Reflections On 2008, Themes For 2009

2008 may best be remembered as the year most would like to forget.

Sure there were some highlights that nearly everyone will remember fondly such as the opening ceremony of the Olympics in China, and for Democrats the election of Barrack Obama, the first black president in history, but otherwise there were slim pickings, especially on the economic side.

2008 brought a continuation of the housing crash, massive foreclosures, rising unemployment, the collapse of Bear Stearns, the bankruptcy of Lehman, a $700 billion bailout that most citizens were against, fear mongering by Bush and Paulson to get the bailout bill passed, a ponzi scheme right under the nose of the SEC by Madoff that wiped out as much as $50 billion, hundreds of mortgage lenders imploding, and a stock market crash that was down as much as 51% finishing the year at -38.5%.

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Peacenik likes Mish's take on the inflation/deflation dilemma. If you have mutual funds you are already screwed. If you have a 5% GIC coming due next week what should you do? Mish is in the deflation camp. Mish doesn't see hyper-inflation as a risk. Peacenik thinks Mish would say take 3.9% and stay short. But Peacenik doesn't know. What would Brian Burke do?

Warning: More Doom Ahead

By Nouriel Roubini

“Because the United States is such a huge part of the global economy, there’s real reason to worry that an American financial virus could mark the beginning of a global economic contagion.”
– Nouriel Roubini, March 2008

Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst.

The prevailing conventional wisdom holds that prices of many risky financial assets have fallen so much that we are at the bottom. Although it’s true that these assets have fallen sharply from their peaks of late 2007, they will likely fall further still. In the next few months, the macroeconomic news in the United States and around the world will be much worse than most expect. Corporate earnings reports will shock any equity analysts who are still deluding themselves that the economic contraction will be mild and short.

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Peacenik watched an interview with Art Laffer yesterday. This is the Laffer of the totally discredited "Laffer curve". The Laffer of "trickle down" economics. Laffer has a new book out calling for the return of the Reagan years. Tax cuts and no regulation. Laffer is predicting a big boom. The interviewer of course allowed Laffer to spout his nonsense. The finanacial pundit/cheerleaders still don't get it. There will be no going back to a consumer society. Or a growth society. Peacenik hopes there will at least be a civil society. But with auto sales hitting record lows, and no prospects for any future sales, the spectre of millions of unemployed, hungry, indebted and pissed off former autoworkers looms large. Even Dr. Doom, Roubini, may have understated the worst-case scenario. Is Sundin working out?

The End of the Financial World as We Know It

By MICHAEL LEWIS and DAVID EINHORNPublished: January 3, 2009

AMERICANS enter the New Year in a strange new role: financial lunatics. We’ve been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet’s college graduates seemed to want nothing more out of life than a job on Wall Street.

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don’t know what they are doing with money, who does?

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When the New York Times starts talking about the end of the financial world as we know it, it confirms the obvious. Yet many pundits and commentators continue to talk about "the bottom" and recovery, and the status quo, and business as usual. Peacenik wonders about the inflation/deflation debate. If Peacenik had any money what should Peacenik do? What should you do? The urge to ignore it all, and hope for the "muddling through" thesis to play out is great. But Peacenik thinks this is the end of globalization and capitalism. Peacenik thinks buying some seeds is a good idea. Can anyone protect themselves from hyper-inflation or deflation? Probaby not. But Peacenik recommends taking some small steps towards survival. Peacenik got a solar flashlight for xmas. Peacenik wishes everyone all the best for 2009.

Violence and Lies: What, Exactly, is Israel's Mission?

By Neve Gordon
www.counterpunch.com

The first bombardment took three minutes and forty seconds. Sixty Israeli F-16 fighter jets bombed fifty sites in Gaza, killing over two hundred Palestinians, and wounding close to a thousand more.

A few hours after the deadly strike, Israeli Prime Minister Ehud Olmert convened a press conference in Tel-Aviv. With Foreign Minister Tzipi Livni sitting on his right and Defense Minister Ehud Barak on his left, he declared: “It may take time, and each and every one of us must be patient so we can complete the mission.”

But what exactly, one might ask, is Israel’s mission?

Although Olmert did not say as much, the “mission” includes four distinct objectives.

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punditman says...
We often get the impression through our dumbed down media that all Israelis feel one way and all Palestinians feel the opposite way.

