Current Events

Where Do You Stand on a Constitutional Convention?

June 3rd, 2014 // 11:18 am @ Oliver DeMille

An Invitation to Join the Current Debate

Please participate in a conversation with us. Here goes:

Background

I received the two emails within a week of each other, and they really made me think.

First of all, they made me happy. I’m so glad there are two people out there so passionate and studious about a topic that most Americans don’t ever think about.

That’s great.

The fact that there are two such people actually making contact means there are certainly a lot more engaged with the issue, and actually these were only 2 of dozens of notes I’ve received on the same topic. Wonderful.

We need this kind of citizen participation in order for our freedom to work and last.

The Debate

Second, well…just consider these two notes:

“Oliver, why do you support a Constitutional Convention that will send delegates from each state to rewrite our Constitution? Don’t you know that the participants will be almost entirely today’s politicians and attorneys, and possibly a few famous Establishment Academicians from the Ivy League or Berkeley thrown in, and that they’ll reject everything in the Constitution, get rid of the three branches and the checks and balances and who knows what else? Anyone who supports this just doesn’t understand freedom.”

I had to respond that I have never supported a Constitutional Convention, in fact I have written against it on various occasions. Some readers got confused when I quoted a couple of well-known supporters of a Convention, thinking I agreed with them.

Actually, those who read my full article could see that I quoted them to show that they were up to no good—because these particular supporters of a Convention want to use it to reject the Constitution and go to a Parliamentary system. Bad idea for freedom.

I have to point out, however, that some people who support a Convention do so for all the right reasons. Still, if a Convention happens, its actions will all depend on who gets sent as delegates.

The second note was very different, though similar in tone:

“Oliver, how can you not support a Constitutional Convention? I know you think it will be hijacked by today’s lawyers and politicians and used to throw away the Constitution and replace it with something much worse, but how is that any different from what’s happening anyway? If we don’t hold a Convention, we’ll continue to see the politicians and special interest groups just circumvent the Constitution, and the President, Congress and Court just ignore it when it’s inconvenient.

“This problem is getting worse, and most people really think that we’re under the Constitution. But we’re not. It’s ignored or circumvented every day, and this trend is only growing. At least with a Convention the loss of our freedoms will be out in the open. People will know what’s happening. And there is a chance, a slim one I grant you, but a chance, that the people and states will send good delegates who really do something to refocus on the principles of the original Constitution and help restore our freedoms.

“Without a Convention, there is absolutely no chance of this at all. Why don’t you support at least a chance for freedom? Without a Convention, Washington will just continue to destroy the Constitution piece by piece until our freedoms are entirely gone. A Convention gives us a slim chance for freedom, while no Convention gives us no chance.”

I’ve heard this argument before. In fact, I heard it from one of my mentors, W. Cleon Skousen, who said almost exactly the same words. When he said this back in the 1990s, I argued that the Constitution was still mostly intact, and we should give the natural tension between branches of government the time it needed to correct the problems.

He countered that it was headed in the wrong direction and would soon become unsalvagable without either a Convention or some major world crisis that forced a Convention—or something like it. Most of his predictions have certainly come true, the Constitution is much less followed or valued than it was just twenty years ago when he and I enjoyed in a number of deep discussions on this topic.

For example, the Spring 2014 edition of the Harvard Journal of Law & Public Policy has no less than 8 full articles on how the federal government is right now further ignoring or circumventing the Constitution and drastically encroaching on state’s rights!

Would such states now feel the need to send good, freedom-supporting delegates to a Constitutional Convention just to get their rights back?

Should those of us who have opposed a Convention change our minds before all of Cleon’s predictions happen?

Or will a Convention just speed up the loss of our freedoms and give us less time to do something else—outside a Convention—that really could work? After our long and deep discussions, Cleon and I agreed on how we thought this point would go.

More later on what we decided…

What Do You Think?

So, what do you think of these two arguments? More importantly, where do you stand?

Will a Constitutional Convention help us?

Do you think it gives us a slim chance for a restoration of freedom?

Do you think anything else realistically gives us a better chance?

I have a strong opinion on this, but before I share more about it I want to see what you think. Seriously, what do you think can turn our nation in the direction of freedom (and end our current direction of decreasing freedom and inevitable decline)?

