SYRIA AND THE WAR PARTY: “AFTER YOU GET WHAT YOU WANT YOU DON’T WANT IT…”

6/17/13

President Barack “W” Obama has decided it’s a good idea to take sides in the Sunni/Shia civil war in Syria (See my 5/24/13 post THE SYRIAN CIVIL WAR:  A FRIGHTENING HISTORICAL ANALOGY for a not surprisingly amazingly prescient piece on this aspect of the war for which Mr. Obama now has such enthusiasm.) and has authorized sending arms to the Sunnis radicals to fight the Alawite/Shia radicals; see my 6/15/13 piece SYRIA:   HOW LONG BEFORE WE’RE CALLING OUR STOOGES “BRUTAL DICTATORS”?, only my latest piece on this impending next disaster for U.S. foreign policy.

Suddenly, though, the bipartisan War Party, of which, apparently, “W” Obama is now seeking to become the most salient member, is not satisfied with the small arms it was demanding we send to the Al Qaeda affiliates in Syria.   Prominent War Party mouthpiece Senator Bob Menendez (D., but really War Party, NJ) says

“You can’t simply send a pea shooter against a blunderbuss.”

Senator Saxby Chambliss (R., but really War Party, Ga.) talks of sending more powerful weapons to the “moderates” he is confident we have found in Syria and of enforcing no-fly zones.   Penultimate War Party leader Lindsey Graham (R., but really War Party, SC, pictured with the Dr. Frankenstein to whom he plays Igor, John McCain) says that the rebels can’t bring Bashar Assad down with small arms; they need something stronger.

The old expression regarding giving people inches only to have them demand yards immediately comes to mind.

Senator Mark Udall (D., but really War Party, Colo.) whimpers that he is afraid of a slippery slope but, lest he fall out of favor with the “defense” contractors who keep War Party members well larded and comfortably ensconced in Washington, says

“But I think we ought to be listening to the president, we ought to be listening to the military leadership.”

What Mr. Udall doesn’t understand, or understands but delights in, is that we are already on a slippery slope.  First it’s non-lethal aid, then it’s small arms, next it’s a no-fly zone, then it’s American “trainers” (what the Kennedy and Johnson administrations used to call “advisers,” only the “advisers” knew that they were really “troops,” but I digress.), then it’s….well, you know the logical conclusion of this game.  

Among all this craziness, the voice of reason comes from, of all people, Russian President Vladimir Putin, who asked the West, referring to the Al Qaeda dominated Syrian rebels,

“You want to support these people?  You want to supply arms to these people?  This bears little relation to the humanitarian values that countries all across Europe have been propagating for hundreds of years.” 

It’s not as if Mr. Putin’s horse in this race, Bashar Assad, has his feet firmly planted in the soil from which sprang the Magna Carta, either.   Mr. Putin is backing his thug not only out of a degree of affinity but also out of self-interest; not only is Syria Russia’s sole friend in the Arab world  (See my 5/17/13 post, AMERICAN ASSURANCES IN SYRIA:  A RUSSIAN GUANTANAMO IN AL QAEDA’S COURT?), but if the rebels win in Syria and it either descends into an ungovernable dystopia or becomes a radical Sunni dominated state (the only two options, despite the War Party’s disingenuous reassurances to the contrary), Russia’s terrorist problem, which makes ours look quite mild by comparison, will become virtually uncontrollable.   Mr. Putin is understandably bewildered that the West is so gung-ho about supporting people who mean the West, and Russia, so much harm.   This makes absolutely no sense to him, and understandably so.   For all his faults, the Russian president has something that most western leaders, and certainly the two U.S. presidents he has had to suffer through, lack…a sense of strategic perspective and, well, common sense.  Mr. Putin must be baffled as the United States and its allies sink further into the miasma of another deadly, expensive, and unwinnable conflict in a place we have no business being.

Somewhere, however, LBJ is smiling.  But not nearly as broadly as John McCain, the War Party’s leader, and the arms merchants who support the lifelong ego trip he and his fellow War Party members call careers.

