Dow 10,000 a Bubble, Not a Boom

Whenever we see a bubble, we want to think it's a bag of gold. And when we enter the eye of a storm, we like to kid ourselves that times of peace has come at last.

Now that the Dow Jones Industrial Average has once again surpassed the 10,000 mark, we want to believe that the hard times are finally over and that ten to fifteen years of unbroken prosperity lies before us. Brace yourself.

The New York Times reminds us ("10,000: The and Now") that when the Dow first passed that point on March 29, 1999, the economy was roaring through it's eighth year of wild prosperity, and unemployment was about as low as it could be. This ten is not the same as that ten.

Yes, unemployment today stands at 9.8 percent. But is that just the economy lagging behind the first indicators of economic recovery? Sorry. No.

The spike in the Dow is the result of huge profits that the banks have posted from their recoveries. But they are still not lending, and without that there will be no recovery for the rest of us. But don't get angry. Get answers. Why are these shrewd people still not lending? Isn't it their business to lend? No, it is their business, as in any business, to make money. They must have reason to believe that if they lend, e.g. to small businesses or to prospective homeowners, they will lose money. So look around for what they are seeing.

Look here. David Malpass, the president of Encima Global LLC, points us to our collapsing dollar as a source of our vanishing prosperity ("The Weak-Dollar Threat to Prosperity"). The Bush administration was devaluing the dollar throughout the decade. That corresponded with runaway government spending. When faced with large debts, government must either cut spending (unthinkable), raise taxes (impolitic and counterproductive), or devalue the currency. How do they do this? By keeping interests rates low, they encourage public and private borrowing, such as government bonds and home mortgages. If anything becomes oversupplied, it's value decreases. As dollars lose their value, it takes more of them to buy things, both at home and abroad. Prices rise across the board.

How much value has the dollar lost? Is this a big deal? You can see how dramatic the fall has been by looking at the price of gold over the past decade. Gold has a stable value. The fluctuation in its price reflects the relative value of the currencies that are used to price it. So as the dollar loses value, it takes more of them to buy an ounce of gold. When President George W. Bush came into office, gold was selling at over $250 an ounce. When he left office eight years later, it was about $850 an ounce. The price climbed steadily over those eight years.

President Obama is making his predecessor look like the king of thrift, and he's not done. The present government has popped the roof off an already large public debt, spending trillions, and preparing to spend trillions more. As a consequence, the dollar is falling faster than ever. Since Barack Obama took office less than a year ago, gold has gone from about $850 an ounce to roughly $1,050. You should expect it to go higher. Much higher. Adjusted for inflation, gold's historic high is over $2,000 an ounce.

As Obama pumps trillions of dollars into the economy, and the economy does not respond proportionately with a vigorously growing GDP (still no sign of that), more dollars chasing the same number of goods will mean inflation. A ridiculous increase in the money supply on top of a stalled economy will give us a devouring plague of inflation further devastating people's lives.

You might be wondering, however, about the upside to a weak currency. Doesn't it make our exports cheaper, and thus boost domestic production and launch us into recovery? Malpass explains how historically this has always been a losing strategy.

As the pound slid in the 1950s and '60s and the British Empire crumbled, the corporations that prospered were the ones that borrowed pounds aggressively in order to expand abroad. Though British equities rose in pound terms, they generally underperformed gold and foreign equities. At the end of empire, the giant sucking sound was from British capital and jobs moving offshore as the pound sank....No countries have devalued their way into prosperity, while many—Hong Kong, China, Australia today—have used stable money to invite capital and jobs.

None of this indicates the American economy returning to boom times any time soon. In fact, this window onto the future reveals just the opposite.

The other place bankers are looking is the second wave of residential mortgage defaults and, on top of that, the coming collapse of the commercial real estate market. Charles Gasparino helps us there ("The Next Bank Crisis").

[The banks are] still holding trillions of dollars in ailing mortgage loans and commercial-real-estate debt that they have yet to fully write down. They're hoping they won't have to -- but continued joblessness is squeezing those portfolios. The banks will tell you that they've written down a good chunk of their consumer loans. But the problem, according to banking analysts like Mike Mayo, becomes acute if unemployment passes 10 percent and nears 11 percent. That's the point, according to many economic models, that American consumers start defaulting on loans in such a way that trillions of dollars in consumer-related loans and debt that haven't been written down start to implode.

And that doesn't account for the trillions in commercial-real-estate loans and bonds that have yet to take any significant hit at all -- but (most analysts predict) will be crashing in the months ahead even if unemployment stabilizes at 10 percent.

Bottom line: If unemployment goes higher than 10 percent, the banks' numbers get even worse. As losses begin to mount, the big banks may well find themselves back begging the government for more bailout money.

So beware of jumping on the bank profit driven bull market, thinking that you are going to ride it into the Obama Boom Years. There is much pain to come, and with it much tragic loss. It is tragic because wise leadership could steer us through it more safely by stabilizing the currency and tightening up on government spending. The administration is doing just the opposite. It's like physics. If you torch your house, it will burn down. We are already feeling the heat.

Bush, the Law, and the Truth

This week's cover of Time magazine features a close-up of George W. Bush and a sinister Dick Cheney (what else would he be?) peering out from behind him. "Special Report: The Final Days of Bush and Cheney." The title evokes memories of Richard Nixon and the corruption that brought his presidency to a premature end. But what we read about W. in the article itself shows us a man of high moral integrity. It's story of Dick Cheney's campaign in the closing weeks, and even hours, of the Bush years to secure a full pardon for Cheney's former chief of staff, I. Lewis (Scooter) Libby. It's the story of Bush's morally and legally conscientious dealing with the repeated requests from his close friend, the due process he followed, and his principled decisions to decline the request.

Libby was convicted of obstructing justice, perjury, and lying to investigators. He was sentenced to 30 months in prison and fined $250,000. Bush did not pardon Libby, but in June 2007 commuted his sentence, arguing that the prison sentence was an excessive punishment given the fine, the disbarment, and the disgrace were sufficient.

Bush not only noted his "respect for the jury verdict" and the prosecutor, he also emphasized the "harsh punishment" Libby still faced, including a "forever damaged" professional reputation and the "long-lasting" consequences of a felony conviction.
And there were these two sentences: "Our entire system of justice relies on people telling the truth," Bush said. "And if a person does not tell the truth, particularly if he serves in government and holds the public trust, he must be held accountable." Particularly if he serves in government. Bush's allies would say later that the language was intended to send an unmistakable message, internally as well as externally: No one is above the law.

We did not see such concern for the rule of law in the previous administration. I doubt that we will see it under the former Chicago politician and friend of ACORN who currently serves in the White House. But I'm happy to be surprised.

Even as governor of Texas, Bush had been generally suspicious of the pardon system, though he was not opposed to it in principle. "His reluctance stemmed not from a lack of mercy but from his sense that pardons were a rigged game, tilted in favor of offenders with political connections. 'He thought the whole pardon system was completely corrupt,' says a top Bush adviser."

The article supplies an illustration:

On Dec. 23, 2008, Bush announced 19 pardons. No big names. No apparent political sponsors. But one planned pardon went to a Brooklyn, N.Y., developer who had pleaded guilty in the early 2000s to lying to federal housing authorities. After news accounts surfaced that his father had given nearly $30,000 to the Republican Party earlier that year, the White House backpedaled. It didn't help that one of the lawyers who had sought the pardon had once worked in Bush's own counsel's office — exactly the kind of inside favoritism Bush despised. Bush, who had retreated to Camp David for a last family holiday, spent Christmas Eve fielding phone calls about the case. By day's end, he decided to kill the developer's pardon. The experience left him, aides say, even more wary of the process than he was before.

Later, Cheney pressed his boss again for the pardon. Bush set up a meeting at which Cheney could make his case and White House counsel Fred Fielding could make his case against it. Cheney made political arguments about Iraq War opponents targeting Libby because they couldn't get at Bush. He made emotional appeals to not leaving any soldiers on the battlefield. "But Bush pushed past the political dimension. 'Did the jury get it right or wrong?' he asked."

