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Helen Thomas Blasts White House Control Of Press

“Transparency and the rule of law will be the touchstones of this
presidency.”

-U.S. President Barack Obama, January 21, 2009, upon signing executive orders relating to ethics guidelines for staff members of his administration

It appears the Obama administration is having a hard time convincing legendary journalist and prominent symbol of the liberal media Helen Thomas, who has been a correspondent for 57 years and has covered every president since JFK, that this is indeed the case these days.

From MyFOX Dallas/Fort Worth yesterday:

During the daily press briefing on Wednesday, some reporters asked whether the White House staged questions at President Obama’s Wednesday Town Hall meeting on health care.

On its Web site, the White House had asked Americans to submit questions to the president via social networking sites like Facebook, Twitter and YouTube. The White House says hundreds of entries were received.

Press Secretary Robert Gibbs said the White House would “screen” submissions — and pick some for the president to answer at his town hall in Virginia. But at least two reporters told Gibbs this amounted to choosing questions, which would just make Obama look good.

“This is an open forum for the public to ask question,” said Chip Reid of CBS News. “But it’s not really open?”

“Based on what?” responded Gibbs.

“Based on the information … on how the audience and the questions are being selected,” said Reid.

“How about this: I promise we will interrupt the AP’s tradition of asking the first question. I’ll let you ask me a question tomorrow on whether you thought the questions at the town hall meeting that the President conducted at Annandale….”

“That’s not his point,” interrupted Helen Thomas, correspondent for Hearst Newspapers. “That’s, that’s not his point. His point is the control from here. We have never had that in the White House. I’m amazed at you people who call for openness and transparency and control.

“You have left open the suggestion that you are pumping the answers,” Thomas continued. “It’s shocking. It’s really shocking.”

“Let’s have this discussion at the conclusion of the town hall meeting,” Gibbs said.

“No, no, no. We are having it now.” claimed Thomas. “It’s a pattern. It’s a pattern. It isn’t the question. It’s a pattern of controlling the press.”

CNS News’ Fred Lucas and Penny Starr added the following:

Following a testy exchange during Wednesday’s briefing with White House Press Secretary Robert Gibbs, veteran White House correspondent Helen Thomas told CNSNews.com that not even Richard Nixon tried to control the press the way President Obama is trying to control the press.

“Nixon didn’t try to do that,” Thomas said. “They couldn’t control (the media). They didn’t try.”

“What the hell do they think we are, puppets?” Thomas said. “They’re supposed to stay out of our business. They are our public servants. We pay them.”

What’s next? A fake press conference?

Thomas/White House Exchange
MyFOX Dallas/Fort Worth Video Link

Sources:

“Helen Thomas, Reporter Grill Gibbs”
MyFOX Dallas/Fort Worth, July 2, 2009

“Helen Thomas: Not Even Nixon Tried to Control the Media Like Obama”
Fred Lucas, Penny Starr
CNSNews.com, July 1, 2009

A Question Of Journalistic Integrity

“There are honest journalists like there are honest politicians – they stay bought.”

-Bill Moyers, American journalist, public commentator, and former White House Press Secretary in the Lyndon B. Johnson Administration. 1934- )

Say it ain’t so, WaPo!

From Mike Allen and Michael Calderone of the political news site POLITICO this morning:

Washington Post publisher Katharine Weymouth said today she was canceling plans for an exclusive “salon” at her home where for as much as $250,000, the Post offered lobbyists and association executives off-the-record access to “those powerful few” — Obama administration officials, members of Congress, and even the paper’s own reporters and editors.

The astonishing offer was detailed in a flier circulated Wednesday to a health care lobbyist, who provided it to a reporter because the lobbyist said he felt it was a conflict for the paper to charge for access to, as the flier says, its “health care reporting and editorial staff.”

With the Post newsroom in an uproar after POLITICO reported the solicitation, Weymouth said in an email to the staff that “a flier went out that was prepared by the Marketing department and was never vetted by me or by the newsroom. Had it been, the flier would have been immediately killed, because it completely misrepresented what we were trying to do.”

