Still On Vacation

I am still on vacation. Unless something dramatic has happened, I will only write occasionally. I apologize to you who follow this blog. I should be back in full swing in 3 weeks. Thank you for your patience and understanding.

Obama's 100 days+

Obama has done one thing that will go down in history as "game changing". I don't just mean getting himself elected. That certainly was a game changer. How quickly has the country (apart from a small minority of racist largely Republican) accepted a black president as "normal".

The really significant thing in my view is the number of "people of color" he has brought into his cabinet whose credentials are awesome. Steve Chu is a Nobel physicist. His new Supreme Court nominee is a Hispanic who graduated Summa from Princeton and onto Yale Law Review. And so on. Never again one should hear the argument that there are no qualified "minority" citizens. There are plenty and Obama has once put away that not so subtle racist argument.

However, as long time supporter of Obama, Frank Rich of the NY Times wrote in today's Sunday paper that some serious stuff is going down badly. The full column is here. It shoudl be read in full.

Here are a few excerpts:

...The administration’s two financial gurus, Lawrence Summers and Timothy Geithner, wrote to preview their plan [in the Washington Post]: “Some people will say that this is not the time to debate the future of financial regulation, that this debate should wait until the crisis is fully behind us,” they wrote by way of congratulating themselves on taking charge.

Who exactly are these “some people” who want to delay debate on the future of regulation? Not anyone you or I know. Most Americans were desperate for action and wondered why it was taking so long. The only people who Summers and Geithner could possibly be talking about are the bankers in their cohort who helped usher us into this disaster in the first place. Both men are protégés of one of them, Robert Rubin, the former wise man of Citigroup.

There are some worthwhile protections in the Summers-Geithner legislation, especially for consumers, but there’s little that will disturb these unnamed “people” too much.

Remember I raged over the lose-lose proposition of Geithner's Public/Private Investment Plan? To see how the issue of "conflict of interest" has been set aside for Obama's economic team working with some of the powerful people in the financial sector, just read in the same issue of NY Times a long article on Bill Gross's role in shaping government policy. I don't know to laugh or to cry. Read the full article as well here.

NY Times has been a huge supporter of Obama's Campaign for President.

Another longstanding "liberal" magazine close to the Center is also unhappy about Obama's increasingly "traditional" politics as usual presidency. The whole article by Kevin Baker needs subscription at Harper's Magazine, July Issue. But here is one excerpt.

Wall Street Won - 2

I am still on the road in the United States living off a suitcase with just time and energy to do emails. I try to keep up with the news but cannot blog as often as I would like. Very sorry.

However, one thing caught my eyes. Michael Lewis, one of best writers about Wall Street, is angry at the same thing I was sometime ago regarding how Obama, as advised by his two chief economic lieutenants, had cratered to Wall Street tycoons. The biggest of them all on Wall Street are those who run Goldman Sachs. Read here.

There are two fundamental issues in the financial rescue operation: systemic stability and economic justice. They are not mutually exclusive especially in this particular financial meltdown when the victims, the majority of taxpayers, are also footing the bill to rescue Wall Street.

It is simply wrong to save Wall Street in the name of restoring systemic stability at further disadvantage against the working stiffs who in California are experiecing a growing unemployment rate now at over 12% and rising.

Paul Krugman just came out with a short but punchy analysis of what was so lacking in Obama's new policy on regulating Wall Street.

The package is yet again an example of saving the backsides of the tycoons while plugging some holes related to systemic risks. Read here.

A Decaying Empire

It gives me no pleasure to lament over the sad state of many aspects of the United States who has given so many shelter, protection and a second chance in life from their unhappy past. Me included. My parents were refugees from China before 1949.

Yet, as the American Society of Civil Engineers, (ASCE) the nation's largest such association, has been warning over the past many years, the conditions of the American infrastructure, once the world's Gold Standard, are in dire conditions. Anyone who has visited mainland China (even!), or Korea which US once saved from the North or Taiwan, can spot the lamentable state of much of American roads, telecomunication, bridges. Internet speed is mostly slow even in the high income neighborhood. I compare it to what I have in Thailand. Read the latest from ASCE here.

It isn't just "hardware" that's a big issue in this country where I have been traveling the past weeks.

American airline companies these days, like Detroit automakers, must be prime materials in management courses as to how not to run any organizations.

