Diatribes of Jay

The Perfect Dupes

2012-01-22T07:57:00.002-05:00

What does Newt Gingrich’s crushing forty-percent-plus win in South Carolina’s Republican primary mean?

In order to answer that question, you have to ask another, more pointed one. How did he win? According to the Washington Post’s informal exit polling, he won by being mean. Faced with serious questions about his character and morality, in both his marriages and his pubic life, he exploded at his questioners, including moderator John King and rival Mitt Romney.

This junkyard-dog approach appeared to work for Newt. But what does it mean for South Carolina and much of the rest of the South?

Anger in politics is a dangerous thing. It motivated the worst self-inflicted political wounds in human history, the French and Russian Revolutions. Skillful demagogues rode it to overwhelming power and then turned on the people they claimed to represent and protect. Bloodshed, terror, misery and horror followed.

The Tea Party movement is but a pale reflection of these disastrous outbursts of popular anger. But its motive force is the same. People make all the wrong choices for themselves and their future. A clever demagogue directs their anger—which rightly should target themselves—outward, against scapegoats. The result is power for the demagogue and yet more suffering for the clueless dupes.

States like South Carolina have been dupes since the Civil War. They have followed the easy path of bossism and racism down into a sewer of poverty, ignorance, joblessness, helplessness, and obesity. It’s easy to misdirect their anger against a half-black President and a gay congressional leader (Barney Frank) because they have always hated outsiders and the different, even (especially) well-meaning ones. They don’t need help from outsiders, thank you, and haven’t since the destruction and capture of Charleston.

Like much of working America, South Carolinians should be angry at themselves. They have far too little education. They don’t pay much attention to politics, except when it mimics a soap opera. They drink and eat too much. They get too little exercise. They hate too much.

And so they are dupes for a simplistic ideology that redounds of “freedom” but self-evidently hasn’t worked for forty years and never will. They are like the Russian peasants who still believe that Communism will restore their nation’s greatness and make them rich and happy. If only . . . . If only . . . .

Politicians like Newt demonstrate spectacularly the two types of human intelligence: emotional and analytical. Like Newt, tyrants usually have lots of the first and little of the second. Like the psychopaths who have destroyed the global economy and still threaten to do it again, they also lack empathy and a sense of responsibility—what most of us ordinary folk call “morality.” How anyone could vote for Newt knowing what he has done to two of his wives, his House and the nation is nearly beyond comprehension.

But with his extraordinary emotional intelligence, Newt well understands the downtrodden, backward common people of our racist, bossist South. He figuratively rubbed the faces of two of his three wives in excrement. He is the only Speaker of the House ever to be formally censured for ethical violations. In the runup to the Crash of 2008, he played both sides of the fence, receiving hundreds of thousands in “consulting” fees from Freddie. Then, when the shit hit the fan, he blamed the whole mess on that gay guy, Barney Frank. His policies and programs continue to entrench Wall Street’s selfishness, isolation and raw economic power, which have oppressed South Carolina and most of the South for 150 years.

Yet his dupes don’t have a clue. Newt manipulates their anger like a street musician playing an accordion, and the monkeys jump to his tune.

Fortunately, South Carolina is one of our least populated, least powerful, most backward and ignorant states. In the larger scheme of things, the delusion of its population doesn’t matter much. All its duping and anger will do is split the vote against the President and insure his re-election.

But the South remains both a danger and an opportunity—in Chinese terms a perpetual crisis. In the wrong hands, of someone even worse then Newt, it could fall into something like German or Italian fascism. In the right hands, with education and skill, it might join the twenty-first century and play a key part in America’s renewal. But it will take a better, smarter and far more moral person than Newt to dupe it in the right direction.

The only real things that Newt can hope to accomplish are to destroy his party’s chances to unseat a vulnerable president, cause an ignominious loss, and perhaps (inadvertently) begin his party’s long overdue reformation.

permalink

France and Germany versus the Psychopaths

2012-01-10T10:20:00.009-05:00

[For hints on how bankers can avoid becoming psychopaths, click here .]

Two primary traits distinguish psychopaths from the rest of us. First, they have no empathy. Second, they are always right, even when they are wrong. They cannot admit fault or take responsibility. They make their own “morality.”

Recently William Cohan, a writer and columnist for Bloomberg.com, accused the leaders of our big banks of being psychopaths.

If the shoe fits, they should wear it. Have you ever seen a big-bank CEO show the slightest empathy or remorse for making tens of millions unemployed, underemployed, or homeless, or for trapping millions more in a daily hell of on-the-edge anxiety? And as for always being right, what about Jamie Dimon, who trots the globe telling everyone who will listen that the slightest taxation or regulation of banking will destroy that so-called “industry,” which has done so much for all of us the last five years?

Bankers don’t admit the slightest fault. They were just doing what comes naturally: building financial houses of cards that make themselves obscenely rich and periodically fall down, bringing an otherwise thriving economy to ruin.

For guilt, they point their fingers at Fannie and Freddie. But we all know the truth. The collapse of Lehman Brothers and AIG caused the Crash of 2008. Those firms were private. And AIG now is again, after we taxpayers bailed it out.

Not only that. When Hank Paulson sought to stem the initial damage by handing out over $120 billion of our tax money in that infamous meeting in October 2008, the recipients in the room were all CEOs of our biggest private banks: Bank of America, Citigroup, Goldman Sachs, Merrill Lynch, Morgan Stanley, State Street, and Wells Fargo. Fannie and Freddie weren’t even in the room.

So who, if anyone, is trying to save us from the psychopaths? The answer might surprise you. France and Germany (or at least their leaders) have buried ancient animosities and the hurt from two world wars and are joining hands. They want to make banks eat 50% of the losses from their mistakes in lending to Greece, relying on derivative “insurance” from the psychopaths.

The psychopaths don’t want that at all. No, no, no! If minor banks had to obey the normal rules of capitalism and pay for their mistakes, they would stop gambling at the big banks’ casinos and might actually make prudent loans. Eventually, they might unwind the $600 trillion overhang of derivatives that threaten another Crash of 2008 at any time. At least they wouldn’t add to it. The horror! The horror!

France and Germany also want to levy a tiny financial transactions tax. Its purpose is simple. When the finance psychopaths next ruin a perfectly functioning industrial economy again—as they have over a dozen times in the last 200 years, and will again—the bailout will come from a fund they financed, rather than from taxes paid by real businesses and ordinary working stiffs.

How big is the tax to be? A mere 0.1% (one one-thousandth) on stocks and bonds, and 0.01% (one ten-thousandth) on derivatives.

It’s hard to ken what those numbers mean, because it’s hard to fathom the astronomical sums that these psychopaths daily put at risk.

If you’re a millionaire, you might feel proud of yourself. But on that dark day in 2008, Hank Paulson handed out over $120 billion of our tax money. You might think of 120,000 of you, standing in a very long line, just to give up your entire net worth to save the bankers.

And as for the overhang of derivatives—that incomprehensible $600 trillion—you can think of it as the aggregate net worth of 600,000,000 millionaires. If every single person in the entire US and the EU, including infants and the elderly, were a millionaire, the collapse of that house of cards would bankrupt nearly every one of them.

And what about that vicious transactions tax? Well, suppose you’re an average upper-middle-class professional, making $100,000 per year. (That class is under attack right now and may become extinct. But it isn’t yet.) At 0.01%, a derivatives tax on your entire annual income would amount to ten dollars.

Not being a psychopath, you probably have some empathy and generosity. So you might drop that much into the hat of a beggar or the Salvation Army at Christmas time. You certainly would give that big a tip—probably more—to a good waiter who made a special dinner a happy one.

But faced with that minuscule level of taxation on their casinos, the bankers won’t hear of it. They pull the strings of their puppets in the US and UK. Then the puppets raise their wooden arms and vote against the tax.

The puppets say the tax has to be global to work at all. That would certainly be better: then the bankers couldn’t flee to Shanghai, the Cayman Islands or Manhattan to continue their psychopathy. But the puppets are making no moves to levy the tax in the English-speaking world, which is still in thrall to the psychopaths.

There is only one prominent voice in Anglo-America who stands against them: Jon Huntsman, Jr. He has proposed yet another solution, but one that also might work. He would simply break the big banks up. He would make them small enough to fail again, and he would force them to compete against each other for business. In other words, he would take them off the public tit, converting them from psychopathic sucklings back into capitalists.

So when you think of That Idiot Rumsfeld’s “Old Europe,” thank God it still exists. Thank France, where Nicolas Sarkozy led the charge to liberate Libya and is leading the charge to impose a financial transactions tax. And thank Germany, where CEOs earn ten times the pay of the average worker, and where hard bargainer Angela Merkel is trying to make the banks take responsibility for their mistakes. Don’t thank the “Grand Alliance” of the US and the UK, which still believes that we need these psychopathic parasites. For what?

Those states will change only when their people rise up. More likely, they will change when members of their real ruling class—industrialists and the few remaining honest bankers—wise up.

Have you ever heard of an economic collapse caused by real industry? Did Apple, Boeing or Caterpillar cause the Crash of 2008? Did steel, railroads, or emerging electric industries cause the Great Depression?

Not hardly. These and other real industries busy themselves creating wealth and making the world a better place every day. Then the finance psychopaths come along and blow the whole system up.

We will start to rein in the causes of all financial crashes in human history—finance psychopaths—only when the leaders of those and other industries come to understand a basic truth. You can have a vibrant and thriving global industrial economy. Or you can have a laissez faire financial sector where finance psychopaths can do what they want to enrich themselves. You can’t have both.

Your call, industry. We, the people are counting on you, because Jon Huntsman probably won’t make much headway until 2016. By then, unless France and Germany win, the next Great Depression may already have set in.

Are All Bankers Psychopaths?

As recently as three decades ago, that question would have been laughable. Bankers were pillars of the community, staid, proper, prudent and boring. They had two things increasingly rare in our go-go, me-first society: gravitas and a sense of responsibility. They got rich, but not that rich; they lived in the big house on the hill, but without in-your-face ostentation. In fact, their riches, which were quite modest by today’s standards, set them apart and embarrassed them a bit, and they tried to hide them.

Even some big bankers had the same spirit. A.P. Giannini, the founder of Bank of America, was like that. He was a people person first, a banker second. Back when his bank was the “Bank of Italy” in San Francisco, he succeeded by knowing his customers and taking sensible risks to help them when no one else would. After he expanded to Los Angeles, he got to know the leaders of Hollywood and helped many of them personally. Producers, actors and directors used to tell how his personal banking had made their careers.

Community bankers cared about their communities and the people they served. Many still do. Even some big bankers did. So how did the pillar of the community morph into the pitiless pillager?

I think three factors did it: size, remoteness, and an inhuman culture of over-the-top capitalism.

When a bank has thousands of branches and millions of customers, no single manager, let alone the CEO, can know their names, let alone their characters and needs. Community banking becomes impossible. So what takes its place?

That’s where the MBAs and green eyeshades come in. They reduce loan applicants and other customers to ciphers on a page. All an entrepreneur’s vision, initiative, hopes, dreams, fortitude and industry become abstractions on a standardized form. All the intangibles that community bankers and A.P. Giannini once used to assess real risk on a human scale vanish, replaced by sterilized ciphers.

As this process of sterilization was overtaking the nation, community banks merged into regional monsters located in distant cities and then behemoths headquartered on Wall Street. Bankers’ remoteness from their customers made it impossible to know even the important ones. And remoteness from legions of inferior employees made it even more necessary to reduce customers and risk judgments to ciphers on a page.

No wonder bankers became inhuman! They divorced themselves from human contact by reducing their customers to mathematical abstractions one to three time zones away.

The final ignominy was culture. As banks became bigger and bankers more remote from their customers—with the biggest banks relocating to Wall Street—bankers’ culture changed. They became an insular tribe without community and therefore without moral values. Their moral lodestars became their profits and stock prices, the higher the better.

Living so far from the people and places they served, bankers became completely oblivious to the damage they caused. The reductio ad absurdum was Lloyd Blankfein, CEO of Goldman Sachs, who testified in Congress to “doing God’s work” after helping destroy the global economy.

So what turned bankers into psychopaths was not some hidden internal devil of banking. Nor was it an inherent character flaw in bankers themselves. It was the terrible logic of business, institutional and social changes that cut bankers off from the rest of humanity. It was also the culture of Wall Street, in which profits and stock price are the sole moral values, and they gain irresistible traction with fallible humans by determining their pay. Pillaging followed as night the day.

You can reduce systemic risk by better oversight and stronger regulation. And of course we should. You can tax financial transactions and build up a fund to help ameliorate the worst consequences of inevitable pillaging. And of course we should. But you can’t change the picture described above in an insular culture of conditioned vultures, all located in a single city (Manhattan) physically and culturally alienated from the rest of America.

That why Jon Huntsman’s solution—breaking up the big banks—deserves a sustained closer look. Of course we can’t go back to nineteenth-century America. But we can carefully design and shape institutions, in this case banks, so as not to leave behind the community spirit and individual customer relations that once made American business pre-eminent not only in profits, but in fairness and humanity as well.

There are ways to break up the big banks legally, without passing new antitrust laws or violating the constitutional prohibition against impairing the obligations of contracts. I have suggested one. Huntsman may have others. (And by the way, smaller banks can still do big deals, the same way they used to, by syndication. Syndication also has risk-reducing potential, for it forces several independent minds to assess the same risks.)

But one thing is certain. Humanity does not flow from inhuman institutions imposing inhuman values on real people. That way lies revolution.

After our revolutionary War of Independence, we Americans have always found ways to avoid violent revolution through peaceful social evolution. We did it with collective bargaining in the age of labor unrest. We did it with peaceful protest and legal reform in the Civil Rights Era of the 1960s. We even did it with peaceful protest in the Vietnam Era, although Iraq and Afghanistan suggests that the lessons of those years need reinforcement.

We can do it now with our finance sector, too. But we first have to recognize the problem. Can we do it without another Crash of 2008, which this time might presage a second Great Depression? I hope so. But the hour is late and time is wasting.

permalink

Why Romney Would Make a Bad President

2012-01-08T23:21:00.002-05:00

[For eleven questions that moderators should try to ask at remaining presidential debates, click here.]

In at several places on this blog (1, 2 and 3), I have dinged Mitt Romney as a flip-flopper and a jerk. Now that he appears to have the presumptive nomination within his grasp, it’s appropriate to take a closer look.

He’s not running on his successful health-care program in Massachusetts, at least not in the GOP! That program is much too close to the so-called “Obamacare” that he continually bashes in his stump speeches.

And he’s certainly not running on his chameleon approach to social issues, which made him a social moderate in Massachusetts and an ersatz social conservative today. People like me might not care much because we don’t think those issues matter at a national level, and anyway we think Romney is lying now, not then.

So what makes Romney nearly the presumptive GOP nominee?

Two things, I think, help him stand out. First, he’s supposed to be a good debater. He’s had a lot of practice, so he comes on like the alpha-est of the alpha males competing in the penis-matching contests that pass for “debates” in our celebrity-obsessed and sick democracy. He’s got the good riposte and the glib line.

Second, he does have successful business experience. He started a successful business consulting firm called Bain Capital and made well over a hundred million dollars running it for about a decade.

So let’s analyze whether those qualities and that experience would make him a good president.

Romney’s glib ripostes can sound good to the average voter, especially when delivered with his trademark self-confidence. But do they actually makes sense when analyzed coldly? I think not.

One of his most famous one-liners came during the 2008 campaign. He accused then-candidate Barack Obama of being like Jane Fonda one day and Doctor Strangelove the next.

You had to be over fifty even to understand what he was talking about—a point that tells you something about Romney’s favored demographic. Jane Fonda is the American actress who went to North Vietnam several times during the Vietnam War, in order to protest it, and whom many Republicans consider a traitress. Dr. Strangelove was the fictional character in the movie of the same name, who sought nuclear Armageddon with the Soviets. What Romney was referring to was Obama’s willingness to talk to our enemies, including Iran and the Taliban, without preconditions, and his plan to pursue Al Qaeda leaders bin Laden and Zawahiri into Pakistan if necessary.

Romney’s jibe may have sounded good at a fraternity party—a frat boy one-liner. But in substance it was precisely and spectacularly wrong. Talking with our enemies led to mutual disarmament with the Soviets and eventual dissolution of the Soviet Union. Moreover, every president (except Dubya) since Jack Kennedy had pursued a policy of talking with our enemies without preconditions. As for bin Laden, pursuing him into Pakistan was precisely what eventually brought him justice, under President Obama’s command.

A similarly erroneous one-liner appeared in Saturday night’s New Hampshire debate. Huntsman criticized Romney for being willing to start a trade war with China—an outcome that would be catastrophic for both sides. Romney responded by saying that China sells far more to us them we to it, so it has more to lose in a trade war, giving us leverage. The clueless moderators gave Huntsman no chance for rebuttal.

That riposte may have sounded good to the thoughtless or uniformed. The Chinese do indeed sell far more to us than we to them. But that’s the point. Go into any Wal-Mart, Lowe’s or Home Depot in our land. Pick up any product at random. Chances are it will say “Made in China.” My wife and I recently put up an artificial Christmas tree she had bought a decade ago. “Product of China,” its packaging said.

What would happen if we put tariffs on all those products that we buy and use every day, or otherwise restricted their imports? Retail prices would go up, sparking inflation, and/or we would have the kinds of shortages that Soviet consumers suffered in their worst days.

Maybe American voters aren’t smart enough to understand this economic cause and effect. But the Chinese are. So the simple trade imbalance that Romney cited gives us no leverage with the Chinese, who are smart enough to know the consequences of a trade war for both sides. They know that, no matter how much we act like cowboys, at the end of the day we won’t shoot ourselves in the foot.

In order to deal with the Chinese, Romney needs to do more than be smarter than the average Republican voter. He needs to be as smart or smarter than the Chinese themselves. His frat-boy one liner gave no evidence that he is. It just showed that he’s as willing to dupe the American voter on matters of economics as he is about his positions on abortion and health care.

But Romney’s forte is his business success. Let’s give the devil his due. I have criticized his downsizing other people’s companies. But there’s nothing wrong with that if downsizing helps those companies survive when they otherwise wouldn’t. Downsizing can save jobs and businesses, if it’s a last resort. After all, I laud the president’s bailout of GM, and that’s precisely what what it did: downsize and refinance GM in order to save it and the jobs it provided.

But let’s look at what Romney did more closely. In downsizing the companies he saved, Romney had the whip hand all the way. In many cases they were smallish companies with family or entrenched management unfamiliar with modern business methods. Romney came in with his Harvard M.B.A., modern quantitative methods of analysis and cost cutting, and investors ready to provide massive capital infusions on his recommendation. When he said jump, management and shareholders, who wanted to salvage whatever they could, asked “How high?” on the way up.

How does that experience translate into a presidency? Not very well.

In dealing with China, for example, Romney as president would not be dealing with a failing company whose leaders were looking for any way out. He would be dealing with a rising global power, likely to become the world’s leading economic power within the decade. With three trillion dollars of foreign reserves, China is far more solvent than we are. And Romney has nothing to tell the Chinese, who have been practicing quantitative business methods and beating us at our own game for two decades.

In downsizing his clients as a consultant, Romney was dealing from a position of absolute strength. He wasn’t operating from a position of equality or weakness, as we must with the Chinese and our other allies and rivals. In that circumstance, diplomacy is much more likely to succeed than frat-boy one-liners or a false (and offensive!) air of command. Dubya and Hank Paulson tried the commanding approach with China and got nowhere.

That same analysis applies here at home. Congressional gridlock will continue even if Romney wins this year’s presidential election. With the Senate’s filibuster rules and senators’ individual “holds” still supreme, Romney won’t be able to say “Jump!” as he did consulting for failing companies. He will have to persuade members of Congress and bargain with them as equals in order to make any progress at all.

Does anything in his history or personality suggest that he would be particularly good at that? He’s cocky, arrogant and glib. His frat-boy one-liners might amuse right wing average voters. They will not amuse Chinese ministers or ambassadors or Democratic members of Congress.

To make progress with China or Congress—or Russia or Europe, for that matter—you have to know how to bargain with equals and from a position of real or perceived weakness. Nothing in Romney’s history shows that he has any particular experience or skill in doing that. That sort of thing—which we call “diplomacy”—is Huntsman’s forte.

Under circumstances of international conflict, Romney’s approach would be even worse. Dubya proved as much by getting us into two unnecessary wars, among the longest in our history. Assuming your rivals’ or enemies’ stupidity and trying to “take command” in a system of serious international conflict is not the best way to avoid war.

In order to avoid war or win it, you must know your rival or enemy and its alien culture. Romney’s language experience is in French, hardly an alien culture like Iran’s, North Korea’s, or even Russia’s or China’s. His bluster and saber rattling with respect to Iran may serve him well with a right-wing electorate, but it won’t in dealing with the real world as president. Coupled with his total absence of military service and experience, it makes him a dangerous man.

I have written a whole essay about the military tragedies that failure to appreciate alien cultures can cause. I won’t repeat it here. But I will say that treating a foreign nation like a failing company in need of help from Wall Street would be just as dangerous as treating its leaders like American pols, as Lyndon Jonhson tried to do in Vietnam.

One of the many aspects of fuzzy thinking in current Republican dogma is the notion that “leadership” in American business translates easily into leadership in other fields. American business operates under known, stable and fair rules of conduct, which rely on a common culture and set of laws. The rest of the world does not. Nor does war.

The notion that Mitt Romney’s special brand of business experience makes him qualified to resolve conflicts and win wars with utterly alien cultures is a complete non-sequitur. It’s an error of logic that could cost us as dearly as our wars in Iraq and Afghanistan.

permalink

Signs of a Sick Democracy: the First New Hampshire “Debate”

2012-01-08T01:27:00.007-05:00

[For a list of questions that the moderators of last night’s debate should have asked—and that every moderator of a presidential debate should ask—click here.]

I watched my first GOP debate last night. I watched it from beginning to end. What I saw was evidence of a sick, sick democracy.

That impression took hold even before the actual debate began. There was Diane Sawyer, the central of three moderators, dressed to the nines, with inappropriately heavy and flashy earrings. She looked like the rich hostess at a grotesque dinner party.

And that’s exactly how she acted. Her grandiose and condescending manner put her somewhere between the MC at the Academy Awards and a rich heiress inviting not-too-welcome guests (us, the people) into her palatial estate—one far too elegant for the invited hoi palloi to appreciate.

Everything about her revealed what the debate itself made incontrovertible. This was a grand show for us, the rubes. Any relationship to governing our country was purely coincidental.

After the debate Diane grandiosely and obsequiously thanked the specially selected audience and the candidates’ families, as if they were all doing us, the people, a great favor just by showing up. I had to turn the TV off quickly in order not to vomit on our coffee table.

Maybe Diane was subconsciously telling us something we all ought to know by now: what a sham these debates and our so-called “democracy” have become.

But—believe it or not—the debate itself went downhill from there. I didn’t keep exact count. But I would bet no more than ten minutes of the discussion focused on what we, the people, care about, or ought to care about: jobs, our economy, and our future as nation. The rest was alpha bulls strutting their stuff and jousting with each other, and the moderators deliberately encouraging them like schoolchildren at a football match.

No doubt thinking himself sooooo clever, George Stephanopolous opened with an abstract, hypothetical question about state regulation of privacy and birth control. His question confused the roles of the President and the Supreme Court and no doubt went completely over the head of every viewer who is not a lawyer. Romney batted it away like the intellectual fly dropping that it was.

You couldn’t find better evidence than that question of grossly overpaid people not giving a damn about the rest of us. Iran is threatening to close the Straits of Hormuz and cut our oil addiction cold turkey. A teenage mutant tyrant is now in charge of North Korea. China has sucked up our jobs, intellectual property and wealth. Europe is about to explode the financial system for the second time in four years, if our own casino banks don’t do it first. And Stephanopoulos opens with an abstract, hypothetical legal question that belongs in a constitutional law exam at a third-rate law school.

My first thought was that I had never seen as incompetent moderation of a presidential debate. But that was assuming that the purpose was to edify the public and not just put on a good show.

If the purpose was—like all the later talk about gay marriage and the President’s alleged “war on religion” (Newt’s words)—to distract us from our troubles and let rich people continue stealing the substance of our nation while it declines irretrievably, then the question was brilliant! (Do you begin to see why I don’t spend a lot of time watching televised political debates?)

Apparently the media arranged the candidates according to their showing in Iowa. There was Romney, in the center, fielding the vast majority of questions. Jon Huntsman, Jr.—the only candidate willing to admit to being a moderate—was on the left, and Rick Perry on the right.

How cute! That placement was certainly appropriate for Perry. At the end of the debate, responding to Diane’s general question, he said he would have been at the shooting range on Saturday night if he hadn’t been there.

I never attribute motives or intent to people I don’t know well. But ABC, which staged this farce, could not have arranged a better coronation of Romney if it had planned every detail for that purpose.

Again, I didn’t count exactly. But I’d be surprised if Romney didn’t get at least half again the air time as any other candidate on the stage, and at least twice as much as Huntsman, the only one in my opinion qualified to be there.

Romney rose to the occasion, with a good debate performance, as such things go today. He gave no hint of detail but struck an optimistic and forceful tone. He made the music of an alpha male without any words at all. He even managed to show some emotion about our nation’s future—something his consultants no doubt have told him had been lacking so far.

The same pro-leader bias infected ABC’s little “teasers”—choice excerpts from the immediately preceding portion of the debate that ABC aired between ads during commercial breaks. Their relevance and even punchiness varied directly with the candidates’ distance from central Romney. For Huntsman, they picked an utterly meaningless clip of two abstract sentences—from a segment in which he had made at least two cogent and unique points.

And if you think ABC’s stage-managing wasn’t close enough, know this. ABC has “helpfully” culled what it thinks are the “highlights” of the debate and presented them for you, on a site that makes it hard or impossible (I tried, without success) to do your own browsing. (I’m not providing a link because I think it stinks.)

ABC’s clip headings even ridiculed Huntsman for using a phrase of Chinese. If you fall for that, you might as well give ABC your vote, too. But try to find a clean feed of the whole debate on the Web. I couldn’t. All I could find last night was independent edits, each touting its own candidate or point of view. Thus have our “mainsteam” media degenerated from reporting the news to telling you what and how to think.

By now you may have wondered why I, a substance freak, have spent so much ink on appearance and process. The reason: there was hardly any substance in the debate at all. If you want to see it, just watch the last eight minutes or so. (I couldn’t tell precisely how long because I couldn’t find a clean feed. That’s what we get for giving a private firm, ABC, an exclusive on a presidential debate. This is democracy?)

There was also an earlier bit of substance about infrastructure. But if you’re in a hurry, you can skip it. The candidates who spoke about infrastructure all said they’re for it. Only Huntsman laid out a concrete plan to pay for it, complete with an amount. Two or three others said they had a plan but gave no details or figures.

And so it went.

The last session did serve up a tiny bit of substance. ABC saved it for the very end, when the children would be asleep.

As it turned out, there were actually some good ideas. Several candidates proposed cutting corporate taxes in order to make our manufactures more competitive abroad. Huntsman’s proposals, as usual, were more concrete and sensible.

But none of the candidates bothered to explain that their are four relevant tax rates: (1) the corporate tax rate for ordinary income, (2) the corporate tax rate for long-term capital gains, and (3) and (4) the same two rates for individuals. Lowering corporate ordinary-income rates makes it easier for corporations to offer products cheaper. Lowering long-term capital gains rates (whether on individuals or corporations) encourages long-term investment and long-term thinking—a point I have made myself. But lowering individual tax rates on high ordinary incomes just makes the rich richer, without corresponding economic or social benefit. You don’t have to be a genius to understand why no Republican explains these vital distinctions.

And so it went. The “adults,”—our plutocratic masters and their shills—don’t discuss anything important while we children are present. They drop a few key words so the more attentive among us won’t feel offended. They tend to do so at the end of the debate, when we children are tired and sleepy.

But mostly they talk about “hot button” issues that have absolutely no bearing on our jobs, our standard of living, our children’s future, our national security, or even whether we can keep our homes. And the media are completely complicit.

We think we have a democracy! Anyone who believes that so should spend a few hours watching the Nixon-Kennedy debates of 1960. Now those were real debates about real issues. If you want to know how much we, the people, have been excluded from our governance, just compare them to the sham last night.

And so, children, how was your play today?

P.S. (1/9/12) I didn’t want to leave readers with the impression that I favor cutting corporate ordinary-income or capital gains taxes for the purpose of drowning government in a bathtub. Obviously any revenue lost from cutting those taxes would have to be made up by increasing taxes elsewhere.

That truth would force Republicans into an uncomfortable tradeoff. If they wanted to reduce corporate ordinary-income tax rates for the purpose of making American businesses more competitive, or to reduce long-term capital-gains rates for the purpose of encouraging longer-term investment and thinking, they would have to compensate by raising individual tax rates, at least for high earners.

I haven’t done the math to see how high the individual tax rates would have to go, and for how low incomes. But I would hope that Republicans who care about their businesses would be willing to make the individual sacrifices necessary to keep their businesses competitive and their workers employed.

Eleven Questions for All Presidential Candidates

The foregoing essay might seem a bit snotty to young people who’ve never seen a real presidential debate. So I thought it might be helpful to demonstrate more directly the abysmal incompetence of the moderators last night. Doing so is consistent with my general philosophy on this blog: I try not to identify a problem without providing some sort of solution.

Here are eleven questions that moderators of any presidential debate—Democratic or Republican—could pose to every candidate for president of the United States. They are really obvious questions when you think about them. They mostly track the list of our grave national problems, which have festered for an average of 17.5 years. They’re unlikely to change unless new and unforeseen crises add new substantive subject matter. The chances of the problems they implicate being solved by next November are infinitesimal.

Moderators should pose these questions in the order listed below. Why? Because people in our scatterbrained culture have the attention spans of gnats. So you want to pose the most important questions first, before the audience zones out. Putting fluff first and last is a form of sycophancy that candidates for president do not deserve. They are, after all, applying for the job of our supreme leader.

Here are the questions—actually groups of questions, including follow-ups:

1. Jobs. What specific steps would you take as president to put unemployed and underemployed people back to work? If your proposals would cost money, how would you pay for them? If they would require congressional action, what compromises and other inducements would you make to get the other political party to go along?

2. Foreclosures. Various estimates put the number of home foreclosures since the Crash of 2008, including those now in progress, at two to four million. How would you address this economic and social problem? Would you seek to keep people in their homes or expedite the foreclosure process and “clear the market”? How would you advance your goals, and what would you do about cases where the firm stuck with the loan has no or insufficient documentation? If your program costs money, how would you pay for it? And how would you get the other political party to go along?

3. Finance-caused economic crashes. In just the past century, we have suffered two major global crashes, the Great Depression and the so-called “Great Recession.” Finance, not industry, caused both. In 1929 it was the financial “innovation” of buying securities on margin. In 2008 it was unregulated derivatives, mostly mortgage-backed securities, which became “toxic assets.” What specific steps would you take to get derivatives and other financial “innovations” under control and insure that the “Great Recession” is the last global financial collapse caused by banks and other financial institutions? How would you fund those steps, and how would you get the private financial sector and the other political party to go along?

4. Energy. Some energy analysts expect oil prices to advance steadily as soon as the global economy recovers. In 2011, we imported about 9.5 million barrels of oil per day. At a cost of $100 per barrel (not too far from where we are today), that’s a balance-of-payments deficit—a sort of direct “tax” on our economy—of nearly a billion dollars a day. How would you reduce it? How much would your solutions reduced our foreign oil consumption, in oil barrels or barrel equivalents, or by a percentage? How would you pay for your proposals, and how would you get the other political party to go along?

5. Economic inequality. Right now, economic inequality in our country is the worst it has been since the Gilded Age a century ago. The ratio of CEOs’ pay to the average worker’s pay is over 400. In Germany it’s about ten. Would you as president try to reduce that ratio and restore economic equality? If not, why not? If so, how? How would you pay for your proposals, and how would you get the private sector and the other political party to go along?

6. Broken government. Gridlock in Congress is not likely to end next year, no matter what happens in November’s elections. A large part of the problem lies in our Senate, where filibusters have become routine and easy—without the actual speechifying portrayed in the movie “Mr. Smith Goes to Washington.” And individual senators, without any collective action in the Senate, can put “holds” on legislation and presidential appointments, often anonymously. Should a president try to solve these problems and, if so, how? Would you support a constitutional amendment to change these practices, use your “bully pulpit” to expose, castigate and ridicule them, or something else?

7. Immigration. An estimated twelve million undocumented immigrants live in this country. Most do jobs that Americans sometimes say they would do but seldom actually do, at least for the wages the illegals accept. Businesses exploit these illegal immigrants economically, and politicians exploit them electorally. What would you do as president to stop this vicious cycle and get control of our borders? How would you pay for your proposal, and what would you do to get the other party and immigrant advocates, including our growing Hispanic community, to go along?

8. Military policy and expense. President Obama has proposed saving about a trillion dollars by reducing the Pentagon’s ability to fight two major wars simultaneously. He proposes being able to fight one major war and simultaneously deter another aggressor—a sort of “war and a half” strategy. Do you agree or disagree with his proposal? If you disagree, what specific two wars with what specific two foes do you think we should be ready to fight? Under what conditions are those wars likely, and what else, besides greater spending on our military-industrial complex, would you do to prevent them?

9. Specific threats. Insofar as reported in our press, our intelligence services believe that Iran is working on nuclear weapons. Do you also think so? If so, what steps would you take as president to prevent or delay Iran developing nuclear weapons? Would you limit your action to sanctions and diplomacy, or would you go so far as to attack Iran’s nuclear facilities and infrastructure—acts of war? What guidance would you take and what help would you seek from the international community, and how? What would your goals be for North Korea? Would you seek to limits its nuclear arsenal to existing weapons, to get it to destroy its arsenal, or something else? How specifically would you accomplish your goals: by working with North Korea’s neighbors, by direct engagement with North Korea, by inducing China to apply pressure, or otherwise?

10. International democratic movements. The last year saw an explosion of popular movements for democracy throughout Greater Arabia and in places as unlikely as Syria and Moscow. Movements in Tunisia and Egypt seemed to succeed without violence. But Egypt’s movement may be turning violent, and Libya required international military intervention. In Syria, a tyrant is busy murdering his people. Some analysts fear that these movements in Arabia, which often involve Islamist parties, will ultimately threaten international stability. Do you see these movements as generally positive or generally destabilizing? Would you seek to advance or suppress them, and how?

11. Science in America. From our Manhattan Project (which first developed atomic weapons secretly, in the midst of war), to lasers, transistors, integrated circuits and the Internet, our nation has been supreme in science and technology. Now we are coasting at best, losing ground at worst. Europe has taken over high-energy physics with Geneva’s Large Hadron Collider. Russia and China both have manned space missions; we no longer do. And the Hubble Telescope—which advanced mankind’s knowledge of our Universe more in twenty years than in all of previous human history—is going dark. What would you do as president to restore our nation’s pre-eminence in basic science, including space science? How would you pay for it, and how would you get the other party to go along?

* * *

There! That wasn’t so hard, was it?

You would think that someone like George Stephanopoulos, who reportedly gets paid $ 6 million per year, would be able to come up with at least some of them. But, as the report of his grossly excessive pay headlines, he’s a “celebrity,” not a journalist. Maybe that’s part of our problem: we take “debates” for entertainment and let “celebrities,” not professional journalists, run them.

