James Taranto: “Unlike homosexuality, heterosexuality is amenable to therapeutic remedies–or so Anthony Weiner and his fellow House Democrats would like us to believe.”

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Pam Geller quotes Muslim woman (throwing a backpack onto the DC Red Line train and exiting): “Praise Allah. I’m going to kill the world.”

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Jeff Dunetz: Obama’s Israel Policy: “F*** The Jews, They Will Vote For Us Anyway!”

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Mark Steyn (reporting on last night’s NH debate): “John King makes Tim Pawlenty look like Lady Gaga.”

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Barack Obama: “I wish I could tell you there was a quick fix to our economic problems. But the truth is, we didn’t get into this mess overnight, and we won’t get out of it overnight. It’s going to take time.”

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Iowahawk: “The world is not a high school regional moderated debate & clarinet competition. It’s a high school parking lot gang fight.”

Thomas Jefferson

A little patience, and we shall see the reign of witches pass over, their spells dissolve, and the people, recovering their true sight, restore their government to its true principles. It is true that in the meantime we are suffering deeply in spirit, and incurring the horrors of a war and long oppressions of enormous public debt. If the game runs sometimes against us at home we must have patience till luck turns, and then we shall have an opportunity of winning back the principles we have lost, for this is a game where principles are at stake.

–From a letter to John Taylor of Caroline (June 1798)

Walter Russell Mead (who has recently been on a roll, producing a series of very intelligent articles) argues that the imminent end of the entitlement era marks as profound a change in the American way of life as the century ago passing of the family farm and the transition to majority employment in towns and cities.

The death of the family farm didn’t kill the American republic for several reasons. First, to some degree Jefferson was wrong and Hamilton was right. A strong manufacturing and financial sector can strengthen democracy under the right conditions; ancient, slave-holding Rome was less like modern capitalist New York and London than Thomas Jefferson thought.

But under American conditions there was something else: the end of the family farm did not mean the rise of a propertyless proletariat in the United States. Bankers like A.P. Giannini made the argument that the thirty year mortgage was a weapon against Marx: if the average American family no longer owned a farm, it could still own a house.

Thanks to home ownership, post-agricultural America remained a land of mass property ownership and that experience continued to inform American political and social values. American neighborhoods are still schools of political engagement; it’s clear who keeps up their property, who takes the lead in community activities, who leads the PTA and who coaches the youth league. Property ownership continues to serve as a political tutor; American voters want better municipal services, and they don’t like high property taxes. They have to think about the relationship between the two in every election, and their experience in local affairs continues to inform their ideas about national policy.

At the same time, the fact that most Americans buy their homes through mortgages, and that they have to keep those payments up or lose the old homestead, teaches responsibility and steady habits. If the farmer didn’t get up at dawn to plow the north forty, there was nothing to eat in the winter. If the suburbanite doesn’t get in the car and head onto the freeway every morning, the bank balance sinks and the repo men will come and take the house away. Home ownership also teaches people about investments and compound interest (although lately it has been giving us a painful introduction to bubbles and downturns).

Both versions of the American Dream had this in common: the farm in the valley and the box in the burbs helped the American people develop the skills and the values necessary for successful republican government.

From this standpoint, suburban America looks like a watered down but still potent blend of the original American farmer’s republic. The inherited values and culture coming to us from the old days plus the still potent force of mass home ownership have kept the United States from retracing the steps of older democracies on their slow decline. So far.

But our consumer republic is clearly in trouble. Economically, as I wrote earlier this week, the model is breaking down. The consumer republic is based on debt and depends on high consumption. We are nearing the limits of that kind of economy. The country’s external debt, the explosive growth of federal debt and the weak balance sheets of consumer households are all pointing in the same direction.

The cultural and social weaknesses of the consumer state are if anything more troubling. While suburbia is not the kind of alienating horror show that Marxist critics make it out to be, it is a less effective school for citizenship and character than the family farm. Daniel Bell wrote about the cultural contradictions of capitalism more than thirty years ago; life in a consumer society does not support the virtues and ideas that a healthy society requires.

