Roundup: Media's Take
This is where we excerpt articles from the media that take a historical approach to events in the news.
Martin Kettle: History can guide, yet there are new limits of the possible
Karen Blumenthal: As Dire as the Times May Seem, History Isn't About to Repeat Itself
Christopher Clausen: This is the most important election in American history. They always say that.
Editorial in the Newstatesman: We have no imperial right to remake nations
Editorial in the Guardian: In praise of ... John Maynard Keynes
Richard Bernstein: Past holds lessons for future of presidential debates
Jeff Randall: Remember 1929 – what seemed to be the end was only the beginning
Gordon Rayner: Does the world need a new banking 'policeman'?
Stephen King: Roosevelt's lesson... a decisive act to break the psychology of depression
Justin Raimondo: Gang of Democracies ... Woodrow Wilson's dream may yet become our nightmare
Tom Streithorst: Would Iraqis greet us with flowers? I made sure of it.
Friday, October 10, 2008
Stephen Foley: History lessons ... Galbraith's 'The Great Crash 1929' is still essential reading today
Source: Independent (UK) (10-10-08)
[Stephen Foley writes for the Independent.]
The late John Kenneth Galbraith attributed the longevity of his book The Great Crash 1929 – published in 1955 and never since out of print – to the tendency of history to threaten a repeat. "Each time it has been about to pass from bookstores," he wrote in a later foreword, "another speculative episode – another bubble or the ensuing misfortune – has stirred interest in the history of this, the great modern case of boom and collapse, which led on to an unforgiving depression."
So here we are again. The financial crisis that has engulfed credit markets over the past year has finally crashed into the public consciousness, and the question of whether the US is headed for a second Great Depression is now a staple of bar-room debate. Little wonder, this has pushed the old Keynesian economist's book back into the Amazon charts.
Almost 80 years ago, a financial crisis led directly to an economic catastrophe. The Great Crash 1929 sets out the five routes by which one became the other. Not all have direct parallels today, but some do. All these years later, Galbraith's book is still essential reading.
The bad distribution of income
The most extreme point for income inequality in the US in the 20th century was 1928, thanks to a financial boom that had handed great wealth to the rich with the funds to play the stock market. Worryingly, we were back at just such an extreme in 2006.
In 1928, the richest 5 per cent of the population took in more than a third of all personal income. They averaged less than a quarter for most of the post-war period, but inequality began to rise sharply from the Eighties. In the past two or three years, the top 5 per cent have again made up to 38 per cent of all personal income, according to US data compiled by Emmanuel Saez, economist at the University of California.
Galbraith argued that an economy that relies on the spending of so few people is less stable, more prone to big swings, than one made up of a broader range of people of more modest means. The rich use their money on consumer luxuries or business investment, which can dry up if they lose a lot of money. The 1929 crash hit the rich hardest; the question today is whether they have shared the same amount of the financial pain from the credit crisis, the plunging stock market and the convulsions in the hedge fund industry.
The bad corporate structure
Galbraith calls it "devastation by reverse leverage". He describes a corporate pyramid, with vast holding companies controlling large segments of the utility, railroad and entertainment business. Because dividends from subsidiaries were passed up to corporate holding companies, which relied on them to pay the interest on giant debts, an interruption in those dividends would threaten bankruptcy. To avoid that, holding company executives demanded a lock-down on investment throughout the whole structure, exacerbating the depression.
Today, public companies outside the financial sector have generally been less highly leveraged and have enjoyed a long period of strong cash generation, and conglomerates have been out of stock market fashion for a generation. The same cannot be said of the private sector, newly swollen by the private equity boom and a slew of multi-billion dollar buy-outs. The question will be, if there is an economic downturn, how will private equity owners respond to the demands of bondholders in their highly leveraged companies, and whether they have the wherewithal to keep their companies' investment taps on.
The bad banking structure
"Since the early Thirties, a generation of Americans has been told, sometimes with amusement, sometimes with indignation, often with outrage, of the banking practices of the late Twenties," Galbraith notes, but surprisingly he absolves most bankers of blame. Many lending practices only looked profligate or foolish when the unprecedented severity of the depression became clear. Rather, the economist blames panicking depositors, who saw the life savings of their neighbours wiped out when one bank collapsed and didn't wait around to see the same thing happen to them. In the first six months of 1929, 346 US banks collapsed, and that was just the beginning of a series of bank runs.
It was precisely this that led to the creation of a federal deposit insurance scheme in 1933, guaranteeing most people's savings – a scheme which has so far prevented further banking runs in the US and even managed to oversee the biggest-ever US banking collapse (of Washington Mutual, last month, whose customers were turned over to JPMorgan Chase) without anyone feeling their money was in danger.
So the banking system now is very different, then, to the 1929 era. Whether this time out, Galbraith would so absolve the bankers is unclear. The financial sector had its own version of the corporate pyramid he railed against, and "devastation by reverse leverage" is an apt summation. The sudden reversal of the US housing market and the rising number of mortgage defaults has cascaded up through the financial system, where trillions of dollars of bonds and other derivatives have relied on that underlying income stream for their value. Now we have the lock-down on bank lending, as financial institutions struggle to assess the damage...
Martin Kettle: History can guide, yet there are new limits of the possible
Source: Guardian (UK) (10-10-08)
[Martin Kettle writes for the Guardian on British, European and American politics, as well as the media, law and music.]
This is no time for outdated thinking and conventional dogma, Gordon Brown announced as he unveiled Labour's bank rescue package this week. Who could disagree? Yet since David Cameron was not about to insist that outdated thinking and conventional dogma were exactly what we need more of at such a time, Brown's words recalled a Roy Jenkins axiom - that a politician is speaking nonsense if no sensible person could conceivably be expected to argue the exact opposite.
This is most certainly a time for honest thinking. Too much at is stake to do otherwise. An unfinished and not necessarily propitious tectonic change is still in train. Though recent UK economic policy was never as ultra-liberal as some pretend - neither the public expenditure nor tax revenue ratios in the UK economy are hugely different today from what they were in 1979 - these are clearly now new times. Under pressure of events the limits of the possible have been redefined - or at least reopened.
In the recent past Brown has veered uncertainly between pandering to the regulatory left and paying court to the deregulatory right. Now, however, he appears to believe events have presented him with the space to promote a third way in the form of a controlling but flexible governmental stake in what remains fundamentally a free-market economy. This is good, if hardly new thinking, though it is undeniably bold in the circumstances. But he is gambling £500bn and Labour's 21st century credibility on a hope and a hunch.
This well-read prime minister must know we have been somewhere quite like this before. The capitalist world, wrote John Maynard Keynes at the height of the economic crisis of August 1931, faced a choice. That choice was between "finding some way to increase the money values of assets towards their former figure" and "seeing widespread insolvencies and defaults and the collapse of a large part of the financial structure". That remains a good statement of the choice facing us again today. Yet now, just as Keynes argued, we may again be overly concerned with trying to preserve the system's gains rather than cutting its losses and allowing parts of the financial structure to collapse.
