Wednesday Night #1534

The difference between the optimist and the pessimist is the pessimist has a little more information

The Scribe’s Prologue
Evolutionists trace the physical makeup of fauna from unicellular beings through evolutionary changes which enabled animals to develop organs and brains, until ultimately, when the pressure of their pulmonary and systemic circulation attained a delicate equilibrium, they became land based.  Whether the product of random happenings, an innate drive to evolve intellectually as well as physically, or the hand of the Deity, there cannot be any doubt that the self-interest of the species has been advancing every way but spiritually, regardless of the cost to future self or fellow living beings.  The human invention of money (or more precisely, credit) as a medium of exchange has brought into focus the drive to evolve into a better life, seemingly without penalty but apparently, more importantly as a symbol of power over fellow humans.  It is evident that it has been successful, especially for those favoured individuals who have unlocked the secret to access to that intangible asset known as credit.

The evening opened on a cheerful note of congratulations for Kyle Hill, newly-minted Ph.D. His work http://vimeo.com/27127938

The debt-ceiling crisis
Because it has no precedence, the danger of the  United States defaulting on the interest payment on its national debt has triggered an Armageddon type fear on this continent and indeed, around the world.  A more realistic view sees this more as a  political battle with some Republicans seeking a knockout punch in preparation for the main event, namely the 2012 election campaign.
The truth is that the United States is the only country in the world that has a debt ceiling, that daily national revenue is more than adequate to pay the interest on the debt and that there does not appear to be an appreciable concern over the individual U.S. states (or Canadian provinces) that are technically bankrupt.  In Europe too, everyone, including the banks, invests in government bonds.  Everyone appears worried, but nobody is acting on that concern.
There cannot be any doubt that the current (contrived) U.S. crisis will be resolved, but there should very well be valid concern over mounting public debt world-wide, the slowing down of China with its aging population and fallout from its one child policy, huge disparity between the wealthy and the general population, energy issues, pollution and more recently, trade.
The  failure to rein in the bankers around the world is said to have been responsible for the current world-wide debt situation, but unless an alternative solution can be found, this appears to be the most logical solution, although risking the suppression of successful risk-taking which has favoured the advance of western civilization.  There has been some debate over the probability of a successful solution through the sale by the U.S. of its gold holdings.

Some Wednesday Nighters predict that there is a small probability that we may be entering a decade of little or no growth, hence decreasing tax revenues for all levels of government, increasing civil disobedience, perhaps protectionism, xenophobia and/or even war, a prediction not supported by the majority of those present.  The current situation will more likely result in changes here that are long overdue, that having become aware of the problem we possess the human ingenuity to solve it.  Neither is the European problem said to be intractable.  The eurozone has produced the embryo of a combined euro debt, ultimately the possible issue of euro bonds, leading to a cure.  Some Wednesday Nighters draw a parallel with a bankrupt Newfoundland having successfully joined Canada.  A common European banking system, though laudable, would take a longer time to create.

Canada
Although Canada is currently doing better than many of the world countries, we should be concerned about our own national and household debt, our strengthening dollar versus that of the U.S., increasing household debt and the extent of our reliance on national resources of finite size limiting our interest in innovation and creativity.

