Posts Tagged ‘lisbon treaty’

About that state sovereignty thing… (Karl Denninger)

June 3, 2011

Karl Denninger is one of the more astute observers in the blogosphere and recently he was musing on the European situation decrying the fact that Trichet implied he would like individual states in Europe to cede sovereignty to the ECB

I can’t post on Mr. Denninger’s forum because the procedure is much too complicated for someone that would only post very occasionally so I decided to make a post of my own.

The reality is that through the Lisbon Treaty, a whole chunk of sovereignty has already been ceded to an unelected EU executive body. For the ECB and the rest of the governing elite to now complete the legislative and juridical take over of Euroland,  is only a formality.

Is a world war impossible?

May 28, 2011

Of course it is not. Sticklers for semantics might opine that it is not impossible but rather it is improbable.

How do you explain the following then.

Is it not curious how in the past ten years and particularly in the past five Western governments have gradually enacted legislation that could make a total war possible? Starting with broadening the definition of “terrorist”  to encompass actions that till recently had been an integral part of democratic expression thereby turning most law abiding citizens in potential terrorists if, for example, they dissent from the political line imposed by decree by government.

McGovern recalled how five years ago, when he challenged Rumsfeld, he did not get beat up by police, and was at least given the opportunity to interact with Rumsfeld.  By contrast, when McGovern disrupted a speech by Secretary of State Hillary Clinton, on February 15, 2011, he was arrested.  All he did was turn his back on Clinton at a speech at Georgia Washington University (You Tube video). After turning his back on Clinton, McGovern was dragged out of the room, and left with blood dripping down his pants.  This seems unbelievable, as McGovern poses no threat, is a 71 year-old calm gentleman, and a respected former CIA official.

Is it not curious that the Lisbon Treaty should have given rise to a political body that despite not being elected has broad executive powers?

And then there is the pesky provision of “Worldwide War” embedded in the National Defense Authorization Act:

And then there is that troubling attitude  that till recently was the almost exclusive domain of tin pot dictators in fringe countries like Tunisia, Syria North Korea or Libya for example and that is becoming ever more prevalent amongst “enlightened” Western politicians.

A worldwide war impossible? At this rate, hardly.

PS: By the way. I forgot this little gem from some months back:

So now NATO MUST, in the words of its chief, be prepared for perpetual war; must!

Must??!! Has anyone bothered to ask why we should prepare to launch foreign wars?

The economic incompetence of the political class (Charles W. Kadlec)

December 9, 2010

It is human nature. We never give something much thought till something goes horribly wrong.

I often drive across Europe. I recently returned from just such trip and as I drove through the St Bernard’s tunnel I was discussing the inevitability of disaster in human endeavor with my passenger. By means of example, I told him, take these tunnels. Till the Mont Blanc tunnel did not suffer a devastating fire and killed scores, tunnel safety wasn’t really an issue. Then the fire happened and now going through the Mont Blanc is an experience akin to driving into the Starship Enterprise – there are sensors, multi-colored lights, markers, signs, cameras, there is a blanket radio signal that takes over your car radio and at the toll booth you are only allowed to enter the tunnel at some distance from other vehicles. But then, a few years later, the Gottard tunnel too suffered a devastating fire and, once again, scores were killed. Similarly, and despite the Mont Blanc precedent, Gottard’s tunnel security wasn’t really and issue till then.

As we were discussing these unique human traits of waiting for something to happen before we do something, not two days later the Frejus tunnel skirted disaster two weeks ago as a fire developed. Maybe because this is the oldest and least practical of all the trans alpine tunnels and is therefore not used by many or because of sheer luck, the fire was contained and no lives lost.

And through the soul searching, the hand wringing and the finger pointing during the aftermath of disaster, we are singularly incapable (or are we unwilling) to take preventive measures for situations that inherently breed disaster.

The opinion expressed by Mr. Kadlec in Forbes can be generally agreed with; “generally”. But of course, as is the case with Mr. Kadlec, we must ask where was the press and the punditry when all this was developing and when, by the year 2000, the trend was clear and unmistakable.

