MY TRIUMPH OVER KWANZAA!

Dow Gains 108 Points, Capping Dismal Year

Blue Chips Sink 34% for 2008 in Worst Performance Since 1931

A year of market misery for the history books ended on an improbably sunny note as stocks posted a second straight round of broad-based gains Wednesday.

The Dow Jones Industrial Average climbed 108 points, or 1.3%, to 8776.39. The blue-chip measure is up 3.4% over its two-day winning streak but ended 2008 down 33.8%, its worst annual performance since 1931, when the Great Depression was in full swing.

A round of better-than-expected unemployment data and improving credit conditions helped boost the mood of the market participants who stuck around Wednesday, while many others remained on vacation or on the sidelines by choice. Volume was light, as it has been throughout the last few holiday-shortened weeks.

Oil futures jumped $5.57 to $44.60 a barrel in New York despite government data showing a rise in U.S. inventories of crude due to a slowdown in refinery utilization. The commodity plummeted 54% on the year, snapping a six-year bull run. The decline was also the worst showing in more than two decades of oil-futures trading on the New York Mercantile Exchange.

Markets Data Center

Track indexes and hot stocks, with rollover charting and headlines. Plus, bonds, commodities, forex and more. Highlights:

Heading into 2009, Wall Street veterans are divided over whether the stock market can continue on a less volatile path and avoid returning to its lows. There is widespread consensus that the economy will continue to show signs of pain, but the question of whether the market can sustain its recent gains in anticipation of better times to come is trickier.

Ned Riley, chief executive of Riley Asset Management in Marshfield, Mass., said he expects volatility to return as hedge-fund traders come back from their holiday vacations.

"It seems that many of these guys have essentially taken the month of December off," said Mr. Riley. "But when they're back, you could get back into that pattern of having 450-point Dow moves in a span of 20 minutes," the sort of wild swings that characterized the market's swoon this fall.

On Wednesday, however, the market enjoyed a rally that spread through all sectors. The S&P 500 rose 1.4% to 903.25, led by a 3.5% gain in its financial sector. Even the S&P's weakest category, health care, was up 0.9% on Wednesday. For the full year, the broad measure plummeted 38.5%.

The technology-heavy Nasdaq Composite Index climbed 1.7% to 1577.03, off 40.5% for the year. The small-stock Russell 2000 jumped 3.5% to 499.44, off 34.8% for the year.

About 1.3 billion shares changed hands on the New York Stock Exchange floor, slightly below the daily average for 2008. Advancers outnumbered decliners by more than five to one.

The Labor Department announced that new claims for unemployment benefits dropped significantly last week. Initial claims for jobless benefits fell by 94,000 to a seasonally adjusted 492,000 in the week ended Dec. 27 from an unrevised 586,000 the week before. Economists had expected new claims would drop by 11,000. But the number of continuing claims, those drawn by workers collecting benefits for more than one week in the week ended Dec. 20, surged by 140,000 to 4,506,000. The weekly claims report usually comes out on Thursdays, but the latest was released a day early because of the New Year's Day holiday.

Associated Press

Traders react as they begin work during early activity on the floor of the New York Stock Exchange Dec. 31.

The cost of borrowing longer-term U.S. dollars in the interbank market fell Wednesday, although market activity remained extremely limited on the last business day of 2008. Data from the British Bankers' Association showed three-month U.S. dollar Libor dropped to 1.425%, the lowest rate since June 2004, from Tuesday's fixing of 1.435%.

Treasury prices sank in an abbreviated session that ended at 2 p.m. Eastern. The two-year note fell 3/32 to yield 0.768%. The 10-year note shed 1-18/32 to yield 2.219%. The 30-year bond fell 3-4/32 to yield 2.67%.

The mortgage market showed further signs of easing on Wednesday. The average rate on 30-year fixed-rate mortgages fell for the ninth week in a row, setting a third-straight record low, according to Freddie Mac's weekly survey of rates.

The Mortgage Bankers Association said the volume of residential mortgage applications filed last week was essentially unchanged, hovering at a five-year high. And the Federal Reserve announced it will spend $500 billion on mortgage instruments in the coming months to help drive down borrowing costs.

Despite generally favorable developments regarding jobs and credit on Wednesday, Michael T. Darda, chief economist at MKM Partners in Greenwich, Conn., remained circumspect in his long-term outlook in a year-end note to clients on Wednesday. "These 'positives' probably say more about a modest recovery taking shape in 2010 (or at best late 2009) than they do about the first half of 2009, which is likely to be bumpy," he wrote.

The dollar strengthened against major rivals Wednesday. One euro cost $1.3961, down from $1.4074 late Tuesday. One dollar fetched 90.79 Japanese yen, up from 90.30 yen.

Other commodity prices strengthened Wednesday. The broad Dow Jones-AIG Commodity Index was up 3.3%. Gold futures rose 1.7%, or $14.30, to $883.60 per ounce in New York, up 5.8% on the year. The rally was the metal's eighth consecutive full-year gain.

Among stocks to watch, Dell shares were up 0.1% after the computer maker announced a management shake-up early Wednesday.

Major U.S. exchanges will be closed Thursday in observance of New Year's Day.

MY TRIUMPH OVER KWANZAA!

MY TRIUMPH OVER KWANZAA!
ANN COULTER

Is it just me, or does Kwanzaa seem to come earlier and earlier each year?

This year, I believe my triumph over this synthetic holiday is nearly complete. The only mentions of Kwanzaa I've seen are humorous ones. Most important, for the first time in eight years, President George Bush appears not to have issued "Kwanzaa greetings" to honor this phony non-Christian holiday that is younger than I am.

It is a fact that Kwanzaa was invented in 1966 by a black radical FBI stooge, Ron Karenga, aka Dr. Maulana Karenga. Karenga was a founder of United Slaves, a violent nationalist rival to the Black Panthers and a dupe of the FBI.

In what was probably ultimately a foolish gamble, during the madness of the '60s the FBI encouraged the most extreme black nationalist organizations in order to discredit and split the left. The more preposterous the organization, the better. Using that criterion, Karenga's United Slaves was perfect. In the annals of the American '60s, Karenga was the Father Gapon, stooge of the czarist police.

Despite modern perceptions that blend all the black activists of the '60s, the Black Panthers did not hate whites. They did not seek armed revolution. Those were the precepts of Karenga's United Slaves. United Slaves were proto-fascists, walking around in dashikis, gunning down Black Panthers and adopting invented "African" names. (That was a big help to the black community: How many boys named "Jamal" currently sit on death row?)

