Dana Blankenhorn

Old Economy, New Economy

- Norah Jones "Sinkin' Soon" Lyrics

Paulson lied.

He claimed to have a coherent plan for $700 billion in workout money. I supported him on that basis. He would buy up toxic assets at the market value, find the real value in them, and re-sell them for what they were.

Instead he propped up the capital in banks and insurance companies, no strings attached, and now he claims to be trying to prop up consumer spending and housing.

Heckuva job, Henry.

Michael Brown at least had the excuse of a rotten career in the private sector. Hank Paulson was once the head of Goldman Sachs, the smartest investment banker in the world.

Markets have tanked for a good reason. It is now plain that there is no one with a brain cell alive in Washington City. If Paulson has lost his marbles, the old economy is lost.

The implications of that are painful to contemplate.

Housing has to find its level, regardless of the consequences. Consumer spending has to find its level, regardless of consequences. People have to get their own balance sheets in line, on their own, or go under. Same with all kinds of businesses, all around the world.

The old economy is dead. It can no longer be saved. And this has enormous implications for the policy of the new Administration.

The Crimes of CNBC

Think of this as Volume 11, Number 46 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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In all the to-ing and fro-ing over the financial mess we are in one culprit has gotten off scot-free.

CNBC.

I have been watching CNBC for over a decade now. I'm one of those shut-in executives who are their prime market. Here is what I have learned.

They are always, always wrong.

It's not that they are trying to be wrong. But what they do is look at the latest trend in order to identify where people should be putting their money. That is what is always wrong.

Call it the stupidity of crowds. Any financial trend or concept immediately stops working once enough people start using it. Always. When everyone is buying something you should be looking to sell. When everyone is selling you should be looking to buy. This is the way to profit, and always has been.

During the late 1990s, however, every guest on CNBC was touting Internet stocks. When they tanked, CNBC guests (and talent) went on to the next hot trend. And the next. And the next. Maria Bartiromo cooed over hedge fund managers like they were her lovers. Once Jim Cramer touted any stock on his Mad Money show, you could be certain some stupid money was about to get shaved, once the smart guys got downwind of it.

The result has been to exacerbate every trend. It's terribly unhealthy.

Sauron's Eye

This victory seems different somehow. More "once and for all" than anything I've experienced before.

I anticipated this, of course, but the moment itself is incredibly delicious.

It's the reaction on both sides which has me feeling this way.

Start with the Democrats. Liberals want revenge on Joe Lieberman, but President-elect Obama refuses to give them the satisfaction. He wants Lieberman in his caucus as a bridge to the "moderate" Republicans left in the Senate who can help him beat routine filibusters -- Olympia Snowe, Susan Collins, Richard Lugar, Arlen Spector -- people who watch to see which way the wind blows and don't go knee-jerk into their own party's column.

Barack Obama really is trying to make the Internet Thesis of Consensus happen. He's dead serious about this. Liberals, like those at DailyKos and Firedoglake, may see Lieberman as a snake, but Obama thinks he can grab him by the head and bring him on-board, most of the time.

It's risky business. The President-elect has a pre-approval rating of 70, much higher than any Democrat since LBJ, and he wants to use that to get consensus on a coherent program involving the economy, foreign policy, health care, and the War Against Oil. It's a deep game, for historical stakes, and no one has played such a game since Nixon. (Reagan just played the hand Nixon fed him.)

Shame of the South

If you're interested in a good book for the Christmas of 2009, drop me a note. If you can't wait just follow along here over the next several months

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In the wake of Barack Obama's historic victory there are many proclaiming the end of race-based politics, or who at least see it on the horizon.

I don't.

I have spent the last three years as editor at Voic.Us, a political blog site. My method was simple. I wrote stories about southern politics, based on links to newspaper stories and blog posts. My job was to collect all the political blogs I could in each state, and then try to describe to readers what they were obsessing about in terms of local and state politics.

The Voic.Us beat eventually covered 10 southern states. I eventually put them into two camps:

1. A near-south group (Florida, Virginia, North Carolina, Kentucky) where the parties mirrored those of the nation as a whole, and
2. A deep south group (Tennessee, Georgia, South Carolina, Alabama, Mississippi, Louisiana) where the parties divided by race. Those who chose to be Democrats had to put up with their neighbors considering them "n-lovers."

Note. Five Thirtyeight.com says that Republicans actually did better in some Voic.Us areas -- Kentucky, Tennessee and Louisiana -- in 2008 than in 2004.

China's New Deal

Think of this as Volume 11, Number 45 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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China's 4 trillion yuan stimulus program may turn out to be the most important story of this year.

How much is that? It's one-sixth of the country's GDP last year. The equivalent figure for the U.S. would be something like $2.2 trillion. It's nearly what the Iraq war's harshest critics say was spent there, by us, over this decade.

What will China get for its $586 billion? It will get new railways and subways. It will rebuild Sichuan after the earthquake. And it will stimulate demand.

Stimulating domestic demand, importing raw materials and putting money into job-seekers' pockets all around the country, is what the New Deal of FDR was all about. The difference was that FDR's New Deal didn't really do a whole lot of this. They didn't spend a lot.

This program is more on the order of what Hitler did in Germany, around the same time. Only it's not going into swords -- or not much of it is. It's going into plowshares. And that's important.

The main thing this program will do is help grow the Chinese middle class, outward from its base in manufacturing, into other areas like construction and civil engineering. From there the money will flow outward further still, creating new demands for Chinese-made goods, for education, and for medical technology. Yes, this is also very very good news for Sheldon Adelson.  Will it save him? Who cares?

The Reverse McKinley

A brief comment on last night's results, from a purely analytical perspective.

It was interesting to me how the 1992 results re-capitulated the 1860 election, only in reverse. Clinton won where Lincoln had, while Bush won where Douglas or Breckenridge had.

This year's results are a reverse of 1896. Obama has won where McKinley did, while McCain has won where Bryan did. What's most startling about that is it shows Republicans to be a Populist Party, one led (no joke) by Sarah Palin.

The result of these switches was almost a wash. Despite the higher turnout Obama's popular vote win did nothing more than reverse the 2004 result. But it's really significant, and shows the makings of a longer-lasting coalition than Clinton's win did.

What Will This Election Look Like Down South?

For the last three years I have been honored to cover southern politics at Voic.Us, a political site launched by a friend and then left in my care (he went off to start a sports business -- smart fella.)

At Voic.Us I go for a minimum of personal commentary. (Sometimes I can't help myself.) Instead I try to let links do my talking. Some stories can have dozens of links to blogs and newspapers.

I try to look at every political blog in 10 states -- Louisiana, Mississippi, Alabama, Georgia, Florida, South Carolina, North Carolina, Virginia, Tennessee, and Kentucky. For a Democrat this can be depressing. Back in 2006 I liveblogged the returns and watched as Democrats picked up a grand total of 1 House seat in the region.

I just finished my final soundings for 2008, doing articles on each one of those states. Here is what I found out.

If the Voic.Us region were the whole country you would doubtless be looking at President McCain. He has solid leads in 6 states and a real chance of winning 3 more. Only one state, Virginia, can definitely be painted blue.

But almost everywhere conservative bloggers seem dispirited. (The exception is Tennessee, which has now surpassed Georgia as the most ineffectual Democratic organization in the nation.) Democrats have Senate seats in play in Mississippi and Kentucky (the McCain landslide will bury them there), but they look set to break even in Louisiana and could actually make gains everywhere else.

Why?