Last November I wrote a posting on the "Arrogance of Exceptionalism". It was sparked by a story in the Washington Post about American "exceptionalism" (to be referred to as E)and how the concept was an important element of right wing ideology.
As stated by me in that posting, the heart of E was the idea that the U.S. "is superior to other countries in the world and . . . to deny that means you are both un-American and godless." The Post article noted that E was a view adopted by such persons as Mitt Romney, Sarah Palin, and Mike Huckabee. That these three would latch on to American E as part of their pitch to far right ideologies was no surprise. But I was taken aback when the term was used subsequently by leftist commentator Chris Matthews to press the remarkable fact that Barack Obama, an African-American, could be elected U.S. President.
The counterview of E was made by the late Senator Fulbright more than four decades ago in his book "Arrogance of Power", written within the context of the U.S. war in Vietnam. (There is no doubt he would have felt the same way about the U.S. invasion of Iraq in 2003.) He put it this way: "Power tends to confuse itself with virtue and a great nation is particularly susceptible to the idea that its power is a sign of God's favor, conferring upon it a special responsibility for other nations . . . . "
What is so striking about the right wing adherence to American E is the clear evidence that E, if it was ever true, has certainly been humbled in recent years. In the fall of 2008, the greed of the financial markets in this country brought on a near collapse of the international financial structure. Then of course there is the current fiscal/political issue of spending cuts and debt ceiling, an issue that has not enhanced our image abroad.
The so-called Arab Spring found us in the embarassing situation of having been a major supporter of various authoritarian regimes while unsuccessfully preaching to them the need for democratic reform. When authoritarian regimes in Tunisia and Egypt fell, the U.S. was exposed as their major props and we were slow to join the pro-democracy forces seeking to oust these regimes. Similarly in authoritarian Bahrain and Yemen where we found our national security interests outweighing support for regime change or democratic reform, although we did call for such reform. Our very late call for Syrian President Assad to step aside sounded hollow and the likely ouster of Kaddafi in Libya followed a period of accomodationist policy after the Libyan dictator appeared to throw off his terrorist connections and nuclear weapons ambitions.
In short, if American E encompasses a special international responsibility for bringing U.S. and western values to the world, we should stand humbled. To the extent that such values have recently found niches in some countries of the Arab world, it came from home-grown discontent and desires in spite of our support, explicit or implicit, for authoritarian regimes that suppressed such demands.
Years ago, and this is from memory rather than taking the time to look it up, historian/political scientist James McGregor Burns wrote a book on the American presidency. In the book he cited three examples of President Truman's exercising strong executive power. I can only remember two: 1) Truman's seizure of the steel industry after a management-labor breakdown during the Korean War; and 2) his firing of General MacArthur when the general overstepped his military role and involved himself deeply and publicly in the policy debate over using nuclear weapons against China after its military intervention in the Korean War.
Burns noted that these actions were interpreted as moves of a strong exercise of presidential executive authority. Burns said, not so. To him, these were in fact evidence of presidential failures, failures of the President to persuade steel's management and labor leaders and MacArthur that they should do the right thing without the exercise of presidential executive authority, the last resort for solving the problems.
What we need to do today is to be able to sort out what are actually successes and what are failures. In doing so we will discover the hollowness of American E ideology and accept a more modest role for ourselves in the universe of nations.
Tuesday, August 30, 2011
Friday, August 26, 2011
WHAT'S NEXT FOR CONGRESS?
Congress, our dysfunctional and unloved branch of government, has a bit more than a week of unearned vacation before returning to "work" and resuming its political posturing and partisan ways. If that seems a bit harsh, I'm sorry but their deliberations have more the character of a mantra than a serious dialog for resolving differences of opinions and policy choices.
There will be a new guy on the block, however. With its inability to resolve the spending cuts/new revenues issues through its normal byzantine procedures, before going on vacation it resorted to creating a Special Committee or Super Congress to come up with a new round of spending cuts and/or new revenues that will accompany further increases in the debt ceiling. How this newly rigged process will turn out remains to be seen, but with the requirement that this Super Whatever come up with a new fiscal plan by Thanksgiving, we won't have too long to wait.
But of one thing we can be reasonably assured, the GOP center of ideological gravity will continue to be reliance on big spending reductions, accompanied by corporate tax cuts, while the Democrats will seek to leaven a solution with some revenue increases along with continued defense of health care entitlements. If we again get a GOP position of no compromise on new revenues and an equally firm Democratic response on entitlements, across the board spending cuts will be the legislatively prescribed alternative.
That alternative would hit particularly heavily on defense spending and the Pentagon has already started its traditional counteroffensive about the dire implications of deep cuts on national security. To this was usually added how newly discovered threats from a foreign source make cuts in the Pentagon budget even more dangerous. In the good old days the Pentagon could be counted on to have a report of some new Soviet threat such as a new missle or anti-missile system. Now it's China and just last week there was a report on the future dangers of Chinese development of stealth aircraft and aircraft carriers to threaten our future dominance of the western Pacific. So not much changes when the Pentagon feels its budget, currently $500 billion plus (not counting the money for two wars), is threatened.
So the return of Congress means the return to the fiscal battle, but with the Super
Whatever as the supposed final arbiter of how things will be resolved THIS YEAR. Ahead in 2012 still lies the more intense battles to be fought over what to do about the costly entitlement programs, particularly health care, and another shootout over whether some or all of the decade-old "temporary" tax cuts of the Bush administration should expire at the end of next year.
On track two of the returning Congress is likely to be a renewed fight over jobs and the economy. With the economic recovery just limping along, the outlook for new jobs and/or re-employing those already laid off is not very encouraging. But it is the issue which has driven and continues to drive public opinion about the failures of Washington to solve or even get good traction on the problem. In such instances in the past, the President, in this case Obama, has drawn the most fire for his presumed failure to get the economy moving again. Presidents get good marks when the economy is robust and they pay the price when it isn't. What this distills to is that jobs and the economy will once again break the surface as a dominant issue dividing Republicans and Democrats. With the presidential election just a little over a year away, there is likely to be a lot of clash and clang, if not progress, or as Shakespeare put it in a different context the air and airwaves will be "full of sound and fury, signifying nothing".
