In Defense of Gambling with Borrowed Chips, Part V

My book, Gambling with Borrowed Chips, calls for the abolition of legal tender laws.

For a sense of what that means, dear (American) reader, please take a dollar out of your wallet. Above and to the left of George Washington’s head, you’ll see in small print the words, “The Note is legal tender for all debts, public and private.”

Once upon a time, not too long ago, the words in that spot offered the prospect of redemption of the dollar bill in specie, gold or silver.

Between the one sort of engraved bill and the other, the notion of a “legal tender” stipulated by law has replaced the idea of redemption by a backed currency. The system of fiat money, then, is one in which legal tender laws require people to accept unbacked paper that they might not otherwise take, arbitrarily forcing a medium of exchange upon the populace. For those who like the particulars of codification: the “legal tender” status of these bits of paper is secured at 31 USC §5103.

Those of us who speak of repealing legal tender laws, are, then, in effect proposing a return to commodity backed money. We speak this way not for the delight of talking in codes, but simply as a way of focusing on the difficulty: not so much what the government isn’t doing, but what it is doing (installing its paper by fiat as the Ur-money).    

I don’t really feel like a “gold bug.” I do believe there are lots of ways of hardening a money supply, as I mentioned in yesterday’s entry. Still, for the remainder of our discussion (and we near its end), I will accept the shorthand account of what I am proposing here. I am advocating a gold standard as a geology-backed medium of exchange.

When Gravelle writes: “In fact, most economics textbooks, for good reason, devote no more than a page or two to explaining the gold standard and how the U.S. and other countries’ economies moved away from commodity money to fiat money….” she merely confirms my own pessimistic assessment of the textbook publishing industry.

She then adds her own definition of “fiat money” in a parenthetical comment. She calls it “money backed by the promises of the government.” Sorry but, no. This is not what it is! The promise of the government to do …? Fiat money is backed only by the demands of the government, as expressed 31 USC §5103. There is no “promise” involved. That word suggests the long-discontinued redemptions.

But then say: for purposes of discussion, let us make this about gold.

Gravelle writes: “Faille seems to believe that the gold standard was restored after World War II, but that standard only applied to international transactions and even then only in a limited fashion.”

She suggests here that I am confused about the nature of the Bretton Woods monetary system. In fact, I explain explicitly that “U.S. citizens were not allowed to convert their dollars into gold” during the Bretton Woods period. I also say, though, that through the Bretton Woods accords the U.S. “committed itself to tying the value of its dollar to the price of gold.” Both assertions are true. Yes, the tie in question was not what it had been before 1933, or before the creation of the Federal Reserve twenty years before that, but all that establishes is that there is more than one way to harden the money supply, even more than one way to alloy it with gold.   

Indeed, in December 2011 (too late, alas, for mention in Gambling with Borrowed Chips) the Bank of England issued a white paper, its “Financial Stability Paper No. 13,” that reviews the global financial crisis from a monetary perspective and that confirms many of my book’s points.

The authors of this paper – Oliver Bush, Katie Farrant, and Michelle Wright –list three objectives for an international monetary and financial system: internal balance, allocative efficiency, and financial stability. They conclude that the system now in place “has performed poorly against each of its three objectives, at least compared with the Bretton Woods System.”

The key fact about gold is that its supply is limited by the nature of the planet we’re on, and that adding new gold supplies to the world system will always require investment, risk, and expenditure. Such additions cannot be accomplished by fiat. This is why Robert Zoellick, former president of the World Bank, said recently, “The system should … consider employing gold as an international reference point of market expectations about inflation, deflation, and future currency values.”  Indeed it should.

The problem, finally, is that the "business cycle" is not really a circle. The turns don't leave us where they found us. The business cycle is in many respects a downward spiral. So long as we grease up the money making machinery each timne around to save us from each bust, we preserve old inefficiencies and create new ones. In the best of times they are hidden, in the worst of times they are obvious. We should take advantage of that obviousness to address them head on.

That is my point, and I am happy -- or at least content -- to have gone outside of the mainstream to make it.

There is just one final point I need to make, and this arises from Gravelle's casual observation in her review that the only worrisome symptom of "easy money" would be "accelerating inflation while at full employment." I passed that remark by rather lightly in an earlier entry in this series. Tomorrow I hope to come back to it. It gives us a bang-up close.

Self-fulfilling Prophecy

There are hedges that may bring about that against which they seek to guard their drafters.

