Dana Blankenhorn

On the Battlefield

Funny thing about elections. As the national numbers move the battlefields shift. They don't go away.

With Barack Obama ahead by 7-10 points in national polls, then, Georgia has become a battlefield. Recent polls show the Democrat down only 3 points. State House candidate (and former blogger) Chris Huttman notes this makes the state eminently winnable. The main DailyKos site adds this makes the execreble Saxby (the draft dodger who called a three-limb amputee a coward) Chambliss eminently beatable.

This is firing us up. Time to go back inside the Obama ground game.

The Year of Shortages

Think of this as Volume 11, Number 41 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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The year 2008 will go down in history as the Year of Shortages. (Picture from Endrtimes.)

My own story is typical.

• Last year we ran out of water here in the Southeast. I started calling my front lawn a garden. I let it die. I planted a rosemary bush and stopped mowing. No one called me on it. When I go to the bathroom, if it's yellow, I generally let it mellow. But there is a limit. Laundry has to be done, showers have to be taken. Sometimes the water in the tap stops, and what little is there becomes brown and brackish. Then I have to buy water at the grocery to stay alive.
• The energy shortage hit hard. We insulated the house tight as a drum, but it still didn't lower the bills. We raised our summer temp to 77 and our winter nights are at 55. The bills stay high. This summer we ran out of gas. I had been "ready" for this, trading in my van for a Scion years ago. But I do need some, sometime, and weeks ago found myself wandering around the area looking for an open pump. When I found one a line formed behind me. My 20-year old daughter was scared to try and find a fill-up, so she borrowed my car.
• Now comes the money shortage. Half my retirement savings are gone. I'm afraid to use the credit cards. I used to watch bear markets with glee on the TV, and now I can't watch at all. My wife got some stock options from work, they like her there, but they're worthless in the present market. We were going to add to the house and send the kids to college. We have some cash, but the home improvement idea is gone and we wonder, can we still afford to educate the kids?

Check that. My story is not typical. We are very lucky. Very lucky indeed. We weren't hit by the spring tornadoes or the summer hurricanes. We weren't flooded out, and the taps still flow. We have enough gas, and electricity to turn the ceiling fans. We still have cash, my wife still has her job and I still have some money coming in. Compared to the vast majority of people we are in very good shape indeed. We have a roof, we have the Internet, we have one another.

In the years before the year of shortage I was a pessimist. I saw the horrors coming from a great distance away. I didn't know how it would play out, but I tried some scenarios in my head. And I screamed through this blog that the sky was about to fall. Nothing I said did any good at all.

Now the sky has fallen. Good businesses can't get the loans they need. The cost of living is skyrocketing but people are about to lose their jobs. A lot of people. The crime rate is rising, the fear is growing palpable on the streets. Will the schools stay open? Will there be money to pay the cops?

Some years ago technology change took away our little video store. Now the CD store looks about to go, the owner unable to crack the jokes with us he once did. The restaurants are still open but you can get a table at any time, the waiters are a little "too happy" to see us. You can see the fear in their eyes. No one can do a thing about it. No one talks about what they are thinking. They're scared.

All the material shortages pale in comparison to the biggest shortage of all.

Hope.

How the Haties Got That Way

The Haties are not a unique force in our history. You can see their faces where I live, in the old Confederacy.

But their cause is different.

The cause for the South was the "bargain" which brought them into the Union on the backs of black slavery. The struggle that defined our history through the Civil War took 75 years to erupt, and echoes on in many ways still.

The cause for the Haties is equally old, so don't dismiss their threat.

You can trace it back to World War II, the life-or-death struggle of civilizations with intractable "others" defined by race, ideology, and a religious form of nationalism. Taking out Hitler and Tojo took everything we had. We had to fight as dirty as the enemy.

This attitude was taken into the long Cold War struggle with the Soviet Union, which was fought in 10,000 places. The European line became fixed in 1948, but the lines elsewhere were fluid. Wherever we saw the enemy we countered. We felt forced to, especially, following the success of Communism in China and the Korean conflict.

