Sunday, 24 July 2011

Of (Bounced) Cheques and (overdraft) balances






U.S. House of Representatives Speaker John Boehner - "That ceiling is leaking in so many places I'm just going to sit here and try and look cool"


For those following and concerned about the summer 2011 American political epic battle to raise the debt ceiling, a deeper understanding is needed of the problem. First, when I say "concerned about", I assume that that is the state of mind of most people who become acquanited with the phenomenon. It is a very serious problem and one that shows and the reasoned, rational observations of the American financial and political system diligently pounded day-in, day-out on the internet by "obscure cranks and doomsayers" like Charles Hugh Smith, Chris Hedges, and James Howard Kunstler are catching up to the inane, irrational, deluded thinking of mainstream North American media culutre, and they will complete the journey when the ensuing crisis is brought to bear.

Unfortunately the fruition of that journey is nothing more than "being right", which doesn't help anybody in the long run, and which anybody using their head and paying attention could have seen that they were all along. The real question, though, is what the United States hopes to accomplish by raising the debt ceiling.

Money and capital created out of thin air are not actually the problem. If the financial system collapsed and we had to start all over again, regardless of how right we got it, we would be required to engage in the practice of the same fundamental principle - the suspension of disbelief that makes fiat currency possible - that we do now. This twenty dollar bill is only worth something because I think it is and you think it is. The minute one of us realizes that it is not worth the paper its printed on, one of us has been taken and one of us has made a profit off the exchange. One of us is an exploiter and one of us is a fool. But human nature is amazing, and the discovery of one thing can make us realize that - the truth. The truth (in brief, that money is worthless) is publicly available at no cost, yet people continue to act based on habit, convenience, materialism, etc. Many people know the truth, but it has yet to wreak serious havoc. A detailed accounting of OECD countries current account balances does nothing to real estate values in those countries, even though the accounting is devastating and public knowledge. This is because there are still enough people who think they are participating in worthy exchanges (money, toil, commuting, poor health, in exchange for status, inflated real estate, etc.) They either know the truth and don't care or are unwillingly ignorant of it.

The worth of any given thing is arbitrary, negotiable, and subject to change just as that of our cash. When I walk around my hometown of Toronto and look at regular modest bungalows selling for $650,000 - three times what they were worth maybe 10 or 12 years ago, I simply refuse to believe that is what they are worth. When this kind of astronomical increase occurs, it is not because young, child having guys with families like me can afford to get into the market and retain any kind of sanity and/or quality of life (To give you an idea - I have been working in the white collar world for over 4 years, living simply, have made choices most people don't make like to grow food and forego a car, scrimped and saved money, accumulated no debt, and I'm nowhere near a down payment on one of these). It is because two key policy decisions have been made - to manipulate market conditions to make it very easy for people and encourage them to take on enormous amounts of debt they can only afford with low interest rates, and to essentially skim the rich people off other countries and society and import them and their money under the guise of "immigration". So you are placing an additional huge strain on our already strained health care and education systems by letting people work themselves to death and stress about money, and by importing people who think our country is great because they can send their kids to great universities for $5,000 a year and get free health care for the rest of their lives.