When celebrity replaces education and professionalism, a society inevitably declines. You need look no further than Rush, Glenn, and Sarah for evidence. That’s not something we are going to solve in this election season. But at least we can get our debate moderators to ask some decent questions, and follow up.

permalink

Huntsman v. Romney

2012-01-06T11:25:00.008-05:00

There is only one serious candidate for president on the Republican side. The overwhelming majority of Americans don’t even know who he is yet.

But they will. His name is Jon Huntsman, Jr. In an interview last night, Gwen Ifill introduced him to the small sliver of still-thinking Americans that follow PBS.

All Americans—Republicans and Democrats—should watch the interview, which is only eight minutes long. What they’ll see is a thoughtful, low-key, articulate, honest and supremely intelligent man.

Ifill didn’t explore Huntsman’s policy positions. She tossed him mostly softball questions on the horse race and his prospects. But she did get him to admit, after some reluctance, that he is a moderate.

Republicans haven’t yet embraced him for precisely that reason. Goaded by Fox and the worst elements of their party, they’ve scattered to the four winds, looking under every stone for a radical conservative alternative to Romney.

They don’t like Romney because, in addition to being a flip-flopper and a jerk, he’s not radical enough for them, either on social or fiscal issues. They want a sincere and honest bomb thrower, not a president.

But here’s the thing. Gridlock in Congress is not going to change next year. Some pundits think Democrats may take the House and Republicans the Senate. Even if Republicans end up with majorities in both Houses, they won’t have a filibuster-proof edge in the Senate. Not even the idlest GOP dreamer thinks they will.

So, even if a Republican takes the White House, congressional gridlock will continue. Senate Democrats will maintain the same obstructionism that Republicans have taught them so well during the last three years.

Consequently, nothing will get done, let alone anything as radical as the program of the Tea Party or Ron Paul. Nothing, that is, in domestic policy.

Foreign policy is another matter. As Dubya showed by getting us into two unnecessary wars, the President has virtually plenary power in foreign and military policy. In those fields, it’s one-man rule.

So if you happen to be a Republican, and if you want someone who can accomplish something in the single field in which a president can act while Congress is in gridlock, Huntsman is your man.

Here’s the score so far:

State Administrative Experience:

Huntsman:

one term, re-elected for a second, 2004-2009

Romney:

one term, 2004-2008

International Administrative Experience:

Huntsman:

six years

Deputy Assistant Secretary for Trade Development, Department of Commerce, 1989

Deputy Assistant Secretary for East Asia and the Pacific, Department of Commerce, 1990-1991

Ambassador (youngest in a century) to Singapore, 1992

Ambassador to China, 2009-2010

Romney:

Foreign Language Skills:

Huntsman:

Romney:

Fluent in French

Business experience:

Huntsman:

build billion-dollar multinational family business

Romney:

in Bain Capital consulting firm

If Republicans want an alternative to Romney with the best chance to beat President Obama—and the best prospects of doing something in the White House once there—Huntsman is their man.

Will they recognize that fact and exploit this historic opportunity? Probably not. That’s why, in my view, Huntsman is treating this campaign season as practice for a serious run in 2016. Then the President will have retired (with no viable successor now in sight), and the GOP will have kept its suicide pact with extremism and perhaps begun to resurrect itself.

permalink

Thank You, Iowa, and Hello Huntsman

2012-01-04T23:44:00.009-05:00

[For a very brief comment on the President’s recess appointments, click here.]

I love Iowa, although I’ve never lived there. Its unique caucus system gave Barack Obama his first real break in his uphill battle against our first serious female candidate for president.

Iowa’s Democrats had a chance to meet the President, up close in and in person. They did so with an open mind and liked what they saw. They voted their hearts, and the rest is history.

Even this week, Iowa’s Republicans made some sense. They’re not responsible for the ridiculous field that the fiends of fate handed them. Their task was to choose the lesser of evils among a passel of (mostly) utterly unqualified buffoons.

Given that awful task, they didn’t do a bad job. They preferred the button-down business downsizer with brains over the idiots. But they did so by the slimmest of possible margins: eight votes. They didn’t seem to like his flip-flopping and his apparently complete lack of any moral core.

In second place they put a man who definitely has a moral core, which he wears on both sleeves and both lapels. He’s honest, doesn’t flip-flop, and has a stable home life.

But Rick Santorum isn’t very bright, or at least his political persona isn’t. Anyone who thinks abortion and gay marriage are leading issues—at a time when eleven gravely real issues have festered for an average of at least 17.5 years, and any could undo us at any time—simply doesn’t have the basic intelligence to serve as president.

We just suffered eight years of a presidency with that sort of low intellectual wattage. It nearly destroyed us. We don’t need another.

Apparently Iowa’s Republicans split the difference: put Romney’s brains and cunning together with Santorum’s honesty and “cleanliness,” and you might actually have something. That’s what one prominent Iowa pol’s wife said; you could create a decent candidate from this abysmal field by making a chimera.

Then there’s Ron Paul. Some of his “solutions”—including no new optional wars and downsizing our military—are absolutely right and long overdue. Others—like repealing or ignoring the civil rights laws that make our ideal of equality real—are absolutely wrong and dangerous.

But by putting Paul in third place, Iowa’s Republicans recognized a basic truth: we as a nation are in deep guano. Re-arranging the deck chairs on the Titanic just won’t cut it. We need some bold, new, even radical ideas. In voting for Paul, a quarter of Iowa’s caucus-goers (mostly the young and disaffected) recognized this basic truth, as unpalatable as it may be in a peaceful, prosperous state where farming is the primary occupation and unemployment is 5.7%.

Iowa’s Republicans also did something else—no small thing, when you think about it. They disqualified candidates who had no business running for President in the first place. They relegated to the dustbin of history a world-class scoundrel, flake and troublemaker (Newt), a man so stupid he couldn’t even remember his own propaganda (Rick), and a woman who apparently thought the presidency is a place for a high-school cheerleader (Michele).

Two of these buffoons don’t yet know it, but they are all toast, thanks in part to Iowa. It’s a testament to the dysfunction and decline of our society that we had to be subjected to their random musings for several months, under the guise of “debates.” But Iowans weren’t responsible for that, any more than they will be responsible for the same sort of moronic debates continuing until lack of funds and prospects make the remaining two tire of hearing their own voices. Despite it all, Iowans did their job in helping winnow the sorry field.

Which brings me to Jon Huntsman. Being a smart man of limited political resources, he didn’t even compete in Iowa. He bided his time. And now he is going to make a credible showing, with a decent campaign, in New Hampshire, where reason and pragmatism precede the Bible as selection criteria.

A life-long Democrat, I can’t recall being as excited about a Republican presidential candidate in my 66 years.

I’m not sure why. Perhaps it’s sheer relief from seeing a real candidate among a passel of morons and scoundrels. Perhaps it’s the mystery. I don’t know much about Huntsman, and I want to know more.

Perhaps it’s hope. I have a firm conviction that China is our most important bilateral relationship. I expect it to be the world’s leading economic power before I exit this world. And here’s a Republican candidate who learned to speak fluent Mandarin and spent two years as our Ambassador to China under a Democratic president. He probably has deeper and more recent knowledge of China and the Chinese than all but a handful of so-called “China experts” in our leading universities.

And that’s not all. Alone among the presidential candidates, Huntsman has proposed cutting our big banks down to size, so they are no longer “too big to fail.” That simple structural solution would be the best way to make sure our casinos don’t blow up the world economy again, just as we are getting back on our feet.

And that’s still not all. Huntsman didn’t become our ambassador to China as an ingenue. He had five years of trade-related diplomatic experience under the two Bushes, including stints as US Trade Representative and Ambassador to Singapore. What experience could possibly be more important now, when trade in general, and trade with China and Asia in particular, will likely determine our economic future?

When you add his five years of trade-related diplomacy to two years as Ambassador to China and four years as Governor of Utah, that’s a total of eleven years of intensely relevant political and international experience. On that score Huntsman outclasses Romney’s four years as Massachusetts governor by nearly a factor of three in years alone, and infinitely in international trade expertise.

A man with that kind of résumé has got to be smart. That thought helps me answer my own question as to why he’s running now, in 2012, when his party is utterly dysfunctional and in disarray.

It’s practice. Huntsman knows he hasn’t the ghost of a chance to be the Republican nominee. He also knows that no Republican has much of a chance of winning this year. So he’s learning the ropes for a real run in 2016.

By then the economy will have had four more years to heal (if the casinos don’t blow it up again first). By then his losing party will have self-destructed in recrimination and (God willing) will have begun to reform and rebuild. From a man who spent five years learning the ropes of international trade diplomacy, we should expect no less. Unlike most Americans, he thinks long term.

So this campaign, starting in New Hampshire, is Huntsman’s opportunity to introduce himself to the nation. Against the background of buffoons, his résumé and low-key pragmatism will shine like the morning star.

Even I, a Democrat, am excited about him. If my new state allows, I might switch parties temporarily to vote for him in the Republican primary.

If worse comes to worst and the President loses, I want to be able to say that I did my best to assure us a qualified candidate on both sides. I have no fear of a challenge to the President from within his own party, or from the left. And the President doesn’t need my vote in the primary, where he will have no or token opposition, to know I support him strongly.

But I’m starting to wonder what the President and the Democrats are doing to nurture a successor on the Democratic side for 2016. Next summer’s Democratic convention, whose outcome is foreordained, would be the perfect place to introduce future Democratic presidents, just as the 2004 convention introduced the President himself. Whoever runs in 2016 will have formidable competition, in the form of a practiced and ready Huntsman, perhaps aided by a reformed and renewing opposition party.

The President’s Recess Appointments

I have one word of comment on the President’s recess appointments of Richard Cordray (to head the new Consumer Financial Protection Bureau) and three members of the National Labor Relations Board: Yes !!!!

At last the President has taken action against the obstructionism and extortion that has characterized the GOP’s approach to so-called “loyal opposition” since before his inauguration.

Why did he wait so long? Because of his superb political sensitivity. He had to wait long enough for the stupidest, laziest and most ill-informed voter to see what the GOP are up to. Now he has. The GOP have made crystal clear that they will stoop to whatever ruse they can devise—down to holding sham “sessions” of the Senate that do absolutely nothing—in order to hamstring and discredit our President and get their way.

The GOP will try to make this seem like a power play by the President. But it’s not. The power play was by bought cretins like Senator Shelby of Alabama (our first or second most backward state), who singlehandedly placed 70 “holds” on judicial and administrative appointments, including a Nobel Prize winner and Elizabeth Warren.

The President is doing what he must to restore constitutional government by the duly elected representative of all the people, namely him. If our Founders had wanted to let a single senator eviscerate the executive branch by blocking appointments of the people it needs to run, they would have said so. They didn’t. Instead, they gave the President explicit power to make appointments when the Senate is not in session. Sending senators who happen to live in or near Washington into the chamber every three days to turn on the lights and do none of the nation’s business is a sham, not a “session.”

Might the Supreme Court disagree and declare the President’s action unlawful? Possibly. This particular Court has become a political body, as much governed by precedent as was Stalin. But if it follows age-old precedent, it should duck the question as a political one for political resolution, and let the “political branches”—executive and legislative—continue to duke it out.

If the Senate as a whole—as distinguished from an individual senator or a small group—wants to block an appointment, it can do so simply, in a single hour, by convening and voting the appointment down. But the Senate cannot continually block numerous appointments, in secret and without a vote or any public accounting, at the behest of small groups of its members. The Senate must take the political heat of public, collective action if it wants to stop the executive from appointing the administrators and judges it and the judiciary need to function. What about “personal responsibility” do some senators not understand?

Under current circumstances, the President’s action is absolutely necessary for the executive branch to function. If the Supreme Court dares to overturn it, its fingerprints, not the President’s, will be all over the unrest and destruction of our democracy that follow.

permalink

Bye, Bye American Media, or Why I’m Dropping the New York Times

2012-01-01T13:22:00.005-05:00

“Bye, bye, miss American pie. Drove the Chevy to the levee but the levee was dry . . .” Don McClean

A constant, low-level theme on this blog has been the decline of our American news media. I have described the demise of the old Wall Street Journal, our absurd preference for gossip over news, and the specter of Murdoch the Antichrist behind the general decay.

But far more is going on than just Rupert. Financial and business pressures are driving good reporters and writers out of “print” journalism (which is now also on line), into tawdry tabloids, superficial video, and other less worthy pursuits. Decent news reporting, let alone thoughtful, historically accurate and well-written analysis, is a dying art. Perhaps its best practitioner today is Joe Klein of Time Magazine.

Decay is most apparent at the old Manhattan rags, the Wall Street Journal and the New York Times. They are about as impressive today as Manhattan’s cratered city streets. The Journal has morphed from a leading business newspaper into a tawdry and transparent house organ of mindless and extreme capitalism—a bizarre mirror image of the Soviets’ Pravda in its heyday. And in just the last year, the Times has begun to resemble a terminal patient on life support.

Bias and propaganda are not the only problems. Journalism is. The general level of English grammar and sentence structure is abysmal. And as for organizing a whole story in coherent and logically flowing paragraphs, fuhgeddaboutit!

In order to comment intelligently on current news, you’ve got to actually know something. But reporters’ general knowledge, too, is uniformly appalling. I still recall the young WSJ ingenue who named two nationally known law firms and an economic/antitrust consultant as lobbying firms, apparently because some of their members had been doing what seemed to her to be lobbying at the time. And then there’s the New York Times reporter who didn’t even question a fringe pol’s claim that long-time Harvard Professor Elizabeth Warren was a “carpetbagger” in Massachusetts. Apparently, this naïf didn’t even know that Harvard is in Massachusetts, or how long Warren had been there (nineteen years).

To the extent I didn’t already know it, I found the information to refute these anti-facts through Google in literally less than sixty seconds.

In an era when computers provide accurate, convenient and instantaneous memory, there is no excuse for failing to get basic facts right. If our news media spent as much time figuring out whether what they have is right, and in organizing and presenting it well, as they do in feverishly filling a supposed 24/7/365 news “void,” they might actually give us something worth reading or viewing.

And as for editors—even simple copy editors who avoid typos, mistakes and ambiguities—forget about them, too. They are either long gone, replaced by spell checkers [scroll to bottom of page and read poem]. Or apparently they are watching video games on some kind of dope.

The last straw has been the New York Times. For some reason, it gave me a temporary free pass earlier this year as it switched to a subscription model. But now it wants me to pay, at the same time as it ends a year in which it has suffered a catastrophic decline in basic quality, most probably due to lack of money and clear-eyed management.

The Times’ best columnists, Bob Herbert and Frank Rich, are gone. Gail Collins is wasting her humor on the various morons who provide increasingly dark self-parody in the Party of Extremists. Tom Friedman’s “gee whiz!” approach to the most pedestrian engineering achievements has now reached an apex of bipolar mania, as if Facebook alone could bring back our jobs and repair our broken government.

Paul Krugman is brilliant less often recently. He seems to be stuck in an intellectual “Groundhog Day,” repeatedly writing the same column—about stimulus and Keynesian economics—over and over in different words. You’d think someone with his Nobel Prize and intellectual curiosity might run some numbers on our rampant casinos and the threat they pose of another financial catastrophe. Maybe he just can’t get the data, which Geithner and the banks are mostly keeping secret. But then isn’t that a job for some enterprising investigative reporter?

As for the Times’ so-called “journalism,” decay is too weak a word. There are still a few good investigative pieces, from time to time, although running closer to three web pages each than the previous six or seven. But they’re less and less frequent and about less and less important subjects. Then, when we get a really vital report on the EU bailouts, the key sentence on banks—signifying continuing corporate welfare—is buried in the middle of a long story, disguised with a double negative to make it sound positive.

One other annoying thing about the Times: its apparent philosophy that liberal-arts majors know everything worth knowing. Not only is Tom Friedman’s utter ignorance of engineering, science and math increasingly embarrassing. Except for Paul Krugman and an occasional cameo appearance by David Leonhardt, the Times’ staff is bereft of reporters and analysts who know anything about finance, economics, or simple arithmetic, let alone how to present these subjects clearly, succinctly, with balance and without hysteria. And as for science and engineering, forget them! For readers not afraid of numbers and math, Bloomberg.com is an increasingly attractive alternative.

So there’s not much left in the New York Times to draw my loyalty as a reader. The healthy skepticism of everyone in power is gone. The sycophancy toward Wall Street is palpable. The excellence is gone. The traditional gap between the arts on the one hand and the sciences (including economics), finance and math grows larger and more important every day. Even the readers’ comments have been dumbed down in length and format; they are beginning to repeat themselves endlessly, just like the ones in the WSJ. Only mediocrity remains.

I’ve found I read the NYT less and less often now, even for free on line. So I’m going to let the paid subscription go. It’s not as if I can’t afford it; I just won’t miss it much.

And, if the truth be told, I’m sick of getting all my news from decrepit Manhattan. Not only has its near-absolute control of our politics made a mess of our nation. It’s near-absolute control of the nation’s media has dumbed us down to the point of catatonia. Manhattan’s self-evident intellectual decay and moral laxity have become our nation’s own.

So how will I get my news now? I’m making a New Year’s Resolution to be more eclectic and more international.

I’m going to get current news from various on-line sources and PBS. I’m going to continue to read the two New York-based “print” news sources that still seem able to maintain reasonable quality: Bloomberg.com, because it’s not afraid of numbers and writes stories (mostly) straight down the middle, organizing them they way a normal writer who wants readers to understand the subject quickly would, and Time Magazine, because it does the same and covers things that need covering but that the Times’ obsessive focus on the cretinous GOP horse race doesn’t leave space or energy for.

I’ve already written in praise of Bloomberg.com and Time Magazine in other contexts. I won’t repeat those points here. I would, however, note three good stories from Bloomberg.com: (1) this one on the increasingly wild volatility of our financial markets, which (mirabile dictu) has some math beyond arithmetic and reporters who actually seem to understand it, and (2) this one, which gives a balanced, unbaised and well-organized summary of the President’s foreign-policy achievements and risks, and (3) a year-end story about Treasury bond yields and returns, which provides more useful information in fewer words than almost anything in the financial press today. (Hint: it uses numbers and manages to figure out which ones are most important.)

It’s a sad day when a simple, well-organized and well-balanced story on an important subject draws particular praise. But that’s the unenviable fate of American journalism today, at least as practiced in Manhattan.

Maybe it will dawn on some enterprising journalistic hero that the Internet makes journalism possible outside the Manhattan echo chamber. Maybe some day soon our ignorant nation, which now ranks 25th among OECD countries in math education, will begin to understand the importance of math not just to science and engineering, but to economics, finance and budgeting as well. Maybe then our media will begin to hire people who can at least do arithmetic and present its results coherently. I wait with hope.

In the meantime, I’m going abroad. Years ago, I had a paper subscription to the British magazine The Economist. I’m going to resurrect it on line. I’m going to watch, listen and read the BBC much more. It enjoys the wide support of a government and people who, unlike our own, still widely credit facts and respect intelligence. For Mideast news, I’m going to start following the English-language version of Al Jazeera, a high-quality local product with an imported British journalistic tradition. And I’m going to look more at foreign news generally. For news on Russia I’m going to start reading Russian again. I hope I’ll be able to find Kommersant on line with reasonable Internet speed and a reasonable price.

So, as my title says, “Bye, Bye American Media.” It’s a big, multipolar world out there. Unlike ours, some cultures still seem to respect facts, accuracy, cogent analysis and good writing, and to take the time to get them right. Almost every other culture values math more.

I’m sure I can find those cultures. I just wish the rest of my compatriots could, too.

And wouldn’t it be wonderful if someone with brains and a conscience would start up a real American news medium outside Manhattan? Maybe closer to Asia, where all the real action now is! Maybe someone could buy the New York Times’ grand old brand, not to pillage and destroy it as Rupert did the Journal, but to turn it back into a real newspaper again.

Footnote 1: I used to love Rich’s hyperlinking every fact in his pieces to some sort of external authority. That’s what we jurists have to do every time we write a brief or a law-review article. Checking facts compulsively is not a bad discipline; it keeps you honest.

Update: 1/2/12: There is Intelligent Life on Bloomberg.com

Evidence is mounting that Bloomberg.com, alone among our daily national news media (Time Magazine is a weekly), harbors intelligent life. The latest evidence is worth special mention: a new “Sustainability” section, with contents on the home page and its own subsidiary page. The new section is separate and apart from the “Energy” section, which remains as before.

By that simple act of classification, Bloomberg.com has made a giant leap forward in American media. It has acknowledged that energy is only part of the problem of human sustainability, and that there are other aspects to energy discovery and production as well.

Why is that important? Well, a society is just like a gigantic organism. The head must turn before the body does. The head contains not only the brains, but nearly all the sensory organs, too.

When a whole society’s sensory organs—its media—insist on looking in the wrong direction, and on failing to really see what is there, the organism suffers. If the sensory misdirection goes on too long, the organism dies. Our American polity is somewhere between the first and second stages of sensory deprivation.

I can still remember standing, as a prepubertal kid, in front of the huge wall-sized map of Europe that my father used to plot troop movements during World War II and later gave me. I asked how many people lived on Earth, and he, who happened to know such things, answered “2.5 billion.”

I’m not sure what year that was, but it must have been no later than 1957. Historical estimates of global population roughly bear out that memory. In just 54 more years, our global population has nearly tripled, to 7 billion.

If nothing changes, and if we continue to find ways to drain the Earth’s resources and other species without destroying both, that number will be around twenty billion by mid-century. Nothing is more important to human survival and quality of life than preventing or reducing that further population explosion and making industrial society sustainable for those of us who remain.

So I salute Bloomberg.com, once again, for recognizing what’s important—nay, essential—and keeping to a minimum reportage of the antics of idiots, who would distract us from what really matters until it physically overwhelms us. It is now becoming clear that, just as tawdriness drives out quality, Bloomberg.com is collecting editors and journalists who still know what’s important and what quality means.

permalink

George Washington and Vladimir Putin

2011-12-30T11:44:00.002-05:00

[I hate to upstage my novel posts on Antichrists and the New York Times’ transparently yellow push for war. But this one already has waited too long after the Russian Spring.]

When I was young, Thomas Jefferson was my favorite Founder. I’m a writer’s son, and words matter to me. His glowing phrases, including “all men are created equal,” enchanted me just as they had ennobled our new nation.

But as a man, Jefferson was hardly a role model, let alone for equality. He was landed gentry, who lived for his time in extreme opulence, far beyond his means. He was a plutocrat of his day.

Despite giving us those glowing words, Jefferson kept slaves all his life. He never freed any but Sally Hemmings and her children, who we now now were his mistress and his own offspring. When he died, his great estate, his huge library, and his slaves were sold off to pay his enormous debts. Jefferson embodied the self-regard and horrible contradictions of our Southern aristocracy that still exist today.

George Washington I always took for granted. He was a man of great character and courage but few words, even fewer of which were memorable. About all we recall from his words today is his warning to beware foreign entanglements. (The famous story about the Cherry tree is now known to be a myth.)

Washington survives in deeds, not words. He was a physical giant for his time—tall, immensely strong, and later full of courage and perseverance as our leading soldier.

He was not a particularly gifted strategist. Nor had he any formal military training before taking command of our rag-tag troops. During our Revolutionary War, he left a small trail in Brooklyn unguarded. That mistake cost our forces New York City and nearly the war.

But Washington was a good leader and motivator of men, always in the thick of battle and leading the way. Our six-year War of Independence was our longest until Vietnam. Through luck and learning, he eventually led his ill-trained, ill-equipped and generally miserable troops to a miraculous victory over the Western world’s then mightiest imperial power.

Washington and his officers all held a very realistic fear of being hanged as traitors if they had lost. Cynics might say that fear motivated their legendary perseverance. But without it we would not have become a nation.

Among Washington’s greatest traits were modesty and humility. His sheer height, strength, size and dignity attracted natural obedience. After the War, so did his perseverance, motivational skill, and success in battle. Like Caesar in Shakespeare’s famous play, he could have had it all. But like the fictional Caesar, he thrice refused the offered crown.

Washington and Jefferson were both Southern landed gentry. But Washington was among the leaders of the movement to outlaw aristocracy in our Constitution. When the time came to name our supreme leader, he pushed strongly against bombastic titles and for a simple, democratic, “Mr. President.”

Most of all, Washington stepped down. After two terms as president, he could easily have had a third. His party and many of his colleagues begged him to remain in office.

He declined. It was time, he thought, to let others continue the work he had begun. And he wanted to establish a firm and healthy precedent for term limits, long before they had the force of law. A presidency for life, he thought, resembled nothing so much as monarchy, even without the title.

Washington’s healthy custom of term limits lasted a century and a half, without legal force. It held until our greatest trials since our own Civil War—the Great Depression and two mighty, globe-straddling military tyrannies. Only then did we rely on FDR for four terms, during the last of which he died exhausted. Later we put Washington’s wise term limits into our Constitution.

As Vladimir Putin juggles Russian constitutional law like so many wooden matryoshki to stay in power, it is impossible not to make invidious comparisons.

I am no Putin basher. I have studied the Russian language for exactly fifty years now. In 1993, I spent four months in Moscow as a Fulbright Fellow teaching law, in Russian, at the same educational institute that trained Putin himself. While not a recognized Russian “expert,” I know Russia far better than most Americans.

With that knowledge, I have great respect for what Putin has accomplished. He consummated Yeltsin’s incipient (and often drunken) revolution. He purged Russia of the scourge of Communism without war, bloodshed or tragic misuse of nuclear weapons. He finished removing Stalin’s barbed-wire compartments, re-established peaceful trade with Germany, and made the Russian-German corridor one of the world’s most lucrative trade routes.

While keeping tight reins on government and so suppressing other, more dangerous strongmen, Putin gave Russia’s people more personal freedom and prosperity than they had ever known. And he used Russia’s natural resources, principally oil, to reconstruct a semblance of a normal economy that seventy years of fictional economic theory had destroyed.

For all these things, Putin deserves the gratitude of the Russian people and (given Russia’s huge arsenal of nuclear weapons) the world. In terms of sheer accomplishment, he is one of the most admirable leaders on the world stage today.

But people do not age like wine. They age like eggs.

Our FDR was a rare exception. Crippled by polio in his prime, he had little to live for but his people and his nation.

FDR literally gave himself to us. Watching old newsreels of his four-term presidency is like watching one of those horror movies in which fictional zombies steal people’s souls. The cares and stress of our most consequential presidency literally sucked the life out of him. And in the end, he failed adequately to anticipate the menace of militant, international Communism—a task that fell suddenly to Harry Truman when he died.

Not one leader in a million could duplicate FDR’s feat. Maybe you had to have suffered his unique disability even to try.

Putin obviously is not the one. As a young, visionary leader, he once spoke before the Bundestag—in fluent German!—about a peaceful, prosperous realm from the Atlantic to the Urals. Now he has become cynical and vulgar. He makes crude jokes, in public, about spit for us Yanks and condoms for his own struggling people.

These jokes are not just signs of a puerile intellect once disguised by great seriousness and dedication. They are signs of an increasing cynicism, loss of idealism and arrogance of power. They are whiffs of hydrogen sulfide from the rotting eggs that most of us become as we age.

Putin now has a choice. He’s about where Mao was after unifying China and resurrecting it from the devastation of world war. He can step down and let other, newer, fresher people build on what he has done. Or, like Mao, he can create a cult of personality, prolong his personal power, and set his nation and his people back decades. If he goes down that awful path, he could even become another Antichrist.

Putin seems to know better than that. Unlike nearly all Antichrists, already he has installed a potential successor. Dmitriy Medvedev is a modest, reasonable lawyer with an apparently real penchant for modernity and the rule of law. At the least, he could make a good transitional figure. He could continue slow progress toward democracy while political parties in Russia, which are only now beginning, sort themselves out.

But Putin’s personal choice is clear and stark. He can have his bright legacy or continue his personal power. He can’t do both. The delusion that he—or any man—is indispensable will only hurt Russia.

The choice Putin makes will fix the Russian people’s immediate future. It will mold their best chance soon to shed the serfdom they have known now for a thousand years. For their sake and for ours, may he make the same wise choice that Washington once made.

permalink

The Real Antichrists

2011-12-28T08:47:00.016-05:00

[For a brief comment on yellow journalism and Iran’s threat to block the Strait of Hormuz, click here.]

Now that I’ve revealed who I am, readers good at digging on the Internet will have discovered that I’m the son of a successful storyteller. Maybe that explains my fascination with myth, despite a lifelong immersion in fact-based careers: science, engineering and law.

Myth’s enormous power for good and for ill intrigues me. The older I get, the more I believe that culture matters more than anything, including law and science. That’s one reason why I’ve written so many posts about American culture.

Culture makes law, not vice versa. And the more I think about culture, the more I believe it depends on myth. To rationalists like me, the Bible is just one long and successful myth. And it’s still a global best-seller after two millennia.

When I was growing up, writers and producers in Hollywood, most of whom were Jewish, made American myths on the big screen. I knew of them through my father. Many were refugees (or sons of refugees) from war-torn Europe or (later) from Nazism.

To a man, they loved America. They were immensely grateful just to be here, and not where they had been or their parents had come from. They painted us as a just, egalitarian society in which everyone got a fair shake eventually, and government and the law were on the common person’s side.

Of course that was a just a myth. Every non-white, female and foreign-born person of my age knows how hard we have struggled to make that myth real and how far we still have to go. But that myth fixed our society’s direction for most of my lifetime.

Today our big myths are quite different. They teach that “government is the problem” and “winner take all” will make us strong.

What a difference from my youth! Just ask yourself how many films you’ve seen in the last ten years in which a bumbling or downright evil military, FBI, or CIA was the villain, and a rogue individual cop or Green Beret with supernatural skill the hero. Such myths would have been inconceivable in the last century, when organized American government, industrial might and military power saved the world from Nazism and militant Communism.

Running a capitalist society without strong government is like running a footrace with one leg cut off. We are now in the process of discovering that truth, as formerly “backward” societies like Brazil, China and India overtake us. Even as I write this, Europe is struggling to make its government stronger, while we are still in the process of dismantling ours.

But I digress. There is a another, much darker myth abroad in the land. Today it lives mainly in an extremist underground. But properly understood and applied, it has the potential to improve the human condition. I speak of the myth of the “Antichrist.”

As a Jew and an agnostic, I don’t for a moment believe in the myth in its traditional, Christian religious raiment. I’m not an apocalyptic. As I’ve written, I’m glad we avoided earthly Armageddon in 1962, and I hope we never come as close again.

But the myth of the Antichrist is a powerful, seductive metaphor. We all know people—mostly men—who smile and put their arms around you while they stab you in the back—figuratively or literally—at the first opportunity. Sadly, most adults have met such a person at least once in their lives. When it first happens to you, it’s an eye-opening experience, one you never forget.

An Antichrist is just such a person, but one whose evil and treachery affect a whole society. In extreme cases they can ruin the whole Earth.

An Antichrist plays the common people’s friend but secretly pulls the rug out from under them, for his own or cronies’ benefit, or in pursuit of some abstract ideology or absolute power. He spouts lofty phrases of good but promotes evil. He is in league with the Devil, or—in the extreme case—is the Devil himself. His hegemony (if he achieve it) could turn the whole Earth to the Dark Side.

The traditional myth paints the Antichrist as singular. But students of history know there have been many. We all can recite the names of several just from the last century and our own time: Hitler, Stalin, Mao, Pol Pot, the ruling Kims of North Korea, the late Muammar Gaddafi, the Assad family of Syria, and Robert Mugabe. Vladimir Putin may be in the process of becoming one of them if he doesn’t soon step down.

Many of these Antichrists—notably Stalin and Mao—fit the myth almost perfectly. At first, they unified and strengthened their respective countries. They bid to raise the common person up from poverty and ignorance, at least in theory. Spouting stirring phrases of Communism, they goaded their people toward what they promised would be a new and better society. Stalin even promised a new and better human condition, a new “Soviet Man.”

Then, personifying Lord Acton’s truth that absolute power corrupts absolutely, they nearly destroyed their countries. Stalin did it with the Terror, the Gulags and his part in the mutually mindless Cold War. Mao did it with the Great Leap Forward and the Red Guards, plus the personal atrocities described by his doctor in his famous biography. Both did it with absolute centralization of power—anathema to any modern, diverse, multi-ethnic society built on business, technology and science.

Russians today still revere Stalin as a national hero and a savior of Mother Russia from German fascism. They do so although, analyzed rationally, almost every one of his policies (let alone his numerous paranoid acts) made Russia weaker and a less desirable place to live. Mao’s record in China is similar, at least after he unified it.

That’s what makes the myth of the Antichrist so powerful. It’s not the Evil alone: that’s pedestrian and mundane, an apparently irreducible part of human nature. What makes an Antichrist is the ability for a time—and sometimes a long time—to impersonate God or Christ while doing the Devil’s work. Just such men wrote the darkest parts of human history.

We know there have been Antichrists at work in the world at large. Until recently, nearly all of them have been abroad, not here at home.

But what about among us? What about the West? Do we have them, too?

Yes, we do. I would submit one name above all. And no, it’s not Dubya. He was far too much an innocent blunderer. If the truth be told, he merely completed a process set in motion by Ronald Reagan and by useful idiots like Newt Gingrich, Dick Armey and Phil Gramm. Even Bill Clinton was an unwitting accomplice to the financial deregulation that is busily destroying the West’s economies. And now Dubya is suffering a punishment to fit the crime: silently watching the country he sincerely loves decline, perhaps irrevocably, due in large measure to his own ineptness.

Nor is Karl Rove an Antichrist. He is a mere handmaiden of Evil. He missed half the myth: the veneer of good. He never pretended to have any goal but serving his masters by pandering to the basest human instincts, tribalism above all. In order to be an Antichrist, you have to have a plausible veneer of good. There is no way that Karl Rove could impersonate Christ.

No, my nominee for our Western Antichrist is someone whom most people seldom mention, except lately. He’s an old man now. His iron hand on his vast empire is weakening. But he has done more to destroy Western culture (and capitalism itself!) over the last two generations than anyone else I can name. He’s Rupert Murdoch.

Rupert fits the myth of the Antichrist almost perfectly. With his sensationalism, his gossip, his propaganda, and his daily “tit page” in the English tabloid The Sun, he put his arm around the common man and smiled. He said (and says), in effect, “I’ll give you what you want; I’ll make the ‘news’ interesting for you. And I’ll do it even if you have no interest in politics, business or anything serious.”

That’s how Rupert made himself enormously rich. He panders to humanity’s basest instincts. He serves gossip as policy, invasion of privacy as news, schadenfreude at famous people’s troubles and illnesses, and every possible disaster, foible and defect in industry and politics, no matter how minor or irrelevant. His propaganda organs make heroes of clowns like Sarah Palin, Michele Bachmann, and Rick Perry. Then they vilify, marginalize or destroy serious, dedicated people like the President, Jon Huntsman and Elizabeth Warren.

But while he’s titillating and entertaining us, Rupert has ulterior motives. He’s inculcating in us an entire world view—a gigantic myth—that is sheer fiction. He’s teaching us that democratic governments—the forces that make capitalism tolerable for the non-rich—are the common person’s enemy.

The kindly old man serving us those lovely tits daily is actually helping his cronies steal our substance, pollute our waters, poison our fish, and make the Earth’s skies look like Dickensian London. He’s working hard to return us to the hard and unenlightened times that Dickens described so well in his classics, with beggars on the streets and common folk dependent on largesse from their “betters.”

