Archive for August, 2010

New Yorker punches below the belt

August 31, 2010

“Of course, Democrats give money too.  Their most prominent donor, the financier George Soros, runs a foundation, the Open Society Institute, that has spent as much as a hundred million dollars a year in America.  Soros has also made generous private contributions to various Democratic campaigns, including Obama’s.  But Michael Vachon, his spokesman, argued that Soros’s giving is transparent, and that ‘none of his contributions are in the service of his own economic interests.” Jane Mayer, ‘Covert Operations’, The New Yorker, August 30, 2010.

Under the rules of boxing, brawlers who punch their opponents below the belt routinely are disqualified. Repeated episodes of such unprofessional behavior may lead to permanent bans from entering the ring. In Jane Mayer’s lengthy column entitled Covert Operations, August 30, 2010, The New Yorker sets out on just an unprofessional course in its unrelenting attack on Charles and David Koch and their philanthropic and other non-profit programs.

Let me say at the outset that I am no fan of Charles and David Koch and I do not write this as an exercise in hagiography. But  I am a great fan in unbiased reporting and I accuse (J’accuse) Jane Mayer and the progressive political rag on whose behalf she writes her columns, of gross prejudice and bias in singling out the Kochs for condemnation and George Soros for a whitewash. Talk about hanging their watermelons (green on the outside, red on the  inside) out to dry!

So this column will attempt to redress the balance just a little, by looking more closely at George Soros and the Hungarian influence on U.S. politics. Let me see if I can floor Jane Mayer with a left jab to the chin, followed by a right cross  to the jaw, both entirely professional responses as compared with her low blow in Round One.

George Soros may just be the biggest political fat cat of all time. An 80 year old Hungarian Jew, Soros emigrated to England in 1947 and graduated from the London School of Economics in 1952.  In 1956, he moved again to New York City, where he worked as an arbitrage trader and analyst.  In 1970, he co-founded the Quantum Fund, which created the bulk of the Soros fortune.  In 2007, the Quantum Fund netted Soros $2.9 billion.

In 1988, Soros bought shares in the French bank, Societe Generale. French authorities began an investigation of these purchases in 1989 and in 2002 a French court ruled that Soros had engaged in insider trading, fining him $2.3 million. Punitive damages were not imposed because of the delay in bringing the case to trial.

On September 16, 1992 – known as Black Wednesday in Britain – Soros’s fund sold short more than $10 billion worth of pounds sterling, profiting from the reluctance of the Bank of England either to raise interest rates or to float its currency. As a consequence, the Bank of England withdrew the currency from the European Exchange Rate Mechanism, devaluing the pound sterling and earning Soros $1.1 billion.  Black Wednesday cost the British Treasury 3.4 billion pounds. Talk about biting the hand that saved him from the anti-Semitism of the Evil Empire. A man of honor, George Soros most surely is not.

In 1997, during the Asian financial crisis, Soros punished ASEAN for welcoming Myanmur as a member, driving down the nominal US dollar GDP of ASEAN by $9.2 billion in 1997 and by $218.2 billion (31.7 percent) in 1998.

In an interview with The Washington Post on November 11, 2003, Soros stated that removing President George W. Bush from office was the ‘central focus of my life’ and  ‘a matter of life and death’.  Soros gave $3 million to the Center for American Progress, $5 million to MoveOn.org, and $10 million to America Coming Together.  These groups worked to support Democrats in the 2004 election.  Overall, during the 2003-2004 election cycle, Soros donated $23,581,000 to various 527 groups dedicated to defeating President Bush.  527 groups are tax-exempt organizations. Note that tax exempt organisations are not ‘allowed’ to engage in political activities.

Since 2004, Soros has thrown vast sums of campaign moneys behind Barack Obama. Although much of this support was provided through seemingly independent organizations, Soros is recognized as the major funder of the Obama campaign and of his administration.  Like the Merchant of Venice, Soros extracts his pound of flesh for this support. He is heavily invested in green energy, most especially in wind and solar power,  and eagerly awaits the passage of cap and trade legislation. He is the prime beneficiary of the Obama-imposed moratorium on oil-drilling, holding millions of common shares in Petrobas, the Brazilian  company now likely to become the leading company in offshore oil production in the Americas.

