Tuesday, January 8, 2013

Which Way Forward American Man

Had I been a Republican Congressman, I wouldn't have given in to the fiscal cliff deal:  I would have let the tax hikes and spending cuts happen, and then proposed a bill to cut taxes afterwards. The bill wouldn't have passed the Senate, and even if it did, it would have been vetoed by Obama. But a bill would have shown the American electorate that the Republicans were still serious about cutting taxes.

Of course, this may have been bad politics (and one of the reasons why I wouldn't make a good politician). The Democrats, in this scenario, may have put forward their own tax cut bill - one which which would leave high rates on "the rich" (however they may be defined) but would cut rates for "the middle class" (however they may be defined). The Republicans then, were they to continue playing hardball, would be forced to adopt it or block it.

That's pretty much what happened anyway, and so far, we can say that the markets like the recent deal. After the passage of the bill, the DJIA climbed to 13,435 and gold fell to $USD1658 an ounce. The fact that the price of gold has dropped indicates a strengthening US dollar, and increased appetite for liquidity (i.e., an increased demand for US dollars to spend and invest). Gold doesn't respond to supply and demand that much, but US dollars - and all other currencies - do. Increased demand for a currency indicates a strengthening currency and falling prices (deflation); conversely, excess supply indicates a weakening currency and rising prices (inflation). To judge by the falling price of gold and the strengthening of the US dollar, the US is in a deflationary environment right now. But that's a good thing. Increased demand for liquidity (dollars) means increased demand to spend and invest in the US.

If we are to divide the DJIA by the current price of gold, we have a DJIA worth 8.10 ounces of gold. Which is good - probably a high for the past twelve months - but which only puts the DJIA to where it was in the very early nineties, as we see from this chart:

Or, as we can see from the chart, the DJIA was nearly this high back in September 2010. For most of 2012, the DJIA was bobbing around 7 ounces or so.

So why did the DJIA rally after the fiscal deal? Probably because, as Larry Kudlow suggests, the markets expected a real walloping from anything proposed by the Democrats and instead it only wound up with a smack on the backside. The capital gains tax has gone up from 15% to 23.8%, ditto the tax on dividends, and the estate tax has gone up from 35% to 40% with a $USD5 million exemption. But it could have been a lot worse. Dividend taxes could have gone up 43.4% without a fiscal cliff deal, and estate taxes could have climbed to 55%. And the loophole which allows American taxpayers to circumvent the dreaded Alternative Minimum Tax could have expired.

Rush Limbaugh shrewdly observed that, while income tax rates (which are applied to labour) have been raised to high levels, taxes on investment income (i.e., capital gains and dividends) were raised only a little. To Limbaugh, this is evidence of Obama's hatred for aspirational Americans: high rates on labour are designed to thwart them from entering the "middle class" (however it may be defined) and competing against the super-rich - the Romneys and Buffets. Indeed, it's well-known that Romney and Buffett hide their wealth using the low divided and capital gains tax rates. Any rich and clever American can do so, and this is part of the reason why so many wealthy Obama supporters - including Hollywood types, wealthy Jewish-Americans hedge fund and private equity managers and the like - continue to support him.

It's good to consider all this simply because US markets - and fiscal and monetary policy - are so intimately interconnected with the rest of the world's. When Herbert Hoover raised the top rate of income tax from 25% to 63% (Obama would have loved Hoover) in 1931, the rest of the world - including Europe and Australia - responded with its own super tax-hikes, and so began the Great Depression.

We can already see other countries following the Obama plan. Japan, under Shinzo Abe, will commence yet another round of Keynesianism: currency devaluation and massive "stimulus" deficit-spending on public works. Europe, meanwhile, has large deficits too, just like America, and Spain, France, Britain, etc., have introduced their own tax increases on "the rich". (Keynesians and liberals, however, dispute the efficacy of the European method. Tax increases on "the rich" are never contractionary: top rates on income, capital gains, etc., can be raised to 99% to little adverse effect. Tax increases on consumption are always contractionary, and some of these European countries have made the error of increasing their value-added taxes, which directly affects consumption. Some the belt-tightening "austerity" measures are bad, too, even though the budget-cutting hasn't really run that deep). On top of this, the Eurozone members can't print their own currencies, like Britain and America, and so can't devalue). No doubt all of this foreign aping of Obamism will enjoy the same success that it did in America - which is to say, no success at all.

