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Of Central Bankers, Monkeys, and John Law

December 9, 2015

Back in April, my good friend Charles Gave, Chairman of Gavekal, penned a short but brilliant piece in which he likened central bankers to a bunch of monkeys in a cage. In the unforgettable “Of Central Bankers, Monkeys and John Law,” he proceeded to run down the parallels between France’s 18th-century “Mississippi Bubble” and the situation in the Eurozone today.

Now Charles has given us a follow-up, titled “The Apex of Market Stupidity,” in which he regales us with a sardonic but spot-on recap of the sundry ways in which market participants and analysts have been witless over the years. And just last week, he says, we scrambled, clawed, and algoed our way to the very summit of market stupidity, when European markets were routed by the failure of ECB Chairman Mario Draghi to be sufficiently dovish.

Thus, Charles concludes, we now find ourselves in a world where “value in the financial markets is no longer a function of the discounted cash flow of future income, but instead is determined by the amount of money the central bank is printing, and especially by how much it intends to print in the coming months.”

This distortion of the basic tenets of investing is leaving otherwise rational market participants feeling like they are living in an alternate universe. Of course, reality will eventually reassert itself; but as Keynes famously said, “The markets can stay irrational longer than you can stay solvent.”

For today’s Outside the Box I bring you both of these pieces, which not only make for fun reading, as Charles is such a great writer, but will also help you understand a bit more about the psychology of the marketplace.

I want to offer a comment on Donald Trump’s latest contretemps – that we should not allow Muslims into this country for a period of time. That may be simply the most boneheaded, ill-conceived idea I have heard from a politician in my life, which is saying a lot, given Bernie Sanders’ recent suggestions for cutting carbon emissions by 80% by 2050, which is merely impossible without creating a multi-decade depression in the United States.

Aside from the Constitutional, ethical, and practical problems, closing the border to arbitrary groups, even temporarily, would cause enormous economic damage. Muslim-majority countries would certainly retaliate by barring Americans and/or Christians. The result could be a trade war at least as bad as that brought on by the old Smoot-Hawley tariffs, with people as the weapons and no resulting benefit to national security.

My associate Patrick Watson offered a very succinct thought on Twitter that is in the process of going viral (he is @PatrickW). Here’s a cut-and-paste of it:

Trump simply offers to ISIS and other Islamic terrorists a further rationale for their hatred of the West: “See, it’s just like we said. The West doesn’t just want to go after us; it wants to destroy all of Islam. They hate us, which is why we must fight back. Everything we do in our jihad is justified because of their actions.”

Whether or not their point of view makes sense to us is beside the point. They will take Trump’s words and talk about how well he is doing in the polls and say this is how most Americans feel. Forget the fact that this may be the most unconstitutional idea I have ever heard from a major candidate (has he read the First Amendment?), his proposal is simply offensive on so many levels. To characterize an entire major world religion as comprising nothing but extremists is just not right.

The United States was first settled by religious refugees, and more than a few of your and my ancestors came as refugees from religious persecution, poverty, or oppression by brutal governments. They were seeking freedom and opportunity. We are a land of immigrants and we have an immigration process, and we have never had a religious requirement as part of that process. That would be unconstitutional and decidedly un-American. And yes, I get that many Muslim states are not taking in refugees, and all the rest. That isn’t any excuse for America to be anything less than the beacon on the hill that we are supposed to be.

Okay, let me just say it right here (even though this is going to anger more than a few of you): Donald Trump is the only man in America who could get me to vote for Hillary Clinton. You have to understand that my distaste for the policies that Mrs. Clinton would institute is monumental. I can’t tell you how bad a continuation of the current political climate would be for this country. But to have a loose cannon like Donald Trump in the White House – a man who could say and do just about anything at any time, with no control of his ego – would be too much.

Think about it for a moment. He is president, and basically, no one gets to tell the president no if he really decides he’s right. Sometimes that has worked well for the country, and at other times it has been a disaster. Donald Trump looks like a walking, talking, shoot-from-the-mouth-with-my-latest-greatest-idea disaster to me.

Trump continually spouts so-called solutions, and when asked how he would accomplish them, he just says, in essence, “I’m Donald Trump. I’m a world-class negotiator. I can just go to the bargaining table and get what I want.” When he says that ISIS would cease to exist under his administration but then offers no realistic plan as to how he would accomplish that, he reveals himself for the egotistical fool that he is. He really has no notion of history or military context or the impact of geopolitical decisions.

