Let's quickly summarize our economic situation. The Federal Reserve, riding on the back of the fractional reserve banking system, has managed to print out of thin air enough money to allow US banks to explode to sizes that are "simply too big to fail." The loans that these banks issue are backed by nothing more than a promise to be paid back at a later date. This money, which is not backed by any asset or commodity value, has facilitated unsustainable investment in energy, then technology, and now housing. This mal-investment has produced economic havoc in the form of bankruptcies, foreclosures, bailouts, probable recession, and, thereby, almost certain inflation and monetary collapse.

Don't worry everyone, Obama's on the case. He has new people with new plans. Who are these new people? Enter Timothy Geithner, Lawrence Summers, and Paul Volcker. Have you heard these names before. The Obama administration is counting on the fact that you haven't. So who are they?

The most familiar name on the list is Paul Volcker, former Chairman of the Federal Reserve, conservative Keyensian, and promoter of the US's money-as-debt system. His record is well known, and you can find it here.

Timothy Geithner began his career working for the Treasury Department starting in 1988. Yes, the same Treasury Department that bailed out the savings and loan industry because of (sound familiar?) poor real-estate investments and the subsequent collapse of the FSLIC (the Savings and Loan version of the FDIC). "In 1999 he was promoted to Under Secretary of the Treasury for International Affairs and served under Treasury Secretaries Robert Rubin and Lawrence Summers [source]," whom we'll meet shortly. Geithner was again around just in time to enjoy the ".COM" bubble burst. His latest exploits include work for the Council on Foreign Relations (proponents of the North American Union), the International Monetary Fund (the tool of the US Treasury to bailout any country whose corrupt economy threatens to leave their Keynesian dreamland in shambles), and lastly the President of the New York Federal Reserve.

Finally, Summers was one of the prominent spokesmen for the "Commodity Futures Modernization Act, which allowed many derivatives--like the credit default swaps that have rocked markets this fall--to go unregulated." Summers fought hard for the $750 billion dollar bailout and continues to fight hard for another round of bailouts of undetermined size, but certainly in the hundreds of billions. Economist Dean Baker says of Mr. Summers, "the policies he promoted as Treasury Secretary and in his subsequent writings led to the economic disaster that we now face." [Source]

Does this list of appointees sound like a change we can believe in? Does it even sound like a change at all? These men aren't going to rescue our economic situation; these are the men that created our economic situation. One or another of these men have been in active economic or governance rolls for every major economic disaster of the last 40 years.

One could make the argument, "whom could Obama have appointed, who also has the economic credentials to advise a US president and at the same time was not a participant in the calamity? I'm glad you asked. How about picking the gentleman who repeatedly predicted the chaos over and over again, was repeatedly shunned and ridiculed by the media and the so-called economic experts that were, themselves, responsible for the mess. I refer to none other than Peter Schiff. Need proof of his credentials and sheer economic genius? Watch this YouTube video and join me in encouraging Obama to choose the people who predicted the problems not produced the problems:

In the early decades of the Republic, equality meant before God; liberty meant the liberty to shape one's own life. The obvious conflict between the Declaration of Independence and the institution of slavery occupied the center of the stage. That conflict was finally resolved by the Civil War. The debate then moved to a different level. Equality came more and more to be interpreted as "equality of opportunity" in the sense that no one should be prevented by arbitrary obstacles from using his capacities to pursue his own objectives. That is still its dominant meaning to most citizens today. . .

. . . A very different meaning of quality has emerged in the United States in recent decades--equality of outcome. Everyone should have the same level of living or of income, should finish the race at the same time. Equality of outcome is in clear conflict with liberty. The attempt to promote it has been a major source of bigger and bigger government, and of government-imposed restrictions on our liberty.

The persistence of Marxist equality of outcome in modern American thinking is shocking given the repeatedly catastrophic results of this idea on society itself. The list of communist countries who, in one way or another, drove the citizens toward outcome equality in the twentieth century read like a who's who of human rights violators: Albania, Bulgaria, China, Cuba, Czechoslovakia, East Germany, Hungary, Laos, Mongolia, North Korea, Poland, Romania, U.S.S.R., Vietnam, and Yugoslavia. Such is the hubris of mankind: surely it has failed in the past because I was not the one in charge of it, but this time it will be different.

