Venezuela

Venezuela is a mess — and in a list of countries that could benefit from a coup d'état, Venezuela would be pretty close to the top.  That said, it should be their coup d'état, not ours.

The Venezuelan economy was not destroyed by socialism: it was destroyed by incompetence. Venezuela's oil fields were nationalized in 1976, but by the late 1980s they once again had fallen under the control of foreign multinational oil companies, with profits going primarily to big oil and Venezuelan plutocrats.  Hugo Chavez came to power in 1999, on a promise of returning oil profits to the people — and he did.  There were massive improvements in education, health care, and other social goods.  The main beneficiaries were the poor.

That's when the incompetence kicked in.  Valuing loyalty over expertise (sound familiar?), Chavez replaced virtually everybody who knew anything about running an oil company with a political supporter.  As time went on, maintenance was neglected, equipment wasn't replaced, corruption flourished, and production fell steadily.  Persistent US economic sanctions (the oil companies were really pissed!) didn't help at all.

The Bush Administration organized a coup attempt in 2002, which accomplished nothing but alienating most of Latin America — even though the Bush team at least tried to be sneaky about it.  When Chavez died and Nicolás Maduro took over, oil revenues continued to fall, and so did the fortunes of the Venezuelan people.  Maduro seems to have no goal other than to stay in power.

Juan Guidó recently claimed the presidency following an encouraging phone call from Mike Pence; and John Bolton cheerily applauded the impending privatization of Venezuelan oil.  Guidó comes from a far-right political party that represents only a fraction of Maduro's opposition, but a lot of Venezuelans seem willing to take what they can get, provided it's not Maduro.  Even many of the poor are deserting the Chavezistas in the face of economic catastrophe.  The oil barons are licking their lips.

If Guidó does come to power, at least Venezuelans will get an influx of sorely needed economic aid.  Hopefully, he can do it without the American invasion Our President says is "on the table."  Maduro is right when he says it could turn into another Vietnam: numerous past US interventions in Latin America have left us few real friends south of the border. Of course, Tr*mp might invade just to distract attention from the Mueller investigation.

We'll have to wait and see — probably not for long.

Yemen

Is the enemy of my enemy, etc. etc... ?  Apparently not.

We have heard Yemen described as a proxy war between Saudi Arabia and Iran, and I suppose that's accurate enough a description.  We've also heard it described as an outgrowth of the classic Middle Eastern conflict between Sunni and Shi'a Islam.  That, I'm pretty sure, it is not.

The Houthi are adherents of the Zaydi sect, which is an offshoot of Shi'a Islam, but not nearly orthodox enough to satisfy the clerics who hold power in Iran.  Iranian Muslims supporting the Houthi because they're, sort of, Shiite, would be kind of like the Roman Catholic Church supporting Seventh Day Adventists because they're sort of...  well, you get it.

Move over to Iraq, and you find Sunni clients of the USofA fighting the Sunni zealots of Daesh, aka all those other names and acronyms tirelessly repeated in the American press.  Why are Sunni fighting Sunni?  Not because IS (aka etc. etc.) is especially naughty what with the beheadings and whatnot.  No, it's all about the usual, just as it was from the time of the Cheney invasions or even the CIA's 1953 overthrow of the democratically elected Mosaddegh government in Iran and installation of the Shah.

It's about the oil.

That's why Saleh could be fighting the Houthi one minute and supporting them the next.  That's why the Egyptian military, an equal opportunity oppressor of Islamists no matter what branch of Islam they spring from, is out there trying to restore Hadi to power.  That's why Americans, even some in government, are having such a hard time figuring out how and why anybody is putatively allied with anybody out there around the Persian Gulf.

Don't be confused.  Just follow the money.  Follow the oil.

What next for Libya?

Now that NATO has enabled the "Libyan rebels" to push Qaddifi (aka Gadaffi, Ghadafi, Khadaffi, etc.) out of Tripoli, it is time to start wondering who will be running the alleged "country" in the future. According to the New York Times, "Colonel Qaddafi proved to be a problematic partner for international oil companies, frequently raising fees and taxes and making other demands. A new government with close ties to NATO may be an easier partner for Western nations to deal with."

