Saturday, March 28, 2009

O's Laser I's

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President Obama has devoted a lot of time to foreign policy this past week, focusing like a laser beam on three countries that begin with the letter “I.”  He gave star billing in Washington to the prime minister of Ireland (who was treated a lot better than British Prime Minister Gordon Brown), during the course of which each read the other’s prepared text, perhaps a new departure in international diplomacy.  He also sent a letter to Italian President Giorgio Napolitano (a member of the now defunct Communist Party), expressing confidence that the United States and Italy would work together “to overcome the current global political and economic hardships and build a safer world.”  The only problem with the letter was that the Italian president does not make policy; that power resides with the prime minister and his cabinet. 
Then the president turned his charm on the Iranian mullahs,
And then there was this:
“This holiday is both an ancient ritual and a moment of renewal, and I hope that you enjoy this special time of year with friends and family.”

If he was trying to make nice to the mullahs, he should have omitted the “ancient ritual” reference, since that ritual–featuring bonfires (symbols from the ancient Zoroastrian faith) through which people leap and around which they dance–is banned in Iran, and anyone who engages in the ancient ritual is subject to beatings, arrest, and torture. So, rather like the unfortunate “overcharge” button that Secretary of State Clinton gave the Russian foreign minister, the hoped-for change in our “relationship” with Iran got off to an unfortunate start.
Among much more. RTWT.

Tea Time: The Counter Gramsci Revolution Begins

Dr. Helen: "It is a society steadily transitioning toward statism."

Dr. Helen reviews Levin's new book. The good news is that the people we need to remove from leadership of our institutions and their followers are largely incompetent boobs. Come on, if Ogabe is the best they have then that's all you need to know. The bad news is that they're running the institutions and we were insane enough to let them.

So says Mark Levin about American government in his new book, Liberty and Tyranny: A Conservative Manifesto. I looked over the book a while back after Glenn received an advanced copy but didn't read it thoroughly due to time constraints. It looked pretty good then but when I saw it was up to #1 on Amazon, I decided to give it a second read. I'm glad I did. For his "Conservative Manifesto" is a wake-up call to all of us who care about individual freedom and resisting the transition to statism.

Mr. Levin gives some thoughts on what conservatives need to be doing. He describes why many conservatives don't become engaged in public matters but explains why it is important to change:
The Conservative must become more engaged in public matters. It is in his nature to live and let live, to attend to his family, to volunteer time with his church and synagogue, and to quietly assist a friend, a neighbor, or even a stranger. These are certainly admirable qualities that contribute to the overall health of the community. But it is no longer enough. The Statist's counterrevolution has turned the instrumentalities of public affairs and public governance against the civil society. They can no longer be left to the devices of the Statist, which is largely the case today.

This will require a new generation of conservative activists, larger in number, shrewder, and more articulate than before, who seek to blunt the Statist's counterrevolution--not imitate it--and gradually and steadily reverse course. More conservatives than before will need to seek elective and appointed office, fill the ranks of administrative state, hold teaching positions in public schools and universities, and find positions in Hollywood and the media where they make a difference in infinite ways. The Statist does not have a birthright ownership to these institutions. The Conservative must fight for them, mold them, and where appropriate, eliminate them where they are destructive to the preservation and improvement of civil society.
We are already seeing people who have never been politically active taking part in tea parties across the nation.

(Fascist) Progressive Corporatism And The Resistance

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Remember, when a private company wants to cover up billions in losses and the responsibility for them, that's a major scandal and proof of the evils of capitalism. But when a government regulator does the same thing, hat's just how people are, these things happen, whaddyagonnado...

Read the whole thing. You can see how the U.S is going to function under what I call Progressive Corporatism.

Another post you should read is one that was written last month by Pete Boettke.