George Soros is a progressive socialist who knows how to profit from state capitalism and who controls the central levers of U.S. economic policy under the Obama administration. Outsiders may well ask why this evil, convicted  criminal,  insider- trader and political manipulator was whitewashed by Jane Mayer in her one-sided column.  Readers of this column will know full well the answer to that question.

The Sound Barrier

August 29, 2010

The so-called Sound Barrier was a difficulty encountered by pilots as they approached Mach 1, the speed of sound, usually while diving, during World War II. The airplane typically failed to respond to its controls as it approached this speed, with consequential loss of life.  Following the war, and especially with the development of the jet engine, work proceeded on technical improvements in aircraft design based on British break-throughs.  Chuck Yeager is credited with being the first pilot to break the sound barrier in level flight in the Bell X-1 on October 14, 1947, while flying at an altitude of 45,000 feet. By the early 1950s, the sound barrier disappeared as aircraft became routinely powered by jet engines, with the introduction of swept wings, and all-moving tails.

These developments notwithstanding, in 1952 a British movie entitled: The Sound Barrier appeared, based on a story by Terence Rattigan.  Although the story is fictional, I repeat it here because it is a metaphor for economic policy in the United States at this time. President Obama would do well to think seriously about this tale.

The movie recounts the despair experienced by a young woman whose father and husband became obsessed with aircraft experimentation to break the sound barrier.  Her husband is killed in an attempt to fly a jet through the barrier, with the aircraft breaking up as he futilely attempts to pull back on the joy- stick to exit his dive. The more he pulls back on the stick, the more the air pressure pounds the aircraft until finally it implodes.

Notwithstanding this set-back, the young lady’s  father resolutely proceeds with his experimentation. Once again a young pilot loses his life as he experiences exactly the same setback at the trough of his dive.  In the meantime, the young woman has become attracted to a former wartime RAF ace, who is watching progress on the experimentation. He believes that he successfully navigated the sound barrier while dog-fighting a German plane towards the end of the war.

To the young lady’s horror, he volunteers to confront the barrier. Towards the end of his dive, he pulls back on the joy-stick only to encounter the pounding of his craft. Remembering his reaction while at war, he reverses his response, pushing the joy-stick forward, instead of pulling it backward.  His aircraft responds superbly, sweeping through the barrier and taking him to glory.

Readers will now be aware of what I am going to say.  Throughout the current economic contraction, the Bush and the Obama administrations have been applying an economic policy that I shall categorize as pulling back on the joy-stick. I urge President Obama to reverse the response, and to allow the ship of state to sweep through the barrier. Specifically, the policy responses should be: (1)  tighten the money supply and allow interest rates to rise to market clearing levels; (2) remove mortgage subsidies and allow the house market to move to a swift equilibrium; (3) reduce public expenditures sharply across the board; (4) confirm that tax rates will remain constant for the next several years.

I have no doubt that such a reversal of policies would take President Obama and the U.S.  economy through the recession barrier. Unfortunately, I have no doubt that President Obama, and his ill-informed and reckless team of advisers, will ignore this advice,  and continue to wreck aircraft after aircraft, until November 2012, when the entire factory disintegrates.

DJIA as Predictor of November 2010 Elections

August 27, 2010

On August 27, 2010, the Dow Jones Industrial Average fell back once again below 10,000.  Since January 2010, the DJIA has spent roughly equal amounts of time above and below that benchmark, with a peak of 11,200 in April and a trough of 9.700 in June.  My public choice prediction is that a DJIA below 10,000 by end-October will result in both the House and the Senate turning Republican in November, and that a DJIA below 11,500 will result in the House turning Republican. If the DJIA is running below 10,000 early in 2011, Hillary Clinton will launch a primary challenge against Barack Obama for November 2012. So the DJIA is worth close scrutiny for political as well as economic reasons.

