In time there will be books written about the events surrounding the worldwide financial crisis and the efforts directed towards its resolution. While reading many of the news reports in recent days, while I've begun to draw some conclusions, I assure you I won't be writing a book.

Back to some of my conclusions. They're all drawn from various news reports with the conclusions being my own. I'll make them abbreviated.

• The U.S. is no longer the world's financial leader. The European Union (EU) has assumed that role. Their actions over the weekend to nationalize their banks in a huge way went a lot farther towards stemming the financial crisis than anything the U.S. is even contemplating.

• The EU has committed 10 times the amount of their treasury funds to resolve the financial crisis as the U.S. has. The EU is an economy that's roughly the same size as the U.S. with a population that's about 50% larger than ours.

• The EU has already injected almost $2.5 trillion to nationalize the key banks in the U.K., Germany, France and Spain. The U.S. is still trying to figure out how to inject $250 billion into our financial institutions.

• Reports are that initially the White House wanted only to buy back bad loans from troubled financial institutions, the initial bailout proposal presented by Henry Paulson. Unconfirmed reports from insiders are that President Bush wanted no part of anything that even remotely looked like the nationalization of U.S. banks. But as the crisis worsened and the EU plans began to take form, the U.S, administration was forced to abandon their idealogy and follow the direction being provided by the EU.

• Concurrent with injecting the money into their banks, the EU finance ministers fired the CEO's of the banks which got the most money, eliminated any bonuses or golden parachutes, and essentially took control of the banks. The U.S. is still studying how or when to do this sort of thing.

• The political leaders of the EU countries have made it clear to their residents that they can and should rely on actions by their government to resolve the crisis that began in the U.S. It may have been best said by Britain's Prime Minister Gordon Brown, "The government cannot just leave people alone to be buffetted about. We must in an uncertain and unstable world be the rock of stability on which our people can depend." (Maybe I missed it, but what has our President or eiher of the candidates said anything like this in such a strong and resolute way?)

• The EU finance ministers have already injected capital into the key banks as well as provided substantial guarantees to assure the loosening of the European credit markets. Reports are that in the U.S. lobbyists for the banks and the non-bank financial companies are lobbying the administration had so that one group or the other won't be advantaged by receiving Treasury Department funding. The lobbyists for the investment banks and mutual funds are concerned that if deposit guarantees are broadly expanded for the banks, that they will lose huge amounts of money market deposits and the associated management fees.

• While the EU has actually injected almost $2.5 trillion into their banking system, all the U.S. has done so far is authorize the expenditure of $700 billion. We have not as yet spent even one dollar of that amount. Thus far all our time and effort has been spent creating a new sub-department of the Treasury, hiring people, finid office space, writing rules for how we will deploy the money, and hiring third-party consultants to make the investment/deployment decisions and track the results of the investments.

This is just the beginning of the dramatic erosion of our financial leadership of the world. The U.S. followed the EU in the development of a solution that is working. We were not able to commit anywhere near the amount of treasury support as the EU countries did, presumably because we no longer have the borrowing capacity to do so. It might have been best said by French President Nicolas Sarkozy, "The time of everyone acting alone is over." I interpret that to mean that a "super-nationalization" of the world's banking system is underway, which the U.S. will almost certainly have to join.

What's more disturbing is the well-known fact that political leadership closely follows financial leadership in world affairs. Right now and for the foreseeable future our political and business leaders have placed the U.S. in a position where we could easily become a second-tier world power behind the likes of China, India and now a re-energized and financially capable European Union.

Watch for the books and articles on this subject. I know I will be.

Liquidating the Empire


by Patrick J. Buchanan
"Liquidate labor, liquidate stocks, liquidate the farmers."

So Treasury Secretary Andrew Mellon advised Herbert Hoover in the Great Crash of '29.

Hoover did. And the nation liquidated him – and the Republicans.

In the Crash of 2008, 40 percent of stock value has vanished, almost $9 trillion. Some $5 trillion in real estate value has disappeared. A recession looms with sweeping layoffs, unemployment compensation surging, and social welfare benefits soaring.

America's first trillion-dollar deficit is at hand.

In fiscal year 2008 the deficit was $438 billion.

With tax revenue sinking, we will add to this year's deficit the $200 to $300 billion needed to wipe the rotten paper off the books of Fannie and Freddie, the $700 billion (plus the $100 billion in add-ons and pork) for the Wall Street bailout, the $85 billion to bail out AIG, and $37 billion more now needed, the $25 billion for GM, Chrysler, and Ford, and the hundreds of billions Hank Paulson will need to buy corporate paper and bail out banks to stop the panic.

