PRESIDENT ADMITS HE WAS WRONG ...

Unfortunately it was President Lincoln, in a letter to Ulysses S. Grant. It was simple and to the point: "I now wish to make the personal acknowledgment that you were right, and I was wrong."

Perhaps most importantly, he did it the moment he understood he was wrong. Lincoln’s legal colleague wrote, "It required no effort on his part to admit another man's superiority … [and] was perfectly in character."

What? You thought I was talking about this guy?


- Mark

TURKEY IGNORES BUSH ... TWICE

In an effort to pursue its troublesome and separatist driven Kurdistan Worker’s Party (PKK) Turkey chased the group into northern Iraq. According to Turkey, the PKK receives weapons and shelter from the Kurds in northern Iraq.


Fearing Turkey’s incursion into Iraq might drag Iraqi Kurds into the fray, President Bush wants the hostilities to cease. And he wants them ended soon because Iraq’s northern Kurds have been as good an ally we have in fighting the insurgents in Iraq. Dragging them into a battle with Turkey undermines security in Iraq.

Trouble is the PKK is not just a highly troublesome separatist group (thousands dead since 1984). It is also labeled a terrorist group by Turkey and the United States. As a result, and not surprisingly, the Turkish government is defending its Iraqi operations.

Illustrating, once again, the dwindling influence (and lack of control) President Bush has over the mess he created in Iraq, Turkey’s Defense Minister Vecdi Gonul refused to give a timetable for a pull-out from Iraq, commenting, "Turkey will remain in northern Iraq as long as necessary." These comments came after President Bush said Turkey’s presence (and the fighting) should be “limited and … temporary in nature.”

And why shouldn’t Turkey ignore President Bush? They already know there are no costs associated with defying the president. After Turkey’s parliament passed a motion supporting intervention, President Bush warned “it is not in [Turkey’s] interest to send more troops.” Sufficiently cowed, the Turkish government promptly sent troops into Iraq.

So here we stand, with President Bush encouraging an ally in the War on Terror to back away from fighting a U.S. labeled terrorist group. Then our ally, after being encouraged to leave Iraq, all but tells us “We’ll think about it … when we’re ready.”

So much for that "War President" thing. Are the republicans embarrassed yet?

- Mark

NEXT UP ... RISING CORPORATE DEFAULTS

And the news just gets better ...

After hovering around 1-2% during the easy credit era, global default rates among corporations are projected to quadruple this year, and could get worse.

As a point of comparison, during the Great Depression, Moody’s Rated companies experienced its highest rates of debt default at 9.2% in 1932. The U.S. as a whole experienced a 21.2% corporate default rate during this time according to the U.S. Bureau of Economic Analysis.

But trouble may already be here. According to the RGE Monitor, the total value of corporate-bond defaults – defined as missed payments, bankruptcy, or restructuring – already exceeds the total for all of 2007. And it’s only February. As well, the amount of new grade “B” rated deals is approaching 90%, up from about 65% in 1997. This is important because …

The B ranking, four to six levels below investment grade, means holders of the debt only have a “small” assurance of being repaid over “any long period of time …”

Making matters worse in our contracting debt markets is the amount of total debt being carried in this country ...

This tells us that Americans aren't in any position to take on any more debt, no matter what the Fed does with interest rates. What we should be wary of now is an unforeseen event, which increases the risk of financial matters getting worse (referred to as event risk), especially since the U.S. economy is already in a precarious position.

Keep this in mind the next time someone tells you market fundamentals are strong.

- Mark

THE ROOTS OF MARKETS & WEALTH

Last Saturday I said that I would begin posting snippets from my book, which I will be sending to the publisher by the end of next month. The following is an introduction to the chapter that discusses America's Grand Liberal Strategy and the roots of Europe's economic success.


... Months before the start of the Second Gulf War in 2003, Secretary of Defense Donald Rumsfeld chided Germany and France for not following the U.S. lead on Iraq – derogatorily referring to their leaders as holdovers from “old Europe.” The claim was both misinformed and full of hubris.

Since 1945 Europe has embraced democratic and free market principles, was a solid ally during the Cold War, and pursued economic integration as a way to foment cooperation and allay past tensions in the region. Rumsfeld’s comments demonstrated a willful ignorance of how “new Europe” fulfilled, if not exceeded, the aspirations of America’s post-war architects. “Old Europe” – if we are to get our history right – would not have waited for the U.S. to sweep into the Middle East on its own. In the end, Rumsfeld should have spoken to General Electric’s former Chief Executive Officer, Jack Welch. He understands “new Europe.”

During his tenure as CEO Welch had merged more than 900 firms with GE. So when Honeywell became available in October 2000 Welch went into action. While Honeywell produced many of the same products as GE – plastics, chemicals, electrical machinery, and aircraft engines – Welch was not concerned about anti-trust legislation because he believed Honeywell’s products were “complimentary” rather than competitive. And, besides, why should he worry? He was Jack Welch - perhaps the biggest fish in the business world's open sea.

