Google, Haiti, and Taxachusetts

Saturday, January 23, 2010

There have been so many juicy topics to cover, it’s been difficult to keep away. Every time I’m moved to write, though, I really have something else to do or simply don’t want to devote the time to it. That said, here is, in summary, how to think about the following issues:

Google/China: Yes, if Google was #1 in China this wouldn’t have happened, but they’re not and it did. As a result, this is one of the great humanitarian corporate moves of all time. Perhaps the greatest (there’s not a lot of competition, I’m guessing). Google should follow through and close their business there. As arguably the most important corporation in the world, the move will properly shame China and the many companies that remain in that authoritarian country. Here’s a question that any one doing business there should ask: Would I want to live here?

Haiti: Nothing to do in the aftermath but help. In the long term, I’m with David Brooks and Bret Stephenson. Let’s stop giving money to countries “in need.” It does nothing, and may actively do harm. It’s difficult, because it is human nature to try to help fellow humans in need, but it’s also the right thing to do. Certainly, what the first world has been doing for decades has not worked.

Taxachusetts: I would have voted for Scott Brown too. Seriously. I would have voted for a cardboard cutout against Coakley. Although she was inept, I would have done it to send the message. I have said, many times, that if Obama and this Congress can’t get it done, then there is no hope for us. Year one has been an epic, unmitigated failure. Iraq, Afghanistan, secrecy, deficit spending, bank coddling, and worst of all, the healthcare nightmare. I blame Obama for not using his robust post-election strength to strong arm Pelosi (failure) and Reid (failure) immediately. Weak, poorly managed, pathetic. Obama, where are your balls? It’s time to lead.

And, btw, why do you need the 60 votes? Make an exceptional bill and let the GOP filibuster. Call their bluff. If they do it, and the bill dies, you hang it around their neck. Now, the bill dies, and it’s a Dem failure. Disgraceful.

(But then there would be no healthcare bill, someone wails. So fucking what? Paul Krugman can cry to his cats. This is not the most pressing issue in America. Budget restraint, financial reform, and confiscatory, punitive taxes on very wealth bankers, should be the priority. Followed by a 10% spending cut across the entire government, no exceptions.

We are going to have to suffer, period. Let us start suffering already so we have a shot at not fucking our children.)

The bottom line for me, in all this, is that I have really given up hope. I don’t believe our Congress (and the state legislatures) are capable of introducing the change (ethics, responsible spending) that is necessary.

Something very, very bad is going to happen in the next ten or twenty years. War with China, epic depression/inflation/default, or, in the best case scenario, a benevolent military coup (and a draft) that reforms the government in a way that makes it possible for America to function properly.

David Petraeus, are you out there? Rome needs you. Cross the Rubicon. Cast the die!

P.S. I can’t believe I just wrote that. Nevertheless, letting it stand.


Bush’s Legacy

Monday, March 30, 2009

Historians will produce reams about this abject failure of a man and his hastening the decline of the United States. Some thousand years from now scholars will look back in awe at the damage one presidency could inflict on a nation. Within the scope of the limitations of his office, he couldn’t have done more damage if he was trying.

For this, I will take off my shoe and beat the walls of his presidential library at SMU, if ever I get there.

In the meantime, I give you the quote that prompted this post:

“The United States is desperately trying to assert leadership, as if it were 10 years ago, when the U.S. set the agenda,” said Kenneth S. Rogoff, an economist at Harvard and another former chief economist of the fund.

It’s from an article in today’s New York Times about China and India challenging U.S. leadership of the IMF.

Japan’s Depression

Monday, February 2, 2009

Factories cut production by 10%(!!!) in December after a horrible November.

Yves Smith on Naked Capitalism quotes Frank Veneroso on Japan:

I have been writing about an Asian black hole for almost two months now. I have been crying from the rooftops about an emerging depression in Japan. It has been as though a neutron bomb had gone off in the world. There was no one who seemed to notice, no one who seemed to listen.

Every week it gets worse and worse and worse. Today it was Japan….

THERE HAS NEVER BEEN DATA THIS BAD FOR ANY MAJOR ECONOMY – EVEN IN THE GREAT DEPRESSION. December industrial production came in down 9.6%, worse than the METI forecast. It is now down almost 21% year over year. METI forecasts a further 4.7% decline in February. The inventory to production ratio soared again. Maybe METI will be correct.

If it is, Japan industrial production will have fallen 28% (non annualized) in four months. It will have fallen by a third in about a year. Nothing in the history of major nations compares. A 28% decline in four months would be more than half of the entire decline in U.S. industrial production over the 3 years and nine months of the U.S. Great Depression.

It would be a greater decline in four months than in any 12 month period in the Great Depression in the U.S. We are literally looking at the unimaginable. (I am attaching the U.S. industrial production index from the Great Depression for comparison).



