Well, we made it past the Mayan day of doom, but still no deal – in fact, we’re further away from a deal than ever.

On the third day of Christmas,
My True Love Gave to Me
Three French Hens…

Three French Hens

Last night the Republicans refused to go along with Plan B. Speaker Boehner has left the building, and with him any likelihood of reaching consensus on a plan before the end of December.

So, on day 10, we will continue to count down to the end of the year, with full expectation that the problems will continue to pile up until some Deus Ex Machina comes in to shake Washington politicos from their absorption in dogma and gamesmanship.

Back to the hens – three birds from France. Well, we’ve already gotten the bird twice – now we get it from the French. Francois Hollande, the French President, is a lifelong Socialist (no, really – not a socialist like Obama ..ha .. but a real, card carrying member of the Socialist Party.)

Elected last May, he has separated from his partner of 30 years with whom he had 4 children, threatened to nationalize Arcelor Mittel as a blackmail attempt to prevent layoffs in their steel unit in the northeast section of the country, and raised taxes. Apparently rich folks are turning in their passports to avoid the tax increases Hollande would impose on them – e.g. Gerard Depardieu, the French actor. And all this since just last May!

So the Republicans think Obama is bad? How amusing…but the point is this: the Republicans have failed in their bid to try to gain some leverage in these negotiations. Speaker Boehner has, in typical Republican fashion, stated that it’s now up to the Democrats to come up with a deal. He knows full well that his caucus will never agree with anything the Democrats develop – criminy, they wouldn’t even agree with his suggestion! So all roads inevitably lead to a great big goose egg (zilch)…

So the weekend will be days 9 and 8, Monday is Christmas Eve – day 7: nobody works on Christmas Eve..Day 6 is Christmas, day 5 is Boxing Day in England, so maybe Wednesday of next week will start the next round of pugilistic shenanigans.

Whatever comes of all this, I am ashamed of my country’s government. We should be better than this. What if we had real problems? Because it’s exceedingly clear the House of Representatives does not believe this is a real problem, or it’d be solved by now. What about those nationally-elected women talking with Diane Sawyer, assuring her that if they were in charge, something would be done by now? Well, gals – stand up & be counted! Take the reins and lead this horse to the barn!

If the negotiations over the fiscal cliff were a different game – say, craps – eleven would be a good thing. It, along with seven, is the lucky combination for the dice.

But the negotiations over the fiscal cliff aren’t craps – ohh, so tempting, but resist…they are a game of poker.

According to Gail Collins’ column, this morning, here’s the situation:

“Attempts to avert the infamous “fiscal cliff” are like a super-high-stakes card game. But you have to imagine a game in which one player needs to go into a back room before he makes his bet and get the approval of a herd of rabid ferrets. ”

I like that allusion to the Republicans – rabid ferrets…

Now John Boehner is going to try to get his colleagues to pass “Plan B”, which materialized out of nowhere. All it does is get past the hump of tax increases for all but people who’s adjusted gross income is $1,000,000 or more. Something tells me there will only be two of those left in the country if this passes. Everybody else will find a way to use tax loopholes and defer compensation to stay at $999,999 (cents don’t matter since everything is rounded).

So with eleven days left, we are once again confronted with the reality that Washington simply cannot and will not function as the Founding Fathers designed it to function. So let’s start thinking and talking about ways to give them the ultimatum: work together, pass something meaningful, or else …?? The “or else” is where I welcome your comments, gentle (and not so gentle) readers…

But the song remains the same: the taxpayer foots the bill for all this wasted effort. And apparently the President, with all his good points, is someone with whom you definitely want to play poker, because he’s really not very good at it. Hey – that’s my first suggestion for a revenue-generating suggestion…

But back to the theme song:

On the second day of Christmas,
My true love gave to me
Two turtle doves…

Two turtle doves.

Here’s a description of the bird, from Wikipedia:

Perhaps because of Biblical references (especially the well-known verse from the Song of Songs), its mournful voice, and the fact that it forms strong pair bonds, Turtle Doves have become emblems of devoted love.

Strong pair bonds…like the Reps and Dems; Boehner and Obama…sort of the antithesis of what we’re experiencing, eh?

So, let’s recap: so far we’ve gotten the ‘flying fickle finger of fate’, stranded up a tree and the opposite of ‘strong bonding’…What will we get for Christmas from these gentlemen? Undoubtedly a lump of coal in our stocking, and a ski trip to some nice venue for them. What’s wrong with those pics?

