Weekly Letter to President Obama
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INAUGURATION, January 20, 2009
Drunk in its stale air
For two hundred years.
Fettered in mind and body,
The soul, the safe escape
To let me breathe the cries
Of my heart singing
Tears of mel-an-choly.
The tears flow free today
Washing the stains of blood
And sweat in brotherhood.
Raise the curtain then an'
Let the world look in
On this promised land --
We breathe free today.... almost.
--- Arshad M. Khan
We will be known forever by the tracks we leave.
--- Native American proverb
December 30, 2011
Mr. President: Year end is time for summaries and if one can summarize this
administration's achievements on the economic front, it would be thus: It
has bankrupted the institution of bankruptcy for the banks that matter. As a
consequence, interest rates, calculated on the probability of payback, have
been thrown out of whack.
Yes, the Fed sets interest rates but those are for the safest of instruments
backed by the U.S. Treasury. These establish a floor for riskier instruments,
the rates for which are then set by the market, based on calculations of that
risk. But the free flow of capital has been log-jammed by political forces.
Today, banks that should be bankrupt are being rescued and their lenders
paid back on terms set by political leaders. Yet, who knows how political
winds will blow tomorrow. By outmoding bankruptcy, they have succeeded
in upsetting a basic tenet of capitalism (on which is based its efficiency), i.e.
to ensure the survival of the fittest.
A palliative for chronic ailment, the payroll tax rollback (which amounts to a
daily latte' at Starbucks) has been much in the news as a political football. As
Keynes observed many, many decades ago, doling out money in an economy
burdened with trade deficits merely fortifies the economies of the trading
partners. So if not a cup of coffee (from Brazil, Colombia or wherever), then
perhaps other consumer goods (toys, TVs, electronics) all from China, Japan
and East Asia. Well, it helps retailing here and transportation. The question
remains: when do we start training and retraining programs and investment
incentives to bring back well-paying manufacturing jobs?
With regards to Iran, this week there were two statements of the obvious:
First, the Iranian naval chief reasserted their capacity to block the Strait of
Hormuz. Everybody knows that and also knows there is no way to stop them
if they are driven to do so -- one might add they would not want to because it
would also block their own oil exports. Second, Ron Paul remarked Iran
could do little even if it had nuclear capability because any bomb would have
a return address with devastating consequences for the sender. And no
matter what is said about them, the Ayatollahs -- generally holding the
equivalent of PhDs in philosophy -- have been astute; some might even say
restrained given our tacit (occasionally tangible) support for the
insurgencies in Northwest and Southeast Iran.
The problems can wait a couple more days. In the meantime, the beaches in
Hawaii are as golden as ever, the weather is balmy and we wish you a happy
holiday (despite the unavoidable $4 million tab for a Presidential trip in these
fraught times). Happy New Year. May it bring us peace and a modicum of