Whether Karenga was a willing dupe, or just a dupe, remains unclear. Curiously, in a 1995 interview with Ethnic NewsWatch, Karenga matter-of-factly explained that the forces out to get O.J. Simpson for the "framed" murder of two whites included: "the FBI, the CIA, the State Department, Interpol, the Chicago Police Department" and so on. Karenga should know about FBI infiltration. (He further noted that the evidence against O.J. "was not strong enough to prohibit or eliminate unreasonable doubt" -- an interesting standard of proof.)

In the category of the-gentleman-doth-protest-too-much, back in the '70s, Karenga was quick to criticize rumors that black radicals were government-supported. When Nigerian newspapers claimed that some American black radicals were CIA operatives, Karenga publicly denounced the idea, saying, "Africans must stop generalizing about the loyalties and motives of Afro-Americans, including the widespread suspicion of black Americans being CIA agents."

Now we know that the FBI fueled the bloody rivalry between the Panthers and United Slaves. In one barbarous outburst, Karenga's United Slaves shot to death Black Panthers Al "Bunchy" Carter and Deputy Minister John Huggins on the UCLA campus. Karenga himself served time, a useful stepping-stone for his current position as a black studies professor at California State University at Long Beach.

(Sing to "Jingle Bells")
Kwanzaa bells, dashikis sell
Whitey has to pay;
Burning, shooting, oh what fun
On this made-up holiday!

Kwanzaa itself is a nutty blend of schmaltzy '60s rhetoric, black racism and Marxism. Indeed, the seven "principles" of Kwanzaa praise collectivism in every possible arena of life -- economics, work, personality, even litter removal. ("Kuumba: Everyone should strive to improve the community and make it more beautiful.") It takes a village to raise a police snitch.

When Karenga was asked to distinguish Kawaida, the philosophy underlying Kwanzaa, from "classical Marxism," he essentially explained that under Kawaida, we also hate whites. While taking the "best of early Chinese and Cuban socialism" -- which one assumes would exclude the forced abortions, imprisonment of homosexuals and forced labor -- Kawaida practitioners believe one's racial identity "determines life conditions, life chances and self-understanding." There's an inclusive philosophy for you.

Coincidentally, the seven principles of Kwanzaa are the very same seven principles of the Symbionese Liberation Army, another charming invention of the Worst Generation. In 1974, Patricia Hearst, kidnap victim-cum-SLA revolutionary, posed next to the banner of her alleged captors, a seven-headed cobra. Each snake head stood for one of the SLA's revolutionary principles: Umoja, Kujichagulia, Ujima, Ujamaa, Nia, Kuumba and Imani — the exact same seven "principles" of Kwanzaa.

Kwanzaa was the result of a '60s psychosis grafted onto the black community. Liberals have become so mesmerized by multicultural nonsense that they have forgotten the real history of Kwanzaa and Karenga's United Slaves -- the violence, the Marxism, the insanity. Most absurdly, for leftists anyway, is that they have forgotten the FBI's tacit encouragement of this murderous black nationalist cult founded by the father of Kwanzaa.

This is a holiday for white liberals -- the kind of holiday Bill Ayers and Bernardine Dohrn probably celebrate. Meanwhile, most blacks celebrate Christmas.

Kwanzaa liberates no one; Christianity liberates everyone, proclaiming that we are all equal before God. "There is neither Jew nor Greek, slave nor free, male nor female, for you are all one in Christ Jesus" (Galatians 3:28). Not surprisingly, it was practitioners of that faith who were at the forefront of the abolitionist and civil rights movements.

Next year this time, we'll find out if our new "Halfrican" president is really black or just another white liberal. If he's black enough to say the "brothers should pull up their pants," surely Obama can just say no to Kwanzaa.

Bernard Madoff: The rule or exception?

---

---

Bernard Madoff: The rule or exception?

---

Add the name Bernard Madoff to the pantheon of big-time thieves. The legendary billionaire hedge-fund manager, "the man with the Midas touch," now stands accused of running a massive Ponzi scheme, perhaps the largest in history. Year after year, his investors – somehow, someway, in good times and bad – received a consistent, steady return on their investments. If the accusations against him hold up, Madoff's modus operandi would have embarrassed Carlo Ponzi.

Ponzi, in the early 1900s, defrauded investors by paying out money to old investors – not through legitimate earnings, but through the entry money of new suckers. The music, of course, stopped, as it always does. The "investments" collapsed, leaving a bunch of people angry and broke.

To many, the Madoffs of the world confirm this "truism": The rich get rich not through hard work, risk taking or crafty assumptions about the future. No, the rich get rich the old-fashioned way: They steal. They profit through inside information, use their clubby network of eyes and ears, get a heads-up when storm clouds appear and plunder the unsophisticated, and thus cleverly dodge the common misfortunes suffered by the "little guy."

But the overwhelming majority of the soon-to-be-a-lot-less-than-super-rich people did not deal with Madoff. They lost a lot of money while the guardian angels perched on their shoulders let it happen.

Consider the declining fortunes of some of these immune-from-disaster elites:

Indian brothers Anil and Mukesh Ambani of Reliance Capital lost a combined $60.7 billion. Anil dropped $32.5 billion – perhaps making him, worldwide, the biggest loser in today's downturn.

Lakshmi Mittal of Mittal Steel – whose $50 billion net worth last year made him the richest man in India and the fourth-richest in the world – has lost $30.5 billion, sending his net worth plummeting down to about $20 billion.

Sumner Redstone is CEO of National Amusements, one of the largest entertainment conglomerates, which owns Viacom, CBS and all their subsidiaries, among others. His net worth, so far, has declined by more than 80 percent. Forbes, three months ago, placed his net worth at more than $5 billion. Facing a margin call (lenders wanting their money back), Redstone unloaded, fire-sale-like, hundreds of millions in stock to pay it off.

The Google guys, Sergey Brin and Larry Page, are down $12.1 billion this year – nearly half their net worth.

Forbes magazine, in 2006, called Las Vegas casino and real estate mogul Sheldon Adelson the third-richest person in the country. He has lost $30 billion, perhaps the largest loss on paper in the history of the United States – and this includes John D. Rockefeller's adjusted-for-inflation Great Depression losses.

Eddie Lampert of ESL Investments is sometimes called the "next Warren Buffett." But the Sears Holdings chairman has lost, so far, on paper, $5 billion.

