Letter From The Capitol

Global Cooling: More Evidence

Another scientist has gone public with a prediction that cooling is coming.  He predicts that within a decade the world will enter an 80-year period of a new Little Ice Age (the label given the period 1400 - 1850, when temperatures globally were much colder than 1000 - 1400 or since 1850).  Current climate models do not, says the scientist, reflect the impact of solar activity.  Meanwhile, New Zealand reports an all-time record snow base of 4.5 meters, which is 14-3/4 feet, or, using the measure American ski resorts use, 1,771 inches.  Alta, Utah, considered "skiers' heaven" in the US of A, reported 701 inches of snow for the 2007 - 2008 ski season, through April 30, 2008.  Has Al Gore ever tried southern hemisphere glacier skiing?

21st: The Chinese Century?

Columnist Robert Samuelson suggests that China's major challenge to the West, and the world, is economic.  Goldman Sachs estimates that China's $3.5 trillion GDP, 1/4 that for the US, will surpass ours in the 2020s, albeit its average income will still be only half that of Americans in 2050.  China has four times America's population, which explains why its GDP eventually will catch up to ours.  Samuelson cites international economist C. Fred Bergsten, who notes that since 1950 real GDP for South Korea is up 16-fold, Japan, 10-fold, France fourfold and America threefold.  A liberal trading system and raw materials policy championed by the US made this prosperity possible.

But China's extreme economic nationalism--restrictive trade policy, hoarding of massive currency reserves and ravenous appetite for raw materials, argues Bergsten, threatens to destabilize the world economy through massive economic imbalances.  Retaliating by equally nationalistic economic policy risks another Great Depression.  The task, then, is to persuade Beijing to perceive that its own prosperity could be undermined if it destabilizes the global economy.

NY Times columnist Nicholas Kristof, author of a fine 1990s book (China Wakes) on China, predicts that China will play a dominant role in other spheres as well: athletic, artistic, science & eduction.  Kristof is, however, optimistic that China will evolve towards a more open & liberal political system.  He notes that as of 1400 the two largest economies in the world were China & India.  They may once again hold that position at the end of the 21st century.

CHINA'S CHALLENGE: NOT RUSSIA's.  China's emerging challenge stands in stark contrast to that from Russia.  China is a rapidly industrializing country with a bright future, driven by business acumen, technological innovation, artistic creativity and a desire to recover its glory days, centuries ago, when it was the world's leading civilization, a dominance that lasted, with several gaps, for nearly two millennia.  For much of that time, China retreated behind its Great Wall, disdaining to engage foreign powers save on its terms, but rarely engaging in imperial adventurism.  Russia's thousand-year history is one of almost continual warfare, with Russia most often the aggressor; its economy has been resource-extractive in the main, and its technology innovation largely confined to military spheres, much of it poached from the West; artistic creativity has been at times vibrant.  Both powers were badly deformed by 20th century communist totalitarian rule.

But while China has the potential to become a dominant world power, based upon its enormous internal dynamism and international reach, Russia faces a demographic implosion (China's demographic crisis, not trivial, is the 6:5 ratio of boys to girls over the past generation, driven by the government's one-child policy).  Russia sees the chance to project regional power backed by petropower lasting perhaps a generation.  If Russia is to grow it must reconquer its Near Abroad, as its criminal corporatist state cannot generate broad internal economic growth.  The challenge, then differs for the West: China's rise poses problems of integration into the world polity and economy; Russia's impending implosion poses the threat of imperial expansion, driven by ultra-nationalist passion.

Olympics: "It's Only a Beijing Mist!"

Beijing says of the miasma descending upon its imminent festivities: It's not pollution, only a "mist".  Which brings to mind the Harold Arlen song, It's Only a Paper Moon, and the lyrics by E. Y. "Yip" Harburg.  With apologies to Mr. Harburg, here are lyrics for Beijing's Pollution Games:

Say, it's only a Beijing mist
Surely folks, you can get the gist
Falun Gong will add protest twist
And monkeys will play whist

Typhoons-- yes,will make landfall
Rain showers for one and all
Hu Jintao tells Prez Bush tales tall
Fun fibs for one and all

Harsh repression
To keep up our grand charade
Our obsession
Don't protesters rain on Opening Day Parade!

