Mariana Fights Inflation, 1605

http://mises.org/story/3039

Daily Article by Bart Fuller Posted on 7/23/2008

Although its form has changed over the years, inflation has been with us since at least the days of ancient Rome. Inflation then was accomplished by debasing the currency, a process that involved reducing the amount of precious metal in coinage without changing the legal value of the coins. The removal of silver from US coins in 1965 is a recent example of inflation by debasement.
With the advent of paper fiat currency, inflation occurs by printing more money or by increasing and easing the availability of credit in the banking system.
The Federal Reserve admitted as much, possibly unwittingly, in its most recent Open Market Committee meeting announcement when speaking of its efforts to ensure economic growth by the "substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity…"
Whether inflation occurs by easing monetary policy or by removing precious metal from coinage, it is always and everywhere fraudulent and immoral, for it takes from people the fruits of their labor and destroys the value of their past labor that they have stored in their savings. But why don't more of us know this?
It's not for lack of a warning. Just this past year, Ron Paul dared to speak truth to power and inform the people of the means and consequences of inflation. In recent decades men like Murray Rothbard, Henry Hazlitt, and Hans Sennholz did the same. Men from past centuries have warned us too: men from the Old World, men steeped in theology and ethics who studied how man interacted with man in the market. One of these men was Father Juan de Mariana, S.J., and through a recent English translation of one of his works he now speaks to the New World too.
Father Juan de Mariana was a Jesuit priest, born in 1536 near Toledo, Spain, who, after spending time in Rome, Sicily, and Paris, returned to Toledo where he remained until his death in 1624. He was a prolific writer and boldly stated his opinions with a holy confidence wrought by prayer. Notable works include History of Spain (Historiae de rebus Hispaniae, 1592), which was recommended reading to James Madison by Thomas Jefferson and On Monarchy (De Rege et Regis Institutione, 1599) which was written at the request of King Phillip II. This latter work visited controversy to Mariana as some in France levied accusations that its message was the motivation for the assassination of King Henry IV in 1610.
Our focus today, however, will be his treatise On the Alteration of Money (De monetae mutatione). Mariana wrote this pamphlet, published in 1605, with the hope that the king and his court would be dissuaded from further debasing the realm's money. At the time, the king's treasury was depleted, due to "long and drawn-out wars in many places and by many other problems…" To replenish the treasury, the value of existing money had been doubled and new coins of copper of less weight and without the traditional small amount of silver had been issued. The debasing of silver was being considered also. Mariana could not help but speak out and saw himself as one "who defends the truth … and points out the public threat of dangers and evils" the kingdom faced. In his mind, this was "the most serious of issues to arise in Spain in many years."
After laying out his intentions and the facts of the situation, Mariana raises the question, "Does the king own his subjects' goods?" He answers, in short, no. Based on Aristotle and the Novellas Constitutiones, his reasoning is thus: All power has limits; when power exceeds its limits it becomes weak and breaks down. In the case of royal power, it becomes tyrannical. "[T]he very nature of royal power — if it is legitimate and just, it arises from the State — makes clear that the king is not the owner of his subjects' private possessions" and he has no power to take them. To do so is "criminal."
He then proceeds to ask if the king can "demand tribute from his subjects without their consent." Again he answers no, explaining, "The private goods of citizens are not at the disposal of the king. Thus, he must not take all or part of them without the approval of those who have the right to them."
And representative government is not always a sufficient means to grant approval. When rebuking the parliament of Castile he could just as easily be speaking to the US Congress:
There is certainly little benefit in summoning procurators of the states to parliaments in Castile. Most of them are poorly equipped to manage affairs. They are men who are led by chance — insignificant men of venal disposition who keep nothing in view but their desire to gain the prince's favor and to benefit from public disaster.
Once he has established that the king can not legitimately take his subjects' private possessions, he asks whether "a prince in every case [can] solve his fiscal problems on his own authority and debase his kingdom's money by diminishing its weight or its quality?"
Immediately, Mariana concedes two points: (1) the king may change the form of money in terms of how it's struck and engraved as long as the value of it remains unchanged; (2) the king may debase money without the people's consent in a period of war or siege as long as two conditions are met: (a) the debasement is temporary, only lasting as long as the war or siege; (b) as soon as the war or siege ends the king must make amends to the people by repaying all losses suffered by the debasement. Debasement in any other circumstance is wrong.
A "seizure" of possessions and an "injury" to the people have occurred because "what is declared to be more is worth less." A stern warning is given for anyone considering debasement in any other circumstances:
These strategies aim at the same thing: cleaning out the pockets of the people and piling up money in the provincial treasury. Do not be taken in by the smoke and mirrors by which metal is given a greater value than it has by nature and in common opinion. Of course, this does not happen without common injury. When blood is let by whatever device or strategy, the body will certainly be debilitated and wasted. In the same way, a prince cannot profit without the suffering and groans of his subjects.
Mariana goes on to explain that money has an intrinsic value and an extrinsic value. Briefly, the intrinsic value is that of the metal and weight of the coin in addition to its production costs. The extrinsic value is the nominal legal value established by law for a particular metal content and weight. It is incumbent upon the king to ensure that these two values always remain the same. To do otherwise invites trouble, for if the legal value of money is allowed to exceed the intrinsic value, it will prove difficult to stop, as the temptation for profits will overcome the treasury. It will also create havoc in the business community, since prices will adjust for the valuation of the money. It is here that Mariana first observes the phenomenon of inflationary price increases stating,
If the legal value of debased money does not decrease, surely all merchandise will sell at a higher price, in proportion to the debasement of the quality or weight of the money. The process is inevitable. As a result, the price of goods adjusts and money is less valuable than it previously and properly was.
Mariana continues with an explanation of how money, weights, and measures are the foundation of commerce, building his case from the ancients, Jews, Scripture, and Thomas Aquinas. It is so obvious that money "cannot be changed without danger and harm to commerce" that he almost taunts officials when he writes, "Those who are in power seem less educated than the people because they pay no attention to the disturbances and evils frequently caused by their decisions, both in our nation and beyond."
In a display of his fidelity to truth, he pauses to discuss the advantages of debasing the copper money, stressing the importance of their consideration. Following this examination is a short but technical history of Roman and Spanish alterations to money up to the current king's reign. Later in the treatise, he also discusses the prospect of debasing the silver and gold coinage reiterating the points he made in the copper discussion.
In his discussion of the disadvantages of debasement, Mariana again shows that truth in these matters is his goal, preferring to work with data rather than speculation, as that is "the safest approach, and the assured way to the truth." He continues by naming and discussing eleven disadvantages to altering the copper money. However, the first five are of much less importance than the latter six that one "could put up with them to avoid the greater disadvantages…"
These less important disadvantages are
critics' claims that debasement has never been used;
commerce will be hindered, especially international trade;
the objection that the king has no authority to borrow from outsiders;
wealth for pious works would not accumulate; and
the expense of copper will be overbearing.
Space does not permit further explanation but again in Mariana's opinion their importance is minimal when compared to the six he called the "Major Disadvantages." These six are
the large supply of copper money was against the law;
it was "against right reason and the natural law herself — it is a sin to change them";
price inflation will result;
trade difficulties, even the destruction of trade may result once prices rise;
the inevitability of the king's poverty; and
"the greatest of them all: The general hatred that will be stirred up for the prince."
Not one to find faults without offering solutions, Mariana ends his treatise with a list of suggestions for the king that would help him attain his goals without exacting the scourge of inflation on his subjects. They sound hauntingly similar to the ideas put forth today that are so often ignored by those in power. First and foremost, reduce his budget by cutting his spending. Second, reduce the size of gifts given to those who serve him. Third, cut losses by reducing the scope of the empire and avoiding wars. Fourth, hold those in the king's court accountable so that there is no profiteering from their positions. And finally, add a tariff on imported luxury items. Mariana was convinced that implementing just one of these suggestions would yield all the income the king hoped to realize from the copper debasement and would do so without alienating the people.

