Prognostications and Expostulations

We’re going out on a limb with this one or given thats its winter we’ll say we’re walking on thin ice. We’ll gaze into the crystal ball and pontificate on eleven subject areas for 2010. With some we hope we will be wrong. With some we hope we will be right.

1. Stock Market: Buoyed by well managed earnings by the large multinational companies in the DOW, principally as a result of cost reduction initiatives and exposure to global markets the Index will finish up 6% and close at 11, 011 on the last trading day of 2010. Given an inflation rate of 4% investors will realize a 2% gain on equity investments in DOW constituents. S&P 500 and NASDAQ will be flat gaining 2% for the year.

2. Iraq War: The war in Iraq will continue to wind down. America will scale down its military presence in the country. Troop levels in the country will approximate 85,000 by the close of 2010. Though direct American military involvement in conflicts will decline, Iraq will experience civil unrest as Kurd nationalists, Shiite and Sunni Muslims seek to protect their political and economic interests.

3. Afghanistan War: The escalation of America’s military presence in Afghanistan will move the theater of war further into Pakistan. The Taliban will be satisfied to harass US forces by engaging in a guerrilla war. Taliban and Al-Qaeda supporters will use the opportunity to increase the level of urban terrorist attacks in the large cities of Pakistan. Al-Qaeda confederates will seek to reestablish base of support in Somalia, Yemen and ties will begin to emerge in Latin American narco-terror states.

4. Iran: The political situation in Iran will continue to deteriorate. This is a positive development for regional stability because it will force the ruling regime to cede its nuclear program development initiatives. Iran will not be able to capitalize on the US draw down in Iraq. It will become increasingly isolated as Hezbollah and Hamas pursue actions that are less confrontational to Israel in Palestine and Lebanon. The ruling Caliphate position will weaken due to internal political dissent and external economic pressures.

5. China: It will be a year of ultra-nationalism in China. Its stimulus program that is targeted to internal development will sustain a GDP growth rate of 8%. China will use this opportunity to strengthen the ideological support of its citizens to fall in line with the national development initiative. Globally China will continue to expand its interests in Africa and will cull deeper relationships with its Pacific Rim club member Latin America. China will continue to use US preoccupation with its wars in Afghanistan, Iraq and skirmishes in Yemen and Somalia as an opportunity to expand its global presence with a message of peace and cooperation.

5. US Mid Term Elections: Republicans will gain a number of seats in Congress. The continued soft economic conditions, state and local government fiscal crisis, war weariness and cut back in services and rising expenses will make this a bad year for incumbents and the party in power, namely the democrats. Sarah Palin will play a large role in supporting anti-government candidates drooling over the prospect of winning a seat in government.

6. Recession: Though the recession may be officially over, high unemployment, home foreclosures and spiking interest rates will hamper a robust recovery. The end of large government stimulus programs and the continued decrease in real estate values also present strong headwinds to recovery. We predict a GDP growth rate of 2% for the US economy. Outsourcing will abate and a move to reintroduce SME manufacturing will commence.

7. Technology: The new green technology will focus on the development of nuclear power plants.  The clash of the titan’s between Google’s Droid and Apple’s I Phone will dominate tech news during the year.  Lesser skirmishes  between Smart Phones makers or the war of the clones will continue to explode altering the home PC market and continue to change the market paradigm for old line firms like DELL, Microsoft and HP.   SaaS or cloud computing will gain on the back of lean business process initiatives and smart phone application development and processing infrastructure will encourage cottage industries fueling the cloud and making for some new millionaires. The tension between the creators of content and search and delivery will begin to tilt back toward the content providers. Litigation involving social networking sites will be filed to create safeguards against its use as a tool to control and manipulate behaviors thus threatening civil liberties and privacy rights.

