Friday, August 17, 2012

Letter From a Former Obama Supporter

Ah, I see we have a lot to talk about, especially on the matter of Israel. But, on politics, you have me about 180 degrees wrong. I despise Wall Street. The more I learn, and I had ample opportunity for that while working for the hedge fund, the more I consider most of Wall Street to be a criminal conspiracy. And, in fact, Romney took great advantage of that criminal conspiracy to buy private companies, cut some costs, put lipstick on the proverbial pigs, and have Wall Street help those companies put it back on the public market. I short-sold Burger King, which was something that Bain privatized and then took public again. I could not figure out how the company, after I short-sold, continued to report robust sales and profit growth, when I could see that McDonalds was kicking its ass up and down the block. I finally capitulated, admitting that I must have been wrong about it, perhaps by relying too much on anecdotal evidence. But, over time, the real truth, as opposed to the phony accounting-chicanery-truth, emerged. The stock tanked, another private equity firm took it over, and we will go through the same process enabled by Wall Street once again.

So, you definitely have me wrong on Wall Street and I can cite a dozen other examples of Wall Street criminality and, in fact, since I trade actively, can see it on levels in which you could would never imagine. No, in fact, one reason I dislike Obama is that he, too, has become a puppet of Wall Street. Not only did banks receive a bailout, but they received front-door, back-door and side-door bailouts as well. Most people have no clue as to the extent of the bailout. Even the ultra-low interest rate policy, at some point, serves no purpose other than to allow banks to borrow at 0% and put the money into Treasury bonds with implicit support from the Fed to keep Treasury yields from spiking, i.e., free money for banks. If I could start a bank tomorrow, take deposits at 0% and buy Treasuries, I would.

Yes, I understand that politicans are bought and sold by corporate interest these days, with Wall Street purchasing both parties, and oil and gas purchasing the Republicans. But, although I have a friend who makes fun of me for having given Obama money TWICE, I don't believe I was ever snookered by him. I don't believe in God or lesser gods on earth. I did not believe that Obama was the savior of the modern world. What I did believe was that, for whatever reason, he had won over the hearts of the American people (other than the racists), and had a political as well as psychological mandate to do great things. But, instead, Wall Street beckoned and the Republicans intimidated, and instead of demonstrating leadership, he started to plot and plan his re-election.

So, here is where I stand now on the US, and much is backed by my training and knowledge as an economist. I believe that the US has become a hopeless case. It started with Reagan, who, after teaching us to unlearn the lesson of Vietnam by calling it a "noble cause," proceeded to teach us (and we were so willing as a people to embrace) that making lots of money was noble, in fact, almost godly, no matter how you made the money, so long as you did not get caught and wind up in the slammer. So, the reigning principle was that anything that made money was good so long as you did not get caught.

Bush I, in restrospect, was relatively benign. Clinton gave us complete control by Wall Street, thanks to the likes of Rubin and Summers, who, of course, was embraced by Obama, too, along with that horrible Geithner. We also had to deal with the Great Emperor with no clothes, Greenspan, who, after suspecting a stock market bubble, decided that, in fact, the stock market was merely responding to his "wizardry," pre-Harry Potter, and that it was therefore all justified. And, then, after bubble was burst, decided to replace it with a real estate bubble.

And, while I am on the subject, the North Koreans got the bomb because of Clinton, not because of Bush. Clinton, who was concerned with appearance over substance, was easily con-able into signing agreements that the North Koreans had no intention of honoring, and then not wanting to the writing on the wall as it was being written.)

So, you take Reagan, who replaced logical thought with "feel good" thought, add Greenspan, the father of the bubble, and then you add Bush II, the worst president in history, and it leaves you really needing a transformative figure to reverse the horror show that had become the US. And, Obama found himself in the position to be that person, but was consumed with his re-election practically the day he took office. So, we have had another Clinton-like, Republican-lite presidency when, unlike Clinton, we could no longer afford to fiddle while the US burned.

