Obama’s Speech

Read the full text here.

My immediate thoughts on the twitter feed (check the right hand column).

As much as I dig the guy, and I do, the “mush-headed” (as Will Wilkinson calls them) Obamaphiles are both creepy and annoying.  More than ever.  He gave a very good speech I thought.  Not that surprising he’s got a talent for it.  I thought he struck a decent balance, mostly focusing on the seriousness of the challenges and the difficulties ahead.  Not going all-soaring.  No matter, too many will just be entranced by the image and the giddiness and the collective vibes, etc.  The words are what matter.  What matters more actually are the actions the words he says point to.

But the key to me is the emphasis on hard work, responsibility, old fashioned values like honesty, thrift, parsimony, etc.  Not the Obama will come to save us, now I love America kinda junk.  He’s a man and will be undoubtedly a very imperfect President.

Obama will the president of another major turning point in American history.  He is while not literally/chronologically, in actual mindset, the first president of the 21st century.  Bush was on a 20th century bender in the 21st.  The country now awakes to the morning after (a new kind of morning in America, this one mostly hung over and dazed).  Obama is a liberal and a new 21st century liberalism (for better and undoubtedly for worse) is now upon us.  [Well assuming he can rangle the Democratic fools in Congress to grow up—paging House and Senate Majority Leader.  Not to mention the resident idiot hacks like Boehner and McConnell].  I wish it didn’t involve (as it will) growth of the state, but since the Republicans had control for 8 years and couldn’t meet the growing challenges via a non-state, organic, civil society process, than they have no one to blame but themselves when it is inevitable that the state fills the void.  I won’t shed a crocodile tear for them truth be told, no matter how much I’m not some reflexively pro-left sorta dude (which I’m not).  The problems of infrastructure–financial, energetic, material–have to be met.  Something has to be done with health care, energy policy, a new rule set for global capitalism, a foreign policy reboot (which I’m not sure he’s going to go as far as I wish he would).  I wish those had been in the last eight years when they could have been done without as much mass state intervention, and I would have prefered less liberal forms of solutions than the ones Obama will pass, but Bush’s AWOL presidency on that front really hurt.  And again, the conservatives had their chance to meet the days challenges and they failed them.  It is then inevitable that the state will grow as a result. They have no one to blame but themselves.

And The New New Majority as it were, when the Republicans eventually do come back to (some/partial) power, as they undoubtedly will, they will only be able to modulate what this liberal wave has set.  As has been the case in American history.   The other form of conservatism, the conservatism of skeptical mindset (but not “believed skepticism”), the conservatism that is best understood as a personal philosophy, will remain and be of enduring value.

J. Enriquez: Understanding The Economic Crisis

Everyone should must watch this short 30 minute clip on the Financial Crisis and the necessity for absolutely radical change.  The talk is a PopTech gtalk given by Juan Enriquez, whose spent most of his life studying similar crises around the world (particularly in Latin America).

His 5 Stages of Meltdown are:

1. Denial (Greenspan, W. Bush)
2. Borrow, Spend, Borrow More (Stimulus Packages)
3. Go Broke
4. Brutal Readjustment
5. Rebuild

The US and much of the world is at step 2. Question: When the whole industrialized world goes broke simultaneously who foots the bill? Who does the restructuring? Where does that money come from?

Without a massive change–i.e. massive cuts in defense and entitlement spending, caps in health care spending, raised taxes–the US appears headed to become Mexico (or perhaps Brazil) in about t-minus 6-10 years.  If the dollar loses its value (with 70% of debt owned by foreign entities) then there will be a global run on shorting the dollar and that’s all she wrote folks.

The Democrats are increasingly beholden to Keynesian economics, which assumes the problem is on the demand side.  Whatever is left of the Republican party thinks its Fannie Mae and some temporary credit crisis and a nice chance to apply some shock-therapy disaster capitalism (say to the Auto Unions).  I’m less than a true believer in the Obama stimulus (or the Krugman retort that it is too tax cut heavy and not enough infrastructure buildup).  Both are just variations on how best to do the Keynesian thing.  [Friedman monetary policy has failed and I think Keynesian will as well].