After getting the green light from the U.S. Justice Department Welch met with Eurocrat, Mario Monti, the European Union’s Director-General for Competition (its “antitrust” division). In Brussels Welch would find “new Europe.” In The United States of Europe T.R. Reid described the introduction:

Welch flashed his friendly, casual smile, stuck out a hand, and said, ‘Mario – call me Jack’ … ‘Mr. Welch,’ [Monti] replied in his accented but precise English, ‘we have a regulatory proceeding under way. I feel the proper approach would be to keep things on a more formal basis. You can call me Sgr. Monti.’

Monti’s team had done their homework. They secured information from both GE’s industry competitors and United Technologies (the firm GE outbid for Honeywell). At one point, when asked about aircraft electronic parts manufactured by Honeywell, GE’s team offered only blank stares. And on it went. When Monti finally called Welch to tell him the “deal is over” he would end the conversation by saying, “Now I can say to you, ‘Good-bye, Jack.’”

Fifty-five years after the end of WWII Mr. Welch learned the hard way that the system U.S. post-war architects wanted to build for the world had found a home in Europe. Welch learned something else: By creating the conditions for a prosperous and independent Europe to emerge America’s grand liberal strategy had – and apparently without Donald Rumsfeld’s knowledge – erased “old Europe.”

- Mark

WAKE ME IN NOVEMBER ...

Four days ago I posted this on sovereign wealth funds and the potential future of economic warfare. While Treasury officials in the Bush administration are apparently unconcerned, this article suggests the Europeans are hedging their bets, and are way ahead of us on the issue.

Why am I not surprised?

- Mark

TO REGULATE OR BAILOUT?

Related to the previous post, this graph from Paul Kasriel of Northern Trust helps explains why the banks need the bailout. It's not pretty.

In real simple terms, mortgage related assets now account for over 60% of total bank earnings - a post-war record high. If commercial banks can't make money on their mortgage assets, because homeowners can't repay the loans, the entire industry is in trouble.

And we all know what happens when the banks get into trouble.



Big Question Time: So, which is preferable ... Regulation, or corporate bailouts?

- Mark

THE MAGIC OF THE MARKET ... IN BUSH'S AMERICA

Yet another lurid example of the private sector privatizing the profits and socializing the losses …

On Feb. 14 the Wall Street Journal reported that major banks are looking to shift the burden of their supprime stupidity to the federal government. In a proposal advanced by Credit Suisse, the Federal Housing Administration (FHA) would guarantee the refinanced mortgages of delinquent borrowers. According to MoneyNews.Com, the programs currently being discussed include creating "negative equity certificates" that would help financial institutions recoup losses from refinancing a mortgage when a home's value has dropped.

Can someone tell me, Where’s the market risk in guaranteeing an industry's profits? With knowledge that the feds and the American taxpayer will bail them out, won’t they just go out and do something even dumber the next time?

Let’s keep in mind that these are the same idiots who made the decisions that created this ponzi-like bubble market reality in the first place. And you can bet your life that the same guys with their hands out today will be at the forefront, whining that taxes are a form of theft, should someone with common sense ask how we should pay for this industry bailout.

So here we stand … Banks asking the federal government and American taxpayers to help them keep their profit margins. I don't know, but it seems to me that the dream fantasies of Alice's Wonderland can't hold a candle to the twisted but guranteed profit schemes in Bush's Neo-Conlandia.

- Mark

BILL KRISTOL ... A STUDY IN FAILURE

When the NY Times decided to give failed analyst and FOX News war monger William Kristol a one year contract to write op-eds for them I was stunned. But when they justified it by arguing that they are "giving voice to a guy who is a serious, respected conservative intellectual" I had to laugh.

BarbinMD is doing a pretty good job of chronicling the lunacy of Mr. Kristol. With links to how wrong Kristol was on WMD and the growing Iraq threat, to simply being wrong about virtually everything under the sun, the NY Times decision to provide Kristol an outlet for his failed analysis is simply mind boggling.

- Mark

CHICKEN LITTLE RIDES AGAIN ...

And the fear mongering continues ...

The Bush administration is once again telling everyone that failing to act on the president's spying initiative has made the U.S. 'more vulnerable to terrorist attack.' Pathetic.

- Mark

BUSH'S MIDDLE EAST "FREEDOM"

Well, it looks like President Bush's freedom and democracy initiative is really taking off in the Middle East ...

According to the BBC prosecutors in Saudi Arabia are investigating 57 young men, who were arrested Thursday for flirting with girls at shopping centers in Mecca. Among the infractions the young men are accused of include "wearing indecent clothes, playing loud music and dancing in order to attract the attention of girls." The arrest came following a request from the Commission for the Promotion of Virtue and Prevention of Vice.

At least they waited until after Valentine's Day to ... oh, wait ... it looks like they went after that one too ... something about it being un-islamic.

- Mark

CASTRO'S LEGACY

I wrote the following for the Bakersfield Californian when Castro was thought to be on his death bed in August 2006. I still like it. I'll post the Californian link later. Enjoy ...

