership has consistently fallen. Why should workers pay dues to support leaders who betray them?

The claim that America is too big to fail should seem absurd now that we have witnessed General Motors' failure. For much of my life, GM was the largest corporation in the world and few could have imagined its failure, at least until the mid 1970s. The claim that China and other countries "need us" may be true, but eventually some will wake up to the fact that the Emperor is a pauper and will pull out, leading to a dollar crisis.

Greek labor unions are striking. But one cannot derive water from a stone, and the irrational strikes will only make matters worse.

In response to mounting American and European instability, Marc Faber on Kitco radio recommends gold, US real estate, developing countries' stocks like India and Brazil and cash. Faber says that a crash in China cannot be ruled out so that there is no rush to go into developing countries' stocks. Also, US real estate may not have much further to fall in his opinion. He says up to twenty percent further. I'm not sure of that, but given Congress's commitment to prop up real estate and stock prices, he may be right. I doubt that real estate prices could be maintained were this a market economy. But that is true of all assets.

In the meantime I have begun to have thoughts of an exit strategy as I am concerned that the US will increasingly become totalitarian under Obama and the Democratic Party. Were I slightly wealthier I would buy land in the Bahamas. Unfortunately, on a professor's salary I have to be content with hard asset investments and my house. Without a stable monetary system and with a system of economic redistribution whereby the privileged benefit from Congress's and the states' theories of beneficence, which inevitably loot those who work hard and are criminal in substance, has the American dream died?