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Tag: The Atlantic

Five Reasons the House GOP Is to Blame via James Fallows from The Atlantic

James Fallows

James Fallows continues his comments on the current debt ceiling crisis. –

Here’s a comparison: Suppose, by similar quirk, there was an arbitrary ceiling on the amount of ammunition the U.S. military could buy each year. Or the amount of fuel for drones, bombers, and Humvees. Like overall national debt, these purchases are foreseeable consequences of previous political decisions — in this case, about the wars the country decides to fight. But suppose that when the “ammo ceiling” came due for its routine extension, a group of legislators said they would refuse. No more bullets or jet fuel after August 2, and for good measure no more food for the troops, unless demands for radical change in future foreign policy were met in full. That would rightly be seen as blackmail, and as a reckless willingness to damage the nation for partisan ends. A similar reckless exercise in blackmail is underway now, with the difference that the consequences can be longer-lasting and worse.

Blackmail- that’s exactly how I see it. I am happy to observe that I am not the only one.

There is not much to be done now. The Republicans cannot generate a bill that will get a majority of their own caucus’ vote. Without that, there is no chance of a congressional action ending the crisis. The only ball park left is for the President to declare that based on a Constitutional provision, the United States will continue to pay its debts.

I doubt if he has the will or the courage. Of course, even mice pushed into a corner will on occasion bite.

James Pilant

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The U.S. as ‘Lethal Laughing Stock’ (via James Fallows from the Atlantic)

This is from James Fallows –

Yesterday I mentioned that governmental paralysis over the debt ceiling — a wholly artificial construct* being addressed with mainly incoherent arguments** — was already turning the strongest, richest country in the world into an international laughing stock, whether or not we reach the final disaster of a default.

Yes, that’s about right.

It’s easy to blame the ideology driven House or Representatives but the real villain is the President. Obama has established a reputation as a negotiator ever ready to cave under every imaginable circumstance, always willing to appear as the “adult in the room” no matter what has to be given up to maintain that image. But if that isn’t enough, we have a President celebrated for his eloquence who is constantly unable to rally the American people behind any major policy whatever. His speech this week should have laid out the shady blackmail being played out by the House, instead it’s a wimp suggestion to “call your congressman.”

I would like to explain something to Mr. Obama. My congressman is one of those people who are blackmailing him to do what they want on the budget. There is no threat I can imagine including physical violence that will change his mind. He could not care less what I think and probably even less what the President thinks.

I am a constituent of this person only in the most technical sense. In reality I am meaningless to him. His real constituency is Fox news, Rush Limbaugh, the Tea Party and talk radio. The President’s call for phone call activism is a waste of his and my time.

So, the train wreck approaches. Will the President cave? Of course – that’s almost his profession.

But that is not enough any more to stop default. There are too many competing plans and the Republicans Congress is split – unable to generate a majority for any one plan. Even if they can get it together in these last few days. any bill put together by these petty blackmailers, is dead on arrival in the Senate.

So, disaster is coming, kinds of a 2012 apocalypse on an early schedule, a quick gateway into the status of a lethal laughing stock just like Fallows said.

James Pilant

 

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Today's (Needless) Hysteria: the S&P Panic (via The Atlantic)

I find the S&P rating panic to be bizarre. They have decided to throw their weight into politics after a decade of incompetent performance such as giving high ratings to the toxic assets that almost destroyed our economy. This will certainly enhance their reputation for neutrality and judgment. After a decade of predictions, often frightening in their irrationality, why not jump into a new arena of prediction?

These guys shouldn’t be making prognostications. The ones who helped create the current economic mess should be winnowed out between the merely incompetent and those that have committed fraud.

I get tired of these highly paid experts. I have freshmen and sophomores in starting business classes that would never even have considered making this kind of decision.

Perhaps, I should have them send in some resumes.

