As I sit here in the Aerie, writing this piece here on Super Bowl Sunday, there are several momentous economic events from which to choose as the basis of this week's Sunday commentary.
So many are these, and of such critical nature, in fact, that to choose ONE would, by definition, actually serve to obscure the larger picture.
That would defeat the purpose of the Blue Penguin Report.
Accordingly, I am going to draw our lens up to the 60,000 foot level and take an overview of the entire Global situation here on February 1, 2009 and identify the themes and situations that we will be talking about for the rest of the year - some 335 Blue Penguin Reports - plenty of time to go in-depth on the particulars of each one.
The United States is reeling.
There is no dispute about that. Unemployment appears to be heading to 10%. The US Dollar, manipulated to a position of weakness by the Bush administration in the early part of the decade (a misguided attempt to boost manufacturing and trade through favorable currency exchange), has fallen down flat on its face (sorry, George Washington!) due to the almost surrealistic deficit that administration ran up. The current interest rate climate (near zero) and stimulus packages, when added to the war expenses, metastasizing foreclosures, job/benefit losses insure that, for the foreseeable future, the Dollar will be structurally weak against the Euro and the Yen.
The Obama administration, in its first days, has wisely focused on longer term economic fixes that are literally, the only 'Hope' the 'Yes We Can' guy can provide us - but these changes insure pain for wide swaths of our industrial base. Insurance companies, Banks, Investment firms, agriculture, for profit-medical companies, pharmaceuticals, bio-techs, forestry, oil & gas, defense, automotive...all of these businesses are going to be dramatically restructured in the coming years. None of us can reliably predict how those changes will impact on the NEAR term - and none of us can afford to focus on that, as the situation dictates dramatic change that will help us to GET to the mid-term with a competitive chance...
And a clue.
Because, the neo-feudal model of the Bush years?
That's D-O-N-E.
The 'Fossil-Fuels and Combustion-Engines Forever' duopoly?
On it's way OUT.
Companies that have avoided innovation, and chosen to plow their burgeoning profits into labor battles and political advocacy are now in line to reap what they have sewn. And that is a whirlwind.
The upshot of these disturbing elements is, as the Obama campaign promised - change.
Change, that in this case, is overdue, well needed and jarring. Tens of millions of Americans are going to discover that not only has their situation deteriorated in the past eighteen months, but it is likely that the lifestyle they knew or aspired to previously, will never again be in their grasp. That is sobering, but it also reality. In fact, as we discuss here in the coming months and years, the conversion of the United States economy from a hybrid 19th Century (commodities, agriculture, extraction industries)/20th Century (insurance, advertising, processed foods) model into a 21st Century version (green, digital, knowledge based, space, robotics, cybernetics, bioengineering, space...) is the single most important task this generation will face, and, like its Depression era forebears, there is every reason to believe this generation will do so while fighting much of the rest of the world Militarily.
That is daunting stuff.
And what is worse? ('How can anything be worse, Guru?) The Obama administration will be trying to right this enormous ship, amidst roiling seas, with at least half of it's citizenry pulling in the opposite direction. As Machiavelli noted in that too-often-quoted-by-Guru line, those who have benefited from the 'old' ways will be pulling to return to them or reinforce them, at the expense of change. The changes that are coming, in the stimulus bill and in the Global arena, will permanently alter the basis of 'The American Dream' for tens of millions of Americans who have no CONCEPTION of such a thing.
For these Americans, many of them already reeling from a country that looks very different from the one they thought they were voting for with a succession of GOP Presidents who promised them their biases would hold sway in the World - their illusion of central position is ALL THEY HAVE LEFT. It is that VERY illusion that kept Detroit from dramatically transforming the automobile after the Japanese influx and oil-embargo's of the 1970's, that kept Blue Collar workers from pushing their children towards new arenas and scholarship despite the near-uninterrupted decline in their relevance and circumstance over the past thirty years - dooming the kids to the fate of the fathers - now all threatened together.
What those companies have discovered - that competition does not wait for Y-O-U and those workers have learned - that not only isn't mommy staying home, daddy making a big-time income that will easily support a single family home, two car garage, new car every other year (the '50s 'dream' that Reagan sold in the '80s, already gone before he was elected) but those elements - a single family home, an automobile (let alone two), a decent paying job, a relationship - are all subject to new realities that render them not only less desirable, but less affordable and even, less POSSIBLE.
And they aren't the only ones in for a shock to add to the shock they have already endured. Those who HAVE looked to scholarship for a leg-up and believed that making it INTO the hallowed halls of white-collar life - Medicine, Law, Investment Banking...guaranteed one a certain lifestyle are now discovering the same thing those auto-workers realized - there ARE no more guarantees.
