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Authored by Patrick Buchanan via Buchanan.org,

To manifest his opposition to President Donald Trump’s decision to pull all 2,000 U.S. troops out of Syria, and half of the 14,000 in Afghanistan, Gen. James Mattis went public and resigned as secretary of defense.

Now Director of National Intelligence Dan Coats, in public testimony to Congress, has contradicted Trump about the threats that face the nation.

Contrary to what the president believes, Coats says, North Korea is unlikely to give up its nuclear weapons. ISIS remains a serious threat, even if the caliphate has been rolled up. And there is no evidence that Iran, though hostile and aggressive, is acquiring nuclear weapons.

CIA Director Gina Haspel agreed: Iran remains in compliance with the nuclear treaty that Trump has trashed and abandoned. The treaty is still doing what it was designed to do.

At this perceived public defiance, Trump exploded:

“The Intelligence people seem to be extremely passive and naive when it comes to the dangers of Iran. They are wrong! … They [the Iranians] are testing Rockets (last week), and more, and are coming very close to the edge. … Be careful of Iran.”

Trump added: “Perhaps Intelligence should go back to school!”

Trump then brought up the epochal blunder of U.S. intelligence in backing the Bush II claim that Saddam Hussein had weapons of mass destruction (a “slam dunk”), and was a grave threat to the USA.

Born of incompetence and mendacity, that counsel led to the greatest strategic blunder of the 21st century, if not of U.S. history — the second Iraq War. Launched by George W. Bush, this invasion plunged us into the Middle East’s forever war and got the Republican Party ejected from power in 2006 and 2008.

While it’s not unusual for a president and the intel community to diverge on the gravity of threats, what is astonishing is that the intel leaders would declare a president to be flat-out wrong.

Yet the confrontation is not unhealthy, for it reflects reality. On foreign policy, we are divided not only on means but ends.

And the division calls to mind Walter Lippmann’s words, after U.S. political clashes and unpreparedness in FDR’s New Deal decade led to the early disasters at Pearl Harbor, Bataan and Corregidor.

“For nearly fifty years,” wrote the dean of American columnists, “the nation had not had a settled and generally accepted foreign policy. This is a danger to the Republic. For when a people is divided … about the conduct of its foreign relations, it is unable to agree on the determination of its true interest. It is unable to prepare adequately for war or to safeguard successfully its peace.”

We seem to be in just such a situation today.

Indeed, Trump is president because of the foreign policy disasters produced by his predecessors, who leaned on the U.S. intel community, and because Trump, in 2016, appeared to read the nation right.

Yet there is common ground between Trump and the spy chiefs.

Coats and Haspel are correct that the U.S. faces a Russia and China that are closer and more collaborative than they have been since the 1950s, before the Cuban missile crisis, which Mao saw as a Moscow capitulation.

And as we have more in common with Russia, with its historic ties to the West, and Russia appears by far the lesser long-term threat, how do we split Russia off from China? Here, Trump’s instincts are right and the Beltway Russophobes are wrong.

As for Iran, the intelligence community is consistent.

In 2007 and 2011, the CIA declared “with high confidence” that Iran had no nuclear weapons program. Now, with U.N. inspectors crawling all over Tehran’s nuclear facilities under the treaty, the CIA and DNI are still saying the same thing.

What of the contention that Iran is seeking hegemony in the Middle East?

Really? How? Would a nuclear-armed Israel, which has launched 200 strikes on Iran’s allies in Syria, accept that? What would Turkey, with the second-largest army in NATO, Egypt, the largest Arab nation, and Saudi Arabia have to say about that?

How could Shiite Iran, whose Persian majority is nearly matched by its Arab, Azeri, Baloch and Kurdish minorities, gain dominance over a Middle East where the vast majority is Sunni Arab? How is Iran a threat to us over here, compared to the threat we pose to Iran over there?

Iran broke out of its isolation for two reasons. First, George W. Bush came in and overthrew its Taliban enemies on its eastern border, and then he overthrew Saddam Hussein, the enemy on its western border.