And now that I have offended a substantial number of my readers and probably even lost a few, I had better hit the send button before I get into even deeper trouble. Have a great week, and take comfort in the fact that 80% of Republicans haven’t decided who they will vote for, so that means Donald Trump is getting 25% of the 20% who have a favorite. I have to admit that I’m firmly undecided but would be happy with any one of five or six of them. They are probably not the same five or six you would choose, but I bet there would be some overlap.

Your trying to figure out what’s driving both politics and markets analyst,

John Mauldin, Editor
Outside the Box

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Of Central Bankers, Monkeys, and John Law

By Charles Gave
April 17, 2015

A revealing experiment involved monkeys being placed in a cage with a pile of nuts stashed on an upper level. Their efforts to snaffle the food caused them to be doused in water, blasted with a siren and startled by an electric shock. After a number of attempts the monkeys gave up. Later, a second group of monkeys were introduced—the new entrants made a beeline for the goodies, but were quickly beaten back by the chastened first group of monkeys. Finally, this first group were removed from the cage and replaced by a fresh contingent. The new monkeys immediately made a dash for the nuts, but were beaten back by the second group; i.e., those who had never experienced the cold water, siren or shocks.

It does not take a wild imagination to see a parallel between our monkeys and central bankers. For generations central bankers were cowed by their inflation-scarred colleagues and accepted that the top of the cage was off limits. But then a rebel monkey, erh central banker, emerged in the shape of Alan Greenspan. As the gorilla in the pack he persuaded the rest that the fruits at the top of the cage may not be forbidden. The result of this “bravery” in economic policymaking has been two huge financial crises.

The funny thing is that the general public remains grateful to the central bankers since their “new-fangled” actions to “save” the world economy appear to be working. For the most part our monetary guardians have escaped responsibility for the crashes, with popular ire focusing instead on “nasty” commercial bankers. The concern must be that few experiments (certainly in economics) are “new”, except for those which ignore history. And, of course, to quote philosopher George Santayana “Those who cannot remember the past are condemned to repeat it”.

History has thrown up multiple attempts to create wealth by printing money from the Song Dynasty in China to renaissance era Italian bankers, through revolutionaries in France and their Assignat notes, to the more recent case of Zimbabwe. However, one of the most revealing cases took place in the early 18th century when France was ruled by the boy king Louis XV and power was exercised by his uncle, the Regent.

Heroes and villains

This story has two protagonists: the first being a classic villain in the shape of John Law, a Scottish professional gambler, who can been thought of as a proto Mario Draghi. Our hero was Richard Cantillon, an Irishman, whose actions shared similarities with Georges Soros, the investment manager who in 1992 forced the pound to leave the European exchange rate mechanism. Back in the early 18th century France was almost bankrupt because of the wars that accompanied the end of Louis XIV’s reign. As a result, the French “rente”, the equivalent of today’s OAT, was selling at a huge discount to its face value.

Enter John Law who presented the Regent with a simple solution to the kingdom’s straitened financial situation: the government would grant a client company “La Compagnie des Indes Orientales” (CIO) a monopoly to conduct international trade between France and French colonies in the new world. Later CIO would become Banque Royale as its notes were to be guaranteed by the crown. Law would arrange for shares in CIO to be sold to the public, allowing payment to be made using the discounted French rente at full value, rather than its discounted market price. The price of the shares, and also that of the rente, went through the roof, which we have come to recognize as the usual response to a quantitative easing program. Since the run lasted quite a while, it led to a remarkable boom, centered on the Palais Royal in Paris and the luxury industries.

At this point, Cantillon joins the story. He was an astute financial operator who, sensing an opportunity, decided to move to Paris. He quickly had three key insights:

  • No new wealth was being created in France; rather there was just a massive increase in the monetary value ascribed to older assets. In fact France was getting less, rather than more competitive. He went short the French currency and long the British pound, a trade which eventually made him a ton of money.
     
  • The main beneficiaries of the artificial wealth being created were those cronies closest to the Banque Royale which had been granted the trade monopoly. This phenomenon was later called the “Cantillon effect”.
     
