Ah, this may be one of those prison camps that don’t exist

As per Paul Craig Roberts:


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Catching up

With the many links I failed to note over the past week

Christopher Ketcham believes the economic crisis will cleanse the land of kitsch, crap and the pimps who market the stuff. This is his silver lining and he considers it a praiseworthy endgame to America's binge-driven consumer culture.

A grim assessment can be found in Michael Hudson's latest essay:

The financial "wealth creation" game is over. Economies emerged from World War II relatively free of debt, but the 60-year global run-up has run its course. Finance capitalism is in a state of collapse, and marginal palliatives cannot revive it. The U.S. economy cannot "inflate its way out of debt," because this would collapse the dollar and end its dreams of global empire by forcing foreign countries to go their own way. There is too little manufacturing to make the economy more "competitive," given its high housing costs, transportation, debt and tax overhead. A quarter to a third of U.S. real estate has fallen into negative equity, so no banks will lend to them. The economy has hit a debt wall and is falling into negative equity, where it may remain for as far as the eye can see until there is a debt write-down.

Mr. Obama's "recovery" plan, based on infrastructure spending, will make real estate fortunes for well-situated properties along the new public transport routes, but there is no sign of cities levying a windfall property tax to save their finances. Their mayors would rather keep the cities broke than to tax real estate and finance. The aim is to re-inflate property markets to enable owners to pay the banks, not to help the public sector break even. So state and local pension plans will remain underfunded while more corporate pension plans go broke.

Mike Whitney argues that:

Eastern Europe is about to blow. If it does, it could take much of the EU with it. It's an emergency situation but there are no easy solutions.

Peter Phillips argues that the Obama administration has not abandoned the neoconservativism of the recent past; it has only softened or 'humanized' this strategic focus so that a fragmented world might accept it as legitimate. Yet, continuing to rely upon this strategy would spell misfortune for more than the non-Americans killed, maimed or jailed by the American security and war apparatus. In fact, militarism has already thoroughly corrupted America's national politics, according to Phillips. The developmental path that would lead the country away from this political impasse begins with an active and self-sustaining anti-war movement.

Chris Hedges warns that the economic crisis, not the "terrorist threat" abroad, might bring down America's democratic republic. The penultimate situation: The economic crisis motivates Americans to take to the streets in defense of their interests and the federal government responds to this "provocation" by declaring martial law, thus abolishing the democratic-popular threat to the security apparatus and the economic sectors that depend on this apparatus.

Tom Englehardt wonders if the current economic crisis will endure until that time when it can meld with the pending ecological catastrophe.

Benjamin Netanyahu will attempt to form the next Israeli government, according to the New York Times. If Netanyahu is successful, the new government will sit on the far right and will not likely include the moderate Kadima party or its leader Tzipi Livni who are expected to join the opposition.

And Rick Santelli's now infamous rant:

Some financial crisis links (9.29.2008)

America on the road to dictatorship?

Joseph Stiglitz writes in the Nation that

To a skeptic, Paulson's [bailout] proposal looks like another of those shell games that Wall Street has honed to a fine art. Wall Street has always made money by slicing, dicing and recombining risk. This "cure" is another one of these rearrangements: somehow, by stripping out the bad assets from the banks and paying fair market value for them, the value of the banks will soar.

There is, however, an alternative explanation for Wall Street's celebration: the banks realized that they were about to get a free ride at taxpayers' expense. No private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price; they finally had found a sucker who would take them off their hands — called the American taxpayer.

Daniel Gros and Stefano Miccosi of the Financial Times observe: "…the largest European banks have become not only too big to fail, but also too big to be saved." From this point they conclude:

With banks that have outgrown their home turf, national treasuries and regulators in Europe are living on borrowed time: they cannot simply develop "road maps" (the only result of various Ecofin discussions of regulatory reform by finance ministers), but must contemplate a worst-case scenario.

To Gros and Miccosi's point, Wolfgang Münchau, also writing in the Financial Times, adds:

Banks once considered as too big to fail have become too big to save. Unlike the German government, the US administration is in a position to save its largest bank, but is not big enough to save its entire financial system.

