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Chris Sanders: Clueless in Frogville

Sanders Research Associates
March 5, 2002

Founder's Comment

"Clueless in Frogville"


Chris Sanders

Over the weekend at the beginning of the month, Sanders Research crossed a sort of threshold, receiving its first death threat. "We will destroy you" was sent on one of our internal e-mail addresses through an American ISP. At least someone reads us.

Feedback from another reader in the American heartland suggests that we are "clueless in Frogville," which presumably means that our attitudes are suspiciously continental. Now, the French have given the world good food, wonderful wine, Voltaire, Brigitte Bardot and a strong aversion to excessive debt. The order of importance of these is debatable, and seems to move around depending on how close it is to lunchtime. In our view, that is no sin. The French also helped to give the world the United States of America, which they must rue from time to time, given the ingratitude of so many Americans.

It should be abundantly clear to anyone who has managed to pass a university level course in macroeconomics that the United States began to move down the path to war with Iraq a number of years ago when the government chose to aggressively promote policies that expanded an already bloated national balance sheet. The reason why this should be retrospectively clear is that logically, perpetual balance sheet expansion is a policy without an exit strategy. The American government has become utterly dependent on foreign savings to finance its budget, and the private sector economy has been overwhelmed by the state capitalism of the defence sector. In my home state of Texas at least, the reality of this has done little to disturb the infantile cast of politics, in which everything that is wrong is laid at the door of the "liberals" and everything right at the hand of a god who works in a mysterious way through the supposedly reformed drunk in the White House. The fact that F16s are produced in Fort Worth, that NASA is headquartered in Houston, that the military is a big part of the state economy and that all that and much else is dependent on a cash flow that comes largely from out of state probably informs this view of things to a large degree, even if unconsciously.

That unconsciousness seems also to be operative at the national level. The Clinton administration has gone down in Wall Street and journalistic lore as the government that balanced the budget. While true, narrowly speaking, the fashion in which this was accomplished is seldom acknowledged. Ramping the stock and housing markets by aggressively expanding liquidity and allowing the for-all-intents-and-purposes unlimited expansion of GSE balance sheets did the business by creating a one-time tax windfall. But what this really accomplished was to postpone the hard choices necessary. Now a man whose personal history seems to be a litany of tough choice avoidance runs the present administration. Of course this may just represent a perverse operation of the principle that leaders appear to fit the occasion. Deserted by the top three members of his economic team within two years of assuming office, it is clear as can be that the secret of his economic plan is that there is no plan, only the systematic plundering of what is left of national health and retirement systems and the seizure of another country's oil. It is surely evidence of the dearth of irony in American life that the destruction of domestic public goods is being justified, or camouflaged, by the proposed seizure of a world public good.

The tenuousness of the American financial position is obvious. Dependent on the flow of foreign savings in general, it is especially dependent on Japanese savings in particular and on the recycling of petrodollar profits. America's Japanese clients, in the form of the rulers of the Liberal Democratic Party (a party that is anything but liberal or democratic) have striven mightily to accommodate, digging themselves and their country in the process a deeper and deeper hole. Their central bank has abandoned all pretence to prudent management; having accumulated such a huge stock of government bonds that its balance sheet is now 25% of GDP. It now faces proposals to increase the rate of increase of bond purchases to 2 trillion yen ($17 billion, give or take few) per month. It has invested nearly $500 billion of national savings in dollar reserves, giving it almost 5% of American GDP in cash. Late last year it commenced a systematic and huge intervention in the stock market, and is swiftly becoming one of the biggest industrial and commercial stockholders in the world. If Japan is threatened by depression, it should be clear that the reason is its slavish subservience to the Americans. It should be equally clear that the consequences, both financial and political, of disengaging from this policy dead end rise the longer it goes on.

Perhaps to compensate for his isolation on matters economic, President Bush has surrounded himself ever more closely with a group of second raters and individuals whose worldview is Manichean, apocalyptic, and irrational. Replete with indicted perjurers, the administration is dominated by men whose literal plan for world domination could not be clearer. Called A Clean Break: A New Strategy for Securing the Realm , this document was published in 1996 by the Institute for Advanced Strategic and Political Studies . Democracy, to these people, appears to be an inconvenience paid homage entirely in the breach, in pursuit of a self-defined higher good immune to the normal workings of parliamentary politics or human decency. A national polity that has survived for more than two hundred years is in the process of being dismantled lock, stock and barrel, with the apparent endorsement of the very Congress whose powers are being usurped wholesale. It is supremely ironic that at the end of a week in which the Israeli Defence Forces killed more than three score Palestinians and the American President endorsed illegal Israeli settlements that the Turkish parliament found the courage to deliver a stinging rebuke to America and a lesson in democracy by refusing to endorse the use of Turkey as a base for a war of aggression.

Neither the world's manifest public opposition to war nor the workings of the United Nations are considered legitimate by the present American government, the former derided by the president as a mere focus group and the latter as irrelevant. Swept away in the rush to war is any consideration of the larger issues of the approaching peak in global oil production, the equitable administration of a vital global public good, the financial consequences of decades of militarisation and global war, and for that matter even proper equipment for the troops expected to conduct the invasion. It is hard to escape the impression that the reason for this lunatic haste is less the Iraqi summer or the imminent threat of attack by Iraq, but rather the inexorable rise of a tide of world condemnation and opposition, in the hope that the creation of facts on the ground will outflank it.

Why Americans of any stripe should find the response of the rest of the world to this unreasonable or odd is hard to understand. Neither the United States, the United Kingdom nor Israel is alone in defining a national interest, and it may be fairly expected that other nations will resist by what means they find at their disposal the wholesale hijacking of world hydrocarbon supplies by the financially parlous tri-partite alliance. Indeed, the term "Axis" that the American president has applied to the supposed enemy in this phoniest of wars seems far more apposite applied to the Anglo-Israeli-American condominium that proposes to unilaterally redraw the world map.

The establishment of the United States in the late 18th century could be fairly considered one of the ornaments of the Enlightenment, a rational exercise of power in a world often irrational. It was, not unfairly, considered by many a beacon of light in a dark political landscape. Since then, it has been the intellectual and political inspiration for revolution and political and social liberation the world over. It has been a long time, however, and more than just two centuries have gone by since then. When a justice of the Supreme Court can say, as did Antonin Scalia, such things as "The more Christian a country is, the less likely it is to view the death penalty as immoral," or refer to "post-Christian Europe," the lights are going out, and not in Frogville.

ENDS

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