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Chaos in Washington!

Friday, September 26, 2008, 8:47 AM

This is the most explosive story of the day, because of what it implies - a rupture in the formerly seamless power structure down in DC.

The chaos in Washington represents the most serious split of political power in, well, far too long.  Depending on your point of view, this is either a godsend or a complete disaster.

If you are the Bush administration, trying to find a crevice of political advantage for John McCain, it is a disaster.

You don't even have to read between the lines on this one.

Quote:
WASHINGTON - Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, it was a remarkably bad day for Republicans.

A White House summit meeting on Thursday meant to shore up John McCain's shaky campaign "devolved into a contentious shouting match." And that's how McCain's own campaign described it.

The meeting revealed that President Bush's $700 billion bid to combat the worst financial crisis in decades had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.

Link

Imagine that!  Democrats were all ready to roll over and hand an open checkbook to the financial industry, but conservative Republicans (yes, there are a few left) said "no way."  Apparently, they've been pushed too far on this matter.

Prior to this breakdown, here was the political-financial model I was operating from:

Now that seems to have changed in an important way.  It would seem that the conservatives have split off from both the financial power structure and all the remaining Republicans and Democrats.

This next quote captures that dynamic quite well:

Quote:
Treasury Secretary Henry Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way to make his point according to witnesses.

And when Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House's top Republican refused to send a negotiator.

"This is the president's own party," said Rep. Barney Frank, a top Democratic negotiator who attended both meetings. "I don't think a president has been repudiated so strongly by the congressional wing of his own party in a long time."

So this is my new model:

Now this is really an earth-shaking development.  The continuation of the illusion requires that everybody be on the same page, telling Americans how handing over three generations' worth of money to the financial industry is really in their best interests.  No cracks can be allowed in that story.

Even as the Mainstream Media goes out of its way to assure us that a failure to hand over our money to the banking industry would be the worst thing for us, it is pretty clear that a major schism now exists:

Quote:
The consequences could be worse for Bush, and for millions of Americans if the impasse sends financial markets tumbling, as some officials fear. Closed-door negotiations were to resume Friday, but it was unclear whether House Republicans would attend.

The next potential development, which I believe will really let us know that the final moments of the American dollar hegemony are upon us, will be if/when the monolithic central banking system develops a fissure and breaks apart (see next image):

The ability to coordinate all the competing interests and needs will assure paralysis and policies that work at cross purposes.  Our sign that this is upon us will be a decline in the dollar, coincident with (sharply) rising interest rates.

When/if that happens, you had better have your financial affairs more or less structured exactly how you want them, because the doorway will not be big enough for everyone.

Here is my final model of what that will resemble:

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12 Comments

JGus's picture
JGus
Status: Member (Offline)
Joined: Aug 27 2008
Posts: 1
Good to have you back!

Chris,

It's great to have you back helping us navigate these tumultuous times. Events are unfolding so rapidly that a 24 hour period without your keen insight feels like an eternity    : ) Thanks for all of your hard work and willingness to help all of us be as prepared as we possibly can. 

gsti's picture
gsti
Status: Bronze Member (Offline)
Joined: Jul 21 2008
Posts: 60
ditto

Very true JGus,

 I was giving the refresh button a good work out ;)

 Welcome back Chris!

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Strange crosscurrents

Definitely there are some strange political crosscurrents underway, which the orthodox Dems vs. Repubs model can't begin to resolve.

For one thing, the Republican revolt against the Bush/Paulson plan harks back to the party's traditional "fiscal restraint" roots -- roots which seemed to be completely abandoned under the reckless borrow-and-spend Bush administration. That's a real head-snapper. And besides being fiscally conservative, the Republican rank-and-file stance also represents the populist "no bailout for Wall Street" view. Several members said in hearings this week that their constituents were "99 to 1" against the bailout.

But Senator Harry Reid -- after acknowledging that a former Nevada banking commissioner had advised Reid that the plan is "the goofiest thing he's ever seen" -- went on to say that "just because it's unpopular doesn't mean we shouldn't pass it." And that's the other stunner -- except for a few populist firebrands such as Rep. Marcy Kaptur (D-Ohio) who has savaged the bailout plan -- Democratic leaders are representing Wall Street's interests in fronting the plan, and working with Bush to pass it. Sure, they want to attach "executive compensation" and "foreclosure relief" bandaids. But those are very small baubles on an immense Christmas tree for Wall Street.

Bottom line, both these shape-shifting parties are morphing before our eyes, seemingly switching sides in midfield, as the Great Game goes on. Unfortunately, given the way Washington works, I have little doubt that the some "compromise" at the expense of the taxpayers (the only parties not represented at the bargaining table) will be enacted. The Old Yellow Dog sniffs this already.

