When the first message on the ARPANET (the predecessor of today’s Internet) was sent by UCLA programmer Charley Kline, on October 29, 1969, the message text was the word “login”; the letters “l” and the “o” were transmitted, then the system crashed.

Forty two years later, the Internet is everywhere and rapidly becoming embedded in every device. Kevin Kelly sees the Net as evolving into a single “planetary computer” with “all the many gadgets we possess” as “windows into its core.” The Internet Society’s slogan is “The Internet is for everyone,” but Vint Cerf (who co-developed the TCP/IP network protocol that connects everything on the Net today) now prefers “The Internet is for everything.”

The world-wide adoption of a decentralized network that connects everything creates continuous technical, social and policy challenges that no one could have foreseen in 1969. Even as we take the Net for granted, the way we do the air that we breathe, decisions are being made by policy-makers, technologists and end-users that shape its future.

The success of the Internet has had a great deal to do with the development of open standards — often by volunteers — in groups such as the Internet Engineering Task Force (IETF). Decisions in Working Groups (WG) of the IETF are reached by consensus on the group mailing list so that anyone active on that list can be part of the process.

The need to add capacity is a constant challenge. What balance of public and private funding, regulation or deregulation are appropriate, and which types of infrastructure (centralized vs. decentralized; fiber, cable, wireless) warrant investment are subject to ongoing debate.

The Net has provided a platform for incredible innovation and economic growth. How to reward innovation and creativity while encouraging the widest dissemination of new content and technologies? How to encourage disruptive technologies while mitigating their potentially negative impacts?

Does there have to be a conflict between freedom and privacy on one hand and security on the other? How can users safely share personal information using social media which rely on the sale of their personal data as a business model? What legal and technical protections are necessary for businesses to securely move into the cloud?

Internet users have continuously influenced key technology innovations and policy decisions. But keeping them in the decision-making loop as they increasingly take the Net for granted presents an ongoing challenge.

On June 14, Internet pioneers Vint Cerf, Sir Tim Berners-Lee, inventor of the World Wide Web, and Lawrence E. Strickling, Assistant Secretary for Communications and Information, and Administrator, National Telecommunications and Information Administration (NTIA), will address these questions as keynote speakers for the INET Conference in New York City, sponsored by the Internet Society and the Internet Society of New York. [Disclaimer: As President of the Internet Society of New York I will deliver opening remarks.]

There will also be panels featuring industry leaders, members of civil society organizations, open source software advocates and government officials. The conference is open to the public although advance registration is required. It will also be streamed live.

Just as a democracy is never the rule of the people, but rather the people who participate in the process, the Internet has evolved through the efforts of technologists and activists — many who have volunteered their time to develop open standards, open source software and to advocate for an open Internet. It’s your call: What kind of Internet do you want?

Last week, Congress and the administration refused to seriously consider the problem of government spending. Despite the fear-mongering, a government shutdown would not have been as bad as claimed.

It is encouraging that some in Washington seem to be insisting on reduced spending, which is definitely a step in the right direction, but only one step. We have miles to go before we can even come close to a solution, and it will involve completely redefining the role of government in our lives and on the world stage. A compromise was struck at the last minute, but until Democrats agree to rein in entitlement spending, and Republicans back off the blank checks to the military industrial complex, it all amounts to political gamesmanship.

Unfortunately, the compromises always seem to be just the opposite. Instead of the left agreeing to cut social spending and the right agreeing to cut military spending, the right agrees to more welfare and the left agrees to more warfare. In spite of all the rhetoric, we will go deeper in debt, the Fed will print more money, and the value of the dollar will continue to plummet. How long will it be before foreigners stop buying our debt, and hyperinflation arrives? Throughout history, empires have always overextended themselves through conquests and wealth transfers leading to eventual collapse, from the Roman Empire to the Soviet Union. We are headed in the same direction and it seems only the chaos of the collapse of the dollar will stop the spending spree. Arguing over funding for Planned Parenthood and NPR, though important, only shows that leadership in Washington either won’t face reality, or don’t understand how serious the problem is.

