Archive for May, 2011

Stanley Fischer for Managing Director of the I.M.F.

May 31, 2011

In yesterday’s column, I disqualified Christine Lagarde for the position of Managing Director of the International Monetary Fund on the grounds that she emanates from France, a country at the heart of the Euro-Zone bailout charade, that she is an impulsive bailer-outer of insolvent organizations and insolvent nations, and that she is technically incompetent in the discipline of economics.

Stanley Fischer towers over her as a financial realist, an intellectual giant and one of the world’s most accomplished economists working in precisely the areas relevant to the task of the I.M.F..The comparison is so one-sided that one would gasp with incredulity at the sight of the world’s leaders and the world’s press drooling over Madame Lagarde’s candidature, if one did not know just how out of kilter these wacked-out people truly are.

Stanley Fischer was born in 1943 in Northern Rhodesia (now Zambia). He is now an Israeli citizen. He obtained a Bachelor of Science and a Master of Science Degree in Economics from The London School of Economics and Political Science,  and a Ph.D. in Economics from Massachusetts Institute of Technology.

He served as Professor of Economics at the MIT Sloan School of Management from 1977 to 1988, where he co-authored two highly-regarded textbooks, one with Rudiger Dornbusch and the other with Olivier Blanchard. In addition, he has edited 12 books and has published 254 articles primarily in leading professional journals of economics. Most of these articles are single-authored.

Among Stanley Fischer’s former students are to be found N. Gregory Mankiw, Ben S. Bernanke, and Kenneth Rogoff.  Yes, this man knows something about the world of macroeconomics, monetary economics and financial crises! 

Madame Lagarde, I challenge you to put your papers on the table before you trade your qualifications for office with those of Stanley Fischer.

But Stanley Fischer has not been content to while his time away looking out over the Charles River while dreaming of the Potomac. He has spent a great deal of his career in the real world of political economics. From January 1988 to August 1990, he was Vice President, Development Economics and Chief Economist at the World Bank. From September 1994 until August 2001, he was the First Deputy Managing Director of  the International Monetary Fund.  In December 2001, he became a member of the influential Washington-based financial advisory body, the Group of Thirty. Between February 2002 and April 2005, Stanley Fischer also worked as Vice President of Citigroup, as President of Citigroup International, and  as Head of the Public Sector Client Group.

On May 1, 2005, Stanley Fischer became Governor of the Bank of Israel.  On May 2, 2010, he was sworn in for a second term.  Under his management, in 2010, the Bank of Israel was ranked first among central banks for its efficient functioning, according to IMD’s World Competitiveness Yearbook. 

Stanley Fischer has earned international plaudits across the board for his handling of the Israeli economy in the aftermath of the global financial crisis of 2008.  In September 2009, the Bank of Israel was the first bank in the developed world to raise its interest rates.

In 2009 and 2010, Fischer received an ‘A’ rating on the Central Banker Report Card published by Global Finance Magazine.

In October 2010, Fischer was declared Central Bank Governor of the Year by Euromoney Magazine.

You may well ponder with me, Dear Readers, why this star performer is not coasting into the Managing Directorship of the I.M.F. at this moment of international crisis. For he is clearly not just the Man for this Moment. He is a Man for all Seasons.

The answer surely does not lie in weaknesses in his Resume, which is as near perfection for this job as makes no difference. It lies in the muddy waters of public choice, and in the influence exerted by special interest groups that line the pockets of their members while harming the global economy.

Oh yes, and let us never  forget that Stanley Fischer also happens to be a citizen of Israel!

Christine Lagarde is disqualified as Managing Director of the I.M.F.

May 30, 2011

  The case against Christine Lagarde

Following the resignation of alleged rapist and serial sexual predator, Dominique Strauss Kahn, from the Managing Directorship of the International Monetary fund, Christine Lagarde, unfortunately, has emerged as front-runner to replace him. Surely the associated reduction in testosterone would prove to be a blessing for all female employees within the organization (perhaps even some males, since, as yet, we do not know the full reach of DSK’s sexual predations).  However, Christine Lagarde carries three intractable impediments of her own, first  that she emanates from France, second that she is a bail-out  repeat offender and third that she has no training in economics.

