I came across this terrific post by Tom Engelhardt via Michael Panzner. Englehardt takes a cold, hard look at the Bush Adminsitration’s performance and practices, and argues you don’t need to be an economist to predict that whatever limited efforts they make to address the credit crisis are sure to fail. After all, everything they’ve attempted to accomplish had ended badly.
It’s hard to remember back to 2000, when Bush promised compassionate conservatism (although Paul Krugman reminds us that those who looked at his proposals knew better) and a competent Administration. Bush was an MBA, so we’d have a President who would act like a capable CEO. Even the New York Times talked up that wishful line of thinking, ignoring the fact that Bush’s qualifications were that he had been a part-time Governor (that office is very weak in Texas), had worked in his family’s oil business, and was co-owner of a baseball team. In other words, he had ridden his entire life on his family’s coattails. And my Texas buddies (very successful oilmen and investors) had nothing nice to say about their former Governor even before he proved their low opinion of him to be well founded.
Most Americans look at Bush and see a path of destruction: bullheaded refusal to abandon failed initiatives, extraordinary success in tarnishing America’s image, fiscal irresponsibility, further enrichment of an upper class that didn’t need any more help. Yet undergriding it is an extraordinary degree of incompetence, as Englehardt reminds us.
I try to avoid featuring others’ posts long form, but this piece merits being read in its entirety. If you like it, be sure to go to the Tomdispatch.com site and sign up for its several-times-a-week e-mailing.
From Engelhardt:
No one was prepared for the storm when it hit. The levees meant to protect us had long since been breached and key officials had already left town. The well-to-do were assured of rescue, but for everyone else trapped inside the Superdome in a fast-flooding region, there was no evacuation plan in sight. The Bush administration, of course, claimed that it was in control and the President was already assuring his key officials that they were doing a heck of a job.
No, I’m not talking about post-Katrina New Orleans. That was so then. I’m talking about the housing and credit crunches, as well as the Bear Stearns bailout, that have given the term “bear market” new meaning.
Now, don’t get me wrong — when it comes to the arcane science of economics, like most Americans, I’d benefit from an “Economics for Dummies” course. What I do know something about, though, is history, a subject that hasn’t been on the Bush administration’s course curriculum since the President turned out not to be Winston Churchill and conquered Iraq refused to morph into occupied Germany ‘n Japan 1945….
Just consider the record: Administration officials proved incapable of rebuilding two countries that their military occupied and damaged. In Afghanistan and Iraq, while talking up the President’s “freedom agenda,” they were the equivalent of a natural disaster, a whirlwind of destruction.
In the case of Iraq, in disbanding its military, its government, and even its economy, they were literal nation-wreckers. On taking Baghdad, their first act of omission was to let the capital be looted. (“Stuff happens,” commented Secretary of Defense Donald Rumsfeld at the time.) Soon after, the administration’s new viceroy in Baghdad, L. Paul Bremer III, promptly plunged the country into the equivalent of the Great Depression — without a Bear Stearns bailout in sight.
In the case of Afghanistan, only a staggering boom in opiate growing — the country now supplies an estimated 93% of the global market in illegal opiates, bringing about four billion dollars into the country — has slightly offset the disaster of “liberation.” By just about any other measure, Afghanistan is a wreck.
In the case of New Orleans, the Bush administration not only couldn’t rebuild an American city that nature (and the Army Corps of Engineers) damaged, but turned a natural disaster into a man-made catastrophe that has yet to end.
Despite a reputation for being the most disciplined, tough, and focused administration in memory, Bush’s men and women couldn’t even secure their fondest inside-the-Beltway dream: constructing a generation-long Pax Republicana in Washington….
And now, with a mere ten “lame duck” months to go, comes the American economy…
You don’t faintly need to understand economics to grasp the immediate danger. The people overseeing the handling of this crisis have done little these last years but hand money over to the rich, while running American power into the dirt.
Let me review our history lesson for a moment: No to nation-rebuilding, no to city-rebuilding, no to Congressional majority-building…
Who dares imagine that the people who brought you Iraq, the war, could begin the rebuilding of an economy, or even successfully caulk the cracks in the levees of a system that, in its complexity, puts Iraq’s feeble economy to shame?
In some ways, an administration — whatever its periodic changes of personnel — can be compared to an individual. At a certain age, its urges become predictable, its habits set, its limits largely known. While change may be possible, you wouldn’t want to bet your house on it.