In conversations that followed, two considerations kept coming up: repentance and the truth. "Bush would decide alone. In private, he was bothered by Libby's lack of repentance. But he seemed more riveted by the central issue of the trial: truthfulness. Did Libby lie to prosecutors?"

For President George W. Bush, pardoning someone convicted of a crime by due process of law in the American judicial system was a matter of awesome weight. It carried implications for the rule of law on which our system of liberty rested, and still rests. Thus, what was of ultimate concern to him was the question of truth. Those who are currently in power at both ends of Pennsylvania Avenue would serve us and themselves better by trembling more sincerely before that consideration.

The Dark Knight and the Politics of Admiration

At the end of the most recent (and I think the best) Batman film, The Dark Knight, the caped crusader says, "Sometimes the truth isn't good enough. Sometimes people deserve more. Sometimes people deserve to have their faith rewarded."

Friedrich Nietzsche says something similar in On the Use and Disadvantage of History for Life. People abuse what he calls "critical history" when they use to debunk everything that is admirable and noble, everything that might inspire people to heroic lives of great accomplishment. In every exemplar of the human race--a Washington, a Jefferson, a Lincoln, to use only American examples--there are certainly blemishes to be found. Though the nobility of these great men is true greatness, their faults are also true faults. But for the sake of inspiring people to live life most fully, Nietzsche warns against the abuse of historical investigation that "asks a thousand impertinent questions." If you make a public display of what these great men were in every ugly detail, people will cease to believe in the possibility of goodness and nobility and will no longer rise to the challenge of embodying those virtuous qualities. The world will sink through and through into bland mediocrity. I would add that this is especially a danger in an age when people have largely ceased to believe in God or do not set their sights as squarely as they should on the God in whom they do believe.

A film like Flags of Our Fathers (2006; dir. Clint Eastwood) takes the opposite approach. That film burrows irreverently and wrecklessly into the historical details behind the raising of the American flag at Iwo Jima. It reduces that dramatic declaration of victory at the end of an heroic and decisive battle to a staged photo opportunity. It paraded the heroes as shams and drunks. The premise is that if you burrow into the facts behind every hero you will find a disappointment. Everything we have been taught to admire is a lie. There is no greatness. There is no virtue. There is "nothing to kill or die for."

If someone had torn Lincoln's clothes off him as he delivered the Gettysburg address, or old Churchill's clothes off him (try not to think about it) as he delivered his Iron Curtain speech, everyone would have seen these men's blemishes and how ridiculous and ordinary they are underneath the lies that are their clothes. But that exposé would also have distracted us in each case from something genuinely praiseworthy in these men and their deeds, something human beings need, in their life together, for their flourishing. In such cases, what is ordinary--character flaws and unflattering circumstances--masks the extraordinary. And what we would have to admit, if we were forced to confront it, is not actually what is most important from a political standpoint.

Advocates of this debunking approach to history of course have their own heroes. Whereas they are quick to debunk George Washington, Thomas Jefferson and so on, they jealously protect names of John F. Kennedy, Martin Luther King Jr., and Barack Obama...as well they should. But they should note that he who lives by the debunking spirit will also die by it, and the civilization we share will die in turn, and is dying.

I draw your attention to Andrew Klavan's insightful reading of the film in his Wall Street Journal article, "What Bush and Batman Have in Common" (July 25, 2008).

There seems to me no question that the Batman film "The Dark Knight," currently breaking every box office record in history, is at some level a paean of praise to the fortitude and moral courage that has been shown by George W. Bush in this time of terror and war. Like W, Batman is vilified and despised for confronting terrorists in the only terms they understand. Like W, Batman sometimes has to push the boundaries of civil rights to deal with an emergency, certain that he will re-establish those boundaries when the emergency is past. And like W, Batman understands that there is no moral equivalence between a free society -- in which people sometimes make the wrong choices -- and a criminal sect bent on destruction. The former must be cherished even in its moments of folly; the latter must be hounded to the gates of Hell.

