We’ve truly entered a Bizarro World universe, where up is down, right is left – and the Russians, of all people, are now lecturing us about the virtues of free enterprise. Yes, it happened at the Davos conference of bigwigs, insiders, and their sycophantic hangers-on, where the elite meet to munch canapés and discuss the way the world works, or, in this case, the way it isn’t working. The conference was heavy with the sort of pessimism that doesn’t usually accompany a gathering of the rich and pompous, yet instead of the usual self-congratulatory vaunting of their own virtue and “concern” for the world’s peasants, these aristocrats of the conference table were less than ebullient about the downward spiral of the global economy – which, you’ll remember, yesterday was touted as the savior of us all, but these days is portrayed as the instrument of our collective doom.
While the walkout of Turkish Prime Minister Recep Erdogan grabbed the biggest headlines – he didn’t like it when David Ignatius of the Washington Post shushed him in favor of letting former Israeli Prime Minister Shimon Peres drone on uninterrupted – the real shocker was Vladimir Putin’s peroration, which sounded more like Ron Paul than the leader of a nation that has intruded the state into the economy and polity in a big way. Putin likened the economic crisis the world is facing to “the perfect storm, which denotes a situation when nature’s forces converge in one point of the ocean and increase their destructive potential many times over.” This is very similar to the apocalyptic tone not only of Rep. Paul, but of gold bugs and libertarians outside the Beltway: save your candles, the dark ages are coming!
Yet our leaders were unprepared: in spite of strong indications that the crisis was breaking over our heads, only a prescient minority realized that our chickens were coming home to roost, while the “majority strove to get their share of the pie, be it one dollar or a billion, and did not want to notice the rising wave.” As the Remnant looked on, Western elites were oblivious to their onrushing doom: “I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasized the U.S. economy’s fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism. “The time for enlightenment has come. We must calmly, and without gloating, assess the root causes of this situation and try to peek into the future.”
Well, perhaps he was gloating just a little, but who can blame him? After all, the high-and-mighties of the West had recently undergone a spasm of unrestrained hubris, from which we have only just begun to recover. This manic mood was given expression not only by the Bush Doctrine and its attendant military campaigns, but also by a mad triumphalism that predated 9/11 and really started with the fall of the Soviet empire. The “unipolar” delusion distorted our thinking and gave rise to all sorts of grandiose projects that wound up costing us dearly. One of those projects was – and is – the encirclement and economic strangulation of Russia: the ill-fated “color revolutions,” the deployment of “soft power” in the service of penetrating the former Soviet republics with “civil society” organizations, funded and directed by Western governments, and the challenge to Russian predominance in the “near abroad” of the Caucasus and central Asia, where the U.S. seeks to build bases ostensibly to fight the “war on terrorism” in Afghanistan and Pakistan. That this dagger pointed at the throat of Kremlin leaders will have to be withdrawn, albeit reluctantly and temporarily, is doubtless where the gloating comes in.
So far, Putin’s critique is pointed, yet hardly shocking. Well, hang in there, dear reader, because we’re just getting to the good part: “Add to this colossal disproportions that have accumulated over the last few years. This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral.”
This realistic perspective is in sharp contrast to the frantic gyrations of our own political and financial leaders, who are wholly invested in maintaining that disproportion in all its gargantuan perversity. Collateral? Real value? Such bothersome impediments to omnipotence have long since been thrown overboard by the Washington-Wall Street crowd. As a top White House aide once told journalist Ron Suskind, guys like him – disdainfully dubbed “the reality-based community” – who “believe that solutions emerge from [their] judicious study of discernible reality” aren’t clued in to the new reality: “That’s not the way the world really works anymore. We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality – judiciously, as you will – we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors… and you, all of you, will be left to just study what we do.”
The same hubris that drove the Iraq war and led us to believe we could “transform” the Middle East, as some of the more perfervid neocons insisted, drove our financial leaders over a similarly steep cliff. The empire is now crumbling, along with the economic assumptions that financed it, as Putin points out: “The entire economic growth system, where one regional center prints money without respite and consumes material wealth, while another regional center manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback.”