Is a Convention the answer?

What, if any, other truly realistic policy answers are there? Specifically?

I’m excited to see how many people care enough to answer, and what great ideas you have.

How to Share Your Vote

Please don’t just rehash the two views above. If you think a Convention is a bad idea, for the reasons above, just write: “My vote is against a Convention.” If you think a Convention is needed for the reasons above, just write, “I’m for a Convention.”

But if you have any third ideas beyond a Convention that can really fix America, or different reasons for or against a Convention, please share them.

[Be civil and polite in this; I’ll just delete any name-calling or uncivil responses or words toward anyone or any view joining this discussion. Every view deserves to be heard.]

This topic is too important to turn impolite.

This is a very important discussion, and I’ll tally the responses and share some that really add to the topic, along with my own ideas on what needs to happen—in a future article.

I look forward to reading your thoughts!

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Citizenship &Constitution &Culture &Current Events &Generations &Government &History &Leadership &Liberty &Politics

What’s Up With College?

May 30th, 2014 // 1:13 pm @ Oliver DeMille

The Big Picture

Every once in a while it’s important for parents and mentors to step back from the day-to-day work of teaching children and youth and look at the big picture of education in America—from elementary learning to high school and college, and beyond.

In that vein, Marie Clarie magazine recently ran an interesting article about the declining value of attending college. The name of the article was, bluntly, “Generation Debt.”

Here are a few of the highlights from this important article:

• “It used to be that college was the ticket to the top. Now graduates are starting from the bottom—buried by student-loan debt that has skyrocketed to a collective $1.2 trillion. Welcome to the student-debt crisis.” Because college graduates now start out with high debt, and with a smaller likelihood of jobs in the current economy, they are well behind their peers who spend the four years getting settled in jobs or starting businesses—without huge student debts hanging around their necks.

• The $1.2 trillion dollars of student debt held by Americans is “more than all credit card debt.”

• “Tuition prices are increasing at about twice the rate of inflation, while state governments are slashing billions from their higher-education budgets, leaving students to foot more of the bill.”

• In the new economy, ever since the recession of 2008, student loan debtees “are less likely to own a home, take out a car loan, or even make rent payments.” And they are paying almost nothing in taxes, thus increasing the tax burden on the older generation. They also aren’t spending money in the economy, and according to Harper’s, around half of them are moving back home with their parents instead of getting jobs and moving on with their lives.

• Many graduates are amassing $600 or more of additional debt each month just in interest on their student loans. Without jobs, they are getting buried deeper and deeper in economic problems.

• As one person Marie Claire interviewed, who was lucky enough to hold a job, told them: “I work with brilliant people who don’t have college degrees. My degree has never come up—not even in my job interview—so I don’t think I needed it. My brother, who has no degree but is more entrepreneurial, makes twice what I do and doesn’t carry the burden of being in debt.” While some graduates do believe that their college degree helped them get a job, many simply can’t find a job in this economy.

• Another graduate wrote: “’I made it!’ read my Instagram caption under my law-school graduation photos. A year later, I’m 32, nearly $200,000 in debt, sitting on a couch in a 900-square-foot apartment…dreaming of the house I thought I would own by now. My situation is not unique.”

Losing Later for Now

This is the reality now for many graduates, and as the report stated, “It’s time to adjust expectations.” It also noted that while a $29,400 student loan ends up costing $53,862 on a 20-year repayment plan, a person investing the same $29,400 at 7% annual return for forty years would end with $440,249.06.

Or as one interviewee, a newly practicing deputy district attorney, put it: “I love my job, but I still feel like I’m an indentured servant. You practically have to rob a bank to pay back these things.”

An article in The Atlantic summarized the problem:

“The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults….It could cripple marriage as an institution in many communities….Ultimately, it is likely to warp our politics, our culture and the character of our society for years come…The economy now sits in a hole 10 million jobs deep…[and] we need to produce roughly 1.5 million jobs a year—about 125,000 a month—just to keep from sinking deeper. Even if the economy were to immediately begin producing 600,000 jobs a month—more than double the pace of the mid-to-late 1990s, when job growth was strong—it would take roughly two years to dig ourselves out of the hole we’re in….But the U.S. hasn’t seen that pace of sustained employment growth in more than 30 years…”

Outdated Promises

College can still be a great place to get a great education, but only if students stop thinking in terms of “hire education” and find great mentors, read the greatest books, and really seek quality learning rather than mere career prep. Career prep still may help them if they avoid any student debt. But spending four years increasing one’s debt at college is no longer a good path for most people in the current economy.

