The People Who Eat Mud

“There are people digging with their hands, searching for people
in the rubble. There was unimaginable destruction.”

— Bernice Robertson, an analyst with the International Crisis Group

January 13, 2010 New York Times

A massive earthquake hit Haiti – near the capital city of Port-au-Prince – on January 12^th, killing thousands, injuring a multiple of that, crushing buildings and squeezing the life out of a nation where the national pastime appears to be hopelessness. This is the poorest country in the Western Hemisphere and near the bottom of the entire earth, sharing an island home with the not-so-bad-off Dominican Republic. Haiti is also the country where people eat mud to stave off the belly-wrenching pangs of hunger.

On July 29, 2008, the Guardian (a UK newspaper) wrote about this scene in the capital: “In a dusty courtyard women mould clay and water into hundreds of little platters and lay them out to harden under the Caribbean sun… The craftsmanship is rough and the finished products are uneven. But customers do not object. This is Cité Soleil, Haiti's most notorious slum, and these platters are not to hold food. They are food.

“Brittle and gritty - and as revolting as they sound - these are ‘mud cakes’. For years they have been consumed by impoverished pregnant women seeking calcium, a risky and medically unproven supplement, but now the cakes have become a staple for entire families…. It is not for the taste and nutrition - smidgins of salt and margarine do not disguise what is essentially dirt, and the Guardian can testify that the aftertaste lingers - but because they are the cheapest and increasingly only way to fill bellies… ‘It stops the hunger,’ said Marie-Carmelle Baptiste, 35, a producer, eyeing up her stock laid out in rows. She did not embroider their appeal. ‘You eat them when you have to.’”

Before the earthquake, Haiti and its population were starving. 80% of the nation’s food is imported (most of the local soil has been so depleted by over cultivation so as to be useless), vast segments of its population live in squalor, joblessness is the norm and political instability quite routine. The few successful farmers that eked out a living on their patches of land were devastated when the country lifted the tariffs on food in the 1980s, cheap imports follow, and the land simply atrophied. As forests were cut and used to make charcoal to heat homes and cook, erosion further decimated the quality of the farmland. Food prices in the international marketplace have since skyrocketed, placing new burdens on this lost corner of the earth.

Then, the earthquake hit. The January 13^th Los Angeles Times: “[A]long the city's roadsides, the true cost of Tuesday's magnitude 7 earthquake was readily visible: the bodies of victims neatly lined up, some covered in white sheets and some not… The corpses included that of a young girl -- perhaps a teenager -- in pink shorts; a couple lying next to one another; a man covered in a sheet up save for his horribly swollen feet poking out from beneath… There was virtually no sign of outside assistance other than a few United Nations vehicles passing by -- and there was no police presence, no water being handed out, no encampments except those set up by people apparently left homeless by the quake or those too afraid to go back into their ramshackle homes in case of aftershocks.

“Across the capital, some of the worst damage appeared to be in hillside neighborhoods such as Petionville… Elsewhere in the city, structures lay collapsed like giant sandwiches, with layer upon layer of concrete and remnants showing through: mattresses, shreds of clothing, chairs.” According to CNN, over 100,000 have died, most of Port-au-Prince is in rubble, electricity is off and government services have ground to a halt; thousands are missing, and big after-shocks (5.0+) have hit and more are expected.

What else is there to say; they need our help. www.ArtistsForPeaceAndJustice.com if you want to donate. To wire a payment immediately, please use the following information:

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I’m Peter Dekom, and I am deeply saddened.

Banks Laughing All the Way to You

Ha! Ha! Ha! Haw! Haw! Hee! Haw! Hee! Haw! That’s the sound of your big friendly bankers as they keep one step ahead of spate of new laws and regulations passed by Congress and signed into law by the President of the United States last year. Laws that prevent instant and random credit card rate hikes without warning, not explaining stuff clearly to consumers, limiting rate increases (effective in February), etc. The banks – the same banks who wanted government help when their balance sheets tanked with bad subprime mortgages and failing commercial real estate loans and who had no problems taking taxpayer-funded TARP money – are screaming like stuck hogs that the government is messing with a free market with all these new rules that they claim will cost them $50 billion a year.

So dem banks are messin’ with your checking account and your plastic – raising fees for all kinds of stuff (there will be a lot fewer ads for “free checking”), higher credit card fees, lower credit limits, higher interest before the limitations on interest rates kick in, “dormancy fees” when you don’t use your card enough, moving to variable interest rates and the list rolls on. Banks are even complaining that the requirement to notify consumers in advance of account changes is going to cost them tons in postage and paper. Woo hoo! I feel bad that they cannot sneak up on you anymore. How about not changing the account so often so you don’t have to send out all those nasty, piggybank-breaking stamp costs?

The one thing that these bankers are going to make sure of: dollar for dollar, they are not going to bear any financial burden for the new rules. They’ll take the bailout money, but if there is a cost that they can figure out how to charge to a consumer, well, they’re gonna go there. Of course, this refusal to accept the burdens of regulations aimed at the bankers in the first place, and shifting the entire burden to the consumers that the legislation were clearly intended protect, will probably piss off the same legislators who thought they were doing the public a favor.

So there’ll be a pile of Senate and House subcommittees considering this reaction from the financial community, a gaggle of lock-step-Congress-people who always buy any banker who uses the “free market” argument, even though the banks have been the primary beneficiaries of a very banking-friendly-subsidy-non-free-market policy, and some banking bigwigs who will testify, with straight faces, that their new assessments against consumers are necessary for their very survival. I wonder if they will fly to DC in the company jet or slum by just sitting in first class? There will be new laws, new regulations… but the banks will find a way to limit the changes and then create new loopholes to dance around the next set of changes… but they are banks… whaddyaexpect?!