Each decade the failure rate of countries adopting the idea of outcome equality grows. In fact, of the list of fifteen countries in the last paragraph only five remain communist to this day, and the success of China cannot be divorced from it's largely capitalistic economic structure. Two questions remain glaring, however; why does "equality of outcome" persist with such vigor, and why, with so many dedicated to its success, does it continually fail? Surely, a lifetime of scholarship could precede the answers to those two questions; however, the general principle could be resident already in Friedman's initial assertion. If we take each of the three equalities and examine it individually, a potential hypothesis becomes apparent.

Let us suppose that in the first case only transcendent equality exists--equality in the eyes of God or from our birthright, our humanity. If a society were constructed with sole respect to this type of equality, which type of societal model would best fit it? Likely the anarchist or anarcho-capitalist model would best fit (note I'm using anarchist in the academic sense not the colloquial sense). The positivist idea that rights derive from the State would have no place whatsoever, and the logical conclusion would be a society driven by laws enforced, prosecuted, and adjudicated by private enterprise--the free choice of citizens to pay for and trust in objective third-party arbitration. And the so called third-party arbitrator would survive as a business based on the quality of its objectivity and lack of shadowy backdoor dealings, less it be replaced with a more upstanding institution.

On the other hand, let us examine the society that might best fit the adherence to the idea of equality of opportunity. Note Friedman's phrase "arbitrary obstacles" in his description of equality of opportunity. The implication is that there might well be some natural or systemic obstacles. Natural obstacles, as Friedman later points out, might be, for example, that one child is born blind while another has sight. Systemic obstacles might be a tax levied for national defense, a service that benefits all equally but, at the same time, unlike a progressive tax or social welfare mechanism which disproportionately benefits some and not others. Surely natural obstacles, as previously noted, would affect a society based purely on transcendent equality, but certainly no systemic obstacles would exist in a true anarchist or anarcho-capitalist society. So perhaps a system well suited to opportunity equality might be minarchism--very limited government for the sole purpose of protecting citizens from force, violence, and coercion.

We find, therefore, many similarities and overlaps between societies strictly adhering to transcendent and opportunity equality. Both seem to suggest that rights are largely existential but absolute and in no way subjective. However, unlike the natural evolution evident in transcendent and opportunity equality, outcome equality not only promotes but demands intervention from another party. It is without question a different breed, which Friedman makes clear. Socialistic and Communistic systems both have their root in outcome equality. Marx was clear that each gives according to his ability, and each takes according to his need. Abilities may vary among individuals, but unlike human "wants," human "needs" remain of a relatively fixed order. In the best possible case, none go without as long as all give. But those who cannot give ensure that none go for very long with much.

Ardent supporters of outcome equality point to the necessity and perceived moral high ground of benevolence and social responsibility as a means of dealing with the ills brought about by natural and systemic obstacles to equality. Social ills, they claim, require social solutions and society-wide initiatives. The truth, however, is often lost in the language and the implications lost in the details. Ultimately, they provide no apparatus by which society can be induced to participate in any macro-political rescue without first diminishing or removing outright transcendent and opportunity equality. In other words, outcome equality is gained at the expense of individual liberty, is implemented by force, violence, and coercion, and remains, therefore, an ideology so unlike and utterly separate from both transcendent and opportunity equality as to deny that society itself is nothing more than a voluntary cooperation of free individuals. Society, from the "outcome equality" standpoint, is not something that grows but something that is invented, not something alive, but something dead; and we find that death wherever it is implemented.

Equality of outcome persists, therefore, in an ooze of simultaneous disdain for natural obstacles and a willful disregard for any ethical or moral hierarchy--any sense that we are in fact not liberated as we become equal, but that we are equal as we become liberated. We find it good and honorable to help those in need, to give of ourselves for others. But this goal becomes darkened when we must force and coerce others to that end. Rather than rely on compulsion to achieve our goals, we must persuade in open dialogue others to our opinions, using the strength of our arguments. Compulsion from external entities must end and be replaced with an impulse from within. This is the goal of liberty. This is the only true road to equality.

