May 31, 2007

Things will now become very interesting in the good ol' USA

And on the economic front:

WASHINGTON — "The economy nearly stalled in the first quarter with growth slowing to a pace of just 0.6 percent. That was the worst three-month showing in over four years.

"The new reading on the gross domestic product, released by the Commerce Department Thursday, showed that economic growth in the January-through-March quarter was much weaker. Government statisticians slashed by more than half their first estimate of a 1.3 percent growth rate for the quarter." (Source: the real world.)

The economy has not sputtered like this since 2002, when the United States was emerging from a recession caused by the hallucination, and inevitable collapse, of the status quo ante, namely, the Internet IPO craze. Americans, who long ago gave up the idea we could build wealth by manufacturing durable goods or high technology and selling such stuff to the rest of the world in order to raise cash, replaced one racket with another. We began cannibalizing our capital wealth, more or less in the style of an English baron, now gone to seed, who is forced to open up the family castle to tourists, add a gift shop and install a carousel just to make ends meet. For a while, until he's ultimately faced with the necessity of subdividing his heritage, selling the place and moving to a condo in the West End, where he'll still be Sir Somethingorother, but no more liveried footmen answering the front door.

One stat I don't see referenced too much in the mainstream media is an astonishing fact revealed in the pages of Kevin Phillips's book American Theocracy. To wit, between 2000 and 2005 Americans derived over half of their "income" through refinancing of their principal residences. It's not income at all, of course; even an amateur economist like myself knows that. It adds to cash flow, but on a balance sheet it dumps a debit to match the influx of created cash. When Ben Bernanke or Alan Greenspan talks about the economy, I never hear them refer to this ominous development. Add to this disturbing datum the widely-acknowledged reality that the U.S. gross domestic product relies, to the extent of 70%, on consumer spending and you have the macrocosmic picture in focus. Get it? The good years of the Bush Administration, insofar as the economy was concerned, depended to a phenomenal degree on the availability of cheap, not to say promiscuous, credit. All of this was pimped by the Fed, who made cheap money (furnished by China, Japan and other net exporters selling in the U.S. market with fistfuls of dollars at their disposal) available to banks and other lenders, who then used various artful tricks and strategems, such as negative amortization, to "qualify" just about anyone who could fog a mirror. Thus, money from China and Japan flowed through the Fed to the lenders to the consumers to Best Buy, Wal-Mart and Target.

Until everyone hit the upper limit on available "equity," which was itself based on inflated housing prices (in turn based upon easy credit, in a kind of upward death spiral). With re-fi money drying up, the consumers became nervous and edgy and stopped buying so many Chinese electric nose clippers at Wal-Mart, which reported its biggest sales drop in 28 years (which gives you an idea of my sheltered life: I had no idea Wal-Mart had been around that long). When consumer spending dies, a percentage of the U.S. economy equal to the volume of water in the human body begins to expire. Which means recession.

If Bush thought he had problems before, he ain't seen nothin' yet. 72% of Americans thought we were on the "wrong track" when the economy was "booming." I suspect that everyone was a little uneasy about how all of this was being accomplished. Intuitively, it simply made no sense. No one was really doing anything to create wealth in a traditional sense, yet all this money was flowing through the system. It is reassuring, if somewhat terrifying in its prospects, to see common sense vindicated. We were in the process of mortgaging our patrimony, the one built up by generations who actually did a lot of hard work. I think I've got room in my back yard, however, for a Bumper Car Ride.


May 29, 2007

Cindy Sheehan and Cognitive Dissonance

One of the country's foremost anti-war activists, Cindy Sheehan, has retired from the field. Her parting remarks were bitter and disillusioned. She concluded that her son Casey died in Iraq for "nothing." I think it is understandable that a grieving mother whose son died in an ambiguous war became an activist. Most parents can understand this impulse; for one thing, it allows one to seek meaning in an otherwise unmitigated tragedy. Then, too, one might hold away, at least for a while, the full impact of the grief a parent would otherwise feel. One can, at least in part, immerse those feelings in a cause associated with the loss. Maybe Cindy Sheehan finally reached the point where that strategy was no longer working. It should not be for us to guess. If the country had any emotional decency, it would afford a compassionate respect for her decision; since this is, however, the United States, her choice will be subject to the usual partisan bloviating.

