Basically, “it’s a tear-jerker for budget wonks,” says Taxpayers for Common Sense. It is also a downer for taxpayers, their children and their grandchildren.

The weak economy and financial markets, “and the government’s response to them,” have resulted in “near-term increases in federal deficits,” reaching record levels in 2009.

Unfortunately, the feds face even larger fiscal challenges “that will persist long after the return of fiscal stability and economic growth.” The die, as it were, is cast.

GAO’s simulations or models show “escalating levels of debt that illustrate that the long-term fiscal outlook remains unstable.” In little over 10 years, debt held by the public as a percent of GDP is projected to exceed the historical high reached in the aftermath of World War II “and grow at a steady rate thereafter.” Again, it will come as no surprise that this fiscal situation is driven by health care cost growth and demographic trends.

“Absent reform, Social Security, Medicare, and Medicaid will account for a growing share of the economy in coming years,” says GAO. “The longer action to deal with the nation’s long-term fiscal outlook is delayed, the larger the changes will need to be increasing the likelihood that they will be disruptive and destabilizing.”

As the Irish like to say, it will all come to tears. But we do not have to wait long for that. Evidently, the cost and demographic trends, which we often assume are somewhere out there on the horizon, are already taking their toll. The oldest members of the baby-boom generation are now eligible for Social Security and will be getting Medicare benefits in less than two years. The Medicare Hospital Trust Fund began running out of cash in 2008, meaning expenses exceeded dedicated revenues. Social Security surpluses, which have been financing other government programs, are now projected to turn into cash deficits by 2016. Annual budget deficits are likely to increase continuously under GAO’s two different sets of assumptions or simulation models that it uses for these forecasts, and “both simulations show that the federal government is on an unsustainable fiscal path.” For any green eyeshade types who might be reading this, GAO makes it clear that the results of its various simulations “are not materially different.” You can check out the document for the technical explanations.

Is anyone in Congress listening? And are we to believe that the Baucus health care plan is really a cost-saver over time? Adding new health care mandates on top of this mountain of debt is simply “the absolute height of fiscal irresponsibility” as my hero, Congressman Paul Ryan (R-WI) recently told Peggy Noonan.

Anyway, GAO soldiers on, noting that “the sense of urgency has increased” since it now sees “persistent annual budget deficits in excess of 7 percent of GDP — levels not seen since the aftermath of World War II.”

According to the GAO, “…absent changes in federal entitlement programs, spending on Social Security, Medicare, Medicaid, and interest on the federal debt will account for an ever-growing share of the economy.” There will be little room for “all other spending,” which basically is what we all think of as “government”: defense, homeland security, highways, farm price supports and assistance to needy families. Under one simulation model, GAO claims that roughly 92 cents of every dollar of federal revenue will be spend on major entitlements and net interest costs by 2019 due to the increased federal debt.

“However, the longer action to deal with the nation’s long-term fiscal outlook is delayed, the greater is the risk that eventual changes will be disruptive and destabilizing,” says GAO. So “waiting even ten years would require a revenue increase of about 58 percent, a noninterest spending cut of about 39 percent, or some combination of the two.” Pick your poison.

Of course, none of this is unexpected. This train wreck has been predicted for some time. What is amazing is the collective case of cognitive dissonance that has gripped Washington. Congress and the Administration have long forgotten the principle of “do no wrong.” They are deep into making matters worse. The entire town seems immune to the exhortations of GAO and other urgent voices such as David Walker, the former Comptroller General of the United States.

It is as if the colonists, hearing the cries of Paul Revere, gave out a yawn, rolled over, and went back to sleep.

The Romanian Orthodox Church, the majority religious group in the country, released a political statement on September 29 reaffirming its commitment to lobby for a law that would unjustly resolve property disputes with the Romanian Greek-Catholic Church. The Orthodox Patriarchy proposed that Greek-Catholic properties should be split between the two Churches “based on the current number of believers that each Church has within the local community.”

In response, the Romanian Greek-Catholic Church said, on October 5, that the Orthodox Patriarchy’s statement “incites religious hatred and supports the process of cultural and religious cleansing that the Greek-Catholic minority is facing in Romania.” This statement was endorsed by the Romanian Conference of the Catholic Bishops on October 7.

“The current number of believers, to which the Orthodox Patriarchy is referring in the statement, is the result of 40 years of communist persecution against the Romanian Greek-Catholic Church.” These were “followed by 20 years in which the Greek-Catholic community is faced with a process of cultural and religious cleansing in Romania,” explained the Greek-Catholic Church.

In 1948, the Romanian communist regime declared the Greek-Catholic Church outlawed and confiscated all of its properties, handing most of them over to the Orthodox Church. The communist regime then forced 1.5 million Greek-Catholics to join the Orthodox Church, and the Greek-Catholics who refused were arrested and persecuted. The Greek-Catholic Church was the only Church outlawed by the communism regime in Romania.

