Tuesday, September 30, 2008
Of course, Paulson isn't helping on this front. When his original draft of the bill is three pages long and basically gives him complete, unfettered control over a chunk of money that is larger than the entire GDP of India, he didn't make too many friends. Among the American people especially. The fear that this ex-Goldman Sachs CEO is enriching his friends at our expense really is a valid concern: recent revisions to the bill, however, have softened the original proposal considerably, complete with provisions to limit executive compensation and an equity stake in the companies themselves (plus a vague guarantee that the Treasury is repaid within a certain set period of time). This should calm all those anxious heads (like mine) out there that balked at the original plan.
Something tells me that if Americans truly understood the extent of the problem, there would be more public support for this plan. The problem is that our financial system has spiralled so out of control over the last twenty years (and especially in the last 8) that it is now too exceedingly complex to grasp. Even top Wall Streeters don't understand the depth of this crisis, where all these toxic mortages were bundled off to, how the $60+ trillion derivitives markets (Buffett's "financial weapons of mass destruction") will respond to the fact that there is suddenly less money in the world, etc. They are on tenderhooks just like we are. The media has been doing a truly commendable job explaining global finance over the last two weeks, but some of this stuff is closer to quantum physics than it is to simple supply-demand macroeconomic models we've all learned in high school. Expecting Americans to "understand" what's going on might be too much to ask when nobody seems to get it.
However, this much now seems clear: if we don't act, we face certain financial disaster. The problem here, again, is one of abstraction. I imagine lots of people out there are picturing all the towers in lower Manhattan with "For Sale" signs out front and a lot of guys in Gucci suits waiting in line for some bread. They don't picture themselves in the same situation; after all, it was Wall Street that messed up, right? And despite all the turbulence on the markets these last couple weeks, the majority of Americans still have their jobs, drive to work, plan for retirement, and do everything they were doing before the financial hurricane hit. So why should they bail out Wall Street tycoons? Let them suffer a little bit for their greed.
The problem with this understanding of the situation is that it assumes one can keep away from the tangled mess of Wall Street, could simply open up accounts in banks that are completely independent from the asset-backed securities market, etc. Of course, our financial system don't work this way, and it really is impossible to stay out of the meltdown. Your job security, your ability to buy a new car, your 401(k): all of these are tied to the vageries of the markets. So before we adopt an attitude of Schadenfreude towards the tycoons, we need to understand that, like it or not, we are all bedpartners with Wall Street.
Collapse is an abstract phenomenon until it actually happens. But you don't have to dig too deep to unearth evidence that collapse was imminent two weeks ago (as it might be right now). On Sept. 16, for example, we actually experienced a near seize-up of the credit market. For a day or so, trading in commercial paper - that simple money-market instrument that allows businesses to take large, short-term loans with low interest rates - ground to a halt. Since businesses often don't have the money on-hand to make significant investments, commercial paper is essential to a well-functioning economy. It is the oil that keeps the machine running smoothly. If this market would have remained out of commission for another few days, it would have been ruinous.
Paulson, Bush, Bernanke, Barney Frank, and all the other important parties in the bailout deliberations have talked up the potential for disaster here. But the American public isn't buying it. Our legistators are losing the PR battle, and they're going to need to retool quickly to pull this bill away from certain doom. Here are a couple of PR suggestions to make this bill go down a little easier with regular Americans:
1) Stop using the word "bailout." Yes, that's essentially what it is, but it minimizes the importance to everyone of getting something passed. "Bailout" makes it sounds too contained, like the financial sector exists in isolation from the rest of the US economy and the pocketbooks of Everyman. It also puts the emphasis on saving the asses of a lot of fat cats who, most Americans would agree, don't deserve saving.
2) Ramp up the language. Bush has talked about how "this sucker could go down"; others have said that the consequences of doing nothing "could spell disaster for the economy." Let's cut the qualifiers out here. Bush needs to be saying that unless we act, this sucker will go down. There is a time for communicative nuance and hedging, but now is not it. Our leaders need to be direct and urgent with their message. I'm not suggesting that they fear-monger ("The Depression is coming for your children!!"), but the language needs to be unequivocal.
3) Stop blaming each other. I know that many top pols have talked about the need for bipartisanship here, but who's actually doing it in Washington? McCain "suspends" his campaign to put "country over politics" only to insert himself into a huge partisan circus, holds up the deliberations, and then - gallingly - blames Obama and the Democrats for failure of leadership. Like Paulson getting on his knee in front to Nancy Pelosi, there is a belief here that Democrats are somehow responsible for the actions of House Republicans. The blame game goes the other way. In an act of supreme stupidity, Nancy Pelosi chided the Republicans right before taking a vote on the bailout. (Although it should be noted here that the Republican claims that Pelosi's speech doomed the vote is risably ludicrous.) Our politicians talk the bipartisan talk, but when the rubber hits the road, everything turns rancorous, arguments spill into the Capitol halls, and politics once again reasserts itself as the dominant force. In addition to the financial crisis, our leaders are creating a political crisis in Washington, further eroding confidence in the American system around the globe and domestically. Reps in the House need to stop blaming each other and start working together: we can only handle one major crisis at a time.
Something needs to change quickly in the way Washington is handling the Paulson Plan, for it's not just the fat cats bankers who will be hurting when "this sucker goes down."
Monday, September 29, 2008
This really is a microcosm of the global warming argument circulated widely on the web: the risks of doing nothing far outweight the potential waste of doing something that's not necessary. Of course, many House Republicans, who voted 133 to 65 against the bill, believe that the bailout plan isn't worth the expense because it probably won't work anyway. This is the equivalent of saying, "our climate is changing too rapidly for us to do anything about it anyway, so trying to stop it is like throwing ice cubes at the sun." Although according to most sources House members are united in the belief that something must be done urgently, the collapse of the bill puts the entire endeavor in jeopardy. Pelosi will call another vote; but why should we expect a different outcome when the nay-sayers are voting primarily on principle and politics, not on the specifics of the bill?
First the principles of the matter. The GOP-suggested provision to the bill - that the bailout basically be treated as a large insurance plan - never made it into the final version. Yet, by most accounts, this is not what's holding up the fractured GOP House members. The primary issue here is one of principle, namely that a bailout of this magnitude is tantamount to an un-American socialist coup. Jeb Hensarling, a Texas Republican, fears “the slippery slope to socialism.” In remark after remark by many of the House GOP minority, similar sentiments are expressed. Now, we can all be sympathetic to these comments - very few people in the country actually look forward to putting down their hard-earned money to get liquidity flowing through our markets again. But a time for emergency action based on the facts is not a good time for ideological arguments. Many House Republicans are not just rejecting the bill because they don't think it will work, a legitimate reason; they are rejecting it because it goes against every free-market fiber of their being. Ideology trumps action.
Another divisive issue in the bailout vote today had to do with the contentious politics involved. As soon as this thing passes/crashes, congressmen and women will be returning to their districts to campaign. The fact of the matter is that a majority of Americans are still hostile towards the Paulson Plan (although the margin has been shrinking). Supporting an unpopular bill a month before an election is never good politics. Furthermore, the future political dividends on a bailout vote are complex: if the bill passes and the economy stabilizes, people will still go on criticizing it simply because they never experienced how bad it could have gotten. Republicans, therefore, could argue that they fought against wasteful, socialistic Democrats in the House (net effect - the GOP wins). It is sad to think that in the best case scenario, those who vote for a bailout will probably not get any credit for averting disaster - after all, potential disaster is still an abstract concept. If the bailout passes but then fails to staunch the bleeding and the economy dives into a recession anyway, the GOP's view will be born out and voting "no" shows prescience and wisdom (the GOP wins). On the other hand, if the GOP effectively blocks this bill and the credit markets seize up, lending stops, businesses falter, employees are laid off, foreign central banks reconsider the security of their US treasury bonds in the face of a plummeting dollar that is tied of the plummeting cost of oil, and the ripple continues on down until every American is affected, then I think we could safely say that the Republican party is done for. In fact, David Brooks did come out and say that the other day (if this happens, "the GOP will cease to exist").
Again, getting back to risk assessment: provided the economy is able to creak along and nothing serious happens here, the GOP wins (although, we should remember, John McCain supported the bill today). The dissenters in the House have staked their political careers on this premise. But if our economy starts to go down in flames in the next couple weeks because of congressional inaction, the GOP will be at the center of it.
