American Gulag - Criminalizing Everyone

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The U.S. Government is totally and completely out of control.

Brian W. Walsh
Washington Times
Criminalizing Everyone

"You don't need to know. You can't know." That's what Kathy Norris, a 60-year-old grandmother of eight, was told when she tried to ask court officials why, the day before, federal agents had subjected her home to a furious search.

The agents who spent half a day ransacking Mrs. Norris' longtime home in Spring, Texas, answered no questions while they emptied file cabinets, pulled books off shelves, rifled through drawers and closets, and threw the contents on the floor.

The six agents, wearing SWAT gear and carrying weapons, were with - get this- the U.S. Fish and Wildlife Service.

Kathy and George Norris lived under the specter of a covert government investigation for almost six months before the government unsealed a secret indictment and revealed why the Fish and Wildlife Service had treated their family home as if it were a training base for suspected terrorists. Orchids.

That's right. Orchids.

By March 2004, federal prosecutors were well on their way to turning 66-year-old retiree George Norris into an inmate in a federal penitentiary - based on his home-based business of cultivating, importing and selling orchids.

Mrs. Norris testified before the House Judiciary subcommittee on crime this summer. The hearing's topic: the rapid and dangerous expansion of federal criminal law, an expansion that is often unprincipled and highly partisan.

Chairman Robert C. Scott, Virginia Democrat, and ranking member Louie Gohmert, Texas Republican, conducted a truly bipartisan hearing (a D.C. rarity this year).

These two leaders have begun giving voice to the increasing number of experts who worry about "overcriminalization." Astronomical numbers of federal criminal laws lack specifics, can apply to almost anyone and fail to protect innocents by requiring substantial proof that an accused person acted with actual criminal intent.

Mr. Norris ended up spending almost two years in prison because he didn't have the proper paperwork for some of the many orchids he imported. The orchids were all legal - but Mr. Norris and the overseas shippers who had packaged the flowers had failed to properly navigate the many, often irrational, paperwork requirements the U.S. imposed when it implemented an arcane international treaty's new restrictions on trade in flowers and other flora.

The judge who sentenced Mr. Norris had some advice for him and his wife: "Life sometimes presents us with lemons." Their job was, yes, to "turn lemons into lemonade."

The judge apparently failed to appreciate how difficult it is to run a successful lemonade stand when you're an elderly diabetic with coronary complications, arthritis and Parkinson's disease serving time in a federal penitentiary. If only Mr. Norris had been a Libyan terrorist, maybe some European official at least would have weighed in on his behalf to secure a health-based mercy release.

Krister Evertson, another victim of overcriminalization, told Congress, "What I have experienced in these past years is something that should scare you and all Americans." He's right. Evertson, a small-time entrepreneur and inventor, faced two separate federal prosecutions stemming from his work trying to develop clean-energy fuel cells.

The feds prosecuted Mr. Evertson the first time for failing to put a federally mandated sticker on an otherwise lawful UPS package in which he shipped some of his supplies. A jury acquitted him, so the feds brought new charges. This time they claimed he technically had "abandoned" his fuel-cell materials - something he had no intention of doing - while defending himself against the first charges. Mr. Evertson, too, spent almost two years in federal prison.

As George Washington University law professor Stephen Saltzburg testified at the House hearing, cases like these "illustrate about as well as you can illustrate the overreach of federal criminal law." The Cato Institute's Timothy Lynch, an expert on overcriminalization, called for "a clean line between lawful conduct and unlawful conduct." A person should not be deemed a criminal unless that person "crossed over that line knowing what he or she was doing." Seems like common sense, but apparently it isn't to some federal officials.

Former U.S. Attorney General Richard Thornburgh's testimony captured the essence of the problems that worry so many criminal-law experts. "Those of us concerned about this subject," he testified, "share a common goal - to have criminal statutes that punish actual criminal acts and [that] do not seek to criminalize conduct that is better dealt with by the seeking of regulatory and civil remedies." Only when the conduct is sufficiently wrongful and severe, Mr. Thornburgh said, does it warrant the "stigma, public condemnation and potential deprivation of liberty that go along with [the criminal] sanction."

The Norrises' nightmare began with the search in October 2003. It didn't end until Mr. Norris was released from federal supervision in December 2008. His wife testified, however, that even after he came home, the man she had married was still gone. He was by then 71 years old. Unsurprisingly, serving two years as a federal convict - in addition to the years it took to defend unsuccessfully against the charges - had taken a severe toll on him mentally, emotionally and physically.

