RENT A WHITE GUY ... WALL STREET STYLE

Oh, how the tables have turned. Check out this article on Chinese business practices in The Atlantic. We all know that Wall Street has turned itself into a empty but glitzy casino that no longer produces anything. But renting white guys in ties as show pieces in China is a little like NASCAR renting hot women. They're bit players in a circus sideshow.

The article is actually kind of funny ... until you realize that using white guys as props is really an indicator of what's happening to the American Empire. Unfortunately the new face of America's Empire is increasingly dominated by sideshow circus freaks (in a tie, of course) who aren't interest in creating anything of value. And that includes Wall Street.

- Mark

INFLATION MONSTER POISED TO STRIKE?

Yesterday I spoke in front of the Bakersfield South Rotary about my book and recent developments in the market. I used an article I wrote for the Bakersfield Californian (and posted here) as a way of introducing why we should be skeptical of all the "good news" coming out of the markets. In a few words, I argued that we have far too many costly supports, guarantees, and credits out there for anyone to be speaking about "the market" making a comeback.

What usually makes a presentation is the Q & A afterwards. I have to say that the questions I received from Bakersfield South Rotary were top notch. They took me across a broad range of topics that made it abundantly clear that this group understands how deep and complex our challenges are in the future. I was particularly struck by questions that made it clear no one is happy with the status quo and that inflation is on everyone's mind.


I bring this up because I ran across this post from nakedcapitalism.com, one of the better sites to follow if you want consistently good economic analysis. In a few words, the article sustains what I said yesterday and makes it clear that inflationary fears could become "hyper" inflation if we don't do something about the guarantees and credits that the Federal Reserve has extended to our financial institutions (about $12 trillion).

Without getting too technical (I hope I didn't) I said that inflation would come in the form of 1970s-like inflation (8-12%), but that we ran the risk of "hyper" inflation if we didn't do something about our commitments and guarantees to our financial institutions AND if the rest of the world (China, OPEC nations, the Europeans) decided to stop supporting the dollar.

Read the article for a deeper review of these dynamics. While the article might be a bit technical in some places it really is worth read. If you don't make it through, don't worry. I'll break it down on this Saturday's program.

- Mark

UPDATE: This probably doesn't mean much in the short-term, but long-term this can't be good if we continue on our current path.

“There can be no successful currency system, and particularly a global system, if the financial instruments that are used are denominated in only one currency ... Today, this is the case and the currency is the dollar.”

- Russia’s president, Dmitri A. Medvedev, at today's BRIC meeting (a meeting of the four largest emerging market economies - Brazil, Russia, India, and China - who met to discuss ways to reduce their reliance on the United States).

CHINA, U.S. MILITARISM AND AMERICA'S FUTURE

Robert Scheer nails it when it comes to understanding how out of touch our increasingly militarized culture has become. Looking at the growing relationship between China and Taiwan, he sees a new "consumer revolution" fostering civility between these two Chinese speaking nations.

You can't trust the Chinese. I don't care if you're talking about those communists on the mainland or the other guys on Taiwan — they just won't follow the war-games script that our weapons hawks had counted on ... No longer pretending to be enemies, where they engaged in angry rhetoric while doing much business together on the side, a public love affair has broken out across the Straits of Formosa. On Friday, scheduled direct flights began between the mainland and its breakaway island for the first time in 60 years, and the invasion of tourists clicking their cameras was on.

After citing growing investments and academic exchanges between the two nations, Scheer points out that the leader of the "old nationalist Kuomintang Party, which won the recent Taiwan election, quickly went to the mainland to pledge the dawn of a new era."

The political descendants of Chairman Mao and Chiang Kai-shek holding hands. Can you imagine?

The benefits of these developments are obvious. That is, except to American militarists, who believe pretend patriotism and more weapons make the nation ... and that expanded military budgets make the politician.

That peace has broken out is a nightmare scenario for America's military hawks in desperate need of an excuse for soaking up more than half of the U.S. government's discretionary budget. There was real panic when Mikhail Gorbachev formally ended the Cold War and George H.W. Bush announced a 30 percent cut in military spending in 1992. Then came the 9-11 terrorist attacks and the wildest peacetime spending spree in history. No one in power noticed that the expensive weapons were designed to defeat an enemy that no longer existed.

The result of 9/11 and the rise of American Militarism is not simply tied to America spending money like drunken sailors, or to the fact that the Bush administration wants to bury America's Constitution. Rather, as we strain to pay for weapons we can't afford, we are now faced with very real threats to America's economic well-being and our standard of living.

Still, we're told we need to break the bank every time the militarists soil themselves, which seems to be every time they see a shadow.

And when Iran or the bearded guys hiding out in Pakastani caves don't work it's all too easy to break out the China Card.

Fomenting fear of China is essential to making the case for the whole range of high-tech war toys that no longer have a legitimate military purpose. But it's a sick joke. We are paying the Chinese the interest on the money we borrow from them to build very expensive weapons to counter weapons the Chinese have no intention of building.

But we still need to prepare, no doubt, because of what the Chinese might do, in ten years ... or so. From Scheer's column:

The latest word from the Pentagon is that "the intelligence community estimates China will take until the end of this decade or later to produce a modern force capable of defeating a moderate-size adversary."

Let's see, if we're already spending more than ten times what the Chinese are spending on their military, in ten years we should be 100 times more powerful than China - like we are today - right? I feel muscular already.

At that time, I'm sure, we can tell the Chinese we aren't going to pay them what we owe them (hey, if George W. Bush can threaten future Social Security recipients with non-payment, we can certainly do it to the Chinese). That way they won't be able to afford the weapons we think they're thinking of building. Under this scenario, we remain at the top of the world (kind of) ... even deeper in debt, no longer masters of our own destiny.

Higher inflation, increased taxes, and dependence on the financial kindness of others may be the price we have to pay, but at least we'll have the most expensive military money can buy - even if we can't find and kill a sick man in a Pakastani cave with it.

George Washington and Dwight Eisenhower would be proud.

- Mark

P.S. At the center of the top photo is Hu Jintao, general secretary of China's Communist Party. He's shaking hands with the Chairman of Taiwan's Kuomintang Party, Lien Chan, April 28, 2007, in Beijing, China. Lien Chan was leading Taiwanese delegation to the the third Cross-Taiwan Strait Economic, Trade and Cultural Forum since 2005.