CounterPunch Diary On the Rocks


I write these words at the end of a week in which:
A new Democratic president, Barack Obama, via his Attorney General, has explicitly endorsed Bush’s policy on renditions and Bush’s refusal to recognize the jurisdiction of US courts in any legal proceedings in this regard; also a week in which Obama’s solicitor general has explicitly endorsed Bush’s policy on enemy combatants.
I write not long after the New York Times reported that state welfare rolls are actually shrinking in months when unemployment has risen to real totals of 17 and 18 per cent – 1.7 million in Dec and Jan, hence when more and more people are in desperate straits. This is a consequence of a former Democratic president’s “reform” of welfare in the mid-90s.
Back then, Clinton reached out in the spirit of bipartisanship to Republicans to effect this piece of legislative savagery. In the same spirit of bipartisanship Obama invited a New Hampshire right-winger, Judd Gregg, to be his Commerce Secretary, while simultaneously pledging that Judd’s vacated seat would be filled by… a Republican! Ultimately, Judd contemptuously kicked away the proffered hand of friendship.
For much of last year progressives rallied support for Obama not just with scenarios of the destruction that would be wrought by John McCain, but with screams of fear at the menace of right-wing populist insurgency, embodied in the supposed threats to mainstream consensus represented by Ron Paul, Mike Huckabee and Sarah Palin. You know, fascists; at least two of them Christian fascists. Head for the deep shelters and vote Democrat! Vote for change.

The menace of the Christian hordes? Christians now exult that Obama is talking of a waiver on constitutional prohibitions concerning federal support for faith-based initiatives. As the Los Angeles Times editorialized angrily last week, “Like his predecessor, Obama has supported providing federal grants and contracts to social-service programs operated by religious groups. The surprise — an unpleasant one — is that he is equivocating on a campaign promise to condition such aid on an agreement by religious charities not to discriminate in hiring.”
And meanwhile, in America as across the planet, it’s economic devastation, near and far. Here in northern California I walk into a local plumbing store, a large place used by building contractors. There’s one other man in the store, buying a $5 plastic fitting. One of the owners says there’s zero new construction in the area. “We fix a few toilets. The only people actually building are the marijuana growers down in southern Humboldt.”

Take out Humboldt’s good fortune in being in the Emerald Triangle and multiply by every plumbing store in America. Throw in the idled lumber yards, construction stores, paint suppliers, and building crews. Count in the car lots that are going out of business because the banks won’t finance car loans. Go to the lost auto assembly jobs. It tots up to job loss across America just in December and January of 1,175,000. And that’s an underestimate. Every president since Reagan, particularly Clinton, has jimmied the unemployment criteria to produce an undercount. The actual number for the two months is nearer one and three quarter million. The actual total unemployment rate, according to statistician John Williams, on pre-Reagan criteria, rose to 18 per cent in January, from 17.5 per cent in December.

These are numbers out of the great Depression of the 1930s and it’s going to get worse in the next few months as businesses put up their shutters. The air is whistling out of the American economy. We’re now heading into the Feb-May trough dreaded by every retail store on every Main Street in America. Consumer spending is dropping longer and faster than at any time since they began keeping records in 1947. A quarter of all home-buyers are late on mortgage payments or in foreclosure. People inch through monthly payments on maxed out credit cards.

My own state of California – often touted as the eighth largest economy in the world — can’t pay its bills. There’s a shortfall in revenues and it can’t sell enough bonds. On January 26 the California State Controller John Chiang announced that the state is going to print its own money. If the state owes us money we’ll get this scrip as IOUs. Who knows, in happier times maybe we can hawk them on e-Bay. Student aid and payments to the disabled and needy will also come in the form of IOUs. Governor Schwarzenegger and his aides are negotiating with the banks to get them to accept the IOUs as deposits.

America is in economic meltdown. In Washington President Obama has been battling for his stimulus plan, with the Congress now totting up the exact total – somewhere around $800 billion. Although it’s the largest such package in US history the New York Times’ Paul Krugman, resplendent with his Nobel prize for Economics, has torn into it for being way too skimpy and conservative, far too respectful of Republican prejudices against hand-outs to anyone without a 10021 zip code, a Wall St business address and a mansion in Connecticut or Long Island.

The Republicans have elected to array themselves in implacable opposition to the package – surely the stupidest political strategy available for public inspection since Walter Mondale tried to beat Reagan in 1984 by promising to raise taxes. One of the maddest moments was when they raised Herculean guffaws at money requested for a program trying to figure out the decline of the honey bee. What use is the honey bee – damn bug, buzzing around in the spring, pollinating!

When Obama went last week to Elkhart, Indiana, where official unemployment is running at over 15 per cent because no one wants to buy a recreational vehicle, he invited Indiana Republican Senator Dick Lugar to come along. Lugar declined – a petty, sectarian display of a sort which could cost Republicans badly in the 2010 midterm elections.

Obama’s package is meant to generate three to four million new jobs which will maybe cope with job losses from December through next April if we’re lucky. It’s piecemeal: a wad of money for schools, for health insurance for all children, for “infrastructure” – which means good times for cement pourers. But as Paul Craig Roberts has pointed out many times on this site, to clamber out of this terrible economic hole Uncle Sam has to start making things he can sell abroad. That way the nation can offset the problem of running huge deficits importing things from China. “Infrastructure repair” doesn’t do that. It causes traffic jams for the next ten years as the highway lobby gets its new overpasses, underpasses, bridges, freeway exits and toll-road expressways, none of which can be sold overseas and all of which don’t restore America’s near-dead manufacturing economy.

