I’m not gone yet.[0] 
Since retirement (from my day-job) I’ve largely ignored defense issues like the actual reason America, the UK, Canada, … are trying to occupy southern Afghanistan, but Monday’s post [1] by Russ Winter caught my eye. Russ’s assertions about increasing tensions in the Upper Persian Gulf theatre of the war for Western energy security seemed a bit random, but at least they had me awake for the news [2] later in the day that the new US budget included significant defense increases for the next couple of years.
Then something clicked when I read Fleckenstein’s judgment [3] that "Withdrawing equity from one’s home was the economy, from essentially 2001 through sometime last year." (emphasis in original) Here was MSM support for a position I’d been trying to sell since at least late 2002.
This recently unmasked underlying weakness in America’s economy combined with escalating military costs is starting to pull the place apart like a piece of toffee. This can be easily seen from the level of offsetting cuts to social programs in that same just-released budget. I wish I’d had Fleck’s analysis long ago, when I suspected but couldn’t convincingly demonstrate that the REIC was somehow making the economy look stronger than it was. For years I held a fantastic hope that the researchers at the AEI’s GSE project would sit down with key neo-con planners like former PNAC [6] executive and AEI Fellow Tom Donnelly. Surely Wallison’s people must have had the hard numbers to convince Donnelly he’d have to rein in his schemes for world domination. Didn’t they take coffee breaks in the same cafeteria?
The world keeps turning, though, and with Rumsfeld gone the hard choices now lie mostly with Hillary and the neo-liberals. God bless us every one. Meanwhile, this week brought [4] [5] a flurry of news, some of it collected in a Tuesday Ben’s post, suggesting the beginnings of a deterioration in the outer-ring suburbs like California’s Inland Empire. That just underscores what Fleckenstein was saying about the end of the MEW extraction era. Let’s just hope the budgeteers can read the writing on the wall and slash military spending.
________________________
Notes and References
[0]: Monday’s farewell "Safety Net" was quite a going away party. Admin tells me it was a record traffic result for one of my efforts, and close to some of the best twist-post days. Thanks to Old Mike for the compliment (not to mention the gold watch!) My official "back off" day is this Friday, and even after that I hope to periodically post efforts like this, where I’m not so much presenting a mature argument as stringing some links together and groping toward a theme.
[1]: "Last Throw of the Dice", by Russ Winter, WallStreetExaminer blog, February 5, 2007.
[2]: "Bush Budget Calls for Big Boost in Defense Spending", by Ron Elving, NPR, February 5, 2007.
[3]: "How housing masked a weak economy: Since 2001, the nation’s economic growth has been powered by the real estate industry, particularly mortgage-equity withdrawals. Without housing to prop it up, the economy is in trouble", by Bill Fleckenstein, MSN Money, February 5, 2007.
[4]: "Far-flung exurbs hard hit by housing downturn", by Patrick Rucker, Reuters / Yahoo News, February 5, 2007.
[5]: "Poor Among Plenty: For the first time, poverty shifts to the U.S. suburbs", Newsweek, February 2, 2007.
[6]: As luck would have it, this week’s 3381 assignment is "found poems".
twisted smiles
Although it may take several decades
for the process of transformation to unfold,
in time, the art of warfare
on air, land, and sea
will be vastly different
than it is today,and “combat” likely will take place
in new dimensions:
in space, “cyber-space,”
and perhaps
the world of microbes.Air warfare may no longer be fought by pilots
manning tactical fighter aircraft
sweeping the skies of opposing fighters,
but a regime dominated
by long-range, stealthy unmanned craft.On land, the clash
of massive, combined-arms armored forces
may be replaced by the dashes
of much lighter, stealthier
and information-intensive forces,
augmented by fleets of robots,
some small enough to fit in soldiers’
pockets.Control of the sea
could be largely determined not by fleets
of surface combatants
and aircraft carriers,
but from land- and space-based systems,
forcing navies to maneuver and fight underwater.Space itself will become a theater
of war,as nations gain access to space
capabilities and come to rely on them;
further, the distinction between military
and commercial space systems
– combatants and noncombatants –
will become blurred. Information
systems will become an important
focus of attack,
particularly for U.S. enemies
seeking to short-circuit sophisticated
American forces.And advanced forms
of biological warfare
that can “target”
specific genotypes
may transform biological warfare
from the realm of terrorto a politically
useful
tool.
source: "REBUILDING AMERICA’S DEFENSES: Strategy, Forces and Resources For a New Century", A Report of The Project for the New American Century September 2000, page 60.