Dope-ing ev'ry body and mind
Med-i-cine--drugs of any kind
The IOC may never find
Reporters, please be kind!

Copyright John C. Wohlstetter 2008

Nations: Breaking Up's Not Hard to Do

George Will writes of nations splitting up, notably in Europe.  Mini-nationalism, it seems, is increasingly in vogue.  European Union, beware.

Brazil: Emerging at Last

A Thursday NY Times front-pager reported that Brazil's economy is booming, and poised to grow more.  after decades of under-performing expectations, Brazil is the shining star of South America.

Global Diplomacy: Politics of Planetary Paralysis

David Brooks is a prolific idea guy.  Like most of that ilk, he racks up his share of misses.  But when he hits it is worth a look.  He terms "Globosclerosis" the inability of the UN and world powers to deal with numerous matters: war, genocide, trade, poverty, pollution etc.  Brooks captures the problem:

But globally, people have no sense of shared citizenship. Everybody feels they have the right to say no, and in a multipolar world, many people have the power to do so. There is no mechanism to wield authority. There are few shared values on which to base a mechanism. The autocrats of the world don’t even want a mechanism because they are afraid that it would be used to interfere with their autocracy.

The results are familiar. We get United Nations resolutions that go unenforced. We get high-minded vows to police rogue regimes, but little is done. We get the failure of the Doha round and the gradual weakening of the international economic order.

A few years ago, the U.S. tried to break through this global passivity. It tried to enforce U.N. resolutions and put the mantle of authority on its own shoulders. The results of that enterprise, the Iraq war, suggest that this approach will not be tried again anytime soon.

Brooks adds that some top Western leaders have poll numbers below that for George W. Bush--Gordon Brown is at 17%.  The decline in prestige of leaders, he argues, stems from public perception that they cannot solve vital problems.  Brooks believes that a League of Democracies (presumably, liberal democracies) might work better.  Perhaps.  But part of the dilemma is that mega-problems elude solution; at best, amelioration might be accomplished.  Media coverage fans public pressure to solve the insoluble.

To be fair, domestic politics in the US play a part in this, as illustrated by Charles Krauthammer's column impaling Nancy Pelosi for blocking even a vote on oil drilling, lest her side lose, and justifying it by her proclaimed intent to "save the planet" CK wryly notes that instead we purchase oil from places far less solicitous of environmental or safety concerns, such as Nigeria and Kazakhstan.  A Wall Street Journal editorial further details Democrat icobstructionism, adding that practiced by Harry Reid in the Senate.

But some problems are soluble, and the manifest inability of world powers to address them will engender growing cynicism and, perhaps, make the world search for a messiah.  Obama's "citizen of the world" Berlin formulation (Brooks aptly notes that "shared citizenship" can only exist given "shared values") is, in one sense, his bid to become a global secular messiah.  Surely there will be more aspirants to follow.

Manhattan Institute scholar Michael Know Beran dissects the problems of charisma and messianism in a crisp City Journal article.  What makes matters even more worrisome is that messiah proliferation oft coincides with new millennium milestones.

Yet amidst diplomatic paralysis, aspiring messiahs and their eager acolytes, there is one proven remedy that works, regarding our terrorist adversaries: Al-Qaeda confirmed yesterday that its top weapons expert was killed recently in Pakistan.  It was accomplished by a missile fired by an American drone.

Airlines: Jumbo Jet-Set Haven

Emirates, the flagship airline of Dubai, offers super-luxury on its Airbus A380s (a/k/a, on LFTC, the "Flying Fat Albert"), as this photo gallery (10 images) posted by the Sydney Morning Herald shows.  Most fliers will, on the A380 as on other planes, be flying in a glorified Greyhound bus, but a few folks will, it seems, be comfortable.  The real 21st century jet set, naturally, flies private planes.