WAS PAT QUINN “PUT ON THIS EARTH” TO SOLVE ILLINOIS’ PENSION PROBLEMS?

6/15/13

Illinois Governor Pat Quinn (no relation), in his never ending attempts to “do something” about the $100 billion unfunded pension liability in this state, has called a special legislative session for next Wednesday.   As of this writing, the idea is to have the special session vote on Speaker Mike Madigan’s pension reform plan  (See my 5/2/13 post MIKE MADIGAN’S PENSION REFORM PLAN:  “THE BEST THAT (WE) CAN HOPE FOR IS TO DIE IN (OUR) SLEEP.”)   The Senate will vote the plan down, as it did in the regular session.  Then a special, and just about unheard of, “conference committee” of legislative leaders will be formed to work toward pension reform throughout the summer.  Why as much couldn’t be accomplished by Speaker Madigan and Senate President John Cullerton sitting down together over a beer and a large sausage pie at Vito and Nick’s as will be accomplished in the conference committee is beyond me, but one supposes something resembling protocol must be observed.  Of course, I digress.   In short, the latest plan will accomplish as much on pensions as has been accomplished up until now…nothing.

But the Governor is trying.   And he will achieve some measure of success in these latest moves, probably not in addressing the pension issue but certainly in advancing a strategy for reelection; see my 6/5/13 post  PAT QUINN, PENSIONS, AND THE UPCOMING ILLINOIS GUBERNATORIAL PRIMARY:  WHAT WOULD JIMMY STEWART DO?.

Speaking of Governor Quinn, much ridicule has been made of his contention that he “was put on this earth” to solve Illinois’ public pension problem.  While there is doubtless plenty of the politicaster’s portentous and popinjayish puffery at work here, the Governor does have a point.  If the pension problem isn’t solved, Illinois goes bankrupt.   If Illinois goes bankrupt, the economic disruption throughout not only the state but also the country and the world would be enormous as the credit of every political entity short of those entities, like the federal government, that can print their own money, comes into question.  Not only would Illinois become something of a ghost state, if you will, but the whole world would face another financial crisis in which millions would suffer.

So, yes, solving the pension problem in Illinois, while perhaps sounding quite mundane to those who eschew things such as economics and finance in favor of loftier aspirations and purposes, would be quite a reason for anyone to have been “put on this earth.”  Pat Quinn knows that; too bad he is apparently alone among his Springfield colleagues in possessing this knowledge.

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics. 

SYRIA: HOW LONG BEFORE WE’RE CALLING OUR STOOGES “BRUTAL DICTATORS”?

6/15/15

British Prime Minister David Cameron, a normally sensible fellow, in attempting to justify western aid to the group of thugs he favors in Syria in their fight against the group of thugs he doesn’t favor, argued yesterday that Syrian President Bashar Assad is

“…a brutal dictator who is using chemical weapons under our nose.”

Mr. Cameron, his French counterpart, and, presumably, our formerly cautious President Barack Obama prefer General Salim Idris, the latest third world fraud parading around calling himself a “moderate” in order to access western cash and a place to defect to if things don’t go his way.

Let’s assume for a moment that General Idris wins this conflict with generous help, including who knows what at this stage, from the west and becomes the latest western stooge to occupy the seat of power in a Middle Eastern ethnic jigsaw puzzle of a “country.”  Should that be the outcome in Syria, one wonders how long it will take Messrs. Cameron, Obama, Hollande and others who are seemingly so anxious to create another dystopic terrorist breeding ground in Syria to call General Idris

“…a brutal dictator who is using chemical weapons under our nose.”

As I have said on numerous occasions in the past (Only my latest post on Syria is 5/29/13’s RUSSIAN ARMS TO SYRIA:   THANK YOU, COMRADE?; please read it and the posts to which it will direct you.), we have no friends in Syria and there are no moderates, whatever that means, in Syria.   We are left with a choice between the devil we know and the devil we don’t.   We do, however, have a promising course of action, to wit, stay the hell out and tell the winner we are willing to do business with him to the extent it is in our interest to do so.  Mr. Obama, though, has just announced his intention to back, with American arms, trainers, and air cover (but only for a “no fly zone” over the areas in Jordan in which we will “train” the Al Qaeda members and wannabes we will be backing), the devil we don’t.  Despite his rhetoric to the contrary, Mr. Obama apparently shares the George Bush view that we indeed can and should save the world and make it over in our image.  Terrific.