The American people, as result, have not been transformed. Our economy still depends on an unsustainable way of life of overconsumption that we can no longer afford, while Bernanke tries to prop up stock prices so that we continue to overconsume. Our entitlement programs are out-of-control, and Obama's great contribution to that argument was to try to make a game-changing agreement with the Republicans in which he would maybe delay Medicare coverage until 70, while doing nothing to bring down health care costs and/or make private insurance more affordable, since he caved completely and immediately on single-payer. All I can say is that, thank God, the Republicans were so stupid that they refused a deal that would have savaged Obama's liberal constituency.

So, here I am. Iran is getting a bomb. Even if Romney does not feel warm and fuzzy over Israel, Republican politics, if nothing else, makes it more likely that he will attack Iran. And, yes, I am for the US attacking Iran, because I do not see Israel as being able to get the job done, and I see WW III if Israel does attack Iran.

At one point, I mused about a Great Compromise between Obama and Israel in which Israel agreed to stop all settlement building outside of East Jerusalem TOMORROW for a quid pro quo that Obama would take care of Iran. But, it is not happening.

Am I happy about settlement building? No, although I do not think that all settlements were created equal. I find the settlement building provocative and biting the American hand the helps feed Israel, even if I do not necessarily disagree with some of the settlement activity, especially in East Jerusalem, which I do not think that the Palestinians are entitled to as their capital. Having said that, I believe that is something that is up to the Israeli people, and not armchair American Jewish quarterbacks, since I and mine will not be dying to keep East Jerusalem. And, of course, the Palestinians were offered East Jerusalem under at least Ehud Barak, and seemingly Olmert.

If Israel has a hard-liner as PM now, it is because of the Palestinians themselves. Israel is a democracy that was responding to Palestinians intransigence. And, if the Palestinians ever learn to play nice, they will once again see a dovish Israeli PM. But, they have to spend some time in limbo on good behavior and find, somewhere among their heap, a real leader, as opposed to a real terrorist (Arafat) and a cowardly waffler (Abbas).

And, no, I don't trust Obama to "have Israel's back." He has proven himself to be most untrustworthy. Israel will change back to a more dovish government when Palestinians grow up a little. But, right now, the problem is not peace with the Palestinians, it is Iran with its henchmen Hezbollah and Hamas on two of Israel's borders. Just a dirty bomb in the hands of the those two is a very bad prospect for Israel and hardly mitigated by MAD [Mutual Assured Destruction] theory.

Yes, Obama fell way short of his potential. I don't think, though, it was because he was focused on reelection, though contributions he got from Wall Street certainly played a role, particularly in who he chose for his economic team. I think his formative life experience was being editor of Harvard Law Review and surprising everyone by making peace in a bitter conflict between left and right, so he thought, wrongly, that he could do the same in Washington. Other than that, his big mistake was in thinking of being President as being a matter of making deals with Congress, rather than getting voters on his side (or at least telling them what the hell was going on).

I know Larry Summers slightly, so I cut him a lot more slack than most people do. He may have been Rubin's protege on Wall Street, but he is first and foremost an academic economist. (Took some flak as President of Harvard, btw, for being outspokenly pro-Israel.) The latest I've heard is that it was Geithner who insisted that all the counterparties, if I'm using that word correctly, get 100%.

I think Reagan's biggest sins were (1) destroying the consensus that budgets should be more or less balanced in normal times, (2) legitimating the attitude that government can't do anything, is staffed by lazy incompetents, etc. It's still hens' teeth to find a politician who will say anything good about bureaucrats. (Though this is partly due to politicians' wanting to shift the blame for laws they passed.) 

Greenspan had two big contributions to our current problems, neither of which is monetary policy. One was his belief that market forces could regulate Wall Street (followed by his "oops" moment). The other was his saying that the Bush tax cuts were perfectly OK, in fact a good thing, lest the economy run out of government debt.

