Today's Must Read: Bury the idea that swaying the center will win elections

Scientist George Lakoff has a fascinating essay over at Common Dreams. His central point: There is no such thing as a moderate.

Here are just a few of the tasty bits from the piece.

* “Centrism” is the creation of an inaccurate self-serving metaphor, and it is time to bury it. There is no left to right linear spectrum in the American political life. There are two systems of values and modes of thought - call them progressive and conservative (or nurturant and strict, as I have).

*American ideas are fundamentally progressive ideas - the ideas this country was founded on and that carry forth that spirit. Progressives care about people and the earth, and act with responsibility and strength on that care.

Lakoff goes on to demolish the DLC and talk about the strategy that will guarantee a Democratic loss in the next election. His discussion of what he calls “biconceptuals” holds clues to a progressive victory.

Not everyone likes what Lakoff says, but I think he makes enormous sense. We have to think differently in order to even have the ability to see what's really going on in this country. If we don't learn how to think differently, we'll never learn how to move this nation forward.

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Ted Stevens Over Acts

During an interview with the Anchorage Daily News editorial board, Sen. Ted Stevens (R-AK) was asked how, in light of ongoing federal investigations into him, he could “be effective in Congress.” Instead of addressing the question, Stevens attacked the paper:

This paper has caused me more difficulty, and I’ve told you that before, than anything else. You’ve created me as the senator-for-life. You’ve been hanging me weekly. […]

I’ve spent hours here with you here in the past, and I’ve never seen any result of it at all. … This paper has done nothing but try to assassinate me.

Stevens is evidently upset about coverage of events like the FBI raid of his home, which marked the first time in history federal investigators searched a sitting U.S. senator's residence.

To paraphrase Sarah Vowell, "Assassins and self-important senators invite the same basic question: Just who do you think you are?"

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Wall Street: Giant Ponzi scheme? Giant poker game?

The combination of subprime mortgages, other mortgages and other items of debt into the complex collateralized debt obligations and credit default swaps invite both these comparisons, as Michael Panzner makes clear.

In essence, these forms of smashed, blended debt, sliced into tranches, are a Ponzi scheme because they have been relying on more and more people buying houses, buying bigger houses, refinancing for remodels and so forth.

These debt forms are like a giant poker game because the main bettors have been betting against the odds, especially the odds of subprime borrowers defaulting. (At the same time, as part of the incestuousness of these arrangements, creators of this debt have been depending on ratings agencies like Moody’s both to give the best possible rating on CDOs and to talk up the financial market in general, and housing market in particular, at the same time.

From Mish (whose blog on economic analysis is a highly recommended read), here’s what I mean by incestuousness:

Moody’s: “Moody’s has no obligation to perform, and does not perform, due diligence.”

S&P: “Any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision.”

Because of that bottom-line fact, Mish has a boatload of questions:

* How many billions of dollars will be lost because of absurd pricing models?
• How can it be that an entire system of investment decisions are based on ratings that the ratings companies tell everyone not to use for investment purposes?
• Were the ratings companies grossly incompetent or just foolish?
• Will the disclaimers of the ratings companies hold up in court?
• How long will it be before there be a court test of those disclaimers?
• Why has only a minuscule portion of subprime debt (2.1% or $12 billion of a massive $565.3 billion of subprime bonds) downgraded?
• Are the ratings companies under pressure by the banks and/or the Fed to not rerate this debt?
• Why is it that ratings companies are allowed to have outside business relationships with the companies whose debt they rate?
• Did banks realize how absurd those ratings were but look away because of greed and the ease in offloading he debt to pension plans, insurance companies, and hedge funds out of pure greed?
• Heck, did the upper echelons at the ratings companies themselves know their ratings model was flawed and look the other way out of greed?
• How long before there is a government sponsored bailout of this mess? Hint small ones are starting already. See Please - No More Help! for a discussion.
• How long before Bernanke starts cutting rates?
• How high will gold prices rise when Bernanke starts cutting?
Here's the big question: How big will the taxpayer bailout be?

But, Mish’s quote of Moody and S&P hand-washing, bad as it is, still isn’t the full story.

For one thing, these CDOs were backed not with money, but with insurance. And, just like people can “short” a stock, banks and other CDO creators could short their insurance.

Well, what’s happening right now is that a lot of bluffs are being called. Or, on the analogy above, a lot of banks and other lenders are facing the equivalent of margin calls. And, a lot of the people whose bluffs are being called are having to reveal they’ve been betting with IOUs or overrun bank drafts. And, unlike monetary deposits, these investments aren’t protected, even if made by banks. Plus, as Panzner points out, many of these types of loans were made by nonbanking entities.

Already three years ago, Warren Buffet was calling derivatives “financial weapons of mass destruction.” But Greenspan kept encouraging banks and other lending agencies to keep churning them out. Combine that with the Fed loosening the fractional money reserve requirement of banks, and you have the perfect storm.

