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This article was published in The Daily Caller. I have made some small improvements.
By Barry Rubin
Earlier this week, The Washington Post’s Lally Weymouth interviewed King Abdallah of Jordan. Here’s how King Abdallah responded to Weymouth’s question, “Do you and other leaders in this area believe you cannot rely on the U.S.?”
He replied:
“I think everybody is wary of dealing with the West….Looking at how quickly people turned their backs on [Egyptian President Husni] Mubarak, I would say that most people are going to try and go their own way. I think there is going to be less coordination with the West and therefore a chance of more misunderstandings.”
This is devastating. I’m not shocked that the king thinks that way but I am shocked that he says so openly. In other words he isn’t afraid of Obama’s being angry and thinks he has nothing to lose because things aren’t going to be better. That’s how far the situation has deteriorated.
Imagine that instead of going to Jordan (which is also an Arab country in addition to being a pro-American, moderate one) for advice on building the opposition leadership in neighboring Syria, the Obama Administration went to the non-Arab, Islamist Turkish regime!
Jordan is now turning to Saudi Arabia, another country that is no longer relying on Obama, to be its protector and source for financial aid.
Jordan has been the most long-term, consistent ally of the United States in the Arab world, continuously for more than 40 years. Yet the king cannot trust those in the White House any more. They dumped Mubarak, they might dump him.
Therefore, no one will stick his neck out on behalf of U.S. interests or requests. Moreover, they are going their own way. While Washington extolls Islamist forces or things that benefit them in Egypt, Lebanon, Libya, Tunisia, and Turkey, they don’t seem to care at all about Israel, Jordan, or Saudi Arabia, the scattered survivors of recent developments and Obama’s pro-Islamist policies.
Iraq’s disinterest in having a continued U.S. troop presence arises from several issues but Baghdad’s determination to go its own way is also connected to this situation. And in Afghanistan, the government knows that it cannot depend on a U.S. government that is not only withdrawing but has subverted the Kabul regime, proven powerless in dealing with Pakistan, and openly talks of political negotiations with the Taliban and even al-Qaida-linked terrorist groups (the Haqqani Network).
The U.S. policy formulated around 1955–allying with moderate Arab monarchies and nationalist regimes–as well as that originating in the 1970s–adding Israel to that list–has been undone by the Obama Administration. When the king of Jordan openly complains you know that U.S. credibility among pro-Western Arabs is pretty close to zero.
Yes, there was a time not so long ago when Turkey wasn’t ruled by Islamists and the New York Times wasn’t ruled by far leftists.
Turkey has just had a major earthquake. Israel offered help; the Turkish government refused. Yet it was Israel’s generous help at the time that was the breakthrough event for the close relationship between these two countries.
”Israelis are absolutely obsessed with the earthquake,” said Barry Rubin, an Israeli scholar who has written extensively about the Turkish-Israeli relationship.
”There’s a psychological as well as a political reason for this,” Mr. Rubin said. ”Jews and Turks have historically been thought of as outsiders, especially in Europe. They are two peoples who are extremely conscious of who their friends are. But even though I’ve been following this subject for 10 years, I’m amazed at how many messages I’ve received since the earthquake. Israelis want to know what they can do to help, and Turks want to say how grateful they are.”
Now, Turks and Jews are still “outsiders” but the new solution of the regime in Ankara is to overcome this by making the prime Turkish identity as Muslims rather than as Turks. For a few months, this seemed to work as Arab Islamists were thrilled that Turks were sympathetic to Hamas, (Shia) Hizballah, Assad’s Syria, and Iran.
But now the Sunni Arab Islamists have their own heroes taking over in Libya, Tunisia, Egypt, and perhaps Syria. When Turkey’s stealth Islamist Prime Minister Recep Tayyib Erdogan came calling in Cairo–and spoke too openly of his leadership ambitions for the region–the Islamists suddenly remembered that he was a Turk and not really one of them….
