January 31, 2009

Aspiriational Apocaphilia

A term I first encountered while reading a writer named R.J. Eskow, who weighs in periodically on various political blogs. I think the terms refers to the state of ecstasy some writers appear to achieve while composing jeremiads to the imminent downfall of Western Civilization.  Eskow cites as a prime example James Howard Kunstler, whose "Clusterf**k Nation" is linked right here on this page.  Admittedly, there is something orgiastic about Mr. Kunstler's weekly downers, in which he excoriates the United States for being fat, tattooed and stupid, calling America a "clown nation" that cannot do anything right.  He is also absolute in his conviction that we're incapable of any sort of technological fix for the problem; to make certain there's no hope, he relies upon his deus ex machina, Peak Oil.  So even though electric cars are actually right around the corner, and entire countries like Israel are figuring out how to run a national fleet of electric cars on an electrical grid powered by wind and solar, he'll have none of it.  It cannot work, he says, with religious conviction. It's so obvious that he doesn't even bother to explain why it cannot work.

I think he's wrong about that, way wrong in the way that those who are confident about foretelling the future are usually wrong.  The imagination of a single person is unequal to the task of encompassing the unfathomable permutations of scientific discovery in advance.  There is much too much interplay among ideas, synergies of discovery, unanticipated brilliance, breakthroughs, genius - indeed, it is quite arrogant to discount it all on the basis of an emotional predisposition to be pessimistic. Hamlet was right when he told Horatio that there were more things in Heaven and Earth than dreamt of in his philosophy.

What's causing the collapse of the U.S. economy right now is simpler than Peak Oil or Conspiracies among the Illuminati.  What we're seeing is that an entire country, acting collectively, has behaved in ways depressingly similar to a procrastinating, careless individual.  Mr. Kunstler, for example, derides the USA for not doing "productive" things, but he himself is a novelist and a writer of doomsday books.  Knocking the U.S. is a gig, in other words, but it is not a "productive activity" of the kind he urges on the rest of us Americans.  Neither is blogging or the Blogosphere in general.  These are more symptomatic of what's wrong than they are "productive activity."

The United States, as a nation, succumbed to the temptations of great affluence and power.  We have numerous historical antecedents for this behavior, most particularly the Roman Empire.  Take, as one simple point of entry, the current "crisis" involving Social Security.  Congress, to its initial credit, saw this one coming back in the early Eighties and upped the FICA tax to create a surplus.  Congress then proceeded to spend this surplus; one can measure the amount of surplus spent by reference to the multi-trillion dollar portion of the national debt owed to internal "trust funds."  Among other things, the surplus was spent on defense and security.  Seminal economics work, such as that by David Aschauer of the same period (1989), demonstrated that military spending by the government is the least productive form of "infrastructure" investment, and that growing economies, such as China, instead invested in schools, mass transportation, improving the electrical grid and water supply, etc., instead of an army and weaponry.  It's a commonplace observation that the U.S., spends as much as the rest of the world combined on defense, so it is engaged either in (a) complete irrationality or (b) complete corruption by MIC lobbyist influence. Either way,  this form of waste has crippled all other social spending and has foreclosed our ability to have a humane medical system for the citizenry.

Similarly, it was obvious that doing nothing to protect Americans from the huge numbers of relatively high-paying manufacturing jobs sent overseas, and even providing tax incentives for multi-nationals to do so, meant that the USA would devolve into a "consumer society" dependent on imports with our own productive capacity hollowed out.  This "globalization" mania, urged on by President Clinton and his advisor team of Casino Capitalists (Rubin, Summers, etc.), and cheerleaded by "influential" writers like Tom Friedman, left us with no alternative but to ship all our money overseas and hope foreigners would lend it back to us.  

We did nothing about the energy problem, of course, despite the clear warnings from President Carter in the late Seventies.  We allowed dependence on foreign oil to hit the 70% level.  But with or without the added insult of Peak Oil, these other trends have come home to roost.  We invested in what is really the least productive form of capital "hardware," vast subdivisions of new houses.  Houses are good for living in, but they are not places where a country makes any money or gets things done except when they are (a) being built or (b) being bought and sold, and then only at the margins.

Analyses of how we got here tend toward the excessively Byzantine.  It's not really all that complicated.  No one was minding the store.  No one was planning.  It was plain as day what was coming, and many people described it in highly accurate detail.  Nonproductive societies cannot create wealth out of thin air by financial games, not forever anyway, and certainly not by taking on excessive debt.  