Of course, an actual government collapse would create serious problems for many people who have come to depend on government payments for healthcare, retirement income, their children’s education, and even food and housing. However, these so-called entitlement programs are unconstitutional to begin with and have engendered a culture of dependence on wealth transfer payments that is out of control. It concerns me greatly that instead of dealing seriously with our situation, so many in Washington would rather allow the chaos that will ensue when all of the dependent people are suddenly cut off. Better to look reality squarely in the face and tell people the difficult truth that government is simply not capable of managing people’s lives from cradle to grave as was foolishly promised. We face trillions in deficits with any of the budgets under consideration. Keeping those promises is, sadly, just not one of our options in the long run. Better to admit the nanny state is coming to an end and we are no longer working on “compromises” but a transition — to a sustainable way of life, one that respects the constitution, the rule of law and property rights.

Last week Secretary of State Hillary Clinton testified before the House Foreign Affairs Committee, and I had the opportunity to raise some of my concerns regarding US foreign policy and the costs of our interventionism around the world.

Many observers claim that the recent overthrow of governments in northern Africa and the Middle East will result in more liberty for individuals across those regions. I sincerely hope this proves to be true, but history is replete with revolutions that began as a cry for freedom against oppressive governments but ended badly. There are no guarantees that Egyptians, Tunisians, or others will be better off after these heralded regime changes.

We do know, however, that these conflicts in Africa and the Middle East can be made worse if the U.S. government attempts to intervene and support certain candidates or factions. Such intervention would not further US interests or win us new friends, but in fact would undermine the legitimacy of any government that may emerge after the end of old regimes. Just as we would resent and reject any political force that came to power here with the sponsorship of a foreign government, Egyptians, Tunisians, Libyans, and others are not likely to take kindly to what they view as one US puppet being replaced by another US puppet. It is ironic, but the US government’s endless promotion of “democracy” overseas actually distorts and undermines democracy in targeted nations. The involvement of a foreign power often undermines true self-determination.

Radicals who understand this may use rising resentment and anti-Americanism as leverage to gain power, thus defeating the stated purpose of US involvement in the first place. I have never understood how the US government justifies subsidizing a newspaper or political party abroad in the name of promoting independence and pluralism. It makes no sense.

Unfortunately it seems to me that the administration has learned nothing from recent events in the Mediterranean region. Secretary Clinton emphasized several times at the committee hearing that “nothing is off the table” with regard to a US response to internal civil unrest in Libya. Since when is it our obligation to use political pressure or even military force to solve every problem overseas? Washington is currently buzzing with talk of “no-fly zones” and even a land invasion of Libya to aid rebel groups seeking to overthrow the Gadaffi regime. Some military leaders, including Defense Secretary Robert Gates, have rightly warned the more enthusiastic interventionists that such military operations can be enormously costly both financially and in lives.

The costs of trying to run the world are unsustainable, and we simply don’t have the money. Morally, it is inexcusable for the US to pick sides in such conflicts overseas, no matter how odious either side may be. Financially, it is no longer possible. The 2012 budget request from the administration for “international affairs,” which is code for “foreign aid”, is two and a half times larger than it was just nine years ago! As our economy shrinks at home, our obligations increase abroad. As our infrastructure crumbles at home, we continue to spend billions expanding infrastructure in places like Afghanistan and Iraq. If the interventionists have their way, no doubt we will be soon pay to reconstruct the infrastructure we destroy in a Libyan military operation. It does not take a genius to see that we are going broke, but Washington remains in denial and intent on business as usual. I fear that if we continue this way we may soon be out of business altogether.

Remember the late great Tea Party? The grass roots movement that made the political establishment quake? For one glorious moment it seemed as if a truly independent, average Joe/Joan movement might be gathering steam. A memory from that halcyon time: assorted TV pundits telling Republican leaders that Tea Party people “don’t like you guys either.” To which said leaders would put on a humble face and mumble something about how Republicans had lost their way and needed to get back on track. The out-of-control spending, corruption, and support for endless wars were missteps off the path of Republican core values.

In truth, no missteps were made. The Republican core was intact. Albeit shared with the Democrats. Out-of-control spending, corruption, and endless wars R both parties.

Though the following factoid has disappeared into the memory hole of ideological rewrites, a goodly number of those initially drawn to the Tea Party did not support endless wars. They supported the troops ’cause that’s a question of loyalty. But adventures-in-nation-building weren’t their thing. They were also concerned about losing civil liberties via Homeland Security overkill. And most Tea Party protesters blamed Wall Street, as much as government, for the financial meltdown of 2008. Lest we forget, the Tea Party really took off when the too-big-to-fail banks and other financial entities that partied with housing bubble paper were bailed out by taxpayers.

