Friday Night's Lame-A-Thon

It wasn't just the dumb formatting of the thing, such as Jim Lehrer's cute "Say it to him!" direction reminiscent of marriage counseling.  That made your skin crawl, but Lehrer is just that sort of folksy presence; he wants people to like each other.  It was simply that the debate was fundamentally stupid, much as the coverage of American politics is increasingly irrelevant and dumb, ossified within jingoistic parameters that never permit an actual airing out of what we used to call Reality.  And when you don't talk about reality, but simply measure who's better at arranging the stock answers as zingers! or sound-bites, you know we are actively in the process of joining our one foot in the grave with the other one.

As an example?  Okay, take our departure date from Iraq.  McCain says that if we don't leave with an honorable victory, "we'll have to go back."  Obama says that we will be as "careful about leaving Iraq as we were careless about going in."  Great, evocative lines.  There's only one problem.  Both of these guys need to read the news more so they'll realize that Nouri al-Maliki has been playing us for fools, using our money and our military to consolidate his own power base while he temporizes about the Status of Forces Agreement he has no intention of giving us.  So when the UN Mandate expires on December 31, 2008, a little over three months from now, what is our cover story for remaining in Iraq?  Even if things go to hell when we're kicked out, under what new Neocon theory of international relations would we "go back" to do as we damn well please?  It would appear that Commander McQueeg's reasoning is based on the unilateralist thinking that supported the invasions of Vietnam, Cambodia, Afghanistan and Iraq '03.  How could it apply to a "sovereign democracy," our bulwark of Freedom in the Middle East?

And if Obama wants to oversee an orderly withdrawal from Iraq ending in 2011 or so, what does he do about Maliki's desire to get us out much sooner for the sake of Iraqi domestic politics?  It's a popular cause in Iraq now, to make the Yankees go home.  The clever Maliki is already aware that Bush is trying to lengthen the occupation past the point of strict necessity in order to make American "policy" more congruent with McCain's stick-it-out campaign slogan.  I suspect Maliki would like nothing better than to pull the Persian rug out from under this ploy and turn to his natural supporters, the regime in Tehran and its benefactors, Russia and China.

McCain hammered Obama on his reluctance to cut "government programs," and Lehrer, of course (like all Mainstream thinkers) never thinks to include the defense budget as one of those government programs.  It is absolutely telling, in considering how empty the national discourse has become, that the single largest item of discretionary spending has achieved this sacrosanct category of The Untouchable.  Listen to my former prof and current favorite voice-of-reason on the insanity of America's obsession with "security spending," Chalmers Johnson, as he notes that last week Congress passed the defense appropriation bill of about the same size as the 'bailout" without so much as a public comment:

"This is pure waste. Our annual spending on "national security" -- meaning the defense budget plus all military expenditures hidden in the budgets for the departments of Energy, State, Treasury, Veterans Affairs, the CIA, and numerous other places in the executive branch -- already exceeds a trillion dollars, an amount larger than that of all other national defense budgets combined. Not only was there no significant media coverage of this latest appropriation, there have been no signs of even the slightest urge to inquire into the relationship between our bloated military, our staggering weapons expenditures, our extravagantly expensive failed wars abroad, and the financial catastrophe on Wall Street."

Obama, of course, couldn't touch it.  McCain bragged about his war on "cost-plus" contracting for the military, or how he canceled a redundant bomber program.  That's as good as it's going to get.  Lehrer is even afraid to ask the question.  That's how much of a third rail the issue of defense spending is in this country.  War and preparations for war have become the raison d'etre of the United States, which is the only reason a bellicose loose cannon like McCain is even taken seriously as a candidate.  The national Zeitgeist allows him to sound echoes of the Cold War without being challenged; when he looks into the eyes of Putin he sees "three letters: KGB."  (McCain's stock zingers are really cornball stuff.)  And what three letters do the Russians see when they look into the close-set eyes of the current American President, the son of the former head of the Central Intelligence Agency?  What's the point of such saber rattling, other than to hope, as McCain does, that constant provocations of Russia, such as meddling in Georgia, placing radar in "Czechoslovakia," or missiles in Poland can bring us back to those joyous days when we spent every waking minute on the edge of nuclear annihilation?

As we watch America's financial institutions take turns circling the drain and disappearing, it's worth thinking about the priorities we have set for American spending.  We are a modern Sparta and it has become so ingrained, so pervasive and natural to our thinking, that it's a bit like asking fish to comment on the necessity of the ocean.  Although it's bankrupting us and preventing us from spending money on anything else with a human future, we just can't stop ourselves. We can't even ask questions about it.  We have to sit quietly in the living room, coffee cups poised, listening to Jim Lehrer admonish his unruly interlocutors about "relating to each other," and ignoring the ten thousand pound fire-breathing monster, covered with scales, with razor blades for eyes and machetes for claws, sitting indecorously next to us on the couch.

Convergence at the Bottom, Or There Are No Ideologues in Foxholes

George Stephwhatever interviewed the surly John McCain for a few minutes on his show Sunday morning.  McCain seemed to have undergone a beige makeup job which made him look less cadaverous than in recent TV appearances, which is good, but he spoke in that soft, furry monotone the whole time, which is not so good.  I did pick up on McCain's basic trick, now that I know what to look for: it isn't difficult to find inconsistencies in any position Johnny Mac takes; his life is so full of inherent contradictions that they're hard to miss.  He's the anti-special interest crusader, for example, whose campaign is wholly owned by lobbyists on the payroll of those very same corrupting influences.  When George S. asked about Rick Davis, the lobbyist for Freddie Mac who runs McCain's campaign and whose lobbying firm, Davis Manafort, remained on the payroll of Freddie Mac until last month, McCain simply persisted in the obvious lie that Davis has not been connected to Freddie Mac "for years." That's how he handles criticism; anyone who points out that he's simply lying is playing the "politics game" and anyone can do that, after all.  It doesn't "mean anything."  McCain's work is too important and he's too much of a maverick to engage in politics as usual and play the back-and-forth game of modern elections, such as responding honestly to accusations he's lying through his clenched teeth. Since all criticism is politically motivated, it's equally meaningless in McCain's view - just part of the "process," so that even when he's accurately portrayed as a liar and con man it doesn't mean anything.  People are only accurately describing him as a charlatan and hypocrite because he's running for office, so why pay it any mind? In that sense, McCain probably represents the final evolutionary stage of American media politics: a human being who underwent a soul-ectomy so long ago that there's no conscience left to bother.

Still, it was the second half of the show that was the most interesting.  George S. led a roundtable discussion featuring Newt Gingrich, George Will, Robert Reich and Steven Pearlstein, an economics writer for the Washington Post.  The bailout and the country's financial crisis were the topics of discussion.  It was an uncommonly serious conversation for one of George's gabfests. I got the general feeling that everyone around the table was genuinely scared.  And the most remarkable aspect of the discussion was this: although it might be hard to find two personalities in American politics more historically dissimilar in ideology than Robert Reich and Newt Gingrich, they essentially agreed on everything.  Gingrich contended that America can't compete because our educational system has gone to the dogs, our infrastructure is shot, and we're broke. Pearlstein said that America had lived beyond its means for so long that the time had come to pay the piper; the foreign creditors were through financing our extravagant lifestyle.  George Will opined that the candidates were probably going to have to admit the truth about the "sainted American electorate;" in general, they're a bunch of self-indulgent, childish and unrealistic people who financed their lives with heavy debt.  Reich said that Newt was turning into a "liberal Democrat" before his very eyes, and Gingrich only smiled.  Indeed, the only person I thought sounded completely unrealistic was Robert Reich, who gamely tossed out the usual New Deal bromides about the need for increased government spending and larger deficits to stimulate the economy and "get it moving again."  What money, Bob?  What economy?

So what we're seeing here is the consensus that develops when all options are essentially gone. If four people of disparate political leanings are sitting in the middle of the trackless Sahara next to a Landcruiser that has run out of gas, they might argue about how, exactly, they came to their desperate pass.  But they could all probably concur that they were shit out of luck no matter how they got there.  That's what it sounded like.  Congress can appropriate $700 billion (a number which Henry Paulson admits was plucked out of the air because it sounded "big") by authorizing some more borrowing from those same oversubscribed foreign lenders, but it doesn't mean the U.S. economy is going anywhere.  Commercial banks are currently borrowing phenomenal amounts from the Federal Reserve through all of its new open "windows" in order to give the appearance of solvency, as much as $188 billion per week (and how long does it take to reach $700 billion at that rate?), but it's sort of like experimenting with a dead frog in a lab tray.  You can run electric current through the frog's legs and make them move, but the frog is still dead.

This huge "bailout" is designed solely to reimburse close personal friends of Administration bigwigs for the consequences of their own cupidity, and to levitate the general economy for a few months or weeks or whatever so that the incumbent scoundrels can get out of Washington, D.C.  The Democrats, of course, went along with it, but if you've watched the riveting, incisive commentary by the electrifying Harry Reid during his press ops, you'll have little problem understanding how he got rolled by Bush yet again.  

The Big Four around George S.'s table seemed to have little trouble understanding where we are, even if it's impolitic to admit just how bad things really are.  Money is what made all those policy differences go, after all; Newt liked seeing the Federal largesse siphoned off to private enterprise and away from entitlements (or public schools, for that matter).  Robert Reich liked government "programs," that bete noire of Conservative regard.  Now it doesn't matter what they used to think.  The money's gone.  The sun is rising along with the temperature, the sand dunes are shimmering in the heat, and they don't see any camel-riding rescuers on the horizon.