Neve Gordon is just one example of how that notion is a deadly myth. As someone who served in the Israeli military in an IDF paratrooper unit and was wounded in action, resulting in a 42 percent disability, he is someone who knows a thing or two about the nature of Israel's occupation of Palestinian territories.

He is known for his views on social justice and is a vocal critic of Israeli policies. Gordon is a Senior Lecturer and head of the Department of Politics and Government at Ben-Gurion University. He is the author of "Israel's Occupation," University of California Press, 2008, which can be purchased here.

Obama's Duty To Prosecute Bush For War Crimes

Patriot Daily News Clearinghouse

Obama promised that he would investigate and prosecute Bush team for "genuine crimes" because no one is above the law, but he would not prosecute "really dumb policies." Obama plans to have his AG review the available information to determine if investigations are needed. Well, AG nominee Eric Holder knows that many crimes have been committed:

Our government authorized the use of torture, approved of secret electronic surveillance against American citizens, secretly detained American citizens without due process of law, denied the writ of habeas corpus to hundreds of accused enemy combatants and authorized the use of procedures that violate both international law and the United States Constitution.... We owe the American people a reckoning.

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Peacenik has been busy enjoying Christmas and the lead up to the New Year. Peacenik suspended reality for a few days to do this. This article about war crimes and the Bush administration is a good avenue back to reality. Lots of reality coming. CNBC, the corporate media arm of General Electric, which itself has been in line for a bailout, has been busy during the holidays touting the danger of excessive financial regulation. The mid-east is in flames again. GMAC just got a $5 billion bailout. The holidays have been the lull before the storm. Peacenik's google alerts about empty grocery shelves are becoming more alarming. Peacenik says its time to enjoy New Year's Eve celebrations, and its time to wake up and get ready. 2009 will be a year of a new reality.

Robert Fisk: Leaders lie, civilians die, and lessons of history are ignored

We've got so used to the carnage of the Middle East that we don't care any more – providing we don't offend the Israelis. It's not clear how many of the Gaza dead are civilians, but the response of the Bush administration, not to mention the pusillanimous reaction of Gordon Brown, reaffirm for Arabs what they have known for decades: however they struggle against their antagonists, the West will take Israel's side. As usual, the bloodbath was the fault of the Arabs – who, as we all know, only understand force.

Ever since 1948, we've been hearing this balderdash from the Israelis – just as Arab nationalists and then Arab Islamists have been peddling their own lies: that the Zionist "death wagon" will be overthrown, that all Jerusalem will be "liberated". And always Mr Bush Snr or Mr Clinton or Mr Bush Jnr or Mr Blair or Mr Brown have called upon both sides to exercise "restraint" – as if the Palestinians and the Israelis both have F-18s and Merkava tanks and field artillery. Hamas's home-made rockets have killed just 20 Israelis in eight years, but a day-long blitz by Israeli aircraft that kills almost 300 Palestinians is just par for the course.

The blood-splattering has its own routine. Yes, Hamas provoked Israel's anger, just as Israel provoked Hamas's anger, which was provoked by Israel, which was provoked by Hamas, which ... See what I mean? Hamas fires rockets at Israel, Israel bombs Hamas, Hamas fires more rockets and Israel bombs again and ... Got it? And we demand security for Israel – rightly – but overlook this massive and utterly disproportionate slaughter by Israel. It was Madeleine Albright who once said that Israel was "under siege" – as if Palestinian tanks were in the streets of Tel Aviv.

By last night, the exchange rate stood at 296 Palestinians dead for one dead Israeli. Back in 2006, it was 10 Lebanese dead for one Israeli dead. This weekend was the most inflationary exchange rate in a single day since – the 1973 Middle East War? The 1967 Six Day War? The 1956 Suez War? The 1948 Independence/Nakba War? It's obscene, a gruesome game – which Ehud Barak, the Israeli Defence Minister, unconsciously admitted when he spoke this weekend to Fox TV. "Our intention is to totally change the rules of the game," Barak said.

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punditman says...
If there is one debate that trumps all others in terms of mainstream media bias, it is the question of Israel and Palestine. This article by Robert Fisk in Britain's Independent is the exception by a wide margin in that is strives for balance and objectivity.