  • The system could work only as long as nobody asked to be repaid in real money, at that time gold.

When Cantillon started to see great French aristocrats (those close to the Banque Royal such as Prince de Conti) selling their shares against gold he opened up a large short position, and made out like an (Irish) bandit. When the system imploded, he was sued for both shorting the French currency and also being short the shares of the colonial monopolist. He won, as at that time the courts in France were genuinely independent.

Fortunately, he committed his analysis to paper in the book “Traite sur la nature du commerce” which is a must-read for anyone interested in financial speculation. Schumpeter spoke highly of Cantillon, who was probably the first economist to clearly distinguish wealth from money. He recognized the distinction between asset prices rising due to an economy becoming more productive rather than as a result of a massive expansion of the supply of credit. In the second case, the value of money is going down versus the price of assets, which is a form of inflation.

This audacious attempt to monetize asset prices by printing money resulted in ruin for the French middle class, which had sold its weak but solvent French rente against worthless shares. What followed was a collapse in the credit sphere followed by a great deflation. The lesson is that a huge inflation in asset prices is seldom followed by inflation in retail prices; rather once asset prices start deflating what usually follows is a deflation in retail prices (see “The Debt Deflation Theory Of Great Depressions” by Irving Fisher).

The stability of the system was predicated on the guarantee that French government bonds could, if asked, be repaid in gold, and the same for the shares in CIO. At the peak of the “Mississippi Bubble” the Banque Royale had 4mn francs in its vault and outstanding notes totaling more than 100mn francs. So when the consummate insider, Prince de Conti, started to convert his positions for gold, the system began to collapse. Within a year the CIO share price had fallen by more than 80%. From start to finish, the episode lasted a little more than three years.

Why I am recounting this old story? Because we are at it again. Simply replace the French rente with current Italian or Spanish Bonds; the Regent with Francois Hollande; John Law with Mario Draghi and it is clear that very little has changed. My hope is that most of our clients will end up following Cantillon rather than face the predicament of France’s ruined middle class at such time that latter day Prince de Contis cash out.

In the current system, gold is being replaced by the willingness of Germans to keep accumulating financial assets issued by the rest of Europe, which will never be repaid. The ratio that exorcised Cantillon was the value of the gold stock / the value of engagements; the modern equivalent may be the net external balance of Germany vs the rest of Europe with Angela Merkel or the Bundestag playing the Prince de Conti.

And what has Mario Draghi, in the role of John Law, done to prolong the agony? He has manipulated the cost of money by increasing the quantity of money, or, at least, promised to do so in the hope that speculators front run the ECB. They have, of course, duly obliged. And what happened during the Mississipi Bubble is now unfolding in our time. The increase in the quantity of money in itself cannot lead to an increase in wealth. For confirmation, consider the case of Italy as shown in the chart below.

The blue line is the ratio between the Italian and the German industrial production indices. From 1960 to 2000, Italian industrial output grew faster than its German equivalent by 48%. However, since 2002, the Italian measure has declined 40% versus that in Germany. As a result, the Italian stock market, which outperformed the German market between 1970 and 2002 by a robust 250% (in common currency terms) has, since 2002, underperformed by 60% (red line, right scale). I have few doubts that a modern day Cantillon would have been short the Italian stock market versus the German one at least since 2002.

Indeed, it is clear that wealth creation in Italy has effectively stopped, as shown by the fact that since 2000 the economy has spent three quarters of its time in recession. Indeed, measured in absolute terms, industrial production today is 25% below where it was in 2000.

Of course, the only sensible approach for a heavily indebted country which has seen growth disappear would be to devalue its currency. Since that option was off the table due to the strictures of the euro system, the bond markets, from 2008 onwards started to play the default game. By 2012, spreads had opened to such an extent that it should have been obvious that the euro was doomed (see bottom pane of the chart above).

At this point “Derivative Draghi” did his worst and promised to do “whatever it takes”. The bond markets understood this as a promise that the ECB would buy Italian, Spanish and Portuguese government bonds. As a result, yields promptly collapsed. But, and this is a big but, the Italian economy kept shrinking and the German economy kept expanding. If the policy had succeeded, one would have expected the expression of the relative return-on-investment in the two economies (namely the ratio between the two stock markets indices) to change direction.