The right-after-the-immediacy of the credit/demand problem-is-over horizon is a solvency crisis.  It is a debt crisis–a crisis of the fundamental way of doing economic business.  That we have to be more like our grandparents (my grandparents I should say), who actually built things and saved money.  No get rich quick schemes.  As Enriquez says the stimulus at best is a torniquet, but with all torniquets if it is applied beyond the moment of aboslute need, then it will cut off the circulation, causing amputation or worse death. I’m not lauding or romaniticizing some austerity program and the good old days when everyone helped one another.  This is going to brutal.  It’s surgery–invasive, multi-organ, painful surgery–in Enriquez’s words.

It’s that or enjoying living in a post-imperial decline state.

Another related clip here from the film IOUSA

For an alternative view, see Krugman here.

Patrick Deneen on (Purposefully) Ignorant Democracy

Patrick Deneen excerpts a decent-sized section of a recently published article of his entitled Democracy Wrongly Understood. It is so brilliant I’m tempted to just cut and paste the whole thing. Read it all. Link here.

Deneen’s basic point is that the US Federalist system (as in Federal power not he states rights’ understanding of Federalism) is of course a republic not a democracy. Madison, the main architect of The Constitution, feared the agglomeration of factionalism within the country. He argued for a powerful federal government that would be filled by disinterested parties who would rightly guide the nation. In that regard, that a whole mess of Americans can’t find the US on a map (“our adults isn’t learning” apparently) shouldn’t surprise us as the US republic is predicated on divide and dissipate dissent–it is built to create a fairly uneducated populace in other words.

For all of the differences between the Progressives and the Framers – and the differences are manifold, as many scholars eagerly point out (e.g., Pestritto, 2005) – there nevertheless exists this striking continuity: both the Founding and the Progressive Eras are dominated by thinkers who praise the rule of the electorate even as they seek to promote systemic governmental features that will minimize electoral influence in the name of good policy outcomes.

As Sanford Levinson has argued for a long time the US constitution is not democratic.

Deneen again:

What requires more reflection are the deeper presuppositions of what constitutes “good policy” [of the sort consistently called upon by social scientists who study civic competence]. Good policy for the Founders and Progressives alike were policies that promoted the economic and political strength of the American republic and the attendant expansion of power in its private and public forms. For all their differences, what is strikingly similar about the thinkers of the Founding era and leading thinkers of the Progressive era were similar efforts to increase the “orbit” or scope of the national government concomitant with increases in the scale of the American economic order.

These patterns of similarity between The Progressives and The Founders (as well as Cold War Liberals and Conservatives) helps undercut arguments that the liberal (or progressive) are entirely foreign constructs. Particularly once Lincoln’s understanding of the republic/constitutional order becomes normative–over say a Calhoun’s.

I have to do some further thinking on this, but one thought that occurs to me is that a serious bug in Madison’s design was the assumption that there were ever dis-interested individuals. Charles Beard I think put that argument to bed in US history. The “corrosive political economics” of our age maybe attributable to this bug. The republican order does play off the intrinsic factionalism at the local level but among other things, with the failure of the Legislative Branch to be anything other than an attempt to get into The Executive these days and the politicization (on both sides liberal and conservative) of SCOTUS, we have a real problem. No one exists to check the factionalism at the federal level.

I think Deneen’s contribution is that (if I’m riffing correctly here) that this is not some European transplant from the left in the 20th century (a la Jonah Goldberg) but is there (at least in germinal form) from the get go.

Deneen’s analysis dovetails nicely with the book I’m currently reading Bounding Power: republican Security Theory from the Polis to the Global Village by Daniel Deudney. I’ve mentioned the book before, and I plan to do so more posts just on it, but a core argument of the text is that republican (little ‘r’) security theory goes through a series of emergent stages of development which are intertwined with material/technological contexts (i.e. it wasn’t just Marx would came up with this insight).

republics exist, for Deudney, between or perhaps bypassing the extremes of anarchy and hierarchy. [Hierarchy understood as domination not natural hierarchies, e.g. physiosphere to biosphere to noosphere].

