Risk & Opportunity

A quarterly political and economic newsletter published by Michael Cuddehe

Q3 '10

2010 Election Issue: The Rise of the Mob

America is in trouble. Around the country, the nominations of Tea Party Republicans like Senate candidates Christine O’Donnell in Delaware, Sharon Angle in Nevada, Joe Miller in Alaska, Rand Paul in Kentucky and Ken Buck in Colorado are the canaries in the coal mine. A group of Rand Paul supporters assaulted and stomped a woman from MoveOn at a campaign event in Kentucky. Joe Miller’s security arrested and handcuffed a reporter at public event in Alaska. Tea Party Republican House candidate Stephen Broden says violent overthrow of the government is “on the table,” a sentiment previously suggested by Sharon Angle.

Tea Party Republicans talk endlessly about “protecting the constitution” even as they work to undermine the separation of church and state. They rally their supporters with cries of “freedom,” apparently unaware that the freedom they are advocating is the freedom of huge corporations to grind the American people into serfdom. They don’t understand that the economic calamity they are railing about was created by the very policies they are promoting at the behest of their corporate financiers, and that the massive deficits are the direct and deliberate result of the Republican “starve the beast” strategy. These candidates are woefully unqualified to hold high office. The fact that approximately half the American people support them suggests that America is no longer worthy of democracy. Mob rule is the new order.

The rise of the Tea Party mob is the direct result of decades of Republican “divide and conquer” tactics, featuring a relentless propaganda machine attacking anything Democrat or “liberal,” characterizing our government as the enemy, and promoting conspiracy theories and outright lies about “death panels,” “government takeovers” and such. The Grand Ole Party is now the party of Karl Rove, Rush Limbaugh, Sarah Palin, Glenn Beck and the Tea Party…demagogues and lunatics. Principled conservatives are no longer welcome. What remains of the Republican Party has become an entirely destructive force and is a cancer on America.

Our sound-bite media doesn’t seem to have the ability to place anything in context. Stepping back from the cacophony of the 24-hour news cycle and taking in the long view, one can see clearly how much damage the Republican Party has done, and continues to do, to our country. See my op-ed, “The Republican Wrecking Ball” in the Denver Post.

Free lunch and magic cake

The entire Republican agenda is a fraud, as is their politics. Their economic agenda is the same utopian free market fundamentalism, anchored in “supply side economics,” that created our current problems. Supply side economics was properly labeled as “voodoo economics” by George Bush Sr. when it was first introduced to the public by Ronald Reagan. I call it the “free lunch and magic cake” theory. The rich get free lunch, and everyone else gets magic cake. Supply side economics, also known as trickle-down economics, was never anything other than a scam intended to shift the national wealth from the hands of the many to the hands of the few, and it has been quite successful in this mission. See Martin Wolfe’s blog post “The Political Genius of Supply Side Economics.”

In their politics Republicans have totally embraced the anti-ethic that “the end justifies the means.” Their end is to gain power for its own sake. And their means are depraved. They have taught the impressionable that the truth matters not at all. What matters is what plays; what gives an advantage; what undermines the opposition, even if it’s an outright lie. Principles? None. What was touted as good policy or practice in the Bush years is now condemned as a threat to the republic and a crime against humanity in the Obama years. Any damage to the country from their scorched earth politics is “collateral damage.”

Republicans have deliberately sabotaged our nation and our future in their blind pursuit of power.

Those interested in some perspective from a couple of old fashioned Republicans might take a look at John Danforth’s book, Faith and Politics. Also recommended is a visit to the National Endowment for the Humanities website to check out a series of speeches given recently by Jim Leach on the importance of civility in public discourse, and the historical consequences of the kind of incivility we are seeing from so-called conservatives today.

Obama’s Failure

Obama inspired the nation by promising a big change from the tawdry record and mean-spirited hubris of Republican rule. He made a terrible strategic error by retreating from his promise for change into a deal-making posture that made him look weak, emboldened his opposition and left his supporters completely disillusioned.

The architect of this strategy, Rahm Emmanuel, is now gone. The other bad influence, Lawrence Summers, will also be gone at the end of the year. (Unfortunately Tim Geithner remains at Treasury.) Whether these personnel changes signal that Obama is going to finally take a stand for something remains to be seen. Democrats are too cowed by the right wing propaganda machine and the thinly veiled threats of violence from the Tea Party types. They won’t stand and fight unless Obama steps up first. If he doesn’t start to lead politically, the Republican mob will overrun Washington, and the country will come apart at the seams. See Frank Rich’s column, What Happened to Change We Can Believe In?

