New Hampshire…

Chickenhawk

And so the Presidential race turns to New Hampshire. The only real question is whether a unifying candidate can emerge from the religious conservative wing of the party. Newt Gingrich? Rick Santorum? Neither?

The Republican party today is broadly split in three: there is the establishment represented by Mitt Romney. There are libertarians and constitutionalists represented by Ron Paul. And there are religious conservatives — a large chunk of the electorate, but without a consistent or fiscally conservative figurehead. And that’s unsurprising. Religious conservatives believe in the government legislating morality and redistributing wealth. Certainly, they believe in a different morality, and a different pattern of redistribution than Obama. But it is still tax-and-spend redistribution. Gingrich’s and Santorum’s records speak very clearly on that. And in the current economic climate, big spending is unpalatable. Each religious or social conservative that has surged to the top tier — Bachmann, Perry, Gingrich, Cain, Trump, Palin and Santorum — has crumbled under the spotlight. The Santorum candidacy does not have legs outside of Iowa — he has no money, no organisation, and has a record of voting for various big-spending initatives.

Religious and social conservatives are running out of time, and out of candidates. They may be forced to pin their colours to either Romney or Paul’s mast.

If no religious conservative emerges clearly from New Hampshire or South Carolina it shapes for a very interesting race.

Paul and Romney will maintain their bases. They are in it for the long haul. The winner will be the one who pulls in more of the social conservatives. Romney is confident that this will be him. After all, Paul is not a foreign policy interventionist, and most social and religious conservatives are.

Yet we should not discount economic and fiscal policy. Paul is the staunchest fiscal conservative in the race, and the only candidate with a serious program of cuts. Narrow Romney victories in South Carolina and Florida might not “sew the race up”, so much as drive social conservatives to Ron Paul as the only serious challenger to a Romney candidacy that differs from Obama only in details, not substance.

The other prospect is that social conservatives unite behind one candidate. But who is it to be? Gingrich? Perry? Santorum? None can be described as a consistent fiscal conservative, and that is a problem in this election cycle.

Most likely Romney will win New Hampshire and South Carolina. To many observers that would be game over after just three states. But Romney is an unsettling prospect to many Republicans — too liberal, too Wall Street, too establishment. Ron Paul — the only candidate other than Romney with a firm base —  stands a fine chance of establishing himself as the anti-Romney and winning a lot of delegates.

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Why the Republican Party Needs Ron Paul

From the Washington Post:

Simply, Ron Paul is just too popular to ignore. Republicans will find it very hard to win with him running as an Independent. If anything, a three-way split might play out even more strongly for Paul, as he can bash both the incumbent and the Republican as emblematic of the establishment — an establishment that more and more is failing America.

Of course, many forces are deeply opposed to Ron Paul, because for better or worse, his small-government anti-Federalist policies are a drastic change from the status quo, and embarrass big-government Republicans like Newt Gingrich, Rick Perry and George W. Bush who claim they want to balance the budget and end up spending a heck of a lot more.

So Paul supporters can expect a deluge of negative claims: claims that he is a racist, claims that his foreign policy is dangerous, claims he wants to return to segregation, claims that he cannot win and is unelectable.

Ultimately, everyone knows that it is the status quo that is more unsustainable than anything else. America is now the most indebted nation in the history of our planet, bogged down in expensive wars and its role as global policeman, and increasingly in denial of her constitution and the principles of her founders. Congress and Obama — as well as extending the reactionary and unconstitutional Patriot Act — have recently signed some of the most reactionary and illiberal legislation ever in the NDAA of 2011, which allows for the indefinite detention of American citizens without due process. Americans voted for Obama hoping for change from the big-spending interventionist corporatism of George W. Bush, and got much more of the same.

Paul’s non-interventionist foreign policy, his civil libertarianism, his strict adherence to the constitution, his rejection of banking bailouts and his willingness to cut spending are not what every voter is looking for, but are a tonic to the disastrous policies of the status quo that are sucking down the American economy.

Of course, many Americans fear radical change. That’s why establishment contenders like Cain, Gingrich, Bachmann and Perry have rapidly risen in the polls and fallen, as voters scrabble around hunting for a viable alternative to the status quo. Paul’s gains have been slow, steady and consistent. This has been in spite of an earlier campaign of media ignorance, and now a campaign of media smears, including the charge that he is either or a racist, or has associated himself with racists.

