The Dick's Faulty and Tortured Logic

America's most overrated smart guy, Dick Cheney, has been taking to the airwaves lately to insist that if the Obama Administration is going to release the quack legal memos which justified the Bush Administration's lawless reign of torture and mayhem, then the CIA should also declassify the reports of the "testimony" "elicited" during the torture chamber sessions.  So that we get a balanced picture.

The Dick never fails to amaze me.  A lawyer somewhere, knowing he's going to have to defend Cheney someday, is squirming right now, wishing the Dick would just shut the f*** up, head to some ranch in Texas and shoot someone with a shotgun.  Whatever.  Just stop talking to The Dick's "friends" at Fox News, because this is not helping.

In a very dark way, there is something comical about Cheney.  He never loses that growling gravitas, that heavily serious way he has of taking himself absolutely seriously; and yet, over and over and over again, he's wrong.  Not just sort of wrong, either.  Fundamentally, hilariously, unbelievably wrong.  And still, there he is again, holding forth.  Setting the record straight.  The guy who was Vice President when the worst terrorist attack in American history occurred lectures everyone on how to keep America safe.

The Dick is missing a very fundamental point with his justifications for torture: the Convention Against Torture, to which the United States is a signatory, does not permit any form of justification. 

"No exceptional circumstances whatsoever may be invoked to justify torture, including war, threat of war, internal political instability, public emergency, terrorist acts, violent crime, or any form of armed conflict. Torture cannot be justified as a means to protect public safety or prevent emergencies. Neither can it be justified by orders from superior officers or public officials. The prohibition on torture applies to all territories under a party's effective jurisdiction, and protects all people under its effective control, regardless of citizenship or how that control is exercised."  

Summary of Article 2 of the Convention.  What The Dick has done, by extolling the benefits of pouring water into the lungs and wall-slamming the heads of various Arab captives, and stuffing them into tiny boxes with bugs and the rest of his Marquis de Sade wish-list, is to establish the necessary mens rea (state of mind) for convicting him (and Bush) of war crimes and violations of various anti-torture statutes in the federal code.  He has established that the torture was deliberate and calculated and achieved the effect he was after; yet, as noted, the "justification" he offers cannot be used to defend, exonerate or even mitigate his crimes.  It's not even admissible.  Not a bad day's work for The Dick.  

So he's left with a single defense: all this stuff he and the High Command put into action, probably as early as the summer of 2002 as part of an effort to establish the nonexistent link between Saddam Hussein and 9-11 -- you see, it wasn't really torture.  Thus the flurry of legal memos after the fact, attempting to define torture out of existence.  Thus the reinvention of history, pretending that the United States has not itself prosecuted as war crimes the very acts which Bush and Cheney authorized.

Bush is either being smarter or his lawyer is better at client control.  He's not saying anything. Bush & Cheney missed their chance on January 19, 2009; they should have done the Pardon Two-Step.  The Dick is doubling down on that mistake by running his mouth (or at least one side of it).  For what they authorized, ordered and approved was in fact torture.  And now the Obama Administration is administering a water torture of its own: the slow drip of disclosures. First the release of the legal memos.  Now the additional photos of detainee abuse.  And the Big Enchilada will happen when one of those videotapes of a screaming, struggling captive finally gets smuggled out and scores one billion hits on YouTube.  And then The Dick will see it never really mattered whether he could convince Sean Hannity or not.

Has Obama Seen the Light?

So what's this about Barack Obama suddenly being "open" to the idea of prosecuting Bush Administration officials for waterboarding Khalid Sheikh Mohammed 283 times in one month?  Of course, that's just the headline story designed to fit within a limited public attention span.  Probably much, much worse was the American practice of rendition, where terrorist suspects were delivered to countries, such as Egypt, for the express purpose of subcontracting out murder and mayhem that Americans find repugnant, yet still cheer on when other countries do it.

Before leaving Khalid, the Gurgling Confessor, behind, I pause to bring up a question I have adverted to before.  If one takes the time to read the 9-11 Commission Report, and particularly the novelistic, highly readable Executive Summary concerning the plot, one may be struck, as I was, by how much of the Commission's investigation depended on the testimony of this one man. References to things that "KSM" said run throughout the narrative, including tales of meetings between Osama bin Laden and the actual hijackers.  As I've written before, Dore Gold wrote a book about Saudi Arabia's involvement in terrorism in which he specifically opined that "there was no evidence" that any of the actual 9-11 hijackers ever traveled to Afghanistan or ever met with Osama.  Quite a bold statement for a reputable, esteemed author and statesman to make if he was not sure of his ground.  You have to wonder how a guy who is waterboarded 283 times in one month had the chance to gargle up information about anything; but one thing's certain, it's ludicrous to imagine that such evidence is reliable.  With that many sessions where people are putting a hood over your head and pouring water into your lungs (12 minutes at a time), you're going to say anything they want to hear, and it's obvious if you have a war going on in Afghanistan premised solely and exclusively on the "harboring" of Osama bin Laden by the Afghanistan government, then the most valuable thing that KSM could possibly gurgle about would be all the connections between OBL and the hijackers.  

If the 9-11 Report had not been so demure and sanitized, we might have learned, for example, that Atta's meeting with Osama was described in Session #177 of KSM's waterboarding torture. This would have given a different "feel" to the whole narrative, would it have not?  What are the odds, however, of our lazy-ass press ever going back to the Commission Report and lining up KSM's "testimony" with these new revelations?

But back to the idea of prosecuting Bush "officials."  First, I hope Prez O sticks with the idea of laying off the actual field operatives who poured water or stuffed people into boxes.  That's how Bush, Cheney, Rummy & the Gang got away with Abu Ghraib: by pretending it was a bunch of out of control "bad apples" instead of official policy dreamed up by the barbarians hanging around the Oval Office.  Second, I think Bush's bad luck comes from the dawning realization in the Obama camp that this Depression we're in is not going away anytime soon.  Leaking out of the banking underworld is the news that the big mortgage companies are maintaining a "shadow inventory" of foreclosed homes which are vacant but which they are holding off the market in an effort to arrest the steep decline of housing prices.  This shadow inventory measures in the hundreds of thousands of empty homes.  Since the housing slump is the root of this malaise, since without equity in their homes Americans lack the wherewithal to get the consumer economy going again, we're in a vicious cycle of deflation and unemployment that is going to consume most if not all of Obama's first term.  

So, quite counterintuitively to O's naive pronouncements about the "distraction" of Our Own Private Nuremburg, Barry needs a circus and he needs it bad.  And absolutely the very best circus he can bring to town is the highest of high profile prosecutions: a "Commission" to try Bush, Cheney, Rumsfeld and Gonzalez for war crimes and systematic violations of the Convention Against Torture.  (I actually don't care about the lawyers who wrote those pathetic memos; those were opinions for hire which reached preordained conclusions.)  

Wall-to-wall coverage, every night of every week for a year or more.  Boffo ratings!  An entertained public!  Come on, O: man up.  We need this show.  More to the point, you need this show.  Listen to that little angel whispering in your ear, who happens to be named Rahm: go get 'em!

The Judge, the Coffin Box and the Stinging Insect

He certainly looks like a nice guy, this Judge Jay Bybee of the Ninth Circuit Court of Appeals.  I guess his judgeship was a reward for his tireless work in providing legal cover for the CIA's torture regime, particularly when it came to Abu Zubaydah and Khallid Sheikh Mohammed.  The recently disclosed "torture memos" written while Judge Bybee was working in the Little Shop of Legal Horrors (the Office of Legal Counsel) are case studies in pushing things to the brink of absurdity, such as Judge Bybee's solicitous attitude about what kind of stinging insect could be put into a coffin-like box with Abu in order to get him to start talking.  

Abu, it turns out, had a morbid fear of stinging insects, which, I have to say, doesn't really surprise me.  I think most of us share a similar phobia.  My guess, based on the idea that most of these great legal thinkers despite their gaudy credentials are actually dumbshits, is that Judge Bybee really wanted to talk about stinging "arachnids."  Certainly there are insects which sting, such as the honeybee or wasp, but for downright fear, give me an eight-legged entomological specimen anytime, such as a tarantula, scorpion or brown recluse spider.  We'll get the facts on that 9-11 plot in no time.