In other cheerful news, Clusterstock has a little post linking to stories about China’s army preparing for civil unrest.

It is truly a world nearing the edge.

In the darkest corners of my mind, I fear that only war will ultimately settle what is quickly and steadily becoming a global economic catastrophe.

China’s Half-Trillion Dollar Stimulus

Monday, November 10, 2008

This, in some ways, is what I have been afraid of. Unlike the U.S., China actually has the money to pour into their economy for this kind of Keynesian stimulus. We don’t. We also get our money from China.

Now it has long been argued that the Chinese can’t afford to stop buying our government debt because it will kill their exports. But let’s just play out the string on my paranoia. If the Chinese (and whomever else) see their domestic situation deteriorating because of global economic conditions, they will, as is natural, use their wealth to stabilize their own economy and ensure (and this is always their primary goal) the Communist Party’s continued grip on power.

Now assume this $586 billion package is the first step towards that end. At what point (in the very near future?), does the cost of borrowing skyrocket for the U.S.? So far that hasn’t happened. In fact, just the reverse. American debt is still considered arguably the safest investment in the world. But should it be?

With every bank and government around the world now strapped, do we ever reach a point where we simply can’t borrow anymore, no matter what interest we offer? Do we, in fact, default?

Probably not. For one thing, the Fed would likely print up money to buy the government debt. Would this lead to Weimar/Zimbabwean-like inflation and essentially destroy our economy, anyway? Yes, but it would take longer.

Alternatively, the world could call a kind of global timeout before it lets America go under. After that, we’d be faced with an IMF-like austerity plan (but at least we’d reduce the Icelandic (18%) rates of interest that would surely precede this kind of a bailout, or so one would hope).

You see where I’m going.

My worry is that the excess savings that the world formerly parked in Treasuries will be put to urgent domestic use elsewhere. My worry is that there soon won’t be money for us to borrow.

Paranoid, I know, but this is a risky time. America is truly at one of its most desperate hours. And it has been nothing but bad morals that has gotten us here. Greed, profligacy, entitlement, and arrogance.

We can only pray that these various government interventions will get this world kick started, and that Obama and team will figure a way for us to muddle through. At this point, Japan 90s-style is looking like a great option.

Update (11/11/08): Here’s an analyst on CNBC who shares my paranoia.

Update (11/13/08): Former Goldman Sachs Chairman Whitehead shares my paranoia, too.

Bush in China

Thursday, August 7, 2008

The Beijing Olympics have been a human rights disaster in China. There has been a nationwide crackdown on dissidents and a marked uptick in surveillance and propaganda. Ellen Bork from Freedom House writes about it today in the Wall Street Journal.

China’s diligent focus on censoring anything unsavory to its Communist rulers as the Olympics approaches has had an unintended ironic effect. The world is watching as this crackdown unfolds. Everyday in the paper, on blogs, and on websites, we see new stories of China’s trampling on the rights of its people. This shining of light, Bush’s remarks in Thailand

America stands in firm opposition to China’s detention of political dissidents, human rights advocates and religious activists. We press for openness and justice not to impose our beliefs, but to allow the Chinese people to express theirs.

…and the unavoidable context that must complement any story about the Olympics under this repressive regime, can only help. So, perhaps, the silver lining to the cloud that hovers over Beijing (no pun intended), is that we are all paying attention, and the Chinese know that we do not approve. A cultural meme is setting in. And, in time, ideas give flower to change. I quote Bush again:

Change in China will arrive on its own terms and in keeping with its own history and its own traditions. Yet change will arrive. And it will be clear for all to see that those who aspire to speak their conscience and worship their God are no threat to the future of China. They’re the people who will make China a great nation in the 21st century.

Let us hope that Bush will continue to press this issue. Write him here to let him know you want him to.

P.S. Here’s a harrowing report from Amnesty International on China’s human rights situation.

China’s Looming Population Problem

Wednesday, July 16, 2008

No, it’s not the fact that they’ve got 1.3 billion people to feed (although that is a problem). The problem, as outlined nicely in this article by Mara Hvistendahl in the New Republic, is that, in the next ten years or so, there will be far too many men who can’t find wives. From the piece:

In the 2020s, Chinese Academy of Social Sciences researcher Zheng Zhenzhen, estimates in a People’s Daily interview that 10 percent of Chinese men will be unable to find wives…

Obviously, this is a huge potential social problem. But what is genuinely frightening is that the anger of these men – which might normally be directed at the state and it’s one child policy – could likely (do you want to take bets on this?) be turned outward. Taiwan, Japan, and, of course, America being the likely targets. We already know that the Chinese government will be ruthless in maintaining control. But given the sheer numbers here (my rough estimate, at least 100 million men), only a war, organized extermination, or if they’re lucky, famine and disease, could keep all that testosterone in check.

Which outcome do you think is most likely?

