30 September 2008

McCain says Palin is underestimated like Reagan: well part of that sentence is correct...

One fun side-effect of digging around for stuff about just how bad the oncoming global collapse is, is that you get to read a lot of amusing stuff about Sarah Palin.

Here's a Telegraph report that John McCain has argued people are underestimating Sarah Palin like Bill Clinton and Ronald Reagan - both of whom went on to serve two terms.

I guess you could compare her with Clinton in that both have been governors of fairly small (population-wise), perhaps even inconsequential, states beginning with 'A' (Alaska and Arkansas respectively.) But Clinton was certainly no fool either in interview or debate.

I mean, can anyone imagine Bill Clinton (or Hillary Clinton for that matter) delivering a performance like this in a TV interview. The link is to Palin's performance in an interview on the CBS network and it's unbelievably, laughably, shit. If this had cropped up on Brass Eye it would have fitted in very nicely. (It would explain a lot if Chris Morris turns out to be the Republican campaign manager...)

The Reagan comparison has a bit more merit to it. The guy was a cheap punk who was refused membership of the US Communist party in the 1940s for being too stupid, and who enjoyed high-quality policy advice from his astrologer (call David Icke NOW!!!). But undeniably he was (sometimes) good on TV and had a certain knack for nailing a catchphrase which resonated with the US electorate; one can perhaps imagine Palin being able to do that if circumstances were right (i.e. probably not in the middle of the biggest economic crisis for 70 years).

The fantastic parody cartoon from The Onion of the Carter-Reagan contest in 1980 sums up Ronnie's appeal; Carter saying "let's talk better mileage", and Reagan saying "kill the bastards". That sums it up; a cold-blooded, simple, fascistic message that many of the voters could identify with. In the right circumstances I believe Palin could do that. But these ain't the right circumstances. At best she will manage one or two killer one-liners. Now if Joe Biden is completely shit that could be enough; but I don't believe he is that shit. At the very least, he showed considerable good taste by stealing Neil Kinnock's speech on being the first of his family in a thousand generations to go to university... etc.

I think a more appropriate comparator for Palin is Dan Quayle, widely acknowledged to be the most crap Vice-Presidential choice of the last half-century or so. But don't forget that Quayle was seen as a real turkey well before the '88 election and it didn't stop George Bush snr. winning by a landslide. I think the V-P debate is kind of irrelevant, except for the fact that McCain is not a man with a good record of health, and he is 72 years old. So the question of the fitness for duty of the V-P may weigh more heavily in this case. But in any case, it's fun to blog about.

29 September 2008

Skid row, here we come...

...not the early 90s heavy metal band, fortunately, but the imminent collapse of the entire US (and perhaps the entire Western developed world) economies.

The US bailout plan has been defeated.

As that was pretty much the only thing holding global stock markets up, stand by for a financial bloodbath. It'll probably unfold as a domino effect over the next few weeks, with bank after bank failing - and dragging various other companies down with it.

What seems to have scuppered the bailout plan is three things:

  1. hardcore opposition from the right wing of the Republicans. The official line from these guys is that a bailout is inimical to capitalism; we need to let the irresponsible corporations and investors fail, and the responsible ones will prosper. Which would be fine - except that the more banks fail, the worse the situation gets for everyone else. What looked like good investments up until recently suddenly turn bad as asset values fall further and further, asset values are hiked and your debtors default. The idea that capitalism is some kind of atomistic system where my fortunes don't depend on external market conditions, or anyone else's actions, is pure unadulterated bullshit that anyone with a brain, even on the right wing, should be able to see through.
  2. hardcore opposition from the left wing of the Democrats. These guys don't want to bail out Big Corporate America, and that's a viewpoint it's very easy to have sympathy with. But again, the problem is that Big Corporate America takes a lot of people down with it - in the US and elsewhere - if it goes down. Again, it's all interlinked. Letting the big corporates collapse is the wrong remedy to corporate abuses - we need more effective (and more substantial) taxation and regulation of big capital, both here and in the US.
  3. the fact that there is an election in 5 weeks and many politicians were worried that their constituents wouldn't forgive them for supporting the bailout. Again, many people are worried about the bailout for the best of reasons, but see 2. above.
There may also be a more sinister factor at work for the Republicans - which is that the worse the economic crisis gets, the worse John McCain's poll ratings seem to get as well. Many Republicans may have decided that there is simply no way McCain can win in November - so it's time to adopt a 'scorched earth' strategy, f***ing up the economy as much as possible so that Obama has a complete 'mare when he gets in, his poll ratings collapse and that clears the way for an extremist right wing nutter to take over in 2012. Well, it worked for the GOP in the late 70s. Jimmy Carter was unable to sort out the tremendous mess that the Nixon and Ford administrations had made of the economy in time to avoid going down to Reagan in 1980.