And speaking of the still-gazillionaire Warren Buffett, even he's down $13.6 billion on paper, and thus forced to scrape by with only $48 billion.

No one's passing a hat for any of these people. They're still rich. But this shows that even smart guys' money can go south, Antarctica-like south.

The that-guy's-a-crook headlines aside, most rich folks do it the hard way. They get up early, bust their tails and work harder than their subordinates. They treat their staff, employees and co-workers with respect. In return, employees enjoy their work, remain loyal and work hard for a boss who shows his appreciation. Decades of work later, the boss suddenly wakes up rich.

The rich consider their success primarily a combination of hard and persistent work. But most are humble enough also to recognize the role of luck -- lucky to operate in a place that values free enterprise and risk-taking, with a stable government and an orderly transition of power.

They subscribe to the adage that "the harder I work the luckier I get," without discounting the role of luck, chance and happenstance. But above all -- unlike the Madoffs of the world -- most successful people value and practice honesty.

Ephraim Diamond, one of North America's largest real estate developers, recently died. A former electrical engineer, this Canadian real estate czar came from a poor immigrant family. He co-founded and ran a wildly successful company called Cadillac Fairview. Business associates, friends and co-workers spoke about him with reverence. One of the company's senior directors said he "reeked of integrity."

Diamond once said, "If scoundrels were aware of the benefits of being honest, they would be honest out of pure rascality."

The Year of Investing Dangerously

The Year of Investing Dangerously

by Graydon Carter

As the momentous year 2008 wound down, everyone seemed to be taking it on the chin, in small towns and big cities alike. Illinois’s almost farcically venal governor got into the holiday spirit early by putting incoming president Barack Obama’s vacated Senate seat up for sale—but without the 60 percent markdown so many retailers have been offering. His asking price in one taped conversation was a job with a $250,000-to-$300,000 salary, an impressive amount to a governor earning $170,000 a year, but penny-ante stuff compared with the black hole of Wall Street incompetence, greed, and outright fraud that he found himself sharing headlines with. Not long after the federal prosecutors laid out their case against him, Rod Blagojevich—a name only a South Park writer could come up with—preened shamelessly in black Adidas warm-up pants on his front porch for camera crews. While news anchors practiced reading his name off cue cards with phonetic spellings, The New York Times reported that the governor is something of a petty tyrant, one whose most important accessory is not his BlackBerry but his black Paul Mitchell hairbrush—which he refers to as “the football,” a reference to the nuclear-code case that travels with the president.

After eight long years of the Bush administration, it appears that we as a nation have lost any sense of shame—shame in the fact that our actions (the Iraq invasion, pathological deregulation) and inactions (Katrina) have consequences and that they have not been owned up to. (For more on the squandered opportunities of the past two administrations, don’t miss “Farewell to All That,” a 26-page oral history of the Bush years by V.F. editor-at-large Cullen Murphy and national editor Todd S. Purdum. Another not-to-be-missed piece is contributing editor Bethany McLean’s investigation into the real reasons behind the failures of the federally backed mortgage giants Fannie Mae and Freddie Mac, “Fannie Mae’s Last Stand.”) With the federal government now on the hook for what appears to be trillions of dollars in bailout money to U.S. financial institutions that have all but crippled the global economy, dollar amounts have become so abstract that no figure seems real anymore. When the 513-page draft report on the rebuilding effort in Iraq circulated in December, its description of a $117 billion failure barely registered in the public consciousness. The WorldCom scandal, earlier this decade, was triggered by an $11 billion accounting fraud. Enron swallowed more than $60 billion of its investors’ money. However shocking they were at the time, these losses were just warm-ups for the cumulative 2008 main event. In early December, New York money people were horrified by the massive fraud orchestrated by Marc Dreier, a Harvard Law School graduate who ran a sizable New York law firm consisting of 250 attorneys. But just as investors and observers wrapped their minds around the size of his alleged $380 million fraud, he was one-upped by Bernard L. Madoff and his historic $50 billion Ponzi scheme.

All manner of heartbreak and surprises have emerged in the wake of the Madoff scandal. Countless charities have been hobbled or shuttered altogether. And the lack of due diligence on the part of federal regulators and professional investors alike is mind-boggling. A hedge fund with the tony name Ascot Partners, which was run by J. Ezra Merkin (brother of writer and spanking buff Daphne Merkin), plunked nearly every penny it looked after into Madoff’s investment business, and yet still had the nerve to charge investors 1.5 percent a year to manage their money—or, in this case, their former money. You don’t even need a laptop to run a hedge fund like that. It’s perhaps no accident that this has become a season for outing chicanery. Operations like the ones run by Dreier and Madoff can thrive only if the furnace is constantly stoked with fresh money, and with money in increasingly short supply, all that’s left is embers. These sorts of games are rarely isolated cases, and it should come as no surprise if more such scandals are on the horizon.

On the other side of the country, Hollywood is facing its own set of problems. How could a land so sunny produce such an endless stream of relentlessly dreary, dead-end movies this season? There’s only one conclusion, and that is that too many producers, directors, and actors are making films to impress one another rather than creating movies that provide genuine entertainment. As a friend loves to tell people in the film business when they get all highfalutin: Don’t forget—half your customers bought their tickets for the air-conditioning! In Hollywood, the new year begins with the improbable threat of an actors’ strike. A strike would be an authentically cockamamy decision, given the country’s current economic state and the fact that the vast majority of Screen Actors Guild members are unemployed at any given time. If movie and television production halts, the inevitable layoffs will soon begin at Botox parlors, waxing factories, and Pilates studios, not to mention hotels and restaurants. That’s when many of the actors will lose their real jobs as bellhops and waiters. (As someone eligible for membership in the Screen Actors Guild—and who can forget the Oscar buzz around my all-too-brief performance in Alfie a few years back—I hereby offer my services as a negotiator between the actors and the producers.)

Old habits die hard, and even with banks and other financial institutions shoveling funds out of Washington, the men at the top—and they are all men—can’t help themselves when there’s money lying around. At the insurance behemoth A.I.G., Joseph Cassano, the man in charge of the company’s financial-products division—one of the root sources of A.I.G.’s massive troubles—was let go last February. He received $34 million in unvested bonuses and was kept on retainer at $1 million a month. Plus, he was allowed to keep the $280 million he had been paid over the previous eight years. In September, just days after the federal government poured $85 billion into A.I.G. (an amount that grew to $150 billion), company executives famously treated themselves to a near-half-million-dollar spa retreat in Southern California. A week later, another group of A.I.G. executives ran up a huge tab with a company-sponsored shooting party in the fragrant hills of Dorset, on the English coast. The next month, A.I.G. bigwigs gathered at the Pointe Hilton Squaw Peak Resort, in Phoenix. The company was more discreet this time: it instructed the hotel not to put up any A.I.G. logos or signage on the property.

