Hair of the dog----

Here we are in the holiday season of 2008. As we approach New Years Eve the media will be full of advice for those who in care free celebration, or, at least as likely, in an attempt to tame their worries and associated anxiety, over imbibe.

The overhanging problem is that this country has been over imbibing for at least 20 years. Consumption, at all levels, from consumer to corporate to congress have left us in a perpetual, over extended stupor, with an economic hangover that the government is trying to cure quickly. They have tried mutual support, with J.P. Morgan Chase swallowing Bear Stearns, Wells Fargo gulping down Wachovia, Bank of America absorbing Merrill Lynch (we hope). As they pursued that remedy they also tried going cold turkey and abandoned Lehman Brothers. They also effectively absorbed the sinking entities most closely associated with the housing bubble, Fannie Mae and Freddie Mac.In separate efforts they overdosed AIG on aspirin, as in almost unlimited money and are trying to save Citi Group by removing it’s toxic “assets” and transfusing new funds.

But, so far economic equilibrium is not in sight.

Now, a collaborated effort to feed the entire country, the entire population, a hefty dose of the “hair of the dog,” is in process. After New Years Eve, many of those in grouchy agony reach for a spicy Bloody Mary (some throw an egg in it) to re - hydrate, get some nourishment while letting the alcohol dilate their blood vessels and to again reach the mellow painless state of being drunk. The analogy here is that the government is now pleading with banks and lending sources to offer more credit in order to prime the consumer spending pump. Indeed, retailers have pulled out all stops in promoting Black Monday (day after Thanksgiving sales that try to stimulate holiday purchases) urging consumers to take on more instant gratification debt. In other words to get drunk again.

This is going on as virtually anyone with an ounce of sense understands that the mountain of debt layered on this country is virtually beyond comprehension. What they are doing is urging everybody to reach for a Bloody Mary or two, or three.

The banks are resisting this effort. Not that they mind drunk consumers, they love it. But bankers while greedy are not too nervy and they have learned (after this period of gross excess) that the consumer is not up to paying the accumulated bar tab. Hence, many of the people being urged to spend can not get the credit to continue to feed their acquisitive habit.

As the banks and hedge funds are forced to de-leverage to survive, so must the consumer. Some will not get the message and others are too far gone to continue an economic life so why does the government urge the consumer on? The answer is simple the entire economy is over leveraged. Equity in homes or tangible toys such as luxury cars, boats, ATV’s etc., is nil. Unrealistic and unwarranted real estate prices have collapses and equity in homes is either gone, due to values falling, or all ready backing expenditures for the toys that they are still paying for.





Further, prices for food and other basics, even though commodity prices have crashed over the last few months, have still not fallen though manufacturers have all ready cut package sizes and raised prices when they had a need and an excuse to do it.

The concerted effort to get the consumer to spend is, after the other steps mentioned have so far fallen short is a last gasp.

Only with the consumer continuing to spend can we support the economic beast that years of over imbibing created. The dim hope is that is if just enough “hair of the dog” is swallowed we can avoid a very hard landing, an aorta ripping crash.

I am not sanguine.

People do not turn on a dime and with the turmoil that everyone is hearing about, even if not yet directly experiencing and despite the crowds that turned out for Black Friday specials, the need for gratification induced by spending, is giving way to caution or outright fear.

President elect Obama plans a massive job creating stimulus focused on rebuilding the nations infrastructure. It is being compared to Roosevelt’s National Recovery Act that gave millions work , if not rewarding employment. The Great Depression ended as time played out, the economy stabilized and then blazed hot with World War II creating real need and hence prosperity after victory.

Which brings us to today.

While we have far more safety nets than the 1920's and into the1930's, we had simple ways to create work for lots of people. In looking at the workers photographed in the 30's we see hoards of men with shovels. Not too different than when looking at the really old photos of laborers building the trans continental railroads in the mid 1800's. Now when you look at infrastructure workers you see a team of a few “watchers” and machines, big machines, chewing the earth. It will be a challenge to put today’s growing levels of unemployed into productive work much less positive employment.

A mess, and we did it to ourselves. Sure a bunch of clever and or unscrupulous folks made ridiculous amounts of money creating and servicing the demands of the consumers and most of them will get to keep the greater part of their gains, but the nature of human beings means that it will all happen again.

For mankind, too much is never enough. Anybody for a Bloody Mary?

Taking the medicine----

In the 1959 Broadway hit musical “Lil’ Abner”, that was based upon the enduring comic strip by Al Capp, General Bullmoose, in a cynical takeoff on the congressional testimony of Charles Wilson, a former Chairman of General Motors, sang “What’s Good for General Bullmoose is Good For the USA”. Bullmoose, an evil industrialist, tried wine, woman and song to steal Lil Abner’s potion for strength (Steroids?) but the paid fem fatale, Passionata VonClimax, proved unable to separate Lil Abner and Daisy May and Dogpatch fought off the special interests, that were determined to make Dogpatch ground zero for an atomic bomb test.

This week in Washington, the three current chairman of GM, Ford and Chrysler, all of whom are in dire financial shape are aping the late Mr. Wilson by claiming that the bankruptcy of any of the big three automakers will unleash an economic disaster upon the entire country and hence the government must provide an open ended bridge loan until the economic tide turns.

In short, the rubber has hit the road and the now the wheels are about to come off for real. General Motors management has informed our elected officials that the corporation is facing imminent death, as they are hemorrhaging the life blood of all businesses, money.

Congressmen, senators, President Bush and President - elect Obama all agree that the country must maintain a vibrant automobile industry as a foundation of our dwindling industrial base. The industry representatives estimate that counting suppliers, dealers and after market businesses the industry gives employment to some 3 million people and that failure of any of the Big Three will mean losses of massive tax revenue and will be on the hook for huge amounts of unemployment insurance. No one, however, has been really coherent on how the government could help other than by just writing a check. Many disparage the idea of a bridge loan, pointing out that it would be throwing good money after bad by supporting a failed model.

The have a very valid point.

Many economists, lawyers and business people have called for the automotive companies and especially GM to use the existing remedy of bankruptcy to gain time to restructure. Mr. Wagoner, the GM Chairman states that GM is not even considering such a step and that no restructuring plan has been laid out by GM management. He is also taking the position that since he and his colleagues are the ones with experience in running large car companies who else is better suited to handle things after the “loan” is granted.

I was going to go off on a tear and do a blog on prepackaged, debtor in possession, Chapter 11 being a possible solution, but in Tuesday’s New York Times, Andrew Ross Sorkin did the job for me.

(http://www.nytimes.com/2008/11/18/business/economy/18sorkin.html)

First consider the dire predictions of Mr. Wagoner, et.al. If the 3 million job losses are accurate it would mean that the companies would file for Chapter 7 under the bankruptcy laws, meaning the companies would close their doors and a trustee would lead in an “orderly” liquidation. If this were to happen I would agree with the overall tenor of Mr. Wagoner’s predictions as orderly is a subjective word and an immediate liquidation of the Big Three would be chaos.

But as Mr. Sorkin points out Chapter 7 is not called for but rather what is appropriate is Chapter 11 of the code. In Chapter 11, guided by the courts and not the politicians, a company presents a plan for the restructuring of a business into a workable model. Huge powers are given to the judge who hears all the competing claims from creditors, shareholders, employees, suppliers, customers and by far the most important, the demands of the entity willing to put up the new money needed to keep the concern in business. In short, the new money talks and the old BS walks. The new money, steps in front of old debts and effectively “crams down” it’s terms on the other interested parties.

Leases and all contracts can be broken, creditors can be forced to take a haircut on what is owed them and when they will get it. Debts, except for the new money, may all be adjusted for the common good. Everyone feels the pain but hopefully the level of pain is better than the alternative, death of the entity. For the shareholders it is not a pleasant thing. They usually get wiped out or diluted to near zip by the new money.

