Not My Fault!

Okay, at the beginning of the week I proclaimed that the market improvement we've seen recently looked like just another bubble to me — then, at the end of the week, all the indices take big hits.

Honest, though, I didn't do it. Blame somebody whose blog actually has readers. (I do this for the sake of posterity or, more to the point, so I can check on how right or wrong I've been over the years.)

Okay, again — and for the sake of "posterity" — I still think the markets are overpriced by 15 to 20 percent. When the financials finally are forced to write down their losses, I can't see how the markets won't wind up taking another big hit. If Congress and the Administration ever agree on a financial regulatory bill with some real teeth, that will impact the numbers as well. With some sensible reserve requirements, the big banks won't be able to play quite so fast nor so loose.

Continuing in my usual pessimistic vein, I'll also predict that the recent rise in GDP will fall off again — that the "recession is over" news was the product of a little stimulus package and a big statistical blip. I just hope the upcoming bad news is not sufficient to inspire voters to give the Republicans another try in 2010 — the goddamned Democrats are bad enough.

Economic reform?

Why are the stock markets doing so "well" lately? Clearly, it's not because the businesses whose shares the markets trade are posting increased profits. Some of the increase in stock prices may be accounted for by the falling value of the dollar — as the dollar weakens, it takes more dollars to buy anything — but that's not the whole story.

Who, we may wonder, is bidding up the price of stocks, and where are they getting the money to do it in this economic environment? Look no further than the investment branches of our banking behemoths, using cheap, government guaranteed credit. To me, it's looking like another bubble — and given the poor shape of a lot of American businesses, it seems pretty obvious that their price to earnings ratios over the past few months have been falling like it's the nineties again.

A lot of people are blaming a handful of conservative Democratic senators for the lame, half baked efforts coming out of Congress for reforming the financial system. I suppose they have their part to play, but the real fault lies with the White House.

If the Obama administration genuinely wanted to bring Wall Street to heel, it could be making a far more aggressive effort than we've seen. Fiddling with executive pay packages may score a few populist points, but in the long run (or even the short run), it means nothing. Some of us remember that the whole corrupt bonus system arose out of efforts to rein in executive pay during the Carter administration.

As for regulating derivatives, there are enough holes in the proposed legislation to accommodate every rat looking for a way through — and damned near as many in the proposal for the consumer protection agency. Instead of breaking up the institutions that were "too big to fail," government has helped them grow even larger through mergers and acquisitions.

Paul Volcker has been out there, crying in the wilderness for genuine reform — rolling back the Clinton administration's gutting of whatever remained of Glass-Steagall, and separating banking's commercial and investment sectors again. The White House will not be doing that anytime soon — at least not as long as two of the three Clintonistas who engineered that gutting remain in power. Robert Rubin may be gone, but he left Larry Summers and Tim Geithner behind to look after the interests of the Wall Street power brokers.

Well, viva Volcker. The White House is ignoring him, but at least he's getting some attention in the press.

The Peace Prize??!!

Everybody knows the Nobel Peace Prize has been politicized for quite a while now. Every once in a while, the political aspect seems to coincide with a genuine contribution to peace, like when it was awarded to Muhammad Yunis in 2006, or Médecins Sans Frontières in 1999. Nobody can deny that Begin and Sadat deserved the 1978 prize for negotiating the only lasting peace agreement in the Middle East that any of us can recall, and that Jimmy Carter's role in that agreement plus the work of the Carter Center in succeeding years qualified him for the 2002 prize. Speaking of lifetime achievement, Martti Ahtisaari, the 2008 laureate also was no slouch.

When Al Gore won the prize in 2007, mostly for a PowerPoint presentation, it was pretty silly — but, at least, he'd done something. So what did Barack Obama do?

So far, nothing. Maybe the committee was hoping awarding him the Nobel would encourage him to continue resisting McChrystal and refrain from escalating the war in Afghanistan. If so, I suspect they'll be disappointed. Our President, in all likelihood, will continue in his wishy-washy, distinctly non-heroic pattern of splitting the difference.

More likely, though, Obama was awarded the prize for one simple reason: he's not George W. Bush.

Hey, Norwegians! I'm not George W. Bush either! Where's my million-and-a-half bucks?

Obama and the Generals

It is heartening to see Obama taking some time before responding to McChrystal's request for another 40,000 troops for Afghanistan. The Biden proposal apparently has been altered a bit, to my disappointment, in that troop reductions seem to be out of the picture at the moment; but it seems we truly are lucky not to have President McCain, who seems to believe that anything a general asks for should be delivered immediately.

My guess is that the real holdup is the lack of a viable Afghanistani partner due to Karzai's almost laughably transparent manipulation of the election results. Can Obama hang in there and do little or nothing until that mess is straightened out? Maybe.

His first order of business, though, must be pulling back the undermanned, isolated outposts in the south to cut back the alarming increase in American fatalities. The Taliban — or whoever is organizing the attacks on those outposts — is demonstrating considerable military skill and determination, with well planned assaults rather than spontaneous raids.

As for McChrystal and the generals, Obama must bear in mind that they are military men who automatically think of military solutions for every problem — and as the Soviets learned some years back, a military solution might not be a solution at all.

Public option? Who cares?

Okay, the Senate Finance Committee has turned down the "public option" in its health care bill — to which I say, "So what?" If people actually were paying attention, they'd know that any real public option — to wit, one that actually could lower the cost of health care — never even was considered by either the Senate or the House.

The alleged public option was always nothing more than a choice for individuals forced to buy their insurance via local or regional "exchanges." It never was an option for employers, and employer funded health insurance is where the money is.

So, some paranoid Republicans possibly think such tiny and limited public options might be a "first step" towards SOCIALIZED MEDICINE (gasp, wheeze, urinate fresh white tennis trousers) and some not especially bright liberal Democrats think public options can successfully compete with private plans even under enormous constraints. Nothing ever has prevented the American Public from electing individuals who are enormously stupid.

If there's no public option for employers to buy into, there is no real competition. The so-called public option now under consideration is just a straw horse, set up so as to be knocked down — or not — but it doesn't matter to any real extent. It serves only to differentiate "liberal" Democrats, "moderate" Democrats, and Republicans — and if that's all that matters, we may as well roll over and go back to sleep.