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Grand Strategy for a Divided America

Potential bad news for the US, and thus by extention the global economy. Essentially, the banking industry learned nothing from the 2008 market meltdown, and are now investing heavily in similar investment vehicles backed by low rated corporate debt instead of mortgages. What could possibly go wrong?

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/

The Looming Bank Collapse
The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.
Story by Frank Partnoy

After months of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.

You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse.

The financial crisis of 2008 was about home mortgages. Hundreds of billions of dollars in loans to home buyers were repackaged into securities called collateralized debt obligations, known as CDOs. In theory, CDOs were intended to shift risk away from banks, which lend money to home buyers. In practice, the same banks that issued home loans also bet heavily on CDOs, often using complex techniques hidden from investors and regulators. When the housing market took a hit, these banks were doubly affected. In late 2007, banks began disclosing tens of billions of dollars of subprime-CDO losses. The next year, Lehman Brothers went under, taking the economy with it.

The federal government stepped in to rescue the other big banks and forestall a panic. The intervention worked—though its success did not seem assured at the time—and the system righted itself. Of course, many Americans suffered as a result of the crash, losing homes, jobs, and wealth. An already troubling gap between America’s haves and have-nots grew wider still. Yet by March 2009, the economy was on the upswing, and the longest bull market in history had begun.

To prevent the next crisis, Congress in 2010 passed the Dodd-Frank Act. Under the new rules, banks were supposed to borrow less, make fewer long-shot bets, and be more transparent about their holdings. The Federal Reserve began conducting “stress tests” to keep the banks in line. Congress also tried to reform the credit-rating agencies, which were widely blamed for enabling the meltdown by giving high marks to dubious CDOs, many of which were larded with subprime loans given to unqualified borrowers. Over the course of the crisis, more than 13,000 CDO investments that were rated AAA—the highest possible rating—defaulted.

The reforms were well intentioned, but, as we’ll see, they haven’t kept the banks from falling back into old, bad habits. After the housing crisis, subprime CDOs naturally fell out of favor. Demand shifted to a similar—and similarly risky—instrument, one that even has a similar name: the CLO, or collateralized loan obligation. A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world. These are loans made to companies that have maxed out their borrowing and can no longer sell bonds directly to investors or qualify for a traditional bank loan. There are more than $1 trillion worth of leveraged loans currently outstanding. The majority are held in CLOs.

The rest of the article goes into more depth about what these are, how they work and how banks and financial institutions are resorting to many fo the same accounting tricks to put these assets "off the books" (although this didn't help anyone the last time).

So among the multiplicity of challenges that the United States will have to face in the coming decades, another banking implosion, or finding a way to unwind this potential threat and deter banks from going down this route again is going to be a high priority.
 
Scary stuff.


Maybe I'm just being a conspiracy theorist, but I have a 'hunch' that national debt isn't something most countries are worried about paying back.

We often hear arguments - extremely valid ones - about the national debt, whether it is us or other countries.  We spend more than we take in, we borrow more than we can safely finance, and future generations won't benefit from government help the way we do, because the government simply won't have any money.

And all of this may very well be true.  Indeed, the math and simple logic would support this...and there's a very good chance this is how it may pan out.



The conspiracy theorist in me, for some reason, has the hunch that all this national debt won't mean anything in another generation or two.  No country on earth can afford to pay back what it owes - China, the US, Canada, etc etc - none of us can afford to pay back what we owe, and ever have a true surplus of 'our own money'.  Heck, the US alone now has a deficit of almost a Trillion dollars a year.

I imagine some catastrophic event will happen - whether it is financial, military, global change (devastating meteor, global plague/pandemic, war, alien contact, etc etc) - that will cause the entire world to rethink the way the global economy works. 

After all, money is a man-made creation, as is the concept of currency.  Borrowing from the World Bank, countries lending each other money, etc etc - all of this is 'human created' stuff, and thus, may be drastically modified in the future to accommodate an entire globe that can't afford to pay each other back. 


:2c: :dunno:
 
Americans Increasingly Believe Violence is Justified if the Other Side Wins

https://www.politico.com/news/magazine/2020/10/01/political-violence-424157?fbclid=IwAR3bGWGi9Ag9PGRk1wquOhAwiI6IF3vDvhS4ibyNe7C-uuP8YGWdihPjVog

At the presidential debate this week, the Republican candidate voiced his concern about political violence—left-wing political violence. And the Democratic candidate likewise voiced concern about political violence—right-wing political violence.

They were both right.

________________________

That article is terrifying.
 
Halifax Tar said:
Americans Increasingly Believe Violence is Justified if the Other Side Wins

That article is terrifying.