The Prologue

We are deeply saddened by the news today of Jack Layton‘s new cancer that is forcing him to step down temporarily. We hope that it is indeed a temporary absence, not only because we wish him well, but because we believe that he is needed at the helm of the NDP, our Loyal Opposition. We do not believe that any of those waiting in the wings would be able to both generate the genuine affection in which he is held across the board and maintain the shall-we-say somewhat disparate caucus to effectively hold Mr. Harper’s majority government to account. Has anyone noticed that StatsCan reports Crime falls to 1973 levels as Tories push for sentencing reform? Or that the Canadian Parliamentary Coalition to Combat Anti-Semitism (CPCCA) has declared that criticism of Israel should be considered anti-Semitic: Canada clamps down on criticism of Israel – there will be (many) more issues come the fall session of Parliament, all requiring intelligent opposition.
The debt ceiling crisis heads our list of topics, although the media analysts appear to be as confused as we are by the almost-hourly developments. Tonight’s speeches did not help, in the sense that the divide appears greater than ever and each appealed to a certain base. Your reaction will depend on with which base you identify. Awaiting the wisdom of pundits far and near, for the moment Bob Schieffer of CBS has given the best on-the-spot analysis: Party leaders unable to lead on debt
“This is a gridlock that is far from being solved. This is a very different kind of situation than we’ve had in recent years in Washington. Most people in Washington will tell you that the leaders are ready to deal, that Speaker Boehner is ready to deal, that Barack Obama is ready to deal, that the Majority Leader in the Senate, Harry Reid and his counterpart Mitch McConnell are ready to deal. But they cannot get the followers to follow the leaders.” Will the average American respond to Obama’s call to action and besiege the politicians with e-mails and phone calls?
Last week, on PBS Newshour, David Brooks took issue with “the president’s tone of being the only adult in Washington, everyone else is a child”, however as we contemplate the daily – if not hourly – bulletins about who will not support whose proposals, we can only sympathize with President Obama. Talks are on, talks are off; politicians stalk out of meetings and promptly call a press conference to justify their behaviour. Their apparent insouciance regarding the state of the nation as they fight for what can only be regarded as political advantage (and they may be very surprised in 2012), is simply appalling. We need look no further than the latest from the NYT: House and Senate Leaders Split on Debt Ceiling Plan  “The Democratic Senate and Republican House put themselves on a legislative collision course Monday as they moved forward with significantly different plans on how to raise the debt limit and avert a possible federal default next week”
Meanwhile, the IMF has weighed in calling for US to raise debt ceiling and cut spending, though we don’t see mention in the headlines of raising taxes and summaries of the review indicate the institution’s characteristic avoidance of clear-cut recommendations, or language.
Monday’s Globe & Mail carried a thoughtful, almost angst-filled, piece by Clive Crook of the Financial Times that we suggest is required reading: Washington is drowning America Because the author is a self-proclaimed “born-again admirer of the American people, the American project and the American system of government [with] no patience with the view that the country was entering its twilight years. … a militant anti-declinist”, the arguments are more telling than the often smug coverage that accompanies even a minor foot fault of the USG and/or its representatives. We were surprised by Paul Krugman’s negative reaction, and even more so by many of the comments on his blog site.
A sidebar to the crisis from the Christian Science Monitor that should provoke some comment from Wednesday Nighters: Why investors turn to gold amid debt-ceiling uncertainty “The price of gold went up $12.90 an ounce on Monday alone, closing at $1,614.40. But if the debt ceiling is raised, the gold price could come down over the short term.” There is a downside to everything!
The Greek/EU Crisis is still as relevant as last week, but now appears in the news only with reference to Moody’s action in cutting Greece’s rating, warning that a planned debt swap would constitute a default. We can only hope that this implies that there is much profound thinking, analysis and planning happening somewhere behind closed doors. We have been fortunate over the past several Wednesdays to enjoy Kimon Valaskakis‘ reflections on the underlying issues and need for solutions grounded in correct diagnosis of the problem, along with comments from what he refers to as the Wednesday Night Economists Caucus. Soon these will be distilled into a paper which we will proudly publish on our websites and, of course, that of the NSoA. This week, Ken Matziorinis will present to WN the ideas he has developed in a thoughtful paper “The Eurozone in Crisis: Change or Fail?” We can make copies available to those who are interested, with the understanding that this is still a draft.
Of course, the horror of the bomb explosion and mass murders in Norway has taken over the air and ether waves. As always with such stories, we are treated to endless, repetitive coverage, adding little to our understanding of how and why this could happen, but most certainly fulfilling the murderer’s wildest dreams of self-promotion, and no doubt fuelling ambitions of equally sick imitators.
The horrific stories of famine in the Horn of Africa continue unabated – and we are heartened to see that coverage is now global – while The Guardian’s account of the G20/FAO emergency meeting is not optimistic.
It is hard to absorb in these days of instant communication, how quickly THE STORY OF THE DAY slips down below the fold. Thus, once Wendi Deng (Mrs Murdoch) had almost felled her husband’s assailant with a very professional right hook in the committee hearings, the story of the phone hacking/demise of the News of the World, which had most of us enthralled, was seemingly over. The follow-up stories will likely be relegated to the back pages now that Rebekah has resigned.
Some old stories, like old soldiers never die, they just fade away (eventually). Thus we have the DSK story revisited with Nafissatou Diallo’s appearance on ABC’s Good Morning America
As we strive to end on a high note, our final contribution is one we hope you will find as wonderfully uplifting as we do. It is the Financial Times profile of Joi Ito and the MIT Media Lab that he now heads. What a wonderful playpen for geniuses! It gives one hope in the midst of the doom and gloom of the news that surrounds us.