The Mound of Sound

The Globe & Mail says it all. Harper has pretty much lifted Stephane Dion’s plans for getting Canada through the hard times that we face:

Most of these measures are in fact actions one would expect a prime minister to take and the list looks similar to the five-point action plan proposed by Liberal Leader Stéphane Dion during the campaign.

They include:

• Convening a meeting with the premiers and territorial leaders on the economy to discuss a joint approach to the global financial crisis.

I’ve read far too many posts blaming the Canadian voting public for last night’s Liberal drubbing. That disgusting little narrative holds that they were too dumb to see through Mr. Harper or too weakminded to understand the brilliance that is Mr. Dion.

What an arrogant load of crap!

The Canadians who handed the LPC its head on a platter last night were the same Canadians who have trusted the Liberals to govern the country in the past. If they’re good enough when they support us, they’re every bit as good when they don’t.

You have to win an election. Even the Liberals have no entitlement to govern. Liberals have a genuine advantage in that mainstream Canadians are ideologically compatible with the party. So, when voters turn elsewhere they’ve obviously rejected something or someone in the Liberal campaign.

You cannot win an election if you don’t connect with the voting public. It was Mr. Dion’s job every day since he assumed party leadership to connect with the voting public, to help them understand what the Liberals were offering and why they ought to support it. He went into this election already having failed on that score.

In terms of electoral skills, Dion was completely outclassed by Mr. Harper. Time and again when he ought to have brought the government down, he stepped aside and had his caucus shamefully flee the floor of the Commons. Had he brought the government down on any one of several, legitimate disputes, Dion would have had some control over the timing of the election and, more importantly, an ability to frame the issues.

The only surprise in Harper’s election call was that anyone should have been surprised by it. Parliament had had the summer off and all the scandals and blunders of the Harper government had receded in the minds of the voters. This was Harper’s one chance to not have to run on his record and clear issues. And he caught the opposition, particularly the Liberals utterly flatfooted.

We, the Liberal Party of Canada, did extremely poorly last night. We were completely outmatched and that was the culmination of a whole series of mistakes and blunders. We lost this election, the voters merely responded.

If, as has been widely claimed, the real Achilles’ Heel to the global financial meltdown, lies in $60-trillion dollars of bogus Credit Default Swaps dumped into the markets by American financial giants, how wise is it to rely on the recent head of one of those very companies to rescue America from this very curse?

Just read the Wikipedia biography of Henry Paulson and you decide:

Paulson was Staff Assistant to the Assistant Secretary of Defense at The Pentagon from 1970 to 1972.[7] He then worked for the administration of U.S. President Richard Nixon, serving as assistant to John Ehrlichman from 1972 to 1973.

He joined Goldman Sachs in 1974, working in the firm’s Chicago office for Manmeet Taneja. He became a partner in 1982. From 1983 until 1988, Paulson led the Investment Banking group for the Midwest Region, and became managing partner of the Chicago office in 1988. From 1990 to November 1994, he was co-head of Investment Banking, then, Chief Operating Officer from December 1994 to June 1998;[8] eventually succeeding Jon Corzine (now Governor of New Jersey) as its chief executive. His compensation package, according to reports, was US$37 million in 2005, and US$16.4 million projected for 2006.[9] His net worth has been estimated at over US$700 million.[9] Paulson has personally built close relations with China during his career. In July 2008 it was reported by The Daily Telegraph that: “Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs when he visited the country more than 70 times.”[10]

[edit] Tenure at and later relationship with Goldman Sachs

In 2004, at the request of the major Wall Street investment houses, including Goldman Sachs, then headed by Paulson, the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint that was put forth by the investment banks was of increasingly onerous regulatory requirements — in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. In the immediate lead-up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms’ reserve holdings if the SEC agreed to do so instead. The 1999 Gramm-Leach-Bliley Act, however, put the parent holding company of each of the big American brokerages beyond SEC oversight. In order for the agreement to go ahead, the investment banks lobbied for a decision that would allow “voluntary” inspection of their parent and subsidiary holdings by the SEC.

During this repeal of the net capital rule, SEC Chairman William H. Donaldson agreed to the establishment of a risk management office that would monitor signs of future problems. This office was eventually dismantled by Chairman Christopher Cox, after discussions with Paulson. According to the New York Times, “While other financial regulatory agencies criticized a blueprint by Mr. Paulson, the [new] Treasury secretary, that proposed to reduce their stature — and that of the S.E.C. — Mr. Cox did not challenge the plan, leaving it to three former Democratic and Republican commission chairmen to complain that the blueprint would neuter the agency.”[11]

In late September 2008, Chairman Cox and the other Commissioners agreed to end the 2004 program of voluntary regulation.

I don’t know but it sure sounds to me as though Paulson was one of the key players who were gaming the American economy with these toxic, Credit Default Swaps, that created the Wall Street house of cards that now lies flattened.

It might last just a few years if we’re lucky, several more if we’re not, but the America that emerges from the meltdown that’s just beginning to take hold is bound to be a better, healthier, more dynamic country – more closely resembling a sophisticated version of what it was in the 60’s than the diseased stepchild of the Reagan era.

The United States of America spent 30-years getting sick, really sick. Today’s meltdown is just the fever of that long-cultivated illness.

And what a sickness it was. It was a disease of both body and mind. The predisposition to this malady has been around since the country’s earliest days. It came in the form of what’s known as “American exceptionalism.” It’s the sort of mass delusion that comes to the fore when Americans (such as Sarah Palin) talk about the “City on the Hill.” It works its way through the American system in manifestations such as state rights, the every man a king sort of thing. It is infuriated by the perceived threat to liberty in central authority and any restraint on the notional “land of opportunity.”