Sigh, there is no free market. Big bullies push individuals around because of a profoundly uneven playing field. They can aggregate billions, hire the most expensive lobbyists and lawyers they can find, sponsor huge-fund-raising efforts for politicians running for office… while ordinary people only get to aggregate their power at the ballot box. It’s the only balancing act we can get… and the thought that free market competition will create efficiencies and consumer benefits is a theory that fails in an era of credit impairment and this strange reality that banks seem to impose pretty similar looking fees and charges (or at least fees and charges that, in the aggregate, generate roughly the same result) no matter what the market conditions.

Banks aren’t really interested in little people with little purchases and small savings anyway. It’s not about the little rivulets at the source of a great river, these banks want the ocean that the big river runs into. And it is very necessary that our elected representatives push back… hard!

I’m Peter Dekom, and I approve this message.

Fed Up with the Fed

Politicians want political control. Regulatory economists want the ability to operate without catering to the political pressure du jure. And most folks don’t have a clue about what’s right or what should happen, because it is just too complex for the layperson to understand. And like most regulatory bodies, the roots of the Federal Reserve Bank, our major monetary policy instrument, were fertilized in pain.

Over a century ago, the “Panic of 1907” sent Wall Street stocks plunging (by half), folks ran to pull their money out of banks and trust companies, and a ravaging recession pushed economic chaos and bankruptcy across the nation. Sound familiar? The brakes on this free fall came not from the federal government (there was no central bank to push money into this dehydrated financial system), but from the efforts of mega-banker J.P. Morgan (pictured above) who pledged his own funds and convinced a number of other bankers to furnish the necessary liquidity to the American banking system out of their own pockets. The U.S. economy was still relatively small, especially when compared to its European counterparts, and the nation was still struggling with the complexities of modern economics.

The Panic pointed out a governmental capacity that was sorely lacking at the time: a central bank that could push money into the system when needed or contract money out (by making it more expensive) to create more stability in the currency and financial markets. Congressional leaders looked to the central banks in Europe for their inspiration, but many Americans were suspicious that such a centralized institution would effectively be run for the benefit of the mega-bankers like J.P. Morgan and not for the betterment of the general public.

The 1913 bill creating the Federal Reserve came from commissions headed by a noted Republican and had initial Republican support as a private bank, but when the bill finally came to a vote, Republicans mostly voted against the legislation, liberal Democrats wanted it to be a directly controlled branch of the federal government, and conservative Democrats wanted this bank to be a separate government corporation, out of the range of powerful bankers like Morgan (made worse by his daughter’s marriage to a Rockefeller).

The ultimate result: The Fed (including its 12 branches) is a quasi-governmental corporation, but it is not a part of the federal government and it is not owned by anyone. The President appoints the board of directors, including of course the chairman, subject to Senate confirmation. They serve long, 14-year, staggered terms, to insulate them from political vagaries (the chairman gets a 4-year term). The Federal Reserve (according to Wikipedia) has the following responsibilities (which have changed over time in reaction to financial crises):

1. Conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system, and protect the credit rights of consumers.
3. Maintaining stability of the financial system and containing systemic risk that may arise in financial markets.
4. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system.

Why does any of this remotely matter? Because in the interest of stability, the Fed is charged, as one of its primary duties, with preventing “bubbles” (like the real estate bubble and all the underlying lending that exploded into the current financial mess) and, when “bubbles” occur, to mitigate the damage they cause. And while Fed. Chairman Ben Bernanke is likely to be confirmed for another term in his current role, and even though he is credited with having reacted well to the financial damaged caused by the recent bubble, the harsh reality is that the Fed, much like Wall Street, fell victim to the unsustainable myth – “conventional wisdom” – that accelerating real estate prices and the easy access to mortgage money were not systemic problems for the U.S. economy. They were wrong – dead wrong!

The January 6^th New York Times illustrates: “In 2004, Alan Greenspan, then the chairman, said the rise in home values was ‘not enough in our judgment to raise major concerns.’ In 2005, Mr. Bernanke — then a Bush administration official — said a housing bubble was ‘a pretty unlikely possibility.’ As late as May 2007, he said that Fed officials ‘do not expect significant spillovers from the subprime market to the rest of the economy.’” The Fed wants an expanded role in the regulation of financial institutions to prevent bubbles – but they didn’t see this huge one coming – and a number of Congress men and women, want to impose more direct, control over the entire Federal Reserve System, incl uding the right to review and alter Fed-set interest rates.

What really pisses folks off is that Bernanke is making lots of speeches about what should be done in the future and how well the Fed reacted to the current crisis, but notably absent from these talks is any explanation of why the Fed missed this bubble and why they are the right folks to prevent the next possible bubble. My opinion? The Fed cannot become subject to the whims of political trends and be subjected to the pressures that all politicians succumb to, but likewise, it owes the American people a damned good explanation of why it erred so badly in predicting this obvious path to destruction, how they will resist the pressure of defying conventional (destructive) wisdom, what steps they are taking to better predict and deal with future bubbles and what fundamental changes in their analysis will take place to make sure Americans are protected against such economic destruction. The Fed owes us a new mission statement!

In fairness, the Fed hasn’t been a complete bust for taxpayers; in 2009, the Fed made a big profit – $45 billion to be precise – generating interest income from everything from emergency bank loans to its investments in U.S. government debt and mortgage-related securities. All that money is going back to the Department of the Treasury at a time when the country needs cash badly. That still doesn’t excuse its bigger missteps or tell the American public how the Fed plans to avoid its herd-like following of misguided “conventional wisdom” and substitute a future of astute leadership and objective analysis instead.

I’m Peter Dekom, and this is one of America’s biggest issues.

Begrudging Wealth – Again!

It’s not that Americans generally begrudge those who have truly earned riches their wealth. It is the American “rags to riches” paradigm, or, more probably, “not-too-bad-rags to oh-wow riches” model. We all want to grab that brass ring, and those whose ring-grabbing has soared like an eagle often become role models, celebrities (some with reality television nastily tucked under their belt) and sought-after speakers.

But what galls most of us it where a particular group of individuals’ behavior has wreaked havoc with our entire economy, destroying the lives of millions of people through irresponsible and what, in my opinion, were often unethical (if not illegal) choices, where the government has – out what I believe was a sense of “blackmail out of necessity” bailout of the system for the nation to “make it through” – invested untold billions of dollars to resuscitate that (financial) sector…. and as the Titanic sinks (housing prices have begun to fall again), Rome burns (unemployment shows no signs of abating anytime soon), they buy new luxury yachts, waiving at the victims floating out to sea, and build a new city of gold to get a better view of the flames!

The emotion that many Americans feel at wealth garnered from taxpayer sacrifices is not admiration or envy, it is rage mixed with an unpleasant quantity of down-and-dirty lust-for-revenge. As these black souls rail at the thought of being regulated – sending lobbyists with reminders of campaign contributions of old to the Hill for the less-than-subtle pressure – wanting to be able to recreate future bubbles (the only way to amass big fortunes, they freely admit, in a relatively short time) and take advantage of their automated and exceptionally complex computer trading programs that unlevel the playing fields to their exceptional benefit, the rest of us can only stand in horror as they “do it to us again” with taxpayer money at the lowest point in the lives of millions of Americans.

We are about to witness the release of what some say will be an aggregate of $50 billion dollars of aggregate “Wall Street bonuses” and, as the calculations are updated, we get a pretty good idea of what is about to come in the next week or two: “Goldman Sachs is expected to pay its employees an average of about $595,000 apiece for 2009, one of the most profitable years in its 141-year history. Workers in the investment bank of JPMorgan Chase stand to collect about $463,000 on average.” January 10^th New York Times. And since that money isn’t exactly being allocated to favor secretaries, messengers, clerks and non-professional staff, we know that translates into vastly larger bonuses for those in the direct path of revenue-generating, still a significant number of thousands of employees in each large company who will see seven figure or near-seven figure bonuses soon.

But these boys and girls are smart… they sense the public rage. “Some bankers worry that the United States, like Britain, might create an extra tax on bank bonuses, and Representative Dennis J. Kucinich, Democrat of Ohio, is proposing legislation to do so… Those worries aside, few banks are taking immediate steps to reduce bonuses substantially. Instead, Wall Street is confronting a dilemma of riches: How to wrap its eye-popping paychecks in a mantle of moderation. Because of the potential blowback, some major banks are adjusting their pay practices, paring or even eliminating some cash bonuses in favor of stock awards and reducing the portion of their revenue earmarked for pay.” The Times.

The compensation structures at these financial mega-structures are built primarily around bonuses – although they mostly get sizeable six figure minimum annual salaries. Since large teams of professionals work on each large transaction, giving a fixed percentage of transactions to specific performers is rarely feasible. The big banks are scaling down, in reaction to the public outcry, but there is no easy way to compensate these denizens of financial irresponsibility, even at “reduced rates” (which still drops the jaws of most Americans), without drawing the ire of the rest of the nation. We’re still waiting to see how the government addresses the fact that these overpaid players caused this financial debacle which plagues the rest of us but have yet to suffer any serious consequences for their actions.

Paying the bonuses with stock appreciation rights or option or restricted stock in lieu of cash doesn’t assuage the electorate. We want the money that they are paying themselves to go from point A (their pockets) to point B (where the money can be used to fix the damage they caused). While Wall Street claims to be the engine that creates new jobs and finances efficient new industries – they’re doing God’s work according to Goldman CEO Lloyd Bankfein – it is very, very clear that their recent trading (and lack of lending) activities have most definitely had the opposite effect. Pressing for increased corporate efficiency has resulted in massive layoffs, and using the credit provided virtually for free by the Federal Reserve for their own internal purposes and not to enable small and mid-level businesses to operate has further erode the economic reality for most Americans. The general lay consensus is that they don’t “make anything of value,” but just “make” money by moving assets and numbers around.

Wall Street needs to address the massive payback they truly owe to the American people. They need to pay for the excesses that led to our financial fall. They are not going to do that voluntarily; we need to regulate their bubble practices out of existence and tax their current financial gains as payback for their most recent sins. We need to stop this de facto subsidy/ amnesty program we seem to have created to bless Wall Street. They can no longer be a separate and sacred stratum of society, exempt from the rules of being responsible for the damage they caused.

I’m Peter Dekom, and I approve this message.

London’s Bridge is Falling Down

New York & London. Two cities of monumental financial power that hyper-accelerated the global meltdown. Home of the rogue traders, the mysterious derivatives, mega-funds, the trader-cowboys and the largest financial centers on earth. And two symbols of financial excess that have drawn the ire of the rest of the world for obvious reasons. Among two major currencies on earth, neither the British pound sterling nor the dollar is faring particularly well. Deficits are soaring, and the powerful and well-funded lobbyists are using their massive war chests to resist any wholesale rewriting of financial regulations that might restrain a repeat of the recent past. The UK has at least taken steps to tax the excess bonuses payable and paid to financial players at all levels, this after much the same rescue effort (as mounted by the U.S.) by the British government.

I’ve trashed my own nation’s ungrateful and insensitive financial institutions, but it is equally interesting to examine the mounting pressures in England to reign in a financial market gone wild. The stage is set for a showdown – you see the UK has another master to serve and cannot simply set the financial rules for itself. As a member of the European Union, even though it has elected to retain its own currency at the expense of using the Euro and thereby has sidestepped some of the regulatory issues, Britain must accept the overall financial regulations imposed within the EU. And the Continent is bubbling and broiling with hostility for the London market.