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John,
First of all, I would hardly call Fleck MSM. He is an entertaining permabear who is sometimes correct like when it comes to the bubble.
Second Calculated Risk has been talking about MEW for over a year and has graphed it very nicely.
http://calculatedrisk.blogspot.com/2005/12/gdp-growth-with-and-without-mortgage.html
Third, AEI is a shill organization whose motives are at the very least suspect and worst criminal. I would hardly think to use much of anything they put out.
I quote from the Wikipedia entry,
“Global warming
On 2 February 2007, the British newspaper The Guardian reported that the AEI had sent letters to scientists, offering US$ 10,000 plus travel expenses and additional payments, asking them to discredit a consensus report on global warming by the UN’s Intergovernmental Panel on Climate Change (IPCC). The letters alleged that the IPCC was “resistant to reasonable criticism and dissent and prone to summary conclusions that are poorly supported by the analytical work” and asked for essays that “thoughtfully explore the limitations of climate model outputs.”[1][2]
Scientists who participated in the IPCC report argue that the AEI is merely trying to confuse the public about the scientific consensus on climate change by giving undue prominence to dissenting voices that represent a small minority of scientists, and circumventing the scientific peer review process by offering cash incentives for predetermined scientific conclusions.[3]
According to the Guardian article, the AEI received $1.6 million in funding from
ExxonMobil.”
http://environment.guardian.co.uk/climatechange/story/0,,2004397,00.html
AEI, is just contemptible in my opinion.
metro -
That being the case, you might want to miss the video of an event two years ago (near the height of AEI’s influence): Science Policy in the 21st Century (January 28, 2005), featuring a keynote by that renowned environmental researcher, Michael Crichton.
John,I really hoped we could avoid this. My word, I have not consumed such tripe since the debates surrounding the Students for a Democratic Society (“SDS”) division into RYM I and RYM II(“RYM” meaning “Revolutionary Youth Movement”)!. Then the overly self-serious young Trots and the so-called “Weathermen” disagreed about whether the nasty military, industrial, imperialist, capitalist, racist (and on and on)America was a bigger threat to the poor socialist third world or the oppressed American working class, leading to the “great” split. At least the Weathermen knew how to party.
Your article today was like a memory of the first time I smelled really stagnant water.
Having left New York City for home after a wonderful visit on a certain September 9th, I can only say that your not so subtle suggestion that our continuing Afganistan “occupation” effort relates to “imperial” colonization is the product of either a pettyfog or a fool. The brave men and women there know why they are there. They hope to find that bearded, evil freak and kill him and as many of his violent supporters as they can. I have talked to and e-mailed a number of our troops there. Have you?
The views of a “proud” Canadian citizen that we need less American resources devoted to defense, and presumably a bit more to “social safety nets” for that “deteriorating” society you seem to relish regailing us about may be much in vogue among you concerned observers from that awesome powerhouse of economic & military might to the North. Perhaps with such a shift in priorities we can aspire to decline to those levels of productivity and national cohesiveness experienced by France and your own Canada. All I can say is its a good thing you did not have to actually defend yourselves since the 1950s. It does make your budgeting process for civil servant pensions a bit easier doesn’t it? Your welcome.
Ultimately you should concentrate on the budget and politics in your own country, don’t you think? Or is Canada so irrelvant to the larger world stage that your self-percieved vast intellect apparently feels compelled to grace MY nation with your opinions regarding how MY tax dollars should be allocated. A bit cheeky don’t you think?
Whatever theme you were “groping for” here, it is clear even without your “footnote 1″ that todays post was not even close to “a mature argument”. So much for going out on a high note. I will avoid the angry impulse to fully quote a Bruce Willis character and merely flick my Zippo and say “Adios”.