More broadly, Huck Finn was right and the Widow Douglass was wrong: a holistic life in which family, work, education, leisure and production are all blended and mixed is healthier than an existence in which every sphere of life is rigidly set off from the others. it is not good for children to work long hours in textile mills; it is also not good for them to grow up without participating in and learning about the productive labor that is such a big part of what it means to be human. Family bonds are weaker now that husbands and wives spend so much less time together and mostly cooperate to spend money rather than working together to make it. The family is less of a unit because the real business of each member of the family takes place in some other environment be it the office, the factory or the school.

The special shape of modern and suburban family life is part of the blue social model I’ve been posting about on this blog and the hollowing out of blue society is increasingly felt within as well as around the contemporary American family. The suburban consumption based nuclear family is increasingly under stress; family budgets and time are increasingly on the edge.

More, the very entitlements most under pressure economically are those that have allowed the multigenerational family to yield to the suburban nuclear idyll. Defined benefit pensions, Social Security, home equity and Medicare allowed older Americans to live independent lives and reduced the need for solidarity between the generations. The generations, like the widow’s vittles, were all cooking in their separate pots. …

The one thing I do know is that change is on its way — more fundamental, more challenging, and also perhaps more exhilarating than many of us are ready for. The health of the American economy is going to require us to move away from the credit card economics of the consumer republic. The health of American society and democracy require that we move beyond the life of the last eighty years.

Read the whole thing.

Nobel Prize winning economist Robert Lucas contended in his Milliman Lecture (.pdf), delivered May 19th at the University of Washington, that US economic growth has been roughly a consistent 3% per year over the last two centuries. There have been deviations from the pattern as a result of wars and financial downturns, but the American economy has consistently returned to the same trend line.

The recession which began in 2008, however, seems possibly to represent a fundamental change. Economic activity has not resumed growth. We have not returned to our customary trend line.

Instead, policies adopted by the Obama Administration and the democrat party congress elected in 2008 may have systematically reduced the American rate of economic growth to levels comparable to those of major European countries.

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You or I read all this and shudder at the terrible news, but the progressive Matthew Yglesias basically accepts Lucas’s analysis and sees this as cause for awarding Obama laurels.

[A]ccording to Lucas, is that Obama’s policies have caused us to deviate permanently to a lower, European-style growth path. The initiation of Social Security didn’t do that. Nor did its expansion in the 1950s. Nor did the creation of Medicare, Medicaid, Title I federal aid to schools or the War On Poverty. The Clean Air Act didn’t do it. Nor did the Clean Water Act or the Americans With Disabilities Act. George W Bush’s expansion of Medicare didn’t do it. Nothing about the growth of the welfare state in postwar America was able to jar America off the American-style growth path and put it on the European path. And then along came Barack Obama, the Affordable Care Act and a few other bills, and like magic we’re Sweden. Forget the economic implications of this. Think about the history! Think about all the unfair knocks Obama’s gotten from the left. A leading economic scholar thinks Obama’s domestic agenda has been far-and-away the most consequential in American history. It’s kind of a big deal.

In other words, when we look around at the ruins of the US economy, the devastated housing market, massive unemployment, a crisis forcing Americans to reduce their life-styles and expectations, a shrinking economy, the financial industry departing overseas, the possible end of the US dollar as reserve currency, and a forced American retreat from military investment and commitments, as most of America despairs, we find the American left rejoicing over the fulfillment of their hopes and dreams.

If there was ever any question as to what the left’s agenda was ultimately directed, as to exactly what its goal really was, well, now you know.

The Fiscal Times reports that the United States is experiencing a level of dependency on government unknown since the depth of the Great Depression.

For the first time since the Great Depression, households are receiving more income from the government than they are paying the government in taxes. The combination of more cash from various programs, called transfer payments, and lower taxes has been a double-barreled boost to consumers’ buying power, while also blowing a hole in the deficit. The 1930s offer a cautionary tale: The only other time government income support exceeded taxes paid was from 1931 to 1936. That trend reversed in 1936, after a recovery was underway, and the economy fell back into a second leg of recession during 1937 and 1938.