The DJIA is struggling precisely because  the economic policies of the Obama administration have failed to stimulate the economy. Worse, in my judgment, these policies are actively clamping down on market recovery.  If the President does not have a political death wish for himself and his Party, he simply has to change course radically.  He should lean on Bernanke to do the right thing for his country and return to the academy; and he should bring back Paul Volcker as Chairman of the Federal Reserve. He should replace Timothy Geithner with William A. Niskanen as Treasury Secretary.  He should replace Christina Romer with Gregory Mankiw and he should remove Lawrence Summers in favor of Walter Williams.  He should then spend a week or two in London consulting with Prime Minister David Cameron in order to learn how to  turn the tide economically for a  country bowed down with public and private debt and poor saving habits. He would then have a half-chance of pulling his own chestnuts out of the fire by November 2012.

Because President Obama is an ideologue and not a statesman, he will make no such adjustments. By his intransigence, he will take the economy downwards from recession to much worse. By the time that he is finished, Richard Posner will have become an accurate predictor of where we have drifted: DEPRESSION.

Flailing Obamanians fear Clinton challenge in 2012

August 26, 2010

Within 18 months, President Obama has demonstrated his unsuitability for the presidency of the United States.  Seemingly politically inept and naive,  seemingly preferring campaign- jaunts and sports activities to policy heavy- lifting, the President, from the outset, was highly suspect. Now he has displayed an evident talent for picking low-quality policy advisers and for positioning himself well to the left of the median voter on all matters economic and social and on most matters of foreign policy. In  a Christian-majority, understandably  partly Islamaphobic country,  he has displayed alarming sympathies for Islamic critics of the United States.  Under his administration, the economy is tanking once again, and is extremely unlikely to recover in time for the upcoming presidential election campaign (which will kick off  as early as January 2011 in this election- besotted nation).

Obamanians, who look to this president to deliver on progressive socialist policies, understandably are alarmed.  Currently, they are flailing to abort a predictable  primary challenge from Hillary Clinton some time in 2011.  So we hear proposals from the left that Clinton should replace Joe Biden on the Vice-Presidential ticket for 2012, or that she should replace Robert Gates as Defense Secretary in 2011, even perhaps that she should replace Michelle Obama as Diet-Tsar for Children with immediate effect. 

Now the fact that the Left are moving earth (they mostly do not believe in Heaven)  to keep Hillary Clinton out of the White House,  indicates just how far their aspirations have moved since the mid-1990s, when they drooled over the policy-agenda of her centrist husband, Bill.  Hillary Clinton, let us remember, was a one-time Marxist, who launched a fundamentalist attack on President Ronald Reagan from her position as Chairman of The Legal Services Corporation during the first term of his presidency.  Hillary Clinton is no closet Reagan, not even a closet W.

The hard left understand, however, that Hillary Clinton is highly intelligent and that, much  like her husband, she has a reputation for  moving in sync. with the polling data. The United States currently is polling closer to free markets than the Left can bear to contemplate.  Better, they think, to try to fool the electorate one more time, and keep a progressive socialist, Christian-skeptic in the White House for four more years, especially because  he is politically inept, and will ignore the polls: Apres-soi, le deluge, n’est ce pas?

Divine Providence versus Manifest Destiny in the United States

August 25, 2010

The American Founders, for the most part, were devout Christians, who understood that the best designs of man must conform with the laws of nature and the laws of God if Divine Providence is to lead a People to freedom and  to prosperity.  On this basis, they crafted the greatest political document ever written as the basis for their new Nation.  The fact that their beautiful parchment is now tattered and torn is not the fault of the crafting.  It is a sad consequence of a decisive majority of the People parting company with the laws of nature and the laws of God.

While the founders lived, and controlled the supreme offices of government in the new republic, Divine Providence indeed dictated their actions and shone upon their People.  Once they were gone, however, darker forces began to dominate, as the Andrew Jacksons, the Woodrow Wilsons, the FDRs, the Lyndon Johnsons, and the Barack Obamas assumed ascendancy under the new secular doctrine of  Manifest Destiny

In this doctrine, based on  the so-called Enlightenment, man is viewed as the captain of his soul and as the  sole determinant of his destiny. In a national view not ultimately dissimilar to one that later would dominate much of continental Europe in the years between the two great wars, Manifest Destiny implies that man is supreme in the Universe, that Americans are exceptional in this regard, and that every action that Americans take is justified by this exceptionalism.  So, the destruction of the Native American tribes, the elimination of the buffalo, the unstoppable drive Westwards in pursuit of Gold, the seizure of Mexican lands in the West,  the incarceration of German-Americans and Japanese-Americans in ‘concentration camps’, were all justified by the Manifest Destiny  of a now-Pagan Super-Race,  much in the way that ReichsFuhrer Adolf Hitler justified Operation Barbarossa in his murderous attack on the Slavonic and Jewish races of Eastern Europe and the USSR.