Keep several provisos in mind when considering how Keynes might reflect on the events of 2008. One is that the crisis of 1929-31 was extremely different from the one the world is grappling with today. The problem in 1931 was a massive stock market crash followed later by an international currency crisis that left national economies deflated, companies insolvent and governments literally bankrupt. Today, the deep crisis is still largely confined to finance and banking, though it is certain to spread. Though there has been a fall in shares, this has certainly not been reflected in a widespread corporate collapse or a general lowering of prices of the sort that fuelled the Great Depression.
Yet Keynes's words in 1931 still ring true. "Banks and bankers are by nature blind," he wrote. "The present signs suggest that the bankers of the world are bent on suicide. At every stage they have been unwilling to adopt a sufficiently drastic remedy. And by now matters have been allowed to go so far that it has become extraordinarily difficult to find any way out." RBS take note.
A second point is that, in times that would tax a Cromwell or a Churchill, the politicians are doing their best. It is not their failing that they are not always sure how to act. What David Marquand writes about the crisis of 1931 - when another intellectually gifted Labour prime minister from north-east Scotland battled to hold the national economy together - could also almost have been written today: "With hindsight it is tempting to picture the politics of these years as a manichaean struggle between the forces of light, which wished to break with the economic orthodoxy of the day, and the forces of darkness, which wished to cling to it. The truth is more complex ... Orthodoxy and unorthodoxy overlapped, not only in the middle of the spectrum, but at both ends ... The old distinctions between left and right grew so blurred as to be almost meaningless, but no new direction took their place. Politicians of all parties found themselves in unknown territory, groping for the way ahead."
A third thing to remember is that we have actually learned in some ways from 1929-31. The great lesson of the 1920s was that it was necessary for governments to step in earlier than they did to prevent the eventual firestorm of over-inflated prices and assets. That lesson has not been applied in the current crisis; on the contrary, the fault has been repeated. On the other hand, the great lesson of the 1930s, especially from America - that government alone has the wealth and power to stem the wave of fear-based selling - has been remembered, perhaps in the nick of time...
Noam Scheiber: The resentments of Sarah Palin
Source: New Republic (10-22-08)
It's unlikely the name Sarah Palin would mean much to anyone if not for a man named Nick Carney. Long before she stood up to Republican cronies and "the good old boys" of Alaska, Palin stood up to Carney, a colleague on Wasilla's city council. As Kaylene Johnson explains in her sympathetic biography, Sarah, Carney had the gall to propose an ordinance giving his own company the city contract for garbage removal. In Johnson's telling, it was the first time Palin bravely spoke truth to power: "'I said no and I voted no,' Sarah said. 'People should have the choice about whether or not to haul their garbage to the dump.'" Johnson writes that Palin's vote made Carney into a "political enemy"--the first of many, it turns out.
The episode might serve as a compelling, if small-bore, example of Palin's reformer instincts. Except that, according to those who were present, Carney wasn't quite the crooked trash magnate Palin makes him out to be. For one thing, Carney couldn't have proposed the ordinance because he'd recused himself from the matter. The council, in fact, had asked him to appear as a kind of expert witness on the relevant rules and regulations. "I looked at it as we actually had an expert on the council sharing the information," recalls Laura Chase, a fellow councilwoman. "Not ... conspiring over a contract. There was no way that was happening."
So if it wasn't a sinister garbage conspiracy that put Carney in Palin's crosshairs, what was it? At first glance, the two would have appeared to be allies--both had spent most of their lives in Wasilla and had attended the same high school. But, beyond that, they were sociological opposites in almost every respect. Whereas Palin had bounced around several no-name colleges before graduating from the University of Idaho, Carney held a degree from Dartmouth. Palin seemed preoccupied with her family and church when she entered politics. Carney was preoccupied with histories of the Civil War and World War II (he later contributed a self-published book to the genre) and savored the New York Times crossword puzzle. By the time he joined the city council, Carney had traveled to Asia, Australia, and Central America. He'd run the Anchorage office of Alaska's economic development agency and had served as the state's agriculture director. "I'd dealt with larger budgets by far than the city of Wasilla," he recently told me.
Carney had a wry sense of humor. He was fond of joking that he'd graduated from Wasilla High School in the "top 20 percent"--by which he meant he was valedictorian of his five-person class. Sometimes Palin was the only colleague who didn't get his jokes. "I don't think he had too much patience for her lack of understanding," says John Stein, then the town's mayor. In internal discussions, Carney would be relentlessly logical while Palin was vague and intuitive. "Nick had a way of being direct and to the point, something that Sarah was uncomfortable with," recalls Chase. Which is to say, when it came to garbage removal, what Palin seemed to have chafed against was less the substance of Carney's position than what she felt was his elitist, Ivy League bearing. And, over the next few years, she found ways to get him back.
These days, Palin is engaged in this same fight against elites, though on a considerably larger stage. "I'm not one of those who maybe came from a background of, you know, kids who perhaps graduate college and their parents give them a passport and give them a backpack and say go off and travel the world," she recently told Katie Couric. "No, I've worked all my life." That hardly makes her the first politician to run on class resentments--nearly every conservative from George W. Bush to Mitt Romney has sought a bond with voters by attacking the over-educated and entitled. But more often than not these conservatives are elites themselves; hence the spectacle of Yale legacies and Harvard millionaires (and most of the Fox News executive suite) railing against wine-swilling sophisticates.
Palin, by contrast, may be the first conservative politician since Nixon to experience resentment so authentically. For her, it's not so much a political tool as a motivating principle. A trip through Palin's past reveals that almost every step of her career can be understood as a reaction to elitist condescension--much of it in her own mind....
Thursday, October 9, 2008
Karen Blumenthal: As Dire as the Times May Seem, History Isn't About to Repeat Itself
Source: WSJ (10-7-08)
A long streak of speculative lending got out of hand as banks and even staid industrial companies made a stream of risky loans. Consumer spending on cars and clothes was slipping, but no one was paying attention. The stock market grew shaky in September, and then in October, the bottom fell out.
Suddenly, everyone seemed to want to sell. But there were few buyers, and over six bleak trading days, the Dow Jones Industrial Average lost a third of its value. It was a panic, said a senior New York Stock Exchange official, "where all at once, the inconceivable terrors of the unknown and the unfamiliar are thrust upon the public mind; confidence is paralyzed, and until it is restored, chaos reigns."
The year, of course, was 1929, though it sounds just enough like today to make us wonder if we should stock up the pantry, take the cash out of the bank and hunker down for a 21st-century Great Depression. No doubt, the parallels are stark and frightening. But the differences between now and then are even greater.
Let's start with lending. In the late 1920s, as the stock market took off, banks expanded their loans for those most unpredictable of assets: stocks. Investors could easily borrow up to 75% of the value of a stock purchase. By 1929, almost $4 of every $10 in bank loans went to buy shares. In addition, Chrysler, General Motors and Standard Oil of New Jersey all made tens of millions of dollars available for stock loans. In one of the most egregious examples, an energy company called Cities Service sold stock and then used the cash to make loans for people to buy more shares.
When the market started to fall, however, brokers had to call clients for more cash to secure their loans -- a so-called margin call. Because they had seen short downturns before, customers weren't eager to bail out. The entertainer Groucho Marx borrowed from the bank, against his life-insurance policy and against his house to come up with cash to meet his margin calls. But it wasn't enough. During that dark week in October, his broker sold all his stocks, wiping out his life savings of $240,000 and leaving him deeply in debt.