Put simply, in the eyes of Western media, the Israelis can do no wrong; they merely act in self defence. The Palestinian leadership (and by implication, all Palestinians, are always the instigators); Israel acts 'humanely,' Arabs have no respect for human life, etc., etc. We hear this ad nasuem in each round of this tragic conflict. This is the narrative at work throughout the 'liberal media,' and it is has become a sick joke to try to find some balanced reporting each time this prolonged clash flares up.

Given the power of the Israeli lobby (see AIPAC), this should come us no surprise. Even Jimmy Carter can't criticize Israel without encountering the establishment's wrath while being shunned by his own party's orthodoxy. Thank God for Mr. Fisk who at least attempts to give us a proportioned perspective.

Meanwhile, I'm trying to find some links for the above comment, but what the hell is wrong with the internet? Who cut the damn underwater cables this time?

Wages, It all gets down to wages

by Mike Whitney

A strong economy must be built on a solid foundation of steadily rising wages. If wages don't keep pace with production, the only way the economy can grow is through the expansion of debt, which leads to disaster.

Consider this: the US economy is 72 percent consumer spending. That means the Gross Domestic Product (GDP) cannot grow if salaries don't keep up with the price of living. Low Income Families (LOF)--that is, any couple making less than $80,000--represent 50 percent of all consumer spending. These LOF's spend everything they earn just to maintain their present standard of living. So, how can these families help to grow the economy if they're already spending every last farthing they earn?

They can't! Which is why wages have to go up. The cost to short-term profits is miniscule compared to the turmoil of a deep recession which is what the world is facing right now. The present crisis could have been avoided if there was a better balance between management and labor. But the unions are weak, so salaries have languished while Wall Street has grown more powerful, stretching its tentacles into the government and spreading its anti-labor dogma wherever it goes.

The investor class has rejiggered the system to meet their particular needs. Financial wizardry has replaced factories, capital formation and hard assets while real wealth has been replaced by chopped up bits of mortgage paper, stitched together by Ivy League MBAs, and sold to investors as priceless gemstones. This is the system that Bernanke is trying to resuscitate with his multi-trillion dollar injections; a system that shifts a larger and larger amount of the nation's wealth to a smaller and smaller group of elites.

When Alan Greenspan appeared before Congress a few months ago, he admitted that he had discovered a "flaw" in his theory of how markets operate. The former Fed chief was referring to his belief that investment bankers could be trusted to regulate themselves. Whether one believes Greenspan was telling the truth or not is irrelevant. What really matters is that the wily Maestro managed to skirt the larger issues and stick to his script. Congress never challenged Greenspan's discredited, trickle-down economic theories which guided his policymaking from the get-go. Nor was he asked to explain how a consumer-driven economy can thrive when salaries stay flat for 30 years. An answer to that question might have exposed Greenspan's penchant for low interest rates and deregulation, the two fuel-sources for the massive speculative bubbles which emerged on Greenspan's watch. These are the tools the Fed chief used for 18 years to enrich his buddies at the big brokerage houses while workers slipped further and further into debt.

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Punditman says..

As usual, Mike Whitney cuts through all the doublespeak about what is wrong with the economy, who caused it and what to do about it. He notes that salaries (thus wages) have basically stayed flat for 30 years. Punditman has noticed that the cost of living hasn't. I am assuming Whitney is excluding the parasitic financial sector from his generalization—the geniuses who got us into this mess—as well as professional athletes and a few other obscenely paid "employees" such as lying media anchorpersons and loud-mouthed blithering sportscasters—but I digress.

To stimulate the economy, the answer is not to keep the average worker one paycheck away from the homeless shelter by allowing them to accumulate more and more unsupportable debt. The answer is (wait for it)...more income at the bottom end of the economy! Imagine that. To get out of this mess, all households that make under 80 K need a raise. I find this oddly optimistic (now: how do you un-brainwash and politicize this huge constituency?).

Shoe Journalist Says He Was Tortured After Arrest

"Apology" Letter was Written Against His Will

www.antiwar.com

Iraqi journalist Muntadar al-Zeidi became an international celebrity when eight days ago he hurled his shoes at President Bush during a press conference. The move has had a myriad of surprising effects, from a huge financial boost for a Turkish shoe company to potentially ending the British military presence in Iraq.

One other thing it did was put renewed scrutiny on the Iraqi justice system and how it treats its detainees. That scrutiny is likely to be increasingly uncomfortable as Zeidi’s brother, the first family member permitted to see the journalist in jail, reports of his torture in the hours after his arrest.