Perhaps a more timely book to read than even Hayek would be Mises's Omnipotent Government and in particular the sections on the German economic model of national socialist policy. Our current policy path seems more along those lines, [rather than] outright expropriation of private property by the government.
At this point, I think that the relevant political divide is not between the two parties. It is between the forces of Progressive Corporatism and the (much smaller) forces of The Resistance.

OShocka (Part 87,835)

What a shocker. Dear Leader's town hall participants were ALL campaign supporters or donors.
President Barack Obama listens to a question from teacher Bonnee Breese, right, of Philadelphia, as he takes part in an Internet town hall meeting, Thursday, March 26, 2009, in the East Room of the White House in Washington. (AP Photo/Ron Edmonds)

The AP forgot to mention that Bonnee is a member of the 11,626-person Pennsylvania for Obama page on Facebook. She was invited to the meeting through the American Federation of Teachers union.

Schiff: The Big Picture Of Inflation And Practical Advice

What Bush Did With The War...

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That is, why it isn’t the solution it is touted to be. Jeffrey Sachs of the Financial Times:

The Geithner-Summers plan, officially called the public/private investment programme, is a thinly veiled attempt to transfer up to hundreds of billions of dollars of US taxpayer funds to the commercial banks, by buying toxic assets from the banks at far above their market value. It is dressed up as a market transaction but that is a fig-leaf, since the government will put in 90 per cent or more of the funds and the “price discovery” process is not genuine.

So to avoid the overwhelming popular objection to perpetual bailouts and expenditures, the Obama administration will do this all “off budget” and with no hearings, Congressional debates, or votes. Not very transparent and quite imperious, when you get right down to it.

Yeah, not very “hopey changey” is it?

... Obama does with the bailouts. To be fair, Bush was already doing the bailouts largely off the Federal balance sheet. But you have rocks for brains if you think Ogabe is cleaning things up.

Greenspan: Guilty

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The Z.1 details, on the one hand, the unprecedented underlying U.S. Credit growth behind our massive Current Account Deficits.  ROW data, in particular, diagnoses the flooding of dollar balances to the rest of the world – and the “recycling” of these flows back to dollar instruments.  This unmatched flow of finance devalued our currency, and in the process inflated commodities, foreign debt, equity and assets markets, and global Credit systems more generally.  In somewhat simplistic terms, ultra-loose monetary conditions fed U.S. Credit excess, excessive financial leveraging and speculating, asset inflation, over-consumption, and enormous Current Account Deficits.  And this unrelenting flow of dollar balances to the world inflated the value of many things priced in devalued dollars, thus exacerbating both global Credit and speculative excess.  The path from the U.S. Credit Bubble to the Global Credit Bubble is even more evident in hindsight.

President O-Rahm-a

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Yes, that’s Barack Obama’s hatchet man Rahm Emanuel, arguing for an end to corporate welfare. As Verum Serum points out (at the link above), he’s serving the President that just dismantled welfare reform in Porkulus and helping to shovel hundreds of billions to corporations.

He doesn't mean a word that he says of course. It was election time.

A Sick Joke

We read that the Harper government has vowed to oppose polygamy before the courts. This is a sick joke, to those who remember how Stephen Harper disposed of same-sex marriage.

To ensure self-defeat, his government is now mounting its whole case on "Canadian values." As one legal blogger writes, "Canadian values" currently embrace saving puppies, but eating cows. "Canadian values" would have some relevance to the case if Canadians had the right to decide whether they wanted polygamy to be legal; and if, moreover, Canadians were allowed to debate such issues openly, freed from the legal and other intimidations of the politically correct.

But we have lost that right, which has been transferred -- thanks chiefly to the Charter, but also to various supporting trends in politics, jurisprudence, bureaucracy, and media -- to special-interest activists who can afford lawyers and lobbyists to work the system.

Friday, March 27, 2009

The Keynes Quote You Somehow Missed

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Hemingway wasn’t an economist, but there are plenty out there consider John Maynard Keynes a fairly good one, even now. And he said much the same thing about the economic side of the Hemingway quote:

“The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

Right now, in lieu of dollars, our Federal Reserve is in the midst of printing trillions of “Bernanke Bucks”. I hesitate to call them dollars, even though they’re similar in their look and feel. But in essence they are worth little more than the paper they’re printed on.