These media attacks will prove ineffective. Voters are turning to Paul because of his policies, and the fact that he represents a radical departure from what to many Americans is a disastrously failed status quo. He could be the Grand Wizard of the KKK, a shapeshifting Reptilian from Alpha Draconis, or a cross-dressing drug addict, and that would not change a thing because Ron Paul will ultimately be judged on the content of his policies, not superficial smears that have nothing whatever to do with policy.

Voters — middle class voters, poor voters, factory workers, the unemployed — like the idea that the President will cut the debt. Voters like the idea that the President will respect a strict interpretation of the constitution, instead of passing authoritarian legislation like the NDAA, SOPA and the Patriot Act. Voters like the idea that the President will end wars, close foreign bases, and defend America, instead of practicing expensive nation building in the middle east and central Asia. Voters like the idea of not pledging future tax dollars to bailing out badly managed and corrupt banks.

While some of his stances are unpopular with some segments of the population, there is no other declared candidate from either of the major parties who offers any of the above. None. Ron Paul’s rise is just a symptom of the establishment not delivering to the people what they want, need and deserve.

Government Can Be Bought Cheaply

If you’re a corruption-heavy sleaze bag looking to rack up crooked profits, the easiest way to do it is by rigging the game. And what better to rig the game than to buy off government and have them offer you tax breaks while “regulating” your competitors out of business?

So how much would it cost to buy the Presidency?

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Is Bernanke Letting the Economy Crash?

So we know Bernanke didn’t print. Let’s survey the damage.

From Zero Hedge:

This is what happens when the market prices in $1+ trillion in loose money from the Chairman, and gets a sharp stick in the eye instead.

Stocks plunge, commodities collapse, Morgan Stanley refutes facts presented by a fringe blog, gold and precious metals are liquidated as margin calls explode, dollar soars as every bank in Europe scrambles to get its hands on every Benjamin it can get, Treasurys surge to never before seen prices even as CDS of the underlying countries soars, and the DJIA posts the third biggest weekly drop in history (and the week is not even over yet)…

…And beneath it is all is the creeping realization that the Fed’s most recent global bailout action with the ECB, the SNB, the BOJ and the BOE does not start for another 20 days, or October 12, 2011. That’s right: three weeks in which there is  to provide the much critical trillions of dollar that every bank in the world so desperately needs. We wish Europe all the best in pretending for 20 days that it can survive on its own, even as Greece is about to become the riotcam’s favorite destination once again.

What readers will want to know is why Bernanke didn’t print. There are three chief theories.

  1.  Inflation Fears; American CPI recently hit 3.5%. Are central bankers that excessive liquidity are causing the economy to overheat?

    From Paul Krugman:

    Like me, Tim Duy comes down hard on Paul Volcker’s inflation-is-history’s-greatest-monster op-ed. I pointed out that the last time we were in an economic trap resembling our current predicament, inflation actually helped get us out. Duy adopts a somewhat different but complementary approach: he asks just how bad the evil inflationary 1970s actually were. And the answer is, not nearly as bad as the noninflationary 00s. For example:

    Now Krugman is not Bernanke, but it does sum up the Keynesian perspective: inflation is not taken to be half as bad (and in many case beneficial) by monetary authorities as it is by the public. So is it inflationary fears that have caused Bernanke not to print? I doubt it.

  2. Bernanke has been ordered not to print; Debt-holders around the world are uncomfortable with QE because they feel that it is adversely affecting the purchasing power of their holdings.

    As I wrote last month:

    Wen Jiabao is bluffing for time. China knows America is sitting on a house of cards, and is quickly changing its tack away from criticising America, to getting the heck out of dodge. It is becoming clearer and clearer that America cannot and will not produce a coherent deficit-reduction strategy, a strategy to boost domestic manufacturing, or any meaningful economic plan at all outside of printing money. China is offloading not only its Treasury balance, but also its dollar pile. It has long been getting into productive assets and gold, and out of fiat money.

    Now we know that China wants to get out of US debt. But is America really coward enough to let China boss it around? American foreign policy (at least the slice of it we get to see) is conducted to show America as a global leader financially, politically and ethically. Certainly Bernanke is being as conservative as possible with bondholder purchasing power. But does that explain the full picture?

  3. Bernanke is deliberately letting the economy crash; he realises that further easing is politically and internationally untenable — even if it is necessary to stabilise and inflate asset prices — and he wants to show other actors the consequences of the Federal Reserve stepping back so that future action — both fiscal, monetary and organisational — is made politically viable.

Is China a Bubble?

Hedge fund manager Jim Chanos (among others, including Nouriel Roubini) says that China is a giant wreck due a hard landing.