America is actually one of those charmed places on Earth which probably could be almost totally self-sufficient with enlightened leadership. We could grow all of our own food and we could meet all of our energy needs by harnessing sun and wind, bridging our way there with the use of natural gas, coal with sequestrated carbon emissions, cellulosic ethanol, nuclear energy  and geothermal.  There would be plenty of work and it would be economically sustainable.

Instead we got what we got.  We're broke, dependent on the kindness of foreigners, and we're entering a prolonged period of completely unnecessary shortages and privation.  But I don't feel "philiac" about it all; it's a damn shame.

January 29, 2009

Will Das Boot Rise from the Bottom?

In a great scene from "Das Boot," the German movie about the horrors of submarining in World War II that was perhaps the most effective anti-war movie ever made, the captain and crew are trapped on the bottom of the Mediterranean near the Straits of Gibraltar.  The submarine has been damaged by Allied fire, and the only chance for survival rests on the ability of the strange, selpulchral, hollow-eyed chief engineer who is attempting to jerry-rig enough battery power to blow the ballast tanks so Das Boot will rise.  The crew sits quietly waiting while he works; the ship is running low on oxygen, the tension is overpowering, and they all know they have one chance.  If the power surge fails, they're doomed to suffocate on the bottom of the sea (the fate, in fact, of most German submariners during the war).

While we go about our business here in the Heimatland, Captain Obama and his chief financial engineers are rigging up a similarly desperate fix.  If you look at the figures for growth in the national debt for the period ending September 30, 2008, you will note that the number increased by $1 trillion, the largest annual leap (by about a factor of 2) in U.S. history.  As we know, however, we ain't seen nothin' yet.  All the subsequent bailouts and the impending recovery jolt of $800 billion are surely going to result in a measured increase this September in the two to three trillion dollar range.  It goes without saying the United States does not have this kind of cash lying around.

So it must be borrowed.  Sales of Treasury bills have been brisk over the last year, even at highly depressed interest rates, because there's nowhere else for money to go.  Money pouring out of the equities market has been redirected into these zero-growth instruments on the theory at least they're "safe."  But supposing that the deficit really does go to $2 trillion or above: with the money already squeezed out of the stock market, are there enough sovereign wealth funds and individual investors around to buy up this much debt?

The foreign creditors, such as central banks in Saudi Arabia, the Gulf States, Japan and China, have reliably recylced trade surplus dollars on the order of $700 billion per year.  While this is nice as a historical fact, there are two problems going forward.  First, the USA is not such a reliable trading partner anymore because the American consumer is cash-strapped.  That $700 B figure is probably shrinking as we virtually speak.  The second is that a donation on the order of $700 billion, even if possible, is not nearly enough.

The neat trick employed by the fulminating Congresspeople at hearings and Mike-Stand Moments is to talk angrily about the "taxpayers" and how they're being robbed by the necessity of bailing out all the banksters.  It's true that the "taxpayers" have been asked historically to pay interest on all this money borrowed, but we're obviously losing contact with any ability ever to pay back the principal amount.  The national debt is now approaching one year's total GDP for the United States.  We're not going to shake that money out of our sleeve. All the taxpayers can do is provide the cash flow on which more massive borrowing can be based.

So what happens if the funding sources simply aren't there?  If the money can't be borrowed because there just aren't enough dollars lying around the world in the hands of people willing to buy Treasury notes? What then?  I think I can say that I have never heard a politician of either party, or the Chairman of the Federal Reserve, or the Treasury Secretary, or even Paul Krugman, address this question directly (of course, in a recent column Prof. Krugman opined that budget deficits weren't that "big a deal, because it's basically money we owe ourselves," a head-scratcher if I ever heard one. I think Wen Jiabao would answer, "Speak for yourself, Caucasian.")

President O, who would really like to be "transparent" (I do believe that), probably wrestles with this conundrum every night. The limited intellect of his predecessor shielded Bush from similar anguish.  Should Obama lay it out, that maybe there just isn't enough money to make this thing work, that we can "appropriate" all we want, but if you ain't got it, you ain't got it? 

I think it would be good if someone just laid it out for once.  At least describe the risk of insolvency so the populace would know where we're at.  The captain of Das Boot told his men ahead of time that they had one shot at clearing the ballast tanks.  They knew what they were up against.  So that when the sub began to lift up off the bottom, ever so slowly at first, they knew what they had escaped.

January 28, 2009

I'm Skipping Davos This Year

Admittedly,  a little grandiose.  I wasn't invited and there's no auditing allowed.  Security in Davos (pronounced Dah-VOHS, if you care to get it right) is tighter than a drum.  That's because a lot of troublemakers think the annual meeting of the World Economic Forum (WEF) is just an excuse for a lot of celebrities to convene and be rich together.  To network with other greedheads so they can all get richer. Personally, I would like to see the WEF merge with the WWF so Vlad Putin and George Soros could meet in a fight-to-the-death cage match.

