by Gilles d'Aymery
(Swans - December 17, 2007) Maybe I am getting old. 2007 whizzed by me in a hurry. Too many episodes, some more significant than others, occurred -- the death of our loving cat, Bijou, in April, three days after dear Kurt Vonnegut passed away; our older dog's health problems; my mother's slow but irreversible descent into blindness; the yet unresolved leak over our head; the long-overdue and welcome marriage with Jan Baughman, my companion and loving partner for the past 18 years; the unremitting efforts to keep Swans alive in spite of too many trials and contributor disappearances; the feelings of being left aside, lost in the boonies of nothingness, downright ignored by all, unable to make a living, even a modest one, and yet keeping my window wide open onto the world. In the big picture (not mine though), no one should care, with good reasons. My take is so inconsequential. I want the world changed but am unwilling to kill and destroy to further my aims. How quaint! That's not part of the reality we all have to contend with. As I was thinking about the content of this essay, I went back and read what I had written in former years. From the time I started Swans in 1996 to these days, I evolved from irony to skepticism. In the past few years, this skepticism has grown exponentially. I may be wrong, and the future (and you) will be the judge, but 2007, from these forgotten hills, looks like reckoning is in the making, and it will be painful for all, except those who are at the top of the food chain. 2007 will quite possibly be recorded in the history books as the year the USA became the USS Titanic, a ship that may bring the entire world down. Again I can be mistaken, but from both an international and domestic perspective America's policies are leading to a worldwide crisis that could cause an unmitigated disaster for humanity's well being.
Foreign military policy in tatters
Like her predecessor at the State Department, Madeleine Albright, who infamously quipped that she thought the sanctions policy against the people of Iraq that killed so many children and innocent civilians was "worth it," Secretary Condoleezza Rice will quite possibly be remembered for her as infamous "birth pangs of a new Middle East" that she uttered on July 21, 2006, in a Q&A session that followed her Special Briefing on Travel to the Middle East and Europe as Lebanon was being destroyed once again by the Israeli Defense Forces. "What we're seeing here," Ms. Rice said, "in a sense, is the growing -- the birth pangs of a new Middle East and whatever we do we have to be certain that we're pushing forward to the new Middle East not going back to the old one."
The birth pangs seem to have expanded beyond the region stricto sensu to include the entire Arc of Instability, which now extends from Morocco in North Africa through the Sudan and the Horn of Africa all the way to Pakistan, and turned out far more painful than ever expected. Bogged down in Afghanistan and Iraq, our over-used and abused superb military (1) is increasingly confronted with the chaotic entanglements that our policymakers created back in Washington D.C. The moment a blazing fire is under control or extinguished another one explodes in any one of some 15 countries. There are more pyromaniacs than firefighters from the streets of Algiers to those of Baghdad, Beirut, Islamabad, Kabul, Mogadishu, and many other exotic places. Our "military supremacy" has fanned resentments to such extent that violence has spread and grown much worse than before 9/11; rag-tag armies, fighting asymmetrically, continue to keep in check the "best military the world has ever known"; and the entire project (for the New American Century) is facing increasing resistance, or push-back policies, from powerful state actors such as Russia and China, and other more modest players.
This disastrous bipartisan policy wreck is compounded by the excruciating financial costs of its execution. By next year US defense expenditures will top $700 billion -- more than anything ever authorized in over 60 years -- at a time when the country has largely become insolvent due to an insurmountable amount of liabilities both from within and without. While the US Establishment appears to be oblivious to the dire situation that it has created, the rest of the word has taken notice and acted accordingly.
Seven Latin American countries -- Argentina, Bolivia, Brazil, Equator, Uruguay, Paraguay, and Venezuela -- have just created the Bank of the South with a capital of $7 billion that intends to be a counterweight to the International Monetary Fund (whose capital is also about $7 billion). While Chile, Colombia, and Peru have not joined yet, the purpose of that project is to advance the financial autonomy of Latin America and break the shackles that the Washington consensus through the IMF had tightly kept around these economies' necks for decades. If or when they manage to create a common currency it will further weaken the almighty dollar and the power of Washington to control these nations.