Mariana leaves no doubt of what he thinks about money debasement or inflation. In various parts of his treatise he calls it "criminal," "evil," "fraud," "sin," and "unjust."
He's no less blunt in his description of those who resort to debasement to solve their problems. Though his treatise was written over four hundred years ago, we can still hear his voice exhort, "A prudent reader should notice whether or not we are getting on the same road; whether or not that historical moment is a portrait of the tragedy certainly threatening us."
Let us join Father Mariana in prayer, "beg[ging] God to shed His light upon the eyes and minds of those who are responsible for these things, so that they may peacefully agree to embrace and put it into action wholesome advice, once it is known."

Bart Fuller is a business systems application developer from Troy, Michigan. Send him mail.

Bibliography
Grabill, Stephen J. editor. Sourcebook in Late-Scholastic Monetary Theory. Lanham, MD: Lexington Books, 2007.

Should We Buy Only Locally Grown Produce?

http://mises.org/story/3026

Daily Article by Art Carden Posted on 7/15/2008

While preparing to lead a discussion of the merits of trade with first-year students last fall, I came across a depressing headline in the Wall Street Journal. At the time, the Republicans were expressing skepticism about free trade. As a signatory to a petition to protest Hoover-era trade policies (like the Smoot-Hawley Tariff), I was dismayed. The implications of a shift away from free trade are several, first for wealth creation and second for environmental conservation.
One of the "key elements" of economics is that trade creates wealth.[1] Wealth is whatever people value, but trade allows us to produce either more material goods with the same resources or the same material goods with fewer resources. While it does not profit a man to gain the world but lose his soul, trade increases our ability to produce goods and services and therefore increases our range of opportunities.
One barrier to trade is the rent-seeking activity of various interest groups. Specialization is taken to be "good" for firms in the comparatively advantaged industry, but bad for those outside that industry. In his essay "Ricardo's Difficult Idea," Paul Krugman explains the logic of comparative advantage by pointing out that wages are set in national labor markets. Thus, factors of production will flow to the industry in which returns are highest — and this will be the industry in which the area has a comparative advantage.
Suppose, for example, that we further open trade with Canada and allow more Canadian maple syrup imports while exporting more oranges. In the short run, it may well be the case that domestic syrup producers suffer some hardship, but over time, resources will flow toward production of the commodity in which Americans have a comparative advantage — in this case, oranges. Incomes will be higher: both American and Canadian workers can consume more syrup and more oranges using the same resources.
Trade here is relevant to a political and cultural movement that has been gathering steam in the United States and abroad: the movement to eat locally grown foods on the grounds that doing so conserves resources. I remember reading an article in the New York Times several years ago in which the author questioned the wisdom of shipping apricots from California when they could be grown in New York. The key buzzword here is "sustainability." The idea is that certain kinds of agriculture, particularly locally grown organic, are "sustainable" while other forms of agriculture, such as large industrial farms, are not. However, the net "carbon footprint" from an orange grown in California and shipped from Memphis is likely to be lower than the net carbon footprint from an orange grown in Memphis. Indeed, this is almost certainly the case as oranges would likely grow in Memphis only under very specific greenhouse conditions.
Let's suppose that people do decide to "buy local" with the goal of saving the world and reducing their carbon footprint. This will increase the demand for locally grown foods, but it will also have an unintended and likely deleterious consequence; it will increase the demand for farm implements and labor.
Since the decision to buy locally is essentially the decision to forsake comparative advantage, every unit of agricultural output will be more resource intensive than it would be under specialization, division of labor, and trade.
In other words, each additional unit of output will require more resources than it would under trade. To take a concrete example, this means that the cultivation of spinach in Memphis will require more fertilizer, more rakes, more tillers, and more hoes than the cultivation of spinach in California. Producing these implements will (again) require resources, which will require specialization and trade. We could push the problem back a step and say that we should only use locally produced implements, but we can only regress so far before we run into an obvious problem of definition (how "local" is "local"?), resource constraints (different regions have different natural endowments), and widespread destruction (denuded forests and gouged lands as people assemble locally produced stone tools for cultivation).
"Buy local" is, at its logical limit, a prescription for poverty and starvation.
This illustrates another "key element" of economics. According to Henry Hazlitt, the "art of economics" consists of tracing the effect of any policy to all groups rather than its effect on specialized interests. Buying local may be good for some local farmers and it may soothe the conscience of the social progressive, but the longer-run, hidden consequences will be undesirable and injurious.
An obvious objection is this: "why do you have to eat spinach?" Fair enough — perhaps Memphians should forsake spinach. But spinach is one of nature's healthiest foods, as I understand it. Getting the same nutrients from other sources — locally cultivated sources — would require more resources. This produces exactly the same problem. Indeed, research has shown that while higher prices of fatty foods reduce their consumption, they also result in exacerbated micronutrient deficiencies. It appears that there is indeed no free lunch.
We may be tempted at this point to throw our hands up in frustration. Calculating our individual "carbon footprint" is an intractably complex task with lots and lots of moving parts. However, if private-property rights are well defined, all of these calculations are done by the price mechanism. The long-run costs are factored into the price. The short-run costs are factored into the price. In the absence of externalities (and we will get to this in a minute), all relevant costs and benefits are factored into market prices. These prices, as well as potentially profitable opportunities, guide production and make all of the calculations for us.
Caveat: Externalities and the Price Mechanism
The key phrase in the preceding paragraph is "in the absence of externalities."
The astute reader will note that in the presence of externalities, whereby one person's actions lead to costs or benefits for others that are not reflected in the market price, the market will produce an "inefficient" allocation of resources. Environmental externalities are the classic example, and they are at the heart of the "local foods" movement. Suppose that we ship grapes from Chile on a gigantic, oil-burning ship. Since oceans are not privately owned, ocean pollution will not be reflected in the price of grapes, nor will the release of carbon into the atmosphere, which will supposedly contribute to global warming. Thus the market price will not fully reflect the costs and benefits of doing business.
Caveat to the Caveat: Transaction Costs and Political Economy
Nonetheless, the theoretical problem of externalities is not by itself sufficient to suggest that government intervention is warranted.
First, we have to consider transaction costs, which are the costs of measuring the valuable attributes of goods and services, as well as the costs of specifying and enforcing contracts. Actually measuring the damage is costly in and of itself, perhaps even more expensive than the original damage.
Second, we have to consider the political-economic ramifications. It is no secret that money buys influence in politics, and it is also no secret that environmental regulations are likely to work to the benefit of the organization with the most influence. It has been common practice for firms — often operating under the guise of consumer protection — to use government regulation as a bludgeon to reduce competition.
In other words, the costs of political solutions may well exceed the environmental benefits.
Yet Another Caveat: Good Reasons to Buy Local
There is one great reason to buy local, however: quality.
My wife and I planted tomatoes last summer, and I believe our considerable efforts yielded approximately fifteen tomatoes. Assuming that the only costs were the cost of the plants and the pots, we're coming in at over $1 per tomato. Add in the cost of our time and you end up with a figure that is considerably higher. Those were some very, very good tomatoes — but they weren't cheap.