Yep, and the New Jersey Office of Homeland Security and Preparedness (amongst several interested observers) strongly concurs.  Their just-published "2020-2021 Supplemental Threat Assessment" is available at LINK
 
Journeyman said:
Yep, and the New Jersey Office of Homeland Security and Preparedness (amongst several interested observers) strongly concurs.  Their just-published "2020-2021 Supplemental Threat Assessment" is available at LINK

Balkan North American powder keg ?
 
Is this the same state like New York that put covid patients in nursing homes ? Pot calling the kettle black.  8)
 
tomahawk6 said:
Is this the same state like New York that put covid patients in nursing homes ? Pot calling the kettle black.  8)
Did you actually read the report?  Don't worry, it's a rhetorical question.
 
Journeyman said:
Yep, and the New Jersey Office of Homeland Security and Preparedness (amongst several interested observers) strongly concurs.  Their just-published "2020-2021 Supplemental Threat Assessment" is available at LINK

Notable slide at page 11, US Presidential Election-  Wildcard Variables.

Arguably 2 and possibly 3 of the 4 wildcards have occurred:
Supreme Court Justice dies
Deep Fake (underway)
COVID disruption (President infected)

The US is experiencing record firearms sales, ammunition being purchased far out of proportion, firearms appearing and being used at civil unrest events.  In scenarios 2 and 3 there is indeed a Powder Keg of epic proportions. 

 
The underlying problem might just be that people who are politically engaged are too deeply engaged, coupled with the proposition that the unhappiness gap from losing is greater than the happiness gap from winning.

Political Ignorance Is Bliss, at reason.com.
 
If under Pres. Biden the US becomes the global taxman, how much more will any Canadian government be willing be pay? Note Canada is not mentioned in this post by Julian Lindley-French (Senior Fellow of the Institute of Statecraft, Director of Europa Analytica & Distinguished Visiting Research Fellow, National Defense University, Washington DC https://www.blogger.com/profile/01634606743670025071 )--excerpts:

Does America (Still) Want to Lead the Free World?

“We confide in our strength, without boasting of it; we respect that of others, without fearing it”.

Thomas Jefferson

Checks and balances

November 5th, 2020. So, that was that! The Great Arsenal of Democracy has spoken…sort of. As I write the US is heading for a Biden presidency. However, the Democrats are likely to see their majority in the House of Representatives reduced and, crucially, fail to gain control of the US Senate.  If confirmed the real ‘winner’ is the US Constitution. The checks and balances it enshrines will ensure that a Biden White House will be an essentially centrist administration.  What does the last forty-eight hours suggest about the next four years for Europe and America’s leadership of the free world?

Many Europeans will be quietly celebrating this morning amidst the economic wreckage of COVID-19. At least the transatlantic relationship will return to some form of ‘business as usual’, some will suggest.  Wrong! It cannot and will not.  There are few concepts I can lay claim to but I was the first to suggest the foreign and security policy of the Trump presidency would be transactional. At the time I called upon Europeans to look beyond the politics of Trump at the structural challenges the Americans are facing, foreign and domestic. They did not.  Instead, Europeans have used President Trump as an alibi to avoid facing the hard security and defence choices they must now make. This is something, I fear, COVID-19 is about to make a whole lot worse.

The world is changing…

Some months ago I also asked a question: who will win COVID-19?  It will certainly not be Europe, but nor will it be the US.  The terrible twin titans of the post COVID-19 international system are geopolitics and geo-economics, neither of which are trending in the West’s favour.  The world is witnessing a profound shift in the balance of coercive power away from the democracies towards China, and by extension its piggy back partner, Russia. The economic and military rise of China also seems to be accelerating as a consequence of COVID-19 with profound implications for European defence and the transatlantic relationship.

The defence strategic consequences?  In spite of the still awesome military power projection the US Armed Forces are still capable of even the mighty US Armed Forces cannot be present in strength in all places all of the time across the full spectrum of twenty-first century conflict.  Power is relative and for a state to exert such influence it would need to be uniquely strong in relation to all other possible peer competitors. There may have been a moment back in the early 2000s when some Americans thought the US enjoyed such power and could act as the Global Policeman (even if many Americans denied such ambitions), but 911, Afghanistan and Iraq quickly proved such pretention to be illusory, if not delusional. The coming years will thus likely see a kind of information-digital-hypersonic arms race in which the autocracies systematically seek to ‘short-of-war’ exploit the many vulnerabilities that are also the very essence of democracy.

