Jan 21, 2009
http://www.atimes.com/images/f_images/spacer15.gif
http://www.atimes.com/images/f_images/spacer15.gif
Absolute power gets blamed absolutely
By Spengler
Inauguration day brings to mind the reason I don't read science fiction.
It's never weird enough. Today, America will place more power than any
peacetime president ever has wielded into the hands of a man nobody knows.
He has convinced more incompatible constituencies that he takes their side
than any politician in American history. And through no fault or merit of
his own, he has stumbled into more power than the White House has had since
World War II.
>From the day Obama was elected to 9:30am Tokyo time on Monday morning, the
S&P 500 index has lost 17% of its value, after absorbing Obama's proposed
cabinet and hearing the gist of his economic stimulus plan. That can't be
blamed on Bush. It counts as the "Obama crash". With the unprecedented power
of his office, Obama inherits a commensurately high level of accountability.
Unless he offers something radically different, the boomerang of
expectations could flatten him faster and more thoroughly than the swift
ascent of his star. People in power get blamed; people with absolute power
get blamed absolutely. As the economy continues to deteriorate, there will
be no one left standing to blame but Obama.
Before America entered World War II, Franklin Delano Roosevelt borrowed no
more than 6% of gross national product in a given year. During his first
year in office, Obama will have borrowed perhaps double that amount.
Figure 1: Federal borrowing as a % of GDP: Roosevelt vs Obama's First Year
http://www.atimes.com/atimes/Global_Economy/images/chart200108a.gif
The weight of the Obama administration in terms of financial flows will be
double that of the Roosevelt presidency at its peak, and that does not
account however many trillions of dollars in assets the
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> Federal Reserve
buys for its own account. These numbers barely express the government's
muscle. With bond markets shut down, the banks are the only provider of
credit, and the government can tell the banks how and to whom to lend, in
return for trillions of dollars of guarantees and capital injections. The
big banks are private in name only. Complaints about lending policy go
straight to Washington.
Never in peacetime has the Federal government commanded such an enormous
share of financial flows, and never has it had such a capacity to command
such flows. Investment-grade corporate borrowers pay three to four times the
bond yield rate that the Treasury does, against an historical range of one
or two times, which is to say that private borrowers are priced out of the
market. Corporate bond issuance towards the end of 2008 was running at a
fifth or so of the 2007 level.
Figure 2: Baa-rated bond yields as a percentage of Treasury bond yields
http://www.atimes.com/atimes/Global_Economy/images/chart200108b.gif
If the Ronald Reagan revolution shifted the balance of power away from
Washington and towards the challengers and entrepreneurs, the present crisis
has restored Washington's power with a vengeance. Tax cuts and deregulation
opened the field to new entrants who quickly overwhelmed the old corporate
and moneyed elite. Mortgage-backed securities unlocked the capital in
American homes and became the largest fixed-income market in the world.
Small firms such as Lehman Brothers and Bear Stearns became industry giants.
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> Bank of America
grew from a little North Carolina bank that broke through the barriers to
interstate branch
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> banking. The
technology boom made
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> venture
capitalists into billionaires.
Lehman and Bear Stearns are dead, and Bank of America took on a federal yoke
last week in the form of a US$130 billion bailout. The technology sector is
moribund and investors are breaking commitments to
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> venture capital
funds. The entrepreneurs and promoters who followed Reagan's camp have gone
from shirtsleeves to shirtsleeves in a single generation.
At the capillary level of the American economy, the Republican political
base - local boosters who lived off the fat of the real estate market - has
sunk out of sight. It is as if Joseph Stalin had killed off the kulaks to
make America safe for Obama. Even before the October bust, Obama outspent
Senator John McCain by 3 to 1 on television during the past campaign. The
big sources of Republican money are badly damaged by the economic collapse
and will take many years to return.
Globally, the advantage of the American government over prospective rivals
is even greater. A double-digit decline in world trade and a collapse in
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> commodity prices
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html>
http://kona.kontera.com/javascript/lib/imgs/grey_loader.gif
leaves Russia, Brazil and the Middle Eastern oil exporters gasping for air,
and leaves China and the Asian exporters conducting emergency damage
control.
Figure 3: Cost of credit protection on a broad index of emerging markets,
January 2005 to January 2009 (basis points above London interbank offered
rate.)
http://www.atimes.com/atimes/Global_Economy/images/chart200108c.gif
The cost of protection against sovereign defaults by emerging markets
quintupled this autumn from the level prevailing since 2005. The effective
collapse of Argentina, Ukraine, Pakistan and Venezuela skews the number
higher. The number of countries that have become wards of the international
community will continue to rise.
Economic disaster will occur in geopolitical hotspots, starting with
Pakistan. New York Times reporter David Sanger wrote on January 11 that
Pakistan's nuclear arsenal might be Obama's worst nightmare. The candidates
for "worst nightmare", though, have multiplied since I warned at the end of
October that the world isn't flat - as one New York Times writer likes to
say - but rather flattened (see The
<http://www.atimes.com/atimes/Global_Economy/JJ28Dj07.html> world isn't
flat, it's flattened, Asia Times Online, October 28, 2008). The prospects of
a narco-state on American's southern border, now widely mooted in the press,
might be the most daunting.
What will Obama do? He has more answers to urgent problems than the verses
of Barnacle Bill the Sailor ("I'll tell Iran/that I'm the man"), but they
are just as fanciful.