1. France

France is a member of the Euro-Zone and an aggressive defender of that seriously non-optimal monetary union. At the present time, the Euro-Zone needs to be saved from its own folly. It needs an outside agency to  force out non-conforming members – Greece, Portugal and Ireland for sure – and to place them into non-Euro, E.U. membership while they repent their fiscal sins, revalue their currencies, and restructure their debts. The woes of these countries are not the woes of illiquidity, but rather the woes of insolvency. The rightful home for insolvents is bankruptcy, where they negotiate with creditors and flagellate themselves for their sins. Any emissary from France – one of the founding members of the original Treaty of Rome -  could not even begin to contemplate such surgery.

2. Madame Bailout

Christine Lagarde has never seen an insolvent that she would not bail-out. In the movie, Too Big to Fail her character is portrayed as scolding Henry Paulson, the U.S. Treasury Secretary, for allowing Lehman Brothers to go bankrupt. Drenching her Armani and Chanel clothing, her Hermes handbag, and her stylish scarf, with flowing tears, she once observed that if the investment bank had only been named Lehman Sisters, it would not have found itself in such dire straits.

As Minister of Finance in the French government since June 2007, Madame Bailout has played a lead role in bailing out errant members of the Euro-Zone in ways that have failed spectacularly. She simply does not understand the crucial difference between illiquidity and insolvency, and she certainly has no idea how to prevent the former ending up as the latter.

She has led the ‘no-restructuring’ school of thought in recent months with regard to Greece and other failing Euro-Zone nations. Most tellingly, Christine Lagarde has fought tooth and claw against tightening bank capital requirements during the recently concluded Basel III negotiations. Low bank capital creates serious systemic financial risk for Europe and the world. Madame Bailout simply does not comprehend this reality.

3. Economics Ignorama

Christine Lagarde is a lawyer, not an economist, by training. President Sarkozy also views her as an intellectual lightweight, but that may be a calculated political judgment. At the present time, however, an absence of economic training is an unforgivable impediment for anyone aspiring to a lead role in the International Monetary Fund.  Her occupying that position would be equivalent to FDR assuming responsibility for pulling the United States out of the Great Depression. And we all know how that ended up!

Tomorrow, I shall make the case for a far superior appointment to the Managing Directorship of the I.M.F.. Because his case is so strong, he faces an uphill task in a world largely governed by special interests like Goldman Sachs, who exist to exploit financial crises. This column does not respect the notion of political infeasibility, even if it recognizes that reality. So the case will be made to the very best of my ability.

 

Egypt disintegrates into primitive tribalism

May 29, 2011

Western romantics dream of Egypt as a focal point of Middle Eastern civilization.  That may have been true under the reign of Cleopatra before her dalliance with Marc Antony brought down the wrath of Rome. Surely, two millenia of disintegration have taken their toll in that wretched country since that allegedly golden time.

President Obama appears to have dreamed of restoring the glory of Eygpt when he conspired with the Egyptian army to topple President Hosni Mubarek from power.  In so doing, President Obama displayed an  ignorance of history, failing to remember that this army is the same corrupt and weak army that fled the battlefield in June 1967 when Israel struck back at Gamel Abdul Nasser’s bid to wipe Israel off the map of the Middle East.  Neither does he appear to remember that this is the same corrupt and weak army that fled the battlefield in October 1973 when President Sadat launched a second attempt to push the Israelis into the Mediterranean Sea. The story goes that the Arabs  fled so quickly that they left their foot-sandals lying on the desert sand!

So it is entirely predictable that this same corrupt and weak army is now rushing to abandon the supposed principles of  the Tahrir Revolution.  Egypt’s transitional military council announced a week ago that it intends to try Hosni Mubarek for conspiring to kill unarmed protesters.  Conviction could mean the death penalty.  The new regime also intends to prosecute Mubarek and his two sons, along with a lengthy list of business associates on charges of corruption.  Nowhere has the new regime announced that it will prosecute its own agents and associates, including themselves, for the murders that they effected during the Tahrir Revolution and for the corruption which is the ongoing basis of the Army’s wealth and social status.

There is no rule of law in Egypt – it existed if at all only for the brief period of British rule – and there is no toleration for religious minorities. Already Muslims are attacking Christian churches, and threatening mob intimidation for all those who worship God in the name of Jesus Christ.  The Egyptian army stands aside, smirking at this display of intolerance.

 The path is already set for the disintegration of Egypt into pre-modern tribal and ethnic loyalties, as happened in post-Hussein Iraq. And, unless President Obama  demonstrates an amazing change of mind, this time there will be no American military boots on the ground to prevent attempted genocide.