Whether the Russian leader has been boning up on the works of the Austrian economists and has absorbed or at least understood their critique of central banking as the flaw in the otherwise beneficial ointment of Western-style capitalism, or has independently come to similar conclusions, is open to speculation. Suffice to say that the parallelism is astonishing. For the long period of American economic and imperial expansion, the dollar was the reserve currency of choice, its markets the freest and most profitable in the world. As we enter a perhaps even lengthier period of decline, the leading indicator of our protracted contraction is the end of the dollar-denominated world economy. Whereas the Chinese premier, in his Davos speech, merely called for closer monetary regulation and restraint on the part of his American trading partner, Putin called on the markets to dump the dollar.
Putin accurately describes the bubble of American supremacism and diagnoses its cause. It was “brought about ,” he avers, “by excessive expectations. Corporate appetites with regard to constantly growing demand swelled unjustifiably. The race between stock market indices and capitalization began to overshadow rising labor productivity and real-life corporate effectiveness.” The industrial West engaged in an orgy of consumption, without producing any more – indeed, while producing much less. Our entire system was and is based on the generation of “unearned wealth, a loan that will have to be repaid by future generations.” It all “would have collapsed sooner or later,” and “in fact, this is happening right before our eyes.”
As America’s political leaders rush to reinflate the bubble, Putin would let it pop: “This means we must assess the real situation and write off all hopeless debts and ‘bad’ assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalization, bonuses, or reputation. However, we would ‘conserve’ and prolong the crisis, unless we clean up our balance sheets.”
In short, the malinvestment engaged in during the bubble years must be liquidated. The longer we try to conserve enterprises supposedly “too big to fail,” the more painful and prolonged will be the process of economic recovery. This is precisely what libertarians such as Ron Paul and analysts such as Peter Schiff have been saying all along. Unlike Barack Obama and his advisers, whose faith in government action is near religious, Putin warns against “excessive intervention in economic activity and blind faith in the state’s omnipotence.” It may be a “natural reaction” to turn to an increased state role in such times as these, yet “instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent. The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.” Oh, but this is my favorite part: “In the 20th century, the Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.”
I lived to see an American president red-baited by the Kremlin! That, in itself, is utterly amazing, and proof positive that we have indeed slipped into an alternate universe, a Bizarro World where history runs backward – and in reverse. Sounding more like Barry Goldwater than any Russian leader I ever heard of, Putin took aim at the Obama-commies: “Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.”
Those remarks would not be out of place coming out of the mouth of a Republican congressman – and a fairly conservative one – inveighing against the “stimulus” package. Putin goes beyond even this, however, when he warns against the danger of military Keynesianism: “Unfortunately, we are increasingly hearing the argument that the buildup of military spending could solve today’s social and economic problems. The logic is simple enough. Additional military allocations create new jobs. “At a glance, this sounds like a good way of fighting the crisis and unemployment. This policy might even be quite effective in the short term. But in the longer run, militarization won’t solve the problem but will rather quell it temporarily. What it will do is squeeze huge financial and other resources from the economy instead of finding better and wiser uses for them.”
Paul Krugman and his media echo chamber happily inform us that it doesn’t matter how or where we spend the money, just as long as we “stimulate” the economy with massive injections of monetary steroids. So why not military spending – lots more military spending? After all, this is a point both conservatives and liberal Keynesians can agree on, as Putin surely realizes. I suspect his call for disarmament will be largely ignored, along with his insight that demilitarization will “bring significant economic dividends.” That a Russian leader is now telling Americans that their turn toward statism and militarism is harmful both to themselves and to the world is a turn of events no one of my generation could possibly have imagined, certainly not anyone of libertarian inclinations. It is a sad and telling commentary that no American leader of any stature, aside from the previously mentioned Rep. Paul, has the courage to tell us what we need to hear.
