With Friends Like These... / The Daily Reckoning

verfasst von - Elli -, 13.03.2003, 17:00

-->With Friends Like These...

The Daily Reckoning

Paris, France

Thursday, 13 March 2003

---------------------

*** Consumers not very comfortable...and borrowing heavily.
Go figure.

*** It's a dangerous world. Fuchsia alert!

*** Dollar rises on surrender rumors...Dear friends of
Saddam...and more...


Two bits of news from yesterday tell the sordid tale:

An ABC/Money survey tells us that people are not feeling
comfortable. Consumer comfort levels are near 9-year lows,
say the pollsters.

Meanwhile, house refinancings (as opposed to purchases) hit
a new record in the most recent week.

Go figure. Why would people who are feeling ill at ease
about the economy - and perhaps their own jobs - want to
put themselves deeper in debt? Answer: because they need
the money.

Nearly half of America's credit card holders make only
minimum payments on their debt, says a group that puts
together the Cambridge Consumer Credit Index. And 44% of
them are going further into debt because they don't have
the cash to pay on-going expenses.

Friday's numbers from the Fed showed consumer debt rising
at 9.1% annually - more than 3 times faster than GDP, and
the fastest rate since November of 2001.

Let's face it, said a financial planner to the Sacramento
Bee, many of these people are"just one paycheck away from
disaster".

Perhaps that is why McDonald's, which feeds many of these
people, reported falling sales in February - for the 12th
straight month. And Walmart, which clothes them, said its
same-store sales are edging off, too.

When the consumer goes down, the whole economy goes down.
What else would hold it up? Capital spending is the only
possibility. But what would make businesses begin new
projects and hire new workers? Profits...of which there are
none. Consumers are cutting back on spending. Energy costs
are up sharply. Pension fund deficits are eating into
profits.

"From the macro perspective," Dr. Richebächer elaborates,
"higher profits would have to come mainly from rising
business investment spending or from lower consumer saving.
We see neither of the two happening. Investment spending so
far shows no sign of life. Personal saving, on the other
hand, is increasing, as the powerful negative stock market
wealth effects outlast the housing bubble."

We maintain our Code Fuchsia alert status: the whole
economy and its stock market are only one paycheck away
from disaster. Investors are edgy and could panic any day.
Consumers are getting nervous, too. The dollar could also
collapse - without notice.

*** But what a strange and wonderful world. The dollar rose
yesterday after reports surfaced that the CIA was talking
to Iraqi generals about a possible surrender.

"Didn't you see in the news," said my friend Michel at
lunch yesterday,"there was a story that one Iraq division
near the border had tried to surrender to the British
commander on the other side of the frontier.

"The British general said, 'So sorry, but we're not taking
surrenders quite yet. We'll have to get back to you on
that...'

"This is amazing," Michel went on."It is the first time in
history that an army has surrendered before the war even
began."

*** But you can't trust those Iraqis. They could be up to
something devious. Like trying to avoid getting themselves
blown up. Next, they'll be refinancing their homes to buy
Starbucks franchises.

***"Dear Paris friends of Saddam," begins a letter posted
to the Daily Reckoning.

Now wait a minute, begins our response. We've never even
met Saddam. And as for the war...we have no opinion on it.
Will it make the world a better place...or a worse one? We
know no more about it than the commander-in-chief. For all
we know, the war is as likely to be a complete disaster as
a triumph.

But now that we understand the U.S. war aims better, at
least it is beginning to make a little more sense. If your
goal is to put U.S. troops all over the world and to meddle
in the affairs of nations you couldn't find on a map and
wouldn't want to visit...Iraq is a better place to start
than, say, France.

We are beginning to see, too, how the war fits into the
macro-economic picture. Economics is our beat, after all.
And though we know no more about economics than the Fed
chairman, we have an opinion or two.

The war against Iraq is seen, at least through the eyes of
Thomas P.M. Barnett of the Naval War College, quoted here
yesterday, as a way of making sure history really has come
to an end. You'll recall Francis Fukuyama's woebegone
declaration, after the Berlin Wall came down, that history
had come to its final fulfillment. American-style consumer
capitalism was triumphant almost everywhere. And since no
improvement could be imagined...history had to end.

Well, then came the biggest stock market debacle of all
time...and the 9/11 attacks against Manhattan...and, all of
a sudden, it looked like history might be back in business.

But that's where Mr. Barnett's visionary view comes in.
There's a time for every mistake under heaven, we say here
at the Daily Reckoning headquarters. Mr. Barnett's peculiar
mistake seems to have found favor in the Bush
administration; its time has come.

The gist of it is that in order to make sure American
democratic consumer capitalism remains triumphant and
secure, the U.S. should use its military might to force it
on"the Gap", which is what he calls those large areas of
the world that either don't want it or can't manage it. He
calls this effort"exporting security". Once these areas
are"secure", people in them presumably begin voting for
Republicans and opening mutual fund accounts.