Among these, one has to count this.  

The European Investment Bank, which is making loans to various Greek businesses (in order to fulfill a commitment to issue a total of 600 million euros of such loans by January 2013, and 1.4 billion euros by the end of 2015) has taken to including clauses that account for the possibility that Greece will resume use of the drachma.

As I mentioned in mid February of this year, the EIB is one party in a “troika” of institutions bargaining on behalf of the central Eurozone countries with the countries of the zone’s more troubled periphery. The EU itself and the IMF are the other members of said troika.

The key coming date is May 6. That is Election Day in Greece, and polls indicate that the coalition of political parties inclined to pursue the country’s dealings with the troika [roughly speaking, a center-right party and a center-left party] are in position to win a one vote majority in the next parliament. But this leaves open the intriguing question: what if anything will the electorate make of drachma clauses? Don’t they rather dent the we’re-all-in-this-together mood you’d want to foster if you wanted to save the unity of the Eurozone? Don’t they suggest that the troika and the nations by whom it is dominated are looking out for themselves and Greece ought to do so as well?

I suspect the governing coalition may not get that one-vote majority on which it is counting, and will not survive this election as a governing coalition.

Talking about Greek Bonds

The government of Greece finds itself (fittingly, if you're into the whole mythology scene) trying to navigate between Scylla and Charybdis. Thus far, it has managed to avoid running aground, though nobody thinks it has reached the safety of broad and deep waters.

Spend at least a moment to send good thoughts to the suffering prime minister, Lucas Papademos. He has to negotiate with Europe on the one hand (and "Europe" means three distinct institutions -- the European Union, the central bank, and the IMF, collectively the "official creditors" or the Troika) and with his own country's ticked off unions on the other. In principle, there is a fourth party (though that rather ruins the mythic resonance) -- the class of private/unofficial owners of his country's sovereign debt. But, as Felix Salmon has aptly observed, the bondholders as represented by the International Institute of Finance, have demonstrated that they will "agree to pretty much anything," so they don't really count as a factor and we've got the resonance back.

Dealing with the aforesaid European institutions is tricky because it means, among much else, appealing to politicians who are accountable to a German electorate which believes that it has already lost quite enough money down the Greek sinkhole.

Der Spiegel recently quoted one important German politician putting the point in these terms, "There is no money for a standstill in reforms."

But by "reform" that politician -- Horst Seehofer -- means roughly austerity, a pull-back in social-welfare spending.

Yet Papademos' own constituents have already given him a very good indication of how much appetite they have for the sort of reform Seehofer has in mind.

Meanwhile, though, Sarkozy and Merkel seem to have made up their minds to help him through this difficult passage. This week they've developed a plan  that will steer the crucial funds, apparently they'll be coming from the European Financial Stability Facility, Europe's answer to America's TARP, into the hands of both the "official creditors" and to some (cooperating) private creditors without ever putting a single coin into the hands of any Greek officials at all.

This is unkind to delusions of sovereignty, but ... so is life.
The blogger who gives himself the wonderfully Bagehotian name "London Banker" has his own take on the matter. This is what he wrote Tuesday: "If I were a Greek politician, I could probably live with this deal. While it is humiliating to have the money held and distributed elsewhere, it is still money that forestalls an otherwise certain default. And Greece can always default later anyway, should that prove convenient ... The can is kicked down the road for another quarter, and the bankers can pay themselves their 2011 bonuses."

The State, Its Revenue, and Its Enemies

Let me think this through in simple terms, fitting for a simple guy like me.

I have a credit card that has a $6,000 credit limit. I go along happily spending for awhile until one day I find that I've hit the limit, and stores/bars/vending machines are spitting my card back out at me.

So I scrape together $1,000, pay it, and now I'm below the limit again. I can go back to using my plastic and (bonus), the credit card company, happy to have received the $1,000 payment, increases my limit to $10,000.

Something like that has been the history of the US legislatively imposed Treasury debt limit, and various increases thereof.

What do I do for a living? I sell widgets, let us suppose.  I work on commission, so the more widgets I sell, the more money I get. [Okay, this part doesn't seem at first blush to fit the analogy, but it will in time. Work with me here.] The problem is, how to raise that $1,000 quick so I can (a) render my card limit immediately irrelevant and (b) likely get it raised into the bargain?