What Saddam Hussein's Iraq was unable to implement, Iran has achieved -- not nuclear power status, but independence from the ruling US dollar. Iran's sales of oil and gas are no longer libeled in the US currency. Furthermore, even though remaining under the constant threat of a military attack by the U.S. or its regional proxy, Iran has concluded a deal worth $2 billion with the Chinese oil company Sinopec to develop a major oil field (Yadavaran), and it keeps developing its nuclear program. Its oil bourse is on track to open in the next few months. No wonder the U.S. remains in regime-change mode.
In 1997 -- eons ago in American amnesia -- Hong Kong reverted to Chinese sovereignty. China agreed to keep the island an international hub of freight traffic where ships could dock, whether commercial or military, in laissez-faire fashion. The US Navy makes about 50 calls a year on Hong Kong. Every quarter, a C-17 cargo plane lands there to re-supply the US Consulate with food, water, and amenities American personnel are used to year in and year out. In 2007, China rescinded permission for one plane to land. In November, contrary to maritime traditions, China denied two navy minesweepers to dock at the Hong Kong port, in spite of the fact that the ships were low in fuel and facing a storm. Around Thanksgiving, China also refused the US aircraft carrier (USS Kitty Hawk) safe passage to Hong Kong, forcing the US Navy to send the ship to Japan -- a country that hosted a Chinese war ship for the first time in 60-some years. Protests were duly filed to no avails. The US administration and Congress keep whining about the unfair trade practices of China and all the terrible human rights abuses occurring there, but have precious little recourse when their own mandarins have to journey to Beijing, hats in hand, to beg for more financial help to fund our wars and keep our economy afloat.
It looks like events took control of Washington at long last, not the other way around, as though policy makers could no longer "create [their] own reality" or "other new realities," and be "history's actors." (2) Real realities rushed back to center stage. From the Mesopotamian and Persian sands to the Russian tundra, the Chinese Great Wall, and scores of other challenges at home and abroad, the US administration has been in full retreat (even Turkey is openly defying Washington's diktats). America's reputation stands at the lowest it has ever been. The confirmed use of torture (waterboarding, which the new Attorney General can't decide whether it is), the irresponsible and dangerous saber rattling against Iran, the evidence that the U.S. intends to stay in Iraq for decades, the double-talk about the Israeli-Palestinian "peace process," the refusal to address climate change, are all indicators of America's near-total loss of credibility. Even the members of the "coalition of the willing" are deserting as fast as they can. The architects of this wreck, their wizardry unveiled, their façade in shambles pierced by so many lies and deceptions, are reduced to policies of the last resort -- bribing local tribal leaders and chieftains to do their bidding and supporting tin-pot dictators à la Musharraf, Mubarak, and Co.
Meanwhile the clouds that have been gathering at home for years -- obscene consumption, maddening fiscal irresponsibility, untenable personal indebtedness, deepening inequalities -- have suddenly coalesced, threatening the country and the entire world with an economic recession, possibly even a worldwide depression.