Egypt has no chance whatsoever at this time of evolving into a modern nation through the democratic process.  It offers every sign of disintegrating into the Pits of Hell.

Obama and the E.U. increasingly delusional about the Middle East

May 28, 2011

“Mr. Obama dined with more than a dozen Central and Eastern European leaders to hear their thoughts on their economies’ transition from communism two decades ago, after the collapse of the Soviet Union. ‘We have taken great inspiration from the blossoming of freedom and economic growth in this region,’ Mr. Obama said…Comparisons of the Arab Spring to the fall of the Berlin Wall and the then G-7′s response filled the halls of the two-day summit, said Michael Froman, deputy national adviser for international economic affairs.” Carol E. Lee, ‘In Eastern Europe, Obama Sees Communism’s Fall Echoed in the Middle East’, The Wall Street Journal, May 28, 2011

If President Obama truly believes that the Arab Spring is a facsimile of the freeing of Eastern Europe from Soviet Rule, then he is more delusional than I have come to believe. Let me identify the enormous differences between the two impulses.

First, the majority of Eastern Europeans had never swallowed the communist religion of the Soviet Union.  They tolerated what they could not overthrow, spitting in the gutter whenever uncivilized Soviet jackboots patrolled their precious streets. For the populations of Eastern Europe had experienced better times, had indulged themselves for the most part in the blessings of Western civilization before a new Dark Age was imposed upon them. Their conquerors were their  uncivilized inferiors.

By contrast, a majority of the Arabs caught up in the Arab Spring still relish Islamic fundamentalism, the religious cult that has retarded their economic development over the past millenium.  Surely there are enlightened Muslims, who ignore the ban on interest and  pay only token lip-service to the Supreme Authority identified by an illiterate Prophet.  But they will find themselves swamped out by the rise of Islamic fundamentalism once the secular dictators are removed from power. President Obama should be looking at 1970s Iran, not 199os Hungary, Poland and Czechoslovakia for indications of where  too much of the Arab Spring eventually will flow.

Second, Eastern Europe, for the most part, was relatively well-educated in 1990.  The USSR had no interest in keeping its female captives illiterate, covering their minds as well as their heads from the real world. Illiteracy across Arabia and North Africa is significantly greater, especially among the female population. If Iran is an example, the Arab Spring will force Arabian women back into medieval servitude as it imprisons secular men in an impermeable web of religious bigotry.

Third, most Eastern Europeans had some history of democracy, some experience with the institutions of relatively free societies. The Middle East, with the exception of Israel, has no such experience. Democratic institutions will not emerge fully grown out of the desert sand. They may take perhaps centuries to evolve.

Fourth, Eastern Europeans had a real incentive to allow the institutions of a free society to evolve. Only by that route would they be able to secure the economic benefits of E.U. membership. There will be no such incentive available to Middle Eastern and North African countries as they attempt to shake off the shackles of autocracy.  I hear no murmurs within the EU of extending membership to Egypt, Yemen, Libya, Tunisia, or Iraq.  E.U. foot-dragging over Turkey is a clear enough signal that there are are no low-hanging European fruits available for those who engage in the Arab Spring.

This is not to say that the Arab Spring necessarily will choke on its own desert sand, that autocracy will follow autocracy in an unending process. It rather suggests that President Obama and the E.U.  should stand back and allow the Arab Spring to run its own course, without Western meddling. For those Arab Springs that turn into glorious summer, trade opportunities with the West should be forthcoming, and helping hands should be extended. For those that fail, hard-earned lessons should be allowed to accumulate in the hope, if not the expectation, that an Arab Renaissance eventually will sweep away  irrational religious impediments to their human flourishing.

Obama, the Democrats and the Fed slam thrift and encourage indebtedness

May 27, 2011

Sen. Richard J. Durbin, Illinois Democrat, is here to help.  Grab your debit card and run.  Thanks to the latest kindness from the Senate’s No. 2 Democrat, many of America’s 185 million debit-card holders soon will endure new fees and lose existing benefits. Other consumers can kiss their free checking accounts goodbye.  Mr. Durbin’s bright idea even could shutter some banks…Under his his amendment to last-year’s 2,319-page Dodd-Frank financial regulation juggernaut, the Federal Reserve decreed a Cuban-style price control.”  Deroy Murdock, ‘Wshington declares war on your debit card’, The Washington Times, May 27, 2011

First, let us be clear that a single Senator cannot impose his will on America. The Durbin amendment was passed  by majority votes in the then Democrat-controlled House of Representatives and the Senate and was eagerly signed into law by President Obama. So  a significant number of financially  stupid politicians share responsibility for this harmful intervention.