Well, who cares about precise classification of arthropods?  It could be a centipede too, for that matter.  I can't help but feel that the CIA and the OLC got their ideas from Nineteen Eighty-Four and Winston Smith's morbid fear of rats.  Nothing about the Bush-Cheney crowd ever struck me as being very original. 

"In addition to using the confinement boxes alone, you also would like to introduce an insect into one of the boxes with Zubaydah. As we understand it, you plan to inform Zubaydah that you are going to place a stinging insect into the box, but you will actually place a harmless insect in the box, such as a caterpillar. . . . [Y]ou must inform him that the insects will not have a sting that would produce death or severe pain...An individual placed in a box, even an individual with a fear of insects, would not reasonably feel threatened with severe physical pain or suffering if a caterpillar was placed in the box. . . . Thus, we conclude that the placement of the insect in the confinement box with Zubaydah would not constitute a predicate act," [i.e. violate the anti-torture statute. (p. 14)] "[T]hough the introduction of an insect may produce trepidation in Zubaydah it certainly does not cause physical pain." 

That's the OLC's version of reading a suspect his rights: he must be told whether the insect spending time in the coffin with him for a couple of hours can kill him or not.  If you don't say, then he could "reasonably" feel threatened with severe physical pain or suffering of a lasting nature, and now you've violated the Convention Against Torture.  On the other hand, if Zubaydah (who was recovering from wounds at the time) chooses to go ahead and "unreasonably" fear being stuck in a box so cramped he can't move for a couple of hours with any kind of insect -- well, that's his problem.

After this sophistry, waterboarding and banging someone's head against a wall were really easy to laugh off.  The key is "specific intent:" the CIA operative (or sociopathic contractor hired for the well-paid job) must not only intend the predicate act of messing with someone, he must also have the specific intent of causing great physical or mental harm of a lasting nature.  Legal reasoning is great, isn't it?  If I pick up a baseball bat and take a swing at your head, I must not only intend to swing the bat and knock you into next week but intend that this harm be lasting and severe.  This approach, as far as gaining the greatest possible latitude, would seem to favor hiring the dumbest, meanest interrogators you could find, to go along with the dumbest, meanest lawyers you can find to stock the Office of Legal Counsel with, which Bush certainly succeeded in doing.

Bybee may get impeached.  I can kind of feel that one coming.  Impeaching Bybee, disbarring him, disgracing him, would placate a lot of people who want Obama and Congress to do more, which they're not going to do.  There is really only a small band of Americans who actually care about this stuff, or at least pretend to care.  In reality they just like writing about it.  Glenn Greenwald is up in arms, but hell - he lives in Brazil.  Torture is interesting as a subject because it's full of legalisms, international law and relative precision.  Bush also wrecked the world economy, but that's too diffuse a topic.  Denouncing torture allows American critics to wax self-righteous (such as Keith Olbermann) without actually doing anything about it, because they can't.  And Obama has made it pretty clear he's never going to prosecute anyone.  It would upset people, and that's too much for him.

We should just face it and realize we're a nation which tortures people, a lot, and we have a lot of company in the world. And after we torture people, we don't care if the Convention Against Torture, a ratified treaty and supreme law of the land, requires us to investigate and prosecute where appropriate.  So we don't follow the Treaty or our own Constitution? What else is new? At least we write memos before we slam your head into a wall or pour water into your lungs.  How civilized can you get?

James D. Houston, 1933 - 2009

Novelist, essayist, classical guitar virtuoso, ukelele kahuna, ragtime piano player, standup bass standout, poet; devoted father, loving husband, inspirational cousin; philosopher, lover of life, bigger than life, deep seeker of the Truth; kind friend and all-around good guy.

Tea bags and other signs of disintegration

In general, it seems that the country is losing even that marginal social cohesion, such as it was, that existed during the "heyday" of the Bush Administration.  This "tea bag" stuff, borrowed by right wing zealots from wholly inappropriate sources, such as the Sons of Liberty and Thomas Paine, is an ominous sign.  Egged on by the modern-day Father Coughlins, Rush Limbaugh and Glenn Beck, a kind of free-form and omni-directional rage is being stirred up.  I imagine (based on some close-in anecdotal evidence) that the members of this "movement" are the disaffected Evangelicals and unemployed millions who used to align themselves with the Republican Party, but the GOP is falling completely apart.

So, nature -- and the political world -- abhor a vacuum.  One might think, as a rational person, that those hundreds of thousands of American workers added to the unemployment rolls every month might naturally see that if they have a common enemy, it's the "financial sector" of the economy.  That's where the collapse started - AIG, Goldman Sachs, Bank of America, Bear Stearns, et alia.  Those are the companies who played all the games with America's mortgage market and set the world's economy, integrated so tightly through "globalization" of finance, on the path toward destruction.  But, of course, that's not what happens here in America.  That would be logical, natural, even appropriate, so we can be sure nothing like that is going on. Instead, the "tea bag" movement and Right Wing agitation in general, centers around the "Socialism" of Barack Obama.  One might search high and low for evidence that Obama is a Socialist and never find a thing.  He wants to raise the top income tax rate from about 36% to 39.6%, or where it was during the Clinton Administration (and much lower than during the Reagan Administration).  This will be accomplished simply by allowing Bush's tax cuts to expire on schedule; it would be far too sophisticated an argument to point out to the pitchfork wavers that Bush built a sundown into the tax reductions so he could dishonestly argue that his future budgets would be "balanced."  Bush intended, however, to avoid sundowning (and balancing) by extending the same tax cuts, counting on the short attention span of his subjects to get away with his complete inconsistency.

That doesn't help Obama, because for the Tea Bag Brigades, 39.6% is Socialist and 36% is right where God intended the top marginal rate to be.  Or something like that.  

I would think that Prez O is not having that much fun.  The subject matter of his Presidency - a disintegrating economy - manages to be both painfully boring and scary as hell all at the same time.  The central question on which everything will depend remains unanswered.  America's financial situation, as Gore Vidal said recently on Real Time, places it "somewhere between Argentina and Brazil" in terms of First World/Third World status.  Congress has "appropriated" trillions and the Treasury and Fed, using a variety of tricks to avoid Congressional involvement (describing many of its purchases of worthless crap as "investments" instead of hand-outs), have promised trillions more to bail out the banks and financial institutions deemed too big to fail.  As Nouriel Roubini has pointed out, however, the market for raising all this money is in bad shape; the Chinese are not increasing their holdings of the dollar, nor are the Russians.  They can't lend us the money because the same "globalized integration" has caused their own economies to tank along with ours.  So where do we get the dough?  

One route is to melt down the domestic securities market - the Dow, the S&P, what's left of the NASDAQ.  Free up all that equity so Treasuries can be purchased.  To entice the purchases, maybe the payout on Treasuries will get raised, which, of course, will cause a general interest rate increase.  But can Wall Street survive another meltdown, say to Dow 4000?  The other is to simply print the money and "buy" Treasuries from ourselves.  (I wonder why we even bother to print it, in such a case.  Why not simply declare it exists?  A friend of mine, speaking from the next bar stool, came up with a plan to allow Americans simply to print their own money at home, which might be a better idea.)

The hyperinflation implied in the untethered creation of money may also lie down the road.  It's the reason that at the G-20, ominous noises were made from China, Russia and other affiliates of BRIC (Brazil, Russia, India, China) about creating a new reserve currency.  If that happens, all bets are off for the American economy, because running the printing press for the world's fiat currency is what gives us our remaining viability.  It's what makes our Treasuries internationally marketable; it's what allows us to conjure wealth.  Without it, we're screwed.

Our new currency might devolve to commodities, like trading in tea bags.

You're Welcome America

I caught Will Ferrell's act on HBO the other night, his one-man Broadway show about George W. Bush.  I thought his performance was as significant for what he chose not to do as for his actual choice of material.  Ferrell avoided most of the easy jokes about Bush, the usual, worn-out ones about his malapropisms and garbled syntax.  There were a few of those, but where he used them, as in a sequence on the meaning of "where wings take dream," Ferrell used them to great comic effect.