Weymouth said the paper had planned a series of dinners with participation from the newsroom “but with parameters such that we did not in any way compromise our integrity. Sponsorship of events, like advertising in the newspaper, must be at arm’s length and cannot imply control over the content or access to our journalists. At this juncture, we will not be holding the planned July dinner and we will not hold salon dinners involving the newsroom…”

$250,000? I wonder how much a trip to the salon’s VIP Room would have cost?

Source:

“WaPo cancels lobbyist event amid uproar”
Mike Allen, Michael Calderone
POLITICO, July 2, 2009

Pocket Knife Control?

I don’t make this stuff up, folks.

From Bob Barr, former federal prosecutor, Congressman, and 2008 Libertarian nominee for President, in his “Barr Code Blog” on the Atlanta Journal-Constitution website yesterday:

Temporarily stymied in its efforts to move a gun control agenda forward because of strong public backlash, the administration of President Barack Obama is shifting its regulatory focus to pocket knives. No kidding. In a little noted proposed regulatory decision issued in May by the U.S. Customs and Border Protection (”CPB”), the administration is seeking to ban the import of any pocket knife that partially opens with a flick of the wrist.

The government is able to reach into the pockets of America’s millions of pocket knife users to limit the type of knife they can own, thanks to a novel and expansive interpretation of the 1958 “Switchblade Knife Act.” This half-century old law prohibited the importation into the U.S. of, or the interstate commerce in, automatic switchblade and stiletto knives. As recently as last August, the CPB interpreted the law with a common sense view, in approving requests by knife companies to import and market new products. Lawful, modern-day pocket knives do not have prohibited, spring-released blades, but many are able to be opened by one hand with a flick of the wrist; and for this reason are very popular, especially with hunters, campers, and handymen. Now, the new administration is moving to revoke “permission” it gave earlier to importers of these popular knives; deciding they are dangerous “switchblades” after all. This is assinine.

If the Obama Administration has its way, such pocket knives will no longer be lawfully imported into the country, and could not be sold or transported in interstate commerce; thus effectively outlawing their sale or shipment.

The Customs agency is playing hardball in this process. It just last week denied a request by the knife industry for additional time to respond to the initial revocation proposal issued in late May; such requests for additional time to comment on such rulings are usually allowed. The government also is allowing only written comments, as opposed to e-mail comments which are normally permitted. The Obama Administration may be going slow with regard to gun control, but its knife-control effort is on a very fast track.

I hear the proposed Nerf-gun ban is making progress as well…

Source:

“Pocket knives now in feds’ gunsights”
Bob Barr
Atlanta Journal-Constitution (Barr Code Blog), June 17, 2009

Chavez: Obama Becoming More ‘Left’ Than Fidel And I

Hugo… BAD Hugo.

From the Associated Press’ Enrique Andres Pretel on Tuesday:

Venezuela’s President Hugo Chavez said on Tuesday that he and Cuban ally Fidel Castro risk being more conservative than U.S. President Barack Obama as Washington prepares to take control of General Motors Corp.

During one of Chavez’s customary lectures on the “curse” of capitalism and the bonanzas of socialism, the Venezuelan leader made reference to GM’s bankruptcy filing, which is expected to give the U.S. government a 60 percent stake in the 100-year-old former symbol of American might.

“Hey, Obama has just nationalized nothing more and nothing less than General Motors. Comrade Obama! Fidel, careful or we are going to end up to his right,” Chavez joked on a live television broadcast.

“Low blow, Hugo, low blow”

Source:

“Venezuela Chavez says ‘Comrade’ Obama more left-wing”
Enrique Andres Pretel
Reuters, June 2, 2009

Chinese Students Laugh At Treasury Secretary’s Remarks

“Geithner: China Confident in U.S. Policy Steps”

-Washington Post, June 2

“Treasurys up as Geithner, China inspire confidence”

-MarketWatch, June 2

“Geithner’s China Visit Seen Adding Fuel to ‘Great Comeback’ of U.S. Economy”

-Supply & Demand Chain Executive Magazine website, June 2

From the looks of these headlines this morning, it appears that U.S. Treasury Secretary Timothy Geithner is having a lot of success in bolstering Chinese confidence in U.S. assets during his visit to the People’s Republic of China.