Update: This cogent analysis of the political crisis that yesterday's no vote represents was published by David Brooks this morning.
Friday, September 26, 2008
Looking over the recent posts, I am both impressed with the quality of commentary and relative paucity of posts/comments, which may reflect the complexity and speed of events. We are still trying to synthesize it all. Major ‘credit’ goes to Zach, for his cogent, thorough and innovative thinking on the crisis. But he is also a hard act to follow...
Pulling together my own thoughts (and with goodly prodding from others, including Zach), I’ve had a hard time believing that the very people who helped to get us into a very large mess (from ex-Goldman CEO Paulson to Rep. Barney Frank and Senator Christopher Dodd to Ben Bernanke’s weak dollar and negative real interest rates) will miraculously devise a solution. Talk about the fox in charge of the chicken coop!
As Zach wisely points out, a drastic government bailout should be the last option, not the first. As Zach also mentions, Alan Greenspan doubts whether $700b would be the end of it, once we start (no, continue) going down the government takeover parade route. (Our government now owns/runs, though AIG and Freddie and Fannie, what is it? half of the insurance market and half of the nation’s mortgages?) Chris Bailly, in his equally wise series of questions to my last post, brought up the huge question of moral hazard which, after Paulson’s and Bernanke’s shoot-from-the-hip recent interventions, may already be too far out of the barn to ever get back in – despite Paulson’s belated attempt to restore a bit of real-life hazard by letting Lehman fail.
So the question arises, what if $700b is just a drop in the bucket? (Apparently the wet finger number in the air comes from 5% of total US mortgages.) And once every US and foreign bank which rashly bought ‘toxic’ mortgage backed securities is taken care of, who and what else will get in the bailout line, the large garage sale of Clean Your Balance Sheet Now, care of the US Gov’t? How about the credit card companies? Or all those shaky car loans and leases? While we are at it, why not an even more massive bailout (apparently $30b for Detroit was already slipped into a recent spending bill) for our failing car manufacturers? Once Washington gets into the French-specialty business of supporting national champions and trying to keep every bad business, including many banks, afloat, where does it all end? With a massive flight from the dollar (as Chris points out) that could end its position as the world’s reserve currency? In national bankruptcy? (OK, OK, that’s hyperbole.)
Call me crazy, but I’m starting to listen to people like Ron Paul and Newt Gingrich who have opposed the boondoggle from the start. Gingrich, perhaps sagaciously, recommends scraping the ill-advised bailout (which House Republicans, complaining of tsunami waves of phone calls opposed, are ready to bail on) and taking some different steps. First, change the inane ‘mark to market’ accounting rule which caused the downward spiral in balance sheets to occur and change it to a three year moving average for these toxic assets. (So instead of immediately reducing the mortgage securities to fire sale values of 10-15%, forcing companies to urgently raise capital, you take the slow road, allowing the market to work out the values over time.) Second, instead of buying these impossible-to-fairly-value assets, offer preferred debt loans at better than market rates to help these companies raise the capital that Zach points out is the second, economist-preferred means for correcting these lopsided balance sheets. (I might take issue with Zach’s suggestion of Uncle Sam’s outright purchase of equity in all these companies: do we really want the Federal Gov’t, with all its political and mischievous ways, to take ownership? Senior debt might not give the taxpayers such a high upside, but it would maintain an arm’s length at least.)
So, while I’m far from an economist, and even further from being a lawyer, couldn’t a more incremental deal along these lines be hammered out – before insisting on going the equivalent of financial nuclear?
No doubt our financial sector is going to have to shrink some. (By virtue of morphing back into commercial banks, leverage ratios will drop from 30 to 1 to 10 to 1 for these former investment banks, with high capital reserve requirements.) But shouldn’t we at least let the markets try to sort things out – with help from Uncle Sam to avoid the worst of accounting distortions and provide credit when needed as a consequence of the temporarily frozen credit markets – before short-circuiting everything?
News flash: new home sales in Southern Florida ticked up for the first time last month. Could it be we aren’t that far from the bottom of the real estate market?
Wednesday, September 24, 2008
The following email has been circulating around during these tense days of bailout deliberations. We've all seen something like this before....
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to email@example.com so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully, Minister of Treasury Paulson
Tuesday, September 23, 2008
No, this isn't a recap of the hasty congressional putsch that whipped and shamed the legislative branch into authorizing the Iraq War. This is what's going on right now in Washington in an effort to get Congress to sign off on the proposed $700 federal toxic mortgage buyout proposed by Ben Bernanke and Henry Paulson before the legislative session ends. Once again, the Congress - and the American people, by proxy - are being asked to sign away unprecedented powers to the administration with little to no oversight on the way our money is being put to use. Back in 2002, we were bamboozled into a disasterous war; now, we might just be bamboozled into a bailout plan that will cost just as much as another Iraq War.
There is something deeply wrong about a plan that socializes all risk associated with these bad mortgages while not giving taxpayers a stake in the potential profits brought in by major commercial banks, insurance companies, and investment banks. But, contrary to the run-up to our Iraq fiasco, there may just be some congressional opposition this time around. Today in Washington, Paulson and Bernanke held a hearing to pitch their 3-page plan, and leaders in Congress - from both sides of the political spectrum - voiced overwhelming concern. Chris Dodd called the plan "stunning and unprecedented in its scope and lack of detail"; Republican Jim Bunning commented: "It's financial socialism, and it's un-American." In The Nation yesterday, William Greider wrote: “If Wall Street gets away with this, it will represent an historic swindle of the American public — all sugar for the villains, lasting pain and damage for the victims.” Bernanke and Paulson received quite a grilling indeed.
Hopefully our elected officials (as opposed to the Bush-appointed heads of the Treasury and the Fed) continue to put the pressure on. We can all acknowledge that we are in dire times right now, but rushing into an ill-conceived and extravagantly expensive bailout plan is a reckless way to spend public funds. (And Alan Greenspan thinks it will cost a lot more than $700 billion.) Add to this the fact that Treasury will have virtually unfettered power to do with our money as they see fit, and you have a recipe for a disaster. This plan is somehow being framed as the only way to avert catastrophe, but is that really the case?
The fundamental problem here is that firms have too much debt relative to their assets. Credit is frozen because an institute can't go out and make big promises when they don't have the assets/collateral to back up their loans. Therefore, in order to avoid a seizure of credit, either the bad assets need to disappear or the firms need to acquire new capital to invest. (A great, simple explanation of this can be found here.) The Paulson plan follows the first idea: we buy up bad mortgages to relieve firms of their toxic assets so they can go out and start lending again. Many economists, however, suggest the second option: through major government investments in the firms themselves, taxpayers won't simply be saddled with subprime mortgages - we will in essence be given a piece of the companies that invested stupidly in the first place. Profits down the road, therefore, would be shared with the investors (us).
Firms now need capital, that much is not in doubt. But there are more ways for them to recapitalize than simply having all their bad paper bought up (so-called "cash for trash"). Firms could seek money from sovereign wealth funds. They could ask their shareholders to pony up additional money to get the capital flowing through their veins again. A government bailout should be the last possible option, reserved in case all other plans fail. Yet this is essentially the first solution we're running to.
(Warren Buffett's recently announced $5 billion investment in Goldman Sachs is a case in point: funds don't have to come from the taxpayer.)
When many readers see the $700 billion pricetag, their eyes glaze over. This is a truly abstract amount of money. But let's put this into a little perspective here: 700 billion is roughly the same as the entire US defense budget; it represents 5% of our GDP; it is approximately the same size as the entire economy of Brazil, India, Russia, or South Korea. It makes you want to cry when you see the Earth Policy Institute's projected costs for sweeping global warming-related social programs and earth restoration goals - $190 billion. For less than 1/3 of these bailout expenses, we could achieve global universal primary education, universal health care, adult literacy, protection of forested land, stabilization of our water tables, restoration of fisheries and biological diversity, etc. etc. Think how significantly we could bite into global carbon emissions with $700 billion.
Yes, we're in the middle of a crisis. But we need to think long and hard before ceding so much money and such sweeping powers to Mr. Paulson (who was Goldman Sachs's CEO before taking this gov't gig, as the revolving door has it). From what I understand of the situation right now, this bailout is a disastrous idea.
To be continued...
[Please join the point-counterpoint of economic posts by Ben Batchelder and I by contributing your comments and impressions about this mess.]