As to the merits of what she said - I don't think her son died for "nothing." I think he died as part of a military force executing a phase of America's modern business plan. Whatever high-minded rationales have been offered for the invasion of Iraq, I think almost all of us instinctively recognize that Iraq's oil was always the essential cause. The spreading of democracy, the toppling of an "evil dictator:" these rationales can be refuted by noting the selective nature of the battle we fought. Brutal dictators are in abundance in the world; humanitarian crises are everywhere. Any Middle Eastern Arab country could have been invaded if the criterion was our opposition to authoritarian rule. Saudi Arabia, Egypt and Syria would have worked as well. But Egypt and Syria do not have significant oil, and the Saudis already cooperate. That left Iraq, with the second largest known reserves of light sweet crude in the world. So a PR campaign was mounted to justify the invasion on grounds that were more reminiscent of John Wayne-type illusions. Iraq was a "threat." They would attack us with nuclear weapons if we didn't act right away. It was all a huge and intentional lie. Those who told the lie knew it was untrue.

But they also knew that Americans, at base, were not well-situated to contest that falsehood effectively. The reason for that disability is deeply psychological. Almost all of us, everyday, make conscious choices that necessitate foreign, adventurist wars in order to keep the oil pipelines flowing. We were candid about the rationale for Operation Desert Storm back in 1991. We made no bones about invading Kuwait in order to secure a steady and affordable supply of Mideast Oil. But Iraq II involved a "war of choice," and there is something about a premeditated invasion of another sovereign country which has done nothing to provoke an attack which does not sit well with our conscious image of ourselves. So the various, specious rationales were conflated with the 9/11 attacks, and the Bush Administration had a product it could sell.

Congress is now loath to disengage from Iraq; both the Republicans and the Vichy Democrats under occupation by the Bush Administration are avoiding obvious steps they could take to end the war. I doubt that it is a coincidence that the lingering goodbye is contemporaneous with Iraq's "hydrocarbon law" deliberations, and it's probably part of the same gambit that the Iraqi parliament is dragging its feet to see if American domestic politics make it possible to deliberate without Big Brother looking over its shoulder. The production sharing agreements which form the core of the hydrocarbon law are under construction by an American corporate lawyer (a graduate of my own legal alma mater) and will return a Middle Eastern country to the kind of colonial vassalage, in terms of oil revenue, not seen since the days of Aramco and the Anglo-Persian Oil Company, the vehicles for American and British exploitation of Saudi Arabia and Iran, respectively. It is too sweet a plum to leave behind, especially after America's ruinously costly war. If Bush caves on the demand for withdrawal, he will have to add this loss to the fiasco which preceded it, and America's supply of future petroleum will also be in jeopardy.

There is no longer any essential division between America's private and public sectors; the federal government is an extension of corporate interests. The inability of the electorate to influence this "complex" relates to the monopoly over politics held by the only two significant parties. The remaining means of influence is individual lifestyle, and it is here that Americans are deeply ambivalent. We import about 14 millions barrels of oil a day against a total usage of 20 million barrels per day, out of worldwide consumption of 80 million barrels; thus, with 5% of the world's population, we use about 25% of the world's petroleum. We have not increased fuel efficiency standards for cars since 1986, and the overall efficiency of vehicles in America is approximately the same as in 1981. All Middle Eastern imports could be eliminated by switching to cars which are currently available in the American market. If we added to this a true commitment to mass transportation with a better passenger-mile efficiency than cars (such as trains), we could probably eliminate the necessity of any foreign imports of oil. Since these are consumer choices and the solutions are already here, no reliance on the federal government to implement the change is necessary.

The blame game, however, is practically irresistible to Americans, who would rather look anywhere other than at themselves, where the problem lies. The "Iraq War Debate" is a kind of industry which services this distraction. Huge blogsites, such as the Huffington Post on the Left and Powerline on the Right, have built their reputations on taking sides. Being a "Democrat" or a "Republican" is largely defined by being for or against this war, at least in this day and age. Yet we ignore the obvious solution, both to corporatism and a dangerous involvement in Middle Eastern politics. Change the way we live. Stop believing that unbridled consumerism can be sustained.

I think we're all aware of this, at a limbic-brain level at least. But how do you profess your superiority if you acknowledge you're part of the problem? Without the assistance of the government, we could win the Iraq War here at home simply by reordering our priorities.

Cindy Sheehan, at last, saw through the emptiness of the official rationales for the Iraq War. The war is simply an exercise in servicing America's tendency to indulge itself endlessly in the things it wants, its toys and the energy to run them. Bush and his crew would have no power if we corrected these tendencies in ourselves. I think Cindy Sheehan probably came to see that; it's a shame she did not see it in time to save her son.