These are repressive consequences for an elderly man who made mistakes in a small business. The feds should be ashamed, and Mr. Evertson is right that everyone else should be scared. Far too many federal laws are far too broad.

Mr. Scott and Mr. Gohmert have set the stage for more hearings on why this places far too many Americans at risk of unjust punishment. Members of both parties in Congress should follow their lead.

Brian W. Walsh is senior legal research fellow in the Center for Legal and Judicial Studies at the Heritage Foundation.

http://washingtontimes.com/news/2009/oct/05/criminalizing-everyone/

Total Collapse is Near - All Paper Money Will Fail

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ZeroHedge makes a strong argument for the physical possession of precious metals:

Gold and Systemic Crisis
Presently many otherwise intelligent and capable individuals in America do not seem to understand the origins of the present financial crisis -- and the multiple aspects (or shall we say 'tentacles'?) of its origination. These tentacles stretch far back in history: from the present demoralization and fragmentation of American society, to the demonetization of gold in 1971, stretching to the forces behind World War I and World War II, and ultimately, in terms of the 20th century, to the creation the Federal Reserve in 1913.

Our topic here is gold, and unfortunately we will have to save the analysis of totalitarianism's final forms for another paper. But what must be understood is that ultimately we are witnessing a 'failure of imagination' on the part of the general public -- a similar failure to what always permits radical evil to spread. This moral failure was characterized by both Hannah Arendt in Eichmann in Jerusalem , and Alexander Solzhenitsyn in The Gulag Archipelago. Because in our society people do not understand history nor human nature, and are saturated with lies and propaganda 24/7 via the CNBS broadcast media, they cannot imagine the moral consequences of their actions or inactions -- let alone the consequences of systemic failure. So to remedy this situation, let us take a quick glance at history, but try to avoid the pitfalls of the gold bug crowd. As someone mentioned, here at ZeroHedge, we are 'truth bugs'.

"If only it were all so simple! If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them. But the line dividing good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart?"
-Aleksandr Solzhenitsyn

History is a great teacher. One thing it shows us is that all systems of paper money fail. And they usually fail very quickly, not outlasting a man's lifetime. Gold and silver have been used as money for over 6000 years, including for extended periods of time, such as during the 1000 years of the Eastern Roman Empire. There are mathematical reasons why humans historically use precious metals as money, but we will not go into them here. Our present system is curious and almost astonishing that it has managed to last so long, given the lessons of history. Dr. Antal Fekete wrote in his latest paper that the mean time to failure of a non-gold backed system is approximately 18 years. Our present system has lasted over twice as long -- 38 years at last count, measured since the U.S.'s surreptitious default on it's foreign gold obligations under the Nixon administration in 1971 and currencies began to 'float'.

We have a fractional-reserve credit based system, where our money is mostly hallucinated computer pixels. The system is highly leveraged, but is almost entirely electronic. We now have multiple generations which have grown up without using money in its historic forms. For example, even the new Monopoly game uses electronic cards rather than paper money. Let me summarize these changes -- for simplicity sake, here we use gold to mean gold and/or silver. The global monetary system has changed three times: first, from gold to gold IOUs, then from gold IOUs to debt IOUs, and finally from debt IOUs to electronic-debt IOUs. But are these IOU's really 'unbacked', as claimed by the gold bugs? Actually , they *are* backed. They are backed as long as the IOUs can be exchanged for oil and gold at some realistic price metric.

According to Dr. Fekete, the reason our unmoored system has continued so long, past the usual 18 year lifespan of fiat currency experiments, is that we have invented a system of gold futures clearing and gold derivatives trading -- an innovation that did not exist in the past. In other words, we have created a gold 'price horizon' in electronic-debt IOUs, with the tendency to converge to the gold spot price. (Is the tail wagging the dog?) Additionally we have gold leasing, forward hedging, and all sorts of other trickery that has been going on for quite some time now. The electronic debt-IOU remains linked to gold via various Ponzi-like paper innovations.

The author FOFOA adds that additionally, what has characterized our system since 1971 is gold/oil flows between the various Petro States of the Middle East and the New York and London banking centers. These implicit deals allowed the United States to continue to purchase oil directly in dollars -- despite having defaulted on its international obligations. This 'innovation' somewhat resembles a US military-led protection racket. Remember that the second oil crisis of 1979-1980 coincided with price explosions in both gold and oil, yet catastrophe was avoided. This will not be the case the second time around.