On the surface Prop. 8 appears to simply limit the rights of gay couples to marry; however, from another perspective the Prop. 8 vote in California actually limits the government's power of licensure, hindering its ability to extend marriage licenses. Keep in mind that the legal definition of a license is:

The permission granted by competent authority to exercise a certain privilege that, without such authority, would constitute an illegal act.

In other words, marriage in all fifty states is illegal unless the State grants its permission.

The truth is that the State and Federal government have gone mad with the power of requisite licensing. Without a license citizens of the US cannot fish, hunt, marry, drive, provide health services (even non-medical), or practice law; they cannot manufacture products, build structures, provide retail or wholesale goods, start a business, trade, or be a travel or real-estate agent; in some states even selling flowers, selling your services as an interior designer, or running a public pinball machine are strictly prohibited without a State issued license. The ugly truth is that in many cases licensure is a hidden tax on consumers and a boon to government at the citizens' expense; indeed, marriage licensure alone is a $100,000,000 a year industry--with 2.2+ million marriages per year at an average cost of $44 per license.

And what does the government provide in return? Two things: firstly, it provides the chaos which naturally arises as the state attempts to define the nature of a legally binding contract that it did not initiate but requires by law. And second, it provides subsidies in the form of tax breaks and benefits to married couples. The latter might sound good, but the details are troubling. These tax breaks and benefits are a form of wealth redistribution doled out according to the policy objectives of the State and Federal government and is paid for by everyone while directly benefiting only those who are married.

Further, a state marriage license embroils citizens in undue contractual relationships with the State and sometimes the Federal government. One of the best anti-licensure arguments that I've read comes from a rather unlikely source; Pastor Matt Trewhella writes in a thorough and well-thought-out article addressed specifically to Christians:

When you marry with a marriage license, you grant the State jurisdiction over your marriage. When you marry with a marriage license, your marriage is a creature of the State. It is a corporation of the State! Therefore, they have jurisdiction over your marriage including the fruit of your marriage. What is the fruit of marriage? Your children and every piece of property you own. There is plenty of case law in American jurisprudence which declares this to be true. [source]

Truly, nothing gives the State the right to make illegal the consensual contract of marriage, except for that which the citizens of the states allow. For this reason Prop. 8 was an overwhelming success. It rightfully limited the government's too-often-abused power of licensure.

If there was any problem with Prop. 8, it was that it did not go far enough. Certainly, another amendment is needed in California, and all states for that matter, that would deprive the State of the power to prohibit marriage without its consent. The right of contract is one that ought to belong to the free citizens and to no other. To the gay-rights activists I say, take to the streets, though not in protest, but in celebration; and thank the "traditional" married couples and religious organizations that funded the Vote Yes campaign, for there in lies your protection from overreaching State power.

On December 26, 2004 a magnitude 9.3 earthquake shook the subduction zone along the India and Burma plates in the Indian Ocean, sending multiple walls of water--some as high as a hundred feet--racing toward Sumatra, Indonesia at a rate of nearly 600 miles per hour. The tsunami, which struck land, took the lives of more than 225,000 people and caused still-inestimable economic damage to the region. Survivors interviewed following the disaster almost unanimously relayed the same grim tale: minutes before the tsunami hit the animals were spooked and flighty and the beach water receded dramatically. Ignorantly, many people treated the receding waters as a spectacle and looked at the situation as an opportunity to venture out and collect stranded fish and shells. They were to learn too late the awesome gravity of the situation.

And yet, unbeknownst to many, an even more devastating tsunami might well be building. And like many in Indonesia the warning signs are now becoming evident, but do we understand what we are seeing, or are we treating it as a boon; are we walking out to collect fish and shells?