- Mark


After 46-plus years in power, the revolutionary movement that ousted military dictator Fulgencio Batista in 1959 has had some successes. For example, Cuba’s infant mortality rate rivals the U.S. and surpasses the U.S. in its inner cities. Investments in the medical field have paid off handsomely.

But the character and strength of Cuba’s revolution under Fidel Castro rests not so much in Cuba’s medical advancements. Indeed, if quality of life and standard of living have anything to do with Castro’s record, and it does, Cuba stands as a failure for the lack of freedoms and civil liberty guarantees that other Latin American countries enjoy.

Instead, Fidel Castro’s prestige and a good part of Cuba’s revolutionary success rests in how they have survived decades of U.S. efforts to regain control of the island. Castro has survived assassination attempts, a 40-year U.S.-led economic blockade, the collapse of its primary trading partner and more recent efforts, like the Helms-Burton Act (designed to punish corporations doing business on the island). Survival and longevity have allowed Fidel Castro and ordinary Cubans to come across as modern-day Davids, standing tall against the U.S. Goliath.

Fidel Castro’s global standing is especially significant given he didn’t start off as a Soviet puppet. His early track record of ignoring the socialists, his subsequent reversal and embrace of the Soviet Union, and his eventual back-peddling on revolutionary ideas best inform us about Cuba’s future after Castro is gone.

It’s not often acknowledged that Castro had, at best, cool relations with Cuba’s socialists and Marxists. In fact, like Batista, Castro didn’t initially recognize the Soviet Union when he came to power.

What drove Castro was nationalism, not communism. A student of Cuban history, Castro came to despise the U.S. for imposing the Platt Amendment on the Cuban Constitution. The amendment turned Cuba into a virtual U.S. protectorate. He hated how U.S. companies and jetsetters wielded financial power, while bringing bigoted attitudes that came with the times in the U.S.

Because of Castro’s fervent nationalism, most of Cuba’s elite and clergy initially stayed in Cuba after the revolution. To be sure, elites really wanted to preserve their privileges, but they also genuinely believed they could work with Castro. This is important because it showed that Castro was not only a nationalist, but viewed as a pragmatist.

In this vein, like the Peter Sellers character in “The Mouse that Roared,” Castro tried to play the U.S. and the Soviet Union against each other in an effort to secure resources.

This would all change after the U.S. began denying Castro certain raw materials and access to markets. When U.S.-owned refineries refused to process Russian crude in 1960, Castro began nationalizing U.S.-owned assets.

Political expediency, driven by economic realities, made Castro a communist and an outlaw in the eyes of the U.S. At this time, Castro realized something else: Defying the U.S. might bring assassination attempts, but it could also turn you into a national hero. For someone with Castro’s ego, becoming Public Enemy #1 in the U.S. wasn’t all that bad.

As a political chameleon, what really made Castro effective was the fervor he demonstrated once he embraced the rhetoric and policies of the socialists. However, Castro also engaged in policies and practices that frustrated revolutionaries throughout the world.

For example, after initially condemning Soviet tanks in Czechoslovakia in 1968 (arguing socialists don’t invade socialist states), Castro backed down. As well, Castro agreed not to support radicals and leftist guerrillas in Mexico in return for diplomatic recognition from Mexico.

On another level, Castro demonstrated he understood the capitalist money game when he allowed Cuba to play treasurer for Argentina’s infamous leftist revolutionaries, the Montoneros. After kidnapping the heirs to one of the world’s largest agriculture firms in 1974, the Montoneros were able to extort at least $64 million in cash. But they needed a place to store the money. After floating the money around European banks, they decided to place the money with a trusted and impartial player, Cuba.

Castro determined that the safest and most profitable place to hold the money was in New York banks. For a moment, forget the irony of U.S. banks holding funds for Latin American leftists committed to revolution. Instead, concentrate on the pragmatism demonstrated by Fidel Castro to use U.S. banks to manage money.

In the end, Castro’s political acumen goes a long way in helping us understand how he thwarted CIA-led assassination and coup attempts, avoided murder at the hands of frustrated leftists, and never experienced serious threats to his rule at home.

Working through his 10th U.S. president, whether we appreciate it or not, Fidel Castro has become a legendary figure in Latin America and around the world by doing more than hiding behind a façade of flowery rhetoric and indulgent dictatorship. Castro’s real legacy lies in instilling Cubans with the sense they no longer have to bend to the demands of the U.S.

Castro’s ghost will forever remind Cubans of this. And this is what will drive post-Castro Cuba and, more than anything else, will frustrate those in Washington who declared last week that the U.S. will again be directing things in Cuba when Castro is gone.

EMIGRATION'S A PROBLEM TOO?

I first saw this on Whiskey & Gunpowder and had to go to the source, Barron's.

• 1.6 million U.S. households have already made the decision to relocate. That figure has remained stable over the year and a half during which seven surveys were conducted.

• Another 1.8 million households are seriously considering relocation and are likely to do it.

• 7.7 million households are "somewhat seriously" considering relocation and "may" do it.

• Nearly 3 million households are seriously considering the purchase of a vacation home or other property outside the U.S., and another 10 million are "somewhat" seriously considering it.