Wall Street, Main Street, All Around the Town

...the Brooklyn Bridge is falling dow-owwwn!

About five years ago, I read a book by Frank Partnoy, who teaches law at the University of San Diego and knows a lot about financial derivatives, called Infectious Greed.  A very interesting book. I would use that currently popular ten-dollar word "prescient" but at the time he wrote it, in 2003, the meltdown of Long-Term Capital Management was already five years in the past.  LTCM was leveraged at about 100 to 1 on its various market plays, and its market strategies were designed by a couple of Nobel Prize winners (Scholes & Black).  The algorithms were worked out by enthusiastic math PhDs from places like MIT and Yale, just down the road from LTCM's suburban Connecticut headquarters.  LTCM was maybe the first of the Ferrari hedge funds, hypermodern and built on the premise that computers could take advantage of tiny inefficiencies in the market by high-speed transactions that capitalized on arbitrage deltas multiplied millions of times.

Of course, one might ask: other than enabling the investors to buy one of those pretty white Colonials in Greenwich and a beach house in the Hamptons and a chalet in Gstaad, what is the social utility of this kind of bullshit?  The answer, in modern America, is that you're asking the wrong question.  No one cares about that morality crap anymore.  You can make money at it, so shut up and go hug a tree.  

Partnoy warned darkly that the web of derivatives in which LTCM and other hedge funds (and increasingly, investment banks) placed their bets had become so complex and interrelated that "systemic collapse" was always a looming catastrophe waiting to happen.  Credit default swaps, the option plays of puts and calls, short selling, collateralized debt obligations, all these fancy financial contraptions which are not the equity thing itself but related to or derived from it made a tremor in the market reverberate through the whole system. So that the 100-year Black Swan, that improbable event ruled statistically nonexistent for all practical purposes by the geniuses at LTCM, that thing that just can't happen, happens anyhow in a way that no one, not even a math PhD from Yale, expects, because the system is just too damn complex and exotic for anyone to make 100% accurate predictions, especially when its functioning is influenced by factors like human emotions.  Like panic.  So LTCM, which could not fail, failed anyway when margin calls because of events happening in Russia and elsewhere exposed its ridiculously thin real capitalization.  And the Feds rode to the rescue, led by Bill Clinton and Robert Rubin, because LTCM was "too big to fail."

Now if any of this sounds vaguely familiar that is not surprising.  And did the federal government tighten up its regulation as the result of this massive failure and huge government outlay of "taxpayer" money?  Uh...no.  Indeed, led by scalliwags like Phil Gramm, the feds went exactly the other way and enabled even more risk taking by banks and hedge funds of all shapes and sizes, and leaving the huge market in credit default swaps, which by some estimates have a "notional value" of several hundred trillion dollars, totally unregulated by anyone except the Invisible Hand of the Market.  And it was a bipartisan effort all the way, because Wall Street, not Main Street, is where the real money is, and Congress represents money. Christopher Dodd of Connecticut (no coincidence) helped Fannie Mae and Freddie Mac crash and burn, Chuck Schumer of New York is the hedge fund manager's best friend on taxation, Joe Biden helped roll the American consumer when bankruptcy "reform" was passed.  One should have no illusions about any of this latter-day heroism by any of these guys, and when Dodd, with his surfer 'do and Pacino voice (huuu-AHH!), leads the charge to "save America," you can rest assured it ain't you he's saving, not unless you're holding on by your fingernails to your desk at Goldman Sachs or JP Morgan Chase.

Some ancient philosophers saw the right way to deal with what we have here.  One of them, a Jewish Rabbi (so Judas called him), teacher, precocious Talmudic scholar and eponymous head of a famous religion borrowing his name, took a whip and scourge to the rabble infesting the people's temple.  We don't have anyone representing our interests in Washington, D.C. at the present time, so the tables of filthy lucre are not going to be overturned by any righteous vindicator.  The Democrats, whose prostration before Bush's demands seems so paradoxical, are not responding to The Decider at all, but to their true constituents on Wall Street.  Only the "House Republicans" are balking at the deal, and how they got to that position is anyone's guess.  Could they even be...sincere?  

You might take heart in this realization.  Partnoy was writing his book in 2003 about a bailout in 1998.  That bailout simply set the stage for later bailouts, as the S&L bailout had set the stage for the LTCM bailout.  Each one gets much, much larger than the last, as the potentiating effects of the derivatives connections force the market to the extremes.  I think you can safely say that if Bush is right and all we have between us and Depression is this bailout, the system is not going to be saved.  That Joker at the base of the house of cards is trembling right now.  The Temples of Wall Street don't have to fear a new Jesus arising from the foreclosed precincts of Main Street, but Reality itself is going to exact its revenge.

The Weirdest Speech I've Ever Heard

George W. Bush does not have a shred of credibility left, but that does not silence him.  The only person in the country who doesn't realize how ridiculous his role as titular leader of the country has become is George W. Bush.  That is the secret of his deep, inner happiness, the happiness that drives so many of us crazy.  He keeps talking, still seeking to persuade, his narrow forehead crinkled, his dead eyes staring blankly, his immobile upper lip opening and closing like a tropical bird's beak, in the dim recesses of some hallway in the White House, where, improbably, surrealistically, he continues to reside.

Bush also resides in the Eternal Now.  There is no history for Bush; not even yesterday exists in his mind.  Only this moment, this moment where he is right once again.  The economy is going to collapse and we're going to go into a deep, painful recession, a Depression really, unless some financial legerdemain is played by borrowing a huge sum of money from foreign purchasers of Treasury bonds and giving the take to a group of Wall Street loan sharks.  That's where we are. And none of it, absolutely none of it, is his fault.  He didn't have anything to do with it.  He did what a government is supposed to do about business, nothing, and it didn't work out because business did not behave itself.  Now he is going to clean it up because he sees the way forward and everyone should simply do what he says or the Depression will be on your head.

I've never in my life seen anyone like him and I doubt that you have either.  

I think, after these eight years have gone by, with fewer than 120 days to go in this bizarre interregnum of idiocy, I finally see what Bush's gift for screwing up is made of.  It is no small talent. It is the lethal mix of intellectual limitations mixed with psychological and personality dysfunctions.  It works this way, and has probably always worked this way throughout his calamitous business and political career.  First, he makes a terrible decision, a really bonehead call, such as ordering a full-scale invasion of Iraq on nonexistent evidence that Iraq is any sort of threat to the U.S.  Next, all hell breaks loose as the consequences of his bad decision become apparent.  Bush is unperturbed.  It is not in his psychological makeup to discern any responsibility for a screw-up, ever.  While one might think that strong personalities around Bush could nudge him toward a saner path, to get the car out of the ditch, they cannot, not even Cheney.  Rather, Bush uses two other techniques to insulate himself from criticism that he sees, in any case, as completely gratuitous.  Number one is to fire all dissenters.  Goodbye Colin Powell, Treasury Secretary O'Neill, Terrorism Czar Richard Clarke.  The second technique is to use his abrasive and caustic personality to intimidate critics.  This defense is augmented by his control of the terrain.  He sets the ground rules for any encounter.  It is never free-flowing and unstructured.  It is one minute in the Oval Office where he demands an abrupt, 30-second summary of the critic's position.  It is easy for Bush to be dominant in such a situation because (a) he never thinks for a moment that he could be wrong, lacking all curiosity about the ideas of others and (b) Bush never allows the sort of logical discourse, the back and forth, which could pin him down and prove him in error.

So we have a profoundly limited man, bolstered by the sense of entitlement which his dynastic background makes second nature, exacerbated by an innate megalomania and density to criticism, and crystallized by his fundamentally lonely and isolated nature.  Thus we have the strange vision of this odd creature standing behind a lectern and telling us the American Dream is now over with just a few weeks left in his eight-year reign of incompetence, and never a single word acknowledging that he was President when it all died on us.  Such phenomenal obtuseness doesn't seem real in some fundamental way.  

I don't quite understand how it is that he's the President of the country.  It makes me think I don't actually grasp how images are created and idealized in the mass electronic age. How the consciousnesses of my fellow citizens are formed in such an environment. Whether the data overload of mass media has succeeded, in some fundamental way, in actually replacing the contents of consciousness with ephemeral imagery and prefabricated strips of language and slogans, so that rationality is not possible for vast segments of the populace.  Somewhere in the realm of my own ignorance lies the answer to the riddle of how such an unlikely cipher could actually ascend to the top of our government.  Yet there he is, yesterday, today and tomorrow. It's quite possible, perhaps almost certain, that we are living in a system that can no longer work.

Gentle Ben Suffers the Fools, Not Gladly

I confess that I like Ben Bernanke and refuse to believe that he's actually "in on" the Conspiracy to Fleece America.  I don't see him as a crypto-member of the Illuminati or co-author of the Protocols of the Elders of Zion.  He's an academic, a very smart and reasonable guy, and in some ways he's our last best hope to emerge from the financial crisis more or less intact, that is, with most of us still living indoors.  Henry Paulson, on the other hand, is a former Goldman Sachs operative who no doubt sought unfettered latitude to administer the Big Bailout precisely because he could guarantee that his colleagues and future partners on Wall Street could maintain their gilt-edged lifestyle undiminished by any of these crazy, Socialist ideas of lowering their annual take to a measly minimum wage of $400,000 per year or something.  Just because the federal government is saving their fat white asses does not mean the G-Men can bring them down to their level. What next?  Do you expect them to drive Fords?

