WITH
FRIENDS LIKE THESE...
by J. Christoph Amberger
Back in June of 1982...I remember it being a bright and, for my Central
European tastes, unusually hot day...I found myself
wedged in a throng of people in the gardens of
Charlottenburg Palace in my hometown of West Berlin. We were waiting for a
controversial U.S. president to take the stage: a man derided by smug Euro
leftists as a "cowboy", for being American, for not being a liberal, and
for not being overly receptive to having U.S. policy dictated to him by
the neo-pacifist rabble that was barely being
contained outside the Palace boundaries by riot-hardened Berlin policemen.
Sound familiar? I have to admit that I have always considered George
Santayana's trademark quote a bit sophomoric. You remember: "Those who do
not remember the
past are condemned to repeat it." But the past six months appear set to
prove him right.
Back in 1982, Berlin had mobilized to welcome Ronald Reagan. And when I
say mobilized, I mean mobilized: Counter-culture riot tourists from West
Germany had been
descending upon the city for days via car and train...waved through by
East European border guards whose purpose in life was to terrorize normal
travelers. The airwaves were
filled with an anti-American ditty performed by an aging fool: artist
Joseph Beuys, most famous for creating "art" from
coagulated lard and having a tame coyote defecate on
the Wall Street Journal, was singing his mawkish "Wir wollen Sonneschein
und keinen Reagan"...We want sunshine and no Reagan, Reagan being assonant
with the German word
Regen, for "rain".
Those were the days...not a weekend went by that there weren't large-scale
demonstrations in downtown Berlin, with thousands of always somewhat
unwashed-looking juveniles with long, greasy hair, wearing army parkas and
black leather jackets, motorcycle helmets and kaffyas. They were
protesting nuclear energy, the Berlin senate's housing policy - but first
and foremost Ronald Reagan's foreign policy...including Star Wars and the
deployment of Cruise Missiles that were to be pointed at the Soviets'
SS-20
batteries in the most defiant gesture of Mutually Assured Destruction to
date.
The ideological pillars that carried this early prototype of Germany's "Peace
Movement" into the country's political mainstream - culminating in the
ascent of the Greens into
government as junior partners of Gerhard Schroeder's Socialists in 1998 -
were not all that original. (The German writer Max Goldt called them a "collection
of political slogans from their parents' generation they found scrawled on
the walls of a public restroom".)
Nor were they all that peaceful: most demonstrations culminated in pitched
battles, with Molotov cocktails and cobblestones raining down on police
officers. More than once my morning trip to school led me past burned-out
stores torched by the Princes of Peace.
The speech Reagan gave that day was not particularly memorable. (Remember,
Gorbachev was still unknown, and "Tear down that Wall" was yet unwritten.)
Only one phrase stands out in my memory, the German phrase "Was immer sei,
Berlin bleibt frei". Whatever may be, Berlin remains free.
The irony wasn't lost on me even at the tender age of 18: The democratic
rights used and abused by the anti-American demonstrators outside were
theirs because of America's
commitment to West Germany and West Berlin. Without the forlorn hope of
American, British, and French troops in Berlin - hopelessly outgunned by
the surrounding Red Army
and Warsaw Pact - the long hair alone would have provided sufficient
reason for them to be harassed if not imprisoned as "degenerates" by East
Germany's communists.
I made my way home that day using public transportation, carrying an
American flag I had tied to a broomstick. I arrived unharmed...a fact I
credit mostly to cutting an
uninvitingly dashing figure at 6'4" - and traveling part of the way in the
company an even more uninvitingly dashing U.S. special forces soldier who
was part of my parents'
circle of American friends who spent weekends and holidays at our house...
It is more than a decade ago that Ronald Reagan's great bluff sent the
Soviet Union and the Warsaw Pact into a death spiral that resulted in the
liberation of Eastern
Europe. And today, there is again a U.S. president derided by smug Euro
leftists as a "cowboy", for being American, for not being a liberal, and
for not being overly receptive
to having U.S. policy dictated by the same neo-pacifist rabble whose
anti-Americanism twenty years ago was focused on Ronald Reagan, Star Wars,
and Cruise missiles.
Given the obvious cyclicality of events, pardon me if I feel compelled to
chuckle when I hear that anti-American sentiment is a product of George W.
Bush and Donald Rumsfeld's foreign policy.
And pardon me if I just don't buy it when I hear that countries like
Russia, China, and France are suddenly appearing concerned with global
peace. Make no mistake about it, none of the countries posing at the U.N.
Security Council as protectors of peace are pacifist countries.