First, it is important to recognize the scope and impact of the London-based financial markets. 70% of Europe’s major financial transactions flow through London at some level or another. The December 28^th TheDeal.com” “About 80% of EU hedge fund activity is managed from London, as is 60% of EU[‘s large private equity funds]. Yet Britain's rivals would like nothing more than to see the City cut down to size… Now that London, New York and the offshore islands that host their fund industries have shown that barely regulated ‘Anglo-Saxon’ capitalism can destroy wealth as well as create it, a tightly regulated, socially responsible European capitalism is seen as the superior model.”

There has always been hostility, rivalry if you will, between two particular segments of the European marketplace, nations with profoundly different national sensibilities: England and France. The Brits see an over-regulated, socialist menace across the Channel, and the French see boorish bullies ready to use money to force their way in the world. To France, this moment represents an opportunity for a little comeuppance. The fact that the new EU commissioner for the internal European market is a Frenchman, Michel Barnier, with regulation on his mind suggests that the UK is in for a battle, you’ll excuse the expression, royal. The Brits took their eye off the ball, emphasized other priorities of involvement in the EU, and let this clearly anti-UK regulator into a job that will impact the London financial markets like no other.

The press for regulation was already steaming through the EU parliament. “The Alternative Investment Fund Managers’ Directive, now passing through the EU's legislative process, with parallel discussions in the European Parliament and among the 27 member states, seeks to regulate EU-based managers of hedge, private equity and venture funds that are either domiciled or marketed within the EU. The directive demands greater transparency and disclosure, independent valuation of assets and regulatory oversight of fundraising outside the manager's home country… Unfairly, in the eyes of [private equity] players, it excludes sovereign wealth funds [funds that are managed by national governments], family endowments, individual billionaires and non-EU alternative funds, if the latter do not market to investors in Europe. All of these players will be able to invest in EU assets at a lower cost than their regulated brethren. Yet -- as Dubai has shown -- sovereign funds could themselves pose systemic risks to the world economy… The commission estimates the legislation would catch about 30% of hedge fund managers, managing almost 90% of the assets of EU-domiciled funds. It will also affect about half of PE and other fund managers.” TheDeal.com

While this new wave of regulatory frenzy will impact anyone with a European presence, and that embraces American funds as well, the clear target is the London market, traders who are covered on every transaction simply because of their location. Will they move to other countries – very difficult and inconvenient, follow the directives while squealing down the line, or rail in other less-than-supportive ways? British banks are barely able to contain their envy at their U.S. counterparts who have managed to sabotage the most serious efforts of regulation in the States with highly effective lobbyists and even more effective campaign dollars. But wait, it gets worse.

According to the January 8^th Wall Street Journal, "Big Deficits Cloud Britain's Future" as their national deficit looks as if it will consume a staggering $280 billion, representing approximately 12.5% of their Gross Domestic Product. Hey, we're not doing too well either in this department, but at least we are better off with a deficit that represents only 9.4% of our GDP (the wider European Union is at 6.9% of GDP). Bottom line: even as the U.K.'s financial sector is pushed down by the EU regulators, there isn't going to be much in the way of new local government spending to pick up the slack; they won't have the money. As the U.S., Japan, France and Germany saw a tiny movement of growth at the end of 2009, Britain contracted still, "making it the last of the Group of 20 developed nations to leave the recession." (WSJ)

For London, the writing is on the wall: “In the new EU configuration, the free-trading, free-market nations seem to have lost the economic portfolios to more corporatist and mercantilist rivals. British Prime Minister Gordon Brown wanted to make a mark in foreign and security policy but likely made a huge strategic error in failing to push for an economic job for the U.K. As a result, Britain will shout angrily from outside the euro currency zone -- and continue to shoot itself in the foot every time it reminds Europe of the importance of British financial services. Private equity losses are just collateral damage.” Will New York be the last mainstream refuge in the Western World for the rogue trader? Time will tell.

I’m Peter Dekom, and “s@%t” happens.

Yes Men in Yemen

In the world of Middle Eastern governments, you have or control access to oil, have a big bad military or shiver in a corner, hoping no one will kill you. Yemen used to have oil, a lot of oil… but millennia of biodegraded fossil fuel being what it is when it is savagely removed by an oil-slorping humanity… is reaching its limit in this small, war-torn country on the edge of the Arabian Peninsula, strategically located at the gateway between the Red Sea and the Gulf of Aden. As oil revenues have plummeted, the sphere of influence and control exerted by its President, Ali Abdullah Saleh, has contracted proportionately. For all practical purposes, the “legitimate” government of Yemen is pretty much relegated to controlling the capital city of Sanaa.

The extent of Yemen’s instability is staggering: “Much of Yemen is in turmoil. Government forces on Monday killed two militants suspected of being with Al Qaeda. There is another round of rebellion in the north and a growing secessionist movement in the south. In important provinces where key oil resources are and where Al Qaeda in the Arabian Peninsula is strong, government troops and the police largely remain in their barracks or in the central cities. Order outside the cities is kept by tribal chiefs, with their own complicated loyalties.” January 5^th New York Times. Bottom line, the government isn’t really in control, and 67-year-old Saleh doesn’t exactly have his eye on these particularly dire issues; he’s more concerned with consolidating his power and passing the baton to his son as his designated successor and in keeping his family on top of the most powerful government agencies.

Entire a Nigerian crotch bomber who, with Yemeni al Qaeda training, almost brought down an American passenger jet headed for Detroit on Christmas day. And enter both the U.S. and the U.K., fearing the growth of al Qaeda, and now wanting to create a “partnership” with the Yemini government to fight al Qaeda. They were notably absent in offering really significant aid until the recent incident. Ali Saleh wasn’t very interested in provoking a hornet’s nest of discontent, but when the U.S. supplied specific evidence that Ali Saleh and his family were being singled out as al Qaeda targets, the President showed serious interest.

