Quantitative Easing (QE): The Beginning of the Federal Spending Death Spiral?

Mike Walker, Col. USMC (retired)

All,

Sorry for the long post and if you do not economics then delete but do not say you were not warned later.

If we are looking for early indicators of the collapse of Federal deficit spending, the Fed’s QE policy is the proverbial “Canary in the coal mine.”

So far it is breathing easily. Hurray! No worries, Mate, at least for today. But do not look away for a moment as Uncle Sam’s days as a spendthrift drunken sailor are coming to and end.

Fortunately, the Federal Government is still a small part of the American economy. Most state and local governments, with notable exceptions such as Illinois (California is on the “watch list”), have made the tough decisions to put them on a sustainable fiscal path and we must never forget that the private sector economy is still the overwhelming engine for economic good.

Nonetheless, the Federal Government is on schedule for a tragic financial meltdown and the Fed is blazing the path to ruin. Here is our reality: the stock market and precious metals are rising in value because we are seeing flight of capital from US Treasuries, once the sine qua non of safe investments.

Of course, the virtual zero interest rate policy of the Fed has dammed up bank deposits (not to mention masking the real cost of future deficit spending). What reasonably informed average Joe would keep money in a bank savings account and what above-average Jane would invest in bank CD’s or other financial instruments?

The rise in the stock market is not as beneficial as we think as we are witnessing investors chasing a return on invest based on an abnormally high taste for risk. The obvious problem being that when you take on risk, you enter the realm of big winners and big losers. No one wants to be the loser, but there you have it.

So what has this to do with QE and a “death spiral”?

Across-the-board “chasing risk for return” is very bad news. Think back to the housing bubble where your family home was increasing in value regardless of what you did to improve (or even lower) its real value. The increases made no sense except as warning that what is too good to be true is not and chasing risk sends the same message. 

That is what QE is doing. China is no longer increasing the size of its US Treasury portfolio, a policy that is being followed by many former Treasury investors. The message is: do not buy US Treasuries if you have a choice.

Enter the Fed and exit hope for a good outcome.

Here is ugly cycle that is being created: the Treasury issues debt to keep the trillion dollars of overspending intact and the Fed is now buying up the debt at a rate that has never occurred in the entire history of America since 1776, which means its balance sheet is larger than ever before and its assets are overwhelmingly US Treasuries (and do not forget that the Fed also gets to print money, aye, there’s the rub!).

So what will eventually happen is that US Government is going to want to borrow and the Fed will become the buyer of last resort. But the Fed will only have two options: liquidate it assets to get the money to buy more Federal debt or print money like Weimar Germany. Since the Fed’s assets will be primarily US Treasuries, cashing them in to buy more US Treasuries is meaningless.

If the USG needs $300B to pay the bills, it is an exercise in futility to have the Fed buy the $300B in Treasuries if it has to cash in $300B in old Treasuries to buy the new Treasuries, as at the end of the day, the USG gets no new money to spend (+$300B - $300B = $0) and has to make $300B in immediate cuts (that makes the sequestration cuts look tame in comparison).

The alternative is to have the Fed simply print $300B in paper money (or some ugly combination of ever more borrowing and printing). That causes an inflationary death spiral as the paper money gradually becomes worthless as the Fed prints a trillion or so US dollars and the end is at hand.

We are now in sailing unchartered and dangerously treacherous waters. There are two truths the will become apparent when the Treasury/Fed Boat sinks: you cannot survive very long is a stormy ocean with only a life vest and there will be a great many casualties.

Mike

John McNaughton's painting... Empower!

From Jim DeMint,

I’ve spent the past 14 years on Capitol Hill. I first ran for Congress because I know conservative ideas work. But I realized our ideas don’t resonate with all Americans.
That’s why I chose to leave the Senate and serve the American people at The Heritage Foundation.
For too long, we conservatives have sat back and relied on lawmakers and politicos to deliver the message of limited government and individual liberty -- the message of the American Founding.
But it’s time to wake up and realize we cannot continue to fight today’s battles with yesterday’s tactics.
We need a leader who can powerfully and positively communicate proven conservative solutions directly to the American people. And Heritage is uniquely poised to take on the challenge.
Will you help Heritage lead this conservative charge? We must reenergize the conservative movement in such a way that Americans can’t help but be drawn in.
Heritage plans to launch bold initiatives that will revive conservative ideas -- American ideas -- with a hopeful, optimistic message. But we can’t do it alone. Find out more about our bold revival and watch a video about how you can lead the charge.
None of what we do at Heritage would be possible without your support.
Sincerely,

Jim DeMint
President-Elect

Sequester Shenanigans

Sequester Shenanigans

Mike Walker, Col. USMC (retired)

All,

 

When the Federal Government gets cut, please be ready for the same type of shenanigans that occurred in California.

 

The California State Government, like Washington DC, has a lot of agencies. When the recession hit, those agencies had their budgets cut and we had a lot of examples of profiles in courage and cowardice, of high ethical behavior and disgusting selfishness.