Even the few positive stories Rupert serves us are all designed to promote his own and his friends’ interests, as he sees them. He especially favors gas-driven cars (the bigger and faster the better) and fossil fuels—hence his constant denial of climate change, six years after the most prestigious bodies in the American scientific establishment confirmed it.

In Fox, Rupert has created human history’s greatest and most powerful propaganda machine. If Hitler, Goebbels, Stalin, and Mao were still alive, they could only sigh with envy at what he has wrought. None of them was smart enough to make propaganda such titillating entertainment, such fun. And none was audacious enough to try to inculcate in their victims an entire, internally consistent fictional universe, let alone throw large segments of society into a state of collective delusion.

In those feats, Rupert has become a myth-maker far more influential than Hollywood at its height. But his myths are leading us toward a very different and much darker society than the uplifting myths of my youth.

I have written a whole essay on how Rupert subverted and destroyed the Wall Street Journal, so I won’t belabor the point here. Suffice it to say that he took what was once America’s leading business newspaper (at least outside its editorial pages) and converted it into a tawdry and transparent propaganda organ, a sort of Pravda of extremist capitalism. He even took a page from the old Soviet playbook. Instead of calling his propaganda machine “truth” (pravda in Russian), he calls it “fair and balanced.” (If you actually tell the truth, you don’t have to say so; people will know. Only liars tout their own truth telling.)

Like the EU, Fox is something new under the Sun. The closest thing the human race has ever had was the emperors’ “bread and circuses” in ancient Rome as it declined. But the bread and circuses had nothing like the focus, power, nuance and dogmatic consistency of Fox. You would have to look to the Nazis or Soviets for comparison there.

No, Rupert is one of a kind. At first he seemed much like William Randolph Hearst from the last century—a man who practically single-handedly ginned up his own needless war (in Cuba and the Philippines).

But Rupert has outdone Hearst in all but Hearst’s obscenely opulent castle at San Simeon. Where Hearst was American only, Rupert sits astride most of the English speaking world, dominating media markets in his native Australia, the UK and the US. He’s now moving into India. Where Hearst was just a particularly powerful voice among many in a rich, highly competitive media market, Rupert controls one of a dying few. In most markets, his is by far the dominant voice speaking to the common person.

Most of all, Rupert has achieved a level of direct political influence that Hearst never did. The best measure of that influence is our wars in Iraq and Afghanistan, each of which Rupert supported and helped instigate, and each of which has been infinitely larger, more costly and less effective than the Spanish-American War that Hearst fomented. Rupert is indeed the Dark Prince whispering in the ears of global leaders.

With his knighthood and all the rest, Rupert has made the Dark Side respectable, just like the Antichrist. Whoever thought of granting him knighthood and American citizenship—by special act of Congress—should forever twist in purgatory.

He is a boy who, figuratively speaking, never stopped pulling the wings off flies. Today, even in his dotage, he is strong enough to pull the legs off presidents and prime ministers. One can only hope that the recent scandals and his advancing age presage the downfall of his Evil Empire.

But don’t for a moment underestimate him, even now. An Antichrist’s work is never done.

Footnote 1: No, I’m not a prude. I enjoy seeing breasts as much as any male. But their proper place in media is in art, appropriate movies and even specialized erotic publications like Playboy and Hustler. Tits are not news. Like gossip, their display in news media debases the media’s prime function of telling people what they need to know to survive and prosper in an impossibly complex and ornery world. I mention tits here only because they provide a striking visual image of Rupert’s modus operandi: distract, delude, and destroy.

Footnote 2. Sorry. I can’t bring myself to use the word “news” in the same sentence with Fox. And I can no longer use the cutesy term “Faux News” or my own “Fox Propaganda.” They trivialize the Antichrist. So I’ll just use “Fox,” which, like “the Antichrist” is sui generis and defies easy marginalization. It also reminds us that, so far, this particular Antichrist has outfoxed all the better angels of our nature.

Our Banks, Our Media, Oil and War

You would hope that the Antichrist Rupert and the greedy and stupid bankers who are doing their best to create a second Great Depression would just shut up.

But no, they still want to be heard. They now are trying to goad our exhausted military and population into a new war with Iran. And the New York Times—once a responsible newspaper—has apparently taken up the cudgel.

The reasons appear today in an article ostensibly on oil prices—a classic example of fuzzy thinking. The Times does acknowledge what has been obvious for at least 3.4 years: except for fluctuations due to recessions and maybe a new depression, the price of oil is going nowhere but steadily up. Yet the article leads with the absurd notion that a recent threat of Iran to block the Strait of Hormuz to oil traffic is to blame.

After a two-sentence lead on rising oil prices, the Times’ second paragraph states the thesis in a single sentence:

With Iran threatening to cut off about a fifth of the world’s supply of oil by closing the Strait of Hormuz and unrest in Iraq [also] endangering [the world’s oil supply] . . ., financial analysts say” that global crude oil prices “will average from $100 to $120 in 2012.”

Nowhere does it mention who these unnamed “financial analysts” are. If they are indeed financial analysts, and not energy analysts, they are probably the same greedy morons who insist that further massive gambling at our “too big to fail” casinos is essential to advance our failing economy.

The Times does report the real reasons for rising oil prices later in the same article. It notes that “Markets seemed to shrug off Iran’s threats.” Even later, on the second on-line page, it notes that economists expect oil prices to stay high “because global demand for oil—especially diesel—is escalating and outstripping supply.”

Duh! Using Economics 1A and simple arithmetic, this blogger has repeatedly predicted as much for the last 3.4 years. (See 1, 2 and 3). Sage oil analysts have been predicting Peak Oil for decades.

Now that Peak Oil has arrived—as confirmed by Exxon Mobil’s deeds, not just words— prices are going steadily up, except for brief drops occasioned by economic crashes. The reason is simple: China and India, which account for one-third of the world’s population, are just now reaching the exponential part of their middle-class growth and consequent car use. And the rest of the developing world is hard on their heels.

But some idiot bankers predict the West’s threat to boycott Iran’s oil will make things even worse in the short term. What nonsense! There will always be countries to which Iran can sell its oil. There isn’t enough oil in the world to keep prices low on today’s global market, let alone future markets with emerging economies building new cars and new roads just as fast as they can. China will probably shun any boycott, as might South Korea and Japan, because they all desperately need oil to keep their economies running, let alone advancing.

If the truth be told, the President’s quixotic effort to create a global boycott of Iran’s oil is just a ruse to reduce the pressure for war. We have to look as if we’re doing something (and everything) about Iran’s push to create nuclear weapons. But the most effective actions still are: (1) clever sabotage, including the Stuxnet virus, (2) isolating Iran from the international banking system, making it hard for Iran to purchase materials and supplies available only (or most easily) from the West, (3) pressuring Russia and China to try to prevent a conflagration in the Middle East that would ruin the global economy, and (4) preparing drones and non-nuclear missiles to destroy Iran’s nuclear facilities in the worst case.

As for Iran’s nuclear program, some day we might have to bite the bullet and accept it. The only rational use of nuclear weapons is to deter others’ first strikes and conventional invasions. (See 1 and 2.) They are not offensive weapons. They never have been used as such, even by Pakistan or North Korea’s Kims (unless you consider our own use to end the world’s most disastrous armed conflict offensive). Just like the Soviets in their day, Iran’s leaders are smart enough to know this, despite all their bluster.

And if it comes to that, a single American or Russian nuclear submarine, hiding unseen in the oceans near Iran, could utterly annihilate Iran’s major cities—Tehran, Qom, Isfahan and Masshad—in less than fifteen minutes. Israel’s air force could do the same in a bit longer time: a few hours. So if Iran’s leaders are stupid enough to waste the money, time and effort, and incur the global opprobrium, of developing nuclear weapons, the rest of the world just may have to sigh and let them.

Our choices are quite clear: (1) a totally unnecessary hot conventional war now or (2) perhaps a new cold war later. Long before Iran develops the technology to pose anywhere near the military threat that the Soviet Union once did, its present leadership will likely succumb to something like the Arab Spring, and Iran will become a much more normal country. At least old age and natural death will change the players.

Fomenting another unnecessary conventional war would only delay that process. It would be utter folly. And blaming Iran’s idle threats for the steadily rising rice of oil is as inaccurate economics as 2 + 2 = 5.

permalink

Jon Huntsman: A Good Man Ignored

2011-12-24T09:07:00.004-05:00

[For a brief note on a small ray of light in our media darkness—Time Magazine—click here.]

I don’t know much about former Utah governor Jon Huntsman. But everything I know I like.

Nearly six months ago I noted two unique things about him. First, as Obama’s former ambassador to China, he speaks fluent Mandarin. That means he can deal well with our nation’s most important business partner and rival (by far!) and the nation most likely to overtake us economically in the next two decades (earlier if the big banks blow up our economy again). It also means he can uniquely command the respect of a nation that for millennia considered itself the center of human civilization.

Second, Huntsman is a diplomat. He knows how to say things—even important things—without getting people needlessly riled up. That’s what diplomats do, and that’s apparently what Huntsman did.

Diplomats only make the news when they screw up. We never heard about Huntsman as ambassador to China. So he must have worked quietly and well, just like the President.

These things alone make Huntsman—by far—the most serious Republican as a candidate to govern our nation.

But the media ignore him because he’s a real candidate. He’s not an amusing buffoon like the succession of inexperienced, not-Romney morons whom the media have anointed as “leading” contenders so far (except for Newt, who has plenty of experience, all bad).

Now we learn a third positive thing about Huntsman, just this week. Leading Time columnist Joe Klein reported it in his personal “Teddy” (political courage) awards. First Klein praised Huntsman for believing in evolution and global warming, like all sane people but unlike nearly all of his Republican rivals. Then Klein dropped this little bombshell:

“Huntsman [has] proposed the only plan offered by any candidate, including Obama, to break up the big banks and move our economy, in the long term, back towards productive investment and away from speculation.”

One of our biggest and gravest national problems (a large part of number nine out of ten on my list) is our media. They are a joke. Recently the New York Times buried the EU’s caving to gamblers and casinos in a single sentence, with a double negative, hidden in the middle of a long story. Now we hear of Huntsman’s real solution for a very real problem in a bit of year-end fluff (although, coming from Klein, more thoughtful fluff than most).

That story was big news because Huntsman is the only serious candidate for president on the Republican side. Romney is a jerk and unelectable and, with only one gubernatorial term under his belt, would be the most inexperienced President in American history. But much more important, breaking up the big banks is the best way to stop their gambling and swindling and protect our fragile economy from the very real threat of a second Great Depression.

As every economist and antitrust lawyer knows, structural solutions are often the best way to deal with serious economic problems, especially long-term, structural ones. Cutting the big banks down to size so they are no longer “too big to fail” is a far better solution to their collective financial depredation than trying to watch their every move through multiple competing federal agencies. I have proposed specific means (which I think could be made perfectly legal) to break them up and prevent another utterly gratuitous financial catastrophe, which would make China the world’s leading economic power far ahead of its already-ambitious schedule.

So if Huntsman says “break the big banks up” and so prevent the coming second Great Depression, that’s big news that every voter should know. It’s big news even if its only effect is to drive the President and his advisors to a similar conclusion.

But would all who heard about Huntsman’s proposal before reading this post (or Klein’s “Teddy Awards” piece) please raise their hands? The media have grossly underreported this story, and Huntsman’s candidacy generally, because they are either: (1) in Wall Street’s pocket or (2) simply incompetent.

Resurrecting Time

While on the subject of our failing media, I’d like to note a rare counterexample: Time Magazine.

When I was a kid, Time was part of the old Luce media empire. It was consistently, and often stupidly, right wing, virtually a Republican house organ. I can’t remember how many times my father threatened to (or did; I don’t recall) cancel our subscription for bias in reporting.

How Time has changed! My wife has had a subscription for many years. And lately, I’ve been reading it more than usual. I’m making the transition between an obsolete netbook and a new MacBook Air. I can’t bear to risk getting food on that beautiful machine at the breakfast table. So when we recently came back from over six weeks away, I eagerly attacked our small pile of unread Times.

The collected issues had a few misses, like a shallow, cover-page psychobabble piece on anxiety. But they also had some reporting and analysis that I’d found nowhere else.

At the top of the list was a story on the success and relative moderation of Turkish president Recep Tayyip Erdogan. Coming at the national height of Fox-inspired Islamophobia and paranoia about the Arab Spring, it was a real eye-opener. A second story—equally unusual and equally important—discussed the dangerous alienation of our abused armed forces and what they face when they come home to a nation that didn’t really know it was at war. The headline read, “The Other 1%.” Time also re-introduced me to an old friend, Van Jones, who is now an organizer with Occupy Wall Street. It’s nice to know what’s happening to unafraid activists like him.

That was not all. Time has columnist Joe Klein, a superb writer and thinker. Now that Bob Herbert and Frank Rich of the New York Times have retired and Paul Krugman repeatedly writes the same column over and over again (“more stimulus!”), Klein may be the best in the business. With his honesty, his insight and his good turns of phrase, he is certainly a pleasure to read.

Finally, Time’s year-end piece, made “The Protestor,” worldwide, “Person of the Year.” That stroke of genius reflected real understanding of our zeitgeist, backed up by in-depth reporting and superior analysis.

It collected stories from the Arab Spring and all over the world. It showed how no one (perhaps outside of China) is satisfied with government. And it told how the Arab Spring’s techniques and procedures went viral globally, finding their way into some very unlikely places, including Russia and here at home.

These pieces are great journalism—fine reporting coupled with probing analysis and succinct, clear and often inspired writing. Many of them provide information that is readily available nowhere else.

Time is now on line, so I can cite and link to its superb journalism. Except for its thick year-end edition, I worry sometimes about emaciation of its weeklies. But maybe—unlike most media—when Time doesn’t have anything to say it doesn’t say it. What a concept!

So, no, unlike my late father, we won’t be canceling our subscription anytime soon. We’ll be recommending Time to friends. And I’ll be linking to it repeatedly on this blog.

Time is the best antidote to Fox. It comes in a compact and convenient weekly package. You don’t need power or long battery life to read its print version. And its good journalism just might help save our Republic. The next time you fly, buy a copy at the newsstand. It’ll give you a whole new and more accurate picture of the world out there.

permalink

The Casinos Won, so Buckle Your Seat Belts

2011-12-17T11:54:00.009-05:00

[For a 12/18/11 update on market volatility and what it means, click here.]

In an earlier post, I reasoned that nothing important has changed in finance since the Crash of 2008. We still have unrepentant casinos getting ordinary banks and investment houses to bet billions and trillions on uncertain future events.

The total tab is now around $600 trillion. That’s the amount of outstanding derivatives, most of which represent this sort of bet.

Instead of evaluating loans and investments on their business merits, as banks used to do, they now go to the casino for “risk management.” They buy “innovative” financial instruments, called “derivatives,” which are supposed to protect them against any downside. They hope to foist the real risk of their businesses onto clueless buyers, who know nothing about the banks’ businesses and do even less “due diligence” than the banks themselves do.

The sub-prime-mortgage fiasco, which caused the Crash of 2008, is just a special case of this exploding practice. So our global “financial” system has become little more than a gigantic, high stakes casino.

When you look at it closely, the casino analogy is actually quite good. The casinos are the “elite” investment banks, led by Goldman Sachs and its many spawn. The gamblers are the ordinary banks and lesser investment banks who place bets in the vain hope of gambling away the real risks of their businesses.

Remember the rule from ordinary gambling that “the house always wins”? Just so for these casinos. The’re very good at what they do, and usually they guess right. When they’re uncertain, they sell bets to gamblers on both sides and take a commission. When they’re confident but their gamblers are weak, they take collateral to make sure that losers can pay. When even the collateral fails, they get governments and taxpayers to bail them out.

So the casinos can’t lose, because they or the gamblers they fleece are “too big to fail.”

Lest you think I exaggerate, I offer three pieces of evidence, all within the last two months. In October, an obscure European bank named “Dexia” became insolvent and had to be rescued by the governments of Belgium and France. The reason: Goldman Sachs, with whom the bank had placed derivative “bets” on risky instruments, made a collateral call. Readers with good memories will recall that’s exactly what triggered the Crash of 2008: Goldman making a collateral call on companies “too big to fail,” including AIG.

In 2008 Goldman got its money, and the threatened financial system stabilized because the US Treasury bailed everyone out. This time Goldman got its collateral, and Belgium and France bailed Dexia out. But we don’t yet know the rest of the story because we don’t know how many other Dexias are out there.

My second piece of evidence came out in the New York Times last Thursday: the complete story of the debacle that was MF Global, former New Jersey Governor Jon Corzine’s baby. Anyone who invests in the markets should read this story three times and compare it with the debacles of Lehman Brothers and Bear Stearns in 2008.

The highlights are three. First, as CEO of MF Global, Corzine “pushed through a $6.3 billion bet on European debt—a wager big enough to wipe out the firm five times over if it went bad[.]” Second, the firm made the bet using an obscure form of derivative called a “repurchase-to-maturity,” which allowed the bet to be kept off the firm’s balance sheets. (The firm’s auditors, PricewaterhouseCoopers, insisted that it disclose the bet in a footnote in the annual report.) Third, “[s]ome $1 billion in customer money remains missing[,]” and thousands of clients may have lost up to a third of their money.

But here is the kicker. In testimony before Congress a week ago, Corzine had the gall to say, “There actually were no losses.” He was referring to the firm’s big debt bets, not the unexplained losses of customers’ money. Those bets had actually made money for the firm, although too late to save it. Corzine is a Goldman spawn; he used to be its co-CEO.

My third piece of evidence comes from a recent NYT story on the new EU bailout fund led by Germany’s Chancellor Merkel. The story buries the following key sentence in the middle, as if to hide it. But the sentence is so important and so troubling that it deserves highlighting:

“The [EU] leaders sent an important signal to the bond markets by scrapping a pledge to make private investors absorb losses in any future bailout for a euro nation.”

In other words, the EU and Chancellor Merkel—who I had hoped would save global finance from itself—caved in to the casinos.

That’s all I know the about EU’s apparent capitulation, just that one buried sentence. But it’s enough. Who else but a reporter from New York, the den of Wall Street, would bury it in the middle of a story and try to make it sound positive?

The bottom line is this: it’s all going to happen again. Sooner or later the whole house of cards is going to fall. Why? Three reasons.

First, no individual positioned to do anything about it cares about the big picture, and no one at all really understands it.

No politician—including the current President and the last two presidents—understands any of this. President Obama delegates to Goldman Sachs’ alumni like Tim Geithner, just as Dubya did to Hank Paulson. Bill Clinton, no doubt on the advice of similar worthies, signed into law the Gramm-Leach-Bliley Act that started the whole collapse off [search for “single event”]. And if presidents don’t understand this stuff and therefore don’t care about it, do you think anyone in Congress does?

Let’s face it. Banking is a dull business. It’s a bunch of boring numbers, without content. Even the hardiest policy wonks can fall asleep in a discussion of finance. It appeals only to greedy people for whom the fact that those numbers are dollars makes them interesting. That simple truth has allowed rogue bankers to steal the wealth of our otherwise thriving industrial economy and drive it into the ground.

As for the people making the derivative trades, they have every incentive not to understand the big picture because they are making too much money ignoring it. Willful ignorance is their modus operandi.

Second, there have been no consequences to any casino, or any big gambler for that matter. No one responsible for any losses has gone to jail. None has lost his job. After all the government bailouts, no one has even lost money. The big casinos are still running the show, and their collective tab is up to $600 trillion.

The two big SEC suits so far—against Goldman and just this week against Fanny and Freddie, are essentially suits for fraud: telling investors one thing while thinking and writing another. There have been no suits against casinos or gamblers as such. Why? Apparently because, in our fantasy world of freedom-as-license, gambling with our economy is not illegal, although it destroyed the economy once three years ago and is very likely to do so again.

Making it illegal is the job of the Dodd-Frank legislation and regulations under it. But the casinos and gamblers, using Wall Street’s control over the nation and now foreign governments, have been highly effective in watering the legislation down and diluting, delaying and avoiding regulations under it. And they haven’t yet even begun to stonewall and litigate.

By the time the legislation and regulations under it have any real teeth, the next crash likely will already have occurred. All this makes rational people envy China and its ability to rule by decree.

The only people who might have a clue about what is about to come down are Ben Bernanke and the folks at the SEC. But they are under incredible pressure not to disturb “The Markets,” which of course are just fallible human institutions, now controlled by the bankers and Wall Street. So if you think a man on a white horse is going to ride in from any direction, think again. All the gates are locked and barred.

Finally, the casinos so far have been making piles of money. Like all of their kind, the gamblers have the illusion that gambling will bring their businesses greater security. What incentive do either have to stop?

So who are the losers? Just as in Las Vegas, they are us, the rubes. Unbeknownst to them, they are also all the industrial capitalists and shareholders, whose earnings and substance are being dissipated in this orgy of gambling. In the end, they are the governments and taxpayers who bail the gamblers and casinos out in a vain attempt to keep them afloat. They are countries like Belgium, France, Greece, Iceland and their taxpayers, who bail out the losing side, while the winners count their money.

Oh, and did I forget to mention us Yanks and our drowning-in-a-bathtub government? Sorry! How quickly we forget, in our manic news cycle of irrelevancies and willful malefactors like Newt!

This is all really, really sad. Outside of rotten finance, the global economy is puttering along well. If rogue banking casinos hadn’t upset the applecart, we could be looking at a new global Golden Age, just as I speculated seven years ago. Our excellent “ABC companies,” as well as their counterparts abroad, are doing good business making real things. Even our cars are selling again.

But the bastards in finance are going to blow the whole thing up again.

The did it a little less than a century ago, kicking off the Great Depression. Our industrial economy was booming. Electric power, with all its uses in homes and industry, was just reaching it growth peak. The revolution in radio, which later would morph into television, was just beginning. But along came finance and upset the applecart. Our economy didn’t get back on track again for seventeen years.

And funny thing. The immediate trigger for the Crash of 1929 was just another so-called financial “innovation”: buying securities on margin. That “innovation” was a simple one for simple times. It was so simple that even the rubes could use it and be burned. J.P. Morgan famously said that he sold out when his cab driver started giving him stock tips.

Today’s financial “innovations”—derivatives—are infinitely more complicated, so much so that only professionals use them. But the same principles apply. The huge pyramid of derivatives, to which no one is paying any attention, is just as bound to collapse as the huge pyramid of margin sales did under margin calls in 1929—and as the pyramid of subprime-backed mortgage securities did in 2008. The play and results don’t ever change, only the names of the players and their “innovative” instruments of financial mass destruction.

So the house of cards will fall again. You can bet on it.

How certain am I? About 70%. People don’t change their behavior without consequences. And for the small clique of supremely selfish and self-confident men who’ve made themselves enormously wealthy by gambling away the substance of the West’s industry, there have been absolutely no consequences so far.

And should they expect consequences? They control or know all the right people. As “experts,” (never mind the inherent conflict of interest) they have the ear of all the West’s leaders. So where is help going to come from, outer space?

Lest readers think I’m just alarmist, I’ll mention how I saved my own retirement fund the first time around (2008). I did it with a futile search for an honest man in American finance, which I called the “Diogenes Test.” But the immediate trigger was the sudden collapse of a real estate firm in Australia, where I happened to be at the time. I sold everything.

You don’t have to rush to the exits right now. No one can tell precisely when the next crash will come. Certainly I can’t. It could come next week, next month, next year, or in two or three years.

But one thing is pretty clear right now: the global gambling won’t stop until there are really unpleasant personal consequences for the casinos and gamblers. And with the collapse of my hope that the EU would stand up, there is not the faintest sign of such consequences on the horizon, anywhere in the world. Apparently there won’t be any until after something like a replay of the Great Depression.

So I wouldn’t urge you to sell everything that might go down in value and buckle your seat belts. But that’s what I did in late 2007. And that’s what I’m doing now.

This week’s market dive was not necessarily the next crash. Most probably, it was people selling to realize year-end losses for tax purposes. Investors also want to spend time with their families during the Christmas season, without always glancing over their shoulders at volatility induced by unregulated programmed trading.

But make no mistake about it. When the next crash comes—and barring some deus ex caelo, it will come—it will be much, much worse.

Concluding Thought: Gambling is a vice. We deride it in gentle Chinese ladies playing mahjong, while we gamble away an economy based on two centuries of science, technology and industry. Gambling is tolerable only when the gambler (1) can afford it and (2) can control his/her impulses. The mahjong ladies can do both; we, apparently, can do neither.

Footnote 1: You should read the footnotes to financial statements before you read the balance sheets. Why? Because footnotes usually mean the auditors wanted something on the balance sheet that the firm under audit would rather not disclose. A footnote is the usual compromise: the law requires disclosure but doesn’t say exactly how.

Update 12/18/2011:

It’s nice when, as is happening ever more frequently these days, mainstream media corroborate my analysis within a few days of posting. That’s what happened today, when Bloomberg.com published a must-read story on volatility in the stock markets.

Two key facts were among the gems this piece revealed. First, the three-month historic measure of volatility, derived from the VIX volatility index, reached “a record 191.59 on Oct. 31, above the 92.56 median over the past decade and surpassing the prior peak of 190.44 from December 2008.” Second, the correlation of individual stocks in the S&P 500 index to the index itself last month reached 0.86, on a scale in which 1.0 would reflect perfect correlation, i.e., all stocks moving in lockstep.

This second fact means, in essence, that general economic conditions—i.e., fear of a new meltdown—drives 86% of the movement of stocks. The companies’ respective business, management, prospects and profits account for only 14%. As the story reports, even seasoned stock-pickers are complaining, because their expertise just doesn’t matter any more.

The doubling of volatility from its median over the last decade reflects the same phenomenon. In general, no company’s fortunes or real business prospects change often and rapidly enough to create that kind of volatility, which some hedge-fund managers describe as the greatest they’ve seen in their entire careers. (One hedge fund even shut down because of it.)

The only thing that can create that sort of volatility is alternating greed and fear about the general economy. In this case it’s evanescent hope for some gargantuan bailout of the casinos and gamblers (the manic phase), followed by a more realistic fear of what happens when the music stops and governments and taxpayers are asked to pick up trillions in gambling losses (the depressive phase). Get used to our new, bipolar markets.

permalink

Our Ten Grave National Problems: How Long Have they Festered?

2011-12-14T12:41:00.006-05:00

As readers of this blog know, I like to tie things together. Hyperlinks make that easier than ever before. So the list of ten grave national problems in my last post will be my mantra for the duration of this electoral season.

For the next eleven months, you can expect to see many hyperlinks to that post. I’m going to measure every candidate on a simple scale. Does he or she have serious solutions to some—or any!—of those grave problems? And does he or she have the brains, character, patience and political skill to make them work?

That’s what any rational, informed voter who wants to arrest our nation’s decline would do. Sometimes I’ll also discuss foreign policy. But, except for our endless wars, it’s not on the list. Why? Now that those endless (and needless) wars are winding down, our biggest problems are at home and of our own making.

How long have these problems festered? Here is a brief table listing the rough chronological origins of each problem and its longevity so far:

No.	Problem	“Origin”	Year	Longevity
1	Foreign Oil Dependence	Second Arab Oil Embargo	1973	38 years
2	Infrastructure Decay	Minnesota I-35W Bridge Collapse	2007	4 years
3A	Economic Inequality	Grasso Pay Controversy	2003	8 years
3B	Finance Going Rogue	Gramm, Leach, Bliley Act	1999	12 years
4	National Debt	Off-Budget Iraq War	2003	8 years
5	Public-Education Lag	Report “A Nation at Risk”	1983	28 years
6	Endless Wars	Bush Declaration	2001	10 years
7	Immigration	Immigration Reform and Control Act	1986	25 years
8	Decline of Science	Canceling Superconducting Super Collider	1993	18 years
9	Broken Government	Routine Use of Filibuster	1975	36 years
10	Global Warming	Joint National Academies’ Statement	2005	6 years

The column on problem “origin” requires some explanation. In most cases, the “origin” I have listed is not the cause or inception of the problem, but the first dramatic public notice of it. For example, our dependence on foreign oil did not begin with the Second Arab Oil Embargo of 1973, but that event made the American public—and even politicians—painfully aware of it. Likewise, the decline in our public schools did not begin with the National Commission on Education’s shocking report in 1983, but that report made the public aware that our presumed “Number One!” status was in jeopardy.

Sometimes a single event, in retrospect, appears to have been the primary cause of a problem. An example is passage of the Gramm–Leach–Bliley Act, officially known as the Financial Services Modernization Act of 1999. Financial deregulation began as early as pre-emption of state [anti-]usury laws in 1989. It continued after Gramm-Leach-Bliley, notably with the Commodity Futures Modernization Act of 2000, which deregulated most derivatives other than commodities futures sold on regulated exchanges.

But expert observers now believe that the key mistake was the 1999 Act’s partial repeal of the Glass-Steagall Act, allowing commercial banks, investment banks, and insurance companies to merge. That mistake, along with related mergers, turned venerable financial institutions like Citibank, Bank of America, Chase Manhattan Bank and the once-solid international insurer AIG into big gamblers or big casinos. That enormous change in our financial landscape, in turn, led directly to the Crash of 2008.

As for broken government, the primary cause is routine use of the filibuster, which allows the minority party to block any initiative of the majority party with a mere 41% vote in the Senate. The result is minority rule or (more accurately) minority-induced paralysis of government.

The longevity of this practice surprised even me. But the Senate has kept careful records. From 1917 through 1972, senators used the filibuster to block legislation exactly twelve times. That’s an annual average of 12/55, or less than one-quarter of a block per year! And lest you think that was a placid period, consider that it included the Great Depression, the Second World War, the civil rights movement of the 1960s, women’s liberation, and most of our highly controversial War in Vietnam.

In the 93rd Congress, 1973-1974, blocking rose to nine times, or an average of 4.5 times per year, twenty times the earlier average. From that time on, blocking never dropped below nine times per Congress, or 4.5 per year, except in the 95th Congress (1977-78), when it averaged 1.5 per year.

In the last two years of Dubya’s administration and the first two years of President Obama’s, blockage averaged 31 per year, or 142 times the average from 1917 through 1972. But the precedent for this extraordinary explosion of legislative gridlock had already been established.

In most cases, I have tried to be conservative in estimating the longevity of a problem. The extreme case is infrastructure neglect. The public first became generally aware of the problem when the I-35W bridge suddenly collapsed in Minneapolis, killing several drivers. But the decay that caused that tragedy obviously had been going on for decades, as the report of American Society of Civil Engineers reveals.

Similarly, neglect of basic science has been ongoing since the 1970s. I know this from personal experience. But notwithstanding this long-term secular decline, I have picked the much-later cancellation of the Superconducting Super Collider as the key event in our government’s turning its back on basic science. The Collider, on which we would have spent some $11 billion, would have cost less less than three months’ worth of the War in Iraq.

The problem of global warming is similar. Indicative research goes back well into the eighties, and Al Gore famously made an issue of it in the 2000 campaign. But I picked the short, Web-published statement of our own, prestigious National Academies (including the National Academy of Sciences) as a point where rational argument should have stopped. Denial after that point, by people (such as Senator Inhofe of Oklahoma) with absolutely no scientific knowledge or training, is like an illiterate Taliban fighter presuming to instruct the College of Cardinals on Catholic doctrine.

The hardest problem for which to pinpoint an “origin” was economic inequality. (That’s one reason why, in the table, I split it off from financial depravity, although lumping both together in my original list of ten.) Ordinary folks’ wages have been stagnating and CEOs’ pay skyrocketing since the late 1970s. But public awareness came only slowly. So I rather arbitrarily picked 2003.

That was the year in which Dick Grasso’s contracted-for $188 million annual pay as head of the New York Stock Exchange created huge public controversy. Grasso’s job was to be a marketer for the exchange, but his most important function was to regulate it and keep it honest. For that job, he was to earn hundreds of times what his counterparts in government (for example, the SEC) would earn. His excessive pay rapidly became an example and a metaphor for injustice then consuming our society.

No wonder plutocrats want to privatize everything! If your salary went up hundreds of times by that simple act, you’d want to privatize everything, too! But life doesn’t work that way for most of us: when things privatize, the folks at the top get more, and we get less.

Perhaps you can quibble with some of my dates of “origin,” or how much the public really knew or knows, and when. But even if you quibble in one two cases, this table amply demonstrates how long-lived our biggest problems are. None of them arose, or even first came to public notice, within the last three years.

The average longevity of the eleven problems in the table is 17.5 years—nearly a generation—with no solutions in sight! Surely we as a nation can do better than that.

By and large, our biggest problems are longstanding, of bipartisan concern, and often of bipartisan origin. That’s especially so with regard to the disastrous effects of impulsive financial deregulation. The worst legislative changes occurred on Bill Clinton’s watch, and he signed them into law.

Bill Clinton was one of the most intelligent presidents in American history. But brains alone are not enough. Finance is an obscure and esoteric field, and he was no expert. After the public recantation of the most powerful expert, Alan Greenspan, he can claim innocent ignorance.

But if the most disastrous economic mistakes in nearly a century could happen on his watch, doesn’t that argue for the caution and deliberation of an equally intelligent man like the President?

Character matters as much as intelligence does. I have seen no one in national public life since JFK to match the President’s character, prudence, deliberation and judgment. Some call him “dithering” or “weak.” But I think we’ve seen quite enough of the impulsive kind of “strength” that makes endless, unnecessary wars and the impulsive deregulation that creates wholly gratuitous financial catastrophes.

Anyway, blame is not the issue; there is plenty to go around. Since our mistakes and problems, by and large, have been bipartisan, shouldn’t both parties be looking for intelligent, pragmatic solutions, rather than placing blame? And shouldn’t we voters start thinking about who, if anyone, offers real solutions, instead of tired ideological dogma, frat-boy one-liners, and “hot button” distractions from what really matters?

Footnote 1: In 2001, shortly after 9/11, Dubya declared any nation who harbors terrorists our enemy. As I’ve pointed out at length in another post, that announcement implicitly declared war on some sixty countries, most of which were innocent and inept (like Somalia) or our ostensible allies (like Pakistan). It led directly to our now-ten-year senseless and ineffective war in Afghanistan.

Footnote 2: I and my classmates in physics graduate school got our Ph.D.s in the late sixties and early seventies, just as the bottom dropped out of federal support for basic science. Several classmates left the field of science and became lawyers (like me), a medical doctor, an investment advisor, or various administrators.

That outcome wasted the time and effort required to get a doctor’s degree in science—typically five years of study—which in my era were heavily subsidized by federal support. For example, a National Science Foundation Fellowship supported my graduate education until I began working on my thesis, after which I got other federal support for essentially full-time research work. I would rather have stayed in science—if I could have made a decent living doing so—but society pushed me (like many others) toward my choice by making a law career much more comfortable, and a career in science poor and insecure.

permalink

Why Obama Should Win (and Why I’m Donating Again)

2011-12-10T01:36:00.015-05:00

[For a brief note on my hero for today, which is uncannily apropos of the following post, click here.]

A little less than half a year ago, I wrote a post entitled “Why Obama Will Win Again (and Why I’m No Longer Donating).” That post was largely about politics, not substance.

People who are homeless, out of work, underemployed, or working harder for less may soon begin to think about substance. So may people like me, who wonder whether our precipitous national decline has an end, or whether we will soon see the banana standard replace the Stars and Stripes. In the hope that politics-as-entertainment can’t last forever, I think it’s time to remind people what’s at stake in 2012. I’ll be as brief as I know how.

