There seems to be a lot of use of the "D" word (depression, as in "great") going around in the media lately, and the political scene seems to be taking on a distinctly 1930's tinge lately as well. Once again, its time to veer off-topic to see what some of the more outspoken members of the media have to say...
I'll start with Guy Rundle at Crikey, who has a pair of entertaining columns up - No one expected this, no one.
Absolutely no-one expected this. No-one. Even those who were arguing against the vote -- economically right-wing Republicans, and left Democrats, and their supporters in the op-ed columns -- were doing so in a spirit of bearing witness in the face of noble defeat.
Half an hour after the vote went down, the Republicans came out for a presser to blame ... house speaker Nancy Pelosi, for giving a partisan speech -- a pretty standard turkey slap of the Republicans, deregulation etc etc -- that had so angered their wavering renegade members, that they had voted against. This is pissweak -- either they think the bill was worthwhile, and should have taken Pelosi's party-line slap -- or they always intended to play politics with it, and undermine the Democrats de facto leadership role in this.
The accusations prompted the bill's principal pilot, Barney Frank to new heights of drawled sarcasm: "there's 12 Republicans who are putting feelings over country, holding out because someone said something they didn't agree with ... give me their names and I will go and be uncharacteristically nice to them," to big laughs.
What was the way ahead now? Boehner was asked. He simply didn't know. Neither did Republican Senate minority leader John Gregg, who had assumed the bill would be up for the Senate on Wednesday. Congress members are desperate to get out of Washington and back to their districts to campaign -- so that they can pretend that they're outsiders and mavericks, unassociated with Congress and if you send me to washington, (for the 17th time), I will clean up the ... etc.
Added to the complexity, is that it's the Jewish new year holiday of Rosh Hashanah, when we commemorate God's reneging on every promise to His people, and devout Jewish congressmembers -- or those with devout Jewish communities in their districts -- have announced that they won't be doing politics until it's over tomorrow sundown. Since Barney Frank, chair of the Senate Housing subcommittee, whose been putting this bill together, is one of their number, that puts an immediate 24 hour crimp in the thing.
As the deal went down, so did the Dow. With a two hundred point fall on the books by late morning, as the vote started to fail it fell another five hundred points , before recovering ever so slightly and then falling again. There was a stampede of money towards US Treasury bills, whose yield fell to near zero ... and Campbell's stocks, which had the second biggest rise of the day. T-Bills and canned goods.
At 3.30pm, President Bush spoke to the assembled press, very briefly, in the middle of an official greeting of the Ukrainian President, who must have been fighting the urge to run and call his broker. Bush's mumbled vacuities didn't reassure anyone. ...
Their political task now is to sheet home the blame to the Republicans as wreckers -- Boehner's remark about people turning against the bill because of Pelosi's speech is a godsend to them, as Frank clearly realised. John McCain is also jammed up by the failure of this vote, since he'd basically attached himself to it.
"I dived in and suspended my campaign," old walnuts said before the vote failed.
Snorting and smirking he said that "my opponent said that he was monitoring the situation" surrounding it with tiny air quotes.
He's looking bloody silly now, and Obama's prudence is paying off -- he, once again, looks presidential, demanding that Congress get it together, McCain looks chaotic.
After the vote, a Republican House member made things worse trying to pull Walnuts out of the fire, saying Senator McCain's campaign suspension "had brought this issue to the attention of the American people..." Yeah, because no one had been paying any attention to THE COLLAPSE OF THE AMERICAN FINANCIAL SECTOR before Johnny crashed in.
In a coffee shop near the Capitol building, the vote had the same effect as a hurricane, prompting strangers to talk to each other.
"You gotta put your money in silver and gold," said one guy at the counter. Another snorted.
"Silver and gold? Guns and food man, guns and food."
Someone rushed in -- "I just heard that ATM's will be shutting down by this evening," he said breathlessly. Everyone looked at each other, and went back to their coffee, the TV. And then a couple of people quickly paid their cheque and quietly slid out...
At a quarter to five, after the market had closed 777 points down -- spooky -- Treasury secretary Henry Paulson addressed a press conference outside the White House and said, well nothing, what could he say: "I will be continuing to work with Congressional leaders to get a deal they can all support..."
He sounded hoarse like he'd spent the past 72 hours on the phone -- or the past three shouting at people.
