March 22, 2009 - March 28, 2009 | David Seaton's Blog

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Week of March 22, 2009 - March 28, 2009

An outer space laugh riot

March 28, 2009, 2:26PM

Grapes of Wrath Redux?
Sacramento, California's jobless tent city

What is happening? Where are we headed?

Regular News Links readers may recall that I have always maintained that Bush was merely a symptom of a systemic problem, not really a cause.

Barack Obama, it is obvious to me, is a treatment of the symptoms and not any cure for the underlying causes. Simply the re-branding of a defective product.

Obama's apparent strategy in Afghanistan confirms my impression that he is the lampedusian, "change everything, so that nothing changes" figure I have always suspected.

Pakistan, not Afghanistan is the real problem. A stable, un-threatened and prosperous Pakistan would act like a Valium on the whole region.

Stabilizing Pakistan should be the first priority and this does not seem to be the case... far from it.

If the globalized, world economy were doing well, perhaps stabilizing Pakistan would be "doable", but with emerging nations taking the worst hit in this crisis, such an "unlikely lad" as Pakistan is probably not going to make it... in most part due to American meddling... With absolutely catastrophic consequences.

I am afraid that the Obama policy in Afghanistan/Pakistan is not only incorrect, it is frivolous. Not because Obama himself is particularly frivolous, but because the system itself within which he operates is.

I think that because it is so painful, we are taking all of this much more seriously then it deserves to be.

I imagine that if I were a Martian observing this situation from the comfort of my flying saucer I would be peeing my space suit with laughter.

Lucky Martians!

The American Black Hole of Value

March 25, 2009, 4:40PM

Martin Wolf, chief economist of the Financial Times is worried about the Geithner plan, he writes:

The crisis has broken the American social contract: people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. (...) If this scheme works, a number of the fund managers are going to make vast returns. I fear this is going to convince ordinary Americans that their government is a racket run for the benefit of Wall Street. Now imagine what happens if, after "stress tests" of the country's biggest banks are completed, the government concludes - surprise, surprise! - that it needs to provide more capital. How will it persuade Congress to pay up? The danger is that this scheme will, at best, achieve something not particularly important - making past loans more liquid - at the cost of making harder something that is essential - recapitalising banks.

Nobel Prize winner, Joseph Stiglitz, was blunt:

"Quite frankly, this amounts to robbery of the American people. I don't think it's going to work because I think there'll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer."

And of course that other Nobel, Krugman, blogged:

"What an awful mess."

In my opinion there was something much more important than Geithner's plan floated this week:

Are the Chinese just worried about the sagging value of the $1.4 trillion in U.S. Treasuries they hold or are they really on to something? That's the big question now that China's central banker, Zhou Xiaochuan, has called for the greenback to be jettisoned as the world's dominant currency and replaced by a new type of benchmark controlled by the International Monetary Fund. Zhou made his call in an essay that appeared on the website of People's Bank of China, China's central bank, on Monday. It was clearly timed to make a splash in the run-up to the G20 meeting that starts in London on April 2. Calling the use of the dollar as the world's benchmark currency "a rare special case in history," Zhou urged the "creative reform of the existing international monetary system towards an international reserve currency." Zhou said the reserve currency, managed by the IMF, should be "disconnected from individual nations and is able to remain stable in the long run." Talk about a vote of no confidence on the future of the U.S. economy! Washington Post

Of course the moment the US dollar ceases to be the world's reserve currency, the American economy will no longer be able to pay its debts with money it prints in its basement... The jig will up. Meatloaf will take the place of Camembert on many a formerly festive board from that day out.

Pushing aside all the epidemically anecdotal sound and fury, what has happened?

Josh's article from the WSJ

March 24, 2009, 3:23AM

Josh has an article from the Wall Street Journal to which he invites reader's comments.
Here is the principal quote:

Bankers were shell-shocked, especially when Congress moved to heavily tax bonuses. When administration officials began calling them to talk about the next phase of the bailout, the bankers turned the tables. They used the calls to lobby against the antibonus legislation, Wall Street executives say. Several big firms called Treasury and White House officials to urge a more reasonable approach, both sides say. The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.

Josh asks:

"Give it a read. Am I reading it right? What do you make of it?"

What is there to make of it?

If you translate it into street language it means simply: "uppagainsawallmuhfuggah".

We have come to the point where if the Dow Jones goes up "X" number of points it is safe to say that the public weal has been damaged to that extent.
http://seaton-newslinks.blogspot.com/

Obama or "Elvis joins the army"

March 22, 2009, 1:00PM

A charming visit with Jay Leno won't fix it. A 90 percent tax on bankers' bonuses won't fix it. Firing Timothy Geithner won't fix it. Unless and until Barack Obama addresses the full depth of Americans' anger with his full arsenal of policy smarts and political gifts, his presidency and, worse, our economy will be paralyzed. It would be foolish to dismiss as hyperbole the stark warning delivered by Paulette Altmaier of Cupertino, Calif., in a letter to the editor published by The Times last week: "President Obama may not realize it yet, but his Katrina moment has arrived." Frank Rich - New York Times

I wrote what follows over a year ago, on February 22nd, 2008. A reader of my home blog reminded me of it and on re-reading I find it relevant to the disenchantment that is beginning to set in. Here is what I wrote: