All Column Finals 2007
Final 1-9-07 The Coming Constitutional Clash
George Bush has run a Presidency that is breathtaking in its boldness and achievement. On the barest possible electoral victory, he set himself to be a transformative President, defining and implementing an entirely new "unitary presidency," outside our constitutional system of checks and balances. It is as if his motto were from General Patton and Frederick the Great, "Audacity, audacity, always audacity." And no one challenged him - till now.
George Bush stepped boldly onto the 5,000 year old stage of Middle Eastern history with the stated intent of converting Islam to democracy. In addition, he funded a corporate military that fights in our name in
From the beginning, this Administration borrowed and spent hundreds of billions of dollars of our future income to reorient our economy and let corporate heads decide when and how to take care of our health, the environment, job losses and economic instability. Through its signing statements, it defined and implemented a presidency that seized monarchical power to arrest and hold anyone anywhere without trial or explanation. In its faith-based initiative, it tore down the separation of church and state. By cutting taxes on the rich, it reversed our democratic drive to income equality. With its drive to the privatization of pensions, health care and the courts, it shifted risk from the community to the individual. And it has, at the same time, shrouded all of this in a fog of official secrecy that defies the transparency inherent in democracy.
Make no mistake, this was a revolution. It just did not have the fanfare or bloodshed of a popular uprising. It was more in the nature of a sophisticated, quiet coup. A corrupt and cowed Congress did nothing. It was more interested in getting its share of the billions of ear-marked, lobbyist payoffs.
Now people are telling the Democrats that they should look forward and not backward. They are supposed to get on with the problems we face just as though there were no revolution.
That ain't gonna happen. History and democracy have caught up with George Bush. When he rejected James Baker's Iraq Study Report he gave up the paternal rescue system that always bailed him out of the messes he made in the past. The accountability moment is here.
First, lets get rid of the arguments over the ideological structure of the new Congress. The old shibboleths of conservative and liberal no longer apply. Does anyone really believe anymore that this deficit-ridden, war-mongering, strong central government, heavy regulation Administration is conservative? Or that the pay-as-you-go, ethics demanding Democratic Speaker is a wild liberal?
The Democrats know that they are in a fight over the fundamentals. They have carefully removed extraneous issues that might distract from the coming main event. No fight for the sake of a fight. They are preaching moderation, cooperation, comity and bi-partisanship. Likewise, impeachment or getting back at the Republicans for the
The Democrats will likewise not go after the astounding incompetence and failures in the occupation of
The clash, whether or not anyone wants it, is going to come on the war in
The Congress will tell the President that in order to legislate in regard to paying for the war, it needs documents and information. Or the President will refuse, under one of his signing statements, to follow the legislation on some problem such as torture. The President will defy Congress and the battle will be joined, exactly where it was with the previous imperial President, Richard Nixon. Then it will go to the Supreme Court. It will keep going to the Supreme Court until, at some point, the President is ordered to respond to the authority of the Congress in the lawful pursuit of its obligations and he won't do it.
If President Bush is consistent, he will refuse to follow the Court's order on the theory of the power of the unitary presidency. Then we find out if our republic really works.
Final1-23-07 A Single Payer Universal Medicare
The only part of the American healthcare system that seems to be working is Medicare and Medicaid. Our employment-based, managed care system is clearly collapsing from inefficiency, rising costs, and loss of the industrial base that paid for it. Now, when we don’t have enough health coverage as it is, George Bush proposes fiddling with the tax code to set up tax incentives for workers to buy less insurance.
Not to worry, George is simply making political noises. He only means to look responsive to healthcare complaints, make sure he reframes the later debate and, more importantly, distract us from his
Until then, everyone will lament the lack of progress, the states will tinker with patch work solutions and Bush will muddy the waters with the tax code fiddling we heard about in the State of the Union address.
In the interim, it is important to make sure we properly identify the problem and frame the question so we can address it in a national election.
The healthcare crisis is real. As a nation, we spend twice as much as others and get worse outcomes. The
How bad is it? The
When we round up the usual suspects, we blame soaring healthcare costs on new and expensive technology, an aging population, rising expectations, lawyers and soaring drug costs in an ever more drug focused therapy. The problem, aside from our peculiarly litigious nature, is that the rest of the industrialized world shares these “causes” but does not share anything near
To begin an intelligent debate, we have to isolate what is different about the American system that makes it the world’s highest cost system with some of the world’s worst outcomes.
Two things pop up: the administrative costs of our multi-payer system and the control of prices by our suppliers. According to the New England Journal of Medicine, 30 percent or $600 billion of that $2 trillion we spend per year on healthcare goes for the administration, marketing and profits associated with a multiplicity of insurance collectors and payers. Medicare, a single payer system, and much of the rest of the world pays as little as two percent in administrative costs.
The provision that forbids Medicare to negotiate prices is probably the most absurd thing in these last six years of this government of the absurd. Maybe even worse, the
Medicare, at least Part A – Hospitalization, is the quintessential single payer system: you choose your own doctor while medical practices, hospitals and pharmaceutical companies remain privately owned and compete. The government acts only as the payer. Part B – Medical, with its confusion of firms and forms, is an unnecessary concession to the insurance companies.
The point of putting healthcare into the State of the Union message is to reframe the debate away from the real problem which is affordable healthcare and put the focus on affordable insurance. The President has to get hold of this. If the Congress ever started looking at the sources of the increased healthcare costs, the dysfunctional insurance industry could lose billions in profit.
The question has to be framed in terms of an affordable healthcare system and not availability of insurance. The best way to do that is simply to take the age provisions and Part B firms out of Medicare and apply to all that single payer system that we know and love.
I’m over 65; it works for me.
Final 2-20-07 Fast Track Investment Authority
Life used to be simple for the advocates of free trade.
The Congress is shortly going to have to vote on something called "fast track." This is the constitutionally dubious rule that permits the President to submit a negotiated trade agreement that will be rushed through Congress with no amendments allowed. In the past, the Congress has given that authority to the Presidents of both parties. That authority expires in July and prospects for its extension are not good because the people are now more aware of what free trade really means.
The corporations, the banks and their faithful economists support free trade and fast track because they will profit from "trade promotion" agreements. Their lobbyists argue that the opposition to the WTO, the Doha Round, CAFTA/NAFTA and such are selfish protectionists who want to prop up out-of-date industries and to deny to consumers the benefits of expanded markets. Workers are portrayed as bad, dumb protectionists who are afraid of the modernized and globalized world.
When you frame the question that way, free trade holds the moral high ground and opponents have to argue against the wealth creating efficiency of markets.
But this whole program has for the past 50 years assumed that the rules which GATT/WTO and NAFTA/CAFTA are imposing make world markets more open and efficient. That is simply not the case.
Free trade is now and always has been something of a fraud. No one ever advocates, much less implements, real free trade. With real free trade, you end up with a war-lord economy like the oligarchs and President Putin run in
Markets have to be managed and everyone knows it. The question is for whose benefit. The rules that the WTO imposes divert benefits, as you would expect, to those with the power to set the rules. At home, the corporations and banks own the negotiators and legislators. Internationally, the rich countries call the shots. Others get a Godfather-like offer that they can't refuse.
No one, not even the
The developing world has openly shown the power of managed trade. The export-platform model, which is the pattern for post WWII economic development, violates every free trade principle there is. Domestic markets are protected, exports are subsidized, domestic industries are managed and all of this with a carefully undervalued currency. This model was pioneered by
But things have changed. While it lasted, developed countries sold their high-tech products abroad but at the same time all of them protected, subsidized and exported many basic manufactured goods and their farm products. Now the world is globalizing to a new pattern of trade, or rather investment, in intellectual property like patented pharmaceuticals, trade-marked logos and copy-righted, software, music and movies.
The developing countries are smiling all the way to the bank, notoriously pirating everything in sight. The way they see it, rich countries are abusing the system so that enforcement of patents denies life saving drugs to the developing world. So
These new so-called trade promotion agreements are really investment agreements designed to protect those endangered patents, trade marks and copy rights which, by their very nature, restrain trade. Or they protect the investments of American firms who are moving production overseas.
The American people are awake to what is happening. Let us hope Congress wakes up and stops fast track and all this hypocritical nonsense misnamed free trade.