The current manifestation of Manifest Destiny and rejection of Divine Providence now comes under the label of Progressive Socialism. In essence, it differs little from its earlier forms.  It is a philosophy that denies the laws of nature and is contemptuous of the laws of God.  It represents a clear and present danger to the future for freedom and prosperity in the United States:

“I long hesitated whether to insert this personal note here, but ultimately decided to do so because support by a professed agnostic may help religious people more unhesitatingly to pursue those conclusions that we do share.  Perhaps what many people mean when in speaking of God is just a personification of that tradition of morals or values that keeps their community alive.  The source of order that religion ascribes to a human-like divinity – the map or guide that will show a part successfully how to move within the whole – we now learn to see to be not outside the physical world but one of its characteristics, one far too complex for any of its parts possibly to form an ‘image’ or ‘picture’ of it.  Thus religious prohibitions against idolatry, against the making of such images, are well taken.  Yet perhaps most people can conceive of abstract tradition only as a personal Will.  If so, will they not be inclined to find this will in ‘society’ in an age in which more overt supernaturalisms are ruled out as superstitions?

On  that question may rest the survival of our civilisation.

Friedrich A. von Hayek, The Fatal Coceit:  The Errors of Socialism. University of Chicago Press, 1988.

President Obama’s economic advisers should take a permanent vacation

August 24, 2010

Well, here we go again!  As home sales in the United States plunge to their lowest level in 15 years, with existing home sales tanking 27.2 percent in July 2010 alone, surely even the most dumb of  hydraulic Keynesian economists – even Lawrence Summers, Christina Romer,  Timothy Geithner and Ben Bernanke –  can see the writing on the wall!  If they cannot do so by now, then I strongly recommend that they refresh their knowledge by attending an undergraduate  economics 101 class at George Mason University; preferably one focused on Austrian economics;  but almost anything is better than what they currently have on board.

Economics 101, properly taught, will educate those mired in the  Keynesian  fallacy that temporary home-buyer tax credits in the sum of $8,000 will induce potential home-buyers to accelerate ther purchases of houses, providing a purely temporary uptick in the  house market.  When the tax break expires, the market will down-tick to reflect underlying realities. There has been no fundamental change in market equilibrium. So why hang on to the impossible dream that government can wave a magic wand, and induce an unsustainable market expansion?  That it can do so in the auto market, in the housing market, in the green-is-good market, or in any other market that temporary government subsidies can penetrate?

Wake up hydraulic Keynesians, pull your heads out of the sand, and look around you at the economic mess that you have created for the American people and for Americans yet unborn.  Have you no shame?  No shame, at all?

More Austrian economics nails are hammered into Obama’s political coffin

August 23, 2010

“A government always finds itself obliged to resort to inflationary measures when it cannot negotiate loans and dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following if it reveals too soon the financial and general economic consequences of that policy.  Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed;”  Ludwig von Mises

In a Weekly Market Comment,  John P. Hussman (www.hussmanfunds.com/wmc/wmc100823.htm) relies on this Mises’ insight to demonstrate why the new program of quantitative easing recently initiated by Ben Bernanke’s Federal Reserve is likely to trigger a collapse of the U.S. dollar.  Hussman’s Comment extends Gerald O’Driscoll’s  critique of President Obama’s economic policies beyond the level that I outlined in yesterday’s column.

Hussman points out that the Fed’s purchase of Treasury securities and creation of base money is occurring in an environment where fiscal deficits are already out of control.  Two-third’s of the Fed’s balance sheet represents Fannie Mae and Freddie Mac bailed-out securities.  The Fed essentially is printing new money to finance ongoing spending for fiscal deficits and for bailout of the GSEs, a policy that cannot easily be reversed, given the poor quality of its assets. 