Along comes someone named Lancelot Giggler who tells me that I could sell a lot more widgets if I charged less as a commission.   Perhaps I could offer some portion of my commission as a rebate to buyers.   Enough new buyers will mean a higher total income, means I pay the credit card company.

Now, let's imagine that there are a variety of different opinions about the social value of Faille and the widgets he sells. There is a faction who believes that if I died, or (let's be less bloodthirsty here) if I lost a lot of weight because of a starvation diet, and wasn't able to sell widgets any more, then the world would be better off, because the social net value of widget salesmen, or of chubby ones anyway, is negative.

So we have Lancelot Giggler on the one hand and we have the Faille Starvers on the other.

This is where I get confused. Aren't Giggler and the Starvers taking up quite contrary positions? If Giggler is telling the truth about the effects of commissions cuts on my sales, then he is describing a way in which I can make more sales and remain chubby and prosperous. If the Starvers believe him, they'll want to dissuade or prevent me from doing that.

Right?

The Sloppier Reality

Some thoughts toward what will eventually become chapter 10 of my book, ECMH, The Much Sloppier Practice.

Though there is much to be said for the ECMH, it has its limits as an explanatory tool. There are certain respects in which certain asset price moves are not random, and in which accordingly those properly placed to take advantage of the moves can make a good deal of low-risk money.

Let us note before going further that the great paradox of the ECMH is that it only works to the extent a lot of sophisticated people disbelieve it.

A market can be what ECMH posits that it is, an efficient machine quickly processing all available information, only because there are lots of wily traders looking for inefficiencies and exploiting them. A market is a bit like a river with pirahnas. We can say, as observers, that the river is almost certainly void of large chunks of fresh meat. Why? because if fresh meat were there, it would not be there long! That is in quick form the ECMH argument, where "fresh meat" is an inefficiency and thus a non-random price move. Yet the piranhas are still there, and something is keeping them alive! If there isn't any fresh meat, how do the piranhas continue working to keep the river clean of fresh meat?

One could hypothesize a lot of "sucker piranhas," who wrongly believe that they will find fresh meat and who are in time washed out to sea in their emaciated condition. Would these unhappy piranhas, during their brief life, be sufficient to underwrite the theory: to guarantee the meatfree character of the river?

That won't work. After all, the value of the piranhas in keeping the river free of meat depends upon their being sophisticated enough to know where the profit opportunities are. It seems unsatisfactory that our theory requires that certain fish be both emaciated suckers and sophisticated feeders. If the piranhas stop believing in the presence of fresh meat, they'll stop being piranhas -- they'll find another line of work in which they won't starve -- and the theory will lose its enforcers. Inefficiencies will then prevail, according to the reasoning of the ECMH itself.

What is really going on here? I submit that the reality is sloppier than the theory, and it is the sloppiness at the edges that makes the theory (for the most part) a valuable one.

How might sophisticated traders make money and stay alive? Four examples will do:

1) Distressed debt/assets, reorganization proceedings (intra-national)
2) Distressed sovereign debt (international)
3) Regulatory arbitrage
4) Currency disparities/ the carry trade.

Hitler's Holy Relics II

In yesterday's blog entry I discussed the case of the missing relics of the "first Reich," the Holy Roman Empire, and the efforts on the part of the U.S. Forces, European Theatre, to secure them at the end of the Second World War.

I didn't say anything there about Horn's troubled relationship, in the course of his investigation, with the man to whom he had to report in Nuremburg, Captain John Thompson. Thompson is portrayed here as a clueless bureaucrat, who didn't understand all this fancy stuff about arts and antiquities. As evidence in support of this characterization, our author, Sidney Kirkpatrick, mentions a conversation between the two men in which Thompson, wondering why the Nazis would have gone to such trouble to hang on to some of the more religious artefacts in the vault, such as a reliquary containing a sliver purported to be from the True Cross, casually described the Nazis as pagans.

This remark induced Horn to give Thompson the benefit of a quasi-academic lecture about how "The Fuhrer's ideologues sought not to do away with God but to champion their own twisted notions of Aryan Christianity, Germanic history, and rulership. Lines couldn't be drawn separating the ecclesiastical treasures from the regalia of the emperor. The 'stuff,' as Thompson so blithely referred to the contents of the vault, was all sacred symbols of Reich continuity and the dynastic succession of the Holy Roman Emperors."