Final 2-6-07 The American Dilemma
Race in
I have witnessed almost three-quarters of a century of mostly progress. I grew up in a de facto segregated
Back in 1944, when I was serving Mass every Sunday on the black side of that wall, Gunnar Myrdal, a Swedish scientist of towering reputation, did what is still considered the definitive study of race in
To Myrdal, that dilemma was insoluble. He could not envisage the black population rising in the Civil Rights Movement so he would be surprised and pleased at how far we have come. Yet, for all the progress, it takes the arrogance of an oppressor not to see the racial gaps in educational achievement, income, incarceration and executions.
Yet something new is happening to further undermine that dilemma. A tipping point is here and we are again going to test whether this nation or any nation can live up to the proposition that all men are created equal. The country is awash with signs that things are tipping for the better.
First there was Super-bowl Sunday – which, for all of its hype, is as representative a reflection of American culture as you could ask for. For the first time, we had a black coach, in fact two of them, lead their respective teams to victory and defeat. The occasion was over-noted and over-hyped in that hyper world but the presence of those black coaches stated emphatically “We are here.”
Movies are the great American art form, the self-reflection that we project outward to tell the world who we are. Two movies with Oscar nominations, “The Pursuit of Happyness” and “Dream Girls,” speak beautifully and un-selfconsciously of the black experience in
In these movies the story is presented as an American experience where we can all celebrate the trials and tribulations of the music industry and the success of one courageous man winning against the odds. This is a celebration of their culture and of our diversity.
Finally, we have Senator Barak Obama bursting on the scene with charisma, power and a real hope of winning the Presidency of the
Obama himself does not shy from his blackness but calls himself “a black man of mixed heritage.” And then there is the delightful Tiger Woods playfully referring to himself as a “Cablinasian”, which is a contraction of Caucasian, Black, American Indian, and Asian, a category they don’t yet have on the Census form.
With Obama, more than anyone else, we now have the chance to face down the dilemma of American racism. He exemplifies and has cast his lot not just with those black coaches and players in the Super Bowl and those actors in Dream Girls but with the culture of working
I don’t want to minimize the problem that Obama or the coaches or the movie stars face because of the color of their skin. The hard statistics point, for instance, to a criminal justice system that is wretchedly racist in every aspect. And the hate machine is already vomiting up its bile at Obama.
For all that, it still looks like something basic is tipping toward hope. The dilemma is dissolving and Americans just might be ready to put their hopes on a man disregarding the color of his skin.
Final 3-8-07 Corporate Success; Community Failure
Hershey’s going global with new plants or acquisitions in
Two questions: What is Lenny’s definition of success and how does off-shoring fit into the global marketplace? Simply put, Hershey is a corporation and its must “ensure the future success of the company for its shareholders” while the global market place is competitive only to the sense that off-shoring is the result of managed trade and investment.
Milton Hershey, like many great American entrepreneurs, saw his enterprise as a community. A community is a group, like a family or nation, where everyone shares the benefits of success but stays loyal to also share the cost of hard times. Lenny’s statement that “[Shareholder] loyalty tends to rise and fall with growth and success” notes this difference between a community and a corporation. Workers, on the other hand, are still expected to be loyal.
Mr. Lenny’s job at Hershey was to come from the outside and restructure it from a community to a corporation. This realignment mean he has finished the job.
Hershey, as a corporation like all the rest, sees no continuing obligation to employees, customers or suppliers. In effect, shareholders have seized the productive communities of
The Hershey Board of Directors probably violated its fiduciary trust when it rejected the Wrigley offer because a buy-out by Wrigley, or in the end more likely Nestle, would have maximized shareholder wealth. Nestle was, and still is, lusting after Hershey’s 44 percent share of the US chocolate market and that $550 million in profits last year.
The case of Hershey vs Wrigley was decided in the court of public opinion when Governor Rendell and the legislature intervened. Politics trumped the law because Hershey was still too much of a community. Lenny had not yet finished his job.
This American corporate model was first imagined when the courts granted legal personhood to corporations in 1886. The courts, not the legislatures, extended to corporations all the rights and privileges of the Constitution and made them as powerful and independent of the community as they have become.
In pre-corporate
Outside the Anglo-Saxon countries, the world imposes community responsibility on its corporations. In fact, globalization is an attempt to spread the American model of the corporation to the rest of the world.
And that brings us to the other part of Mr. Lenny’s justification of his action, that global marketplace and the way corporations remain competitive.
Hershey is closing its plant in Smith’s Falls,
This is, we are told, the flat world of global competition. Well, when Hershey went to
Everywhere else in the world, politics and community trump shareholder wealth. In
Lenny said it all: “The people who want The Hershey Company to remain a vibrant, successful part of central
You can bet your pension check that Mr. Lenny will not have completed his job in
Final 3-20-07 US Attorneys and the Rule of Law
Of course President Bush has the right to fire US Attorneys. They do serve at the pleasure of the President, just like cabinet officers, ambassadors and Karl Rove. The President does not, however, have the right to fire them for refusing to use the prosecutorial powers of their office for partisan purposes.
One fired US Attorney, David Iglesias, said that when he was appointed, Attorney General John Ashcroft told him, "politics end when you pass through that door (that is, become a
US Attorneys are expected to implement the policies of the Administration and, like "good Bushies" (a White House criterion), to emphasize Administration priorities such as capital punishment or the war on terrorism. This legitimate support for the Administration is, in a very real way, political. But failure in this regard is not the reason they were fired.
The White House has sequenced through many inconsistent explanations for the firings. Whatever the excuse of the moment, this is not just a "mistakes were made" clumsiness or more politically embarrassing incompetence. Nor is it the petty machinations of White House aides trying to stiff the Congress and get by with something just a little bit shady: "All this (stalling, gumming this to death and otherwise running out the clock) should be done in ‘good faith’ of course." Nor is it poor, long-gone Harriet Miers’ fault.
What the Bush Administration has done is quite different. Those eight US Attorneys were fired for prosecuting Republicans or for not prosecuting Democrats in regard to elections.
Voter fraud, in fact, seems to be a pervasive issue in these firings. To Republicans, voter fraud means inflation of the Democratic vote count with fraudulent or immigrant voters. To the Democrats, it means suppression of the legitimate votes of minorities and the poor or other Democratic leaning groups. Zealots on both sides may do some of this but, despite all the accusations, the record shows little evidence of widespread voter fraud in the
What is really at stake is the politicization of law enforcement. These US Attorneys apparently got fired for not twisting the law to benefit Republicans. These eight, good Republicans all, constitute profiles in courage in that they stood up to partisan pressure, followed the law of the land and lost their jobs.
These firings raise the question whether the other 85 US attorneys are loyal Bushie's who are carrying the Administration's dirty political water. The firings threaten the impartiality of the law upon which our system depends and impugn the credibility of the Attorney General, the office of the US Attorneys and the entire Department of Justice.
These firings are probably the most serious of the offenses of this offense-prone Administration. We can go to war by mistake and eventually pull out of it. We can ignore the environment, global warming, test ban treaties, anti-missile agreements and come back to right it all later. We can let someone else deal with healthcare. We will rebuild our broken army. It may be harder to repair our damaged economy and stay up with the Chinese over the next 50 years but we can do it. While many of these Administration actions might violate the law, they are not the law itself and therein lays the problem.
The most difficult task will be to restore the integrity of our legal system. When we let politics corrupt the enforcement of law, we set a precedent that the president and his political goals are above the law. For a nation built on law and not territory or nationality this is the most serious kind of corruption.
Many people, starting with President Bush, are to blame for this underlying failure to accept the political impartiality of the law. But Attorney General Gonzales’ entire career has been to tell George W. Bush that the law allows him to do whatever he wants.
The only way the President can really take responsibility for this breach of the rule of law is to fire Attorney General Gonzales.
Final 4-3-07 Creative Destruction
Conservation programs and universal healthcare aren't the problem; they are the solution. Environmental rules save resources. Universal healthcare saves lives. And both create jobs.
The North Pole and Antarctica and glaciers from Greenland to the
With the last election, the tide shifted not just politically but environmentally as people came to realize that the cost of the Bush administration's policy of protecting the jobs and the profits of the status quo was just too high.
Economists define progress as a process of "creative destruction." Old industries, old ideas and old jobs are destroyed as new industries that are coming from new demands create new jobs.