'Back Off And Stay Out of Our Airspace,' Russia
Four Canadian and U.S. fighter jets were scrambled to meet two Russian bomber planes found flying on the edge of Canada's Arctic airspace hours before President Barack Obama arrived in Ottawa for his first foreign visit, Canada's defence minister said yesterday. Peter MacKay wouldn't say whether he thought the Feb. 18 flight of the two TU-95 Bears, long-range Russian bombers, was designed to create mischief for a Canadian security system already stressed by the presidential visit. But he said the response of Canadian pilots operating under the command of NORAD sent a clear message to Moscow. "I'm not going to stand here and accuse the Russians of deliberately doing this during the presidential visit, but it was a strong coincidence which we met with the presence ... of F-18 fighter planes and world-class pilots that know their business and send a strong signal that they should back off and stay out of our airspace," he told reporters.
In Moscow, an unnamed government official called MacKay's statement a "farce" and said the Russian government was reacting to Canada's objections with "astonishment," news agency RIA-Novosti reported. Prime Minister Stephen Harper said in Saskatoon that the incident was a real cause for concern that will not intimidate Canada. "This government has responded every time the Russians have done that. We will continue to respond. We will defend our airspace." The Russian planes broke no international laws when they encroached on the 200-mile (320-kilometre) Canadian perimeter, 190 kilometres northeast of Tuktoyaktuk, but experts say it is a clear attempt to test defence systems in the disputed Arctic territories.
NORAD spokesperson Michael Kucharek said Canadian and U.S. fighter jets have been scrambled more than 20 times since early 2007 to perform visual identification of Russian bombers and to direct them away from North American airspace. "Russia has become more active than in the past," said Ray Henault, formerly Canada's chief of defence staff. Henault, who served as chair of NATO's military council until last year, said the bomber flights are a "legitimate activity" that have nonetheless complicated relations with other Arctic nations in recent years. "To call it a threat is probably a little bit stronger than I would call it."
It's not clear why Canada chose yesterday to draw attention to what is a fairly common occurrence. A senior government official said highlighting the mid-air meeting was a good way to show the worth and relevance of NORAD while its commander, U.S. Gen. Victor Renuart, was visiting Ottawa. It's also a good way to "get some ink" for Canada's contribution to continental security, the official said. In addition, it's a diplomatic rebuff to Russian officials who have complained in the last week about nations "militarizing" the Arctic to bolster claims to valuable energy and mineral resources beneath the thawing tundra and the seabed. "We know that the waters are opening up, we know that other countries have expressed interest in the Arctic and that we intend to have a very real and current activity and presence in the Arctic," MacKay said yesterday. MacKay has asked Russian Defence Minister Anatoly Serdyukov and Russia's ambassador to Canada to give Ottawa notice when such flights are planned. "To date, we have not received this type of notice," he said.
Renuart has also asked Russian officials to file formal international notice of the flights, but to no avail, said Kucharek. The RIA-Novosti agency quoted Col. Alexander Drobyshevsky, a defence ministry spokesperson, saying that neighbouring states had been previously notified of the bomber flight. The breakup of the Soviet Union in 1989 crippled Russia's economy and brought such long-range flights, a staple of the Cold War, to an end. But the flights have resumed in recent years.Source: http://www.thestar.com/news/canada/article/594490
World Agenda: Russian Builds its New Empire With Finance, Not Bear
Whatever the economic calamities ahead, this year is proving an excellent one for the political project of forging a new Russian empire. A plethora initiatives from the of Kremlin is binding most of Russia's former Soviet satellites ever more tightly to Moscow. Only yesterday the Kremlin created a rapid reaction force with six of the states and an economic bailout fund with four of them. The reaction force will be under central command, which will undoubtedly be in Moscow since Russia is providing most of the troops. Soldiers from Belarus, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan will once again learn to take orders in Russian. Russia is also putting up $7.5 billion (£5.19 billion) of a $10 billion mutual rescue fund it established with Belarus, Kazakhstan, Uzbekistan and Kyrgyzstan. Despite growing hardship for millions of Russians at home, the Kremlin also offered to throw billions of roubles at Belarus after both countries agreed to form a joint air defence system pointed at Europe.
