The Mound of Sound

The insanely bellicose Bush Doctrine continues to stoke the world’s arms races (in case you didn’t know, there are several underway).

Russian president Medvedev says his country will have a “guaranteed nuclear deterrent system” up and running by 2020. BBC reports that Medvedev is calling for a new fleet of nuke subs to go along with the missile shield programme.

He said it was necessary to build “new types of armaments”, and to “achieve dominance in airspace”, according to quotes carried by the Itar-Tass news agency.

“We plan to start serial production of warships, primarily nuclear-powered submarines carrying cruise missiles and multifunctional submarines,” Mr Medvedev said.

Before he stepped down to become prime minister, Vlad Putin, announced Russia would develop its own new generation of nuclear weapons and an advanced missile designed to defeat the latest American anti-missile systems.

Can somebody tell me why we’re starting this Cold War thing again? Just who is getting precisely what out of this? Or is it just bloodyminded idiocy?

Actually, that’s where you’re wrong.

Listening to both sides on this crisis, there’s one thing conspicuously absent in their discourse – the rest of the world. Both sides on the bailout debate act as though this was an internal matter, no dirty linen to be aired in public. Americans – whether that be the elitists or the mob – will sort this out as they see fit.

They don’t seem to understand that they forfeited that privilege a long time ago when they became so woefully dependent on foreign lenders to finance their wars, their tax cuts, their government and, now, their bailout options.

The United States government does not have a spare trillion dollars stuffed away under some mattress. That trillion dollars is sitting in a whole bunch of foreign banks in accounts belonging to a whole lot of foreign lenders. These guys are watching what’s going on very, very closely because they’ll be the ones to decide whether America gets the funding for this bailout and on what terms.

When you’re feeding yourself from the begging bowl, it pays not to make your benefactors nervous. Right now, the United States of America, its government and its financial institutions are making foreign lenders very, very nervous.

If these lenders get too nervous and if they perceive America as too weak, too indecisive, there’s two things they might do right off the bat – demand higher interest rates and, worse, lend to America in another currency or a basket of currencies, anything but unstable US dollars.

The currency swap issue has been a Sword of Damocles hanging over America’s head for some time. An unnoticed live microphone at a recent OPEC meeting broadcast secret discussions about taking the oil market off the America dollar standard and moving it into Euros instead.

America gets huge benefits from being able to trade and borrow in its own currency. If its currency plummets against other currencies, its foreign debt obligations, all in American currency, have an offsetting decline in value. However if the US has to begin paying in other, stronger currencies, it will face some real economic problems.

So Johnny McCain can play electoral silly bugger if he likes and the American people can howl in rage and frustration but their country faces dire consequences if its leaders don’t (as Krugman writes) start acting like adults and get a reasonable bailout plan in place and soon.

They really don’t have any choice. I’ll bet John McCain knows that too.

The Canadian Judicial Council has rejected out of hand a ploy by uber-right, religious nutjob Charles McVety to have Chief Justice Beverly McLachlan pulled from the bench for supposedly playing an inappropriate role in getting the Order of Canada for Dr. Henry Morgantaler.

The Council said the complaints – 11 in all, comprising copies of McVety’s own letter signed by supporters – were utterly without merit and based on hollow allegations readily disproved by publicly available information.

McVety, greaseball to the end, couldn’t resist taking a swipe at the Council. “When you’re appealing to the very council that the chief justice is a part of, fairness is not to be expected and in my view fairness has not been delivered by the council.” What a sphincter!

The Guardian is reporting that George w. Bush derailed Israeli plans for air strikes on Iranian nuclear facilities earlier this year. Bush is said to have told Israeli prime minister, Ehud Olmert, that Washington didn’t believe that Israel could take out Iran’s nuclear plants without a prolonged air campaign that would ignite a major Middle East war. He also said it would likely spark Iranian attacks against American forces in Iraq and Afghanistan and on oil shipping in the Persian Gulf.