Ferrell's best comic persona involves the projection of anger, as in one hilarious skit from SNL where he plays the part of a victorious political candidate who, for some reason, keeps running attack ads against his defeated opponent.  His mystified opponent takes to the airwaves to ask what's going on, and then Ferrell attacks him for "whining" and being such a "poor loser."  There is real menace in these portrayals.  So Will's choice of Bush as an alter ego is a natural, because Bush is the same kind of bully.  Ferrell gets inside Bush's head, somehow, and plays him as a man absolutely devoid of self-awareness.  Ferrell's Bush thinks that the completely trivial, mundane things he's saying, his patient explanations of the obvious, are important and, furthermore, necessary because it's unlikely anyone in the room can keep up with him.

The Bush Ferrell portrays isn't stupid.  His monologue is intelligent, coherent, occasionally witty, but the brilliant trick is that thing about Bush that Ferrell has isolated: he is a person totally cut off from the effect he is having on the public.  He just can't imagine that he could be wrong about anything, and it is this insulated, narcissistic quality that is the surest proof of Bush's mediocrity. Bush can't see that it is the combination of his unwarranted self-confidence coupled with his weird, skewed judgment that leads him over and over again into disaster.  At one point Ferrell goes through Bush's list of "accomplishments," from freezing up on the day of 9-11, through his Katrina non-reaction, to launching a war against Iraq on completely mistaken premises, to "destroying the world's economy," and sort of sniggers at the whole idea it's his fault.  He can't see a connection between this awesome list and the 71% disapproval rating he carried on leaving office.

Ferrell allows Bush, amid the frat-boy humor and nickname-giving shtick, a few moments of dignity, as when he talks about his feelings concerning American and Iraqi casualties in the Iraq War.  I thought the funniest moment in the show happened early, when Bush is out at the ranch in Crawford  (which he claims Rove made him buy so he'd seem folksy, but he actually hates it and prefers the "whites only" gated community in Dallas).  His brothers are there, and Poppy Bush too, and W gets them trapped in an old abandoned mine on the property.  At one point during their panic, Poppy gets frustrated with Bush and yells, "And why are you the only one in the family who talks with a Texas accent?  It just doesn't make sense!"

That was the thing about Bush.  Nothing about him made sense, including those 8 years he served as President, 40% of which he spent on vacation. I guess we can thank him for leaving and Bush, as oblivious as ever, will just say you're welcome, America.

The Financial Crisis, A Pathological Report

Anyone deeply interested in the nuts and bolts of the financial crisis, including a pretty lucid explanation of the ways in which we have gotten ourselves into one helluva jam, would be well-advised to read the always entertaining Matt Taiibi's takedown of the Wall Street bailouts in Rolling Stone, the URL for which is: http://www.rollingstone.com/politics/story/26793903/the_big_takeover.

It's utterly hilarious to the extent that it's not absolutely infuriating.  Matt does what the dilettantes of the Brainfart Brigade at the New York Times never do, get on the phone and talk to people who can describe in detail how mortgage-backed securities were devised; how they were sold; why they were created; and how they were insured by AIG at the Casino Division of the (formerly) world's largest insurance compnay  And then, after this indispensable research, Taiibi actually thinks through how the system works and why it has come to the awful pass it has.

I recall that narrow escape we managed a few decades ago when we discovered that CFCs in the atmosphere were destroying ozone.  We reversed that folly just in time to avoid utter catastrophe.  What made it all the more chilling was the subsequent revelation that had the makers of refrigerants decided to use bromine (in molecules termed halons) instead of chlorine, discovering the source of ozone depletion at the point we did would have been too late.  The greater ozone destroying capacity of bromine would have made attempts to ameliorate the situation futile.  And the difference in choice between the two elements had to do with a slight marginal advantage in cost in using chlorine instead of bromine; the fate of the planet hung on this trivial choice.

It seems to me that the United States has probably come to something like such a pass with the current financial crisis.  It's a one-time fix that we may be allowed to implement with the world held in a state of co-dependent pretending along with us as we hallucinate the necessary money to fix the system.  I appreciate the comment of my highly intelligent fellow alum and Erstwhile bandmate of a few days ago about the Treasury/Fed's plan to create money out of thin air by (a) running the printing presses to create currency to (b) purchasing our own T-bills, which I have likened before to an ability to cure a bounced check by depositing a check from the same overdrawn account into the account and claiming "solvency."  The United States is "borrowing" money, in other words, from itself, akin to reaching the roof three feet away by lifting the ladder on which you're standing with your own two hands.

We're the only country in the world, for the time being, who might be allowed to get away with this conjurer's trick, simply because we run the printing press for the world's reserve currency. And now China and Russia are making noises about changing that, which is very, very dangerous and scary, and probably the reason that Nouriel Roubini thinks that gold may go to $2,000 an ounce by this summer.

Chief Wizard of the Brainfart Brigade, Paul Krugman, thinks the whole problem with the banks can be cured by nationalization.  Krugman has never much liked Obama, and takes potshots at him whenever he can.  Krugman, in his once-over-lightly research way, cites the Swedish example as the way to go.  Of course, Sweden has a population of about 9 million, or about the size of the metropolitan area of New York.  By an order of magnitude, its problems in the 1990's are not comparable to what's going on with B of A, Citigroup, AIG, Wells Fargo and the rest of them.  Nationalization, in effect, is what the FDIC does when it takes over an insolvent bank. Krugman is proposing that the U.S. take on banks with deposits literally thousands of times larger than the biggest bank failure the FDIC has ever handled in order to "clean up their balance sheets."  After all, it's what they did in Stockholm; should work here too.

The addiction to conspiracy theories of all branches of the media at this point, mainstream press (while it lasts) and all the hip blogs, leads everyone writing about this situation to assume, automatically and a priori, that the only reason Ben Bernanke and Tim Geithner favor of an outsider's approach to clearing the balance sheets is because they're in bed with the big Wall Street banks.  I doubt this.  Nouriel Roubini (a guy who does not share the conspiracy compulsion of these others, probably because he does a little homework) notes that probably $1.8 trillion in toxic assets infects the books of the big banks.  That's what I like about Nouriel; he uses actual, comprehensible numbers, instead of the qualitative junk Krugman uses habitually. So the question becomes, do you actually have to take ownership of the banks in order to get rid of these debits on the books, or is there a way to leverage federal money to clear the debt? That's what Geithner is trying to do.

Interesting that the Dow jumped 500 points when Geithner and Bernanke announced their plan. Almost as if there are people in finance who don't take all their cues from the Op-Ed pages of the New York Times.

I don't know what to say either

I've been perplexed (and bored) by the torrent of uninformed commentary concerning the "financial crisis" in the United States, so much so that I've been unable to formulate any sort of coherent comments of my own. I was finally moved today to say something by the truly dazzling display of stupidity offered up by Maureen Dowd in her New York Times column of even date.  In effect, Dowd accuses the Obama Administration of allowing AIG, that nefarious financial craps table, to shovel money out the 'back door" to Goldman Sachs, other Wall Street "counterparties" and even (gasp!) European banks, such as the Deutsche Bank. Thus, bailout money "intended" for AIG winds up in the hands of outfits with "insider connections" to the Obama Administration or with foreigners.

Well, look: when you were learning to read in school, especially if you had decent teachers, you were taught to "read critically," weren't you?  So let's do that with Dowd.

First, the only intelligent thing I have heard anyone say recently about the state of the U.S. financial system is what Prez O himself said: we got into this mess, mostly, through people doing legal things.  And when you think about it, that's the most frightening aspect of all.  What it means is that the natural, intended consequences of our financial system, for about the last ten years at least (say, from the repeal of the Glass-Steagall Act) have been what we're seeing now. The sorry state of collapse was simply waiting for a big downturn in the value of underlying assets (in this case, the housing market) in order to blow up. And now it has. 

