Mission improbable

Your mission, if you should choose to accept it is to save capitalism. This economy will self-destruct in 5 seconds

David Seaton's News Links

Universal health care, free university education for all, a more realistic foreign policy, freeing science from superstition... All of these Obama initiatives not only sound good, they sound wonderful, thrilling.

But somehow, at this moment, the new president and his government's lovely initiatives mostly remind me of the pediatricians and the nurses at a children's cancer ward organizing a big Christmas party... for the summer.

Aside from Santa Claus, the doctors don't know who else will still be around to decorate the tree, but at least thinking about the future goodies takes our minds off of our poor little, pale, bald heads.

For, truly, at this point it is not just "it's the economy, stupid", it is more like "it's the economy, dear Jesus".

Most Americans (53%) now think the United States is at least somewhat likely to enter a 1930’s-like depression within the next few years.(...) The most recent survey also found that half of all adults (49%) say today’s children will not be better off than their parents. Only 26% hold the more optimistic view, while another 25% are not sure. Rasmussen Reports

Even Obama-friendly commentators of impeccable professional qualifications like Paul Krugman are beginning to have serious doubts whether Obama and Geithner have the political will to do what it takes to save the economy from a depression.

Last month, in his big speech to Congress, President Obama argued for bold steps to fix America’s dysfunctional banks. “While the cost of action will be great,” he declared, “I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade.” Many analysts agree. But among people I talk to there’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Paul Krugman: The Big Dither - New York Times

Here is how financial strategist David M. Smick put the cost of this "dithering" in the Washington Post:

Our present position is unsustainable. The longer we delay fixing the banks, the faster the economy deleverages, the more credit dries up, the further the stock market falls, the higher the ultimate bank bailout price tag for the American taxpayer, and the more we risk falling into a financial black hole from which escape could take decades.

Even Thomas Friedman chips in his two cents worth in his inimitable, "dwarf in the locker room" style.

Friends, this is not a test. Economically, this is the big one. This is August 1914. This is the morning after Pearl Harbor. This is 9/12. Yet, in too many ways, we seem to be playing politics as usual. Our country has congestive heart failure. Our heart, our banking system that pumps blood to our industrial muscles, is clogged and functioning far below capacity. Nothing else remotely compares in importance to the urgent need to heal our banks. Yet I read that we’re actually holding up dozens of key appointments at the Treasury Department because we are worried whether someone paid Social Security taxes on a nanny hired 20 years ago at $5 an hour. That’s insane. It’s as if our financial house is burning down but we won’t let the Fire Department open the hydrant until it assures us that there isn’t too much chlorine in the water.

It seems unanimous.

Treasury Secretary Timothy Geithner, who may be President Obama's biggest mistake, has not been able to inspire confidence or convince a frantically anxious public that he knows what he is doing. The man, whose TV personality is that of a slightly sneaky, know-it-all-ish technocrat, is overwhelmed and understaffed in what at the moment is the second-most-important job in the American government. Nicholas Von Hoffman - The Nation

None other than the great Roubini,

"also took issue with the $800 billion stimulus package, saying it's not enough. For one thing, there's only $200 billion upfront, and half of that is a tax cut, which Roubini calls "a waste of money" that is not going to make a difference."

The entire world is waiting, hoping and maybe some are still expecting that Barack Obama will wave a magic wand and everything will be alright. However it could very well be that Obama and his "good vibes" will be swept away by events. As Martin Wolf wrote in the Financial Times:

The ability of the west in general and the US in particular to influence the course of events will also be damaged. The collapse of the western financial system, while China’s flourishes, marks a humiliating end to the “uni-polar moment”. As western policymakers struggle, their credibility lies broken. Who still trusts the teachers?

The other night we had dinner with an old friend, an American lady, the widow of a Spanish architect, who works in the Spanish ministry of culture. Needless to say she is a passionate Democrat and an Obamite. She made an interesting observation about the financial crisis.

"Everything is so quiet..." she said, "In the run up to the war in Iraq, literally millions of angry Spanish people took to the streets to protest against the USA... but the war itself had little effect on the daily life of Spaniards. Now, in this economic crisis, which has its origins in America, it's as if the United States of America had personally dropped a bomb on every Spanish family... You'd think they'd be burning down the US embassy, but they aren't... not yet. It's kinda weird, when you think about it, isn't it?" she said. You betcha.