The report also throws into doubt last week’s “apology” letter, which brother Uday al-Zeidi insists Muntadar wrote against his will after his torture. Prime Minister Maliki’s subsequent claim that Zeidi “confessed” that the mastermind behind the intricate plot (the sum total of which consist of removing his shoes and throwing them as hard as he could at the President’s head) was an unnamed militant known for slitting throats is likely to also face further doubts amid the allegations.

punditman says...

Here is the follow-up confirmation to what punditman hinted would happen to this fella back here. So here's the size of it: you throw a shoe at the world's number war criminal and you get tortured by a puppet regime supported by the war criminal regime who happens to have authorized torture. This of course is all masquerading under the banner of democratic reform in an oil-rich country. What kind of upside down world is this?

The shoe-man has caused quite a stir. Rick Salutin of the Globe and Mail notes that this should be viewed as a Christmas present for all of us who seek non-violent (well, almost ;-) ways to react to injustice. His article, Peace on Earth, good shoes toward men can be read over at rabble here.

Advanced Missiles to Iran? Russia Says No

Iran MP Insists Deliveries Already Started

The potential sale of Russia’s S-300 air defense system to Iran has caused Israeli officials no end of concern, but as Major General Amos Gilad wrapped up his visit to Russia that nation’s intentions with respect to the system depend largely on whom you believe.

Pyotr Stegny, Russia’s ambassador to Israel, says there is no question of such a sale, adding the Russia is adhering to agreements reached during Israeli Prime Minister Olmert’s visit to Moscow. Beyond that, the ambassador insists, Israel “will be the first to know about any progress or change in the matter of the missiles.”

But Esmail Kosari, member of Iranian parliament and Deputy Head of the National Security and Foreign Policy Committee, says today that Iran and Russia have reached an agreement on the delivery of the system after years of negotiations.

The S-300 series of surface to air missiles are the backbone of Russia’s air defense system, and their acquisition by Iran would make Israel’s long threatened attack on Iran considerably more difficult. Israel previously claimed to be developing an “electronic warfare device” which would neutralize the S-300 both in Iran and in Russia but has since claimed that the acquisition of the defensive missiles by Iran could lead to the destruction of Israel.

punditman says...
All this talk of the economy, who Obama has chosen, who he has not or what Stephen Harper will do next--can lead you, dear reader, astray. Let's not forget about a bigger and potentially deadlier picture. As usual, it is difficult to know who to believe, at first glance, when it comes to the Middle East. But with the global focus on jobs, the region's sabre rattling keeps apace with the military industrial complex and the complex alliances that feed it. Stay tuned...

Debt Rattle, December 17 2008: Your lives at zero percent

Ilargi: As you may have gathered by now, I read a lot. A whole lot. Today is no exception, as you can see from the amount of material below. I like to see what everyone is saying, especially when opinions differ a lot. Still, I knew beforehand what I thought, and what I would write about. I’ve known this one since I first started writing about finance a few years ago.

The credit - or financial- crisis we are drowning in today was caused by one thing: bankers and other financial institutions treated their deposits and other solid assets as items that could be put on casino tables as collateral for bets. Anything they could claim ownership of was laid out right there in front of the dealer, and the dealer accepted it. This was possible because regulators, and governments in general, loosened definitions of ownership (is that really yours, sir? ), and allowed their fat fingered bankers to bet 10-20-100 more than they actually showed the dealer, who in turn assumed the government would be good for it.

This part of the casino has now been closed; the tables are empty, the chips are missing, and Mr. Luciano is out looking for kneecaps.

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Ilargi's post follows Peacenik's rant about the banks yesterday. The banks gambled away the world's wealth and now the bankrupt system is beyond salvation. Chrsyler just announced it is shutting down all its operations for a month. Does anyone really believe that Chrysler is going to re-open. Just for old time's sake Peacenik will visit a few car dealerships and take some pictures. Peacenik is documenting history, ancient history. Motorola just announced it is freezing salaries and pensions. The dominos begin to fall. The consumer society is dead. Peacenik's sad advice is to save your cash and buy food and water only. And beer. Peacenik got Peacenik's first Google Alert about groceries this morning. Stay tuned, the early warning system is operational.