America's Lost Greatness

As the debate about the fiscal cliff drags on, it is becoming clearer to me that the US has lost its greatness.  It is no longer the biblical city on a hill envisioned by Reagan.  Our leaders are no longer concerned about our nation, they are concerned about themselves -- their power, their wealth, their position,  No one puts their country first.

We are supposed to have a democracy that allows the people to choose good leaders, but they have chosen poorly.  Too many of our leaders are stupid, selfish, greedy, corrupt, or worse.  One of the worst things as been the capture of the political system by moneyed interests.  A few years in government are just preparation for making real money as a lobbyist, consultant, or businessman selling to the government.  Another real problem is gerrymandering, making congressional districts safe for incumbents.  The House of representatives should be the most in touch with the people's needs, but it has become less and less responsible to them.  Congressmen's main concern is keeping their donors happy, most of whom live outside of their districts.

So, it looks like we will either continue to run trillion dollar annual deficits, or we will fall off the fiscal cliff into a deep recession, neither of which would be necessary.  Economists have good ideas about how to avoid both disasters, but our leaders are not listening.

Why Obama Failed Me

I didn't want to vote for Obama, but between Obama and Romney, Obama was the better choice. I was going to vote for a third party candidate, but ironically thanks to some Wall Street Journal Internet test of political positions, I found that both of the third party candidates were too radical for me. I have voted for Ralph Nader in the past, because I thought he was a good, honest man, unlike the major party candidates. This year however, I didn't know anything about the Green Party or the Libertarian Party candidates, and according to the Wall Street Journal they both espoused extreme positions. I often agreed with the Green Party on economic issues, but not on social issues. Similarly I often agreed with the Libertarians on social issues, but not on economic/financial issues. I think the Fed has saved the US from a horrible financial debacle brought on by Wall Street, which seems to be run by some of the worst people on earth. I think they are evil, but they may just be grossly incompetent.

So I was stuck between Obama and Romney, both of whom held more moderate positions on both social and economic issues, but I was closer to Obama.  However, I am unhappy with a number of things Obama did or did not do during his first term.
- He did not end the war in Afghanistan, which everybody thought was the "good" war, but it turned out that everybody was wrong (except Joe Biden).
- He did not close the Guantanamo prison, leaving the US with its own "gulag" like the old Soviet Union. It's like having a billboard that says, "The US is no longer a free, democratic country ruled by law." No wonder foreign students are going home when they graduate.
- He continued the Bush tax cuts. These tax cuts have badly unbalanced the US economy, contributing to our running up a trillion dollar deficit every year. They are unsustainable, especially when they undercut financing for the wars in Iraq and Afghanistan. That's one of the main reasons Rumsfeld said that you go to war with the Army you have, not the Army you want. The Republicans were happy to pocket a few thousand dollars in tax savings, although it meant many more troops would die in those wars because they did not have the best equipment.
- He did not try hard enough to get Elizabeth Warren approved as the first head of the Consumer Financial Protection Bureau. She created the bureau, and she should have been allowed to get it started. She would have faced fierce opposition from the Republicans in Congress, but Obama should have taken them on. It's possible that the big banks hated her so much that the bribed Obama and Democrats to desert her, too. I'm glad she was elected Senator, but I would have preferred to see her take on the banks in the bureau she created. Hopefully she will be able to do some of the same things as Senator. It will be interesting to see whether she gets on any relevant committees, or whether the banks will bribe the Democratic leadership to stick her in the boondocks somewhere.
- Obama did not give us single payer health care, i.e., Medicare for everybody. He have us expanded health care based on a Republican model that is a gift to the health insurance companies and the medical community. It means much higher costs that a single payer system would have meant.
- He has continued the Bush Administration drone strikes, which in many cases have killed innocent civilians and in some cases US citizens. This is like Guantanamo. It shows the world that the US is not longer an honest, decent, just country of laws.
I am hoping that Obama will do better in his second term. His first task is to do something about the fiscal cliff in a way that will reduce the outrageous budget deficit. So far, I am not optimistic. They may reach some sort of a deal that will allow us to muddle through, but will do little or nothing to redress the fundamental problem of the debt that is destroying America.