Here, in rough order of importance, are real, substantive national issues that we must resolve, or at least begin resolving, if people younger than I are to have any realistic shot at a decent life in this country, let alone the “American Dream:”

1. Our oil “tax.” At present prices, we spend about $950 million per day on imported oil. That’s about $347 billion per year, or $3.47 trillion over a ten-year period. That “tax” directly affects every American. It could get dramatically higher if there’s another revolution or a war in the Middle East, or simply if the global economy recovers strongly.

2. Our decaying infrastructure. In 2009, the American Society of Civil Engineers estimated that we needed to invest $2.2 trillion [see page 7] within five years, in our infrastructure (roads, bridges, railroads, airports, and water and sewer systems) just to fix dangerous and longstanding deficiencies.

3. Our economic inequality. Virtually complete control of our finance sector by Wall Street has produced the greatest economic inequality since the Gilded Age a century ago. That inequality is in the process of destroying our productivity and our social cohesion. And Wall-Street’s stranglehold on our nation has given us a $600 trillion unregulated derivatives casino that could replay the Crash of 2008 at any moment, perhaps triggered by a sovereign default in Europe. The opposition party’s response to this risk overhang has been to filibuster a universally admired candidate (Ohio Attorney General Richard Cordray) in order to “re-litigate” the organization of a new Consumer Financial Protection Bureau as it had passed with bipartisan support last year.

4. Our national debt. The Congressional Budget Office estimates [see table page 2] that our public debt will be 73.9 percent of our GDP at the end of fiscal year 2012. If we don’t reveal a credible plan to reduce it, our credit rating will suffer and our deficit will increase with debt service. The only reason this isn’t happening right now is that much of the rest of the world, including Italy, Japan and Spain, is in as bad or worse shape.

5. Our education. Once among the best in the world, our primary system of public schools now ranks 14th among OECD countries in reading, 17th in science, and 25th in math. Our colleges and universities are daily losing ground to comparable institutions in Europe and Asia. If we don’t fix this decline quickly and decisively, nothing else will matter. We will continue to lose ground on all the rest of the problems described here, both in real terms and in comparison with competing nations.

6. Our endless wars and our alienated troops. We are winding down our eight-year war in Iraq, but we won’t wind down our ten-year war in Afghanistan for another three years. Over a hundred thousand troops will come home, many wounded, to a society of scarcity in which scoundrels will try to skimp on their dearly earned care. They will be at odds with the society they have risked all to protect, which doesn’t know what they did and didn’t share and therefore doesn’t appreciate their sacrifice. Unlike their earlier counterparts (who were drafted and therefore perhaps less qualified), these troops are overwhelmingly conservative and Christian. Some are angry, and many have good justification. If you don’t think these facts could produce social upheavals, maybe even revolution, you’d better read some history.

7. Our immigrants. We have twelve million illegal immigrants in this country. While nearly all are gainfully employed and pay taxes, they have become a political and economic football, exploited by businesses for economic advantage and by politicians for electoral advantage. Under the wrong circumstances, this national shame could produce social unrest or exacerbate an economic downturn.

8. Our decaying science establishment. We have ceded the fields of high-energy physics and human space travel to other countries. Now that the Hubble Telescope is finished, our space science is in abeyance. We have relegated most other fields of science to private industry, with its short-term profit mentality and quarterly reports. Our excellence in basic science, which helped us win World War II and made us the global leader for most of a century, is waning. Even medical science, at which we still excel, suffers budget cuts virtually every year. If we continue on this course, we will be a second-rate power in science by the end of the 2020s.

9. Our broken government. Congress isn’t working. The presidency has no power to fix the country and all power in the world to make foreign wars without anyone’s consent. Our judiciary approves rich people’s and corporations’ control over our broken political system. Our press is a joke, which no longer even tries to report and expose the things that matter, including the other problems outlined here.

10. Global warming. Meanwhile, global warming of human origin continues inexorably, without our leadership or even our participation in a solution. Extreme weather is becoming the norm. Tropical pests and diseases march relentlessly northward. And at any moment the Ross, Antarctic or Greenland Ice Sheets could shift or break, converting this vast product of human neglect from a slow-moving train wreck to an immediate catastrophe. The only reason this problem is last on the list is that we only suspect (but don’t actually know) that it could impact terribly the lives of people now living, both here and abroad. By the time we know for sure, it will be far too late.

Clever readers will note that none of these problems has anything to do with abortion, gay marriage, the Ten Commandments on courthouse lawns, the use of languages other than English in our country—or any of the other irrelevancies that demagogues have used to distract us from what really matters and win elections.

We have words for people who “hold out” for an ideal spouse. We call them “spinsters” or “bachelors.” They don’t reproduce. Recent medical research tells us that they suffer poorer health, have lower income, and die earlier than married people. The winners in the marriage game are those who pick a real spouse from real candidates and make the inevitable compromises to make their marriages work.

Just so in politics. While the right has spent the last three years bashing Obama just because he’s there (and because, you know . . .), much of the left has piled on because he’s not the ideal. If the left continues that course of action, we’ll find out what happens when an entire country becomes figurative spinsters and doesn’t reproduce.

I’m not worried for myself. I’m 66 and in comfortable retirement. By the time the shit really hits the fan, I’ll probably be dead.

But if you’re younger than I am, you have more than an even chance of finding out from personal experience what the Great Depression, Germany’s hyperinflation, or even the Russian Revolution were like. Take it from me, whose proudest vote was for Hubert Humphrey against Richard Nixon, that voting for “the lesser of two evils” is better. (Today Nixon, who proudly raised taxes and signed the Clean Air Act into law, would be far to the left of anyone running for the Republican nomination.)

And as you consider who’s the lesser of two evils, recall a few points. Mitt Romney’s last political experience, as governor of Massachusetts, ended three years ago. It constituted a single term as governor. Were Mitt elected president, that record would make him the least experienced president in American history.

President Obama had a learning curve, but he’s three years in. Do you really want a newbie with even less (and less recent) experience to be running our nation at the most critical time in our post-war history?

No doubt Mitt is a smart guy. But he’s not smart enough to see that the health-care plan he put in place in Massachusetts, which everyone acknowledges is working just fine, is a dead ringer for so-called “Obamacare.” He thinks if he lies often enough and flip-flops long enough, people will forget the truth.

Mitt’s much-lauded business experience as a consultant was mostly in downsizing failing companies. And we know he wants to downsize government; that’s his and his party’s mantra. Do we really want him to downsize our failing nation? Shall we sell off Mississippi or California?

And as for Newt, all I can say is anyone who would even think of voting for a man who kissed off his wife in the hospital where she was being treated for what turned out to be terminal cancer deserves what they get. If Newt gets the nomination, take a good, close look. Examine his wretched character, his Jupiter-sized ego, and his obnoxious smirk. Then have a nice vomit and reconsider.

As for me, I’ve started contributing again, to the campaigns of Elizabeth Warren, Senator Claire McCaskill in Missouri, and the President. I’m not doing it for me; I’m doing it for you. I have this quaint idea that, because this country has been good to me, I ought to try to leave it in better shape when I go.

I hope you’ll all do the same. But for God’s sake, don’t stay home. Just read the St. Crispin’s Day speech from Shakespeare’s Henry V (or my own modified version from 2008) and vote.

Voting is less dangerous and bloody than battle. And anyway history doesn’t reward bystanders. You wouldn’t want to say they stole your country and your birthright and you didn’t even show up. Would you? Make up your mind right now and go register, if you aren’t registered yet.

Endnote: My Hero for Today (12/12)

My hero for today is a gay, smoking Vietnam veteran named Bob Garon, from Epsom, N.H.

He’s 63, a bit younger than I. But he’s obviously just as skeptical of politics in general and Mitt Romney in particular. As reported today in a New York Times blog, Garon got Mitt Romney to admit that, because he believes marriage is “between a man and a woman,” he does not support marital benefits for gay servicemembers or veterans.

Only then did Garon reveal his own point of view. He is gay and legally married to another man under New Hampshire law. And he berated Mitt for wanting to deprive him of his constitutional rights.

If you love politics and hate what it has become here, you must read the story. Garon’s simple human dignity, in contrast to the pol’s sliminess, will make you smile, maybe even laugh out loud.

For me, it illustrated three essential truths. First, most politicians are slimy bastards, and you have to be cagey if you want to find out what they really think. In this respect Garon did better than nearly all of our media (the reporter who wrote the piece excepted), and much, much better than the spineless nebbishes who moderate so-called presidential debates.

The second truth is even more important: you can’t have it both ways. Politicians can only flip-flop, prevaricate and evade “hypotheticals” for so long. Hats off to Garon for making Mitt-the-Olympic-class-flip-flopper take a clear position on at least one issue.

The final truth is why neither Mitt nor any Republican will be elected president next year. The GOP has become a party of extremists, of all stripes, on this issue as on so many others. A healthy—and I do mean healthy—majority of Americans support the rights of Americans to marry whom they want and do what they want between the sheets. Even those who are a bit uneasy about it recognize that gay marriage won’t destroy the Republic, whereas the problems I’ve listed above might.

So no Republican can win today because he or she has to take extreme views on most issues in the primary. Then he or she must justify that miserable and all-too-recent record to the entire electorate in the general.

As Garon said to Mitt, “Good luck.” I’m still eager to see how Democratic ad makers will use that neat vignette of all Republican candidates raising their hands to oppose a budget-deficit solution with ten parts spending cuts and one part tax increases.

After Garon said he wouldn’t vote for Romney, the reporter asked him whether he agreed with Romney on any issues. “I kind of liked his health care plan in Massachusetts,” Garon said. He didn’t have to say what most New York Times readers already know: it’s much the same as the President’s plan for the nation.

God bless you, Mr. Garon. You do your state and its first primary honor, as well as your country. Merry Christmas and long life to you and your spouse! And may reporters everywhere take notice of your courage and your techniques.

permalink

My (Never-Given) Matriculation Speech

2011-12-05T20:34:00.002-05:00

[The following post may be of interest to college students. It’s a little late for matriculation, but it’s not too late for planning next semester’s courses. I wrote it and published it to a small circle a couple of years ago, and anonymity kept me from publishing it here. Here it is, with some minor updating and correction of a few errors.]

Life has many oddities, when you think about them. One of them is the so-called “commencement” speech. Colleges and universities get famous people to lecture to their students just before giving them diplomas. These leading lights are supposed to reveal their secrets―in Doug Adams’ famous words from A Hitchhiker’s Guide to the Galaxy― of “life, the universe and everything.”

Now this is more than passing strange. Young folk sitting in the audience have read thousands of pages, all assigned by their professors. They’ve done experiments in the laboratory. They’ve written essays. They’ve taken tests. If all this wasn’t supposed to teach them about life, the universe and everything, what good was it?

Maybe all those leading lights giving commencement speeches know more about life, the universe and everything than professors. That’s certainly possible. But if so, and if the kids can get what’s important out of a forty-minute commencement speech, why spend four years and incur over $100,000 in student debt? Why not just cut to the chase?

And if the commencement speech is just a good summary―a sort of Cliffnotes’ Cliffnotes―of all that came before, is it really more than a chance to practice the skill of sleeping in class without snoring?

No, I think the commencement speech is a bit of blather out of time. When students really need to know the secrets of life, the universe and everything is when they matriculate, not when they graduate. They need to know what’s really important beforehand so they can plan their schedules, their majors, their careers, and their lives. In the best of all possible worlds, the first two would match the last.

In that spirit, I’ve prepared the following matriculation speech. My credentials are simple: I’ve had three careers: physicist/geophysicist, lawyer, and law professor. So, except for investment banking, which I learned something about indirectly in my last two careers, I’ve had pretty rigorous training in all the things that our society has valued most since the last great war: science, law and commerce. If you think I’ve got my priorities wrong, then by all means, write a matriculation speech of your own.

Dear matriculants,

I call you “matriculants” both because it’s a long word and a neutral one. It might be more accurate to call you “subjects” or “victims.” But that might annoy or scare you. It’s better to use a long word that many of you will never have heard and will have to look up. Using the dictionary, whether on line or on dead trees, is a good skill in college and in life.

So, dear matriculants . . . Here’s my advice on starting college. There are only four points, so you won’t have to take detailed notes. But please remember the four and think about them.

First, you are about to enter the most intense educational experience of your life. Many of you will have gone through execrable high schools. So you won’t know what “execrable” means, and you will have trouble writing a coherent sentence, let alone an incisive paragraph. The dictionary can help with the strange word, but learning to express yourself well in writing can take a long time.

That’s one reason why college takes four years. While you think you are learning other things, what you are really learning is how great minds thought and wrote, and how to emulate them.

Colleges stow much of this lore under the general heading of “English,” although journalism and other courses teach it, too. But “English” is such a narrow, boring title. It’s also misleading. You think you already know English, right? You’ve been speaking it for most of your life.

But you don’t really know English unless you know Shakespeare’s English, the King James Bible’s English, a rapper’s English, an ad-man’s English, the President’s English, and a corporate manager’s English. And you don’t really know English unless you can take all these differing genres apart and explain why and how they differ.

Most of all, you don’t really know English unless you can tell when a speaker or writer is lying or deliberately trying to mislead you. For that, you can take clues from the speech or writing itself. But to see quickly when someone is trying to mislead you, you have to know a little of life, the universe and everything.

That’s another reason why college is so long. Context is everything. If you know little or nothing, it’s easy to lie and mislead you. The more you know, the harder it gets.

Liars usually lie about more than one thing. So the best way to identify a liar is to know lots of things. As a liar says more and more things you know are not so, you begin to lose credulity and identify the speaker as a liar or propagandist. That’s one of the most important skills that college or anyone can give you. It might even save our democracy.

How do you acquire these skills? Well, as boring as it may sound, you take courses in English. You read a lot. You write a lot. And you might consider taking a basic course in journalism, “communication,” or political science―especially one that focuses on propaganda and totalitarianism―even if those subjects don’t appeal to you in general.

So as you plan your schedules, be sure to take courses that force you to write. That’s a good strategy even if you plan to be a mathematician, scientist, engineer or dentist. You never know where life will take you, especially at your age. Good command of English is always an advantage, and poor command a disadvantage, in any occupation.

Let me give you an example. When I first started teaching law, they forced me to teach a course in beginning legal writing. I didn’t much like teaching that course―just as many of you won’t like struggling to write assigned essays. But I tried to do my best. I marked up students’ papers carefully, explained to them their many errors, and consulted personally with each student at length.

One young woman seemed pleasant, bright and earnest. But she wrote execrably. (There’s that dictionary again.) As she became frustrated with her slow progress in the course, I asked about her background. She had been an accounting major at a state university. So I asked her how much she had written in her entire college career. After some thought and some prompting from me, she came up with the answer: “four pages”—one per year.

I explained to her that, in my freshman English course in 1962, I had written ten pages every week four fourteen weeks. That was just one course, and I was a physics major. “How,” I asked her gently, “could you expect to be good at something if you never do it?” 

You can never know enough about your own language, how to use it effectively, and how others in the past have used it to ennoble or corrupt. Perfecting your language is a task that never ends. You can begin, if you don’t already know them, by looking up the words “matriculant,” “execrable,” and “credulity” and internalizing their meanings.

My second point may seem remote from the first, almost contradictory. But it isn’t. After mastering your own primary tongue, your next most important task is math. Why? Because just as English (in this country) is the language of life in general, math is the language of science (including economics), business, investing and daily commerce.

I don’t mean to imply that you are a loser and a failure if you don’t excel in math. We all know that higher math requires special aptitude. Some people have more, and some people have less. Some people have such genius that we can only view their work and minds with awe.

But whatever aptitude or skill you have in math, take it as far as it goes. You won’t know why it’s important at first, just as you won’t know at first why it’s important to read and appreciate Shakespeare. But you will with time. I guarantee it.

If you’re considering becoming a scientist, engineer, economist or financial planner, your need for math is obvious. But math goes way beyond that. If you buy a house or car on time, only math can tell you what your monthly payments will be, how much interest you will ultimately pay, and how much it helps you to pay off more quickly. If you invest in stocks, bonds or other intangibles―as more than half of Americans do today―only math can help you compare them as investments and choose the best one.

Most of all, math helps put things in perspective, even in politics. Once you’ve learned enough math, you will acquire something that people who use math a lot call “mathematical intuition.” Without actually doing calculations in detail, you will know when something doesn’t make quantitative sense.

For example, suppose a national politician rails about a ten-million-dollar waste. If you have mathematical intuition, and if you know that we have a 15 trillion dollar economy and over 14 trillion dollars of national debt, you will know that he is either (1) an idiot or (2) trying to distract your attention from something more important. And you’ll know so without even doing the arithmetic and calculating that what he is railing about amounts to less than one millionth of our national economy or national debt.

So never slight math. Take as much as you can stomach. And always seek the teachers with the best reputations for making it simple. Like sour-tasting medicine, or like “pumping iron” even after your muscles start to burn, math is good for you.

As an adjunct to math, take a course or two in economics, and make sure it has some math in it. The great economist John Maynard Keynes called economics a “dismal science.” But it is indeed a mathematical science, more so today than in his time. Every citizen should know something about economics and the mathematical logic behind it, if only to protect their own economic interests and recognize politicians’ lies.

My third point may seem in tension with my first. Take the time in college to learn a foreign language well, fluently if you can. Doing so will broaden your learning and your opportunities in life more than almost anything else you can do.

While English is everybody’s favorite second language, we who speak English as our first or only language are only about ten percent of the world’s population―one out of ten. The other nine out of ten speak, think, write and grow up with other languages.

Unless you learn another language well, you will never know how much your own language influences the way you think and feel. Every language has its own unique way of expressing certain things. Some are better, shorter or more current than others.

We Americans say “violà,” in French, because we have no similar word. The rough equivalent “behold!” is too old fashioned, and “look here!” sounds too angry or dictatorial. And we have no equivalent to the Spanish “adios!” It means “goodbye” for a long time or forever, while our single word “bye” works both for forever and a telephone call to someone about to meet you across the street.

These are just tiny, overly simple examples. But as you learn a foreign language well, you will begin to appreciate a whole new way of thinking, feeling and expressing yourself. You will absorb a new culture along with the language.

Doing that will open you up to appreciating foreigners here and abroad in whole new ways. It might also bring you a new career, a foreign place of residence, a new spouse or new set of friends. There is nothing potentially more broadening.

When you pick a foreign language to study, don’t just pick the one you think is easiest. Think strategically. More than 1.3 billion people speak Mandarin, and China is likely to become the world’s economic and technological leader in your lifetime. So don’t dismiss Mandarin just because it’s hard to learn. Also consider languages that cross national boundaries, such as Arabic, French, Portuguese, Russian and Spanish.

And if you already have a tongue other than English, think twice, maybe three times, before abandoning it in a headlong rush to become fully American. The experts say you can’t learn a language without an accent unless you start before you are eight years old. So learning a foreign language as a baby gives you a big head start over other Americans, who start in high school or college. Don’t give that advantage up without a great deal of strategic thought about your life and the state of the world. If you can, keep studying and mastering your native “second” language in college, whether or not besides another non-English tongue.

Your linguistic strategy won’t always be right, but it may lead you to strange and wonderful places. My father, a native-born American, spoke fluent German. As I was growing up, he and I always assumed that I would learn German, because it was then the language of science and I wanted to become a scientist. But in 1959, the Soviet Union launched Sputnik, and overnight Russian became the second language of science. Two years later, our public high school―which was a good one!―hired a native Russian speaker to teach it, and I began to learn.

The Cold War kept me from visiting Russia, and later I switched careers from science to law. But I had taken a course in Russian literature, in Russian, in graduate school, and I never lost my love of Russian literature and poetry. In my new law-teaching career, I got a Fulbright Fellowship and taught law in Moscow, in Russian, in 1993. There I watched the Russians shed their confining skin of Communism and create a more modern, freer society. My time there was far from a vacation, but I would not exchange those four months for any others in my life.

If you have still not taken this chance to hone your skills of sleeping in class, some of you may have noticed something strange. So far, all my advice has been about means, not ends. English is a means of communicating. Math is a means of calculating. It’s a primary subject only to mathematicians; the rest of us use it only as a tool. Foreign languages are similar; they are the equivalent of English to foreign people and a means of communicating with them.

So don’t I have any advice on “substantive” subjects, things that are not just means or process? The answer―besides touting economics as an adjunct to math―is only one.

You yourself will choose the right “substantive” courses as you explore the world of knowledge and chart your life’s course. You will know what they are. Some of them are required for your eventual goals, even in your first year.

But the subjects I have named so far―English, math with economics, and a foreign language―are fundamental. They are the basis on which you will build the rest of your life and life’s knowledge, including knowledge of whatever foreign cultures you may be thrown into. They are the foundation for everything else.

As for specific subjects, I would recommend only one: history. That advice may seem odd coming from a physicist who became a lawyer and later a law professor. It might seem odder still when I confess that I personally hated history until I was well into my advanced years. In college I tried as hard as I could to avoid it. In law school I got the worst academic grade in my life, a D, in English Legal History after I couldn’t bring myself to read the boring assigned tome.

But history is a bit like English and math. It’s a foundation. It underlies what we are today―our culture, our politics, our national preferences and our quirks. It does the same for every other people on this planet. Language alone―even a foreign language―is not enough. You cannot fully understand another people, or even your own, without knowing something about their history.

Ignoring history can be harmful to your health. We lost the War in Vietnam―and over 50,000 Americans―because we didn’t know Vietnam’s history. We didn’t understand how long its people had been hell bent on achieving independence from both China and Western colonial powers. So we didn’t see that our “domino theory,” which viewed Communism in Russia and China as a dangerous motivating force, was just a paranoid delusion. We are now having trouble in Afghanistan because we failed fully to appreciate that mountain realm’s history. Though seemingly primitive to us, it had repelled every foreign invader since Alexander the Great, including the British and the Soviets. We might have acted differently if we had understood that history better and thought longer about how we might be next.

So now, in my retirement years, I think history is one of the most important subjects and one of those most consistently undervalued in our college curricula. Fortunately for me, my childish distaste didn’t render me completely ignorant. My university forced me, like every other student, to take one course in American history and another in “institutions,” which had a lot of history in it. I’m still learning world history as I age.

Like math, history is not something you have to steep yourself in if you don’t like it. Take only as much as you can comfortably carry, and seek out professors who make it interesting and fun. But at least take one course in American history, so you can recognize present-day domestic lies, and one course in world history, so you can put your globalized world in perspective. As an American in a globalized and multipolar world, you are going to have to deal with foreigners whether you like it or not, and you might as well know something about who they are and how they got that way.

If enough of you take history seriously, it might even save your or your child’s life. There might be enough Americans who understand what really happened in the past to think twice or more before entering foreign wars rashly.

So that’s it: a matriculation sonata in four parts: English and writing, math with a bit of economics, a foreign language and history. The rest is up to you.

But don’t forget to spend enough time and college credits to learn that foreign language fluently. If you can, take a semester or year abroad to perfect your foreign-language skills. Doing so will enrich your career and your life more than you can now imagine. And finally, don’t forget to perfect your own language―English―by practicing writing and using that dictionary every chance you get.

permalink

Common Sense about Pakistan

2011-11-27T17:12:00.015-05:00

[For a brief update on electric cars and the risk of crash-induced fires in the Chevy Volt’s batteries, click here. I apologize to readers for being slow to moderate comments. I'll be back on that job December 2.]

Cyberspace is all agog over yesterday’s apparent killing of 25 Pakistani troops by American air strikes. As usual, we Yanks are aghast at a wholly predictable development.

This tragedy may not have been predictable in precise detail. But in general outline such events were not only predictable, but predicted. Nearly six months ago, I predicted a dark and prickly turn to the US/Pakistan relationship. The reason was an obvious divergence of interests.

That divergence becomes more evident every day. Our primary interest in the area is simple and limited: preventing the Af-Pak border area from becoming a launching pad for terrorist attacks against us.

Pakistan has much more complex and less limited interests. Among other things, it is caught up in a regional power struggle with some very strong neighbors, including India. It is also finding its place among the other “Stans,” including those that used to be part of the Soviet Union.

Part of its struggle (particularly regarding Kashmir) has religious roots. The British split Pakistan from India in 1947 because its Muslims did not want to live in a Hindu-majority nation. The Muslims who fled India to the new state―sometimes driven by pogroms and often bearing unspeakable hardship―were either more fearful or more committed to Islam than those who (in much larger numbers) remained in India.

This history gives Pakistan some of the tarnish of a religious state. But lest that fact evoke even more needless Islamophobia than we Yanks already suffer, I rush to qualify it.

Pakistan’s religious aspects are important but limited. They derive primarily from its origins as a state and the relatively primitive education of much of its people, especially in the tribal borderlands (inluding Baluchistan). They also derive from the extremist madrassas that the Saudi Princes have financed throughout the region. (This is by far the worst consequence of the Saudis’ Faustian bargain with extremism, which some day will destroy their own rule and perhaps take much else with it.)

But Pakistan also enjoys an overlay of modern bureaucracy, a strong but still nascent democracy, and a now-dominant professional military and intelligence culture―all derived (and well learned!) from British colonials. It is self-evidently not a theocratic state.

In these respects Pakistan in not dissimilar from Israel, although less advanced. Its modern democracy and relatively efficient military sit atop a population that, under the wrong circumstances, might support a theocratic state.

Let me remind readers than I am Jewish. As an American Jew, I have an absolute conviction that my own country handles religion the right way: no official or “established” religion, and complete freedom for every citizen to believe and worship as he or she chooses.

Our First Amendment has the best answer for a modern, pluralistic, connected world. And every successful empire in human history observed the same principles, especially the largest ones. The ancient Roman empire did. So did the Mongol Empire. China’s empires, including Mao’s, were all based on secular power and civil governance, not religion. At its height, the Islamic empire tolerated Christian and Jewish worship widely, although Islam was as much a part of the ruling class in it as Catholicism was in the Holy Roman Empire. (The Islamic empire, however, never had anything remotely resembling the Christian Inquisition. More medieval Jews were forced to recant their religion, flee or die from Christian lands than ever under the Caliphs.)

Today secular government and religious tolerance are the norms worldwide. To varying degrees they prevail in China, Europe, India, Russia and the United States. They even prevail (in somewhat diluted from) in majority-Muslim nations like Indonesia, Malaysia and Turkey.

So in this respect Israel and Pakistan are both a bit retrograde. And both have nuclear weapons. Every human on this planet has a strong interest in making sure those weapons never get used to advance religion, or because some “prophet” believes that God commands it.

I make these points simply because I have never seen them made anywhere else. But it’s important not to overemphasize them, especially in Pakistan. Pakistan’s current leaders are about as far from religious fanatics as it is possible to be. Like other leaders worldwide, they have exclusively secular goals, such as regional influence, social stability, economic advancement and national sovereignty (a key concern of any nation as young as Pakistan).

Pakistan also lives in a dangerous and still potentially unstable neighborhood. Freed by the collapse of the Soviet Union, the other “Stans,” including Afghanistan, are potential allies, potential rivals, potential trading partners and (by virtual of majority-Muslim similarity) potential partners for social and cultural exchange. Some are still ruled by tyrants and therefore sources of potential instability, including refugees from any violent change.

Pakistan’s neighborhood also has a number of powerful, stable giants (China, India, and Russia) and one not-so-stable Islamic theocracy, namely, Iran. As a young and insecure nation, Pakistan is trying to find its place among the giants, while trying to reconcile its sectarian origins and religious population with the giants’ uniformly secular norms and with Iran’s muscular theocracy.

All these things make dealing with Pakistan a diplomatic and military leader’s nightmare. They also make our stunning success in virtually dismantling Al Qaeda in the region all the more remarkable. But they make utterly quixotic any further (and perhaps more noble) ends, such as building nations or democracies.

This is where the realism comes in. We have nearly achieved our primary goal―taking down the terrorist training camps and killing or co-opting their leaders. There is virtually no chance that we can achieve broader goals at acceptable expense, whatever guilt we may feel for letting Afghanistan decay into a war-torn theocracy after our successful jihad against the Soviet Union.

So the key to wisdom here is hewing to the pragmatic. We are not in the neighborhood. We are half a world away. Very powerful nations situated much nearer―China, India and Russia―have more interest than we do in seeking stability and peaceful economic growth. They have infinitely more interest in avoiding the use of nuclear weapons, since any nuclear blast in the region would undoubtedly affect their territories and peoples directly, through radioactive fallout, refugees and all the other unintended consequences of war.

Like tyrants, great empires get pathetic in their old age. They cannot ken when it’s time to leave things to younger, closer, newer forces. Had they passed on power in their primes, Mao Zedong and Robert Mugabe would have been sung forever as national liberators, unifiers and founders of new nations. But they both nearly destroyed what they had built by holding onto absolute power far too long, far beyond their personal competence.

So it is with empires. Like the Brits before us, we Yanks have had a good run. We helped bring peace in World War I and World War II and bore the brunt of keeping the peace since then. Following the Brits’ lead, we brought the economic benefits of free markets and capitalism to most of the world. We have stood as the world’s prime example of racial equality, religious freedom, freedom of speech and human rights, although now the EU is challenging us (which is why it’s well worth preserving, whatever the Euro’s troubles). Having no colonies (we let Cuba and the Philippines go), we introduced the principles of native sovereignty.

We’ve done much that we can be proud of. But we’ve held on much too long. And in doing so, we’ve let our homeland decline to the point of embarrassment. (On my recent trip to Cataluña, for example, that part of Spain seemed like Beverly Hills compared to our aged and dilapidation Eastern cities. A US-Europe comparison used to be the other way around.)

So it’s time to let go.

Of course we need to maintain enough force in the region to be sure that terrorist camps don’t rise again. But our aerial technologies for doing so are increasing in power and accuracy daily. And this is one area in which Pakistan’s and our interests virtually converge. Might we do better in letting Pakistanis carry most of the burden, even if they don’t act as quickly and as decisively as we would like in every case?

As for the giant neighbors, their interests converge with ours almost precisely. They want what we want even more avidly because they are nearer to the possible epicenters of instability, as well as to the terrorist training camps. And their capabilities are greater because they are nearer and because they (unlike us) are not teetering on the edge of bankruptcy. So why not trust the giant neighbors more, work more closely with them, and build better relationships at the same time? The results might surprise us.

If we continue on our present course, future historians may rank us with Mao and Mugabe as having blown a promising start by holding on too long. There’s a time to build, a time to control, and a time to step back and work with others. We’re at that last stage now.

[Erratum (12/30/11): In an earlier version of this post, the following sentence was garbled by omitting the words in brackets: “At its height, the Islamic empire tolerated Christian and Jewish worship widely, although Islam was as much a part of the ruling class in it {as Catholicism was} in the Holy Roman Empire.” I regret the error.]

Yellow Journalism and Electric Cars
God, how I wish the news media would hire some reporters with engineering backgrounds. Even one or two would make the so-called “news” much better.

Today Bloomberg.com, my now-favorite source of business news, reported on a minor setback in GM’s Chevy Volt production with all the sensationalism of Hearst or Fox at their worst. “GM’s Volt Battery Fires Threaten ‘Moon Shot,’” the headline screamed.

What malarkey! The headline is absolute nonsense in two respects. First, it implies that the battery fires are regular or random occurrences. Not so. As the story itself reveals, three fires have occurred in the Volt’s lithium batteries days or hours after they were subjected to crash tests, i.e., simulated crashes. Second, referring to a remark of GM’s Volt “champion,” Bob Lutz, the headline implied that making lithium batteries work is as difficult as sending men to the Moon.

Anyone with the slightest knowledge of engineering can only shake his head. Lithium batteries aren’t rocket science. They aren’t even close. They’re matters of pedestrian engineering. They work right now, today, by the millions, in every cell phone, laptop, tablet, Prius, and other hybrid running down the road. Problems with fires after radical deceleration in crash tests (or possibly actual crashes) mean that the batteries’ interior structure and cell separation need to be more robust. Or the batteries need to be (better?) shock-mounted. Duh!

GM’s problem is purely economic. It has to fix the batteries (and possibly replace existing ones) quickly enough to avoid consumer anxiety. It needs to do so at a reasonable price, which may not be easy. And, above all, it needs to avoid a repeat of the Ford Pinto, whose rare but fatal gas-tank explosions tarnished the car’s and Ford’s public image for decades.

Can GM do this? Almost certainly, if it acts quickly and puts the right people on the job. Will it be as hard as putting men on the Moon, or getting the ill-fated Apollo 13 crew back safely? Not even remotely in the same league. GM could solve the problem right away, at least temporarily, by promising to tow any car involved in a crash and replace the battery pack free of charge.

GM’s reported solution―offering Volt owners replacement gas-driven loaner cars―is retrograde. It implies that electric cars are not a viable technology, and that GM lacks corporate commitment to them. Replacing the battery packs after crashes, however minor, would be a better solution. Likely it would be less expensive. Crashes don’t happen very often, and probably even less often to Volts. People driving a brand new, relatively expensive car with new technology tend to drive carefully.

For me, the big news in Bloomberg.com’s yellow story is that GM is now marketing the Volt in all 50 states.

So I should be able to test-drive one this year. I also plan to test-drive a Leaf if I can find one in my area. If I like one or the other, I’ll probably buy it. I’ve lusted for an electric car for most of my life, and I’m not getting any younger. I’ll worry about battery fires if I have a crash, which I don’t plan to do; then I’ll take the car in for testing. (My wife and I do plan to keep at least one of our two gas-driven Hyundais for longer trips.)

The big thing for me is not battery fires, but the Volt’s range in cold weather and the stories I’ve read that you can’t really force it to run on electricity alone, at least not when the battery is partially discharged or when accelerating on the freeway. If I can get to town and back on the battery alone, I may be satisfied.

I still want to reward stodgy old GM for being the first mover that forced all the “me, toos” (including Ford) to get off their duffs. So I’ll probably buy the Volt if I like the way it runs, even if the Leaf is fully electric, and without waiting for Ford’s all-electric Focus, which will probably debut late next year.

But GM better produce enough Volts to keep its dealers from price-gouging based on scarcity. According to the Bloomberg.com report, it plans to produce 60,000 next year. If it wants to stick to that schedule and retain the lead, it had better solve the battery-cell-matrix problem quickly. Competent engineers surely could.

[Note to readers: the shock-mounting alternative and the paragraph criticizing gas-driven loaner cars as a temporary solution were not in the original version of this post.]

permalink

Thanksgiving: A Good Day to “Come Out”

2011-11-24T05:11:00.001-05:00

Once again, I find myself abroad at Thanksgiving. In the past, that feeling has been bittersweet. There was bitterness at being far from home, mixed with the sweetness of anticipated homecoming. And―though I hate to confess it―there was sweetness also in an inbred sense of America’s global superiority.

This year much has changed. I still look forward to my return home, which will come just days after Thanksgiving. Yet the smugness of returning to an unquestionably better place has vanished utterly.

I have always been skeptical of American “exceptionalism.” Unfortunately, America today is “exceptional” in much the same sense that Mongoloid children are “exceptional.” Pride, arrogance, stubbornness, belligerence and stupidity have stained our national character as never before. It is hard to be an American abroad today without feeling a sense of shame, if only for destroying a global economy that―by our effort and under our leadership―not long ago seemed poised on the edge of a new, global Golden Age.

Nevertheless, Thanksgiving is still my favorite holiday. Unlike most other holidays at home and abroad, it celebrates no victory in war, no conquest or territorial acquisition, and no saint, miracle or religion. It recalls the simple beauty of refugees from religious and political persecution, barely surviving in what was for them a wilderness, being helped by friendly and cooperative native people.

