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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
June 2, 2009
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Americans and everyone else are these days the spectators to some amazing events inside the United States. On the west coast, California is heading for a state bankruptcy after the voters turned down any new increase in taxes. At the moment, California is the world's eighth largest economy all by itself. In what was once the industrial centre of the US, General Motors (GM) is also heading for bankruptcy. California and GM are on the "flanks" of the US Treasury. The Treasury is borrowing week by week simply to keep itself funded. The latest US budget deficit estimate is $US 1.84 TRILLION or 13 percent of US GDP. California, GM and the Treasury are all an increasing dead weight on the US Dollar.

The last of the big time spenders, the US Treasury, is on a countdown to bankruptcy with its gargantuan borrowing. When it goes, the final US underpinning - the international value of the US Dollar - will go with it.

The Man In The Middle:

President Obama is facing the takeover of two of the biggest economic entities in the world - California and GM – with another entity, the US Treasury, which relies totally on foreign borrowing for its continued viability. When lending to the US Treasury stops it's game over.

Stage Three Deflation - Governments Going Broke:

The collapse of the US real estate collateral foundation continues. After the rally, another fall on US stock markets lies waiting. The economy has already fallen out from under the markets as seen in the unemployment rates. These events have torn the heart out of the tax revenue of all levels of US government. The bureaucracies are hanging in mid air - broke.

The HUGE Global Missing Link:

This missing link is staring millions of people all over the world right in the eye, but so far they are not seeing it, at least in intellectual terms. People everywhere have seen stock markets, bond markets, real estate markets, commodity markets and economies fall all over the world as businesses fail and unemployment climbs. What they have NOT seen is any contraction in the size of the state bureaucracies.

Bureaucracy IS The State:

With a few exceptions, the immense government bureaucracies are almost the same size they were before the crisis began. They have experienced little unemployment while their "livelihood" - their taxes - are falling out from under them. Without taxes, all bureaucracies face their demise.

The Fundamentals Of Bureaucracy:

No bureaucracy can effectively fund itself. That is why it needs taxes to keep operating. These taxes have to come from the civil and private economy. Further, no bureaucrat really pays taxes because his or entire wage or salary IS taxes. Protestations to the contrary are logically void. When a (very low paid) bureaucrat on $50,000 a year claims to have paid $15,000 in taxes, all that really amounts to is a final transfer of money to the bureaucrat from the taxpayers to the tune of $35,000.

Further, if the taxes "paid" by bureaucrats were sufficient to fund their organisation, they would not need to send their tax collectors out into the private economy and its community to pick up the difference.

Bureaucracy Is Diametrically Opposite To The Rule Of Law:

In a land where freedom reigns, the only place where any individual man or woman encounters the State is in a courtroom. Both the government and the State (the sum total of government agencies) are LIMITED. There are seventeen delegated powers stated in the Constitution of the United States. THAT IS ALL. There are NO others. Any attempt by Congress or the Executive or both to exceed these delegated powers is UN-Constitutional. But US bureaucracy today is under no such restriction once Congress has voted an agency into existence and then voted the funds necessary for it to function.

Once established and funded, the bureaucracy seeks to expand. Internal promotion and increased funding is a lot easier to get in an expanding bureaucracy than in a stagnating one. What follows next is critical. The new bureaucratic agency acquires a "sub-legislative" power. It gains the power to issue regulations! In order to have these regulations enforced, it gains the power to issue fines for non-compliance.

With that, we enter the labyrinth of ADMINISTRATIVE law. Unelected bureaucrats sit in their offices having in their hands the same power as an elected body of legislators. The only difference is that they issue "regulations" funded from the legislature which established the bureaucracy and from fines and fees gained from licenses, permits etc.. The private, civil economy pays of ALL of this.

Today - Bureaucracy IS The Permanent Government:

Anybody over the age of forty and having seen a few elections roll by will undoubtedly have noticed that nothing much really changes regardless of any change in political party. The reasons are simple. Most nations in the West have firmly established political establishments which make sure that a vote for ANY viable candidate is a vote for them. On top of that, the State bureaucracy is a permanent component of the political establishment itself. No government today can act except through bureaucrats.