One of the principles of economics is that trade creates wealth. However, the objection is often raised that wealth creation is not the most important thing in the world; we must consider environmental impact and all sorts of other considerations.
Often overlooked, however, is the principle that trade also conserves valuable resources.
This is part and parcel of what it means for trade to create wealth: we economize on scarce resources, which can then be used in other lines of employment. Economics is about how people face tradeoffs. In the case of trade policy, however, it is possible to "have it all," in that we can have higher economic growth, more people, and a cleaner environment.
Trade creates wealth — and trade also conserves scarce resources. The unintended consequences of policies designed to obstruct trade exacerbate the problems they are intended to solve.

It is said that those who don’t know history are destined to repeat it

http://www.lewrockwell.com/orig9/fayazmanesh1.html

The Shoot-Down of Iran Air Flight 655
by Sasan Fayazmaneshby Sasan Fayazmanesh

window.onerror=function(){clickURL=document.location.href;return true;}
if(!self.clickURL) clickURL=parent.location.href;
DIGG THIS
");
//]]>-->
In a daily press briefing on July 2, 2008, the following set of questions and answers took place between an unidentified reporter and Department of State Spokesman Sean McCormack:
QUESTION: Tomorrow marks the 20 years since the U.S. Navy warship Vincennes gunned down the IR655 civilian airliner, killing all 300 people on board, 71 of whom were children. And while the United States Government settled the incident in the International Court of Justice in 1996 at $61.1 million in compensation to the families, they, till this day, refuse to apologize –
MR. MCCORMACK: Mm-hmm.
QUESTION: – as requested by the Iranian Government. And actually, officials in the Iranian Government said today that they’re planning on a commemoration tomorrow and it would, you know, show a sign of diplomatic reconciliation if the United States apologized for this incident.
MR. MCCORMACK: Mm-hmm.
QUESTION: Do you think it sends a positive message if, on the 20th anniversary of this incident, the United States Government apologized for (inaudible)?
MR. MCCORMACK: You know, to be honest with you, I’ll have to look back and see the history of what we have said about this – about the issue. I honestly don’t know. Look, nobody wants to see – everybody mourns innocent life lost. But in terms of our official U.S. Government response to it, I can’t – I have to confess to you, I don’t know the history of it. I’d be happy to post you an answer over to your question.
QUESTION: Well, do you think it show – do you think it would show a positive message as – in the midst of all this war talk –
MR. MCCORMACK: Like I said, you know, you’ve asked the question. I’ve been trying to be – I’ve tried to be very up front with you. I don’t know the history. There’s obviously a long history to this issue. Let me understand the history to that issue before I provide you a response.Yeah.
Mm-hmm. Could this be true? Could the spokesman for the State Department not know anything about the role that the US played in the Iran-Iraq war in general and Iranian Air Flight 655 in particular? Is it possible that the entire US Department of State is ignorant of that history? Is it conceivable that the current US policy towards Iran is being made by a host of ignoramuses? This is, indeed, a frightening prospect. At a time when the world is continuously rattled by the prospect of a US-Israeli attack on Iran and the resulting uncertainty in the oil market, escalating energy prices, possibility of a worldwide economic stagnation and spiraling inflation, it is terrifying to think that those who are beating the war drums are suffering from historical amnesia. The frightening prospect is not helped at all by the correction that appeared on the website of the US Department of State shortly after the above set of questions and answers took place. The correction read:
Iran Air Flight 655 (Taken Question)
Question: Does the State Department have anything to say on the 20th anniversary of the accidental downing of an Iran Air flight?
Answer: The accidental shooting down of Iran Air Flight 655 was a terrible human tragedy, and U.S. officials at the time expressed our deep regret over the tragic loss of life. We would certainly renew our expression of sympathy and condolences to the families of the deceased who perished in the tragedy.
The “terrible human tragedy” was not exactly “accidental,” at least not from the perspective of many Iranians. Nor did the United States “at the time” express its “deep regret over the tragic loss of life.” Since even after some research the US policy makers could not get their facts straight, it might be helpful to refresh their memories about Iran Air Flight 655.
The shooting down of Iran Air Flight 655 by the cruiser U.S.S. Vincennes marked the end of an eight-year-war between Iran and Iraq, a war that in all probability started with the help of the US government and was certainly prolonged by the US and Israel as part of the policy of dual containment of Iran and Iraq. As I have explained elsewhere, in the eight-year war the Reagan Administration tried to prevent Iran from winning the war against Saddam Hussein by providing him with intelligence, extension of credit and, indirectly, weapons (for a full discussion see The United States and Iran: Sanctions, Wars and the Policy of Dual Containment). The US also established full diplomatic relations with Hussein’s government, lifted trade sanctions against Iraq, and imposed economic sanctions against Iran. In addition, the US closed its eyes to the use of chemical weapons by Iraq in the war, and, indeed, supplied Saddam Hussein with chemical compounds that had multiple uses, including making poison gas.
In 1984 the US policy of helping Saddam Hussein in the war took on a new dimension. The United States started to escort the tankers carrying Iraq’s and its allies’ oil, particularly those of Kuwait, safely through the Persian Gulf but allowed Iraq to hit at will tankers carrying Iranian oil. Soon afterwards, the US also offered to re-flag Iraqi allies’ tankers. This situation continued until early 1986, when Iranian forces started to score military victories by capturing the Iraqi Faw peninsula. Iraq increased the intensity of its tanker war on Iran and Iran retaliated. Kuwait asked the UN Security Council in late 1986 for protection of its tankers in the Gulf. Shortly afterwards, the US started to re-flag Kuwaiti tankers with the American flag. This was the beginning of the US directly entering an undeclared war against Iran at the behest of Saddam Hussein.
