The Lull Before The Storm: What’s Coming in 2011

Correction below, 12/30/10.

This week—what with Christmas on one end and the new year’s celebration on the other, and everthing in between covered in snow—nothing much is gonna happen: It’s a week that’s about as dead as Dillinger. So I figured I should take stock of where we are—and more importantly, where we’re going.

To me, the biggest macro-economic story of 2010 was Europe: It’s falling apart, and there doesn’t seem to be anything that’s going to stop this collapse.

The second biggest macro-economic story of the year—though not by much—was the successful monetization of 75% of the U.S. Federal government deficit by Ben Bernanke and the Federal Reserve. I use the word “successful” in a morality-free, completely pragmatic sense: Bernanke achieved monetization with minimal market disruption. In fact, a lot of people would argue that QE-lite and QE-2 were not policies of debt monetization—that is how successful Bernanke has been. (Talk about “reality distortion field”! Steve Jobs ain’t got nuthin’ on Benny!)

This “success” has allowed the U.S. Federal government to continue to avoid making necessary, critical budgetary decisions—paradoxically accelerating the U.S.’s deteriorating fiscal situation.

The third biggest macro-economic story of 2010 has been the inexorable rise in commodity prices. Everyone’s been paying attention to silver and gold, but the real story has been industrial metals—especially copper—and agricultural commodities—especially grains—especially wheat—and corn, corn, corn!

To be sure, there were other important stories in 2010—the Mortgage Mess, Wikileaks, Wayne Rooney. But these three issues—auguries of EMU collapse, successful Fed monetization, and commodity price rises—are the ones that mattered on a macro-economic level this past year.

In 2011, every other financial story will be either a cause or consequence of one of these three issues: Guaranteed.

Now then—to specifics:

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A Christmas Gift for My Readers: The Trooper

Dear Readers and Kind Fans, 

I’ve mentioned here and there that for the past several years, I’ve been writing a monster called The Green of the Republic—but I’ve also written other fiction. 

Back in July–September 2008, while taking a break from my monster, I wrote a highly experimental novel called The Trooper. 

It’s about a State Trooper, patrolling a suburb in a post-Crash, Millennial Depression wasteland. It’s a dark, scary, creepy book—a horror story for thinking people. 

Between its formal experimentation and its black-as-outer-space tone, mainstream publishers would never touch such a book, no matter how good it might be—not in a million years. 

But it is pretty good. I know it’s arrogant of me to say that about my own work, but, well, you all know that I’m an arrogant shit. More to the point, if I didn’t think it was good, I’d never mention it—I’d keep it locked away like an unloved adopted child. 

But I do love The Trooper. It seems such a shame that—because of publisher timidity—no one will get to read it—

—so I’ve decided to make it available to people via a blogspot site. 

Every Saturday, I’ll be posting a ten-to-twenty page chunk of the novel—today, for your Christmas pleasure, I’ve posted the first two such chunks, 

So without further ado, here it is—The Trooper. 

Enjoy!

GL

As Godzilla Says . . .

©Mary Wells

Has American Military Spending Really Been a Form of Keynesian Stimulus?

In my recent post, Falling Forward, I discussed the failure of the American economy to de-militarize once the Cold War ended in 1991. 

This is a major issue—major like a hole in the head: The United States spends over 6% of its GDP on the military—more, if you add the money spent on wars in Afghanistan and Iraq. (And by the way: The self-delusion that keeps those two wars “off the books”? Astonishing—but that’s for another time.) 

Since the U.S. is the largest economy in the world, that +6% means that America spends more on the military than the rest of the world combined—with room to spare.

Right there, you know something’s gone horribly wrong. 

In Falling Forward, I argued that this enormous military created the need to find a new enemy, now that the Soviet Union is no more, and the nations of the former Warsaw Pact are busy trying to join NATO, rather than fight it. 

But there’s another thing we should be looking at, when we examine this enormous military spending, especially over the last 20 years: Shouldn’t we really be thinking of it as an enormous stimulus program—a Keynesian stimulus program of the first order?

Military spending as a form of Keynesian stimulus is not an original argument—in fact, it’s been advocated, even by a few non-Keynesians: 

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Falling Forward: America’s Loss of Direction Since the End of the Cold War

You know how when you’re pushing against something heavy and unyielding—a heavy door, say, or maybe a car stuck in a ditch—and all of a sudden, the thing you were pushing against abruptly yields? What happens?