Grads just aren’t getting jobs like they were promised—the “college will get you a job” promise mostly worked from 1950 to 2008, but it’s not working now.

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Current Events &Economics &Education &Generations

Who Will Stand For Freedom

May 21st, 2014 // 11:10 am @ Oliver DeMille

The Destiny of Freedom

In 1961 the great legal scholar Bruno Leoni wrote about freedom in modern times.

He said:

“It seems to be the destiny of individual freedom at the present time to be defended mainly be economists rather than by lawyers or political scientists.”

Why? Leoni’s answer was intriguing:

“As far as lawyers are concerned, perhaps the reason is that they are in some way forced to speak on the basis of their professional knowledge and therefore in terms of contemporary law.”

As a result, since modern law is too often in the business of reducing freedom rather than supporting it, most of today’s attorneys have become experts on the opposite of freedom.

How They Speak

As Lord Bacon would have said, “They speak as if they were bound.” Over fifty years later, the same is true of nearly all today’s economists, teachers and professors. Sad.

The modern intelligentsia has become a body of experts on force. Their expertise is usually focused on how to reduce freedom—though few use these specific words to describe their careers.

Leoni continued: “Political scientists, on the other hand, often to appear to be inclined to think of politics as a sort of technique, comparable, say, to engineering, which involves the idea that people should be dealt with by political scientists approximately in the same way as machines or factories are dealt with by engineers.

“The engineering idea of political science has, in fact, little, if anything, in common with the cause of individual freedom” just as “the contemporary legal systems to which [attorneys are now] bound seem to leave an ever-shrinking area to individual freedom.”

Leoni’s words cut right to the heart of the matter.

When I was in college in the late 1980s, I heard a speaker tell a group of young student leaders how to influence society. I don’t remember his exact words, but his meaning was clear.

He told us, “If you want to make the nation and world more committed to liberal ideals, become a journalist, professor, teacher, or attorney. If you want to promote conservative goals in society, go to business school and become an executive.”

It was a shallow, but prophetic, suggestion. In the three decades since, his recommendation has proven accurate for two whole generations, and today it is part of the rising generation’s culture.

Pushing the Wrong Direction

But what profession(s), if any, stand today for individual freedom? The economists have mostly gone the direction of law—bound too often by their profession’s expertise in how to reduce freedom.

The days when Leoni spoke on the same podium with Milton Friedman and Friedrich Hayek are long gone.

Likewise gone to the dustbin of history is the era when many business executives advanced the cause of liberty as one of their main goals. Now the drive is to survive in the global economy, usually by expanding one’s company outside of North America and Europe.

This is the overarching focus of most boards and executives.

The economy now rewards growth, not promotion of freedom—just like the professions tend to promote young people who support the push for more institutional controls and power, not more liberty for the masses.

As the divide between the rich and the rest widens, the pressure to impress the Establishment grows. Youthful ideals (such as freedom) are the last thing on today’s executive agenda.

The Factory Model

In the midst of the Charter School movement of the mid-1990s, I spoke on the same stage as a courageous woman who had founded a successful East Coast inner city Charter high school. In a moment together in the Green Room, I asked her how long she thought she could keep teaching the principles of freedom in her cutting-edge school.

She replied that, given the pace of intrusive government regulation over Charter schools (and schools in general), she thought she had 5-10 years before she would have to reject state funds and turn the school private.

Today, over 15 years later, the school has grown into a lucrative business, regulation has shut down the original curriculum and replaced it with one practically identical to the public schools in the same city, and this lady still runs her Charter school.

But where her school once stood for freedom against the mediocrity of the public conveyor belt, it has now joined the factory model.

And she is now “respectable,” not an educational reformer or freedom thought leader any more, but just another of the city’s high school principals—professionally reined in, committed to “the system.”

She has even stopped teaching the freedom classics that convinced her to start the Charter school in the first place.

