Sunday, February 21

Glenn Beck to CPAC: No Prisoners. Plus Pundita tells Glenn what's really wrong with the USA and tosses in a lesson on Global Village Math

Last night Glenn Beck gave the keynote address at the annual CPAC (Conservative Political Action Conference) in Washington. The speech, which lasted about an hour and included as 'special guest' Glenn's trademark chalkboard, was a huge hit with the audience, which had packed the lecture hall to capacity. However, the key point in Glenn's speech is not good news for America's centrists, those Independents who prefer to fence-sit, and the Republicans and Conservatives who want to regain the White House at any cost.

He stood before the CPAC and said bluntly that there could be no compromise with the Progressive position; it would have to be a fight to the political death, winner take all.

He also spoke of the Progressive philosophy as a cancer that had to be cut out of American society before the country could find its way back to sustained prosperity and a sane political system.

I'm not sure how Newt Gingrich, who is a Conservative, and who also spoke at CPAC, is taking Glenn's news that no, there can't be a "principled bipartisanship" between the Left and the Right in Congress.

Glenn's position is that one can't compromise with a position that's destroying the country. And last night he aimed the message straight at Republicans. In his most evocative utterance he spoke of being stabbed in the eye by a Democratic screwdriver, and that he didn't consider being stabbed in the other eye with a Republican pin to be effective relief.

His speech got cheers and standing ovations but many in that audience of over a thousand, and indeed the ten thousand in attendance at CPAC, were college students. So I'm also not sure how Glenn's message will be received by the most powerful Republicans.

And I don't think it takes a crystal ball to predict the reaction from Wall Street and corporate board members who traditionally divide their donations between Republicans and Democrats, and who just want to see enough gridlock in Congress to allow them to get business done. That crowd includes Glenn's boss at Fox Cable News, Rupert Murdoch, a self-described Libertarian who's made a career of bending with political winds around the world to protect his far-flung media empire.

As to how the Libertarians at CPAC took Glenn's speech, which comported with major Libertarian principles, it was well received but that's not necessarily saying much. Shortly before Glenn spoke the results of the CPAC straw poll were released, in which the attendees voted their pick for the next U.S. President:

Ron Paul, the leading Libertarian politician in America, got a stunning 31 percent of the vote, which left all other Conservative candidates in the dust: Mitt Romney got 22 percent; Sarah Palin, 7 percent; Tim Pawlenty, 6 percent. (And a majority of the voters said they wished the Republicans had a better field of potential candidates.)

However, within moments of the announcement a Fox reporter at the convention did some detective work. She learned that only about two thousand attendees had voted. She found that the ballots hadn't been distributed among the ten thousand attendees; they were available at only one table in the convention hall and unless people sought out the table they didn't get a chance to vote. She added that Ron Paul's highly organized and energetic supporters had made sure to snap up ballots.

So while the Tea Party rebellion probably gave Ron Paul the largest vote he's ever received at CPAC, it's doubtful he was the most popular candidate at the convention; a chorus of boos accompanying the cheers from his supporters during the announcement shores this observation.

Most Conservatives consider Ron Paul too radical in his positions -- although I think it might have been Larry Kudlow, the supply-side economist and financial news commentator, who said in 2008 that with every year that passed Paul's position sounded less radical to him.

Yes, in the awful aftermath of the financial markets meltdown Paul's warnings and imprecations don't sound nearly as a radical as they did a decade ago. But that plus 50 cents in a national election won't go far, not for those who're determined to put a Republican in the White House no matter how much compromise it takes.

As for the Tea Partiers, the other day Pat Buchanan observed for Human Events, a Conservative publication that's one of the CPAC organizers:
[...] This week, a smoke detector went off. China, in December, had unloaded $45 billion of its $790 billion in T-bills. Is Beijing bailing out?

To assure the world we are not Greece writ large, the United States must soon adopt a visible plan for slashing the deficit.

There are three ways to do it. One is through growth that increases the tax revenue flowing into the Treasury and reduces the outflow for safety net programs like unemployment insurance.

But growth only comes slowly and can take us only so far.

Needed is a combination of big budget cuts and tax hikes. But the only place one can get budget cuts of the magnitude required is from the big entitlement programs, Social Security, Medicare and Medicaid. And the only place to get revenue of that magnitude is by raising taxes on the American middle class.

And here is where Barack Obama hits the wall.

Republicans are not going to give him a single vote for a tax increase. Not only would this violate a commitment most made to the people who elected them, it would be politically suicidal. For behind the GOP today, and its best hope of recapturing Congress in 2010, are the Tea Party irregulars.