2Son of man, say to the prince of Tyre, Thus says the Lord God: Because your heart is lifted up and you have said and thought, I am a god, I sit in the seat of the gods, in the heart of the seas; yet you are only man [weak, feeble, made of earth] and not God, though you imagine yourself to be almost more than mortal with your mind as the mind of God;
3Indeed, you are [imagining yourself] wiser than Daniel; there is no secret [you think] that is hidden from you;
4With your own wisdom and with your own understanding you have gotten you riches and power and have brought gold and silver into your treasuries;
5By your great wisdom and by your traffic you have increased your riches and power, and your heart is proud and lifted up because of your wealth;
6Therefore thus says the Lord God: Because you have imagined your mind as the mind of God [having thoughts and purposes suitable only to God Himself],
7Behold therefore, I am bringing strangers upon you, the most terrible of the nations, and they shall draw their swords against the beauty of your wisdom [O Tyre], and they shall defile your splendor.
8They shall bring you down to the pit [of destruction] and you shall die the [many] deaths of all the Tyrians that are slain in the heart of the seas.
9Will you still say, I am a god, before him who slays you? But you are only a man [made of earth] and no god in the hand of him who wounds and profanes you.
10You shall die the death of the uncircumcised by the hand of strangers, for I have spoken it, says the Lord God.
11Moreover, the word of the Lord came to me, saying,
12Son of man, take up a lamentation over the king of Tyre and say to him, Thus says the Lord God: You are the full measure and pattern of exactness [giving the finishing touch to all that constitutes completeness], full of wisdom and perfect in beauty.
13You were in [a]Eden, the garden of God; every precious stone was your covering, the carnelian, topaz, jasper, chrysolite, beryl, onyx, sapphire, carbuncle, and emerald; and your settings and your sockets and engravings were wrought in gold. On the day that you were created they were prepared.
14You were the anointed cherub that covers with overshadowing [wings], and I set you so. You were upon the holy mountain of God; you walked up and down in the midst of the stones of fire [like the paved work of gleaming sapphire stone upon which the God of Israel walked on Mount Sinai].
15You were blameless in your ways from the day you were created until iniquity and guilt were found in you.
16Through the abundance of your commerce you were filled with lawlessness and violence, and you sinned; therefore I cast you out as a profane thing from the mountain of God and the guardian cherub drove you out from the midst of the stones of fire.
17Your heart was proud and lifted up because of your beauty; you corrupted your wisdom for the sake of your splendor. I cast you to the ground; I lay you before kings, that they might gaze at you.
18You have profaned your sanctuaries by the multitude of your iniquities and the enormity of your guilt, by the unrighteousness of your trade. Therefore I have brought forth a fire from your midst; it has consumed you, and I have reduced you to ashes upon the earth in the sight of all who looked at you.
19All who know you among the people are astonished and appalled at you; you have come to a horrible end and shall never return to being.
20Again the word of the Lord came to me, saying,
21Son of man, set your face toward Sidon and prophesy against her.
22And say, Thus says the Lord God: Behold, I am against you, O Sidon, and I will show forth My glory and be glorified in the midst of you. And they shall know (understand and realize) that I am the Lord when I execute judgments and punishments in her, and am set apart and separated and My holiness is manifested in her.
23For I will send pestilence into her and blood into her streets, and the wounded shall be judged and fall by the sword in the midst of her on every side, and they shall know (understand and realize) that I am the Lord [the Sovereign Ruler, Who calls forth loyalty and obedient service].
24And there shall be no more a brier to prick the house of Israel or a hurting thorn of all those around them who have treated them with contempt, and they shall know (understand and realize) that I am the Lord God [the Sovereign Ruler, Who calls forth loyalty and obedient service].
25Thus says the Lord God: When I gather the house of Israel from the peoples among whom they are scattered, and I shall be set apart and separated and My holiness made apparent in them in the sight of the nations, then shall they dwell in their own land which I gave to My servant Jacob.
26And they shall dwell safely in it and shall build houses and plant vineyards; yes, they shall dwell securely and with confidence when I have executed judgments and punishments upon all those round about them who have despised and trodden upon them and pushed them away, and they shall know (understand and realize) that I am the Lord their God [their Sovereign Ruler, Who calls forth loyalty and obedient service]. — Amplified Bible
Footnotes:
Ezekiel 28:13 This speech, though not addressed to Satan in and of himself, seems to be ironically spoken against his evil genius fulfilling itself in and through the human ruler who appropriates to himself the honors due only to God, as in the case of the king of Babylon (Isa. 14:12-15). Here is to be seen a foreshadowing of “the beast” who is to attribute to himself divine rights in the time of the end (Dan. 7:8-28; II Thess. 2:1-12; Rev. 13; 19:20).