It was legal to bundle up mortgages into bond securities which could be sold here and abroad.  What was not necessarily foreseen was that the underlying "rationale" for this practice was the presupposition that the housing market could only go up; this supported the practice of dubious loans, since the houses could "always be sold" or "refinanced" when the market was better. Was it fraudulent to sell MBS on the theory that the housing market would continue to go up?  It was probably not clear enough to support a 10b-5 action under the Securities & Exchange Act, although many lawyers will try it anyway.

Plus, only the savviest of the insiders saw that minor perturbations within a MBS would sink the whole instrument.  Smart guys like John Paulson, who saw that about a 5-6% decline in the value of a MBS would make the whole thing worthless and unmarketable.  In retrospect, elementary logic supports his analysis.  Say that a group of bundled mortgages of the subprime variety pay on average 8%.  With front-end fees and servicing costs, it makes sense that the pass-through to investors (such as big pension funds and foreign banks) would equal about 6% net.  If the face value of the bond is premised on a 6% return, then one can see that a fairly small failure rate among the mortgages supporting the bond will result in a return less than this notional rate.  When that happens, the bond quickly degrades in value.  If, in addition to this factor, the "tranching" and intermixing of MBS has so obscured which bonds are good and which contain many failing mortgages, then the whole class of security becomes suspect, leading to a dodgy market for the things in general.

Which is where we are.  Because the buyers of these MBS realized they were entering, to a certain degree, terra incognita, they insured the bonds they purchased.  These are the so-called credit default swaps.  AIG ran the biggest business in CDS notes.  The difficulty here was that the federal government (led by such free marketeers as Ayn Greenspan) did not require that purchasers of CDS notes have an "insurable interest" in the underlying MBS.  By analogy, to buy life insurance on a person, one must have some sort of relationship, at the point of purchase, which makes the insured life a matter of personal importance.  A spouse, for example.  If members of the general public were allowed to place bets on the death or survival of anonymous people to whom they had no direct relationship, we would, among other things, encourage the practice of killing-for-hire in order to improve the "odds."  No such requirement existed for CDS instruments. Anyone could bet "pass or not pass" on a MBS bought by someone else.  And AIG wanted all the action it could get, since it considered the premiums free money. It certainly did not retain sufficient reserves, you know, in the quadrillion range.

Thus, the "counterparties" that AIG is paying off, such as those suspicious foreigners, include Goldman Sachs, Bank of America, hedge funds, and the Deutsche Bank either as insureds holding MBS or people placing side bets at the CDS craps table.  This latter category, while legal, was a yawning loophole which has brought the world's financial system to the brink of disaster.

But it has nothing to do with Maureen Dowd's moronic take on the situation. If you want to declare all the CDS contracts null and void, then a plenary conference of all the world's industrial countries must be convened to sort out all the debits and credits of these "financial weapons of mass destruction," the notional value of which has been pegged at $1.4 quadrillion, which is probably even more money than Timothy Geithner wants to commit.

General Motors, To You We Bid Adieu

As much as it's become a pariah in recent decades because of its infamous failure to adapt, which is to say, to understand that the introduction of the Toyota Corolla and Datsun way back in the 1970s into the American market represented the wave of the future - still, someone my age can't help but be nostalgic about General Motors.  GM built the cars that symbolized American affluence at the height of its dominance, in the 1950s and 1960s.  Who can forget those eyebrow fins on the 1959 Chevy Impala?  The inverted Nike Whoosh on the side of the 1955 Oldsmobile (nothing new under the sun, including Phil Knight's ideas).  Those bullet holes along the fenders of the late Fifties Buicks. The most ostentatious and ridiculous gewgaw of them all, those tail lights on the Cadillac hung like two alien eyes atop a vertical fin.

And the engines: massively overpowered, yet very inefficient.  300 horsepower capable of propelling the tank-like mass of a Buick Century maybe 120 miles per hour.  No safety features, either. No seatbelts, steel dashboards (to dash your brains out on), hood ornaments to impale pedestrians with.  Death traps, as the yearly statistics on traffic fatalities demonstrated.  Well, that's what America was like - big, muscular, powerful, and we left the wounded behind on the highways to fend for themselves.

'Tis said you can now buy a house in Detroit for a buck.  Full retail price is maybe 18 grand, but you can take one off the hands of a bank, relieving it of the tax burden and "maintenance," for much less.  Just put the sucker in your name, please.  We'll pay you a buck if you'll accept this deed.  Then the city of Detroit can foreclose a tax lien on a squatter, put the house up for auction, receive a buck against the accrued back taxes, and start the whole rigmarole over again.  Such data points surely spell the end of GM.  The workers are all leaving.  Well, car sales are down 50% anyway, and not just for General Motors.  No company can survive that kind of contraction for long.

The Congressional Clown Troupe will hold more hearings on GM, no doubt.  We can put these proceedings in the same category as their occasional meddling in major league baseball.  The steroid hearings are held periodically so these dweebs can finally sit in the same room with their boyhood idols, albeit abusing the privilege by browbeating the players, all to no good purpose other than the vindication of their own nostalgia.  Back when baseball was pure and unsullied! Other than the drinking, whoring and Black Sox scandal, sure -- as the driven snow.  But the aging solons also remember the General Motors of their youths, and they need to appear in public to blame the current executives for the passing of an age.  It can't really be gone!  What about that turquoise and cream '57 Chevy with three on a tree?  With the slick bench seats and AM radio?  All gone, just like GM.  GM's golden age didn't really last that long.  It's odd when the parentheses of your own years surround an entire epoch, but so it was with General Motors.

Kind of sad.  See the USA in your Chevrolet.  How do you like your Buick?  I think it's wonderful.

All the news that's hard to take

697,000 jobs were lost during February, according to the Department of Labor's preliminary estimate.  This will be revised upward later, of course; you can see the propaganda effect pretty easily in the number.  Ju-u-u-s-t shy of 700,000.  Odd how often that seems to happen with the first number that comes out early in the month: 595,000, et cetera.  Does anyone even have a job at this point, aside from (a) TV news people and (b) government employees, such as the President?In a few months will the Dept. of Labor simply announce, "The rest of the American people lost their jobs last month," and that will be it?

Here's a wiseass from Russia weighing in: 

"MOSCOW — If you're inclined to believe Igor Panarin, and the Kremlin wouldn't mind if you did, then President Barack Obama will order martial law this year, the U.S. will split into six rump-states before 2011, and Russia and China will become the backbones of a new world order."  

Sheila Bair, the head of the FDIC and the remaining federal employee in the financial sector with any credibility left, says the FDIC may become insolvent by the end of the year.  I don't see how that can happen.  Wouldn't the Treasury Department simply "replenish" its capital by "injecting" a few trillion to keep it going?  I think that's our operative principle for everything these days.  A bulkhead buckles, the water starts pouring in, and we patch the hole with more federal "money."  That's why I'm concerned about this guy Panarin; it isn't so much that I see him as some kind of spot-on Cassandra for the West's misery.  It's simply that he's saying it at all.  Like G.K. Chesterton's horse who could play chess: it isn't so much that he plays well, said the wit; it's that he plays at all.  Sort of like that.  Russia, while floundering itself, still has a lot of stuff to sell, namely, oil and natural gas, so they can raise cash.  And we're counting on that cash, and a few trillions like it from China and Saudi Arabia, to keep the party going at the Casino at the End of the Universe.  So we don't want these guys drooling over the prospect of our collapse.  We need the money.

So this outbreak of Schadenfreude is disconcerting, to say the least.  These other... people, as Daniel Plainview says in "There Will Be Blood:"  what are we to do with them? Or without them? Are they going to drink our milkshake?  They are well aware, because they are educated at least as well as we are (okay, better, but I'm looking for a silver lining here), that the immediately precipitating cause, that which gave impetus to a long process of decline in the U.S., was the last great Casino game we could come up with: mortgage laundering.  Mortgages were sold to anyone who could pass the mirror-fogging test, then lumped together into gargantuan pools of "diversified risk," then sold as jigsaw-puzzle bonds.  It's important to remember that what looks like the actual and efficient cause of our problem is really only a symptom of something far more dire.  We had run out of ways to make money in any productive way, in any way that the plutocratic class could use to maintain an extravagant lifestyle, and so the final resort was made to the hocking of the very land of America.