Why, you fall forward, of course.

Especially if you’ve been pushing for a good long while: You were so hell-bent on pushing at the thing—the car stuck in the ditch, the heavy door that wouldn’t budge—that when it finally does move, you over-balance. You fall forward. You might even trip up. You might ever fall on your face—and painfully, at that.

This is what’s happening to the United States: After the long struggle of the Cold War, America is falling forward.

And this falling forward is turning into an epic tragedy.

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Want To Ruin Your Own Country? Assume Your Banks’ Liabilities

Recently, I read up on how Iceland is doing—surprisingly well, actually. Unemployment is down, the Krona is going back up. Good balance of trade, good fiscal balance sheet. Quite the turnaround, after its troubles over the last couple of years—

—so then if Iceland is doing OK, why then are we in the hole that we’re in?

Why is the American economy slogging along? Why is Europe circling the drain? Why are the bond markets queasy as a patient with a low-grade malarial fever? Why is Ben Bernanke’s chin quivering and his voice quaking on 60 Minutes? (And by the way: Was that a terrifying spectacle or what?) Why has the conversation turned from bond market risk to sovereign debt risk? Why are commodities rising, equities moving jagged and irrational, and all of a sudden silver is now the new darling of the retail investor?

What the hell is going on? Why are things getting worse, instead of better? 

The answer is so simple, it hurts:

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A PUBLIC SERVICE ANNOUNCEMENT: Prosecuting the Banksters, and the Mortgage Mess

As many of you know, I’ve written a lot about the Mortgage Mess—see here in my blog’s directory, for a rundown of the posts I’ve written on the subject.

Yves Smith, whom I respect, posted the following at naked capitalism:

Tomorrow, a group of homeowners is meeting with Iowa’s attorney general Tom Miller, who is leading the 50-state effort which is investigating foreclosure and mortgage lending abuses.

This group is presenting a letter to Miller asking them to prosecute bank executives for mortgage fraud and wants to show broad-based support for this idea via having concerned citizens sign it.

Here is the text of their letter:

Dear Attorneys General,

We, the undersigned thank you for investigating fraudulent and illegal foreclosure practices by the nation’s biggest banks.

Your investigation is the best hope for homeowners and communities since this crisis began. Americans are watching. Our expectations are high that we will see justice for the millions of families who have lost their homes, the millions more who are at risk of foreclosure, and the neighborhoods across the country devastated by falling housing values and vacant properties as a result of widespread mortgage fraud.

The bank executives who committed fraud should be prosecuted. Any settlement needs to go beyond fixing paperwork, fully addressing ongoing abuse and ending the flood of unnecessary foreclosures.

We demand that any overarching settlement agreement contain mandatory loan modification programs, including principal reduction for owner-occupant families facing foreclosure and remedies for those families who have already lost their homes.

Now is the time for bold leadership from the nation’s Attorney Generals to hold big banks accountable for the damage they have done to families, communities and the nation’s economy.

I have signed this letter and strongly encourage you to do so. Please visit the site, www.crimeshouldntpay.com to support this effort. Thanks!

Gonzalo here (to borrow a phrase from Yves): I fully support her call, which is why I have signed this letter, and am now passing it along to my readers, so that they might do the same.

Bitching and moaning never ever achieved anything—in a democracy, numbers count. So please sign up—at least go on record that you support sticking it to these bankster fraudsters. 

This is important—and time is short. Thank you. 

GL

A Question for My Kind Fans

Shocking as it is—and it’s a shock to me most of all—but I have fans.

Not just casual readers, but fan fans—diehards.

This message is for them.

Recently, you saw how I wrote about two big subjects over the past few weeks: European sovereign debt, and the whole Wikileaks thing—and I won’t lie to you, it was exhausting. 

Having to bear down and and get a firm grip on this material was a lot like, well, work. It was fun, sure—and it was fascinating to find out such interesting stuff—and to once again be underwhelmed by the slipshod practices of the mainstream media. 

But it was work—and hard work at that. 

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The New McCarthyism, The Real Terrorists—The Case of Wikileaks, Part II

In my previous post, “The Hacker’s Treehouse”, I discussed Wikileaks, its founder and leader Julian Assange, and the latest hubbub they’ve stirred with the State Department cable scandal. 