And Tea Partiers now play the role of Red Army commissars who sat at machine guns behind their own troops to shoot down any soldier who retreated or ran. Republicans who sign on to tax hikes cannot go home again.[...]
Pat is sympathetic to the Tea Party position and Glenn Beck's:
The Tea Party folks are not into the Gerald Ford politics of compromise and consensus. They have seen what it produces: the inexorable growth of Government. [...] Principled conservatives are resisting tax hikes because they believe government has grown too huge for the good of the country. And if that means putting the beast on a starvation diet -- no new tax revenue to batten on -- so be it. Cold turkey time.
But his article is titled, Is this how democracy ends? In his closing remarks he wonders what will happen to an American political system that can no longer bend to accommodate compromises:
Anticipating gains in November, Republicans will not give Obama any new taxes before then. After November, their ranks swollen by Tea Party support, they will be even more intractable.

Where does that leave Obama -- and us?

Later this year or early next, to avoid a debt crisis, Obama will ask Congress to raise taxes and pare back entitlement programs.

And a paralyzed government will drift closer toward the maelstrom.
That is the argument centrists and many Independents will use, and which leaders in both the Republican and Democrat parties will use against the Tea Partiers: cut out the extremists on both sides and find a compromise we can all live with.

I think the answer to the argument is to ask how compromise got so elevated in the American political system that it became the system's defining characteristic. In Glenn Beck's view the obsession with political compromise, which amounts to 'You scratch my back I'll scratch yours,' has created massive corruption in Washington.

As to what the Chinese are going to do to us if we don't stampede into compromise -- there is a path other than the three Pat Buchanan named. It's called default. Before you scream and faint, yes it will mean higher interest rates for U.S. borrowing, but this will drive down the U.S. dollar, which will drive up U.S. exports, which makes Beijing happy because the renminbi is pegged to the dollar. However, this will make Brussels unhappy because the euro will appreciate too much against the dollar, driving down EU exports. Ergo, a way will magically materialize to remove the stigma from the U.S. default, thus returning more strength to the U.S. dollar. Global Village Math. It's a wonderful thing.

I hope we don't have to take the drastic step of default but the world is not going to come to an end, and neither is the United States, if we don't hurry up and compromise our way into yet another blind alley.

As to whether Glenn has correctly identified America's root problem, the impossible can never be a root cause. The economics that Progressive or 'Leftist' policies depend on don't work, they can't work. But they've been working in one fashion or another in the United States since the end of World War Two. How to explain this seeming contradiction?

The explanation is essentially the same one that kept the Soviet Union afloat during the Cold War. After Stalin's death Moscow abandoned isolationist policy and began selling energy to Western Europe, which had an insatiable need for fuel, as their economies began to grow in the wake of reconstruction era.(1)(2) From that point on, which was even before Ostpolitik, Russia had an economy that was part bare-knuckles capitalism. Saudi Aramco used to complain in those days that Russia was undercutting their prices in the oil markets.(3)

So Russia's central planning schemes, which did not work, and which could not work in any galaxy, were propped up by capitalism and American support of our dear NATO allies in Western Europe, who were buying scads of fuel from Moscow.

If anyone's wondering: Yes, there were protests on Capitol Hill. Some members of Congress said, 'We're helping to support the Soviets while we're fighting them. This is nuts.'

It was either be nutty or pull out of NATO. Actually there was a rational alternative to the U.S. continuing the farce. Washington could have admitted that Communism was deader than a doornail in Russia, then re-thought the Cold War. But where's the fun in being rational?

The Russians didn't want to admit the obvious, either. They had a reputation as Communists and successful central planners to keep up, even though all of Europe knew the real story.

The point here is that it's a joke that the Soviet Union was able to function for any length of time according to central planning. And Marxist schemes were propped up by oil and gas sales, which incidentally spawned a class of kleptocrats that ran the Soviet Union into the ground.

It's essentially the same with government-backed Leftist schemes in the United States. Something's been propping them up all these decades, even though FDR's handling of the Depression was clear demonstration that redistribution of wealth doesn't work. You have no further than your wallet to look for the solution to the mystery. Those U.S. dollars are not just a medium of exchange; they're also a commodity -- one the world can't live without.

Because the U.S. dollar is the world's primary reserve currency, central banks have to buy dollars and hold a certain amount of their reserves in dollars. That means Washington generated their own Commanding Heights industry, which brought in revenue that's quite distinct from tax revenue. That is how the world's oldest continually functioning democracy managed to spawn an imperial government, one that over the decades was increasingly insulated from the will of the people. So it's not in your imagination that no matter who the voters send to Congress it's always business as usual in Washington.

The profit from U.S. trade in dollars meant that Washington could literally paper over the failures of internal and external policies. It didn't matter whether Progressive schemes worked; they could be kept on life support by dollar sales.