This professional caving in to institutional pressure is what Leoni lamented in 1961 about his beloved profession of law. But today it is much more widespread.

The “civilizing decline and fall of the professions” is nearly complete. Now most (not all) lawyers, teachers, professors, economists, journalists and executives fight for the same side—big institutions, the Wall Street-White House nexus, the Ivy League-Federal Government connection, the Boston/New York City/Washington D.C. corridor, the big business/big government power elite. The Establishment.

In all this, who will stand against elite rule?

Who will stand for freedom?

Unheeded Messages

Leoni’s book, Freedom and the Law, a fantastic classic, was written in an attempt to convince the legal profession to take a stand for liberty, not slip into the easier current of seeking benefits from big government. Leoni predicted that his outcry would fail to convince enough people to turn down such lucrative promises, but he felt he had to try anyway.

Freedom was worth it.

Leoni made it clear that every loss of freedom is an increase in constraint, and constraint by government is always autocratic. No exceptions. Therefore, every minor decrease of freedom is an attack on the very roots of liberty.

In a sense, Leoni did the same thing Virgil tried to do centuries ago when he saw Rome falling. Virgil warned that a loss of individual freedom here and there would trigger a loss of freedom for everyone in the nation. But he was basically ignored.

In fact, his great work on this topic, entitled Georgics, is still hardly even read or studied today.

Sadly, the message of warning about losing freedom seems forever destined to go unheeded—until it is lost, at which point people get very interested in the topic.

Leoni’s view of freedom takes us back to the basics. He argued that freedom is ultimately nothing more than the Golden Rule, the idea that we should only do unto others what we would be happy having them do to us. To the extent that this is followed in a society, it is genuinely free.

To the level it is ignored, for whatever reason (private or governmental), freedom declines.

Important Questions

To understand freedom, using this definition, just ask yourself: “Who would I give the power to make all my decisions for me?”

Your answer tells where you stand for freedom. If you say, “nobody,” or “God, and nobody else,” you are adamantly a supporter of freedom. If you say “the government,” you are adamantly against freedom. If you say, “my employer, and government, and local committees and boards,” you are choosing socialism.

Note that the question was who would you give the power to make ALL your decisions, not some of them, or a few of them, or certain decisions, or even a lot of them. All of them. The answer tells you where you stand on the freedom question.

Leoni expands this one question into several:

1. How do you want to be treated?
2. Are you willing to treat others the way you want to be treated?
3. Are you willing to voluntarily sacrifice to create and maintain a society where everyone is treated this way?
4. Who will rule in such a society, who will choose these rulers, and how can these rulers be kept from using their power to treat people in wrong ways?
5. Why do you allow society and rulers to treat you and others in wrong ways?
6. What are you doing to ensure that everyone is treated the right way?

These are the questions of freedom.

What are your answers?

 The future belongs to innovation,
not conformity.

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Citizenship &Constitution &Current Events &Economics &Education &Entrepreneurship &Generations &Government &History &Leadership &Liberty &Mini-Factories

7 Kinds of Government (An Alarming Analysis) – Oliver DeMille

May 5th, 2014 // 11:42 am @ Oliver DeMille

Power and Obedience

Every government seeks to increase its power. And “power” is control over obedience, according to the great writer Bertrand de Jouvenel.

“Force alone can establish power, habit alone can keep it in being…”

But one more thing is needed to have absolute power: credit. (This is Jouvenel’s word, meaning “recognition” or “validation” – not lending.)

This means that any government wanting great power must come up with some way to openly reward people who obey its commands.

In short, any entity trying to control obedience must find a way to use force, to maintain a habit of obedience among the people, and to give credit and recognition to the most obedient.

This makes obedience popular and lucrative, and disobedience dangerous and unpopular.

To gain the obedience of the masses, Jouvenel taught, a government must first convince the people that they should obey. Then it must show them that they will hurt if they don’t obey, and be rewarded if they do.