Hot Air Pundit: U.S. Debt Jumped $72 Billion Same Day The U.S. House Voted to Cut Spending $6 Billion.

Curt from Flopping Aces forwarded a lengthy posting by MataHarley which raises the question of whether the near financial collapse of 2008 was deliberately engineered, and whether a further stage of the same anti-American offensive remains to be completed.

MH summarizes and discusses the hypotheses advanced in a highly provocative paper on Economic Warfare written in 2009 by Kevin D. Freeman via the DOD contracting system for the Department of Defense Irregular Warfare Support Program (IWSP).

It is undeniable that if the collapse of the financial system was deliberately engineered by calculated attacks aimed at perceived vulnerabilities, those attacks were tremendously successful and resulted in enormous economic losses.

The hypothesis discussed in this paper suggests the very real possibility that financial terrorism may have cost the global economy as much as $50 trillion, roughly 1000 times greater than Bernie Madoff’s fund and equal to nearly four years of American productive output.

[A]n estimated $50 trillion of global wealth virtually vanished. At least $15 trillion of that loss was experienced by Americans, as measured by the combined declines in the value of stocks, bonds, real estate, and other assets.

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The Freeman paper visualizes a three-stage assault on the US economy, and the American position of military, political, and economic leadership, only two parts of which are so far completed.

The hypothesis under consideration is that a three-phased attack is underway with two of those phases completed to date.

The first phase was a speculative run-up in oil prices that generated as much as $2 trillion of excess wealth for oil-producing nations, filling the coffers of Sovereign Wealth Funds, especially those that follow Shariah Compliant Finance. This phase appears to have begun in 2007 and lasted through June 2008.

The rapid run-up in oil prices made the value of OPEC oil in the ground roughly$137 trillion (based on $125/barrel oil) virtually equal to the value of all other world financial assets, including every share of stock, every bond, every private
company, all government and corporate debt, and the entire world‘s bank deposits. That means that the proven OPEC reserves were valued at almost three times the total market capitalization of every company on the planet traded in all 27 global stock markets.

The second phase appears to have begun in 2008 with a series of bear raids targeting U.S. financial services firms that appeared to be systemically significant.

An initial bear raid against Bear Stearns was successful in forcing the firm to near bankruptcy. It was acquired by JP Morgan Chase and the systemic risk was averted briefly. Similar bear raids were conducted against various other firms during the summer, each ending in an acquisition. The attacks continued until the outright failure of Lehman Brothers in mid-September. This created a system-wide crisis, caused the collapse of the credit markets, and nearly collapsed the global financial system. The bear raids were perpetrated by naked short selling and manipulation of credit default swaps, both of which were virtually unregulated. The short selling was actually enhanced by recent regulatory changes including rescission of the uptick
rule and loopholes such as ―the Madoff exemption.

While substantial, unusual trading activity can be identified, the source of the bear raids has not been traceable to date due to serious transparency gaps for hedge funds, trading pools, sponsored access, and sovereign wealth funds. What can be demonstrated, however, is that two relatively small broker dealers emerged virtually overnight to trade ―trillions of dollars worth of U.S. blue chip companies. They are the number one traders in all financial companies that collapsed or are now financially supported by the U.S. government. Trading by the firms has grown exponentially while the markets have lost trillions of dollars in value.

The risk of a Phase Three has quickly emerged, suggesting a potential direct economic attack on the U.S. Treasury and U.S. dollar.

Such an event has already been discussed by finance ministers in major emerging market nations such as China and Russia as well as Iran and the Arab states. A focused effort to collapse the dollar by dumping Treasury bonds has grave implications including the possibility of a downgrading of U.S. debt forcing rapidly rising interest rates and a collapse of the American economy. In short, a bear raid against the U.S.financial system remains possible and may even be likely. Phase Two may have concluded with the brief market rebound that was supported by an emerging regulatory response calling for greater transparency across the board.

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Freeman observes: “[W]e remain left with the critical unanswered questions of who and how?”

