Deep breath.
Folks, let me be absolutely clear at the outset. I am definitely NOT someone with any kind of political agenda. I am not a Republican nor am I a Democrat. I am neither Labour nor Conservative. I hold just about all politicians in equally low regard, the only exceptions being those I hold in utter contempt (yes Tony, I'm talking about you).
I know, as I put finger to keyboard this week, that my thoughts are likely to raise the hackles of many, cause an outpouring of sympathy in others and, possibly, cost me a few subscribers (such is the strange spell cast by politics over normally reasoned and rational human beings). But frankly, I am so utterly outraged by what I have been forced to watch that I can't stop myself from venting any longer.
For those of you who feel a Brit has no right criticizing the US political system, I will point to my already-on-the-record love of America as well as the fact that I lived in Connecticut and worked in Manhattan for the best part of nine years; and so I like to think I have paid enough taxes (and claimed no benefits, I might add) to justify at least a little time in the pulpit. But, as Piers Morgan has recently demonstrated, American intolerance of British opinions is quite high at the moment. For what it's worth, though, I hope America still has the receipt, because we do NOT want him back.
'Why the US? Why not stick it to the UK?' you might ask. Well, frankly, US politics matter more to the rest of the world, the people involved are just too damn good at being ridiculous (Herman Cain? Maxine Waters? Sarah Palin? Michelle Bachmann? MAXINE WATERS?), and it'll be the UK's turn again soon enough, don't worry.
For some reason, talking about politics is a hugely divisive thing to do. People extrapolate what they want from your opinion, stick a nice, tidy label on you, and file you under the letter 'F' for either 'Friend' or 'Foe'. Once declared, your politics define you, and that is a great shame.
If I could find a politician worthy of my vote, I would vote for that politician regardless of the party he or she represented—that is the hallmark of a leader: someone who transcends the aisle of any house.
There are a few elected representatives out there for whom I have a great deal of respect and admiration—chief amongst them Ron Paul in America and Nigel Farage in the UK; but whilst, as characters upon the world's political stage, the two men couldn't be farther apart (the quiet, respectful, grandfatherly bearing of Dr. Paul is a world away from the pugnacious, outspoken lightning rod that is Mr. Farage), they have something in common that marks them out (in my mind at least) as leaders: they have taken a stand against institutions that they see as bringing great harm to their fellow citizens and have both fought tirelessly and consistently to try and change the impact those institutions have upon the electorate in their respective countries.
For Dr. Paul the bugbear has been the Federal Reserve and 'big government', whilst for Mr. Farage it is the Confederacy of Dunces in Brussels.
This past few weeks, the world has been in thrall to something that was dubbed 'the fiscal cliff' (probably by Willem Buiter, who gave birth to the irritating 'Grexit'). To recap—for those amongst you who have perhaps been incarcerated in North Korea for the past six months—this was a set of automatic spending cuts and tax increases that the honorable men and women deemed worthiest to represent their fellow citizens in Washington DC set up to come into force simultaneously at the end of 2012. One can only assume this was done to inspire the necessary urgency amongst them to 'get a deal done'.
Source: Goldman Sachs
At its gravest (chart, previous page) the 'cliff' would have meant a near-6% dent in US GDP (so, clearly, that was never going to be allowed to happen); at its least harmful, the can would be re-kicked and the whole thing would end up being another drama of little or no substance—a tempest in a teacup as Jamie Dimon would probably have called it (and that was by far the most likely outcome). Throw into the mix the need to raise the US debt ceiling, a deadline that again occurred almost simultaneously, and it was easy to see why so much attention was being paid to the outcome. Except...
The outcome was never in doubt. These fools were always going to go over the cliff—once the requisite degree of drama had been generated—before frantically agreeing to a deal that cast them as tireless heroes but solved nothing and kicked the can further down the road. The only question marks were, which side would score a political victory from the fiasco, and how big would the relief rally be before reality set in again?
So, how did the solution play out? Well, at one minute after midnight a deal was struck which essentially put a line through all of the tax increases that were due to come into effect (except those on the very wealthy) and postponed all of the spending cuts that were to take effect, too. The net result, it is estimated, will be a 1% drag on the US economy in 2013.