Beijing Haze Daze; Arctic Ices Up

The International Herald Tribune ran this photo of a man-made "Foggy Day in Beijing Town" that should give enviro-red-hots whooping cough just looking at it.  Beijing says the air there is cleaner than in 2007.  Suffice it to observe that while, contrary to Ira Gershwin's 1937 lyric about a foggy day in another town, the British Museum has not lost its charm, surely this picture shows that the China Olympics will be charm-free for many athletes & visitors.

Meanwhile news from Norway tells us that north of the Svalbard archipelago there is more ice this year--instead of open water there is ice.  Not true at the Pole this summer, but the Pole is clearly not a proxy for everything north of the Arctic Circle.

Extra! Extra! Barack Saves Planet! Solar System!!

Times of London columnist Gerard Baker is at his acerbically witty best in his "He ventured forth to bing light to the world" Friday column, satirizing brilliantly the media's hagiography of Obama.  A Sunday Times article gives added flavor, detailing his stops with Tony Blair, PM Gordon Brown and opposition leader David Cameron; the Times detected "a hint of Diana-mania, a touch of Obama Mia!" in his UK reception.  On ABC News This Week George Will called "narcissism elevated to a metaphysic" Obama's Berlin opus, which, Will added, amounted to "no metaphor left behind."  On TAS, John Tabin presents a portrait of the Tiergarten crowd that listened to Obama, and notes that Obama's staff, ever thorough, canvassed the crowd looking for Americans they could register to vote come November.

To be fair, National Review Online editors thought better of his speech, listing points of agreement with conservatives; NRO did, however, find it too utopian.  Yet NRO prefers utopian to leftist radicals, and sees Obama as the former.  Manhattan Institute scholar Steven Malanga sees Obama as our first would-be community-organizer president; his roots, like those of Hillary, lie with Chicago activist Saul Alinsky.  Hill went hard left; Barack may achieve more by funding community groups at higher levels than Hill did as First Lady, many of whom are radical.

Victor Davis Hanson catches the whiff of American culpability, and that of giving credit to all, rather than just the allies, for defeating the USSR in the Cold war; Obama's "citizen of the world" is his genuflection to, and identification with, global transnational elites.  Hanson also predicts that Obama's Euro-adulators will not come to love America more.  John Cullinan of NRO rebuts Obama's citation of Belfast as a place where, since the 1998 Good Friday peace accord, walls have come down; in fact, residential segregation has increased, a quite logical, if politically incorrect) consequence of the ending of a protracted, bitter, ethnic conflict.  Jeff Jacoby's Boston Globe column echoes the theme of Obama being one-world rather than alliance-oriented in his historical view, and adds what Harry Truman wrote in his diary during the Berlin Airlift, that separates HST from BO: We'll stay in Berlin -- come what may.  I don't pass the buck, nor do I alibi out of any decision I make."

Jim Gergahty's Campaign Spot entry captures the speech perfectly.  Just as Al Gore's enviro-screed "Earth in the Balance" was replete with passages that are indistinguishable from the Unabomber's screed, so Obama's speech contains quotes inseparable from the lyrics of "We are the World."  Check the link and take the mini-quiz!!  Ace diplomat John Bolton thinks Barack is on another planet, metaphorically, in that he perceives "one world"--a concept, JB notes, that, ironically, was first coined by a GOP presidential candidate (Wendell Wilkie in 1940)--where in fact there is not the commonality of perception and understanding the term implies.

This is true despite Obama's "a proud citizen of the United States" that preceded it.  Put simply, unlike dual national citizenship, citizen of the world is a designation inconsistent with national citizenship.  For citizen status to be meaningful it must exclude being a citizen somewhere, as dual national citizenship does.  If we are all world citizens, then no one is a citizen in any meaningful sense.  We may reasonably believe in a global human community, but not the legal definition implied by global citizen status.

Historian Walter Russell Mead discerns irony in Obama's trip: He has moved close to President Bush on the war, on Iraq & Iran, thus benefiting from an emerging consensus that he, Obama, stood squarely against until becoming presumptive nominee of his party.