As Trump contends, ISIS has been defeated and driven from its twin capitals — Raqqa in Syria and Mosul in Iraq. But it is also true that ISIS and al-Qaida still have tens of thousands of jihadists living among the peoples of the Middle East.

And the great question remains:

Are U.S. troops necessary over there – to prevent terrorists from coming over here? Or are they over here – because we are over there?

via ZeroHedge News http://bit.ly/2t01a3q Tyler Durden

With embattled Venezuelan dictator Nicolas Maduro reportedly preparing to ship 20 tonnes of gold to the United Arab Emirates, opponents of his regime – including one US senator and former presidential candidate – are scrambling to try and stop him.

As we reported Thursday, Maduro’s government reportedly shipped three tonnes of gold to the UAE last week, and, though reports on the exact number vary, he is believed to be preparing to ship another 20 tonnes in the near future. Earlier this week, a member of the Venezuelan opposition warned that a Russian jetliner had landed in Caracas, purportedly with the intent of spiriting away a hefty slice of the country’s already dwindling gold reserves.

But while that plane left allegedly without any gold on board, in its place another plane from Dubai landed, prompting a wave of speculation that Maduro is planning to ship more gold to the UAE, according to Bloomberg. The gold is valued at some $850 million.

Taken together, the 20 tonnes of gold represent more than 10% of Venezuela’s dwindling reserves.

Twenty tons is a lot of gold bars – almost 1,600 of them. Together, they represent about 10 percent of all the Venezuelan central bank’s foreign reserves. Those assets form a key part of the fierce battle for control of Venezuela’s finances between Maduro and Juan Guaido, the National Assembly leader who is trying to install a transitional government with the support of the U.S. and other countries across the region.

Rumors about Maduro’s quest to expatriate the gold come after the Bank of England denied Maduro officials’ request to withdraw $1.2 billion of gold stored in BoE vaults after US officials intervened.

But Florida Sen. Marco Rubio, who has become one of the most outspoken US officials agitating for the toppling of the Maduro regime, tweeted on Thursday that a French national working for Abu Dhabi-based Noor Capital was in Venezuela on Thursday to arrange the “theft” of more gold. He added that the firm, its employee and the airline it hired to help move the gold could be subject to US sanctions.

.@UAEEmbassyUS, we have reports that a French national working for @noor_capital is in Caracas today to arrange for the theft of more Gold from #Venezuela. I hope you have advised them that they & any air charter service that does this will be subject to Treasury sanctions.

— Marco Rubio (@marcorubio) January 31, 2019

As of Thursday evening, the gold had yet to leave the central bank, though BBG was unable to get in contact with anybody from Noor capital or Venezuela’s central bank.

Earlier this week, National Security Advisor John Bolton issued a similar warning to anybody seeking to deal in Venezuelan gold.

My advice to bankers, brokers, traders, facilitators, and other businesses: don’t deal in gold, oil, or other Venezuelan commodities being stolen from the Venezuelan people by the Maduro mafia. We stand ready to continue to take action.

— John Bolton (@AmbJohnBolton) January 30, 2019

Opposition leader Juan Guaido, who is now recognized as the legitimate leader of Venezuelan by roughly two dozen countries, has repeatedly emphasized his team’s efforts to protect the country’s remaining assets so that they can be used to offer humanitarian aide. After being harassed by Maduro’s shock troops, who raided his home, an act that the US denounced as an “act of intimidation”, Guaido said he would hold Maduro responsible for the safety of his daughter. Guaido most recently vowed to defy the administration’s order to accept humanitarian aide by orchestrating a plan to ship large quantities of medicine into the country after the US granted him access to Venezuelan assets being kept at the New York Federal Reserve.

But given the support that Maduro continues to receive from China, Russia and other allies who have invested billions of dollars in Venezeulan oil production under his rule, his regime, though weakened, is hardly on the verge of an imminent collapse.

via ZeroHedge News http://bit.ly/2sY2bcr Tyler Durden

Authored by David Robertson via RealInvestmentAdvice.com,

One of the most fundamental arguments for investing in stocks is to benefit from growth. Whether it arises generally from growth in the broader economy or more specifically from opportunities in sectors or individual companies, growth can drive investments. Outperformance of the growth style over that of value for the last ten years has hammered home the primacy of growth.

