“Shares may slip as U.S. mood gets darker,” reports Allison Jackson in today’s Australian. Indeed. We’ve had some dark days in the last year here at the Old Hat Factory. But for whatever reason, today is one of the darkest that we can recall.
Here’s a warning. Today’s Daily Reckoning is largely about the growing tension between individual liberty and the coercive power of governments. If that’s not your cup of tea, you may want to duck out and have a coffee and join us tomorrow.
But we believe politics and government are fair game for a financial newsletter. How you get and keep money depends on the kind of government you have and how much legal protection you have from government power. So that’s our beat today.
First, though, there is the purely financial bad news. In the States, Fannie Mae reported a US$29 billion third quarter loss. But the more notable bad news came from insurance giant AIG. AIG reported a $24 billion third quarter loss. And then the U.S. government announced a new US$150 billion bailout plan.
Another week, another bailout plan at AIG. Just how bad is the credit default swap problem at AIG? Pretty bad, apparently. Remember, AIG collected premia by writing credit default insurance policies against all sorts of securities, but mostly residential mortgage backed securities. It is now engaged in a mad rush to post collateral as its balance sheet falls apart.
It’s the U.S. taxpayer who’s paying off AIG’s credit default swap policies. And the bill just keeps getting bigger. But that doesn’t seem to bother anyone.
After all, the Federal Reserve has loaned out over US$2 trillion through its various new lending facilities. It’s refusing to tell Bloomberg who got how much money and for how long. This doesn’t appear to bother anyone, except Bloomberg, which has filed a Freedom of Information Act request to force the Fed to be more transparent.
Good on ya Bloomberg.
Without more transparency, no one knows what collateral these borrowers have posted to borrow from the Fed. And we don’t know what price the Fed has slapped on that collateral, or how it even came up with a price for illiquid assets used as collateral.
None of it would matter too much if the Fed wasn’t, you know, taking on obligations on behalf of the U.S. taxpayer and his money. The Fed has increased its lending by 140% since September 14th, from $1.17 trillion to over $2 trillion now. The Fed has eleven separate lending programs (helicopters) set up to hose money into the financial system. Eight of them are new in the last 15 months alone.
Shills for the non-transparency in Congress and the media say that if the Fed published who was borrowing what, it would lead to lack of confidence in vulnerable financial institutions, bank runs, and short selling-all of which would nullify the purpose of the programs to begin with.
That’s right…you’re better off not knowing who you’re money has been given to. If you did know, you’d probably vomit…or want to break something. As if your own government was actually accountable to you. Ha.
Are Gordon Brown and Barrack Obama reading from the same hymnal? Obama and his team are advocating a ‘big bang’ approach to their first 100 days in office. This approach uses the epic financial crisis as an excuse for the broadest expansion of government involvement in the economy and private life since LBJ’s Great Society and Roosevelt’s New Deal.
What’s with Obama? You mean it’s not enough for him to be a secular Messiah? A kind of second coming of JFK? Apparently not. Not content with being the second coming on Earth, Obama wants to be the author of the entire Universe and become the Prime Mover in a Statist “Big Bang.”
Gordon Brown has more terrestrial ambitions. Brown is preparing to steal some of Obama’s messianic thunder by laying out his vision for a Great and Just Global Society built from the ashes of the financial crisis. Speaking in London, Brow said, “The alliance between Britain and the U.S. and more broadly between Europe and the U.S. can and must provide leadership, not in order to make the rules ourselves, but to lead the global effort to build a stronger and more just international order.”
But wait, there’s more.
” Uniquely in this global age,” he continued, “it is now in our power to come together so that 2008 is remembered not just for the failure of a financial crash that engulfed the world but for the resilience and optimism with which we faced the storm, endured it and prevailed.”
Delusional. But let’s hear him out.
“If we learn from our experience of turning unity of purpose into unity of action, we can together seize this moment of change in our world to create a truly global society… My message is that we must be: internationalist not protectionist; interventionist not neutral; progressive not reactive; and forward looking not frozen by events. We can seize the moment and in doing so build a truly global society.”
What is a truly global society? Does this mean we can have cocktails with Posh and Becks down at the George Public Bar on Fitzroy Street in St. Kilda? Is Putin coming over for tea? Will the U.S. soccer team win the World Cup?
We don’t know what it means, dear reader. But it doesn’t sound good to us. At all. It sounds, in fact, like the financial crisis is being used at the excuse for an enormous push toward more integration of government at the international level. One world government, you might say.
This is the most serious campaign against individual liberty in a long time. And it’s just getting started. The Statists of the world (both Left and Right) will be dusting off all their favourite plans for more expansions of government power into commerce and private life. We feel compelled to mention in today because in their moral righteousness and fervour, the advocates of this huge expansion are not bothering to hide their real objectives, their motives, or their methods.