You may be right about Clinton and North Korea, but as I recall, Bush and his neo-cons decided to show how tough they were by refusing to deal with North Korea anymore, and we saw how well that worked out. Quite possibly there was no way to stop North Korea. That doesn't stop people from second-guessing and saying, "If I'd been in charge...." Talk is cheap.

Our entitlement programs are out of control for one reason, that health care costs are out of control. Obamacare actually does some good on that, though not enough. Republicans have transformed the health-care problem into an "entitlement problem". Actually, of course, the 60% or so of costs that go through the private sector have the same effect on people's disposable income as the part in the public sector, even though one is called "consumption" and the other "government spending". By calling it an "entitlement problem", Republicans can imply without saying that the problem is really Food Stamps and minorities. They can also offer a plan to deal with it that does nothing about health care costs and cuts the budget by shifting Medicare costs above a cutoff back onto recipients, then attack Obama for making "cuts" to Medicare.

I have no objection in principle to attacking Iran. I just doubt that at this point the likely consequences-- Hezbollah attacks on Israel, terrorist attacks on Americans worldwide, increased world support for Iran, increased Iranian support for the regime, closure of the Persian Gulf-- are worth it just to kick the can down the road two or three years. What then? If Iran wanted Hezbollah to have a dirty bomb, they could give it to them now. Is that less or more likely to happen after the US attacks them?

You don't have to tell me that the Palestinians shape Israeli politics. I was there in the late nineties, when the Israeli public believed that peace was coming, and then the second intifada cut off the Israeli left at the knees. The trouble with Arafat wasn't that he was terrorist, as if that's some kind of unchanging characteristic like eye color. The problem was his cowardice and completely self-seeking behavior: "I must follow the people, for I am their leader." I often say that the reason the Jews have a state and the Palestinians don't is that the Jews had Ben-Gurion and the Palestinians had Arafat.

At the time of the second intifada, I thought that the appropriate response would be to draw a line down the middle of the West Bank, annex everything west of the line, and say the Palestinians could have it back when they made peace. The problem is, that's not what the settlers (and no, they're not all alike, I mean the movement) want-- they want the Arabs out, and intend to push them out through harassment, intimidation, and if necessary murder. By supporting the expansion of settlements, the Israeli government is saying that it has no intention of leaving the West Bank. So, if you're a Palestinian, why negotiate? What's to negotiate about?

Again, Israeli politics responds to what the Palestinians do, and Palestinians have been dumb and self-destructive. But the influence runs both ways. Actually, Israelis influence Palestinian politics as much as vice versa. For all of Netanyahu's bleating about not having a partner for peace, it's not obvious that the Palestinians do either. And it's certainly not obvious that subjecting them to more years of petty humiliations is going to make them more inclined toward peace. In any case, expanding the settlements makes no sense regardless of what the Palestinians do. 

I'm not sure why you say that Obama is "most untrustworthy"... are you talking about the Middle East or Wall Street? If the former, I can't think a single thing he has done or said that hasn't been US policy for decades. I myself would have talked a lot tougher to Netanyahu (and the Palestinians) than he has. But anyone who tells both sides the truth will be cast into the darkness by the AIPAC crowd. In any case, what US politician does have Israel's back, and what does that mean anyway?

I certainly can't see how Romney is more trustworthy in any way than Obama. He seems completely devoid of political beliefs, and has hardly uttered a true sentence since the campaign began, starting with his first campaign ad. You seem to be saying that you're just going to worry about Israel because things couldn't get any worse in the US. But that's an overly optimistic view-- things can easily get worse. A US where any attempt to rein in Wall Street is completely abandoned, where any attempt to either control health costs or cover everyone is completely abandoned and every health insurance company is based in South Dakota, where there are six right-wing judges on the Supreme Court, where the top 0.1% scoop up an even larger share of GDP, and where the intolerant and anti-scientific rule the roost-- that would be lot worse.

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