December 28, 2009
As the year and the decade come to a close, we are being bombarded with a slew of retrospectives about what was “important” during this crazy time. Those of us who are capable of directing our attention to intellectually stimulating subjects, have found the increasing availability of information from internet-based sources to be life-changing. Now that we are no longer stuck with a focus on the handful of news stories deemed “important” by mainstream media outlets, we have familiarized ourselves with the ever-expanding marketplace of ideas to be found online. We all have our favorite websites, where we go first when we want to find out the latest and most attention-grabbing news events of the day. From there, many of us take a closer look at a particular topic by going to a more specialized, subject-oriented website. I keep a blogroll at the left side of this page, which is offered as a diverse aggregation of sources and perspectives on subjects usually covered in this blog. Lately, I’ve found myself spending more and more time reading the great material by Edward Harrison of Credit Writedowns. As a result, I’ve added a link to that site on my blogroll.
Edward Harrison explained the reason why he chose such a gloomy name for his website:
I named my blog “Credit Writedowns” because I anticipated an historic wave of credit writedowns in the global banking system which would lead to a wave of deleveraging, systemic risk, and bank failures — in short, a massive financial and economic bust to rival the Great Depression.
Mr. Harrison has an MBA degree in Finance from Columbia University and he works as a banking and finance specialist for Global Macro Advisors. One of his noteworthy efforts from the first year of Credit Writedowns came about on September 24, 2008, when he published “The Dummy’s Guide to the US Banking Crisis”.
I have been particularly impressed by the “year in review” series, presently underway at Credit Writedowns. On December 23, Mr. Harrison published a great essay about how “kleptocracy” (rule by thieves) has become the status quo. The premise for this piece was originally included in one of Harrison’s early postings on Credit Writedowns, from March 24, 2008. At that time, he explained the subject this way:
First, let’s use a theory from Guns, Germs, and Steel by Jared Diamond as the center-piece for this little theory. In Chapter 14, entitled “From Egalitarianism to Kleptocracy,” Diamond postulates that more stratified societies are by definition less egalitarian, but more efficient and are, thus, able to eradicate or conquer more egalitarian, less stratified societies. Thus, all “advanced” societies with high levels of GDP are complex and hierarchical.
The problem is: these more stratified, more complex societies are in essence Kleptocracies, where those in power re-distribute societal wealth to themselves. Those at the bottom of the society’s pyramid accept this unequal, non-egalitarian state of affairs because they too benefit from their society’s relative advancement. It’s a case of a rising tide lifting all boats.
Back in March of 2008, Edward Harrison was one of just a small handful of thinkers capable of facing up to the ugly reality of where the credit bubble brought us:
The United States has been living beyond its means for some time. Since the 1960s, we have run up a massive federal debt and current account deficit, while debt levels have doubled on a percentage of GDP basis. Our present levels of consumption are simply not justified by our current levels of productivity, if we want to maintain our present standard of living in the future.
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The fact is our day of reckoning is upon us. We will soon realize that our massive debt and an outsized credit bubble have not only saddled us with debt, but it has also misallocated capital so that we are less productive than we believed. We have built miles and miles of telecom dark fibre when we could have invested in schools. We have built massive numbers of new homes, when we could have repaired our bridges and roads. The last 35 years have been an illusion of extreme productivity and wealth because we have artificially pulled forward demand by misallocating resources in order to consume today, what could have been consumed tomorrow. In essence, we are consuming today, while unwittingly making it more difficult to consume tomorrow because we believe we are wealthier than we truly are.
The recent sneaky move by Treasury Secretary “Turbo” Tim Geithner on Christmas Eve, lifting the $400 billion restriction on bailouts to Fannie Mae and Freddie Mac (sidestepping the need for Congressional approval because it was done before the end of the year) is drawing attention to the kleptocracy’s strategy of relying on distraction of public attention in order to get away with skullduggery. Harrison’s point from the December 23 posting: that the kleptocracy anesthetizes the public with television, which has become “our own modern-day agent of mental anesthesia”, struck a chord with me.
The latest entry in the “year in review” series at Credit Writedowns concerns the subject of crony capitalism. Here’s how Edward Harrison described the piece:
In this post, I want to talk about Obama’s economic policies in the context of what I perceive as a crony capitalism which is now endemic in Washington. As I see it, Americans are angry because the economy is still quite fragile and the personal financial situation for many ordinary Americans is still quite dire. Yet, the so-called fat cats seem more pigs eating at the trough of government largesse. This juxtaposition is galling and undermines any success that the Obama Administration has achieved.
A key theme of that essay is expressed in this passage:
The evidence, therefore, tends to demonstrate that we have witnessed an orchestrated campaign by the Bush and Obama Administrations to recapitalize too big to fail institutions by hook or by crook, bypassing Congressional approval if necessary. And when it comes to healthcare, both Congress and the White House have bent over backwards to keep the lobbyists onside. As I see it, our government has favored special interests in the past year of Obama’s tenure to our detriment.
As more economists voice agreement with the opinion expressed by Joseph Stiglitz, that there will likely be further economic contraction in the second half of 2010, the inevitability of a dreaded “double-dip” recession will become more apparent. Mr. Harrison pointed out that this scenario could result in some disdain for President Obama, which might impact the 2010 election results. Perhaps President Obama should start reading Credit Writedowns — and stop listening to Larry Summers.