So what exactly has the Bush administration proven itself good at? The twin skills of destruction and looting would stand at the top of any list. Perhaps that’s because it chose to put its “eggs” in only two baskets — those of the U.S. military and crony corporations.
Awed by the shock-and-awe force of forces that fell into their hands, administration officials moved to transfer as many powers of civil governance as possible to the Pentagon. From diplomacy to disaster relief, nation-building to intelligence gathering, an organization built only to destroy was designated as the go-to outfit for activities normally associated with those who have building in mind.
At the same time, the government was being staffed, top-to-bottom, with ill-prepared political pals, while a small set of crony corporations, of which Halliburton is certainly the best known, was given the nod in every rebuilding situation. It really didn’t matter where you looked, they were the ones camped out, making money, on the landscape of destruction. With their no-bid, cost-plus contracts, these companies ran up the hours and then tended to jump ship when the going got bad. The same corporations that had essentially looted Iraq — it was labeled “reconstruction” — were the first ones called in when New Orleans went down….
Unsurprisingly, the Bush administration has proved serially incapable of building anything, even — in the long run — their own machine. And, from the Enron moment to the Bear Stearns one, whenever it looked like the Titanic might have hit an iceberg, it was a lock that those passengers assigned to the limited places in the lifeboats wouldn’t be from steerage (or be weighed down with subprime mortgages).
So rebuilding. No. Saving people who aren’t already friends. No. Doing a heck of a job in a crisis. No. Now, our latest and greatest crisis is upon us, the sort that, in a matter of weeks, has sent media commentators and pundits from reluctant discussions of whether we might be heading into a recession straight to references to the “d” word, “1929,” and the Great Depression. And they’re not alone. A recent USA Today/Gallup poll indicates that a startling 59% of Americans already believe we’re heading for a long-term depression, not a recession (and 79% are worried about the possibility). Leave the definitional details to the experts. Most Americans have undoubtedly assessed the Bush administration’s proven incapacity in perilous times and drawn the logical conclusions.
Ten months is a long, long time when only their hands are near the pilot’s wheel of the ship of state and water’s already seeping through the hull. It’s an eon for an administration capable of sinking New Orleans in a matter of days, and Iraq in little more than months. Or, thought of another way, it’s plenty of time if your expertise happens to lie in deconstruction. After all, barring a miracle, you’re talking about the little administration that couldn’t, no matter how hard Ben Bernanke may try.
So, even if you, like me, know next to nothing about economics, you already know enough to be afraid, very afraid.
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I would feel a little bit better if Dick Cheney ( the bunker architect) would resign due to health issues.
The article sums it up. Too bad it has taken so many calamities for the “people” to catch on. The US trade policies are the next time bomb. It’s like watching a slow mo train wreck in progress. Only the crash will get attention.
Even now, It’s not so clear that the “people” have caught on. We are all home stuffing our bellies,glued to the tv, breathlessly watching Fox “news”, and ready to blame the democrats (if they are unlucky enough to win)for causing the recession by raising taxes and for “losing” the war by withdrawing troops. The Republican machine has destroyed the country’s ability for rational thought.
On the basis of the theory that even a blind squirrel finds a nut every now and then, it would seem that the Bush Administration’s record of destruction of the Constitutional and ideological foundations of our Republic is rooted in something more nefarious than incompetence.
Grover Norquist, an ideological sibling of both Bush and Cheney and a leading voice for “(neo)conservative” political interests, was very clear regarding their goal: To make our government small [and weak] enough to drown in a bathtub.
I guess everybody thought he was joking.
I really think that America as a democracy is now completely dysfunctional.
Almost all news is now presented as entertainment, with fast-moving images, dramatic sound, and emphasis on attention-grabbing sound-bites and image-bites.
The logic and reasoning required for democracy are founded in the written word. Most Americans obtain their information in audio-visual form rather than by READING IT.
Television is a medium perfectly designed for generating an emotional response (through sound and image). That emotional response will override the power of reasoning. This is the foundation of any successful TV commercial today.
Take for example Anderson Cooper 360 on CNN. It is a total joke. Everything moves so fast that you could never have an in-depth sober discussion of any single issue. It is purposely designed to be that way for an audience that has an increasingly short attention span. There seems to be a need to constantly accelerate the pace at which images are shown. I find this very disturbing, and I find it even more disturbing that no one seems to ever comment on this basic fact.
