La Constitución de los Estados Unidos

Bill of Rights

The Constitution of the United States of America

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

Article I
Section 1. All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.
Section 2. The House of Representatives shall be composed of members chosen every second year by the people of the several states, and the electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislature.
No person shall be a Representative who shall not have attained to the age of twenty five years, and been seven years a citizen of the United States, and who shall not, when elected, be an inhabitant of that state in which he shall be chosen.
Representatives and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three fifths of all other Persons. The actual Enumeration shall be made within three years after the first meeting of the Congress of the United States, and within every subsequent term of ten years, in such manner as they shall by law direct. The number of Representatives shall not exceed one for every thirty thousand, but each state shall have at least one Representative; and until such enumeration shall be made, the state of New Hampshire shall be entitled to chuse three, Massachusetts eight, Rhode Island and Providence Plantations one, Connecticut five, New York six, New Jersey four, Pennsylvania eight, Delaware one, Maryland six, Virginia ten, North Carolina five, South Carolina five, and Georgia three.
When vacancies happen in the Representation from any state, the executive authority thereof shall issue writs of election to fill such vacancies.
The House of Representatives shall choose their speaker and other officers; and shall have the sole power of impeachment.
Section 3. The Senate of the United States shall be composed of two Senators from each state, chosen by the legislature thereof, for six years; and each Senator shall have one vote.
Immediately after they shall be assembled in consequence of the first election, they shall be divided as equally as may be into three classes. The seats of the Senators of the first class shall be vacated at the expiration of the second year, of the second class at the expiration of the fourth year, and the third class at the expiration of the sixth year, so that one third may be chosen every second year;and if vacancies happen by resignation, or otherwise, during the recess of the legislature of any state, the executive thereof may make temporary appointments until the next meeting of the legislature, which shall then fill such vacancies.
No person shall be a Senator who shall not have attained to the age of thirty years, and been nine years a citizen of the United States and who shall not, when elected, be an inhabitant of that state for which he shall be chosen.
The Vice President of the United States shall be President of the Senate, but shall have no vote, unless they be equally divided.
The Senate shall choose their other officers, and also a President pro tempore, in the absence of the Vice President, or when he shall exercise the office of President of the United States.
The Senate shall have the sole power to try all impeachments. When sitting for that purpose, they shall be on oath or affirmation. When the President of the United States is tried, the Chief Justice shall preside: And no person shall be convicted without the concurrence of two thirds of the members present.
Judgment in cases of impeachment shall not extend further than to removal from office, and disqualification to hold and enjoy any office of honor, trust or profit under the United States: but the party convicted shall nevertheless be liable and subject to indictment, trial, judgment and punishment, according to law.
Section 4. The times, places and manner of holding elections for Senators and Representatives, shall be prescribed in each state by the legislature thereof; but the Congress may at any time by law make or alter such regulations, except as to the places of choosing Senators.
The Congress shall assemble at least once in every year, and such meeting shall be on the first Monday in December, unless they shall by law appoint a different day.
Section 5. Each House shall be the judge of the elections, returns and qualifications of its own members, and a majority of each shall constitute a quorum to do business; but a smaller number may adjourn from day to day, and may be authorized to compel the attendance of absent members, in such manner, and under such penalties as each House may provide.
Each House may determine the rules of its proceedings, punish its members for disorderly behavior, and, with the concurrence of two thirds, expel a member.
Each House shall keep a journal of its proceedings, and from time to time publish the same, excepting such parts as may in their judgment require secrecy; and the yeas and nays of the members of either House on any question shall, at the desire of one fifth of those present, be entered on the journal.
Neither House, during the session of Congress, shall, without the consent of the other, adjourn for more than three days, nor to any other place than that in which the two Houses shall be sitting.
Section 6. The Senators and Representatives shall receive a compensation for their services, to be ascertained by law, and paid out of the treasury of the United States. They shall in all cases, except treason, felony and breach of the peace, be privileged from arrest during their attendance at the session of their respective Houses, and in going to and returning from the same; and for any speech or debate in either House, they shall not be questioned in any other place.
No Senator or Representative shall, during the time for which he was elected, be appointed to any civil office under the authority of the United States, which shall have been created, or the emoluments whereof shall have been increased during such time: and no person holding any office under the United States, shall be a member of either House during his continuance in office.
Section 7. All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.
Every bill which shall have passed the House of Representatives and the Senate, shall, before it become a law, be presented to the President of the United States; if he approve he shall sign it, but if not he shall return it, with his objections to that House in which it shall have originated, who shall enter the objections at large on their journal, and proceed to reconsider it. If after such reconsideration two thirds of that House shall agree to pass the bill, it shall be sent, together with the objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a law. But in all such cases the votes of both Houses shall be determined by yeas and nays, and the names of the persons voting for and against the bill shall be entered on the journal of each House respectively. If any bill shall not be returned by the President within ten days (Sundays excepted) after it shall have been presented to him, the same shall be a law, in like manner as if he had signed it, unless the Congress by their adjournment prevent its return, in which case it shall not be a law.
Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him, or being disapproved by him, shall be repassed by two thirds of the Senate and House of Representatives, according to the rules and limitations prescribed in the case of a bill.
Section 8. The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;
To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;
To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;
To provide for the punishment of counterfeiting the securities and current coin of the United States;
To establish post offices and post roads;
To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;
To constitute tribunals inferior to the Supreme Court;
To define and punish piracies and felonies committed on the high seas, and offenses against the law of nations;
To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water;
To raise and support armies, but no appropriation of money to that use shall be for a longer term than two years;
To provide and maintain a navy;
To make rules for the government and regulation of the land and naval forces;
To provide for calling forth the militia to execute the laws of the union, suppress insurrections and repel invasions;
To provide for organizing, arming, and disciplining, the militia, and for governing such part of them as may be employed in the service of the United States, reserving to the states respectively, the appointment of the officers, and the authority of training the militia according to the discipline prescribed by Congress;
To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and other needful buildings;--And
To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.
Section 9. The migration or importation of such persons as any of the states now existing shall think proper to admit, shall not be prohibited by the Congress prior to the year one thousand eight hundred and eight, but a tax or duty may be imposed on such importation, not exceeding ten dollars for each person.
The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it.
No bill of attainder or ex post facto Law shall be passed.
No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.
No tax or duty shall be laid on articles exported from any state.
No preference shall be given by any regulation of commerce or revenue to the ports of one state over those of another: nor shall vessels bound to, or from, one state, be obliged to enter, clear or pay duties in another.
No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time.
No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.
Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing it's inspection laws: and the net produce of all duties and imposts, laid by any state on imports or exports, shall be for the use of the treasury of the United States; and all such laws shall be subject to the revision and control of the Congress.
No state shall, without the consent of Congress, lay any duty of tonnage, keep troops, or ships of war in time of peace, enter into any agreement or compact with another state, or with a foreign power, or engage in war, unless actually invaded, or in such imminent danger as will not admit of delay.

Article II
Section 1. The executive power shall be vested in a President of the United States of America. He shall hold his office during the term of four years, and, together with the Vice President, chosen for the same term, be elected, as follows:
Each state shall appoint, in such manner as the Legislature thereof may direct, a number of electors, equal to the whole number of Senators and Representatives to which the State may be entitled in the Congress: but no Senator or Representative, or person holding an office of trust or profit under the United States, shall be appointed an elector.
The electors shall meet in their respective states, and vote by ballot for two persons, of whom one at least shall not be an inhabitant of the same state with themselves. And they shall make a list of all the persons voted for, and of the number of votes for each; which list they shall sign and certify, and transmit sealed to the seat of the government of the United States, directed to the President of the Senate. The President of the Senate shall, in the presence of the Senate and House of Representatives, open all the certificates, and the votes shall then be counted. The person having the greatest number of votes shall be the President, if such number be a majority of the whole number of electors appointed; and if there be more than one who have such majority, and have an equal number of votes, then the House of Representatives shall immediately choose by ballot one of them for President; and if no person have a majority, then from the five highest on the list the said House shall in like manner choose the President. But in choosing the President, the votes shall be taken by States, the representation from each state having one vote; A quorum for this purpose shall consist of a member or members from two thirds of the states, and a majority of all the states shall be necessary to a choice. In every case, after the choice of the President, the person having the greatest number of votes of the electors shall be the Vice President. But if there should remain two or more who have equal votes, the Senate shall choose from them by ballot the Vice President.
The Congress may determine the time of choosing the electors, and the day on which they shall give their votes; which day shall be the same throughout the United States.
No person except a natural born citizen, or a citizen of the United States, at the time of the adoption of this Constitution, shall be eligible to the office of President; neither shall any person be eligible to that office who shall not have attained to the age of thirty five years, and been fourteen Years a resident within the United States.
In case of the removal of the President from office, or of his death, resignation, or inability to discharge the powers and duties of the said office, the same shall devolve on the Vice President, and the Congress may by law provide for the case of removal, death, resignation or inability, both of the President and Vice President, declaring what officer shall then act as President, and such officer shall act accordingly, until the disability be removed, or a President shall be elected.
The President shall, at stated times, receive for his services, a compensation, which shall neither be increased nor diminished during the period for which he shall have been elected, and he shall not receive within that period any other emolument from the United States, or any of them.
Before he enter on the execution of his office, he shall take the following oath or affirmation:--"I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States."
Section 2. The President shall be commander in chief of the Army and Navy of the United States, and of the militia of the several states, when called into the actual service of the United States; he may require the opinion, in writing, of the principal officer in each of the executive departments, upon any subject relating to the duties of their respective offices, and he shall have power to grant reprieves and pardons for offenses against the United States, except in cases of impeachment.
He shall have power, by and with the advice and consent of the Senate, to make treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the advice and consent of the Senate, shall appoint ambassadors, other public ministers and consuls, judges of the Supreme Court, and all other officers of the United States, whose appointments are not herein otherwise provided for, and which shall be established by law: but the Congress may by law vest the appointment of such inferior officers, as they think proper, in the President alone, in the courts of law, or in the heads of departments.
The President shall have power to fill up all vacancies that may happen during the recess of the Senate, by granting commissions which shall expire at the end of their next session.
Section 3. He shall from time to time give to the Congress information of the state of the union, and recommend to their consideration such measures as he shall judge necessary and expedient; he may, on extraordinary occasions, convene both Houses, or either of them, and in case of disagreement between them, with respect to the time of adjournment, he may adjourn them to such time as he shall think proper; he shall receive ambassadors and other public ministers; he shall take care that the laws be faithfully executed, and shall commission all the officers of the United States.
Section 4. The President, Vice President and all civil officers of the United States, shall be removed from office on impeachment for, and conviction of, treason, bribery, or other high crimes and misdemeanors.

Article III
Section 1. The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish. The judges, both of the supreme and inferior courts, shall hold their offices during good behaviour, and shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office.
Section 2. The judicial power shall extend to all cases, in law and equity, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority;--to all cases affecting ambassadors, other public ministers and consuls;--to all cases of admiralty and maritime jurisdiction;--to controversies to which the United States shall be a party;--to controversies between two or more states;--between a state and citizens of another state;--between citizens of different states;--between citizens of the same state claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects.
In all cases affecting ambassadors, other public ministers and consuls, and those in which a state shall be party, the Supreme Court shall have original jurisdiction. In all the other cases before mentioned, the Supreme Court shall have appellate jurisdiction, both as to law and fact, with such exceptions, and under such regulations as the Congress shall make.
The trial of all crimes, except in cases of impeachment, shall be by jury; and such trial shall be held in the state where the said crimes shall have been committed; but when not committed within any state, the trial shall be at such place or places as the Congress may by law have directed.
Section 3. Treason against the United States, shall consist only in levying war against them, or in adhering to their enemies, giving them aid and comfort. No person shall be convicted of treason unless on the testimony of two witnesses to the same overt act, or on confession in open court.
The Congress shall have power to declare the punishment of treason, but no attainder of treason shall work corruption of blood, or forfeiture except during the life of the person attainted.

Article IV
Section 1. Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.
Section 2. The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.
A person charged in any state with treason, felony, or other crime, who shall flee from justice, and be found in another state, shall on demand of the executive authority of the state from which he fled, be delivered up, to be removed to the state having jurisdiction of the crime.
No person held to service or labor in one state, under the laws thereof, escaping into another, shall, in consequence of any law or regulation therein, be discharged from such service or labor, but shall be delivered up on claim of the party to whom such service or labor may be due.
Section 3. New states may be admitted by the Congress into this union; but no new states shall be formed or erected within the jurisdiction of any other state; nor any state be formed by the junction of two or more states, or parts of states, without the consent of the legislatures of the states concerned as well as of the Congress.
The Congress shall have power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States; and nothing in this Constitution shall be so construed as to prejudice any claims of the United States, or of any particular state.
Section 4. The United States shall guarantee to every state in this union a republican form of government, and shall protect each of them against invasion; and on application of the legislature, or of the executive (when the legislature cannot be convened) against domestic violence.

Article V
The Congress, whenever two thirds of both houses shall deem it necessary, shall propose amendments to this Constitution, or, on the application of the legislatures of two thirds of the several states, shall call a convention for proposing amendments, which, in either case, shall be valid to all intents and purposes, as part of this Constitution, when ratified by the legislatures of three fourths of the several states, or by conventions in three fourths thereof, as the one or the other mode of ratification may be proposed by the Congress; provided that no amendment which may be made prior to the year one thousand eight hundred and eight shall in any manner affect the first and fourth clauses in the ninth section of the first article; and that no state, without its consent, shall be deprived of its equal suffrage in the Senate.

Article VI
All debts contracted and engagements entered into, before the adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation.
This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.
The Senators and Representatives before mentioned, and the members of the several state legislatures, and all executive and judicial officers, both of the United States and of the several states, shall be bound by oath or affirmation, to support this Constitution; but no religious test shall ever be required as a qualification to any office or public trust under the United States.

Article VII
The ratification of the conventions of nine states, shall be sufficient for the establishment of this Constitution between the states so ratifying the same.


Amendment I
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Amendment II
A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

Amendment III
No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.

Amendment IV
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Amendment V
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Amendment VI
In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

Amendment VII
In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.

Amendment VIII
Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

Amendment IX
The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Amendment X
The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

Amendment XI
The judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.

Amendment XII
The electors shall meet in their respective states and vote by ballot for President and Vice-President, one of whom, at least, shall not be an inhabitant of the same state with themselves; they shall name in their ballots the person voted for as President, and in distinct ballots the person voted for as Vice-President, and they shall make distinct lists of all persons voted for as President, and of all persons voted for as Vice-President, and of the number of votes for each, which lists they shall sign and certify, and transmit sealed to the seat of the government of the United States, directed to the President of the Senate;--The President of the Senate shall, in the presence of the Senate and House of Representatives, open all the certificates and the votes shall then be counted;--the person having the greatest number of votes for President, shall be the President, if such number be a majority of the whole number of electors appointed; and if no person have such majority, then from the persons having the highest numbers not exceeding three on the list of those voted for as President, the House of Representatives shall choose immediately, by ballot, the President. But in choosing the President, the votes shall be taken by states, the representation from each state having one vote; a quorum for this purpose shall consist of a member or members from two-thirds of the states, and a majority of all the states shall be necessary to a choice. And if the House of Representatives shall not choose a President whenever the right of choice shall devolve upon them, before the fourth day of March next following, then the Vice-President shall act as President, as in the case of the death or other constitutional disability of the President.The person having the greatest number of votes as Vice-President, shall be the Vice-President, if such number be a majority of the whole number of electors appointed, and if no person have a majority, then from the two highest numbers on the list, the Senate shall choose the Vice-President; a quorum for the purpose shall consist of two-thirds of the whole number of Senators, and a majority of the whole number shall be necessary to a choice. But no person constitutionally ineligible to the office of President shall be eligible to that of Vice-President of the United States.

Amendment XIII
Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
Section 2. Congress shall have power to enforce this article by appropriate legislation.

Amendment XIV
Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
Section 2. Representatives shall be apportioned among the several states according to their respective numbers, counting the whole number of persons in each state, excluding Indians not taxed. But when the right to vote at any election for the choice of electors for President and Vice President of the United States, Representatives in Congress, the executive and judicial officers of a state, or the members of the legislature thereof, is denied to any of the male inhabitants of such state, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such state.
Section 3. No person shall be a Senator or Representative in Congress, or elector of President and Vice President, or hold any office, civil or military, under the United States, or under any state, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any state legislature, or as an executive or judicial officer of any state, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may by a vote of two-thirds of each House, remove such disability.
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.

Amendment XV
Section 1. The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of race, color, or previous condition of servitude.
Section 2. The Congress shall have power to enforce this article by appropriate legislation.

Amendment XVI
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

Amendment XVII
The Senate of the United States shall be composed of two Senators from each state, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislatures.
When vacancies happen in the representation of any state in the Senate, the executive authority of such state shall issue writs of election to fill such vacancies: Provided, that the legislature of any state may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct.
This amendment shall not be so construed as to affect the election or term of any Senator chosen before it becomes valid as part of the Constitution.

Amendment XVIII
Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.
Section 2. The Congress and the several states shall have concurrent power to enforce this article by appropriate legislation.
Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.

Amendment XIX
The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of sex.
Congress shall have power to enforce this article by appropriate legislation.