I guess the air up that at the top of the financial industry is so intoxicating, that these people could think they were so influential that the government itself will bow to their legislative demands. This isn’t Greece or Ireland. This is the United States and if some half-assed twerp thinks this economy rises or falls on his judgment, he needs to be put in his place.

James Pilant

Please read James Fallows’ post on this matter.

I agree with Clive Crook’s puzzlement about the S&P downgrade “bombshell” today:

“S&P adduces no new information that I can see. Competent ratings of opaque instruments such as, oh, mortgage-backed securities would be very useful to investors (not that ratings agencies troubled to provide competent ratings in that case, obviously). But why should anybody need that kind of help in judging the soundness of US government bonds? S&P knows nothing about them that you or I don’t know.”

And I like James K. Galbraith’s derisive guffaw, For More

The New Financial Elite – The Rich Are Different

Chrystia Freeland has written an article in The Atlantic called The Rise of the New Global Elite.

Here is a sample –

Meanwhile, the vast majority of U.S. workers, however devoted and skilled at their jobs, have missed out on the windfalls of this winner-take-most economy—or worse, found their savings, employers, or professions ravaged by the same forces that have enriched the plutocratic elite. The result of these divergent trends is a jaw-dropping surge in U.S. income inequality. According to the economists Emmanuel Saez of Berkeley and Thomas Piketty of the Paris School of Economics, between 2002 and 2007, 65 percent of all income growth in the United States went to the top 1 percent of the population. The financial crisis interrupted this trend temporarily, as incomes for the top 1 percent fell more than those of the rest of the population in 2008. But recent evidence suggests that, in the wake of the crisis, incomes at the summit are rebounding more quickly than those below. One example: after a down year in 2008, the top 25 hedge-fund managers were paid, on average, more than $1 billion each in 2009, quickly eclipsing the record they had set in pre-recession 2007.

The middle class is devastated and will continue to be. The difference between the middle class and the new class of the wealthy is so large as to be difficult to understand.

Try this example –

As an example, she described a conversation with a couple at a Manhattan dinner party: “They started saying, ‘If you’re going to buy all this stuff, life starts getting really expensive. If you’re going to do the NetJet thing’”—this is a service offering “fractional aircraft ownership” for those who do not wish to buy outright—“‘and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.’”

The clincher, Peterson says, came from the wife: “She turns to me and she goes, ‘You know, the thing about 20’”—by this, she meant $20 million a year—“‘is 20 is only 10 after taxes.’ And everyone at the table is nodding.”

Only ten million. Worse, this new elite is acquiring a global perspective. In other words, their attachment and loyalty to the people of America is becoming fragile indeed.

The good news—and the bad news—for America is that the nation’s own super-elite is rapidly adjusting to this more global perspective. The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

He’s right, it sounds harsh. He has all the qualities necessary in Bond villain.

At last summer’s Aspen Ideas Festival, Michael Splinter, CEO of the Silicon Valley green-tech firm Applied Materials, said that if he were starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the U.S.,” he explained. “The pull to be close to the customers—most of them in Asia—is enormous.” Speaking at the same conference, Thomas Wilson, CEO of Allstate, also lamented this global reality: “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business … American businesses will adapt.”

 Why should they worry about American workers? They are virtuous and we just don’t understand. They don’t understand why we don’t understant. (I have serious doubts any of these individuals read my blog save for amusement.)

As a consequence of this disconnect, when business titans talk about the economy and their role in it, the notes they strike are often discordant: for example, Goldman Sachs CEO Lloyd Blankfein waving away public outrage in 2009 by saying he was “doing God’s work”; or the insistence by several top bankers after the immediate threat of the financial crisis receded that their institutions could have survived without TARP funding and that they had accepted it only because they had been strong-armed by Treasury Secretary Henry Paulson. Nor does this aloof disposition end at the water’s edge: think of BP CEO Tony Hayward, who complained of wanting to get his life back after the Gulf oil spill and then proceeded to do so by watching his yacht compete in a race off the Isle of Wight.

I want you to go and read the full article.

James Pilant

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