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Archive for October 10th, 2008

Parallels

Posted by James O'Rourke on October 10, 2008

Op-Ed: The Second Great Depression?

Minyanville Staff

Oct 06, 2008 2:45 pm

This country has been living in false prosperity since the early 1980s: The huge McMansions, luxury cars, high tech gadgets, granite kitchens, second homes and exotic vacations were all purchased with debt. These “assets” are depreciating rapidly, and consumers and companies are selling them desperately to pay down their suffocating debts. 

The psychology of this country has begun to change from conspicuous consumption to forced liquidation and saving. The most recent flow of funds data shows that total credit market debt is $51 trillion; our GDP is $14.3 trillion. Debt as a percentage of GDP is now 356%; during the Great Depression, it was 260%. This massive buildup of leverage is just beginning to unwind; the pain will be tremendous when it gains momentum.

Coming Depression?

There’s no consensus regarding the causes of the Great Depression, but some common themes are clear. I will try to evaluate today’s environment versus the conditions that existed in the 1920s. 

1. Expansion of the money supply during the 1920s

According to the Austrian School of Economics, the Great Depression was mainly caused by the expansion of the money supply by the Federal Reserve in the 1920s, leading to an unsustainable credit driven boom. Both Friedrich Hayek and Ludwig von Mises predicted an economic collapse in early 1929. In the Austrian view, it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods.

Alan Greenspan reduced interest rates to 1% for over a year in 2003. This act led to a speculative frenzy in real estate, $3 trillion of equity withdrawal by consumers and tremendous overconsumption built upon a foundation of debt. This speculative frenzy was exacerbated by the “Masters of the Universe” on Wall Street, with their CDOs, MBSs, and other magic potions that made bad loans appear good. 

The Bush administration’s decision to not enforce any existing oversight of the banks also contributed greatly to the current situation. Realistically, the current conditions are worse than they were prior to the Great Depression, based on the speculation that has occurred in the last 8 years in stocks and real estate.

2. Excessive debt leading to false prosperity

By 1929, the richest 1% owned 40% of the nation’s wealth. The top 5% earned 33% of the income in the country, while the bottom 93% experienced a 4% drop in real disposable income between 1923 and 1929. The middle class comprised only 20% of all Americans. 

Society was skewed heavily towards the haves but, by 1929, more than half of all Americans were living below a minimum subsistence level. Those with means were taking advantage of low interest rates by using margin to invest in stocks. The margin requirement was only 10%, so you could buy $10,000 worth of stock for $1,000 and borrow the rest. 

There are some disturbing parallels between what was happening during the 1920s and what’s been happening in America in the last 10 years. Today, the richest 1% own 21% of the nation’s wealth. The bottom 50% experienced a 4% drop in real disposable income over the last 8 years. During the dot-com boom, small investors used massive margins to speculate in companies with no earnings. When this bubble collapsed, a lesson should have been learned. Instead, Alan Greenspan lowered interest rates to 1% and encouraged everyone to take out an Adjustable Rate Mortgage. The speculation in real estate reached phenomenal heights by 2005; the downside of that speculation is now only half finished. Stabilization of housing prices is at least another year — and another 20% to the downside — away. 

That would still leave prices high on a historical basis. Home prices did not fall on a national level during the Great Depression. Read the rest of this entry »

Posted in *Economy | Leave a Comment »

That Other Failed War

Posted by James O'Rourke on October 10, 2008

By Dan Froomkin

Special to washingtonopost.com

Thursday, October 9, 2008; 12:37 PM

With less than four months left in their tenure, White House aides are scrambling to come up with some sort of winning strategy for Afghanistan, the long-eclipsed war that’s looking increasingly like another major debacle for President Bush’s legacy.

There’s no question Afghanistan demands a new approach. Experts have been saying that for months if not years. But the White House’s new sense of urgency may have more to do with trying to insulate Bush from history’s verdict that he let Afghanistan slip through his fingers.

Karen DeYoung writes in The Washington Post: “The White House has launched an urgent review of Afghanistan policy, fast-tracked for completion in the next several weeks, amid growing concern that the administration lacks a comprehensive strategy for the foundering war there and as intelligence officials warn of a rapidly worsening situation on the ground.

“Underlying the deliberations is a nearly completed National Intelligence Estimate on Afghanistan and the Pakistan-based extremists fighting there. Analysts have concluded that reconstituted elements of al-Qaeda and the resurgent Taliban are collaborating with an expanding network of militant groups, making the counterinsurgency war infinitely more complicated.

