Friday, 8 August 2008

Snake Oil and Deflation

First, an apology for neglecting the blog this past week as I enjoyed the damp, cold, rainy discomfort of an English seaside resort in August. As a European, I make no apologies for taking my full entitlement to holiday each year, but should have provided warning of my impending leave as I posted last Friday. I regret not being active in the discussion which the Fisher Debt-Deflation Theory prompted, and will follow up with a further post taking up some of the many substantive comments when I’ve returned to my office and can organise myself again.


We are likely in future to have great debates on the who, how, why and wherefore of the coming recession/depression, particularly if it leads to global conflict and currency realignments that mark the end of Bretton Woods II and US economic hegemony. At base we have the quote I opened with last week:

“Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works.”
- Mr John Mills, Article read before the Manchester Statistical Society, December 11, 1867, on Credit Cycles and the Origin of Commercial Panics as quoted in Financial crises and periods of industrial and commercial depression, Burton, T. E. (1931, first published 1902). New York and London: D. Appleton & Co

The difficulty is that the policies which financed highly leveraged unproductive works are extremely popular to the extent of representing the culture of at least two generations. While a deflationary recession/depression will make such policies even more costly and destructive than they have been in getting us to the critical point of failure, the same policies are such basic political drivers that without a culture change political and economic change become almost impossible.

It should be obvious that borrowing short through commercial paper to lend long on mortgages and credit cards to bad credits with inadequate collateral is not a sound business model. And yet somehow the alchemy of securitisation with a sprinkling of AAA pixie dust was widely accepted as turning financial lead into gold. It should be obvious that a house, once built, is not a productive asset as it produces no revenue but instead absorbs a high proportion of its owner’s income on mortgage interest, property taxes, maintenance and utilities. It should be obvious that credit card debt, once consumption goods are purchased, produces no productive income stream for repayment of the debt but instead becomes an obstacle to future consumption as debt service eats up a rising proportion of stagnant wages. It should be obvious that a car that weighs twice as much and uses twice as much fuel is not as productive as a car that is small and fuel efficient, and costing twice as much will harm more productive savings and investment with the excess debt borrowed for its purchase. It should be obvious that the financial sector, as intermediaries between savers and productive ventures requiring capital, should never rise to the point where it alone represents over thirty percent of economic activity. Nonetheless, markets all over the world carelessly followed the path of under-production, dis-savings and over-consumption as the path to prosperity rather than a betrayal of capital into hopelessly unproductive works.

It will be a very brave politician indeed that says that young people should save twenty percent cash for a downpayment on their first home (as is the rule generally in countries that never experience boom/bust property cycles like Germany and Switzerland). It will be a very brave politician indeed that says that consumers should save cash to purchase electronic goods and cars. It will be a very brave politician indeed that raises taxes on single family housing and privately owned cars in the face of a sustained housing market crash and sustained high oil prices. It will be a very brave politican indeed that says that the financial sector should not be government subsidised with tax breaks on interest, tax breaks on unproductive speculation, tax avoidance through off-shore registration of hedge funds and private equity, and other magnanimous means of raising election year contributions.

In short, the system which has for sixty years precipitated the greatest debt cycle in history may be inadequate to address the greatest deflationary cycle in history if it chooses to prescribe the same snake oil which sickened the economy in the first place rather than the balanced (fiscal) diet and (strict economy) excercise we all know would be better for us.

Even bank supervisors, who should know better than others that rapid asset growth is the surest indicator of bank failure, chose instead to believe the hype and ignore the reality. Instead of intervening to curb credit excess, regulators congratulated themselves on overseeing a robust and innovative financial sector while rewriting their rulebooks to embrace the market’s delusional ratings-based models for undercapitalising greater and less transparent risks.

If the core problem leading to the current seizure of the credit markets is the misallocation of credit into unproductive works during the boom years, then no amount of new credit will solve the problem unless the distortions promoting misallocation are redressed through fiscal and regulatory policy changes. Bailouts and recapitalisation of failed policies of the past are only digging a deeper hole, betraying more capital of younger generations into the unproductive works financed by the current generation.

Correcting the bias toward betrayal of capital will not be popular or easy. Correcting the bias toward unproductive investments will require a massive change of political structures, financial intermediation channels, savings and consumption habits, and economic incentives which challenge virtually every assumption made by at least two generations of American businessmen and consumers and exported globally.