The Colorado Girl Scouts have said they would allow a 7-year-old boy to join after initially rejecting his application.
The boy, Bobby Montoya, wants to join his sister in the group. According to a Daily Mail report, he also dresses like a girl and loves playing with dolls.
A troop leader initially told Bobby he could not join because he was a boy and rejected his application.
However, the Girl Scouts released a statement to KUSA saying a worker gave Bobby’s family the wrong information.
The boy’s mother, Felisha Archulets, was told the her son could not join the Girl Scouts because he has “boy parts.”
She told KUSA, “He’s been doing this since he was about two-years-old. He’s loved girl stuff, so we just let him dress how he wants.”
In a statement the organization said, “If a child identifies as a girl and the child’s family presents her as a girl, Girl Scouts of Colorado welcomes her as a Girl Scout.”
“In this case, an associate delivering our program was not aware of our approach. She contacted her supervisor, who immediately began working with the family to get the child involved and supported in Girl Scouts,” the organization stated.
Adding, “We are accelerating our support systems and training so that we’re better able to serve all girls, families and volunteers.”
The Girl Scouts have said they have received lots of requests to support transgender kids. The organization said it would support the children, families and volunteers who help them.
War is on its way in the Middle East as Muslim countries are determined to force a showdown over the future of Israel, Ronald Reagan’s assistant defense secretary Frank Gaffney warned in an exclusive Newsmax.TV interview.
“I’m afraid there’s a war coming, a very serious, perhaps cataclysmic regional war,” he said. “It will be presumably over, at least in part, the future existence of the state of Israel. It may involve all of its neighbors, as they have in the past, attacking Israel to try, as they say, to drive the Jews into the sea.
“It may involve the use of nuclear weapons,” Gaffney predicted. “But whatever form it takes and whenever it occurs, it is unlikely to be contained to that region, and we must do everything we can to prevent freedom’s enemies from thinking they have an opportunity to engage in that kind of warfare.”
That means standing “absolutely, unmistakably” as one with Israel and doing everything to prevent Iran getting its hands on nuclear weapons.
Gaffney, who now heads up the nonprofit Center for Security Policy in Washington, D.C., was speaking on the day that the “moderate” Islamist party Ennahda claimed victory at the ballot box in Tunisia and the day after Libya’s new rulers declared that country will be run on Islamic principles and under Sharia law.
Gaffney does not believe Ennahda is really a moderating force. “I don’t believe there is such a thing as a moderate Islamist party,” he said. “The challenge with Islamists is that they seek to impose what they call Sharia on everybody, Muslim and non-Muslim alike.
“They may, as a matter of tactical expediency, choose to do so in incremental ways, often nonviolently, at least initially.
“The problem is that, because ultimately they must — according to Sharia, according to what they believe is God’s will — make everyone feel subdued in order to achieve their God-mandated direction, they will not remain moderate. They will not be satisfied with anything less than the ultimate supremacy of Sharia and they certainly will not resist the use of violence when it becomes expedient to get their way.”
Gaffney, who writes a regular column for Newsmax, foresees a rising tide of Islamist governments growing throughout Middle East and North Africa and spreading even further.
“We’re witnessing not just the violent kind of jihad that these Islamists believe God compels them to engage in, but also, where they must for tactical reasons, a more stealthy kind, or civilizational jihad as the Muslim Brotherhood calls it. We’re witnessing that playing out, not only in places in the Middle East but also in Europe, in Australia, in Canada and here in the United States as well,” he said.
The spread of Sharia, which Gaffney said often is referred to as “Communism with a god,” is “the most urgent and grievous challenge we face as a free people.
“Those who follow this program of Sharia believe that God is directing them to engage in jihad or whatever form of warfare is necessary to accomplish their goals . . . .Through stealth, they have successfully penetrated important parts of the free world including our own government and civil society institutions.”
The Obama administration has to stop “embracing” the Muslim Brotherhood, Gaffney said.
“This is legitimating our enemies,” he said. “It is facilitating their influence operations and their penetration and it greatly increases the prospect that they will be successful at what the Muslim Brotherhood’s own documents indicate is their desire, which is to destroy western civilization from within.”