To this blogger, a big part of any solution has to be a meaningful stimulus program, even in the face of huge deficits and growing debts. The partisan difference is that the Democrats, or most of them, see the need to somehow get substantial money into the pockets of the consumer for immediate spending, plus a longer term program in the form of job creation through a new and large package aimed at building and repairing our infrastructure from roads and bridges to sewer lines.
Unfortunately, the GOP has a single and timeless mantra as its answer to the jobs problem. Cut taxes on the wealthy and corporations and let the money "trickle down" in a way that new jobs will be created. This posting will not again go into the fallacies of trickle down, voodoo economics, but the reader is referred to the recent postings of June 15 and 22 to show the dead end character of GOP job creation policy.
As journalists used to say in ending a story, "that's 30."
There will be a new guy on the block, however. With its inability to resolve the spending cuts/new revenues issues through its normal byzantine procedures, before going on vacation it resorted to creating a Special Committee or Super Congress to come up with a new round of spending cuts and/or new revenues that will accompany further increases in the debt ceiling. How this newly rigged process will turn out remains to be seen, but with the requirement that this Super Whatever come up with a new fiscal plan by Thanksgiving, we won't have too long to wait.
But of one thing we can be reasonably assured, the GOP center of ideological gravity will continue to be reliance on big spending reductions, accompanied by corporate tax cuts, while the Democrats will seek to leaven a solution with some revenue increases along with continued defense of health care entitlements. If we again get a GOP position of no compromise on new revenues and an equally firm Democratic response on entitlements, across the board spending cuts will be the legislatively prescribed alternative.
That alternative would hit particularly heavily on defense spending and the Pentagon has already started its traditional counteroffensive about the dire implications of deep cuts on national security. To this was usually added how newly discovered threats from a foreign source make cuts in the Pentagon budget even more dangerous. In the good old days the Pentagon could be counted on to have a report of some new Soviet threat such as a new missle or anti-missile system. Now it's China and just last week there was a report on the future dangers of Chinese development of stealth aircraft and aircraft carriers to threaten our future dominance of the western Pacific. So not much changes when the Pentagon feels its budget, currently $500 billion plus (not counting the money for two wars), is threatened.
So the return of Congress means the return to the fiscal battle, but with the Super
Whatever as the supposed final arbiter of how things will be resolved THIS YEAR. Ahead in 2012 still lies the more intense battles to be fought over what to do about the costly entitlement programs, particularly health care, and another shootout over whether some or all of the decade-old "temporary" tax cuts of the Bush administration should expire at the end of next year.
On track two of the returning Congress is likely to be a renewed fight over jobs and the economy. With the economic recovery just limping along, the outlook for new jobs and/or re-employing those already laid off is not very encouraging. But it is the issue which has driven and continues to drive public opinion about the failures of Washington to solve or even get good traction on the problem. In such instances in the past, the President, in this case Obama, has drawn the most fire for his presumed failure to get the economy moving again. Presidents get good marks when the economy is robust and they pay the price when it isn't. What this distills to is that jobs and the economy will once again break the surface as a dominant issue dividing Republicans and Democrats. With the presidential election just a little over a year away, there is likely to be a lot of clash and clang, if not progress, or as Shakespeare put it in a different context the air and airwaves will be "full of sound and fury, signifying nothing".
To this blogger, a big part of any solution has to be a meaningful stimulus program, even in the face of huge deficits and growing debts. The partisan difference is that the Democrats, or most of them, see the need to somehow get substantial money into the pockets of the consumer for immediate spending, plus a longer term program in the form of job creation through a new and large package aimed at building and repairing our infrastructure from roads and bridges to sewer lines.
Unfortunately, the GOP has a single and timeless mantra as its answer to the jobs problem. Cut taxes on the wealthy and corporations and let the money "trickle down" in a way that new jobs will be created. This posting will not again go into the fallacies of trickle down, voodoo economics, but the reader is referred to the recent postings of June 15 and 22 to show the dead end character of GOP job creation policy.
As journalists used to say in ending a story, "that's 30."
Tuesday, August 23, 2011
WHAT NEXT FOR THE ARAB WORLD?
As things seem to look good for the ouster of Gaddafi, a more sobering view may be in order, an overview that takes into account future U.S. foreign policy prospects in the Middle East and the Arab world.
While I am a supporter of President Obama and a lot of his works, there is one area where Obama's policy efforts seem to be crashing in flames. That is, or was, his policy of engagement. Two major targets of that policy were Iran and Syria. Departing from the Bush policy of having no relations with the two countries, Obama held the view that it is necessary to engage the two countries in a kind of step-by-step dialogue in order to eventually resolve some major issues and restore normal relations.
For Iran that engagement policy was directed at persuading it to give up any nuclear ambitions that would lead to weaponizing its nuclear capabilities. But Iran has rejected, with a tone of finality, various international efforts to halt its uranium enrichment program neeeded to reach the weapons development stage.
In Syria's case Bush ended our relations when that country was implicated in the assassination of Lebanese Prime Minister Hariri in 2005. (Those relations were already strained for several reasons including Syria's opposition to the U.S. invasion of Iraq and Syria was seen as the haven for foreign fighters entering Iraq.) Following the assassination of Hariri our ambassador was pulled out of Damascus and not replaced until earlier this year. In the case of Syria, Obama's engagement policy was , among other things, aimed at encouraging President Assad to liberalize his control of the country and to try to wean him away from his close ties to Iran's President Ahmadinejad. And it was hoped that Syria would become a stabilizing country in the Middle East rather than a source of support, like Iran, of terrorist organizations such as Hezbollah and Hamas.
When the anti-Assad street demonstrations for political liberalization began, the U.S. walked softly in its attitude toward Assad despite his bloody suppression of the demonstrations, secretly aided by Iran. It wasn't until last week that the U.S. finally called for Assad's ouster, thus ending whatever was left of Obama's Syrian engagement policy. So instead of succeeding in driving a wedge between Syria and Iran, the end result seems to be strengthened ties between the two neighbors.
Returning to the situation in Libya, the U.S. from the outset left it to NATO to take the lead in supporting the anti-Gaddafi rebels while we took a secondary role of providing intelligence and weapons support. More recently, as the rebels closed in on Gaddafi's stronghold in Tripoli, the U.S. began to give more direct air support to the effort. If this is the end of Gaddafi, the question becomes -- what then? The rebels are not a single unified force, but rather a collection of historically competing tribes, a problem which may or may not be easily resolved with victory. Further, there were questions early in the rebellion about the role and linkages of al-Qaeda to the rebels. In short, we did not know what we were buying into in supporting the rebels.