It is these kinds of complicated problems that are the logical extension of what I term a "balls to the wall" economic system in which no result but growth is acceptable, and no guiding principle but rising expectations is followed. Politicians are scared to tell the mob anything else other than things will keep getting better, your house will be worth double again in 2 years, just keep working hard and paying taxes and subsidizing the oil and auto industries with your choices and shut up. Unfortunately, this logic would never work if it applied to individual humans because it refuses to acknowledge cycles, maturity and evolution. Imagine (you may know one) a 35 year old who is still coddled by their parents into thinking you're special, you're the best, we have such high hopes for you, we'll ruin ourselves to help you make it. It doesn't have to come through the telling of these phrases, either; actions such as laundry, dishes, cooking and bill payments performed by parents for their children beyond a certain age affirm these statements in their childrens' minds. And the government has become a caretaker and enabler for our childish, insipid, irresponsible population in North America. The logical step for the extraordinarily wasteful and greedy society Canada has become at this point would be to "power down" and de-leverage; instead we seem hell bent on repeating the mistakes that the U.S. economy is still reeling from in its spin all the way around and around and down the toilet bowl (although their effects will be less pronouned, thanks to a huge supply of environment we can destroy by extracting resources from it. Whoopeee!).
So, what does any of this got to do with the debt ceiling? Well, the first thing you need to know is the United States in in 14.6 trillion dollars debt and that that amount now rises by 1.6 trillion a year, or .2 trillion (200 billion dollars) every 2.5 months. How does the American government raise money to fund its operations? It does what every country, state, province and munipality does - it issues bonds (decades long, interest paid ballooning "promises to pay".) Isn't that insane? What if we allowed heavily indebted people(which all entities I listed definitely are) to engage in this practice? There would be so much debt in the system our money would be - hey check it out! - worthless.
Governments such as America's and Canada's also raise money through taxes (which they refuse to increase, and in response to which there is a never ending growing and never-ending set of loopholes the rich can use to avoid) and spend money (more than ever, all the time) But because America's forefathers who authored its constitution foresaw this possibility, they created an ingenious system of "checks and balances" in which that one well-heeled irresponsible individual (the president) or 100 well-heeled, irresponsible individuals (senators) could not unilaterally take the decision on the whim to spend the country beyond its means into oblivion.
They made it so that you needed the approval of 535 well-heeled, irresponsible individuals (congress) to raise the nation's acceptable level of debt. Unfortunately, no provision was provided as to what point this became an actual legislative process and not a thoughtless friday afternoon rubber-stamp. That is why it took a number (14,600,000,000,000) to make the nation have this conversation for the first time ever in the summer of 2011.
While the debate over whether the United States will default on August 2nd remains in the hands of 100 or so Tea Party congress representatives who are utterly intransigeant on the matter of raising taxes (which any basic math knowing person can see needed to happen a million years ago to prevent this thing from descending into chaos.), chances are they will settle the matter amid much fanfare because between denial and reality, who really chooses the right one when they are given a choice? President Obama will make some lame speech filled with adjectives (courageous, reasonable) and nouns (adversity, resolve) that don't really apply to america anymore but he does it because thats his job. Making lame speeches. And they are lame because they don't actually denote any accomplishments. America will have pulled together at the 11th hour and extended itself credit for 2.5 more months. Phew. Do you need a statuatory holiday to go with that achievement?
We could go on for days about the 3 trillion of the debt held by China, or Europe and the Euro living beyond their means due to their inclusion of countries that are heavily indebted and will never be economically productive again, but what's the point? The economic system is a house of cards. And until we get back to what's real (real money for real value and real cash for real services), the illusions, speculation, lies and fraud will continue to run rampant.
The $600,000 bungalow, as much as its value is an artificial creation, is definitely worth that right now and any reasonable person would agree on the legitimacy of that price. But what happens when the sewer backs up, the trash piles up, the emergency services stop and death piles up inside, the foliage overgrows and reclaims the property, natural gas is not delivered to the furnace, and rocks thrown by the anarchist youth fly through the windows and go unrepaired? The $600,000 is not the inherent value of some crappy bricks and mortar from 60 years ago but a huge premium on top of those crappy bricks and mortar for a well-functioning, well-run, well-lubricated by petroleum society.
And the above described society, up until now, has been bolstered by a "strong" U.S. economy. But those checks and balances on which the nation's stability and strong democracy were founded have now, in addition to airing out the dirty laundry of the nation's financial system, become its ruin. Consider a 2,300 page health care bill that was supposed to provide care for everyone yet somehow provides care for less and makes insurance companies richer. There is no way for a massive, three branch government operation to get a handle on a legislative challenge without entirely lousing it up - and that is by no means restricted to America. They are just world and leaders and champions at it. But the collective failure of top down government structures to address the rot and the inherent bullshitting of the system is ultimately why we will go back to smaller, localized, accountable governments that live within their means whenever these big ones screw this debt boondoggle up so bad that nobody can ignore reality anymore. And with the word "default" on everyone's lips when they're talking about the U.S. for the first time, in 2011, I don't see how it can be much farther off.