The early republics–e.g. Sparta–were martial because they were fragile and vulnerable to attack. They either became too successful in war in which case they became imperial–see the shift of Greece from the Persian War to Alexander the Great’s Conquests or the evolution of the Roman republic to the Roman Empire–or they were unsuccessful and destroyed.

Madison feared democracy and (as Deneen points out) saw them as small scale state-level republics. See the failure of The Articles of Confederation. The creation of a federal republic which pushed up a complexified level of the “sphere of sovereignty” was a major achievement.

Deneen in the rest of his article argues for an alternate, localized, Aristotelian, more communitarian type notion of citizenship. That has its place to be sure I think, so long as we recall that (following Deudney’s insight) that frame was connected in part with technological-material constructs. We do not live in the plow and horse (or human chattel slavery) age. [Well sadly many do, but not in the contexts generally of people reading this blog]. In this technology age, any such micro-communities, need to be linked to each other through the internet, so the local and the global are not really particularly separate. In that sense, I wonder what education for republican order in a global age might look like? Deudney makes an argument for republican security theory applied to world setting (not a world government mind you) but I wonder what that would entail for those who are not part of that power holding class? De facto Deneenism? I need to think more on that one.

Skypecast: Foreign Policy into 2009 (Audio Content)

Scott and I discuss economics, the global political frame, and the future into 2009.  We begin by discussing a recent fairly grim post of mine (Happy New Year!!!) and then discuss potential creative ways out of the morass.

[Click the links below, pts1 & 2 for the audio.]

foreign-policy
foreign-policy2

Links:

Thomas Barnett post
My apocalyptic post
James Poulos’ Uncrackables
John Robbforeign-policy1

Scott’s post/embedding of the audio (if you have trouble on mine)

Tom Barnett’s New Book

Barnett’s Trilogy is now complete.  The link here provides the chapter headings for his new book (due out in Feb ’09) entitled Great Powers: America and the World After Bush. This is going to be his most ambitious work to date from the looks of it.  If one is going to have a grand strategy, this is the one it seems to me.  As I said yesterday, I’m increasingly questioning the place or I guess the viability of any grand strategy.  So it’s not that I think Barnett is wrong within the parameters of a grand strategy based on the frame of globalization, global integration, and nation-states, in fact just the opposite.  From within those parameters (social, strategic assumptions) I think he is unsurpassed.  It’s that I question those parameters themselves.

I wonder if there was a time for this strategy,  that being the Bush years.  I guess part of me (not all) questions if in the wake of the wreckage to come though whether the playing field, even the game itself will have so changed that any recommendations based on the logic of a previous game/structural rule patterning, however brilliant (and trust his is nothing if not brilliant) will be simply no longer viable.  Not wrong but simply not on the radar any longer.  Outmoded–or maybe out-timed?.

I’m not saying I’ve gone whole hog in the other direction and given up on something the vision outlined in this book.  i.e. I plan on reading the thing and if I’m wrong about the shape of things to come, then his strategy returns to de facto primary status in my book.  If not, and things do radically shift, maybe it could be re-formulated, re-formatted, elements of it metabolized and re-directed to a different overall theory/paradigm.  Who knows.

Update IThis post from Barnettt today is worth the read.  He makes the strongest case possible that the current crisis demands the kind of strategy he lays out. The crux of which relies on moving China from selling stuff to the Old Core (in his terms, i.e. US, Canada, Europe).  China can not become an overnight neo-US world consumer (nor would I want them to be even if they could which they can’t).  So there is clear agreement across the board that the way forward is not to try to revive the fake US consumer economy of the last 30 years.  Rather it’s a strategic partnership predicated on (in Barnett’s terms) a race to the bottom.  That’s alot riding on China.  Also alot riding on The so-called Beijing Consensus, mangaerial capitalism, neo-Keynesianism, Bad Samaritanism, whatever you want to call it.