McCarthyism never died, even after McCarthy was discredited. The us vs. them attitude was an integral part of the CIA's activities. We took out Iran's government in 1953, replacing it with the Shah's dictatorship. We created a dictatorship in Guatamala a year later.

This set a pattern that never really ended. The only way to fight a Communist dictatorship, even a democratic government that might tolerate them, was to enforse a right-wing dictatorship of our own. Not just Vietnam and Cuba, but throughout Latin America. We fought proxy wars in Africa, supporting pro-apartheid forces, through the 1980s. And, of course, we fought Charlie Wilson's War, which created Al Qaeda and the Taliban in Afghanistan.

In this way we created generations of veterans, and their families, not just from our military but from our spy services, who saw the world's struggles in black and white, and whose preference for dictatorship over democracy was proven by history.

Starting in 1968 this became the partisan divide, and since then the Haties have been let loose, on the world when Republicans were in power, on us when Democrats were.

Capitulation

The most important task in any downturn is to reach the moment of capitulation.

(This neat graph of the emotional roller-coaster comes from, believe it or not, FinanceManila. Note how despondency at this point would be even better.)

The stock market has tried to do this several times in the last few weeks, and so far it has failed.

The real estate market, on the other hand, may finally be doing it. The number of homes sold rose in July. Critics called the buyers "vulture investors" taking on foreclosed properties, but they are all putting capital at risk, so God love 'em.

Markets can't hit bottom until buyers come out and sellers start to disappear. In a fierce downturn this can happen anywhere from 30-50% from the market's peak. In the case of the NASDAQ, you will recall, the market average fell from about 5,000 to under 2,000 before recovering. (The latest downdraft has it at 1,750, testing those old lows.)

Why should housing be any different? It shouldn't. Prices rose in a bubble to unaffordable levels. Homes were unaffordable even to those willing to take out liar loans and balloon notes. Now they must fall until they are affordable by ordinary people, paying just 25-33% of their monthly net income, on fixed rate notes held by the lenders. Until we reach that point we may have hit a "bottom" but we haven't hit firm ground on which to build a recovery.

As to everything else.

Buying Opportunity

It's official. When Jim Cramer says panic, you've got the buying opportunity of a lifetime.

I can't call the precise bottom. We're in a period of testing lows. We are not going straight up.

But we are going up. Here is why.

The Fed and Treasury Department are dedicated to freeing up liquidity, worldwide, and they will succeed in time. The CDOs will be unwound even if the $700 billion has to be invested several times.  With Europe divided and Japan frozen in fear, the world has no choice but to accept those dollars and use them to jump start their own economies.

That's what makes this so delicious. It's like unclogging a drain. Once the obstruction is gone things will flow fast. At that point we will need to take back much of that liquidity. Inflation will be a worry. But you'll have the added liquidity, plus the unfrozen liquidity, all looking for opportunity.

Market goes up.

Pile On

The recent growth of Barack Obama's lead in opinion polls, when read through the media filter, may cause many to lose enthusiasm.

If it isn't a"horserace," if it isn't "close," if they can't go to "swing states" and warn about this or that campaign tactic, today's political reporters don't have a Clue.

But the size of a victory is just as important as the winner's identity. Here is why:

1. Mandate -- Generally a big win is needed to create big change. The rule in democracies is a narrow win requires compromise, and only a big one lets you install your program.
2. Momentum -- A big win creates momentum for change. It invests the people in what is about to happen in Washington. A small margin, like that of President Clinton in 1992, is a hand that is easy to overplay, momentum easy to blunt.
3. Policy -- Our problems require investment by all of us, not in passing a program, but in implementing it, in making the changes in our lives and careers needed to make things better.
4. Moderation -- The most important point about a big win is what it does to the losing party. You can blame a narrow loss on the tactics or the candidate's personality. A right thumping makes you re-examine your premises. Democrats did this after McGovern's loss in 1972 (that's why Carter won) and Mondale's 1984 thumping (that's when the DLC was started)

If you want a responsible and legitimate Republican opposition, you have to demand it. By voting Democratic, even if that means holding your nose as you do so.