In our very first Thanksgiving dinner, immigrant European refugees and native Americans feasted together, each learning from the other. So-called “Indians” contributed much of the food, as well as much of the know-how to grow or gather it in a harsh new land. That simple cooperation seemed to me a beautiful paradigm for inter-cultural relations. It still does.

The internment, relocation and near-genocide of our “Indians” came later. They mar the promise of that beautiful fall day considerably.

But they do not extinguish it entirely. Though tarnished, the promise of that day still shines brightly. We still are the world’s only nation―and by far the most significant major power―to be led by a member of an oppressed and once enslaved minority. We are still the nation to which many around the world seek entrance for the opportunity to live, work and prosper free from persecution based on skin color, native language, ethnicity, religion, politics, or family connections. Our “Indians” still survive, and many prosper, in a state of relative political and cultural autonomy that many oppressed minorities abroad might envy. And we all speak a common English language, with innumerable accents, including many native ones.

So in spite of our many failings, we still lift our lamp beside the golden door. In that alone, we are a luminous example.

Thus Thanksgiving still has meaning. No doubt it will as long as America (or the idea of an America) persists. Hence it’s still a good day to “come out” from behind my anonymity.

My reasons for doing so I’ve already outlined. Now that I’m fully retired from teaching (although I still profess from time to time), I have much less need to preserve my professional neutrality . In our personality-obsessed culture, anonymity seems to detract from acceptance of (and traffic to!) this blog more than I ever dreamed it would. And there is much in my background that, absent the fetters of anonymity, might enhance my credibility.

For those who hoped for some earth-shaking revelation, I apologize in advance. I am far from a household name. I’m one of those anonymous experts from the “next levels down” that I’ve described in an earlier post. I have spent a quarter century in school, have been a Woodrow Wilson National Fellow, an NSF-NATO Postdoctoral Fellow, an articles editor on the Harvard Law Review, and a Fulbright Fellow in Moscow. I've lived abroad in England and in Russia. I have visited every one of the seven continents, including Antarctica, although travel in Africa has been sparse and China remains on my list.

In my 66 years I’ve been a scientist, engineer, lawyer, and law professor. These four disparate careers give me an unusual perspective that I hope informs this blog. My last two careers―law practice and teaching―give me special insight into a society (ours) with far too many lawyers having far too much power.

And all my careers have given me an abiding respect for facts, evidence and logical deductions from both, plus a healthy skepticism of simple theory. The more you know, it seems to me, the more you come to believe that the simple abstractions our grapefruit-sized brains are capable of forming and retaining are usually misleading and often flat wrong.

Wisdom and pragmatism often abide in forsaking theory (including ideology) for facts and reality in all their complexity and detail. Fox’s cardinal sin, it seems to me, is deriving facts from opinions, rather than vice versa. That approach is very close to the clinical definition of insanity.

It may seem inconsistent with my veneration for facts, but I’m now working on my first novel. History tells us that stories (myths and fiction) can be far more influential in motivating change than fact. God knows we Americans believe many fictional things, including our own omnipotence. And God knows truth can be stranger than fiction. Who would have guessed, for example, that a blond, right-wing Norwegian, not an Arab or Muslim, would perpetrate Europe’s single greatest terrorist atrocity since the rape of Sarajevo by Christian Serbs?

My idol in this regard is Harriet Beecher Stowe, whose famous novel Lincoln credited with starting the Civil War. I am hardly presumptuous enough to compare myself with her. She probably ranks with Newton, Adam Smith, Darwin and Einstein in changing human thought and behavior. And she did it with fact-based fiction, avoiding equations and the curse of all those damned footnotes. If I can emulate her even in some minuscule way, that would sate my desire to feel a small measure of usefulness in my old age.

My name? I might as well extend the suspense a bit. Few who don’t know me already will recognize it. You can find it on my profile, and you can find a fairly complete résumé here, and a better photo and links to some of my books here. But don’t look for novels; my books to date have been dry and tedious law tomes.

In posts to come, I now can cite my background for greater credibility. I intend to emphasize my experience with and in Russia, whose language I have studied off and on for all my adult life, and whose transition away from internal terror and Communism I witnessed personally in a fellowship in Moscow in 1993, teaching in the same Institute that once educated Vladimir Putin.

But for the moment, let’s return to the bitter and the sweet. It’s sweet, I think, to “come out” now and to be free to be myself. Yet it’s bitter to do so at a time when so much is wrong in the world, and when we Americans are responsible for so much of it. As an educator, I find it particularly galling that so much of what is wrong today stems from fuzzy thinking or deliberate, self-serving nonsense that we Yanks propagate. So I intend to do what I can, in the time left to me, to set things right.

One thing I ask of readers. With my name, clever users can discover my personal e-mail address. I implore all not to use it, but to confine responses to this blog to comments on it. I pledge to be fair (albeit slow) as a moderator and post all comments that are (1) civil and (2) substantive and (3) avoid spam and abuse. Right now, further moderation of comments will have to await my return home.

permalink

Can Markets Be Wrong?

2011-11-20T07:08:00.004-05:00

Human history is a tale of the elite controlling the masses by manipulating popular belief.

In the bad old days, back before science and near-universal literacy, the priests did it. They “read” the entrails of recently slaughtered animals or the “signs” of weather. They found “meaning” in unusual movements of birds and animals. The natural world “spoke” to them in a language only they could hear.

Random natural phenomena of course didn’t “speak” intelligibly. They were ambiguous at best. They required interpretation by “experts.” And why shouldn’t the “experts” construe them as best fit their own interests, even if dimly perceived?

Ever since the days of polytheism, a priest class has been with us. Once every rock, tree or peal of thunder could become its own special god. When uncertain leaders sought guidance, priests “read” the unknown for them, and so increased their own numbers, prestige and authority.

At first they did so unconsciously. Later, after the fall of Rome, they acted quite consciously. For the better part of a millennium, the Church ruled the West as a secular power. Innovation ceased by religious command. Intellectual activity devolved into passing on the Word of Authority, in the form of beautifully illuminated manuscripts.

The people who did the utterly boring (but safe!) work of passing on the Word of the Powers that Were won refuge (in monasteries) from the ceaseless wars, famines and feudal class exploitation that had overtaken the West. It was a hard time.

We call that the Dark Ages. It ended with the rise of science, the Renaissance of human thought and the rebirth of individual initiative, along with democracy in modern form. For all the violence and tumult it caused, the Protestant movement was a key factor in that rebirth, based on each individual’s personal relationship with God and therefore individual thought and conscience.

Human history repeats itself, but never precisely the same way twice. Our modern priests wear no robes or jewels and carry no scepters. They wear business suits. The old ones we have relegated to supporting roles, teaching basic human virtues like kindness, charity, and humility.

There’s an easy way to tell who has the real power in any human society. Just look for the tallest buildings. In the Dark Ages, they were the cathedrals. Societies mired in poverty and misery spent all their meager resources building for the priests, often for decades and sometimes for centuries. In Morocco and other Islamic societies, even today, the tallest buildings (often by law) are the minarets of the mosques.

But in the West our modern cathedrals are different. They bear the names and logos of banks and insurance companies. Or, like the Empire State Building and the now-demolished Twin Towers, they served the needs of Capital without fear or favor, renting their vertical space to banks, investment banks, brokerages and real-estate offices―and their handmaidens in law and accounting.

Our high priests today are mostly anonymous. Except for minor narcissists like Donald Trump and Jamie Dimon, they work behind the scenes. But collectively they have far more power than any priest class in human history, with the possible except of the Dark Ages.

These priests rule by a sort of public oracle that has become a central institution of every advanced human society. It’s called “The Markets.”

The last few weeks have shown just have much power The Markets have. Without a shot fired, and with nary a public objection (except from the hoi palloi), they have brought down democratically elected governments in Greece and Italy. And they have done so by supporting programs of public austerity that the public universally opposes.

Think about that. Here are the remnants of ancient Greece and Rome, the seats of ancient democracy and the progenitors of modern political thought and architecture. And The Markets blew their modern remnants away like a child blowing a bubble.

What does it all mean? Well, it certainly doesn’t mean that The Markets know the way to Truth, Light and Happiness for all humanity. Alan Greenspan taught us that.

Not four years ago, Greenspan was the highest priest of The Markets, charged with supervising The Markets of the world’s largest economy. Just like the ancient world’s high priests, he commanded a combination of science and art. He ruled, mostly successfully, for decades. He understood sophisticated quantitative economic science, with all its horrendously complex computer models. And when that didn’t suffice, he ruled by the seat of his pants, using his extraordinary insight and intuition.

But as a high priest of The Markets, Greenspan had a fatal flaw. Unlike most priests―but like most scientists―he was (and is) an honest man. When the tower of cards that derivatives had created finally fell, destroying human history’s largest economy and most of the world’s with it, he recanted. The Markets, he said, don’t regulate themselves, and he was wrong in so believing.

Greenspan’s recanting was a giant milestone in human intellectual development. It didn’t take the brilliance (or the hard work) of Newton’s calculus or theory of gravitation, Darwin’s theory of evolution, or Einstein’s theories of relativity. But it took similar intellectual and moral courage. It was as if the Renaissance Pope had put his arm around Galileo and said, “You know, Gally, you’re right and I’m wrong. The Earth really does revolve around the Sun.”

But in our chattering, gossiping culture, morons like Palin, Bachmann and Perry occupy weeks of public attention. (That, too, is part of the ruling class’ plan.) So the seminal moment of Greenspan’s recanting passed without much notice. He left the stage, disgraced as a mere tool of the financial ruling class.

We should have lionized him as an intellectual hero. For he was the high priest who confessed, in effect, “Look folks, there’s no God in The Markets; there are just bankers’ self-interested hands.”

Educated people today are far too smart to believe in a personal, anthropomorphic God―one who answers their prayers and tilts this huge and impossibly complex University in their favor. Their “God” is much more abstract―a silent and largely unseen force of Reason, Order, and Truth. They can’t square their education and sophistication with the idea of an old, bearded gentleman sitting on a cloud, who gets mad at them when they don’t bend their knees or observe the proper rituals.

But at the same time, they’ll believe in the theology of Adam Smith. They think he taught that Markets are the individual Hand of God, operating invisibly and automatically for the betterment of humankind, without friction, without transaction costs, and without perceptible conscious intervention.

Voltaire would laugh out loud at this naïve faith in an invisible force making this the best of all possible worlds.

Of course this belief is nonsense. Markets are human institutions. They have leaders (or rulers, if you like accuracy). Hedge-fund managers and their banker buddies, along with their trading computers, can move hundreds of millions or trillions in minutes. They don’t have to agree or conspire because they all think alike. So when secular leaders have the temerity to question their rule or their bailouts, or their sacred status as “too big to fail,” they make The Markets dive and governments fall. Just ask Papandreou or Berlusconi.

This was not the inevitable reaction of some ineluctable celestial force. It was a conscious and deliberate international power play. Who were and are the beneficiaries? Do you really have to ask?

Are these hands behind the masks supernatural? Hardly. Are they smarter and better than the rest of us? Recent economic history suggests not.

But these new high priests of an unseen economic religion are just as powerful as ever were the Pope and Cardinals in the Dark Ages or the oracular “seers” of ancient Greece and Rome. And as we increasingly fall under their spell, forsaking science, reason and democracy, we begin to resemble history’s most dysfunctional societies. We follow them and enrich them because we believe the myths they have spawned.

Can markets be wrong? Of course they can. In an historic burst of unaccustomed honesty, the Great High Priest Greenspan told us so. But we didn’t listen.

The Markets are just our new religion, and bankers its unseen priests. They are neither honest scientists not disinterested public servants (if in fact any such exist). Like all the high priests in human history, they will run their special religion for their own enrichment and aggrandizement until the rest us―the vast majority of our sorry species―wise up.

Maybe the Chinese can help. They appear to be the only people on Earth whose leaders can still think clearly, without the taint of manipulated economic religion. But good luck in getting our Western sheep to follow China’s pragmatic and sensible lead.

permalink

Two Things You Can Do Right Now to Help Save America

2011-11-10T14:01:00.003-05:00

[NOTES TO COMMENTERS AND READERS: I am traveling and unable to devote as much time as usual to this blog. As a result, responses to comments will come out of order, and some will be delayed. I am responding to comments in the order in which I think they make points of general interest, not in the order received. Eventually I intend to respond to all, but that may take a couple of weeks.

As for finance and the stock market, I have little further to say. (See 1, 2, 3, 4, 5, 6, 7, and 8). Nothing significant about the global economy will improve until Greece defaults, the banks take a huge haircut (as Europe’s leaders have proposed), and the world’s politicians begin to unwind the monstrous global casino that international finance has become.

That process will take some time―perhaps a year or two. It will be slow, halting and painful. The slower it goes, the slower and more painful will be our global recovery.

A cure delayed is always painful. In the meantime, I recommend that readers do what I have done: assume an extremely defensive position in their personal finances, hunker down, and wait. Day traders can take their chances, but the extreme volatility we are now suffering will not relent until political and business leaders have achieved at least a weak consensus on a new direction. We are far from that day.

As for us Yanks, there is not much we can do at all. Under the “leadership” of people like Hank Paulson Tim Geithner, who have sacrificed our real economy to the most outrageously selfish, bloated and short-sighted financial sector in human history, we so far have “led” in precisely the wrong direction. The rest of the world, especially Europe, will have to throw off our dominance and seek an independent path if Western capitalism (as distinguished from Chinese capitalism) is to save itself.

So, while Europe is struggling to come to its senses and its independent voice, I will be writing mostly about how we Yanks can get our own house back in order.

That’s going to take years, if not decades. At the end we will be much diminished in wealth, power, influence and international stature. But if we are successful, we can regain our self-respect and once again earn the respect of others as a nation of good will and common sense. The short essay below is one small step in that direction, but it is directed largely to us Yanks.]

Are you worried about our nation’s future? Do your kids have less chance to make it than you did? Do you expect their standard of living to be worse than yours? Are they living at home with you while looking for low-paying jobs for which they are overqualified?

If so, you’re not alone.

And if so, there are two things you can do right now to help. They don’t involve politics, voting or supporting the Occupy Wall Street movement―although all those things can help, too. (See 1, 2, 3, 4, 5, and 6). These are things you can do easily, right now, in minutes. They will improve your life and save you money, too.

First, turn off Fox. I mean really turn it off. Take the pledge. Promise never to watch it again, anywhere, anytime, even in bars or at friends’ homes. If you have to leave, tell everyone why.

It’ll be a bit like losing weight. If you really want to lose weight, all you have to do is swear off desserts and do a bit of exercise. But I mean really swear off them. Go cold turkey. In two weeks you won’t miss them any more. Your love handles will start to shrink. And soon you’ll feel lighter, stronger, brighter, healthier and more alive.

Swearing off Fox is just like that.

I know, I know. That know-it-all self-righteousness can give you a high, a feeling of mastery over a complex and contrary world. It’s like the sugar high you get from eating rich desserts.

But in two weeks, you won’t miss it. You’ll begin to recall the difference between opinion and fact. Your brain will refill with the once-familiar idea that opinions come from facts, and not vice versa. You’ll have more time for your family and for fun. And soon you’ll feel lighter, stronger, brighter, healthier and more alive. Trust me.

The second thing you can do right now to save America is to cancel your cable TV subscription.

Doing that will actually save you money. And you won’t lose a thing. All the things you like on cable TV are now available over the Internet through services like iTunes, Netflix, Amazon Video, Hulu, IMDB and others. Best of all, you can have them for free with commercials, just as on cable TV. Or you can pay for them separately, as on iTunes or Amazon Video, and junk commercials forever, without paying for a DVR or taking the trouble to fast-forward every show.

Canceling your cable TV subscription won’t force your cable company out of business or leave you without an ISP. Why? Because your cable company is probably your ISP, too.

As more and more customers junk cable TV, it will have more resources to improve your Internet bandwith and your online experience. It may jack up your Internet pricing a bit. But it’s got a long way to go to recapture what you pay for cable TV, which is usually the same or more than you pay for Internet access.

Best of all, canceling cable TV will break you out of “audience jail.” You may not know it, but you’re in that jail right now. When you pay $50 or more every month―$600 or more per year―for cable TV, you’re paying for dozens or hundreds of channels that you never watch, likely including Fox. And if you’ve been reading the business pages lately, you know that Fox has had some high-profile brinksmanship negotiations with cable companies like Comcast. It tries (and often succeeds) to squeeze them for more money for the same old junk. Of course customers like you ultimately have to pay the increase, whether you watch Fox or not.

In that respect, Fox is like the Taliban and Islamic terrorists. It’s on the run. It’s losing customers by the bushels. More and more Americans are coming to see its leader, Rupert Murdoch, as the Australian destroyer of America―a liar, thief and scoundrel whose ruthless media prey on anyone, including kids, and promulgate any lie to keep his friends in power and make a buck.

So what does Rupert do to keep the departing customers? Does he improve his service, lower his prices, or actually become more “fair and balanced”? Hell, no. He acts like a monopolist or the titled royalty he no doubt thinks himself to be. He raises prices to cable TV systems, which made him what he is today and can just as easily break him. He’s like the Taliban blowing up yet more people when it’s under pressure and so making yet more enemies.

You can accelerate his (and Fox’s) downfall just by canceling your cable TV subscription, while keeping your Internet service. That will save you money right away. Then send an e-mail to your cable TV company saying that your canceled because you don’t want to pay for Fox.

If a marketer calls to ask why, say the same thing. But be careful. Truth can be habit forming.

And don’t worry about consequences. In two weeks, you won’t miss that snarling self-righteousness. The tone of the bully will fade from your ears and sweet reason will resume its flow through your veins. You’ll feel lighter, stronger, brighter, healthier and more alive. You might even start to believe that America has a future again.

If you like this message, send it or a link to all your friends. Post it on Facebook or Twitter. With my blessing.

permalink

Islamophobia: Three Lies

2011-11-03T11:57:00.002-04:00

Introduction
Lie 1: Islam is an inherently violent religion
Lie 2: Muslims want to establish a global Caliphate
and subject everyone to Sharia law
Lie 3: Muslims intend to establish their global Caliphate by killing or converting nonbelievers
Conclusion

Introduction

It is long past time for wise and good people everywhere to take up the struggle against Islamophobia. Islamophobia is a self-fulfilling proposition. The more people who ought to know better fear and hate Muslims, in nations whose leaders ought to demand better, the more Muslims will fear and hate them back.

Islamophobia is nothing more than primitive tribalism dressed up in fancy clothes. It’s a second cousin to racism, anti-Semitism, Hispanophobia, and all the other tribalisms that propagandists invent to subvert weak minds and keep them from seeing the theft of their liberty, livelihood and future that is going on right under their noses.

Islamophobia springs from three persistent lies. Islam, it says, is an inherently violent religion. Its adherents want to dominate the world, creating a global Islamic Caliphate and subjecting innocent Christians, Jews, Buddhists and others to medieval Sharia law. And they want to reach those goals by putting innocent nonbelievers to the sword, or by killing and terrorizing them as bin Laden and Zarkawi did.

There are indeed a few wild-eyed extremists whom these propositions describe. They include Al Qaeda and some, but not all, of the Taliban. But they are now and always have been a tiny minority of the 1.3 billion Muslims worldwide. As applied to the overwhelming majority of Muslims, none of these three propositions stands up to the slightest serious scrutiny.

Lie 1: Islam is an inherently violent religion

Islam is no more inherently violent than any other monotheistic religion. To be sure, the Qu’ran has some phrases that suggest violence as a means to political and religious ends. But in that respect how does it differ from the Old Testament?

From Cain and Abel, through Joseph’s brothers, to the innumerable incidents of “smiting,” that good Book has more than its share of violence, assassination and treachery. Its dark images of human nature are mere literary reflections of sordid but universal human impulses. In the primitive time in which the Old Testament was written, those impulses led to tragic action far more often than they do today.

The New Testament can claim a bit of difference. Jesus’ central message was one of peace. But that message was a political necessity for him in his time. He was a member of a tiny minority: a Jew in one of the farthest corners of the mighty Roman Empire. And he was starting a brand new movement that (much later) took his name as “Christianity.”

Jesus’ movement began impossibly tiny, with nothing more than twelve disciples. So he had to― and he did―keep a low profile, professing to “renders unto Caesar what is Caesar’s.” Yet the Romans treated his message and his movement as dangerously political anyway and crucified him just the same. His martyrdom spawned what was unquestionably the world’s most powerful new mass movement of any kind, until Mohamed came along.

But look what happened later to the religion that Jesus started. A schism between Catholics and Protestants incited some of the most violent and prolonged wars in human history. Like all wars, those wars had economic causes as well. But religious tribalism was a principal motivating factor for the fighting and the dying, especially among the common foot soldiers that did them.

For their times and their levels of weapons technology, those wars were some of the bloodiest in human history. They persisted in various places and in various forms for several hundred years. They persist today in the uneasy peace in Northern Ireland.

Of course those wars were part nationalistic and part political, as well as religious. But can’t we say the same today about the tensions between Sunni and Shiites? The Sunni-Shiite split was political from its very beginning, so any astute student of history can see the resemblance. Since the days of the Greek oracles, political and military leaders have always exploited and manipulated (and only rarely sincerely adopted) religion for secular political and military ends.

To an historical realist, there is very little difference between the real-world effects of the Catholic-Protestant schism in the history of Europe and the Sunni-Shiite schism in the history of the Islamic world, up to today. The only difference is the passage of time, today’s access to more fearsome weapons, and the different stages of development of Islam and of Christianity, which had a six-hundred-year head start.

And what can we say about the Crusades? To be sure, they were in part a reaction to the conquest of large parts of Southern Europe by the Islamic Empire. That was the political part. But in their pathological focus on religious images and artifacts, such as the Holy Grail, they masked a fundamental economic problem in the organization of “Western” society.

During the Crusades, the Western world was mired in feudalism. Under that hapless regime, the vast masses of “common” people, including rising classes of merchants and artisans (but very few truly educated people), labored in squalor and poverty to support largely idle landowners. To maintain their power and occupy their largely idle time, the ruling class engaged in the “sport” of war, continually training in swordsmanship, jousting, and other preparations for affaires militaires.

In other words, Western feudal society devoted a pathological share of its meager resources to arms and armies. Boys will be boys, and testosterone is the Earth’s most dangerous single substance. So all those troops, weapons and training had to be used somewhere. Better for them to be used outside of Europe, where they would do the European ruling class little harm and (for those who survived) produce tougher and better soldiers.

So the Crusades were born. They dumped all that excess military expenditure and all that dangerous testosterone onto the Islamic world. In the process they perpetrated some of the most horrendous wartime atrocities in human history, in which whole cities were butchered. This expedient nicely disposed of the Europe’s dangerous military surplus, with little direct or immediate consequence for Europe or its ruling class (except those unlucky enough not to return from the Crusades).

Under this intermittent but fierce onslaught, the great Islamic Empire slowly retreated. Once Jerusalem got “liberated” and the Empire no longer seemed a serious threat, Europe began to turn its well-trained military inward. At the same time, the Catholic-Protestant schism and rising nationalism added fuel to the fire.

The result was several hundred years of the worlds most vicious and senseless wars, fought mostly for reasons of religious and national tribalism that now seem absurd. That era culminated in the greatest war in history, which, had nuclear weapons arrived a little earlier, might have extinguished human civilization or our entire species.

Now Europe, exhausted by those wars, is at peace and trying fitfully to construct a real, diverse, and multifaceted peaceful civilization. But to say that the Islamic world is more violent, when its own wars for the past several centuries have been but pale reflections of the incomparably bloodier wars in Europe is to be ignorant of history.

No one but Europeans ever produced the industrial-scale slaughter of World War I (with machine guns and poison gas), the fire-bombings of London, Dresden and Tokyo (with civilian casualties in the hundreds of thousands in the latter cities), the nuclear incineration of Hiroshima and Nagasaki (ditto), and the death machinery of the Holocaust (with six million casualties). Those horrible episodes of human history were “innovations” of Europeans and their cultural descendants, us Yanks. Muslims had nothing to do with them.

So whose religion is more violent?

Lie 2: Muslims want to establish a Global Caliphate and subject everyone to Sharia Law

There are indeed Muslims who profess to want these things. But how numerous are they, and how representative of their faith?

You have only to look around the world for an answer. Indonesia―the most populous Islamic country on Earth―is a peaceful tropical country struggling to become a modern democracy. Ditto Malaysia. Both nations are preoccupied with economic development and their own ethnic minorities, which in Malaysia comprise 35% ethnic Chinese and 15% ethnic Indians (mostly Tamils). The half of the nation that consists of non-Muslims enjoys both economic and political freedom, while complaining noisily about affirmative action for Muslim Malays. No serious politician in either nation has even proposed implementing Sharia law nationwide, let alone has any prospect of implementing it.

Next take Turkey. It is probably the world’s most advanced Muslim nation. Why? Because Mustafa Kemal Attatürk, the founder of modern Turkey and its great leader in the last century, threw off the dead weight of backward-looking Islam in politics (without constraining the religion as such), remade its economy, military and governance under modern, secular principles, and brought Turkey into the twentieth century.

Turks are still free to practice their religion, but the nation’s thriving democracy, increasingly vibrant economy and powerful, secular army are all based on modern, universal, non-Islamic principles. Turkey has about as much chance of becoming a theocracy as Catholic France. (And as for reasonable military restraint, how else would you describe Turkey’s response to Israel’s capture of its ship on the high seas, killing several Turkish nationals?)

Most of the rest of the list is about the same. Egypt is a nascent democracy now controlled by its army, a relatively tolerant, professional and secular force in absolutely no danger of instituting Sharia law. Jordan is a Western-oriented, relatively moderate kingdom in the process of democratizing. The Gulf Emirates are much the same. Those that have oil are using its proceeds to build modern, secular societies with varying degrees of democratization. Those that don’t are trying to integrate themselves as quickly as possible into the global economy, in order to draw some trade and wealth from their oil-rich neighbors. And the sheikhs who run them have absolutely no desire to institute Sharia law, at least for themselves and their families, since they are all busy with smoking, drinking, fornicating and stealing their countries’ wealth as best they can, every time they go abroad, which they do often.

So who, if anyone, in the Islamic world is advocating Sharia law and a new global Caliphate? We know the terrorists are. But they are a tiny, tiny minority daily getting tinier under the not-so-tender ministrations of our ninjas and drones. Is there anyone else?

Yes there is. But they are all hypocrites. They keep the vision of Sharia and a new Caliphate alive to placate, suppress and oppress their own populations while they rape and rob them and keep them in ignorance and poverty. They have absolutely no desire or intention to institute Sharia law inside their own domains because, were it administered impartially, they would be its first victims. And they have even less desire (let alone plans) for global conquest.

This is the state of the mullahs in Iran, the Saudi Princes, and the ISI and some military leaders in Pakistan. All are exploiting Islamic extremists for purely secular purposes: to maintain their own political power, to suppress secular and religious democratic opposition, and to keep their presumed foreign foes off balance. For these purposes they finance and support Islamic extremists outside their borders while killing and imprisoning them inside.

How do these nations’ ruling classes use extremism? Each in its own way. The mullahs in Iran use it to keep their educated and internationalist big-city people in check. If you look into them, you will find that nearly all the stonings of adulterers and cutting off of thieves’ hands occur in the countryside, where simple country folk, often devout and fundamentalist Muslims, accept them. In the cities, where many reject this medieval primitivism, these medieval punishments are used (along with lighter punishments like caning and beating) to keep political opposition in check. The Basiji who inflict these punishments on ordinary citizens are close cousins of the Nazi Gestapo and the Soviet secret police, operating under the cover of primitive religion. Their goal is political control, not piety.

The Saudi Princes have made a very simple Faustian bargain. They permit no extremism inside their borders. But they placate (or try to) extremist mullahs and their followers by using their own oil wealth to support radical Wahhabi madrassas abroad, all around the world. Many of these schools of hate and ignorance are in Pakistan, where they indoctrinate youth in extremist ideologies and fuel the terrorism that Pakistan’s ruling class directs against India and other regional rivals.

In short, the Saudi Princes’ only significant export (besides oil) is Islamic extremism, which often produces Islamic terrorism. It was no accident that eighteen of the nineteen 9/11 hijackers were Saudi nationals.

The Saudi Princes’ gilded tyranny is probably the most tenacious and effective totalitarian regime in human history. It preserves itself by rigidly suppressing any kind of dissent at home and sometimes buying it off, as recently in the Arab Spring. At the same time it spreads extremism and terrorism like plagues, to all external parts of the globe not sufficiently healthy to be immune to them. And we, in turn, foolishly support this evil regime with our oil money, our sales of aircraft and other military supplies, and our obsequious and fawning support from our last five or more presidencies, epitomized by those wonderful photos of Dubya walking literally hand-in-hand with the late King Abdullah. We are absolutely in league with the Devil here.

There may be a few closet Islamists in Pakistan’s military or intelligence services, but their goals are purely secular. They want to harm India as revenge for the human cost of their partition. And they want to conquer Kashmir and annex it, regardless of the wishes of its rather diverse populace.

These are purely secular military and political goals. Yet because India is much larger and also has nuclear weapons, the Pakistanis cannot reach them by conventional military means. So they exploit terrorists and Islamic extremists as means to fight their traditional rival (India), to keep alive their dark dream of annexing Kashmir, and to maintain some regional influence.

Pakistan itself has a British cultural overlay, a vibrant subculture of lawyers (who marched in the streets to push out the strongman Musharraf and restore the Supreme Court), and a strong and not unprofessional military. None of these cultural factions supports Islamic extremism as a ruling philosophy or would like to institute Sharia law. But Pakistan’s military and intelligence leaders fan the flames of extremism as a means of keeping perceived foreign enemies at bay. At the same time they continue to kill extremists at home, sporadically and spasmodically, as outside the Red Mosque. In this respect, as in some others, Pakistan is a schizophrenic society, with significant elements adhering to the most cynical and primitive Macchiavellianism.

No matter how far to the left or right it may be, no rational government can tolerate random terrorism for long and survive. Nor can any rational government tolerate a brand of Islam that seeks to replace it with rule by mullahs and Sharia law. Eventually, extremists will turn on their supposed masters, and vice versa. But some governments can, for a time, delude themselves that they can exploit terrorists and extremists for domestic and international political purposes without significant long-term consequences to themselves.

That is the fantasy world in which the ruling classes of Iran, Pakistan and Saudi Arabia now live. And that is what creates uncertainty for them and their neighbors.

The future is always unclear, and the outcome of these risky strategies is uncertain. But one thing is absolutely certain: in the long run, these strategies will not end well for the people behind them. As for the rest of the Islamic world, it is in as much danger of instituting Sharia law and building a new global Caliphate as Ireland.

Lie 3: Muslims intend to establish their Global Caliphate by killing or converting nonbelievers

This lie persists despite the utter lack of any credible evidence for it in the modern world. All the “evidence” for it comes from the ancient world, i.e., the Islamic Empire that preceded the Crusades. That was six centuries ago.

People in the Dark Ages did a lot of killing, whether they were Christians or Muslims. If the truth be told, Christians probably did more killing on a per capita basis. You would think that rational people, let alone rational leaders of a democracy, would demand some current evidence of the extraordinary proposition that Muslims today kill or convert nonbelievers. But there is none.

Are there people who call themselves Muslims who support such things? Of course. But we have similar crazies inside our own society. We have people who want to nuke Iran. We have people who would like to to nuke China. We have people who want to put up tariff barriers on all Chinese goods, thereby immediately increasing the prices the vast majority of manufactures that we use here at home and sparking rampant inflation. There are even people who still want to nuke the Russians, although they have totally forsaken Communism of their own free will and haven’t been our enemies for two decades.

But do we pay any attention to these wing nuts? Do we expect our allies or even international rivals to do so? Of course not. You can do quite a good job driving yourself crazy if you take the most extreme elements in a foreign nation, project their loopy views onto the whole society, and imagine that that nation is out to get you. That is precisely what Islamophobes do.

If you look at results, i.e. actual killings, there is no evidence suggesting any organized movement, let alone a significant one, to kill or convert non-Muslims. Some Christian Copts got killed by mobs in Egypt recently. But the army and civilian leaders hardly condoned this atrocity, let alone deliberately incited it. It was an unfortunate pogrom of the type that often happens in unstable socieities, just like the murders of Alewites (minority Muslims like dictator Bashar al-Asaad) in Syria.

The last real genocide of Christians by Muslims was perpetrated by Turks against Armenians about a century ago. In the meantime we had a much larger genocide of Jews by Christian Nazis in the Holocaust, and a deliberate massacre of Muslims by Christian Serbs in Kosovo. Is there a discernible trend in these revolting episodes of human bestiality? I think not. They are random acts of evil flowing from pathological conditions at particular times and places.

The trouble with Islam is that it’s too “democratic.” Anyone can call himself an imam or mullah and set up shop as one. You don’t have to have any formal religious training whatsoever, let alone have “graduated” from a respectable Islamic center of theology.

So people like Muqtada Al-Sadr in Iraq and the recently dispatched Anwar Al-Awlaki in Yemen can call themselves mullahs and attract a “religious” following without even the acknowledgment, let alone approval, of any widely recognized religious authority. Al-Sadr relied on association with his assassinated father and uncle, who had been recognized religious leaders, and Al-Awlaki exploited his association with American mullahs and terrorists, plus his Internet notoriety. Neither had or (in Al-Sadr’s case) has any legitimate claim to religious authority.

While this state of affairs offers the potential for religious revival and renewal, it also has a big downside. It allows cranks and charlatans like bin Laden to hijack one of the world’s oldest and most venerable religions. It also allows demagogues here at home to tar a global religion as “violent” or “evil” with a semblance of credibility. Not being a Muslim myself, I hesitate to prescribe a remedy, but this is clearly a problem that begs for solution.

Several non-Muslims have been executed as such by stateless terrorists without formal political or religious authority. The most notable was Daniel Pearl, the late WSJ reporter, whom Khaled Sheikh Mohammed decapitated in Pakistan. This killer is now in our custody, and Pearl’s bereaved wife has made a personal crusade of fostering religious tolerance in her deceased husband’s name.

Yet so far as I know, not a single Christian or Jew has been executed, anywhere in the world, solely for being an unbeliever in Islam, with the official sanction or edict of any well-recognized religious or secular Islamic leader. Not one, during my entire 66 years of life.

So where does this rampant Islamophobia come from? Ask Fox.

Conclusion

When so many people believe such patent lies, you have to ask the age-old question: cui bono? Who benefits? Who gains by deluding Americans and making them fear and hate one of the world’s oldest religions, practiced by nearly one-quarter of the human race?

The first obvious beneficiary is Christian fundamentalists. It’s hard to attract people educated in a modern, scientific, secular society by denying the foundation of all modern biology (evolution), ignoring global warming as polar ice melts and the weather gets wilder worldwide, and generally acting like a “seer” of still-warm entrails from the Dark Ages. But set up fictional enemies who you claim do the very same thing and oppose yourself to them, and you’ve got a better chance at gaining a following.

Tribalism is always the last refuge of scoundrels and demagogues. It’s been a staple of vicious propaganda from the destruction of Carthage, through the Nazi Holocaust, to Nixon’s Southern Strategy and the rape of Sarajevo. It’s a little embarrassing that it’s happening so successfully in our “exceptional” nation that styles itself the foundation of Reason and modern democracy. But I guess it just shows we Yanks are human, after all.