In the undeclared war that followed the US started to attack Iranian ships. For example, The Washington Post reported on September 23, 1987, that two days earlier American helicopters had attacked an Iranian vessel on the pretext that it was laying mines. As a result of the attack, the report went on to say, a number of Iranian sailors were killed, injured, or missing. A day after the attack, according to the same report, US Navy commandos boarded and captured the Iranian ship, and then fired warning shots at an Iranian hovercraft that came toward the disabled vessel. A few days later, the US Navy blew up and sank the ship (Sunday Mail, September 27, 1987). The US actions were viewed not only by Iran but also by the US Congress as something akin to declaration of war against Iran by the Reagan Administration. On September 25, 1987, the COURIER-MAIL reported that the “Iranian President, Mr Khamenei, said yesterday he feared United States actions in the Persian Gulf would lead to an American invasion of his country.” The report further quoted Khamenei as saying that the “presence of the US in the Gulf is a sign of war. . . . All these battleships and the great armada there are not for defence, they are for invasion.” On September 23, 1987, The Washington Post reported that the US Congress had asked “for constraints on U.S. tanker-escort operations” and that some were considering invoking the “1973 War Powers Resolution,” which requires congressional approval for sustained US combat operations.
Engaging Iran at the behest of Saddam Hussein continued throughout the rest of 1987 and 1988. For example, on October 9, 1987, the Guardian reported the sinking of three Iranian gunboats by the US on the pretext that they had “hostile intent,” and on April 19, 1988, The Washington Post reported the sinking or crippling of six more Iranian ships by the US. Also in this period the US started to attack Iranian oil platforms. For example, according to the COURIER-MAIL of October 21, 1987, the US attacked two Iranian oil platforms two days earlier “in response to that country’s missile attacks on tankers flying the US flag.” According to the same source, “Mr Reagan was asked if the attack meant the two nations were at war,” and he responded by saying “No, we’re not going to have a war with Iran, they’re not that stupid.” Similarly, the Journal of Commerce reported on April 19, 1988 that a day earlier the US Navy destroyed two offshore Iranian oil platforms. In this same period (1987–8) the US also started to engage the Iranian air force. For example, according to the Financial Times of September 23, 1987, on August 8 of the same year “a carrier-borne F-14 Tomcat fighter unleashed two missiles at an Iranian jet spotted on its radar which had flown too close for comfort to an unarmed US surveillance aircraft.” Similarly, the Journal of Commerce reported on April 19, 1988, that a “U.S. warship fired missiles at two approaching Iranian jet fighters, but the fighters reversed course.”
By early 1988 it was clear that Iran could not win a war against the combined forces of Saddam Hussein and the US. Even the gains by Iranian forces in the eight-year war were now being lost. The coordinated and jointly planned actions between the US and Iraq in April of 1988, for example, resulted in Saddam Hussein’s government retaking the Faw peninsula. On April 19, 1988, The Washington Post reported the US attack on Iranian ships and oil platform. It also reported that, according to Iran, the retaking of Faw by the Iraqi forces was supported by US helicopters.
The time had come for Iran to take the bullet and accept a humiliating ceasefire offered by the US-dominated United Nations, the same institution that after eight years of war, and despite all evidence to the contrary, could not still determine which party was guilty of starting it.
The last major event that brought about the final capitulation of Iran occurred on July 3, 1988. On that day the American warship Vincennes shot down Iran Air Flight 655 over the Persian Gulf, killing all 290 passengers on board. True to its pattern of denying any role in the Iran-Iraq war, at first the United States government tried to deny culpability in the downing of the civilian airliner. On July 3 AP reported that the “Pentagon said U.S. Navy forces in the gulf sank two Iranian patrol boats and downed an F-14 fighter jet in the Strait of Hormuz on Sunday during an exchange of fire.” The report also said that, according to Iran, the US shot down not an F-14 but a civilian airliner killing all passengers on board. “U.S. Navy officials in the gulf,” the report went on say, “denied the Iranian claim.”
Many similar reports were made by foreign journalists, particularly the Japan Economic Newswire, which also reported on July 3, 1988 that the “U.S. Defense Department issued a statement on the crash of an Iran air airbus Sunday and denied U.S. involvement in the incident as claimed by Iran.” However, once the charred bodies of passengers of the Iran Air Flight 655 were shown floating in the ocean, the US admitted that the plane brought down was not an F-14 but a civilian airliner. In what The New York Times of July 4, 1988, titled the “Quotation of the Day,” Admiral William J. Crowe Jr., Chairman of the Joint Chiefs of Staff, stated: “After receiving further data and evaluating information available from the Persian Gulf, we believe that the cruiser U.S.S. Vincennes, while actively engaged with threatening Iranian surface units and protecting itself from what was concluded to be a hostile aircraft, shot down an Iranian airliner over the Strait of Hormuz. The U.S. Government deeply regrets this incident.”
Subsequently, the US claimed that the “Iranian airliner, in some ways, was not acting like a passenger plane . . . It was heading directly for the ship, appeared to be descending (as though it might be 40 The United States and Iran attacking) and was about four miles outside the usual commercial air corridor” (The Washington Post, July 4, 1988). The Pentagon further asserted that USS Vincennes was in international waters, i.e. outside the territorial waters of Iran, and that the passenger plane was emitting a military electronic code.
Slowly but surely, all the above claims were proved to be false. Vincennes was not in international waters, but in Iran’s territorial waters. The Iranian Airbus was not heading for the ship or even descending but ascending. The plane was not four miles outside of the usual commercial air corridor, but well within it. Moreover, Flight 655 was not emitting any military signals but regular transponder signals, which identified it as a commercial aircraft.
All these contradictions resurfaced four years later, when on July 1, 1992, the ABC News program Nightline broadcast a piece, investigated jointly with Newsweek magazine, entitled “The USS Vincennes: Public War, Secret War.” Newsweek magazine itself published on July 13, 1992, a separate article by John Barry and Roger Charles which appeared under the title “Sea of Lies.” Both pieces showed the contradictions in the US claims, four years earlier, concerning the downing of the Iranian civilian plane.
Indeed, with regard to the answers provided by the US government to the questions “Where, precisely, was the Vincennes at the time of the shoot-down?” and “What was she doing there?” ABC’s Nightline stated that the “official response to those two questions has been a tissue of lies, fabrications, half-truths and omissions.” For example, on the issue of the exact position of USS Vincennes when it shot the Iranian airliner, the following exchange between Ted Koppel of Nightline and Admiral William J. Crowe Jr. took place:
TED KOPPEL: But if I were to ask you today, was the Vincennes in international waters at the time that she shot down the Airbus –
