The President and I


On Saturday — as part of a much larger series of posts exposing the West’s dire trade and resource dependency — I wrote
:

Governments are advised to go out of their way to make sure that back-up systems in terms of medium-to-long-term food supply, fuel supply and medicine supply are in place so that the consequences of a breakdown in the system of global trade can be minimised.

Seems like President Obama’s people have been thinking along similar lines.

From the Huffington Post:

President Barack Obama may have quietly placed the United States on a war preparedness footing, perhaps in anticipation of an outbreak of war between Israel, the West, and Iran. A newly-propounded Executive Order, titled “National Defense Resources Preparedness,” renews and updates the president’s power to take control of all civil energy supplies, including oil and natural gas, control and restrict all civil transportation, which is almost 97 percent dependent upon oil; and even provides the option to re-enable a draft in order to achieve both the military and non-military demands of the country, according to a simple reading of the text.

Intriguing. Certainly, the last few occupants have spent more time planning for the democratisation of the middle east than considering the contingencies of a breakdown in global trade. At least they are aware of the fragility.

But government officials warned that bin Laden was about to strike in Summer 2001. They were aware of a fragility then, too. But that was not enough.

The real question then, is whether these late and frankly emergency measures will be sufficient. Of course, there is no time like the present to address the problem of Western weakness to global trade fragility and external resource dependency, and the fact that we are extremely vulnerable to energy shocks, resource shocks, and trade shocks. It should be noted, though, that we shouldn’t be in this place at all. Our dire position today has been built slowly decision by awful decision, over decades.

So is putting the U.S. on a war economy footing really addressing these problems? Frankly, it strikes me of power-grabbing panic. With the middle east and much of Eurasia on edge, a disastrous trade shock or energy shock could be with us any month now. The threats to America’s economy from a global trade shock are very real, but this policy just looks like a power grab:

Specifically, Obama’s plan involves seizing control of:

  • “All commodities and products that are capable of being ingested by either human beings or animals”
  • “All forms of energy”
  • “All forms of civil transportation”
  • “All usable water from all sources”
  • “Health resources –  drugs, biological products, medical devices, materials, facilities, health supplies, services and equipment”
  •  Forced labor ( or “induction” as the executive order delicately refers to military conscription)

The economy the United States needs to be robust to global trade shocks and wars is a decentralised one. A key example is energy generation. If every house and business facility has its own energy source (e.g. solar panels, wind turbines, etc) then that nation is robust to shocks to the electrical grid. If every house and business facility has stored food and fresh water supplies than that nation is robust to short-term trade breakdowns.

It is completely unsurprising that the Obama administration has written a panic-stricken executive order. But I see no evidence that this will do a shred of good. Such powers could be used for great evil.

 

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23 thoughts on “The President and I

  1. Aziz, you missed a MONSTER quote in that HuffPo article:

    Blocking the Strait of Hormuz would create an international and economic calamity of unprecedented severity. Here are the crude realities. America uses approximately 19 to 20 million barrels of oil per day, almost half of which is imported. If we lose just 1 million barrels per day, or suffer the type of damage sustained from Hurricane Katrina, our government will open the Strategic Petroleum Reserve (SPR), which offers a mere six- to eight-week supply of unrefined crude oil. If we lose 1.5 million barrels per day, or approximately 7.5 percent, we will ask our allies in the 28-member International Energy Agency to open their SPRs and otherwise assist. If we lose 2 million barrels per day, or 10 percent, for a protracted period, government crisis monitors say the chaos will be so catastrophic, they cannot even model it. One government oil crisis source recently told me: “We cannot put a price tag on it. If it happens, just cash in your 401(k).”

    I knew you probably already knew all of this, but I didn’t. Our disaster preparedness is a joke.

  2. The National Defense Resources Preparedness executive order appears to be the first step toward developing a potentially vast, far-sweeping plan that could reach into every garage and grocery store shelf. Government experts who watch the day-to-day ebb and flow of oil stocks were surprised at the sudden move. One quipped, “If this is true, it would be such a departure in policy, I can scarcely believe it.”