Amendment XX
Section 1. The terms of the President and Vice President shall end at noon on the 20th day of January, and the terms of Senators and Representatives at noon on the 3d day of January, of the years in which such terms would have ended if this article had not been ratified; and the terms of their successors shall then begin.
Section 2. The Congress shall assemble at least once in every year, and such meeting shall begin at noon on the 3d day of January, unless they shall by law appoint a different day.
Section 3. If, at the time fixed for the beginning of the term of the President, the President elect shall have died, the Vice President elect shall become President. If a President shall not have been chosen before the time fixed for the beginning of his term, or if the President elect shall have failed to qualify, then the Vice President elect shall act as President until a President shall have qualified; and the Congress may by law provide for the case wherein neither a President elect nor a Vice President elect shall have qualified, declaring who shall then act as President, or the manner in which one who is to act shall be selected, and such person shall act accordingly until a President or Vice President shall have qualified.
Section 4. The Congress may by law provide for the case of the death of any of the persons from whom the House of Representatives may choose a President whenever the right of choice shall have devolved upon them, and for the case of the death of any of the persons from whom the Senate may choose a Vice President whenever the right of choice shall have devolved upon them.
Section 5. Sections 1 and 2 shall take effect on the 15th day of October following the ratification of this article.
Section 6. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of three-fourths of the several states within seven years from the date of its submission.

Amendment XXI
Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.
Section 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.
Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several states, as provided in the Constitution, within seven years from the date of the submission hereof to the states by the Congress.

Amendment XXII
Section 1. No person shall be elected to the office of the President more than twice, and no person who has held the office of President, or acted as President, for more than two years of a term to which some other person was elected President shall be elected to the office of the President more than once. But this article shall not apply to any person holding the office of President when this article was proposed by the Congress, and shall not prevent any person who may be holding the office of President, or acting as President, during the term within which this article becomes operative from holding the office of President or acting as President during the remainder of such term.
Section 2. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by the legislatures of three-fourths of the several states within seven years from the date of its submission to the states by the Congress.

Amendment XXIII
Section 1. The District constituting the seat of government of the United States shall appoint in such manner as the Congress may direct:
A number of electors of President and Vice President equal to the whole number of Senators and Representatives in Congress to which the District would be entitled if it were a state, but in no event more than the least populous state; they shall be in addition to those appointed by the states, but they shall be considered, for the purposes of the election of President and Vice President, to be electors appointed by a state; and they shall meet in the District and perform such duties as provided by the twelfth article of amendment.
Section 2. The Congress shall have power to enforce this article by appropriate legislation.

Amendment XXIV
Section 1. The right of citizens of the United States to vote in any primary or other election for President or Vice President, for electors for President or Vice President, or for Senator or Representative in Congress, shall not be denied or abridged by the United States or any state by reason of failure to pay any poll tax or other tax.
Section 2. The Congress shall have power to enforce this article by appropriate legislation.

Amendment XXV
Section 1. In case of the removal of the President from office or of his death or resignation, the Vice President shall become President.
Section 2. Whenever there is a vacancy in the office of the Vice President, the President shall nominate a Vice President who shall take office upon confirmation by a majority vote of both Houses of Congress.
Section 3. Whenever the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice President as Acting President.
Section 4. Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.
Thereafter, when the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that no inability exists, he shall resume the powers and duties of his office unless the Vice President and a majority of either the principal officers of the executive department or of such other body as Congress may by law provide, transmit within four days to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office. Thereupon Congress shall decide the issue, assembling within forty-eight hours for that purpose if not in session. If the Congress, within twenty-one days after receipt of the latter written declaration, or, if Congress is not in session, within twenty-one days after Congress is required to assemble, determines by two-thirds vote of both Houses that the President is unable to discharge the powers and duties of his office, the Vice President shall continue to discharge the same as Acting President; otherwise, the President shall resume the powers and duties of his office.

Amendment XXVI
Section 1. The right of citizens of the United States, who are 18 years of age or older, to vote, shall not be denied or abridged by the United States or any state on account of age.
Section 2. The Congress shall have the power to enforce this article by appropriate legislation.

Amendment XXVII
No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.

Reality Check

My Recommended Federal Reserve Policy
Gary North
Reality Check (May 29, 2007)

