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I am a self-employed IT consultant and degreed engineer, a former project engineer for a major Eastern nuclear utility who struck out on his own and hasn’t looked back. I am an independent student of political and economic history. I believe in free men and free markets; politically I am a... More
  • Kleptocracy End Game? Part I 0 comments
    Jun 20, 2009 10:26 AM

    The government's handling of the Chrysler and the GM bankruptcy cases, their proposed structure for the PPIP, the $700 Billion dollar bailout package, the AIG CDS payouts, and numerous other measures and proposals, make it clear that the power structure of this country no longer believe in the country's future.  Why do I say that?  The overt behavior of the Administration and its politically favored groups resembles more a group of hyenas fighting over a corpse than a governing body gently and covertly stroking its vested political interests.  It seems a last-minute grab for whatever you can lay hands on before anyone stops you, like looting.  In fact, exactly like looting.  Looting means lawlessness.

    Denninger of Market-Ticker has repeatedly noted that the Fed's purchases of long-term non-Agency MBS debt is not within its charter; in other words, the purchases are illegal.  I know of no legal challenge in progress to the Fed's actions; such a challenge would likely run into challenges of its own related to "standing".  In the meantime, expedience and lack of challenge allows the Fed to continue breaking the law, in the open, with impunity.

    The courts seem to be the preferred vehicle for this administration to work its will with regard to the ramrodded automaker bankruptcies.  The ongoing GM case provides a worthwhile glimpse into the way that precedent / expected legal treatment of creditors is being brushed aside in the name of expedience. 

    I am willing to say that we seem to be living in a kind of economic martial law; or is it rather a kind of economic lawlessness?  Are there rules which are arbitrary and based on whim, or are there no longer any rules at all?  This is not an idle question.  There is an extremely grave danger here, an appreciation of which requires historical perspective.

    The Western system of government is an imperfect one.  It evolved from a system known as Primogeniture, the right of the first born son of the king to be the next king.  The king could do whatever he wanted.  He ruled by decree; it was a kind of permanent martial law.  Courts existed, but mostly to enforce king's will upon the subjects.

    One famous challenge to this system came in the form of a publication by John Locke: Two Treatises of Government.  The entire first Treatise is a refutation of the right of kings to rule simply by birthright.  It is the Second Treatise that is of interest to us here.

    Locke asks a question, the most important one of all, simple to pose but difficult to answer: If we're not going to have rule by kings, what kind of government should we have?  And if we're going to create a system of government from scratch, what should governments actually do?  What is the purpose of government?

    Locke develops his answer beautifully, by beginning with the situation where no government exists at all: The State of Nature. 

    "To understand political power right, and derive it from its original, we must consider, what state all men are naturally in; and that is, a state of perfect freedom to order their actions, and dispose of their possessions and persons, as they think fit, within the bounds of the law of nature, without asking leave, or depending upon the will of any other man.

    A state also of equality, wherein all the power and jurisdiction is reciprocal, no one having more than another;"

    "But though this be a state of liberty, yet it is not a state of licence: though man in that state have an uncontroulable liberty to dispose of his person or possessions, yet he has not liberty to destroy himself, or so much as any creature in his possession, but where some nobler use than its bare preservation calls for it. The state of nature has a law of nature to govern it, which obliges every one: and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions: and being furnished with like faculties, sharing all in one community of nature, there cannot be supposed any such subordination among us, that may authorize us to destroy one another, as if we were made for one another's uses, as the inferior ranks of creatures are for our's. Every one, as he is bound to preserve himself, and not to quit his station wilfully, so by the like reason, when his own preservation comes not in competition, ought he, as much as he can, to preserve the rest of mankind, and may not, unless it be to do justice on an offender, take away, or impair the life, or what tends to the preservation of the life, the liberty, health, limb, or goods of another."

    More to come in Part II...

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