I sincerely believe that it is this very television that is at the root of the socially dysfunctional behaviour that in turn resulted in the impending breakdown of our financial system. The TV was introduced in the 1950s and since then has profoundly changed the culture. Everyone is immersed in exposure to advertisements in a way that never happened before (yet this is very much taken for granted). This drove an ever-increasing popular bias for consumption as a way to build one’s self-image (and need for status). It also had many other socially destructive effects as well.
The home mortgage crisis that has Wall Street and consumers worried about an economic meltdown is prompting many in the U.S. Congress to come to the rescue of hard-hit states that just happen to be crucial to their own election-year success.
Florida, Ohio, Michigan and California have some of the highest concentrations of home foreclosures. They also are vote-rich states that congressional and presidential candidates need to win in November’s elections.
http://www.reuters.com/article/bondsNews/idUSN2843835220080330
Americans are in for an Argentina moment when the currency collapses as this no pain ever entitlement society tries to spend itself into prosperity. “W” is just a wheel in the machine. The American people are getting what they deserve.
“A recent USA Today/Gallup poll indicates that a startling 59% of Americans already believe we’re heading for a long-term depression, not a recession (and 79% are worried about the possibility).”
This is a very profound change in crowd psychology. The media is now bandying about the “D” word in a way that hasn’t been seen before. It used to be socially frowned upon for the longest time to even mention the “D” word, and now it it has clearly become socially acceptable. Most people have never observed this prevailing level of fear in their lifetime.
This is no garden-variety recession (with a “V-shaped” recovery) as most economists still assume. The piper is about to be paid.
Thank you MA,I carried a copy of your “meditations when I hitchhiked around the country in the late 60’s.I took Grover very seriously,and still do,although I do not think many of his adherents have given much thought to the quality of life that even the wealthy will have if he realizes his dream.Like the followers of Pol Pot they are true believers who need their world to be simple and entirely controllable in order to feel safe.And it will work just as well as it always has.however I do not believe that Malevolence excludes incompetence .
Great minds think alike. I spent yesterday writing something along the same line on my blog:
“The housing bubble popped, the banks were shown to have no clothes, all branches of government were asleep at the wheel, and the only active players on the field are the banks and the Federal reserve.
Will government react to this crisis? No, or at the very least, not before a crash. You will hear plans and platitudes, investigations and calls for reform, but the two major parties need big buck for the election fight this year. There will be no perp walk for the people who bundle campaign contributions. (Or at least not till there are riots in the streets.) “
http://whatwilloccur.blogspot.com/2008/03/score-card-up-till-now-and-tomorrows.html
The most you will get, is the least you are willing to accept. I think this sums up governance in a democratic republic. When people criticize washington elites, I wish they would criticize the voters who are ultimately responsible.
anonymous 8:59 said: “The Republican machine has destroyed the country’s ability for rational thought.” Any evidence for that? you can’t let the voters off the hook like that. They can think, if they want to put in the effort
Engelhardt can’t even mount a reasonable criticism of Bush regarding Iraq and Afghanistan. The flaw is Bush expecting muslims to do things that are contrary to Islam. When has that happened in the last 1300 years? There is no “competent” way to make muslims suddenly act like non-muslims. What is Engelhardts plan for this? He is as clueless as Bush
Blueskies
I am an Asian here in the States for just 8 years now. I really do not understand why on gods green earth, the American Citizens have to elect Bush. The people of this country have unlimited access to information and can educate themselves as they see fit. This is not a third world country where the majority are illiterate (a practical description. Not just enough to read and write their name). This is not a country where the population in manipulated with force or bribery. But the Americans in their infinite wisdom CHOOSE to believe the propaganda. You had a choice, a chance, and you F***ed it up.
Democracy and freedom are taken for granted here. So much so that the people seem to be willing to be led to the slaughter. Even sheep have an instinct and become uneasy when they are let to slaughter.
All we can do now is to stop crying and blaming the administration as if it was forced down on us. All the American citizens are responsible for this mess and should not just take the easy way out and blame someone else.
I, an outsider seem to know more about the principles on which this great country was founded on. Things will get worse, much worse until most of the citizens are forced to accept responsibility and this, I hope will lead to a big change in the way of thinking (a revolution hopefully), one in which I hope to participate.
Ven
Ven,
I could go on for days on that topic, but let me give you a couple of thoughts. First, until perhaps 20 years ago, the media in this country did a reasonably good job of news reporting (real media watchers can probably give a better fever chart of the decline). Americans trust their institutions. If you said “media reporting is biased,” they would assume it was biased in favor of liberals, not more fundamentally corrupt. And pictures are powerful, I am convinced, although I cannot prove it, that the US public has been mesmerized by TV.