I'm not sure, but I have to believe that these numbers are inflated. But if these numbers are close, our discussions on migration trends need to move in another direction.

- Mark

RISING TO 'THE LEVEL OF THEIR INCOMPETENCE'

Remember David Walker? In his position as the GAO's Comptroller General, which is charged with insuring financial transparency, he requested information on Vice-President Dick Cheney's energy task force (only to be turned away). Then, as our country’s chief accountant, he became a tenacious financial watchdog, warning we are ignoring threats to our nation’s long-term fiscal security with continued record budget deficits. Well, he's finally given up and quit.

In other good news that augers well for transparency and fiscal responsibility, effective March 1 the Bush administration’s Department of Commerce starts playing more fiscal games and will shut down its extremely useful and popular economic indicators site because of “budgetary constraints.”

Imagine that ... We have a recession ramping up. We get more record budget deficits. Consumer confidence is down. And Team Bush decides we don’t need easy access to the data that allow us to better understand our financial state of affairs. The investor site Angora Financial says it best:

Funny how that works, eh? Bush proposes the first-ever $3 trillion budget this year, but there’s not enough porked in to keep a stats Web site running.

Forcing good people out ... and we can't even keep a good web site running. This explains why even Conservatives are starting to acknowledge that the only people now surrounding President Bush are those who have the unique ability to "rise to the level of their incompetence."

Is this any way to run a country?

- Mark

AN AMERICAN CAESAR ...

First we had President Bush's "signing statements," which the president claims allows him to ignore the will of Congress.

Next, we got the administration claiming unitary executive powers (from John Yoo’s famous 2001 memo), which says the president has the authority to do what he wants in a time of war.

Then we get the administration’s insistence that they can claim “state secrets” for virtually everything under the sun, which enables the administration to withhold certain information.

Upping the ante, Attorney General Alberto Gonzales' office declared the president has the authority to unilaterally declare anyone "enemy combatants,” and then hold them indefinitely.

Now, we’re treated to this.

The U.S. Supreme Court is says if you claim you were the target of the president’s spying program – which the telecom industry participated in, and the president now wants retroactive immunity for – you need to provide proof you were spied on. Without it you can’t sue the government for violating your constitutional rights. There’s just one catch. The federal government doesn’t have to release certain information, especially if it falls under the “state’s secrets” privilege of the president, which the president can claim with his executive authority. Nice.

For those of you keeping score at home this is what we have: The president (1) can ignore Congress, (2) has the authority to do what he wants, (3) can label his activities as state secrets, (4) can declare and hold “enemy combatants” unilaterally, and (5) can keep potential evidence (of wrongdoing) from the public indefinitely.

All that’s left is for President Bush to develop is a Praetorian Guard.
- Mark

P.S. Glenn Greenwald has an excellent post on what the Supreme Court's decision means. It's not pretty. Here's a snippet ...

We do not know which Americans were spied upon without warrants, how they were chosen for surveillance, whether they had any connection to terrorists, and/or what was done with the information obtained. Despite the fact that we enacted laws 30 years ago making warrantless spying a felony, we have no idea what was done with the warrantless spying powers the President arrogated unto himself and then used for years

THE FUTURE OF ECONOMIC WARFARE?

Imagine the following scenario ...

The next president of the United States is confronted with an increasingly weakened U.S. economy. Relations have exploded between India and China. China tells the new U.S. president that if the U.S. doesn’t follow China’s lead they will begin dumping dollars and other dollar denominated assets they hold (e.g. treasury notes and U.S. stocks). Who holds the upper hand here?

This is an issue of increasing concern in the U.S. Congress and in the U.S. Department of Treasury as foreigners continue to buy up U.S. assets while continuing to hold on to increasingly weakened U.S. dollars. Former U.S. Treasury Secretary Lawerence Summers asks,

What about the day that a country joins the ‘coalition of the willing’ and asks the U.S. president to support a tax break for a company in which it has invested? Or when a decision has to be made whether to bail out a company, much of who’s debt is held by an ally’s central bank?

Critical here is whether other countries might use their economic weight in the U.S. economy to extract concessions, or compel us to act a certain way. Threats like these have been made in the past. And we should know. We did the threatening.

One of the best examples of this was when the Eisenhower administration threatened to ruin Britain’s currency if they didn’t change course after participating with France and Israel in the Suez Canal events of 1956. It was reported that Britain’s Prime Minister at the time, Anthony Eden, was reduced to tears over the U.S. threat and was, eventually, forced to resign.

While I don’t agree with U.S. Deputy Secretary of the Treasury Robert M. Kimmitt’s assessment (he seems to believe we have nothing to worry about), he brings up several points to ponder.

- Mark

THIS IS NOT COMFORTING ...

My two most recent posts discussing Alan Greenspan's role in the economic mess we are now in may, for some, be overstated. However, when you read Greenspan's book you will see that I am rather generous.

