Nothing much to write about in the markets. Dow up 56 points yesterday. Oil flat. Gold plus $16.
Moody’s downgraded Portuguese debt to junk status. The IMF says it will still take the debt as collateral until all four rating agencies downgrade it. Then, the banks holding it are out of luck. They won’t be able to borrow against it. The credits won’t be good. Not even at the IMF.
The prestigious IMF was run by Dominique Strauss-Kahn…until the man was accused of rape by a New York hotel maid. The judicial system panicked and put DSK in jail. And the whole US press corps leaped to point the finger and give a he-had-it-coming scowl.
On network news…
“Finally, one brave woman has stood up,” or words to that affect, said Diane Sawyer, approvingly.
But at least here at The Daily Reckoning we kept our heads. We take for granted that DSK is a cad and a bounder. But a rapist? Not likely.
And now the hotel maid has been revealed as a liar. It doesn’t mean she’s lying about the “affair DSK,” but it is a rare district attorney who will want to put a woman like that in front of a jury.
Soon, DSK will be a free man again…and now, another frog is at the head of the IMF, Christine Lagarde. She knows nothing about banking or money either. But at least she has a nice smile and is less likely to be accused of rape.
She’ll have to face the same problems. Only, now they’re worse. While her predecessor may or may not be a menace to the female part of the human race, he was surely a menace to its money. Lending at the IMF increased 10 times under DSK. Guess where that money went? That’s right – to borrowers who can’t pay it back. Such as Greece. And Portugal.
Meanwhile, America’s central bank, under the direction of Ben Bernanke, has taken the same approach. Got a problem? Lend it more money!
The authorities in Europe and in America face more or less the same situation. They are facing up to it in more or less the same way too – either by pretending it doesn’t exist…or hoping it will go away…and/or lending more money.
And for the moment, they’re having some success. Not success at fixing the problem…but success at pretending! For the moment, they can still finance their own debts…and still bailout others…at very low interest rates.
And more thoughts…
Last Sunday’s sermon started out well enough.
“Jesus rode on a donkey signifying that this was a new kind of king. The donkey is a humble animal. Jesus wanted to show that he was a humble king, not at all like the kings people were used to.”
But the preacher’s message was soon out of control. He began talking about serving Christ. Then, he hit the guardrail, flipped over and was talking about serving the least humble empire the world has ever seen – the USA.
“I’ve met many [US] soldiers,” he continued. “They are going off to places like Iraq and Afghanistan. But they are not just looking out for themselves. They have a higher sense of purpose. They are always ready to do more than their share.”
What soldiers has our new minister met? The ones we know take Caesar’s money and do Caesar’s bidding. Like the soldiers who crucified Christ, they’re not paid to think too much about what they’re doing. That’s what makes them good soldiers.
But he’s right; they’re doing more than their share – to bring the empire to its knees.
Here’s the latest from The Telegraph in London:
The total cost to America of its wars in Iraq and Afghanistan, plus the related military operations in Pakistan, is set to exceed $4 trillion – more than three times the sum so far authorized by Congress in the decade since the 9/11 attacks.
This staggering sum emerges from a new study by academics at the Ivy- league Brown University that reveals the $1.3 trillion officially appropriated on Capitol Hill is the tip of a spending iceberg. If other Pentagon outlays, interest payments on money borrowed to finance the wars, and the $400bn estimated to have been spent on the domestic “war on terror”, the total cost is already somewhere between $2.3 and $2.7 trillion.
And even though the wars are now winding down, add in future military spending and above all the cost of looking after veterans, disabled and otherwise and the total bill will be somewhere between $3.7 trillion and $4.4 trillion.
The report by Brown’s Watson Institute for International Studies is not the first time such astronomical figures have been cited; a 2008 study co-authored by the Harvard economist Linda Bilmes and Joseph Stiglitz, a former Nobel economics laureate, reckoned the wars would end up costing over $3 trillion. The difference is that America’s financial position has worsened considerably in the meantime, with a brutal recession and a federal budget deficit running at some $1.5 trillion annually, while healthcare and social security spending is set to soar as the population ages and the baby boomer generation enters retirement.
Unlike most of America’s previous conflicts moreover, Iraq and Afghanistan have been financed almost entirely by borrowed money that sooner or later must be repaid.
The human misery is commensurate. The report concludes that in all, between 225,000 and 258,000 people have died as a result of the wars. Of that total, US soldiers killed on the battlefield represent a small fraction, some 6,100. The civilian death toll in Iraq is put at 125,000 (rather less than some other estimates) and at up to 14,000 in Afghanistan. For Pakistan, no reliable calculation can be made.
Even these figures however only scratch the surface of the suffering, in terms of people injured and maimed, or those who have died from malnutrition or lack of treatment.
“When the fighting stops, the indirect dying continues,” Neta Crawford, a co-director of the Brown study, said. Not least, the wars may have created some 7.8 million refugees, roughly equal to the population of Scotland and Wales.
What America achieved by such outlays is also more than questionable. Two brutal regimes, those of the Taliban and Saddam Hussein, have been overturned while al-Qa’ida, the terrorist group that carried out 9/11, by all accounts has been largely destroyed – but in neither Iraq nor Afghanistan is democracy exactly flourishing, while the biggest winner from the Iraq war has been America’s arch-foe Iran.
Osama bin Laden and his henchmen probably spent the pittance of just $500,000 on organising the September 2001 attacks, which killed 3,000 people and directly cost the US economy an estimated $50bn to $100bn. In 2003, President George W Bush proclaimed that the Iraq war would cost $50bn to $60bn. Governments that go to war invariably underestimate the cost – but rarely on such an epic scale.
If the Brown study is correct, the wars that flowed from 9/11 will not only have been the longest in US history. At $4 trillion and counting, their combined cost is approaching that of the Second World War, put at some $4.1 trillion in today’s prices by the Congressional Budget Office.
For Daily Reckoning Australia