The Case Of The Missing Production

Washington is telling us that our problems result from a lack of consumer spending. Therefore, the solution is for government spending to pick up the slack. However, if Americans are too broke to spend, then how can our government spend for us?
Printing money is merely taxation in another form. Rather than robbing citizens of their money, government robs their money of its purchasing power.
If the government simply prints money and doles it out, we will not be able to buy more stuff; we will simply pay higher prices. The only way to buy more is to produce more. It is production that creates purchasing power, not the printing press!

To solve our problems we must first come to terms with their source. That is what the voices from abroad are telling us. We borrowed and spent ourselves to the brink of bankruptcy, and now we must save and produce ourselves back to prosperity.

Of course, this simple solution is rejected by Keynesian economists who insist that we must keep spending.


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HOPE AND CHANGE: “Many economists and analysts are worrying that the United States might go the way of Japan, which suffered a ‘lost decade’ after its own real estate market fell apart in the early 1990s. But I’m more concerned that the United States is coming to resemble Argentina, Russia and other so-called emerging markets, both in what led us to the crisis, and in how we’re trying to fix it. . . . The parallels between U.S. policymaking and what we see in emerging markets are clearest in how we’ve mishandled the banking crisis. We delude ourselves that our banks face liquidity problems, rather than deeper solvency problems, and we try to fix it all on the cheap just like any run-of-the-mill emerging market economy would try to do.”

Big Time Republicrats

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A year ago, President Bush and Congress passed a “stimulus bill” for $146 billion to jumpstart the economy. It failed. Last summer, a housing bill was passed to save Fannie Mae and Freddie Mac. It cost $300 billion and it also failed. In the autumn, with the collapse of Lehman Brothers and the failure of Fannie and Freddie, the government then passed a “bailout” for Wall Street to the tab of $700 billion. It was a failure. A few weeks ago, President Obama signed into law another pork-laden stimulus bill, the euphemistically entitled American Recovery and Reinvestment Act of 2009.

Democrats succeeded in portraying George Bush as a stereotypical conservative, given his penchant for good-ole’-boy southern social values and his proclivity for an assertive foreign policy posture. But economically, nothing could be further from the truth. George Bush was not a small-government conservative. He grew government, and the role of government, immeasurably. And Obama wants to add to that. Big time.

Thursday, March 26, 2009

Tuesday, March 24, 2009

Schiff's Austrian Scholar's Conference Talk - The Video

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WTWT. Or just listen.

Why The Dollar Is Strong

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“All of Europe, which has nationalized health care already, is also experiencing the current economic crisis. Why does Obama believe that bringing national health care here will in any way save us a similar economic crisis in the future? He keeps repeating that only if we get health care costs under control will we have ‘real’ prosperity, but the countries that have already ‘tackled’ this problem in the past were not spared their own economic meltdowns.”

In fact, as Obama noted, the dollar has stayed surprisingly strong because foreigners think the U.S. economy is stronger than others’ — others who have already introduced national health care. I’m just sayin’ . . . .


W Made Him Do It?

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Good luck with that...

So Few Realized He Was Gone

Today we mourn the passing of a beloved old friend, Common Sense, who lived among us for many years. No one knows for sure how old he was; his birth records were long ago lost in bureaucratic red tape. He will be remembered as having cultivated such valuable lessons as
  • Knowing when to come in out of the rain
  • Why the early bird gets the worm
  • Life isn't always fair
  • Maybe it was my fault
Common Sense lived by simple, sound financial policies (don't spend more than you can earn) and reliable strategies (adults, not children, are in charge).
Common Sense was preceded in death by
  • his parents, Truth and Trust
  • his wife, Discretion
  • his daughter, Responsibility
  • his son, Reason
He is survived by his 4 stepbrothers
  • I Know My Rights
  • I Want It Now
  • Someone Else Is To Blame
  • I'm A Victim
Not many attended his funeral because so few realized he was gone.