The natural appeal of the growth proposition, however, also belies important risks for investors. One is that the benefits of growth are often offset by declines in return on capital. Another is that growth can easily be overestimated. Either way, the unfortunate reality is that too often investors do not benefit from growth as much as they anticipate.

As important as growth is in investment analysis, the association between growth and investment returns is often poorly understood. A recent study by Jean-Francois L’Her, CFA, Tarek Masmoudi, and Ram Karthik Krishnamoorthy, CFA in the Financial Analysts Journal [here] explores the association and provides some interesting new insights.

The authors acknowledge that in practice:

“Economic growth forecasts are core inputs used to differentiate long-term expected stock market returns”.

But the authors also point out that the link between economic growth and stock returns is more fraught than many practitioners appreciate.

Several different studies using different data sets show that “high (low) economic growth may not necessarily turn into high (low) returns.” At best, studies correlating real aggregate GDP to market returns have been mixed. At worst, several studies focusing on the growth rate in GDP per capita produce negative correlations between returns and economic growth. The lack of a conclusive relationship between growth and returns has been viewed as a“puzzle”. 

In order to better understand the relationship between growth and returns the authors examine returns of stocks in 43 different world markets over the period from 1997 to 2017. In doing so, returns are decomposed into eight distinct components. Most of them include factors that investors are quite familiar with such as inflation and currency effects, margin growth, payout ratio variation, real per capita GDP growth, price-to-dividend variation, and dividend yield.

Two of the factors, however, require a bit of explanation. They represent “slippage” that prevents economic progress from being realized in returns. One is relative dynamism which reflects the degree to which entrepreneurial efforts are or are not captured by indexes of public stocks. The other is net buybacks which reflects the increase or decrease in the ownership percentage of existing shareholders as a result of new issues or repurchases.

With that, one finding from the research was simply to corroborate earlier studies: The results “confirm that economic growth does not necessarily translate into stock market returns.”

Another finding, however, is more surprising — and more meaningful. It turns out that the dispersion of returns is absolutely dominated by one factor.

The authors report:

“Net buybacks have explained 80% of the cross-sectional dispersion of stock market returns of developed and developing markets since 1997, hence dwarfing the seven other building blocks considered in the decomposition of stock market returns.”

In short, it’s not economic factors that dominate differentiation, but rather slippage.

These findings are especially relevant for emerging market investors, many of whom have been pitched the narrative that emerging markets are attractive because they are exposed to higher economic growth. The research disproves this narrative and Peter Tasker provides an excellent illustration that captures why the narrative fails in the Financial Times [here].

“Rich and stable cashflows are much rarer in emerging economies than in mature economies. So even the companies that do survive and prosper – the emerging world’s emerging champions – will likely finance their growth by repeatedly raising large amounts of new capital. This is of no benefit to shareholders without an overall improvement in return on capital. Why waste time attempting to raise returns on your existing capital when you can easily access more?”

Citing a study by Jay Ritter of the University of Florida, he determines,

“Countries with high growth potential do not offer good investment opportunities unless valuations are low.”

This provides useful insight as to why net buybacks are such an important factor. It’s not at all that growth is a bogus variable. Rather, just like a car with a great engine but a faulty transmission, economic growth provides power, but it will only move the car forward when that power gets transmitted to the wheels. Likewise, the power of growth only benefits existing shareholders to the degree that it gets transmitted without slippage.

Nor is the phenomenon of faulty transmission confined to country markets. The exact same phenomenon occurs with companies and sectors as well. In a previous blog [here] I noted that tech executives,

“Believe that they can always raise financial capital to meet their funding shortfall or use company stock or options to pay for acquisitions and employee wages.” 

Such freely available capital results in a situation in which “The CEO’s principal aim therefore is not necessarily to judiciously allocate financial capital but to allocate precious scientific and human resources to the most promising projects …” In other words, existing shareholders are the ones who suffer.

This creates something of a zen-like paradox for investors. The more you look for growth to drive returns, the greater the chance your returns will suffer because of dilution by additional capital. So, growth does not give back when demands for external financing are either too high or too tempting.