If you want to protest, the Swiss will let you hold up placards in, say, Zurich or Basel, but you're not getting anywhere near Davos, the highest city and biggest ski area in Europe.  The WEF is a non-profit organization dedicated to "global issues" like the environment and world health.  Hard to get more global than the environment, I suppose.  Arianna Huffington is going and wrote an excited blog on the eponymous HuffPost about all the forums she'll be attending, with names like "Empowering the Netroots for Change in a Changing World."  I made that up, but it doesn't make any difference. The real titles are equally meaningful. The WEF has been holding Davos since 1971.  That corresponds pretty neatly with the expansion of the biggest wealth disparity between rich and poor in modern history.  Also, the accelerating takeoff of CO2 concentration in the atmosphere, the death of 95% of all large predator fish in the oceans, the disappearance of Arctic sea ice, the pandemic of AIDS and the looming disaster of bird flu. Just the jets flying into Switzerland for this shindig alone probably moved us five years closer to the greenhouse tipping point. Some deep ecologists (such as those quoted in James Speth's "The Bridge at the Edge of the World") rate the odds of Earth being habitable for humans in 2100 at no more than 50/50.  But if you're a glass-half-full person, you might say that without Davos maybe it would be 50/50 next week.

I wrote Arianna in the comments section and asked her the question the Beatles once asked:

How does it feel to be
One of the beau-ti-ful

The HuffPost wouldn't accept it.  Did I hit a nerve?  Globalization, of course, has been a disaster for everyone except for people who go to things like Davos.  It has allowed huge multinational corporations to ride roughshod over local law and custom so that poorly-paid workers (dark melanin) can make stuff and sell it to people who used to make it themselves (less melanin), thus bringing about a new "global" standard of living for both light & dark, that is, dirt poor. Much as the much-maligned Karl Marx predicted; hey, just because he was an evil Commie doesn't mean he wasn't right.  But as Freud said about Marxism, Karl was right about the greedy self-centeredness of humans which leads to exploitation, but his solution won't work because of the greedy self-centeredness of humans.

I'm dreaming of a White Dah-VOHS!
Just like the ones I'll never know,
Where the ass-holes gather
To drink and blather
And watch...fat cats in the snow...

The last line is Bono's summary take on Davos.  We'll breathlessly await dispatches from the slopes.  Thank God these beautiful people are hard at work, looking out for you and me.

January 26, 2009

America's Economy as a Black Hole

I'm sure you share my fascination with the encroachment of scientific terminology on everyday conversation.  It's especially prevalent among liberal arts majors, because nothing adds to the gravitas of otherwise completely unprovable assertions like the generous sprinkling of terms like "critical mass, " "quantum leap," "power curve," and "nanosecond" in otherwise banal discussions. If you add action buzzwords like "get it right" to what you're saying, almost all other content becomes superfluous.  For example, if a Congressman thunders that the stimulus plan must have sufficient critical mass to jump start the economy  to get us ahead of the power curve and that we don't have a nanosecond to lose if we're going to get it right, then you know you're listening to a guy who's learned to take himself very seriously, even while having no idea what he's talking about.  

It's important to remember that none of this pretentious terminology actually indicates that the speaker has any quantitative command over the concepts he's pilfering; this is all qualitative bullshit.  I know, because I do it all the time myself.  For example, I love the term "event horizon" because it sounds so spooky and arcane, but I am unable to crunch the formulas to tell you where it is in relation to any given mass constituting a black hole.  Stephen Hawking, on the other hand, can do that.  I do know that the idea black holes suck up all the surrounding mass, no matter how far away, into their vortex (and over their event horizon - mooooaaaahhhhhaahhhhh!) is just fear-mongering; if the Earth were a black hole, it would be about the size of a ping-pong ball, but the Moon would go on circling the Earth as if nothing much had happened other than those annoying deposits of junk on its surface every few decades would stop.  The mass of the Earth would be the same, so its gravitational pull would be nearly identical.  Just, you know, kinda dense.

Black holes occur because of gravitational collapse of a massive object such as a big star, usually when it runs out of fusionable fuel to maintain the internal pressure resisting gravity.  You can see where I'm going with this.  Senator Chuck Schumer (Gasbag, NY) could talk like this if he would just Wikipedia that shit and read about black holes.  Then he could carry on about whether America is approaching an economic event horizon.