For a brief period the left was equally vociferous re the bailouts. But the moment of rapprochement between progressives and Tea Party types, along with the potential for game-changing coalitions, passed when it dawned on the left that coming down too hard on taxpayer infusions and massive government interventions might not set the right tone for passing health care reform. The Tea Party was way suspicious of government (almost as much as the 60′s counter-culture had been) and it was the wrong time to fan such suspicion. Instead ’twas time to ridicule and revile the masses of average Americans who feared that a government redo would make the failings of U.S. health care worse instead of better. That this fear might be based on, say, observation of the role federal policies played in inflating and eventually collapsing the housing market buttered no progressive parsnips. As for the fear that Obamacare would be Homeland Security in a nurse’s uniform, how paranoid was that?

While the left was in the basement mixing up the medicine and the Tea Party was on the pavement thinking about the government, the Republicans seized the time. Coming back strong as champions of the people and enemy of the political elite. (Insert row of laughing emoticons here.) Hoovering up the Tea Party and making it their own. The more the left trashed “tea baggers” the more the independent spark in the Tea Party dimmed. Tea talk started sounding more and more like the type of Republican conservatism dished by Limbaugh & company. Critiques of state capitalism, particularly as practiced during the Bush years, were out. So were thoughts of a third party. Union bashing was in. With public employee unions cast as evil incarnate.

After several years of government hearings and investigations into the 2008 financial meltdown, Republicans and Democrats have been unable to reach agreement on who-done-it. Republicans put the blame on the government sponsored mortgage giants, Fannie Mae and Freddie Mac; Democrats pin it on an insufficiently regulated Wall Street. No prime movers of subprime sleaze (hello Angelo Mozilo), or political enablers (hello Friends of Angelo), or major Wall Street sludge jugglers (too many for a shout out) have been prosecuted. Nor have new lending regulations staunched the growth of mortgage fraud in taxpayer-backed housing programs. However, we will be able to hang some teachers out to dry.

The concordance of big government and big finance that pumped the housing bubble and hence inflated hauls of real estate derived taxes (including property taxes) was not why so many local governments overextended themselves during the boom years and now face disaster during the bust. The real villains were teachers, firefighters, police officers, sanitation workers, and secretaries in public agencies. Aka Joe and Joan Average with a government job. Who, according to the bashers, are not average at all ’cause they get better benefits and more job security than a private sector employee or a small business owner. That being a private sector employee or a small business owner has its own set of advantages butters no conservative parsnips. The right, which typically decries attempts to stir up class warfare, is passing out flaming torches and whipping up envy. Screaming for folks to be stripped (preferably in public?) of their collective bargaining rights. Working to turn the American middle-class against itself.

And I thought only lefties were into creating social chaos…

Incidentally (or not) while the billionaire Koch brothers donated $43,000 to the gubernatorial campaign of union-busting Wisconsin Governor Scott Walker, housing and Realtor groups kicked in $43,125. Not that Republicans in general are uniquely blessed by the real estate industries. In New York, another state with budget problems, the NYC real estate crowd has been particularly generous to Governor Andrew Cuomo.

As for Joe and Joan Average, who really represents them? The left or the right? Answer: neither. At least, not reliably. Under certain self-serving circumstances both do an occasional good deed. But when push comes to shove in our state capitalist times, Joe and Joan are on their own. Which is less discouraging than it sounds. Being independent means never having to say you’re sorry for noticing that your representatives, no matter how rhetorically righteous, primarily rep big money conjoined with government power.

Third party, anyone?

Carola Von Hoffmannstahl
Mondo QT

During the past few weeks, Congress has been locked in a battle to pass a continuing resolution to fund government operations through September. Both supporters and opponents of the bill, HR 1, claim it is a serious attempt to reduce federal spending. However, an examination of the details of the bill call that claim into question. For one thing, the oft-cited assertion that HR 1 reduces spending by $99 billion is misleading. The $99 billion figure merely represents the amount that HR 1 reduces spending from the President’s proposed Fiscal Year 2011 budget — not reductions in actual spending. Trying to claim credit for a reduction in spending based on cuts in proposed spending is like claiming someone is following a diet because he had only five slices of pizza when he intended to have 10 slices!