The real issue, or connundrum, lies in determining what we need to do to avoid what looks like some real economic ugliness around the corner. Robert Reich takes a solid bite at the apple and makes it clear that - as is the case with what Bush is leaving us in Iraq - there are not any good options. To make a long story short, we are no longer master's of our destiny - we need the rest of the world to bail us out.

Can you say Xie Xie? (And pass the wontons.)

- Mark

GREENSPAN, II: FROM MR. HYDE TO DR. JEKYLL?

After posting “Bubbles Greenspan” I started thinking about the larger impact that Alan Greenspan’s monetary policies will have on our nation. This is what I’ve come up with so far.

MR. HYDE … In my post I suggested that Greenspan’s policies largely went by the book and complimented deregulation by making money readily available in measured amounts. This helped satisfy America’s financial needs during the Reagan-Bush I years. With the arrival of Bill Clinton and his deficit reduction policies (i.e. tax hikes and budget cuts) Greenspan promised and delivered Fed policies that helped produce economic growth and healthy surpluses. In the process he helped show that the Fed is not so apolitical, and that entrepreneurs don’t wait around for the marginal tax rate to fall in order to work hard and/or have a good idea. So far so good.

DR. JEKYLL … But then George Bush entered the White House in 2001. Greenspan proceeded to undermine what good his policies may have done by foolishly supporting a massive transfer of wealth (budget surpluses) to America’s financial elites through Bush’s ill-targeted tax cuts. What good had been produced by careful economic policies and monetary prudence was wiped out by Greenspan’s imprudent trust in the reckless policies of Born Again supply-side economics. In the process, he helped insure that the national debt would not be paid down, nor would investments in infrastructures be made (Louisiana and Minnesota show what happens when infrastructures are ignored). In the process Greenspan showed himself to be a political hack of the first order.

DR. JEKYLL ON STEROIDS … It seems to me, the real threat lies in what lurks around the corner. After taking a look at economist J. Bradford De Long’s article on America’s inflationary 1970s something else became clear about Greenspan's tenure. De Long argues convincingly that while OPEC's oil price hikes in the 1970s may have energized inflationary pressures, they only exacerbated what was already a bad situation. Simply put dollar policies and U.S. spending from the 1950s and 1960s had already planted the seeds of inflation. Inflation was going to happen one way or the other in the U.S. after the 1960s. This is what makes the past 28 years so important, and Greenspan’s political hackery so much worse than one might think.

Since 1981 we have added $8.1 trillion to our national debt. We borrow recklessly and run record budget deficits year after year, as if tomorrow will never come. Still, the only time Greenspan saw fit to do his job and guard the integrity of the dollar – which is the only real goal of any central banker – was when Bill Clinton came to office. It was then that he made deficits his primary concern. And if Greenspan’s own account of events are true, he not only got religion suddenly, but he played a pretty good game of political extortion with Bill Clinton.

So why the change of heart when President Bush came to office? While we can debate the answer to this question, there's little doubt that Greenspan’s tenure will be marred by the fact that he allowed one Republican administration after another to wander aimlessly in his monetary forest. Today, as was the case in the early 1970s, the American economy has become primed for inflation.

With the jobs protecting "Shadow of the Depression" gone (which Brad De Long explains), and with deregulated Globalization on the march, there is little to inhibit policymakers from going after workers and wages when the scourge of inflation rears its ugly head. Nice.

- Mark

"BUBBLES" GREENSPAN ... DISEASE OR SCAPEGOAT?

Analysts have suggested that former Chair of the Federal Reserve Alan Greenspan had a heavy hand in keeping consumer demand high (with low interest rates), and that he created the financial conditions for the bubble economy and economic mess we now confront. Is Alan Greenspan the root of our economic troubles, or simply a convenient scapegoat?

GREENSPAN AS SCAPEGOAT?
Let’s start with this. Alan Greenspan came to the Fed during the Reagan-Bush years. Deregulation of America’s economy and mega-mergers were already under way. From the decision to unleash the Savings & Loans, to deregulation, and industry friendly legislation, the argument can be made that Alan Greenspan was merely “the good bartender” at the corner Deregulation Bar.

Then President Clinton came to office. Clinton courted Wall Street and presided over the dismantling of the Depression Era Glass-Steagall Act, which had kept the same financial institution from offering loans, insurance, and broker-investment services. So, after passing the Financial Modernization Act we shouldn’t act surprised that lenders ended up in the messy sub-prime mess. They could pawn off their new loans (which generated hefty fees and fat profits) to underwriters in their own building. Throw in the flood of deficit dollars ($3.5 trillion) that were pushed into the economy by record U.S. spending under Bush II, and the case can be made that Mr. Greenspan was merely pouring the drinks, and was the not the real “host” of America’s economic binge.

GREENSPAN AS DISEASE?
Here’s another way to look at the situation. Greenspan let things get out of control by not raising the cost of money (by raising interest rates) and cutting off the American economy when it mattered. Indeed, Greenspan as Bartender played to the deregulation of the bars by firing the bouncers, ignoring sensible drinking limits, closing only when no one was left, and letting the drunks leave with the car keys. If we accept this logic we have to accept that economies – like bars - need rules, enforced discipline, and limits. Greenspan ignored this logic.