Since the 1989 fall of communism in Romania, the Greek-Catholic Church has tried to regain its properties through dialog, but the Orthodox Church refuses to restitute them. In many cases, the Orthodox Patriarchy is destroying or demolishing these churches, rather than returning them to the Greek-Catholics.

Over the last 20 years, the Orthodox Church has harassed and intimidated Greek-Catholics with defamatory speeches, death threats and physical abuses in an attempt to eradicate what was left from this religious minority from Romania.

Even though the Greek-Catholic Church wants its properties back, since 1989 it has been open to a practical solution which would allow the Orthodox communities use of its restituted churches if the Orthodox have no place to worship. Around the world, and especially in Western Europe, the Catholic Church offers many of its churches to the Romanian Orthodox communities if they don’t have a place to worship. However, the Orthodox Patriarchy rejects this Christian proposal in Romania.

In other words, Romanian Orthodox minorities around the world receive help from the Catholic Church, but the Orthodox majority in Romania refuses to return the confiscated properties to the Greek-Catholics, even if the Greek-Catholic Church declared that the Orthodox communities can continue having their religious services in the Greek-Catholic churches.

Because the Orthodox Church refuses to return the Greek-Catholic properties, the Greek-Catholic Church had resorted to filing lawsuits to regain its churches. To this day, Greek-Catholics must conduct their religious services (liturgies, baptisms, weddings, etc) either outdoors in the streets or in garages, private homes and other improper places.

In the context of joining the European Union in 2007, Romania had to reform its judiciary system and provide equal access to justice for all.

The Greek-Catholic Church started winning back some of its properties in the courts, which was a sign that Romania was heading towards a functional judiciary system. The Romanian Greek-Catholic Church, as promised, offered these few restituted churches to the Orthodox communities to conduct their religious services if they haven’t had a place to worship.

Despite this, the Romanian Orthodox Church reacted with “big concern” over the cases won in court by the Greek-Catholic Church, fearing that, if the situation continues, it would lose the other Greek-Catholic properties received from the communist regime as well.

In 2007, a bill (PL 368/2007) was entered in the Romanian Parliament which would grant the Greek-Catholic properties to the Orthodox Church based on the “majority rules” principle. This is the argument used by the Orthodox Church over the last 20 years for refusing the return the Greek-Catholic properties to their rightful owner.

In its position, the Romanian Orthodox Church argues with the communist principle that it is not the person, physical or juridical, but the collective community who owns a property. As a result, in order to exist, the community with most members, in this case a religious community, is entitled to take and keep the properties from a community with fewer members.

Despite national and international protests from the Catholic community, and the meeting between the Pope and the Romanian prime minister on September 16, the bill to grant Greek-Catholic properties to the Orthodox Church was not withdrawn from the Romanian Parliament.

Rather, instead of being withdrawn, the “majority rules” principle of the bill was endorsed by the Romanian Orthodox Church in its statement from September 29.

With less than two months to the presidential election in Romania on November 22, and in the context of a political crisis in the country, the Orthodox Church found the proper time to trade with the politicians the support for its interest in exchange for the Orthodox votes.

On the same day with the Orthodox release, a Senator and a Deputy made defamatory speeches against the Catholic Church and the Greek-Catholic minority from the pulpit of the Romanian Parliament.

In its official statement, the Greek-Catholic Church pleaded with “the Romanian politicians not to make the violation of the right of property and the violation of religious freedom a platform during the presidential election.”

However, the Orthodox Church’s official position is apparently winning over many Romanian politicians. Due to the Orthodox statement, the anti-Catholic sentiment is on the rise prior to the presidential election. It remains to be seen which presidential candidate will take advantage of it.

All of this is unfortunate; bad ideas are bad ideas whether we are in economic recession or prosperity.

To make sense of our current economic woes, it would be far better to look not to John Maynard Keynes but instead to a different economist: Ludwig von Mises, who was born over a century ago. In his monumental biography, “Mises: the Last Knight of Liberalism,” Guido Hülsmann makes the case that because of his theoretical framework and brilliant application of that framework, Mises was the greatest economist of the 20th century. Reading Hülsmann, it is clear that Mises’ voluminous body of work provides many insights that speak to our current situation. For example, Mises’ theory of the business cycle provides the genuine explanation why we are in the worst recession since the Great Depression and why our current policy trends toward a form of economic fascism that actually hampers recovery.

Decades before Keynes wrote his “General Theory,” Mises’ early work integrated monetary theory with the rest of economics and, in so doing, provided a truly general theory of the business cycle. Mises demonstrated that credit expansion by the central bank (in our case, the Federal Reserve) artificially lowers interest rates and promotes unwise borrowing and unsustainable malinvestments that eventually must be liquidated. Firms will go bankrupt, workers will be laid-off, and unemployment will increase. Sound familiar?

