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The Daily Reckoning | Thursday, August 16, 2012
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Quote of the Day...
If voting changed anything it would be illegal.
— Emma Goldman Expecting Nothing How to Avoid Disappointment in a “Muddle Along” Economy
Reckoning today from Paris, France...
Joel Bowman
Today, we take a break from history. A breather. We pause to look at the here...the now...and the shortly thereafter.
Stocks were more or less flat yesterday. Not so for gold, though...which advanced about twelve bucks an ounce. The reason? Well, if you need one, you might like to chalk it up to downward pressure on the dollar index. And the reason for that?
My oh my, Fellow Reckoner...aren’t we demanding this morning!
Greenback selling might have been triggered by a “weaker-than- expected” vibe from the Philadelphia Fed business survey. The report showed, according to the wires, that “Factory activity in the US mid-Atlantic region shrank in August for the fourth month in a row.”
Or maybe it was the other, “weaker-than-expected” report...the one showing that housing starts in the US fell 1.1 percent in July, to an annual rate of 746,000, down slightly from June’s 754,000 pace.
But Commerce Department figures from the very same report also showed that building permits, a proxy for future construction, rose to a pace of 812,000, the most since August 2008.
So what gives?
Worse-than-expected...better-than-expected...and worse-than-expected again...
Well, what did you expect?
It’s a “muddle along” economy, as Bill likes to call it. Prices themselves are as unreliable as a skinny chef...or a fat sprinter. What the world wants is an honest indicator, not the tortured, Weekend At Bernie’s variety the Feds churn out...the walking dead...the smiling stiff...the hung, drawn and quartered statistics squeezed out of the dot.gov sausage machine.
Truth is, nobody knows what’s really going on...least of all those who, after causing, then missing, the current and ongoing crisis, were quick to nominate themselves as the saviors of the day.
“Commentators, economists and kibitzers focus on whether austerity or stimulus is the proper path to ‘recovery,’” observes Bill. “The argument is fraudulent. Neither will work. You owe more than you can pay, you can neither save nor spend your way out. When debt is bad, it is bad. Unpayable. Rotten. Worthless.”
It’s true, Fellow Reckoner. One side argues for more government...the other side argues for much more government. Neither is really committed to a solution that doesn’t involve pandering to the ballot box brigade of flag-waving, bumper sticker-sporting Obamney supporters.
Take Paul Ryan, for example, Mitt Romney’s...ahem...Number Two. Here is a man who voted for the TARP bailouts, auto bailouts, medicare expansion, housing subsidies and unemployment extensions...and who somehow has the conservative base praising him as some kind of penny-counting pinchfist.
That he also voted to make the Patriot Act a permanent fixture, to introduce a national ID card and for indefinite detainment, without trial, of US citizens, in accordance with the National Defense Authorization Act for Fiscal Year 2012 (signed by President Obama), might have won him some points with the far right...
..but it is his much-ballyhooed budget plan that’s really working them into a lather. And why not? After all, the Ryan Plan is a roadmap to a balanced budget. It just happens to be a very, very long road...one that reaches “balanced” in, oh...2050. Our mates over at The 5 have been on the story for some time.
“Pay no mind to the mainstream chatter about the ‘vast difference’ between Ryan’s budget proposal and, say, that of the Obama White House,” reports Dave Gonigam. “Sixteen months ago, we showed them plotted on a chart.
“Hmmn...” Addison mused at the time. “Shall we raise the national debt by 84% in the next 10 years, or merely 62%? To even suggest the national credit card may be revoked long before then... well, that makes you a ‘kook’ in these parts.”
“Worse,” continues Dave, “Ryan’s numbers sit on a foundation of ever-shifting sands. Like the president’s figures, Ryan’s rely on crazy-optimistic projections of GDP growth — about 3% a year. For the last debt-choked decade, the average has been closer to 1.6%.
“Anything short of that magical 3% projection means the expected tax revenue won’t materialize and the debt grows even faster than on the chart. Never mind the hubris of believing your blueprint is so swell that every president and Congress for the next 38 years will stick to it.”
Reading this, you might feel compelled to write your local Congressman...or Tea Party organizer...or town Occupier. But it would be a waste of time. The government’s interests are as aligned with yours as a prison warden’s are with those of his inmates. Best to just let them get on with bringing the system down. What’s that saying again? “Never interrupt your enemy when he is making a mistake.”
P.S. Of course, that’s not to say you shouldn’t be prepared for when it comes crashing down. Au contraire! In this special video presentation, Bill Bonner and Addison Wiggin take a look at the Mother of All Bubbles...and how you can protect yourself from the fallout. Watch it here:
The Daily Reckoning Presents The Whiskey Rebellion, Part III: Ending the Rebellion
As Washington’s expedition approached its destination from the mountains to the east, another group of western Pennsylvania militia formed with the intent of attacking Pittsburgh and burning the city in advance of Washington’s arrival. The city fathers, who had made plans for a great civic celebration upon the arrival of Washington, heard of the threat. Thinking fast, they rode out to meet the militia at a place named Braddock Field, the site of a major engagement during the French & Indian War (and now the site of U.S. Steel’s Edgar Thomson Works). In tow, the Pittsburgh men brought many wagons filled with beef, beer, and other victuals that were originally intended for Washington and his army. The Pittsburghers offered the feast to the militia, who enjoyed it thoroughly and thereafter determined that they would not burn the city to the ground. A few days later, Washington’s army marched to the city line, but the militia had dispersed and, lo and behold...few people had any recollection of the identities of the offending rebels. Realizing that the nation was at a political crossroads, President Washington took a magnanimous route and granted a general amnesty to almost all of the insurrectionists.