8. Culture: The Googlization of civilization will allow individuals to embrace more corporatism as a pillar to add efficiency and order to their lives. Multiculturalism will continue to grow in the US. However a growing political backlash against it will become more of a prominent theme as Teabaggers agitate for a return to the true values of America. Electronic arts will make major leaps and bounds as commodification continues to be a driving force in the world of art. Printed words like books and newspapers will continue to dramatically decline. Writing, drawing and playing musical instruments skills will ebb as people prefer to develop digital skill sets. Texting and Tweeting make for poor practice for extended compositions.

9. Latin America: Instability will grow in Latin America as narcodollars continue to undermine political stability in Columbia, Venezuela, Mexico and Panama. The US will increasingly become involved in the conflicts between petro and narcodollars. Mexico’s stability will be increasingly undermined by the power and corruptible influence of the drug trade. China’s influence on the continent will grow.

10. European Union: The EU will continue to manage itself for stability. It will yearn to return to its aristocratic roots and will become increasingly conservative. It will continue to have a complex relationship with the expanding Muslim community. A call to deeper nationalism will arise out of a growing influence of Islam and the inefficiencies of EC bureaucrats in Belgium. The EU will continue its union of expediency to counterbalance their distrust of Russia and their distaste for America.

11. Environmental Justice: Though awareness continues to grow concerning the need to mount and implement large scale solutions to halt the problem of global climate change; the political will and resources required to drastically alter the planets current trajectory in growth of carbon emissions from the burning of fossil fuels remains unaltered. Social responsible enterprises, small businesses and individuals continue to make a difference. Eco friendly small businesses, urban farming, capital formation initiatives around renewable energy businesses are hopeful signs of a market response to the pressing problem. China is investing heavily in becoming a market leader out of business savvy and environmental necessity. Until the great powers of the world can come to some collective agreement on how to limit , cap or trade carbon credits we’ll have to be content to separate the trash and recycle, reuse and reduce.

You Tube Music Video: Donald Byrd, Stepping Into Tomorrow

Risk: unfulfilled predictions will make me look bad

Bring the Warriors Home

Heart of my heart, is it meet or wise
To warn a King of his enemies?
We know what Heaven or Hell may bring,
But no man knoweth the mind of the King.
Of the gray-coat coming who can say?
When the night is gathering all is gray.
Two things greater than all things are,
The first is Love, and the second War.
And since we know not how War may prove,
Heart of my heart, let us talk of Love!”

The Ballad of the King’s Jest

Rudyard Kipling

The irony of President Obama’s selection as the Nobel Peace Prize winner for 2009 was not lost on the recipient. In one of the receptions held to honor him, Mr. Obama spoke about Alfred Nobel’s invention of dynamite and its use as a weapon of war as the source of wealth that funds the prestigious peace prize.   Earlier in the day during his acceptance speech, Mr. Obama spoke eloquently on the motives for his decision to continue the prosecution and escalation of the Afghan war.  As a war time President, Mr. Obama sees war as a tool to bend the will of history toward justice and good.  He believes the greatest global good will be served by the pursuit of the Afghan conflict.  I respectfully disagree.

The greater irony in Mr. Obama’s acceptance speech for a peace prize is that it was essentially a discourse of war apologetics.    Mr. Obama delivered a speech void of any contrition and never once equivocated as he outlined his commitment and reasoning why a nation should engage in war.  To be fair to Mr. Obama, his decision to escalate the war in Afghanistan is not a surprise. Throughout his Presidential election campaign, Mr. Obama was explicitly clear that he intended to pursue Osama bin Laden and his band of murderous terrorists to the Gates of Hell.  Even if those gates led to a protected compound in downtown Karachi,  Mr.  Obama’s resolve to check mate al-Qaeda remains steadfast.

The problem with the continued prosecution of the Afghan War is that our enemies are not a nation state nor do they occupy a single geography.  Al-Qaeda and their confederates are stationed throughout the globe.  They exist in underground sleeper cells waiting to be summoned by unconscionable puppet masters.  They are guided by an ideology of hate neatly disguised and wrapped in a hajab of religious orthodoxy. They use asymmetric strategies and tactics to wage war on citizens and soldiers alike.  A conventional army garrisoned in a provincial  hamlet is ill suited to fight an enemy that knows no bounds in territories and tactics and is prepared to conduct a military operation that spans multiple generations.