The objective? Bigger, more intrusive government. The motive? Moral righteousness that people smarter than you know better what you should do with your money and your life. The method? Coercion, both through taxation and suppression of individual action (thought, expression, movement).
Which brings us to Australia. A few readers have written to ask if we are aware of the internet censorship legislation being proposed by Communications Minister Stephen Conroy. Yes, we are.
The government wants to “filter out” content that is already illegal in Australia by forcing internet service providers to censor content which you can access from your computer. The original legislation would have filtered content for households and schools. The next version of it applied to all internet users, but would have allowed users to opt-out of the filter. The latest version is compulsory for everyone, everywhere, no questions asked.
What websites would be blacklisted? Well, we asked around at the Australian Communications and Media Authority (ACMA), the agency in charge of the list, and didn’t receive an answer. Is the list maintained by a person? By an algorithm? By a modern day Joe McCarthy? No answers as of yet.
And does ISP-level filtering it even work? An in-house government trial of the filtering software showed that the filters don’t prevent access to content deemed to be illegal, block content that is legal, and slow down network speeds dramatically. Based on that poor result, the government is proceeding with a live, voluntary trial conducted by real Aussie ISPs.
Like all campaigns that take away a measure of your freedom, you’re being told this is done to protect “the children.” For example, Conroy told a national radio Audience that, “Labor makes no apologies to those that argue that any regulation of the Internet is like going down the Chinese road…If people equate freedom of speech with watching child pornography, then the Rudd Labor government is going to disagree.”
Right Minister (moron). Because so many people equate freedom of speech with child pornography. You could not possibly defend civil liberties and freedom of speech without being a pervert, a drug user, or a terrorist. Could you?
The trouble is, there is no protection of freedom of speech at the Commonwealth level in Australia; at least none that we’re aware of. According to a June 2002 research note by the Parliamentary Library in Canberra, Australia is a signatory to the Universal Declaration of Human Rights (UDHR), passed by the U.N. in 1948.
Article 19th of the UDHR affirms that, “Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.”
No specific Act of Parliament has been passed at the Commonwealth level to incorporate this article into Australian law and “no government has implemented the free speech provisions and therefore they are not enforceable by Australian courts.” Why don’t you get on that Malcolm Turnbull?
In early 2006, Victoria passed a kind of Bill of Rights called the Charter of Human Rights and Responsibilities which DOES include freedom of expression (see page 15). You should also note that Victoria’s Act isn’t like a Constitutional right to free expression. It says the right of free expression, “may be subject to lawful restrictions reasonably necessary,” such as “for the protection of national security, public order, public health or public morality.”
The Australian Capital Territory passed its own Bill of Rights in 2004. Its language does not suggest that freedom of expression is proscribed by any limits at all. On page 13 it states, “Everyone has the right to freedom of expression. This right includes the freedom to seek, receive and impart information and ideas of all kinds, regardless of borders, whether orally, in writing or in print, by way of art, or in another way chosen by him or her.”
–Maybe it’s time the Commonwealth of Australia had a Bill of Rights. From our early investigations, we see that the subject has been debated on and off throughout Australian history. Maybe it’s time for a new debate.
The big advantage of having constitutional protection for freedom of expression is that it stands over and above common law. Public tastes and morality change with the times, and common law generally reflects these gradual changes in tastes. But certain rights ought not to be subject to the passing whims of legislators. There are very few such rights, but that’s why they are enshrined and protected in a Bill of Rights.
Constitutions and Bills of Rights do not exist to spell out what the government allows you to do as a private individual. They are not lists of legal and illegal private behaviour. Just the opposite in fact.
The U.S. Constitution and Bill of Rights describe the precise limits of Federal power. They do not list what you and I can or cannot do. But they do specify acts which the government must almost always refrain from doing. They exist to define and limit government power, not to define and circumscribe individual liberty.
Most people forget that these days because they are used to being bossed around by the government at all levels. But Bills of Rights generally prevent the government from telling people how to worship, what they can or cannot say, and who they can or cannot assemble with in public. In the U.S., it also includes the right to bear arms.
To the extent that the Bill of Rights describes what the government can do, it’s usually things the government HAS to do once it’s already infringed on individual liberty. This includes a trial by jury, right to confront accusers, and the right to counsel. But these again are designed to guarantee the private individual’s rights are respected by the government.
Why the long digression into liberties, rights, and law? It seems like a timely subject these days. So many things that are described as “rights” by legislators are not rights at all, in the strictly legal sense. They are morally and politically desirable outcomes. But the government has no legal responsibility or authority to guarantee those outcomes through coercion.
Would it be better if there was no child pornography on the Internet? Of course. Does the government have the right to try and guarantee that outcome by restricting and censoring internet access for all Australians? Maybe so.
But if there’s any decent opposition party left in Australia, perhaps it should begin asking the question and treating Australians like adults and free people, instead of children who must protected from themselves and the world at large.