And I think that unless Barack Obama gets his shit together on the small matter of a fundamental shift in US economic policy before taking office (if he does win), there is a real danger of his presidency running aground big-time on the economy. Four years is normally a fairly long time in the economic cycle, but if we are headed for a 1930s-style depression... maybe not.

That's assuming the pundits are right that we are headed back to the 1930s. I've had my doubts before, but the new crop of data coming out from the UK is so weak that it's getting hard to maintain any faith in the system's ability to right itself without taking a huge hit. For example, mortgage lending has collapsed by 95% in one month. And that was before Lehman/AIG! Jesus Christ, we are f***ed.

Remember the barter economy... start storing those valuable non-perishables now. And a stock of food to eat, if your bank goes under and you can't withdraw any money from the cashpoint. Yes, you've got £35,000 covered by the Deposits Scheme but how long will it take the govt to give that to you? Gotta play it safe at the moment.

We're OK for a few days... got a vegetable patch. Beetroot is gonna be on the menu... a lot.

28 September 2008

The US Presidential Race: debates, half-wits, and poll tracks

This is gonna be a long one, as I'm getting back to blogging out the US Presidential Election after several months out of the loop - I enjoyed the mammoth struggle between Obama and Clinton in the Democratic primaries, but once Obama won it, things got a bit boring for quite a while.

Then we had the whole Sarah Palin thing for the Republicans - a huge bounce, with McCain leading for a couple of weeks, then gradually slipping away as more and more Americans seemed to realise that whatever the glamour factor of having Palin on the ticket, she was a dangerous lunatic along the lines of Stillson from The Dead Zone (in many ways the archetypal Republican politician), most likely to lead the US into nuclear war with Russia (or whoever) at the first opportunity.

In 1996 I was standing in the British Rail (now National Express) ticket office at Walthamstow Central buying a ticket with a couple of mates, and a guy ran in and out the ticket hall at top speed. Five seconds later another guy weilding a bicycle chain ran in, stopped for two seconds to shout at us "who wants it?" then ran off again in pursuit of his poor victim. Politically speaking, Sarah Palin is the equivalent of that guy with the bicycle chain. Initially scary but then you realise she's a small time villain jumped up to the big stage. Although of course she is really no worse than Bush (Jnr) or Reagan, each of whom were, for my money, equally clueless... to say nothing of Dan Quayle.

I don't know how Palin will do in the V-P debate next week, or if it matters much given that her star seems to have fallen so fast. I don't know much about Joe Biden but if he can walk and answer his Blackberry at the same time he should be OK. Palin's performance on various chat shows recently seems to have been so lame that the Republican campaign managers are doing everything they can to keep her out of the spotlight lest she drop yet another clanger. Of course it could be the old Dubya Bush tactic of playing dumb and then progressing from no-brain to half a brain at just the right moment to exceed public expectations. (This apparently is what happened in the sequence of Bush-Kerry debates in '04: Bush was total shit in the first one, then marginally less shit in the others - giving the impression that he was on a roll. Clever stuff.) In any case, it will be interesting to see if Biden can find a killer line to equal Lloyd Bentsen's "Senator, you're no Jack Kennedy" against Quayle in '88.

But more interesting than this is the first Presidential debate, which took place on Friday - despite earlier assurances from John McCain that he would not show up. My impressions (and see for yourself on the BBC site) were:

Obama: competent without being amazing. Did fairly well on the economy although in the current situation it would have been almost impossible for him not to. I thought he was good on foreign policy - McCain seemed to think that the only way to assess a situation in Iraq/Afghanistan was to go there oneself, in which case presumably we can get rid of all military intelligence personnel and just parachute the President in whenever we need to find something out. Yeah, right. (Of course, there are good grounds for wanting to see with one's own eyes what's going on, given that the Bush administration lies all the time - but on foreign policy, McCain supports the Bush administration. In fact he's even more wedded to crazy militaristic adventures in foreign policy than Bush/Cheney were, if that's possible.)