It is an unedifying, not to say nauseating, spectacle to watch the Congress "at work" grilling Ben Bernanke, who has forgotten more about economic history and policy than any of these fancily-dressed Popinjays will ever know.  Naturally, this tiresome tribe, like "Chuckie" Schumer of New York, attempt to draw Ben into the political arena, asking why Congress should appropriate $700 billion for a bank bailout when, for one of millions of examples, Bush found it impossible to add a pittance to the children's health insurance fund.  And so the Solons thunder on, suddenly the outraged guardians of the commonweal, the staunch defenders of "Main Street" and the "taxpayers."

What a load of bullshit.  Schumer's the guy who can't stand the thought that hedge fund managers, who at times have counted their annual compensation in the billions, should have to pay ordinary income tax rates instead of capital gains.  How do these guys manage the cognitive dissonance in their heads?  Have they actually managed to compartmentalize the public persona who fulminates on television from the backroom pol who does favors for friends so completely that they are, in effect, a Congress of Sybils at this point, whose various selves are unaware of each other?   

I'll say this for Bernanke: he's trying to put together a bailout mechanism which minimizes the federal outlay on a net basis.  The "toxic" assets (what an overused term that's become) can be purchased by this new federal bureaucracy at a figure representing their long-term worth, or even less, which may be higher than the distress sale, mark-to-market dumping that ruined Merrill Lynch, for example, which received about 22 cents on the dollar.  So perhaps (and there is some precedent for this in the actions of the Resolution Trust Fund which bought assets from failed savings and loan banks) the eventual cost will not add nearly so much to the national debt as the face amount of the appropriation would suggest, while at the same time strengthening the banking system.  And if this happens, it will owe much to the rigorous hard work of Ben Bernanke and his staff.  

Which is a helluva lot more than you can say for Congress.  Because Congress, you see, ultimately appropriates all the money for federal operations, not just bailouts.  And what these frauds and fakes never ever talk about when they're putting the screws to Gentle Ben is about the rest of the budget.  The United States, under W the Idiot, has been adding about $500 billion to the national debt each year.  The math is simple; look at that figure to the right that's clocking upward toward its new "ceiling."  If I tell you the debt was around $5 trillion when Bush took office, and you divide the difference between today's number and that by 8, what do you get?  So never mind these phony calculations of the deficit by the Bureau of Official Lies.  And the reason we keep running these humongous deficits, and getting deeper and deeper into the hole, and trying the patience of our foreign lenders to the breaking point, is because we won't cut back on military spending or on waging unnecessary wars of foreign aggression.

The analysis is getting very stark and very simple.  The world at large is actually very tired of the bellicose United States and its gratuitous invasions of convenience and resource-grabbing. We add insult to injury because we can't even afford to fight them.  We have to borrow money from the rest of the world to finance our militancy.  Then unstable madmen like John McCain up the ante by demanding aggression against one of our lenders, Russia.  You have to like the sweet paradox of that one. Let's kick Russia out of the G-8, then borrow money from our creditors, oh like Russia, to take on this new Red Menace that we just hallucinated.  What McCain and Congress in general don't want to come to terms with is that American Hegemony cannot be financed by the very same world you're trying to dominate.  The continued attempt to borrow our way to the top is destroying the country.  The next step is the reduction of U.S. Treasury debt to junk status, and when that happens we won't be the world's reserve currency anymore. And then Congress can appropriate all the suitcases full of worthless green paper it wants and nothing is going to help.

Throw all these bums out, every last one of them.  The 535 Plan.  Reduce military spending to the levels necessary to defend the country and no more.  Raise taxes to balance the budget. Resume the practice of regulating systematic fraud instead of enshrining it as the national ethos. And you stuffed shirts in Congress - leave Ben Bernanke the hell alone.  He's the only guy in that town working for a living.

Monopoly, the End Game

So this analogy seemed to work for some of my fellow American peasants over the weekend, as we ate breakfast and kicked around the extraordinary specter of America's financial collapse. Indeed, these particular serfs are related to me by blood, brothers not of another mother but of the same mother.  Beyond that, I will retreat into the mysteriousness which seems so much in vogue these days, such as when Henry Paulson describes, in dark and somber tones, the reason we need an immediate infusion of a sum representing about 25% of the entire annual federal budget in a mass give-away exercise. And he needs it this week.  Odd, considering how often, and how recently, Bush has mentioned that the "fundamentals of the economy are sound," except, I guess, for all the fundamental parts.  You'd think, when you're talking about that kind of money, and raising the debt ceiling over $11 trillion while you're at it, that you could risk a little candor.  Just spell it out.  Not a five-minute, vague overview full of the same cliches we keep hearing.  "Liquidity," "credit crisis," "financial markets."  Just tell us, Colonel Klink: what gives? Ist Amerika kaput oder nicht?  Without $700 billion, or $1 trillion, sprayed around Wall Street, is the system really going to collapse?  So far you've put American "taxpayer" money (as if any of it is ever going to be repaid!) behind the Bear Stearns buyout for $30 billion, AIG for $85 billion and backed up Fannie Mae and Freddie Mac's obligations in the American mortgage market to the tune of about $5 trillion.  Now you want to throw another trillion at the problem, whatever it is.  Do you see a pattern here?  I think I do.  The palpable sense of complete failure is so great that it's driving a desperate need to believe the United States has the wherewithal to keep the game going, that we have not bankrupted the financial system while at the very same moment experiencing the first gut-clutching premonitions that our foreign creditors have had it with us. And without them, there is no money, there is no ability to do any of this. Isn't there some rational upper limit to the capacity of the United States government to bail out private enterprise, and haven't we already passed it?  Is George W. Bush's emotional security so important that we all have to pretend that his deregulatory madness and his insistence on grotesque military spending is not part and parcel of this calamity and that we can't allow Great Depression II, The Sequel to begin during his final four months in office?

It seems we won't get any greater clarity, in part because our learned solons are no better than Paulson at explaining any of this.  I loved that moment yesterday when the Democrats gathered around the microphone in the halls of Congress, in that Standard Photo-Op, and after Barney Frank talked tough for a moment, Nancy Pelosi leaned in and said, "We're not signing a blank check."  No, Madama Diva, you would never do that, not again, not after all the blank checks you've signed for that crazy war over in Iraq.  Maybe we could get Nouri al-Maliki to fund this bail-out.

Back to the metaphor.  You played Monopoly as a kid, I'm sure.  My boyhood friends and I never played strictly by the rules, of course.  When Parker Brothers invented this game during the Great Depression as fantasy relief from hard times, they designed the rules so the game would, in fact, end at some point.  Not one of those two-day marathons more typical of a bunch of kids playing with their improvised rule book.  In the early stages you acquired deeds to property. You collected rent, maybe you passed Go without going to jail, maybe you hit a couple of scores on Chance and Community Chest.  You were clever and made some good trades for monopolies, maybe on some of those squares where real estate wasn't too expensive but people coming out of jail had to run your gamut.  You know, like the orange properties, or the dreaded reds.  You bought plastic green houses, then traded them in for the monolithic terror of a Hotel.  Later in the game, when Marvin Gardens, the greens and the awe-inspiring Park Place and Boardwalk were developed, you knew it was crunch time.  It was just a matter of one bad roll of the dice.

If you ran out of cash because of some unlucky rolls, because of misjudgment in staying at hotels on Pennsylvania Avenue you couldn't really afford, you could resort to placing your properties in hock.  This had a double whammy effect.  If you really played by the rules, you were entitled only to half the value of a hotel, house or deed mortgaged to the bank.  Plus, when a deed was mortgaged and turned face down, rent was no longer collectible.  You could not borrow money from other players, at least by the rules.  You could, of course, sell your properties, but you were up against a group of 9-year old boys (like vulture funds) with no real interest in your survival.

We're in the End Game of the Great American Game of Monopoly.  That was the true meaning of the "mortgage-backed security" phase of the national meltdown.  It's true that high rollers on Wall Street seized on a scheme of turning huge bundles of ordinary home mortgages into bonds that could be sliced, diced, tranched and parted out in a secondary market, and this was a great boon to the investment banks, like the aggressively sleazy Bear Stearns.  They had a new bubble to inflate to maximum surface tension.  The air blown into the bubble was cheap money, and that was pumped in from recycled dollars around the world.  Greenspan & Co. kept domestic interest rates unrealistically low, so that from the viewpoint of foreign sovereign wealth funds, the return was less than nothing when devaluation of the dollar was considered.  China, Saudi Arabia, many other countries sat still for that, because the run-up in real estate prices permitted an orgy of borrow and spend consumerism during the early years of the 21st century, and we shipped a lot of that money overseas for oil, cars, plasma TVs and poison dog food.

So for a while there we owned everything from Baltic to Boardwalk.  Mortgaged to the hilt, it's true, but it looked good on paper.  And then the mortgages began to fail.  The problem was that, in America, real wages, the standard of living for the majority of the population, have not really progressed since about 1973.  Lots of Americans couldn't afford those overpriced houses; they were trying to develop Park Place on a Mediterranean Avenue budget.  Once the foreclosed houses flooded the market, prices nosedived, and the housing stock hemorraghed equity.  Thus, no more lines of credit or re-fi to prime the consumer pump.  The Chinese, the Saudis, so many others began to wonder: if they don't buy our crap, what's in it for us?  