Gaffney noted that Ennahda had won what appears to be a clean election in Tunisia, but that doesn’t mean there ever will be another vote there.
“The problem is not simply democracy. People are pointing to Tunisia as a perfect example of democracy at work. Democracy is fine if all you want is one-man-one-vote one-time. That is precisely what the Muslim Brotherhood and its like-minded Islamist friends want.”
The Obama administration must apply pressure to ensure that democracy has a future there and elsewhere in the region, Gaffney said.
“The president and his administration are not even pursuing that,” he said. “What we are likely to wind up with, not just in Tunisia, not just in Libya, not just in Egypt, but probably in due course in Syria — as we have in Lebanon, as we have in Gaza and probably will have down the road in Yemen, Bahrain, maybe Saudi Arabia — is the takeover, the unmistakable takeover, perhaps through the ballot box, of people who will not seek or allow others freedom, who will impose Sharia and who will use whatever resources they amass as a result, not only to suppress their own people, but to endanger us.
Although at one time a large and influential religious denomination in North America, a fact sheet published by The Episcopal Church shows that its membership has dipped below two million members.
The survey of membership trends noted that in 2006 there were over 2.1 million “Active Baptized Members” in the church. By 2010, however, the number decreased to less than 1.96 million.
Jeff Walton, communications manager for the Institute on Religion and Democracy and staff member of the IRD’s “Anglican Action” program, believes that many factors have contributed to this decline.
“The Episcopal Church’s numerical decline comes from a drop in baptisms, departures sparked by disagreements within the church over the authority of Scripture and the identity of Jesus Christ, and a decrease in evangelism as Episcopalians focus increasingly on social charity,” Walton explained to The Christian Post.
“The spread of universalist theology within Episcopal seminaries has extinguished the urgency of winning souls, and the church has been largely unsuccessful in reaching immigrant populations which are disproportionately attracted to Roman Catholic and Pentecostal churches.”
Walton was not optimistic about The Episcopal Church’s ability to reverse the downward trend, considering the rapid decrease in marriages and baptisms within the denomination as a sign of still more decline in the future.
“The charismatic faction of the denomination, responsible for much of its new church planting in the recent past, has almost completely departed, as have a significant number of low church evangelicals,” said Walton.
“These departures are significant not just for the number of people who have left The Episcopal Church, but for the people whom they would have brought into it through evangelism and procreation.”
At their peak, Episcopalians in the United States numbered 3.6 million members, which was in 1966. Along with other mainline Protestant denominations, the church declined from the 1960s to the present.
Many exited the denomination following the 2003 consecration of openly gay bishop the Rt. Rev. V. Gene Robinson and later the decision in 2009 by The Episcopal Church’s highest legislative body to open the ordination process to all baptized members, which many saw as giving the green light to practicing homosexuals.
Some 100,000 conservative members left and formed their own body, called the Anglican Church in North America, that year (2009).
The Episcopal Church is part of the worldwide Anglican Communion, which has about 80 million members and is increasing in numbers in the more socially conservative global south.
About 73 percent of Iraqis said they believe it is likely Iran will act aggressively toward their country after U.S. troops leave in December.
Fifty-one percent said they believe the security situation within Iraq will get worse when the U.S. forces leave.
These are the results of a survey conducted by YouGov-Cambridge, a partnership between the British polling group YouGov and Cambridge University. The survey interviewed 505 Iraqis from July 12-27.
The survey also found that 80 percent of Iraqis—403 of the 505 surveyed—said they believe it is likely that neighboring countries will act aggressively toward Iraq after U.S. forces leave the country.
Of the 403 who said that thought this was likely, 91 percent said they thought it was likely that Iran would act aggressively toward Iran.
That means about 73 percent of the overall sample said they believed it was likely Iran would act aggressively toward Iraq after the U.S. withdraws.
Only 22 percent of Iraqis said they were confident that Iraq’s own forces could protect the country’s borders from neighboring countries after the U.S. withdraws, while 75 percent said they were not confident Iraqi forces could do that.
Similarly, only 31 percent of Iraqis said they were confident Iraqi forces could protect the Iraqi population from terrorist attacks, while 67 percent said they were not confident.
The survey asked the Iraqi respondents this question: “If the security situation does not improve or gets worse, would you personally support Iraqi politicians asking the U.S. government to keep the troops in Iraq?”