Once again, the U.S. is seeking an alliance with a regionally corrupt, self-serving regime. Saleh’s relatives are everywhere. The Times: “Ahmed Saleh is head of the Yemen Republican Guard and the country’s special forces… The president’s nephews — sons of his late brother — include Amar, the deputy director for national security; Yahye, head of the central security forces and the counterterrorism unit; and Tarek, head of the Presidential Guard. The president’s half brother is head of the air force.” And millions of dollars flow at the direction of a President who could direct such resources towards his own people; he even spent $120 million to build a personal mosque – the al-Saleh Mosque.

There is opposition to the intended political succession, and Saleh is busy horse-trading to insure his goals are met. Without the necessary oil money, Saleh is using outside money, notably from neighboring Saudi Arabia, and now from the U.S. and the U.K. to stay in power and finance the cost of the war in the north. And since some powerful political interests, which Saleh needs to court in order to solidify his succession plans, have ties to some of these fundamentalist Islamist militants, including al Qaeda, Mr. Saleh has to rein in a wholesale foreign-supported military blast against these operatives. It’s a critical balancing act, but already, there are signs that Saleh is trying to minimalize the extent of the al Qaeda presence in his country.

The January 4^th Washington Post: “The head of Yemen's national security agency declared over the weekend that the threat posed by al-Qaeda had been exaggerated and that Yemen is not a haven for militants, the state news agency Saba reported. The comments by Ali Muhammad al-Anisi came a day after Gen. David H. Petraeus, the head of U.S. Central Command, promised increased U.S. support for Yemen on a visit here. Since Anisi's statement, al-Qaeda threats have forced the U.S., British, German, French and Japanese embassies to close… While playing down the U.S. role seems designed to prevent a domestic backlash, it also raises questions about the government's long-term commitment and will to fight al-Qaeda in the wake of the attempted bombing of a U.S. airliner on Christmas Day, analysts say. Yemen's fragile government is in a delicate balancing act between its allegiance to the United States and tribal, political and religious forces that resent U.S. interference in Yemen and sympathize with al-Qaeda's ideology.”

Under the laws of unintended consequences, it will be most interesting to see how the U.S. and its allies deal in a world where Western interests are hardly what local leaders really want. It is relevant to ask exactly what we are getting ourselves into, just as we are beginning to seek extraction of U.S. forces from the region. Is there a better way to contain al Qaeda in Yemen and the region?

I’m Peter Dekom, and I like asking obvious questions.

The “On Our Knees” State

The vast majority of States – facing reduced property taxes from declining home values, foreclosed properties combined with reduced sales tax and vaporizing income tax was unemployment rates soared – are dealing with deficits. But no state… not one… faces the massive budget deficit of sunny California . The Jan. 1^st Washington Post: “Gov. Arnold Schwarzenegger labored mightily in 2009 to close a $60 billion budget deficit, hammering out a plan that included $32 billion in spending cuts and $12.5 billion in temporary tax increases… But at year's end, Schwarzenegger was still looking at a combined $21 billion deficit for the current and coming fiscal years, and he was pleading for an $8 billion federal bailout.” It seems they ran all their numbers based on the “previously healthy” economy. Oh well!

California is an ungovernable state where voter-originated ballot initiatives, riding the wave of popular passion with often little attention to long-term consequences, can override the best intentions of any legislature… but particularly a legislature with serious terms limits (imposed by a ballot initiative) that prevents the legislators from remaining in office long enough to have enough experience to deal with the State’s complex issues. Fox example, California ’s had the requirement for two-thirds majority to pass a budget – the result of a ballot initiative; hence the budgets haven’t been remotely passed on time since that passed.

How easy is it to qualify for a ballot initiative in the Golden State ? Pay a registration fee of $200 (and thousands of folks get this far every year) and then gather a pile of signatures: 433,971 if you’re just looking to pass a statute, but 694,354 if you’re after a constitutional amendment. The approximate cost of gathering those signatures is about $1 million for each measure. The legislature can also place such initiatives on the ballot… but the good old “constitutional convention” hasn’t been used since California became a state.

But look at one huge cost that California would have to unravel: state pension plans (for working and retired state workers) offered fixed benefits and relatively short paths to retirement. Over the past decade, according to the Governator himself, the cost of state pensions has increased by an intolerable 2,000%!!! How do you take away what these folks have already worked to earn? And if you don’t how in the world do you pay for these benefits while supporting all of the other critical needs of the state? Or how about this little fact that bothers Mr. Schwarzenegger as well: the State spends 7.5% of its budget on higher education and 11% of that budget on prisons!

The federal government has been loath to get into the state bailout business, because if they do it for one, they may feel compelled to do it for all. But at least the fed can “print money” (not literally, but simply by increasing the M-1 money supply), incur deficits and not face imminent bankruptcy. Okay, you can build up inflation levels until you become a banana republic and need a suitcase-full of cash to buy a cup of coffee. But Californians already feel taxed to death already; record high income tax, sales tax, motor vehicle fees, business taxes… and those corporations able to depart the state without overwhelming disruption are leaving in droves.

The latest high-level defection is defense contractor, Northrop Grumman, which will vacate its Los Angeles headquarters in favor of the Washington , D.C. area next year. The Washington Post (January 4^th) noted: “This doesn't mean a lot of new jobs for the [D.C. area] -- the company plans on moving about 300 people of the 120,000 who work worldwide for Northrop -- but it is a big catch for the region and a tough image blow, at least in prestige, for the battered California economy.” Not to mention the loss of the corporate taxes California so desperately needs. Raise taxes enough and the only folks who’ll stay behind will be the unemployed who can’t afford the moving costs! That’ll take the state out with a big bang!