But can we, the country, take the medicine. The real money will still come from the government but the deal the government demands must be at least as tough as I have outlined . But, that will be tough to accomplish if for no other reason than that the Democrats draw massive support from the unions all of whom will stand with the United Auto Workers (UAW). It is the UAW contracts that are a primary reason why our auto makers can never climb out of the hole that has been dug going back to the 1960's. Congressman Barney Frank, who brought us sub - par Fannie Mae and Freddie Mac, has already opined that Chapter 11 is simply another union busting trick.

If the domestic auto business can be rationalized and restructured for today’s world it will be far reaching but with immediate short painful effects. But it could work. All labor will be repriced and it will force a very real readjustment to fixed assets like homes, etc. All adjustments will be down but will at least stabilize and be more competitive in all fields as time moves on.

But can we take the medicine. No spoonful of sugar will make this medicine palatable.

Economic reality ----

Economic reality is related to gravity and excessive financial engineering has an analogy that I call economic alchemy. Rejecting the power of a dried eyeball of the newt the modern financial alchemists, rather than striving to turn lead to gold, ,turned illusionary financial solidity into leveraged fools gold.

Like all the artists of illusion, be they magicians, or politicians and clergy of all stripes, the financial engineers simply had to build the illusion and let human nature run with it.

When humans recognize a magicians illusion for what it is and while they may still be unable to see how they were tricked, they blithely proclaim that they always knew that the lady in the box was not really being sawed in half.

However, a magical illusion, performed by a professional usually has no lingering negative effect on the deceived. If anything, an entertaining illusion may offer a relatively cheap education, as it demonstrates that just seeing, may not be truly worthy of believing.

However, if the illusion causes war, consider the illusion of the "Thousand Year Reich" that Hitler sold to the German people, or causes economic catastrophe, consider the Great Depression, the price of the education is very, very dear.

History shows that such a painful education does not last for too long, generations die and the public forgets.

And that is where we are now and it is why no form of stimulus or bailout package will avoid us having to pay a very hefty price as illusion gives way to reality.

It does not mean that Secretary of the Treasury, Henry Paulson should not keep trying, shifting and revising the programs and mechanisms hoping to prevent or at least slow a systemic and catastrophic collapse, but for a long time to come our society will not have a level economic environment such as what was enjoyed until our excesses led to a bubble, an illusionary period of perpetual well being, that has indeed burst.

In the 1990's economists and "big thinkers" ridiculed Japan for failing to bite the bullet and bankrupt many banks that were swamped with billions of bad loans, many based upon crazy real estate valuations. Japan muddled through with a decade of stagnation. But the people buckled down and as only the Japanese can they endured. With our government extending virtually unlimited credits to the banks; by permitting at risk financial firms to become banks; by shoring up AIG, the insurance monster that was spawned like a financial horror creature from the black lagoon of greed and by than letting the same institutions now book their "assets" at values far greater than the assets would bring on the open market we are doing virtually the same thing we scorned Japan for.

And good luck to us! If all we end up with is ten years of stagnation we will be getting off cheap.

The real risk is cataclysmic, systemic collapse. The real risk is another Great Depression or worse. Deflation of valuations joined by inflation of currency, as we print dollars, is not a remote possibility.

While we cannot let our industrial base collapse we can no longer fund it’s current structure. If we are to bolster such basic industries as our automobile business it will take a form of bankruptcy and consolidation that forces real change on the industry. To fund more of the same from Detroit will not work in the long run. It will become a habit, a dependancy.

Testifying today before congress, George Soros, who I had the pleasure of working with and observing some thirty years ago opined that a, " deep recession is inevitable and that a depression cannot be ruled out." I remember him as a tough cookie with a remarkable mind. Not always right but very willing to change on a dime as the situation demanded. Conservatives hate him as a Liberal and thus discount what he says. They do so at their peril. First they should examine his long track record of reading economic factors as marked by his amazing long term financial success.

I believe he is right.

Hence, any and every effort, by the government, to hold our fall to that of a recession must be tried. Every remediating effort must be examined and reexamined with a willingness to get egg on our collective faces if a new approach is needed.

This is not a political or philosophical issue, this is a survival issue.

The only President we have -----

During all of President Bush’s tenure in office a major segment of our population, accepting the lead of the Democratic political leadership attempted, with significant success, in turning every issue into a direct attack on, or an opportunity to undermine the stature of the only President we have. In fairness, the Republicans, led by the likes of Tom Delay and Newt Gingrich were less than constructive when dealing with positive initiatives of Bill Clinton during his eight years in office.

While it is certainly clear that political life calls for vigorous opposition and while it is certainly clear that both of the last two sitting presidents earned opposition attacks, the effort to totally demean, even destroy, our designated leader has been distasteful in general and costly to us all, as individuals and as a nation.

Things have gotten worse during the Bush administration, during a time when when our nation has been under threat, a time when a level of proper respect for our country’s carefully built structure cries out for maintenance.

Adopting the theme of Mr. Obama’s campaign, it is time for a change. And yes, I mean that in many ways.

For our nation to survive as a true land of opportunity, one that made Mr. Obama’s improbable ascendency possible, it is mandatory that the basic concepts, the foundational strengths of this experiment in democracy, be maintained. Every way must remain open for any person to achieve "life, liberty and the pursuit of happiness" but those rights, though available to all cannot be guaranteed for all.

The idea that seemed to leak through from Mr. Obama’s philosophy is that rather than making sure that opportunity exists for all he is willing to extract the property and wealth from those that have achieved and to redistribute it to those that have not been able to do so.

While it makes all the sense in the world to insure that all people be equally able and encouraged to achieve, that steps be taken to insure that opportunity be available to all, those that have failed to make their way should not expect reach their goals in life, no matter how modest they may be, by taking away from those who have achieved their own goals, no matter how modest they are.

When Mr. Obama takes the oath of office in January I would hope he proceeds in a way that build on the basic precepts of this republic. I would hope that the extremes of both party’s be overwhelmed by the centrists and that we are able to move forward with a constructive agenda.
This is not a cry to keep taxes low. In fact, taxes must and will go up. It is the use and the method of using the needed tax dollars that will be the critical issue that will speak to the country’s future.

We need not be wed to the Bush tax cuts nor does it mean that we should discourage investment, there is room to maneuver for all. In the meantime the simple problems like Afghanistan, Iraq, the entire Middle East and our periously over extended economic balance sheet must be tended to.

Mr. Obama has a very full plate.

The least we can do is support his efforts and, when we can not, to let him know what we are having trouble with, but in a way that preserves the dignity of his office and as the elected leader of this country.

He too will be the only President we have.

The meat of the matter-------

Finally, the Presidential Campaign is focusing on the meat of the matter. While the platforms of both parties are, in many respects, hopeless blather, in August three economists at Bank of America did a concise, side by side comparison, of central parts of the economic import of the programs proposed by Mr. McCain and Mr. Obama.

http://montclairrepublicancc.org/McCain_and_Obama.pdf

The analysis has been picked up by Republicans and forwarded here, there and everywhere but the crux of the differences has not gained sustained traction with the majority of the public until the last presidential debates. While the analysis document from the BOA economists has been embraced by Republicans, it does not, to me, appear to be biased or political in nature.

It was the now famous "Joe the Plumber" that finally brought the key and overriding issue to the forefront. That issue, as explained by Mr. Obama to Joe, was, that through his tax plans, " he intended to spread the wealth around." While Senator McCain raised it numerous times in the debate he still has not been pointedly coherent in framing the issue and in countering the Obama camps claims that the McCain approach is, in the long run, the same thing.

However, the BOA analysis points out that Mr. Obama intends to increase taxes upon high wage earners (those reporting net income, after deductions, of over $250,000 a year). In addition, while his plans call for spending bundles of money on many new programs he also intends to drop many millions of low income people from the tax rolls (in addition to the existing millions not paying income taxes today) and then provide additional tax dollars to them by actually giving them a credit as in sending them a government check. The government is already doing this and Mr. Obama wants to vastly expand this misguided, corrosive, free ride.

So, while he claims that he will not raise the taxes of the "middle class" by one penny he is most definitely intending to take more tax money from the middle class to further turn the poor into a dependent class. It amounts to perpetual and thus perpetuating, welfare. A subsidized existence, a public dole, that sucks any form of positive societal contribution out of the recipients. No matter what uplifting name the politicians give these programs, they are destructive and actually poison a healthy society.