Economic Tectonics
Deep beneath the surface of the US economy there is a seismic fault where the Federal Reserve meets the fractional reserve banking system. Unlike sound banking where each dollar loaned is a dollar deposited in the bank in a fixed term maturing account like a CD, this system uses initial capital investments and deposits to pyramid a hundred fold expansion of money in the US economy--essentially printing out of thin air $100,000 for every $1000 of productive money on reserve. The new money is given as loans to individuals and businesses to be paid back with interest at a future date. The Federal Reserve (the Fed) aggressively price fixes interest rates (the cost of immediate access to money) to further embolden citizens to take out these loans.

When a business person, for example, takes out a loan from a bank to build a new facility, s/he signs a contract with the bank to repay the loan with interest after a period of time. As unbelievable as it might sound, the bank from whom s/he burrows the money does not actually have the money to loan. One might ask where the money comes from. With a few keystrokes in the bank computer, the banker types in that the business person now has the money in his or her account. The money, as the banks will reluctantly tell you, is nothing more than the promise of paying it back. The new loan money then is used for architects, engineers, contractors, laborers, suppliers, etc. Once this money is in the hands of this second tier, some money is exchanged further for goods and services and some money is saved or invested in, say, mutual funds, stocks, retirement accounts, etc. This money in the form of currency, savings, and investments makes up what is called M1 and M2. It further becomes a part of the MZM (Money of Zero Maturity)--money immediately available for withdrawal.

The Nature of Inflation
Monetary inflation begins at the precise moment that more money has entered the economy than there are assets in the market. It might be easy to think that if everyone in the US were suddenly one million dollars richer, everyone could buy a million dollars worth of stuff and be better off. As nice as it sounds, this is simply not true. No, if everyone were a million dollars richer, Cars, boats, big screen TVs, etc. would immediately fly off the shelves (so to speak), producers wouldn't be able to keep up with the increased demand for those products, and prices would skyrocket as demand for precious few resources increased. After a short time prices would reflect the influx of new money and everyone would be exactly where they were before the million dollar pay day--only now the purchasing power of a dollar would be greatly decreased.

Though the sums of the loans are different and the number and distribution of the debtors are unevenly dispersed, banks are, indeed, engaged in precisely this practice. With all of this extra money floating around, however, should we not already see massive inflation? The Fed is quick to point out that the CPI (consumer price index) shows that inflation is rather stable, at about 2% per year. Herein lies the insidious nature of the Federal Reserve system. Although money flows like water and appears to be of unlimited supply, natural resources, goods, and workers are not of unlimited supply. The extra money in the economy promotes expansion and investment in areas that are not necessarily sustainable in terms of assets and supply and demand. Nevertheless, so long as consumer and business spending increase with the influx of money and companies can continue to produce at elevated levels, inflation is held at bay. What happens, however, if spending and production drop off?

The answer is that we get serious problems like those found in the current housing market. Massive and unsustainable investment was pumped into the housing market with unending credit expansion and government loan guarantees on both loan principle and interest. As long as consumers were buying homes, building and loaning could continue. However, eventually something occurred which no Keynesian economist appeared to think possible: housing supply exceeded demand, and the market simply dried up.

The housing bubble, however, was just the side effect of an easy-money-credit-crises-earthquake deep below the surface of the economy. And the economy soon began its tumult: unsustainable businesses produced by years of easy-money investments began closing; unemployment began rising; home owners were going into foreclosure; bankers were stuck with houses that no one wanted; eventually banks failed; bailouts ensued and with it a new influx of debt--money printed out of thin air, and the inflation tsunami was on its way.

The Warning Signs
But what are the warning signs of an inflation tsunami? Ironically, the most visible manifestation might well be sudden and sharp deflation coupled with a sharp increase in the strength of the dollar. In other words, look for the water to recede from shore and the height of the water off the horizon to rise. Why might this be? As consumers pull back on spending and burrowing, retailers also pull back with the fear of holding more product supply than product demand. Wholesalers perceive this pull back and retreat. Manufacturers see the retreat and stop burrowing for expansion projects and cut back on production. Parts suppliers see the cut back and then demand reduced quantities of raw materials--iron, steel, coal, oil, etc. along with other commodities. Finally when even raw materials drop production the waters might well be close to nadir.