In fact, HR 1 only reduces real federal spending by $66 billion compared to last year’s budget. This may seem like a lot to the average American but in the context of an overwhelming trillion-dollar budget and a national debt that could exceed 100 percent of GNP in September, it is barely a drop in the bucket.

One reason that HR 1 does not cut spending enough is that too many fiscal conservatives continue to embrace the fallacy that we can balance the budget without reducing spending on militarism. Until Congress realizes the folly of spending trillions pretending to impose democracy on the world we will never be able to seriously reduce spending.

Congress must not only reject the warfare state, it must also reject the welfare state. HR 1 is more aggressive in ending domestic spending than foreign spending, and does zero out some objectionable federal programs such as AmeriCorps. However, HR 1 leaves most of the current functions of the federal government undisturbed. This bill thus continues the delusion that we can have a fiscally responsible and efficient welfare state.

The failure to even attempt to address the serious threat the welfare-warfare state poses to American liberty and prosperity is the main reason why supporters of limited government and individual liberty ultimately should find HR 1 unsatisfactory. Only a rejection of the view that Congress can run the economy, run our lives, and run the world will allow us to make the spending reductions necessary to avert a serious financial crisis. This does not mean we should not prioritize and discuss how to gradually transition away from the welfare state in a manner that does not harm those currently relying on these programs. However, we must go beyond balancing the budget to transitioning back to a free society, and that means eventually placing responsibility for social welfare back in the hands of individuals and private institutions.

Despite the overheated rhetoric heard during the debate, HR 1 is a diversion from the difficult task of restoring constitutional government and a free economy and society. It is time for Congress to get serious about cutting spending, not merely tinkering around the edges of the proposed budget and kicking the can down the road for future generations. If we fail to act decisively now, there will soon come a time when both our money and our capacity to borrow will run out. When that happens, our ability to negotiate and play political games with spending priorities will be over. To avoid real chaos, the time to start dealing with our bloated government budget is right now.

Last week, the Financial Crisis Inquiry Commission (FCIC) presented its results to the Financial Services Committee. As with most other politically-appointed commissions, the results of the FCIC’s investigation were easy to predict. Established by the same congress that gave us national healthcare and with a majority of its members appointed by those who seek to solve every problem with more government intervention, it was no surprise that the commission’s findings would favor increased government intervention in the economy. Minority members were not substantively involved in the commission’s operations, and the commission attempted to exclude their dissenting views by granting them very limited space to do so.

However, even the minority members of the commission failed to consider the most important cause of the financial crisis, namely the Federal Reserve’s loose monetary policy. Almost a century ago, in 1912, Ludwig von Mises published his great work The Theory of Money and Credit. This was the first systematic description of Austrian Business Cycle Theory (ABCT), which explains the origins of the business cycle in monetary expansion. This theory explains why so many businessmen make so many of the same errors at the same time. Yet not a single member of the commission undertook an analysis of the financial crisis from an Austrian economic viewpoint.

Instead, blame was placed on failures in financial regulation and corporate governance, excessive borrowing and risky investments, and expansion of subprime lending, among other factors. But none of these explanations can answer why this crisis occurred. Why was there excessive borrowing? Why was there an explosion of subprime lending? Why were there failures in corporate governance? Why did virtually no one except Austrian economists see this coming?

Without the Federal Reserve’s massive expansion of credit throughout the 1990s and early 2000s, there could have been no excessive borrowing or explosion of subprime lending. Through easy credit, the Fed initiated the economic boom that created the dot-com bubble. When that bubble burst the Fed pumped additional liquidity into the system, which led to a new boom that created the housing bubble. And now the Fed’s additional trillions of dollars in monetary pumping is creating yet another bubble. This is the exact opposite of stability in the marketplace and has nothing to do with free markets. It is central economic planning at its worst.

It is imperative that the historic record accurately reflect what actually happened. In the popular press we see columnists attempting to blame the financial crisis on the “small-government,” “free-market” policies of President Bush. Hundreds of billions of dollars in stimulus payments, a $700 billion bailout program, and trillions of dollars of Federal Reserve credit facilities hardly represent small-government and free-market principles in action! On the contrary, these government interventions by both major parties demonstrate quite clearly our nation’s acceptance of crony capitalism.