Republicans hate taxes, and Democrats tend to want to create social programs and union benefits. That combination is increasingly lethal, all across the nation. But California , with its out-of-control ballot initiative system, is… to put it mildly… toast. In an article entitled, Schwarzenegger's New Action Role: Beggar , the local NBC affiliate in the Bay Area noted: “The White House said it would ‘take a look at’ the Governator's latest spare-a-dime proposal. That's what they said last time around. Translation: Don't count on any help from Washington .

“ California needs to solve its problems at home. Schwarzenegger's grab bag of budget fixes -- offshore oil drilling, slashing welfare and in-home healthcare, and cutting public-transit funding from the state gas tax -- wouldn't come close to closing the budget hole… The state budget requires a major restructuring, with a wholesale jettisoning of decades of voter mandates and unfunded requirements at the state and federal level. It's true that California pays more than its fair share of federal taxes -- but that's been the case for years, and it's not something that will be solved in Sacramento.” NBCbayarea.com (December 29^th)

The January 6^th Los Angeles Times does suggest that California is getting short-changed by the feds, but don’t expect any miracles any time soon: “Schwarzenegger asked lawmakers to help him push the federal government to fix an ‘unfair’ system in which California received 78 cents back from each dollar it paid in federal taxes, while Texas received 94 cents, Pennysylvania got $1.07 and Alaska got $1.84. Meanwhile, as a border state, he said, the state incurs extra costs relating to immigration, along with other federal mandates. Now, he said, the new federal healthcare bill would ‘pile billions more onto California .’” Oh well! Got a sinking feeling about this cause.

How is your state doing with these issues? And what do you think the solutions should be? Realistically… some that can be sold to the voters and that will in fact work?

I’m Peter Dekom, and I’ve love to know the answers.

Dead Ends, Really

Developers love ‘em, and homebuyers look for ‘em: cul-de-sac residences. Quiet and away from through-traffic, safe and off the beaten orbit. Safe places for kids to play. If you can sell a house in a new development at all, the properties on the cul-de-sacs will almost always go first. So since there’re so cherished and people love ‘em, I guess that means they are something that government needs to get rid of.

Yup… I figured you might want a respite from Taliban-meets-Goldman Sachs stories and see something that is less-than-critical that you probably never think about… the dreaded banishment of cul-de-sacs. Why? Crotch and shoe bombers prefer these places? They’re better for weed and crystal meth growing/manufacturing? Nah! They’re less efficient to those city services – trash collection, snow plowing, street cleaning, police patrol, etc., harder for emergency vehicles to access or even find, and require more driving through circuitous streets to reach main arteries, shopping centers, etc. (hence they encourage wasting fuel and add extra car trips for simple errands). So they’re toast! I know these issues were gnawing at your innards!

The cul-de-sac was primarily a product of post World War II suburban planning – one of the many off-shoots generated as housing tracts were produced to service the massive influx of soldiers returning after the war. The theory of “safety, peace and quiet” was a great marketing tool, and those private spots, with a few homes clustered at the end of a “no-thru-way” street, were indeed coveted.

Not so “fast” says the December 31^st FastCompany.com: “[A]ppearances can deceive. All indications are that cul-de-sacs are less safe than pre-war neighborhoods layed [sic] out in the traditional grid. An article by Philip Langdon in the Jan/Feb 2009 issue of New Urban News shows that, according California accident statistics, cul-de-sac neighborhoods see more car crashes than the denser pre-war neighborhoods. The older grid patterns also have quicker response times for fire trucks and other emergency vehicles. And accidents and crimes in the older neighborhoods are more likely to be reported faster since they have more people on the streets.”

The myth that these properties hold their values better than grid-based housing appears to be another myth that tough economic times may have shattered. The August 22^nd New York Times tracked the fate of a group of cul-de-sac homes in the Riverside Country community of the Moreno Valley, one of those bedroom neighborhoods at the edge of the Los Angeles sprawl. This area was particularly hard-hit by the housing collapse, with foreclosures exploding across entire neighborhood and 50%+ erosions of underlying values. Cul-de-sac houses fell in value and faced foreclosure at the same rate as those “grid street” houses nearby. There was no meaningful differential in “the big hurt.”

So… “whatever”… as state and municipal governments begin to clamp down on this dreaded menace: “[In early 2009,] Virginia became the first state to encourage walkable neighborhoods by limiting the use of cul-de-sacs. State rules now require that subdivisions have through streets connecting them to adjacent residences and shopping areas. Developments that ignore the new rules will be denied snowplowing and other state services. Research shows that neighborhoods with more street connections and intersections reduce car use. Some of the country's most progressive-minded cities, including Portland, Oregon, and Austin, Texas, have also made it difficult to build new cul-de-sac subdivisions.” I am so glad that our elected representatives and the civil servants that implement their policies are on the alert!

I’m Peter Dekom, and I bet you’re all worked up over this one!

Pakistan is Theirs, Not Ours

With the Pakistani Supreme Court reversing a statute aimed at protecting certain incumbents from anti-corruption prosecutions, President Asif Zardari finds himself in the cross-hairs of an investigation that threatens to push him out of office. Strangely, the Pakistani body politic is pleased with this result, not just because they so wanted a corrupt politician to fall (Pakistanis pretty much assume they are all corrupt), but because Zardari was cozying up to the U.S. government and supporting their anti-Taliban policies, including the controversial NATO “drone” attacks in the Tribal District across the Afghan border.

Indeed, anti-American hardliner, Pakistani army chief Gen. Ashfaq Kayani, seems very much in line to gain with Zardari’s demise. And if this happens, a likely path, the United States may find itself without even token support from Pakistan in America’s and NATO’s attempt to limit the ability of al Qaeda and Taliban operatives to use the Pakistani border regions as safe havens against U.S. attacks. Scary stuff, as this increasingly anti-American nation holds a stockpile of more than 60-70 nuclear warheads, which would be devastating in the hands of Islamist militants.