Byron King
Today, the Whiskey Rebellion is usually mentioned as a minor event in American history. It is considered by most people, if they have ever even heard of it, as a quaint occurrence long ago, just a footnote in the standard history texts. But the Whiskey Rebellion was actually a defining moment for the United States, and, by implication, for the world. In many respects, it is a period that still resonates today. The Whiskey rebellion raised issues of liberty, peoples’ right of protest, taxation, treason, the use of the militia, and the scope of representative government. The events leading up to, and after, Washington’s march across Pennsylvania in 1794 forced a national debate on the power of the new federal government, including the limitations on the use of that power. Out of it all came a general consensus on the principle of federal supremacy in many fields of national life, among the least of which was to clarify federal power to impose and collect a tax on whiskey.
Post-Whiskey Rebellion, the political life of the nation began to concern itself with the meaning of “perpetual union,” and the implications of the concept. The national memory of the near- dissolution of the young constitutional republic lasted for several generations, until the matter flared again and ignited in 1861. The immediate threat to national expansion that was inherent in discussion of secession, by certain individuals in “Westsylvania” in 1794, prompted an aggressive federal policy favoring westward expansion, fueled by a relatively liberal immigration policy.The lands south of the Great Lakes began to fill up with American immigrants, not Canadians. Within a decade, President Jefferson would purchase the Louisiana Territory from France, and through the explorations of Lewis and Clark (whose boat was constructed on the banks of the Monongahela River, just south of Pittsburgh) America would move the western frontier of the nation to the Pacific Coast. The Whiskey Rebellion started the country on its path to becoming a continental power, and later a world power.
The westward movement of the United States also prompted federal efforts to expend resources on what were called “internal improvements,” both to construct roads, canals and mail routes to the interior, and also to put gold and silver coins into the western frontier economy. Not coincidentally, on October 15, 1794, as Washington’s army was encamped in western Pennsylvania, the U.S. Mint in Philadelphia struck 1,758 silver dollars. These coins were intended to compete with the foreign currencies then circulating freely in the U.S. These “1794 Silvers,” of which only a few are known still to exist, are considered the nation’s first true issue of real money and are all but priceless in today’s numismatic market.
The Whiskey Rebellion framed the debate in early America over the limits to freedom of speech and when such speech would be considered seditious. National divisions over the propriety of the cause of the insurrectionists highlighted philosophical fault lines, along which the first American “political societies” (now called “parties”) were formed. At the same time, the federal government confronted the reality of an armed citizenry and the grudging respect that a large group of like-minded people with guns and ammunition were entitled to be accorded by the sovereign. It is no coincidence that these two issues, speech and guns, had been the focus of the first two Amendments to the U.S. Constitution, in 1791, just a few years before the Whiskey Rebellion.
The need to call out the militia of one state to quell a disturbance in another highlighted the inadequacy of the federal army of that time. It illuminated sectarian fears, in that an army of Virginians was marching through Pennsylvania. (The next time that would occur would be on the march to Gettysburg.) After this episode in 1794, the central government began to build a national military capability based upon a standing army, with an industrial base of armories and associated vendors. The use of federalized militia to enforce police powers and execute the laws also led to a robust debate that has lasted through today. Almost a century after the Whiskey Rebellion, the principle was embodied in the national policy behind the Posse Comitatus Act of 1878.
The sense of unfairness caused by citizens having to travel great distances to confront their government in a federal courthouse led to the establishment of numerous federal District Court jurisdictions, in particular the Western District of Pennsylvania located at Pittsburgh. “Just in case,” President Washington must have been thinking. Incidentally, this philosophy of locating courts near the citizens also led to a national political consensus that state courts should be located near to the people as well, resulting in the development of relatively compact county jurisdictions as the United States expanded to the west. This was a key element in the shaping of an “American” political character, and the development of American participatory democracy. People still say that “All politics is local.”
In today’s world, American taxpayers routinely part with 40-50% of their income in the form of federal, state, and local taxes. It might seem strange to the modern mind that the collection of a tax on whiskey would usher in a defining episode in the history of the United States. But this says more about the loss of national memory of people today than about the political values and motives of the whiskey insurrectionists. In many respects, the fault lines of the Whiskey Rebellion are still present in contemporary society, if you understand the issues and know where to look. And absent Mr. Hamilton’s tax on whiskey and the rebellion that it sparked, the United States of America would be a very different nation. The world would be a very different place.
One last note...If you want to sample the rye whiskey of old, the closest brand you can find on the market today is Old Overholt. If you cannot locate a bottle of “O.O.” (it is hard to find), then try a sip of Jim Beam Straight Rye Whiskey. Even if you do not drink hard liquor, take a taste. You will be reliving history.
Regards,
Byron King,
for The Daily Reckoning
Joel’s Note: As we mentioned yesterday, this article was first featured in the Whiskey & Gunpowder newsletter back in 2004. And as we also mentioned, the wonderful Whiskey— Agora Financial’s “rough and tumble” idea crucible — is joining forces with Laissez-Faire Books this coming Monday.
To be absolutely clear, the Whiskey name isn’t going anywhere. Nor is the website. Nor is the indomitable spirit of Whiskey.
The idea behind this “free-market marriage” is to combine the refined, intellectual sensibilities of Laissez-Faire Books with the bare-knuckled, editorial gumption ofWhiskey. The team is excited and looking forward to fulfilling all your “Salon-meets-Saloon” liberty-minded needs.
So, what does this all mean?
If you’re an existing Whiskey reader, you don’t need to do a thing. Your Laissez-Faire Today subscription, and all the goodies that entails, will begin automatically next Monday.
If you are not an LF Today or Whiskey reader, we invite you to either sign up for LF Today (it’s free at) Lfb.org...or proceed directly to Club membership, here.
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Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com
Friday, 17 August 2012
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