The entire concept of any citizen being excused from paying taxes is grating. None of us like paying taxes but most understand it is necessary. Indeed, if being an American is a privilege, and I think it is, we must understand that the wonder of this country has a cost and some of the cost, only some, can be paid for with money, tax money.

Are there inequities in our society? You bet! In recent advertisements in the New York Times they are listing a new duplex in Greenwich Village for some $21 million, marked down from over $23 million. Looking at something like that and the pay scales of many senior executives or investment bankers compared to the wages of many hardworking contributing members of society and the word inequity is mild.

Gobs of money taken from those overly compensated folks as well as the middle class, to be used as a way to blast and propel contributing people out of poverty, is a worthy endeavor. However, paying off the poor is counter productive in trying to reduce the problem and infuriating to an honest taxpayer.

Can intentions and plenty of tax dollars, like the tide, lift all boats---no chance. Some boats leak, some have holes in the hull. Poverty has always been with us and always will be but one would think that we can do better in pushing it back. A government give away, that inbreeds ever greater dependency does not lift souls much less leaky boats. Such an effort is not the answer, it will actually make things worse as it plays to some of the worst aspects of human nature.

Mr. Obama would not agree with me. Thus I have real problem with Mr. Obama as this is the central theme of his campaign and may very well be the defining basis of his very being. Mr. McCain and many of his core supporters, who have chosen to calling themselves conservatives, have simply labeled it socialism, considering that pejorative at least one step worse than being a plain liberal.

Mr. Obama, ever cool, with a nod of knowing explains that Mr. McCain just does not get it. Some truth to that, but neither does he.

If he is elected and I think he will be, every effort must be made to point his intelligent consideration to the fact that in trying to save this country from itself his current plans will likely ensure a historic slide.

Looking forward--------

I was born in 1936, in the middle of the Great Depression. Needless to say I remember nothing about those days in a macro sense, but quite a few things at the micro level that effected my family, until well after the depression was over.


My father, who was an orphan, managed, with the great assistance of an older brother, to graduate college and law school. However, in that economy, the choices for young lawyers without the right connections, who were also highly idealistic, was not good. Before I was born as unemployment reached over 20%, my father quit the law, took the test to become a teacher. He then worked worked until just a few years before his death as an educator for the New York City Board of Education. While teachers today are still not overly well compensated back then they were in far worse shape. At the same time he worked other jobs, tutoring children, running night schools, summer camps and during the war, also in the summer, as an electrician in a shipyard racing to turn out cargo ships to haul sustenance and the tools of war to the troops in Europe.
As I remember it we never had any money and were not even able to finish a month without the check book and wallet being completely empty. A revolving loan of five dollars, from my grandmother, until the 1950's, carried us through. We owned some furniture (some of it still in use), always rented and frequently moved, to take advantage of the free months rent each land lord would give to attract new tenants. We had no debt and no stocks and not until 1948, when we almost went off the Bear Mountain bridge in our 1934 Pontiac, with the leaky fabric roof and no heater, did we get a "modern" Chevy, which was a pre war design.


I do not remember feeling behind the curve until late in high school when I saw my friends families prospering, while my father, who by personality and life experience, remained very risk adverse, staying well protected in the civil service system.


That is what I see looking back and unfortunately what I see, and worse, for many, as I look forward.


The financial crisis we are in today is not just a low level economic dip that anyone my age has experienced from the 1970's through the Dot. Com bust of the early 2000's. This is the real McCoy and it will take years for the effects of the recent and continuing collapse for the economy to restore itself to a comfortable growth rate. To date, in most local economies the pain is primarily affecting real estate values. But the spill over into everyday life will follow and hang on with a vengeance.


The popular belief of certain politicians, that Wall Street is not connected to Main Street is total eye wash and the concept that what has happened is the fault of greed confined to Wall Street is worse than self serving.


The ones who ran and prospered unnaturally on the greater Wall Street were a creation demanded by the satisfaction of the wants and hence needs, of those living on Maine Street. The ability to effectively regulate and control both sides of that equation has always evaded man and the governments they create.


Even when governments try, the ingenuity of man soon finds a way around the pesky regulations to serve the needs of hard wired human materialism and personal greed.
It is also safe to say that the economy and lifestyle that enfolds us as we recover will not look like what we have seen over the past 50 years. In addition this country will not have the same international position and clout that we earned and have enjoyed since world War II. For my children and my grandchildren it will be a totally different reality with many unpleasant experiences for them that they will, at the least, learn from.


Fresh leadership will come to the table. We will, in my view, be watching Barack Obama take the oath of office in January. I see no way for a majority of the people to elect a candidate tied to the party in power, no matter how loosely, as the country becomes immersed in a debacle such as the one we now face. Unfortunately, Mr. Obama, bright and articulate as he is, is not equipped by experience to assume such a position and his underlying philosophy, no matter how he tries to play it down, runs far from the basic foundations that have contributed mightily to the successful American experience .


In fairness, I also feel less than enthusiastic about Senator McCain primarily because of his age and his choice of a running mate who could well be less than a full heartbeat from the presidency. As for the fringe candidates, I cringe.


So, if Mr. Obama is elected I will offer my full support and all my energy, in my less than meager way, to urge him and his administration to face reality, to forego their airy dreams and bring us back to equilibrium without killing the advantages of the American economy and reasonable free market activities that cannot be stopped in any event.


If he follows the lead of ranking legislators in his party who, along with a good many Republicans, turned Fannie Mae and Freddie Mac into the absurd behemoths they became, in a misguided effort to provide home ownership to those who could not afford homes, we will be in worse shape.


If he tries to effectively redistribute the wealth of America to those who have not, for any number of reasons, earned it, his cure will poison our economic well for far longer than a decade. His plans to remove more low wage earners from the tax rolls magnifies his philosophic beliefs and is totally inappropriate. While there can be much debate as to what a fair, graduated tax should be the concept that some can avoid even token payments for the right and good fortune of being an American is wrong.


One should look forward with enthusiasm, this country always has. It is difficult for me to do so at this time.

What can we do??

As the markets contract, as money, the blood of commercial life, clots and no longer flows one wonders what one can do.

I have resorted to faxing (email and phone did not go through) the single congressman in the great State of Maine who voted against the Treasury plan in the first time around. The value of the proposed plan is all ready severely depreciated in value as the elected leaders stumble around, failing to understand what their meandering and posturing will surely cause.

To gain a perspective from an informed fellow all should consider spending an hours time watching a recent interview of Warren Buffett at:

www.charlierose.com/shows/2007/05/10/1/an-exclusive-conversation-with-warren-buffett - 66k

-----------and it is not a bailout

The week plus that was, after my last post, has offered lots of reinforcement for my stated angst. It was not so much the behavior of the markets, which was as anticipated, but the exposure to moronic utterances of those elected officials who we have entrusted with our well being.

Utterances by Mr. Obama and Mr. McCain were no better.

Obama made the case that the economy was the Bush economy and that McCain would be four more years of Bush. First, the mortgage, housing market mess goes back to at least early in the Clinton administration and perhaps well before that. As earlier mentioned, Fannie Mae and Freddie Mac were put in place to provide ease for those seeking to buy a house to gain financing. The intent went so far that it threw out sound credit scoring and encouragedthose with little to no hope of keeping up with payments to overbid and to still gain a mortgage. It was not just the low income folks who took advantage of the easy money. It drove the entire housing market with everyone willing to go far out on a limb to move up and keep up or ahead of the Jones’. The inflated prices that the excess credit fueled led to home equity loans on houses with inflated values that fueled still further consumer spending that was then again parlayed with growing credit card debt.


And now the party is over.


As a society and as a nation we have spent far more than we can afford and the way out of the mess, so called bailout or not will be long and painful. All we can hope for now is that it will not be a cataclysmic correction.


Henry Paulson, the Secretary of the Treasury and Ben Bernanke the Chairman of the Federal Reserve Bank have put their health and well being on the line as they struggle seven days a week and in the night time too, as they try to forge a mechanism that will hold the Apocalypse back.