That people have the gall to call that any sort of solution beggars belief—and yet US stock markets rallied about 3% on the news that nothing bad had happened and wouldn't for another couple of months.
This deal did absolutely nothing to stop the rampant entitlement spending, and the additional revenue which will (supposedly) be garnered from the deal will make virtually no dent in the annual deficit, as can be seen from the chart at left.
This kick-the-can approach, followed by press conferences announcing the miraculous, hard-fought solution which was actually designed to merely sell the public on the ability of their elected representatives to do their job, put me in mind of another political locale—Europe.
Yes, the home of political dysfunction now has a rival for its formerly undisputed crown, and that rival is in similarly dire political straits, as the Economist pointed out in a timely article that I read after penning this piece:
(Economist): For the past three years America’s leaders have looked on Europe’s management of the euro crisis with barely disguised contempt. In the White House and on Capitol Hill there has been incredulity that Europe’s politicians could be so incompetent at handling an economic problem; so addicted to last-minute, short-term fixes; and so incapable of agreeing on a long-term strategy for the single currency.
Those criticisms were all valid, but now those who made them should take the planks from their own eyes. America’s economy may not be in as bad a state as Europe’s, but the failures of its politicians—epitomised by this week’s 11th-hour deal to avoid the calamity of the “fiscal cliff”—suggest that Washington’s pattern of dysfunction is disturbingly similar to the euro zone’s.
Indeed.
In no more than a handful of weeks, we will go through the whole fiasco all over again as Republicans (no doubt still stinging from what was portrayed in the media—fairly accurately, I might add—as complete capitulation) and Democrats (who will finally have to confront their own Waterloo when spending cuts are addressed) come together to do battle over the sequester and the raising of the debt ceiling.
The problem is that both parties are addicted to spending money that they don't have, as can be readily seen from the chart below, which shows the US federal debt increase by president.
Source: Truthful Politics
Whilst Obama's presidency has seen the debt levels go parabolic, Reagan and both Bushes certainly did their bit to get us to where we are today. (Funnily enough, the real fun didn't get started until immediately after Nixon severed the dollar's link to gold. But that is a story for another day. Let's not cloud the issue here).
It seems as though the only thing there is no bubble in right now is leadership. Where are the leaders? Where are the statesmen and -women? It's not just the USA; Europe and the UK are suffering from a similar vacuum, whilst China is riddled with graft as a few powerful individuals attempt to squirrel away as much money as they can without upsetting the apple cart. The problem is so endemic and reaches such high levels of the Party that Xi Jinping's promise to address the issue is already doomed to failure. How bad is it?
(Time, June 2011): Last week, the People's Bank of China published a report that looked at corruption monitoring and how corrupt officials transfer assets overseas. The report quotes statistics based on research by the Chinese Academy of Social Sciences: 18,000 Communist Party and government officials, public-security members, judicial cadres, agents of state institutions and senior-management individuals of state-owned enterprises have fled China since 1990. Also missing is about 0 billion.
The People's Bank of China report stresses that until now, nobody has been able to provide an authoritative figure of the exact sum pilfered, and the figure of 0 billion is still only an estimate. It is nonetheless an astronomical sum. It is equivalent to China's total financial allocation for education from 1978 to '98. Each escaped official stole, on average, million. But the real numbers might be even higher. Some media have reported that the wife of the deputy chief engineer of the Ministry of Railways, Zhang Shuguang, who was recently caught for corruption, owns three luxury mansions in Los Angeles and has bank savings of as much as .8 billion in the U.S. and Switzerland. This example gives a glimpse into the broader picture.
But I digress. Let's stick to the West and specifically America for now.
The last quote on the front page of this week's Things That Make You Go Hmmm... comes from Anthony Jay, the octogenarian writer of the UK's greatest political satire, Yes Minister, a show about an incompetent junior minister in the UK government that ran on British TV in the 1980s (the show evolved into Yes, Prime Minister when the bumbling hero of the show, the Right Honourable Jim Hacker MP, ascended to the rank of Prime Minister despite his obvious ineptitude for the post). Jay and his writing partner, Jonathan Lynn, have recently been commissioned to resurrect the series, setting it in the modern political arena; and, since Jay has spent a considerable amount of time immersed in the environs of Westminster, his observation is both important and, sadly, points to a phenomenon which extends far beyond the UK.