And so I say ... DEATH TO THE DOLLAR!!!

miranda's picture
miranda
Status: Bronze Member (Offline)
Joined: Apr 29 2008
Posts: 28
single, monolithic looting operation

Chris I love your site and learn so much from it. But I balk at the idea that there was a "monolithic looting operation in effect" - previous to the current breakaway by conservatives.

C'mon - Life and politics are never that simple.

I think there's a bunch of scared Democrats who did not like the bill but were terrified of loosing the election for Obama by bearing responsibility for scuttling Paulson's plan and thereby risking collapse of the economy before Nov. 4. Don't you think some of them are thrilled that the Republican rank-and-file (who have less to lose - since they're less likely to be re-elected anyway, given the mess created on their party's watch) are going to take the fall on this one?

I don't think that the Democrats in congress are now sitting around wringing their hands and crying over the delicious loot  they and their banker friends stand to lose should the bail-out not go through. I'm not saying the Dems are not complicit in, and responsible for, any number of stupid or venal policy decisions, I just don't think this bail-out is looting operation conceived of and carried out in a monolithic way by what is (or was) the bi-partisan D.C. leadership.

Let's not overlook panic, stupidity and the basic human impulse to want to cling to the status quo. The status quo is clung to not soley due to greed, but as a deep psychological mechanism. We all have a need to believe that our concepts of 'normal' have some grounding in reality and safety. And that somebody (be it Paulson, Bernake, other Senators, Wall Street - whomever represents to us the known way things have been working) knows what's going on and can clean up the mess.

Change is hard...

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5969
The reason I view this as a looting operation

The reason I view DC as a monolithic looting operation is not just because of this most recent display.

I have carefully cultivated this opinion over many years after watching how my country's future was sold down the river, often for embarrassingly small donations or favors.

Consider:

  1. The US insolvent. See Chapter 12 (debt) and Chapter 13 (National Failure to Save) for my complete views on this matter.
  2. The Federal Reserve has been printing money at several times the underlying rate of economic growth for decades.  This explicitly transferred wealth into the pockets of those fortunate enough to benefit from rising asset inflation at the expense of those who did not.
  3. Interest rates have long been below the rate of inflation punishing savers.  

A long time ago I lost any sense that there was any discernible difference between the political parties.  Regardless of who was in charge, I observed the same trends towards transferring wealth away from workers and towards the so-called (now exposed as frauds) capitalists.

So, yes, there's fear and loathing down in DC right now as people scramble to preserve the status quo, but the status quo has been several decades of massive, asymmetrical benefit for the well-connected at the expense of everybody else.  That seems to finally be boiling over out in streets (but net yet in Reid or Pelosi's impenetrable bubbles).

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5969
Well said.

MH - the quote by Reid is just another in a very long string of quotes by Democratic leadership that are hard to accept at face value.

Watching Pelosi angrily react when recently questioned about the 9% approval rating of the House she oversees revealed much.

It was patently obvious that she felt being asked about her job performance by 'little people' crossed a line.

The great silver lining in all of this will be getting the "little people" a spot back at the bargaining table.

miranda's picture
miranda
Status: Bronze Member (Offline)
Joined: Apr 29 2008
Posts: 28
looting operation

I do agree with you about having been sold down the river for many years.

But, specifically regarding congress now trying to ram a $700 billion bail-out down our throats for their own greedy financial ends, I still think it's neigh-on impossible to mass-coordinate a conspiracy of that magnitude. Too many people involved.

joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
i needed a laugh

i know you put that first chart down on the floor and gave your kids the crayola box and let them have at it.

i spent 2 hours  yesterday in front of the federal building in fayetteville arkansas holding a sign that read "will work for bailout." this weekend

there is the third largest biker rally in the world going on here.  chris it is scary we got mostly blank stares. the fifty percent of the people who vote  in this country are the

ones  calling and writing the powers that be "for now" the rest of the population is totally oblivious. i have been sending out a friends and family email to everyone in my address book sharing your crash course so that people can get up to speed in a very short time i am going to organize a public showing here next week.