Deep down, of course, the Keynesians - and Obama - know that they have stuffed things up. But the problems can be easily hidden. America's CPI doesn't count the cost of food and energy - the only two things which go up in price - which is why US CPI inflation figures have stayed more or less consistently low despite the extraordinary weakness of the US dollar (the US dollar has been devalued by 91.73% against gold in the past five years). US unemployment figures could be higher, but the participation rate is at record lows, meaning that the official unemployment rate stays down (most of the new jobs created every month, too, are going to immigrants, as the US Household Employment Survey shows). As for interest rates on US debt - Bernanke has aggressively intervened in the bond market to keep them at near zero. (It's for this reason that US debt won't see the same calamitous rise in yields as the Italian, Spanish, Greek and French). The US media, as a whole, has abnegated its position as a critic and watchdog of the US government, and has been extraordinarily supine with regard to Obama (as has the liberal establishment, which awarded him the Nobel Prize for Peace), and can be counted on not to draw attention to Obama's failures.

In short, there's no reason why Obama should change course: it's a case of another four more years of the same.

That's economic policy: what of social policy? Well, we can see a continuation of the massive transfer of wealth, via government spending and welfare transfers, from white Americans (especially "middle-class" white Americans) to an Afro-American and Hispanic underclass. This is Obama's socialism, but, because the socialism is racial, American conservatives dare not speak its name. On top of this, Obama wants inmagraciòn, lots more inmagraciòn - again, something the majority of American conservatives approve of - and probably legalisation of gay marriage and marijuana too.

Geopolitically and militarily, America has become something of a joke. Despite its superior weapons and equipment, its technology, its well-trained troops, the US army couldn't win wars in Iraq and Afghanistan. One of its elite units - the Navy SEALs - have been reduced to the status of play-actors: the Bin Laden "raid" and "assassination" most likely never happened. (One has to ask if, in thirty or so years time, whether or not the truth will come out and if the documents concerning the "raid" will declassified).

So what's the answer to America's woes? Secessionism. The United States has to break apart, along traditional cultural, historical and regional lines.

What I mean by those lines is described, brilliantly, in Colin Woodard's American Nations: A History of the Eleven Regional Cultures of North America (Viking Press, 2011), which is every bit as good as Hunter Wallace - the Southern nationalist - says it is. A succinct summary of its contents - including descriptions of the eleven "nations" - can be found here.

Some nations (like the former Yugoslavia or Czechoslovakia, or even Belgium, Spain and the United Kingdom today) are constructed on unstable, shifting tectonic plates, culturally speaking. North America is a continent of a similar character. There was no original, primordial unity, a unity constructed by the Founding Fathers, in American history: that is, a decision as to what sort of nation America would be. Instead, there were always warring nations within America: and the ten nations making up America have gone to war with one another, several times, and not just during the American Civil War. Secessionism, and political and cultural independence from an overweening (often Yankee-controlled) federal government, is written in to the American DNA. (From Woodard, we learn that the region of New Netherland (which contains New York and its surrounding boroughs) wanted to cede from the US and become a city-state).

The way to understand America, according to Woodward, is to see it divided up into nations which are almost like different planets - like the different civilisations the adventurers on the 1960s era Star Trek came across on their journeys. New Netherland is pure commerce, founded by Dutch, and bolstered by the presence of Jews and other European immigrants: this is the true 'nation of immigrants'. Yankeedom was founded by Puritans, who are communitarian, do-gooding and determined to interfere in other Americans' lives. The Midlands, founded by pacifist, easy-going Quakers, German Mennonites and Scandinavians, is a world populated by peaceful farmers who don't cause any trouble and indeed, are reluctant to take up arms to defend themselves against aggressors: they are the equivalent of Luke Skywalker's aunt and uncle on Tatooine in Star Wars. Tidewater was founded by English gentlemen who wore wigs and lived in English-style country estates, like out of a Jane Austen novel, and who were descendants of the Royalist English who had fled Cromwell after the end of the English Civil War. The Deep South is a slaver state, and really has more in common with the Caribbean - that is, the white Caribbean, the white West Indies slaver states - than anywhere else. Then there is the Greater Appalachian region, which is populated by the rambunctious, redneck, cracker 'Scots-Irish' and whose religion is Christian Revivalist Baptism and Methodism - of evangelicals, snake-handling and speaking in tongues.