What exactly has happened and what is at risk?

Banks currently earn 1.14 per cent fees to process debit-card purchases. So, for example, if a customer purchases a $100 product using his debit card, the bank will receive $1,14 on that transaction. If, alternatively a customer purchases a $1,000 product, the bank will receive $11.40 on that transaction.  These fees cover banking costs and ensure that debit cards are readily available at no separate charge to the customer.

Post the  Frank-Dodd-Marx-Lenin-Obama intervention, the situation will radically change. The Federal Reserve, acting under the new legislation, has decreed that banks henceforth must charge 12 cents per transaction, regardless of size or risk. A $1 transaction or a $1 million transaction will be charged exactly the same 12 cents.  That sounds like a really smart idea, do you not think?  Certainly something that Larry summers, or Christina Romer or Cass Sunstein would drool about while drinking their White House margharitas!

The new policy will impose significant losses on debit card transactions for participating banks.  So, how will such banks react?  Well, some banks may fail completely, a sure-fire way to expand the economy! Those hard-to-secure business loans will be even harder to secure as bank profits decline.  To mimimize exposure, many banks will impose limits on the value of any single transaction where debit cards are deployed – aay $50 per transaction – if debit cards are issued at all.

Confronted with such restrictions, consumers will substitute credit cards for debit cards, with significant implications for the well-being of the nation. Debit cards offer individuals an incentive to drain their own bank accounts when purchasing commodities. This encourages thrift in household budgeting.  Credit cards offer individuals an incentive to borrow from other people’s wallets and to wind up knee deep in debt.

Do I hear the words September 2008 out there in the ether?  Maybe all Progressives love to live out there in some such  accumulating  sea of household debt!

A special and essential relationship? Learn from English history, David Cameron!

May 26, 2011

“Pushing back against the notion of an Old World in decline, President Obama told Britain’s Parliament that while the US and United Kingdom no longer can single-handledly carve up the world, they remain the fundamental forces pushing the rest of the globe toward democracy and open economies…The relationship between the two countries has been a hot topic since Mr. Obama arrived in London, so much so that the president and Prime Minister David Cameron have upgraded its status from ‘special’ to ‘special and essential’. ” Stephen Dinan and Naomi Westland, ‘Obama: U.S., U.K. not in decline globally’, The Washington Times, May 26, 2011″

By all accounts, this public upgrade in the special relationship met with a mixed reception in the Palace of Westminster:

“Labor parliamentarian Sadiq Khan said the warm reception Mr. Obama received shows that ‘our political and cultural ties are still incredibly strong. It was clear from what we heard today that this is a president who wants to work with others to help tackle some of the world’s biggest problems’.  Others were more muted in their praise.  ‘I felt that standing there was a man…who had no particular emotional attachment while trying to explain the value of the relationship between the U.K. and the U.S. and his commitment to it,’ said Secretary of State for Transport Philip Hammond.ibid.”

My sentiments conform with those of Mr. Hammond. Englishmen, especially, might want to reflect on the rise and fall of a similar ‘special relationship’ in the mid-17th century:  that between King Charles I and Thomas Wentworth, The First Earl of Strafford.

Thomas Wentworth – created Earl of Strafford by King Charles in 1640 – was a particular favorite of the King.  King Charles commissioned Strafford to engage in a military resolution of the Scottish problem.  At the Battle of Newburn on August 28, 1640, an out-numbered and ill-equipped English army fled the field, allowing the Scots to seize Newcastle, a strategically-important city that provided London with coal,  its basic heating fuel.

In October 1640, Charles I was obliged to concede, in the Treaty of Ripon, that the Scots should continue to occupy Northumberland and Cumberland and that a parliament should be summoned to cover the full costs of that occupation.  Meeting at Westminster in November 1640, the Long Parliament was adamant in seeking revenge for the Scottish victory. Not daring to fix responsibility on its sovereign, Parliament instead sought the impeachment of the Earl of Strafford.

Unable to present convincing evidence of Strafford’s alleged treason, in April 1641 the House of Commons decided instead to proceed against him by an Act of Attainder. However, the Bill foundered in the House of Lords, where many of Strafford’s fellow peers were swayed by his defence that he had been faithfully obedient both to his King and to the English law.