Here is the Forbes’ opinion piece with my comments interspersed:

The sovereign debt crisis now threatening Europe, as well as major American states and cities, discloses the sheer incompetence of a political class that has over-promised, under-delivered and squandered vast amounts of their citizens’ wealth.

Guido here: Right there from the get go I have to take exception. Politics, and electoral politics in particular, can only be manipulative thus expedient and self serving. It cannot be otherwise. The simple political dynamic requires that a politician must either convince or deceive people in order to acquire a base larger than his/her opponents. But in the particular case of the interaction of politics and the economy, no politician could  viably propose spending cuts or the termination of programs. Thus electoral politics will always and everywhere be devoted to increased spending because a case can always be made that change can be brought about without cutting any programs.

Greece, Ireland, Spain, Portugal, California, Illinois, Los Angeles and Chicago are simply the poster children for what happens when elected officials engage in reckless and irresponsible management of their economies, their banking system or their respective government’s public finances.

Guido here: if Mr. Kadlec were familiar with the variety of monetary system we currently employ in the West, he would realize that “mismanagement” of the system is built into the system as a necessity for the life of the system.

Greece’s debt stands at 144% of its gross domestic product, the highest in Europe. Ireland’s debt is 70% of GDP, due in large measure to the liabilities it assumed when it bailed out the Irish banking system. The just-announced European loan of 50 billion euros to Ireland is equal to nearly 50% of its GDP. Within the next year, Italy will have to borrow 20% of its GDP just to refinance its maturing debt.

California’s budget deficit has soared to $25 billion, or more than 25% of total spending. And, according to a recent study, the City of Chicago’s unfunded pension liabilities total $45 billion, or more than $40,000 per household.

Politicians may not be solely responsible for this fiscal mess. But they are responsible for using borrowed money to pay for current expenses until they had borrowed more than they now seem able to pay back. Furthermore, they agreed to generous pension plans without properly funding those future obligations. As a result, massive tax increases–or a renegotiation of those commitments–now seem unavoidable. Neither alternative is going to be very pleasant economically or politically.

Guido here: Politicians are absolutely and solely responsible for this crisis. It is the politicians that have allowed the banks to propose and impose this particular variety of monetary system. It is the politicians that then and now continually fail to inform themselves on the characteristics and ramifications of the use of one system over another. It is the politicians that have imposed this particular variety of monetary system on society unilaterally and arbitrarily. Finally, for the same reasons I outlined just above, it is the politicians that insist on curing any political or economic crisis with excess spending and excess debt.

Prior to the euro, the political class in Europe could cover up its incompetence through a devaluation of the country currency in question. The ensuing inflation reduced the real value of the debt, providing elected officials and their economic advisors a face-saving way to force lenders to take a “haircut” on the value of their government bonds.

But with the euro, devaluation is off the table, and capital markets are beginning to bring the political class–and the supporters of big government–to account. In fact, capital markets were further empowered to check government excess by an agreement among European leaders that after 2013, bondholders will face a loss of principal in the event of a financial rescue of a European state. Lenders, as well as taxpayers, will be at risk from wasteful government spending.

Guido here: devaluation of the Euro is alive and well. Mr. Kadlec is either not familiar with the concept of Floating Exchange Rates or he does not understand it. But the Euro has been grossly and steadily devalued against a bunch of other things. What Mr. Kadlec intends to say here, is that being members of the Euro monetary system, European countries cannot devalue “against each other”. For a graphic representation of devaluation, check my charts (link at right) on page 4, 5 and 6.

In the meantime, however, the European strategy of enabling more borrowing while imposing austerity plans, including higher tax rates, on overly leveraged countries may prove counterproductive. Increasing tax rates slows growth, reducing GDP, employment and the tax base necessary to service the debt.

A shrinking economy and rising unemployment also increase the demand for higher government spending to support failing businesses and the unemployed. Moreover, lenders are already demanding higher interest rates, increasing the cost of refinancing past debts, which are now coming due.

At some point, there is a risk that one or more European countries may be unable to avoid a de facto, if not de jure default on their debt, requiring a complete restructuring. And that creates the risk that the European Central Bank will be forced to bail out the political class by buying that country’s sovereign debt and devaluing the euro–hence the current weakness of the European currency.

