Economy

The American Bubble Machine’s Last Gurgles

Obama drops a sham budget the same day China officially overtakes Japan as the World’s second largest economy. The latter is pre-baked old news. That China will surpass the U.S. in a mere 10 years? Some might wonder why the delay?

Obama tactically is wise to play budget kabuki with Republicans now. They’re disorganized, fumbling votes. Tactical politics dictate only open with the first card. Make the Republicans get their act together before trying to make a deal. Shows he’s learned a little bit from the stimulus fiasco. Still, a small a game with small players. Neither offers a way out for America’s long term economic problems. The first step must be to wean the American addict off its bubble addiction.

Round And Round It Goes

Consider: Deng Xiaoping accelerated China’s economic reforms in and around 1980. The same time as America abandoned traditional capitalism for plutocratic crony casino gambling. The game started with the then new fax machine and spreadsheet technology. Together, Wall Street didn’t need to be Wall Street anymore. And a 28 year old could gin up arguments for ‘unlocking’ wealth by tearing down. Hence, the 1980s M&A/LBO bubble. We were friends with one of the real life players fictionally portrayed in Stone’s ‘Wall Street’. Stone was not that far off. When we got there some people really did spread out lines at 2:30 AM to make it through another 24 hours churning out mounds of mind numbing, mostly unread paper for a closing. This first bubble popped the same time as its sisters, the S&L boondoggle and the first real estate run up.

By the early to mid 1990s, the American economy started its long migration to the Pearl River Complex. Consulting companies like the current Accenture held huge conferences teaching how to out source to China. The structural damage all carefully camouflaged. Post Netscape IPO and tout le monde reached for the NASDAQ ring. Boom, fraud, the usual routine. ENRON, Ebbers at WorldCom, etc. We had a friend working with then-AT&T CEO Armstrong who was going crazy facing pressure to match WorldCom’s (faked) numbers.

They say Clinton’s America created 20 million new jobs. True. Many of them, however, based on illusions and sock puppets peddling dog food. We all know the dot com bubble popped. And the CLEC (competitive local exchange carrier) flame out. By 2001 America economically flat lined, albeit with a budget surplus.

Two bubbles quickly helped obscure the reality that the American economy no longer creates long term wealth and jobs. First came the fear/threat national security boom followed by the real estate/financial swindle. Net result? No net new jobs created. Underscore that — we are exactly back where we started. With one exception – unprecedented wealth concentration.

The Patient’s Flatlining! Get Those Paddles! Stat!

Obama may claim he’s creating new jobs. Or ‘making investments’. But the American economic structural atrophy is not and can not be tackled by a federal budget. Or Potemkin ‘retraining’ programs. We must first begin with hard truths. The American economy doesn’t create much real value. For us or for export. We need a comprehensive macro economic development vision to cure our bubble addiction. Executed across industry by industry, down each silo from component and subcomponents to final assembly, etc. With tax, tariff and budgets aligned accordingly. Not the reverse.

Obama’s budget is thus D.O.A. regardless of the Republican counter. Neither have a plan to stop the bubble addiction. Neither can afford to. It’d mean telling the American people they are indeed rodents in the spinning wheel, going nowhere.

Some Rightists share this concern. They argue America needs a return to ‘Hamiltonian’ policies. Helpful but insufficient. Quaint even. Hamilton’s ad hoc market interventions helped nurture burgeoning American comparative advantage. Japan, China, the Four Tigers – all gouged the heart out of the American ‘free trade’ tragedy of the commons. Corporate America was not only complicit but eager partners. Does anyone really think ‘Hamiltonian’ policies could have handled “>Japan’s original post-war wealth creation model copied by others? Or the current Chinese juggernaut? What’s precisely the American comparative advantage now?

A problem with junkies is they never admit they’ve a problem. So now comes another fake boom, the ‘social media’ economy. Overstated? Zynga is the company that makes games for Facebook. It’s now being valued at between $7-$9 billion. It was a mere $4 billion 10 months ago. Facebook is now valued higher than Amazon and tails only Google on the Web. Don’t forget Twitter. It’s a company that doesn’t have a real business model or a path to sustainable revenue. It’s average revenue per user (ARPU) is 28 cents. Now said to be ‘worth’ $8-$10 billion. Most likely as a part of Google, etc.