Nothing of the sort has happened. In fact, the Italian government can now borrow at 1.5% or so, while the average growth rate of the Italian economy has been -1% for the last two years. Italy was and remains solidly in a debt trap; debt as a share of GDP will keep rising as long as the 10-year yield is above -1%. The problem is that negative rates destroy a country’s savings industry and thus its long term growth rate. The same is true for France or Spain, not so much because interest rates are too high but because both countries have massive primary deficits.

Conclusion

So what should the savvy investor do? Remember Richard Cantillon and do not trust John Law. Stay short the Italian stock market versus the German one (equivalent to CIO stock in 1717). Remain short the German bond market versus the US (equivalent to being short the French currency vs. the British one in 1717).

The Apex Of Market Stupidity

By Charles Gave
December 8, 2015

In some 40 years of watching financial markets, my dominant emotion has been a mixture of curiosity, amusement and despair. It seems the stock market must have been invented to make the maximum number of people miserable for the greatest possible amount of time. The bond market, meanwhile, has just one goal in life: to make economists’ forecasts for interest rates look even more silly than their other predictions.

Over the years I have often observed how most market participants are able to concentrate on only one set of information at a time. For example, in the 1970s, the only data release that mattered was the consumer price index. In the days leading up to the CPI’s publication, everybody dropped all other considerations to speculate feverishly about what the number might be. And then following the release, they would spend the next week or two commenting sagely on what the number actually had been. Eventually Milton Friedman convinced the Federal Reserve (and from there the markets) that there was some kind of relationship between the money supply and the CPI. So everyone stopped looking at the CPI, and instead started to focus on the publication every Thursday evening of M1 (or was it M2?). Inevitably each week would see an immediate rash of commentary on these arcane matters from the leading specialists at the time, Dr. Doom and Dr. Gloom.

This gave way to a period in which the US dollar went through the roof on the covering of short positions established during the era of the minister of silly walks in the 1970s. For a few years, the only thing that mattered was the spread between the three-month T-bill yield and the three-month rate on dollar deposits in London (an indication of the shortage of dollars outside the US). The beauty of this one was that the scribblers on Wall Street could comment on it twice a day or more, which of course had no discernible impact on reality, except for the destruction of the forests needed to print so much waffle.

That era came to an end in 1985 with the Plaza Accord. At that point the Fed, under the wise guidance of Paul Volcker—my favorite central banker of all time, probably because he was the only one without a PhD in economics, which may well explain his success—decided it was going to follow a type of Wicksellian rule-based policy under which short rates were kept closely in line with the rate of GDP growth. Of course, this meant the Fed paid little attention to the vagaries of the financial markets, so there was very little to comment on. The result of policymakers’ lack of interest in financial markets was that from 1985 to 2000 the US enjoyed a long period of rising economic growth, low inflation, low unemployment and high productivity; a period dubbed “the great moderation”. The trouble was that no one was able to make any money trading on inside information provided by the politicians and central bankers. As an advertisement for Smith Barney put it at the time: “We are making money the old way. We earn it.”

Naturally, that wouldn’t do at all. After nearly 20 years of economic success, the US budget was in surplus, the pension funds were over-funded, and the “consultants” in Washington were on the verge of bankruptcy, having nothing to say. Clearly something had to be done, and it was: policy shifted to accommodate Wall Street, with forward guidance, negative real rates, the privatization of money, and a lack of regulation. This allowed Wall Street to make money, but it created nightmares elsewhere through the ever-successful euthanasia of the dreadful rentier.

Still, the shift to an economy driven by the decisions of central bankers meant the market commentators were back in business in a big way. For the last 12 years, the only thing that has mattered has been to know whether or not the chairman of the Federal Reserve has had a good night’s sleep. Similarly in Europe, the dysfunctional euro, created by a bunch of incompetent politicians and Eurocrats, bred drama after drama. Since nobody wanted to admit it was a failure, the most important man in Europe became the president of the European Central Bank.  