And we've come up snake-eyes.  The Grim Croupier is raking in all the chips and looking askance at our furtive effort to pass off crude chips made of particle board as the real thing.

What's the guy mean by "rump state," anyway?  That sounds like some sort of Commie-speak. They're forever using such terminology in their dialectical analyses.  Bourgeois, proletariat, stooge, apparatchik, rump state.  I think he means some kind of regional federation thrown together in a state of panic.  Not to worry: one of George W. Bush's "secret memos" covers that, the memos containing what Bush/Cheney considered the Real Constitution.  The one without the Bill of Rights, and that allowed the U.S. military to operate within the country to "quell insurrections," even citing the Civil War as an example or a provocation.

Could be Dick & George were on the same page as Igor.  What may be hard for us to accept is that there are situations too dire to get out of.  They happen regularly in world history, often as the result of imperial overreach.  Everything seems okay, manageable, just a rough patch. But it just keeps getting worse, and it gradually dawns on you that you're running out of options. There's no money, no credit, and too many people are beginning to operate independently to save themselves for a cohesive center to hold.

Barack running a regime under martial law?  I was kidding about that Sheriff Bart thing, you know.

America's Sheriff Bart Gambit

In Mel Brooks's immortal "Blazing Saddles," the gentle townfolk of Rockridge get their first glimpse of the new sheriff, a hip freed slave foisted upon them by Governor Lepetomane ("the leading asshole in the state"), and decide to string him up.  In the late, great Cleavon Little's achingly funny rendition of Sheriff Bart, the new law man pulls his own gun on himself and begins dragging himself toward the safety of the jail.  "One move and the n___r gets it," Sheriff Bart tells the stunned crowd.  One of the morons watching announces that they'd better do as they're told, because "he's not bluffing."

For reasons that probably say more about my peculiar thought processes than they do about reality, I was thinking of Sheriff Bart while contemplating President Obama's (our hip, sharp, first African-American President) budget of $3.5 trillion.  With a $1.75 trillion deficit.  This makes for pretty easy mathematics: half of the money the federal government needs in fiscal 2010 (beginning Oct. 1 of this year) will be borrowed.  50%.  

The budget was announced after last Tuesday night's speech, where Prez O was as sharp, masterful and on top of his game as Sheriff Bart.  ("Baby, you are so talented," Bart says to himself after he sits down in the sheriff's office.  "And they are so dumb.")  More than to a little extent, the budget verges on the unbelievable (even though, as I've admitted, I love it).  While it's presented as business as usual, I think we can admit one thing.  If any other country in the world presented a budget where it proposed to spend $3.5 trillion while borrowing half of it, we would realize that country had gone fully belly up.  It would be seen as the last gasp of a hyperinflationary, completely out-of-control banana republic on the verge of complete collapse. No one would go near the place with a loan.  Foreign countries doing business with the nation would pull up stakes and head for the exits one step ahead of expropriation.  Terrified visitors would clog the airports, as in "The Year of Living Dangerously."  The government would fall, to be replaced by a military junta run by guys in green fatigues.

But not here.  Borrowing half the federal budget from...well, whom?  Or from what?  Where do you come up with that kind of dough?  No matter.  We remain serene.  The Sheriff Bart gambit works, or has worked so far, because the rest of the world stands in for the Rockridgers that Gene Wilder's Waco Kid called the "simple people of the land...you know, morons."  We're holding the gun to own heads and the world doesn't want to take the chance that we're bluffing.  Everyone is suspending belief, and credulity, in order to wish along with us that the United States escapes this self-inflicted hostage crisis.

"Do what he say-ay, do what he say-ay," the terrified Bart yells to the town folk as Bart drags himself off to the safety of the jail.  That's right, World.  Do what we say-ay.  Otherwise, we gets it.  And we're not bluffing.

Echoes in the Left-O-Sphere

Bill Maher had a lively crowd at his table Friday night on "Real Time," including Gavin Newsom and Alan Cumming, the Irish comic actor.  At one point in the discussion, Bill Maher made a point which has occurred to me over and over again, that the entire case against Afghanistan and its role in the attacks of 9/11 seems to be built on the complex of dreaded jungle gyms (which Maher may have called monkey bars) which show up in the standard stock footage every time we hear about bin Laden's training camps.  Maher had ealier inteviewed Robin Wright (the journalist, not Mrs. Penn), and she had confidently assured us that we cannot allow Afghanistan to become a "failed state," or it will become a breeding ground for terrorists.  Thus, we have no choice: we have to remain in Afghanistan indefinitely to nation-build even though, as with Iraq, this was not part of the original mission statement or war authorization.

Maher wondered to his panel (which also included P.J. O'Rourke) whether the world actually needs a whole "failed state" in order to breed terrorists, or in order for them to plot an attack against the United States.  I think a fair reading of the Report of the 9/11 Commission, which gave full credence to the testimony of Khallid Sheikh Mohammed at a point before we knew he had been systematically tortured, leads one to the conclusion that the actual plotters of the attack were in no need of Kandahar, Afghanistan or even a children's playground in order to put together a successful conspiracy.  Atta & the other ringleaders were apparently radicalized by contact with the West while attending school in Hamburg, Germany, and held their meetings at the local mosque and in their apartments.  If bin Laden was a funding source, and if Khallid Sheikh was actually the mastermind, it nevertheless does not follow that they needed a whole "harboring country" in order to proceed with their plans to enter the United States, train in American flight schools and hijack the aircraft.  It seems also doubtful whether the prior attack on the World Trade Center in 1993 in any way relied on the existence of a "safe haven" for terrorists; similarly, the attacks on American embassies in Africa in the 1990's did not require the Taliban or a whole country full of radical Muslims as preconditions.

In his speech on Tuesday night, President Obama emphasized, to deafening applause, that Afghanistan would not be used to "launch" attacks against the United States again.  This is more or less the standard formulation of the thesis, but it points to an almost superstitious approach to anti-terrorism in this country.    If Osama bin Laden was in Afghanistan when the attacks of 9/11 occurred, then the U.S. military must fight, for seven plus years and counting, in that country so that bin Laden can't use that country again.  I'm sure this plan, as formulated, will probably succeed.  There are, however, two billion Muslims in the world; the largest Muslim population anywhere is Indonesia, where we are not fighting any battles at all.  And what is it about fighting a land war in Afghanistan that would prevent another group of 15 Saudi "muscle" hijackers from going to work for another Egyptian (probably radicalized originally in the Muslim Brotherhood, not al-Qaeda) and UAE national (Mawran al-Sheihi)?  What would have worked in 2001 was to act on the good work of American intelligence agencies which discovered clear evidence of the plot, and all without (a) a "war on terror," or (b) an invasion of Afghanistan.  The clearest rationale I can think of for the war on Afghanistan in the first place was that it distracted the American people from thinking about these fundamental, obvious facts.

The problem of "bad conditions" in Muslim countries is simply far too diffuse to approach the problem by pacifying every trouble spot with the U.S. military. Added to this difficulty is the widely acknowledged problem that "collateral damage" in the form of civilian casualties in Afghanistan probably results in greater risk to American security.  

I think it's unfortunate that President O, who is beginning to find his stride in very positive ways in other areas, feels the need to double down on this original American mistake. I can understand the political exigencies; it's more important to appear tough on terror than it is to make any sense.  But Maher's simple question reflects what I think is a lucid perspective on Afghanistan. One looks at the war and can find no rationale, no matter how far your gaze. Alice in Wonderland looked down the road and said she could see nothing.  The King complimented her on her vision; one must have astonishing eyesight, he said, to see nothing at such a great distance.

Loving Barack's Budget

Everyone loves President O's budget, so I've decided to love it too.  From the Left (Paul Krugman) and from the Right (Charles Krauthammer, David Brooks), hosannas ring out.  Its clarity is admired, its willingness to count that which must be counted (the costs of the wars, for example), its visionary embrace of health care reform and energy research -- all good.