The most surprising visitor to the honeypot is John Thain, who was brought in to run Merrill Lynch in December 2007. He was given a signing bonus of $15 million and collected a further $750,000 salary in 2008. As the year drew to a close, and Merrill was absorbed by Bank of America, Thain went to the firm’s compensation committee with a request for a further $10 million bonus. (Cooler heads prevailed and Thain backed down from his request.) At Citigroup, $25.9 billion was set aside for compensation and bonuses, even as the company banked a $25 billion infusion from Washington. (Citigroup tried to explain that this $25 billion was a different $25 billion from the government’s $25 billion.) It is estimated that, even in a year during which Wall Street has beggared the world, the bonus pool available to employees at failing banks could still equal 10 percent of the government money doled out so far. And if the Bush administration had had its way, the bankers would have received even more. When the bailouts were first announced, the White House opposed restrictions on executive pay—the argument being that, without the banks’ ability to overpay, their employees might go somewhere else. And where might that be? Other bankrupt banks? Book publishing? Starbucks?

The absence of shame (and its corollary, accountability) appears to be a uniquely American problem. When U.S. intelligence ignored warnings of 9/11 and incorrectly assessed the W.M.D. situation in pre-invasion Iraq, C.I.A. chief George Tenet was awarded the Presidential Medal of Freedom and a $4 million book contract from HarperCollins. By comparison, when terrorists stormed Mumbai in November, killing nearly 200 civilians, India’s home minister resigned, saying that he took “moral” responsibility for the massacre. After the Zurich-based investment bank UBS announced huge first-quarter losses last year, its chairman and four members of its board of directors tendered their resignations. The top three executives at France’s Caisse d’Epargne stepped down last year in the wake of steep losses. And the head of the Royal Bank of Scotland offered his resignation when its losses caused its stock to decline by 91 percent since 2007. Nowhere in all the malfeasance on Wall Street this past year has the senior officer of a major bank publicly accepted responsibility for his actions and tendered his resignation. Even the man who was the official Wall Street watchdog through these troubled times, Securities and Exchange Commission chairman Christopher Cox, still has his job.

Blessedly, the president is making preparations for his exit. Dodging thrown shoes at a press conference in Baghdad was probably not in his game plan, but it was mother’s milk to the New York tabloids, with lame duck! on the front page of the Post, and the Daily News leading with shoe-icide attack. The president said that the shoe-throwing incident was in his eyes a shining example of the freedoms he has brought to Iraq. The country’s prime minister, Nuri Kamal al-Maliki, saw it slightly differently and announced that the offender—now a hero in his part of the world—could be jailed for up to 15 years.

Bush was less generous when the Obamas asked if they might move into Blair House, the official guest residence across the street from the White House, about two weeks earlier than is usual so that their daughters, Malia and Sasha, could begin classes on January 5 at Sidwell Friends, their new school. The Obamas were turned down by the Bush White House, which claimed that the residence was going to be used for some functions—functions that they couldn’t disclose to the Obama camp. As my colleague Cullen Murphy said, No Child Left Behind indeed.

If this is the Second Great Depression, or the Great Retrenchment, or the Great Reckoning, or whatever it’s going to be called, there has to be a silver lining somewhere. Perhaps all those expensive educations and burning talents that wound up on Wall Street moving money around will be redirected to fields of endeavor with some tangible output. In the years between 1929 and 1939, creative talent in the U.S. flowered as in no other period of the last century. The 30s, a decade of devastating hardship for so many, was also the golden age of art, photography, theater, and film. In New York City alone the Empire State Building, the Chrysler Building, and Rockefeller Center were built during the 10 years beginning in 1929. The Museum of Modern Art, the Whitney, the Frick, and the Guggenheim all opened their doors during this period. And many of our great magazines, including Fortune, Life, Newsweek, and Esquire, were started during the decade. After the collapse of Wall Street in the 1920s, the culture stopped being all about money, and the country survived and ultimately flourished. Amid the wreckage we’ve created, America will most certainly rise again, and it might even be a better place to live and dream.

The Best of The Globalist Research Center in 2008

Read the best of The Globalist Research Center from 2007.

Special Feature > Global Briefing The Best of The Globalist Research Center in 2008 By The Globalist | Through cross-cultural comparisons and insightful research, contributors to The Globalist Research Center analyzed a wide array of topics in 2008 — ranging from how to build a better world financial system to political turmoil in Kenya. We present the top ten features published by The Globalist Research Center this year.

1.

China in My Life — A Personal Journey How does the emergence of China look through the prism of a Westerner's life? By Jean-Pierre Lehmann

2.

On the Politics of Financial Meltdowns What can the United States learn from the financial crises that have roiled emerging markets? By Raj M. Desai

3.

Building a Better Global Financial System Under what terms should countries meet in order to build a better global financial system? By Lex Rieffel

4.

1860 and the Challenges of the Future (Part I) What similarities emerge between the U.S. economy of today and that of 1860? By Michael L. Eskew

5.

An Independence Day Reflection: America's Next Challenge Is the United States on the verge of a major civil transition? By Robert H. Dugger

6.

The Fed's Decade of Deception What havoc has the U.S. Federal Reserve's ten years of deception wreaked on the U.S. — and global — economy? By Martin Hutchinson

7.

Rethinking Globalization: A European Perspective Is there a unique European perspective on globalization? By Luis Francisco Martínez Montes

8.

Dateline Kenya: Democracy as a Nation Breaker? Has the West's insistence on democracy contributed to the current turmoil in Kenya? By Bernard Wasow

9.

Sovereign Development Funds What are the consequences of developing economies' growing influence in the global market? By Javier Santiso

10.

Out of Bretton Woods What is the most effective way for the new U.S. administration to cooperate on international financial issues?

Russia's Woes Spell Trouble for the U.S.

Russia's Woes Spell Trouble for the U.S.

Obama shouldn't reward dictatorial Kremlin with goodwill overtures.