Another situation in which growth can fail to deliver is when it gets overestimated. As James Montier describes [here]:

“Overoptimism and overconfidence are two well-known psychological traits of our species. They are particularly dangerous in the late stages of an economic cycle where these terrible twins result in investors overestimating return and underestimating risk …”

Further, our natural predilection for optimism can be exaggerated by an environment of low rates. As I also noted in a prior blog post,

“Low rates unleash natural limits to speculation and pave the way for inflated expectations to become even more so. This means that the hype cycle gets amplified, but it also means that the cycle gets extended.” 

Such tendencies can also be fueled by earnings estimates. Montier shows:

“Take for example Exhibit 1. It shows the long-term EPS expectations from consensus bottom-up analysts. It appears that analysts are extremely optimistic about long-term growth prospects. Indeed, to borrow an expression from Toy Story’s Buzz Light Year, they appear to believe earnings can grow ‘To infinity and beyond.’ Their expectations have now soared to levels last seen during the tech bubble of the late 1990s.”

Source: GMO, I/B/E/S

This is interesting because this “unbridled economic enthusiasm” flies in the face of a far more mundane economic reality. Montier presents an exhibit (below) which “shows the flight paths of all post war economic expansions in terms of GDP.” He highlights:

“The current expansion is the slowest and weakest economic recovery witnessed in the entire post war period.”

Source: GMO 

This is not an outlier forecast either; John Hussman corroborates the findings [here]. Taking his measure “from the peak of the economic cycle in 2007 to the current peak,” Hussman finds,

“Actual S&P 500 reported GAAP earnings have grown at an average rate of just 3.8% annually, with revenues growing at just 2.7%”.

In the context of such evidence, he characterizes current long-term earnings projections as “particularly offensive”.

Montier goes on to explain how estimates can become so inflated:

“Because most of the analysts are spoon fed the short-term outlook from company managements, they don’t have many degrees of freedom in their model to twiddle with to get their desired outcome, so they end up jacking up long-term earnings growth. So, in some ways, the picture in Exhibit 1 is a reflection of market prices action.” 

So, on many occasions, there is a lot less to growth than meets the eye. It’s not so much that long-term growth prospects actually become so much better. Rather, there is a positive feedback loop in which expectations get inflated, investors chase prices up, and analysts raise growth estimates to adjust. Rinse and repeat.

Despite all of this, however, “the stock market remains well bid,” observes Montier, which despite wobbles in the fourth quarter remains true. As a result, one could plausibly argue that growth expectations may very well be too high, but so what if the stocks aren’t reacting?

It is a fair argument over the very short-term, but there are also clearly identifiable ways in which inflated growth expectations will come back to haunt investors over any longer period. One of those ways is described by Martin Tarlie at GMO [here]: He notes,

“Bubbles are prone to form when times are good (high valuation) and expected to get even better (positive expected change in sentiment). Bubbles burst when hopes of even better times ahead are dashed.” 

So, one thing to look out for is anything that can dash hopes of even better times ahead. On this score, there is plenty of fodder to choose from. The FT reported [here],

“This global outlook does not help assuage growing pessimism over US corporate earnings growth and margins. Wall Street analysts have sharply cut their outlooks for profit expansion over the first half of this year.”

This negative assessment was complemented by another:

“Wariness rightfully prevails at the moment and this week the International Monetary Fund chimed in with the observation that global activity is weakening faster than expected.”

In addition, these reports were punctuated by Greg Jensen, co-CIO of Bridgewater, who indicated at the World Economic Forum in Davos [here] that “he sees a more negative outlook for growth than the markets and policy makers.”

With the knowledge, then, that growth expectations appear far too high, that bubbles burst when hopes of even better times are dashed, and that an increasing body of evidence is dashing those hopes, it looks like an accident waiting to happen.

Investors can also gauge the progress of this accident-in-the-making by monitoring market activity. Stocks remain well bid according to Montier:

“In large part from the buybacks (and mergers) from USA Inc. itself. However, individual investors have returned to the ‘party’ – never a good sign. Other portents of late-cycle capitulation include global fund managers throwing in the towel and buying into U.S. equities.”