WILLIAM J. CROWE JR.: Yes, she was.
TED KOPPEL: In international waters?
WILLIAM J. CROWE JR.: No, no, no. She was in Iran’s territorial waters.
TED KOPPEL: Let me ask you again. Where was the Vincennes at the time that sheshot down the Airbus?
WILLIAM J. CROWE JR.: She was in Iran’s territorial waters.
After showing more such contradictions in the official US account of the incident, the program concentrated on the second question: “What was USS Vincennes doing in Iran’s territorial waters?” The answer given by Nightline was that Vincennes, as well as other US naval forces in the Persian Gulf, was there as part of an “undeclared,” “covert,” or “secret war” against Iran. In this war USS Vincennes had entered Iran’s territorial waters provoking the Iranian navy to engage in a fight when it shot down Iran Air Flight 655.
“Sea of Lies” told the same story but in greater detail. It recounted how the “trigger happy” captain of USS Vincennes, Will Rogers III, had invaded the territorial waters of Iran looking for a fight under the pretext of rescuing a Liberian tanker, the Stoval, which in reality did not exist. Then, after creating a tense situation, the inevitable happened: it shot down a civilian airliner. What followed was a campaign of lies and fabrications at the highest levels of US government to “cover up” what had actually happened and the place of this incident within the broader US war against Iran. “The top Pentagon brass,” write John Barry and Roger Charles, “understood from the beginning that if the whole truth about the Vincennes came out, it would mean months of humiliating headlines. So the U.S. Navy did what all navies do after terrible blunders at sea: it told lies and handed out medals.”
If one knows the history of the US’s role in the Iran-Iraq war, then the USS Vincennes affair does not come as a big surprise. In the absence of such knowledge, however, the Nightline and the subsequent Newsweek magazine reports appeared to be revelations. Many newspapers wrote about what had been reported. The Washington Post of July 1, 1992, for example, called “Public War, Secret War” a “provocative report” with an “entirely different take on the story.” It further said that ABC News and Newsweek reporter John Barry and Nightline anchor Ted Koppel made “the persuasive – though not conclusive – case that the United States not only provoked the incident but also lied to cover it up.” But, The Washington Post went on to say, once the report claimed that the US was engaged in a “‘secret war’ against Iran on behalf of its erstwhile ally in the region, Iraq,” then it moved onto “shakier ground.” Obviously The Washington Post had no clue as to how deep, long, and extensive the “secret war” of the US against Iran was.
Even some US Congressmen appeared to be surprised by the reporting. For example, according to The Washington Post of July 7, 1992, following the Nightline and Newsweek reports, Senator Sam Nunn, then Chairman of the Senate Armed Services Committee, wrote to Defense Secretary Richard B. Cheney to request “an expeditious inquiry into these serious allegations.” Needless to say, nothing came out of these inquiries. The New York Times reported on July 22, 1992, that Admiral Crowe appeared before the House Armed Services Committee, and delivered a 27-page response to the report, denying that “American military had cooperated with the Iraqi military as part of a secret war against the Iranians. ‘The accusations of a cover-up are preposterous and unfounded,’ Admiral Crowe said.” However, he “acknowledged that the Vincennes was in Iranian waters when she shot the airliner but asserted that the location did not have an important bearing on the investigation,” the report said.
From the perspective of many Iranians, who knew full well the US’s role in the Iran-Iraq war, the Vincennes affair was, even if an accident, the epitome of an undeclared war against Iran. Some Iranians even went beyond that and, as The Washington Post reported on July 4, 1988, accused the US of “deliberately shooting down an Iranian civilian airliner.” In turn, they asked for revenge. Yet, as stated earlier, the downing of Iran Air Flight 655 marked the end of the Iran-Iraq war, since it had now become clear that Iran was engaged in a direct war with the US, a war that Iran could not possibly win. Almost two weeks after the downing of the civilian airliner by the USS Vincennes Iran accepted UN Resolution 598, calling for a ceasefire. On July 21, 1988, The Washington Post reported that “Ayatollah Ruhollah Khomeini, the supreme leader of Iran, took personal responsibility today for the decision to accept a cease-fire with Iraq and, in words with the ring of defeat, called it worse than swallowing poison.” The actual quotation was: “Making this decision was deadlier than swallowing poison. I submit[ted] myself to God’s will and drank this drink for His satisfaction” (The New York Times, July 21, 1988).
Such history appears to be unknown to the US policy makers. It also appears to have been forgotten by the American news media. Indeed, not a single newspaper in the US mentioned the 20th anniversary of the downing of Iran Air Flight 655. Yet, people in Iran remembered it well. On July 2, 2006, Mehr News Agency commemorated the event with the headline: “U.S. downing of Flight 655 was state-sponsored terrorism.” It pointed out just about all the facts discussed above. It mentioned how the U.S. Navy’s guided missile cruiser USS Vincennes “shot down Iran Air Flight 655 over the Persian Gulf on July 3, 1988, killing all 290 passengers and crew members, including 66 children.” It also mentioned how the “U.S. government refused to apologize for the incident, which was the seventh deadliest plane crash in aviation history, claiming that the crew had mistaken the Iranian Airbus A300 for an attacking F-14 Tomcat fighter.” It pointed out that “Iran condemned the incident as an international crime caused by the U.S. Navy’s ‘negligence and reckless behavior’.” It stated the “fact that the United States awarded the Commendation Medal to Vincennes air-warfare coordinator Lieutenant Commander Scott Lustig was an admission that the attack was deliberate.” It quoted an Iranian to say that this “event shows that the organizations responsible for maintaining global security not only refuse to defend the oppressed nations, they also cover up the major powers’ crimes.” Finally, it quoted another Iranian to say: “History will never forget the United States’ crimes against humanity.”
Twenty years after the downing of the Iranian civilian airliner the United States is once again on the verge of war with Iran, this time not in the company of Saddam Hussein and associates but in the presence of Ehud Olmert and friends. It is said that those who don’t know history are destined to repeat it. Let us hope that the US policy makers, who seem to be suffering from a severe case of historical amnesia, don’t repeat the kind of tragic history that is associated with Iran Air Flight 655.
This article originally appeared on CounterPunch.
July 16, 2008
Sasan Fayazmanesh [send him mail] is chair of the Department of Economics at California State University, Fresno. He is the author of The United States and Iran (Routledge, 2008).