Obama’s Treasury Secretary Tim Geithner tried to sell his bank bail-out plan earlier this week. He deservedly drew an F because in his mumbled prospectus he conceded he didn’t actually have a plan, but was toiling night and day to come up with one. Markets duly plunged. In outline, the prospective trillion-plus plan has the usual forced perspective of a banker, whose idea of rescue is to lend people money, thus drowning them in even more debt. Americans don’t need more debt. They need debt relief.

Obama’s bailout plan, added to the FY 2009 budget deficit he has inherited from Bush, opens a expenditure hole of about $3 trillion. As Roberts, former assistant secretary of the Treasury in the Reagan years, pointed out here last week, “Who is going to purchase $3 trillion of US Treasury bonds? Not the US consumer. The consumer is out of work and out of money. Private sector credit market debt is 174 per cent of GDP.” The sum is too big for the increasingly wary Chinese and Saudis to underwrite by buying Treasury bills where interest yields are have been so low that one joke, quoted by CounterPuncher P. Sainath, is that the US Treasury is the only institution in the world to be actually abiding by Islamic prohibitions on usury.

Failing everything else, there’s the government printing press, which can roll out the dollars and add inflation to unemployment.
The Republicans don’t have a plan, and though Obama has been energetically selling his package even his fans are beginning to wonder if he really has a convincing vision either. Americans can understand something big in the way of make-work – like Roosevelt’s dams, or the construction of the interstate highway system in the 1950s, or Kennedy’s space project or even, in its ultimate absurdity and waste, Reagan’s Star Wars plan , still unworkable and now consuming 19 per cent of the Defense budget. There’s nothing rhetorically tremendous in Obama’s stimulus plan, just a billion here and a billion there, on and on in an endless array.

There’s always something cloudy about Obama, just when I’ve almost persuaded myself to like the guy, always hedging his bets, doffing his cap to the ruling powers, even micromanaging his press conferences so there are no follow- up questions. That meant last week he didn’t have to deal with Helen Thomas following up on her initial inquiry as to whether he could name a nuclear power in the Middle East. Obama stalled until his aides could force Thomas to sit back down. The blacks his press secretary installed in the front row said later they were just put there as window dressing.

America is broke but here’s Obama , seemingly set on boosting a US force in Afghanistan where, according to the Center for Budgetary Analysis, it costs $775,000 per year to send a single soldier. And, as I noted at the outset, this week Obama punched his core supporters twice in the stomach by committing his administration to the same unconstitutional canons of secrecy and claims of executive immunity to the rule of law that made Bush one of the most hated presidents in history. His staff can’t seem to nail down safe appointments. In sum, in these crucial early weeks, Obama seems to have trouble setting his compass, as the ship heads towards the rocks. But hey, at least we have a Democrat in the White House, saving us from endless war, constitutional abuses and bank bailouts, right?

Could the Press Have Nailed Madoff Years Ago?

Bernie Madoff is one of the great thieves of history. He looted $50 billion. His criminal career stretched across a generation. Is it conceivable that no suspicions were aroused, no warning bells sounded the alarm? Of course they were and they did. As a stockbroker, CounterPunch’s Pam Martens was on to Madoff’s game in 1991. Wall Streeter Harry Markopolos had him cold in 1995 and gave a detailed outline of Madoff’s Ponzi game to the SEC which did nothing.
If only the press had gotten hold of Markopolos’ report. Just think what the Wall Street Journal would have done with it. Madoff would have been arrested and four more years of robbery – his biggest years – stopped in its tracks. But wait! The Wall Street Journal did get Markopolos’ report in 2005, straight from Markopolos. Markopolos says he also alerted the New York Times.

The incredible story of how the watchdogs of the Fourth Estate took good care to doze in their kennels is told at length by Eamonn Fingleton in the new edition of our CounterPunch newsletter. Amid the death throes of the old corporate press, Fingleton pitilessly excavates one of its greatest failures. The smoking gun was placed in their newsroom in-trays and they carefully looked the other way.
Also in this new edition of our newsletter Paul Craig Roberts concludes his three-part series on economics, — the shortest, sharpest guide ever written.

Let me quote a couple of paragraphs:
Modern economic theory is based on “empty-world” economics. But, in fact, today the world is full. In a “full world,” the fish catch is limited by the remaining population of fish, not by the number of fishing boats, which are man-made capital in excess supply. Oil energy is limited by geological deposits, not by the drilling and pumping capacity of man-made capital. In national income accounting, the use of man-made capital is depreciated, but the use of nature’s capital has no cost. Therefore, the using up of natural capital always results in economic growth.
For example, the dead zones in the Gulf of Mexico from fertilizer runoff from chemical fertilizer farming are not counted as a cost against the increase in agricultural output from chemical farming. The brown clouds that reduce light over large areas of Asia are not included as costs in the production of energy from coal. Economists continue to assume that the only limits to growth are labor, man-made capital, and consumer demand. In fact, the critical limit is ecological.
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