 the first overt shot in the coup took place in 1913 " give me control of a country's money supply and i care not who it's elected leaders are" baron rothschild

any piece of legislation passed now has to absolutely include nationalizng our bank. if we as a people settle for anything less we are doomed . this message needs to be included in any call or email with congress shills. the utter arrogance of that statement by the good baron is beyond belief but it gives us the key HE ACTUALLY IS TELLING US WHAT WE NEED TO DO. they are getting their cash out as quickly as they can they are setting up in dubai and south america. their homes here will be "second homes" the rats are abandoning a sinking ship. this is the ultimate example of disaster capitalism. i suggest everyone read naomi klein in harpers oct.2007. folks orwell was an optimist. i agree with your strategies chris. as far as stock picks imy first choice is remington arms they have been around since about 1813 nothing but upside as they are one of if not the largest mfg. of ammo. colt makes the m16 so they look good but i dont think they are public. not sure about glock they are austrian probably on the dax i really think the sleeper tho is smith and wesson they are a virtual penny stock now and are at about one seventh their 52 week high. one tip i have for the people of this community, i know this from my sailing days, a flare gun makes an incredible close range weapon and you dont need a permit just order a few from a marine catalog.

by the way i am a quaker

they are going to pass this over the weekend. we need to keep writing and calling and getting others to do the same. the speed with which this is happening is unbelievable. china is NOT lending us anymore money. they must have run the numbers and said to themselves we are not throwing any good money after bad. no china? the party is over turn out the lights. the 800 pound gorilla  in the corner is peak oil. my partner is in asheville nc and he cant leave home in his car --no gas- people are getting into fist fights over a tank of gas. oh yes they slipped in the bailout to gm and ford, i think chrysler got left out in the cold, into hr2638 it is the emergency govt funding bill to keep the govt running. the secy. at my congressmans office said he was forced to sign it or the govt would shut down i asked her if she thought that would be a bad idea. she laughed. chris i cant thank you enough. i hope to meet you one day. this is a great time to be alive this is the greatest opportunity of our lives i am and will remain optimistic we can do it but it wont happen if we sit on our hands. POWER TO THE PEOPLE............KEEP CALLING

 

ike's picture
ike
Status: Member (Offline)
Joined: Sep 17 2008
Posts: 19
While we debate, the rest of the world prepares...

 

The writing is now so large on the wall that the end of U.S. domination is being openly talked about and prepared for.

 

China's state newspaper (the official newspaper of China's ruling Communist Party) has printed that “The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States.“  (see http://www.reuters.com/article/ousiv/idUSPEK4365020080917?sp=true

 

Russia and Venezuela are forming an alliance with explicit purposes to create a 'multipolar world'. They are forming energy and military pacts. Go to Google News and enter Chavez for the details.

 

And German Finance Minister said the United States will “lose its financial superpower status“ as a result of the current financial crisis. He said it was now inevitable that the major industrial powers would move into a multipolar financial world with better capitalized Asian and European banking centers rivaling the United States. 

 

srbarbour's picture
srbarbour
Status: Silver Member (Offline)
Joined: Aug 23 2008
Posts: 148
Fiscal Conservatives? Is that an Oxymoron?

[quote]For one thing, the Republican revolt against the Bush/Paulson plan harks back to the party's traditional "fiscal restraint" roots -- roots which seemed to be completely abandoned under the reckless borrow-and-spend Bush administration.[/quote]

Ha ha ha ha ha ha ha ha!

Thanks for the joke. Fiscally conservative Republicans indeed...

... oh wait, you weren't kidding? Then I suggest you take a look at what the break away group's suggestions: here

An insurance policy? Sounds nice doesn't it. But, usually insurance starts years before because, well, if it doesn't then there is no hope that there will ever be a possibility of repaying it. So, those of you who guessed it, here it is: They want a stealth bailout.

Yes, that's right. The great complaint here is that since the 'Taxpayers' know what is going on they, the government, might *gasp* have to be responsible.

If that werent enough, right on the end of a catstrophy caused by primarily by deregulation and irresponsible tax cuts for the weathy, guess what their solution is: more of the same.

Fiscal conservatives my ass.

--

Steve

miranda's picture
miranda
Status: Bronze Member (Offline)
Joined: Apr 29 2008
Posts: 28
Fiscal Conservatives? Is that an Oxymoron?

Exactly. Thank You Steve

There's not some overwhelming "seamless power structure" looting the treasury, against which those fed-up conservatives are 'bravely' standing against. It's those deregulation conservatives who have been doing the looting. Weren't they in power for most of the last eight years? More so if you consider the portion of Clinton's tern during which they held the majority.

Damn. Their plan for MORE DEregulation is making me wonder if the Paulson bail-out isn't positively noble...joking...but i still believe it's those free market republicans/wall street guys who are profoundly responsible for this - more so than the Democrats. Though the fact that the free market republicans have split with wall streeters over this only ads to the confusion - and fascination...

 

LifeisGood's picture
LifeisGood
Status: Bronze Member (Offline)
Joined: Aug 16 2008
Posts: 27
Welcome back!

Chris, I'll keep this short and simple!

 "Because of you, I am more confident than I could ever be about our uncertain times"

 

Thank you!

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