Barnett links to this article in the Asian Times for background on this idea which states:

The goals of the partnership should be to:

  • Support China’s internal development by re-orienting export flows towards China and other emerging economies from the United States and other industrial countries.
  • Transfer technologies and other expertise to the emerging economies.
  • Make the emerging economies partners in the recovery of American asset prices.
  • Hang on to your hats, it’s gonna be a wild ride. There is no predicting (seems to me) what comes out on the other side.

    Update on Yesterday’s Apocalyptic Musings–More Hopeful

    I meant to do yesterday’s post in two parts but ran out of time last night.  So it came off probably excessively dark (as the comments thread points out).  So here is a potential remedy via John Robb:

    It’s the same with the current crisis. We’re stuck and can’t see a way through the crisis given our conditioned responses. The crisis is way, way bigger than we are. So, it’s little wonder that we are fearful. Of course, if you break down the crisis, the entire situation becomes manageable. Fix what you can control. The local is the first place to start. Eliminate dependencies. Grow networks. Make the local productive.

    Published in: on December 16, 2008 at 11:27 am  Leave a Comment  
    Tags:

    Some Apocalyptic Thoughts for Monday Afternoon

    Warning:  This is some very disturbing analysis.  I hope I’m 100% wrong on this one.  I’ve also thought the scenario I outline below was possible for 2009 but through the end of October/early November, I thought it still somewhat remote.  I’m less confident and increasingly pesimisstic about the potential for this scenario to be very real, very much in play (more and more likely by the day it seems as of now with no wise leadership or counter-movements to help block the momentum).  So be warned.  I’m not in the business of fear-peddling or fear-hyping, but these are dark thoughts.  There are not the only ones within my brain, but I have been appalled (even fairly cynical me) by the responses across the board to this crisis and the sense that there is no Wizard behind the curtain.

    I’m increasingly growing very disturbed by the way global events are proceeding.  A chain of potential explosions across the grid of the globe looks frighteningly more plausible by the day.  Meanwhile the US media is caught in wonderful tales of some pathetic Illinois Governor and a dude launching his foot wear. Here in Canada it’s about the potential of a coalition government.

    All of which still assume a top-down model of power, a kind of view of the stability of large scale social organization that may all be swept away.  Reading the newspapers and frankly much of the blogosphere is becoming an increasingly useless exercise for me.  Particularly when it comes to political discussion:  left, right, libertarian, progressive, blah blah.  All of those discussions are assuming the continued existence in some form or other or our social-technological cultural foundations.

    To me its increasingly as if reading the news in the ancient ziggurat/city-state culture a few months before Alexander the Great came conquering across Eurasian and installed the Hellenistic world and swept away the decaying, crumbling previous world era.  Like I said some apocalyptic thoughts.

    The economic story would go like this:  the American consumer is dead and has been flogged to the breaking point of exhaustion.  Who then is going to buy all those Asian products?  Who can they sell their wares to?  The Asian economies contract leading them to stop buying the commodities across the Global South (esp. Latin America and Africa) that have led to that bubble (see the mass decrease in the price of oil recently).  Huge deflationary movements across the global simultaneously.  Much more rapidly and the fragility (i.e. non-redundancy) of the global platform system bleeds out.

    As Niall Ferguson in his epic The War of the World, the great catacylsm and spasm of violence across the globe emanating from Europe during the 20th century (First War, Second War, Cold War) consisted of the inter-locking reality of the three “E”s:  empire, economics, and ethnicity.  Empire being the death of imperial systems.  See the decline of the US.  Also with all the talk of the coming Asian Century (rise of India/China), this could all be swept away by the economic meltdown.  The Asian Century that wasn’t in other words.  Still-born Asian Century.  The vacuum created by the implosion of economic and imperial systems, is filled by ethnic hatreds that flare up to the consternation and shock of many who assume a cosmopolitan order of peace and security (all fine when the economy and governance is roughly holding up).