I’m afraid our fearless blogmeister is flogging misdirected fear when he likens our situation to a house of cards in the below entry. He raises many valid concerns about the $700 billion sweetheart deal, but may be getting some of the fundamentals wrong. First off, to liken the entire world of financial risk evaluation as a shell game is to misinterpret finance’s fundamental role in a healthy economy – which is the efficient allocation of capital. In an open, capitalist economy there are surely excesses which we can all agree about, but to call them indicative could well turn into a disastrous own-goal. Yes, during a crisis we all tend to look for scapegoats, but is it really helpful to throw the proverbial baby out with the bath water?
It is an old canard, and even somewhat retro, to lament the flight of US manufacturing to foreign shores. Before then, we probably lamented the loss of farm jobs to manufacturing ones. The competitive advantages of nations, as suggested in Adam Smith’s ground-breaking The Wealth of Nations and elucidated in Michael Porter’s The Competitive Advantage of Nations (1990) is just as valid as it was in the 18th century: as we become more innovative and creative, we as a nation are marching irreversibly into service jobs. Think of the technology sector: would we really want to still be manufacturing computer boxes instead of dreaming up the software, games, uses and frustrations that go in them? Or physically make the internet switchers instead of having brought forth the world wide web itself? Whether it is Bear Stearns or, for that matter, Disney or Dreamworks, does it matter that there are few physical assets when you turn out the lights? No, because in a country which most unleashes human initiative and creativity, the primary ‘assets’ are us, the people. (And speaking of Lehman’s 22,000 employees, let’s not cry crocodile-shoe tears for them: Nomura is in the process of buying Lehman’s Asian operations and most of Lehman’s ‘assets’, its people, will quickly find work in other financial firms – perhaps at slightly less elevated salaries, amen.)
This gets to the fallacy that Wall Street doesn’t create real value. Of course it does! By taking companies public, creating innovative debt instruments, financing bold new ideas, and myriad other activities, Wall Street, arguably, is the most important creator of value after entrepreneurs and employees themselves. An efficient distribution of capital is what turbo charges our robust economy, still the envy of the world. That financial services represent a fifth of our economy is not a red flag at all: broaden your parameters and it is a fraction of the word’s economy that is driven by the US’s enviable leadership of such an all-important sector.
Yet, sadly but inevitably, even Masters of the Universe are fallible. Even worse, add to the very human attributes of greed, avarice and lemming tendencies the vanity and power hunger of politicians, now THAT’s a real crisis. While I couldn’t agree more that reform is needed, I couldn’t disagree more with the understandable if erroneous reaction that more and ‘stricter’ regulation is needed. (Sarbane-Oxley and ‘mark-to-market’ accounting rules are two examples of counterproductive, perhaps disastrous ‘stricter’ regulations.) By my view, it was the nexus of political patronage with the politically mandated do-goodsim (i.e. mortgages to people who couldn’t afford them) of Fanny and Freddie – a truly rampaging elephant created by politicians for the ultimate benefit of politicians and therefore given a semi- (and now total) government guarantee – that was truly innovative.
The $700-1000 billion bailout (including this summer’s $300 b mortgage stop gap bill) is scary not because it is fueling another house of cards. (Technically speaking, it is to buy up the ‘bad’ mortgage paper of house loans that should never have been made in the first place.) What is scary is that our political class has no interest in getting to the root of the crisis, their own power-hungry patronage plays. Even today, Barney Frank (D-MA, Chair House Financial Services Committee), the congressman with the dubious record of having blocked most meaningful reform of his favorite, pet semi-governmental companies in recent years, has no interest in scaling back Fannie and Freddie’s future activities. The most meaningful reform bill, which from the Senate in 2005 was set to rein in Freddie and Fannie via bank regulator-like powers, was opposed by all Finance Committee Democrats and never allowed to come to a full vote. Yet the blame can easily be spread around: the Fed’s dangerously low (real negative) interest rates fueled the bubble real estate market, and the Administration’s weak dollar policy fueled inflation in that and all markets. In the end, once again, we, the duped taxpayers, are being called in to clean up after the consequences of the political class’s malfeasance – which shows no capacity for self-correction or -policing.
Who’s to blame then? We, after all, elect the politicians who legislate the incentives that Wall Street responds to. Despite the ‘greed is good’ caricature of Wall Street, it is the woeful ignorance of most of the DC political class when it comes to how our wildly successful economy works that most scares me. The Depression was not caused by the stock market crash, but by the entirely ill-advised policy reactions of our political savior saints. Let’s hope we avoid a repeat, not of the Depression (which I believe unlikely), but of the 14 years of lost growth in the Japanese economy, once believed (as China is now) to be the dragon breathing down our door. The dragon, it so happens, is already inside.
We are in perilous times and I would put politicians, not bankers, at the center of it.
Sunday, September 21, 2008
The economic storm that's been quietly generating strength for years is now coming ashore, and it's official: last week was a Category 5 disaster for the American (and global) financial sector. Reputable, highly respected economists went on the record using the word "depression"; suddenly and irrevocably, the whole fragile network of our economy seemed on the verge of falling to pieces for a few tense days. The failures are by now well-known. Fannie Mae and Freddie Mac, mortgage giants with total loan obligations of 4 trillion dollars (making it the biggest company in human history and second only to the United States itself in total assets) were brought in under the umbrella of the US Treasury (read: taxpayer). Lehman Bros., a company with a hallowed 158 year history, went under, erasing much of their $600 billion investment pool as well as 20,000 employees. AIG, the world's biggest insurance company, followed in the path of government takeover. In a far less bloody but in many ways more real way than 9/11, American capitalism was placed under existential red alert, where it remains now.
It's stunning how quickly the events of the last two weeks have transpired. We have just witnessed the biggest government socialization of a private financial sector ever, yet most of us are too shocked and awed to question the profound ramifications of the continuing crisis. The fear is so palpable on both Wall St. and Main St. that we've essentially ceded huge powers to Hank Paulson at Treasury and Ben Bernanke at the Fed - investors have whisked their money away into the safest possible investments (CDs, gold, bonds) and handed these two men the sword with which to go off and kill the dragon. They'll open their eyes when the battle is over.
Over the weekend, our two beleagured and desperate saviors met with congressional leaders to hash out a far more radical and comprehensive approach to the widening crisis. The plan: throw $700 billion at bad mortgages, effectively taking the yoke of bad loans off the financial service sector's shoulders and placing them on those of the American taxpayer. Paulson expressed great grief over this prospect in interview after interview as he made his Sunday morning talk show rounds just like a presidential candidate: "It pains me that the taxpayer had to get involved in this, but it's better than the alternative." This notion has widespread bipartisan support: something must be done, and congress is prepared to act. But, as Paul Krugman points out, the new plans raises many more questions than it answers: are we going to buy these mortgages at a fair, real price or are we going to buy them up for inflated prices just to get some liquidity back into the credit markets? If we get them for fair, market prices, we leave much of the financial sector in dire trouble; if we overpay, we're essentially throwing money back into the hands of the institutions that so stupidly and greedily led us into this disaster to begin with ("cash for trash"). There is no win-win endgame here. If these pieces of paper are valueless - and nobody really knows how much they're worth - then we'll be throwing our money into a black hole. (And, by the way, $700 billion comes out to around $2,000 for each American.)
Like the earlier buyouts, this is a palliative measure. Injecting some liquidity into markets might have the desired short-term effect of freeing up credit so the economic juggernaut can keep churning away to face our crises another day. But will it solve the problem? Many people talk about the concomitant reforms that must accompany the bailout: in the future, we must have stricter regulations to ensure that "irrational exuberance" (or, in layman terms, avarice leading to idiocy) is kept at bay. This is indeed true - twenty plus years of hands-off, neo-liberal economic policy have knocked all regulation and accountability from the dark corners of the so-called "shadow economy" (all these complicated new financial instruments that have been developed to help rich firms get something for nothing). However, this isn't going to be enough. Even the vast sums of (borrowed) money, even the reforms - there is a systemic problem here. I'm no economist (although I do read the magazine), but I'm aware enough to understand that there's an elephant in the room here. Lately, more and more of us have started to address the pachyderm, however inconvenient a truth it may be.