We never do learn anything in this country, do we?

JAPAN: THE MARKETS DETECT A PAPERING OVER OPERATION

6/14/13

The Japanese stock market has done a round trip since the Bank of Japan, embarking on its leg of “Abenomics” two months ago, started buying everything in site…bills, bonds, even stocks.   The yen has also done a similar round trip since the monetary leg of Abenomics made its debut in April.   Real measures of the Japanese economy seem to be holding up; first quarter GDP growth was 4.1% and the employment picture is brightening, but the financial markets’ reaction to Mr. Abe’s reflation plans do not bode well.

While we don’t know yet how the embryonic experiment we call Abenomics will turn out, one suspects that Abenomics, which boils down to spending lots of money, watering down the yen, and supposedly embarking on structural change in the Japanese economy,  is doomed to failure because, aside from the obvious shortcomings of the first two measures, it is running smack into Japan’s overwhelming problems of demographics and cultural change, the latter not for the better.

Even before Prime Minister Shinzo Abe announced that he was throwing out the rule book and taking drastic action to turn Japan’s economy around, Japan’s public debt/GDP ratio, at 220%, was the highest in the developed, and probably the entire, world.   The Japanese could get away with such brobdingnagian spending because they also had the highest savings rate in the developed world for much of the post war era; as recently as 1990, the savings rate in Japan was 44%.   (See my 4/9/13 post, THE NOT SO INCREDIBLE SHRINKING YEN, for further discussion on these points.) While the government’s spending huge amounts of money is rarely salubrious for the economy, the negative impact is muted when the government can tap such enormous savings to satisfy its more lascivious impulses.  

But the numbers that supported a big spending government have changed markedly in the last 25 or so years.  With a rapidly aging population and cultural changes (i.e., exposure to the West, and especially America, and our free spending ways), the Japanese savings rate is now down to 2%, which is considered healthy only in America.  At the same time, an aging population demands more government services.   So those who used to lend the government money are now tapping the government’s coffers for income and services, as we all do when we age.  Further, younger Japanese are not emulating their elders’ big saving ways; they are starting to spend like Americans.   Simply put, the Japanese can no longer service a debt load that was predicated on a young and saving population now that it has an old and spending population.   Servicing the normal increase in government spending brought about by demographics would have been tough enough, but spending even more to “stimulate” the economy is simply unsustainable.

Despite these demographic realities, Mr. Abe decided that the Japanese could continue to spend like it was 1985 and essentially create the money to do so.  The latter would have the ancillary benefit of weakening the yen, thus improving the Japanese “terms of trade,” policies that back in the ‘30s were derisively and justifiably called “beggar they neighbor.”  Some could argue that the policy worked; first quarter GDP growth was strong, but that was the FIRST quarter, before Abenomics was implemented.   Things are slowing down and the Japanese stock market, with its inherent foresight, is taking a beating.  Strangely, though, the yen, as I said in the first paragraph, is strengthening and, 94.67 to the dollar, is about where it was at the end of March after trading over 102 to the dollar in May.   This not only run counters to the foreign exchange goals of Abenomics but also seems to defy logic; the yen should not be strengthening when the BOJ is creating so many of them.

Meanwhile, the third leg of the Abenomics stool, economic restructuring, has so far been disappointing.   High hopes for corporate tax reform and modifications of onerous employment rules have been dashed.  

So the Japanese government is spending and printing lots of money.   The real economy appears to be responding, but it’s too early to tell how much of the first quarter’s resurgent growth can be attributed to policies not implemented in the first quarter.   Structural reform has so far been disappointing.   And the proverbial, and trite, 900 pound gorillas, high debt, demographics, and the partially attendant declining savings rate, still loom.