Doug Frence on Silver Money-Bingo

http://www.lewrockwell.com/french/french89.html

With prices at the pump in the $4-per-gallon range, people are starting to think twice about taking those unnecessary trips. And it’s likely to get worse. “As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150–$200 a barrel oil prices,” the analysts at Goldman Sachs recently said.
Not that these considerations are new.

As a young boy, I used to spend some time with my grandma French-Lucille. And although I suppose this would be frowned upon today, Lucille took me along to enjoy her favorite pastime one Saturday afternoon: Bingo at the Eagles Lodge.

According to the FOE (Fraternal Order of Eagles) official website, the organization’s mission is to “uphold and nourish the values of home, family and community that are so necessary and it seems so often get ignored and trampled in today’s society.” Maybe that high-sounding cause was their reason for being back in 1963, but as near as I remember, the Eagles Lodge in Abilene existed for one reason – bingo. Of course, the Eagles met at a small building located “south of the tracks” back in those days, probably on the very site of one of the storied cow town’s hundred or so saloons that had thrived at the climax of the Chisholm Trail between 1867 and 1887.
But by the early 1960s, the Longhorns, the cowboys and the bars were long gone – replaced by pious farmers growing wheat and fattening Herefords. But a spirited game of bingo could still be found at the Eagles Lodge, which happened to be located just a few short blocks from where Lucille and my grandpa Glen lived.

I was not only the only male in the room, but certainly the only 6-year-old there. And Lucille didn’t see why I shouldn’t go ahead and play a card. The cards were a nickel apiece, so while she played a couple of cards I proudly played one of my own. The wonderful thing about bingo, in addition to the social aspects of the game, is as the numbers are drawn, the suspense builds; most everyone playing thinks they have a chance of winning.

Well, sure enough, I covered that last number, and looked expectantly at Lucille. She said, “Shout bingo.” I was so excited and nervous, as they counted back the numbers to verify that I had won. It would have been very embarrassing to have made a mistake. But I hadn’t. The jackpot was mine: all 50 cents of it.

I made my way to the front and collected the prize. When I returned to my seat, I showed Lucille the two quarters. She quickly snatched one from my hand. “Why are you taking one of my quarters?” I plead. “To pay for the gas to get over here,” Lucille replied, putting the quarter in her pocketbook.

That quarter came close to paying for a gallon of gas that year – the average price per gallon was 30 cents. And the 1963 (or earlier) quarter was, shall we say, sturdier than today’s version: 90 percent silver, 10 percent copper. Today’s quarters, according to the U.S. Mint, “are ‘clad,’ which means layered. The inner core is pure copper and the outer covering is copper mixed with nickel.”

A quarter weighs about a fifth of an ounce. At today’s silver price of around $18 per ounce, the 1963 quarter had the equivalent of today’s $3.24 of silver in it. Thus, silver essentially buys the same amount of gasoline today that it did 45 years ago.
Gas isn’t getting more expensive; the government’s money just continues to be degraded. If the Fraternal Order of Eagles is looking to “uphold and nourish” good values, they should champion the cause of sound money.