In this post, I discuss the reaction of the various governments to the Wikileaks revelations, and what these reactions say about our current state of affairs. At the end of the piece, I conclude that we are living in the era of the New McCarthyism. 

The New McCarthyism, The Real Terrorism

Can you identify the terrorist?
Or do they all look the same to you?

What is a terrorist?

Someone who uses violence and intimidation in order to achieve a political goal. 

What is a criminal?

Someone who, whether by action or omission, carries out an offense proscribed by the law, an offense which is therefore punishable by the State. 

It’s important to know what these words mean, because both of them—criminal and terrorist—have been liberally applied to Julian Assange and Wikileaks, since it posted its very first batch of documents.

Now, with the State Department cable leaks, those calls have become a collective roar of condemnation, in America:

“Terrorist!”

“Criminal!”

Of course, Assange is neither a terrorist nor a criminal: He simply published some leaked documents that embarrassed some people. 

He’s not a terrorist, because he did not commit a single act of violence or intimidation, in order to achieve his political goal. 

He’s not a criminal, at least not in the United States, because he has not broken any law in America, and he is not an American citizen, subject to U.S. jurisdiction. 

But you wouldn’t know it, from the uproar over the Wikileaks’ case. 

The examples are too numerous to list—so let’s go to the highlight reel: 

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The Case of Wikileaks, Part I—The Hacker’s Treehouse

This is the first of a two-part examination of Wikileaks. Part II, “The New McCarthyism” will be posted on Thursday morning. 

GL.

It’s only when you poke the beast that you get a sense of its true nature.

The American government, media, and corporate establishment are all in a tizzy over the latest poke from Wikileaks:

The “whistleblowing” site (it really isn’t, but I’ll get to that in a minute) is releasing excerpts from a cache of some 250,000 diplomatic cables and other documents. These cables were sent from various American embassies back to the State Department between 1966 and 2010. The leaks have been dripping out since November 28, revealing a whole host of tawdry but so far trivial tidbits of American diplomatic behavior.

None of the “secrets” revealed by Wikileaks are really secrets: They’re mostly confidential appraisals of the U.S.’s allies and rivals; much of it is gossip, or merely pedestrian—demonstrably so:

Of the 251,287 documents Wikileaks has obtained, 134,000 are outright unclassified; 102,000 are classified “confidential”; and 15,652 are classified as “secret”. Source is linked here, confirmation is linked here.

None of these documents are classified “top secret” or higher—anyone claiming that they are “top secret” or that they “put lives in danger” is at best exaggerating, and at worst lying.

Read more »

Firefox Users Are Having Trouble Seeing My Blog

• Fix below •

√ Problem seems to be fixed, see Update II below.

A housekeeping note: Firefox users are having trouble seeing my blog. 

I do not have control over this—it is apparently a Blogger or Firefox problem. 

I have contacted Blogger. Hopefully it will be repaired shortly. I do not know how to contact Firefox. 

I have also removed left the original cloud background (which is what Firefox users were seeing beneath the text, making blog text well nigh impossible to read), and temporarily replaced it with a smooth cream background. 

To my readers using Firefox, I suggest you use any other browser, as none of the others I have tried (Safari, Explorer, Chrome, Stainless) seem to have this problem.

Please excuse the inconvenience. 

GL

Update I:

The problem seems to be intermittent with Firefox users—some users have trouble, some do not. Considering over a third of my readers use Firefox, this is an issue to me.

To anyone having trouble seeing my blog with Firefox, I would suggest you try out different browsers: You can find downloads for Safari here (I heartily endorse Safari, which I use), Chrome here (which I also recommend), Explorer here, Opera here, and Stainless here (for Mac Snow Leopard only).

GL


Fix for this problem: 

The easiest fix for the Firefox users experiencing this problem is:

Go to the View menu—go to Page Style—select No Style.

Voilà!—a plain white background appears, with the text in black and links in default blue. Not as pretty as the regular format, but functional, and you can read all the text easily—which of course is the whole point.

If you are one of the (few) Firefox users experiencing this problem, I am sorry for the inconvenience. However, it appears to be a Firefox issue, not an issue with my blog (I’ve spent the whole afternoon troubleshooting it, to make sure it's okay).

Hope you enjoy my posts.

GL

Update II — Dec. 20, 2010:

All on its own, the problem seems to have resolved itself. Yeay team!

If the problem recurs, please e-mail me. Thank you.

GL