 

Expect the same from Washington DC.

 

How to spot the unethical lowlifes from the good people? Watch how they manage the cuts. 

California agencies took different paths and, eventually, benefited or were crucified for how they enacted the cuts.

 

The bottom line is that governmental employees have one duty: Provide the best service possible to the citizens. That ethical and moral imperative is especially critical when budgets get trimmed.

 

In California, for example, the DMV prioritized what to cut and then cut everything they could that had the LEAST impact on the services that they provided to the citizens of the State. Nonetheless, once the cuts passed 20% they had to close offices as the furloughs hit. They published the dates in advance and got out ahead of the problem and earned a lot of sympathy and support from across the State (which is hard for the DMV to do).

 

They behaved like professionals who earned the public trust.

 

Then there are the immoral and unethical governmental employees who believe that citizens exist to serve them and meet their needs.

 

California also saw those folks at work as well.

 

The leadership of the California Department of Parks and Recreation decided to become “bureaucratic terrorists.” They closed down the most popular and widely used parks in the State resulting in an immediate backlash from the people. Everyone demanded that the legislators and governor reopen the parks. 

 

The Park & Rec bubbas thought they had won but then came the questions from the lawmakers and the press. They discovered the truth: The bureaucrats had not focused the cuts to protect the parks, but to accomplish the exact opposite.

 

The “bureaucratic terrorists” deliberately avoided closing the parks that had the lowest attendance. They kept parks open during off-season so they could close them during the busy season. They intentionally kept them open during slow hours so they could close them during peak hours.

 

They did everything in their power to make the disruption far worse than it had to be. 

 

It was a disgusting abuse of governmental power.

 

Every governmental agency can and must prioritize their operations (Park & Rec certainly did for all the wrong reasons) and start cutting the least important things first.

 

Ethical governmental agencies will be able to say: "Here is what we cut first..." then "after that, we had to cut..." and finally "Now we have no choice but to cut these really important operations..."

 

Governmental agencies, especially the Defense Department, cannot afford to take the road of the "bureaucratic terrorists."

 

It will be a Pyrrhic victory where you lose your credibility, alienate your allies and strengthen your enemies who want to cut spending even further.

 

Forewarned is forearmed. Protect the heroes and fire the bums.

 

Mike

Barak’s Really Bad Idea? The Water is Fine....

A word from Mike Walker, Col USMC (retired)

All,

Sequestration is the new “boogey man” in “drama central,” AKA Washington D.C. (I actually like Sequestration, but today that is a very unpopular position in D.C.).

Yet, Sequestration starts at home, Barak Obama’s home, to be specific.

Given a fawning Washington press corps that allows the President to dissemble about the facts without challenge, no one can blame him for disowning his own bad idea.

As Washington often resembles a circus that never leaves town then the President can be seen as the lion tamer while the press can be seen as the clowns who flit around the big top while broom brigade sweeps up the mess.

Here is the truth: The White House created the Sequestration. The problem is that Barak no longer loves his creation, as it seems the White House wonks were too clever by half when they created it.

The President demanded Sequestration as part of the negotiations that led to the Budget Control Act of 2011. The poor Republicans had never seen anything like it and it took them several days to even figure out what the heck President Obama was putting forward.

The President remained adamant that Sequestration be part of any final deal, however (and we all know how inflexible he gets when really wants something). So in the end, the Republicans gave in and agreed to President Obama’s demand. 

The rest, as they say is history. The Budget Control Act of 2011 became a major bipartisan agreement:

It passed the House with 95 Democratic and 174 Republican votes.

It passed the Senate with 45 Democratic and 28 Republican votes.

The President signed it onto law on 3 August 2011.

Now, amongst all the smart people in the Beltway, it has turned out to be an ugly and unwanted monster created in the White House.

No wonder Barak Obama is desperately seeking to blame anyone but himself for a highly unpopular policy he created.

ONLY “SMART” BUDGET CUT IS A FAKE BUDGET CUT

IN WASHINGTON, THE ONLY “SMART” BUDGET CUT IS A FAKE BUDGET CUT

PAUL MIRENGOFF  (Powerline)

Critics of sequestration complain that it is a blunderbuss approach to cutting spending. They argue that “targeted cuts” — which operate line-by-line, program-by-program — are the smart way to rein in the budget without doing harm.

But, as the Washington Post demonstrates, in practice “targeted cuts” frequently prove to be no cuts at all. Instead, they are a method through which legislators can claim to be slashing the budget while continuing to spend at the same levels as before.

Consider the $37.8 billion in “cuts” agreed to in 2011, proclaimed by President Obama as “the largest annual spending cut in our history.” The Post finds that package to be “an epic kind of Washington illusion, stuffed with gimmicks that made the cuts seem far bigger — and the politicians far bolder — than they actually were.”

