November 15, 2004

Monday Musings

The War Within
If you have been watching the battle progress lately you may be wondering which side to root for. Over the past couple of months it’s gotten pretty bloody and it’s getting harder and harder to ignore.

Oh, I’m not talking about Iraq. I’m referring to the war between the Bush administration and it’s own CIA.

The battle took a new turn last night when former top CIA official, Michael Scheuer, went on 60 Minutes and went public. Scheuer headed the CIA’s special bin Laden branch and was authorized early this year to release a book that trashed the US war on terrorism. The book was credited then only to an author identified as “Anonymous.” Last week he resigned the CIA, he said, so he could go public with his concerns about how this administration has botched the war on terrorism and the hunt for bin Laden. (Translation: Scheuer left his “official” CIA position so he could defend the CIA in public.)

Scheuer’s appearance coincided with other high-level (headline catching) CIA resignations. Deputy Director John E. McLaughlin, who had been acting director, announced his retirement Friday, saying it was a "purely personal decision." The Washington Post reported that Deputy Director of Operations Steven R. Kappes also submitted his resignation, but withdrew it for reconsideration over the weekend. Career CIA insiders are carefully orchestrating this whole thing, and if you believe otherwise, I have this bridge..

So, don’t look for any heroes on either side. This is not a war between one group with all the right solutions and another group with wrong solutions. This is a war between two political entities trying to shift blame for monumental failures to the other. Like Dr. Jekyll blaming Mr. Hyde.

Bush escalated the war when they invaded enemy territory by appointing former Republican Congressman, Peter Goss to replace former CIA director George Tenet. Before being canned Tenant had already begun shooting back at White House after the Bushites tried to pin the whole WMD fiasco on the CIA. Goss’s first job at the CIA would not be to reform the agency, but to put a cork in it. CIA veterans believed reform was needed, but at the White House, not the CIA -- which is why his CIA superiors approved the release of Scheuer’s book just weeks before the election. It was that kind of thing Goss was suppose to stop. A politically disloyal CIA was a politically dangerous CIA.

So, which side should we root for? Neither. Congress and the White House should get 100% behind the 9/11 Commission recommendations and implement them ASAP. Everything else is a sideshow designed largely to derail the Commission’s most important reforms. Hell hath no furry like a bureaucracy threatened.

The Ekkkonomy
I got some email from readers of Friday’s column, Slip, Slipping Away, saying they thought I was overstating the decrepit condition of the US economy. I pointed out to one of those readers that economic change seldom arrives as a clap of lightening, but rather sneaks up. Consumers are always the last to notice -- like the proverbial frog that just sits in a pot of water as he is boiled to death as the temperature is raised so slowly he does not notice it.
Clinton Treasury Secretary, Bob Rubin, understood that the bond market controls the economic heat. Watch the bond markets if you want to know if it’s time to get out of the water. I’ve been watching and I’m getting out. Here’s why.

Thanks to Bush’s “cut-taxes-borrow and spend” policies the US has become the biggest debtor nation in history of money. Everything we need to pay for -- from soldier’s wages, to bombs and tanks, to medical care, to repairing our own infrastructure, is now being paid for largely by borrowing from other countries.. primarily China and Japan. Those two countries alone hold over $1.3 trillion of US bonds.

That debt puts downward pressure on the dollar, which is why the dollar is now in freefall on world markets. Now, here’s where things get hairy. As the dollar falls in value bondholders begin to loose money. Needless to say, losing money was not part of their investment strategy. Sooner or later China and Japan’s bankers will decide that US dollars are no longer a good investment and will stop buying US bonds. During the September 9, 2004 sale of U.S. Treasury bonds Japan and China were no shows – the first time that anyone could remember that happening.

"Thoughts of panic flickered out there," Sadakichi Robbins, head of global fixed-income trading at Bank Julius Baer,” told the LA Times, adding that if it happened again it could precipitate what Robbins called "the doomsday scenario" — Japan and China not only refusing to buy U.S. bonds, but dumping their $1.3 trillion in US Bonds.