LEON ARON

Russia faces a particularly nasty version of the global recession (at a minimum), and perhaps an economic "perfect storm." Regardless of how bad its economy gets, two broad political trends, each carrying profound implications for Russia's foreign policy and U.S.-Russian relations, are bound to emerge.

David Klein

The first will be a growing dissatisfaction with the government, which may lead to a political crisis. The second will be a reactionary retrenchment: increased internal repression and more of its already troubling foreign policy. Managing the relationship with Moscow in the face of these trends is something President-elect Barack Obama and his administration should start thinking about now.

The size and depth of Russia's economic problems -- and thus the amount of political turbulence -- will depend primarily on two variables. The first is the ruble decline. The national currency is steadily depreciating and has reached an all-time low against the euro despite the central bank's having spent $161 billion on its defense since mid-September. The ruble's losing at least 25% to 30% of its value is a given; the key political issue is whether the weakening can be managed into a gradual decline, or whether the depreciation turns into a panicky flight from the currency. (Already last September Russians dumped around 160 billion rubles to buy $6 billion -- the highest demand for dollars since the aftermath of the 1998 financial crisis.)

The second factor is oil prices. Last year, oil revenues accounted for at least one-fifth of Russia's GDP and half of state revenues. At $40 a barrel, the state budget goes into a 3%-4% deficit. In the past eight years, the national economy has mirrored fluctuating oil prices. So the 7%-8% growth projected for 2008 will have to be cut at best to 1%-2% for 2009. Zero growth or contraction are distinct possibilities.

Such a predicament is most dangerous politically for a country whose population has become used to incomes increasing 8%-10% every year since 2000. Growing disappointment is sure to follow, first among the elites and then people at large.

Despite the reduction of the poverty rate to 14% from 20% in the last five years, tens of millions of Russians continue to live precariously: A recent poll found that 37% of all families have money enough only to cover food. Unemployment and inflation (already 14%, year-on-year, in November) may well push these people over the edge and into the streets.

Perilous for any regime, such disenchantment would be especially worrisome in a country where the legitimacy of the entire political structure appears to rest on the popularity of one man, Vladimir Putin, whose astronomic ratings stemmed largely from the relative economic prosperity he has presided over. This dangerously narrow legitimacy will be sorely tried in the coming months.

Forestalling or at least containing inevitable political consequences of the economic crisis is likely to be at the root of the other political tendency: an attempt by the Putin-led elite, coalesced around Gazprom, Rosneft, state corporations and the loyal industrial "oligarchs," to pre-empt challenges by beefing up the authoritarian "vertical of power." The rewriting of the constitution to give the president 12 consecutive years in office signals the implementation of this strategy. The amendment was overwhelmingly passed by both houses of the Federal Assembly within three weeks in November, ratified by all 83 regional parliaments in less than a month. President Dmitry Medvedev signed it into law yesterday.

One scenario bruited about in Moscow has Mr. Medvedev taking full responsibility for the crisis and resigning to free the Kremlin for the caretaker prime minister (Mr. Putin), soon to be re-elected president.

A bill introduced in the Duma on Dec. 12 expands the definition of treason, punishable by up to 20 years in prison, to "taking action aimed at endangering the constitutional order, sovereignty and territorial integrity" of Russia. That same day the parliament approved the elimination of the right to jury trials for defendants charged with treason. The ruthlessness with which the riot police troops, the OMON, attacked protesters, journalists and bystanders in Vladivostok over the weekend of Dec. 20 may be a preview of things to come.

A reactionary crackdown will also mean the continuation and intensification of the already incessant and deafening propaganda portraying Russia as a "besieged fortress," surrounded by the U.S.-led enemies on the outside and undermined by the "fifth column" of the democratic political opposition within. In the words of one of the most astute independent columnists, the courageous Yulia Latyinina, the rabid anti-Americanism, which has become a linchpin of the regime's domestic political strategy, is likely to turn into a full-blown "hysteria."

The key lesson of George W. Bush's dealings with Russia is that the Kremlin's foreign policy priorities are determined by the changing ideology and the domestic political agenda of Russia's rulers to a far greater degree than by anything the U.S. does or does not do. (Which is why the U.S. exit from the antiballistic missile treaty was accepted with equanimity in 2002, while the intent to install a rudimentary antimissile system provoked Moscow's fury in 2007.) If reaction advances at home, the Kremlin will continue a truculent or outright aggressive foreign policy of resurgence and retribution, intended, among other things, to distract from and justify domestic repression. The recovery of geostrategic assets lost in the Soviet collapse will remain Moscow's overarching objective, especially in the territory of the former Soviet Union.

The Obama White House will have to navigate a difficult and narrow path in its relations with Moscow in 2009 between continuing to engage Moscow on the key issues of mutual concern (Iran, missile defense, nonproliferation, terrorism), on the one hand, and the broader strategic goal of assisting democratic stabilization in Russia.

But no matter what the Kremlin leaders and their propaganda stooges say in public, anything interpreted as approval or even a mere sign of respect by America, first and foremost by its president, is a huge boost to the government's domestic popularity and legitimacy. So the natural, almost protocol-dictated, inclination of the new administration to show good will must be balanced against firm support for the return to political and economic liberalization in Russia. Throwing diplomatic lifelines to a regime that refuses to choose such a path out of the crisis is not in America's -- and Russia's -- long-term interests.

Mr. Aron is director of Russian studies at the American Enterprise Institute and the author, most recently, of "Russia's Revolution: Essays 1989-2007" (AEI, 2007).

The Crisis in 10 Points

The Crisis in 10 Points

by Robert Stewart

The 2007–2008 financial crisis had its genesis in the United States housing markets, but it rapidly spread to other economies, first to the United Kingdom, but then almost everywhere else, including such unlikely spots as Iceland whose banking system collapsed.[1] Because events in the United States triggered the crisis, this essay will concentrate on the US causes although they had their many counterparts elsewhere.

There are at least three long-standing background influences that contributed to the financial debacle that dominated the US economy in 2008:

1. For almost 100 years, the US government has not felt constrained to match its expenditure with its revenue. This policy was given intellectual justification by the writings of John Maynard Keynes who argued in the 1930s that, during periods of slow economic growth, active and purposeful government policies would allow the economy to spend its way out of recession.[2] It was simply a matter of time before citizens aped the financial habits of their governments by living beyond their means.