For example, the Transportation Department took credit for “cutting” a $280 million tunnel that had been cancelled six months earlier and a $375,000 road project that had been created due to a typo on a road that didn’t exist.

Meanwhile, the Census Department took a $6 billion “cut” for not conducting the 2010 census in 2011. And Congress agreed, in the spirit of shared sacrifice, to “cut” $14.6 million by not spending money on a visitors center that had already been built.

These aren’t “smart” cuts, they are smart-ass ones.

Going beyond the anecdotal evidence, Post reporter David Fahrenthold analyzed the 16 largest cuts in the 2011 deal, each of which was supposed to trim at least $500 millions from the federal budget. Collectively, the 16 were to account for two-thirds of the total reduction.

In four instances, the agency involved simply stonewalled the Post, making it impossible to tell whether the cuts were real. Under these circumstances, I think we should presume they were not.

In seven of the remaining 12 cases, the Post found that the cuts had minimal or no real-world impact. Instead, they involved the kind of sleight-of-hand described in the examples cited above.

This track record obviously militates in favor of using a sequester, rather than the 2011 approach, this time around. The White House claims that things are different now because the “low-hanging fruit” from 2011 has been cut. But there are always recently expired projects, or non-existent ones, that can be claimed as cuts. Anyone who believes the government has run out of budgetary gimmicks hasn’t been paying attention, and would rather not.

The real question, I think, is not whether alternatives to sequestration can be undermined, but whether sequestration can be as well. The answer is probably “yes,” but not to the degree that past cuts have bee

Women in Combat: The Marine Infantry and Playing “You Bet Your Life” for Real

Contributed by Mike Walker, Col USMC (retired)

All,

Let me begin by arguing that I support opening combat arms to anyone, and I mean anyone, who can lead, win, and protect the Marines (as best possible given the mission) under their charge. Special Operations seems particularly inviting. One of their strengths is not playing by the rules. In many parts of the world, women as a threat are immediately dismissed as part of a cultural prejudice. Women in Special Operations could add an additional layer of complexity to confound and defeat the enemy.

Opening up the combat arms to women is an appropriate and positive decision. When I went through Marine Corps OCS the goal was to weed out those who could not handle the inseparable combination of physical and mental rigor demanded by those who are placed in the position of leading Marines in combat.

One test was to conduct a “fireman’s carry” at a sprint of a “wounded’ Marine fifty yards to safety. Being 5’10” and 150 lbs I was not quite a “Feather Merchant” but neither was I “Muscles McGurk.” My DI picked some 6’3’’ 200 lb candidate who played college ball in Georgia as my “wounded” fellow. The decision was not based on harassment but in driving home the reality that you cannot control who is “fit” and who is “hit” in combat.

Women candidates at that time did not have to meet male goals. It was dismaying to see a male candidate dismissed for failing to meet physical requirements that were waived for a female candidate. We knew there was two sets of sets of standards and males were held to higher level of performance.

I understood why when I applied for the infantry combat arm.

I can only write as a Marine infantry officer. That narrows but does not negate my argument. In the Marine infantry there was a common refrain, “Life’s a bitch and then you die.” Life in the infantry is harsh. The reason for this mentality is simple. In peacetime, infantry life is defined by:

Mission

Terrain

Weather

In combat, your life, for what it is worth, is defined by:

Enemy

Mission

Terrain

Weather

Those are the Leviathans that face an infantry commander day in and day out.

You either cut it or you do not. It is a Hobbesian existence. Either the “System” removes those who are incapable of leading Marines under those constraints or Darwin will. In combat, Darwin uses death and dismemberment as his primary tools.

Washington wonks, despite their attempts at ascendancy to omnipotence, can change neither the face of the earth nor the world’s weather to suit their domestic socio-political agenda or fantasies. They will never, through some muddled combination of legislative and/or judicial acumen, be able to alter the determined effort of an enemy to kill and maim on a battlefield. That is reality.

In the infantry, a leader has to thrive, not simply survive, under cruelly harsh physical and mental pressures. Even in the “Gung Ho” Marine Corps, the majority male officers opt out of a life in the “grunts.” There is no doubt that females will make the same choice.

Let me expand on the harsh life. Officers eat after everyone else. That can mean going without. Sometimes that is not missing much if the chow is served in subzero weather where everything hot is icy cold before it enters your mouth or in the rain where the food is tastelessly floating in water or where the insects are so thick that eating a few bugs during their migration from a nearby shit pile to your spoon is taken in stride.

Your home is on your back and, as you carry it with you, it seems to weigh a ton. If you are on the march and the machine gunner needs a rest then you pick the gun up off the shoulder and carry it for the next several miles. There is not a shred of privacy in the infantry in the field. If you want to change your clothes, you do so in the open. The same goes for washing, shitting and pissing. 