"I would have lost more," he said later, "but that was all the money I had."
When those stock assets evaporated, an already weak banking system was crushed. In the first half of 1929, well before the crash, more than 300 banks had closed. More than 1,000 banks closed in 1930. Without a Federal Deposit Insurance Corp., depositors lost everything.
Initially, the Federal Reserve did nothing. To try to keep speculative borrowing on stocks from continuing, it declined to reduce interest rates, choking off credit. Unemployment climbed toward 25% at a time when there was no unemployment compensation. In the Prohibition era, those without jobs couldn't even legally drown their sorrows in beer.
Most striking was the long reluctance to acknowledge a serious problem....
James Taranto: The 'Fact Checking' Fad
Source: WSJ (10-7-08)
In a September 1984 campaign speech, Walter Mondale, the Democratic presidential nominee and former vice president, asked, "Do you really want Jerry Falwell to pick the next two judges to the Supreme Court?" What reminded us of this was a story from yesterday's New York Times, written by Patrick Healy, which begins as follows:
There is no way, of course, that Senator Barack Obama would ever nominate three controversial figures from his past to serve on the United States Supreme Court: the convicted felon Antoin Rezko; the former Weather Underground radical Bill Ayers; or Mr. Obama's former pastor, the Rev. Jeremiah A. Wright Jr.
Yet the names and faces of the three men appear in a new television advertisement--running in Michigan and Ohio this week and nationally on Fox News on Monday, at a total cost of $500,000--arguing that Mr. Obama's judgment about his associates shows that he cannot be trusted to pick justices for the Supreme Court.
We wondered if the Times had thought it necessary back in '84 to point out that only the president has the power to make nominations to the federal bench, that Falwell was not running for president, that there was no way he would end up holding any office that would put him in the line of presidential succession, and, therefore, that the premise of Mondale's question was false.
Nope. Times reporter Fay Joyce merely quoted Mondale, apparently confident that her readers would be smart enough to distinguish political hyperbole from fact.
So why, a generation later, does the Times begin an article by rebutting an assertion that the ad in question (watch it here) does not even make? Because 2008 is the year in which "fact checking" of political ads and statements became a full-blown journalistic fad. May it soon go the way of streaking and Mexican jumping beans.
The "fact check" is opinion journalism or criticism, masquerading as straight news. The object is not merely to report facts but to pass a judgment. The Washington Post'sFact Checker blog ends each assessment with between one and four "Pinocchios," just like movie reviewers giving out stars....
John Tierney: A Gift From the ’70s ... Energy Lessons
Source: NYT (10-7-08)
The presidential candidates claim to see America’s energy future, but their competing visions have a certain vintage quality. They’ve revived that classic debate: the hard path versus the soft path.
The soft path, as Amory Lovins defined it in the 1970s, is energy conservation and power from the sun, wind and plants — the technologies that Senator Barack Obamaemphasizes in his plan to reduce greenhouse emissions. Senator John McCain is more enthusiastic about building nuclear power plants, the quintessential hard path.
As a rule, it’s not a good idea to revive anything from the 1970s. But this debate is the exception, and not just because the threat of global warming has raised the stakes. The old lessons are as good a guide as any to the future, as William Tucker argues in “Terrestrial Energy,” his history of the hard-soft debate.
The initial debate over nuclear power seemed to end not long after the partial meltdown in 1979 of the reactor at Three Mile Island. Utilities canceled orders and stopped building reactors, partly because of public fears, but perhaps mainly because of rising costs. Mr. Lovins and his allies liked to say that nuclear power, once promoted as “too cheap to meter,” had now become “too expensive to matter.”
The soft path seemed to be the way to go, particularly when some of Mr. Lovins’s predictions about energy conservation came true. As Americans cut back in response to higher prices and new incentives, the growth in electricity demand slowed. Some public officials, most enthusiastically in California, told utilities to stop building large power plants. Instead, they subsidized wind farms and solar power, which were supposed to be cheap and plentiful alternatives once the technologies matured.
Instead, they remained so costly and scarce that Californians’ electricity rates were among the highest in America. They endured rolling blackouts in 2000 while paying astronomical prices for power from nuclear and fossil-fuel plants in other states. The crisis was attributed to price controls and Enron’s market manipulation, but the underlying problem was a shortage of power that forced the state to start building old-fashioned fossil-fuel plants for itself.
Meanwhile, there was a surprise on the hard path, too. Once utilities stopped building reactors, the share of electricity from nuclear power was projected to decline steadily as the oldest reactors were retired. But then several new “merchant energy” companies began assembling fleets of reactors sold off by local utilities. The new owners standardized operations, retrained workers and brought in human-factor engineers to redesign the famously indecipherable control panels.
Under the old owners, the reactors were balky white elephants operating only 60 percent of the time. ...
David Martin: Swiftboating George Washington
Source: Smithsonian Magazine (10-1-08)
Back page of the January 3, 1789, edition of the Philadelphia Weekly Gazette:
We, the delaware boat veterans, take as our solemn duty before our Creator to make known the truth concerning the Presidential candidate who calls himself George Washington. We beseech the public to read our account.
General Washington hath permitted certain myths and misconceptions to arise surrounding his alleged role in the crossing of the Delaware River on December 25, 1776. As pious and patriotic citizens, We have the Means of calling the right of it in question and thereby setting history's record straight.
On the night recalled, Each one of us did cross the Delaware. But none did see General Washington in any of the lead boats. We were in the first two boats to come ashore and We attest that no officer of a rank higher than captain was with us.
Whilst it may be that the General did in due course make his way to the opposite bank, it was well after the dawn and passage was in a heated ferryboat. Any account of him astride the bow of the first boat is most assuredly a fable—perhaps a rumor conceived by the General himself, to provide inspiration for a future painting in the service of his vanity....
Christopher Clausen: This is the most important election in American history. They always say that.
Source: http://www.theamericanscholar.org (8-1-08)
[Christopher Clausen is the author of Faded Mosaic: The Emergence of Post-Cultural America.]
In July 1864, as President Abraham Lincoln prepared to run for a second term against General George B. McClellan, The New York Times editorialized: “We have had many important elections, but never one so important as that now approaching....The republic is approaching what is to be one of the most important elections in its history.” The Civil War had been raging for three years and seemed to be at a stalemate. Lincoln was for fighting on until victory, regardless of the cost. McClellan supported compromise and negotiation to end the bloodiest conflict in American history. As everybody knows, Lincoln won the election, the Union soon won the war, and McClellan’s reputation never recovered.
The expression “the most important election in history,” however, achieved immortality. “Every even-numbered year,” Senator John McCain told an interviewer in 2006, “politicians go around and say ‘This is the most important election in history.’” As the republic’s history lengthened, the phrase often mutated into “the most important election in my lifetime” or “in a century.” Still, in all its forms it proved remarkably resistant to irony or derision. In 1988, when George H. W. Bush ran against Michael Dukakis, the already venerable Senator Robert C. Byrd declared: “It may be the most important election of this century.” In 1992, when Bush ran for re-election against Bill Clinton, Clinton declared it “the most important election in a generation,” generation being a word that sounds weighty and biblical but is often deployed without any precise meaning.
