George Rebane

Here are some thoughts about the coming year that have been cooking for a while.  This is the annual season of prognostications in which pundits, publishers, politicians, and propagandists are bellying up to the bar to be heard.

The Economist, venerable ‘newspaper’ of opinion economics, has slid markedly leftward during 2010.  It is now taking another fresh look at capitalism and the role of markets, letting its readers know that free markets have had their chance and have been found wanting.  Some of the data for my prognostications is taken from that publication’s generous research.

In response, the eligible electorate did rise to the occasion and deliver a massive repudiation of President Obama’s government overreach which repudiation totally failed to deliver its intended message to the principals involved.  They instead have retreated to hone their ‘communication skills’.

Nevertheless, there is evidence that some countries in Europe are discovering that unhinged spending on social programs and green jobs is a sure invitation to financial disaster and blood in the gutters.  Their toe-in-the-water cutbacks in 2011 in the aggregate will amount to less than 1% of GDP – but it’s a start.  Meanwhile America’s states will continue to head toward the fiscal mud.

California is judged by many to have one of “the most useless governments on Earth.”  I would add that this November’s election guaranteed that California will be among a handful of states lobbying Congress to enact the equivalent of Chapter 9 laws allowing those jurisdictions to declare bankruptcy in the desperate attempt to avoid becoming federalized.  Perhaps sidestepping your creditors and unfunded financial obligations through formal bankruptcy is the softest form of failure that leaves some local controls intact.

New year’s resolution for California

The Federal Reserve will stand fast denying its program of debt monetization.  Meanwhile the rest of the world will continue playing musical chairs with the dollar.  The dollar has been backed by nothing but hope that the American economy will not bite the dust before any given debt holder can bail out.  But the last two years have demonstrated that our economy, often characterized as a huge ocean liner, may indeed turn out to have the unexpected vertical dynamics of the HMS Titanic.  The question of the year will be what to do with your extra dollars.  Borrowing to the hilt is the current advice of financial pundits because you can pay it off with the coming cheaper dollars.  But then, where are those mentally challenged lenders?

In this regard the housing market will surprise us again.  Its return from bubble levels is far from complete and the government’s easy money policies and mandates, which caused the bubble in the first place and have prevented the market from settling, are back in full force.  The longer the distortion continues, the harder will be the ultimate fall.  And it could happen as early as this year as the administration is pulling all the triggers to delay the inevitable correction (crash?) until after the 2012 election.

Peter Schiff argues in the 30dec10 WSJ that ‘Home Prices are Still Too High’, and states that “without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more.  These are not conditions that inspire confidence for a recovery in prices.” 

 Colluding governments around the world will ship even more American jobs overseas.  Led by US government supported GM and GE, such companies will join Chinese and other Asian corporations to develop, manufacture, and market products worldwide.  Profitability will come from overseas. When was the last time you saw China set up manufacturing operations in the US?  But our leftwing will continue to blame ‘the rich’ for slowing down our economic recovery.  And this might even work as California’s populist dumbth spreads across the land.  Trumpeting the downfall of capitalism and free markets as the culprits in America’s ‘stolen economy’ is the only lever left to the left.

America’s exports will contract tighter around products and services connected to advanced technologies, higher education in the science/tech fields, and food.  Progressive governments at all levels will continue their best efforts to stifle efficient and abundant food production ranging from import controls to mandated foodstuff diversions from market demands to green insanities like using delta smelt to destroy a good fraction of the richest agriculture in the world that comes from California’s central valley.  Another crisis in the offing that will not be wasted.

America’s importing of the world’s best and brightest technology oriented students will continue, as will their exodus upon graduation or soon thereafter.  We used to nail those graduates to our shores and our way of life.  Today America is no longer the best and easiest place to start and profit from a new business.  The home countries of the foreign students know this and are successfully providing incentives for their return to generate the wealth there instead of here.  Under Obama’s administration this process will continue and speed up in 2011.

The big lies on healthcare will go on both in their being trumpeted by the lame stream media, and their exposure as we learn more and more of how this devastation will affect our country.  The new Republican strength in Congress will be able to do little but nibble at the edges of Obamacare as it is implemented.  Even our dullest will begin to understand that nationalized healthcare is even more expensive and provides fewer services under stronger and stronger regimens of rationing.  Calling the rationing boards and agencies ‘Death Panels’ may provide the left with the traction needed to start its long awaited assault on free speech in the media, including blogs like RR.

America will ultimately fail to ‘pacify’ Afghanistan and transform it into any kind of a modern nation-state – i.e. it will remain a gaggle of corrupt, warlike tribes.  A debate will start on whether to continue the current strategy or adopt an altogether new form of projecting force around the world in support of our nation’s interests.  A hopeful candidate is to communicate and revert to a policy of rapid, visible, destructive, and time-limited tit-for-tat actions against countries and factions that harm or intend to harm America.  (In the theory of co-operation a tit-for-tat policy 1) never strikes or ‘defects’ first, 2) responds immediately to a strike or ‘defection’ with possibly assymetrical force, and 3) forgives immediately once its response is over.  To an opponent, tit-for-tat is completely predictable.)  Implementing TFT would never involve taking and holding real estate, but only using high technology resources to destroy from a distance and/or quickly insert and extract strike teams.

The global efforts to demote the dollar as the world’s premier reserve and exchange currency will strengthen.  It will be abetted by ongoing leftwing domestic policies to weaken the country under the guise of principled ‘social justice’, all this in order to prepare America for its diminished role as a member in the new global order.  The public service employee unions will continue to support this slide toward collectivism through their rapacious assault on the public purse adding militant disruptions of public services.  FDR’s prescient words about public sector unions will be selectively forgotten by the left-leaning media.  In a 1937 letter to the National Federation of Federal Employees he wrote –

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. It is, therefore, with a feeling of gratification that I have noted in the constitution of the National Federation of Federal Employees the provision that “under no circumstances shall this Federation engage in or support strikes against the United States Government.

Finally, the nation’s Tea Parties will go through a relevance crisis in 2011, and come out the better for it.  In the relative calm before the election year storm of 2012, the various factions will have problems identifying ideological targets and issues that will communicate immediacy and continue to motivate the grassroots at their 2010 intensities.  In confronting this crisis the movement will become more structured, perhaps more compact, but will remain as the rallying center for fiscal prudence, constitutionality, and individual freedoms.