The Mound of Sound

See, socialism isn’t all that bad. Now that Washington has taken a page out of Fidel’s book and begun nationalizing its mortgage, securities, investment banks and insurance industries, stock prices are on the rebound and worried investors are breathing a huge sigh of relief. And today they announced a starter (you watch) fund of $50-billion in loan money for money market mutual funds.

Ain’t life grand.

Of course, as pointed out in a McClatchey Newspapers item recently, the American way is to privatize gains and socialize only the losses. That way the rich folk actually do get their cake and get to eat it too no matter how badly they’ve screwed up. And that’s what makes America the greatest land of all.

I saw a pity piece in one of the American papers lamenting the downfall and suffering of the former head of Lehman Brothers. The article showed that this guy had lost too – big time. Why he used to get paid $34-million a year (that’s just shy of $3-million a month) and now he’s out of work. His holdings in Lehman were valued at $1-billion last month and now they’re a million, tops. Of course nobody wants to point out that this guy raked in hundreds of millions of tax sheltered bucks while he was asleep at the wheel, driving his company’s investors straight off a cliff. I might feel sorry for the guy – if an angry mob had actually flayed him alive – but it sounds to me like he’s come out of this just fine.

Early on in his administration, George w. Bush realigned America’s tax system to shift the burden of feeding his insatiable government off the shoulders of the investor class, the rentiers, and more directly onto the shoulders of the working people, let’s just call them wage earners. He largely freed capital gains, the money made by investors, from Washington’s tax grab – which shifted that little obligation over to the silly wage earners.

Now, did the little guy’s taxes go up to reflect that new tax burden? Of course not. Why not? Because it was all floated on borrowed, foreign money. You might have had all those wage earners marching down Pennsylvania Avenue in the middle of the night with torches and pitchforks if you were open with them and handed them the rich folks’ tax bill. Best to get the foreigners to loan you the cash and not trouble the little people with these petty details. Don’t worry, you’ll find some of that money when you start trimming their Social Security cheques.

Remember that video clip of George addressing a black tie dinner when he got that grin on his face and scanned the crowd and said he saw “the haves and the have-mores – my base.” He wasn’t joking. He meant it and he’s shown that repeatedly over the past eight years.

The past eight years have seen a powerful class war waged in the United States by the big and powerful against the little and weak. So why haven’t the little people risen up? Why haven’t they used their voting power to elect a government that serves their needs, their interests – you know, that government of the people, by the people, for the people deal?

Why? Because they’ve been blinded to it. You don’t know that your savings are gone until somebody opens the vault door. Keep that door shut by using money borrowed from foreigners and they won’t know the difference. And, if somebody does try to warn them, a latter day Paul Revere sort of thing, well you simply jam the message. You get the powerfully corporatized media and the blatantly partisan Fox News and all those angry, open mouth radio guys like Limbaugh and Savage and their ilk to denounce the left, the looney left. Americans have been subjected to propaganda on a level not seen outside the Communist world since the 30’s.

Why has there been no action on global warming? Because that would interfere with wealth. Why has there been no attempt to restore fiscal sanity to government? That would interfere with wealth. Why are they blowing the tops off mountains in West Virginia and rendering the valleys toxic waste dumps? I suppose that too would be about wealth.

Where is the public debate on these issues? You won’t hear it from the Republicans, they know better, but why aren’t the Dems using this obviously powerful stuff? One reason is that they’re not far enough removed from this chicanery themselves. They’ve supported a lot of this stuff. Another reason is that anyone who talks about this is branded a “liberal” and, to many Americans, liberal = elitist = socialist = revolutionary = traitor. They get fed that nonsense every day.

To me, America resembles one giant, cheque-kiting scheme. I became familiar with those back when I did fraud work. They often start off quite small and then they build to a higher level, almost a plateau for a while, and then they tend to go full bore usually just before the police show up or the bad guy heads for the airport with the cops hot on his trail.

The American government and especially the Pentagon quietly let on that they see China as America’s emerging strategic threat. They’re not keeping it secret, they just don’t go on about it. Now China, by all appearances, is set to become the world’s next economic giant, outstripping the US.