    The most likely early hot spots of ethnic hatred is the band of the Middle East (Lebanon, Iraq, Kurdistan, Iran, Syria???, through obviously Afghanistan, Pakistan, and India).  Other increased zones of violence would be Gap-status countires in the Western Hempishere (on smaller scale but still bloody).  Revived narco-fueled wars across Colombia, Venezuela, Peru, Ecuador, El Salvador, southern Mexico.  Other ranges of violence: The Horn of Africa (another Somalia implosion on the horizon) as well as violence across the middle band (Chad, Sudan, Nigeria, and potential flare ups again in Congo).

    The massive de-leveraging must continue and the question is only whether the end of the fall (which has at least 9 months, probably 12 to 24 to maybe even 36-40 to go. who the hell knows at this point) will end us worse than the build up.  Exposed, exhausted, and de-legitimized.  The space of de-legitimization to be filled by ethno-nationalistic movements across the board.

    With the breakdown of nation-state systems (orange and blue in Spiral colors), comes a mass re-reddifying both in memetic coloring and potentially in real blood, merged with increased technological capacity (global platform) plus increased cognitive flexibility and complexity however merged to earlier moral/social systems. Roving bands of pirates (e.g. Somalia), terrorists (e.g. Mumbai), criminal networks (coming here already to Vancouver in preparation for the 2010 Olympics, particularly the global sex slavery/human chattel trade) counteracted by potentially increased technocratic elites holding onto whatever power they can, as civil libertiese erode due to the inability to come up with a worldwide republican security theory, class lines harden in the post-industrial societies, the social contract of the 20th century continues to break down (ask Ford, GM, Chrysler) as the Nation-State gives way to the (increainsgly predatory?) Market State.

    Ferguson forget a fourth E:  Environment.  As in environmental degradation/destruction as a potential accelerant to the fire of the other three.  Something along the lines of Diamond’s Collapse scenario.

    The idea that an infrastructure stimulus will jump start the US economy out of this bog seems increasingly detached from reality for me.  At the pace things are moving, if the wave swells become large enough, it isn’t going to matter, as it could all be swept away by the mega-forces aligning at the moment.

    Like I said, God how I hope I’m  completely wrong on this one.

    Taliban(ds)

    This excellent piece by Anand Gopal in the Asian Times on the Taliban is getting some play (rightly) in the b-sphere.

    Gopal asks who are they (The Taliban):

    The movement is a melange of nationalists, Islamists, and bandits that fall uneasily into three or four main factions. The factions themselves are made up of competing commanders with differing ideologies and strategies, who nonetheless agree on one essential goal: kicking out the foreigners.

    Gopal tells us the harrowing reality that took over Afghanistan after the initial ejection of the 90s Taliban (Afghan Taliban 1.0):

    Meanwhile, the country was being carved up by warlords and criminals. On the brand-new highway connecting Kabul to Kandahar and Herat, built with millions of Washington’s dollars, well-organized groups of bandits would regularly terrorize travelers. “[Once], 30, maybe 50 criminals, some in police uniforms, stopped our bus and shot [out] our windows,” Muhammadullah, the owner of a bus company that regularly uses the route, told me. “They searched our vehicle and stole everything from everyone.” Criminal syndicates, often with government connections, organized kidnapping sprees in urban centers like the former Taliban stronghold of Kandahar city. Often, those few who were caught would simply be released after the right palms were greased.

    In Spiral Dynamics terms, this was the regression of the country from blue–imperial mythic, 90s Taliban system–to red warlordism, gangs, and criminality.

    As a result, blue has to come back to keep the peace:

    Onto this landscape of violence and criminality rode the Taliban again, promising law and order. The exiled leadership, based in Quetta, Pakistan, began reactivating its networks of fighters who had blended into the country’s villages. They resurrected relationships with Pashtun tribes. (The insurgents, historically a predominantly Pashtun movement, still have very little influence among other Afghan minority ethnic groups like the Tajiks and Hezaras.) With funds from wealthy Arab donors and training from the Inter-Services Intelligence (ISI), the Pakistani intelligence apparatus, they were able to bring weapons and expertise into Pashtun villages.

