by David Steven | Sep 17, 2007 | North America
It’s hard to underestimate how buoyed Republicans have been by Petraeus’s testimony last week. They’re pleased by his reports of progress in Iraq, of course, but mainly they’re happy to see domestic political opponents on the back foot.
Allow three pieces from the Weekly Standard to illustrate the point.
Fred Barnes is giddy at the ‘air of defeat’ that surrounds Democrats after the ‘wrenching ordeal’ of listening to Petraeus testify. Fred Kagan and Bill Kristol, godfathers to the surge, meanwhile, contrast the ‘serious men’ (Petraeus and Crocker) with their ‘children at play’ in the Congress and Senate.
But they’re just playing nice. It’s left to their colleague, David Gerlernter (who had the misfortune to open a parcel from the Unabomber) to really go for the jugular. Polls be damned, he believes Democrats are on the verge of losing any right to govern:
America’s political spectrum a decade or more in the future will be defined by two parties both born of today’s GOP after a natural and painless mitosis…
Americans traditionally like their two opposing parties to differ on domestic affairs but agree on basic foreign policy–not because things are nicer that way; rather because foreign-policy arguments are good for our enemies, bad for our friends, and hugely dangerous to ourselves–especially in an age when swarms of maniac, murderous jihadists blacken the Middle East like toxic locusts.
All this reminds me of the good old days. You remember. 2003. When the mission had been accomplished…
by David Steven | Sep 17, 2007 | Global system, North America
It’s one thing for an ex-newspaper editor to engage in panic-for-publicity (see Alex’s post below), another for the ex-head of the US Federal Reserve to do the same.
But Alan Greenspan has done just that. Greenspan has mounted a major media offensive with three main messages.
First, you’re all screwed. Second, it didn’t happen on my watch. And third, buy my new book (he has a reported $8.5m advance to pay back).
Greenspan, who never mentioned the word bubble when leading the Fed, now expects single digit falls in the US housing market, but thinks a double digit collapse would be unsurprising.
He compares asset-backed securities to cocaine and describes the current crisis as a ‘disaster waiting to happen.’ Perhaps most interestingly, he predicts long-term upward pressure on inflation, as deflationary pressure from China eases off.
All in the all, though, the ex-Fed chairman comes across as one of those shy and retiring types who is desperately missing the limelight:
“Why am I penalised for effectively coming out of government? Do I abandon my profession? What do I do? I understand that [my statements have a market impact], and that’s the reason why when I speak in public I don’t talk about monetary policy. I do talk about the economy.
“Do I become an anthropologist? I don’t know what to do about this. It’s like putting me in jail. I didn’t do anything!” But while he remains fascinated by the goings-on at the Fed, he harbours no desire to be back there in the driving seat.
“I spent a considerable time there. I learnt a great deal, I enjoyed working with the people, but I’m really more a private economist. I’m essentially introverted, and being out in the open the way I became was very disconcerting to me. I’m a private person.”
by David Steven | Sep 17, 2007 | Conflict and security, South Asia
For a couple of years now, one of the big questions in Pakistan has been whether Musharraf will doff his uniform before seeking re-election as President. It now looks like the uniform will indeed be doffed…
by Alex Evans | Sep 17, 2007 | Climate and resource scarcity, Global system
The FT notes that:
- Oil touched an all-time high at the end of last week, reaching $80.36 at one point, as traders reacted to last week’s OPEC decision to raise crude output by 500,000 barrels a day from November as “too little, too late”;
- Wheat hit a record last week as well, making it to $9.11¼ a bushel on Wednesday after the US Department of Agriculture warned that global stockpiles would shrink to a 30 year low;
- Corn prices were still going up last week even after USDA forecast a record US crop, thanks to the global explosion in corn consumption – for biofuels as well as food; and
- Gold touched $717 a troy ounce, a 17 month high, on Friday – driven by investors going for safety and a predicted further weakening in the dollar.
Most media commentary over the last week has suggested that US, eurozone and UK interest rates will decline as central banks seek to inject liquidity to the markets. But if real world scarcity trends in agriculture and energy keep pushing raw material prices upwards, then that could make for a painful countervailing force on interest rates – putting central bankers between a rock and a hard place on growth versus inflation. Stagflation, anyone?
by Alex Evans | Sep 17, 2007 | Global system, Influence and networks
Given the obvious risk of self-fulfilling prophecy when terms like ‘bank run’ start being bandied about in the midst of a low level consumer panic, sensible commentators try to err away from being too lurid in what they say to the mainstream media during a crisis.
A pity, then, that Will Hutton just couldn’t resist when the opportunity for some publicity came knocking. Yesterday, he was in the Observer, arguing that:
This is a full-blown run on a bank, something we have not seen on such a scale since the 19th century, and a measure of the depth of mismanagement, non-regulation and structural dysfunctionality of today’s financial system.
By this morning, he clearly felt that he hadn’t gone far enough, so he decided to go on the Today programme (RealPlayer stream; fast forward to 10.30) and announce to the nation that unless the government improved the depositors’ insurance scheme, got the interbank loan market moving “at all costs”, was willing to “stand behind structured investment vehicles” and “re-regulate the markets”, and was prepared to nationalise Northern Rock if push really came to shove, then
“…there is a really serious risk that there could be a bank run that spreads beyond Northern Rock.”
This is not to deny that a serious problem is underway; we published posts on both 22 August and 7 September quoting experts who were arguing that the situation was considerably worse than generally understood by generalist policymakers or the mainstream media. But Hutton’s shrill polemic is both uninformative and unhelpful, especially as it ignores the two key counter-arguments to his plan for a mega-bailout: moral hazard and the question of who picks up the tab.
If the Bank of England says it will prop up any bank or building society at risk of failure now that we’ve hit the first really serious bout of financial market turbulence since the turn of the decade, what kind of signal does that send? And his call for the government to “get the interbank market moving at all costs” seems similarly bizarre: given that the reason it has dried up in the first place is because banks don’t know who’s been left holding the bad loans now that the music’s stopped, is his suggestion that the Bank of England should pick up the tab for all of them?
Both of these issues have been widely – and soberly – debated in the press over the last few days. But by ignoring the nuances at the same time as upping the rhetoric, the risk that Hutton runs is of worsening perceptions of the problem without contributing to a consensus on solutions. There are serious structural issues of financial market regulation that clearly need to be addressed, yes. But there’s plenty of scope for a frank discussion of symptoms, causes and policy without tearing on to the Today programme to tell the nation about “financial tsunamis” and suggesting implicitly that perhaps we should all withdraw our cash from wherever it’s saved, convert it into gold sovereigns and stash it under the mattress.