Schoolchildren today are taught the myth that Herbert Hoover was a small-government President who did nothing to stop the Depression, while the truth is exactly the opposite. Fed Chairman Bernanke failed to understand the true cause of the Great Depression, so his policy prescriptions to combat the current crisis are understandably flawed. Unless we confront and correct false economic rhetoric, truly understand the causes of the economic crisis, and do away with our loose monetary policy, we will find ourselves in ever more vicious business cycles.

Ah, mortgage fraud. The unsung power tool of the housing bubble. Starting around 1999, the FBI issued repeated warnings that mortgage fraud was surging. Few in government listened. Fraudsters ranged from organized cross-country rings of real estate, banking, and investment professionals, to non-profit profiteers and Joe and Joan Doakes lying on mortgage aps ’cause they just had to have that house. Feeling nostalgic about the big grift that sent no major players to jail but left taxpayers holding the Hefty and the landscape blotted with foreclosures? No need. Boom or bust, the impetus for mortgage fraud is a constant. When housing is hot there’s pressure to keep the market booming, in bust mode there’s pressure to jack it back up.

According to Core Logic (a leading provider of business information), after taking a breather in 2009 mortgage fraud increased more than 20% in 2010. (The Mortgage Asset Research Institute reports that Florida and New York lead the nation at number one and two respectively.) With government now owning or insuring 97% of mortgage bonds via Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), taxpayers are on the hook more than ever. And they’re paying for new twists. Quoting* mortgage fraud attorney L. T. Lafferty, a former federal prosecutor specializing in white collar crime, “fraud is … perpetrated differently when there are different opportunities.”

When one door closes, another opens…

Loan origination fraud, a mortgage fraud staple, is seeing new emphasis on hiding debt and liabilities. (Prior mortgage defaults? No problem.) Due to increased requirements for proof of income, credit, etc., mortgage fraud rings increasingly rely on identity theft rather than fake documents — thereby involving a wider circle of victims. Then there are the homebuilders with a glut of houses or condos who offer buyers financial incentives that aren’t disclosed to lenders. After buyers obtain loans, builders welch on the incentives. Oops, more underwater mortgages. Faked occupancy is on the rise. (Loans for second homes, and for rental properties without an owner in residence require larger down-payments and higher interest rates.) And hey — foreclosure rescue scams are on fire! Loan modification, refinancing, short sales, real estate owned (REO) sales, and government sponsored programs are being mined big time. Of course, almost the entire housing market might now be called a government sponsored program…

To date, taxpayers have kicked in $153 billion just to prop up Fannie Mae and Freddie Mac. Fan and Fred’s oversight agency (an organ of the FHA) estimates that the agencies’ losses through 2013 will require another infusion of between $68 billion to $210 billion. In government speak, a massive transfer of wealth from the general public (roughly one third of whom are renters) to cover a mountain of bad private assets is called an “investment.”

In Washington, the Obama administration and Congress are trying to hammer out a plan for “weaning the $11 trillion mortgage market from its dependence on government.”** The weaning, which will allegedly include the waning of Fannie Mae and Freddie Mac, must be done carefully and slowly so as not to damage the fragile housing market. (When the market was robust, reform was rejected ’cause it might damage the boom.) A time frame of five to seven years has been mentioned. By then the full wean will be in the hands of the next administration. In the meantime, the real estate lobby is beating down doors in DC, to make sure that nothing (untoward) is accomplished. The National Association of Realtors, the American Bankers Association, the National Association of Home Builders, the National Council of State Housing Agencies, and the National Fair Housing Alliance are united by their determination to protect folks from being cheated out of the American Dream of Home Ownership.

Do Mollusks Dream of Electric Drills?

Mortgage fraud isn’t the only real estate product backed by taxpayer investment. There’s always (forever and ever) urban revitalization. Point of info: investment in urban revitalization does not put the truly needy in safe, clean public housing and bring industry back to fading blue collar cities. Instead it pumps luxury condo enclaves, twee art and restaurant districts, and political corruption. Perhaps no place exemplifies this type of urban revitalization better than Hoboken, New Jersey. A small (one mile square) waterfront town across the Hudson River from Manhattan, which after biting post-industrial dust was reborn as the jewel of government-backed new urbanism. That almost all of Hoboken’s blue collar residents were pushed out of town in favor of wealthier professionals largely employed by Wall Street mattered not. Gazillion urban planners saw the future and it was Hoboken.