The Taliban and al-Qaeda’s access and control of Afghanistan’s lucrative opium trade forms the socio-economic base that allows them to leverage considerable political power to pursue their terrorist agenda.  The opium trade is weaved into a complex tribal culture whose power and prominence supersedes a weak and corrupt central government that derives its right to govern by the tepid consent of friendly tribal leaders and the military might of foreign armies.    Afghanistan like other narco dependent states will remain politically unstable and continue as a terroristic threat to the United States until the opium trade is supplanted as the countries principal source of economic and political power.

Afghanistan is not the world’s sole narco-terrorist state.  A number exist in the Western Hemisphere and one need look no further then across the Rio Grande to witness the growing power of a narco-dollar financed state subversion.  Mexico’s difficulties serve as a reminder that the risks to the stability of our republic lie much closer to home and is in fact in full residence within our borders.  Engaging a war in Afghanistan is a clear and present distraction from addressing the pressing issues that undermine our national security.

True al-Qaeda’s acquisition of a nuclear weapon conjures up many unimaginable and terrifying scenarios.  Unfriendly regimes that are hostile to the United States like North Korea and Iran control nuclear capabilities.  But we have  no armies attacking them.  Perhaps the solution is to remove nuclear weapons and uranium devises beyond the reach of the Taliban, al-Qaeda and other avowed enemies of our republic.  If this is the major threat, its mitigation can be achieved without the prolonged deployment of 130,000 troops.   It can be accomplished by having an international force guard and quarantine Pakistan’s nuclear arsenal.  Certainly the Bush Doctrine allows for this type of intervention.  Some will object to this course of action on the grounds that we must respect Pakistan’s sovereignty.  But Mr. Obama’s escalation of the Afghan War will require unilateral incursions into Pakistan.  This action to eliminate the ultimate horror of nuclear weapons falling into the hands of terrorists is the surest way to mitigate this pressing threat.

The multifaceted omnipresent dangers to the United States transcend nuclear terrorism. Economic degradation is compounding social problems and creating deep political fissures within the country.  Our countries fractured culture is being exploited by powerful self serving interests.  A cabal of corporate elites equate national security with their economic well being.  They employ armies of lobbyists  and ply multi-channel media platforms to stoke fear and division to advance their narrow interests.  Usually at the expense of supporting initiatives that address the complex threats that weigh on the security of the country.  These special interests attack programs that stabilize social safety nets.  They finance expensive media campaigns condemning aid for local government fiscal stability, universal health care, meaningful environmental policy, expanded funding for public education, infrastructure improvements, support for trade unions, job creation programs and social assistance programs.  The well being of our people is the basis of our national prosperity.  The sources of social instability remain strong and continue to grow.  The recession,  a jobless rate of 10%, 4 million foreclosed homes, 30 million citizens unable to have access to affordable health care, failing school systems, bulging prison systems and environmental degradation represent a greater threat to national security then 100 al-Qaeda fighters holed up in an ice cave in the Tora Bora tribal regions.

No doubt  the United States was attacked by terrorists enjoying protection of a friendly regime in Afghanistan.  On 9/11 I witnessed first hand the horror of fellow countrymen jumping to their deaths from the upper floors of the World Trade Center.  Moments later as I stood in front of Trinity Church I escaped the pyroclastic cloud of the falling South Tower through a revolving door on Wall Street.   I understand the irrational hatred terrorists harbor in their hearts and the devastating consequences of their insane acts.  They are a cancer that must be eradicated.

Mr. Obama, has stated that the Afghan insurgency enjoys no popular support.   Afghanistan has a long memory and a longer history of a people subjected to the designs of imperial powers and foreign invaders since the time of Genghis Khan. The resistance to foreign occupation by the Afghani’s is legendary.  From the massacre of Elphinstone’s Army trying to escape blood thirsty tribes through the Khyber Pass, to the Soviets disgraceful retreat from the hail of Stinger Missiles supplied by the United States; it now  may be our time for a  ride in this horrible wheel barrel.