    In one village after another, they drove out the remaining minority of government sympathizers through intimidation and assassination. Then they won over the majority with promises of security and efficiency. The guerrillas implemented a harsh version of sharia law, cutting off the hands of thieves and shooting adulterers. They were brutal, but they were also incorruptible. Justice no longer went to the highest bidder. “There’s no crime any more, unlike before,” said Abdul Halim, who lives in a district under Taliban control.

    Gopal goes on to indicate that the increasingly Pashtun nationalist Taliban are largely out of the al-Qaeda connection as they were in the 90s. There were always Taliban factions even back then, who had no time for AQ, but Mullah Omar (their leader) was close with bin Laden. That relationship may be breaking down and some elements of the Taliban, which is increasingly de-centralized and networked, are getting on with girls in schools and realize they can not go back to the 90s version of themselves.

    That’s group #1. Group two is Hekmatyar Gulbuddin and his Hiz-i-Islami group. They are insurgents against the NATO occupation, but again not necessarily tied to AQ and really only interested in power back in Afghanistan. So 2 out of 4 at this point seem open to negotiations on a future Afghanistan that will involve them along side other parties. Though Gulbuddin is implicated in an attempt on President Karzai’s life. The Afghanistan situation, as always, is murky.

    The last two groups however appear to have no such deals and have sanctuary-providing protections for al-Qaeda. This is the real conundrum as both are based in the Pakistani NWFP. Jaluludin Haqqani in North Waziristan and Beitullah Mehsud in the South.

    With Haqqani:

    Pakistan extends support to the Haqqanis on the understanding that the network will keep its holy war within Afghanistan’s borders. Such agreements are necessary because, in recent years, Pakistan’s longstanding policy of aiding Islamic militant groups has plunged the country into a devastating war within its own borders.

    Even with Mehsud however the issue seems to be anger at the Pakistani government for attempting to take over the Frontier Provinces. In the recent Pakistani elections, the fundamentalist parties lost heavily in the NWFP regions. But it is unclear if those votes have any real influence as increasingly the Paksitani Taliban under Mehsud appear dedicated to re-installing a 90s like Afghanistan Taliban ghastly asylum state in Waziristan. Mehsud’s men publicly hang tribal chiefs of the old guard who do not accept their rule. There has been some talk of creating a Sons of Iraq like scenario with a tribal rebellion against the Pakistani Taliban, but so far that has gone to naught. The Pakistani Army is built for a war with India and not for counterinsurgency in the tribal regions. The two times they have gone up there in the last few years, they have lost and been sent packing. The blowback that has come out of those operations led to the murder of Bhutto, the recent bombing in Mumbai, the attack on the Indian embassy in Kabul, as well as the attack on the Marriott in Islamabad.

    I have no idea how we deal with this issue. If the Pakistanis go in there, more blowback, they will likely break with the US completely go with China and Russia (which would love the delicious irony of profiting off Pashtun resistance to Americans in Afghanistan). If we continue the airstrikes, Pakistani sovereignty (whatever is left of it) gets further quashed, more blowback, and the civilian government which probably has about zero power currently has even less so and probably a full on military coup. If nothing is done then it festers and I can definitely see an al-Qaeda attack in the West getting launched from the new sanctuary.

    For Afghanistan to recover it requires a deal with the Talban or at least the dominant factions. Gulbuddin may not go for that. Haqqani likely the same. Mehsud no dice. With the sanctuary open, insurgencies always win over time in Afghanistan (see Alexander the Great, The British, and The Soviets).

    Afghanistan also requires a regional deal that ends the countries in the neighborhood to stop using it as a pawn to be carved up in their power play:  Iran, India, Pakistan, Russia.   Can’t see any evidence of that happening soon.

    Which means we are back to where we started–how to prevent Al-Qaeda Central from launching another attack when they have sanctuary.  If the attempt to go into the sanctuary would cause regional collapse scenarios, hollowing out areas that al-Qaeda could then flee to if need be?