One important clue must be the bizarre and confusing story of the seizure of $134.5 billion of apparently counterfeit US Treasury bearer bonds being smuggled across the border from Italy into Switzerland in June of 2009 by two Japanese nationals.

St. Louis Adjusted Monetary Base (BASE)

Freeman says that incident “may be as significant as the Japanese radio intercepts were before December 1941.” A hundred and thirty four billion dollars worth of counterfeit treasury bonds here and a hundred and thirty four billion dollars worth of counterfeit treasury bonds there adds up to a lot of money very quickly. The Obama Administration’s expansion of the US Monetary Base already threatens major inflation and jeopardizes the role of the dollar as reserve currency, additional counterfeit-based inflation could easily constitute a tipping-point factor changing our worst fears into reality.

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Freeman refers to, and quotes points made in, an anonymous, non-publicly-available 65-page paper titled Red Flags of Market Manipulation Causing a Collapse of the U.S. Economy, distributed to law enforcement agencies, members of Congress, and regulators.

This report discusses extensive research that shows significant red flags‘ of danger to the world‘s economy from what appears to be market manipulation in the global financial markets, which includes trading in common stocks, options,futures, commodities, currencies, oil, and bonds.

Two companies…are at the heart of this trading and they consistently work in concert. These firms became, virtually overnight, the largest traders in the U.S. financial markets. These companies provide a one-stop-shop for trade execution, back office clearing and bookkeeping that cater to hedge funds and small broker dealers. To give perspective, the amount of trading executed by these two firms in October 2008 exceeded the trading of securities firms Goldman Sachs, JP Morgan and Merrill Lynch combined in the NASDAQ market participant reports.

Key points

1) The firms have traded trillions of dollars worth of U.S. blue chip companies. They are the number one traders in all financial companies that collapsed or are now financially supported by the U.S. government. Trading by the firms has grown exponentially while the markets have lost trillions of dollars in value.

2) These firms appear to own few or no shares of blue chip companies they are number one traders in. There is no doubt that the magnitude of their trading impacted the marketplace. Since the direction of the market place has been in a severe downward trend, the impact from the firms has been and remains, negative to the marketplace.

Some other starling findings in the report, based almost exclusively on reviewing basic trading data, include:

The two previously small broker dealers mentioned in the report are market makers for every major financial services firm under attack.

These firms have a combined 76 different symbols under which they act as market maker (by contrast a major firm such as Citigroup has just 6).

Both firms offer sponsored access.

Both firms offer access to dark pools.

From June through September 2008, the two firms appeared to concentrate on Lehman Brothers, trading 1.04 billion shares while the stock price collapsed from $33.83 to $0.21 on 15 September. This pattern seemed to repeat in every other major financial stock.

The report estimates that the two firms completed as many as 641,000 trades per hour in October 2008 (based on market participation statistics and average trade size from the last available data).

Total trading volume by month in the financial sector listed for these two firms grew from approximately 350,000 shares (less than 1% of all market participant trading) in September 2006 to approximately 600,000 shares in the sector (about 6% of all market participant trading) in September 2007, to over 8 billion shares in the sector (about 19% of all market participant trading) by September 2008. That‘s an increase of 2.4 million percent in two years.

While both firms have been around for several decades, their rapid growth began in 2006 for one and 2007 for the other.

Both firms seem to specialize in the same stocks at the same time, appearing to work in concert.

Combined, the two firms traded 203 billion shares, mostly concentrated in major financial services companies. This compares to a total of 427 billion shares outstanding of all issues on the New York Stock Exchange.

The report estimates trading of at least $5 trillion over the 25-month period ending in November 2008.

The trading appears to represent new money to the marketplace by new participants.

From July 2008 through September 2008, the two firms ―traded more shares of Fannie and Freddie than were issued even as the share prices were collapsing.

The firms were also the largest traders of the UltraShort funds as well as the financial spider (symbol ―XLF) during the reporting period.

The firms also became the largest traders of energy stocks.

The two firms did not and do not hold major equity positions on their books.