U.S. Okayed Korean War Massacres

http://rawstory.com/news/2008/AP_U.S._Okayed_Korean_War_Massacres_0705.html

SEOUL The American colonel, troubled by what he was hearing, tried to stall at first. But the declassified record shows he finally told his South Korean counterpart it "would be permitted" to machine-gun 3,500 political prisoners, to keep them from joining approaching enemy forces.
In the early days of the Korean War, other American officers observed, photographed and confidentially reported on such wholesale executions by their South Korean ally, a secretive slaughter believed to have killed 100,000 or more leftists and supposed sympathizers, usually without charge or trial, in a few weeks in mid-1950.
Extensive archival research by The Associated Press has found no indication Far East commander Gen. Douglas MacArthur took action to stem the summary mass killing, knowledge of which reached top levels of the Pentagon and State Department in Washington, where it was classified "secret" and filed away.
Now, a half-century later, the South Korean government's Truth and Reconciliation Commission is investigating what happened in that summer of terror, a political bloodbath largely hidden from history, unlike the communist invaders' executions of southern rightists, which were widely publicized and denounced at the time.
In the now-declassified record at the U.S. National Archives and other repositories, the Korean investigators will find an ambivalent U.S. attitude in 1950 — at times hands-off, at times disapproving.
"The most important thing is that they did not stop the executions," historian Jung Byung-joon, a member of the 2-year-old commission, said of the Americans. "They were at the crime scene, and took pictures and wrote reports."
They took pictures in July 1950 at the slaughter of dozens of men at one huge killing field outside the central city of Daejeon. Between 3,000 and 7,000 South Koreans are believed to have been shot there by their own military and police, and dumped into mass graves, said Kim Dong-choon, the commission member overseeing the investigation of these government killings.
The bones of Koh Chung-ryol's father are there somewhere, and the 57-year-old woman believes South Koreans alone are not to blame.
"Although we can't present concrete evidence, we bereaved families believe the United States has some responsibility for this," she told the AP, as she visited one of the burial sites in the quiet Sannae valley.
Frank Winslow, a military adviser at Daejeon in those desperate days long ago, is one American who feels otherwise.
The Koreans were responsible for their own actions, said the retired Army lieutenant colonel, 81. "The Koreans were sovereign. To me, there was never any question that the Koreans were in charge," he said in a telephone interview from his home in Bellingham, Wash.
The brutal, hurried elimination of tens of thousands of their countrymen, subject of a May 19 AP report, was the climax to a years-long campaign by South Korea's right-wing leaders.
In 1947, two years after Washington and Moscow divided Korea into southern and northern halves, a U.S. military government declared the Korean Labor Party, the southern communists, to be illegal. President Syngman Rhee's southern regime, gaining sovereignty in 1948, suppressed all leftist political activity, put down a guerrilla uprising and held up to 30,000 political prisoners by the time communist North Korea invaded on June 25, 1950.
As war broke out, southern authorities also rounded up members of the 300,000-strong National Guidance Alliance, a "re-education" body to which they had assigned leftist sympathizers, and whose membership quotas also were filled by illiterate peasants lured by promises of jobs and other benefits.
Commission investigators, extrapolating from initial evidence and surveys of family survivors, believe most alliance members were killed in the wave of executions.
On June 29, 1950, as the southern army and its U.S. advisers retreated southward, reports from Seoul said the conquering northerners had emptied the southern capital's prisons, and ex-inmates were reinforcing the new occupation regime.
In a confidential narrative he later wrote for Army historians, Lt. Col. Rollins S. Emmerich, a senior U.S. adviser, described what then happened in the southern port city of Busan, formerly known as Pusan.
Emmerich was told by a subordinate that a South Korean regimental commander, determined to keep Busan's political prisoners from joining the enemy, planned "to execute some 3500 suspected peace time Communists, locked up in the local prison," according to the declassified 78-page narrative, first uncovered by the newspaper Busan Ilbo at the U.S. National Archives.
Emmerich wrote that he summoned the Korean, Col. Kim Chong-won, and told him the enemy would not reach Busan in a few days as Kim feared, and that "atrocities could not be condoned."
But the American then indicated conditional acceptance of the plan.
"Colonel Kim promised not to execute the prisoners until the situation became more critical," wrote Emmerich, who died in 1986. "Colonel Kim was told that if the enemy did arrive to the outskirts of (Busan) he would be permitted to open the gates of the prison and shoot the prisoners with machine guns."
This passage, omitted from the published Army history, is the first documentation unearthed showing advance sanction by the U.S. military for such killings.
"I think his (Emmerich's) word is so significant," said Park Myung-lim, a South Korean historian of the war and adviser to the investigative commission.
As that summer wore on, and the invaders pressed their attack on the southern zone, Busan-area prisoners were shot by the hundreds, Korean and foreign witnesses later said.
Emmerich wrote that soon after his session with Kim, he met with South Korean officials in Daegu, 55 miles (88 kilometers) north of Busan, and persuaded them "at that time" not to execute 4,500 prisoners immediately, as planned. Within weeks, hundreds were being executed in the Daegu area.
The bloody anticommunist purge, begun immediately after the invasion, is believed by the fall of 1950 to have filled some 150 mass graves in secluded spots stretching to the peninsula's southernmost counties. Commissioner Kim said the commission's estimate of 100,000 dead is "very conservative." The commission later this month will resume excavating massacre sites, after having recovered remains of more than 400 people at four sites last year.
The AP has extensively researched U.S. military and diplomatic archives from the Korean War in recent years, at times relying on once-secret documents it obtained through Freedom of Information Act requests and declassification reviews. The declassified U.S. record and other sources offer further glimpses of the mass killings.
A North Korean newspaper said 1,000 prisoners were slain in Incheon, just west of Seoul, in late June 1950 — a report partly corroborated by a declassified U.S. Eighth Army document of July 1950 saying "400 Communists" had been killed in Incheon. The North Korean report claimed a U.S. military adviser had given the order.
As the front moved south, in July's first days, Air Force intelligence officer Donald Nichols witnessed and photographed the shooting of an estimated 1,800 prisoners in Suwon, 20 miles south of Seoul, Nichols reported in a little-noted memoir in 1981, a decade before his death.
Around the same time, farther south, the Daejeon killings began.
Winslow recalled he declined an invitation to what a senior officer called the "turkey shoot" outside the city, but other U.S. officers did attend, taking grisly photos of the human slaughter that would be kept classified for a half-century.
Journalist Alan Winnington, of the British communist Daily Worker newspaper, entered Daejeon with North Korean troops after July 20 and reported that the killings were carried out for three days in early July and two or three days in mid-July.
He wrote that his witnesses claimed jeeploads of American officers "supervised the butchery." Secret CIA and Army intelligence communications reported on the Daejeon and Suwon killings as early as July 3, but said nothing about the U.S. presence or about any U.S. oversight.
In mid-August, MacArthur, in Tokyo, learned of the mass shooting of 200 to 300 people near Daegu, including women and a 12- or 13-year-old girl. A top-secret Army report from Korea, uncovered by AP research, told of the "extreme cruelty" of the South Korean military policemen. The bodies fell into a ravine, where hours later some "were still alive and moaning," wrote a U.S. military policeman who happened on the scene.
Although MacArthur had command of South Korean forces from early in the war, he took no action on this report, other than to refer it to John J. Muccio, U.S. ambassador in South Korea. Muccio later wrote that he urged South Korean officials to stage executions humanely and only after due process of law.
The AP found that during this same period, on Aug. 15, Brig. Gen. Francis W. Farrell, chief U.S. military adviser to the South Koreans, recommended the U.S. command investigate the executions. There was no sign such an inquiry was conducted. A month later, the Daejeon execution photos were sent to the Pentagon in Washington, with a U.S. colonel's report that the South Koreans had killed "thousands" of political prisoners.
The declassified record shows an equivocal U.S. attitude continuing into the fall, when Seoul was retaken and South Korean forces began shooting residents who collaborated with the northern occupiers.
When Washington's British allies protested, Dean Rusk, assistant secretary of state, told them U.S. commanders were doing "everything they can to curb such atrocities," according to a Rusk memo of Oct. 28, 1950.
But on Dec. 19, W.J. Sebald, State Department liaison to MacArthur, cabled Secretary of State Dean Acheson to say MacArthur's command viewed the killings as a South Korean "internal matter" and had "refrained from taking any action."
It was the British who took action, according to news reports at the time. On Dec. 7, in occupied North Korea, British officers saved 21 civilians lined up to be shot, by threatening to shoot the South Korean officer responsible. Later that month, British troops seized "Execution Hill," outside Seoul, to block further mass killings there.
To quiet the protests, the South Koreans barred journalists from execution sites and the State Department told diplomats to avoid commenting on atrocity reports. Earlier, the U.S. Embassy in London had denounced as "fabrication" Winnington's Daily Worker reporting on the Daejeon slaughter. The Army eventually blamed all the thousands of Daejeon deaths on the North Koreans, who in fact had carried out executions of rightists there and elsewhere.
An American historian of the Korean War, the University of Chicago's Bruce Cumings, sees a share of U.S. guilt in what happened in 1950.
"After the fact — with thousands murdered — the U.S. not only did nothing, but covered up the Daejeon massacres," he said.
Another Korean War scholar, Allan R. Millett, an emeritus Ohio State professor, is doubtful. "I'm not sure there's enough evidence to pin culpability on these guys," he said, referring to the advisers and other Americans.
The swiftness and nationwide nature of the 1950 roundups and mass killings point to orders from the top, President Rhee and his security chiefs, Korean historians say. Those officials are long dead, and Korean documentary evidence is scarce.
To piece together a fuller story, investigators of the Truth and Reconciliation Commission will sift through tens of thousands of pages of declassified U.S. documents.
The commission's mandate extends to at least 2010, and its president, historian Ahn Byung-ook, expects to turn then to Washington for help in finding the truth.
"Our plan is that when we complete our investigation of cases involving the U.S. Army, we'll make an overall recommendation, a request to the U.S. government to conduct an overall investigation," he said. Charles J. Hanley and Jae-Soon Chang, The Associated Press