So, three main groups of investors continue buying stocks at higher prices that assume even more exaggerated growth rates. Why would they do that?

Harley Bassman provides some helpful perspective [here] by noting simply,

“Everybody acts rationally from their own point of view.”

Fair enough. So what incentives might they have and how long might they persist?

US companies certainly have incentives to repurchase stock under certain conditions. For example, when organic growth rates are low or uncertain, companies can sensibly look elsewhere to deploy cash. In addition, when repurchases can be financed with cheap debt, a decent argument can be made to repurchase. Finally, few corporate executives would object to propping up share prices which serve as both their scorecard and remuneration package.

Companies have been repurchasing shares at a torrid pace but are unlikely to be able to do so indefinitely. For one, higher debt loads increasingly constrain the repurchasing capacity of many companies. As a result, companies increasingly depend on cash flows to finance repurchases and those will decline in any downturn. Sooner or later, this source is likely to dry up.

Global fund managers also have incentives to buy overpriced stocks when the risks of losing clients by being out of the market is greater than the risk of losing money for them. While career risk creates a potent motive for buying expensive stocks on the way up, it is just as potent of a risk on the way down.

Finally, individual investors are notorious for being late to the market party — both on the way up and on the way down. As a result, it is possible that they remain net purchasers of stocks long after the evidence, and the markets, have turned against them.

Because long-term growth estimates are so inflated right now and because capital is still readily available for which to dilute existing shareholders, there is enormous potential for investors to be disappointed by growth prospects. Fortunately, there are things investors can do to moderate this risk.

Two types of growth companies are especially vulnerable to significant dislocations and should be carefully assessed by investors. One type includes companies that have high growth expectations but low returns on capital. Due to the low returns, these companies rely heavily on external financing to fund their growth. If/when hopes get dashed, not only do growth expectations come down, but external financing can dry up in a heartbeat.

This not only puts company growth at risk, but often company viability as well. As such, the payoff structure looks a lot more like a call option than a stock. This isn’t inherently bad but given the potential for a substantial or total loss, it should probably not be a core holding in a retirement account. The poster child for this type of company is Tesla.

Another type of company has very high returns and very high growth expectations. For these companies, growth can be funded internally so lower growth prospects do not present the same kind of existential risk.

The bigger threat for these companies is valuation risk. The combination of high returns, high growth and strong competitive advantage is incredibly powerful for creating value. By the same token, however, when expectations are reduced, warranted value can fall precipitously. Apple is a good example.

Investors should also beware that regardless of what happens with growth expectations, it is very unlikely that they will receive any kind of warning that things are changing. As John Hussman describes,

“Instead of the investment profession acting as a historically-informed buffer to defend investors against reckless speculation, extrapolative projections … are actually endorsed and encouraged by the very people who should know better.”

As a result, the best way to avoid a big downdraft is to read the economic cues and adjust exposure before everyone else tries to.

Finally, L’Her, Masmoudi, and Karthik Krishnamoorthy leave readers with a useful message:

“This finding does not mean that economic growth is bad, simply that it is not necessarily captured by existing shareholders”.

That’s a good lesson to embrace. In an environment saturated with growth narratives and significantly inflated expectations, it helps to know when you get rewarded for growth and when growth doesn’t give back.

via ZeroHedge News http://bit.ly/2S31Ow7 Tyler Durden

New evidence obtained by Senate investigators reveal that Donald Trump Jr. did not speak with his father from a blocked telephone number days ahead of the 2016 Trump Tower meeting, as first reported by CNN, contradicting Democratic conspiracy theories.

Records provided to the Senate Intelligence Committee show the calls were between Trump Jr. and two of his business associates, the sources said, and appear to contradict Democrats’ long-held suspicions that the blocked number was from then-candidate Donald Trump. –CNN

Democrats led by Rep. Adam Schiff (D-CA) have pointed to the blocked-number calls as evidence that President Trump himself had knowledge that his son, son-in-law Jared Kushner and Paul Manafort met with a Russian attorney who said she had dirt on Hillary Clinton. 