Not only flight delays are routine, not only service is uncaring, even baggage handling is laughably "Third World". My short flight from San Francisco to Los Angeles was delayed for 3 hours. I checked in 2 hours before scheduled departure. Yet, the carrier managed to have left behind my luggage. If only my random experience were exceptional. But my story met with a knowing shrug among all my friends for it was apparently a common phenomenon. Sad

An Apology

I have been traveling constantly last 2 weeks in California on personal business living off a suitcase.  Two more weeks to go before I could sit down and do some serious writing.  Please accept my apologies.

Nothing fundamentally has changed.  Wall Street is still practically dictating what the economic team of the Obama Administration should or should not do.  

Financial markets like what they see, for now.  Despite reassurances from Washington that its policies are only anti-deflationary, inflation fears are increasingly affecting the bond market as the long end moves up.  Gold, Oil, other commodities have stayed very strong.  

Dr Doom, Marc Faber, an old friend, is going around the world saying US is going the way of Zimbabwe because the Feds have been printing and committing trillions to avoid Great Depression 2.  So inflation was to become hyperinflation.

Marc as usually overstates his case, but his directional prediction is not to be dismissed so quickly.  

For the time being, I can only contribute occasionally to my blog.  July should be when I get back to the swing of things.  

General Motors and Team Obama

GM is dead. Long Live GM. Uncle Sam is there to give you back life. Will the new GM work? Can a broken vase be put back together?

No one provides a better answer to the GM question by the normally conservative NY Times columnist David Brooks. His analysis is here.

The following rejoinder by a reader makes a good companion piece to Brooks' analysis:

David, your thinking is sound, but missing an historical context that would actually reinforce it.

There are two books that completely explain what GM was, is, and will become:

1. "My Years With General Motors" by Alfred Sloan

2. "Concept of the Corporation" by Peter Drucker

The first is by the quintessential GM insider. Sloan was chairman of GM during its formative years - and pioneered the ostensible virtue that proved to be GM (and other American) companies' demise. That is, of course, centralized finance and decentralized operations.

GM has always been run by its finance people. Recently, run into the ground. This is perhaps why Barack's team is so deceptively comfortable at its helm.

Everything by the numbers. The Corvair. The Vega. The Aztek. More harmfully, a succession of mediocre models.

The second is by the quintessential GM outsider - and about GM from an outsider's perspective. The poignancy here goes to the other fatal aspect of GM's culture - its insularity.

As Drucker wrote his book, GM's senior executive management grew so comfortable with him, they wanted to offer him a senior executive job. Upon reading the book, however, that thought dissipated. They had grown to see Peter as an insider - and so his outsider's view was seen as disloyal and even seditious. So Drucker brought his lessens elsewhere. To Japan.

Santayana's comment (incidentally, Barack, a Harvard man through and through) about those not remembering the past being doomed to repeat is eerily poignant here.

Lutz, from Chrysler - the engineering-oriented company of the big three - couldn't make a significant dent (pun intended) in GM's culture.

But our new young president might just get it right - and I certainly wish him and his team well to that end - and learn a valuable lesson in wealth creation.

GM's challenge is not creating a supply of cars. It is about creating demand.

For that - he needs to turn to the marketing-oriented company of the big three.

I see a Ford in GM's future. You heard it here first.

— W in the Middle, New York State

Beijing Ridiculed Tim Geithner

US Treasury Secretary, Tim Geithner, is in Beijing to reassure America's single largest creditor that it's bonds are "safe". Chinese Prime Minister, Wen Jia Bao, recently asked for reassurance as China is saddled with US government papers.

The Peking University audience to which Geithner addressed humiliated Geithner by laughing out loud when he said "Your assets are safe".

A former Central Bank governor of China told the press Geithner's math was dubious when Geithner claimed US could reduce its fiscal deficits substantially in the foreseeable future. It is rare that Chinese hosts so openly disparage a guest.

The coup de grace came when the ex Chinese central banker said "The Federal Reserve Bank is the world's largest investor in junk assets."

Three signs of any empire falling: a decaying economy, declining morality and a world losing respect of the emperor seen to be increasingly naked. The US unfortunately is well on its way to meeting those three pre-conditions. The Bloomberg report on Geithner's visit in Beijing is here.