Well, as you can see from the counter over on the right, it’s 12 days left until we reach the Cliff. The Abyss…the maelstrom of financial and psychological misery. And where are we?

Well, let’s recap a bit. First and foremost, apparently the investment world had a lot more faith (delusion) than me, because the DOW is a smidge away from its 52 week high. So much for panic!

Nonetheless, in spite of commentary from both sides and the usual Lucy/football/Charlie Brown stunt on the part of the Republican leadership, we are nowhere close to an agreement. So, just for fun, we’ll play The Twelve Days of Christmas game between now and doomsday (which, by the way, is actually scheduled for two days’ hence, if memory serves…???

So, let’s begin…

the-twelve-days-of-christmas

If you’ve had enuf of that musical interlude, recall the first verse:

On the First Day of Christmas,
My True Love Gave to Me…
A Partridge in a Pear Tree…

A bird and a tree…well, gentle readers, it’s you and I that are getting the bird – the third digit of the upraised hand – but reality is if there’s no deal we’ll all be up a tree…stranded without even an umbrella to break the fall…

The world is watching!

True and faithful Ambrose Evans-Pritchard has written a doozy of a column for the Telegraph – if interested, here’s the link to it:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9717728/The-worlds-commodity-supercycle-is-far-from-dead.html

Here’s a summary of what he’s talking about.

Ambrose quotes from a couple of reports: one from the World Bank and one from Citigroup’s Ed Morse (not the local Honda dealership owner). The two reports combine to form a concept that affects the U.S., China, iron ore supplier Australia and frankly the rest of the world. What’s up with that?

As the title indicates, the World Bank has written about commodity “supercycles” that last 10 or more years, followed by a prolonged drop in commodity pricing. The run-up in oil prices from 2003 to 2008 was exceptional, however the overall trend is still the same. Ed Morse’s report for Citigroup addresses the oil question, indicating current pricing of between $80 and $90 a barrel is what we should expect to see for the next 20 years or so. This lends credence to what the World Bank is saying in their report.

But the analysis is the thing: of course. And here’s the analysis, which comes from a combination of sources that clever Ambrose utilizes to make his point:

Point 1: what is the only engine driving what little upward lift exists for the world economy?

China

The bulk of the world’s commodities have been purchased by and shipped to China since 2009. China used all these raw materials to build dams, skyscrapers, roads and apartment buildings. Where? In the factory towns in the east. Why? To support the mass migration of the population moving from the rural areas to the cities in the east to work in the factories. Factories? All that stuff you bought for the past 10 years at WalMart? Those factories made that stuff.

This worked very well until 2012.

Then what happened?

Quite intentionally, to ward off inflationary bubbles that were beginning to form, the Chinese government clamped down on the country’s economy, particularly in real estate, by limiting the supply of money. The clamp worked so well, that this sole world driver slowed down, causing the rest of economic traffic behind it (Europe, Latin America, the US) to slow down – in the case of Europe & Great Britain into recession. Okay, so then what happened?

Not so fast – let’s take a few steps back. While those of us on the ground might see this as simply short term changes that will be resolved over time, the World Bank’s report sees the situation in light of their analysis of over 200 years’ worth of data. What they suggest is that China – like most all countries that have come before it – has reached the end of its “supercycle”. This supercycle allowed them to see unprecedented growth over the past 12 years or so.

But according to the World Bank, they have just about extracted all they can from the plan developed by Deng Zhao Ping in the 80’s: transforming a poor, rural economy into a manufacturing powerhouse by utilizing cheap labor and underbidding the rest of the world. But you know all about that, eh?

Back to the World Bank. What will follow will be 20 or more years of growth at what the rest of the world considers “normal” rates, but is considered totally unacceptable in China: anywhere from 3.5% to 7%.

Now this is where politics rears its ugly head. The Chinese change their heads of government every 10 years or so, and the old guard’s 10 years is up. The ‘new’ guard just took over. China watchers expected there to be a mix of thinkers in the new government: traditional and progressive. But instead, what came to pass was mostly a younger version of the old guard.

So why should we care? Ahh…that’s where we get to the title of my piece (thank you for your patience in getting this far). Continuing to follow the same policies will inevitably lead to what is known as the ‘middle income trap’. What is that?