People ask me, "What should the Federal Reserve's monetary policy be?" The answer, theoretically and practically, is simple: paralysis.
Are prices rising? The FED should cease buying or selling assets, e.g., U.S. Treasury debt.
Are prices falling? The FED should stop buying or selling assets.
Are prices stable? The FED should cease buying or selling assets.
What about the members of the Federal Open Market Committee (FOMC), who decide as a committee how many assets to buy or sell? Offer them early retirement at 120% of their present salaries.
Do the same for their respective staffs.
What if interest rates fall in a recession? Let them fall. What if they rise, due to a war? Let them rise.
In short, let participants on a free market decide what the rate of interest should be.
Why is the collective, competitive judgment of profit- seeking investors who put their own money on the line inferior to a group of salaried bureaucrats who create money out of nothing to be put on the line?
BANKRUPTCIES
There is a serious possibility that, in a recession, some large banks might not be able to stay in business.
This is true of every line of business. Why should banks be exempt from the threat of bankruptcy?
But, critics may say, the government has promised to pay off depositors in insolvent banks. How? Through its Federal Deposit Insurance Corporation (FDIC).
I respond: Why not let Congress find the money needed, if any, to pay off depositors? Why call on a privately owned, government-chartered central bank to counterfeit money in order to pay off depositors? Congress made the promise. Let Congress bear the responsibility.
That, of course, is the whole point. Congress wants credit for a good economy. "Re-elect us! We helped made things good!" It also wants to shift blame for a bad economy. "Re-elect us! We'll get to the bottom of all this!"
Political promises should be paid for politically. But political promises are made by politicians who want to avoid the bills when they come due. They rely on the Federal Reserve System's Board of Governors to keep the bills from ever coming due. The FED does this by creating money and buying assets, especially U.S. Treasury debt.
The result since 1933 has been an increase in the supply of money, which helps political debtors to meet their monthly payment schedules.
Instead of bankrupting the political debtors, the FED has just about bankrupted the dollar and all those creditors who have loaned long-term money at fixed interest rates.
The bills keep coming due. The FED keeps paying them off with depreciated money. "Shut up. You've been paid." So, creditors accept this and seek to get higher rates of interest to compensate them for the depreciating dollar. They can't always get what they want.
At some point, creditors look abroad in search of promises to pay, denominated in stable money. But central banks are universal in our day, and they are all inflationary. Fiat money is the standard of our era. The world's economy rests on promises to pay. Central banks back up these promises with fiat money. The politically unsustainable promises become politically sustainable inflation. Congress can blame something else for inflation. In contrast, it would have to blame itself for default on promises.
The central bank cartel in one nation is always threatened by stable money in other economies. This is why central banking is a growing cartel. Every new nation is told by central bankers to start a domestic central bank. All but two countries today have a central bank. The two exceptions are Monaco, which has a casino instead, and Andorra, which has mostly sheep. Since neither of them has an army to pay for, they don't need a central bank. (The old leftists Malvina Reynolds and Pete Seeger wrote "I Want to Go to Andorra" in 1962. I have had that song in my collection ever since 1963. I can still sing it. They were right: www.GaryNorth.com/snip/176.htm)
FOREIGN EXCHANGE
If the FED were to stabilize the monetary base by refusing to buy or sell assets, the value of the dollar in relation to other nations' currencies would be determined by currency speculators' competing assessments of the future effects of everything that might conceivably affect the purchasing power of the dollar.
The best economic forecasters on earth are currency speculators. The uncertainty is enormous, the leverage is high, and the markets are relentless. You can make or lose more money faster and with lower commissions in the currency futures markets than any other. The market is essentially unregulated, since the assets it trades are international. Any attempt by governments to regulate this market has the effect of driving the computers off shore to some island nation that doesn't regulate it.
If the FED did nothing for a year or two, world currency speculators would conclude that the U.S. dollar had become the world's only stable currency. It would become the benchmark. For as long as the FED did nothing, the dollar would be established as the world's reserve currency even more than it is today.
This would force any nation whose politicians wanted its currency to replace the dollar as the world's reserve currency to instruct its central bank to imitate the FED's policy of doing nothing.
Foreign investors would soon recognize that their capital is safe from depreciation by purchasing dollars and investing them at whatever market rate is available. The dollar would become as close to immune from competition as any currency on earth. The U.S. domestic capital markets are huge. The dollar's role as the world's reserve currency makes the U.S. markets even more huge. Stable money would make the U.S. dollar the best widely available currency unit.
What about the trade deficit? That would depend on the comparative social rates of future orientation. Americans' future orientation, if lower than foreign investors' future orientation, is what produces the trade deficit. With foreign investors doing even more what they are doing today -- buying assets denominated in dollars -- foreigners would buy up even more American capital and debt. But they would do this at low rates of interest. If selling off income-producing assets is what Americans want to do -- and they seem to -- then they could buy more of what they want with stable money: more goods per dollar because the dollar would increase in value in relation to foreign currencies, whose central banks refuse to do nothing.
LAISSEZ FAIRE IN MONEY
The policy I am recommending is semi-laissez faire: "Let us alone." The FED would let us alone as users of its currency. Congress would let the FED alone as the taxer and borrower of the FED's currency.
Make no mistake about this: the currency is the FED's. The FED has a monopoly over it. Paper bills are by law legal tender. Congress in 1913 passed sovereignty over money to a privately owned agency.
This is not pure laissez faire. Pure laissez faire in money would be based on legally enforceable debt contracts. Banks would not be allowed to promise two check-writers -- the depositor and the borrower -- the right to withdraw their deposits at the same time. In other words, there would be no fractional reserve banking.
Then it's "Come one, come all!" Anyone could set up a bank. Anyone could issue a warehouse receipt for gold or silver or copper. The free market would allow money users to assess the reliability of every bank's IOUs. The banks would compete.
Congress would get out of the money business entirely. It would merely identify the private currency or currencies that it is willing to accept for the payment of taxes. No more legal tender laws. No more government mint. No more monopoly central bank. Congress would do what the FED ought to do: nothing.
This suggestion is opposed by academic economists, commercial bankers, politicians, historians, and all other inflationists, whose are, like the demons of old, legion. This would place the fate of every currency solely in the hands of the judges, who would enforce contracts, and currency speculators, a group which ultimately includes everyone who uses money. Such a view of money places sovereignty over money into the same hands as sovereignty over chewing gum: owners.
This view of money rests on a presupposition, best stated by Jesus in the parable of the employer.
Is it not lawful for me to do what I will with mine own? Is thine eye evil, because I am good? (Matthew 20:15)
When it comes to money, the evil eye is universal. Men do not trust the principle of exclusive private ownership. They may say they do, but they really don't. The most flagrant masters of this evil eye are free market economists -- Austrian School economists excepted -- who praise the free market to the skies until they get to the chapter on money and banking. Then the free market needs the guiding hand of -- you guessed it -- academically certified economists.
Three decades ago, I knew a newly certified Austrian School economist. He showed considerable promise academically. But then he got an offer from the FED to become a staff economist. He disappeared into the bowels of the FED, never to reappear. He ceased writing. He maintained, when the deal was first offered to him, that he would write on the side. He never did. Somehow, his enthusiasm for the ideal of the free market ceased to motivate him enough to sit down and write. That monthly check from the world's supreme monopoly undercut his ideology, which had been opposed to government-licensed monopoly. "Let us alone" was replaced by "fully vested pension."
A free market in money and the enforcement of contracts in banking are ideas so utterly foreign to the modern world that they are simply not discussed in polite circles.
The best way to discover the heart, mind, and soul of a society is to discover those issues that are so widely taken for granted that they are not discussed in public. I don't mean hate crimes. I don't mean political correctness. Here, there have to be negative sanctions to keep them from being discussed. I mean ideas that are so off the mental radar of a society that they are essentially inconceivable.
A free market in money and banking is such an idea.
THE FUTILITY OF REFORM
People for four decades have asked me, "How can we reform the FED?" I always tell them: "Let it alone." Laissez faire works both ways.
The FED is immune to reform because central banking is a universal phenomenon. Ever since the creation of the Bank of England in 1694, academics and opinion leaders have supported the idea. It has spread ever since, but especially in the 20th century. You cannot reform an institution that rests on a universally accepted idea -- so universally accepted that to think otherwise is to join the lunatic fringe.
There have been Congressmen over the years who have exposed the FED. Some have thought there was hope. Others have used the FED as a whipping boy. Of all institutional boys to be whipped, the FED is at the top of my list. But we should recognize the difference between analysis are implementation.
To undermine the public's confidence in the FED is impossible, except for one factor: the FED. Central banking is inherently immoral. It is inherently inflationary. It is inherently de-stabilizing. Why? Because it is inherently statist. It rests on coercion. It rests on the idea that a committee of tenured, salaried, government-protected people possesses greater insight into supply and demand than speculators who put their own money, or their clients' money, on the line, moment by moment. It rests on the idea that government-enforced central planning is more efficient, more compassionate, and more profitable for a society than market planning by owners of capital.
Central planning is irrational. Ludwig von Mises proved this in 1920. In 1991, the collapse of the Soviet Union finally verified what he had argued theoretically.
Central banking is irrational. Ludwig von Mises showed why in 1912 in his book, "The Theory of Money and Credit." As yet, we have not seen a collapse comparable to the fall of the Soviet Union, although the Great Depression was a good first-stage early warning indicator. So is the decline of the dollar by 95% since 1914. But, ultimately, either central banking will be replaced by market institutions in a slow and steady way, or else there will be a replacement after a worldwide collapse. I hope for the former, but the latter is possible.
If the latter happens, I will want to be in Andorra.
CONCLUSION
For people who have read about the Federal Reserve System's monopolistic power over the economy, it is frustrating to imagine that the voters can do nothing. Trust me: the voters can do nothing. Most voters have not heard of the FED, do not understand central banking, and do not have allies in Congress, other than Ron Paul.
Yet the FED is doomed, as is central banking in general. Government power cannot make the irrational rational. It cannot make coercion productive. It cannot make committees wise.
You might as well use the system to profit from it. You can't change it.
If you want a good 42-minute introduction to the Federal Reserve System, watch the video produced by the Mises Institute.
http://video.google.com/videoplay?docid=-466210540567002553&q=mises+institute&hl=en
If you want a simple introduction to the issue of central banking, read Murray Rothbard's book, "What Has Government Done to Our Money?" It's free.
www.Mises.org/money.asp
For the most detailed book on fractional reserve banking -- law, practices, results -- read DeSoto's 800-page book, "Money, Bank Credit, and Economic Cycles." It's free.
www.Mises.org/books/desoto.pdf
© 2005-2006 GaryNorth.Com, Inc. All Rights Reserved. Reproduction without permission prohibited.

Extreme Investing:

Inside Colombia
An improbable journey from crime capital to investment hot spot.
Can this boom last?

BUSINESSWEEK MAGAZINE
MAY 28, 2007

RELATED ITEMS

Cover Image: What's The Most Extreme Emerging Market On Earth? http://www.businessweek.com/magazine/content/07_22/b4036002.htm

Graphic: The New Elite http://www.businessweek.com/magazine/content/07_22/b4036004.htm

Chart: Colombia Rising http://www.businessweek.com/magazine/content/07_22/b4036007.htm

Alvaro Uribe: The Change Agent http://www.businessweek.com/magazine/content/07_22/b4036008.htm

Online Extra: Slide Show: Colombia's Surprising Transformation and Unique Challenges http://images.businessweek.com/ss/07/05/0517_colombia/index_01.htm

Online Extra: Slide Show: Revenge Of The Frontier Markets http://images.businessweek.com/ss/07/05/0517_emergingmarkets/index_01.htm


COVER STORY
By Roben Farzad

"You going there to get some kilos?" asks the driver as he drops me off at Newark's international airport for my six-hour flight to Bogotá. He grins at me in the rear-view mirror as if he has cracked the most original one-liner in history. "Like Scarface," he continues, shifting to his Pakistani/Latino gangster accent: "Say hello to my little friend! Pow! Pow!" He hands me my bags and reminds me to call my mom and make peace with the Almighty before I embark for certain death. "You are crazy, my friend."


Traveling to Colombia to chronicle the investment miracle unfolding there seemed perfectly reasonable a few weeks earlier. The stats all scream "Go! Go! Go!": Colombia's stock market has soared fourteenfold since October, 2001. Foreign direct investment and capital inflows have more than doubled, while real estate prices have tripled in many areas. Citigroup (C ) CEO Chuck Prince even kicked off his February "world tour" in Bogotá, where the bank is building branches and a Latin American call center. But when most Americans hear the name Colombia they think about the late Medellín drug lord, Pablo Escobar. And roving paramilitary death squads. And speedboat-loads of cocaine headed for Miami.


I've been assured by bankers that things are getting much better in this nation of 42 million. But it isn't until I step onto the packed 737 to Bogotá that I get my first real sense of the intense interest in Colombian investments. I spy at least 20 business suits, including the laptop-toting Swede sitting next to me who's building a boutique hotel in the beautiful 16th century city of Cartagena on the north coast.