What happened?
The post WW II economy was built upon several unsustainable factors that allowed a country of a couple of hundred million people to bestride a world of BILLIONS.
A Europe and Japan in ruins took a generation to rebuild.
A Russia beholden to ideology took a generation to implode.
A China only one generation removed from rice paddies and agricultural life took another generation to embrace technology and educational reforms.
A Latin-America in the grips of Dictators, Death-Squads, Catholicism and Oligarchs has taken two generations to move towards modernity.
An India beholden to colonial England took two generations to remove the Brits, split off from Islamic Fundamentalists and embrace modernity.
An Islam battered by two world wars, broken off from the Ottoman empire, colonized, granted independence...has been lifted by the commodity rush for its oil but held down by its faith and rejection of modernity - creating a hybrid of modern technology and ancient ideology that threatens to bring the entire planet under in favor of those who 'crave death as much as you cherish life'.
An America not yet sufficiently threatened by environmental degradation to account for the damage and not yet sufficiently 'free' to offer equal opportunity for the pursuit of 'life, liberty' and 'Happiness' that are its creed, to its Blacks, its women, its Gays or those who answered its call for the 'tired, poor, huddled masses yearning to be free'. They all yearned, they are all now free, to some extent that will only increase.
So what to do?
Scientists perform experiments in vacuum conditions to understand how forces respond in ideal conditions - ie: conditions that are favorable to the results the Scientist is seeking. The highly conditional Global circumstances of the past sixty years WERE a vacuum.
THAT was the 'bubble' that has burst on America. A Vacuum condition in which, only America was whole and in-place to drive global growth and set global priorities. The changes, which we've listed in only a broad, simple fashion are not going away - ever. Once the atmosphere hits that test-tube, all bets are off. That is why for every 1,000 conditions achievable in the laboratory, there is only one or two that can handle being exposed to the elements of reality.
In 2009, America is exposed to reality - big time. We can grow up, pull our pants up, roll up our sleeves and compete...put aside nonsensical discussions about bygone ideas of race, faith and sexuality and focus on the century we are actually LIVING IN...
Or not.
There is no rule that dictates American primacy in the World, any more than there is one that says the Yankees will always win. America's rivals want that role for themselves, just as the Yankees rivals do, and even those who deem America the leader, want her humbled and contrite, working as a partner not an overseer. The only way for America to overcome these obstacles, is to have the BEST PLAYERS and to do THAT, we need to get smart, get real, get humble.
If you understand this place, you understand how difficult that is going to be.
Obama has shown that he is smart AND humble, that's the start we need.
But he and his team are up against it, due to conditions we've just discussed. No American President has ever had less room for error than Obama. And that is why his Treasury Secretary, Tim Geithner, choosing to chastise the Chinese on DAY ONE of his term is the sort of mistake America cannot allow. Already, in the immediate aftermath of the comments, the Chinese have adopted a belligerent tone not heard throughout the crisis previously and cozied up to the Russians, who they previously had kept at arm's length.
Step ONE in this crisis, more than the stimulus battle, which while begun, will take many forms and many fights in the coming years (the voting in Congress is the BEGINNING, not the end), is to shore up America's place in the World by taking an HONEST and REAL appraisal of the circumstances. China is not to blame for the crisis we find ourselves in, any more than Steinbrenner is responsible for the plight
of the Pittsburgh Pirates.
In FACT, the Chinese have behaved with extraordinary grace and reticence thus far, OUR crisis has harmed them - our largest creditor, and done so not only by slowing business conditions but through the very types of Structured-finance products that the Bush administration arrogantly PUSHED on the Chinese during the past eight years as a necessity. Instead of saying 'we told you so', they have said 'show us you are solid and sincere about partnership' - all the more reason N-O-T to begin a new economic regime parroting the SAME misdirection towards them that the Bushes used.
Big mistake for Geithner and critical for us that Obama 'gets' that and is prepared to speak to the Chinese, the Japanese, India, Latin America and the EU directly. Each of those spheres are still disposed to working with America and perceives their own prosperity as being linked to our restoration - not to dominance, but to functionality. Islam and Russia do NOT wish this and do NOT intend to work with us, in fact - quite the opposite, they intend to do whatever they are able to obstruct us. We can survive this ONLY with a solid alliance with these other Global players and cannot afford the 'on-the-job training' miscues the Treasury Secretary began with.
On the other hand, like the Country - he can only go UP from there!
See you tomorrow.