The principal question: "Was anything resembling his plan dead in the water?" ... he stonewalled. And then let slip: "Our banking system has been holding up very well, considering the pressures."
Read that again -- he's actually saying the whole banking system could go. Not "our system is solid" but "it's holding up very well".
Rundle has another column asking rhetorically if the founding fathers of the US were anarchists (my guess is probably not, but then I've never studied the Federalist Papers) before launching into a distinctly marxist celebration of the distant sight of the final crisis of capitalism hoving into view -
A political and cultural crisis of capitalism.
The final act of Monday the 29th of September ... was a press conference by Walnuts McCain himself in Des Moines, Iowa.
He'd put it off for a long time – so long, that CNN just played footage of tech setting the white balance, holding up a sheet of paper to the cameras, as they droned on about the day's events. It had a weird performance art quality, as if Laurie Anderson had taken over the airwaves. Eventually he hustled on like he was powerwalking, flourished a single sheet of paper and began:
I worked hard to bring everyone to the table .......we improved it greatly...our leaders are expected to leave partisanship at the door...Senator Obama and his allies in Congress infused the process with partisanship...Now is not the time to fix the blame, now is the time to fix the problem...
Good old John, the chuzpah kid – now is not the time for partisanship, especially from that partisan c-nt Obama – the old showman still got it. He gave the statement and then he hustled out as fast as he came in, not taking a single question. So, the whole Republican ticket is now off limits to actual scrutiny.
He had no choice but to do all that, because the silly boob had made a statement practically claiming credit for the whole bailout just before jumping on a plane at the exact moment the bailout went kablooey – and landed to find that his last statement zinging around the wires was a statement on his personal responsibility for the failed deal that may have killed America.
Obama didn't do a specific press conference, but he didn't need to – he gave two great speeches with a half-dozen zingers in each that the cable networks were more than happy to excerpt. They were old stuff --- "I think John McCain just doesn't get it" – but they were delivered with more authority than there'd been for a while. Most importantly politically, he took on the presidential voice urging everyone to "stay calm" and work through it – pretty much the stuff the President should be saying, if America currently had a President.
For those of you who missed the morning edition, and haven't had a chance to read the news before this bulletin: EVERYTHING IS F-CKED! CONGRESS DIDN'T PASS THE BAILOUT BILL, DEFEATING IT 228 TO 205, AND THE MARKET FELL NEARLY 800 POINTS! NO-ONE KNOWS WHAT THE HELL'S GOING ON, OR WHAT TO DO NEXT!
Okay, where were we? Ah yeah, collapse of America. People thought it could be over as night came down. But of course we live in a global society, so nothing is insulated. For it was morning in East Asia, and everything started tanking there too, falling by the requisite 5%. This fed back into the evening news shows, to create a fresh round of panic, disguised as earnest discussion.
By that point, any hope of sensible discussion had departed as the evening discussion shows took over. It is the particular tragedy of the US that its discussion programmes have become dominated by a particular type of telepopulism, in which various hosts – Lou Dobbs and Glenn Beck are the most prominent examples – present themselves as the unmediated voice of the people against a monolithic political class.
This has always been tiresome, but now it's starting to look ridiculous and noxious. It is part of the dominant political fantasy of American life – that government is, in the last analysis not a part of society, but a necessary evil, like an annual colonoscopy, to be despised, loathed and feared.
This mood took hold of America in the late 1970s, with Ronald Reagan humming the tune, as everything was going wrong for the country. Reagan and his supporters, taking up the themes of the failed Goldwater campaign of 1964, suggested that government was "the problem" and linked that theme to the American Revolution, effectively portraying the founders as a bunch of anarchists.
But the whole point of the American revolution, at least in terms of ideals, was not minimal government per se – it was virtuous government. The core of it was that there were good and bad governments, and you could judge them based on the principles they were founded on.
The weird thing is that survives to a degree. Watching Congress today, I didn't see caricatured, crony government, even though it was obvious that those voting the bill down would be members from both sides in danger of losing their seat. I saw complex, detailed arguments, the clash of ideas about what should be done, about what was happening, about different models of reality.
In effect, the TV pundits were the least intelligent thing going on, with their failure to get behind one or other model of reality, with its consequent course of action, one idea of what is going on.