Their recommended program, for the government to take the banks bad debts off their balance sheet , at a fire sale price, makes sense as we face desperation. It may not work but it is the best shot we have. The debt, taken in to the Treasuryat a major markdown from face value. All ofthe paper in question is not totally bad and the government should be able to recoup it’s investment and perhaps more, over the coming years.


It is by no means a bailout. Rather it is an attempt to use the remaining credibility of the United States of America to take one grand additional massive mortgage on the country's future. Senators, in pompous pose and Congressman awash in ignorance have berated and pilloried Paulson and Bernanke in public hearings, shaming themselves and those who voted them into power.


As some have bemoaned the load being put on the taxpayer Paulson has correctly stated that the load is all ready on the taxpayer and that to do nothing will bury the taxpayer. He is right.

Certainly clever greedy types have made a fortune catering to the wants and wishes of the not so clever but greedy citizens. The root cause is the over extension, by the public, and the willingness of the politicians to help the public, their constituents, to do just realize dreams that they cannot afford.


Now, tonight, Obama and McCain will have their first debate. I am not optimistic that much light will be shed on this key subject.


For McCain it is a critical juncture as his running mate Sarah Palin has, in her exposure to interviews by Katie Couric of CBS, failed badly. And his rush to Washington to help out in ending the congressional side show on the credit package came off as posturing with no position.

Food for analysis - Georgia

While it is impossible to authenticate articles like this they all provide perspective and assist in reaching or supporting ones opinions. This Reuters piece makes sense though I am sure it has a hefty level of self interest added by the source.

http://www.reuters.com/article/wtMostRead/idUSLD12378020080914

Column from January, 2008 - Monday will be a bad day!!

Column of mine published in January 2008.

RUN FOR YOUR MONEY ---- WHERE?

The other day an old friend called. We had been in the Navy together and continue to share a jaundiced view of the powers that be. He asked me how safe he should feel with all his money, hopefully enough to get him out of this life - dead, resting in a variety of accounts at Merrill Lynch, the humongous investment and brokerage house. I snorted, not in derision but because I was in the same boat, along with all the rest of us, unless you are sleeping on a mattress of gold bars.

All of us, rich, comfortable, stretched or poor are caught in a pickle. Our financial underpinnings are less than what we assumed they were, less than what we have taken for granted, at least going back to 1933. Since 1933 there has not been a vision of a financial abyss such is now hovering on the horizon.

In March of 1933, a different time in every way, except for greed and other unpleasant hard wired human traits, President Roosevelt shut the nations banks for a four day "holiday," in order to calm the population and slow the drainage of cash and gold that people wanted back under their mattresses. The government was able to shore up the financial system, ease the panic and put in place the Federal Deposit Insurance Corporation (FDIC), that insures, by the government, bank deposits, in member banks, for up to a total of $2,500 in 1934 and $100,000 today with an additional $250,000 coverage on Individual Retirement accounts (IRA). A lot of money in those days and still a big deal today.

Over the past several months Merrill Lynch, Citigroup, Bank of America and innumerable investment houses, mutual funds and even the sacrosanct treasury of the great state of Maine have literally had the hubristic stuffing plucked out of their over inflated mattresses. Racing for fat returns they all drank their own bath water either packaging for resale, buying, or both, rafts of mortgage obligations, from "sub prime" borrowers. Many who had little hope of ever paying them off.

Insurance funds that were supposed to cover the failures are proving insufficient to cover the mess and as these rock solid piggy banks have had to show their losses they have been scrambling all over the world to raise capital by selling steeply discounted stock to deep pockets. The majority of the new investors are sovereign funds of various countries who are floating on trillions of petro and lead toy generated dollars. In short the dollars that we profligate citizens have shipped overseas are now coming back to buy our banking assets that rest on collapsing pillars of probity.

Needless to say the dollar also has tumbled in value. To the extent if your retirement money is in Treasury Bills, the assumed safest of the safe, though you will get your money back with interest it will be worth substantially less than when you put it in safekeeping. Maybe way less.

So what to do?

Run to the bank and yell give me my money? Forget it, they cannot print the stuff fast enough. Look to a stimulus package? How funny, in other words send more depreciated dollars to the citizens and urge them to blow it at the mall all in the hope of holding off an inevitable shattering correction.

Am I an alarmist? To a degree, probably, but face it we have been living way beyond our means. Stories in the Wall Street Journal, the New York Times and the Economist point out that the country has taken bigger hits in the past and that we are a $ 13 trillion economy. So what does it matter if we take a mere $700 billion hit on the mortgage trash.

But, but, but — if this mess spreads to all other parts of the debt economy, credit cards, home equity, retail sales, etc., as I am convinced it will, we could end up realizing that we are all living on the San Andreas fault of a shaky global economy.

What did this? The nasty greedy corporations? Please, we all did it. We want, and our politicians, of all stripes, want us to be happy so they feed our wants. Meanwhile we cannot even fill the infrastructure jobs that the 12 million illegal immigrants fill. Not because we can’t, but because we view such employment with disdain. Who wants to work as a busboy when they can sit at the table? Who wants to have their kids educated until they are stuffed with knowledge on physics and engineering and math when it is a free ride and easier to take a bogus course in "lifeology."

The piper will be paid.

Our future-------

This week we learned that President Bush has authorized cross border attacks, by ground forces in Afghanistan, on Pakistani tribal retreats from where the Taliban launches attacks on NATO forces in Afghanistan. The Pakistani government has wailed over our ignoring their sovereignty but unless those enclaves are thrashed our hopes of eliminating this terrorist base their infrastructure could take over Pakistan along with it’s nuclear weapons and know how.


Meanwhile, Russia, with foreign investors bailing out, has pulled back from forward checkpoints in Georgia, one of it’s breakaway republics. This, even after Vice President Cheney, as Bush emissary, pledged $ 1 billion of our money to rebuild that befuddled country, after it was appropriately thrashed and trashed by Russian forces, who were responding to Georgia’s full scale attack on it’s own breakaway province of South Ossetia.


On a muggy, overcast day in Maine I am reviewing video clips on the web of the scenes in Galveston and Houston that have also been thrashed by Hurricane Ike while also following the news reports of top level meetings aimed to still the economic hurricane that is thrashing our financial and banking system.


Finally, I have watched with interest and no small dismay the ABC interviews of Governor Sarah Palin, the Republican candidate for Vice President, by Charles Gibson, that networks lead talking head. I was and am dismayed.


Dismayed by Gibson’s prosecutorial and churlish tone and Ms. Palin’s obvious lack of background. Having once been in such a situation I regret the need for her or anyone to be placed in a position subject to a talking heads interrogation that are then distorted by the network edits.


Needless to say she could have avoided such treatment simply by refusing Senator McCain’s offer to join his ticket. After she accepted the interview entertainment, instead of the Republican minders trying to cram everything that there is to know about everything into her head over a week they should have trained her to answer fire with fire.


No one, including Bill or Hillary Clinton, Barack Obama or John McCain can or should be expected to give a discourse, in detail, in under twenty seconds a question, on any of the key points challenging our country and the world. No one can provide clear steps to just address the few points I have listed at the intro to this blog, let alone provide a running, real time analysis of how to cure the worlds ills and uncertainty.


Ms. Palin however, did not chose to do that and her vulnerability came through. Her understanding of what the Bush doctrine was, or is, demonstrated lack of depth. Her statements about stem cell research demonstrated that she really had no idea what stem cell research is.


Her stated beliefs that she and McCain can make a dent in our entitlement mess by bringing efficiencies to government agencies is a hopeless concept.


But why do I focus on her a mear potential vice president? She is absolutely correct that others who have come to that office never had met a head of state before and yes, I do not think that such an accomplishment is a qualification for anyone. However, I am two months older than John McCain and if, like the old cliche, she is one heartbeat away from being president, I am dismayed. Her lack of background and core beliefs that are based on a depth of religious surety, that we have seen having great effect on the reasoning of George Bush, magnifies my concerns.
Meanwhile Obama squirms and Biden is lost and alone, somewhere out in America. Obama all ready has given answers to all of the questions that someone like Charles Gibson will ask (Gibson and Stephonopolous once probed Obama about a flag pin in his lapel.) and it will sound like beautiful music. But, if he actually tries even half of what he may at any given time espouse (it changes) he will not be leading a nationwide sing along.