Most Pakistanis hate their country’s official affiliation with America’s anti-terrorism strategy (they still cling to that “war on terror” phrase even though the Obama administration has tried to distance itself from that descriptive epithet), and feel somewhat betrayed that their government is willing to support an aggressive “infidel” nation – one that breaks promises and pushes nations around solely for its own agenda in Pakistani eyes – against a fellow Muslim group of perceived “freedom fighters.”

In their eyes, notwithstanding the occasional internal attack of a Taliban militant group against the Pakistani government, the Taliban is not their real enemy… India, which holds mostly-Muslim Kashmir (a northern Indian state that borders Pakistan) against Pakistani claims, is the only real foe. Bottom line: to the ordinary Pakistani, they have no sympathy or support for the U.S. position against even the most obvious and threatening Islamist militants; that is America’s problem and should not involve Pakistan at all. In fact, they really hope we fail in Afghanistan, which appears to be another “inevitable” in the struggles in Central Asia.

On January 2^nd, a suicide bomber detonated 550 pounds of high explosives at a crowded volleyball tournament in the Pakistani village of Shah Hasan Khel in Northwest Pakistan. The blast claimed the lives of at least 96 innocents, raising the total killed in recent bomb attacks in Pakistan to around 600 since October. Three dozen homes were leveled. The consensus was that this attack was in retaliation for the village’s apparent cooperation with forces that tried to resist the infiltration of such villages by Taliban militants.

The January 2^nd Washington Post: “The village lies in Lakki Marwat district near South Waziristan, a semiautonomous tribal region where the army has battled the Pakistani Taliban since October. The military operation was undertaken with the backing of the U.S., which is eager for Pakistan to free its tribal belt of militants believed to be involved in attacks on Western troops in Afghanistan… But the offensive has provoked apparent reprisal attacks across the country. Those behind the strikes appear increasingly willing to hit targets beyond security forces. No group claimed responsibility for Friday's blast, but that is not uncommon when many civilians die.”

An under-staffed an ill-equipped local police force is no match for the powerful Taliban, who will target any local leader who gets in their way: “Several suicide attacks have targeted meetings of anti-Taliban elders, and militants also often go after individuals. One reason militancy has spread in Pakistan's semiautonomous tribal belt is because insurgents have slain dozens of tribal elders and filled a power vacuum.” The Post. The Taliban’s ace in the hole is their claim that they are simply resisting a hostile, U.S.-backed and corrupt Pakistani government effort to defeat Islam, a position that strikes a sympathetic chord even as Taliban militants blow up hundreds of innocents along the way.

Strange as it may seem, such attacks do not spur Pakistanis into a cry for revenge against the Taliban, even if they don’t like the extremism or the violent toll directly linked to this Islamist group; instead, they want their government to distance itself from anti-Taliban American policies, thereby reducing the need for the Taliban to mount such devastating attacks. And as long as al Qaeda and anti-NATO Taliban operatives can find safe haven in Pakistan, our war in Afghanistan is an effort that cannot end. When the going gets tough, the Taliban tough can slide into Pakistan and wait until our forces recede… springing back when the coast is clear… mounting lightening attacks against U.S. positions and friendly villages, and then returning to safe haven within Pakistan. To make matters worse in these Islamic tribal regions and further reinforcing these cultural complexities and local sympathies, “tribal codes require the protection of those who seek refuge and help.” Jan 2^nd New York Times.

If Zardari is thrown from office, American policy-makers will be hard-pressed to find a replacement that is remotely sympathetic to our cause. Unless America can take and hold Pakistan – an alternative that is not on anybody’s table – we are not in a position to win a sustained victory against the Taliban/al Qaeda forces in the region. Obama’s aim appears to be to generate sufficient military success to bring the Taliban to the bargaining table – his apparent Afghan exit strategy – but local sensibilities and anti-American feelings only seem to be strengthening the Taliban’s hand in the region.

I’m Peter Dekom, and I don’t think we should fight wars we cannot win.

Some Children’s Games are Not for Children

Low interest rates benefit those who can borrow – mostly big companies and people who benefit from government loan guarantees (homeowners whose loans fall within Freddy Mac and Fannie Mae programs, car-buyers where the government has subsidized car lenders, etc.). The government benefits as it places its deficit in the marketplace as well. It certainly is great for big banks with trading arms that can borrow fed funds at near zero percent interest and invest in their programmed trading structures that react to stock market changes in milliseconds. It most certainly doesn’t benefit anyone who thought that they could invest conservatively and live off the interest.

As interest rates in general have fallen, the yields on Treasuries, bonds, interest-bearing savings accounts have plunged to rates that often are below 1%. And for those who invested in commercial bonds and even some municipal tax-free bonds, the prospects of losing the underlying principal in a trashed economy loom large as institutions and even governmental units consider or actually file for protection under bankruptcy laws… or worse, simply slide out of business altogether. Underfunded pension plans, pummeled by stock losses and now yielding next-to-nothing on conservative debt investments, are seriously undermining the ability of many retirees to survive.

The December 26^th New York Times offers some examples: “‘Open a Savings Plus Account today and get a great rate,’ read an advertisement in the Dec. 16 Newsday for Citibank, which was then offering 1.2 percent for an account. (As low as it was, the offer was good only for accounts of $25,000 and up.)… ‘They’re advertising it in the papers as if they’re actually proud of that,’ said Steven Weisman, a title insurance consultant in New York. ‘It’s a joke.’

