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Congress Ranks Last in Confidence in Institutions

In case you need more evidence that the government keeps encroaching on our liberty and freedom to pursue our lives without the interference of bureaucrats, the government has enacted a law designed to track purchases of gold coins and bullion.  This law and many others that we will find out about as time goes by, was inserted into Section 9006 of the Patient Protection and Affordable Care Act of Obamacare.  Is this chutzpah or what?  Our health is protected by tracking the gold we buy. 

Do wonder why we are losing confidence in Congress!



A major oil spill in China is threatening wildlife and sea life along the Yellow Sea.  I guess the Chinese should emulate Washington and fight this ecological disaster by blaming the Republicans, Bush and Cheney.

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A Short Money Treatise for D.C. Dummies by Steve Forbes

A devastating trade war with China has once again been averted, thanks to some last-minute diplomacy. But the destructive idea behind this ongoing crisis is still there, which means the dispute will undoubtedly flare up again. Uncle Sam believes Beijing manipulates its currency, the yuan, to give China an unfair trade advantage. Washington claims that since China's economy has long been strong and growing rapidly the yuan should go up against the greenback as if it were a common stock experiencing a surge in earnings. This theory is preposterous, but it has a stranglehold on Washington policymakers in both the legislative and executive branches.

It's time to get back to basic economics. Money--both the paper and electronic varieties--is, in and of itself, worth nothing; it has no intrinsic value. It is a means--and a profoundly important one--of enabling people to more easily conduct transactions without having to go through the clumsy and utterly inefficient barter process.

For example, when we sell a subscription to Forbes we don't receive in return an endless variety of products (loaves of bread, goat cheese, hot dogs, shoes, blouses and neckties, etc.) or services (two hours of lawn mowing, etc.). We are paid in cash and can then determine for ourselves what products or services--such as a writer's salary--we pay for with that subscription fee. If policymakers could grasp that elemental concept, they'd save themselves and the world considerable grief and could then get down to the business of removing trade barriers between those who wish to do business with one another.

Money is a facilitator. It should be a fixed standard of measure, as are the minutes in an hour, inches in a foot and pints in a quart.

Coins, mainly gold and silver, were the first money that facilitated trade beyond an immediate village or compact community, whose members would previously have used seashells or some other indigenous items. Coins had intrinsic value, which is why they were accepted beyond their community of origin. It was the pioneering use of coins, for example, that enabled Athens to become the commercial and cultural center of ancient Greece.

Coins are bulky and therefore can do only so much to ease and encourage commerce, hence the need for paper currency, financial instruments and today's electronic versions. This brings us to the chronic problem of how to ensure that money is not manufactured beyond the needs of a free marketplace, which is why the gold standard was established.

Alas, the notion arose in the late 19th and early 20th centuries that if wise men could have "flexibility" in issuing money without the constraints of its being tied to the supply of gold, or even silver, they could rid us of financial panics, the business cycle and other human ailments! John Maynard Keynes and others thought that if the economy looked to be slowing you should just churn out more money, like putting more logs on a flickering fire, and do the opposite if things looked to be overheating. But manipulating the amount of money or the cost of it, à la the Fed's fixing interest rates, gets in the way of prosperity. It does not facilitate prosperity but retards it. There is no way a handful of people--wise or unwise--in government and central banks can second-guess what markets made up of billions of people might need. We are living through a disaster that is the result of the latest Greenspan/Bernanke attempts to guide our economic destiny through central bank operations.

Imagine if the government decided to increase the number of minutes in an hour from 60 to 70. You can hear policymakers congratulating themselves: "People will work longer at the same pay. This will be a boon to productivity!" Or if Washington increased the number of inches in a foot from 12 to 15: "Home buyers will thus get more house for the same price and that will stimulate home buying!" Preposterous? It's no more foolish than what we and other countries routinely do with our currencies.

But back to China. A decade and a half ago China fixed the yuan to the dollar. If there had been any mistake in the exchange rate it would have been flushed out in trade patterns fairly quickly. Again, to simplify: If you sell a bottle of wine for four loaves of bread but suddenly notice you're getting only two loaves, you'll adjust your price pretty quickly to ensure you'll get those four loaves again.

By fixing the yuan to the dollar Beijing outsourced its monetary policy to the Federal Reserve. And for this "manipulation" Washington politicians and policymakers are in a lather of outrage. This fixing of a measure of value has enormously facilitated commerce--and thus prosperity. During the last 15 years U.S. exports to China have increased 650%, China's exports to the U.S. almost 670%.