Man oh man, this ain't the dumper – that will be the next one, in around 2017 – but it's starting to feel really, really big. What anyone in the know in the US is scared witless about, in the developing stockmarket tank, is the 401(k) situation. 401Ks are basically super funds, built evenly by employee and employer contributions, as in Australia.
Unlike Australia, employees still have little control over their 401ks, which can be regularly raided and ruined, even though hundreds of millions depend for their old age on them utterly.
The 401ks are all invested by various pension funds in the stock market – not in crazy stocks of course. In stable blue chip things, like Washington Mutual, or Wachovia or.....So the short point is that if the market tanks to the degree that 401ks slide through the floor, then this economic crisis will become a social and political one as people, faced with the prospect of lifelong penury and no reward for decades of work, will simply be disabused of any notion that the system has any legitimacy whatsoever.
That is already starting to happen, and to a degree, the general political cynicism is the beginnings of a more mature political push-back – which may or may not bloom in full – but which is being sold down the river by the Democrats and Republicans' acceptance of a deal that everyone calls "rotten", "the worst possible deal", "something I would normally never vote for". Etc.
But here is what is really, really important to understand about this current event is that this is not merely a financial system crisis – that is a mere ripple of a much deeper problem. Desperate to gain some political capital out of this, the right have been suggesting that the problem is over-regulation, which is mad. But no less illusory is the centre-left assertion that the problem is simply one of lack of regulation, and that if a proper framework could be put in place everything would be all right.
For the great truth of this mess is that the folks who designed the deregulation were, in a narrow sense, right -- if their goal was to give western capitalism another lease of life. What the market faced in the US at the end of the 90s, was a crucial lack of things to invest in, for the free money sloshing around the markets. By 2001, the dotcom bubble had burst and you couldn't shove $X billion into Ewidgets.com, and so there was a desperate need for another object that would keep the circus going. Mortgage backed securities was it – bricks and mortar, which looked like the most concrete investment was actually the most abstract, the notional capacity of people with no-deposit mortgages to repay.
Crazy, but what could you do? For the bitter fact is that without these pseudo-investments, the West is running on fumes. As China and the East roars ahead in classical 19th century high capitalist mode, the West runs on financial services, and rents – such as intellectual property, and debt and debt and debt.
For twenty five years, the US has been starving its public sector of investment – investment that would have created jobs and real growth and lowered overall costs – and allowed the rich to shuffle money into luxuries and useless services and waste, as the society decayed around them. To keep that running there was no choice but to keep coming up with increasingly unreal financial instruments, to give the illusion that a real economy was at work.
But there is no way to avoid what is now obvious to many people – the big sectors of the economy are not private products, they are social products – hence the need to keep them going, even when the morons who run them screw it up. The great great result of this crisis, is that hundreds of millions of people have now begun to understand this. Effectively what we have seen is the first glimpse of the shores of socialism. It may take another decade or two – and another two crises each worse than this – to get there, but we are on the way.
In the wake of this crisis, blame is being sheeted home to the average person, who is apparently running up too much debt. Well, mercy, what a surprise, it's the people's fault. Let's face it, people only consent to this crappy society because of what they can rack up on debt. If you're going to spend forty years of fifty hours a week – your whole one life on Earth – in the same office, doing crap you don't want to do, damn right you want a frikkin flat screen TV at the end of it. And to eat out. And drink stupid overpriced cocktails in awful resorts.
The short point is that if we close down easy credit, the rationale for Western capitalism collapses instantly. Because the rest of it is so godawful, that without rewards, no one would put up with it. Hence the need, over the last eight years, to keep it all bubbling, at any cost.
This is not an economic crisis, this is a political and cultural crisis of capitalism, and if you don't understand that, well, you're a financial journalist.
That is the meaning of what happened today.
Ya es da dia!
Also at Crikey, Alan Kohler (who I doubt is any form of marxist at all) is talking about a new "new deal" and a "greater depression" -
The end of triumphalism.
At Business Spectator and Eureka Report we are increasingly being asked whether the big four banks are safe -- not to invest money in their shares, but for deposits.
Our answer, of course, is that they are -- they are four of only 18 AA-rated banks in the world -- and will probably come out of this crisis stronger and with more market share than when the malaise started, but the question is being raised.
The fact is that this is a crisis not just in the United States, but in the western world.