In the last week, we have reached what is surely the apex of this stupidity. A bunch of algo traders programmed their computers expecting “Derivative Draghi” to be extremely dovish, as any proper Italian central banker should be. I am not sure I understand why, but some traders obviously decided that he had not been dovish enough. European stock markets plunged by -4%, while the euro went up by roughly the same amount in the space of a few minutes. What that means is simple: value in the financial markets is no longer a function of the discounted cash flow of future income, but instead is determined by the amount of money the central bank is printing, and especially by how much it intends to print in the coming months. So we are in a world where I can postulate the following economic and financial law: variations in the value of assets are a function of the expected changes in the quantity of money printed by the central bank. To put it in a format that today’s economists understand:

Δ (VA) = x * Δ (M)

where VA is the value of assets and M is the monetary increase.

What we are seeing is in fact in one of the stupidest possible applications of the Cantillon effect, whereby those who are closest to the money-printing, i.e. the financial markets, are the biggest beneficiaries of that printing. This is exactly what happened in 1720 in France during the Mississippi Bubble inflated by John Law. The end results were not pretty (see “Of Central Bankers, Monkeys And John Law” [above]).

What I find most hilarious is that some serious commentators have been pontificating at considerable length about what the market’s participants think. These days, some 70% of market orders are generated by computers, and many of the rest by indexers. And computers do not think. They simply calculate at light speed, which allows them to react to short term movements in market prices as they were programmed to do. And since they are all programmed the same way, the result is some big short term market moves. In essence, these computers act as machines that allow market participants to stop thinking. As a result, I cannot remember a time when less thinking has ever been done in the financial markets, which is why I find today’s financial markets infinitely boring.

We are swimming in an ocean of ignorance, just like France in 1720. It seems all the painful economics lessons learned over the last 300 years have been forgotten. I suppose that means we will just have to wait for another Adam Smith to appear. La vie est un éternel recommencement...

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Bob Holliman

Dec. 22, 2015, 12:18 p.m.

I never comment on things like this, but after weeks of thinking, I feel convicted to speak. Although I’ve never been a political creature until the last few years, I never thought I’d agree with a New Yorker, let alone Donald Trump. To my surprise, I find him quite refreshing and although he can be abrasive at times and I would say things differently, I can’t disagree with much he says.
What is most revealing are the comments of the people I come in contact with outside of the metropolitan/political areas, the people who actually work every day physically creating America’s wealth. They love him! Shades of Ronald Regan! Who would ever think we’d elect an actor as president?
Regarding Mr. Trump’s comment on the temporary moratorium on Muslim immigration, I’d be willing to bet the vast majority of those who have risked life or limb in the defense of our country would support his position. To allow an enemy, who has no regard for your life or the life of your loved ones to come into your home (country), and execute them is absolutely unfathomable. What we should be discussing is how this shifted from the realm of “law enforcement (against acts of violence)” and into the “political arena.” There is a world of difference between someone coming into our country to earn a better standard of living for their family or themselves and someone who has the sole purpose of inflicting harm on innocent people. Until we can distinguish, we probably should pause and rethink our policies and procedures. Unless I’m badly mistaken, that is exactly what Mr. Trump said.

James McNulty

Dec. 14, 2015, 7:39 p.m.

John, I am not a fan of Trump but the USA needs to find a way(and quickly) to stop the terrorizing and killing our citizens. Our present POTUS is not going to do it. These acts of violence have gone on way to long.

As regard to the First Amendment, if shira law dictates that non-Muslims should be converted or killed then, shira law does not belong in the USA. It seems that you are concerned more about the global economic impact than our citizens living constantly in fear of being murdered.
 
  James McNulty

Morris Bryant

Dec. 13, 2015, 7:06 p.m.

John, you realize you said something you just didn’t need to?  Deciding you would vote for Hillary over Trump?  OK, that’s like the scene in Batman where the judge says to the Commissioner in passing sentence “Death or Exile?”  When exile is chosen, it then becomes “Death by exile!”

Ernest M Kraus

Dec. 11, 2015, 7:39 p.m.

JM-
So you would vote for Hillary; sounds like another country club republican. Perhaps you will pay more in federal taxes; perhaps things in Texas will slump enough that the state will have an income tax. Other then that, you and the rest of the economists will still have your overpaid symposiums at which to speak and pontificate like any other Monday morning quarterback.
What Trump should have said is bar entry to anyone from Iraq, Iran, Syria, Egypt, Saudi Arabia, and any other country that is supporting and exporting Muslim terrorism. This would have, though I doubt he wants to be associated with Jimmy Carter. If you will recall, Carter banned all Iranians after the take over of the American embassy and the long ordeal our citizens went thru as captives. He also went after students on student visas and others already here. The 2nd time I agreed with Carter; the first being when he said ” life is not fair.”

cmooibroek@gmail.com

Dec. 11, 2015, 3:59 p.m.