Adjusting a currency does not ultimately improve a trade balance. Look at Japan: The dollar has depreciated 70% against the yen since the 1970s, when we pressured Tokyo--as we are now pressuring China--to appreciate the yen in order to reduce our trade deficit with Japan. Result: Japan's exports have grown markedly, and our trade deficit is far greater today than it was 30 years ago. Make no mistake: Arbitrarily changing a currency's value is a form of protectionism. Instead of raising taxes on imports the same effect is achieved by changing prices through currency devaluation. In 1984 one dollar bought 250 yen. Say that a widget cost 250 yen (or $1). If what the dollar could buy dropped from 250 yen to 165 yen, then the price of the widget went up to $1.50. That's as good as a 50% tariff.

The notion that a trade deficit or surplus indicates anything about an economy's health is also mistaken. The U.S. has had a trade deficit with the rest of the world for some 350 years out of the 400-plus since Jamestown was settled in 1607. Focusing on deficits and surpluses ignores equally important flows of capital, as well as the phenomenon of supply chains and the intracompany trade that crosses borders.

Pressuring Beijing about its currency is a destructively futile exercise that could have ugly political ramifications and escalate into a trade war. The Smoot-Hawley Tariff of 1929--30 set off a global trade war that sank us all into the Great Depression. If not for that economic catastrophe, Hitler would never have come to power in Germany. If cheap money were the way to wealth, Zimbabwe and Argentina would own the world today.

We should instead focus on substantive issues, including various Chinese trade barriers to U.S. imports and getting China to open up its capital markets.

The New Fascism

Let’s see if I remember my social studies lessons. There was a special definition for a government that denounced democracy as inefficient, scoffed at civil liberties, praised dictatorships, was extremely nationalistic and controlled every aspect of life, including the economies and workers organizations. Mmmmmm...what was it called? Oh, I remember…it was the definition for fascism!

Today’s New York Times is carrying an article under the banner Russia’s Leaders See China as Template for Ruling. What a surprise and how ironic that the tables have turned and it is Russia that does the emulating sixty-two years after being the role model for the Communist takeover of China. Putin has discovered the formula for success. Be fascist but call yourself a socialist. The West will love you.

Sixty-four years after the defeat of fascism, nations are using the templates of Hitler and Mussolini without hearing one word of condemnation from Western democracies. The reason is simple and exemplifies the power of words. Instead of calling themselves fascists, they use the terms People Democracies, Communists, Socialists or just plain Revolutionaries. But; a rose by any other name would smell as sweet.

Whether it is China, Russia, Venezuela, Cuba, North Korea, Vietnam, Bolivia or any of the many nations that are in the grip of despotic governments, the West accepts it because they use the mantle of the left.

And so it is that in the United States we can have Bill Maher, intellectual comic of the Left, announce that he envies China because it’s a dictatorship. Van Jones states that he is a communist, Anita Dunn quotes chairman Mao as her favorite political philosopher, the Hollywood elite, with high numbers in their bank accounts, and low numbers in their IQ’s, travel to Venezuela or Cuba praising the achievements of Castro and Chavez. Michael Moore continues making millions blaming millionaires. The UN blames Israel for everything, MSNBC gives a platform to the Left, the Dalai Lama is denied access to the White House, and we kowtow to Russia getting nothing in return.

All this because despots have discovered the magic of the Red banner. A few others are even shrewder. They know that they can destroy democracy, freedom and free markets under a different banner. The green one.

140 Dead in China. No Big Deal

Riots in China caused by tensions between ethnic Muslims and Han Chinese left 140 dead. No reports are offered by the government controlled media as to how many of the dead are Uighur.

Let us imagine that these riots had occurred in Israel, France, England or the United States between Muslims and non-Muslims with 140 dead. How would the media have reported these events? I somehow doubt that the reports would have been as restrained, indifferent and condescending as they have been so far with respect to China.

I am pointing this simply to show the double standard that exists depending on the location of events. A Palestinian killed by Israelis merits page one in every important newspaper. 140 dead in China is business as usual.

Perhaps in addition to importing every conceivable crap from China, we should also import their media manipulators. They are almost as good as Obama's.

Tim Geithner's Comedy Routine in China

The following is a report from Reuters. Read the last and highlighted paragraph:

U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.

A major goal of Geithner’s maiden visit to China as Treasury chief is to allay concerns that Washington’s bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China’s total U.S. dollar-denominated investments could be twice as high.

“Chinese assets are very safe,” Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

In today's news...

A great article for those of you who want socialized medicine.