Excessive consumption and debt in the west, basically riding the triumphalism that followed the fall of the Soviet Union in 1989 and Operation Desert Storm in 1990, has destroyed the equity of a financial system that knew no restraint in stoking that excess.
We were all, perhaps, uneasy at the time, as we watched the profits of banks and investment banks explode, along with the salaries of those who ran them, but we were along for the ride ourselves -- enjoying the rise in superannuation wealth that came from investing in the banks.
And then the boom was super-charged by China’s emergence from the shadows and the deflation it exported to the rest of the world through low labour costs.
The low inflation, low interest rates and high commodity prices supported by China combined with a burst of consumerism and a housing bubble in the west to create an explosive mixture that has now gone off.
The consumers and home borrowers who fuelled the boom have now turned on their partners in excess -- the bankers. It seems likely their anger will be formidable, made all the more so by a deep sense of shame.
The regulation that followed the collapse of Enron, focused mainly on the Sarbanes-Oxley Act, will come to look like a curtain-raiser.
Whether there is a Greater Depression or not, there is likely to be another New Deal imposing strict controls on the financial sector that will last a generation.
Jerome a Paris, on the other hand, does have a distinctly left wing tone to his remarks at The Oil Drum (not sure what this has to do with energy - it may have been more appropriate at Kos) written before the bailout collapsed -
Some lessons from Bailout Week.
While I still haven't seen the details of the now apparently agreed bailout as I write this, it is rather unlikely that the final version is going to be very satisfactory and that the following notes will be contradicted by the final result:
* the consequences of the financial crisis are so dire that the lesson here should not be that a bailout is necessary (it is, at this point) - but to acknowledge that the financial sector has the power to hold the rest of the economy to ransom during both good times and bad times and thus that it need to be emasculated so that we never get again to the stage where a bailout is necesary. The lesson is that the financial world cannot behave responsibly, if left to its own devices and thus should not be left to its own devices;
* another is that the main argument to give financial markets a free hand - that they have created so much growth and prosperity - needs to be called for what it is: a lie. Not only the so-called prosperity of the past year was highy unequally shared (see the next point), but it was not even real, as the income and profits of the good years are now dwarfed by the losses of today. Arguments about growth need to be dismissed by a reference to the "full cycle", ie the prosperity of the recent past can only be accepted as real if it wasn't a capture of the prosperity of today and the near future. If the forthcoming growth and GDP numbers are dismal, this should be seen as a direct proof that the growth of the past was nothing but, and that the policy prescriptions focused on financial profit are abject failures;
* as the bailout calls for yet another transfer from poor to rich, it is worth noting that even in the good years, the vast majority of the population saw very little of the then much touted prosperity: incomes were stagnant or declining, while benefits declined, and healthcare and energy costs skyrocketed. Thus, current policies seem focused, at all times, on maximising the income of the few rather than that of the general population;
* the next conclusion is that our political systems are completely geared towards fulfilling that last goal: politiicans of all stripes are supporting the bailout despite massive protests by their constituents, just like they supported financial deregulation, labor market "reform", "free" trade, the tax race to the bottom and other similar policy prescriptions in the past. Politicians are supported in that by a media system that brings to the fore pundits that are fully aligned with these prescriptions, and creates an incestuous class of insiders who, as it were, tend to peronally benefit directly from the overall winner-takes-all policies put in place;
* the quasi-unanimous support of the Serious People for the bailout, or at least their inability to point out that the current crisis was the invitable conclusion of the policy framework pushed by the neolib cabal shows how successful they have been at killing alternative ideas as fringe or absurd or dangerous, and suggests that there still is an ideologial vacuum; alternative ideas are not "there" enough to be taken seriously despite the ongoing reality, and I'm not sure they will until the current elites are completely pushed out;
* given that staying in power and doing whatever it takes to achieve that goal is their main competence, I fear that we're going to be pushed into ever more dangerous brinkmanship, as the McCain campaign has amply demonstrated in recent days. They will not leave without a fight, even if reality is overwhelmingly against them, and I expect obfuscation, distraction and worse to be used to deny or avoid that reality. Quite frankly, the alternative now, just like in the 30s, is either a full break from the past (a new "New Deal") or a move towards fascism and war - the latter being our current elites' only chance of holding onto power.