Afghanistan is a region of the globe where the great powers and trends of history clash.  It is a vortex of a turbulent maelstrom that brings the powers of China, Russia, India and Islam into a volatile mix.  The forces of national interests and modernity is held at bay by tribesmen toting WWII rifles, expedient tribal allegiances and ancient codes of honor.  Why doesn’t China and India have a more prominent role in ending this conflict?   It is in their geopolitical interest.  Better let the United States  send its nations finest young people to chase phantoms and fight in the endless canyons of the Hindu Kush; while Chindia builds their economies at home and forge new alliances abroad.  Perhaps they hope that this war could be the Pax Americana’s Waterloo?

Mr. Obama quoted from Dr. Martin Luther Kings Nobel acceptance speech, stating, “Violence never brings permanent peace. It solves no social problem: it merely creates new and more complicated ones.”  This above all else may prove to be the most prophetic and ironic truth to Mr. Obama’s war.

The United States cannot afford this war. It is a distraction. It weakens us.  National security is more then a well provisioned and gallant army. A nations strength and its ultimate security is based on an enlightened, well fed, healthy and industrious people.

Mr. Obama acknowledged his indebtedness to those that went before him.  He stated that, Mahatma Gandhi, George Marshall, Albert Schweitzer,  Martin Luther King Jr. and Nelson Mandela are worthy figures that we should emulate.  Their greatness showed us that a better path must be chosen if we are to progress as a people.  Their choices and examples of leadership were not based on expediency and some came at  terrible cost.  The pathway of war is worn and old.  The world is much too weary from the familiar journey.  Its time to choose a better path.  End the war now Mr. Obama.  Bring the troops home.

You Tube Music Video: Mormon Tabernacle Choir, Battle Hymn of the Republic

Risk: war, peace

The Cost of Banking Goes Up

The severity of the banking crisis is evident in the 95 banks the FDIC has closed during 2009. The inordinate amount of bank failures has placed a significant strain on the FDIC insurance fund. The FDIC insurance fund protects bank customers from losing their deposits when the FDIC closes an insolvent bank.

The depletion of the FDIC Insurance fund is accelerating at an alarming rate. At the close of the first quarter, the FDIC bank rescue fund had a balance of $13 billion. Since that time three major bank failures, BankUnited Financial Corp, Colonial BancGroup and Guaranty Financial Group depleted the fund by almost $11 billion. In addition to these three large failures over 50 banks have been closed during the past six months. Total assets in the fund are at its lowest level since the close of the S&L Crisis in 1992. Bank analysts research suggests that FDIC may require $100 billion from the insurance fund to cover the expense of an additional 150 to 200 bank failures they estimate will occur through 2013. This will require massive capital infusions into the FDIC insurance fund. The FDIC’s goal of maintaining confidence in functioning credit markets and a sound banking system may yet face its sternest test.

FDIC Chairwoman Sheila Bair is considering a number of options to recapitalize the fund. The US Treasury has a $100 billion line of credit available to the fund. Ms. Bair is also considering a special assessment on bank capital and may ask banks to prepay FDIC premiums through 2012. The prepay option would raise about $45 billion. The FDIC is also exploring capital infusions from foreign banking institutions, Sovereign Wealth Funds and traditional private equity channels.

Requiring banks to prepay its FDIC insurance premiums will drain economic capital from the industry. The removal of $45 billion dollars may not seem like a large amount but it is a considerable amount of capital that banks will need to withdraw from the credit markets with the prepay option. Think of the impact a targeted lending program of $45 billion to SME’s could achieve to incubate and restore economic growth. Sum2 advocates the establishment of an SME Development Bank to encourage capital formation for SMEs to achieve economic growth.