There’ll be economic spin offs from this newest bubble. There always is. Cheerful cable talking heads touting some index going up. The question few will ask is what’s any different from the other bubbles? Valuations suggest it’s the same old song. How long will the associated economic activity last? Where does the final ‘wealth’ end up? Or just the chimera of hope and change? You know where the Stiftung stands.

All of which is to say the looming budget fracas is relatively uninteresting. Cutting the deficit or ‘investing’ in education or even on random projects like high speed rail are beside the point. Without a comprehensive macro economic vision and actual politics to implement it, the budget ‘battle’ is like the old WWF. Which reduces 2012 down to Republican Light vs. Republican Right.

Oh joy.

The Crises Of Capitalism, Animated

Down To The Last Arrows

With a dysfunctional Duma and Administration, lonely eyes turn to Joe DiMaggio the Fed for economic hope. Krugman advises don’t expect much. We agree. It’s always a comfort to know the Fed sees the same color sky as the rest of us. Still, in practical terms, there’s not much it can do. The easiest course is play to market and consumer psychologies. Which is what this piece in the WaPo is all about. ‘There’s alot we can still do.’ Except there isn’t.

Fed leaders are weighing modest steps that could offer more support for economic activity at a time when their target for short-term interest rates is already near zero. They are still resistant to calls to pull out their big guns — massive infusions of cash, such as those undertaken during the depths of the financial crisis — but would reconsider if conditions worsen.

The main floated idea? It’s a recycle. Even before Bernanke became Fed Chairman, based on his study of Japan’s ‘Lost Decade’, he noted that the Fed could do more than drive short term rates to zero or historic lows re mortgages, etc. The Fed could venture into influencing long term and private debt. How? By ‘signaling’ markets its commitment to keep such rates ‘exceptionally low’ for an ‘extended period’. To be effective this language would require an implicit commitment to embark upon (most likely) a public asset (bond) repurchasing program. This ‘comfort letter’ would in turn stimulate economic activity.

Except that even here, the Fed’s hands are largely tied, despite assurances offered by, say, the President of the St Louis Federal Reserve Bank in the WaPo item. Krugman refers (ironically) to a Goldman analysis as a guesstimate: to achieve our current near zero short term rates would be the equivalent of the Fed embarking on $10 trillion in asset purchases. If the short-lived Fed 2008-2009 actual long term asset purchase program of around $2 trillion is perceived as unprecedented and ‘massive’? So we take Krugman’s point.

Obama’s folly of premature ‘bi-partisan’ surrender to ineffectual tax cut demands gutted the already inadequate stimulus package. The ‘Summer of Jobs’ comes home to roost. ‘Mission Accomplished’, indeed. Wither economic policy now with a radicalized demos? Disturbing data suggests Democrats in power have accomplished the once unthinkable — nudging Boomers generationally to embrace the irrational Rightists. Losing this demographic is more than just a partisan political body blow per supra.

We haven’t seen the generational preference data ourselves. We don’t dismiss it, however. David Winston, while a proud partisan, is deeply committed to the empirical. This from personal experience. We tend to give both his analysis as well as generalized glosses more credence than from others that come to mind.

Go team.

On Andy Grove, Mercantilist Schwerpunkts And Free Trade Kool Aid

If one is serious about re-industrializing the United States to create high wage manufacturing jobs, one probably should shun hapless pundits and other ideological purveyors. To be fair the braying comes from all sides: ‘Free Markets’ cant or the tiresome “What Would Hamilton Do Today”? As par for the course, the most visible ‘experts’ provided to us on the cable news wall often can’t read a spreadsheet, think EBITDA is a new social networking site, haven’t actually worked for an industrial company or consistently met a payroll.

Economic development requires a more serious mind. But then, one could say the same about war. And look at that.

Even more than killing dark people, a sustained development concept in Bubble-addicted America is particularly challenging. Americans expect to earn inflated income by performing essentially meaningless and frivolous output. Haven’t we essentially outsourced the wars, too?

Andy Grove laments the decline of the hi-tech industry’s domestic manufacturing. He’s right that it is essentially now a (temporary) branding and marketing channel for Asian manufacturers. “Made in China, Designed By Apple In California”. Our friend comment shared this link from Grove on point: Sadly, one has to ask: where precisely have you been for the last 30 years, Andy? (Let’s overlook the Intel billions invested in India, Malaysia and China along the way.)