Let's ignore all the smoke and mirrors of complex derivatives, credit-default swaps, bundled securities, and all the other arcane products of the finance world for a second here. Here's the fundamental question: What in an economy creates real value? This is something right out of a high school Econ text, but I feel our Masters of the Universe on Wall Street need to take a step back and contemplate this question for a moment. Real value, of course, comes in the form of real things: products, technologies, innovative ideas, houses, services, etc. At one point in the 20th century, America was the undisputed world leader in all of these things: we produced the world's cars, its electronics, its cutting edge concepts, etc. We CREATED value, in other words.
What's the difference now? Well, starting in the late 1960s and leading to the present, our economy underwent a profound transformation. The "Empire of Production" (historian Charles Maier's term) made way for the "Empire of Consumption." Our economy shifted to services, manufacturing jobs fled to China - this is all well known and it continues to be a major political bugbear. But what is often overlooked, however, is the rise of the financial services sector during this period, especially in the last 25 years or so. As value-creating areas of the American economy disappeared, investment banks and hedge funds moved in to take their place at the table of American wealth.
But are Goldman Sachs and AIG really the same as Apple and GM? They all produce billions in profits, have a global reach, trade publically. In ways, both industries are productive: Apple and GM produce things, and the financial sector lubes up the economy and gets them the funds they need to make significant investments. Some financial industries - I think we all can agree - are a good thing for the American economy. But the finance sector has become bloated and obese as a result of its own excesses (much like the American people - see last post). Today, the finance sector (money management, insurance, etc.) is bigger than health care, bigger than energy, bigger than manufacturing. Currently, this area of the economy accounts for over 20% of US GDP: that's right, 1 in every 5 dollars in the American economy is generated here. And what takes place on the computer screens and trading floors of these behemoths? Money and assets are transfered around, and the Masters of the Universe in the firms (what a telling term from the good ol' Reagan years) take a generous cut off the top. They are fundamentally middlemen, yet they account for a whopping percetage of our national economy.
Many analysts go much further in their damning assessment of finance's role in the US economy. More than being the unnecessary but ultimately benign middlemen, it can easily be argued that finance actually subtracts value from the economy. John Bogle (Vanguard Group CEO) estimates that finance takes a stunning $560 billion from the economy every year, money that could be going into research and development, new products, and other value-creating activities. Instead, these funds are going into the padded wallets of major investment firms. In the midst of the mortgage crisis, when Americans were losing their homes, we learned last winter that hedge fund manager John Paulson took home $3.7 billion as a result of betting against the housing sector. Without creating a thing, utilizing a system that completely lacks transparency, Paulson and his ilk fleeced the productive economy of vast fortunes while millions of people were getting booted onto the street. This is perverse and despicable, and it illustrates precisely what's wrong today. As economist Catherine Austin Fitts says, we have a "tapeworm economy."
Now, getting back to the bailout. We can toss all the taxpayer money we want at the problem, but it's not going to create value where there fundamentally is none. In a telling moment, we learned recently that Bear Stearns' biggest real asset at this point is their high-rise headquarters in Manhattan. At the end of the day, when all the smoke cleared, all they really owned was their building. All the files on the computers telling them they had hundred of billions in assets; all the pieces of stock paper - it was all just a house of cards. So what happens if Treasury tosses a lot of money back into this colossal shell game? Does it suddenly, magically make it so that the coin will appear under any of the shells when they are overturned, in essence creating something out of nothing?
The answer, of course, is no. We've been hearing a lot about the "crisis of confidence" lately. This fear is extending far beyond mortgages, even though that's what sparked this whole thing. So why is the entire sector all of a sudden dangerous and unsure of itself?
We are a debter nation - with the addition of all these buyouts, our total federal debt comes to over $14 trillion. Like the government, American people are proligate with their purses, and the average household now saves less than 0% a year: we officially borrow more than we earn. We let foreign countries, particularly China, subsidize our reckless culture of insolvency and living beyond our means. We let others subsidize our disasterous wars. Our trade deficit accounts for 5% of GDP, which essentially means that we consume far more than we create.
On an individual and a collective level, we are a culture living on borrowed time. And perhaps our time has finally run out. America's economic chickens are coming home to roost.
[In addition to the daily paper, information for this post was drawn from the following sources: Andrew Bacevich ("The Limits of Power: The End of American Exceptionalism"); Kevin Phillips ("Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism"); John Bogle ("The Battle for the Soul of Capitalism"); Catherine Austin Fitts (see web citation); the following great interviews here and here; and NPR's new Planet Money podcast - all of these have been invaluable resources in helping me understand this grave situation.]
Thursday, September 18, 2008
This recent analysis in Environment magazine (drawn from Gallop polling data) is truly alarming. Just at the time when we need to take urgent political and cultural action to slow the existential threat of climate change, Republicans are burying their heads even deeper in the sand.
The entire scientific community is in agreement on the reality of global human-related climate change. As far as the facts go - not the politically directed spin - global warning is a reality, just as much as evolution is a fact. Yet, like evolution, a startling number of Republicans have been hoodwinked by the supposed "scientific debate" into believing that 1) there is in fact a debate happening in scientific communities, and 2) we're not feeling the effects of climate change yet. Despite the mounting evidence to the contrary, the GOP - led by high-powered lobbies from the energy industry - have actually retreated since 1997 in their recognition that climate change is happening now. For the last five years, a fairly steady 41-46% of Republicans have taken this view (compared to an almost 20% rise of awareness in Democrats during the same time period, to a total of 76% believing climate change has already begun in 2008). Similarly, the percentage of Republicans who believe that global warming is still a "controversial theory" has stayed more or less static for the last seven years. (If anything, the number is actually in slow decline.)
What does it say when there is such a distinct, quantifiable partisan line between those who recognize this problem and those who don't? When an overwhelming plurality of Democrats appreciate that the problem is real, while a majority of Republicans still think the jury is out? The calculated GOP subversion of science and campaign of public misinformation is turning many Americans into a bunch of retrograde idiots. There is no debate about climate change in Japan; there is no controversy about this in Germany - yet in the richest country in the world, a major political party has turned away from the issue with the pathetic and misleading excuse of "plausible deniability."
I can't think of an issue that is as black and white as this one: on the threat of climate change, the Democratic party embraces the truth while the Republicans embrace lies.
Tuesday, September 16, 2008
One moment in Disney World really epitomized the state of the collective US waistline, and our eating habits in general. In the restroom at a buffet restaurant, I entered to find a father and his son standing in line to use the stalls - both of them were incredibly fat, and the father actually had food smeared all over his shirt, like a baby without a bib. I could hear the sound of someone throwing up in the bathroom. As I was washing my hands, the person in the stall came out - an obese kid of about 12 - and waddled over to the father and son. "You all right, buddy?" asked the father. After another stall opened up, the father and older son took leave of the youngster, closed themselves into the two adjoining stalls, and both proceeded to puke their guts out in unison. After that collective family purge, they were probably back at the buffet line.
Anecdotes aside, the stats on America's decline into obesity are truly shocking. In 1985, when I was four, only eight states had an obesity rate of 10-14%, the highest level of the day; today, not a single state has a rate that low. In 2008, three states have an obesity rate of around 30% (Alabama, Mississippi, and Tennessee); the majority are in the 25-29% range. And a quick definition of terms here: "obese" refers to someone with a BMI of 30 or more: when merely "overweight" people are factored into the equation (BMI of 25-29.9), the national percentage is a staggering 66%.
You might ask: "Zach, why do you care how fat other people are? They don't effect you - mind your own business." Our national obesity epidemic very much effects me, however; if effects every American, regardless of what pants size we wear. I don't hope to take on the whole issue here (I hope other writers will jump in and help me out on that count), but I would like to address two costly components of the obesity problem. Our increasing waistlines are both a public health disaster and an act of environmental irresponsibility.
Despite all the fancy dieting techniques and expensive surgeries out there to help shed some pounds, the trick to weight loss is stupidly simple: eat a balanced, nutritious diet and exercise regularly. A doctor a hundred years ago could have given the same advice, but it's disturbing now how illusive this solution is to many people. Instead of following these two simple strictures - which would require changes in lifestyle - people are instead turning to "something for nothing" schemes to make themselves healthy without making any real sacrifices. Not only is this dishonest, it doesn't work. Moreover, it is an abdication of responsibility for the root causes of the affliction in the first place: gluttony and sloth. That may be politically incorrect - some might even say "fattist" - to say, but that's the truth, folks. Barring thyroid conditions and other legitimate medical problems, obesity is entirely a choice.