What nobody seems to be willing to recognize is that Islam is not merely a religion. It is a system of government with its own (dictatorial) laws and established theology. Therefore, it is totally incompatible with our American constitutional freedoms. Of course it is not a problem in the US so long as the Muslims are a small minority. But you only have to look at some of the European countries to see what happens when the percentage of Muslims becomes substantially larger. There are sections in some of these countries where Sharia law applies, not the laws of the land. Now, someone might argue that most Muslims are moderate so they are no threat to our system of government. But think about this: as their communities grow and some radical elements begin to dominate them, do you think the moderates will stand up against the radicals? They will not, they’ll submit. Just remember what happened to the German population when the Nazis took over. For your information I’m a US citizen who immigrated from the Netherlands.

bridgetl13@gmail.com

Dec. 11, 2015, 1:09 a.m.

Wow, what ferocious debate the Trump/Muslim issue brings.  Does anyone think about WHY we have ISIS?  Why they hate us with all their might, enough to die?  Maybe it is because we go over and tear up their countries and tell them what to do.  ISIS is paying us back for terrorizing the Middle East.  You all would do the same if someone tried to bully and bomb the US.  It is pretty easy to see why one “radicalizes” once you think about it. The question is, is more war and belligerence the answer? Plus we have plenty of violence from our own people, Dylan Roof, Mr. Dear, etc., etc., etc., why so much concern about Muslims?

John B. Robb

Dec. 10, 2015, 1:15 p.m.

I’m afraid, Mr. Mauldin, you need to go back to school regarding US history and the Constitution.

The First Amendment is not a guarantee of religious tolerance.  It merely prohibits the federal government from establishing a national religion that all US citizens are obliged to subscribe to.  The federal Constitution is a document by which the people of the various states delegated certain of their sovereign powers to a central government for certain explicit purposes, the most important of which was the national DEFENSE (no authorization there for foreign adventurism and neo-imperialism; but that is another story).

The 9th and 10th Amendments make explicit the principle that was well understood by all the Founding Fathers: that the powers not explicitly delegated to the federal government by the Constitution were reserved to the states, and to the sovereign free people who created the states.  It was left up to the states to decide what to do about religion, and every state followed its own policies.  The two most important states, Massachusetts and Virginia, went there separate ways on this issue, thanks largey to Thomas Jefferson.  The Congregational religion remained de facto established in Massachusetts until 1833, since the state laws enacted in 1780 required every citizen to attend a church, and in practice that usually meant the only church in town, which was the Congregational Church, and the citizens were taxed until 1833 to support that chruch.  In Virginia, the Anglican Church, which had been formally established throughout the colonial period was disestablished only because Thomas Jefferson lobbied for it and pushed through the appropriate legislation. Disestablishing the Church in Virginia was far from a forgone conclusion: in fact it was one of the three accomplishments that Jefferson wished to be memorialized for on his gravestone, the others being authorship of the Declaration, and the design and establishment of the University of Virginia.

During the colonial period, the only colony whose constitution anticipated the First Amendment was Rhode Island, and that was thanks to the radical Roger Williams, whose concept of “soul liberty” almost uniquely recognized that a man couldn’t be considered free unless he was free not to subscribe to any particular religion, or for that matter to any religion at all.  The Puritans and Pilgrims of Massachusetts persecuted all religious dissenters.  Quakers were lucky if they were only whipped and deprived of their property before being banished from the colony.  In Virginia, the penalty for failing to attend church or pay its tithes was death.

All modern state constitutions now follow the federal principle that prohibits the state from establishing any particular religion or favoring or disfavoring it by law.  And for that reason, most of them are silent with respect to religion in general.  Which is as it should be.  And all these constitutions also at least implicitly recognize the underlying common law rights that we are all born with: some, like Virginia, have explicit bills of rights (the federal Bill of Rights is modeled largely on George Mason’s contribution to the Virginia Constitution), but none of these are intended to be prescriptive or exhaustive catalogs of rights; they are merely illustrative of the rights that inhere in each sovereign individual as his birthright, prior to and superceding any sort of citizenship.