Adding stress to the industry, banks remain obligated to repay TARP funds they received when the program was enacted last year. To date only a fraction of TARP funds have been repaid. Banks also remain under enormous pressure to curtail overdraft, late payment fees and reduce usurious credit card interest rates. All these factors will place added pressures on banks financial performance. Though historic low interest rates and cost of capital will help to buttress bank profitability, high write offs for bad debt, lower fee income and decreased loan origination will test the patience of bank shareholders. Management will surely respond with a new pallet of transaction and penalty fees to maintain a positive P&L statement. Its like a double taxation for citizens. Consumers saddled with additional tax liabilities to maintain a solvent banking system will also face higher fees  charged y their banks so they can repay the loans extended by the US Treasury to assure a well functioning financial system for the benefit of the republic’s citizenry.

You Tube Music Video: The 5th Dimension, Up Up and Away

Risk: bank failures, regulatory, profitability, political, recession, economic recovery, SME

Managing Pandemic Risk

The Swine Flu outbreak carries with it the potential to severely damage the financial health of small and mid-size enterprises (SMEs). Left unmanaged pandemics can impair profits, generate losses, undermine the contribution of key employees, disrupt supply chains, halt operations and undermine an enterprises financial health that can ultimately lead to bankruptcy.

Though many consider pandemics as a force majeure risk event that lies beyond control, businesses can take steps to mitigate and manage the drastic challenges a pandemic can pose to a business. This is particularly important for businesses that find themselves in a weakened position due to the recession. Businesses that have become highly stressed due to the current business cycle are at acute risk of becoming insolvent due to the shock of this potentially catastrophic risk event. Business managers, bankers, shareholders and businesses with extended supply chains need to take steps to manage and mitigate the severe  effects of pandemic risk.

The first step is to create or update a business continuity plan. Business continuity plans need to address a range of issues that includes planning for disasters in general and planning for the unique challenges an influenza pandemic presents and integrate mitigation initiatives into critical business processes.

All businesses are unique. Addressing a pandemic risk event in your business plan will require you to conduct a risk-management assessment on all aspects of your operations, business processes and market impact to ensure continued operation and financial health of the enterprise.

Some things management must consider in its review are:

• Assess how you work with employees, customers, contractors to minimize contagion threats
• Determine mission critical business functions your business requires to maintain operations
• Stress test your business operations to determine how to function with high absentee rates
• Review inventories in case foreign or domestic suppliers and transport services are interrupted
• Review supply chain links, determine at risk suppliers and identify backups
• Reorganize work spaces to minimize the spread of the disease
• Equip employees to support telecommuting
• Develop communication strategies to update employees, customers and the media
• Use this opportunity to expand e-commerce capabilities
• Promote awareness of the problems associated with pandemic flu
• Alert employees about what steps you’re taking and what they can do to limit the pandemic’s impact
• Review sick-leave and pay policies to ensure they don’t discourage workers from staying home when they’re ill
• Make backup plans if you need to pull people out of countries where the epidemic strikes
• Develop a travel policy that restricts travel to areas where the virus is active
• Stock up on masks and sanitizers, and consider staggering work hours to limit the size of gatherings

Sum2 publishes the Profit|Optimizer product series.  The Profit|Optimizer is the leading SME risk management platform that helps business managers and business stakeholders quickly assess enterprise risk factors and take considered action to mitigate and manage those risk factors. Sum2 will be releasing a pandemic risk assessment module by the close of this week.  The product will retail for $95.00 and will assist SME’s to assess, mitigate and manage the threats posed to their business by pandemics and other social disasters.

More information can be found on our website www.sum2.com.

Sum2 helps businesses assess risk and realize opportunities.

The Upside To A Recession

Like everything in life there are two sides to every coin. If the recession is hampering your ability to put some new coin into your piggy bank or if it drives you to break it open to help make ends meet, there may be some unintended positive consequences of this period of economic duress. Yesterday during a hike in the hills of beautiful Harriman State Park, a member of our troop spoke of a recent article she read in the New Your Times. The article was about how some people are responding to the loss of their jobs by taking up a physical fitness regimen. People who are now blessed with the gift of unoccupied time, excess energy and the need to quell anxiety are burning off the exigencies of fear with a vigorous workout. Some people are using the opportunity of being unemployed as a way to get back into shape. A good thing and an unexpected and unintended consequence of the recession. We began to think about some of the other positive unintended consequences born from the recession and we came up with the following items. Its good to accentuate the positive.

