Spengler was less impressed with Barack Obama's SC victory speech than many of us. To put it mildly:
Obama's South Carolina victory speech was the economic equivalent of a carnival snake-oil pitch. He promised to "stop giving tax breaks to rich companies and instead put the money in the pockets of struggling homeowners who can't pay their mortgages", and at the same time stop the export of American jobs overseas, while raising everyone's wages.The crowd chanted, "Yes we can! Yes we can!" Excuse me: No, you can't. You can't keep inefficient American factories open without massive tax breaks to corporations, in the form of tariffs or otherwise. In 1992, voters rejected the same message from Ross Perot, who warned that free trade with Mexico would create a "giant sucking sound" as American jobs disappeared, and chose the free-trader Bill Clinton. But that was then: this is now.
(I hasten to add that my appreciation for Obama's speech was purely political; I don't think most of his policies will be good for the country at all. But he is the absolute master of feelgood optimism. He sure made me feel good.)
Spengler goes on to point out how the massive economic crisis upon us is not really understood by Americans, which makes us susceptible to snake oil salesmen. Excerpt:
America faces not a dip in the business cycle, but the end of a 25-year run of wealth creation. Rising home prices were supposed to provide America's retirement nest egg, the substitute for the savings that Americans never amassed. Home prices have fallen by a third in markets like California, Arizona, Nevada and Florida where the bubble rose fastest. During 2007, the price of American homes fell overall for the first time since the Great Depression. Yet Americans still expect home price appreciation of 5% a year over the long term, according to polls conducted by economist Robert Shiller.Americans, as I wrote on January 8 (Putin for President ... of the United States) mistook the one-time windfall from the Ronald Reagan boom of the 1980s for the enduring right to get something for nothing. Despite massive evidence to the contrary, they still cling to the delusion that twenty years from now, everyone will retire by selling his home to his neighbor at double the price. It is like the passengers on the Titanic selling each other annuities.
People in the know are whispering that this could be the year that the entire structure of international finance comes crashing down. This fascinating analysis from yesterday's Boston Globe explains how and why financiers created a system of trading to evade regulators, and may in fact have conjured a demon that will devour us all. The Emirs of Davostan are ducking and covering:
For George Soros, the financier who made a fortune betting against the British pound, the slump goes beyond subprime loans. It signals a reordering of the postwar economy and the end of dollar dominance. ''The current crisis is not only the bust that follows the housing boom,'' Soros declared. ''It's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency.''Signs of a new economic order abounded here. India's commerce and industry minister, Kamal Nath, noted that China had overtaken the United States as his country's largest trading partner, buttressing his view that India could come through a U.S. recession unscathed.
The head of the National Bank of Kuwait, Ibrahim Dabdoub, said Americans who opposed sovereign wealth funds, such as the one run by the Kuwaiti government, need to come to terms with the new reality.
And an American economist, Nouriel Roubini, said bluntly, ''The United States looks like an emerging market,'' with large deficits and a weak currency. Brazil, an actual emerging market, had done a better job overhauling its economy, he said.
Roubini, whose frequent predictions of a downturn have made him something of a soothsayer at Davos, said the United States would suffer a recession lasting at least a year. He foresees a flood of defaults on car loans and corporate bonds, and a prolonged bear market.
''The debate is not whether we're going to have a soft landing or a hard landing,'' he said, as his audience squirmed. ''The question is only how hard the hard landing will be.''
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With interest rates topping out at almost 21% along with high inflation during the Carter Administration, the sky was falling.
The doom'n'gloom reminds me of what I was hearing in 1999 about the alleged Y2K crisis. I also remember people saying that the big crash of 1987(?) was the start of the *real* crash. The DJIA was then, what, 1700, and now it's 12000+? Too many people scare easily.
I meant to say "every politician has a crook" up above ...
Interesting Freudian slip on my part, though!
Well, Spengler (and all those who agree) why are you an American? If we cannot possibly make this country any better how can anyone who agrees even claim we live in a great nation? Can Obama make a utopia? No! But can we make it better? YES WE CAN! And a functional utopia is the efforts of our forefathers, and every noteworthy candidate since. I think that is all that the American public dreams about right now, something - anything - better. If any one thing that Obama speaks about does come true, then the desires of the American voter is accomplished.
In the 1990's when that "great sucking sound" started did American products become cheaper, or did amerikan CEO's become richer? (America, spelled with a big A and a c, isn't about corporate interests). I am pretty darn certain that Maytag would find some way to continue to exist even with their supposedly "inefficient" factories if they had to. I am pretty sure that once the US Government and the co-sponsored Central American gravy train stops, American companies will find some way to make money and to survive. Isn't that capitalism is all about? Survival of the, bets most efficient and most valuable of products at the best price? How anyone can claim to be a capitalist and support governement paychecks to big business and exploitive trade policies which lend our jobs to other nations than our own is beyond me. We tried this "service economy", a word made up so we can feel good about our under-diversified economy, and IT DOESN'T WORK!
So how dare you, Spengler, questioning what America and Americans CAN do. Doing so is, in my opinion, anti-pragmatic and most of all anti-American.
I don't know if Spengler is right or not, but he sure can write:
"If Reagan offered "voodoo economics", as his opponents charged, Obama is selling Cargo Cult economics. After World War II, New Guinea aborigines build model airfields to entice the gods to bring them "cargo". They watched American soldiers build airstrips and land cargo planes, and sought to accomplish the same through sympathetic magic. Given the culture of the aborigines and their observations, anthropologists aver, making radios and observation towers out of straw and coconuts was a rational response. Something similar might be said of the position of the American middle class."
Ouch!
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