All of this comes at a time when U.S. leadership and image in the Arab world was already greatly diminished, beginning with the Arab Spring and the ouster of one- time regional ally President Mubarak of Egypt. In that case the U.S. waffled for several weeks before finally saying Mubarak must go. And in saying so, our standing with another strong regional ally, Saudi Arabia, was weakened as we were perceived by the authoritarian Saudi monarchy as less than a reliable source of support.
To sum up, our already weakened position in the Middle East and the Arab world was further diminished this week. Our call for the ouster of Assad sounded like the final tolling of the bell for the Obama engagement policy. And, assuming for now the ouster of Ghadaffi, we are left supporting successful rebels about whom there are many questiions of who they are and in what direction they are heading.
While I am a supporter of President Obama and a lot of his works, there is one area where Obama's policy efforts seem to be crashing in flames. That is, or was, his policy of engagement. Two major targets of that policy were Iran and Syria. Departing from the Bush policy of having no relations with the two countries, Obama held the view that it is necessary to engage the two countries in a kind of step-by-step dialogue in order to eventually resolve some major issues and restore normal relations.
For Iran that engagement policy was directed at persuading it to give up any nuclear ambitions that would lead to weaponizing its nuclear capabilities. But Iran has rejected, with a tone of finality, various international efforts to halt its uranium enrichment program neeeded to reach the weapons development stage.
In Syria's case Bush ended our relations when that country was implicated in the assassination of Lebanese Prime Minister Hariri in 2005. (Those relations were already strained for several reasons including Syria's opposition to the U.S. invasion of Iraq and Syria was seen as the haven for foreign fighters entering Iraq.) Following the assassination of Hariri our ambassador was pulled out of Damascus and not replaced until earlier this year. In the case of Syria, Obama's engagement policy was , among other things, aimed at encouraging President Assad to liberalize his control of the country and to try to wean him away from his close ties to Iran's President Ahmadinejad. And it was hoped that Syria would become a stabilizing country in the Middle East rather than a source of support, like Iran, of terrorist organizations such as Hezbollah and Hamas.
When the anti-Assad street demonstrations for political liberalization began, the U.S. walked softly in its attitude toward Assad despite his bloody suppression of the demonstrations, secretly aided by Iran. It wasn't until last week that the U.S. finally called for Assad's ouster, thus ending whatever was left of Obama's Syrian engagement policy. So instead of succeeding in driving a wedge between Syria and Iran, the end result seems to be strengthened ties between the two neighbors.
Returning to the situation in Libya, the U.S. from the outset left it to NATO to take the lead in supporting the anti-Gaddafi rebels while we took a secondary role of providing intelligence and weapons support. More recently, as the rebels closed in on Gaddafi's stronghold in Tripoli, the U.S. began to give more direct air support to the effort. If this is the end of Gaddafi, the question becomes -- what then? The rebels are not a single unified force, but rather a collection of historically competing tribes, a problem which may or may not be easily resolved with victory. Further, there were questions early in the rebellion about the role and linkages of al-Qaeda to the rebels. In short, we did not know what we were buying into in supporting the rebels.
All of this comes at a time when U.S. leadership and image in the Arab world was already greatly diminished, beginning with the Arab Spring and the ouster of one- time regional ally President Mubarak of Egypt. In that case the U.S. waffled for several weeks before finally saying Mubarak must go. And in saying so, our standing with another strong regional ally, Saudi Arabia, was weakened as we were perceived by the authoritarian Saudi monarchy as less than a reliable source of support.
To sum up, our already weakened position in the Middle East and the Arab world was further diminished this week. Our call for the ouster of Assad sounded like the final tolling of the bell for the Obama engagement policy. And, assuming for now the ouster of Ghadaffi, we are left supporting successful rebels about whom there are many questiions of who they are and in what direction they are heading.
Wednesday, August 17, 2011
FIGHT HARDER -- FOR WHAT?
NOTE TO READERS: We're in the process of moving this week so the usual posting on Sunday as well as replies to comments will be missing this week. Thank you.
0-0-0-0-0
Last November 19, about two weeks after the mid-term elections, the posting was entitled "Disappearance of the Middle: Bipolarization of Politics." The bottom line of the posting was that "the political middle seems to have disappeared, at least for now, as we drift toward increased bipolar politics." The "at least for now" still holds.
A very recent New York Times article carried the head, "Fight Harder, Voters Telling Congressmen." The article was based on comments from a few local gatherings held by House lawmakers during their unearned summer vacation. The comments came from the left and right, or perhaps it would be better to say from the farther left and right. They came from party activists who are the people who tend to show up for such gatherings. The middle and independents stay at home. Their primary political act is casting a vote, with an occasional word of disgruntlement.
The key words and views expressed in the article were "fight harder," meaning the lawmakers were not tough enough. A Minnesota liberal said President Obama just "rolled over" and needs "some steel in his backbone". A Utah Republican was quoted: ". . . Republicans chasing Democrats to the left, and I hate it when the party deserts me." And a Georgia Congressman was applauded when he said "compromises are what got us into this mess." Another liberal Democrat put blame on the tea party which "forced the country from one manufactured crisis after another."
The scarey part of the story, if such anecdotal stuff reflects a broader public opinion, is that what lawmakers seem to be hearing are messages that reinforce their partisan/ideological predispositions. Is anyone out there saying, go back to Washington and work issues out in an agreeable manner without political posturing and a vision that doesn't go beyond just getting re-elected?
Recent polls show an all time low for congressional approval ratings, with disapproval over 80 percent. Is the disapproval more a reflection of the disappointment of the ideologically driven wings of the two parties or does the low opinion primarily reflect a general attitude toward congressional political and policy behavior? That's no small question. This blogger prefers to think it's the latter, general disapproval, but the Times story could lend credence to the view that the two extreme sides don't believe their lawmakers are tough enough and thus give very low grades to Congress. If the latter is the case, then we are in for some discouraging times ahead when the so-called Super Congress makes it recommendations by late November on further cuts big cuts in spending and, perhaps, revenue increases. There is already room for skepticism about the Super Procedures of the Super Congress, a skepticism that could get even deeper if intransigence, purveyed primarily and quite successfully by the tea party to fellow Republicans, continues as the guideline for resolution of highly partisan political conflicts in Washington.