The names of these two firms have been purposely withheld in this report because trading data alone is insufficient to consider any accusations against them. But, this trading data is specifically the type of red flag that should prompt further investigation. In addition, even in the event that trades were entered with the purpose of manipulating markets,there is no evidence to suggest that either of the brokerage firms discussed had any knowledge of, or in any way participated in any wrongdoing. They simply could have been conduits through which orders were placed as the laws and regulatory authorities currently allow. Nevertheless, this trading activity does lead to numerous questions:

Who had the capital to effect $5 trillion worth of trades in such a short period?

Who are the clients behind the trades? Are they foreign or domestic?

Why would two long-standing but relatively minor broker dealers be selected for such massive trading rather than the major firms? Did they have more permissive rules for sponsored access?

Why was trading concentrated in the financial firms that failed (Lehman, AIG, Bear Stearns, Fannie, Freddie) or were under threat of failing (Citigroup, Bank of America, Merrill Lynch, and Wachovia)?

There is obviously no definitive evidence here that the Financial Collapse of 2008 was the result of a deliberate strategic plan to bring down the US economy carried out by hostile foreign agencies, but many of the details noted, particularly the scale of bear raids on major US financial institutions, certainly do provoke suspicion. The US Government is hardly about to share what it knows, so the rest of us can only file all this away for future reference, and keep an eye out for further related coverage.

And Henry Blodget has produced a graphic illustration to illustrate his contention.

[H]ere’s the one chart you need to see to understand why the US is screwed.

This is the “income statement” of the United States in 2010. “Revenue” is on the left. “Expenses” are on the right.

Note a few things…

First, “Revenue” is tiny relative to “Expenses.”

Second, most of the expense is entitlement programs, not defense, education, or any of the other line items that most budget crusaders normally howl about.

Third, as horrifying as these charts are, they don’t even show the trends of these two pies: The “expense” pie is growing like gangbusters, driven by the explosive growth of the entitlement programs that no one in government even has the balls to talk about. “Revenue” is barely growing at all.

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I’d put it another way.

I’d say that Liberalism and the post-New Deal American Welfare State is screwed.

The accident of the chickens finally coming home to roost from decades-old federal housing policies during the waning weeks of an increasingly unpopular Republican Administration delivered both elected branches of government into the hands of left-wing democrats eager to expand the empire of statism.

Those kinds of democrats do not understand economics and are not prudent and responsible managers. Their response to the economic crisis was to apply traditional liberal pump-priming excuses to enact a massive Stimulus package and to nationalize some automakers and bail out more banks, while driving full steam ahead on creating another new cyclopean entitlement system.

The result is a kind of show-and-tell demonstration, in front of God and everybody, making it perfectly clear to everyone whose intellect is not paralyzed by ideology that what conservatives had been saying all along is perfectly true. Social Security is a Ponzi scheme, and was always destined to fail one fine day when demographics failed to cooperate. That there are limits to the percentage of the national economy which can be taxed and redistributed without drastic costs in growth and prosperity. That there are limits to how much government you can have, how much government can do, how many departments and programs you can create, and how many bureaucrats you can hire.

The music has stopped. The era of the expansion of socialism, regulation, and federal authority is over. We have run out of money. National bankruptcy is within sight. The end of government’s capacity to pay for the entitlement system existing prior to Obamacare is at hand. Obamacare is a dream and a delusion which we could never afford. Our domestic experiment in social welfarism has failed.

The American people are gradually awakening from a troubled sleep. A political avalanche is building which is going to sweep Barack Obama, Harry Reid, and Nancy Pelosi, liberalism and the America left, and the whole New Deal/Great Society philosophy from the national political landscape onto the rubbish heap of history.

James Polous, at Ricochet, was listening to Obama’s State of the Union address and speaks for his own generation when he notes that the Big Zero picked the wrong metaphor.

[Y]ou heard it in the surrealistically repurposed Sputnik Moment, which became in Obama’s hands a way to get older Americans to imagine that the reliable, stable world of their past was actually a cavalcade of personal reinvention and societal reeducation.