This motivation for the invasion has been clear enough from the beginning, but the question remains: who will govern Libya now that Qaddifi, albeit uncaptured and not thoroughly vanquished, is out of power? The situation might prove more problematic than dealing with the old Colonel himself.

The "Transitional National Council," currently "speaking for" the "rebels," seems to consist of expatriates from Europe and the United States, a few defectors from Gaddafi's government (one of whom already has been assassinated), and a couple of tribes traditionally opposed to Ghadiffi's tribe. They are not the stuff of a unified government.

Well, whatever "government" emerges from the wreckage, I suppose there will be some contracts negotiated for Libyan oil. My suggestion, similar to my suggestion for Afghanistan, is that the western powers let the tribes work it out for themselves. Tribalism is the basic political motif for the middle east, so the best idea is to go with it. (Afghanistan, by the way, needs a loya jurga, not an "elected" government, to get it back on the road to nationhood.)

Meanwhile, though, let us all hope that Libya can begin to ship oil again — so that European (and world) oil prices can decline a bit. Will it make up for the expenditures of the Libyan War?

Who knows.

Yikes!

As much as I hate to admit it, occasionally I'm wrong. Very occasionally, I'm extremely wrong.

As gasoline prices drop below $3 a gallon, commodity prices in general crash, and the CPI comes in unchanged, I have to consider the possibility that my fears regarding inflation (and the concomitant stagflation I've ranted about) well may be unfounded. On the other hand, all of us might be in better shape if I'd been right.

Gasoline prices fell because the price of oil is down, due, we're told, to a steep drop in demand. And how much of a drop in demand does it take to bring about a 50% drop in the price of a barrel of light, sweet crude? Since oil is valued in dollars, the calculation is easy -- 50% -- and we know it can't be just from people cutting back the mileage they put on their SUVs.

(Yes, I know -- gasoline prices have fallen by about a third, not by a half. So where has that extra money gone? Give it a little thought. It will come to you.)

Since we haven't exactly gone green in the past few weeks, demand for oil ought to be a pretty good indicator of the world's level of economic activity -- which leads one to surmise that the global economic slowdown might be a good deal worse than we've been told. Also, consider that if the CPI has dropped again the next time the figure comes out, we'll have entered the realm of deflation. Bye bye recession, hello depression.

Apparently, a new stimulus package is in the works. I sincerely hope there are no "checks in the mail" to individuals this time, given how little multiplier effect there was last time. Previously, I called for aid to the states, tied to infrastructure spending, to get the construction trades back to work. Now, I say, just give the money to the states -- no strings attached. A lot of it easily can be spent on infrastructure -- not even by creating new projects, but just by continuing existing projects. Did you ever notice how the roads always seem to get repaired in the months just before an election? Keep fixing those roads, governor! Build us some new schools, and repair some bridges! Even if all the contracts are assigned by patronage, and half the federal aid is used to pay relatively unproductive bureaucrats, people who otherwise might be unemployed will be working instead.

Of course, nobody actually has a clue what's really going on in the economy. Bernanke really seem to be playing it by ear, and Paulson changes direction as often as John McCain. Movement in the stock markets, as you've noticed, is totally erratic. Marketplace should forget about playing "We're in the Money" or "Stormy Weather" when it reports the Dow and the NASDAQ, and just play Willie Nelson's "Crazy" every time.

Way back in my youth, there was a frequently quoted fortune cookie that went something like this:

"May you live in interesting times."
-- ancient Chinese curse

Well, whatever. Life sure is interesting these days -- but I can't help but hope that out of this painful mess may arise a kinder, happier, post-capitalist world.

The next economic stimulus package

As I predicted way back on Groundhog Day, that stimulus package that was supposed to rescue us from economic stagnation turned out to have been a bust. The reason, clearly, is that it was more a product of political considerations than economic considerations. Giving away "free" money always is popular with the public, but it wasn't especially helpful.

To the extent that the cash was used to pay down consumer debt, it may have delayed some write-downs by the banks -- but given the state of American indebtedness, most of those who used their "Bush Bucks"* to pay credit card bills probably were in just as much trouble when the next month's batch of statements arrived.

It seems likely that most of the remaining rebate money was spent on gasoline. The part of the oil company profits that didn't go overseas went to the usual fat cats, and wasn't spread through the economy to any significant extent. The multiplier effect of the rebates, it follows, was insignificant.