Markets

The dollar is the driver of all markets right now….down, down, down. Everything else….up, up, up. The Fed is going to keep pumping until real estate floats. The dollar will be worth a nickel…oh, wait…it’s already worth a nickel! Gold is telling the story of the value of the dollar…$1,340 at press time. Ten years ago it was $250.

Currently we are in an intermediate term disinflationary cycle, driven by still deflating real estate prices and consumer retrenchment. When this cycle has run its course, inflation is going to go bonkers. (That’s a technical term.) Even now, despite the disinflationary pressure and official inflation of 1.5%, real inflation is running closer to 8% according to John Williams’ Shadow Government Statistics. That number better reflects my personal experience with the cost of necessities like food, gasoline and insurance.

Commodity prices across the board have had a big move up recently. That move will be felt in increased consumer prices in the coming months. Coming soon: a big rise in rates. The authorities have been playing a manipulation game for 30 years, and they have lost control. Even the Fed can’t hold back the ocean forever. When the dike bursts, we will see dramatically higher rates, and everything else will go into freefall. Then we will have a new dollar, worth a fraction of the old dollar at conversion time. Maybe we’ll have two dollars; one for international dealings, backed partially by gold, and another domestic dollar that the politicians will immediately start devaluing with new debt.

Geopolitics

China is on the rise, growing steadily stronger and more confident, with India not far behind. The entire Far East is forming into its own economic sphere. If they can avoid falling into old rivalries and warfare, they are in for a long run of expansion and growing prosperity. We, on the other hand, are in decline, and our lack of leadership and general political decay ensures that we will remain so for a long time. Soon there will be a battle royal over military spending vs. Social Security and Medicare. The military is going to lose this battle and we will finally start closing down our global network of military installations. Maybe we can put our downsized military to work eradicating the Mexican drug cartels, which have risen to power courtesy of the price support from our War on Drugs.

Unless Iran collapses inward from the growing pressure of global sanctions, war is inevitable in the Middle East. In fact, the war is already underway. Stuxnet was the opening volley. For those who are unaware, Stuxnet is the computer worm that has mysteriously appeared in Iranian industrial computers, most specifically those related to the nuclear industry. Reports are sketchy but apparently it has done extensive damage. Stuxnet is the first weaponized computer virus, specifically designed to take control of industrial computers and to destroy equipment and facilities. The general consensus is that Stuxnet is so sophisticated and complex that it could only have been created by governments, namely Israel and/or the United States.

Also, Debka reports that Iranian bunkers housing ballistic rocket launchers earmarked for attacks on Israel and U.S. ships have been destroyed by drone attacks. Iran will no doubt be looking for its opportunity to strike back.

Economy

The economy is not going to get much better any time soon. If Republicans make the election gains predicted and follow through on their promise to bring government to a halt, things are certain to start deteriorating again, quickly.

As Warren Buffett put it not long ago, we’re on our way to becoming a “sharecropper society.” He was referring to our increasing indebtedness to foreigners. But the analogy applies in another way as well. The wealth of a nation is like the blood in a body. It needs to circulate. Thirty years of Republican economic policies have concentrated America’s wealth increasingly in the upper tier, devastating our once thriving middle class and gradually impoverishing an ever greater segment of the population. On our current track most of us will soon be sharecroppers, if we aren’t already, in a neo-feudal state where most assets are controlled by a small oligarchy.

Summary

The election of Barack Obama in 2008 presented an opportunity for America, and a choice. We could undertake the hard task of cleaning up the wreckage left by the Bush regime together, or we could continue the partisan warfare and make everything worse.

It seemed that Obama was genuine in his desire to work in a bi-partisan way, and he certainly did make the effort, to a fault in my opinion. The destructive behavior of the Republican Party has ensured that we are going to go through this the hard way. Ultimately, though, it is we the people who are responsible. If Republicans didn’t have the support of approximately half the people, they wouldn’t do these things. Unless there is a miraculous national awakening at the final moment, it appears that we have made our choice, and we are going to suffer for it.

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