Grunts develop a peculiarly odd sense of humor to deal with the harshness. Never having to had to experience a “menstrual” period” after a few weeks without bathing, I can only guess the outcome, but it must be nicely crusty. In Panama while undergoing jungle warfare training, I remember smelling the Marines a good ten yards before I could see them. What is that stench? It is I! I also recall getting the “running shits” in the desert and loosing my balance while squatting for the umpteenth time and falling ass first into a steaming pile of diarrhea and cutting my skivve shorts off to extract myself (not to mention having to use a badly needed canteen of water to wash with).

There is no need to go into the details of seeing wounded Marines. One lesson is important. A Marine infantry officer leads in combat. Corpsmen treat the wounded. There is also no need to go into the insect bites, stings, body lice, ticks, chiggers, rashes, puss-filled sores, etc. Life is a bitch and then you die. You get the point.

Women should be allowed to go into the infantry. Just enter with your eyes wide open. The enemy certainly does and will kill you if you expose the least weakness.

Semper Fi,

Mike

The Age of what???

The Age of Obama?

Charles R. Kesler is a senior fellow of the Claremont Institute, editor of the Claremont Review of Books, and professor of government at Claremont McKenna College.

Cheer up, conservatives. Election night was gruesome, but it produced neither a landslide for President Obama nor a wipeout of the GOP. Judging by the numbers alone, the message was not so much "Forward!" as "Sideways!"

The president's 332 electoral votes (counting Florida, which fell eventually into his hands) amounted to a convincing victory. Measured against all the presidential contests since 1896, however, the year which political scientists often regard as the beginning of "modern" American politics, Obama's winning percentage (61.71% of the electoral vote) was below average, ranking 22nd out of 30.

Likewise, his percentage of the popular vote, which is not all counted yet, will probably put him 20th among the 30 presidential victors. Jack Pitney, the political scientist who has made these calculations, points out that in races with a serious third-party contender the winning percentage of the popular vote will be unusually low. Better, then, to adjust for that anomaly (prominent in 1912, 1980, 1992, and other races) by looking at the winner's margin of victory in the popular vote, rather than his overall percentage of it. By that standard, Obama's winning margin over Romney (3.2%) will rank even lower, only 24th out of 30—which is less than half his 7.3% victory over McCain in 2008.

So much for the notion that this was an electoral earthquake. Though he hasn't managed to heal the planet and stop the rise of the oceans (ask New Jersey), Obama has succeeded in stopping and even reversing the rise of his popularity with voters.

The Republican Party lives to fight another day; and it retains control of the House of Representatives. Divided government, the status quo ante, was the electorate's decree again. At the state level, however, Republicans added a governorship and kept control of a majority of state legislatures, which bodes well for their farm team for future presidential and congressional contests.

In politics as in life, of course, the numbers don't tell the whole story. What dismayed Republicans was their belief they had the election won, and that they deserved to win. After Mitt Romney's vigorous performance in the first debate and his winning turn at the Al Smith dinner in New York, he surged into a lead in the polls. He had the Big Mo, as George H.W. Bush once called it. But his momentum stalled, and Obama began closing the gap long before the superstorm blew in. By election eve it was a dead heat, and many polls, accurately it turned out, had the president ahead.

* * *

Romney's campaign, especially his decision to sit on his lead, has already been ruthlessly dissected. In many ways he was a gallant candidate who deserves to be remembered better. But neither he nor his party learned from the example in front of them: Meg Whitman's losing 2010 gubernatorial race in California. A billionaire businesswoman who found it hard to connect with ordinary people, Whitman allowed herself to be pummeled by ads featuring former employees she had fired heartlessly, so they said. Her reputation never recovered, and she got fewer votes than the losing initiative to legalize marijuana.

Romney was similarly disparaged by negative ads in the battleground states, and waited a long time to reply. His political instincts were better than Whitman's, and he came much closer to victory. Still, his difficulties, on top of hers, ought to shake the long-held but irrational Republican faith in the businessman's skills as the one thing needful to solve our problems (or even to get elected). With it should go, too, the inclination to purge politics as much as possible of abstract questions like justice in favor of concrete issues of dollars and cents and efficiency. Such false practicality merely cedes to liberals the right to define America's first principles—not exactly a winning strategy, as the uninspired debate over Obamacare showed.

Liberals won't be inclined to much soul-searching after this election, which will be the root of their future undoing. They succeeded, more than conservatives are willing to admit, in Hooverizing George W. Bush's administration—turning it into a symbol of economic collapse, loose morals, and failed foreign policy. W's second term, alas, proved helpful to this endeavor. Romney never came to terms with this problem—the elephant in the room, so to speak.

But Democrats have already cast Obama as the new FDR, a role he was born to play, at least in his own imagination. They view 2012 as a confirming election, the American people's blessing on the sharp leftward turn executed since 2008. The Age of Obama is well underway, they tell themselves and the people. Hope lives, but unfortunately for them, so does Change.