Partial failure of a tranched bond tended to drastically reduce the face value of a mortgage-backed security.  The underwriters and purchasers of these exotic instruments were reinsured against failure by a complex and completely unregulated web of derivatives such as credit default swaps, so that mass failures of the bonds reverberated through the whole financial community, entailing investment banks, commercial banks, insurance companies and government sponsored enterprises.  All hell broke loose and the big investment houses were burned to the ground.  

The federal government would like to believe, at this point, that it is the guarantor and banker of last resort.  This is not quite accurate.  There have been some other observers watching our immature President and his gang of childish enablers play this silly, fatuous and fatal game of Monopoly.  Some of these observers wear burnooses as their daily attire, others business suits of a Western style, although the wearers speak Mandarin or Japanese.  The standards of living of many of the citizens in the countries ruled by these observers are not quite as lavish or self-indulgent as their American counterparts, to say the least.  As they watch the American lifestyle implode, they do so with equanimity and not a little satisfaction.  While America, at least for a while yet, might fancy itself as the financial capital of the world, that kid who lived up the street from you who always wanted to be the Banker in the Monopoly game has been replaced by Chou and Faisal, who are not nearly so easygoing.  They sit a little back from the card table, watching. One can detect the faintest hint of a smirk as they watch the last two players fight it out.  Should they dole out any more money or not?  The kids are begging for a bailout but maybe this game has gone on too long.  Oops, Sonny just hit Park Place with a hotel and he's busted.  Now Rusty has the dice and he tosses them on to the board...oh no.  Did he just throw a nine?

It's Probably Time to Face the Music

I believe it was a distant relative of mine, Aristotle, who observed that it was the fate of democracy to devolve into oligarchy.  It certainly happened here.  The final push was the abandonment by the United States of even the trappings of social democracy in favor of a devil-take-the-hindmost capitalism without restraints of any kind.  Human nature being the immutable thing it is, a greedy competitiveness became the ethos of the Hollow Men of the Bush Era.  They ran scams, Ponzi schemes, swindles, the whole gamut, settling on the securitization of America's last great asset, its actual land, as the final play.

It all crashed and burned and now America's days as the great hegemonic capitalist are coming to an abrupt end.  The "bail-out" is not actually to restore America to functionality.  Its sole purpose is to reimburse the financial swindlers who call the shots for the Bush Administration.  On their way out the door, they're going to pull a Brinks job of historic proportions.  Empty the Treasury of its last shreds of notional value, its "dollar reserves."  Hey, if it proves legal tender in countries with hard currencies, so much the better.  There is no real harm in taking a hand-out arranged by your friends in high places, even if it proves worth less than it seems.

A moment's reflection should convince you that the "bail-out" is preposterous.  It violates what you might think of as the First Law of Financial Thermodynamics: if the United States is actually $10 trillion in debt, if we run yearly trade deficits of $800 billion, if the American banking system is overleveraged and broke, how do we conjure, out of thin air, another $1 trillion to give to large financial institutions?  If we can actually do that simply by "appropriating" the money, then why do we say we have any national debt at all?  Why don't we immediately "appropriate" enough money to pay off the national debt?  It's only one order of magnitude removed.  There, now we're solvent.  We print the world's fiat currency, don't we?  Then we decide how rich we are and how rich everyone else can be.

The "bail-out" is a hallucination which might work long enough for Bush and his financial cronies to transmute Paulson's unsupervised, unreviewable largesse into something of actual value.  If you read the actual language of this ridiculous piece of "legislation," you will see things that sound simply and fundamentally un-American, as we used to think of that term.  Why would a cabinet member be given dictatorial powers to decide who receives public money, and why would all courts be deprived of jurisdiction to challenge his use regardless of cronyism, bribery, favoritism, graft?  It's simple: the bail-out is theft, pure and simple, and no one in the Bush Administration wants to answer for what they do with that $700 billion.  If the Congress is stupid enough to give Paulson this kind of power, then I think we can safely say at that point - that's all she wrote, there is no one in Washington who actually represents the American people.

No amount of legerdemain is going to really create money where there is none.  The world has caught on to this act.  It's better to face insolvency sooner rather than later, particularly when the efforts to delay the inevitable simply add to the problem.  The last of the bubbles has burst and the bills have come due.  It's time to start powering down the American economy, and if "crises" of illiquidity occur and the "financial markets" freeze up, so be it. We'll have to get used to a standard of living based on our actual productivity and income.  Adding a crushing burden of debt as the economy goes down anyway makes no sense.

Like most observers, I have no confidence that the Democratic Party will do anything other than whimper a few objections to Chairman Bush's latest Socialist foray, and then line up behind his "plan."  Let's face it: they're in on it.  They're on the payroll of the same lobbying groups.  And they certainly don't want to shoulder any blame if the Crash comes with no legislation in place.  They would prefer a larger Crash sometime in the future, when a President who doesn't scare them so much won't give them dirty looks and call them names.

The Ungrateful Nouri Pulls a Fast One

I think it would be quite possible to go broke underestimating the intelligence of Nouri al-Maliki. Let's just say if we were trading camels, Nouri would probably walk away with all of my animals and I would hitch a ride home in my boxer shorts.  The buttoned-up fashion plates in the White House, like Bush with his new-suit-a-day program, always wearing the chic new colors in men's neckties, probably think of Nouri as an Arab rube, what with his shlumpy attire and Nixonian five o'clock shadow.  Should be a pushover.  We're the mighty United States, with our giant red-white-and-blue foam finger thrust high into the Baghdad sky.  We stormed into Iraq, kicked ass and took names.  We're Number One!

So why's Maliki cleaning Condi Rice's clock in these 11th hour negotiation games?  Hmm?  I keep coming back to the idea this scruffy dude was schooled in a different milieu, to speak in French, the language of international diplomacy.  Nouri's a master at the asymmetrical power game.  When he was causing trouble for Saddam in his old dissident days, first in Iraq and then when the heat got too hot, in Iran and Syria, he had mainly his wits and his gift for organization. And up against this guy who literally learned cloak-and-dagger as on the job training, who played life and death games for a living, we've got a bunch of effete spoiled brats like the ex-preppie cheerleader turned faux cowboy, George W. Bush, and his anvil-haired Girl Friday, the wiz from the University of Denver who plays the piano and ice skates.  

Why did we think we had a chance?  George Bush has been sooo played by this dude.  If we were still capable of embarrassment, and I don't see how we could be, this would be humiliating. Look at the Brink's job Maliki has pulled off.  All of the money we spent to liberate Iraq, to cashier the hateful Saddam, was strictly on our tab.  Iraq has been socking money away, $79 billion at last count.  We've got 130,000 soldiers and just as many contractors there, we've spent a fortune on "permanent installations," forts and such, we're still spending $10 billion a month there even though we're going broke at home, and what does Maliki say?  "It's been real, Yanks.  Can't tell you how much we appreciate it.  Now get the hell out of here."

The United Nations mandate deadline is coming up on December 31, only about three months away.  After that, we have no legal authority to remain in Iraq.  The cocky numbskull Bush, with his usual completely unwarranted confidence, thought we could have it all.  First dibs on the oil fields, permanent bases, a Status of Forces Agreement (SOFA) which would allow our soldiers and contractors to carry on in the scofflaw way that has made the American military so popular in places like Okinawa.  So Nouri, for just a little while, just long enough to lull us into complacency and to stop watching the clock, made a few tentative agreements with American oil companies for development (but not those profit sharing agreements we lusted after) and one or two other concessions. Which he's now pulled the plug on. As to the SOFA, Nouri and his team negotiated.  And negotiated.  And negotiated.  Until finally even Clueless-in-Chief began to smell the camel droppings.  Something just wasn't right. Nouri kind of tipped his hand a little while back when he altered his starting lineup on the negotiating team, purging the pro-American Iraqis and installing hardliners.

Condi, doing what she does best, pronouncing painfully obvious and utterly empty conclusions with her trademark self-importance, told us "we would have an agreement when we agree," which, frankly, did not surprise me to learn.  Nouri picked the immunity provision as his line in the sand, but it could have been any of a number of terms of disagreement.  I think he settled on immunity because he knew how much it would bug Bush -- the idea that an American soldier caught in some impropriety in Iraq could wind up in one of those scary court rooms of the kind that Saddam was "tried" in.

“Even if we ask for an extension, then we will ask for it according to our terms and we will attach conditions and the U.S. side will refuse,” he said in an interview on Wednesday with the directors of Iraqi satellite television channels. “U.S. forces would be without legal cover and will have no choice but to pull out from Iraq or stay and be in contravention of international law.”  New York Times, September 18, 2008.

What Nouri is talking about there is that beyond December 31, 2008, sans accord, the United States military can no longer occupy Iraq with any international legitimacy.  He's kind of rubbing our noses in it, isn't he?  Is that really very subtle?  Nouri and his "negotiating team" are dreaming up conditions to an extension of the 12/31 drop-dead date which they know we can't accept.  I can't wait to hear about those.  "Provided, that the extension of the UN Mandate beyond December 31, 2008, is expressly predicated and conditioned upon the agreement of Heidi Klum to a two-week vacation in Cannes with the Prime Minister, all expenses to be paid personally by the President of the United States with transportation aboard Air Force One." They're going to have fun with their sham caveats, all right.