By 1996, when Clinton himself was running for a second term against Senator Robert Dole, Ralph Reed, executive director of the Christian Coalition, declared it “the most important election of our lifetime,” while John Sweeney, president of the afl-cio, pushed the envelope by describing it as “the most critical election in the long history of the American labor movement.” In November 2000 Ebony magazine tried to re-establish a sense of proportion by asserting, “The first national election of the 21st century is the most important election (so far) of the 21st century,” though strictly speaking it was still the 20th. By 2004 everyone was getting in on the act, from the rock band Pearl Jam (“the most important [election] of our lifetime”) to Bruce Springsteen and Democratic nominee John Kerry (“the most important election of our lifetime”) to the Christian Coalition again (“the most important election in our nation’s history”)....
Marc Ginsberg: Obama's New Deal for America
Source: Huffington Post (Blog) (10-8-08)
[Ambassador Ginsberg spent his formative years in the Middle East, particularly in Israel, Egypt, Jordan and Lebanon from 1960-1968. He began his foreign policy career as a foreign affairs advisor during his freshman year in college to Senator Edward M. Kennedy (1971-1977). He was appointed by Secretary of State Vance as his White House Liaison in 1977, and then served as Deputy Senior Advisor to President Carter for Middle East Policy on his White House staff from 1979-1981.]
Kudos to Sen. Obama for hard-wiring an empathetic connection to the beleaguered American middle class at last night's debate. His winning performance inspired me to go outside my normal national security box to consider how he could construct a greater economic recovery program to meet dead on the fear and apprehension that is undermining confidence in our future.
I believe now is the time for Obama to consider a bolder and more historic approach to the financial crisis by presenting to middle income Americans a step-by-step "big think" FDR-style New Deal program to add greatness and urgency to his economic recovery plan. Tough times call for urgent and big-think measures. Surely, we are in this era, once again.
In 1933, Franklin Delano Roosevelt unveiled a landmark economic recovery plan that created a "New Deal" for America's middle class and restored confidence to a hard-pressed nation. It was imaginative, bold and daring and lifted America up by its bootstraps and restored confidence and stability. It took several years, but it worked.
A similar type of "new deal" program aimed principally at the crux of our financial crisis -- the falling U.S. housing market -- is now urgently needed by our Democratic standard-bearer to create an indelibly understandable and comprehensive framework in the minds of voters that he has the most coherent and bold recovery program that gets at the very heart of what plunged our financial markets into chaos (aside from greedy Wall Street executives peddling credit default swaps, etc.) . Another financial infusion of funds to average Americans modeled after the last economic stimulus proposal may just be too insufficient to meet the emergency that will surely follow us well into 2009.
Accordingly, coupled with his affordable health care program, necessary tax reductions and renewable energy incentives the components of the Obama "New Deal" for middle-income America could include the following options:
-- Setting the table, so to speak: take one day out of the campaign to convene an emergency economic summit of key financial advisors, business leaders and economists to discuss and assess the credit and liquidity crisis with the objective of legitimating this "New Deal" style-emergency recovery program for the middle class, and present it in a easily comprehensible speech to the American people (fireplaces always a good backdrop).
Program elements would include a new across-the-board housing-focused economic stimulus package. It would be be designed to ensure that the plan is directed at incentivizing prospective and existing home buyers to re-enter/remain in the housing ownership market. Such a stimulus would include the following components:
1. A tax credit on 2009 taxes in the amount of $10,000 used to purchase a principal residence for qualifying buyers whose FICO scores are deemed above the sub-prime lending qualifications and who can meet reasonable credit worthiness and income qualifications to manage the special mortgage requirements noted below.
2. A government-guaranty fixed rate mortgage program offered through banks that would set a federally-mandated interest rate ceiling of 5.5% on 30 year fixed rate conforming mortgages. The fixed-rate mortgage would provide an adequate return to banks that would be compelled to hold these mortgages in to assure the government-backed guaranty (thus avoiding the securitization shenanigans that got us into the fix in the first place).
3. A tax credit in the amount of $3,000 on 2009 and 2010 taxes to cover moving and out-of-pocket costs (excluding points) for qualifying purchasers of principal residences.
-- Propose to offer banks that are holding delinquent but not defaulted mortgages a federally financed .875% discount off the then federal rate on short term borrowings in exchange for converting conforming adjustable rate mortgages to fixed rate mortgages plus a "payment holiday" of 90 days to enable borrowers to regain their financial footing. This is significantly different than McCain's plan for the federal government to purchase mortgages.
-- Create a new series of 3-5 year U.S. Treasury bonds targeted to be purchased by Americans participating in 401K plans through licensed asset managers who would be incentivized to promote the purchase of such bonds by receiving a personal tax credit in 2009 and 2010 for the amount of such bonds sold. Pre-redeemed bonds would be used to finance the housing stimulus package components and interest earned would be tax deductible if/if purchasers use bonds as collateral toward housing purchases or qualified renewable energy improvements in existing or newly purchased houses.
-- Given the escalating unemployment rate and the lack of financial incentive to maintain current employment levels, propose an new Unemployment Recovery Program that would extend existing unemployment benefits for unemployed whose benefits have lapsed, AND provide a two year tax credit to employers who maintain their 2008 full and part-time time employee roster at levels not less than two-thirds existing salary and benefits equal up to 33% of any salary reduction for each employee retained; provided that any former full time employee that was laid off due to the economic crisis is rehired at comparable levels.
-- For Americans aged 55 or older who have lost at least 20% of the value in any annuity, retirement or 401K plan in 2008 due to losses directly attributable to passive equity portfolio losses, establish a one-time 2009 and 2010 tax deduction equal to 50% of the loss up to a maximum of $50,000.
OK...I will keep my day job, but I hope that between now and the election this meager attempt at rolling up my inexperienced sleeves in Economic Recovery 101 will generate additional ideas so come inauguration day our new president demonstrates to the nation and the world an audacity for FDR-style leadership at a time of national crisis since he represents that best hope for a more secure financial future for our nation.
Editorial in the Newstatesman: We have no imperial right to remake nations
Source: Newstatesman (10-9-08)
Brigadier Mark Carleton-Smith and Sir Sherard Cowper-Coles sound like the kind of chaps who might have led skirmishes along the North-West Frontier in the days of the Great Game. Their names may be redolent of the era when an officer bound for the east set off from his St James's club with a volume or two of Kipling in his trunk; but this should not make us overlook the wisdom of their judgement about the resilience of the Taliban in Afghanistan.
The brigadier, Britain's most senior military commander in Afghanistan, and Sir Sherard, Our Man in Kabul, both warn that the current strategy will not work. "We're not going to win this war," said Carleton-Smith. Sir Sherard reportedly thinks the approach is "doomed to failure". Given that Britain has suffered 120 military fatalities since 2001, there is urgency in their advice.
Some have already dismissed such talk as defeatism. But 170 years to the month that Lord Auckland, governor general of India, issued the Simla Manifesto justifying British intervention in Afghanistan, it is high time we learned lessons from our long and dismal history in central Asia.