Yet, I wonder if this is not just one more instance where “the devil is in the details.”

From the Washington Post’s Ariana Eunjung Cha this morning:

Geithner’s remarks stand in sharp contrast to the commentary in China’s official propaganda papers.

An editorial in the English-language China Daily said it will be “regrettable if [Geithner] underestimates and shuts his ears to voices from China’s civil society,” noting that there are worries that “Washington’s mushrooming deficit, generated by massive government borrowing to fuel its economic recovery plan . . . will undermine both the dollar and U.S. bonds.”

The Global Times, which is affiliated with the Communist Party, said an online poll found that 87 percent of respondents believe China’s dollar-assets are unsafe. The paper concluded, “Ordinary Chinese people are discontent with the declining value of China’s huge foreign exchange reserves denominated in U.S. dollars.”

And the Economic Information Daily, which is part of the official New China News Agency and affiliated with the State Council, in a headline demanded to know of Geithner: “How do you propose implementing fiscal discipline? How will you maintain the stability of the dollar after the crisis?”

Why do you suppose the Post reporter pointed out The Global Times was affiliated with the Communists? To discredit their statement?

Think this might be a case of “the pot calling the kettle black,” considering America’s socialist, and some would argue increasingly fascist, leanings these days?

Other publications also expressed doubts over Geithner’s success. From Peter Ford of The Christian Science Monitor this morning:

US Treasury Secretary Timothy Geithner said Tuesday he had found “a lot of confidence” in the US economy among Chinese leaders he met on his two-day visit here. In other circles, however, skepticism was widespread.

When Mr. Geithner told a student audience Monday that Chinese assets invested in Treasury bonds were “very safe,” his intended reassurance drew loud and dubious laughter.

A survey of 23 top Chinese economists, published in the daily Global Times on the eve of his arrival, found that 17 feared that Beijing’s huge dollar holdings put China in “a very dangerous position.”

More Communist propaganda, I suppose.

Ford added such views also existed outside the political and academic sphere. From the piece:

Ordinary citizens, however, appear to have little sympathy for such arguments, to judge by comments on Internet chat rooms.

“It’s a big joke that China’s money will disappear with nothing to be gained, and the beneficiary still says that the money is safe,” wrote one Internaut from Hebei Province on Sina.com, a popular Internet portal.

“Don’t trust Uncle Sam,” warned another. “Why do they enjoy the pleasures and we pay the bill?”

I suspect this situation might not continue for much longer.

Sources:

“Geithner: China Confident in U.S. Policy Steps”
Ariana Eunjung Cha
Washington Post, June 2, 2009

“Treasurys up as Geithner, China inspire confidence”
Deborah Levine
MarketWatch, June 2, 2009

“Geithner’s China Visit Seen Adding Fuel to ‘Great Comeback’ of U.S. Economy”
Supply & Demand Chain Executive Magazine, June 2, 2009

“Geithner visit: Chinese economists skeptical of US strength”
Peter Ford
The Christian Science Monitor, June 2, 2009

Quotes For The Week

“I am a citizen.”

-John Hamilton, at his Sandusky (Ohio) Municipal Court arraignment last Thursday after being arrested by the Sandusky Police Department for refusing to stop mowing overgrown grass at a public park (for which the city has limited funds to maintain).

“I am 100 percent sure that the U.S. will go into hyperinflation.”

-Legendary money manager Marc Faber, during an interview with Bloomberg Television last Wednesday.

“I don’t know why they got Bernie Madoff in jail… They ought to make him secretary of the Treasury.”

-Peter Schiff, President of Euro Pacific Capital and author of the upcoming book Crash Proof 2.0: How to Profit From the Economic Collapse, at the Ira W. Sohn Investment Research Conference in New York City last week.