Has the United States reached a point where we're like that obnoxious clown poised above a barrel of cold water who hurls insults at passersby, daring them to hit the target and dowse him? Does the world look at this madhouse, with the government now buying up all the investment banks and insurance companies, and running the Treasury's printing press till the currency catches fire, and think:  WTF?  Do they see that one of the major candidates for President is a guy who just announced that he thinks that Spain must be an enemy because its President has an Hispanic name, just like Hugo Chavez, and makes errors of comparable magnitude every five minutes because he's lost his marbles?  

Maybe Maliki just wants America as far from Baghdad as humanly possible.  The Arabs will take it from here.  No hard feelings.  Here, take some of this hummus with you - on the house.

The Wingnuts and Buyer's Remorse

I first noticed this tendency about a month ago while watching "This Week" with George Stepha-whatever.  He was leading his supercilious, sententious crew through another mindless exercise of in-crowd baloney, the real lowdown on the campaign which only Cokie Roberts, George Will, Patrick (Heil!) Buchanan know about.  I think it was Cokie who described some weakness in the Obama campaign, some developing vulnerability which opened the door for McCain, and Will jumped down her throat.  He was having none of it.

"Strange," I said.

"They have to live in this country after the election," a wise friend said.

"Indeed," I thought.  Maybe I said that out loud too.

Now this trickle through the dike has become a burst levee.  The conservative writers, usually so reliable for knee-jerk support for whomever, even for whatever, the Republicans nominate, are lining up to take shots at John McCain.  David Brooks in Tuesday's New York Times, in his smarmy, snooty way, has delicately pointed out that Sarah Palin doesn't have any idea what the hell she's talking about.  Of course, he words it as a deficiency in "patterns of experience."  That's the key thing, whether you realized it or not.  A presidential candidate's chief asset is his history of "patterns of experience."  Are we electing a chief executive or a maitre d'?    (Where did the Times find this guy?  Brooks has the annoying, condescending habit of beginning his various fatuous analyses with dichotomous taxonomy:  "There are two kinds of people who serve in public office.  Those who..."  Here's another bisection:  There are two kinds of writers, smart ones and David Brooks.)  Then Richard Cohen and Charles Krauthammer of the Washington Post, all piling on mercilessly, using this Palin choice as their cudgel.  Of course, it's a delicate dance; these ultimate snobs don't want to sound like snobs, so they have to defend Palin against the charge that she's exactly like that woman at the PTA meetings who won't shut up because she knows everything.  And she knows everything with certainty because she doesn't know anything.  But that's exactly what these insider mandarins are thinking.  McCain threatens to turn the United States, in its present shape, over to a trailer park bimbo who is in way over her head.  They can't say it because they're part of the Very Serious Media, but when they meet for drinks after work that's exactly how they talk, and we all know it.  

All this reflects rather poorly on McCain's "judgment."  How could he do this to us?  He actually cares so little about the country that he puts his own election above the survivability of the nation?  Cohen called it an act of "political treason," and he's a longtime admirer of John McCain's image.

What shape is the country in?  Here's David Paul Roberts, former Assistant Treasurer in the Reagan Administration:  

"A country that had intelligent leaders would recognize its dire straits, stop its gratuitous wars, and slash its massive military budget, which exceeds that of the rest of the world combined. But a country whose foreign policy goal is world hegemony will continue on the path to destruction until the rest of the world ceases to finance its existence.

"Most Americans, including the presidential candidates and the media, are unaware that the US government today, now at this minute, is unable to finance its day-to-day operations and must rely on foreigners to purchase its bonds. The government pays the interest to foreigners by selling more bonds, and when the bonds come due, the government redeems the bonds by selling new bonds. The day the foreigners do not buy is the day the American people and their government are brought to reality."

In the law game, we used to call it "winning too much."  You were too successful at trial, creating issues of appeal for the opponent.  You won things you should have lost and now the whole case is in danger of being turned over on review.  That's where the Wingnuts are now.  They're dropping all pretense that they are dominated by an "opposition media," that fictitious entity called the Monolithic Liberal Media.  It has not existed in a long, long time.  Rush Limbaugh is heard coast to coast, Bill O'Reilly rules the evening gabfests, the weekend network shows are dominated by Establishment functionaries like George Will and Patrick Buchanan.  They have been winning for most of the last 30 years.  They got everything they wanted: huge deficits, a bloated military, wars of choice, no taxes, crushed entitlement programs, a fusion of church and State, and absolutely no regulation of Big Business.  It's led to the world Roberts describes.  And now they're scared.  Their propaganda has put John McCain in close proximity to the White House, and he's bringing along the Tootsie from Wasilla, who will rule the country if McCain strokes out from his high blood pressure, dies of a heart attack from his coronary artery disease, sinks into dementia or succumbs to a fifth bout of invasive melanoma.  Sarah Palin is going to take on that list of perils which Roberts limns above.

Kind of give you the chills?  The situation is not much better if McCain survives his first term. He's not going to cut the military, he's admitted he knows nothing about economics, or technology, or much of anything, except he's damned proud of The Surge, because that allows us to spend $10 billion a month of borrowed money on behalf of a country which doesn't even want us there anymore.

So the Wingers are in a quandary.  How do we derail this thing?  Which we created.  How do we go back to all the Fundamentalists, the NASCAR fans, the swarms of racists in Ohio, West Virginia, Florida and Pennsylvania and convince them?  "Just kidding," they'll say.  "McCain's actually kind of a mediocre nut.  Heh-heh.  Uh, don't vote for him."

The financial system in the USA is falling apart.  The housing market is in the toilet.  The deficits are careening out of control.  All the wars have proved pointless.  People are losing their jobs by the millions.  Hell, there might not even be jobs at the New York Times, Washington Post and ABC if this keeps up.  Hey Johnny Boy, you who would be Caesar.  If Brutus Cohen and Cassius Brooks ask you to talk a walk down to the Forum, watch your back.

Cockroaches for McCain

Insects of the order Blattaria have apparently formed a 527 organization to purchase ads for the underfunded presidential campaign of John S. McCain, Republican.  Working with a worldwide network of other species of cockroach, the American branch, consisting of Periplaneta americana, have reached across international boundaries to join forces with a German group, Blattella germanica and two Asian cockroach activist organizations, Blattella asahinai and Blatta orientalis. 

We caught up with the leader of the American chapter, Hal Roach, as he emerged from a foraging expedition beneath a kitchen sink in Plano, Texas.  He agreed to answer a few questions on the record.

Waldenswimmer:  Hal, what's up with the insect PAC?  What motivated you?

Roach: Wally, the thing is that McCain has really fired up the base, and when I say base, I'm talking baseboard.  This selection of Sarah Palin was pure genius.

WS:  How so? Have you heard her talk?  She's hopelessly inexperienced and unqualified.

Roach:  And your point is?  No, look.  We've enjoyed our time with you on Earth, we really have. I mean, you treat us like low life, but in general we've got a good thing going with you.  You're wasteful, sloppy, you throw tons of stuff away, which is right up our alley, and when I say alley...

WS:  Yeah, I get it.  None of that's likely to change, is it?  Why the partisanship?

Roach:  It's our shot, that's all.  Why don't we just let it go at that?

WS:  You're being awfully mysterious.

Roach:  I'm a cockroach, Dude.  We own the night.

WS:  Still, I'm not following.

Roach:  (sighs [I think -WS])  Look, you've come close before.  Reagan, W. Bush.  I mean, Bush. That was hilarious.  But he was actually pretty good natured.  He only demolished countries that couldn't fight back.  There was no future in that.  What I mean is, there was a future in that. He wanted to be Vladimir Putin's pal, at the ranch, up in Maine.  They carried on like a couple of school buddies.

WS:  Really?

Roach:  I was there, Dude.  Terrrific garbage, by the way.  So us Blattarians had just about given up hope for a nuclear war.  Then...magic.  The Republicans nominate an angry ex-pilot with a short life expectancy and he picks this End Times cupcake.  And the next thing you know they're both talking out loud about a war with Russia.  And you know what that means?  

WS:  Radiation.

Roach:  Bingo.  Fiesta Periplaneta, baby.

WS:  It's a myth you'd survive.

Roach:  Don't you wish, Dude.  No, it's the real deal.  It's because we only do mitosis when we molt, which is about once a week, and that's when the radiation can get to you.  So a lot of us will buy it.  But it's a numbers game, man, and numbers we got.  We won't all be molting at the same time.

WS:  You've given this a lot of thought.

Roach:  It's a serious issue.  Life and death, something you guys never think about.  Hey, you know the difference between a hockey mom and a cockroach?

WS:  I don't feel like joking around.

Roach:  Sorry, man.

WS:  Why did you come up with something this...evil, Hal?

Roach:  Us?  Who came up with Terminix, Dude?  Give me a frigging break.

WS:  So that's it, huh?  No talking you out of it?

Roach:  'Fraid not.  Listen, I gotta skitter.  Buncha battleground states to hit.

WS:  Your own Southern Strategy?

Roach:  Prime cockroach country, Dude.

_____________________________________________________

(with thanks to Dan D.)