Forty percent said they would support Iraqi politicians asking the U.S. to keep troops in Iraq if the situation did not improve and 26 percent said they would support Iraqi politicians asking the U.S. to keep troops in Iraq but only if the security situation got worse. Only 28 percent said they would not support Iraqi politicians asking the U.S. to keep troops in the country under either circumstance.
When asked what they thought would be the impact on Iraq’s governing coalition if Iraqi politicians asked the U.S. to keep troops in the country after the agreed-upon December departure date, 31 percent said they believed the coalition government would collapse, while 56 percent said it would have no impact on the coalition.
The improved quality of anti-aircraft missiles held by Hamas in Gaza is increasingly worrying the Israeli defense establishment. Hamas recently managed to smuggle relatively advanced Russian missiles, which were looted from Libyan military warehouses, into the Gaza Strip. Israel is worried about the presence of the missiles, both because they curb the air force’s almost unlimited freedom of movement over Gaza today, and because of their possible use against civil aviation in Eilat.
Shoulder-fired anti-aicraft missiles have been smuggled into Gaza in recent years at Iran’s initiative. But the fall of Muammar Gadhafi’s regime has enabled Hamas to bring in much higher quality missiles – and in much larger quantities.
Rings of smugglers utilized the riots in Libya to break into military storage facilities and steal large quantities of weapons, some of which have relatively advanced capabilities. The weapons were then sold to terrorist organizations, first and foremost to various Palestinian factions. It seems that extremist Islamist organizations in Somalia also bought large quantities of weapons.
The United States is also worried by the developments. U.S. Secretary of State Hillary Clinton, who visited Libya last week, announced the U.S. would grant the new Libyan regime millions of dollars in aid in an attempt to fight the arms smuggling. American experts expressed their fears in particular over the transfer of shoulder-launched missiles to terrorists, and said the aid was intended to allow the Libyans to locate where such weapons are stored – and destroy them.
There have been previous reports of the smuggling of Russian SA-7 anti-aircraft missiles into Gaza. Now there are reports of more advanced missiles.
A few weeks ago, the cabinet discussed the issue of protecting civilian aviation in Eilat, including the possible purchase of systems to defend planes against anti-aircraft missiles. The issue has been put off for nine years since the failed attempt by an al-Qaida faction to shoot down an Israeli passenger plane in Mombasa, Kenya.
In the August 18 battle between the IDF and terrorists, the terrorists fired a missile at an Israeli attack helicopter. The missile missed. But the Air Force has been operating for a number of years over Gaza on the assumption that various Palestinian factions possess anti-aircraft missiles.
The anarchy in Sinai in recent months has allowed the Palestinians in Gaza to operate almost without interference, and improve their training and weaponry.
Matthew 3:11
He that cometh after me is mightier than I;….he shall baptize you with the Holy Ghost and with fire.
God only gives good gifts to His children. Unfortunately we are apt to esteem them lightly because of their sheer abundance.
The Old Testament saints, who were less favored than we are, could appreciate more readily the preciousness of this gift of the outpoured Spirit.
In their day it was a gift given only to the select few, chiefly to priests, judges, kings and prophets, whereas now it is the portion of every child of God.
Think! We mere nonentities who trust in Christ can have resting upon us the same Spirit who rested upon Moses the friend of God, upon David the beloved king, and upon Elijah the mighty prophet.
“Among them that are born of women,” said Jesus, “there hath not arisen a greater than John the Baptist: yet he that is but little in the kingdom of heaven is greater than he.”
- Watchman Nee: A Table in the Wilderness.
There are more than a few similarities between the newly forged federal Europe and the former Soviet Union.
It is quite ironic that only 30 years after the fall of the Berlin wall and the end of Soviet communism, a new tyranny has risen, predicated on the same failed centralist political tactics tried and tested in the old Soviet Union. Just ask Russia how that worked out.
And yet with the recent debt crisis spreading across Europe, the problem with centralism as a model has been illustrated yet again, since it is now apparent to all watching that a supranational central bank that sets uniform interest rates and controls the liquidity of an entire continent is unable to contain major dislocations and financial disruptions in member states. The financial contagion that resulted from European loan defaults, most notably in the case of Greece, has prompted calls for yet more centralization.