At that very moment, King Charles I rashly declared that his conscience would never allow him to sign an Act of Attainder against his most loyal servant.  Relying on this royal oath, the Lords passed the Bill of Attainder on May 8, 1641, by 37 votes to 11.

On May 10, frightened by the threat to himself and to his family from angry mobs surrounding Whitehall, and urged on by his terrified Queen, Henrietta Maria, King Charles I signed the Act of Attainder into law. Thomas Wentworth, Earl of Strafford, upon hearing that his King had forsaken him uttered the following fateful words:

“Put not your trust in princes, nor in the sons of men, for in them there is no salvation.”

Strafford was mutilated as a traitor, and executed on Tower Hill on May 12, 1641.

When your military adventures in the Middle East at the bequest of your U.S. sovereign, ultimately fail, Mr. Cameron,  as fail they assuredly will, given your ill-equipped and out-numbered forces, do not rely on any special relationship. For that relationship is a figment of your imagination, not that of Barack Obama. By comparison with the conscience-stricken King Charles I, you will find President Obama will react to your plight with an unemotional and essentially amoral ruthlessness:

 ‘Be gone, I say, and have done with you!’

Of course, the ultimate outcome will be the same for you, as for the Earl of Strafford.

Go Bibi!

May 25, 2011

Lawmakers gave Binyamin Netanyahu 59 rounds of applause as the Israeli prime minister addressed a joint meeting of Congress Tuesday.  But more revealing was the whisper I heard while watching the speech from the House gallery.  It came as Netanyahu repeated his rejection of the notion, floated by President Obama last week, that peace talks with Palestinians should be based on Israel’s smaller, pre-1967 borders.  ‘Israel will not return to the indefensible boundaries of 1967,’ Netanyahu thundered. ‘Jerusalem must never again be divided,’ he roared.  ‘Go Bibi!’ the woman next to me said, sotto voce.  It was the voice of Inna Graizel, the 21-year-old Israeli I’ve been harboring in my basement for the last eight months…Though she’s a moderate who was suspicious of the uncompromising Netanyahu, the episode turned her into a supporter…’It’s a big thing to say ‘no’ to the president of the United States,’ she said.  ‘If there were an election now,’ she said, ‘I would vote for Bibi.’  This is why Obama’s speech was such a blunder.  By pushing an Israeli moderate such as Inna into the arms of Netqnyahu, Obama has strengthened the hard-liners.” Dana Milbank, ‘Falling for Netanyahu: What Obama’s bungle means to my Israeli au pair’, The Washington Post, May 25, 2011

“Mr. Netanyahu told U.S. lawmakers on Tuesday that his government would accept no peace deal that would require Israel to accept division of Jerusalem, allow for the return of Palestinian refugees or agree to withdraw all security forces from the disputed West Bank…Senior Democrats were among the most enthusiastic audience members to Mr. Netanyahu’s speech.  Some have broken with Mr. Obama in recent days on the issue of using the 1967 lines as a basis for negotiations…’Both sides of the aisle believe that you advanced the cause for peace,’ Rep Nancy Pelosi of California, the top Democrat in the House of representatives told Mr. Netanyahu after his speech.” Jay Solomon, ‘Congress Applauds Israeli’s Hard Line’, The Wall Street Journal, May 23, 2011

“Benjamin Netanyahu, Israeli prime minister, has delivered a fiery speech to the US Congress, rejecting any negotiations with a Palestinian unity government…’In a genuine peace, we’ll be required to give up parts of the ancestral Jewish homeland.  And you have to understand this: in Judea and Samaria, the Jewish people are not foreign occupiers,’ he said, referring to the West Bank by its Biblical names….’Israel will not negotiate with a Palestinian government backed by the Palestinian version of al-Qaeda.’ ” Daniel Dombey and Tobias Buck, ‘Netanyahu defiant on peace talks’, Financial Times, May 25, 2011

Like so many others, Israelis and Americans alike, but not, so it would seem, most Europeans,  I repeat the words of Inna Graizel:

‘Go Bibi!’

I add, as she apparently did not:

‘Shame on you, Barack Obama’.

Tax fraud in the belly of the IRS

May 24, 2011

Federal investigators have unraveled serious tax fraud among agents and other employees of the IRS.  Specifically,  128 employees of the Internal Revenue Service have been identified as having cheated the federal government by fraudulently claiming a first-time homebuyer tax credit included in the 2008 and 2009 economic stimulus packages. And that number almost certainly is the tip of a much larger iceberg of tax cheats within the IRS.