The first Anglo-Afghan War ended with the massacre of the retreating British forces in 1842. Only one man, Dr William Brydon, survived out of 16,000 who attempted to reach Jalalabad from Kabul. ("Where is the army?" he was asked on arrival. "I am the army," he replied.) Subsequent attempts to impose our will on a population with the misfortune to be caught between two empires, those of Britain and Russia, were scarcely less happy...
Editorial in the Guardian: In praise of ... John Maynard Keynes
Source: Guardian (UK) (10-9-08)
He was about the last person you would expect to devise an economy theory for state intervention. Educated at Eton and Cambridge, a don with a flair for making money, and a Bloomsbury group aesthete, John Maynard Keynes enjoyed nothing more than proving Victorian morality wrong. So he relished the paradox of thrift: the idea that if everyone saves at the same time, the collapse in demand drags down national income to the point where the value of what is being saved is reduced. Keynes's greatest thinking is contained in an indigestible tome called The General Theory of Employment, Interest and Money - a title which aped Einstein's magnum opus (modesty was not one of Keynes's many favourable attributes). In it, he said that government action was often the only route out of recession; that insight still provides our best hope of avoiding a rerun of the Great Depression today. No intellectual was more engaged with the world of his times. After the first world war, he was a delegate to the Paris peace conference, where he predicted the trouble that would flow from the vindictive war reparations being imposed on Germany; after the second, he brokered the creation of the Bretton Woods system. His name was posthumously associated with the sloppy notion that paying ourselves ever more would lead to prosperity, but his thinking was more subtle than that. Keynes had no patience with economists who argued that everything would work out in the long run. He wrote: "In the long run we are all dead."
Wednesday, October 8, 2008
Richard Bernstein: Past holds lessons for future of presidential debates
Source: International Herald Tribune (10-8-08)
[Richard Bernstein writes for the International Herald Tribune.]
How's this for an idea? Rather than continuing to have presidential-election debates in the current quick-and-shallow one-upmanship format currently being used, let's revert to the mother of all great political debates in America, those between Abraham Lincoln and Stephen Douglas, which took place during the race for the U.S. Senate in Illinois 150 years ago.
As in the Lincoln-Douglas affair, the first speaker would have an hour to present his views; the second would rebut in an hour and a half, whereupon the first speaker would be given the floor again for half an hour to rebut the rebuttal. There would be no moderator.
The truth is, of course, that in the age of television, debates like those of the Lincoln-Douglas era would probably eliminate most of the audience. Who in America is going to sit for three hours while the candidates make long speeches?
And, by the way, if we wanted to be scrupulously exact in resurrecting the past, the audience wouldn't sit through the speeches. They would stand.
We not only had longer attention spans in the good old days; we were a lot hardier then, too, even if some of the ideas we had (the Lincoln-Douglas debates were about slavery, after all) were pretty retrograde.
Still, there's something to be said for turning back the clock when it comes to political debates, an idea that actually has occurred to some of the candidates in the current election. Last April, before the North Carolina and Indiana primaries, Hillary Rodham Clinton proposed what she called a "Lincoln-Douglas style" debate with Barack Obama, one with no moderator, just a direct exchange between the two candidates. Obama turned it down.
In June, however, with the Democratic nomination seeming within certain reach, Obama himself proposed that he and John McCain have a debate that, as Obama's campaign manager put it, "more closely resembles the historic debates between Abraham Lincoln and Stephen Douglas." This time it was McCain who showed no enthusiasm, perhaps because in the original Lincoln-Douglas contest, it was the Republican candidate, Lincoln, who lost the ensuing election.
"Anytime you hear a candidate in American politics propose a Lincoln-Douglas style debate, you know they're losing," was the rather jaundiced comment of one blogger, Andrew Malcolm, who was writing on The Los Angeles Times Web site.
The appeal is to a certain high-mindedness, an effort to acquire the mantle of high seriousness even as everybody knows that real Lincoln-Douglas style debates just wouldn't wash anymore.
And that's too bad. I always read the sample questions that experts propose to newspapers, like the excellent ones on the economy suggested for Obama and McCain, but then, given the one-to-two minute time slots available to each candidate to answer questions, it's not surprising that these questions are never answered.
In the days of Lincoln and Douglas, the question was whether slavery should be allowed into the territories of Kansas and Nebraska as they prepared for statehood, and the questions did get an ample hearing.
Indeed, it was in the debates and in his other speeches on the subject that Lincoln, who provided his standing-up audiences with detailed histories of preceding actions and arguments on the question, first articulated his eloquent antislavery position.
Douglas was in favor of what he called popular sovereignty, meaning that it was a matter of right for the people of a territory (though the white people only) to decide if they wanted slavery or not. Lincoln (who, like Douglas, believed that blacks were inferior to whites but was nonetheless genuinely repelled by slavery) said that no person had the right to ownership over another, and that, while nothing could be done to end slavery in the existing slave states, it was a matter of urgent moral importance that it not spread anyplace else.
It happens that last week's vice-presidential debate fell on the anniversary of the first Lincoln-Douglas debate, and, seizing on that coincidence, the Colorado Center for Public Humanities at the University of Colorado Denver last week held a re-enactment of the earlier contest.
The exercise, in which professional actors played the roles of Lincoln and Douglas, was in part to demonstrate how much the political discourse in America has changed over the years, and, according to participants, the earlier method held up pretty well...
Jeff Randall: Remember 1929 – what seemed to be the end was only the beginning
Source: Telegraph (UK) (10-8-08)
[Jeff Randall is a business journalist.]
His televised humiliation was orchestrated by a veteran Democrat, Henry Waxman, whose simple question about Fuld’s alleged $480m of earnings – Is that fair? – hit the banker like a haymaker, rendering him speechless.
As the cameras focused on Fuld’s haunted stare, there was a sense of action replay. Hadn’t we seen this freak show, or at least something remarkably like it, long before Lehman went under – a display of furious inquisitors wiping the floor with Wall Street’s loftiest reputations?
Yes, history was repeating itself: “As the ghosts of numerous tyrants, from Julius Caesar to Benito Mussolini will testify, people are very hard on those who, having had power, lose it or are destroyed. Then anger at past arrogance is joined with contempt for present weakness.
“The victim or his corpse is made to suffer all available indignities. Such was the fate of the bankers. They were fair game for Congressional committees, courts, the press and comedians.”
These are the observations of economist J K Galbraith in The Great Crash, 1929. First published in 1954, his analysis of the greed and self-delusion that led to the unravelling of America’s stock market and the subsequent Depression is undimmed by time.
Replace 1929 with 2008 and the story, I’m afraid, is eerily familiar: a speculative orgy, crescendo, climax and crash. As this plays out, important people – business and political leaders – rely on “the power of incantation” to keep the rest of us calm. Their efforts are doomed to fail.
“Cause and effect run from the economy to the stock market, never the reverse. In 1929, the economy was headed for trouble,” wrote Galbraith.
As now, too few understood this. Many who foresaw disaster kept quiet. There was a conspiracy of silence. “The foolish thus [had] the field to themselves.”
In the 1920s, says Galbraith, America’s economy had been weakened by “bad distribution of income... bad corporate structure... bad banking structure... dubious state of the foreign balance... and poor state of economic intelligence”. Who can say with certainty that today it is different? Who now wants to defend the promoters of a one-way bet on property? Any takers?