Lower Gas Prices: We see it and celebrate it at the pump every time we pull in to fill up. The economic downturn has quelled the worldwide demand for energy and oil. It is reflected in the lower prices we pay. The price of gas in Jersey has dropped by over 50% since the summer.

Healthy Environment: The demand for oil is falling because factories are operating at diminished capacities. Unoccupied office space needs less light and heat. People are turning down their thermostats to save money. Businesses are delivering less goods while people are commuting less to work and business travel is way down. The diminished use of fossil fuels is lessening the amount of carbon based emissions being released into the atmosphere. This gives Mother Earth a brief respite from our all out assault on her delicate ecological sensibilities. There is also a lot less noise pollution in my surburban neighborhood. The constant drone of speeding cars and the decelerating roar of jet engines initiating a landing has lessened greatly. Silence is golden.

More Time with Family: Spending less time at work provides more time to be with family. The kids need help with homework. Your spouse needs to know they are loved. Kids love to see you at their JV basketball game or watching them practice Tae Kwon Do at the local dojo. Little ones will forever remember the bed time stories you read to them. Goodnight Moon and the Run Away Bunny are bed time classics that will make you smile for the rest of your life. More time at home also allows you to turn off the Nanny Cam and stop being a virtual parent. You can now become one in the flesh. A virtual presence is good. Being physically, emotionally and mentally available for your family is better.

Eating More Healthy Foods: The recession may require us to trim down the food budget. One way to do this is by replacing all the processed foods we have become accustomed to buying and consuming because we didn’t have the time to cook meals using wholesome fresh foods. Now that we are blessed with more time and incented to save money we can replace the box of mac and cheese with the protein rich rice and beans. We can replace the frozen fish sticks with a fillet of fresh broiled fish accented with a sprig of rosemary. Yum Yum!

Reading More Books: Last week I needed to visit the main branch of the NY Public Library. I was pleasantly surprised to find a large line queuing at the entrance waiting for it to open. People can take the opportunity to fill their free time to read more books. Libraries are free and provide a rich offering of mind enriching services. Some will go back to school to get a degree, learn a new trade or acquire a new skill. Reading books also provide a wonderfully constructive escape from the harsh realities of a recession.

Quality of Life: It may seem counter intuitive but the recession can help you to upgrade your quality of life. Eliminating the expense of all those extra cable channels will dampen the temptation of watching “All in the Family” reruns or “The Titanic” for the sixth time. The changing economic realities of our lives will certainly create the possibilities for looking at new opportunities and explore the benefits of a simpler more active life. Getting back into nature, sports, learning, family, community service and pursuing the personal projects and dreams we have all sought to do can become real and can enhance the quality of our lives beyond our wildest imaginings.

Spiritual Development: Trying times will create opportunities for people to explore their inward selves. The Apostle James says we should consider difficulties as opportunities for growth. Growth occurs if one is faithful and willing to connect to solutions that are larger then oneself. That connection is made possible through an optimistic application of faith that believes that all things are possible and that the joy is truly in the journey. Living through tough economic times may not be fun but it can be a joyous experience. If we are mindful we can detect the presence of the heavenly born opportunities that are the unintended consequences of our time of trail. If we remain grateful we will be blessed with sight to realize the abundant grace we enjoy in the midst of our trying circumstances. As we live life abundantly we need to remember to share it with others so that our portion of joy may double.

