Freefalling Meltdown

What happened at the beginning of 2008 was the beginning of the freefalling meltdown of the biggest pyramid game in human history. Since the burst of the Nasdaq internet bubble in March 2000, hedge funds, private equity funds and proprietary trading at banks have come to dominate money making. The new business model depended on asset prices constantly rising. Because so many wanted the same assets at the same time, demand pushed up asset prices and the model became a self-fulfilling prophesy. “Higher return” came to mean “faster appreciating” instead of “higher yielding.” Once banks started making margin calls and hedge funds and private equity had to liquidate and assets had to be marked-to-market, the pyramid collapsed.

The Bank for International Settlements said credit default swaps totaling $43 trillion, half the entire asset base of the global banking system were outstanding at the end of 2007. That is reality. Any wonder President George Bush, Treasury Secretary Hank Paulsen, Federal Reserve Chairman Ben Bernanke and Congress are panicking about how to structure a sustainable bailout package? Asking U.S. taxpayers to sign off on a $700 billion bailout package without adequate regulation or assurances as to how many more billions ─ make that trillions ─ will be needed or how it will be recouped, just because Congress wants to recess is absurd. Why should taxpayers trust the government when it is a responsible creator of the mess the career politicians and their financial backers ─ the same banks and insurance companies that pushed the “higher returns” that accelerated the freefalling meltdown ─ are now begging to be bailed out at any cost to taxpayers.

The ongoing implosion of the global financial infrastructure so dramatically exemplified by the government bailout of Bear Stearns, Freddie Mac, Fannie Mae, AIG and the bankruptcy filing of Lehman Brothers and 24 banks, with other takeovers and bankruptcies to surely follow, dictates that the government take its time and do things right this time ─ for a change.

The long slippery slope of globalization and financial deregulation has resulted in a financial meltdown that has put America where it doesn’t want to be ─ at the mercy of foreign government sovereign funds and a prolonged recession that is incurring trillions ─ not billions ─ of dollars of government debt faster than American taxpayers can acquire the means to pay it off.

Change: Obama/Palin Style

Change Obama/Palin Style (“COPS”) is exactly what America needs ─ or is it? The operative political consensus from both Senators McCain and Obama is that “change” is coming to Washington and the Beltway insiders are in for an unpleasant shake’n’ bake-wakeup call no matter who wins. America is going to have to come to grips with a change that is going to not only shakeup D.C., but the world. First term senator-African-American president, or small state woman governor-vice president, regardless of their experience and credentials, is unquestionably a 21st-century revolutionary change in U.S, politics. It is going to be one or the other. Either way it is a welcome change.

The ailing U.S. economy is the number one issue of the 2008 presidential election. Foreign affairs, national security and the conflicts in the Middle East and the Caucuses ─ and of course the wars in Iraq and Afghanistan ─ play second fiddle. Most American voters know very little about U.S. foreign policy and care even less. Their number one concern is domestic policy, which includes employment, an affordable home, health care and education for their children. Unemployment hit its highest monthly rate in five years as Republican Vice President Sarah Palin accepted her party’s nomination. U.S. joblessness rate shot up to 6.1 percent in August during the American political convention season while China basked in the glory of its outstanding opening-closing ceremony showmanship and stellar gold medal performance at the Beijing 2008 Olympics. America, notwithstanding the brilliant performance of the Redeem Team, came in a distant second in the gold medal count.

America is in desperate need for change, something both U.S. presidential contenders and their vice presidential nominees recognize and are addressing. The reality is that both the Democratic and Republican senators vying for the presidency are maverick Beltway politicos. Neither one has accepted or played by party conventional rules. Add to that a vice president that is not a traditional Beltway insider ─ notwithstanding her traditional values ─ and one has to acknowledge change is on its way to D.C.

Is the change, regardless of which party wins good for America? The criticism of both Obama and Palin is their lack of experience. What experience? The Washington Beltway “Good Ol’ Boy Network” failed domestic and foreign policies experience? Where does one start? Education, health care, housing, employment, social security, Medicare, federal deficit, failed foreign policies in the Middle East, the Americas, Iraq, Afghanistan, Russia, China…? Change, regardless of which party wins with their inexperienced team will be a refreshing political Redeem Team that can hopefully bring the change America so desperately needs.

Putinomics

Russia’s military invasion of Georgia, Stalin’s home state, has generated world condemnation and calls for economic sanctions. Economic sanctions are short sighted and won’t work. The minute any state questions or challenges Russia or its oil czar, Prime Minister Vladimir Putin, Russia instinctively resorts to Cold War totalitarian bombastic rhetoric and tactics, which includes military confrontation.

Putin is well aware of the response his Putinomic actions will elicit and is prepared to pay the price. He has called America’s bluff.

The new cold war Russia has launched, unlike the first one, is not a fight for military supremacy, but rather for respect and security. Putin is transforming Russia into a new economic oil and gas superpower with vast bargaining power over America and the European community. Russia is the world’s eighth largest producer of crude oil and the largest of natural gas. Russia is also third only to China and Japan as a holder of Western government securities. Moscow is using its energy clout for geopolitical gain. Especially in the regions that were once under Soviet control but are now independent countries.

Russia and Putin are angry and fuming at America for what they perceive as deliberate bad-faith dealings. It dismantles the Soviet Union and the Berlin Wall, folds up and abolishes the Warsaw Pact. And what does America do instead of being supportive and welcoming? It surrounds Russia with NATO and a missile defense system it places in the former Soviet puppet states of Poland and the Czech Republic to allegedly defend against any missiles launched from Iran. Sound right? Is it any surprise Russia invaded Georgia? Georgia lost a war with Abkhaz separatists in the early 1990s. Since then the area has been a self-declared republic that sought independence and finally got it.

The Cold War border effectively moved from Germany to Poland, Czech Republic and Georgia. Not bad for America. It thought it had a first down in Poland and the new Cold War until the ugly Russian interception and touchdown in Georgia. Moscow will not under any circumstances accept that America is the sole world superpower. Russia’s actions are supported and backed by the Russian people.

Russia’s strategic security will not be sacrificed and it is being secured with its recycled petrodollars loaned to the West. Imposing economic sanctions on Russia will only result in more economic and geopolitical interceptions by Russia that will cost America dearly. America, faced with a global recession it helped bring about, cannot afford to marginalize Russia and its Putinomic clout. America and Russia must reach an accommodation.