Foreign investors have no interest in precipitating a panic because they would lose too. So, you will not hear them sounding the alarm bells. Instead what we see are foreign investors whistling a nonchalant tune as they edge slowly, but steadily, towards the door.
In August, the most recent period for which there's data, foreign private investors sold $2 billion more in U.S. stocks than they bought and, more troubling, dumped $4 billion more in government bonds than they purchased.

"A run for the exits could happen any day, that's for sure," said C. Fred Bergsten, author of "Dollar Overvaluation and the World Economy" and director of the Institute for International Economics, a Washington think tank.

I have spent a quarter century covering business and, if I learned anything I learned this; there are immutable rules that apply to economics the same way there rules of physics apply to nature. Gravity… what a bitch. Wouldn’t it be so much easier to just step out a tenth floor window than walk down the steps? Right. Go ahead. Be my guest. And, it’s so much easier to just borrow money than earn it by cutting spending and/or raising revenue (taxes.)
Bottom line: Two different scenarios. Same result.

Bang! Bang! Primaries Being in Palestine
You think our elections are rough! Try running for office in Palestine. With their ugly thug former leader dead, the Palestinians need a new one. American authorities believe the candidate with the best chance of winning is Mahmoud Abbas. But before he can do that he has to survive what passes for the primaries in that part of the world. Voting in those primaries began yesterday. Electronic voting machines having not yet arrived in Palestine. Voters continue using their traditional ballot-casting AK47s.

Abbas was paying respects at Arafat’s grave when a group of masked voters arrived and began casting votes. Abbas did not “get” any of those votes, but two of his security guards did. Six other people were wounded.

Once again the rest of the world is going to be asked to choose between terrorist-rabble on the Palestinian side and a fat neo-fascist land-grabber on the Israeli side.

Bottom line: Nothing short of a Cyprus-like, Bosnia-like armed-enforced partition of these two countries will ever –EVER – put a stop to this nonsense.

Big Tent Party Get Ugly
When GOP leaders are pressed on issues like a woman’s right to choose, they always fall back on the same piece of worn out party propaganda. “We are a big tent party,” they say with that sugary evangelical half-smile we have all come too familiar with. “Unlike the Democrats we have room in our party for people who do not agree on all issues.”

What they don’t tell you about is the second part of the GOP Big Tent Rule: “Don’t ask, don’t tell.”

When a reporter asked newly re-elected GOP Senator, Arlen Specter, if, as chairman of the Senate Judiciary Committee, he would approve an anti-choice Supreme Court nominee, Spector told… well sort of. He indicated that he did not expect that to happen.

It was hardly a resounding promise and more a dodge. Nevertheless it was not the resounding YES the GOP’s powerful religious right demands. So, Specter’s elevation to the chairmanship of Judiciary is now up in the air.

Bottom Line: The GOP Big Tent is crapola.

Praise The Lord. It’s the Law.
The Washington Post reported Friday that Christian evangelicals, who provided much of the passion and manpower for President Bush's re-election, are now lining up for their payday. And, like religious fundamentalists of any stripe, they are in no mood for namby-pamby compromises. Some evangelical leaders have even overtly warned the GOP will pay a price in future elections if its leaders do not take up the issues that brought evangelicals to the polls.

"Business as usual isn't going to cut it, where the GOP rides to victory by espousing traditional family values and then turns around and rewards the liberals in its ranks," said Robert Knight, who heads an affiliate of Concerned Women for America, a Christian-conservative advocacy group. "If the GOP wants to expand and govern effectively, it can't play both sides of the fence anymore. It needs a coherent message, which came through loud and clear in the election."

Bottom Line: Those of you out there with those little Darwin fish emblems on your cars might want to pry them off. Things are gonna get a little weird for the next couple of years.