Would it be a surprise if creating lots of yen and spending them didn’t solve the problems of a once great nation?

TOYOTA’S MARKET SHARE AND THE JAPANESE BUICK

6/13/13

Toyota’s North American boss Jim Lentz said yesterday that Toyota (TM) is unlikely to reach its peak U.S. market share (17% in 2009) this year.   Some observers had expected, or at least hoped, that Toyota could reach this milestone after having a great 2012 after a series of sudden acceleration recalls in 2009 and 2010 and tsunami related supply disruptions in 2011.  These expectations, or hopes, have been dashed as sales have been up by only 5.2% in 2013, not enough to coax TM’s market share beyond the low 14% handle.   The problem seems to have its core in slow sales of the Camry, the Yaris, and the whole Scion line.

So why isn’t Toyota reaching its former market share glory?   The answer is two-fold.

First, Toyota is a successful car company, both here and abroad, because it makes, with a few exceptions, reliable and boring transportation.  In this context, boring is not exclusively a negative; it can be taken in the context of

“This car gets 30 miles per gallon (starts on the coldest of mornings, doesn’t burn oil, never has an electronics problem, etc.) with boring regularity.”

Most people like, or at least will certainly accept, boring with their transportation, and not only in the context of their car providing no surprises.   They aren’t in it for excitement; they want reliable transportation and will accept, or even embrace, boredom for such reliability.   Even though most car guys don’t understand this, this set of preferences is perfectly understandable.   For most drivers, cars are not sources of recreation, or even outright joy, as they are for yours truly.  They are a means of getting around in comfort, a place of temporary much welcomed solitude, and a tool for navigating the roadways of life, literally and figuratively.   They aren’t meant for flinging into curves, apex hunting, rev matching, or other such activities that occupy the time and thoughts of those of us who look to our cars as ways of life, or at least a means of enjoying ourselves.

While those of us who seek outright excitement, exhilaration, and never ending entertainment in our cars constitute a very small minority, there is a substantial subset of people who, while not seeking out excitement in their cars, would certainly tolerate, or even seek out, a little excitement if it requires little or no sacrifice in reliability.   That excitement can come in many forms, be it styling, handling, power, or interior features.  With the vast improvement in cars of late, car buyers are increasingly finding that they don’t have to put up with the boredom of most Toyotas and Lexi in order to enjoy, well, boring reliability.   The Camry and its competitors immediately come to mind.   While the Accord has traditionally been the slightly more fun alternative to the Camry, the Ford Fusion, the Mazda 6, and the Subaru Legacy (See my 5/31/13 piece “OOH, OOH SUBARU…THERE’S SO MUCH THAT CAR CAN DO…”) are all capable of nearly, or completely, matching the Camry in reliability while providing a measure of excitement in styling, handling, power, or some other aspect or combination of aspects of the driving experience.   The same argument can be made to an even greater degree regarding the Lexus ES350 and the BMW 3 series, the Caddy XTS, the Audi A4, and even the Mercedes C Class.

So one doesn’t have to drive a boring Toyota to achieve boring Toyota reliability.

Second, Toyota has been effectively “Buickized,” a phenomenon I’ve been talking about for years.   Toyota is seen by GenXers, GenYers (or millennials or whatever one calls kids born in the ‘90s) as old guys’ cars, much as our generation regarded Buicks.  (Things are changing at Buick in this regard, but not many people seem to notice, but I digress.) This trend was arrested dramatically  in 2012 when the new body style of the Camry, which looks sharper but is still, at least of on a relative basis, a wallowing mattress on wheels, was reducing the average age of its buyers to the mid ‘40s from the (obviously intolerably old!) mid ‘50s.   But that reduction, while dramatic, may prove to be temporary and is reversing in 2013, with the average Toyota buyer’s age stabilizing in the mid 50s.

