The United States of Wusses

Posted Dec 01, 2009 02:03pm EST by Henry Blodget

From The Business Insider, Dec. 1, 2009:

When Dubai wobbled last week, everyone rushed to the Internet to await confirmation of the imminent bailout.

And they saw what they wanted to see!

The airwaves (and pipes) were clogged by a steady stream of pundits declaring that there was no way Abu Dhabi would let Dubai go bust.

Why not?

Because if Dubai went bust, then... well... then the stock market might go down for a while! Then the idiots who loaned Dubai World money to build huge islands and buildings in the desert would have to pay for their stupidity! Then the buildings' ownership would change in a debt restructuring--the kind that happens every day in a normally functioning capitalist economy!

INCONCEIVABLE!!!

Remarkably, against this tidal wave of panic and entitlement, Abu Dhabi stood its ground, refusing to reward idiocy by throwing more good money after bad.

And lo and behold... the world's stock markets have stabilized and Dubai is having civilized conversations with its lenders, the same way folks who have had to restructure their debts have had since the dawn of time.

In the United States, meanwhile, Messrs. Bernanke and Geithner no longer have to assure us that they will never let a big bank fail--because we understand that this guarantee has basically been written into the United States constitution. The LESSON OF LEHMAN BROTHERS has been learned, and the lesson is this:

We have become a nation of mamma's boys.

Specifically, after 25 years of debt-fueled consumerism, we have become accustomed to instant gratification and instant fixes, led by politicians and regulators terrified of having to tell us the harsh truth:

We lost our discipline. Getting it back will make life tougher for a while. But it will make us stronger in the end.

It wasn't always this way. In fact, the era of prosperity that we've just enjoyed was made possible by a leader with a huge spine--one who, unlike our current financial and economic leaders, wasn't afraid to risk his job (and enormous public pressure and disapproval) to do the right thing.

Who was that leader?

Paul Volcker.

How much public hatred was Volcker willing to withstand to get us back on the right track?

Take a look at the chart below. The red bars are the Fed Funds rate (which Volcker directly controlled). The blue line is unemployment (which he indirectly controlled).

In 1980, with the country beset by chronic, runaway inflation, Paul Volcker decided to do something about it. Specifically, he hiked rates sharply, into a weak economy.

What happened?

He killed the economy.

Unemployment soared--spiking from 6% to well over 10%, the highest level since the Great Depression. The economy crashed back down into a double-dip recession. Millions of Americans were put out of work. The stock market plunged to 15 year lows.

But Paul Volcker held fast. And a few years later, inflation was all but dead, setting us up for two decades of prosperity (and one of letting ourselves go to pot).

Fast forward to today. Today, we are led by men like Ben Bernanke and Tim Geithner. Men who are so afraid of the consequences of making people pay for their profligacy and stupidity that they have restarted the debt bubble (free money and bailouts for Wall Street, FHA, cash for clunkers) and made Too Big To Fail a national policy.

Take another look at that chart.

Do you think Ben Bernanke would be willing to withstand the heat that Paul Volcker took to get this country back on track? Tim Geithner? Larry Summers? Barack Obama? Do you think any of them would be willing to stand up and deliver the message this country--and Wall Street--desperately needs to hear?

We don't either.

But at some level, we can't say we blame them. Given our current national attitude, we would fire them instantly for even daring to suggest such a thing.

But we'd still be better off hearing it. And it would make us stronger and better in the end.

This is what we all should be like!!

More coverage from The Business Insider:

• 10 Amazingly Wasteful Stimulus Projects
• Paul Krugman's Emergency Jobs Program Will Never Work

What is Happening to the Promise of Change??

Change Is Changing - Already

A funny thing happened on his way to the White House: that old, left-wing community organizer Barack Obama has suddenly veered toward the center, and his incoming administration is looking more and more like the Daley Machine in Chicago than Hugo Chavez's administration down in Venezuela.

It seems that reality has set in, instructing the soon-to-be president-elect (he won't be that until the presidential electors gather and vote for him next month) that it's easier to promise change then it is to change the way things are traditionally done in a democracy.

Watching him announce key appointments to cabinet and sub-cabinet posts makes one think that this is Bill Clinton redux. Mr. Obama has dug deep into the 1990s and resurrected much of the Clinton cast of characters, even to naming Hillary Clinton to be secretary of state.

That appointment, some have suggested, is Obama's way of emulating Lyndon Johnson. When LBJ named an old foe to a post in his administration, he explained that it was better to have the camel inside the tent urinating out, than outside the tent urinating in.

None of this satisfies the radical left that went bonkers trying to elect the man they thought would turn the White House into a new Kremlin and name all of them commissars of the new Socialist Republic of America.

Barack Obama, ardent disciple of the late Saul Alinsky, seems to have forgotten the iron-clad left-wing dictate -- "no enemies to the left." With every Clintonite or Wall Streeter appointment he makes a new enemy on the left.

What the Alinsky/Ayers crowd doesn't seem to understand is that Barack Obama's only acquaintanceship with government in action was his close relationship with Chicago's Daley machine, where its hallmark -- aside from its rampant corruption -- was devotion to pragmatism. If it works, do it; if it doesn't, don't.

Everything Mr. Obama has done in recent weeks since winning the election has been an exercise in pragmatism -- gone is all the heated rhetoric about change and reform. Everything is now measured by only one standard -- it must above all be practical.

What his disappointed leftist allies don't grasp is that many of those who voted for him thought he had a conservative message for them. Now with his appointments such as keeping Robert Gates at the Defense Department and naming Paul Volcker as a top economic advisor, he's delivering on what the voters saw as his conservative promises.

Unlike Bill Clinton, he's moving to the center before he takes office, and not two years afterwards as Clinton did. During the campaign I prayed he was lying when he unveiled his platform and promises of what he'd do as president.

I was hoping he lied about taxes. I was hoping he lied about ending the war in Iraq in 16 months. I was hoping he lied about all of those nutty left-wing programs he was promising.

It looks as if my prayers were answered.

I expect that he'll try to mollify his now-dejected left-wing supporters by tossing them a few bones. He'll push for the horrendous "Freedom of Choice" bill that would enshrine abortion as the supreme law of the land, overturning all restrictions on the grisly procedure previously enacted by the states; and trying to gag conservative talk radio hosts, for example.

I'm sure he knows that those attempts might be empty gestures if his party falls short of the 60 votes in the Senate they need to shut off debate on such measures, thereby allowing the Republican minority to use the filibusters to kill such measures so dear to the hearts of the so-called progressives.

What's happening is Obama's discovery that there is a big difference between running for president and being president. He is now up to date, up to speed, and getting all the information George Bush is getting -- and he having to make decisions based on that information.

As a result he and George Bush are now on the same wavelength. It's amazing what a little dose of reality will do to a man who dreamt dreams before he encountered the inescapable facts of life.

Welcome to Washington, Barack Obama.

 Change is Changing

by Michael Reagan, the eldest son of Ronald Reagan, is heard daily by over 5 million listeners via his nationally syndicated talk radio program, “The Michael Reagan Show.”

Posted:  Marion's Place