Why should I be special?  Why don't I just love it too?  Well, I do love it.  That's what I'm saying. I love it because it is a quintessentially American budget, and I'm a quintessential American. Indeed, I've been an American my entire life, even during the Bush 43 years.

You're waiting for the other shoe to drop.  The other shoe will not drop.  Prez O, after all, inherited this steaming pile of economic doo-doo from his truly, monumentally incompetent predecessor, the aforementioned W.  The $1.75 trillion deficit is Bush's fault; at least $1 trillion of it was inevitable after Bush, and that's without regard to the stimulus bill, which is also Bush's fault because he drove the economy into a ditch. 

In fact, everything is Bush's fault.  Let's just stipulate that and move on.  Anything which can be blamed on Bush, should be blamed on Bush, because he was just awful.  Maybe what we need in America are periodic "Hate Sessions," as in Nineteen Eight-Four.  Remember? The government (Big Brother) would display a picture of the armies of Eurasia or Emanuel Goldstein on TV screens, and workers in Oceania would get up from their desks and scream "Hate! Hate!" for a few minutes.  Could we put Bush's stupid visage up on a few thousand Jumbo-Trons around the country and try that?  I know, I know -- not very bipartisan.  The gentle Barack would never go for it, and he's right.  There's no telling where that kind of energy might lead, you know?  I sense there's a great deal of pent-up rage in this country.

But the budget, the budget.  It's just great.  Bear in mind that we start with a basic template that already allocates 64% of the discretionary budget to the military, homeland security, the nuclear program at the Department of Energy, all the spy agenices, and interest on that part of the national debt attributable to past military spending.  So we have only 36% of the discretionary budget (outside of the entitlement programs) to fool around with in the first place.  And Barack moves this around in nice ways.

That's what being a progressive President is, these days.  Moving the 36% around so some goes to good stuff like energy research and forming committees to see if we can try and get our for-profit medical system to cooperate a little and maybe bring down their premiums a little so we have fewer than 50 million people without health insurance, like maybe just 10 or 20 million, like a civilized country.  Okay, not exactly like a civilized country, but like the old United States.

Let's face it, being the world's mightiest military power is what we do.  We're not going to change that.  President Obama's budget increases military spending a little, because, you know, the world just keeps getting more dangerous all the time.  Ann Coulter, noted defense analyst, is right.  Anyone who doesn't want to spend as much as we do is an unrealistic, unpatriotic Liberal.  We should spend more, really, because the world is counting on us to do all of the military work on a global basis, and we pretty much do that all the time.  In point of fact, other than a few lapses, such as overthrowing liberal, democratically elected presidents in Third World countries because they posed a threat to the United Fruit Co., Standard Oil or ITT, we operate with pretty good restraint.  Noam Chomsky can rave on, but the fact is that probably no other country, with this much power, would use it as responsibly as we do.

I'm not sure what that proves, either, but it looks and sounds kind of nice.  Ann Coulter might be after my phone number after that line.  If she calls, I will just tell her to give O a break for once.  He's surging the troops in Afghanistan, he's going to negotiate for a long-term garrison in Iraq, he's increasing military spending.  So what if he believes in global warming?  That doesn't make him a bad person.  And this health care reform no doubt will stagger out of the committee room stiff-legged, arms thrust forward at shoulder level, its head all stitched up, like the Frankenstein monster it will no doubt be.  Ann and Rush and Bill O'Reilly can take heart in the certainty that medical care will remain out of reach for America's losers, the way it should.

Anyway, Prez O, count me in.  I'm back on the bus.  Or the high speed train, zipping down to the free medical clinic located just across the New Urban plaza from the solar panel farm.

Can Obama escalate the war in Afghanistan without Congressional approval?

Sandy Levinon, a professor of law at the University of Texas who writes very interesting stuff on the legal blog Balkinization, poses a provocative question which I have not seen elsewhere asked: does our most recently installed Constitutional Dictator, Barack Obama, actually have the power to escalate the war in Afghanistan without seeking some further auhorization from Congress?  By "Dictator" I mean no disrespect; Caesar, after all, was a dictator yet much beloved by his Roman subjects.  The "Fifth Republic" style of governance which has taken hold in the United States yields up most of its power to the Executive.  Thus, most people don't even notice anymore that the War Power, strictly speaking, is vested in the Congress, not the President.

It is fitting that the question was asked by an academic because the question, and answer, if there is one, are also academic.  No one in the Congress is going to challenge the planned increase of 17,000 troops in Afghanistan, there will be no Congressional debate, any request for money to fund the escalation will be hurriedly and gladly given -- in short, it's a done deal.  But just for the sake of tracking where we've been and where we're going, it's at least intellectually interesting to see how it all happened.

So that original Authorization, passed in a heated rush on September 18, 2001 stated as follows: 

Section 2 - Authorization For Use of United States Armed Forces

(a) IN GENERAL- That the President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons.

Rather vague and amorphous, of course, but try to remember that we didn't know much, one week after the 9/11 attacks, about what had happened, other than the basic facts.  19 young Arab men had boarded American planes, hijacked them, flew three of them into buildings and one into the ground.  Not one of them was from Afghanistan; Afghanistan, indeed, is not Arab, but it is Muslim.  Be that as it may, and returning to our foundational document: the President is authorized to use force against "those nations, organizations, or persons" involved in the 9/11 attacks. The disjunctive phrase states "or harbored such organizations or persons."  What is the subject or antecedent of this phrase?  It must be "nations" in order to avoid what is somethimes called the "Russian doll" fallacy in legal construction; otherwise we're talking about "organizations or persons" harboring organizations or persons, which while technically possible, is probably not what Congress had in mind.  If there are two possible interpretations of Congressional action, and one involves simple stupidity, that's where to put your money.

But let's just say that the President was authorized to use military force against any nation, organization or person involved in 9/11 or involved in harboring people who were involved in carrying out the attacks.  That's broad enough, I think, and it gives the President and Congress the benefit of every doubt.  How does this relate to what's going on in Afghanistan right now?

The original idea was that the government of Mullah Omar and his Taliban gang provided a sanctuary for Osama bin Laden near Kandahar; bin Laden was the brains and money behind 9/11, and his fearsome array of jungle gyms and Gymboree tunnels were critical in training the hijackers to overpower the unarmed flight crews and gain access to the unlocked cockpits that fateful day.  Everyone now concedes that (a) the Taliban are no longer in power, (b) Mullah Omar was dethroned, and in fact may have been killed by an October, 2008, drone missile attack, and (c) bin Laden fled Afghanistan.

So Afghanistan still technically exists, of course, but now under the government of the Mayor of Kabul, Hamid Karzai, former Unocal consultant and dapper headpiece wearer.  Afghanistan was the "nation," but as presently constituted, it had nothing to do with 9/11, nor in harboring those who attacked or planned.  Are there any "organizations or persons" in Afghanistan in Column A (active planning or execution of 9/11) or Column B (harboring)? That would presumably be al Qaeda.  They don't wear badges or uniforms, so how will we know when we get to the end of al Qaeda in Afghanistan?  And are the al Qaeda in Afghanistan "persons" who were actually involved in 9/11, or involved in "harboring" those who were?  How do we know that?  And what is the technical or operative distinction between al Qaeda that we might find in Afghanistan and al Qaeda we might find in, say, Saudi Arabia?  Why war in one place but not in the other?

As I say, an interesting academic question Professor Levinson has posed.  Congress won't touch it because the whole idea of the "war on terror" is to keep it as vague and amorphous as possible, the better to use it as a funding mechanism for the Pentagon and as a means of concentrating power in the Presidency.  The one thing we can know for certain is that it certainly doesn't have to make any sense.  That's now how they do things on Capitol Hill.

Obama - Change I'm Trying to Figure Out!