A couple paragraphs from Wikipedia say it best:

Avoiding the middle income trap

The Middle Income Trap occurs when a country’s growth plateaus and eventually stagnates after reaching middle income levels. The problem usually arises when developing economies find themselves stuck in the middle, with rising wages and declining cost competitiveness, unable to compete with advanced economies in high-skill innovations, or with low income, low wage economies in the cheap production of manufactured goods.[3]

The biggest challenge is moving from resource-driven growth that is dependent on cheap labor and capital to growth based on high productivity and innovation. This requires investments in infrastructure and education. As the Republic of Korea has proven, building a high-quality education system which encourages creativity and supports breakthroughs in science and technology is key.

So Ambrose says this younger version of the old guard – mostly made up of mentees of the old guard – think they can extract at least another 5 years’ worth of high octane growth out of the Chinese economy. The World Bank seems to think not. Depending on who’s right, the result could affect the rest of the world.

That’s why we should be interested. Very few countries have made it out of the middle income trap: Hong Kong SAR (special administrative region), Japan, South Korea and Equatorial Guiana are identified as some that have. Hong Kong is now part of China; Japan is on the decline because of the aging of its population, and South Korea has to worry about North Korea being foolish. So if China languishes in this middle income trap for the foreseeable future, it’s likely we will continue to experience slow growth and continued high unemployment.

Maybe we should send some folks over there to help?

I’m now really tired of hearing about the fiscal cliff. John was kind enough to work up a little countdown app over there on the right – the stars falling from the sky is appropriate symbology, eh?

Things are at a stalemate, so the countdown will continue while the politicos dither. Big surprise, eh?

So it’s time to move on; change the subject: talk about other things.

How about some pictures from our Thanksgiving? It’s been over a week since the groaning board was depleted, so it’s time to view those pix…

Here’s the last piece of advice:

5). Last suggestion: start succession planning on day 3. Joe Biden cannot and should not be President. Recall that George W. lost the White House for his party because he selected an unelectable vice president. Don’t make the same mistake, or we’ll have Jeb Bush in the White House in 2016. That will be your mortal sin.

And what are we hearing these days? Jeb Bush is meeting with advisors in Washington to consider his run for the Presidency in 2016. Heard anything about succession, other than Hillary Clinton might run (I doubt it)? Not really..

So, all in all, I appear to presently be 0 for 5. No surprise in that – after all, I am frequently ahead of my time in understanding these things. But eventually the Democratic Party will regret that there is no clear successor that has been named now. I guess there’s only room for one big ego in the room, at least until the inauguration in January. But those who rest on their laurels frequently find themselves behind the curve, and regretting the lack of action in a timely fashion.

But I’m still not ready to let go of #4. The problem of veteran’s suicides is really serious, and it demands our attention. I am determined to try to do something about it every day until there is some progress on this front. Any and all ideas from you, my gentle reader, would be appreciated.

Here’s piece of advice number 4. This post will lack the light-hearted touch of previous posts, as this is the most serious and difficult of topics for me.

4). Our veterans are dying daily. They need for you to devote a huge portion of your second term to finding solutions, not just rhetoric. Find someone with passion to run Veteran’s Affairs-Eric Shinseki needs to go. Ask somebody like Ross Perot seemed to be to run it for a dollar a year. Get some FDR mojo on this one.

What’s the latest suicide statistic for the Army? Interesting question, because there is nothing about it on the Web since the rate spiked in July. The election and the economy trumped news about veterans’ killing themselves. But thru a circuitous route, I found the statistic on the Stars and Stripes web page. Eighteen a day. That’s 126 a week; a year will net you over 6,500 suicides of veterans. Why does this happen? This little piece for one vet’s story is a recurring theme:

The former soldier had been distraught for weeks, frustrated by family problems, unemployment and his lingering service injuries. He was long ago diagnosed with traumatic brain injury, caused by a military training accident, and post-traumatic stress disorder stemming from the aftermath. He had battled depression before, but never an episode this bad.

Has there been any introspection on the part of the Army on this topic?

How about this headline from the Army G1 Suicide Prevention Team?

Army Suicide Prevention Month 2012
September 2012
Suggested Activities
“A HEALTHY FORCE IS A READY FORCE

So they declare one month a “Suicide Prevention Month”? Kind of reminds you of those old training films about Syphilis from WWII

We don’t want you to kill yourself because if you do, you won’t be ready to fight in the next war…oh my. Sure looks like rhetoric to me.