Factions inside the European Commission are discussing proposals to make defaulting states “wards” of the Commission, effectively ending national sovereignty for indebted states. Each “ward” would be assigned a budget officer who would oversee spending in the geographical area under his or her direction.
How is this to be tolerated on a continent that once prized freedom and accountable, democratic government? American victory in World War II seems overshadowed by the willful acquiescence to despotic rule which now characterizes European political organization. The world watches with bated breath as European nations line up to surrender precious, historic freedom to Brussels. And Greece, the cradle of democracy, is next on the menu.
The parallels between the Soviet Union and the European Union are undeniable.
The unelected European Commission acts as supreme legislator, ipso facto, the politburo. (See the text of the Lisbon Treaty as amended, specifically the provisions dealing with the powers of the Commission.) As a matter of fact, there is no higher power than the European Commission. Unlike the separation of powers found in the political organization of the United States, or the two-tiered system of checks and balances found in the legislative structure of the former United Kingdom, the European Commission can revise, edit, repeal, remake, and remand laws passed by the duly elected representatives of the European people. This process has been allegedly improved with a procedure called “co-decision,” but the wind still blows from Brussels. When all is said and done, assuming the European Parliament is uncooperative, the Commission can simply rule by fiat, and implement policy via regulation, which is immediately binding in all member states.
And far from a traditional democratic body, the European Parliament is a publicity stunt, elected through a “list” system that minimizes poplar choice. People vote for a party list, eliminating competitive elections, very similar to the one-vote, one-candidate Soviet system. If candidates on the list are not representative of local tastes, citizens will have no recourse but to vote for another party, which presents its own challenges. In essence, the European Parliament fulfills the role of the former Supreme Soviet, backing the policy prescriptions of the Politburo and giving a democratic face to the European Union (EU).
And eerily similar to the Soviet approach of divide and conquer, hundreds of artificial regions have replaced traditional provinces and counties on a host of policy questions, and these abstract constructs answer directly to Brussels, ipso facto Soviet Socialist Republics (SSRs). In point of fact, regional governments can now compete independently of national parliaments for European Union (EU) funds, neutering national sovereignty and creating new financially-driven loyalties that supersede questions of national patriotism.
The centrality of regionalism to the EU agenda is embodied in “Framework” regulation 2052/88 instituted by regional visionary Jacques Delors during his time as European Commission President: it provides a swift means of delivering regulation upon the subject peoples of Europe without the filtering mechanism of national parliaments. As regulations, apart from directives, instantly become law in EU member states without parliamentary scrutiny, it makes sense to have European administrative units that are charged with the implementation of European policy.
The Delors regulation made it lawful in all EU member states for regional authorities, which were a requirement after the Single European Act, to deal directly with Brussels on a host of issues without consulting with, or working with, national parliaments. The Treaties of Amsterdam and Maastricht even gave regional authorities an advisory role in all EU legislation, regulations, and directives. Currently, the EU’s end-run around national parliaments only extends to “structural funds,” which encompasses most economic issues. But as “EU law takes primacy over the law of member states,” there would be little, if any, recourse for national parliaments following new regulations that expanded on the current EU practice of benign neglect.
Joseph Stalin once observed that people will more readily surrender sovereignty to vague regional entities with which they have more in common, than to an abrasive and offensive world authority. In his 1912 essay “Marxism and the National Question,” Joseph Stalin maintained that “regional autonomy is an essential element in the solution of the national problem.” The 1936 Official Program of the Communist International proclaimed:
The world dictatorship can be established only when the victory of socialism has been achieved in certain countries or groups of countries, when the newly established proletarian republics enter into a federative union with the already existing proletarian republics…[and] when these federations of republics have finally grown into a World Union of Soviet Socialist Republics uniting the whole of mankind under the hegemony of the international proletariat organized as a state.
European nations have already been consigned to the ashbin of history with the ratification of Lisbon, which took effect Dec. 1, 2009, but residual national feelings will still have to be contended with. Regional division offers the best hope of defusing national patriotism. And the sky is the limit now that national parliamentary vetoes have been replaced with Qualified Majority Voting (QMV) in vital matters of domestic importance. Even QMV is a joke. See this excerpt from protests held in the supposedly democratic European Parliament in response to the willful disregard of the European people after the widespread rejection of the proposed federal European Constitution in referenda.