Investors like these have visited many exotic ports in recent years. Colombia's surprising rise has been fueled by two larger trends: the enormous amount of money sluicing through global markets and investors' increasing risk tolerance. First, cash poured into the so-called BRIC countries—Brazil, Russia, India, and China. Next it flooded riskier secondary destinations such as Turkey and Poland, and last year, with ferocity, Vietnam. Now money is gushing into third-tier hinterlands fraught with political and economic problems, where even the rule of law isn't a given.

THE CONFIANZA INDEX
Call them extreme emerging markets. The Standard & Poor's/IFCG Frontier Index of 22 such destinations, which includes investing curiosities like Lebanon, Côte d'Ivoire, and Bangladesh, has gained nearly 400% in the past five years. The question is whether these nascent markets have what it takes to parlay the fickle enthusiasm of hedge-fund traders and other investors into long-term economic development.

Yet Colombia is so extreme that it hasn't even made the Frontier Index. Its stock market has an aggregate capitalization of just $59 billion. In this parallel investing universe, price-earnings ratios take a backseat to fuzzy measures such as confianza, which translates into confidence and trust but is more accurately described as the general sense that people can safely transact business and get through everyday life unharmed. The handful of Wall Street analysts who cover Colombia supply their clients with charts of murder rates and kidnappings.

President Alvaro Uribe, who took office in 2002, nearly five decades into a civil war that has pitted Marxist guerrillas against right-wing death squads, has made confianza his overarching goal. Killings and abductions are down sharply in the big cities, and that has been a boon for all manner of investments, from stocks to real estate. "I guarantee that if you graph the decline in kidnappings to investment gains, the correlation would be one-to-one," says Ben M. Laidler, head of Andean research for UBS Pactual.

On a continent whose economic history is the stuff of a blooper reel, Colombia's strong fundamentals stand out. Its $130 billion economy, a world leader in the production of coffee, petroleum, textiles, and flowers, is growing at 6.8% a year, two full points faster than the Latin American average. In the past 10 years, Colombia has slashed its inflation rate from 18% to 5%, and since Uribe was elected, unemployment has dipped from 16% to 13%. The nation has never defaulted on its debt or experienced hyperinflation. And entrepreneurial thinking is spreading. Run a Google (GOOG ) geographical-hit query, and you'll see that, per capita, nowhere in the world are there more searches for the words "Peter Drucker," the late management guru, than in Bogotá. No. 2? Medellín.

Yes, Medellín. Once the murder capital of the world, this city of 2.4 million is regaining its status as a commercial hub, hosting regional offices for a growing roster of multinationals including Philip Morris (MO ), Toyota (TM ), and Renault, as well as globally minded Colombian companies that make up 70% of the country's stock market value. More high-rises are under construction here than in Manhattan and Los Angeles combined.

But all of it—the stock market gains, the development, the rising living standards—rests on confianza. Foreigners' view of Colombia as a lawless, violent, riven land won't change quickly. As Commerce Minister Luis Guillermo Plata acknowledges, "Why would I invest in a country if I can't go there?"

As I get into the cramped cab that's taking me to my hotel, I can't help thinking about the fabled "millionaire's tour of Bogotá," a stretch of road where colluding cabbies and thieves once drove passengers from ATM to ATM to drain their bank accounts. And then there's the drugs. Colombia still produces the majority of the world's cocaine, an ongoing crisis that draws a steady supply of U.S. military and financial aid. Even corporate crime here takes on deadly overtones: Cincinnati-based banana giant Chiquita Brands International (CQB ) was in the news recently for admitting to having paid $1.7 million in protection money to a Colombian paramilitary group on Washington's list of foreign terrorist organizations.

I'm here to find out whether Colombia's fledgling stock market can keep surging, whether its financial and physical infrastructures can accommodate the flood of investment, and whether an equity culture can take hold.

At the center of everything is President Uribe. "We need to rescue international confidence in our country," he tells me in his heavily guarded compound in Bogotá's historic center full of Spanish colonial architecture. Access to Uribe is preceded by an hour of security checks and chilling looks from guards holding bayonet-tipped machine guns.

The 54-year-old Uribe is a rarity in increasingly leftist Latin America. A center-right ruler with an approval rating of more than 60%, he won a landslide second term in 2006 after having amended the constitution to allow him to run again. Uribe knows Colombia's history of violence firsthand: A decade ago he was governor of Medellín's province, and in 1983 his father was murdered by kidnappers. The sometimes dour leader has driven most of the drug traffickers and leftist guerrillas out of urban centers, though they still reign in remote regions.

But allegations have surfaced in Colombia that the President himself has links to right-wing paramilitaries who murdered hundreds, including labor-union activists. On May 14, 20 Colombian lawmakers and businessmen were arrested on charges in connection with the scandal. Colombia's police chief and head of police intelligence, meanwhile, were ousted amid allegations of illegal wiretapping of opposition politicians and journalists. Uribe vehemently denies any personal connection to the affair. (See Alvaro Uribe: The Change Agent).

Despite his obsession with law and order, the economy is never far from his mind. "The state is the most important private enterprise," he says, "and the public is like a universe of shareholders." Javier Vargas, a Colombian banker with Credit Suisse (CS ), has heard Uribe sound that theme many times. "He talks like a person who is selling and marketing his country," he says. "Investor confidence is key for him." In May, Uribe visited Washington to meet with supporters in the Bush Administration and lobby congressional Democrats on a free-trade pact between the two countries. Democrats have been uneasy with Uribe since the recent allegations surfaced. But Colombia is a vital strategic ally in an increasingly hostile continent, bordered by Hugo Chávez' Venezuela and left-leaning Ecuador. Washington has sent Colombia $5 billion in aid since 2000, including $650 million last year; only Iraq, Egypt, Afghanistan, and Israel receive more.

For Uribe, a deal is crucial both for the tangible economic benefits and the perceptual ones. He has invested much political capital already, visiting the U.S. at least 25 times since taking office. Winning full free-trade benefits with the U.S. would do much to bolster the fragile investor confidence he has been nurturing, while a loss would damage his prestige. Uribe's challenge is one that everyone, from business leaders to taxi drivers, acknowledges. "Investing here is rooted in improving physical safety and lowering the risk of doing business," says Alexander P. Kazan, a Latin American strategist at Bear Stearns & Co. (BSC ) "You really cannot overstate the importance."

SLEEPY EXCHANGE
On a cool April morning, I make my way to Bogotá's bustling financial district. Amid the roar of motorcycle engines and a haze of bus exhaust, the district brims with young professionals sipping tintos—tiny cups of dark coffee—while chatting on newfangled cell phones. At every crosswalk and on street medians, the less fortunate hawk snacks, cigarettes, and telephone calling cards from salvaged baby carriages, stark reminders of the gaping disparities in this poor nation.

Halfway up a glassy office building is an ultramodern floor containing Colombia's stock exchange, the Bolsa de Valores. It's high-tech, but no one would confuse it with the NASDAQ. Just 12 people sit around a circular table staring at their flat-panel displays in a space no bigger than a conference room at a Best Western hotel. It's so quiet you might think you showed up to take the GMAT. I jokingly ask if we're at the right place. Our photographer wonders aloud if he should bother unpacking his equipment.

"This is it," says Jaime Sarmiento, the exchange's 34-year-old communications director, sensing the anticlimax of the moment. He points up at the ticker, a circular LCD sign. "Does anyone know how to turn this thing on?" The specialists on the floor arrange a photo op, choosing a mustachioed elder to sit on the elevated chair in the center of the ring and motion as if he is directing order flow. Truth be told, everyone is just waiting for 1 p.m., when the market closes and the power lunch scene takes hold. When I ask if the early close is a vestige of the Spanish siesta, I'm curtly told that it's purely a result of how little business there is to transact. Sarmiento takes us downstairs to tour the café, a swank lounge that was conceived as a high-energy, high-buzz meeting place for stock junkies. On this day, two or three guys sit around reading the paper, blissfully unaware of the handful of digits flickering on the wall-mounted display above.

Such sleepiness belies the market's breathtaking volatility. This is the central paradox of extreme emerging markets: With so few buyers and sellers, small upticks can quickly turn into major surges, while the faintest of downticks can lead to painful routs. After posting a 128% gain for 2005, second best in the world, the Bolsa nosedived 45% in two months during last year's late-spring emerging-markets swoon, the second-worst showing on the globe. It has since jumped 75%; on June 15, 2006, alone, the index gained 16%. It's down 5% in 2007.

All the choppiness merely confirms the suspicions of most of the locals, who eschew stocks for government bonds, even though they yield just 6% now, a third of what they did eight years ago. "The general public just isn't all that accustomed to stocks," says Rodrigo Jaramillo, CEO of Interbolsa, the country's largest brokerage, and former chairman of the stock exchange. He notes that fewer than 70,000 Colombians bought local shares in 2006.