“We are all grieving over the loss of ‘upward only’ lifestyles and the David Copperfield-style disappearing act of our net worths and savings. Even more frustrating is that we all feel that it was not ‘our’ screw up. We were lured into a false sense of security and aspirations of wealth accumulation by the cosmos. It just happened!!! We were all hit by a pandemic economic plague, not by sniper fire, so we are left without a rationale, reason or an understandable cause. We search the airwaves and the internet for solace and comfort. Why did it happen? Who is to blame? Is there a magic wand that might bring us back to life? We have an unquenchable thirst for information to help answer these questions. However, the ability to cheer up and get on with life does not rest in the plethora of governmental programs enacted to ease our economic pain, or in the well-intentioned commentary of pundits on the history and future of financial engineering and statistics. The solution rests in first, immediately adapting and surviving so that we are around in order to, secondly, understand what information is important and how that information is harvested.

The first objective is most easily achieved by understanding the Kubler-Ross book On Death and Dying, which outlines 5 stages of grieving:

Denial
Anger
Bargaining
Depression
Acceptance

I will save you 200 pages of reading by concluding that recovery is the amount of time required to go from Stage 1, denial, to Stage 5, acceptance. What we have learned after 30 years of investing and cyclical roller coasters is bypass 2 to 4 and go immediately to 5. In short: Get over it and get on with it!”

-Legendary real estate investor Tom Barrack, in his latest “Chairman’s Corner” column on the Colony Capital website.

When Good Deeds Get Punished

A few years ago while reading a local paper, I came across the story of a high school kid from a Chicago suburb who was arrested for removing snow from his neighbor’s property. From what I recall, the young man went outside to shovel after a sizeable snowfall here in the Chicagoland area. As he was getting a good workout from the task, the high school wrestler decided to push on and shovel snow from sidewalks, walkways, and driveways down his street as well.

I remember thinking to myself. Wow. I want this kid living next door to me.

Apparently, not everyone thinks like me, and one of his neighbors decided to call the cops on the teenager upon seeing him shoveling her property.

Sure, the young man should have asked the owner’s permission before he came onto her property, but was it really necessary to call the police department on him? Come on!

Just last night, I came across yet one more example of how some good deeds are being “rewarded” these days. From the Associated Press:

An Ohio man arrested for mowing unkempt grass at a public park said he just wanted to make his city look nice. John Hamilton said he took control of the situation because the grass in Sandusky’s Central Park was about a foot high. According to a police report, a witness said Hamilton was blowing grass onto the sidewalk and shredding trash in the park that had not been picked up.

Police said they arrested 48-year-old Hamilton after he refused to stop mowing and charged him with obstructing official business and disorderly conduct.

City Manager Matt Kline called the arrest unfortunate and said he understands Hamilton’s frustration. Kline said budget cuts have left Sandusky understaffed for seasonal maintenance work.

And from The Sandusky Register yesterday:

According to the police report, he was seen mowing the grass by Penny Randleman, a forestry department employee.

The employee said Hamilton was blowing grass onto the sidewalk and shredding trash in the park that had not been picked up prior to mowing, so she called the police.

Upon their arrival, Hamilton told police officers “he is sick of seeing the grass so long in parks, so he is fixing the problem” Police arrested him after he continued to mow when they told him to stop. Officers cited “liability reasons” in the police report.

What “liability reasons?” From Dave Nethers of Cleveland’s FOX 8 News yesterday:

The acting police chief tells Fox 8 News that the park was littered with trash and Hamilton was mowing over all of it. City Manager Mat Kline says there were bottles and other debris that were being thrown by his mower into the street. Kline also says there are employee issues with unions that are supposed to cut the grass that had to be considered.

Nethers also noted:

A police report obtained by Fox 8 shows one of the officers measured the grass, which was in fact more than a foot high. City crews finished cutting the grass there later on Thursday.

Hamilton was arraigned in municipal court early Friday.