To me the Times story is depressing since lawmakers hear what they want to hear and if what they hear is that they're not tough enough in pushing their partisan/ideological agendas, then there can be little expectation of light at the end of the long, dark tunnel we have been traveling through. Is there a voice for the middle that is clear enough and loud enough to say, and be heard, that is is indeed time for a change in the Washington political culture? --or "In the name of God, go", or in Brooklyn baseball parlance,"throw the bums out."
0-0-0-0-0
Last November 19, about two weeks after the mid-term elections, the posting was entitled "Disappearance of the Middle: Bipolarization of Politics." The bottom line of the posting was that "the political middle seems to have disappeared, at least for now, as we drift toward increased bipolar politics." The "at least for now" still holds.
A very recent New York Times article carried the head, "Fight Harder, Voters Telling Congressmen." The article was based on comments from a few local gatherings held by House lawmakers during their unearned summer vacation. The comments came from the left and right, or perhaps it would be better to say from the farther left and right. They came from party activists who are the people who tend to show up for such gatherings. The middle and independents stay at home. Their primary political act is casting a vote, with an occasional word of disgruntlement.
The key words and views expressed in the article were "fight harder," meaning the lawmakers were not tough enough. A Minnesota liberal said President Obama just "rolled over" and needs "some steel in his backbone". A Utah Republican was quoted: ". . . Republicans chasing Democrats to the left, and I hate it when the party deserts me." And a Georgia Congressman was applauded when he said "compromises are what got us into this mess." Another liberal Democrat put blame on the tea party which "forced the country from one manufactured crisis after another."
The scarey part of the story, if such anecdotal stuff reflects a broader public opinion, is that what lawmakers seem to be hearing are messages that reinforce their partisan/ideological predispositions. Is anyone out there saying, go back to Washington and work issues out in an agreeable manner without political posturing and a vision that doesn't go beyond just getting re-elected?
Recent polls show an all time low for congressional approval ratings, with disapproval over 80 percent. Is the disapproval more a reflection of the disappointment of the ideologically driven wings of the two parties or does the low opinion primarily reflect a general attitude toward congressional political and policy behavior? That's no small question. This blogger prefers to think it's the latter, general disapproval, but the Times story could lend credence to the view that the two extreme sides don't believe their lawmakers are tough enough and thus give very low grades to Congress. If the latter is the case, then we are in for some discouraging times ahead when the so-called Super Congress makes it recommendations by late November on further cuts big cuts in spending and, perhaps, revenue increases. There is already room for skepticism about the Super Procedures of the Super Congress, a skepticism that could get even deeper if intransigence, purveyed primarily and quite successfully by the tea party to fellow Republicans, continues as the guideline for resolution of highly partisan political conflicts in Washington.
To me the Times story is depressing since lawmakers hear what they want to hear and if what they hear is that they're not tough enough in pushing their partisan/ideological agendas, then there can be little expectation of light at the end of the long, dark tunnel we have been traveling through. Is there a voice for the middle that is clear enough and loud enough to say, and be heard, that is is indeed time for a change in the Washington political culture? --or "In the name of God, go", or in Brooklyn baseball parlance,"throw the bums out."
Sunday, August 14, 2011
INTERNATIONAL POTPOURRI: ISRAEL, FRANCE, BRITAIN
It is hardly any wonder that Israel finds it difficult to make and keep friends in the international community.
About a week ago Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians, using the pre-l967 border as a starting point for negotiations. When President Obama first suggested such an approach, Netanyahu seemed outraged, saying the l967 borders were indefensible for Israeli security, even though Obama said some lands would have to be swapped by both parties to reflect the reality on the ground, primarily meaning the pattern of Israeli settlements built since l967. So Netanyahu's most recent statement sounded like a significant concession, although this blog labeled it a "phony gesture" concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass peace talks and go directly to the United Nations for recognition as an independent state. Mahmoud Abbas, President of the Palestinian Authority, said he would submit an application for membership when the U.N. General Assembly meets on September 20.
How "phony" Netanyahu was or how little control he has over his coalition government with its pro-settlement right wing was highlighted this week when his Interior Minister announced plans for large, new apartment settlements in east Jerusalem. East Jerusalem is a key area for the Palestinians who want to make it their future capital.
The announced new settlement plans were immediately denounced by the Palestinians who asked the U.S. to pressure Israel to stop this "unilateral" move. Lots of luck. The U.S. has been noticeably ineffective in trying to get the Israelis to halt new settlements on land envisioned to be part of a new Palestinian state. The Israeli "in your face" attitude on settlements was starkly evident in March 2010 when Israel announced major new settlement plans just when Vice President Biden was visiting the country.
In short, nothing has changed and it seems that the next confrontation will be at the U.N. when Israel, backed by the U.S. in a move that will be unpopular in the Arab world, works to block the Palestinian request for recognition. But . . . . There is always a "but" in the endless so-called peace talks.
0-0-0-0
France, Italy, Spain, and Portugal have joined forces to halt "short selling" of their securities by market manipulators who bet that the fiscal conditions of these countries will get worse.
Short selling is when an investor anticipates or aids and abets a decline in securities, stocks or bonds, by taking steps to assure the decline will take place and the investor will make money. A short seller is one who sells securities he or she doesn't even own. In simple terms what he or she does is borrow the securities from some institution such as a pension fund and then sells the borrowed securities on the market. By selling them, the short seller hopes to drive the prices down. Then the short seller buys these or identical ones at the lower price and returns the securities to the institution from which they were borrowed. The profit is the difference between the cost at the time of the borrowing and the lower price he or she actually paid for the securities.
Large scale short selling can be very injurious to the companies or countries whose securities are involved. For a time after the October 2008 fiasco on Wall Street, the U.S. halted short sales on financial institution securities to prevent them from getting into an even deeper hole. With the shakey fiscal condition of some European countries, it is no surprise that the halt on short selling was put in place.
0-0-0-0
Much was written during the period of the "Arab Spring" earlier this year and how the social media such as Facebook and Twitter were a very important part of mobilizing pro-democracy public sentiment in Egypt and elsewhere. Some countries sought to head off such communications through various technological schemes, with mixed success.