Protecting the status quo against creative destruction is called protectionism and is universally condemned as inefficient and costly. We stand to lose a lot if we try to protect the status quo rather than clean up the mess that we have made, as we have seen in American manufacturing.
The American automobile industry swore that catalytic converters would cost far too much. The industry fought seatbelts, airbags, and car seats and is still fighting higher gas mileage standards when the American public has embraced all of these.
It’s not that American ingenuity has dried up. American firms developed front-wheel drive and electric car technology, but it was the Japanese who brought these to market. American industry has to partner with the Congress to clean up its act and build the technology of tomorrow. It is futile to try to protect the profit the industry makes on SUVs.
Cleaning up the environment and extending healthcare to all Americans could jumpstart our economy creating opportunity for investment in new technology, new products and new jobs. We can develop those products and that technology or we can let the Chinese do it.
Universal healthcare will indeed destroy jobs in the insurance industry. But those jobs, which were mostly deciding who would or would not be covered, added nothing to the health status of Americans. Similarly all the people that the pharmaceutical companies hire to advertise and administer their prices would lose their jobs. Let's do away with the middleman who adds nothing. Job loss may be the cost of progress but job creation only comes from that same progress.
It was a dumb idea to tie healthcare to employment. It makes accountable, responsible firms and industries uncompetitive against irresponsible domestic producers and imports from countries where healthcare is a shared cost. The tie to employment is why the programs proposed by Governor Romney in
We need a single-payer system to spread the risk nationally across all producers and consumers. Similarly we need the Climate Stewardship and Innovation Act and reinvigorated Clean-Air and Water Acts to try to save our planet.
The apologists for the right to pollute and to deny healthcare have the money to buy economists and PR specialists to give them the numbers to undermine community effort. They will, in the coming political fight, spend tens of millions of dollars on TV and other media. Any public action to protect the environment or provide for those without health care will have them trot out the ancient, name-calling accusation of “Socialism!” But we know that these people condemn any community action where they might have to share the cost. That's what those no-tax pledges are all about.
The Bush administration has been particularly negligent in its refusal to ask for common action or support of the community in the tasks that face us as a nation. "Ask not what you can do for your country; but what you can get for yourself," seems to be their motto.
Instead, we need to embrace the “creative destructiveness” of true capitalism and then get ready to share the challenges and opportunities of new technologies, new ways of protecting our planet and new ways to provide healthcare for all.
Final 4-17, 2007 Violence
On Sunday I read an article describing how the Central American civil wars of the 1980s had spread gangs north into
And then came
Violence is all around us and, as a rule, we either ignore it, if there is enough cultural distance, or we succumb to the temptation to violence ourselves and declare a war of annihilation on anyone or anything that we judge to be threatening.
Having taken our vote on the war and agreed we should get out, we were all in a mood to ignore the increasing violence of the surge and deal with trivia. The press and pundits, as well as the population, got busy with a presidential election that is starting all too early, US attorneys who were probably fired for lack of partisan zeal and President Wolfowitz of the World Bank who may have paid off his girlfriend. Or worse, we hear endlessly of Imus, American Idol and Anna Nicole's baby. And besides, the media are not showing us the bodies and blood of
We know we have to address the violence but so far we have been doing it all wrong. The war in
That wall along our southern border will be as effective as the Great Wall of China which the Mongols breached at will or
Violence is a legacy that our generation is going to have to deal with in a far more preventive way than we have in the past. The
Violence arises from the frustrations of poverty, alienation or ideology. To declare a war on poverty, a war on drugs or on Al Qaeda does no good if you do not address the causes of the frustrations that engender the violence.
Everything is related to everything else. Nowhere is this truer than in regard to
Declaring wars, resorting to violence and building walls does not create a peaceful, prosperous world.
The culture of violence is intruding into our everyday lives. The only chance of success in this ever more violent world is a sense of mission to the rest of the world to help them rise out of poverty, inequality, and violence. So far we are doing the opposite.
Final 5-1-07 October Pullout -- the Endgame
Democratic control of the Congress forced the President to come up with a plan to do more then stay the course in
Mr. Bush meets the law of unintended consequences: his plan forces an October timetable for the beginning of the pullout.
President Bush announced the "surge" plan on January 10 and implementation began February 14. It is now 60% in place and its outcome is supposed to be determined by September. One would suppose something would happen then.
The logic of the surge and the withdrawal of the surge forces lead necessarily to a reduction of forces beginning in October. It is simple. If Al Maliki meets the benchmarks, we leave declaring victory. If Al Maliki has not met the benchmark deadlines then we have to admit we have done all we can and it is time to get out of the way and let them decide their own fate.
The benchmarks are actually an area of potential agreement between Republicans and Democrats in the coming negotiations over timetables and funding of the war. We expect the Iraqis to pass legislation for the sharing of oil revenues, reintegrate the Sunnis and Baathists into the central government and set a time for provincial elections.
US forces, with the increase in their numbers, ensure that we can pacify
The Iraqis read the New York Times and American politics like everyone else and they can see that an American departure beginning this year is inevitable. Their response is what you would expect from those who have become very good at adaptive-behavior. They are all waiting eagerly, jockeying for position in a post occupation world
The adaptation to the timetable has already begun. Militarily,
Politically, the regime is not strong enough to negotiate with either the Sunnis or their own Shi’a factions. No political adaptation is likely to take place. None of the warring factions takes the government seriously and even the legislature plans a two-month vacation during July and August when it is supposed to be drafting and voting on those benchmarks measures.
In some sense, the surge is working. But that is only because it is coupled with the belief that after the surge, that is in October, we will be gone. This success is merely a temporary facade. The Iraqis can now afford to sit back and wait us out.
Our departure, it is feared, will lead to a chaotic Sunni-Shi'ite civil war with the slaughter of the Sunni by the Shi'ites and
The civil war will certainly enter a new phase but all-out war is unlikely. The Shi'ite Iranians may be viewed as a threat by those Sunni countries and the other Sunni mini-states around the
The US/Iraq war was won militarily four years ago with "
A stable democratic
Final 5-15-07 Collapsing Government
Two things should alert us to the breakdown of this Administration and warn us of the consequences. First, the crowd of recent resignations for reasons of partisan political corruption, sex and money or "spending more time with the family" is seriously depopulating the Administration. The people simply are not there to do the job.
Second, the interagency chains of communication and control are going slack. This is reflected in the statement by John Bolton, the deposed Ambassador to the United Nations that "the whole system of interdepartmental policy deliberation has broken down." Confirming this, David Frum a former speechwriter to Mr. Bush, said "The real concern is that the Bush Administration is losing its ability to control
Things are happening, momentous things, things that will not be denied and will have consequences for generations. At the same time the Bush administration is in danger of collapsing, again with consequences for generations.
Internationally, we are sitting, virtually friendless, on the edge of catastrophe: King Abdallah of
More frightening, Pervez Musharraf, President of Pakistan, faces rioting that has "made his position tenuous and seriously undermined his credibility."
These two Arab countries, along with
Domestically, over two thirds of the people believe we are headed in the wrong direction. That is an enormous vote of no-confidence and for good reason. On global climate change, we are still outside the
Exactly in this hour of need we see the system weakening. In the past several months, over 20 key people have left the National Security Council, the Defense Department and the Department of State. The Justice Department has lost four people who work closely with the Attorney General, who is himself under attack. Four of the Inspector Generals are themselves under investigation.
At the same time, the Administration had to settle for the relatively unknown three-star General Douglas Lute to fill a spot as important as an
The news media are again letting us down. To get the story of these departures, you had to go to the Financial Times, Global News or the All Headline News Service. The AP finally did a story on May 7 but spoke only of the "Bush Security Team" and no one picked up the story or followed up.
This Administration and the Republican Party that supports it are increasingly dysfunctional. Eleven Republican members of Congress went to George Bush to complain, not that there were serious problems that need addressing for the good of the nation, but that the Republican Party was in danger if he did not act. They felt Vice President Cheney's sharp tongue when he said, "we didn't get elected to worry about the fate of the Republican Party." They deserved that.
The real story this week is not the reason people are leaving the Administration or the state of the Republican Party but the consequences for our country when a serious issue arises and no one is minding the store.
The news media has to stop handicapping a race almost two years away where the horses are not yet all listed and get to the investigative reporting that is its job. Both parties have to recognize the perilous condition of the Administration and, without pampering or posturing, keep it on the straight and narrow.