"The Dark Knight," then, is a conservative movie about the war on terror. And like another such film, last year's "300," "The Dark Knight" is making a fortune depicting the values and necessities that the Bush administration cannot seem to articulate for beans. Conversely, time after time, left-wing films about the war on terror -- films like "In The Valley of Elah," "Rendition" and "Redacted" -- which preach moral equivalence and advocate surrender, that disrespect the military and their mission, that seem unable to distinguish the difference between America and Islamo-fascism, have bombed more spectacularly than Operation Shock and Awe.

I offer this as a third take on The Dark Knight. In the end, Batman becomes a Christ figure. He is despised and rejected, taking to his own name the evil deeds of another, in order to save the city. Though Batman is the Dark Knight, the Bible offers Jesus Christ as the Crimson Knight, "clothed in a robe dipped in blood," leading an army of White Knights, "arrayed in fine linen, white and pure" (Rev. 19:11-16). We just cannot escape the power of that gospel message.

Auto Bailouts and Sinking American Prospects

In the 1970s, my dad bought American cars on point of principle. He thought it was right to support the North American auto industry. Eventually, however, he found that American car manufacturers were doing him no favors in return. So since the late 1970s, he has bought Peugeot, Saab, Volvo, and Acura (which is Honda). I drive a Honda Odyssey.

As consumers, we direct our money to the companies we think will give us the best products. But recently, the so-called Big Three American automakers went to Washington asking for $15 billion of your money and mine to make up for the money we have not been spending on their cars. The trouble has been not only that many Americans have been preferring the products of other companies. But even when we have been buying GM, Ford and Chrysler, we have been paying only the market price, which is considerably less than what the companies need to make a profit. So having failed in the marketplace, they asked the government to take from us what we have freely chosen not to give them.

Congress refused. But on Friday, President Bush gave them, by executive decree, over $17 billion from the Congressionally established $700 billion slush fund (TARP, the Troubled Asset Relief Program) designated for stabilizing the financial markets.

George Will sees not just an unwise use of public funds, but a deterioration of our constitutional system of government.

The expansion of government entails an increasingly swollen executive branch and the steady enlargement of executive discretion. This inevitably means the eclipse of Congress and attenuation of the rule of law.

Mark Steyn tells us why these car companies are failing and will continue to fail.

General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small loss-making auto subsidiary. The UAW is AARP in an Edsel: It has 3 times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people. How do you make that math add up? Not by selling cars: Honda and Nissan make a pre-tax operating profit per vehicle of around $1,600; Ford, Chrysler and GM make a loss of between $500 and $1,500. That's to say, they lose money on every vehicle they sell. Like Henry Ford said, you can get it in any color as long as it's red.

Steyn actually takes you on a jolly ride through several aspects of America's present decline: "See the USA from your Chevrolet: An hereditary legislature, a media fawning its way into bankruptcy, its iconic coastal states driving out innovators and entrepreneurs, the arrival of the new messiah heralded only by the leaden dirge of "We Three Kings Of Ol' Detroit Are/Seeking checks we traverse afar," and Route 66 looking ever more like a one-way dead-end street to Bailoutistan."

But he ends upbeat, wishing us all "a very Hopey Changemas."

Whoever said the era of Great Canadians would die with William Shatner haven't been reading Mark Steyn.

Socialists Anonymous for the Right

Are conservatives in America serious about facing what we have become and about rethinking what we need to be if we are to help foster what is best in this free republic?

George Will throws a bucket of cold water on anyone who is still baffled and whining within the movement ("The Hyperbole of a Conservative").

Conservatism's current intellectual chaos reverberated in the Republican ticket's end-of-campaign crescendo of surreal warnings that big government -- verily, "socialism" -- would impend were Democrats elected. John McCain and Sarah Palin experienced this epiphany when Barack Obama told a Toledo plumber that he would "spread the wealth around."