We have entered terra incognita.

Those of us who like to "think outside the box" are having trouble even locating the box these days.

Reality has always been a moving target, but now it appears a moving hologram. The world may be so different in a year of two that its own mother wouldn't recognize it.

The only thing I'm sure of at the moment is that if things are ever going to get better they are going to have to get a helluva lot worse. Idols are falling, more must fall.

This crisis has radically changed the political landscape and the sudden loss of authority of what Martin Wolf calls "the teachers" has opened the door for language and thinking to enter mainstream discourse, that only a few weeks ago would have been unthinkable.

"Populism" is a funny word. In the American media it usually has a pejorative connotation. But here is how Wikipedia defines it:

The word populism is derived from the Latin word populus, which means people in English (in the sense of "nation," as in: "The Roman People" (populus Romanus), not in the sense of "multiple individual persons" as in: "There are people visiting us today"). Therefore, populism espouses government by the people as a whole (that is to say, the masses). This is in contrast to elitism, aristocracy, synarchy or plutocracy, each of which is an ideology that espouse government by a small, privileged group above the masses.

Lula, the president of Brazil put it this way in no less than the Financial Times:

"I am not worried about the name to be given to the economic and social order that will come after the crisis, so long as its central concern is with human beings."

Nobel Prize winner, Amartya Sen went even a bit further in the New York Review of Books

The market economy has depended for its own working not only on maximizing profits but also on many other activities, such as maintaining public security and supplying public services—some of which have taken people well beyond an economy driven only by profit. The creditable performance of the so-called capitalist system, when things moved forward, drew on a combination of institutions—publicly funded education, medical care, and mass transportation are just a few of many—that went much beyond relying only on a profit-maximizing market economy and on personal entitlements confined to private ownership. Underlying this issue is a more basic question: whether capitalism is a term that is of particular use today. The idea of capitalism did in fact have an important role historically, but by now that usefulness may well be fairly exhausted.

A mainstream, Nobel Prize winning economist saying the usefulness of capitalism, "may well be exhausted"! The unspeakable is being spoken.

You, like me, may find this change of language and the new horizons it presents filled with hope, but you better believe there are quite a few people who it is surely making terminally nervous.

As we noted last week, the people who stand to lose money, power and prestige through this sea change in the political mood are certainly not going to take these losses lying down.

I think that this is one of the lines they are going to take:

While the Obama administration seeks to improve America’s position vis-à-vis Iraq, Afghanistan, Israel-Palestine, Europe, and Asia, the most critical foreign-policy front of all – the home front—is looking brittle. This development is new, as for almost seven decades – ever since Pearl Harbor—policymakers have taken for granted that the homefront would cooperate with military missions and expenditures.(...) The fact that the public has docilely accepted this arrangement for so long does not mean that it will continue to do so. Despite the many new billions that President Obama’s budget allocates for jump-starting the economy, he intends to substantially cut the Pentagon’s money-line.(...) What I foresee is a more gradual siphoning of money away from vital programs over the next decade, even as China, India, and other countries enlarge their navies and other forces. This will not necessarily lead to a security dilemma for the U.S., but it will certainly lead to a multipolar world and the end of American dominance. The only development that could change this equation would be a new and sudden threat – and one other than mass-casualty terrorism."The Shrinking Superpower", Robert D. Kaplan, The Atlantic

Or this:

We are on the verge – within 10 years – of a major collapse of evangelical Christianity. This breakdown will follow the deterioration of the mainline Protestant world and it will fundamentally alter the religious and cultural environment in the West.(...) This collapse will herald the arrival of an anti-Christian chapter of the post-Christian West. Intolerance of Christianity will rise to levels many of us have not believed possible in our lifetimes, and public policy will become hostile toward evangelical Christianity, seeing it as the opponent of the common good. Michael Spencer - Christian Science Monitor

It is indeed a great blessing that the Soviet Union has disappeared. This disappearance at least makes true change possible. The presence of a rival superpower with an alternative economic system and ideology at this moment would mean that this crisis could only lead America farther to the right.

Seen this way the crisis couldn't have come at a better time.

As it is someday the United States may just be able to muddle its way through by sheer process of elimination into something more humane. DS