He who pays the piper calls the tune as the United States learned painfully on Tuesday from President Bakiyev of Kyrgyzstan, who served notice to quit a key airbase for supplying Nato forces in Afghanistan. A gleeful Kremlin denied any link between that decision and the $2.15 billion in loans and aid it had given the impoverished republic just moments earlier. Washington is flirting with Tajikistan as another potential base for Afghan supplies. President Rakhmon, enjoying the attention, apparently felt emboldened enough to cancel his visit to Moscow initially, but quickly thought better of it. Having squeezed the US military out of Central Asia, Russia is determined to prevent the European Union becoming a rival for energy in its backyard. The EU is desperate to break Russia's grip on gas by securing new supplies from the region through the Caucasus. President Medvedev beat them to Uzbekistan where his Uzbek counterpart, Islam Karimov, pledged last month to double supplies to Russia, adding reassuringly that Uzbekistan "sells gas to Russia and to Russia only". Gas-rich Turkmenistan offers hope but only if the Caucasus remains open as a conduit for pipelines. Since the war with Georgia last summer and the de facto annexation of Abkhazia and South Ossetia, Russia has returned to the region with a bang.
Armenia is little more than a vassal state, having sold most of its economic infrastructure to Russian companies. The "frozen conflict" between Armenia and neighbouring Azerbaijan over the disputed territory of Nagorno-Karabakh gives the Kremlin further leverage. Moscow denied Azeri claims last month that it had funnelled arms worth $800 million to Armenia, which is host to a Russian military base. But both sides understand that Russia could tip the balance of power in either direction if it chooses. From Belarus to the Caucasus and Central Asia, Russian power and influence is now at its greatest height since the Soviet collapse. While Kremlin ruled its old empire with fear, it is building its new one on finance. Only Ukraine remains beyond Moscow's so-called "sphere of influence" despite the recent bruising gas war. Presidential elections are just 11 months away, however, offering the Kremlin empire-builders a great opportunity to avenge the setback of the pro-western Orange revolution.
In other news:
Russia Pops Disney's Dreams
It will be awhile yet before Russian kids can enjoy the drip-feed of glutinous entertainment that is Disney television. Russia's anti-monopoly service has just blocked The Walt Disney Company's attempt to establish a joint venture with one of the country's leading media firms so that it could launch a channel there, Interfax reported Friday. Disney announced last year that it was planning to crack the lucrative Russian television market with a free-to-air Disney Channel, as part of a joint venture with Media-One Holdings. The Russian broadcaster runs 86 television and radio stations throughout the country and Disney was hoping to air its channel on 30 of its TV stations. The channel would include Disney shows aimed at children and families and would also air original Russian TV programs.
Disney was due to take a 49.0% stake in the joint venture, in return for an unspecified amount of funding and programming, while leading content acquisition and marketing to the channel's target audience. The halting of Disney's deal illustrates the difficulties even large multinational companies can have in navigating Russia's complicated regulatory system, despite Disney already operates local retail, theatrical distribution and Internet businesses in Russia. One of the Mouse's biggest competitors,
"They've been trying for more than a year to sell assets in Eastern Europe and Russia," said Miller Tabak analyst David Joyce. "They didn't like the way the operating or regulatory environment was starting to evolve and they were trying to sell to current managers and private equity. But the market wasn't letting it happen." Though Joyce said Friday's setback was not a major blow to Disney's growth prospects, it will upset the company's attempts to reach a broader audience in Russia. Back when Disney was announcing its joint venture in December, Walt Disney International Chairman Andy Bird said it wanted to reach a broader Russian audience because paid-cable and satellite TV subscriptions were "very limited." Shares of
Soros Confirms Lindsey William’s Assertion Oil is a Weapon