“The advertised rate for the Savings Plus account has expired, according to the bank’s Web site; as of Friday, the account paid an interest rate of 0.5 percent. The bank’s highest-yield savings account, the Ultimate, was paying 1.01 percent… The best deal Mr. Weisman has found is 2 percent on a one-year certificate of deposit offered by ING Direct, an online bank that has become a bit of a darling among the fixed-income crowd... Interest on one- and two-year Treasury notes was just 0.40 percent and 0.89 percent, as of Monday. Bank of America offers 0.35 percent on a standard money market account with $10,000 to $25,000, and Wells Fargo will pay 0.05 percent on a basic savings account.

“Indeed, after fees are subtracted, inflation is accounted for and taxes are paid, many investors in C.D.’s, government bonds and savings and money market accounts are losing money. In fact, Northern Trust waived some $8 million in fees on money market accounts because they would have wiped out all interest, and then some.” So folks on fixed incomes are living with vast reductions in their available cash flow or worse, invading their principal just to survive now, but are destroying their future safety nets.

Meanwhile, expecting a rash of governmental regulation, credit card companies are jacking up their rates, well north of 20%, some evening hitting 30%, making life infinitely more difficult for those already pounded by the new financial realities. Medicare premiums are also rising. A few retirees have found solace in reverse mortgages, tricky and often treacherous structures, but their estates are eroded and these structures don’t offer much to people who are just renters or whose equity has collapsed under the recent fall in home values.

Policy-making can create a series of domino-effects that can ripple for many years. We may not want higher interest rates for any number of reasons, but pressures from the buyers of our national-debt-generated bonds and the needs of those on fixed incomes create countervailing forces that suggest that there are values or even necessities to those rate increases. It may, however, take years for interest rates to mirror those upon which retirement plans were originally built. There is no such thing as “fixing the economy,” and we are dealing with lots of games most of us really don’t want to play anymore: seesaws and dominoes are not for the faint of heart. Help one sector, and there is bound to be pain somewhere else.

I’m Peter Dekom, and I approve this message.

97 Pages

Can Senators and Congressmen/women get reelected without generating some special (and often completely unneeded or at least profoundly wasteful) local benefits? Is it possible for an elected official to support nationally-beneficial legislation that may hurt his or her local district? Can earmarks ever be contained? Would you believe that under our system of government, the answer appears to be “never, not ever, no way, not, no!”?

We can take a recent but pretty egregious example, Democratic Senator Ben Nelson’s exempting his home state, Nebraska, from ever (forever!) contributing the state share of Medicaid, in exchange for his support of the healthcare legislation. In the first decade alone, if this bill passes, federal taxpayers will contribute an estimated $45+ billion of national money to pay for the only state in the union that is now exempt from making its state contribution to the Medicaid fund. If every state did that, fine, and we’d have a national policy, but a couple of states… one state… and the unfairness is obvious. But Nelson’s constituency is not the United States; he is only accountable to Nebraska voters, and he may have saved them a ton! Does that make him a Nebraskan above being an American?

The December 29^th Washington Post tracks the current flow of pork through the federal legislative stockyard: “[P]ause for a moment and consider that there are 97 pages listing nearly 1,000 congressional earmarks in the 543-page report by the House-Senate conferees on the $626 billion defense appropriations bill signed by President Obama this month… They cover every category from procurement to operations and maintenance to research and development, with the last group alone spanning more than 77 of those pages. Who is to say what kind of impact these separate transfers of what may be $5 billion will have on our defense posture -- and on our intelligence operations, since that money is also in the bill?”

Instead of reflecting the shame of embracing waste and unnecessary spending in a time of national economic desperation, our elected representatives are even proud of their local efforts, making sure that the local press picks up on their porky machinations. Some examples from the Post:

· Sen. Charles E. Schumer and Rep. Michael A. Arcuri, both New York Democrats, got $2.4 million earmarked in the final [defense appropriations] bill to upgrade 3,000 M-24 sniper rifles. Although a contract will be up for bidding, the two legislators issued a news release on Dec. 17 saying they expect that Remington Arms, the original manufacturer, would be successful and that all work would be done at the company's Ilion, N.Y., factory… [Although the M-4 has some very limited value in Afghanistan, the] bolt-action rifle, which first came into service in 1988, fell out of use when semi-automatics became popular.

· In a statement released the day the appropriations bill passed Congress, Rep. Allen Boyd (D-Fla.) [a self-proclaimed fiscally conservative “Blue Dog Democrat”] heralded his earmark for $1.5 million to continue development work on a non-gasoline-burning outboard engine for the Navy Special Operation Forces' underwater systems… What's interesting about this earmark is that the U.S. Special Operations Command began its search for such an engine in 1995 and halted funding for research on it in 2008… The sixth highest-ranking member of the defense subcommittee of the House Appropriations Committee, Boyd was not shy about telling his constituents of his other earmarks in the Pentagon spending bill… When the bill passed the committee, he said, he obtained $18 million worth of projects for the Panama City Navy base and Tyndall Air Force Base, another facility in Boyd's district that is facing a reduction in operational activity. When the bill passed the House in October, Boyd claimed $17 million for the Navy and Air Force facilities.

We’ve had proposals that a commission be established to filter Congressional bills that favor local constituencies to measure waste, but needless to say, these proposals go down in flames. The Obama administration pledged to fight porky earmarks, but in the horse-trading world of Congress, that pledge is impossible to keep. America is government “of the special interests, by the special interests and for the special interests”… fractionalized along party lines, dominated by those with enough money to have generated special access to our “deciders,” and polarized to what I see as the greatest split in the American body politic since the Civil War.

We may not be able to stop this pattern of waste and self-interest at the expense of what is best for the nation as a whole… but we can keep shining a light on this dysfunction in the hopes that we can moderate its abusive and destructive force on the entirety of what we still call the United States of America.

I’m Peter Dekom, and I approve this message.