This is why the Fed and the European Central Bank are injecting money into the system through buybacks. Banks already are thin enough on reserves that their power to fluff more credit into the system is running low. But, the Fed is actually using credit, not money, for these buybacks; banks, then, with their small reserve margins, can inflate this credit.

Stoneleigh at The Oil Drum goes into even more depth (warning, it’s about 5,000 words); if you still don’t understand too much about how much more than a “housing bubble” the subprime crisis is, and have a bit of reading time, I strongly recommend it.

One final note; our, and the world’s, Great Depression wasn’t caused by hyperinflation anywhere. Instead, the Roaring ’20s were a period of high credit inflation.

I think I’ve writeen enough on this to give you the general idea.

Cross-posted at Socratic Gadfly.

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Those 110,000 U.S. weapons missing from Iraq?

A notorious Russian arms dealer is behind those missing AK-47s:

Consider the case of one particular bad guy, Viktor Bout — a stout, canny Russian air transporter who also happens to be the world's most notorious arms dealer.

When the U.S. government needed to fly four planeloads of seized weapons from an American base in Bosnia to Iraqi security forces in Baghdad in August 2004, they used a Moldovan air cargo firm tied to Bout's aviation empire. The problem is that the planes apparently never arrived.

The missing Bosnian weapons could simply be a paperwork problem (and it's not certain that they are among the missing weapons the GAO discovered; they may be an additional loss). But Bout's involvement raises bleak possibilities … that the arms were diverted to another country or to Iraqi insurgents killing American troops.

For more than a decade before he landed on U.S. payrolls, Bout's air cargo operations delivered tons of contraband weapons … to some of the world's most dangerous misfits.

He stoked wars across Africa, supplying Charles Taylor, the deposed Liberian president now on trial for war crimes. He ferried $50 million in guns and other cargo, and he even sold air freighters to the Taliban. …

Bout also has a well-known record for working both sides of the fence. His planes armed both the Angolan government in Africa and rebel forces arrayed against it. He cut weapons deals with Afghanistan's Northern Alliance government before betraying it by arming the Taliban.

One thing about the Bout affair is certain. As of mid-2006, his firms were no longer flying for the U.S. in Iraq. But now he poses a new problem: "blowback," the blunt term espionage writers like to use for the deadly consequences of poor spycraft.

When the U.S. turned to the Bout network to mount its Iraq supply flights, it was already clear that Bout's network had aided the Taliban's extremist mullahs. How could the U.S. be absolutely certain he wouldn't fly for our enemies once he had left the payroll?

We couldn't and, apparently, he is.

Last summer, a jumbo Il-76 flying the Khazakh flag swooped down to a landing in Mogadishu to unload arms for radical Islamic leaders who briefly seized control of Somalia. It was one of Bout's planes, concluded U.S. military intelligence officials.

With arms-dealer friends like this, who needs enemies, eh?

Cross-posted at Socratic Gadfly and Out of Iraq Bloggers Caucus.

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Iraq vets suicide rate at 3 percent

Greg Peterson of Editor and Publisher laments the lack of news coverage; the rate is twice that of soldiers not in Iraq.

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So…Why are we waiting for Petraeus?

You know how the Resident keeps saying that we should sit back on our heels and wait for what Petraeus and Crocker have to say come September?

Yeah…about that…Petraeus and Crocker aren’t even writing the report that will bear their names.

Despite Bush's repeated statements that the report will reflect evaluations by Petraeus and Ryan Crocker, the U.S. ambassador to Iraq, administration officials said it would actually be written by the White House, with inputs from officials throughout the government.

And though Petraeus and Crocker will present their recommendations on Capitol Hill, legislation passed by Congress leaves it to the president to decide how to interpret the report's data.

So someone tell me again why we are waiting for Petraeus and Crocker to deliver Georgies foredrawn conclusions?

One “senior administration official” – speaking on condition of anonymity, of course – said that the process had put the administration in “uncomfortable positions” because they can’t decide what constitutes “satisfactory progress.”

In July, when the interim report was being written, some officials were encouraging the telling of blatant lies, by claiming progress where none existed. They urged the administration to claim success on the Exxon-Mobile Enrichment Act er, Oil Sharing Law, in spite of the fact there had been no agreement reached.

At least some insiders argued against telling the big lie, claiming it would be disingenuous. "There were some in the drafting of the report that said, 'Well, we can claim progress,' " the administration official said. "There were others who said: 'Wait a second. Sure we can claim progress, but it's not credible to . . . just neglect the fact that it's had no effect on the ground.' "

A DoD official who has been skeptical of the escalation from the outset said he expects Petraeus to emphasize military progress, such as “improving security in Baghdad” and a reduction in the number of suicide attacks. But how does that translate to political progress? How does that improve the day-to-day lives of the Iraqi people? "Who cares how many neighborhoods of Baghdad are secured?" the official said. "Let's talk about the rest of the country: How come they have electricity twice a day, how come there is no running water?"

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