So, our future is cluttered. Problems are building, problems are escalating and there is no leeway for frivolous as usual.


Our future is grim!

Capitalism, free enterprise and common sense

In a Republican administration that prides itself on global and market economies, the government has, in the last two years, stepped in to tweak the system. It has taken control of the side flippers on the pinball machine of economic well being and is trying to prevent a world wide economic tilt and I wish them well.


At the same time I think the whole mess deserves serious thought by the general public. Unfortunately this is wishful thinking.


Our economy, which the Democrats try to lay at the feet of the Bush administration, belongs to all. Until recently Bush and his administration have done virtually nothing to improve our steadily deteriorating economic foundation and it can be convincingly argued that he has hastened the erosion. However, in the end, it is the general tone and expectations of our population, egged on by politicians and fools of both parties, who, for over 60 years has generated the conditions that we now find ourselves in.


The Great Depression of the 1930's "cured" by the demands and sacrifices, in blood and treasure, of World War II, provided a pent up demand that propelled this country forward into the 1960's. As the natural momentum slowed the Republicans amplified their preaching of free enterprise and the Democrats, supposedly echoing Franklin D. Roosevelt, urged programs that would "take care of the little guy." But, in the era of the great depression that was not only what Roosevelt was trying to do. Roosevelt was desperately trying to right the economic foundations of this country, a foundation built on excesses, that had crumbled.


It is interesting to find that it is now a Republican administration that is attempting to do the same thing and using tools that were first developed in the Roosevelt administration. I do not believe that Bush is leading this effort. In fact, I have not read or heard him say anything that indicates that he even recognizes or comprehends the fundamentals of what has transpired and what the possible ramifications are.


For perhaps different reasons neither of the two candidates for president or their running mates have given any indication that they are intellectually invested in the dilemma other than to toss blame.

Out on a limb, indeed very far out on a limb, is Secretary of the Treasury Henry Paulson. Paulson, who came to government after running Goldman Sachs, the free market, capitalistic giant of Wall Street, is wielding a large club and banging around the vested interests of this era’s financial excesses. He is, using long standing powers, that are vested in his position, as well as new powers recently voted by congress, to take steps that are unprecedented since Roosevelt declared a four day bank "holiday" in 1933.


First, a year ago, he took great liberty with his powers and forced the teetering Bear, Stearns, a Wall Street firm that was a perfect model of a traders and, bare knuckled , risk takers. A firm that believed "the market price, is the market price" showing no mercy, to those on the other side of a bad bet, and forced them to eat their own cake. He forced them to sell themselves to J. P. Morgan, Chase at a pittance. He did this as Bear had made tremendous bets on the mortgage market "securities" that, as the housing bubble burst, were anything but secure.


Helping the housing boom, supported by Democrats and Republicans alike, was the creation of two companies, whose roots are historically tied to the Roosevelt era, that came to be called Fannie Mae and Freddy Mac. They were odd hybrids. Each was chartered as private, publicly traded corporations and were labeled Government Sponsored Entities. Their charter was for them to buy mortgages placed by banks, combine them into other forms of securities and sell those securities to all comers. Thus, they continuously replenished the originating banks capital creating a rolling snowball of revolving money with everyone involved taking fees. The Democrats looked at these GSE’s as a way to promote home ownership for the lower end of the middle class and the Republicans looked at them as engines of infinite liquidity and profit for all. The buyers of the securities issued by the GSE’s, banks, foreign and domestic, foreign government sovereign funds, etc. considered the investments to be implicitly backed by the United States government but nowhere did the securities that the Fannie’s issued state that they had the "full faith and backing" of our government. Still, the Fannie’s sold, or guaranteed, in the neighborhood of at least $ 5 trillion of paper.


Alas, some of the ultimate mortgages that backed the Fannie’s paper, in total fully one half of all mortgages in place in this country, started to sink rapidly in value as those who had been urged to buy homes, that they really could not afford, with mortgages that should never have been written, fell into foreclosure. All of a sudden the buyers of Fannie paper, the banks of Europe, China, Russia, etc. got very nervous. Paulson, fully realizing that a collapse of the Fannie’s could lead to a worldwide financial freeze up, not so different to the Great Depression, took government control of the Fannie’s using a conservatorship. Call it a gentle form of bankruptcy without using the word.


Economists have estimated that in the end this debacle may cost us taxpayers some $100 billion to cover the rotten paper. If it works, it will be cheap.


What we must think about is what will happen if it does not work. And on the brighter side, what can we do to stop it from happening again.

Speak loudly and forget the stick ------------

The following link of an in depth commentary by Robert Kagan, from the August 30 - 31, 2008, Wall Street Journal is very informative whether one agrees with all of it or none or if you sit somewhere in between. Kagan is very well informed and presents concisely.

(http://s.wsj.net/article/SB122005366593885103.html)

It is especially appropriate with Vice President Cheney traveling in the Caucasus and to the various "stans." In Georgia he is announcing a $1 billion dollar contribution for rebuilding after it was thrashed by Russia for attacking and entering the breakaway South Ossetia region.
I will dig into this further at a later date but I do suggest that the graphed data in the article is compelling

Democrats and Republicans and bi - partisan blunders

In 1952, at 16 years of age, while working on a small farm in the Borscht Belt of upstate New York, I joined the farmer and his family in front of their TV set, watching large portions of both the Democratic and Republican presidential nominating conventions. It was televisions first full time and elaborate convention coverage and the last time that multiple ballots were needed to select the nominee. Unlike today, going in there was no ruling primary system and hence no "presumptive nominee." The outcome of neither convention was locked in before they started.

In between haying, weeding strawberries and hilling potatoes we watched the contentious drama for hours. It was exciting and boring but it was estimated, both before and afterwards (by Popular Mechanics, the networks and Scientific American) that some 75 million Americans, watching on 16 million TV sets, would overcome the boredom and watch. It was further estimated that folks spent a total of 10 hours a piece watching the conventions.


This year I have watched none of the Democratic Convention, that attracted 40 million viewers for Senator Obama’s coronation speech, live, though I have watched a good number of the featured speakers on MSNBC video clips. After watching the speeches, using You Tube, I flashed back to other times checking out the campaigns of Hubert Humphrey, Adlai Stevenson, Harry Truman, John Kennedy, LBJ, Richard Nixon, Ronald Reagan, etc.. I compared their "performances" to the eloquence to Barack Obama’s and shuddered.


Mr. Obama, who had been selling "change you can believe in,"segued at the convention to "change we need," far outclassed his predecessors in his presentation of what he has stated he will deliver to the people of this country. However, other than allowing for the drift of events over time, he was very much in synch with the empty rhetoric of the past. So why did I shudder? Simply because the change he was selling has always been and will always be a mythical dream and he has sold the pig in a poke better and created more believers assured to be disappointed and who will look for somebody othr than temselves to blame.


There is no heaven on earth. Instead there is cold reality based upon human nature shaped and shifted by time. A realistic approach acknowledging the limits of what government can and cannot do is required for our nation to survive in a form that hews to it’s basic principles. Having the ability to convince millions of people that there is a way to willfully change the cards that have been dealt, by time and events, in search of the myth, leads to actions and legislation by the leaders that not only will fail to work but that always lead to unintended consequences that can be worse than the unrealistic intended gain. Just look at how the push to make purchasing a home available to those who simply could not afford it has devastated our financial systems over the last year.


Can this nation be better governed – no question, always. But we should not be embarking on a quest for the impossible, an expensive quest when we are all ready well overdrawn at the bank. Lowering taxes on the middle class and attempting to recoup the money from the rich is rhetoric. Adjusting taxes in a more equitable manner, what ever that is, always makes sense.


But nothing is as infuriating as knowing that ones earnings are being taken in taxes to pay for programs and costs for others, who are unable or unwilling to work at the same level of physical or mental stress that the over achievers accept.