You Tube Video: Bing Crosby & Bette Midler: Accentuate the Positive

Risk: negativism, pessimism, faith

Honda Motors Practices Enlightened Capitalism

Amidst all the layoffs, business closures and shutdowns the hard edge of capitalism is a painful experience far too many people are forced to endure. During times of plenty, the relationship of labor and capital is harmonious and symbiotic. Both parties recognize the value that each bring to the corporate community and each parties enrichment and well being is served by the degree of harmony present in that relationship. During down business cycles management may resort to layoffs to preserve the enterprise. Unfortunately this often causes resentments and hard feelings on the part of workers who have lost the means of earning a living. When workers return to their jobs this can cause problems and hurt an affirmative corporate culture that is critical to maintaining a sustainable business enterprise.

In the face of the meltdown in the automobile manufacturing sector, Honda Motors is one of a very select few that is not resorting to layoffs. Honda Motors known for product quality and leadership in product innovation and business processes is also highly respected for its treatment of employees. Honda Motors places great emphasis on the creation and maintenance of an affirmative corporate culture to sustain profitability and market leadership.

Honda Motors decision to restructure the work force, and give workers a period of paid leave until business conditions improve speaks volumes about how management respects and values the contribution labor makes to the long term sustainability of the enterprise. Any remuneration workers receive during the leave will be paid back to the company with unpaid overtime when the workers return to the production line.

The value of good will on the Honda Motor balance sheet has increased exponentially. The sustainability of an affirmative corporate culture will drive profitability, product innovation and market leadership for the many years to come.

We applaud Honda Motors for this innovative and enlightened response to the current market challenges.

You Tube Video: June Carter Cash & Johnny Cash, One Piece At A Time

Risk: sustainability, labor relations, corporate culture

Healing on the Sabbath

There is a wonderful story in the New Testament from the Book of Matthew. It tells about a man Jesus discovers in a synagogue with a withered hand. The Pharisees who were the fundamentalists of their day asked if it was lawful to heal on the Sabbath? Jesus answers that it is always lawful to do the right thing on the Sabbath. Jesus understood that The Divine Healer requires us always to be mindful as to how to respond to those in need even if that means violating supposedly sacred rules to do so.

The Republican Party opposition to the economic stimulus legislation reminds me of this story from the Gospel. The passage of the recovery bill in the congress was accomplished without one affirmative vote from the GOP. Almost every Republican to the last member cited concern about the country sliding into socialism. Taking a cue from lead party shill Rush Limbaugh, the self anointed demagogue and chief has been howling about the government sponsored recovery plan. Speaking for all Republicans, Rush states that government involvement will lead to the corruption of free market enterprise, ballooning administrative bureaucracies and the sure return of the debauchery of erstwhile earmarks splayed about in an orgy of pork barrel spending sprees.

The economy like the man with the shrived hand needs healing. He cannot find work if he is not healed. The doctor is in the house and being faithful to the Hippocratic Oath is compelled to heal despite the incantations of conservative demagogues of damnable results if ideological dogmas are violated.

An interesting historical analogy steeped in realpolitik can be found in a famous statement made by Deng Xiaoping as China’s disastrous Great Leap Forward was concluding. Said Deng: “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.” This was interpreted to mean that being productive is more important then upholding beliefs in communism or capitalism.

The leader of China at the time, Mao Tse-Tung saw this type of thinking as a great threat to his power. To consolidate his power and mitigate the threat Deng’s thinking represented, Mao launched the equally disastrous Cultural Revolution. Deng and his policies were rehabilitated years later only after the damage of the Cultural Revolution became apparent. The adoption of liberalized economic reforms and the eradication of ideological strictures has done wonders for China. Like Mao, the GOP demands ideological purity regardless of the effect. The United States has pursued the policies advocated by the GOP since the Reagan Administration. Those policies and philosophies have brought us to where we sit today. A moribund economy over dependent on a financial services industry, leverage and the availability of cheap credit.

President Obama’s recovery program is classic move taken from the Keynesian economics playbook. It offers a massive capital infusion into the economy that is funded by an increase in Federal debt and a generous tax cuts that should satiate the most rabid Reaganomic raconteur. Obama is not beholden to ideology. The Great Empiricist has proclaimed the death to all ideologies and is not beholden to the stale bread of old dogmas. Obama is willing and most able to craft solutions from tools and systemic loam to effect the cure. He might even resort to a dollop of supply-siderism and sprinkle a bitty bit of voodoo economics on the zombie republicans to get the American economy going again.