United Kingdom Moves Away from the European Project

Stratfor, Global Intelligence

By Adriano Bosoni

British Prime Minister David Cameron will deliver a speech in London on Jan. 23, during which he will discuss the future of the United Kingdom's relationship with the European Union. Excerpts leaked to the media suggest that harsh EU criticism will figure prominently in the speech, a suggestion in keeping with Cameron's recent statements about the bloc. But more important, the excerpts signal an unprecedented policy departure: renegotiating the United Kingdom's role in the European Union. London has negotiated exemptions from some EU policies in the past, even gaining some concessions from Brussels in the process; this time, it is trying to become less integrated with the bloc altogether.

Cameron has pledged to hold a referendum after 2015 on the United Kingdom's role in Europe. He has also said he would reclaim powers London surrendered to the European Union. While they no doubt reflect similar anxieties across the Continent, such statements are anathema to the European project, and by making them, Cameron could be setting a precedent that could further undermine the European Union.

Cameron's Compromise

Cameron's strategy partly is a reaction to British domestic politics. There is a faction within the ruling Conservative Party that believes the country should abandon the European Union entirely. It was this faction that pressed Cameron to call a referendum on the United Kingdom's EU membership. Some party members also fear that the United Kingdom Independence Party, the country's traditionally euroskeptic party, is gaining ground in the country.

Such fears may be well founded. According to various opinion polls, roughly 8-14 percent of the country supports the United Kingdom Independence Party, even though it received only 3.1 percent of the popular vote in the 2010 elections. These levels of support make the party a serious contender with the Liberal Democrats as the United Kingdom's third-largest party (after the Labour Party and the Conservative Party). Some polls show that the United Kingdom Independence Party already is the third-most popular party, while others suggest it has poached members from the Conservative Party, a worrying trend ahead of elections for the European Parliament in 2014 and general elections in 2015.

Its growing popularity can be attributed to other factors. Beyond its anti-EU rhetoric, the United Kingdom Independence Party is gaining strength as an anti-establishment voice in the country, supported by those disappointed with mainstream British parties. Similar situations are developing elsewhere in Europe, where the ongoing crisis has weakened the traditional political elite.

The debate over the United Kingdom's role in the European Union is also causing friction with the Conservatives' junior coalition partner, the Liberal Democrats. Party leader and Deputy Prime Minister Nick Clegg has repeatedly criticized the Conservatives' push for a referendum, arguing that the proposal is creating uncertainty in the country and by extension threatening economic growth and job creation. Several of the country's top businessmen share this belief. On Jan. 9, Virgin Group's Richard Branson, London Stock Exchange head Chris Gibson-Smith and eight other business leaders published a letter in the Financial Times criticizing Cameron's plan to renegotiate EU membership terms.

British citizens likewise are conflicted on the subject. In general, polls have shown that a slight majority of Britons favor leaving the European Union, but recent surveys found that opinion was evenly split. Conservative Party voters particularly support an EU withdrawal.

Given the issue's sensitivity, Cameron has sought to please everyone. He said there would be a referendum, but it would entail the United Kingdom's position in the European Union, not British membership. Despite his criticisms of the bloc, Cameron has said he does not want to leave the European Union outright; rather, he wants to repatriate from Brussels as many powers as possible. Cameron believes the United Kingdom still needs direct access to Europe's common market but that London should regain power regarding such issues as employment legislation and social and judicial affairs. Most important, the referendum would take place after the general elections of 2015.

London's Costs of Membership

London also believes that the United Kingdom has surrendered too much of its national sovereignty to supranational EU institutions. The United Kingdom is a net contributor to the European Union, and London feels that the costs of membership exceed the benefits. The Common Agricultural Policy, which subsidizes agricultural sectors in continental Europe, does not really benefit the United Kingdom, and the Common Fisheries Policy has forced the United Kingdom to share its fishing waters with other EU member states.

Yet the United Kingdom is a strong defender of the single market. Roughly half of its exports end up in the European Union, and half of its imports come from the European Union. While the United States is the United Kingdom's single most important export destination, four of its five top export destinations are eurozone countries: Germany, the Netherlands, France and Ireland. Germany is also the source of about 12.6 percent of all British imports.

Some critics suggest that the United Kingdom could leave the European Union but remain a part of the European Economic Area, the trade agreement that includes non-EU members, such as Iceland and Norway. However, the country would still be required to make financial contributions to continental Europe and adapt its legal order to EU standards, but it would not have a vote in EU decisions. According to Cameron, the United Kingdom must be part of the common market and have a say in policymaking.

The issue points to the United Kingdom's grand strategy. Despite an alliance with the United States, the United Kingdom is essentially a European power, and it cannot afford to be excluded from Continental affairs. Throughout history, London's foremost concern has been the emergence of a single European power that could threaten the British Isles politically, economically or militarily. Maintaining the balance of power in the Continent -- especially one in which London has some degree of influence -- is a strategic imperative for the United Kingdom.