In extreme instances, overweight people have tried to place the blame for their conditions on others, most notably the class-action lawsuit against McDonald's in 2004. Thankfully, the judge laughed at the argument that McDonalds is to blame for making you fat, effectively setting a precedent that a lawsuit of this nature is the very definition of frivolous.
There is a creeping danger in the obesity stats beyond the obvious the health problems associated with the condition. The more something becomes "normal," the less inclined people are to recognize it as a problem. In Mississippi, where 1 in 3 people is categorically obese, where is the motivation for losing some weight? Also, as my Disney story suggests, weight problems very often run in the family: if your whole community, included your sister and your father, are fat, then what's wrong with being fat? This perpetuates a false sense of security about the very real risks associated with obesity. And the risks are many. For example: type 2 diabetes (an epidemic now), hypertension, osteoarthritis, high cholesterol, heart disease, increased risk of strokes, gallbladder disease, sleep problems, and even some forms of cancer.
Treating an ailment which is entirely within the control of the individual has put a huge strain on our health system. According to a recent study, obesity costs health care providers (and taxpayers) $61 billion annually; it also costs the US economy $56 billion annually in indirect expenses (loss of productivity, etc.). For those of us who think that the explosive increase in fat people only affects those with the big guts, think again - your health insurance is as high as it is, in part, because of the diabetes treatments you're subsidizing for an obese woman in Birmingham.
Recently, in fact, the state of Alabama (#1 in obesity) has adopted a measure that requires obese state employees to pay a monthly fee for the health insurance that would normally come free in their payment packages. It is encouraging news: those who bring increased liability into an insurance risk pool should contribute more to it. We don't let smokers off the hook for their habits, and we shouldn't let obese people either.
Another important component of obesity is its effect on the environment. Like our fuel-consumption habits, Americans eat more than any other nation in the world. But as the world becomes increasingly more crowded and resources grow scarcer and scarcer, we can't keep eating like hogs. The Earth Policy Institute estimates that the average American eats the equivalent of 800 kilograms of grain per year (100 directly, as bread, pasta, etc., and 700 in the form of feedstock for cows, pigs, etc.). Let's contrast that with a couple other countries: Italy, by comparison, consumes 400 kilos per person. Indians eat 200 kilos of grain per year. In the words of EPI director Lester Brown, it's time for Americans to move down the food chain.
A couple of conclusions emerge from this data: 1) we eat too much in general, and 2) we eat too much meat. Neither of these things is good for our individual health, and as it turns out, it's not good for the planet either. In the last fifty years, world meat consumption has gone from 44 million tons a year to 240 million tons, more than doubling consumption per person. And with more livestock, we have more of the problems associated with it: deforestation, overgrazing leading to erosion, huge amounts of methane gas (20 times as potent as CO2), pollution to water sources, etc. It is also an incredibly inefficient way to get nutrients, as 7 kilos of grain are required to grow 1 kilo of beef. With populations growing and forests shrinking, is a fiercely carnivorous diet really that wise anymore? Eating lots, with plenty of meat, is unsustainable both from a personal and a global perspective.
Combating deeply ingrained eating habits will be difficult. Despite rises in the prices of staple foods over the last couple years, the obesity rate has remained unaffected, so entrenched are our current eating patterns. We've come to expect huge portions at our restaurants, and retreating from this ideal will take some getting used to. But we're going to have to suck in the gut and deal with it.
To me, one of the big reasons the obesity epidemic has gone unchecked for so long is because of mass complacency. The more fat we become, the more acceptable it is to be fat. I don't suggest socially stigmatizing overweight people per se, but I do believe that we need to recognize the problem for what it is - obesity is not simply a voluntary choice that should be respected: it is a destructive and unsustainable lifestyle.
Update: Here's some great commentary about our current eating problem by a NYT food writer. A bit long, but well worth the time. Thanks for the link, mFin!
The general consensus seems to be that choosing McCain over Obama doesn't get much support; some, like me, go as far as saying that picking McCain would be another huge mistake. The previous one being the election and re-election of "Dubya".
Now, when I say "support" I'm mostly talking about analysts of U.S. politics, some politicians (mostly people who are one way or another connected to foreign relations) and perhaps independent bloggers. The average Joe doesn't bother his mind with it. Why should he, it doesn't consider him, he thinks. But as we've seen (at least) in the recent years, the election of a U.S. president has true global consequences. Apart from news considering the election (like the recent conventions), The Finnish media is very selective in providing information about the candidates themselves, you have to dig that information by yourself. And apart from possible talk show appearances (we get Conan, Kimmel and Letterman on cable) we obviously don't get the televised debates etc that at least give a hint of the man behind the name (I know, politics is politics, but still...). Generally I'd say that both candidates get an equal amount of coverage, and there's no favoring one or the other, even though Obama's racial heritage is obviously an interesting issue. And don't get me wrong, at least the media broadcasts truly international information unlike the local U.S. TV news where "international news" means news about Canada or Mexico. But that's another story...
I think what the Finns do have an opinion on though, is Americans in general, for better or worse. And needless to say, thanks to W., that image could use some polishing. All over the world, not just here, but that goes without saying I'm sure.
The McCain campaign got an unexpected (?) turn for the worse when a certain Alaskan governor was chosen as McCain's future VP-to-come, for purely political purposes it seems, and the media seems to be obsessed with her. A former Miss Alaska, whose former aspiration (according to rumors) was a TV anchor, who was a mayor of a really small town, and the governor of Alaska for two years, and is now running for the "top post of the world" so to speak. Until 2007, she didn't have a passport, and her only following visits abroad were in U.S. military bases in Kuwait for example, where she met and spoke mostly to Americans. What kind of an image does she have of the world we live in? That it consists of three nations, the U.S., Europe, and Iraq? They say that she has "plenty of international experience" because of that trip, and that Alaska is neighbouring Russia and Canada...I rest my case. (You can correct me if I'm wrong, but I'm told a really small percentage of Americans actually have passports. That's fine, but when running for such an important position, without visiting other regions of the world how can you be aware of the diversity of culture in the world, let alone go to war?)
She seems to be a firm believer of creationism and teaching it in public schools, not interested in environmental issues, is anti-gay rights and anti-abortion - all the "good stuff", then.
It's truly a scary thought that Palin is indeed quite literally "a heart beat" away from being a president. When the primary candidate is a 72-year old man who has battled cancer twice...
In closure, for me personally it's quite a helpless feeling having to "sit at the sidelines" and watch basically the fate and the future direction of this world (if I'm being slightly over dramatic) being chosen in front of my eyes and I can't do anything about it.
Thursday, September 11, 2008
We stepped out into the dazzlingly beautiful day, not believing the images we had just seen on TV. On our way to Washington Square - the best Twin Towers vantage point we could think of - we ran into a sea of people, all walking wearily uptown, some covered from head to toe in dark gray ash. The street was crammed; no room for cars or anyone foolhardy enough to be venturing downtown. Their faces registered shock, exhaustion, but most of all, pure bewilderment. Our worlds had just been turned outside down, and people were struggling to reorient themselves. People were lost.
This sense of profound confusion struck me when we reached the park and, looking down the island at a view I had marveled at many times before, I saw a black pillar of smoke suspended in the bright blue. We must have stood there staring for a solid ten minutes: I was waiting for the besmirched sky to clear so I could get a look at the damage to the towers - at the time we watched TV earlier, the only footage shown was that of a firey hole in the side of one of the buildings. But no towers materialized. Surely they were just hiding behind the smoke? They couldn't be gone. My statistician's mind flashed to a TV program I had seen years ago that said that 50,000 people worked in the trade center daily. Where were all of those people? I looked around and saw that a head-scratching mass of humanity was engaging in the same sort of tortured mental juggling I was: this was impossible. They must be there.
Everyone registered their confusion differently. Groups of students huddled together in circles, sobbing uncontrollably; a red-haired girl laughed awkwardly and had her boyfriend take a picture of her smiling with the black devastation behind her; a grizzled old Rastafarian started chanting, "Babylon is falling! Babylon is falling!" We entered this buzzing congregation and asked around: "What happened? Who did this?" Nobody knew a thing. I asked one friend what he had heard, and his eyes took on a distant, glazed look: we were all too busy coping with the enormity of the giant hole in the sky to care. Even as we mingled, expressing our mutual bewilderment, everyone's eyes kept drifting south. Each and every time, part of me expected to see them there, standing arrogantly over lower Manhattan. I imagined the crowds erupting with a sigh of relief over this false alarm and everyone shuffling back home.