Certainly we must realize that those who are unable to reach a bare minimum subsistence must be allowed for. However, public programs that are ostensibly inclined to propel those not inclined or equipped to share the full load, always tend to attract those looking for a way to thrive at no cost to themselves. Every system designed by man to ostensibly level the playing field based upon the idea that all will work shoulder to shoulder and equally carry the load has failed. Not because of those who simply were not up to it but always because of those who chose to get by doing the least.


Without bothering to compare the philosophy of the Soviet collectives, simply looking at the Israeli kibbutz and the 1970's communes of America, are example enough. These supposedly utopian arrangements, where all would pull together for the common good and equal return did not work as intended because people are people.


To me the Democratic rhetoric, as exquisitely presented by Mr. Obama, is really a dream for the entire body of the United States to be shaped into a mythical commune. Certainly many things in the public sector need attention. Our healthcare system and costs are overwhelming. Medicare works very well for the elderly, but that system, extended to the entire nation is beyond our means. Whether run by the government or the private markets delivering medical care for all, young and old, will be unsustainable if we continue the present form that seeks eternal life, for all, as a right.


Another army of teachers will not improve reading scores as much as "no child left behind" has. The desired end point is more closely tied to the family and individual motivation. Unfortunately how to deliver that elusive motivation is beyond governments capability and any government that thinks they can legislate that critical component leads it’s people down a yellow brick road.


After Mr. Obama’s performance I was very anxious to see Mr. McCain’s VP choice set for Friday. When it was announced I dug into the net to find out what was available concerning the background and experience of the Governor of Alaska, Sarah Palin.


After reviewing the information I was aghast. With subsequent announcements the selection has proved closer to a soap opera then reality TV. A last minute, inadequately vetted candidate, who , no matter how well intended she is not in anyway qualified to serve as Vice President behind a 72 year old president.


So I continue to shudder. Both of the candidates leave me uneasy. Mr. Obama, unqualified except for raw intellect and great communication skills is promising what cannot be delivered and Mr. McCain making a very poor choice for his VP throwing into question his skills in deliberative and careful decision making. A capability that we desperately need in the White House.

"Know when to hold them"

In the old Kenny Rodgers song he sang about the gambler who cautioned that, "you got to know when to hold them and know when to fold them," sound advice.

If you look at life in a grand perspective, we make bets all the time. We bet on our futures when we chose whether to get an education, what sort of sports to play, choosing our diet, marrying for money or looks, etc. Most of us do not look at these natural choices as a bet but in the long run they can be seen to be just that. How boring it would be if we all were trained, or programmed by genes, to weigh every action in life to pick the best odds for each decision. It is also impossible because, as we all know, the set of facts for yesterday may be radically different today. Today’s bet may be a sure shot by next week, as the world turns, or it could cloud future actions going forward.

While it would be boring to rule our individual lives by statistical likelihood and seasoned logic, not so for international affairs. Too many administrations have made bets that effect all of the American people and because of our country’s dominant position, millions of others in the world. Early isolationism let Hitler inflict world wide horror and pain on millions. His intentions were known, his mass murders were apparent long before the spine of the "free" world stiffened. Churchill’s foresight and determination to avoid what was coming, his ability to convince and gain support of Roosevelt was all part of a calculated, hard decision, a big bet, that won the jackpot of relative world peace since 1945.

Today, I am concerned that recent bets by individuals, corporations, world leaders and especially those that are ideologically driven, has stacked the deck against a continuance of our always fragile peaceful existence.

The situation with Russia and Georgia, in the Caucasus is a prime example of laying down a bet that seemed a no - brainer and unfortunately turned out to truly be a no - brainer on the stupid side. Thomas Friedman, multiple Pulitzer Prize winning author and op - ed columnist for the New York Times discussed the expansion of NATO into what Russia calls the "near abroad", (meaning "in my back yard" ). I find Friedman world class when he sticks to the Middle east and international affairs and an unrealistic gadfly when he preaches on environmental issues. However, on the expansion of NATO and the encroachment on traditional Russian spheres of influence he pegged the Clint administration and the Bush administration for leading us down a risky, no win, path for 16 years.

Friedman, to his credit, does take chances by going on record early. He has written extensively on Lebanon and the on going turmoil surrounding Israel and the entire Middle East. A strong, traditional voice for people to get along he also displays his biases as when he supported the Bush reasoning on Iraq , hung in there as things went askew and then tried to slip a fair share of accountability on the subject as things soured.


However, now when it comes to Georgia and the poorly evaluated decision to have NATO creep up on Russia he is sticking to his early analysis that warned against the strategy. Good for him.
In hindsight one can see how the initial Clinton "bet" was wrong. But it seemed so logical. The USSR was dead, new Russia was on it’s knees, what could seem simpler then urging the non core Russian appendages to declare their independence and for us to jump in and to push western enterprises to lock up the gas oil and other plentiful natural resources while we looked for military bases giving us a leg up if the USSR tried to rebuild itself. To the East all the "stans" broke loose, though none has taken on the glow of Democracy predicted for them. Autocrats and sons of autocrats still hold power and use it to maintain strict internal control. In the West we jumped to have all the Baltic states, all of whom were not unhappy with Hitler, to peel out and they are now in NATO. Russia who had loaded up those countries with Russians during the Cold War, seethed. In the Balkans we were happy to see Yugoslavia explode into it’s previous ungovernable pieces. We used NATO to stop the ethnic cleansing, genetically wired into the citizens of that area as well as the Caucasus and then supported a sanitized ethnic cleansing letting the Albanian majority in Kosovo kill or chase out the significant number of Serbs who called it home.

Again and still, Russia seethed.

Now, our administration and NATO has reacted with alarm after their pet model Georgia, a fractured democracy at best aroused the Russian bear who effectively and swiftly made jam out of the Georgian peach. Now, Russia has announced it recognizes the independence of the two breakaway Georgian provinces, South Ossetia and Abkhazia that were not historically part of Georgia. The US and the European Union or at least NATO is mouthing off.
We dealt ourselves a bad hand.

It was an ill considered bet. It is time to "fold" and to try and cuddle up to the bear with dignity.

Who will he ask to the prom?

Senator Obama’s staff was quick to bridle at Senator McCain’s playful ad, the one with shots of vacuous celebrities Britney Spears and Paris Hilton, an ad that asked if Mr. Obama was a celebrity or somebody ready to lead.The Obama crew claimed it was adolescent high school humor. In a sense it was but it was worth a chuckle and made a valid point.

However, the Obama complaint proves shallow undermined by the high school intrigue and gossip game of, "who will Mr. Obama pick for his VP?" Can he nominate a woman if it is not Hillary? Will the team like each other and "accentuate the positive and eliminate the negative." (Thank you, Johnny Mercer.)

This is a very serious question. But the question should be not who he wants to date, but why. Will his VP be expected to do a take off from Vice President Cheney’s role as deputy president or will it be someone who fly’s hither and yon to funerals and coronations?

We will all quickly ask that question.

And who will Mr. McCain chose? I would like him to show a different level of maturity and name his VP seconds after Obama name his true flame. If it is a good pick. Tim Pawlenty -- who?????
VP’s or failed VP candidates of the not so distant past are usually not even remembered. Some we try to forget. Many of them came from nowhere and quickly go back to where they came from.

Does any one remember Barry Goldwater’s choice in 1964, an obscure upstate New York congressman that nobody heard of before he was nominated or after. A solid citizen, William Miller, the failed candidate, was one of the the first face "celebrities" used by the American Express card ad that asked, "Do you know me?"

Nobody did even after he ran.

So Saturday will be the big day for Obamanics. A real life edition of "Survivor" with probably just as much lasting meaning.

A must read

Just a quick post to pass along an op - ed piece by former President Gorbachev who effectively put finished on the old USSR. His points are telling and in agreement with my views. I feel very strange, almost disjointed finding myself seeing things the way he does.

