Beyond the Cusp

April 8, 2013

A Lesson from the Holocaust

Today is Holocaust Heroes and Martyrs Remembrance Day in Israel where time is taken to assure that the Holocaust is never forgotten. This year it falls on the 70th anniversary of the Warsaw Ghetto Uprising against the Nazis where half-starved Jews with almost no weapons other than a few handguns and rifles stood against an entire battalion of the Nazi army and held them at bay for over a month before the entire ghetto was annihilated. This desperate final stand was a response to the planned slaughter of the Warsaw Ghetto by the Nazis which had been scheduled for the first day of Passover in order to celebrate the Jewish holiday of liberation with what the Nazis saw as a celebration of the denial of G0d and the promises to the Jewish People. Throughout the years since the Holocaust there have been many lessons drawn that mainly lead to the one singular goal, the promise Jews must revere and keep to themselves and their posterity, “Never Again!” There has always been one manner of keeping that promise which has always seemed of paramount importance which I will try to explain.

Before the horrors that were the Nazi execution of plans to conquer the world and reshape it in their own image, Germany was the leading country of the modern world with the best minds and most advanced culture. The majority of the world’s leading scientists resided there, especially in the disciplines of physics. Germany was viewed as the new renaissance with benevolent governance under the Weimar Republic. Germany was the leading republic of freedom and thought making their society the envy of many. But there was a problem with this near perfect scene that lay underneath it guaranteeing it would fail in a drastic manner. Germany was suffering under punitive laws placed on her after World War I which undercut her economic health. This eventually led to the printing of monies in order to meet payments levied against the German government. These payments along with large outlays of “investments in the future” led to runaway inflation as the German money became devalued. This led to a cycle which eventually caused unemployment and economic strife which the Nazis promised a solution and blamed it on the outside world and the plotting of those who wished to destroy the German race. Germany had also bought wholesale into the eugenics movement which had blossomed in the United States and spread through Europe. Take all these individual difficulties and social upheavals, shake well, and you do not get a happy ending.

Once in power the Nazis began to implement purity laws which were more about punishing the impure than it was about aggrandizing the pure or master race. This, of course, was not supposed to be possible in the country which a few short years earlier had been the most liberal and socially advanced nation in the history of the world. The overriding thought to many while the initial plots were being enacted by the Nazis was one of, “It cannot happen here,” Nowhere was this denial of reality stronger than in the assimilated Jews of Germany. Many of these Jews had arrived from Russia where they suffered the pogroms under the Czars and then persecution under Stalin and the Communists. Upon their arrival in Germany the Jews tried to assimilate and weave themselves into the German society attempting to be as much like their non-Jewish German neighbors as they could. Assimilation was the answer to pogroms as they happened because the Jews had lived separately from the Russian society preferring to keep amongst themselves. It was the otherness that had caused the pogroms, not the fact that they were Jews. True, there were still some religious Jewish communities which attempted to live apart from the rest of society much as exist today in areas of Europe and the United States. But the Jews in Germany had lived assimilated and integrated into the German society more so than in previous European societies. The Jews lived lives the epitome of, “It cannot happen here.” Yet somehow it happened here in a way beyond anything that had ever come before. One of the first steps taken by the Nazis was to pass laws forbidding the Jews and other undesirables from owning firearms. They went from house to house disarming those determined to be part of the “other” in German society. Yet even this disarming of the Nazis’ future victims did not alarm anybody as they accepted that this was just being done to make society safer by removing guns. It was all done for a better tomorrow and to save the children etc.

I had mentioned that many of these Jews had fled Russia and the Czarist and Communist pogroms. One would tend to believe that these Jews who were but one or at most two generations removed from experiencing the pogroms would have been more sensitive to what befell the Jews starting in Germany and spreading throughout Europe. But what about the Jews from the Russian pogroms, why did they not realize and see the warning signs? Was it because of their separateness? Unlikely as many of the Jews provided needed skills for the Russian people amongst whom they resided. But where had these Russian Jews arrived from? Many of the Russian Jews came to Russia via numerous places throughout Europe which could be traced back to a series of singular events which inevitably nudged and shoved them to Russia. For many of these Jews the previous residence had been Germany, Britain, France, Italy and lastly, Poland. In each and every one of these countries the Jews had faced persecution. One could trace these families’ history simply be tracing where they had faced persecution and managed to get out before the final cleansing and they would flee to the nearest, or sometimes the farthest, safe haven where Jews were not persecuted. This would increase the presence of the Jews in the new country which inevitably led to the next persecution as soon as disease or hard economic times gave way to finding the others who were to blame. This was the coming to fruition of the worst of all curses which were prophesized to inflict the Jewish People. The verse is well known as it is taught in every Jewish Bible study as it is one of the most frightful passages in the Torah.