Further afield is New France (New Orleans and Quebec), El Norte (northern Mexico) and the Left Coast, which is the coast of California, Oregon and Washington state - and contains the Pacific Northwest. The Left Coast is individualistic, idealist, and given to utopianism and self-actualisation - the true birthplace of beatnikism and hippie-ism. Missionary Yankees from New England attempted (unsuccessfully) to colonise it and save the inhabitants from themselves. I found this intriguing reference in Woodard:

The new Yankee "errand in the wilderness" got underway in fits and starts in the late 1820s. A delusional New Hampshire schoolmaster, Hall Jackson Kelley, tirelessly promoted an ambitious colonisation scheme for the Pacific Northwest, a region he'd never seen. His elaborate plans for a civic and religious republic never got off the ground, but his marketing effort - he plastered posters across New England, published books, and petitioned Congress for aid - did inspire others... [Woodard, p. 217]
Is the (purportedly schizophrenic) advocate of white colonisation of the Pacific Northwest, Harold Covington, the reincarnation of Hall Jackson Kelley?

The last of the eleven nations is the Far West, a sparsely populated, desolate area which is rich in resources and is effectively controlled by mining companies: it includes Idaho, Montana, Wyoming, Utah, most of Nevada, Arizona, Colorado, etc. It's probably the equivalent of Western Australia.

So, to revert to our science-fiction analogy of different civilisations on different planets: the Far West is the mining planet, the Midlands is the farming planet, the Deep South is the slave planet, New Netherland is the commerce planet, California is the hippie, environmentalist and New Age planet, Yankeedom is the, well, Puritan planet, Tidewater the 'replica 17th-century Anglican and English planet', and so on.

Most countries, including Australia, have pronounced regional differences - which are reflected in differences of accent, but also a pronounced competitiveness and even resentfulness. I've seen a recent article, in the German media, saying that Berliners resent the Swabians who have moved there. (The idiosyncrasies of the differing German regions are well-chronicled in Hitler, Nietzsche and other writers on German national life). But it's only a few rare instances - in the history of the West, anyway - that these antagonisms, differences and resentments become political, i.e., become calls for secession, and even go all the way up to armed conflict and war. America is one such rare case.

America is on the threshold of another break-up of the union, as the 'red' states (or rather, red nations) which voted for Romney will attempt to cede from the 'blue', which voted for Obama and the Obama program (inmagraciòn, gay marriage, marijuana legalisation, massive tax hikes, massive deficits, massive transfers of white wealth to Afro-Americans, currency devaluations, etc.). The Southern strategy is the correct one: the Dixie or neo-Confederate nations - Greater Appalachia, the Deep South, New France and Tidewater - need to cede from the northern states, Yankeedom, Midlands and New Netherland. (The Far West can be, in the event of a breakup of the United States, can be expected to side with the South; the Left Coast and El Norte with the Yankees).

One consequence of this is that the 'red' states will regain control of their own borders and the rapacious demographic advances of the Mexicans (and South and Central Americans) who emigrate to America from El Norte.

As well as that, the Southerners will regain control of their fiscal policies - particularly welfare policies. According to the Southern nationalists, the Afro-American population in the South are huge net consumers of welfare; once, however, the Southern secessionist states cut off the welfare supply, the Afro-Americans will flee the wicked white Southerners and go to the northern states, where they can except a warm welcome. New cities in the north will become majority Afro-American, just like Detroit, Chicago, St Louis and the like, cities which are renowned, the world over, as numbering among the most liveable in the world.

How would such a partition of the US affect Australia and Europe? America, as such, would no longer be a force to be feared. Germany and the rest of Europe can breathe easy, without the threat of American interference (and military intervention, which happened twice in the 20th century) and Australia would be thrown upon her own resources.

When it comes to immigration policy, it would be a case of anything goes. France, Greece, Italy, and then perhaps the entirety of the Western world, would perhaps gain the courage and daring to tackle their illegal (and legal) immigration problems. All because of the break-up, the balkanisation, of America.

Once the American boot is lifted off Europe's neck (it's been there since 1945), Germany can reassert its control of the Continent and weld it into a political and economic unity (this is already under way).

Secessionism, too, is already under way in the US - in thought, but not yet in deed. Obama is just the right man, at the right point of history, to help bring secessionism is about. He is a natural born polariser, who delights in setting different groups within American society against one another. The fact that he is nominating Chuck Hagel as a Defence Secretary, as opposed to a mediocre, establishment Jewish-American like John Kerry, is proof of this. I myself am delighted by the furore of the Jewish-American and Israel lobbies over Hagel, because I watching their rage (what's more, it's proof-positive that the Jewish lobby actually exists - when was the last time you saw France, Russia, Mexico or Germany putting pressure on the US government over its choice of a cabinet nomination?). But I can't help remarking at how Obama is unnecessarily antagonising an ethnic group which is one of his staunchest backers. The reason why he's doing this is that he enjoys it.

At any rate, he has permanently set the two halves of America - the 'red' and 'blue' states - at war against one another, and perhaps, by the end of his second term, we will see the second breakup of the Union.