This is not necessarily a bad thing; there are a lot of people in their mid 50s and we are all getting older (if we aren’t dying) and we all spend money, even if we don’t have it.  (See my 5/29/13 post SAVING FOR RETIREMENT, PAYING FOR EDUCATION, AND TALKIN’ ‘BOUT MY GENERATION.)  Why car buyers feel compelled to constantly go after the younger consumer, even as the legions of older consumers keep growing, is beyond me.   Note, for example, that Pontiac, GM’s division that supposedly aimed at younger buyers, is a memory while Buick soldiers on.   That had more to do with China than the U.S., but that is another story.  The point is that selling to older consumers when the population is aging does not seem to be a bad strategy to yours truly, but those who are smarter, or at least who make a lot more money, seem to think so.

So there are two reasons that Toyota, while seeing increasing sales and consistently being among the top selling manufacturers in the U.S., is not likely to reach its peak 2009 market share in 2013:   more interesting, exciting competitors can match, or nearly match, Toyota and Lexus for reliability and Toyota and Lexus remain old people’s cars.   But don’t make too much of the latter.

BILL DALEY AND THE GOVERNOR’S OFFICE: THE BROTHER ALSO RISES?

6/13/13

Bill Daley has formed an exploratory committee for a run for governor in 2014.   Forming an exploratory committee permits a candidate to raise funds for a race but is not a formal declaration of candidacy.   So Mr. Daley is not yet in the race but, as he said

“I’m in this race, okay?  Yes, it’s an exploratory committee because that’s how you start.  You don’t run, you don’t walk.”

If Mr. Daley were not a politician, I would be inclined to say that we have to take the man at his word.   But Mr. Daley is, after all, in the politics business and, as I have said on numerous occasions, prevaricating is at least as easy as telling the truth for those in that business.   Further, it’s difficult to determine what the above statement means.   He’s in the race, but he didn’t add the words “to stay” and didn’t say if he intends to stop walking and start running.   One doesn’t know how carefully parsed Mr. Daley’s words were, and it wouldn’t matter much because of the nature of Mr. Daley’s line of work. 

Yours truly’s thoughts on this latest development have not changed since I wrote the now seminal “GOVERNOR BILL DALEY…SENATOR BILL DALEY.   THERE JUST WASN’T THE TIME…” a week ago.   I’m surprised, or at least I would be surprised if Mr. Daley’s announcement meant more than it apparently means.   Bill Daley is a cautious, calculating man.  As a Daley, he avoids elections in which the outcome is not a foregone conclusion.   The politics of a Daley run for governor don’t make much sense, at least at this juncture.   It would seem he would stand no chance in a three way primary with a powerhouse woman candidate (Lisa Madigan) in the race and the incumbent governor.   The Daley name, which only briefly, during Rich Daley’s first few terms as mayor, had any cachet downstate, has been badly tarnished, and not only downstate, by the missteps of Rich Daley’s last few terms, most saliently the parking meter deal and the general growing perception that city government was something of an ATM for Daley pals during those last few terms.   The polls I have seen have shown Mr. Daley far behind Governor Pat Quinn and even further behind Attorney General Lisa Madigan, who people are assuming is an all but declared candidate.   So why is Mr. Daley looking like he is going to run?

Perhaps, as John Kass of the Chicago Tribune indicated last week, Mr. Daley knows something we don’t know, i.e., that Lisa Madigan has decided not to run.  Maybe Mr. Daley is trying to smoke out Lisa Madigan, trying to force her to show her hand.  If she gets in, he can still get out.   Perhaps at the age of 64, Mr. Daley thinks this is his last chance for high, or any, elected office, so he is throwing caution to the wind…my least favorite and least likely explanation.  Or maybe Mr. Daley is not motivated by political calculation but by a sense of duty and genuinely feels he is the man that can solve our state’s fiscal problems and is called to do so before all is lost.   One would like to ascribe such noble motives to Mr. Daley; he is one of the most competent and, from what I have seen, one of the more noble politicians out there.  But he is still a politician and the adjective “noble” is difficult to fit with the noun “politician” under any circumstances.   If this is his motivation, however, my hat is off to him.