Segregation

The clearest fact of life in the era now ending is segregation.

Not racial segregation, although that still exists. I'm talking more of social segregation, religious segregation, economic segregation, media segregation, and political segregation.

We have modeled the cul de sac attitude in how we live, and now live lives completely separate from one another.

• When you drive to work, by yourself, you don't deal with other people except on your own terms, at a gas station or in a store getting coffee. And you can choose to shop near your neighborhood, among people just like you.
• The Internet does not help. It's easy on this medium to only look at things which validate you, and to flame anyone who questions your assumptions.

No two places illustrate this segregation better than Arizona and Alaska.

Neither could not exist without federal subsidies. Arizona would have no water without federal dams, and Alaska could not expand its civilization absent federal highways. (The picture is of a traffic jam on top of the Hoover Dam, on the Arizona-Nevada border.)

But on the ground, the people in those states have long bought into the lie that they are totally self-reliant, independent, that they are solely responsible for their own prosperity. And when you don't see the Mexican immigrants who pick your food or build your houses, and you don't see the petrodollars that subsidize your WalMart lifestyle, it's an easy lie to buy.

These are extreme versions of what we have become.  We don't see one another. We don't see what made our lives possible. We credit nothing but our own efforts. Easy, then, to dream a dream where we can have it all, fly across the state in our private plane from palatial mansion to palatial mansion, take the whole state for ourselves, declaring it independent and holding all those riches as our personal property. To hell with anyone else.

This disconnection from the world's reality made the "shock and awe" of the Iraq War possible. We could turn the massacre of thousands into a TV show, "embed" some loyal reporters with our storm troopers, and paint a moving picture of freedom on the march.

But reality has a way of intruding. For every action there is a reaction. You may control the land but you can't have the people. You may pay for that war, and more, by creating Confederate Money, but the scam will eventually be found out.

Confederate Money

The whole Big Shitpile comes down to one simple phrase.

Confederate Money.

Americans know what Confederate Money was. It was money printed by the Confederacy during the recent unpleasantness. Early in the war it was very good money. When fortunes turned it became very bad money, eventually worthless money, thus  a shorthand way of saying worthless money, non-money money.

CDOs are Confederate Money. What our laws allowed, and what our bankers did, was to take a bunch of mortgages -- good, bad and indifferent -- bundle them into a single security, then sell that as a valuable bond, with a "guarantee" provided by insurance and, often, the backing of Fannie Mae or Freddie Mac.

While the mortgages were being paid on time, this was good money. Real money. It was treated as such by bankers around the world. After all, it was insured, and it had the approval of the U.S. government.

The Gettysburg here was the foreclosure crisis. When mortgages started going bad, you couldn't tell from looking at your CDO whether you had bad mortgages in it. A $10 million face value security with 1 bad mortgage in it might be worth 99 cents on the dollar (plus interest, so make it $105), or it might be worth 95 cents on the dollar. Or there might be two bad mortgages in there. Or five. Or ten. There was no way to tell.

Thus these securities became impossible to trade. You couldn't place a value on them. They became worthless. They became Confederate Money.

Populism is for Losers

Think of this as Volume 11, Number 40 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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The most telling fact of the last week is that Wall Street and big business advocates have been forced to re-think their knee-jerk support of the Republican Party.

That's because, in its embrace of its Church Street wing, the GOP has had to eat increased amounts of Populism to stay in power. Populism forced the party to end its Bush-Dole feud in 1988 in order to pivot against Pat Robertson. Populism was let into power only because Bush the Lesser was a Bush, and thus it was assumed he would not crash the ambulance through populist tendencies.

But Bush did crash the ambulance. Wall Street lost some of its enthusiasm, but remained strong enough to see John McCain to victory over Mike Huckabee.

Then came Palin. And the bailout bill.