Eastern Europe tasted liberty for a brief moment and has been plunged back into the darkness of despotism once more. The tragedy is unbearable. An ideological curtain has descended across the Atlantic. The only question remaining is, does America have the stomach for another Cold War?
The current economic crisis rivals the one of the 1930s. Despite shameless propaganda by government and its cronies in the media, people understand that the situation is getting worse. Consumer confidence continues to decline as does confidence in the future.
We are headed for an event that history will record as worse than the Great Depression. It is unavoidable.
The Level of Debt
The principal reason for the dire prediction is the level of debt outstanding. Current debt levels are simply not sustainable. Assets and cash flows cannot support or service this debt.
No economic recovery can occur without massive debt reduction. As shown below, current debt is much higher than the 1930s:
As a percentage of GDP, debt is at an all-time high. Immediately prior to the Great Depression US debt was about 200% of GDP. It rose briefly to 300% as a result of massive government interventions to combat the Depression.
At the beginning of the current downturn, debt was about 370% of GDP. It is about 400% currently.
Eyeballing the chart from 1870 forward, debt levels are generally in the range of 150% of GDP. That appears to be the norm for the last 140 years. Only in the 1920s and recently did debt exceed 180% of GDP. Even funding World Wars I and II did not drive debt above 180%.
To return to 150% requires a reduction of about $30 Trillion in debt. That represents about two full years worth of GDP!
The Political Myths
After the 1930s politicians convinced themselves and the public of two things:
Free markets need government interventions to produce a healthy economy.
Keynesian pseudo science provided the tools necessary to manage the economy.
Both beliefs were false, but both aided politicians’ insatiable drive for power and control. Once the public came to believe these myths, government owned the economy. Any economic problem became a political one. Economic slowdowns were no longer politically acceptable.
“Don’t just stand there, do something” drove economic policy. It was politically impossible to allow an economy to correct on its own. Political action was required, even if such activity was ultimately harmful. Politicians had to do something, anything! Their constituents demanded it.
The “government is responsible” attitude quickly spread. Today, virtually any perceived problem or inequity is assumed to be fixable by government. Government readily took on responsibility for virtually every aspect of our lives.
The madness is evident. It is assumed that government creates jobs, educates kids, designs toilets and light bulbs. It is necessary to provide mortgages, retirement benefits and healthcare. ”Green energy” and other new technologies are assumed impossible without the assistance of government.
This litany of the presumed need for government could continue for pages. Virtually all these presumptions are false. Worse, many in the public still believe that these “services” are “free.”
Economic Reality
Every swing in the business cycle, no matter how mild, became the responsibility of government. Government was to step in and “fix” economic problems. Seventy years of such “fixes” preceded our current problem.
Economic downturns are both normal and necessary. Individual and business mistakes are remedied via economic slowdowns. Misplaced capital and labor is freed up for more productive uses. When this cleansing does not occur, an economy becomes less efficient and grows at a slower rate. The mistakes remain in place and are perpetuated.
Government intervention is not corrective. It is a cover up of prior mistakes. The phrase “pretend and extend” describes what happens. Instead of allowing the economy to correct, government attempts to avoid the correction and the pain by covering up the mistakes. That has been the history of much of the last 80 years. Continued interventionism brought the economy to this crisis point.
The artificial boom that began decades ago is exhausted. Response to the dot-com stock market bubble was the last coverup that “worked.” The system was flooded with credit and one bubble was replaced with another. Now the housing bubble has burst, marking the high point of “pretend and extend.”
Credit expansion since 2008 has been impotent. The real economy has stopped responding. Economists who advocate more stimulus or credit are either ill-trained or have political motives. Governmental stimulus and credit expansion created the problem. Recommendations for more of the same qualify as insanity per Albert Einstein’s definition.
A Worldwide Problem
The US is not unique. Most of the developed world is burdened by excessive credit and government spending. Easy credit enabled governments to grow too large and individuals to take on too much debt. The point where markets are unwilling to provide more debt has arrived.
The position of the US, thought to be stronger than other countries, is not, as shown in this chart:
Rumors of another US credit downgrade circulate for good reason.