The Bureaucratic Takeover Of A Nation:

President Obama, as an experienced politician, knows that to achieve his aims he has to act through the standing Federal Public Service. Knowing this, he has decided to make its inherent drive to expand coincide with his own. The joint aim is to rule. What millions of Americans are observing right in front of their eyes is the direct political takeover of their nation by their bureaucracies as "led" by their President. Ultimately, that is Totalitarianism by another name, in this case it's called "change". It is self-evident that if there is no private space where an individual is free to act unsupervised by any authority, then there is no freedom. As Lord Acton stated: "Freedom Is Where Government Is NOT." In the Land of Obama, government and its bureaucrats are everywhere, regulating everything, deciding all.

The Problem Is That All This Has To Be Funded:

That is the basic flaw in the design. A bureaucracy is the permanent internal occupation force of the State. It must borrow to exist because the private, civil American economy cannot fund it.

Governments Going Broke:

California is centre stage in global terms as the first major economy to literally go broke. This has come about because of the contraction of the Californian economy and the refusal of its voters to pay more taxes. The state of California – its legislators and bureaucrats -have literally seen their own livelihood disappear right in front of their eyes. This is in fact happening right across the US in all the states - the only difference being that it is happening faster in some states than in others.

When The Tax Base Disappears:

Real estate, with its prices and valuations, is the collateral foundation under $US 14.1 TRILLION in loans and mortgages. It is also the feeding ground for the bureaucrats in the state, county and municipal governments. The "food" is land taxes, rates, charges for services etc.. But the "take" on all this is now disappearing. US home prices in the 20 major metropolitan areas fell more than forecast in March as foreclosures surged, threatening to extend the housing slump. The S&P Case-Shiller home price index fell 18.7 percent from March 2008, matching the drop in the year which ended in February. Housing prices nationally fell by 19.1 percent in the first quarter from the same period last year, the largest drop in the index's 21-year history, and were down 7.5 percent from the last three months of 2008.

California - Where The Future Arrives First:

Over the next few weeks, Californians face park closures, massive welfare cuts and sales of public buildings and land. At the end of the line, California's bureaucrats face furloughs, pay freezes and lay-offs. The government has to cut $US Billions of current expenditure. This means that it is quite literally the cost of the state - the sum of Californian agencies - being cut in size. In 2009, personal income has declined for the first time since 1938 and unemployment is 11 percent, one of the highest rates in the US.

Nearly $US 13 Billion in tax increases and $US 15 Billion in cuts enacted earlier this year, as well as $US Billion in federal stimulus money, has not been enough to make up for the drop in tax revenue.

California's Collateral Foundation Crash:

In the San Francisco Bay Area, home prices fell by 41 percent in April from a year earlier as foreclosures accounted for almost half of all sales, MDA DataQuick said. The median price dropped to $US 304,000 from $US 518,000 a year earlier and was 54 percent below the peak reached two years ago. This is toxic for the lenders against this collateral and economically catastrophic for all those who have borrowed.

In terms of political economy, it is the 54 percent fall from the peak mentioned above which matters. It sends the stark message that in terms of economic history, the size and total cost of government has to be cut by a matching degree to open the economic space for California's civil economy to revive itself. In hard concrete economic terms, think the Great Fire of London, the week when olde London town burned down several centuries ago. The physical destruction in London was enormous.

In those circumstances, to have maintained the splendour at court at taxpayer expense would look insane, even from the point of view of the court. Costs were cut drastically. Today, there is no such similar physical destruction in California. The destruction is financial and that should make it easier to repair the damage - provided that all the flunkies and hangers on in California's government are shown the door.

Late Flash:

The California Citizens Compensation Commission has moved to impose an 18 percent pay cut for all elected officials. That is for elected officials, NOT for the abundant members of the public service and the standing bureaucracies. This is stage three deflation in political action. There will be more.

Ó 2009 – The Privateer

(reproduced with permission)


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