What they didn’t see were the mollusks. More about them in a minute. First, the corruption. Everyone saw the corruption. Over the roughly three decades in which Hoboken became the revitalized gem of Jersey’s “Gold Coast,” developers and public officials from Hoboken and its parent entity Hudson County, went down like nine pins; bowled over by federal and state investigations frequently targeting corruption related to government-backed development projects. The U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Transportation were soaked again and again. As were assorted state agencies. Tax breaks were/are crony candy. Hudson County’s other cities revitalized their historic corruption with equal fervor, inspired by Hoboken’s new urban success.

Hoboken eventually became one of the most valuable chunks of real estate in the country. Yet taxpayers have never stopped investing in its revitalization. The promenade that stretches along the city’s condo-lined waterfront was a mega investment. The walkway and its park areas are open to the public. Hoboken’s master builders would have preferred waterfront access to be restricted to condo dwellers but local green space activists fought not only to keep it open, but to expand the walkway into an unbroken strip running along the entire Gold Coast. Since public largess was powering waterfront development, developers had to bend. Pols scrambled to speed their plow, cutting government red tape re construction. In Hoboken the promenade was largely in place by the 1990′s. New Jersey’s Department of Environmental Protection signed off on it every step of the way.

Now we get to the mollusks.

The first cave-in on Hoboken’s promenade occurred in 2007, at Castle Point Park in mid Hoboken. Just a small collapse. No cause for alarm. But two years later, part of a sports field that had been built atop a pier slid into the Hudson. When the field was developed in the 90′s engineers warned that the pier’s pilings were infested with shipworms, a type of mollusk. Shipworms eat wood. Suggestions were made that the pilings be replaced with something less tasty. The suggestion went into the memory hole.

In early 2010, a section of the walkway in the north, near a cove between Hoboken and Weehawken collapsed. Last October, a fifty foot sinkhole opened on Frank Sinatra Drive. (Sinatra was a Hoboken boy.) The drive, which is 13 years old, runs along the river in front of a strip of luxury condo towers — including one which houses former NJ governor and ex Goldman Sachs boss Jon Corzine. The sinkhole, which was also allegedly caused by mollusks, followed two smaller collapses on Sinatra. Recently, engineers determined that the steel beams supporting Pier A, a popular park on the south end of the promenade near Hoboken’s train and ferry stations, need a makeover. Seems the concrete jackets on the beams aren’t covering all they should. No danger from salt water corrosion yet. Just being proactive. Pier A is like, totally safe.

Despite all the wealth that hangs in Hoboken, the city has severe financial problems. Hoboken isn’t the only entity responsible for repairing the collapsing waterfront (as example, Sinatra Drive was a county project) but the city will have to cover much of the rehab. The cost will be more than the entire city budget. Massive debt will be assumed via bonding. According to the New York Times,*** Mayor Dawn Zimmer (elected in 2009) is holding out “hope for state and federal aid.” And Hudson County is hoping to obtain federal grants to repair the Sinatra sinkhole. As for the mollusks, they have high hopes for more wood.

*Mortgage Fraud: Worse Before Better, Expect More Schemes and More Regulatory Oversight in 2011, Tracy Kitten, Managing Editor, Bank Info Security, 02/04/11

**Obama Administration Calls for Winding Down Fannie, Freddie, Lorraine Woellert and Rebecca Christie, Bloomberg News, 02/11/11

***As Hoboken’s Riverfront Crumbles, the Cost for Repairs Soars, Richard Perez-Pena, New York Times, 02/08/11

For the past three decades, the Federal Reserve has been given a dual mandate: keeping prices stable and maximizing employment. This policy relies not only on the fatal conceit of believing in the wisdom of supposed experts, but also on numerical chicanery.

Rather than understanding inflation in the classical sense as a monetary phenomenon — an increase in the money supply — it has been redefined as an increase in the Consumer Price Index (CPI). The CPI is calculated based on a weighted basket of goods which is constantly fluctuating, allowing for manipulation of the index to keep inflation expectations low. Employment figures are much the same, relying on survey data, seasonal adjustments, and birth/death models, while the major focus remains on the unemployment rate. Of course, the unemployment rate can fall as discouraged workers drop out of the labor market altogether, leading to the phenomenon of a falling unemployment rate with no job growth.

