Saturday, February 18, 2012

Is the American Military Preparing for an Economic Cataclysm?

My friend, Lincoln Eagle-publisher Mike Marnell, has mentioned that his friend's Army-enlisted twenty-something has been sent to a training program for civilian disruption control.  My wife came home yesterday after lunch with a different friend who told a similar story--one of her relatives in the military has had training related to handling of US civilian insurgencies.  This follows passage of the National Defense Authorization Act that has declared the entire world, including the United States, a battlefield.

What is behind this domestic insurgency training?  Wikipedia says the following about the Reconstruction-era Posse Comitatus Act:

The Posse Comitatus Act is the United States federal law (18 U.S.C. § 1385) that was passed on June 18, 1878, after the end of Reconstruction. Its intent (in concert with the Insurrection Act of 1807) was to limit the powers of local governments and law enforcement agencies in using federal military personnel to enforce the laws of the land. Contrary to popular belief, the Act does not prohibit members of the Army from exercising state law enforcement, police, or peace officer powers that maintain "law and order"; it simply requires that any orders to do so must originate with the United States Constitution or Act of Congress.

The NDAA provided authorization of military violence at the local level.  That the military is actually training personnel (according to two independent eye-witness accounts) in domestic civilian control seems to confirm that this may occur.

What might concern the Obama administration to authorize such training?  As James Carville once said, "It's the economy, stupid." The Federal Reserve Bank has created a great deal of fresh reserves in the past four years, tripling the money supply.  Printing more would bring us to 1922 Germany.  There are roughly 10 trillion dollars in circulation worldwide (and under 3 trillion in the US).  In addition, central banks around the world hold trillions in treasury bonds.  Recently, researchers associated with the Jerome Levy Economic Institute found that the Fed has swapped $29 trillion in treasury bonds for  badly performing assets.

Let us say that there is a run on dollar-denominated assets. This might occur because of fear of further dollar devaluation (the dollar has already fallen precipitously over the past 40 years).  The result would be a rapidly diminishing purchasing power of the dollar, that is, inflation. A sharp increase in inflation would compel the Federal Reserve Bank to reduce the reserves it has created. This would cause rising interest rates. Rising rates would cause stock and real estate market collapses.  In turn, consumer spending would fall because of reduced wealth. The result might be civil instability like Greece's.

The stock market has had a nice run over the past six months, but it will not continue forever.  I just heard an interesting talk by a newsletter writer named Michael Lombardi entitled "Critical Warning Number 6."  Lombardi outlines a reasonable scenario.  While I don't know if there will be a market decline this year, as he claims, there is no reason to think that there won't a sharp market decline in the coming years as the current negative interest rate regime reverses.  Just as there was stagflation in the late 1970s, so we can expect a period of stagflation when the massive monetary expansion translates into inflation. The only cure for stagflation is depression.

These are all government-induced problems. Might the recent domestic civilian counter-insurgency training be related to this scenario?  Recall the Oath Keepers, the organization of military and police personnel that advocates commitment to the Constitution over the federal government's illegitimate tyranny.  The Oath Keepers hold that if given an order than contradicts the Constitution, they will uphold the Constitution and disobey the order.  Are there enough Oath Keepers to say no to a tyrannical federal government?