Perhaps the most fundamental of these rights is the one recognized by the 4th Amendment: “The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures”, i.e. even against the delegated police power of the government, if that power is exercised unreasonably (which is to be determined by a jury).  Our governments, in fact, were erected principally to safeguard such rights, and when our rights to be secure in our persons and property are threatened, it is the duty as well as the right of those governments to protect us from such threats, and if the perpetrators of such threats are motivated by religious beliefs it is the duty of our government to identify that religious nexus and take whatevern action is necessary to defuse that threat - even against fellow citizens, let alone aliens.

The daily news feeds instruct us that the Muslim religion, whose sacred texts have always advocated militant conquest and forcible conversion of unbelievers, is increasingly becoming a hotbed of radicalism, hate, and outright terrorism, and the fact that this is a religious uprising mandates that religion become the identifying principle for screening potential criminals and violaters of the rights of American citizens.  Any sort of religion or religious true belief that fails to respect the rights of others is incompatible with our American way of life and can no more tolerated than any other sort of criminal activity.  We do not excuse a criminal from liability for his acts because he claims they were justified by his religious or political beliefs, and if many criminals or potential criminals (makers of threats) happen to claim the same justification that merely requires our government to profile and target the militant religious group to which he belongs: anything less would a violation of the constitutional rights of law abiding American citizens.

Fortunately, we are not yet at the point where our society and its government needs to think of repeating their shameful action of 1942 and beyond of rounding up and interring all Muslims, though there is more justification for doing so today than there was then.  The Japanese-Americans of that day were by and large exemplary and loyal citizens, and no fifth columnist behavior or overt treason was ever uncovered to justify their incarceration.

The same cannot be said for most of the major American Muslim communities, where evidently religious fanatiscism, hate, and intolerance are rife, and no doubt Sharia law is covertly practiced by many.  When the leaders and imams of these communites come forward and take the lead in denouncing the militant prescriptions of their religious texts, and in extirpating these cancerous and anti-American thought patterns, then and only then can we afford not to look suspiciously at all Muslims in this country, and to discourage or prohibit others from coming here.

I will leave my last word to Teddy Roosevelt in 1907:


“In the first place, we should insist that if the immigrant who comes here in good faith becomes an American and assimilates himself to us, he shall be treated on an exact equality with everyone else, for it is an outrage to discriminate against any such man because of creed, or birthplace, or origin. But this is predicated upon the person’s becoming in every facet an American, and nothing but an American ... There can be no divided allegiance here. Any man who says he is an American, but something else also, isn’t an American at all. We have room for but one flag, the American flag ... We have room for but one language here, and that is the English language ... and we have room for but one sole loyalty and that is a loyalty to the American people.”

Curt Sanders

Dec. 10, 2015, 10:49 a.m.

John keep up your exceptional work. Issues like Syrian immigration are volital and difficult to examine but it is vitally important we do so. Happy Holidays!

Curt Sanders

Dec. 10, 2015, 10:41 a.m.

Perhaps the supersedeing issue regarding immigration overall is really where is the money coming from.? America is the shinning city on the hill but that shinning city is maxed out and up to its eyeballs in debt. Time for a reality check. Yes it’s wonderful to remember the Statue of Liberty and what it means. Yet the Statue and all that it means requires a certain amount of money to maintain. Government revenues are barely paying the interest on this colossal sovereign debt of ours. The paper games that have been so clearly defined here by Gave today as well John and many others cannot continue indefinitely. It is time to face reality before it is forced upon us. We have to get our financial house in order. My heart goes out to these desperate Syrian refuges but until vetting gets substantially better and the U.S. Gets its fiscal and monetary act together. We must suspend it…

jhduss@aol.com

Dec. 10, 2015, 8:11 a.m.

I shall never again seriously consider any opinion you offer.  I would not vote for Trump either, but for you to suggest that what He says is giving the Muslim terrorists new reason to hate and kill us is incomprehensible to me.  The terrorists were committing atrocities in the name of their “religion” long before Trump came on the scene.  And by the way if those countries begin to ban Americans from entry into their country, they may just be saving their lives.  If you think the solution is to vote for Hillary Clinton, please feel free.  We can then see how 4 more years of Obama work out for us.

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