China is greeting the new Obama administrations overtures and cuts in defense by increasing its defense budget by 15%.

Hillary again criticizes Israel. The next four years are going to by quite bumpy for Israel.

Obama rude to our closest ally. I guess he reserves his politeness for Ahmadinejad.

Michael Rubin argues that Obama shouldn't sacrifice allies to please Russia

Revisionist History in Japan

After many years of either teaching, studying or just reading history, I have become aware of the many views and contradictions in the narrative of historical events which depends on who is doing the writing. The same historical event will always be viewed differently and the historian will always find in his own biases the perceptions that shape his writings. Thus, events will be explained differently by those who belong to opposing countries, religions, cultures, political ideology or simply are anxious to be published in academia where “publish or perish” is the motto to follow, and the more controversial the writing, the better the chances of publication. The problems occur when the line is crossed between interpretation and denial. Historians can debate events within the Holocaust, however they cannot deny that Holocaust took place.

I decided to write about this after reading a report on the BBC dealing with firing of General Toshio Tamogami from his post as chief of the Japanese Air Force. This took place after he entered and won first prize in a history essay writing contest organized by the APA Group, a real estate company, where he promoted some very controversial revisionist ideas. Some of his most controversial statements were that Japan was entrapped by FDR, and Chiang Kai-shek into attacking Pearl Harbor, that the Comintern manipulated FDR and that failure to wage war would have made Japan into a white nation’s colony. He then proceeded to argue that the war ended up bringing prosperity to occupied China, Taiwan and Korea. Finally the essay argues that many Asian countries view the role of Japan positively. According to Tamogami the descriptions of Japanese brutality were mostly rumors spread by those who never witnessed it.

Revisionism in history is not a new phenomenon, and in some cases it even has a positive outcome, since it offers serious historians the intellectual exercise required to engage in the refutation of these theories. But in most cases the revisionist views remain in the peripheries of history. In the case of General Tamogami however, there are two differences, his position within the Japanese military hierarchy and the fact that the essay won first prize. This historical revisionism has gained support among many in Japan and especially in the Japanese military, where the glorious past with its samurais and bushido code are viewed through a nostalgic prism.

Now for a little bit of history. Leaving aside political and economic causation, I want to concentrate on the brutality of the Japanese during the period between the late 19the century and 1945. Tamogami denies the charges of brutality. But, like their Nazi allies, the Japanese forces were quite efficient in documenting their actions, and in many photographs one can actually see the pride exhibited by Japanese soldiers while performing the most despicable acts. For example, a bet between two officers as to which one of them will be the first one to kill one hundred Chinese with their samurai swords was used as a propaganda tool.

Starting in 1870, Japan emerged as a major power in Asia and began to flex its muscles demanding that Korea abandon the Chinese sphere of influence and move into the Japanese, and in China, territorial claims were soon followed by the invasion of Manchuria.

When Miura was appointed Japan’s resident minister extraordinary and plenipotentiary in Korea he ordered the assassination of Queen Min. The fact that Miura was found not guilty of this assassination while on trial in Japan, does not exculpate this action. In 1910, Korea was further humiliated when forced to sign the Japan-Korea Annexation Treaty which kept Korea under Japanese occupation until 1945. By 1931 the invasion of Manchuria gave further evidence to the imperial ambition of Japan and their desire to rule over Greater Asia.

By 1939, five million Koreans were conscripted into forced labor, thousands of Koreans were forced to join the Japanese army and two hundred thousand Chinese and Korean women were forced to prostitute themselves by becoming what the Japanese euphemistically called comfort women. This is not historical conjecture, since many victims and witnesses are still alive, and Japanese officials admitted and apologized for these acts.

Unit 731 offers another example of Japanese behavior during the war. This unit was in charge of scientific experimentation, and their behavior was not different from the worst Nazi atrocities. Prisoners were subjected to vivisection, amputations and served as guinea pigs in the testing of biological weapons. All experiments were carried out without anesthesia, since it was believed that anesthetizing subjects would interfere with the results of the experiments.

The death toll in prisoners of war camps was 30%, 26% higher than in Nazi camps. Millions across Asia died of starvation when their rice was confiscated for shipment to Japan. The list continues and papers and books have been written documenting Japanese conduct during the war. General Tamogami has done an actual disservice to the cause he wants to promote, namely that Japan should rearm and become a military power not a dependant of the US for its security. With ideas such has his, I would take my time allowing the rearming of Japan. I am sure China, Korea, The Philippines, and the rest of Greater Asia feel the same way.