As far back as 2009, JP Morgan's Michael Cembalest published an article on Forbes.com entitled 'Obama's Business Blind Spot'. In it he took issue with the low level of private-sector experience amongst the President's cabinet:
I looked back at the history of the Presidential Cabinet. Starting with the creation of the Secretary of Commerce back in 1900, I compiled the prior private-sector experience of all 432 cabinet members, focusing on those positions one would expect to participate in this discussion: Secretaries of State; Commerce; Treasury; Agriculture; Interior; Labor; Transportation; Energy; and Housing & Urban Development (a).
Many of these individuals started a company or ran one, with first-hand experience in hiring and firing, domestic and international competition, red tape, recessions, wars and technological change. Their industries included agribusiness, chemicals, finance, construction, communications, energy, insurance, mining, publishing, pharmaceuticals, railroads and steel; a cross-section of the American experience. [I even gave partial credit to attorneys focused on private-sector issues, although one could argue this is a completely different kettle of fish]. One thing is clear: The current administration, compared with past Democratic and Republican ones, marks a departure from the traditional reliance on a balance of public- and private-sector experiences.
This lack of private-sector experience is totally in keeping with the behaviour of governments that fundamentally believe they are the solution to every problem. In actual fact, the truth is far closer to Ronald Reagan's famous remark:
[G]overnment is not the solution to our problem; government is the problem.
This was underlined this past week when the curious announcement was made that Timothy Geithner will not only be stepping down as Treasury Secretary but will be leaving before the debt-ceiling negotiations are concluded. But, as strange as I found that piece of news, it was an article on Bloomberg about his likely successor that had me banging my head on my desk:
Treasury Secretary Timothy F. Geithner plans to leave the administration at the end of January, even if President Barack Obama and congressional Republicans haven’t reached an agreement to raise the debt ceiling, according to two people familiar with the matter.
After giving in to Obama’s previous entreaties to stay as long as needed, Geithner has indicated to White House officials and Wall Street executives that he is unlikely to change his departure plans this time, increasing pressure on the president to name his successor at Treasury, said the people, who requested anonymity to discuss the private talks…
So far, so good, but then, this:
White House Chief of Staff Jack Lew remains the leading contender for the Treasury job, the people said. Because Lew’s experience in financial markets is thin, Obama may seek to name a Wall Street executive as deputy Treasury secretary, they said.
While Lew, 57, worked as a managing director for Citigroup from July 2006 until the end of 2008, he’s spent most of his career in government. He served as director of the Office of Management and Budget for both Obama and President Bill Clinton and was an aide to the late Tip O’Neill, former speaker of the U.S. House.
How in the name of all that is remotely sensible can your leading candidate for the Treasury Secretary role have 'thin' financial markets experience? Now? After 2008? With all the problems facing the banking sector? Lew may well be an extremely smart guy; but surely, a man who spent two years at Citigroup in his 50s after a career in government isn't the smart choice. Presumably, however, the likes of Jamie Dimon or Lloyd Blankfein wouldn't be quick to subject themselves to the confirmation process...
But then, to top it all off, things took yet another turn for the absurd.
How utterly ridiculous have things become? Well, this week we find ourselves in the truly bizarre situation of actually spending more time discussing the ' trillion coin'.
A google search for the phrase ' trillion coin' already yields close to 2 million results, and that number is climbing faster than the signatories to the 'Deport Piers Morgan' petition.
But what the hell is this all about? Are we seriously talking about producing a magical coin that will solve the debt problem? Folks, it looks like that's the world we now live in—a world inhabited by 'journalists' who actually spend their time writing articles with headlines such as:
Can a Trillion Coin End Debt Ceiling Crisis?
Allow me. No.
Is a Trillion Coin a Good Way to Avoid Another Debt-Ceiling Impasse?
I'll take this one too. NO!
Hell, CNN even aired a TWO-AND-A-HALF-MINUTE segment on whether this was a feasible solution, which included the opinion of 'economist' Joe Gagnon, who thought it was a good idea:
It's better than a government shutdown, it's better than defaulting on the debt. It's better than the bad alternatives.
It gets even better.