Here’s a map I took from the Veteran’s Affairs Website dealing with Suicide Prevention:

It tells Vets to visit their nearest help center if they’re feeling suicidal. There are 24 circles on this map, by my count. According to Wikipedia, there are 3.79 million square miles in the United States. So that means there’s a Veteran’s Suicide Help Center for every 157,917 square miles in this country. Might take a while to get to one of them if you live in a fairly rural area, eh?

But fear not – the Army has entered cyberspace to deal with the problem – there are mobile apps to remind you of why you shouldn’t take your life if you are a distraught vet:

If what I’ve written sounds angry, it’s because I am angry. I am tired of reading about the problem, and finding that little to no progress has been made in dealing with it. If you don’t have a loved one or family member who is one of the 2.4 million who served in combat in Iraq and Afghanistan, then you really don’t appreciate the impact those wars had on these young men and women.

So my advice to the big man is: find someone of high stature and lots of moxie to take on this problem for a dollar a year. The pay is symbolic; the point is to elevate veterans’ suicides to the status of the other problems we discuss every day and that dominate the media. Like the economy or who knew what before and after Chris Stevens was killed in Bengazi. At this point, that is a very small issue, compared to the eighteen young men or women who risked their lives in service to their country, and today will decide to end that life out of hopelessness, depression and despair.

God damn it, man! Do something!

Here’s item #3, and … oh my … it has surely been the topic of conversation on the Sunday shows for the past two sessions:

3). FIND the will and a way to work with the Republicans. You are way smarter than them, but you need to get past that. Without bipartisan cooperation, we cannot solve any of our problems. So get over the fact that they hate you for being who and what you are and rise to your level of potential. I’ll bet Michelle tells you the same thing.

The key words in advice item #3 are “the will”. If you can find the will, the way is fairly easy. But I think finding the will is hard because you have to summon a modicum of respect for your adversary to effectively negotiate with them. Because the President is so much brighter and has more integrity than the Republican cadre, he is struggling with dealing. Instead, he puts the onus on the Congressional Dems who, we all know, could not manage their way out of a brown paper bag.

That just won’t work. They may not be as smart or have as much soul as you, sir, but nonetheless they exist and YOU, sir, have to be the one to make the deal. No other…

How would I approach this if I were in your shoes? I’d do these three things:

a) Role play the negotiations with trusted colleagues – just like the practice for the debate. That way, you can actually see the face of your trusted colleague when you’re talking with John Boehner or Mitch McConnell, because you’ve practiced it that way. That will help with your body language which, frankly sir, you are lousy at hiding.

b) Figure out what you want and communicate that within the next five days to the populace…make it the obvious conclusion. Forget the political debt you owe the left side of the party who want you to hold out and go over the cliff. You don’t owe them anything. You could have shown up drunk for each of the three debate sessions, and they’d have come out stronger for you. Besides, the White House is lost in 2016 anyway, so… what the hell? Go for whatever it takes to negate the ‘no taxes of any kind’ pledge that the Reps are ready to give up. Tax rates up by a little, and deductions down by a little. Now – wasn’t that easy?

c) Finally, recognize that even though they were mean to you, you don’t trust them, in point of fact you loathe them and everything they stand for, you still have to reach a deal with them. As such, recognize their dilemma, clues of which could be found in the Grand Bargain negotiations from last year. The Republican party’s problem isn’t John Boehner or Mitch McConnell, it’s the stalwart holdouts from the last vestiges of the tealiban members in the House. They need to be sufficiently won over to prevent a mass exodus to the door when the vote comes up. There is still enough fear in the average Republican’s heart of being replaced in the next primary that a real potential exists for this ‘no’ vote to occur. Can you help John and Mitch with these folks? Who knows – but at least you can have a frank discussion with J&M on the topic, and volunteer to try with the vast resources at your disposal. That will show empathy and maybe help you get past the smug attitude that is so off-putting to them.

There you have it – really quite easy…we’ll see whether we can turn a corner with this problem. Because there is much more at stake than this so-called ‘cliff’. There’s every potential for the US economy to begin a true recovery this year if bipartisan cooperation prevails. Everybody wants it – even folks in the rest of the world want it. So let’s see if we can do it, eh?

Here was the second thing I suggested to soon-to-be-newly-elected President Obama last August:

2). The day after the election, you need to convene a round table of the best minds in the world. Note I said the best minds, not the best economists or Wall Street executives or government leaders-just the 15 or so best minds in the World. Put them all in a room and challenge them to develop a plan to fix the world economy. Give them 72 hours and only allow bathroom breaks; send food and water in while they work. Tell them you want the solution in plain English with no more than 15 pages of text. You take the product to the UN and get the world to endorse it. This will atone for Colin Powell’s mortal sin in 2004 and may save us all.