Final 5-29-07 Sovereign Investment Funds
Last week the Chinese Central Bank announced that it was going to invest $3 billion in the Blackstone Group, a
The global financial world is presently suffering a dollar glut. The current bull market on Wall Street is liquidity driven: too much money chasing too few assets. It is an asset bubble.
Dollars to feed this bubble are accumulating all over the place. Domestically,
Internationally, the
Traditionally, governments use surpluses such as these to build up reserves or to manage the value of their currency. It was the humdrum part of international finance.
So long as the dollar glut was based on trade deficits alone there was no threat to the system. Asian banks bought American bonds that about matched the American need for cash. Those deficits were old news.
Rather suddenly, the oil and trade surplus funds have together become so large ($2.5 trillion) that foreign banks and governments feel they have a duty to get a better return than was offered by secure but low-yield government bonds. They're switching to the stock market and the outright purchase of what is left of our industrial base.
When sovereign governments start buying into the world's supply of equities, now about $55 trillion, to the tune of as much as $12 trillion by 2015 that is not the same as your local mutual fund. These "Sovereign Investment Funds", are growing by $500 billion per year.
The major petro-surplus countries --
.
Traditionally, the Asian governments, and their reserve banks, did not want to destabilize the economic system which was generating their growth. In a crisis, they were expected, even though it was not in their short term interest, to hold their bonds and probably buy more. They were expected to stabilize the system.
Times have changed. These Sovereign Investment Funds are part of the current "quest for yield", the demand for higher returns. These petrodollar surpluses are now large enough to cause a problem for the system. And it isn't just the oil countries. The Chinese and Japanese governments with their trade-generated surpluses are now diversified and rich enough to also switch from a stability-oriented to returns-oriented goal. They feel less need to protect the dollar. They want a reasonable return and would be expected to protect their short-term profit position when the bubble pops. In other words, the Asian banks will dump dollars and equities.
Multinational corporations like GE and Halliburton, the private equity firms like the Blackstone and Carlyle Groups, the hedge funds like the Medallion Fund or Arbitrage Fund are all so diversified into world markets that they would survive and prosper.
That part of the American economy that is stuck here at home, the average wage-earning homeowner, will be seriously injured by a financial crisis. All our personal and government debt will come crashing down around us.
The ugly advice for you and me: if you can't afford that increased risk level, diversify into foreign markets because that is what the big boys are doing.
Final 6-12-07 Serious Consideration or Post-Kyoto Is Post-Bush
Global climate change apparently got brushed off by the G-8 last week. The final communiqué appeared to be at best innocuous. Yet it can be read to set us up for a post-Kyoto world because it will also be a post-Bush world.
George Bush agreed to "seriously consider" the goal of the rest of the world of cutting greenhouse gas emissions in half by 2050. The rest of the world, in turn, endorsed the Bush offer to convene yet another set of meetings, which the
It would be easy to be cynical but the environmentalists, that is most of us, should be more optimistic. If the world adopts a post-Kyoto mindset where the powers-that-be are thinking seriously about greenhouse gas emission goals for the year 2050, then the Bush proposal might actually be useful. It is time to move on and take care of some of the
There are some problems. The Clinton Administration, which negotiated and signed the Kyoto Protocol, did not submit it to the Senate for ratification. The Senate had already stated its unanimous opposition on the grounds the Protocol did not require the developing countries to cut their emissions and it might have required the
The Bush Administration then came in and toughened the
The times, they are a changing. Al Gore now gets credit for putting global climate change on the domestic political agenda with his Oscar-winning movie “An Inconvenient Truth". George Bush gets the blame for derailing
Global climate change is real. It does threaten the stability of the planet itself. The ice caps are melting and
The next round of action is springing from the grassroots where the individual American states and cities around the world are joining the clean climate parade. As many as 22 of the states are setting emission standards for power utilities. Ten states in the Northeast, with close attention from
Cities in the
The developing countries, especially the biggest polluter among them -
Under the Bush proposal, the 15 countries with the largest economies would meet to set voluntary "national goals for reducing emissions". That doesn't sound like much but there are encouraging circumstances that make things more hopeful. We have to start thinking of that post-Bush world
First, George Bush will not be there to protect the profits of the oil patch. Even if the incoming Administration is Republican, they will be forced to be more forthcoming. Next, discussion of the post-Kyoto action program has to take place somewhere in some forum. The
Finally, the
Besides, the world is not flat, every economy is embedded in a different social structure and each economy should have some kind of wiggle room in its environmental enforcement structure. That's what negotiations are about. So let's get on with it, even if it is the Bush proposal.
Final 6-26-07 A Bargain Gone Wrong
You get what you pay for. That's
What did we bargain for when we put the government haters in charge? What ever we were supposed to get, we ended up with a shabby, rundown government, a government that ignores the rule of law and attacks our constitutional structure.
We were told we could have it all -- tax cuts, freedom and security and not have to pay for it. Instead, along with those tax cuts, we got ill considered and often immoral policies: budget deficits, Katrina, preemptive invasions, torture, foreign kidnapping, obsessive secrecy, corporate-owned governance and the ill will of the world.
But we know all that. More important, the institutional construct that is our government, that which we rely on to protect and sustain us, is being quietly and consciously subverted and no one has taken note.
Our most basic institutions are under attack from within. The claims made for the "unitary executive" in all those Presidential signing statements undermine the entire structure of checks and balances upon which all else is based. Vice President Cheney's extraordinary claim that his office is not part of the executive branch is a perfect symbol of this blatant challenge. Article II of the U.S. Constitution, The Executive Branch, in fact, establishes his office.
Our army, the institution that symbolizes and protects our sovereignty, is broken. We asked 150,000 soldiers to do the work of several hundred thousand. They tried and fought valiantly to perform an ever-changing and ever more demanding task in
The VA hospital system is overwhelmed by the 30-50,000 wounded that continues to pour in. It isn't just the mold and neglect at
The Department of State, the institution that is our face to the world, like many agencies, does not have the resources to do the job. The Council on Foreign Affairs has said that "about 200 existing jobs -- mostly overseas -- were unfilled and that the department needed an additional 900 training slots to provide essential language skills." In
The most basic role of government is to protect us in our homes and daily life and that is where the failure is greatest and the bargain the worst.
The Transportation Security Administration has that 50,000 member "no-fly list" that holds up my neighbor’s eight-year-old every time he flies but can't find a way to inspect the containers that are flooding the United States with poisonous toys, melamine-tainted food, fake Rolexes and who knows what else. Our borders are becoming meaningless; our naturalization system is really broken.
We read and hear almost daily of other agencies that are noted for their failure or inability to perform their task. Volumes list the specific failings of the Central Intelligence Agency, the Environmental Protection Agency, FEMA and almost the whole of the Department of Homeland Security.
It has come to the point where 60-70% of Americans think they got a raw deal. They have an unfavorable view of their most basic institutions -- their President, their Congress and themselves in the sense they believe we as a nation are going in the wrong direction. And they are right because those governmental institutions, which need nurturing the most, are being neglected and abused.
We got the tax cut we were promised but not the defense of the institutions that is explicit in that bargain. Nor did we get the security, unity or moral values that we bargained for. We got what we paid for -- nothing. We have an election coming up: let the buyer beware.
Final 7-10-07 Cheney: The Dangerous Dark Force.
It is probably safe not to impeach George Bush and just let him continue to strut about like some under inflated Little King. But Cheney, that's a whole different bundle of worries.
Left to himself, Bush does what is dumb but rarely what is dangerous. People were easily able to clean up after his military record, his oil patch misadventures and his plaything baseball club. As President, think Harriet Myers for the Supreme Court. (He had not told Cheney.) Or recognize that whatever he says in unscripted moments can be chalked up to dyslexic muttering. (You know what he meant!) Russian President Putin and other world leaders are unlikely to get upset; they have measured the man.
Cheney, on the other hand, has shown that he is able with great stealth and sometimes with disarming candor to manipulate the agenda, the policy and the outcome virtually anywhere in this government. All papers going to the President pass through Cheney's office, to be supported or undercut, whether others in the Office of the President know it or not. This is where, for instance, signing statements are controlled. George W. Bush may be the decider but Richard Cheney controls the flow and presents the decisions to be made.