Second, to a much greater than most people realize, their views have been skillfully manipulated. See the four-part BBC series “Century of the Self” which you can view for free on Google Video. That will explain a lot.
Third, Bush was able to pull off and hold together an unholy alliance of evangelicals and big business.
Fourth, Florida was stolen. Gore should have won, and not by virtue of hanging chads. See Greg Palast on how 90,000+ black voters were scrubbed, Assuming normal voter turnout and the normal propensity of blacks to vote Democratic (90%), he would have won Florida. There were also tricks played in Ohio, for instance, voting machines removed in black precincts to assure long lines and deter voting; anomalies in the electronic voting that was entirely in favor of the Republicans (even Christopher Hitchens, no fan of the left, said it needed to be investigated).
Yves,
Thank you for your thoughts.
You did provide links to the BBC video before and I did see all the parts. Needless to say, it did change the way I look at and perceive things.
Ven
Yves, take a look!!!
Lessons from leveraging and pains of deleveraging
http://www.todayszaman.com/tz-web/yazarDetay.do?haberno=135986
The financial intermediary institutions, mostly traditional banks which can fund their loans and securities (assets) through either equity capital or debt (liabilities), are highly leveraged, i.e., their total asset to equity capital ratio is very high; the study estimates roughly 12. The study shows that during the last two decades, the asset growth and leverage growth of major commercial banks have been positively correlated. In the pro-cyclical “leverage circle” that helps us understand the nature of financial contagion, during an asset price boom with stronger balance sheets, banks leverage more and increase balance sheet size by lending more. But during an asset price bust, with weaker balance sheets, they deleverage and decrease balance sheet size by lending less.
The study assumes in its baseline scenario that deleveraging by 5 percent and through recapitalization, the banking system will recoup about half of its $200 billion estimated loss. Based on these and other plausible assumptions, the study estimates that the balance sheets of financial intermediary institutions, due to their capital losses from subprime mortgage-related securities, will contract by $1.98 trillion, of which $910 billion will be a reduction in their lending to households and businesses. Such a sharp fall in the supply of credit to non-leveraged borrowers will lead to a drop in the rate of growth of real gross domestic product (GDP) by 1-1.5 percent next year. The study cautions that these scary numbers can get scarier …
“”The Republican machine has destroyed the country’s ability for rational thought.” Any evidence for that? you can’t let the voters off the hook like that. They can think, if they want to put in the effort.”
That is a very good point. If you want to give yourself a fighting chance to think, the last thing you want to do is listen to a candidate on TV. Radio, or printed word helps a lot (that works for me anyway) to filter the emotional BS and distractions irrelevant to the discourse.
That has been my attitude since Barbara Walters interviewed Castro, way back then. She was the first American journalist to get an interview with him, and I remember that at the time, it was deemed a big deal. The thing that struck me like a brick was that 85% of the comments received at ABC were…(drum roll please…) about the fact that BW had changed her hairdo!! The content of the interview? Well…I guess it got lost somewhere in the vortex created by the lizard brains of the masses.
Francois,
Your throwaway comment about lizard brain is more central than you might realize. Crudely speaking, humans have three brains that aren’t terribly well integrated: the old reptile brain (fear, anger, autonomous body functions, sexual impulses), the limbic system (emotional/social behavior, notions of fairness and compassion are limbic brain activities) and the cerebral cortex (higher reason). Brain researchers have found that when two areas of the brain are in conflict in the vast majority of cases, the older area of the brain wins.
Arianna Huffington, not knowing about this research, wrote about appeals by the Republicans to the reptile brain. And we’ve all seen them. I live in NYC and I’m not worried about being a victim of terrorism. I know I am far more likely to die in an auto accident, and I still take cars and cross streets. But there are people in places like Saginaw, Miichigan, who have no rational basis for being worried about terrorists, and yet are afraid.
Similarly, look how willing the public at large has been to accept violations of our civil liberties in the name of security. And why don’t people protest? Because they think it’s ineffectual (probably correct) and are afraid of winding up on a list somewhere. Now that we have star chambers beyond the reach of any US court, that isn’t a trivial concern.