Regulatory policies promoting misallocation of capital included elimination of restrictions on bank dealing and brokerage of securities and derivatives, self-determined models-based capital adequacy calculation, ratings-based weightings of capital assets, accounting reforms that permitted off-balance sheet financings and acceptance of ill-transparent corporate structures. Re-knitting that sweater/jumper, however ill-fitting and itchy, won’t be easy either.

Consumer credit is viewed as a fundamental necessity by virtually all classes of the workforce. Weaning the populace from borrowing to saving would require a huge shift of policy and popular culture. Few of the generations raised on instant gratification of desire will gracefully or voluntarily shift to living within their means and saving for their future requirements.

In short, there are no easy answers. We have hypothecated our future prosperity to repayment of our current debts. We will live less well in future, as will our children for a time. Whether by inflation or deflation our debts must be extinguished. Savings must be encouraged and must be allocated to productive investments that will yield not just future prosperity but social equity to minimise political conflicts.

Those who sold us or imposed on us the current set of policies and practices will be re-bottling their snake oil under new labels. We must be wary before buying bulk lots in the tens of billions of dollars worth of the same old snake oil that has sickened our economies and political processes already. In the US, I class the bailouts of Bear Stearns/JPM and Freddie/Fannie as snake oil, that perpetuates the subsidies to speculation and unproductive housing markets. In the UK, I class the talk of a cut in stamp duty (a transfer tax on house sales) as similar snake oil. Snake oil, unfortunately, wins elections because it appeals to constituencies that are politically important. As a result, we may be entering a dangerous phase where the democratic structures are biased to economically damaging policies that further harm future growth and prosperity because investment in unproductive works is so widespread as to form part of the popular culture.

Deflation challenges many of the assumptions that work in an inflationary context: “Property is a safe investment.” and “You’ll be fine in equities in the long term.” and “Governments don’t default.” When people are forced to reconsider these cherished touchstones of their financial beliefs, they will also reconsider the cherished notions of their political beliefs. It was under similar conditions that nations in the past embraced racial hatred, ethnic divisions, discrimination against gender/sexual preference, economic imperialism and war as a means of directing public discontent away from threatened elites.

Just bear in mind who sold you the snake oil that sickened you, and be wary of new bottles of whatever shape or size from the same salesmen.

Hattip: Steve Phillips who traced the Mills quote back to the original and corrected my attribution.


Peter J. Bolton said...

LB, with respect, I find your post article to be somewhat apologetic: I don't accept that as an excuse, as there have been too many formal warnings and objections over the past years and decades and even so, the banking elite , the politicians and the bureaucrats (the priest classes) have pressed on - always at the expense of those always available (involuntarily) to pay; the public or unwashed masses.

Screw this- I am angry as now the lobbying bankers (financial industry elite) having access to those that pretend to represent, convince same, to continue the rape, pillage and plunder; which in the end destroys civilization; that it is they and they alone that must, a priori, survive, intact, while at the same time, continue to profit.

I like the hanging tree and the guillotine ideations - las banditos have had their day - it is time for justice.

On the side of reality and this really bothers me - there is still no talk of a re-build?

So, and again, screw the bankers, the politicians and the bureaucrats; it is time for revolution or, to etymologically define this term, it is time to "Grace the Word of God"! Vivre La Revolution.


Sabretache said...

Cracking post - and cracking first comment by JB too.

The only things missing from what is already an explosive mix are the confluence of population growth, climate change and resource (especially oil) depletion. - not to mention the extent to which US global military capability and the determination of its controllers to use it in the 'defence' of our non-negotiable way of life.

We live in interesting times indeed.

Anonymous said...

Excellent read and well written, Sir.

I suggest the only possible way to hurt the snake oil sales folks is a wholesale vote against all incumbents.

In this sort of environment they'll have to spend more to put their amendments in the people's laws... Eventually more would catch on.

Republicans and Democrats here have sold us out. It is not Liberal vs Conservative. It is money.

And while I'm at it: Any institution at the Fed window cannot lobby.

Anonymous said...

I quoted from Atlas Shrugged last week - and in response to Peter JB will reference it again this week (I am reading Ayn Rand for the first time and am quite taken...).