Here's my true, honest-to-God thought on this "recovery program."  All the economic experts, such as Paul Krugman and others who are pushing this massive spending solution, do not really know whether it will "work" at all.  They are talking this way because they don't know what else to say.  America is currently in a state of shock and denial about the "apparent" disappearance of about 40% of its net worth into thin air. Poooof! So the American economy, super-star that it was, is running out of fuel to sustain its gaseous, inflated state.  To drive the metaphor into the ground, that fuel (our hydrogen - if only we'd actually developed it!) was disposable income in the hands of the vast unwashed Booboisie, the open-air Jerry Springer Green Room that is my (and your) modern Homeland, Battlestar Consumerica!  Americans, during the Bush "Ownership Society" period, were getting about half that dough by treating their houses like ATMs.  No more, dat kine, as Hawaii's two 84 year old Senators might say for old times' sake, with Punahou Barack chuckling along.

As the "disposable" income vanishes, the national chain stores are all going bust-o, one by one, at an accelerating pace.  Just like a collapsing star accelerates in its collapse as its mass becomes more concentrated.  Shopping malls empty out, the stores close, the crap jobs disappear, house payments aren't made, credit card bills are ignored, banks teeter on the edge of insolvency, et cetera et cetera, as Yul Brynner said.  This description would be fantastic except that it's actually happening as I write and you read.

President Obama, who presides over this mess, doesn't really know what to do.  Nothing in his specific training or education equips him to deal with this enormously complex problem. America is collapsing under its own weight - huge federal and state budgets, corporate pension obligations, an out-of-control medical system, and Himalayas of private debt.  There just isn't enough money to keep it all puffed up.  We're about 40% short of what we need.  But what the politicians don't want to face, or to say out loud, is that maybe that's just where we are now.  They're professional optimists and their job description doesn't allow them to say things like that.  As Patrick Henry would say now, give me false hope or give me death!

So if Obama and the Democrats in Congress are going to fail in such a spectacular way (a singularity - there's another one), they want to be sure they fail in a way prescribed by the consensus of the experts.  It's safer that way.  And the Republicans, who know this massive spending thing is going to happen anyway, can thus oppose it safely, and then if we go bankrupt, or into hyperinflation because of a worthless dollar, they have another way to win, for whatever that would be worth inside our ping-pong ball sized economy.

The Old Folks at Home

To its great credit, the national media did not focus on the somewhat comical aspects of two elderly Senators collapsing during the Inaugural Luncheon at the Capitol.  To my everlasting shame, I couldn't help but think of all the Mel Brooks and Woody Allen movies I have seen where such a tableau would have fit right into the story line.  I have great respect for Senator Ted Kennedy, I know he has fought tirelessly on education and health care issues, but it's not altogether surprising that a man who will be 77 next month might have some health issues of his own.  As for Robert Byrd, who is now 91, I guess West Virginia may seek at some point a Constitutional Amendment allowing posthumous reelection.

I'm not an agist, I hope, especially as I kind of get up there myself; I know one 91 year old guy living in South Florida who could take Byrd's seat and revitalize the whole Senate. Nevertheless, I think the injection of new blood into any organization, of members whose education is a little closer to their current careers, who are a little more up on what's going on in society in general, is salutary. Crucial, even.  The average age of the U.S. Senate is currently 62 years old; one must count down 59 Senators before you get to a Senator, in fact, who is younger than 60, and then you reach a group of Senators in their late fifties.

The talk these days is how to avoid another Great Depression.  A lot of the current Senators might have first-hand knowledge, because I count 29 of them who were born prior to 1940.  A group of about 4 of them will cross the age 70 Rubicon this year, including Mr. Mumbles himself, Harry Reid of Searchlight, Nevada, who allows the small Republican minority in his House of Congress to block any piece of legislation the Republicans don't like by handing him a note saying they would filibuster if the bill is introduced.  Mumbles rolls over for this; I suspect that a younger, more ambitious Democrat with fire in his/her belly who wanted to make a name for him/herself, would force these obstructionists to stand up at the podium and read the Manhattan telephone directory for weeks at a time instead of thwarting the nation's will.  But gentle Harry likes comity, collegiality, reelection. Once, in the entire history of the Iraq War funding debate, Reid made the Senate pull an all-nighter; then they rolled the day beds away and Reid went back to rolling over for the GOP.

It's a commonplace observation that one of Barack Obama's keys to success was his superior mastery of the new world of Internet communications.  He knew how FaceBook, MySpace, networking all fit together in the national grid.  He raised hundreds of millions of dollars and organized the country down to the block level.  It was a kind of below-the-radar virtual universe that Hillary Clinton and John McCain just couldn't get the hang of.