2. The Federal Reserve System (the Fed — created in 1913) has accommodated government's policy of spending to excess by inflating the money supply and keeping interest rates artificially low. Today's dollar will buy what in 1913 would cost less than a nickel. This easy-money policy has not only led to inflation but has resulted in investments taking place that would not be justified had the money supply been constrained, and had interest rates more clearly reflected economic reality.

3. Since the 1960s, politicians parroting the suspect theories of Keynes have fed the public's naïve belief that government can provide ever-increasing living standards by means of its monetary and fiscal policies. Pulling a fiscal lever here and pushing a monetary button there meant that constraints on spending were old fashioned, and living standards would forever improve. The limitations imposed by the laws of economics had been repealed if you voted for politicians who promised to provide you with something for nothing. Fiscal prudence was simply a capitalist lie.

It is against this long term, more philosophic backdrop, that the following, more immediate issues, assumed greater importance.

4. Households collectively made little attempt to save for the future. The United States, in particular, borrowed from China, Japan, and Middle Eastern countries to finance its spending addictions. Financial responsibility was considered an old-fashioned, or even an irrelevant, virtue, and people were led to believe that government could, by waving its magic wand, provide improved housing without the pain of saving or foregoing immediate consumption.

5. The acquisition of a house was viewed by many buyers not so much as having somewhere to live but as a painless way to make money. House prices, they naively believed, would always continue to increase in value while the relative burden of mortgages would continue to fall. Not only that, but as house values increased, a house could be used as collateral for a further loan. The financial equivalent of turning sea water into gold had been created. So long as house prices increased, borrowers were in financial heaven. When house prices fell, the earth opened up under the feet of lenders.

6. Government-sponsored entities like Fannie Mae and Freddie Mac subsidized mortgages for people who, under more-prudent rules of borrowing, would never have qualified for a loan from a conservative banking institution. Congressman Barney Frank in 2003 stated in a moment of candor, "I want to roll the dice a little bit more in this situation toward subsidized housing."[3] Well he certainly did, at the same time accepting with gratitude campaign contributions from Fannie and Freddie.

7. The egalitarian policies of government through such legislation as the Community Reinvestment Act of 1977 "persuaded" lenders, Mafioso style, to lend to low-income borrowers, against their better judgment. Government lawyers made it clear that the consequences of failing to meet politically imposed targets and quotas could be dire.

8. It was a matter of time before a substantial minority of borrowers could not or would not service their mortgages. Partly because astute people predicted this, well-known names in the financial world began to package, or sponsor, mortgage and other debts such as credit-card balances into what were called structured-investment vehicles (SIV), dubbed "financial weapons of mass destruction" by Warren Buffet. So complicated were the terms contained in such instruments that many legal minds and the credit-rating agencies were baffled as to exactly what they meant and where the ultimate risk lay. Banks and others could benefit by lending to people who could not afford to pay interest, far less capital, provided they were able to sell the SIVs to gullible investors. Money managers naively bought such investments for pension funds, money market funds, and (even more surprisingly) for their firms' own accounts. This was the primrose path to unlimited housing ownership, with no painful cash deposit, and no adverse consequences to the first lenders.

9. So long as (a) the value of housing increased, (b) borrowers paid on time, and (c) confidence remained in the credibility of SIVs, everything was hunky-dory. Unfortunately, all three cratered about the same time; house values stagnated or fell as supply exceeded demand; when values stuttered, so did borrowers repayments, and confidence plunged. Borrowers, having promised to pay and having offered security for their promises, were failing to pay because their security had declined in value. They repudiated their debts, and the burden fell on hapless financial institutions. Populist politicians rarely blamed the borrowers, because there are so many of them and they vote; instead they blamed greedy capitalists, speculators, short sellers, anyone except the debtors, and the imprudent economic policies of the US government.

10. As events began to unravel in mid-2008, well-established firms like Lehman Brothers, went to the wall. Others like Bear Stearns and Merrill Lynch were sold at knockdown prices. Yet others, like insurance giant AIG, were effectively nationalized.[4] Meanwhile, the stock-market value of banks and other financial institutions took a nosedive. For example, Citibank stock price fell by 79% between October 2008 and October 2009. The broader stock-market indices like the Dow Jones also plummeted by around 40%. The US government had no systematic policy, and rules were made up as more and more bad news emerged, especially about jobs. Citibank had a labor force of 375,000 in 2007; in November 2008, it was announced that 53,000 jobs would go by the first quarter of 2009. Senior government officials were like shipwrecked sailors (and were spending money like drunken sailors) paddling like mad but with little idea of where they were going, or why. The only consistent rule was that something had to be done, and the US government must be the action party.[5]

    It is difficult not to recall the words of Herbert Spencer: "The ultimate result of shielding man from the effects of folly is to people the world with fools."

The financial crisis of 2007–2008 was a Ponzi scheme writ large. A Ponzi scheme, or chain letter, initially succeeds but eventually collapses, just as imprudent loans may at first succeed in their objectives but eventually the laws of economics come into play and expose the futility of the whole exercise. A pyramid scheme is always unsustainable for the simple reason that it is based on faulty principles and built on flawed foundations. Until too late, no one in authority (regulators, risk managers, senior bank executives, credit-rating agencies, investment analysts) asked the key question, namely, how on earth was it possible in the long term to make profits by lending money to people whose chances of paying it back were practically nil?[6] The issue was simply swept under the carpet because loans to deadbeats provided a better short-term return than did lower-risk debt instruments.

In summary, the essence of the subprime crisis is that money was lent (often through the agency of questionable mortgage brokers) at very low interest rates (courtesy of the Fed) to hundreds of thousands of people (all they needed was a credit score and a pulse) who could not afford to pay it back; and it was backed by collateral (a house) that was not properly valued.[7] Such assets, accurately described as "liar loans," were then packaged into opaque securities, known as structured-investment vehicles (sponsored but not guaranteed by a respected and well-known name), which very few people understood. They were sold on to pension funds, banks, and others whose gullible investment managers also did not understand them and failed to carry out the rigorous analysis that their clients had a right to expect.[8]

Government encouraged all of this by supporting affordable housing (which was politically correct) and accusing banks of redlining (failing to lend to poor and black people in the same proportion as they lent to the rich and white). When the borrower, already maxed out on his credit cards, predictably failed to make payments, the scale of the problems eventually became apparent to somnolent regulators and financial institutions. Confidence and trust evaporated, because no one knew which institutions held suspect securities, how much the losses were, and who was ultimately safe. A financial system built on debt and excessive leverage was a financial system built on sand.