A tip o' the hat to Prez O for his speech last night.  His performance reminded me of his very best efforts on the campaign trail: the soaring rhetoric, the carefully planned moments when he continued speaking over the applause (a nuance learned from his true teacher, Martin Luther King), the natural aura of leadership.  What was also fun was the way he boxed the Republicans in; at first they sat on their hands in angry defiance, but Barack forced them to cheer along.  What were the Repubs going to do, act as if they were for bank executives buying up private jets and $85,000 area rugs? And once he had them cheering against the plutocrats, it was natural that the Republicans found themselves in favor of restoring the top marginal tax rate of 39% when Bush's tax plan expires.  But if the Republicans desert the fat cats, who the hell do they represent?  Everyone knows that their pretended advocacy for the Evangelicals is only a gag to give them a slightly broader base than the foursomes about to tee off at Burning Tree.

The First Dude is a master politician, a preternatural talent, no doubt about it. He threw in some red meat for the mouth-breathers, too.  His non-withdrawal withdrawal from Iraq, for example.  Will all the troops in Iraq really be home by the summer of 2010? "We are now carefully reviewing our policies in both wars, and I will soon announce a way forward that leaves Iraq to its people and responsibly ends this war."  If all the troops were coming home next summer, wouldn't that be the "way forward" announced now?  What the speech "announces" now is that we will "end this war," and that's what people hear, and are meant to hear.  Meanwhile, one learns from the New York Times that the "end" of the war means that a garrison of 50,000 troops will still be in Iraq for "training" and to "guard American institutions."  Those institutions, of course, would include the American embassy, permanent bases and the Iraqi oil industry, which we will not give up without a fight.

If you're scratching your head and wondering how this is different from what Bush would have done, do not distress yourself unduly.  Bush, because of the obnoxiousness of his own personality, so exasperated Nouri al-Maliki that the Iraqis pushed for our expulsion.  President Smooth, on the other hand, knows how to play people to get what he wants, and now Nouri doesn't want to lose his own access to Obamania.  Pretty cool, huh?

Of course, that does mean that Americans will continue to get picked off over in Diyala, Anbar, Mosul, etc., but hell -- enlistment is way up because the economy sucks.  It's a win-win! And meanwhile, the Afghanistan war is entering a growth phase because we need to make sure that no one can "use" that land "halfway" around the world to stage attacks against America; we want them to have to use Saudi Arabia or Yemen or Germany instead.

So, what do we got here?  A "better" health care system is promised.  Universal, free, like France?!  Don't get hysterical. He didn't say that.  Just tweak it to get rid of "waste."  

We will double our supply of renewable energy in the next three years.  That's better than nothing, especially if Obama is not counting his oxymoronic inclusion of "clean coal" in the mix.  But current renewable use supplies only 10% of our energy, and reality-based hysterics, such as those at RealClimate.org (to the right), argue along with Al Gore that if we're going to avoid the worst effects of global warming (as opposed to those which are now inevitable), we really need to use goals like 100% by the year 2020.  Obama proposes to invest $150 billion in renewable research over the next 10 years, or approximately the amount the United States was spending on Iraq on an annual basis during the height of the insurgency.

So:  Obama is not really serious about an alternative energy regime.  His policies in Iraq and Afghanistan are virtually indistinguishable from his predecessor, except to the extent his approach to Afghanistan is worse.  He's carried forward a lot of the Bushian bullshit about detainee and "state secret" policy, using Bagram as his substitute for Guantanamo, just as Bush did when the Supreme Court went upside his head on the Cuban gulag.

But man - does he sound good!  It's almost as if I can't believe I'm writing what I'm writing, because it's so hard to believe that in actuality, nothing much is changing.  How can that be?  Should I clap?  Or scowl and sit on my hands?  Republicans -- I feel you!

The Casino at the End of the Universe

I have referred before to a remarkably prescient book, published some years back, entitled Infectious Greed by Frank Partnoy, which detailed the tenuous world of derivatives and the threat they posed to the world's financial stability.  Partnoy took as a jumping-off place the meltdown of Long-Term Capital Management, that giant hedge fund quietly working its sinister magic in the sylvan quiet of the Connecticut suburbs.  LTCM innovated like crazy and had the inspiration, and genius, of sensing it required the services not of standard issue MBAs, but of math PhDs from MIT and Harvard who could construct the arcane and insanely complicated algorithms necessary for LTCM to optimize its computer-driven arbitrage strategies.  The system couldn't miss, until it missed entirely.

The nightmare, house-of-cards scenario which Partnoy predicted in detail has now actually happened.  Usually these sci-fi disaster movies remain fictional; not this time.  Instead of learning anything from LTCM's game-playing and ultimate implosion, what Wall Street learned was that even in a stagnant economy, where nothing of real worth is being produced, enormous sums can still be earned by playing games with money.  Any common financial...thing, such as a residential mortgage or a VISA card balance, could, with sufficient scale, aided and abetted by millions of side bets, become the stuff of new fortunes.  And so we witnessed (we didn't really see it, and we certainly never regulated it) the massive proliferation of mortgage-backed securities, collateralized debt obligations, short selling, and credit default swaps.  

These all interplayed and interacted; for example, Bank A might bundle together a few thousand mortgages into a pool, and base the issuance of bonds upon them, creating a Special Purpose Vehicle to issue the bond (and to keep the liability off the books of Bank A).  The actual bonds were sliced, diced and parsed into tranches of relative risk: top level (AAA), mezzanine, lower equity, which might be retained by Bank A itself.  To insure the risk involved in these mortgages (and the MBS based upon them), credit default swaps were bought and sold, sometimes by the issuer and purchaser, sometimes by insurance companies such as AIG.  

The swap guaranteed payment in the event of default.  To make it all more fun, there was no requirement that the swap be held by someone with any real interest in the MBS at all; anyone could buy one, thousands of people could place bets on whether the MBS would pay or fail. Then to stack the deck a little further, the playuhs, the Big Boyz, could increase their chances of collecting on their bet the MBS would fail by short selling the underlying instrument to drive down its price.  What made it all the more creative and exciting is that no one regulated the world of credit default swaps. Not the SEC, certainly not the Federal Reserve of Ayn Greenspan.  One can only guess as to their total "notional value;" some people estimate a total value of $1.4 quadrillion, or more money than exists in the world.  Did the United States, in purchasing an 80% stake in AIG, succeed to an exposure for $1.4 quadrillion in swaps?  Hey, I guess we'll find out!

Does any of this actually sound like a process by which one puts vegetables on the table or heats one's dwelling?  I think Thoreau said, in more eloquent words than these, that one should beware of solutions to the problem of living that are more complicated than the problem itself.  I was thinking of this last night as I was watching the PBS "Frontline" special called "Inside the Meltdown" which tried (really tried) to explain what's happened to us. Personally, I don't think it came close.  There were the usual tableaux vivants: the big conference room videos with Bush, Paulson, Schumer, Dodd, Reid, Pelosi, Bernanke sitting around a table, and then someone like Chris Dodd standing in front of a microphone saying stuff like, "When we heard how close we were to a meltdown, the oxygen left the room.  We've got to get this right."

It's all so dramatic.  But it occurred to me (a) the ones sitting around the conference table were the ones who let it all happen and (b) they are entirely the wrong people to fix it.  It's as if these same people sitting around the table were asked to come up with an innovative approach to string theory.  The complexity of the problem is simply beyond their understanding.  The only hope, and it's not much of one, would be to enlist the MIT PhDs who constructed the algorithms in the first place to conduct a seminar for a month or so and to suggest ways to unravel and unwind the puzzles they had constructed.

Instead, the Treasury and the Fed are going to continue down a path of reacting to the latest bad news, without really understanding the underlying origins of the problems they're confronting.  How big they are, how long they might go on.  They are going to treat this enormous financial Frankenstein as if it were the normal outcome of "banking" and "investing," and sacrosanct because, after all, these were all "contracts" freely entered into by capitalists pursuing their trade.  No matter how far the contagion spreads, the U.S. government is going to keep doling out billions, hundreds of billions, trillions of dollars in an effort to stanch the infection.  To keep this enormous Casino at the End of the Universe, these palaces of greed and bad judgment, standing for as long as possible, until they topple over from the rot within.