Mises provided such clear analysis of the business cycle because he rooted his economic analysis in the reality of human action. He refused to characterize the economy as if it were a hydraulic machine and people were merely inanimate objects reacting to stimuli. One of the crowning achievements of his great work “Human Action” is to explain that all social phenomena are the result of purposeful behavior of individuals. Humans are the cause, not the effect. Unlike much of modern economics, Mises explained that while humans do not have perfect foresight, they do not act irrationally.

Building on his foundation of human action, Mises forcefully demonstrated why all forms of socialism and government interventionism are recipes for economic destruction, not recovery and prosperity. In the 1920s, Mises explained that in a socialist economy the economic czar cannot rationally calculate expected profit and loss for different investment projects because there are no true prices for factors of production. There are no market prices because there is no exchange of these goods; the state owns them all. Without the tool of economic calculation, central planners are left, as Mises said, “groping about in the dark.” Such insights are the primary reason to oppose root and branch centralization of the economy, such as government takeovers of the banking and automobile industries and universal government healthcare.

Mises further demonstrated that the only way back to prosperity is through capital accumulation made possible by real savings. Government stimulus/spending programs are futile because such spending must be funded by taxation, borrowing, or monetary inflation, all of which have negative economic consequences. What the state giveth with its right hand, it taketh away with its left.

In order to recover true prosperity, we must follow the Misesian prescription: cut government spending, cut taxes, reduce regulation, cease the push for further socialized healthcare, and stop the monetary inflation that the Fed has been pursuing in great earnest for the past year. In short, we need a return to real private property in this country. Only such an economy fosters saving and investment in the capital accumulation necessary for economic recovery. We fail to heed the economic insights of Ludwig von Mises at our peril.

All of these phenomena are early death throes of Federal Reserve notes. I balk at saying “the U.S. dollar,” because a “dollar” is still defined in law as a certain quantity of silver or gold, whereas the U.S. currency that now circulates here and around the globe consists of nothing more than scraps of paper (actually, a linen-cotton compound)—a “fiat currency.” (Technically, Federal Reserve notes aren’t even money. Historically, “money” denoted coinage of metals prized in the commercial marketplace; therefore, only a currency redeemable in those metals is a genuine money substitutes. Federal Reserve notes are fakes, nothing more than legalized counterfeits of true money substitutes.)

Whether Federal Reserve notes survive—that is, whether they continue to retain purchasing power and function as money—for a few more years or a few more decades is unknowable. In fact, the Federal Reserve note could strengthen against other currencies if the powers-that-be would trigger another financial crisis like last year’s. (Isn’t that a wretched option?) Inevitably, though, Federal Reserve notes will become worthless, just as every other fiat currency in world history eventually ends up worth nothing more than what they are—little scraps of material.

You may hear some politicians and commentators complain about the Chinese and others as they rebel against the dollar’s status as the world reserve currency. You may say that the Chinese have no business stating that our government needs to stop its spendthrift, debt-bingeing ways. The fact of the matter, though, is that the Chinese have a right to speak out on these issues. After all, the Chinese are joined to us at the financial hip. They hold reserves of over two trillion Federal Reserve notes, and close to one trillion of Treasury debt.

Put yourself in their shoes: If we held that much of a foreign currency, and we could see that the government of that country was in the process of debauching that currency by having its central bank flood the financial system with newly created reserves while the government’s debt was exploding as a result of reckless, runaway spending, wouldn’t you worry? Wouldn’t you be tempted to feel resentful and indignant?

It is vital to realize that neither the Chinese nor the Russians nor any other foreign nation has put us in this predicament. Our fiscal/monetary crisis is 100 percent homegrown. President Obama’s request for Congress to raise the debt ceiling higher than 12.1 trillion Federal Reserve notes is the result of Uncle Sam’s undisciplined spending, not anything that foreigners have done.

The Federal Reserve note will eventually cease to function as the world’s reserve currency. The buck served as the globe’s monetary anchor back when it was “as good as gold,” but once our country embarked on the typical democratic excess of chronic deficit spending, President Nixon “closed the gold window” (that is, defaulted on our solemn pledge to redeem Federal Reserve notes for gold on demand) in 1971, and the long-term depreciation of the Federal Reserve note has accelerated since then.

The world could use a solid, dependable reserve currency. Many international businesses have performed brilliantly, only to be stuck with surprise losses due to fluctuations in exchange rates between currencies. Can there be such a currency?

Yes. In fact, the world had one before World War I. It was gold. Each country minted its own gold coins. The functionality of the gold coin standard was that regardless of whose portrait or which national symbol decorated the coin’s surface, an ounce of gold was always an ounce of gold, regardless of where in the world it ended up.