The United Kingdom's Strategic Dilemma

The United Kingdom's push to renegotiate its status in the European Union threatens the European project. In the past, the bloc granted special concessions to the British, such as allowing them to keep the pound sterling during Maastricht Treaty negotiations. These concessions inspired other EU members to ask for similar treatment -- most notably Denmark, which also managed to opt out of the euro.

However, this is the first time that London has openly demanded the return to a previous stage in the process of European integration. At no other time has a country tried to dissociate itself from the bloc in this way. The decision not only challenges the Franco-German view of the European Union but also makes a compromise extremely difficult and risky between France and Germany and the United Kingdom.

Most important, Cameron is framing his proposals not in terms of national sovereignty but in terms of social well-being. In doing so, he acknowledges the social implications of the European crisis. Cameron has even said that the European Union currently is hurting its citizens more than it is helping them. According to leaked portions of his upcoming speech, he believes that there is a "growing frustration that the EU is seen as something that is done to people rather than acting on their behalf" and that the issues are "being intensified by the very solutions required to resolve the economic problems."

The excerpts also cite Cameron as saying "people are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity or their taxes are used to bail out governments on the other side of the Continent." This rhetoric could become highly attractive in Europe, where people from Germany to Finland believe that taxpayers' money is being used to bail out inefficient peripheral countries. And many Greek, Spanish and Portuguese citizens probably would sympathize with the notion that austerity is worsening their quality of life. Cameron's rhetoric suggests that he is positioning the United Kingdom to be the leader of a counternarrative that opposes Germany's view of the crisis.

But this strategy is not without risks for the United Kingdom. In recent years, the country's veto power in the European Union has been reduced substantially. With each reform of the European treaties, unanimous decisions were replaced by the use of qualified majority. Even in cases where unanimity is required, Berlin and Paris have managed to bypass London when making decisions. For example, Cameron refused to sign the fiscal compact treaty in 2011, but Germany and France decided to proceed with it, even if only 25 of the 27 EU members accepted it.

Moreover, the "enhanced cooperation mechanism," the system by which EU members can make decisions without the participation of other members, increasingly has been used to move forward with European projects. Currently, the EU's Financial Transaction Tax is being negotiated under this format. In recent times, London has been able only to achieve exemptions without real power to block decisions.

Meanwhile, the ongoing crisis has compelled the European Union to prioritize the 17 members of the eurozone over the rest of the bloc. This has created a two-speed Europe, where core EU members integrate even further as the others are neglected somewhat. London could try to become the leader of the non-eurozone countries, but these countries often have competing agendas, as evidenced by recent negotiations over the EU budget. In those negotiations, the United Kingdom was pushing for a smaller EU budget to ease its financial burden, but countries like Poland and Romania were interested in maintaining high agricultural subsidies and strong development aid.

The dilemma is best understood in the context of the United Kingdom's grand strategy. Unnecessary political isolation on the Continent is a real threat to London. The more the European Union focuses on the eurozone, the less influence the United Kingdom has on continental Europe. The eurozone currently stretches from Finland to Portugal, creating the type of unified, Continental entity that London fears.

For the British, this threat can be mitigated in several ways, the most important of which is its alliance with the United States. As long as London is the main military ally and a major economic partner of the world's only superpower, continental Europe cannot afford to ignore the United Kingdom. Moreover, London also represents a viable alternative to the German leadership of Europe, especially when France is weak and enmeshed in its own domestic problems. And even if the United Kingdom chooses to move away from mainland Europe, its political and economic influence will continue to be felt in the Continent.

The United Kingdom's grand strategy has long been characterized by balancing between Europe and the United States. Currently, London is not so much redefining that grand strategy as it is shifting its weight away from Europe without completely abandoning the Continent.

Hugh Hewitt

Examiner columnist

A Gloomy Swearing-in

Attendance at Monday's inauguration is expected to be down by almost a million from the 2009 swearing-in of President Obama.

Why? President Obama ran the most negative, content-free presidential campaign in modern American history, and since his re-election has worked to reinforce his partisan edge, not soften it.

His two press conferences since Nov. 6 have been exercises in evasion and blame assignment, and his "no negotiation" positioning on the debt ceiling has already served notice that the second term will be one long scrum, political trench warfare.

Republicans who might have been inclined to give much more than they got from a re-elected president, despite their own successful campaigns and a House majority, have had all reasonable hope for constructive engagement destroyed. The president wants to brawl, and it is impossible to argue otherwise.

Even the Manhattan-Beltway media elite are waking up to the president's intent. The question set at last week's presser, especially those incredulous queries about the debt limit from Chuck Todd and Major Garrett, signaled that even the White House press corps, puppyish in their affection for the president, have a limit when it comes to the willing suspension of disbelief.

No wonder the mood in the country is gloomy and the prospects for a surge in growth or confidence low to nonexistent. The bills for Obamacare are coming due, another terrorist attack from al Qaeda has claimed American blood, and the trillion-dollar coin absurdity merged into magazine clip debates as the public debate slipped into serial inanity.