As a consequence, even though inflation is not yet manifest, inflationary expectations are escalating.  In such a situation, foreign currencies will appreciate against the dollar,  perhaps discretely rather than gradually, most particularly once other countries regain control over their budgets.

In my judgment, this policy reflects only in part an error in judgment by an administration that is perversely wedded to Keynesian economics. Progressive socialists have read their Lenin, and they are fully aware that the most effective way in which to destroy a market economy is to debauch its currency. Before long, Comrade Bernanke’s printing presses will be operational 24 hours a day.  And anyone with  the means and the common sense will have already purchased gold and taken urgent delivery.

An Austrian economist’s explanation of recession in the United States

August 22, 2010

“our lingering crisis and economic weakness was brought on not by a Keynesian failure of effective demand, but by a Hayekian asset boom and bust.”  Gerald P. O’Driscoll Jr. ‘The Fed Can’t Solve Our Economic Woes’, The Wall Street Journal, August 16, 2010

In that succinct passage, Gerald O’Driscoll sums up a great deal of what is mis-directed in President Obama’s economic policies. Helpless, as a non-economist, in the hands of hydraulic Keynesian economic advisers, the President has been led by (an albeit extremely willing)  nose down a veritable garden-path of error and fatal conceit.

The immediate cause of the financial crisis and economic contraction in the United States was the housing boom and bust.  This boom and bust was a classic asset bubble, such as occurred frequently during the 18th and 19th centuries.  The root cause of any such bubble is easy money, working its way through cheap credit, that makes long-term investments appear to be more valuable than otherwise would have been the case.

Under normal conditions, investment expands industries characterized by sound fundamentals.  Sustainable economic growth builds on such investments.  When cheap credit flows  freely, however, fundamentals frequently are forgotten, and the process evolves into a mania.  What cannot be sustained will not be sustained; and so the boom terminates in a crisis.All this is the meat and potatoes of Austrian economics.  Unfortunately, hydraulic Keynesians tend to be ignorant of the scholarship of Ludwig von  Mises and Friedrich von Hayek, and do not begin to understand the nature of a boom and bust contraction.

When a major asset bubble bursts, the collapse of aggregate demand is a consequence, not the cause, of the bust.  When housing prices peaked and then turned down  in the United States, repercussions echoed throughout the financial system.  Mortgage-related securities collapsed in value, impacting adversely on the balance sheets of the institutions that foolishly were holding them.  Credit dried up and the economy collapsed.  A more general collapse in the stock market ensued.  What occurred was a classic balance-sheet recession. 

However relevant Keynesian economics may be for other kinds of recession – and I shall not debate this further here – it is clearly inappropriate in the case of a balance sheet recession.  The Obama policy of pumping up the money supply and pouring fiscal stimulus packages into the economy is designed as a response to economic weakness brought on by deficient aggregate demand.  Low interest rates are supposed to stimulate investment and to lower saving, thus encouraging aggregate spending through the multiplier process.  These policies do not address the root problems of a balance sheet recession.  For, until balance sheets – corporate and household – are restored, increased aggregate spending is simply non-sustainable and will not be sustained.

The solution to a balance sheet recession lies in the restoration of balance sheets: for financial firms that implies the raising of capital; for households and businesses alike, it implies saving more out of their reduced incomes. Until these goals have been achieved government spending will never create the conditions for sustainable recovery.

The appropriate monetary and fiscal responses to a balance sheet recession are the opposite of those pursued by the Obama administration.  Monetary policy should be designed to increase interest rates as a means of encouraging household saving and corporate responsibility. If house prices have not yet reached market clearing levels, then the more quickly they do so,  the better for long term recovery.  Fiscal policy should be designed to encourage households to save and not to binge on excessive consumption, and to encourage productive investment, and not further financial speculation.  This implies a reduction in the size of the public sector, and in the magnitude of budget deficits, by expenditure cuts, not by tax hikes.  Costly initiatives such as health care reform, cap and trade, card check legislation and increased financial regulation should be avoided at all cost as job-destructive interventions.