We need to keep in mind that rules are designed to help discipline those who can’t control basic human instincts, like greed and avarice. The Reagan-Bush–Bush years got out of hand, fattened the wallets of the already wealthy, and added $6.7 trillion to our national debt. The Republican strategy of deregulation and cutting taxes to make the rich richer is – as economist Nouriel Roubini no doubt agrees – a travesty of economic logic. It’s here that Robert Reich helps us understand Alan Greenspan's role in today's economic situation.

GREENSPAN AS DISEASED SCAPEGOAT?
In a review of Alan Greenspan’s book Reich tells us how Greenspan supported the deficit driven binge years of President Bush in 2001. By backing Bush’s tax cuts for the rich Greenspan ignored the long-term effects of not paying down our national debt and not investing in our infrastructure. Worse, by giving approval to Bush’s tax cuts in his testimony to Congress Greenspan gave his stamp of approval to Bush’s larger economic policies. In what will surely go down as one of history’s greatest displays of ego and partisan selfishness, Greenspan essentially told America “go ahead and spend your projected surpluses … you don’t need them anyways because I’m saying everything will be alright.”

By giving President Bush the Green Light to transfer America’s hard earned savings (the surplus) to the rich Greenspan’s congressional testimony did something else. It insured that whoever followed Bush in the White House would be saddled with so much debt they would not be able to pursue viable public programs because just as Clinton had to pay back Reagan’s borrowing binge debt (which Greenspan noted), so it would be with Bush’s successor. Massive budget deficits by republican administrations insures that subsequent (i.e. Democratic) administrations would have their hands tied which, as Robert Reich tells us, is “almost exactly” as the Republicans “planned it.”

Greenspan had to understand this. He's not a dumb man. Nor is he as objective or apolitical as he would like us to believe. For buying into the Republican tax cut nonsense, and for putting partisan ideology over national interests, it is both understandable and deserved that Greenspan shoulder a good portion of the blame for the current economic mess.

At the end of the day, making Greenspan out to be either the “disease” or the appropriate “scapegoat” is not entirely appropriate – he’s both.

- Mark

OUR TWILIGHT ZONE MOMENT

The Senate has voted to expand the spying powers of the fear mongering Bush administration. Worse, claiming that the telecom industry was simply helping “in times of national security emergencies” the Bush administration got the Senate to approve retroactive immunity for the telecom industry’s spying. But here’s our Twilight Zone Moment: The Bush administration asked the telecom industry to help them spy on Americans … back in February 2001.

Do the math. That’s seven months before 9/11. Can anyone explain to me, What was the emergency in February of 2001?

- Mark

HEALTH CARE COSTS IN AMERICA

Drawing from a New England Journal of Medicine article Brad De Long cuts through the jargon to help explain what makes our out of control health care costs so, well, out of control ...

Profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and less appreciated syndrome is the set of perverse incentives produced by commercial dominance of the system... medicine... does not lend itself to market discipline. Why not?

The private insurance system's main techniques for holding down costs are practicing risk selection, limiting the services covered, constraining payments to providers, and shifting costs to patients. But given the system's fragmentation and perverse incentives, much cost-effective care is squeezed out... unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system. The result is a blend of overtreatment and undertreatment ...

There's probably an independent, and long, post for every category listed here. The end result is that what we have is not working. I'll be returning to this topic soon.

- Mark

THIS SAYS IT ALL ...

President Bush, in an interview with FOX News:

“... there’s just a certain freedom of movement that you don’t have and so I tell people, yeah, there’s a bubble but life’s pretty comfortable inside the bubble.”

Add your own punchline.

- Mark

THE COMING BUSH DEBACALYPSE?

In a sign that President Bush's seven year Debacalypse may be accelerating the decline of the United States at a faster rate than previously imagined, New York stores are now accepting Euros. In fact, one NY store’s sign reads “Euro’s Only.” Bush apologists will no doubt argue accepting Euros is a sign of that “market forces are at work.” This argument works only if your analytical compass accepts continued record deficits as a good thing – or if you’re partial to sticking your head in the sand, and imagining an Orwellian World where living beyond your means is a sign of greatness.

But there’s another way to look at this. And we might as well as be creative while we’re at it.

Consider how the collapse of the dollar is part of larger problems that have emerged under George Bush’s watch. For our evangelical friends out there – who look forward to the Apocalypse – we may be witnessing the emergence the last of President Bush’s Four Horseman of Ineptitude. Specifically, we have seen:

(1) Bush's stubborn WHITE HORSE OF CONQUEST, which abuses power, blindly persecutes, and disrespects the rule of law at home & abroad.
(2) Bush's impotent RED HORSE OF WAR, riding wild in Iraq and Iran.
(3) Bush's ideological BLACK HORSE OF PESTILENCE, which is represented by economic breakdown and corruption (war profiteering, the subprime mess, record debt, the dollar’s collapse, etc.).