Alas, we are in no position, I fear, to return to a gold standard now. Gold is honest money, and honest money will be rejected wherever politicians engage in the fiscal folly of spending more than the revenue they collect. The rule of thumb seems to be that the world’s leaders want a reserve currency with the benefits of a gold standard, but only on the condition that the currency isn’t gold!

The worst possible development at this juncture would be for the world’s governments to grant the United Nations the authority to develop its own global currency. As imperfect as is the current system of competing, depreciating, national-fiat currencies, at least individuals and businesses can seek refuge in the least bad of the lot. To eliminate those options by the imposition of a monopolistic global fiat currency would be to make financial hostages of the whole world’s population to the U.N. bureaucracy.

This brings to mind the famous statement attributed to Mayer Rothschild (1744-1812), the founder of the immensely powerful Rothschild banking family: “Let me issue and control a nation’s money and I care not who writes the laws.”

To give the United Nations control over the world’s currency would mark the end of liberty. The fact that such a fearsome possibility is even being raised is the fault of our country’s political leaders. They are the ones who have brought us to this sad state of affairs.

By all accounts the soaring costs of health care have precipitated the national discussion on medicine, insurance, and the government’s role in provision and regulation. President Obama has pledged that any reform of the health care industry must be “revenue neutral” for a government already facing huge budgetary shortfalls. In a conference call to faith leaders from around the country on Aug. 19, the president noted, “By far the single biggest driver of our deficit and our debt is federal government spending on Medicare and Medicaid. And Medicare is about to go into the red in eight years.” At the same time he neglected to mention the need to address malpractice litigation as a contributing factor to health care insurance costs.

Insurance companies are often blamed for skyrocketing health care costs. And, indeed, it’s hard to argue with the personal experience of many working Americans, who have seen premiums and co-pays increase while coverage decreases. There are undoubtedly bureaucratic costs and inefficiencies plaguing insurance companies, but these kinds of bureaucracies usually exist and metastasize in response to burdens imposed by external players. In the case of medical insurance in the United States, there are an estimated $5.8 billion in medical malpractice claims annually.

While this figure may seem inconsequential when compared with health care spending expected to reach $2.5 trillion this year, the true import of these billions is found not merely in the direct cost of lawsuits. More significant is the number of procedures that are performed as so-called “defensive medicine,” intended more to mitigate exposure to litigation than to promote patient welfare. While it is difficult to estimate the costs of these kinds of practices, a study published in November of 2008 by Massachusetts Medical Society and UConn Health Center researcher Robert Aseltine Jr. found that 83 percent of doctors surveyed admitted to “practicing defensive medicine, with an average of between 18 percent and 28 percent of tests, procedures, referrals, and consultations and 13 percent of hospitalizations ordered for defensive reasons.” These are not insubstantial numbers, especially if you happen to be one of the many patients directly affected by such defensive medical practice.

The corrosion of the culture of trust necessary to good medical care resulting from these kinds of practices is perhaps even more worrisome than the clearly quantifiable economic costs. Patients are less inclined to trust doctors whom they believe are ordering tests and procedures out of a desire to protect their own economic interests. Patients in turn are much more apt to turn to legal remedies when they feel that doctors have not been forthcoming and trustworthy.

The University of Michigan Health System has implemented a policy in which doctors help foster a culture of trust by voluntarily admitting when mistakes have been made and offering compensation before legal action has been undertaken by the patient. A study by risk officers and officials at the health system found that malpractice claims were cut nearly in half after the implementation of this approach, from 121 in 2001 to 61 in 2006.

Restoring trust in the relationship between patient and doctor is critical to health care reform that promotes human flourishing and societal well-being. The approach taken by the University of Michigan system serves as an example of the kind of undertaking that brings doctors and patients together. This kind of worldly wisdom was invoked by Jesus when he used the prudence of such pre-emptive reconciliation to illustrate a truth with eternal import: “Settle matters quickly with your adversary who is taking you to court. Do it while you are still with him on the way, or he may hand you over to the judge, and the judge may hand you over to the officer, and you may be thrown into prison. I tell you the truth, you will not get out until you have paid the last penny” (Matthew 5:25-26 NIV).

The alternative is an approach in which lawyers, judges, or insurance agents mediate between doctors and patients who view each other with suspicion. Any comprehensive attempt to reform the health care insurance system and address skyrocketing costs needs to include provisions to protect doctors from spurious litigation and promote the responsible admission of regret and recompense. Such action would encourage doctors and patients to see each other not as adversaries but as partners in mutual trust.

Every time you see or hear an ad saying, “We guarantee we can save your home,” beware of a scam. There is no company, agency, or federal affiliate that can save every house from foreclosure. What lenders refer to as loss mitigation — the process of finding ways to keep borrowers in their homes — works on a case by case basis and requires an evaluation of all parts of a borrower’s loan and expenses. Yes, some properties can be saved, but there are no guarantees.