The next class of beneficiaries is less obvious. We have a problem not dissimilar to the problem of feudal society described above. Spooked by World War II and the Cold War, we Yanks have massively over-invested in arms and armies. We spend more on “defense” than the rest of the world combined, at a time when we are nearing bankruptcy.

When you spend so much on arms, you’ve got to use them one way or another. If you don’t, they get rusty or make trouble at home.

So it’s no surprise that the country (ours) that spends the most on arms and armies started the last two big wars and kept them going for the better part of a decade. And it’s no surprise that, for a society rightly famed for social engineering and brilliant planning, our action in those wars had no discernible rational plan (1 and 2) until recently. We didn’t even have a clear idea of who our enemies were.

Is the “plan” just to keep our military “ready,” “lean and mean,” well supported, and out of domestic trouble?

I mean no disrespect to our courageous troops or their well-qualified leaders. But the simple fact is we Yanks devote an extraordinarily large (and poorly justified) fraction of our industrial output, wealth, popular culture, and politics to military affairs. When you have that large a sink of national resources devoted to arms, you need an enemy.

The Chinese are no longer our enemy. Apart from occupying Tibet and a few disputed incidents in the Spratly Islands, they have not taken any hostile external act since the end of the Vietnam War 36 years ago. And in diplomacy they go out of their way to keep a low profile, never making threats or referring (even obliquely) to the possibility of war.

We did have a real enemy in the form of Al Qaeda. It did us great damage on 9/11 and in the years leading up to that attack. But we have it on the run now. And we are on the path to defeating it economically, using ninjas and drones and supporting legitimate popular liberation movements like the Libyan rebels. All these things cost us a small fraction of what we have spent in Iraq and Afghanistan and have achieved incomparably better results in far less time.

So if you have no powerful enemy, and if you are routing the small bands of stateless terrorists that had the temerity to declare “war” on the greatest military power in human history, what do you do? You have to invent an enemy sufficiently fearsome to justify continuing your massive over-investment in arms and armies.

And what better enemy to invent than one so diffuse as militant Islam? It’s everywhere and nowhere. It’s part of a religion in which nearly one-quarter of the human race believes. It’s here at home, embodied in millions of peaceful Muslims thankful for (at last) reaching a place where they can practice their religion without fear of death or imprisonment. But how many of them are terrorists, deep in their hearts?

Islamophobia is tailor-made for those who make their living from a bloated military-industrial complex. It’s hard to refute, because terrorists do exist. It’s hard to belittle, because any domestic terrorist attack will make you seem, in retrospect, a fool or a dupe. So it’s a perfect vehicle to keep fear alive and keep the military profits and career opportunities rolling in.

In that respect, Islamophobia is much like the Red Scares of the early Cold War. Just as Joe McCarthy once accused our own State Department (without evidence but without contradiction) of harboring dozens of (never-named) Communists, fear-mongers today say that terrorists live among us in the bodies of the peaceful the Muslims down the street. And no one has the information to contradict them, or the courage to say something that eventually might turn out to be wrong.

Yet still we have to recall how the Cold War turned out. An effective and peaceful policy of deterrence avoided war for over half a century, giving the Russian people a chance to discover the nonsense of Communism and reject it of their own accord.

Much the same thing is now happening with militant Islam in the Arab Spring, which promises a decisive rejection of terrorism and an embrace of globalism throughout the Islamic world. We would be foolish indeed if we failed to catch that wave, and instead grasped the demagogues’ fear. We might bankrupt ourselves, financially and morally, just when our President has finally found an effective and quite economical strategy for fighting terrorism.

permalink

Europe’s New Bailout Plan

2011-10-30T12:36:00.005-04:00

Announced last Wednesday, the EU’s new bailout plan could be the beginning of a solution to the European debt crisis. The plan’s most important feature by far is forcing banks to take a 50% haircut on shaky Greek bonds.

The best current estimate of those bonds’ market value today is a 60% discount from their face value, for a market value of 40% of face. Early reports of the apparent deal were ambiguous. They did not make clear whether the 50% was the percentage of loss to be shared by banks and taxpayers or the percentage discount from face value (haircut) that banks would have to bear. Wednesday’s report made clear that the latter deal was in mind, making banks eat 50% of a 60% drop in face value, or 83% of the loss.

So for the first time since fall 2008, some Very Serious People want to put the lion’s share of the risk of default where it belongs: on the banks that are supposed to be experts in, and make a routine business of, assessing the risks of lending.

After all, a “bond” is just a securitized and formalized loan. And if banks aren’t good at deciding to whom to lend, at what interest rates and on what terms, what the hell good are they? If the public is to bear the loss, why shouldn’t it eliminate the middleman (banks) and fix the rates and terms through elected or appointed public officials with the public interest in mind? The idea that the public should bear the core risks of the banking business for private bankers’ benefit is nothing less than a frontal assault on the foundations of capitalism and free markets.

If implemented as reported, the EU deal could be the beginning of a solution to the central cause of the Crash of 2008 and all the angst since: a massive and systematic shift of the normal and proper risks of the banking business from banks and their “insurance” casinos (like AIG and Goldman Sachs) to governments and taxpayers.

Who is the hero (or heroine) so far? A woman―Chancellor Angela Merkel of Germany. According to reports, it was her leadership that led to putting the risk back where it belongs, on the banks, and her support that motivated expansion of the EU bailout fund to lower the risk and fear of problems in Italy, the EU’s third largest economy (after Germany and France).

France’s intrepid president, Nicolas Sarkozy, who courageously led the world in backing liberty in the form of Libyan rebels, wimped out. He would have opted to do more for the banking welfare queens. Go figure.

If nothing else, this result shows the wisdom and power of collective leadership, of the type that China has institutionalized and the EU now has in somewhat chaotic form. No single individual can be smart, wise, courageous or right all the time. So when you have good, thinking leaders of roughly equal power and influence, you can have good results in Libya and in finance, too. (We Yanks have the opposite: one good, wise leader and 535 crazed Lilliputians persistently trying to tie him down and emasculate him.)

I am working on an essay that will have much more to say about the value of collective leadership and its global progress, especially in China. But today the scoffing and jeering from American exceptionalists about Europe’s dysfunction and the EU’s imminent collapse sound hollow. Europe, unlike us, has begun to address with courage and clarity the central economic problem of our new century: rampant gambling by banks at public expense.

We are by no means out of the woods yet. The EU is indeed a congeries of separate polities, much like our own country as it struggled (briefly) under the Articles of Confederation. National approval of the announced deal and its implementation remain to be seen. The EU could backslide, or the overhang of the $600 million of outstanding derivatives could be more disastrous than anyone now expects.

But at least with Chancellor Merkel’s leadership the EU―unlike the US―has finally begun to address the central problem that led to the Crash of 2008 and all its aftermath, namely, an utterly unsustainable epidemic of reckless gambling by banks relying on implicit or explicit guarantees of governments and taxpayers to relieve them of the hazards that have been the very core of the business of banking since banking began.

permalink

A Second Great Depression

2011-10-25T12:19:00.003-04:00

Are we slip-sliding into a Second Great Depression, which would again be global but would make the current so-called “Great Recession” look like a walk in the park? The answer is by no means certain, but it’s a distinct possibility.

The problem is that all the Very Serious People (as commentator Paul Krugman calls them) are working on the wrong problem. They are all trying to patch the leaky boats of insolvent or illiquid banks.

They are doing this―or in the EU’s case, just now threatening to do it―with public money. It’s a completely haphazard exercise, quintessentially ad hoc. It’s like trying to patch a leaky hull half-buried in water with a bucket of sticky tar. You can’t really see the leaks clearly, and you have no idea where the next one will spring up.

That in itself wouldn’t be so bad if the Very Serious People knew what they are doing and had a plan. But they don’t. They’re just temporizing and hoping their bucket of tar, paid for by global taxpayers, will last at least as long as new leaks spring up.

But that’s not all. It’s not even the beginning. You see, the Very Serious People are working on stabilizing bad banks and illiquid governments, one by one, as nervous markets declare them leaky. They haven’t even begun to address the root cause of the leaks: a global epidemic of financial gambling.

As usual, numbers tell the tale (1 and 2). Take the US for example. As of the second quarter of 2011, our annualized GDP was about $15 trillion [Table 1.1.5].

Now GDP for a nation is analogous to income for an individual or corporation. But what’s the size of the economy, analogous to its total value, net worth?

For a rough estimate you can use a valuation technique that business people use every day. It’s called capitalization of earnings. You take a reasonable, current interest rate, express it as a fraction, takes its reciprocal (i.e., divide one by it) and multiply that by the income. The result is the value of an income-earning asset according to the capitalization-of-earnings method. For example, if you rent your house out at $1,000 per month, or $12,000 annually, and you consider a reasonable interest rate to be 5%, then your house, as a business asset and according to this method, is worth 20 times (1/0.05) that income, or $240,000.

Traditionally, in normal times, business people often considered ten percent a reasonable rate of return. If so, our entire economy would be worth ten times (one divided by 10%) its income, or about $150 trillion. That number seems not unreasonable, as estimates of the aggregate value of all our real property alone are in the $40 to $60 trillion range.

But these, of course, are not normal times. Interest rates are at historic lows, in the 2.5 to 3 percent range for putatively risk-free Treasury bonds. So let’s say a reasonable, risk-adjusted rate of interest today is about 4 percent, for a capitalization ratio of 25. Then our entire economy is worth $15 trillion times 25, or about $375 trillion dollars.

Now, what’s the significance of that? Well, recent reports estimate (1 and 2) the total value of outstanding derivatives in the US alone as $600 trillion dollars. In other words, the Masters of the Universe have created a highly complex and entirely imaginary financial castle in the air. And all by itself, this airy castle has an aggregate face value of the better part of twice the worth of our entire economy, i.e., close to twice our collective total net worth.

If that doesn’t scare you, you’re a better man than I am, Gunga Din. Here are all our Very Serious People, busy applying sticky tar to the leaky, underwater hull of our collective boat, while above them (and us!) looms this huge, leaky tank of water about twice the size of the boat. Talk about focusing on the wrong problem!

And Paul Krugman, despite his Nobel Prize and consistently superior writing style (in both senses of the word “superior”) is one of those Very Serious People. Ever since 2008, he has never stopped banging the drum for more stimulus and less short-term obsession over deficits. Of course he’s right: the classic Keynesian solution to every economic dip since (and including) the (First) Great Depression has been to run short-term deficits so the government can “prime the pump” and put people back to work.

But no one, including Krugman, is paying any attention to the root cause of the Crash of 2008, and the continuing cause of our global financial precariousness: gambling.

Bubbles have happened before, lots of them, ever since the Dutch tulip bubble of the seventeenth century. But we’ve never before had an entirely imaginary global financial system, amounting to nearly twice the total net worth of the world’s largest national economy, based entirely on gambling.

So this time really is different, but not on the upside. Today’s difference makes this continuing crisis much worse than anything in human history, and possibly not susceptible to any of the simple remedies, like Keynesian pump priming, that have worked before.

The various articles that, a few months ago, announced the $600 trillion derivatives overhang all said, in effect, “Don’t worry, the Very Serious People have all those derivatives under control.” But they never explained why or how. We―interested people, politicians, governments, and non-financial experts―are asked to take it all on faith. But isn’t that precisely what we were asked in 1929, in the Saving-and-Loan Crisis, and before the Crash of 2008?

Anyone who believes the Very Serious People really have an answer, let alone that it works or that they actually understand what is going on, is the veriest rube. Financial “reform” was supposed to provide some transparency in the derivatives market. But it hasn’t yet even begun. The relevant federal agencies are still writing the rules. And the people who make piles of money from these obscure and totally non-transparent markets are doing their level best to make sure that whatever rules emerge won’t hold them back a bit.

Just think, again, of the numbers. Right now, as I write this, the Very Serious Politicians in the EU are whipping themselves into a frenzy. They are stretching as hard as they can (and squeezing their taxpayers as hard as they can) to come up with a 1 trillion euro bailout fund. Converted into dollars, that’s about $1.4 trillion, give or take. How far do you think that bailout fund will go if the $600 trillion derivatives house of cards begins to collapse?

And collapse it will. It’s just a matter of time. No one is minding the store. No one, least of all the avid traders in this blackest of black markets, has any idea of the big picture. That was crystal clear in 2008, and it’s even more crystal clear today. When they say, “Don’t worry. Everything’s fine!” the translation is “Don’t bother me! I’m making my fortune, and I’m on track to have my penthouse in Manhattan, my summer home on the Riviera, and my 150-foot yacht with full crew standing by off Capri long before the whole toxic mess blows up.”

The solution is clear but radical. That whole gambling casino―derivatives, interest-rate swaps, debt-default swaps, and every other instrument (perhaps excluding simple commodities futures) that gambles on uncertain future events―has become a cancer on society. And, as the numbers above show, the tumor is now far larger than the patient.

So the only way we can possibly survive is to quarantine, separate, and excise the tumor from the real economy, and eventually outlaw all but the most demonstrably beneficial gambling instruments. Otherwise, what eventually happens to all gambling addicts will happen to us. The bet will come along that starts the $600 trillion house of cards falling, and all of us will lose. Big.

Excising the huge tumor was what I and many observers thought we were trying to do in 2008-2009. But we never followed through. The gamblers were throwing too big a party. They got us to bail them out, and then they bought us off with piles of money and deeply entrenched political power. Nothing important changed, and the casinos stayed in business. They even grew.

Now the EU’s pols are poised to do the very same thing again: bail out the casinos and gamblers, let their game go on, and hope the next Great Unraveling will occur when they are safely out of office and running global charities for the increasingly numerous victims of their folly.

What assurance do we have that the same collapse won’t happen again, much bigger this time? Absolutely none. We have strong evidence to the contrary. The collapse of Dexia is a precise mirror of the collapse of AIG here that precipitated the Crash of 2008. And the world’s chief casino, Goldman Sachs, is the same one that, by making collateral calls, helped pull the plug in both cases.

All we have is assurances of Very Serious People like Tim Geithner and the CEOs of the casinos that things are under control. If you believe them, you deserve what’s going to happen to you and yours if you don’t start preparing seriously for a Second Great Depression. And this time, like the first time, it will be absolutely global, with the possible exception of China, because there is no sign that any Very Serious Person, anywhere in the world, is wising up.

permalink

Dexia = AIG Redux, or Einstein’s Definition of Insanity

2011-10-23T13:08:00.014-04:00

[For my recent post on the Arab Spring, click here. But this one is probably just as important, that is, if you think Western economies are important.]

I don’t want to upstage my post on the Arab Spring, which is a key development in human history in its own right. But I can’t refrain from commenting on the Dexia debacle now taking place in Europe. It is proof positive that, if Europe continues on the disastrous path broken (and I do mean “broken”) by Hank Paulson and Tim Geithner, it will do nothing but flush the economies of the EU and US, and probably Japan by association, further down the drain.

The essential facts appear in a good and succinct report in the New York Times today. The report summarizes a bunch of dry banking details, but it’s only two online pages. Everyone who wonders why Western economies are in such bad shape should read it, maybe three times.

Dexia is a European bank unknown to most Americans. It is insolvent, and it owes a lot of money to American banks like Goldman Sachs and Morgan Stanley. The EU is now deciding how much its governments and taxpayers, especially those of France and Belgium, will pay Dexia and (indirectly) its creditors to bail it out.

If you’ve followed the 2008 crisis with any interest and attention, what immediately strikes you is how exact an analogue is Dexia in 2011 to the failed American insurance company AIG in 2008. And I mean exact.

Dexia was once a sleepy bank helping finance municipalities in Europe. It did what every bank has done from time immemorial. It lent them money at a certain interest rate. It tried to borrow at a lower interest rate, to make money on the spread. But the Crash of 2008 and its aftermath made interest rates volatile and uncertain.

So what did Dexia do? Did it reduce its business, seek more capital, and batten down the hatches for a coming storm, as every other capitalist in the world did (outside finance)?

Hell, no. It went straight to the casino. It bought a number of “innovative” financial-gambling vehicles, many from American companies, to “hedge” the risk of unpredictable interest rates.

Dexia’s bets weren’t very smart. It gambled that interest rates would go up. Unfortunately, as the global economy tanked and central banks began printing money furiously to prevent a global collapse, they went down. So Dexia lost big.

That, of course, was exactly what AIG had done here in the US. The only difference was that AIG had bet on ever-rising housing prices and mortgage-backed securities, and Dexia bet on ever-rising interest rates.

But that’s not all. When you gamble, the house always has an advantage. Just so with the interest-rate hedges that Goldman Sachs and other American casinos sold Dexia. Their creative financial instruments held a big trick in favor of the house: collateral. When things even began to turn against the gambler, the house could demand more collateral―as much as twice the amount of any putative loss.

That is exactly what happened, both to AIG and to Dexia. As interest rates turned south and Dexia’s balance sheet turned red, the American casinos demanded collateral, according to the fine print they themselves had written into their instruments of gambling, in order to stay safe.

And guess who was in the forefront of the demand for collateral? Goldman Sachs, the very firm whose early demand for collateral had, according to crack reporter Matt Taibbi in his now-famous book Griftopia, sunk the State of Texas and AIG, leading to the Crash of 2008.

One last thing. European governments are on the hook for much of this nonsense because they guaranteed it. That’s a bit more than on our side of the pond. Our government only made implicit guarantees of banks “too big to fail.” Europe’s guarantees were explicit and in writing. But that’s a distinction without a difference. Whether implicit or explicit, paying private bankers on all these guarantees without radical structural changes will just make another round of 2008 virtually inevitable. Crash of 2014, anyone?

Einstein’s definition of insanity is doing the same thing over and over again and expecting different results. The Russians have a similar proverb. If you step on the short end (the tines) of a rake, and the handle comes up and bonks you in the head, you should learn. That should only happen once. If it happens more than once, you’re either careless or pretty stupid. If it happens three times, no one is going to hire you for anything other than menial labor.

Well, after watching the US do it, all of Europe is about to step on the rake’s tines a second time. All we here across the pond can do is watch in utter horror. And China, which has all its banks under pretty firm control, is smiling and waiting to pick up the pieces.

The bankers say there is no alternative. They would, wouldn’t they? Bail us out and let us keep all our power and our perks and continue gambling with your money, they say, or the whole system will collapse.

No, it won’t. Not if we bail out the innocent parties and let the gamblers and swindlers, or at least the casinos, fail.

The solution is radical but simple. The global financial system―not capitalism itself―is badly and plainly broken, So bail out its innocent victims but let it die.

That’s precisely what we did during the Great Depression. We bailed out depositors and other innocent creditors and let government take over the failed banks. That’s what the FDIC still does with failed retail banks. But the really big banks, which are now also investment banks and casinos (thanks to repeal of Glass-Steagall), have managed to win themselves immunity by infiltrating every level of government from here to Brussels.

The banking system is much more complicated now that it has become a nexus of interlocked casinos. But the principle is still the same. Bail out individual depositors (but not traders!), no matter how rich, and any firm with a legitimate non-financial business, but only to the extent of that business. Then let the whole global financial casino go through an extended, specially structured bankruptcy proceeding to see which croupier gets to feast on what’s left of the collective rotten carcass.

In the meantime, instead of having central banks printing money to support the casinos, let them lend to worthy individuals and real businesses. Let them support, take over or re-create the commercial-paper market to keep real business alive. In other words, let central bankers take over the essential non-casino functions of the financial sector to sustain real global businesses, including America’s excellent ABC companies.

I suspect we will find that the essential functions comprise a surprisingly small subset of the things so-called “banks” now do. Every gambler thinks that the next bet is the one that will make him whole. That why we have Gamblers Anonymous. It’s time for our global gamblers, who have tanked economies worldwide and now threaten to do so a second time, to begin their twelve-step healing program.

Is this a radical solution? You bet! Are there any better ones? I’m listening. To continue stepping on the short end of the rake with the wild abandon of a battered and half-crazed gardener would epitomize Einstein’s definition of insanity. Unfortunately, that looks like precisely what the EU is about to do, beginning with Dexia.

So the Western world may be about to hit the canvas a second time. The third time, and we’ll be down for the count.

Me? I've got my money nearly all in cash and safe investments until I can foresee how many times we’ll step on the short end of the rake, before we learn that gambling is neither finance nor legitimate business, and bailing out casinos and gamblers is not capitalism.

P.S. For all you day traders out there, I just wanted to note that I’m aware of how the “markets” view these bailouts. They are salivating over them. They are just waiting for European governments to bail out the likes of Dexia, and through them the likes of Goldman Sachs and Morgan Stanley. Then they’ll surge.

But that irrational exuberance won’t last for long. It may last months, maybe even a whole year. It might last about as long as it takes a drinking binge to turn into a terrible hangover.

The writing is on the wall. We Yanks are broke―as broke as we’ve even been since the world’s greatest war. Europeans are broke and about to get broker, the more so the more they bail out the casinos and gamblers.

Who’s next? The Chinese? I don’t think so. They’re far too smart. They didn’t work like dogs and bear insufferable pollution and authoritarian government for several decades just to throw it all away on the likes of Goldman Sachs. They’ll say some nice words and make a token contribution for the sake of international good will. They they’ll politely bow out. Ditto for Brazil, India, Russia and whoever else the broke gamblers pass their empty hats to.

The fact is, bailing out casinos and gamblers is simply unsustainable, as every housewife with a gambling husband knows. You either stop gambling, or you lose big.

If you personally want to gamble on being comfortably seated when the music stops, be my guest. But don’t delude yourself that you’re investing. You’re not; you’re gambling. You might win in the short term. But in the medium term, let alone the long term, investors will beat you every time.

That’s one reason why this century promises to be the Asian Century. Asians gamble as individuals. They don’t gamble with their governments or big institutions. So if the West persists in gambling away all its riches, they’ll win. And they’ll win much quicker than they would if the West offered serious, disciplined competition.

permalink

The Arab Spring, Ten Months In

2011-10-22T07:46:00.005-04:00

It seems hard to believe, but the Arab Spring is not even eleven months old. An unknown Tunisian street vendor named Mohamed Bouazizi struck the spark (literally) by igniting himself in protest on December 17, 2010.

So far, the conflagration that Bouazizi ignited has made the most significant and positive changes in human affairs since the Russians wised up and threw off Communism of their own free will. Here’s the score so far:

Arab Spring Results So Far

Tyrants deposed or killed: three

Nations liberated: three (Tunisia, Egypt, and Libya)

Dictators tottering: two more (in Yemen and Syria)

Elapsed time: less than eleven months

Wars caused: one

Western lives lost: none

US and NATO expense: a few billion dollars

It’s instructive to compare what the Arab Spring has accomplished with what unilateral exercise of American power has accomplished in ten times the time:

Results of Unilateral American Power

Tyrants deposed or killed: one (Saddam)

Nations liberated: maybe one (Iraq)

Dictators tottering: none

Elapsed time: a decade

Wars caused: two

Western lives lost: 7,565 and counting

US and NATO expense: over one trillion dollars

In this age of moral relativism and “spin,” these raw facts show three things beyond question. First, there are right ways and wrong ways to accomplish an objective. Second, the right way costs immeasurably less in lives, blood, toil, dollars, tears, and sweat. Being smart really matters.

Third and most important, no matter how noble it may be, a good end never justifies bad means. In the last century, we Americans and other Westerners disparaged Marxism and Communism for believing that it does. Now the shoe is on the other foot. We freedom-loving Americans have caused no end of misery for ourselves (including a broken economy) and no end of havoc for others by trying to do good things the wrong way. How you do things really matters.

The irony is that both Dubya and our current President were and are idealists. Dubya had a psychiatrist’s grab-bag of complex motivations for invading Iraq, including a desire to prove himself to a skeptical father and a desire to avenge Saddam’s attempt on his father’s life. But among those mixed motives was a sincere and noble desire to bring liberty and modernity to a still-medieval part of the world that still has a resource we need to make the modern world run.

It was not always thus. The Marshall Plan was one of the most enlightened and effective foreign policies in human history. After sharing the suffering and sacrifice of World War II, we could have turned back to isolationism. But we didn’t. We spent our hard-earned money to build up Western democracies in devastated Europe and occupied Japan. In so doing, we nurtured the soft flame of the Western Enlightenment, which today has begun to light the world.

But after that, and in other parts of the world, our intelligence faltered. We still had good intentions, or at least we gave them lip service. We purported to espouse liberty and self-determination for all peoples. But in practice any tyrant who publicly damned Communism (no matter what he did in private) and kept the oil flowing was good enough for us.

Dubya was our first president to try to change all that. With the goading of then Secretary of State Condoleezza Rice, he actually announced the new policy several times. I noted it on this blog and gave it credit for his win over John Kerry, despite Dubya’s gross mismanagement of the both war in the Iraq and domestic policy.

But means matter. Dubya tried to realize his noble and idealistic policy like a combination of an untutored child and a West-Texas sheriff revived from the nineteenth century. He actually said of bin Laden, “wanted, dead or alive.” He acted unilaterally and heedless of international conditions, starting two wars that no one wanted, one on false pretenses. And in the process, he announced the asinine “Bush Doctrine,” namely, that those who harbor terrorists are our sworn enemies. In so doing, he implicitly declared war on some sixty countries, including ones (like Yemen and Pakistan) trying vainly to suppress terrorism, and others (like Somalia) that were and are failed states.

In contrast, our current President had and has precisely the same goals but is acting like an intelligent adult, like the leaders who brought us the Marshall Plan.

He can’t take credit for the Arab Spring. No American can. The Arab Spring is a creation of the Arab people, who have suffered abysmal government and truncated futures for far too long. But after a little dithering, our President was smart enough to catch the wave and is now riding it to the far-off destination of Arab liberation and a better world.

The difference is one of brains versus brawn, finesse versus brute force, understanding versus bald desire. And the results, summarized in the tables above, show how intelligence matters.

Will there be bumps in the road ahead? Of course. The future of Libya is no more certain than the future of Iraq, which is still precarious despite our massive investment of blood and treasure.

But this time, we’re doing things the right way. We’re acknowledging what we Americans held to be “self-evident” in our own Declaration of Independence. Liberation is up to each people alone. It can be neither forced nor granted by others. Others can help, as Lafayette and the French did with our own liberation two centuries ago. But the spark and the suffering have to come from the people themselves.

And this time we’re unambiguously on the right side: the side of ordinary people who want their share of the coming global Golden Age, with free markets, free speech, and basic human rights. That side has been the (slowly) winning side since the Western Enlightenment began half a millennium ago. It’s also the natural side for us, and it’s about time we put ourselves firmly on it.

But to be on that side, we sometimes have to let foreign peoples lead, at least in their own affairs.

That, I think, is the meaning of the President’s announcement yesterday that we really are pulling out of Iraq. We have supposed the Iraqis to be sovereign ever since 2004, but we haven’t always acted that way. Now the President is treating them as sovereign adults. We wanted legal immunity for our troops; they wouldn’t (or politically couldn’t) give it. So we’re leaving.

Iraq’s noisy and chaotic politics are schizophrenic about us. Because we acted so clumsily and disastrously in our invasion, the Iraqis can’t quite figure out whether to applaud us as liberators or despise us as invaders.

And so we’re leaving and letting them figure it out. Our much-abused troops will mostly be home by Christmas, and the President’s campaign promise will be fulfilled.

But I don’t for a moment believe domestic politics or his campaign promise was the root of the President’s decision. Our troops can come back to Iraq any time they’re needed and invited. Some will remain, out of harm’s way, just across the border in Kuwait.

What the President did was to give an unambiguous signal to the entire world. The era of unilateral American action is over. The West-Texas sheriff is gone, and a successor (Rick Perry) is highly unlikely.

What we have instead is a mature and intelligent leader of the world’s largest economy and greatest military power (still). He and we are now firmly and intelligently on the side of ordinary people worldwide, ready to help them ride the waves they themselves create to liberation and a better life. But they have to make the waves themselves.

P.S. As I was publishing this post, it occurred to me that the President is taking the same tack at home as abroad. I do not for a minute believe his heart is really with Wall Street. The whole arc of his life speaks to the contrary.

Yet, as a realist, the President knows he cannot overcome thirty years of “government bad―greed good” propaganda all by himself, let alone in a single presidential term. He knows that real change always comes from the grass roots, whether in Arabia or here at home.

That’s why the Occupy Wall Street movement has such promise. It may be the beginning of a genuine grass-roots movement to throw the welfare-queen bankers out and restore regulated capitalism here at home.

With the Arab Spring in full flower, can an American Spring be far behind? Winter is almost upon us, but hope, like spring, blooms eternal.

permalink

Capitalism Isn’t Broken; Wall Street Is

2011-10-20T12:48:00.004-04:00

Now that the WSJ has succumbed to Rupert Murdoch’s plunder and lost all pretense to journalistic independence and quality, Bloomberg.com is the new apostle of capitalism. Today, it published a short piece under the provocative headline “Protests Show Capitalism is ‘Nearly Broken’.”

Of course that wasn’t an editorial. Bloomberg.com is as much committed to capitalism and Wall Street as the WSJ; it’s just more intelligent and objective about it. The headline was a quote from a capitalist investor, a refugee from eighteen years with Goldman Sachs, who now invests in forward-looking stuff like clean energy and environmental protection.

But the very idea that the new apostle of capitalism could publish such a headline is a sign of our times. Like the inevitable loonies wearing nothing but barrels and signboards proclaiming “The End is Near,” there are always bizarre theories in tough times. Now is no different.

The problem, of course, is theory itself. Everyone has a theory, AKA ideology, as to how the world works. For most of the last century, large parts of the world subscribed to variants of Marxism. Two huge societies―the Soviet Union and pre-Deng-Xiaoping China―tried Marxism for decades. They accomplished nothing but grossly retarding their national progress and making their people miserable. In the 1970s, China abandoned Communism for heavily regulated capitalism and took off like a rocket. Russia and its people are still suffering because their leaders can’t figure out what they want to do.

Today, the US and its fellow travelers have an opposing theory. “Government is the problem, not the solution.” If we just got rid of government and went back to nineteenth-century, brutal, unregulated, laissez faire capitalism, we’d be fine, they say.

But these people don’t know history and can’t predict consequences. If we went back to the nineteenth century with our population and far more massive industry today, we’d burn out our people and their children with massive exploitation of both (and probably spawn a bloody revolution), and we’d burn out our planet with massive environmental spoliation even quicker.

The problem, as I said, is theory. If we just junked theory and looked at actual practice, we’d be a lot smarter.

Marxism had two big, honest trials in the last century. Those experiments took seventy and nearly forty years, respectively. They were run by huge, authoritarian societies whose every level of leadership was totally committed to Marxism, which was taught in every school.

Those trials failed. Don’t ask the rest of the world, which might be biased. Look at those societies themselves. The Soviet Union is no more. Russia and China are now capitalist. So what does that tell you about the effectiveness of Marxism? Do you even have to ask?

Ever since the demise of monarchy and the Western Enlightenment brought real science and free markets to humanity, capitalist societies have beat their competitors hands down. First it was Britain and its colonies in the nineteenth century. Then it was we Americans in the twentieth. And today it’s China and India, both of which are enthusiastic proponents of regulated capitalism, despite the anachronistic and incongruous name of China’s ruling party.

So forget theory. What does experience, that is, history, tell us about capitalism? It tells us it’s the most successful and powerful economic system that we humans have yet devised. In contrast, Marxism is an utter failure. That result is unsurprising, for Marx and Engels were neither modern quantitative scientists nor even second-rank political thinkers. They were mere creative writers reacting to the evils of the nineteenth-century capitalism, which was all they knew.

But closet Marxists who keep pecking away at every stumble of capitalism are not the only short-sighted ones. A lot of people who style themselves “capitalists” are just as stupid and rigid. “If capitalists do it,” they think, “it must be right.”

Wrong. The mere fact that so-called “capitalists” do something doesn’t make it workable, right or proper. It doesn’t even make it capitalism.

And so we had the specter of bankers making millions of loans to people they knew (or ought to have known) couldn’t repay them. And then we had them stick their palms out to government, which they had maligned for thirty years as “the problem , not the solution,” to repay the losses their own greed and stupidity had caused.

That’s not capitalism. It’s welfare―welfare for the rich. And Wall Street got away with it because, in an era that disparaged and ridiculed government, Wall Street had slowly and secretly collected virtually all civilian power, at least here at home.

There is no doubt that the nation―ours―that has styled itself the chief exponent of global capitalism is now in steep decline. But that’s not due to capitalism. It’s due first of all to our financial sector, which has gone from capitalism to socialism for the rich without attracting much notice. And it’s secondly due to our political and business leaders, who made capitalism into a religion, with dogma replacing intelligent pragmatism.

So what’s the answer? For God’s sake it’s not more theory, thank you very much! It’s looking at experience, including history, and learning from it. The right wing wants us to learn (over and over again!) from the abject failure of Marxism but adamantly persists in refusing to learn from the worst stumbles of capitalism.

About a century ago, our economy tanked and took most of the world’s economies with it because our bankers and financiers, i.e., Wall Street, got out of control. It took about two decades, massive government regulation and human history’s greatest war to get things back in balance.

Recently, the same thing happened all over again. With the postwar economy humming smoothly, we relaxed our regulations and let Wall Street get out of control again. The Crash of 2008 followed, as night the day.

Then we compounded our error by bailing out the culprits, rather than their innocent victims. And now we find, mirabile dictu, that there’s no more money to bail anyone else out, including underwater mortgagors. So the global economy is slowly sinking in a mire of its own making.

Even China can’t help much, although it has its own bankers pretty much under control. It’s still a distant second in economic size. And since it has yet to let its renminbi float, it’s still not fully integrated with the global economy. It’s a good flywheel, but it’s not yet powerful enough or linked up enough with the global economic engine to balance things by itself.

So what should we do? The left―or at least the theorists among them―wants to junk capitalism because the financial welfare queens are abusing it. The right wants to make capitalism more “pure,” i.e., to jettison all the intelligent regulation that made it work so well during the last century. They’re kind of like the people who want to go back to coal, a nineteenth-century fuel that’s the dirtiest known to mankind, to make our industry run. Indeed, many of the economic troglodytes and the energy troglodytes are the very same people!

But we don’t need more theory or more fundamental revolutions. We know that capitalism is the best system we humans have yet discovered for running economies. We know it mirrors natural human evolutionary incentives to work hard for oneself, one’s family, one’s legacy (see, e.g., Steve Jobs) and (sometimes) one’s community. We know it works best when strong government regulation weeds out the worst of the stupidity that comes from unbridled and inappropriately rewarded greed. And we know full well who, at this particular moment in history, are the chief exponents and culprits of the stupidity that arises from unbridled and inappropriately rewarded greed.

So we don’t need to kill the goose that laid the golden egg, namely capitalism. We certainly don’t need to kill any of the excellent ABC . . . companies like Apple, Boeing, Caterpillar, Disney, Exxon-Mobil, Ford, Google, etc., which make all the modern marvels that enrich our lives. And we don’t need to try Marxism, which the two societies that tried it fairly have abandoned of their own volition as a complete failure.

What we do need to do is stop giving welfare to the people who secretly rule us and call themselves capitalists but are not. We need to stop coddling them, send the worst to prison, and make the others work as hard for their living as the rest of us do. In short, we need to bring Wall Street to heel.