Now Britain is looking at what it sees as the other side of the coin with the social media allegedly being used to mobilize destructive riots that erupted in various cities. The violence started as a protest against a police shooting in an area of London. According to the British government, the London violence spread to other cities through the social media. Prime Minister Cameron is exploring ways to shut down such communications in what is turning out to be a free speech vs. public safety issue, an issue not easily resolved.
Will keep on looking for some good news at home or abroad, but such seems to be quite scarce.
About a week ago Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians, using the pre-l967 border as a starting point for negotiations. When President Obama first suggested such an approach, Netanyahu seemed outraged, saying the l967 borders were indefensible for Israeli security, even though Obama said some lands would have to be swapped by both parties to reflect the reality on the ground, primarily meaning the pattern of Israeli settlements built since l967. So Netanyahu's most recent statement sounded like a significant concession, although this blog labeled it a "phony gesture" concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass peace talks and go directly to the United Nations for recognition as an independent state. Mahmoud Abbas, President of the Palestinian Authority, said he would submit an application for membership when the U.N. General Assembly meets on September 20.
How "phony" Netanyahu was or how little control he has over his coalition government with its pro-settlement right wing was highlighted this week when his Interior Minister announced plans for large, new apartment settlements in east Jerusalem. East Jerusalem is a key area for the Palestinians who want to make it their future capital.
The announced new settlement plans were immediately denounced by the Palestinians who asked the U.S. to pressure Israel to stop this "unilateral" move. Lots of luck. The U.S. has been noticeably ineffective in trying to get the Israelis to halt new settlements on land envisioned to be part of a new Palestinian state. The Israeli "in your face" attitude on settlements was starkly evident in March 2010 when Israel announced major new settlement plans just when Vice President Biden was visiting the country.
In short, nothing has changed and it seems that the next confrontation will be at the U.N. when Israel, backed by the U.S. in a move that will be unpopular in the Arab world, works to block the Palestinian request for recognition. But . . . . There is always a "but" in the endless so-called peace talks.
0-0-0-0
France, Italy, Spain, and Portugal have joined forces to halt "short selling" of their securities by market manipulators who bet that the fiscal conditions of these countries will get worse.
Short selling is when an investor anticipates or aids and abets a decline in securities, stocks or bonds, by taking steps to assure the decline will take place and the investor will make money. A short seller is one who sells securities he or she doesn't even own. In simple terms what he or she does is borrow the securities from some institution such as a pension fund and then sells the borrowed securities on the market. By selling them, the short seller hopes to drive the prices down. Then the short seller buys these or identical ones at the lower price and returns the securities to the institution from which they were borrowed. The profit is the difference between the cost at the time of the borrowing and the lower price he or she actually paid for the securities.
Large scale short selling can be very injurious to the companies or countries whose securities are involved. For a time after the October 2008 fiasco on Wall Street, the U.S. halted short sales on financial institution securities to prevent them from getting into an even deeper hole. With the shakey fiscal condition of some European countries, it is no surprise that the halt on short selling was put in place.
0-0-0-0
Much was written during the period of the "Arab Spring" earlier this year and how the social media such as Facebook and Twitter were a very important part of mobilizing pro-democracy public sentiment in Egypt and elsewhere. Some countries sought to head off such communications through various technological schemes, with mixed success.
Now Britain is looking at what it sees as the other side of the coin with the social media allegedly being used to mobilize destructive riots that erupted in various cities. The violence started as a protest against a police shooting in an area of London. According to the British government, the London violence spread to other cities through the social media. Prime Minister Cameron is exploring ways to shut down such communications in what is turning out to be a free speech vs. public safety issue, an issue not easily resolved.
Will keep on looking for some good news at home or abroad, but such seems to be quite scarce.
Wednesday, August 10, 2011
SCORCHING THE FINANCIAL EARTH
Last November 22, my posting was entitled "GOP: Putting the Torch to Everything." The thought was inspired by economist Paul Krugman's inclusion of the GOP in his "Axis of Depression" which included China and Germany because of their opposition to the Federal Reserve plan to purchase $600 billion in government bonds to help drive down interest rates and contribute to economic growth. The need to use monetary policy came because fiscal policy, meaning at the time more federal spending, was blocked in Congress by the GOP backed by the obstructionist tea party (TP) and its fellow traveling fiscal hawks on the right right wing of the GOP.
With the debt ceiling legislation passed with its short term, remedy-light promises for cutting federal spending, and with Congress on vacation where it could do no further damage, it seemed like a time for a breather from the political angst rippling out of Washington everyday. Ah, for the good old days of just two weeks ago. Like the Cold War of yesteryear, just two weeks ago we knew who the enemy was and could try to protect ourselves, emphasis on "try".
But then, out of the cosmos came the credit rating agencies, particularly Standard & Poor (S&P) to gain immediate membership and perhaps leadership in Krugman's Axis of Depression. The three major credit agencies, S&P, Moody and Fitch, had been giving warning about downgrading the country's AAA credit rating because of the fiscal ill-health of the federal government. But there were few who expected the magnitude of the negative impact on the financial world when S&P lowered the U.S. credit rating from AAA to AA+ last Friday. Within two trading days on Wall Street, the Dow index dropped more than 1,100 points, bringing back analyst comparison with the debacle of October 2008 when the fall of Lehman Brothers triggered a Wall Street collapse and the Great Recession which still seems to be with us. In all fairness to S&P it should be noted that there were economic indicators and the fiscal troubles in Europe which contributed to the huge Dow decline.
Aside from the immediate negative impact in financial markets, the really troubling aspect of the S&P downgrade is that that agency brushed aside the fact that its analysis was based, at least in part, on some faulty data. S&P chose to give emphasis to subjective factors, meaning its view of Washington politics and the inability of the players there to deal effectively with the country's fiscal problems, as the primary reason for the credit downgrade. And if that resort to subject analysis isn't enough, there is also the troubling fact that S&P and other rating agencies were among the villains who brought about the collapse of the housing market by overrating mortgage-backed bond issues which were huckstered to investors. So how reliable are they in judging the fiscal health of nations? (See previous post)
Not content with lowering the U.S. credit rating, S&P then proceeded to downgrade the ratings of financially troubled Fannie Mae and Freddie Mac whose holdings of untold numbers of bad mortgages had forced them to keep coming back to the government for bailout money. Those downgrades were overdue. At the same time, S&P lowered the ratings on some Israeli bonds backed by the U.S. government.