And:

Without a contraction in the financial sector, the US administration risks a debt explosion, and a sudden withdrawal of foreign financial investors. This is the other big catastrophe looming large in the background. We are facing two big tail risks from different ends. Failing to rescue the banking system could lead to a depression. But so could a rescue if it produced macroeconomic instability [emphasis added].

Yves Smith of Naked Capitalism, the lead source for the comments above, then observes:

But in the course of his discussion, Munchau makes the observation that none have dared face up to: the financial system is too big for governments to rescue. We've given the weaker form of that argument: the US, or even the US plus all the world's central banks, cannot keep a massive, multi-market asset bubble from deflating. But not only can the current financial system be saved, it shouldn't be saved. The debt binge means it is at an unsupportable, bloated scale. It needs to be scaled down to a more viable size, and only that level should get government support [emphasis added].

As reported by the Financial Times, Peer Steinbrück, the German Finance Minister, told the German Parliament that

"The US will lose its status as the superpower of the world financial system. This world will become multipolar" with the emergence of stronger, better capitalised centres in Asia and Europe…. "The world will never be the same again."

And:

"When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative."

John Gray also does not mince words in his assessment of America's predicament. He points out that

Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over.

You can see it in the way America's dominion has slipped away in its own backyard, with Venezuelan President Hugo Chávez taunting and ridiculing the superpower with impunity. Yet the setback of America's standing at the global level is even more striking. With the nationalisation of crucial parts of the financial system, the American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated. In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed [emphasis added].

Unfortunately, for those of us who must live with the consequences of the plan, which is to say, of the political response to the financial crisis, the "creed" in question is likely to survive in some form. In America, Market fundamentalist talk has long coexisted with the remnants of the New Deal State. Economic conservatives made their peace with the New Deal order during Reagan's time. We know, then, that such talk does not need a solid basis in reality to be effective as an ideology. Consequently there is no compelling reason to believe that Americans will completely jettison market fundamentalism because America's finance capitalists have taken a few blows. One possibility has the crisis affirming market fundamentalism because it would serve to legitimize state repression of dissent.

The Chilean option — liberal dictatorship, military or otherwise — stands before America as one 'attractive method' to conserve market fundamentalism as an ideology and a practice.

Floyd Norris of the New York Times reports that the Secretary of the Treasury will gain significant powers because of the bailout legislation.

Some political links (9.24.2008)

Joshua Frank takes a close look at the very inadequate Barak Obama — another "centrist Democrat" — before he suggests

…standing up and voting for what you believe in, no matter how fringe or foolish you are made out to be by others who claim to know better than you. Our democracy is in peril. War rages on. Jobs are scarce and the environment is being destroyed at an exponential rate. Voting on the likelihood of perceived social gains in the short-term is not only erroneous; it is without a true understanding of what it is going to take to bring about real change in this country.

Paul Starr, on the other hand, believes the two parties are sharply divided because of their different and opposed social bases — i.e. he offers a race-based explanation of America's party polarization.

McCain and Obama stand in as proxies for two versions of America. When voters hear Obama, they are responding not just to him but to a new multicultural America that they find attractive or frightening. And when they hear McCain, they are responding to a traditional America — or rather, an idea of that America — that they are determined to preserve or willing to see change.

Paul Craig Roberts believes the Plan to be unfeasible. One reason: The rest of the world has grown tired of American's "arrogance" and empire. This reaction is significant because, as Roberts states, "The US cannot be a hegemonic power without foreign financing." Hyperinflation beckons.

According to a recent Washington Post/ABC News poll, Obama's star has risen with the grim economic news coming from New York and Washington (via Huffington Post).

Patrick O'Conner of Politico reports that House Republicans refused to support the Plan when they met with Vice President Cheney.

The Army Times reports (via Greenwald) that

But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities [link added].

Glenn Greenwald rightly adds:

There's no need to start manufacturing all sorts of scare scenarios about Bush canceling elections or the imminent declaration of martial law or anything of that sort. None of that is going to happen with a single brigade and it's unlikely in the extreme that they'd be announcing these deployments if they had activated any such plans. The point is that the deployment is a very dangerous precedent, quite possibly illegal, and a radical abandonment of an important democratic safeguard. As always with first steps of this sort, the danger lies in how the power can be abused in the future. [emphasis added]