Can Americans Even Have An Intelligent Policy On Re-Industrialization?

Americans we will assert seem generally uninterested in development matters, especially historical economic development. So it’s important to put forth first principles to frame a conversation. Say a president visits a failed state like Michigan. He declares ‘new manufacturing jobs in America’ [cue ritual applause] will come. But before that can happen, we should be clear on what’s the goal of American economic activity? To promote *consumer* welfare measured in the here and now? Or to develop a social and economic infrastructure that maximizes *societal* welfare in the medium to long term? An infrastructure to enable other economic and social expenditures (military, standard of living, life expectancy, etc.)?

The first is America 1960-2010; ‘consumer welfare’ is the metric. The second? Delayed consumption, lower standards of living and capital accumulation for the future. How one answers these questions determines divergent paths.

The Four Models

For statesmen or serious students of Great Power history (this excludes by definition march of trumpets Boys Life ‘history’ ala Victor Davis Hanson et. al.), there are 4 essential, successful modern development models: (a) the British until 1870s (the end of the mercantalist First Empire and commingling with ‘Wealth of Nations’ and ‘White Man’s Burden’ era); (b) the Germans from 1870-1914; (c) the American from 1880s-1960s; (d) the Soviets 1917-1970s; (e) Japan from 1945-1991; (f) the Four Tigers (copying Japan); and (g) China (1980s-today). The latter three are essentially variations on the Japanese dual economy mercantalist approach. (The BRICs are more notional, still in China’s shadow).

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Battlestar Obama

It’s an old geek conceit that their latest infatuation is genius for ‘the dude who rocks da eyballs to the skull, man he has a *plan*!’ All those seemingly disjointed false starts the last 9 episodes? Critics stop harshing! It’s in the plan, man. And if you disagree, shut up, you are a troll and hater.

We’ve all been there. Or stumbled across almost identical threads or flames.

It’s not wholly irrational. Tolkein had one. Books aside, the Kiwis delivered in spades for the screen. Several legendary Japanese manga do the plan/story arc well, too. It’s clear today LOST never did. But people – especially Americans — invested too much to cop to years of self abuse for naught. In science fiction terms, the late Babylon 5 truly did have a 5 year arc written out before the first episode filmed. And Joss Whedon created what must surely rank as some of the most sublime television — genre or not — ever achieved with achingly poignant (and funny) arcs each season for Buffy The Vampire Slayer.

There are many pinheads.  And they have a plan.

Why Obama And Geithner Are Following Battlestar Galactica To Disaster

Which brings us to Obama and his apprentice, Tim Geithner. They threaten to drag us all down the hype-saturated Battlestar Galactica (BSG) cul de sac. BSG as you may know currently clogs bandwidth everywhere as its gasps to its final episode expiration. BSG is an almost perfect mirror for our times of catastrophe, beers with Sean Hannity and bong hitting hypocrisy.

Why is BSG like Geithner’s ‘plan’? First, it’s unoriginal, too. The story and characters borrow from a super cheesy 1970s actioner with Lorne Greene. Did the Stiftung tell you we sat next to the real Commander Adama at the Reagan Inaugural? We kept prodding him to lower the blast shields but he just kept blinking (this was many champagnes into things – but more another time).

Second, BSG is a fitting Obama and Geithner template given its provenance. BSG’s head honchos have pedigrees from that most lamentable Star Trek fiasco, Deep Space (Sit & Spin) 9. BSG naturally suffers an ignoble birth twice over. (Btw, as some of you may know, Paramount famously stole the entire concept of DS9 after sitting through the Babylon 5 productions’ pitch meeting, turning them down, and pouring all the purloined ideas into their PC drenched, lethargic abomination. To make peace, Gene Roddenbury’s wife agreed to star on a later Babylon 5 episode — a lesson in geek shuttle diplomacy. This dishonesty makes BSG trebly appropo for Geithner today).