Even people who invest for a living are reluctant to buy Colombian stocks with their own money. "I like to invest in young cows," admits a 26-year-old private investment adviser in a British-spread collar and Hermès tie between bites of an empanada in a breakfast joint near the exchange. His eyes light up as he explains that his uncle has given him dibs on investing in heifers, an inside opportunity that has lately scored him 20% to 30% annual returns. Why dabble in risky stocks, he asks, when he can collect steady returns on the family ranch? "I sponsor the cows until—how do you say?—graduation," he says, grinning diabolically, of the day when they're auctioned off and he reaps his windfall.

But in fits and starts local investors are coming around. I'm struck by how many twenty- and thirtysomethings in Bogotá are at the leading edge of business and civic life: chief executives, money managers, restaurateurs, even cabinet ministers. Young and educated, Colombia's new elite could ply their trade anywhere in the hemisphere. A decade ago there would have been no question that they would end up abroad. Just four years ago, Bogotá's Club El Nogal, a hot night spot, was car-bombed by a leftist rebel group, resulting in 36 deaths. But El Nogal has come back stronger than ever. Even with all the bomb-sniffing dogs, the place is nearly impossible to get into on a weeknight. Bogotáns consider it a metaphor of their resilience.

I meet some young professionals for dinner at Balzac, a restaurant modeled after Manhattan's trendy Balthazar. José María de Valenzuela, a recently minted MBA at INSEAD in France, lights a cigarette and reflects on his accomplishments. "There was just a small possibility I'd end up back here," he says. All of 32, Valenzuela, who did his undergraduate work at Brown University a decade ago, used to specialize in what you might call distressed investing. "People were afraid to leave the city," he recalls of the siege mentality of seven or eight years back, when terrified families sought escapism at his miniature golf course in Bogotá. "You could buy real estate just for the cost of the taxes." Which is what Valenzuela did, before selling into a property boom and plowing his winnings into what he and a former finance professor correctly thought would be the start of a roaring bull market for stocks. Last summer, Valenzuela rolled those profits into a partnership with HenCorp Futures, a U.S.-based trading firm, to offer currency strategies to foreign investors—a critical building block to outside participation in the Colombian market. The only way to buy Bolsa-listed stocks directly is in pesos, and there are no pure-play Colombian mutual funds available to foreigners.

The next afternoon, on Valenzuela's recommendation, I head to Harry's Bar, in a tony Bogotá neighborhood that resembles San Francisco's Russian Hill. Amid the din of clinking wine glasses, blond-streaked women and sharply dressed men pick at plates of seared tuna and Argentinian steak. In the evenings the place is often overrun by actors, soccer stars, and diplomats. The owner, spotting my reporter's notebook, stops by. "Please tell America we're not a bunch of drug dealers shooting at each other from trees," he says.

COFFEE BUZZ
In walks my lunch guest, Felipe Gaviria, the boyish money manager whose name is on the lips of everyone in the smart-money set. In 1997, at 23, Gaviria was promoted to head of currency trading at a small bank in Cali. Two years later he left for business school in Barcelona. He returned to Colombia when Uribe was elected in 2002, sensing the moment was right to buy Colombian property and bet that the peso would strengthen against the dollar. Now he oversees $3 billion in pension assets for Spain's Grupo Santander. It's common knowledge that Gaviria is being wooed by bulge-bracket investment banks and hedge funds. "I receive everybody," he says coyly.

With more money pouring in as the economy grows, Gaviria says he's impatient for more local investment options. Fortunately for him, some big ones are just around the corner. In an audacious move, Procafecol, of the fast-growing Juan Valdez coffee shop fame, is floating its shares on the Bolsa. The unlikely beneficiaries: thousands of rural caficultores, or coffee growers, who make up Colombia's national coffee alliance. They've recently been swarmed by an army of financial advisers dispatched to the countryside. "Your preferred shares give you dividend priority over ordinary investors," reads the glossy offering letter, as if to poke fun at the more cosmopolitan Class B shareholders.

The real game changer could be the $4 billion initial public offering of state oil concern Ecopetrol, one of South America's four largest. In short order, it could become the most widely held stock on the exchange. And with U.S. bankers circling, a New York Stock Exchange (NYX ) listing could be in the offing. The only other Colombian stock listed in the U.S. is Medellín-based Bancolombia (CIB ), whose shares have jumped twentyfold in the past five years.

Indeed, Wall Street is doing its best to ride the Colombia wave. In 2005, SABMiller (SAB.L ) PLC took over Colombia's biggest brewery, Bavaria, for a record $7.8 billion, with Merrill Lynch (MER ), JPMorgan Chase (JPM ), Lehman Brothers (LEH ), Morgan Stanley (MS ), and Citigroup (C ) advising on the acquisition. Last year ABN Amro advised on the sale of a controlling $657 million stake in a key oil refinery to Switzerland's Glencore International. "You're having more and more investment banks going into Colombia," says Eric Newman, a Bogotá native who was recently poached from Lehman Brothers by Morgan Stanley to cover the country for its Miami-based Latin American private banking arm. He shuttles to Colombia 20 times a year.

Not only are Colombia's top companies doing better at home, they're also branching out to the rest of Latin America and beyond. A company called Chocolates, essentially Colombia's Kraft Foods (KFT ), now ships to Los Angeles and the Southwest, while Argos, the country's foremost cement producer, has been buying operations in Arkansas, Georgia, North Carolina, and Texas. Bancolombia recently acquired El Salvador's largest bank.

One sign of the rising fortunes in Colombia is the sudden misfortune of the self-proclaimed Bulletproof Tailor. Miguel Caballero makes suits and other apparel tough enough to withstand gunshots. His garment factory, located in a seedy neighborhood of Bogotá, features a picture gallery of famous customers, including action film star Steven Seagal and President Uribe, as well as glossies of Caballero discharging his handgun into the bulletproofed torsos of employees. Ten years ago, he says, his company sold 70% of its wares in Colombia. Now, thanks to the ebbing violence, that figure is just 20%. Caballero is dispatching salesmen to Russia, Venezuela, even Iraq. "The idea is to save the business," he says. "You can say we're globalizing."

The growing confidence in Colombia brings a new set of challenges. The streets are safer, and citizens are road tripping again. Export-import activity is steadily growing. Tourism has nearly tripled in five years, and beach-lined, historic Cartagena is among South America's most expensive real estate markets. But with all of that happening, Colombia's highways, roads, ports, and other industrial backbones are becoming increasingly overburdened. "We're really behind on infrastructure," says Juliana Ocampo, a recent MBA from Massachusetts Institute of Technology who returned to Bogotá to work for Mexican cement giant Cemex. "If you ask everyone here, that's where the investment needs to flow next." Says Gaviria, the young money manager: "Our north port is terrible. If we had a world-class port project, I would invest right then and there." Bear Stearns warned in a recent report that growth could halt if tens of billions worth of infrastructure isn't soon built, noting that Colombian pension funds are clamoring to invest. If the buildout stalls, it will undermine Uribe's reforms.

STOCK OPTION
I take up the issue with Vice-President Francisco Santos. Schooled in Texas and Kansas and formerly the editor of Colombia's largest daily newspaper, Santos was once kidnapped by Pablo Escobar's men and surely draws satisfaction from the fact that the cartel's late-'80s vehicles sit rusting in a pound adjacent to his office. "The roads are getting so clogged," he concedes. "But who will pay for all the infrastructure?"

Financiers argue that the money is there for the taking, if only the government would change its thinking. Historically, Bogotá has issued bonds to fund such projects, but investors were hungrier for them when they yielded 20%. It also takes time to rouse all the layers of bureaucracy in the way. Bankers want the government to sell equity in the projects instead, following the privatization trend sweeping Europe and the U.S. "We can build roads without a penny of government money," insists Pedro Nel Ospina, the head of Corficolombiana, one of the country's top investment and merchant banks. "Let us do it already. Give us equity."

The government isn't ready to make that leap just yet. But the fact that a vigorous debate about how best to become an ownership society is heating up—complete with business page editorials and regional free-trade zones—shows how far this rugged stretch of the Andes Mountains has come.

Medellín, in particular, is undergoing one of the most extraordinary urban makeovers in modern times. "Our trucks, drivers, and distributors were attacked at least once a day," recalls Carlos Enrique Piedrahita, president of Chocolates, of the scene seven years ago. "Now it just doesn't happen."