The Decline and Fall of the American Empire

To attract attention above the bawling crowd, the professional Doomsayers perforce must use each gravestone along the way to mark the end of American life as we have known it.  Thus, when Bear Stearns failed, that was it; when Fannie Mae and Freddie Mac were nationalized, that was the final straw.  Now Lehman Bros., Merrill Lynch, AIG and Washington Mutual have their heads on the chopping block and surely there is no tomorrow.  Even the House Liberal, Paul Krugman, has weighed in with a considered "Yikes" in today's column, wondering whether the American financial system is about to collapse.

James Kunstler, the Peak Oil Man, finds yet another in a series of apparently inexhaustible omens in today's roiling Wall Street news.  The American Economy, that sickly patient forever in extremis, with the priests of high finance always at the bedside reading Last Rites, struggles up off his death pallet to stagger through another day.

Why doesn't he just die, dammit?  It's because he's slowly starving to death, that's why, and when this period of privation began, he weighed 10,326 pounds.  It takes a long time to metabolize all of one's caloric stores.  We've been at this work for decades, but there's never going to be a final straw.

At the height of the Roman Empire, perhaps one million people lived in Rome.  10% patrician, 90% plebeian, rather similar to America's wealth distribution today.  By the time the Vandals from the north sacked Rome, there wasn't much left to conquer.  Maybe 50,000 stragglers still hanging around the Pantheon and the Forum, wondering why funny things never happened anymore.  Where did they all go?  They had died, gone insane from lead poisoning, mainly dispersed.  Rome perished of imperial overstretch.  It got too expensive to subdue all those far-off lands and the returns on investment were rapidly diminishing.  Rome, like America, was built on a growth model, and there were no new worlds left to conquer.  So the Roman Empire went into a long period of gradual decline as it lived off its accumulated largesse and its population became complacent, lazy and stupid.

The United States, a mostly agrarian country at the turn of the 20th Century, sagged into the Great Depression, a noticeable downturn, but things had not been so opulent before the Depression and so Americans rode out the storm with grit and determination.  The Second World War vaulted the United States into industrial overdrive, pulling us out of the Depression.  After the ruination of all other industrial powers by the war itself, the USA emerged as the unquestioned economic leader of the world.  While Europe and Japan struggled to rebuild their countries out of rubble, America built a huge, heavy industrial infrastructure and began selling its products to its citizens and to modernizing customers all over the globe.  The 1950s and 1960s were our true Golden Age.  Those of us now running the country (into the ground) had our consciousnesses formed during that halcyon period, including the clueless incumbent in the White House.  It was easy to believe in American Exceptionalism because it was manifested all around us.  We felt so expansive we even elected a liberal President, the last one as it turned out, Lyndon B. Johnson, and by a landslide.  A Bircherite candidate like Barry Goldwater, indistinguishable politically from his modern-day avatar (and Senate replacement) John McCain, had no chance in those days.  We didn't need to be small, mean, dishonest and highly partisan because there was enough for everybody.

There was enough for everybody because we still had the habits of hard work left over from the immediate post-Depression generation.  But let's face it: who really wants to work hard in factories and mines and on construction sites?  We certainly didn't, as we went through various incarnations as the Information, Technology and Consumer Economies.  That last national descriptor said it all: we would support ourselves by buying stuff from each other, and all the stuff would be made elsewhere.  Japanese and European cars, Asian electronics and then finally, Chinese everything.  Oil importation went from 30% of national use in 1973 (the time of the Oil Shock) to 70% today.  And while all that progressed, Americans not only did not adjust to privation and scarcity, they doubled down on their wastrel habits, buying SUVs instead of Corollas and building 12,000 square foot McMansions which required vast amounts of natural gas and fuel oil to heat.

With zero savings and tightening international competition, Americans looked around for ways to conserve their dough (freeing it up for consumer purchases) and decided to starve the public sector.  The most popular candidates and political leaders became the Republican tax-cutters and screwballs like Howard Jarvis in California, who decided that gutting the educational base with the axe of Proposition 13 represented a good investment in the future.  Americans now look around in wonder at the bridges collapsing, the dikes breaking in New Orleans, the potholed, disgraceful highways, the old, tired airports, the absence of mass transportation and wonder -- where did all the money go?  

Money, or rather the assets representing that money, have been pledged as collateral.  That was the true meaning of the final financial game the Gnomes of Wall Street could come up with to keep the merry-go-round spinning for a few more turns.  In that last spasm of putative solvency, when the money we sent abroad was being recycled to us by the people who made the stuff we bought, we lowered the effective borrowing rate to Less than Zero, and like a nation of crack addicts we binged on the easy credit.  To keep the consumerism in motion, Americans pledged the last remaining things they owned, their houses, as collateral, and those pledges were bundled up into mortgage-backed securities and sold all around the world.  It bought time, slowed the unwinding of the Empire, but it hastened our demise because we also bought the distrust of the entire world as they saw themselves conned by American fast-buck artists.

And now the Giants of Wall Street are toppling one by one.  The short view is to blame the Republican Party as the party of deregulation, as the party "that wrecked America," and certainly there is something to that.  But the long and true view is far more nuanced, and ultimately more damning, than that.  

Kevin Phillips, in a series of brilliant books, has chronicled the ascension and demise of the Dutch, Spanish and British Empires, more modern successors to the Romans of antiquity.  Great empires follow a predictable arc of triumph and dissolution, in the shape of an inverted parabola.  In the end America is not really "Exceptional."  We're just like all the other empires.  Great wealth, resting uneasily on world domination, inevitably breeds generations who begin to believe in the Cosmic Free Lunch, in the unearned incremental advantage, in the idea it's possible to prosper permanently without doing much.  These views are heard daily on the financial news channels.  There will be a "housing recovery," a turnaround, the market fundamentals suggest prosperity is just up ahead.  The housing recovery will occur when foreigners actually start buying American residences in large numbers, instead of simply buying the collateral for them.  We can count on the federal government, corrupt to its core, to assist in this process.  You might think of it as the Vandals entering Rome.  There will be no resistance.  A desperate populace will greet them as liberators.

With Enough Shovels

One theoretical approach to surviving a thermonuclear war, at least outside of the immediate blast zone (the "overpressure area"), is to construct a primitive bomb shelter as follows:  Dig a deep hole, as deep as your age and physical condition will allow you.  It needs to be large enough for you and for whomever else you wish to protect, but not so great in area that it cannot be completely covered by a pair of stout wooden doors.  You're going to be down there for a while so you might want to consider lining the floor and walls with planks so it will be homey.  The important part of the construction is the roof.  On top of the doors you need to pile three feet of earth; this is the key protection against radiation in the immediate aftermath of the explosion of hydrogen bombs.  You need to work out ventilation, because let's face it, this shelter is a little like burying yourself alive.  On the bright side, however, if you die in the shelter from radiation poisoning, you will have saved the trouble of your interment by others who will probably be in no shape to dispose of you.

These joyous thoughts occur to me in the aftermath of Sarah Palin's interview with Charlie Gibson, in which she joins with Senator McCain in seeing all us here Americans as "Georgians now."  How can I say this?  These people are freaking crazy.  I don't suppose that Sarah Palin, in the course of bouncing around among various third-rate colleges for six years more than 20 years ago, read much history of the First World War.  But the way all of those European countries got themselves sucked into a stupid and ruinous war was through the existence of a bunch of "mutual defense pacts," which have their modern cognate in NATO. Substitute President's Saakashvili's stupid provocation of Russia for the assassination of Archduke Ferdinand, and you get a sense of how these modern entanglements could spell doom.  George W. Bush wants every country he can find to be in NATO now; Poland, Georgia, maybe Russia itself. Maybe the new plan is to force Russia to attack Russia if one of our NATO allies goes to war with Russia.  That would make as much sense as stationing a battery of defense missiles in Poland as a first line of defense against Iranian missiles topped with nuclear warheads that don't exist.

This is getting extremely weird.  I'm beginning to wax nostalgic for George W. Bush.  Bush, in his naive, aw shucks way, at least wanted to get along with Vladimir Putin and to view Russia as a strategic ally.  I don't doubt that Putin was playing Bush a little, and if you have ever read any of the analyses of Russia written by the chess player Garry Kasparov, you would have little doubt about the kind of quasi-police state Putin is running over there with his United Russia party.  That, however, is not the point.  The point is simpler: why does the United States, and more particularly John McCain and his sidekick, Ma Barker Palin, want a new Cold War?

These are such dangerous games we're beginning to play.  McCain dispenses even with the pretense of coexisting peacefully with Russia.  He wants to kick Russia out of the G-8.  He wants to fast track Georgia into NATO so we'll be obligated by treaty to defend this little jerkwater hovel, Josef Stalin's home state, if Georgia decides to provoke another confrontation with Russia, as Georgia did in August.  Georgia cooperated with Bill Clinton, after all, in agreeing to construction of an oil pipeline between the Caspian and Black Seas, one that provides an alternative to the pipeline passing through Russia to the north.  This was Clinton's gambit in the neverending Great Game of access to oil in the Caucusus, which has prompted international conflict from Hitler to the present.  This lies at the root of everything going on over there.

South Ossetia, Abkhazia.  These are regions so vital to the U.S. that we should risk the destruction of human civilization to make sure they stay part of Georgia?  They're part of Georgia because Stalin, a Georgian, wanted them included in his home Soviet Republic.  So our defiant stand against Putin is to ensure that Stalin's legacy is honored and respected.  South Ossetia, not surprisingly, sees itself as naturally allied with North Ossetia, which is within Russia. Abkhazia is simply bitter because it knows its name is so stupid.