Sources:

“Ohio man arrested for mowing unkempt grass at park”
Associated Press, May 29, 2009

“Arrested for mowing city grass”
The Sandusky Register, May 29, 2009

“Sandusky Man Arrested for Mowing Grass”
FOX 8, May 29, 2009

Me Versus We

When I take a look around these days, I sometimes think this whole “me” thing is getting out of hand.

Think MySpace.

Think clown on the cell phone sharing intimate details of their personal life with everyone trapped in the check-out line at the store.

Think “me, me, look at me.”

So, whatever happened to “us?” Our family, our place of worship, our community, OUR NATION?

Incivility, perhaps?

From The Oregonian’s Phillip Swarts back on May 18:

Midway through a slow day of jury duty, Grant Faber, of Hillsboro “just couldn’t take it” any more. So, after lunch, the 25-year-old man left.

Not surprisingly, that didn’t sit well with Washington County Circuit Judge Gayle Nachtigal, who issued a warrant for his arrest.

On May 7, police found Faber near his home and asked why he skipped out on jury duty. Faber told the officers he left because he was “extremely bored,” according to a police report. Following the judge’s orders, the officers arrested Faber on a charge of contempt of court.

Nachtigal wouldn’t talk about her runaway juror, but said jury duty is a critical part of a fair trial. Juries must be composed of a balanced cross section of the American population in order to be fair and impartial.

“It think it is one of the most important civil responsibilities that citizens … have,” Nachtigal said.

On the other hand, here’s a story from the Associated Press last week:

Chen Fuchao, a man heavily in debt, had been contemplating suicide on a bridge in southern China for hours when a passer-by came up, shook his hand — and pushed him off the ledge.

Chen fell 26 feet (8 meters) onto a partially inflated emergency air cushion laid out by authorities and survived, suffering spine and elbow injuries, the official Xinhua News Agency said Saturday.

The passer-by, 66-year-old Lai Jiansheng, had been fed up with what he called Chen’s “selfish activity,” Xinhua said. Traffic around the Haizhu bridge in the city of Guangzhou had been backed up for five hours and police had cordoned off the area.

“I pushed him off because jumpers like Chen are very selfish. Their action violates a lot of public interest,” Lai was quoted as saying by Xinhua. “They do not really dare to kill themselves. Instead, they just want to raise the relevant government authorities’ attention to their appeals.”

Okay, so maybe that last story isn’t the best example of the concept of “we.” Come to think of it, it may even represent the whole “me” mindset once again, depending on Mr. Jiansheng’s real intentions in offering the jumper a “helping hand.”

Regardless, while I appreciate the sanctity of the individual, I also recognize the importance of the common good, of civility, of civic virtue and duty.

Perhaps a more middle-of-the-road approach may achieve some harmonious equilibirum. A fellow blogger who’s been working in China offered the following earlier this week:

I think relationship is the biggest thing that china has to teach to the west if they would listen. If the west would loose a little of it’s “me” mentality, and the east would loose a little of it’s “we” mentality we’d have perfect road in the middle.

And there’s nothing wrong with being in the middle.

Unless you’re a monkey, that is.

The Cribs, “Men’s Needs” (2007)
YouTube Video Link
Warning! Brief Nudity

Sources:

“Hillsboro’s Grant Faber was bored, so he left jury duty”
Phillip Swarts
The Oregonian, May 18, 2009

“Passer-by pushes suicide jumper in south China”
Associated Press, May 23, 2009

“When you really are part of the team”
Anina
Anina.net, May 25, 2009

Good Economic News All The Time

“The news media have generated a lot of fear. Ben Stein has a point when he says ‘The actual economic conditions are not that bad. I think if we have a recession, if we have a serious recession, a great deal will lie at the media’s feet.’ Hopefully a little perspective will enter the picture before even more harm is done.”

-John R. Lott, Jr., author of Freedomnomics and a senior research scientist at the University of Maryland, on the FOX News website back on April 1, 2008

Now there’s a solution to that darned media being mostly responsible for causing this economic recession.