“The Treasury Department’s inspector general for tax administration, in several reports over the past few years, has identified a total of 128 IRS employees who claimed the tax credit but who also made other claims that showed they either weren’t first-time buyers or bought their homes outside the eligibility period for the crdit, which was worth up to $8,000.” Stephen Dinan, ‘IRS staff committed tax credit fraud’, The Washington Times, May 24, 2011

The IRS employees represented a small part of the total fraud in the program, which the inspector general suggests may have totaled more than a half billion dollars overall.  The inspector general points out that refundable tax credits, which transfer money back to taxpayers even when their tax liability is zero, ‘are targets for fraud’. But then the President and the Democratic -controlled Congress knew that full well when they set up that pot of gold for vote-seeking purposes.

Members of Congress, who have oversight over the IRS said it’s ‘particularly egregious’ when the employees are caught cheating. Talk about the pot calling the kettle black!  The truth is that the IRS, from the outset did not even require those claiming the credit to submit documents proving their eligibility before they were granted the credit; and Congress did not give the agency the tools to track fraud.

Hey, guys, the cost is on the forgotten man – the grubby taxpayer whom we all love to hate – so let us make this one an open season to fill our own pockets!  President Obama can claim for one of these on the White House and we can claim for one each on the Capitol!

‘You’ve gotta pick a pocket or two boys!  You’ve gotta pick a pocket or two!’

 

The political cowardice of Newt Gingrich

May 23, 2011

Last week, presidential candidate – dare I now say erstwhile presidential candidate – Newt Gingrich, attacked Paul Ryan’s proposal for reforming Medicare  using the nasty  rhetoric that Ryan’s proposal represents ‘right-wing social engineering’. In reality, Gingrich was displaying political cowardice of the first order, a cowardice that should disqualify him forever from any political career in a self-respecting constitutional republic:

“Entitlement reform is the hardest challenge in politics, which is one reason we oppose all new entitlements.  But Republicans now tempted to retreat at the first smell of cordite need to understand that they are taking even larger political and policy risks than Mr. Ryan is.  The Medicare status quo of even two years ago, much less 20, is irretrievably gone, and anyone pining for its return is merely making President Obama’s vision of government-run health care inevitable.”  Editorial, ‘Republicans and Mediscare’, The Wall Street Journal, May 23, 2011

The Medicare reality is outlined in the recently-released Report of the Medicare Trustees.  The Report clearly shows that the program’s finances have deteriorated even over the last 12 months.  Medicare is now carrying $24.6 trillion in unfunded liabilities through 2085.  Even this projection ‘does not represent a reasonable expectation for actual program operations’ (chief actuary, Richard Foster).

The Medicare problem cannot be resolved through tax increases, since the program’s costs are increasing by several orders of magnitude faster than the economy as a whole.  Some form of rationing, therefore, is inevitable. 

Under Obamacare, a 15-member unelected board, would impose the rationing. This board would be empowered to set prices for doctors, hospitals and other providers, driving some suppliers and some services out of the market entirely. It would be empowered to regulate how services are provided and to determine what government will or will not pay for. Individuals would have no right to supplement their medical purchases, as long as they continued to utilize the Medicare program. As is always the case, such a powerful non-market program would be riddled with corruption as the politically-privileged gained differential access to its services.

Representative Paul Ryan has responded with a market-based ‘premium support’ alternative. Seniors would receive a fixed-dollar subsidy from the government to expend among a range of competing private insurance options. Higher support subsidies would be made to the poor and to the chonically sick. All individuals would be free to supplement their support premiums, should they so wish. In such circumstances, consumers would be encouraged to make cost-conscious choices with respect to their health care and insurers and providers would be encouraged to compete in terms of health-care value and quality.

Of course, a reform proposal of this magnitude bears with it a high political risk. The GOP-controlled House of Representatives had the courage to bear that risk when endorsing Paul Ryan’s proposal.  If the GOP now retreats from this courageous position, as Newt Gingrich demands for his own political safety, the road will be paved for the Obamacare disaster”

The political forces unleashed by Obamacare will grow unimpeded if Republicans now retreat from offering an alternative.  Once the White House’s efforts to limit costs by fiat fail – as they inevitably will – liberals will turn to even harsher controls.  This future is already emerging in post-Mitt Romney Massachusetts, and also in Vermont, which wants to move to single government payer.” ibid.