Leviticus 26:36-38 As for those of you who are left, I will fill their hearts with anxiety in the lands of their enemies. The sound of a driven leaf will frighten them, so that they will flee as one flees from the sword and fall when no one is pursuing. 37 Yes, with no one pursuing they will stumble over each other as if fleeing the sword — you will have no power to stand before your enemies. 38 And among the nations you will perish; the land of your enemies will devour you.

This history of being chased from persecution to persecution where once Jews had fled the country or province in which they were being hunted or even slaughtered as a reaction to times of trouble had one thing common to all of these troubles and persecutions, the Jews were not permitted to own weapons. Originally the laws against owning weapons were applied to entire groups or classes of societies. Only the nobles and those in their employ were permitted weapons even if one could afford such luxuries. Eventually weaponry became affordable and everybody could own them. This is when governments began the real exercise of disarming the citizenry. When the peoples under a ruler were disarmed, it was not always universal. Still, unless everybody was permitted to own weapons, the Jews were usually among those disallowed such privilege. The two most known cases were in Czarist Russia and Nazi Germany where Jews were explicitly disallowed to possess weapons and their homes and businesses searched and all weapons removed some time before the actual persecutions were begun. That is the lesson that the Holocaust and all of the similar persecutions, pogroms, purifications, inquisitions, and other oppressions throughout the ages have taught me, never allow myself to be disarmed and that if such should become the law of the land and I am not living in the Jewish homeland, move. It is that simple and I choose not to even discuss the supposed realities and niceties which always come along with those who will disarm the people before enslaving the people or worse. I forbid my continuing to reside amongst those who would disarm me. It is that simple, a lesson learned.

Beyond the Cusp

October 14, 2012

What Happens when the Party Ends?

The signs are all around that the party is beginning to wind down and the end is near. The music has slowed and the volume has been lowered, the lights are slowly being brought back to full illumination and the satellite bars have closed. Soon everybody will wander out into the parking lot and realize that while they were partying like it was the middle of the summer, outside it is cold and a blizzard has hit town. The party I am talking about is this false realm we are living in where everything is sunshine and we act like there is no storm brewing just outside the door. We have our fancy hats on and celebrate the low inflation and interest rates at such a level that borrowing is virtually free; and borrow we have. We have borrowed in about every manner that is conceivable to record levels. The National Debt in the United States is at levels never even imagined possible a mere decade ago and much of Europe has reached similar levels though they have been building their debt steadily while the United States seems to have caught up and passed them almost overnight. Personal debt in the Western World is at unprecedented levels and student loan debt is being touted as very likely the next overly inflated bubble to burst taking many banks down with it. This is the real reason that the government has taken over the student loan industry, they can force the payment for this unfunded, collateral free indebtedness onto the American taxpayer when the defaults hit the fan. Add to all of this that many cities, counties and states are at debt levels that they are unable to contain and even keep up on paying the interest. All of this debt is being managed solely because the interest rates have been held down by false pretenses mostly because if it were allowed to rise even slightly the entire house of credit cards would come a tumbling down around our ears. The music slows and sounds even more distant and the lights are coming back on.