For those hoping that the stock market’s recent “correction” will be followed by a swift recovery, Galbraith puts a wealth warning on suckers’ rallies. “The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximise the suffering.”
It’s worth remembering that a full recovery in the stock market took more than 20 years. During that time, in July 1932 the Dow Jones index was 89pc below its top. In Britain, the reaction was less severe: the market merely halved.
Amid the carnage, there were buy-backs of stock by investment trusts, desperate to shore up their share prices. This resulted in a massive outflow of cash, just when liquidity was at its most precious. “They bought their own worthless stock,” wrote Galbraith. “Men have been swindled by other men on many occasions. The autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.”
Sadly, it was not the last...
Gordon Rayner: Does the world need a new banking 'policeman'?
Source: Telegraph (UK) (10-8-08)
[Gordon Rayner is chief reporter at the Telegraph.]
With war raging across the globe in July 1944, ministers from all 44 Allied nations met at the imposing Mount Washington Hotel in Bretton Woods, New Hampshire, to thrash out a set of rules that would govern world finance once Hitler was defeated. Knowing that greater international trade would help to prevent future wars, and determined to avoid another Great Depression, the delegates signed the Bretton Woods Agreements, creating the International Monetary Fund and the World Bank. It was a big vision, driven by grand historical figures: Winston Churchill, Franklin D Roosevelt and the British economist John Maynard Keynes.
But a system that was designed 64 years ago has, not surprisingly, proved ill equipped to deal with the fiendishly complex practices of 21st-century banking that led to the current worldwide crisis. Neither the IMF, the World Bank nor any other institution has the power to police the global financial system in a way that might have prevented the excessive risk-taking which led to the sub-prime mortgage crisis and, in turn, the credit crunch.
A more recent creation, the G8 group of industrialised nations, looks hopelessly out of date without the emerging economic giants of Brazil, India and China among its ranks. And the “beggar-thy-neighbour” policies of guaranteeing savings that have sprung up in Germany, Greece and Ireland in recent days have shown that even in Europe, co-ordinated economic policy is a myth.
“The current system is in crisis and we have an environment where dog eats dog,” said Bob McKee, of the economic consultancy Independent Strategy. “Electorates will expect more regulation, and politicians will push for it.”
The new Business Secretary, Peter Mandelson, argued last week that new global solutions are needed because “the machinery of global economic governance barely exists”, adding: “It is time for a Bretton Woods for this century.”
Gordon Brown argued as long ago as January 2007 that global regulation was “urgently in need of modernisation and reform”.
So, as the world’s central bankers gather this week in Washington DC for an IMF-World Bank conference to discuss the crisis, the big question they face is whether it is time to establish a global economic “policeman” to ensure the crash of 2008 can never be repeated.
Top of the to-do list for any new or reformed body would be new rules to manage the level of risk that banks and financial institutions are allowed to take on. Major economies already have regulatory bodies designed to keep financial institutions in check, such as the Financial Services Authority (FSA) in the UK and the Securities and Exchange Commission (SEC) in the US. But even if these bodies had done their job properly, opinions differ wildly between different countries over what constitutes an acceptable risk.
Take, for example, the Basle II Accord, a voluntary international agreement which might have seemed a crushing bore when it was published in 2004, but which just might have prevented the credit crunch if the world’s major economies had realised it was actually a good idea.
In essence, Basle II, concocted by the Basle Committee on Banking Supervision, set up by 10 leading economic nations, was designed to make sure banks did not overstretch themselves by lending too much money in relation to the amount of capital they held.
If it had been implemented the moment it was written, Basle II might have prevented the collapse of Northern Rock – which had lent seven times the amount of money it held on deposit – and saved the likes of Lehman Brothers in America. Instead, motivated by national self-interest, not to mention greed, the world’s major economies dithered, so that few, if any, had implemented the agreement by the start of 2008, with 95 countries only able to promise they would adhere to it by 2015.
We can only speculate whether a global policeman would have intervened in another seismic shift in economic policy: the abolition by the US president, Bill Clinton, in 1999 of the Glass-Steagall Act, which had, since 1933, separated retail banks from investment banks. The Act had been passed during the Great Depression to prevent banks from speculating with depositors’ money, and its repeal by Mr Clinton has been blamed by some commentators for contributing to the current financial crisis, which would have been limited to investment banks if Glass-Steagall had remained in place.
Too late, then, to remedy the missed opportunity of Basle II or to reinstate Glass-Steagall. But a new global regulatory arrangement might come just in time to address another issue troubling the world’s financial watchdogs: mark-to-market accounting, about which we are likely to be hearing a great deal in coming weeks...
Norman Solomon: Projecting an Obama Victory?
Source: Media Beat column (10-6-08)
Projection is a psychological hazard of politics. What’s “obvious” to some doesn’t occur to others. So, these days, it’s hardly reassuring when some progressives roll their eyes at the latest McCain-Palin maneuver and express confidence that few voters will be swayed by the latest slimy attacks on Barack Obama.
The poll numbers so far in October, combined with ample media hype, have fostered the belief that the economic crisis is close to dooming the McCain campaign. But any crystal ball that offers assurance of an Obama victory is a piece of junk.
Twenty years ago, presidential nominee Michael Dukakis emerged from the Democratic National Convention with a 17-point lead in a Gallup Poll. One of the main reasons that the lead disappeared was a scurrilous TV ad, linking Gov. Dukakis to a prisoner who committed a rape during a weekend furlough. The commercial included an ominous photo of the African-American convict, Willie Horton.
Now, a “Willie Ayers” ad is getting plenty of media attention, and Sarah Palin is accusing Obama of “palling around with terrorists.” The McCain campaign is eager to implement desperate measures for its desperate times -- making preposterous claims to link Obama with terrorism -- scraping toward the bottom of the barrel and heaving larger quantities of mud.
Any confidence that such tactics will have scant effect on the electorate is misplaced.
There’s also the matter of race -- and, more to the point, racism. “Many older Democrats quietly admit they will not vote for Mr. Obama because they fear he would put too many blacks in power, or be hamstrung in office by racial opposition,” the New York Times reported from Florida on Oct. 4.
This fall, no one knows exactly how much we’ll see of the “Bradley effect” -- named after the defeat of the black mayor of Los Angeles, Tom Bradley, who received conspicuously fewer votes from whites than election-eve polling had predicted when he ran for governor in 1982.
Polls involving a black nominee “have tended to undersell the level to which race negatively impacts voting -- particularly among whites,” political reporter Chris Cillizza wrote on washingtonpost.com four months ago. “That is, a black candidate tends to underperform his or her polls on Election Day, as some voters who may have told a pollster they would support an African-American candidate ultimately decide against doing so.”
The Bradley effect has a long history, Cillizza noted. “In other races involving a black candidate -- most notably Charlotte Mayor Harvey Gantt’s candidacies against Sen. Jesse Helms in 1990 and 1996 as well as L. Douglas Wilder’s victorious run for the Virginia governor's mansion in 1989 -- the Bradley effect came into play.”
Some political analysts say that the Bradley effect has diminished and will have little or no impact on Obama. Maybe they’re right. But I doubt it.