As more is learned about how the industry operated during its boom, we find mortgage fraud is nothing new. But it appears that some of the same people guilty of fraudulent mortgage practices in years past, along with some newcomers, have concocted new schemes to defraud homeowners. Today’s mortgage fraudster preys on the vulnerable, those who have run out of options and are desperate for help. They seek out people known to have fallen on hard times, pressuring them into making snap decisions about things they know little about. Unlike those schemes we saw during the peak of the housing market, which capitalized on the dream of owning a home, the fraud of today takes advantage of the fear of foreclosure. These practices bolster the stereotype of the predatory lender, except now the predators are the ones ostensibly offering assistance, tempting ignorant homeowners into what appears to be an easy solution to their tough problems. All this further erodes trust in the housing market which, in the long term, undermines the stability of lenders and homeowners alike.

Although fraud was common during the housing boom, the FBI’s 2008 Mortgage Fraud Report suggested a rise in activity after the bust: “There is a direct correlation,” it concluded, “between fraud and distressed real estate markets.” According to the study, there was a 36 percent increase from 2007 to 2008 of reported suspicious activity in the mortgage industry. This led to $1.4 billion of losses in 2008, and losses reported so far in 2009 exceeded the same period in 2008 by $208 million.

Nearly 12 percent of homeowners were at least one month behind or in foreclosure at the end of 2008, and that number has been growing steadily during 2009. These are the people targeted by those the FBI calls “mortgage fraud perpetrators.” Senior citizens are viewed as easy marks. The FBI report explains, “(perpetrators) recruit seniors through local churches, investment seminars, television, radio, billboard, and mailer advertisements, to commit fraud.”

The FBI outlines many different kinds of mortgage fraud, from taking advantage of distressed builders to fraudulent offers of credit repair. But the greatest problem in today’s markets is the “Foreclosure Rescue” scheme.

Once the culprits at work in these schemes have a borrower on the hook, they convince him to stop talking to his mortgage company or bank. The perpetrators then ask for an up front fee, usually between $1,000 and $3,000, and once it is paid, promise to handle the rest of the process. A legitimate mortgage lender may charge a fee when stopping the foreclosure process with a loan modification or a repayment plan, but it will not ask for this fee up front and will work to stay in contact with a borrower throughout the process.

Once the mortgage fraud perpetrators have received their fee, they tell the borrower to stop making mortgage payments, or worse, to make mortgage payments to the bogus organization directly. They may use part of the up front fee to file paperwork putting the borrower into bankruptcy, as this places a temporary hold on any foreclosure proceedings. Since the defrauders told the borrower to stop talking to lenders and anyone affiliated with the court system, the borrower has no idea this hold only lasts until the case is heard in court. When the borrower does not show up for the court date, foreclosure proceedings resume. Or, in most other cases, perpetrators falsely tell a borrower that the troubled mortgage can be renegotiated and monthly payments can be reduced with delinquent payments applied to the principle or negotiated away. They tell the borrower that the loan is being worked on, but nothing is ever done. In most cases, once the borrower realizes she or he has been a victim of mortgage fraud, the loan is so delinquent that there is little any legitimate lender can do.

More needs to be done by the mortgage industry to make homeowners aware of these schemes. The Administration of National Banks and the U.S. Treasury Department produced a list of “Consumer Tips for Avoiding Mortgage Modification and Foreclosure Rescue Scams” in April, but it is important for all legitimate lenders to make sure borrowers know what risks are out there.

Mortgage fraud is taking money out of a market working to rebuild itself, and these schemes, along with the intervention it will take to end them, will only slow recovery. They also further deteriorate trust in the housing market, where this quality is critical. We need to trust our builders to build safe homes, trust our realtors to price homes fairly, and trust our lenders to have in mind the best interests of the people who comprise their market. When this trust is damaged, it is more difficult to stem falling home values and housing recessions. Unethical mortgage operations, like all selfish and shortsighted economic activities, do not only harm the immediate victims; they hurt all of us.

Those were my words, Feb. 8, 2008. It’s time for a “depression watch” update.

Unfortunately, it’s mostly bad news. While another 12-year depression still isn’t inevitable, the post-financial-crisis policy blunders of Presidents Hoover and Roosevelt are being re-enacted with eerie similitude by the current president.

Hoover devastated America’s exporters by signing the Smoot-Hawley Tariff Act, triggering a devastating trade war. President Obama triggered retaliatory tariffs from Mexico when he appeased his Teamster supporters by blocking Mexican trucks from entering the United States, unilaterally repudiating NAFTA. He also elicited retaliatory tariffs from Canada (other countries will follow) by inserting a “buy American” clause in his “stimulus” bill. As in the 1930s, international trade is collapsing today. Foreigners suddenly find themselves earning fewer dollars to buy American products. Nor can they buy as much American government debt as before.