GOP pollster Kellyanne Fitzpatrick punctures the notion that Obamamania abroad will tilt the election back home; among her numbers is one showing that by 55-35 voters consider Obama a riskier choice than John McCain.  In other words, Obama has yet to close the sale with the American electorate, even as European publics (not their foreign ministries) have already elected him Emperor Divine--like the Japanese emperor from medieval times to 1946, above mere politics.  A July 23 - 25 Gallup poll shows Obama up 7 nationally; a July 24 - 26 Gallup poll shows Obama up 9.  The latest (posted 3 AM Monday, July 28) Rasmussen Daily Presidential Tracking Poll shows Obama up by only 5, 46 - 41.

Confirming Obama's poll problems is a new Wall Street Journal/NBC News poll, reported in the July 23 WSJ.  It also shows the widest-ever young-old generation gap, and a racial chasm.  Besides the 89-3 edge Obama has among blacks, 10% of voters say race is a dominant factor, compared to 6% one month ago; 6% of whites say so, vs. 5% a month ago, while 20% of blacks say so.  Times have indeed changed, as Obama likes to say; today race is taboo--for proof, check out this YouTube video (4:39) of Don Rickles roasting Sammy Davis on the Dean Martin Celebrity Roast, sometime in 1975-76 (you can tell by two clues); watch the whole politically incorrect video to catch all the flavor.

On fitness for office, whereas 50% of voters say they are focused on what kind of president Obama might be, only 25% express similar concerns about Bag Mac (voters are more concerned that Mac will be a Bush Jr. third term).  Perhaps Jay Leno's quip that Obama had just been elected German Chancellor captures his Berlin boffo best.

Markets: Laws of Leverage Kick-In

A Business Week cover story looks at Wall Street and the financial mess.  Behind it is the downside pull of leverage in a declining market.  Banks lend $15 for every $1 of capital, e.g., $10 billion of capital turns into $150 billion in loans.  Works great on the way up.  But now, suppose that there is a measly 2% drop in the bank's asset value, $3 billion dollars.  At 15:1 the bank loses 30 percent of its portfolio, down to $105 billion.

Already there has been a $400 billion meltdown in global credit markets, a figure that the IMF fears may grow to $1 trillion.  Now, multiply these numbers by 15 to see the total impact.  Worse, credit markets take longer, on average, to recover than do stock markets.  For the three months ending in mid-June, credit contracted by 9% at an annualized rate, the worst number in the 35 years since data first was collected.  Mortgage-backed bond issuances are down 87%, and corporate junk bond issuances are down 65%.  Mortgage-backed bond losses alone could amount to $1 trillion.

The Federal Reserve will open its discount window, but--quite understandably--will limit lending leverage.  Similar tighter lending criteria will be imposed by banks who acquire troubled institutions--equally understandably.  Re the Fed, financial writer Allan Sloan reminds us that the Fed controls only short-term (overnight) interest rates; the financial markets set the remainder, and longer-term rates often move in different directions than short-term rates.  Since September, the Fed's discount rate has declined 62%, from 5.25 to 2%, while 30-year mortgage rates rose slightly, from 7.26% to 7.63%.  This is what happens when the Fed's easy money policy spooks inflation-wary investors--long-term rates rise in anticipation of inflation increases due to excess money creation.  On the plus side, Sloan notes that the Fed can create money beyond its $800 billion in Treasury bill reserve, either by buying securities on the open market and reselling them to needy financial institutions, or by entering a credit on its books and lending the same amount to a needy institution, the credit to be redeemed later.  Thus the Fed will not, as a practical matter, run out of money to support Fannie & Freddie.

Also on the sunnier side of the financial street, Hudson Institute's Irwin Stelzer sees cautious optimism in the fact that our economy is growing, if sluggishly, and that it is more flexible it was than a generation ago.  Leverage is the key worry in the rosier scenario.  Leverage, in sum, works like a roller coaster: a thrilling ride on the way up, a heart-stopping moment at the top, and a stomach-upending, screaming descent.  And as the descent continues, gravity works its way, accelerating the roller coaster.  At the amusement park, acceleration is kept within manageable bounds.  For today's financial markets, the hope is that the same can be done by a partnership of public and private entities.  Stay tuned, and hold on to your hat (and wallet).