You Tube Video: Dr. John, Gris-Gris Gumbo Ya Ya

Risk: economy, politics, recession

In The Hall of the Mountain Kings

The tenor of this years Davos Conference is markedly different from years past. As recently as last years gathering of the worlds power elites, the agenda of the annual World Economic Forum was keen to address the smoothing over the rough edges of globalization in a post scarcity world. Those rich in capital, ideas, power and connections assembled to devise solutions to the worlds dilemmas with the practical medicine of enlightened capitalism. The weltanschauung from the halls of these mountain Kings and Queens has drastically changed with the turn of the year.

Gone are many of the deep pocketed investment bankers who in past years underwrote elaborate banquets and soirees to curry influence and to woo favor with the potentates of power. Gone is the insatiable appetite of the American consumer market that drove much of the conferees suppositions of the sustainability of a healthy global economy. The American consumer now lies prostrate like a Jolly Green Giant coated with an overdose of pesticides by a mad Iowan crop duster. Gone is the confidence of those who believed American pronouncements about the sustainability, soundness and correctness of its economic policies. Gone is a concerted spirit of cooperation among the nations and a belief to work together in a cooperative spirit to solve the problems that acutely ail the global economy. Unfortunately the ghosts of economic deprivation, acute political conflict and social dissonance still freely roam and continue to haunt the exalted halls of the mountain kings.

You Tube Video: Apocalyptica, Edvard Grieg’s, In the Hall of the Mountain Kings

Risk: economic, political, social

Livin in the USA

Don’t quote me on this, but I seem to remember some sage advise Barton Biggs offered his high net worth clientele about the coming social disintegration due to the economic meltdown. I remember him saying “to stock up your wine cellars, get liquid with your assets and find communities to live in where enhanced security services is a chief accoutrement.” He may be on to something.

Urban tensions have exploded in Oakland California this past week over the slaying of a BART commuter at the hands of a transit policemen. The unfortunate killing of the African American youth Oscar Grant occurred on New Years eve when the BART transit police were trying to control rowdy New Years revelers. The shooting has triggered a series of violent protests that are becoming more commonplace in cities of the world.

These high profile cases of police brutality are incendiary incidents that give voice to a seething urban anguish fed by economic duress, racial tensions and cultural dislocation. The police murders of a person of color give focused voice to community discontent fueled by rising unemployment, homelessness, home foreclosures, ethnic tensions and rising impoverishment unleashing a horrific display of civil disturbances that are in turn met with brutal state suppression.

Urban social unrest is becoming more commonplace in democratic nation states. The riots in Paris and Amsterdam in 2007 and the recent unrest in Athens speak of a deep dissatisfaction of the economic and cultural disenfranchisement of urban minorities and working poor. These Euro Zone riots assume a Muslim ethnic dimension. It exemplifies the cultural dislocation of Islamic youths and the failure to integrate the large Muslim immigrant community into Old World Europe. As the recession deepens ethnic unrest and class conflict will grow. Perhaps we should take Mr. Biggs’ advise and stock up the wine cellars before it becomes to dangerous for a run to the local liquor store.

You Tube News Footage: Oakland riots

You Tube Music Video: Steve Miller Band, Livin in the USA

US Economy Bleeding Jobs

The ADP National Employment Report was just released. The US economy is bleeding jobs. Over 693,000 jobs were lost during the month of December 2008. The report shows steep declines in all market segments that include, small and mid-size businesses, large businesses, manufacturers, service businesses and construction. The Report shows that job loss is accelerating more rapidly then observed levels during the 2001 recession.

Full ADP report and an explanation of their methodology can be accessed here.

You Tube Video: Johnny Cash, The Ballad of John Henry

Risk: economy, jobs