Still not finished, on Monday S&P also lowered the ratings on five large insurance companies from AAA to AA+ and warned that further downgrades may be ahead. On the same day it lowered the outlook on five other firms from stable to negative, including Warren Buffet's Berkshire Hathaway. Not content with all of that, S&P also lowered the ratings on some other firms who support credit by loaning to other banks.
And there may be more trouble ahead at the state and local levels. Even before the debt ceiling agreement in Congress, the Moody rating firm warned that at least five states are in trouble because of high levels of reliance on federal funds and the high number of federal employees in the state. If these states are downgraded they will have to pay higher interest rates to continue borrowing in the credit markets. And such downgrading is not likely to be confined to just five states. So far Moody and Fitch are staying with the AAA rating for the federal government.
The bottom line in all of this is that S&P, Moody, and Fitch by their in-house data and subjective political analyses have had or potentially will have a major negative effect on the financial markets, and all of the rippling effects are as yet unknown. If the TP and right wing extremists think the federal government is too big and too intrusive in our lives, what about these rating agencies who can and have already shaken the financial world here and abroad and have cost millions of us collectively to lose trillions of dollars in the 401k plans and other investments. We have heard disparagingly of "too big to fail;" how about "too arrogant to roam freely to scorch the financial earth."
With the debt ceiling legislation passed with its short term, remedy-light promises for cutting federal spending, and with Congress on vacation where it could do no further damage, it seemed like a time for a breather from the political angst rippling out of Washington everyday. Ah, for the good old days of just two weeks ago. Like the Cold War of yesteryear, just two weeks ago we knew who the enemy was and could try to protect ourselves, emphasis on "try".
But then, out of the cosmos came the credit rating agencies, particularly Standard & Poor (S&P) to gain immediate membership and perhaps leadership in Krugman's Axis of Depression. The three major credit agencies, S&P, Moody and Fitch, had been giving warning about downgrading the country's AAA credit rating because of the fiscal ill-health of the federal government. But there were few who expected the magnitude of the negative impact on the financial world when S&P lowered the U.S. credit rating from AAA to AA+ last Friday. Within two trading days on Wall Street, the Dow index dropped more than 1,100 points, bringing back analyst comparison with the debacle of October 2008 when the fall of Lehman Brothers triggered a Wall Street collapse and the Great Recession which still seems to be with us. In all fairness to S&P it should be noted that there were economic indicators and the fiscal troubles in Europe which contributed to the huge Dow decline.
Aside from the immediate negative impact in financial markets, the really troubling aspect of the S&P downgrade is that that agency brushed aside the fact that its analysis was based, at least in part, on some faulty data. S&P chose to give emphasis to subjective factors, meaning its view of Washington politics and the inability of the players there to deal effectively with the country's fiscal problems, as the primary reason for the credit downgrade. And if that resort to subject analysis isn't enough, there is also the troubling fact that S&P and other rating agencies were among the villains who brought about the collapse of the housing market by overrating mortgage-backed bond issues which were huckstered to investors. So how reliable are they in judging the fiscal health of nations? (See previous post)
Not content with lowering the U.S. credit rating, S&P then proceeded to downgrade the ratings of financially troubled Fannie Mae and Freddie Mac whose holdings of untold numbers of bad mortgages had forced them to keep coming back to the government for bailout money. Those downgrades were overdue. At the same time, S&P lowered the ratings on some Israeli bonds backed by the U.S. government.
Still not finished, on Monday S&P also lowered the ratings on five large insurance companies from AAA to AA+ and warned that further downgrades may be ahead. On the same day it lowered the outlook on five other firms from stable to negative, including Warren Buffet's Berkshire Hathaway. Not content with all of that, S&P also lowered the ratings on some other firms who support credit by loaning to other banks.
And there may be more trouble ahead at the state and local levels. Even before the debt ceiling agreement in Congress, the Moody rating firm warned that at least five states are in trouble because of high levels of reliance on federal funds and the high number of federal employees in the state. If these states are downgraded they will have to pay higher interest rates to continue borrowing in the credit markets. And such downgrading is not likely to be confined to just five states. So far Moody and Fitch are staying with the AAA rating for the federal government.
The bottom line in all of this is that S&P, Moody, and Fitch by their in-house data and subjective political analyses have had or potentially will have a major negative effect on the financial markets, and all of the rippling effects are as yet unknown. If the TP and right wing extremists think the federal government is too big and too intrusive in our lives, what about these rating agencies who can and have already shaken the financial world here and abroad and have cost millions of us collectively to lose trillions of dollars in the 401k plans and other investments. We have heard disparagingly of "too big to fail;" how about "too arrogant to roam freely to scorch the financial earth."
Sunday, August 7, 2011
AT HOME AND ABROAD: U.S., ISRAEL, CHINA
The Standard & Poor rating service is becoming something of a handmaiden to the tea party (TP) and fellow traveling right wing fiscal hawks who seem to have an interest in aggravating our fiscal problems rather than seeking solutions. At least that's the way I view S&P's decision on Friday to downgrade the country's AAA credit rating. Moody and Fitch, the other two major credit rating firms, are sticking with the AAA rating, although both have served notice that they will be watching the U.S. credit standing with a critical eye.
In a recent posting I was critical of all the credit rating agencies in their role as judges of any country's credit standing, although there is enough evidence to question the fiscal viability of such countries as Greece, Ireland, Portugal, and perhaps a few other European countries. My point in that posting was that these private credit rating agencies were the same ones who were knowingly giving high investment ratings to mortgage-backed bonds being huckstered by investment banks such as Goldman Sachs. The high ratings were given even though there was plenty of evidence to know that the bundle of mortgages serving as collateral on a bond issue was loaded with subprime housing loans that were almost certain to go bad.
So why should we give them any more credibility when it comes to assessing a country's credit worthiness? In the case of the S&P downgrading the U.S.'s AAA rating, the Obama administration protested that the model used by S&P for analysis was off by several trillion dollars. S&P paused briefly in making the decision final, but quickly went ahead with the original downgrade decision. What really caught the eye (or ear) was that S&P acknowledged a $2 trillion error in its calculation but it didn't make a difference relative to other data points such as the ratio of debt to gross domestic product. The $2 trillion error didn't "make a material difference," according to S&P.
