Rove Skitters Down the Gang Plank

Let us take a moment to consider the unconsidered, that Karl Rove left his position as Deputy Chief of Staff to the President not because he is concerned with the multiple investigations of his involvement in the usual dirty machinations which are his stock in trade, nor because he wishes to lower his profile in the face of a widespread perception that he has led the modern GOP to ruin. I suspect that Rove, rather more in line with his nature as a member of the genus Rattus Rattus, class Mammalia, order Rodentia, family muridae (black or "ship" rat) has noticed the water level rising aboard the Good Ship Fuckup captained by his ward and protege, George W. (for What?!) Bush. To wit, Rove's business has always been more closely aligned with toxicology than policy, and this gig as "Deputy Chief of Staff" is not really what Rove is all about. He's a slime merchant, and he is now concerned that his icky reputation is about to be permanently damaged by a too-close proximity to what lies dead ahead.

Bush's lone claim to legitimacy as a national leader has been, to the present time, a "good" economy. Certainly this is controversial; it is truer to say that Bush has created a tax regime and a trade policy that favor the super-wealthy and those involved in transnational business. They have done well. Corporate profits, particularly in such sectors as petroleum, are way up. To the extent that the economy functioned for the common man, it depended to a large degree on maintaining the pace of consumer spending on which 70% of the GDP depends. This, more than anything, is the reason that Bush thought the most patriotic response to 9/11, for an ordinary American civilian, was to go shopping. To shop, however, requires money, and since the American standard of living, in real terms, has been declining since about 1973, this has gotten harder to do. A temporary reprieve was achieved during the period between about 2000 and 2006 by a unique historical circumstance, which consisted of the re-fi boom, made possible by cheap money created by the reinvestment of foreign trade surplus (particularly Chinese and Japanese) into American T-bills, along with the usual sale of about one-half trillion in Treasury debt to these same foreigners to finance Bush's budget deficits (Bush illegally fails to count the confiscated Social Security surplus as part of the national debt, as Hale Stewart points out; the national debt has increased by about $3 trillion during Bush's 6 years in office, presenting so simple a division problem, even an American can do it). The Fed kept the prime rate low, the banks made cheap loans to Americans, cheap loans drove up the price of houses and created "equity" and the net result was a massive influx into the American economy, which some writers (such as Kevin Phillips) have estimated as equal to the amount earned as wages by Americans during the period between 2000 and 2005.

Bush benefited from these fortunate, unique and unsustainable circumstances. America, having danced a wild jig for the last six and a half years, must now begin to pay the piper. This is not going to be pretty. Wal-Mart and Home Depot (equivalent, in effect, to the "American economy") now forecast weak sales in the months ahead. The essential reason for this is that Americans don't have any money. If 70% of the economy depended on spending, and if roughly half the spending money has evaporated with re-fi extinction, then it is possible that the American economy could soon consist of the 30% of GDP not consumer-related + 35% (1/2 of 70) = 65% = Big Honkin' Recession. I am sure the picture is more complicated than this, of course, but the complications may actually make the situation more dire; for example, the interplay between consumer and non-consumer GDP may also drag the non-consumer element down, so that 65% is actually Best Case.

In grudging and horrified recognition (confused by heavy doses of denial) of these somber realities, the Dow Jones is tanking. Liquidity is drying up. Reset "subprime" mortgages, which form the rotten core of collateralized debt obligations and other derivatives, are falling into foreclosure in large numbers. The Fed is being asked to lower the prime, of course, and to give up the fiction that it has been curtailing "inflation" instead of retaining the minimum level feasible to continue servicing debt to its foreign dun-noticers. But how is the Fed going to face the Beijing Central Bank and inform our Commie loan officers that we're going to allow the dollar to weaken further? They're already growing restive with their paltry return, and if the U.S. is really going to stop taking shipment on all those $10 blow dryers, then what, exactly, is the point? You do not want to think about the consequences of a failure of the Chinese and other central banks to roll over their Treasury positions.

So Bush, in the course of allowing the U.S. economy to become completely hollowed out by trade imbalances, massive foreign debt, and job exportation, is nearing the end of the smooth part of his sailing. Whatever else we say about his First Mate, Rattus Rattus Rove, he's not dumb. He needs to finish that book and make a lot of speeches so he can establish big positions in Euros and the Yuan, and like all the other patriots on the captain's deck of the U.S.S. America, get ready to shove all the women and children out of the way so they can have the lifeboats all to themselves.