Part I: Six Bad Types and One Good Type of Government

There are seven main ways to persuade the people that they really should follow a government, and six of them have been used multiple times in history to increase the power and force of bad governments. Freedom is decreased any time the people believe any of these six:

1. The Divine Right of Kings (“God made me your ruler, and your eternal salvation depends on obeying me and my agents.”)
2. Majority Rules (“If most of the people vote for it, the rest should follow, even if the vote is evil or ridiculous, because we are all part of the whole and must follow the majority decision.”)
3. Benefits to the People (“If you vote for me, I’ll make sure you get more of x and less of y.”)
4. The Need for Order and Security (“If the government doesn’t have the power to protect you, bad people will hurt you; so give us more power—we promise, we’ll never, ever abuse it. Just trust us.”)
5. The Pure Force Doctrine (“If you don’t obey us, here is what we’ll do to your parents, spouse, children, reputation, body, and possessions…”)
6. The Invisible Government/or/A combined Pure Force and Order and Security system on Steroids (“A few of us will know the secrets and make the decisions so that the rest of you can relax and enjoy life. Trust us, because though historical governments have abused power, we never will.”)

Any government or politician arguing any of these six dangerous doctrines should immediately set off a warning bell to every citizen.

Exactly none have ever maintained their trust; all have been abusive of their power and their people.

Moreover, all six of these arguments are fallacies; none are a true reason for giving power or obedience to a government.

The Seventh Form: You

The solution to all of these is the 7^th form of government: The Informed Citizen. This is the doctrine of regular people 1) having the vote to determine who will lead them, and who will not lead them, and also 2) having the wisdom to keep a close eye on everything government does and keeping it in line if this is ever needed.

Without the second part of this—regular people closely watching government and keeping it checked—all governments end up as one of the six bad types. In all six, freedom is eventually lost. In fact, all six types eventually turn into The Pure Force style of government.

But don’t just take my word for it; do the math: There is no exception to this in history.

By the way, the worst type of government system is The Invisible Government. In this model, the government operates largely in secret, exerting Pure Force whenever and however it wants without effective media or citizen oversight.

In fact, many people living in an Invisible Government system don’t even realize that Pure Force is happening every day – until they’re the ones on the receiving end of power abuse. And under an Invisible Government, such “complainers” are often branded as paranoid or rebellious non-conformists who are rocking the boat for everyone else, who prefer to enjoy the “security” and “prosperity” the uber-powerful government provides. (The big party poopers. Why can’t they just get back in line and enjoy the gettin’ while the gettin’s good??)

The only way to stop the six bad kinds of government—including eventually becoming a Pure Force government—is The Informed Citizen society. Without this, no nation can last.

The American founding generation, and the American framers, established an Informed Citizen model. It wasn’t perfect, and because of slavery it never fully flourished until after the Civil War. Once slavery was abolished, the Informed Citizen system began to deepen and expand.

By 1945, the United States, with less than 6% of the world’s population, was producing over half of the globe’s goods and services.

Turns out that freedom works.

But freedom only lasts when The Informed Citizen stays strong and active.

Are you such a citizen?

Part II: How to Know Which System Your Government is Following

Today we live under an Invisible Government model (with Pure Force steadily increasing in power) where a few power elites are expected to know the secrets and make the big decisions so the rest of us can just live our lives.

If this trend continues, the entire freedom system of the United States will experience further decline. (Are those just words, words, words to you? I sincerely hope not. Ponder for a moment what that means for your children, and your children’s children.)

If this trend continues, the entire freedom system of the United States will experience further decline.

The way to determine which system your government uses is simple: How does your government and nation treat the weakest, most vulnerable, least powerful among you, les miserables; and, how does it treat your enemies?

As Jouvenel said, expansionism is part of the character of a nation seeking more power.

By these measures, Rome was powerful but it wasn’t great. Slaves, women and children were chattel, literally owned by their masters. Enemy cities were leveled, the inhabitants tortured and killed or sold into slavery.

The ground was salted so nothing could grow for generations to come.

Likewise, the British Empire was powerful but cruel. The lower classes were frequently treated like slaves (read Dickens, for example), the wealthy were often aloof and domineering, and the people in foreign colonies such as those in India and Africa were consistently exploited and mistreated.

Money and power were used to manipulate nearly every transaction and relationship.

In contrast, once slavery was abolished in the United States, America stood for the principle of freedom to millions around the world.

It raised a Statue of Liberty in the New York Harbor that invited all the poor and mistreated from around the world to immigrate to our shores and join us in freedom.