…but so is America

Then there is the changing nature of America itself. A lot of Europeans still tend to view America through the prism of ‘the Greatest Generation’, which in tandem with Churchill’s Britain and Stalin’s Russia won World War Two. They forget the isolationist Vandenberg America of the 1930s and ignore the extent to which the US is again fast changing…

Lessons from history?

In some important (although not all) respects contemporary America is not unlike late imperial Britain in the 1920s.  On the face of it, 1920 saw British power and influence at its zenith. Britain emerged from World War One victorious and in 1920 still possessed by far the largest navy in the world, the true measure of global power at the time. However, Britain was also mired in debt, not unlike the US today which faces a budget deficit of some 16% GDP, the largest since 1945, and a national debt fast approaching $28 trillion.

Britain was also deeply divided…

Downton Abbey America?

The shift in the Britain of the 1920s away from Imperialism and towards Disarmament was not just a consequence of the sacrifice of World War One. With the seizure of power by the political leaders of the bourgeois and working classes a British world view began to emerge that was very different from that of the Patrician order of old. That is the implicit story of Downton Abbey which any fan will recognise. In what was perhaps the first great struggle between imperial globalists and social nationalists the Great Depression then further accelerated change in the global, political and social order, just like COVID economics seems to be doing today. The change showed itself most clearly over the question of Britain’s role in the world, in particular what was then termed Indian Home Rule.  Gandhi, Nehru and others were successful (eventually) in agitating for Indian independence, but what is not often recalled is the support for such independence in Britain itself.

Masked by Britain’s subsequent role in World War Two it is often overlooked that much of 1930s Britain no longer had the political appetite to be an imperial power…

…immense domestic pressures the new Administration will face also begs two further questions of Americans. First, do Americans still want to lead the free world?  Second, if Americans do, how? Britain’s past may again prove illuminating.  The Naval Defence Act of May 31st, 1889 formally adopted the so-called Two Power Standard. This committed the Royal Navy to maintain twice the strength of the next two most powerful navies combined. On the face of it the Standard was a statement of British Imperial power. In fact, it was recognition that the French and Russian navies enjoyed the luxury of being able to make life exceedingly difficult for an over-stretched Royal Navy by choosing when, where and how to apply pressure the world over.  This is much the same dilemma the US faces today with the rise of China as a hybrid, cyber and potentially hyper war power, and Russia’s assertive coercion in and around much of Europe. In other words, for America to still lead the free world and defend Europe it will need to impose some form of ‘tax’ on the Allies to do it [emphasis added]. 

…America is not Britain and its power fundamentals are far stronger than Britain’s ever was.  Therefore, if the US still has the will and political cohesion to lead the free world it can do so, but only in concert with committed and capable allies. In the Indo-Pacific that will mean deeper ties with Australia, South Korea and, of course, Japan. India? As for Europe, the Americans need NATO, but only if NATO can be transformed into a group of capable allies that can and will properly share risks, costs and burdens.  However, if such a new NATO is to be realised THIS America must want to lead and be willing to continue to bear the costs of such leadership, which will remain substantial [emphasis added].  Washington will also need to demonstrate the strategic patience needed to rebuild and maintain the alliances Washington increasingly needs. The alternative?  Look at Britain. A century ago London’s writ ran the length and breadth of the world. Today, London’s writ does not even run the length and breadth of Britain.

The difference between a President Biden and President Trump? They will be manifold, particularly in matters of style.  President Trump also saw American power as transactional because he for him international relations is little more than a protracted big business negotiation over global real estate. The transactionalism would be driven by a simple truth: the US has no alternative. Yes, there are many Americans who no longer confide in US strength and not a few who increasingly fear the power of the other, but the free world still needs American leadership and that leadership must both empower its people domestically and its allies globally.
http://lindleyfrench.blogspot.com/2020/11/does-america-still-want-to-lead-free.html

Mark
Ottawa
 
Secretary Mike Pompeo outlines a new American strategy focusing on fragility. This is a very "bottom up" and 4GW sort of thinking about defence and security issues:


On Point: The Enemy Is Fragility: Pompeo's New Strategy​

by Austin Bay
December 22, 2020

Planet Earth, for worse and occasionally better, is a world of neighborhood existence -- many neighborhoods at peace, many (most?) neighborhoods uneasy and facing tenuous circumstances, too many neighborhoods experiencing outright anarchy and war.

Blame the level of perception, of easy aggregation, for missing this truth. I'll illustrate with an anecdote. Six years ago, an obstreperous type saw me at a private reception. From across the room, he bellowed: "Austin Bay! Is there any hope for Africa?"

My reply to the bellower -- and the 15 or 20 so others present, who were surprised by the bellowing and puzzled by the question: "Which Africa? There are 6,000 Africas. Some Africas are doing quite well."