Most of that has been pretty thoroughly trashed over the past generation although the myth of exceptionalism dies hard. Look at recent videos of angry crowds lined up to get into McCain/Palin rallies. They seem to sense that the myth is over and they’re both afraid of and furious at the uncertainty ahead.

American exceptionalism began its slow death when its Calvinist foundation began to erode during the Reagan years with the acceptance of debt and deficits as permanent governing principles of the country, its states, even its towns and cities – and, of course, its people. It died when, as Lewis Lapham put it, Americans came to, “equate wealth with virtue.” That set off a generational orgy of consumerism that quickly led to a nation, its states, its cities and its people living beyond their means.

It’s not entirely the Americans’ fault. Foreign lenders were all too happy financing this bachannal, especially the Chinese who watched America’s indentured wealth being siphoned off to grow China’s economy.

But those days of greed and madness are coming to a close. China is weaning itself off its heavy dependence on American consumers. They’ll still play a major part in China’s economic ascendancy but the Chinese are now creating their own markets out of their own domestic affluence. The story is similar for India. The Euros, likewise, are looking to expand and cement their trade ties into alternate markets.

But it’s not just the markets and fiscal policy that will bring America back to sanity. It’s also the country’s social policies and the looming crisis of its state and municipal governments’ neglect.

I did a post about a year ago detailing how India is opening 29-new science and technology universities every year. China, too, is churning out legions of mathematicians, scientists and engineers. America, by contrast, is lurching backward in training its next generation of leaders. The New York Times’ op-ed columnist Bob Herbert focused on the double whammy coming America’s way from the failure of its education policies and the looming collapse of its decayed infrastructure:

‘“The United States is failing to develop the math skills of both girls and boys, especially among those who could excel at the highest levels, a new study asserts, and girls who do succeed in the field are almost all immigrants or the daughters of immigrants from countries where mathematics is more highly valued.”

The idea that the U.S. won’t even properly develop the skills of young people who could perform at the highest intellectual levels is breathtaking — breathtakingly stupid, that is.

Meanwhile, the country is going down the tubes. Felix Rohatyn, who helped lead New York City out of the dark days of the 1970s fiscal crisis, had an article in a recent issue of The New York Review of Books (with co-author Everett Ehrlich) lamenting the sad state of the U.S. infrastructure. Most Americans are oblivious on this issue. We’re like a family that won’t even think about fixing a sagging, leaky roof until it collapses on our heads.
New Orleans was nearly wiped from the map in the Hurricane Katrina nightmare, and 13 people were killed when a bridge in Minneapolis broke apart during rush hour, hurling helpless motorists 60 feet into the Mississippi River. Neither of those disasters was enough of a warning for us to think seriously about infrastructure maintenance, repair and construction.

Could these types of disasters happen again? They’re going to happen again. Mr. Rohatyn reminds us that nearly 30 percent of the nation’s bridges are “structurally deficient or functionally obsolete.”

We haven’t even got sense enough to keep an eye on the water we drink. Citing a report from the American Society of Civil Engineers, Mr. Rohatyn and Mr. Ehrlich write: “Current funding for safe drinking water, amounts to ‘less than 10 percent of the total national requirement.’ ”

A country that refuses to properly educate its young people or to maintain its physical plant is one that has clearly lost its way. Add in the myriad problems associated with unnecessary warfare and a clueless central government that wastes taxpayer dollars by the trillions, and you’ve got a society in danger of becoming completely unhinged.”

This is the price exacted of a country that equates education with elitism and believes that taxation is nothing short of robbery. I recall a case from several months back where Louisiana voters, whose state is about as impoverished and backward as you can find in the Lower 48, introduced and passed a proposition to slash funding for education for no reason other than to shave a couple of points off the tax rates.

Astonishing, absolutely astonishing. But now, finally, this drunken orgy is coming to an end. The era of 4,000 sq. ft. homes for everyone is over. America is about to enter a period of sustainable retreat and, in that, lies its salvation. For despite all the excesses of the past decades there remains within the United States a core of vitality that has survived by staying low key, mainly in the halls of academia. It’s from America’s top universities that a new generation of clear thinkers will emerge, free of the now utterly discredited dogma and jingoism that has brought their country to its knees.

These are the people who understand the need to again invest their country’s wealth in rebuilding America’s economy, not China’s – in the need to reward effort, production and innovation, not bogus paper shuffling and coupon clipping. They don’t need to be told that America’s strength lies in the health of its blue and white collar working and middle classes, not the rentiers.

We will see these people come forward over the next decade to cure the madness that is today’s America. It’ll be a long road back and there’ll be a lot of potholes along the way but there’s no other option if America is to maintain its place in the community of nations.

The media are beginning to sort through the debris and identify the upwards of 60-trillion dollars in bogus Credit Default Swaps as the real malignancy in today’s global economic meltdown.

It’s even argued that world governments should step in to make good these enormous liabilities. Yeah, that’s right, a taxpayer funded SIXTY TRILLION dollar bailout.

Here’s my problem with that idea. The banks, stock brokers and insurers who were trading back and forth in these Credit Default Swaps had to know they weren’t worth the paper they were printed on. They had to know that they weren’t good for the obligations they were selling and that the other firms weren’t good for the obligations either.

So, if they engaged in this mutual, mass larceny – why the hell are taxpayers supposed to make good what was never more than scrap paper anyway?

What would happen if the world governments simply declared all Credit Default Swaps null and void? Tell all these financial sector giants that they’re no longer liable on the CDSs they wrote but they won’t be collecting anything on the CDSs they’re holding either. It started off as a greed-driven scam, it continued as a greed-driven scam all the way until the meltdown, so why legitimize a scam by forcing the taxpayer make it good?