Monday, 11 July 2011

Half-Gone-Eesh-Tawn

Welcome back to Lacking Credentials, and happy 4th of July (one week late) to all of my mysterious and unknown American readership. I feel this day commemorating your nation's independence from Britain 335 years ago is an appropriate one to comment on the "pullout" of 20,000 out of your 130,000 soldiers from Afghanistan. My country, Canada, has just removed its 2,500-strong force from Kandahar after almost 10 years of maintaining a military presence in Afghanistan.

Unfortunately, up here, I have been able to obtain little analysis and few articles pertaining to this very significant event, because this is the week the world's two favourite twentysomethings who have accomplished nothing in their lives besides being born and getting married, Prince William and Kate Middleton, have decided to parade around Canada. The media in this country have chosen to fulfill their sacred duty of protecting the public interest by minutely scrutinizing every pathetic photo-op and public wack-off session these two professional smiling faces have placed in their itinerary. I don't need waste any more type on that, let alone a whole blog posting, and will content myself to leave it at the four words I know are on most peoples' minds: WHO the F*&K CARES?!

Since the media cannot be relied upon to communicate to us the goals and purpose of the critically important Afghan mission (other than transmitting meaningless anecdotes from North American politicians about "staying the course" and the "bravery of our troops"), one wanting to learn more about the country where North America's two armies have decided to spend 10 years and untold billions has had to seek out information through books. I have had the good fortune during the past year of reading two excellent ones to acquaint myself with Afghanistan, and recommend that you do the same if you have the oppurtunity. Rory Stewart's The Places in Between is a great initiation for a Westerner to this country to a by a guy who literally walked all the way across it, and was familiar enough with local languages to not be completely stunned by the whole experience. And Ahmed Rashid's Taliban is a painstakingly researched and fantastically written account of the Taliban's rise to power during the period of 1990-2000, which is essential to understanding why the west has been embroiled in this latest ten year conflict in a country that has been a mess for the past thirty.

As a person who is generally opposed to war, conquest, and colonialism, I can tell you that the Taliban are honest to god dirtbags who are worthy of being wiped out if there ever were any. These guys, Pashtun villagers with no education or literacy skills to speak of all, spent time and money on such worthy initiatives as dynamiting lakes to kill all the fish in them and blowing up 1,500 year old Buddha statues while other Afghans starved to death. The Taliban didn't really care about those who suffered, because those starving were Hazaras, a rival ethnic group. In fact, the Taliban went into all non-Pashtun areas Afghanistan, including the Tajik-populated west, the Uzbek-populated north, and the Hazarajat in the mountains and the centre, and slaughtered thousands. They stood in cities (Herat, Mazar-e-Sharif) where they had never been and whose languages they did not speak and ordered women to remain indoors with the windows blackened. These cities had never had such customs in their millenia of existence. Worse, the Taliban had taken over the burgeoning drug trade and now had more money and resources than ever to make people lives miserable with this boneheaded bullshit. And where did the money for the toyota pickups and AK47s used by the Taliban come before the drug trade? From America's gas pumps (via the Saudis) and from America'a government (via the CIA via Pakistan's government).

If you see the film Charlie Wilson's War, starring Tom Hanks and Julia Roberts, you can enjoy an entertaining dramatization of how, in the mid -980s a charismatic democratic congressman from Texas managed to appropriate what was supposed to be a few million dollars for anti-aircraft firepower in covert aid to the Afghans in the war against the Soviets. He used his testimony and influence to turn this into a multi-billion dollar finagling of military aid. As with most cold war narratives, it has a happy ending at the point in history it stops at; as we all know, history trudges mercilessly on, and this military hardware lies strewn all over Afghanistan today and is used by the Taliban, many of whom themselves are issued out of the anticommunist guerrillas that received US military training.