Obama and Geithner come to their bank rescue pitch in much the same way. Locked in by predecessors, using some ‘borrowed ideas’, they essentially dressed up the old Paulson er, battlestar with lipstick. But this time with a plan ! BSG honcho Moore, deludedly thinks his genius at ad hoc recycling puts him on par with Joss Whedon or other modern myth makers (he naturally scratched Tim Kring/Heroes from the to-do list). Moore claimed from his very first episode that the Cylons had a plan behind their genocidal nuclear Pearl Harbor on mankind. To the unwashed used to fare like King of Queens, BSG seemed to deliver the goods.

So, too, with Geither. How soon do you suppose he also starts making speeches flanked by massive gold flaked signs proclaiming ‘Plan For Solvency’? There must be plenty of supplies left over in OEOB somewhere.

Even the so-self-consciously-hip-we’re-just-plain-folks at Salon drool over BSG. Why? We don’t know. It’s so mediocre. But to cut them some slack, well, it is dystopian – a better world view outside of Japan and Blade Runner is hard to find. So it looks cool. But as far as acting, sloppy characterization, lack of plausibility, and zero- none -3 dimensionality (all of the characters are flat self parodies of their season one appearances) the show is a painful joke. And Salon swoons for all things Obama and his ‘plan.’

Take heed Obama and Geithner. Now, even the dimmest BSG fan realizes all along there has been no plan. Moore et al. were pulling out characters and story arc like monkeys from their posteriors. Crucial, vital items cutting to the show’s very raison d’etre from episode one made up on the fly this final year. Wounded geeks howling in betrayal are not for the squeamish. It seems politicos are no different.

Yet we pity geek pain. Moore et al. have been winging BSG; Heroes is an embarrassment ($4 million an ep?); Terminator: Sarah Connor Chronicles is so illogical, disjointed and feckless *within each episode* the Stiftung’s Aibo is chafing to go and just waste that Connor punk to end the misery. They face a wasteland.

It’s amazing Obama and Geithner don’t realize a serialized story with no plan is a train wreck. No clue. In the end, no real audience. Take this as an unkind studio note on your pilot script: get a script doctor. Or it’s no go. Why?

To mix geek references, Padawan Geithner tried to serve his Master’s bidding yesterday. But his Jedi mind tricks are weak. Did you notice the vague hand movement in front of him as he droned ‘All will be well, we will unveil our plan soon’? Fah. My dear Padawan, you can mind trick all of the American lemmings all of the time, but pundits, foreign creditors, foreign observers, ‘the Street’, and Hutts on the Hill are immune. He and his Master wish us to believe that like a multi year genre serial, all the little plots and twists we see ahead immediately will all make sense *when the story is revealed* at the end. Except the joke is on Geithner; we know he is creating BSG while Obama seems to seek higher fare.

A New Script Based On Reality

A script doctor would counsel that there are two distinct story lines for Geithner to establish now, at the pilot episode. He must choose. One is that we are essentially in a panic. Fundamentally sound assets are temporarily underwater or without valuation. Thus King Henry claimed he would buy up ‘toxic assets’, banks like the house in Poltergeist would be made ‘clean’ and King Henry would sell off the purchased at a profit. An elevator pitch at MGM – except the studio would want Clooney as Paulson, James Wood at AIG and Roseanne Barr in a foreclosed home surrounded by cubic zirconium.

The other story is that many if not most of the affected financial institutions are fundamentally and irretrievably insolvent. The IMF puts the insolvency rate at circa $1.4 trillion. Nouriel Roubini pegs it around $3.6 trillion. These institutions can not be made clean by buying toxic debt because there is no there, there. The elevator pitch here is Will Smith in I am Legend without the annoying woman and child; he makes it out to Darien, CT with some bearer bonds.

The Stiftung like others subscribes to this later view. Obama and Geithner (and the Hill, media and Wall Street) are all hoping for Geitner’s BSG script — the current geek heartburn is they haven’t seen enough ‘spoilers’ to know what the plan is not realizing there isn’t one. There is no arc, no plan for this BSG tact. Guarantees and buying some toxic assets here and there and $350 billion Son of TARP will give us George Romero Living Dead Banks for at least a Lost Decade if not more. That, dear reader, is no plan. It is, however, Ron Moore BSG classic. Yet who would claim 4 years hence this was meant to be?

Shoot The Wounded !