It seems to me that Obama's more open and conciliatory demeanour will go down well with voters - he called McCain "John" a lot, said when he thought McCain was right about something, gave credit where credit was due. Some would say this is too "nice guy" an approach and he should have got down and dirty more but remember that the job to do here is to win over the swing voters. No point playing the tough guy to please your hardcore support - this is a good time to try to convince people who may not be wanting to vote at all 'cos they are so f***ed off with the whole thing (and there are tens of millions of people like that in the US). Obama did lay into McCain at strategic points, and it worked pretty well.

McCain: body language and general posture was pretty bad - he looks like he's been taking lessons from Andrew Green of Migration Watch. Certainly not the complete moron that some pro-Obama commentators have been claiming - but not brilliantly articulate, either. Very negative in most of the exchanges. Did a reasonably good job of criticising the Bush administration where he felt things needed to be done differently (e.g. the pork barrel - I've no idea if McCain really would get rid of substantial amounts of pork-barrelling - it seems unlikely given the corporate domination of US politics - but to the uninitiated voter it probably came across well.)

One thing is - McCain just looks really old. This may not matter - from footage of the Reagan-Mondale debates in '84 Reagan looks half dead and he still won - but I get the feeling the guy is a US Brezhnev and could drop dead at any minute. If that happens, of course, you guys get President Palin. The Democrats should be running scare stuff on this all the time.

The general media consensus was that it was close-run with Obama just shading it - and I'd go along with that. Anything less than a big win for McCain in the last two debates is disastrous for the Republicans as the economic crisis has come along at just the right time for the Democrats, who must be very relieved that real issues are under discussion now, rather than whether Sarah Palin is a pig with lipstick or not.

My feeling now is that barring some sort of major tragedy (another terrorist attack? Joe Biden revealed to be Barney the dinosaur in disguise? etc.) the Democrats have got this sown up. The excellent polling site FiveThirtyEight agrees with me, at least at the moment. Even so, I'll be a little nervous come election day in November (probably with a beer in my hand.) There's always a danger this could be like Labour in the UK in 1992, after all. (Someone should tell Barack Obama about the Sheffield rally). And I'll be more nervous afterwards if Obama gets in - what's he gonna do about the economy? Because he said very little on Friday to make me think he had any idea what to do about the onset of recession, let alone depression... are we looking at a Jimmy Carter Mark 2 here? I leave you with that thought.

27 September 2008

Brown: the unexpected (but fragile) fightback

Well, Gordon Brown, eh. Just when everyone's started to agree with the likes of Guido Fawkes that he's out for the count, he rebounds with what was generally reckoned to be the best speech of his career. OK, so I couldn't be bothered to actually watch it - I was a party conference-free zone this year, after 4 years of traipsing round the awful things in my previous job. And the people who said Brown was doing well are the very same people who were saying we were "over the worst of the credit crunch" 2 months ago - so take them with a salt shaker or three.

But Brown's line "it's no time for a novice" seems to have found some temporary resonance with the electorate. Guardian / ICM has Labour up to 32% - only 3 points shy of where they were in 2005. Now, of course, that ain't enough to win, or even to prevent losing. Labour had 32% at the 1987 election and the Tories still got a majority of 100. Also, parties usually get a post-conference bounce - so it is very likely that Labour will go right back down the week after next, once the polling numbers come through from Dave Cameron's speech (in previous years Dave's conference speeches have been minor miracles of cosy vacuity which the public, sensing the reincarnation of Tony Blair, has warmed to for some reason).

However, even if the recovery is transient, it does offer some slim hope for Labour. Firstly, Brown can make a good speech on occasion. Secondly, there are still swing voters out there who could return to Labour if the conditions were right. Thirdly, the economic crisis might help Labour, as it did the Tories in '92, if they think Labour has a better chance of handling it than the Tories. I'm not sure why they would think that, given that New Labour was absolutely complicit in getting us into the present mess, but hey - don't look a gift horse in the mouth. The 'no time for a novice' line seems to have some traction...

...But on its own I very much doubt it'll be enough. Brown has bought himself some time and none of the challengers for the premiership has decided to pounce. Miliband has tested the water and decided to play it safe, whilst Johnson has (sadly) ruled himself out. Any other names on the table are too duff to contemplate (Harriet Harman, ferchrissakes....)