The question therefore is: will the new President, and the new Congress, be part of the problem or part of the solution? With respect to Obama, I'm willing to suspend judgement given the requirements of campaigning in today's environment. But with respect to Congress, many future members are already in now, and their performance, frankly, is not encouraging. what will it be?
In other words: nothing short of a revolution will do. Can it still be a peaceful, democratic one?
Bill Bonner at
The Daily Reckoning - NAM (not a marxist - though he does read "Liberation" every day apparently, so you never know) is declaring laissez faire dead as well, though with rather less glee than Jerome.
Meanwhile, over on this foggy island, the government is preparing to nationalize another major bank - Bradford and Bingley. Nervous savers are taking their money out of B&B, leaving the firm dangerously short of cash, says the FT.
But it didn't take a genius to see that there would be Hell to pay. That's what always happens when you reach the top of a credit bubble. People may spend more than they earn for years; eventually they reach the point where they can't go on. And lenders and investors inevitably go overboard too. They're so eager to earn a fee, they stop worrying about whether the loan will ever be repaid.
But the geniuses didn't see it coming. They were too impressed by their own theories and their own financial models...and their own multi- million dollar bonuses.
It fell to us here at The Daily Reckoning - poor, neglected, lonely as we are - to fly the "Crash Alert" flag day after day...and to say the obvious to anyone who would listen: "this too shall pass."
And now, according to the New York Times, it is passing:
"The End of Euphoria," the Times puts it. "Bill comes due for excesses of past 15 years."
But where's the surprise? Mr. Market always has a surprise in store. And he always brings it out when you least expect it.
So far, the surprise is that the financial sector has been hit harder than expected. Each time an institution goes bust, the feds react with more money and more credit. Each time, stocks rally and word goes out that the crisis is over.
Then, another institution goes belly up. And now Warren Buffett is apparently on the phone - according to our sources at the Financial Times - warning Congress that if they don't take action on the bailout plan things could get a lot worse.
Yes, that is all part of the program too. When people get the bill for their own mistakes they naturally want to pass it off to someone else. Who better than that chump of last resort - the taxpayer? The bill for the Paulson bailout plan could come to $1 trillion. At least, that's the estimate of Ken Rogoff, a Harvard economist. Let's see, that's about $12,000 for every family in the country. Yet, who complains? Where are the riots? Who's got a spare $12,000 to send to the feds so they can pass it along to Wall Street?
It doesn't seem to matter to anyone...people figure it's all "funny money" anyway. And they worry that if it's not forthcoming, well...maybe Warren Buffett is right. And maybe Paulson and Larry Summers (opining today in the Financial Times ) are right too - maybe the bureaucrats will do such a good job of managing this program that it will make a profit. Which gives us an idea: why not take TARP - as the program is called - public? Give public officials an opportunity to make some money for a change...let them put their own money into the rescue plan, along with the taxpayers' money.
Let's see what the prospectus will say: 'Firm will buy up Wall Street's mistakes at above-market prices; later, when all this blows over, these 'assets' will be sold back to Wall Street.'
Let's see how much of his own money Hank Paulson would bet on this business model!
No, they're not likely to take TARP public. Too bad. We'd love to sell it short. Too bad also because it would nice to give Mr. Market a chance to sort this out himself. He'd probably mark down stocks, derivative financial assets, bonds and houses - fast. But so what? "Liquidate the farmers...liquidate labor...liquidate the railroads...liquidate investors..." - in 1929, that was US Treasury Secretary Andrew Mellon's idea of how to let Mr. Market handle a financial crisis. Let it be! Let Mr. Market do his savage cleaning work. Then, the economy can begin to grow again - on a healthier base.
But that's not going to happen. Once again, the fix is in. This one bigger than any before...
"We must regulate," says Dominique Strauss-Kahn, director of the IMF (perhaps forgetting that Fortis was regulated by hundreds of bureaucrats in dozens of different countries....).
"The time has come to save capitalism from the capitalists," writes Luigi Zingales of the University of Chicago.
Thank God for the bureaucrats. The economists. The Wall Street pros. Now, they're going to "rescue" us...