From Zero Hedge:

On the Chinese government’s balance sheet:

“The Chinese government’s balance sheet directly does not have a lot of debt. The state-owned enterprises of the local governments and all the other ancillary borrowing vehicles have lots of debt and its growing at a very fast rate. The assumption is that the state stands behind all this debt. We see that the debt in China, implicitly backed by the Chinese government, probably has gone from about 100% of GDP to about 200% of GDP recently. Those are numbers that are staggering. Those are European kind of numbers if not worse.”

On how a Chinese property bubble will play out:

“I think that will be the surprise going into this year, and into 2012 – that it is not so strong. The property market is hitting the wall right now and things are decelerating. The CEO of Komatsu said last week that he is having trouble getting paid for his excavator sales in China. Developers are being squeezed. They’re turning to the black market for lending, this shadow banking system that is growing by leaps and bounds like everything in China.

“Regulators over there are really trying to get their hands around the problem. In the meantime, local governments have every incentive to just keep the game going. So they will continue with these projects, continuing to borrow as the central government tries to rein it in.”

Chanos on his long and short positions:

“We are short Chinese banks, the property developers, commodity companies that sell into China, anything related to property there is still a short.”

“We are long the Macau casinos. It’s our long corruption, short property play. We feel that there’s American management and American accounting. They are growing at a faster rate even than the property developers.”

On the IMF lowering growth estimates for China:

“A lot of people are assuming that half of all new loans in China are going to go bad. In fact, the Chinese government even said that last year relating to the local governments. If we assume that China will grow total credit this year between 30% to 40% of GDP, and half of that debt will go bad, that is 15% to 20%. Say the recoveries on that are 50%. That means that China, on an after write off basis, may not be growing at all. It may be having to simply write off some of this stuff in the future so its 9% growth may be zero.”


Is he right?

Absolutely not.

China has a property bubble, resulting from excess supply. It is also the world’s greatest industrial behemoth, controlling the world’s supply chains in many key components, and is becoming an increasingly powerful player in energy markets thanks to its buy-out of Venezuela and its close ties to authoritarian Eurasian energy powers like Russia, Iran and Pakistan. This means that it’s probably not the best place for Westerners to park capital in the short term. But it has no bearing on China’s strategic standing in the medium to long term.

A comparison with America is inevitable. The United States destroyed its industrial productive capacity, has a zombified financial system , a stagnating labour market, stagnating infrastructure, a clueless establishment, and its currency is about to lose global reserve currency status.

Every day, America becomes more dependent on foreign oil and resources.

America needs the global resource and trade infrastructureThat’s why America is in Iraq, Afghanistan, Yemen, Pakistan. That’s why there are hundreds of bases around the world and why America spends trillions policing the world.

The counter-argument I often hear is “but America has nukes, America can order other countries to do things and they will do it”. But ever since mutually-assured destruction that hasn’t been true.

If you don’t control your supply chains, you have a geostrategic problem. China grasped the importance of supply chains, and through cunning use of long-term planning has made itself the spider at the centre of the web of global trade. America grasped they could get a free lunch with US treasuries and that free lunch destroyed their productive capacity.

China has a cold. America has congential haemerrhoids, restless legs syndrome, diabetes, and autism.

Rick Perry: Heir to Bush & Cheney

So a slick, folksy Governor of Texas just parachuted into the Republican Presidential race. Remind you of anyone? Hair coiffed, teleprompter set to patronisingly moralistic, Rick Perry — who previously promised America he would not run for President — has decided that the country needs yet more faith-based initiatives, public prayer and foreign excursions. In his own words:

One in six work-eligible Americans cannot find a full-time job. That is not a recovery — that is an economic disaster.

He’s right. But of course — rather than investing in dilapidated infrastructure — Perry believes that righting our economic woes is just a matter of getting right with God. From CNN:

On August 6, Texas Gov. Rick Perry wants you to drop the Texas BBQ, grab a moist towelette and fold your hands to pray. On Monday, Perry declared the date a “day of prayer and fasting for our nation’s challenges.”
“America is in crisis, ” the Republican governor says on a website promoting the event. “We have been besieged by financial debt, terrorism, and a multitude of natural disasters.”

Perry invited the 49 other governors in the U.S. to issue similar proclamations, “encouraging their constituents to pray that day for unity and righteousness for our states, nation and mankind.” He wants other governors to join him at Houston’s Reliant Stadium, home to the NFL’s Houston Texans, for an August 6 event called The Response, organized by a conservative Christian group.

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