    The most important reason to prevent such an attack (minus the obvious defense of innocent life) is that the US is still not ready to be resilient in the face of another attack (a la India recently or Great Britain before). The insane over-reaction that would occur, like after 9/11 but only that much worse, would be so destructive, particularly now.  Particularly when a Democrat is in the White House.  The worst attack in US history happens under a right-wing administration and they spend years blaming the left and kowtowing them into obedience.  I don’t even want to think how dastardly they would be if an attack happened when a Dem was president.  Goodbye free society and civil liberties.

    Economists Who Correctly Predicted the Crash

    Nouriel Roubini discussing the market meltdown.  I’m less sanguine than he is about Neo-Keynesian stimulus spending.  US infrastructure needs re-building so badly, but I don’t think that is what is going to slow down the recession/mini-depression.  It may halt it somewhat (maybe), but it’s too long by the time Obama gets into office and before the projects will really get going.  Paulson & Crew have not surprisingly known what the f–k to do with the monies so far given in the bailouts.  Nor the  CEOs of said firms who have their heads up their back sides.

    Even someone like Roubini or Nassim Taleb, as well as Peter Schiff & George Soros, correctly predicted the housing bubble collapse, which then exposed a much deeper bubble (a super-bubble in Soros’ terms) that was the entire solvency/credit trap that has taken over and the failure of 30 years of economic policy.  Black swans in Taleb’s language can not be predicted.  Both he and Roubini correctly predicted that said market was built on sand and would eventually collapse, but neither one of them got right precisely when it would happen (they both thought in 2003). And now after the fact, as Taleb would say, we create a story—a narrative fallacy in his words–that Bear Sterns was the presenting cause of the collapse.  But say Bear Sterns had been bailed out, maybe something else would have caused it, or rather simply exposed what was shoddy construction. Eventually a house built on shifting sands is going to fall down.  Predicting exactly when or why is not really the issue.  The issue is the poor choice of construction.

    But looking back over my blog, I noticed these comments to a post of mine from my friend Daniel O’Connor.   He wrote the following on Jan 23rd of this year.  That’s January of 2008.   That’s as the sub-prime bubble is beginning to burst, but before bailouts, market crash, the “r” word, unemployment hitting big, the credit crunch really coming to the fore.  His predictions are beyond prescient.  I’ve highlighted the relevant portions on specific points of pinpoint accuracy in his predictions and added some bracketed comments for contextualization/translation:

    The market economy is now very clearly in the midst of a deflationary-recessionary system dynamic wherein money-credit and productive output are both contracting. This is what the early stages of a depression look like in this unique new era. [ed: Credit Crunch, Global 1-2 yr Recession/Mini-Depression]. It may not come to pass as a full-blown deflationary-recession, but the basic system structure is in place and the dynamics are working in predictable ways.

    The Feds already are and will continue to do everything possible to inflate money-credit and GDP over the next several years, fighting the market system’s natural drive to reduce asset prices (primarily housing, but also stocks [Stock Market Crash in Fall 2008] and soon enough commercial real estate) and write-off the associated debt [See bailouts of AIG, Citigroup, etc. via TARP, .

    They did this with surprising effectiveness beginning in 2000, but at that time they had a balanced budget and a housing sector not yet maxed out in terms of debt and asset prices. Now they are in a desperate situation, far worse than the 2000 scenario and about all they have left in their conventional policy arsenal is to maintain massive budget deficits that are monetized by the Federal Reserve (i.e., the Fed buying new treasury securites to fund the deficits as a way to automatically create new money and thereby inflate GDP via excessive government spending). If they were to spend this extra $300B a year on domestic infrastructure and clean technology [Obama’s Fiscal Infrastructure Stimulus], rather than weapons that are destroyed in their use to destroy other people’s capital structure, then the deficits might not be nearly so bad for the economy.