It’s called “Recession Blocker.”

From their website:

All this irresponsible talk of recession only makes it more likely. Do your bit for the economy by only reading the news through this web browser, which blacks out unwelcome words…

Ahhhh. Pollyanna would be proud.

(Hat Tip: The Prudent Investor)

Subscribe to Barron’s Magazine today and get 52 weeks for $149 Plus 4 FREE WEEKS

Michael Moore To Release Documentary On Economic Crisis

Filmmaker Michael Moore is coming out with a new documentary. And this time, it’s about the economic crisis. From Reuters’ Dean Goodman tonight:

Firebrand filmmaker Michael Moore, who targeted the Bush administration in “Fahrenheit 9/11″ and the healthcare industry in “Sicko,” is now focusing on the global economic meltdown.

The Oscar-winning director will release his as-yet-untitled documentary across North America on October 2, co-financiers Overture Films and Paramount Vantage said on Thursday.

“The wealthy, at some point, decided they didn’t have enough wealth,” the statement quoted Moore as saying.

“They wanted more — a lot more. So they systematically set about to fleece the American people out of their hard-earned money. Now, why would they do this? That is what I seek to discover in this movie.”

Overture said Moore was still working on the film, and was keeping plot details close to his vest in typical fashion.

As-yet-untitled documentary, huh? Any suggestions for Mr. Moore regarding a title, readers? Leave them in the comments section of this post, and I will e-mail Mr. Moore at the end of the month about taking a peek at your recommendations.

Source:

“Filmmaker Michael Moore targeting economic crisis”
Dean Goodman
Reuters, May 21, 2009

Drugmaker Wyeth Accused Of Cheating Medicaid

Say it ain’t so! The Associated Press’ Devlin Barrett reported yesterday:

The Justice Department is accusing drugmaker Wyeth of overcharging Medicaid hundreds of millions of dollars for drugs.

The Justice Department and 16 states have joined in two whistleblower lawsuits filed in federal court in Massachusetts.

The government says Wyeth offered steep discounts to thousands of hospitals for two versions of Protonix, a drug that suppresses stomach acid.

By law, manufacturers of brand-name drugs are required to offer the same rebates to state Medicaid programs that they provide to other customers.

The government claims the maneuver helped the company avoid paying hundreds of millions of dollars in rebates to Medicaid.

Alas, my faith in the goodwill of pharmaceutical companies, fostered by plentiful helpings of their feel-good yet incredibly-corny TV commercials, can never be the same.

Source:

“US: Drugmaker Wyeth cheated Medicaid”
Devlin Barrett
Associated Press, May 18, 2009

Wall Street Pay To Be Dictated By Washington?

The Wall Street Journal reported today that the Obama administration is seriously contemplating changing compensation practices on Wall Street and throughout the financial services sector. The Journal’s Damian Paletta and Deborah Solomon wrote:

The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve’s supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

Among ideas being discussed are Fed rules that would curb banks’ ability to pay employees in a way that would threaten the “safety and soundness” of the bank — such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing “best practices” to guide firms in structuring pay.

At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government’s ability both to monitor compensation and to curb incentives that threaten a company’s viability or pose a systemic risk to the economy.

Just more posturing, or another nail in the coffin for Wall Street as we know it?

Some, like legendary investor Jim Rogers, would say it really doesn’t matter, as they argue a new financial center is being established in Asia. They might have a point, considering that’s where the money is flowing to these days.

As usual, time will tell.

Source:

“U.S. Eyes Bank Pay Overhaul”
Damian Paletta, Deborah Solomon
Wall Street Journal, May 13, 2009

Beware Of Isms

“Isms in my opinion are not good. A person should not believe in an ism, he should believe in himself. I quote John Lennon: ‘I don’t believe in Beatles, I just believe in me.’ Good point there…”

-Ferris Bueller, 1986

“When anybody preaches disunity, tries to pit one of us against the other, through class warfare, race hatred, or religious intolerance, you know that person seeks to rob us of our freedom, and destroy our very lives…”

“Make Mine Freedom”
YouTube Video Link

Hat tip WhatReallyHappened.com.