In the North West Frontier Province of Pakistan, where there is little government, law enforcement, or social services to speak of, Pashtun villagers (yes, the same fiercely conservative Sunni muslim ethnic group that the Taliban are issued from - the border with Pakistan is an arbitrary creation of some unknown picked alcoholic British military man grunting in his office chair fifty or sixty years ago, and has nothing to do with ethnicity, history or geography) operate a network of 9,000 madrassa schools. Here, young schoolboys (who are plentiful in this backward region of sky high birthrates) learn such valuable life skills as hatred of Westerners (who are depraved, bloodthirsty perverts), militarism, and how to subjugate women, who occupy the space between snails and carpenter ants on the evolutionary totem pole of this branch of Islam. When these boys come of age, they become a new batallion of...Taliban fighters! Since the name Taliban actually means "students", they are one group of people on Earth we can say are truly dedicated to lifelong learning!

All kidding aside, this is why thousands of elite Western troops with the latest and greatest military hardware cannot kick this quagmire's ass to an end. When NATO or US CENTCOM brag about killing 2,500 Taliban in a weekend, Mullah Omar (the too-shy-to-be-photographed leader of the Taliban) picks up the phone, dials Peshawar, and approves the waiving of the remaining madrassa curriculum for that year (bashing your third wife's face in for menstruating 101, fundamentals of balancing opium shipments and bribes) to freshen up his manpower reserves. Why can't they just fire a couple of heat-seeking, cruise guided missiles into this guy's house in Kandahar, a city he has after all only left once in his life, and end this thing that way? I don't know. Your guess is as good as mine.

What I do know is that, as sorry as I feel for the poor, impoverished, hungry, illiterate people of the nation of Afghanistan, is as sorry as a death it is for a Canadian soldier to die from some cheap plastic explosives at the side of the road in Kandahar. This mission, which has been sold variously as "helping little girls go to school" and "winning hearts and minds", is actually the propping up a pathetic and corrupt (and Pashtun dominated) Hamid Karzai government in Kabul that has no authority outside of that city, while fighting a vicious and unending stalemate with the Taliban. Insolvent Western nations, naive and ignorant pacifists and "pur et dur" asshole colonist hawks all agree, for different reasons, on one thing: this cannot go on much longer. If the Taliban take over the country again, the 55% of non-Pashtun Afghans (and hopefully, a sizeable chunk of reasonable Pashtuns) will have to get over their differences and defeat them themselves. It almost happened in the 90s, and it would have happened had it not been for the pettiness and miserly backstabbing of the Uzbek, Tajik and Hazara military leaders who refused to cooperate for their peoples's common best interest because of old ethnic, religious baggage or whatever. This is why, as much as I don't want to wish the Taliban on anybody, Afghanistan needs to grow up and crush the Taliban itself (I'd like to say peacefully, but I'm pretty sure the Taliban with all their acid in people's face throwin and public execution havin ways, don't do peaceful). The West, for sad and murky reasons, was not able to accomplish this objective for them. It is similar to the situation with Israel, who I am no apologist for. But to the Arab states surrounding it that bitch about it non stop and cry for its imminent demise, I say - You guys surrounded a small nation for three decades, who you outmanned, outgunned, and out-experienced at a ratio somewhere between 10 and 30 to 1. Yet you guys lost, mainly because of your infighting and your general idiocy and ineptitude. So despite its maintaining apartheid and ongoing terrible behaviour (which I am firmly opposed to, but thats another column) Israel deserves to exist. Idem for the Afghans deserving our abandonment (sorry, harsh). In theory we should have obliterated the Taliban sometime in mid-2003, but we didn't. It's because people in North America are too busy mowing their lawns and watching So You Think You Can Dance to have any skin in your fight/oppression. Only you can take down the Taliban, because only you can appreciate from firsthand experience how truly terrible they are.

When NATO and the States went into Afghanistan in October 2001, it was so far gone as a nation and a state that people wondered what aggression could really accomplish. Some good things have been done by Western soldiers, in truth, and today it might not be quite as far gone. But its nowhere near even halfway where it needs to be. Lets leave Afghanistan with the gift of our reasonable expectation. Afghans, try and claw your way back to only half gone. Think of this as a goal for your country, to be attained. Half Gone ee stan.