Friday, January 1, 2010

Two more steps towards Argentina

Several months ago I wrote a piece called Going south to Argentina, where I described the process where the United States and Argentina parted paths as promising emerging market economies about a century ago. However, much of the malaise that has plagued Argentina is now showing up in America today.

What happened to "inalienable rights"?
Recently I saw two more steps that America is taking down the road to Argentina. Yves Smith at Naked Capitalism writes:
Reader Walter passed along this distressing sighting from Chris Floyd’s blog. American civil liberties were gutted last week, and the media failed to take note of it.

The development? [The Supreme Court has ruled that i]f the president or one of his subordinates declares someone to be an “enemy combatant” (the 21st century version of “enemy of the state”) he is denied any protection of the law. So any trouble-maker (which means anyone) can be whisked away, incarcerated, tortured, “disappeared,” you name it.
Preconditions for a Dirty War?
This Supreme Court ruling sets up the preconditions for a Dirty War that Argentina saw in the late 1970s and early 1980s, where government forces made suspected left-wing guerrillas and their sympathizers “disappear”. Just as the repeal of the Glass-Steagall did not result in immediate consequences, I don’t believe that we will see the effects of this ruling overnight but the long term effects are potentially disastrous.

This ruling tramples on the Constitution and one of the most powerful symbols of America. Just understand this - that Constitution was paid for by blood, not only of the Founding Fathers, but by every American soldier. Every G.I. that ever enlisted swore an oath, not to the president of the day, but to the Constitution of the United States.

Remember the U.S. soldiers who fell at Omaha Beach?

…and at Pearl Harbor?

IMHO, this Supreme Court ruling tramples on their graves. More importantly, it sets up the preconditions for an Argentina-style "Dirty War" that represses the population.

Addendum: An alert reader emailed me to note that the Supreme Court did not rule that the president can declare anyone an enemy combatant, but declined to hear an appeal from a lower court on that issue (which is judicially a very different matter). While the ruling (or non-ruling) nevertheless has far reaching implications, it isn't as bad as I initially thought.

Selling off the family silver to pay the bills
Equally disturbing was Robert Shiller’s trial balloon about selling GDP-linked bonds. His proposal represents the sale of the equity of the country which involves participation in economic growth, as opposed to the debt which involves no participation in growth.

Shiller’s proposal is an echo from a past era of what happens when empires get desperate. Consider what historian Niall Ferguson had to say about the financial difficulties of the Ottoman empire about a century ago [emphasis mine]:
The crisis had two distinct financial consequences: the sale of the khedive's shares in the Suez canal to the British government (for £4m, famously ad­vanced to Disraeli by the Rothschilds) and the hypothecation of certain Ottoman tax revenues for debt service under the auspices of an international Administration of the Ottoman Public Debt, on which European bondholders were represented. The critical point is that the debt crisis necessitated the sale or transfer of Middle Eastern revenue streams to Eur­opeans.


In Disraeli's day, the debt crisis turned out to have political as well as financial implications, presaging a reduction not just in income but also in sovereignty.

In the case of Egypt, what began with asset sales continued with the creation of a foreign commission to manage the public debt, the installation of an "international" government and finally, in 1882, to British military intervention and the country's transformation into a de facto colony. In the case of Turkey, the debt crisis was followed by the sultan's abdication and Russian military intervention, which dealt a lethal blow to the Ottoman position in the Balkans.
Given that backdrop, analysis that showing that the US needs to roll over $3.4T in debt over the next four years must be a huge concern, not only for investors but for the political stability of America and the world.

[Sigh...] sometimes you can’t save the world, you can only save yourself.


# 56 said...

Regarding the "Dirty War" concerns, and the degradation of the Constitution, do you have any thoughts on the Interpol Executive Order controversy? Largely ignored by the media, seems like ABC noticed and Fox mentioned, it is provoking deep concern in the libertarian and civil rights community.
The White House response is nothing short of outrageous. Instead of answering the questions raised they have taken a "nothing to see here" stance as seen in this piece:
The questions McCarthy raises are valid; whatever the White House thinks of his politics, his credentials are impeccable. AG Holder invited him to join a Blue Ribbon Commission earlier in the year.
Your step toward Argentina raises real concerns, but that decision was subject to Judicial review. To the best of my knowledge this XO is not. As it stands, this order flies directly in the face of the protections the constitution provides US citizens. The questions raised should be addressed, if for no other reason than this will fuel the fears of the black helicopter/militia crowd. This may be one of those rare occasion where they are correct in their interpretation of events.
We the people have questions, and we deserve answers.

Patrick said...

I think you're absolutely right, and I'll add that concerns about a dirty war in the US was one of my motivations for leaving. Guess where I live now? Argentina. Who knows, maybe we'll see a pole shift.

keithpiccirillo said...

Happy Brave New Year World.
At this time of year many of us reflect with families by watching the doomsday shows such as "The Twilight Zone" and stories of aliens on the history channel delivering humans to earth centuries ago to build the world's pyramids.
I sifted through "1984", and read some "Brave New World" and "Animal Farm" because it keeps my edge in place.
Big Brother (think Google) does exist.
There is no easy way to solve mortgage foreclosures and bank's balance sheet lopsidedness quickly enough to coincide with our Ministry of Unplenty's quantitative easing timing.
I fear one way out is through a might makes right military conflict to ameliorate debt. Is bankruptcy an option and is the impetus a downgrading of our bonds?
Since March, "All stocks are equal, but some are more equal than others", and I've been following along with your inflation/deflation timer.

Cam Hui, CFA said...

An alert reader emailed me to note that the Supreme Court did not rule that the president can declare anyone an enemy combatant, but declined to hear an appeal from a lower court on that issue (which is judicially a very different matter). While the ruling (or non-ruling) nevertheless has far reaching implications, it isn't as bad as I initially thought.