Governments everywhere are trying to prevent a massive economic and financial correction, but they will not succeed. In order for economies to return to health, debt must be liquidated. De-leveraging must occur. Debt will be paid down and/or defaulted upon. Normal economic growth cannot resume until excess debt is removed from the system.
The Problem With De-Leveraging
Reducing debt is known as de-leveraging. The ramifications of de-leveraging are not widely understood. Ray Dalio of Bridgewater Associates discussed the process on the Charlie Rose show (full transcript):
I think it’s important to understand that we’re going through a deleveraging. So we have to understand the big picture is — there’s a deleveraging. Three big themes: first there’s a deleveraging; secondly we have a problem with monetary and fiscal policies are running out of ammunition; and thirdly we have an issue in terms of people most importantly who are at each other’s throats politically and globally in terms of having a problem resolving those.
So then we begin the process in reverse as you can’t spend as much you — somebody else’s income falls. And that process works in reverse.
Imagine you earned $100,000 a year and you didn’t have any debt. You can go to a bank and borrow $10,000 a year. You can spend, therefore, $110 a year. When you spend $110,000 a year, somebody else earns $110,000 and they can go to a bank and there’s a self-reinforcing process in which your debt rises in relationship to your income.
And that goes on for a long time and that goes on for 50 or 75 years through history. We’ve had 50, 75-year cycles and then you reach a point where you can’t anymore get more debt and the process starts to change. And you can’t leverage up. Traditionally the private sector leverages up, we leveraged up then we got to a point in 2007 where we had a bubble and that same sort of bubble that happened in Japan, same sort of bubble that happened in the Great Depression, meaning we reached our debt limits. Europe’s reached its debt limits.
The current credit bubble is bigger than the one that preceded and caused The Great Depression. Consumer and government balance sheets are worse than they were eighty years ago. Income is incapable of supporting current debt levels.
Reducing debt to manageable levels will produce another Great Depression, likely greater and more painful than the original. Debt reduction requires lower spending and higher savings. Large amounts of debt will not be paid and will be liquidated via defaults.
Until now, governments have done everything to prevent this natural process from occurring. According to Dalio, governments have “no more tools in the tool kit.”
Some governments and private companies will experience bankruptcy. Harrisburg, PA just did so. National government defaults will occur with Greece most likely be the first. When the economy begins to shrink, private companies will follow.
The Other Alternative
There is no other alternative cure for the economy other than de-leveraging.
Governments around the world will attempt to avoid de-leveraging because of the associated pain of a Great Depression. Unfortunately, that is not possible as Ludwig von Mises pointed out:
There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.
Prior attempts to avoid corrections got us to this point. Now the supply of credit has been exhausted and taxpayers deeply indebted. Another coverup is not possible.
The simple summary of what years of governmental intervention accomplished is the impending economic and financial tragedy. Politicians from the past may have gleaned benefits. Our generation is left to pick up the pieces.
A printing press is available to most countries. It is no solution to the underlying economic problems, but is the method that the political class will try once again. Doing so will make the situation worse. It steals purchasing power from the private sector. In extremis, it will cause hyperinflation, effectively wiping out the value of savings and fixed contract obligations.
Credit creation cannot prevent de-leveraging. It merely defers it and impoverishes the citizens of a country prior to the onset of a Depression. Will the US government engage in such chicanery? Based on past history, the answer must be an unqualified Yes! Jon Hilsenrath, sometimes referred to as the unofficial trial balloon holder for the Fed, has reported:
Federal Reserve officials are starting to build a case for a new program of buying mortgage-backed securities to boost the ailing economy, though they appear unlikely to move swiftly.
Steve Englander of Citibank describes how Europe will be set up as an excuse for more credit creation:
Policymakers in the US, UK and elsewhere are using the euro crisis as cover to ease policy. For example, the FRBNY’s Dudley yesterday characterized even the improved US numbers as disappointing and pointed to further measures if growth did not improve. Chinese growth targets and policy maker comments imply that measures might be taken if there is any sign of slowing. The BoE has already expanded it QE program.
That a Great Depression lies in our near future is not at issue. Whether we are forced down the route of hyperinflation before the correction occurs is unknown.
Our best outcome is a Depression tomorrow. Better sooner than later. That is what politicians have provided. Hopefully they will not “do something” but “just stand there.” The economy needs to be left alone. Their help is killing us. Hyperinflation will truly destroy.
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