But wait a minute......wasn't it the US government that set up Fannie and Freddie with an implied guarantee?...wasn't it the SEC that was set up to regulate Wall Street and prohibit the sale of slimy "investments?"...weren't these same economists the ones who thought the U.S. financial system was the best in the world...because it was so "dynamic...inventive...and flexible?"...isn't it the Fed itself that has been lending money below the inflation rate since 2002? And wasn't that the major source of "liquidity" that created such a huge credit bubble?...and wasn't Hank Paulson the head man at Wall Street's most go-go firm when all this stuff was going on? Do you remember hearing him warn investors or lawmakers that the whole Vesuvius of hyper-credit was going to blow up? We don't...
Yes, dear reader, as predicted in these pages...we are witnessing an epochal shift - from capitalism to socialism...from markets to politics...from subtle swindle to naked larceny...from white collar grifters to stick-up men...from slick fraud to brute force.
And then...who will rescue us from the rescuers?
Of course, last time we slipped into a great depression, we saw the rise of the far right as well the left - something which seems to be underway in central europe already. The Australian reports on the Austrian elections -
Far-Right surges ahead in Austrian election (the SMH was briefer and blunter -
Fascist gains in Austria). You'd hope they would have learned from their mistake last time, but apparently history is like some cranky old-timer that keeps on repeating itself.
THE Far-Right has made a grand return in Austria, emerging from yesterday's elections as the second biggest parliamentary bloc, according to preliminary results. The two parties that campaigned on an anti-immigrant and anti-EU ticket have captured about 29 per cent of the vote, pushing the country's conservative party into third place.
Heinz-Christian Strache and his Freedom Party of Austria, who were accused of xenophobia and waging an anti-Muslim campaign, won 18 per cent - a rise of 7 per cent compared with the previous elections. Mr Strache's former mentor, Joerg Haider, won 11 per cent of the vote with his new party, the Alliance for the Future of Austria. ...
A throaty roar filled the Freedom Party's election tent in Vienna when the results flashed up on a screen. The crowd - mainly young and middle-aged men drinking beer - punched the air in triumph. ...
Mr Strache has attacked the EU with a tirade against "the capitalists and the neo-liberals" who, he said, were turning common people into "slave workers of the globalisation insanity of the European Union".
His Vienna rally was marred by a violent confrontation between hundreds of his left-wing opponents and his extreme far-right supporters, some of whom were jackbooted skinheads. The police intervened when the groups threw bottles at each other.
John Gray at The Guardian says "The global financial crisis will see the US falter in the same way the Soviet Union did when the Berlin Wall came down. The era of American dominance is over" -
A shattering moment in America's fall from power.
Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over.
You can see it in the way America's dominion has slipped away in its own backyard, with Venezuelan President Hugo Chávez taunting and ridiculing the superpower with impunity. Yet the setback of America's standing at the global level is even more striking. With the nationalisation of crucial parts of the financial system, the American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated. In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed.
Ever since the end of the Cold War, successive American administrations have lectured other countries on the necessity of sound finance. Indonesia, Thailand, Argentina and several African states endured severe cuts in spending and deep recessions as the price of aid from the International Monetary Fund, which enforced the American orthodoxy. China in particular was hectored relentlessly on the weakness of its banking system. But China's success has been based on its consistent contempt for Western advice and it is not Chinese banks that are currently going bust. How symbolic yesterday that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.
Despite incessantly urging other countries to adopt its way of doing business, America has always had one economic policy for itself and another for the rest of the world. Throughout the years in which the US was punishing countries that departed from fiscal prudence, it was borrowing on a colossal scale to finance tax cuts and fund its over-stretched military commitments. Now, with federal finances critically dependent on continuing large inflows of foreign capital, it will be the countries that spurned the American model of capitalism that will shape America's economic future. ...
The fate of empires is very often sealed by the interaction of war and debt. That was true of the British Empire, whose finances deteriorated from the First World War onwards, and of the Soviet Union. Defeat in Afghanistan and the economic burden of trying to respond to Reagan's technically flawed but politically extremely effective Star Wars programme were vital factors in triggering the Soviet collapse. Despite its insistent exceptionalism, America is no different. The Iraq War and the credit bubble have fatally undermined America's economic primacy. The US will continue to be the world's largest economy for a while longer, but it will be the new rising powers that, once the crisis is over, buy up what remains intact in the wreckage of America's financial system.