Russia has no qualms at all using military force against its breakaway
Chechen subjects...or along the Central Asian periphery of its Empire. In
a last quiver of Pan-Slavist
aspiration, it threw in its lot with the Serbs at the peak of that
nation's genocidal ambition in the mid-1990s, hoping to keep the U.N. out
of the Balkans until Serbia had
finished its dirty work. Russia even sent a military welcoming committee
into Serbia to greet American troops sent to halt the slaughter of
Bosnians and ethnic Albanians
by Bill Clinton (out of all people) - whose attempts to intervene in the
large-scale massacres were vehemently opposed by Britain and France.
China has a closet full of skeletons. The most prominent is the undead
Taiwan...whose mention in Chinese documents is uncomfortably close to the
sentiments cultivated by Saddam toward Kuwait...only that it is backed by
greater firepower. And whatever happened to Kim Basinger and Richard
Gere's chants of "Free Tibet" at the Oscars?
The answer, my friend, is blowing in the wind...
And France? This country's love of peace comes on the heels of one of the
most repressive and predatory imperialist histories in modern times. In
the decades following taking
to bed with the Dien Bien Flu in Indochina, the arbitrary and for the most
part weak leadership of France has chummed up to such appetizing
characters as Leonid Brezhnev and Saddam Hussein. Emperor Jacques himself
ran for re-election last year principally to preserve his immunity from
prosecution, mainly on charges of corruption that were
nothing if not serious.
If Donald Rumsfeld's diplomatic skills are those of a sledgehammer,
France's diplomatic efforts were recently summed up by Christopher
Hitchins as "preoccupied with
extracting advantage and prestige from the difficulties of its allies".
What puzzles me most about the current stalemate at the U.N. is...why now?
Why discover one's inner rainbow when it comes to Saddam? Given the
background of the U.N. "doves", I think it is safe to exclude purity of
purpose. Peace...or the at least the absence of military conflict...in
international politics is not an absolute value - contrary
to popular belief - but like war, an extension of politics.
That goes for the Pax Americana as well as the neo-pacifist "multi-lateralist"
brands of peace now espoused by Europe and China. And politics, by their
very nature, are
egocentric and aimed at maintaining and expanding one's own advantage. (Nothing
illustrates this better than Gerhard Schroeder's categorical rejection of
military intervention weeks prior to his reelection...or the German
conservatives' rediscovery of their support for America a week after
state-level elections were over.)
Opposition to the U.S. and Britain's plans to take out Saddam thus are
political, not moral, in nature. It aims at suppressing American influence
wherever possible...even if
that means propping up the most unappetizing dictator in the Middle East.
Western European mainstream has been latently and fundamentally
anti-American for decades...not
because of George Bush and not because of Iraq, but out of a feeling of
superficial cultural and ethical superiority that has been frustrated by
reality since the end of World
War II.
This sentiment exists independently of the political imprint of the U.S.
Administration, and readjusts its target depending on where the European
mainstream perceives the moral foundations of American identity to
reside...Newt Gingrich in the Clinton Era...and George Bush today. As the
German Israeli author Henry Broder wrote in the magazine
Der Spiegel last October: "Anti-Americanism is not a conditional reflex to
the policies of the United States, but an autonomous resentment that seeks
out its justification: The Effect accepts any Cause, as long as it can
preen itself in the conscience of being the morally superior position."
For the weeks, months, and years ahead, these are the realities of the New
World Order -independent of how the U.N. tug of war plays out. That's good
news for anyone
still keeping an eye peeled out for those mythical black helicopters of
the New World Order. It's bad news for anyone seeking external validation
for being an American -
passport-carrying or otherwise.
Regards,
Christoph Amberger,
for The Daily Reckoning
P.S. One of your correspondents here in the D.R. informed
you earlier this week: "Once in place, [U.S. troops] are
expected to remain [in Iraq] - a more or less permanent
outpost of the new American empire. Whether this will be
good or bad, we cannot say."
Based on my personal history...growing up in a country and
city occupied by U.S. forces and forcefully steeped in the
American Way...this seems a no-brainer to be: good or bad,
for those living and growing up in a scenario like this,
this particular outcome - a free Iraq regrouping in the
American fold - is preferable to any other.
FORGET IRAQ
By Kurt Richebächer
From what we read about the U.S. economy, we have to conclude that its
enormous bubble-related, structural problems are still little understood.
Too many economists in America possess an extraordinary ingenuity to
discard the greatest imbalances in the economy as irrelevant. Record-high
trade deficits, record-low
savings and record-low profits do not matter in their eyes. It is, by
definition, an economy that cannot have serious problems.