The trial of Scooter Libby and the attendant exposures made it clear that the Vice President led us fraudulently into a war that strengthened Al Qaeda and threatens the security of our country. Cheney led the attack on Ambassador Wilson and tried to suppress information that might have shown there were no weapons of mass destruction in
Cheney violated his oath of office and the Constitution when he discovered “unlawful combatants” and stripped them of the right of habeas corpus, the right to be heard in court, one of our formerly inalienable rights. He made the
Richard Cheney was made Vice President by George H. W. Bush and his cronies in order to have someone to guide the boy President. Cheney was not supposed to have any ambition other than as a technocrat-manager. The plan failed when the character flaws that denied him national office in his own right grew monstrous in the shade of the Vice Presidency.
Cheney's outstanding and most dangerous characteristic is his incomparable tenacity, especially when wrong. Cheney asserts, even to this day, that there were weapons of mass destruction in
When the Supreme Court says that he can’t ignore habeas corpus, he piles rationalization upon rationalization while American citizens remain in jail. He simply will not give in, ever. And that is our problem. We know he will not change his behavior just because the Supreme Court or the nation judges him wrong.
Meanwhile he continues. Cheney destroyed the honor of America: when he condoned cruelty and claimed nothing short of organ failure and death was torture; when he spied on American citizens in violation of the Foreign Intelligence Surveillance Act; when he set up a secret worldwide prison system; and when he snatched people off the streets, kidnapped them and sent them to country's renowned for their torture in the "extraordinary rendition" program. Still he claims "we do not torture."
We now know that Vice President Cheney has been consistently wrong. His office has authored or fought for virtually all of the major crimes and blunders that have plagued this administration. We can diagnose George Bush as being in denial of what he cannot face. But how do you excuse a mind as sharp and a will as determined as Dick Cheney’s?
We can't and we have to protect our nation. The legal and factual grounds for impeaching Mr. Cheney certainly exist. However, the real reason to impeach Cheney is not what he has done, which is impeachable, but rather what a man with nothing but disdain for our country, its institutions and laws might still do in the next 18 months with a compliant President.
Vice President Cheney is the dark force that has to be held accountable now lest he take us into war with Iran or who knows what other unpardonable crime we the people will find ourselves party to.
Final 7-24-07 EO 13438 -- The End of Property Rights
On July 17, 2007 the president issued Executive Order (EO) 13438: “Blocking Property of Certain Persons Who Threaten Stabilization Efforts in
What the Executive Order says, minus the legal verbiage, is that the administration can, pursuant to the National Emergencies Act, seize the property of anyone who they determine poses "a significant risk of committing acts of violence ... threatening the peace or stability of Iraq … or undermining efforts to promote economic reconstruction and political reform in Iraq.”
In effect, if you disagree with the administration position on the war or Iraqi reconstruction or if you oppose any position that they feel is essential to the peace and security of
You then have the burden of proof to get your property back. The catch is that no one -- lawyers, family or advocacy group -- can help you. If they do, they also are in jeopardy of losing their property.
Executive orders have the force of law. They are supposedly statements by the president on how to interpret or implement some law. Some are routine, some are not. They can be good or bad.
The Bush administration has abused executive orders before, using them to excuse private contractors and oil companies in
This use of the Executive Order is even more serious. It attacks our basic rights here at home -- private property and the right to dissent. The most common variety of political dissent has now become the legal equivalent of a terrorist act.
For example, Senator Clinton, in her capacity as a member of the Armed Services Committee, asked the Defense Department for information on contingency plans for withdrawal from
Senator Clinton was directly accused of undermining political reform in
I don't think even this administration is so politically inept that they would seize Hillary Clinton's house. But they could seize mine or anyone else’s that disagrees with their policies in
In fact, anyone who advocates immediate or even phased withdrawal of troops is in such a category and subject to seizure of their property without benefit of any constitutional protection by the courts. At last count, that is 70% of Americans.
This administration is going beyond the violation of civil and human rights to a blatant ignoring of the Constitution. I worry for my country when I do not see rage in the streets. The administration has been so contemptuous in its usurpation of power that we are numb.
The complicit and negligent failure of the mainstream media to recognize the importance of this suspension of our constitutional right to private property and the right to dissent is an example of why the country has been pushed so far in the wrong direction. No one is really willing to stand up and say stop-- not even the Democratic presidential candidates.
Maybe for its silence, this generation does not deserve these rights.
Final 8-7-07 The Global Class War
In the book The Global Class War, Jeff Faux maintains that there is a governing class, that it is going global, that it is at war with the rest of us over the benefits of globalization and that we have to do something about this. This column is an introduction to the argument in that book.
Amid all the hubbub about illegal immigration, we have to ask why droves of Mexicans are risking their lives streaming across the border. It's NAFTA, stupid! And it was planned that way by Alan, Bob and Larry, who the New York Times called "The Committee to Save the World," their world. The North American Free-Trade Agreement (NAFTA) is a weapon in the war on the middle class and guess who is losing.
Alan is Alan Greenspan, formerly Chairman of the Federal Reserve Board, Bob is Robert Rubin formerly Chairman of Goldman Sachs and Secretary of the Treasury, and Larry is Lawrence Summers formerly Secretary of Treasury and President of Harvard. These three stooges are the guys who brought you NAFTA, the Mexican peso crisis of 1995, the stagnation of American wages and the surge of Mexican immigrants.
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Their close friend Carlos Salinas, then Mexican President, arguing to the adoption of NAFTA, asked: "Do you want our tomatoes or our tomato pickers?" Now everyone knows we got the tomatoes and the pickers because NAFTA crushed the Mexican economy. And that is the story of every glowing promise about the benefits of NAFTA: promises of prosperity became the reality of misery.
Alan, Bob and Larry were selling NAFTA on the basis of increased jobs and a trade surplus in both countries but they were buying profits for the corporations they represented and economic benefits for themselves and their class. They were supporting
This international economic agenda, like the governing elite, is bipartisan. When the conservatives in Congress balked at the peso bailout Rubin called Newt Gingrich who called Greenspan who called Limbaugh to promote the bailout among the conservatives.
The “national interest” remained the same: profits. The only difference was that the Rubin/Summer's team preferred to protect profits with economic tools while the Cheney/Wolfowitz team preferred to use the military.
When Bill Clinton was first elected, Hillary wanted healthcare and Bob Rubin wanted NAFTA. Rubin, as we know, won and
Yes,
Any time concern is raised about our stagnating wages, our increasing income inequality, or our huge and growing disparities in wealth, the apologists and corporate PR flacks disparage it as class warfare. They would have you believe that Americans live in a classless society or that those classes are not based on wealth and income.
NAFTA gave the signal that outsourcing was now the name of the game. NAFTA was not a trade agreement; it was an agreement to protect American and Mexican capital from any kind of government oversight. NAFTA gave the signal that labor standards and the environment had a legal subservience to profits. House Speaker Nancy Pelosi, like
There is a global class war and the rich are winning. Does someone want to claim that it is an accident that the median wage, adjusted for inflation, is lower now than in 1980 while the top one-tenth of 1% earned over $3 million annually, more than twice as much as in 1980? The idea that
If you want to learn more or take part in a discussion, I will be leading a discussion/book review of his work on Tuesday August 14 at 10 a.m. at the
Final 8-21-07 Karl Rove Resigns: Why and Where Now
Karl Rove resigned and you would think he was going into some kind of limbo: "a place of neglect and oblivion." The pundits celebrate his genius and his fiascoes and scoff at his "more time with my family" but they leave him in a professional limbo because they never ask why he is resigning or what he might be doing next.
Well, the Pope recently abolished limbo so all the pundits, bloggers and politicians, pro and con, should be asking "why and where now" because Karl Rove is not going away. He is still working for the Bush family.
No one is saying so but the Bush wing of the Republican Party is taking Rove out of the policy area where he has been a disaster and putting him back in electoral politics where he was successful. Karl Rove will then do what he does best, which is win elections for the Bushes and their Republican allies, not with some delusional grand strategy but with down and dirty tricks, one election at a time.
Rove has, since the 1970s, served well the Republican National Committee and the Bush dynasty. He won 34 of the 41 campaigns where his firm, Rove & Co., was the primary strategist, including the last four elections with George W. Bush. These elections are the basis of his well-earned reputation.
Karl Rove and the Bushes go way back. In 1973, following a disputed election, Rove was appointed National Chairman of the College Republicans by George H. W. Bush, who was at the time chairman of the Republican National Committee.