    What’ve his people been reading?

    • By the way, Aziz, Obama’s people might listen to these types of concerns, and they might be grateful that there are bloggers out there raising these concerns and scenarios but they will in no way ever believe in yours (and Hayek’s, Taleb’s, etc) solutions. They are dyed-in-the-blood statists.

      • Yeah, but I find this development very surprising. A bolt out of the blue. I had the impression the Obama administration was not staffed for long-sighted disaster-minded people.

        • I’m surprised that you view this as a legitimate preparedness plan and not the Federal power grab that it is. This isn’t the action of long-sighted disaster-minded people. This is an action to take over the country’s productive capacity for food, energy and human resources. Disaster preparedness is just a ruse to cover up what is a 21st Century Enabling Act.

        • Well it is problematic in the sense that it is increasing centralisation and central planning.

          But it is addressing a fundamental and real problem, in a way the Enabling Act really wasn’t.

          My real worry is that it will end up making the problem worse through greater misallocation of resources, and because it seems like a panicky plan put together by people who may not fully understand the texture of the thing they’re dealing with (central planners never do).

          But if there is one single place where government deserves to be it is in national disaster preparedness. This doesn’t give me any comfort that they will do things right. But I’d rather they were worrying about the nation’s petroleum supply during a trade shock than democratising the middle east. For a start the first one is constitutional, and the second one isn’t.

        • Thanks for that Hawks, I was surprised that Aziz did not comment more on the incredible affront to everyone in the US that is this bill – but rather instead focused on the inneficiency of using this method to allocate ressources. Aziz, I liked your previous post about interdependency and agree with it, but this bill is anot an attempt to rectify this… it’s an attempt to … well… I actually don’t know where they want to go with it – but it’s a road I thought we would never go down and I want to jump out of this bus ASAP.

        • Aziz: “But I’d rather they were worrying about the nation’s petroleum supply during a trade shock than democratising the middle east.”

          If the government did just that, and spent the BILLIONS in preparing for emergencies, there would be no need to put a bill that enforces martial law and forced re-allocation of people’s property.

        • Well the thing the government does most of is reallocate resources by force from one party to another. It’s not really more redistributive than eminent domain, or the New Deal, or any of the various big government programs of the last 100 years.

          The big difference appears to be that there is a recognition that the United States’ basic economy should be resource independent . Unfortunately, Obama conceptualises that as the military-industrial complex, whereas I would say that food, resources, components and fuel for small business and ordinary society is the real priority.

          So while I like some of the supposed intent, clearly I dislike the means. I dislike the fact that there is the potential for a massive power grab, and the potential for oppression.

          Is the resource independence argument just an excuse for more oppression? There was already a huge federal power grab before this. Does this really make any difference in that regard? The Obama administration was already claiming the power to kill anyone they suspected of terrorism, guilty or not. They don’t need this executive order to be oppressive. There’s still a potential that this move — which is trying to address a very real problem — may in the end make that problem worse. I don’t know. It’s a panic measure. Panic measures are very problematic. But at least they finally get that the problem exists. Maybe 10 years too late.

  3. @aziz: “Western nations should have long ago employed philosophers versed in Heraclitus, Seneca and Sun Tzu to determine national policy, instead of quants, wonks and statisticians versed in obscure non-reality-based masturbatory mathematical models”

    That is a quotable quote!

    hahahaahhaa Nothing like poking fun at Nerds. They never got it at High School and they don’t get it now!

    • I don’t even understand how they took over so many functions. Their theories mostly do not work and they tend to have no charisma, except for a very few (e.g. Paul Krugman), so it can’t just be confidence trickery.

      Is it just that they sound superficially impressive, and so politicians tend to find their arguments convincing?

      The government’s best work is always done by philosophers. Often their arguments are less superficially impressive (less quantifiction, and also I think philosophers tend to be very self-deprecating) but they have the great advantage of ideas and creativity.

      • They took over functions because Politicians are so involved in manipuating the economy they need to be briefed. And how do they ensure quality (perceived) control?

        Use advisors with Phd after their name!