The bellower blinked -- an encouraging response. By George, he got it.

The 6,000 figure was meant to indicate I thought he had framed his question rater poorly. I could have replied 30,000 Africas and, given airtime and footnotes, defended the figure. Understand I could say the same thing about the Americas, Europe and Asia. Antarctica is an exception, maybe. Australia isn't.

Self-serving power brokers, corrupt leaders, nepotism, sham elections, violent intimidation and calculated propaganda spewed by crooked political and tribal organizations designed to divide communities and incite hate -- these destructive actors and actions threaten human life globally. They strangle human creativity and, in so doing, deny or steal prosperity.

If "propaganda" sounds too fancy a term for some neighborhoods, substitute "malign gossip concocted to manipulate people using shock, fright and anger." Whether delivered vocally or digitally, the abusive purveyors utilize the tactic of falsehood.

2020 provides numerous USA examples: Minneapolis. Chicago. New York. Seattle. El Paso. Stability and safety anywhere on planet Earth are not givens.

To the bellower's credit, he approached me as I was leaving. He had recently read an article about central African instability and recalled reading a column I had written about the Democratic Republic of Congo's anarchic eastern provinces. He regretted shouting. But the rampant violence appalled him.

I assured him it appalled me as well, but how we feel has zilch effect on the horror.

We didn't discuss formulating, much less executing policies -- fancy terms for trying to do something to protect lives. In retrospect, I should have asked him whether he supported funding the police in Austin, Texas. Since the 2020 city council supports defunding, let's revise his bellow. "Austin, Texas! Is there any hope?"

The term "failed state" had its day in D.C. Beltway discourse. It translated -- roughly -- as a region that could not or did not protect humans living within its political boundaries. On the ground, it meant scores, if not hundreds, of neighborhoods convulsed by violence.

This is why the U.S. State Department's new document "U.S. Strategy to Prevent Conflict and Promote Stability" is worth reading and implementing.

The new strategy identifies fragility as the key strategic issue, not failure. "Failed state" implies static rubble that requires centralized rebuilding.

Fragility frames the problem as a dynamic where small changes -- neighborhood by neighborhood -- can ultimately produce systemic improvement.

Here's the American interest: "Fragility can enable authoritarianism, external exploitation, and increase the influence of the United States' competitors in both physical and digital realms. Weak states are much more susceptible to Russian and Chinese coercion."

The new strategy "seeks to break the costly cycle of fragility and promote peaceful, self-reliant nations that become U.S. economic and security partners. The United States will pursue a new approach that addresses the political drivers of fragility and supports locally driven solutions."

Amen. The core problems are local.
 
"That grand strategy, of course, had two main elements: upholding and defending the liberal international order (ends) and maintaining American primacy (means).

I think they err. Maintaining American Primacy is the ends. Defending and upholding the liberal international order is the moral justification for American primacy (means).

No slight against the Americans. Every reasonable nation puts its own survival first. Suicide isn't a viable life choice.

Britain policed the abolition of the slave trade while guaranteeing their primacy at sea.

 
Jacksonianism redivivus


In foreign affairs, says Mead, Jacksonians hew to bareknuckles realism. They hold that “international life is and will remain both anarchic and violent,” and thus that “the United States must be vigilant and strongly armed. Our diplomacy must be cunning, forceful and no more scrupulous than anybody else’s. At times, we must fight preemptive wars.” And Jacksonian sentiment perseveres over time when the community is convinced vital national interests are at stake, as in World War II, the Cold War, and Desert Storm.

As a corollary, though, Jacksonians evince little interest in foreign enterprises undertaken for reasons not directly related to defending the national interest. Humanitarian intervention is one venture that leaves them cold. Or—in the case of Afghanistan after twenty years of warfare—they may lose interest in enterprises that once seemed worthwhile by realist standards but no longer do.

Jacksonians also harbor strong views about how wars should be fought. Unless a vital national interest is in peril, they insist America ought to mind its own business. If a compelling interest is at stake, the United States ought to use all martial means at its disposal and refuse to stop short of complete victory—preferably manifest in the foe’s unconditional surrender. Yet Jacksonians welcome a magnanimous peace once victory is in hand—witness the clement treatment afforded the erstwhile Confederacy, imperial Japan, and Nazi Germany.
 
What does a guy have to do to get fired?

Dissing his boss.

Colluding with the opposition.

Screwing up the withdrawal from Afghanistan.

Telling the Chinese not to worry about the Boss because the Joint Chiefs won't allow him to fire the missiles and they'll give you a heads up if anything real is going to happen.