We like the statement that Rep. Bernard Sanders recently made to Fed
Chairman Alan Greenspan after a testimony: "Mr. Greenspan, I always enjoy
your presentation because,
frankly, I wonder what world you live in." It is a question that we would
like to ask numerous Wall Street economists and analysts.
Not only Mr. Greenspan, but indeed most economists are clearly overstating
the role of the Iraq "jitters" in slowing the economy. In the same vein,
they flatly ignore the implications of the severe economic and financial
maladjustments that the bubble-related borrowing and spending excesses
have inflicted on the economy, among them in particular the profit
implosion. There is no debate, no discussion, no questioning about this
unprecedented profit calamity - just lamenting that increasing oil prices
and the looming war with Iraq are causing companies and consumers to
postpone big spending decisions. This explanation has, of course, the
great virtue to make believe that the economy and the markets will resume
booming as soon as this uncertainty is lifted, war or no war.
For the great economic thinkers of the past, it was uniformly apodictic
that healthy economic growth depends on three key attributes: a high share
of saving, a high share
of investment and a high share of profits. But the U.S. economy's strong
growth during last year badly lacked all three attributes.
Looking for the effective quality of the U.S. economy's strong growth in
recent years, we noted the following facts: In 2002, consumption accounted
for 87% and government spending for 32% of GDP growth in current dollars.
On the other hand, business fixed investment diminished GDP growth by
23.6%. Another sizable cut by 20.2% derived from the further worsening
trade deficit. In the fourth quarter of 2002, by the way, government
spending accounted for 39.4% of GDP growth. If this was a recovery,
it was a very sick one that lacked everything for sustainability.
During the preceding four years, 1997-2001, nominal GDP grew altogether by
$1,763.8 billion, or 21%. Consumption accounted for $1,457.7 billion, or
82.6%, of the total.
That share was about 15 percentage points above the long-term average.
Government spending provided $370 billion, or 20.9%. An unusually small
contribution came from business fixed investment, with $202.2 billion, or
11.4%, of the total. The soaring import surplus diverted a huge $259.6
billion of domestic spending abroad.
According to official interpretation and general perception, the U.S.
economy's growth during these years was led by strong investment and
productivity growth. The ugly reality was that growth was consumption-led
growth as usual, with one important difference: this time, the consumer
borrowing binge went to an unprecedented extreme.
Just as clear was its decisive propellant: the skyrocketing wealth effects
of the booming stock market.
By definition, it is the essence of a bubble economy that rising asset
prices fuel specific borrowing and spending excesses. In the case of Japan,
these went mainly into
commercial construction and business fixed investment.
America's bubble economy had its decisive, big structural distortion in
the borrowing and spending orgy of the consumer.
Consumption's steeply rising share in GDP was the manifest hallmark of the
U.S. bubble economy that developed in the late 1990s. Essentially, a sharp
rise in one GDP component
implies the looting of other components. In the U.S. case, these victims
were fixed investment and foreign trade.
There is a widespread, hopeful view that the bubble-related imbalances and
distortions are being rapidly corrected. In this view, the U.S. economy's
main problem from the past
boom years has been a protracted excess in business spending on fixed
investment that has resulted in vastly excessive production capacity.
Boosting potential supply in
relation to slower demand growth, it is also supposed to be the main cause
behind the profit carnage by destroying pricing power. From this
perspective, the drastic
retrenchment of business fixed investment represents a highly desirable
correction of the prior investment excesses.
It is the consensus view. Yet it is absolutely ludicrous.
Overinvestment may, indeed, be true for Asia, but definitely not for the
United States. As explained and documented, America's overwhelming
structural maladjustment in the past few years has been bubble-driven
overconsumption that plainly bombed out business investment and the trade
balance.
What the slide in business fixed investment truly reflects from this
perspective - our perspective - is not at all a desirable and necessary
correction of a prior maladjustment, but a dramatic worsening of chronic
corporate underinvestment in the United States. The profit carnage is the
obvious culprit.
What saved the U.S. economy from a crushing recession was the housing and
mortgage refinancing bubble that developed with consumer debt growth
beating record after record. In the third quarter of 2002, it ran at an
annual rate of $770.7 billion, as against $661.3 billion in the same
quarter a year ago, and $571.4 billion another year back.
Everybody is hailing this acceleration of the consumer borrowing binge
because it has prevented a deeper recession. But in essence, this, too,
represents an increasing maladjustment in consumer spending.
Regards,
Kurt Richebächer,
for The Daily Reckoning
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