        In the old days Politicians came from distinguished careers and used their distinguished networks for advice. Now the use : “quants, wonks and statisticians versed in obscure non-reality-based masturbatory mathematical models”-John Aziz, 2012

  4. Well, a war with Iran would allow Obama to blame the ongoing depression on somebody else.

    But he would never allow that, would he?

    • He can already blame it (semi-legitimately) on Bush-Cheney.

      I am keen on Ron Paul 2012, but what we really needed was Ron Paul 2000. That was a critical juncture for the country. We would have dealt with all these underlying problems.

  5. Reading your link to Tom Friedman, I can say that I do agree with some points. A benevolent wise dictator (Read King and heirs schooled in Philosophy Religion/Morals) Such as the last Czar of Russia (Putin could assume this role if he has heirs who are elected) tend to see bigger long term horizons for their nations. Look at Qaddafi. Students were sent abroad to learn at State expense. If that is not building long term intellectual capital, I don’t know what is. Attila came from the Libya region, Carthage. Perhaps he like Mussolini saw long term revival in their nations. Leaders always have grand vision, even if it is megalomania.

    Perhaps we are witnessing the collapse of humanistic enlightenment. People had the opportunity to self improve and live an anarchistic life, but they chose the short term gratification of consumer goods and reality TV escapism. I don’t see a Democratic system solving anything, especially when Politicians are captive to public mood swings and welfare handouts.

    Technocratic Governments will be the norm in a few generations.

    • “Perhaps we are witnessing the collapse of humanistic enlightenment”

      perhaps, Perhaps, PERHAPS!

      Just kidding Buddy, I know your a smart guy.

      You make a fine point about the TV escapism, short term gratification and welfare handouts. But, at some point that which cannot be sustained, will not be sustained.

      I am laughing at the current “housing my have bottomed in the US” stories the MSM is peddling. Um yeah, housing has bottomed as %50 of the youth don’t have a job, the college kids have a $1 Trillion+ in debt, baby boomers are retiring to coffins and urns and inflation is running rampent in the necessities of life.

      Not to mention that PITI (Yeah I worked in the mortgage industry a bit) is based on alltime historic lows in mortgage rates. Anybody with half a brain shouldn’t touch housing until the 30-year mortgage is atleast %7.5. If we get 70’s style inflation, I would wait for the 30 year to hit %10 and then refi down. If hyperinflation hits (it can’t happen here everybody says, which is why it probably will), buy a house with your saved up gold. Its what gold is for. Buying real assets when the currency goes to shit.

      Yes, there are exceptions, as real estate is a locally consumed product. So if you live in Silcon Valley, you can probably expect home prices to rise in the future.

      But Detroit is the flip side. Homes with appraisal values of $450,000 ten years ago, are now, basically free.

      • Priced in gold, FO-SHO, housing has bottomed in the US. I personally have a lot of caveats, and believed that we are heading to a much lower new normal. But from a purely technical analysis real estate is a buy buy buy. And that’s the problem with purely technical analysis, and technocracy in general…

        • Aziz,

          I can only tell you that incomes and houses prices still haven’t reached historical norms in CA. I understand that other parts of the country are different.

          Or that, to qualify for a loan, its not the price of the house that you qualify for, its the monthly payment. Pry tell, what happens when the Bernank has to rise IR to, gasp, %1 or everybody run for the hills, %2?

        • I don’t really see the Bernank raising interest rates. I see events “raising interest rates” on the Bernank (he can set the Federal funds rate, but he can’t control the flow of goods into the country). But yes, this is another reason why I see housing falling to a new normal.

    • Buddy:

      Technocratic government is the norm now, and that is the problem. We need philosopher-kings, not technocrat-kings. Believe me, what Friedman is referring to is a nerdocracy. What is Bernanke? A mathematician in a suit, not a philosopher. Technocracy invariably fails because it is a nerdocracy. With a government of philosophers we would be looking at a man like Nassim Taleb or Jim Grant running the Fed, not another mathematician or computer programmer in a suit.

      In generations’ time, I believe we will be seeing a new norm: government by philosophers. Everything else is too fragile.

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