The newspaper’s account is third hand. They’re relying on statements from two aides of a European head of state who informed them of what Olmert had told him during a visit to Israel. So, Olmert reportedly revealed this to the European head of state who subsequently related the account to his aides who, in turn, let it slip to the English paper.

Does this rule out an American air campaign against Iran? That remains an open question. There is some speculation that, should Obama win the November election, Cheney might pressure Bush to take out Iran’s nuclear facilities before leaving office.

America’s credit crunch crisis is trouble for plenty but a golden opportunity for some – like Senator John McCain.

McCain, while he appears to be suffering in the polls due to voter discontent with the Republicans and their ways, has decided his way out may be to turn those lemons into lemonade. How? By positioning himself to claim that he is the guy who saved America’s bacon in this emergency.

Forget all the Repug spin about this crisis being the fault of the Dems. The whole derivative scam was the handiwork of McCain’s own cherished economic advisor, former Senator Phil Gramm, who, while chairman of the Senate Banking Committee instituted and pushed through two pet projects, the Gramm-Leach-Bliley Act of 1999 and the Commodity Futures Modernization Act of 2000. “Commodity” “futures” “modernization” put’em all together and they spell poison for the masses.

Throughout his campaign, McCain has regularly revealed his avaricious, craven, manipulative and exploitative talents and they are powerful indeed. He’s also shown a steady hand at the worst of Rovian tactics.

Credit crunch. Problem. Widespread public ignorance. Advantage. Populism factor. Enormous. Fear. Bonus.

Most Americans have a weak, incomplete or misguided understanding of just what’s going on. It’s hard to blame them, given the deterioration in the quality of their mass media which no longer bothers trying to understand or analyze but offers itself up as a repeating station for political messaging. What filters down are words like “greed” “700-billion dollars” “trillion dollars” “Wall Street” “bail out.”

What’s not explained to people is constipation. How is the American economy dependent on the free flow of credit and what risks does the economy face of America face if their country encounters credit constipation? This is a subject that doesn’t have high drama. There are no heroes, no villains, no guilty faces to throw up on screen. Here’s how Krugman sees it. From the New York Times:

…one non-rank-and-file Republican, Senator John McCain, is apparently playing spoiler. Earlier this week, while refusing to say whether he supported the Paulson plan, he claimed not to have had a chance to read it; the plan is all of three pages long. Then he inserted himself into the delicate negotiations over the Congressional plan, insisting on a White House meeting at which he reportedly said little — but during which consensus collapsed.

The Iraq War scam shows that an awful lot of Americans don’t want to know. They get stirred up and then they react. That’s what John McCain is counting on to turn his pig’s ear into a silk purse. When the mob hits the streets with their torches and pitchforks, McCain knows the safest place to be is right in front leading them on.

He knows that it’s critical for him to ride this wave. He has to be seen to be the voice of the American public’s anger and frustration. If that means killing the deal, he’ll do what it takes.

McCain realizes that, with the election just weeks away, he might just pull this one off. If he wins, kills the bail out, and it backfires on the American economy, the election will have come and gone before people start pointing fingers at him. By then he’ll either be safely headed for the White House or drifting off to retirement.

If, however, he loses, he can claim the mantle of champion of all those upset Americans who are being ignored “as usual” by those damned politicians in Washington, those elitist bastards. Once again, he wins.

Will the American people see through McCain’s gambit? I wouldn’t bet on it. With his recent shenanigans about suspending his campaign and postponing debates he might have overplayed his hand. Then again, maybe not.

Steve Harper, echoing his American Idol, Mr. Bush and the Geezer McCain, says we have nothing to worry about, that the fundamentals of the Canadian economy are sound.

Does that sound familiar?

Then, yesterday, Merrill Lynch Canada released a report saying that we Canadians shouldn’t get smug about what’s happening in the U.S. and that we’ll be next to face our own debt and housing price crisis. I found that pretty hard to believe but the more I thought about it the more I had to wonder what if they’re right?

It may or may not be anecdotal but I recalled a recent study that showed that the average, first time home buyers in Vancouver were now paying something in the range of 75-78% of their combined, after-tax income on housing. A Vancouver starter home takes somewhere between three quarters and four fifths of a two income family’s take home.

