Job No. 1 — Juxtapose

New York Crisis reveals real center of American power.

Interesting, no – even as juxtaposition. Although, like Shanghai, we too have always felt NYC was far more important to Amerikuh than the city built on a swamp. So when the City faces a full blown crisis, we take it seriously. U.S. strength despite the Military and History Channels’ (sometimes remarkably inaccurate) porn always has been our economic resources: today in tatters. What makes this case even more problematic than Bear Stearns is the government’s role in encouraging activities through the implicit non-guarantee guarantee.

We’re comforted tonight. The Man Child Who Will Bring Change agrees that “there is little doubt” the country is in a recession. How Clinton-esque, the parsing, so that the Crowned One can always fall back on the technical definitions of how many quarters of negative growth overall are required. Perhaps like re Iraq he can hold a second press conference. This time, big signs, a nice speech and a good grin won’t change “facts on the ground.” Or overcome mental whining.

No one can use the dreaded “b” word — bail out — yet, but it is exactly what is happening Monday, congressional approval a formality. After all, what are 435 members of a castrated Duma supposed to do when Reality drops its cloak and pulls its dagger? Midnight Rambler, indeed.

Don’t you feel like bystanders watching another slo mo accident? Is the American political system even capable anymore of strategic thought? Beyond lurching from crisis to crisis? Beyond tax cuts to this decimal place for this demographic. Beyond just energy. We can’t blame Neocons for our failure (and it is ours, collectively); Rumsfeld didn’t screw this up.

The U.S. Shanghai Two Step Crash And Burn

Easy for academics (including Bernanke) to criticize roundly the Japanese handling of their post 1989 bubble economy. Papers published, tenure locked in. Yet what exactly is learned? And its practical application?

Almost non-existent regulation of both Fannie Mae and Freddie Mac? Check. Almost non-existent regulation of derivatives and roll back of Wall Street ‘Chinese Walls’ between banking and investment banking? Check. Agit Prop from Movement types bleating to repeal the odious tedium of requiring exalted CEOs to sign declarations that they actually have read and understand company financials offered to the markets? Check. We even put eunuchs in at the SEC (Chris Cox) — and have no doubt, a Democrat Congress is as complicit now along with the Warlord’s feeble end.

The Prophet should not take all the skepticism. McCain is worse. We’ve only met Phil Gramm personally in his office a couple of times on the Hill. To us he is as out there as you guess. So we never did and never will take him personally seriously (in the Senate he was, however, a real “Force” by virtue of his mere presence and vote). We did find his wife intellectually interesting the few times we crossed paths. McCain’s problems go deeper. Did anyone else watch Carly Fiorina, Mcain’s other ‘economic advisor’ twitch on today’s moribund Press The Meat? How uncomfortable to watch someone alternate between stand up and pathos. (Someone needs to whisper in Carly’s ear that to express interest in the Veepship on national TV is a death knell). To all of them, we say “Well here is what you’re going to eat on Monday, Dearest Virginia”:

US taxpayers are about to find out what their long-standing and (strictly speaking) non-existent guarantee of Fannie Mae and Freddie Mac will cost them. One way to think of it is this: take the US national debt of roughly $9,000bn and add $5,000bn. Not bad for an obligation still officially denied.

In the end, that astounding prospect might be the outcome. Partial or outright nationalisation of the housing lenders – colossal pseudo-private entities that own and underwrite US housing loans – would add some or all of their $5,000bn (€3,144bn, £2,513bn) in liabilities to the government’s balance sheet. While it is true that the agencies (unlike the government) own housing-related assets that roughly match those liabilities, the still-collapsing housing market makes this a lot less reassuring than one could wish.

In some cosmic Jungian juxtapose, for 10 days next month we will see China proclaim her place on the global multimedia stage. Symbolism beyond mortal planning. True, Beijing is their Moscow to the Russian/Soviet Leningrad (see supra ). Also true that air there makes Los Angeles Aspen. But in the end, does it matter? What speaks louder today? LA smog or China’s staggering liquidity? The future is made real in their architecture, physical infrastructure and deft geopolitical expansion. Oh, and cash. By contrast, forget our crumbling infrastructure. We can’t even create a single building after 7 years (if you know what we mean).