Defense Contractors Suck Taxpayer Money

The Republicans complain about all the individual citizens who rely on taxpayer, government money, and there are a lot of them.  But what about the defense contractors, whom the Republicans want to protect from going off the fiscal cliff?  Lockheed Martin works almost entirely for the government, although it sells some weapons systems to other countries, and thus has some income from other sources, but not much.  Yahoo says Lockheed annual revenues are about $47 billion.  Some of its competitors, companies that also make money largely from government contracts funded by the taxpayers include Northrop Grumman with revenues of about $26 billion, Raytheon with revenues of about $24 billion, General Dynamics with revenues of about $32 billion, and Boeing which is only partially a defense contractor has total revenues of $79 billion, perhaps half of which are from defense sales to taxpayers, about $40 billion.  This amounts to an annual taxpayer expense of around $169 billion.  Although we are talking about budget overruns of about $1 trillion, this is a meaningful portion of that. 

These companies are very focused on lobbying.  They often succeed in getting Congress to authorize money for defense projects that the Pentagon wants to cancel.  When Republicans talk about preserving the military budget, many are mainly worried about keeping the money flowing to these companies, who have cleverly located factories and offices in many key congressional districts.  The service men and women stationed in Afghanistan and around the world are secondary to man of these congressmen and senators.  The servicemen are a drain on congressional resources, asking for better medical care, etc., while the defense contractors give the congressmen and senators lots of money for their campaigns, etc. 

One of the biggest concerns about the fiscal cliff is that it would mandate reducing payments to some of these welfare gluttons who suck up taxpayer money.  We'll see how clever their lobbyists are in keeping the money flowing. 

SAC Insider Trading

It looks like insider trading is the rule rather than the exception on Wall Street, most recently illustrated by the SEC case against SAC involving its head, Steven Cohen.  It probably extends to anywhere there is insider information to trade on, the entertainment industry in Los Angeles, for example.  Charlie Gasparino of Fox Business News says that insider trading is a victimless crime.  But the victims are potentially every other stock trader, who because they don't have insider information sell or buy at a price that hurts them and benefits the person with insider information, who knows that the stock is going to go up or down.  In essence, the insider is stealing money from those without inside information.  It's like selling fake Rolex watches while claiming they are genuine and charging the full retail price of a real Rolex.  You think you are buying a good stock, based on all the information available to you, but it's not a good stock and the man selling it to you knows that it's not, because he has nonpublic, inside information. 

Martha Stewart went to jail for what seemed to be a common practice among high-level business people.  Another story in the Wall Street Journal about executives who routinely made money trading in their own companies' stock illustrates that problem. 

It only reinforces the terrible impression created by Wall Street in the great subprime housing derivative fiasco that created the worst recession since the depression.  These guys are crooks.  They are mafioso in suits who will destroy America for a buck.  And it all the big shots who run the financial industry, which Warren Buffet said on the Daily Show last night is responsible for about 20% of the US GDP.  This is basically the figure presented by the government Bureau of Economic Analysis.  And Michael Lewis says that one reason the Germans got suckered into the housing mess was that they thought the derivative salesmen from Goldman Sachs and the other big American banks were honest, when in fact the salemen were lying through their teeth. 

In a Vanity Fair article, Lewis says, quoting a German banker:

“For 40 years we didn’t lose a penny on anything with a triple-A rating,” he says. “We stopped building the portfolio in subprime in 2006. I had the idea that there was something wrong with your market.” He pauses. “I was in the belief that the best supervised of all banking systems was in New York. To me the Fed and the S.E.C. were second to none. I did not believe that there would be e-mail traffic between investment bankers saying that they were selling … ” He pauses and decides he shouldn’t say “shit.” “Dirt,” he says instead. “This is by far my biggest professional disappointment. I was in a much too positive way U.S.-biased. I had a set of beliefs about U.S. values.”

The global financial system may exist to bring borrowers and lenders together, but it has become over the past few decades something else too: a tool for maximizing the number of encounters between the strong and the weak, so that one might exploit the other. Extremely smart traders inside Wall Street investment banks devise deeply unfair, diabolically complicated bets, and then send their sales forces out to scour the world for some idiot who will take the other side of those bets. During the boom years a wildly disproportionate number of those idiots were in Germany. As a reporter for Bloomberg News in Frankfurt, named Aaron Kirchfeld, put it to me, “You’d talk to a New York investment banker, and they’d say, ‘No one is going to buy this crap. Oh. Wait. The Landesbanks will!’ ” When Morgan Stanley designed extremely complicated credit-default swaps all but certain to fail so that their own proprietary traders could bet against them, the main buyers were German. When Goldman Sachs helped the New York hedge-fund manager John Paulson design a bond to bet against—a bond that Paulson hoped would fail—the buyer on the other side was a German bank called IKB. IKB, along with another famous fool at the Wall Street poker table called WestLB, is based in Düsseldorf—which is why, when you asked a smart Wall Street bond trader who was buying all this crap during the boom, he might well say, simply, “Stupid Germans in Düsseldorf.”