In terms of keeping stable prices, the Fed has failed miserably. According to the government’s own CPI calculators, it takes $2.65 today to purchase what cost one dollar in 1980. And since its creation in 1913, the Federal Reserve has presided over a 98% decline in the dollar’s purchasing power. The average American family sees the price of milk, eggs, and meat increasing, while packaged household goods decrease in size rather than price.

Loose fiscal policy has failed to create jobs also. Consider that we had a $700 billion TARP program, nearly $1 trillion in stimulus spending, a government takeover of General Motors, and hundreds of billions of dollars of guarantees to Fannie Mae, Freddie Mac, HUD, FDIC, etc. On top of those programs the Federal Reserve has provided over $4 trillion worth of assistance over the past few years through its credit facilities, purchases of mortgage-backed securities, and now its second round of quantitative easing. Yet even after all these trillions of dollars of spending and bailouts, total nonfarm payroll employment is still seven million jobs lower than it was before this crisis began.

In this same period of time, the total U.S. population has increased by nine million people. We would expect that roughly four million of these people should have been employed, so we are really dealing with eleven million fewer employed people than would otherwise be expected.

It should not be surprising that monetary policy is ineffective at creating actual jobs. It is the effects of monetary policy itself that cause the boom and bust of the business cycle that leads to swings in the unemployment rate. By lowering interest rates through its loose monetary policy, the Fed spurs investment in long-term projects that would not be profitable at market-determined interest rates. Everything seems to go well for awhile until businesses realize that they cannot sell their newly-built houses, their inventories of iron ore, or their new cars. Until these resources are redirected, often with great economic pain for all involved, true economic recovery cannot begin.

Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment. What is needed is liquidation of debt and malinvested resources. Pumping money into the same sectors that have just crashed merely prolongs the crisis. Until we learn the lesson that jobs are produced through real savings and investment and not through the creation of new money, we are doomed to repeat this boom and bust cycle.

Protesters fed up with political repression, corruption and poverty (particularly recent food price inflation) toppled the government of Tunisia. They threaten to do the same in other countries throughout the Mideast as pundits hail the “Twitter and Facebook revolution.” But repressive governments have as much compunction about shutting down communication services as they do about torturing dissidents.

Egypt has cut all Internet access and most mobile phone service as huge protests threaten to topple that government. For a while the ISP Noor remained online — largely because it connects the country’s Stock Exchange and many offices of foreign companies to the outside world. Noor has now been cut off as well.

Interestingly, Egypt and Tunisia have some of the largest percentages of the population online in Africa. Egypt’s Communications Minister, Tarek Kamel, was secretary and co-founder of the global Internet Society’s Egyptian Chapter (which is no longer active). He is still listed as a member of the Board of Trustees on the Internet Society’s website. The Internet Society has strongly denounced the Internet shutdown.

Kamel is widely recognized as the person who brought the Internet to Egypt. He has publicly supported the open development of the Internet. His bio on the Internet Society’s website states that in the early years of the development of the Internet in Egypt, “Kamel’s work extended into liberalization issues such as a tax reduction for ISPs as well as a government/private sector partnership to serve the Egyptian Internet community. He has actively participated in the establishment of community centers in remote areas to bring the Internet to the have-nots.” His role in the shutdown is unknown, although he wasn’t among the cabinet members removed in the shakeup of the Egyptian government in the wake of the protests.

Cutting off most communication with the outside world for an extended period would be economic suicide for any modern, developed country, but temporary interruption — long enough to kill or imprison a large number of protesters without too much visibility for squeamish foreign allies — is viable for a poor country ruled by an elite supported by gifts of military technology from wealthier countries.

The protesters’ vulnerability is relying on highly centralized communication networks and services while fighting an overly centralized political system. The younger ones probably don’t have any memory of being without mobile phones and the Internet and may have taken them for granted.

To succeed in the face of violent repression and the shutdown of Internet and phone service, they must quickly develop low-tech strategies that are as fast and flexible as the ones that have been lost.