Then came the subjective political judgment on risk with S&P saying its decision also considered the slowness of Congress raising the debt ceiling and the political infighting involved. It was akin to the TP modus operandi -- we know where we want to go and that is where we are going regardless of the facts and how what we do may negatively affect the U.S. fiscal credibility in the world and the world economy itself. The only saving grace, at least in my initial reaction, is that ultimately it won't be the S&P decision that drives the bond market and collateral effects, but the judgment of investors in the safety of U.S. bonds. Given the shakey fiscal condition of some European countries, the U.S. bond market is likely to remain the best poker game in town. Now to turn the corner and go abroad.
0-0-0-0-0
Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians using the pre-l967 borders as a starting point for negotiations. This comes after Netanyahu several weeks ago denounced President Obama's proposal that the l967 borders be the basis of new talks, but with the recognition that land swaps will be a necessary part of any agreement, such swaps reflecting the reality of where Israel has established new or expanded settlements.
The Netanyahu offer, agreed to in written form with the U.S., had the clear appearance of a phony gesture concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass the peace talks and go to the U.N. this fall to seek recognition of Palestine as an independent state. Both the U.S. and Israel figure they have a lot to lose if the Palestinians pursue their U.N. strategy for recognition. Recognition would put international pressure on Israel to make concessions on various outstanding economic and security issues. The U.S. stands to lose even more friends in the Muslim world if it votes against Palestinian recognition, as it almost certainly would if recognition comes to a vote. As of this posting, the Palestinians have rejected the Netanyahu offer. But on the unending Israeli-Palestinian confrontation, there is no such thing as the final word.
0-0-0-0-0
There was another outbreak of violence in China's predominantly Muslim province of Xinjiang in northwest China. This time it was a rather mild outbreak compared with previous violence between the Muslim Uighurs and the Chinese Han minority. The basic Uighur complaint is that Beijing development policies, such as development of oil and natural gas resources, discriminate in favor of the Han. That has been the Uighur charge against China.
What struck me was farther down in the story with China saying that the Uighur ringleaders received their training in firearms and explosives in Pakistan! Pakistan has long been a staunch ally of China in China's long border dispute, including a war, with India, Pakistan's number one enemy. So Pakistan, or at least the northeast frontier region bordering Afghanistan, has now become an equal opportunity training camp for terrorists, a charge we have long made about Taliban and al-Qaeda safe havens in Pakistan.
To conclude, the world at home and abroad has become so jumbled and messy that it may be time to step through Alice's looking glass in search of an alternative reality.
In a recent posting I was critical of all the credit rating agencies in their role as judges of any country's credit standing, although there is enough evidence to question the fiscal viability of such countries as Greece, Ireland, Portugal, and perhaps a few other European countries. My point in that posting was that these private credit rating agencies were the same ones who were knowingly giving high investment ratings to mortgage-backed bonds being huckstered by investment banks such as Goldman Sachs. The high ratings were given even though there was plenty of evidence to know that the bundle of mortgages serving as collateral on a bond issue was loaded with subprime housing loans that were almost certain to go bad.
So why should we give them any more credibility when it comes to assessing a country's credit worthiness? In the case of the S&P downgrading the U.S.'s AAA rating, the Obama administration protested that the model used by S&P for analysis was off by several trillion dollars. S&P paused briefly in making the decision final, but quickly went ahead with the original downgrade decision. What really caught the eye (or ear) was that S&P acknowledged a $2 trillion error in its calculation but it didn't make a difference relative to other data points such as the ratio of debt to gross domestic product. The $2 trillion error didn't "make a material difference," according to S&P.
Then came the subjective political judgment on risk with S&P saying its decision also considered the slowness of Congress raising the debt ceiling and the political infighting involved. It was akin to the TP modus operandi -- we know where we want to go and that is where we are going regardless of the facts and how what we do may negatively affect the U.S. fiscal credibility in the world and the world economy itself. The only saving grace, at least in my initial reaction, is that ultimately it won't be the S&P decision that drives the bond market and collateral effects, but the judgment of investors in the safety of U.S. bonds. Given the shakey fiscal condition of some European countries, the U.S. bond market is likely to remain the best poker game in town. Now to turn the corner and go abroad.
0-0-0-0-0
Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians using the pre-l967 borders as a starting point for negotiations. This comes after Netanyahu several weeks ago denounced President Obama's proposal that the l967 borders be the basis of new talks, but with the recognition that land swaps will be a necessary part of any agreement, such swaps reflecting the reality of where Israel has established new or expanded settlements.
The Netanyahu offer, agreed to in written form with the U.S., had the clear appearance of a phony gesture concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass the peace talks and go to the U.N. this fall to seek recognition of Palestine as an independent state. Both the U.S. and Israel figure they have a lot to lose if the Palestinians pursue their U.N. strategy for recognition. Recognition would put international pressure on Israel to make concessions on various outstanding economic and security issues. The U.S. stands to lose even more friends in the Muslim world if it votes against Palestinian recognition, as it almost certainly would if recognition comes to a vote. As of this posting, the Palestinians have rejected the Netanyahu offer. But on the unending Israeli-Palestinian confrontation, there is no such thing as the final word.
0-0-0-0-0
There was another outbreak of violence in China's predominantly Muslim province of Xinjiang in northwest China. This time it was a rather mild outbreak compared with previous violence between the Muslim Uighurs and the Chinese Han minority. The basic Uighur complaint is that Beijing development policies, such as development of oil and natural gas resources, discriminate in favor of the Han. That has been the Uighur charge against China.
What struck me was farther down in the story with China saying that the Uighur ringleaders received their training in firearms and explosives in Pakistan! Pakistan has long been a staunch ally of China in China's long border dispute, including a war, with India, Pakistan's number one enemy. So Pakistan, or at least the northeast frontier region bordering Afghanistan, has now become an equal opportunity training camp for terrorists, a charge we have long made about Taliban and al-Qaeda safe havens in Pakistan.
To conclude, the world at home and abroad has become so jumbled and messy that it may be time to step through Alice's looking glass in search of an alternative reality.