The lesson from Austrian economics is that markets are resilient, but that their recovery can be impeded by bad policies.  As Gerald O’Driscoll  forcefully reminds us, at present,  both monetary and fiscal policies are on the wrong track.  President Obama has simply hired the wrong advisers,  partly because he is blinded by progressive socialist ideology, and partly because he is blind to economic science.

Ten fathoms deep on the road to hell

August 21, 2010

“Fifteen men on the Dead Man’s Chest-

Yo-ho-ho and a bottle of rum!

Drink and the devil had done for the rest-

Yo-ho-ho and a bottle of rum!

We wrapped  ‘em all in a mains’l tight,

With twice ten turns of hawser’s bight,

And we heaved ‘em over and out of sight-

With a yo-heave-ho!

And a fare-you-well!

And a sullen plunge

In a sullen swell,

Ten fathoms deep on the road to hell!

Yo-ho-ho and a bottle of rum!

Young Ewing Allison, Derelict

Well, ‘drink and the devil’ have already taken good care of Christina Romer and Peter Orszag and soon will do the same for Robert Gates. A lifeless, sullen, overboard plunge awaits many more of those associated with the Obama administration, both in the executive branch and in the legislature, if not in November 2010, then most assuredly in November 2012.  And rightly so!  For the ship of state is already all but derelict, its sails empty in the doldrums of poor seamanship, with the further-sighted of the crew already in the lifeboats, as the remainder engage in blood-thirsty  hand-to-hand combat in a fruitless effort to seize control of the tiller and move the vessel out of the deadly reach of the  oncoming electoral storm.

A vessel that sailed out of port only a brief 18 months ago, its sails billowing with a favorable wind, its prow cutting through largely pacific electoral waters, is now marooned in the doldrums (or equatorial calms)  encountered by appallingly bad crewmanship.  As the water barrels of commensense run increasingly dry, the crew’s frantic remnants binge on the toxic rum of ideology that leaves their foundering vessel helplessly trapped in a windless environment. They and their vessel are doomed to a blood-letting destiny.

So what has gone wrong over this 18 month journey to hell.  Just about everything that this hapless government has attempted to achieve.  In the teeth of excellent economic advice, the Obama administration has pursued fiscal policies destructive of economic growth.  In the teeth of excellent economic advice, the same administration has pursued a health care policy designed to lower access overall to health care services.  In the teeth of excellent economic advice, the same administration has shut down oil drillng activities that provide jobs in hard-hit Gulf states.  In the teeth of excellent economic advice, the same administration has poured tax dollars into an attempt to create a new housing market bubble.  In the teeth of excellent economic advice, the same administration has  engrossed the monetary base to an extent that threatens a new wave of stagflation. 

Why has this occurred?  The simple answer is that the electorate of the United States, in November 2008, took the wrong road,  abandoning (in the sense of Glenn Beck) the benign concept of Divine Providence in favor of the malignant concept of Manifest Destiny, as they elected into office politicians dedicated to engrossing the size and the role of the state, rather than those dedicated to releasing the energies and entrepreneurship of the individual.  So, instead of a wealth and freedom creating president like  an Eisenhower or a Reagan, they currently find themselves encumbered with a wealth and freedom reducing president like a Wilson or a FDR.

Fortunately, democracies have a remedy for such mis-judgments. They can – and they surely will – throw the bums out of office.  Which is precisely why some rats are now scrambling to exit the doomed vessel, while others struggle among themselves, and with the captain, for control over a now- useless tiller.

“Fifteen men of  ‘em stiff and stark–

Yo-ho-ho and a bottle of rum!

Ten of the crew had the Murder mark–

Yo-ho-ho and a bottle of rum!

‘Twas a cutlass swipe or an ounce of lead,

Or a yawing hole in a battered head–

And the scuppers glut with a rotting red

And there they lay–

Aye, damn my eyes–

All lookouts clapped

On paradise–

All souls bound just contrariwise–

Yo-ho-ho and a bottle of rum.

ibid.