The Braying Yahoos

With the braying of 328 yahoos -- members of the House of Representatives who voted for retroactive and punitive use of the tax code to confiscate the legal earnings of a small, unpopular group -- still reverberating, the Obama administration yesterday invited private-sector investors to become business partners with the capricious and increasingly anti-constitutional government. This latest plan to unfreeze the financial system came almost half a year after Congress shoveled $700 billion into the Troubled Assets Relief Program, $325 billion of which has been spent without purchasing any toxic assets.

TARP funds have, however, semi-purchased, among many other things, two automobile companies (and, last week, some of their parts suppliers), which must amaze Sweden. That unlikely tutor of America regarding capitalist common sense has said, through a Cabinet minister, that the ailing Saab automobile company is on its own: "The Swedish state is not prepared to own car factories."

The Sad Truth

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JERRY POURNELLE on democracy and tyranny. “The sad truth is that democracy itself is often unstable. Intellectuals lose faith. Democracy is not flashy. It falls out of fashion. The intelligentsia feel scorned, unappreciated, and turn to new theories. There are other pressures. Republics stand until the citizens begin to vote themselves largess from the public treasury. When the plunder begins, those plundered feel no loyalty to the nation—and the beneficiaries demand ever more, until few are left unplundered. Eventually everyone plunders everyone, the state serving as little more than an agency for collecting and dispensing largess. The economy falters. Inflation begins. Deficits mount. Something must be done. Strong measures are demanded, but nothing can be agreed to.”

The Deeper Hole

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I Can't, Actually

All terrific press for Orion, except that Obama kept pronouncing the company's name wrong, calling it OAR-ee-on.

Unbelievable. Orion is one of the best-known constellations, mostly because it actually looks like its namesake. So evidently we have to add astronomy to history and economics as subjects of which Obama is remarkably ignorant. I'm beginning to fear that our President has below-average knowledge of the world. Not for a President, but for a middle-aged American.

Finally, I know it's a trite observation, and one to which we have been driven on almost a daily basis since the Age of Obama began two short months ago, but can you imagine the hooting and hollering that would have ensued if George Bush had never heard of Orion? I can't, actually.

Monday, March 23, 2009

The Narcissist

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“The numbers are going down,” Zogby told the Herald. “It’s not because of the gaffes, but a combination of high expectations and that things aren’t moving fast enough with the economy.”

Well, that, and maybe some people are beginning to recognize that a “good man” who has the country’s best interests at heart doesn’t take careless shots at Special Olympians, or make suggestions that wounded soldiers pay for their own upkeep, much less lie and dissemble about his role in everything from AIG bonuses to his administration’s coordinated effort to try to take down Rush Limbaugh and assert a certain control over the press.

In fact, some people might even find those kinds of policies indicative of a character that is somewhat the opposite of good — specifically, they could be starting to see in Obama a narcissist who believes his personal appeal can cover up the disdain he has for this country and its founding ideals.

Welcome To Transparency

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Finally, since the problem is insolvency of our financial system caused by unrestrained credit creation, the solution is to collapse the over-inflated financial assets.  Bailouts merely legitimize the pseudo-wealth created by unrestrained credit expansion by socializing it. It charges all of us, as citizens, to pay for the phantom wealth that never should have been created in the first place.

Up until now, the Fed has refused to disclose where the $2.3 trillion they have thus far spent has gone or for what purpose. Their arguments for non-disclosure are sophistry.  They know that if it were revealed, everyone would realize that they will never get this money back. They were merely bailing out financial players with worthless assets and speculative bets. 

AIG just now disclosed that the first $100 billion of Fed money went to pay, among others, foreign banks more than $50 billion for credit default swaps (CDS).