(http://www.nytimes.com/2008/08/20/opinion/20gorbachev.html?hp)

Am I missing something --------

As the Georgian fiasco unfolded factual on the ground reporting was hard to come by. Snippets of "facts" were everywhere. It did become clear that Georgia attacked and entered South Ossetia, in strength, on August 7. It also became clear that Russia’s prompt response, with overwhelming strength, had been planned for. Large forces of armor and personnel need massive amounts of fuel and support and the column that swept through South Ossetia and into Georgia was no ad hoc security force, brought quickly together. The Russian Black Sea fleet had steam up and was ready to go.

President Bush, showing alarm garnished with embarrassment and anger, set the tone for England, France and Germany to wail and the media said little to bring balance to the picture. After all, Democrat or Republican, who was going to offer justification much less rational understanding that could be taken as justification, for the marauding Russian bear.

Extensive video coverage, a virtually unlimited forum, for the distraught Georgian President to present his case, worked against him as each time he slid further into a the quicksand of sloppy lies.

As I scanned newspaper accounts of what had and was happening I noted that many, here and abroad, that were printing "news" as well as commentary , were showing a time line of events. Many commenced the time line on August 8, stating that this was when the Russians invaded Georgia.

August 7 and the events leading up to it were initially ignored.

Finally, on August 18, The New York Times printed an article (link below)

(http://(http//www.nytimes.com/2008/08/18/washington/18diplo.html?em)

that provides a broader perspective and it is very helpful though it does not go far enough in reviewing the history of the Caucasus in general and Georgia and South Ossetia in specific. I find it interesting to consider that Georgia has been part of Russia, or what ever it was called, for longer than where I live, Maine, has been a state in this country.

In the article, describing how President Bush and Vice President Cheney embraced the President Saaskashvilli and today’s independent Republic of Georgia, that they promoted and even created, you have to wonder about the hubris and blind spots of both of them. What had they seen and what were they seeing. In a column of mine published in 2000 I touched on how I always watched the eyes. An excerpt follows:

"ALWAYS WATCH THE EYES
In my career I have had to walk into a room to negotiate this or that and the people on the other side of the table were frequently not known to me before the meeting. While one looks for all sorts of clues to learn about the adversary from clothing, haircut, size, build etc. the key to me has always been the eyes. Sooner or later the eyes do not lie. Body language is complex and revealing but sooner or later the eyes provide the key to break the performance code. Now, some people are awfully good actors and some can really control all of the extraneous little signals but as the husk is discarded the nut of the problem is usually revealed in the eyes.
So, if TV is of limited value for lots of things I find that it provides scads of information when you get to look at the national and political figures strut their stuff. To me Secretary of State Madeline Albright has the flat eyed stare of a stone cold assassin and Acting President of Russia, Vladimir Putin has a look of reptilian coolness. President Clinton has the eyes of a consummate deceiver. His problem is that we have all seen him flick them into different modes and what we know is that he is simply a person with no center. You want tough he flashes tough ("Now I want you to listen to me. I did not--") you want sincere he gives you sincere, you want fawning, just look at the old picture, when as a teenager when he came to Washington and shook hands with President Kennedy."

If our leaders had really watched the eyes of Mr.Saaskashvilli before the fiasco they would have seen a scheming and fawning neophyte. Had they watched him at his numerous post invasion news conferences they clearly should have thought things through before rushing to give Georgia unconditional support.

As it is, what the U.S and NATO are threatening to do to Russia so that, as Vice President Cheney states, "their action can not go unanswered," is a joke. The threat to bar Russia from the G- 7 and G - 8, the large country fraternities, is nuts. In the 1990's, Russia was basically bankrupt and close to anarchy and thus badly in need of credibility. They wanted and needed international acceptance and recognition. Those days are well behind them. Locking the big dog out of the kennel makes one wonder just who is locked up. Borrowing a line from the movie "Animal House," putting the Russia of today on "double secret probation" is just too funny.
It is equally absurd for our government and untold number of pundits to declare that "spheres of influence," are a thing of the past. After all, NATO is just one example of a western sphere of influence. It is the way this whole mess started.

At the special meeting of NATO, today, the representatives played double kissy cheek with our Secretary of Sate Condolleeza Rice and then frolicked around before they got down to business to issue stern warnings to Russia and do nothing. Which, after all, is better than if they had tried to do something.

So what to do.

Short term we will not be able, or wise, to try and do anything. War with Russia is neither justified or wanted. Our new president is going to have to lead a careful review of our entire foreign policy posture. Just consider the mess in Pakistan much less the Caucasus. It behooves us to sit down with Russia and learn their red lines and to let them know ours.

To me, Russia, at this time, does not appear to seek world domination. Neither does China or India the other predominant growing powers. they just want a bigger piece of the pie.

That could change.

However, a true understanding and rational acceptance of what these countries really want is critically needed. At the same time if their "eyes" and the facts indicate that what they want they cannot have we better reshape our own national character and direction to protect our "red lines."

Quick Comments on the Georgian situation —which remains on my mind

As I note in my introduction as to why I write/blog I mentioned matching up various sources of information trying to bracket "the truth." Needless to say, as a book written about the McBundy brothers during the Kennedy and Johnson era, "the color of truth is gray."

With the use of the wondrous web, scanning the New York Times, CNN, Russia Today, al Jazzera, etc.,etc., one can bracket a subject reasonably well.

Watching Georgian President Saaskashvilli in enumerable press conferences, always give in English, you can get a distinct feel for the man and it can not be one of candor or confidence.

Putin is also a clear read. He is being pegged as evil but were you a Russian or simply an objective observer he has most dramatically put Russia back together again. Where it ends only time will tell but I really do not see the Russians on the march for world domination. They certainly want a seat at the main table and they will not be denied.

The following are to links to NY times articles. The first:

http://www.nytimes.com/2008/08/17/world/europe/17military.html?ref=world


This is the clearest analysis I have yet seen to date of what the Russian military looked liked in their reaction in Georgia. Another piece I have seen speaks about the age of the Russian T 72 tank pointing out that it is 1970's vintage. True enough, but a person I know who knows about these issues pointed out to me that these "old" tanks have been modernized including a full redo of their armor protection.

The second,

http://www.nytimes.com/2008/08/17/opinion/17dowd.html?hp

a column by the frustrating Maureen Dowd, is worth noting as it is in an area that she excels. She puts credible innuendo together with wit and can draw a cogent picture. I believe that in this case she has succeeded.

As you all know I have only recently started sending out this blog. To my surprise the comments I have received directly, from those of the left and the right are very supportive.

I appreciate it.

I also find that most of those who sit with me to the right of the center in the politically center, many with career military experience see the same concerns here that I do.

The Bush Disaster - From Benign Ideology to Dangerous Posturing

As a point of disclosure I voted for this President, Bush, # 43, twice. All things considered, until a week ago, I would do it again considering the alternatives and considering the world situation at each juncture.

No, I have not been comfortable with his performance. He has been over his head, he has been locked into simplistic, ideologically based behavior and though not lacking in brain power he has, by choice and habit, shown lack of intellectual depth or curiosity. Following his effort in Iraq, allowing that he may have thought he had ample reason to cause us to invade when we did, his approach on the international front as well as here at home, highlighted by his braggadocio about using his "political capital" after the 2004 re - election to reform Social Security, coupled with permissive, rampant government spending has left him bereft of positive contribution, much less a positive historical legacy.

All that he has failed to accomplish now takes a back seat to the fiasco he conceived for the Caucasus, culminating in unnecessary provocation of Russia. The Cold War, to our good fortune, ended in a whimper. In a sense the inefficient Communist Soviet model bankrupted itself based upon the challenges of keeping up with capitalism. The Iron Curtain turned out to be made of tissue. The USSR turned into the Kingdom of OZ with no Wizard.

And, as is normal in the course of human events the opportunistic side of human nature, mostly bad or worse, sought advantage. From roadside flea markets to large corporate skullduggery, everyone likes a bargain.

Quickly, egged on by the United States, many Soviet Republics, those on the borders of old Mother Russia, even if they had been part of Russia for over a hundred years before Communism took root, declared their independence. As Russia evolved, from early chaos, as it searched for a democratic format, they had neither the wherewithal or the cohesion to object and act.