Hoover’s Reconstruction Finance Corp., which interfered with needed economic adjustments by channeling federal dollars to various money-losing businesses, was reincarnated as the Bush/Paulson TARP program, which continues under Team Obama.

Both Hoover and Roosevelt crippled economic activity by raising income tax rates. In addition to the massive tax hike already scheduled for next year when Bush’s tax cuts expire, Obama seeks additional tax hikes on higher-income taxpayers.

FDR burdened poor and middle-class Americans with higher excise taxes on everyday purchases—milk, gasoline, check-writing, stamps, beer, etc. Today, Obama wants to saddle Americans with the mother of all excise taxes—the cap and trade tax on coal, oil, and natural gas. This will raise the price of driving cars, heating and cooling homes, and powering businesses. Most other prices will rise, too, since energy is used to produce almost everything we consume, including food, clothing, and shelter.

During the Great Depression, runaway federal spending and ballooning deficits diverted capital from private investment into government programs. Today, private credit is again contracting as the U.S. Treasury absorbs capital (an astounding $1,442.8 billion in recent months). In the name of “stimulus,” Obama is asphyxiating the private sector by hogging all the economic oxygen—capital.

Obama shares FDR’s overt hostility to private, profit-making firms. FDR forced businesses into government-regulated cartels. Obama simply nationalizes them. FDR plundered corporate treasuries with his “undistributed profits” tax; Obama is targeting corporations’ offshore earnings. FDR persecuted successful businesses by threatening them with criminal prosecution for alleged antitrust violations. Obama’s Assistant Attorney General for Antitrust, Christine Varney, is making similar noises today. FDR crippled economic expansion and job creation by creating a climate of fear and uncertainty among the business community. Obama’s unfortunate diatribes against profits are having the same chilling effect today.

Like FDR, Obama doesn’t trust or doesn’t want the private sector to create jobs. The only “good” jobs are government jobs, such as low-paying, taxpayer-funded, weather-stripping jobs instead of high-paying, private-sector, oil-extraction jobs. Obama is replicating FDR’s strategy of adding workers to the federal payroll (Civilian Conservation Corps, Works Progress Administration, etc.) through such measures as tripling the size of AmeriCorps and adding the Serve America Act. Just as FDR’s New Deal programs failed to reduce employment below 14 percent throughout the 1930s, Obama’s federal jobs will siphon resources from the private sector, thereby exacerbating overall unemployment. Team Obama even wants to regulate, control, and stifle those great incubators of private jobs—venture capitalists—even though the VC firms did nothing to cause our country’s financial mess.

FDR discouraged business activity by ignoring contract law when he unilaterally voided the gold clause in private contracts. Recently, Obama made corporate bonds—an important source of business financing—less attractive by abrogating bankruptcy law when he expropriated the property of secured creditors and gave it to his UAW allies.

Like FDR, who championed the 1935 Wagner Act (which led to massive work stoppages, lost profits, and fewer jobs), Obama seeks special privileges for labor unions. In addition to the UAW handout and the Teamsters favor, Obama supports the Employee Free Choice Act that would scrap secret ballots and make it easier for union-organizing intimidators to “persuade” workers to unionize. He even threatened California Gov. Schwarzenegger with withholding $7 billion in federal stimulus money unless legislated wage cuts for unionized health-care workers were restored. To the degree that Obama strengthens unions, the result will look like the ‘30s—higher unemployment.

President Obama seems determined to be the second coming of FDR. This is economically irrational. Government couldn’t spend us out of economic depression in the 1930s, nor can it today. But runaway government spending and intervention do have the potential to create the worst depression that money can buy.

For the Obama/Pelosi/Reid axis to ignore history, and instead repeat the policy errors of the ‘30s, brings to mind Einstein’s remark about the insanity of doing the same thing over and over and expecting different results. If Team Obama persists in defying the inexorable laws of economics, it will inflict great hardship on Americans. This unnecessary tragedy is still avoidable, but only if we wake up in time and alter our course.

New proposals ignore the real danger associated with “strategic default,” when homeowners decide to stop paying their mortgage, even though they have enough money to make payments. The Obama administration is working to lower monthly mortgage payments, but as a recent study conducted at the University of Chicago points out, it is not necessarily high payments but negative equity in homes that drives default.

In the study, researchers found that “individuals who think the government should help homeowners who cannot make their mortgage payments are 12 percentage points less likely than the average homeowner to say strategic default is morally wrong.” The same study states that “26 percent of existing defaults are strategic.”