So what can Brown do to build a revival? Well, the resignation of Ruth Kelly may have pointed the way forward. It's not clear whether the timing of Kelly's departure was her attempt to stick the knife in or whether it was precipitated by bungled leaking from Number 10 - but for the purposes of this post, that is irrelevant. What matters is that a leading Blairite left the cabinet and the impact was... extremely minimal. She has of course been briefing about the need not to "shift to the left" and all that crap... yes Ruth, let's stick with the failed centre-right policies of the last 11 years. Great idea, there.

But if one Blairite can depart without any negative consequences, why not kick out all the useless bastards? Not Miliband - for one thing it's far from clear that he actually is 'Blairite' and for another thing he's too dangerous to have outside the Cabinet. And not Johnson - again he's not really 'Blairite' or 'Brownite' - just very effective, and a good communicator. But useless idiots like John Hutton, Hazel Blears and James Purnell can safely be jettisoned at this point. They're just dead wood and are getting in the way.

Brown needs to build on the revival and assert his authority. The statesmanlike 'govt of all the talents' idea - relying on odious morons like Digby Jones and Andrew Adonis - just confused people and looked bureaucratic and unfocused. The further he strayed from core Labour values, the weaker the govt has looked - the 10p tax rate debacle, for example, was a disaster.

He should broaden his base on the left, not the right - John Cruddas, for example, would be a massive asset to the Cabinet. And given the collapse of the Thatcher/Reagan economic model that we've been in hock to since 1980, some serious consideration of alternative economic strategy by the Number 10 Policy Unit and the Treasury is absolutely vital. Given that the Tories have very little to offer on economic policy (that's why they've been so quiet in the current crisis), and that Nick Clegg seems to have shifted the LibDems to an extreme right tax-cutting agenda, there is more room to manoevure on the centre-left and left than there's been for some time. But Gordon Brown needs to seize the initiative and not sleepwalk from crisis to crisis as he's been doing for the last 12 months. Come on son. You know you can do it.

26 September 2008

Good news and bad news

Well there is some good news and some bad news.

On the good side it looks like the version of the plan drafted on Thursday does contain provisions for the Government taking equity in the assisted firms and for some additional oversight of the Treasury - see Paul Krugman again.

On the bad side, a lot of rank-and-file Republicans are saying they can't support it as it stands because it involves the Govt playing too large a role in the financial system. (Doh! I thought that was the whole point?)

I thought the bipartisan approach of the last few days was too good to be true - we almost never get it in the UK, and it looks like it's a rare thing in the US as well. What would be most amusing at this juncture would be if the plan failed due to Republican intransigence, and then the crisis really did escalate into a wave of banking failures on the eve of the US election. Given that the more the economy takes centre stage, the more Obama pulls ahead in the polls, if he can blame the Republicans for collapsing the plan, we could be looking at an Obama landslide.

Of course the consequences of a major US slump wouldn't be at all amusing... looking forward to mass unemployment anyone? Probably the BNP is rubbing its hands with glee but the rest of us will be in a bit of a pickle.

Of course, one explanation for the Republicans' intransigence is that they figure the McCain/Palin ticket is a lost cause and they have abandoned hope of winning the Presidential election, instead opting to be the wrecking crew. Trying to make economic conditions as difficult as hell for Obama in the next 4 years so that the electorate will blame him and they can come back with a landslide in 2012.

That is a real concern, actually: the US is gonna need some very tough medicine after the economic lunacy of the Bush years, and the question is whether people are still going to blame the Republicans even after Obama gets in (if he gets in), or direct their anger at the incumbent. The US could still be in a deep slump by 2012, and the prospects for a right wing demagogue - a Huckabee/Palin type, or even worse (Stillson from The Dead Zone) could look real strong. Or am I just being too pessimistic?

25 September 2008

An incredible gamble with the global financial system

Well, it looks like the US Congress is close to agreeing a $700bn bailout package for the banking system - provided the White House agrees. Given that Bush went on the TV yesterday to say that the US banking system would collapse unless there was a deal, it would look bizarre, to say the least, if he turned the package down. So it's probably going through.

Many politicians in Congress - both Democrat and Republican - were severely critical of the initial Paulson/Bernanke bailout plan, which proposed sweeping powers for the US Treasury to administer the $700bn fund. In particular, the Treasury wanted complete discretion to acquire assets as it saw fit, and very limited oversight - twice-yearly reports to Congress. Also, in the original plan there was no provision for the US Government to take an equity stake in firms that received bailout money - so unless the bailout fund can sell off its book of bad loans at a higher price than it pays the banks for them, the US taxpayer was facing very big losses under the original scheme. The problem is that the lower the price the bailout fund pays for the bad debts, the less effective the bailout is likely to be in boosting confidence. Paul Krugman's blog has a really good explanation of why the numbers don't add up on this original version of the bailout plan.