Read it and weep people:
“The 2008 budget for defense spending ($624.6 bil) is greater than the allotted budgets for education, agriculture, commerce, energy, the EPA, homeland security, housing and urban development, the interior, justice, state, transportation, labor, NASA, corps of engineers, judiciary, and veterans affairs departments…combined!”
Poet. I agree that it is important for citizens and taxpayers to carefully consider how the various levels of government allocate our precious tax dollars. Defense, a primary function of our government at the Federal level, will, especially in times of international instabilty, be comparativly large in the type of comparison you make. Many of the agencies you identify actually only oversee and assist far more extensive State (and even local)government agencies that perform and fund most of the tangible work. For example, state environmental agencies do the vast majority of permitting and enforcement work for the EPA. This is also obviously true of Justice and Judiciary.
In fact, historically some of these federal agencies are of relatively recent origins. Many reasonable people question the benefits of the federal role and increasedexpenditures, for example in the Department of Education, and undoubtedly that budget mesures only a very small amount of the nations resources that are actually dedicated to education. The value added by much of the expenditures at the Federal level in Commerce, Labor, Energy and Housing and Urban Development have also been seriously questioned and in many of these areas State funded activities provide most of the meat. The converse is, of course, true with national defense.
All this is not to say that we should not careful manage our Defense resources and demand that we recieve both security and military superiority given the amount of our resources committed to this task. It is also fair to say that a great number of our “allies” have taken advantage of the security we fund, and we should take steps to assure that the free ride ends soon. We have all heard of the DOD $500 toilet seat, and if waste or corruption is shown,deal with it harsly, especially while our brave men and women are in harms way and seem to sometime lack armor and other equipment.
I believe the budget proposes significant increasesfor veterans affairs and I thought (but am not sure) for Corps of Engineers. Reductions in the more recent entitlements programs merely continue trends, based on their documented failure, carried out by the last three administrations.Many should be merciful put to sleep, but they have all developed politically active advocates who prosper by their continuation. Much the same can be said for the Department of Agriculture.
My strong reaction to this posting resulted from the the suggestion that we attempt “control” of other nations resources through force of arms. I believe that is largely anti-american and anti-capitalist propaganda, trotted out periodically for a whole host of reasons, none of them I consider legitimate. By all means, we who fund the federal budget should debate its level of funding, its allocations and its appropriate role in our system, which also includes significant government activity and spending at the state and local level.
Old Mike,
What are you saying? That the war in Iraq is not about oil. You said that the brave men and women know why they are over there fighting. I humbly disagree. I know someone who enlisted about a year after Afghanistan for the Afghan action and is still over there but in Iraq instead. He has no clue as to why he is there. The administration keeps making up a new reason. First it was WMD, then when that did not pan out it was to start a fledgling democracy to somehow transform the mideast. That neocon bs is just that bs. It is about the oil. If you consider me somehow unamerican for being critical, so be it. That is your problem and I would say right back at ya! While John was a little off base about suggesting how our country’s priorities are out of whack because he is Canadian, I have to say I agree with him for the most part. I also think this neocon crap will be (has been) mostly discredited as naive, and even criminal.
Metro, Afganistan is is not Iraq, never was,probably never will be. That I believe was the topic. I for one know why we went there. I have friends who were officers there and the children of friends still there. They all volunteered and knew why they where there. If your friend does not, I hope he or she is out of uniform soon. I know of no one, on a blog or otherwise, that has suggested WMD has anything to do with our entry into, or continued efforts in, Afganistan.
Whatever a “neo-con” is these days, if they are those bow-tied clowns with permanent smiles who argue we should send brave soldiers and national treasure to “nation build” in these violent cesspools, I agree that they are misguided and worse. We used to call such people “liberals”, who knew it changed.;-). And good luck with the group John calls “neo-liberals” (I cannot spell Mogidishu but remember it). The truly frightening conservatives, myself among them, would have prefered the “instant glass” option for the training camps, Taliban leadership sites and caves between Afganistan and Pakistan (profound shock by John I’m sure), rather than a full deployment of our military. I personally have no great desire to be loved by the French, the Canadians, the Syrians, the Iraqs, the Israelis or any other part of the “international community”. Some respect is enough, cooperation is expected and in exteme situations fear will do. While we have the ability to put our foot down and say “enough”, without “cleaning up afterwords” in places like Afganistan, we just do not have the will. I’m sure that is a different kind of old world “head on a pike imperialism”, but I can live with that as a reaction to something like September 11.