The errors and fallacies that weave and surround this awful catalog of errors could have largely been avoided by paying attention to a single sentence written by Henry Hazlitt over 60 years ago:

The art of economics consists in looking not merely at the immediate but at the long effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Yes, Greenspan Did It

Yes, Greenspan Did It

Daily Article by Stefan Karlsson

With no one denying the obvious fact that America is in a deep slump anymore, the discussion has instead shifted to why it happened. The Austrians (including me) who predicted these problems based on Greenspan’s low interest rate policy know of course that the main cause was that low interest rate policy, with his numerous bailouts of failed financial institutions also creating a moral hazard that encouraged risky behavior.

But non-Austrians who for various reasons seem determined to exonerate the central bank has instead offered various other explanations. I will not here answer them all, and will instead simply comment on the most common alternative explanations and the various arguments used explicitly for the purpose of exonerating Greenspan.

From the supply-side Republican establishment who until 2007 and in some cases well into 2008 denied the existence of any serious problems the blame is cast on Fannie Mae and Freddie Mac and the Community Reinvestment Act (CRA). Despite having been so wrong, they are closer to the truth than other deniers as the factors they blame did. Surely the fear of being accused of violating the CRA made some lenders more willing to lend to some low-income and minority households that really weren’t credit worthy. And surely, the role of Fannie and Freddie in buying up many of the mortgage backed securities and then selling them on with their guarantees helped increase such lending.

But there is little reason to believe that either of those factors was more than something that aggravated slightly the crisis. After all, both Fannie & Freddie and the CRA had existed for decades without causing anything similar to this. And most sub prime loans were issued by institutions not covered by the CRA, and the act itself isn’t really that draconian as it says that lenders aren’t compelled to make loans that are likely to be unprofitable. Similarly, lending not covered by Fannie & Freddie expanded rapidly too during the bubble.

One argument that particularly left-wingers has advanced is that "deregulation” or "lack of regulation" is the cause of the problems. Rarely do they specify exactly what regulations they refer to (I suspect that many simply have such great faith in government that there must be some lack of regulation that cause any problems. What regulation is unimportant to them) so it, but often it is said that securitization, and lack of regulation of it after the repeal of the Glass-Steagall Act, is the problem.

As the argument goes, by being able to sell the mortgages, which is then transformed into mortgage backed securities, mortgage lenders do not need to worry about the money ever getting paid back, so they loosen their lending standards and make loans which wouldn’t be profitable if they had been forced to keep the loan.

But this begs the question as to why investors would want to buy such dodgy debt. Or to put it another way: how could mortgage lenders fool investors to not demand such high risk premiums so as to cover the likely loan losses? If investors had demanded sufficiently high risk premiums, then the initial loans wouldn’t have been profitable.

There are two possible explanations for this: either they rationally assume that they will be able to let others take losses, or these investors are incompetent and didn’t understand the nature of these securities or realize that once interest rates rose again, the sub-prime borrowers wouldn’t be able to make their payments. Explanation number one takes us back to the moral hazard created by Greenspan’s previous bailouts, as well as the guarantees that Fannie Mae and Freddie Mac created for the various mortgages they bought and either kept or sold to others with that guarantee. Explanation number two also takes us back to Greenspan’s bailouts, and the fact that incompetent financial firms aren’t weeded out like incompetent companies in other sectors due to the bailouts. Whatever the case, previous bailouts are the root cause of this problem.

One common argument from all deniers of Greenspan's guilt is that a "global savings glut" was to blame. One of the arguments for that explanation is the alleged inability of the Fed to influence long-term yields which I analyze below. The other argument for this explanation is that the United States wasn't the only country experiencing a housing bubble. Yet not all countries experienced a bubble and the fact that some other countries also experienced bubbles that only shows that other countries pursued policies similar to the U.S.

And this explanation really doesn't explain why the bubble started to inflate in 2001 and ended in 2006-07. Did the savings glut start in 2001 and then end in 2006? To the contrary, the external surplus of both China and oil-exporting nations fell in 2001, while they rose quickly in 2006-07. And as, explained below, given how the central bank sets interest rates, those flows will mainly affect money supply instead of interest rates.

Greenspan himself argues that in the housing bubble by pointing to how long term interest rates did not rise after the rate increases in 2004-2005. This is dishonest for more than one reason. First of all, the housing bubble started already in 2001, when he pushed through rate cuts of an unprecedented magnitude, from 6.5% to 1.75% in a mere year. Secondly, because of the increased popularity of adjustable rate mortgages, short-term interest rates were just as important as long-term interest rates. Thirdly, movements in market interest rates always tend to precede movements in the fed funds rate as market interest rates is really the future average fed funds rate during the duration of the bond.

If really long-term interest rates were determined only by global liquidity, then how come long-term interest rates until only recently were about 1.5% in Japan and 6.5% in Australia? This is all the more telling given the fact that Japan has a very high budget deficit and a huge public debt, while Australia had a budget surplus and a very small public debt. And to further illustrate the point, after the Reserve Bank of Australia unexpectedly reversed its previous rate hike policy and started to aggressively lower short-term interest rates, the 10-year yield has fallen some two percentage points, while the Japanese yield has stayed unchanged.

And long-term interest rates did in fact rise from 3.3% in June 2003, when the deflation scare made everyone believe interest rates would stay low for long, to 4.7% in June 2004 when the Fed had already signaled the start of a series of rate increases. That long-term interest rates didn't rise further after that merely reflected that the series of rate increases after that was priced in by the markets.

Another attempt to exonerate Greenspan was made by Cato Institute economists Jeffrey Hummel and David Henderson. Neither predicted the crisis and both by their own admission still have no idea as to why the crisis has occurred. Yet they claim to know that Greenspan did not cause the crisis.

One of their arguments is that by 2006, money supply growth had fallen sharply compared to 2001, regardless of whether your preferred measure of money supply is M1, M2 or MZM. That is true, but that certainly does not somehow prove that Greenspan's interest rate cuts weren't responsible for the bubble. The housing bubble by all measures started in 2001. Before that, the level of house prices, construction activity and mortgage debt was reasonable by historical standards. But then during 2001, house prices and mortgage debt started to suddenly rise above 10%-during a recession when they usually decline.

And unusually enough for a recession, residential investments increased. Normally residential investment is the most cyclical component of GDP, falling even more than business investments during slumps. But during the 2001 recession, it actually rose even as business investments slumped. This would clearly suggest that the surge in money supply helped kick start the housing boom.