Liberty And Tyranny

Mark Levin's new book, published today, is essential reading. It is a remarkable work on several different levels. It takes no degree of clairvoyance to predict that it will become an enormous best seller and very soon begin to influence the national political debate.
Liberty and Tyranny artfully presents a harmonious marriage of the timeless with the timely. On the one hand, the book is a thorough yet compact briefing on the major political issues of this era. On the other hand, the author brings to bear the principles of the American Founders and Framers of the Constitution (and the great thinkers who guided them), illustrating, dissecting, and explaining our current political arguments, while enlightening the reader with the genuine wisdom bequeathed to all of us -- the sacred trust of the Founders, embodied in the Declaration of Independence, The Constitution, and Federalist Papers, all of which are quoted and applied with insight and precision.


What's going on? Let Alex Knapp and Andrew Sullivan encourage others to sneer at the "Going Galt" phenomenon, but the simple facts are (a) we entered 2009 facing a severe capital shortage, (b) the Obama administration's moves seem calculated to scare capital to death, and (c) without capital, capitalism doesn't work. (Of course, without capital, socialism doesn't work either, but I don't have time to explain that right now.)
"The fundamentals suck," Michelle Malkin said last September, and no rational person with a minimal understanding of basic economics could disagree that the sucking has only become louder since then. We are looking at an ill-designed house of cards on top of a Ponzi scheme erected over the San Andreas Fault. The question is not whether disaster will result, but when.
What would the tax penalty be if you zeroed out your 401K? Less than 30%?

The Chinese Shopping Spree

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The largest purchasers of U.S. Treasury bonds at present are foreign central banks. So what the Fed is really doing is printing enough money to crater the exchange value of the U.S. dollar, while leaving foreigners with a trillion dollars of savings that they would otherwise have invested in Treasury bonds, which they will now use, not to buy our lousy, toxic assets, but to acquire our productive assets, and at a steep discount thanks to the currency depreciation. So yes, the extra trillion in dollar bills will ultimately end up as bank reserves (and currency in circulation), but only by encouraging Beijing to go on a shopping spree to acquire a claim on our future production. Ultimately, funding the bailout of lousy assets comes at the cost of debasing our currency and selling our good assets to foreigners.

Make no mistake - we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses.

China: Time We Bail Out Of The Bailouts

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China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

Enumeration Lost

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There is only one question to ask were there to be a debate whether Congress should mandate regular exercise. Whether regular exercise is a good idea or a bad idea is entirely irrelevant. The only relevant question is: Is it permissible under the Constitution?
What about Article I, Section 8 of the Constitution, which says Congress shall provide for the 'general welfare of the United States.'? Surely, healthy Americans contribute to the nation's general welfare." That's precisely the response I'd expect from your average law professor, congressman or derelict U.S. Supreme Court justice.
James Madison, the father of the Constitution, said, "If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one ..."
Thomas Jefferson said, "Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated."

Williams On The Invisible

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Here's another tax question: Which worker receives the higher pay: a worker on a road construction project moving dirt with a shovel or a worker moving dirt atop a giant earthmover? If you said the guy on the earthmover, go to the head of the class. But why? It's not because he's unionized or that employers just love earthmover operators. It's because having more capital (tools) makes him more productive and therefore earn higher wages.

You might wonder how congressmen can get away with taxes and other measures that reduce our prosperity potential. Part of the answer is the anti-business climate promoted in academia and the news media. The more important reason is that prosperity foregone is invisible. In other words, we can never tell how much richer we would have been without today's level of congressional interference in our lives and therefore don't fight it as much as we should.


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In almost everything that Geithner has done, he has roused this populism by appearing to be a patron of Wall Street. Whatever its merits, his bailout plan offers generous subsidies to banks and private investors while protecting bank management and creditors. He clearly didn't anticipate or take seriously the uproar over compensation to the executives at bailout companies like Merrill Lynch and AIG. And he has resorted to secrecy--fuelling fears of conspiracy--in concealing AIG's payments to counter-parties.