Gates and the Future of the Military

Thursday, June 19, 2008

Iraq, it has been noted, has been a strategic disaster for America. We have, in five short years, handed Iran pocket aces, depleted our military deployment capability, destroyed our popular and diplomatic reputation around the world, and cost ourselves the chance to catch Bin Laden. And that’s just the beginning.

The many lessons to be learned from Iraq will be studied by historians and scholars for decades. It is my strong belief that the neocon armchair warriors who cooked up the Iraq plan will be excoriated in perpetuity (and, I hope, charged with war crimes). But that is for another post. This post is about planning for the post-Iraq War world.

Secretary of Defense Robert Gates, an old school realist in the mold of Brent Scowcroft and George H.W. Bush, took over for the inept Donald Rumsfeld on December 18, 2006. He has recently given a couple of speeches reflecting his perception of the issues that will face the military in the future (the recent shake-up of the Air Force command was, in part, a response to his sense that procurement priorities are often out-of-whack).

Gates outlines a role for the military that is two-pronged. The first prong involves, of course, continuing to be prepared to fight wars against the rising conventional powers around the globe. The second prong, however, and this was the point of emphasis in these two speeches, was to prepare for asymmetrical warfare against terrorists and rogue nations.

From his speech to young Air Force officers at the Air War College (Maxwell, AL) on April 21, 2008:

“In an era when we are most likely to be challenged in asymmetric ways, I would ask you to think through how we can build the kinds of air capabilities most likely to be needed while continuing to offer a strategic hedge against rising powers.”

“Protecting the 21st Century’s “global commons” – in particular, space and cyberspace – has been identified and adopted as a key task.”

“These new realities and missions should be reflected in our training and doctrine. The Air Force will be increasingly called on to conduct civil-military or humanitarian operations with interagency and non-governmental partners, and deal directly with local populations. This will put a premium on foreign language and cultural expertise.”

“Furthermore, the counterinsurgency manual issued by the Army and Marines is over 200-pages long – and yet only 4 pages are dedicated to air, space, and cyberspace. Not long ago, the Air Force published a doctrine document on irregular warfare. But, as future leaders of air power, you should consider whether there is more the service might do to articulate and codify the unique role of airpower in stability operations.”

He goes on to question (and this in my mind is key) the bureaucracy and procurement policies at the Pentagon.

“Other questions I would ask you to consider go to the heart of how the service is organized, manned, and equipped. What new priorities should drive procurement and what new criteria should drive promotions?”

He quotes John Boyd, “a brilliant, eccentric, and stubborn” former Air Force colonel who “had to overcome a large measure of bureaucratic resistance and institutional hostility. He had some advice that he used to pass on to his colleagues and subordinates that is worth sharing with you. Boyd would say, and I quote: ‘one day you will take a fork in the road, and you’re going to have to make a decision about which direction you want to go. If you go [one] way, you can be somebody. You will have to make compromises and you will have to turn your back on your friends. But you will be a member of the club and you will get promoted and get good assignments. Or you can go [the other] way and you can do something – something for your country and for your Air Force and for yourself … If you decide to do something, you may not get promoted and you may not get good assignments and you certainly will not be a favorite of your superiors. But you won’t have to compromise yourself … To be somebody or to do something. In life there is often a roll call. That’s when you have to make a decision. To be or to do?'”

Gates suggests Boyd as a role model for these young officers.

In the other speech, given on May 13, 2008, to the Heritage Foundation, Gates again addresses the procurement issue:

“First, I believe that any major weapons program, in order to remain viable, will have to show some utility and relevance to the kind of irregular campaigns that, as I mentioned, are most likely to engage America’s military in the coming decades.”

“Second, I would stress that the perennial procurement cycle – going back many decades – of adding layer upon layer of cost and complexity onto fewer and fewer platforms that take longer and longer to build must come to an end.”

He also addressed the stress on our ground forces:

“It is true that we would be hard-pressed to launch a major conventional ground operation elsewhere in the world at this time – but where would we sensibly do that? The United States has ample and untapped combat power in our naval and air forces, with the capacity to defeat any – repeat, any – adversary who committed an act of aggression – whether in the Persian Gulf, on the Korean Peninsula, or in the Straits of Taiwan. There is a risk – but a prudent and manageable one.”

The takeaway from these two speeches?

The American military has its work cut out for it. In addition to preparing for the rising threat of China (a future threat, not a present one) and whomever else, America must learn the key lesson of Iraq: that the enemy will choose the type of war we will fight, not Lockheed Martin or Paul Wolfowitz.

From Gates: “As I’ve told Army gatherings, the lessons learned and capabilities built from the Iraq and Afghanistan campaigns need to be institutionalized into the service’s core doctrine, funding priorities, and personnel policies. And that is taking place, though we must always guard against falling into past historical patterns where, if bureaucratic nature takes its course, these kinds of irregular capabilities tend to slide to the margins.

From his mouth to God’s ears.