America can't have that, exclaimed the Republican ticket while Republicans -- whose prescription drug entitlement is the largest expansion of the welfare state since President Lyndon Johnson's Great Society gave birth to Medicare in 1965; a majority of whom in Congress supported a lavish farm bill at a time of record profits for the less than 2 percent of the American people-cum-corporations who farm -- and their administration were partially nationalizing the banking system, putting Detroit on the dole and looking around to see if some bit of what is smilingly called "the private sector" has been inadvertently left off the ever-expanding list of entities eligible for a bailout from the $1 trillion or so that is to be "spread around."

The seepage of government into everywhere is, we are assured, to be temporary and nonpolitical. Well. ...

He goes on to cite "temporary" programs that started with the Depression and WWII, but which, alas, are still with us. It is the nature of most public officials that once they get their claws into a source of revenue or a sphere of control, they never let go. Why should the banks, the automakers, and the occasional trillion dollars of public "emergency" spending be exceptions to this natural law?

Will drives home his point here:

Hyperbole is not harmless; careless language bewitches the speaker's intelligence. ... In America, socialism is un-American. Instead, Americans merely do rent-seeking -- bending government for the benefit of private factions. The difference is in degree, including the degree of candor. The rehabilitation of conservatism cannot begin until conservatives are candid about their complicity in what government has become.

Conservatives need to face what they have become under George W. Bush, and then confess "Hi, my name's _______, and I'm a socialist," repent, re-study the Founding, the Constitution, the basic principles of political and economic liberty, and I would add the disgrace and dignity of man in the gospel of Christ, and then study how prudence would apply these lessons to the present shambles of which we are co-architects.

For background on W-conservatism, read Fred Barnes, "Big-Government Conservatism," The Weekly Standard, Aug. 18, 2003.

Et Tu, McClellan?

Despicable. Little Scott McCLellan, barely out of short pants when he stepped into Ari Fleischer's job as press secretary, is out peddling a hatchet job masquerading as a memoir of his "service" --I use the term lightly, even facetiously--in the Bush administration. One of the most inept and useless appointees George Bush ever gave the nod to, he now repays the president by standing with the mindless, baying press hounds and levels the same kind of breathless accusations on the celebrated international spy case known as the Valery Plame affair. Yeah, that one. The "covert" agent who got the full semi-celebrity Vanity Fair interview treatment, including full-facial photo spread on the cover--not the sort of cover one ordinarily associates with covert agents. But whatever. I suppose McClellan thinks we have forgotten that the prosecutor knew before he started his career building witch hunt, that Colin Powell's henchman, Richard Armitage, who still has his job, unlike the ruined Scooter Libby, was the one who "outed"--if one can out an office worker at CIA--to the press. Or that Plame and her tea drinking ambassador-lite husband were merely two foot soldiers in the anti-Bush shadow government that the CIA had long since become.

Peddling this sort of back-stabbing, insinuating, self serving tattletale book, using a sensationalized non-story to smear the president--while the man is still in office!--is beneath contempt. This must have the feel to President Bush of holding a baby grandchild in his arms, only to have him reach up and slap in him across the face.

Think your new liberal friends are going to find you some cushy job now that you've joined the assassins' circle, Scotty? Good luck with that.

Angry Left: Bush is a Beast – I’m Unconvinced

Historically, in order to bring us out of our natural isolationism and onto the battlefield overseas, we have had to view an enemy as the embodiment of evil. Alas, this moralistic, apocalyptic view of the world (in some cases justified internationally) has come home to domestic politics. No, it is not the Religious Right we have to thank for this. The bitterness of our present political discourse began with the response of the New Left to the Vietnam Conflict. In the 1980s, it took a new form in opposition to Ronald Reagan whom, they warned us with dread thunderings, would bring upon us the scourge of nuclear nightmare. For the past six years, it is George W. Bush who is not merely a bad choice, a fool, a crook or even the corrupter of virgins and patriots, but the Beast himself.