An economic tsunami in the making
No one knows for sure the full amount of subprime mortgages that have been issued in the past few years in the U.S. -- some say between $1.3 to $2.0 trillion. Financial hucksters and Wall Street paper-dealers found creative ways through a maze of financial instruments (Structured Investment Vehicles, Collateralized Debt Obligations, etc.) to "securitize" these high-risk, "non-securitizable" loans in a Ponzi scheme that will dwarf the junk bonds crisis of the mid 1980s, the $125-150 billion taxpayer-funded bailout of the late-1980s Savings & Loan swindle, and even the dot-com bubble of the late 1990s. To date at least $200 billion are in default, and with higher rates kicking in on those mortgages another $500 billion will be at risk next year. Three-and-one-half million homes are currently in, or threatened by, foreclosure. Subprime loans have financed about seven million additional homes -- a majority of which is at risk as the real estate market is spiraling down out of control with devastating consequences for cities and communities around the country and the world. In the U.S., many social services are financed locally based on property taxes. The dwindling value of housing portends further cuts in those social services. Furthermore, many city councils, being lured by corrupt brokers and expectations of higher returns, chose to invest in those fuzzy financial instruments, thus seeing their investments melt as fast as the Artic ice. This phenomenon is being repeated all over the world as far as East Asia and Germany and Norway. Narvick, an 18,000-people municipality in the far North of Norway, invested $9.5 million in a Citigroup hedge fund through a local brokerage firm. The brokerage firm is out of business, having declared bankruptcy, and Citigroup has shut down the fund. The city also invested $34.5 million in another Citigroup package that may have lost half of its value. This is a snowball that keeps rolling downhill. Banks and investment firms have already written off $100 billion with no end in sight. Banks have responded by becoming more conservative on their loan policies, creating a credit crunch that is forcing central banks to infuse liquidities in the banking system, thus fueling inflation that remains unreported in the corporate press. Whichever ways the Fed cooks the books it won't alter the reality. Inflation is back and will worsen. (Don't take my word for it: Check the price of gasoline and diesel, the tab of your food basket at your regular supermarket, your utility bills, the cost of your medicine and heath care insurance, and the cost of educating your kids, to cite just five indicators.)
One could argue that in a $14 trillion economy the subprime con game is not that big of a deal, but when other certain and potential liabilities are factored in the picture, the situation becomes very grim indeed. The US's total mortgage debt is close to $10 trillion. The country has an overall minus savings rate per capita. It also carries a $900 billion credit card debt and over $9 trillion of public debt, of which $2.5 trillion are held by foreign central banks. Hedge funds, which no one knows exactly what they are made of, total over $1.5 trillion. More ominously, the financial risk of leveraged derivatives is estimated at a staggering $60 trillion. Add to these dark numbers the continued US trade deficit. In spite of a 40% drop in the value of the US dollar that logically should help US exports, the trade deficit in 2007 will be in the vicinity of $800 billion (over $250 billion with China alone). Foreign sovereign funds, aside from central banks' holdings, have a $3 trillion capital that they use to buy into American and European assets. If the trend continues, these sovereign funds will reach $10 trillion in a decade or so. In other words, the U.S. finds itself in a situation whereby it is forced to sell the land to save the ranch.
The foreign policy debacle and the economic crisis could not have happened at a worse moment, as the country is being managed by a faith-based, stubborn lame-duck administration -- après moi le deluge -- and is preoccupied with the quadrennial circus that is the US presidential elections.
An oblivious, ostrich-like polity
The presidential campaign began in earnest in the spring of 2007, a sheer 18 months prior to the actual election of November 2008, creating a pseudo reality within the actualities the country faces. The chief usefulness of this spectacle perpetrated by the media and the punditry is to divert the attention of the public toward feel-good clichés, slogans, and vaporous generalities. On the Republican side, a crop of intellectually-challenged candidates compete on who is more "Christian" than the other, who will keep the country safe, defeat the terrorists, cut taxes to finance health care and education, increase defense spending, and be tough on illegal immigrants. We even have a B-movie actor whose most prized possession is his "trophy wife" (his words) and believes he is the embodiment of the more famous B-movie actor who presided over the fate of the country in the 1980s. They all denounce the tax-and-spend Democrats as weak on defense and far too "liberal."