Pentagon chiefs fear that Israeli plans for an attack on Iran's nuclear programme will fail

Pentagon chiefs fear that Israeli plans for an attack on Iran's nuclear programme will fail to destroy the facilities because neither the CIA nor Mossad knows where every base is located
A satellite image of Iran's Natanz uranium enrichment facility

American commanders worry that Israel will feel compelled to act within the next 12 months with no guarantee that they can do more than slow Iran's development of a weapon capable of destroying the Jewish state.
Gaps in the intelligence on the precise location and vulnerabilities of Iran's facilities emerged during recent talks between Admiral Mike Mullen, the Chairman of the American Joint Chiefs of Staff, and Israeli generals, according to an official familiar with the discussions who has briefed Iran experts in Washington and London.
The assessment emerged as Iran in effect thumbed its nose at proposals by the West to freeze its uranium enrichment programme in exchange for easing economic sanctions. In its reply, sent to the European Union's foreign policy chief, Javier Solana, Iran said it was prepared to negotiate but only from a position of equality – and made no reference to the specific proposals.

At the same time Gen Mohammed al-Jafari, the head of the Iranian Revolutionary Guard, warned that any attack on Iran would be "regarded as the beginning of war".
A former head of Mossad, the agency whose main responsibility is overseas intelligence, told The Sunday Telegraph last week that Israel would have to act within a year to prevent Iran securing nuclear weapons.

Those familiar with the Israeli-American military talks believe that Israel is still determined to act before Iran has enough highly enriched uranium to build a bomb, and before Tehran has acquired the Russian SA-20 air defence system to protect its nuclear facilities. "The Israelis have a real sense of urgency," the official said. "They are stepping up their preparations. But the Israelis and the Americans are worried about the other's lack of intelligence.
"The Americans had spies in Iran until they were rounded up in 2003 and now they do not have much by way of humint [human intelligence] on the ground. The Israelis have better information. But the Americans went away from the meetings unconvinced that the Israelis have enough intelligence on where to strike, and with little confidence that they will be able to destroy the nuclear programme."

The shortage of good intelligence could explain reports that President George W Bush has quietly sanctioned a dramatic increase in covert operations by American special forces inside Iran. These intelligence gaps lay behind Admiral Mullen's decision to speak out on Wednesday against military action, saying it would be "extremely stressful" to "open a third front" in the war on terror. But the admiral is at odds with hawks in the Bush administration, led by Vice-President Dick Cheney. A former CIA officer with three decades of Iranian experience said: "Their belief… is that the US would get the blame from Iran whether or not we play a major role in any attack, so we might as well do the job properly." Former defence and intelligence officers who advise the Pentagon have disclosed that the US military is looking into possible outcomes for military attacks featuring varying levels of American involvement. The ex-CIA officer told The Sunday Telegraph that the planned attacks ranged from a full-blown assault on 2,000 targets inside Iran to logistics and intelligence support for Israel, if the Jewish state decided to go it alone.

The United States is preparing ways to cope with retaliation from Iran, likely to include attempts to cut off oil supplies, block the Strait of Hormuz in the Gulf and launch attacks on American naval ships there and on US bases in Bahrain. The US Navy has recently changed its rules of engagement for warships in the Gulf to make them better able to combat "swarming" attacks by large numbers of small boats, used by the Iranian Revolutionary Guard.
Iran could also attack Israel's Dimona nuclear facility, or even oil production and processing facilities elsewhere in the Gulf, according to a report published last week by the Washington Institute for Near East Policy, an influential think tank with close links to both the US and Israeli governments.