Embracing the Suck of Iraq and the Middle Class

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We run backwards through life.

Like old hippies still wearing the beads they put on in the 1960s, we hold onto the familiar props that shaped our lives and ourselves. We give up our illusions and fashions reluctantly. And we imagine things, not as they are, but as they were when we first got to know them.

How else can you explain it? The typical investor imagines that he is investing in the era he just left, not the era he is entering. Aging professors still read Sartre and Marx…and imagine they are the intelligentsias leading the class struggle. And poor George Bush imagines that he is John Wayne in WWII! None seem aware that times have changed.

“Embrace the suck,” say the grunts in Iraq. Down on the ground in Mesopotamia, the idea of fighting for freedom and democracy must seem pretty hollow. The suck is everywhere, according to news reports. Near as we can tell, the whole place sucked even before the arrival of U.S. liberators. But then came a new chance for liberty…the ballot box…and a civil war. Thirty-four thousand Iraqis were killed in 2006.

“I think,” said President George W. Bush, “the Iraqi people owe the American people a huge debt of gratitude.”

Over the weekend, the ‘Army of Heaven’ went up against U.S. backed troops. The heavenly soldiers lost 250 troops, if you can believe the reports. We’d be a little hesitant to do battle with an ‘Army of Heaven’, but it didn’t seem to matter to our allies. In fact, the press didn’t seem to know what Heaven these fellows were fighting for. Were they Shiites? Sunnis? Unitarians? Nobody seemed to know. All reporters could say was that they were ‘militants’…which seems like a strange way to describe a group of people in a country where everyone is armed and ready to kill.

All we know is that a lot of ammunition was shot off and many people embraced the suck widely and terminally, if not wholeheartedly.

And now, even our military leaders have picked up on the fashion of the times. They speak of using ‘stop losses’ in Iraq – just as they would on Wall Street. The whole world has moved toward finance. It is the Next Big Thing.

Meanwhile, back in the Homeland, there is a different kind of suck to embrace. While the rich are getting richer, the poor are getting their houses repossessed – which sucks…but probably not as much as you might think, because the poor could never really afford the houses anyway.

According to the weekend news, 1.2 million houses were foreclosed in 2006, up 42% from the previous year. And even at the top of the market, a little softness in property prices is creeping in. Billionaire Kirk Kerkorian put his mansion in Beverly Hills on the market last year for $25 million. Now, he’s cut the price to $18 million. He must be getting desperate.

But the real problems are not among billionaires, but among paupers who can’t make their mortgage payments. They lose their houses…and the people who lent them money take a loss. Again, this may suck…but at least there is some rough justice to it.

The Orange County Register reports:

“Many of Orange County’s boldest lenders are struggling to stay in the black – and in some cases to stay in business – as their customers miss mortgage payments in record numbers.

“These lenders, experts say, exercised poor judgment in a bid to maintain loan volume last year. They lent money to borrowers with spotty credit, known as the sub-prime market, without proper regard to their ability to repay, experts say.

“‘What’s become clear is a whole bunch of people signed up for loans or were sold a loan they really couldn’t afford,’ said Richard Eckert, an analyst with Roth Capital Partners in Newport Beach.”

No, the ’50s and ’60s dream of home-ownership hasn’t worked out as planned.

And now, even capitalism’s biggest supporters are wondering why this boom doesn’t seem like the ones we used to have…and why so many of today’s rich are not the same sort of rich people we used to admire.

“In capitalism, the most fundamental building block is trust,” writes Ben Stein. “When yeoman farmers sent their savings to banks in London and Glasgow and Paris, they had to be able to count on it not being stolen. That was what allowed capital to be accumulated and deployed, and for the entire world economy to take off.

“When I see what the top dogs at all too many corporations are now doing to that trust, I feel queasy. Outrageous – yes, obscene – pay. Greedy backdating of stock options, which in my opinion is straight-up theft. Managers buying assets from their trustors, the stockholders, at pennies on the dollar, then forestalling competing bids with lockups and insane breakup fees.

“These misdeeds and many, many more are hammer blows at the granite foundation of trust we built in the 1940s and ’50s…

“It’s built on man’s notion that he can trust his neighbor with his money, and that if the neighbor misbehaves, the law will chase him and catch him, and that the ladder of law has no top and no bottom…

“If that trust disappears – if the system is no longer a system for the ordinary citizen but only for the tough guys – how much longer can the miracle last?”

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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