That money supply growth had fallen sharply by 2006 is also very consistent with the link to the housing bubble, since residential investments reached its peak during Q4 2005. Other indicators of the housing bubble such as housing prices and mortgage debt continued to increase a bit longer, but given the lags in monetary policy that is still consistent with the monetary explanation.

They then argues that the fact that many parts of broader money supply measures M2 and MZM lack reserve requirements somehow mean that the Fed can't control them . That is true in the sense that the Fed doesn't decide on the exact money supply increases in their meetings. As I've explained before, money supply is a residual factor of the interest rate that the Fed sets and the various other factors that affect interest rates. Or more correctly, the other factors that would have affected interest rates if the Fed hadn't fixed it.

Now that the Fed has fixed it, these other factors instead affect money supply. But, by fixing interest rates at a certain level the Fed is ultimately responsible for the increases in the money supply and it could have controlled it if it had targeted it instead of interest rates.

Furthermore, during the latter part of the housing bubble, money supply increases arguably understated the Fed's role. The reason for that is that because the low interest rate set by the Fed caused a downward pressure on the U.S. dollar, foreign central banks that wished to avoid seeing their currencies appreciate relative to the dollar started to buy U.S. securities, and so helped keep down U.S. interest rates without any increase in the U.S. money supply.

Henderson & Hummel then asserts that the Fed does control the monetary base. But while it is true that the Fed could potentially control it -like it could with the overall money supply- the fact is that it doesn't as long as it is interest rates that they target. The monetary base as they note consist of two components: currency in circulation (paper and metal cash) and bank reserves. They themselves immediately note that the quantity of currency in circulation is determined by domestic and foreign demand for it. And they further note that these days (or more correctly, until mid-September) currency in circulation constitutes more than 90% of the monetary base. But they appear to believe that bank reserves by contrast are, or were, directly determined by the Fed.

But that is simply not true, nor has it been true. And I find it astounding that they and many other professional economists don't seem to understand the dynamics of how the monetary base was determined. The dynamics of bank reserves have recently changed radically for reasons I explained here, but before this recent upheaval bank reserves were for years basically constantly. Henderson & Hummel takes this as evidence that the Fed's interest rate moves mimicked fluctuations in the natural interest rate. Just how Greenspan and his associates could have been so remarkably skillful in predicting movements in the natural interest rate is not made clear, but I guess they figure that Greenspan was the great maestro and so was perfect.

But as I pointed out in a response to a article from Robert Murphy (who is usually a lot more insightful than Henderson & Hummel), bank reserves are not determined by the Fed, and this is especially true after the 1994 reforms they themselves mention that allows banks to "sweep" money from demand deposits (with reserve requirements) to savings deposits and money market funds (without reserve requirements).

Instead, above the necessary minimum reserves required by the amount of money that they for various reasons must continue to classify as demand deposits, banks have complete discretion to determine how much reserves they want to hold. And before the upheaval that began in September this year, banks had every reason to minimize reserves to the legally required level. The reason was that they could always count on immediate liquidity infusions from the Fed in the case of a liquidity crisis. Meanwhile, as bank reserves yielded zero, they had strong incentives to recycle all cash infusions into the money markets or into loans. Meaning that the quantity of bank reserves was unaffected of how tight or loose monetary policy was, and so was useless as an indicator of that.

In conclusion, there can be no doubt that Greenspan, primarily through his low interest rate policy but also through the negative effects of his various bailouts, was responsible for the housing bubble and therefore the current slump. While the Community Reinvestment Act and the activities of Fannie Mae and Freddie Mac aggravated the crisis, their role was only minor.

The Left, The Right, and The State

The Left, The Right, and The State

Daily Article by Llewellyn H. Rockwell, Jr.

In American political culture, and world political culture too, the divide concerns in what way the state's power should be expanded. The Left has a laundry list and the Right does too. Both represent a grave threat to the only political position that is truly beneficial to the world and its inhabitants: liberty. What is the state? It is the group within society that claims for itself the exclusive right to rule everyone under a special set of laws that permit it to do to others what everyone else is rightly prohibited from doing, namely aggressing against person and property.

Why would any society permit such a gang to enjoy an unchallenged legal privilege? Here is where ideology comes into play. The reality of the state is that it is a looting and killing machine. So why do so many people cheer for its expansion? Indeed, why do we tolerate its existence at all? The very idea of the state is so implausible on its face that the state must wear an ideological garb as means of compelling popular support. Ancient states had one or two: they would protect you from enemies and/or they were ordained by the gods. To greater and lesser extents, all modern states still employ these rationales, but the democratic state in the developed world is more complex. It uses a huge range of ideological rationales — parsed out between Left and Right — that reflect social and cultural priorities of niche groups, even when many of these rationales are contradictory.

The Left wants the state to distribute wealth, to bring about equality, to rein in businesses, to give workers a boost, to provide for the poor, to protect the environment. I address many of these rationales in this book, with an eye toward particular topics in the news.

The Right, on the other hand, wants the state to punish evildoers, to boost the family, to subsidize upright ways of living, to create security against foreign enemies, to make the culture cohere, and to go to war to give ourselves a sense of national identity. I also address these rationales.

So how are these competing interests resolved? They logroll and call it democracy. The Left and Right agree to let each other have their way, provided nothing is done to injure the interests of one or the other. The trick is to keep the balance. Who is in power is really about which way the log is rolling. And there you have the modern state in a nutshell. Although it has ancestors in such regimes as Lincoln's and Wilson's, the genesis of the modern state is in the interwar period, when the idea of the laissez-faire society fell into disrepute — the result of the mistaken view that the free market brought us economic depression. So we had the New Deal, which was a democratic hybrid of socialism and fascism. The old liberals were nearly extinct.

The United States then fought a war against the totalitarian state, allied to a totalitarian state, and the winner was leviathan itself. Our leviathan doesn't always have a chief executive who struts around in a military costume, but he enjoys powers that caesars of old would have envied. The total state today is more soothing and slick than it was in its interwar infancy, but it is no less opposed to the ideals advanced in these pages. How much further would the state have advanced had Mises and Rothbard and many others not dedicated their lives to freedom? We must become the intellectual dissidents of our time, rejecting the demands for statism that come from the Left and Right. And we must advance a positive program of liberty, which is as radical, fresh, and true as it ever was.

Llewellyn H. Rockwell, Jr. is president of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com, and author of The Left, the Right, and the State. Comment on the blog.