Peter, our 'Grace of the Word of God (whatever he may be to you) should take what form? I wonder (possibly fantastically) whether the internet may provide a means to withdraw one's mind and the fruits thereof from service to the 'looting' classes. Would it be possible to set up an alternative currency, which excludes the 'looters' (ie banksters) but provides a real basis for transaction for those who wish to use it?

Only a thought.

I leave with an Orwell quote in response to LB's warning as to conflict:

"The point is that we are all capable of believing things which we know to be untrue, and then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right. Intellectually, it is possible to carry on this process for an indefinite time: the only check on it is that sooner or later a false belief bumps up against solid reality, usually on a battlefield."


njdoc said...

London Banker,

I have just come across your blog and believe it could become on of the most important blogs in the economic "blogsphere". You have very laconically, yet eloquently described the collusive nature of government and the finance sector. For those of us living in the US, it's obvious once the curtains have been pulled back, which Wizards are running our country. I am very grateful for your honesty and insight. During our current election cycle, neither candidate has stood up and said that prior to receiving tax payer funded cash infusions, executives should give any of their ill gotten gains. If you pollute, the EPA will levy a fine. Yet I have not seen anybody stand up to Wall Street and attack them in a populist way. I believe that part of the problem is that no one can "connect the dots". Like Henry Ford said, "if people knew how banking working, they would be rioting in the streets". One question sir. Do you believe this degree of speculation/leverage would be possible if there was "sound" money?

Anonymous said...

And here is the link to the essay containing the Orwell quote, should you wish to read it:


Dragos Popa said...

I believe, in a shell game of that magnitude, that the corrupt layers of society will refrain from nothing to provide a diversion to the dissenters. following the path laid down through deception, lies and manipulation, I think only a global event could provide the magnitude of impact required to distract the laymen from the pains of a worldwide financial crash. war strikes me as the obvious choice and it will have to provide a common enemy, a receptacle for hatred and anger. for anger and hatred will be...

working class said...

Ayn Rand was a fascist who didn't care much for the working class. You are one of the faceless masses. You are not a Captain of Industry, though most Ayn Rand readers would prefer to believe they are. That is one of the allures and dangers of Ayn Rand, her own form of snake oil as it were - which is exactly what LB is warning of.

There is no easy road. There is instead reality which says no one is particularly special, life is dull, we are lucky to live comfortable peaceful lives, and for that we would should be extremely grateful.

Anonymous said...

How do all these banks and investment banks get access to the fed while paying out large dividends?
we have been looted by a bunch of polticians andlobbyist working hard for the Banking Wall Street and Real Estate sectors. why does re get such large subsisidies? RE is overrated as an economic engine.
The lying bunch of them looted the country and we get stuck with the debts. It's time to confiscate the loot back from these slick operators.

Sabretache said...

Whilst I concur with the thrust of the comment, Working Class also said:

"we are lucky to live comfortable peaceful lives, and for that we would should be extremely grateful."

To whom should we be grateful do you suppose?

John said...

Absolutely great post.

S said...

BW2 is already broken, it is simply a game of chicken now. The great unwind will occur when the US debt market explodes. The cartel will continue to perpetuate this myth until it becomes so painfully one sided that the world simply capitulates. You can be John Paulson too...

Anonymous said...

"Those who sold us or imposed on us the current set of policies and practices will be re-bottling their snake oil under new labels. We must be wary before buying bulk lots in the tens of billions of dollars worth of the same old snake oil that has sickened our economies and political processes already."

LB, The pigmen are just chomping at the bit to get their hands on the carbon swaps trade. That's the next target and it is going to be major moulah.


armchair said...

This post brought to mind the situation in Russia after the USSR collapsed, and all of these middle aged and old guys started killing themselves off with vodka and cigarettes. Perhaps it can be attributed to cognitive dissonance that comes from swallowing decades of B.S., because that is how you survived in the communist system, then you wake up one morning and find out that your survival skill no longer do you any good.

Jesse said...

Someone has certainly had a gloomy time of it in Brighton.

Yes it is all that you say, and more. And the necessity is that we will pass through this conflagration which we have ignited by allowing the playboys to run the estate for their own personal kicks as it were. Because it is only by passing through this that we will have sufficient motivation to change.