That’s why the name of the movement is Occupy Wall Street, not “Occupy Apple, Boeing, etc.,” and certainly not “Occupy Silicon Valley, Route 128, Silicon Gulch, or Biotech Alley.” We need our industrial capitalists pretty much just as they are, maybe a little wiser. (In particular, they could benefit from a little less lemming-like class solidarity with financier-welfare recipients, who are slowly starving their businesses by depriving them of customers.) And we need to bring our rogue bankers and financiers back into the market discipline of capitalism. That’s why the name of the movement and its target are precisely correct.

permalink

Zuccotti Park, or the Power of Numbers

2011-10-15T01:32:00.007-04:00

“Something is happening here, but you don’t know what it is, do you, Mr. Bloomberg?”――Bob Dylan (with slight emendation)

What’s going on in Zuccotti Park is now crystal clear. As the spent leaves and bitter rains of autumn fall, that heretofore inconsequential place now holds a tiny spark of liberty, all that is left of what was once a great light unto nations. The so-called rag-tag youth are freezing and fighting for all of us.

They are small in number, but they are only the tip of the spear. To see how many millions stand figuratively behind them, you have only to read the on-line comments on any article on the subject, anywhere.

Millions now know the bankers of Wall Street have not done their jobs. Millions see how they have deceived, swindled and bamboozled their peers in finance, real business and the rest of us. Millions laugh when they claim the exalted status of “essential” capitalists, “too big to fail.”

Wall Street has exerted its unholy influence over our elected officials, our political system, and our media. It has won virtually every battle of significance for the last thirty years.

But as the old song goes, “the times they are a-changin’.” Wall Street did not fight fair. It did not fight openly. It acted by stealth and indirection, backed by the greatest propaganda machine in human history. And now, when the tide is just beginning to turn, its minions wail, “class warfare!”

They should have thought of that when they started the war on the middle class thirty years ago. They were vastly outnumbered from the start.

They seem to have forgotten Lincoln’s famous admonition: “you can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.” Now the people are waking up.

For the bankers and their sorry myths of “too big to fail,” “trickle down” and “competitiveness” with foreign bankers, the time is up. We don’t need people who gamble and swindle under the guise of “innovation” and “modernity.” We don’t need people who torpedo the global economic system and, when their victims―the swindled, defrauded, and innocent depositors, homeowners and creditors―come to collect their just bills, point to the government and us taxpayers. We don’t need people who lack even the basic humility to give up their corporate jets while flying to Senate hearings to explain why their mistakes, greed and dishonesty should be rewarded with continuing power and more obscene bonuses.

It’s not just that we want them stripped of the power to do further damage. We do. It’s not just that we want the worst of them behind bars, in real prisons where real criminals do hard time. We do. It’s not just that we want them stripped of their wealth (although we’d be happy if most of them would just retire to their yachts or luxury mansions in Europe and never bother us again). We do.

It’s that we hate their guts for what they have done to our economy, our country and our democracy, for spoiling the most just and equitable society in human history.

And it will be a long, long time―and will take a lot of real contrition and public sacrifice―before we forgive them, if ever. There is no sign yet of the slightest contrition, even a mere acknowledgement of mistakes. So there is no basis for forgiveness or mercy.

These men (they are all men) have no sense of perspective and little imagination. What little imagination they possess bends toward numbers and greed. But the hatred of millions could lead to the same results here as in the French and Russian revolutions. That’s why the private owner of Zuccotti Park, under pressure form politicians who can sense the public tide, called off the police yesterday.

Thomas Jefferson wrote that “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.” But in that quote, Jefferson forgot one thing. An enlightened society need not shed blood if people can count. Our democracy started nearly eight centuries ago, on the fields of Runnymede, when King John counted the opposing barons and their armies.

He decided not to fight, but to settle, and our Magna Carta was the result. Isn’t that the whole idea of democracy, ballots not bullets?

They have taken our ballots from us by stealth, guile and corruption. But it doesn’t take a genius to count us now. Even the loopy Tea Partiers want to bring the bankers down and break up their monstrous, thieving empires, as does everyone who can read and think.

We the people have the plutocrats outnumbered at least 100,000 to one. And, if it comes to that, the army is the one force in our society they do not yet control. We just have to make it clear even to these supremely arrogant fools that they are outnumbered, their days are numbered, and their number of days is small. Then they’ll retreat to their gated mansions and let us begin the Herculean job of cleaning up the mess they have made. We can’t even begin with them standing in the way, claiming their disastrous prerogatives.

The notion that the protesters are “disorganized” and lack plans is absurd. They are not protesting to form a government, at least not yet. They are protesting to bring a corrupt and monstrous system down, or at least bring it to heel. Their grievances have been read on cable TV, are crystal clear, and are well and succinctly expressed.

Millions share those grievances, and justly so. Nobody likes the bankers of Wall Street. Nobody who is not on their payroll thinks they are doing a good job. Nobody believes they are necessary to the survival of capitalism, let alone democracy.

We all want them gone. We want their fine leather boots off our necks, so our economy and our liberty can breathe again. If you took a real popular vote today, you could probably summon a majority for nationalizing all the big banks. We the people have paid for them many times over. We should own them.

The protesters have done as much as our Founders, who listed their grievances against King George III in our Declaration, asserted the right of self determination, and left the rest to the future. It took five more years (mostly in war) to form a government under the Articles of Confederation, and fifteen in all to form a lasting government under our Constitution. To ask more of youth whose bulwarks are courage, zeal and outrage (which all of us feel) is not just unfair. It’s ridiculous.

Make no mistake about it. The protesters in Zuccotti Park are no paid front group like the Tea Party. They are the genuine article. They are a spontaneous popular movement drawn from millions of people who have been pushed beyond endurance. And they represent all the millions of us―including me―who are just now deciding how much of our “lives, fortunes and sacred honor” we are willing to put at risk to get our country back. We know that what we do next will seal our own and our childrens’ fate, not to mention our nation’s.

Sparks can catch fire even in the depths of wet autumn. Just ask the Russians about October 1917. The bankers and their shills and lackeys had better start reading some history and readying their exits, for the hour is growing late.

permalink

How Rick Santelli Killed the Housing Rescue

2011-10-10T01:01:00.001-04:00

Ezra Klein is an economically trained columnist for various publications, including the Washington Post. On Saturday, the Post published his thorough review of why our economic recovery is going so slowly.

It’s the best non-book-length explanation I’ve yet read. It combines sophisticated economic understanding with political realism. So it deserves everyone’s careful attention.

Among many other things, Klein explains why our housing decline still hasn’t reached bottom. Housing was the core of the financial crisis. Virtually every toxic asset was a derivative of home mortgages: mortgaged-backed securities, “risk tranche” derivatives of mortgage-backed securities, debt obligations collateralized by packages of mortgages or mortgaged-backed securities, and debt swaps and other “insurance” on banks that held the foregoing assets.

The simple home mortgage lay at the core of it all. If each homeowner could have paid as promised, all the other assets would have had face value, and no crisis would have arisen. So the logical place to start detoxifying the assets was with the home mortgages that underlay the whole mess.

This was and is not rocket science, or even particularly sophisticated economics. It was just common sense. I myself proposed such a solution in September 2008.

The idea was and is as follows. For homeowners in default or facing foreclosure, the government would intervene and let the homeowner pay what he could, for example, by reducing the principal amount of the mortgage. Then it would reimburse the mortgage holder for the loss. The mortgage would then be good, and so would all the securities derived from it. Problem solved.

When you think about it arithmetically, this solution would have been far better than what actually happened. Most, if not all, homeowners could pay something, even if they were on unemployment. So nearly every defaulted mortgage would have been worth some non-zero percentage of original face value, and the home would still have been occupied and maintained.

What actually happened was much worse. Homeowners defaulted and had their homes foreclosed. Their mortgages became worth zero, lowering the values of all securities derived from the mortgages. Homes went vacant. Neighborhoods went downhill; and homes in neighborhoods with still-paying homeowners lost value. Everybody lost.

The government lost, too. In the “rescue” scenario described above, every home mortgage would have been worth some substantial percentage of face value, depending on what the homeowner could pay. So would all the toxic assets that derived from the mortgages. But when the mortgagors defaulted and stopped paying, the mortgages all became worth zero.

And remaining mortgages not yet foreclosed had much more uncertain value, because they were either worth nothing or face value, with unknown probability. Therefore, the government had to pay much more to bail out the various banks and quarantine the toxic assets than it would have had to pay had each each underlying mortgage been worth a known and substantial percentage of its face value.

So why didn’t this rescue happen? Enter Rick Santelli. He’s the trader on the floor of the Chicago Board of Trade whose famous tirade killed the whole deal.

Here’s how Klein describes it [search for “hideous”]:

“Rick Santelli’s famous CNBC rant wasn’t about big government or high taxes or creeping socialism. It was about a modest program the White House was proposing to help certain homeowners restructure their mortgages. It had Santelli screaming bloody murder.

‘This is America!’ he shouted from the trading floor . . . . ‘How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills? Raise their hand.’ The traders around him began booing loudly. ‘President Obama, are you listening?’

If you believe Santelli’s rant kicked off the tea party, then that’s what the tea party was originally about: forgiving housing debt.”

Klein writes that “[h]ome prices have fallen almost 33 percent since the beginning of the crisis.” How much less would they have fallen if the estimated 2.2 million homes that are now abandoned had owner occupants? How many of the additional estimated 7.5 million homeowners facing foreclosure would be secure? How many neighborhoods would not be decaying with abandoned properties, crime and crack houses?

We’ll never know. But one thing is certain. Even stringing up Rick Santelli now wouldn’t save a single home.

I mention Santelli not to make a villain, although he certainly (and briefly) played that role. Santelli epitomizes a much larger problem that has laid our country low.

He’s a trader. What do traders create? Nothing. What do they build? Nothing. What win-win contracts for mutual gain do they sign? None. If a trader buys low and sells high, someone else has bought high and sold low. He wins; they lose. That’s the way it is in trading: a zero-sum game.

But here’s the thing. If Santelli had thought a little more, rather than just braying like a bull about paying for his neighbor’s extra bathroom, he might have asked a simple question: “Could I, too, benefit from this program?”

As it turns out, he would have. By saving his neighbor’s home from foreclosure and abandonment, he would have protected the property value of his own home from decline and his neighborhood from blight, crime and decay. Too late, millions of innocent, mortgage-paying homeowners who probably thought Santelli was a genius learned that lesson the hard way.

Santelli represented the trader’s view of life, the Universe and everything. Someone has to lose so that someone else can win. There’s no middle ground. Life is hard; then you die. There’s no such thing as cooperation. There’s no such thing as mutual self-help. It’s always you or me.

That philosophy is why no nation that lets a place like Wall Street call the shots can ever rise to prosperity, let alone greatness. And that is why, ever since Wall Street took over effective control of our nation (1, 2, 3, and 4), we have been going straight to hell.

If that philosophy had ruled us in the last century, we would be just another struggling banana republic. The transcontinental railroads (which required government land grants) would never had been built. Ditto the Interstate Highway system. We would not have built the greatest educational system in human history. The Centers for Disease Control and National Institutes of Health would not exist. Nor would the WHO. Nations victim of pandemics would not look to us for rescue but would suffer and die with prayers and lamentations.

I could go on and on, but you get the drift. Santelli’s philosophy of life may work on the trading floor, but nowhere else. Even on the field of battle and in the sports arena, teamwork matters. You can’t build a nation, a state, a city, or a just society without it.

As it turned out—and as Klein carefully explains—the Obama Administration considered direct relief to struggling homeowners but was too timid in implementing it. There is also a crowning irony in Klein’s superb piece. Douglas Holtz-Eakin, who was John McCain’s economic advisor during the 2008 presidential campaign, also wanted to cure the housing crisis by helping the distressed homeowners who lay at its core. He even managed to convince McCain to adopt the idea. But no one else on the Republican side liked it. Klein quotes Holz-Eakin as saying, “[t]he politics on housing are hideous.”

Who’s responsible for the “hideous” politics that killed what could have rescued our national housing market cheaply and early? People like Rick Santelli. If we let them—and their like on Wall Street—continue to rule us, we are lost.

permalink

Us Against Them

2011-10-07T16:04:00.011-04:00

[For information on the Occupy Wall Street movement, click here.]

People like me, who style themselves experts, are hard to rile and slow to boil. We want evidence, personally verifiable, before we go off half cocked.

For the last several months, I have been slowly accumulating evidence of our nation’s complete domination by Wall Street. I wrote a post on that subject back in June, when it first occurred to me that Wall Street’s domination is total.

Not only does Wall Street control our nation’s financial sector, which not too long ago accounted for 41% of all our nation’s business profits, including Apple’s and the oil companies’. Not only does it control Congress, to the point where a senator (Shelby) from one of our nation’s three most backward states reflexively supports Wall Street, ignoring the interests of his own largely poor constituents. Not only does our Supreme Court support Wall Street’s dominance of politics through such decisions as Citizens United. But Wall Street, which controls Manhattan, also controls our nation’s media.

That, for me, was the last point of critical inquiry. Is it true that nothing gets out in the mainstream media that Wall Street dislikes? The evidence now is overwhelming.

Back in June, my analysis was largely theoretical. Wall Street controls and feeds Manhattan, I reasoned. All the mainstream media, including PBS, are headquartered in Manhattan. Every lawyer, accountant, bank, department store, restaurant and bar there owes its living directly or indirectly to Wall Street. And therefore so do the media and their pundits. Cut Wall Street down to size, and the condo or cooperative apartment of every media analyst would plummet in value, as would their exorbitant salaries, which are based on “competition” in Manhattan (where else?).

But that was just theory. Now the evidence is in, including some very personal evidence.

Although a blogger myself, I still tend to get most of my news from the mainstream media. For reasons of quality that I explained recently, Bloomberg.com has replaced the WSJ as my primary financial/investment news source. The others mainstream sources that I read regularly are the New York Times, the Washington Post (primarily for politics) and—far less frequently—the Los Angeles Times and the San Jose Mercury-News.

With these as my sources, I was totally unaware of the Occupy Wall Street movement until this week. So, I think, were the vast majority of Americans, until NYT pundit Paul Krugman deigned to comment on it in his column today.

Here was a movement that has existed for about three weeks (probably much longer, in the planning stage) and has mounted protests coast to coast involving tens of thousands of people. And I knew nothing of it until the past few days. Not a word about it in Bloomberg.com, which greatly surpasses the WSJ in every measure of journalistic quality except coverage.

But that’s not all. For about a year I have been writing comments to online newspapers under various names. The comments have made various points and adduced various evidence. Economic themes predominated.

But lately my comments have struck new themes. It is becoming increasingly evident (1 and 2) that our economy will continue to hobble until we stop bailing out bankers and start helping their innocent depositors, creditors and foreclosed homeowners, just as we did successfully in the 1930s. Right now, we are like medieval “doctors,” bleeding a patient with leeches, rather than feeding the patient to restore her strength and health. And I don’t have to tell you who the leeches are.

Furthermore, we are right now at a critical point in modern history with respect to this precise point. Here in the US, we have decided to cast our lot with bailouts for bankers and austerity for the people. But Europe is still undecided. In the slow process of bringing the EU’s seventeen member states to consensus, there are still powerful forces in Europe that want the bankers who took bad sovereign bonds to accept more of a “haircut.” That’s the primary reason why the “fix” in the EU is taking so long.

Europe’s indecision is the best thing to happen to the global economy since 2008 (though not necessarily for stock markets in the short term). There are people in power in Europe, albeit in a minority, who realize that continuing to feed the banks and starve the people is not a sustainable proposition, let alone a solution to the continuing global economic crisis that the banks themselves created. If Europe goes for our successful 1929-35 solution, rather than Tim Geithner’s “save the plutocrats” fix, the Western world might just be able to turn this thing around. Why knows? We might be next.

But here’s the rub. As the critical decision time in Europe approaches (we’re still in it!), I found it harder and harder to get my comments published. There were strange technical errors that never occurred before. Some comments just didn’t make it on screen for unexplained reasons.

Recently key online commented journals, including Bloomberg.com and the NYT, began to post warnings that they would not explain their comment-moderation decisions. I presume those warnings were responding to more people than just me. Apparently many more people than I wanted to know why their views were not getting published in a supposedly open, public forum.

Based on this circumstantial evidence, I conclude that Wall Street and its minions are simply exercising their power over the media to consolidate their power over finance and the global economy.

It bears repeating that this is a critical time. If Europe follows our abysmal lead, it will take the better part of a decade (if ever) to restore the so-called “Western” economies of the US, the EU and Japan. The West will be irrevocably committed to the wrong solution, one that bails out bankers, starves the people and their governments with “austerity,” and concentrates economic power in the hands of fewer and fewer people who have done nothing but abuse it for three decades.

In that circumstance, China will rise to economic pre-eminence much faster than anyone has yet predicted, not entirely on its own merits, but based largely on the West’s default. Your children will have nowhere to go but the BRIC nations, or Down Under, to find good jobs (outside finance) and a decent economic future, let alone good health care. So there’s a lot at stake here, much more than just the next few years of unemployment numbers.

Make no mistake about it. This is class warfare, us against them. But I think Warren Buffet was wrong when he said his class already has won. (I also think he was wrong to include himself with the bankers. There ought to be room for smart and honest investors in any capitalist economy. But that’s another whole story.)

The plutocrats have gained a lot of ground. But much like terrorists, they have been working largely by stealth and surprise. Until recently, the vast bulk of the world’s middle class had no idea they were under constant, sustained and deliberate attack. Now they are beginning to wake up.

So the battle is not yet fully joined. Occupy Wall Street is just a raw beginning. That movement will grow, and others will follow. People will have to shun the mainstream media—even the best of it—to build those movements and fight back.

This will be long struggle. It may take decades. But does anyone doubt it is a war worth waging? At stake is the future of capitalism, democracy, and the Western Enlightenment now half a millennium old. After five hundred years of struggle, we don’t want to replace the old titled aristocracies with new ones based on inherited wealth and educational and social advantage.

So it’s us against them now. There are hundreds of million of us and only, at most, a few thousand of them. Just like the Arab Spring, the outcome is foreordained, as long as we can get organized.

So let’s get started. You can begin by paying serious attention to Occupy Wall Street, no matter how much the mainstream media try to demonize and ridicule it. And you can start doing that by reading the comments in the NYT of actual participants and direct observers, who describe how badly the mainstream media have twisted public perception of this genuine popular movement.

This is not the Tea Party—an ignorant front group brainwashed by Fox and financed by the Koch Brothers. This is the real thing.

Correction: 9/7/11 5:00 pm
I stand corrected. There is at least one person in the mainstream media (besides Paul Krugman, who is just a columnist) who has treated Occupy Wall Street with the serious attention that it deserves. He is Keith Olbermann, formerly of MSNBC and now with Current TV, a cable channel. On Wednesday, he reported the police action (including mounted police) against the movement and read, on camera, the movement’s indictment of all that our plutocrats have wrought.

The indictment is just that: a catalogue of ills wrought by unchecked banks and corporate power. It is well written, articulate, and absolutely accurate. It offers no solutions, but serves as an invitation to join the movement and help devise them.

Occupy Wall Street’s indictment resembles the preamble of our Declaration of Independence, with its list of grievances against King George III. And it paraphrases, in modern language, the following excerpt from our Declaration: “whenever any Form of Government becomes destructive of [democratic] ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

Don’t be fooled by nattering naysayers. These young people are smart, articulate and fully conscious of the long and glorious democratic tradition that they follow, from Magna Carta on. If with our help and God’s they succeed, they may well be among the Founders of something new and better.

[For more video information on the movement, click here.]

permalink

Party of Extremists

2011-10-05T07:10:00.011-04:00

Steve Jobs, An American Original
R.I.P.

We have so few heroes today. That’s what makes Steve’s passing so sad.

We have our “routine” heroes. You know, the ones in Iraq and Afghanistan. Nobody likes to think about them because, deep down, we sense that they’re fighting unnecessary wars in unnecessary ways. But they’re fighting for us, and they’re risking their lives every day. And that makes them heroes. Who knows their names?

Then we have our the domestic heroes—the policemen, firemen, and medical first responders who save our lives and property every day, without asking who we are or whether we have insurance. You know, the ones who are being laid off in droves because we can’t seem to find the money to support heroes any more.

Today celebrities have replaced heroes. We’ve got Sarah Palin, a world-class gold digger, who just announced she’s not running for president, after everybody stopped caring. We’ve got raging bull Rick Perry, who’s great at fund raising and rabble rousing and not much else.

We’ve go so many whose names everybody knows because their antics entertain us. Yet ancient Greece or Rome would have ignored or ostracized them because they don’t have an ounce of the skill, finesse or learning that makes a leader.

So when a man like Steve Jobs falls, it’s a big deal.

Steve wasn’t quite the same kind of hands-on inventor as Thomas Edison. But no one since Edison has been anything like Steve. No one had the same single-minded passion for innovation and excellence. No one so honored the single credo “let’s make it better!” Steve lived that credo until the month before he died.

It’s invidious to compare national icons. But fifty years from now, historians will probably conclude that Steve changed our world—and for the better—as much as did Edison, who invented the electric light, phonograph, and motion pictures and started the first electric power company.

We all know about the iPod, the iPhone, and the iPad. Most of us value the fact that anyone can use and enjoy these devices, without extensive training in hardware, software or electronics. But some of us forget that Steve Jobs, alongside Apple’s co-founder Steve Wozniak, invented the personal computer, long before Bill Gates and the hardware MBAs took it away from them.

And the vast majority of us still don’t know how superior Jobs’ computer operating system is for everything except justifying a whole industry to fix, update, repair and maintain its more popular rival. Gates created a gigantic industry around mediocre and poorly-performing software. Steve gave us products that made most of those jobs unnecessary.

Steve was no angel. He could throw tantrums. He could be a tyrant. And the corporate course he set just before he died began to resemble Gates’—a monopolist’s exercise in turf protection.

But laid against what Steve gave us, those things are peccadillo. He was not just a visionary, but a true hero. He wasn’t particularly good looking. He wasn’t the world’ smoothest personality. He had no ideology but excellence. He never complained about taxes, regulations, or “uncertainty.” He knew that the future is always uncertain, but he never lost faith that he could make it better.

Steve didn’t complain even when the MBAs banished him from the company he had founded. Instead he worked hard, invented, came back, saved his old firm from rigor mortis, and built several new industries in the process. As he did so, he taught us that an innovator with imagination can out-compete a passel of MBAs.

Steve never stopped envisioning new products to make consumers’ lives easier, richer and more fun. And his final battle—with cancer—he waged with consummate elegance and grace. He stayed on to fulfill his role, never mentioning his malady until it ripped him from the work he loved.

Steve ruled the empire he had created absolutely. He wanted things done his way. But for hundreds of millions of ordinary people, his way turned out to be better, more elegant, and more fun than all that had come before.

We will miss him. Our future, too, is uncertain. And now we have no one left with Steve’s unquenchable confidence that he could make it better for us.

Many people are still wondering why New Jersey Governor Chris Christie reaffirmed his decision not to run for president.

There are lots of plausible reasons. He has no national experience, let alone experience in foreign, security or military policy. In a society trying to forget its morbid obesity, he’s much too fat. And the very things that seem to make him so attractive—his frankness and “authenticity”—can be time bombs in this era of “Gotcha!” politics. Just ask Joe Biden or Rick Perry.

There’s also another possible reason that no one dares to name. Am I the only one who’s noticed how effeminate are his mannerisms and style of speech? Is he a closet gay?

If I had any inclination to vote for a Republican for any office for the rest of my life, I wouldn’t care. I strongly support civil rights for homosexuals, including marriage, and I’m a fan of Barney Frank. But could a gay man ever get by the GOP’s huge homophobic wing?

Which brings me to the main point of this short essay. Today the Grand Old Party is “grand” in only one respect. It has built a “big tent” for extremists.

In a desperate try to maintain a party with nineteenth-century values in the twenty-first-century, the Republicans have invited in kooks of every stripe. They’ve collected racists, xenophobes, homophobes, gun nuts, anti-abortion crazies, Christian Taliban, extreme libertarians, immigrant bashers, and free-market fundamentalists and made them their own. They have built their party and their platform around the fanciful and reality-free propaganda of Limbaugh, Beck and Reilly. No view has been too extreme for them to endorse, as long as it promised votes for lower taxes, less regulation, and more power to their plutocratic masters.

From all appearances, Christie is honest, reasonably smart, personally modest, and (for the GOP today) relatively moderate. So how could he ever run the gauntlet of crazies in his party and win the nomination? And if he pandered to the kooks enough to win the nomination, how could he ever win the general election?

Ay, there’s the rub—the central dilemma of the GOP today.

We Americans are many things, not all good. But in the final analysis we tend to shun extremism. That’s why we rejected Communism even at the height of the labor movement in the last century, when the plutocrats were literally beating up working folk and shooting them down. That’s why we (so far) have rejected fascism. That’s why we so abhor the Taliban.

Can you overcome that basic cultural repugnance by collecting a whole lot of extremists of different stripes and calling them a political party? I think not.

In this era of YouTube, Twitter, Facebook and ubiquitous cell-phone cams, electronic eyes are always watching. To win his party’s nomination, any Republican will have to say things that the general electorate won’t want to hear. And all those things will be recorded in full-color video, to be played back during the general campaign, over and over again.

Exhibit A in the general election will be every GOP candidate (including Romney) raising his or her hand to oppose any deficit reduction with so much as a one-in-ten ratio of tax hikes to spending cuts. This from the party that has demagogued the deficit as its only real issue for nearly two years! How do you think that video will play when our economy is one year sicker and one year more indebted, and after one more year of mindless cutting has put tens of thousands more teachers, police, fire fighters and other public servants out in the streets?

Romney is willing to run on that record because his ego is bigger than his brain. Why Jon Huntsman is running is anyone’s guess. Maybe he was in China too long and deluded himself that what had become of his party was mere foreign propaganda.

Romney is also an arrogant jerk, and therefore unelectable. That’s just one more reason why the GOP, like a trapped animal, is searching for any way out of his nomination.

But Romney is now the inevitable nominee and inevitable loser. It’s not his fault. He’s the best the Party of Extremists can produce, and the only semi-reasonable person willing to run on a Taliban platform.

But he can’t win.

No candidate of the Party of Extremists can win in a nation of cultural moderation and common sense, let alone against a centrist president known for his moderation, modesty and understatement. That’s why Christie wisely decided to bide his time to 2016, when he will have more experience and his party may have begun to reform itself.

P.S. I have to confess that I already have broken my vow to sit on my wallet. I’ve contributed to the campaigns of the President, Elizabeth Warren (as I had promised, and even more!) and Claire McCaskill in Missouri.

What made me change my mind? The simple realization that money—in the form of campaign contributions—has virtually replaced voting in our so-called democratic process. Early reports of contributions to candidates now serve as a “pre-primary primary,” attracting media attention, what passes for respect in our twisted society, and still further contributions to leading candidates.

We no longer have anything like a representative democracy. Money talks. And since I’m relatively comfortable financially, I’m in a position to have more influence than most of the crazies (but certainly not the Koch Brothers!). So I would be remiss if I failed to exercise my true “franchise” to the best of my ability, in an attempt to save the country I love from extremism and continued decline.

permalink

The New Royalists (and the New Guillotines)

2011-09-27T16:52:00.001-04:00

In rough outline, the causes of the French Revolution were pretty simple. The King and his court, plus a bunch of obscenely rich aristocrats, ran the country and owned nearly all the wealth. They ran it badly and didn’t like sharing. They gave little thought to and had no sympathy for common folk. On hearing that peasants had no bread to eat, Marie Antoinette famously quipped, “Let them eat cake!”

They didn’t use their heads (or their hearts), so they lost them.

We in the Western World like to think we have democracy. We like to think we have capitalism. We like to think we know the principles by which both work.

But there is a class of people—very wealthy and powerful people—who have eluded these principles for most of our history. They’re bankers, or more generally, finance men. (I use the masculine gender because the overwhelming majority are men, and have been throughout our history.)

It is an odd thing, really. Today one of these men, Jamie Dimon, has made himself infamous as a one-man lobbying army, opposing effective regulation of the same financial system that three years ago almost destroyed the global economy and continually threatens a repeat performance. He happens to be the CEO of JP Morgan Chase, one of America’s top five banks by assets. He therefore carries the legacy of J. Pierpont Morgan, a private banker who virtually controlled our entire nation’s finance throughout the nineteenth century, and who could control financial panics—or not—at his whim.

Both were big men physically and metaphorically. Morgan had a veneer of culture but made himself look bigger and more imposing with a tall top hat. Dimon looks fitter, in accordance with modern culture. If you saw him in a dark alley without his business suit, you might take him for a Mafia hit man and walk quickly away. Both men no doubt grew up accustomed to obedience because of their size, intensity and cunning.

In the nineteenth century, Morgan operated almost entirely in secret. There were no antirust laws until 1890. There was no income tax (except briefly to pay for the Civil War) until after ratification of our Sixteenth Amendment in 1913. So the money Morgan made and how he made it were known only to the similarly-minded plutocrats with whom he met behind closed doors. He made and broke empires in electricity and steel. He advised and pressured presidents like the potentate of an invisible nation within a nation.

Dimon can’t act precisely like that today. We do have antitrust laws and the income tax. Our legal regulatory regime and our media are vastly more pervasive and intrusive than in the nineteenth century. But Dimon and his ilk have reacted by infiltrating and suborning our government, particularly in Treasury, Congress and the Fed. They still get their way, regardless of the supposed rules of democracy and capitalism. But today they have to do it more publicly.

The paradigmatic private meeting of our era came on October 13, 2008. Dubya’s Treasury Secretary, Hank Paulson, himself a former chairman of Goldman Sachs, called the CEOs of America’s leading banks together in Washington. Fed Chairman Ben Bernanke was present. In addition to Dimon from JP Morgan Chase, there were six others from major banks, representing Bank of America, Citigroup, Merrill Lynch, Morgan Stanley, and Wells Fargo.

Did Paulson call these men together to reprimand them for destroying American finance and (later) the American economy? Did he chide them for building businesses on liars’ loans palmed off to unsuspecting investors in the form of mortgage-backed securities? Did he urge them to take the necessary “haircuts” on their toxic investments? Did he ask them to help him find the best way out of the crisis? No, no, no and no.

Paulson called them together to give them money—our money, yours and mine. He handed out over $120 billion of the people’s money that day. Sure, it wasn’t a gift. In return Paulson got for the Treasury convertible preferred stock paying 9% interest, which Paulson promised never to vote.

Think about that. Now 9% wasn’t a bad interest rate, and it would actually go up with time, to give the banks an incentive to replace the government investment with private capital. But the investment firmly established two principles that, insofar as I know, were unprecedented in American history.

The first principle was “too big to fail.” When banks had failed in the Great Depression, the federal government came up with two answers. The first was depositors’ insurance. It made depositors whole. Not the banks, their investors, or their managers. The depositors.

The government, in the form of the Federal Deposit Insurance Corporation (or equivalent agencies for non-bank financial institutions) took the failed banks into receivership, dismissed management, sold off the parts or assets that other banks or private investors would buy, and liquidated the rest. Bank investors got nothing, or pennies on the dollar, and management largely ceased to function, except as consultants to the receivers.

That was capitalism. The guys who drove the banks into bankruptcy were out. The shareholders who had hired or tolerated them lost most or all of their investment. And innocent depositors and some other creditors were spared. There was no moral hazard, no bank runs, and no financial panic. The economy muddled on, with some duly chastened bankers and shareholders.

Paulson’s excuse for fundamentally changing the paradigm for government intervention was plausible. The banks were too incestuous, he argued. Their toxic assets were too intertwined. They all owned some of the sludge, so if you marked it all to market the whole house of cards would collapse. If you put the failed banks in receivership, no one would buy the toxic assets because no one knew what they were worth.

There was some sense in these arguments at the time. And they got accepted because everyone was in a panic.

But in the clear light of hindsight, we can see their obvious flaws. As it turns out, the federal government (through the Fed) did invest trillions in buying, quarantining and stabilizing toxic assets. It did so through direct capital infusions, like those of October 13, though TARP, through near-zero-interest loans at the Fed window, and by printing new money to do what had to be done.

But on October 13, 2008, Paulson had firmly established a new principle of federal intervention, never before used. (For Obama bashers, let us emphasize briefly that that was during the reign of George W. “Dubya” Bush.) Henceforth government would prop up the banks themselves, their managers and investors, not their depositors and creditors. Saving the banks and their incompetent managers was to be the price for saving the economy.

That principle could only have been laid down by a cabal of bankers, in the manner of J. Pierpoint Morgan in the nineteenth century, before the antitrust laws, the income tax, and federal regulation of banking and securities. Yet Paulson and his fellow thieves pulled it off in broad daylight, in the twenty-first century, under the noses of the public, the Department of Justice, and financial regulators, with active complicity of the Fed. The Wall Street Journal [subscription required] and the New York Times reported on the meeting that same week.

When you think of its consequences, it was probably the single greatest heist in human history, done in plain view.

The second unprecedented aspect of Paulson’s “innovation” was continuity of management. In the old days, when people screwed up, they got fired. When a bank went bankrupt, the court or federal receiver took over, and management was out. The screwups didn’t get a second chance, at least not at the same bank. But in Paulson’s new world, Treasury gave them new money, took stock in exchange, and promised not to vote it. Paulson left the foxes in charge of the hen house with a pledge that they would stay there.

Don’t get me wrong. I don’t think Paulson et al. had the minds of thieves, what lawyers call mens rea. Things just turned out that way. Paulson and his colleagues did what they did because banking was all they knew and all they cared about. Their universe was collapsing, and they wanted to save it. The economy was secondary. The abstract principles of capitalism and free markets, let alone FDR’s response to the Great Depression, if they mattered at all, came in a distant third.

These men just handled things like the new royalists they are, in a back room in their own interest, the same way J. Pierpont Morgan had done over a century before.

Once their little meeting had set the stage, the play went forward as written. By the end of the week, the federal government had committed $2.25 trillion to the philosophy of “too big to fail.” By the time President Obama took the oath of office on January 21, over three months later, additional trillions were committed or in the works. And the President, perhaps unbeknownst to him, had two fifth columnists on his team—Geithner and Summers—both committed, willing and predisposed by background and experience to play out the script.

The rest is history. For three years, the nation’s biggest banks have been exempt from the rules of market discipline, market valuation of assets, and capitalism itself, because they are “too big to fail.”

Not only that. This royalist exemption from the normal rules of free markets has spread to Europe and is instrumental in the ongoing panic there. For example, the latest proposal in the EU is for banks that invested in bad Greek bonds to take a 21% “haircut,” when the bonds’ market value is 60% below face. This approach would leaves the other 40% loss for various governments and the people of Europe to pick up.

It’s not a complete exemption, as here. The banks take one-third the loss they caused and the people two-thirds. But it’s good enough for greedy incompetents.

So there you have it. Democracy and the free press have failed miserably. The process is different, more public, and much more messy. But the outcome is the same as it was in J. Pierpont Morgan’s day. The money men call the shots in private meetings; they protect their interests well; and the rest of us pay the bill. The only difference is that, this time, we have badly damaged the very foundations of capitalism and free markets, at least in finance.

In the French Revolution, the people had a simple, rather mechanical response to royalists: the guillotine. We’re not quite there yet. The French peasants were literally starving. Few are starving today, although many are in poverty, malnourished and sleeping under culverts, in homeless shelters, or in their cars.

So we still have a way to go before we reach the guillotining stage. Anyway, we live in a more “civilized” era, when beheadings and other mass violence are generally just not done.

More to the point, there are guillotine substitutes that might get us back on track without bloodshed.