The Bush Doctrine, the policy that Sarah Palin had never heard of, holds that America reserves the right to use its military muscle to subdue any nation or group of nations that rises to become as economically or militarily powerful as America. In other words, growing bigger than America will be taken as an act of war, a casus belli as it were. That would seem to put China on its way into America’s crosshairs.

Okay, let’s work this through. You’ve identified C as your looming strategic threat. You ship your industrial base to C and use your wealth to grow C’s economy. Meanwhile you can’t resist a pipeline of cheap money loaned back to you by C, putting your country in hock to your strategic rival. Then you financialize your economy which leaves you extremely vulnerable to creditors – especially foreign countries just like C – while you drive your country with its financialized economy steadily deeper into deficits, debt and unfunded obligations which is sort of like giving a box of Havana cigars to a lung cancer patient.

What gives? Here’s a way to make sense of this. Years ago a psychiatrist explained to me that even when people do self-destructive things, they do it because they get something out of it. In other words, this may seem like madness but you have to realize that someone, some influential group, is getting something out of this no matter that, overall, it all seems harmful to the United States of America.

At least you can’t say this is boring.

One of Britain’s top think tanks wants a halt to NATO expansion.

The International Institute of Strategic Studies warns it would be a “strategic error” to admit Georgia and the Ukraine into the Alliance. From The Indepdendent:

America’s biggest, and hence most important, economic sector isn’t manufacturing or agriculture or resources, it’s America’s financial sector.

For better than 20-years the financial sector – stocks, bonds, insurance, banking – has been the real economic engine of the United States.

The America of my youth was a manufacturing powerhouse. The rest of the industrialized world had largely been bombed out in WWII but America (Canada too) had come through that with its industrial base intact, even thoroughly modernized as a result of the conflict.

I don’t have the study at hand but, if memory serves, the US came out of WWII with something in the order of 70% plus of the world’s entire manufacturing capacity. Detroit ruled unchallenged in the global automotive market. Airplanes? They were made all over the United States in plants from Wichita to Seattle, plants that had just a couple of years earlier been churning out warplanes en masse.

The whole thing made us really, really prosperous. Single income families with stay at home moms were relatively common. It was the birthing of Suburbia. The car companies changed the style of their cars every year because there were always buyers lined up to get the latest and greatest. No gasoline shortage, no shortages of any kind for that matter. Clean air, clean water (although we were unwittingly busy putting an end to that). No hole in the ozone layer. All this bounty and just a third of the population the earth wallows under today.

But all things must pass. It took a couple of decades but the rest of the industrialized world bounced back and global competition took on a whole new dimension. For a while we had a buffer in an enormous military-industrial sector but, in the long run, that really wasn’t enough.

Like other societies before us we finally began looking for new opportunities. Manufacturing was virtually disparaged. Our future would rest not in making things but in providing services, in the financialization of our economies. Globalize production, outsource it. We would make our wealth in the trade in those outsourced products and commodities, we would move paper and manipulate data.

Remember the Dot.Com bubble? Can you recall how the believers preached the “new economy” which was to bring us all great blessings in the future? Anyone who clung to fundamentals was a dinosaur, lacking the grand vision to prosperity. Vision, yes indeed. The sort of vision that allowed one to see the Emperor’s clothes were none existed.

When you produce cars it’s very hard to delude yourself about what and how well you’re doing. You have a huge lot where you can see what you’ve made and you can monitor the trucks and trains carrying your vehicles to waiting buyers. If the lot is full but the trucks and trains aren’t moving, it’s not hard to see you’re in trouble. You can’t delude yourself on that score (although Detroit has tried awfully hard to prove me wrong).

When it comes to paper and data, however, you’re the kid in the toystore of delusion. Anything becomes plausible even if not remotely possible. Wealth and prosperity become mere states of mind. You’re happy, you’re rich.

Let’s return to the Dot.Com bubble. Here, apparent wealth came to be as valid as actual wealth. Millionaires, even billionaires were created out of thin air. When that bubble burst there was wailing and moaning about massive wealth that had been suddenly wiped out. But, in the main, it was wealth that never existed except in people’s minds, wealth that was nothing more than an entry in a ledger.

Wealth that never existed and yet people would sell you things on the strength of it. Banks would lend you money on it. Little people invested their life savings in it. Bill Clinton actually balanced his government’s budget on tax revenues flowing out of this grand illusion.