It is difficult to prove whether someone stopped making mortgage payments out of need or out of choice. The study discovered the true rate of strategic default by asking people at what point they would choose to walk away from their home instead of continuing to pay their mortgage. Was it when the value of their mortgage exceeded the value of their house by $50,000, $100,000, or $300,000? The survey found, “no household would default if the equity shortfall is less than 10 percent of the value of the home. Yet, 17 percent of households would default, even if they can afford the mortgage, when the equity shortfall reaches 50 percent” (emphasis added).

The problem of strategic default highlights one of the ways in which the current downturn is a function of ethical failure. Increasingly, the determination of when to default is not guided by the moral question: Is this the right thing to do? It is guided by the pragmatic concern: Am I too far underwater on my mortgage? Such difficulties are not easily addressed by legislation because they are deeply rooted in the moral culture in which the market operates. The University of Chicago survey found that important variables in predicting strategic default have nothing to do with money. “People who consider it immoral to default are 77 percent less likely to declare their intentions to do so, while people who know someone who defaulted are 82 percent more likely to declare their intentions to do so.” The more socially acceptable it becomes to default, the more likely people are to do it.

The bottom line: Choosing to walk away from a mortgage when you have the money to make payments is fraud. A contract has been signed, terms have been laid out, and a promise has been made. The biggest problem this survey shows us is not that 26 percent of defaults are strategic, but that Americans are not exactly sure if strategic default is wrong.

This moral weakness has concrete consequences. A mortgage company or bank loses money every time it forecloses on a house. Strategic defaults, which in almost every case lead to foreclosure, will lead to more financial loss to the mortgage industry. People living near someone who defaults can expect lower home values. It is a nasty cycle: As more homes go into foreclosure, more housing prices in the area drop, more people have negative equity in their homes, more defaults, and again, more foreclosures. When people who can still afford to keep their mortgage payments current choose to go into foreclosure, they do not just take money from their lender, they accelerate the decline of home values in their entire neighborhood and harm their community.

New legislation has done little to slow this cycle of foreclosure. The Obama administration is focusing on lower borrower payments, believing “that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments.” The solution the administration proposes is the Home Affordable Modification Program, or HAMP. This loan modification program specifically targets Fannie Mae and Freddie Mac loans, working to lower borrowers’ monthly payments to 31 percent or less of their monthly gross income. It does so by lowering interest rates, and, if necessary, extending maturity dates, using taxpayer money to make up the difference in the payments. It is the most complex and time consuming loan modification system lenders have ever seen, and lenders who service Fannie Mae and Freddie Mac loans must comply with the new federal regulations or face serious fines and sanctions.

Obama’s plan is not forever. In five years, the payments that HAMP set will begin to rise again to meet the market interest rate. And if current trends continue, home equity will continue to fall for months and possibly years. This legislation is simply further distorting the correction necessary to right the market. Some struggling to keep up with their mortgage simply cannot afford the home they purchased and the false floor offered by HAMP only defers the inevitable. Others—the potential strategic defaulters—should make the sacrifices necessary to fulfill the contract they signed. Further tinkering with the mortgage market only continues the problems that got us into this crisis, and prolongs the time it will take to turn it around.

Remember SDI? There’s a good chance you don’t because as soon as Ronald Reagan announced his plan to develop a missile-defense system, his opponents mocked the program, calling it “Star Wars” rather than using the proper name, “Strategic Defense Initiative,” or SDI. In effect, SDI broke the back of the Soviets and ushered in a new global order with the United States as the world’s sole superpower.

There’s another acronym you might want to get familiar with: SDR. Like SDI, SDR could become a catalyst that causes a major shift in world power—a shift away from the dollar as the world’s major reserve currency.

SDR stands for “Special Drawing Rights.” Special Drawing Rights are an international quasi-reserve currency created by the International Monetary Fund (IMF) in 1969 for governments around the world to finance deficits. The IMF was created in 1947 following the “Bretton Woods” agreement among World War II Allies, held at the Mount Washington Hotel in Bretton Woods, New Hampshire. The goal was to create an international monetary system with the gold-backed U.S. dollar as the world’s reserve currency.

Is your brain melting yet? Okay, let’s slow down with the details: Suffice it to say that SDR is a form of international currency dealt to international governments by the IMF, comprised of a "basket" of international currencies consisting of the dollar, the euro, the pound sterling, and the Japanese yen. Good enough for now.

“Wishing,” you’re saying, “why should I care?” Good question.

Here’s why: Keep your eyes on the news as we witness the potential decline of the dollar and the world’s wealth. At the G-20 summit in London last March, the IMF decided to raise money by issuing a never-before-seen bond—a bond backed by, you got it, SDRs. Last week China fired a financial shot across the bow of the sinking ship U.S. Treasury. It announced that it wants to buy up to $50 billion in bonds backed by SDRs. Russia wants $10 billion and so does Brazil .