We can go back to the old ways any time we want. We can stop bailing out banks and liquidate them when they fail. We can continue protecting individual depositors and expand that protection to bigger accounts and to businesses. We can include selected other creditors, to take some of the risk out of a falling house of cards.

We can do all this through existing institutions, like the FDIC, FHLBB, the Fed, and bankruptcy courts. If we’re worried that things might collapse too fast, we can create special receivers with extraordinary powers to unwind failing financial institutions quickly and accurately. In doing so, we would have a signal advantage over liquidators and economic consultants in FDR’s day: computers and the Internet. We use the same technology that created the Flash Crash to restore the principles of capitalism, free markets, and democracy.

It is absolutely clear who is responsible for this brave, perverted world: Hank Paulson, his fellow bankers, George W. Bush, and (to a lesser extent) Ben Bernanke. But it’s far too late to worry about blame. The contagion has spread to Europe, and Japan cannot be far behind. China alone cannot stem the tide and in any event doesn’t care much about democracy.

So if we want to save democracy and capitalism from the latest powerful cabal of unchecked royalists, we have to act fast. There is nothing wrong with our global industries. Our A, B, C companies are the finest in human history.

But if we don’t get the royalist bankers off their and our backs and back under a regime of capitalism and free markets, the entire global economy will sour, perhaps irrevocably. Millions will suffer. Governments will fall. War may break out. Then real guillotines may come into play.

If those horrors come, they will come not because we stuck to the principles of free markets and capitalism. They will come because abandoned them for royalists.

permalink

Bankers’ Chutzpah

2011-09-26T08:22:00.011-04:00

“Chutzpah” (with the “ch” pronounced as a hard “h”) is a word of Hebrew/Yiddish derivation meaning outrageous gall. An example of chutzpah, an old joke goes, is a young hoodlum who murders his parents and later begs mercy from the court because he is an orphan.

Bankers today are like that. The worst are here in the US. But the problem, like banking itself, is global.

Jamie Dimon is the CEO of JP Morgan Chase and one of the vilest scoundrels in the history of American business. He exemplifies the arrogant, clueless bankers who destroyed the global economy and expect their business and their exorbitant pay to continue as usual, with no accounting and minimal additional regulation. He wants American banks—including his, of course!—to be exempt from the more stringent capital reserve requirements that European regulators are proposing to stem the epidemic of gambling and swindling that has overtaken banking worldwide.

But Dimon is not alone. The crux of the European crisis that has caused the global panic du jour is quite simple. European bankers want nations and their populations, rather than them and their shareholders, to take the hit for their bad lending decisions.

As Bloomberg.com reports, the markets now rate Greek bonds at 40% on the dollar. But European bankers who hold those bonds insist on taking only a 21% “haircut.” And, with our own Treasury Secretary Tim Geithner leading the charge, they are likely to get away with foisting the rest of their losses on the EU’s public.

Who will take that hit? Ordinary people like you and me, just as in the US: government workers, those who rely on social safety nets, and taxpayers. And not just in Greece, but in Germany, France and Italy, too.

Why are the Dimon push and the EU bailout plan such outrageous examples of chutzpah? There are at least four reasons.

First, the two plans contravene the principle of personal responsibility. That principle is the bedrock of modern human civilization, not just for butchers and tyrants, but for financial malefactors, too. Ignore it or thwart it, and the foundations of civilization begin to erode, revealing the law of the jungle.

Second, the Dimon and EU plans contravene the basis of capitalism itself.

We know why labor merits pay. Labor is how people have made their living since the dawn of human civilization. But why does capital merit pay? Why pay someone just because they have money? Isn’t that just making the rich richer?

The classic answer—and the basis of our entire global capitalist system—is risk. Capital merits “pay,” i.e., a good return on investment, when invested money is at risk.

A person who puts money at risk to build a hotel, an airline, or computers—or to make a loan—advances commercial and often technological progress. That person employs others in gainful pursuits. In other words, the capitalist risks money to provide jobs and make social/economic progress. Taking a risk for good purposes deserves a return commensurate with the risk taken and the progress made.

But remove the risk, and there’s no justification for the reward. In rewarding capital that takes no risk, or in removing the risk ex post facto by bailouts, you simply steal from the poor to give to the rich. You become a reverse Robin Hood. That’s what bankers are asking us to do for them today, and that’s what we in the US have already done, big time.

The third reason to reject the Dimon and EU plans is moral hazard. To state the obvious, risk is risky. It can create loss, a dead loss of sunk investment. The Crash of 2008 taught us that. Trillions of dollars of value in stocks, mortgages and homes vanished because bankers took too much risk in funding liars’ loans and couldn’t pass that risk onto others (mostly other banks and governments).

Personal responsibility for one’s conduct and bad decisions is not just a moral imperative. It’s an economic one, too. Reduce personal responsibility for loss and people begin to take excessive risk, losing their money and ultimately yours and mine. That’s the meaning of the continuing bank bailouts over the last three years. And that’s the reason why people everywhere, including even the Tea Mob, have a right to be furious.

But the last straw is my last point: nationalism. Nationalism underlay all the last century’s bloodbaths. It’s a form of tribalism and a second cousin to racism. It’s something that— outside the soccer stadium—we must shed if we are to become fully civilized. Wherever it rears its ugly head, it makes trouble.

Nationalism was the primary impetus for our last Great War. That war could have extinguished our species if nuclear weapons had come a little earlier. Ever since, men and women of wisdom and good will have tried to reject nationalism and establish uniform, neutral and global rules of conduct.

That’s why we have Bretton Woods, the United Nations, the World Trade Organization, the International Monetary Fund and the World Bank. That’s why we have the EU itself. In slow but steady baby steps, were are tying to lay down transnational, global rules at least for commercial and economic conduct, so that nationalism and greed do not lead to war or economic collapse, as they did in the last century.

That effort is one of the most important features of modern civilization. It is essential is our species is to survive. Adapting to and fighting climate change will require the same sort of international cooperation that we now have in finance and trade.

So here we have this laudable, global trend toward international cooperation in many things. And up until recently, bankers have been part of it.

But now that they face responsibility for their gambling and swindling, now that their own exorbitant pay is on the line, they are eager to backslide.

Like the parricide who claims he’s an orphan, they tout the old human devil, nationalism. Banker Dimon wants American banks excepted from EU capital-reserve requirements because, well, they’re American and they’re therefore ours. Europe’s scoundrels rely on the national pride of Germans and the French to squeeze those freeloading Greeks with harsh austerity, while the bankers get off with only a fraction of the “haircut” they deserve.

You can already see the awful consequences of these scoundrels invoking the devil. Some are predicting the exit of Greece from the EU, the dissolution of the Eurozone, or even the breakup of the EU itself. The malefactors are willing to sacrifice the very EU they took so long to build—one of the crown jewels of human history and a bastion of human rights to rival our own—in order to protect bankers from their own bad decisions. That has got to be one of the worst-ever perversions of human values.

We are sliding into a global depression because of a massive, international failure of will. Bankers have gone rogue, not just here in the US, but globally. In refusing to accept the consequences of their bad behavior, they are flouting basic principles of human responsibility, economics and capitalism itself. And people who ought to know better—politicians, business people in the real economy, central bankers, and economists—are letting them get away with it.

We will not bring the global economy back into balance until we bring the errant bankers to heel. Even China, which has done a pretty good job of keeping its bankers under control, can’t help. It has, after all, less than a quarter of us. The global community has to step up and tell the parricide orphan “no, you don’t get mercy, excuses, bailouts or continuing bonuses for the problems that you caused.”

If anyone deserves a bailout, it’s the depositors and other innocent creditors of the errant banks. Make them whole, and you avoid runs on banks and financial panics. Make the bankers who caused the problem whole, and you penalize the innocent and undermine the global capitalist system.

FDR had the right idea eight decades ago with federal depositors’ insurance. Something like that, perhaps with wider sweep, is all we need to save our economic system, both here and in the EU. We don’t need to reward the parricide orphan.

permalink

Why an American Jew Supports Palestinian Statehood

2011-09-23T23:39:00.004-04:00

Is the Palestinian-Israeli dispute about land or about religion? Isn’t that the question?

If it’s about religion, I don’t want any part of it. I may be a Jew, but I’m first an American. I am grateful to the point of tears that our Founders let anyone—including people a lot more religious than I—practice any religion, or even atheism, as long as it doesn’t involve human sacrifices or break other basic laws.

Religion is a personal thing. If the Crusades and the several hundred years of bloody wars between Catholics and Protestants have taught us anything, they should have taught us that. Try to force your religion on others, and you condemn yourself to perpetual, senseless war.

If we insist on everyone worshipping the same God we do in the same way, we can kill each other off until our species goes extinct. Now, with nuclear weapons, we have the means as well as the motive. No doubt other intelligent life in the Universe would be happy to be rid of us if we think that way.

But in my view, in reality, the dispute is about land. The crux of the matter is a bit of unfortunate history.

After we Jews dispersed, they persecuted us for centuries. Oddly enough, they hated us for precisely the same reasons that many Americans now hate Muslims. We dressed differently. We wore funny (to the majority) clothes, including the tefillin (fringes), kippah (yarmulke) and sideburns. We kept our own customs and traditions and our own way of life.

And for that the majority accused us of killing Christ, killing Christian babies, and other calumnies too horrible to tell. So the Nazis could easily demonize us and slaughter us in the Holocaust.

The Israelis are children of the Holocaust. They are its Darwinian survivors. They are tough as nails and self-righteous as priests because of what they or their ancestors endured. They believe only their God and their religion let them survive.

These tough, visionary people didn’t think that anyone in the world would accept them. So they dreamed up the idea of returning to “Zion,” a place their ancestors had lived in two millennia before.

That was a beautiful, compelling idea. Leon Uris captured it dramatically in the classic novel Exodus. When I read it as a kid, the sheer beauty of it brought me to tears. It was an historic coming home.

But there was only one problem: other people—Arabs—were living there, too. The Arabs living there were no match for the Jews who had survived the Holocaust. They were not as smart or as tough. There were not as worldly wise and politically sophisticated. They did not have behind them the guilt of a world that had acquiesced in the Holocaust.

So they lost in international politics. And when the UN and the US declared Israel a state, they lost in the battle that they started.

So they fled.

But does that mean they have no rights, no dignity? Does that mean they are not people, just like us? I don’t think so.

The Nazis, too, thought they were tougher, smarter, purer, better and more “efficient” than the rest of us. Maybe they were. But did their “superiority” give them the right to rape, kill, starve, imprison and burn us Jews or anyone else?

The Second World War, I thought, answered “no.” Fifty million people died to prove the point. Being “better” than others creates obligations, not rights to trample them. Isn’t that what World War II was all about? Might doesn’t make right; it makes responsibility.

Although I’m a Jew and a sometime Israeli partisan, one thing always stuck in my craw about Palestinians. Like African-Americans in our own country (before Dr. King and President Obama) they “didn’t get no respec’.”

Why not? Aren’t they people, like the rest of us? When you prick them, do they not bleed?

When I listen to people like Hanan Ashrawi or Mahmoud Abbas, I hear well-educated, reasonable people just like me. I like them. I respect them.

Do I want to marginalize them? Do I want to dispose of them? Do I want the same thing to happen to them as happened my own people in the Holocaust, or to the Armenians, to the Rwandans, to the Albanian Kosovars? Hell, no.

As I am Jewish and remember the Holocaust, I want no more genocides, no more ethnic cleansing, and no more oppression. Ever. Period. Not of us or anyone, including Palestinians.

So when Mahmoud Abbas stands up in the United Nations and requests statehood for his people, I ask, “Why not?”

He’s a reasonable man. He’s already proved his ability to provide some security for Israelis. His people have lived in their territory for as long as Israelis have lived in theirs, maybe longer. Does he not deserve to stand before the world as leader of his people? Does he not deserve a state?

Unlike his Hamas rivals, Abbas is no demagogue. He doesn’t talk about driving Israelis into the sea—when any attempt to do so would cause unthinkable suffering to both sides. He just wants recognition for his people, living on their land, so he can bargain as a sovereign and end this nightmare of conflict that has split the world into warring camps.

Let’s give it to him. Let’s acknowledge that his people, just like the Israelis, have a right to exist and to live and to bargain with the Israelis to settle this controversy.

All reasoning minds want and expect a two-state solution. So let’s set up the two states that can negotiate the end game.

Abbas may not be Nelson Mandela, but he seems genuinely interested in peace and security, which poll after poll shows 70% of both sides want. Isn’t it time to end Apartheid and bring that long-suffering region into the twenty-first century? After 63 years of endless conflict, what the hell do we have to lose?

permalink

Snap!

2011-09-20T01:36:00.002-04:00

To the wolf, the sound of a trap slamming shut is a terrible thing. A shaft of pain accompanies the noise. To the sheep and the farmer, it is a comforting sound. It signifies one more predator off the field.

So it was yesterday when the President promised to veto any debt-reduction bill that does not raise taxes on the wealthy.

The henchmen of the middle class’ assassins—Messrs Boehner and McConnell—apparently didn’t feel the pain. After all, they are not the wolves; they are the wolves’ shills. So blithely and dumbly they stuck to their script. Boehner went so far as to decry “this administration’s insistence on raising taxes on job creators[.]”

But people who are unemployed or worried about becoming unemployed are tired of hearing that refrain. If the rich who shun taxes are “job creators,” what jobs do they offer? And when will they start?

Their taxes are nearly the lowest they’ve ever been. Corporations have the largest collective cash hoard in memory, variously estimated as between $1.5 and $2 trillion dollars. And their costs to borrow more are next to zero, thanks to the Fed printing money.

This situation has pertained for more than a year. So where are the jobs?

There are only two possible answers. Either the “job creators” are waiting to remove the President from office and make their kleptocracy complete. Or, whatever happens in politics, they won’t create jobs until demand picks up. In the second case, our economy has to pick itself up by its bootstraps without their help. Some “job creators”!

Everyone who can read and reason now knows there is no other realistic possibility. Cutting taxes on the rich won’t produce jobs—not even if we cut them to zero—because their goals have nothing directly to do with jobs. They want to make money by selling things, which requires demand. You can’t sell things if you have no customers. Or maybe they think they can “run the table” by clearing all progressive or even centrist opposition if they just keep the myths and lies alive a little longer. How even that will create demand they don’t say.

As always, the President’s timing was impeccable. He waited for the news to sink in about the Republican debate in which every single GOP candidate rejected a hypothetical debt-reduction deal with ten parts spending cuts and one part tax increases. Now everyone who follows the news knows that the GOP is the American Taliban, following bearded imam Grover Norquist to martyrdom regardless of the consequences—the same Norquist who would turn our students into indentured servants.

The President’s proposal of yesterday is not too far from the hypothetical case that all Republican candidates rejected. It consists of $800 billion in tax increases for $3 trillion in debt reduction, or a ratio of spending cuts to tax increases of a bit less than three to one. If the GOP’s presidential candidates are serious about not accepting a ten-to-one deal, the party surely won’t take three to one.

Thus, you might say all this is political theater. But more to the point, it’s all part of teaching the retarded. Informed people who follow the news know what the GOP’s real goals are. The so-called independents—people who don’t know or care enough to focus for more than a few minutes a year—need to be taught.

So we are in a nationwide course in experiential learning, and the President is our teacher-in-chief.

For people like me, who’ve followed the President closely for four years now, none of this is a surprise. He is a master of timing. And as a former professor he can assess his “students’” abysmal state of ignorance and indoctrination.

With so many biased against him based (consciously or unconsciously) on nothing more than his dual race, he could not risk seeming intransigent himself. So he had to let the GOP drive itself into an extremist corner. And now it has. There’s nothing it can do. Like the Taliban, it has tied itself up in knots of orthodoxy. Imam Norquist will have his due.

This is just the first of many traps the President will spring as the campaign season gets under way. When the series is done, the wolves’ shills will be boxed, caged and hog tied, and the President will win. The more vital question is whether he can bring the House with him and enough of the Senate to overcome the automatic filibuster and get something done.

Yet there is one other question. How long will it take his fair-weather supporters—the perpetual carpers, whiners and lamenters—to see the game and wise up? The answer is largely of sociological, not political, importance because at the end of the day, they will have to support him. The alternative will just be too horrible, even if it’s not Perry. Those who didn’t learn to vote for the lesser of two evils in 2000 should have by now.

permalink

Coming Out!

2011-09-14T22:52:00.105-04:00

[For a brief comment on Elizabeth Warren’s Senate run, click here.]

This fall, I’m “coming out” from my anonymity.

My reasons for anonymity were well considered, and I’ve explained them in some detail. What has changed? Well, when your wife, sister and best friends all say the same thing, it would be impolitic not to listen. They all advise me to edit these essays, organize them and publish them electronically in book form on various topics. With well over 500 essays, there are at least two or three books here.

The same idea had occurred to me many times. Much gets lost in this huge blog, whose 500-plus index entries are repeated under various headings. And many a post could benefit from cogent, organized collection with others.

You can blog anonymously. You can tweet anonymously, if you like bumper stickers and the spirit moves you. But can you publish books anonymously?

I don’t think so. When people take the time and trouble to read a whole book of nonfiction, they want to know who you are. Authors like “George Eliot” and “Andre Norton” could get away with pseudonyms for fiction when the minds of the “fair sex” didn’t get the respect they deserved. But who in this age of beggared privacy wants to read a whole book of fact and analysis not knowing who the author is? My sitemeter’s many hits on my unrevealing personal profile suggest, “Not many.” So does a commenter.

One other thing has changed, too. I’ve retired from full-time teaching. I still dabble in short courses, and I may yet teach a full semester under conditions known only to my Dean. So my major reason for staying anonymous—that my blog might impair my professionalism before full-time students—just doesn’t apply any more.

There are other reasons for keeping anonymous, namely, avoiding the “flag” of ideology, trying to get readers to focus on my ideas and not me, and trying to do some good without grabbing credit.

All are good reasons. But as it turns out, all are a bit quixotic. Ideological readers will classify and dismiss you on the slightest pretext. Many would-be readers appear already to have done so, moving on to the next blog after spotting “Obama” in my blog description. Such is our partisan divide. You cannot persuade those who habitually think ad hominem to do otherwise in a single blog, especially if you can’t get them to read it.

As for taking credit, well, Sarah Palin taught me something. Here’s a woman who has little to offer but greed, ignorance and stupidity. Yet she’s gotten millions to pay serious attention to her, and she’s made millions doing it. Talk about exploiting your fifteen minutes of fame!

What’s her secret? Relentless and shameless self-promotion. In our time, and maybe in all times, that seems to matter even more than ideology and the merit of one’s ideas.

We all have our faults. When the shameless self-promotion genes were passed out, I wasn’t in the queue. I always thought that good ideas would prevail on their own merit, without special advertising. Was I naïve!

So, at the age of 66, I’m going to try to learn something new. I’ll be like a baby learning to walk. Probably I’ll be comical. But please laugh with me, not at me, as I try to learn a new skill that may get my ideas more exposure.

Blogs are free. I have nothing against free. I like free, especially when I otherwise would be the one paying. And with the reduced appetites of age, I’m comfortable enough not to need an income supplement. So I’ll keep this blog up and free, but not the books I derive from it.

Samuel Johnson (the author of the first English dictionary) wrote, “No man but a blockhead ever wrote except for money.” I’m not quite sure what he meant by that. In his time, landed gentry wrote without much care for money because they didn’t need it. Maybe Johnson was describing then-rare writers like him, who didn’t have titles or land.

But I think he was touching on something deeper: writer’s insecurity. How do you really know that people like what you write? Talk is cheap and blogs are even cheaper (let alone tweets). The only way you really know whether people like what you write is whether they are willing to shell out a few bucks for it. It’s a kind of applause that can’t be denied. I guess I want to test whether my non-academic writing can garner some of that.

Another reason why I want to come out is that I have more to tell. I’ve withheld much of my personal history because it would identify me. In doing so, I’ve lost some credibility that my education, multiple careers, and life experience might give me. Once I come out, I can describe the relevant facts of my life boldly.

The final reason for coming out is people. There aren’t that many commenters on this blog. But I feel I’ve come to know some of the repeaters. By holding myself aloof and anonymous, I can never really know them. I’d like to exchange e-mails (as much as I have time for) with some and maybe even meet some in the flesh. You can’t do that anonymously: masked balls are out of fashion.

So the only question left is when. As I learn the new (for me) skill of self-promotion, I’m going to create a little suspense. I like Thanksgiving. As I’ve mentioned in a previous post, it’s my favorite holiday.

Thanksgiving celebrates no military victory, no defeat, no religion, no saint or sinner, no political or social cataclysm. It venerates the simple beauty of native people, misnamed “Indians,” taking clueless white visitors under their wings and teaching them how to survive a first harsh winter in a new land. It’s a model for pure human and ethnic relations that could only have come from the Garden of Eden, which we of European ancestry left when we started to colonize.

So that’s the day I’ll come out. It’s a day of leisure when readers can reflect on what really matters in life. Then you’ll learn all you want to know about me (maybe more!), and I’ll be a real face, not a question mark.

Until Thanksgiving, then, when I come out!

P.S. I will keep blogging in the interim, but at a slower pace. I’ll also be working on those books.

Footnote

Just after I wrote a first draft of this post, I read a comment from a reader named Janet Camp. It’s so apropos that I publish it below verbatim:

Hello Jay,

Your writing is clear and concise, but unless you “come out” and use your real name, it’s just more words and cannot make much difference. Your NYT post today was excellent as well, but again, what does “Old Curmudgeon” tell us? It helps that you got the #1 slot, and I will visit this blog again, but I truly wish more bloggers would be more public about their backgrounds.

Elizabeth is Running!

This may be old news to many readers of this blog, but it’s now official. Elizabeth Warren is running for the U.S. Senate in Massachusetts. She’s running against Scott Brown, the not-too-crazy Republican who took Ted Kennedy’s old seat in a special election after his death.

Brown is smart and popular, and he’s got a big head start. And this is Warren’s first political campaign. So she will have a tough race. But I can’t think of anyone I would rather see in the US Senate, or anyone more worthy to sit in Ted’s old seat.

I’m sure Ted is pulling for her. I’ve just fulfilled my pledge to donate $500 to her campaign. If you want to take our country back to the side of reason and restore our middle class, I hope you’ll do your part, too.

This is a woman who’s fought courageously for a fair shake for ordinary people for decades, first as a law professor and then as an appointed Obama-Administration official. She’s fought for us despite the most vile chauvinism from the likes of Richard Shelby and others. Now she needs our support. If you’ve ever lamented the dearth of truly outstanding women in politics, now’s the time to dig deep.

permalink

The Lessons of 9/11, Ten Years Later

2011-09-12T08:25:00.005-04:00

Now we can relax, think a bit and indulge our hindsight. There was no recurrence, despite reports of credible and specific threats.

Our defenses are working. So is our offense: our superb but secret counterintelligence, our ninjas, and our drones. If the best defense is a good offense, we have finally hit our stride, under a president who understands foreign cultures and how to deal with them [end of post].

As it turns out, an effective response didn’t require declaring war on Iraq or any of the sixty countries that, knowingly or not, harbor terrorists or their sympathizers. We didn’t have to take on the Taliban either. All we had to do was go after the tiny band of extremists who are threatening us.

That we are now doing, after ten years of flailing about with grossly disproportionate and therefore ineffective military responses.

Al Qaeda was once our worst enemy. But now it’s on the run. Bin Laden is dead, executed by our modern ninjas, of which we have a whole regiment. So are most of Al Qaeda Central’s leadership.

The terrorists can’t use modern telecommunications against us because we can hear them. They can’t use air power because we can see them and shoot them down. They can’t use plague bioterror weapons because they’d kill themselves and theirs first. They have trouble moving among us because they throw off clues the way a sneezing flu patient throws off viruses.

They can only use stealth, as they did on 9/11. But now we are ready. The element of surprise is gone. And now the whole civilized world is with us, sharing intelligence and cooperating to shut Al Qaeda down.

Most of all, the Arab Spring has made Al Qaeda irrelevant. Its self-professed goal was to free Muslims from the rule of Western-dominated tyrants, especially in Saudi Arabia and Egypt. That’s why Bin Laden and nearly all the 9/11 hijackers were Saudis, and Al-Zawahiri, Bin Laden’s second in command (still at large) was Egyptian.

But now the Arab Spring is doing that, with far less bloodshed and far more success than Al Qaeda ever enjoyed. The Saudi Princes likely will be the last tyrants to fall, but their days, too, are numbered.

And it won’t be explosions in Western democracies that defeat them, but ordinary Arabs and Muslims seeking the same opportunities that people elsewhere, including the BRIC nations, now have. As many already have done, Arabian and Muslim martyrs will risk their lives not to kill Americans and other Westerners, but to secure their freedom. They will do so just the same way every other people has throughout history: by struggling, fighting and, where necessary, dying for it.

So now, with the aid of hindsight and a growing degree of confidence, we can see more clearly the lessons of 9/11. Most of them are negative, as follows:

1. It’s not a good idea to threaten sixty foreign nations with war, simply because they may harbor inimical non-state actors.

2. It’s not a good idea to make war on an already war-ravaged nation (Afghanistan) just because its current leaders won’t turn over a terrorist. Even Teddy Roosevelt, when he famously said "Perdicaris alive or Raisuli dead!" had a specific country, person and location in mind and means to carry out his threat quickly and with minimal cost.

3. It’s equally not a good idea to start a war in an irrelevant third country (Iraq), using the pretext of a terrorist attack by people from and hiding elsewhere.

4. When first responders have to enter a hellish environment in the aftermath of a terrorist attack, it’s best not to do “photo ops” that encourage them to doff their protective gear, lest thoughtless bravado injure or kill them as terrorists could not. And it’s a good idea to give them radios that work, so they can hear orders to evacuate. Get it, Rudy?

5. It’s generally not a good idea to make war on a nation simply because small bands of terrorists are hiding there. Doing so incurs the enmity of that nation’s leaders (legitimate or not), its people, and its casualties and survivors from “collateral damage,” who otherwise might be on your side.

6. It’s best not to elect “deciders,” whether presidents or mayors, who are stupid enough not only to do the things noted in points 1 through 5, but to brag about their blunders and call them “patriotism.”

7. Dwelling morbidly on losses from an attack can promote fear and trembling, which nearly always leads to overreaction and poor decisions in the face of danger.

8. As FDR so well put it, the only thing we have to fear is fear itself. Our continual obsession with 9/11, including incessant replays of the Twin Towers falling, only aids and abets our native enemies within. Fear and overreaction have done us more harm than any terrorist attack we ever suffered, including 9/11.

Although these negative lessons are by far the most important, 9/11 also taught us some positive things, to wit:

1. A nation of 300 million people, with the strongest and most innovative economy in human history, can be incredibly resilient, as long as it retains confidence in itself and does not succumb to fear.

2. Responding effectively to attacks and the threat of encores requires both defense and offense. Cowering behind the TSA at home is not our best policy. But neither is making war on people who had nothing directly to do with the attacks, as we have done and are doing in Iraq and Afghanistan.

3. Innovation and imagination are the best responses to new threats. What better way to counter terrorists bent on killing innocent civilians than sending ninjas out to kill them [end of post]?

4. Use of force proportionate to a threat is not only right and moral. It’s also more effective because it creates less unnecessary opposition and fewer unintended consequences.

5. A nation that acts boldly, quickly, proportionately and cleverly need not fear, just as fear will not help a nation with stupid, unimaginative leaders.

permalink

Excising our Metastatic Cancer of Finance: Temporary Market-Based Nationalization

2011-09-08T11:26:00.004-04:00

Over three weeks ago, I wrote about our metastasizing financial sector. If not removed, its all-consuming cancer will kill our national economic recovery.

I left that post up while on a trip abroad because I believe it to be one of the most of important I have written this year. We cannot restore our economy without first getting our rogue financial sector under control. Our markets seems to recognize this point; they have sent financial stocks into a tailspin. They know who is at fault.

The horse of financial reform must precede the cart of jobs. We cannot create new jobs, let alone in manufacturing, while we seduce the best minds of yet another generation into useless paper-shuffling with the promise of obscene, undeserved and early wealth.

However attractive getting rich quick from financial legerdemain may be to individuals, it creates no real wealth for society. On the contrary, the gambling and swindling that have become the hallmarks of our rotten financial sector, especially in derivatives and commodities, threaten to subvert our entire economy once again.

This time, their metastasis likely will be terminal. Nowhere in the world is there enough government money to bail the banks out again. Not in North America. Not in Europe. Not in Japan. And not even in China.

So when I said that reforming finance, not jobs, is job one, I meant it. There will be no employment recovery, and no relief from a lost decade for mature economies in North America, Europe and East Asia, unless those economies collectively hold their banks accountable and reform their financial systems. The cancer must be removed, or the patient will die.

But how to excise it? In my earlier post, I promised solutions. Here I propose one.

To be effective, the solution must be radical. Last year’s so-called financial reform, still under sustained attack by armies of lobbyists in the regulatory process, just won’t work. It’s too little, too late, too weak, and too vulnerable to subversion by the very powers it seeks to control.

The basic problem is concentration of economic power. Simply put, our big Manhattan banks have taken control of virtually every lever of power in our society. We must cut them down to size, by a least a factor of three. Otherwise, they will stay in control of our political process and remain “too big to fail.” The ultimate consequence, in the inevitable collapse resulting from unrestrained financial “innovation,” will be a financial flood to big to bail.

Regulation alone cannot do the job. The problem is the big banks’ size. That size carries with it enormous political and commercial power, plus an implicit government guarantee against loss and therefore immunity from market forces, which increases moral hazard.

Our big banks are in the market but not of the market. They subvert capitalism itself, while paying lip service to market principles for consumption by naïve voters and legislators.

The goal of financial reform should be to split up the big banks in three ways. First, we should separate their commercial banking operations from their investment banking and proprietary trading, including trading in derivatives and commodities. The split should be practical and real. Then we should back it up with legislative prohibitions against recombining and cross-ownership, along the lines of the old Glass-Steagall law but more nuanced and stronger for our modern age. Perhaps we should also separate retail (personal) banking from commercial banking, the better to protect consumers and stem the recent tide of high-handedness and swindling.

But how to reach these goals? Our antitrust laws are impotent. They only forbid anticompetitive mergers and acquisitions, and then only those that have not yet become stale or accomplished facts. Our laws give government no power to split up banks too big to fail. Furthermore, our Constitution forbids impairing the obligations of contracts or taking private property without just compensation. And longstanding political and judicial culture prohibits government from messing with the private economy in any significant respect.

In the last century, there was talk of nationalizing the banks and treating them like public utilities, monopolies over money, if you will. Many nations did just that, including our European trading partners. But, however temporary or interim it might be, “nationalization” has the ring of socialism and would evoke storms of protest and interminable litigation here. Nationalization by decree therefore would be impractical and likely politically impossible.

So are we stymied? I don’t think so. What about “market-based nationalization”? Why can’t the government, perhaps through the Fed, simply buy up the big banks at market prices, dismiss management and the boards of directors, hire teams of finance and economic experts to unscramble their eggs, and sell off the pieces to private investors, perhaps even at a profit?

The crux of the matter is leverage. The big banks have trillions of assets, which the government could never buy on its own. But, as a result of their gambling, swindling and general mismanagement, they also have trillions of liabilities and risks. The net result is a pittance by the standards of our recent bank bailouts.

For example, as of today (September 8, 2011) Morningstar reports Bank of America’s market capitalization as $ 74.9 billion. Buying control would take about half that, or about $37.5 billion. By recent standards of bank bailouts, that is pocket change.

A leak or announcement of the government’s intention might cause the market price to rise in anticipation of a government purchase. Or it might cause the market price to fall even further, in anticipation of a breakup, a loss of the implicit government guarantee, and/or further regulation. But in any event buying control would be orders of magnitude cheaper than bailing out another failure, even without accounting for the expected income from selling off the pieces later.

By buying, splitting up, and selling off the top five or six banks, the government could recreate a rational, competitive banking systems in two ways. First, it could sell off the retail banking, commercial banking, investment banking and trading (including derivatives) operations separately. Second, it could create regional diversity and restore community banking by selling off regional or local offices separately. In other words, the government could re-create a vibrant, highly competitive banking system like the one that existed before the most recent waves of mergers made our big banks “too big to fail.”

None of this would involve “nationalization” in the old twentieth-century sense. Government intervention would be through securities markets and temporary, only for the time necessary to analyze the banks’ operations, figure out the best way to unscramble the eggs, and sell off the pieces.

Private banking investors would have no choice but bid if they wanted a piece of the action, because, at the end of the process, none of the big banks would remain. Gone would be their implicit guarantees, their increased moral hazard, their entitlement to bailouts, and their political and economic dominance. Market forces would resurge and rationalize our finance sector in accordance with classical capitalist economics.

How would the downsized banks make big deals? The same way they did before the latest waves of mergers made them “too big to fail” and caused market failure. By syndication. Banks would have to collaborate on big deals, bringing the advantage of “more heads than one” to deals involving significant financial risk. Thus the downsizing would reduce systemic risk as well as moral hazard.

Competition would benefit. Local and regional control would benefit. The banks would no longer have enough money and clout to buy legislatures and corrupt the political process. And regulation of the separate sectors (retail, commercial, investment and trading) could be calibrated separately to avoid regulatory overkill. Once the government had downsized the biggest tumors, market forces would do the rest.

This would be a bold, radical plan. But it would work without damage to fundamental free-market principles. It would restore market forces to a sector that long has eluded them. And the end result would be a highly competitive, much smaller and more rational financial sector without the power to corrupt government, command bailouts and make the public pay for its mismanagement and mistakes.

permalink

Diatribes of Jay

The Perfect Dupes

France and Germany versus the Psychopaths

Are All Bankers Psychopaths?

Why Romney Would Make a Bad President

Signs of a Sick Democracy: the First New Hampshire “Debate”

Eleven Questions for All Presidential Candidates

Huntsman v. Romney

Thank You, Iowa, and Hello Huntsman

The President’s Recess Appointments

Bye, Bye American Media, or Why I’m Dropping the New York Times

Update: 1/2/12: There is Intelligent Life on Bloomberg.com

George Washington and Vladimir Putin

The Real Antichrists

Our Banks, Our Media, Oil and War

Jon Huntsman: A Good Man Ignored

Resurrecting Time

The Casinos Won, so Buckle Your Seat Belts

Our Ten Grave National Problems: How Long Have they Festered?

Why Obama Should Win (and Why I’m Donating Again)

My (Never-Given) Matriculation Speech

Common Sense about Pakistan

Yellow Journalism and Electric Cars

Thanksgiving: A Good Day to “Come Out”

Can Markets Be Wrong?

Two Things You Can Do Right Now to Help Save America

Islamophobia: Three Lies

Europe’s New Bailout Plan

A Second Great Depression

Dexia = AIG Redux, or Einstein’s Definition of Insanity

The Arab Spring, Ten Months In

Capitalism Isn’t Broken; Wall Street Is

Zuccotti Park, or the Power of Numbers

How Rick Santelli Killed the Housing Rescue

Us Against Them

Correction: 9/7/11 5:00 pm

Party of Extremists

Steve Jobs, An American OriginalR.I.P.

The New Royalists (and the New Guillotines)

Bankers’ Chutzpah

Why an American Jew Supports Palestinian Statehood

Snap!

Coming Out!

Elizabeth is Running!

The Lessons of 9/11, Ten Years Later

Excising our Metastatic Cancer of Finance: Temporary Market-Based Nationalization

Steve Jobs, An American Original
R.I.P.