Oil is obviously a strategic concern in the Middle East, more for Japan & Europe than us, thankfully. Oil can certainly be placed as a major priority reason for Desert Shield/Storm when Saudi was threatened. It may well be why our foreign policy focuses on the area more than say Nigeria (oil?) or Venezula (oil?). I believe oil (and yes John natural gas of any type) had almost nothing to do with our mission in Afganistan. It probably also explains only a small part of why, after getting Sadam(he did try to kill his Dad after all), we didn’t just leave and say “we broke it, you fix it, adios”. I agree that the idea of the US trying to balance the various factions in the region is absurd. Was Sadam and the Taliban better(for us, my only concern) than what we have now, only time will tell.
I do object to the simplistic idea that our foreign and military actions are dictated by “big oil” or “powerful corporations”on some secret agenda. The left blames our mistakes there on capitalism, the extreme right on “Israel’s influence”. They are both thinking like bitter grade school teachers talking about CEO salaries. Its generally old line leftist drivel that once argued our interests in Latin America were driven by bananas and in Cuba by the Mob. They said we were in Vietnam for “rubber”, the tiny fools! Remember, if it was “imperial America” wishing to militarily control more oil and mineral resources, both Canada and Mexico are alot easier and closer. Perhaps that could be the new “neo-idiot” initative?
Foreign adventures occur for a large number of reasons, and many of them have nothing to do with Oil or the “seven sisters”. When they are carried on too long, they become unsustainable, especially for the US. They often end badly. I obviously prefer spasmotic and overwhelming over-reaction to actual injury, than either some weak-willed missle strike on an empty camp or, worse yet a prolonged deployment designed to “bring democracy” to the bronze age theocrats. Perhaps the worst thing about the Iraq experience, other than the injuries and loss of American lives, is that when (unfortunately probably not if) some “maximum national leader” or “man of god” actual has WMD and ties to terrorists, we as a nation will not believe it again, until the hard rain begins to fall somewhere down-wind in America. Maybe Rudy will be there to help us out again.
Old MIke,
I never said that Afghanistan and Iraq that the two were analagous. We went over to Afghanistan for very righteous reasons: to get the Taliban and Osama. But you have not answered the question of “why are we in Iraq?”. So I ask you give me your best dumbed down explanation, because I have yet to hear of one that makes sense other than “its about the oil”
Metro, Sorry I thought your prior post kind of mushed the two together. To your Iraq question, a true skeptic would say: Bush I stopped short in Storm. As I agreed, that was largely about oil, Saudi oil, but it was also about a large nasty nation attacking a friendly smaller nation, Kuwait. Then Sadam tried to have Bush I killed. Bush II, a good texas son, was looking for any opportunity to take him out. Then he felt compelled to “do more”, heaven help us. That is probably as simplistic as blaming capitalist big oil.
I believe that very serious people (including ironically a vast majority of Congresspersons from both sides) believed Sadam still had WMD. For conclusive proof of prior possesion see the real pictures of many actually gas-dead Kurds, for example). They also believed his Sunni friends and military had at least some ties to certain terrorist groups, the ones that the Shiites in Iran did not have covered.(Test: is Osama a Sunni or Shiite? Hint he was Saudi). [two sentences removed, JM]
That soon after September 11, and especially after seeing how integrated terrorists had become in the Talaban government in Afganistan, we were perhaps understandably, if mistakenly, paranoid regarding Sadam, WMD & terror. Sadam’s game of throwing out international inspectors just to hear the French whine did not help either. We can blame “intelligence” failures, biased analysis, etc., but we need to remember that themonuclear missles were actually in Cuba, and weeks from operational, before we found them only 90 miles away. Which way you would rather error in such circumstances is, of course, a matter of opinion.