Along with throwing mud and benefitting from racism, McCain stands to gain from the fact that the national Republican Party now has a lot more money in the bank than the Democratic Party does. And in many states, a wide range of anti-democratic measures -- including purges of voter rolls and very unreasonable requirements for voter ID on Election Day -- will work to the benefit of the McCain-Palin ticket.
Overall, the polls showing Obama with a sizeable lead should be taken with a box of salt. The count on election night could be close. In the meantime, McCain can only benefit when progressives assume he’ll lose.
Such rosy assumptions are dangerous. They’re apt to result in overconfidence, reducing volunteer energy and voter turnout for Obama.
Assume that the economic crisis has doomed the McCain campaign? He hopes you will.
Tuesday, October 7, 2008
Stephen King: Roosevelt's lesson... a decisive act to break the psychology of depression
Source: Independent (UK) (10-6-08)
[Stephen King is managing director of economics at HSBC.]
...The nuclear option is to bypass the banking system altogether. In effect, this is what President Roosevelt did in 1933 and 1934. If banks are unwilling to lend to each other and, thus, unable to lend to non-banks, governments can elect to turn themselves into banks. After all, during a banking crisis, people are typically happier to hold cash and government bonds than anything else. The desire to avoid financial losses absolutely dominates, and the best avoidance scheme is to rely on the taxpayer: government bonds are attractive in these circumstances because governments in the developed world, at least, will always coerce their taxpayers to repay creditors. During banking crises, governments can, therefore, raise funds relatively cheaply.
They can do even more. They can also choose to monetise government debt, by selling bonds to the central bank rather than to the public. By doing so, governments can flood an economy with money. At a stroke, the perceived monetary shortage which leads to hoarding, bank runs and a financial climate of fear can be removed. Moreover, with excess money, other assets suddenly look more interesting, at least in nominal terms.
If, though, the banking system is in a mess, how does a government get money into the economy? The answer is simple: either tax cuts or, even better, big increases in government spending. In the first two years of the Roosevelt administration, government spending increased by 80 per cent. If ever there was a decisive act designed to break the psychology of depression, that was it.
If, though, this is the ultimate "do", what about the "don'ts"?
First, central banks should not defend their independence at all costs. This, after all, is what the Federal Reserve did during the Hoover administration at the beginning of the 1930s. The approach was a hopeless failure. During banking crises, central banks lose their power. To restore it, they need, and should ask for, fiscal help.
Second, each central bank should, ideally, speak with one voice. Better, in my view, to show strong leadership than to advertise publicly a collection of disparate views which can only sow the seeds of doubt throughout the financial system. After years of success in highlighting the nuances of the economic debate, we're now seeing the downside to the Bank of England's committee system.
Third, under no circumstances should countries resort to capital market protectionism. The Irish government's offer to underwrite deposits in Irish banks (and, hence, to protect the Irish banks' interests) is an unfortunate precedent (it would be far better if all countries were to offer deposit guarantees simultaneously, but that hasn't happened). It's reminiscent of the Smoot-Hawley tariff in 1930, designed to protect the interests of American exporters but, ultimately, a contributor to the subsequent collapse in world trade. Others were forced to launch their own "beggar-thy-neighbour" policies, contributing to a global economic collapse and, tragically, fanning the flames of fascism. We don't want to go down that route again.
Howard Fineman: Obama and the Echoes of Lincoln
Source: Newsweek (10-6-08)
[Howard Fineman is Newsweek's senior Washington Correspondent and columnist, senior editor and deputy Washington Bureau Chief.]
... As Obama has said repeatedly, he is, by virtue of his own DNA, “the change we have been waiting for.” He is, by that standard, the rightful heir to Lincoln’s vision and hope. Obama is a brilliant and welcoming fellow with an eye for the main chance, a knack for offering himself as a vehicle for consensus.
But in what other way does Obama deserve to be seen as Lincolnesque?
In the life Lincoln led before his victory in 1860, he was tested as perhaps no leader in America had ever been—by financial struggle, personal loss, public humiliation and political defeat. He had risen above all of that—from the humblest beginnings imaginable—to become one of the leading lawyers in Chicago. He had studied the country from the ground up and the inside out, from its farm fields and rivers to its corporate boardrooms.
What testing, what true testing, has Obama ever faced besides eschewing a high-paying job out of Harvard Law School? To be blunt, his trials are a lot less Malcolm X than Obama’s autobiography has made it seem. The psychological strain of being a mixed race youth in Honolulu was no doubt trying, but he had the support of well-connected and loving grandparents who saw that he had the best education available in the state of Hawaii.
To skeptics, Obama is nothing more or less than a suburban prep-school graduate who did well at Columbia and Harvard, and who smoothly propelled himself upward. He deployed his eloquence, brains and charm to build contacts among progressive foundations, elite universities and members of the extended Daley family of Chicago.
Obama’s community-organizing work was not very controversial (or effective); his affirmative-action syllabus at the University of Chicago Law School was earnestly PC but carefully mainstream; his famous speech against the war in Iraq in 2002 was prescient but not so heroic given the time and place: the early stages of a U.S. Senate race that would require initial liberal support.
Other than his one electoral loss, in 2000, when he impetuously ran for a U.S. House seat, what political adversity or long night of the soul has Obama faced? His contests for the Illinois legislature were essentially foregone conclusions; his U.S. Senate race in 2004 was a laugher and also a joke. After all, he ran against Republican Alan Keyes, famous for his squirrelly conservatism and minimal ties to the state of Illinois. It was an Obama cakewalk.
Nor does Obama’s decision to launch a presidential bid deserve a place in the “Braveheart” pantheon of pluck and daring. What did he really have to lose? Hillary Clinton was the odds-on favorite at the time; he was a tyro who could explain away an embarrassing loss as merely the wobbly flight test of a novice campaigner.
Obama had one truly tough moment in the primary season, when Clinton cleaned his clock in New Hampshire. But that was hardly a killer. South Carolina, with its huge black population, was next. Obama could and did appeal to racial solidarity, slyly accusing Bill Clinton of playing the race card even as he, Obama, did so.
From the moment the voting started in this campaign, Obama has never really been behind. Yes, he kept his cool in the first debate with John McCain, but when has he had to scramble, to reorder things, or overturn his strategic assumptions?
Never.
What have we learned about how Obama would handle a real crisis?
Nothing.
Do we know if he can claim descent from Chicago’s only president?
No.
So if he wins, and he well may, voters will have to hope that the lineage that traces back to Chicago is no mere coincidence, and that the echoes of Lincoln are credible enough to inspire us all.
Justin Raimondo: Gang of Democracies ... Woodrow Wilson's dream may yet become our nightmare
Source: American Conservative (10-6-08)
[Justin Raimondo is editorial director of Antiwar.com. ]
When I hear the word "democracy," I reach not for my revolver, but for my wallet. I freeze and wait for the next blow to fall: a tax hike, another war, a new form of knavery masquerading as well-intentioned ignorance.