George W. Bush and Condoleezza Rice actually said, with a straight face in admonishing Russia, that "nations do not invade other countries to resolve differences in the 21st century."  As Mark Twain once said, some things are simply beyond satire.  Bush and Rice are "satire incarnate." Bush, sensing that something was amiss, later amended the Bush Doctrine 2.0 to state that countries don't invade "neighboring countries to resolve differences," and one could hear the collective sigh of relief in Canada and Mexico when he did so.  Probably the White House should post on its website the minimum distance from a nation's capital the invaded country must be to make invasion okay.  That could clear up a lot of confusion in Putin's mind, because he's hung up on our ongoing invasions of Afghanistan and Iraq.

McCain simply does not appear to understand the concept of a zero sum game.  We cannot actually go to war with Russia for any reason whatsoever, with the exception of a nuclear attack by Russia on the United States.  Bush showed good judgment in ranting and raving about Russia's retaliation against Georgia and doing nothing else, because nothing else can be done.  In agitating for war against Russia, Sarah Palin has already done an immense amount of damage to the foreign policy and relations of the United States.  There's been no general election, she's not in national office, and already she's messing us up.  You just don't make statements like that; no sane leader in American history has ever talked enthusiastically about a war with Russia in the post-World War II era.  Crazed militarists, like General Curtis LeMay (satirized unforgettably by George C. Scott in "Dr. Strangelove"), have talked about a nuclear war with Russia as if it's a legitimate subject for discussion, but anyone who wants to survive never talks that way.  Dick Cheney, even, doesn't talk about war with Russia.

Yet here we go again, we've got a half-insane militarist running for President for the Republicans, an elderly man of no intellectual distinction whatsoever, with recurring bouts of invasive melanoma, high blood pressure, high cholesterol, a doddering, confused manner suggestive of onrushing dementia, who is saber rattling about Russia; and he chooses as a running mate a nonentity with no background at all in foreign affairs, who's never been to Europe, Asia, South America or Africa, but who thinks she knows Russia because she can see it across the Bering Strait.  

Carl Sagan and others did some very valuable work concerning nuclear winter about twenty years ago when some of Reagan's advisers were suggesting we could survive a nuclear war with enough shovels to dig the rudimentary shelters described above.  Sagan's research indicated that a full-scale exchange of thermonuclear weapons between the superpowers would destroy the Earth's climate and most humans with it; there is no way to "confine" the damage done by H-bombs to the blast zone or the downwind victims of radioactive fall-out.  It's much, much worse than that.  More recent studies at the University of Colorado at Boulder led by Michael Mills have demonstrated that even a regional conflict between two countries such as Pakistan and India, which possess atom bombs, could spell the end of human civilization.  All that is necessary is for these countries to exchange 40 or 50 Hiroshima-sized A-bombs (10-15 kiloton range, cherry bombs by H-bomb standards) with cities as their targets.  The resulting soot plumes carried up into the troposphere would result in a 50% decrease in ozone levels in the Northern Latitudes (70% at higher latitudes).

So, knowing the answer before I ask the question: do these shitty students, McCain & Palin, know this?  Do they realize what they're playing with when they indulge themselves in all this uninformed macho posturing about Russia?  Does Bush realize how insane it is to station missile batteries in Poland, which reduce Russia's deterrent-reaction time from a few minutes to effectively zero if a missile is launched from Poland?  The Russians know.  They have told Poland that if they allow the placement of American missiles in Poland, the Russians will destroy them militarily.  And when you think about it, what choice would Russia have, regardless of your fond memories of the Cold War, when they were always bad and we were always good?  Would we allow the placement of "defensive" Russian missiles in Tijuana to protect their Venezuelan friend Chavez from North Korean missiles?

This is getting very, very serious.  

This is the way the world ends, 

this is the way the world ends, 

not with a bang but with an F in nuclear physics.

The Anti-Government Government and Its Fundie Enablers

There can be economies of scale even in blogging; for example, suppose I post a comment to Paul Krugman's column in the New York Times and then quote myself:

"Mr. Krugman's column strikes me as a very limited view of what Paulson's bailout is really all about. The reason the stockholders of Fannie & Freddie have been sacrificed is to conserve as much of the available assets of the two GSEs as possible in order to make timely payments to the foreign holders of the MBS bonds issued by these two companies under the implied assurance that the bonds were, in effect, backed by the full faith and credit of the USA, just as T-bills and bonds are. The Chinese in particular have voiced ominous warnings about the consequences of default. It was thus a no-brainer for the no-brain crowd of the Bush Administration. They've got to keep the house of cards intact at least through January 2009."

This post was recommended by 157 readers of the intelligent readership of the New York Times, more than anyone else on the first page of comments.  I didn't look farther than the first page to avoid finding a comment with a bigger readership.

Am I mad as hell and disinclined to take it anymore?  That's silly; we're all going to take a great deal more.  I console myself with the canard that the Bush Administration is the "no-brain" crowd; actually, they're smart as hell and they're going to take as much as they can on their way out the door.  What I hate to see is the house Liberal, Paul Krugman, running cover for the Bushies.  How can he write an entire column about the Paulson bailout of Fannie & Freddie and never once mention its true purpose?  Krugman is the kind of overrated analyst writing in mainstream publications who assuages the mostly unconscious and yet highly accurate suspicion among ordinary Americans that they're being taken for a royal ride by their own government.  The Treasury Department did not engineer a socialization of America's two biggest mortgage companies, which together hold about $5 trillion in mortgage and mortgage-related paper, so that Americans could once again "afford housing."  This idea is, you know, a sick joke.  In a sense, housing in America is becoming more affordable all the time.  The price declines in the real estate market are the largest since the Great Depresssion, and they're far from over.  Adjustable mortgage resets, declining wages and rising unemployment ensure that more and more foreclosed houses will continue to swamp the market at least through all of 2009.  Propping up Fannie & Freddie is not going to do anything for that problem.

Paul Krugman often has the right idea; he sees the Bush Administration, in line with every Republican Administration since Reagan, as the anti-government government.  It is government by sabotage, a species of "vandalism," as Thomas Frank writes in his brilliant new book on Conservative rule called "The Wrecking Crew." It's just that Krugman, as a writer for a mainstream publication, just can't hold that (accurate) view steady.  He wants to believe that even this crew in power occasionally does something which you might call "altruistic," that is, designed to help the majority of the great masses of people they govern.  But:  they never, ever do. That is never, ever the function of an oligarchic government.  Every move they make is designed to benefit the Big Business Class, period, end of story.  The purpose of the Medicare Prescription Bill?  To prevent mass purchases of pharmaceuticals by Medicare itself, thus driving the price of drugs down (it's in the law, folks; is that for you?)  The Bankruptcy Reform Bill?  To make it more difficult for ordinary Americans to discharge credit card debt in bankruptcy.  The bill was written by banking industry lobbyists, with the assistance of Joe Biden (thanks, Joe!  Well, corruption is also bipartisan).  FISA reform?  To exonerate Big Telecom from felonious spying at the behest of the government.  Bush's tax cuts?  Okay, he couldn't help it if it also reduced average income taxes a little, but it was a huge break for the plutocrat class because it capped the high marginal rate at 35% (down 4% from Clinton) and brought capital gains to 15%, allowing hedge fund managers like John Paulson, who earned $4 billion last year to pay at a lower "marginal" rate (he pays capital gains rates) than his secretary.

The mania for deregulation, privatization and the unleashing of greed on the broadest possible basis has led us to this pretty pass, where the entire economic structure of the United States is teetering on the brink of implosion.  While the Fundamentalist/Evangelical voting bloc is brought into the Republican tent with promises of a few baubles like outlawing abortion, stigmatizing gays in every way possible, making automatic weapons possession legal (if not mandatory) and installing Christianity as the State Religion (just as the Pilgrims wanted), that's not really what the Republicans are all about.  That's simply the bait-and-switch technique which Thomas Frank described in another brilliant book, "What's the Matter with Kansas?"  Their agenda is simpler: free markets completely untethered from any government regulation.

The Republicans share one habit of thinking in common with their Fundie enablers; a tendency toward what "secularists" call a priori reasoning.  It works like this: my theory is correct.  Now here is a real world problem.  It will be solved by means of my theory.  What is my theory?  My theory is that the all-seeing, all-knowing "invisible hand of the market" routs out all inefficiencies, makes everything transparent and results in a completely fair and level playing field.  That this is complete and utter nonsense does not matter.  Grover Norquist, Tom DeLay, Howard Phillips, Jack Abramoff, John McCain, George W. Bush, they all believe it to the depth of their beings.  And the Fundies have kept them in power for 20 or the last 28 years, long enough to change everything about our government and regulatory agencies.  The Bush Administration did not even believe that disaster response should be "regulated:" it should be left to the open market to decide whether saving New Orleans was or was not a sound business decision.  I guess it wasn't.

Now John McCain adds a secessionist, inexperienced, and vindictive person to his ticket, someone who believes that polar bears are not endangered in her state but that dinosaurs walked around in Alaska as recently as 5,000 years ago, and what happens?  McCain gets a 15 point bounce in the "Southern tier," those states that have always been part of Nixon's "Southern Strategy."  What used to work down South was anti-black rabble rousing.  Now the appeal is softer and gentler: a return to a Golden Era before the "humanist" predations of abortion and gay rights turned our country into Sodom.