Revolutions are messy, and equally unproductive. Hopefully we will not expend too much energy in that direction.

I'm curious to know if you favor the inflationary or deflationary approach to extinguishing the debt, or if you see a probabilistic lean in there anywhere.

Personally I lean towards the Russian experience as a model despite their current fall from grace, as opposed to the Japanese since after all the UK and US are major debtor states and a proper deflation would be a 'long shot.'

Enjoy your laying out of the boundaries, and a new school of economic thought is most likely to be built within them.

In the meanwhile, we must just KBO and figure out how to get by since the system is no where ready to be reformed, and we are now at the stage where sage warnings will fall on deaf, or violently ungrateful, ears.



Tiger Coach said...


Another excellent post. Your clarity and purpose is appreciated!

In the U.S., there was a Presidential candidate by the name of Ron Paul (Austrian School of Economics)who has taken the Fed...and Treasury to task for its policies. While not always right, Paul at least brings a paradigm shift to Congress.

There is a criminal element in the mix of market and politics for sure! (move over Jesse James and John Dillinger while the a professional shows you how it is done.)

I believe the current fiscal policies will usher in a period of inflation and deflation like we have never seen. It could well be that a crash-less depression is already underway.

Note that the Roman Empire's collapse has an eerie similarity to
the Western World's situation.
I have written my elected officials about this situation... The following link will take you to the letter I received from one of my Congressmen... or click on the name Tiger Coach.

Brian Davis

PS: I have also included Paul speech on Dollar Hegemony... truly fascinating read

jk said...

you might be interested in, especially the interviews with, and glosses on, the work of economist michael hudson. hudson describes the growth of the f.i.r.e. economy [finance, insurance, real estate] at the expense of the p.c. [production/consumption] economy. the f.i.r.e. economy denizens heavily populate the rolls of political donors on both sides of the aisle, and have gained increasing sway over legislation and [lack of] regulation. the thinking on that board [itulip] is that an inflationary outcome is achievable and inevitable.

Injin said...

Sadly, I can't see anything but the snake oil salesmen getting their way until everything really does collapse completely.

Even after that, the good looking figurehead with the nice teeth will almost certainly come along and "do a Menem."

State failure and full banking collapse is almost certainly our future.

Anonymous said...

Thank you, LB, for the post.

I read an interesting book about robotics called "Almost Human" -- the author, Lee Gutkind, talks about the two types of scientists creating these machines -- the "egghead" theorists and the "gearhead" builders -- who often clash, but ultimately depend on each other to create these marvels of artificial intelligence.

As I watch our economy, and its wing man, politics, stumble toward any solution that would keep their drink on, I wonder if they haven't been brought to this drooling state by systems based entirely on egghead imaginings, without the benefit of gearhead stress-testing.

We have suffered under a system that imagines a perfect captialism, a "free market," without exploring how easily such a market can be corrupted, pillaged and self-destructing (hello, Ayn). The same can be said for systems that allege they have put economic power back in the hands of the "masses" -- if by "masses" you mean a small, oppressive governing elite.

Admittedly, applying the gearhead's craft to economics and politics would be hard work - and could lead to disappointment. It might mean setting aside a lot of theories built on good intentions and inspiring speeches, but utter disregard for how people and things really behave.

But it means the eggheads would be forced to come up with better systems. The kind that recognize a theory is only as good as the most ruthless, relentless, corrupting force trying to game it.

yoyomo said...

I have a suggestion, how about showing our gratitude to those less fortunate than us by trying to prevent our govts from exploiting them more whether at home or abroad. Most comfortable citizens owe a portion of their good fortune to those beneath them. If we cared more about the least amongst us we would have risen up against the corruption long before it started to affect us.

Bron said...

By coincidence I came across this paper just before reading your blog:

Anatal would suggest that the answer to the problem is to get control back over money by letting gold reassert itself. Do you think this would work?

randy said...

@ LB

I've read your posts for quite some time on RGE Monitor and enjoyed them all. Congrats on starting this.

I recently watched the video "the money masters" which can be found on the web esily. It's about the bankers ruling the world thru the central banks and how the rothschilds have been/are behind it. It is very depressing because I now have a feeling that no matter what is done the bankers will win.

the FR is in cohoots with the WS banks and the other world CBs to keep the "average" citizen down.