Sarah Palin was put on the ticket because she could bring the Populist wing of the Republican Party enthusiastically on board. Regardless of what you feel about her personally, her political personality is right out of the William Jennings Bryan playbook. Small town, producers of basic goods (oil and moose), church-going people with a thick streak of bigotry.

When kids are taught American history, they're taught about the rise of Jefferson, which was essentially Populist, and the Party of Jackson, which was also Populist. By that I mean they were distrustful of big institutions, big businesses and government authority. They may even be taught that, in the run-up to the Civil War, the North represented manufacturers and the South farmers.

Here is what they are not taught.

Since 1860 Populism has been the losing card in American politics. Wall Street was Republican through the age of FDR, switched to support Democrats during the New Deal and World War II, then gradually fell back to the Republicans, who have now been the majority party for a generation.

The most important political event of the year may have been Monday's House vote on the bailout bill. House Republicans, taking a cue from their Populist constituents, went against the bill 2-1. They lied to their leaders, who then lied to the Democrats. The deal Wall Street needed could not get done.

The reaction, on CNBC, was shock, apoplexy, followed by all the stages of grief. The anchors there are as Republican as those at Fox News, albeit without the populist sugar coating. So are their guests. Neither could believe that their party had deserted them, that the people they put into power were calling them names.

Even on the vote last night which resurrected the bill, 14 of the 25 no votes came from Republicans. The party's standard-bearer, Sen. McCain, did vote the "right" way, but grudgingly. Many on Wall Street saw his grandstanding of the previous week as scuttling a deal as it was being done, and he refused to explain himself when given a chance in debate.

By contrast, Barack Obama delivered a 13-minute speech supporting the bill. It may have been the most important speech of the year so far. In it he set terms by which the Democratic Party will support Wall Street's interests, not just now but in the future:

Govern or Kvetch

There are two ways to approach politics.

You can seek to govern or you can seek to kvetch.  That is you can seek responsibility of you can run from it.

Most of us are kvetchers. We are so far from the reality of power that there is no cost to our kvetching. We say "if I ran the world" but we don't so where is the harm.

If we take that attitude  into our political lives and depend upon it in every case nothing can get done unless one side is oppressed. This is the key to the Nixon Thesis of Conflict. It's about getting to 51%, it's about us vs. them, it's about playing dominance games. It is, at its heart, dysfunctional, and it has brought us to this point. The beliefs underlying Nixonism no longer work -- seeking the "other," fighting the "other," destroying the "other" has become a dead-end street.

It is at the heart of what I call the Internet Thesis of Consensus (because the Internet is where these values spring from) that we seek a general agreement and work out from there, rather than seeking disagreement and working inward. The latter search may get you to 51%, and the American system of checks and balances can be very frustrating in that search (which is why the Bushies turned over the table) but that's what conflict gets you.

So my question to Jerome Armstrong and Markos Moulitsas (above), to Digby and David Sirota and Jane Hamsher, to Howie Klein and all the rest, is this.

You want to govern or you want to kvetch?

What happened on Monday is that your kvetching killed a compromise that might have worked. We  buy these CDOs, this Confederate Money we let Wall Street create, we take it apart, toss out the garbage, renegotiate what we can, and put together new instruments people can value for re-sale. It can work if we have enough capital backing the play so everyone who holds the fake paper knows they will find a buyer. We can even make money doing it.

Instead, Markos became Richard Viguerie (right) with hair. The simple plan went down, and today the Senate will debate a Christmas tree. Something for everyone. Do conservatives think higher FDIC limits and the elimination of the "mark to market" rule will save the day? You got it. Do liberals think limits on CEO compensation and mortgage forbearance will save the day? You got it. Anyone else got anything else on their wish list? You got it. Now pass it.

You know what the kvetchers will say? This plan has their stuff in it, hell no.  Markos hates Viguerie and Viguerie hates Markos. These are the habits of lifetimes.

These are the habits we must break if we're to save the country and save the world.