There is always the crazy idea, that I advanced last week, that Mr. Daley will eschew the primary altogether and run as an independent, especially if Pat Quinn somehow emerges as the Democratic nominee.   This notion is interesting and tantalizing, indeed, but still quite unlikely.  Should it happen, though, you heard it here first.

I know no more than what I read in the papers.  As I said last week, I don’t know Mr. Daley; I have never even met Mr. Daley, much to the detriment of both of us.   All I know is that the next few months will be interesting.

One of the most interesting aspects of a Daley candidacy is whether he will be able to raise the kind of money people assume he can raise.   When his brother was mayor and controlled the levers of power, raising money was no problem; see my comments two paragraphs prior regarding Chicago’s government’s becoming something of an ATM for Daley pals.  But Rich Daley can’t do much for people any more; the supposed tough guys and hardened pols who used to bow and scrape before him are now bowing and scraping before Rahm Emanuel.  Mr. Emanuel is the one handing out the contracts and raising the dough from the grateful.  If Mr. Emanuel, who has raised the normal political practice of not doing anything for anybody that doesn’t benefit him to an art form, decides that there is no reason any longer to help the Daley family, could he indicate to potential donors that writing Bill Daley a check might not only not curry the Mayor’s favor but might engender his wrath?   Why would Mr. Emanuel want to help out the Daley family which, except for John, is out of power, when he still needs the help, or at least the acquiescence, of the Speaker Mike Madigan?   Personal loyalty?   Gratitude?   C’mon!   We’re talking Rahm Emanuel here!

If Mr. Daley suddenly finds potential donors asking “What ya done for me lately?” the implications for his bid for governor are obvious.  And Mr. Emanuel might be the man who induces potential donors to ask that question.   Then the Daleys will know they backed the wrong horse in 2011, but will only be able to watch helplessly as they fade into irrelevance.   Some mistakes in politics are indeed irreversible.

See my two books, The Chairman, A Novel of Big City Politics and The Chairman’s Challenge, A Continuing Novel of Big City Politics, for further illumination on how things work in Chicago and Illinois politics. 

DO WE ALL LIVE IN GOVERNMENT SUPPORTED HOUSING?

6/10/13

This morning’s (i.e., Monday, 6/10/13’s, page A2) Wall Street Journal contained an article by Nick Timiraos discussing the bull and bear cases for the housing market.  The bulls argue that demographics, primarily increasing household formation and falling inventories of housing units, and affordability should spur something of a housing boom.  The bears argue that the end of the one-time boosts to consumption that came about as a result of the broad introduction of two-income households and the democratization of credit should hobble housing.  The bears argue further that home financing will be harder to come by as banks tighten standards and first time home buyers are hobbled by student debt.

Given my normal predispositions, I tend to favor the bear case.   There is still too much household debt in the economy (See, inter alia, my 4/23/13 post THE ATTACK OF THE McMANSIONS FOR SALE:  A SECULAR BRAKE ON THE HOUSING MARKET for some statistics.) and incomes are not growing at a pace that will alleviate the burden of servicing that debt.  Banks, and investors, are understandably reluctant to lend to people who can’t pay back their debts.

Therein lies the problem currently plaguing the prospects for reinvigoration of the housing market, to wit, banks are reluctant to lend to less than creditworthy buyers and so the government, though Fannie Mae, Freddie Mac, or the FHA, still guarantees the overwhelming majority of mortgage loans made in this country.  The last I saw, the percentage of new home loans that are guaranteed by the U.S. government was about 90% and I suspect the number still hovers somewhere in that unprecedented, until the credit debacle of 2008-09, level.

Add the government being the ultimate guarantor of just about all new housing loans to Ben Bernanke’s War on the Elderly, i.e., the Fed policy of keeping interest rates low across the curve, that itself is designed in large part to support housing and you have a housing market that is nearly completely dependent on government support.  We talk about a stock market that is being propped up by Fed policy; the housing market is at least as dependent on Fed manipulation of interest rates to make housing “affordable.”

Add to that the argument I made in the aforementioned 4/23/13 post and yours truly finds little reason to be sanguine about the housing market.