Colonial Williamsburg and the Spirit of America

August 16, 2010

Today, I depart for a short four day vacation in Colonial Williamsburg. So this column reflects on the nature of those early beginnings and most especially on the spirit of those early Americans – a spirit that would ready them for rebellion against the mighty British Empire and for the successful pursuit of  individual freedom and free markets under God and the rule of law.

Williamsburg emerged as a consequence of the failure of the very first English settlement at Jamestown (named for King James 1 of England).  Jamestown was founded in 1603  as the center of governance and commerce in the Virginia Colony (named for England’s virgin queen, Elizabeth 1).  However, the settlement struggled to survive, located as it was on swampy, mosquito-infested terrain, and, because it was low-lying, difficult to fortify and protect from periodic attacks by the Powhatan Confederacy.  Jamestown burned down in 1676 (not for the first time, but on this occasion deliberately, during Bacon’s Rebellion). 

As soon as Governor William Berkeley regained  control, temporary headquarters for the government were established some 12 miles away on the high ground of Middle Plantation, a 1632 settlement.  The members of the House of Burgesses discovered that this location was both safer and more pleasant than Jamestown. So in 1698, after the rebuilt Statehouse in Jamestown burned down yet again, the House of Burgesses chose Middle Plantation as the new capital of the growing Virginia Colony, renaming it  Williamsburg in honor of King  William III of England.  A village was laid out and a new Statehouse was constructed.

Williamsburg is located along the center-line of the Virginia Peninsula, some distance both from the James and the York Rivers, the ground sloping down to the shore of each. At this location, the land area is only 6 miles wide. The new settlement was much more easily fortified against Indian attacks, and much less vulnerable to malaria and other insect-borne diseases. In these more favorable conditions, the capital of Virginia Colony grew and thrived as a center for farming, small-scale industry, and commerce, functioning with a limited government, under the rule of the common law. As early as 1693, a royal charter had provided for a college of higher learning in Middle Plantation, to be named the College of William and Mary, in honor of King William III and Queen Mary II. This College was only the second in the colonies. Given its present reputation in economics, the other college will not be identified in this column.

By the middle of the eighteenth century, immediately prior to the Revolutionary War, save for the British presence, Williamsburg represented the ideal form of Thomas Jefferson’s vision of the new America.  It also fully incorporated the Spirit of America that would lead the colonists to victory over the British Empire. On the Eve of the American Revolution, nearly 2,000 people, half of whom were slaves, called the city home.  Tailors, carpenters, bakers, gunsmiths, coopers, wheelrights, merchants, clerks, all worked and prospered in this peaceful environment. Arguably, the most important institutions in the city were neither those of business nor those of politics.  The taverns were not just drinking places.  They comprised the heart of political, social and cultural discourse.

By 1774, just prior to the revolution, the Virginia Colony was the most important of all the British colonies in America, the source of its most widely- recognized statesmen and military leaders.  Naturally, therefore, Williamsburg played a prominent role in the events leading up to the revolutionary war.  The Gunpowder Incident of April 1775 began as a dispute between Governor Dunmore and Virginia colonists over gunpowder stored in the Williamsburg magazine.  Dunmore, fearing rebellion, ordered royal marines to seize the gunpowder.  Virginia militia, led by Patrick Henry, responded by marching on Williamsburg. A standoff resulted with the Governor threateneing to invest  the city if atacked by the militia. The dispute ended when payment was arranged for the powder.  But the seeds for rebellion by then had been well sown. 

Williamsburg is also the location for some of the most fiery pre- revolutionary speeches. Two immortal contributions by Patrick Henry offer the Williamsburg flavor of the Spirit of America:

“Give me Liberty, or give me Death!”

” Caesar had his Brutus – Charles the first his Cromwell – and George III – may he profit from their example!”

Colonial Williamsburg faithfully replicates the nature and the spirit of Williamsburg as it was in 1774. At this moment of  grave crisis for our Constitution of Liberty, I look forward to recapturing that Spirit of America in an environment that George Washington, Thomas Jefferson,  James Madison, Patrick Henry, and George Mason all knew, and loved sufficiently that they threw down the gauntlet of rebellion against an overly autocratic King.


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