After the Debt Feast

The front page of the New York Times business section recently had a piece entitled, “After the Debt Feast Comes the Heartburn,” by Gretchen Morgenson (11/27/05).  It features a synopsis of research findings by Paul Kasriel, chief economist at the Northern Trust Company in Chicago, who says “We have the most highly leveraged economy in the postwar period.”  He’s not talking about the Vietnam police action.

Kasriel isn’t a lone voice.  Paul Krugman, whose specialty is international economic stability, likens the US to a Latin American economy.  Many will counter that by citing the size of the US economy; however, as the saying goes, “The bigger they are, the harder they fall,” and US production of tangible goods (manufacturing) has declined drastically over the past few decades.  General Motors is going to shed about 30,000 jobs (check fact) in the next few years, and this will have a ripple effect to other jobs.  Krugman’s concern has led him to personally change his behavior; he has changed his adjustable mortgage to a fixed mortgage.  I have too.

Kasriel includes real estate in his short list of concerns:  rising interest rates, record consumer debt, and a cooling housing market.  It’s cooling in Baltimore despite the Washington DC pressure.  This list doesn’t even include government debt, international trade debt, and the lurking concern that much of this debt is not being invested in creating productive capacity to grow the economy.  Rather, it is being consumed in the form of consumer products bought from China, military hardware, salaries and veterans benefits, and luxury goods being purchased by the wealthy 1-percent who have received windfall tax breaks over the past few years.

Kasriel thinks the party is coming to an end, and that the record consumer debt, combined with new a bankruptcy law, could turn an economic recession into an “accident.”  It was, in part, excessive leveraging that caused the crash of 1929.  But at that time, the US was not in debt to foreigners.

Of course, those who anticipate and prepare for an accident can fare well.  More can be said.

Howard Dean: Democratic Party Truth-Sayer

Democratic Party politicians are fearful of getting too far out ahead of the general public. They fear loosing voter support, or having statements spun by Republican attack macines, and the ditto-head echo chamber of right wing talk radio. This fear is legitimate; recall the famous Scream in the 2004 Iowa Caucus by Howard Dean that was the downward turning point of his presidential asperations. Nevertheless, many people think the Democrat’s fear of speaking the thruth makes the Democrats look weak, or worse. This is a dilemma for the Democrats.

The solution: Howard Dean. He has already established his credentials for speaking the truth. On the one hand, as Democratic National Committee Chair, he represents a voice of the Democratic Party. On the other hand, individual Democratic politicians can safely distance themselves. In this way, the general public hears a truth-telling message from the Democrats without any individual politician taking the risk.

Recent Examples: In justifying the need to get out of Iraq, Dean recently said, “This is the same situation we had in Vietnam. Everybody then kept saying, ‘just another year, just stay the course, we’ll have a victory.’ Well, we didn’t have a victory, and this policy cost the lives of an additional 25,000 troops because we were too stubborn to recognize what was happening.” This was spun on the Drudge Report to read “Dem Chair Dean: USA Won’t win in Iraq,” something to which no elected official would want their name attached.

Dean can also attack the President, which cannot be done by politicians who might need a favor from Bush at some point. For example, Dean recently said, “The President said last week that Congress saw the same intelligence that he did in making the decision to go to war, and that is flat out wrong.” Dean went on to give examples.

Bottom Line: The Democrats have a strategy for speaking the truth, while protecting their elected politicians. We’ll see if it works.

Freedom and Fear

Writer Alan Paton’s “Cry, The Beloved Country,” set in 1940s South Africa, includes a revealing passage that explores the fears whites had of the natives. In doing so, he touches on several forms of freedom and the conflicts between them: Freedom for the natives, freedom of white’s conscience, freedom from fear of the known and unknown. A similar situation exists between so-called “terrorists” and people who accept President George Bush’s framing of the World.

Yes, there are a hundred, and a thousand voices crying. But what does one do, when one cries for this thing, and one cries for another? Who knows how we shall fashion a land of peace where black outnumbers white so greatly? Some say that the earth has bounty enough for all, and that more for one does not mean less for another, that the advance of one does not mean the decline of another. They say that poor-paid labour means greater markets and greater scope for industry and manufacture. And others say that this is a danger, for better-paid labour will not only buy more but will also read more, think more, ask more, and will not be content to be forever voiceless and inferior.

Who knows how we shall fashion such a land? For we fear not only the loss of our possessions, but the loss of our superiority and the loss of our whiteness. Some say it is true that crime is bad, but would this not be worse? Is it not better to hold what we have, and to pay the price of it with fear? And others say, can such fear be endured? For is it not this fear that drives men to ponder these things at all?

We do not know, we do not know. We shall live from day to day, and put more locks on the doors, and get a fine fierce dog when the fine fierce bitch next door has pups, and hold on to our handbags more tenaciously; and the beauty of the trees by night, and the raptures of lovers under the stars, these things we shall forego. We shall forego the coming home drunken through the midnight streets, and the evening walk over the star-lit veld. We shall be careful, and knock this off, and knock that off our lives, and hedge ourselves about with safety and precaution. And our lives will shrink, but they shall be the lives of superior beings; and we shall live with fear, but at least it will not be a fear of the unknown. And the conscience shall be thrust down; the light of life shall not be extinguished, but be put under a bushel, to be preserved for a generation that will live by it again, in some day not yet come; and how it will come, and when it will come, we shall not think about at all.

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