So what's the difference with the new plan? There are provisions to cap executive remuneration in firms which receive bailout money - which should make the plan more popular with the public - but as far as I can tell based on the limited information available so far, the revised plan doesn't include provisions to take equity stakes in the assisted firms. So far I have been unable to find out what is on offer in terms of additional oversight.

Really, given the rushed manner in which this has been done, how can anybody be sure (or even have a reasonable degree of belief) that this plan is going to work? Undoubtedly there was a strong case for drastic action, but it needs to be credible and effective action rather than something half-baked. This whole thing feels like it's being bounced through with Bush and the US Treasury holding a metaphorical gun to Congress's head - saying "pass this law or we'll blame you for the collapse of the global financial system".

Whilst I'm sure that if there is a deal in the next 24 hours or so it will be trumpeted with a big fanfare, and stock markets will rise for a day or two, as the hangover sets in we may well find that we aren't in a much better position than we were before the plan was hatched. Except that US taxpayers will be several hundred billion dollars worse off.

And what happens after that?

18 September 2008

We're goin' down.

I'm writing this at the end of a 72-hour period which has been the weirdest time I can remember in financial markets.

The merger of Lloyds TSB and HBOS to create a high street uber-bank, with the competition regulations bypassed. AIG bailed out by $85bn of US government funds. $100 bn pumped into the system by central banks to provide extra liquidity. And suggestions that the US government itself may have its credit rating downgraded due to the huge extra liabilities it has taken on.

The whole system seems to be on the verge of collapse, held up by a variety of sticking-plasters pasted on by the increasingly desperate policymakers. Unless confidence returns to the market in the next few days (and is there any particular reason it should do?) it looks to me like the US government will end up nationalising most of the American banks. Paul Krugman's blog has more detail on the US situation, including the remarkable statistic that the interest rate on 3-month Treasury bills has gone negative. Does that even make sense? Why would someone hold an asset with a negative rate of interest? Perhaps because there is a small risk that the US financial system might collapse? But then, wouldn't US Treasury Bills be worthless too? On the face of it, it doesn't make sense. But in any case it looks 'real bad'.

Big news on the Telegraph site (which I'm increasingly turning to as it seems to update more quickly than the BBC) - the FSA has banned short-selling of stocks by hedge funds and other investors. But that's a bit like insulating your house by closing the door while leaving all the windows open. Short selling is only one mechanism by which prices are driven down. Actual selling of stocks by the people who own them can do just the same thing - and presumably can't be outlawed without outlawing all transactions. Russia has indeed done this temporarily by suspending its stock market.

These are insane times. Grab food, clothing and a selection of items to barter; at this rate you're gonna need them.

14 September 2008

The credit crunch may have just gotten a whole lot crunchier

Breaking news: the Lehman Brothers investment bank has failed to find a buyer, and as things stand it will have to file for Chapter 11 bankruptcy protection in the US tomorrow morning. That is unless :

(a) a buyer is found (and it looks like all the obvious avenues have been exhausted on this front), or
(b) the US government steps in with a financial support package.

BBC Business Editor Robert Peston suggests in his blog that US Treasury Secretary Henry Paulson is reluctant to do another Freddie Mac/Fannie Mae and bail Lehman out. I'm not sure what source Peston bases that assertion on, but if the bank really does go under, the knock-on effect on other banks could be substantial. On the other hand, bailing the bank out sends a signal to other financial institutions that the US taxpayer will pick up the tab if they run into difficulties. It's a tough quandary but I think Paulson is probably bluffing and will step in with a rescue package at the eleventh hour. The danger of a bank the size of Lehman collapsing is simply too big for the authorities to contemplate.

Strangely, the Bush administration seems to be succeeding in moving the US economy towards a nationalised financial services sector - one of the key elements of a socialist economy. Actor-turned-nutter Jon Voight claimed earlier this year that Barack Obama would introduce socialism into America if elected. But the way things seem to be going in the banking sector, maybe America won't have to wait that long.

Update: well I was wrong and not for the first time - they let it fail. Hold on to yer hats folks - sounds like the gigantic insurer AIG could be next in line... and then...?