Here we get to how the whole story matters. Some may take the book as an unusual angle on the military-occupation period in German history. But I see it as making a timeless point about sovereignty. People believe in (earthly) sovereignty not so much because the idea is logically compelling, but because it is bound up in a lot of things. Stuff. It has physical manifestations that surround us and with which we become familiar, to which we become attached. The town hall by the green. The flag on the big pole out in front of the town hall. Fenway Park! -- or wherever it might have been in your case, dear reader, where you first saw a professional ball game and where you were happy to stand for the national anthem as part of the ritual of it all. We become attached to sovereignty because it floods through our lives, in obvious and not-so-obvious ways, in sounds and sights and even smells.

The Germanic artefacts around which this book's plot turns are a token of a type.

It has for a very long time been very difficult for most people to think their way out of the box of sovereign power, or a unilateral imposition of legitimacy, because we have to try to think our way past a mist through which we have been walking our whole lives, and we havew become attached to that mist. It someone says, "perhaps we could see better if we could clear this mist away" he is met by indignation. "How dare you! Aren't you grateful to the mist-givers for all they've done for you???"

And yet, we all in our various times and places do so badly need to clear away the mists.

Hitler's Holy Relics I

I've recently read a surprisingly fascinating book, Hitler's Holy Relics: A True Story of Nazi Plunder and the Race to Recover the Crown Jewels of the Holy Roman Empire by Sidney D. Kirkpatrick.

The book is written from the point of view of Walter Horn, an art historian by trade who had improbably been given the task near the war's end in Europe of interrogating German prisoners on what they knew about poison gas. There was nothing improbable about the mission: allied intelligence was sensibly concerned, circa February 1945, that Hitler would unleash poison gas when he believed he had nothing left to lose. What seems improbable in retrospect was that Horn, whose interest in medieval art had had him studying before the war with such giants in the field as Erwin Panofsky and Bernard Berenson, should have been given that task. But it was a fortuitous circumstance, because one day one of the German prisoners, knowing nothing about poison gas but eager to please his captors and perhaps improve his own miserable conditions, leaned forward to ask Horn, "Are you interested in art and antiques?"

He was. And that sets Kirkpatrick's tale in motion. Private Huber told of a bunker on Blacksmith's Alley in Nuremburg that held a variety of artefacts that he, the private, had seen but the importance of which he did not understood. (Huber had been there because his father was in charge of maintaining the air ventilation unit, which is obviously crucial to any facility for the underground storage of antiquities.) Huber told of monarchical robes embroidered with pearl-studded pictures of camels and lions, of a crown with uncut sapphires, rubies, and amethysts, a golden apple tipped with a cross, and much else. Horn recognized that the descriptions matched the regal paraphenalia of the Holy Roman Emperors, the "First Reich" in the line in which Hitler fancied his own regime the Third.

US forces invaded Nuremburg on April 17. Acting on Horn's report, and on high command's concerns that the relics could become symbolically significant for the would-be founders of a Fourth Reich, a 135-man assault team was detailed in the chaos of that battle to secure the Blacksmith's Alley facility. Huber had been telling the truth. The facility was the Third Reich's treasure trove.

The war in Europe ended on May 8 (and the dying Third Reich had never employed poison gas). Horn's job in the early days of the occupation was to interrogate high-ranking Nazis, in anticipation of the eventual war crimes trials. So although he was now asking questions of people who far outranked poor Private Huber, his daily work had not much changed. But in July '45 Horn was called away from that task and given another. Some of the most precious of the treasures inside that Blacksmith's Alley trove had gone missing. He was ordered to become an impromptu gumshoe -- to report within three weeks on who was responsible for their disappearance, and if possible, to recover them.

SPOILER ALERT! Stop reading NOW if you hope ever to read this book in the spirit of reading a who-dunnit. Still with me? All right.

The two alternative hypotheses with which Horn begins his quest are: that the Nazis had established a covert resistance program near war's end in order to sabotage the occupation and lay the groundwork for an eventual restoration of their fortunes, and had spirited away the pick of the treasures -- including the aforementioned imperial crown -- for this purpose; and that one or more GIs within the occupation administration had taken them either for souvenirs or for a black-market profit.

The right answer was a variant of the first of those. There was general agreement among the Nazi elite that these treasures should be kept safe for a Fourth Reich, but the actual move of the five key pieces out of the Blacksmith Alley locale seems not to have been part of any very careful plan, but the result of an intra-party dispute, and of an order given by the City's mayor (who was himself murdered by an SA Group Leader just before the US forces invaded the city.)

