Guest Post: How do I dismantle the American Empire

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Submitted by Laurence M. Vance via the Ludwig von Mises Institute,

This selection is from chapter 7 of Laurence Vance’s War, Empire, and the Military: Essays on the Follies of War and U.S. Foreign Policy, now available in the Mises Store.

The WikiLeaks revelations have shined a light on the dark nature of U.S. foreign policy, including, as Eric Margolis recently described it: “Washington’s heavy-handed treatment of friends and foes alike, its bullying, use of diplomats as junior-grade spies, narrow-minded views, and snide remarks about world leaders.”

As much as I, an American, hate to say it, U.S. foreign policy is actually much worse. It is aggressive, reckless, belligerent, and meddling. It sanctions the destabilization and overthrow of governments, the assassination of leaders, the destruction of industry and infrastructure, the backing of military coups, death squads, and drug traffickers, and imperialism under the guise of humanitarianism. It supports corrupt and tyrannical governments and brutal sanctions and embargoes. It results in discord, strife, hatred, and terrorism toward the United States.

The question, then, is simply this: Can U.S. foreign policy be fixed? Although I am not very optimistic that it will be, I am more than confident that it can be.

I propose a four-pronged solution from the following perspectives: Founding Fathers, military, congressional, libertarian. In brief, to fix its foreign policy the United States should implement a Jeffersonian foreign policy, adopt Major General Smedley Butler’s Amendment for Peace, follow the advice of Congressman Ron Paul, and do it all within the libertarian framework of philosopher Murray Rothbard.

Thomas Jefferson, our first secretary of state and third president, favored a foreign policy of “peace, commerce, and honest friendship with all nations — entangling alliances with none.” This policy was basically followed until the Spanish-American War of 1898. Here is the simple but profound wisdom of Jefferson:

“No one nation has a right to sit in judgment over another.”

“We wish not to meddle with the internal affairs of any country, nor with the general affairs of Europe.”

“I am for free commerce with all nations, political connection with none, and little or no diplomatic establishment.”

“We have produced proofs, from the most enlightened and approved writers on the subject, that a neutral nation must, in all things relating to the war, observe an exact impartiality towards the parties.”

No judgment, no meddling, no political connection, and no partiality: this is a Jeffersonian foreign policy.

U.S. Marine Corps Major General Smedley Butler was the most decorated Marine in U.S. history. After leaving the military, he authored the classic work War Is a Racket. Butler proposed an Amendment for Peace to provide an “absolute guarantee to the women of America that their loved ones never would be sent overseas to be needlessly shot down in European or Asiatic or African wars that are no concern of our people.” Here are its three planks:

1. The removal of members of the land armed forces from within the continental limits of the United States and the Panama Canal Zone for any cause whatsoever is hereby prohibited.

2. The vessels of the United States Navy, or of the other branches of the armed services, are hereby prohibited from steaming, for any reason whatsoever except on an errand of mercy, more than five hundred miles from our coast.

3. Aircraft of the Army, Navy and Marine Corps is hereby prohibited from flying, for any reason whatsoever, more than seven hundred and fifty miles beyond the coast of the United States.

Butler also reasoned that because of “our geographical position, it is all but impossible for any foreign power to muster, transport and land sufficient troops on our shores for a successful invasion.” In this he was echoing Jefferson, who recognized that geography was one of the great advantages of the United States: “At such a distance from Europe and with such an ocean between us, we hope to meddle little in its quarrels or combinations. Its peace and its commerce are what we shall court.”

And then there is our modern Jeffersonian in Congress, Rep. Ron Paul, the only consistent voice in Congress from either party for a foreign policy of peace and nonintervention. In a speech on the House floor several months before the invasion of Iraq, Ron Paul made the case for a foreign policy of peace through commerce and nonintervention:

A proper foreign policy of non-intervention is built on friendship with other nations, free trade, and open travel, maximizing the exchanges of goods and services and ideas.

We should avoid entangling alliances and stop meddling in the internal affairs of other nations — no matter how many special interests demand otherwise. The entangling alliances that we should avoid include the complex alliances in the UN, the IMF, the World Bank, and the WTO.