You woulda thunk we’d have learned our lesson from the Dot.Com bubble but no, not really. It was barely over when our American cousins seized onto the bizarre notion that their houses were acutally machines that would generate bags of cash forever and ever amen.

Housing prices skyrocketed. There was going to be no end to it. Just a year or two back, two out of three new mortgages written in California were “interest only.” There was no intention of paying down that debt, only to service it for a year or two while that house skyrocketed in value at the end of which you would sell it and grab your windfall.

There was no end to the games that were being played. Mortgages became commodities. Brokers lured borrowers into taking their mortgages with low, introductory rates. A year or two later that mortgage interest zoomed up. It was on the expecation of the return from that deferred, higher rate that these mortgages were bundled and flogged to major lenders. Meanwhile the home buyer had no intention of hanging around to pay that adjusted rate. The house, after all, would just keep soaring in value. Toward the end of the cheap interest period the homeowner would “re-fi” – get a new mortgage, again with a cheap introductory teaser rate, and so the game would go on and on and on.

Before long the mortgage brokers ran out of qualified borrowers, people who could actually make mortgage payments. That left them facing a dire shortage of paper to flog as derivatives – the place they now made their money. So they went to option B – the unqualified buyers, the subprime.

Everybody got into this game. Homeowners, those who arranged their mortgages, those who bundled and sold those mortgages, those who bought and traded in these bundled assets, those who insured the risks of those who bought and traded in these derivatives. It went right to the top – Wall Street.

This scam – and it really was a scam at all levels – bought America a decade of prosperity. It was tailor-made for a financialized economy but, as we’re seeing today, it also played into the often unrecognized weaknesses and vulnerabilities of that financialized economy.

A decade of prosperity. Prosperity? How can a country have prosperity when it’s saddled with massive debts and deficits? How can a country be prosperous when it’s enduring murderous balance of trade shortfalls? How can a country and its people enjoy prosperity atop a mountain of unfunded obligations propped up by foreign borrowings? How can any nation, any people hope to remain prosperous when they’re living wildly beyond their means?

What did Warren Buffet understand that Alan Greenspan couldn’t grasp? Let’s just call that “reality” for the purpose of this discussion. You see, it’s bad enough having a financialized economy but it’s downright lethal when that financialized economy isn’t tightly bound to reality. You gotta tie it down. You have to sit on it. There’s no letting up. It will constantly try to slip away into La La Land and, when it gets there, it causes boundless havoc.

America has become unbalanced, perhaps terminally so. In Canada we’ve been a bit more prudent. We’ve funded our social insurance plan. We’ve wrestled our government out of the red (we Liberals did that). We’re not terribly reckless with debt. We have regular balance of trade surpluses and, best of all, we have a strong, resource-sector. Maybe we just never grew prosperous enough to do the same things our American cousins have done or maybe we are more comfortable with reality.

Can America get back to basics, restore its neglected economic sectors and reclaim its promise? It’s possible but it would require a radical rethinking of just what America is and what it needs to become. I just don’t see many encouraging signs that Americans are willing to give up their delusional thinking and, if they don’t, their country’s economic Mardi Gras isn’t over.

But if Americans aren’t yet ready to put their house in order, there’s no excuse for us falling into their troubles. This is no time to be toying with continental integration. We need to keep our distance for the time being, wait to see if the fever passes.

Canada needs a healthy, vibrant America. We need an America grounded in reality. There are no guarantees that will come to pass anytime soon. In the meantime, let’s keep our eggs dispersed in our own baskets.

The way things are going today’s Atlas might be out of date before you know it, at least from the Middle East to the Caucasus.

Georgia seems about to look a lot lighter with the loss of South Ossetia and Abkhazia as “independent” republics under Russian protection.

Oh yeah, then there’s the Crimea. Maybe you haven’t read about this one but there’s a move afoot by the Russian-leaning Crimean peninsula to say “no” to a Ukraine enlisted in NATO. That would, of course, leave Sevastapol, whose port is under lease to the Russian navy until 2017,under Russian control and eliminate any ideas of a viable Western presence in the Black Sea.

But wait, there’s more.