Guido here: Correction. Corrections aplenty. Higher government spending is the de-facto natural inclination of government whether the economy is doing well or not. Why else would anyone choose to adopt a Debt Based Fiat Monetary System? Hence the reason that, for example, since 1980 in the USA, Federal debt increased well over 1000% but GDP barely doubled. Besides; we are already bailing out the political class as we are bailing out the banks quite successfully too for now I might add.

In the U.S. at least, the looming debt crisis among states and municipalities also reflects a lack of diligence on the part of the citizenry. This can be attributed in part to a naïve assumption by the electorate that those in government, freed from the profit motive, could be trusted to do what was “right” for the community as a whole.

Guido here: ooooohhh so wrong. The debt crisis is the result of government deliberately debasing the currency. When interest rates move inexhorably from the top left to the bottom right, individuals are put in a position whereby if they do not spend they stand to loose all their savings. When government constantly and repeatedly lowers interest rates and regularly spends in excess of what the economy could sustain, the individual cannot do otherwise but spend because saving makes no sense.

Instead, what we now can see is that elected officials, following a power motive, can be as greedy and irresponsible as anyone in the private sector. In many cases, officials from both parties have been captured by powerful interests, including public sector unions and recipients of transfer payments. As a consequence, they have willfully committed current and future taxpayer money to benefit those with political power at the expense of the community as a whole.

Guido here: yeah. That’s the political dynamic in an electoral context. In an ideal world, it is the degree of fiduciary duty the higher echelons of government are willing to extend to society that could make the difference. But, again. The electoral politics dynamic pretty much precludes that.

One lesson is that to live in liberty requires an elevated level of diligence, oversight and skepticism of our elected officials. Taxpayers and financial market regulators need to insist on more honest accounting and disclosure of the true costs of the government programs in general, and government employee pensions and benefits in particular.

Guido here: Indeed. Liberty does require diligence and, I might add, sacrifice. That and pundits that can inform themselves.

The sovereign debt crisis now encircling Europe may well prove to be a preview of what lies ahead for the political class in the U.S. Like their European counterparts, they may be participants in an end-game in which capital markets force a reassessment of debt-financed government spending, especially on transfer payments, government pensions and wealth-destroying investments in bridges to nowhere, green energy and other government boondoggles with negative rates of return.

Charles W. Kadlec is an author and the founder of the Community of Liberty. He can be reached at

A (unwitting) mention of dictatroship…?

November 1, 2010

Our weekly dose of Ambrose Evans Pritchard is, as usual, interesting. But this time, it is interesting in unexpected ways.

Two things jump out. The first and the most stunning for reasons other than economics is this (emphasis added as a hint): “These were the terms imposed by Germany at Friday’s EU summit as the Quid Pro Quo for the creation of a permanent rescue fund in 2013. A [EU] treaty change will be rammed through under Article 48 of the Lisbon Treaty, a trick that circumvents the need for full ratification. Eurosceptics can feel vindicated in warning this “escalator” clause would soon be exploited for unchecked treaty-creep.”

If there ever were any doubts as to what the Lisbon Treaty is, the above should put those to rest. The Lisbon Treaty is the single most dangerous piece of fascist autocratic legislation aimed at the concentration of executive power that has been “passed” on mainland Europe since 1930s Germany.

But we all too numb yet (or still) to realize what is happening.

The other thing that jumped out at me from AEP’s piece today is his comment that: “Chancellor Merkel is ultimately correct. A mechanism for sovereign defaults is entirely healthy. Had it been in place long ago, EMU would have been stronger. The proper timing for this was at the Maastricht Treaty, or Amsterdam, or at the latest Nice, but in those days the EU elites were still arrogantly dismissive about the implications of a currency union. To wait until now borders on careless.”

That’s a bit of a departure for AEP whom till very recently advocated a (not entirely understood by this writer) mix of fiscal austerity with massive stimulus.

You know where I stand.