A Democratic Senator from Brooklyn, NY, whose name—and I wish I were kidding—is Jerry Lewis Nadler, said:
I'm being absolutely serious... It sounds silly but it's absolutely legal.
But perhaps the pick of the quotes is this one from the segment anchor, Brian Todd:
...and by the way, none of this requires Congressional consent, so that's what makes it attractive to so many observers here.
I despair.
It may be technically legal, but why do these people insist on opening their mouths and letting the words escape before engaging their brains?
You cannot simply mint a 1-oz platnum coin, stamp ' Trillion' on it, and assume it is worth trillion dollars.
This is simply a cute way for politicians to technically stay within the law and have free reign over spending again. Jeez.
The last I saw, at the close of the market on Friday, 1 oz of platinum was worth precisely ,559 (almost exactly 0 less than an ounce of gold), and yet we still have to put up with crap like this video. Folks, just take a look at the chart (left) from Zerohedge. Case closed. Please.
The whole idea for the coin stems from a rather obscure article in legal statute USC › Title 31 › Subtitle IV › Chapter 51 › Subchapter II › § 5112, which is entitled 'Denominations, specifications, and design of coins' and contains the following thirty-seven words:
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
Of course, there is the now-obligatory petition on the White House website and, as I write this, over 3,000 4,000 people sufficiently detached from reality have signed it. Such is the world in which we live.
When will this end? When will the world wake up to the fact that large parts of it are hopelessly broke? When will the public become sufficiently engaged in the world around them to demonstrate the requisite level of outrage? At what point does the cavalier attitude of 'the 1%' come face to face with any kind of justice? Will anyone ever go to jail? Mozilo? Fuld? Corzine? ANYBODY?
With one last thumbing of the nose to the 99%, on Friday it emerged that ex-Vice President Al Gore had attempted to save himself million in higher taxes by rushing through the 0mn sale of Current TV to Qatari-sponsored Al Jazeera before the fiscal cliff deadline. Sadly (for Gore, at least) he was unsuccessful and will be subject to the 5 percent increase in capital gains tax that came into effect on Jan 2nd.
(NYT): Al Jazeera did not disclose the purchase price, but people with direct knowledge of the deal pegged it at around 0 million, indicating a 0 million payout for Mr. Gore.
Mr. Gore and his partners were eager to complete the deal by December 31st, lest it be subject to higher tax rates that took effect on January 1st, according to several people who insisted on anonymity because they were not authorised to speak publicly.
But the deal was not signed until Wednesday.
There is an insidious pattern of ineptitude, corruption, and outright dishonesty amongst public servants at the highest levels today—made possible by a public too lazy to try to understand the ramifications of the lies to which they are being subjected.
With each successful escape from detection and prosecution, the audacity of those perpetrating the crimes (yes, crimes) increases. Where will it end? I don't know, but if history is any guide, it won't end either well or peacefully.
Now, I'm not normally one to start making predictions about outrageous possible outcomes, but, as George Santayana famously said:
Those who do not remember the past are condemned to repeat it.
So, by way of illustrating exactly what he was referring to, I give you the following passage lifted in its entirety from Wikipedia. The passage is extremely interesting (particularly for any 'Les Miserables' fans out there) and explains events during the lead-up to the French Revolution:
(WIkipedia): At a governmental level the sequence of events leading to the revolution was sparked by France's effective bankruptcy due to the enormous cost of previous wars.
The attempt to challenge British naval and commercial power in the Seven Years' War was a costly disaster, with the loss of France's colonial possessions in continental North America and the destruction of the French Navy. French forces were rebuilt and performed more successfully in the American Revolutionary War, but only at massive additional cost. France's inefficient and antiquated financial system was unable to finance this debt, a problem both partially caused and exacerbated by a grossly inequitable system of taxation. Faced with a political impasse, the king called an Assembly of Notables in 1787.
Meanwhile, the royal court at Versailles was seen as being isolated from, and indifferent to, the hardships of the lower classes. While in theory King Louis XVI was an absolute monarch, in practice he was often indecisive and known to back down when faced with strong opposition.
While he did reduce government expenditures, opponents in the parlements successfully thwarted his attempts at enacting much needed reforms. Those who were opposed to Louis' policies further undermined royal authority by distributing pamphlets (often reporting false or exaggerated information) that criticized the government and its officials, stirring up public opinion against the monarchy.