Before that final confrontation, Mayor Liebel had instructed that certain artefacts be moved out of one underground hiding place ... into another. Not far away. Indeed, this mystery has a twist that reminds me of one of Poe's stories, "The treasures for which [Horn] had criss-crossed Germany had apparently been hidden less than a thousand yards from where his investigation had begun."

Two of the mayor's underlings did some prison time for lying about this to the occupation authorities, and Horn was treated like a conquering hero by the MFAA, the office of the US Forces European Theatre concerned with "Monuments, Fine Arts and Archives."

It's a fine story, with broader significance concerning the core matters of this blog -- pragmatism and sovereignty. I hope to speak to that significance tomorrow.

Top Financial Stories 2008

I generally ask myself at this time of year what were the biggest stories of the past twelve months, in business/financial news.

By "stories," I don't mean themes, such as "Bear market in bank stocks" or "volatile crude oil prices." I mean stories, such as one might have seen in a particular newspaper on some specific day.

Of course, I choose the ones I do largely because they illustrate an important theme. But the theme itself isn't the story.

Further, I don't rank them, as in a top ten list. Usually, on this blog last year at this time and at my blog-city home for two years before that, I've simply given one "top" story from each of the twelve months of the year now ending.

This year has been so wild, though, especially its second half, that I haven't been able to stick to the one-a-month presentation. I've ended up with a list of 18 big stories, two per month starting with July.

All that understood, here we go!

January. Frenchman Jerome Kerviel loses 4.9 billion euros for Societe Generale. $7 billion. The story started off the year with a bang. Kerviel leap-frogged past Nick Leeson as the all-time most rogue-ish "rogue trader."

February. A jury in Hartford, Conn. convicts a former AIG exec of skullduggery.

The executive in question was Christian Milton, once AIG's vice-president for re-insurance. He was convicted of an effort to inflate AIG's loss reserve numbers.

March. The Federal Reserve backs a JPMorgan takeover of Bear Stearns. At one point, [i.e. the morning of March 17] the price was actually $2 a share for Bear's stock, although less than a week prior -- at the close of trading Monday afternoon, March 10, the market valuation had been $70.08 a share. It was hard not to think JP Morgan was making off with ill-gotten gains somnehow. In fact, the purchase price didn't stay down at $2. To resolve some problem in the documentation, it was eventually raised to $10. Bully. Still, the value-evaporation was breaktaking.

April. Food price increases cause riots, political crises, worldwide.

There would be a lot to discuss under this heading, were that my goal in this entry. Instead, I'll just ask about the use of foodstuffs as a surrogate for gasoline: what impact did that have in triggering the price increases or the result?

May. Yahoo successful in warding off acquisition attempt by MS.

A victory for Jerry Yang, the founder of Yahoo!, who remains its guiding spirit and has preserved its independence.

June. Voters in Ireland reject the Lisbon treaty, thus slowing Euro unity..

The world continues to wrestle with the whole idea of "sovereignty," in terms of nation-states or of broader or smaller units.

Hereafter we award two biggest-story prizes per month.

July. (a) Israel, of Bayou and Bear Mountain infamy, turns himself in.

The whole Bayou funds meltdown had more than a touch of the bizaare to it. Israel's effort to simulate a suicide on the Bear Mountain Bridge, the failure of authorities to discover a body in the Hudson, and his re-appearance and surrender just added the garnish to that meal of oddities.

(b) Crude oil prices peak near $150 barrel, head down.

Why did it get that high? Why has each barrel lost close to three quarters of that value in the months since? Which one is the anamoly, prices above $140 or around $40? which one will be the norm going forward? Reviewing this year just leaves me full of questions.

August. (a) Second circuit court hears arguments in CSX/TCI dispute.

This is fascinating litigation about proxy votes and the working of the equity swaps market. These aren't issues that will go away anytime soon.

(b) CME, Nymex agree to consolidation -- part of the much broader trend of the consolidation of exchanges worldwide.

September. (a) Bankruptcy of Lehman Brothers, all heck breaks loose re: bank stocks or, for that mnatter, US equities generally.
(b) SEC emergency order bans any short selling of bank stocks .

These two points rather adequately explain themselves. I'll only add that the ban later expired unlamented. Various restrictions of short-selling remain, but a simple ban on it is akin to a ban on pessimism. It is idiotic.