It fought for European and Asian freedom and asked for no colonies or tributes in return.

During this era, America genuinely aspired to live up to the ideals of an Informed Citizen system.

Two Paths…

This focus has changed in recent times. How do we now treat the poor or struggling immigrant yearning to be free? The unborn baby? The captured enemy? We exclude, we terminate, we torture.

Yet because the regular citizen does not hold the torturer’s knife we are able to (falsely) claim a semblance of morality. We comfort ourselves in plausible deniability.

This is precisely how Invisible Government works.

But when our government agents torture in the name of our protection and freedom, they act in our name.

This means we bear responsibility—unless we attempt to decry and end such behaviors.

When they came for the unborn babies, we turn a tearful eye. But it kept happening—to millions.

When they came for the captured enemy we turned a blind eye to torture. We played Javert, thinking the government knew best. But even if this were true, when we allow our government to torture it will eventually turn such measures on us.

This is a law of history.

When they come for the weary immigrant, who risks his life just to send a few dollars home to feed his child like a modern Jean Valjean, we frown in disgust and send him on his way. An Abraham, a Jesus, the Bishop in Les Miserables would have thrown open their arms and proffered (personal) resources of sustenance, hospitality and welcome.

Too few of us follow their example.

We stand at a crossroads in modern America. On the one hand, we are quickly headed toward overwhelming Invisible Government that spies on us, expands its controls over us, and every day increases its tentacles of force.

On the other, we can be Informed and Active Citizens.

These are the two choices.

“The face of power changes,
but not its nature.”
—Bertrand de Jouvenel

(See FreedomShift, by Oliver DeMille, for more commentary on and solutions to these trends.)

Category : Blog &Citizenship &Community &Current Events &Economics &Government &History &Leadership &Liberty &Politics

Corruption By Any Other Name – Oliver DeMille

April 25th, 2014 // 10:41 am @ Oliver DeMille

Another Domino Falling

JP Morgan recently settled a case brought by the government, agreeing to pay Washington $13 billion for its role in the mortgage bubble meltdown.

This creates a very dangerous standard. When something bad happens, Washington will naturally seek to find fault in a place that brings it a lot of extra cash—the most profitable businesses.

As Ken Kurson put it:

“This settlement sets a terrible precedent. Companies with strong balance sheets can expect to become targets of the government…”[i]

This is another domino in the decline of our freedoms, and it’s a big one. This new approach allows, even incentivizes, government corruption. Let’s review how this process works:

• The federal government passes laws that require or incentivize businesses to give loans or offer services/products to people who can’t actually afford them. Businesses that refuse are penalized.

• As a result of this kind of bad policy, many businesses fail. Businesses that comply, but only make middling profits, are left alone.

• Businesses that comply, and make big profits, are targeted by the federal government and end up paying huge sums of money to the government.

Godfather Over Again

This is a great racket. It’s akin to a mafia protection scheme: “You need protection from us. We’ll provide it, for a fee. The fee will be set by us, without appeal or negotiation. If you don’t pay it, we’ll hurt you and/or your business—thus proving that you really did need protection.”

An official term for this new precedent is “corruption.” Except that the Supreme Court gets to determine the actual definition of the word. And who gave the Court the power to do this?

The Supreme Court did, in a string of cases starting in 1803 through 1936.

Is this recurring pattern starting to make sense?

“Wait,” the critics say. “The crash was real! And JP Morgan and other companies that participated need to pay! Right?”

As Kurson wrote:

“Of course, most of JP Morgan’s wrongdoing—70 to 80 percent of the exposure—was committed by two companies, Bear Stearns and Washington Mutual, it acquired in 2008 at the request, to the point of command, of then-Treasury Secretary Henry Paulson. JPM acquired those companies as acts of mercy during a crisis.”[ii]

Let’s get this straight. The economy was tanking, so the government demanded that JP Morgan buy two flailing firms—to help save the economy. Then, when the fall came, the government targeted JP Morgan for the mistakes of these two firms and made it pay for them.

Godfather corruption indeed.

Who It Hurts

How are businesses responding to this emerging new economy? Many are closing. Others are going abroad, to China, India, Brazil, etc.  Those that make enough from the U.S. economy simply pay the fines, settlements, and fees—it’s the cost of doing business.