    Beyond this, look to the Fed to start systematically buying Treasury securities on the open market [see Roubini’s statement on this very point in the video above] as a way to lower long-term interest rates–very unconventional, though I suspect they are already doing this now. They are also likely buying stocks through their secret accounts on Wall Street in order to preclude a crash.

    This is serious game time for these guys, so from their perspective another 4 years of deficits is not only not a problem, but a key part of the short-term solution to a bigger problem than they will ever admit publicly.

    If I ever run for office (not gonna happen), then I’m asking Daniel to be my economics adviser.   If  you want to check out some more of his stuff, his website is here (Catallaxis).  He has some recent posts from the summer more fully fleshing out his views on Integral Theory of Praxis.  Some really brilliant stuff.  I hope to have some time to comment on some of it in the next few weeks.

    Published in: on December 9, 2008 at 10:22 pm  Comments (3)  
    Tags: , , ,

    Canadian Politics Update

    To get a little pomo for a second, here’s me (quoting me) on October 16th:

    Here’s what I wrote yesterday regarding the Liberals in Canada time out of power:

    What all those scenarios have in common is that the left was fractured. What that means is that Canada is built so that the Liberals will always rule the country minus a scenario in which they are totally corrupt and/or lose their left flank.

    From the NyTimes this morning:

    But as the election post-mortems got under way on Wednesday, some Liberals were suggesting that the only way to take on Mr. Harper may be to adopt one of his own strategies. In the same way that Mr. Harper rebuilt right-of-center politics in Canada through political party mergers, some Liberals are now considering the idea of an alliance, formal or otherwise, between their centrist party and the left-of-center New Democratic Party, which is known as the N.D.P. and is led by Jack Layton.

    And look what could be taking shape before our very eyes:

    Prime Minister Stephen Harper has temporarily stymied a Liberal plan to bring down the government and propose a governing coalition with the New Democrats, delaying the opportunity for a no-confidence vote by one week.

    Now the cynic in me can not help but point to these two issues:

    1. The separatists exist only to suck up taxpayer money and are pathetic (either grow a pair or you don’t get any, that’s how it works fellas)

    The Bloc Québécois would not be part of any coalition government, but has expressed support for the idea as long as the coalition provides economic help for Quebec’s forest and manufacturing sectors.

    2. Politicians can not rally to do anything in this country unless their tax-payer sponsored existences are on the line:

    Also at issue was a proposal to save money by cutting public subsidies for political parties, but Kory Teneycke, director of communications for the Prime Minister’s Office, said Friday that the subsidies won’t be tied to the fiscal update set for a vote on Monday.

    That measure would cut the $1.95-per-vote each party gets to fund such things as staffing and research. Removal of the subsidies would harm the opposition parties more than the ruling Conservatives, who have been more successful at raising money privately.

    This analysis however seems quite sharp:

    Strangely, removing the political funding component of the bill actually helps the opposition maintain momentum. The Conservative argument that the attempt to bring down the government is about crass political advantage is removed. Now the three “progressive” parties can say with a straight face that this is about the government’s policy, not its dollars.

    The coalition-to-be (possibly) is now going to rally hard around the notion of a fiscal stimulus….a la the US Democrats, trying to pin Harper as Bush/Reagan-like and out of touch on the economy in a worldwide mini-depression (deflationary recession period of worldwide stagflation). It could work I suppose.  But the Liberals I still believe have to think long term about governing as a party with a vision, not an ad hoc temporary power grab.

    We just had the lowest turnout in recent memory in our election just 2 months ago, and the Liberals after having received their lowest percentage vote total since I believe Confederation (1860s) could be in power?  Honestly?  How does this not further corrode the political system?

    Clearly Harper’s plan was buffoonish with only a minority government.  He may be past his prime already–his election call was wrong, the arts comment he made as well as the hardline punishment stance for juveniles both of which killed his chances for a majority in Quebec, and now this.

    The Liberals, whether in a coalition with ministries for the NDP or not, could come back but boy oh boy would they be headed for a fiscal and governmental crash.  The only thing worse than a fractured left out of power might be a fractured left in power.