October. (a) Bush and 'leadership' put a TARP over troubles.
The acronym "TARP" stood for the "Troubled Assets Relief Plan," the keystone of the Emergency Economic Stabilization Act of 2008, which became law on OPctober 3, after a turtuous legislative process that re-defined the Presidential campaign to Senator McCain's disadvantage. That isn't all it has redefined.

(b) Waxman hearings excoriate the credit rating agencies I'll just leave a link to my contemporaneous explanation of this hearing and its bovine idiom.

November. (a) Geithner an early cabinet choice of President Elect.
The Republicans during the campaign had sought to tag Sen. Obama a "socialist" (while a President and Treasury Secy of their party were nationalizing industries -- how odd!) Anyway, the Prez-elect's choice of Timothy Geithner as his own Treasuiry Secretary should have re-assured anyone who needed re-assurance on this front.
(b) Paulson completes the bait-and-switch with the TARP.
The outgoing Treasury boss has advertised the TARP as a fund for purchasing troubled assets. Hence, the name. Those purchases were meant to stabilize, without taking over, the banking system. But by one month out, Paulson was acknowledging that the real use of the money would be to make "equity infusions." In other words, takeovers.

December. (a) Bernard Madoff is arrested Dec. 11, one day after his sons had apparently revealed his pyramid scheme to the authorities.

You can't really call Madoff a "rogue trader" in the manner of Kerviel, the rogue with whom the year began. A rogue is a trader who gets a firm in trouble by going behind the back of his bosses there. Madoff was the guy with his name on the door. Call him a "rogue principal" if you like. Still, his fall gives a nice sense of symmetry to the year.

(b) Dec. 16, Federal Reserve lowers federal funds rate to a range between 0% and 0.25%, record territory. Three days later, the Bank of Japan followed suit, lowering its benchmark rate to 0.10%.

Wow. Funds rates are dropping like crude oil prices.

Whew. I'm sooo happy this year is over.

Tobin tax

I'm confident that the trend of history is toward the disaggregation of sovereignty, and I'm happy that Ireland's recent rejection of the latest round of Euro-treaty making looks like an example of that.

That said, there are still efforts underway in the other direction, toward some sort of global political federation. This would require a world tax, and the latest plausible candidate for such a thing is the "Tobin tax."

The original idea, posed by American economist James Tobin in the 1970s as the Bretton Woods structure was unravelling, was that if an international authority imposed a tax upon currency speculators, they'd dampen down the volatility of that market, preventing wild swings in say pound-versus-yen rates that might otherwise generate crises.

Tobin, a Nobel Prize winner, didn't pay much attention to the issue of what would be done with the money once it was collected. The point for him was chiefly to discourage the sort of thing that later made Soros so wealthy.

At any rate, the "Tobin tax" is almost always cited nowadays as a neat idea for collecting money for a lot of idealistic causes as here.

My usual mellow response to Tobin tax supporters, though, is: in your dreams.

Why do I bring it up? Well, I find the original idea behind the proposal intellectually interesting. I wrote about it a few times while at HW, and I'm happy to say that advocates of the tax thought I was being fair to them.

And besides, what else would you have me write about? the news from Denver? Boooooring.

William Joyce

Sixty two years ago today, the Brits executed William Joyce for treason. This is a bit of history now largely forgotten, but Lord Haw-Haw was once as famous a radio personality as, say, Tokyo Rose.

At his trial, Joyce had sought to argue that he hadn't committed treason against the crowmn because he had never been a subject of the crown. He was born in New York City in 1906, and his father was a naturalized US citizen.

The family soon moved to Ireland, and Joyce went off to university in England in 1921, and stayed. He became a fascist in 1932, and deputy leader of the British Union of Fascists two years later.

In August 1939, shortly before war was declared between Germany and the UK, Joyce left the latter to live amongst fellow true believers in Nazi Germany. To get the passport necessary for this move, Joyce falsely claimed Brit nationality.

Let's skip past the radio broadcasts themselves. We should mention that Joyce became a naturalized German citizen in September 1940. The now-infamous Haw-Haw was captured by British soldiers while trying to sneak across the northern border of Germany into Denmark, in May 1945.

At his trial, the prosecution had to rely entirely on events between the outbreak of war and September 1940. After that, the defendant had aligned his citizenship with his ideology. But even before that ... whose citizen or subject was he? As I noted above, he raised his trump card at trial -- one can't betray a loyalty one never owed. He was never a subject, thus he wasn't a traitor.