Again, “Wishing, why should I care?” We Americans should care because China and other foreign nations have been financing our massive deficit spending by buying our U.S. Treasury bonds. The Chinese hold about $2 trillion in dollar-denominated reserves, including about $700 billion in U.S. Treasury bonds. Bottom line: China is getting tired of the spending shenanigans of our Congress and financing frivolities of the Federal Reserve that could lead to a massive devaluation of the dollar.

Imagine this: China is holding $2 trillion in dollar-denominated reserves. Of course, we pay China interest and principal in dollars. Because the Federal Reserve is creating a massive amount of dollars out of thin air to jump start the economy, to bail out Wall Street and Detroit, and because America has an $11-trillion deficit and another $100 trillion or so in unfunded liabilities, the U.S. dollar could drop in value significantly, generate inflation like we’ve never experienced … and depreciate the value of China’s holdings. What would you do if you were the governor of the central bank of China? Hmmm, maybe you would tell the United States to get its financial house in order. Maybe you would call for the end of the dollar as the world’s dominant reserve currency and suggest that the dollar be supplanted by SDRs. And maybe you would start to diversify your government bond purchases away from U.S. Treasury bonds and into alternatives like SDR bonds.

The Chinese are doing all these things. Can you blame them? Please keep this move by China in perspective. They are not acting radically. They are trying to protect their financial holdings. If they move too dramatically from the dollar, they stand to lose a lot of money quickly. China is moving, but moving cautiously.

By the way, it’s a bit ironic that China called for the end of the U.S. dollar as the world’s reserve currency on March 23—the same day that Ronald Reagan announced SDI in 1983.

"Reprinted with permission of WORLDmag.com. To read more news and views from a Christian perspective, call 800-951-6397 or visit http://www.worldmag.com/ ."

Duferco Farrell, located in little Farrell, Pa., is part of an international steel-producing conglomerate that buys its raw material—steel slab—from one of its affiliates in Russia and other global suppliers and rolls it into steel sheet coils. Duferco sells the coils to other companies that fabricate the steel into things like pipe and tube, automobile bumpers, and washing machines. Its biggest customer, Wheatland Tube, owned by a private global-investment firm, is a short distance down the street. Due largely to the AFL-CIO’s influence, Wheatland Tube cannot buy steel coil from its neighbors at Duferco for projects funded by stimulus monies because Duferco does not melt the steel slab it uses—it buys the slab from foreign sources. The result is that Duferco, already struggling due to the ailing economy, is further jeopardized and is laying off workers. In other words, the Buy American steel-slab clause supported by the AFL-CIO and the USW is hurting American union workers represented by USW Local 1016.

Duferco Farrell is seeking an exemption to the clause and, incredibly, the International United Steel Workers union is now fighting the exemption that would keep its USW brethren working in Farrell. Last week, an International USW vice president wrote a letter to the trade publication “American Metal Market” complaining about Duferco Farrell.

Why? The USW doesn’t like that Duferco is telling the federal government that the Buy American provision is cause for additional layoffs.

But that’s the truth.

“This unnecessary and unwarranted threat (of layoffs) is despicable,” the USW vice president wrote. He told the Farrell-area newspaper, The Herald, “I really think this is a form of blackmail.” He may think Duferco’s concern about layoffs is unnecessary and unwarranted because, as he told The Herald, he’s identified, “American steelmakers willing to sell them (Duferco) steel at market prices,” that are “probably below the cost of production because people just want to generate volume right now. … But that doesn’t fit their model of rolling, which is based on cheap Russian slabs.”

Do you think it’s possible that Duferco will lose money if it buys and rolls cheap American slabs rather than buying and rolling cheap Russian slabs? Keep in mind that Duferco has to transport the Russian slabs from halfway across the globe.

The USW vice president contends that this strategy “doesn’t pass the smell test.” I’ve seen the numbers from a source at Duferco. The company will lose money rolling American slabs, which have been offered to Duferco at prices higher than the global market for steel slabs. One of the companies that the USW vice president suggested as a reliable slab supplier offered slab to Duferco at a price higher than finished coils. Translation: Duferco loses money rolling American slabs even if they’re sold to the company below market prices. Today’s most efficient steel-making operations happen to reside outside of America, so buying Russian slab at world market prices would allow Duferco to earn a profit … and keep USW union employees working.

Duferco’s concerns do pass the smell test. The AFL-CIO and USW are the source of this odor. Due to their efforts and congressional complicity, Duferco’s freedom to make a profit and keep its USW employees in the factory is rotting.

Remember those questions I asked earlier?: Is freedom a good thing? Are freedom and Buy American legislation compatible? Is Buy American un-American?

Americans hold a few truths to be self-evident, including that our Creator endowed us with the unalienable rights of life, liberty, and the pursuit of happiness. I think you know the answers to the questions.