All that’s left is for the PALE HORSE OF DEATH to emerge. But wait … If Bush’s empty-headed comments on WWIII are paired with his saber rattling with Iran we won’t have long to wait. Bush’s Debacalypse will come full circle.

Is it November yet?

- Mark

A CONTINENT OF SEA GARBAGE

Via Dailykos: An underwater continent of garbage ...

A "plastic soup" of waste floating in the Pacific Ocean is growing at an alarming rate and now covers an area twice the size of the continental United States, scientists have said.

The vast expanse of debris – in effect the world's largest rubbish dump – is held in place by swirling underwater currents. This drifting "soup" stretches from about 500 nautical miles off the Californian coast, across the northern Pacific, past Hawaii and almost as far as Japan.

Maybe it's just me, but if this gains media traction I'm sure some industry will fund some kind of "Garbage Institute" to create doubt and controversy about the science behind Global Garbage.

- Mark

FOX DEBATE OFFER ACCEPTED BY CLINTON

Wow, my vote for Obama is already looking good. Hilary Clinton's team just accepted an offer from FOX News to participate in a presidential debate.

I don't know how many times this needs to be said but FOX News is not an impartial news outlet, and shouldn’t be granted a forum like this, let alone by Hilary Clinton.

Let’s review …

1. LEGAL LIES: FOX News went to court and secured the legal right to distort the news.

2. MANIPULATING THE NEWS CYCLE: Rupert Murdoch admits FOX News tried to manipulate the news on Iraq.

3. FOX BILE-SPEWING FEST OVER DEMOCRATS: This FOX News piece on the economy turned a into Wingnut bile-fest over Democratic candidates.

4. IGNORE FACTS: During their bile-fest, FOX deliberately ignored Wall Street’s record under Democratic administrations.

5. SMOKE & MIRRORS: FOX News incompetence, bias and/or deliberate attempts to obfuscate the truth, all in one place. Check out these headlines and rolling subplots …

* Libby Found “Not Guilty”
* “Civil War in Iraq: Made up by the Media?”
* “Reid: Did Dems Ignore Foley e-mails to Preserve Seats?”

6. CHRIS WALLACE LIES SCRUBBED: John Kerry catches Chris Wallace in a lie, which FOX transcribers then scrub/edit from the transcripts.

7. IGNORE FACTS, II: Paul Begala explains how FOX News continued to run with a story even after the main figure (Paul Begala) informs them there’s nothing to the story.

There’s more, but I’ve got some projects to work on.

It should be clear, however, that FOX News lies and distorts in ways that support the republican agenda. Do an interview if you must, but Hilary Clinton should not validate FOX News with a presidential debate. I hope Obama holds out.

- Mark

WHY I VOTED OBAMA TODAY

Since my guy - John Edwards - is out of the race I decided to vote for Barack Obama. And while I think Hilary would make an excellent president, and I will vote for her should she win the nomination, there was one issue that swayed my vote: The Senate's vote on the resolution to go to war on Iraq. Hilary voted to support war. Barack Obama stood up to Bush's lies and fear mongering when it mattered.

After 7 years of poor decision-making and presidential ineptitude judgment matters.

- Mark

P.S. It was suggested by my co-host, Candi Easter, that some may be confused because Obama was not yet a U.S. Senator when the War Resolution came up. I should have been clearer ... Barack Obama (1) was a candidate for U.S. Senate between 2002 and 2004 and (2) was a vocal opponent of the war, warning of “an occupation of undetermined length, with undetermined costs, and undetermined consequences.”

Candidate Obama took as much heat for his position as did any sitting U.S. Senator who voted against the resolution. In fact, he probably took a greater risk standing up to Bush's pack of lies because Bush's popular support still hovered between 65-70%. Again, judgment matters.

BUSH'S POLICIES: VIOLATING ADAM SMITH'S 'LAWS OF JUSTICE'?

When I wrote about our “sting economy” I was referring to the tendency of unregulated market players trying to game the system. In the process they undermine the integrity of our market system by pushing bad products for the wrong reasons. Adam Smith would have been the first to argue that these dynamics violated the “laws of justice” he believed were necessary for markets to function effectively – and for society’s benefit.

What's been the result of poor planning and unrestrained markets? Economic recession, record debt, and a stimulus package that does nothing to promote sustained growth. This provides a bleak snapshot of where we’re heading. But a better gauge might be this, The Bank-Implode-O-Meter.

Here we find lots of interesting information– like banks writing down over $100 billion from their books, Canadian banks threatening to ignore the Bank of Canada’s rate cuts, and news on failing financial institutions throughout North America. If this doesn’t create doubts about the economy and the Bush administration’s ability to manage these challenges, especially with its deficit driven “Budget Clown Show,” then The Mortgage Lender-Implode-O-Meter should help. Among many interesting bits of information, it lists 225 lending institutions that have gone under since 2006. Relatedly – and I’m not sure how this shakes out just yet – experienced investors are now buying up collateralized debt obligations (CDOs) at 15-30 cents on the dollar.