Some of his hires have also picked the scab of this populism. He chose as his chief of staff a Goldman Sachs lobbyist, who had actually lobbied against a bill to restrain executive pay. Geithner also recently hired as a key advisor Lewis Alexander, Citibank's chief economist, whose thinking seems sadly typical of Wall Street: In December 2007, he told Bloomberg News that the subprime mortgages did not pose a severe problem and that a recession was not imminent.

Run, Not Walk

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Economists see the Fed’s balance sheet ballooning to $4.5
trillion this year, with its announced purchases added to
existing lending facilities. That’s trillion with a “t.” And it
would be five times the size of the balance sheet in the first
eight months of 2008, before the Fed cranked up the printing

In the short run, bond traders will capitalize from a price-
insensitive buyer waiting in the wings.

“They want to buy now, push the price higher, and then sell
it at the offered side to the Fed,” Bianco says.

Once that’s done, “you want to sell everything you own and
run, not walk, away from the market,” he says.

Hands Out

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In a 1924 speech before the National Republican Club, President Calvin Coolidge observed "that when the taxation of large incomes is excessive, they tend to disappear." Coolidge found that in 1916, 206 people had incomes of $1,000,000 or more, but once a higher tax rate on million-dollar incomes was passed, the number dwindled--falling all the way to 21 in 1921.

The answer to all of this is very simple, however. If we want the government off of our backs, we must also get our hands out of its pocket. This means we must be ready to give up the various deductions that we've grown accustomed to in order to get the marginal tax rates on our income reduced.

Until then, we shouldn't be fooled by the ongoing tax debate in Washington. So long as the discussion centers around minor changes to marginal rates, we can know that, whether they go higher or lower, the headline numbers will be a sideshow relative to the various favors given in order to reduce what we pay.

Out Of Their Ears

Blodget's view is that the economy's weakness is due to an explosion of debt:

The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it. As consumers retrench, companies that sell to them are retrenching, thus exacerbating the problem. The banks, meanwhile, are lending. They just aren't lending as much as they used to. Also the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed. ...

American consumers still have debt coming out of their ears, and they'll be working it off for years. House prices are still falling. Retirement savings have been crushed. Americans need to increase their savings rate from today's 5% (a vast improvement from the 0% rate of two years ago) to the 10% long-term average. Consumers don't have room to take on more debt, even if the banks are willing to give it to them.

A Matter Of Interpretation

It is curious that most of those who insist that the drafter’s intent gives meaning to a statute reject the drafter’s intent as the criterion for interpretation of the Constitution. I reject it for both. I will consult the writings of some men who happened to be delegates to the Constitutional Convention— Hamilton’s and Madison’s writings in The Federalist, for example. I do so, however, not because they were Framers and therefore their intent is authoritative and must be the law; but rather because their writings, like those of other intelligent and informed people of the time, display how the text of the Constitution was originally understood. Thus I give equal weight to Jay’s pieces in The Federalist, and to Jefferson’s writings, even though neither of them was a Framer. What I look for in the Constitution is precisely what I look for in a statute: the original meaning of the text, not what the original draftsmen intended. 
That stupid Scalia again

Principle Bites

Disgruntled American colonialists, in response to Great Britain’s tax on tea, dumped about forty-five tons of tea into Boston Harbor during what’s called the Boston Tea Party, 1773; a pivotal event leading into the Revolutionary War that triggered birth of the United States of America.

Tensions had been brewing for ten years prior to the Tea Party, based on the theme of taxation without representation. Because colonialists refused to pay high taxes imposed by the Townshend Acts of 1767, the British rescinded all taxes except a tax on tea, then made certain the taxed tea sold for a lower price than imported tea colonists could buy on the black market from growers in Holland. The ploy was that colonialists would purchase that tea, and in so doing endorse Britain’s right to tax the colonies. But the colonialists didn’t bite.