Now Democrats are talking about another stimulus package. Mind you, just before a national election is really a very bad time to discuss an economic stimulus because there's no possibility that politics won't play a big role in what takes shape -- but there are a few level heads in the relevant Congressional Committees, so perhaps there are a few rays of hope for a genuinely helpful package this time.

The hardest part will be enacting a package without rebates. A new round of rebate checks will be no more helpful than the last round -- but the temptation to woo voters with dollars may be too strong to resist. If the presidential candidates get on the rebate bus, there's absolutely no hope of putting the money to better use.

To be worthwhile, stimulus spending must be targeted. A good start would be direct financial assistance to state and local governments. State and local governments are major employers, and many state constitutions mandate balanced budgets. When sales tax revenues fall -- and they have fallen fast because of the current recession -- government employees are laid off.

Not all aid to the states should wind up in their general funds, though. Some should be specifically targeted towards infrastructure improvements. Workers in the construction trades were particularly hard hit by the collapse of the housing market, and infrastructure projects could put many of them back to work.

Yes, politically connected contractors, as always, would get the lion's share of the contracts -- but I don't care if certain brothers-in-law profit so long as they are paying worker salaries. In my ideal world, contractors being paid with federal funds would be required to hire union workers, but that's probably way too much to hope for, even if the Democrats win big in November. There still are entirely too many "New Democrats" out there.

If there was anything good about the 2008 Farm Bill, it was the improvement in the Food Stamps program (now to be known as the Supplemental Nutrition Assistance Program for the sake of a snappy acronym), but rising food prices make even more improvement necessary. I also was pleased by the expansion of unemployment insurance benefits. Both programs pump money into the economy at the bottom, where it is certain to be spent, and have the greatest multiplier effect.

In the long run, though, no economic stimulus will be especially effective if it drives the federal government deeper into debt, further depressing the value of the dollar. To the greatest extent possible, federal stimulus spending should be paid for with cuts in other areas. I can think of two places to cut, right off the bat: oil subsidies, and agricultural subsidies. Big oil and big agribusiness have been making out like bandits (an apt comparison) while the rest of America has been suffering.

I'd also suggest changes in the Alternative Minimum Tax: index it for inflation, so that Congress need not go through it's annual ritual of raising the floor amount; and make what essentially is a flat tax progressive, so that the super- and super-duper-rich pay more than the current 28%. Of course, the AMT could be eliminated entirely if Congress had the guts to undo some Reaganomics and create a couple of higher tax brackets for both individual and corporate income taxes.

In brief, I think the people who got us into our current mess should pay to get us out of it.

*(Note: I heard the expression "Bush Bucks" from my daughter. I don't know how widespread its use might be.)

Maliki to Bush: "Scram!"

How embarrassing! Our President, seeking to establish a puppet regime in Iraq, seem to have backed the wrong horse. Somebody should have told him it's not the 1950s anymore.

Twice in two days, top-level Iraqi officials have indicated that any pact with the U.S. must include a (gasp) "timetable" for withdrawal. A timetable? Withdrawal?!! Heaven forfend! Why, just a few days ago, John McCain was suggesting that Iraq might turn out something like South Korea, with a permanent U.S. troop presence -- just looming around, you know -- with nobody actually shooting at them.

"Not good enough," say our Iraqi allies in the Persian Gulf region. "Look, if you keep troops in Iraq, how in hell are we supposed to establish a workable relationship with our Shi'ite brothers in Iran? And it's embarrassing [yes, everybody's embarrassed] that we needed you to help us dump Saddam but, shit, we have to live here! So goodbye, and we'll handle it now. You're doing us more harm than good."

Meanwhile, at the G8 summit, leaders of some countries that used to be the world's leading industrial nations are busily recording sound bites. Goodbye, global warming! Don't despair, developing world, the lunch bucket will be arriving any day now!

Uh huh. But meanwhile:

"Overall, the summit's main goal will be demonstrating confidence that they can 'work through the oil crisis without causing the global economy to melt down,' said Tom Cooley, dean of New York University's Stern School of Business."* That's a mighty important goal, but we're unlikely to accomplish it without involving China, India, Brazil, and, perhaps, Indonesia. Eight is Enough works as a late-night nostalgia sitcom, but it doesn't make much sense in contemporary real life.