I'm currently reading "the creature from Jekyll island" which is about the cretion of the current federal reserve headed by JP Morgan himself who was supposedly, owned by the Rothschilds.

What is your take on this?????

London Banker said...

I'm back home. It rained the whole six hour drive through heavy holiday traffic. It's good to be among the familiar comforts, with reliable pizza delivery a phone call away.

I listened to BBC Radio 4 the whole way. Several of the shows were about the effects of the credit crunch on consumer habits and green issues. It's wonderful to have the BBC in a period of rapid change and conflict as they alone can give sufficient time and depth to discussion of complex issues. The commercial networks wouldn't touch these issues with a bargepole, but public airing of complex, unpleasant policy choices is where the BBC really shines. I particularly enjoyed Any Questions which has a live panel of politicians from all parties coping with live questions from an audience. That is followed by Any Answers which invites the listeners to e-mail or call in with their views on the issues discussed on the previous programme. Both were intelligent, lively and reinforced my faith that British institutions will cope with the coming downturn fairly well, however serious it turns out to be.

Listen online any time if you want to get an insight into British public life and political interaction.

@ Jesse
I was at a family resort town. Brighton is more suited to the flamboyant confirmed batchelor.

working class said...

Most comfortable citizens owe a portion of their good fortune to those beneath them.

Very well said yoyomo. Instead, there is too much contempt or embarrassment. Or worse, indifference.

London Banker said...

Improved links:

Any Questions

Any Answers

Anonymous said...


Your quote: “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works”. - John Stuart Mill, explains most of the problem individuals face today.

- a larger house in the suburbs rather than a smaller house close to work
- a 4-weel drive SUV that never goes off-road nor thru unplowed snow
- a large SUV rather than a mini-van to have lots of space and storage
- a Chevy Suburban without a tow-kit
- a BMW Z-3 rather than a Mazda Miata
- a car capable of cruising over 120 mph in North America, where over 100 is by law: 'reckless driving'.
- a corn based ethanol processing plant while people are starving
- a trans-fat plant
- a luxury home development on productive farm land
- many of the levees upstream on the Mississippi {spare the farm and flood the city}
- reconstruction in a hazardous flood plain
- any war when you are not defending yourself or someone else
- land based nuclear missiles when you have the equivalent of Polaris or Poseidon submarine launched missiles.
- B-1 boomers that carry little more than a few long-range fighter planes can
- arms developed to keep military ‘commands’ alive when their time has passed
- pay-day loan companies when you have banks and pawn shops
- books by Alan Greenspan
- central banks

Leila said...

"Most comfortable citizens owe a portion of their good fortune to those beneath them." In America this sort of sentiment gets you labeled a contemptible, cheese-eating, Volvo-driving liberal.

Anonymous at 15:25 - more unproductive works: all American health insurance policies, their purveyors and shareholders. Included under the F.I.R.E. rubric so admirably described above, but worthy of special notice.

Leila said...

"We will live less well in future, as will our children for a time."

Will we?

A story: Because of family illness, not financial stress, we recently chose to host a child's birthday party with absolutely no paid entertainment, rented party space with activities, nor catered food. We asked the guests to meet us at a local public lake with their own picnics, and we would provide a cake.

The children were delighted to romp about and later swim; being children, they were happy enough to eat whatever turned up, if it included sweets. The adults, all good friends, enjoyed lying about on blankets or kicking footballs or splashing in the water. Guests repeatedly told me how happy they were to be at such a "low-key" party. The birthday child felt properly feted.

To speak openly about money, we saved about $450 over the standard children's party in our area. Of course some parents spend $1,000 or more for a child's birthday party. These are middle and upper-middle class professionals, not financiers.

We chose this party for personal reasons, not to save the money. However we discovered that everyone was much, much happier with the simpler festivities.

Whatever economic shocks might arrive, I predict that those of us who can see past frantic activity and material greed will find we can live very well. I assume Europeans still understand these principles and know how to enjoy life detached from a price tag.

I argue that living well does not depend upon quantity of electronic gadgets, costumes or trinkets. We may even find that eating simpler food and living in closer quarters might have benefits not measurable by pounds, shillings and ounces.

So while I agree that we may be in for difficult times, I do not agree that we will have to live less well. We will live differently. How well we live is up to us.

London Banker said...