Currently the interest rate on much of the national debt is below 2%, much is actually at 1%. We can afford our debt at this level, but even at this bargain rate it takes all we can just to keep up with the interest payments. Eventually there is going to be a real economic recovery. A good thing, right? Well, not entirely. When the recovery takes hold in earnest and that causes prices to start to climb, that is when the Federal Reserve, actually a group of unnamed bankers who have little or nothing to do with the government except they can sway elections with their policies, will have to address the inflationary tendencies. The normal way to nip inflation in the bud is to raise interest rates at the first signs which will act to keep the lid on and force a slower rate of increases in prices as credit becomes more expensive. The reason the inflation is guaranteed to come as soon as a real and true recovery starts in earnest is because of the massive increase to the money supply. Right now, much of that cash is simply sitting in banks and other repositories and not being used to finance or buy goods. When the recovery gets into gear it will cause businesses and individuals to begin to invest more in production and other mediums. This will require more active cash flow which will force all of these funds from lying around and not flowing through the economic picture to begin to be moved into the economic picture giving it what is called velocity. This extra influx of capital will cause an excess of money in the system which will necessitate an increase in prices. Hopefully, it will also be reflected in salaries or we will have additional problems. As soon as the velocity hits a certain point it will cause undesirable levels of inflation to set in which will necessitate higher interest rates. This is done as a method of removing some of the now activated excess cash which we had printed in order to pay for some of the government programs which were intended to stimulate the economy but had thus far failed to produce, actually we do not print new money as much as simply invent it electronically which makes it way too easy to do and thus so tempting. There are only three methods of balancing the economic equations once you have infused trillions upon trillions of dollars into the mix, either you increase interest rates, increase taxes, or inflate prices or some combination of these three. Since the Federal Reserve can control the interest rate and they wish to prevent runaway inflation at virtually any cost, they will necessarily raise interest rates. Government, on the other hand, cannot afford to have the interest rates go up too steeply as that would make the interest payments on the debt unmanageable which would cause default, ask Greece how that works. This gives government, especially the Federal Government, a strong shove to increase taxes across the boards so that the Federal Reserve does not have to raise the interest rates as much as the government is also removing excess monies that had been infused to carry through bad times but are now a threat in good times. The one problem is that both increased taxes and higher interest rates take time to pull the excess money out of the system. So, what that means is that initially, until the increased taxes and interest rates balance the economic equations, everything in this world had its own equations, prices will rise as a reaction to the additional cash flowing in the system.

Oddly enough, the inflation will prove to be the least of the problems initially. In the end the inflation will necessarily run rampant as there is one huge elephant in the living-room that everybody is doing their best to ignore. What is going to happen when the interest rates go from ranging between 1% and 2% to the 4% to 7% range? This will cause the interest payments on government debt to necessarily double. And what happens if government faces a shortfall and finds itself unable to pay the interest on the outstanding loans? Well, they will do exactly what they did to “invest” in stimulating the economy which got us all into this mess; they will wind up the old computers and electronically invent the needed monies to pay the increased debt interest payments. Once the government, in this case it would be the Federal Government as the States are forbidden by the constitution from making money out of the thin air, once again resorts to increasing the money supply it will cause the same conditions that forced the interest payments to rise in the first place. Soon we will face interest rates between 9% and 15% which will redouble the interest payments if not triple them. If you want to see where this all ends, simply find a book or research the Weimar Republic of Germany from 1919 to 1923 and then continue your research until you find references to Adolph Hitler and the Nazis and you will be at the end result of the Weimar Republic and its fiscal mismanagement. Pay particular attention to their wonderful cure-all for fiscal insolvency and you might see some similarities to the United States under Presidents George W. Bush and Barack Obama.

If you wish to see an adult approach to facing such a problem, read about the years under President Jimmy Carter to see how we faced a similar predicament in the late 1970s and then read about the first term of President Ronald Reagan. Today everybody tends to remember the last five years under President Reagan, which were particularly nice and comfortable economically. In order to get our economic scales balanced and everything running as it is hoped for by every person in a position responsible for the economic wellbeing of the United States or any other country or entity, President Reagan faced all resistance to taking our lumps as they came in order to allow the situation to work itself through to a balanced and proper end. President Reagan did the most difficult thing any leader can do in a situation of dire fiscal troubles, he set the course that would eventually even everything into balance and then did absolutely nothing and waited for it to reach equilibrium. Sometimes doing nothing is both the correct solution and also likely the most difficult solution. The problem with waiting out the storm is that the public is often not that lenient so as to allow you the moment’s peace to take such an approach. The worst thing that government can do when facing fiscal difficulties is to try something new every few weeks expecting immediate results as this makes for an uncertainty in the rules of the game which forces those who invest or run large or small companies to shore up, store whatever cash they can, and wait until the madness ends and somebody sets the rules and promises not to further adjust them. Those constant and repeated changes in policy as a reaction to the public’s demands to do something, anything, are what I call Panic Policies.

Well, looks like the party is almost at an end and it is almost time to go out into that blizzard. Let us hope that whomever takes control as the next President has enough sense or his advisors have the sense to set a path forward, announce it and promise all will be well if we all have faith and stick to the plan, and really mean that and then just keep reassuring those who may panic and wait for balance to return which is almost always followed by a period of wealth and optimism. In the meantime, button up as it is going to get nasty for quite a while.

Beyond the Cusp

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