2009 Jackass Of The Year Award
December 31, 2009
Well, it’s that time once again! The 2008 competition brought us a robust field of candidates, probably because it was an election year. This year, I’ve decided to ignore the one-event wonders and stick with nominees demonstrating a consistent pattern of jackass behavior. The isolated exhibitions of foolishness illustrated by Richard Heene’s “balloon boy” hoax and Janet Napolitano’s “the system worked” gaffe, just don’t rise to the level of an award-winning honor. I’m also avoiding individuals categorized as “the usual suspects” — the media darlings who are already getting beaten-up in the 2009 retrospective shows. That list includes such notables as Tiger Woods, Carrie Prejean and “The Undiebomber” (Umar Mutallab).
This year I have narrowed the competition down to two people.
In just a few short weeks, our first nominee will be celebrating the anniversary of his inauguration as President of the United States. During his early days in office, he enjoyed an approval rating as high as 69 percent, according to Gallup. By early December, Gallup reported that his approval rating had taken a 22-point drop to 47 percent. At that time, Rasmussen Reports revealed that not only had the President’s approval rating dropped to 48 percent — his disapproval rating actually reached 52 percent! On December 9, Quinnipiac University published the results of a poll conducted during December 1 – 6. The results gave the President a job approval rating of only 46 percent, and those disapproving Obama’s performance amounted to 44 percent. The Ipsos/McClatchy Poll taken during that period, disclosed that the President received his highest “unsatisfactory” rating on the issue of “jobs and the economy” with 45 percent giving the President an unsatisfactory grade (D or F) while only 36 percent gave him a satisfactory grade (A or B) and 19 percent gave him a C.
Many commentators have pondered over the reasons for President Obama’s decreasing approval ratings. I have previously discussed the subject here, here and here. In doing so, I found the criticism of Obama’s performance as expressed by Edward Harrison of Credit Writedowns, to be particularly insightful. In his December 27 posting, Mr. Harrison posed a question that has obviously been on the minds of many disappointed Obama supporters:
Mr. Harrison contended that the foregoing inquiry is actually irrelevant because it involves ascribing an intent behind the President’s behavior, when we should be looking at either motive or outcome. Mr. Harrison eventually focused on a recent op-ed piece by Ross Douthat of The New York Times entitled: “The Obama Way”. Obama’s track record of broken campaign promises, including “no more trickle-down economics” and those documented on The Obameter, is something that obviously weighs on the minds of dispirited Obama supporters. Ross Douthat explained how the President’s leadership style is itself a broken campaign promise:
Ross Douthat’s conclusion implied that it’s still too early determine whether Obama’s political approach will ultimately result in success or failure. By this time next year, the mid-term elections will be over. If the careers of many Democratic politicians are over at that point, we will then have to assess whether President Obama’s leadership style helped to bring them down. As a result, we will have to defer to next year’s competition before deciding whether our new President rates the title “Jackass of the Year”.
Our second nominee is the so-called “Supreme Leader” of Iran, Ali Khamenei. Khamenei decided to rig the June elections to ensure that his tool, the equally crazy Mahmoud Ahmadinejad, would be re-elected. The resulting public outrage was escalated by Khamenei into a bloodbath. Since that time, Khamenei’s ham-handed tactics in attempting to squelch opposition have only made things worse. A recent New York Times editorial entitled “Iran’s War on Its People” put it this way:
Al Jazeera’s Teymoor Nabili reported that Baqer Moin, London-based analyst and Ayatollah Khomeini biographer, explained that Iran’s opposition party, the Greens, would still settle for modest reform, if the regime would compromise. Nevertheless, Mr. Nabili’s report quoted other sources who expressed concern that the upcoming anniversary of the revolution could be “the next potential spark”. Will the Supreme Leader negotiate? Based on his record over the past six months, there is no reason to believe that he will. His strategy of cracking down on the Greens with more deadly repression is exactly the approach that could lead to the regime’s demise. Mr. Nabili added this insight to an already gloomy picture:
Brilliant plan, huh? Another Al Jazeera report revealed that the Iranian government’s desperate actions are a sign of weakness that could ultimately lead to the end of Khamenei’s days as “Supreme Leader”:
After George W. Bush overthrew the regime of Saddam Hussein in Iraq, many commentators expressed concern that this development could bring about an era of Iranian hegemony in the Middle East. Nevertheless, Iran’s relentless efforts to create a nuclear arsenal and the craziness of its Supreme Leader, who would likely detonate an atomic bomb in Israel if he had such a weapon, have apparently made the Iranian people more than a little uncomfortable with their government. The events since June could only serve to underscore fears that the Khamenei regime would attempt a nuclear strike on Israel, resulting in a retaliatory move that would wipe Tehran off the map. The Iranian people are obviously not going to sit on their hands and wait for that to happen. Al Jazeera’s Teymoor Nabili provided us with some insight on the current mood of the Iranian protesters:
Although it may be too early to celebrate the demise of the Khamenei regime, the time is certainly right to honor Iran’s Supreme Leader, Ali Khamenei, with TheCenterLane.com‘s Jackass of the Year Award. Congratulations, Jackass!