Sunday, February 22, 2009


This week the doomsaying over the world financial crisis became hard to ignore. In a Reuters report, Paul Volcher was quoted as saying, "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world". George Soros likened the current tailspin to the financial collapse of the Soviet Union, a turbulence more severe than the Great Depression. (Pedro Nicolaci da Casta/Juan Logoria reporting)

According to Soros, the financial system worldwide has "effectively disintegrated".

Topping the list of radical measures to meet this crisis, we have the idea of nationalizing the banks, and the less discussed notion of abolishing the Federal Reserve altogether, and printing "greenback" dollars, as Lincoln did during the Civil War. This was money not borrowed nor beholden to interest payments, but created from whole cloth, so to speak, on the full faith and credit of the USA.

The world today has stepped into a hole, and no one yet knows how deep it is. The terrible danger is in not being able to put a reliable number on the numerous debts and defaults that the banks are holding.

The best argument for nationalization of the banks is that it would make all the "toxic" papers visible. This would act like a formal bankruptcy proceeding; by audit and evaluation of all holdings, examiners could be able to advise as to invalidating the credit swaps or making the necessary markdown of assets. Some debt would be written off in this process.

Without such examination and consolidation, it seems futile to try piecemeal bailouts for banks, on the order of a $trillion or a $trillion-and-a-half, against an occult debt, that may run to the tens of trillions of dollars. But this is the avowed policy of the new administration, plus a supplement of around $800 billion to stimulate the economy.

Abraham Lincoln believed a government had the power to issue its own currency, and was not bound or obligated to borrow it from private sector sources. The Federal Reserve is a collection of powerful banking interests, which have insinuated their way into the status of a "semi-governmental agency", by the power of compound interest. We might want to change that at some point.

Secretary of State Hillary Clinton travelled to China this week, with hat in hand, it has been said. And under the circumstances, the Chinese are not altogether happy with the posturing of certain American politicians, who accuse China of manipulating its currency, the yuan. And the Obama administration includes some of those trying to scapegoat China; but the light has not yet gone on in American heads to acknowledge that US lifestyles are to some degree negotiable, contrary to longstanding belief, since all other nations are beset by this calamity. There is undoubtedly a lot Americans can learn from the collapse of the late Soviet Union. Dmitry Orlov recently gave a speech to a small audience in San Francisco, where he outlined what he calls Social Collapse Best Practices, a concise guide to coping with the kind of meltdown the Russians experienced; and he describes how they were able to survive that ordeal. Orlov has long predicted that the US was headed for the kind of breakdown that befell the Soviets.

Thanks is owed to blogger, badger, for catching a translation of this excellent report by Frederico Rampini, from Italy's La Reppublica:

The palpable tension on the upper floors of China's leadership structure is proportionate to the wealth that Beijing has entrusted to its great overseas debtor. Fang Shangpu, the head of China's foreign exchange bureau, makes this very clear: "America must protect the interests of foreign investors. Its currency is China's number one foreign investment". With 2,000 billion dollars in official foreign currency reserves, Beijing's central bank is the richest on the planet. But that war-chest is subject to de facto sterilization. Its destination is obligatory: US Treasury Bonds, yet again, as always. In 2008 China bought a further 700 billion of them. Every US treasuries auction would fail if the Chinese central bankers did not turn up to play the role of kind-hearted creditor. And this situation continues despite the exchange-rate losses they have already suffered : since China's renminbi abandoned its fixed parity to the dollar (in July 2005) it has risen by 21%, thereby decreasing the value of China's dollar investments to an equal extent.

Meanwhile, the social costs of the US locomotive's crash are extremely severe. In the third quarter of 2008, as a result of the fall in exports, China's growth rate was brutally halved: 6.8% in GDP growth as compared to 13% in 2007. Following the mass layoffs in the textile, toys and electronics industries, the unemployed workers forced back into the rural economy now officially number around 27 million. Over a million and a half young college graduates too are unemployed: an even more politically explosive army of discontents. Now that Beijing needs to mobilize all available resource to relaunch its domestic growth, it is frustrating to remember those 2,000 billion dollars "frozen" to finance America.

The straw that has broken the camel's back is the revival of protectionism in Washington. First Treasury secretary Tim Geithner accused Beijing of "manipulating" its currency. Then came the Buy American clause in the 787 billion dollar public expenditure package launched by Congress, with Chinese steel as its number-one target. Xi Jinping, China's vice president and designated heir to the supreme leadership position, is furious. He too briefly abandons the language of diplomacy: "Even in this crisis", says Xi, "certain westerners seem to have nothing better to do than pick on us. I would like to remind them of some of our merits. Firstly, China does not export revolutions or hostile ideologies. Secondly, we do not export poverty or hunger. Thirdly, we do not export armed conflicts".

The seething resentment in these words does not yet mark the end of Chimerica. With Mrs Clinton the regime's leaders will rehearse the continuation of a constructive dialogue, convinced as they are that aggravating the global recession would benefit no-one. But in the light of mainstreet America's increasing hostility towards them, the leadership of the People's Republic is studying a "Plan B". Its most audacious moves include using the country's massive currency reserves for new purposes: to finance buy-ups of deposits of raw materials in other countries, ranging from Australia to Africa to Latin America. A reconversion that would have heavy consequences: a blow to the stability of the dollar, a worrying shortfall in treasury funding for Washington. However, the decision to step over this fatal threshold has not yet been reached: "We hate you but we can't do without you" is still the key sentiment in the present phase. But even Confucian patience has its limits.
What should we make of the power relationship between China and the US? One is the ascendant power, the other a power in decline. The world's manufactured goods are being made by the lender, while the borrower is the world's most strung out consumer and debt addict. Grab those dollars till they scream, for one day the bottom will fall out.

Friday, February 06, 2009

grayson harper TERRORISTS

Those red devils that whipped
Custer at Little Big Horn
rode into battle spangled and costumed
or stripped naked painted
red yellow charcoal black the color of death
Some decorated their faces with dragonflies
they put handprints on their horses' flanks
drew rings around their horses' eyes
dangled human scalps from spears.
They were terrorists. They flew
screaming through the blue coat troops
unhinging them so they could scarce think
how to work their carbines
scared so bad they shit themselves
then shooting, stabbing,
bashing out their brains with stone clubs.
So there's nothing new about our folk
feeling entitled to invade and murder
darker skinned people in their homes
or slaughter their women and children
while they sleep in their beds,
only these particular ones apparently
weren't interested in our brand of
but instead decided
maybe they should give the stupid
fuckers something to think about.

copeland morris ENTWINED SONNET

Her shaded eyes, her necklace black velvet, onyx. Anguish she spoke; and he carried on, obsessed As only a young man could. An odd harm...