The Democrats all want change (code word to imply ABB or his potential successor), which seems to be measured by the color of one's skin or the gender of another contender. A multimillionaire, playing the populist card Teddy Roosevelt-like, attacks the fat cats and the corporate interests (insurance companies) and promises he will tell the truth to the American people (code word to suggest...not like Mr. Bush). Change is also debated at length in terms of freshness versus experience -- all possessing beefy resumes all the way back to kindergarten -- and blathers about new policies to help the poor and the famed middle class go aplenty. While all options remain on the table in regard to foes and enemies, they want to implement a more robust diplomacy and work with their friends and allies so that the "indispensable" nation will recover the credibility it has lost in the past seven years. The generalities continue piling up faster than one can keep track. While three mavericks on the fringes of both parties and totally marginalized by the respective political machines are unreservedly antiwar candidates (with no chance to win the nomination) the consensus is to draw down the level of troops in Iraq (which Mr. Bush is already doing out of necessity) but still have a presence there in 2013. Nobody is fooled. Week in and week out the charade carries on. Mr. Bush, armed with the power of his veto, watches the spectacle with amusement and pursues his botched, irrational policies in total impunity. In a nutshell, the political establishment, the powers-that be, refuse to address the real issues and the gravity of the situation.
The people yawn
Fires, droughts, water shortages, inundations have become a regular happenstance. The ice cap in the Artic and Greenland is melting at a pace no scientist had ever modeled. "Today, we dumped another seventy million tons of global-warming pollution into the thin shell of atmosphere surrounding our planet, as if it were an open sewer." (3) The people yawn.
The earth -- our living system -- is being raped and destroyed in the name of profits and free markets. The people yawn.
A ferocious competition among the major providers of nuclear energy, General Electric (U.S.), Toshiba-Westinghouse (Japan), Atomenergoprom (Russia), and Areva (France), are peddling their wares all over the world. Thirty-one countries already possess civil nuclear power, of which nine belong to the club of [weaponized] Nuclear Powers that adamantly refuse to work toward the abolition of nuclear weapons. Beside Iran, many other countries including Egypt, Qatar, Dubaï, Abu Dhabi, Algeria, and Libya are actively pursuing a nuclear future that will augment the probabilities of nuclear proliferation. The people yawn.
Wars with no end in sight have turned into a litany of video games. The all-too-real wars ravage the planet with an abandon never, ever observed in history, enriching the wealthy, impoverishing the masses. The people yawn.
The federal government is insolvent, the states' budgets are deep in debt, towns and cities can't cope with the torrents of red ink. The dreaded word stagflation has resurfaced. The people yawn.
Yawn, and yawn, and yawn...
Or they pray...or drive to the Mall to purchase the latest gadget made in China as they are overwhelmed by the stakes at play. American consumers spent $9.5 trillion last year (in comparison Chinese consumers spent about $1 trillion and Indian consumers $650 billion). With the housing bubble, the mortgage crisis, and inflationary trends, the US consumption is bound to slow down significantly. Then what?
High-stakes gambling, snake-oil peddling, faith-based initiatives are not new to these shores but the chickens are coming home to roost in a hurry. One can only hope -- assuming that one is not secretly calling for the demise of the U.S. and this observer is definitely not (the pain that would be inflicted would fall heavily on the least able to cope: the poor, the weak, the helpless, in this country and beyond, especially in the Third World) -- one can then only hope that:
a) The countries that have financially sustained our follies will not pull the rug out from under us prematurely (they will eventually) and continue to keep afloat this ship that has gone astray. It is, to be honest (and something the US elites may be counting on), in their self-interest. Were the USS Titanic go asunder, the entire world would be sucked in the drowning.
b) The people will stop yawning and wake up to the challenges ahead, and that out of this awakening a new generation of civic leaders and politicians will come to the fore with a course of actions that put cooperation, peace, and sound social and economic policies above competition and reckless wars for greed and resources. The issues are for real, and real people are direly needed.
c) And, beyond everything else, I personally hope that the near-term future will prove me incorrect -- that America has not reached the tipping point and that there is still time to change course.
2. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do." Suskind, Ron, "Without a Doubt," by Ron Suskind, The New York Times Magazine, October 17, 2004. (back)
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