Wednesday, August 3, 2011
THE HIGH PRICE OF BIPARTISANSHIP
It seems that whenever Congress and President Obama cobble together major domestic legislation tailored to get bipartisan support the end result is a lopsided, so-called compromise victory for the GOP and the wealthy. This is the real outcome regardless of Democratic efforts to find some silver lining in the debt ceiling agreement. We hear some Democrats tout how they saved medicare, put the Pentagon budget on the line, and how they succeeded in avoiding another debt ceiling battle until after the 2012 election. But for the GOP, pushed by the tea party (TP) and fellow traveling kamikaze-like fiscal hawks, the victory was in the $2.1 - 2.5 trillion in spending cuts over the next decade while excluding any revenue increases by closing tax loopholes and tax give- aways to the wealthy and large corporations.
The last time "bipartisanship" blossomed so visibly was late last year in the special session of Congress following the huge GOP victory in the congressional elections which gave them control of the House and set the stage for this year's display of how broken the congressional branch of government really is. The 2010 special session preserved the Bush income tax cuts which particularly benefited the wealthy, along with aiding the wealthy in preserving the big benefits of the estate tax. This is not to say that President Obama and the Democrats got nothing out of the deal. The extension of benefits for the unemployed and the disguised stimulus of a one-year, 2 percentage point reduction in the social security payroll tax were also included in the fiscal package. Further extension of these Democratic pieces of the package were not included in the debt ceiling agreement just passed.
In this week's minimalist agreement the Democrats are quick to point out that tax reform and revenue increases are possible this fall. That's when a special 12-person "bipartisan" (again in quotation marks) congressional committee submits its vote-up-or-down proposal on a further increase of about $1.5 trillion to be added both to spending cuts and the debt ceiling This would be added to the approximately $900 billion provided in a two-step increase between now and the fall. Lots of luck. Any proposal from the special committee that includes new revenues that look like a tax increase has dim prospects of passing, at least in my opinion. As a side note, the establishment of a special committee further indicates how broken Congress is that it can't conduct its business through normal processes.
If the GOP could kill revenue increases in the deal just completed, there is no reason to believe it can't do the same this fall. Congressional rejection of the special committee proposal would trigger an across-the-board cut in spending, including a big reduction in the Pentagon budget but exclude cuts in medicaid and social security. The argument is made that the GOP may go for the special committee package to avoid cutting defense spending. But it should be noted that the tea party wants reductions in the Pentagon budget and the TP already has demonstrated how the TP tail can wag the GOP dog.
The upshot of the minimalist deal just signed into law is that it just kicks the can down the road. In 2013 this battle will have to be fought again and the President, whoever he or she may be, and Congress cannot continue to avoid the really big decisions needed to get the country's fiscal house in order. Such decisions could very well include ways to control social security and health care spending, as well as tax reform to increase revenues.
Also, keep in mind that the Bush tax cuts expire at the end of 2012 which means a post-election lame duck session of Congress is again likely. The GOP will again seek to protect those in the top income brackets and the Democrats will take a stand on preserving the tax cuts for the middle class. The same positions were taken in the post-election 2010 special session and we saw how that turned out. The determining fact is that in these great taxing/spending battles, the GOP, stiffened by TP intransigence, seems willing to risk an economic debacle while the Democrats are not. Translated, this means the GOP can take a no compromise stand to get its way, maneuvering the Democrats into a so-called compromise that undermines the basic Democratic political ideology and alienates the progressive wing of the party while the GOP walks away with its ideology intact as it continues to pander to its extreme right wing base.
How many more "bipartisan" compromises can the Democrats afford?
The last time "bipartisanship" blossomed so visibly was late last year in the special session of Congress following the huge GOP victory in the congressional elections which gave them control of the House and set the stage for this year's display of how broken the congressional branch of government really is. The 2010 special session preserved the Bush income tax cuts which particularly benefited the wealthy, along with aiding the wealthy in preserving the big benefits of the estate tax. This is not to say that President Obama and the Democrats got nothing out of the deal. The extension of benefits for the unemployed and the disguised stimulus of a one-year, 2 percentage point reduction in the social security payroll tax were also included in the fiscal package. Further extension of these Democratic pieces of the package were not included in the debt ceiling agreement just passed.
In this week's minimalist agreement the Democrats are quick to point out that tax reform and revenue increases are possible this fall. That's when a special 12-person "bipartisan" (again in quotation marks) congressional committee submits its vote-up-or-down proposal on a further increase of about $1.5 trillion to be added both to spending cuts and the debt ceiling This would be added to the approximately $900 billion provided in a two-step increase between now and the fall. Lots of luck. Any proposal from the special committee that includes new revenues that look like a tax increase has dim prospects of passing, at least in my opinion. As a side note, the establishment of a special committee further indicates how broken Congress is that it can't conduct its business through normal processes.
If the GOP could kill revenue increases in the deal just completed, there is no reason to believe it can't do the same this fall. Congressional rejection of the special committee proposal would trigger an across-the-board cut in spending, including a big reduction in the Pentagon budget but exclude cuts in medicaid and social security. The argument is made that the GOP may go for the special committee package to avoid cutting defense spending. But it should be noted that the tea party wants reductions in the Pentagon budget and the TP already has demonstrated how the TP tail can wag the GOP dog.
The upshot of the minimalist deal just signed into law is that it just kicks the can down the road. In 2013 this battle will have to be fought again and the President, whoever he or she may be, and Congress cannot continue to avoid the really big decisions needed to get the country's fiscal house in order. Such decisions could very well include ways to control social security and health care spending, as well as tax reform to increase revenues.
Also, keep in mind that the Bush tax cuts expire at the end of 2012 which means a post-election lame duck session of Congress is again likely. The GOP will again seek to protect those in the top income brackets and the Democrats will take a stand on preserving the tax cuts for the middle class. The same positions were taken in the post-election 2010 special session and we saw how that turned out. The determining fact is that in these great taxing/spending battles, the GOP, stiffened by TP intransigence, seems willing to risk an economic debacle while the Democrats are not. Translated, this means the GOP can take a no compromise stand to get its way, maneuvering the Democrats into a so-called compromise that undermines the basic Democratic political ideology and alienates the progressive wing of the party while the GOP walks away with its ideology intact as it continues to pander to its extreme right wing base.
How many more "bipartisan" compromises can the Democrats afford?
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