I have never met the man, but I have interviewed a fair sampling of his
supporters, and conclude that Obama learned the power to cloud men's minds,
like the Shadow <http://www.vintagelibrary.com/OldTimeRadio/The-Shadow.htm>
on the old radio show. Apart from ambition, there is no "there" there. There
are as many Obamas as there are interlocutors. He is a hollow man, I
concluded, a Third World anthropologist studying us with engaged curiosity
but complete emotional detachment. In this respect he is unpredictable.
I predict that he will do nothing much at all. The American economy is in
trouble because Americans got too much
<http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html> cheap credit to
buy houses, using their price appreciation to buy other consumer goods.
Obama proposes to provide more cheap credit to homebuyers and incentives to
buy consumer goods, which seems an odd response to the problem. Now that
Americans are scared out of their wits and likely to save every available
penny, it is hard to flush with enthusiasm over his program's prospects.
Obama's secretary of state, the redoubtable Hillary Clinton, will pursue the
same tired formulas in the Middle East and South Asia into tighter and
tighter little circles, until she quits in frustration. His Treasury
secretary, Timothy Geithner, will do precisely what he has done in the past
year in his capacity as head of the Federal Reserve Bank of New York, which
is to use the federal balance sheet to buy trillions of dollars of toxic
assets. And Defense Secretary Robert Gates will continue to attempt to
engage the Iranians, as he has done since the Islamic Revolution in 1979,
when he took notes for president Jimmy Carter's national security advisor
Zbigniew Brzezinski in meetings with the newly empowered mullahs.
He will make resonant speeches, hold frequent press conferences, consult
friend and foe alike, and tread water while America's economy and strategic
position continue to deteriorate. His entourage of one-trick wizards, as I
called them in a recent commentary, will pick over the broken American
economy for trophies to put into private equity funds. (See Obama's
<http://www.atimes.com/atimes/Global_Economy/JK25Dj06.html> one-trick
wizards, Asia Times Online, November 25, 2008). Without casting aspersions
on anyone involved, the opportunity for self-dealing in a
multi-trillion-dollar bailout-cum-recapitalization of the financial system
exceeds the grandest dreams of Third World kleptocrats.
At a certain point he will have to take a decisive stand on something. And
then we will learn who Obama is, and what he wants. Four years ago, I
predicted of George W Bush, "Many will be the night during his second term
that Bush will wish he were still in Texas, and still drunk." (see Careful
<http://www.atimes.com/atimes/Front_Page/FH03Aa02.html> what you Bush for,
Asia Times Online, August 3, 2004). I predict that there will be nights when
Obama will wish he were still in Springfield.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved.
Please contact us about sales,
<javascript:openWindow('http://www.atimes.com/mediakit/content-form.html','l
ist','resizable=yes,scrollbars,width=260,height=370');> syndication and
republishing
<javascript:openWindow('http://www.atimes.com/mediakit/repub-form.html','lis
t','resizable=yes,scrollbars,width=260,height=370');> .)
http://www.atimes.com/images/f_images/spacer15.gif
http://www.atimes.com/images/f_images/1pix.gif
Accessed 19 January 2009,
http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html
09-01-21, Spengler, Absolute power gets blamed absolutely, atimes.com, 21
January 2009, http://www.atimes.com/atimes/Global_Economy/KA21Dj08.html
(accessed 20 January 2009).
AVERTISSEMENT/ WARNING
Les informations contenues dans ce document sont confidentielles et
privilégiées. Elles sont destinées à l'usage exclusif de la (ou des)
personne(s) identifiée(s) ci-dessus. Si vous n'en êtes pas le
destinataire,soyez avisé que tout usage de ce document est interdit. Le cas
échéant, veuillez détruire ce document et nous en aviser sans délai.
The information contained in this document is confidential and privileged
and is intended solely for the individual(s) to whom it is addressed. If you
are not the intended recipient of this document, be advised that any
unauthorized use of this document is strictly prohibited. In such a case,
please notify us immediately and destroy this document.
[Non-text portions of this message have been removed]
------------------------------------
--------------------------
Want to discuss this topic? Head on over to our discussion list,
[email protected].
--------------------------
Brooks Isoldi, editor
[email protected]
http://www.intellnet.org
Post message: [email protected]
Subscribe: [email protected]
Unsubscribe: [email protected]
*** FAIR USE NOTICE. This message contains copyrighted material whose use has
not been specifically authorized by the copyright owner. OSINT, as a part of
The Intelligence Network, is making it available without profit to OSINT
YahooGroups members who have expressed a prior interest in receiving the
included information in their efforts to advance the understanding of
intelligence and law enforcement organizations, their activities, methods,
techniques, human rights, civil liberties, social justice and other
intelligence related issues, for non-profit research and educational purposes
only. We believe that this constitutes a 'fair use' of the copyrighted material
as provided for in section 107 of the U.S. Copyright Law. If you wish to use
this copyrighted material for purposes of your own that go beyond 'fair use,'
you must obtain permission from the copyright owner.
For more information go to:
http://www.law.cornell.edu/uscode/17/107.shtmlYahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/osint/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/osint/join
(Yahoo! ID required)
<*> To change settings via email:
mailto:[email protected]
mailto:[email protected]
<*> To unsubscribe from this group, send an email to:
[email protected]
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
