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Volume 12, Issue 48: November 30, 2010

  1. The New Stagflation and the Coming Political Fallout
  2. Americans Need a Nuclear Arms Treaty—If It’s Constitutional
  3. Memo to Tea Party Senators
  4. “Is U.S. Justice Broken? Overcoming Government Legal Failure” (Oakland, Calif., 12/9/10)
  5. New Blog Posts

1) The New Stagflation and the Coming Political Fallout

Is Ben Bernanke in denial about the risk of ever-rising prices? In his recent defense of additional “quantitative easing”—his plan to expand the supply of money and credit by purchasing $600 billion of U.S. Treasury bonds—the Federal Reserve chairman stated that the “core” rate of price inflation was only 0.6 percent over the past year. But according to Independent Institute Senior Fellow Alvaro Vargas Llosa, the concept of “core” inflation is a contrivance—a gimmick invented by the Nixon administration to hide real inflation.

“It does not take into account food and energy,” writes Vargas Llosa in his column for the Washington Post Writers Group. “Anyone who has been to the supermarket or the gas station (or to a hospital) knows that inflation is already high.”

Investors aren’t buying Bernanke’s claims—hence their flight to gold, silver, and other hard assets that have been a reliable store of value during inflationary periods. Moreover, their reasonable concerns go beyond the conduct of U.S. monetary policy, which has nearly tripled the size of the Fed’s balance sheet since the housing bubble popped. European and Chinese monetary authorities have also amped up their creation of money and credit. The cumulative effect—stagflation across much of the globe—will likely have momentous political implications. “The danger that it will take a messianic, populist and authoritarian form cannot be discarded, given the signs we are already seeing at the ballot box in some European countries where anti-immigration far rights have polled strongly,” concludes Vargas Llosa.

“The Return of Stagflation,” by Alvaro Vargas Llosa (11/24/10) Spanish Translation

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa

Lessons from the Poor: The Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa


2) Americans Need a Nuclear Arms Treaty—If It’s Constitutional

U.S. National Security would be enhanced—and the lives of the American people would be made more secure—if Senator Jon Kyl (R-Ariz.) allowed the New Strategic Arms Reduction Treaty (START) to move forward. Whether motivated by a wish to leverage his power to secure more defense pork for key constituents or inspired by a desire to deny the Obama administration a foreign-policy victory, Kyl’s obstructionism is irresponsible, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty.

The treaty would not drastically reduce nuclear stockpiles of the United States and Russia, but it would open the door for meaningful reductions down the road. More important, the treaty would create an inspections process for the world’s two leading nuclear powers. “This transparency is imperative to ameliorate the only existential threat to the United States in its history,” writes Eland in his latest op-ed.

Some pundits, including former Clinton administration official James Rubin, argue that the treaty is too important to be left to the Senate. Instead of meeting the constitutional requirement that all treaties pass that chamber by a two-thirds vote, they would rather have the treaty be enacted via regular (simple majority) legislation and executive decree. Eland disagrees: “Although New START is important and worthy, circumventing the nation’s Constitution to bring it to fruition is not worth it.”

“New START Is Worthy, but Let’s Not Violate the Constitution to Save It,” by Ivan Eland (11/24/10)

Partitioning for Peace: An Exit Strategy for Iraq, by Ivan Eland

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland


3) Memo to Tea Party Senators

If Washington’s incoming Republican Senators take the Tea Party message of fiscal responsibility seriously, they must slash spending in the largest and most wasteful agency in the federal bureaucracy, the Defense Department, according to Independent Institute Research Fellow Winslow T. Wheeler and defense-policy writer Sanford Gottleib.

In an open letter to Senators-elect Ron Johnson (Wisconsin), Mike Lee (Utah), Rand Paul (Kentucky), Marco Rubio (Florida), and Pat Toomey (Pennsylvania), Wheeler and Gottleib note that although defense spending is higher than at any time since the end of World War II, the Pentagon cannot keep track of its spending. This fiscal laxity can only mean that the $700 billion annual defense budget is saturated with pork and other waste.

Defense Secretary Robert Gates has proposed closing the Joint Forces Command in Norfolk, Virg., and other programs that contribute to overruns and overstaffing—and as a result has heard loud protests from both sides of the aisle. Another problem: Gates cannot rely on the Pentagon to identify waste because it is a sprawling agency with competing fiefdoms all scrambling for greater influence and dollars. Senator Tom Coburn (R-Ok.) has called for freezing defense spending at current levels until the Pentagon can pass comprehensive audits. Wheeler and Gottleib encourage the Tea Party favorite sons to look for additional approaches. “You have your work cut out for you,” they write. “We wish you well.”

“The Pentagon Budget,” by Winslow T. Wheeler and Sanford Gottleib (11/29/10)

Congress, the Defense Budget, and Pork: A Snout-to-Tail Description of Congress’ Foremost Concern in National Security Legislation, by Winslow T. Wheeler

Wastrels of Defense: How Congress Sabotages U.S. Security, by Winslow T. Wheeler

Budgeting for Empire: The Effect of Iraq and Afghanistan on Military Forces, Budgets, and Plans, by David Isenberg

Arms, Politics, and the Economy, edited by Robert Higgs


4) “Is U.S. Justice Broken? Overcoming Government Legal Failure” (Oakland, Calif., 12/9/10)

Is the U.S. legal system fraught with injustice, backlogged courts, and billions of dollars in waste? Ask Thomas Lee Goldstein. In August, he was awarded a $7.95 million judgment against the City of Long Beach, Calif., because a court found that policemen engaged in misconduct that led to his imprisonment for 24 years for a crime he didn’t commit. Or ask the estimated 4,700 people wrongly convicted of felonies each year due to false positives in fingerprint testing. Or ask the U.S. Justice Department, which recently rescinded a five-year-old policy that forced defendants in federal criminal trials to waive the right to post-conviction DNA testing in exchange for a plea bargain.

Are these examples just the tip of the iceberg? And, what can be done to make the justice system worthy of the name?

To address these and related questions, the Independent Institute is hosting “Is U.S. Justice Broken? Overcoming Government Legal Failure,” a public forum featuring economist Edward López (editor of the path-breaking new book, The Pursuit of Justice), David Friedman (Santa Clara University Professor of Law) and Judge Alex Kozinski (Chief Judge for the Ninth Circuit U.S. Court of Appeals). This event will be held on the evening of Thursday, December 9, at the Independent Institute’s conference center in Oakland, Calif.

Read details about the event.

Reserve tickets today.

Read a summary of The Pursuit of Justice: Law and Economics of Legal Institutions, ed. by Edward López.


5) New Blog Posts

From The Beacon:

From MyGovCost Blog:


  • Catalyst
  • Beyond Homeless