What do the American crisis, Chinese Olympics and American analytical entrepreneurs have in common? Those still peddling Neocon conspiracies against Iran barely cling to an Israeli exercise and Photoshop. They should think about all of the above and take off their blinkers. A war with Iran? One must ask that famous question, paraphrased — “yeah you and whose finances [army]?” First, the U.S. military; it is no shape to wage war against Iran. Not going to happen. Absent a near term cataclysmic event. Beyond generational burnout of hardware in Iraq and personnel replenishment, the imminent procurement crisis still creeps up. Juggling those amazing costs, a new American president must then still manage an economy edging precariously close to a whirlpool. From that spring all national power flows. A tanking economy, two failing wars abroad *and* launch a third against Iran? Analytical shots of absinthe until the eyes bleed. But it makes good copy.

Imagine this scenario. The U.S. domestic situation somehow sua sponte “stabilizes”. We still won’t go to war against Iran. We can’t afford another unilateral expeditionary activity as they like to say. (We may not realize it yet, but it is true). Perhaps by 2015 — as the Marines wargamed — per earlier posts. Things may change human and real capital wise. But in the meantime? We are paper tigers to revive a Maoist slogan. At best we slink in as lowly mercenaries, fighting on another’s dime (Euro). The bottom of the barrel? Be like the Brits after 1940, fighting on charity. And who exactly has their wallets open?

We do concede one recent error. We thought human capital requirements would force major American troop drawdowns from Iraq around April-May. Recent announcements of larger returns to CONUS this Fall while late were inevitable. Even so, the idea that large portions of American troops simply will move to Afghanistan misses the point. Leaked studies estimating a drawdown to about 50,000 in Iraq makes sense for an initial — and only initial — bureaucratic ante. Iran? Puhlease.

Still, no reason for the Summertime Blues. Unlike some others we don’t have to take dog off the menu. Even our creditors are pre-occupied — building the future is not a stroll in the park, doncha know. How interesting in the background to watch breakthroughs as a EU Middle Eastern summit unfolds.

Strike a pose. There’s nothing to it. Juxtapose.

Comments

  1. Comment says

    re Chris Matthews today defined himself as a 50s kid who grew up loving John Wayne and Audie Murphey etc then said , nostalgically, we don’t make Wayne movies anymore.

    One wonders of Matthews is trying to will himself away from the fact he was a 60s kid who did all he could to avoid war – He is actually dating himself older – a broadcast novelty. Surely, it matters little to him that Audie Murphey suffered greatly (if quietly) for his real heroism.

  2. Comment says

    We very much doubt that MoDo would think it so funny if the New Yorker made a cartoons about her – sending up the , no doubt, spurious and exaggerated rumors about her. Would she find such a cartoon about her to be amusing satire – even if Remnick said he was mocking those stories about her and all those editors – all of which are untrue.

  3. srv says

    “We did find his wife intellectually interesting the few times we crossed paths.”

    Yeah, her brain really worked wonders at Enron.

    Really, tell us who you find an idiot, and we’ll vote for them.

  4. Hunter says

    The front page just threw up a quote from Ludwig Fleck… Excellent! It’s good to see such a sadly underappreciated but brilliant epistemologist (and scientist) get some recognition, even if only in one of the few intellectually interesting corners of the internet.

  5. DrLeoStrauss says

    Burns to meet with Iranians.

    Better to Jaw Jaw than . . . well Jaw Bluff Jaw Bluff.

    http://www.nytimes.com/2008/07/16/world/middleeast/16iran.html?partner=rssnyt&emc=rss

    Curmudgeon, besides owing a royalty from blatant lift from last post (to be donated to the Chris Matthews For Meet The Press Boaters For Truth), air strikes and the like as you know are not war. We would achieve little more than de-stabilize the region, mobilize the Iranian/Persian ethnoplex and further radicalize Arab sensibilities. The suasion power of U.S. air dominance was lost in the sands of Iraq a long, long time ago. Solving the “Iranian problem” militarily on current U.S. terms means ignoring Harlan Ullman. Real boots on the ground, a real war plan, forced entry against a denied littoral, raising taxes and rationing, and lots and lots of casualties as it ends with an 18 year old standing on the ground — and not looking around without backup as the town is looted around him. JDAMs look great on TV. American fetish for stand off kinetic solutions says much for the national psyche and even more about our prospects.

  6. DrLeoStrauss says

    The McLaughlin comment is hilarious in context. Besides, he stood up during the Dark Times alone before the anklebiters that came after.

    How tragic that by next February so many newly minted Leftist ‘Oppositionists’ and ‘media personalities’ will be obsolete. The new totalitarianism of ‘no enemies on the Left’ so pathetic; these younglings are canon fodder and climb the ladder at the whistle blow. Charging to expire in the barbed wire having learned precisely nothing from the past.