By his self-serving cowardice, Newt Gingrich has struck a dangerous blow against market-based reform for Medicare.  Focus your attentions on your third wife, Mr. Ex-Speaker, pay off your reputed half million debt to Tiffany & Co., for who-knows what bauble that you acquired,  and for what purpose, and leave the 2012 presidential elections to true leaders  imbued with the courage and statesmanship to serve the People well.  The GOP could do much worse than to turn its attentions to Paul Ryan, who has already demonstrated in spades the courage and foresight that you so clearly lack, and an ability to strike down President Obama is a widely-televised debate over the then-controversial  Obamacare bill.

Henry Kissinger waffles on China

May 22, 2011

When one of the world’s most accomplished analysts of international behavior chooses to avoid giving specific answers to carefully formulated questions on the future of the Sino-United States relationship, there is cause for serious concern. The concern is not about the state of Henry Kissinger’s still remarkably astute mind, but about what that mind truly thinks about the nature of the relationship:

” ‘What I am reflecting about now is not that I don’t think I know an answer to your question,’ says a pensive Henry Kissinger, sitting in his spacious Park Avenue corner office adorned with  signed photos of former presidents and foreign leaders. ‘It’s that I don’t know whether I choose to talk about it at this moment and in this forum…And I don’t mind dropping the interview and I don’t mind you saying that I refused to go any further and pay the price for it.’…’I really think that what you should say is that you tried to get down this road with me,’ he advises. ‘I won’t do it.  I’ve written what I have to write on the subject.  Let me take my beating as a result of that, and just stop it.  That’s a bigger news story than anything I can possibly say in an interview.  I will not now discuss a confrontational strategy with China in a formal way.’ ” Bret Stephens, ‘Henry Kissinger on China. Or Not.’, The Wall Street Journal, May 21, 2011

Now that is a truly interesting statement!

So let me answer the questions raised by Bret Stephens, but evaded by Henry Kissinger. I surely do not have the analytical reach of the former Secretary of State, but I think that I can read his mind.

Question 1:  How do you regard the treatment by the Chinese government of Chinese dissident, Liu Xiaobo?

Answer 1: The Chinese autocrats are terrified by the  Middle Eastern reach of the Jasmine Revolution. They look over their shoulders at 600 million Chinese peasants living on subsistence wages and restricted from migration to the cities by apartheid rules, and they fear for their lives. Most of them have sent their children to  Western universities in the hope that safe passages will be provided for them should a popular revolution break out. Liu Ziaobo will be detained in custody for the rest of his life, which may well be shorter than nature intended. Unless, that is,  the Jasmine Revolution successfully extends to the Middle Kingdom.

Question 2:  What’s the right – and wrong – way of raising human rights with the Chinese?

Answer 2:  Given that the United States government has placed itself into financial hock with the Chinese dictators, there is no effective way to raise such issues. One cannot impose sanctions on one’s banker when he owns you lock, stock and barrel. One cannot threaten military intervention when one has lost all credibility by one’s failure to deal with Gaddafi in Libya and when one’s surge forces are stalemated in a minor country like Afghanistan. The United States is now Rome at the end of  Empire.  Keep quiet, or suck up to the dictators, and hope that they do not storm your barricades!

Question 3: Will an autocratic China ever fufill the promises of genuine economic reform?

Answer 3: Not in your lifetime, Mr. Stephens.  The next President of China, Xi Jinping, is a throw-back to the more repressive past, perhaps even to the last dreadful days of Chairman Mao. As one of the Princelings whose families survived through the Cultural Revolution and now have built their fortunes through political corruption, Xi Jinping and his close associates will rely less on popular loyalty and much more on increased repression. That is one reason why Liu Xiaobo and like-minded dissidents will continue to rot in jail.

Question 4:  Will Chinese nationalism coupled with aggressive militarization threaten the Pax Americana?

Answer 4:  Damn sure it will!  You ain’t seen nothing yet!  The recent moves in the South China Sea are childs-play by comparison with what is yet to come. China’s ‘One-China’ stance is not simple rhetoric. The new leaders will move to take back Taiwan and the United States will be helpless to stop them.  A British-style  Hong Kong handback is clearly on the cards for Taiwan. What the Chinese then do to Taiwanese dissidents will make the treatment of Liu Xiaobo look like a Club Med. paradise.

So now we can understand why Henry Kissinger  was less talkative than usual!


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