That remained the case until Vladimir Putin came to power. He clearly has shaped Russia up. Not in a way that would be called liberal democracy but, in fairness, not in the way of the viscous totalitarian state of the past either. His anger, if you will his controlled rage, at the lack of respect that his nation was receiving from the West was palpable. The expansion of the European Union, the encroaching NATO, what he saw as disdainful treatment, as Kosovo was wrenched from Serbia, a long time Russian ally, more than irked.

The secession of Georgia was a lingering lesion. Strategically it left a way for oil and gas from other past Russian republics could pipe their riches straight through to the Mediterranean without having the product routed through Russian territory and thus being vulnerable to the turning of a valve.


More annoying to Putin was the pecking and constant chirping of Georgian President Mikhail Saaskashvili of Georgia who had cozzied up to President Bush, sent 2,000 troops to support our effort in Iraq and who was spending 15% of his country’s GDP on building a well equipped and outsized military for a country of Georgia’s size.

Saaskashvili was particularly intent on regaining Ossetia and Abkhazia, regions that were part of Georgia when Georgia was part of the USSR. When Georgia declared it’s independence from Russia those two regions declared their independence from Georgia. The West recognized Georgia but the two regions, though self governing, were self governing and aligned with Russia.
President Bush visited Georgia, urged their admission to NATO, called it "a special project" and Saaskahvili crowed that America stood behind him. As Bush and Putin chatted in Beijing Russian armor and troops massed on Ossetia’s doorstep waiting for the Georgians to attack . Noting that Russian intelligence is well wired in Georgia it is easily assumed that they knew exactely what was coming.

Georgia attacked Ossetia, the population fled, not to Georgia but to Russia, Russian armor rolled, the Georgians were crushed and president Bush is sending "humanitarian aid," and demanding that Russia respect Georgia’s as a sovereign nation and it’s geographic integrity.
President Bush who lacked any judgement or foresight as to what his policies were bringing about is talking bellicose but there is no lead in his pencil. All of Eastern Europe has to take notice. The Ukraine another key player of the independence game is also looking to join NATO and President Bush is pushing on with his plans to put a "missile defense" system," against terrorists" in Poland.

While Barack Obama has proposed talking with the Russians and mediating the issue. John McCain submits a shallow piece to the Wall Street Journal stating that, "We are all Georgians now." No Mr. McCain, I do not think so and no, Mr. Obama, Putin has all ready meditated and mediated. The issue is closed!

Let us evaluate where we stand:

1. We have failed to understand that Russia was a great power and by nature of geography, population and natural resources and that it always will be.

2. Our armed forces, at the level we have maintained them, are overstretched. Thank heavans!

3. Our armed forces, being heavily shifted to small war fighting and nation reconstruction, are no longer able to field the force required to handle open warfare on the European model.

4. The population of the United Sates lacks the nationalistic fervor that Russians have in abundance and want no part of a fight for Georgia the Ukraine or any of the other x - Republics of the USSR.

5. Our entire foreign policy establishment suffers from a lack of strong leadership and insight and the idealistic policy foundation of President Bush has gone past benign and ineffective to flat out dangerous.

Given enough time Bush could turn this embarassment into a very large disaster.

HELL IN THE CAUCASUS AND DELUSIONS ALL THE WAY TO WASHINGTON


The complex region know as the Caucasus, a region of relatively small population with a large mixture of ethnic, religious and language differences has been a tinder box of conflict for centuries. A mountainous difficult terrain, where East met West, the pot always bubbled with intrigue. Small kingdoms became nations and at one time or another, going back at least 200 years, all were enveloped by "Mother Russia." When Russia became the Union of Soviet Socialist Republics, (USSR) in the Communist Revolution, the area lost much of it’s glamour and wore the Soviet yoke in a fairly restrained manner.

Georgia, an early Christian entity, was known for it’s fruits, wine, gangsters and two world class mass murderers, Stalin and his colleague Laventia Beria, who ran the feared KGB under Stalin. Beria was considered so dangerous that when Stalin died it was the quick decision, of other powerful Soviet leaders, to execute him before he made his own move.

The quiet time in the mountain vastness ended abruptly with the implosion of the communist state with most of the outlying captive "republics" declaring independence. New and broken, post Soviet Russia was in no position to halt the disintegration and the world looked at Russia, with it’s failed ideology, as critically wounded, that would not return to it’s former position of power, for a very long time, if ever.

The West and especially the United States were quick to ignore Russia’s traditional hot buttons and showed little interest in seeing things from the Russian perspective. Our handling of the Yugoslavian breakup made no allowance for the traditional Russian support of Serbia, whom of all the Balkan states had stood up against Nazi Germany, while the rest actively supported fascism. Our recent championing the independence of Kosovo rubbed salt in their wounds.

In the Caucasus the quiet time was over. Chechnya, a heavily Muslim enclave that was supplying fighters in the Balkans and to al Queda forces in various locations, exploded and the Russians needed two major efforts to pacify the region. It was a brutal, sloppy and bloody and showed the deterioration of the Russian armed forces. What followed was a series of color coded and largely bloodless national revolutions where friends, even puppets of the new Russia, were replaced by what was advertised as democratically elected leaders. Skull duggery abounded with Russian fingerprints all over it. The West, led by the United States, fanned the flames of every small conflagration and we became particularly supportive of Georgia. In 1991, Georgia declared it’s independence and in 2003 Mikheil Saakashvili, who gained law degrees in the United States, was elected by 96% of the population. He immediately adopted a strong pro western posture and applied for membership in the European Union and NATO. He requested and got hundreds of U.S. military trainers and dispatched 2,000 Georgian troops to become part of the "coalition of the willing" in Iraq. That made this tiny country of some 4 . 5 million people the third largest supplier of forces to our Iraq effort.

Vladmir Putin, then President of Russia and still a very powerful, if not all powerful Prime Minister, was not at all pleased. Two breakaway provinces of Georgia, South Ossetia (population about 100,000) and Abkhazia received support from Russia and Russian "peacekeepers" were in place in both regions. Cross border incidents between Georgia and South Ossetia were routine and Georgian forces occupied a key tunnel and it’s approaches through the otherwise impenetrable mountains in Abkhazia. Over the recent past Saakashvili always blamed banditry by South Ossetia for his reasons for sending his troops across the border to eliminate South Ossetian "rebels."

Who knows?

But what we do know is that Mr. Saakashvili, who is described as "headstrong" by even his friends was getting cocky with his now well equipped and trained army. At the end of the first week of August as all of the heavies showed up, at the great theater that is the Olympics in China, Georgian troops, tanks, equipment and aircraft entered into South Ossetia and did a credible job of quickly destroying South Ossetia’s main city, Tskhinvali.

Wrong move!

In fact his whole effort to embrace the west was a wrong move. Delirious in his case and absolutely arrogant on ours. NATO, to open up shop on Russia’s border; a trained western supplied army to tweak the Russian bear; hope for support when Russia controls virtually all the natural gas that Europe require to not freeze to death much less supply their industry; to think that the United sates and it’s virtually impotent president was going to lead a gallop to the rescue?

Nuts!

Hungary made the same mistake in 1956 when, tuned into the encouraging Voice of America, they tried to overthrow their Russian wardens and assumed that then President Eisenhower and U. S. might would make things right.

Wrong!

And when over 500 Russian tanks rolled into South Ossetia and sent the Georgians running and when the tanks and ships and planes went well past the South Ossetian border every one called foul. Our two candidates for President , our existing President and Vice President and all the flunkies of Western Europe who called the Russian response a "disproportional" response. Cheney says the Russian actions must be answered. McCain, states that future relations between Russia and the U.S. will suffer and his tone is hopelessly bellicose. Obama, has called for talks and mediation. All, in one form or another have suggested that every one go back to the way things were on August 6, 2008, before Saakashvilli lost his mind and then we should start talking. Putin, who rushed from Bejing to South Ossetia has literally, in cruder language, said, "Up yours."


Lets get some things straight. We had no business encouraging Georgia. Georgia had no business applying for NATO membership and that will never happen. Spheres of influence of old count. Pundits are claiming that Putin is living in a Cold War mind set. Actually it goes back at least to the Middle Ages it is how mankind thinks.