That Which Didn’t Kill Could’ve Made US Stronger

Earlier today, I was doing research for Boom2Bust.com’s sister blog, Investorazzi.com, when I noticed Jeremy Grantham, the chairman of global investment firm GMO and advisor to such notable individuals as former U.S. Vice President Dick Cheney and U.S. Senator John Kerry, had just released his latest quarterly letter. The British-born investor set aside the last part of his May publication to lay into those responsible for the financial mess we find ourselves in today, as well as those who have traded in America’s long-term economic health to preserve the cancerous financial status-quo. From the piece:

It is ironic, by the way, that the U.S. would be less hurt than most given that Pied Piper Greenspan led all of us global rats off the cliff. And, yes, in this case the Maestro (well named) had an orchestra pit filled with Treasury and Fed officials (especially the NY Fed), and such a large supporting cast of dancing CEOs of financial firms and their reckless board chums that even Cecil B. DeMille would have found them sufficient. So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit. Yet, unfairly or not, the U.S. has some considerable advantages in this mess we created. First, we have an unusually low percentage of our labor force in manufacturing and export-oriented companies that will be the most immediately affected by the global downturn, unlike Germany and China, to name two. Second, the dollar plays an important role that may cushion U.S. pain by allowing U.S. authorities the flexibility to make their own rules where other countries such as Spain and Ireland have most decisions heavily constrained. More profoundly, the U.S. is in a position where necessary sacrifices will simply be less painful. We in the U.S. will have to buy two fewer teddy bears for our already spoiled four-year-olds. The third television set will be postponed as will the second or third car. We will have to settle for a slimmed down financial industry and fewer deal-oriented lawyers. Woe is us…

It may indeed be a better long-term solution to accept a more punishing decline and let foolish overleveraged banks go under together with weak players in other industries. Surely assets would flow to stronger hands with beneficial long-term effects. Indeed, the quick 1922 recovery from the precipitous decline of 1919-21 was so profound that the “Roaring Twenties” suppressed the memory of that earlier depression…

Current stimulus seems to be more about timing. We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period. What is likely to happen in the near term always has far more political influence than what may happen in the longer term. So we have been more decisively selecting the Japanese route rather than the 1921 or the S&L approach of a more rapid liquidation. Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.

I do think I know one thing, however. If a government invests directly, drawing employment from a large pool of the unemployed, and only invests in projects with a high societal return on investment such as hiring workers with well-stocked tool belts to install insulation, or repair bridges and transmission lines, or lay track to accommodate a respectably fast train from Boston to Washington (Yes!), it seems nearly certain that such a government will never have to regret it. Keeping banks, bankers, or even extra auto workers in business seems, in comparison, far more questionable. So questionable in fact that it must be justified by politics, not economics. We should particularly not allow ourselves to be intimidated by the financial mafia into believing that all of the failing financial companies – or very nearly all – had to be defended at all costs. To take the equivalent dough that was spent on propping up, say, Goldman or related entities like AIG (that were necessary to Goldman’s well being), as well as the many other incompetent banks and spending it instead on really useful, high return infrastructure and energy conservation and oil and coal replacement projects would seem like a real bargain for society. Yes, we would certainly have had a very painful temporary economic hit from financial and other bankruptcies if we had decided to let them go, but given the proven resilience of economies, it would still have seemed a better long-term bet. But, as I said, this is all just speculative theory and I don’t have to deal with Congress.

Let me end this section by emphasizing once again the difference between real wealth and the real economy on one hand, and illusionary wealth and debt on the other. If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality. Real economies are much more resilient than they are given credit for. We allow ourselves to be terrified by the “financial-industrial complex” as Eisenhower might have said, much to their advantage.

You can read the entire quarterly letter (in .pdf format) here.

Source:

“The Last Hurrah and Seven Lean Years”
Jeremy Grantham
Quarterly Letter
GMO, May 2009