Of course, this won't happen overnight. It will cost a lot
of money...and some lives. But hey, Rome wasn't built in a
day, either.

But who will pay for it? We will take a guess at Mr.
Barnett's answer: by rights, the people who benefit from
this exported 'security' should pay for it. Most of them
don't have any money, of course. On the other hand, Iraq
does have oil.

America does not produce enough to sustain its present
spending levels, let alone a whole new geopolitical agenda.
But it has this marvelous new export industry - security -
which, if you could find some way to force people to pay
for it, could help balance the books.

It is all claptrap, of course. But it is the kind of
claptrap that rules the world...and makes history.

Sell the dollar. Buy gold.

*** Recent news stories tell of Americans pouring out good
French wine in order to show how cross they are with
Chirac's attitude to the war against Iraq. Here at the
Daily Reckoning, we're always willing to do our part for
Old Glory. Readers may send unopened bottles of French wine
- preferably the '86 vintage, Bordeaux - we'll make sure
they are properly disposed of.


The Daily Reckoning PRESENTS: Pitched battles between
Cowboys and the Princes of Peace - Molotov cocktails and
all...


WITH FRIENDS LIKE THESE...
by J. Christoph Amberger

Back in June of 1982...I remember it being a bright and,
for my Central European tastes, unusually hot day...I found
myself wedged in a throng of people in the gardens of
Charlottenburg Palace in my hometown of West Berlin. We
were waiting for a controversial U.S. president to take the
stage: a man derided by smug Euro leftists as a"cowboy",
for being American, for not being a liberal, and for not
being overly receptive to having U.S. policy dictated to
him by the neo-pacifist rabble that was barely being
contained outside the Palace boundaries by riot-hardened
Berlin policemen.

Sound familiar? I have to admit that I have always
considered George Santayana's trademark quote a bit
sophomoric. You remember:"Those who do not remember the
past are condemned to repeat it." But the past six months
appear set to prove him right.

Back in 1982, Berlin had mobilized to welcome Ronald
Reagan. And when I say mobilized, I mean mobilized:
Counter-culture riot tourists from West Germany had been
descending upon the city for days via car and train...waved
through by East European border guards whose purpose in
life was to terrorize normal travelers. The airwaves were
filled with an anti-American ditty performed by an aging
fool: artist Joseph Beuys, most famous for creating"art"
from coagulated lard and having a tame coyote defecate on
the Wall Street Journal, was singing his mawkish"Wir
wollen Sonneschein und keinen Reagan"...We want sunshine
and no Reagan, Reagan being assonant with the German word
Regen, for"rain".

Those were the days...not a weekend went by that there
weren't large-scale demonstrations in downtown Berlin, with
thousands of always somewhat unwashed-looking juveniles
with long, greasy hair, wearing army parkas and black
leather jackets, motorcycle helmets and kaffyas. They were
protesting nuclear energy, the Berlin senate's housing
policy - but first and foremost Ronald Reagan's foreign
policy...including Star Wars and the deployment of Cruise
Missiles that were to be pointed at the Soviets' SS-20
batteries in the most defiant gesture of Mutually Assured
Destruction to date.

The ideological pillars that carried this early prototype
of Germany's"Peace Movement" into the country's political
mainstream - culminating in the ascent of the Greens into
government as junior partners of Gerhard Schroeder's
Socialists in 1998 - were not all that original. (The
German writer Max Goldt called them a"collection of
political slogans from their parents' generation they found
scrawled on the walls of a public restroom".)

Nor were they all that peaceful: most demonstrations
culminated in pitched battles, with Molotov cocktails and
cobblestones raining down on police officers. More than
once my morning trip to school led me past burned-out
stores torched by the Princes of Peace.

The speech Reagan gave that day was not particularly
memorable. (Remember, Gorbachev was still unknown, and
"Tear down that Wall" was yet unwritten.) Only one phrase
stands out in my memory, the German phrase"Was immer sei,
Berlin bleibt frei". Whatever may be, Berlin remains free.
The irony wasn't lost on me even at the tender age of 18:
The democratic rights used and abused by the anti-American
demonstrators outside were theirs because of America's
commitment to West Germany and West Berlin. Without the
forlorn hope of American, British, and French troops in
Berlin - hopelessly outgunned by the surrounding Red Army
and Warsaw Pact - the long hair alone would have provided
sufficient reason for them to be harassed if not imprisoned
as"degenerates" by East Germany's communists.

I made my way home that day using public transportation,
carrying an American flag I had tied to a broomstick. I
arrived unharmed...a fact I credit mostly to cutting an
uninvitingly dashing figure at 6'4" - and traveling part of
the way in the company an even more uninvitingly dashing
U.S. special forces soldier who was part of my parents'
circle of American friends who spent weekends and holidays
at our house...