Another approach is to build communication services that cannot be intercepted or shut down. Human rights activists and hackers are already starting to do it with combination of low-cost commodity hardware and free open source software:

• Landlines still work in Egypt and a French ISP FDN offers free dialup Internet to Egyptians. Instructions to connect to foreign ISPs via dialup with a mobile phone are also being circulated for those who can use them.
• For Egyptians who are still able to use their mobile phones, there is Sukey, “a security-conscious news, communications and logistics support service principally for use by demonstrators during demonstrations.”
• Tech entrepreneur Shervin Pishevar put a call out on Twitter for volunteers to help construct self-configuring unblockable mobile ad hoc networks to prevent government caused blackouts during future protests worldwide.
• We Rebuild, a Europe-based group working for free speech and an open Internet is developing non-Internet modes of communication, including amateur, shortwave and pirate radio as well as a fax gateway, to assist protesters and humanitarian relief efforts. Information on these efforts can be found on their Telecomix news site.
• Remaining Internet activity is certainly being monitored. The Tor network of anonymous, encrypted proxies has seen a huge increase in Egyptian traffic.

Efforts like these could be the tipping point for the uprisings. In 1989 Czech student protesters received a gift of then state of the art 2400 baud modems from a mysterious man who may have been from the covert-operations wing of the Japanese embassy. Modems were illegal but the most Czech police didn’t even know what they were. The students set up BBS systems to coordinate actions throughout the country and successfully overthrew the Soviet communist backed dictatorship.

If you think the problems people in Egypt have could never happen here, you might want to think again. In the U.S. the “Internet kill switch” bill in Congress would allow interruption of Internet services in a “national cyberemergency.” Senator Joe Lieberman, who introduced the bill in the Senate, has described the Internet as a “dangerous place” and promised the bill would protect against “cyber terrorists.”

Some of our current political leaders, hanging on every word of their consultants and pollsters, and terrified of harsh criticism, might consider hostile online commentary more of an “emergency” than something trivial like say, a collision with an asteroid.

General Douglas MacArthur said, “No man is entitled to the blessings of freedom unless he be vigilant in its preservation.” Today that vigilance means learning to build and modify the technology that we use rather than being passive consumers of it.

Unemployment continues to plague our economy. In spite of constant claims that we have just turned the corner into recovery, the jobs reports remain grim with no real signs of improvement. While Keynesian economists and big government apologists scratch their heads about persistent unemployment in spite of unprecedented government “investment” in the economy, free market economists understand the problem perfectly well. In short, they understand that we are looking to the Federal Reserve to solve an unemployment crisis that the Fed itself largely created.

For example, the Fed is supposed to maintain full employment as half of its “dual mandate.” But the Fed simply has the wrong tools to do this. In fact, its credit expansion and manipulation of interest rates cause harm when they are applied to “help” the economy. As we saw with the housing boom and bust, Fed-created inflation cannot be sustained without harmful consequences. The Fed’s artificial boom led to the unemployment we’re suffering today. The Fed is not a small business or a manufacturer that creates value or increases productivity to sustain real job growth. It literally destroys value by printing more money, and distributing it through sweetheart deals to well connected banks and corporations (including foreign banks!). The only success the Fed has had in maintaining full employment has been on Wall Street where it props up crony banks and investment houses to prevent them from going bankrupt as they should. Instead, they survive to malinvest another day while their executives enjoy jackpot bonuses.

The Fed also pumped up employment in the housing industry with artificially low interest rates that created an unsustainable demand for housing. Millions jumped into this sector when the money was loose and the bubble inflating. Besides the many who bought houses they could not afford and now face foreclosure, there were also those who became employed in housing related fields. These people invested time and money in training and spent years establishing careers in real estate, mortgage lending, construction and contracting, careers that all vanished into thin air with the burst of the bubble. Now they face considerable disruption in their lives as they struggle with unemployment, underemployment and decisions about retraining for different careers. This amounts to a tremendous amount of unnecessary waste that would not have occurred had the housing industry been allowed to develop naturally according to market demands.

Jobs are properly created by entrepreneurs who are willing to work hard and take calculated risks. Jobs are also created through real increases in productivity, resulting from re-invested profits or conservative borrowing at market interest rates. But the Fed has made those risks impossible to calculate, and made borrowing money artificially cheap. As a result, economic growth has been chilled while unemployment skyrockets.

Until those in power understand the harm they do with central economic planning, we will continue to slide backwards and lose jobs. The Fed needs to stay out of the job creating business altogether and the federal government needs to focus on its constitutional duties. Just when we need government to back off, we hear about more government intervention in the economy in the form of more spending, only they call it “investment.” It is more properly called “malinvestment,” and the resources that are funneled into industries by government policies will only hurt employment more in the long run.