The basic moral principle underpinning a non-interventionist foreign policy is that of rejecting the initiation of force against others. It is based on non-violence and friendship unless attacked, self-determination, and self-defense while avoiding confrontation, even when we disagree with the way other countries run their affairs. It simply means that we should mind our own business and not be influenced by special interests that have an ax to grind or benefits to gain by controlling our foreign policy. Manipulating our country into conflicts that are none of our business and unrelated to national security provides no benefits to us, while exposing us to great risks financially and militarily.

For the libertarian framework necessary to ensure a foreign policy of peace and nonintervention, we can turn to libertarian political philosopher and theoretician Murray Rothbard:

The primary plank of a libertarian foreign policy program for America must be to call upon the United States to abandon its policy of global interventionism: to withdraw immediately and completely, militarily and politically, from Asia, Europe, Latin America, the Middle East, from everywhere. The cry among American libertarians should be for the United States to withdraw now, in every way that involves the U.S. government. The United States should dismantle its bases, withdraw its troops, stop its incessant political meddling, and abolish the CIA. It should also end all foreign aid — which is simply a device to coerce the American taxpayer into subsidizing American exports and favored foreign States, all in the name of “helping the starving peoples of the world.” In short, the United States government should withdraw totally to within its own boundaries and maintain a policy of strict political “isolation” or neutrality everywhere.

The U.S. global empire with its 1,000 foreign military bases and half a million troops and mercenary contractors in three-fourths of the world’s countries must be dismantled. This along with the empire’s spies, covert operations, foreign aid, gargantuan military budgets, abuse and misuse of the military, prison camps, torture, extraordinary renditions, assassinations, nation building, spreading democracy at the point of a gun, jingoism, regime changes, military alliances, security guarantees, and meddling in the affairs of other countries.

U.S. foreign policy can be fixed. The United States would never tolerate another country building a string of bases around North America, stationing thousands of its troops on our soil, enforcing a no-fly zone over American territory, or sending their fleets to patrol off our coasts. How much longer will other countries tolerate these actions by the United States? We have already experienced blowback from the Muslim world for our foreign policy. And how much longer can the United States afford to maintain its empire?

It is time for the world’s policeman, fireman, security guard, social worker, and busybody to announce its retirement.

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"The Course of Empire": A Retrospective On The US Housing Crisis