“As the U.S. presidential election approaches, senior officials have expressed worry that the situation in Afghanistan and Pakistan is so tenuous that it may fall apart while a new set of U.S. policymakers settles in. Others believe a more comprehensive, airtight road map for the way ahead would limit the new president’s options.”

DeYoung also notes: “Alarms were first sounded early this year, when Secretary of State Condoleezza Rice returned from a trip to Afghanistan in early February — her first in two years — convinced that the war there was heading downhill. Defense Secretary Robert M. Gates shared her pessimism, telling Congress that same week that Taliban insurgents had adopted more dangerous tactics, that the U.S.-led military coalition was disorganized, and that international development efforts were failing because ‘there is no overarching strategy.’

“But seven months would pass before the administration, distracted by issues as serious as the Iraq war and as far afield as the Olympics, was seized with the urgency to put a new strategy in place.” Read the rest of this entry »

Posted in Afghanistan, Bush Administration | 1 Comment »

The President Who Will Deal With Iran

Posted by James O'Rourke on October 10, 2008

By Michael Gerson

Friday, October 10, 2008; Page A19

The Washington Post

A specter is haunting the presidential race — and it is not just the economy. It is the specter of a nuclear Iran.

Economic downturns are wrenching but cyclical. Nuclear proliferation is more difficult to reverse, creating the permanent prospect of massive miscalculation and tragedy. America’s next leader may be known to history as the president who had to deal with Iran.

This topic received glancing attention in the second presidential debate. Barack Obama called a nuclear Iran “unacceptable.” John McCain said it would raise the prospect of “a second Holocaust.” But neither man seriously confronted the choices ahead.

Days earlier, at an event at the Nixon Center here, the former chief weapons inspector for the United Nations, David Kay, delivered a bleak assessment of Iranian capabilities and intentions. The Iranian regime, he argues, is about 80 percent of the way toward its nuclear goals — perhaps two to four years from “effective, deployable weapons.”

Kay believes that the reaction to this threat by both political parties is unrealistic. By simply saying a nuclear Iran is unacceptable, America is set up for a choice between “suicide” (a disastrous military attack on Iran) and “humiliation” (a galling acceptance of the unacceptable). Instead, Kay calls for a new round of “skillful diplomacy” to persuade Iran to stop at what he calls “virtual capability” — a global recognition that it could produce nuclear weapons in short order, without all the drawbacks caused by actually producing those weapons. Read the rest of this entry »

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Early Returns Are Promising In ‘SNL’s’ Thursday Campaign

Posted by James O'Rourke on October 10, 2008

By Tom Shales
Friday, October 10, 2008; Page C01
The Washington Post

 

In television, success breeds success, which can then breed excess. So far, “Saturday Night Live” is still at the success-success level, a happy fact of life celebrated last night with the first of three prime-time specials keyed to the forthcoming presidential election. Explosively funny and running riot from start to finish, “Weekend Update Thursday” — “live from New York” last night — may have disappointed viewers hoping to see Tina Fey‘s already legendary Sarah Palin impression; Fey appeared, but only in promos for her sitcom “30 Rock,” which is derived from backstage life at “SNL” and returns for a new season on Oct. 30.
In her absence, “SNL” Executive Producer Lorne Michaels and his merry band of writers and performers carried on splendidly, dividing the show into a 10-minute parody of the most recent debate between Sens. Barack Obama and John McCain and a 20-minute version of the “Weekend Update” feature that included jokes about the economy, O.J. Simpson, Bollywood and other topics in addition to the campaign.
All the performers are riding high on the rousing reception they’ve received since returning for the new season, a hugely renewed enthusiasm that is a tradition for the show in election years — though this year, it seems, more than any other. With the nation focused on the candidates and their manipulations, “SNL” has tailor-made targets that seem especially ripe. Eight years of George W. Bush really weren’t a great boon to the show; he seemed hard to satirize, and not even the show’s master impressionist Darrell Hammond could work up a really, wickedly accurate imitation of him. Bush turned out to be his own best parody, a self-satirizing figure who seemed to thwart friendly spoofing. Read the rest of this entry »

Posted in Humor | Leave a Comment »

AFGHANISTAN

Posted by James O'Rourke on October 10, 2008

‘Muddling Through’

Asked in November 2003 whether the United States would “finish the job” in Afghanistan, Sen. John McCain (R-AZ) responded “I’m not as concerned as I am about Iraq…but I believe that if Karzai can make the progress that he is making then in the long term we may muddle through in Afghanistan.” Unfortunately, “muddling through” is just what we seem to be doing in Afghanistan. According to the New York Times, a new National Intelligence Estimate (NIE) to be released in November “concludes that Afghanistan is in a ‘downward spiral’ and casts serious doubt on the ability of the Afghan government to stem the rise in the Taliban’s influence there.” The report will be “the most comprehensive American assessment in years on the situation in Afghanistan.” In addition to the problem of cross-border attacks launched by militants in neighboring Pakistan, and inefficiency and corruption in the Afghan government, the report also describes “the destabilizing impact of the booming heroin trade, which by some estimates accounts for 50 percent of Afghanistan’s economy,” according to intelligence officials. Afghanistan produces the most opium in the world.