Rove was first hired by George H. W. Bush in 1977 for the 1980 primary campaign where, in the end, Bush became Ronald Reagan's vice president. Rove was fired from that campaign for leaking information to the press. This misdeed did not keep him from being re-hired by George H. W. for the 1992 campaign; and again fired, this time for planting negative stories.
These tactics and their success seem to be what recommend him. George Dubya was quick to hire him and praise him with nicknames like "boy genius," the "architect" and "turd blossom" (not as negative as it sounds). Bush felt no need to investigate much less fire Rove when he was in the midst of the leaking in the Plame affair, when he directed the firing of US attorneys for political reasons or when he destroyed e-mails.
The fact is that Karl Rove was the "architect" who built a reelection campaign that brought policy to the support of electoral politics and blurred the line between the two.
In previous administrations, when the Attorney General was managing our justice system or the Secretary of State was implementing foreign-policy, they were nonpartisan. The firing of the US Attorneys for not prosecuting Democrats is unacceptable even to many Republicans. Similarly, Ambassador Bolton at the UN made foreign-policy dependent on partisan goals. Rove does not care that there are laws that separate policy and politics.
When Rove brought partisanship to policy, his failures were serious. Everyone seems to have forgotten now but Bush assigned Rove to manage the political impact of Katrina. The public perception of the failed Katrina response is what broke the 9/11 shield that long held back criticism of Bush and his policies.
Rove and the Bush family do not acknowledge mistakes. The election of 2006 was an accident of the Abramoff and other Congressional scandals. They share a faith that the "permanent" Republican majority will resurface in 2008.
It is now quite clear that Karl Rove has not resigned and gone to limbo. He resigned because the George W. Bush presidency is winding down and, having succeeded, it is time to move on to the next stage. He is being sent back to the trenches to do battle in the coming elections and be ready for Jeb in 2012.
Rove already has the house in
His drumbeat of attacks on Hillary Clinton has already begun on the Sunday talk shows. We can expect to hear "fatally flawed" repeated endlessly and to see every dirty trick in the book, and maybe some new ones.
But Rove is no genius. He still does not understand that electoral politics are discrete battles while government policy is a continuously repeated game. As a result and because of his passion for political advantage, Rove is more responsible than anyone else for the failures of the Bush administration and the bitter partisanship that it has brought to our government.
Final 9-4-07 Work and the Money Managers
This Labor Day the discussion was not about the dignity of work but about who was being paid how much. The argument is that CEOs are paid too much, workers are paid too little and things are getting worse. That finding, while true, is incomplete for it focuses on only a part of our wage system which now pays off like a crooked casino.
The real economy, the one that produces goods and services, is suffering not just falling wages and anemic job growth but an inequality of compensation not seen even in the era of the robber barons. This is because our money economy, the one that is supposed to set the incentives for our productive machine, is not rewarding hard work, good management and bright ideas.
In a market economy, wage changes are supposed to reward increases in productivity or output per worker. Despite sharp increases in productivity over the past 20 years, the real average annual wage, adjusted for inflation, is essentially the same as it was in 1970, now about $35 thousand per year. On the other hand, the compensation of CEOs in the Fortune 500 companies soared to $10.8 million per year, a 45% increase in just the last 10 years. But CEO pay is only the beginning.
To see who is really ripping off the system, look to the financial sector. The astounding fact is that the average annual pay of the top 20 private equity and hedge fund managers was $657 million each in 2006. That is not a misprint! The four top money managers received more than $1 billion each last year. And these guys are paid these sums year after year. George Soros, already famous for his $8 billion, made $950 million last year and he is 32nd on the list of US billionaires. Just to put some icing on their cake, these money managers pay only the capital gains tax rate of 15% on those earnings.
To earn these amounts, the top 20 hedge funds manage over $300 billion for their rich clients. When they borrow from your pension or mutual funds, they leverage this to trillions of dollars. Hedge funds presently account for more than one half of the daily trading volume on the New York Stock Exchange. What they actually do is place bets that are just like casino gambling with what, in essence, is your money. The managers are rewarded with 2% of the total under management and 20% of the profits when they bet correctly that indexes will go up or down. There is no relationship to profitability, progress or the real output of the economy.
These money managers, who are ultimately responsible for the health of our financial markets, have taken huge rewards for failing. They have precipitated the subprime mortgage débâcle that is now about to crash down on our economy.
No-money-down and interest-only home loans carry the fees and high interest rates that brought big returns to the money managers. When the clearly foreseen foreclosures and losses come, you and the mortgage holder will be the losers. With all the leverage, very little of their money and much of your savings in mutual and pension funds is the money at risk.
At the same time, the Securities and Exchange Commission is not looking out for your interest. Rich people, who put in the basic funds and can afford to lose them, are supposed to know what they are doing so the government does not regulate nor monitor hedge funds. Private equity firms, the mergers and acquisition people, are likewise not monitored because they are not traded publicly. But both are always heavily leveraged with other people's money.
Everyone knew that the complicated and risky trading in subprime mortgage instruments was a house of cards. As anyone who has been to a casino or played the lottery knows, in the long run, you can't beat the house.
The problem is that they are the house and they are now doubling up with your money even as payment is coming due. In the fall, we face a massive increase in home mortgage foreclosures when many mortgage interest payments will adjust upward by 50% or even 100%.
There is nothing in economic theory, the economic facts or even gambling theory that says the money managers deserve the hundreds of millions of dollars in compensation they are receiving.
On this Labor Day, we should note that some former money managers think all that compensation entitles them to public office. Mitt Romney, with almost half a billion, spent $6 million of his own money to run for the Senate and governorship. Michael Bloomberg, with $5 billion, spent $73 million to be elected mayor of
The money managers distortion of our compensation system is not minor. They now have the assets to do anything they want to with our economic and political system.
Final 9-18-07 Baby Bush
Poppa Bush lived in the real world of war and with it aftermath of deficits and taxes. Baby Bush lives in a bully's playground of war where he does not have to think of the aftermath.
Poppa Bush paid dearly for his grasp of reality and Baby Bush learned the wrong lesson. The result is that the American body politic is now somewhere over the rainbow in a world of make-believe where Santa Claus pays for the war, the Easter bunny pays for Social Security and the tooth fairy takes care of our healthcare.
It is quite clear that reality is in short supply among both our politicians and our people as we willingly accept an endless war and eagerly consume ever more of the world's resources -- which we refuse to pay for. But the curtain is about to be pulled aside and we will be back in
Reagan began this
The unfortunate reality is that whoever is president, any of the Republicans and both Hillary Clinton and Barak Obama, will maintain combat brigades, with massive supporting airpower, indefinitely at those “enduring” bases in the desert. We will do this to keep
Economic reality exists in the same dreamland. Alan Greenspan can say he did not see the housing price bubble or understand its importance but a lot of other people did and nobody did anything. And it is the pricking of that particular balloon that is going to force some adults to start a cleanup after the party.
The neo-liberal fantasy of laissez-faire and free trade is also collapsing in the face of a nasty reality. Even American industry is saying; get real, as it begins to demand re-regulation. Businessmen know there have to be rules of the game, and the vigorous enforcement of those rules, if they are going to be able to invest intelligently and stay in business in the face of international competition.
The recent volatility in financial markets reflects the unreal world where investors are unable to predict production and profits because no one knows what the price of anything should be.
The unreal is everywhere. Everyone knows global climate change is directly related to our immature pattern of buy-now-pay-later and our refusal to face the external costs of our very dirty footprints in the living room. Everyone who has been to
Everyone knows and no one does anything. The collapse of the housing market and the subprime mortgage market will impact our debt-driven consumer consumption. Homeowners will be forced to face the reality of the market just as American troops are forced to face the insurgents in
Baby Bush can go on television and tell fairy tales even as the
T he Republicans continue to ignore reality and simply beat the war drums. The Democrats are frozen in place fearing that reality will offend the voters. Both do this while tens of thousands die in Iraq, while foreclosures take away people's homes, while the ice caps melt, while the trade deficit soars and our competitors are years ahead of us in the use of information technology.
And the worst may be yet to come as our Darth Vader vice president wants to bomb
Well, the bursting of the housing balloon is likely to trigger the end of the kiddie party and we are about to enter the real world.
Final 10-2-07 The Economic Chill
The price of gold has reached $743 per troy ounce and that spells trouble -- or many people think it does. A rising gold price is taken as a sure sign that people are looking for a safe place to put their savings.
There is an economic chill in the air. Many ordinary people, who do not usually worry about such things, are asking me where they should put the assets they have saved to cover their retirement. I am not an investment counselor and they are not asking me about particular stocks or the appropriate diversification model to minimize portfolio risk. Rather, these friends are expressing their worry about a serious or even catastrophic economic downturn.
A little knowledge is a dangerous thing and the information age is good at furnishing that. Even those who know very little are concerned that the Chinese are threatening us with the almost $1 trillion of our currency they are holding. Those who know a little more worry about the credit contagion of the
Those sophisticated enough to recognize that all economics is political know it is time to panic when they add into the mix the neo-cons in the Bush administration who prefer confrontation to anything else and who now want to bomb Iran. They fear that the “correction” of the resulting instability and disorder will require a worldwide depression or war.
The existence of so many complicating factors and the inability to weigh all of the competing pressures on the system leave ordinary people scared and asking: "where do I run and hide." That's why the price of gold is rising. Everyone seems to feel that gold is the place to be if our paper-money, credit-built economy should really fall apart.
The fact is that we were comfortable with the Cold War and the frozen-in-place status of the economic and political world where we were the top dog. The collapse of the Soviet Union and the rise of
But the threat is political, economic and long-term, not military or short-term financial. It is not some kind of imminent collapse but long-term competition that we have to face. We now have to work out with the rest of the globe a new balance of power.
The world is not going to accept the neo-con position that says
A new set of facts calls for that new set of rules.
And it isn’t just
The challenges are there and traditionally we love a challenge. But we do have to face reality. That means getting out there and really competing. Don't ask me where you can run and hide. Ask me what industries are going to dominate world economic growth in the next 50 years.
All of the problems above are real and deserves a healthy concern not just by policymakers but also by the average citizen who will, shortly, get a chance to vote on such things.
I don't think there is reason to panic. None of my savings is in gold. I look at my sweet, tough, smart 12 year old granddaughter and I'm betting on
Final10-16-07 Alan Greenspan
It is said of Alan Greenspan that, "the markets liked him." No wonder, he gave the securities industry free rein to fleece the American people and those thieves took full advantage of it. In everything that Greenspan has done there has been this sleight-of-handiness -- a con game that puffed him up and left the rich and powerful claiming the pot.
It is also said he was obtuse. When the erudite and authoritative become obtuse, that is, utilize a multitude of polysyllabic Greco-Latinate derivatives to explicate the obvious, those individuals are intentionally obfuscating and a conniving species of chicanery. Or, in plain language, if some hot shot is using big words, he is trying to hide the truth and con you. That is the real Alan Greenspan.
First, “Doctor” Greenspan was given his Ph.D. by NYU in 1977 after he had already been Chairman of President Ford's Council of Economic Advisers for three years. And he got the degree without benefit of such niceties as the required dissertation. His degree is really to be compared to the honorary degrees that universities handout routinely to large donors.
Second, go back to the Social Security Commission of the early 1980s which he chaired. It was supposed to save Social Security from the prospect of a baby-boom induced bankruptcy. The Commission set up tax increases that were to be put into trust funds.
Noble purpose, but Greenspan and his business buddies, who made up virtually the entire Commission, were well aware that the trust funds would not exist in the real world. The hidden purpose was to make the huge Reagan and Bush I and II budget deficits look smaller.
Those trust funds were also intended as the first l hidden step in privatizing Social Security, which would, of course, put the money in the greedy hands of Wall Street. The Bush attempt to push this along failed because the people saw through the scheme.
Greenspan's years as chairman of the Fed, 1987 to 2006, are what he will be remembered for.
The Federal Reserve is supposed to use its power over money to maintain a healthy economy. To Greenspan, a healthy economy is almost exclusively low inflation but can also include a booming stock market and a globalized securities market
Economics is called the dismal science because it deals and trade-offs and choices. Alan Greenspan always chose the policy that benefited the rich. In Greenspan's choice book, high growth is bad because it is thought to cause inflation and unemployment is a tool to keep inflation down.
The low inflation he always chose was purchased, in the short run, by raising interest rates, slowing up the economy and causing a recession. He did that in 1990 and 2000, in each case, deliberately causing a recession, to avoid the mere possibility of inflation. Recessions, he believes, squeeze the inefficiency and inflation out of the economy
It is the responsibility of the Federal Reserve to avoid speculative bubbles and they have the tools to do the job. Instead a soaring stock market was purchased at the price of dot.com and housing bubbles whose bursting staggered the economy.
Greenspan can say now that he did not see these bubbles, yet in 1996 just as the stock market bubble was taking off, he warned of an "irrational exuberance". When that caused the stock market to hesitate, he embraced the idea of a "Cinderella economy." That meant that the laws of economics had been repealed so now you could have price-earning ratios of a hundred to one that made sense. The laws of economics are still in effect.
When speculative bubbles burst causing the
A globalized security market, which was the intent of NAFTA and WTO, left us with a gutted American manufacturing economy and stagnant wages and job growth.
Greenspan was, I guess still is with his recent memoir, one of the greatest of con men, a cross between the Houdini and John Law. Now he claims he never really agreed privately with the advice he was giving publicly on tax cuts. I think most people are on to him now with this literary attempt to rewrite the history of his botched job.
Greenspan is Ayn Rand's star pupil. A man who hates government and regulation had the world's most important regulatory job. His success in refusing to regulate emerging bubbles and in making the rich richer with tax cuts has left a seriously distorted economy. The results are now crashing down around us in the housing market, income inequality, competitors charging ahead on challenged and a looming massive financial "correction".
Final10-30-07 War with
George Bush and Richard Cheney are determined to attack
The Iran-Iraq border is where terrorists can trigger the most bang for their buck. And that is exactly where George Bush wants to start throwing bombs at the Iranian Revolutionary guards and their élite Quds force. It is 2003 all over again. The president will attack.
The president wanted to bomb
There is no reason to attack
Shortly after that,
Condoleezza Rice is now offering "full-scale negotiations anytime and anyplace." Unfortunately she is also demanding that the Iranians first give up their nuclear enrichment program, which is their only negotiating card. Unlikely.
Moreover, Stephen Hadley, now National Security Adviser, undermined even that with Hadley's Rules: "If a state like
The catastrophic consequences of an air war with
In 1991, with the collapse of the
This new millennium is witnessing a rebirth of faith, a shift from the nation state to shared governance and the spread of the riches of industrialization across the globe.
President Bush, with the invasion of
Such an attack is all Bush has left. The U.S. Air Force sits on five "enduring" bases in
We will face a proud, ancient and roused people who have the national cohesion, technological capacity and determination to attack asymmetrically on a worldwide basis. The Iranians are not terrorists who blow up women and children but they will attack at least our military here.
This is really madness.
Low-intensity but high-technology war will spread across the world wherever US troops are located even though the core conflict would clearly be a Sunni-Shi’a civil war. Idiotically, a fight over oil wealth will be disguised to look like an Islamic civil war about a seventh century dynastic problem!
The ensuing chaos will hurt us more than anyone else. The rest of the world will continue to pursue religion, integrated political power and industrialization as we pursue military leadership.
George Bush wants to ensure that the next president is forced to continue his legacy of trying to spread democracy through preemptive attack. He can only do that if he bequeaths such a war already in progress.
The attack on
Will no one stand up and yell: Stop it! Stop it!
Final 11-13-07 Recession: What Now?
The too easy money is over and we are headed for a recession. First question: how deep and how long? Second question: what can the Federal Reserve do about it?
No one knows how long or how deep the coming recession will be because nobody knows the default potential of the immense public and private debt that has been created over the last five to seven years. The consensus is not good. A range of characters, from Warren Buffett to George Soros and Alan Greenspan, tell us the economy is headed for a hard landing.
The central banks of the world funneled billions of dollars into rising markets. Private mortgage debt is now $10.1 trillion compared to $4.3 trillion just seven years ago. The bankers let hedge funds finance huge leveraged buyouts and they ignored the "carry trade" where investors borrowed $200 billion in
That too easy money financed a housing bubble which, as you know, popped. The dominoes are falling. It works like this. When housing values were rising as much as 13% per year, your local bank was eager to tease you into a large mortgage with a low introductory rate. The bank then sold the mortgage to a middleman who bundled it into a multimillion-dollar package. Middlemen then sold those bundles to investment banks, mutual funds, hedge funds and other investor groups. Everyone got credit, everyone's skimmed a little and everyone was happy.