We have an involvency crisis, not a panic or business cycle. We need a new script. We are looking at either nationalization for recapitalization or massive debt for equity swaps on a level far above being contemplated now. Obama and Geithner would be advised to shoot the wounded. Let the bad banks die. Start with new good banks, with new management, with new ethos untainted by the ruinous gluttony of the bubbles.

We are actually serious when we suggest that should an existing tainted bank want recapitalization or a swap, it must relocate executive offices to an economic recovery zone. Youngstown, Ohio. Michigan. The Katrina inland wasteland. Pick another.

Technologically there is no reason for anyone to be on Wall Street anymore (banks and Cravath and others fled a while ago). There’s no reason for them to be in the City, either. We don’t have re-education farms yet in America. But requiring bankers on the federal dole to live among the hoi ploi and see reality is a small price to pay for their Walter Mitty daydreams that they still matter.

That’s a script, a plan and a ComicCon panel that will rock. And no one plausibly can scream ‘Curse you Timothy Geithner, you raped my childhood !!!’ Although he may get a couple of Michael Bay’s ‘I hope you die for destroying my sole joy in life, Transformers ‘Dude! You own my eyeballs!’ And Obama? He won’t have to be worried about being cancelled after 4 short seasons.

Microsoft, FDR And Escaping The Prison Of The Past

America still gropes for a generally accepted conceptual past template to explain the present and future. The most hegemonic meme is ‘The greatest crisis since the Great Depression’. The slogan is everywhere. It taps into a hazy Jungian collective memory and aligns American expectations for Obama. The meme’s 7 words are shorthand for 100 days, public works — the dimly recalled 3-4 pages from high school American history textbooks.

Redmond and the American Future

We’ve all seen how America’s soupy consciousness sucks it in from blog and cable micro channel niches, silos, stratifications and spam. The dominant meme itself then becomes a news story as contrarians fight for web hits and fleeting relevancy.

In 1933, as today, a new president stepped into the White House, vowing change and decisive action at a time when a banking crisis posed a grave threat to the nation’s economy.

The economic morass that confronted Franklin D. Roosevelt 76 years ago was undeniably deeper and more ominous than the trouble President Obama is facing. Yet, according to economists and historians, there are also some telling similarities and cautionary lessons to be drawn from the experience of the Roosevelt years in the 1930s.

And so on. One does wonder what FDR would have encountered had Hoover’s Commerce Department and then the newly created FCC not nationalized radio spectrum and protected government and incumbents with licenses and regulatory control. A small reason there to be thankful Obama is not following the Hoover-FDR thing too closely.

Beyond FDR

But we digress. We offer an alternative meme to FDR. One that resonates with today and looks foward with honesty.

Consider Microsoft and its latest earnings report. Microsoft’s setbacks were long anticipated by technology watchers (in fact most reported in December the layoffs would be 15,000, not the actual 5,000). Much like the American economy in 2008-2009, Microsoft is reaping the bitter harvest of its once seemingly permanent business model/license to print money. Redmond’s prognosis is a better template and cautionary tale than FDR when thinking about the post-Warlord economy.

The Microsoft Economy Is Not Sustainable

First, a short recap why Microsoft, like the American economy, suffers from structural flaws. Most know Redmond’s billions accrue from its strangehold on the desktop environment: (a) the operating system; and (b) office applications. Think of Microsoft operating systems as the American economic model – pervasive, loathed by some, and the epitome of the Davos set.

Unfortunately for them, Vista, Redmond’s latest operating system, is a fiasco. Now the recurring butt of Leno monologue jokes, it is the IT industry’s Edsel. It may go down as one of the biggest corporate blunders in American history.

Fine. That’s one product. More damning, however, the world environment changed. Customers and enterprises are migrating to web-based applications instead of the old Office Suite. It doesn’t matter so much which operating system is around. A surprising rise in the new ‘netbook’ segment of ultra portable notebooks in 2008-2009 caught Microsoft flat footed. The hot-selling smaller devices can not run the Vista bloatware — XP remained in demand. To Redmond’s alarm manufacturers for once had the upper hand — they could always turn to the free Linux alternative. Microsoft’s comical tilting at Google wind mills via the aborted Yahoo acquisition speaks for itself.