We apparently are as resigned to a dispirited four years as CNN is to Piers Morgan. CNN is in better shape, of course, because someone is going to wake up someday to the reality of the impact of a lightweight on audience share and pull Morgan's ticket. But President Obama is here until January 2016.

This is the backdrop to today's speech. Even on the Left, there isn't much hope in the president or enthusiasm for his policies. A few special interests are trusting that his unilateralism will yield even greater departures from constitutional norms, but no serious person is expecting anything much from the next two years.

Maybe today's speech will inspire, but there is no reason to believe it will have any more lasting impact than any other Obama speech. Quick -- quote an Obama line or cite an Obama speech the memory of which still puts people to smiling. The Boston convention speech from 2004 is notable for what it launched, not for what he said. The June 3, 2008, St. Paul speech, marking the president's clinching of the Democratic nomination, did have that wonderful moment in which the candidate proclaimed that "this was the moment when the rise of the oceans began to slow and our planet began to heal." But critics of the president are much more likely to cite that than supporters.

The first inaugural? The acceptance speech at the Democratic convention in Charlotte? Any address to Congress?

The president is the only alleged great speechmaker whose supporters can't quote any of his speeches. He's also among the weakest re-elected presidents, given that the House is solidly in the other party's control and not at all inclined to defer to a president who has already launched the next campaign.

The parade will have wonderful young people marching, the parties will be full and fun, and the president's genuinely wonderful family will add some lift to the day.

The following day is the 40th anniversary of Roe v. Wade and the first working day of a long four years. The hangover will be historic.

Examiner Columnist Hugh Hewitt is a law professor at Chapman University Law School and a nationally syndicated radio talk show host who blogs daily at HughHewitt.com.

While pondering how to control the "general population" and their right to bear arms, his city is exploding with violence. The use of guns in his city is secondary,  total disregard for human life is primary. There is an attempt to paint the NRA and other 2nd Amendment protective organizations for the city's problems. It is, of course,  a leadership and community vision problem... BH

Thanks, Bev...

Gingrich Productions

Dear Friend,

Why doesn't Vice President Biden take his gun commission to Chicago, the murder capital of the United States and a place with some of the strictest gun laws in the country?

Chicago had more than 500 gun homicides in 2012, or roughly 19 per 100,000 people.

By way of comparison, New York City had just 237 gun homicides with more than three times the population -- only about 3 gun homicides per 100,000 people.

This puts the city of Chicago at more than 6 times the national gun homicide rate. Yet in Chicago, it is effectively illegal to possess a handgun outside the confines of your own home. (Even taking the gun outdoors on your own property can be illegal.) Long guns face similar prohibitions outside the home or place of business. And if you have more than one gun in your household, only one at a time may be maintained in "operable" condition.

All gun owners must register themselves with Chicago police, allow themselves to be fingerprinted and take a training course on gun use, supervised by police officers, in addition to paying a $100 fee.

They must also register each gun individually, at a cost of $15 per firearm. In addition, a whole assortment of rifles and shotguns are banned completely, including many of the so-called "assault" weapons.

These prohibitions are not new to the city. In fact, for most of the last 30 years, Chicago had even stricter laws than they do today. In 2010, the Supreme Court struck down a ban on all handguns that had been on the books since 1982. The city continues to attempt to restrict guns as much as it can get away with without running afoul of the Court's decision.

Many media elites, who are wealthy enough that they rarely need to worry about their own personal safety, are saying constantly these days that the U.S.'s gun homicide rate -- higher than some cherry picked countries with gun bans -- is proof that we, too, need to disarm our population.

But in Chicago, officials have gone as far as they can toward an outright ban and the city has one of the highest gun homicide rates in the developed world. If the absence of strong gun laws accounts for gun violence, how do they explain such significant outliers as Chicago?

And how many of these advocates for prohibition would feel the same way if they had to live in a place with the kind of lawlessness that's occurring in Chicago, with a murder rate many times the national average?

The Vice President's commission on gun control ought to start there in the murder capital of America. And the House Republicans should immediately begin hearings on how the gun control laws now being proposed have worked out for the people of the Windy City.

The answer, as last year's historic gun homicide rate suggests, is not very well.

Your Friend,

Newt

P.S. My friend James Farwell's new book, 'Persuasion and Power' on strategic communication and national security is an important read, full of history. You can read more about it here.

Cold Stoned Foolery
Contributed by Mike Walker, Col. USMC (retired)

All,

On occasion, a lie provides a clarity that the truth can never reveal.

Oliver Stone is the master of the self-defeating lie. The movie "JFK" had to be his touchstone of silliness. It also captured the cleverness of his mischief.

In the movie, he created the nonsense about the assassin’s “magic bullet” that moved in impossible three-dimensional right angles to wound both President Kennedy and Governor Connelly. “WE MUST HAVE BEEN LIED TO!” was the only possible verdict. That was indeed true, but the only trickster was Oliver Stone.