Back in my day it was considered not just prudent but essential to keep one’s housing costs below 30% of net income. That got me wondering how this has changed so radically? How does a family get by while paying out three quarters of their disposable income on housing?

What if Merrill Lynch Canada is right? Don’t we need a government that’s on top of this now? If this danger is real, what measures, what policies do Canadians need to minimize the risks and impact? Is it really enough for Steve to tell us that the fundamentals are strong?

I don’t know but it seems to me that when it takes nearly all of a two job family’s net income to buy a house, maybe we are in an unhealthy and dangerous housing bubble. Why do I need to find that out from the Canadian subsidiary of a defunct, American securities giant?

In the greater scheme of things it’s no skin off my backside. My house may have soared in price but it hasn’t gone up a dime in value. It’ll still buy me the house next door and that’s about it. That’s just fine for those of us lucky to be in a low debt/no debt position but the operative word there is “lucky.”

What about the unlucky, the vulnerable? I’m talking about the new families that have just taken the plunge, hoping they can stay afloat long enough to get their debt down to something manageable. It’s easy to say “that’s their problem” except that it’s not just their problem, it affects all of us. It affects the prosperity and stability of our communities among other things. It certainly affects their ability to contribute to our communities, to our societies. We benefit when we keep them healthy.

Have our politicians been asleep at the switch, blinded by our petro wealth to the gathering perils to our people?

Housing bubbles are economic cancer. Read my post on that subject from yesterday. It cavasses the approach some other countries have used to tame the destructive fluctuations in housing stocks, to recognize that housing can’t be treated as just another commodity for speculation.

Don’t look for any answers from Steve “the fundamentals are sound” Harper. I want to hear from the Liberals on this. If this problem is nearly as bad as claimed by Merrill Lynch, we need to identify it and come up with solutions. The Americans have shown us what happens if you don’t deal with these threats promptly.

There’s no better time to get this on the radar screen than right now, in the midst of a general election.

There aren’t many places that achieve independence and failed state status on the very same day. Welcome to Kosovo. More or less sovereign since February 17th, the notional state appears to be on the verge of itself breaking apart. According to the International Crisis Group, Kosovo is teetering on the edge of de facto partition:

“Major violence has been avoided but the calm is deceptive”, says Alexander Anderson, Crisis Group’s Kosovo Project Director. “Divisions between Albanian and Serb areas have widened. If de facto partition continues, Kosovo’s Serbs south of the Ibar River will be at risk, pressure will mount to redraw borders on ethnic lines throughout the states of the former Yugoslavia, and EU membership prospects for these countries will fade”.

Meanwhile Serbia is putting its own chances at EU membership at risk by, “pressing the UN General Assembly for an International Court of Justice opinion on the legality of Kosovo’s independence.” Can’t be having that now, can we?

Kosovo currently gets a staggering 30% of its GDP in the form of transfers from ex-pats living in countries that have functioning economies. Much of the rest comes in the form of foreign aid. As an independent state it just doesn’t make much sense, except in fulfillment of Washington’s foreign policy.

Curiously, in its 4 September, 2008 update on Kosovo, the CIA World Factbook has excised any reference to what had been one of Kosovo’s biggest economic sectors – the smuggling of cigarettes and cement. Oh well, maybe they’ve all kicked the habit. With a per capita GDP of just $1,800, Kosovo has a fast lock on the title of Europe’s poorest state.

An Angus Reid online survey has found Canadians support the Insite safe-injection programme by a margin of 38% to 23% with the remainder undecided.

The Tories, however, seem to have done their job in convincing a lot of folks that Insite actually provides drugs to addicts. Fully 19% of those polled by Angus Reid believe this nonsense.

In BC and Alberta, Insite’s support numbers are better than 50%. It seems we’re less apt to swallow that “drug pushing” drivel pumped out by the right.

https://www.angusreidforum.com/MediaServer/3/documents/2008%2008%2020_Insite_ARF.pdf