There are also of course the lesser but nonetheless important details such as hedging which was done via large gold producers, the gold price suppression by the central banks, the geometric growth of OTC interest rate swaps, and so on. For those interested in these technical details, we highly recommend reading all the posts at FOFOA and the work of Rob Kirby. But here, the goal is a summary 'big picture' overview regarding the main points. What we can surmise though, is that our present system is a historical anomaly despite its technological innovations. And that should make us cautious of issuing blanket proclamations about the U.S. dollar's future stability over the next 8 weeks -- let alone the next 80 years. Have the pure dollar deflationistas skipped the Taleb? Sometimes we wonder.

The U.S. has a unique and deep relationship with Saudi Arabia, historically the world's largest oil producer. This relationship that goes back almost a century, to the foundation of Saudi Aramco by Rockefeller oil interests (specifically Standard Oil of California) in 1933. From 1933 to 1971 the payment system was somewhat stable, characterized by gold clearing on the international level at a fixed price of dollars for gold. This continued until the French under de Gaulle began draining the US Treasury of its gold, due to the expense of America's involvment in the Vietnam war. The French gold redemptions ultimately lead to the unilateral default of the United States on its gold obligations and the death of Bretton Woods I, which had been created post World War II with the dollar as gold-backed world reserve currency.

What has characterized our international system since 1971, or "Bretton Woods II" as it is sometimes called, is this: 1) the gold futures clearing system, and related paper markets and 2) the ability to swap oil for gold via these markets using exclusively US Dollars. This has given implicit support to the U.S. dollar far beyond what could be reasonably imagined considering the U.S. fiscal situation -- in the sense that the dollar is supported as long as 1) oil is for sale in dollars and 2) gold is for sale in dollars. This does not always have to be the case, and this is the core of the issue. If gold goes into permanent backwardation it will no longer be for sale in dollars on COMEX. Period. This will implicitly cut off oil flows to a trickle until payment is re-linked to gold via the IMF SDR or another mechanism.

To many of us, it is obvious the US equity markets will soon crash, but the real crisis will come with the failure of our currency -- a currency which is IMPLICITLY and historically linked with trading of both dollars for oil, and dollars for gold. Thus, these spot markets are the ones to watch. Some may be aware Russia recently surpassed Saudi Arabia as the world's number 1 oil producer -- and last week , number 2 oil producer Saudi Arabia has signed a $2bn weapons deal with Moscow. The final strategic alignment of Saudia Arabia and the rest of the Middle East remains up for debate, but we have certainly witnessed the tentative steps of the BRIC nations and their affiliated satellites to build their own international clearing system, based in Hong Kong and Moscow, rather than New York and London. Ultimately this will probably involve some form of the IMF SDR -- rebalanced with new currencies and possibly a gold component. Remember Medvedev at the G8?

Minus the political shifts towards a 'multipolar' world (prior to the onset of the final bloody form of the Hegelian dielectic), the weakest point in the present system is certainly the U.S. Dollar. Indeed there are many angles for speculative currency attack. And there are many weak points at which this may simply happen by accident. Assuming we see such an external speculative attack, what can we expect?

1) A currency failure will happen rapidly (likely overnight to 8-12weeks). The dollar will devalue against gold and oil. We are talking 50% decline or more.
2) Gold will go into backwardation (aka Spot Price above Near-Futures Price). This is the single most important indicator.
3) The Gold price will vault upwards -- and ultimately trading will halt in USD.
4) Oil will likely vault upwards as well, but this analysis is difficult. The gold:oil ratio is a useful indicator.

Where will capital flow during a time of a systemic crisis? Since 1971, capital has moved up this chart. Now it is reversing. Capital will flow into government bonds, treasury bills, physical cash, and ultimately its final home, gold.

There are all sorts of other things that may occur under conditions of currency failure, but you can find these sorts of analysis elsewhere. Use your imagination, as Hannah Arendt might suggest. Or google teotwawki and crack open a beer. The point here is that our present system is very fragile and cannot last much longer in its present form. It is far too unstable. There will be a collapse , and out of this a new system will emerge. The only guarantee of your purchasing power is in physical gold coins which you have in your possession. This is why the Zerohedge Dog, Scooby, keeps 20% or more of his assets in physical gold coins, and at least another 10-20% in physical cash with which to pay his bills. The world is changing, and to cope with the new reality requires both discernment and imagination.