It is more than a decade ago that Ronald Reagan's great
bluff sent the Soviet Union and the Warsaw Pact into a
death spiral that resulted in the liberation of Eastern
Europe. And today, there is again a U.S. president derided
by smug Euro leftists as a"cowboy", for being American,
for not being a liberal, and for not being overly receptive
to having U.S. policy dictated by the same neo-pacifist
rabble whose anti-Americanism twenty years ago was focused
on Ronald Reagan, Star Wars, and Cruise missiles. Given the
obvious cyclicality of events, pardon me if I feel
compelled to chuckle when I hear that anti-American
sentiment is a product of George W. Bush and Donald
Rumsfeld's foreign policy.

And pardon me if I just don't buy it when I hear that
countries like Russia, China, and France are suddenly
appearing concerned with global peace. Make no mistake
about it, none of the countries posing at the U.N. Security
Council as protectors of peace are pacifist countries.
Russia has no qualms at all using military force against
its breakaway Chechen subjects...or along the Central Asian
periphery of its Empire. In a last quiver of Pan-Slavist
aspiration, it threw in its lot with the Serbs at the peak
of that nation's genocidal ambition in the mid-1990s,
hoping to keep the U.N. out of the Balkans until Serbia had
finished its dirty work. Russia even sent a military
welcoming committee into Serbia to greet American troops
sent to halt the slaughter of Bosnians and ethnic Albanians
by Bill Clinton (out of all people) - whose attempts to
intervene in the large-scale massacres were vehemently
opposed by Britain and France.

China has a closet full of skeletons. The most prominent is
the undead Taiwan...whose mention in Chinese documents is
uncomfortably close to the sentiments cultivated by Saddam
toward Kuwait...only that it is backed by greater
firepower. And whatever happened to Kim Basinger and
Richard Gere's chants of"Free Tibet" at the Oscars?

The answer, my friend, is blowing in the wind...

And France? This country's love of peace comes on the heels
of one of the most repressive and predatory imperialist
histories in modern times. In the decades following taking
to bed with the Dien Bien Flu in Indochina, the arbitrary
and for the most part weak leadership of France has chummed
up to such appetizing characters as Leonid Brezhnev and
Saddam Hussein. Emperor Jacques himself ran for re-election
last year principally to preserve his immunity from
prosecution, mainly on charges of corruption that were
nothing if not serious.

If Donald Rumsfeld's diplomatic skills are those of a
sledgehammer, France's diplomatic efforts were recently
summed up by Christopher Hitchins as"preoccupied with
extracting advantage and prestige from the difficulties of
its allies".

What puzzles me most about the current stalemate at the
U.N. is...why now? Why discover one's inner rainbow when it
comes to Saddam? Given the background of the U.N."doves",
I think it is safe to exclude purity of purpose. Peace...or
the at least the absence of military conflict...in
international politics is not an absolute value - contrary
to popular belief - but like war, an extension of politics.
That goes for the Pax Americana as well as the neo-pacifist
"multi-lateralist" brands of peace now espoused by Europe
and China. And politics, by their very nature, are
egocentric and aimed at maintaining and expanding one's own
advantage. (Nothing illustrates this better than Gerhard
Schroeder's categorical rejection of military intervention
weeks prior to his reelection...or the German
conservatives' rediscovery of their support for America a
week after state-level elections were over.)

Opposition to the U.S. and Britain's plans to take out
Saddam thus are political, not moral, in nature. It aims at
suppressing American influence wherever possible...even if
that means propping up the most unappetizing dictator in
the Middle East. Western European mainstream has been
latently and fundamentally anti-American for decades...not
because of George Bush and not because of Iraq, but out of
a feeling of superficial cultural and ethical superiority
that has been frustrated by reality since the end of World
War II.

This sentiment exists independently of the political
imprint of the U.S. Administration, and readjusts its
target depending on where the European mainstream perceives
the moral foundations of American identity to reside...Newt
Gingrich in the Clinton Era...and George Bush today. As the
German Israeli author Henry Broder wrote in the magazine
Der Spiegel last October:"Anti-Americanism is not a
conditional reflex to the policies of the United States,
but an autonomous resentment that seeks out its
justification: The Effect accepts any Cause, as long as it
can preen itself in the conscience of being the morally
superior position."

For the weeks, months, and years ahead, these are the
realities of the New World Order -independent of how the
U.N. tug of war plays out. That's good news for anyone
still keeping an eye peeled out for those mythical black
helicopters of the New World Order. It's bad news for
anyone seeking external validation for being an American -
passport-carrying or otherwise.


Regards,

Christoph Amberger,
for The Daily Reckoning

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• With Friends Like These... / The Daily Reckoning - - Elli -, 13.03.2003, 17:00