Tag Archives: George Bush

Let's Not Fool Ourselves

Leave a reply

Now that it appears a bailout deal has been struck, I feel a need to introduce a note of realism to the conversation. Last week in his Senate testimony, Fed Chairman Bernanke said the “bailout was necessary to avoid a recession”. This, I’m afraid, is imaginary thinking. We are in a recession right now and It’s going to get worse. My assumption is that this package will keep us out of a depression. But when the unemployment rate hits 7% and foreclosures keep climbing and  people turn to Bernanke and Paulson with the words “but you said…”, there may be more anger floating around than politicians are used to.

They better be sure no to oversell this solution in Washington.

New World Order

Leave a reply

Orn March 6, 1991, President George H.W.Bush spoke before Congress of “a new world order”, in which the resurgent American superpower (having just defeated Iraq in the Gulf War), would help remake the world in the image of America’s free market democratic capitalism. Yesterday, Bush’s son showed up at the United Nations like the chastened football captain of a win-less team.

With a pillar of American power — its financial leadership — so badly shaken, there was a certain satisfaction among some of the attendees that the Bush administration, which had long lectured other nations about the benefits of unfettered markets, was now rejecting its own medicine by proposing a major bailout of financial firms.

“What you are seeing here is the letting off of some political steam,” said Mark Malloch Brown, a British cabinet minister and former senior United Nations official. “They are all remembering the very hard, unforgiving advice that they got from American financial institutions” to “deflate your economy, let your banks go to the wall,” he said. “There is a resentment at what they would see as a further evidence of double standards.”

As the esteemed James Grant pointed out this morning, America’s financial fate hangs on the votes of foreign dollar holders.

And it is on the world’s opinion of the dollar that the Treasury’s plan ultimately hangs.It hangs by a thread, if Monday’s steep drop of the greenback against the euro is any indication. We Americans, constitutionally inattentive to developments in the foreign exchange markets, should be grateful for what we have. That a piece of paper of no intrinsic value should pass for good money the world over is nothing less than a secular miracle. Every year but one since 1982, this country has consumed much more than it has produced, and it has managed to discharge its debts with the money that it alone can lawfully print.

If we continue to run the dollar printing presses 24/7 to pay for the trillion dollar bailout, there is no reason to believe that the foreign holders of $9.4 trillion of dollar denominated securities will continue to sit on these holdings as their value depreciates. The schadenfreude of foreign leaders towards Bush at the UN is the least of our problems. The world stopped regarding the British Pound as the reserve currency at just that moment when its empire was fading. The end of American Hegemony is here. We live from this day forward in a multi-polar world. There will be lots of time to figure out how this set of circumstances arrived on our shores, but in Beyond Tragedy, Reinhold Niebuhr argued that this was as inevitable as the sunrise in the East.

One of the most pathetic aspects of human history is that every civilization expresses itself most pretentiously, compounds its partial and universal values most convincingly, and claims immortality for its finite existence at the very moment when the decay which leads to death has already begun.

But like Niebuhr I also believe in the rebirth that the creative destuction of the business cycle brings forth. The country that the next President leads will be a different and more humble America. She will trim her imperial overstretch and begin the task of getting our own house in order.

What Printing Dollars Get's You

Leave a reply

Turning on the Government money printing presses has consequences.

Crude-oil futures surged more than $25 a barrel Monday as stocks fell, the dollar slid and Treasurys declined amid an investor flight out of U.S. assets.

Stocks traded sharply lower, while the dollar and Treasury prices took a hit as traders fretted that the vast spending necessary to prop up the financial industry will make the government itself a somewhat less attractive borrower. Oil prices soared by the daily limit of $10 as the likelihood of a bailout prompted bets that the economy would stay on firmer footing, keeping demand for fuel on an even keel.

Bush and his Wall Street Journal Opinion Page cheerleaders acts like this trillion dollar rescue will keep us out of a recession. and we can quickly go back to the no-regulation society they have been touting since Reagan took over.

I want what they’re smoking.

"Show Me The Money, Georgie Boy"

Leave a reply

 

The dirty little secret to last week’s crisis is buried in a quote from Henry Paulson in this morning’s Times.

“Going back a long time, maybe a year ago, Ben, as a world-class economist, said to me, ‘When you look at the housing bubble and the correction, if the price decline was significant enough,’ ” the only solution might be a large-scale government intervention, Mr. Paulson said. “He talked about what had happened when there had been other situations historically.”

Mr. Paulson said he agreed but hoped it would not come to that. “I knew he was right theoretically,” he said. “But I also had, and we both did, some hope that, with all the liquidity out there from investors, that after a certain decline that we would reach a bottom.”

There is in fact a lot of liquidity out there–in two places–sovereign wealth funds in China, Korea, Russia and the Gulf States–and in hedge funds. But neither the sovereign wealth funds nor the hedge funds want to touch this toxic waste. And so we the taxpayers are being asked to provide the liquidity.

It is a testimony to George Bush’s Cowboy Diplomacy, that none of these countries will come to the rescue of American Capitalism. As for his white tie friends in the hedge funds that paid for his political campaigns, they’re not taking his calls either.

So much for “Bring it on.”

The Next America

Leave a reply

When you see a fork in the road, take it.-Yogi Berra

The events of the past week have clearly brought us to a fork in the road. At any important decision point it’s often useful to do a scenario planning exercise. What are the dynamics we are wrestling with and what are the possible outcomes of those forces? So the first force is that of deleverage. In ten years will we as a country (both individuals, businesses and governments) be more in debt or less in debt? And the second, countervailing force is that of devolution. Will the sources of leadership, innovation and change come from decentralized, networked, “bottom up” forces or from centralized, hierarchical, “top down” forces?

Anyone who doubted that we are living in a decentralized, networked world must have had their mind changed by this week’s events. On Thursday the Fed injected $105 billion into the U.S. Banking system and $200 billion to other central banks and still the global credit markets seized up. George Bush, Dick Cheney and John McCain are leaders for a centralized, top down world that no longer exists. Bush’s perplexed look at Paulson this morning tells the whole tale. He doesn’t have a clue as to what is happening on his watch. On the other hand, Barack Obama believes in the power of the decentralized, bottom up forces that powered his campaign and overthrew the top down hierarchy of the Clinton Machine. He is ready for this moment.

Then it seems to me the only question is are we going to be richer or poorer in ten years time? Will the boomers be leaving an unmanageable debt on our children and grandchildren? My belief is that the devolutionary forces that made it impossible for Paulson to control the downspiral on a de facto basis, can also help us figure out how to slowly rebuild our collective savings. Continue reading →

Gunrunners

Leave a reply

Proof that the Military Industrial Complex has a friend in George Bush need look not further than this proud statistic of Bush-Cheney accomplishment.

The Department of Defense has agreed so far this fiscal year to sell or transfer more than $32 billion in weapons and other military equipment to foreign governments, compared with $12 billion in 2005. The category of direct commercial sales has seen an enormous surge as well, as measured by export licenses issued this fiscal year covering an estimated $96 billion, up from $58 billion in 2005, according to the State Department, which must approve the licenses.

By the end of Bush’s term the U.S. could control up to 56% of the worl’d arms trade, up from 40% in 2000. Bush and Cheney can proudly point to these tremendous “market share” gains under their leadership. Only a McCain-Palin executive team can keep us on this wonderful sales trajectory.

“This is not about being gunrunners,” said Bruce S. Lemkin, the Air Force deputy under secretary who is helping to coordinate many of the biggest sales. “This is about building a more secure world.”