Twenty-five Years after Nineteen Eighty-Four

One of George W. Bush's recurrent fantasies was that if we could simply democratize the whole world, war and terrorism would disappear, rainbows would appear in the sky on cloudless days and the world's rivers would flow with milk and honey.  History does not really support the point of view that democracies are incapable of aggressive war; this simpleton's analysis was part-and-parcel of what I always thought of as Bush's World Book Encyclopedia approach to international relations.  His ideas about the world entered a condition of stasis when he was about 12 years old and never really developed much beyond that.  Thus, America could do what it wanted because it was "good," and apparently bad things that America did were not bad because it was America that did them.  These ideas are familiar to me as relics of my own elementary school years.  In the dichotomous world of America vs. the Soviet Union, it's how we were all taught to think back then.

In point of fact, the 20th Century was probably the high point for liberal democracy worldwide, yet it's possible to argue that the absolutely worst things in human history happened during the same epoch.  The two total wars, the Holocaust, the Stalinist Gulags, the use of nuclear weapons on civilian populations, the killing fields of Cambodia, the Cultural Revolution in China. These were all events of mass horror and carnage.  They were also all triumphs of state power over the helplessness of the individual.  One can argue that a great deal of the mischief was caused by totalitarian governments, and I would agree.  The essential problem, however, is that even in those situation where a government is elected democratically, as in the case of the National Socialist Party in Germany in 1933, there is no guarantee that a stable regime dedicated to individual liberty will survive. I'm sure that Iraq will bear this thesis out once they are free from our custodial supervision.

Even here in the good ol' USA, a pretty funky devolution is going on right now. A number of modern thinkers are trying to describe it, and Glenn Greenwald (linked to the right) is one of the best, but it's a murky phenomenon that is difficult to encapsulate in a few words.  In essence, there seems to be an almost complete disconnect between what you might call populist sentiment (majority will) and the actual policies pursued by the federal government.  For years, for example, poll after poll demonstrated that the general American populace was way ahead of the Congressional establishment on the subject of Iraq withdrawal. The people wanted out; yet the Congressional consensus, reinforced by the Beltway media, kept repeating that "no one" wanted a precipitous withdrawal or one that "abandoned" our troops.  So one appropriations bill after another was rubber-stamped by Congress, even after the Democrats took over.

The same nonsense has gone on with the question of investigating/prosecuting the Bush regime for war crimes.  In point of fact, reliable polls demonstrate that about 64% of Americans want the Bush people at least investigated, and a substantial plurality want them prosecuted.  Yet the "official" position, which Obama has adopted, is that "no one" wants to get bogged down in a "partisan" argument and that we must "look forward."

I was reminded of this principle reading Paul Krugman's column in the New York Times today where he mused about the Obama Administrations's obvious reluctance to nationalize banks such as Citigroup and Bank of America, choosing instead to shovel money their way even as it becomes apparent that the bailout sums exceed, by several multiples, the total capitalization of the corporations at their current stock price.  Of course, certain individuals at these banks would take a financial hit if the government assumes control, dismisses management and declares the stock worthless, and it's worth remembering that Wall Street in general donated about $18 million to the Obama election campaign.  And the choice of Timothy Geithner as Treasury Secretary, a fellow club member with all the high rollers on the Street, may also be a telltale sign.  

Still, the Obama campaign was the first presidential campaign in history to eschew entirely public financing, raising about $700 million, and most of that from individuals. It seems like a populist triumph; yet the actual policies of the Obama Administration do not seem to line up with the expressed will of the majority of the American people, as reflected in national polls.  This is a little scary.  What does it even mean to have a choice in candidates if the federal government does whatever the hell it feels like doing despite that "choice?"  

Obama is now going to guide his own surge of troops into Afghanistan. In some vague way, I recall that the war in Afghanistan is supposed to have something to do with the 9/11 attack by a group of Egyptians, Lebanese, UAE, Yemenis and (mostly) Saudis as planned in apartments in Hamburg, Germany starting about a decade ago.  (We probably felt like we couldn't bomb Hamburg again, not after the fire bombing of July 1943.) I wonder if the Afghanistan war, at this point, is not a great deal like the war which Oceania fought in perpetuity against East Asia and Eurasia in 1984.  It transfixes the populace and keeps us in a state of constant anxiety and aggressiveness.  We're at war! It doesn't do to question the government excessively when they are leading us in a fight for our very survival against the Evil-Doers.

So Obama, like Bush before him, has his war, which provides a covering rationale for the continued programs of extraordinary rendition, state secrets, telecom immunity, and, most important of all, no reduction in the massive amounts spent on defense and our 700+ military bases in foreign countries. I am beginning to form the opinion that the stock markets, which continue their elevator ride south to the basement, are reacting because of unconscious perceptions at work in the minds of average Americans. A country which continues its profligate waste of money on imperial nonsense, such as the war in Afghanistan, and which refuses to pay for anything with real money in real time, is not a country which is going to evade financial ruin.  So that while the federal government believes that it is escaping the judgment of the American people by traducing their will, it will not escape the judgment of reality, which has always dealt with similar hubris in the same way.

A Dream Fulfilled

Perhaps it was not too early in my career to achieve the ultimate: a letter chosen as an "Editors' Selection" by the New York Times.  As a small child growing up in a nondescript neighborhood, suffering through the anomie of the Eisenhower years, such an accomplishment seemed beyond my grasp, perhaps because (a) there was no Internet and (b) there was no such thing as an Editors' Selection at the New York Times.  Maybe, however, such a prize, this Golden Fleece of the churlish Net-commenter, existed as a Platonic Ideal, one of those reflections or shadows on the cave wall he wrote about.  No, I never understood what Plato was talking about, either.

I had suffered, as most products of public education must suffer, as I saw all those commenters from Cambridge, MA and Greenwich, CT ascend to the heights of Editors' Recommendations. Why? I would ask.  Why can't one of my letters make the grade?  I had the West Coast advantage. I can read the Times columns at 9 pm Pacific Time and comment before anyone else can comment.  Or - was that the problem? Was my exclusion the all-too-predictable East Coast bias against the under-educated rubes of the Western provinces?  So many of the comments from the East Coast bear time stamps of 6:30 am or so, meaning that if I wanted to mix my contribution in among the East Coasters without drawing a lot of attention, I would have to get up at 3:30 am.  Was it worth it?  Well, of course it's worth it.  The reason most people read columns in the New York Times at all is simply to provide grist for their own opinion mills. Particularly if you're reading something as worthless as a column by David Brooks.

But my letter was in response to Dr. Nobel himself, Paul Krugman.  This is where the Big Boys come to post.  You know, hitch your wagon to a star.  If a man's reach does not exceed his grasp, what's a Heaven for?  Your turn, as Woody says to the Spanish couple in "Love & Death."

What does an Editors' Selection look like?  Like this, and by the way, I think it was the use of "sui generis" that made the Editors think that maybe, just maybe, I had gone to Harvard or Yale and was therefore worth taking a flyer on:

"Not too many columns ago, Prof. Krugman wrote that 2009 would certainly be a bad year, but that he felt fairly optimistic about 2010. I didn't understand his sunny attitude at the time. This column seems to clear that up. The previous prognosis was probably a reflexive analysis about recessions in general: they run their course in a year or two, things improve. What makes this downturn sui generis, I think, is that it's the culmination of a number of very bad trends in America all converging at once. A hollowed-out, offshored manufacturing base, leaving Americans with the crap jobs of the service economy; over-development of the suburbs leading to an excess supply of houses vs. qualified buyers; and decades of flatlined earnings by the majority of Americans, who watched the uber-rich take a disproportionately huge chunk of all income. On top of this, we've had a ridiculously unbalanced trade relationship with China and the oil exporters, we've run large budget deficits, and we failed to prioritize away from military spending (and adventurism) toward technological innovation such as green energy, mass transit, universal health care and energy efficient housing. Now we're in a world of hurt, and we've taken a lot of countries down with us, including those we were counting on to finance our way out of this mess. I think we'll certainly have our own Lost Decade. If we don't get creative, innovative and more self-sufficient, then in the immortal words of the Sage of Crawford, "this sucker could go down."