I wish I could track how this media (and therefore popular) fixation on appearance and personality took hold. Someone as dour and ugly as Lincoln would be unelectable today. Is it simply that all leads in Hollywood (and therefore all leaders) are good looking? In most of the rest of the world, there are top actors and actresses who fail to meet the US standards for eye candy.
I cringe everytime I read that voters are worried about character.In the vast majority of cases they are focusing on likeabilty rather than substance.
To Yves mostly, but also to Ven and François:
Many thakns for this post and clever comments and answers.
No more words.
Asuk
Well the country deserves what it is getting. They voted for Bush twice and they support no the new right of the government to wiretap any conversation with out a court order. Who said that those willing to give up their rights for security deserved neither? Well this is exactly what voters did: They voted their fears.
I think Mr. Bush would have been a one term President but for 9-11. Remember, his approval rating soared into the ninety percentile range in late 2001. That is pure political capital, the likes of which have never been seen before.
I also think it was a staged event. Yeah, it’s probably blogger suicide for me to say that, but I’ve spent enough time on the subject to know what I’m talking about.
So when I read articles from the likes of people such as Tom Englehardt, telling me how incompetent this administration has been, I kinda feel like he deserves John McCain. Both barrels.
I don’t like deleting comments, but the one expunged was an excessively long rant (the substance wasn’t terrible, truth be told) that was made on six separate posts. I haven’t published a formal policy re comments, but if in doubt, look here and here to get an idea of what will get your comment deleted. Multiple listings of the same content is one of them.
Schacht introduced the ‘New Plan’, Germany’s autarchic attempt to distance itself from foreign entanglements in its economy, in September 1934. Germany had accrued a massive foreign currency deficit during the Great Depression, and it continued into the early years of the Nazis’ reign. Schacht negotiated several trade agreements with countries in South America, and South-East Europe, ensuring that Germany would continue to receive raw materials from those countries, but that they would be paid in Reichsmarks; thus ensuring that the deficit would not get any worse; whilst allowing the Nazis to deal with the gap which had already developed. Schacht also found an innovative solution to the problem of the government deficit by using mefo bills.
See: http://en.wikipedia.org/wiki/Mefo_bills
An imaginary company
Hjalmar Schacht formed the limited liability company Metallurgische Forschungsgesellschaft, m.b.H., or “MEFO” for short. The company’s “mefo bills” served as bills of exchange, convertible into Reichsmark upon demand. MEFO had no actual existence or operations and was solely a balance sheet entity. The bills were mainly issued as payment to armaments manufacturers.
Mefo bills were issued to last for six months initially, but with the provision for indefinite three-month extensions. The total amount of mefo bills issued was kept secret.
Essentially, mefo bills enabled the German Reich to run a greater deficit than it would normally have done. By 1939, there were 12 billion Reichsmark of mefo bills, compared to 19 billion of normal government bonds.
This enabled the government to fund rearmament, and do so in a stealthy manner.
God Bless george Bush!
FEDERAL RESERVE STATISTICAL RELEASE
http://www.federalreserve.gov/releases/h3/Current/
arch 27, 2008
The Board’s H.3 statistical release, “Aggregate Reserves of Depository Institutions and the Monetary Base,”
has been modified to include data on the Primary Dealer Credit Facility, which was approved by the Board of
Governors on March 16, 2008, and began operations on March 17, 2008. The release also includes data on
“other credit extensions.” This category includes credit extensions such as the arrangements >>>
involving
JPMorgan Chase & Co. and The Bear Stearns Companies Inc. that were approved by the Board of Governors on
March 14, 2008, and March 16, 2008
MacroMan has a nice find, in a post aptly entitled Timmy Geithner, SIV Manager!?. He points us to details of the “loan” being arranged by the Fed to support J.P. Morgan’s (JPM) purchase of Bear Stearns (BSC).
It is not a loan at all. The Fed and J.P. Morgan are creating an investment fund, to be managed by BlackRock:
The New York Fed will take, through a limited liability company formed for this purpose, control of a portfolio of assets valued at $30 billion as of March 14, 2008. The assets will be pledged as security for $29 billion in term financing from the New York Fed at its primary credit rate.
JPMorgan Chase will bear the first $1 billion of any losses associated with the portfolio and any realized gains will accrue to the New York Fed.
The money that the Fed and J.P. Morgan will provide is startup capital for the fund. All of it is referred to as “loans”, but that’s facile. Obviously, somebody will own these assets, bear the risk of carrying them, and realize any gains on the fund’s portfolio.
http://seekingalpha.com/article/…ck-managed- fund