Now that path is running in reverse. As the value of your house falls to below the mortgage amount and the time comes when your variable rate mortgage is reset upward doubling your monthly payment, it pays you to just walk away. The bundle holders have no recourse but to foreclose. Now no one is getting credit, everyone loses and the lack of credit is dragging the economy down after it.
Between October 2007 and December 2008, approximately $800 billion of these adjustable-rate mortgages will be reset upward and that is just the beginning. A congressional estimate says that 2 million homes financed by subprime loans will be foreclosed in the next 18 months. Those investment banks and hedge funds are the people now reporting huge "write-downs", that is losses. Estimates of total write-down losses of the banks run to $1 trillion.
As usual, the consumer will pick up a good part of the tab. American home ownership value is currently estimated at $21 trillion. A 20% drop in the value of housing, a moderate estimate, will cost American homeowners $4.2 trillion in capital.
This is serious stuff, well beyond loss of retirement funds, because it affects spending in the whole American economy. Home equity cash-outs have, over the past five years, totaled $1.1 trillion. This is almost half of the increase in total consumer spending over the same period. This spending kept
The Federal Reserve is in a box. Normally, when the Fed sees a recession coming, it lowers the interest-rate, puts money in the economy and thereby stimulates output to avoid the recession. Similarly, in reverse, fear of inflation leads the Fed to increase interest rates and withdraw money to slow the economy.
But the Fed doesn't have even that choice. The Fed lowered the interest rates twice in recent months but no one is sure what they will do next. The problem: while signs of recession are everywhere, so are the signs of inflation.
The dollar is dropping, especially against the euro, the prices of all commodities, not just oil, are soaring. The Chinese and other emerging economies are sucking up commodities and pushing up prices. At the same time, undervalued currencies are distorting trade everywhere. Realigning those currencies will also raise prices.
We are looking at the worst of all possible worlds -- a return of the stagflation of the 1970s: negative GDP growth accompanied by an increasing level of inflation.
When the Fed had this situation in the past, especially 1982-83, it chose to address only the inflation threat. They let the recession happen. They will do so again. The value of the dollar comes before people.
All the experts saw this coming. Greenspan and the politicians could have stopped it but their constituents, the bankers and investors, were making too much money to ask questions. Now we all pay.
The only mitigating fact in a near catastrophic situation is that the deeper the recession is the shorter it will likely be. I am guessing, barring another doubtful election or an attack on
Final11-27-07 Immigration: Our Problem Is in
The anger over 12 million illegal immigrants has made immigration a hot button issue in this presidential primary season. The cynical Republican candidates embrace that anger, talk tough and rail against "sanctuary cities" and "amnesty". The cowardly Democrats are trying their best to duck the issue.
The candidates and their parties see immigration solely as either an opportunity or a threat to their political goals. American politicians want to build fences, send mothers home without their children, raise the price of naturalization from $405-$675 and harass citizenship applicants with a tougher test. Their palliatives address the anger and not the cause.
The real reasons are in
The European Union (EU) has its migration of workers from Eastern to
The EU, however, has not seen the mass migration that was feared and that happened here following the signing of NAFTA. The reason is that EU integration included mobility in labor markets, maintenance of the social contract, human rights and the transfer of capital for investment in human and industrial infrastructure. The poor of
NAFTA led to the collapse of the Mexican economy. In the three years before NAFTA, emigration from
Well, NAFTA failed. Mexican real wages fell by over 20% in the first five years and are still below pre-NAFTA levels. In rural areas, 1.5 million families were driven from the farms by imports of US subsidized corn. So now one quarter of the working age population of
When Vincente. Fox became president of
President Fox and his administration were willing to go for the EU model of true integration with a common external tariff, coordination of economic and industrial policy and even a single currency. And they wanted a "cohesion fund" of the European type for infrastructure development.
The attacks of 9/11 ended all of that. The Bush administration virtually forgot about
The Republicans are playing to their base in this season of primaries but, with all of their tough talk they are alienating the Hispanic voters who are now 8% of the total. The Republicans got 20% of that vote in 2000 and 40% in 2004 but, after the anti-immigrant complaints began, only 30% in 2006. The Republicans also risk the vote and the money of the business community in industries like agriculture, restaurants, construction and hotels where undocumented workers have become indispensable.
The Democrats, who get tangled up in their refusal to face the issue, are alienating those in their base who feel most vulnerable to the competition of immigrants. Voters with only a high school education, African-Americans and rural voters have good reason to feel threatened by the immigrants and abandoned by the Democrats.
If there is going to be any progress on the immigration issue, our candidates are all going to have to stop pandering to their base. They must reach across the border and across the political aisle to start worrying about the failed Mexican economy that NAFTA helped to create. It is our problem and neither fences nor side agreements on labor standards address the depressed economy and chaotic politics that the Mexicans are fleeing.
It would certainly push politics in a new direction and we don’t need a failed state on our southern border.
Final12-11-07 Peace and Goodwill
Peace on the earth, goodwill to men (or peace to men of good will). Luke 2:14.
The ancient texts, my biblical scholar tells me, leave some ambiguity as to whether God is wishing peace and goodwill to all of us or whether His peace is just for those who have goodwill. I choose to think of this in terms of the inclusiveness of the New Testament. We are charged to reach out with peace and goodwill to everyone and that is what the Christmas spirit really is. But I fear our society is veering otherwise.
Starting with the Reformation this became a sore point as Catholics took one side and Protestants the other but it is ambiguous. If for some strange reason, you should care, it boils down to whether the word for goodwill is in the nominative or genitive case. The ancient texts in Aramaic and Greek are just not clear. If you are really up to date on biblical studies, I can tell you the Anchor Bible also says it is ambiguous.
But I don't really know who took which side nor do I care. It is a fine point of exegesis and the kind of thing that theologians come to blows over, which is ironic since the point is really peace and goodwill, however you parse it. Theologians, like all other professions, have not always been a credit to their subject matter.
Peace and goodwill are what God is talking about here and what we should be thinking, talking, and praying about during this Christmas season. I see peace as an inner quality reflecting that we are right with God and our fellow man. Good will is the extension of that peace, the reaching out, to those around us. This is the peace and goodwill we extend when we voice the Christmas spirit with "Merry Christmas".
The recognized loss of that inner peace is trivialized with the accusation of some kind of War on Christmas. The supposed conflict where religion and the Christ child are fighting with secularism and Santa Claus is a case in point. In one sense, it is true that the commercialization of Christmas into a shopping orgy is anything but peaceful. It can become a gross contradiction of the simplicity, poverty and peace of the newborn Jesus.
In another sense, and the way we should see it, all the Christmas presents constitute peace offerings and the extension of goodwill. Then the spirit of Christmas, even if disguised as Santa Claus, can be recognized in the goodwill of the gift and Christmas becomes what it is supposed to be.
However, the erosion of peace and goodwill in our society is real and reflects a growing lack of trust. The peace of Christmas can only exist where we trust one another. We can't be right with or extend goodwill to those we do not trust.
This lack of trust has many sources. Too many want to exclude all those we disagree with as untrustworthy and therefore unworthy of sharing the peace of Christmas.
Another problem is that there are ever fewer people whom we know well enough to trust. Our society encourages individualism and independence and discourages the community and sharing that build understanding and trust.. That inner peace becomes an ever more rare attribute. There are ever fewer shared communities where we learn and express trust.
Finally, we are daily fed stories of institutional corruption in our business and political communities. There are wars and rumors of war. Or the stories tell us of school or mall shootings and senseless road rage. All of these undermine of peace and goodwill.
Christmas is a family feast, a time when we go to those whom we know and trust in order to renew our stock of peace. Aside from those who have a faith community, the family is about all we have left.
Somehow we have to find a way to trust one another. Extending peace and goodwill will be difficult in a year when political stakes are very high, when our economy is in a precarious state, and when there is talk of a permanent war.
In this Christmas season, we are called to reach out with a greeting of peace to all of those around us and generate the goodwill that will lead to a Happier New Year for all.
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