As Americans save nothing, where are the Feds going to get the money? Is the Fed going to print it and destroy the dollar and credit rating of the United States? Because the nations whose vaults are full of dollars and U.S. debt – China, Japan, Saudi Arabia, the Gulf Arabs – are reluctant to lend us more. Sovereign wealth funds that plunged billions into U.S. banks have already been burned.

Uncle Sam's Visa card is about to be stamped "Canceled."

The budget is going to have to go under the knife. But what gets cut?

Social Security and Medicare are surely exempt. Seniors have already taken a huge hit in their 401(k)s. And as the Democrats are crafting another $150 billion stimulus package for the working poor and middle class, Medicaid and food stamps are untouchable. Interest on the debt cannot be cut. It is going up. Will a Democratic Congress slash unemployment benefits, welfare, education, student loans, veterans benefits – in a recession?

No way. Yet, that is almost the entire U.S. budget – except for defense, the wars in Afghanistan and Iraq, and foreign aid. And this is where the ax will eventually fall.

It is the American Empire that is going to be liquidated.

Retrenchment has begun with Bush's backing away from confrontations with Axis-of-Evil charter members Iran and North Korea over their nuclear programs, and will likely continue with a negotiated peace in Afghanistan. Gen. Petraeus and Secretary Gates are already talking "reconciliation" with the Taliban.

We no longer live in Eisenhower or Reagan's America. Even the post-Cold War world of George H. W. Bush, where America was a global hegemon, is history. In both relative and real terms, the U.S.A. is a diminished power.

We have two wars bleeding us and many more nations to defend, with commitments in the Baltic, Eastern Europe, and the Balkans we did not have in the Cold War. As U.S. weapons systems are many times more expensive today, we have fewer strategic aircraft and Navy ships than Ike or Reagan commanded. Our active-duty Army and Marine Corps consist of 700,000 troops, 15 percent women, and a far higher percentage of them support rather than combat troops.

With so few legions, we cannot police the world, and we cannot afford more. Yet, we have a host of newly hostile nations we did not have in 1989.

U.S. interests in Latin America are being challenged not only by Cuba, but Venezuela, Bolivia, Ecuador, Nicaragua, and Honduras. Brazil, Argentina, and Chile go their own way. Russia is reasserting hegemony in the Caucasus, testing new ICBMs, running bomber probes up to U.S. air space. China, growing at 10 percent as we head into recession, is bristling over U.S. military sales to Taiwan. Iran remains defiant. Pakistan is rife with anti-Americanism and al-Qaeda sentiment.

The American Empire has become a vast extravagance.

With U.S. markets crashing and wealth vanishing, what are we doing with 750 bases and troops in over 100 countries?

With a recession of unknown depth and duration looming, why keep borrowing billions from rich Arabs to defend rich Europeans, or billions from China?

America needs a bottom-up review of all strategic commitments dating to a Cold War now over for 20 years.

Is it essential to keep 30,000 troops in a South Korea with twice the population and 40 times the wealth of the North? Why are McCain and Obama offering NATO memberships, i.e., war guarantees against Russia, to a Georgia run by a hothead like Mikheil Saakashvili, and a Ukraine, millions of whose people prefer their kinship to Russia to an alliance with us?

We must put "country first," says John McCain.

Right you are, Senator. Time to look out for America first.

Excerpted from an article on the front page of today's New York Times...

“The Europeans not only provided a blueprint, but forced our hand,” said Kenneth S. Rogoff, a professor of economics at Harvard and an adviser to John McCain, the Republican presidential nominee.

In the process, Mr. Rogoff and other experts said, the government is remaking the financial landscape in ways that would have been unimaginable a few weeks ago — taking stakes in the industry and making Washington the ultimate guarantor for banking in the United States.

Like the article posted above says...America First.

If we could believe that any elected official insode Washington's beltway really believed that, maybe we should vote for them. But at the moment, I don't think any current member of the U.S. Congress has earned the right to re-election. Unfortunately, we'll have to vote for at least one of the ones who are running for President.

Originally Posted by Villages Kahuna

Excerpted from an article on the front page of today's New York Times...

“The Europeans not only provided a blueprint, but forced our hand,” said Kenneth S. Rogoff, a professor of economics at Harvard and an adviser to John McCain, the Republican presidential nominee.

In the process, Mr. Rogoff and other experts said, the government is remaking the financial landscape in ways that would have been unimaginable a few weeks ago — taking stakes in the industry and making Washington the ultimate guarantor for banking in the United States.

Like the article posted above says...America First.

If we could believe that any elected official insode Washington's beltway really believed that, maybe we should vote for them. But at the moment, I don't think any current member of the U.S. Congress has earned the right to re-election. Unfortunately, we'll have to vote for at least one of the ones who are running for President.

Sometimes we disagree..sometimes we agree Kahuana...this time we AGREE !