So now every day you read about the President meeting with one group or another, and that he is expecting both sides of the Congressional table to throw aside all their baggage, issues and dislike for one another and agree on a compromise.

That’s about as likely to happen as … well, you get the idea.

So now I’m 0 for 2 in my sage advice to the president. I’m starting to get the feeling he isn’t listening!

On the other hand, a guy named Peter Diamond, a notable economics professor emeritus from MIT, wrote an Op-Ed in the New York Times this morning. Here’s a link, if you’re interested…

The title of the piece is “Down with Supercommittees”. And – surprise, surprise, surprise as Gomer Pyle used to say – Professor Diamond suggests that

“Instead of wide-ranging, politically motivated panels, we need narrowly targeted commissions, without sitting members of Congress, modeled on the successful Base Closure and Realignment Commissions of recent decades.”

Hmph – that kind of sounds like a group of really smart people locked in a room until they come up with a really good plan.

So from all of this, one could almost glean the conclusion that Washington truly does not want to reach an agreement.

An alternate conclusion would be that they are not sufficiently competent managers to achieve that goal. A third conclusion could be that politics is still the best game in town, it’s still payback time for the Dems and the President, and there will no substantive agreement before the FC is breached. So in spite of a tick upward in the Dow and other indices yesterday, I stick with my prognostication that there will be no meaningful agreement, and there will be consequences to this failure.

Final note: my advice to the Chief Executive was to have the smart folks develop a solution to the woes of the world economy. This post is about the US economy. If anyone thinks one has no effect on the other, you just haven’t been paying attention for the past 4 years.

Maybe those Mayans knew what they were talking about!

Let’s talk about the fiscal cliff. Everybody asks me: what IS this thing called the fiscal cliff? And I say, oh gee whiz, let’s not talk about that now.

Let’s talk about the fact that since the election, the DJIA (Dow Jones Industrial Average) has gone from 13,120 to 12,570. If my math skills remain intact, that is a loss of 550 points in 8 days. That’s a loss of 4%, as pointed out by today’s Marketwatch online site. This is what the trend looks like…

If, hypothetically, this trend were to continue, with 47 days left before the end of the year (as indicated by that tiny little ‘fiscal cliff’ link in the predictions section that takes you to the site that counts down the days)…anyway, back to my point..

If this trend were to continue, that would equate to a 23.5% further reduction in the DJIA. That would put it at 9616.05, which is 1384 points lower than even I – the doomsday prepper – predicted. So we’re likely not looking at a linear downturn…

But I stick with my prediction of 11,000 by year’s end. That is a net 16% loss from the value of those 30 stocks that make up the DOW. And why, my gentle reader asks, is this happening? The answer is quite simple: dithering over the FISCALLLLLL CLIFFFFF…….(note picture above – pay particular attention to the location of that rope)…

Are the learned ladies & gentlemen of Congress and the Executive Branch aware of this trend? I’m confident they are. The more important question is: do they care? Or are they so caught up in the drama, they fail to see the impact their head fake games are having on ordinary citizens? That is the question..

To that end, I have a thought: I think the learned ladies & gentlemen in Washington get so caught up in the goings-on in their world that they rationalize the impact on the real world. Otherwise, how do you explain the behavior of the individuals involved in the mess known as the Petraeus scandal? Get ready…going to change subjects on you here…

Jill Kelley, the squealer, gets some guy in the FBI to check out some messages from a person whose identity she likely knew. How does that happen? If you complain about this blog post anonymously, do you think I could get the FBI to discern your identity? Sure…so she complains, once the investigation gets going, it really spins out of control and then the investigators have a real tiger by the tail. In the end, four families are somewhere between troubled and devastated, careers are on hold or lost forever and all of this is because…some gal got pissed off at another gal.

So what’s the moral of the story? Every so often these pampered and coddled folks come up for real air and sense the gravity of their transgressions. Unfortunately, just like in most Greek tragedies, alea iacta est…Latin for ‘the die is cast’…and once that die is cast, there’s no putting it back in your pocket and walking away.

And so it goes with the so-called negotiations over the fiscal cliff. The Republicans are trying to save some semblence of face in spite of the election outcome, and Obama et al can’t help but succumb to a whole lot of smug. Where will this end? 11,000…lots of money lost…and not much likelihood of any kind of collaboration in D.C. But that’s a topic for another post…