The 45-minute ride to town from Medellín's main airport winds through lush forests and fragrant flower farms. The city is shaped like a bowl, with commerce and wealth concentrated at the center as poverty stares down from the rim. It all descended into chaos with the decline of Medellín's textile industry in the 1970s and the simultaneous rise of the drug trade. In 1991, two years before Escobar met his end in a rooftop gunfight with police, he was recruiting cocaine-addicted teens in the hillside slums, paying them $750 for every police officer they murdered. Gang shootouts continued into emergency rooms. "One can have the impression that Medellín is about to drown in its own blood," The New Yorker magazine's Alma Guillermoprieto wrote in 1991, when the city's homicide rate was 381 per 100,000, the highest in the world.

But exploding revenue from Medellín's resurgent corporate tax base is funding a rapid metamorphosis. Now those very same shanties are connected to the city center by a sky-lift gondola of the sort you might find at EPCOT Center. New libraries and schools court students from other parts of Colombia. "Imagination Park" stands where murdered bodies were once dumped. The business assistance office in the heart of the slum is helping tiny food stores and Internet cafés flourish where there used to be only crumbling cinder block and exposed sewer pipes. Today, Medellín's murder rate is 28 per 100,000, lower than those of Baltimore and Washington, D.C.

Statistics alone don't capture the sense of rebirth here. Atop the slum, in the shadow of ascending gondolas and a new computer lab, the city's poorest children think they're kings of the hill. They chase after me, tugging at my jacket, 30 or 40 at once. It's not my money that they want, it's pictures of themselves and their friends. As I sit down to catch my breath, a runty seven-year-old boy with a precocious understanding of digital photography suddenly climbs out from under the bench. "I don't have e-mail yet," he says. "So print it for me for when you come back, O.K.?"

Se está arriesgando Hugo Chavez a una invasión de los EE.UU.?
Publicado hoy 17 de Mayo en The Daily Reckoning de Gary North:

Venezuelan President Hugo Chavez recently seized control of Orinoco, the country's last privately owned oil field, sending ripples through the world economy. Martin Hutchinson explains why this event is of major long-term importance...

THE END OF OIL SECURITY.
by Martin Hutchinson

By seizing control of the Orinoco tar sands, Venezuelan President Hugo Chavez delivered a stunning blow to US oil security. If the world economy worked in the way postulated by the globalizers his action would hardly have mattered, except to the unfortunate shareholders of the affected oil companies. However, the world economy doesn't work that way, and Chavez's seizure is thus of major long-term importance.

Orinoco is important, not because of current production from the region, a modest 600,000 barrels per day at a cost of $20 per barrel, economic but well in excess of the cost of Saudi or even Mexican offshore oil, but because of the size of the tar sands deposit. This has been variously estimated at between 1.2 trillion and 1.8 trillion barrels of oil, with higher estimates more recently. At the latter figure Orinoco represents 34% of all known world oil reserves, and 58 years of world oil consumption at current levels.

Since Orinoco's oil comes in the form of tar sands, extracting petroleum is expensive, and not all the theoretically available petroleum can be extracted. However, current estimates that only around one fifth of these sands can be economically used are probably over-pessimistic; we have only been extracting oil commercially from the Orinoco tar sands and the similar Athabasca tar sands in Canada for less than a decade, so extraction technology can be expected to improve. Over the next couple of decades, production from Orinoco could be ramped up and extraction technology improved, so that the sands could take their rightful place among the world's truly important sources of energy supply.

Thus if Orinoco and Athabasca were freely available to the world market the extreme "peak oil" theorizers would be wrong; there is enough oil supply for the world's needs for at least 100 years at current prices.

Only a sharp ramp-up in world oil usage or a disruption in the free trade patterns of world oil could prevent the United States and other major world oil users from having enough supply well past 2100. Whether burning all that oil would disrupt the world's climate is another question (my estimate is: only modestly, provided appropriate precautions were taken) but oil supply as such should not be a problem.

Before Chavez's action, a free world oil market seemed a reasonable assumption. There were certain rigidities, such as the US refusal to deal with Iran, but Iran is a second tier supplier and there are plenty of other countries willing to deal with it (as there were with Iraq in the days of the infamous "oil for food" program.) The main problem has been the extraordinarily rapid surge in Chinese and to a lesser extent Indian oil demand, which disrupted established market relationships and was bound to strain the system as well as raising oil prices.

In a well ordered market, other participants would have met with China and held open discussions of China's future needs and the potential sources to satisfy Chinese demand. This would have ensured that China was reassured about the openness of world oil markets to Chinese participation, and might well have led China itself to play by the rules in a value-maximizing way. One way of convincing China that the world market was truly open to it, for example, would have been to allow the Chinese National Oil Company to buy Union Oil of California in 2005, a substantial but strictly second-tier transaction that threatened nobody.

This didn't happen. Instead the Chinese leadership, having been brought up outside the free market system, naturally don't expect to play by its rules. Having seen political pressure brought to bear in the US Congress to prevent them buying an oil source on the free market, China has determined to deal primarily with the "bad guys" who violate human rights or are otherwise motivated by hatred of the US and the existing world order. Since in turn Chinese checkbooks have removed any incentive to good behavior for human rights violators with natural resource deposits, human rights abuses have increased, as has anti-Americanism.

However, until now China's actions weren't particularly important. Sudan is not a major player in the world's oil markets, while Iran is only a middle tier player and has other potential buyers in Europe. Human rights may thus suffer because of China's oil purchases, and US foreign policy has taken a major hit, but the oil market itself has not been significantly affected. Even China's deal last September to take 500,000 barrels per day from Venezuela, although economically insane because Venezuela has a much closer market in the US, was for a modest amount of oil and could not reasonably have been said to be market-disruptive.

The combination of Chavez's visceral anti-Americanism with Chinese paranoia, when applied to the Orinoco oil sands is uniquely damaging to the stability of the world's oil market; it is a marriage truly made in the nether regions as far as the United States is concerned.

If Chavez did not have access to non-US technology, even the simplest of embargoes would prevent him from exploiting Orinoco beyond its current state of development. The natural inefficiency of the state-run petroleum combine Petroleos de Venezuela would cause oil output to decline, particularly in the technologically complex Orinoco projects, while attempts to divert sales away from the United States would reduce Venezuela's oil revenues. Chavez would run out of money fairly rapidly, and in the next oil price downturn would either be deposed or would return to the United States, cap in hand like Libya's Muammar Qaddafi. Either way, disruption to the world oil market and to US energy security would be minor and short-lived.

With Chinese help, however, Chavez is in a very different position.

Chinese technology is probably not currently state-of-the-art in its ability to extract oil from sands. However China's ability to backward-engineer technology and the resources it has available to devote to the problem would, with the US facilities already in place, quickly bring a Chinese "technical assistance" crew up to speed. At that point, there would be no further need for Chavez ever to sell another barrel of oil to the United States; he could simply ship Venezuela's entire output to China.

Again, if the world oil market were truly free in the Adam Smith sense, this would not matter. If China bought its oil from Venezuela, and used its technological abilities to ramp up Venezuelan output, the United States could simply divert its purchases to other sellers. However, in a tight oil market this runs into a problem: in the long term, the major oil suppliers outside Orinoco, Athabasca and Russia are all in the Middle East. As it has shown in the gas market and again with its attempted suspension of deliveries to Estonia, the Russia of Vladimir Putin is a fairly unreliable supplier. In any case Russian oil production is beginning to decline, and is unlikely to be increased sharply while the country is mired in its current corruption.

Thus instead of China being forced to rely on unpleasant and unreliable Sudanese and Iranians for the additional oil it needs, the US consumer will now be subject to the tender mercies of the three major Middle Eastern oil producers, Saudi Arabia, Iraq and Iran. While the US has troops in Iraq, there probably isn't a problem; Iraq is now believed to have oil reserves of 200 billion barrels, little more than a tenth of Orinoco but still enough to be ramped up to supplement other sources. If and when the US withdraws from Iraq, and that country either collapses into civil war or aligns itself with US-hostile Iran, the US suddenly has a frighteningly large number of economic chips placed on the fragile political stability of Saudi Arabia.

Absent a major world recession, this is a problem that is only going to get worse. The United States currently imports 58% of its oil needs; that percentage is forecast to rise to 68% by 2020. Athabasca will supply some of the excess, but environmental considerations and the difficulty and cost of extraction mean that Athabasca may not be able to be ramped up as quickly as the US would wish - the US Energy Department's 2006 International Energy Outlook has Athabasca production at only 2.8 million barrels/day in 2030, less than 10% of US consumption in that year. China's consumption, on the other hand, is expected to have quadrupled by 2030, with the country importing 11 million barrels/day.