Add to all that an almost child-like belief that military intervention and economic assistance can transform the quasi-nations of that area into a growth market for modern democracy.(Here is your neo-cons) Include a dash of hope(experienced by most modern presidents except Reagan) that we could bring peace & security to an area of both religious and economic (heres your oil) significance to the rest of the world, and you quickly arrive at a “no good deed goes unpunished” view of American foreign policy.
The idea that we invaded Iraq because some oil company executives wanted it to happen is just silly. Are we more interested in the area because it has more economic significance, especially because of oil, that say, central Africa, sure. But its alot more complex than saying “oil made us do it”. Hollywood fictional propoganda aside (silly Syriana screed), our foreign policy mistakes are often just that. If your right and I’m wrong, look for boots on the ground in Venezula real soon.
Old Mike -
It’s been fun watch you channel Noam Chomsky, but like I said, I’ve not been following this stuff since last June, so won’t comment further.
However, in the thirty-six hours since this post went up two big players in the US subprime market have released significant “oopsie” warnings. That bolsters my main assertion that the US should consider immediate military cutbacks to preserve more of its remaining strength for upcoming economic challenges.
I don’t agree with you completely, the Saddam-terrorist link was specious but oft repeated as somehow true but was manufactured to curry sentiments in favor of war. I still think it is about oil. BTW, I did not say it was corporate driven but that secret Cheney energy committe makes one wonder. Anyway it was not necessarily corporate driven but in terms of supply strategy for the nation, in light of declining oil production in the Saudi fields as well as Mexico’s and the North Sea. Oil is an open world market, therefore, Saudi, Irani and Russian oil is affecting our supply.
FT has an article summarizing those two oopsies I referred to above.
——————————
“Wall St lower on concerns over housing market”, by Alex Barker, Financial Times (London), February 8, 2007.
John,
I have been seeing alot on this today. Apparently 3 hedge funds are betting against housing now too. alittle late as far as I am concerned.
Metro, no answer to the test? I’m disappointed especially since you declare all concerns about a Saddam regime/terrorist connection were “manufactured” and “specious”. But let us just agree to disagree.
John, you seem to confuse a number of things. From my view, the sub-prime lender problems are a good thing, a needed correction. Your over-blown fears notwithstanding(your “Black Thursday” reference on the side bar), as I write the Dow has “collapsed” by about 50 points. Seems the Treasury Auction found more than a few buyers also. Guess the sub-prime lending market may not actual drive the US economy, who would have believed it.
As far as bending my Brilliant Pebbles sword into an “affordable housing” plowshare, I’ll pass. And if you consider my views mirror the internationalist junk Chomsky sells, its time to have your water tested.;-)
Old Mike,
First of all a test? thhp! What I am supposed to say Sunni? Osama is a wacked out al qaeda muslim, whatever that means. Sorry for not jumping through your hoops before I was responding from work and have limited time on my break and could not read all of your post.
To call him a Sunni would be like calling a Baptist a snakehandling, arsenic drinking Pentacostal a Baptist.
Oh and I resent the comment on my good friend over there lured under false pretenses should give up his unoform, as if he is any less an American. How dare you! This was supposed to be about a good fight. I am thinking it is not even so-so.
Metro. Big misunderstanding there my man, I seriously do hope, if your friend is dissatisfied, he gets out. That makes him no less American, a wrong conclusion you jumped to without much help from me. As far as his being misled, it is true that they do not sign up only for certain assignments, but I can understand wanting to serve after 9-11 and then being unhappy with Iraq. I am proud of him for doing his duty, especially if he is disgruntled.
As far as the Sunni/Shiite issue, it was not unreasonable for the British to suspect that the IRA may have gotten some finacial assistance from the Boston area, whether either or both sides were “good” Catholics. I merely ask you to consider that the same may have been “not unreasonable” in the case of Osama and members of the Iraq government and military. Osama was critical of both a secular Sadam’s Iraq and the Saudi royal family as “not good muslims”. Regardless, I believe it is likily he recieved funding and information from persons in both governments. Actually tracing such things is not easy and even if we did, they would not tell us thank god. That all. Hindsight is 20/20. While we are getting testy, the original post was about AFGANISTAN, as was my response. I think the word IRAQ first appears in your comment 6.