But that also explains why the federal government has made increasingly stupid decisions and keeps repeating the same stupid decisions. This is the Little Emperor syndrome in action: if you're always protected from the worst consequences of your mistakes, if there's always a blank check to bail you out, which is what the dollar trade amounts to, there is no impetus to learn from your mistakes.

In short, the U.S. dollar's role as the world's chief reserve currency, which has done so much since World War Two to stabilize and grow international trade, turned out to be America's Achilles Heel. That's because an endless series of blank checks are too much for human nature to resist abusing.

The same happened to the British when the pound sterling was the world's reserve currency. They abused the pound's reserve status, and they paid a tragically high price for that. I think that's why John Maynard Keynes suggested at Bretton Woods that an alternative to a national currency be devised to handle international payments. He proposed a global currency unit he called the Bancor, which was to reflect the averaged price of 30 of the most important commodities, including gold.

The idea was shot down by the Americans, who told the British delegation that from then on the U.S. dollar, not the pound, was to be the world's major reserve currency.

It's a great irony that Keynes's daffy economic ideas were accepted, while his sound idea for the Bancor was rejected. But that observation is with hindsight, and glosses the way things were at the end of the Second World War. Much of the world was in ruins. People all over the world trusted the U.S. dollar, and it was something tangible. They wouldn't have trusted a medium of exchange that was not based in a successful, stable, and powerful nation. Keynes's idea was simply ahead of its time.

Has the Bancor's time arrived? I mentioned in a post I wrote last year, when Glenn Beck and Larry Kudlow had become alarmed by Robert Fisk's blitherings that the U.S. dollar was to be dumped tomorrow as a reserve currency, that you can't just wave a wand to create a new reserve currency. Many conditions must be met, and these conditions can't be forced.

For years the world has been gradually moving away from the dollar as the major reserve currency. That trend will continue. Today at least 20 percent of a major central bank's reserves is in euros. Yet that's been part of the problem for the United States: for more than a half century the increasingly big trade in the dollar commodity gave Americans a misplaced sense of security. No matter how much we lost in industrial output, we didn't fall because we had that ace in the hole -- that endless series of blank checks generated by dollar sales.

So while the dollar sales helped build the global economy, our dependence on those blank checks made our own economy weak. As the world began to diversify away from dollars, as a natural consequence of the success of globalized trade, the weakness became evident but only after the financial crash. And here we are today.

At some point in the future, maybe not even in our lifetime, the world will be ready for something like the Bancor. For now, we depend on the Lords of the Craps Table, who meet at places such as the Bank for International Settlements, to keep patching things in The Casino (the international monetary system), so it can lurch along.

(Don't worry; the central banker types in The Casino are just window dressing. The Lords really run things and they're like your cousin Vinny. The only difference is that their parents drew the line when they learned their child wanted to monkey with the innards of cars instead of going to college. Yes, these Lords have degrees in finance but they're tinkering brains. They can patch anything, even a broken financial system, with nothing more than duct tape and chicken wire. So what if the patch only lasts 15 minutes? They live to patch things.)

And don't worry about China. The next time a Chinese economist tells you, 'We're going to create an Asian reserve currency,' do me a favor: Look as pitiful as you possibly can and whimper, 'Please please Bre'r Sir don't throw us Americans in the briar patch. Do what you want with us, just don't make an Asian reserve currency.'

Let me tell you what will happen the day there's an Asian reserve currency. George Soros and the rest of the blood-sucking currency speculators will get off our backs and go leech off the Asian economies. And with any luck Soros will change his citizenship yet again, then proceed to do for China exactly what he did for the USA.

All right; that's enough happy thoughts for one day. Yes, Leftist schemes to redistribute wealth need to be exposed as unworkable, and Glenn Beck has been doing a magnificent job at that. He just needs to widen the lens to see that final piece of the puzzle: why the unworkable has hung on so long in this country.

1) From a 1982 paper for the Heritage Foundation titled Is Soviet Gas Pipeline a Steel Noose?:
Since 1955, oil and natural gas have accounted for 85 percent of Soviet energy growth. More important, however, crude oil sales have become the major source of Moscow's hard currency earnings. In 1980, oil sales brought in two out of every three foreign exchange dollars earned, even though the one million barrels a day exported to the West were hardly a major factor in the international oil market. Yet it constituted 70 percent of all Soviet trade outside the East bloc.
2) For more readings on Soviet energy sales to Europe, see Ruhrgas AG Company History and The Recurring Fear of Russian Gas Dependency

3) The Threat Of Soviet Oil; Saudi Aramco World, Volume 13, Number 3; March 1962

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