Barack is now the leader of a country which absolutely has to make some paradigm changes in housing, farming, autos, the electrical grid, photovoltaics and wind power, desalination, and passenger rail in order to revitalize the economy. We have to go from the old system of a corporate growth economy to a steady-state ecological economy, in order to (a) be prosperous again and (b) avoid destroying the natural world.  President O knows we are not going to be successful at "jump starting" the old consumer nonsense.  The serial bubbles have all popped, and you can't get people to spend when they don't have the money anymore.

Barack must sit at those conferences, with a vast frieze of gray hair arrayed around the giant oval table, and think to himself: oy vey iz mir. Thanks to his father, he may know how to say it in Swahili.  He has to work with a Senate Majority Leader who thinks the opposition of Arlen Specter (78), Jim Bunning (77), Richard Lugar (76), Chuck Grassley (75), Bob Bennett (75), Orrin Hatch (74), Richard Shelby (74, but dyed black), James Inhofe (74), among other senior citizens, should carry the day.  Well, the soon-to-be 70 Reid is just respecting his elders, I guess.

I have serious doubts that this ancien regime is going to be equal to the task at hand.  Maybe it's not that funny, but I bet Woody Allen could make a kickass movie out of it.

January 25, 2009

George W. Bush as America's Chernobyl

The Chenobyl nuclear reactor explosion on April 26, 1986, was in fact more catastrophic than is commonly believed.  The total radioactive contamination released, a full array of fissile products, was 400 times the total output of the bomb dropped on Hiroshima on August 6, 1945.  A permanent evacuation of 336,000 people from around the area of Pirpyat in the Ukraine was necessary.  The red cloud in the accompanying photograph demonstrates the worldwide distribution of radioactivity as it appeared the day after the steam explosion at Reactor 4 at Chirnobyl destroyed the containment building, exposing the reactor core to oxygen and igniting the graphite moderator.  The resulting fire from hell propelled radioactivity 20,000 feet into the air, where it drifted as far as the Pacific Coast of North America.

Reading a good book lately about the epic chess matches between Americans and Russians (White King and Red Queen, by Daniel Johnson), especially the famous showdown between Bobby Fischer and Boris Spassky in 1972, I was struck by a remark in passing about Chernobyl (Kasparov and Karpov, playing for the championship in 1986, donated their prize money to disaster relief in the Ukraine).  Gorbachev thought the disaster, and the botched Soviet response and attempted coverup of the extent of the damage, was the single biggest factor leading to the demise of the Soviet Union, which occurred within a few years.  The Soviet populace finally lost all faith in the ability of the government to do anything competently, even in mounting a propaganda campaign, something at which the Soviets had once excelled.

A tantalizing thesis.  Of course, we had our own non-radioactive disaster with Hurricane Katrina, and I doubt there is an American anywhere who doesn't have serious doubts about the competence of the federal government in the wake of that fiasco. Yet the Bush years provided so much more.  A war to eliminate weapons that did not exist, followed by an occupation so obviously botched that a book all about it entitled Fiasco was a best seller.  And as Bush left office, the American economy fell completely apart.

I am reading with amazement these days about the transmogrification of the "recovery plan" into yet another in an apparently endless series of "tax cuts."  The impetus for this compromise is Republican resistance to the spending bill, Republicans who, if I remember correctly, now comprise an almost irrelevant minority in both Houses of Congress.

Conservative estimates of the budget deficit for fiscal year 2009 run in the $2 trillion range, larger by a factor of 4 than any previous deficit in American history.  This estimate is based upon a fairly rosy view of the fate of the government "investment" in all the failed financial institutions it has been bailing out on a 24/7 basis over the last year, such as buying mortgage-backed securities with no known secondary market.  If this has been money down a rat hole, then the deficit might approach $3 trillion, according to prognosticators such as the always dour Paul Craig Roberts.  

In the face of such surreal deficits, if I understand things right, the federal government is proposing to reduce its income while simultaneously passing the hat among the usual American foreign benefactors, asking for unprecedented subscriptions. America seems to be settling into a kind of subprime mentality; if we can fog a mirror, they'll lend us the money.  I'm not so sure. We've been the linchpin of the world economy for a long time, and a worldwide recession is underway because of our slump, but I strongly suspect that money managers of all the "sovereign wealth funds" are asking themselves some hard questions right now about their dollar positions.  Such as, have the Americans just completely lost it?  And can we get out before the whole thing blows?