    No wonder the Crowned One freaked out MoDo’s clumsy column about his big ears. Bravo New Yorker — if only you had stood your ground and not caved into imposed Self Criticism on Anderson Cooper 360 and that ilk.

  7. DrLeoStrauss says

    The Divine One’s Communications Team from Hotline:

    Robert Gibbs — senior strategist for communications and message taking on a broader strategic portfolio for the Fall campaign while continuing to serve as senior communications aide travelling with Sen. Obama

    Anita Dunn — senior advisor overseeing the campaign’s communications, research and policy departments

    Dan Pfeiffer — communications director

    Linda Douglass — travelling spokesperson for the campaign

    Bill Burton (former DCCC communications director) — national spokesperson out of the Chicago headquarters

    Josh Earnest (former DNC’er and was Vilsack’s communications director during his short lived campaign) — deputy communications director

    Christina Reynolds (fmr res. dir. for John Edwards in 2004 and 2008) — director of rapid response

    Wendy Morigi — national security spokesperson

    Dag Vega (former DNCer) — director of surrogate communications

    Joelle Terry — deputy director of surrogate press, chief booker for interviews for the senator

    Tommy Vietor and Hari Sevugan — rapid response

    Moira Mack and Nick Shapiro — deputy national press secretaries working for Burton

    The following individuals will serve as regional communications directors:

    Gannett Tseggai – Northeast

    Amy Brundage – Midwest

    Shannon Gilson – Southwest

    Dan Leistikow – Industrial Midwest

    Melanie Roussell – South

    Nayyera Haq – West

    (Hotline’s On Call blog)

  8. Anon says

    Leo – have you demanded an on-air apology from McLaughlin over Oreogate? LOL – Actually, we think that Media Matters ‘jumped the shark’ on this small piece of nit picking – Besides, The Jesuitical McLaughlin added his pre-emptive qualifiers by saying it was not him saying such things – Come to think of it – he’s just like Clinton and Obama
    http://mediamatters.org/action_center/mclaughlin/

  9. Comment says

    We think Bush is wise to outsource Mid East stuff to the EU and France as much as possible. Some of this is accidental – but the more he can envelop Blair and Sarkozy, the better

    Do you know how Neocons always say (roughly) “That’s not what they (varius Arab states) really want – they just say that publicly, but in private they really want perminent bases etc ….”

    That has become more true in the USA – words about the Mid East made by Condi or any gov official are always meaningless on their face – They always have to be interpreted

  10. Comment says

    Carly’s legacy at HP is debatable – She says the stock rose when she left and her reforms were realized. As a small shareholder , we can concur – But we tend to think she harmed its long term value as an innovator, rather than an expoliter of outsourcing, design, and commodity products.

    Her ridiculous birth control diversion showed the world the gulf that exists when many business people try to talk politics. In any event – her comparison – a standard feminist slogan re medical inequality – falls apart on examination – on the merits. But no male politician looks dignified discussing any of this stuff. It’s all a total draq

    Ofcourse, McCain never gave such things any thought – He cares only about big man issues. Unfortunately, he lacks TR’s intellect

  11. says

    One of the finance/political economy writers on the Agonist[1] is predicting a 20% drop in housing prices before all is said and done. That’s going to equate to a hefty chunk of FNMA/FHLMC’s paper assets turning to dust and a lot of their liabilities being added to the national debt. There’s already noise that merely assuming FNMA/FHLMC’s debt could cost the Treasury its AAA rating[2]. If their assets collapse then things are going to go to hell in an handbasket pretty damn quick.

    As for Iran, I’m curious why your analysis leaves the USN and USAF out of the picture. A substantive ground invasion is out of the question with basically everything tied up in Iraq and Afghanistan. USN and USAF air and cruise missile resources, however, remain available. A bombing campaign would prevent reproachment with the US during Democratic reign and put the strategic situation on hold until the next Movement President is installed in office. By that point a partial withdrawal from Iraq can be expected and the Movement will have enough troops to attempt an invasion of Iran.

    My feeling is that the US economy will collapse before an invasion of Iran becomes militarily possible vis a vie withdrawal from Iraq but the Movement will not hold to this view. Given the opportunity, the Movement will launch a bombing campaign to set the stage for an invasion of Iran in 4 or 8 years.

    [1] http://agonist.org/numerian/20080713/fannie_mae_and_freddie_mac_nationalized

    [2]
    http://www.bloomberg.com/apps/news?pid=20601009&sid=aPtGkDRIgBHo&refer=bond

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