A slight confession here — the Stiftung is not ambivalent about Microsoft. We’ve dealt with Microsoft’s Chief Operating Officer, Vice Presidents, Directors and alarmingly smug managers over decades. In both a representative capacity and other ways. With the possible exception of one defense contractor, the Stiftung never met a more duplicitous, dishonest, mendacious, anger-filled and sociopathic corporate culture. But like a broken clock (or should that be Zune?) even Microsoft can be right.

Redmond warns investors and the market that the future will not rebound to 2007 or before. Based on current economic trends and its own business model (described in strictly revenue terms for the Street) the future will unfold on a significantly lower economic plateau. Is Microsoft finished? Doomed? Hardly, but it will have to fight harder and make do with less.

This is where the Obama Administration makes a strategic error. The ‘Stimulus Bill’ is a misnomer. Obama should ‘state clearly’ (his favorite phrase – it makes a great drinking game, try it) he is proposing a stabilization bill. This is in keeping with his ‘create or preserve’ jobs meme. It’s also more accurate regarding his plans for the States. A ‘stabilization bill’ also protects him from retroactive recriminations down the road for preserving what never cratered.

As we wrote recently, Obama should come clean with the American people that there is no going back to the economy and lifestyle fueled by the tech and real estate bubbles. This means resetting expectations to circa 1994 at best. Many of those jobs related to the bubbles are gone for good. Obama is wise enough to cloak this message in fairer, more palatable terms than say the Peanut Farmer’s malaise thing. It needs saying.

Regardless Dear Reader, don’t you think we need to move beyond the imperialism of the FDR meme?

A Punch In The Face . . .


So the Fed now must take the unprecedented step and buy up commercial paper directly in an effort to unblock the credit market freeze. Why are people so on edge? Don’t they remember what Richard Perle said from atop Isengard, not that long ago?

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And Survey Says !? (ding, ding)


More to come apres l’accident de voiture . . . well, if Alessandra Stanley says it, it must be so. But Stanley is this once much more perceptive than the tiresome Joan Walsh. Walsh, Olbermann and the Maddows of the world don’t seem to realize that it is no longer 2003-4. Being an Oppositionist is no longer a furtive, brave thing. No one beyond the 30% dead enders doubts the essential critique. Especially today.

Perversely, the more shrill Olbermann, Walsh or in the tank Tweety, MSNBC et al. are for Obama, the more it actually galvanizes the (until St. Paul moribund) Republican base. And one does wonder what will become of all of the above under a Boy King reign. What will they really do? Their self identity the past eight years (understandably) is one of beleaguered outrage. (or in Tweety’s case, shamelessly tacking with the wind, so let’s drop him as an outlier). What new phantoms will they need to shadow box? To retain the cognitive focus and emotional engine that sustains them. Will they belatedly discover the Boy King campaigned as all things to all people?

In Japan, they defined Imperial Rule under different ages for a given Emperor since the Meiji Restoration. Hirohito’s tumultous reign is the Showa period. The new Heisei era began in 1989 when his son Akihito took the throne. We seemingly are on the edge of our own new era: nobika na funari (serene inexperience).

One good sign. The Godzilla and Gamera movies improved noticeably in the Heisei era. So there’s always some hope here.

The MBA Warlord Speaks From The Ruins


Administration punt returned about 9 yards. Objectively marginal results with optics designed to mask the meager effort. The essential field position is unchanged. Plutocratic subsidy, massive nationalization with a roll of the dice. In the dark.

From a tactical point of view, one might take comfort that the Democrats for once didn’t flinch, cave and roll over completely. Talk about reduced expectations.

It’s an outrage really that they expect frappuccino applause for this constitutional posturing. CEO pay? Some ‘oversight? All small upticks in Rachel Maddow demographics. They discover separation of powers only now. And tonight we hear them assert with smug bravado “We really are members of phylum cordata. ” Amidst a prostrate nation in financial ruins.

The Warlord’s incompetence is a fact of life. Like a morning traffic jam. (Long time readers here understand and likely share the Stiftung’s assertion that the incompetence is inextricably linked to the underlying radical ideology). So Americans just tuning in now justifiably could ask “Which really is worse? Weakness or incompetence? Are they the same thing?” What happened to November 2006?