Old Mike -
Indeed the Economic Firewall Myth is being pushed as hard for the (now undeniable) problems in subprime as it has been for some months by those asserting, now that they are tanking, that the REIC and auto sectors have no connection with the rest of the economy. Since psychology is so critical it might actually make a temporary difference. You can take comfort in this soothing report that the firewall is real.
————————————-
“Sub-Prime Lending Stocks Hit Hard By HSBC’s Surge in Bad Debts”, CNBC, February 8, 2007.
John. Please understand I too am concerned about the economy. I don’t have to go to GSEs or subprimes or be spooked by derivatives. I stop at the negative savings rate. I am not a CNBC cheerleader. As you know in most reasonable crowds I’m the bear of the bunch. I only like business models I can understand. I would be alot more concerned if sub-primes were NOT tanking and credit tightening. At least a correction is underway.
But lets assume your right and it gets as bad as Mr. Smith et. al. have been predicting for quite a while, in some cases a lifetime? If I got a wee little pile of Old Mike money what do I do? Real Estate? No. Stock market? No. Bonds? Will there be any high quality paper left in your future, my guess is No?
CD’s? What about the banks’ exposure on mortgages and derivatives? What is FDIC worth if your “fiat currency” concerns come true? Is that a No? Euros, Yen, OJ Futures, what? Maybe Gold? If it gets that bad what happens to jewlry and manufacturing demand (the lions share of that market is not investment). Ask Twist. Or is that ” one thing” that resists the laws of supply and demand? Do I use my maple leaf to buy a pizza? Plus, as a concerned citizen that stuff is just awful for the environment, probably almost as bad on a per pound basis as coal.;-)
I’m not trying to be a smart alec (maybe a little ok), but what do the perma-doomers believe I should do other than anti-depressants? I know what a bear would say to a recessionary cycle, but thats not what you guys are talking about is it?
Old Mike -
Your investment decisions or mine are somewhat beside the point, but Tom Donnelly’s advice isn’t. The MIC needs to understand its new post-bubble financial constraints immediately or it will crush America.
My father assured America had no military peer for the second half of the 20th Century, and that’s blinded the planners to the possibility that anything can go wrong in this era. I’m examining the soft underbelly of Structured Finance in an effort to warn them that new dangers are imminent. The creative destruction of the subprime meltdown is indeed necessary medicine to advance the business cycle, but the artificial extension of the national ’01 – ’05 housing bubble has left us with the situation where we will probably overdose on this medicine. Furthermore, corporate accounting schemes to increase profits by hiding assets off-balance-sheet in joint ventures have weakened the ability of the financial services industry to withstand the shock of this overdose. Some of the Administration likely thinks that asking F&F to sell off their portfolios is just so that MBA-types can get bigger pieces of the borscht, but I’m certain Poole and his friends realize the issue is battening down the hatches for a hurricane. I really wish the good folk inside the Beltway would compare notes once in a while, it might help them get out of this mess in one piece. Cutting social programs will not be enough.
John, And you remind us, appropriately, that we do not express enough our thanks to those men & women who came before us, giving us this great bounty and, compared to the period of history they lived through, peace & security. Your Dad (DARPA wasn’t it?) deserves our gratitude. Even the simple GI, like my Dad, was part of getting us here alive and free.
If the solution is for individuals, corporations and government to live within their means, count me in. Hope for a better future is, of course, part of that equation, as it was for our Fathers’ generation. I don’t hear much of that from “doomers” (thus the name, huh?) and it bothers me alot. We’ve beat bigger “imminent dangers” before. I’m betting we will do it again, with or without the folks “inside the beltway” doing much of anything. At least I hope so.
Old Mike-
I’m convinced that the way we have viewed housing for the last few years is “doomed.” From our lending practices to our retirement plans, we have developed an unsustainable system. There is going to be a lot of pain involved in fixing it.
I have a lot of faith in the resiliency of the American people though. I believe that most people will make better decisions armed with good information.
No great “conspiracy” caused this situation, and I don’t think any institution, government or otherwise, can “fix” it (although they have the power to influence the market, that power is limited). When we as a people decide that honesty is the best policy, and that hard work and thrift is the ticket to success, we will have done more to repair our economy than any beltway policy.