aA decision by the FHFA requiring the GSEs to finally release detailed information on loans they acquired and guaranteed uncovers an ugly truth about the GSEs that many should be aware of (as we noted the exuberance here). The release was only required on 35 million fully-amortizing, full documentation, 30-year fixed rate mortgages, which means as JPMorgan's Michael Cembalest notes the underwriting histories on another 20-30 million loans (e.g., the riskier ones) remain a mystery (and likely will forever). As Cembalest concludes, some people made up their minds on all the factors causing the housing crisis in 2009, and others in 2011. As long as new information keeps coming out, it seems premature to close the book on it, he adds, first, the private sector descent into underwriting hell took place well after the multi-trillion dollar GSE balance sheets had gone there first; and second, there are many reasons to wonder how bad the former would have been had the latter not preceded it.Via JPMorgan's Michael Cembalest,"The Course of Empire": A Retrospective On The US Housing CrisisThomas Cole’s 19th century paintings entitled Course of Empire, chronicling the rise and fall of civilizations, have been reinterpreted below as a commentary on the US housing crisis. Why now? This retrospective is made possible in part by a decision by the Federal Housing Finance Authority requiring Freddie Mac and Fannie Mae to finally release detailed information on loans they acquired and guaranteed1. The release was only required on 35 million fully-amortizing, fulldocumentation, 30-year fixed rate mortgages, meaning that the underwriting histories on another 20-30 million loans (e.g., the riskier ones) remain a mystery. Some people made up their minds on all the factors causing the housing crisis in 2009, and others in 2011. As long as new information keeps coming out, it seems premature to close the book on it; it took 30 years for Friedman to diagnose the Great Depression. This latest disclosure, though partial and purposefully incomplete, adds to the evolving understanding of what took place, why, and in what sequence. Everyone is entitled to their opinion; the charts and the data below explain mine.“The Pastoral State”Informed by the experience of the 1980’s housing crisis, by 1990, government sponsored enterprises Fannie Mae and Freddie Mac adhered to prudent underwriting on single family mortgages. The GSEs had a small allowance for loans outside traditional investment-grade standards: loans with debt-to-income ratios above 38%, loan-to-values above 90% on purchase loans, or loan to values on cash-out refinancing loans above 75%2. However, these exceptions were typically justified by compensating factors such as higher cash reserves or higher levels of equity. Even the Federal Housing Administration, which focuses on lower income households and first time homebuyers, acted with more restraint than in later years when measured by their LTVs over 97%.The GSEs had a one third share of outstanding mortgages compared to GSE plus private sector lending. Private sector subprime had existed for decades, but was limited in size at ~10% of annual residential mortgage origination. Home ownership rates and home prices relative to income and replacement cost were stable at post-war averages.“Consummation of Empire”The era of sound GSE lending did not last. The 1992 “Federal Housing Enterprises Financial Safety and Soundness Act” enabled the Department of Housing and Urban Development to set formalized minimum affordable lending standards for the GSEs. Only George Orwell could have named a bill that was so fundamentally contradicted by its purpose and consequence. HUD first set Low & Moderate Income standards at 30% of annual GSE acquisitions, and raised them to 50% in the week before the November 2000 election. In the wake of the bill, in 1994, Fannie Mae issued a press release citing its commitment to transforming the housing finance system, vowing to provide $1 trillion in targeted lending, and citing a goal of eliminating the “no” in the mortgage application process. Prudent 1990 GSE underwriting standards, designed to benefit future borrowers and not just current ones, were discarded. Home ownership rates jumped, and home prices relative to replacement cost, rent and household income began to rise above historically stable levels.By 2002, the revolution is complete: the GSEs increased their market share from one third to 60% as the size of the mortgage market rose by 2.5x vs. 1990; Freddie Mac’s non-traditional loans were ~45% of their annual acquisitions and guarantees; Fannie Mae claimed that the FHA was its only competitor, asserting that it had become overwhelmingly an affordable housing company; and more than 40% of Fannie Mae’s Alt A (low documentation) loans qualified for the HUD-determined affordable housing goals. These developments were celebrated by HUD as a “revolution” in affordable lending. In 2002, Nobel Laureate Joseph Stiglitz and future OMB Director Peter Orszag cited the probability of a shock to GSE balance sheets as “substantially less than one in 500,000”, and estimated the expected cost to the government of guaranteeing $1 trillion of mortgages at $2 million. Yes, you read that correctly.Note that the GSE revolution takes place before the explosion in private sector subprime and Alt A loans. The private sector, seeing its market share shrink, organizes several not-so-successful efforts to constrain GSE expansion. Private sector subprime and Alt A market shares remain constant, but its underwriting becomes riskier as the GSEs encroach on their territory with a multi-trillion dollar balance sheet.“Prelude to Destruction”GSE non-traditional loans eventually converge to 40%-50% of their annual underwriting, culminating with a warning from Fannie Mae to shareholders about losses from affordable lending. There are some remarkable quotes from HUD in 2000 on how it expected this GSE revolution to result in a private sector revolution as well; it eventually did. The private sector finds a way to compete: the deepening of private mortgage backed securities markets. Propelled by demand when the Fed cut policy rates to 1% in 2002, PMBS markets did not price much of a differential between subprime and traditional risk. As a result, the funding advantage enjoyed by GSEs was conveyed to private sector originators. Privately securitized mortgages skyrocket, home prices surge further, and the mortgage market doubles in size vs. 2002. The private sector regains market share, mostly through subprime and Alt A loans which rose to 40% of annual origination. To be clear, private sector defaults and losses per dollar on subprime were much worse than on GSE loans, particularly when related to malignant derivative offshoots. To complete the circle, the GSEs support private sector origination by purchasing $275 billion of mostly subprime mortgage-backed securities by 2005. With these trends in place, it’s only a matter of time before it all comes undone.I did not reproduce Cole’s last painting in the series (“Desolation”) since we know what came next. The paintings above convince me of 2 things. First, the private sector descent into underwriting hell took place well after the multi-trillion dollar GSE balance sheets had gone there first. Second, there are many reasons to wonder how bad the former would have been had the latter not preceded it. I have doubts that public consciousness is aware of this timeline and the impact of public policy on it, and stronger doubts that data on the millions of undisclosed, riskier Fannie Mae and Freddie Mac loans will ever be released. Let’s just leave it at that.Average: Your rating: None Average: 4.7 (6 votes)