If Venezuela were democratic, the United States would not need to worry - Chavez would be out of office at the latest by 2015 or so, as even the impoverished Venezuelan masses wouldn't elect him indefinitely. If he didn't have China to help him, an undemocratic but economically incompetent Chavez would also undoubtedly fall from power well before then. However, as Chavez moves towards dictatorship his potential longevity increases - Fidel Castro, after all, has been in office 48 years and counting. In 2030 Chavez will still be only 76, five years younger than Castro is today and with Chinese-derived oil revenues he is very likely to be still in power. The United States, desperate for oil imports, may well by that year be begging Vladimir Putin's thuggish successors and the revolutionary regime that replaced Saudi Arabia's monarchy for oil market mercy.

The Iraq war was not about oil. It didn't need to be; the world oil market under the control of the United States, Japan and the EU was more or less free, so that a hostile Iraqi regime could easily be countered by a partial oil embargo and purchases elsewhere. The next war in which the United States is involved may well be about oil, however, and if the United States seeks to preserve its essential interests by assaulting the largest source of supply, with the most irredeemably hostile regime, Islam will have nothing whatever to do with it.

Regards,

Martin Hutchinson
for The Daily Reckoning

Is U.S. Heading For Financial Trouble?

March 4, 2007

(CBS) When the stock market plunges like it did this week, everyone pays attention. The man you're about to meet says hardly anyone is paying attention to what really threatens our financial future. Like an Old Testament prophet, David Walker has been traveling the country, urging people to "wake up before it's too late." But David Walker is no wild-eyed zealot. As Steve Kroft reports, David Walker is an accountant, the nation’s top accountant to be exact, the comptroller general of the United States. He has totaled up our government's income, liabilities, and future obligations and concluded the numbers simply don’t add up. And he’s not alone. Its been called the "dirty little secret everyone in Washington knows" – a set of financial truths so inconvenient that most elected officials don’t even want to talk about them, which is exactly why David Walker does.

"I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility," Walker tells Kroft. David Walker is a prudent man and a highly respected public official. As comptroller general of the United States he runs he Government Accountability Office, the GAO, which audits the government's books and serves as the investigative arm of the U.S. Congress. He has more than 3,000 employees, a budget of a half a billion dollars, and a message he considers urgent. "I'm going to show you some numbers…they’re all big and they’re all bad," he says.

So bad, that Walker has given up on elected officials and taken his message directly to taxpayers and opinion makers, hoping to shape the debate in the next presidential election. "You know the American people, I tell you, we've been to 13 cities outside of Washington with the fiscal wake up tour. They are absolutely starved for two things: the truth, and leadership," Walker says. He calls it a fiscal wake up tour, and he is telling civic groups, university forums and newspaper editorial boards that the U.S. has spent, promised, and borrowed itself into such a deep hole it will be unable to climb out if it doesn’t act now.

As Walker sees it, the survival of the republic is at stake. "What’s going on right now is we’re spending more money than we make…we’re charging it to credit card…and expecting our grandchildren to pay for it. And that’s absolutely outrageous," he told the editorial board of the Seattle Post Intelligencer. You have heard this before, from Ross Perot 15 years ago. You might have even thought the problem had been solved, when President Clinton announced, "Tonight, I come before you to announce that the federal deficit … will be simply zero." "Well, those days are gone.

We've gone from surpluses to huge deficits and our long range situation is much worse," Walker says. "President Bush would argue that the economy is in pretty good shape, unemployment is down, the deficit is actually less than expected," Kroft remarks. "The fact is, is that we don't face an immediate crisis. And, so people say, 'What's the problem?' The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country," Walker replies.

The cancer, Walker says, are massive entitlement programs we can no longer afford, exacerbated by a demographic glitch that began more than 60 years ago-- a dramatic spike in the fertility rate called the "baby boom." Beginning next year, and for 20 years thereafter, 78 million Americans will become pensioners and medical dependents of the U.S. taxpayer. "The first baby boomer will reach 62 and be eligible for early retirement of Social Security January 1, 2008. They'll be eligible for Medicare just three years later. And when those boomers start retiring in mass, then that will be a tsunami of spending that could swamp our ship of state if we don't get serious," Walker explains.

To illustrate their impact, he uses a power point presentation to show what would happen in 30 years if the U.S. maintains its current course and fulfills all of the promises politicians have made to the public on things like Social Security and Medicare. What would happen in 2040 if nothing changes? "If nothing changes, the federal government's not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won't have money left for anything else – national defense, homeland security, education, you name it," Walker warns. Walker says you could eliminate all waste and fraud, and the entire

Pentagon budget and the long range financial projections barely change, in what's shaping up as an actuarial nightmare. Part of the problem, Walker acknowledges, is that there won't be enough wage earners to support the benefits of the baby boomers. "But the real problem, Steve, is health care costs. Our health care problem is much more significant than Social Security," he says. Asked what he means by that, Walker tells Kroft, "By that I mean that the Medicare problem is five times greater than the Social Security problem." The problem with Medicare, Walker says, is people keep living longer, and medical costs keep rising at twice the rate of inflation.

But instead of dealing with the problem, he says, the president and the Congress made things much worse just three years ago when they expanded the Medicare program to include prescription drug coverage. "The prescription drug bill was probably the most fiscally irresponsible piece of legislation since the 1960s," Walker argues. Asked why, Walker says, "Well, because we promise way more than we can afford to keep. Eight trillion dollars added to what was already a 15 to $20 trillion under-funding. We're not being realistic. We can't afford the promises we've already made, much less to be able, piling on top of 'em." With one stroke of the pen, Walker says, the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years. "We’d have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise," Walker explains. Asked how much we actually have, Walker says, "Zip." So where's that money going to come from? "Well it's gonna come from additional taxes, or it's gonna come from restructuring these promises, or it's gonna come from cutting other spending," Walker says.

He is not suggesting that the nation do away with Medicare or prescription drug benefits. He does believe the current health care system is way too expensive, and overrated. "On cost we're number one in the world. We spend 50 percent more of our economy on health care than any nation on earth," he says. "We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation," Walker points out. Walker says we have promised almost unlimited health care to senior citizens who never see the bills, and the government already is borrowing money to pay them. He says the system is unsustainable. "It's the number one fiscal challenge for the federal government, it's the number one fiscal challenge for state governments and it's the number one competitive challenge for American business. We're gonna have to dramatically and fundamentally reform our health care system in installments over the next 20 years," Walker tells Kroft. And if we don't? "And if we don't, it could bankrupt America," Walker argues.

You’re probably expecting to hear from someone who disagrees with the comptroller general’s numbers, projections, and analysis. But hardly anyone does. He is accompanied on the wake-up tour by economists from the conservative Heritage Foundation, the left-leaning Brookings Institution, and the non-partisan Concord Coalition. The only dissenters seem to be a small minority of economists who believe either that the U.S. can grow its way out of the problem, or that Walker is over-stating it. "The Wall Street Journal for example calls you 'Chicken Little,' running around saying that the 'sky is falling, the sky is falling,'" Kroft remarks. "Unfortunately they don't get it. I don't know anybody who has done their homework, has researched history, and who's good at math who would tell you that we can grow our way out of this problem," Walker replies.

Federal Reserve Chairman Ben Bernanke validated much of Walker's take on the situation at congressional hearings this year, and so did ranking Republicans and Democrats on the Senate Budget Committee. Senator Kent Conrad of North Dakota is the Chairman. Sen. Conrad thinks David Walker is "providing an enormous public service." Asked if he agrees with Walker’s figures and his projections, Sen. Conrad says, "I do. You know, I mean we could always question the precise nature of this projection or that projection. But, that misses the point. The larger story that he is telling is exactly correct."

Conrad acknowledges that most people in Washington are aware how bad the situation is. "They know in large measure here, Republicans and Democrats, that we are on a course that doesn't add up," the senator tells Kroft. "Why doesn't somebody do something about it?" Kroft asks. "Because it's always easier not to. 'Cause it's always easier to defer, to kick the can down the road to avoid making choices. You know, you get in trouble in politics when you make choices," Sen. Conrad says. Asked if he thinks taxes should be raised, the senator says, "I believe first of all, we need more revenue. We need to be tough on spending. And we need to reform the entitlement programs … we need to do all of it." But he admits he doesn't think there's a consensus for raising taxes. "Any politician who tells you that we can solve our problem without reforming Social Security, Medicare, and Medicaid is not telling you the truth," Walker told an audience at the University of Denver.

Over the next year, the nation’s top accountant will be traveling to the early primary states, telling voters that we need to begin raising taxes or government revenues and put a cap on federal spending if we want to maintain our economic security and standard of living. "If you tell them the truth, if you give them the facts, if you explain this in terms of not just numbers but values and people, they will get it and empower their elected officials to make tough choices," Walker argues.

Asked if he knows any politicians willing to raise taxes or cut back benefits, Walker says, "I don't know politicians that like to raise taxes. I don't know politicians that like to cut spending, but I think what we have to recognize is this is not just about numbers. We are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it's an issue of immorality."

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