Afghanistan, as we know from our Furious Leader’s recent tacit admission of failure, remains very much in play. It’s not just the Taliban any more. Other tribes are beginning to turn on Kabul as well. We’ve long since gone from “liberator” to “occupier” in the minds of the locals and, as Petraeus himself noted in his counterinsurgency field manual, once you lose your moral legitimacy in a guerrilla war, you’ve lost the war. Shit, oh dear!

It wasn’t supposed to be this way. It was supposed to be a strong American military presence in Iraq and a strong American military presence in Afghanistan with Iran caught right in the middle. Like all half-assed plans, this one doesn’t seem to have worked out as hoped.

You see there’s Pakistan messing up the gears. Ah Pakistan, a classic example of a Western attempt to hobble together disparate tribes into a modern country. Ouch! Think I’m kidding? Look up the history behind the country’s name.

Pakistan is somewhat less than the Western ideal of a stable, nuclear power. But we cannot sort out Afghanistan until we overcome the refusal of the Pakistanis to do our bidding in the untamed tribal homelands. Here’s where we begin to run out of options.

One of these is to try to pursue al Qaeda and the Taliban into the agencies, particularly Waziristan, as US special forces have done a couple of times recently. It sounds like a plan except it infuriates the Pakistani people and turns them against us. That’s why their military has issued orders to fire upon Western forces who show up inside Pakistan.

Maybe we should just wipe out the Pakistan military. Trouble is it’s too large and far too well trained to be taken lightly. It’s not at all a pushover outfit like Saddam’s army was in 2003. And then there’s that business about Pakistan’s nukes. Add to that the inconvenient fact that America’s ground forces have been all but trashed by the protracted nonsense in Iraq and you’ve got a problem, but that’s just the start.

Pakistan, if pushed too hard, could jump into the other camp. I’m talking about the Shanghai Cooperation Organization or SCO, the ascendant East’s equivalent of NATO for the 21st Century. Guess who else is trying to get under the SCO’s skirts? You’re right – Iran. Best get that map out again.

Think of these numbers. Kabul to Islamabad – 374 km. Kabul to Tehran – 1614 km. Kabul to Moscow – 2,095 km. Kabul to Beijing – 4,183 km. Kabul to Washington – 11, 134 km. Get the picture?

Paskistan already has observer status at the SCO. So does Iran. That’s sort of like the touchy-feely deal Washington is forcing NATO into with Georgia and Ukraine. Is this beginning to sound blurry? It is.

Back to the map. Take a look at Afghanistan. Now imagine it isolated, surrounded on all sides by decidedly anti-Western Iran, Kazakhstan and Pakistan under the protection of Russia and China. Do you begin to see the picture? Hell, all China would have to do is to announce it would refuse to buy any more American debt. It doesn’t have to raise a gun barrel to inflict crippling damage on the West. We can hardly grouse about it, we put that little weapon in their hands.

For more than two centuries Asians and South Asians have borne the yoke of Western domination. If you were in that situation, how would you feel about that?

Sorry, folks, but I think we may must have screwed the pooch this time. The Atlas, the one we created, may be about the change.

Now, let me get this right. Steve wants Canadians to give him a majority so that the opposition parties don’t sabotage his government’s ability to deal with the coming economic crisis.

Sabotage? This, of course, coming from the guy who ensured that every member of his caucus had a manual on how to subvert parliament, especially parliamentary committees. A manual. A how-to-sabotage-government handbook. And this arrogant clown, without offering the slightest evidence, claims the opposition parties would do what only his party has done to date. What a sphincter!

So, no evidence of sabotage plans beyond Steve’s word and he’s shown us all we need to know about what his word is worth. He’s not quite John McCain yet but he could get there.

But, better yet, why doesn’t Steve tell us what his government plans to do about this looming economic crisis? He’s had the reins of power these past two years, he’s got all the experts working for him. He ought to be coming to the voters with a concrete plan. So where is it?

Nowhere to be seen, that’s where it is. If a plan exists, he’s not going to share it with the electorate. But, if he wins, he’ll puff himself up and claim he’s got a mandate to effect measures he wouldn’t disclose to the voters during the campaign.

A sphincter, the guy’s a sphincter.