Young Americans? To the extent that we heard anything, we heard that our future is cut and dried: science and math education, because that’s what they do in China; a career as a scientist, an engineer, or a science and math teacher, because in South Korea those people are celebrated as “nation builders;” a lifetime of work spent in an economy propped up by spending, subsidies, and a perpetual partnership between big government and big business.

Cheer up, kids. You’re the ones you’ve been waiting for. Remember?

Which generation’s Sputnik moment is this, again? If we’re fated to work with metaphors from the middle of the twentieth century, let’s at least choose one that resonates with people who are coming of age in the twenty-first.

Say, perhaps, the Hitler Finds Out metaphor. From the vantage of the young, for the President — and, indeed, virtually the entire leadership class of the United States of America — this is their Stalingrad moment: the moment at which the vast armies they continue to maneuver around the gigantic battle map turn out to be gone, destroyed, never to return again. The bold challenges, the arbitrary and random numerical goalposts (80% more of these, 100,000 more of those) — it all gave off the disconnected feel of denial-driven fantasy. It’s not that the emperor has no clothes. It’s that he has no divisions.

Young Americans already face a future defined by an inescapable reckoning. They already tend to look at our grand entitlements as phantoms, as dead entitlements walking. They already know the problem isn’t that we have too few college graduates, but that we — like Tunisia and (gasp!) China, to mention a few — have too many for the market to absorb. And they already know that all the science and math in the world can’t serve to nourish our personal and cultural convictions about the purpose and character of American life in transformed times.

When will Obama’s generation reckon with that?

The young people who are going to get to pay the check for Barack Obama’s socialist free lunch are feeling a bit dyspeptic.

Via Theo.

Daniel J. Mitchell posted the above chart from Heritage and offered the following observation.

This is a remarkable image, but let’s start with some disclaimers. There are lots of factors that impact economic performance, and many of them are outside the control of politicians. Moreover, it is impossible to know what would have happened in the past two years or in the early 1980s if Obama or Reagan had chosen different policies.

But even with these caveats, it is difficult to look at this chart and not conclude that Obama’s big government policies are much less successful than Reagan’s small government policies.

Peggy Noonan marvels at Barack Obama’s approach to cheerleading for compromise.

We have not in our lifetimes seen a president in this position. He spent his first year losing the center, which elected him, and his second losing his base, which is supposed to provide his troops. There isn’t much left to lose! Which may explain Tuesday’s press conference.

President Obama was supposed to be announcing an important compromise, as he put it, on tax policy. Normally a president, having agreed with the opposition on something big, would go through certain expected motions. He would laud the specific virtues of the plan, show graciousness toward the negotiators on the other side—graciousness implies that you won—and refer respectfully to potential critics as people who’ll surely come around once they are fully exposed to the deep merits of the plan.

Instead Mr. Obama said, essentially, that he hates the deal he just agreed to, hates the people he made the deal with, and hates even more the people who’ll criticize it. His statement was startling in the breadth of its animosity. Republicans are “hostage takers” who worship a “holy grail” of “tax cuts for the wealthy.” “That seems to be their central economic doctrine.”

As for the left, they ignore his accomplishments and are always looking for “weakness and compromise.” They are “sanctimonious,” “purist,” and just want to “feel good about” themselves. In a difficult world, they cling to their “ideal positions” and constant charges of “betrayals.”

Those not of the left might view all this as straight talk, and much needed. But if you were of the left it would only deepen your anger and sharpen your response. Which it did. “Gettysburg,” “sellout,” “disaster.”

The president must have thought that distancing himself from left and right would make him more attractive to the center. But you get credit for going to the center only if you say the centrist position you’ve just embraced is right. If you suggest, as the president did, that the seemingly moderate plan you agreed to is awful and you’ll try to rescind it in two years, you won’t leave the center thinking, “He’s our guy!” You’ll leave them thinking, “Note to self: Remove Obama in two years.”

This week, Obama seems to have hit the same point-of-no-return in which he is visibly angry with the American people for not supporting his policies that Jimmy Carter did at the time of his “malaise” speech.