THE CENTRAL FRONT: A Center for American Progress report, The Forgotten Front, anticipated the NIE’s conclusions back in November 2007, noting that while “the United States and the international community initially made great strides to oust the Taliban and al Qaeda and stand up the Afghan government following the invasion in October 2001…the situation has dramatically deteriorated since 2005.” The Taliban and Al Qaeda have regrouped in the Afghanistan-Pakistan border area and now support a growing Afghan insurgency. “Although the current administration has portrayed Iraq as the central front of the ‘global war on terror,’” the report states, “Afghanistan and the borderlands of Pakistan remain the central battlefield.” The website Long War Journal reported in August that “Afghanistan experienced 18.4 attacks per day in 2008, compared to 12.4 in 2007,” with “the eastern provinces bordering Pakistan’s tribal areas account[ing] for seven of the remaining top nine most violent provinces.” Gen. David McKiernan, the commander of some 60,000 U.S. and NATO troops in Afghanistan, reported that roadside bomb attacks — “the largest casualty-producing event in Afghanistan” — are up 30 to 40 percent over last year. CAP’s Caroline Wadhams, Colin Cookman, and Jenny Shin wrote yesterday that the new NIE and other reports “confirm that the current U.S. strategy in Afghanistan is desperately off-course and suffering from a lack of resources, policymaker attention, and clear, presidential-level direction.” Read the rest of this entry »

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12 New Stomach-Turning Revelations About Sarah Palin

Posted by James O'Rourke on October 10, 2008

By AlterNet Staff, AlterNet. Posted October 10, 2008.

 

Palin has taken to smearing Obama. But it’s her own record that

continues to yield alarming information, undermining her skills

and credibility.

Sarah Palin has had a lot of ups and downs in her time in the national spotlight. When she was first nominated, the Alaska governor exceeded expectations by successfully reading from a teleprompter at the Republican National Convention. Then, she sat down with CBS’s Katie Couric to disastrous results — disastrous, hilarious or downright frightening, given your point of view. Any way you look at it, Palin’s awful interview with Couric set the bar so low that her embarrassing performance at the vice presidential debate, where she refused to answer the questions and flirtatiously winked at the camera, was deemed a success by many commentators in the corporate media. At least she didn’t vomit on stage, seemed to be the general consensus.

Since the debate, though, Sarah Palin has dropped to new lows. She has maliciously gone after Barack Obama, using hate speech, dog whistles and every inexcusable attack in the book.

But no matter how ridiculous or sensational Palin’s attacks on Obama are, her venomous words cannot hide all the skeletons that keep pouring out of her unvetted closet. And these are the things that should give the American public cause for concern.

1. Palin’s Fearmongering Attacks on Obama

Palin’s attacks on Barack Obama over the past week have been sickening. She has questioned his patriotism and manufactured a bogus association to terrorism. Her hateful rhetoric goes far beyond dirty politics.

Palin is a “demagogue in a skirt,” says Susie Hoeller of the Huffington Post.

“Webster’s Dictionary defines a demagogue as ‘a leader who obtains power by means of impassioned appeals to the emotions and prejudices of the populace,’” Hoeller writes. “Governor Palin, in her stump speeches this week, fits this dictionary definition.”

The McCain-Palin campaign has said that it does not condone the use of Obama’s full name, but given that almost everyone who introduces either McCain or Palin at their official rallies is doing just that, many are wondering if it may be an order straight from the campaign.

Jeffrey Feldman goes even further, asking of Palin’s recent hate speech, “Is Palin Trying to Incite Violence Against Obama?“: Palin’s new rhetorical strategy signifies an alarming new development in the 2008 presidential election, and one that has been not only been documented by such high-profile newspapers as the Washington Post, but confirmed by the McCain campaign itself.

“It’s a dangerous road, but we have no choice,” a top McCain strategist recently admitted to the Daily News. “If we keep talking about the economic crisis, we’re going to lose.”

 

2. Palin Lied About Darfur Read the rest of this entry »

Posted in Issues | 4 Comments »