According to Schiff, “We wanted to get the phone records to determine, was Donald Trump talking to his son about this meeting,” he told CNN last November. “It’s an obvious investigative step, but one the Republicans were unwilling to take because they were afraid of where the evidence might lead.“

California Senator Dianne Feinstein (D) also pointed to the blocked calls in a Democratic report last year detailing the Senate Judiciary Committee’s investigation of the Trump Tower meeting. “We also do not know who they told about this meeting, including whether they ever discussed it with Mr. Trump,” wrote Feinstein – who noted that Trump Jr. placed three calls to the blocked numbers.

Schiff’s report, however, states that the first call on June 6 was incoming, while CNN reports that the records provided to Congress do not indicate whether the blocked calls were incoming or outgoing. 

Democrats have long suggested that Trump Jr. lied to Congress and that President Trump has lied about whether he knew about the Trump Tower meeting before it happened. Trump claims he learned about it when the press began covering it in 2017, over a year after it took place. 

Just out: The big deal, very mysterious Don jr telephone calls, after the innocent Trump Tower meeting, that the media & Dems said were made to his father (me), were just conclusively found NOT to be made to me. They were made to friends & business associates of Don. Really sad!

— Donald J. Trump (@realDonaldTrump) February 1, 2019

The Russian attorney at the Trump Tower meeting, Natalia Veselnitskaya, met with Fusion GPS co-founder Glenn Simpson hours before she met with Trump Jr. Also in attendance was Russian-American lobbyist Rinat Akhmetshin.

Hillary Clinton’s campaign paid Fusion GPS to produce the “Steele dossier” used by the FBI to justify spying on the Trump campaign – and later leaked to the public to smear the President. Both Veselnitskaya and Akhmetshin were working with Fusion GPS, however they claim the Trump Tower meeting was unrelated to their work with the opposition research firm.

Also working with Fusion GPS was Nellie Ohr, the wife of the former #4 official at the DOJ, Bruce Ohr. 

Nellie Ohr, the wife of DOJ official Bruce Ohr, was long ago investigating for pay (GPS Fusion) members of my family, feeding it to her husband who was then giving it to the FBI, even though it was created by ousted & discredited Christopher Steele. Illegal! WITCH HUNT

— Donald J. Trump (@realDonaldTrump) February 1, 2019

The Daily Caller‘s Chuck Ross notes the irony in CNN breaking the news regarding the blocked calls, given their sloppy and embarrassing reporting surrounding the matter: 

Ironically given CNN’s role in breaking the new story, the network has been behind other reporting about Trump Jr. and his Trump Tower conversations that have turned out to be false.

CNN reported in July 2018 former Trump attorney Michael Cohen was involved in a conversation in which Trump Jr. told his father that the meeting with Russians was going to take place. But on Aug. 22, 2018, Cohen adviser Lanny Davis acknowledged he was a source for the CNN article and that he was mistaken. He said Cohen did not know whether Trump Jr. told Trump about the meeting.

CNN also retracted a story Dec. 8, 2017, that falsely claimed Trump Jr. had received an email Sept. 4, 2016, that included a link to a WikiLeaks emails that had yet to be made public. It turned out the email was actually dated Sept. 14, 2016, a day after WikiLeaks had posted the emails. A person who Trump Jr. did not know sent him the email with a link to information that had already been made public. –Daily Caller

A lot of people look dumb today.

“Records provided to the Senate Intelligence Committee show the calls were between Trump Jr. & two of his business associates…and appear to contradict Democrats’ long-held suspicions that the blocked number was from then-candidate Donald Trump” https://t.co/Iw513UQwuV

— Andrew Surabian (@Surabees) January 31, 2019

via ZeroHedge News http://bit.ly/2GlbaMq Tyler Durden

Authored by Anthony Mueller via The Mises Institute,

The longing for the socialist dream comes in part from the great success of capitalism as an engine of prosperity. From the nineteenth century onwards, the entrepreneurial economy created prosperity on a scale that had never been seen before in history.The socialists, however, believed economic success would become even greater in a society of egalitarian redistribution. The socialists expect that under their rule, the economy would become more productive and society more just.