@ Leila
I agree with you that spending doesn't buy happiness nor wealth equate with quality of life. I've just spent a beach holiday (in Britain!) with two families sharing a modest house, cooking most meals in the inadequate kitchen to be eaten together at the table, listening to live music at pubs, throwing pebbles into the cold Atlantic water from the stony beach, and playing dice, card and board games.

None of it was costly, even though we are none of us are poor. The families enjoyed it so much we have already determined to repeat the holiday next year.

I have frequently urged that the best investment you can make is time spent on your primary relationship (e.g., marriage) and your children. Divorce destroys wealth and security more surely than any recession. And time invested in a young family almost always yields an enduring dividend in later years.

Anonymous said...

When malappropriation of national wealth carries on long enough and far enough, resort to violence becomes inevitable.

As the unfailing handmaiden of private greed, the only question is whether the state shall eventually destroy the people by war (if they are witless) or will itself be destroyed by the people in self defense (if they are not).

maynardGKeynes said...

I don't get the deflationary view expressed here so often (and so eloquently). Deflation is quite unlikely if wages increase, which is the most likely scenario at this juncture. Until rather recently, realistic options other than wage increases were readily available to keep American's household income and consumption rising, or at least not collapsing to a politically, economically or socially unacceptable level. In the 70s and 80s, wives went to work, enabling households to keep their heads above water. In the 90's and this century, houses became ATMs through easy credit and securitization, accomplishing the same objective. But now, both options are, quite literally, spent out. It's hard to imagine in what other ways households can now keep up other tha wage increases. (Child labor laws have not been repealed last I checked.) Capital does not want to pay labor more, but it will do so willingly if the alternative is a serious collapse of demand. A more dreary scenario is for capital to initiate a wage and price spiral to give the illusion of higher wages to a tapped out working class, at least for a time. While I think a genuine redistribution of wealth through wage increases is the most likely and indeed the wisest outcome, wage push inflation, however unpleasant to some interests, seems a much likelier scenario than deflation, which is disastrous to all.

London Banker said...

@ Maynard
Wages cannot rise in the US and UK with wages low and labour competition high throughout the world. It is too easy to shift jobs overseas through outsourcing or to substitute goods/services from low wage suppliers.

Your history left out the de-unionisation of the labour force over the past generation. Who will strike and/or lobby for higher wages? Who has the political muscle to force managements and government to support labour over corporate profitability? The answer now is no one - except in the highly unionised government sector (police, fire, teachers, etc.). With many local governments already in the red, and declining municipal tax revenues from real estate and builders fees, even those unionised sectors will not be able to secure above inflation rises.

Phil said...

maynardgkeynes said "Capital does not want to pay labor more, but it will do so willingly if the alternative is a serious collapse of demand."

In the real world it is individual organisations which have to decide whether to pay employees more. If they are being financially squeezed, they are not having trouble keeping staff, AND the unions have collapsed, why on earth would they want to pay staff more, even if they could?


Sion said...

What if non-wage inflation is persistant and high? Given the global labor glut you mentioned wages cannot rise much. But material and energy costs can and are.

Demand destruction is reducing these pressures but the demand destruction has not yet spread to China/India. If it does start to effect China/India's export models we are in for a global recession no doubt.

If deflation is the predominant ultimate outcome how does that effect western debt nations? What happens to their debt obligations? I guess the debt gets harder to pay off and insolvency becomes a reality. Won't the central banks just print money to avoid this? Won't they simply inflate their way out?

The required excuse for this action would simply be a war of some sort. America has always used printing presses to fund wars. That would solve their debt problem without the embarrassment of insolvency wouldn't it?

It's a dreadful thought. The last depression was brought to an end by war. How will it all play out...Things do not look good.

We need to reassign those climate modeling computers to this problem.

Iconoclast421 said...

I liked the post too, but I found it to be outdated by about... oh 5 years. The snake oil salesmen are well ahead of you. They know people are going to be angry, and they're already hard at work manufacturing the next crisis that they will use to sell more snake oil and cover their butts. They will shut down the web, and they will try to move against everyone who ever shined the light of truth on them. It is time to focus much more effort on figuring out how to stop the police state apparachi from being used against "the 21st century jew", or "jew of the 4th reich" (anyone who is awake and aware of what the power elites are doing)