Fearful of Donald Trump’s actions in his final weeks as president, the United States’ top military officer twice called his Chinese counterpart to assure him that the two nations would not suddenly go to war, a senior defense official said Tuesday after the conversations were described in excerpts from a forthcoming book.

Chairman of the Joint Chiefs of Staff Mark Milley told Gen. Li Zuocheng of the People’s Liberation Army that the United States would not strike. One call took place on Oct. 30, 2020, four days before the election that defeated Trump. The second call was on Jan. 8, 2021, just two days after the insurrection at the U.S. Capitol by supporters of the outgoing chief executive.

Milley went so far as to promise Li that he would warn his counterpart in the event of a U.S. attack, according to the book “Peril,” written by Washington Post journalists Bob Woodward and Robert Costa. The Associated Press obtained a copy of the book. Details from the book, which is set to be released next week, were first reported by The Washington Post on Tuesday.

 
Milley's oath is to the Constitution and not to the President.

I've ordered the book in and will wait 'til I've read it. So far I'll back Milley.

🍻
 
Milley's oath is to the Constitution and not to the President.

I've ordered the book in and will wait 'til I've read it. So far I'll back Milley.

🍻
Yeah but, if this is true, any modern interpretation of the Constitution doesn't say call the nemesis and say "we are good." This could get very ugly.
 
Yeah but, if this is true, any modern interpretation of the Constitution doesn't say call the nemesis and say "we are good." This could get very ugly.
You mean it hasn't been for some time now?

Neither you nor I know how that conversation went and I doubt the book will tell us either. The reason opposing countries have had these communication links ever since the nuclear age is to provide a chance for stable communications and to produce calm when tensions are high and unstable situations exist. Milley had one great advantage neither you nor I have; he was in the room with Trump and the rest of his cabinet and could properly assess the situation.

And, I've promised myself to stop getting involved in discussions about the last administration. My bad. I'm outta here.

🍻
 
From a CNN piece. This excerpt from the book shows Milley seems to think he has authority to require an oath to him personally.
As for talking to foreign military leaders I believe he has no authority to do so. If anybody can correct me I would appreciate it.
Woodward/Costa
"You never know what a president's trigger point is," Milley told his senior staff, according to the book.

In response, Milley took extraordinary action, and called a secret meeting in his Pentagon office on January 8 to review the process for military action, including launching nuclear weapons. Speaking to senior military officials in charge of the National Military Command Center, the Pentagon's war room, Milley instructed them not to take orders from anyone unless he was involved.
"No matter what you are told, you do the procedure. You do the process. And I'm part of that procedure," Milley told the officers, according to the book. He then went around the room, looked each officer in the eye, and asked them to verbally confirm they understood.
"Got it?" Milley asked, according to the book.
"Yes, sir."
'Milley considered it an oath,' the authors write.
 
It’s been ugly for a while. I find it telling that not just Milley, but obviously a number of very senior military personnel were so legitimately scared of the possibilities of Trump going rogue after he lost the election that they felt these various things were both necessary and appropriate. After all we’re not talking partisan appointees or political hacks, but soldiers who’ve risen to or near the pinnacle of their profession, and who have been defending their nation and its interests for their entire adult lives.

Note that with regards to nukes and the use of military force, Milley is reported as making extremely sure that everyone was very familiar with, and would follow, lawful process. There’s no wrong in that.

His reach out to a counterpart in China is obviously deserving of scrutiny, but there is something to be said for reassuring an adversary that temporary internal disruptions will not be allowed to spark events that could powderkeg them into an enemy.

There is no fealty owed to a president; military officers swear an oath to support and defend the constitution against all enemies foreign and domestic.

Taking what Woodward reports at face value, I don’t at present have any reason to doubt the loyalty of Milley or any of the other officers involved, nor that they were acting in good faith in the best interests of America.
 
His reach out to a counterpart in China is obviously deserving of scrutiny, but there is something to be said for reassuring an adversary that temporary internal disruptions will not be allowed to spark events that could powderkeg them into an enemy.
Absolutely no. He has no idea about the current diplomatic talks between the 2 countries. He could derail very important talks. His sole role is advisor to the president, he has no command authority whatsoever. He can't conduct talks with a foreign country no matter what.

Taking what Woodward reports at face value, I don’t at present have any reason to doubt the loyalty of Milley or any of the other officers involved, nor that they were acting in good faith in the best interests of America.
Is this common for military officers to go around the authority of the commander in chief and make decisions that could affect foreign relations? If he says the wrong thing to his Chinese counterpart it could really be catastrophic. He is not a diplomat he is a soldier.
 
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