It's amazing the banal thoughts that take over in times of crisis. In an attempt to grapple with the unimaginable, we are led to embrace the trivial and the meaningless to block out harsh realities. My big beginning-of-the-school-year audition was scheduled for later that afternoon, and I recall contemplating seriously what I should do about it. Would it be OK to just not show up or should I call? Does the toppling of the World Trade Center warrant a postponement of my jazz audition? Those are the sorts of absurd thoughts that fill one's head when one is confronted with the incomprehensible.
This may seem a strange word to use here, but the experience of the first 24 hours after the towers fell was surreal in a way that bordered on the psychedelic. Seeing the smoke billow up there in Washington Square violently punctured the bubble most Americans my age had lived in until that point. Something unreal was happening in front of our eyes; history was grabbing us and screaming. Like a psychedelic experience, this challenged my sense of what was real and what was not. After the initial shock, we all started grappling for something real, information, news, something. It was impossible to find a newspaper and, of course, things were changing too quickly for the authoritative NYT account to really mean anything anyways. We jumped into the current of bodies and let ourselves be pushed uptown.
Confusion was quickly transforming into fear. Just as soon as the realization that the towers had collapsed hit us, a torrent of anxious questions flowed to the surface. We were under attack. We didn't know by whom, but that made the fear all the more hyperreal. Rumors swept through the shell-shocked streets, and we quickly settled on the obvious truth that "they" were on their way to destroy the Empire State Building. We were a people under siege, or so we felt.
On the journey north to find information, the loud roar of a low-flying plane filled the air. For a few seconds, hundreds of people stopped walking around me, stopped talking, and stared - terrified - into the skies. It was a moment that I instantly felt should not be happening: frightened people on the streets of New York City scanning the horizon for a plane whose pilot wanted to kill us. The fear was palpable, overwhelming - and totally real. For that afternoon, once reality has been intruded upon so horrifically, anything else was on the table. If someone would have shouted that armed gunmen were invading the island and shooting everyone, I'm sure most of us would have believed it. Our senses and rationality were too pulverized to put up a fight. When a solitary F-16 fighter jet emerged over the jagged skyscrapers, you could literally hear a collective sigh. We all turned north and began our march again.
All the newsstands were either boarded up or sold out of the late edition of the Times, but I managed to find a copy of the New York Post, finally. It's a rag, of course, but we were hungry for any information we could get. Tearing into the paper, my eyes fixed on the leading article: "Let's Kill the Bastards." Just as most of us were struggling with the grim reality of the situation and trying to fight back panic, some were already plotting who we should bomb. My heart sank, and I turned to Chris: "This is the sort of stuff that wars are launched over." In a split-second, I understood that this disaster was a game-changer, that my country would never be the same afterwards, and that the bubble of American exceptionalism and isolation had crumbled that day along with the towers. It was a dizzying thought.
That night, putrid smelling smoke blanketed the East Village as we stayed up with a group of 5 or 6 refugee-friends from lower Manhattan (who would end up staying with us for a couple weeks) and watched as the first shots were fired in the battle to rid Afghanistan of the Taliban. It would be another two weeks until classes tentatively started up again: we tried to keep ourselves active, despite the complete, hermetic, military sealing off of our neighborhood from the rest of the world. We discussed the incident endlessly and kept the TV running; we joked, played Mario Kart and tried to keep ourselves distracted; we even went down to the West Side Highway with a few bags full of powerbars and tried to help aid workers as they poured into the newly-annointed "ground zero." And we sat around wondering what new world this disaster had created and how it would affect our lives. Everything had shifted overnight.
Within a couple weeks, however, life was starting to return - tentatively - to normal. There was fear in the smoky air, but hearty New Yorkers, despite their intimate involvement with the 9/11 attack, were eager to return to normalcy. In late September, I returned to Oregon for a weekend in an effort to clear my mind and refresh my spirit (and boy was airfare cheap in the days after the disaster..). It was truly surprising, then, to see that Oregonians, through their TVs, had internalized 9/11 in such a completed different way than New Yorkers had. American flags were everywhere; people displayed jingoistic bumper stickers on their trucks; there was a level of aggression that I didn't see at all in New York. You can bet that New Yorkers weren't angrily chanting for bombing strikes on the enemy, yet in Salem, OR, people were. Interestingly, the very people who lived through 9/11 were the first who wanted to simply move on. Of course, the rest of America would have their wars.
To end on a political note: It is deeply discouraging to sit here today during a neck and neck presidential election as the same party that so completely mismanaged our collective goodwill, politicized our national tragedy, subverted our Constitution, and hastily rushed into a bloody and corporatized war that had nothing to do with 9/11, is running against itself as an agent of "change" and actually making some headway. It fills me with disgust when misguided Republicans at the convention chant "Drill, baby, Drill!," even as the regimes that sponsor terrorism have the most to gain from our dependence on this competely destructive form of energy (Rudy Guiliani should know better than that). As we commemorate and memorialize this awful day for America, we should be cognizant of what's at stake this presidential election. Though the GOP has been so quick to capitalize on 9/11 for crass political gain, their botched Middle East policies, unjustifiable military adventurism, and anemic ideas in the aftermath of the biggest terrorist attack on US soil should give us pause as we stand in the voting booth. Let us not forget September 11th on November 4th.
Tuesday, September 9, 2008
Saturday, September 6, 2008
Latest Poll Reveals 430 New Demographics That Will Decide Election
From "lunch-bucket Democrats" and "latte liberals" to my new favorite, "hockey moms," we've been loaded up with an earful of demographic data on what sliver of the American public is going to decide this election. The Onion clip above illustrates this sort of pseudo-scientific attempt to predict voting habits beautifully.
Now, I have nothing against hockey moms. To me, this term has zero significance because, like the vast majority of Americans, I don't have any opinion whatsoever about the sport of hockey. Which begs the question: exactly what percentage of the American public are self-identified "hockey moms"? What political dividends is it paying for Sarah Palin to wear that demographic label so proudly?
No disrespect to the denizens of "the Great State of Alaska" or any of the other regions lying at a latitude northerly enough for ice hockey to be a viable sporting option. Nonetheless, this population of individuals is dwarfed by, say, the good ol' "soccer mom" demographic, let alone all the "tennis moms" and "T-ball dads." As a percentage of our total population, "hockey moms" are probably about on par with "racquetball grandmas."
Yet at the RNC one could see numerous "Hockey Moms for Sarah Palin!" signs in the audience. Since most of these people were probably not real "hockey moms," what is it that's so appealing about everyone's favorite new demographic? Is it simply a colorful biographical detail that people have jumped on? Or did the GOP really truly find the Holy Grail of voter demographics?
Beats me. You can bet one thing for sure, though: "hockey moms" are a much more patriotic and all-American group than volvo drivers, latte drinkers, and granola eaters. They're certainly more American than music editors.
Thursday, September 4, 2008
The last three days have completely reshaped my understanding of the Palin pick and the McCain campaign strategy in general. When it was first announced that a socially conservative, female governor of Alaska was chosen for the #2 spot on the GOP ticket, I thought (like many of us) that it was a desperate attempt to pull in Hillary supports and the evangelical Christian base so essential to Republican success. But this theory is so three days ago. Recent twists reveal that different forces are at play here.
Palin's speech last night showed her to be an effective communicator: she hit all the big Republican talking points, outlined her biography, attacked her opponenents in searing (and I believe, mean-spirited) terms, and generally came off as competent, serious, and focused. It was a major success for someone who has been defined by competing media interpretations of her over the last week - she took back her identity and showed the nation that she is for real.
Watching the GOP's reaction to her over the last few days has been very revealing, and indeed has shifted my perspective on the issue. The primary reason for chosing her, I now believe, has little to do with pulling in woman voters who will cast their votes for a woman regardless of anything else; she was chosen because she is a social conservative with the ability to excite the base. This decision was not made for the Democrats: it was made for the hard-core GOP faithful. Despite the fact that the nation knows nothing about her, the conservative base has flocked to Palin. (Some conservative Christian leaders have questioned the herd mentality seen at the convention: a prominent Christian leader and former Jerry Falwell aide, Mark DeMoss, puts it this way: "Too many evangelicals and religious conservative are too preoccupied with values and faith and pay no attention to competence. We don't apply this approach to anything else in life, including choosing a pastor.") Even in the early days of the RNC, the party line had been established: Palin was a great choice. Reporters on the floor heard the same handful of talking points and defenses whenever they questioned the new running mate's viability. The GOP, en masse, had made up its mind: Palin is The One.
