Trade Barriers Toughen With Global Slump
Despite Free-Market Pledge, Many Nations Adopt Restrictive Policies
By Anthony Faiola and Glenn Kessler
Washington Post Staff Writers
Monday, December 22, 2008; A01

Only a few weeks after world leaders vowed at a Washington summit to reject trade protectionism and adhere to free-market principles as they combat the global financial crisis, a host of nations are already breaking that promise.

Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.

The list of countries making access to their markets harder potentially includes the United States, where critics are calling the White House's $17.4 billion bailout of the U.S. auto industry an unfair government subsidy that would put foreign competitors at a disadvantage.

Though still relatively narrow in scope, the moves, observers warn, in the coming months may grow into a broader wave of protectionism. That could worsen the global financial crisis by further choking world trade, which is already facing its first decline since 1982 as the world economy sharply slows and demand dries up.

read more at the WP and see toon on top.

Dollar Shift: Chinese Pockets Filled as Americans’ Emptied

“Usually it’s the rich country lending to the poor. This time, it’s the poor country lending to the rich.”

— Niall Ferguson

WASHINGTON — In March 2005, a low-key Princeton economist who had become a Federal Reserve governor coined a novel theory to explain the growing tendency of Americans to borrow from foreigners, particularly the Chinese, to finance their heavy spending.

The problem, he said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.

This colossal credit cycle could not last forever, he said. But in a global economy, the transfer of Chinese money to America was a market phenomenon that would take years, even a decade, to work itself out. For now, he said, “we probably have little choice except to be patient.”

Today, the dependence of the United States on Chinese money looks less benign. And the economist who proposed the theory, Ben S. Bernanke, is dealing with the consequences, having been promoted to chairman of the Fed in 2006, as these cross-border money flows were reaching stratospheric levels.

In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.

China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways.

“This was a blinking red light,” said Kenneth S. Rogoff, a professor of economics at Harvard and a former chief economist at the International Monetary Fund. “We should have reacted to it.”

In hindsight, many economists say, the United States should have recognized that borrowing from abroad for consumption and deficit spending at home was not a formula for economic success. Even as that weakness is becoming more widely recognized, however, the United States is likely to be more addicted than ever to foreign creditors to finance record government spending to revive the broken economy.

From Bob Herbert, the NYT

When Mr. Bush officially takes his leave in three weeks (in reality, he checked out long ago), most Americans will be content to sigh good riddance. I disagree. I don’t think he should be allowed to slip quietly out of town. There should be a great hue and cry — a loud, collective angry howl, demonstrations with signs and bullhorns and fiery speeches — over the damage he’s done to this country.

From the NYT

The president listened as Ben S. Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

Then his Treasury secretary, Henry M. Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history.

Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.

“How,” he wondered aloud, “did we get here?”

....

Mr. Bush said he was too focused on the present to do much looking back.

 see toon at top....

Hadley invoked Bush's 2000 campaign theme in summing up the president's personal qualities. "He has got this great compassion which was not just a slogan, 'compassionate conservative.' It is who he is. It is one of the great things he brought to this office," Hadley concluded. "This is the one thing that just drives me crazy, that somehow this is an arrogant administration, an arrogant president running an arrogant policy. This guy -- one thing he is not is arrogant."

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Gus: Bushit? Not arrogant?... Okay, we could take that... may be not... May we say, ill informed, not as smart as a president should be, slightly loopy on many issue, liar extraordinaire, dummy to a clever underling — Cheney — like Ted E Bear to David Strassman. Bushit? Stupid, slow, cunning like toad of "the Wind in the Willows", basically someone farting above his own arse.

From the start of his dubious election win in 2000, the Decider was the Destroyer — of whatever came in contact with him... or whatever he touched. Compassionate? Tight arse idiot? take your pick...

Sad, sad... for all of us. He should be impeached on his last day of masquerade...

"Consider the terrible consequences of the 'anything goes' Bush Administration, whose irresponsible non-regulation of financial institutions has led to this crisis."

Those words, from the Democratic Speaker of the House of Representatives Nancy Pelosi, sum up the charge against George W Bush - that in the eight years of his presidency he actively pursued policies of deregulation which caused the biggest financial and economic meltdown since the Great Depression.

It is a grim legacy for President Bush to contemplate as he enters his final days in office - but is it true?

He certainly presided over a widespread failure of regulation.

On his watch, the US authorities did little to prevent the sale of millions of mortgages to people who could never afford them.

They failed to police the market in mortgage-backed securities which has now collapsed with such devastating consequences.

And credit default swaps, those multi-billion-dollar bets on other people going bust, went virtually unregulated.

see toon at top.

Eight Years of Madoffs

THREE days after the world learned that $50 billion may have disappeared in Bernie Madoff’s Ponzi scheme, The Times led its front page of Dec. 14 with the revelation of another $50 billion rip-off. This time the vanished loot belonged to American taxpayers. That was our collective contribution to the $117 billion spent (as of mid-2008) on Iraq reconstruction — a sinkhole of corruption, cronyism, incompetence and outright theft that epitomized Bush management at home and abroad.

The source for this news was a near-final draft of an as-yet-unpublished 513-page federal history of this nation-building fiasco. The document was assembled by the Office of the Special Inspector General for Iraq Reconstruction — led by a Bush appointee, no less. It pinpoints, among other transgressions, a governmental Ponzi scheme concocted to bamboozle Americans into believing they were accruing steady dividends on their investment in a “new” Iraq.

The report quotes no less an authority than Colin Powell on how the scam worked. Back in 2003, Powell said, the Defense Department just “kept inventing numbers of Iraqi security forces — the number would jump 20,000 a week! ‘We now have 80,000, we now have 100,000, we now have 120,000.’ ” Those of us who questioned these astonishing numbers were dismissed as fools, much like those who begged in vain to get the Securities and Exchange Commission to challenge Madoff’s math.

What’s most remarkable about the Times article, however, is how little stir it caused. When, in 1971, The Times got its hands on the Pentagon Papers, the internal federal history of the Vietnam disaster, the revelations caused a national uproar. But after eight years of battering by Bush, the nation has been rendered half-catatonic. The Iraq Pentagon Papers sank with barely a trace.

After all, next to big-ticket administration horrors like Abu Ghraib, Guantánamo and the politicized hiring and firing at Alberto Gonzales’s Justice Department, the wreckage of Iraq reconstruction is what Ralph Kramden of “The Honeymooners” would dismiss as “a mere bag of shells.” The $50 billion also pales next to other sums that remain unaccounted for in the Bush era, from the $345 billion in lost tax revenue due to unpoliced offshore corporate tax havens to the far-from-transparent disposition of some $350 billion in Wall Street bailout money. In the old Pat Moynihan phrase, the Bush years have “defined deviancy down” in terms of how low a standard of ethical behavior we now tolerate as the norm from public officials.

The toon at top tells the whole story...