With billion dollar write-downs, recession, record debt, sagging consumer confidence, banks ignoring rate cuts, and the president’s budget referred to as a “clown show” there’s little doubt that something is amiss in Kansas. President Bush has been able to escape political accountability for geo-strategic and military incompetence. The question now is whether he will be able to leave town - and the economic mess on the table - without suffering the consequences of his "tax cuts work ... let's deregulate" babble.

If history is any guide, my bet is that he will. Unfortunately, we may not. In future posts I am going to discuss this with reference to Adam Smith's "laws of justice."

- Mark

WHY WE LISTEN TO THE EXPERTS

I know we’ve seen this before, but President Bush is keeping the troop deployment discussion alive by issuing signing statements that promise to keep us in Iraq long after he’s gone. This 2003 RAND report makes it clear that George Bush should have listened to Gen. Shinsenski instead of following his gut.

Peaceful populations require force ratios of somewhere between one and four police officers per thousand residents. The United States as a whole has about 2.3 sworn police officers per thousand residents.


For cases drastic enough to warrant outside intervention, the required force ratio is much higher. Although numbers alone do not constitute a security strategy, successful strategies for population security and control have required force ratios either as large as or larger than 20 security personnel (troops and police combined) per thousand inhabitants …


… The population of Iraq today is nearly 25 million. That population would require 500,000 foreign troops on the ground to meet a standard of 20 troops per thousand residents. This number is more than three times the number of foreign troops now deployed to Iraq (see figure).

So the experts said we would need about 20 troops per thousand Iraqis during an occupation but we have about 6.5 per thousand. Great. The RAND report also comments on the duration of troop deployments (we’re doing it all wrong), Bosnia and Kosovo operations (we got it right), force rotation requirements for sustainable stabilization (we’re not even close), etc.

No wonder then JCS Shinsenski was dumped. He was telling our Errant Knight of Incompetence “the facts” instead of what he wanted to hear.

- Mark

BUSH'S 'BUDGET CLOWN SHOW'

President Bush’s proposed budget is already getting rave reviews.

"There's a lot of games, smoke, mirrors, incomplete numbers, basically there's not much realism … They're playing the usual games ..."

And that was the top Republican on the Budget Committee, Senator Judd Gregg. Check out what UC Berkeley economist Brad De Long has to say about Bush’s “Budget Clown Show.”

I'll return to this topic tomorrow.

- Mark

BUSH SETS A NEW STANDARD ... IN 'FEAR MONGERING'

Richard A. Clarke, former head of counterterrorism at the National Security Council, and the author of "Against All Enemies: Inside America's War on Terror," is pretty blunt in his op-ed assessment of President Bush.

You can read all the lowlights in his article, "Bush legacy: Setting a standard in fear-mongering"

... While he has failed in spreading democracy, stemming global terrorism, and leaving the country better off than when he took power, he did achieve one thing: successfully perpetuating fear for political gain.

- Mark

ANTI-NAFTA PROTESTS IN MEXICO ... U.S. Anti-Immigration Protests Soon to Follow

By way of Dailykos, we find out Mexico’s farmers are protesting the “free-market” arrangements of the North American Free Trade Agreement (NAFTA). Specifically, they’re protesting the industry supporting subsidies and protections NAFTA continues to afford U.S. ag producers. Without the same type of subsidies and protections, Mexico's farmers say they can't compete.

This is unfortunate because NAFTA was supposed to help increase Mexico’s development prospects and reduce immigration from Mexico. It has yet to do either. I wouldn’t worry about it to much, though. It only means that Mexico’s "inefficient" farmers go out of business. But here's the catch: Without any training programs or jobs in Mexico, you can bet the farm that immigration from Mexico will continue to increase as a result of this heavily subsidized "free-market" agreement.

Who could have foreseen these events? Oh, yeah, me ... fourteen years ago.

- Mark

P.S. I'll post-link an English language op-ed I wrote on this later.

NUREMBERG MUKASEY?

So we can’t get Attorney General Mukasey to accept that certain actitivites may be unlawful. When discussing what constitutes torture AG Mukasey makes the following three arguments.

• He can’t say what constitutes torture because what we’re talking about is what “shocks the conscience” – and besides certain topics are secret.
• Certain acts may be permissible if the “relative benefit that might be gained” from the technique outweigh the act.
• If authority – or “certification” – was given the acts may not be illegal.

Great. Laws are (1) now a matter of judgment, (2) applicable depending on the information that might be gained, and (3) can be made legal, depending on who gave the order.

This seems pretty arbitrary to me. So why have any laws? Slate’s Dalhia Lithwick puts it more concretely: If the law has any purpose “it is to punish past bad acts and to alert people as to what types of conduct will be punished in the future ..." She adds "... the attorney general has just obliterated that purpose.” At least Senator Sheldon Whitehouse (D-R.I.) had the good sense to tell AG Michael Mukasey that the “I had authorization and therefore I’m immune from prosecution” argument is reminiscent of the Nuremberg Defense.

Whew ... I’m relieved. I thought we were collapsing into the era of Rome’s Caligula under President Bush. It's good to know a U.S. Senator thinks it’s just the Nazis we're emulating. I feel better now.

- Mark