Now I’m all for calling a beast a beast (Saddam), a tyrant a tyrant (Mugabe), an evil empire an evil empire (you know who) and a fool a fool (let’s not get into it). I support the Republican Party, and I do so on principle. But if one of our number goes bad, I join with other principled Republicans in crying, “Bad!” But I see no moral fault in this President. There is much to debate in his presidency. Reasonable and patriotic people can disagree with him and even oppose him politically. But I see no reasonable grounds for the hatred that animates his sharpest critics.

There is any number of left wing rants we could consider. But recently I happened to come across this speech by E. L. Doctorow. Though it is now more than three years old, it expresses the rage and loathing that characterizes the hard left view of our sitting President.

Doctorow published this essay on September 9, 2004 in the East Hampton Star here on Long Island where Doctorow has a home in Sag Harbor. The previous May, he gave the commencement address at Long Island's Hofstra University where he accused the president of telling "bad stories" about there being WMDs in Iraq when he knew there were none. (After all, who would believe the obviously wild speculations and frantic concerns of those UN weapons inspectors?) Incidentally, he was booed into silence for what many viewed as an unwelcome intrusion of fanatically angry politics into an otherwise happy event.

His charge was this: “I fault this president for not knowing what death is…. He does not mourn. He doesn't understand why he should mourn. He is satisfied during the course of a speech written for him to look solemn for a moment and speak of the brave young Americans who made the ultimate sacrifice for their country. But you study him, you look into his eyes and know he dissembles an emotion which he does not feel in the depths of his being because he has no capacity for it. …To mourn is to express regret and he regrets nothing. …He is the president who does not feel. … He cannot mourn but is a figure of such moral vacancy as to make us mourn for ourselves.” There are two pages of this unbroken invective.

In other words, the president is a criminal psychopath but, sadly, a brilliantly deceptive one. Of course, Reagan was the same…except stupid…but in a crafty way. Nixon was Tyrannosaurus Nix. Like Columbia’s Lee Bollinger, this accomplished novelist seems to think that a tongue lashing is persuasive rhetoric, words that topple thrones.

So what am I to make of this? I have various data available to me regarding GWB. I have this opinion from Doctorow. But on what does he base his opinion? It seems all that he offers is the fact that, unlike Eisenhower, Bush has never seen combat. “On the eve of D-Day in 1944 General Eisenhower prayed to God for the lives of the young soldiers he knew were going to die. He knew what death was.” Well, most of us have never seen combat or any kind of death up close, but from that fact it would be rash and unjustified to conclude that we are all unfeeling monsters.

Consider another similarly situated American president. Bill Clinton as commander-in-chief sent young men to die in Mogadishu and Bosnia. If Doctorow had similar words for President Clinton, they have not come to my attention.

Incidentally, notice that he does not say that Eisenhower wept for the boys he sent overseas, only that he prayed for them. That, of course, could be a politically calculated act though I assume he was sincere. Bush himself is widely known as a praying man. President Clinton, on the other hand, the darling of the left, was a notorious weeper, but also an infamous dissembler. While leaving the Ron Brown funeral, he was caught on camera laughing it up with Rev. Tony Campolo. The instant his eye caught the camera filming him he broke into tears, much to the confusion of his companion.

I have other reports, however (to me, credible ones), that President Bush weeps with the parents of those who fall in battle and that he understands -- and yes even feels -- the awesome weight of the consequences of his decisions as commander-in-chief. He also feels the profound weight of his responsibility for keeping this country safe from an Al Qaeda nuclear device in New York Harbor or some other American nerve center. (As someone who works in Manhattan, I personally appreciate his concern.) When I saw him at the Ames Straw Poll in 2000, I saw man who loved his country, who was jealous for the honor of the office of the president and who could lead the country with firmness and integrity. I have neither read nor seen anything to discredit those impressions. (The picture is of President Bush grieving with Ashley Faulkner whose mother, Wendy, died in the WTC south tower on 9/11.)

This Doctorow piece is just another hysterical screed from the left wing cultural elite who cannot fathom why, despite the years of cultural and political education which they have liberally bestowed upon this nation, the "red state" bubbas, bozos and Bible thumping obscurantists with whom they are forced to share citizenship continue to elect conservatives and refuse to be enlightened. Whatever happened to progress?

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