We’re hurtling towards a world war that is entirely engineered by our leaders as a way to get out of their responsibility for having aided and abetted the arbitrary and unilateral imposition of a monetary system that is limited mathematically and that, in its ending phase, is inherently destructive but that in the intervening period ensures an albeit diminishing degree of financial independence to the politicians that are willing to offer the most recklessly costly programs to the electorate.

War by 2012 / 2015

Greece under EU protectorate…

February 4, 2010

The article describes what is happening in terms of sovereigns trying to find a solution to their predicament. However, much more interesting are the themes the author touches upon but does not explore further. To wit:

Greece’s labour federation immediately called a general strike for February 24, dashing hopes that Europe’s provisional backing for Greek crisis policies would restore investor confidence.”

Unions, students and all unemployed will fight tooth and nail any austerity measure needed to put things right. As I remarked in many previous posts, over past decades society has developed an acute sense of entitlement vis a vis the state and rightly so. In a fiat monetary system, the authorities will always and everywhere confront a political or economic crisis with increased spending. Since 1913, subsequent administrations in the USA and then gradually in Europe and then the rest of the world, have always and still are resorting to inflation in order to solve any problem real or perceived as it may be. Inflation has thus come to be viewed as the natural state of the world and the state as the natural provider and the problem solver of last resort.

Of course, if you read this blog you will know that government spending can and does palliate the tragedy that is the political process in a society based on democratic principles. But that’s all it can do. Excess spending can only postpone the problem for as long as inflation can be expanded into a monetary system. When inflation hits the inevitable brick wall, then drastic measures are needed to re-create the conditions to allow the inflationary cycle to start again. In the meantime, deliberate inflationary policies pander to interest groups including unions and sundry political interest groups thus fostering an acute sense of entitlement. Thus, when the cows come home and spending must be curtailed, society will resist.

Mr Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. “In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big,” he said.”

Considering that less than a year ago Almunia was boasting about the presumed commercial and financial advantages of EU membership, this is quite a change of heart. But then again. Almunia contradicts himself week in week out because, once again, political pandering is more important than effective action.

Brussels invoked new EU powers under Article 121 of the Lisbon Treaty, allowing it to reshape the structure of pensions, healthcare, labour markets and private commerce – a step-change in the level of EU intrusion.”

Right there is the more interesting tid bit of info that gets no attention whatever. Remember the Lisbon Treaty? Do you remember that it gave us a whole new layer of politicians that despite not being elected by the people have nonetheless serious executive power? Well there you go. But wait! This is not what is important. If you understand what is going on here, then you surely can understand the degree of political sovereignty we have surrendered to what is for all intents and purposes an entity that is very Fascist in inspiration… and now in deed. The more long range ramification of the Lisbon Treaty (and this so far is only speculation on my part) is the ability for the EU to declare war bypassing all traditional political mechanisms that would necessarily require various levels of approvals from civic and political entities alike.

The EU told Greece to “spell out the implementation calendar of (budget) measures within one month”. Athens must be ready to “adopt additional measures if needed” and to submit quarterly updates.”

So that’s what it comes to; threats. Which begs the question: what if Greece doesn’t play ball? Then what could the EU do? What; we are going to send the army to straighten the country out? What does this threat imply?

The gap between what EU demands and what ordinary Greeks seem willing to accept is so wide that it may prove extremely hard for Mr Papandreou carry the country. The top union bloc said the government had “succumbed to the will of the markets” but would now have to face the stronger will of the people.

The top union bloc, like all unions around the world and particularly in the West (with the exception of Germany) fails to grasp the situation. When the monetary authorities can no longer push inflation any farther, there is no money left for political pandering. Certainly there is no money left for political pandering at the level of the great unwashed. And this is what is going to light the tinderbox. The unemployed, the homeless, students, the elderly, the retired and, at some point, even the employed will notice that although we are contributing billions to save the banks, we have no money left for society… that is the point at which the masses begin to get twitchy… that is the point at which, Western governments are going to need a drastic solution…. which speaks to the whole point of this entire blog…

Our options are few and well defined. In order to avoid doing what is necessary, our leaders will plunge us in a world war. I stand by my prediction. War by 2013/2015.