John McCain's solution to the Fannie & Freddie crisis is to pump them up with taxpayer money and then re-privatize them.  (Palin thought they were public entities all along; oh man, we are in such trouble; between a Republican who thinks Iraq and Afghanistan are contiguous countries and one who believes Fannie & Freddie are public agencies, we're never going to make it.) Privatized gain, socialized loss.  See how it works?  

Is there a unifying theme to today's screed?  Maybe this: it's worse than you think.

This Year's Election in Flohiovaynia

One of the funnier things Dmitry Orlov wrote in "Reinventing Collapse" was his take on the new American electoral innovation; the two Center-Right Parties nominate candidates who finish in a virtual dead heat and the winner is selected out of "statistical noise."  It does seem, after you factor in all the usual Republican election cheating, that about the same number of people vote for the Republican as for the Democrat.  And if the vote is especially close in one of three "battleground" states, then selection of a President can wind up the result of a rounding error.

Those three states, of course, are Florida, Ohio and Pennsylvania.  Florida decided 2000 (maybe), Ohio decided 2004 (maybe).  While both campaigns this year are excitedly talking about all the new states "in play," I doubt this is really the case.  This year will be another Flohiovaynia election.  Pennhiofla?  Hiopennorida?  Call this three-headed monster what you want, Flohiovaynia holds the key to our next President.  Barack isn't going to win Virginia or South Dakota; where does he think he is, Germany?  He isn't going to win West Virginia or Kentucky or South Carolina.  I do note with a mordant amusement that in the worldwide polls, among all other industrialized countries, Obama is the overwhelming favorite to win, by a factor of 4 to 1.  Just one of those things (racism) which makes this country so "exceptional," I guess.

If I don't vote in November, it will make no difference.  My state will be carried by Barack by 10+ points.  The job of us here progressives in this state is to give money to Barry and to do "campaign work."  Our votes are superfluous beyond a certain bare majority.  And our votes are quite dilute compared to, say, Wyoming or Alaska.  My vote counts about 33% as much as one of Governor Sarah Palin's subjects, all because we "decided" to freeze the number of elected Representatives from all states at 435, and those barren stretches of real estate in Montana, Wyoming, South Dakota and Alaska are entitled to a statutory minimum of 3 electoral votes each.  Simple math.  Alaska, 600,000 citizens, 3 votes = 200,000 people per vote.  California, 33 million people, 55 votes, = 600,000 people per vote.  Are people in Alaska really three times smarter than I am and ought to be given a weighted vote?  So it would seem.  Maybe what would make more sense is simply to disenfranchise enough Californians so that we are represented at the 200,000 to 1 level.  So let's get those Republican caging lists to work here and get 22,000,000 Californians off the voting rolls.  You know they want to, anyway.  Or, to be more "democratic," let's select a representative 11,000,000 Californians to do our voting each time around who conform to the state's voting profile.  That way I'd only have to vote for President once every twelve years.  And maybe I could "pair" my vote with some Republican somewhere, cancelling each other out (every other time, say), and I could vote once every 24 years.  If we think this system through, we could set it up so each American citizen of a populous state with a dilute vote could vote once in a lifetime.

Those Founding Fathers - geniuses.  Nah, it's not their fault.  They had 13 states, remember?  They were trying to balance the few powerful states against the relatively weaker majority.  They could not have foreseen that in 200 years, Flohiovaynia would be choosing the President every four years.  Only Pennsylvania was even a state at the beginning.  And guess what?  It would take a Constitutional amendment to change the Electoral College system.  Requiring three-fourths approval of all 50 states.  What do you suppose the odds are that all those over-represented states are going to willingly give up their advantages in the ratification process? What do you suppose the odds are such a bill would ever get out of committee?

No, we're stuck with the Flohiovaynia system.  There are options, however, if you want your vote to mean something.  You could move to one of those three states.  The other possibility for reform is if that political party that Todd Palin belonged to (and to which his heart no doubt still is pledged), the Alaskan Independence Party, succeeds in freeing itself from the Union.  I noted that the AIP (which has even elected a governor, and that governor served as Sarah Palin's campaign manager - think about that - a secessionist Vice President) has affiliations with other secessionist parties in other states.  I had no idea, until John McCain selected a secessionist as his running mate, that secessionist parties were even legal in the United States.  Goes to show - some people are always ahead of the curve.  But you know  -- is that something that we 22 million Californians who get to take this year off could work on ourselves?

Determining that Government is Too Big to Fail, Government Takes Over Government

The struggling mortgage-purchasing giants, Fannie Mae and Freddie Mac, have been placed in a financial "conservatorship," the maximally-stressed out Secretary of the Treasury Henry Paulson announced on Sunday. A conservatorship is the sort of legal vehicle you might consider for your failing Aunt Tilly when she acquires the distressing habit of dispensing thousand dollar checks to complete strangers. The gummed-up lending market in the United States is in desperate need of some fiscal WD-40, and so the Treasury Department, as in the case of Bear Stearns, is riding to the rescue with its usual implement of resuscitation, more money. Where does all the money come from? From the usual source: the printing press at the Treasury Department.

The problem, in a way, gets simpler and simpler as we go. The United States does not actually have any "money," as we used to understand the term. I am not talking about going off the gold standard, as Nixon decided to do a long time ago when we moved to the present system of "fiat currency." What we have is an international agreement among the nations of the world that the dollar, for now, is the agreed marker for how much money is available in the world. Most commodities, most notably oil, are denominated in dollars. This is one of the major reasons, in fact, that the price of oil moves inversely to the value of the dollar. The lower price of gasoline at present reflects a relative "strengthening" of the dollar against foreign currencies, but in part this is because the economic woes of the United States are dragging the rest of the world down with it, and all of this is particularly attributable to the flagging fortunes of that mightiest of all econ-drivers, the American Consumer.

To keep the consumer economy going in the first eight years of this millenium, the U.S. came up with a brilliant scheme for breathing new life into its profligate consumption. The hard assets, primarily the housing stock of America, were used as collateral for recycled dollars collected from around the world and the money thus raised was used to keep the consumer economy going despite the declining wages of the American worker. The collateral instruments, the mortgages, were sold in the secondary market to numerous purchasers, but especially to Fannie & Freddie who together are involved in about 70% of the secondary mortgage market in the United States. F&F bundled the mortgages into mortgage backed securities (MBS) and sold them domestically and around the world.

While Fannie & Freddie are only "quasi" public entities, the quasi-CEOs of these outfits were not reticent about assuring foreign purchasers that MBS bonds purchased, inter alia, by the Chinese, Japanese, Cayman Islanders and others were really, when you think about it, a whole lot like Treasury bonds issued by the Unites States government, except, you know, they're not. In reliance on this fraud, our most important creditors went all in for this toxic crud. And so, when it came to pass that a great number of the MBS bonds were collateralized by houses whose former owners now live in tent cities in Ontario, California and other scenic locales, the international merde hit the ventilateur.

Henry Paulson's anal pucker factor, which had been hovering around 9.7 (10 is slammed completely shut) suddenly leapt to an untenable 9.9. We have relied for a very long time on the kindness of strangers, and if those foreign creditors, who hold about $1.3 trillion worth of the MBS (Mortgaged Bullshit), were to suddenly cast a gimlet eye on the Treasury securities they also hold, and were to logically decide that a country which runs half-trillion dollar yearly deficits, and which owes itself and others $10 trillion, and borrows money in order to buy oil and fund wars of aggression to ensure access to oil, might not be actually good for all that U.S. paper they were holding; well, it could start to sound something like this:

"Our new Chinese creditors have demanded their first payment. Several times in the last week, Chinese officials have stated in no unceertain terms that they would be VERY UNHAPPY if their Fannie and Freddie bonds weren't honored in full. Forget the Fed: US economic conditions are now dictated by the People's Bank of China." From Economic Populist.

What form might this unhappiness take? It might take the form of economic catastrophe for the United States if it dispelled the group hallucination on which American prosperity now depends; to wit, the consensus delusion that running our printing press entitles us to determine how wealthy we are. So Paulson really had no choice. It was obvious the "drunk" (Bush's term) execs at Fannie & Fred had managed the companies off a cliff, but their demise spelled huge trouble for the government's own viability. So, yet another no-brainer for Paulson. The Feds are calling the shots from here on out, with the "taxpayers" left to inject whatever operating capital the GSEs will need to service their foreign and other debts.

Of course, the idea of the "taxpayers" actually paying for this latest emergency relief is yet another fantasy. The Feds may as well pile on as much debt as they can get away with at this point, because the truth is we're not good for any of it. The taxpayers don't have that kind of money. The idea of enforcing some sort of financial discipline through the principle of "moral hazard" disappeared about the time that Clinton's Treasury Secretary, Robert Rubin, engineered the bailout of Long-Term Capital Management. It's now standard operating procedure for the federal government to take over one huge financial company after another, as we gradually socialize the financial structure of the United States. It is the natural, inescapable action-reaction sequence after all the years of mindless, Ayn Rand-inspired, deregulated greed. But really, Paulson is just kicking the problem down the road. If you don't have the money, you don't have the money. He's staving off the inevitable until, let's see, about November 5, 2008.

Which might be the biggest, ironical joke of all. Paulson might help McCain get elected, and then this addled, goofy, querulous, forgetful shmegege can inherit the job of straightening out - what would you call it? - the financial meltdown of the United States economy. It would almost be worth it just to see that.