This illusion of obtaining prosperity and justice under socialism was already evident in the Communist Manifesto of 1848. In their pamphlet, Karl Marx and his sponsor Friedrich Engels enthusiastically praised capitalist achievements:

“The bourgeoisie,” they declared, “has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.”

During its rule, the bourgeoisie

has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground – what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor?

Yet, according to Marx and Engels, the capitalist system is doomed, and private property stands in the way to a perfect society: “the theory of the communists may be summed up in the single sentence: abolition of private property.” Doing away with private property implies the “abolition of bourgeois individuality, bourgeois independence, and bourgeois freedom…”

For Marx and Engels, the bourgeois family remained a fundamental part of liberal and capitalist. Thus, under communism, the “bourgeois family will vanish along with country, nationality, and religion.”

The Socialist Plan

To achieve these aims, the Communist Manifesto demands the following measures:

1. Abolition of property in land and application of all rents of land to public purposes.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance.

4. Confiscation of the property of all emigrants and rebels.

5. Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

6. Centralization of the means of communication and transport in the hands of the State.

7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial production”

Under socialism, individualism must make way for collectivism. Then the state will replace private initiative. Communist rule also requires the centralization of money and credit in the hands of a state and production must follow a central plan. Public education comes with the obligation to work and its combination with industrial production.

On the way to achieve these aims, “the Communists everywhere support every revolutionary movement against the existing social and political order of things… They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions.”

From Dream to Nightmare

The motivation for this revolution is not hard to understand. Who would not want a society that guarantees prosperity for all but does not ask for an equivalent contributory effort? Socialism promises equality and that everyone would receive what he needs — whether one adds little or nothing to produce the goods. The fatal attraction to socialism results from the wishful thinking there could be an economic system, which would be as productive as capitalism and come with equality. The problem with this promise is that it does not work.

While private property lies at the heart of the free order of classical liberalism, socialism requires its abolishment. The means of production must come under the regime’s control.

But not all advocates of socialism want immediate and total revolution as Marx and Engels implied. Different from the communists — who want to install the “dictatorship of the proletariat” — are the “democratic socialists,”  who believe in a gradual method, and who also believe that one could maintain personal freedom under socialism. Yet while the declared aim is different, the modern socialists plan to use the same instruments as the communists.

Socialists want to abolish private property and the market. Yet if prices as an information and incentive system no longer exist, a command system must supplant it. When there is no market, state directives must take its place. Without prices, however, there is no way of knowing how to coordinate economic activity. The rulers must apply coercion, and everyone must follow the central plans. In practice, socialism installs a power center, the ruling party, which collaborates with the central economic planning apparatus.

But it is not the proletariat that employs the dictatorship. It is the secret police and the military who will alsosuppress all dissent and make sure that the true voice of the people is kept silent and that the workers obey the state’s plans.

Socialism in Disguise

When the murderous reality of communism in the Soviet system became well known in the West with the publication of Solzhenitsyn’s The Gulag Archipelago in 1973, the term “communism” fell out of favor and was replaced by the less burdensome concept of “socialism.”

When this term became less appealing, the expression “left” came to the fore. When “left” got a bad name, “liberal” became the brand name, as has happened in the United States. Here, the socialists have usurped the concept of “liberal”, so that “liberalism” denotes the opposite of its original meaning. Now, the term “democratic socialism” is en vogue.

In this expression, “democratic” has replaced the communist concept of the “proletariat.” The idea behind this change is that “the people” are identical with the proletariat because they are the large majority. “Dictatorship of the proletariat” gains a new meaning. For the democratic socialists, majority rule gives the party in power the legitimacy to erode and finally to do away with private property — at first by taxation and regulation and finally through the collectivization of the means of production.

All of this is in service to the socialist dream which maintains that under socialism there would be both material abundance and equality. As Marx and Engels proposed, socialism is to offer all the benefits and abundance of capitalism, but maintain perfect equality as well. The reality, however, illustrates that socialism comes with economic misery, social deprivation, and political suppression. Socialism shows that the more one wants to realize the paradise on earth with the use of force the more one will, in fact, create a hell .

via ZeroHedge News http://bit.ly/2D2Bojw Tyler Durden