The price of oil

First, let me make it clear that I'm not at all upset by the rising price of gasoline. For the first time since the 1973 OPEC oil embargo, Americans are driving fewer miles -- only 1.8% fewer, according to what I heard on NPR, but perhaps if prices continue to increase so will that percentage. Better yet, manufacturers are selling fewer trucks and SUVs, and small, fuel efficient cars are in great demand. In urban areas, more people are using public transportation.

I've made big changes in my driving habits from last summer. Now my favorite beach is too far away for frequent visits, and so is Boner the Wonder Dog's favorite dog park. Most often we swim together now, combining our excursions at a park much closer to home. I've decided that five MPH over the speed limit is fast enough. Most of us can find ways to save on gasoline without too much effort -- although the impact of trucking costs on the prices of virtually everything we buy will be pretty unpleasant, and I'm afraid there will be a lot more people who won't be able to afford to heat their homes next winter.

One thing is certain -- the current situation is different from anything we've encountered in the past. As an official graybeard, I remember the last time we Americans changed out driving habits, and it wasn't the same at all. Back in 1973, during the embargo, there actually was a shortage of oil. We lined up at gas stations on alternate days, depending on whether our plate numbers were odd or even. Gas prices were up, but the main reason we drove less was because there just wasn't enough gas to be had.

Today, though, there's plenty of gasoline to go around -- anyplace you go, worldwide, you can pull into a gas station and fill up. Considering that total mileage driven by US drivers has dropped only 1.8% from last year and gas prices have doubled, it's pretty clear that the kind of supply and demand you learned about in high school doesn't apply.

Oh, yeah, we're supposed to blame the speculators.

Well, think about this: if your real wealth is vested in something with only nominal value, and that nominal value is going down, doesn't it make sense to transfer your wealth into something with real value? Dollars have only nominal value. People actually need to consume commodities, so their value is real. Moving wealth from dollars (or the financial institutions that deal in dollars) to commodities like oil and wheat and copper isn't some sort of evil plot, it's just common sense.

If you need somebody to blame, try Allan Greenspan. He really never was as all-powerful as he wanted us to think he was but, what the hell, blame him anyway. He got the credit during the so-called "good" years, so he might as well get the blame now that everything has come crashing down. It was cheap, easy, unregulated credit that made it possible for now tanking hedge funds and investment banks to create one bubble after another. It was cheap, easy, unregulated credit that made it possible for those hedge funds and investment banks to "leverage" their limited assets at rates of twenty to one.

The moral of the story is that credit has been too damned cheap, and "leverage" has to cost more. There already have been too many cuts in interest rates, and the dollar has fallen too far. We can deal with recession, because the alternative is worse. Strengthen the dollar now, and the crazy food and fuel prices inevitably must fall.

This is not your usual political crisis, so our usual political response won't do the trick. We need Ben Bernanke and the other Fed governors to bail us out of a problem politics can't solve otherwise. We need higher interest rates for a stronger dollar -- and only that will pull gasoline prices back down to something that feels vaguely normal.

How did you spend your rebate?

I thought it was kind of serendipitous that my $600 rebate and my $650 fuel oil bill arrived on the same day. Easy come, easy go.

Today, though, I bought an immense heap of pork chops, a gigantic jug of laundry detergent, and a huge package of frozen breakfast sandwiches at Costco. I think I'd have bought those anyway, since no matter how bad the economy gets I will endeavor to continue eating and wearing clean clothes. (By the way, the frozen sandwiches cost no more than they would cost if I made them myself. Granted, they don't taste as good as homemade, but they also don't leave me with a greasy frying pan to wash.)

Okay, I also stopped at the music store and picked up a new harmonica holder, but I'm really trying to economize where I can. It's not because my income is down -- I recently started collecting Social Security, so my income is up quite a bit. Just the same, every time I pull into a gas station or shop at a super market, I feel my new income being drained away -- and I feel really fortunate to have that new income. What are other people doing?

In the meanwhile, though, the President, Wall Street, and most of the mainstream economists are talking as if the alleged "stimulus package" is about to deliver us from evil. I don't see it. I see virtually all the stimulus money going to the oil companies and agribusiness, and a good chunk of the agribusiness money going to the oil companies. In other words, the main thing I see the stimulus payments stimulating is the demand for oil.