Let's back up for a moment here. Gender plays a big role here, but not in the aforementioned context of pulling in dissaffected Hillary fans. No, the truth is far more cynical (what can be more cynical than chosing a woman to attract Hillary fans, you ask?). Palin's sex, her traditional values, and her lack of significant experience combine to form a potent strategy to 1) deflect all criticism of her and the Republican ticket as out-of-touch elitism; 2) cast criticism as "sexism"; and 3) allow GOPers to take up the much beloved role of aggreived outsiders and victims of senseless liberal media bias. The gender issue isn't about Hillary - it's about making the media (and by GOP-think extension, the Left) look like misogynistic bullies, thus rallying Republicans to defend their candidate against the smears.
I'll be the first to admit that many (especially in the blogosphere) jumped to conclusions about Palin; I'd also admit that the Obama campaign's initial statement about the VP wasn't the right way to deal with the news. But the strength of this pick is showing itself more and more to be a strategy to unite Republicans around a much-hated foe, the media. They were fully aware that the media would pounce on Palin (how can they not? She's a complete unknown.) - this, in turn, gave them the pretext to reignite the tired old war against urban elites, the liberal media, out of touch and condescending Democrats, pro-choicers, anti-gunners, etc. With a new enemy in sight, GOPers rallied around the flag of self-righteous indignation. The same old game that defined 2000 and 2004 is now once again afoot.
Was the mainstream media coverage (blogosphere aside) of Palin unfair, sexist, or liberally slanted? You can read into media coverage what you want, hence why there has never been a convincing objective study to put the old canard about liberal bias to rest. One man's truth is another man's bias. (Although the fact that Bush was, until about 2006, given a free pass by the press should poke some holes in the idea that all media is hopelessly biased towards the Left.) I didn't see a media that tore someone up for no reason - I saw a media that were performing due diligence on a complete unknown. They were playing catch-up. Barack Obama was vetted by the media over the course of about two years - Palin was hit with all the background checks and doubts overnight. Would it be appropriate for the press to ignore all the negatives that have come to light? Absolutely not. Yet by expressing legitimate doubt, the media seem to have stirred up that old resentment from the Right. Palin's positives were reported as well, but the narrative has already been established: the liberal media hate a pro-life, small town mother. Toss her gender into the mix, and all of sudden the GOP - who would have ever thought we'd see the day - is able to toss sexism arguments into the mix.
Time writer Joe Klein sums up this situation very well, and it bears repeating in full:
Steve Schmidt [McCain's chief strategist] has decided, for tactical reasons, to slime the press. He wants the public to believe that there is an unfair--sexist (you gotta love it)--personal assault going on against Palin and her family. This is a smokescreen, intended to divert attention from the fact the very real and responsible vetting that is taking place in the media--about the substance of Palin's record as mayor and governor. Sure, there are a few outliers--and the tabloid press--who have fixed on baby stories. That was inevitable....the flip side of the personal stories that the McCain team thought would work to their advantage--Palin's moose-hunting and wolf-shooting, and her admirable decision to have a Down Syndrome baby. And yes, when we all fix on the same story, whether it's a hurricane or a little-known politician, a zoo ensues. But the media coverage of the Palin story has been well within the bounds of responsibility. Schmidt is trying to make it seem otherwise, a desperate tactic.
There is a tendency in the media to kick ourselves, cringe and withdraw, when we are criticized. But I hope my colleagues stand strong in this case: it is important for the public to know that Palin raised taxes as governor, supported the Bridge to Nowhere before she opposed it, pursued pork-barrel projects as mayor, tried to ban books at the local library and thinks the war in Iraq is "a task from God." The attempts by the McCain campaign to bully us into not reporting such things are not only stupidly aggressive, but unprofessional in the extreme.
From a reporter who is often sympathetic to Republican politics, this can't be written off as another piece of liberal bias.
There's a lot to be upset with the media about, but Sarah Palin is not one of them. McCain knew that his pick would be scrutinized closely in the week leading up to her speech; he knew that her sex would make criticisms seem sexist - and all of this works like magic to pull Republicans, with a renewed sense of victimhood, together to rally around their man and chant "USA! USA!" Negative coverage is good for a party that loves to claim that the world is against them. When social conservatives see the press "bashing" a pro-life woman with five kids and an NRA membership, it is just one more instance of the elite attacking people with their values. Before we reflexively follow the line that the media is biased, let's take a moment to stand back and think about the political victory that Republicans receive from a media that is perceived as biased, liberal, and sexist. John McCain has a lot to gain by promulgating this view.
Update I: A great post by the NYT's Judith Warner amplifies these points. And here's another one by Paul Krugman about the politics of resentment.
Update II: This recent Daily Show clip illustrates the rank hypocrisy of GOP spinmeisters beautifully:
Wednesday, September 3, 2008
Mirth and Matter is lucky to have a diverse readership from all over the world. An Alaskan friend and fellow blogger generously volunteered the following opinion piece on the topic of the now-infamous governor of Alaska, Sarah Palin. (Additional thoughts on the Palin pick can be found at her blog.) Thanks for providing an authentic Alaskan woman's perspective on the issue du jour!
I’ve been given the opportunity, being a vagina-ed human being and a former Alaskan, to write this bit about our future VP (God, I hope not), Sarah Palin. I will start this off with a disclaimer, saying that I’m not totally informed about her doings and evil activities within the state of Alaska; however, I will take this opportunity to merely write a rant, or quite possibly even an incoherent tangent, about this sad occurrence that has come upon us. Please note: I do not bother backing up my statements - this is simply how I feel.
What I did knew of the situation in Alaska back in 2006 led me to vote for Tony Knowles, her “Democratic” opponent, who actually has some worldly knowledge and higher-political experiences behind him. I say “Democratic” simply because any politician in Alaska that says they are a Democrat really means that they are a quasi-Republican, not yet full-fledged.
Another reason for voting for Tony Knowle(dge) was because he had been governor of Alaska before, and while being governor, Tony managed not to mess up the state of Alaska too terribly like Frank Murkowski had when he tried to build “ The Bridge to Nowhere” and when he bought the multi-million dollar jet for himself that was too expensive to fly anywhere.
Regardless of Tony’s knowledge, experience, the ability not to screw Alaska up more than it already is, and the several thousands of votes against her, Sarah Palin won the hearts of female and male voters alike due to her “Alaskan-ess.” By this I mean (and what ran in the Anchorage Daily News): Palin’s ideal day was (and perhaps still is) to go snow machining and then fix up a “mean pot of moose meat chili.” How could any Alaskan pass up this opportunity to have a “babe” and a “typical Alaskan” for a governess? Since this election, I have not returned to Alaska, hence me not keeping tabs on, or giving a shit about Ms. Wasilla 1984.
Of course, other than her terminating her ex-brother-in-law from his position of state trooper, and who can forget her threatening the job of a librarian in the city of Wasilla, when the librarian declined to remove “offensive” books from the shelves, I really haven’t busied myself with Palin. Otherwise, most Alaskans seem pretty pleased with her for reasons I cannot explain. Probably because she doesn’t look like a rubbery, old dinosaur who’s about to die from a heart attack.
McCain announcing that he had picked the power-mongering wenchbot to be his veep about damn near wanted to make me puke. I felt (and still feel) offended that Palin, out of all of the experienced conservative-Christian women in politics today, was chosen despite her blatant lack of knowledge in the world outside of Alaska. Here I should note that in Alaska, the consecutive lower-48 states are even called “the outside.”
On another sad note, we’ve all just read that her travels have only consisted of going to Kuwait, Germany, and Ireland—trips that were primarily to visit Alaskan troops abroad. I’m sure much knowledge was gained from these trips. (For example, that getting a passport is an expensive process.)
In addition to her lack of worldly - and in my opinion - national knowledge, I note that for a woman who proclaims to be for women’s rights, she certainly is very restrictive on what rights women should be allowed to have. Of course, as many of you well know, she is anti-abortion and a firm believer of preaching the glorified rule of abstinence (I shant be bothered to go into the hypocrisy here). How in the bloody hell can a woman say she is for women’s rights whilst opposing them?! This woman may have the same reproductive bits as me, but I certainly do not follow this sort of bull that the rabble masses feed on for faith and guidance in politics. Maybe I’m wrong, but shouldn’t someone who supports women somehow believe that women have the right to decide what their uterus may or may not do in 9 months? I could quite possibly be writing something that someone has written prior to me, and possibly with less-refined eloquence; however, this is obviously beyond infuriating for we female folk who believe we should be allowed a decision on things that may suddenly be inside of us.