Many other factors involved resentments and aspirations given focus by the rise of Enlightenment ideals. These included resentment of royal absolutism; resentment by peasants, laborers and the bourgeoisie toward the traditional seigneurial privileges possessed by the nobility; resentment of the Catholic Church's influence over public policy and institutions; aspirations for freedom of religion; resentment of aristocratic bishops by the poorer rural clergy; aspirations for social, political and economic equality, and (especially as the Revolution progressed) republicanism; hatred of Queen Marie-Antoinette, who was falsely accused of being a spendthrift and an Austrian spy; and anger toward the King for firing finance minister Jacques Necker, among others, who were popularly seen as representatives of the people.
Interesting, huh? Now, I could rewrite that last passage and give it some modern-day context; but that would be too easy, so just to make things a little more fun, as we continue with our little history lesson I'll give you a few modern-day terms (at left) and let you choose where in the passages on this page and the following page you'd like to insert them.
The Wikipedia entry continues under the subheading 'Pre-revolution':
Louis XVI ascended to the throne amidst a financial crisis; the state was nearing bankruptcy and outlays outpaced income. This was because of France’s financial obligations stemming from involvement in the Seven Years War and its participation in the American Revolutionary War. In May 1776, finance minister Turgot was dismissed, after he failed to enact reforms. The next year, Jacques Necker, a foreigner, was appointed Comptroller-General of Finance. He could not be made an official minister because he was a Protestant.
Necker realized that the country's extremely regressive tax system subjected the lower classes to a heavy burden, while numerous exemptions existed for the nobility and clergy. He argued that the country could not be taxed higher; that tax exemptions for the nobility and clergy must be reduced; and proposed that borrowing more money would solve the country's fiscal shortages. Necker published a report to support this claim that underestimated the deficit by roughly 36 million livres, and proposed restricting the power of the parlements.
This was not received well by the King's ministers, and Necker, hoping to bolster his position, argued to be made a minister. The King refused, Necker was fired, and Charles Alexandre de Calonne was appointed to the Comptrollership. Calonne initially spent liberally, but he quickly realized the critical financial situation and proposed a new tax code.
The proposal included a consistent land tax, which would include taxation of the nobility and clergy. Faced with opposition from the parlements, Calonne organised the summoning of the Assembly of Notables. But the Assembly failed to endorse Calonne's proposals and instead weakened his position through its criticism. In response, the King announced the calling of the Estates-General for May 1789, the first time the body had been summoned since 1614. This was a signal that the Bourbon monarchy was in a weakened state and subject to the demands of its people.
Quotes about history from the likes of Mark Twain and George Santayana are well-known for a reason. History does have a habit of repeating itself, and people really do need to stop taking what they read and hear about at face value and take a good look around them.
Does anybody in America really think that inflation is running at just 1.8%? Has anybody's cost of living increased just 1.8% over the past 12 months?
What about Europe? Does 50% youth unemployment in Greece and Spain really sound like their problems are fixed and about to go away any time soon?
Is there a Frenchman alive who, having seen what has happened since Hollande's 75% tax rate was imposed, still believes that the measure will raise the money they said it would?
How about Japan? Anybody care to explain to me how Abe-san can generate 3% inflation AND keep Japanese government bonds from collapsing? The two are mutually exclusive—or they used to be.
'The first duty of a man is to think for himself', said José Marti, a Cuban philosopher and political theorist who died in 1885 at the tender age of 32; but today so very few people heed that sage advice that it is enough to make me weep.
What is going on around us, right now, here, in 2013, is going to shape the world for a generation; and the 'solutions' being put in place—and then spun by those lurching from one crisis to another, desperate to staunch the flow of blood—are the solutions of dire necessity and of political survival. Nothing more.
The debt is not being addressed. The spending is not being addressed. Magic coins are being tossed in the air as potential solutions.
It's simple: Too much has been borrowed. Too much has been promised. Too much has been spent.
The time has come to take the pain, and for that to happen the world needs not politicians but leaders.
I fear the places from whence they may spring.
“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.” – Carl Sagan
“Most human beings have an almost infinite capacity for taking things for granted. That men do not learn very much from the lessons of history is the most important of all the lessons of history.” – Aldous Huxley
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