Imagining a "League of Democracies," as a number of foreign-policy mavens have, I reach instead for the history books and recall the many incarnations—and failures, most of them bloody—of this perennial panacea. The League of Nations, Woodrow Wilson's stillborn brainchild, was supposed to be just such an agency, deterring aggression and enforcing the right of nations to self-determination. The lineage of this idea goes back even farther, originating in the imagination of H.G. Wells, whose 1933 novel, The Shape of Things to Come, projected an idealized portrait of an international brotherhood dedicated to Science, Reason, and Order and to cleaning up the mess of a second global conflict. Yes, Wells predicted World War II, which in his version lasted 100 years and culminated in a worldwide plague. Of course, the "Dictatorship of the Air," as Wells dubbed his legion of world saviors, subdued retrograde elements by means of sleeping gas, which rendered nationalists and other unsuitable persons helpless.
In the real world, it wasn't sleeping gas that gave would-be saviors their power, but armed force, as Lenin realized. Neoconservative calls for an international federation of designated "democratic" nations, which would act in concert ostensibly to defend and extend democracy worldwide, have a distinctly Soviet flavor.
When the Soviet empire was at the height of its expansive phase, advancing into Europe in the wake of Hitler's defeat, it set up "People's Democracies" from Warsaw to Sofia. Of course, these weren't democracies at all but dictatorships coated with the thinnest veneer of "democratic" formalism.
When the Communist-dominated "League Against War and Fascism," which had previously opposed U.S. intervention in the war, turned on a dime on the Kremlin's orders, this "peace" group of left-wing ministers and hardened Communist cadres changed its name to the "League for Peace and Democracy." It was the signal that the left-wing "peace" movement was about to defect to the War Party, and, to be sure, the Communists wasted no time in becoming the most ferocious warmongers on the block. Regardless of whether one believes that the war of the "democracies" (including the Soviet Union) against the Axis could have been avoided, the principle holds: when you hear talk of spreading democracy, the beating of war drums is sure to follow.
Instead of a war-making machine, the idea of an international league of supposedly free states is presented as a "Concert of Democracies," but whatever music is produced will no doubt have a distinctly martial tune. This is no symphony but a pro-American version of the Warsaw Pact.
What we are witnessing is a twisted replay of the Cold War, with the U.S. taking the part of Russia....
Tom Streithorst: Would Iraqis greet us with flowers? I made sure of it.
Source: American Conservative (10-6-08)
[Tom Steithorst has worked as a cameraman for 20 years. He is currently back in Iraq.]
Five years into the war, hundreds of thousands of Iraqis and over 4,000 Americans have died. The proud and educated Iraqi middle class has been eviscerated. And America, the birthplace of rock and roll and Marilyn Monroe, the conqueror of the Nazis and the Soviets, for generations a benevolent and powerful force in the world, has been revealed as impotent and petty. The goals of transforming the Middle East, establishing hegemony over the oil fields of Iraq, and demonstrating the invincible powers of the American military have faded. Most of us, except the likes of Norman Podhoretz and Christopher Hitchens, realize the invasion was a disaster. Whom shall we blame?
Blame me. On Feb. 13, 2003, a few weeks before the invasion, I was working as a cameraman for a network news bureau in Kuwait. Our fixer told us that his cousin, a florist, planned to donate 10,000 flowers to children's charities for the youngsters to give to American soldiers to show gratitude for saving them from Saddam. It was a perfect scene: friendly Arabs, cute kids, our brave men about to go into battle. We pitched the story to our bosses in New York.
The boys at the morning show loved it—light and happy, a Valentine's Day bonbon that could still pretend to be a serious look at the impending war. The next morning, we drove to the flower shop and soon realized that we had been duped. No children's charities were involved; the florist had just mobilized his relatives' kids. Had we not agreed to film, he probably would have called the whole thing off. But we didn't care. We had promised New York this story.
I filmed the shop, the flowers, the smiling kids. As we drove to the U.S. Army base, the florist led his nieces and nephews in chants of "We love Bush." (This did not air. Our producers thought it a little "over the top.")
The response when we pulled up was not what we had planned, not at all what the network expected. The military police, seeing three vans filled with flowers, children, and an American TV crew, incomprehensibly assumed we were terrorists intent on breaching security. They pointed their guns at us, ordered us out of the cars, and told me to stop filming.
This was not what we had promised the morning news. American soldiers terrified of flower-bearing nine-year-olds wasn't the image New York producers wanted to project, not something likely to raise our ratings. It did not matter that this story of fear and misunderstanding and the Army's preoccupation with "force protection" was more interesting, important, and real than the sappy tale we had sold.
Since the florist and his kids had an articulate TV crew with them, they were not arrested, but we were all kicked off the base.
Nicholas von Hoffman: Crash Test
Source: American Conservative (10-6-08)
As American finance is being twisted and reshaped almost hourly, many worry that we're in for an encore of the galvanic upheavals of 80 years ago. Is this a gruesome economic Groundhog Day?
There are important parallels but also major differences. The America of 1929 was energy self-sufficient. It was a muscular industrial society that imported few necessities. A businessman would have been hard pressed to get a foreign-manufactured safety pin into the country. We owed no foreign nation money; they owed us. We were at peace. The size of the military establishment was about right for a nation that did not believe in pre-emptive war and had no enemies.
We had a new president who, at least on paper, was ideally prepared for the economic holocaust. Herbert Hoover was the only president to distinguish himself as a businessman. In 1907, he started his own company, opening offices in New York, London, San Francisco, and Russia. By 1913, he had some 175,000 employees and was running mining operations around the world. Generations before the term "global economy" was coined, Hoover was practicing it.
By the standards of his time, Hoover was an interventionist, not inclined to remain inert while calamities rained down, although many in both parties thought differently 80 years ago. Secretary of the Treasury Andrew Mellon's recipe for dealing with the Depression was "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." Ultimately, Hoover liquidated Mellon by making him ambassador to the United Kingdom.
Mellon was of the short, sharp retraction school, which believes an unhampered liquidation of the financially weak blows debt out of the economy fast and enables a quick recovery. The Mellon hypothesis still has adherents, but the politics are too awful for an administration to contemplate since this approach risks throwing 20 million people out of work in months if not weeks.
The 1929 crisis was a stock-market disaster. The 2008 crisis is a bond-market disaster. Yet they have important elements in common. Through much of the 1920s, the Federal Reserve made easy credit available to the nation's banks, which lent money to masses of people to buy stocks on margin. As long as the stock was worth more than the loan to buy it, all was well. The more people got into the market, the higher the prices of stocks went and the easier it was to use the stocks they had borrowed money to buy as collateral to borrow more money to buy more stocks that they did not pay for. Stock prices rose for so long that people came to believe that in the new, modern economy of the 1920s, prices could only go one way. Substitute the word "house" for the word "stock," and you see what the great grandchildren of 1929 did in the 2000s.
When the price of stocks purchased with borrowed money fell to a point where they were worth less than the loan, buyers had to come up with the money to make up the difference. If they couldn't, the stockbroker from whom they had gotten the loan took the stock and sold it. The same happened with mortgages and the bonds or collateralized debt obligations (CDO's) into which the mortgages were packed. Today, purchasers have to put down 50 percent of the price of a stock they buy on margin, but the investment banks that bought CDO's were putting up as little as 0.3 percent and borrowing the rest.
Thus the underlying mechanics of disaster in 2008 are similar to those of 1929. But there are differences. In 1929, there were no derivatives, those complex deals or arcane side bets that multiply potential losses of billions into trillions. We can thank computers for them....
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