The most sickening of all is that a few liberal female friends of mine in Alaska are considering changing their vote from Obama to McCain simply because he has a female running mate from Alaska. Their reasoning behind this is that Palin will be sympathetic, in her run in the White House, toward their womanly and Alaskan needs, whatever they may be. Right. Also, they wish to see a woman in the White House. Yes, so do I, but not Palin. I don’t believe she represents a good change for women in America. In fact, I think it shows that male-conservative politicians feel that they can dupe women into believing that they are the better candidate because they are open to having a woman as a running mate and that woman will then represent ALL women, regardless of their political affiliation. Bitch, please! Don’t I think and don’t I do research on who I’m going to vote for? Simply because some of us females would like to see the sexism in politics cease, it does not mean I’m going to vote for someone who may bleed like me but does not share the same ideals as me.
Tuesday, September 2, 2008
After an eleven year hiatus, nobody knew quite what to expect from one of Britain's founding trip-hop groups, the reclusive and highly influential Portishead. Third, while not as deeply groovy and immediate as 1994's debut smash Dummy, nor as richly textured and harmonically labyrinthine as 1997's self-titled record, is still a force to be reckoned with. The Bristol, UK, trio of Geoff Barrow, Beth Gibbons, and Adrian Utley have emerged from their creative coccoon (I would say "womb," but tact tells me not to put it in the same sentence as "Bristol" this week), reborn with vitality, freshness, and even a few of the old tricks. (Go here for samples - iTunes DRM files won't let me preview them here.)
While the first two records created a sonic environment akin to listening to your grandpa's scratchy, low key jazz records in a creepy basement, drawing heavily from hip-hop beat craft, Third is much more influenced by Radiohead and all the other electronic rock outfits of the intervening decade. Part of the band's new sound is reactionary: upset that their down-tempo grooves of the 90s have been co-opted into hipster-lounge chic for affluent urbanites, the new record tries to shake things up with startling electronic bleeps and blurps and Sonic Youthian noise. The opening cut, "Silence," with a harmonic form based entirely on minor thirds, is identifiably Portishead; but it's guitar driven, heavy, and actually fast. Gibbon's ghoulish voice lets the listener know that Portishead is to be taken seriously, thank you. Her melodies are bizarre, snaky, deceptive, unpredictable, totally unlike anything else in pop, and amazingly effective. But they are uncompromising and definitely not for the fans of the hipster rip-off legions. The song ends suddenly, without reason - I actually checked my iPod on first listen, thinking it had run out of batteries. No. "Silence" is an aggressive reclaiming of the ground that Portishead originally broke.
The band's blend of electronic manipulation, live drums and guitar, samples, and vulnerable, dessicated female vocals is a potent mix. "The Rip," one of Portishead's most lyrical little gems, is a great example of the band's new sound. It starts with acoustic guitar arpeggiations, naked voice, a gentle synth drone and a bassoon (!). Portishead's harmonies often move chromatically, and listening to it here makes you realize how rare this sort of thing is in pop, and how ravishing it can be to the ear (is Mr.Barrow a Wagner fan, I wonder?). About half-way through the song, the stripped down, bare, and human sound world gives way to the realm of machines, as a brassy analog synth takes over the guitar arpeggios and the drum groove enters. Landing on a long note, Gibbon's voice is electronically manipulated to hold as a drone over the groove, essentially becoming another electronic instrument in the mix. Portishead's cyborg soul is on full display.
Guillermo Klein and Los Guachos: Filtros
Quite possibly the most exciting new jazz release I've heard this summer, Argentine pianist-singer Guillermo Klein teams up with his 11-piece band (too big for a combo jazz sound, too small for a big band effect) for a collection of stunningly original music. Unlike many successful modern jazz groups that draw extensively from the energy and directness of rock, Los Guachos performs a fastidiously composed, intricate type of improvisational music that gives a nod to the world of classical music. Like his countryman Osvaldo Golijov, Klein is a chameleon that refuses to see boundaries and borders, preferring to view all music on a level field (there's a Pampas reference in there somewhere but it's not coming to me).
From the first second of the record, "Va Roman," we are hit with Klein's casual, amateurish voice (an acquired taste) over tidally pulsating piano chords. The groove, when it comes in (the masterful Jeff Ballard on drums is amazingly subtle here), is gentle, graceful, but deceptively complex as well (a large 12/4). A skilled orchestrator, Klein uses the ensemble to paint delicate colors behind the soloists; his sense as a writer for large ensemble is influenced by the superbly talented NY bandleader Maria Schneider (and indeed many bandmembers are the same here), but his periodic structures are simpler and more steady. His harmonic palette is positively dazzling; on "Yeso," later in the album, the listener is struck by what might be an Unpluggled Radiohead B-side.
The classical influence can be found in the forms and techniques underlying this superb collection. On "Miula," for instance, Klein uses an effect derived from the string quartets of mid-century American iconoclast Elliott Carter, "metric modulation." Simply put, this technique transforms a subdivision in one tempo (say, triplets) into the pulsation of a new independent tempo. When coordinated well, a groove can transform instantaneously into another seemingly unrelated tempo at the drop of a hat - it's jarring and seriously spicy (and underused, for that matter). In addition to classical techniques, Filtros takes on some beautiful 2oth century compositions (György Ligeti's "Hungarian Rock" and Olivier Messiaen's "Louange a l'eternite de Jesus"), adding the expressive freedom of jazz to an unexpected context. Pulling the European avant-garde, American jazz, and South American folk songs into his eclectic mix, Klein is truly a jazzer for the 21st century. I can't recommend this album strongly enough.
Immortal Technique: The 3rd World
For those of you who think that hip-hop has lost its will to speak truth to power in forceful and urgent terms, listen to Harlem-based MC Immortal Technique. I've followed the career of this underground rapper for a few years now, starting with the furious Revolutionary: Vol. 1 (2001), and I can say with all seriousness that his talent is unmatched in all of hip-hop. He is simply a phenomenon with no peer. The third volume of his "Revolutionary" series, The 3rd World, like its predecessors, is intense, thought-provoking, and will have you running to the computer to look up references with every other verse. This is pure Edu-tainment, as KRS-One formulated the idea: political, hard-hitting, muscular, but also fun.
Like Guillermo Klein, Immortal Technique is a product of different continents. Born in Peru but raised in Harlem, this half-black half-Hispanic rapper has a unique perspective in the traditionally binary world of hip-hop (black and white). He raps in English and Spanish, and his lyrics tend towards the far left: he takes on the topics of American economic imperialism in Latin America, the Iraq War, media failures, the Washington Consensus, CIA complicity in the international drug trade, and the War on Terrorism, all with remarkable humor, lacerating vitriol, and a refreshing clarity and coherence of ideas (this is no Rage Against the Machine!). To understand Immortal Technique's persona, imagine if Noam Chomsky grew up on the mean streets. Yet, while few teenagers would delve into leftist politics and contemporary events with much zeal if forced to read about it in the library, the format of hip-hop - true to its mid-80s, Public Enemy form - makes some pressing political commentary accessible to all who revel in phat beat-craft.
The producer here, DJ Green Lantern, is more slick and produced than his previous collaborators (vol.1, while brilliant, is low-fi and indie to the extreme). This has earned the album some criticism from hard-core, keep-it-to-the-streets type fans; personally, I could take it or leave it. It's not really the point anyway. To me, the real attraction of IT is his brilliant word-play and sense of social justice. In this sense, he is unmatched, although the new album falls short of the first two Revolutionary volumes in the number of epiphanic verbal fireworks. If it were produced by any other MC, I'd say the album was amazing; from IT, it is so-so. Moreover, this album loses its focus frequently, veering off into senseless cant and silly communist agitprop. It's an inconsistent collection, so I'd recommend Vol.1 to the IT newcomer.
Nonetheless, this is an artist to watch. If Immortal Technique ever gets as popular as Jay-Z (an impossibility), you can bet that the younger generation would be out there on the streets chanting down Babylon.