Incompetence destroyed the nation. Will weakness save it? That’s the question for many this new November. It’s not just the Boy King’s doings. How else to explain McCain’s even remotely viable chances? (Although did anyone else find it bizarre beyond usual that today — of all days — Biden spends 40 minutes droning on about Iraq? Does he really think anyone cares he is the cue card girl for the foreign policy debate? Can’t he just be quiet?).

The Thursday joint appearance with McCain and the Boy King should provide everyone at the White House with cover *and* plausible deniability. The Boy King will try and pin McCain like a butterfly. It’s going to be hard in a giant political jello bowl. Try nailing that to a wall. Everybody gets credit and no responsibility. Hundreds of declared individual ‘signing statements’. Bloviation beyond comprehension ‘coulda, woulda shoulda’, ‘market forces’, ‘accountability’ and ‘helping the middle class (what’s left of its skeletal remains).’

Too bad Howie Mandel can’t show up with his models and briefcases for the international audience. Let Bernanke and Paulson pick while Howie calls in the banker. That’s the true face of America the world sees and we don’t recognize.

Still, it’s been less than a week since Chuck Schumer told us things were ‘somber.’ Pretty decent response time for a palsied political system hobbled with both a failed Administraton and Congress. Some Japanese and German financial officials didn’t think it would happen. Too bad no one knows what ‘it’ will turn out to be.

Over To You, Beijing, Riyadh, Kuwait And UAE (Updated)

Fine, who’s going to pay for it? We’re still skeptical the U.S. can sucker punch them yet again for a cash infusion. Particularly now since the Warlord’s tenure puts an exclamation point on “The Unipolar Power Has No Clothes” across all measures of influence, perceptions of power and status (even Scalia is not entertaining abroad).

International observers from Frankfurt to Tokyo observe that the U.S. on its own no longer can afford to pay for projects of this scale. Not anymore. Not without outside help.

Curmudgeon in the comments here noted a good point — T-bills paradoxically are more attractive now with the collapse of commercial paper. And at least verbiage from the Bank of Japan today confirms that they are holding so much in U.S. assets that they too are *in the short term* compelled to intervene and lend actual dollars. If Tokyo is in this position, one can only imagine the conversations in Beijing. Where the skepticism comes is after the short term measures are taken.

Save the Wall Streeters, Save the World (apologies NBC)

Whatever entity the Paulson Posse ™ creates (New Thing) will have to dispose of staggeringly huge, assumed toxic instruments or eat them. We remain in agreement with sentiments in Frankfurt and elsewhere that at this point, the U.S. simply no longer is in a position to do so on its own. Optimistic structural concepts for New Thing are thinking about tapping ‘only’ $250 billion in private money (which is unlikely if it couldn’t or wouldn’t save AIG or Lehman) or foreign sovereign funds. If only it were ‘only’.

We’re amused (in a sardonic way) to see how the campaigns flail about on this issue. McCain’s flip flops are already the stuff of immediate talking head legend. So too to see the Left rapturously pointing to the Boy King’s tete-a-tete avec Larry Summers, Bob Rubin and others who led the charge in the late 1990s to repeal the Depression Era’s Glass Steagall Act. As you know, dear reader, had the law remained intact, with its provision to separate banks, investment banks, etc. much of this cross-sector mutual pull down would not be happening. Observant commentators also note “Mr. Andrea Mitchell’s” finger prints, too. (Love that moniker).

Still, it’s nice to see that the Chairman of the Senate Banking Committee is taking notice:

As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America,” the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”

Mr. Schumer added, “History was sort of hanging over it, like this was a moment.”

When Mr. Schumer described the meeting as “somber,” Mr. Dodd cut in. “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.”

‘Somber’. They used to say the most dangerous place in Washington, D.C. was between Chuck Schumer and a microphone. Thank goodness Dodd heeded Dan Rather’s old sign off and showed ‘courage’ to step into that very harrowing gap.

____________________

And for your amusement, herewith a pen given to the Stiftung by the General Counsel of a major AIG component company — after we signed a joint venture agreement. (Assisted by a famous lawyer known to everyone from his White House Monica Lewinsky days).

It’s actually much nicer than a Bic. Not sure how many $85 billion will save. Maybe we will see if we can make a piece of toast with the AIG logo. And add the pen, too, for eBay . . .

How The Mighty Have . . .