"Ah," the prosecution replied, "but you pretended to be one, to get your passport."

The prosecution said that the possession of a passport entitles the possessor to the protection of the sovereign by whom it was issued as he passes through various ports. Thus, Joyce in accepting such a passport had placed himself in the debt of the crown, and was guilty of treason against said crown for his subsequent broadcasts.

It was on that basis that he was hanged on January 3, 1946, after giving a final defiant speech about how the Jews "caused this last war," and he was sorry for the "sons of Britain who have died" without knowing that.

Its a pathetic story of delusion but Joyce got the ending he probably wanted. He got he chance to say his last words on the gallows and to feel martyred as the executioner slipped the rope around his neck.

What if his defense had prevailed? would he have rather have lived on in obscurity as the fellow who used to be Lord Haw-Haw?

Against riding tigers

It was one thousand and forty-four years ago this week that a council called by an Emperor deposed a Pope.

More specifically, it was on December 4 of 963 that a council called and controlled by the Holy Roman Emperor, Otto, deposed Pope John XII.

John's offense? were they arguing about Arianism or the payment of taxes on Church land or ... what?

Actually, the dispute between John XII and Otto was quite nakedly one about power. John had asked for Otto's help in protecting him from a more small-time despot, Berenger II of Italy, (a Lombard). But John soon realized that he was riding a tiger, that the Emperor's power both above and below the Alps threatened to eclipse his own.

John began a search for allies who might overthrow Otto. Otto heard about this and, unsurprisingly, took offense. Hence his call for a council.

Emperors and Popes would continue to battle for supremacy in western Europe for a long time to come, until the rise of national monarchies and Protestantism created multiple supremacies and rendered their old rivalry moot.

So this week, marking the anniversary of that deposition, let us give a smidgen, but only a smidgen, of sympathy to John XII and to tiger-riders everywhere. As a general rule, there are better ways to deal with the local trouble-maker than calling in the bigger bully from across the mountains.

Wolfowitz scandal: Who Should Care?

I'm just trying to think my way into this one. Just getting my feet wet.

As regular readers know, I don't believe in sovereignty. Sometimes when I say so, people reply, "ah, you must be pushing world government, then." Or harsher words with that implication.

Why do they say that? Chiefly because the word "sovereignty" is nowadays often used to imply "the sovereignty of nations." The antithesis of sovereignty, then, is international organization and law.

But no, I reply when the question arises. I reject that antithesis. International organizations come about through agreements among and to serve the ends of the national governments involved. The same issues of command-and-control or hierarchy, the issues of unearned privilege, are at stake in the one case as in the other. We as humans have to think our way toward better ways of relating to one another than those implied in the myth of sovereignty, and this requires a rejection both of nationalism and of internationalism.

The Bretton Woods organizations in particular (the IMF and the World Bank) have outlived any utility they may once have had by anybody's measure, and they should close up shop.

It is with these biases that I look rather gingerly at the scandal that seems for the moment to have immobilized one of those institutions, the World Bank. Its president, Paul Wolfowitz, has come under fire for showing favoritism to a particular staffer, Shaha Raza, allegedly due to their romantic relationship.
As usual, the basics are at wikipedia, http://en.wikipedia.org/wiki/Shaha_Ali_Riza

There is no principled difference between romantic cronyism and the more traditional all-guys-who are-golfing-buddies sort of cronyism. In either case, such favoritism is inevitably because human beings are hard-wired for dealing with each other, with a small group of acquaintances, rather than with masses and big abstractions. This means that organizations devoted to serving the masses and big abstractions, but nonetheless composed entirely of human beings, rather than robots, are in a biologically determined bind from the start.

What this leads to is an endless trench warfare in which factions profess enduring commitment to the masses and the big abstractions, while using the other factions' scandals as ammunition to advance their own aims. I haven't quite psyched out the hows of this in the Wolfowitz/Raza matter, but I'm pretty sure (a priori, if you will) that this is what is happening.

Which is to say, again, that we need to move toward less absurd and inherently hypocritical ways of dealing with each other than the ways that the latest contre temps would seem to embody.

Here, for those of you who may enjoy bureaucratese, is the URL for an official inquiry. http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21297732~pagePK:64257043~piPK:437376~theSitePK:4607,00.html