The real problem is for American workers and families. JP Morgan has increased its litigation reserve up to $23 billion (from $3 billion in 2010).[iii] Other companies are learning to do the same.

What happens when the extra billions are refocused this way? Money moves away from salaries and purchases, the economy is hurt, private sector jobs are cut or curtailed.

The government is currently seeking similar payoffs from a number of other big companies. As this precedent sends its ripples through the economy, it will harm a lot of families.

More firms will move operations and jobs abroad, and others will shift more money from jobs and put it to litigation and fees.

Old Pattern, New Cloth

Oh, and just re-read the government’s pattern outlined above for the mortgage bubble, but this time read it with Obamacare in mind:

• The federal government passes laws that require or incentivize businesses to offer services/products to people who can’t actually afford them. Businesses that refuse are penalized.

• As a result of these bad policies, many businesses fail. Businesses that comply, but only make middling profits, are left alone.

• Businesses that comply, but make big profits, are targeted by the federal government and end up paying huge sums of money to the government.

This really is as shocking as it sounds. Yes, this really is happening in the United States.

The worst news in all this is that most people will do nothing about it, because this kind of financial news is considered technical mumbo jumbo.

Citizens usually just ignore it. “What can I do, after all?” is the typical response.

This is how freedoms decline: slowly for a while–then all at once. The amazing part is that when the “all at once” crash comes, almost everyone acts surprised.

But what can a regular person do? Really? It’s not like you can stop government overspending, party bickering, or a growing culture of corruption with a call to your Congressman or a letter to the editor.

The answer to this major post-modern question (What can a regular person do?) is interesting: We can start with not being surprised.

Problems and Solutions

We can know what is coming. A government addicted to spending and borrowing, and constantly increasing its spending and borrowing, is going to cause problems for the economy and for its citizens.[iv]

A government addicted to increased regulations is going to cause problems.[v]

A government that demands official secrecy from its own people while increasing how it spies on its own citizens is going to cause problems.[vi]

A government that inflates its currency and borrows from its biggest enemies and competitors is going to cause problems.[vii]

A government whose top officials routinely make promises during elections or to pass big agendas and then break them once they win is going to cause problems.[viii]

A government that uses statistics it knows distort reality (just revising them a few months later once decisions have been made), in order to support its continued ideological course, is going to cause problems.[ix]

A citizenry that turns a collective blind eye to these realities is enabling the very problems it fears. Then the people claims surprise when the crash comes.

Anyone who is surprised by the next crash has been lying to themselves for a long time.

False Recovery

As Allan Greenspan wrote in November 2013:

“One can hope that in a future financial crisis—and there will surely be one…”[x]

Calomiris and Haber noted that banking crises should be expected:

“The banking system in the United States has been highly crisis-prone, suffering no fewer than 14 major crisis in the past 180 years.”[xi]

The question isn’t if, but when, the next one will come.

Or consider what J. Bradford DeLong wrote in a piece in Foreign Affairs titled “The Second Great Depression: Why the Economic Crisis is Worse Than You Think”:

“The U.S. economy has enjoyed a recovery [since 2009] only in the sense that conditions haven’t gotten worse…. But it is unlikely that the economic downturn will be over by 2017…”[xii]

Greenspan suggested the second thing people can do. He wrote:

“Financial firms could have protected themselves…if…they had prepared for a rainy day.”[xiii]

Though he addressed this belated counsel to companies, it certainly applies to regular people as well.

Time and Two Steps

To summarize, we have covered two things a regular person can do about our current problems. First, know about them. Pay attention. Keep a close eye on the government, the economy, and current events. Read the fine print and the technical mumbo jumbo put out by government.

The English word for this daily activity and focus is “citizenship.”

The second is to prepare. Look around, see what is really needed, and what is likely to be needed in the years ahead—and take action to help your community flourish.

Not just for you, but for others.

The word for this kind of initiative and foresight is “entrepreneurship.” It isn’t pessimistic, doomsayer, or extreme. In fact, effective entrepreneurialism is precisely the opposite.

It only works if it is optimistic, positive, and sustained.

Without such citizenship and entrepreneurialism, the decline of freedom is only going to accelerate. We’ve still got time for these two things to work, but time is running out.

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