There has been a good deal of talk in recent weeks about imminent economic armageddon. In fact, this is far from being the end of capitalism. The frantic scrambling that is going on in Washington marks the passing of only one type of capitalism - the peculiar and highly unstable variety that has existed in America over the last 20 years. This experiment in financial laissez-faire has imploded.While the impact of the collapse will be felt everywhere, the market economies that resisted American-style deregulation will best weather the storm. Britain, which has turned itself into a gigantic hedge fund, but of a kind that lacks the ability to profit from a downturn, is likely to be especially badly hit.
Chalmers Johnson has an article at TomDispatch on another great rip-off of the American taxpayer - the Iraq War. From Tom Engelhardt's introduction -
Tomgram: Chalmers Johnson, The Pentagon Bailout Fraud:
Let's start with the money the Bush administration has already thrown at the war in Iraq. According to the June congressional testimony of William Beach, director of the Center for Data Analysis, the war has cost $646 billion so far. The new defense budget for 2009 tacks on another $68.6 billion for Iraq and Afghanistan in the coming year. However, military expert Bill Hartung of the New America Foundation puts a conservative estimate of the costs of a single week of the Iraq War at approximately $3.5 billion (or about $180 billion a year).
In other words, the war in Iraq will cost far more in the next year than the Iraq portion of that $68.6 billion Congress is about to pony up in the defense budget, and so will be funded, as has long been true, through supplemental war bills submitted by the Bush administration (and then whatever administration follows). In other words, sometime in 2009 the direct costs of the war the Bush administration once predicted would cost perhaps $50-60 billion in total will stand at more than $800 billion, or $100 billion above the cost (if all goes well, which it won't) of the bailout of the financial system now being proposed in Washington.
Estimates of the true long-term costs of the President's war of choice, including payments of health care and veterans benefits into the distant future, soar into the budgetary stratosphere. They range from the Congressional Budget Office's $1-2 trillion to an estimate by economists Joseph Stiglitz and Linda J. Bilmes of up to $4-5 trillion. So we're talking somewhere between one-and-a-half and seven bailouts-worth of taxpayer dollars flowing into the morass of disaster, corruption, and carnage in Iraq.
And here's another curious bit of information: Just the other day, the website ThinkProgress pointed out a strange glitch in Iraq planning. The Bush administration, deep into negotiations with the Iraqi government, evidently managed to wheedle an extra year's time for the prospective withdrawal of American combat troops from Iraq; its negotiators pushed the date from 2010 -- the year suggested by both Barack Obama and Iraqi Prime Minister Nouri al-Maliki -- to 2011. According to Maliki in an interview with an Iraqi TV station, this change came from the administration's concern over the "domestic situation" in the U.S. (that is, the needs of the McCain campaign).
"Actually," said Maliki, "the final date was really the end of 2010 and the period between the end of 2010 and the end of 2011 was for withdrawing the remaining troops from all of Iraq, but they asked for a change [in date] due to political circumstances related to the [U.S] domestic situation so it will not be said to the end of 2010 followed by one year for withdrawal but the end of 2011 as a final date." So we're talking about another perhaps $150-180 billion in 2011 -- or approximately the full suggested initial payout in the Washington bailout plan of at least one key Democrat. This gives the phrase "presidential politics" new meaning. Now, just imagine for a moment the situation we might be in if there had been no Iraq War. We could have bailed ourselves out many times over.
As Chalmers Johnson, author most recently of Nemesis: The Last Days of the American Republic, the final volume of his Blowback Trilogy, has pointed out for years, the Pentagon, the military-industrial complex, and America's wars are in the process of bankrupting us. How strange then that, as he indicates below, no one in the mainstream even blinks when a staggering new Pentagon budget sails through the House of Representatives and then, by voice vote, through the Senate just as negotiators in Washington are scrambling to find a similar sum to deal with a catastrophic financial meltdown; nor does anyone in the mainstream bother to make any connection between that budget and the funds we don't have available to use elsewhere, or between the looting of Iraq and the looting of our financial system (and, in both cases, of course, the looting of the American taxpayer).
Its interesting watching the fault lines start to appear in popular culture as well - amply demonstrated by this new
Linkin Park video I noticed at the gym today. I'm not sure embedding these ideas into the younger generation's heads is such a good idea (though maybe I'm being hypocritical - I used to watch Rage Against The Machine when I was younger) - wouldn't a bright green future be a better alternative for everyone...
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