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Volume 8, Issue 50: December 11, 2006

  1. The Recession of 2007?
  2. Big Brother Watches Holiday Travelers
  3. Why Venezuelans Re-elected a Despot
  4. STREET SMART -- A "Top 10" Book on City Living

1) The Recession of 2007?

After a five-year expansion initiated by tax cuts and low interest rates, the U.S. economy is likely to enter into an 18-month-long recession beginning in the first half of 2007, according to Independent Institute Research Fellow Dominick Armentano.

The slump's proximate cause, he argues, is the Federal Reserve Board's quixotic monetary policies. In response to the recession of 2000-2001, the Fed kept interest rates low -- and did so for too long, which created an unsustainable boom in the housing industry. When the Fed caught its mistake and began raising interest rates last year, the price of homes and condos in many areas began a near free-fall. The rising interest rates and falling home prices will discourage consumers from purchasing automobiles and other big-ticket consumer durables. Armentano estimates that it will probably "take years, not months, to work off the surplus national inventory and restore normalcy to the housing market. A 'soft landing' is just not in the cards."

"In short, we are headed (probably) into an extended period of relatively modest economic activity," Armentano concludes. "We can avoid making the slowdown worse by steering clear of tax increases and higher minimum wages. Households with high leveraged debt and cyclical employment will be hit the hardest. The rest of us should muddle through in reasonably fine fashion."

"Recession 2007," by Dominick T. Armentano (12/7/06)
"Recesión 2007"

More articles by Dominick T. Armentano


2) Big Brother Watches Holiday Travelers

Looking forward to holiday air travel? You and your family and friends may not be the only ones "looking forward" to your flight.

"This holiday travel season, Santa Claus is not the only one who is checking to see whether you’ve been naughty or nice," writes Ivan Eland, director of the Independent Institute's Center on Peace & Liberty. "For the last four years, the U.S. government has been snooping by computer into people’s travel records and assigning them a risk score for being terrorists or criminals."

The program -- the Department of Homeland Security’s Automated Targeting System (ATS) -- acts something like a credit score that is shared with third parties, but never with the individuals profiled. Your ATS score is "shared with state, local, and foreign governments, Congress, the courts, and private contractors, and can be used to deny employment in shipping and travel, licenses, security clearances, and government contracts. Even worse, the government intends to keep these assessments on file for 40 years."

How large will the scope of the ATS grow if the executive branch is able to bypass the checks and balances of Congress and the courts? Eland's prognosis is sobering: "Given current trends, during future holiday seasons, perhaps the government will assign ordinary people permanent ratings on their risk for committing murder, rape, burglary, armed assault, child molestation, speeding, and jay walking. Santa Claus could certainly use a comprehensive system like this to determine the distribution of holiday packages. In the meantime, the government’s “war on terror” is the gift that just keeps on giving (more power to the security bureaucracies)."

"More Cheer for the Holiday Travel Season," by Ivan Eland (12/11/06)

THE EMPEROR HAS NO CLOTHES: U.S. Foreign Policy Exposed, by Ivan Eland

PUTTING “DEFENSE” BACK INTO U.S. DEFENSE POLICY: Rethinking U.S. Security in the Post-Cold War World, by Ivan Eland

"The Way Out of Iraq: Decentralizing the Iraqi Government," by Ivan Eland

Center on Peace & Liberty (Ivan Eland, Director)


3) Why Venezuelans Re-elected a Despot

Venezuela was more free and less corrupt during the four decades of democracy that preceded the rule of Hugo Chavez -- so why do voters continue to re-elect him? According to Alvaro Vargas Llosa, director of this Independent Institute's Center on Global Prosperity, a key reason is that Chavez has been so effective at portraying his opponents as elitist reactionaries bent on plundering the country's oil resources that Venezuelans have come to identify with the father-figure strongman, interpreting the world through his eyes.

"In my five trips to Venezuela since Chavez took office eight years ago, I have come to a conclusion that many Venezuelans suffer something akin to Stockholm syndrome, that state of psychological dependence that the victim develops with a kidnapper," Vargas Llosa writes in his latest syndicated column.

Chavez has taken advantage of his popularity by weakening the country's checks and balances and putting the Congress, the Supreme Court, and the National Electoral Council under his own personal control. Venezuela's electoral roll, Vargas Llosa notes, "includes 17 million voters, a surreal figure in a country of 26 million people in which more than half the population is under the legal age to vote."

"Venezuela’s Stockholm Syndrome," by Alvaro Vargas Llosa (12/6/06)
"Venezuela o el síndrome de Estocolmo"

LIBERTY FOR LATIN AMERICA: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

THE CHE GUEVARA MYTH, by Alvaro Vargas Llosa

Center on Global Prosperity (Alvaro Vargas Llosa, director)

El Independent: El Blog del Centro Para la Prosperidad Global de The Independent Institute


4) STREET SMART -- A "Top 10" Book on City Living

We are pleased to announce that the Independent Institute book STREET SMART: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth, has been selected for Planetizen's annual list of Top 10 books in the field of urban planning, design, and development community. Here is Planetizen's write-up of the book:

"STREET SMART provides a cogent challenge to the public sector's monopoly on roads. In this provocative and enlightening compilation, the leading thinkers on privatization put forth market-based solutions for providing roadways and dealing with traffic congestion. Contributors to the volume provide both historic and modern day examples of private sector road services, and outline the case for taking politics out of transportation and unleashing the power of competition. A valuable resource for understanding the argument for privatization."

Planetizen is a public-interest information exchange devoted to urban planning, design, and development. According to its website, "The Planetizen editorial staff based its 2007 edition list on a number of criteria, including editorial reviews, sales rankings, popularity, Planetizen reader nominations, number of references, recommendations from experts and the book's potential impact on the urban planning, development and design professions."

Planetizen Top 10 Books List

STREET SMART -- Book Highlights and Synopsis

Praise for STREET SMART: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth:

"STREET SMART is informative, up-to-date, and a pleasure to read. If we are lucky, the book’s ideas and insights will also find their way into popular and political discourse in order to create real reform."
—Peter Gordon, Professor of Policy, Planning and Development, University of Southern California

"STREET SMART provides a clear-cut and comprehensive investigation of the prospect of either replacing or supplementing our present road system by private, market-based roads. It should start a serious and informed discussion of this important problem."
—Gordon Tullock, University Professor of Law and Economics, George Mason University

"Every public official -- whatever their views -- needs to read STREET SMART to understand the depth of what is becoming a revolution."
—Roger Toleman, Deputy Secretary, New Zealand Ministry of Transport

STREET SMART makes an excellent holiday gift for your favorite policy wonk. Purchase a copy at

“Private Solutions for Reducing Road Congestion, Fuel Costs, Travel Time, and Waste,” featuring STREET SMART editor Gabriel Roth


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