He simply switched the Presidential limousine with another seemingly “look-alike” Lincoln limousine to create his illusion. What one-in-a-billion movie viewer could have possibly known that Connelly’s seat had been moved up and over by Oliver to give us a “stoned” version of the truth?

We have only ourselves to be blamed for being duped in such a manner. At least comedian Jerry Seinfeld gave us a “warning to beware” with his satirical “magic loogie” scene a year later. The joke was on us.

Now we have “Oliver Stone’s Untold History of America” or, be more precise, “Oliver Stone’s Mistold History of America.”

Where to begin with the intellectual dishonesty? How about World War II?

The truth is that Stalin pursued a policy of brutal aggression from the late 1920’s until the day he died in 1953.

In 1939, Josef Stalin rejected the Western Democracies and embraced Adolf Hitler. That was the catalyst that sparked the most terrible of wars.

Stalin’s Union of Soviet Socialist Republics entered the Second World War in September 1939 as an ally of Adolf Hitler’s Nationalist Socialist Germany with goal of carving up Poland and enslaving the free peoples of the Baltic States.

Do not believe the lie that Soviet war began on 22 June 1941 with a German invasion. 22 June 1941 simply marked the date that one evil villain (Hitler) first betrayed another evil villain (Stalin) in the middle of World War II.

The Second World War marked the high water mark of the radical socialist movements that dominated the wars of the 20^th century, the most violent century in human history.

Perhaps the only thing the radical socialist leaders of the 20^th century had in common (the nationalist socialists reflected in Hitler and Mussolini and the communist socialists Stalin and Mao Zedung) was an utter and complete contempt for Western Democracies defined by Canada, France, the United Kingdom, the United States and others.

I could go on, but by now you see the point: The Cold War as born and sustained in Stalin’s Kremlin NOT Ottawa, Paris, No. 10 Downing Street or the White House.

There are many attributes that can be assigned to Stone: Stunning artistic intensity, vision, even genius, to name a few.

When it comes to history, however, the unforgiving truth is that Oliver is a second-rate shrill peddling a stale tale that was dubious the first time around during the Cold War and is only plain goofy in the retelling.

If you to wish view the farce on Showtime then laugh if you don’t remember the horrors and cry if you do. Just do not believe anything you are watching.

Semper Fi,

Mike

States Serve as Conservative Beacon of Hope, Human Events

By: Newt Gingrich
1/2/2013 12:48 PM

Republicans and conservatives in general will feel a lot better if they focus less on Washington and more on the 24 state capitals (including more than half the American people) which have Republican governors and Republican control of the state legislature.

Washington is likely to remain a painful spectacle for the near future. President Obama and the elite media will create anti-conservative and increasingly liberal policy directions. If the last seven weeks are any indication, Washington Republicans will range from inarticulate to deeply split. House Republicans have the Constitutional tools to take on Obamaism, but as long as the leadership refuses to operate strategically, those tools will be largely unused, with [Oversight Committee] Chairman Darrell Issa’s investigations as a striking exception and model for the others.

The good news is that conservatism is on the march outside Washington. (And outside Sacramento, Springfield, and Albany, which will be the new case studies in destructive tax and regulatory policies and the disastrous economic consequences of job-killing and taxpayer flight to other states. All three states will become poorer as long as they are dominated by liberalism.)

Michigan just adopted a right to work law in a stunning victory for workers rights and personal freedom and a deep blow to the power of union leaders to focus resources politically. Governor Rick Snyder has provided real leadership in moving Michigan back toward job creation.

Gov. Scott Walker became a national figure through his campaign to bring basic changes to government employee unions in Wisconsin. His reforms have already begun making life easier for local governments and local school board. The lessons about common sense work rules replacing overly strict and expensive union work rules in Wisconsin will spread across the country.

Texas has adopted common sense prison reforms which are saving taxpayers money while improving the lives of young Americans with minor offenses.

Texas also has an experiment underway to provide four-year college education for $10,000 a year or less. Gov. Rick Perry has taken the lead in helping young people get an education without massive debt.

Departing Gov. Mitch Daniels took a different step toward affordable college when the Daniels Scholarships provided that any Indiana student graduating early would receive the cost to the state of his or her senior year in high school as an automatic scholarship.

Daniels privatized a great deal of infrastructure development and the Indiana model of providing better infrastructure through private investment will be studied by other states and ought to provide a model for Washington as national infrastructure issues are developed.

In Washington, national policy debate seems mired down between a party of big government and redistribution and a party of pain and cuts.

In the 24 states with Republican governors and Republican legislatures there is an emerging party of the future.

Conservatives in general and Republicans in particular ought to spend more time focusing on the states.

The Republican Governor’s Association (RGA) could become the leading idea producer of any Republican organization in the country.

Despite the spectacle of taxing and spending in Washington, there are real signs of hope in the states.

Be of good cheer.

The future will not be defined by President Obama and the elite media.

The future will be defined by the American people — and it will be a much more conservative future than the elite commentators currently expect.