Wednesday, March 12, 2008

third worldism in america

while countries across latin america are starting to look increasingly developed, the US looks more and more like a third world country everyday.

imagine what it's like to look in on the USA from the outside...

we have a fragmented and unclear party system that could cast the democratic party into an historical rift before the one election they've been anxiously awaiting for the last 8 years.

who knows whether this will wind up in the courts, dragging the country through every kind of uncertainty and confusion....

next, I fear eliot spitzer will try to hang on to the governorship of New York state. I worry he will try to drag the whole thing out, hoping to defeat it legally.. again, the state could be locked up for months in an unproductive political fight over a bunch of personal affairs.. rather than real policy ...

I know this might be small... but for the same man who weilded such power over wall st and still runs the state that's home to the world's largest equity market is a bit worrisome. it's a bit backward and troublesome that such an important job could be so compromised. this does little to restore confidence in american governance or credibility -- at a time, of course, when the rest of the world is starting to question american standards of value more than ever...

in fact, bloomberg today reported that german CDS traded through the US levels. I am a bit loath to mention bloomberg because they can shoot for the sensational... but this comes after moody's mentioned long-term problems with the USA's AAA ratings... I know it's very very early to talk about something like this, but once a company or issuer does something to raise credit worries, it doesn't go away.. when it's voluntary, it's always worse ... just ask any bondholder who bought the debt of home depot or clear channel.. unlike when something happens, like when the FDA pulled vioxx, when credit problems are avoidable, it means that the people running the show are thinking a certain way... they chose that behavior... and they'll choose it again.

we're not doing things like levering up to buyback shares -- or are we? we're using debt to drive up assets trading at a big discount .... the basic point is that american creditworthiness is going to start being drawn into question. not much yet, but it will start emerging as a theme in coming months and years.

one other similarity to the third has long bothered me about the US economy ... the large number of employees out who seem to be dropping out of the workforce ... that reflects another problem that has resulted from this pattern: government data is increasingly inaccurate and dismissed -- like the unemployment data. people have long known the numbers didn't tell the whole story...

interestingly, the same also goes for moody's and s&p and their formerly AAA ratings on many subprime issues ... all these things we once took for granted as givens are at risk of crumbling into a world of relativism and intransparency.. after all, the thing that always made the USA stronger than third world countries was the level of rights open to everyman. now, the official rules and meanings are increasingly irrelevant, giving a clear advantage to the powerful and connected ... whatever happened to the america that educated millions of GIs, launching them into the middle class and setting lose the greatest wave of wealth, social justice and change ever known? have we all grown so cynical we don't even care anymore?

2 comments:

pater familias said...

I seem to read some sadness and a bit of despair in your comments. But one should not be surprised when we allow the markets to police themselves. The self-correcting mechanism may be a reality and we're seeing it right now, but who says the correction will happen without lots of suffering. But in all suffering it will be the disenfranchised, the least prepared, and the weakest and (in many cases) the less educated and the poorest who will suffer the most. Afterall they have no buffers, by definition, since the powerful and the richest contain the protection in their very names. I'm afraid we are on the cusp of another move into a "son of Glass-Stegal" saga. What's that saying about those who forget history are cursed to repeat history?


Pater Familias

David said...

I think it will be much harder to fix this compared with the 1930s. first of all, we already have regulatory bodies in place. that will make it harder to change things.
secondly, special interests are much more systematically entrenched and will control any attempts at reform.
thirdly, this crisis is going to play out in slow motion over a long period of time. by the time we really understand what happened, it will be ancient history.